Vodafone West Ltd Gets Relief: ITAT Deletes Disallowance of Roaming Charges, Citing Binding Precedent on Non-Deduction of Tax [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) deleted the disallowance of roaming charges amounting to ₹64,81,13,995 claimed by ruling that the non-deduction of tax on these payments did not warrant a disallowance under sections 40(a)(ia) and 40(a)(i) of the Income Tax Act, 1961.

Vodafone West Limited (formerly known as Vodafone Essar Gujarat Limited) (assessee) a cellular mobile telephony service provider, had paid roaming charges totaling ₹64,81,13,995 to both domestic amounted to ₹54,77,90,700 and overseas amounted to ₹10,03,23,295 service providers during the assessment year 2010-11.

During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had not deducted tax at source on these payments. The AO argued that human intervention by technical experts was persistently required to make the carriage of calls successful.

Thus, the payments for roaming services were subject to tax deduction at source under section 194 read with section 9(i)(vii) of the Act, and failure to deduct tax led to the proposed disallowance of the entire expenditure under sections 40(a)(ia) and 40(a)(i) of the Income Tax Act.

The Dispute Resolution Panel (DRP) rejected the assessee's objections, leading to the impugned addition in the final assessment order. Aggrieved by the DRP's directions and the final assessment order, the assessee filed an appeal before the ITAT.

The two-member bench comprising Vikram Singh Yadav (Accountant Member) and Sandeep Singh Karhail (Judicial Member) held that the issue was no longer res integra and had been decided in favor of the assessee by its Co-ordinate Bench in the assessee's own case for the preceding assessment year (2009-10). That decision followed an earlier ruling of the Co-ordinate Bench in the case of the assessee's sister concern, Vodafone East Ltd.

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The tribunal noted that, more recently, a similar disallowance for roaming charges was deleted by the Co-ordinate Bench in the case of another sister concern, Vodafone Digilink Ltd. The tribunal observed that the Revenue was unable to present any material to deviate from these binding precedents.

The tribunal respectfully followed the decisions and deleted the disallowance made in respect of roaming charges. This Ground raised in the assessee's appeal was allowed.

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