TaxTMI 
TaxTMI 
2011 (10) TMI 21
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....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 camouflage the applicable provisions of 194J as considered by the deductor company as 194C. 6. Without prejudice to the Appellant's contention that the provisions of Section 194C are applicable in the case of payments made to security agencies, where the recipient has fully paid the taxes, the CIT(A) has no jurisdiction u/s. 201(1) to demand further tax from the tax payer in respect of tax allegedly short deducted. The Appellants submit that if the tax has been collected, albeit not in the manner provided for in Chapter XVII - B of the Income-tax Act, then no further liability could be foisted....
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....d 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 Act. The Ld CIT(A), accordingly, upheld that there is a failure on the part of the appellant to deduct tax at the rate of 10% u/s. 194J of the Act while justifying the action of the A.O in passing order u/s. 201(1) of the Act. 3. As regards the ground relating to charging of interest u/s. 201(1A) of the Act, the Ld CIT(A) directed the A.O to charge interest u/s. 201(1A) of the Act till the date of actual payment of tax or completion of assessment of the payee whichever is earlier in view of the decisions relied on by the assessee. 4. Aggrieved, the appellant is now in appeal before us on the above stated grounds raising the issue as to whether provisio....
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....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 security agencies for provision of security guards are not in the nature of managerial, technical or consultancy services. Only if the above payments are in the nature of managerial, technical or consultancy services, the Explanation 2 can be applied, which includes provision of services or technical or other personal. He submitted further that security guards do not require any specific technical qualifications or training for performing their duties. The Ld. A.R. also referred page Nos. 12 to 29 of the paper book i.e. copy of the agreement entered with Industrial Security for providing industrial security and fire fighting services at factory p....
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....nto 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 including the assessee, along with machines, technical manpower and hence, tax was deductible u/s. 194J. The assessee explained that payments made to NSICT were for container movement under the contract and there was no professional or technical services involved in the movement of containers. It was explained that the services provided by NSICT were towards the movement of containers from the customers, trailers/rail wagons to yard and from there to vessels in respect of export containers, and for the import containers, the payment was made for moving containers from vessels on to the trailers at the quay site and for ....
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....p; 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 consultancy services", it becomes apparent that the word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". 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 or to be covered u/s 194J, should be a consideration for acquiring or using technical know-how simplicitor provided or made available by human element. There should be direct and live link between payment and receipt/use of technical services/information. 14. ....
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....dy 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 that all the services rendered by them were covered under Port Services. They also admitted that they had not rendered any MC (management consultancy) services. The learned A.R. has placed on record a text of section 65(82) of the Finance Act, 1994 defining "Port Services" as under: "Port Services means services rendered by a port or any person authorized by the port in any manner in relation to the vessel or goods. Such services include movement of ships and vessels, movement of cargo and goods into and out of the port etc. Services provided at ports are contained in Chapter V on ....