ITAT Mumbai Grants Relief to Vodafone West: Roaming Charges Disallowance Deleted
Tribunal cites binding precedents, says non-deduction of tax on roaming charges not disallowable
Ruling clarifies treatment of inter-operator payments under Income Tax Act, boosting telecom sector confidence
By Our Legal Reporter
New Delhi: December 15, 2025:
In a significant judgment, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has granted relief to Vodafone West Ltd (formerly Vodafone Essar Gujarat Ltd) by deleting a disallowance of ₹64.81 crore relating to roaming charges. The Tribunal ruled that non-deduction of tax at source (TDS) on these payments does not justify disallowance under Sections 40(a)(ia) and 40(a)(i) of the Income Tax Act, 1961.
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The ruling is expected to have a major impact on the telecom industry, where inter-operator payments for roaming services are common.
Background of the Case
- Vodafone West Ltd had claimed roaming charges paid to other telecom operators as business expenditure.
- The Assessing Officer disallowed the claim, citing non-deduction of TDS.
- The matter reached ITAT Mumbai, where Vodafone argued that roaming charges are not subject to TDS under Section 194J (fees for technical services).
- The Tribunal relied on earlier rulings, including those involving Vodafone Digilink Ltd, to delete the disallowance.
Court’s Observations
The ITAT made several important points:
- Roaming charges are not technical services: They are automated processes between telecom networks and do not involve human intervention.
- No TDS liability: Since roaming charges are not fees for technical services, Section 194J does not apply.
- Binding precedents: The Tribunal cited earlier rulings where similar disallowances were deleted.
- Business expenditure allowed: Roaming charges are legitimate business expenses and cannot be disallowed merely due to non-deduction of TDS.
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Impact of the Ruling
1. On Telecom Companies
- Provides clarity on tax treatment of roaming charges.
- Reduces litigation and compliance burden.
- Strengthens confidence in claiming legitimate business expenses.
2. On Tax Administration
- Limits scope of arbitrary disallowances.
- Ensures consistency in applying precedents.
- Encourages focus on genuine cases of tax evasion.
3. On Industry and Investors
- Boosts investor confidence in telecom sector.
- Ensures fair treatment of inter-operator transactions.
- Reduces uncertainty in financial reporting.
Expert Opinions
- Tax consultants hailed the ruling as a “landmark” for telecom taxation.
- Legal experts noted that the judgment reinforces the principle of consistency in tax law.
- Industry analysts said the ruling will reduce disputes and improve ease of doing business.
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Example Scenarios
Scenario 1: Automated Roaming
A Vodafone customer travels to another state and uses Airtel’s network. The roaming charges paid by Vodafone to Airtel are automated and not subject to TDS.
Scenario 2: Inter-Operator Settlements
Telecom operators settle roaming charges monthly. These payments are business expenses, not fees for technical services.
Scenario 3: Past Disallowances
Similar disallowances in other telecom cases have been deleted by ITAT, creating binding precedents.
Broader Context: Telecom Taxation in India
Telecom companies face complex tax issues, including:
- TDS on inter-operator payments.
- GST on telecom services.
- Disputes over spectrum fees and license charges.
The Vodafone West ruling provides clarity on one major issue, reducing litigation and strengthening compliance.
Conclusion
The ITAT Mumbai’s ruling in favour of Vodafone West Ltd marks a turning point in telecom taxation. By deleting the disallowance of ₹64.81 crore in roaming charges, the Tribunal clarified that non-deduction of TDS does not justify disallowance under Sections 40(a)(ia) and 40(a)(i).
This judgment reinforces consistency in tax law, protects legitimate business expenses, and strengthens confidence in India’s telecom sector.
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