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of <h1>Charges for standard subscriber services not 'fees for technical services' under section 194J read with section 9(1)(vii) Explanation 2</h1> <h3>Skycell Communications Ltd. And Another. Versus Deputy Commissioner of Income Tax And Others.</h3> HC held that charges paid by subscribers for use of standard facilities (e.g., fixed or mobile telephone, cable TV, internet, transport, utilities) do not ... Deduction Of Tax At Source on the payments - cellular mobile telephone service providers - definition of 'fees for technical services' in section 194J read with section 9(1)(vii), Explanation 2 - HELD THAT:- At the time the Income-tax Act was enacted in the year 1961, as also at the time when Explanation 2 to section 9(1l)(vii) was introduced by the Finance (No. 2) Act, with effect from April 1, 1977, the products of technology had not been in such wide use as they are today. Any construction of the provisions of the Act must be in the background of the realities of day-to-day life in which the products of technology play an important role in making life smoother and more convenient. Section 194J, as also Explanation 2 in section 9(1)(vii) of the Act were not intended to cover the charges paid by the average house-holder or consumer for utilising the products of modern technology, such as, use of the telephone fixed or mobile, the cable T. V., the internet, the automobiles the railway, the aeroplane, consumption of electrical energy, etc. Such facilities which when used by individuals are not capable of being regarded as technical service cannot become so when used by firms and companies. The facility remains the same whoever the subscriber may be-individual, firm or company. 'Technical service' referred 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. The petitioner is very much affected by the direction that has been issued by the Revenue inasmuch as part of the revenue realisable by the assessee is required to be diverted by the subscriber to the Revenue by reason of the impugned order even when the law does not impose such a requirement. The writ petitions are, therefore, allowed Issues involved: Interpretation of 'fees for technical services' u/s 194J of the Income-tax Act and applicability to cellular mobile telephone service providers.Summary:The petitioners, engaged in providing cellular mobile telephone services, challenged the Chief Commissioner of Income-tax's direction to treat payments from subscribers as 'fees for technical services' u/s 194J. The petitioners argued that their services did not fall under this category as they provided infrastructure for mobile communication, including various components like mobile switching centers, base stations, and more, but the service itself did not constitute technical services as defined in the Act.The definition of 'fees for technical services' in section 194J was examined, which includes managerial, technical, or consultancy services but excludes services like construction or assembly. The court analyzed the term 'technical' and concluded that not every service involving technology qualifies as technical service. Examples were provided, such as taxi services, train travel, electricity supply, and satellite television, where the use of technology does not equate to technical services.The judgment emphasized that services like cellular mobile telephony, fixed telephone services, internet subscriptions, etc., do not amount to technical services under section 194J. The court highlighted that the Act was not intended to cover charges for utilizing modern technology in everyday life. It was clarified that the mere collection of a fee for a standard facility does not constitute a fee for technical services.Despite the usual requirement to exhaust statutory remedies before approaching the court on tax matters, the court granted relief to the petitioners as the Revenue's interpretation of technical services was deemed unreasonable. The petitioners' writ petitions were allowed, with costs awarded in their favor.Overall, the judgment clarified the scope of 'fees for technical services' under section 194J and its inapplicability to certain services, including those provided by cellular mobile telephone service providers.
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