VODAFONE ESSAR LTD, MUMBAI v. DCIT (TDS) RG 3(1), MUMBAI

ITA 6059/MUM/2009 | 2008-2009
Pronouncement Date: 22-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 605919914 RSA 2009
Assessee PAN AAACU5332B
Bench Mumbai
Appeal Number ITA 6059/MUM/2009
Duration Of Justice 1 year(s) 1 month(s) 5 day(s)
Appellant VODAFONE ESSAR LTD, MUMBAI
Respondent DCIT (TDS) RG 3(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 22-12-2010
Date Of Final Hearing 06-09-2010
Next Hearing Date 06-09-2010
Assessment Year 2008-2009
Appeal Filed On 17-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI S V MEHROTRA ACCOUNTANT MEMBER I T A NO: 6058/MUM/2009 6059/MUM/2009 AND 6060/MUM /2009 (ASSESSMENT YEAR: 2007-08 2008-09 AND 2009-10) VODAFONE ESSAR LIMITED MUMBAI APPELLANT (PAN: AAACU5332B) VS DEPUTY COMMISSIONER OF INCOME TAX (TDS) RESPONDEN T RANGE 3(1) MUMBAI APPELLANT BY: MR SOLI DASTUR RESPONDENT BY: MR A P SINGH O R D E R R V EASWAR PRESIDENT: THESE ARE THREE APPEALS FILED BY THE ASSESSEE INVO LVING COMMON ISSUES. SINCE THEY ARISE OUT OF COMMON FACT S AND WERE HEARD TOGETHER THEY ARE DISPOSED OF BY A SINGLE OR DER FOR THE SAKE OF CONVENIENCE. 2. THE APPEALS RELATE TO THE ASSESSMENT YEARS 2007- 08 2008- 09 AND 2009-10. THE ASSESSEE IS A PUBLIC LIMITED C OMPANY ENGAGED IN THE BUSINESS OF PROVIDING MOBILE TELEPHO NE SERVICES. ON THE BASIS OF A SURVEY CONDUCTED UNDER SECTION 13 3A OF THE INCOME TAX ACT 1961 ON ITS PREMISES THE ASSESSIN G OFFICER NOTICED THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE BY THE ASSESSEE COMPANY TO OTHER MOBI LE SERVICE PROVIDERS TOWARDS NATIONAL ROAMING COSTS. THIS W AS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER WHO TOOK THE VIEW THAT PAYMENT OF NATIONAL ROAMING COSTS MADE TO OTHER CELLULAR SERVI CE PROVIDERS FOR ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 2 ALLOWING USE OF THEIR NETWORK WOULD AMOUNT TO PAYME NT MADE FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 19 4J AND THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX FROM SUCH PAYME NTS. IN THE ALTERNATIVE THE ASSESSING OFFICER HELD THAT THE PA YMENT SHOULD BE TREATED AS BEING IN THE NATURE OF HIRING OF PLANT A ND MACHINERY AND THEREFORE SECTION 194-I WOULD APPLY UNDER WHICH A NY PAYMENT OF RENT FOR THE USE OF LAND BUILDING PLANT AND MACHI NERY OR EQUIPMENT OR FURNITURE WAS SUBJECT TO DEDUCTION OF TAX AT SOU RCE. IN THIS VIEW OF THE MATTER HE PASSED ORDERS UNDER SECTION 201 OF T HE INCOME TAX ACT 1961 FOR ALL THE THREE YEARS ON 19 TH FEBRUARY 2009 HOLDING THE ASSESSEE TO BE IN DEFAULT IN NOT DEDUCTING THE TAX WHICH AMOUNTED TO THE FOLLOWING: - FINANCIAL YEAR 2006-07 (ASSESSMENT YEAR: 2007-08) ` 12 23 66 850/- FINANCIAL YEAR 2007-08 (ASSESSMENT YEAR: 2008-09) ` 15 32 34 470/- FINANCIAL YEAR 2008-09 (UP TO DECEMBER 2008) (ASSESSMENT YEAR: 2009-10) ` 12 85 63 030/- THE TOTAL AMOUNT OF TAX DEDUCTED AT SOURCE AMOUNTED TO ` 40 41 64 350/-. TOWARDS THE END OF THE ORDER THE A SSESSING OFFICER OBSERVED THAT SINCE THE ASSESSEE DID NOT FU RNISH ALL THE DETAILS CALLED FOR ANOTHER ORDER WILL BE PASSED IN RESPECT OF VARIOUS DEFAULTS NOTICED DURING THE SURVEY AS ALSO ORDERS CHARGING INTEREST UNDER SECTION 201(1A) OF THE ACT. THE ORDERS PASSE D BY THE ASSESSING OFFICER WERE THUS ONLY IN RESPECT OF THE TDS DEFAULT DIRECTING THE ASSESSEE TO PAY THE TDS AMOUNTS. ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 3 3. THE ASSESSEE FILED AN APPEAL TO THE CIT(A) WHO PASSED IDENTICAL ORDERS FOR ALL THE THREE YEARS. IN THE O RDERS PASSED UNDER SECTION 201 OF THE ACT THERE WERE OTHER PAYMENTS A LSO ON WHICH THE ASSESSEE WAS ASKED TO PAY TAX BUT WE ARE NOT CONCE RNED IN THESE APPEALS WITH THOSE PAYMENTS BECAUSE THEY WERE DECID ED BY THE CIT(A) IN FAVOUR OF THE ASSESSEE AGAINST WHICH SEPA RATE APPEALS HAVE BEEN FILED BY THE DEPARTMENT IN ITA NOS: 155 T O 157/MUM/2010. THESE APPEALS WERE ALSO TAGGED ALONG WITH THE PRESENT APPEALS FILED BY THE ASSESSEE BUT BY CONSEN T OF THE PARTIES THEY WERE DELINKED TO BE HEARD SEPARATELY SINCE THE ISSUES IN THOSE APPEALS WERE IN NO WAY CONNECTED TO THE ISSUE THAT ARISES IN THE ASSESSEES APPEALS. FURTHER THE APPEALS FILED BY THE ASSESSEE ARE STAY GRANTED CASES AND WERE THEREFORE GIVEN PRIORIT Y OF HEARING. BE THAT AS IT MAY THE CIT(A) WHILE EXAMINING THE ASSE SSEES APPEALS IN RESPECT OF THE NATIONAL ROAMING CHARGES AND THE STAND TAKEN BY THE ASSESSING OFFICER THAT THE ASSESSEE OUGHT TO HA VE DEDUCTED TAX THEREFROM UNDER SECTION 194J OR SECTION 194-I HELD THAT SECTION 194-I WAS APPLICABLE TO THE CASE AND THE NATIONAL R OAMING CHARGES PAID BY THE ASSESSEE TO OTHER CELLULAR SERVICE PROV IDERS UNDER THE AGREEMENTS WITH THEM SHOULD BE TREATED AS PAYMENT O F RENT FOR THE USE OF THE EQUIPMENT OF THE OTHER CELLULAR SERVICE PROVIDERS. SO FAR AS SECTION 194J IS CONCERNED THERE IS A CONTROVERS Y AS TO WHAT DECISION WAS TAKEN BY THE CIT(A) TO WHICH WE SHALL REFER TO AND DISCUSS AT THE APPROPRIATE JUNCTURE IN THIS ORDER. EVENTUALLY AT PAGE 25 OF THE IMPUGNED ORDERS THE GROUND NO.1.C) TAKEN BY THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 4 ASSESSEE BEFORE THE CIT(A) WAS DECIDED AGAINST THE APPELLANT BY THE CIT(A). GROUND NO.1 BEFORE THE CIT(A) WAS AS U NDER: - BASED ON THE FACTS CIRCUMSTANCES OF THE CASE AND IN LAW THE APPELLANT RESPECTFULLY SUBMITS THAT THE LEARNED TDS OFFICER HAS ERRED IN: 1. DETERMINING THE TAX LIABILITY OF ` 194 730 954 EXCLUDING INTEREST UNDER SECTION 201(1A) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY TREATING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT ALLEGING THE FOLLOWING: A) LOWER DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TO AGENCIES / CONTRACTORS FOR SUPPLY OF MANPOWER UNDER SECTION 194C OF THE ACT INSTEAD OF SECTION 194J OF THE ACT; B) LOWER DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TOWARDS OUTSOURCED CALL CENTRE SERVICES UNDER SECTION 194C OF THE ACT INSTEAD OF SECTION 194J OF THE ACT; AND C) NON-DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TO TELECOM SERVICE PROVIDERS TOWARDS NATIONAL ROAMING CHARGES UNDER SECTION 194J OR 194-I OF THE ACT. 4. SO FAR AS THE SECTION 194-I IS CONCERNED THE AS SESSEE TOOK UP THE CONTENTION BEFORE THE CIT(A) THAT THE NATION AL ROAMING FACILITY IS A STANDARD FACILITY WHICH CANNOT BE TERMED AS RE NT FOR THE USE OF ANY PLANT AND MACHINERY AS DEFINED IN APPENDIX-I TO THE INCOME TAX RULES 1962. THIS CONTENTION DID NOT FIND FAVO UR WITH THE CIT(A) WHO HELD AS FOLLOWS: - (A) THE WORD RENT HAS BEEN GIVEN A WIDE MEANING I N SECTION 194-I AND THEREFORE INCLUDES ANY PAYMENT BY WHATEVER NAME CALLED. THUS THOUGH THE PAYMENT IS ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 5 CALLED NATIONAL ROAMING CHARGES IT IS ACTUALLY R ENT FOR THE USE OF THE EQUIPMENT BELONGING TO THE OTHER CELLULAR SERVICE PROVIDERS. (B) IT IS NOT NECESSARY THAT THE PAYER OF THE ROAMI NG CHARGES OR THE RENT SHOULD BE IN EXCLUSIVE DOMAIN A ND CONTROL OF THE ASSET AS HELD BY THE DELHI HIGH COUR T IN THE CASE OF UNITED AIRLINES VS. CIT (2006) 287 ITR 281 (DEL). (C) THE PREDOMINANT INTENTION OF THE AGREEMENT BETW EEN THE ASSESSEE AND THE OTHER CELLULAR SERVICE PROVIDE RS IS THE USE OF THE PLANT AND MACHINERY OR EQUIPMENT AND THEREFORE THE PAYMENT OF NATIONAL ROAMING CHARGES AMOUNTS TO PAYMENT OF RENT. (D) THERE IS NO REQUIREMENT OF A REGULAR RENTAL OR HIRING AGREEMENT AND EVEN AN ARRANGEMENT BETWEEN THE PARTIES IS SUFFICIENT TO ATTRACT THE DEFINITION OF RENT. FROM 13.07.2006 AN AMENDMENT WAS MADE TO THE DEFINITION OF RENT IN SECTION 194-I TO INCLUDE A NY ARRANGEMENT UNDER WHICH THE PAYMENT IS MADE IRRESPECTIVE OF WHETHER THE ASSETS ARE OWNED BY THE PAYEE OR NOT. (E) EVEN IF THERE IS NO HUMAN ELEMENT INVOLVED IN T HE PROVISION OF THE FACILITY AND THE ENTIRE FACILITY I S COMPLETELY AUTOMATIC IT WOULD MAKE NO DIFFERENCE T O ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 6 THE POSITION SO LONG AS THE PAYMENT IS MADE FOR THE USE OF THE MACHINE OR EQUIPMENT. IN THIS VIEW OF THE MATTER THE CIT(A) HELD THAT TH E NATIONAL ROAMING CHARGES WERE IN THE NATURE OF RENT AND ACCORDINGLY THE ASSESSEE WAS LIABLE TO DEDUCT TAX UNDER SECTION 194-I OF THE ACT. HE THUS UPHELD THE ORDER UNDER SECTION 201 ON THIS ISSUE FO R ALL THE THREE YEARS. 5. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL FOR ALL THE THREE YEARS AND IN THE FIRST GROUND HAS CHALLEN GED THE CORRECTNESS OF THE DECISION OF THE CIT(A) REGARDING THE APPLICABILITY OF SECTION 194-I. SECTION 194-I WHICH WAS INSERTE D BY THE FINANCE ACT 1994 WITH EFFECT FROM 01.06.1994 PROVIDED FO R DEDUCTION OF TAX BY THE PERSON PAYING RENT AT THE PRESCRIBED RATES. THE SECTION DOES NOT APPLY TO AN INDIVIDUAL OR A HUF. EVEN IN RESPE CT OF THE OTHERS TO WHOM THE SECTION APPLIES THERE IS NO LIABILITY TO DEDUCT TAX IF THE AGGREGATE PAYMENT OF RENT DURING THE FINANCIAL YEAR DOES NOT EXCEED RUPEES ONE HUNDRED TWENTY THOUSAND. THERE I S AN EXPLANATION TO THE SECTION WHICH DEFINES THE WORD RENT AS FOLLOWS:- A. DEFINITION OF RENT AS IT EXISTED BEFORE THE AMENDMENT MADE BY THE TAXATION LAWS (AMENDMENT) ACT 2006 WITH EFFECT FROM 13.07.2006: EXPLANATION FOR THE PURPOSES OF THIS SECTION -- (I) RENT MEANS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE SUB- LEASE TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY LAND ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 7 OR ANY BUILDING (INCLUDING FACTORY BUILDING) TOGETHER WITH FURNITURE FITTINGS AND THE LAND APPURTENANT THERETO WHETHER OR NOT SUCH BUILDING IS OWNED BY THE PAYEE; B. DEFINITION OF RENT AFTER THE AMENDMENT BY THE AFORESAID ACT: EXPLANATION FOR THE PURPOSES OF THIS SECTION -- (I) RENT MEANS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE SUB- LEASE TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY -- (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;. A CAREFUL PERUSAL OF THE DEFINITION OF THE WORD RE NT SHOWS SEVERAL FEATURES. FIRSTLY ANY PAYMENT WHICH IN SUBSTANCE IS RENT BUT IS GIVEN ANOTHER NAME BY THE PARTIES TO THE AGREEMENT WILL ALSO BE CONSIDERED TO BE RENT AND THE NAME GIVEN TO THE PAY MENT BY THE PARTIES WILL BE DISCARDED. THIS IS THE IMPORT OF T HE EXPRESSION BY WHATEVER NAME CALLED. SECONDLY THE PAYMENT SHOUL D BE UNDER ANY LEASE SUB-LEASE TENANCY OR ANY OTHER AGREEMEN T OR ARRANGEMENT. CASES OF LEASE SUB-LEASE AND TENANCY INVOLVE THE TRANSFER OF AN INTEREST IN THE PROPERTY. THE ARGUM ENT OF THE ASSESSEE BEFORE US WAS THAT THE MEANING OF THE WORD S OR ANY ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 8 OTHER AGREEMENT OR ARRANGEMENT IS THAT SUCH OTHER AGREEMENT OR ARRANGEMENT SHOULD ALSO BE OF THE SAME OR SIMILAR N ATURE AS A LEASE SUB-LEASE OR TENANCY AND IT SHOULD INVOLVE A TRANSFER OF INTEREST IN THE ASSET. THE BASIS OF THIS ARGUMENT IS THE RULE OF EJUSDEM GENERIS WHICH SIMPLY MEANS THAT THE MEANING OF A GENERAL WORD SHOULD BE RESTRICTED TO THINGS OR MATTERS OF T HE SAME GENUS AS THE PRECEDING PARTICULAR WORDS. HOWEVER IN ORDER TO ATTRACT THIS PRINCIPLE IT IS ESSENTIAL THAT A DISTINCT GENUS OR CATEGORY MUST BE DISCERNIBLE IN THE WORDS UNDER EXAMINATION. A LUCI D ILLUSTRATION FROM SALMOND ON JURISPRUDENCE TWELFTH EDITION PAGE 135 MAY BE QUOTED WITH ADVANTAGE: - THIS (I.E. THE RULE OF EJUSDEM GENERIS ) HOWEVER IS ONLY THE APPLICATION OF A COMMON SENSE RULE OF LANGUAGE: IF A MAN TELLS HIS WIFE TO GO OUT AND BU Y BUTTER MILK EGGS AND ANYTHING ELSE SHE NEEDS HE WILL NOT NORMALLY BE UNDERSTOOD TO INCLUDE IN THE TERM ANYTHING ELSE SHE NEEDS A NEW HAT OR AN ITEM OF FURNITURE. THE WORDS USED TOGETHER SHOULD BE UNDERSTOOD AS DER IVING COLOUR AND SENSE FROM EACH OTHER. THIS RULE HAS BEEN EMPL OYED IN SEVERAL DECISIONS UNDER THE INCOME TAX ACT AND IT I S NOT NECESSARY TO REFER TO THEM. THE POINT MADE IS THAT UNDER THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND OTHER CELLULA R SERVICE PROVIDERS IN RESPECT OF THE PAYMENT OF NATIONAL ROA MING CHARGES THERE IS NO TRANSFER OF ANY INTEREST IN THE PLANT O R EQUIPMENT OWNED BY THE OTHER SERVICE PROVIDERS IN FAVOUR OF THE ASS ESSEE COMPANY AND THEREFORE THE PAYMENT CANNOT BE CONSIDERED AS RENT APPLYING THE RULE OF EJUSDEM GENERIS . ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 9 6. WE ARE UNABLE TO AGREE WITH THE ASSESSEE THAT TH E RULE OF EJUSDEM GENERIS SHOULD BE INVOKED IN INTERPRETING THE EXPLANATION (I) BELOW SECTION 194-I. THE LANGUAGE OR CONTEXT D OES NOT PERMIT THE USE OF THE RULE. UNDER THE EXPLANATION RENT MEANS ANY PAYMENT BY WHATEVER NAME CALLED UNDER ANY LEASE SU B-LEASE OR TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF.. THE ASSETS MENTIONED THEREIN. WE THINK THAT THE EM PHASIS OF THE PROVISION IS UPON THE USE OF THE ASSET AND SO LON G AS THIS CONDITION IS SATISFIED ANY AGREEMENT OR ARRANGEMENT WHETHER IT IS SIMILAR OR NOT IN NATURE TO A LEASE SUB-LEASE OR TENANCY IS T AKEN IN BY THE EXPLANATION (I). IT SEEMS TO US THAT A TRANSFER OF INTEREST IN THE PROPERTY IS NOT REQUIRED TO BE SHOWN BEFORE THE PAY MENT IS SUBJECTED TO TAX DEDUCTED AT SOURCE. THE APPLICABI LITY OF THE RULE OF EJUSDEM GENERIS IS SUBJECT TO THE LANGUAGE EMPLOYED BY THE STATUTE. WHERE THE INTENTION MANIFESTED BY THE LAN GUAGE OF THE STATUTE IS CLEAR THE RULE HAS NO APPLICATION. IT APPEARS TO US TO BE THE INTENTION OF THE STATUTE THAT SO LONG AS ANY OF THE ASSETS MENTIONED IN CLAUSE (A) OF EXPLANATION (I) IS USED BY THE PAYER OF THE AMOUNT WHATEVER BE THE ARRANGEMENT OR AGREEMEN T BETWEEN HIM AND THE PAYEE THE CONSIDERATION FOR THE USE IS TO BE TREATED AS RENT AND TAX HAS TO BE DEDUCTED FROM THE SAME. I N CGT VS. GETTI CHETTIAR (1971) 82 ITR 599 (SC) CITED ON BEHALF OF THE ASSESSEE THE QUESTION AROSE AS TO WHETHER AN UNEQUAL PARTITION O F JOINT FAMILY PROPERTY CAN GIVE RISE TO A TAXABLE GIFT. IN GENER AL LAW A PARTITION IS NOT A TRANSFER OF PROPERTY AS HELD BY THE SUPREME C OURT IN CIT VS. ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 10 M K STREMANN (1965) 56 ITR 62 (SC). RELIANCE HOWEV ER WAS PLACED BY THE REVENUE ON THE WIDE DEFINITION OF TR ANSFER OF PROPERTY IN SECTION 2(XXIV) OF THE GIFT TAX ACT WHICH INCLUD ED A DISPOSITION CONVEYANCE SETTLEMENT ETC. AND OTHER ALIENATION OF PROPERTY WHICH INCLUDED INTER ALIA ANY TRANSACTION ENTERED INTO BY ANY PERSON WITH INTENTION TO DIMINISH DIRECTLY OR INDIRECTLY THE VA LUE OF HIS OWN PROPERTY AND TO INCREASE THE VALUE OF THE PROPERTY OF ANY OTHER PERSON. THE SUPREME COURT HELD REJECTING THE PLE A OF THE REVENUE THAT MERELY BECAUSE A WORD IS WIDELY DEFIN ED IT DOES NOT LOSE ITS ORDINARY NATURAL AND POPULAR MEANING AND IT ONLY ENABLES THE WORD TO BE APPLIED TO THINGS TO WHICH IT WOULD NOT NORMALLY BE APPLICABLE THERE BEING NOTHING IN THE SUBJECT MATT ER OR IN THE CONTEXT TO THE CONTRARY. IT WAS FURTHER HELD THAT THE WORDS ANY TRANSACTION MUST TAKE THEIR COLOUR FROM THE MAIN P ROVISION VIZ. THAT IT MUST BE A TRANSFER OF PROPERTY IN SOME WAY. IT MUST BE REMEMBERED THAT THE WORDS ANY TRANSACTION. WERE CONTROLLED BY THE EARLIER WORDS OTHER ALIENATION WHICH IN TURN WERE CONTROLLED BY THE WORDS TRANSFER OF PROPERTY WITH THE RESULT T HAT IT WAS ESSENTIAL THAT THERE WAS A TRANSFER OR ALIENATION OF PROPERTY IN THE FIRST PLACE BEFORE IT CAN BE EXAMINED WHETHER THERE WAS A DIMIN ISHMENT OF THE VALUE OF THE PROPERTY OF ONE PERSON AND CORRESPONDI NG INCREASE IN THE VALUE OF THE PROPERTY OF OTHERS. WE ARE IN THE PRESENT CASE CONCERNED WITH A PROVISION WITH A SIGNIFICANT DIFFE RENCE IN THE PHRASEOLOGY. THE EXPLANATION (I) SEEKS TO DEFINE RENT AND IMMEDIATELY CLARIFIES THAT ANY PAYMENT WHICH IS IN SUBSTANCE RENT ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 11 BUT TERMED DIFFERENTLY BY THE PARTIES WOULD ALSO BE INCLUDED IN THE DEFINITION. THE INTENTION APPEARS TO BE ROPE IN PA YMENTS UNDER A LEASE SUB-LEASE OR TENANCY ALL OF WHICH INVOLVE A TRANSFER OF INTEREST IN THE PROPERTY EVEN IF SUCH PAYMENTS ARE TERMED DIFFERENTLY BY THE PARTIES. THERE CAN BE NO DISPUTE THAT THE T HREE TYPES OF TRANSFER OF INTEREST MENTIONED ABOVE DO INVOLVE THE USE OF THE PROPERTY BY THE TRANSFEREE. HOWEVER THERE MAY BE OTHER ARRANGEMENTS OR AGREEMENTS WHICH MAY NOT INVOLVE A TRANSFER OF INTEREST IN THE PROPERTY BUT MAY STILL CONTEMPLATE USE OF THE PROPERTY. A COMMON EXAMPLE IS THAT OF AN AGREEMENT FOR LEAVE AND LICENCE WHERE THE LICENCEE DOES NOT ENJOY ANY INTER EST IN THE PROPERTY EXCEPT THAT HE IS PERMITTED TO USE THE PRO PERTY IN CONSIDERATION FOR WHICH HE PAYS LICENCE FEES. SINC E USE OF THE PROPERTY ALBEIT WITHOUT TRANSFER OF ANY INTEREST T HEREIN IS INVOLVED IN SUCH AN ARRANGEMENT THE PAYMENT THOUGH CALLED LIC ENCE FEE IS DEEMED TO BE RENT. THERE MAY THUS BE CASES WHICH I NVOLVE TRANSFER OF AN INTEREST IN THE PROPERTY AND CASES WHICH DO N OT INVOLVE A TRANSFER OF INTEREST IN THE PROPERTY. IN BOTH CASE S THE PAYMENT MADE IF IT IS FOR THE USE OF THE PROPERTY IS TO B E TREATED AS RENT AND TAX HAS TO BE DEDUCTED THEREFROM. THUS IN OUR HUM BLE OPINION THE WORDS ANY OTHER AGREEMENT OR ARRANGEMENT HAVE BEE N ADVISEDLY EMPLOYED TO INCLUDE TRANSACTIONS INVOLVING USE OF T HE PROPERTY WITHOUT INVOLVING ANY TRANSFER OF INTEREST THEREIN AS IN THE CASES OF LEASE SUB-LEASE OR TENANCY. THAT IS WHY WE OBSERV ED THAT THE EMPHASIS OF EXPLANATION (I) IS ON THE USE OF THE PROPERTY RATHER ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 12 THAN ON THE QUESTION WHETHER THERE IS A TRANSFER OR NOT OF ANY INTEREST IN THE PROPERTY. IN THIS VIEW OF THE MATT ER WE ARE OF THE OPINION THAT IT IS NOT NECESSARY THAT THERE SHOULD BE A TRANSFER OF INTEREST IN THE EQUIPMENT OWNED BY IDEA OR AIRTEL I N FAVOUR OF THE ASSESSEE HEREIN BEFORE THE PAYMENT OF ROAMING CHARG ES IS TERMED AS RENT WITHIN THE MEANING OF EXPLANATION (I) OF SECTION 194-I OF THE ACT. 7. THE REFERENCE TO THE EXPLANATION 3(B) BELOW SECT ION 32 BY THE LEARNED CIT (DR) APPEALS TO US TO BE APPOSITE. IT CONTAINS A DEFINITION OF WHAT INTANGIBLE ASSETS ARE FOR THE PURPOSE OF ALLOWING DEPRECIATION. IT SAYS INTANGIBLE ASSETS ARE KNOW-H OW PATENTS COPYRIGHTS TRADE-MARKS LICENCES OR FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. HERE THE WORDS OF SIMILAR NATURE CLEARLY MAKE ROOM FOR THE APPLI CATION OF THE RULE OF EJUSDEM GENERIS IN THE SENSE THAT THE OTHER BUSINESS OR COMMERCIAL RIGHTS MUST BE OF THE SAME NATURE AS THO SE LISTED IN THE EARLIER PART OF THE PROVISION (VIZ. PATENTS COPYR IGHTS TRADE-MARKS ETC.). SUCH RESTRICTIVE WORDS ARE NOT PRESENT IN E XPLANATION (I) BELOW SECTION 194-I. WE ARE NOT HOWEVER TO BE UNDE RSTOOD THAT ONLY WHERE SUCH RESTRICTIVE WORDS ARE USED CAN THER E BE SCOPE FOR THE APPLICATION OF THE RULE OF EJUSDEM GENERIS . THE RULE MUST BE APPLIED WHERE THE CONTEXT OR LANGUAGE ALSO PERMITS IT BUT WHERE EITHER THE LANGUAGE OR THE CONTEXT DOES NOT PERMIT THE TEMPTATION TO APPLY THE RULE IN A MECHANICAL MANNER HAS TO BE AVO IDED. FURTHER THE OBJECT OF THE STATUTE AND THE MISCHIEF SOUGHT T O BE AVOIDED HAVE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 13 ALSO TO BE KEPT IN VIEW. THE OBJECT OF EXPLANATION (I) BELOW SECTION 194-I APPEARS TO US TO BE TO MAKE ALL PAYMENTS FOR THE USE OF ANY OF THE ASSETS MENTIONED IN CLAUSE (A) SUBJECT TO TAX D EDUCTION AT SOURCE. IN THIS CONTEXT IT MAY BE INCONGRUOUS TO HOLD THAT EVEN WHERE USE OF THE ASSETS IS INVOLVED THE PAYMENT THE REFOR CANNOT BE HELD TO BE SUBJECT TO TAX DEDUCTION AT SOURCE MEREL Y BECAUSE THE AGREEMENT OR ARRANGEMENT BETWEEN THE PARTIES WAS SU CH THAT IT DID NOT INVOLVE A TRANSFER OF INTEREST IN THE PROPERTY IN FAVOUR OF THE PERSON PAYING FOR THE USE OF THE PROPERTY. 8. HAVING HELD THAT THE RULE OF EJUSDEM GENERIS DOES NOT APPLY TO THE INTERPRETATION OF EXPLANATION (I) OF SECTION 194-I AND THAT IT IS NOT NECESSARY THAT THERE SHOULD BE A TRANSFER OF IN TEREST IN THE ASSETS MENTIONED IN CLAUSE (A) THEREOF IN FAVOUR OF THE ASSESSEE HEREIN WE MAY PROCEED TO EXAMINE THE AGREEMENT OR ARRANGEMENT BETWEEN THE PARTIES TO FIND OUT IF THERE IS ANY US E OF THE EQUIPMENT OWNED BY IDEA OR AIRTEL OR ANY OTHER SERVICE PROVID ER WITH WHOM THE ASSESSEE HAS AN AGREEMENT OR ARRANGEMENT IN RES PECT OF GRANTING ROAMING FACILITY TO ITS SUBSCRIBER AND IF SO BY WHOM. WE TAKE UP FOR CONSIDERATION THE NATIONAL GSM ROAMING AGREEMENT ENTERED INTO BETWEEN IDEA CELLULAR LIMITED AND ADIT YA BIRLA TELECOM LIMITED ON THE ONE HAND BOTH OF WHICH ARE COLLECTIVELY REFERRED TO AS IDEA AND VODAFONE ESSAR LIMITED T HE ASSESSEE HEREIN ON THE OTHER. THE AGREEMENT IS DATED 12 TH MAY 2008 AND A COPY THEREOF IS PLACED AT PAGES 81 TO 114 OF THE AS SESSEES PAPER BOOK FILED ON 18 TH FEBRUARY 2010. THE GENERAL TERMS AND ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 14 CONDITIONS FOR GSM NATIONAL ROAMING CONSIST OF 21 C LAUSES RUNNING INTO 19 PAGES (PAGES 86 TO 114). THE INTRODUCTION TO THE AGREEMENT (CLAUSE 2) SAYS THAT THE AGREEMENT PROVIDES FOR THE ESTABLISHMENT OF NATIONAL ROAMING SERVICES WHEREBY A SUBSCRIBER P ROVIDED WITH SERVICES IN ONE CELLULAR CIRCLE BY ONE OF THE NETWO RK OPERATORS CAN ALSO GAIN ACCESS TO THE SERVICES OF ANY OTHER NETWO RK OPERATORS IN THEIR RESPECTIVE LICENSED AREA. SOME OF THE IMPORT ANT DEFINITIONS MAY BE NOTICED FIRST. CLAUSE 3.2 DEFINES ROAMING SUBSCRIBER TO MEAN A PERSON OR ENTITY WITH VALID SUBSCRIPTION FOR NATIONAL USE ISSUED BY ONE OF THE PARTIES TO THE AGREEMENT AND U SING A GSM SUBSCRIBER IDENTITY MODULE (SIM) WHO SEEKS GSM SERV ICE IN A GEOGRAPHIC AREA OUTSIDE THE AREA SERVED BY THE HOME PARTY LOCATION MOBILE NETWORK (HPLMN). CLAUSE 3.6 DEFINES HPLMN OPERATOR TO MEAN A PARTY WHO IS PROVIDING GSM SERV ICE TO ITS SUBSCRIBERS IN A GEOGRAPHIC AREA WHERE IT HOLDS A L ICENSE OR HAS A RIGHT TO ESTABLISH AND OPERATE A GSM NETWORK. THE OTHER PARTY IS KNOWN AS THE VISITING PARTY LOCATION MOBILE NETWORK (VPLMN) AND CLAUSE 3.7 DEFINES A VPLMN OPERATOR AS A PARTY WH ICH ALLOWS ROAMING SUBSCRIBERS TO USE ITS GSM NETWORK. CLAUSE 6.2 PROVIDES FOR SERVICES. THE SERVICE PROVIDED BY EACH PARTY TO THE AGREEMENT IS LISTED IN ANNEXURE 1.2. IT FURTHER SA YS THAT THE GSM SERVICES MADE AVAILABLE TO INDIVIDUAL ROAMING SUBSC RIBERS SHALL ONLY BE THOSE FOR WHICH THE ROAMING SUBSCRIBERS HAVE VAL ID SUBSCRIPTIONS IN THEIR HPLMN. IT FURTHER PROVIDES THAT EACH VPLM N OPERATOR SHALL OFFER THE SAME GSM SERVICES TO ROAMING SUBSCRIBERS OF ALL OTHER ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 15 GSM OPERATORS. CLAUSE 8 PROVIDES FOR CHARGING BI LLING AND ACCOUNTING. IT SAYS THAT THE PARTIES AGREE THAT W HEN A ROAMING SUBSCRIBER USES THE SERVICES OF THE VPLMN OPERATOR THE ROAMING SUBSCRIBERS HPLMN OPERATOR SHALL BE RESPONSIBLE FO R PAYMENT OF THE CHARGES FOR THE SERVICES SO USED IN ACCORDANCE WITH THE TARIFF OF THE VPLMN OPERATOR. THE CLAUSE FURTHER PROVIDES TH AT THE HPLMN OPERATOR SHALL NOT BE SO LIABLE IN RESPECT OF SERVI CES PROVIDED BY VPLMN OPERATOR WITHOUT SUBSCRIBER IDENTITY AUTHENTI CATION AS DEFINED IN THE TERMS AND CONDITIONS. THE CLAUSE AL SO PROVIDES FOR THE CHANGE OF TARIFF BY EITHER PARTY. THERE ARE SE VERAL OTHER TERMS AND CONDITIONS WHICH WERE NOT REFERRED TO BEFORE US AND WHICH MAY NOT BE RELEVANT FOR OUR PURPOSE. 9. THE ASSESSEE HAS SUBMITTED BEFORE US AN 1 1 /2 PAGE NOTE DESCRIBING THE METHODOLOGY INVOLVED IN A ROAMING CA LL. THIS DOCUMENT IS TITLED ROAMING CALL METHODOLOGY. IT EXPLAINS HOW A ROAMING CALL IS MADE IN THE FOLLOWING MANNER: - ROAMING SERVICE VODAFONE SUBSCRIBER IN MUMBAI TRAVELLING TO DELHI SWITCHES ON HIS MOBILE DEVICE AFTER REACHING DELHI (IN CASE OF AIR TRAVEL). WHERE THE SUBSCRIBER TRAVELS BY LAND HE AUTOMATICALLY RECEIVES A MESSAGE REQUESTING FOR SELECTION OF THE ROAMING NETWORK ON VISITING ANOTHER TELECOM CIRCLE. THE SUBSCRIBER HAS A CHOICE OF MANUAL NETWORK SELECTION OR AUTOMATIC NETWORK SELECTION. UNDER AUTOMATIC NETWORK SELECTION THE SERVICES OF THE MOST PREFERRED ROAMING PARTNER OF SUBSCRIBERS HOME NETWORK WILL BE SELECTED. ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 16 UNDER THE MANUAL SELECTION THE SUBSCRIBER CAN CHOOSE THE ROAMING PARTNER WHOSE SERVICES HE WOULD LIKE TO USE OUT OF THE ONES WHICH ARE AVAILABLE IN THAT AREA (SUBSCRIBER CAN ONLY CHOOSE THE ROAMING PARTNER WITH WHOM VODAFONE HAS TIE UP). VISITING NETWORK (EG. IDEA) LOCATES MOBILE DEVICE AND IDENTIFIES THAT IT IS NOT REGISTERED WITH ITS SYSTEM I.E. VLR. VISITING NETWORK CONTACTS HOME NETWORK OF VODAFONE SUBSCRIBER I.E. HLR AND REQUESTS SERVICE INFORMATION ABOUT ROAMING DEVICE USING IMSI NUMBER IMSI NUMBER IS A UNIQUE SUBSCRIBER IDENTITY NUMBER GRANTED TO THE CUSTOMER AT THE TIME OF SUBSCRIPTION. VISITING NETWORK MAINTAINS TEMPORARY SUBSCRIBER RECORD FOR SAID MOBILE DEVICE AND PROVIDES AN INTERNAL TEMPORARY PHONE NUMBER TO THE MOBILE DEVICE. HOME NETWORK ALSO UPDATES ITS REGISTER TO INDICATE THAT THE MOBILE IS ON VISITOR NETWORK SO THAT INFORMATION SENT TO THAT DEVICE IS CORRECTLY ROUTED. THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NOT INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. A CALLER FROM MUMBAI MAKES A CALL TO VODAFONE SUBSCRIBER WHICH IS ROUTED TO THE HOME NETWORK OF VODAFONE SUBSCRIBER IN MUMBAI. HOME NETWORK THEN FORWARDS ALL INCOMING CALLS TO THE TEMPORARY PHONE NUMBER WHICH TERMINATES AT THE DEVICE OF ROAMING SUBSCRIBER (IN DELHI) WHO IS NOW USING THE SERVICES OF THE VISITING NETWORK (I.E. IDEA). THE ENTIRE PROCESS ABOVE IS AUTOMATIC AND DOES NOT INVOLVE ANY HUMAN INTERVENTION AT ANY STAGE. ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 17 BILLING PROCESS USAGE OF ROAMING SUBSCRIBER IN VISITED NETWORK IS CAPTURED IN A FILE CALLED TAP I.E. TRANSFERRED ACCOUNT PROCEDURE FOR GSM / CIBER I.E. CELLULAR INTER-CARRIER BILLING EXCHANGE RECORD FOR CDMA. TAP FILE CONTAINS DETAILS OF CALLS MADE BY SUBSCRIBER VIZ. LOCATION CALLING PARTY TIME OF CALL AND DURATION ETC. TAP / CIBER FILES ARE RATED AS PER TARIFFS CHARGED BY VISITING NETWORK OPERATOR. SUCH TAP / CIBER FILE IS TRANSFERRED TO HOME NETWORK OF SUBSCRIBER (I.E. TO VODAFONE). HOME NETWORK (I.E. VODAFONE) THEN BILLS THESE CALLS TO THE VODAFONE SUBSCRIBER AND PAYS ROAMING CHARGES BASED ON THE TAP TO THE VISITED NETWORK OPERATOR (I.E. IDEA). THE ROAMING OPERATOR CHARGES AS PER THE ROAMING AGREEMENT WITH VODAFONE WHEREAS THE SUBSCRIBER IS BILLED AS PER THE TARIFF SUBSCRIBED. 10. THE QUESTION IS WHETHER THE PAYMENT MADE BY THE ASSESSEE AS NATIONAL ROAMING CHARGES TO THE OTHER SERVICE PR OVIDERS IS FOR THE USE OF SUCH EQUIPMENT. WE MAY REFER TO AN ANALOGOU S SITUATION. LET US TAKE FOR EXAMPLE A LATHE. IF A PERSON TAKES A PIECE OF STEEL ROD FOR TURNING OR GRINDING BY A LATHE HE WOULD AP PROACH THE OWNER OF THE LATHE TO CARRY OUT THE WORK. IT IS THE OWNE R OF THE LATHE WHO WHILE CARRYING OUT THE TURNING OR GRINDING JOB WOU LD USE THE LATHE AND THE PERSON WHO REQUIRES THE LATHE OWNER TO DO T HE JOB IS NOT THE PERSON WHO CAN BE DESCRIBED AS THE USER OF THE LATH E. THE SERVICE OF TURNING OR GRINDING THE STEEL ROD IS RENDERED BY THE LATHE OWNER BY USING THE LATHE FOR WHICH CHARGES ARE PAID BY THE P ERSON WHO WANTED THE STEEL ROD TO BE TURNED OR GROUND. IT IS NOT POSSIBLE TO SAY THAT IT IS THIS PERSON WHO USED THE LATHE. A LL THAT HE PAID FOR ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 18 WAS FOR THE SERVICE RENDERED BY THE LATHE OWNER. A SIMILAR SITUATION ARISES IN A VERY COMMON EXAMPLE OF THE ATTA CHAKKI . THE PERSON WHO BRINGS THE WHEAT CANNOT BE SAID TO BE THE PERSO N WHO USED THE CHAKKI. WHAT HE PAID TO THE OWNER OF THE CHAKKI WA S FOR THE SERVICE OF GRINDING THE WHEAT INTO ATTA. THESE MAY BE COMM ON PLACE EXAMPLES BUT THEY DO NOT PUT THE POINT LESS EFFECTI VELY FOR THAT REASON. THE SUBSCRIBER OF THE ASSESSEE WHO IS ENTI TLED TO USE THE ROAMING SERVICE MERELY OBTAINS A SERVICE FROM THE O THER SERVICE PROVIDER; SAY IDEA OR AIRTEL WITH WHOM THE ASSESSE E HAS A GSM ROAMING AGREEMENT. HE HAS NEITHER SEEN THE EQUIPME NT NOR HAS ANY DIRECT CONTACT WITH THE SAME. ALL THAT HE KNOW S IS THAT BECAUSE HE HAS THE ROAMING FACILITY IN HIS CELL PHONE HE C AN MAKE A CALL FROM DELHI TO ANY OTHER PLACE EVEN THOUGH HE IS REG ISTERED WITH THE ASSESSEE ONLY IN MUMBAI. HE IS THE PERSON WHO IS E NTITLED TO THE ROAMING SERVICE WHICH IS PROVIDED BY THE OTHER SERV ICE PROVIDER WITH WHOM THE ASSESSEE HAS A WORKING ARRANGEMENT AND FOR THAT REASON HE CANNOT BE SAID TO USE THE EQUIPMENT INVOLVED IN PROVIDING THE ROAMING FACILITY. EVEN IF WE ASSUME FOR THE SAKE O F ARGUMENT THAT THE SUBSCRIBER IS THE PERSON WHO MAKES USE OF THE E QUIPMENT THE LIABILITY TO DEDUCT TAX WOULD BE ON HIM AND NOT ON THE ASSESSEE. 11. THE REAL QUESTION NOW TO BE CONSIDERED IS WHETH ER IT IS POSSIBLE TO SAY THAT IT IS THE ASSESSEE WHO HAS USE D THE EQUIPMENT AND HAS PAID THE ROAMING CHARGES TO THE OTHER SERVI CE PROVIDER WITH WHOM IT HAS ENTERED INTO A NATIONAL GSM ROAMING AGR EEMENT. IN OUR OPINION IT IS NOT POSSIBLE TO SAY SO BECAUSE I F AT ALL ANYONE CAN ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 19 BE SAID TO HAVE USED THE EQUIPMENT IT CAN ONLY BE T HE ASSESSEES SUBSCRIBER BUT NOT THE ASSESSEE. THE ASSESSEE HAS COLLECTED THE ROAMING CHARGES FROM ITS SUBSCRIBER WHO HAS THE ROA MING FACILITY BUT AS THE ROAMING CALL METHODOLOGY DESCRIBED ABOVE SHOWS THEREAFTER THE ASSESSEE HAS LITTLE ROLE TO PLAY AND EVERYTHING IS LEFT TO THE SUBSCRIBER. IF ANYTHING THE ASSESSEE IS PLA CED IN A POSITION OF A MERE FACILITATOR BETWEEN ITS SUBSCRIBER AND THE O THER SERVICE PROVIDER FACILITATING A ROAMING CALL TO BE MADE BY THE SUBSCRIBER. THE ASSESSEE CANNOT BE SAID TO HAVE USED THE EQUIPM ENT WHICH IS INVOLVED IN PROVIDING THE ROAMING FACILITY. THE AS SESSEE COLLECTS THE ROAMING CHARGES FROM ITS SUBSCRIBER AND PASSES IT O N TO THE OTHER SERVICE PROVIDER. 12. THE ASSESSEE HAS SUBMITTED A SPECIMEN COPY OF T HE INVOICE RAISED BY AIRTEL ON THE ASSESSEE ON 8 TH FEBRUARY 2010. THIS IS FOR THE PERIOD 01.01.2010 TO 31.01.2010. THE VALUE IN INDIAN RUPEES IS ` 3 84 18 831/- TO WHICH SERVICE TAX OF ` 39 57 140/- HAS BEEN ADDED. THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION T O SECTION 65 OF THE FINANCE ACT 1994 WHICH CONTAINS A SERIES OF D EFINITIONS FOR THE PURPOSE OF LEVYING SERVICE TAX. CLAUSE 105 OF THE SECTION DEFINES TAXABLE SERVICE TO MEAN ANY SERVICE PROVIDED OR T O BE PROVIDED AND THIS CLAUSE READ WITH ITS SUB-CLAUSE (ZZZX) IN CLUDES ANY SERVICE PROVIDED OR TO BE PROVIDED TO ANY PERSON BY THE TEL EGRAPH AUTHORITY IN RELATION TO TELECOMMUNICATION SERVICE. CLAUSE 1 09A OF SECTION 65 DEFINES TELECOMMUNICATION SERVICE TO MEAN SERVICE OF ANY DESCRIPTION PROVIDED BY MEANS OF ANY TRANSMISSION EMISSION OR ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 20 RECEPTION OF SIGNS SIGNALS WRITING IMAGES AND SO UNDS OR INTELLIGENCE OR INFORMATION OF ANY NATURE BY WIRE RADIO OPTICAL VISUAL OR OTHER ELECTRO-MAGNETIC MEANS OR SYSTEMS INCLUDING THE RELATED TRANSFER OR ASSIGNMENT OF THE RIGHT TO USE CAPACITY FOR SUCH TRANSMISSION EMISSION OR RECEPTION BY A PERSON WHO HAS BEEN GRANTED A LICENCE UNDER THE FIRST PROVISO TO SUB-SE CTION (1) OF SECTION 4 OF THE INDIAN TELEGRAPH ACT 1885 AND INCLUDES IN CLAUSE (III) THEREOF CELLULAR MOBILE TELEPHONE SERVICES INCLUDI NG PROVISION OF ACCESS TO AND USE OF SWITCHED OR NON-SWITCHED NETWO RKS FOR THE TRANSMISSION OF VOICE DATA AND VIDEO INBOUND AND OUTBOUND ROAMING SERVICE TO AND FROM NATIONAL AND INTERNATIO NAL DESTINATIONS. THE PROVISIONS OF SECTION 65 OF THE FINANCE ACT 19 94 REFERRED TO ABOVE SHOW THAT THE LEGISLATURE ITSELF HAS LOOKED U PON THE PROVISION OF CELLULAR TELEPHONY AS A SERVICE AND THIS INCLUDE S INBOUND AND OUTBOUND ROAMING SERVICE BOTH TO AND FROM NATIONAL AND INTERNATIONAL DESTINATIONS. THIS EXPLAINS WHY SERV ICE TAX WAS CHARGED BY AIRTEL IN THE INVOICE RAISED ON THE ASSE SSEE. IT IS ALSO FORTIFIED BY THE TERMS OF THE AGREEMENT DATED 27 TH NOVEMBER 1994 ENTERED INTO BETWEEN THE GOVERNMENT OF INDIA (MINIS TRY OF TELECOMMUNICATIONS) AND THE ASSESSEE WHO AT THE RE LEVANT TIME WAS KNOWN AS HUTCHISON MAX TELECOM. A COPY OF THE AGREEMENT WAS FILED ON BEHALF OF THE ASSESSEE AND OUR ATTENTI ON WAS DRAWN TO CERTAIN TERMS THEREIN WHICH SHOW THAT CELLULAR MOBI LE TELEPHONY WAS ALWAYS LOOKED UPON AS A SERVICE AND NOT AS USE OF A NY EQUIPMENT. CLAUSE 1 OF THE AGREEMENT DESCRIBES THE LICENCE AS ONE TO ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 21 ESTABLISH MAINTAIN AND OPERATE CELLULAR MOBILE TE LEPHONE SERVICE. IN SCHEDULE A THE VARIOUS AREAS TO WHI CH THE LICENCE APPLIES HAVE BEEN MENTIONED AS SCHEDULE OF AREA OF SERVICE. SCHEDULE C CONTAINS DEFINITIONS INTERPRETATIONS AND TRANSITIONAL PROVISIONS. CLAUSE 1(A)(I) DEFINES SERVICE AREA AS DENOTING THE GEOGRAPHICAL LIMITS WITHIN WHICH THE LICENSEE MAY OPERATE AND OFFER THE SERVICES. CLAUSE 1(L) DEFINES CELLULAR MOBIL E TELEPHONE SERVICE AS MEANING A TELECOMMUNICATION SERVICE PR OVIDED BY MEANS OF A TELECOMMUNICATION SYSTEM FOR THE CONVEYA NCE OF MESSAGES THROUGH THE AGENCY OF WIRELESS TELEGRAPHY WHERE EVERY MESSAGE THAT IS CONVEYED THEREBY HAS BEEN OR IS TO BE CONVEYED BY MEANS OF A TELECOMMUNICATION SYSTEM WHICH IS DES IGNED OR ADAPTED TO BE CAPABLE OF BEING USED WHILE IN MOTION . IN SEVERAL OTHER PLACES IN THE LICENCE AGREEMENT THE WORD SER VICE HAS BEEN USED. IT WOULD THEREFORE APPEAR TO US THAT THE ROA MING FACILITY IS ACTUALLY A FACILITY OR SERVICE PROVIDED TO THE SUBS CRIBER EITHER BY THE SERVICE PROVIDER WITH WHOM THE SUBSCRIBER IS REGIST ERED OR BY ANOTHER SERVICE PROVIDER WITH WHOM IT HAS AN AGREEM ENT OR ARRANGEMENT FOR THE PROVISION OF THE ROAMING FACILI TY. THE NOTIFICATION DATED 24 TH JANUARY 2003 ISSUED BY THE TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) ALSO USES THE WORDS SERVICE SERVICE OPERATORS AND SERVICE PROVIDERS. AN EXPLA NATORY MEMORANDUM WAS ISSUED TO THE TELECOMMUNICATION INTERCONNECTION USAGE CHARGES (TENTH AMENDMENT) REG ULATIONS 2009 A COPY OF WHICH IS PLACED AT PAGES 38 TO 49 OF THE PAPER ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 22 BOOK FILED BY THE DEPARTMENT. UNDER THE HEADING I UC RECONCILES CONFLICTING OBJECTIVES IN PARAGRAPH 2 OF THE MEMOR ANDUM IT HAS BEEN STATED THAT AN IMPORTANT OBJECTIVE OF IUC IS T O MAKE AVAILABLE THE WIDEST RANGE OF TELECOMMUNICATION SERVICES TO T HE CONSUMERS AT REASONABLE COST AND ALSO THESE SERVICES SHOULD BE P ROVIDED IN THE MOST ECONOMICALLY EFFICIENT MANNER. IT HAS FURTHER BEEN STATED THAT THE BENEFITS OF LIBERALIZATION SHOULD BE DISTRIBUTE D AS QUICKLY AS POSSIBLE TO THE LARGEST SECTION OF THE SOCIETY WITH CONSUMERS ABLE TO ACCESS THE FULL RANGE OF SERVICES IN THE MARKET AND NOT JUST THAT OFFERED BY THE ACCESS PROVIDERS TO WHOSE NETWORK TH EY ARE CONNECTED. IN THIS MEMORANDUM ALSO THE REFERENCE I S TO SERVICES AND SERVICE PROVIDERS WHICH ALSO FORTIFIES THE CLAI M THAT WHAT THE SUBSCRIBER GETS IS A SERVICE AND THE PAYMENT THEREF OR CANNOT BE CONSIDERED AS RENT. 13. THE CLARIFICATION ISSUED BY THE CBDT IN CIRCULA R NO.715 DATED 8 TH AUGUST 1995 (PAGES 50 TO 55 OF THE DEPARTMENTS PA PER BOOK) IS ALSO REVEALING. THE CLARIFICATIONS ARE IN THE FORM OF QUESTIONS AND ANSWERS. QUESTION NO.20 IS WHETHER P AYMENTS MADE TO A HOTEL FOR ROOMS HIRED DURING THE YEAR WOU LD BE OF THE NATURE OF RENT SO THAT THERE IS A LIABILITY TO DED UCT TAX UNDER SECTION 194-I. THE ANSWER WAS THAT PAYMENTS MADE BY PERSON S OTHER THAN INDIVIDUALS AND HUFS FOR HOTEL ACCOMMODATION TAKEN ON REGULAR BASIS WILL BE IN THE NATURE OF RENT SUBJECT TO TDS UNDER THE SECTION. A CLARIFICATION WAS LATER ISSUED ON 30 TH JULY 2002 BY WAY OF CIRCULAR NO.5/2002. THE NEED FOR CLARIFICATION AROSE BECAUS E CERTAIN DOUBTS ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 23 WERE EXPRESSED AS TO WHAT WOULD CONSTITUTE HOTEL A CCOMMODATION TAKEN ON REGULAR BASIS. THE CIRCULAR WENT ON TO E XPLAIN THAT WHERE EARMARKED ROOMS ARE LET OUT FOR A SPECIFIED RATE AN D SPECIFIED PERIOD THEY WOULD BE CONSTRUED TO BE ACCOMMODATION MADE AVAILABLE ON REGULAR BASIS. IT WAS FURTHER CLARI FIED THAT WHERE A ROOM OR SET OF ROOMS ARE NOT EARMARKED BUT THE HOT EL HAS A LEGAL OBLIGATION TO PROVIDE SUCH TYPES OF ROOMS DURING TH E CURRENCY OF THE AGREEMENT THE POSITION WOULD BE THE SAME. IT WAS HOWEVER CLARIFIED THAT WHERE THE INTENTION OF ENTERING INTO AGREEMENTS WITH THE HOTELS IS TO FIX THE ROOM TARIFFS AT LOWER RATE S THEY WOULD BE IN THE NATURE OF RATE-CONTRACTS FOR PROVIDING SPECIFIE D TYPES OF HOTEL ROOMS AT PRE-DETERMINED RATES DURING AN AGREED PERI OD. IT WAS THEREFORE CLARIFIED THAT A RATE-CONTRACT CANNOT BE SAID TO BE FOR ACCOMMODATION TAKEN ON REGULAR BASIS AND THERE WO ULD BE NO OBLIGATION ON THE PART OF A HOTEL TO PROVIDE A ROOM OR SPECIFIED SET OF ROOMS. THUS IT WAS STATED THAT SECTION 194-I WOULD NOT APPLY TO RATE-CONTRACT AGREEMENTS. THE ARGUMENT ON BEHALF O F THE ASSESSEE RELYING ON THE CLARIFICATION IS THAT THE BOARD ITSELF HAS RECOGNIZED THAT RENT IS SOMETHING WHICH IS PAID FOR EARMARKED PREMISES AND IN THE CASE OF ROAMING CHARGES A SUB SCRIBER DOES NOT GET ANY EARMARKED SERVICE PROVIDER AND THE ASSE SSEE ALSO DOES NOT COMMIT ITSELF TO THE SUBSCRIBER TO PROVIDE FOR ANY PARTICULAR SERVICE PROVIDER. THE CHOICE OF THE SERVICE PROVID ER WHO WILL PROVIDE THE ROAMING FACILITY TO THE SUBSCRIBER IS L EFT TO THE SUBSCRIBER. HE USUALLY FINDS A MESSAGE DELIVERED T O HIM WHEN HE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 24 MOVES TO A DIFFERENT PLACE FROM WHERE HE IS REGISTE RED SAY FROM MUMBAI TO DELHI. THE MESSAGE WHICH IS FLASHED ON H IS CELL PHONE GIVES THE NAMES OF THE SERVICE PROVIDERS WHICH HAVE A ROAMING AGREEMENT WITH THE SERVICE PROVIDER WITH WHOM HE IS REGISTERED AND HE CAN CHOOSE ANY OF THEM DURING THE PERIOD OF HIS STAY IN DELHI AND BE CONNECTED THROUGH THE CELL PHONE. VERY OFTE N HE MAY WHILE USING THE ROAMING FACILITY BE GIVEN THE MESSAGE TH AT THE CALL COULD NOT BE PUT THROUGH. THIS IS BECAUSE OF THE LACK OF AVAILABILITY OF SPACE IN THE NETWORK OF THE SERVICE PROVIDER WHOM H E HAS CHOSEN. HE MAY HAVE TO CHANGE TO ANOTHER SERVICE PROVIDER A ND IF THERE IS NONE HE HAS TO TRY AGAIN THROUGH THE SAME SERVICE PROVIDER TILL SPACE IS MADE AVAILABLE. THIS ONLY SHOWS THAT THER E IS NO COMMITMENT EITHER BY THE ASSESSEE OR BY THE OTHER S ERVICE PROVIDER WITH WHOM IT HAS ENTERED INTO A ROAMING AGREEMENT TO MAKE THE SPACE AVAILABLE TO THE SUBSCRIBER WHENEVER DEMANDED . IN OTHER WORDS NO SPACE IN THE NETWORK EQUIPMENT IS RESERVE D OR COMMITTED FOR THE SUBSCRIBER. IF THE PAYMENT IS TO BE CALLED RENT THE SUBSCRIBER AS OF RIGHT SHOULD BE ABLE TO GET THE SPACE WHICH IS EARMARKED FOR HIM. THIS IS ONE MORE REASON WHY THE PAYMENT MADE BY THE SUBSCRIBER THROUGH THE ASSESSEE AS ROAM ING CHARGES CANNOT BE CONSIDERED TO BE RENT. 14. WE MAY NOW REFER TO A FEW AUTHORITIES CITED BY BOTH THE SIDES. FROM THE ASSESSEES SIDE REFERENCE WAS MAD E TO THE DECISION OF THE AAR IN DELL INTERNATIONAL SERVICES INDIA (P) LTD. IN RE (2008) 305 ITR 37. THIS DECISION SEEMS TO SUGGE ST THAT THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 25 USER OF ANY EQUIPMENT SHOULD HAVE SOME RIGHT OVER T HE EQUIPMENT AND FURTHER THAT THERE SHOULD BE SOME DEDICATED MAC HINERY OR EQUIPMENT INSTEAD OF A COMMON INFRASTRUCTURE WHICH CAN BE USED BY VARIOUS OPERATORS TO PROVIDE SERVICES. IT WAS A LSO OBSERVED THAT THERE SHOULD BE A RIGHT TO EXCLUSIVE POSSESSION OR CUSTODY OF THE EQUIPMENT AND ENJOYMENT THEREOF OVER A STIPULATED P ERIOD OF TIME IN ORDER THAT A PAYMENT CAN BE SAID TO BE RENT. BUT T HE MORE IMPORTANT OBSERVATION IN THIS ORDER IS AS TO THE ME ANING AND IMPORT OF THE WORD USE . IT WAS HELD THAT THE WORD USE IN RELATION TO ANY EQUIPMENT IS NOT TO BE UNDERSTOOD IN THE BROAD SENS E OF AVAILING OF THE BENEFIT OF AN EQUIPMENT BUT IT INDICATED THAT THERE MUST BE SOME POSITIVE ACT OF UTILIZATION APPLICATION OR EM PLOYMENT OF THE EQUIPMENT FOR THE DESIRED PURPOSE. IT WAS HELD THA T IF AN ADVANTAGE WAS TAKEN FROM SOPHISTICATED EQUIPMENT INSTALLED AN D PROVIDED BY ANOTHER IT COULD NOT BE SAID THAT THE CUSTOMER USE D THE EQUIPMENT; IT WOULD BE A CASE OF A CUSTOMER MERELY MAKING USE OF THE FACILITY WITHOUT HIMSELF USING THE EQUIPMENT. IT WAS NECESS ARY ACCORDING TO THE DECISION THAT THE CUSTOMER CAME FACE TO FAC E WITH THE EQUIPMENT OPERATED IT OR CONTROLLED ITS FUNCTIONS IN SOME MANNER. BUT IF THE CUSTOMER DID NOTHING TO OR WITH THE EQUI PMENT AND DID NOT EXERCISE ANY POSSESSORY RIGHTS IN RELATION THERETO IT CAN ONLY BE SAID THAT HE MADE USE OF THE FACILITY CREATED BY TH E SERVICE PROVIDER WHO WAS THE OWNER OF THE ENTIRE NETWORK AND RELATED EQUIPMENT. IN THIS CASE THE AAR WAS DEALING WITH A PRIVATE COMPAN Y REGISTERED IN INDIA WHICH WAS MAINLY ENGAGED IN THE BUSINESS OF P ROVIDING CALL ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 26 CENTRE DATA PROCESSING AND INFORMATION TECHNOLOGY SUPPORT SERVICES TO THE DELL GROUP OF COMPANIES. A NON-RES IDENT COMPANY KNOWN AS BT WHICH WAS REGISTERED IN THE USA PROVI DED THE ASSESSEE WITH TWO-WAY TRANSMISSION OF VOICE AND DAT A THROUGH TELECOM BANDWIDTH. THE ASSESSEE HAD TO PAY FIXED M ONTHLY RECURRING CHARGES FOR THE CIRCUIT BETWEEN USA AND I RELAND AND IRELAND TO INDIA NET OF INDIAN TAXES. THERE WAS NO EQUIPMENT OF BT IN THE ASSESSEES PREMISES AND THE ASSESSEE HAD NO RIGHT OVER ANY EQUIPMENT HELD BY BT FOR PROVIDING THE BANDWIDTH. THE FIBER LINK CABLES AND OTHER EQUIPMENT WERE USED FOR ALL CUSTOM ERS OF BT INCLUDING THE ASSESSEE. THE BANDWIDTH WAS PROVIDED THROUGH A HUGE NETWORK OF OPTICAL FIBER CABLES LAID UNDER SEA S ACROSS SEVERAL COUNTRIES OF WHICH BT USED ONLY A SMALL FRACTION. THE QUESTION AROSE AS TO THE NATURE OF THE MONTHLY RECURRING CHA RGES PAID BY THE ASSESSEE TO BT. THE DEPARTMENTS CASE WAS THAT THE PAYMENT FELL UNDER SECTION 9(1)(VI) OF THE INCOME TAX ACT AND WA S TO BE TREATED AS ROYALTY. THE WORD ROYALTY WAS DEFINED IN EXPLANATION 2 BELOW THE SECTION AND CLAUSE (IVA) OF THE EXPLANATION STI PULATED THAT ANY CONSIDERATION FOR THE USE OR RIGHT TO USE ANY IND USTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT WOULD BE CONSIDERED AS ROYA LTY. THE QUESTION WHICH THE AAR WAS REQUIRED TO CONSIDER WAS WHETHER THE ASSESSEE COULD BE SAID TO HAVE PAID THE MONTHLY REC URRING CHARGES TO BT FOR THE USE OF ANY SUCH EQUIPMENT. IT WAS IN THIS CONTEXT THAT THE AAR OPINED THAT IT CANNOT BE CALLED AS A U SE OF THE EQUIPMENT. THE CASE OF THE ASSESSEE BEFORE US IS P ROBABLY ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 27 STRONGER BECAUSE OF THE MORE STRINGENT LANGUAGE USE D IN SECTION 194-I EVEN IF THE RULE OF EJUSDEM GENERIS IS CONSID ERED RIGHTLY APPLICABLE. 15. THE LEARNED CIT DEPARTMENTAL REPRESENTATIVE HAD HOWEVER DRAWN OUR ATTENTION TO THE JUDGMENT OF THE ANDHRA P RADESH HIGH COURT IN KRISHNA OBEROI VS. UNION OF INDIA (2002) 1 23 TAXMAN 709 (AP) IN AN ATTEMPT TO SHOW THAT THE WORD RENT HAS BEEN DEFINED IN THE EXPLANATION BELOW SECTION 194-I IN A WIDE SENSE TO INCLUDE NOT ONLY CONSIDERATION PAID UNDER A LEASE OR SUB-LEASE OR TENANCY BUT ALSO THE CONSIDERATION PAID UNDER ANY OTHER AGREEM ENT OR ARRANGEMENT FOR THE USE OF ANY OF THE ASSETS MENTI ONED THEREIN. A CAREFUL PERUSAL OF PARAGRAPH 9 OF THE JUDGMENT SHOW S THAT HOWEVER WIDE MAY BE THE CONSTRUCTION PLACED ON THE EXPLANAT ION THE PAYMENT IN QUESTION UNDER THE AGREEMENT OR ARRANGEM ENT WITH THE CUSTOMERS SHOULD BE FOR THE USE OF THE EQUIPMENT. THE JUDGMENT IS NOT AN AUTHORITY FOR THE PROPOSITION AS TO WHAT CONSTITUTES USE OF THE EQUIPMENT. IN THAT CASE IT WAS AN ADMITTED POS ITION THAT THE CUSTOMER OF THE HOTEL USED OR OCCUPIED THE ROOM AND THE ARGUMENT PUT FORWARD BEFORE THE HIGH COURT WAS THAT THE CUST OMER WAS NOT A LESSEE OR TENANT BUT A MERE LICENSEE AND THEREFORE THE PAYMENT TO THE HOTEL CANNOT BE CONSIDERED AS RENT. THIS ARGUM ENT WAS NOT ACCEPTED BY THE HIGH COURT. THE DECISION OF THE HI GH COURT MAY TAKE CARE OF THE ASSESSEES ARGUMENT BEFORE US THAT IT MAY NOT BE NECESSARY THAT THERE SHOULD BE A TRANSFER OF INTERE ST IN THE ASSET BEFORE THE PAYMENT IS CONSIDERED AS RENT WITHIN THE MEANING OF THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 28 EXPLANATION BUT AS REGARDS THE QUESTION WHETHER TH ERE IS ANY USE OF THE ASSET AND AS TO WHAT ARE THE CONDITIONS NECE SSARY BEFORE THE PERSON MAKING THE PAYMENT CAN BE CONSIDERED TO HAVE USED THE ASSET THE DECISION DOES NOT TOUCH THE POINT. THE OTHER JUDGMENT REFERRED TO BY MR SINGH APPEARING FOR THE DEPARTME NT IS THAT OF THE DELHI HIGH COURT IN THE CASE OF UNITED AIRLINES VS. CIT [(2006) 152 TAXMAN 516 (DEL) = (2006) 287 ITR 281 (DEL)]. THAT WAS A CASE OF AN AIRLINES HAVING TO PAY LANDING AND PARKING CHARG ES FOR ITS AIRCRAFT AND THE QUESTION WAS WHETHER SUCH CHARGES AMOUNTED TO RENT FOR THE USE OF THE AIRSTRIP FOR THE PURPOSE OF THE EXPL ANATION BELOW SECTION 194-I. THERE ALSO IT WAS HELD THAT THE WOR D RENT IN THE EXPLANATION HAS A WIDER MEANING THAN THE MEANING AT TRIBUTED TO IT IN COMMON PARLANCE. NEVERTHELESS IT WAS HELD THAT ANY AGREEMENT OR ARRANGEMENT BETWEEN THE PARTIES SHOULD BE FOR TH E USE OF THE LAND. IT WAS HELD THAT WHEN THE WHEELS OF AN AIRCR AFT COMING INTO AN AIRPORT TOUCH THE SURFACE OF THE AIR-FIELD USE OF THE LAND OF THE AIRPORT BEGINS. THE PARKING OF THE AIRCRAFT IN THE AIRPORT ALSO INVOLVES USE OF THE LAND. IT WAS THUS HELD THAT TH E PAYMENTS OF LANDING AND PARKING FEE WERE SUBJECT TO TAX DEDUCTE D AT SOURCE. THIS IS A CASE WHERE THE USER OF THE ASSET DIRECTLY CAME INTO CONTACT WITH THE ASSET AND ACTUALLY USED THE ASSET NAMELY THE LAND BELONGING TO THE AIRPORT AUTHORITY BOTH FOR TAXIING AND FOR PARKING. IT CANNOT BE DENIED THAT USE OF THE ASSET WAS CLEARLY INVOLVED. THE ARGUMENT HOWEVER WAS THAT EVEN CONTROL OF TECHNOL OGY FROM A DISTANT PLACE WOULD AMOUNT TO USE IN THE MODERN WOR LD. IT WAS ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 29 POINTED OUT THAT THE HOME LOCATION REGISTER (HLR) I S ALWAYS ACTIVATED IN CASE OF ROAMING FACILITY AND THERE IS HARDWARE INVOLVED IN ABUNDANCE WHEN A ROAMING FACILITY IS PROVIDED. THIS ARGUMENT HAS BEEN FULLY ANSWERED BY THE DECISION OF THE AAR IN THE CASE OF DELL INTERNATIONAL SERVICES INDIA (P) LTD. (SUPRA). 16. ANOTHER JUDGMENT REFERRED TO ON BEHALF OF THE D EPARTMENT WAS THAT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. KOTAK MAHINDRA FINANCE LTD. [(2010) 191 TAXMAN 280 (BOM) = (2009) 317 ITR 236 (BOM)]. THAT WAS A DECISION WHI CH AROSE UNDER SECTION 32 OF THE INCOME TAX ACT WHICH PROVIDED FO R DEPRECIATION ALLOWANCE. THE QUESTION WAS WHETHER AN ASSET GIVEN ON LEASE BY AN ASSESSEE ENGAGED IN THE BUSINESS OF LEASING BEF ORE THE END OF THE ACCOUNTING PERIOD CAN BE SAID TO HAVE USED THE EQUIPMENT FOR THE PURPOSE OF HIS BUSINESS AND WHETHER IT IS NECES SARY TO EXAMINE THE FURTHER QUESTION AS TO WHETHER THE LESSEE ALSO HAD PUT THE ASSET TAKEN ON LEASE TO USE WITHIN THE SAID PERIOD. IT W AS HELD THAT IT WAS NOT NECESSARY THAT THE LESSEE ALSO SHOULD HAVE PUT THE LEASED EQUIPMENT TO USE BEFORE THE END OF THE ACCOUNTING P ERIOD AND IT WAS SUFFICIENT FOR THE PURPOSE OF SECTION 32 THAT T HE LESSOR HAD LEASED OUT THE ASSET TO THE LESSEE WITHIN THE ACCOU NTING PERIOD SO THAT HE CAN BE SAID TO HAVE USED THE ASSET FOR THE PURPOSE OF HIS BUSINESS WHICH WAS THAT OF LEASING. THIS DECISION SEEMS TO US TO BE NOT RELEVANT FOR THE CONTROVERSY BEFORE US. THE POINT FOR CONSIDERATION BEFORE THE HONBLE HIGH COURT WAS NOT WHETHER THERE WAS ANY USE OF THE LEASED EQUIPMENT FOR BUSINESS PU RPOSES THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 30 QUESTION BEING THAT WHETHER IT WAS ALSO NECESSARY T HAT THE LESSEE SHOULD ALSO HAVE USED THE LEASED ASSET BEFORE THE A CCOUNTING PERIOD. THIS DECISION WITH RESPECT IS NOT OF ASS ISTANCE TO THE REVENUE IN THE PRESENT CASE. 17. REFERENCE WAS THEN MADE BY THE DEPARTMENT TO TH E ORDER OF THE SPECIAL BENCH (DELHI) OF THE TRIBUNAL IN THE CA SE OF NEW SKIES SATELLITES N.V. VS. ASSISTANT DIRECTOR OF INCOME-TA X INTERNATIONAL TAXATION (2009) 121 ITD 1 (DEL) (SB). THIS WAS A C ASE WHERE CLAUSE (III) OF EXPLANATION 2 BELOW SECTION 9(1)(VI ) WAS CONSIDERED BY THE SPECIAL BENCH. THIS CLAUSE PROVIDED THAT AN Y PAYMENT MADE FOR THE USE OF ANY PATENT INVENTION ETC. WIL L BE CONSIDERED AS ROYALTY. WHILE INTERPRETING THE WORD USE IN THE CLAUSE THE SPECIAL BENCH LAID DOWN THE FOLLOWING PROPOSITIONS: - (A) THE CONTEXT HAS TO BE KEPT IN MIND; (B) THE WORD HAS TO BE CONSTRUED AS UNDERSTOOD IN T HE TRADE CIRCLES OF THAT PARTICULAR BUSINESS ACTIVITY; AND (C) THE DEVELOPMENT IN THE FIELD OF TECHNOLOGY HAS TO BE TAKEN INTO ACCOUNT. RELYING ON THIS ORDER OF THE SPECIAL BENCH THE REV ENUE CONTENDED THAT WHEN ROAMING FACILITY IS ACTIVATED THE ASSESS EE CONTROLS THE SAME THROUGH THE EQUIPMENT INVOLVED IN THE NETWORK WHICH WOULD AMOUNT TO USE BY THE ASSESSEE OF EQUIPMENT WITHIN T HE MEANING OF THE EXPLANATION BELOW SECTION 194-I. WE HAVE TAKEN NOTE OF THE CONTEXT IN WHICH THE WORD USE OF THE ASSET IS EMP LOYED IN THE EXPLANATION. THE PAYMENT HAS TO BE FOR THE USE OF THE ASSET IF IT IS TO BE SUBJECTED TO TAX DEDUCTION AT SOURCE. THE PA RTIES IN THE AGREEMENT FOR ROAMING SERVICES HAVE REPEATEDLY USED THE WORD ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 31 SERVICE TO DENOTE THE ROAMING FACILITY TO BE OFFE RED BY THE SERVICE PROVIDER. THE TRAI REGULATIONS ALSO REPEATEDLY COI N THE EXPRESSION SERVICE OR SERVICE PROVIDER. THE DEVELOPMENT O F TECHNOLOGY HAS TO BE CERTAINLY TAKEN NOTE OF. AS TECHNOLOGY DEVEL OPS IT WILL CERTAINLY BE POSSIBLE TO ENJOY MORE FACILITIES BY A PERSON SITTING IN REMOTE PLACES JUST BY CLICKING A BUTTON. THAT CAN ONLY BE BECAUSE OF THE TECHNOLOGICAL DEVELOPMENT WHICH MAKES AVAILA BLE THE FACILITY OR SERVICE INSTANTANEOUSLY THROUGH SOPHISTICATED EQ UIPMENT. IN EVERY SUCH CASE IT CANNOT BE CONSIDERED TO BE A US E OF THE EQUIPMENT BY THE PERSON ENJOYING THE FACILITY OR SE RVICE. IN MOST SUCH CASES THE PERSON ENJOYING THE SERVICE OR THE FACILITY MAY NOT HAVE EVEN THE FAINTEST IDEA OF WHAT HE IS USING OR WHAT IS THE TECHNOLOGY INVOLVED WHICH ENABLES HIM TO USE THE FA CILITY OR SERVICE. TO SAY IN SUCH CIRCUMSTANCES THAT HE IS USING THE EQUIPMENT WOULD BE A TRAVESTY OF REALITY. OUR ATTENTION WAS THEN DRAWN TO THE NATIONAL GSM ROAMING AGREEMENT WHERE DEFINITION CLA USE 3.7 DEFINES A VPLMN OPERATOR TO MEAN A PARTY WHO ALLOWS ROAMING SUBSCRIBERS TO USE (UNDERLINING OURS) ITS GSM NETWORK. WHEN WE LOOK AT THIS DEFINITION CLOSELY WE FIND THAT THE V PLMN OPERATOR IN QUESTION IN THE PRESENT CASE WILL BE IDEA OR AIRTEL AND IT IS EITHER IDEA OR AIRTEL WHICH ALLOWS THE ROAMING SUBSCRIBER TO USE ITS GSM NETWORK WHICH MEANS THAT THE GSM NETWORK OF IDEA O R AIRTEL IS BEING USED BY THE ROAMING SUBSCRIBER AND NOT THE AS SESSEE. THEREFORE THIS DEFINITION IS NOT OF MUCH USE TO TH E REVENUE IN THE PRESENT CASE BECAUSE RELIANCE CANNOT BE PLACED ON T HE SAME TO ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 32 CONTEND THAT IT IS THE ASSESSEE WHICH USES THE GSM NETWORK OF THE VPLMN OPERATOR. 18. WE MAY NOW REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF BHARAT SANCHAR NIGAM LTD. AND ANOTHER V S. UNION OF INDIA AND OTHERS (2006) 282 ITR 273 (SC) CITED BY M R DASTUR. THIS JUDGMENT AROSE UNDER THE SERVICE TAX AND SALES TAX. ONE OF THE QUESTIONS WHICH AROSE FOR CONSIDERATION WAS WHETHER THERE WAS ANY TRANSFER OF A RIGHT TO USE ANY GOODS BY PROVIDING A CCESS OR TELEPHONE CONNECTION BY THE TELEPHONE SERVICE PROVI DER TO A SUBSCRIBER. REFERRING TO SECTION 4 OF THE TELEGRAP H ACT 1885 WHICH GIVES EXCLUSIVE PRIVILEGE IN RESPECT OF TELEC OMMUNICATION AND THE POWER TO GRANT LICENSES TO THE CENTRAL GOVERNME NT IT WAS CONTENDED BY THE SERVICE PROVIDERS THAT THEY PROVID ED ONLY A SERVICE BY THE UTILIZATION OF TELEGRAPH LICENSED TO THEM FOR THE BENEFIT OF THE SUBSCRIBERS. THE SUPREME COURT PROC EEDED ON THE ASSUMPTION THAT INCORPOREAL RIGHTS MAY BE GOODS FOR THE PURPOSE OF LEVYING SALES TAX AND POSED TO ITSELF THE QUESTION WHETHER THE ELECTROMAGNETIC WAVES THROUGH WHICH THE SIGNALS ARE TRANSMITTED CAN FULFILL THE CRITERIA FOR BEING DESCRIBED AS GOODS . THE COURT HELD THAT THE ELECTROMAGNETIC WAVES CANNOT BE CALLED GOO DS. THEY WERE HELD TO BE MERELY THE MEDIUM OF COMMUNICATION; THE WAVES ARE NEITHER ABSTRACTED NOR CONSUMED THEY ARE NOT DELIV ERED STORED OR POSSESSED NOR ARE THEY MARKETABLE. WHAT WAS TRANS MITTED IS NOT AN ELECTROMAGNETIC WAVE BUT THE SIGNAL THROUGH SUCH MEANS. THE SUPREME COURT THEREAFTER GAVE A MORE BASIC REASON T O HOLD THAT THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 33 ELECTROMAGNETIC WAVES CANNOT BE CONSIDERED AS GOODS AND IT IS THIS REASON WHICH IS RELEVANT FOR OUR PURPOSE. AT PAGE 302 OF THE REPORT IT WAS HELD AS UNDER: - A SUBSCRIBER TO A TELEPHONE SERVICE COULD NOT REASONABLY BE TAKEN TO HAVE INTENDED TO PURCHASE O R OBTAIN ANY RIGHT TO USE ELECTROMAGNETIC WAVES OR R ADIO FREQUENCIES WHEN A TELEPHONE CONNECTION IS GIVEN. NOR DOES THE SUBSCRIBER INTEND TO USE ANY PORTION OF THE WIRING THE CABLE THE SATELLITE THE TELEPHON E EXCHANGE ETC.AS FAR AS THE SUBSCRIBER IS CONCERNED NO RIGHT TO THE USE OF AN Y OTHER GOODS INCORPOREAL OR CORPOREAL IS GIVEN TO HIM OR HER WITH THE TELEPHONE CONNECTION. THESE OBSERVATIONS GIVE A CLUE TO THE SOLUTION IN T HE PRESENT CASE. IT IS NOTEWORTHY THAT THE SUPREME COURT WAS DEALING WITH MOBILE PHONE CONNECTIONS PROVIDED BY BHARAT SANCHAR NIGAM LTD. AND THE PRINCIPAL QUESTION WAS WHETHER IT WAS A SALE OR A S ERVICE OR BOTH. THE OBSERVATIONS WERE RENDERED IN THAT CONTEXT. AG AIN AT PAGE 306 OF THE REPORT IT WAS OBSERVED THAT PROVIDING ACCESS OR TELEPHONE CONNECTION DOES NOT PUT THE SUBSCRIBER IN POSSESSIO N OF THE ELECTROMAGNETIC WAVES ANY MORE THAN A TOLL COLLECTO R PUTS A ROAD OR BRIDGE INTO THE POSSESSION OF THE TOLL PAYER BY LIF TING A TOLL GATE. ALL THESE OBSERVATIONS MAY HAVE BEEN MADE IN THE CONTEX T OF THE QUESTION WHETHER THE ELECTROMAGNETIC WAVES WERE GOO DS OR NOT BUT ONE OF THE IMPORTANT STRANDS UNDERLINING THE REASON ING OF THE COURT WAS THAT THE SUBSCRIBER TO THE MOBILE TELEPHONE DOE S NOT INTEND TO USE ANY PORTION OF THE EQUIPMENT THAT IS USED IN PR OVIDING THE SERVICE. ANOTHER BASIC OBSERVATION THAT WAS MADE B Y THE COURT IN THE CONTEXT OF THE QUESTION AS TO WHETHER PROVIDING MOBILE TELEPHONING TO THE SUBSCRIBER WAS A SERVICE WAS BAS ED ON THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 34 SERVICE TAX PROVISIONS INTRODUCED BY CHAPTER V OF T HE FINANCE ACT 1994. ONE OF THE PROVISIONS STIPULATED THAT A PERS ON TO WHOM ANY SERVICE OF A TELEPHONE CONNECTION HAS BEEN PROVIDED BY A TELEGRAPH AUTHORITY WOULD BE A SUBSCRIBER AND A SERVICE TO A SUBSCRIBER BY THE TELEPHONE AUTHORITY WAS DEFINED TO BE A TAXABLE SER VICE. AFTER NOTICING THESE PROVISIONS THE SUPREME COURT AT PAGE 308 HELD THAT A TELEPHONE SERVICE IS NOTHING BUT A SERVICE. 19. THE ARGUMENT OF THE DEPARTMENT WAS THAT THE AFO RESAID JUDGMENT OF THE SUPREME COURT WAS NOT RELEVANT IN A LL CONTEXTS. IF THE UNDERLYING POSITION IS THAT A MOBILE TELEPHONY IS A SERVICE IT WOULD BE DIFFICULT TO CONSIDER THE ROAMING FACILITY GIVEN TO A SUBSCRIBER AS PART OF THE SERVICE AS SOMETHING WHIC H WOULD INVOLVE PAYMENT OF RENT FOR USE OF THE ASSETS BELONGING TO ANOTHER SERVICE PROVIDER WHO PROVIDES THE FACILITY TO THE SUBSCRIBE R UNDER AN AGREEMENT OR UNDERSTANDING. IT IS TO THIS EXTENT T HAT THE JUDGMENT OF THE SUPREME COURT IS RELEVANT. 20. MR DASTUR REFERRED TO A JUDGMENT OF THE SUPREME COURT IN THE CASE OF STATE OF ANDHRA PRADESH AND ANOTHER VS. RAS HTRIYA ISPAT NIGAM LTD. (2002) 126 STC 114 (SC). THERE THE QUES TION AROSE AS TO WHETHER THE HIRE CHARGES RECEIVED BY A DEALER FO R HIRING OUT MACHINERY TO CONTRACTORS FOR USE IN A PROJECT ARE C HARGEABLE TO SALES TAX UNDER THE ANDHRA PRADESH GENERAL SALES TA X ACT 1957. SECTION 5-E OF THE SAID ACT PROVIDED THAT EVERY DEA LER WHO TRANSFERS THE RIGHT TO USE ANY GOODS FOR ANY PURPOSE WHATSOE VER IS LIABLE TO PAY SALES TAX AT THE PRESCRIBED RATE. IN THE CASE BEFORE THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 35 SUPREME COURT THE OWNER OF THE MACHINERY HIRED OUT THE SAME TO CONTRACTORS TO BE USED IN THE PROJECT WHICH WAS ALL OTTED TO THE OWNER BY THE STATE GOVERNMENT. THE CONTRACTORS WERE NOT FREE TO USE THE MACHINERY FOR ANY WORK OTHER THAN THE PROJECT WORK NOR THEY WERE PERMITTED TO MOVE OUT THE MACHINERY DURING THE PERI OD WHEN IT WAS IN USE. IN THESE CIRCUMSTANCES A QUESTION AROSE AS TO WHETHER THE OWNER OF THE MACHINERY HAD TRANSFERRED THE RIGHT TO USE THE MACHINERY TO THE CONTRACTORS. THE SUPREME COURT HE LD THAT THE EFFECTIVE CONTROL OF THE MACHINERY EVEN WHILE IT W AS BEING USED BY THE CONTRACTOR WAS WITH THE OWNER OF THE MACHINERY AND FURTHER THE CONTRACTOR COULD NOT USE THE MACHINERY FOR ANY WORK OTHER THAN THE PROJECT WORK OR MOVE IT OUT DURING THE PERIOD IT WA S IN USE. THE SUPREME COURT ON THESE FACTS HELD THAT THERE WAS NO TRANSFER OF THE RIGHT TO USE THE MACHINERY AND NO SALES TAX WAS PAY ABLE ON THE HIRE CHARGES RECEIVED. IT WAS SO NOTWITHSTANDING T HAT THE CONTRACTOR WAS RESPONSIBLE FOR THE CUSTODY OF THE MACHINERY WH ILE IT REMAINED IN THE PROJECT SITE. THE CONTENTION BASED ON THIS DECISION IS THAT IF THE RATIO OF THE JUDGMENT IS APPLIED TO THE PRESENT CASE IT WILL BE SEEN THAT THE EFFECTIVE CONTROL AND POSSESSION OF T HE EQUIPMENT WHICH PROVIDED THE ROAMING FACILITY WAS WITH THE SE RVICE PROVIDER AND NOT WITH THE ASSESSEE AND THEREFORE THERE WAS NO QUESTION OF THE ASSESSEE USING THE EQUIPMENT SO THAT THE PAYMEN T CAN BE CALLED RENT. EVEN THE NATIONAL GSM ROAMING AGREEME NT BETWEEN THE ASSESSEE AND IDEA DOES NOT PROVIDE FOR ANY TRAN SFER OF CONTROL OF THE EQUIPMENT INVOLVED IN THE ROAMING FACILITY T O THE ASSESSEE. IN ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 36 FACT THE DEFINITION OF A ROAMING SUBSCRIBER IN CL AUSE 3.2 OF THE AGREEMENT SAYS THAT IT SHALL MEAN A PERSON OR ENTIT Y WITH VALID SUBSCRIPTION FOR NATIONAL USE ISSUED BY ONE OF THE PARTIES AND USING A GSM SUBSCRIBER IDENTITY MODULE (SIM) AND WHO SEEK S GSM SERVICE IN A GEOGRAPHIC AREA OUTSIDE THE AREA SERVE D BY HIS HPLMN OPERATOR. THE AGREEMENT BETWEEN THE PARTIES IS MER ELY TO THE EFFECT THAT IF THE ASSESSEES SUBSCRIBER WANTS A RO AMING FACILITY WHEN HE IS OUTSIDE THE GEOGRAPHICAL AREA SERVED BY THE ASSESSEE HE CAN ENJOY SUCH FACILITY BECAUSE OF THE AGREEMENT OR ARRANGEMENT ENTERED INTO BETWEEN THE ASSESSEE AND T HE OTHER SERVICE PROVIDER (IDEA). THERE IS NO TERM IN THE R OAMING AGREEMENT WHICH SHOWS THAT THE EFFECTIVE CONTROL OR POSSESSION OF THE NETWORK OF IDEA WOULD BE TRANSFERRED TO THE ASS ESSEE DURING THE PERIOD FOR WHICH THE SUBSCRIBERS OF THE ASSESSE E MAY USE THE ROAMING FACILITY. 21. TWO OTHER DECISIONS CITED ON BEHALF OF THE ASSE SSEE ARE THE DECISIONS OF THE AAR IN ISRO SATELLITE CENTRE (ISAC ) IN RE (2008) 307 ITR 59 (AAR) AND CABLE AND WIRELESS NETWORKS IN DIA P. LTD. IN RE (2009) 315 ITR 72 (AAR). IN THE FIRST OF THESE DEC ISIONS THE AAR WAS CONSIDERING THE WORDS USE AND RIGHT TO USE APPEARING IN EXPLANATION 2(III) BELOW SECTION 9(1)(VI) OF THE INCOME TAX ACT. FOLLOWING ITS EARLIER DECISION IN THE CASE OF DELL INTERNATIONAL SERVICE (P) LTD. (SUPRA) IT WAS HELD THAT THE LEAS E AMOUNT PAID BY ISRO TO THE NON-RESIDENT FOR GAINING ACCESS TO THE NAVIGATION TRANSPONDER FACILITY PROVIDED BY THE NON-RESIDENT C ANNOT BE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 37 CONSIDERED AS ROYALTY PAID FOR THE USE OR RIGHT TO USE ANY EQUIPMENT. THE ARGUMENT OF THE REVENUE IN THIS CAS E WAS THAT IN SUBSTANCE THERE WAS USE OF THE TRANSPONDER BY ISRO BECAUSE THE EXCLUSIVE CAPACITY OF THE TRANSPONDER WAS KEPT ENTI RELY AT THE DISPOSAL OF ISRO AND THE USE OF THE TRANSPONDER WAS ENSURED WHEN IT RESPONDED TO THE DIRECTIONS SENT THROUGH THE GROUND STATION. THE ANALOGY OF OPERATING A TV BY REMOTE CONTROL APPARAT US WAS PUT FORTH BY THE REVENUE. THE AAR FOUND IT DIFFICULT T O ACCEPT THE REVENUES CONTENTION. IT HELD THAT THE FACT THAT T HE TRANSPONDER AUTOMATICALLY RESPONDED TO THE DATA COMMANDS SENT F ROM THE GROUND STATION NETWORK AND RETRANSMITTED THE SAME O VER A WIDER FOOTPRINT AREA COVERED BY THE SATELLITE DID NOT MEA N THAT THE CONTROL AND OPERATION OF THE TRANSPONDER WAS WITH THE ISRO. IT WAS HELD THAT ISRO DID NOT OPERATE THE TRANSPONDER BUT GOT ACCESS TO THE NAVIGATION TRANSPONDER THROUGH ITS OWN NETWORK OR A PPARATUS. ACCORDING TO THE AAR IN ESSENCE IT AMOUNTED TO TH E PROVISION OF A COMMUNICATION OR NAVIGATIONAL LINK THROUGH A FACILI TY OWNED BY THE NON-RESIDENT COMPANY AND EXCLUSIVELY OPERATED / CON TROLLED BY IT. THE OPERATION AND REGULATION OF THE TRANSPONDER WAS ALWAYS WITH THE OWNER OF THE TRANSPONDER WHICH WAS THE NON-RESI DENT. THE ANALOGY OF TV OPERATIONS BY MEANS OF A REMOTE CONTR OL SUGGESTED BY THE REVENUE WAS HELD NOT APPROPRIATE BECAUSE THE REMOTE CONTROL DEVICE WAS AN ACCESSORY TO THE TV ITSELF AN D THE POSSESSOR OF THE TV HIMSELF OPERATES THE TV BY MEANS OF THE R EMOTE CONTROL. IT WAS ALSO OBSERVED THAT THE ASSESSEE BEFORE THE A AR WAS ONE OF ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 38 THE MANY CUSTOMERS WHO DERIVED THE BENEFIT OF THE C APACITY OF THE TRANSPONDER AND THE RESERVATION OF A PARTICULAR CAP ACITY OR BANDWIDTH FOR THE PURPOSE OF PROVIDING THE AUGMENTA TION TO GLOBAL SATELLITE NAVIGATION SYSTEM IS ONLY A FACILITY OFFE RED BY THE NON- RESIDENT COMPANY OUT OF THE SATELLITE INFRASTRUCTUR E IT POSSESSED. IF THESE OBSERVATIONS ARE APPLIED TO THE FACTS OF THE PRESENT CASE IT MAY BE SEEN THAT THE NETWORK OR EQUIPMENT OWNED BY IDEA IS MERELY ACCESSED BY THE ASSESSEES SUBSCRIBER BY THE PRESS OF A BUTTON IN THE MOBILE HANDSET WHICH IS OWNED BY THE SUBSCRIBER. IT CANNOT BE LIKENED TO A REMOTE CONTROL DEVICE BY WHI CH A TV IS OPERATED BECAUSE THE NETWORK OR THE EQUIPMENT IS NO T OWNED OR POSSESSED BY THE SUBSCRIBER NOR BY THE ASSESSEE. A S OBSERVED BY THE AAR WITH WHICH WE RESPECTFULLY AGREE IT AMOUN TS TO THE PROVISION OF THE ROAMING FACILITY THROUGH THE NETWO RK OR EQUIPMENT OWNED BY IDEA AND OPERATED AND CONTROLLED BY IT OF COURSE AFTER PROPER VERIFICATION OF THE NETWORK OF THE ASSESSEE FOR THE PURPOSE OF FINDING OUT WHETHER THE SUBSCRIBER DEMANDING THE RO AMING FACILITY IS REGISTERED WITH THE ASSESSEE. 22. THE DECISION OF THE AAR IN CABLE AND WIRELESS N ETWORKS INDIA P. LTD. IN RE (SUPRA) DOES NOT REQUIRE SEPARATE CONSIDERATION AS THE REASONING AND THE CONCLUSION IS THE SAME AS IN THE CASE OF ISRO SATELLITE CENTRE (ISAC) IN RE (SUPRA) AND DELL INTERNATIONAL SERVICE (P) LTD. (SUPRA). 23. OUR CONCLUSION WITH REGARD TO SECTION 194-I IS THAT THE PAYMENT OF ROAMING CHARGES BY THE ASSESSEE TO THE O THER SERVICE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 39 PROVIDERS CANNOT BE CONSIDERED AS RENT WITHIN THE M EANING OF THE EXPLANATION BELOW SECTION 194-I. THEREFORE THERE WAS NO LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX FROM THE SAME UNDER THAT SECTION. 24. SO FAR AS THE OTHER QUESTION AS TO WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER SECTION 194J IS CONCERNE D WE HAVE HEARD ELABORATE ARGUMENTS FROM BOTH THE SIDES. THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE OUGHT TO HAVE DEDU CTED TAX ON THE FOOTING THAT THE PAYMENT OF ROAMING CHARGES AMOUNTS TO FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 19 4J READ WITH EXPLANATION (B) BELOW THE SAID SECTION WHICH REFER S TO THE DEFINITION OF THE EXPRESSION FEES FOR TECHNICAL SERVICES IN EXPLANATION 2 BELOW SECTION 9(1)(VII) OF THE INCOME TAX ACT. THE DEFINITION OF FEES FOR TECHNICAL SERVICES IN THAT SECTION IS TH AT IT MEANS ANY CONSIDERATION (INCLUDING LUMPSUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL TECHNICAL OR CONSULTANCY SERVICE S INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL. WE ARE NOT CONCERNED WITH THE OTHER PART OF THE DEFINITION WHI CH EXCLUDES CERTAIN TYPES OF CONSIDERATION FROM THE DEFINITION. THE QUESTION REALLY IS WHETHER THE ASSESSEE PAID THE ROAMING CHA RGES IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL SE RVICES BY THE OTHER SERVICE PROVIDER. 25. BEFORE WE PROCEED TO EXAMINE THE QUESTION A PR ELIMINARY POINT NEEDS TO BE SETTLED. IN GROUND NO.2 THE ASSE SSEE HAS QUESTIONED THE APPLICABILITY OF SECTION 194J AND HA S CONTENDED THAT ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 40 THE CIT(A) ERRED IN NOT GIVING ANY FINDING ON NON- APPLICABILITY OF SECTION 194J OF THE ACT ON PAYMENTS TOWARDS NATIONA L ROAMING CHARGES EVEN AFTER CONSIDERING APPELLANTS SUBMISSI ONS AND INDIRECTLY ACCEPTING THAT PROVISIONS OF SECTION 194 J ARE NOT APPLICABLE. A PERUSAL OF THE GROUNDS OF APPEAL FI LED BEFORE THE CIT(A) SHOWS THAT IN GROUND NO.1(C) THE ASSESSEE HA S CHALLENGED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE ASSESSEE AS A DEFAULTER FOR NON DEDUCTION OF TAX AT SOURCE ON PA YMENTS MADE TO TELECOM SERVICE PROVIDERS TOWARDS NATIONAL ROAMING CHARGES UNDER SECTION 194J OR 194-I OF THE ACT. BEFORE THE CIT( A) THE ASSESSEE PUT FORTH ELABORATE SUBMISSIONS BOTH WITH REGARD TO SECTION 194-I AND SECTION 194J. GROUND NO. 1(C) RAISED BY THE AS SESSEE BEFORE THE CIT(A) HAS BEEN CONSIDERED BY HIM IN PARAGRAPHS 9 AND 10 OF HIS ORDER. THE ASSESSEES CONTENTIONS WITH REGARD TO SECTION 194J ARE NOTED IN PARAGRAPHS 9.4 TO 9.7. THE CONTENTION S WITH REGARD TO SECTION 194-I ARE NOTED IN PARAGRAPHS 9.8 TO 9.13 O F THE ORDER. THE CONCLUSION OF THE CIT(A) IS IN PARAGRAPH 10 WHICH COVERS ABOUT 3 1 /2 PAGES (FROM PAGE 22 TO PAGE 25 OF HIS ORDER). HOWE VER THE DISCUSSION IN PARAGRAPH 10 IS CONFINED TO THE ASSES SEES CONTENTIONS UNDER SECTION 194-I NAMELY WHETHER TH E PAYMENT OF NATIONAL ROAMING CHARGES CAN BE REGARDED AS RENT. THERE IS NO DISCUSSION WITH REGARD TO THE ASSESSEES CONTENTION S VIS--VIS SECTION 194J. ULTIMATELY THE OPERATIVE PORTION OF HIS DECISION AT THE END OF PAGE 25 OF HIS ORDER SAYS THAT SO FAR AS 1( C) IS CONCERNED THE SAME IS DECIDED AGAINST THE APPELLANT. ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 41 26. NOW THERE ARE DIFFERENT WAYS OF LOOKING AT THE DECISION OF THE CIT(A). ONE WAY IS TO GO MERELY BY THE OPERATIVE P ORTION OF HIS ORDER AND HOLD THAT BOTH WITH REGARD TO SECTION 194 -I AND SECTION 194J THE MATTER HAS BEEN DECIDED AGAINST THE ASSES SEE. THE OTHER WAY IN WHICH IT CAN BE UNDERSTOOD IS TO TAKE THE VIEW THAT THE CIT(A) THOUGH HE HAS STATED THAT GROUND NO.1(C) IS DECIDED AGAINST THE ASSESSEE CANNOT BE REALLY SAID TO HAVE DONE SO BECAUSE THERE IS NO DISCUSSION OR CONSIDERATION OF THE ASSESSEES ARGUMENTS WITH REGARD TO THE APPLICABILITY OF SECTI ON 194J AND CONSEQUENTLY THERE IS NO FINDING RECORDED BY HIM RE GARDING THE APPLICABILITY OF THE SECTION. IF WE GO BY THE GROU ND OF APPEAL NO.2 BEFORE US BY THE ASSESSEE IN THE MEMORANDUM OF APPE AL IT APPEARS TO US THAT EVEN THE ASSESSEE HAS UNDERSTOOD THE DECISION OF THE CIT(A) THAT WAY. HOWEVER THAT IS ONLY PART LY SO BECAUSE THOUGH THE ASSESSEE HAS STATED IN THE GROUND THAT T HE CIT(A) HAS ERRED IN NOT GIVING ANY FINDING WITH REGARD TO SECT ION 194J IN THE LATER PART OF THE GROUND IT HAS BEEN STATED THAT TH E CIT(A) HAS THEREBY INDIRECTLY ACCEPTED THAT SECTION 194J IS NO T ATTRACTED. INITIALLY THE REVENUE OBJECTED TO ANY ARGUMENTS BEI NG ADVANCED BY THE ASSESSEE WITH REGARD TO SECTION 194J BECAUSE TH ERE WAS NO FINDING BY THE CIT(A). THE CONTENTION OF THE ASSES SEE HOWEVER WAS THAT THE MATTER CAN BE ARGUED BECAUSE OF THE OP ERATIVE PORTION OF THE ORDER OF THE CIT(A) DECIDING THE ENTIRE GRO UND NO.1(C) AGAINST THE ASSESSEE. HOWEVER MR DASTUR ALSO HAD TO RECKON WITH THE LATER PART OF GROUND NO.2 TAKEN BEFORE US WHERE IT WAS STATED ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 42 THAT THE CIT(A) HAS INDIRECTLY ACCEPTED THAT SECTIO N 194J WAS NOT APPLICABLE. IF WE UNDERSTAND THE DECISION OF THE C IT(A) READING HIS ORDER AS A WHOLE THAT HE HAS INDIRECTLY ACCEPTED T HAT SECTION 194J WAS NOT APPLICABLE TO THE CASE THAT WOULD CREATE A DIFFICULTY IN THE SENSE THAT THE REVENUE HAS NOT TAKEN ANY GROUND IN ITS APPEALS TO THE EFFECT THAT THE CIT(A) WAS WRONG IN INDIRECTLY HOLDING THAT SECTION 194J WAS NOT APPLICABLE. APART FROM THIS D IFFICULTY THE REAL QUESTION WILL BE WHETHER WE CAN UNDERSTAND THE ORDE R OF THE CIT(A) AS INDIRECTLY ACCEPTING THE ASSESSEES CONTENTION T HAT SECTION 194J IS NOT ATTRACTED. MR DASTUR SUBMITTED THAT THE ASS ESSEE HAD PUT FORTH ITS CONTENTIONS BEFORE THE CIT(A) BOTH IN REG ARD TO SECTION 194J AND SECTION 194-I AND THE CIT(A) HAS AGREED WI TH THE ASSESSING OFFICER THAT SECTION 194-I IS APPLICABLE WHICH MEANS THAT HE HAS ACCEPTED THE ASSESSEES ARGUMENT THAT SECTIO N 194J IS NOT APPLICABLE. THOUGH IT IS THEORETICALLY POSSIBLE TO UNDERSTAND THE DECISION OF THE CIT(A) THIS WAY WE WOULD HESITATE TO DO SO CONSIDERING THE IMPORTANCE OF THE ISSUE REGARDING T HE APPLICABILITY OF SECTION 194J TO THE PAYMENT OF NATIONAL ROAMING CHARGES. WE WOULD PREFER TO UNDERSTAND THE DECISION OF THE CIT( A) AS NOT GIVING A FINDING WITH REGARD TO THE ASSESSEES CLAIM THAT SECTION 194J IS ALSO NOT ATTRACTED. IN FACT THERE IS NO DISCUSSION OF THE ASSESSEES CONTENTIONS VIS--VIS SECTION 194J AND ULTIMATELY T HE GROUND NO.1(C) TAKEN BEFORE THE CIT(A) WHICH REFERS TO BO TH SECTION 194J AND SECTION 194-I HAS BEEN DISMISSED. TAKING ALL THESE INTO CONSIDERATION IT WOULD APPEAR TO US THAT THE BETTE R COURSE WOULD BE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 43 TO HOLD THAT THE ISSUE REGARDING SECTION 194J THOU GH IT IS STATED BY THE CIT(A) TO HAVE BEEN DECIDED AGAINST THE ASSESSE E IT HAS BEEN DONE SO WITHOUT APPLYING HIS MIND TO THE CONTENTION S PUT FORTH BY THE ASSESSEE QUESTIONING THE APPLICABILITY OF THAT SECTION. IT MAY BE AN INADVERTENCE ON THE PART OF THE CIT(A). 27. WHILE THE CONTENTION OF THE ASSESSEE IS THAT TH ERE WAS NO RENDERING OF ANY TECHNICAL SERVICES BY THE OTHER SE RVICE PROVIDERS AND THUS SECTION 194J WAS NOT ATTRACTED AND WHAT WA S RENDERED WAS MERELY A SERVICE (BUT NOT TECHNICAL SERVICE) OR A FACILITY THE CONTENTION OF THE REVENUE WAS THAT THE PAYMENT WAS FOR TECHNICAL SERVICES. SEVERAL AUTHORITIES WERE CITED BY BOTH T HE SIDES. ON BEHALF OF THE ASSESSEE THE JUDGMENT OF THE DELHI HI GH COURT IN CIT VS. BHARTI CELLULAR LTD. (2009) 319 ITR 139 (DEL) W AS STRONGLY RELIED UPON. IT WAS CONTENDED THAT THIS IS A DIRECT DECIS ION ON THE POINT WHERE IT WAS HELD THAT THE PAYMENT IS NOT FOR TECHN ICAL SERVICES THOUGH THE PAYMENT WAS NOT FOR NATIONAL ROAMING CHA RGES BUT FOR INTERCONNECTION CHARGES. SUPPOSE A CALL TAKES PLAC E BETWEEN DELHI AND NAINITAL. BSNL HAS NO NETWORK IN NAINITAL WHER EAS IT HAS A NETWORK IN DELHI. THE INTERCONNECT AGREEMENT BETWE EN BSNL AND BHARTI CELLULAR ENABLES THE FORMER TO ACCESS THE NE TWORK OF BHARTI CELLULAR IN NAINITAL AND VICE VERSA. MR DASTUR ALS O FAIRLY BROUGHT TO OUR NOTICE THE JUDGMENT OF THE SUPREME COURT RENDER ED ON 12.08.2010 ON APPEAL BY THE CIT AGAINST THE DELHI H IGH COURT JUDGMENT (SUPRA) IN CIT DELHI VS. BHARTI CELLULAR LTD. IN CIVIL APPEAL NO.6691 OF 2010 (ARISING OUT OF SLP(C) NO.16452 OF 2009). THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 44 DELHI HIGH COURT DECISION PROCEEDED ON THE BASIS TH AT THERE WAS NO HUMAN INTERVENTION OR INTERFACE INVOLVED IN CONNECT ION WITH PROVIDING INTERCONNECTION FACILITY BY SERVICE PROVI DERS. BEFORE THE SUPREME COURT THE KEY ISSUE WHICH AROSE FOR DETERMI NATION WAS WHETHER MANUAL INTERVENTION IS INVOLVED IN THE TEC HNICAL OPERATIONS BY WHICH A CELLULAR SERVICE PROVIDER LIKE M/S BHAR TI CELLULAR LIMITED IS GIVEN THE FACILITY BY BSNL / MTNL FOR INTERCONNE CTION?. THE SUPREME COURT HAD TO EXAMINE THE MEANING OF THE WOR DS FEES FOR TECHNICAL SERVICES UNDER SECTION 194J. THE COURT OPINED THAT IT IS NECESSARY TO FIND OUT IF HUMAN INTERVENTION IS INVO LVED IN ANY STAGE INCLUDING THE STAGE WHEN THE EXISTING CAPACITY IS E XHAUSTED AND ADDITIONAL CAPACITY IS URGENTLY REQUIRED. NOTING T HE ABSENCE OF EXPERT EVIDENCE FROM THE SIDE OF THE DEPARTMENT TO SHOW HOW HUMAN INTERVENTION TAKES PLACE DURING THE PROCESS W HEN THE CALLS TAKE PLACE (IN THE ABOVE EXAMPLE FROM DELHI TO NAI NITAL AND VICE VERSA) THE COURT RESTORED THE CASE TO THE AO (TDS) TO EXAMINE A TECHNICAL EXPERT FROM THE SIDE OF THE DEPARTMENT AN D TO DECIDE THE MATTER WITHIN A PERIOD OF FOUR MONTHS. IT FURTHER DIRECTED THAT THE TECHNICAL EXPERT WILL BE EXAMINED AND CROSS-EXAMINE D. THE ASSESSEE WAS ALSO FREE TO EXAMINE ITS EXPERT AND TO ADDUCE ANY OTHER EVIDENCE. THE FOLLOWING DIRECTIONS ARE NOTEW ORTHY: BEFORE CONCLUDING WE ARE DIRECTING CBDT TO ISSUE DIRECTIONS TO ALL ITS OFFICERS THAT IN SUCH CASES THE DEPARTMENT NEED NOT PROCEED ONLY BY THE CONTRACTS PLACED BEFORE THE OFFICERS. WITH THE EMERGENCE OF OUR COUNTRY AS ONE OF THE BRIC COUNTRIES AND WITH THE TECHNOLOGICAL ADVANCEMENT MATTERS SUCH AS PRESENT ONE WILL KEEP ON RECURRING AND HENCE TIME HAS COME WHEN DEPARTMENT SHOULD EXAMINE TECHNICAL EXPERTS ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 45 SO THAT THE MATTERS COULD BE DISPOSED OF EXPEDITIOU SLY AND FURTHER IT WOULD ENABLE THE APPELLATE FORUMS INCLUDING THIS COURT TO DECIDE LEGAL ISSUES BASED ON THE FACTUAL FOUNDATION. WE DO NOT KNOW THE CONSTRAINTS OF THE DEPARTMENT BUT TIME HAS COME WHEN THE DEPARTMENT SHOULD UNDERSTAND THAT WHEN THE CASE INVOLVES REVENUE RUNNING INTO CRORES TECHNICAL EVIDENCE WOULD HELP THE TRIBUNALS AND COURTS TO DECIDE MATTERS EXPEDITIOUSLY BASED ON FACTUAL FOUNDATION. THE LEARNED ATTORNEY GENERAL WHO IS PRESENT IN COURT HAS ASSURED US THAT OUR DIRECTIONS TO CBDT WOULD BE CARRIED OUT AT THE EARLIEST. IN FAIRNESS TO BOTH THE SIDES WE MUST HOWEVER ADMIT THAT WE REQUESTED THEM TO ARGUE THE QUESTION OF APPLICABILI TY OF SECTION 194J ALSO WHICH THEY HAVE DONE WITH GREAT ABILITY AND ASSIDUITY IF WE MAY SAY SO WITH RESPECT. AT THAT TIME WE HAD NO T MADE UP OUR MIND AS TO HOW THE DECISION OF THE CIT(A) SHOULD BE INTERPRETED AND IN ORDER TO AVOID DELAYING THE PROCEEDINGS WE HAD H EARD ARGUMENTS ON THE MERITS OF THE APPLICABILITY OF SECTION 194J ALSO. HOWEVER WE NOW FIND THAT THE PROPER COURSE WILL BE AS NOTED E ARLIER TO HOLD THAT THE CIT(A) HAS NOT IN FACT DECIDED THE ISSUE OF APP LICABILITY OF SECTION 194J. WE ACKNOWLEDGE THAT IT MIGHT HAVE CA USED SOME INCONVENIENCE TO BOTH THE SIDES WHO TOOK GREAT PAIN S TO ARGUE THE MATTER BEFORE US ON MERITS BUT THE OVERRIDING CONSI DERATION FOR OUR DECISION IS THAT THE MATTER IN ALL ITS RAMIFICATION S SHOULD BE PROPERLY DEALT WITH BY THE INCOME TAX AUTHORITIES ESPECIALL Y IN THE LIGHT OF THE OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF CI T VS. BHARTI CELLULAR LTD. (SUPRA). WE ARE THEREFORE OF THE VIE W THAT THE MATTER SHOULD RECEIVE FRESH CONSIDERATION AT THE HANDS OF THE ASSESSING OFFICER ALSO IN THE LIGHT OF THE ABOVE DIRECTIONS O F THE SUPREME ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 46 COURT. THE ASSESSING OFFICER WILL TAKE A FRESH DEC ISION ON THE APPLICABILITY OF SECTION 194J TO THE PAYMENT OF NAT IONAL ROAMING CHARGES IN ACCORDANCE WITH LAW AND IN THE LIGHT OF THE ABOVE OBSERVATIONS AND IN THE LIGHT OF THE OBSERVATIONS O F THE SUPREME COURT IN CIT VS. BHARTI CELLULAR LTD. (SUPRA). THE ASSESSEE SHALL BE GIVEN ADEQUATE OPPORTUNITY OF PUTTING FORTH ITS CAS E BEFORE ANY DECISION IS TAKEN. GROUND NO.2 IS DISPOSED OF ACCO RDINGLY. 28. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND OF APPEAL (GROUND NO.2A) TO THE EFFECT THAT WITHOUT PREJUDIC E TO GROUND NO.2 ABOVE THE CIT(A) OUGHT TO HAVE HELD THAT SECTION 19 4J OF THE ACT WAS NOT APPLICABLE TO NATIONAL ROAMING CHARGES. I N THE LIGHT OF WHAT HAS BEEN STATED IN THE PRECEDING PARAGRAPHS T HE ADDITIONAL GROUND BECOMES INFRUCTUOUS AND IS THEREFORE NOT DEC IDED. 29. GROUND NO.3 IS TO THE EFFECT THAT IN ANY CASE T HE TAXES CANNOT BE RECOVERED FROM THE ASSESSEE SINCE THE PAY EES HAVE ALREADY PAID THE TAX ON THE NATIONAL ROAMING CHARGE S. REFERENCE IS MADE IN THE GROUNDS TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. C IT (2007) 293 ITR 226 (SC) AND THE ORDER OF THE SPECIAL BENCH (MU MBAI) OF THE TRIBUNAL IN THE CASE OF MAHINDRA AND MAHINDRA VS. D CIT (2010) 313 ITR (AT) 263 (MUM). IT IS FURTHER STATED IN THE GR OUND THAT THE ASSESSEE WAS WRONGLY TREATED BY THE ASSESSING OFFIC ER AS AN ASSESSEE IN DEFAULT SINCE THE TAXES HAVE ALREADY BE EN PAID BY THE PAYEES EITHER BY WAY OF ADVANCE TAX OR BY WAY OF SE LF-ASSESSMENT TAX AT THE TIME OF FILING THE RETURN OF INCOME. IT IS POINTED OUT IN THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 47 GROUND THAT THE ACTION OF THE ASSESSING OFFICER AMO UNTS TO RECOVERING THE TAX TWICE IN RELATION TO THE SAME IN COME. IT IS ALSO POINTED OUT IN THE GROUND THAT THE CIT(A) ERRED IN IGNORING THE DECLARATIONS FROM VARIOUS VENDORS / TELECOM OPERATO RS STATING THAT INCOME TAX WAS PAID BY THEM ON THE GROUND THAT THE DECLARATIONS WERE NOT VERIFIED BY THE ASSESSING OFFICER. IT IS STATED THAT THEY WERE ALSO FILED BEFORE THE ASSESSING OFFICER. 30. OUR ATTENTION WAS DRAWN TO PAGES 115 TO 124 OF THE ASSESSEES PAPER BOOK WHICH CONTAIN THE CONFIRMATI ON LETTERS WRITTEN BY EIGHT SERVICE PROVIDERS TO THE ASSESSEE STATING THAT THE NATIONAL ROAMING CHARGES FOR PROVIDING ROAMING CONN ECTIVITY SERVICES DURING THE FINANCIAL YEARS 2006-07 2007-0 8 AND 2008-09 HAVE BEEN CONSIDERED BY THEM IN THE CALCULATION OF THEIR TAXABLE INCOME AND HAS BEEN APPROPRIATELY INCLUDED IN THEIR TAX RETURNS. THE PERMANENT ACCOUNT NUMBERS WERE ALSO GIVEN BY TH E PAYEES IN THEIR LETTERS AS WELL AS THE PLACE AND OFFICE WHERE THEY WERE ASSESSED. AT PAGE 123 IS A LETTER WRITTEN BY THE A SSESSEE TO THE CIT (TDS) ON 24 TH APRIL 2009 IN WHICH THE PERMANENT ACCOUNT NUMBERS OF NINETEEN PARTIES TO WHOM THE ASSESSEE MA DE PAYMENT OF ROAMING CHARGES WERE FURNISHED. IT WAS POINTED OUT THAT THE ASSESSEE HAS RIGHTLY DEDUCTED TAXES UNDER SECTION 1 94C OF THE ACT AND THE DETAILS WERE BEING FURNISHED WITHOUT PREJUD ICE TO THE CLAIM AND THEY WERE BEING FURNISHED IN ANSWER TO THE ASSE SSING OFFICERS ACTION PROPOSING TO TREAT THE ASSESSEE AS A DEFAULT ER AND RECOVER TAX FROM IT ON THAT BASIS. IN THE LETTER THE ASSES SEE HAS ALSO STATED ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 48 THAT RECOVERY OF TAXES FROM THE ASSESSEE WOULD TANT AMOUNT TO RECOVERING THE TAX TWICE IN RELATION TO THE SAME IN COME. A COPY OF THIS LETTER HAS BEEN MARKED TO THE ASSESSING OFFICE R. IT IS SUBMITTED THAT THE CONFIRMATIONS LETTERS FILED BY THE ASSESSE E AS ABOVE WERE FROM 63.53% OF THE PAYEES. 31. THIS ISSUE HAS BEEN CONSIDERED BY THE CIT(A) IN PAGE 26 OF HIS ORDER IN PARAGRAPH 11. HE HAS MADE TWO POINTS AGAINST THE ASSESSEE. THE FIRST IS THAT THE DECLARATIONS FROM THE PAYEES HAVE BEEN FILED ONLY BEFORE HIM AND THEREFORE COULD NO T HAVE BEEN VERIFIED BY THE ASSESSING OFFICER. SECONDLY HE HA S HELD THAT THE ONUS WAS ON THE ASSESSEE AS A TAX DEDUCTOR TO SATIS FY THE ASSESSING OFFICER THAT THE PAYEES HAVE PAID THE TAX ES ON THE NATIONAL ROAMING CHARGES RECEIVED BY THEM AND IT WA S NOT FOR THE ASSESSING OFFICER TO MAKE ENQUIRIES HIMSELF AND GIV E THE BENEFIT OF THE CREDIT TO THE ASSESSEE. ACCORDING TO THE CIT(A ) EVEN AS PER THE ORDER OF THE SPECIAL BENCH IN THE CASE OF MAHIN DRA & MAHINDRA (SUPRA) THE ONUS WAS NOT ON THE ASSESSING OFFICER TO MAKE ENQUIRIES AS TO WHETHER THE DEDUCTEES HAVE PAID THE TAX ON THE INCOME RECEIVED FROM THE ASSESSEE. IN THIS VIEW OF THE MATTER HE REJECTED THE ASSESSEES PLEA. 32. THE CONTENTION OF MR DASTUR APPEARING FOR THE ASSESSEE BEFORE US IS THAT THE CIT(A) HAS PLACED AN IMPOSSIB LE BURDEN ON THE ASSESSEE. IT WAS POINTED OUT THAT THE PERMANENT AC COUNT NUMBERS OF NINETEEN PARTIES WERE FURNISHED TO THE ASSESSING OFFICER IN APRIL 2009 AND THEREAFTER HE COULD HAVE VERIFIED THE ASSE SSEES CLAIM ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 49 EVEN THOUGH THE ORDERS HAD BEEN PASSED IN FEBRUARY 2009 UNDER SECTION 201. HE ALSO POINTED OUT THAT NO ATTEMPT W AS MADE BY THE ASSESSING OFFICER TO VERIFY THE ASSESSEES CLAIM EV EN AFTER THE TRIBUNAL GRANTED STAY OF RECOVERY OF TAXES IN THE M ONTH OF DECEMBER 2009. HE COULD HAVE VERIFIED THE DETAILS SUBMITTED BY THE ASSESSEE FROM THE RESPECTIVE OFFICERS ASSESSING THE PAYEE COMPANIES AND PRESENTED THE FACTUAL POSITION BEFORE THE TRIBUNAL FOR WHICH SUFFICIENT TIME WAS AVAILABLE TO HIM EVEN AFTER THE TRIBUNAL GRANTED THE STAY. STRONG RELIANCE WAS PLACED ON TH E JUDGMENT OF THE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COL A BEVERAGE (P) LTD. (SUPRA). OTHER DECISIONS WHICH WERE RELIE D UPON WERE THE FOLLOWING: - (1) NATHU RAM PREMCHAND VS. CIT (1963) 49 ITR 561 ( ALL) (2) CIT VS. PONNUSWAMY NAIDU (1995) 214 ITR 185 (MA D) (3) CIT VS. S P BHATT (1974) 97 ITR 440 (GUJ) 33. THE ARGUMENT OF THE DEPARTMENT IS THAT THE ISSU E WAS RAISED ONLY BEFORE THE CIT(A) AND NOT BEFORE THE ASSESSING OFFICER AND THE ONUS WAS ON THE ASSESSEE AND NOT THE ASSESSING OFFI CER TO VERIFY THE PAYMENTS. IT WAS FURTHER CONTENDED THAT THE SE LF-DECLARATIONS BY THE PAYEES TO THE EFFECT THAT THEY HAD PAID THE TAX ES CANNOT BE RELIED UPON AND THE FINAL POSITION IN THE PAYEES H ANDS HAS TO BE SEEN. IT WAS FURTHER SUBMITTED THAT OUT OF THE TOT AL OF THE NINETEEN PARTIES IN RESPECT OF WHOM PERMANENT ACCOUNT NUMBER S WERE FILED BEFORE THE CIT (TDS) IN APRIL 2009 ONLY EIGHT CERT IFICATES WERE GIVEN BEFORE THE CIT(A). RELYING ON CIRCULAR NO.8 OF 2009 DATED 24 TH NOVEMBER 2009 IT WAS POINTED OUT THAT IT WAS ESSE NTIAL THAT THE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 50 PAYEE SHOULD FURNISH AN AUDIT CERTIFICATE TO THE EF FECT THAT THE TAX AND INTEREST DUE HAS BEEN PAID FOR THE ASSESSMENT Y EAR CONCERNED. 34. WE HAVE CAREFULLY CONSIDERED THE RIVAL POINTS O F VIEW. AFTER THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF HI NDUSTAN COCA COLA BEVERAGE (P) LTD. (SUPRA) THERE IS NO MERIT I N THE CONTENTION THAT TAXES CAN BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH TAXES WERE PAID BY THE DEDUCTEES. IT IS PERTINENT TO NOT E THAT AT PAGE 229 OF THE REPORT THE SUPREME COURT HAS NOTICED THAT T HE DEPARTMENT IN THAT CASE CONCEDED BEFORE THE TRIBUNAL THAT THE RECOVERY COULD NOT ONCE AGAIN BE MADE FROM THE TAX DEDUCTOR WHERE THE PAYEE INCLUDED THE INCOME ON WHICH TAX WAS ALLEGED TO HAV E BEEN SHORT DEDUCTED IN ITS TAXABLE INCOME AND PAID TAXES THERE ON. THE INCOME TAX DEPARTMENT BEING AN ALL INDIA BODY CANNOT TAKE A DIFFERENT POSITION AND CONTEND THAT EVEN THOUGH THE TAXES WER E PAID BY THE PAYEES INCLUDING THE TAXES ON THE PAYMENT IN DISPUT E IT WAS STILL OPEN TO IT TO RECOVER THE TAXES FROM THE PAYER / DE DUCTOR. HOWEVER THE QUESTION IS WHETHER AS A FACT IT HAS BEEN ESTAB LISHED THAT THE PAYEES HAVE INCLUDED THE INCOME IN THEIR RETURNS AN D PAID TAXES THEREON. THIS REQUIRES FACTUAL VERIFICATION. WE A RE HOWEVER UNABLE TO SHARE THE VIEW OF THE CIT(A) THAT THE ONUS IS EN TIRELY ON THE ASSESSEE TO PROVE THAT THE TAXES HAVE BEEN PAID BY THE PAYEES. IT IS TRUE THAT THE ONUS IS INITIALLY ON THE ASSESSEE WHO TAKES UP THE PLEA BUT WHEN SUFFICIENT DETAILS WHICH WOULD ENABLE THE ASSESSING OFFICER TO VERIFY THE FACTUAL POSITION HAVE BEEN FI LED BEFORE THE ASSESSING OFFICER IT WAS FOR THE ASSESSING OFFICER WITH HIS VAST ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 51 POWERS TO INVOKE THEM AND HAVE THE DETAILS FURNISH ED BY THE ASSESSEE VERIFIED. IN THE PRESENT CASE THE ASSESSE E HAS FURNISHED THE PERMANENT ACCOUNT NUMBERS OF NINETEEN PARTIES A ND LETTERS OF CONFIRMATION HAVE BEEN FILED FROM EIGHT OF THEM BEF ORE THE CIT(A). THE PERMANENT ACCOUNT NUMBERS WOULD FACILITATE AN E NQUIRY TO BE MADE BY THE ASSESSING OFFICER FROM THE ASSESSING OF FICERS ASSESSING THE PAYEES. IT IS ALSO TO BE NOTED THAT FROM EIGHT OUT OF THE NINETEEN PARTIES THE ASSESSEE HAS ALSO FURNISHE D LETTERS OF CONFIRMATION. THE ASSESSEE WOULD APPEAR TO HAVE DO NE WHAT IT COULD UNDER THE CIRCUMSTANCES AND IT WOULD BE A SOM EWHAT EXTREME POSITION TO TAKE IF IT IS ARGUED THAT THE B URDEN IS ENTIRELY UPON THE ASSESSEE. THE ASSESSEE IT MUST BE REMEMB ERED IS DEALING WITH ITS COMPETITORS I.E. THE OTHER SERVIC E PROVIDERS WHO MAY NOT BE WILLING TO PART WITH THEIR ACCOUNTS AND THE DETAILS REGARDING THEIR TAX PAYMENTS OR RETURNS OF INCOME T O THE ASSESSEE EXCEPT CONFIRMING THAT THE TAXES HAVE BEEN PAID. B UT WHEN THEIR PERMANENT ACCOUNT NUMBERS ARE MADE AVAILABLE TO THE ASSESSING OFFICER IT WOULD NOT BE UNREASONABLE ON THE PART O F THE ASSESSEE TO ASK THE ASSESSING OFFICER TO HAVE THE PAYMENTS VERI FIED FROM THE RECORDS OF THE ASSESSING OFFICERS WITHIN WHOSE JURI SDICTION THE PAYEES ARE ASSESSED. WE ARE THEREFORE UNABLE TO AP PRECIATE OR UPHOLD THE DECISION OF THE CIT(A) PLACING THE ONUS ENTIRELY ON THE ASSESSEE AND IN REFUSING TO ACCEPT THE PLEA THAT TH E TAXES CANNOT BE RECOVERED TWICE IN RESPECT OF THE SAME INCOME ON THE GROUND OF INADEQUATE EVIDENCE. IN OUR VIEW THE CIT(A) OUGHT TO HAVE ITA NO: 6058/MUM/2009 ITA NO: 6059/MUM/2009 ITA NO: 6060/MUM/2009 52 DIRECTED THE ASSESSING OFFICER TO INVOKE HIS POWERS UNDER THE ACT AND HAVE THE PAYMENT OF TAXES BY THE PAYEES VERIFIE D FROM THE RESPECTIVE ASSESSING OFFICERS ASSESSING THE PAYEES WITH THE HELP OF THE PERMANENT ACCOUNT NUMBERS OF THE PAYEES MADE AV AILABLE BY THE ASSESSEE. WE DIRECT THE ASSESSING OFFICER TO D O SO. IF UPON VERIFICATION IT IS FOUND THAT THE TAXES HAVE BEEN P AID BY THE PAYEES FULLY IN RESPECT OF THE ROAMING CHARGES RECEIVED BY THEM FROM THE ASSESSEE NOTHING SURVIVES. IN SUCH AN EVENT NO TA XES CAN BE RECOVERED FROM THE ASSESSEE AND THE ASSESSEE CANNOT BE TREATED TO BE IN DEFAULT. THE ISSUE IS ACCORDINGLY RESTORE D TO THE ASSESSING OFFICER WITH THE ABOVE DIRECTIONS. 35. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DECEMBER 2010. SD/- SD/- (S V MEHROTRA) ( R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 22 ND DECEMBER 2010 SALDANHA COPY TO: 1. VODAFONE ESSAR LIMITED PENINSULA CORPORATE PARK GANPATRAO KADAM MARG LOWER PAREL MUMBAI 400 013 2. DCIT (TDS) RANGE 3(1) 3. CIT-(TDS) 4.CIT(A)-14 5.DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI