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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri J. Sudhakar Reddy & Shri S.S. Viswanethra Ravi
ORDER Shri S.S.Viswanethra Ravi, JM:
This appeal by the Assessee is directed against the order of the Commissioner of Income Tax (Appeals)- 24, Kolkata dt. 31-12-2015 for the A.Y 2011-12.
The ld.AR submits that the grounds of appeal as raised in this appeal by the assessee are squarely covered by the order dt. 21-06- 2017 in reported in 2017(8) TMI 714-ITAT Mumbai in the case of Destimoney Securities Pvt. Ltd Vs. ITO (TDS)(OSD)-1(3), Mumbai, copy of the same is on record and referred to para 11 of said order and argued that no TDS is required to be made on payments made towards internet and communication charges.
On the other hand, the ld.DR did not controvert the same by brining on record contrary to the said order of the ITAT, Mumbai. He relied on the orders of the AO and CIT-A.
Heard rival submissions and perused material on record including the paper book details and case laws. We find that the AO 1 on going through the details as submitted by the assessee found that the assessee made payments of Rs.69,43,089/- under the head Leaseline charges to various parties like BSNL,MTNL, Tata Indicom, System Shyam Teleservices Ltd, Bharti Airtel etc. The AO raised an objection for non deduction of TDS on such payments u/s. 194C and 194J of the Act. The assessee contended that these payments were made towards monthly rental for broadband usage charges in different locations. Such payments were made for use of standard facilities and the provisions of section 194C and 194J of the Act are not applicable as there was no contract for carrying out any work and the payment was not a fee for technical services. In support of this contention, the assessee placed on various case laws before the AO. The AO found that the submissions of the assessee is not acceptable and for non deduction of TDS u/s. 194C and 194J of the Act on such payments charged interest @ 1% p.m upto 38 months i.e. at Rs.8,32,040/- and added the same to the total income of assessee by treating the assessee is in default for non deduction of TDS by an order dt. 31-03-2014 passed by the AO u/s. 201(1)/201(1A) of the Act.
The CIT-A after considering the submissions of the assessee partly allowed the claim of assessee by holding no TDS is required u/s. 194C and 194J on broad band charges and confirmed the payment made to HCL Infinet and HCL Comnet and liable to deduction of TDS.
We further find that the Co-ordinate Bench of ITAT, Mumbai in the case of supra, held that there is no requirement of deduction of TDS on payments made towards internet and communication charges by placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Kotak Securities Ltd reported in (2016) 383 ITR 1(SC). We find that the facts in the case of supra of the ITAT Mumbai are similar with that of the case in hand. For better understanding, we may refer to the para 11 of the order dt. 21-06-2017 of the ITAT Mumbai in the case of supra, which is reproduced herein below:-
“11. We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We have given a thoughtful consideration to the issue involved in the present case and find substantial force in the contentions raised by the ld. A.R before us. We find that the internet and communication charges are not liable for deduction of any tax at source, as the same are merely in the nature of payments which cannot be characterized as having been made for availing of any special, exclusive or customized services rendered to the user or consumer who may approach the service provider for such service. We find that the issue involved in the present case is squarely covered by the Judgment of the Hon'ble Supreme Court in the case of CIT Vs. Kotak Securities Ltd. (2016) 383 ITR 1) (SC), wherein the Hon'ble Apex Court had held as under:-
"8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant upgradation of the services made P a g e | 11 available and surveillance of the essential parameters connected with the trade including those of a particular/ single transaction that would lead credence to its authenticity is provided for by the Stock Exchange.All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange. "Technical services" like "Managerial and Consultancy service" would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression "technical services" appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act.
There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which the charges in question had been paid by the appellant - assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment P a g e | 12 and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services" as appearing in Explanation 2 to Section 9(1)(vii) of the Act.
For the aforesaid reasons, we hold that the view taken by the Bombay High court that the transaction charges paid to the Bombay Stock Exchange by its members are for 'technical services' rendered is not an appropriate view. Such charges, really, are in the nature of payments made for facilities provided by the Stock Exchange. No TDS on such payments would, therefore, be deductible under Section 194J of the Act."
We thus in light of the aforesaid settled position of law so laid down by the Hon'ble Apex Court, therefore set aside the order of the CIT(A) holding the assessee as being in default u/ss. 201(1)/201(1A) for failing to deduct tax at source on payments made towards internet and communication charges. The Ground of appeal No. 1 raised by the assessee before us is allowed.
7. In view of the above, we set aside the impugned order of the CIT-A. Accordingly, the grounds raised by the assessee in the appeal are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 09-02-2018