TaxTMI 
TaxTMI 
2010 (11) TMI 692
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....Terminal Limited (hereinafter referred to as "NSICT") and deducted tax at source at the rate of 2.05% as provided u/s.194C for which payment was made. The Assessing Officer, during the course of proceedings u/ss.201(1) and 201(1A), noted that NSICT entered into technical service agreement with P and O Australia under which P and O Australia was to provide technical know-how to the assessee-company. It was also noted by the AO that NSICT had also charged service tax on the payments from the assessee. The Assessing Officer noted that at the time of survey it was found that NSICT was operating its terminal with 8 quay cranes, 29 rubber tyred quantry cranes, 3 rail mounted gantry cranes and more than 600 employees. In para 10 of the assessment order, the A.O. observed that P and O Australia was the main shareholder of NSICT through its holding in South Asia Port Limited and under the agreement P and O Australia supplied technical knowhow in return for fees. In view of these facts the Assessing Officer opined that NSICT was rendering/providing technical and specialized services to its customers including the assessee along with machines and technical manpower and hence tax was deductibl....
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....he learned CIT(A) that the tax was required to be deducted at source under section 194C and not section 194J. The learned Departmental Representative contended that it was discovered during the course of survey that the payments made by NSICT were in the nature of fees for technical services as they were providing specialized services to the assessee. He further argued that P and O Australia entered into technical service agreement with NSICT providing them the technical knowhow, from where it would naturally follow that NSICT also provided technical services to its customers including the assessee. He further stated that NSICT charged service tax in its invoices raised on the customers, which was clear indicator of they being provider of technical services. The learned Departmental Representative argued that section 194C applies in respect of payments made to contractors, which was not the case under consideration. It was, therefore, strenuously argued that the view taken by the learned CIT(A), on this issue, be overturned. 5. In the oppugnation, the learned A.R. argued that the finding recorded by the Assessing Officer in para 5 that NSICT entered into technical service....
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....s from trailers at the quay side on to the vessel with the operation of quay cranes. Similarly the movement of cargo on port, in case of import, involves different stages viz., moving the containers from vessel on to the trailers at the quay side with the operation of quay crane; movement of the containers from yard to vessel side; and operation of rubber tyre grantry cranes/rail mounted gantry cranes for lifting the containers off from trailers to customer's trailers/rail wagons. The above description of the work done by NSICT for the assessee was brought to the notice of authorities below and the A.O. has recorded the same in para 10 of the assessment order. The veracity of above nature of services, as stated by the assessee to have been provided by NSICT, stood established when during the course of survey proceedings it was noted that NSICT operated its terminal with 8 quay cranes, 29 rubber tyred country quantry cranes, 3 rail mounted gantry cranes and more than 600 employees. 7. The reference made by the A.O. in para 5 of the assessment order that NSICT entered into technical services agreement with P and O Australia under which P and O Australia was to provide technical kn....
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....planation (2) to section 9(1)(vii) in juxtaposition to section 194J, it becomes apparent that the fees for technical services is consideration for the rendering of any managerial, technical or consultancy services including the provision of services for technical or other personnel. Thus the foremost criteria for bringing any payment under the purview of Explanation (2) to section 9(1)(vii) is that the payment must have been made for rendering of any managerial, technical or consultancy services and also including the provision of services for technical or other personnel. 12. The Assessing Officer, in the instant case, has restricted himself only to the technical services and it is nobody's case that the assessee made any payment for managerial or consultancy services. In the like manner the AO has not pressed into service the later part of the Expl. 2, which deals with provision of services of technical or other personnel. It is rightly so because of the fact that NSICT raised invoices in respect of movement of cargo and there is no reference to any specific provision of services by technical or other personnel. Rule of ejusdem generis helps in ascertaining the meaning ....
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....d not partake of the character of fees for technical services. Take for example a person going to a cinema and purchasing ticket for watching a movie. When he purchases ticket, he pays for watching the movie and not for availing any technical service. It is a different matter that the movie is exhibited on screen by way of some technical input. Take another example of a person boarding a bus or train by purchasing the requisite ticket. It cannot be said that the person is making payment for technical services. No doubt bus or train is made by sufficient technical input but the user of the same on a non-customized basis cannot be said to be making payment for any technical services. It is the bus manufacturer who avails technical services in making the bus. Once the bus is made and brought on road for use by anyone, boarding on it in lieu of ticket, is a payment for use of bus as a facility and not for technical services which was obtained by the bus manufacturer at the time of making bus. In the present age of technology most of the services availed by us are result of some technical input. The usage of such facility on payment basis cannot be described as fees for technical servic....
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.... of NSICT as the one under the category of PS and MC' along with the fact that the assessee paid for the movement of containers of its customers, there remains no doubt that NSICT, in fact, maintained different types of cranes for the purpose of providing cargo handling services. The registration of any person for the purpose of service tax, no doubt presumes that some sort of services are provided by him within the meaning of Finance Act, 1994, but that does not mean that such services are only in the category of technical services' unless the prescription of Explanation (2) to section 9(1)(vii) is fulfilled. A payment to be covered u/s.194J should be fees for technical services and such fees should be for rendering of any technical, managerial or consultancy services and not anything else. In order to rope in any service provider within the net of section 194J, it is of paramount importance to check the true nature of service provided on the touchstone of the mandate of this provision alone. If the conditions of section 194J r.w.s. 9(1)(vii) Explanation (2) are not fulfilled, the liability under this section is ruled out. 18. In the case of Skycell Communications Ltd. (....
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....AO in this case that the payment for use of any machinery, or equipment or facility, which in turn, involves the input of some technical information in its making, is to be considered as fees for technical services, then the payments in all such cases shall be covered u/s 194J and the other sections, as taken note of above, would be rendered as a redundant piece of legislation. It is axiomatic that it cannot be the case. 21. In view of the foregoing discussion we hold that there was no liability on the assessee to deduct tax at source from the payments made to NSICT within the meaning of section 194J and the ld. CIT(A) was justified in holding so. 22. Now let us examine and evaluate the contention of the assessee that the payments made to NSICT are covered u/s.194C of the Act. This section mandates that any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of contract between the contractor and the persons specified, shall at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other....
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....stands excluded on that. This rule has got the sanction from several courts in the country including the Hon'ble Apex court in Britannia Industries Ltd. VS. CIT (2005) 278 ITR 546 (SC) and that of the Hon'ble jurisdictional High Court in Forbes Forbes Campbell and Co. Ltd. VS. CIT (1994) 206 ITR 495 (Bom). Coming back to the facts of the present case we find that the payments made to NSICT are straightway covered under Explanation III (c) below section 194C(2). This being a specific provision encompassing the payment of carriage, the provisions of section 194J, which are general in the context of not specifically defining the meaning of 'technical services', cannot be applied. 24. We, therefore, hold that the payments made by the assessee to NSCIT are covered u/s 194C and there is no scope for applying the provisions of section 194J. The natural corollary is that the assessee rightly made deduction of tax at source at the applicable rate. 25. Ground no.1 of the assessee's cross objection assails the view of the learned CIT(A) that the assessee was responsible for deduction of tax at source notwithstanding the fact that the recipient had made the payment of tax d....
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....ed the amount received in his income and paid due tax, the liability of payer to interest u/s 201(1A) still exists for the period between the date on which tax was deductible till the date on which the tax was actually paid. In such a situation the date of payment of tax by the payee can be treated as the date of payment. This view has been taken by the Hon'ble Supreme court in CIT VS. Eli Lilly and Co. (India) P. Ltd. (2009) 312 ITR 225 (SC). Still in an earlier case, the Hon'ble Supreme Court in Hindustan Coca Cola Bewerage Ltd. VS. CIT (supra) has held that interest u/s 201(1A) is payable till date of payment by deductee. 30. Be that as it may, this ground has become academic in view of our decision on the Revenue's appeal that the assessee had rightly deducted tax at source u/s.194C. 31. Second ground raised by the assessee in its cross objection is about the holding of the order passed by the A.O. as within reasonable time. The ld. AR argued that the order u/s 201(1) and 201(1A) was passed by the AO on 12.12.2008. In the absence of any time limit provided in the Act for the passing of such order, the ld. AR argued, that it ought to have been passed within a....