TMI Blog2016 (11) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fall under the definition of 'work' as defined in section 194C and hence the provisions of section 194C are not applicable to the impugned issue. We find that there is no dispute on the non-applicability of provisions of section 194I of the Act in the instant case. We also draw support of our finding from the decision of Delhi Tribunal in the case of Bharti Airtel Limited Anr [ 2016 (3) TMI 680 - ITAT DELHI] wherein they have held that the subject mentioned payments do not fall under the ambit of fee for technical services or under royalty u/s 194J of the Act. We hold that there is no obligation to deduct tax at source for the assessee payer in terms of section 194C or 194J of the Act and hence the assessee cannot be treated as assessee in default u/s 201 of the Act. Hence consequentially the interest u/s 201(1A) of the Act cannot be charged on the assessee in the instant case - Assessee appeal allowed. - I.T.A. No. 1101/Kol/2005, I.T.A. No. 1291/Kol/2005 And C.O. No. 142/Kol/2005 In I.T.A. No. 1291/Kol/2005, I.T.A. No. 1102/Kol/2005, I.T.A. No. 1292/Kol/2005 And C.O. No. 143/Kol/2005 In I.T.A. No. 1292/Kol/2005 - - - Dated:- 16-11-2016 - Shri M. Balag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a Hutch subscriber is first encountered in the assessee s Base Transreceiver station and Base station controller. From these stations the call travels to Mobile switching Centre and upto this centre, such call signal had travelled on a wireless system. From the Mobile Switch Centre, it travels through electrical medium to the TX system of Hutch. From this stage, it travels through Optical Fibre Cables to TX system of BSNL from where it is routed to the appropriate BSNL exchange. From the BSNL exchange the voice signals is passed on to the receiver. For the use of leased line between TX system of Hutch to the TX system of BSNL and also between TX system of BSNL and BSNL exchange, the charges are termed as Annual Rent and Guarantee, Rental and / or Leased Line Charges and the same is shown under PSTN Interconnect Fees in the books of the assessee. Depending upon the estimated number / traffic of calls, Hutch blocks the ports at the relevant BSNL exchange. For this purpose, BSNL charges port charges which is also shown under the PSTN Interconnect Fees. 3.1. The assessee submitted that the services provided by these telecom companies were not technical services within the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flying in an aircraft cannot be termed to be use or providing technical services within the meaning of section 194J of the Act. It was also submitted that use of standard facility cannot be equated with technical services being provided within the meaning of section 194J of the Act. The assessee also placed reliance on the decision of the Hon ble Madras High Court supra wherein it was held that the fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber does not on that score make it provision of technical services to the subscriber within the meaning of section 194J of the Act. The Bangalore Tribunal supra also had held that technical services referred to section 9(1) of the Act contemplated rendering of service to the payer for a fee. Mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. The ld CITA duly appreciated the contentions of the aforesaid two rulings and concluded that the provisions of section 194J of the Act would not apply to the assessee s case. 4.2. The ld C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and / or leased line charges and Port charges i.e regulating booking / blocking space for call traffic. Regulating space for call traffic has been already held to be performance of work. Accordingly he held that the component of port charges thereon would fall under section 194C of the Act. He held that annual rent and guarantee rent for the leased line i.e for Optic Fibre Cable linking TX System of the assessee to the TX and Exchange system of BSNL appears to be rental agreement for the use of the same and since the cable is neither land or building or fittings of the building, he held that the provisions of section 194C as well as section 194J of the Act would not apply. 5. Aggrieved, both the revenue as well as the assessee are in appeal before us. The revenue has preferred appeal before us on the ground that the provisions of section 194J of the Act alone could be made applicable in the instant case as against section 194C of the Act held by the ld CITA. The assessee has preferred appeal before us on the ground that the provisions of section 194C of the Act cannot be made applicable to the assessee in the instant case as held by the ld CITA. The assessee has also prefer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired for rendering the subject mentioned services at that point of time. He argued that though nothing could be seen and everything is automated, but without the intervention of the human beings the technology would not function without any defects. The assessee pays roaming charges for services provided by the other operator (Visiting Operator) for connectivity of two mobile handsets while roaming. This is not wireless connectivity. Wireless connection is between handset and connecting tower. Thereafter it is only transmission lines through which the electrical signals travel. It has to be seen that how the voice travels to the other mobile network. It is pertinent to note that the sound does not travel. It gets converted into electrical signals and only those signals travel to the other network. He vehemently argued that the subject mentioned charges namely Roaming charges (Rs. 2,95,28,000/-) ; PSTN Interconnect fees (Rs. 1,23,85,000/-) and Pass Through Charges (Rs. 27,22,41,000/-) would fall under the ambit of TDS provisions u/s 194J of the Act as it involves human intervention. He further argued that the statements of Shri Tanay Krishna were recorded in the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries .' He argued that the term 'managerial' or 'consultancy' services definitely require human intervention. Hence the term 'technical' which is sandwiched between the term 'managerial' and 'consultancy' should be given the same meaning as having human intervention. He also argued that these three words are not inter-connected. Rather they are independent. He argued that this aspect was not considered by the Delhi High Court in CIT v. Bharti Cellular Ltd. [2009] 319 ITR 139/[2008] 175 Taxman 573 which travelled later to Supreme Court while rendering the judgement in Bharti Cellular Ltd. case (supra). 8. In defence, the ld AR argued that the following decisions were not brought to the notice of Mumbai Tribunal while rendering the judgement relied upon by the ld DR :- Vodafone East Ltd reported in 156 ITD 337 (Kolkata Trib) ; Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to various payments made by the assessee to other telecom operators remain undisputed and hence the same are not reiterated for the sake of brevity. The short point that arises for our consideration is as to whether the subject mentioned payments made by the assessee would fall within the ambit of tax deduction provisions either u/s 194C or u/s 194J of the Act. We find that this issue has been examined in detail by this tribunal in ITA No. 1864/Kol/2012 ; ITA No. 243/Kol/2014 and ITA No. 343/Kol/2014 for the Asst Years 2009-10 and 2010-11 vide order dated 15.9.2015 in assessee s own case , wherein it was held that :- 4.10 We have heard the rival submissions and perused the materials available on record. It would be pertinent to note here that roaming services are provided by other telecom operators by using their existing telecom network/infrastructure and no incremental investment is required to put up any additional network/infrastructure for provision of such roaming services. The aforesaid fact lends further support to the contention that roaming services are standard automated services, which are provided by other telecom operators to subscribers of VEL using the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the fact of existence of human intervention for the roaming services and accordingly the ACIT, Circle 51(1), New Delhi had recorded statement from Shri Tanay Krishna on 29.9.2010. The Learned AR has also filed prayer for receipt of additional evidence in terms of Rule 29 of ITAT Rules on 20.7.2015 containing the statements recorded from Shri Tanay Krishna on 29.9.2010 in the case of Vodafone Essar Mobile Services Ltd cross examination by Vodafone Essar Mobile Services Ltd on 29.9.2010. This application under Rule 29 contains a prayer with reasons that these documents could not be filed before the lower authorities and that these documents are very crucial for the disposal of the case under appeal as the examination of the technical experts had taken place post the proceedings before the Assessing Officer and as per the directions of the Hon'ble Supreme Court, these statements were recorded in the case of the group company of the assessee. However, it is seen that the statement of Shri Tanay Krishna on 29.9.2010 have been relied upon by the Learned CIT(Appeals) vide page 29 of his order but the cross examination of Shri Tanay Krishna is not in records of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on network portion. (a) Software by hardware testing - Stand alone testing (b) Interconnect testing - it is done to test if it is compatible with other hardware/software. This testing employs technically qualified professionals and tested as per the agreed plan between services provider and vendor. Question 5: In your expert opinion, does the system work automatically when network system of one cellular operator gets connected with the network system of other cellular operator? Ans. 5: When a calls get connected by one operator to other, per se it is an automatic connection, but there can be instances when there is a problem in the call connect which may require resolution through human intervention. Question 6: Hence there is no 100% automatic operation of this network. Can you explain what kind of human intervention is required? Ans. 6: Yes as I said earlier it can't be 100% fully automated. There are several circumstances under which human intervention would be required. I would briefly tell you about each of such circumstances - (a) There could be a case where there is failure in physical hardware. (b) There could be a problem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of inter-connect services, i.e., carriage of calls from one network to another, or are primarily for fault detection and removal. Please refer to answer to Question 4 of this cross examination. Q.11. What is the extent of human involvement in provision of interconnect services. i.e., carriage of calls originating on network of one operator and termination the network of the other operator? We have answered in question no 5. Q.12. In answer to Question 21 of your Statement, you have stated that in cellular networks the level of human intervention is much higher and of sophisticated technical level. In this regard, do you agree that cellular networks are based on sophisticated technology and work on an automated mode? The human intervention as referred by you for network operations is limited to network monitoring and maintenance and fault repair, rectification, enhancement, configuration, and setup? We agree that the telecom networks are automated networks and do not require human intervention for carriage of calls. However, as stated in Question 4 of this cross examination, human intervention is required at the inter-connect set-up stage (includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not require any human intervention and accordingly we hold that the payment of roaming charges does not fall under the ambit of TDS provisions u/s 194J of the Act. 4.18 As far as the applicability of provisions of section 194C are concerned, we hold that the provisions of section 194C of the Act would become applicable only where some work (works contract) is being carried out and there is some human intervention involved in the carriage of such work. The term 'work' is defined in section 194C as follows:- Work shall include: (a) Advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) Catering; (e) manufacturing or supplying a product according to the requirement or specification of the customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. We hold that 194C is applicable only where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities was fully automatic and did not require any human intervention and, therefore, no TDS was deductible Held, yes (paras 12 13 ) [In favour of assessee]. 9.3. Respectfully following the aforesaid decisions, we hold that there is no obligation to deduct tax at source for the assessee payer in terms of section 194C or 194J of the Act and hence the assessee cannot be treated as assessee in default u/s 201 of the Act. Hence consequentially the interest u/s 201(1A) of the Act cannot be charged on the assessee in the instant case. Since we have decided the issue at the threshold level itself, the other grounds raised by the assessee in his cross appeal as well as in cross objections that the payee had considered these receipts in its returns and hence the assessee should not be treated as assessee in default, becomes infructuous and we refrain to give our findings thereon. Accordingly, the grounds raised by the assessee in its cross appeal as well as in cross objections for the Asst Years 2002-03 and 2003-04 are allowed and that of the revenue are dismissed. 9.4. The decision rendered for Asst Year 2002-03 would apply with equal force for Asst Year 2003-04 also as ide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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