Roaming facility doesn’t require human intervention; roaming charges paid by Telecos aren’t ‘FTS’

The provision of roaming services do not require any human intervention and accordingly, cannot be construed as technical services. Thus, payment of roaming charges by telephone operator does not fall under the ambit of TDS provisions under section 194J.

The disputed issue was:

Whether sum paid by telecom operator towards roaming facility provided by other telecom operators would be liable to TDS either under section 194J or section 194C or section 194-I?

The Tribunal held as under:

a)    Human intervention is required only for installation, setting up, repairing, servicing, maintenance, capacity augmentation of the network. When one of the subscribers in the assessee's circle travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention and it is for this, the roaming charges is paid by the assessee to the Visiting Operator for providing this service. Hence payment of roaming charges cannot be construed as technical services, thus, it does not fall under the ambit of TDS provisions u/s 194J.

b)    The word 'work' in section 194C referred to and comprehends only the activities of workman. It is the physical force which has comprehended in the word 'work'. Since the payment of roaming charges does not require any human intervention. Hence, the provisions of section 194C are not applicable to the impugned issue.

c)  The assessee cannot be said to have used the equipment which is involved in providing the roaming facility. The assessee collects the roaming charges from its subscriber and passes it on to the other service provider. Therefore, the payment of roaming charges by the assessee to other service provider cannot be considered as rent within the meaning of section 194I of the Act. - Vodafone East Ltd. v. Ad. CIT [2015] 61 taxmann.com 263 (Kolkata - Trib.)

Landing and parking charges for Aircrafts are not for ‘use of land’; attract Sec. 194C TDS

Landing and parking charges payable by Airlines in respect of aircrafts are not for the ‘use of land’ per se but the charges are in respect of number of facilities provided by the Airport Authority of India. Thus, landing and parking charges payable by Airlines would attract TDS under Section 194C and not under Section 194-I.

     Facts:

a)  The issue disputed in the instant case was as to whether landing and parking charges paid by Airlines would attract TDS under Section 194-I or under Section 194C of the income-tax Act (‘the Act’)?

b)  The High Court of Delhi in case of CIT v. Japan Airlines Co. Ltd. [2009] 180 Taxman 188 (Delhi) has held that landing and parking charges would attract TDS under Section 194-I of the Act.

c)  However, the Madras High Court in case of CIT v. Singapore Airlines Ltd. [2012] 24 taxmann.com 200 (Madras) has taken a contrary view that landing and parking charges would attract TDS under Section 194C. The two judgments are in conflict with each other.It has to be determined as to which judgment should be allowed to hold the field?

The Supreme Court held as under:

1)    In the instant case, the Airlines are allowed to land and take-off their Aircrafts at Indira Gandhi International Airport (‘IGIA’) for which landing fee is charged. Likewise, they are allowed to park their Aircrafts at IGIA for which parking fee is charged. It is done under an agreement and/or arrangement with the Airport Authority of India (‘AAI’). The moot question is as to whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean ‘use of land’.

2)    In the opinion of the Delhi High Court (Supra) “when the wheels of an aircraft coming into an airport touch the surface of the airfield, use of the land of the airport immediately begins”. Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, rather, the only reason given by the Delhi High Court in support of its conclusion that landing and parking charges would attract TDS under Section 194-I.

3)    The Madras High Court (Supra) examined the issue keeping wider perspective in mind thereby encompassing the utilization of the airport providing the facility of landing and take-off of the airplanes and also parking facility. After taken into consideration these aspects, the Madras High Court came to the conclusion that the facility was not of ‘use of land’ per se but the charges for landing and taking-off these airlines were in respect of number of facilities provided by the AAI which were to be necessarily provided in compliance with the various international protocol. The charges, therefore, were not for land usage or area allotted simpliciter. These were the charges for various services provided.

4)    We are convinced that the charges fixed by the AAI for landing and taking-off services as well as for parking of aircrafts were not for the ‘use of land’. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges were for services and facilities offered in connection with the aircraft operation at the airport. These services included providing of air traffic services, safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services at the airport.

5)    Thus, paymentsfor landing and parking charges wereliable for TDS under Section 194C and not under Section 194-I of the Act.The view taken by the Madras High Court (Supra) was correct view and the judgment of the Delhi High Court (Supra)was to be over-ruled. -Japan Airlines Co. Ltd. v. CIT [2015] 60 taxmann.com 71 (SC)

Short deduction of tax due to application of wrong provision won't lead to sec. 40(a)(ia) disallowance

Facts:

a)The Tribunal held that the assessee had to deduct tax under section 194-I and that the provisions of section 194C were not applicable in respect of transactions entered between the assessee and the contractee.

b)On appeal, the High Court confirmed the order of the Tribunal. However, the High Court restored the matter back to the file of the Tribunal for the limited purposes of applicability of section 40(a)(ia) in respect of short deduction of tax at 2.06% instead of at 10%.

c)On remand, the revenue contended that for the short deduction of TDS there would be disallowance under section 40(a)(ia).

The Tribunal held in favour of assessee as under:

1)In case of Apollo Tyres Ltd. v. Dy. CIT [2013] 35 taxmann.com 593 (Coch.) it was held that section 40(a)(ia) did not envisage a situation where there was short deduction/lesser deduction as in case of section 201(1A) of the Act.

2)There was an obvious omission to include short deduction/lesser deduction in section 40(a)(ia) of the Act. Therefore, in case of short/lesser deduction of tax the entire expenditure could not be disallowed whose genuineness was not doubted by the Assessing Officer.

3)Thus, in view of the decision of this Tribunal in Apollo Tyres (Supra) short deduction of tax could not be a reason or basis for disallowance under section 40(a)(ia). Accordingly, the orders of the lower authorities were to be set aside and the disallowance made under section 40(a)(ia) was to be deleted. - THREE STAR GRANITES (P.) LTD. V. ACIT [2014] 49 taxmann.com 578 (Cochin - Trib.)

Sec. 194-I applicable if vehicle hired for employee is at his disposal; Chauffeur cost covered under sec. 194C

Hiring of vehicle and at disposal of employee shall be subject to Section 194-I. A reasonable sum towards chauffeur and fuel charges are to be deducted from composite sum and the balance amount would fall under Section 194-I.

Facts:

The issue before the Tribunal was:
Whether payment for hiring of vehicle (including chauffeur and fuel cost) for a designated person or class of persons, for a particular time, would fall under section 194C or under section 194J for the purpose of deduction of tax at source?

The Tribunal held as under:
1)Where payment was made for solitary transaction of hiring of vehicle or where a pick and drop facility was provided, it would clearly fall under Section 194C as payment was made for a specified work.

2)In this case, the arrangement was for making available cars for a designated person or class of person for a particular time, which was at the disposal of the employee.

3)As the arrangement also included services of a chauffeur and the fuel cost of transportation. The same could not by any means be considered as towards car rental.

4)Therefore, after deduction of a reasonable amount towards chauffeur and fuel charges, the balance amount would fall under section 194-I.

5)As it was a finding of fact, AO was directed to decide the case after due verification and after giving reasonable opportunity to assessee. – ITO v. Bharat Sanchar Nigam Ltd. [2014] 45 taxmann.com 124 (Mumbai - Trib.)

Hiring of vehicle on hourly basis shifts TDS obligations from sec. 194C to sec. 194-I front yard

Where assessee entered into an agreement with a contractor for hiring of vehicles and made use of vehicles and paid hire charges on number of hours of use, section 194-I and not section 194C would be attracted.

Facts:

1)  The assessee entered into an agreement with contractor for hiring of vehicles to be used for loading, unloading and transportation of goods. It applied provisions of section 194C and deducted tax at 2 %;

2)  However, the Assessing Officer (‘AO’) held that the assessee was to deduct tax at source under section 194-I;

3)  On appeal, the CIT(A) confirmed the order of AO which was further affirmed by the Tribunal. Aggrieved-assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) The agreement entered into by assessee was composite agreement for hiring of vehicles to be used for loading, unloading and transportation of goods;

2) The owner of the vehicles was to retain ownership and possession of the vehicles. The vehicles were to be driven and operated by the persons who were to be paid by the owner;

3) The agreement did not require the owner of the vehicles to do any work at all. It was the assessee who made use of the vehicles. He paid hire charges on the number of hours of use and, thus, clearly the assessee was not justified in contending that section 194C was applicable;

4) What the assessee was permitted to do with the vehicles alone was mentioned in the contract. All those works were done by the assessee and no work within the meaning of section 194C was actually done by the owner;

5) Section 194-I specifically contemplates liability of person paying rent to deduct income tax at the rate of ten per cent for the use of any machinery or plant or equipment. Thus, in the instant case section 194-I was attracted instead of section 194C - Three Star Granites (P.) Ltd. v. ACIT [2014] 41 taxmann.com 91 (Kerala)