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TDS on telephone and internet charges

Dipti (Student) (36 Points)

28 January 2009

Plz advise me, whether there is any TDS obligation U/S 194 C on payment of talephone and internet Charges payable by a Company. And there is any case laws in this regard.

Dipti

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8 Replies

Darshit (CA Final) (964 Points)
Replied 28 January 2009

Internet is liable for TDS while telephone is not liable for TDS

CA Hemant T Dewani (Chartered Accountant) (3356 Points)
Replied 28 January 2009

both are not liable for tds

Darsh*t pl.tell me regarding internet charges paid to TATA,Relience are liable to TDS

thanks

Aanand Majgaonkar (Student) (22 Points)
Replied 28 January 2009

I want to know about FBT in detail.Can you give me information in this respect

Shudhanshu Agrawal (Business) (2570 Points)
Replied 28 January 2009

This question needs more clarification, as if the vendor whos providing the services of internet has a contract with u.....then u will take it under section 194C....secondly if a person is providing u service and u are paying after a month or after a qtr. it shows that u are having a contract with that person.or company and after the services u are paying him which again brings it under section 194C

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 29 January 2009

In my view, provisions of Sec.194C are not applicable as there is no contract for carrying out any work between specified persons and resident contractor. Provisions of Sec.194J are also not applicable as the payment is not a fee for technical service but is for charges for use of a facility. You can refer views of Madras High Court in case of Skycell Communications Ltd. & anr. Vs. Dy CIT & Ors. (251 ITR 53). It is held that mere collection of ‘fee’ for use of a standard facility provided to all those willing to pay for it does not amount to a fee for technical services. It is not a fee merely because hi-tech communication technology is used for providing these services. In fact, it is a charge for use of a facility. Hence, TDS is neither deductible u/s.194C nor u/s. 194J.

CA Anand Shukla (CA) (33 Points)
Replied 30 January 2009

Thanks shah sir for ur valuable opinion, but i'm not clear that wat will position if there are only fixed charges and no variable charges payable to service provider. Can it be covered u/s. 194I (rent) for TDS ?

CA Ghanshyam Joshi (CA, Dip IFR (ACCA UK)) (3229 Points)
Replied 08 November 2009

This was question asked in CA Final Exam Nov 08. Please refer the suggested answer for that which is also available on ICAI web. The answer of Shah Sir is on the same line and TDS is not applicable.

Sunil (Trader) (2611 Points)
Replied 08 November 2009

CA Ashok Shah is right. The usage of telephone is not a contract for a work carried out. They have provided you an interface at your location to access the net or their system. The service of making a phone call or using bandwidtth of ISP for internet is not covered under any of the provisions of TDS. They are not technical services. There is no intelligent human intervention at the time you are using the internet or making a phone call for it to be called a technical service. You are using the equipment at the phone network and not renting it. Nowadays they call it a recurring charge based on minimum usage. Not a rental.

However, if you are arranging with a Cyber Cafe to use his services for connecting to internet you have to deduct charges. If you arrange STD / ISD facility with a private PCO, only on commission he charges you have to deduct TDS. If you pay to a business center all these charges you have to deduct TDS. The non deduction of TDS is only when your dealing is directly with the Provider of the service duly licensed by DOT / TRAI.

FYI Technical Service for Section 194 J is same as defined in Section 9 and it reads as:-

fees for technical services means any consideration (including any lump sum consi-deration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction 80 , assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries.

Fees for provision of telephone or internet connection does not come under this.