TMI Blog2023 (2) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal of the Revenue stands dismissed. - ITA No.7295/Del./2019 - - - Dated:- 22-2-2023 - Shri Shamim Yahya, Accountant Member And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Pulkit Saini, Advocate For the Revenue : Shri K.K. Mishra, Senior DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of ld. CIT (Appeals)-7, New Delhi dated 10.06.2019 pertaining to Assessment Year 2016-17. 2. The grounds of appeal taken by the Revenue read as under :- 1. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law, in deleting the addition of Rs. 2,50,67,8481- made by the Assessing Officer on account of disallowance u/s 40(a)(i) of the Income Tax Act, 1961 of the 'communication charges' paid to M/s TATA Communications/America) Inc(TATA INC), despite the fact that these payments were in the nature of 'Fees for Technical Services' as per the provisions of section 9(1)(vii) of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law holding that the 'communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;the Act'), AO assessed the income after the addition of Rs.2,50,67,848/- u/s 40(a)(i) of the Act on account of non-deduction of TDS and addition of Rs.40,452/- on account of excess depreciation claimed. 4. Against this order, assessee went in appeal before the ld. CIT(A). On the issue of addition of Rs.2,50,67,848/- u/s 40(a)(i) on account of non-deduction of TDS, ld. CIT (A) noted the submissions of the assessee. He found that the appeal was instituted on similar facts for AY 2013-14 which was decided by ld. CIT (A)-5 vide order dated 12.07.2018. After reproducing the order of ld. CIT (A) for AY 2013-14, ld. CIT (A) held that in the present appeal, facts are similar, hence following that order, he held that the addition of Rs.2,50,67,848/- u/s 40(a)(i) on account of non-deduction of TDS is deleted. We may gainfully refer to the order of ld. CIT(A) dated 12.07.2018 for AY 2013-14, reproduced by the ld. CIT(A) in his order, as under : 4.3. The main submission of the appellant was that the payment made is not subject to section 195 as it does not involve in income component arising to the non-resident company. The appellant has stated that the payment was for communicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot read Section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression sum chargeable under the provisions of the Act from Section 195(1). While interpreting a Section one has to give weightage to every word used in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging Sections of that Act de hors the machinery Sections. The Act is to be read as an integrated Code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of C.1. T. Vs. Eli Lilly Co. (India) (P) Ltd [312 ITR 225] the provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the I T. Act form one single integral, inseparable Code and, therefore, the provisions relating to TDS applies only to those sums which are chargeable to tax under the I T. Act. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the words technical and services have to be shed, and only the meaning of the whole expression technical services has to be seen. Moreover, the expression technical service is not to be construed in the abstract and general sense but in the narrower sense as circumscribed by the expressions managerial service and consultancy service as appearing in Explanation 2 to Section 9(1)(vii) of the said Act. Considered in this light, the expression technical service would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots. The aforesaid principle of human interface was upheld by the H'bl Supreme Court in appeal while it referred the matter back to lower authorities to factually determine as to whether there was any human intervention. No human intervention has been brought on record in the present case. Further the Delhi Tribunal has also held that specifically inter connected usage charges paid by Bharti Airtel to a foreign telecom operator do not constitute FTS and do not arise or accrue in India. 73. The undisputed fact is that none of the operations of the FTOs are in India. The call is deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call and facility from the Indian customer to the client in United States. Further a client in the US is also enable through such inter connection to dial a subscriber in India. The basic process involved does not apparently have human inter phase. The assessing officer in his assessment has also not commented that whether the human inter phase can be established or not, even though this was one of the basic provisions sought in remand Interconnected charges per se therefore had been held technical services. Further the payment is made to a non- resident the taxability is to be considered under DTAA, since the recipient is stated to be a tax - resident of us. The DTAA clearly lays out the scope of fee for included services in article 12. The article 12 is reproduced hereunder :- ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State,' but if the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8. 4. For purposes of this Article, fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. 5. Notwithstanding paragraph 4, fees for included services , does not include amounts paid: (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices in India. It has been submitted by the appellant that the services being rendered by the non- resident company at the foreign end and not at the Indian end The license required is for a case where the point of presence is in India. Without going into detailed technicalities requirement it is seen that the terms and conditions of the DOT are prima facie not relevant to the taxability of the same being paid The appellant has taken some services which are inter connection services from an entity in Us. The sum paid to the US entity is not taxable in India. This fact per se is sufficient to insulate the assessee from the provisions of section 40(a)(ia). In view of the above discussion, the addition of Rs.1,52,72,504/- on account of communication charges paid is hereby deleted. 5. Against this order, Revenue is in appeal before us. We have heard both the parties and perused the records. 6. Ld. Counsel for the assessee contended that the issue is covered in favour of the assessee by a series of orders as under :- (i) ITA No. 3328 to 3332/D/2015 Assessment years 2007-08 to 2011-12 M/s. Tata Teleservices Ltd. v. ITO (ii) ITA No. 1417/2018 (Del) CIT v. Tata Teleservices L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges as it cannot be categorized as fee for technical services. 10. Consequently, this Court is of the view that it is not open to the revenue to challenge the correctness of the finding rendered by the Karnataka High Court In Vodafone South Ltd. (supra) in the case of other assessees without just cause. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. 8. Since facts in the present case are not disputed and respectfully following the precedent, we do not find any infirmity in the order of ld. CIT(A), hence we uphold the same. Moreover, it is also not the case that last year s CIT (A) order relied upon by him has been reversed. 9. Apropos the issue of disallowance of an amount of Rs.40,452/- being excess depreciation claimed, ld. CIT (A) noted the AO s contention that assessee has taken license which allows the assessee to use that particular right on payment of certain amount and that being an intangible asset on which depreciation is allowable @ 25% only. Ld. CIT (A) noted that ld. CIT (A) in AY 2013-14 vide order (supra) in assessee s own case granted the relief to the assessee holding that depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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