Income Tax, Issue Update

Roaming charges paid to telecom operator: Scope of ‘Fees for Technical Services’ and applicability of Tax deduction at source

Case: VODAFONE IDEA LTD vs ACIT, TDS, CUTTACK ITAT

Outcome: Assessee

Facts

  • A survey under section 133A of the Act was conducted on 29.9.2011 in the premises of the Assessee and it was found that the Assessee had violated the provisions of tax deducted at source in non-deducting the same.
  • The Assessing Officer issued show cause notice to the Assessee requiring to explain as to why tax was not liable to be withheld under section 194J of the Act on roaming charges paid. The Assessing Officer was of the view that tax was liable to be deducted on inter-connectivity charges in respect of roaming from one state to another state of the country and, therefore, provisions of section 194J of the Act were applicable.
  • Hence, the Assessee was held as the Assessee in default in respect of non-deduction of tax at source under section 194J of the Act.

Key Points

  • In the present facts of the case, in order to enable its subscribers to make or receive calls when they move out of the licensed territory, the Assessee had entered into roaming arrangements with other telecom operators and, according to which, they could enjoy the service facility outside the territory.
  • It was observed that service in respect of roaming charges were standard automated services and require no human interaction or skill. Accordingly, roaming charges were not paid for rendering any managerial, technical or consultancy services and hence, did not fall under the category of fees for technical services.
  • Therefore, the Assessee was not required to deduct tax on such roaming charges under section 194J of the Act.

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