TMI Blog2010 (12) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... harti Cellular Ltd. (2010 -TMI - 202748 - Supreme Court of India ) matter remanded back to AO to decide afresh. Regarding double payment of tax - After the judgment of the Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. (http://www.taxmanagementindia.com/visitor/detail_case_laws.asp?ID=1676), there is no merit in the contention that taxes can be recovered from the deductor even though taxes were paid by the deductees. - CIT(A) ought to have directed the Assessing Officer to invoke his powers under the Act and have the payment of taxes by the payees verified from the respective Assessing Officers assessing the payees with the help of the Permanent Account Numbers of the payees made available by the assessee - If upon verification it is found that the taxes have been paid by the payees fully in respect of the roaming charges received by them from the assessee, nothing survives - Appeal is partly allowed - ITA No. 6058/Mum/2009, 6059/Mum/2009 and 6060/Mum/2009 - - - Dated:- 22-12-2010 - R.V. Easwar, S.V. Mehrotra, JJ. Soli Dastur for the Appellant A.P. Singh for the Respondent ORDER R.V. Easwar, President: These are three appeals fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical orders for all the three years. In the orders passed under section 201 of the Act, there were other payments also on which the assessee was asked to pay tax, but we are not concerned in these appeals with those payments because they were decided by the CIT(A) in favour of the assessee against which separate appeals have been filed by the Department in ITA Nos. 155 to 157/Mum/2010. These appeals were also tagged along with the present appeals filed by the assessee but by consent of the parties they were delinked to be heard separately since the issues in those appeals were in no way connected to the issue that arises in the assessee's appeals. Further, the appeals filed by the assessee are stay granted cases and were therefore given priority of hearing. Be that as it may, the CIT(A) while examining the assessee's appeals in respect of the national roaming charges and the stand taken by the Assessing Officer that the assessee ought to have deducted tax therefrom under section 194J or section 194-I, held that section 194-I was applicable to the case and the national roaming charges paid by the assessee to other cellular service providers under the agreements with them shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery or equipment and, therefore, the payment of national roaming charges amounts to payment of rent. (d) There is no requirement of a regular rental or hiring agreement and even an arrangement between the parties is sufficient to attract the definition of "rent". From 13.07.2006 an amendment was made to the definition of "rent" in section 194-I to include "any arrangement" under which the payment is made irrespective of whether the assets are owned by the payee or not. (e) Even if there is no human element involved in the provision of the facility and the entire facility is completely automatic, it would make no difference to the position so long as the payment is made for the use of the machine or equipment. In this view of the matter, the CIT(A) held that the national roaming charges were in the nature of rent and accordingly the assessee was liable to deduct tax under section 194-I of the Act. He thus upheld the order under section 201 on this issue for all the three years. 5. The assessee is in further appeal before the Tribunal for all the three years and in the first ground has challenged the correctness of the decision of the CIT(A) regarding the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be of the same or similar nature as a lease, sub-lease or tenancy and it should involve a transfer of interest in the asset. The basis of this argument is the rule of ejusdem generis which simply means that the meaning of a general word should be restricted to things or matters of the same genus as the preceding particular words. However, in order to attract this principle, it is essential that a distinct genus or category must be discernible in the words under examination. A lucid illustration from Salmond on Jurisprudence, Twelfth Edition, Page 135, may be quoted with advantage:- "This, (i.e., the rule of ejusdem generis) however, is only the application of a common sense rule of language: If a man tells his wife to go out and buy butter, milk, eggs and anything else she needs, he will not normally be understood to include in the term 'anything else she needs' a new hat or an item of furniture". The words used together should be understood as deriving colour and sense from each other. This rule has been employed in several decisions under the Income Tax Act and it is not necessary to refer to them. The point made is that under the agreement entered into between the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the property of any other person". The Supreme Court held, rejecting the plea of the revenue, that merely because a word is widely defined it does not lose its ordinary, natural and popular meaning and it only enables the word to be applied to things to which it would not normally be applicable, there being nothing in the subject matter or in the context to the contrary. It was further held that the words "any transaction" must take their colour from the main provision viz., that it must be a transfer of property in some way. It must be remembered that the words "any transaction...." were controlled by the earlier words "other alienation" which in turn were controlled by the words "transfer of property", with the result that it was essential that there was a transfer or alienation of property in the first place before it can be examined whether there was a diminishment of the value of the property of one person and corresponding increase in the value of the property of others. We are in the present case concerned with a provision with a significant difference in the phraseology. The Explanation (i) seeks to define "rent" and immediately clarifies that any payment which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights of similar nature". Here, the words "of similar nature" clearly make room for the application of the rule of ejusdem generis in the sense that the other business or commercial rights must be of the same nature as those listed in the earlier part of the provision (viz., patents, copyrights, trade-marks etc.). Such restrictive words are not present in Explanation (i) below section 194-I. We are not however to be understood that only where such restrictive words are used can there be scope for the application of the rule of ejusdem generis. The rule must be applied where the context or language also permits it but where either the language or the context does not permit, the temptation to apply the rule in a mechanical manner has to be avoided. Further, the object of the statute and the mischief sought to be avoided have also to be kept in view. The object of Explanation (i) below section 194-I appears to us to be to make all payments for the use of any of the assets mentioned in clause (a) subject to tax deduction at source. In this context, it may be incongruous to hold that even where use of the assets is involved the payment therefor cannot be held to be subject to tax deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng subscribers to use its GSM network. Clause 6.2 provides for "Services". The service provided by each party to the agreement is listed in Annexure 1.2. It further says that the GSM services made available to individual roaming subscribers shall only be those for which the roaming subscribers have valid subscriptions in their HPLMN. It further provides that each VPLMN Operator shall offer the same GSM services to roaming subscribers of all other GSM Operators. Clause 8 provides for "Charging, Billing and Accounting". It says that the parties agree that when a roaming subscriber uses the services of the VPLMN Operator, the roaming subscriber's HPLMN Operator shall be responsible for payment of the charges for the services so used in accordance with the tariff of the VPLMN Operator. The clause further provides that the HPLMN Operator shall not be so liable in respect of services provided by VPLMN Operator without Subscriber Identity Authentication as defined in the terms and conditions. The clause also provides for the change of tariff by either party. There are several other terms and conditions which were not referred to before us and which may not be relevant for our purpose. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSM/CIBER i.e. Cellular Inter-carrier Billing Exchange Record for CDMA. TAP file contains details of calls made by subscriber viz. location, calling party, time of call and duration etc. TAP/CIBER files are rated as per tariffs charged by Visiting network operator. Such TAP/CIBER file is transferred to Home network of subscriber (i.e. to Vodafone). Home network (i.e. Vodafone) then bills these calls to the Vodafone subscriber and pays roaming charges based on the TAP to the visited network operator (i.e. IDEA). The roaming operator charges as per the roaming agreement with Vodafone, whereas the subscriber is billed as per the tariff subscribed". 10. The question is whether the payment made by the assessee as national roaming charges to the other service providers is for the use of such equipment. We may refer to an analogous situation. Let us take for example a lathe. If a person takes a piece of steel rod for turning or grinding by a lathe, he would approach the owner of the lathe to carry out the work. It is the owner of the lathe who, while carrying out the turning or grinding job, would use the lathe and the person who requires the lathe owner to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilitator between its subscriber and the other service provider, facilitating a roaming call to be made by the subscriber. The assessee cannot be said to have used the equipment which is involved in providing the roaming facility. The assessee collects the roaming charges from its subscriber and passes it on to the other service provider. 12. The assessee has submitted a specimen copy of the invoice raised by Airtel on the assessee on 8th February 2010. This is for the period 01.01.2010 to 31.01.2010. The value in Indian Rupees is Rs.3,84,18,831/- to which Service Tax of Rs.39,57,140/- has been added. The assessee has also drawn our attention to section 65 of the Finance Act, 1994, which contains a series of definitions for the purpose of levying Service Tax. Clause 105 of the section defines "taxable service" to mean any service provided or to be provided and this clause read with its sub-clause (zzzx), includes any service provided or to be provided to any person by the telegraph authority in relation to telecommunication service. Clause 109a of section 65 defines "telecommunication service" to mean service of any description provided by means of any transmission, emission or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed while in motion". In several other places in the licence agreement the word "service" has been used. It would therefore appear to us that the roaming facility is actually a facility or service provided to the subscriber either by the service provider with whom the subscriber is registered or by another service provider with whom it has an agreement or arrangement for the provision of the roaming facility. The Notification dated 24th January 2003 issued by the Telecom Regulatory Authority of India (TRAI) also uses the words "service, service operators and service providers". An Explanatory Memorandum was issued to "The Telecommunication Interconnection Usage Charges (Tenth Amendment) Regulations, 2009", a copy of which is placed at pages 38 to 49 of the Paper Book filed by the Department. Under the heading "IUC reconciles conflicting objectives" in paragraph 2 of the Memorandum it has been stated that an important objective of IUC is to make available the widest range of telecommunication services to the consumers at reasonable cost and also these services should be provided in the most economically efficient manner. It has further been stated that the benefits of liberalization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises, and in the case of roaming charges, a subscriber does not get any earmarked service provider and the assessee also does not commit itself to the subscriber to provide for any particular service provider. The choice of the service provider who will provide the roaming facility to the subscriber is left to the subscriber. He usually finds a message delivered to him when he moves to a different place from where he is registered, say from Mumbai to Delhi. The message which is flashed on his cell phone gives the names of the service providers which have a roaming agreement with the service provider with whom he is registered and he can choose any of them during the period of his stay in Delhi and be connected through the cell phone. Very often he may, while using the roaming facility, be given the message that the call could not be put through. This is because of the lack of availability of space in the network of the service provider whom he has chosen. He may have to change to another service provider and if there is none, he has to try again through the same service provider till space is made available. This only shows that there is no commitment either by the assessee or by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call centre, data processing and information technology support services to the Dell group of companies. A non-resident company known as BT, which was registered in the USA, provided the assessee with two-way transmission of voice and data through telecom bandwidth. The assessee had to pay fixed monthly recurring charges for the circuit between USA and Ireland and Ireland to India net of Indian taxes. There was no equipment of BT in the assessee's premises and the assessee had no right over any equipment held by BT for providing the bandwidth. The fiber link cables and other equipment were used for all customers of BT including the assessee. The bandwidth was provided through a huge network of optical fiber cables laid under seas across several countries of which BT used only a small fraction. The question arose as to the nature of the monthly recurring charges paid by the assessee to BT. The Department's case was that the payment fell under section 9(1)(vi) of the Income Tax Act and was to be treated as royalty. The word "royalty" was defined in Explanation 2 below the section and clause (iva) of the Explanation stipulated that any consideration for the "use or right to use" any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 281 (Del)]. That was a case of an airlines having to pay landing and parking charges for its aircraft and the question was whether such charges amounted to rent for the use of the airstrip for the purpose of the Explanation below section 194-I. There also it was held that the word "rent" in the Explanation has a wider meaning than the meaning attributed to it in common parlance. Nevertheless it was held that any agreement or arrangement between the parties should be for the use of the land. It was held that when the wheels of an aircraft coming into an airport touch the surface of the air-field, use of the land of the airport begins. The parking of the aircraft in the airport also involves use of the land. It was thus held that the payments of landing and parking fee were subject to tax deducted at source. This is a case where the user of the asset directly came into contact with the asset and actually used the asset, namely, the land belonging to the Airport Authority both for taxiing and for parking. It cannot be denied that use of the asset was clearly involved. The argument, however, was that even control of technology from a distant place would amount to use in the modern w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing propositions:- (a) the context has to be kept in mind; (b) the word has to be construed as understood in the trade circles of that particular business activity; and (c) the development in the field of technology has to be taken into account. Relying on this order of the Special Bench, the revenue contended that when roaming facility is activated, the assessee controls the same through the equipment involved in the network, which would amount to use by the assessee of equipment within the meaning of the Explanation below section 194-I. We have taken note of the context in which the word "use" of the asset is employed in the Explanation. The payment has to be for the use of the asset if it is to be subjected to tax deduction at source. The parties in the agreement for roaming services have repeatedly used the word "service" to denote the roaming facility to be offered by the service provider. The TRAI regulations also repeatedly coin the expression "service" or "service provider". The development of technology has to be certainly taken note of. As technology develops, it will certainly be possible to enjoy more facilities by a person sitting in remote places ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a for being described as "goods". The Court held that the electromagnetic waves cannot be called goods. They were held to be merely the medium of communication; the waves are neither abstracted nor consumed, they are not delivered, stored or possessed, nor are they marketable. What was transmitted is not an electromagnetic wave but the signal through such means. The Supreme Court thereafter gave a more basic reason to hold that the electromagnetic waves cannot be considered as goods and it is this reason which is relevant for our purpose. At page 302 of the report it was held as under:- "A subscriber to a telephone service could not reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. Nor does the subscriber intend to use any portion of the wiring, the cable, the satellite, the telephone exchange, etc.........................As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection". These observations give a clue to the solution in the present case. It is noteworthy that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 5-E of the said Act provided that every dealer who transfers the right to use any goods for any purpose, whatsoever, is liable to pay Sales Tax at the prescribed rate. In the case before the Supreme Court the owner of the machinery hired out the same to contractors to be used in the project which was allotted to the owner by the State Government. The contractors were not free to use the machinery for any work other than the project work nor they were permitted to move out the machinery during the period when it was in use. In these circumstances a question arose as to whether the owner of the machinery had transferred the right to use the machinery to the contractors. The Supreme Court held that the effective control of the machinery, even while it was being used by the contractor, was with the owner of the machinery and further the contractor could not use the machinery for any work other than the project work or move it out during the period it was in use. The Supreme Court on these facts held that there was no transfer of the right to use the machinery and no Sales Tax was payable on the hire charges received. It was so notwithstanding that the contractor was responsibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity of the transponder was kept entirely at the disposal of Isro and the use of the transponder was ensured when it responded to the directions sent through the ground station. The analogy of operating a TV by remote control apparatus was put forth by the revenue. The AAR found it difficult to accept the revenue's contention. It held that the fact that the transponder automatically responded to the data commands sent from the ground station network and retransmitted the same over a wider footprint area covered by the satellite did not mean that the control and operation of the transponder was with the Isro. It was held that Isro did not operate the transponder but got access to the navigation transponder through its own network or apparatus. According to the AAR, in essence, it amounted to the provision of a communication or navigational link through a facility owned by the non-resident company and exclusively operated/controlled by it. The operation and regulation of the transponder was always with the owner of the transponder which was the non-resident. The analogy of TV operations by means of a remote control suggested by the revenue was held not appropriate because the remote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the definition of the expression "fees for technical services" in Explanation 2 below section 9(1)(vii) of the Income Tax Act. The definition of "fees for technical services" in that section is that it means any consideration (including lumpsum consideration) for the rendering of any managerial, technical or consultancy services, including the provision of services of technical or other personnel. We are not concerned with the other part of the definition which excludes certain types of consideration from the definition. The question really is whether the assessee paid the roaming charges in consideration for the rendering of any technical services by the other service provider. 25. Before we proceed to examine the question, a preliminary point needs to be settled. In Ground No.2 the assessee has questioned the applicability of section 194J and has contended that the CIT(A) "erred in not giving any finding on non-applicability of section 194J of the Act on payments towards national roaming charges even after considering appellant's submissions and indirectly accepting that provisions of section 194J are not applicable". A perusal of the grounds of appeal filed before the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 194J is not attracted. Initially the revenue objected to any arguments being advanced by the assessee with regard to section 194J because there was no finding by the CIT(A). The contention of the assessee, however, was that the matter can be argued because of the operative portion of the order of the CIT(A) deciding the entire Ground No.1(c) against the assessee. However, Mr Dastur also had to reckon with the later part of Ground No.2 taken before us where it was stated that the CIT(A) has indirectly accepted that section 194J was not applicable. If we understand the decision of the CIT(A), reading his order as a whole, that he has indirectly accepted that section 194J was not applicable to the case, that would create a difficulty in the sense that the revenue has not taken any ground in its appeals to the effect that the CIT(A) was wrong in indirectly holding that section 194J was not applicable. Apart from this difficulty the real question will be whether we can understand the order of the CIT(A) as indirectly accepting the assessee's contention that section 194J is not attracted. Mr Dastur submitted that the assessee had put forth its contentions before the CIT(A) both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court judgment (supra) in CIT, Delhi vs. Bharti Cellular Ltd. in Civil Appeal No.6691 of 2010 (arising out of SLP(C) No.16452 of 2009). The Delhi High Court decision proceeded on the basis that there was no human intervention or interface involved in connection with providing interconnection facility by service providers. Before the Supreme Court the key issue which arose for determination was "whether manual intervention is involved in the technical operations by which a cellular service provider, like M/s Bharti Cellular Limited, is given the facility by BSNL/MTNL for interconnection?". The Supreme Court had to examine the meaning of the words "fees for technical services" under section 194J. The court opined that it is necessary to find out if human intervention is involved in any stage, including the stage when the existing capacity is exhausted and additional capacity is urgently required. Noting the absence of expert evidence from the side of the Department to show how human intervention takes place during the process when the calls take place (in the above example, from Delhi to Nainital and vice versa), the court restored the case to the AO (TDS) to examine a te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld receive fresh consideration at the hands of the Assessing Officer also in the light of the above directions of the Supreme Court. The Assessing Officer will take a fresh decision on the applicability of section 194J to the payment of national roaming charges in accordance with law and in the light of the above observations and in the light of the observations of the Supreme Court in CIT vs. Bharti Cellular Ltd. (supra). The assessee shall be given adequate opportunity of putting forth its case before any decision is taken. Ground No.2 is disposed of accordingly. 28. The assessee has filed an additional ground of appeal (Ground No.2A) to the effect that "without prejudice to Ground No.2 above the CIT(A) ought to have held that section 194J of the Act was not applicable to national roaming charges". In the light of what has been stated in the preceding paragraphs, the additional ground becomes infructuous and is therefore not decided. 29. Ground No.3 is to the effect that in any case the taxes cannot be recovered from the assessee since the payees have already paid the tax on the national roaming charges. Reference is made in the grounds to the judgment of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the payees. 31. This issue has been considered by the CIT(A) in page 26 of his order in paragraph 11. He has made two points against the assessee. The first is that the declarations from the payees have been filed only before him and, therefore, could not have been verified by the Assessing Officer. Secondly, he has held that the onus was on the assessee as a tax deductor to satisfy the Assessing Officer that the payees have paid the taxes on the national roaming charges received by them and it was not for the Assessing Officer to make enquiries himself and give the benefit of the credit to the assessee. According to the CIT(A), even as per the order of the Special Bench in the case of Mahindra and Mahindra (supra), the onus was not on the Assessing Officer to make enquiries as to whether the deductees have paid the tax on the income received from the assessee. In this view of the matter he rejected the assessee's plea. 32. The contention of Mr Dastur, appearing for the assessee, before us is that the CIT(A) has placed an impossible burden on the assessee. It was pointed out that the Permanent Account Numbers of nineteen parties were furnished to the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been short deducted in its taxable income and paid taxes thereon. The Income Tax Department being an All India Body cannot take a different position and contend that even though the taxes were paid by the payees including the taxes on the payment in dispute, it was still open to it to recover the taxes from the payer/deductor. However, the question is whether as a fact it has been established that the payees have included the income in their returns and paid taxes thereon. This requires factual verification. We are however unable to share the view of the CIT(A) that the onus is entirely on the assessee to prove that the taxes have been paid by the payees. It is true that the onus is initially on the assessee who takes up the plea but when sufficient details which would enable the Assessing Officer to verify the factual position have been filed before the Assessing Officer it was for the Assessing Officer, with his vast powers, to invoke them and have the details furnished by the assessee verified. In the present case the assessee has furnished the Permanent Account Numbers of nineteen parties and letters of confirmation have been filed from eight of them before the CIT(A). The Per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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