[CIT v. Bharti Cellular Ltd., (2011) 330 ITR 239 (SC)]
Respondent No. 1, a cellular service provider, had an
interconnected agreement with BSNL/MTNL. Under such agreement, Respondent No. 1
paid interconnect/access/port charges to BSNL/MTNL. Bharti Cellular, BSNL, MTNL,
Hutchison are all service providers. All are governed by National Standards of
CCS No. 7, issued by Telecom Engineering Centre. Under National Standards, M/s. Bharti Cellular Limited is required to connect its network with the network
of BSNL (the service provider) and similar concomitant agreement is provided
for, under which BSNL is required to interconnect its network with M/s. Bharti
Cellular Ltd.
The question basically involved in the lead case before the
Supreme Court was : whether tax was deductible by M/s. Bharti Cellular Ltd when
it paid interconnect charges/access/port charges to BSNL ?
The Supreme Court observed that the problem which arose in
such cases was that there was no expert evidence from the side of the Department
to show how human intervention takes place, particularly during the process when
calls take place, let us say, from Delhi to Nainital and vice versa. If,
for example, M/s. Bharti Cellular Ltd (in this example, in the judgment , it
appears that BSNL is inadvertently mentioned) had no network in Nainital,
whereas it had a network in Delhi, the interconnect agreement enabled M/s.
Bharti Cellular Ltd to access the network of BSNL in Nainital; and the same
situation could arise vice versa in a given case. During the traffic of
such calls, whether there is any manual intervention, was one of the points
which required expert evidence. Similarly, on what basis was the ‘capacity’ of
each service provider fixed when interconnection agreements were arrived at ?
For example, as informed, each service provider is allotted a certain
‘capacity’. On what basis such ‘capacity’ is allotted and what happens if a
situation arises where a service provider’s ‘allotted capacity’ gets exhausted
and it wants, on an urgent basis, ‘additional capacity’ ? Whether at that stage,
any human intervention was involved was required to be examined, which again
required technical data. According to the Supreme Court, these type of matters
could not be decided without any technical assistance available on record.
The Supreme Court directed the Assessing Officer (TDS) in
each case to examine a technical expert from the side of the Department and to
decide the matter. Liberty was also given to the respondents to examine its
expert and to adduce any other evidence.
The next question which arose was whether the Department was
entitled to levy interest u/s. 201(1A) of the Act or impose penalty for non-deduction of tax. The Supreme
Court was of the view, that in the facts and circumstances of the case, it would
not be justified for the following reasons : Firstly, there was no loss of
revenue. Though the tax had not been deducted by the payee, tax had been paid by
the recipient. Secondly, the question involved in the present cases before it
was the moot question of law, which was yet to be decided. The Supreme Court
would have closed the file because these cases were only with regard to levy of
interest but the matter was remitted to the Assessing Officer (TDS) only because
this issue was a live issue and it needed to be settled at the earliest. Once
the issue gets settled, the Department would be entitled to levy both a penalty
and an interest, but as far as the facts and circumstances of the cases before
it were concerned, the Supreme Court was of the view that the interest was not
justified at this stage. Consequently, it held that there would be no levy of
penal interest prior to the date of fresh adjudication order.
