TaxTMI 
TaxTMI 
2020 (9) TMI 72
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....the Ld. CIT(A) erred in confirming demand of Rs. 6,948/- on account of short deduction of tax at source without properly appreciating the facts of the case and submissions made before him even when payee had already offered the said amount as its income and had paid legitimate amount of tax due on the same. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming demand of Rs. 2,073/- on account of interest on short deduction of tax at source without properly appreciating the facts of the case and submissions made before him. 4. The appellant reserves its right to add, alter and modify the grounds of appeal as taken by it." 2. The facts giving rise to the present appeal are that the assessee deductor M/s. Arihant Hospital & Research Centre is a unit of M/s. Arihant Charitable Trust, Indore. A survey action u/s 133A of the income Tax Act 1961 (hereinafter referred as the 'Act') was conducted on 15.05.2014 to verify the TDS compliances. During the course of survey proceedings, statement of Shri Mahendra Bagani, director of M/s. Arihant Hospital & Research Centre was recorded. Thereafter, a show cause notice u/s 2....
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....sal of waste wherein TDS was deducted at the rate of 2% under section 194C of the Income-Tax Act, 1961 instead of 10% under section 194J of the Income-Tax Act, 1961 as opined by the assessing officer. A.5] The appellant preferred an appeal before the Ld CIT(A)-1, Indore against the order of the assessing officer. The Ld CIT(A)-1, Indore dismissed the appeal filed by the appellant observing that the appellant had entered into a contract with M/s Hoswin Incinerator Private Limited for rendering technical services on which TDS should have been deducted under section 194J of the Income-Tax Act, 1961. A.6] The appellant has therefore preferred an appeal before the Hon'ble Bench against the order of the Ld CIT (A)-1, Indore and has taken the following grounds of appeal: 1] That on the facts and in the circumstances of the case and in law, the Ld CIT [A] erred in concurring with the opinion of the assessing officer in treating the amount paid towards collection and disposal of waste as a technical service liable for deduction of tax under section 194J of the Act even when the appellant had paid the said amount in pursuance to a contract and therefore TDS was rig....
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.... 2,924 Total 87,360 6,948 2,073 9,021 1.3] The appellant entered into a contract with M/s Hoswin Incinerator Private Limited for collection and disposal of waste and M/s Hoswin Incinerator Private Limited did not provide any technical services to the appellant which was liable for deduction of tax at the rate of 10% under section 194J of the Income-Tax Act, 1961. The said party merely collected waste from the hospital of the appellant and disposed it off accordingly and henceforth, the appellant rightly deducted TDS at the rate of 2% under section 194C of the Income-Tax Act, 1961 pursuant to a contract entered into between the appellant and M/s Hoswin Incinerator Private Limited. 1.4.1] The Ld CIT(A)-1, Indore dismissed the appeal filed by the appellant observing that the appellant failed to controvert the findings of the assessing officer given at Para 3.3 & 3.4 of the assessment order. Hence, it assumes significant importance to go through the findings of the assessing officer given in Para 3.3 & 3.4 of the assessment order. 1.4.2] The assessing officer in Para 3.3 of the assessment order observed that the....
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....fessional 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; 9. Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India:- (i) .............. .............. .............. (vii) income by way of fees for technical services payable by- (a) .............. (b) .............. (c) .............. .............. 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....
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....is section 194C as per assessee. Explanation 2 Section 194J carves out exemption, wherein any consideration made towards any construction, assembly, mining or like undertaken project by A recipient, would not be included within the purview of section 194J of the Act. Section 194J refers to definition of 'fees for technical services', as having same meaning as per Explanation 2 to sub-clause (vii) of subsection (1) of section 9. In our considered opinion the agreement very clearly spells out that BEL undertook assembling of raw materials provided by assessee in respect of modules M1 and M2, as per specifications provided by assessee. No doubt certain training has been provided by assessee to the engineers of BEL, however these rendering of training has been separately remunerated by BEL to assessee. Thus in our considered opinion payment received by BET L towards the work carried on under Phase II of the agreement, will not fall under the definition of the term professional services as no new technical consultancy has been offered by BEL to assessee. We therefore do not find any fault in the observations of Ld.CIT (A) in holding that the work undertaken by BEL is co....
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.... 1961. The relevant extract from the judgment of the Hon'ble Supreme Court of India is reproduced hereunder for your ready reference: [Page No. 43-48] "6. What meaning should be ascribed to the word "technical services" appearing in Explanation 2 to clause (vii) to Section 9(1) of the Act is the moot question. In CIT v. Bharti Cellular Ltd. [2011] 330 ITR 239/[2010] 193 Taxman 97 this Court has observed as follows: 'Right from 1979, various judgments of the High Courts and Tribunals have taken the view that the words "technical services" have got to be read in the narrower sense by applying the rule of noscitur a sociis, particularly, because the words "technical services" in section 9(1)(vii), read with Explanation 2 comes in between the words "managerial and consultancy services".' 7. "Managerial and consultancy services" and, therefore, necessarily "technical services", would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd's. case (supra). However, it cannot be lost sight of that modern day scientific and technological developments may te....
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.... services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has ....
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....ceive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to, get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable to fixed telephone service. Neither service can be regarded as 'technical service' for the purpose of section 194J. 14. 'Technical service' referred to in section 9(1)(vii) contemplates rendering of a 'service' to the payer of the fee. Mere collection of a 'fee' for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services." [Emphasis Supplied] 1.7.7] In view of the ....
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....hnical systems, services are rendered to others. Rendering of services by allowing use of technical system is different than charging fees for rendering technical services. The applicability of section 194J would come into effect only when by making payment of fee for technical services, assessee acquired certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Similar is the proposition laid down in other cases relied by the learned Authorised Representative supra." [Emphasis Supplied] 1.8.3] The Hon'ble ITAT Chandigarh Bench 'B' in the case of HFCL Infotel Limited v. ITO as reported in [2006] 99 TTJ 440 (Chandigarh) has held that: "9. We have heard both the parties and have gone through the orders of lower authorities and the decisions referred by the parties. We are of the opinion that the interconnect charges paid by ....
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....t from the said judgment is reproduced hereunder for your ready reference: [Page No. 52-61] "8. These grounds of the Revenue pertained to non deduction of tax at source on payments made to M/s. Nandesari Environment Control Ltd. and Gujarat Enviro Protection & Infrastructure Ltd. as per Section 194J of IT Act. An arrangement was made with those parties to lift the material and dispose of the waste. The assessee company was making the payments for treatment of an affluent up to the plants. According to AO such services of carrying on the waste to the affluent plant was a 'technical service'. According to AO, payment made for the disposal of the waste was a 'professional service'; therefore, the provision of Section 194J was applied. 9. When the matter was carried before learned CIT (A), it was held that instead of provision of Section 194J only the provision of Section 194C would be applicable. Relevant paragraph of learned CIT (A) is reproduced below: "The reasons of the ACIT(TDS) Circle, Baroda for arriving at the conclusion that the provisions of Section 194J of the I.T. Act are applicable in I respect of payments made by the ap....
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.... and circumstances of the case, we are of the considered opinion that the collection, transportation and disposal of waste by those two companies can be said to be covered under the provisions of Section 194C of IT Act. The view taken by learned CIT (A) is, therefore, confirmed. We have been informed that the payee, i.e., the assessee company had already deducted the tax as per the provisions of Section 194C of IT Act. However, this fact can be verified by the AO. In the result, we find no force in the ground of the Revenue, hence dismissed. Resultantly, all the appeals of the Revenue are dismissed." [Emphasis Supplied] 1.9.3] The judgment of the Hon'ble ITAT Ahmedabad Bench 'A' in the case of Gujarat Fluorochemicals as cited supra is squarely applicable to the facts of the present case since the appellant also made to M/s Hoswin Incinerator Private Limited for collection, transportation and disposal of waste and therefore TDS was rightly deducted at the rate of 2% under section 194C of the Income-Tax Act, 1961. 1.9.4] The Hon'ble ITAT Mumbai Bench 'C' in the case of M/s Coimbatore Integrated Waste Management Company Pvt. Ltd. Vs. DCIT-TDS, Coimbatore ....
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.... 'Technical' would take colour from the adjunct words i.e., "managerial" and "consultancy", between which it is sandwiched. Since the words "managerial" and "consultancy" involve a human element, even the expression 'technical service' has to be understood as a service which predominantly involves human element. In the said case Bharati Cellular Ltd. provides interconnection between one net work to the other, which are known as ports and payments made by the assessee for such interconnections were held to be not involving any services rendered by a human and thus it cannot be considered as a "technical services" as contemplated under section 194J of the Act. 12. In the case of Skycell Communications Ltd. vs. DCIT (supra) the Hon'ble Madras High Court analysed the provisions of the Act to hold that mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to fee for technical services. VSAT Charges, leased line charges, BOLT charges, Demat charges etc., paid to stock exchange were also held to be not predominantly requiring human services but only fees collected for use of a standard facility. 13. In the cas....
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.... mutuality concept." [Emphasis Supplied] 1.10] In view of the above discussion and findings reiterated in the judicial precedents cited supra, it clearly transpires that payment made for collection, transportation and disposal of waste would be liable for deduction of tax at the rate of 2% under section 194C of the Income-Tax Act, 1961 and not at the rate of 10% under section 194J of the Income-Tax Act, 1961. In the facts of the present case, the appellant rightly deducted TDS at the rate of 2% under section 194C of the Income-Tax Act, 1961 on the payments made to M/s Hoswin Incinerator Private Limited for collection and disposal of waste. Hence, borrowing the ratio laid down by the judicial precedents cited supra, it is humbly submitted that demand as created on account of short-deduction of tax of Rs. 6,948/- and interest on such short-deduction of tax of Rs. 2,073/- was neither legal nor proper and requires to be deleted in entirety. 7. On the other hand, Ld. Departmental Representative (DR) opposed these submissions and supported the order of the authorities below. 8. Ld. counsel for the assessee submitted that the case of the assessee is squarely covered by t....
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....eing mandatory on the short deduction, the appellant is liable to pay. Therefore, the action of the AO in charging the interest of Rs. 2,073/- is hereby confirmed. This ground of appeal is dismissed. 10. It is noteworthy that the deductee company has rendered services of lifting material and disposal of hospital waste from the premises of the assessee. Now question is whether lifting material and disposal of hospital waste would fall within the definition of technical services. The Coordinate Bench of this Tribunal in the case of ITO vs. Gujarat Fluorochemicals Limited (supra) has held as under: "8. These grounds of the Revenue pertained to non deduction of tax at source on payments made to M/s. Nandesari Environment Control Ltd. and Gujarat Enviro Protection & Infrastructure Ltd. as per Section 194J of IT Act. An arrangement was made with those parties to lift the material and dispose of the waste. The assessee company was making the payments for treatment of an affluent up to the plants. According to AO such services of carrying on the waste to the affluent plant was a 'technical service'. According to AO, payment made for the disposal of the waste wa....