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I-T department slaps Rs 1,067-cr tax notice on Bharti Airtel

19 Jan 2012 Evaluate

The income-tax department has slapped a 1,067-crore demand notice on Bharti Airtel, the country's largest telco by revenues and customers, for its alleged non-payment of Tax Deducted at Source (TDS) dues in the last four financial years in relation to its overseas operations.  According to Bharti Airtel, it was fully compliant with all the provisions and termed the demand unjustified even as it would take appropriate legal recourse. The I-T department has asked the telco to make the payment immediately. It has been asked to pay up Rs. 202.07 crore for 2007-08, Rs. 329.913 for 2008-09, Rs. 313.577 crore for 2000-10 and Rs. 221.681 crore for the 2010-11 period in lieu of payments made by the company to 'non-resident mobile service providers'.

Executives aware of the tax notice were of the opinion that it related to roaming charges paid by Bharti Airtel customers when travelling abroad. When Bharti customers travel abroad and roam on the networks of say Vodafone, Telenor or any other foreign operator, the Indian telco pays these companies for the services. The I-T department has requires the company to withhold TDS when making these payments to international telcos. The international taxation unit of the I-T department shares the view that these payments fall under 'fee for technical services' and are therefore subjected to TDS deductions as per Section 195 of the I-T Act. The department, in its notice, is also learnt to have said that for payments of such taxes, the location of the company's property or place of conducting the operations is not 'relevant'.  This marks the latest in a list of payouts the telco may have to make. Bharti may have to shell out over $1 billion if telecom minister Kapil Sibal approves his ministry's decision to charge incumbents for all 'excess' airwaves they hold beyond the 6.2 MHz limit.

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