TaxTMI 
TaxTMI 
2021 (11) TMI 36
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....e disallowance of deduction claimed u/s. 80IA of the Act. 5. The underlying facts in the issue are that the assessee commenced providing telecommunication services from May, 2002. A deduction u/s. 80IA of the Act was claimed by the assessee on profits derived from telecommunication services. A.Y. 2007-08 was taken as the first of the 10 years out of a block of 15 years as stipulated under the provisions of section 80IA of the Act. Accordingly the assessee claimed the deduction u/s. 80IA for the first time in A.Y. 2007-08. The claim was allowed by the AO. 6. In January 2008, the assessee also obtained NLD and ILD licenses from the DoT and continued to provide telecommunication services with enhanced quality. The assessee claimed deduction under section 80IA of the Act on profits derived from telecommunication services including the services rendered pursuant to these licenses for the assessment years under consideration. 7. The AO was of the opinion that the services provided pursuant to ILD/NLD license constitute a new and independent undertaking and since the license was received in 2008, according to the AO the assessee has not complied with the condition requiring that ....
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....ately received payments from the FTOs for the telecommunication services provided by it within India. 18. The AO disallowed the payments so made u/s. 40(a)(i) of the IT Act, 1961 for non-withholding of taxes. 19. When the matter was agitated before the CIT(A) it was strongly contended that no such withholding of taxes was required in terms of the provisions of section 195 of the Act since the subject payments were not chargeable to tax in India under the provisions of the Act and India-US Double Taxation Avoidance Agreement ('DTAA'). 20. The CIT(A) was not convinced with the contention of the assessee and confirmed the disallowance. 21. Before us the counsel for the assessee drew our attention to the decision of this Tribunal in assessee's own case for A.Y. 2011-12 and pointed out that the Tribunal has decided the issue in favour of the assessee. 22. Per contra the DR though supported the findings of the lower authorities, but could not bring any distinguishing decision in favour of the revenue. 23. We have given a thoughtful consideration to the orders of the authorities below. We find force in the contention of the Counsel that this issue was conside....
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....of the considered view that the telecom operators provided connecting, transit and termination services to each other on a reciprocal basis and neither of the parties had any rights in the equipments or in the network of the other parties. The FTOs do not grant any possession or control of any equipment or in the network deployed by them to the assessee. 34. We have carefully perused the decision of this Tribunal in the case of Bharti Airtel (supra). The relevant findings of the coordinate bench read as under:- "6. The fact patterns of the Appellant's case is similar to the fact patters in the order passed by jurisdictional Hon'ble Delhi Tribunal in case of Bharti Airtel (supra), being a DTO in Appellant's case. The Hon'ble Delhi Tribunal examined the taxability of telecom payments to foreign telecom operators in detail and held that there is a clear distinction between service rendering agreements and Royalty agreements and a payment for a 'service' cannot be treated as Royalty for the 'use of a process/equipment' either under the Act or under the tax treaty. Relevant extract of this Hon'ble Tribunal's order is as under: ....
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....es business income and not royalty." "The telecom operator merely render Telecommunications Services to the subscribers, as well as interconnecting telecom operators with the aid of their network and the process embedded therein. This is a standard facility which is used by the FTP itself. Thus the insertion of Explanation 6 to Section 9(1)(vi) does not alter the decision taken by us on this issue." "56. Is far as the insertion of Explanation 5 to Section 9(1)(vi) is concerned, we hold that this Explanation comes into play only in case of Royalty falling within the ambit of Section 2 of Section 9(1)(vi). When a process is widely available in the public domain and is not exclusively owned by anyone the it cannot constitute an item of intellectual property for the purpose of charge of 'Royalty' under clauses (i), (ii) and (iii) of Explanation 2 to Section 9(1)(vi). Hence, the criteria of possession, control, location indirect use etc., as explained by Explanation 5 has no effect in the case in hand." "The Hon'ble Delhi High Court in the case of Bharati Cellular Ltd. (supra) has given a finding that the facility in question provided to the assess....
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....resumption that the services provided under the new licenses tantamount to acquiring of a new undertaking which has come into existence with additional infrastructure and these new services are not possible without new undertaking coming into existence post cut-off date of 31" March, 2005 prescribed in Section 801A (iv)(ii) of the Act. This presumption is nowhere backed by any material or any evidence or any kind of inquiry that whether any separate undertaking has been established to provide services in the light of second license obtained by the assessee. The main conditions for eligibility of deduction w/s.801A is that, firstly, it is available to an undertaking or an enterprise carrying on eligible business which here in this case is telecommunication services; secondly, undertaking must have started rendering the telecommunication services on or after 1st April, 1995 but before 31st March, 2005 and lastly undertaking is not formed by splitting up or reconstruction of business already in existence or form of a transfer to a new business or a machinery or plant previously used for any purpose. The assessee was in the business of transmission of d....
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....ntinues to use the same and certain additional bandwidth under the existing arrangement entered with telecom companies for provision of services. It is in fact continuity of services except that the assessee is providing private internet service with more secure form of data transmission between the close user group and it is not entirely a new kind of business. Thus, the reasoning given by the Assessing Officer and Ld. CIT (A) for making proportionate disallowance of deduction cannot be sustained and same is directed to be deleted," Document 3 5. At the outset, it is submitted that this issue is covered by the judgment of this Hon'ble Tribunal in Appellant's own case in AY 2011-12. While ruling in favor of the Appellant, the Hon'ble Tribunal held as follows: "15/As pointed out by the ld. counsel that this issue is no longer in debate in the jurisdiction of Hon'ble Delhi High Court in the case of DIT vs New Skies Satellites BV (supra). The Hon'ble Delhi High Court has discussed this issue threadbare and have also distinguished the judgment of Hon'ble Madras High Court in the case of Verizon Communication Singapore (supra). The Hon'ble Delhi High C....