Income Tax Appellate Tribunal - Ahmedabad
Idea Cellular Limited, Ahmedabad vs Assessee on 18 April, 2011
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद Ûयायपीठ ''D'', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD,
"D" BENCH
सव[ौी ौी जी.सी
जी सी.गु
सी गुƯा,
ा माननीय उपाÚय¢,
उपाÚय¢ एवं तेज राम मीणा,
मीणा लेखा सदःय के सम¢ ।
BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
TEJ RAM MEENA, ACCOUNTANT MEMBER)
ITA No.1624, 1625 and 1626/Amd/2011
[Asstt.Year : 2008-2009, 2009-10 and 2010-11]
Idea Cellular Ltd. बनाम/Vs. ITO, TDS-4
4th Floor, Abhijeet III, Ahmedabad.
Nr. Mithakhali 6th Road
Ellisbridge
Ahmedabad 380 006.
PAN:AACB2100P
अपीलाथȸ / Appellant)
(अपीलाथȸ ू×यथȸ / Respondent)
(ू×यथȸ
िनधा[ǐरती कȧ ओर से/ : Shri Ronak G. Doshi, AR
Assessee by
राजःव कȧ ओर से/ : Shri. D.P. Gupta CIT-DR
Revenue by
सुनवाई कȧ तारȣख/ : 12th April, 2012
Date of Hearing
घोषणा कȧ तारȣख/ : 20.04.2012
Date of Pronouncement
आदे श / O R D E R
PER T.R. MEENA, ACCOUNTANT MEMBER: These are three
appeals by the assessee against order of the CIT(A)-XXI, Ahmedabad dated 18.4.2011 for the above three assessment years. Since common issues are raised in all these years under appeals, for the sake of convenience, we dispose of all the appeals by this consolidated order.
2. It is admitted by both the parties that the facts in all above three years are identical except quantum. Therefore, we proceed to dispose of the appeals by taking facts as stated in ITA No.1624/Ahd/2011. The ground no.1 of the appeal of the assessee reads as under:
"1. On the facts and in the circumstances of the case and in law, CIT(A) erred neither providing the remand report to the appellant nor providing opportunity to the appellant to respond to the remand report provided by the A.O. 2
3. The learned counsel for the assessee has not pressed this ground, hence dismissed.
4. Ground no.2 reads as under:
"2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that payment of roaming charges to other telecom operators is subject to TDS u/s.194J of the Act and according treating the appellant as an 'assessee in default' u/s.201(1) read with section 194J of the Act."
5. The learned counsel for the assessee submitted that the assessee is engaged in the business of providing cellular mobile telephone services to its customer in Gujarat through network of distributors. One of the services rendered by the assessee to its customers is that of roaming. This service is in the nature of use of facilities and therefore does not amount to technical services and not liable to deduct tax. The assessee submitted before the revenue authorities that in assessee's own case in the A.Y.2003-2004 and 2004-2005, ITAT, Delhi Benches after following the order of Sky Cell Communications Pvt. Ltd., Escotel Mobile Communications Ltd. and HFCL Infotel's decision held that payment made for interconnect charges to the other operators cannot be treated as payment for technical services as provided under Section 194J of the IT Act. The learned counsel for the assessee also drawn to our attention to the submissions made before the AO that in assessee's own case for A.Y.2006-2007, ITAT, Pune Bench has held that payment made for roaming charges to other operators are out of the purview of the provision of Section 194J of the Act. He submitted that it is a payment for use of standard facility provided by the assessee to its customers and hence falling outside the ambit of section 194J read with Explanation 2 to section 9(1)(vii) of the Act and therefore no tax is deductible under Section 194J on the roaming charges. The learned counsel for the assessee has strongly relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Bharati Cellular Ltd., 193 TAXMAN 97 (SC) wherein the Hon'ble Apex Court has given direction to the Department to examine the matter from a technical expert from the side of the department and to decide the matter within the stipulated time. Various other judgments were also relied on by the learned counsel for the assessee to support its case. The learned DR, on the other hand, relied on the orders of the AO and the CIT(A) and referred to relevant paras of the impugned orders to support its case.
6. We have heard both the parties and perused the orders of the AO and the CIT(A) and also material placed on record. We find that the issue under consideration has direct effect from the ratio of the decision of the Hon'ble 3 Supreme Court in the case of Bharati Cellular Ltd., (supra) wherein the Apex Court had to examine the meaning of the words "fees for technical services"
under Section 194J. The Hon'ble Court found that it was necessary to find out if human intervention is involved any stage, including the stage when the exiting capacity is exhausted and additional capacity is urgently required. The Apex Court accordingly directed the AO to examine a technical expert from the side of the department and to decide the matter within a period of four months. The Mumbai Tribunal in case of Vodafone Essar Ltd. v. DCIT 45 SOT 82 (Mum) (URO) has restored the similar issue to AO with similar direction.
Therefore, we are of the considered view that the matter should require fresh consideration from the end of the AO on the applicability of section 194J of the Act in view of the above directions contained in the decision of the Hon'ble Supreme Court. Accordingly, we set aside this issue back to the file of the AO to decide the issue afresh in accordance with the directions of the Hon'ble Apex Court provided in the case of Bharati Cellular Ltd. (supra) after giving reasonable opportunity of being heard to the assessee. We direct accordingly.
7. The ground no.3 of the assessee's appeal reads as under:
"1. The CIT(A) erred in holding that even if the payment of roaming charges would not fall with 'fees for technical services' u/s.194J of the Act, it would fall u/s.194I of the Act.
2 The appellant prays that the effective domain and control of entire facility is always with other telecom operators and, hence it does not fall u/s.194I of the Act and therefore, it be held that no TDS u/s.194I is deductible."
8. The learned counsel for the assessee submitted that no tax is deductible under Section 194J on roaming charges paid to other telecom operators mainly on two counts, i) any payment for the use of standard facility does not amount to fees for technical services and (ii) in the absence of any human intervention during the actual roaming process, payment would not be fees or technical services. The learned counsel relied on the decision of ITAT, Mumbai Bench in the case of Vodafone Essar Ltd. Vs. DCIT, 45 SOT 82 (Mum.) wherein the Tribunal has held that payment of roaming charges could not be considered as 'rent' within the meaning of the Explanation below section 194-I. Therefore, there was no liability on the part of the assessee to deduct tax from the same. The learned DR, on the other hand, relied on the orders of the AO and the CIT(A).
9. We have heard both the parties and gone through the orders of the authorities below. We find that the issue under consideration is directly 4 covered by the decision of the ITAT, Mumbai Bench in the case of Vodafone Essar Ltd. (supra) wherein it has held that payment of roaming charges by the assessee to other service providers cannot be considered as rent within the meaning of Explanation below section194-I, therefore, there was no liability on the part of the assessee to deduct tax from the same under that section. Accordingly, ground of appeal No.3 is allowed in favour of assessee.
10. The ground no.4 of the assessee reads as under:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that the tax is deductible under section 194J instead of 194C as deducted by the appellant at the time of making payment to M/s.I-Gate India Pvt. Ltd. towards call centre charges and accordingly held appellant as 'assessee in default' for alleged short deduction of tax under section 201 read with section 194J of the Act."
2. The appellant prays that it be held that the appellant has rightly deducted TDS u/s.194C and the action of the AO in holding the appellant as 'assessee in default on the alleged short deduction under section 201 read with section 194J of the Act be set aside/quashed."
11. The brief facts is that the AO noticed that the assessee has made payment to call centre which was for contract for managing call centre by hiring skilled personal which the AO considered to be technical services. The assessee has considered this to be falling under section 194J whereas the AO held that it is liable to deduction of tax u/s.194C. The CIT(A) confirmed the action of the AO. Before us, the learned counsel for the assessee relied on the submissions made before the revenue authorities and the learned DR relied on the orders of the AO and the CIT(A).
12. We have heard both the parties and perused the orders of the AO and the CIT(A). We are of the considered view that the matter requires re- adjudication at the end of the AO. The AO is directed to verify the terms and conditions of the agreement between the parties and actual services provided and decide the case on merit after giving reasonable opportunity of hearing to the assessee.
13. The ground no.5 reads as under:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that the tax is deductible under section 194J instead of 194C as deducted by the appellant at the time of making payment of Ericcsson towards installation and commissioning of equipment purchased from M/s.Ericsson India Ltd. and accordingly held appellant as 'assessee in 5 default' for alleged short deduction of tax under section 201 read with section 194J of the Act.
2. The appellant prays that it be held that the appellant has rightly deducted TDS u/s.194C and the action of the AO in holding the appellant as 'assessee in default' on the alleged short deduction under section 201 read with section 194J of the Act be set aside/quashed."
14. We have heard both the parties and perused the orders of the AO and the CIT(A) and the decisions relied on by the learned counsel for the assessee. It is the case of the assessee that in the absence of any intellectual aspect, the work done by the Ericssion cannot be classified as "services" and therefore payment to Ericsson towards installation and commissioning of the equipment purchased from Ericsson as also for expansion of the network and deducted TDS u/s.194C of the Act. The lower authorities have noticed that there were short deductions of tax under Section 201(1) in respect of various payments made to Ericsson Ltd. These payments were made to M/s Ericsson India Ltd for installation and commissioning of equipment are highly skilled and technical in nature. Therefore, we do not find any infirmity in the order of the AO and the CIT(A) on this issue, which is confirmed and this ground of the assessee is dismissed.
15. Ground No.6 of the assessee reads as under:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that the tax is deductible under section 194J instead of 194C as deducted by the assessee at the time of making payment to M/s.Zeplin Moble Systems India Ltd. towards installation of prefabricated shelters and antenna and accordingly held appellant as 'assessee in default' for alleged short deduction of tax under section 201 read with section 194J of the Act.
2. The appellant prays that it be held that the appellant has rightly deducted TDS u/s.194C and the action of the AO in holding the appellant as 'assessee in default' on the alleged short deduction u/s.201 read with section 194J of the Act be set aside/quashed."
16. The AO observed that the assessee has made payment to M/s Geplin Mobile systems India Ltd. at Rs.26.24 lakhs in F.Y. 0708/-, Rs.11.74/- lakhs in F.Y. 2008-09 and Rs.3.45 lakhs in F.Y,.2009-10 for fees for professional or technical services and liable to be deducted T.D.S. @ 11.33% whereas the assessee deducted T.D.S. u/s 194 C @ 2.66 per cent as payment to 6 contractor. The CI.T (A) held the action of the A.O. justifiable and confirmed the order of the A.O.
17. Before us the ld. A.R. for the assessee claimed that these payments were made against contract and liable to be deducted TDS u/s 194 C of I.T. ACT. The ld. D.R. vehemently argued that the payment made to the company are having nature of fees for technical services and he relied upon the order of C.I.T.(A) and order of the A.O.
18. We have heard both the parties and perused the orders of the A.O. and the CIT(A) and the decisions relied on by the learned counsel for the assessee. We find that the assessee has deducted tax at source @ 2.66% while the same was to be deducted @ 11.33% u/s 194J of the Act. The lower authorities have noticed that there were short deductions of tax under Section 201(1) in respect of various payments made to the party. Being payment towards installation of pre-fabricated shelter and antenna are highly skilled and technical. Therefore, we do not find any infirmity in the order of the A.O. and the C.I.T.(A) on this issue, which is confirmed and this ground of the assessee is dismissed.
19. Ground No.7 of the assessee reads ad under:-
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding payments made to M/s GTL Infrastructure Ltd. (GTL) is subject to TDS u/s 194J even after producing lower deduction certificates to him.
2. The appellant prays that the lower deduction certificates obtained by the recipient be considered, and consequently the action of AO in holding the appellant as 'assessee in default' on the alleged short deduction u/s 201 of the Act be set aside/quashed.
20. The AO observed that the assessee had made payment to Idea Cellular Services Ltd. sister concern of the assessee in F.Y. 2007-08 Rs.88.71 lakhs, in F.Y. 2008-09 Rs.5.57 crore and in F.Y. 2009-10 Rs.4.41 crore and deducted TDS @ 2.66% for F.Y. 2007-08 and 2008-09 and for F.Y. 2009-10 up to July, 2010 and for the other period @ 2%. The same should be deducted @ 10% u/s 194J of the 7 I.T. Act. The CIT(A) held the action of the AO as per law and treated this payment for fees for technical services.
21. Before us the ld. A.R. for the assessee has contended that these payments were made to the sister concerned M/s Idea Cellular Services Ltd for providing of men power to the appellant. The men power was not highly qualified personnel. They had education only up to 12 or hardly B.A. They helped the appellant in advertising as well as getting customers for the company. Thus, this was the payment against the contract made between them.
22. The ld D.R. opposed the argument made by the ld. A.R. for the appellant and he drew our attention on the order of the A.O. as well as C.I.T.(A) and claimed that this is payment for fees for technical services and liable to be deducted T.D.S. u/s 194J of the I.T. Act.
23. We heard both the sides and gone through the assessment order as well as the C.I.T.(A) order and factual paper book submitted by the A.R. from Sl. No.194 to 197 which show that these payments were for execution of contract for men power provided by the sister company i.e. Idea Cellular Services Ltd. & were not highly qualified personnel. Therefore, there is no liability on the part of the assessee to deduct tax from the same u/s 194J of the I.T. Act. The appeal on this ground is allowed.
24. Ground No.8 of the assessee reads ad under:-
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that the tax is deductible u/s 194J instead of 194C as deducted by the appellant at the time of making payment to M/s Idea Cellular Services Ltd. for providing manpower to the appellant and accordingly held appellant as 'assessee in default' for alleged short deduction of tax u/s 201 read with Section 194J of the Act.
2. The appellant prays that it be held that the appellant has rightly deducted TDS u/s 194C and the action of AO in holding the appellant as 'assessee in default' on the alleged short deduction u/s 201 read with Section 194J of the Act be set aside/quashed.8
25. The assessee made payment to the S.O.I. Event Management in F.Y. 2007-08 at Rs.1.07 crores and in F.Y. 2008-09 Rs.4.67 lakhs for conducting business promotion activity and supplying of pamphlet for new town launches. The A.O. had treated these payments as fees for technical service and liable to be deducted TDS u/s 194J of the I.T. Act @ 10.33% whereas the assessee had deducted TDS u/s 194C @ 2%. The CIT(A) held the action of the A.O. justifiable and confirmed the findings.
26. Before us the ld. AR for the assessee submitted that these services are covered u/s 194C as contract made with S.O.I. Event Management. He submitted paper book from Sl. No.198 to 207 of factual paper book in which the copy of bills with detailed description of work executed by the S.O.I. Event Management which show that this payment is for business promotion and supply of the pamphlets which did not include any technical expertise as required for the telecommunication work. Thus, there is no liability of the assessee to deduct TDS u/s 194J of the I.T. Act. The ld. DR relied upon the order of the AO and the CIT (A). Prima-facie the evidence submitted by the assessee's AR shows the nature of payment for contract for business promotion. Accordingly, appeal on this point is allowed.
27. Ground No.9 of the assessee reads ad under:-
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in holding that the tax is deductible u/s 194J instead of 194C as deducted by the appellant at the time of making payment to M/s Arth Interior for installation of furniture and fixtures and accordingly held appellant as 'assessee in default' for alleged short deduction of tax u/s 201 read with Section 194J of the Act.
2. The appellant prays that it be held that the appellant has rightly deducted TDS u/s 194C and the action of AO in holding the appellant as 'assessee in default' on the alleged short deduction u/s 201 read with Section 194J of the Act be set aside/quashed.
28. The Assessee made payment to M/s Arth Interior in FY. 2007-08 at Rs.34.36 lakhs, in F.Y. 2008-09 Rs.1.06 lakhs and in F.Y. 9 2009-10 Rs.4.14 lakh and deducted TDS @ 2% u/s 194C of the I.T. Act being contract whereas the A.O. found the payment for installation of furniture and picture as fees for technical services u/s 194J of the I.T. Act. The ld C.I.T.(A) had confirmed the action of the A.O.
29. Before us the ld. AR for the assessee has contended that these payments were for furniture and fixture as per contract between them and are not technical services defined in section 194J of the I.T. Act. He also filed the factual paper book at page 208 to 214 which shows that these payments pertained to fixing of furniture and fixture and the assessee has rightly deducted TDS u/s 194C of the I.T. Act whereas ld. D.R. for the revenue relied upon on the order of the C.I.T. (A) and the order of the A.O.
30. We have perused the order of the A.O., order of the C.I.T.(A) and paper book submitted by the A.R. and also heard the argument of both the sides. It is reasonably concluded by us that there is no highly technical knowledge is required as envisaged in executing the work of installation of furniture and fixture in its project. This is simple fixing of furniture. Therefore, the assessee had rightly deducted TDS u/s 194C of the I.T. Act. Accordingly, appeal on this ground is allowed.
31. Ground No.10 of the assessee reads ad under:-
1. The ld. CIT(A) erred in not considering ground NO.VII raised before him, wherein it was contended by the appellant that if the recipient has paid taxes on income which is alleged to be the subject matter of TDS u/s 194J, the same cannot once again be recovered from the appellant on the ground that no details has been filed by the appellant in this regards.
2. He failed to appreciate and ought to have held that:
The appellant had filed all the prima facie details as to show that recipient had paid taxes on income which is alleged to be the subject matter of TDS u/s 194J.
Without prejudice, even otherwise, based on the above details filed, the CIT(A) an direct AO to make an enquiry from the recipient of the income to verify as to whether the taxes have been paid by the recipient fully or not.10
3. The appellant prays that it be held that if the recipient has paid taxes on the income which is alleged to be subject matter of TDS u/s 194J, the same cannot be once again be recovered from the appellant and accordingly, the A.O. be directed to recomputed the demand u/s 201 after considering the taxes paid by the recipients.
32. The appellant had taken ground before the CIT(A) that recipient had paid taxes on receipts and produced the evidences before him but CIT(A) has dismissed the ground. The assessee relied upon the Apex Court decision in case of Hindustan Coca-Cola Beverage (P) Ltd. Vs. C.I.T.(2007) 163 Taxmen 355 (SC) where Hon'ble Supreme Court held that when recipient of income has already paid taxes on amount received from deducter. The department once again cannot recover tax from deducter on same income by treating deductor to be assessee in default for shortfall in its amount of tax deducted at source after considering the circular No.275/201/95 I.T. (B) dated 29.01.1997. The AO is directed to verify the fact from the recipient and give reasonable opportunity being heard. If the recipient had paid the tax on full receipts, then the department can charge interest u/s 201(1) of the I.T. Act up to date of payment of tax by the recipient from the assessee. The assessee is also directed to cooperate with the AO and produce all the evidences for his satisfaction. Accordingly, this ground of appeal is set aside.
33. Ground No.11 of the assessee reads ad under:-
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO in levying the interest u/s 201(1A) on the alleged short deduction of taxes u/s 194J of the Act.
2. The appellant prays that it be absolved from the liability to pay the interest u/s 201(1A) of the Act or be appropriately reduced.
34. The AO charged interest u/s 201(1A) at Rs.5,20,05,131/- for short deduction of tax on various payment up to date of payment of tax by the assessee. The action of the AO was confirmed by the CIT (A). The AR of the assessee argued that interest 11 u/s 201(1A) is not leviable as there was no liability u/s 194J of the I.T. Act. He further relied on the decision of CIT Vs. Rishikesh Appartments Co-operative Housing Society Ltd. (2001) 119 Taxaman 239 (Guj.) where Hon'ble Gujarat High Court has held that the assessee failed to deduct amount of tax from amount paid to the contractor, which it was required to deduct under provisions of Section 194C. However, the contractor had paid sufficient advance tax and also tax on self assessment on due date. There was no loss having been caused to revenue on account of non-deduction of tax at source by the assessee, no interest could be leveled u/s 201(1A) of the I.T. Act. We respectfully follow the decision of Gujarat High Court but facts of the deductee are not available on record, therefore, the AO is directed to verify the fact and follow the decision of the Hon'ble Gujarat High Court in CIT Vs. Rishikesh Appartments Co-operative Housing Society Ltd. (supra) and calculate the interest u/s 201(1A) of I.T. Act up to date of payment of tax by the deductee. Accordingly, this issue is set aside to the AO with direction to give reasonable opportunity to the assessee. The assessee is also directed to cooperate with the AO and produce required evidence for his satisfaction.
35. Ground No.12 of the assessee reads ad under:-
1. The ld. CIT(A) erred in not adjudicating ground No.X raised before him, wherein it was contended by the appellant that the AO erred in calculating the interest amount u/s 201(1A) on the alleged short deduction of taxes u/s 194J of the Act.
2. The appellant prays that the AO be directed to calculate the interest liability u/s 201(1A) from the due date of alleged short deduction to the date of payments of taxes by the recipient of income.
36. The ld. counsel for the assessee has not pressed this ground, hence dismissed.
37. Ground No.13 of the assessee reads ad under:-
1. The ld. CIT(A) erred in not adjudicating ground No.XI raised before him, wherein it was contended by the appellant that the AO erred in calculating the interest amount u/s 201(1) and interest u/s 201(1A) at Rs,9,08,13,232/- and Rs.5,20,05,131/- respectively.12
2. The appellant prays that the AO be directed to calculate the correct demand and interest amount to R.,9,08,13,232/- and Rs.5,20,05,131/- respectively for the captioned assessment years.
38. The ld. counsel for the assessee has not pressed this ground, hence dismissed.
39. In the result, appeals in all the three years are partly allowed.
Order pronounced in Open Court on 20.04.2012
Sd/- Sd/-
(G.C. Gupta) (T.R. Meena)
Vice President Accountant Member
Copy of the order forwarded to:
: Appellant
: Respondent
: CIT(A)
: CIT concerned
: DR, ITAT.
BY ORDER
DR/AR, ITAT, AHMEDABAD
1. Date of dictation : 12-04-2012
2. Date on which the typed draft is : 12-04-2012
placed before the Dictating Member.
3. Date on which the approved draft :
comes to the Sr.P.S./P.S
4. Date on which the fair order is placed :
before the Dictating Member for
pronouncement.
5. Date on which fair order placed before :
Other Member
6. Date on which the fair order comes :
back to the Sr.P.S./P.S.
7. Date on which the file goes to the :
Bench Clerk.
8. Date on which the file goes to the :
Head Clerk.
9. The date on which the file goes to the :
Assistant Registrar for signature on
the order.
10. Date of Despatch of the Order :