TaxTMI 
TaxTMI 
2017 (1) TMI 310
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....nts. In that view of the matter, the AO treated the assessee as an assessee in default and accordingly raised demand under section 201(1) of the Act for short deduction of tax at source and further charged interest under section 201(1A) of the Act for the year under consideration vide order dated 22.03.2011. 2.2 On appeal by the assessee, the learned CIT(A)-59, Mumbai vide impugned order dated 25.02.2015, following the decision of the Coordinate Bench of the Tribunal, Mumbai in the case of ACIT vs. Merchant Shipping Services Pvt. Ltd. (2011) (8 ITR 1) (Mumbai ITAT), allowed the assessee's appeal on this issue holding that the assessee is liable to deduct tax under section 194C of the Act and not under section 194J of the Act as held by the AO and deleted the demand raised under section 201(1) of the Act and interest charged under section 201(1A) of the Act. 3.1 Aggrieved by the order of the CIT(A)-59, Mumbai dated 25.02.2015 for A.Y. 2005-06, Revenue has preferred this appeal raising the following grounds: - "1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee was under no liability to deduct tax u/s.1....
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....inate Bench of the Tribunal in the case of ACIT vs. Merchant Shipping Service P. Ltd. (2011) 8 ITR 1 (Mumbai ITAT) wherein on similar facts it was held as under: - "6. We have heard the rival submissions and perused the relevant material on record in the light of precedents cited before us. It is noted that the assessee-company is a shipping agent handling vessels for import and export at various Indian ports on behalf of its customers. Before we proceed further, it is sine qua non to zero in on the exact nature of services for which the assessee made the payments in question. Ordinarily shipping agent is a person whose business is to prepare shipping documents, arrange shipping space and insurance and further deal with the customs requirements. It is apparent from the assessment order that during the course of its business as shipping agent, the assessee availed the services provided by NSICT for the movement of its cargo in respect of import and export done by its customers. The movement of cargo on port, in case of export, involves different stages viz., lifting of containers from customer's trailer/rail wagons by the operation of rubber tyre gantry cranes; movement of ....
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....on the payment or the credit of amount to a resident by way of fees for technical services at the specified rate, subject to the fulfillment of the stipulated conditions. The case of the AO is that the assessee availed technical services from NSICT and hence tax was deductible at source under this section. Explanation (b) to s. 194J defines "fees for technical services" as under: "'Fees for technical services' shall have the same meaning as in Expln. (2) to cl. (vii) of sub-s. (1) of s. 9." 10. When we turn to Expln. 2 to s. 9(1)(vii), it is found that 'fees for technical services' has been defined 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 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'." 11. On circumspection of Expln. 2 to s. 9(1)(vii) ....
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....ayment within the scope of s. 194J. The words 'technical services' have not been defined in the Act. But when we view Explanation to s. 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 endeavour, the word 'technical' should also be seen in the same light. To be more precise, any payment for technical services, in order to be covered under s. 194J, should be a consideration for acquiring or using technical know-how simpliciter provided or made available by human element. There should be direct and live link between payment and receipt/use of technical services/information. 14. Where no technical services are provided as such, but the payment is made for the use of some machinery or equipment or standard facility which may have been created or brought into existence with the input of technical services along with man, machine and material, such payment would not partake of the character ....
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....ied 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 dt. 2nd Jan., 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 Authorised Representative has placed on record a text of s. 65(82) of the Finance Act, 1994 defining "port services" as under : "Port services mean 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 works and services to be provided at ports of the Major Port Trust Act, 1963." 17. From the mandate of s. 65(82) of Finance Act, 1994 it is vivid that port services consist of cargo handling, dock services and container handling services. When we view the registration of NSICT as the one under the c....
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....providing access to its subscribers and the Tribunal was justified in coming to the conclusion that no technical services were provided by T to the assessee within the meaning of s. 9(1)(vii) and hence the assessee was not obliged to deduct tax at source from payment made to that party. 20. This case can be viewed from another angle also. There are many sections in Chapter XVII of the Act requiring deduction of tax at source on certain payments, which require the use of machinery in direct or indirect manner. E.g. Expln. III to s. 194C defines 'work' as including (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting. It is obvious that this activity cannot be done without the use of some sophisticated machinery. Similarly s. 194-I requires deduction of tax at source from rent. Explanation to this section defines 'rent' to mean payment for the use of inter alia (e) plant; (f) equipment. This is a direct payment for the use of machinery. No machinery or equipment can be manufactured without some sort of technical service. If we accept the view taken by the AO in this case that the payment for use of any machinery, or equipme....
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....ns, which were lifted from such trailers/rail wagons on the cranes by NSICT and were then moved from yard to vessel side. This movement of cargo is part of the journey of the container from the place of source to the place of destination, which is vessel. The assessee made payment for carriage of goods from the customer's trailers upto the vessel in case of export and vice versa in case of import of goods. This payment cannot be characterized as anything other than for the carriage of goods. When we view Expln. III (c) below s. 194C(2) it becomes apparent that the payment made by the assessee to NSICT is covered within this provision and the assessee rightly deducted tax at source under s. 194C of the Act. 23. At this juncture we are reminded of the well-settled rule of generalia specialibus non derogant which provides that the special provisions override general provisions. In other words, if a special provision has been enacted dealing with a particular thing or situation, then that particular thing or situation is governed by such special provision alone. Application of general provisions stands excluded on that. This rule has got the sanction from several Courts in the....