IGATE Global Solutions Ltd., Pune V. DCIT, TDS 2, Pune

ITA 1616/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85314 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 26-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.1301 TO 1303 & 1616/PN/2013 (ASSESSMENT YEARS: 2007-08 TO 2010-11) IGATE COMPUTER SYSTEMS LTD., (EARLIER KNOWN AS PATNI COMPUTER SYSTEMS LIMITED) LEVEL I, II, V & VI, TOWER 3, CYBERCITY, MAGARPATTA CITY, HADAPSAR, PUNE 411013 PAN: AABCP6219N . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX (TDS)-2, PUNE . RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 02-12-2014 DATE OF PRONOUNCEMENT : 30-12-2014 ORDER PER SUSHMA CHOWLA, J.M: ALL THESE APPEALS FILED BY THE ASSESSEE ARE AGAINST THE S EPARATE ORDERS OF CIT(A)-V, PUNE DATED 16.04.2013 AND 29.07.2013 R ESPECTIVELY RELATING TO ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-11 PASSED UNDER SECTION 201(1)/201(1A) OF THE INCOME TAX ACT. 2. SIMILAR GROUNDS OF APPEAL WERE RAISED IN ALL THE YEARS, W HICH READ AS UNDER:- IN THE FACT AND THE CIRCUMSTANCES OF CASE, AND IN LA W, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -V, PUNE, ERRED: 1. IN RESPECT OF DATALINK CHARGES PAID BY THE APPELLANT: A) IN CONFIRMING THAT DATALINK CHARGES OF RS.8,32,46,468 ARE LIABLE TO TDS U/S 194J B) IN CONCLUDING THAT HUMAN INTERVENTION IS REQUIRED FO R PROVIDING THE DATALINK SERVICES AND HENCE THE DATAL INK CHARGES ARE SUBJECT TO TDS U/S 194J ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 2 C) WITHOUT PREJUDICE TO ABOVE, IN NOT APPRECIATING THAT THE RECIPIENTS OF THE DATALINK CHARGES ARE COMPANIES WH O WOULD HAVE FILED THEIR TAX RETURNS AND INCLUDED THE AMOUNTS IN THEIR TAXABLE INCOME AND HENCE AT THE MOST THE APPELLANT CA N BE LIABLE TO PAY INTEREST U/S 201(1A) 2. THE APPELLANT CRAVES LEAVE TO ADD, MODIFY OR WITHDRA W ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING 3. THE ISSUE RAISED IN ALL THE APPEALS IS AGAINST DEMAND RAIS ED UNDER SECTION 201(1) AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE A CT. 4. ALL THE APPEALS RELATING TO SAME ASSESSEE ON SIMILAR ISSU E WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. THE FACTS IN ALL THE YEARS UND ER APPEAL ARE IDENTICAL. HOWEVER, WE MAKE A REFERENCE TO THE FACTS IN IT A NO.1301/PN/2013 TO ADJUDICATE THE ISSUE. 5. THE BRIEF FACTS OF THE CASE ARE THAT, THE TDS SURVEY U NDER SECTION 133A OF THE ACT WAS CARRIED OUT ON 13.01.2009 AT THE PR EMISES OF ASSESSEE. SUBSEQUENTLY, ACIT-TDS HAD VERIFIED THE RECOR DS OF THE ASSESSEE COMPANY. THE ASSESSEE WAS A SOFTWARE COMPAN Y ENGAGED IN SOFTWARE DEVELOPMENT, SOFTWARE EXPORT AND ALLIED ACTIVITIES. DURING VERIFICATION, THE ACIT NOTICED THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE FROM THE DATA LINK CHARGES PAID TO VARIOUS TELECO M SERVICE PROVIDERS. AS PER THE ACIT, THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE FROM THE SAID DATA LINK CHARGES UNDER SECTION 19 4J OF THE ACT. BESIDES THIS, THE ACIT ALSO WAS OF THE VIEW THAT ON AMC C HARGES, THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE UNDER SE CTION 194J OF THE ACT, INSTEAD OF SECTION 194C OF THE ACT. IN VIEW THEREOF, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 201(1) O F THE ACT AND 201(1A) OF THE ACT. THE PLEA OF THE ASSESSEE BEFORE THE A CIT-TDS WAS THAT THE DATA LINK CHARGES WERE NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES BUT FOR ALLOWING THE SATELLITE LINK LINE FROM ONE SERVIC E PROVIDER ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 3 TO BE CARRIED OVER TO THE OTHER SERVICE PROVIDER. AS S UCH, THE EXISTING SERVICE PROVIDER HAD TO PROVIDE INTER CONNECTION OF THEIR NET WORKS FROM EQUIPMENT OF NET WORKS TO EQUIPMENT OF OTHER SERVICE PRO VIDERS TO PROVIDE SUBSCRIBERS EFFICIENT AND FLAWLESS SERVICES. THE DATA LINK USAGE WAS ONLY FOR TRANSMISSION OF DATA FROM THE SERVER OF ASSE SSEE TO THE DESIGNATED CLIENT SERVER. THE ASSESSEE FURTHER EXPLAINED THAT IT WAS OBVIOUS THAT THROUGH THE PROCESS OF INTERCONNECTION, ONE SERVICE PROVIDER ESTABLISHES A LINK BETWEEN ITS OWN NETWORK, SERVICES AND EQUIPMENT WITH THE NETWORK, SERVICES AND EQUIPMENT OF OTHER SERVICE PRO VIDER. FOR FACILITATING THESE ARRANGEMENTS, SERVICE PROVIDER ONLY USES THE NETWORK ELEMENT (FOR CARRYING THE LINES TO THEIR DESTINATION) OF OTHE R SERVICE PROVIDER. BY PROVIDING THE INTERCONNECTION, THE INTERCON NECTION PROVIDER DOES NOT RENDER ANY TECHNICAL SERVICES EITHER TO THE IN TERCONNECTION SEEKER OR TO THE SUBSCRIBER OF THE SERVICES. THE PLEA OF THE ASSESSEE WAS THAT JUST BECAUSE TECHNICAL EQUIPMENT / GADGETS WERE U SED IN THE TRANSMISSION PROCESS DOES NOT MAKE THE CONTRACT / CON NECT TOWARDS RENDERING / AVAILING TECHNICAL SERVICES. RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN SKYCELL COMMUNICATIONS LTD. VS. DCIT (2001) 119 TAXMAN 496 (MAD) AND IT WAS PROPOSED THAT INTERCONNECTED FACILITIES COULD BE CONSIDERED AS TECHNICAL EQUIPMENT PROVIDED BY THE INTERCO NNECTION PROVIDERS TO INTERCONNECTION SEEKERS. HOWEVER, THE SAM E WOULD NOT RESULT INTO PROVISION OF SERVICES BY THE RECEIVER OF THE FEES . THE ACIT-TDS AFTER CONSIDERING THE DECISION IN SKYCELL COMMUNICATIONS LTD . VS. DCIT (SUPRA) IN TURN, RELIED ON RATIO LAID DOWN BY KOLKATA BENCH OF THE TRIBUNAL IN HUTCHISON TELECOM EAST LTD. VS. ACIT 16 SOT 40 4 WHEREIN IT WAS HELD THAT INTERCONNECTIVITY CHARGES PAID TO BSNL WER E IN THE NATURE OF PAYMENT FOR TECHNICAL SERVICES AND WAS SUBJECT TO THE PROVISIONS OF SECTION 194J OF THE ACT. THE ASSESSING OFFICER OBSERVED T HAT THE DECISION IN SKYCELL COMMUNICATIONS LTD. VS. DCIT (SUPRA) WAS OF 2001 AND THE ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 4 KOLKATA BENCH OF THE TRIBUNAL IN ITS ORDER DATED 25.05.2007 HAD EVEN CONSIDERED THE SAID DECISION OF THE HONBLE MADRAS HIGH CO URT. IN VIEW THEREOF, IT WAS HELD THAT THE DATA LINK CHARGES WAS THE FE E PAID FOR TECHNICAL SERVICES RENDERED BY THE SERVICE PROVIDER AND THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE UNDER THE PROVISION S OF SECTION 194J OF THE ACT. FURTHER, IN RESPECT OF LEVY OF INTEREST UNDER SECTION 201(1A) OF THE ACT, IT WAS OBSERVED BY THE ACIT-TDS THAT WHERE T HE DEDUCTEE HAD PAID THE TAXES ON THE INCOME RECEIVED FROM THE DEDUCTOR THEN, THE SAME WAS TO BE CONSIDERED WHILE COMPUTING INTEREST UNDER SEC TION 201(1A) OF THE ACT. THE ACIT OBSERVED THAT ALL THE SERVICE PROVIDER S WERE COMPANIES OF REPUTE AND THERE WAS NO DOUBT THEY HAD PAID TAXES ON THE PAYMENT MADE BY THE ASSESSEE. HOWEVER, INTEREST UNDER SECTION 201(1A) OF THE ACT WAS CHARGEABLE FOR THE DELAY OF EVEN A DAY AS COR RECT COMPUTATION OF INTEREST WAS NOT POSSIBLE AND HENCE, THERE WAS NO OTHER OPTION BUT TO LEVY THE TOKEN INTEREST WHICH TAKES CARE OF THE DECISION OF THE TRIBUNAL AND THE DEFAULT. IN VIEW THEREOF, INTEREST UNDER SECTION 2 01(1A) OF THE ACT FOR FINANCIAL YEARS 2006-07 TO 2008-09 PUT TOGETHER WAS LEVIED AT RS.10 LAKHS SUBJECT TO RECTIFICATION / DIRECTIONS OF THE APP ELLATE AUTHORITIES. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE CALLED FOR THE REMAND REPORT AND OBSERVED THAT THE REPLY OF THE ACIT(TDS) WAS CRYPTIC AND EVEN THE ASSESSEE HAD NOT BEEN ABLE TO PR OCURE NECESSARY CERTIFICATES FROM THE SERVICE PROVIDERS REGARDING THE NATU RE OF HUMAN ELEMENT INVOLVED IN ENTIRE EXERCISE OF DATA LINK SERVICES. 7. THE CIT(A) VIDE PARA 17 OBSERVED AS UNDER:- 17. FROM THE COPY OF BILLS SUBMITTED DURIN G THE COURSE OF APPELLATE PROCEEDINGS, IT IS SEEN THAT SERVICE TAX HAS BEEN LEVIED BY THE SERVICE PROVIDERS. IT IS CLAIMED BY THE APPELLA NT THAT DATA LINK FACILITY IS PROVIDED BY SERVICE PROVIDERS WITH THE US E OF TECHNICAL GADGETS WITHOUT ANY HUMAN INTERVENTION. THIS SUBMISSI ON MAY BE TRUE AS LONG AS THE LEASED LINES ARE FUNCTIONING PRO PERLY, AS DUE TO ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 5 INCREASED AUTOMATION HUMAN INTERVENTION HAS BEEN GR EATLY REDUCED. HOWEVER, WHENEVER NETWORK IS JAMMED OR DATA LINK IS SLOW OR BAD, HUMAN INTERVENTION IS REQUIRED AS MACHINES CANNOT BE EXPECTED TO CORRECT ITSELF AUTOMATICALLY. TO TAKE CARE OF SUCH EXI GENCIES, SERVICE PROVIDERS HAVE TO MAINTAIN 24/7 CUSTOMER SUPPORT WIT H TOLL FREE NUMBERS. FOR EXAMPLE, IN BILL ISSUED BY STPI DATED 11.07.2006 TH ERE IS CLEAR MENTION OF CUSTOMER SUPPORT. IN THE FOOTNOTE OF THE BILL MENTION IS MADE AS UNDER: 'FOR TECHNICAL PROBLEMS, PLEASE CONTACT 24/7, CUSTOMER SUPPORT.' 8. FROM THE ABOVE, THE CIT(A) WAS OF THE VIEW THAT CUSTO MER SUPPORT WAS REQUIRED FOR THE SMOOTH FUNCTIONING OF GADGETS INVOLVED IN THE DATA LINK SERVICES. 9. THE CIT(A) VIDE PARA 18 FURTHER OBSERVED AS UNDER:- 18. THIS CLEARLY SHOWS THAT CUSTOMER SUPPORT IS REQ UIRED FOR THE SMOOTH FUNCTIONING OF THE GADGETS INVOLVED IN THE DATA LINK SERVICES. THIS PROVIDER HAS TO ENSURE THAT SUFFICIENT BAN DWIDTH IS AVAILABLE ON ONGOING BASIS FOR TRANSFER OF DATA FO R WHICH IT HAS TO MONITOR THE SIGNAL STRENGTH TO ENSURE THAT QUA LITY OF DATA IS UPTO THE MARK AND WHENEVER NETWORK IS JAMME D, IT HAS TO TAKE CORRECTIVE MEASURES. UNLIKE NORMAL INTERN ET FACILITY AVAILABLE TO CUSTOMERS THE LINES MADE AVAILA BLE TO THE APPELLANT ARE DEDICATED AND UNINTERRUPTED WHICH CANN OT BE CONE UNLESS IT IS MONITORED WITH HUMAN INTERVENTION. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN TR EATING THE DATA LINK CHARGES AS FEE FOR TECHNICAL SERVICES WARR ANTING DEDUCTION OF TAX AT SOURCE U/S.194J OF INCOME TAX A CT, 1961 IS UPHELD. 10. THE CIT(A) VIDE PARA 20 ACCEPTED THE ALTERNATE SUBMIS SIONS OF THE ASSESSEE THAT NO DEMAND UNDER SECTION 201(1) OF THE ACT COULD BE RAISED IN CASES WHERE THE RECIPIENT HAD PAID TAXES ON THE AMOUNT IN QUES TION BY INCLUDING THE SAME IN THEIR RESPECTIVE RETURNS OF INCOME. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN HINDUSTAN COCA C OLA BEVERAGES PVT. LTD. REPORTED IN (2007) 293 ITR 226 (SC), T HE DCIT WAS DIRECTED TO MODIFY THE DEMAND UNDER SECTION 201(1) OF THE ACT IN RESPECT OF PROOF / CERTIFICATE SUBMITTED BY THE ASSESSEE FROM THE RESPECTIVE SERVICE PROVIDERS IN RELATION TO THE DATA LINK CHARGES. HO WEVER, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO CALCULATE THE INTERE ST UNDER SECTION 201(1A) OF THE ACT ON ACTUAL BASIS AND NOT ON ESTIMATE BASIS. ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 6 11. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN HOLDING THAT THE DATA LINK CHARGES PAID BY THE ASSESSEE WERE N OT LIABLE TO TAX DEDUCTION AT SOURCE UNDER SECTION 194J OF THE ACT. 12. THE ALTERNATE PLEA RAISED BY THE ASSESSEE WAS THAT WHERE THE DATA LINK CHARGES HAVE BEEN INCLUDED BY THE RECIPIENT COMPANIES IN THEIR RETURNS OF INCOME, THE ASSESSEE AT MOST WOULD BE LIABLE T O PAY INTEREST UNDER SECTION 201(1A) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE SAID DATA LINK C HARGES PAID BY THE ASSESSEE, THE HUMAN INVOLVEMENT WAS ONLY FOR LIMITED PURPOSE OF MAINTENANCE OF EQUIPMENT. THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE RATIOS LAID DOWN IN TH E FOLLOWING DECISIONS:- 1. INFOSYS TECHNOLOGIES LTD. VS. DCIT IN ITA NO.1140/BANG/2009 2. WIPRO LTD. VS. ITO IN ITA NOS.991 TO 996/BANG/2002 3. GLOBAL ONE INDIA P. LTD. VS. ACIT (2014) 31 ITR (TRIB) 722 (DELHI) 4. CIT VS. ESTEL COMMUNICATIONS P. LTD. (2009) 318 ITR 185 (DELHI) 13. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE DECISION OF KOLK ATA BENCH OF THE TRIBUNAL IN HUTCHISON TELECOM EAST LTD. VS. ACIT (SUPRA) WAS LATER ON OVER RULED BY THE HONBLE DELHI HIGH COURT IN CIT VS. BHAR TI CELLULAR LTD. REPORTED IN (2009) 319 ITR 139 (DEL) AND THE HONBLE APEX COURT HAS SET ASIDE THE ISSUE IN CIT VS. BHARTI CELLULAR LTD. (2011) 330 ITR 239 (SC). 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE HAS PLACED RELIANCE ON THE RATIO LAID DOWN IN CIT VS. BHARATI CE LLULAR LTD. (SUPRA) AND IT WAS POINTED OUT BY THE LEARNED DEPARTMENT AL REPRESENTATIVE FOR THE REVENUE THAT THOUGH THE ASSESS EE WAS ASKED TO ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 7 PROVIDE THE NECESSARY CERTIFICATES FROM THE RECIPIENT, BUT IN THE ABSENCE OF THE SAME, THE ORDERS OF THE AUTHORITIES BELOW ARE TO BE UPHELD. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE ASSESSEE WAS ENGAGED IN SOFTWARE DEVELOPMENT, SOFTWARE E XPORT AND ALLIED ACTIVITIES. TDS SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE ON 13.01.2009 . THE ASSESSEE WAS FOUND TO HAVE MADE PAYMENTS AGAINST DATA LINK CHAR GES TO VARIOUS TELECOM SERVICE PROVIDERS. THE ACIT-TDS WAS OF THE VIEW THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE OUT OF SUC H DATA LINK CHARGES PAID TO VARIOUS TELECOM SERVICE PROVIDERS BEING PROFESSIONAL SERVICES PROVIDED BY THE SAID SERVICE PROVIDERS, IN VIEW OF SECTION 194J OF THE ACT. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID PAYMENTS FOR DATA LINK CHARGES WERE PAID FOR USING STANDA RD FACILITIES PROVIDED BY THE SERVICE PROVIDERS BY USING TECHNICAL GAD GETS, WHICH WERE MADE AVAILABLE UNIVERSALLY TO THE OTHERS BY WAY OF THE DA TA LINK SATELLITE LINE, WHICH WAS ESTABLISHED FROM ONE SERVICE PROVIDER TO BE CARRIED OVER TO THE OTHER SERVICE PROVIDER. IN ORDER TO PROVIDE EFFIC IENT AND FLAWLESS SERVICES TO THE SUBSCRIBERS, THE EXISTING SERVICE PROVIDER S PROVIDE INTER- CONNECTION OF THEIR NETWORKS THROUGH EQUIPMENT OF THEIR N ETWORKS TO THE EQUIPMENTS OF OTHER SERVICE PROVIDERS. THE CONNECTION IS USED FOR THE TRANSMISSION OF DATA FROM ONE SERVICE PROVIDER TO THE DES IGNATED CLIENT SERVER AND THERE WAS NO HUMAN INTERVENTION FOR THE TRA NSMISSION OF THE DATA. 16. ON THE PERUSAL OF THE RECORD, IT TRANSPIRES THAT FACILIT IES WERE PROVIDED BY TWO ENTITIES I.E. THE ASSESSEE AND THE SERVIC E PROVIDERS, WHO WERE LINKED TO EACH OTHER THROUGH THE DATA LINK AND FOR FACILITATING THE ARRANGEMENT, ONE SERVICE PROVIDER USED THE NETWORK ELEM ENT OF OTHER SERVICE PROVIDER TO PROVIDE SERVICES TO THE ULTIMATE CUST OMERS. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER SUCH PROVID ING OF SERVICES ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 8 IS COVERED UNDER SECTION 194J OF THE ACT BEING TECHNICAL OR PROFESSIONAL SERVICES PROVIDED BY THE SERVICE PROVIDER. 17. FEES FOR TECHNICAL SERVICES HAS BEEN DEFINED IN EXPLANA TION (B) TO SECTION 194J OF THE ACT TO HAVE SAME MEANING AS IN EXPLA NATION TO SECTION 9(1)(VII) OF THE ACT, WHICH READS AS UNDER:- FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MAN AGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVI SION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONS IDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UN DERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. 18. UNDER THE PROVISIONS OF SECTION 194J OF THE ACT, WHER E THE ASSESSEE MAKES ANY PAYMENT AGAINST FEES FOR TECHNICAL SERVICES, THE N, IS LIABLE TO DEDUCT TAX AT SOURCE AT THE SPECIFIED RATES AT THE TIME OF CREDIT OF THE PAYMENT OR AT THE TIME OF ACTUAL PAYMENT, WHICHEVER IS EA RLIER. FEE FOR TECHNICAL SERVICES IS DEFINED UNDER THE ACT AS CONSIDERATIO N PAID FOR RENDERING ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES BUT DOES NOT INCLUDE CONSIDERATION PAID FOR ANY CONSTRUCTION, ASSEMBLY, M INING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT. FURTHER, THE CONS IDERATION WHICH IN TURN, WOULD BECOME THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES, IS ALSO NOT TO BE INCLUDED AS FEES FOR TEC HNICAL SERVICES. IN OTHER WORDS, THE TECHNICAL SERVICES INVOLVE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. IN ORDER TO PROVIDE MANAGERIAL, TECHNICAL AND CONSULTANCY SERVICES, THE ELEMENT OF HUMAN INVOLVEMENT IS NECESSARY. IN THE FACTS OF PRESENT CASE B EFORE US WHERE, THERE IS PROVISION FOR DATA LINK AND INTER-CONNECTION FACILITIES , THE USER UTILIZES THE TECHNICAL EQUIPMENTS FOR INTER-CONNECTION PURPO SES ONLY THROUGH TECHNICAL EQUIPMENT OR GADGETS USED IN THE TRAN SMISSION PROCESS, BUT THE SAME DOES NOT PART TAKE THE NATURE OF SERVICES OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE. MERELY BECAU SE, CERTAIN ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 9 TECHNICAL EQUIPMENTS OR GADGETS ARE MADE AVAILABLE FOR TRA NSMISSION OF DATA LINK DOES NOT ESTABLISH THE CASE OF THE REVENUE TH AT SUCH SERVICES ARE TECHNICAL SERVICES PROVIDED BY THE SERVICE PROVIDER T O THE ASSESSEE, WHICH ARE COVERED UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. 19. ANOTHER ASPECT TO BE NOTED IN THE CASE IS THAT WHE RE SUCH TECHNICAL EQUIPMENTS / GADGETS REQUIRE MAINTENANCE, THEN TECHNICAL SUPPORT STAFF IS USED FOR CORRECTING THE SYSTEM BUT THAT ITSELF DOES NO T ESTABLISH THAT THE SERVICES PROVIDED BY THE MAINTENANCE CREW ARE IN TH E NATURE OF TECHNICAL SERVICES WHICH ARE NOT IN THE NATURE OF MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES NOR IS IT FOR THE USE OF OR RIGHT TO USE IN INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENTS. 20. THE HONBLE MADRAS HIGH COURT IN SKYCELL COMMUNICATION S LTD. VS. DCIT REPORTED IN (2001) 251 ITR 53 (MAD) HAD HELD TH AT FOR THE PURPOSE OF SECTION 194J TO BECOME APPLICABLE, IT IS NECESSA RY THAT THE PAYEE RECEIVES SERVICES. IF THE PAYEE USES ONLY TECH NICAL GADGETS, WHICH ARE MADE AVAILABLE TO OTHERS ALSO FOR FEES, THE SAME DOES NOT MAKE THE PAYMENT SUBJECT TO TAX DEDUCTION AT SOURCE UNDER SEC TION 194J OF THE ACT. 21. THE BANGALORE BENCH OF THE TRIBUNAL IN INFOSYS TECHNO LOGIES LTD. VS. DCIT (SUPRA) ON CONSIDERATION OF THE PAYMENT MADE TOW ARDS BANDWIDTH CHARGES TO THE SERVICE PROVIDERS HAD HELD THA T SUCH PAYMENTS WERE NOT IN THE NATURE OF MANAGERIAL, CONSULTANCY OR TEC HNICAL SERVICES NOR WAS IT FOR THE USE OF OR RIGHT TO USE INDUSTRIAL, COMME RCIAL OR SCIENTIFIC EQUIPMENTS. IT WAS FURTHER HELD BY THE BENCH TH AT THE SERVICE PROVIDERS WERE ONLY TO ENSURE THAT SUFFICIENT BANDWIDTH W AS AVAILABLE ON AN ONGOING BASIS TO THE ULTIMATE USERS TO UPLINK AND DOWN LINK THE SIGNALS. THE RELEVANT FINDINGS OF THE TRIBUNAL WERE AS UNDER:- ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 10 THE CIT(A)'S REASONING THAT THE ONLY WAY OUT IS TO GET A NO- DEDUCTION CERTIFICATE FROM THE AO (TDS), IS LACKED M ERIT IN SUBSTANCE AND THIS REASONING OF THE CIT(A) IS TO BE OUT RIGHTL Y REJECTED. SOFTWARE DEVELOPED BY COMPANIES IN INDIA IS EXPORTED EITHER IN PHYSICAL MODE (I.E. THROUGH FLOPPY DISKS) OR THROUGH W IRELESS COMMUNICATION USING SATELLITE LINKS. WHEN AN INDIAN COM PANY EXPORTS SOFTWARE TO COMPANIES OUTSIDE INDIA USING SAT ELLITE COMMUNICATION FACILITIES, THE DIGITAL SIGNALS ARE CONVERT ED INTO ANALOG SIGNALS THROUGH EARTH STATIONS AND ARE TRANSMIT TED TO ONE OF THE GEO-STATIONERY SATELLITES USING THE REQUIRED BANDW IDTH PROVIDED BY VIDESH SANCHAR NIGAM LTD. OR SOFTWARE TECHNOLOGY P ARKS OF INDIA. THE SIGNALS THAT HAVE BEEN BEAMED TO THE SATELLIT E WILL BE DOWNLINKED TO THE EARTH STATION IN THE US AND SENT TO THE CLIENT LOCATIONS USING THE BANDWIDTH AND DOWNLINKING FACILIT Y PROVIDED BY INTERNATIONAL SERVICE PROVIDERS SUCH AS AT & T, MCI TELECOMMUNICATIONS ETC. THE ASSESSEE SHARES THE BANDW IDTH PROVIDED BY THE INTERNATIONAL SERVICE PROVIDERS. BAND WIDTH IN NORMAL PARLANCE REFERS TO THE AMOUNT OF TRAFFIC THAT COULD BE CARRIED ON THE INTERNET. GREATER THE BANDWIDTH GREATER WOULD BE THE ABILITY TO TRANSMIT DATA AND OTHER COMMUNICATION. THE PAYMENTS MADE TO SERVICE PROVIDERS SUCH AS AT & T OR MCI TELECOMMUNIC ATIONS ARE FOR THE USE OF BANDWIDTH PROVIDED FOR DOWNLINKING SIGNA LS IN THE US. THE PAYMENTS MADE ARE NOT IN THE NATURE OF MANAGERI AL, CONSULTANCY OR TECHNICAL SERVICES NOR IS IT FOR THE U SE OF OR RIGHT TO USE INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. THE S ERVICE PROVIDERS SUCH AS MCI TELECOMMUNICATIONS OR AT & T, O NLY ENSURE THAT THE SUFFICIENT BANDWIDTH IS AVAILABLE ON AN ONG OING BASIS TO THE ULTIMATE USERS TO UPLINK AND DOWNLINK THE SIGNALS. NO DISALLOWANCE UNDER S. 40(A)(I) WAS CALLED FOR. 22. FURTHER, THE DELHI BENCH OF THE TRIBUNAL IN GLOBAL ONE I NDIA P. LTD. VS. ACIT (SUPRA) WHILE DECIDING THE ISSUE OF PAYMENTS MADE TOWARDS FACILITIES PROVIDED BY THE SERVICE PROVIDER FOR TRANSMISSION O F DATA AND WHETHER TAX WAS TO BE DEDUCTED AT SOURCE UNDER SECT ION 194I OF THE ACT HELD AS UNDER:- WE FIRST TAKE UP CORPORATE TAX ISSUES WHICH IS GRO UND NO. 5 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS A LICENSED I NTERNET PROVIDER. DURING THE YEAR IT PROCURED, DOMESTIC HALF CIRCUIT FACILITY TO ITS CUSTOMERS FROM TELECOM SERVICE PROVIDERS LIKE BSN L, MTNL, AND INTERNATIONAL HALF CIRCUIT FACILITY FROM RAG, ATLANTIC AT FRANCE. THESE ARE STANDARD FACILITIES PROVIDED FOR TRANSMISSION OF DATA BY THOSE ORGANISATIONS. THE ISSUE IS WHETHER TAX SHOULD BE DED UCTED AT SOURCE UNDER SECTION 194-I FROM PAYMENTS MADE FOR U SE OF SUCH STANDARD FACILITIES. THE HON'BLE DELHI HIGH COURT IN TH E CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. V. DIT [2011] 332 ITR 340 (DELHI) AND THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SKY CELL COMMUNICATIONS LTD. V. DEPUTY CIT [2001] 251 ITR 53 (M AD) HAVE ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. RES PECTFULLY FOLLOWING THE SAME, WE HOLD THAT PAYMENTS MADE TOWARDS USE OF STANDARD FACILITY, WHEN THE LESSEE IS NOT HAVING ANY D OMAIN OR CONTROL OR POSSESSORY RIGHTS OVER SUCH FACILITY, CANNO T BE CATEGORISED AS USE OF ASSETS FOR THE PURPOSE OF THE ACT. ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 11 23. THE ASSESSING OFFICER HAD PLACED RELIANCE ON THE RATIO LA ID DOWN BY THE CALCUTTA BENCH OF THE TRIBUNAL IN HUTCHISON TELECOM E AST LTD. VS. ACIT (SUPRA) WHEREIN, IT WAS HELD THAT INTERCONNECTIVITY CH ARGES PAID TO BSNL WERE IN THE NATURE OF PAYMENT FOR TECHNICAL SERVICE S AND NOT PAYMENT MADE AGAINST WORK AND SAME WERE SUBJECT TO P ROVISIONS OF SECTION 194J OF THE ACT. HOWEVER, THE HONBLE DELHI HIGH C OURT IN CIT VS. BHARTI CELLULAR LTD. (SUPRA) HAS OVERRULED THE RATIO LAID D OWN BY THE CALCUTTA BENCH OF THE TRIBUNAL IN HUTCHISON TELECOM EAST L TD. VS. ACIT (SUPRA) BY HOLDING THAT THE WORD TECHNICAL HAD TO TAKE COLOUR FROM THE WORDS MANAGERIAL AND CONSULTANCY. IT WAS FURTHER HELD BY THE HONBLE HIGH COURT THAT MANAGERIAL SERVICES HAD DEFINITE HUMAN ELEM ENT ATTACHED TO AND SIMILAR SERVICES OF CONSULTANCY ALSO NECES SARY ENTAILED HUMAN INTERVENTION AND CONSEQUENTLY, THE WORD TECHNICAL AS APPEARING IN EXPLANATION (2) UNDER SECTION 9(1)(VII) OF THE ACT HAS TO BE CONSTRUED INVOLVING HUMAN ELEMENT. THE FACILITIES WHICH WERE PROVIDED BY MTNL AND OTHER COMPANIES FOR INTER-CONNECTION / PORT ACCESS WHICH WAS PROVIDED AUTOMATICALLY BY THE MACHINES AND HENCE THE MT NL AND OTHER COMPANIES WHICH PROVIDES SAID FACILITIES WERE NOT RENDERING ANY TECH NICAL SERVICES AND THE PAYMENTS MADE TO SUCH SERVICE PROVIDE RS WERE NOT LIABLE FOR TAX DEDUCTION AT SOURCE UNDER SECTION 194J OF THE ACT. 24. THE HONBLE SUPREME COURT IN CIT VS. BHARTI CELLULAR LT D. (SUPRA) OBSERVED THAT QUESTION OF HUMAN INTERVENTION WAS NEVER RAISED BY THE DEPARTMENT EITHER BEFORE THE CIT(A) OR BEFORE THE TRIBUNA L AND WAS NOT RAISED EVEN IN THE PRESENT APPEALS. HOWEVER, KEEPING IN MIND THE HIGHER INTEREST AND RAMIFICATIONS OF THE ISSUE, THE MATTER WAS RE MITTED BACK TO THE ASSESSING OFFICER TO EXAMINE TECHNICAL EXPERT AND DEC IDE THE SAME AFRESH. FURTHER, IT WAS HELD BY THE HONBLE SUPREME COUR T THAT THE DEPARTMENT WAS NOT ENTITLED TO LEVY INTEREST UNDER SECT ION 201(1A) OF THE ACT OR IMPOSE PENALTY FOR NON-DEDUCTION OF TDS ON THE FAC TS AND ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 12 CIRCUMSTANCES OF THE CASE FOR THE REASONS THAT THERE W AS NO LOSS OF REVENUE AS TAXES HAD BEEN PAID BY THE RECIPIENT AND ALS O BECAUSE THE MOOT QUESTION INVOLVED IN THE CASE WAS YET TO BE DECIDED. 25. NOW COMING TO THE FACTS AND CIRCUMSTANCES OF THE PRE SENT CASE, THE ASSESSEE HAD FURNISHED THE EXPLANATION BEFORE THE AS SESSING OFFICER AND ALSO FILED WRITTEN SUBMISSIONS BEFORE THE CIT(A) VIDE LETTE R DATED 01.04.2013 ALONG WITH FLOW CHART / DIAGRAM OF HOW THE DATA LINKS WORKS WHICH IS PLACED AT PAGES 24 TO 26 OF THE PAPER B OOK. THE ASSESSEE ALSO PLACED ON RECORD THE SAMPLE COPIES OF PURCHASE ORDE RS AT PAGES 27 ONWARDS UNDER WHICH, IT WAS EXPLAINED THAT THE PERUSAL OF THE BILLS WOULD REFLECT THE BASIS OF CHARGES, RATES, ETC. WHICH WERE FI XED / AGREED UPON AND FINALLY BILLED BY THE DATA LINK PROVIDERS AND IT WAS VEHEMENTLY STATED THAT THE SAME DOES IN NO WAY INDICATE INVOLVEMEN T OR OTHERWISE OF HUMAN INTERVENTION IN THE DATA LINK PROCESS. IN VIEW THER EOF, IN THE ABSENCE OF ANY HUMAN INTERVENTION BETWEEN THE ASSESSEE AND THE SERVICES PROVIDED BY THE DATA LINK PROVIDER, IT CANNOT BE SAID THAT THE PAYMENT MADE BY THE ASSESSEE WAS FOR TECHNICAL SERVICES . MERELY BECAUSE FOR MAINTENANCE PURPOSE CERTAIN HUMAN INTERVENT ION WAS PROVIDED, CANNOT LEAD TO THE SURMISE THAT THE DATA LINK C HARGES PAID TO VARIOUS TELECOM SERVICE PROVIDERS, WERE IN THE NATURE OF TECH NICAL SERVICES GOVERNED BY THE PROVISIONS OF SECTION 194J OF THE ACT. THE DATA LINK CHARGES WERE PAID FOR UTILIZING THE STANDARD FACILITIES WHICH WERE PRO VIDED BY THE INDIVIDUAL SERVICE PROVIDERS BY WAY OF USE OF TECHNIC AL GADGETS WHICH WERE MADE AVAILABLE VIDE DATA LINK SATELLITE LINK LINE EST ABLISHED FROM ONE SERVICE PROVIDER TO BE CARRIED OVER TO THE OTH ER SERVICE PROVIDER, DOES NOT INVOLVE TECHNICAL SERVICES AS THERE WAS ONLY IN TERCONNECTION OF THE NETWORKS TO THE EQUIPMENTS OF OTHER SERVICE PROVIDE RS. IN THE ABSENCE OF ANY HUMAN INTERVENTION FOR TRANSMITTING THE DA TA THROUGH SUCH DATA LINK SATELLITE LINK LINE, THE PAYMENTS MADE FOR UTILIZIN G SUCH ITA NOS.1301 TO 1303 AND 1616/PN/2013 IGATE COMPUTERS SYSTEMS LTD 13 SERVICES WAS NOT IN THE NATURE OF TECHNICAL SERVICES GO VERNED BY SECTION 194J OF THE ACT. ACCORDINGLY, WE REVERSE THE FINDING OF CI T(A) IN THIS REGARD AND HOLD THAT DATA LINK CHARGES OF RS.8,32,46,468/- WERE NOT LIABLE FOR TAX DEDUCTION AT SOURCE UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. IN VIEW THEREOF, THE GROUNDS OF APPEAL NO.1 (A) AN D (B) ARE ALLOWED. SINCE THERE WAS NO REQUIREMENT TO DEDUCT TAX A T SOURCE UNDER SECTION 194J OF THE ACT, THERE WAS NO LIABILITY UPON THE AS SESSEE AND THERE WAS NO FAILURE ON PART OF ASSESSEE FOR NON-DEDUCT ION OF TAX AT SOURCE AND CONSEQUENTLY, THE ASSESSEE WAS NOT LIABLE TO PAY INTEREST UNDER SECTION 201(1A) OF THE ACT. THE GROUND OF APPEAL N O.1(C) RAISED BY THE ASSESSEE IS ALLOWED. 26. THE FACTS AND ISSUE IN ITA NOS.1302, 1303 AND 1616/PN /2013 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.1301/PN/2013 A ND OUR DECISION IN ITA NO.1301/PN/2013 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.1302, 1303 AND 1616/PN/2013. 27. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF DECEMBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH DECEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE