DCIT Vs Hinduja Global Solutions Ltd. (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai has dismissed two appeals filed by the Revenue against Hinduja Global Solutions Ltd., affirming the deletion of disallowances made by the Commissioner of Income-tax (Appeals) (CIT(A)). The appeals concerned the Assessment Years 2012-13 and 2020-21, addressing two distinct issues: disallowance of internet and broadband charges for non-deduction of TDS, and the disallowance of Corporate Social Responsibility (CSR) donations claimed as deductions under Section 80G of the Income-tax Act, 1961.
For the Assessment Year 2012-13, the Revenue challenged the CIT(A)’s decision to delete a disallowance of ₹7,65,58,000/- made under Section 40(a)(ia) for non-deduction of Tax Deducted at Source (TDS) under Section 195 on payments for internet, broadband, and bandwidth charges. The Assessing Officer (AO) had deemed these payments as royalty, thus attracting TDS provisions. However, the assessee contended that these were standard fees for services and not for the right to use any intellectual property. The CIT(A) ruled in favor of the assessee, citing judicial precedents from the Bombay High Court in UTV Entertainment Television (399 ITR 433), which held that placement charges for bandwidth are not royalty, and the Madras High Court in Skycell Communications Services Ltd. (251 ITR 53). Additionally, a disallowance of ₹3,94,00,000/- for similar charges, part of which was paid by an overseas branch, was also deleted by the CIT(A), relying on the Delhi High Court’s decision in Estel Communications Pvt. Ltd. (318 ITR 185). The ITAT concurred with the CIT(A), finding no error or infirmity in these decisions, thereby dismissing the Revenue’s appeal for AY 2012-13.
