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2015 (5) TMI 471 - ITAT PUNE

2015 (5) TMI 471 - ITAT PUNE - TMI - Non deduction of tds on datalink charges - technical services u/s 194J - Held that:- As decided in assessee own case [2015 (1) TMI 236 - ITAT PUNE] 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 utiliz .....

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link line, the payments made for utilizing such services was not in the nature of technical services governed by section 194J of the Act. Accordingly,hold that DATA link charges were not liable for tax deduction at source under the provisions of section 194J of the Act. - Decided in favour of assessee. - ITA Nos.1636 & 1637/PN/2014 - Dated:- 29-4-2015 - Sushma Chowla, JM And R. K. Panda, AM,JJ. For the Petitioner : Shri C H Naniwadekar For the Respondent : Shri Rajesh Damor ORDER Per: Sushma Cho .....

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o.1 636/PN/2014 to adjudicate the issue. 3. The assessee has raised similar grounds of appeal in both the years and the grounds of appeal in assessment year 2011-12 read as under:- In the fact and the circumstances of case, and in law, the learned Commissioner of Income-tax (Appeals) -V, Pune, erred: 1. In respect of datalink charges paid by the appellant: a) In confirming that datalink charges of ₹ 3,75,36,820 are liable to TDS u/s 194J. b) In concluding that human intervention is require .....

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ue raised in the present appeal is in relation to deductibility of tax under section 194J of the Act on Data Link Charges paid by the assessee. 5. The Assessing Officer was of the view that the assessee was liable to deduct tax at source from the Data Link Charges paid to various telecom service providers under section 194J of the Act. Since the assessee had not deducted the tax at source out of the said Data Link Charges paid by it, the assessee was show caused as to why the demand should not b .....

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providers, on which the assessee should have deducted tax at source under section 194J of the Act. In view of the assessee not having discharged his liability of deduction of tax at source, the Assessing Officer raised demand under section 201(1) of the Act at ₹ 99,17,920/- and charged interest under section 201(1A) of the Act at ₹ 35,70,450/-. 6. The CIT(A) placed reliance on the appellate order passed for assessment year 2007-08, in which similar issue was decided. Further, relian .....

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st chargeable under section 201(1A) of the Act. 7. The assessee is in appeal against the order of CIT(A). 8. On the perusal of record, we find that similar issue of deductibility of tax out of Data Link Charges arose before the Tribunal in assessee's own case in ITA Nos. 1301 to 1303 & 1616/PN/2013, relating to assessment years 2007-08 to 2010-11 and vide order dated 30.12.2014, it was held as under:- "15. We have heard the rival contentions and perused the record. The assessee was .....

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ers, 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, .....

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ther through the DATA link and for facilitating the arrangement, one service provider used the network element of other service provider to provide services to the ultimate customers. The issue which arises in the present appeal is whether such providing of services is covered under section 194J of the Act being technical or professional services provided by the service provider. 17. Fees for technical services has been defined in Explanation (b) to section 194J of the Act to have same meaning a .....

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under the head 'Salaries'. 18. Under the provisions of section 194J of the Act, where the assessee makes any payment against fees for technical services, then, is liable to deduct tax at source at the specified rates at the time of credit of the payment or at the time of actual payment, whichever is earlier. Fee for technical services is defined under the Act as consideration paid for rendering any managerial, technical or consultancy services but does not include consideration paid for .....

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facts of present case before us where, there is provision for DATA link and inter -connection facilities, the user utilizes the technical equipments for inter-connection purposes only through technical equipment or gadgets used in the transmission process, but the same does not part take the nature of services of managerial, technical or consultancy nature. Merely because, certain technical equipments or gadgets are made available for transmission of DATA link does not establish the case of the .....

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f 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 th .....

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were only to ensure that sufficient bandwidth was available on an ongoing basis to the ultimate users to uplink and downlink the signals. The relevant findings of the Tribunal were as under:- "The CIT(A)'s reasoning that the only way out is to get a nodeduction certificate from the AO (TDS), is lacked merit in substance and this reasoning of the CIT(A) is to be out rightly rejected. Software developed by companies in India is exported either in physical mode (i.e. through floppy disks) .....

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in the US and sent to the client locations using the bandwidth and downlinking facility provided by international service providers such as AT & T, MCI Telecommunications etc. The assessee shares the bandwidth provided by the international service providers. Bandwidth in normal parlance refers to the amount of traffic that could be carried on the internet. Greater the bandwidth greater would be the ability to transmit data and other communication. The payments made to service providers such .....

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llowance under s. 40(a)(i) was called for." 22. Further, the Delhi Bench of the Tribunal in Global One India P. Ltd. Vs. ACIT (supra) while deciding the issue of payments made towards facilities provided by 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 .....

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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 as use of assets for the purpose of the Act." 23. The Assessing Officer had plac .....

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son Telecom East Ltd. Vs. ACIT (supra) by holding that the word technical had to take colour from the words managerial and consultancy. It was further held by the Hon'ble High Court that managerial services had definite human element attached to and similar services of consultancy also necessary entailed human intervention and consequently, the word technical as appearing in Explanation (2) under section 9(1)(vii) of the Act has to be construed involving human element. The facilities which w .....

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he Department either before the CIT(A) or before the Tribunal and was not raised even in the present appeals. However, keeping in mind the higher interest and ramifications of the issue, the matter was remitted back to the Assessing Officer to examine technical expert and decide the same afresh. Further, it was held by the Hon'ble Supreme Court that the Department was not entitled to levy interest under section 201(1A) of the Act or impose penalty for non-deduction of TDS on the facts and ci .....

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4 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 interventio .....

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es which were provided by the individual service providers by way of use of technical gadgets which were made available vide DATA link satellite link line established from one service provider to be carried over to the other service provider, does not involve technical services as there was only interconnection of the networks to the equipments of other service providers. In the absence of any human intervention for transmitting the DATA through such DATA link satellite link line, the payments m .....

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