The Income Tax Appellate Tribunal (ITAT), Delhi bench last week held that the provisions relating to tax deduction at source (TDS) under section 194I of the Income Tax Act, 1961 cannot be invoked against the payment towards lease line charges.
The assessee, a Company engaged in the business of providing Telecommunication services under International Long Distance (ILD), National Long Distance (NLD), and Internet Service Provider (ISP) Licenses had withheld tax on lease line charges paid to other telecom operators under section 194J of the Income Tax Act.
Before the authorities, the assessee claimed that the lease line services were standard automatic services that were availed by any telecom service provider for the transmission of data and were not under an exclusive arrangement. The Assessing Officer was of the view that the tax on such expenditure was to be withheld under section 194I of the Act.
A two-member bench of the Tribunal comprising Judicial Member Amit Shukla and Accountant Member B. R. R. Kumar noted that in a similar issue of non-deduction of tax on lease line expenses, held that this expenditure was incurred by the assessee company towards maintenance and usage of the telecom license, and not for acquiring a right to operate telecommunication services and thus would not attract the provisions of Section 35ABB of the Act.
“We find that similar issue of non-deduction of tax on lease line expenses arose before the Tribunal in ITA No.6385/Del/2019 for Assessment Year 2015-16 and for the assessment year 2014-15 also. The issue arising before us is similar and following the same parity and reasoning, we hold that there was no requirement to deduct tax at source under section 194I of the Act.”
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