2018 (6) TMI 1646 - AT - Income Tax

TDS u/s 194J - roaming charges paid for roaming agreements with OTOs - assessee is engaged in the business of providing telecommunication services in telecom circles of Punjab - HELD THAT - We find that departmental appeals are without any merit. The facts taken on record which have not been upset are that for installation/setting up/repairing/servicing/maintenance/capacity augmentation etc. human intervention is required however after this process is complete the interconnection between the operators is automatic and at that stage no human intervention is required. These conclusions have been arrived after considering the Reports of the technical experts their cross-examination etc. Interconnecting User Charges (IUC) which signifies charges for connecting two entities. The Coordinate Benches have relied upon the order in the case of i-Gate Computer Systems Ltd where decision of M/s Bharti Cellulars Ltd. 2010 (8) TMI 332 - SUPREME COURT has been considered and also on the decision of Data Link transfer wherein considering similar facts it has been held that it does not require any human intervention and charges received or paid on account of this is not fees for technical services as envisaged in section 194J read with section 9(1) (vii) read with Explanation-2 of the Act. In the absence of any change in facts or law the payments made for interconnection are not fees for rendering any technical services as envisaged in section 194J of the Act. Therefore no tax is deductible at source u/s 194J of the Act on payment of roaming charges to the OTOs and the assessee therefore cannot be treated as an assessee in default. Apart from the various decisions of High Courts and ITAT orders cited the issue stands concluded in favour of the assessee by the consistent orders of ITAT Bangalore and Jaipur Benches in assessee s own case. In the absence of any distinction on facts circumstances or position of law the departmental appeals are dismissed.

Summary

Issues Involved:
1. Applicability of Section 194J of the Income Tax Act, 1961, on payments made for roaming charges.
2. Determination of whether roaming charges constitute "fees for technical services" requiring tax deduction at source (TDS).

Detailed Analysis:

Issue 1: Applicability of Section 194J on Roaming Charges
The core issue revolves around whether the payments made by the assessee for roaming charges to other telecom operators (OTOs) attract the provisions of Section 194J of the Income Tax Act, 1961. The Assessing Officer (AO) held that these payments should be subjected to TDS as they constitute "fees for technical services" due to human intervention in the roaming process.

Issue 2: Roaming Charges as Fees for Technical Services
The AO's stance was based on the assumption that roaming involves technical services requiring human intervention, thus necessitating TDS under Section 194J. The AO's decision was challenged by the assessee, who argued that the payments for roaming services do not involve human intervention post-installation and setup, making them non-technical in nature.

Arguments and Findings:

1. Revenue's Argument:
- The AO held the assessee in default under Section 201(1) read with Section 194J, arguing that roaming services involve technical processes like maintenance, supervision, and monitoring, which require human intervention.
- The Department sought technical reports from experts, which supported the AO's view that the interconnection process involves significant technical manpower and equipment.

2. Assessee's Argument:
- The assessee contended that the payments for roaming charges do not attract Section 194J as they do not involve technical services post-setup.
- The assessee relied on various judicial precedents, including decisions from different High Courts and ITAT Benches, which consistently ruled in favor of the assessee on similar issues.

3. CIT(A)'s Decision:
- The CIT(A) referred to the Supreme Court's decision in the case of M/s Bharti Cellular Ltd. and other relevant cases, directing the AO to reconsider the applicability of Section 194J.
- The CIT(A) allowed the assessee's appeal, holding that the payments for roaming charges do not constitute fees for technical services as envisaged under Section 194J.

4. ITAT's Findings:
- The ITAT noted that the issue had been consistently decided in favor of the assessee in various judicial forums, including the assessee's own cases in Jaipur and Bangalore ITAT Benches, and the Karnataka High Court.
- The ITAT emphasized that once the setup and installation are complete, the interconnection process is automatic and does not require human intervention, thus not qualifying as technical services.
- The ITAT upheld the CIT(A)'s decision, stating that in the absence of any change in facts or law, the payments made for interconnection are not fees for technical services, and no TDS is deductible under Section 194J.

Conclusion:
The ITAT dismissed the Revenue's appeals, concluding that the payments made for roaming charges do not constitute fees for technical services under Section 194J, and thus, no TDS is required. The decision was based on consistent judicial precedents and the absence of any distinguishing facts or legal changes. The appeals of the Revenue were dismissed, and the order was pronounced in the open court on 28.06.2018.