2015 (10) TMI 1461 - AT - Income Tax

Non-deduction of tax at source under section 194J on roaming charges paid to other telecom operators - assessee in default - appellant liable to pay tax U/s. 201(1) and interest U/s.201(1A) - Held that - In case of the assessee the roaming charges paid by the assessee will not fall under the category of fees for technical services and therefore the provisions of section 194J of the Act would not be attracted in the case of the assessee. Further since Sections 201(1) & 201(1A) of the Act are consequential they will also not be applicable to the case of the assessee. See M/s Dishnet Wireless Limited Chennai Versus The Deputy Commissioner of Income Tax TDS Circle 1 Chennai 2015 (7) TMI 778 - ITAT CHENNAI - Decided in favour of assessee.

Summary

Issues involved:
1. Whether the assessee is liable to pay tax under section 201(1) and interest under section 201(1A) of the Income Tax Act for non-deduction of tax at source on roaming charges paid to other telecom operators under section 194J of the Act.

Detailed Analysis:
The appeals were filed by the assessee against the orders of the Commissioner of Income-tax(A)-II, Coimbatore for the assessment years 2009-10 & 2010-11. The main issue raised by the assessee was regarding being treated as an 'assessee in default' for not deducting tax at source under section 194J of the Act on roaming charges paid to other telecom operators, leading to tax liability under section 201(1) and interest under section 201(1A) of the Act. The assessee contended that the decision of the TDS officer was erroneous, and the issue was confined to this ground for adjudication.

The assessee, engaged in providing cellular mobile services, had not deducted tax at source on roaming charges paid to other telecom operators as per Section 194J of the Act. The Assessing Officer and the Commissioner upheld that the services provided by the telecom operators amounted to "technical service" under section 194J r.w.s 9(1)(viii) of the Act. The Assessing Officer's decision was based on the necessity of human intervention for the operation of machinery and equipment provided by the service provider company.

The assessee argued that a recent decision by the Chennai Bench of the Tribunal in the case of M/s. Dishnet Wireless Ltd. held that tax need not be deducted at source on roaming charges as it did not amount to payment for technical services under section 194J of the Act. The Department contended that human intervention was required for operating the facility provided by the service provider, making the roaming charges eligible for tax deduction under section 194J. However, after considering both arguments, the Tribunal found the issue to be identical to the Dishnet Wireless case and ruled in favor of the assessee.

The Tribunal cited the decision in the Dishnet Wireless case, emphasizing that human intervention was not required for connecting roaming calls, and therefore, the roaming charges did not fall under the category of 'fees for technical services' under section 194J of the Act. Consequently, the provisions of section 201(1) & 201(1A) were deemed inapplicable to the assessee's case. As a result, both appeals of the assessee were allowed, and no tax liability was imposed on the assessee for non-deduction of tax at source on roaming charges paid to other telecom operators.

In conclusion, the Tribunal's judgment clarified that the assessee was not liable to pay tax under section 201(1) and interest under section 201(1A) of the Income Tax Act for non-deduction of tax at source on roaming charges paid to other telecom operators, as the charges did not constitute 'fees for technical services' under section 194J of the Act.