TaxTMI 
TaxTMI 
2008 (10) TMI 321
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....law have been framed: (a) Whether the payments made by the assessee to the MTNL/other companies for the services provided through interconnect/port/access/toll were liable for tax deduction at source in view of the provisions of section 194J of the Act? (b) Whether the learned Income-tax Appellate Tribunal erred in holding that the payment for use of services for MTNL/other companies via the interconnect/ port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194J of the Act so as to be eligible for tax deduction at source? 2. The facts in all these appeals are similar. The respondents/assessees in these appeals are companies engaged in the business of providing cellular telephone facilities to their subscribers. The assessees/respondents had been granted licences by the Department of Telecommunication for operating in their respective specified circles. The assessees are required to set up their own equipment and necessary infrastructure for operating and maintaining their networks. The licences granted to the assessees stipulated that the Department of Telecommunication/MTNL/BSNL would continue to operate ....
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.... the national long distance interconnect charges. IDEA (Maharashtra) would recover the normal call charges from its subscriber A and make the payment to BSNL as per the invoice for the national long distance interconnect charges. BSNL, in turn, would make the payment to Airtel (Delhi) for the local interconnect charges. 4. From the above examples, it is clear that MTNL/BSNL or other companies providing the interconnection access/ports are entitled to charge those networks which seek such interconnection/port access facility for completing their calls. The questions which have been framed in these appeals are related to the nature of these charges. According to the Revenue, the said interconnect/port access charges are liable for tax deduction at source in view of the provisions of section 194J of the said Act and that these interconnect/port access charges are in the nature of fees for technical services. 5. In the present appeals, it is the case of the Revenue that the assessees were liable to deduct tax at source when they made the payments in respect of the interconnect/port access charges. It was contended before us that the non-deduction/short deduction under section 201....
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.... ITR 312, which has considered the expression "technical service" within the context of section 80-O. It was contended that in the said decision, it was pointed out that "technical service" has two components. The first is the use of tools and the second being the application of human reason to the properties of matter and energy. It was, therefore, contended that unless and until the element of human interface was present, the facility provided by the MTNL/other companies could not be regarded as a technical service. 7. It was also contended that since the expression "fee for technical service" as appearing in section 194J, is to be construed in the same manner as given in Explanation 2 of section 9(1)(vii) of the said Act, the entire expression "managerial, technical or consultancy services" would have to be considered. Thus, the word "technical" would take colour from the words "managerial" and "consultancy" and cannot be considered in the general or wider sense. Since both managerial and consultancy services, by their very nature, involve a human element, the technical services which are relevant for the purpose of section 194J would be those technical services which involve....
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....n,- (a) 'professional services' means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;" 11. It is apparent that in respect of fees for technical services tax is to be deducted at source at 5 per cent. (as it then was). It is also clear that the expression "fees for technical services" has the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9. The said Explanation 2 reads as under : "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 an....
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....by a subscriber to the cellular mobile telephone facility provider and not by one cellular network provider to another. For this purpose, we must examine the appeals at hand de hors the decision of the Madras High Court in Skycell Communications Ltd. [2001] 251 ITR 53. 13. We have already pointed out that the expression "fees for technical services" as appearing in section 194J of the said Act has the same meaning as given to the expression in Explanation 2 to section 9(1) (vii) of the said Act. In the said Explanation the expression "fees for technical services" means any consideration for rendering of any "managerial, technical or consultancy services". The word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". Since the expression "technical services" is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on the Interpretation of Statutes (Twelfth Edition) in the following words (page 289) : "Where two or more words which are susceptible of analogous meaning are coupled together, noscuntur a sociis, they are understood to be used in their cognate sense. They take, ....
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.... section 9(1) (vii) would also have to be construed as involving a human element. But, the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. 16. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Explanation 2 to section 9(1) (vii) of the said Act. This is so because the expression "technical services" takes colour from the expressions "managerial services" and "consultancy services" which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as "technical services" as contemplated under section 194J of the said Act. Since we have applied the rule of noscitur a sociis, it would be necessary to indicate that this rule or principle has been applied and accepted by the Supreme Court whenever the meaning of a word, which fall....
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....eaning of the expression "technical services" by itself, is far from clear. It is also clear that the word "technical" has been used in the "society" of the words "managerial" and "consultancy". In such a situation, the rule would clearly apply and, therefore, the expression "technical services" would have to take colour from the expressions "managerial services" and "consultancy services". 18. To conclude the discussion on the application of the rule of noscitur a sociis, we think that a reference to the Supreme Court decision in the case of Stonecraft Enterprises v. CIT [1999] 237 1TR 131 (SC); [1999] 3 SCC 343 would be apposite. In that case, the Supreme Court was required to interpret the provisions of section 80HHC(2)(b) of the said Act relating to the assessment years 1985-86, 1987-88 and 1988-89. In the said sub-section (2) (b) of section 80HHC, it was provided that the section did not apply to the following goods or merchandise, namely :- (i) mineral oil; and (ii) minerals and ores. The question that arose before the Supreme Court was whether granite fell within the meaning of the word "minerals". The contention of the assessee before the Supre....