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SC to decide on govts TDS plea
September, 01st 2009

THE Supreme Court will decide whether private telecom operators are liable to deduct TDS for the payments made to the state-owned BSNL and MTNL for interconnectivity. A bench comprising Justice SH Kapadia and Justice Aftab Alam on Friday issued notice to Bharti Airtel on the plea of the income-tax department.

Advocate Chinmoy P Sharma, on behalf of the I-T department, said the private telecom service providers are liable to deduct TDS under section 194-J of the Income Tax Act in respect of the payments made by them to the public sector telecom service provider for inter-connect/port access charges. Such payments are fees for the technical services provided by the public sector telecom companies.

It comes under the ambit of technical services provided for under the act and the private service providers are thus liable to deduct TDS, said Mr Sharma.

According to the department, the provision of the interconnect/port access facility is itself a service. Since the services are technical in nature (as it is connected with the use of machinery involving expertise, skill and technical knowledge), the interconnectivity charges paid by the private operators are nothing but the fees for technical services, said department.

The department has come to the apex court challenging order of the Delhi High Court.

The high court had said, since the expression technical services is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable.

The high court had further said, it is apparent that both the words managerial and consultancy involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a sociis, the word technical as appearing in explanation 2 to Section 9 (1)(vii) (of the Act) would also have to be construed as involving a human element. .

But, the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines.

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