9911796707
Advanced Search 
TMI Blog2017 (8) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... related services; iii). to provide capital IP-BN services; iv). to set up an international gateway and provide gateway services. The Department of Telecommunications (DoT) granted it a license for a period of fifteen years, w.e.f. 05.02.2001, for providing internet services all over India. During the year under consideration the AO found that the assessee had credited the P&L account with a sum of Rs. 26.97 crores as sale of bandwidth and Rs. 2.21 crores under the head network and support services fee, that it had charged to its P&L account Rs. 29.60 crores as operating and other expenses including bandwidth procurement (Rs.18.97 crores) and network and support services fee(Rs.3.06 crores), that it had claimed deduction of Rs. 1.34 crores u/s.80-IA (4)(ii)( In short 80IA). The AO issued a notice, on 09/11/2009, to the assessee to furnish explanation as to why deduction u/s. 80IA should not be disallowed. After considering its reply, dated 25/11/2009, the AO held that the assessee was merely a trader in bandwidth, that it had been purchasing bandwidth from various ISP.s and was selling the same to other ISP.s, that had the assessee purchased the bandwidth for rendering internet serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and corporate users, that quantum of revenue generated from sale of bandwidth proved that the revenue recognised in its accounts was from sale of bandwidth and not from rendering any services in respect of the bandwidth, that there was thriving business of dealing in bandwidth alone, that the assessee had claimed that it was not engaged in the business of purchase and sale of bandwidth but was only fullfledged ISP, that there could not be dispute that assessee is also an ISP, that primarily it was engaged in business of wholesale purchase and sale of bandwidth, that the tax deducted at source certificates issued by the customers showed that payments made to the assessee were on account of professional services and that the tax was deducted u/s. 194J of the Act, that the invoices were computer generated, that the AO had asked the assessee to furnish confirmation from the parties to support its claim, that none of the parties had issued confirmation, that it was the duty of the assessee to establish that the receipt from sale of bandwidth was eligible for exemption, that no credible material evidence had been brought on record to establish that the sale of bandwidth in fact represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deliberate upon the concept and nature of the internet-service Providers (ISP.s). Internet is the global system of interconnected computer networks that use the Internet protocol suite (TCP/IP) to link devices world wide. It is a 'network of networks' that consists of private, public, academic, business, and government networks of local to global scope, linked by a broad array of electronic, wireless, and optical networking technologies. It carries an extensive range of information resources and services, such as the interlinked hypertext documents and applications of the World Wide Web (WWW), electronic mail, telephony, and file sharing. Internet use grew rapidly from the mid-1990s. In the two decades since then, Internet use has grown 100-times, measured for the period of one year, to over one third of the world population. It has enabled and accelerated new forms of personal interactions through instant messaging, Internet forums and social net-working. 5.i. Internet has no centralized governance in either technological implementation or policies for access and usage; each constituent network sets its own policies. Only the over-reaching definitions of the two principal nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a data connection, bandwidth (communication speed, or connection speed)is the total maximum transfer rate of a network cable or device. Essentially, it is a measurement of how fast data can be sent over a wired or wireless connection, usually measure in bits per second. 5.1. We find that the basic question to be decided is as to whether the assessee was entitled to claim made by it u/s. 80IA of the Act. The section applies to any undertaking which started providing telecommunication services basic cellular, including a division, domestic satellite service, network of trunking, broadband network and Internet services on or after 01/04/1999 but on or before 31/03/2005. We would like to refer to schedule 9:(Accounting Policies and Notes Forming Part of the Audited Financial Statement)for the year under consideration and same reads as under: "1. Company Background: Reach Network India Private Ltd (the "Company") was incorporated on 9 August 2000. The company is primarily engaged in the business of procurement and sale of bandwidth to retail Internet service providers and corporate users. The company has a licence to provide ISP services for a period of 15 years from 5 February 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not provided broadband network/ Internet services. It has admitted that it was purchasing and selling the bandwidth to its customers. It is said that the principles of beneficial interpretation in favour of the assessee, with regard to deductions/exemptions/ rebates should be resorted to only when true scope of the ambit of the provision is not clear or there are two equally reasonable interpretations or when words of the statute are not plain, precise and unambiguous. In the matter before us, there is no ambiguity about the entitlement of the deduction. A wholesale purchaser of bandwidth, in our opinion, cannot be equated with an undertaking providing infrastructure facilities i.e. broadband network and Internet services. In its letter, dated 25/08/209, it had admitted that it used to procure bandwidth in wholesale from parties like MTNL, Bharati Infotel Limited, Broadband Pacenet Internet (India). As stated earlier, that it had also admitted that revenue was recognised on account of 'sale of bandwidth' and not in respect of 'bandwidth services'. 5.3. We are aware that the assessee was granted a licence by the competent authority to provide broadband services and to work as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2.21 crores is concerned, it is found that same were received from RGSL for providing Internet services to its customers in India. It is also found that the assessee had paid similar fees to RDSIPL for installing PoP for rendering Internet services to its customer. Thus, the only income for rendering Internet services is the network and support fee of Rs. 2.21 crores. But if the expenditure of Rs. 3.06 crores on network and support fees paid is considered it would result in a loss on operation of Internet services provided by the assessee. In these circumstances, we are of the opinion that the FAA has rightly held that assessee was not entitled to any deduction u/s. 80 IA of the Act. First effective ground of appeal (GOA.1-9), is decided against the assessee. 7. Next effective ground of appeal is about addition of Rs. 1.31crores on account of difference in income as reflected in the tedious certificate issued by various parties and corresponding income credited by the assessee to its P&L account. In our opinion, the issue needs further verification. Therefore, in the interest of Justice, we are directing the AO to verify the claim made by the assessee and decide the issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
