2010 (8) TMI 332 - SC - Income Tax

TDS - Section 194J – interconnects agreement – "fees" under section 194J of the Act - 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. - Matter requiring examination by Technical experts – going merely by contract between parties not proper – Dept. ought to examine technical experts – Matter remanded

Regarding interest u/s 201(1A) - it would not be justified for the following reasons: Firstly, there is no loss of revenue. It is no doubt true that TDS has not been deducted by the payee but the tax has been paid by the recipient. Secondly, the question involved in the present cases is the moot question of law, which is yet to be decided. Basically, we would have closed the file because these cases are only with regard to levy of interest but we are remitting these cases, as stated above, to the Assessing Officer (TDS) only because we are of the view that this issue is a live issue and it needs to be settled at the earliest. Once the issue gets settled, the Department would be entitled to levy both penalty and interest but, as far as the facts and circumstances of the present cases are concerned, we are of the view that the interest is not justified at this stage.