TaxTMI 
TaxTMI 
2020 (9) TMI 72
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.... account of short deduction of tax at source without properly appreciating the facts of the case and submissions made before him even when payee had already offered the said amount as its income and had paid legitimate amount of tax due on the same. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming demand of Rs. 2,073/- on account of interest on short deduction of tax at source without properly appreciating the facts of the case and submissions made before him. 4. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it." 2. The facts giving rise to the present appeal are that the assessee deductor M/s. Arihant Hospital & Research Centre is a unit of M/s. Arihant Charitable Trust, Indore. A survey action u/s 133A of the income Tax Act 1961 (hereinafter referred as the 'Act') was conducted on 15.05.2014 to verify the TDS compliances. During the course of survey proceedings, statement of Shri Mahendra Bagani, director of M/s. Arihant Hospital & Research Centre was recorded. Thereafter, a show cause notice u/s 201(1)/201(1A) was issued to the assessee calling upon to explain as to why it....
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.... 10% under section 194J of the Income-Tax Act, 1961 as opined by the assessing officer. A.5] The appellant preferred an appeal before the Ld CIT(A)-1, Indore against the order of the assessing officer. The Ld CIT(A)-1, Indore dismissed the appeal filed by the appellant observing that the appellant had entered into a contract with M/s Hoswin Incinerator Private Limited for rendering technical services on which TDS should have been deducted under section 194J of the Income-Tax Act, 1961. A.6] The appellant has therefore preferred an appeal before the Hon'ble Bench against the order of the Ld CIT (A)-1, Indore and has taken the following grounds of appeal: 1] That on the facts and in the circumstances of the case and in law, the Ld CIT [A] erred in concurring with the opinion of the assessing officer in treating the amount paid towards collection and disposal of waste as a technical service liable for deduction of tax under section 194J of the Act even when the appellant had paid the said amount in pursuance to a contract and therefore TDS was rightly deducted under section 194C of the Act. 2] That on the facts and in the circumstances of the case and in law, the Ld CIT [A] er....
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....nical services to the appellant which was liable for deduction of tax at the rate of 10% under section 194J of the Income-Tax Act, 1961. The said party merely collected waste from the hospital of the appellant and disposed it off accordingly and henceforth, the appellant rightly deducted TDS at the rate of 2% under section 194C of the Income-Tax Act, 1961 pursuant to a contract entered into between the appellant and M/s Hoswin Incinerator Private Limited. 1.4.1] The Ld CIT(A)-1, Indore dismissed the appeal filed by the appellant observing that the appellant failed to controvert the findings of the assessing officer given at Para 3.3 & 3.4 of the assessment order. Hence, it assumes significant importance to go through the findings of the assessing officer given in Para 3.3 & 3.4 of the assessment order. 1.4.2] The assessing officer in Para 3.3 of the assessment order observed that the nature of services rendered by M/s Hoswin Incinerator Private Limited involve element of technical consultancy which requires professional expertise within Explanation (a) of section 194J of the Income Tax Act and the managerial services as per Explanation 2 to clause (vii) of sub-section (1) of se....
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.... meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; 9. Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India:- (i) .............. .............. .............. (vii) income by way of fees for technical services payable by- (a) .............. (b) .............. (c) .............. .............. Explanation 2.-For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries"; 1.5.3] In light of the relevant extract of section 194J and Explanation 2 to clause (vii) of sub-section (1) of section 9 of the Income-Tax Act, 1961 as reproduced hereinabove, the observations of the assessing officer are categorically dealt with hereunder for your ready reference: 1.6.1] The first....
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.... assembling of raw materials provided by assessee in respect of modules M1 and M2, as per specifications provided by assessee. No doubt certain training has been provided by assessee to the engineers of BEL, however these rendering of training has been separately remunerated by BEL to assessee. Thus in our considered opinion payment received by BET L towards the work carried on under Phase II of the agreement, will not fall under the definition of the term professional services as no new technical consultancy has been offered by BEL to assessee. We therefore do not find any fault in the observations of Ld.CIT (A) in holding that the work undertaken by BEL is covered under the provisions of section 194C. Accordingly we dismiss the ground raised by the revenue." [Emphasis Supplied] 1.6.5] In view of the above discussion and judicial precedent cited supra, it is quite clear that payments made by the appellant to M/s Hoswin Incinerator Private Limited for collection and disposal of waste did not fall within the purview of 'Fees for Professional Services' so as to attract the provisions of section 194J of the Income-Tax Act, 1961. 1.7.1] The second observation of the assessing offi....
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....the narrower sense by applying the rule of noscitur a sociis, particularly, because the words "technical services" in section 9(1)(vii), read with Explanation 2 comes in between the words "managerial and consultancy services".' 7. "Managerial and consultancy services" and, therefore, necessarily "technical services", would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd's. case (supra). However, it cannot be lost sight of that modern day scientific and technological developments may tend to blur the specific human element in an otherwise fully automated process by which such services may be provided. The search for a more effective basis, therefore, must be made. 8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant upgradation of the services made available and surveillance of the essential parameters connected with the trade including those of a particular/single transaction tha....
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.... and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services" as appearing in Explanation 2 to Section 9(1)(vii) of the Act. 10. For the aforesaid reasons, we ....
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..... What applies to cellular mobile telephone is also applicable to fixed telephone service. Neither service can be regarded as 'technical service' for the purpose of section 194J. 14. 'Technical service' referred to in section 9(1)(vii) contemplates rendering of a 'service' to the payer of the fee. 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." [Emphasis Supplied] 1.7.7] In view of the findings given by the Hon'ble Supreme Court of India and Hon'ble Madras High Court in the judicial precedents cited supra, it is quite clear that facility of waste collection and disposal provided by M/s Hoswin Incinerator Private Limited to the appellant shall not tantamount to 'technical services' since the service provider, M/s Hoswin Incinerator Private Limited runs bio-medical waste treatment facility in Indore wherein it disposes off the bio-medical waste collected from all the hospitals and nursing homes situated in Indore and nearby places. The facility of waste collection and disposal provided by M/s Hoswin Incinerator Private Limited is not something which th....
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.... for a fee. Similar is the proposition laid down in other cases relied by the learned Authorised Representative supra." [Emphasis Supplied] 1.8.3] The Hon'ble ITAT Chandigarh Bench 'B' in the case of HFCL Infotel Limited v. ITO as reported in [2006] 99 TTJ 440 (Chandigarh) has held that: "9. We have heard both the parties and have gone through the orders of lower authorities and the decisions referred by the parties. We are of the opinion that the interconnect charges paid by the assessee to BSNL cannot be treated as technical services as provided under s. 194J. The assessee- company is paying interconnect charges for using the network of BSNL. No doubt that the highly technical and sophisticated equipments and infrastructure is used by the telephone operators but that itself does not mean that the charges paid for routing the telephone calls through the said network means that the technical service is being provided." [Emphasis Supplied] 1.8.4] In view of the findings reiterated in the judicial precedents cited supra, it is quite evident that even in the facts of the present case, the fact that highly technical and sophisticated equipment and infrastructure were being used....
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....s applied. 9. When the matter was carried before learned CIT (A), it was held that instead of provision of Section 194J only the provision of Section 194C would be applicable. Relevant paragraph of learned CIT (A) is reproduced below: "The reasons of the ACIT(TDS) Circle, Baroda for arriving at the conclusion that the provisions of Section 194J of the I.T. Act are applicable in I respect of payments made by the appellant company to the Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection & Infrastructure ltd. as well as above entire submission of the appellant have been considered. In my opinion the ITO(TDS) Circle, Baroda is not correct in holding the view that services rendered for handling and disposal of Hazardous Chemical Waste Management are services of technical nature. The scope of work of Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection & Infrastructure ltd. was for collection, transportation and disposal of Hazardous Solid Waste from GFL, Dahej site to Gujarat Enviro Protection & Infrastructure ltd., Surat as per GPCB norms. Again the work of Nandesari Environment Control Ltd. was for operation and maintenance charges and was also....
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....sent case since the appellant also made to M/s Hoswin Incinerator Private Limited for collection, transportation and disposal of waste and therefore TDS was rightly deducted at the rate of 2% under section 194C of the Income-Tax Act, 1961. 1.9.4] The Hon'ble ITAT Mumbai Bench 'C' in the case of M/s Coimbatore Integrated Waste Management Company Pvt. Ltd. Vs. DCIT-TDS, Coimbatore [I.T.A. No. 2710/Mum/2015] vide order dated 01-03-2018 has held that: [Page No. 62-67] "5....................The issue to be decided is as to whether the work carried out by the assessee would fall in the category of technical services as envisaged by the provisions of section 9 of the Act. Technical services mean any consideration paid for the rendering of any managerial, technical or consultancy services. In the case under consideration no consultancy was provided by the sub contractor. Similarly it had not rendered any managerial services. The assessee had entered in to an agreement with the sub contractor and the sub contractor was carrying out certain jobs as required by CMC. But, it had not transferred any technical knowledge to the assessee. Thus, the first pre-condition of services being of Tech....
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.... a standard facility provided to all those willing to pay for it does not amount to fee for technical services. VSAT Charges, leased line charges, BOLT charges, Demat charges etc., paid to stock exchange were also held to be not predominantly requiring human services but only fees collected for use of a standard facility. 13. In the case of Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT (supra) the question for consideration was as to whether payments for transmission, wheeling and SLDC charges to electricity transmission company would fall within the meaning of the expression "technical services". The Bench observed that as per the agreement there was open access to all users with regard to transmission lines. Merely because operation and maintenance of transmission lines and maintaining its grid station was with the help of certain work force, it cannot be considered that they were rendering any technical services to the assessee since they can be said to be simply discharging their function of operating and maintaining its grid station and transmission lines. Analysing section 194J of the Act, the Bench further noticed that only when the technology or technical knowledge of a person....
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....ax of Rs. 2,073/- was neither legal nor proper and requires to be deleted in entirety. 7. On the other hand, Ld. Departmental Representative (DR) opposed these submissions and supported the order of the authorities below. 8. Ld. counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of the Coordinate Bench of this Tribunal rendered in the case of ITO vs. Gujarat Fluoro chemicals Limited (ITANo.1983,1984,1985/Ahd/2012) dated 31.10.2013. Ld. counsel also placed reliance the judgment of Hon'ble Supreme Court rendered in the case of CIT vs. Kotak Security Ltd. 340 ITR 333(SC). Further reliance was placed on the decision of the Delhi Bench of this Tribunal rendered in the case of ITO, Rohtak vs. Akon Electronics India (P.) Ltd. (2018) 97 Taxmann.com 176(Delhi-Trib.) 9. We have heard rival submissions and perused the material available on record. The Ld. CIT(A) dismissed the appeal by observing as under: "Ground No.1 & 3: Both the grounds of appeal have been raised against raising the tax liability of Rs. 6,948/- on account of short deduction of taxes u/s 201(1) of the Income Tax Act,1961. The AO has discussed the issue at para nos.3....
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....aste. The assessee company was making the payments for treatment of an affluent up to the plants. According to AO such services of carrying on the waste to the affluent plant was a 'technical service'. According to AO, payment made for the disposal of the waste was a 'professional service'; therefore, the provision of Section 194J was applied. 9. When the matter was carried before learned CIT(A), it was held that instead of provision of Section 194J only the provision of Section 194C would be applicable. Relevant paragraph of learned CIT(A) is reproduced below: "The reasons of the ACIT(TDS) Circle, Baroda for arriving at the conclusion that the provisions of Section 194J of the I.T. Act are applicable in I respect of payments made by the appellant company to the Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection & Infrastructure ltd. as well as above entire submission of the appellant have been considered. In my opinion the ITO(TDS) Circle, Baroda is not correct in holding the view that services rendered for handling and disposal of Hazardous Chemical Waste Management are services of technical nature. The scope of work of Nandesari Environmen....