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Income tax Officer (TDS) (OSD) Versus Fino Fintech Foundation/M/s. Financial Inclusion Network & Operation Ltd. (Now known as Fino Paytech Limited)

2016 (6) TMI 891 - ITAT MUMBAI

TDS u/s 194J OR 194C - Fees for technical services - TDS on enrollment expenses and AMC charges - TDs on payment for interconnect/port access charges - Held that:- “Fees for technical services” in section 194J of the Incometax Act, 1961, has the same meaning as given to the expression in Explanation 2 to section 9(1)(vii) of the Act. , that in the Explanation the expression “fees for technical services” means any consideration for rendering of any “managerial, technical or consultancy services”, .....

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ice, are provided by humans, that applying the rule of noscitur a sociis, the word “technical” in Explanation 2 to section 9(1)(vii) would also have to be construed as involving a human element. In that matter the AO was of the opinion that interconnect/port access charges were liable for tax deduction at source in view of the provisions of section 194J of the Act and that these charges were in the nature of fee for technical services. - Provisions of section 194J of the Act would be applica .....

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ffective ground of appeal against the AO. - I. T. A. 5951 & 52/Mum/2014 - Dated:- 22-6-2016 - Sh. Rajendra, Accountant Member And Pawan Singh, Judicial Member For the Revenue : Shri K. Ravi Ramachandran-DR For the Assessee : None ORDER Per Rajendra, AM Challenging the orders, dated 14. 07. 2014 and 18. 07. 2014 of CIT(A)-14, Mumbai, the Assessing Officer (AO) has filed the present appeals raising various grounds. ITA No. 5951/M/2014: 2. Assessee company was providing Banking services in extreme .....

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ount. On verification of the P&L account the AO found that the assessee had incurred major expenditure under the heads enrollment charges, AMC charges, POT usage charges and rent for POT machines. He called for details in that regard and observed that the assessee had considered the enrollment and AMC charges as contract, that the major payments were made to the sister concerns namely financial inclusion network and operations limited (Rs. 26. 98 crores). The assessee had not deducted any ta .....

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Act, that the assessee had claimed those expenditure as contract expenses and had deducted tax as per provisions of section 194C of the Act. Vide his show cause notice, dt. 13. 2. 2013, he directed the assessee to explain as to why on enrollment expenses and AMC charges TDS u/s. 194J was not deducted and why it should not be considered that it had committed default u/s. 201(1) and 201(1A) of the Act. 3. After considering the submission of the assessee, he held that it was providing services for .....

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, that the procedure could not be performed by non technical person, that payment for such services would attract section 194 of the Act. He further held that the assessee had not deducted TDS on ₹ 26. 98 crores, that the deducteee had submitted nil deduction certificate (u/. 197 of the Act, dt. 17. 6. 2010), that the certificate was issued for Nil-deduction for payment/credit under contract for an amount of ₹ 18 crores, that the assessee had not deducted tax for ₹ 26. 98 crore .....

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he said composite work, that one of the service providers had obtained a certificate u/s. 197 for non- deduction/short deduction of tax made by the assessee to it, that mere use of technology and /or technical equipments while providing the services, would not make it as a technical service, that payment made under the head enrollment expenses and AMC charges were in nature of contract, that the tax was rightly deducted u/s. 194C of the Act, that the AO had not given the credit for lower deducti .....

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by the parties to the assessee were not in the nature of fee for professional services, that the services rendered by the service providers were also not in the nature of managerial, technical or consultancy services, that mere use of technology would not make it technical services, that provision of section 194J were not applicable to the payments made to the parties, that in order to cover u/s. 194J it was necessary that there must either be acquisition or use of technical knowhow which was p .....

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d upon the order of the AO and stated that preparing biometric and demographic particulars of banking customers was technical service, that provisions of section 194J of the Act was applicable. As stated earlier none appeared on behalf of the assessee. 6. We have perused the material before us. We find that the AO was of the opinion that TDS was to be made as per the provisions of section 194J of the Act and not as per the provisions of section 194C, that one of the service provider i. e. sister .....

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ion of tax at source from fees for technical services. Technical services consist of services of technical nature when special skills or knowledge relating to technical field are required for their provision, managerial services are rendered for performing management functions and consultancy services relate to provision of advice by someone having special qualification that allow him to do so. What constitutes technical services cannot be understood in a rigid formulaic manner. It will vary fro .....

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agreed terms and conditions. Under clause 8 of the agreement, it was agreed that the transmission charges would be paid to PGCIL by the assessee for transmitting private sector power through PGCIL lines under the guidelines of the Central Electricity Regulatory Commission. Clause 10 stated that the transmission tariff and terms and conditions for the power to be transferred by PGCIL would be in terms of the notification to be issued by the Commission from time to time. On the commissioning of th .....

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f the assessee under section 133A on 2201. 2009. It was noticed that the assessee had deducted tax at source at 2% u/s. 194C of the Act on the wheeling charges paid to PGCIL. According to the AO, the value of these services could not be bifurcated from the total value paid by the assessee to PGCIL for transmission services in the name of wheeling charges. The transmission lines could not be of any use in isolation and without other associated services the transmission of electricity could not ha .....

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ating and maintaining its own system using the services of engineers and qualified technicians. PGCIL was in that process not providing technical services to others, including the assessee. A comparison could be made with the system of distribution of some other commodity like water. It might require the operation and maintenance of water pumping station and the maintenance of a network of pipes. However, what was conveyed through the pipes and the equipment to the ultimate consumer was water. T .....

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aracterised as a provision of technical services and sought to be brought within the fold of section 194J . We further find that in the case of Bharti Cellular Ltd. ( 319 ITR 139), the Hon ble Delhi High Court has held that the expression fees for technical services in section 194J of the Incometax Act, 1961, has the same meaning as given to the expression in Explanation 2 to section 9(1)(vii) of the Act. , that in the Explanation the expression fees for technical services means any consideratio .....

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nt, that both, managerial service and consultancy service, are provided by humans, that applying the rule of noscitur a sociis, the word technical in Explanation 2 to section 9(1)(vii) would also have to be construed as involving a human element. In that matter the AO was of the opinion that interconnect/port access charges were liable for tax deduction at source in view of the provisions of section 194J of the Act and that these charges were in the nature of fee for technical services. If both .....

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