TMI Blog2022 (5) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. AO shall afford reasonable opportunity of hearing to the assessee in this regard and re-compute the interest chargeable u/s 201(1A) - In the result, the ground of appeal raised by the revenue is allowed for statistical purpose. - ITA No. 2355/Del/2015, ITA No. 2356/Del/2015, ITA No. 2925/Del/2015 & ITA No. 2926/Del/2015 - - - Dated:- 31-5-2022 - Sh. Saktijit Dey, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Deepak Chopra, Adv. Ms. Manasvi Bajpai, Adv. For the Revenue : Sh. H. K. Choudhary, CIT DR. ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the assessee as well as the Revenue against the orders of ld. CIT(A)-13, New Delhi dated 27.02.2015. Brief facts and background of the case 2. The assessee company is engaged in the business of prepaid mobile telecommunication services. A survey operation u/s 133A of the Act was conducted in the business premises of the appellant to verify the applicability of TDS provisions. Subsequently, the case was picked up for verification u/s 201(1)/201(1A) of the Act and assessment was completed on 16.03.2012 and 25.03.2013 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: Relevant Clauses of the Contract Particulars CIT v. Idea Cellular, [2010] 325 ITR 148 (Del.) HC [Relevant Paragraphs Extracted] Distributorship Agreement with M/s. Agarwal Enterprises dated 21.10.2009 Remarks/Difference 1. Consideration - Discount offered 5. Consideration a. In consideration of the Distributor fulfilling its obligations contemplated under this Agreement, UNITECH WIRELESS shall provide to the Distributor, the Service Cards at Landed Price as may be communicated to the Distributor by UNITECH WIRELESS from time to time. b. The Distributor shall be paid commission and/or incentives for Services rendered as agreed rom lime to time. The said commercial terms shall also form part of fits Agreement c. The commission and/or incentive are subject to variation during the term of this Agreement at the sole discretion of UNITECH WIRELESS and the same shall be communicated in writing to the Distributor. d. Where applicable, any sums or commissions due to the Distributor by UN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Effect of Termination a. The parties agree that upon termination of this Agreement for any reason the Distributor, shall immediately return all equipment and furniture supplied by UNITECH WIRELESS forthwith upon request and remove all UNITECH WIRELESS signage and all other items indicating that the Distributor's Office was operated as UNITECH WIRELESS distributorship. d. The Distributor and its personnel shall cease to promote, market, or advertise for the Services for Unitech Wireless with immediate effect and shall not be released from any obligation arising out or any transaction entered into or completed prior to the date of such termination or expiry. e. The Distributor shall at its own expense return to UNITECH WIRELESS promptly all information, documentation, samples, advertising, promotional or sales materials relating to the Services in possession of the Distributor and materials confidential to UNITECH WIRELESS and / or software and future marketing plans or future models of the UNITECH WIRELESS together with any copies thereof or any other documents entrusted to the Distributor by UNITECH WIRELESS, f. The Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Delhi in the case of Idea Cellular Ltd. Further, the appellant submitted that in its case, the agreement entered into between the appellant and the pre-paid distributors does not provide that the appellant would be responsible to take back the unsold stock upon termination of the agreement. On the contrary, the agreement entered into by the appellant and its pre-paid distributors specifically provides that upon termination of the agreement, the Appellant shall not be liable to pay any kind of compensation to the said distributors and hence, shall not liable to compensate the distributors for any unsold stock as in the case of Idea. The aforesaid fact further proves that the relationship between the Appellant and its pre-paid distributors is that of a principal to principal and the pre-paid distributors do not act as an agent of the Appellant. Hence, the appellant concluded that the decision of the Hon ble Delhi High Court in the case of Idea Cellular Ltd. is clearly distinguishable on facts and hence cannot be applied to the appellant s case. The applicability of Section 494H in the case of amount received by the appellant from the distributors of prepaid SIM cards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to service and service has not reached the finality in this case. Second issue is regarding the accounting principle applied in the recording of the discount amount. If on delivery of the card, the assessee raise bill for Rs.100 and records Rs. 100 as sale and debits Rs. 20 in the P L account, then certainly the discount given on Rs.20 is liable for TDS. But if the assessee raises the bill for Rs. 80 and records only Rs. 80 in the credit side of the P L account, then the TDS provision will not be applicable. As submitted by the appellant, the appellant is crediting Rs. 80 in the P L account and thus, no TDS will be applicable on this amount as the MRP is not recorded in the account at all. In view of this, the AO is directed to verify the accounting principle applied by the appellant in this case. However, respectfully following the decision of the jurisdictional Hon ble high court in the case of idea cellular limited 325 ITR 148 on this issue, it can be held that the distributors appointed by the appellant are rendering service to the principal company thereby there is a principal agent relationship and hence discount offered to the distributors is in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on involved in the process of transfer of calls from the appellant to other service providers and hence the payment made by the appellant to other service providers is in the nature of fees for technical service involving TDS under the provision of Section 194J. On the other hand, the contention of the appellant is that roaming charges is in fact a payment on behalf of the subscriber of the appellant who has temporarily become a subscriber of another service provider. Even if this is considered as payment by the company on its own right, the judgment in the case of Skycell will still apply and additionally the decision of Hon ble Delhi High Court in the case of Bharti Airtel. 15. The AO s decision is based on the order passed by the Hon ble Supreme Court in the case of CIT vs. Bharti Cellular other in 193 Taxman 97 (SC). The Hon ble Apex Court vide its order dated August 12, 2010 observed that human intervention is essential for any fee/charges to get covered under the definition of fees for technical services as defined in Explanation 2 to clause (vii) of section 9(1) of the Act. However, since the expert opinion was not available on record on whether any human intervent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipment. Roaming service is a technical service provided by one operator to another operator and not directly to the subscriber. It is a service liable for service tax. Hence, the revenue held that provisions of Section 194J of the Act are applicable on the roaming charges paid by the appellant to the telecom companies. 18. We have gone through the statement recorded by the Assessing Officer, the relevant portions are as under: Q.3. What is the process of carriage of cells originating on network of one operator and terminating on the network of the other operator? The call from one network to the other network flows automatically, i.e. without any human intervention. Once a call originates, the call travels automatically. In establishment of a call, there is no human intervention i.e. once a subscriber dials and the call gets connected without any fault, then there is no human intervention. Intervention is required only when the call is not successful, i.e. the call fails due to any reason. Q.4. Is any human intervention involved in the entire process of carriage of call from one operator to another? No, as stated above, no human intervention is required in the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n IMSI which consists of MNC (Mobile Network Code a unique code allotted to assessee) and SIM which is also issued by the assessee. 3) Roaming services is a highly technical service which is possible with the use of equipment such as MSC, VLR, Radio Network, Tower, BTS, BSS and highly advanced technology. 4) It is a technical arrangement between the two telecom service providers to connect their equipments, network and services to enable their customers to have access of telecom network wherever they move. 5) All the necessary arrangements are being made by the Home service provider to enable its subscriber to get connected in all other circles. The subscriber need not interact act for any roaming services with other service provider. It is the technology established between two service providers which executes roaming system. 6) The subscriber has to get roaming activated through Home Service Provider. Only then he can access the services of service provider of another circle. 7) Whenever the subscriber tries to access the network of service provider of other circle, service provider of other circle shall be authorized by the Home Service provider as per the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced for clarity: 9. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that the revenues proposition is that though 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 and therefore, the amount paid for roaming is technical fee in terms of Section 194J read with Explanation 2 to Section 9(1) (vii) of the Act. The ld. AR explained the roaming service and submitted that Hexacom subscriber in Jaipur travels of Mumbai switches on his mobile device after reaching Mumbai. Where the subscriber travels by land he automatically receives a message transferring to the roaming network on visiting another telecom, circle. Visiting network (e.g. Airtel in Mumbai) locates mobile device and identifies that it is not registered with its systems, i.e. VLR. Visiting Network automatically contacts home network of Hexacom subscriber, i.e. HLR and gets service information about roaming device using IMSI number -IMSI number is a unique subscriber identity number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 if 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 manual intervention at the time when the service is being rendered. Technical services should have a fact situation of imparting technical knowledge involving or concerning applied and industrial science. The ld AR further argued that finding of the ld. CIT(A) are based on contract between two operators but contract has no relevancy on the nature of the service whether technical or otherwise. The ld. CIT(A) partly accepted that roaming process is technical because it uses various instruments such as MSC (Mobile Switching Centre), VLR (Visitor Location Register), Radio network, towers, BTC etc, but the system is operated/managed by the Highly skilled professionals. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Therefore, he argued that in roaming charges paid by the assessee to the other operators are not fees for technical services. The ld AR further relied on the decision in the case of iGATE Computer Systems Ltd. v. DCIT in ITA No. 1301 to 1303 1616/PN/2013 for A..Y 2007-08 to 2010-11 wherein the Hon'ble Pune Bench of ITAT had considered whether any human inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined without technical assistance. Decision of the Delhi High Court in CIT v. BHARTI CELLULAR LTD.319 ITR 139 (Del) set aside and matter remanded to the Assessing Officer with directions. After this decision, the 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 automatically. The ld AR also drawn our attention on independent opinion taken from Director CMAI, ExDirector (C M), BSNL, Ex-Member Telecom Commission on 24.12.2010 and admitted that whole interconnected uses process, no manual intervention is required. He further drawn our attention on page No.651 to 652 for postpaid as well as prepaid roaming charges charged between the operators from Mr. Kapoor Singh Guliani. The appellant also taken opinion from Former Chief Justice of India Mr. Kapadia on IUC post technical examination, cross examined and reexamination. Who also opined that Hon'ble Supreme Court decision dated 12.08.2010 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to revise the levy of interest accordingly. Ground 4 of the assessee is partly allowed for statistical purposes. 7. The aforesaid shows that the Tribunal by relying upon the decision of the Delhi High Court found that the fact situation are also the same and the payment made for roaming connectivity cannot be termed as technical services and, ultimately, it was found that the assessee could not be said as in default for non deduction of TDS at source on the roaming charges paid by it to the other service provider and the appeals are allowed to that extent. Under the circumstances, the present appeals before this Court. 8. We have heard Mr. K.V. Aravind, learned counsel appearing for the appellants - Revenue in all the appeals. The learned Counsel relied upon two decisions of the Apex Court for canvassing the contention that the roaming charges paid by the assessee to the other service provider can be said as 'technical services'; one was the decision of the Apex Court in the case of CIT v. Bharti Cellular Ltd. [2010] 193 Taxman 97/[2011] 330 ITR 239 (SC); and the another was the decision of the Apex Court in the case of CIT v. Kotak Securities Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one mobile service provider Company to another mobile service provider Company. Hence, we do not find that the observations made are of any help to the Revenue. 12. As such, even if we consider the observations made by the Apex Court in the case of Bharti Cellular Ltd.supra, whether use of roaming service by one mobile service provider Company from another mobile service provider Company, can be termed as technical services or not, is essentially a question of fact. The Tribunal, after considering all the material produced before it, has found that roaming process between participating entities is fully automatic and does not require any human intervention. Coupled with the aspect that the Tribunal has relied upon the decision of the Delhi High Court for taking support of its view. 13. In our view, the Tribunal is ultimately fact finding authority and has held that the roaming process between participating company cannot be termed as technical services and, therefore, no TDS was deductible. We do not find that any error has been committed by the Tribunal in reaching to the aforesaid conclusion. Apart from the above, the questions are already-covered by the above refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment made by a mobile service provider to another mobile service provider for utilization of roaming mobile date and connectivity cannot be termed as technical service and therefore, no TDS was deductible u/s194J of the Act. The High Court upholding the order of ITAT observed that the ITAT had examined the facts and came to the conclusion that payment made for roaming connectivity cannot be termed as technical services . 23. Hence, we hereby hold that no TDS u/s 194J is deductible in case of roaming charges paid. ITA No. 2925/Del/2015 : A.Y. 2010-11 ITA No. 2926/Del/2015 : A.Y. 2011-12 24. The solitary grounds taken up by the revenue is as under: 1. On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the demand raised u/s 201(1A) on the basis of the decision in the case of M/s Hindustan Coca Cola Beverage (P) Ltd. Vs. CIT (2007) 163 Taxman 355 (SC) whereas the assessee was liable to pay the interest u/s 201(1A) even though the relevant amount might have been included by the respective deductee in their respective income tax returns. 25. The issue pertains to non-applicability of Section 201(1) 201(1A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty u/s 271(1)(c) of the Income- tax Act. 29. Following the ratio laid down by the Apex Court in Hindustan Coca Cola Beverages P. Ltd. Vs. CIT (supra) and Instruction of CBDT as per its Circular No.275/201/95-IT(B) dated 29.1.1997 interest under section 201(1A) of the Act is chargeable up to the date of payment of taxes by the deductee/payee. Accordingly, we direct the Assessing Officer to re-compute the interest under section 201(1A) of the Act in line with the instructions of CBDT till the date of payment of taxes by the respective deductee/payee in the respective Assessment Years. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee in this regard and re-compute the interest chargeable under section 201(1A) of the Act. In the result, the ground of appeal raised by the revenue is allowed for statistical purpose. 30. In the result, the appeals of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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