In recent decision, the division bench of Bombay High Court held that, there is no Tax Deduction at Source (TDS) liability on payment for providing SMS services under Section 194J of the Income Tax Act as there is no technical or professional services involved.
The division bench comprising of Justice S.V. Gangapurwala and Justice A.M Badar upheld the ITAT decision that the provisions of Section 194J is not applicable in respect of the payments made to M/s. Valuefirst Messaging Pvt. Ltd. for providing SMS services as well as technical support services, more particularly, when the service agreement between the assessee and M/s. Valuefirst Messaging Pvt. Ltd. provided for imparting training to a technical team designated by the assessee and further M/s. Valuefirst was entrusted with responsibility to ensure that the SMS service works in accordance with the agreed functionality / description and conforms to the stated service level agreement.
While dismissing the appeal, the Court also observed that, M/s. Value first Messaging Pvt. Ltd. is merely assisting the assessee in sending SMS messages to its customers. The preamble of the agreement between the assessee and M/s. Valuefirst Messaging Pvt. Ltd. itself describes that the company engaged in providing mobile messaging solutions to carry data over mobile network using its mobility platform.
“There is no technical or professional services, which can be said to have been offered by M/s. Valuefirst Messaging Pvt. Ltd”, said the Court.
The Court also relied on Apex Court decisions in Director of Income Tax (International Taxation) V/s. A.P. Moller Maersk and Commissioner of Income Tax Vs. Kotak Securities Ltd. has considered that such a service and charges paid, as not fees for technical services and no liability of direct tax of such liability arises.
Read the full text of the Order below.
