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2018 (3) TMI 433

8 - ITAT JAIPUR] Section 194H pre-supposes the payment to be made to the third party namely, Distributor or the Agency and if on a close scrutiny of Section 182, Distributor is not an agent, therefore, in our considered opinion, the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee. - Deduction of TDS under section 194J in respect of roaming charges paid to other telecom operators - Held that:- As decided in assessee's own case [2017 (7) TMI 1076 - RAJASTHAN HIGH COURT] as decided the issue in favour of the assessee by holding that the fee paid for roaming charges does not fall in the ambit of fee for technical services as no human intervention is required in providing the roaming services by the mobile service provider. - Decided in favour of assessee. - ITA No. 67/JP/2015 - Dated:- 8-3-2018 - Shri Vijay Pal Rao, JM And Shri Bhagchand, AM Assessee by : Ms. Ishita Farsaiya (Adv.) Revenue by: Shri Varinder Mehta (CIT) ORDER Per Vijay Pal Rao, JM This appeal by the assessee is directed against the order dated 25th November, 2014 of ld. CIT (A)-III, Jaipur arising from the order passed under section 201(1)/201(1A .....

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ction 194H of the Act. 2.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the provisions of section 194H of the Act would be applicable to the Appellant s case without taking cognizance of the fact that the Appellant is not responsible to make any payment/ credit to the prepaid distributors towards the discount extended to them and responsibility/ obligation to make payment/ credit is a condition precedent for application of section 194H of the Act, which is absent in the present case. 2.4 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that discount allowed by the Appellant is not income in the hands of its distributors and that income, if any, arises only when the pre-paid SIM cards/ talktime is further distributed by the distributors. 2.5 On the facts and circumstances of the case and in law, the learned CIT (A) has erred in not appreciating the fact that there is no flow of monies from the Appellant to the distributor of pre-paid SIM card/ talktime but rather from the distributor to the Appellant, and hence, the provisions of section 194H of the Act fail to apply. 2.6 On .....

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(A)/ TDS Officer has erred in not appreciating the fact that deduction of tax at source from interconnect charges, was purely on a conservative basis and does not alter the nature of roaming charges and thus, does not lead to a conclusion that such charges qualify as FTS. 4. Ground No. 4- No demand under section 201(1) of the Act can be recovered from the Appellant 4.1 Without prejudice to Ground Nos. 1 to 3 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has failed to appreciate that no demand can be raised under section 201(1) of the Act since taxes would have been paid by the recipient parties and such an action of the learned TDS officer has resulted in double recovery of taxes, which is against the rules of taxation principles. 4.2 Without prejudice to Ground No. 4.1, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in not directing the learned TDS officer to verify the aforesaid fact relating to payment of taxes by the payees basis the details of payees (viz Permanent Account Number, address) submitted by the Appellant. 4.3 On the facts and circumstances of the case and in law, the learned CIT(A) has er .....

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in D.B. Income Tax Appeal No. 99 to 105/2016 vide judgment dated 11/7/2017 wherein the Hon'ble High Court has framed the question of law as under : "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that whether the assessee is liable to deduct TDS u/s. 194H of the IT Act, as the relation between assessee and distributor is that of principal to agent. 2. Whether in the facts and circumstances of the case, the Tribunal has erred in law in deleting the demand u/s. 201(1) for non deduction of TDS u/s 194H on commission payment to various distributors. 3. Whether in the facts and circumstances 'of the case, the TDS is applicable u/s. 194J on roaming charges paid for facility provided by service provider as this interconnection is managed/controlled monitored by human intervention. 4. Whether in the facts and circumstances of the case, TDS u/s. 194J is applicable on roaming charges paid for facilities provided by service providers. 5. Whether in the facts and circumstances of the case, the Tribunal has erred in deleting the interest u/s. 201(1A) on the tax demand raised under section 201(1) of the Act." While deciding the abo .....

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om which amount of tax is to be deducted is doubtful proposition inasmuch as the Management Information System which has been sought to be relied upon for alleging that expenditure has been claimed could not have been relied upon by the Tribunal or the authorities under the Income Tax Act. (i) The findings which are given by the Tribunal regarding Distributor being Agent in view of the discussion made here-in- above, the arrangement which has been made between the Company and the Distributor is on Principal to Principal basis and the responsibility is on the basis of agreement entered into between the parties. (ii) Regarding MRP, the findings which are arrived at is a price which has been fixed by the assessee company and other expenses, namely; commission given to the retailer and everything is to be managed by the Distributor. In that view of the matter, the restrictions which are put forward will not decide the relation-ship of Principal and Agent. (iii) The Distributor has all rights to reduce his margin. He can increase the margin of retailer and will reduce the margin from 10% to anything between 1% to 10%. There is no restriction by the assessee to give commission amount to .....

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tion 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department. Respectfully following the decision of the Hon ble Jurisdictional High Court in assessee s own case for the A.Y. 2007-08 to 2009-10, we decide this issue in favour of the assessee and consequently set aside the orders of the authorities below qua this issue. We note that the issue involved in the year under consideration in respect of deduction of TDS under section 194H is identical to the assessment years 2012-13 and 2013-14 (supra) and accordingly by following the decision of the Coordinate Bench of the Tribunal as well as the judgment of the Hon ble Jurisdictional High Court in assessee s own case, this issue is decided in favour of the assessee and against the revenue. Ground No. 3 is regarding deduction of TDS under section 194J in respect of roaming charges paid to other telecom operators. 4. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. At the outset we note that an identical issue has been considered by this Tribunal in assessee s own case for the assessment years 2012-13 and 2013-14 and the Trib .....

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an involvement for monitoring and for unhindered operations. Moreover, Service Tax Act has also recognized the roaming as service for the purpose of service tax vide the Finance Bill, 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 mind along with technical equipments. The facts mentioned in the order of the Tribunal in ITA No. 656/JP/2010 at para 9 are to the following effect :- 9. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the revenues proposition is that thogh the roaming happens automatically but because equipment is used to render the roaming service, because technical manpower is needed to operate and maintain the technical equipment therefore, roaming per se is rendering of technical services an .....

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ls to the Hexacom s subscriber and pays roaming charges based on the TAP to the visited network operator (i.e. Airtel). The roaming operator charges as per the roaming agreement with Hexacom, whereas the subscriber is billed as per the tariff subscribed. * The entire process is automatic. It is concluded that the above transaction flow that the service of providing airtime by visiting telecom circle is directly to the subscriber and not to Hexacom. The subscriber of Hexacom uses the network set up by the visiting circle and instead of amount being recovered from the roaming 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 words managerial and consultancy services . Based upon the principles of nositur a sociis there has to be an element of m .....

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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 U/s 194J of the Act. He further relied on the decision in the case of Jaipur Vidyut Vitran Limited Vs. DCIT (2009) 123 TTJ 888 (JP Trib) wherein it has been held that Section 194J would have application only when the technology or technical knowledge of person is made available to other and not where by using technical systems, services are rendered to others. Rendering of services by allowing use of technical system is different from charging fees for tendering technical services. The applicability 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. Wh .....

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ers could be disposed of expeditiously. Further, this would enable the appellate forum, including the Supreme Court, to decide the legal issues based on the factual foundation. Held accordingly, remanding the matters for determination with technical assistance, that in these cases, in which a cellular provider under an agreement pays interconnect/access/port charges to BSNL/MTNL, 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 Assessing Officer examined the technical expert of the C-DOT on 29/09/2010 in respect of IUC and which were cross examined on 04/10/2010 by M/s Bharti Cellular Limited, Delhi. The technical experts reexamined on 04/10/2010 on this issue and admitted that roaming services does not require any human intervention, it operates .....

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ssessee 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 is elaborate, detailed, considers the previous Delhi and Kerala High Court judgment against the assessee and is latest comprehensive adjudication on the issue. Even if it is held that there exist divergence of judicial opinion a view favourable to the assessee is to be adopted as held by Hon ble Supreme Court in Vegetable Products Ltd. And Vatika township case (supra). From this angle also in these facts and circumstances Hon ble Karnataka High Court judgment is applicable to the assessee s case. Respectfully following the same we hold that: a. 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. b. There is no relationship of Principal and agent between assessee and distributors as held by authorities below their orders are reversed. c. Looking at the transaction being of .....

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