Vodafone Idea Limited Vs ACIT (ITAT Cuttack)
The issue under consideration is whether the assessee is require to deduct the TDS u/s 194H and 194J on payment of commission and fees for professional or technical services respectively?
In the present case, the assessee company, is in the business of providing telecommunication services in various parts of India. Assessee has not deducted any TDS u/s 194H and 194J and hence, the Assessing Officer issued show cause notice to the assessee requiring to explain as to why tax is not liable to be withheld under section 194J of the Act on roaming charges paid and under section 194H of the Act on discount extended to the pre-paid distributors by the assessee. The assessee filed its reply but did not find favour with the Assessing Officer and accordingly AO considered assessee as assessee in default in respect of non-deduction of TDS under Section 194H and 194J of the Act on payment of commission and fees for professional or technical services and passed an order under Section 201(1) & 201(1A) of the Act.
ITAT states that, The assessee, under prepaid arrangement, has extended discount to prepaid cards to distributors. The arrangement between the assessee and the prepaid distributors for distributor of right to prepaid service is on a ‘principal to principal’ basis. Under this arrangement, at each level of the distribution chain, the party distributing the right to prepaid service retains a margin for its efforts and risks assumed, while the telecom operator, being the service provider assumes the responsibility for provision of services to the subscriber. Hence, the discount extended to the prepaid distributors is in the nature of margin for such distribution of right to prepaid services and such discount does not qualify as commission with the meaning of section 194H of the Act.
Further, in order to enable its subscribers to make or receive calls when they move out of the licensed territory, has entered into roaming arrangements with other telecom operators and, according to which, they can enjoy the service facility outside the territory. Service in respect of roaming charges are standard automated services and require no human interaction or skill. Accordingly, roaming charges are not paid for rendering any managerial, technical or consultancy services and hence, do not fall under the category of ‘ fee for technical services. Therefore, the assessee is not required to deduct tax on such roaming charges under section 194J of the Act.
Hence, appeal filed by assessee allowed.
FULL TEXT OF THE ITAT JUDGEMENT
These are bunch of four appeals filed by the assessee against the separate orders of the CIT(A),1, Bhubaneswar, all dated 20.8.2019 for the assessment years 2009- 10 to 2012-13, respectively.
2. In all these appeals, the assessee has raised various common grounds. Hence, we proceed to adjudicate the appeal in ITA No.306/CTK/2019 for A.Y. 2009-10 and the decision will apply mutatis-mutandis to other appeals. For the sake of convenience and brevity, we reproduce grounds taken by the assessee for assessment year 2009-10 as under:
“ GROUND I:
1. On the facts and in the circumstances of the case and in law, the order of the TDS officer u/s 201(1)/201(1 A) of the Act for Financial year 2008-09 was passed beyond time limit prescribed u/s 201(3) of the Act.
2. The CIT(A) failed to appreciate and ought to have held that any order passed beyond reasonable period is barred by limitation and thus void-ab-initio.
3. The Appellant prays that the TDS officer be directed to consider it invalid and same be quashed.
Without Prejudice to Ground I, GROUND II:
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the order passed by the TDS officer of holding the Appellant as ‘assessee-in-default on non-deduction of tax at source on discount allowed to the prepaid distributors u/s 194H of the Act on distribution of ‘right to prepaid service* and not appreciating the submissions made by the Appellant on net accounting in its books of accounts as directed by the Hon’ble Tribunal while remitting the matter back to his office.
2. He failed to appreciate and ought to have held that:
