Income Tax Dept cannot deviate from Stand Taken in Vodafone Case: ITAT Grants Relief to Bharti Airtel on Disallowance of Roaming Charges for Want of TDS [Read Order]

The Delhi Bench “A” of the Income Tax Appellate Tribunal (ITAT) recently granted relief to Bharti Airtel in a case involving the disallowance of Tax Deducted at Source (TDS), noting that the Income Tax Department cannot deviate from the binding precedent and promulgation made by the Karnataka High Court in the case of CIT vs. Vodafone South Ltd. (2023 TAXSCAN (HC) 1161).

The decision was rendered by the ITAT while adjudicating two-part cross appeals filed by Bharti Airtel Ltd. against the Assistant Commissioner of Income Tax, Circle 4(2), Delhi and vice versa originating from the finances of Airtel from assessment years (A.Y.) 2007-08 and 2008-09.

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The then Assessing Officer (AO) had disallowed a sum of ₹247,31,57,620 paid by Bharti Airtel to other telecom operators as roaming charges, on the ground that no TDS had been deducted under Section 194J of the Income Tax Act, 1961, thus treating the payments as fees for ‘technical services’.

Upon contesting the issue before the Commissioner of Income Taxes (Appeals) ( CIT(A) ), the CIT(A) followed the decision in who had remitted the matter back to the file of the AO considering the academic nature of the matter at the stage.

Rohit Jain, Deepesh Jain and Shivam Gupta, appearing for Bharti Airtel submitted before the ITAT submitted that the factum of the matter had already been settled by the DelhiHigh Court in CIT vs. Tata Teleservices Ltd. (2018) and the Karnataka High Court in the case of Vodafone South Ltd. (supra.

Meanwhile, Departmental Representative Javed Akhtar argued for upholding of the original disallowances relying on the decision of the Madras High Court in CIT vs. Dishnet Wireless Ltd (2024) to contend that roaming charges paid by telecom companies to other telecom operators constitutes a fee for technical services under section 194J of the Act and thus TDS is liable to be deducted.

The Bench of VikasAwasthy, Judicial Member and Amitabh Shukla, Accountant Member observed that that the issue of disallowance under Section 40(a)(ia) for non-deduction of TDS on roaming charges had already been decided by higher courts and was no longer res integra.

Fee for technical services’ as under Section 194J of the Act concluded that the interconnect charges/port access charges cannot be regarded as fee for technical services, hence, no TDS was required to be deducted.

ITAT observed that the Delhi High Court held that once the judgment delivered by the Hon’ble Karnataka High Court in Vodafone South Ltd. had been accepted by the Revenue and was not made the subject of appeal before the Hon’ble Supreme Court, it was not open to the Revenue to challenge the correctness of the findings rendered in that decision in the case of other assessees without just cause.

In such circumstances, the Bench partly allowed the Appeal, granting relief to Bharti Airtel in this regard.

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