Bharti Airtel Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that bandwidth charges remitted by the assessee to foreign telecom service providers cannot be treated as royalty either under the applicable treaty provisions or u/s 9(1)(vi) of the Income Tax Act. Hence, assessee not required to deduct tax at source.
Facts- The assessee is a resident corporate entity providing mobile telecom services in India. AO noticed that the assessee had remitted substantial amount of revenue towards communication charges, cellular roaming charges, bandwidth charges, Annual Maintenance Charges (AMC), Fee for Technical Services (FTS), royalty, training, participation fee, purchase of software etc. without deduction of tax at source or has deducted TDS at lesser rate.
Insofar as bandwidth charges remitted to certain Foreign Telecom Service Providers, the Assessing Officer observed that while remitting such amounts to the Foreign Telecom Services Providers, the assessee has failed to deduct tax at source. Therefore, a show-cause notice was issued to the assessee, as to why the tax and interest thereon u/s. 201(1)/201(1A) should not be levied. AO held that the remittances made by the assessee, being in the nature of royalty u/s. 9(1)(vi) of the Act, the assessee was required to deduct tax at source at the rate of 20%. The assessee having failed to do so, AO not only raised demands u/s. 201(1), but also levied interest u/s. 201(1A) of the Act.
