TMI Blog2017 (1) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... cial pronoucements, provisions of section 263 cannot be invoked on the pretext that assessment order is erroneous and prejudicial to the interests of revenue. The impugned assessment year proceedings u/s 201 were also initiated against assessee for non-deduction of TDS u/s 194J on payment of bandwidth charges and ultimately orders were passed by raising demand u/s 201(1) and 201(1A). When assessee preferred appeal against the said order, ld. CIT(A) decided the issue in favour of assessee by holding that assessee is engaged in trading of bandwidth, hence, the provisions of section 194J are not applicable. It was brought to our notice by ld. AR, this order of ld. CIT(A) has been accepted by the department as no further appeal was filed. This contention of ld. AR remained uncontroverted. Thus, as can be seen from the aforesaid facts, opinion of the departmental authorities on applicability of section 194J to payment of bandwidth charges are also different. Therefore, the assessment order cannot be held to be erroneous and prejudicial to the interests of revenue on such a debatable issue - Decided in favour of assessee - ITA No. 470/Vizag/2013, ITA No. 509/Vizag/2014 - - - Dated:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. After analysing the technicalties of the bandwidth, ld. CIT observed that it is not a physical commodity, but it is invisible, intangible electronic signal which assessee accesses from the service provider and makes it available to the customers for efficient data transfer. Bandwidth is a facility by way of service, provided to the customers for purpose of efficient data transfer. It is a service provided by the service provider for which assessee made payment. He observed that bandwidth is not a ready-made product which can be manufactured, stored and supplied. It is produced by way of continuous process and continuing ef forts of several technically competent people working on sophisticated machinery. In order to make the bandwidth available to assessee, a further process is required by involving satellites, optical cables and other equipment. Even assessee cannot access the same in the manner he can access a tangible commodity in the market. Assessee requires a compatible net work and equipment to access the bandwidth. Payment made by assessee is for using the process through which the bandwidth is produced and made available to it and also for final connected services provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of royalty, it will not attract the provisions of section 194J of the Act, hence, question of disallowance u/s 40(a)(ia) will not arise. In support of such contention, ld. AR relied upon the decision of Hon ble Delhi High Court in case of CIT Vs. Estel Communications Pvt. Ltd., 318 ITR 185 and the following decisions of ITAT: 1. Infosys Technologies Ltd. Vs. DCIT, 45 SOT 157 2. DCIT Vs. M/s Excel Media (P) Ltd., ITA No. 628/Hyd/2009, dt. 03/12/2010 3. ACIT Vs. Ushodaya Enterprises (P) Ltd., 53 SOT 193 6. Ld. DR strongly supporting the order of ld. CIT submitted before us, bandwidth charges paid by assessee to the service provider being in the nature of royalty, provisions of section 194J are applicable. In support of such contention, he relied upon the decision of the Hon ble Madras High Court in case of Verizon Communications Singapore PTE Ltd. Vs. ITO (International Taxation), [2014] 361 ITR 575 (Mad.). 7. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions relied upon before us by both the parties. As can be seen, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made are not in the nature of managerial, consultancy or technical services nor is it for the use of or right to use industrial, commercial or scientific equipment. The service provides such as MCI Telecommunications or AT T only ensure that the sufficient bandwidth is available on an ongoing basis to the ultimate users to uplink and downlink the signals. 4.10 The Madras High Court in the case of Skycell Communication Services Ltd. V DCIT 251 ITR 53 has held that payment for use of mobile phone services would not constitute royalties or fees for technical services. Payments made for bandwidth are akin to the payment made for use of mobile phone services. ITAT, Hyderabad Benches also in the decisions cited by ld. AR has expressed similar view. However, it needs to be observed , the Hon ble Madras High Court in case of Verizon Communications Singapore PTE Ltd. (supra) has expressed a contrary view. In this context, it is to be noted that no decision of the jurisdictional High Court on the issue has been brought to our notice. When there are conflicting views expressed by non-jurisdictional High Courts and decisions of different Benches of ITAT are in favour of assessee, the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is allowed. 9. In view of our finding in preceding paragraphs, the issues raised in the additional grounds are of mere academic interest, hence, we do not feel the necessity to adjudicate them. 10. In the result, assessee s appeal is considered to be partly allowed. ITA No. 509/Vizag/2014 11. This appeal of assessee is directed against the order dated 23/0-6/2014 passed by ld. CIT(A)-V, Vijayawada dismissing the appeal against consequential order passed by AO in pursuance to the ld. CIT s direction u/s 263 of the Act. 12. As can be seen, the AO made addition of payments made towards bandwidth and leaseline charges by applying section 40(a)(ia) in the consequential order passed in pursuance to the directions of ld. CIT u/s 263. Ld. CIT(A) has dismissed assessee s appeal since disallowance was made as per the order passed u/s 263. Considering the fact that while deciding assessee s appeal in ITA No. 470/Vizag/2013, we have set aside the directions of ld. CIT on the issue of applicability of section 40(a)(ia) to payment made towards bandwidth/leaseline charges, no disallowance can be made u/s 40(a)(ia) of the Act. In view of the aforesaid, the impugned order o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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