TaxTMI 
TaxTMI 
2024 (8) TMI 555
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.... while paying roaming charges to the telecom operators since roaming charges paid by the assessee is not a fee for technical services as no human intervention is required for providing the connection while roaming. (ii) Alternatively, whether the Tribunal having held that the human intervention is necessary for maintenance of the telecom system that provides roaming facility, is the Tribunal right in concluding that such human intervention is not sufficient to treat the payment as fee for technical services mandating deduction of tax at source under Section 194J. 2. The succintly stated facts are as under: 2.1. The respondent/assessee is engaged in the business of providing prepaid telecommunication services, including cellular service, data services, and mobile services, through various telecom networks across the country. As part of its business operations, the respondent enters into roaming agreements with other telecom service providers to facilitate its subscribers in availing roaming facilities when they travel outside the home network area. During the course of its business transactions, the respondent has made payments to other telecom operators in the form of roaming c....
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....etwork". The subscriber of a service provider who is not 'roaming' gets services from his home operator, while a subscriber who is roaming will get services from both, the host operator and the home operator. The host operator charges the home operator for providing telecom services to the subscriber of the later. Roaming services are made available to a subscriber by the host operator by virtue of the roaming arrangement entered into by and between the home operator and the host operator for an agreed charges to be paid by the home operator to the host operator. Thus, in essence, roaming charges are payments being made by the appellant to the other sundry telecom operators as consideration for telecom services provided by the said other telecom operators to the subscribers of the appellant. The appellant calls roaming services offered by the host operators as "STANDARD AUTOMATED SERVICES". The appellant refuses to recognize the roaming charges paid to the host operators as "fees for technical services" and hence not considered same for deduction of tax as required by Section 194J. Whereas the assessing officer has treated the roaming charges as fees for technical services ....
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....hnical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or life project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "salaries".' 8.3.4. It may be noted that there is no mention about human intervention as a pre-condition in the above explanation. Whether there is involvement of human being or not, if the service is of technical steering then the consideration paid for such service shall qualify to be FTS. Even otherwise also the roaming service provided by the host operators to the appellant is effectively possible only when there is constant, 24 hrs, perennial and exclusive standby arrangement with the backing support of technically qualified persons is maintained in live and serviceable condition by the host operator. So the presence of human intervention in some form or other cannot be altogether eliminated. In the roaming service in question, there is always present "in-absentia human intervention", atleast in trouble free times. But when the trouble comes human intervention will come to pl....
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....ntentions raised by the appellant and the case laws relied on are all taken care of in the discussion made above and are rejected." 2.4. Aggrieved by the aforesaid order passed by the CIT(A), the respondent filed appeals before the Income Tax Appellate Tribunal (in short, "the Tribunal"). 2.5. The Tribunal, after considering the arguments advanced on both sides and the materials available on record, held that even though human intervention is necessary for routine maintenance of the system and machineries, it is not required for connecting roaming calls. Relying on the expert opinion obtained from the Sub-Divisional Engineer of BSNL, which clarified that human intervention is required for establishing the initial physical connectivity and configuration; and once the necessary configurations are completed, no human intervention is required for connecting roaming calls, the Tribunal further observed that when a subscriber travels outside the home network area, the call gets connected automatically without any human intervention due to the configuration of the software systems in the respective service providers' networks. Ultimately, the Tribunal concluded that since the roamin....
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....ke and receive calls, access and receive data S.P. Nos.324 to 333/Mds/15 and other service without any human intervention. Like any other machinery, whenever the system breakdown, to set right the same, human intervention is required. However, for connecting roaming call, no human intervention is required except initial configuration in system. This Tribunal is of the considered opinion that human intervention is necessary for routine maintenance of the system and machinery. However, no human intervention is required for connecting the roaming calls. Therefore, as held by the Apex Court in Bharti Cellular Limited (supra), the roaming connections are provided without any human intervention and therefore, no technical service is availed by the assessee. Therefore, TDS is not required to be made in respect of roaming charges paid to the other service providers. Accordingly, the orders of the lower authorities are set aside in respect of provision for site restoration expenditure and roaming charges. However, in respect of year-end provision, the issue is remitted back to the file of the Assessing Officer. The issue of limitation raised by the assessee for passing order under Sections ....
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.... system providing roaming facility, such human involvement is sufficient to treat the roaming charges as fees for technical services attracting TDS under Section 194J. Adding further, the learned senior standing counsel relies upon the National GSM Roaming Agreement provided by the respondent itself, which acknowledges the need for human intervention in various aspects of roaming services, such as discussing impacts and taking necessary actions like testing or administrative activities upon any change, providing English-speaking customer care operators to assist roaming subscribers, exchanging roaming information and informing respective subscribers, addressing network faults through coordination between customer care services and technical experts, handling issues related to lost/stolen SIM cards or mobile equipment, and resolving billing inquiries through customer care services. It is submitted that whenever human intervention is involved, as established by the abovementioned clauses of the Roaming Agreement, it has to be considered a technical service under Section 9(1)(vii) of the Income Tax Act. Furthermore, the learned senior standing counsel highlights that the intention beh....
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....AIR 1992 SC 803) : The word 'technical service' has a very broad connotation and it has been elsewhere in the statute also so widely as to comprehend professional service vide Section 9(1)(vii). "27. But, even assuming that there could be some difference of opinion on the above issue, there can be no doubt at all that, under the contract, technical services were rendered by the assessee to the foreign Government. In our opinion, the attempt of Sri Ahuja to differentiate technical services rendered to the assessee by its employees and technicians from technical services rendered by the assessee to a foreign constituent and urge that the latter alone can qualify for relief under Section 80-O on the ground that the project in question was a turnkey project which has succeeded before the High Court, proceeds on an unduly narrow interpretation of the section. In our view, the assessee was undoubtedly rendering services to the foreign Government by executing the water supply project. These services were no doubt technical services, as they required specialised knowledge experience and skill for their proper execution. The argument seems to be that the services in the present ca....
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....al services" have been brought within the scope of Section 80-O only by an amendment by the Finance (No. 2) Act, 1991 and that, too, w.e.f. 14-1992 which is proposing to substitute the word "technical or professional services" in place of the word "technical services" now used in the section. It seems to us that this amendment may be only of a clarificatory nature. The expression "technical services" has a very broad connotation and it has been elsewhere in the statute also so widely as to comprehend professional services : vide Section 9(1)(vii), referred to earlier. But we need not digress on this aspect for two reasons. Firstly, whatever may be the position regarding other "professional services", there can hardly be any doubt that services involving specialised knowledge experience and skill in the field of constructional operations are "technical services". The Board's guidelines, to which reference is made later, specifically say so. Secondly, the question whether "professional services" would be "technical services" or not has no impact on the point we are trying to make viz. that in order to say that a person is rendering such services to another, it is not necessary th....
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..... Dave is right when he submits that in view of the judgment of this Court in Continental Construction Ltd. case Circular No. 187 dated December 23, 1975 of the CBDT may perhaps require certain changes so as it is in conformity with Section 80O of the Act. In J.K. (Bombay) Ltd. case Delhi High Court was of the view that remuneration obtained by running or managing a foreign company would be in the nature of profits while Section 80O deliberately restricted itself to income by way of royalty, commission or fees and included other types of remunerations. We do not think that this is a correct statement as the royalty, commission or fees can be in terms of percentage of profits earned by the foreign enterprise on account of services rendered by the Indian Company. It is substance of the case which matters and not the name. The view taken by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. case MANU/MH/0271/1992: [1993] 203 ITR 947(Bom) commends to us. As it is more in consonance with the provision of Section 80O and the object which it seeks to achieve. Karnataka High Court in the case of HMT Ltd. MANU/KA/0141/1990 : [1991] 188 ITR 457(KAR) has rather taken a narrow view of the....
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....er personnel. But the agreement in question does not provide initial services in India by the foreign company. Therefore, it is very difficult to accept the argument of learned counsel for the Department. Barring the royalty for transfer of drawings and designs, what has been provided in the contract is technical services. As we indicated earlier, what are the services to be rendered by the company in India is only sending two persons for 15 days just to start the machinery and go. In the light of the express provisions made in the agreement, it is difficult to accept the contention of counsel for the Department that royalty for technical engineering consulting charges is for technical services. As we read the agreement in toto, we cannot ascribe to such an interpretation as was attempted to be made out by counsel for the Department. In the light of the aforesaid discussion, we have no hesitation to hold that what is covered by the agreement is only royalty for technology or transfer of technology by the foreign company to the petitioner and what is stipulated to be paid is the consideration for the transfer done and not as fee for technical services. As a consequence of that, that....
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....ounsel further states that paragraph No.6.7.1 of the Approval Order deals with the reliefs and confessions, and the following relief has been granted by the NCLT under the resolution plan "subject to the condition that these shall pertain to any inquiries, investigations, proceedings, suits, claims, disputes, etc., only in relation to the period prior to the approval date and not thereafter." Upon approval of the resolution plan, all the proceedings and claims that pertain to the period before the NCLT approval date shall stand withdrawn and dismissed, and liabilities thereunder extinguished. Accordingly, the current proceedings and the underlying demand/claim of the appellant have become infructuous and should stand dismissed in terms of the approval order. In support of his contentions, the learned counsel cites the following judgments: (i) In the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. [Civil Appeal No.8766-67 of 2019], the Apex Court held that in terms of Section 31 of the Code, once a resolution plan is approved, it is binding on all stakeholders to allow the resolution applicant to run the company with a fresh slate. The Apex....
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.... once the initial configurations are in place. He would further argue that the roaming charges should not be considered technical services, as the automatic connectivity provided during roaming does not require ongoing human intervention for call connections. In support of his contentions, the learned counsel has relied upon the following judgments: (i) Godfrey Phillips India Ltd., Vs. State of U.P. [(2005) 2 SCC 515] (ii) Commissioner of Income Tax Mumbai Vs. Kotak Securities Ltd., [(2016) 11 SCC 424] (iii) Director of Income Tax Vs. A.P.Moller Maersk SA [(2017) 5 SCC 651] (iv) Commissioner of Income Tax Vs. Dakshin Hryana Bijli Vitran Nigam [(2015) SCC Online P&H 18645)] (v) Commissioner of Income Tax, Kolkata Vs. Media World Wide Pvt. Ltd., [I.T.A.No.23 of 2015, dated 08.01.2020 (Calcutta High Court)] (vi) Skycell Communication Ltd. Vs. DCIT [(2001) 251 ITR 53 (Mad)] (vii) GVK Industries Ltd., V. Income Tax Officer [2015) 11 SCC 734] (viii) DCIT Vs. Vodafone India Ltd., [(I.T.A.No.6158/Mum/2018) Judgment dated 27.05.2020 (ITAT, Mumbai) (ix) iGATE Computer Systems Ltd., Vs. DCIT [(2015) 67 SOT 296 (Pune), ITAT, Pune] (x) Asst. Commissioner of Income Tax v. Tor....
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....g to the learned counsels, after the decision of the Delhi High Court in the year 2008 on the said question, the Hon'ble Supreme Court, in the case of CIT v. Bharti Cellular Ltd. [(2010) 193 Taxman 97 (SC)], has made some observations on the decision of the Delhi High Court. According to the information available with the learned counsels, as of now, no other High Court has decided the said questions though such questions might have arisen in the case of various Companies which provide these Mobile Services of connectivity to the Customers. 6. Therefore, prima facie, we are of the opinion that the questions of law involved in the present case are open to debate and answered by the High Court under Section 260A of the Act in the present set of Appeals, irrespective of the approval of Resolution of Insolvency Proceedings by the NCLT. 7. Therefore, both the learned counsels are requested to prepare their case for arguments before this court on merits and they may file a brief synopsis, list of dates and events, etc. and compilation of case laws in both soft and hard copy within 3 weeks from today and on the next date of hearing, the learned counsels may address their arguments....
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....t date mentioned in the public announcement. Sub-regulation (2) was amended with effect from 4-7-2018 and now reads "a creditor shall submit claim with proof on or before the last date mentioned in the public announcement". 23. The Regulations have to be read as a whole and not in a truncated manner and interpreted in the light of the statutory provisions of IBC, as interpreted by this Court. This Court has time and again held that the timelines stipulated in IBC even for completion of proceedings are directory and not mandatory. 24. In this case, claims were invited well before 5-10-2017 which was the last date for submission of claims. Under the unamended provisions of Regulation 12(1), the appellant was not required to file any claim. Read with Regulation 10, the appellant would only be required to substantiate the claim by production of such materials as might be called for. The time stipulations are not mandatory as is obvious from sub-regulation (2) of Regulation 14 which enables the interim resolution professional or the resolution professional, as the case may be, to revise the amounts of claims admitted, including the estimates of claims made under sub-regulation (1) o....
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....ts of subsection (2) of Section 30 IBC, would be invalid and not binding on the Central Government, any State Government, any statutory or other authority, any financial creditor, or other creditor to whom a debt in respect of dues arising under any law for the time being in force is owed. Such a resolution plan would not bind the State when there are outstanding statutory dues of a corporate debtor. 51. If the established facts and circumstances require discretion to be exercised in a particular way, discretion has to be exercised in that way. If a resolution plan is ex facie not in conformity with law and/or the provisions of IBC and/or the Rules and Regulations framed thereunder, the Resolution would have to be rejected. It is also a well-settled principle of interpretation that the expression "may", if circumstances so demand can be construed as "shall". 52. If the resolution plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the adjudicating authority is bound to reject the resolution plan. 53. In other words, if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other a....
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....ons made above. However, this judgment and order will not prevent the resolution applicant from submitting a plan in the light of the observations made above, making provisions for the dues of the statutory creditors like the appellant." From the above judgment, it is clear that the statutory dues cannot be ignored and if ignored, the same would not be binding on the authorities and the resolution plan cannot survive. It would also be appropriate to point out at this stage that the respondents had unsuccessfully challenged the proceedings under the IT Act for the Assessment years 2011-12 and 2012-13 citing the pendency of the resolution proceedings and the moratorium period in W.P Nos. 34668 of 2023 batch and the Learned Single Judge by his order dated 17.06.2022 rejected their contention. That apart, in the present case, the order of the Tribunal is dated 20.07.2015 and the resolution plan was admitted only on 19.03.2018. In any case, as held by the Apex Court in Rainbow Papers Ltd Case (Supra), prima facie, the pre-amendment provisions would be applicable to the present case and the period of operation of the order of the Tribunal is to be treated only as a period of eclipse. Th....
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....t be classified as "technical services". All the judgments relied upon by the Learned Counsel for the respondent drive home the above principles. Much emphasis has been made on the judgment of this Hon'ble Court in Skycell Communications Ltd case (supra) with regard to the claim of "technical service". The judgment according to us may not be of any assistance to the respondent in view of the Judgment of the Hon'ble Apex Court in Bharati Cellular Ltd Case (Supra) and that apart, the facts of the case are completely different as it was a case of deduction of TDS on payment by the subscriber to the service provider and not inter se between the host and home service providers. 17. However, the counsel for the Revenue has contested this position, by citing crucial factors establishing the applicability of Section 194J:- (i) The roaming charges represent consideration paid for highly technical telecommunication services provided to the respondent's subscribers outside the home network area, forming an integral part of the respondent's business operations. (ii) Seamless carriage of calls and data during roaming requires constant monitoring and human intervention by technical ....
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....come of the recipient chargeable under the head "salaries". Before adverting further into the scope of "Technical Service", it would be necessary to point out that the CIT (A) has held that human intervention is not necessary to fall within the definition of "technical service" or in other words, automation is irrelevant. Both sides have relied upon the judgment of the Hon'ble Apex Court in Bharati Cellular Ltd Case accepting the presence of human intervention, the operative portion of the Apex Court judgment is extracted as under: "7. The problem which arises in these cases is that there is no expert evidence from the side of the Department to show how human intervention takes place, particularly, during the process when calls take place, let us say, from Delhi to Nainital and vice versa. If, let us say, BSNL has no network in Nainital whereas it has a network in Delhi, the Interconnect Agreement enables M/s. Bharti Cellular Limited to access the network of BSNL in Nainital and the same situation can arise vice versa in a given case. During the traffic of such calls whether there is any manual intervention, is one of the points which requires expert evidence. Similarly, on what....
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....Liberty is also given to Respondent 1 to examine its expert and to adduce any other evidence. 11. Before concluding, we are directing CBDT to issue directions to all its officers, that in such cases, the Department need not proceed only by the contracts placed before the officers. With the emergence of our country as one of the BRIC countries and with the technological advancement, matters such as the present one will keep on recurring and hence time has come when the Department should examine technical experts so that the matters could be disposed of expeditiously and further it would enable the appellate forums, including this Court, to decide legal issues based on the factual foundation. We do not know the constraints of the Department but time has come when the Department should understand that when the case involves revenue running into crores, technical evidence would help the tribunals and courts to decide matters expeditiously based on factual foundation. The learned Attorney General, who is present in Court, has assured us that our directions to CBDT would be carried out at the earliest. The above case arose from the Judgment of the Delhi High Court, wherein it was held....
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.... considered. Two such situations, as it existed then and also now, is the option to manually select a network when one goes out of the home network at the subscribers' end or to activate international roaming. When the subscriber selects another network when the service is either down or when the service provider does not provide any service in any particular area or country and when there are glitches or connectivity issues, it is only through human intervention, it can be resolved. Similarly, the activation of international roaming is also another situation which requires human intervention. 20. It is evident from the above that human intervention by skilled technical personnel is an integral and unavoidable part of the roaming services provided by the host telecom operators to the respondent-assessee. In our opinion, the "roaming service" to be provided is not mere connection but a seamless service throughout the period, when the subscriber is outside the home geographical area. These services cannot be rendered effectively or efficiently without continuous human monitoring, coordination, troubleshooting, and expertise. Therefore, this Court is of the firm view that the roaming....