Vs. M/S.Bharti Cellular Ltd.  INSC 625 (12 August 2010)
APPELLATE JURISDICTION CIVIL APPEAL NO.6691 OF 2010 (Arising out of S.L.P. (C)
No.16452 of 2009) C.I.T., Delhi ...Appellant(s) Versus M/s. Bharti Cellular
Ltd. ...Respondent(s) With Civil Appeal No.6692 of 2010 @ S.L.P. (C)
No.16453/2009, Civil Appeal No.6693 of 2010 @ S.L.P. (C) No.22156/2009, Civil
Appeal No.6694 of 2010 @ S.L.P. (C) No.26622/2009, Civil Appeal No.6695 of 2010
@ S.L.P. (C) No.26623/2009, Civil Appeal No.6696 of 2010 @ S.L.P. (C)
No.13027/2009, Civil Appeal No.6697 of 2010 @ S.L.P. (C) No.13029/2009, Civil
Appeal No.6698 of 2010 @ S.L.P. (C) No.13030/2009 and Civil Appeal No.6699 of
2010 @ S.L.P. (C) No.20909/2009 O R D E R Civil Appeal Nos.6696/2010,
6697/2010, 6698/2010 and 6699/2010 arising out of S.L.P. (C) Nos.13027/2009,
13029/2009, 13030/2009 and 20909/2009 are taken on Board along with these
batch of cases, the key issue which arises for determination is, whether manual
intervention is involved in the technical operations by which a cellular
service provider, like M/s. Bharti Cellular Limited, is given the facility by
BSNL/MTNL for interconnection? Facts in the lead case of Bharti Cellular
Limited Respondent No.1 is a cellular service provider. It has Interconnect
Agreement with BSNL/MTNL. Under such agreement, Respondent No.1 pays
interconnect/access/port ....2/- - 2 - 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.
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 Limited.
question basically involved in the lead case is:
TDS was deductible by M/s. Bharti Cellular Limited when it paid interconnect
charges/access/port charges to BSNL? For that purpose, we are required to
examine the meaning of the words "fees for technical services" under
Section 194J read with clause (b) of the Explanation to Section 194J of the
Income Tax Act, 1961, [`Act', for short] which, inter alia, states that
"fees for technical services"
have the same meaning as contained in Explanation 2 to clause (vii) of Section
9(1) of the Act. Right from 1979 various judgments of the High Courts and Tribunals
have taken the view that the words "technical services" have got to
be read in the narrower sense by applying the rule of Noscitur a sociis,
particularly, because the words "technical services"
Section 9(1)(vii) read with Explanation 2 comes in between the words
"managerial and consultancy services".
problem which arises in these cases is that there is 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, let us say, BSNL has no network in Nainital
whereas it has a network in Delhi, the Interconnect Agreement enables M/s.
Bharti Cellular Limited to access the network of BSNL in Nainital and the same
....3/- - 3 - situation can arise vice versa in a given case. During the
traffic of such calls whether there is any manual intervention, is one of the
points which requires expert evidence. Similarly, on what basis is the
"capacity" of each service provider fixed when Interconnect
Agreements are arrived at? For example, we are informed that 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 is involved is required to be examined, which again needs a
technical data. We are only highlighting these facts to emphasise that these
types of matters cannot be decided without any technical assistance available
one more aspect that requires to be gone into. It is the contention of
Respondent No.1 herein that Interconnect Agreement between, let us say, M/s.
Bharti Cellular Limited and BSNL in these cases is based on obligations and
counter obligations, which is called a "revenue sharing contract".
According to Respondent No.1, Section 194J of the Act is not attracted in the
case of "revenue sharing contract". According to Respondent No.1, in
such contracts there is only sharing of revenue and, therefore, payments by
revenue sharing cannot constitute "fees" under Section 194J of the
Act. This submission is not accepted by the Department. We leave it there
because this submission has not been examined by the Tribunal.
the above aspects need reconsideration by the Assessing Officer. We make it
clear that the assessee(s) is not at fault in these cases for the simple reason
that the question of human intervention was never raised by the Department
before the CIT. It was not raised even before the ....4/- - 4 - Tribunal; it is
not raised even in these civil appeals.
keeping in mind the larger interest and the ramification of the issues, which
is likely to recur, particularly, in matters of contracts between Indian
Companies and Multinational Corporations, we are of the view that the cases
herein are required to be remitted to the Assessing Officer (TDS).
we are directing the Assessing Officer (TDS) in each of these cases to examine
a technical expert from the side of the Department and to decide the matter
within a period of four months. Such expert(s) will be examined (including
cross-examined) within a period of four weeks from the date of receipt of the
order of this Court.
is also given to Respondent No.1 to examine its expert and to adduce any other
concluding, we are directing CBDT to issue directions to all its officers, that
in such cases, the Department need not proceed only by the contracts placed
before the officers. With the emergence of our country as one of the BRIC
countries and with the technological advancement matters such as present one
will keep on recurring and hence time has come when Department should examine
technical experts so that the matters could be disposed of expeditiously and
further it would enable the Appellate Forums, including this Court, to decide
legal issues based on the factual foundation. We do not know the constraints of
the Department but time has come when the Department should understand that
when the case involves revenue running into crores, technical evidence would
help the Tribunals and Courts to decide matters expeditiously based on factual
foundation. The learned Attorney General, who is present in Court, has assured
us that our directions to CBDT would be carried out at the earliest.
question which arises in this batch of cases is whether the Department is
entitled to levy interest under Section 201(1A) of the Act or impose penalty
for non- deduction of TDS. We are of the view, that in the facts and
circumstances of the case, it would not be justified for the following reasons:
Firstly, there is no loss of revenue. It is no doubt true that TDS has not been
deducted by the payee but the tax has been paid by the recipient. Secondly, the
question involved in the present cases is the moot question of law, which is
yet to be decided. Basically, we would have closed the file because these cases
are only with regard to levy of interest but we are remitting these cases, as
stated above, to the Assessing Officer (TDS) only because we are of the view
that this issue is a live issue and it needs to be settled at the earliest.
Once the issue gets settled, the Department would be entitled to levy both
penalty and interest but, as far as the facts and circumstances of the present
cases are concerned, we are of the view that the interest is not justified at
this stage. Consequently, there will be no levy of penal interest prior to the
date of fresh adjudication order.
the civil appeals are disposed of.
as to costs.
....................CJI. [S.H. KAPADIA]
......................J. [K.S. RADHAKRISHNAN]
August 12, 2010.