Roaming charges paid by Reliance Communications aren’t in the nature of ‘fee for technical services’, TDS not liable to be paid: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that roaming charges paid by Reliance Communications are not in the nature of ‘fee for technical services’, tax deducted at source (TDS) not liable to be paid.

The assessee, Reliance Communications Ltd. is engaged in providing telecommunication services to its subscribers across the country. For providing uninterrupted services to its subscribers, the assessee pays roaming charges/interconnect usage charges to other telecom operators.

The ACIT-TDS held that roaming/interconnect usage charges paid by the assessee to Reliance Telecom Ltd. are in the nature of ‘fee for technical services’, therefore, the assessee was required to deduct tax at source under section 194J of the Act, on such payments.

Since the assessee did not deduct tax at source on the said payments the assessee was held as ‘assessee in default’. Consequently, the ACIT-TDS invoked the provisions of section 201(1) read with section 201(1A) of the Act.

The ACIT-TDS vide order fastens tax liability of Rs.4,24,07,479 on account of withholding tax under section 194J and interest of Rs.57,05,216 under section 201(1A) of the Act.

Aggrieved against the aforesaid order the assessee filed an appeal before CIT(A) wherein it was held that the payment made by the assessee/respondent to other telecom company for utilization of the network cannot be termed as ‘Technical Services’ as access to the network during the calls is fully automatic and does not require any human intervention.

The issue raised in this case was whether CIT(A) erred in holding that “Roaming Charges”  paid by the assessee to Reliance Telecom Ltd. (RTL) are not in the nature of ‘Fees for Technical Services’ and hence not liable for deduction of tax at source under section 194J of the Income-tax Act, 1961.

The issue was considered by the Supreme Court of India in the case of CIT vs. Bharti Cellular Ltd. The Apex Court restored the issue to the file of the Assessing Officer for reconsideration after seeking the support of technical experts to ascertain if any human intervention is required in providing interconnect/roaming services.

The two-member bench of Judicial Member, Vikas Awasthy, and Accountant Member Rajesh Kumar while upholding the order of the CIT(A) held that roaming charges paid by the assessee are not in the nature of ‘fee for technical services’. Therefore, not liable for deduction of tax at source under section 194J of the Income-tax Act, 1961.