TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 20
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....ncluding that its corresponding payments/remittances made to M/s. Computer Science Corporation India Pvt. Ltd. (CSCIPL) are in the nature of fee for technical and professional services attracting TDS deduction u/s.194J rather than Section(s) 194C and 194I of the Act. ITA Nos. 235 & 237/Ahd/2015 for A.Y. 2012-13 & 2013-14 arise against the CIT(A)-VI, Baroda's separate orders; both dated 10.11.2014 in case nos. CAB/VI-337/2013-14 & CAB/VI-339/2013-14 involve similar substantive pleadings except the fact that the assessment(s) in question involved therein read figures of Rs. 31,54,489/- and Rs. 1902710/-; respectively. The above taxpayer's next two appeals ITA Nos. 196 & 236/Ahd/2015 for A.Y. 2012-13 & 2014-15 arise from the CIT(A)-V & VI, Baroda's orders dated 30.10.2014 and 10.11.2014 in case nos. CAB/(A)V-122/14-15 & CAB/VI-342/2013-14, affirming upholding Assessing Officer's action treating payments of Rs. 14,38,31,381/- and Rs. 14,49,04,533/-; respectively towards the above very payers as fee for technical and professional services u/s.194J than u/s. 194C and 194I of the Act. Last A.Y. 2014-15 involves assessee's and Revenue's cross appeals ITA Nos. 238 & 456/Ahd/2015 against the....
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....e produced without resulting in any demand. The assessee thus reiterated that it was not a case of complete non deduction of TDS but that of a very genuine interpretational error of TDS deduction @2% already deducted or that @ 10% proposed to be deducted wherein it would not be treated as an assessee in default is the impugned proceedings as per CIT vs. British Airways 232 CTR 317 (SC) and Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 37 CTR (MP) 351. The assessee further stated that its payee "CSCIPL" had already included the very payments is the return of the corresponding assessment years. It thereafter threw light on the relevant statutory provisions i.e. Section 9(1)(vii) Explanation 2 r.w.s. 194J regarding professional/technical service, Section 194C including "works" definition inserted in the Act in 1972, CBDT Circular No. 202 dated 05.07.1976 clarifying effective meaning of technical services to be covering consideration for only those kinds of contracts wherein the payee recipient had to merely issue its intellectual/technical skills without any physical work through employee or deploy assets since in carrying not physical work through employees or in deploying assets, expen....
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....eement is for provision of 'work' as envisaged, which admittedly maybe technical in nature but not in any way alter the fact that the contract is essentially for execution of work. In any case the definition of work is an inclusive definition. The services envisaged are not a simplicitier case of rendering technical services so as to attract withholding tax provisions under section 194J of the Act. Merely because the scope of work is technical in nature would not render the provisions of section 194C inapplicable. Thus the contract squarely gets covered under the ambit of Section 194C and not Section 194J in light of various case laws and departmental circulars referred to above. In any case where an issue relating to the interpretation of an agreement arises and the scope of work envisaged therein, short deduction of tax cannot be alleged. The assessee/deductor has nothing to gain by short deducting taxes since the payments are subject to withholding tax at the appropriate rates." 6. Case records indicate that the assessee also placed on record details of the payments made to M/s. CSCIPL alongwith all over payees. The Assessing Officer rejected all these assessee's plea....
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....ore, than 200 sites around the world. Localized service agreements will be approved following employee consultations in accordance with appropriate country-specific procedures. Approximately 625 employees and contractors are expected to transfer to CSC in February 2003 in Europe, the -Americas, Australia and Asia when local service agreements are completed. 'This outsourcing project is of strategic importance for Bombardier Transportation," said Pierre Lortie, Bombardier Transportation's president- and chief- operating officer. "CSC will- work with us to deliver an IT transformation. program that will deliver a high quality, cost effective and scalable IT platform that will support the rapid deployment of Bombardier Transportation's business development programs. Improving service, reducing costs and enhancing business agility." In consequence to the above Master Service Agreement (MSA), signed in 2002, between Bombardier Transportation (Parent company of Bombardier Transportation India Ltd) and Computer Science Corporation (Parent Company of Computer Science Corporation India Pvt Ltd), Local Service Agreement (LSA) was signed in India in 2002. Later, this agree....
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....n 194J have been defined as under in the explanation to the section 194J:- ""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 purpose of section 44AA or of this section." Similarly, "fees for technical services" has been defined to have same meaning as in Explanation 2 to clause (vii) of sub section (1) of section 9. Explanation 2 to clause (vii) of sub section (1) of section 9 is reproduced hereunder: - Explanation 2 - For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (inc1uding 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". Now let us examine the various agreements....
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....ted on pages 9-12 of the order is clear that the agreement is not only for providing IT consultancy, it is also for providing entire IT infrastructure (desktops, laptops, printers, LAN,WAN, data storage, facilities-servers etc) and support services to the appellant company. This fact is also supported by the copy of bill raised by CSCIPL filed by the appellant before the AO. Though the agreement is about providing a bundle of services- infrastructure, infrastructure support, software consultancy as well as software support services for a whole range of activities of the appellant, providing of infrastructure is a small part of total contract and it is the fees technical services which dominate the contract. The services are to be provided by qualified software professionals and are to be constantly upgraded to keep pace with the changing technology. CSCIPL is responsible for providing consistent and high levels of IS supports to the BTIL by implementing global standard processes and deploying standard technologies and best practices and it is required to employ industry best practices, eliminate resource, effort and technology duplication and optimise processes by leveraging of its....
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....g that Section 194J applies only in case of any managerial, technical or consultancy services being rendered instead of mere use of technology. Next judicial precedence cited is (2014) 147 ITD 696 (Mum-Trib) STCI Commodities Ltd. v. ACIT denying application of Section 194J of the Act wherein the payer/subsidiary had signed an MOU unit its holding entity for providing skilled professionals, each office support, software, hardware and other infrastructure in lieu of payment of services charges. The above co-ordinate bench treated the said management to be a contract u/s.194C of the Act not attract Section 40(a)(ia). Learned counsel then relies upon Section 9(1)(vii) explanation 2 containing exclusion thereof containing the following expression but does not include consideration for any construction, assembly, mining or like project consideration by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries". He then reiterates that the definition of technical services is the above definition clause is very much an inclusive one. It is not attracted in facts of the instant case as it involves an instance wherein the payee/CSCIPL has recei....
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....nt years. It seeks to take refuge under the contractual format on the other hand to come out of rigor of Section 194J of the Act. We are of the opinion that it is not the medium of contract or payment but the nature of services rendered by the payee which is the crucial factor to determine whether or not they amount to technical or professional services. The assessee cannot succeed in treating its payments u/s.194C by taking recourse to a written contract document. More particularly when it has come on record the payee itself had been issuing press release(s) alike the one already extracted hereinabove. The assessee has not made even a single attempt in the course of hearing to rebut the same. We therefore observe that its recipient's information technology related integrated service activities amount to technical services only. The assessee's reliance on its itemized billings of the above services in classifying the same as bundled payments/services cannot be accepted in view of the forgoing discussion that it is the recipient only who is wholly responsible for handling / providing all information technology related services. 13. We also deem it appropriate to observe that hon'bl....
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....s effect. This argument also fails to convenience us as Section 201(1A) starts with " without prejudice to the provision of sub-section (1)" . Mr. Mehta has not quoted any judicial precedent at all which could take us to such a conclusion in assessee's favour. The assessee therefore fails in its last argument as well as in its lead appeal ITA No.196/Ahd.2015. All of its nine remaining appeals are therefore rejected. 17. We now advert to Revenue's appeal ITA No.456/Ahd/2014 for assessment year 2014-15 seeking to revive the Assessing Officer's action treating the assessee in default qua its impugned payments made to the two payees namely M/s. Aradhana Indian Engineering Works (AEW) and Commtel Networks Pvt. Ltd. (CNPL). The CIT(A) reverses the above findings as follows: "5.4 Since the facts and the circumstances of the present case are similar to the facts and circumstances of the assessee's case for A.Y. 2012-13, the issue is squarely covered by the decision of CIT(A)-V, Baroda in assessee's own case in A.Y. 2012-13 in CAB/(A)V-122/14-15. Following the same, it is held that the appellant was justified in deducting tax at source in respect of Aradhana Indian Engineering Works (AEW....