My company pays mobile phone bills. The department says these are fees for technical services and we must deduct tax under section 194J. Must we?
No. The Madras High Court quashed the department's direction and allowed the writ petitions with costs. Collecting a fee for the use of a standard facility offered to everyone willing to pay for it is not a fee received for technical services, even though the facility runs on sophisticated equipment. A subscriber contracts for airtime, not for a technical service, and is not concerned with the equipment in the exchange or the location of the base station. What is not a technical service when the subscriber is an individual does not become one when the subscriber is a firm or a company, because the facility is the same.
Decided by the High Court (Madras High Court - R. Jayasimha Babu, J) on 2001-02-23, reported as [2001] 251 ITR 53 (Mad). It bears on section 194J, section 9(1)(vii) of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
This is the origin of the standard facility test that runs through the case law on fees for technical services, and it is still the first case cited when the department characterises an ordinary utility or subscription payment as a technical service. The reasoning is that section 9(1)(vii) contemplates the rendering of a service to the payer, and that installing and operating sophisticated equipment so that customers may use it for a fee is not the rendering of a service to any of them. The Court's examples do the work: a taxi, a train, an aeroplane, a bus, the supply of electricity, cable television and internet access are all products of technology, and the provider of none of them renders a technical service to the user. It also holds that the definition, introduced in 1977, was not meant to catch charges paid by an ordinary consumer for the products of modern technology, and it shows a High Court willing to entertain a writ where the department has grossly unreasonably construed a provision and is asserting jurisdiction on that construction.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The petitioners provided cellular mobile telephone services under licences from the Department of Telecommunications. They described their infrastructure in detail - mobile switching centre, visitor and home location registers, short message and voice mail service centres, authentication centre, equipment identity register, base station controllers, transcoders, base transceiver stations, mobile stations, an operation and maintenance centre and a microwave backbone - and explained how outgoing and incoming calls are routed and handed over between cells. The network area is divided into cells with unmanned base stations supported by a central facility, the equipment is highly sophisticated, and once installed the facility is provided automatically. A subscriber pays for the airtime used. By letter dated 18 March 1998 the Chief Commissioner took the view that these payments were fees for technical services within section 194J read with Explanation 2 to section 9(1)(vii), and on 20 March 1998 the Deputy Commissioner (TDS) instructed the Income-tax Officer (TDS) to ensure that subscribers who were firms or companies deducted tax accordingly. The petitioners challenged the direction by writ.
The writ petitions were allowed with costs of Rs 2,000 in each. Mere collection of a fee for the use of a standard facility provided to all those willing to pay for it does not amount to a fee received for technical services. Installation and operation of sophisticated equipment so that customers may use it for a fee does not result in the provision of a technical service to the customer. A subscriber to a cellular telephone service does not contract to receive a technical service; he agrees to pay for the use of airtime. The same applies to a fixed line telephone service, and neither can be regarded as a technical service for section 194J. A facility which is not a technical service when used by an individual does not become one when used by a firm or a company. The Court also held that although it would not normally entertain a writ before statutory remedies were exhausted, it would do so here because the question was one of pure construction which had been grossly unreasonably construed and jurisdiction was being asserted on that construction, and because the petitioners were themselves affected by having part of their revenue diverted.
Section 194J does not define fees for technical services but adopts Explanation 2 to section 9(1)(vii), which covers consideration for the rendering of any managerial, technical or consultancy services, including the provision of the services of technical or other personnel. The legislature did not say what makes a service technical, so the word takes its ordinary meaning in context, the popular sense being involving or concerning applied and industrial science, and the expression can only cover such things technical as are capable of being provided by way of service for a fee. Almost everything used in modern life is a product of science and technology, but it does not follow that every provider of an instrument or facility renders a technical service: a taxi driver does not render a technical service to his passenger, nor does a railway, an airline or a bus operator, nor does an electricity supplier merely because generators, transmission lines, transformers and meters are used, nor does a cable operator to a household, nor an internet service provider to its subscribers. The critical step is that section 9(1)(vii) contemplates the rendering of a service to the payer of the fee, and a subscriber to a standard facility is not the recipient of any service directed at him; he is indifferent to the complexity of the equipment or the location of the base station and wants only to be connected. The Court added that when the Act was passed in 1961 and when the Explanation was introduced from 1 April 1977 the products of technology were not in such wide use, and the provisions were not intended to reach the charges an ordinary consumer pays for the telephone, cable television, the internet, transport or electricity.
Mere collection of a "fee" for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. The Madras High Court quashed the department's direction and allowed the writ petitions with costs. Collecting a fee for the use of a standard facility offered to everyone willing to pay for it is not a fee received for technical services, even though the facility runs on sophisticated equipment. A subscriber contracts for airtime, not for a technical service, and is not concerned with the equipment in the exchange or the location of the base station. What is not a technical service when the subscriber is an individual does not become one when the subscriber is a firm or a company, because the facility is the same. This was decided by the High Court (Madras High Court - R. Jayasimha Babu, J) and bears on section 194J, section 9(1)(vii) of the Income Tax Act 1961. It is reported as [2001] 251 ITR 53 (Mad). This is the origin of the standard facility test that runs through the case law on fees for technical services, and it is still the first case cited when the department characterises an ordinary utility or subscription payment as a technical service. The reasoning is that section 9(1)(vii) contemplates the rendering of a service to the payer, and that installing and operating sophisticated equipment so that customers may use it for a fee is not the rendering of a service to any of them. The Court's examples do the work: a taxi, a train, an aeroplane, a bus, the supply of electricity, cable television and internet access are all products of technology, and the provider of none of them renders a technical service to the user. It also holds that the definition, introduced in 1977, was not meant to catch charges paid by an ordinary consumer for the products of modern technology, and it shows a High Court willing to entertain a writ where the department has grossly unreasonably construed a provision and is asserting jurisdiction on that construction. If it applies to you, the first step is this: Ask whether the payment buys a standard facility available to anyone who pays, or a service tailored to you; only the second is capable of being a technical service.
The petitioners provided cellular mobile telephone services under licences from the Department of Telecommunications. They described their infrastructure in detail - mobile switching centre, visitor and home location registers, short message and voice mail service centres, authentication centre, equipment identity register, base station controllers, transcoders, base transceiver stations, mobile stations, an operation and maintenance centre and a microwave backbone - and explained how outgoing and incoming calls are routed and handed over between cells. The network area is divided into cells with unmanned base stations supported by a central facility, the equipment is highly sophisticated, and once installed the facility is provided automatically. A subscriber pays for the airtime used. By letter dated 18 March 1998 the Chief Commissioner took the view that these payments were fees for technical services within section 194J read with Explanation 2 to section 9(1)(vii), and on 20 March 1998 the Deputy Commissioner (TDS) instructed the Income-tax Officer (TDS) to ensure that subscribers who were firms or companies deducted tax accordingly. The petitioners challenged the direction by writ. The matter was decided on 2001-02-23 by the High Court (Madras High Court - R. Jayasimha Babu, J). On those facts the High Court held as follows. The writ petitions were allowed with costs of Rs 2,000 in each. Mere collection of a fee for the use of a standard facility provided to all those willing to pay for it does not amount to a fee received for technical services. Installation and operation of sophisticated equipment so that customers may use it for a fee does not result in the provision of a technical service to the customer. A subscriber to a cellular telephone service does not contract to receive a technical service; he agrees to pay for the use of airtime. The same applies to a fixed line telephone service, and neither can be regarded as a technical service for section 194J. A facility which is not a technical service when used by an individual does not become one when used by a firm or a company. The Court also held that although it would not normally entertain a writ before statutory remedies were exhausted, it would do so here because the question was one of pure construction which had been grossly unreasonably construed and jurisdiction was being asserted on that construction, and because the petitioners were themselves affected by having part of their revenue diverted.
Section 194J does not define fees for technical services but adopts Explanation 2 to section 9(1)(vii), which covers consideration for the rendering of any managerial, technical or consultancy services, including the provision of the services of technical or other personnel. The legislature did not say what makes a service technical, so the word takes its ordinary meaning in context, the popular sense being involving or concerning applied and industrial science, and the expression can only cover such things technical as are capable of being provided by way of service for a fee. Almost everything used in modern life is a product of science and technology, but it does not follow that every provider of an instrument or facility renders a technical service: a taxi driver does not render a technical service to his passenger, nor does a railway, an airline or a bus operator, nor does an electricity supplier merely because generators, transmission lines, transformers and meters are used, nor does a cable operator to a household, nor an internet service provider to its subscribers. The critical step is that section 9(1)(vii) contemplates the rendering of a service to the payer of the fee, and a subscriber to a standard facility is not the recipient of any service directed at him; he is indifferent to the complexity of the equipment or the location of the base station and wants only to be connected. The Court added that when the Act was passed in 1961 and when the Explanation was introduced from 1 April 1977 the products of technology were not in such wide use, and the provisions were not intended to reach the charges an ordinary consumer pays for the telephone, cable television, the internet, transport or electricity. In the words reproduced by the source cited on this page: "Mere collection of a "fee" for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services."
It was decided by the High Court on 2001-02-23 and is reported as [2001] 251 ITR 53 (Mad). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 194J, section 9(1)(vii), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petitions were allowed with costs of Rs 2,000 in each. Mere collection of a fee for the use of a standard facility provided to all those willing to pay for it does not amount to a fee received for technical services. Installation and operation of sophisticated equipment so that customers may use it for a fee does not result in the provision of a technical service to the customer. A subscriber to a cellular telephone service does not contract to receive a technical service; he agrees to pay for the use of airtime. The same applies to a fixed line telephone service, and neither can be regarded as a technical service for section 194J. A facility which is not a technical service when used by an individual does not become one when used by a firm or a company. The Court also held that although it would not normally entertain a writ before statutory remedies were exhausted, it would do so here because the question was one of pure construction which had been grossly unreasonably construed and jurisdiction was being asserted on that construction, and because the petitioners were themselves affected by having part of their revenue diverted. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194J, section 9(1)(vii) of the Income Tax Act 1961, and was decided by Madras High Court - R. Jayasimha Babu, J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Point out that the sophistication of the provider's equipment is irrelevant if the subscriber neither specifies nor controls how the facility is delivered. Resist the argument that a payment changes character because the payer is a company; the facility is the same whoever subscribes. Where the department issues a general direction to deductors on a pure question of construction, consider a writ rather than waiting for assessment, as the payee is directly affected.
Still good law. A citedby search returns 104 later citing documents, and the judgment is still being used as a working test in 2025. In CIT v Springer Nature Customer Service Centre GmbH (Delhi High Court, 16 April 2025) the Bench quoted this judgment at length at para 17 on what 'technical services' means - the passage about a taxi, the railways, cable television and the internet all using technology without supplying technical services - recorded at para 18 that 'this court had concurred with the view of the Madras High Court in Skycell Communications Ltd. v. Deputy Commissioner of Income-Tax', and applied that reasoning to hold that subscription fees for e-journals are not fees for technical services under s.9(1)(vii), dismissing the Revenue's appeals. The Mumbai Tribunal is still deciding cellular cases on it (Idea Cellular Ltd v DCIT and v ACIT, both 24 July 2025) and the Delhi Tribunal applied it in Hitachi Metglas (India) Pvt Ltd v DCIT (13 October 2021). Nothing overruling, doubting or confining it was found. Two decisions show where it stops rather than that it is wrong: in Ultra Entertainment Solutions Ltd v ITO (TDS) (Mumbai Tribunal, 28 June 2007) and Wipro Ltd v ITO (Bangalore Tribunal, 25 April 2003) the Benches held it 'distinguishable' and 'not applicable' on their facts. A practitioner should also read it alongside Verizon Communications Singapore Pte Ltd v ITO (Madras High Court, 7 November 2013), where the same High Court dealt with assured bandwidth on a different footing. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment does not give the writ petition numbers, and the harvested page does not carry them. It is a single judge order on writ petitions against a direction of the Chief Commissioner, not an appeal from an assessment, so it decides no assessment year and quantifies nothing. It does not consider whether interconnect or roaming charges between operators stand differently, nor does it deal with section 194C or any other deduction provision. The rate mentioned for section 194J and the threshold of Rs 20,000 are those in force at the time and have since changed. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petitions were allowed with costs of Rs 2,000 in each. Mere collection of a fee for the use of a standard facility provided to all those willing to pay for it does not amount to a fee received for technical services. Installation and operation of sophisticated equipment so that customers may use it for a fee does not result in the provision of a technical service to the customer. A subscriber to a cellular telephone service does not contract to receive a technical service; he agrees to pay for the use of airtime. The same applies to a fixed line telephone service, and neither can be regarded as a technical service for section 194J. A facility which is not a technical service when used by an individual does not become one when used by a firm or a company. The Court also held that although it would not normally entertain a writ before statutory remedies were exhausted, it would do so here because the question was one of pure construction which had been grossly unreasonably construed and jurisdiction was being asserted on that construction, and because the petitioners were themselves affected by having part of their revenue diverted.
TaxSphere, “Skycell Communications Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/skycell-communications-ltd-v-dcit/ (validity last checked 2026-08-29)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We pay interconnect and port charges to another telecom operator — is that fees for technical services on which we must deduct tax under section 194J?
We paid stock exchange transaction charges without TDS. Are those fees for technical services under 194J?
I pay uplinking and bandwidth charges for my channel. Is that 194C work or 194J technical services?
Our erection and commissioning contractor uses its own engineers. Should we deduct under 194J, not 194C?
