TMI Blog2017 (11) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... he other telecom operators. CIT(TDS) has erred in concluding that roaming charges paid to other telecom operators by the assessee attracts provisions of section 194J without appreciating the facts that - Roaming charges paid by the assessee to the other telecom operators represent payments made for standard facility provided by such telecom operators and hence, cannot be classified as FTS for the purposes of the Act; No human intervention, which is sine qua non for a service to qualify as technical service, is involved in provision roaming services and therefore, roaming charges cannot be construed as Fee for Technical Services for the purposes of the Act CIT has not appreciated the facts that the other telecom operators, to whom the roaming charges have been paid, would have offered income arising from roaming charges received from the assessee to tax and hence, no prejudice would have been caused to the revenue and hence, initiation of 263 proceedings is bad in law and void ab initio. - Decided in favour of assessee. - ITA Nos. 3779, 3780 AND 3781/Del/2013 AND ITA Nos. 716, 717, 718/Del/2017 - - - Dated:- 7-11-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not appreciating the fact that the other telecom operators, to whom the roaming charges have been paid, would have offered income arising from roaming charges received from the appellant to tax and hence, no prejudice would have been caused to the revenue and hence, initiation of 263 proceedings is bad-in-law and void ab-initio. Without prejudice to the above Grounds 4 On the facts and in circumstance of the case and in law, the learned CIT (TDS) has erred in concluding that roaming charges paid to other telecom operators by the appellant attracts provisions of section 194J without appreciating the facts that - ( i) Roaming charges paid by the appellant to the other telecom operators represent payments made for standard facility provided by such telecom operators and hence, cannot be classified as FTS for the purposes of the Act. ( ii) No human intervention, which is sine qua non for a service to qualify as technical service, is involved in provision roaming services and therefore, roaming charges cannot be construed as Fee for Technical Services for the purposes of the Act. ( iii) The reports of the technical experts clearly establish the fact that roa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a jurisdictional pre-requisite. Ground No.2 - Disallowance under section 194J of the Act on account of non-deduction of tax at source on domestic roaming charges paid to other telecom operators 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the contention of the learned TDS officer that the Appellant was required to deduct tax under section 194J of the Act on the 'roaming charges' paid/payable by the Appellant to other telecom operators, during the subject financial year. 2.2 On the facts and in the circumstances of the case and in law, the learned CIT(A)/TDS officer have erred in not appreciating the fact that roaming services are standard automated services requiring no human intervention which is sine qua non for a service to qualify as a technical service for the purposes of section 194J of the Act. 2.3 On the facts and in the circumstances of the case and in law, the learned CIT(A)/TDS officer have erred in not appreciating that even as per the statement of technical experts, the carriage of calls is an automatic activity and human intervention, if any, is required only at the stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name, address and PAN details furnished by the Appellant. Ground No.4 - No interest under section 201(1A) of the Act can be charged 4.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the TDS officer in charging interest under section 201(IA) of the Act. 4.2 Without prejudice to Ground No 4.1 above, on the facts and circumstances of the case and in law, consequential interest under section 201 (l A) of the Act should be computed from the due date of payment of withholding tax by the Appellant to the date of payment of taxes by the payees/recipients of such income or filing of original return of income, whichever is earlier. The above grounds are without prejudice to each other. The Appellant craves leave to add, mend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case. 4. We first deal with ITA Nos. 3779 to 3781/Del/2013 (AYrs. 2007-08 to 2009-10), together being issues similar and ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in default for non deduction to tax at source from roaming charges paid to other telecom operators during the subject financial years. The aforesaid order passed by the learned TDS Officer was no erroneous as it was passed after due enquiries were conducted by the learned TDS Officer with respect to applicability of withholding tax provisions to the roaming charges paid by VDL to the other telecom operators. On merits of the ease, roaming charges paid by VDL to other telecom operators are not subject to tax deduction at source under the provisions of the Act and hence, VDL cannot be held as an assessee in default for non-deduction of tax at source thereon. In addition to the above submission made vide our letter dated April 27, 2012 and the judicial decisions cited therein, we wish to submit as follows. 1. Proceedings under section 263 of the Act have not been validly initiated We wish to draw your attention to a recent decision of the Hon'ble Delhi High Court in the case of DLF Ltd., (ITA No. 236 384 of2010), wherein the Hon'ble Court has held that proceedings under section 263 of the Act cannot be initiated in a case where the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid view also been upheld and followed by the Hon ble Ahmedabad High Court in the case of Narayan Organics Pvt. (in ITA No. 690/Ahd/2012). Applicability in case of VDL We wish to reiterate that in the present case, during the TDS proceedings, the learned TDS officer conducted detailed enquiries regarding various expense heads including roaming charges paid by VDL to other telecom operators and applicability of withholding tax provisions on such charges. Based on the submission filed by VDL, he came to a conclusion that roaming charges paid are not subject to tax deduction at source under the provisions of the Act and thus, did not hold VDL as an assessee in default for non deduction of tax at source thereon. It cannot be said that the learned TDS Officer had taken an impossible view, rather he had taken one of the legally possible view and the said view was well supported by numerous judicial decisions cited by VDL in the submissions filed with the learned TDS Officer, Since the learned TDS Officer has certainly followed the legally sustainable view while not treating VDL as assessee in default for non deduction of tax at source from roaming charges paid to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of the Act must be in the background of the realities of day-to day life in which the products of technology play an important role in making life smoother and more convenient. Section 194J as also Explanation 2 in section 9(1)(vii) of the Act were not intended to cover the charges paid by the average house-holder or consumer for utilizing the products of modern technology, such as, use of the telephone fixed or mobile, the cable T.V., the internet, the automobile, the railway the aero plane, consumption of electrical energy, etc. Such facilities which when used by individuals are not capable of being regarded as technical service cannot become so when used by firms and companies. The facility remains the same whoever the subscriber may be -individual, firm or company . Applying the aforesaid principle to the instant case, VDL enters into an arrangement with other telecom operators merely to enable its subscribers to avail the service provided by the other telecom operator resulting in transmission of their calls SMS while they are roaming in the telecom service area of the other telecom operator. This is merely a standard facility that can be availed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above definitions, we wish to submit that since the word technical is used in conjunction with the word 'managerial and 'consultancy', applying the rule of Noscitur a sociis, the term 'technical' shall be read in a narrower sense so as to include only those services which involve human intervention in performance thereof Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Bharti Cellular Limited (330ITR 239), wherein the Hon'ble Apex Court has upheld the above contention and has pbseroed that the term 'technical services' should be read in a narrower sense. C. Report of the technical expert of human intervention involved in roaming services. Having discussed the judicial precedents pronounced by the Indian judiciary and their applicability to the present case, we wish to highlight the comments/ observations of an independent technical (Mrs. Vasanthi Ramamurthy -Divisional Engineer, BSNL, Coimbatore) examined by the income tax authorities in Coimbatore during similar proceedings conducted in the case of a group company Vodafone Cellular Limited to ascertain the extent of human in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source under section 194J of the Act 6. Ld. CIT on carefully considering the submissions of the assessee and also on going through the orders passed by the Assessing Officer and assessment records, found that the contentions raised by the assessee are having no merits for the reasons discussed as under: 1. That there exists conditions prerequisite for initiating revisionary proceedings under section 263 of the Income tax Act, 1961, as the Assessing Officer neither in his orders under section 201(1) read with section 201(lA) of the Act nor in the questionnaires issued has ever discussed about the issue of roaming / interconnect charges admittedly paid to other networking operators, by the assessee. This is despite the fact that payment of Roaming/Interconnect charges having paid by assessee during these years are not at all denied and disputed. Thus having not examined this issue the orders passed by the AO are erroneous and having not deemed t the assessee an assessee in default for having not deducted tax at source on roaming/Interconnect Charges paid by it, which is prejudicial to the interest of revenue. I am therefore, satisfied that the provisions of section 263 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax (TDS), Chandigarh and the order passed under section 263 of the Act are illegal, bad in law and without jurisdiction. He further stated that Ld. CIT(TDS) erred in assuming the jurisdiction under section 263 of the Act since the revisionary proceedings under section 263 of the Act have merely been initiated on the basis of the letter received from Assistant Commissioner of Income Tax (TDS), Chandigarh and the Ld. CIT (TDS) did not arrive at any independent satisfaction for initiation of such proceedings; by acceding to the request of the learned ACIT, the CIT(TDS) has effectively enhanced the time limitation prescribed under section 201(3) of the Act for completion of 201 proceedings by a TDS officer; the order passed by the learned ACIT is neither 'erroneous' nor 'prejudicial' to the interest of the revenue since the learned ACIT took one of the two permissible views after conducting a detailed enquiry in respect of applicability of withholding tax provisions on the roaming charges paid by the appellant to the other telecom operators. He further stated that Ld. CIT has not appreciated the facts that the other telecom operators, to whom the roaming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is copy of submission/ reply dated 28.3.2013 filed before the Ld. CIT(TDS). Ld. Counsel of the assessee as regards the validity of initiation of revisionary proceedings under section 263 of the Income Tax Act has relied upon the following cases laws, by filing the copies thereof in the shape of paper book: - CIT vs. Vodafone Essar South Limited (212 Taxman 184) (as affirmed by the Hon ble Supreme Court in CC 9308/2013) (Page no. 1-8 of PB). - CIT vs. Vodafone Essar South Limited (CC 9308/2013) Hon ble Supreme Court (page no. 9 of PB). - CIT vs. Sunbeam Auto Ltd. (322 ITR 167) Delhi High Court (Page no. 10-21a of the PB). 8.1 As regards applicability of section 194J of the I.T. Act on roaming charges paid to roaming partners, the Ld. Counsel of the assessee has relied upon the following case law, the copies thereof are attached with the Paper Book. He further submitted that in these cases the Tribunal held that assessee will not fall under the category of Fees for technical serviced and therefore, the provisions of section 194J of the Act would not be attracted. - Dishnet Wireless Limietd vs. DCIT(TDS) 45 ITR(T) 430 Chennai Bench of the Tribunal) (Page no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the other telecom operators. We further note that Ld. CIT has not appreciated the facts that the other telecom operators, to whom the roaming charges have been paid, would have offered income arising from roaming charges received from the assessee to tax and hence, no prejudice would have been caused to the revenue and hence, initiation of 263 proceedings is bad in law and void ab initio. He further stated that learned CIT(TDS) has erred in concluding that roaming charges paid to other telecom operators by the assessee attracts provisions of section 194J without appreciating the facts that - Roaming charges paid by the assesse to the other telecom operators represent payments made for standard facility provided by such telecom operators and hence, cannot be classified as FTS for the purposes of the Act; No human intervention, which is sine qua non for a service to qualify as technical service, is involved in provision roaming services and therefore, roaming charges cannot be construed as Fee for Technical Services for the purposes of the Act; the reports of the technical experts clearly establish the fact that roaming payments made to other telecom operators for allowing use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ength from the principles laid down by the Supreme Court in Rampyari Devi Sarogi vs. CIT 67 ITR 84 (SC) and Tara Devi Agarwal vs. CIT, 88 ITR 324 (SC). The underlying principle which emerges from these judgments is that if an assessment order is passed without making any enquiries, then such an order would be erroneous. But in the present case, the order passed by the learned ACIT is neither 'erroneous' nor 'prejudicial' to the interest of the revenue since the learned ACIT took one of the two permissible views after conducting a detailed enquiry and after issue of show cause notice in respect of applicability of withholding tax provisions on the roaming charges paid by the assessee to the other telecom operators; no demand u/s. 201/201(1A) of the Act can be raised where taxes so deductible but not deducted by the payer are directly paid by the recipient and such an action would result in double recovery of the demand; the validity of initiation of revisionary proceedings under section 263 of the Income Tax Act is not proper in the present case in view of the following cases laws:- - CIT vs. Vodafone Essar South Limited (212 Taxman 184) (as affirmed by the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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