The Income Tax Appellate Tribunal (ITAT), New Delhi, has held that payment made by a mobile service provider to another mobile service provider for roaming cannot be considered as technical service and can’t deduct TDS u/s 194J of the Income Tax Act,1961.
Sh. Deepak Chopra & Ms Manasvi Bajpai appeared for the assessee and Sh. H. K. Choudhary appeared for the revenue.
The assessee company is engaged in the business of prepaid mobile telecommunication services. The assessment was completed on raising demand of Rs.3,62,76,960/- and Rs.21,45,41,917/-, respectively, on account of non-deduction of taxes on the margin of profit given to the prepaid distributors on sale of prepaid talk time and also non-deduction of taxes on roaming charges. The AO treated the prepaid distributor as an agent of the company to whom the company sold the prepaid cards at a rate lower than the MSC (Maximum Service Charge) printed on the prepaid card as an outright sale and applied Section 194H.
The appellant contended that the relationship between the appellant and the prepaid distributors was not that of ‘Principal to Principal’ and hence not like commission composed under Section 194H. The appellant also argued that there was no payment made to the distributors nor any amount credited into their accounts.
The Tribunal observed that in the case of CIT vs. Vodafone South Ltd held that payment made by a mobile service provider to another mobile service provider for utilization of roaming mobile date and connectivity cannot be termed as technical service and therefore, no TDS was deductible u/s194J of the Act and concluded that payment made for roaming connectivity cannot be termed as “technical services”. It was observed interest under section 201(1A) of the Act is chargeable up to the date of payment of taxes by the deductee/payee.
The Tribunal consist of Sh. Saktijit Dey, Judicial Member Dr B. R. R. Kumar, Accountant Member has held that no TDS u/s 194J is deductible in case of roaming charges paid and further directed the Assessing Officer to re-compute the interest under section 201(1A) of the Act with the instructions of CBDT. The appeals filed by the assessee was partly allowed and that of the Revenue appeals were allowed for statistical purpose.
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