TMI Blog2011 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) II, Nashik [hereinafter referred to as CIT(A) ] erred in upholding the order of the Income-tax Officer(TDS) -1, Nashik [hereinafter referred to as AO ] who invoked the provisions of Section 201(1) and Section 201(1A) of the Income-tax Act read with Section 194J and calling upon the Appellant to pay a sum of Rs. 56,420/- by treating the Appellant to be an assessee deemed to be in default under section 201(1) and a sum of Rs. 23,128/- by way of interest under section 201(1A). 2. The CIT(A) erred in upholding the stand of the AO who held that the payment made pursuant to the contracts entered into by the Appellant for provision of security services fall within the ambit of the provisions of Section 194J. 3. The CIT(A) erred in upholding the stand of the AO who stated that the reliance placed by the Appellant on the Central Board of Direct Taxes Circular No 715 dated 8/8/1995 is irrelevant to the facts of the Appellant. 4. The CIT(A) erred in upholding the stand of the AO who interpreted the provisions of Explanation 2 to Section 9(1)(vii). 5. The CIT(A) erred in upholding the stand of the AO who stated that the security services contract is just to camouflag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant at fault for short deduction of TDS. He passed order u/s. 201 and 201(1A) read with Section 194J demanding payment of TDS and interest on TDS respectively as under : Sr.No. A.Y. Short Deduction of T.D.S.(Rs.) Interest on short deduction(Rs.) Total (Rs.) 1 2005-2006 56,420 23,128 79,548 2 2006-2007 1,33,303 38,338 1,71,641 3 2007-2008 77,271 10,719 4 2008-2009 1,93,133 8,359 2,01,492 TOTAL 4,60,127 80,544 5,40,671 The aggrieved appellant went in first appeal but could not succeed. The Ld CIT(A) did not accept the argument of the assessee that security services are not covered u/s. 194J of the Act as they were not consultancy services. The Ld CIT(A) after discussing the nature of security services as mentioned in the reply of the assessee came to the conclusion that security personnel were rendering skilled services to the assessee and can be categorized as professional or technical services as per the Explanation to Section 194J of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He submitted that on the issue in question as to whether services of the electrician provided by a contractor will come under the provisions of Section 194C or 194 J, the CBDT replied that the payments made to an electrician or to a contractor, who provides the services of an electrician will be in the nature of payment made in pursuance of a contract for carrying out any work. Accordingly, provisions of Section 194C will apply in such cases. The Ld. A.R. submitted that payments made for security services can by no stretch of imagination be covered under the provisions of Section 194J under the head Fees for Technical Services which term is defined u/s. 9(1) Explanation 2 Clause (vii). He submitted that Clause (vii) to Explanation 2 to Section 9(1) defines Fees for Technical Services which means any consideration (including of lumpsum consideration) for rendering of any managerial, technical or consultancy services (including the provisions of services of technical or other personal). 7. Without prejudice to his above contention, the Ld. A.R. submitted further that payments made towards security services are covered under the provisions of Section 194C, payments made to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the ld. A.R. that case of the assessee does not fall under the provisions of Section 194J of the Act. In that case before the Mumbai Bench of the Tribunal, the assessee company was a shipping agent handling vessels at various Indian Ports. During the course of survey, it was discovered that in the F.Y. 2003-04, the assessee made payment of Rs. 12,23,29,581/- to Nav Seva International Container Terminal Ltd., (NSICT in short) and deducted tax at source at the rate of 2.05% as provided u/s. 194C, for which, payment was made. During the course of proceedings u/s. 201(1) and 201(1A), the A.O. noted that NSICT entered into Technical Service agreement with P O, Australlia, under which P O, Australlia was to provide technical knowhow to the assessee company. It was also noted by the A.O that NSICT had also charged service tax on the payment from the assessee. The A.O observed that P O Australlia was the main shareholder of NSIT through its holding in South Asea Board Ltd and under the agreement, P O Australlia supplied technical knowhow in return for peace. In view of these facts, the A.O opined that NSICT was rendering/providing technical and specialized services to its customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recent judgment rendered in CIT VS. McDowell and Co.Ltd. (No.1)(2009) 314 ITR 167 (SC). By applying this rule, the expression other personnel in this provision must fall within the genus of services of technical personnel. It cannot be considered as any personnel unrelated to the managerial, technical or consultancy services. Even though NSICT had the services of several personnel in the process of movement of cargo, those personnel, in the absence of any finding by the AO that they possessed some technical expertise, cannot be considered within the ambit of this provision as falling under other personnel . 13. Further narrowing the scope of controversy to the payments made by the assessee for availing technical services, as has been held by the AO, we need to concentrate on the meaning of technical services . In other words, the technical services should be provided by the recipient of the amount so as to bring the payment within the scope of section 194J. The words technical services have not been defined in the Act. But then we view Explanation to sec. 9(1)(vii), which defines fees for technical services as consideration for rendering of any managerial, technical or con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyre gantry cranes and rail mounted gantry cranes. These cranes are used for specific purposes only. Rubber tyre gantry cranes, rail mounted gantry cranes are used for lifting the container from customer s trailer/rail wagons and quay cranes are used for moving containers from trailers at the quay side on to the vessel. When the assessee made payment to NSICT it was meant for using the facility of cranes provided by them for the movement of containers and not for availing any technical services which may have gone into the making of cranes. NSICT opened its doors of service to one and all. Anybody interested in movement of containers could avail the facility. The assessee has also made payment on bill to bill basis. In other words, payment was made for user of a standard facility provided by NSICT, specifically for the movement of containers from or to the vessel. 16. The Assessing Officer has heavily relied on the fact that NSICT was registered for the purpose of payment of service tax. It was clarified by NSICT to the learned CIT(A), vide their letter dated 02.01.2009, that they were registered under the category of PS and MC . PS stands for Port Services. They admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or consultancy services and not anything else. We respectfully follow the view of the Mumbai Bench of the Tribunal in the afore-cited case of ACIT Vs. Merchant Shipping Services (P) Ltd. and Others (Supra) that in order to rope in any service provider within the net Section 194J, it is of paramount importance to check true nature of service provided on the touchstone of the mandate of this provision alone. Clause (vii) to Explanation 2 to Section 9(1) defines fees for technical services, as consideration for rendering of any managerial, technical or consultancy services , the word technical is precluded by the word managerial and succeeded by the word consultancy . We thus following the decision of Mumbai Bench of the Tribunal in the afore-cited case hold that as both the managerial and consultancy services are possible with human endeavor, the word technical should also be seen in the same light. To be more precise, any payment for technical services in order to be covered u/s. 194J, should be a consideration for acquiring or using technical knowhow simplicitor provided or made available by human element. There should be direct and live link between payment and receipt/us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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