Case Law Details
Vidal Health Insurance TPA (P.) Ltd. Vs JCIT (ITAT Bangalore)
In the present facts of case, payments made are towards toll-free telephone charges paid for toll free telephone number provided by telecom operators, whereby charges for calls made by consumers to the toll-free number is borne by assessee. These are dedicated private circuit lines available to assessee. In other words, a toll-free telephone number or free phone number is a telephone number billed on assessee for all arriving calls, instead of levying charges on telephone caller. For the calling party, call to such toll-free number is free of charge. It is for this exclusive telephone line that payment is made by assessee. Revenue is of the opinion that payment made by assessee for such services amounts to Royalty u/s. 9(1)(vi) of the Act, and that assessee is liable to deduct TDS u/s. 194 J of the Act. There are various judgments relied on by both sides in support of their contentions.
Section 194J of the Act, enjoins upon any person not being an individual or a HUF to deduct tax at source on certain payments, one of them being royalty, to a resident. Explanation (ba) to section 194J(1) defines ‘royalty’, by referring to the meaning given in Explanation 2 to section 9(1)(vi) of the Act.
‘Royalty’, as defined herein above, has very wide import. It brings within its ambit payment made for any kind of services received. As can be seen from the above, ‘royalty’ as per clause (vi) of section 9 would take within its ambit, rendering of any services in connection with activities referred in sub-clauses (i) to (v). In our view consideration paid by assessee is towards provision of bandwidth/telecommunications services for the ‘use of’, or ‘right to use equipment”.
As we analyse services received by assessee in present facts of case, assessee is assured, bandwidth through which, assessee was guaranteed transmission of data and voice, of customers. We observe that there is a ‘process’ involved for exclusive communication link of customers with assessee. It is pertinent to note that, definition of term “royalty” in Explanation 2 to section 9(1)(vi) includes the term ‘process’.
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