Would the payments made by a company to BSNL/ MTNL for the services provided through interconnect / port / access / toll be treated as “fees for technical services” to attract the provisions of tax deduction at source under section 194J?

Would the payments made by a company to BSNL/ MTNL for the services provided through interconnect / port / access / toll be treated as “fees for technical services” to attract the provisions of tax deduction at source under section 194J?

CIT Vs. Bharti Cellular Ltd. & Hutchison Essar Telecom Ltd. (SC)

On this issue, the Delhi High Court had held that the services rendered in relation to interconnection, port access did not involve any human interface and, therefore, the services could not be regarded as “technical services” as contemplated under section 194J. The expression “technical service” would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots. The Delhi High Court, therefore, concluded that interconnect charges/port access charges could not be regarded as fees for technical services, and hence, TDS provisions under section 194J were not attracted.

The Supreme Court observed that the problem which arises in these cases is that there is no proper evidence from the side of the Department to show how human intervention takes place, particularly, during the process when calls take place. During the traffic of calls from one place to another, whether there is any manual intervention is one of the points which requires to be examined.