BHARTI HEXACOM LTD, Jaipur V. ITO, Jaipur

ITA 656/JPR/2010

• Counselvise Citation: 65623114 RSA 2010
• Duration Of Justice: 5 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-01-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROLEE AGARWAL
• Keywords: Non-deduction of tax; Relationship of principal and agent
• Section: 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 656/JP/2010 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 (F.Y. 2008-09) M/S BHARTI HEXACOM LIMITED K-21, MALVIYA MARG, C-SCHEME, JAIPUR. CUKE VS. INCOME TAX OFFICER (TDS)-II, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAACH 1766 P VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI ANIL BHALLA & SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. ROLEE AGARWAL (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/04/2015 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 12/06/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 22/02/2010 PASSED BY THE LEARNED CIT(A)-III, JAIPUR FOR A.Y. 2009-10 (F.Y. 2008-09). THE EFFECTIVE GROUNDS OF APPEAL ARE AS UND ER:- 1 THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED BOT H ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT TO THE TRANSACTION OF TELEPHONY CONDUCTED THROUGH PREPAID ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 2 VOUCHERS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LA W IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.1) THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED B OTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPANY TO BE IN DEFAULT I N RESPECT OF NON-DEDUCTION OF TAX AMOUNTING TO RS. 55,00,794/- U/S 194H ON THE DIFFERENCE BETWEEN THE PRICE AT WHICH THE PREPAID CARD IS SOLD TO THE DISTRIBUTOR AND THE PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAYMENT OF COMMISSION. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 1.2) THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED B OTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS. 4,41,020/- U/S 201(1A) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 2. THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED BOT H ON FACTS AND IN LAW IN APPLYING THE PROVISION OF SECTION 194J OF THE INCOME TAX ACT TO THE TRANSACTIONS OF ROAMING CHARGES. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 2.1) THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED B OTH ON FACTS AND IN LAW IN PASSING AN ORDER U/S 201(1) AND HOLDING THE ASSESSEE COMPANY TO BE IN DEFAULT I N RESPECT OF NON-DEDUCTION OF TAX AMOUNTING TO RS. 10,18,92,350/- U/S 194J ON THE AMOUNT PAID TO OTHER TELEPHONY OPERATORS FOR ROAMING CHARGES INCURRED BY THE APPELLANTS SUBSCRIBERS ON THE NETWORK OF SUCH OTHER TELEPHONE OPERATORS BECAUSE SUCH PAYMENT ARE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 3 NOT FOR TECHNICAL SERVICES AND DO NOT FALL WITHIN TH E PROVISION OF SECTION 194J OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 2.2) THE LEARNED ASSESSING OFFICER (TDS) HAS ERRED B OTH ON FACTS AND IN LAW IN CHARGING INTEREST OF RS. 68,75,375/- U/S 201(1A) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE GROUND OF APPEAL AT A LATER STAGE. 2. THE GROUND NO. 1 OF THE APPEAL IS AGAINST CONFIRM ING THE ADDITION ON TRANSACTION OF PREPAID CARD SOLD TO DISTRIBUTOR AND PRICE AT WHICH THE END CUSTOMER BUYS ALLEGING THE DIFFERENCE TO BE PAY MENT OF COMMISSION. LIABLE TO BE DEDUCTED TDS U/S 194H OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND DEEMED DEFAULT U/S 201(1) AND INTEREST THEREON U/S 201(1A) OF THE ACT. THE LD ITO(TDS) HAS OB SERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CE LLULAR MOBILE TELEPHONE SERVICES IN RAJASTHAN UNDER THE BRAND NAM E AIRTEL. THE ASSESSEE HAD MARKETED ITS PRODUCT THROUGH THE DISTR IBUTOR NETWORK UNDER TWO CATEGORIES NAMELY POST PAID PRODUCTS AND P REPAID PRODUCTS. DISTRIBUTORS DEALING WITH POSTPAID PRODUCTS ARE CALL ED AIRTEL CHANNEL PARTNERS. THE ASSESSEE TREATS THEM AS AGENTS AND HAS DEDUCTED TDS IN ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 4 RESPECT OF THE AMOUNT OF COMMISSION PAID TO THESE D ISTRIBUTORS. IN THE CASE OF PREPAID PRODUCTS, THE DISTRIBUTORS DISTRIBU TE AIRTELS RETAIL PACKAGE PRODUCTS LIKE PREPAID SIM CARD, RECHARGE CO UPONS AND MOBILE PRODUCTS. THE ASSESSEE PROVIDED THESE SERVICES THROU GH THEM BY SUPPLYING TO THEM STARTER PACK AND RECHARGEABLE COU PONS, WHICH IS COMMONLY KNOWN AS SIM CARD AND PREPAID CARD. THESE SIM CARDS AND RECHARGEABLE COUPONS ARE PURCHASED BY THE DISTRIBUT ORS APPOINTED BY THE ASSESSEE AT A FIXED RATE WHICH IS BELOW THE MARKE T PRICE OF SUCH SIM CARD AND THE SAME ARE FURTHER SOLD TO THE RETAILERS BY WHOM IT IS ULTIMATELY SOLD TO THE CUSTOMERS. IN THIS REGARD, T HE ASSESSEE ENTERS INTO AN AGREEMENT WITH THEM. AFTER EXAMINING THE TE RMS AND CONDITIONS OF THE AGREEMENT ENTERED WITH THE ASSESSE E AND THE DISTRIBUTOR, IT IS OBSERVED BY THE ASSESSING OFFICE R THAT THERE IS PRINCIPAL AGENT RELATIONSHIP BETWEEN THEM. THEREFORE, THE ASSES SEE WAS LIABLE TO DEDUCT TAX AT SOURCE AS PER THE PROVISIONS OF SECTI ON 194H OF THE ACT ON COMMISSION PAID TO THESE DISTRIBUTORS BUT THE ASSES SEE HAD NOT DEDUCTED ANY TAX AT SOURCE ON THE PLEA THAT THERE I S PRINCIPAL TO PRINCIPAL RELATIONSHIP BETWEEN THEM AND ALSO PREPAID PRODUCT AND SERVICES WERE SOLD TO THE DISTRIBUTOR AT A DISCOUNTE D PRICE AND AS SUCH NO COMMISSION WAS PAID TO THEM. THE LD ITO(TDS) TABULA TED MONTH ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 5 WISE DETAILS OF MRP AND DEALER PRICE AND DIFFERENCE BETWEEN MRP AND DEALERS PRICE FOR THE F.Y. 2008-08 ON PAGE 2 OF THE ORDER. HE CALCULATED THIS TO BE FOR WHOLE YEAR AT RS. 4,85,48,685/-. TH E LD ASSESSING OFFICER ANALYSED THE SECTION 194H OF THE ACT WITH REFERENCE TO TRANSACTION OF SIM CARD, PREPAID CARD, MRP PRICE AND DEALERS PRICE . THE LD ITO(TDS) ANALYSED THE AGREEMENT MADE BY THE ASSESSEE WITH M/S BANTY TELECOM, SADULPUR, DISTRICT- CHURU (RAJ). THE AGREEMENT WITH M /S BANTY TELECOM AND SOME OF THE CLAUSE HAS BEEN REPRODUCED BY THE A SSESSING OFFICER FROM PAGE 4 TO 14 OF THE ASSESSING OFFICER. HE GAVE THE SHOW CAUSE NOTICE VIDE LETTER DATED 29/1/2009 U/S 201(1) AND 2 01(1A) OF THE ACT, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 1 1/2/2009, WHICH HAS BEEN REPRODUCED BY THE ITO(TDS) FROM PAGE 14 TO 17 OF ITS ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, IT HAS BEEN HELD THAT AS PER CLAUSE 9.2 OF THE AGREEMENT, IT IS CLEAR THAT THERE WAS A PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THEM AND THE ASSESSEE WAS PAYING FIXED COMMISSION TO THESE DISTRIBUTORS IN GARB OF DISCOUN T. THE ENTIRE OWNERSHIP RELYING TO SUCH NEW SIM CARD AND PREPAID CA RD ALWAYS VESTS WITH THE ASSESSEE AS EVIDENT FROM DIFFERENT CLAUSES OF SUCH AGREEMENT. WHEN SERVICES ARE SOLD ON DISCOUNT, THERE CANNOT BE ANY RESTRICTION IMPOSED BY ONE PRINCIPAL ON THE OTHER PRINCIPAL IN REGARD TO THE MANNER ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 6 AND THE AREA OF SALES OF SUCH GOODS SOLD. IN CASE O F PURCHASES ON DISCOUNT, THERE CANNOT BE ANY RESTRICTION ON THE MA NNER IN WHICH THE STOCK PURCHASED BY ONE PRINCIPAL IS KEPT BY IT. IN THE PRESENT CASE, THE ASSESSEE COMPANY HAS GOT ALL THE RIGHT TO REGULARLY MONITOR THE OPERATIONS OF DISTRIBUTOR, MONITOR OR INVESTIGATE T HE MANNER IN WHICH BUSINESS OPERATIONS ARE CARRIED ON BY SUCH DISTRIBU TOR, WHICH IS ABSENT IN THE CASE OF SALE ON DISCOUNT. THE ASSESSEE COMPAN Y CAN DIRECT THE DISTRIBUTORS ABOUT THE MANNER IN WHICH SUCH PRODUCT WOULD BE SOLD IN THE MARKET. NOMENCLATURE GIVEN BY THE ASSESSEE AS D ISCOUNT IS NOTHING BUT COMMISSION PAID BY THE ASSESSEE TO DISTRIBUTOR FOR SERVICE RENDERED BY THEM. HE FURTHER ANALYSED THE CASE LAWS CITED BY THE ASSESSEE, WHICH ARE AS UNDER:- (I) AHMADABAD STAMP VENDORS ASSOCIATION (257 ITR 20 2). (II) M.S. HAMEED & OTHERS VS. DIRECTOR OF STATE LO TTERIES AND OTHERS (KERALA HIGH COURT) 249 ITR 186. (III) IDEA CELLULAR LIMITED DATED 28/03/2008 IN IT A NOS. 3031/DEL/2005, 1857/DEL/2006 AND 2867/DEL/2005. THE ABOVE CASES ARE FOUND TO THE ASSESSING OFFICER D ISTINGUISHABLE. HE FURTHER RELIED ON THE DECISION IN THE CASE OF ACIT, CIRCLE-57, KOLKATA VS. BHARTI CELLULAR LIMITED (105 ITD 129) WHERE THE FACT S ARE IDENTICAL TO PRESENT CASE, IT WAS HELD BY THE HONBLE ITAT, KOLKAT A THAT THE PRICE DIFFERENCE I.E. NET RECEIPT BY THE DISTRIBUTOR IS C OMMISSION IN NATURE AND ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 7 NOT DISCOUNT. FAILURE BY THE ASSESSEE TO DEDUCT TAX AT SOURCE U/S 194H MADE HIM ASSESSEE IN DEFAULT AND THE A.O. WAS JUSTIF IED IN MAKING DEMAND U/S 201(1) AND INTEREST U/S 201(1A). HE FURT HER RELIED UPON THE DECISION OF HONBLE ITAT, JAIPUR BENCH IN THE CASE O F HINDUSTAN COCA COLA BEVERAGES PVT. LTD. 97 ITD 105 WHEREIN THE HON BLE TRIBUNAL ON OBSERVATION OF REAL RELATION OF DISTRIBUTORS WITH AS SESSEE COMPANY, HELD THAT IT WAS PRINCIPAL TO AGENT RELATIONSHIP. AFTER C ONSIDERING THE LEGAL PROPOSITION ON THIS ISSUE, THE LD ITO(TDS) HELD THAT PRICE DIFFERENT BETWEEN THE MRP AND DEALERS PRICE ARE NOTHING BUT CO MMISSION PAID BY THE ASSESSEE TO ITS DISTRIBUTORS AND HENCE THE ASSE SSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194H OF THE ACT ON THE COM MISSION PAYMENT TO ITS DISTRIBUTORS. SINCE THE ASSESSEE FAILED TO D EDUCT TDS, IT IS DEEMED DEFAULT U/S 201(1) AND 201(1A) OF THE ACT. THE LD ITO (TDS) CALCULATED THE PAYMENT U/S 201(1) U/S 194H AT RS. 55,00,794/- AND INTEREST THEREON U/S 201(1A) AT RS. 4,41,020/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER:- 2.3.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE AND SUBMISSIONS OF LD. AR. ON PERUSAL OF THE RELEVANT ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 8 RECORDS, I FIND THAT THE MAIN ISSUE INVOLVED IN THI S GROUND OF APPEAL IS AS TO WHETHER THE RELATIONSHIP BETWEEN THE APPELLANT COMPANY AND THE DISTRIBUTORS O F ITS PREPAID PRODUCTS I.E. SIM CARDS, RECHARGE COUPO NS, ETC. WAS THAT OF A PRINCIPAL TO AGENT RELATIONSHIP O R PRINCIPAL TO PRINCIPAL RELATIONSHIP AND WHETHER THE DIFFERENCE BETWEEN THE MARKET PRICE OF THOSE PRODUCT S AND THE DISCOUNTED PRICE, AT WHICH THEY WERE GIVEN TO THE DISTRIBUTORS, WAS IN THE NATURE OF COMMISSION AN D WHETHER THE APPELLANT COMPANY WAS LIABLE TO MAKE TDS U/S 194H OF THE IT ACT IN RESPECT THEREOF. IN THIS REGARD, I FIND THAT THIS ISSUE IS DIRECTLY COVERED AGAINST THE APPELLANT COMPANY BY THE DECISION OF HONBLE IT AT, COCHIN BENCH IN THE CASE OF M/S VODAFONE ESSAR CELLULAR LTD. VS. ACIT (2010) 35 DTR (COH)(TRIB) 393 AND BY THE RECENT DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF CIT V/S IDEA CELLULAR LTD. (2010) 35 DTR (DEL.) 219, IN WHICH THE HONBLE HIGH COURT HAS HELD THAT THE DISCOUNT OFFERED BY THE ASSESSEE TO THE DISTRIBUTORS ON PAYMENTS MADE BY THE LATTER FOR THE SIM CARDS/RECHARGE COUPONS, WHICH ARE EVENTUALLY SOLD T O THE SUBSCRIBERS AT THE LISTED PRICE, IS COMMISSION AND IT IS SUBJECT TO TDS UNDER S. 194-H OF THE ACT. IN THE SAID ORDER, THE HONBLE HIGH COURT HAS ALSO APPROVED THE AFORESAID DECISION OF THE HONBL;E COCHIN BENCH OF THE ITAT. THEREFORE, RESPECTFULLY FOLLOWING THE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 9 AFOREMENTIONED DECISIONS OF HONBLE DELHI HIGH COUR T AND HONBLE TRIBUNAL, COCHIN BENCH, THIS ISSUE IS DECIDED AGAINST THE APPELLANT. ACCORDINGLY, IT IS H ELD THAT THE APPELLANT COMPANY WAS LIABLE TO MAKE TDS U/S 194-H OF THE I.T. ACT ON THE DIFFERENCE BETWEEN THE MARKET PRICE OF THE AFOREMENTIONED PREPAID PRODUCTS AND THE DISCOUNTED PRICE, AT WHICH THEY WERE GIVEN TO THE DISTRIBUTORS. ALTERNATIVELY, THE LD CIT(A) ALLOWED THE APPEAL BY CO NSIDERING THE HON'BLE SUPREME COURT DECISION IN THE CASE OF M/S H INDUSTAN COCA COLA BEVERAGES PVT. LTD. VS. CIT 293 ITR 226 (SC) AND ASSE SSING OFFICER WAS DIRECTED TO VERIFY THE RECIPIENT WHETHER DISCLOSED RECEIPTS IN THE INCOME OR NOT. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE IS A TELECOMM UNICATION SERVICE PROVIDER. IT SELLS ITS PRODUCTS TO DISTRIBUTORS IN BULK AGAINST PRIOR PAYMENTS SUCH AS PREPAID START UP PACKS AND RECHARG E COUPON VOUCHERS WHICH HAS RIGHT TO USE AIRTIME EMBEDDED IN IT. THES E ARE SOLD TO VARIOUS DISTRIBUTORS ON PRINCIPAL TO PRINCIPAL BASI S AT A DISCOUNTED PRICE AS COMPARED TO MRP. THERE ARE DIFFERENT DISTRIBUTORS WHO IN TURN SELL ON OUT RIGHT BASIS TO RETAILERS. THE LD AR EXPLAINED TH E NATURE OF PREPAID ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 10 PRODUCT. THE DISTRIBUTORS SOLD ITS PRODUCT TO RETAIL ER AND PRICE IS LEFT TO THE RETAIL CHAIN AS PER COMPETITION AND MARKET FORC ES. THE PREPAID PRODUCT WHICH GIVES A RIGHT TO USE AIRTIME OF A SPEC IFIED VALUE, IS TO BE TAKEN AS A GOOD OR MERCHANDISE CAPABLE OF BEING TRA NSFERRED. THE HONBLE GUJARAT HIGH COURT HAD DESCRIBED IN CASE OF AHMADABAD STAMP VENDORS 257 ITR 202 (GUJ). THERE ALSO THERE IS A RIG HT TO UTILIZE THE VALUE CAPTURED IN THE STAMP FOR ENTERING INTO AND E STABLISHING A TRANSACTION/AGREEMENT. SUCH GOODS IN THE FORM OF ST AMPS CANNOT BE SOLD FURTHER, BUT A PREPAID PRODUCT CAN BE. IN FACT A PREPAID PRODUCT IS BETTER PLACED FROM THE POINT OF VIEW OF TRADING. THE MERCHANDISE CONCEPT HAS CHANGED BECAUSE OF TECHNOLOGICAL ADVANC EMENT HAS BEEN RECOGNIZED BY THE HON'BLE SUPREME COURT IN THE MATT ER OF B SURESH 313 ITR 149 (SC). THE HON'BLE SUPREME COURT HAS HELD IN THIS CASE THAT BETA-CAM TAPE (CASSETTE) WAS ONLY A MEDIUM OF TRANSF ER; THAT THERE WAS NO SALE OF THE FILM IN BETA-CAM FORMAT AND THAT THE ASSESSEE HAD ONLY TRANSFERRED THE RIGHT TO USE FOR A PERIOD OF FIVE Y EARS AND SINCE THE TITLE REMAINED WITH THE ASSESSEE, THE IMPUGNED TRANSACTION FELL OUTSIDE SECTION 80HHC. HE FURTHER ARGUED THAT DIFFERENCE BE TWEEN THE TWO IS GETTING BLURRED WITH GLOBALIZATION AND CROSS BORDER TRANSACTION WITH HELP OF TECHNOLOGY. IN THIS CONTEXT THE RIGHT TO USE AIR TIME AND THE PROMISE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 11 TO PROVE AIRTIME IS A PRODUCT OR MERCHANDISE CAPABL E OF BEING TRANSFERRED FROM SERVICE PROVIDER TO THE DISTRIBUTO R FROM THE DISTRIBUTOR TO THE RETAILER AND FROM THE RETAILER TO THE CUSTOM ER. THE PREPAID PRODUCT IS DELIVERED ON PAYMENT BEING RECEIVED IN A DVANCE FROM DISTRIBUTOR OR IS RECEIVED SIMULTANEOUSLY WITH THE S UPPLY OF PRODUCT. THE RISKS AND REWARD ARE THAT OF THE DISTRIBUTOR AND IN CASE THERE IS ANY LOSS, PILFERAGE OR DAMAGE THE DISTRIBUTOR WOULD BE RESPONS IBLE FOR SUCH LOSS, PILFERAGE OR DAMAGE. THIS PROVES THAT THE PROPERTY I N THIS CASE STANDS TRANSFERRED. IT IS OF NO CONSEQUENCE THAT THE SERVI CE TO BE PROVIDED WHICH IS CAPTURED IN THE STARTUP PACK IS TO BE DELIV ERED AT A LATER STAGE. HE ALSO DRAWN OUR ATTENTION ON SAMPLE OF CHALLAN AND INVOICE RAISED BY THE COMPANY ON THE DISTRIBUTORS TO SHOW THAT A PRODU CT OR MERCHANDISE WHICH HAS TO RIGHT TO USE TALK TIME UPTO A SPECIFIED VALUE HAS BEEN SOLD. (PB 348-353). THE LD AR FURTHER ARGUED THAT THE PROV ISIONS OF SECTION 194H IS NOT APPLICABLE UNDER THIS SITUATION BECAUSE FIRSTLY NO INCOME ACCRUED TO THE DISTRIBUTORS AT THE TIME WHEN PREPAI D PRODUCT IS SOLD TO DISTRIBUTORS AND SECONDLY NO COMMISSION HAS BEEN PA ID OR CREDITED. HE FURTHER ARGUED THAT LD CIT(A) BY FOLLOWING THE HONBL E COCHIN BENCH OF ITAT DECISION IN THE CASE OF VODAFONE AND OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LIMITED (2010) 35 DTR (DEL) 21. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 12 THEREAFTER ON THIS ISSUE, THE HONBLE KERALA HIGH CO URT AS WELL AS HONBLE KOLKATA HIGH COURT DECIDED THIS ISSUE BUT H ONBLE KARNATAKA HIGH COURT RECENTLY DECIDED THE CASE OF BHARTI AIRT EL LIMITED BY CONSIDERING ALL ABOVE CASES OF VARIOUS HIGH COURTS AND DECIDED THE CASE IN FAVOUR OF THE ASSESSEE. LD. AR FURTHER HAS DRAWN OUR ATTENTION ON THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF M/S TATA TELE SERVICES LIMITED ITA NO. 309/JP/2012, 502, 503, 504 & 505/JP /2011. IN THIS DECISION ON IDENTICAL FACTS AND ISSUES THE HONBLE ITAT HAS HELD THAT THE SALE OF PREPAID PRODUCTS FROM THE COMPANY TO THE DI STRIBUTOR IS ACTUALLY A SALE OF RIGHT TO SERVICE AND THE PROVISIONS OF SE CTION 194H OF THE ACT DO NOT APPLY. THE HONBLE ITAT HELD THAT IN THAT CASE , THE RELATIONSHIP IS PRINCIPAL TO PRINCIPAL BASIS BECAUSE RIGHT TO SERVI CE HAD BEEN SOLD. THERE WAS NO INCOME ACCRUED TO THE DISTRIBUTOR AT THE TIME OF PURCHASE OF PREPAID CARD. AS PER SECTION 194H THERE HAS TO BE A N ACCRUAL OF INCOME BEFORE CHARGING SECTION CAN BE APPLIED. THE HONBLE JAIPUR ITAT BENCH ALSO FOLLOWED THE PRINCIPLES THAT IN CASE OF DIVERGE NCE OF JUDICIAL OPINION, A VIEW FAVOUR OF THE ASSESSEE IS TO BE ADOP TED AS HELD BY THE HON'BLE SUPREME COURT IN VEGETABLE PRODUCTS LIMITED 88 ITR 192 AND VATIKA TOWNSHIP PVT. LTD. 367 ITR 456. HE FURTHER DRA WN OUR ATTENTION ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 13 ON DECISIONS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHARTI AIRTEL LTD., THEREFORE, HE PRAYED TO ALLOW THE APPEAL ON TH IS GROUND. 5. AT THE OUTSET, THE LD SR. D.R. HAS VEHEMENTLY SU PPORTED THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE VARIOUS HONBLE HIGH COURTS HAVE ALREADY HELD THAT PREPAID CARD SOLD TO THE DISTRIBU TORS INCLUDE COMMISSION, WHICH IS LIABLE TO BE DEDUCTED TDS U/S 19 4H OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. RECEN TLY THIS BENCH HAS DECIDED SIMILAR ISSUE IN THE CASE OF TATA TELE SERVI CES, WHICH IS IDENTICAL TO THE ASSESSEES CASE. THE FACTS OF THE CASE HAS BE EN DEMONSTRATED BY THE AR THAT THE ASSESSEE WAS ISSUING BILL ON NET AMO UNT ON MRP HAS BEEN FIXED ON PREPAID CARD SOLD. THE ASSESSEE HAS NO T TRANSFERRED ANY INCOME TO THE DISTRIBUTOR BUT THE DISTRIBUTOR WAS AL LOWED TO AVAIL THE AIRTIME TO THE EXTENT OF MRP PRICE. IN BOOKS OF ACC OUNT, THE ASSESSEE HAD CREDITED THESE RECEIPTS ON NET BASIS. THE FINDIN G ON THE CASE OF TATA TELE SERVICES IS REPRODUCED AS UNDER: 2.23. WE FIND MERIT IN THE CONTENTION OF LD. COUNSE L THAT THERE IS NO JURISDICTIONAL HIGH COURT JUDGMENT ON THIS IS SUE. HONBLE KARNATAKA HIGH COURT JUDGMENT IS ELABORATE, DETAILED, CONSIDERS THE PREVIOUS DELHI AND KERALA H IGH ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 14 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 V IEW FAVOURABLE TO THE ASSESSEE IS TO BE ADOPTED AS HELD BY HONBLE SUPREME COURT IN VEGETABLE PRODUCTS LTD. AN D VATIKA TOWNSHIP CASE (SUPRA). FROM THIS ANGLE ALSO I N THESE FACTS AND CIRCUMSTANCES HONBLE KARNATAKA HIGH COUR T JUDGMENT IS APPLICABLE TO THE ASSESSEES CASE. RESP ECTFULLY FOLLOWING THE SAME WE HOLD THAT: A. THE RELATIONSHIP BETWEEN ASSESSEE AND ITS DISTRIB UTORS QUA THE SALE OF IMPUGNED PRODUCTS IS ON PRINCIPAL T O PRINCIPAL BASIS; THE CONSIDERATION RECEIVED BY ASSE SSEE IS SALE PRICE SIMPLICITER. B. THERE IS NO RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN ASSESSEE AND DISTRIBUTORS AS HELD BY AUTHORITIES BE LOW THEIR ORDERS ARE REVERSED. C. LOOKING AT THE TRANSACTION BEING OF SALE/PURCHA SE AND RELATIONSHIP BEING OF PRINCIPAL TO PRINCIPAL THE DI SCOUNT DOES NOT AMOUNT TO COMMISSION IN TERMS OF SEC. 194H , THE SAME IS NOT APPLICABLE TO THESE TRANSACTIONS. THEREF ORE, ASSESSEE CANNOT BE HELD IN DEFAULT; IMPUGNED DEMAND RAISED APPLYING SEC. 194H IS QUASHED. ASSESSEES GR OUNDS ARE ALLOWED. BY RESPECTFULLY FOLLOWING OUR OWN DECISION ON SIMILAR FACT, WE REVERSE THE ORDER OF THE LD CIT(A) AND ALLOW THE APPEAL OF TH E ASSESSEE ON THIS GROUND. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 15 7. GROUND NO. 2 OF THE APPEAL IS AGAINST CONFIRMIN G THE ADDITION U/S 194J OF THE ACT ON NOT DEDUCTING TDS ON ROAMING CHAR GES PAID BY THE ASSESSEE BEING A FEE FOR TECHNICAL SERVICES. THE LD ITO(TDS) OBSERVED THAT THE ASSESSEE HAD PAID ROAMING CHARGES TO OTHER MOBILE OPERATORS. THE ASSESSEE IS PROVIDING GSM MOBILE SERVICES TO ITS SUBSCRIBERS. THE MOBILE SUBSCRIBERS OF THE COMPANY HAVE BEEN GIVEN T HE FACILITIES OF GETTING CONNECTED/AVAIL OF TELECOMMUNICATION FACILI TY, WHEN THEY ARE NOT IN THE AREA BEING COVERED BY THE ASSESSEE COMPANY, THROUGH OTHER MOBILE OPERATORS. TO AVAIL SUCH SERVICES, THE ASSESS EE COMPANY MAKES PAYMENT TO OTHER MOBILE OPERATORS, WHICH IS CALLED R OAMING CHARGES. DURING THE FINANCIAL YEAR 2008-09, THE ASSESSEE COM PANY PAID ROAMING CHARGES AT RS. 92,16,60,531/-. AS PER LD ITO(TDS), TH ESE SERVICES ARE LIABLE TO BE DEDUCTED TDS U/S 194J AS FEES FOR TECHN ICAL SERVICES. THE TECHNICAL SERVICE IS NOT DEFINED IN THE ACT BUT DIC TIONARY MEANING OF WORD TECHNICAL AS PER CAMBRIDGE DICTIONARY IS KNOWL EDGE, MACHINES OR METHODS USED IN SCIENCE AND INDUSTRY. THE WORK TECH NICAL IS DERIVED FROM THE WORD TECHNIQUE WHICH MEANS A PARTICULAR OR A SPECIAL WAY OF DOING SOMETHING. HE FURTHER DESCRIBED HOW ROAMING SE RVICES IS TECHNICAL SERVICES, WHICH IS REPRODUCED AS UNDER:- ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 16 IF THE SUBSCRIBER OF RAJASTHAN CIRCLE GOES TO MAHA RASHTRA WHEN HE REACHES MAHARASHTRA, THE NETWORK OF MAHARASHTRA CATCHES SIGNALS FROM HIS MOBILE AND IDE NTIFIES IMSI (INTERNATIONAL MOBILE SUBSCRIBER IDENTITY) OF THE SUBSCRIBER. THE NETWORK OF MAHARASHTRA CIRCLE SHALL AUTOMATICALLY FIND OUT FROM IMSI OF THE SUBSCRIBER AS TO WHETHER SERVICE PROVIDER OF MAHARASHTRA HAS A ROAMIN G AGREEMENT WITH SERVICE PROVIDERS OF RAJASTHAN CIRCLE OR NOT. IF YES, THEY ONLY IT SHALL SEND SIGNALS TO SER VICE PROVIDER OF RAJASTHAN TO AUTHENTICATE THE SUBSCRIBE R. IF THERE IS NO CONTRACT BETWEEN SERVICE PROVIDER OF MAHARASHTRA AND RAJASTHAN, ROAMING SERVICES SHALL N OT BE ALLOWED TO THE SUBSCRIBERS. THIS MEANS THAT STARTING POINTS FOR ROAMING SERVICES IS ESSENTIALLY A CONTRACT BETWE EN TWO SERVICES PROVIDERS. THE SERVICE PROVIDERS OF RAJASTH AN CIRCLE SHALL THEN AUTHENTICATE THE SUBSCRIBER. THE S ERVICE PROVIDER OF RAJASTHAN CIRCLE HAS THE DATA OF SUBSCR IBER WHICH WILL BE SENT TO MAHARASHTRA CIRCLE AND DATE OF RAJASTHAN SUBSCRIBER SHALL BE STORED IN THE VISITOR LOCATION REGISTER OF MAHARASHTRA CIRCLE. THIS DATA ENABLES TH E SERVICES PROVIDER OF MAHARASHTRA TO VERIFY VARIOUS ASPECTS SUCH AS WHETHER SUBSCRIBER ENJOYS THE ISD FACILITIE S OR NOT ETC. AFTER COMPLETING THIS ASPECT, THE SUBSCRIBER WH O HAS GONE TO MAHARASHTRA CAN ACCESS THAN NETWORK AND MAKE OUTGOING CALLS. THIS PROCESS REQUIRES VARIOUS INSTRU MENTS SUCH AS MSC (MOBILE SWITCHING CENTRE), VLR (VISITORS ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 17 LOCATION REGISTER), RADIO NETWORK, TOWERS, BTS (BASE TRANSMISSION STATION), BSS (BASE SUB STATION) ETC. FURTHER, ALL INCOMING CALLS SHALL FIRST GO TO RAJAS THAN SERVICE PROVIDER. THE DATA AVAILABLE WITH RAJASTHAN C IRCLE SHALL IDENTIFY THAT THE SUBSCRIBER IS IN MAHARASHTR A AND THEN CALL SHALL BE DIVERTED TO THE PRESENT LOCATION OF THE SUBSCRIBER I.E. TO MAHARASHTRA. THE LD ITO(TDS) HAS FURTHER OBSERVED THAT THE ENTIRE PROCESS OF ROAMING IS THUS HIGHLY TECHNICAL AND CAN BE EXECUTED ONLY IF THERE IS A CONTRACT BETWEEN TWO SERV ICE PROVIDERS. THE ENTIRE SYSTEM IS BEING OPERATED/MANAG ED BY HIGHLY SKILLED PROFESSIONALS. A SMALL TECHNICAL FAULT CAN DISTURB THE ENTIRE SYSTEM. THEREFORE, HIGHLY TECHNI CAL PERSONS ARE CONSTANTLY MONITORING THE SYSTEM. THE ENTIRE PROCESS DEPENDS ON IMSI WHICH IS A UNIQUE NUMBER COMPRISING OF MCC (MOBILE COUNTRY CODE), MNC (MOBILE NETWORK CODE) ALLOTTED BY TELECOM MINISTRY T O SERVICE PROVIDERS AND MSIN WHICH IS SIM NUMBERS. THE ENTIRE SYSTEM DEPENDS ON IMSI WHICH IS BASED ON THE SIM CARD ISSUED BY THE HOME SERVICE PROVIDER (RAJASTHAN CIRCLE IN ABOVE CASE) AND MNC WHICH IS A UNIQUE CODE PROVID ED TO HOME SERVICE PROVIDER BY THE MINISTRY. WITHOUT T HIS THE ROAMING SYSTEM CANNOT BECOME OPERATIONAL. THIS MAKES IT CLEAR THAT ROAMING SERVICE IS A TECHNICAL SERVICE A ND THE TECHNICAL SERVICES ARE PROVIDED BY ONE OPERATOR TO ANOTHER AND NOT TO THE SUBSCRIBER. THUS ROAMING SERVICE IS A HIGHLY ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 18 TECHNICAL SERVICE AND THEREFORE WHILE MAKING PAYMENT S THE ASSESSEE WAS REQUIRED TO DEDUCT TDS WHICH IT HAD NOT DONE. THE ITO(TDS) GAVE REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE VIDE LETTER DATED 29/01/2009, WHICH HAS BEE N REPLIED BY THE ASSESSEE VIDE LETTER DATED 11/02/2009 AND 12/2/2009 , WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 27 TO 3 0 OF THE ORDER. THE LD ITO(TDS), THEREFORE HELD AS UNDER:- (1) ROAMING IS NOT POSSIBLE UNLESS AN AGREEMENT IS ENTE RED INTO BETWEEN THE TWO SERVICE PROVIDERS. (2) ENTIRE ROAMING FACILITY IS BASED ON IMSI WHICH CONSI STS OF MNC (MOBILE NETWORK CODE A UNIQUE CODE ALLOTTED TO ASSESSEE) AND SIM WHICH IS ALSO ISSUED BY THE ASSES SEE. (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, NETWO RK AND SERVICES TO ENABLE THEIR CUSTOMERS TO HAVE ACCESS O F TELECOM NETWORK WHEREVER THEY MOVE. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 19 (5) ALL THE NECESSARY ARRANGEMENTS ARE BEING MADE BY TH E HOME SERVICE PROVIDER TO ENABLE ITS SUBSCRIBER TO G ET CONNECTED IN ALL OTHER CIRCLES. THE SUBSCRIBER NEED NOT INTERACT ACT FOR ANY ROAMING SERVICES WITH OTHER SER VICE PROVIDER. IT IS THE TECHNOLOGY ESTABLISHED BETWEEN T WO SERVICE PROVIDERS WHICH EXECUTES ROAMING SYSTEM. (6) THE SUBSCRIBER HAS TO GET ROAMING ACTIVATED THROUGH HOME SERVICE PROVIDER. ONLY THEN HE CAN ACCESS THE SERVI CES 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 PROV IDER AS PER THE AGREEMENT ENTERED INTO BETWEEN THE TWO SERVIC E PROVIDERS. IF THERE IS NO ROAMING AGREEMENT BETWEEN TWO OPERATORS OR IF THE HOME TELECOM OPERATOR DOES NOT AUTHENTICATE, SUBSCRIBER CANNOT ENJOY ROAMING FACIL ITY. (8) THE SUBSCRIBER DOES NOT REQUIRE TO CHANGE THE SIM CA RD BUT BY USING THE SIM CARD OF HOME SERVICE PROVIDE HE CA N ACCESS OTHER NETWORK. (9) AS PER THE AGREEMENT THE OTHER SERVICE PROVIDER RAI SES BILL ON THE HOME SERVICE PROVIDER AND ONLY THE HOME SERV ICE PROVIDER IS LIABLE TO PAY THE AMOUNT IRRESPECTIVE O F PAYMENT MADE BY SUBSCRIBER. THE SUBSCRIBER AND SERVICE PROVI DER OF OTHER CIRCLE ARE NO WAY LIABLE FOR ANY THING WITH EAC H OTHER. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 20 (10) IF THE SUBSCRIBER DOES USE SIM OF HOME SERVICE PROV IDER HE CANNOT ACCESS TELECOM OPERATOR OF OTHER CIRCLE UNLE SS HE PURCHASES NEW SIM CARD. (11) IT IS CLEAR FROM THE BILLS RAISED BY TELECOM OPERAT OR OF OTHER CIRCLES THAT THEY HAVE CHANGED SERVICE TAX TO ASSES SEE AND THE ASSESSEE HAS PAID THE SAME. THIS SIMPLY MEANS TH AT SERVICES WERE PROVIDED BY ONE OPERATOR TO OTHER AND NOT TO CUSTOMERS DIRECTLY. THE SERVICE TAX ACT HAS ALSO REC OGNIZED ROAMING SERVICES AS TAXABLE SERVICES THE FINANCE BI LL, 2007. (12) THE ENTIRE SYSTEM IS TO BE MONITORED/MANAGED BY THE HIGHLY SKILLED TECHNICAL. A SMALL TECHNICAL PROBLEM CAN DISTURB THE CONNECTIVITY OF ENTIRE REGION. TO AVOID SUCH EVENTUALITY THE ENTIRE PROCESS IS BEING MONITORED B Y SKILLED PERSONS. (13) THIS CLEARLY SHOWS THAT THE SERVICE PROVIDER OF ANOT HER REGION TO WHOM ROAMING CHARGES ARE PAID IS NOT PROVI DING SERVICES DIRECTLY TO ULTIMATE CUSTOMER BUT IT IS P ROVIDING SERVICES TO ANOTHER TELECOM OPERATOR TO FACILITATE ITS CUSTOMERS. (14) THE PROVISION OF SECTION 194J REFERS TO ANY SUM PA ID BY THE PAYER AND DOES NOT DISTINGUISH BETWEEN THE PAYM ENT MADE BY SOMEONE ON ITS BEHALF OR ITS CUSTOMERS BEH ALF. THEREFORE, THE PLEA OF THE ASSESSEE THAT THE PAYMENT RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS OF THE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 21 ASSESSEE AND PAID TO OTHER MOBILE COMPANY DOES NOT FALL UNDER TDS PROVISION, IS NOT TENABLE. FROM THE ABOVE, IT IS CLEAR THAT HOME SERVICE PROVI DER TAKES TECHNICAL SERVICES OF OTHER TELECOM SERVICE PROVIDE R TO FACILITATE THE SUBSCRIBER TO ACCESS TELEPHONE WHEREVER HE VISIT S AND THEREFORE IT IS REQUIRED TO DEDUCT TDS FROM THE PAYM ENTS MADE TO OBTAIN THESE SERVICES. THE LD. ITO(TDS) CONSIDERED THE FOLLOWING DECISIONS ON WHICH THE ASSESSEE CLAIMED THAT ROAMING CHARGES IS NOT COVERE D U/S 194J OF THE ACT. (I) SKYCELL COMMUNICATION LTD. 251 ITR 53 (MADRAS) (II) BHARTI CELLULAR LIMITED ITA NO. 1120/2007) (III) DCIT VS. PARASRAMPURIA SYNTHETICS LTD. 20 SOT 248 (DELHI). (IV) ITO VS. MOVING PICTURES COMPANY INDIA LTD. 20 SOT 120 (DELHI). (V) KOTAK SECURITIES LTD. VS. ADDL.CIT 25 SOT 440 (M UM). THE ABOVE CASE LAWS REFERRED BY THE ASSESSEE WERE FOU ND DISTINGUISHABLE TO THE ITO(TDS). HE FURTHER RELIED O N THE DECISION IN THE CASE OF CANARA BANK VS. ITO 305 ITR (AT) 189 WHERE THE HONBLE ITAT AHMADABAD BENCH HAS DISTINGUISHED THE ORDER OF THE SKYCELL ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 22 COMMUNICATIONS LTD. AND HELD THAT CLEARING CHARGES PAID TO SBI THROUGH MICR CENTRE BY RENDERING MANAGERIAL SERVICE WHICH FA LLS WITHIN THE DEFINITION OF TECHNICAL SERVICES AND LIABLE TO BE D EDUCTED TDS U/S 194J OF THE ACT. HE FURTHER CONSIDERED THE HONBLE ITAT A HMADABAD OBSERVATION THAT THE DEFINITION OF FEES FOR TECHNIC AL SERVICES IS VERY WIDE, WHICH COVERS WITHIN ITS AMBIT ANY MANAGERIAL, TECHNIC AL OR CONSULTANCY SERVICES RENDERED BY A PERSON. THE MICR FACILITY PR OVIDED BY THE SBI, WHICH IDENTIFIED, READ AND CLEARED THE CHEQUE THROUG H ITS SPECIAL KIND OF MACHINES. THEREFORE, THE SAME IS FEES FOR TECHNICAL SERVICES. THE SERVICE OF THIS NATURE, IN OUR OPINION INVOLVES HUM AN SKILL AS WELL AS COMPUTERIZED MACHINES. IT IS NOT AUTOMATIC. IN THAT SENSE IT IS NO HIRING/LASING OR MAKING AVAILABLE THE TECHNICAL EQU IPMENT WORKING ON ITS OWN. BUT IT IS FULLY SUPPORTED BY SERVICES OF PERSON NEL AND REQUIRES HUMAN APPLICATION OF MIND ALONGWITH TECHNICAL EQUIPM ENTS. IN THE PRESENT CASE, THE ASSESSEE USED HIGHLY SOPHISTICATE D MACHINE, WHICH WAS MANAGED BY THE HIGHLY QUALIFIED TECHNICAL STAFF WHICH INVOLVES APPLICATION OF HUMAN MIND. IN VIEW OF THE ABOVE FIND ING, HE HELD THAT ROAMING CHARGES PAID TO THE OTHER TELECOM OPERATOR IS A FEE FOR TECHNICAL SERVICES AND LIABLE TO BE DEDUCTED TDS U/S 194J OF THE ACT. THE ITO(TDS) REJECTED THE ASSESSEES REQUEST TO APPL Y THE HON'BLE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 23 SUPREME COURT DECISION IN THE CASE OF HINDUSTAN COC A COLA BEVERAGES (P) LTD. VS. CIT (SUPRA) AS PAYEES HAS NOT FILED ITS RETURN OF INCOME. THEREFORE, THE BENEFIT OF HON'BLE SUPREME COURT DECI SION CANNOT BE GIVEN. ACCORDINGLY, HE CREATED THE DEMAND U/S 201(1 ) ON ROAMING CHARGES OF RS. 10,18,92,350/- AND INTEREST THEREON U/S 201(1A) OF THE ACT AT RS. 68,75,375/-. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ORDER OF THE ITO(TDS) BY OBSERVING AS UNDER:- 3.3.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF T HE CASE AND CONTENTIONS/ARGUMENTS OF BOTH THE SIDES AND I FIND THAT THE CONTENTION OF LD. A.R. REGARDING PAYMENT MADE O N BEHALF OF THE SUBSCRIBER OF THE APPELLANT COMPANY I S NOT TENABLE, AS THE APPELLANT COMPANY HAD ENTERED INTO A SEPARATE AGREEMENT WITH THE ROAMING SERVICE PROVIDER AND IS, THEREFORE, LIABLE FOR PAYMENT OF ROAMING CH ARGES ON ITS OWN BEHALF, AS PER THE TERMS AND CONDITIONS O F THE AGREEMENT. HENCE, WHETHER, LATER ON, IT CHARGES FOR ROAMING SERVICES FROM ITS CUSTOMERS OR NOT, THIS FA CT IS NOT RELEVANT AND DOES NOT EXEMPT THE APPELLANT COMPANY FROM THE LIABILITY OF TDS. FURTHER, I FIND T HAT THE LD. A.O. HAS CORRECTLY HELD THAT THE ROAMING FA CILITY ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 24 PROVIDED BY THE OTHER TELECOM SERVICE PROVIDER TO T HE HOME SERVICE PROVIDER (THE APPELLANT) TO FACILITATE THE SUBSCRIBERS OF THE APPELLANT COMPANY, TO ACCESS MOB ILE SERVICES, WHEREVER THEY VISIT, WAS A TECHNICAL SERVIC E. IN THIS REGARD, I AGREE WITH THE REASONING GIVEN, FOR T HE ABOVE FINDING BY THE LD. A.O., IN PARA 3.5 OF HIS O RDER. WHICH IS ALREADY REPRODUCED IN EARLIER PARA OF THIS ORDER. FURTHER, IT IS OBSERVED THAT THE LD. AR HAS AGAIN RELIED ON THE DECISION IN THE CASE OF SKYCELL COMMUNICATIO NS LTD. AND THE DECISION OF HONBLE DELHI HIGH COURT I N ASSESSEES OWN CASE. HOWEVER, IN THIS CONNECTION, I AGREE WITH THE DETAILED OBSERVATIONS OF THE LD. A.O. GIVEN IN PARA 3.6 OF HIS ORDER (ON PAGES 33 AND 34) THAT THE FACTS OF ABOVE TWO CASES ARE DIFFERENT, AS COMPA RED TO THE FACTS OF THE PRESENT CASE AND HENCE, THE DEC ISIONS GIVEN IN THOSE CASES ARE NOT APPLICABLE IN THE PRES ENT CASE. THEREFORE, I FIND NO MERIT IN THE SUBMISSIONS OF THE LD AR FOR THE REASONS DISCUSSED IN THE ORDER OF THE LD A.O. THE LD CIT(A) CONFIRMED THE ORDER OF THE ITO(TDS) U/S 194J OF THE ACT BUT ALLOWED THE BENEFIT OF HON'BLE SUPREME COURT DEC ISION IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. CIT (S UPRA). ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 25 9. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE REVENUES PROPOSITIO N IS THAT THOGH THE ROAMING HAPPENS AUTOMATICALLY BUT BECAUSE EQUIPMENT IS USED TO RENDER THE ROAMING SERVICE, BECAUSE TECHNICAL MANPO WER IS NEEDED TO OPERATE AND MAINTAIN THE TECHNICAL EQUIPMENT THEREF ORE, ROAMING PER SE IS RENDERING OF TECHNICAL SERVICES AND THEREFORE, T HE AMOUNT PAID FOR ROAMING IS TECHNICAL FEE IN TERMS OF SECTION 194J R EAD WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE LD AR EXPLAIN ED THE ROAMING SERVICE AND SUBMITTED THAT HEXACOM SUBSCRIBER IN JA IPUR TRAVELS OF MUMBAI SWITCHES ON HIS MOBILE DEVICE AFTER REACHING MUMBAI. WHERE THE SUBSCRIBER TRAVELS BY LAND HE AUTOMATICALLY REC EIVES A MESSAGE TRANSFERRING TO THE ROAMING NETWORK ON VISITING ANOT HER TELECOM, CIRCLE. * VISITING NETWORK (E.G. AIRTEL IN MUMBAI) LOCATES M OBILE DEVICE AND IDENTIFIES THAT IT IS NOT REGISTERED WITH ITS SY STEMS, I.E. VLR. * VISITING NETWORK AUTOMATICALLY CONTACTS HOME NETWOR K OF HEXACOM SUBSCRIBER, I.E. HLR AND GETS SERVICE INFOR MATION ABOUT ROAMING DEVICE USING IMSI NUMBER-IMSI NUMBER IS A UNIQUE SUBSCRIBER IDENTITY NUMBER GRANTED TO THE CU STOMER AT THE TIME OF SUBSCRIPTION. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 26 * VISITING NETWORK MAINTAINS TEMPORARY SUBSCRIBER RE CORD FOR THE SAID MOBILE DEVICE AND PROVIDES AN INTERNAL TEM PORARY PHONE NUMBER FROM BACKEND SYSTEM TO THE MOBILE DEVI CE WHICH IS NOT VISIBLE TO HUMAN. * HOME NETWORK ALSO UPDATES ITS REGISTER TO INDICATE THAT THE MOBILE IS ON VISITOR NETWORK SO THAT INFORMATION SE NT TO THAT DEVICE IS CORRECTLY ROUTED. * THE HEXACOMS SUBSCRIBER IN MUMBAI, WHO IS TEMPORAR ILY REGISTERED AS AIRTELS SUBSCRIBER MAKES CALLS IN MU MBAI AND THE MINUTES ARE REGISTERED IN HIS IDENTITY FOR WHICH HE HAS TO PAY THROUGH HEXACOM JAIPUR. * ALTERNATIVELY, A CALLED FROM JAIPUR MAKES A CALL TO HEXACOMS SUBSCRIBER WHICH IS ROUTED TO THE HOME NETWORK OF HEX ACOM SUBSCRIBER IN JAIPUR. * HOME NETWORK THEN FORWARDS ALL INCOMING CALLS TO TH E TEMPORARY PHONE NUMBER WHICH TERMINATES AT THE DEVIC E OF ROAMING, SUBSCRIBER (IN MUMBAI) WHO IS NOW USING THE SERVICES OF THE VISITING NETWORK (I.E. AIRTEL): * THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NOT INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. BILLING PROCESS * USAGE OF ROAMING SUBSCRIBER IN VISITED NETWORK IS CAPTURED IN A FILE CALLED TP, I.E. TRANSFERRED ACCOUNT PROCEDURE FOR ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 27 GSM/CIBER, I.E., CELLULAR INTER-CARRIER BILLING EXC HANGE RECORD FOR. * TAP FILE CONTAINS DETAILS OF CALLS MADE BY SUBSCR IBER, VIZ., LOCATION, CALLING PARTY, TIME OF CALL AND DURATION, ETC. * TAP/CIBER FILES ARE RATED AS PER TARIFFS CHARGED BY VISITING NETWORK OPERATOR. * SUCH TAP/CIBER FILE IS TRANSFERRED TO HOME NETWORK OF SUBSCRIBER (I.E. TO HEXACOM). * HOME NETWORK (I.E. HEXACOM) THEN BILLS THESE CALLS TO THE HEXACOMS 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 AGREEME NT 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 THA T THE SERVICE OF PROVIDING AIRTIME BY VISITING TELECOM CI RCLE 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 RECOVER ED FROM THE ROAMING SUBSCRIBER, THE VISITING CIRCLE SENDS T HE AIR MINUTES TO BE RECOVERED FROM THE ROAMING SUBSCRIBER TO THE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 28 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 HU MAN ELEMENT OR THERE HAVE BEEN USE OF CEREBRAL FACULTIE S IN THE PROVISION OF TECHNICAL SERVICES BY THE RECIPIENT OF FEE. * THIS IS SO BECAUSE THE WORD TECHNICAL COMES IN BE TWEEN THE WORDS MANAGERIAL AND CONSULTANCY SERVICES. BAS ED 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 R ELEVANCY ON THE NATURE OF THE SERVICE WHETHER TECHNICAL OR OTHERWISE. THE LD CIT(A) PARTLY ACCEPTED THAT ROAMING PROCESS IS TECHNICAL B ECAUSE IT USES VARIOUS INSTRUMENTS SUCH AS MSC (MOBILE SWITCHING CE NTRE), VLR (VISITOR LOCATION REGISTER), RADIO NETWORK, TOWERS, BTC ETC. BU T THE SYSTEM IS OPERATED/MANAGED BY THE HIGHLY SKILLED PROFESSIONAL S. THE ASSESSEES ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 29 ARGUMENT WAS THAT THE ROAMING SERVICE IS MANAGED AUT OMATICALLY BY MACHINES AND PAYMENT FOR ROAMING CHARGES ARE NOT FE ES FOR TECHNICAL SERVICES. IN CASE OF FAULT IN A BREAKDOWN OF A SYSTE M, THE PROFESSIONAL PEOPLE ARE REQUIRED TO MONITOR THE TELECOM NETWORK T O BE IN A ROBUST CONDITION IN ORDER TO DO BUSINESS FOR SELF. THIS MON ITORING DOES NOT HAVE ANY CONNECTION WITH ROAMING CHARGES PAID BY THE SUBS CRIBER. IF A TELECOM NETWORK BREAKS DOWN THERE IS NO BUSINESS AND THUS NO PAYMENT. EXISTENCE OF IMSI IS ONLY A FACILITY TO CO MMUNICATE AND DOES NOT RESULT THE ROAMING SERVICES PROVIDED ON A STAND ARD FACILITIES TO BE A TECHNICAL SERVICE. THE WHOLE ROAMING PROCESS IS AUTO MATICALLY AND THERE IS NO HUMAN INTERFERENCE IN IT. THE HUMAN INTERFEREN CE IS REQUIRED TO MAINTAIN THE ROBUST NETWORK ONLY TO ENSURE BREAK DOWN FREE SERVICE TO THE SUBSCRIBER. THE NETWORK OWNER HAS TO MAINTAIN FOR ITSELF, ITS NETWORK IN ROBUST CONDITION. THE TECHNICAL SUPPORT OF THE STAFF IS REQUIRED TO MAINTAIN THE EQUIPMENT AND GAZETTES BUT IT IS NOT A SERVICE FOR ROAMING FACILITY PROVIDED TO THE SUBSCRIBER. THE RE IS COMMERCIAL ARRANGEMENT TO CONNECT THE TECHNICAL NETWORKS BASICA LLY TO BE ABLE TO DO BUSINESS. IN FACT DOT MANDATES THAT IT SHOULD BE SO CONNECTED. THERE IS NO PAYMENT MADE FOR CONNECTING THE NETWORKS. PAYMENTS ARE MADE FOR CALLS WHICH THE ROAMING SUBSCRIBER MAKES. IF NO CALLS ARE ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 30 MADE NO PAYMENT IS MADE IN SPITE OF THE FACT THAT T HE NETWORKS ARE INTER CONNECTED. HE FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. BHARTI CELLULAR LTD. 319 ITR 139 (DEL) WHEREIN IT HA S BEEN HELD BY THE HONBLE DELHI HIGH COURT THAT ROAMING SERVICES NOT INVOLVING HUMAN INTERFERENCE AND IS NOT TECHNICAL SERVICES AS CONTE MPLATED UNDER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND N OT LIABLE FOR TAX DEDUCTION AT SOURCE U/S 194J OF THE ACT. THIS VIEW HA S BEEN EARLIER HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SKY CELL COMMUNICATIONS LTD. VS. DCIT (2001) 251 ITR 53 (MAD) ORDER DATED 23/2/2001 WHEREIN THE HONBLE HIGH COURT HAS HELD TH AT 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 APPLICATI ON ONLY WHEN THE TECHNOLOGY OR TECHNICAL KNOWLEDGE OF PERSON IS MADE AVAILABLE TO OTHER AND NOT WHERE BY USING TECHNICAL SYSTEMS, SERVICES A RE RENDERED TO OTHERS. RENDERING OF SERVICES BY ALLOWING USE OF TEC HNICAL SYSTEM IS DIFFERENT FROM CHARGING FEES FOR TENDERING TECHNICA L SERVICES. THE APPLICABILITY OF SECTION 194J WOULD COME INTO EFFECT ONLY WHEN BY ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 31 MAKING PAYMENT OF FEE FOR TECHNICAL SERVICES, ASSES SEE ACQUIRES CERTAIN SKILL/KNOWLEDGE/INTELLECT WHICH CAN BE FURTHER USED B Y HIM FOR ITS OWN PURPOSE/RESEARCH. WHERE FACILITY IS PROVIDED BY USE OF MACHINE/ROBOT OR WHERE SOPHISTICATED EQUIPMENTS ARE INSTALLED AND OPE RATED 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. THEREFO RE, HE ARGUED THAT IN ROAMING CHARGES PAID BY THE ASSESSEE TO THE OTHER O PERATORS ARE NOT FEES FOR TECHNICAL SERVICES. THE LD AR FURTHER RELIE D ON THE DECISION IN THE CASE OF IGATE COMPUTER SYSTEMS LTD. VS. DCIT IN ITA NO. 1301 TO 1303& 1616/PN/2013 FOR A.Y. 2007-08 TO 2010-11 WHER EIN THE HONBLE PUNE BENCH OF ITAT HAD CONSIDERED WHETHER ANY HUMAN INTERVENTION IS REQUIRED FOR PROVIDING THE DATA LINK SERVICES AND A RE LIABLE TO BE DEDUCTED TDS U/S 194J OF THE ACT AND HELD THAT PAYME NTS MADE FOR UTILIZING SUCH SERVICES WAS NOT IN THE NATURE OF TEC HNICAL SERVICES GOVERNED BY SECTION 194J OF THE ACT. HE FURTHER REL IED ON THE DECISION OF ITAT AHMADABAD BENCH IN THE CASE OF CANARA BANK V S. ITO 305 ITR (AT) 189 WHEREIN MICR CHARGES PAID TO SBI HELD NOT T O BE COVERED U/S 194J READ WITH SECTION 9(1)(VII) EXPLANATION-2. HE A LSO RELIED ON THE DECISION OF HONBLE BANGALORE ITAT IN THE CASE OF BA NGALORE ELECTRICITY ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 32 SUPPLY CO. LTD. VS. ITO(TDS) ORDER DATED 16/3/2012 2012(20) ITR (TRIB) 265 WHEREIN PAYMENT MADE BY STATE LOAD DISPATC H CENTER (SLDC) IS HELD NOT LIABLE TO BE DEDUCTED TDS U/S 19 4J OF THE ACT. THE LD AR FURTHER RELIED ON THE DECISION OF HONBLE MUMBAI ITAT IN THE CASE OF MAHARASTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. 25 TAXMAN 164, SIEMENS LIMITED 30 TAXMANN.COM 200, ITAT KOLKATA BENC H DECISION IN THE CASE OF RIGHT FLORISTS PVT. LIMITED ITA NO. 133 6/KOL/2011 AND ITA DELHI BENCH DECISION IN THE CASE OF DELHI TRANSCO LT D. (ITA NO. 755(DEL)/2011 A.Y. 2005-06. HE ALSO RELIED ON THE D ECISION IN THE CASE OF DCIT VS. PARASRAMPURIA SYNTHETICS LTD. 20 SOT 248 (DELHI). THE REVENUE FILED APPEAL AGAINST THE ORDER OF HONBLE D ELHI HIGH COURT IN THE CASE OF BHARTI CELLULAR LTD. BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT HAS HELD AS UNDER:- IN CASES REQUIRING EXAMINATION BY TECHNICAL EXPERT S, THE DEPARTMENT OUGHT NOT TO PROCEED ONLY BY THE CONTRAC TS PLACED BEFORE THE OFFICERS. WITH THE EMERGENCE OF OUR COUN TRY AS ONE OF THE BRIC COUNTRIES AND WITH TECHNOLOGICAL ADVANCE MENT, THE DEPARTMENT OUGHT TO EXAMINE TECHNICAL EXPERTS S O THAT THE MATTERS COULD BE DISPOSED OF EXPEDITIOUSLY. FUR THER, THIS WOULD ENABLE THE APPELLATE FORUM, INCLUDING THE SUPR EME COURT, TO DECIDE THE LEGAL ISSUES BASED ON THE FACT UAL FOUNDATION. ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 33 HELD ACCORDINGLY, REMANDING THE MATTERS FOR DETERMI NATION WITH TECHNICAL ASSISTANCE, THAT IN THESE CASES, IN WH ICH A CELLULAR PROVIDER UNDER AN AGREEMENT PAYS INTERCONNECT/ACCESS/PORT CHARGES TO BSNL/MTNL, THE Q UESTION 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 INVOLV ED DETERMINATION OF WHETHER ANY HUMAN INTERVENTION WAS INVOLVED, WHICH COULD NOT BE DETERMINED WITHOUT TECHN ICAL ASSISTANCE. DECISION OF THE DELHI HIGH COURT IN CIT V. BHARTI CEL LULAR LTD. [2009] 319 ITR 139 SET ASIDE AND MATTER REMANDED TO THE ASSESSING OFFICER WITH DIRECTIONS. AFTER THIS DECISION, THE LD ASSESSING OFFICER EXAMI NED 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 TH IS ISSUE AND ADMITTED THAT ROAMING SERVICES DOES NOT REQUIRE ANY HUMAN INTERVENTION, IT OPERATES AUTOMATICALLY. THE LD AR A LSO DRAWN OUR ATTENTION ON INDEPENDENT OPINION TAKEN FROM DIRECTO R CMAI, EX- DIRECTOR (C&M), BSNL, EX-MEMBER TELECOM COMMISSION O N 24/12/2010 AND ADMITTED THAT WHOLE INTERCONNECTED USES PROCESS, NO MANUAL INTERVENTION IS REQUIRED. HE FURTHER DRAWN OUR ATTEN TION ON PAGE NO. 651 TO 652 FOR POSTPAID AS WELL AS PREPAID ROAMING C HARGES CHARGED BETWEEN THE OPERATORS FROM MR. KAPOOR SINGH GULIANI. THE APPELLANT ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 34 ALSO TAKEN OPINION FROM FORMER CHIEF JUSTICE OF IND IA 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 AN ORDER NOT JUDGMENT AS THE PRINCIPL E OF LAW WAS NOT RES-INTEGRA. THE WORD TECHNICAL SERVICES HAVE GOT TO BE READ IN NARROW SINCE AS HELD BY THE VARIOUS HONBLE HIGH COURTS AN D THE TRIBUNAL BY APPLYING PRINCIPLES OF NOSITUR A SOCIIS PARTICULA R BECAUSE THE WORD TECHNICAL SERVICE IN SECTION 9(1)(VII) READ WITH EXP LANATION-2 IN BETWEEN WORD MANAGERIAL CONSULTANCY SERVICES. FINALLY HE OPI NED THAT SUCH SETTING UP/INSTALLATION, REPAIRING, SERVICING, MAIN TENANCE ARE SEPARATE ACTIVITIES, THEY ARE BACK OFFICE FUNCTIONS AND ARE REQUIRE HUMAN INTERVENTION. BUT THE ROAMING PROCESS BETWEEN PARTIC IPATING ENTITIES IS FULLY AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTE RVENTION. ACCORDINGLY, THE INTERCONNECTED USES CHARGE WILL NOT ATTRACT THE PROVISIONS OF SECTION 194J READ WITH SECTION 9(1)(VI I) READ WITH EXPLANATION-2 THERETO. THEREFORE, HE PRAYED TO DELET E THE ADDITION. 10. AT THE OUTSET, THE LD SR. DR VEHEMENTLY SUPPORT ED THE ORDER OF THE LD CIT(A). ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 35 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AFTER GOING THROUGH THE ORDER OF THE ASSESSING OFFICER, LD CIT(A); SUBMISSIO NS OF THE ASSESSEE AS WELL AS GOING THROUGH THE PROCESS OF PROVIDING R OAMING SERVICES; EXAMINATION OF TECHNICAL EXPERTS BY THE ACIT TDS, NE W DELHI IN THE CASE OF BHARTI CELLULAR LTD.; THEREAFTER CROSS EXAM INATION MADE BY M/S BHARTI CELLULAR LTD.; ALSO OPINION OF HONBLE THE THEN CHIEF JUSTICE OF INDIA MR. S.H. KAPADIA DATED 03/09/2013 AND ALSO VA RIOUS JUDGMENTS GIVEN BY THE ITAT AHMADABAD BENCH IN THE CASE OF CAN ARA BANK ON MICR AND PUNE BENCH DECISION ON DATA LINK SERVICES. WE FIND THAT FOR INSTALLATION/SETTING UP/REPAIRING/SERVICING/MAINTEN ANCE CAPACITY AUGMENTATION ARE REQUIRE HUMAN INTERVENTION BUT AFT ER COMPLETING THIS PROCESS MERE INTERCONNECTION BETWEEN THE OPERATORS I S AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. THE TERM IN TER CONNECTING USER CHARGES (IUC) ALSO SIGNIFIES CHARGES FOR CONNE CTING TWO ENTITIES. THE COORDINATE BENCH ALSO CONSIDERED THE HON'BLE SUP REME COURT DECISION IN THE CASE OF BHARTI CELLULAR LTD. IN THE CASE OF I-GATE COMPUTER SYSTEM LTD. AND HELD THAT DATA LINK TRANSF ER DOES NOT REQUIRE ANY HUMAN INTERVENTION AND CHARGES RECEIVED OR PAID ON ACCOUNT OF THIS IS NOT FEES FOR TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J READ WITH ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 36 SECTION 9(1)(VII) READ WITH EXPLANATION-2 OF THE ACT . IN CASE BEFORE US, THE ASSESSEE HAS PAID ROAMING CHARGES I.E. IUC CHAR GES TO VARIOUS OPERATORS AT RS. 10,18,92,350/-. RESPECTFULLY FOLLO WING ABOVE JUDICIAL PRECEDENTS, WE HOLD THAT THESE CHARGES ARE NOT FEES FOR RENDERING ANY TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) AND ASSESSEES APPEAL IS ALLOWED ON THIS GROUND ALSO. 12. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/06/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 12 TH JUNE, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S BHARTI HEXACOM LIMITED, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- THE ITO (TDS)-II, JAIPUR 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) ITA 656/JP/2010_ BHARTI HEXACOM LTD. VS. ITO(TDS)-II 37 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 656/JP/2010) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR