Delhi HC Quashes I-T Dept Notices To Airtel Over Interconnection Charges [Read Judgment]

The Delhi High Court has quashed notices issued by the Income Tax department to Bharti Airtel on account of failure to deduct tax at source on payments of interconnection usage charges to non-resident operators.The court held that the provision of “reasonable time” be read into the act for initiating action, as no reasonable time has been expressly provided in the Income Tax Act, 1961, which make the notices invalid under the statute.A bench headed by Justice Ravindra Bhat relied heavily on the latest judgment in Vodafone Essar Mobiles Ltd. and stated, ‘Since Vodafone Essar (supra) considered the entire issue and noted that even recently a reasonable period was read into the Act, in relation to exercise of powers (although in a different context) accepting the petitioner’s contention in the present case is based on precedent. Furthermore, the only reason cited by the respondent, i.e. administrative convenience, cannot outweigh the harsh nature of the consequence, which would expose resident payers to the onerous responsibility of maintaining books and documents for an uncertain period of time.’Bharti Airtel had engaged with certain non-resident entities for interconnection from which some charges were accrued. The Income Tax department had issued two show cause notices on 31 March, 2011, and 5 March, 2012, to the firm asking why it should not be deemed to be an assessee-in-default, as it made payments on account of interconnection charges to various foreign entities without deduction of tax under Section 195 of the Act. The charges relate to the periods of 2001-02 and 2010-11.The tax authorities cannot claim jurisdiction to issue show cause notices holding Airtel to be at default under provisions of the I-T Act, the court stated.Read the Judgment here.This article has been made possible because of financial support from Independent and Public-Spirited Media Foundation.

Delhi HC Quashes I-T Dept Notices To Airtel Over Interconnection Charges [Read Judgment]

Vidushi Sahani

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