TaxTMI 
TaxTMI 
2024 (8) TMI 555
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....ucted at source under Section 194J by the assessee 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....
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....reby a subscriber of a cellular phone uses cellular services outside the home network". 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 as....
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....ans any consideration (including any lumpsum consideration) for the rendering of any managerial, technical 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 ....
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....TAT-2013) (Mumbai Tribunal). The appellant tried to argue that for classifying the services as FTS, human intervention is a must. All the contentions 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....
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....ary corrective actions." In view of the above, once configuration was made, no human intervention is required for connecting the roaming calls. The subscriber can make 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 re....
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...." under Section 194J, necessitating TDS deduction by the assessee. Alternatively, it is submitted that even if human intervention is considered necessary only for maintenance of the telecom 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 Roa....
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.... the words are clear and can be attributed wide meaning. 7.2. Interpretation of 'Technical Service': 7.2. (a) M/s. Continental Construction Ltd Vs. Commissioner of Income Tax, Central (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 ....
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....hough he may have got the opinion drafted by a junior of his or procured from another expert in the particular branch of the law. Sri Ahuja tried to negative this line of thinking by urging that "professional 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 "prof....
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....the agreement provides for "information concerning industrial, commercial or scientific knowledge, experience or skill made available" by the respondent to the foreign enterprise for running of the Hotel Soaltee. Mr. 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 i....
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....of the Income Tax Act has clearly defined what is ''technical services". "Technical services" have been defined as managerial, technical or consultancy services including the provision of services of technical or other 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 ....
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....me tax laws and payable to a Government authority. As per the provisions of the Code, all creditors of the Company are required to submit claims regarding dues against the company for the period before the insolvency commencement date. The learned counsel 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 Gupt....
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....service providers for technical services, which are then utilized by subscribers during roaming. The argument is made that the roaming charges should not be categorized as fees for technical services, as the service is provided without continuous human intervention 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)....
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.... any such Scheme of Resolution of Insolvency may not affect the answering of the substantial questions of law arising in the present Appeals under Section 260A of the Act, as such Insolvency Resolution may only affect the final recovery part of taxes depending upon the answers to the questions raised in the present Appeals, by the High Court under Section 260A of the Act. 5. According 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 o....
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....ly with other specified debts. Though lengthy, we feel it necessary to extract relevant portion of the order in Rainbow Papers Limited Case (Supra), which is as under: "22. Prior to amendment by Notification No. IBBI/2018-2019/GN/REG013 dated 3-7-2018, with effect from 4-7-2018, sub-regulation (1) of Regulation 12 read with sub-regulation (2) provided that a creditor shall submit proof of claim on or before the last 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 wi....
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.... "secured creditor". Nclat has, according to Mr Nataraj, come to such a conclusion on the erroneous premise that Section 48 of the GVAT Act, 2003, cannot prevail over Section 53 IBC. 32. The learned ASG argued that, it was not the case of the appellant that Section 48 of the GVAT Act prevails over Section 53 IBC. It was the case of the appellant that the State falls within the purview of "secured creditor". ......... 48. A resolution plan which does not meet the requirements 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 thereun....
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....(Nclat) and the adjudicating authority erred in law in rejecting the application/appeal of the appellant. As observed above, delay in filing a claim cannot be the sole ground for rejecting the claim. 59. The appeals are allowed. The impugned orders [Tourism Finance Corpn. of India Ltd. v. Rainbow Papers Ltd., 2019 SCC OnLine NCLAT 910] , [STO v. Chandra Prakash Jain, 2020 SCC OnLine NCLAT 536] are set aside. The resolution plan approved by the CoC is also set aside. The resolution professional may consider a fresh resolution plan in the light of the observations 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 pende....
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....ent years 2007-08 to 2011-12, the respondent made substantial payments as roaming charges to these other operators without deducting any tax at source under Section 194J. According to the respondent, the roaming services are automated processes without human intervention as the words "managerial and consulting services is used" in the provision, and hence, the roaming charges do not qualify as fees for technical services. The further contention on behalf of the respondent is that the automated services is general and applicable to all and not customer specific and hence cannot 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 provide....
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...., an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2. - For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical 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". 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 und....
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....aised even in these civil appeals. However, keeping in mind the larger interest and the ramification of the issues, which is likely to recur, particularly, in matters of contracts between Indian companies and multinational corporations, we are of the view that the cases herein are required to be remitted to the assessing officer (TDS). 10. Accordingly, we are directing the assessing officer (TDS) in each of these cases to examine a technical expert from the side of the Department and to decide the matter within a period of four months. Such expert(s) will be examined (including cross-examined) within a period of four weeks from the date of receipt of the order of this Court. 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....
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....as a whole. The Roaming Agreement explicitly acknowledges the need for human intervention in various critical aspects of roaming services, such as discussing impacts and taking necessary actions upon any change in the system or network, providing customer care support, addressing network faults through coordination between customer care and technical teams, handling issues related to lost/stolen SIM cards or mobile equipment, and resolving billing inquiries or disputes. The Tribunal also accepted the presence of human intervention, however holding that for connecting a roaming call, human intervention is not required. We wish to point out few situations, which in our opinion the Tribunal has not 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. Similar....