09 May 2012
Reliance is providing telephone service to our company & leving service tax @ 12.36%.Should we deduct tds on it if yes in which section & how much? Pls clearify. Category of Service is Telecommunication Service.
09 May 2012
TDS not required to be deducted from payment made to telecommunication service provider.
The services of telephony is not a work as defined in section 194C and the vendor is not doing any work for the service receiver. It is a normal case of sale of services by a willing vendor and a willing receiver of the services. The services are not being provides specifically to the customers, but are available to all the customers who subscribe for the services. The Telecommunication services are not technical services with in the meaning of services as defined in explanation 2 of the sub section vii to section 9 of IT Act as the services are of providing connection in system. The service of telecommunication may required very technical equipments and technical staff but the subscriber these services is not hiring or availing the services of those technical equipment or staff, he is just availing the product of the seller which is telephonic communication. The Chennei High Court in the case of Skycell Communications Ltd. and Anr. vs Deputy Commissioner of Income-tax and Others 251 ITR 53 [2001] has taken the following view –
“Satellite television has become ubiquitous, and is spreading its area and coverage, and covers millions of homes. When a person receives such transmission of television signals through the cable provided by the cable operator, it cannot be said that the home owner who has such a cable connection is receiving a technical service for which he is required to deduct tax at source on the payments made to the cable operator. Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision of technical service to the customer for a fee. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as "technical service" for the purpose of section 194J of the Act. The same views have been expressed by Delhi ITAI in the case of DCIT vs Pan AmSat International Systems Inc. 103 TTJ 861 and Bharti Airtel, Thus following the above cases – No TDS is required to be deducted from payment made to telecommunication service provider.
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