S. 194J — Payments for network services cannot be Technical services’ liable to TDS

31 Pacific Internet (India) Pvt. Ltd. v.

ITO — TDS

ITAT ‘D’ Bench, Mumbai

Before R. S. Padvekar (JM) and

Rajendra Singh (AM)

ITA Nos. 1607 to 1609/Mum./2006

A.Y. : 2003-04 to 2005-06

Counsel for assessee/revenue : Anil Sathe/

Sanjay Agrawal

Per R. S. Padvekar :

Facts :

The assessee was engaged in the business of providing internet services to its clients. For the same it acquired bandwidth and network operating infrastructure services from MTNL/VSNL. According to the AO, such services availed were in the nature of technical services covered u/s.194J and treated the assessee in default u/s.201(1). The CIT(A) on appeal, confirmed the AO’s order. Before the Tribunal the Revenue submitted that the decision of the Madras High Court in the case of Skycell Communications Ltd. was not applicable to the facts of the assessee’s case, as bandwidth and network operating infrastructure services were nothing but technical services and accordingly, relied on the orders of the lower authorities.

Held :

The Tribunal did not agree with the contention of the Revenue and held that since the services availed were standard facility, the case of the assessee was not only covered by the decision in the case of Skycell Communications Ltd., but also by the Delhi High Court decision in the case of Estel Communication Pvt. Ltd. Accordingly, it was held that the payments made to MTNL/VSNL for availing the services of bandwidth and network operating infrastructure cannot be said to be technical services within the meaning of S. 195J read with Explanation 2 to S. 9(1)(vii) of the Act.

Cases referred to :