IDEA CELLULAR LTD., Jaipur V. ITO, Jaipur

ITA 678/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5401 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 01-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: RAUNAK JI DOSHI CA DHK
• Keywords: Non-deduction of tax
• Section: 194C; 201(1); 6; 154; 15

Judgement Text

ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 1 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 FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO.678/JP/2013 & 293/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S. IDEA CELLULAR LTD. (FORMERALY KNOWN AS IDEAL TELECOMMUNICATION LTD. 1-2, JAI JAWAN COLONY, TONK ROAD, JAIPUR CUKE VS. THE ITO WARD- TDS -2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACB 2100 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT - DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAUNAK JI DOSHI, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15/04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-III, JAIPUR DATE D 15-05-2013 FOR THE ASSESSEE 2011-12 RELATING TO DEMAND U/S 201(1)/201( 1A) OF THE I.T. ACT AND ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 2 OTHER ORDER DATED 18-02-2014 FOR THE ASSESSMENT YEA R 2011-12 RELATING TO ORDER U/S 154 OF THE ACT. 2.1 THE GROUNDS RAISED IN IN ITA NO. 678/JP/2013 F OR THE ASSESSMENT YEAR 2011-12 WHEREIN THE ASSESSEE HAS RAISED FOLLOW ING GROUNDS:- (I) THE LD. CIT(A) HAS FAILED TO CONSIDER AND ADJUDICATE THE GROUND PERTAINING TO NON-DEDUCTION O F TAX U/S 194H OF THE ACT ON DISCOUNT ALLOWED TO THE PREPAID DISTRIBUTORS. (II) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACT ION OF THE ITO IN HOLDING THAT THE PAYMENT MADE FOR THE USE OF STANDARD FACILITY AMOUNTS TO FEES FOR TECHNICAL SE RVICES AS DEFINED IN EXPLANATION 2 TO SECTION ((I)(VII) OF TH E ACT AND HENCE, TAX IS DEDUCTIBLE U/S 194J OF THE ACT IN RES PECT OF ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS. 3.1 THE GROUNDS RAISED IN IN ITA NO. 293/JP/2014 F OR THE ASSESSMENT YEAR 2011-12 WHEREIN THE ASSESSEE HAS RAISED FOLLOW ING GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TREATING THE APPELLA NT AS ASSESSEE IN DEFAULT US 201(1) R.W.S. 194H OF TH E ACT WITHOUT ASCERTAINING AND PROVING THAT WHETHER THE RECIPIENT HAD PAID TAXES ON THE ALLEGED INCOME RECEIVED / RECEIVABLE F ROM THE APPELLANT AS REQUIRED U/S 191 OF THE ACT. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE ITO TDS -2 JAIPUR, U/S 201(1)(201)(1A) OF THE ACT BE QUASHED/ANNULLED OR THE TDS OFFICER BE DIRECTED TO EXAMINE WHETHER THE TAXES HAVE BEEN PAID BY THE RECIPIENT O N THEIR INCOME. ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 3 WITHOUT PREJUDICE TO GROUND NO.1 GROUND NO.II: NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON DISCOUNT ALLOWED TO THE PRE-PAID DISTRIBUTORS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER P ASSED BY TDS OFFICER U/S 201(1)/201)(1A) OF THE ACT BY TREAT ING THE DISCOUNT OFFERED BY THE APPELLANT TO THE DISTRIBUTO R AS COMMISSION AND THEREBY TREATING THE APPELLANT AS AN ASSESSEE IN DEFAULTU/S 201(1) R.W.S. 194H OF THE ACT. (2) THE APPELLANT MOST HUMBLY PRAYS THAT THE DISCOU NT ALLOWED TO THE DISTRIBUTOR BE HELD AS NOT LIABLE TO TDS U/S 194HOF THE ACT AS THE RELATIONSHIP BETWEEN THE APPE LLANT AND ITS DISTRIBUTORS IS ON PRINCIPAL TO PRINCIPAL BASIS AND THUS THE DEMAND RAISED IN THE IMPUGNED ORDER IN RESPECT OF THE ALLEGED FAILURE TO DEDUCT TAX U/S 194H OF THE ACT BE DELETE D. WITHOUT PREJUDICE TO GROUND NO. 1 AND II GROUND N O. III 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE OBSERVA TIONS OF THE TDS OFFICER BY TREATING THE APPELLANT AS AN ASSESSE E IN DEFAULT U/S 102(1) OF THE ACT WITHOUT APPRECIATING THAT IT IS A SETTLED LEGAL POSITION THAT IF TDS MACHINERY FAILS, THE APP ELLANT CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. 2. THE APPELLANT THUS PRAYS THAT IN THE ABSENCE OF ANY PAYMENT OR CREDIT TO THE DISTRIBUTORS, THE APPELLA NT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201 R. W.S. 194H OF THE ACT. ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 4 4.1 APROPOS GROUND NO. 1, THE LD. AR OF THE ASSESSE E CONTENDS THAT THE SAME IS INFRUCTUOUS AS SUBSEQUENTLY AN ORDER U/S 15 4 IN THIS BEHALF HAS BEEN PASSED. 5.1 ASSESSEE HAS RAISED AN ADDITIONAL GROUND CONTEN DING IT TO BE PURELY LEGAL IN NATURE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN HOLDING THAT SECTION 194C OF THE ACT ALSO APPLIES TO THE PAYMENTS MADE FOR ROAMING CHARGES TO OTOS. 2. HE FAILED TO APPRECIATE THAT:- (A) THE CENTRAL BOARD OF DIRECT TAXES (CBDT) VIDE I TS CIRCULAR NO. 720 DATED 30-08-1995 HAD CLARIFIED THE PAYMENT OF ANY SUM SHALL BE LIABLE FOR DEDUCTION OF TAX ONLY UNDER ONE SECTION (B) HAVING RELIED ON THE EARLIER YEARS APPELLATE OR DER WHERE LD. CIT(A) HAS DECIDED THAT SECTION 194C OF THE ACT DOE S NOT APPLY ON PAYMENTS MADE TOWARDS ROAMING CHARGES TO OTOS AND W HERE THE DEPARTMENT HAD NOT FILED ANY APPEAL BEFORE THE TRIB UNAL, HE OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 194C OF THE ACT DOES NOT APPLY 3. THE APPELLANT PRAYS THAT IT BE HELD THAT NODEDUC TION OF TAX U/S 194C OF THE ACT IS WARRANTED ON PAYMENT MADE TOWARD S ROAMING CHARGES TO THE OTOS AND HENCE THE APPELLANT IS NOT ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. 5.2 AFTER HEARING BOTH THE PARTIES WE ADMIT THE ADD ITIONAL GROUND PURELY LEGAL IN NATURE. ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 5 5.3 THE LD. AR CONTENDS THAT ON MERITS OF THE ISSUE I.E. THE ACTION OF THE ITO IN HOLDING THAT THE PAYMENT MADE FOR THE USE OF STANDARD FACILITY AMOUNTS TO BEING FEES FOR TECHNICAL SERVICES AS D EFINED IN EXPLANATION 2 TO SECTION ((I)(VII) OF THE ACT BEING LIABLE TO TDS U/ S 194J OF THE ACT; IN RESPECT OF ROAMING CHARGES PAID TO OTHER TELECOM OPERATORS , IS NEITHER COVERED U/S 194J NOR U/S 194C AND 194-I STANDS DECIDED BY ITAT, KOLKATA BENCH IN THE CASE OF VODAFONE EAST LTD. VS. ADDL. CIT,RANGE-7, K OLKATA (2015) 61 TAXMANN.COM 263 (KOLKATA) BY FOLLOWING OBSERVATIONS :- A. ON APPLICABILITY OF SECTION 194J HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTALLATIO N/ SETTING UP/REPAIRING/SERVICING/ MAINTENANCE / CAPACITY AUGM ENTATION OF THE NETWORK. BUT AFTER COMPLETING THIS PROCESS, MERE IN TERCONNECTION BETWEEN THE OPERATORS WHILE ROAMING IS DONE AUTOMAT ICALLY AND DOES NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY CANNOT BE CONSTRUED AS TECHNICAL SERVICES. IT IS COMMON KNOWLEDGE THAT WHEN ONE OF THE SUBSCRI BERS IN THE ASSESSEE'S CIRCLE TRAVELS TO THE JURISDICTION OF AN OTHER CIRCLE, THE CALL GETS CONNECTED AUTOMATICALLY WITHOUT ANY HUMAN INTE RVENTION AND IT IS FOR THIS, THE ROAMING CHARGES IS PAID BY THE ASSESS EE TO THE VISITING OPERATOR FOR PROVING THIS SERVICE. HENCE, WE HAVE N O HESITATION TO HOLD THAT THE PROVISION OF ROAMING SERVICES DO NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY WE HOLD THAT THE PAYME NT OF ROAMING CHARGES DOES NOT FALL UNDER THE AMBIT OF TDS PROV ISONS U/S 194J OF THE ACT. B. ON APPLICABILITY OF SECTION 194C ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 6 PROVISIONS OF SECTION 194C WOULD BECOME APPLICABLE ONLY WHERE SOME WORK (WORKS CONTRACT) IS BEING CARRIED O UT AND THERE IS SOME HUMAN INTERVENTION INVOLVED IN THE CARRIAGE OF SUCH WORK. FOR CARRYING OUT ANY WORK, MANPOWER IS SINE QUA NON AND WITHOUT MANPOWER, IT CANNOT BE SAID THAT WORK HAS BEEN CARR IED OUT. THE WORD WORK IN SECTION 194C REFERRED TO AND COM PREHENDS ONLY THE ACTIVITIES OF WORKMAN. IT IS THE PHYSICAL FORCE WHICH HAS COMPREHENDED IN THE WORD WORK. WE HAVE ALREADY HE LD THAT THE PAYMENT OF ROAMING CHARGES DOES NOT REQUIRE ANY HUM AN INTERVENTION. HENCE, IN THE ABSENCE OF HUMAN INTERVENTION, THE SE RVICES RENDERED IN THE CONTEXT OF THE IMPUGNED ISSUE DOES NOT FALL UND ER THE DEFINITION OF WORK AS DEFINED IN SECTION 194C AND HENCE, THE PR OVISIONS OF SECTION 194C ARE NOT APPLICABLE TO THE IMPUGNED ISS UE. C. ON APPLICABILITY OF SECTION 194-I FOR APPLICABILITY OF SECTION 194-I, THE REAL TEST T O BE CONSIDERED IS WHETHER IT IS POSSIBLE TO SAY THAT IT IS THE ASS ESSEE WHO HAS USED THE EQUIPMENT AND HAS PAID THE ROAMING CHARGES TO THE O THER SERVICE PROVIDER WITH WHOM IT HAS ENTERED INTO A NATIONAL R OAMING AGREEMENT. WE HOLD THAT IT IS NOT POSSIBLE TO SAY SO BECAUSE I F AT ALL EVERYONE CAN BE SAID TO HAVE USED THE EQUIPMENT IS CAN ONLY BE T HE SUBSCRIBER OF THE ASSESSEE BUT NOT THE ASSESSEE. IF ANYTHING THE ASSE SSEE IS PLACED IN A POSITION OF A MERE FACILITATOR BETWEEN ITS SUBSCRIB ER AND THE OTHER SERVICE PROVIDER, FACILITATING A ROAMING CALL TO BE MADE BY THE SUBSCRIBER. THE ASSESSEE CANNOT BE SAID TO HAVE USED THE EQUIPM ENT WHICH IS INVOLVED IN PROVIDING THE ROAMING FACILITY. THE ASSESSEE COLLECTS THE ROAMING CHARGES FROM ITS SUBSCRIBER AND PASSES IT O N TO THE OTHER SERVICE PROVIDER. IT IS RELEVANT AT THIS JUNCTURE TO GET INTO THE JUD GEMENT OF THE APEX COURT IN THE CASE OF BSNL AND ANOTEHR VS. UNIO N OF INDIA AND OTHERS (2006) 232 ITR 273 (SC). ONE OF THE QUESTION S WHICH AROSE FOR CONSIDERATION WAS WHETHER THERE WAS ANY TRANSFER OF A RIGHT TO USE ANY ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 7 GOODS BY PROVIDING ACCESS OR TELEPHONE CONNECTION B Y THE TELEPHONE PROVIDER TO A SUBSCRIBER. THE SUPREME COURT POSED T O ITSELF THE QUESTION WHETHER THE ELECTROMAGNETIC WAVES THROUGH WHICH THE SIGNALS ARE TRANSMITTED CAN FULFILL THE CRITERIA FO R BEING DESCRIBED AS GOODS. IT HELD THAT THE ELECTROMAGNETIC WAVES CA NNOT BE CALLED GOODS. THUS THE PAYMENT OF ROAMING CHARGES BY THE A SSESSEE TO OTHER SERVICE PROVIDER CANNOT BE CONSIDERED AS RENT WITHI N THE MEANING OF SECTION 194I OF THE ACT. 5.4 SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE, THE ENTIRE DEMAND AND INTEREST THEREON IS UNSUSTAINABLE AND LI ABLE TO BE DELETED. 5.5 THE LD. DR IS HEARD 5.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE IMPUGNED DEMAND WAS RAISED AGAINST THE ASSESSEE BY HOLDING IT TO BE ASSESSEE IN DEFAULT FOR NON-DED UCTION OF TDS BY CONSIDERING THE PAYMENTS MADE IN RESPECT OF ROAMIN G CHARGES TO OTHER TELECOM OPERATORS AS LIABLE FOR TDS EITHER U/S 194J OR 194C OF THE I.T. ACT. THE ITAT KOLKATA BENCH IN THE CASE OF VODAFONE EAST LTD. VS. ADDL. CIT, RANGE-7, KOLKATA [2015] 61 TAXMANN.COM 263 (KOLKATA -TRIB) AND PLETHORA OF OTHER JUDGMENTS HAVE SETTLED THAT THE PAYMENTS I N QUESTION MADE BY THE ASSESSEE TO VARIOUS TELECOM OPERATORS ARE NOT LIABL E FOR TDS IN ANY OF THE SECTIONS I.E. 194C AND 194J OR 194I. IN VIEW THEREO F, THE ISSUE STANDS DECIDED ITA NO. 678/JP/2013 M/S. IDEA CELLULAR LTD. VS. ITO , TDS -2, JAIPUR 8 ON MERIT IN FAVOUR OF THE ASSESSEE. THEREFORE, WE ALLOW THE GROUND NO. 2 IN THIS BEHALF IN ITA NO. 678/JP/2013. 6.1 SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E ON MERITS, THE ITA NO. 293/JP/2014 RELATING TO SECTION 154 OF THE ACT BECOMES INFRUCTUOUS. 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 678/JP/2013 IS ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 2 93/JP/2014 IS DISMISSED AS INFRUCTIOUS AS THE NECESSARY RELIEF STANDS ALREA DY GRANTED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/04/201 6. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER FNUKAD@ DATED:- 15/04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. IDEAL CELLULAR LTD. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, TDS -2,JAIPUR JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.678/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR