Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Vodafone Digilink Limited, (Formerly Vodafone Essar Digilink Limited) Versus CIT (TDS) , Chandigarh And Income Tax Officer (TDS, Karnal

2017 (11) TMI 568 - ITAT DELHI

TDS on Roaming Charges/Interconnect Charges as Technical Fee u/s 194J - revision u/s 263 - Held that:- After perusing the aforesaid order of the Ld. CIT, we are of the considered opinion that the order of the CIT is wrong in assuming the jurisdiction under section 263 because the revisionary proceedings under section 263 have merely been initiated on the basis of the letter received from ACIT (TDS), Chandigarh and the Ld. CIT (TDS) did not arrive at any independent satisfaction for initiation of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the appellant to the 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gs 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 MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Tarun Gulati, Ms. Ishita Farsaiya, Sh. Sparsh Bhargava, Advocates For The Department : Sh. S.S. Rana, CIT(DR) ORDER PER H.S. SIDHU, JM The Assessee have filed these appeals, which are emanate from their respective orders of the L .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ITA No. 3779 to 3781/Del/2013:- The Appellant respectfully submits that: On the facts and circumstances of the case and in law, the notice issued under section 263 of the of Income Tax Act, 1961 ('Act') by the learned Commissioner of Income Tax (TDS), Chandigarh (hereinafter referred to as the 'learned CIT (TDS)') and the order passed under section 263 of the Act are illegal, bad in law and without jurisdiction. 2 On the facts and in circumstances of the of the case and in law, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion prescribed under section 201(3) of the Act for completion of201 proceedings by a TDS officer. 2.3 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. 3 On the facts and circumstances of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r deduction of tax at source under Section 194J of the Act. (iv) No demand U/S 2011201(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. All the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns of the Income Tax Officer - Karnal ('learned TDS officer') that the Appellant is liable to deduct tax at source on 19 charges as per the provisions of the section 194J of the income tax act (' Act'). Each of the ground is referred to separately, which may kindly be considered independent of each other. Ground No.1 - The order passed by the learned TDS officer is bad in law 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ilure of the roaming partners to pay tax directly, which is 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 of inter-connect set-up, capacity enhancement, monitoring, maintenance, fault identification, repair, etc. 2.4 On the facts and in the circumstances of the case and in law, the learned CIT(A)/TDS officer have erred in ignoring the statement of technical experts reco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt purpose/ intention of the payment. 2.6 On the facts and in circumstances of the case and in law the learned CIT(A} has erred in not following the principles laid down in judicial precedents cited by the Appellant and also ignoring the binding Apex Court judgment in the case of CIT vs Delhi Transco Limited 68 taxmann.com 231 and CIT vs Kotak; Securities Limited 67 taxmann.com 356. 3. Ground No.3 - No TDS demand can be under section 201(1) of the Act can be recovered from the Appellant 3.1 On t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mstances of the case and in law, the Ld. CIT(A)/TDS Officer has erred in raising demand under section 201(1) of the Act even though taxes would have been paid on roaming charges by the recipient parties. Such an action has resulted in double recovery of taxes, which is against the rules of taxation principles. 3.3 Without prejudice to Ground No. 3.1 and 3.2 above, on the facts and circumstances of the case and in law, the learned CIT(A)/TDS Officer has erred in not verifying the aforesaid fact, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se 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 t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er (TDS), Karnal on 29.03.2011 for the financial year 2006-07 to 2008-09 relevant to the assessment year 2007-08 to 2009-10. The Joint Commissioner of Income Tax(TDS), Karnal vide his office letter F.No. JCIT(TDS)/Range/KNL/2011-12/775 dated 06.03.2012 has submitted the proposal under section 263 of the Income tax Act, 1961 stating therein that at the time of passing the order under section 201(1) r.w.s. 201(lA), issue relating to TDS on Roaming Charges/Interconnect Charges as Technical Fee u/s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

natural justice, before passing any order u/s. 263 an opportunity of being heard is given to the assessee, vide Ld. CIT s office letter No. 6518 dated 23.03.2012 and the case was fixed for hearing on 29.03.2012. On said date, a letter requesting to adjourn the case on any other convenient date was received. The case was fixed for hearing on 27.04.2012 and finally on 23.03.2013. The assessee submitted its reply stating therein as under:- In this regard, on behalf of and under instruction of our s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

TDS order passed by the learned TDS Officer was not erroneous and prejudicial to the interest of the revenue and resultantly, hold VDL as an assessee 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 t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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 officer has taken a view out of two possible views. Further reliance is placed on the recent decision of the Hon'ble Mumbai bench of the Income Tax Appellate Tribunal ('T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is restricted to revising an order which is erroneous and prejudicial to the interests of the Revenue. An order cannot De said to be erroneous when the AO followed one of the legally sustainable view out of ihe two views available on the point. The CIT cannot call an assessment order to be erroneous simply because he is inclined to follow the other legally sustainable view in preference to the one followed by the AO. The Hon'ble Summit Court in Malabar Industrial Co. Ltd., v. CIT [(2000) 24 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l). In this case it has been noticed that: That at the time when the Commissioner issued the notice under section 263 and passed the order dated March 23, 2004, the question of surcharge on undisclosed income was a debatable one. When an issue was debatable, the provisions of section 263 could not be invoked. From the above discussion it is axiomatic that no revision can be done on a debatable issue. An issue becomes debatable if two legally sustainable views exist on a particular point. When th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

I. On facts, circumstances and in law, roaming charges are not subject to tax deduction at source under section 194J of the Act. Without prejudice to the above contention, we wish to submit that roaming charges paid by VDL do not fall within the scope and ambit of the withholding tax provisions contained under the Act and hence, VDL is not under an obligation to withhold taxes thereon. A. Payment is for use of standard facility. We wish to reiterate that roaming represents a standard facility pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

m operator for which it is entitled to receive appropriate service charges from VOL. It is imperative to note that services provided by the other telecom operators are standard automated services, which are available for any telecom operator willing to avail those services (to enable its subscribes to make/receives calls when the subscribers are roaming) in consideration for payment of appropriate charges. Reliance in this regard is placed on the decision of the Hon'ble Madras High Court in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

so, at the time when explanation 2 to section 9(1)(ii) was introduced by the Finance (No. 2) Act, with effect from April 1, 1977, the products of technology had not been in such wide use as they are today. Any constructions of 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 inten .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ual, 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 by any telecom operator holding a valid telecom license. Further reliance in this regard .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se of the Act. In view of the above judicial precedents, it is clear that payments made for use of standard facility provided by the service provider, even where it involves use of sophisticated equipment and trained personnel by the service provider, cannot be construed as FTS for the purpose of the Act. In the present case as well, roaming charges paid by VDL to other telecom operators represent payments made for standard facility provided by such telecom operators and hence, cannot be classif .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which would be income of the recipient chargeable under the head Salaries . In absence of specific meanings of the terms 'technical', 'managerial' and 'consultancy' in the Act, reliance can be placed on the dictionary meanings of such terms. The same has been listed below: As per the Concise Oxford Dictionary, the term 'technical' has been defined to mean, requiring special knowledge to be understood . The Black's Law Dictionary defines the word technical as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 pronounce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

can be raised on account of non-deduction of tax at source under section 194J of the act from roaming charges paid to other telecom operators. Without prejudice to the contention that the roaming charges paid to other telecom operators do not get covered within the purview of section 194J of the Act, it is humbly submitted that it is trite law that no tax demand under section 201(1) of the act can be raised where taxes so deductible but not deducted by the payer to as the 'Circular'), r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aid the taxes, but has also held that the deductor cannot be treated as an assessee in default till it is found that the recipient has also failed to pay such tax directly. CIT Vs Bharti Cellular Limited & other 330 ITR 239 (Supreme Court). The Hon'ble Supreme Court held that in case where taxes have been paid no demand can be raised under section 201(1) of the Act. Vodafone Essar Limited Mumbai Vs DCIT (TDS) 113 ITJ 385 (Mumbai Tribunal): The Mumbai Tribunal, relying upon the decision o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enue and hence, 'Section 263 of the Act cannot be invoked in the present case. Even on merits of .the case, roaming charges paid VDL to the other telecom operators do not qualify as FTS for the purpose of the Act and hence, are not subject to tax deduction at 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 content .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

te 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 of the Income tax Act, 1961 are at .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat on this issue the Hon'ble Supreme Court in the case of Bharti Cellular Ltd. has directed the Assessing Officer to examine the extent of human involvement for applicability of provision of Section 194J of the Ad and the-Assessing Officer after following the directions of Hon'ble Supreme Court examined this aspect and established that human intervention is required to provide fault free services of interconnection. This human intervention is of highly qualified and trained technical pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

est of revenue. Hence the same are set aside with the direction to Assessing Officer to examine the default of the assessee to the extent of not deducting tax at source on oaming/Interconnect Charges paid during these years and chargeability of interest 'under section 201(1) read with section 201(lA) of the Income tax Act, 1961 by examining the issues on the lines as directed by Hon'ble Supreme Court in the case of M/ s Bharti Cellular Ltd. to the Assessing Officer of Gurgaon who complet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er 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 - R .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arly establish the fact that roaming payments made to other telecom operators for allowing use of their network to assessee s subscribers are in the nature of provision of a standard facility, which does not involve any human intervention at all and hence, such payments cannot be classified as FTS liable for deduction of tax at source under Section 194J of the Act; 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of proposal for revision u/s. 263 of the Act issued by the Ld. CIT(TDS) dated 23.3.2012 and further draw our attention towards the page no. 48- 76 of the PB filed by the assessee which are the copy of the submission/reply to the show cause notice of the Ld. CIT in which it is was specifically mentioned that the issue in dispute has been duly examined by the AO. Further, Ld. Counsel of the assessee draw our attention towards page no. 77-104 which is copy of submission/ reply dated 28.3.2013 filed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sel of the assessee submitted that AO has passed his order dated 29.3.2011 u/s. 201(1) & 201(1A) of the Income Tax Act, 1961 judiciously after making all the enquiries / verification, which has been replied and on the basis of the said reply, the AO has passed the order by relying upon the Hon ble High Court and ITAT decision. Despite that the Ld. Commissioner of Income Tax has wrongly invoked Section 263 of the Act, which is not sustainable in the eyes of law and therefore, the same should .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Revenue before us. After perusing the aforesaid order of the Ld. CIT, we are of the considered opinion that the order of the Ld. CIT is wrong in assuming the jurisdiction under section 263 of the Act because 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

paid by the appellant 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 charge .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rges 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 of their network to assessee s subscribers are in the nature of provision of a standard facility, which does not involve any human intervention at all and hence, such payments cannot be classified as FTS liable for deduction of tax at source under Section 194J of the Act; no deman .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

years and chargeability of interest under section 201(1) read with section 201(1A) of the I.T. Act, 1961 by examining the issues on the lines as directed by Hon ble Supreme Court in the case of M/s Bharti Cellular Ltd. to the AO of Gurgaon who completed the order under section 201/201(1A) of the Income Tax Act, 1961. In our considered opinion, the order of Ld. CIT is wrong and bad in law, because AO has passed the order dated 29.3.2011 judiciously after making all the enquiries / verification, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be exercised only when both the following conditions are satisfied: i) The order of the AO should be erroneous; and ii) It should be prejudicial to the Revenue interest. These conditions are conjunctive. An order of assessment passed by the AO should not be interfered with only because another view is possible. 10.1 An order would be erroneous only when the AO makes no enquiries during the course of assessment proceedings. This principle was noticed by the Delhi High Court in Geevee Enterprises .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s' 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(Page no. 10-21a of the PB). 10.2 And the applicability of section 194J of the I.T. Act on roaming charges paid to roaming partners are not applicable, in view of the following decisions:- Dishnet Wireless Limietd vs. DCIT(TDS) 45 ITR(T) 430 Chennai Bench of the Tribunal) (Page no. 53-62 of PB) - CIT (TDS) vs. VodaFone South Limited (290 CTR 436) Hon ble Karnataka High Court. (Page No. 63-73 of PB) and - Bharti Airtel Ltd. vs. ITO(TDS) (2016) 67 taxmann.com 223 (Delhi-Trib.) and - Vodafone Cell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version