TaxTMI 
TaxTMI 
2022 (7) TMI 990
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....the I.T.Act, 1961 was conducted on 13.10.2009. The assessee was requested by the AO to file details of expenditure incurred and TDS deducted under the various TDS sections. Accordingly, the assessee company filed the details of expenditure incurred and TDS deducted, and on the basis of the information filed by the assessee, the AO noticed Non-deduction of TDS on Auto Roaming Charges paid to other Telecom operators. Accordingly, orders u/s.201(1) & 201(IA) of the I.T. Act, 1961 were passed on by the AO, holding the assessee is liable for TDS u/s. 194J in respect of roaming charges for A.Y. 200405 to 2010-11. For the A. Y. 2010- 11 the assessee was also held liable for TDS u/s. 194H in respect of commission payments made to distribution on prepaid connections. 4. When the assessee preferred appeals before the CIT(A), the CIT(A) passed a combined order for all the AYs under consideration and confirmed the orders of AO. 5. Aggrieved by the order of CIT(A), the assessee is in appeals before the ITAT. 6. Before us, the ld. AR of the assessee filed written submissions, which are as under: 3.1. The Jurisdictional Andhra Pradesh High Court in CIT vs. J.D.Italia (141 ITR 948) held as un....
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....he recipient chargeable under the head "Capital gains") for- (iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;" 3.5.3. The expression 'use' occurring in the relevant provision does not simply mean taking advantage of something or utilizing a facility provided by another through its own network. What is contemplated by the word 'use' is that the customer comes face to face with the equipment, operates it or controls its functioning in some manner, but, if he does nothing to or with the equipment (as in present case) and does not exercise any rights in relation thereto, it may be outside the definition of "royalty". 3.5.4. Hence, considering that the expressions 'use' and 'right to use' are followed by the words "equipment", it suggests that there must be some positive act of utilization, application or employment of the equipment by the recipient for some desired purpose on his own. If there is no such utilization or employment of any equipment by the service recipient in the course of obtaining the equipment, payments in respect thereof may not be chargeab....
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....Appellant. In fact, the definition of a "Roaming Subscriber" (Refer Page No.8 of FPB) in the agreement states that it shall mean a person or entity with valid subscription for national use issued by one of the parties and using a GSM Subscriber Identity Module (SIM) and who seeks GSM service in a geographic area outside the area served by his HPLMN Operator. The agreement between the parties is merely to the effect that if the Appellant's subscriber wants a roaming facility when he is outside the geographical area served by the Appellant, he can enjoy such facility because of the agreement or arrangement entered into between the Appellant and the other service provider. There is no term in the roaming; agreement which shows that the effective control or possession of the network of Aircel would be transferred to the Appellant during; the period for which the subscribers of the Appellant may use the roaming facility. i.e each party is responsible for its own network and for the provisions of services related to it. (Refer Page No.10 of PB defines 'Services' and 'Scope of Agreement' Para 5.1. & Services Para 6.2). The Telecom Operators provide connecting, transit,....
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....der capacity, would be Royalty under the DTAA between India and UK. The Authority after looking into the nature of the agreement. ruled that by earmarking a space segment capacity of the transponder for use by the applicant, the applicant did not get possession (actual or constructive) of the equipment of Inmarsat Global of the U K.; nor did the applicant use any equipment of Inmarsat Global of the U K. The payment made by the applicant could not. therefore, be regarded as payment made for the use of the equipment of Inmarsat Global of the U K. This decision was followed by the Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Ltd. (supra). In the case of Dell International Services (India) (P) Ltd., In re (supra) it was held the word "use" in relation to equipment occurring in clause (iva) was not to be understood ill the broad sense of availing of the benefit of an equipment. The context and collocation of the two expressions "use" and "right to use" followed by the word "equipment" indicated that there must be some positive act of utilization application or employment of. equipment or the desired purpose. If an advantage was taken from sophisticated e....
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....rovision of access to and use of switched or non-switched networks for the transmission of voice, data and video, inbound and outbound roaming service to and from national and international destinations". The provisions of section 65 of the Finance Act, 1994, referred to above show that the Legislature itself has looked upon the provision of cellular telephony as a service and this includes inbound and outbound roaming service both to and from national and international destinations. 3.5.12. Reliance is also placed on the Advance Ruling in the case of Dell International Services India (P.) Ltd., In Re(2008) (305 ITR 37). This decision seems to suggest that the user of any equipment should have some right over the equipment and further that there should be some dedicated machinery or equipment instead of a common infrastructure which can be used by various operators to provide services. It was also observed that there should be a right to exclusive possession or custody of the equipment and enjoyment thereof over a stipulated period of time in order that a payment can be said to be rent. But the more important observation in this order is as to the meaning and import of the word "....
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....4 of the Telegraph Act, 1885, which gives exclusive privilege in respect of telecommunication and the power to l?:rant licenses to the Central Government, it was contended by the service providers that they provided only a service by the utilization of telegraph licensed to them for the benefit of the subscribers. The Supreme Court proceeded on the assumption that incorporeal rights may be goods for the purpose of levying Sales Tax and posed to itself the question whether the electromagnetic waves through which the signals are transmitted can fulfill the criteria for being described as "goods". The Court held that the electromagnetic waves cannot be called goods. They were held to be merely the medium of communication; the waves are neither abstracted nor consumed, they are not delivered, stored or possessed, nor are they marketable. What was transmitted is not an electromagnetic wave but the signal through such means. The Supreme Court thereafter gave a more basic reason to hold that the electromagnetic waves cannot be considered as goods and it is this reason which is relevant for our purpose. At page 302 of the report it was held as under: "A subscriber to a telephone service ....
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.... assessee for use of dedicated private bandwidth in underwater sea cable. consideration paid to American company would not fall under term 'royalty' under section 9(J)(vi). 3.5.18. Thus based on clear observation of Supreme Court in BSNL (at para 3.5.13), direct decisions of Delhi Benches of ITAT, the domestic roaming charges cannot be payment for royalty as use of scientific, commercial or technical equipment. 3.5.19. Lastly, though AO or DR has not argued on applicability of amendments made by Finance Act, 2012 with retrospective effect specifically, Explanation 5 and Explanation 6, it is settled law that Appellant cannot be held to be an 'Assessee in default' for withholding tax obligations in respect of those payments made prior to the amendment. In fact, for captioned assessment years, the provisions were not even on statute. 3.5.20. For tho above proposition, the appellant places reliance on the decision of the Hon'bIe, Bombay High Court in the case of CIT v. M/s. NGC Networks (India) Pvt. Ltd. (IT A No. 397 of 2015) has held that: "In the present facts, the amendment by introduction of Explanation6 to Section 9(1 )(vi) of the Act took place in the....
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.... would like to submit that all the recipients of domestic roaming charges are deep corporate companies, the department can use its machinery to assess and . verify that whether they have included in the income in their hands. 2. Submissions: 2.1. In this regard, the revenue should have first ascertained whether the recipients had directly paid taxes u/s.191 of the Act before treating the Appellant as 'assessee in default' u/s. 201 of the Act. For this proposition, the Appellant places reliance on the decision of Allahabad High Court in the case of Jagran Prakashan Ltd. vs. DCIT (345 ITR 288) and Kolkata High Tribunal in the case of Ramakrishna Vedanta Math vs. ITO (24 axmann.com 29). Thus, the Appellant submits that following above decisions, the demand made u/s.201 be annulled or be directed to appropriately be reduced. Ground No. III: LEVY OF INTEREST U/S 201(1A) Submissions: 1.1 In view of the aforesaid submission of grounds mentioned above, the appellant most humbly submits that it had no liability to deduct tax at source, therefore, the issue of deposit of taxes and consequential interest u/s 201(1A) of the Act does not arise and hence to be deleted. 6.1 I....
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.... telecom operators, the AO raised demand u/s 201(1) & and interest u/s 201(1A) of the Act. The issue in dispute is squarely covered by various decisions as quoted supra in the written submissions filed by the assessee as well as the decisions of coordinate benches of ITAT cited supra. 8.1 The coordinate bench in assessee's own case for AYs 2011-12 and 2012-13 (supra), on similar issue, has held as under: 6. We find no merit in the Revenue's instant stand. It is made clear that section194J (1)(c) of the Act stipulating TDS deduction on royalty makes it clear in Explanation (ba) that "royalty" shall have the same meaning as in Explanation 2 clause (i) to (vi) of subsection (1) of section 9 of the Act. The said latter provision defines royalty as follows : " Section 9(1)(vi) - Explanation 2.-For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or ....
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....le apex court's decision in Commissioner of Customs Vs. Dilip Kumar & Co. (2018) 9 SCC1 (SC). We accordingly proceed to decide the assessee's instant identical latter substantive ground in both these appeals against the department. Ordered accordingly. 8.2 The coordinate bench of ITAT, Kolkota in the case of Vodafone East Ltd. (supra), has observed as under: "9. We have heard the rival submissions and perused the materials available on record. The facts with respect to various payments made by the assessee to other telecom operators remain undisputed and hence the same are not reiterated for the sake of brevity. The short point that arises for our consideration is as to whether the subject mentioned payments made by the assessee would fall within the ambit of tax deduction provisions either u/s 194C or u/s 194J of the Act. We find that this issue has been examined in detail by this tribunal in ITA No. 1864/Kol/2012 ; ITA No. 243/Kol/2014 and ITA No. 343/Kol/2014 for the Asst Years 2009-10 and 2010-11 vide order dated 15.9.2015 in assessee's own case, wherein it was held that :_ 4.10 We have heard the rival submissions and perused the materials available on record. It w....
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....t factual verification to determine the extent of human involvement. Based on this direction, the CBDT had also issued Instruction No. 5 of 2011 dated 30.3.2011 instructing the revenue authorities to seek opinion of technical experts in case of complex technical matters. 4.12 As per the directions of the Supreme Court in the case of Bharti Cellular Ltd. (supra), the TDS officer has been directed to obtain technical evidence from the experts in the telecom field with regard to the fact of existence of human intervention for the roaming services and accordingly the ACIT, Circle 51(1), New Delhi had recorded statementfrom Shri Tanay Krishna on 29.9.2010. The Learned AR has also filed prayer for receipt of additional evidence in terms of Rule 29 of ITAT Rules on 20.7.2015 containing the statements recorded from Shri Tanay Krishna on 29.9.2010 in the case of Vodafone Essar Mobile Services Ltd & cross examination by Vodafone Essar Mobile Services Ltd on 29.9.2010. This application under Rule 29 contains a prayer with reasons that these documents could not be filed before the lower authorities and that these documents are very crucial for the disposal of the case under appeal as the exa....
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....ations. (iv) Installation as per vendor guidelines - it involves installation of both hardware an, software. (v) Call configuration/provisioning of system - in this the operator has to configure an, make provision in data base as to how the calls will flow. This has to be done by , technically competent person. (vi) Testing - it is exhaustive testing. The calls are tested on various modes (terminating loading etc) on network portion. (a) Software by hardware testing - Stand alone testing (b) Interconnect testing - it is done to test if it is compatible with 0: hardware/software. This testing employs technically qualified professionals ( tested as per the agreed plan between services provider and vendor. Question 5: In your expert opinion, does the system work automatically when network system of one cellular operator gets connected with the network system of other cellular operator? Ans. 5: When a calls get connected by one operator to other, per se it is an automatic connection, but there can be instances when there is a problem in the call connect which may require resolution through human intervention. Question 6: Hence there is no 100% automatic operation of thi....
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.... during actual carriage of the call by one operator for the other. Please confirm. Yes. Q.7. From perusal of your answers to various questions posed to you by the Tax Department, you have mentioned that services of a technical expert are required for inter-connect arrangements. Please confirm whether such services are required for provision of inter-connect services. i.e .. carriage of calls from one network to another, or are primarily for fault detection and removal. Please refer to answer to Question 4 of this cross examination. Q.11. What is the extent of human involvement in provision of interconnect services. i.e., carriage of calls originating on network of one operator and termination the network of the other operator? We have answered in question no 5. Q.12. In answer to Question 21 of your Statement, you have stated that in cellular networks the level of human intervention is much higher and of sophisticated technical level. In this regard, do you agree that cellular networks are based on sophisticated technology and work on an automated mode? The human intervention as referred by you for network operations is limited to network monitoring and maintenance and ....
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.... travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention and it is for this, the roaming charges is paid by the assessee to the Visiting Operator for providing this service. Hence we have no hesitation to hold that the provision of roaming services do not require any human intervention and accordingly we hold that the payment of roaming charges does not fall under the ambit of TDS provisions u/s 1941 of the Act. 4.18 As far as the applicability of provisions of section 194C are concerned, we hold that the provisions of section 194C of the Act would become applicable only where some work (works contract) is being carried out and there is some human intervention involved in the carriage of such work. The term 'work' is defined in section 194C as follows:- "Work shall include: (a) Advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) Catering; (e) manufacturing or supplying a product according to the requirement 01' specification ( of the customer b....
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....Years 2005-06 to 2012-13 - Assessee was a mobile service provider company - Whether payment made by assessee to another mobile service provider company for utilization of roaming mobile data and connectivity could not be termed as technical service as roaming process between participating entities was fully automatic and did not require any human intervention and, therefore, no TDS was deductible - Held, yes (paras 12 & 13 ) [In favour of assessee]. 9.3. Respectfully following the aforesaid decisions, we hold that there is no obligation to deduct tax at source for the assessee payer in terms of section 194C or 194J of the Act and hence the assessee cannot be treated as 'assessee in default' u/s 201 of the Act. Hence consequentially the interest u/s 201(1A) of the Act cannot be charged on the assessee in the instant case. Since we have decided the issue at the threshold level itself, the other grounds raised by the assessee in his cross appeal as well as in cross objections that the payee had considered these receipts in its returns and hence the assessee should not be treated as assessee in default, becomes infructuous and we refrain to give our findings thereon. Accordin....