Bharti Airtel Ltd. v. ITO - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2016 TaxPub(DT) 1376 (Del-Trib) : (2016) 178 TTJ 0708 : (2016) 047 ITR (Trib) 0418 Bharti Airtel Ltd. v. ITO INCOME TAX ACT, 1961 --Income deemed to accrue or arise in India--Under section 9(1)(vii)Inter-connection usage charges--Assessee was a leading Telecom Service Provider in India. It was also engaged internationally in the business of providing Cellular Telephone Facilities to subscribers. It had paid Inter-connection Usage Charges (IUC) to the Foreign Telecom Operators (FTO) in course of carrying out its business as an international long distance service provider. In an earlier year's case of assessee, it had paid inter connection charges and port access charges to a company 'M' in India and AO alleged it to be fees for technical services (FTS) and TDS being deductible. Supreme Court in one such earlier year's case held that for being FTS, human intervention was necessary element, for which case of assessee was remanded for expert opinion and expert opined that element of human intervention was present therein. Based on such case and expert operation, that payment of IUC to FTP was in the nature of fees for technical services (FTS) under section 9(1)(vii) and, therefore, tax was deductible under section 195. As assessee had not deducted tax at source, it was held to be assessee-in-default. Assessee contended that services provided by FTO were wholly automated and did not require human intervention and payments were made on successful connections which were connected automatically and therefore, FTP was not liable to tax in India. *Held:* IUC were charges paid by assessee to FTO for providing services to its subscribers in respect of calls orginated/terminated outside India. Supreme Court, in assessee's own case, had confirmed that for the purpose of section 9(1)(vii), FTS would have reference to only technical services rendered by human beings. Regarding human intervention in providing IUC, it was held by various ITAT Benches that there was no manual or human intervention, during the process of transportation of calls between two networks. Human intervention was required in installation, maintenance, repairing and monitoring each operator or individual network but not for inter, connection of calls. Thus, IUC could not be considered as FTS in terms of section 9(1)(vii). Further, for purpose of inclusion in definition of FTS under DTAA, there was mandatory condition of 'make available' which was not fulfilled in IUC. Hence, IUC was not considered as FTS and assessee being non resident and not having permanent establishment in India, was not liable to tax in India and TDS under section 195 was not deductible. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 1376 (Del-Trib) : (2016) 178 TTJ 0708 : (2016) 047 ITR (Trib) 0418

Bharti Airtel Ltd. v. ITO

INCOME TAX ACT, 1961

--Income deemed to accrue or arise in India--Under section 9(1)(vii)Inter-connection usage charges--Assessee was a leading Telecom Service Provider in India. It was also engaged internationally in the business of providing Cellular Telephone Facilities to subscribers. It had paid Inter-connection Usage Charges (IUC) to the Foreign Telecom Operators (FTO) in course of carrying out its business as an international long distance service provider. In an earlier year's case of assessee, it had paid inter connection charges and port access charges to a company 'M' in India and AO alleged it to be fees for technical services (FTS) and TDS being deductible. Supreme Court in one such earlier year's case held that for being FTS, human intervention was necessary element, for which case of assessee was remanded for expert opinion and expert opined that element of human intervention was present therein. Based on such case and expert operation, that payment of IUC to FTP was in the nature of fees for technical services (FTS) under section 9(1)(vii) and, therefore, tax was deductible under section 195. As assessee had not deducted tax at source, it was held to be assessee-in-default. Assessee contended that services provided by FTO were wholly automated and did not require human intervention and payments were made on successful connections which were connected automatically and therefore, FTP was not liable to tax in India. Held: IUC were charges paid by assessee to FTO for providing services to its subscribers in respect of calls orginated/terminated outside India. Supreme Court, in assessee's own case, had confirmed that for the purpose of section 9(1)(vii), FTS would have reference to only technical services rendered by human beings. Regarding human intervention in providing IUC, it was held by various ITAT Benches that there was no manual or human intervention, during the process of transportation of calls between two networks. Human intervention was required in installation, maintenance, repairing and monitoring each operator or individual network but not for inter, connection of calls. Thus, IUC could not be considered as FTS in terms of section 9(1)(vii). Further, for purpose of inclusion in definition of FTS under DTAA, there was mandatory condition of 'make available' which was not fulfilled in IUC. Hence, IUC was not considered as FTS and assessee being non resident and not having permanent establishment in India, was not liable to tax in India and TDS under section 195 was not deductible.