Facts of the Case

The present appeal was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT), which held that the assessee, M/s Tata Teleservices Ltd., was not required to deduct TDS under Section 194J of the Income Tax Act, 1961 on payments made towards interconnect user charges.

The central issue revolved around whether such payments could be classified as “fees for technical services” (FTS) under the Act.

It was noted that the Karnataka High Court in CIT (TDS) vs Vodafone South Ltd. had already decided a similar issue in favour of the assessee, holding that such charges do not qualify as technical services due to absence of human intervention.

Further, the Central Board of Direct Taxes (CBDT) had consciously decided not to file an SLP against the Karnataka High Court ruling 

Issues Involved

  1. Whether interconnect user charges paid by telecom operators attract TDS under Section 194J?
  2. Whether such charges qualify as fees for technical services under Section 9(1)(vii) of the Income Tax Act?
  3. Whether the Revenue can take a contrary stand after accepting a similar judgment in another case?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that interconnect usage charges involve technical services, thereby attracting TDS under Section 194J.
  • It was argued that similar questions of law were pending consideration before other High Courts.
  • The Revenue attempted to distinguish the Karnataka High Court ruling.

 Respondent’s Arguments (Assessee – Tata Teleservices Ltd.)

  • The assessee argued that interconnect services are fully automated and do not involve human intervention, which is a key requirement for classification as technical services.
  • It was emphasized that:
    • The Karnataka High Court ruling had attained finality.
    • CBDT had accepted the said judgment and decided not to file an SLP.
  • The assessee relied on precedents including:
    • Birla Corporation Ltd. vs CCE
    • Berger Paints India Ltd. vs CIT
  • It was contended that the Revenue cannot adopt inconsistent positions in different cases on the same issue.

Court’s Findings / Order

  • No TDS is required under Section 194J on interconnect usage charges.
  • Such charges do not qualify as fees for technical services, as:
    • There is no human intervention involved in the process.
  • The Court emphasized:
    • Once the Revenue has accepted a legal position in one case, it cannot challenge the same issue in another case without just cause.
  • Since the Karnataka High Court judgment was accepted by the Revenue, no substantial question of law arose.

 Accordingly, the appeal was dismissed.

Important Clarifications

  • Human intervention test is crucial for determining “technical services.”
  • Automated telecom processes like interconnection, roaming, and data linking do not constitute technical services.
  • The Revenue is bound by its own litigation policy and cannot take contradictory stands across cases.
  • Judicial consistency is essential to avoid legal uncertainty.

Sections Involved

  • Section 194J – TDS on fees for professional or technical services
  • Section 9(1)(vii) – Definition of fees for technical services


Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2135-DB/MMH30052022ITA14172018_184933.pdf

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