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TMI Blog2015 (1) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 194J c) Without prejudice to above, in not appreciating that the recipients of the datalink charges are companies who would have filed their tax returns and included the amounts in their taxable income and hence at the most the appellant can be liable to pay interest u/s 201(1A) 2. The appellant craves leave to add, modify or withdraw any of the grounds of appeal at the time of hearing 3. The issue raised in all the appeals is against demand raised under section 201(1) and interest charged under section 201(1A) of the Act. 4. All the appeals relating to same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. The facts in all the years under appeal are identical. However, we make a reference to the facts in ITA No.1301/PN/2013 to adjudicate the issue. 5. The brief facts of the case are that, the TDS Survey under section 133A of the Act was carried out on 13.01.2009 at the premises of assessee. Subsequently, ACIT-TDS had verified the records of the assessee company. The assessee was a software company engaged in software development, software export and allied activities. During verification, the AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o laid down by Kolkata Bench of the Tribunal in Hutchison Telecom East Ltd. Vs. ACIT 16 SOT 404 wherein it was held that interconnectivity charges paid to BSNL were in the nature of payment for technical services and was subject to the provisions of section 194J of the Act. The Assessing Officer observed that the decision in Skycell Communications Ltd. Vs. DCIT (supra) was of 2001 and the Kolkata Bench of the Tribunal in its order dated 25.05.2007 had even considered the said decision of the Hon'ble Madras High Court. In view thereof, it was held that the DATA link charges was the fee paid for technical services rendered by the service provider and the assessee should have deducted tax at source under the provisions of section 194J of the Act. Further, in respect of levy of interest under section 201(1A) of the Act, it was observed by the ACIT-TDS that where the deductee had paid the taxes on the income received from the deductor then, the same was to be considered while computing interest under section 201(1A) of the Act. The ACIT observed that all the service providers were companies of repute and there was no doubt they had paid taxes on the payment made by the assessee. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmed, it has to take corrective measures. Unlike normal internet facility available to customers the lines made available to the appellant are dedicated and uninterrupted which cannot be cone unless it is monitored with human intervention. Therefore, the action of the Assessing Officer in treating the data link charges as fee for technical services warranting deduction of tax at source u/s.194J of Income Tax Act, 1961 is upheld." 10. The CIT(A) vide para 20 accepted the alternate submissions of the assessee that no demand under section 201(1) of the Act could be raised in cases where the recipient had paid taxes on the amount in question by including the same in their respective returns of income. In view of the decision of the Hon'ble Supreme Court in Hindustan Coca Cola Beverages Pvt. Ltd. reported in (2007) 293 ITR 226 (SC), the DCIT was directed to modify the demand under section 201(1) of the Act in respect of proof / certificate submitted by the assessee from the respective service providers in relation to the data link charges. However, the CIT(A) directed the Assessing Officer to calculate the interest under section 201(1A) of the Act on actual basis and not on estimate ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es provided by the said service providers, in view of section 194J of the Act. The explanation of the assessee in this regard was that the said payments for DATA link charges were paid for using standard facilities provided by the service providers by using technical gadgets, which were made available universally to the others by way of the DATA link satellite line, which was established from one service provider to be carried over to the other service provider. In order to provide efficient and flawless services to the subscribers, the existing service providers provide interconnection of their networks through equipment of their networks to the equipments of other service providers. The connection is used for the transmission of DATA from one service provider to the designated client server and there was no human intervention for the transmission of the DATA. 16. On the perusal of the record, it transpires that facilities were provided by two entities i.e. the assessee and the service providers, who were linked to each other through the DATA link and for facilitating the arrangement, one service provider used the network element of other service provider to provide services to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, which are covered under the provisions of section 194J of the Act. 19. Another aspect to be noted in the case is that where such technical equipments / gadgets require maintenance, then technical support staff is used for correcting the system but that itself does not establish that the services provided by the maintenance crew are in the nature of technical services which are not in the nature of managerial, technical or consultancy services nor is it for the use of or right to use in industrial, commercial or scientific equipments. 20. The Hon'ble Madras High Court in Skycell Communications Ltd. Vs. DCIT reported in (2001) 251 ITR 53 (Mad) had held that for the purpose of section 194J to become applicable, it is necessary that the payee receives 'services'. If the payee uses only technical gadgets, which are made available to others also for fees, the same does not make the payment subject to tax deduction at source under section 194J of the Act. 21. The Bangalore Bench of the Tribunal in Infosys Technologies Ltd. Vs. DCIT (supra) on consideration of the payment made towards bandwidth charges to the service providers had held that such payments were not in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service provider for transmission of DATA and whether tax was to be deducted at source under section 194I of the Act held as under:- "We first take up corporate tax issues which is ground No. 5 for the assessment year 2007-08. The assessee is a licensed internet provider. During the year it procured, domestic half circuit facility to its customers from telecom service providers like BSNL, MTNL, and international half circuit facility from Rag, Atlantic at France. These are standard facilities provided for transmission of data by those organisations. The issue is whether tax should be deducted at source under section 194-I from payments made for use of such standard facilities. The Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. DIT [2011] 332 ITR 340 (Delhi) and the Hon'ble Madras High Court in the case of Sky cell Communications Ltd. v. Deputy CIT [2001] 251 ITR 53 (Mad) have adjudicated the issue in favour of the assessee. Respectfully following the same, we hold that payments made towards use of standard facility, when the lessee is not having any domain or control or possessory rights over such facility, cannot be categorised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also filed written submissions before the CIT(A) vide letter dated 01.04.2013 along with Flow chart / Diagram of how the DATA links works which is placed at pages 24 to 26 of the Paper Book. The assessee also placed on record the sample copies of purchase orders at pages 27 onwards under which, it was explained that the perusal of the bills would reflect the basis of charges, rates, etc. which were fixed / agreed upon and finally billed by the DATA link providers and it was vehemently stated that the same does in no way indicate involvement or otherwise of human intervention in the DATA link process. In view thereof, in the absence of any human intervention between the assessee and the services provided by the DATA link provider, it cannot be said that the payment made by the assessee was for technical services. Merely because for maintenance purpose certain human intervention was provided, cannot lead to the surmise that the DATA link charges paid to various telecom service providers, were in the nature of technical services governed by the provisions of section 194J of the Act. The DATA link charges were paid for utilizing the standard facilities which were provided by the indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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