Telecommunication services

2023 CLC 1481 ISLAMABAD Judicial Precedent

Ss.7(1), 21 (3) & 41(3)Telecommunication servicesExclusive rightsNon-exclusive telecom licenceScope

Appellant corporation was aggrieved of order passed by Pakistan Telecommunication Authority holding that there was no bar on designated customers of appellant corporation from acquiring services from private telecom operators

Validity

Non-exclusive telecom licence is a type of license granted by government or regulatory authority that allows a telecom operator to provide communication services without any exclusivity

Other operators may also be granted a licence to operate in the same area and to provide similar services to customers whether governmental or non-governmental

Non-exclusive telecom license is typically granted to promote competition and prevent a single operator from monopolizing the market

It allows multiple operators to provide services to customers which can lead to better quality, pricing and innovation in the market

Only way that desire of appellant corporation or National Telecommunication and Information Technology Security Board (N.T.I.S.B.), that it should have the exclusive right to provide telecom services to Government organizations or that the Government organizations could obtain telecom or internet services from private telecom service providers only after obtaining a N.O.C. from appellant corporation could be fulfilled if Ss.21(3) and 41(3) of Pakistan Telecommunication (Re-organization) Act, 1996 were amended so as to give the appellant corporation the exclusive right to provide telecom or internet services to Government organizations

Such desire could not be achieved by issuing a policy directive as it would be inconsistent with the provisions of Pakistan Telecommunication (Re-organization) Act, 1996

Decision taken by Pakistan Telecommunication Authority that there was no bar on the designated customers of appellant corporation to acquire telecom services from private operators was in conformity with and not in derogation of Ss.21(3) & 41(3) of Pakistan Telecommunication (Re-organization) Act, 1996

High Court declined to interfere in the decision of the Authority, as there was no legal or jurisdictional infirmity in it

Appeal was dismissed, in circumstances.

2021 PTD 703 APPELLATE-TRIBUNAL-PUNJAB Judicial Precedent

Ss. 3, 24 & Sr. 6, 2nd Sched.Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012, R. 12Taxable serviceAssessment of taxTelecommunication servicesExport of serviceScope

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Contention of appellant was that its activity being export of services was exempt from payment of tax in Punjab under R.12 of Punjab Sales Tax on Services (Adjustment of tax) Rules, 2012

Validity

Rule 12 of Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012, was a conjunctive provision which had to satisfy all the conditions mentioned therein, since the said services had been used in Pakistan therefore, no relief could be pleaded under said rule

Contention of appellant was rejected

Appeal was party allowed.

2021 PTD 703 APPELLATE-TRIBUNAL-PUNJAB Judicial Precedent

Ss. 3, 24 & Sr. 6, 2nd Sched.Punjab Sales Tax on Services (Definition) Rules, 2012, R. 106Punjab Sales Tax on Services (Specific Provisions) Rules, 2012, Rr. 25 & 26Taxable serviceAssessment of taxTelecommunication servicesTax coverageScope

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of the 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Validity

Activity of long distance international calls fell under telecommunication services being an integral part of the same

Appellant itself had admitted to be engaged into various telecommunication services agreements with foreign LDI (Long-Distance and International) companies

Appellant was found to be engaged in providing LDI calls and allied telecommunication services

International incoming calls had been notified by PTA on agreed settlement rate and such services constituted value of taxable service and the Punjab was entitled to collect tax to the extent of international incoming calls terminating in Punjab

Activity of appellant being telecommunication services squarely fell under serial No. 6 of the 2nd schedule to the Punjab Sales Tax on Services Act, 2012, hence taxable

Appeal was party allowed.

2021 PTD 703 APPELLATE-TRIBUNAL-PUNJAB Judicial Precedent

Ss.3, 24 & Sr. 6, 2nd Sched.Punjab Sales Tax on Services (Specific Provisions) Rules, 2012, R.26Taxable serviceAssessment of taxTelecommunication servicesTax coverageScope

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of the 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Contention of appellant was that it had already paid sales tax on certain amount but it was not excluded from the total value while calculating the sales tax liability

Validity

Appellate Tribunal directed the officer exercising jurisdiction over the case to seek the proofs of sales tax paid by the appellant and accordingly exclude the corresponding revenue from the taxable value of service

Adjudicating officer was required to have calculated the amount by applying Tax Fraction Formula

Adjudicating officer was further directed to afford reasonable opportunity to the appellant for furnishing the proof of tax paid to tax authorities other than Punjab with a view to ascertaining the actual quantum of liability payable to Punjab Revenue Authority

Appeal was party allowed.

2020 PTD 1964 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.3Taxable serviceTelecommunication servicesTransfer of money including telegraphic transfer, mail transfer or electronic transferScope

Question before Appellate Tribunal was whether the branchless Banking services provided by respondent to a Bank was a Banking service covered under Tariff Heading 98.13 or a telecommunication service under Tariff Heading 98.12

Held, respondent was providing two types of services, one was its normal telecommunication service and the other was providing funds transfer service (branchless Banking services)

Services provided by respondent to the Bank fell under Tariff Heading 9813.4600 of the Second Schedule to the Sindh Sales Tax on Services Act, 2011

Appeal was dismissed.

2019 PTD 1668 ISLAMABAD Judicial Precedent

Ss. 3 & 7Pakistan Telecommunication (Reorganization) Act (XVII of 1996), S. 5(2)(h)Sales Tax Act (VII of 1990), S. 3Interconnection Guidelines, 2004, Art. 3.1Federal excise duty, charging ofTelecommunication servicesInterconnection of systems

Order-in-original was passed by authorities for recovery of federal excise duty from taxpayers relating to interconnection of their systems but Appellate Tribunal Inland Revenue dismissed the same

Validity

Federal excise duty and charge thereof was attracted only when call was completed, i.e., when it was answered or received by subscriber of receiving network

On completion of call made by subscriber on one network of service provider to that of other, former was charged entire cost of rendering telecommunication service and same essentially included Federal excise duty, as such same included charges relating to providing facility of interconnection between two distinct networks

Merely agreeing to provide interconnection service to subscribers of two or more service providers did not constitute rendering of telecommunication service

Interconnection of two networks of distinct service providers was for purposes of rendering of telecommunication services to subscribers

On its own same could not be treated as rendering of such service

Authorities misinterpreted concept of interconnection and same was confused with 'rendering of telecommunication services'

Mere interconnection of networks by two service providers was not sufficient to attract Federal excise duty

Appellate Tribunal Inland Revenue had rightly set aside order-in-original

Reference was dismissed accordingly.

2018 PTD 1413 ISLAMABAD Judicial Precedent

Ss. 3, 16, 34A & Sched.Levy, payment and collection of excise dutyExemption from payment of excise dutyTelecommunication servicesInternet servicesScope

Question before the High Court was whether an internet service provider was liable to pay federal excise duty which was imposed with regard to voice / telephonic content of internet applications and whether such voice content of internet applications would fall within purview of "telecommunication services" liable to federal excise under the Federal Excise Act, 2005

Held, that under the Schedule to the Federal Excise Act, 2005; services which were inter alia run through the internet were exempt from levy of federal excise duty

Liability to pay excise duty was dependent upon charges imposed by taxpayer and there existed no mechanism to decipher or segregate internet usage for voice content of applications run on the internet from other internet usage

High Court observed that mechanism devised by the Department by holding that 30% of of the taxpayer internet service provider's earnings were out of voice telecommunication services was arbitrary, whimsical and liable to the rejected

Reference was answered, accordingly.

2015 PTD 1340 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 2(97)Specific Relief Act (I of 1877), Ss. 42 & 54Civil Procedure Code (V of 1908), O.XXXIX, Rr. 1 & 2Suit for declaration and injunctionInterim injunctionTelecommunication services

Plaintiff assailed demand of tax raised by Revenue authorities for use of poles, masts and towers claiming such services to be "telecommunication services," as defined under S. 2(97) of Sindh Sales Tax on Services Act, 2011

Validity

Pole, tower or mast that was being used commonly was being 'shared' between plaintiff and (relevant) defendant

Pole, tower and mast could be regarded as having certain 'capacity' even in plaintiff's own case, since it had a physical dimension and there was only so much equipment (booster, transmitter, antenna etc.) that could be fixed on to or hung from it especially when height requirements were also taken into account

Such capacity was not within the meaning of definition and third element in the definition made it clear

Capacity was in relation, or with reference to transmission, emission or reception of signals

License had granted the service provider, the right to use such capacity and if such capacity was shared with another then a 'telecommunication service' was provided within the meaning of S.2(97) of Sindh Sales Tax on Services Act, 2011

Plaintiff made out a prima facie case as proposed levy fell outside the scope of 'telecommunication service' and other ingredients for interim relief also lay in favour of plaintiff

Business of plaintiff would be adversely affected, if it was unable to have access to various towers, poles etc. as per its arrangements with private defendants (companies) and such access might become practically unavailable if the tax was levied and plaintiff would suffer irreparable loss and injury

Balance of convenience also lay in favour of plaintiff, therefore, case for interim relief was made out

High Court suspended notice issued by revenue authorities and restrained them from charging, claiming or collecting any tax under Sindh Sales Tax on Services Act, 2011, in respect of any matter that would come within the scope of sharing passive infrastructure

Application was allowed accordingly.

2012 PTD 359 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.8(a)(b)(ca)Sales Tax Act (VII of 1990), S.8S.R.O. 550 (I)/2006 dated 5-6-2006Tax Credit not allowedTelecommunication servicesPCT Heading 98.12Audit period July-2005 to June-2009Retrospective application of provision of S.8 of the Sales Tax Act, 1990

Taxpayer raised legal objection regarding unlawful retrospective application of ClS.(a), (b) and (ca) of S.8 of the Sales Tax Act, 1990 amended through Finance Act, 2008 and contended that words "or services" were inserted vide Finance Act, 2008 effective from 1-7-2008 and could not be made applicable to the entire period of audit i.e. July, 2005 to June, 2009

Validity

Telecommunication services were included in the S.R.O. 550(I)/2006 dated 5-6-2006 which prescribed the levy and collection of federal excise duty on services against Value Added Tax mode and did not provide the method for apportionment of tax

Said S.R.O. was effective from 5-6-2006 and the tax liability adjudged by the revenue covered the period July, 2005 to June 2009 which was not desirable

Case of the taxpayer was of excess input adjustment

Said S.R.O. had wrongly been relied upon by the Revenue so far the excess claim of input tax adjustment was concerned

Appellate Tribunal answered the question in favour of the taxpayer and against the Revenue.

2012 PTD 359 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.8(2) & 41(2)Tax Credit not allowedTelecommunication services

Services not included till issuance of amendments made by Finance Act, 2008 had to be dealt with as if the "services" were not included in the Sales Tax Act, 1990

Finance Act, 2008 was prospective in nature.