The Supreme Court has asked the Central Board of Direct Taxes (CBDT) and other tax authorities to get the help of technical experts while deciding income tax liability of cellular service providers. The order came after a batch of appeals by income tax authorities against the ruling of the tribunal favouring Bharti Cellular Ltd and other service providers. The question was whether manual intervention was involved in the technical operations by which cellular service providers were given the facility by BSNL/MTNL for interconnection.
A related question was whether TDS was to be deducted by service providers when they paid interconnect charges/access/port charges to BSNL.
“The problem which arises in these cases is that there is no expert evidence from the side of the department to show how human intervention takes place, particularly, during the process when calls take place,” the order passed by a Bench headed by Chief Justice S H Kapadia said. “We are only highlighting these facts to emphasise that these types of matters cannot be decided without any technical assistance available on record.”
The Supreme Court underlined “with the emergence of our country as one of the BRIC countries and with the technological advancement, matters like the present one will keep on recurring and, hence, the time has come when the department should examine technical experts so that the matters could be disposed of expeditiously and further it would enable the appellate forums, including this court, to decide legal issues based on factual foundation.”
The department should understand that when the case involves revenue running into crores of rupees, technical evidence would help the courts decide matters fast based on factual foundation, the court emphasised, and noted that the Attorney General, who was present in court, had assured it that its directions to CBDT would be carried out at the earliest.
The court further clarified, in this batch of cases, the companies were not at fault as the question of human intervention was never raised by the department before the tribunal. Therefore, the assessing officer (TDS) was asked to re-examine the issue, “keeping in mind the larger interest and the ramification of the issues, which is likely to recur, particularly, in matters of contracts between Indian companies and multinational corporations.”
