ACIT, DELHI vs. M/S. VODAFONE ESSAR MOBILE SERVICES LTD., NEW DELHI

The appellant carves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”

Briefly stated facts of the case are that the assessee was engaged in providing telecom services of mobile telephony. In the process of a call from one customer to another, the assessee was required to connect incoming as well as outgoing calls through other telecom service provider and consequently the interconnected charges were paid by the assessee to various telecom service provider. The Hon’ble Supreme Court in civil appeal no. 6692 dated 12.08.2010 for financial year 2002-03 in the case of assessee restored the matter of TDS applicability on interconnect charges to the file of the assessing officer. Under the fresh examination, the AO held the payment as fee for technical services (FTS) by the AO. In the year under consideration also, the AO held the said interconnection charges paid to another mobile and telecom operator as FTS and held that the assessee was liable for deduction of taxes at source u/s 194 J of the Act. Accordingly, for non deduction of tax at source on said interconnection charges, the M/s. Vodafone Essar Mobile Services Ltd. 3 Assessing Officer held the assessee to be an assessee-in-default within the meaning of u/s 201 r.w.s 194 J of the Act. Further the assessing officer also charged interest u/s 201(1A) of the Act till the payment of taxes by the deductee and worked out total TDS liability u/s 201(1) & 201(1A) of the Act at Rs. 55283184/-. 2.1 On further appeal, the assessee challenged the issue of limitation for issuing proceeding u/s 201(1)/201(1A) of the Act and submitted that issue of the limitation was raised by the assessee before the Hon’ble Delhi High Court by way of writ petition. In view of the said writ petition, the Ld. CIT(A) left the decision on the issue of the limitation open and decided the issue on merit of liability of the TDS on interconnection charges against the assessee. As far as the issue of the interest u/s 201(1A), the CIT(A) allowed in favour of the assessee directing the Ld.AO to compute the interest from the due date of payment of withholding tax (TDS) by the assessee up to the date of payment of the taxes by the payee/recipient. The relevant findings of the Ld. CIT(A) is reproduced as under: “7. Ground of Appeal No.4 is regarding the non-applicability of interest u/s 201(1A) where tax due has already been paid by the payee. In the impugned order, the AO has levied interest from the due date of payment of withholding tax by the Appellant to the date of passing the TDS order. 8.1The issue raised has been fairly discussed in appellant's own case by CIT(A)-XXX, New Delhi in Appeal No. 36/10-11, 35/10-11, 12/10-11 & 578/10-11 for F.Y.s 2007-08 to 2010-11. The AO has also stated (in Para 5.2 for both AY 2005-06 and AY 2006-07) of the TDS order that liability to charge interest under section 201(1A) of the Act is till the date of payment of taxes by the deductee assesse. Following my Ld. Predecessor's order in appellant's own case in Appeal No. 36/10-11, 35/10-11, 12/10-11 & 578/10-11 for F.Y.s 2007-08 to 2010-11, it is M/s. Vodafone Essar Mobile Services Ltd. 4 decided that since section 201(1A) of the Act is compensatory in nature, the period for which interest may be levied, should be computed from the due date of payment of withholding tax (TDS) by the appellant to the date of payment of taxes by the payee/ recipient. This ground of appeal is accordingly allowed. The AO is directed to calculate interest u/s 201(1A) after allowing the appellant an opportunity of being heard.” 3. Aggrieved with the finding of the Ld. CIT(A), both the assessee and the Revenue filed appeals before the Income-tax Appellate Tribunal (in short ‘the Tribunal’). The appeal filed by the assessee has already been disposed off by the Tribunal vide order dated 15.12.2017 in ITA No. 411/Del/2015, wherein the Tribunal keeping in view the findings of the Hon’ble Delhi High Court in the writ petition, restored the matter to the file of the Assessing Officer to implement findings of the Hon’ble Delhi High Court. The relevant findings of the Tribunal (supra) is reproduced as under: “3. At the outset, it is brought to our notice by the learned AR that in WP(C) 8535/2011 & CM APPLS 19305/2011, 9781/2012, WP(C) 8536/2011 & CM APPLS19307/2011, 9778/2012 and WP(C) 8537/2011 & CM APPLS 19309/2011, 9776/2012 the matters preferred by the assessee, the Hon'ble juri ictional High Court was pleased to quash the notice issued by the Revenue seeking to initiate the proceedings against the assessee to declare them to be the assessee in default under section 201(3) of the Act, as such the determination the TDS liability done by the AO u/s 201/201(1)(A) of the Act does not survive. Learned DR does not controvert this fact. 4. We have gone through the record. Learned AR submitted that WP(C) 8535/2011 relate to the financial year 2003-04, WP(C) 8536/2011 relate to the financial year 2004-05 and WP(C) 8537/2011 relate to the financial year 2005-06 and the order dated 9.3.2016 is passed in these three WPCs, however, a typographical mistake had crept in paragraph no. 30 and 31 of this order inasmuch as for the "financial years" by typographical mistake "assessment year" is mentioned. 5. We have gone through the record. Order of the learned CIT(A) vide paragraph no 3.1 reads that the assessee challenged the TDS proceedings as time barred before Hon'ble High Court and in this M/s. Vodafone Essar Mobile Services Ltd. 5 context learned CIT(A) directed the learned AO to apply the orders of the Hon'ble High Court as and when they are passed in the case of the assessee. We, therefore, in view of the order dated 9.3.2016 of the Hon'ble High Court, deem it just and convenient to set aside the issue to the file AO to apply the order of the Hon'ble High Court in WPIC) 8535/2011 & CM APPLS 19305/2011, 9781/2012, WP(C) 8536/2011 & CM APPLS19307/2011, 9778/2012 and WP(C) 0337/2011 @ CM APPLS 19309/2011, 9770/2012 to the case of the assessee. We accordingly direct the Ld. AO to to apply the order of the Hon'ble High Court in WP(C) 8535/2011 & CM APPLS 19305/2011, and batch, to the case of the assessee.” 4. We have heard rival submission of the parties of the issue in dispute raised in the sole ground of the appeal filed by the Revenue. We find that the Hon’ble High Court in the writ petition (Supra) has already quashed the notice issued seeking to initiate proceeding against the assessee to declare it to be the assessee-in-default u/s 201 of the Act, thus, the TDS liability alongwith interest u/s 201(1A) of the Act determined by the Ld.AO in 201(1)/201(1A) cannot survive. Since the appeal of the assessee against the impugned order of the Ld. CIT(A) has already restored to the file of the Assessing Officer, we feel it appropriate to restore issue in dispute in the present appeal also to the file of the assessing officer to decide in view of the direction of the Hon’ble Delhi High Court in writ petition (supra). The ground of the appeal of the Revenue is accordingly allowed for statistical purpose. 5. In the result, the appeal of the Revenue is allowed for statistical purposes.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.