do the TDS to be deducted on internet connection charges which is paid for quarterly basis? If yes, then what will be the section for deduction?
Very Urgent.....
Devendra
(Chartered Accountant)
(4775 Points)
Replied 10 January 2011
TDS is not applicable on Internet Connection Charges as there is no contract between you and the Internet Service Provider.
Regards,
Devendra
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 10 January 2011
IN THE HIGH COURT OF
IT Appeal No. 527 of 2007
COMMISSIONER OF INCOME TAX
Vs
ESTEL COMMUNICATIONS (P) LTD
Shri Madan B Lokur & V B Gupta, JJ
Dated :
Appellant Rep. by : Shri Ms P L Bansal
Respondent Rep. by : Shri R M Mehta
Income Tax - Assessee buys internet bandwidtth from an American company and sells the same to its customers in India - AO treats it as taxable u/s 9(1)(vii) and insists on TDS - Tribunal disagrees - Held, since the payment was made for a simple purchase of internet bandwidtth, no technical services were provided - Revenue's appeal dismissed
JUDGEMENT
The Revenue is aggrieved by the order dt.
2. According to the assessee, it is providing internet access of a certain bandwidtth to its subscribers. The main server, on the basis of which the internet services are provided is located in
3. According to the AO. the assessee was liable to deduct tax at source from the payments made to the
4. Feeling aggrieved by the order passed by the AO, the assessee preferred an appeal which was allowed by the CIT(A). It was held that the assessee was merely providing internet services to its subscribers and, therefore, there was no question of deduction of tax at source in respect of payments made by the assessee to Teleglobe.
5. Against the order passed by the CIT(A), the Revenue preferred an appeal before the Tribunal and we find from a perusal of paragraph 10 thereof that the application of s. 9(1)(i) of the Act was not pressed by the Departmental Representative. The only question that arises, therefore, is about the applicability of the s. 9(1) (vii) of the Act.
6. Insofar as this is concerned, the Tribunal considered the agreement that had been entered into by the assessee with Teleglobe and came to the conclusion that there was no privity of contract between the customers of the assessee and Teleglobe. In fact, the assessee was merely paying for an internet bandwidtth to Teleglobe and then selling it to its customers. The use of internet facility may require sophisticated equipment but that does not mean that technical services were rendered by Teleglobe to the assessee. It was a simple case of purchase of internet bandwidtth by the assessee from Teleglobe.
7. Under the circumstances, the Tribunal came to the conclusion that there were no technical services provided by Teleglobe to the assessee and, therefore, the provisions of s, 9(1)(vii) of the Act did not apply.
8. We find that the Tribunal has rightly dismissed the appeal after taking into consideration the agreement between the assessee and Teleglobe and the nature of services provided by Teleglobe to the assessee. It was a simple case of payment for the provision of a bandwidtth. No technical services were rendered by Teleglobe to the assessee.
9. On a consideration of the material on record, we find that no substantial question arises in the matter. The appeal is, accordingly dismissed.
Conclusion:
THE Delhi High Court has held that where the assessee used internet bandwidtth of a
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 10 January 2011
IN THE ITAT MUMBAI BENCH ‘D’
Pacific Internet (
v.
Income-tax Officer - TDS, Ward 1(4), Mumbai
R.S. PADVEKAR, JUDICIAL MEMBER
AND REJENDRA SINGH, ACCOUNTANT MEMBER
IT APPEAL NOS. 1607 TO 1609 (MUM.) OF 2006
[ASSESSMENT YEARS 2003-04 TO 2005-06]
Section 194J of the Income-tax Act, 1961 - Deduction of tax at source - Fee for professional or technical services - Assessment years 2003-04 to 2005-06 - Assessee-company was engaged in business of providing internet access services to corporate clients and consumers - It availed bandwidtth and network operating infrastructure from VSNL/MTNL and other concerns and made huge payments in lieu of those services - Assessing Officer opined that in respect of said payments assessee should have deducted tax at source - Whether since bandwidtth and network operating facilities availed of by assessee were standard facilities and were not in nature of technical services within meaning of section 194J, read with Explanation 2 to clause (vii) of section 9(1), assessee would not be liable to deduct tax at source under section 194J in respect of payments-in-question - Held, yes
ANKSS
(CA)
(151 Points)
Replied 11 January 2011
Aditya, ur doing a really good job by sharing the case laws for removal of any confusion....
Keep sharing
CAclubindia
