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2016 (3) TMI 727 - ITAT JAIPUR

2016 (3) TMI 727 - ITAT JAIPUR - TMI - TDS u/s 194H - whether roaming charges paid by the appellant qualify as Fee for Technical Services and thus, subject to tax deduction at source? - Held that:- The relationship between assessee and its distributors qua the sale of impugned products is on principal to principal basis; the consideration received by assessee is sale price simpliciter.

There is no relationship of Principal and agent between assessee and distributors as held by authori .....

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ssessee by : Shri Deepak Chopra and Ms Manasvini Bajpai (Advocates) For The Revenue by : Shri B.K. Gupta (CIT) and Shri O.P. Bateja (Addl.CIT) ORDER PER BENCH : These are seven connected appeals filed by the assessee against the order of ld. CIT (Appeals)-III, Jaipur dated 15th November, 2012 for the A.Ys. 2004-05 to 2010-11. The common grounds raised in the appeals are as under :- 1) On the facts and circumstances of the case and in law, the learned CIT (A) has erred in holding that the order p .....

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learned TDS Officer to verify payment of tax in respect of the recipient telecom operators for whom the appellant could not furnish confirmations despite the fact that other requisite details for such verification were available with the learned CIT (A)/TDS Officer. 4) On the facts and circumstances of the case and in law, the learned CIT (A) has erred in directing the learned TDS Officer to levy interest under section 201(1A) on the tax demand raised under section 201(1) of the Act. 2. The Tri .....

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enches of Chennai, in the matter of M/s. Vodafone Cellular Ltd. vs. DCIT vide order dated 31.07.2015 has held that the charges paid for roaming services do not fall under the Fee for technical services and, therefore, provisions of section 194J of the Act could not be attracted in the case of the assessee. 3.1. The ld. D/R for the revenue, has relied upon the order passed by the authorities below. In addition to that it was also pointed out that the matter is now pending adjudication before Hon .....

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e judgment passed by the Coordinate Bench is equally applicable to the cases in hand. For ready reference, we are hereby reproducing the facts mentioned in para 3 of the order passed by the AO TDS. The same are as under :- The assessee has relied on the decision of Hon ble Delhi High Court in the case of Bharti Cellular Ltd. - On the basis of which the Hon ble Apex Court has remanded the matter to the AO for fresh adjudication. Firstly, the matter is pending before the AO and thus the issue has .....

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ssarily human interface involved in providing roaming service. There is no doubt that there is intensive use of sophisticated machines and modern technology but simultaneously there is constant involvement of human mind and skill which is required for providing roaming services. For example, there is requirement of technical and skilled employees for following procedures involved in providing roaming services :- 1. To maintain and operate customer care centre round the clock for the subscribers .....

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ill, 2007. Thus the reliance on the decision in the case of Bharti Cellular Limited placed by the assessee is misplaced. Here it is also pertinent that The definition of fees for technical services is very wide. It covers within its ambit any managerial, technical or consultancy services rendered by a person. The service of this nature involves human skill as well as computerized machines. It is not automatic. But it is fully supported by services of personnel and requires human application of m .....

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technical services and therefore, the amount paid for roaming is technical fee in terms of Section 194J read with Explanation 2 to Section 9(1)(vii) of the Act. The ld AR explained the roaming service and submitted that Hexacom subscriber in Jaipur travels of Mumbai switches on his mobile device after reaching Mumbai. Where the subscriber travels by land he automatically receives a message transferring to the roaming network on visiting another telecom, circle. * Visiting network (e.g. Airtel in .....

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end system to the mobile device which is not visible to human. * Home network also updates its register to indicate that the mobile is on visitor network so that information sent to that device is correctly routed. * The Hexacom s subscriber in Mumbai, who is temporarily registered as Airtel s subscriber makes calls in Mumbai and the minutes are registered in his identity for which he has to pay through Hexacom Jaipur. * Alternatively, a called from Jaipur makes a call to Hexacom s subscriber wh .....

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procedure for GSM/CIBER, i.e., cellular inter-carrier billing exchange record for. * 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 Hexacom). * Home network (i.e. Hexacom) then bills these calls to the Hexacom s subscriber and pays roaming charges based on the TAP to the .....

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g subscriber, the visiting circle sends the air minutes to be recovered from the roaming subscriber to the Home circle for recovery from the subscriber who had visited the visiting circle. Technical fees * It is an accepted fact that technical service can be said to have been rendered if there is an involvement of human element or there have been use of cerebral faculties in the provision of technical services by the recipient of fee. * This is so because the word technical comes in between the .....

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al or otherwise. The ld CIT(A) partly accepted that roaming process is technical because it uses various instruments such as MSC (Mobile Switching Centre), VLR (Visitor Location Register), Radio network, towers, BTC etc. but the system is operated/managed by the Highly skilled professionals. The assessee s argument was that the roaming service is managed automatically by machines and payment for roaming charges are not fees for technical services. In case of fault in a breakdown of a system, the .....

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s no human interference in it. The human interference is required to maintain the robust network only to ensure break down free service to the subscriber. The network owner has to maintain for itself, its network in robust condition. The technical support of the staff is required to maintain the equipment and gazettes but it is not a service for roaming facility provided to the subscriber. There is commercial arrangement to connect the technical networks basically to be able to do business. In f .....

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ices as contemplated under Explanation 2 to Section 9(1)(vii) of the Act and not liable for tax deduction at source U/s 194J of the Act. This view has been earlier held by the Hon ble Madras High Court in the case of Skycell Communications Ltd. Vs. DCIT (2001) 251 ITR 53 (Mad) order dated 23/2/2001 wherein the Hon ble High Court has held that provisions of Cellular mobile telephone facility to subscribe is not a technical service. Deduction of tax at source need not to be made from subscriptions .....

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ility of Section 194J would come into effect only when by making payment of fee for technical services, assessee acquires certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to .....

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t and held that payments made for utilizing such services was not in the nature of technical services governed by Section 194J of the Act. He further relied on the decision of ITAT Ahmadabad Bench in the case of Canara Bank Vs. ITO 305 ITR (AT) 189 wherein MICR charges paid to SBI held not to be covered U/s 194J read with Section 9(1)(vii) Explanation-2. He also relied on the decision of Hon ble Bangalore ITAT in the case of Bangalore Electricity Supply Co. Ltd. Vs. ITO(TDS) order dated 16/3/201 .....

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11 A.Y. 2005-06. He also relied on the decision in the case of DCIT Vs. Parasrampuria Synthetics Ltd. 20 SOT 248 (Delhi). The revenue filed appeal against the order of Hon ble Delhi High Court in the case of Bharti Cellular Ltd. before the Hon'ble Supreme Court. The Hon'ble Supreme Court has held as under:- In cases requiring examination by technical experts, the Department ought not to proceed only by the contracts placed before the officers. With the emergence of our country as one of .....

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NL, the question whether the cellular provider has rendered technical services and has to deduct tax at source, depended on whether the charges were for technical services, and this involved determination of whether any human intervention was involved, which could not be determined without technical assistance. Decision of the Delhi High Court in CIT v. BHARTI CELLULAR LTD. [2009] 319 ITR 139 set aside and matter remanded to the Assessing Officer with directions. After this decision, the ld Asse .....

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itted that whole interconnected uses process, no manual intervention is required. He further drawn our attention on page No. 651 to 652 for postpaid as well as prepaid roaming charges charged between the operators from Mr. Kapoor Singh Guliani. The appellant also taken opinion from Former Chief Justice of India Mr. Kapadia on IUC post technical examination, cross examined and reexamination. Who also opined that Hon'ble Supreme Court decision dated 12/08/2010 is an order not judgment as the p .....

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re human intervention. But the roaming process between participating entities is fully automatic and does not require any human intervention. Accordingly, the interconnected uses charge will not attract the provisions of Section 194J read with Section 9(1)(vii) read with Explanation-2 thereto. Therefore, he prayed to delete the addition. If we examine the issue in both the matters, a irresistible conclusion about the lis involved in both the appeals are the same. Accordingly, we have no hesitati .....

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amount on MRP has been fixed on prepaid card sold. The assessee has not transferred any income to the distributor but the distributor was allowed to avail the airtime to the extent of MRP price. In books of account, the assessee had credited these receipts on net basis. The finding on the case of Tata Tele Services is reproduced as under: 2.23. We find merit in the contention of ld. Counsel that there is no jurisdictional high court judgment on this issue. Hon ble Karnataka High Court Judgment .....

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