Application of tds on internet charges, voip charges etc

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Querist : Anonymous

Querist : Anonymous (Querist)

14 December 2012 Whether TDS is applicable on internet charges, VOIP Charges, Telephone charges etc u/s 194J due to amendment of the definition of Royalty under the said Sec.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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14 December 2012 Standard facility to a number of customers such as telephone/cell phone users does not amount to rendering any ‘technical service’ within the meaning of the definition of technical service. Technical or consultancy service rendered should be of such a nature that it ‘makes available’ the technical knowledge, skills etc. must remain with the person receiving the services even after the particular contract comes to an end. It is enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider.
Intertek Testing Services India (P.) Ltd., In re [2008] 307 ITR 418/175 Taxman 375 (AAR – New Delhi)

Also, in the case of Skycell Communications Ltd. (supra) has taken support of in the case of CIT v. Bharti Cellular Ltd. [2009] 319 ITR 139/[2008] 175 Taxman 573 (Delhi) wherein it has been held that interconnect charges/port access charges cannot be regarded as fees for technical service.

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Querist : Anonymous

Querist : Anonymous (Querist)

14 December 2012 What is the impact of the amendment in the definition of royalty on these charges? Is these charges are now under the purview of Sec 194J because of the change in definition of Royalty u/s 194J.

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