TaxTMI 
TaxTMI 
2021 (10) TMI 1005
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....uming that there is an element of managerial, technical or consultancy in the services rendered to Appellant by its non-resident group companies, by completely disregarding facts including that the provisioning of such services did not involve any human intervention. 4. Ld. CIT(A)/AO have erred in law and on facts of the present case by holding that payments made for network and administrative support charges are characterized as FTS under section 9(1)(vii) of the Act and therefore the appellant is liable to deduct tax at source under section 195 of the Act. 5. Ld. CIT(A)/AO have erred in law and on facts of the case by not considering all materials/submissions filed during the course of assessment/appellate proceedings. 6. Ld. AO has erred by alleging that the Assessee has furnished inaccurate particulars of income, thereby proposing to initiate penalty proceedings under Section 271(1)(c) of the Act." 3. The assessee company is engaged in the business of designing and manufacturing of cores and other amorphous metal or nanocrystalline soft magnetic metal used in transmission and distribution equipment and in electronic and computer products and other ....
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....r Technical Services" as the amounts have been paid for link charges for mail and internet services which do not need in "human intervention". He argued that the services are seamless and the transmission is automatic in nature. 10. On the other hand, the ld. DR argued that "human intervention" is a part of service agreement and the AE also provides for certain service personnel. Hence, the services availed should be treated as "Fee for Technical Services" u/s. 9(1)(vii). 11. Heard the arguments of both the parties and perused the material available on record. 12. The Sections referred by the ld. CIT(A) pertaining to the Master Service agreement between the assessee and Hitachi Ltd. are as under: "SECTION 4 INFORMATION AND ACCESS Each of HAS and Service Recipient may have in its possession or under its control (or the control of persons or firms which have rendered services to or otherwise done business with it) books, records, Contracts, instruments, data and other information (collectively, "Information") which may be necessary or desirable to the other in connection with the performance of this Agreement. Worn- lotion shall include, without limitation,....
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....g to the contrary in this Agreement the provisions of this Section 5 are not intended to and shall not be deemed to constitute an authorization by either HAS or Service Recipient to permit the other to accept service of process on its behalf and neither party is or shall be deemed to be the agent of the other for service of process purposes. SECTION 8 CONFIDENTIALITY Except as otherwise required under applicable law or legal process, HAS and Service Recipient agree to maintain as confidential and not to disclose to any third party any and all Confidential information provided by one party to the other or otherwise obtained by one party from the other party in the performance of this Agreement. "Confidential information" shall mean the non-public information of each party, but shall not include information that: (a) at the time of disclosure is published or is otherwise in the public domain; (b) after disclosure becomes part of the public domain other than through a breach of this clause by the receiving party; (c) was known to the receiving party prior to receipt from the disclosing party provided such prior knowledge can be adequately sustained by documentary evi....
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....e collection of fee for use of standard facility provided to all those willing to pay for it. 16. Reliance in this regard is placed on the ruling of the Hon'ble Supreme Court in the case of CIT vs. Kotak Securities Ltd. [2016] 383 ITR 1 (SC) wherein it was held that common or standard services provided to every member who wants to trade on the stock exchange cannot be termed as fee for technical service under Explanation 2 to section 9(1)(vii) of the IT Act (para 9). 17. In the ruling of CIT vs. Media World Wide (P.) Ltd. 120 taxmann.com 423, the Hon'ble Calcutta High Court observed that mere collection of a 'fee' for use of a standard facility which is available to everybody against payment of a fee, does not amount to the provider of the facility receiving fee for technical services. 18. In the ruling of CIT vs. ESTEL Communication (P.) Ltd. 318 ITR 185, Hon'ble Delhi High Court held that the taxpayer in that case was merely paying for an internet bandwidth to the deductee and then selling it to its customers. It observed that the use of internet facility may require sophisticated equipment but that does not mean that technical services were being ren....
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....s appearing in Explanation 2 to section 9(1)(vii) of the Act is preceded by the word "managerial" and succeeded by the word "consultancy" and the same takes colour from the word "managerial and consultancy". The Court held that in such a case principle of noscitur a sociis gets attracted, which means that the meaning of the word or expression is to be gathered from the surrounding word i.e. from the context. Coupling of the words together shows that they are to be understood in the same sense. The word "managerial and consultancy" is a definite indicative of the involvement of a human element. Managerial services and consultancy services must be given by human only and not by any means or equipment. Therefore, the word "technical" must be construed in the same sense involving direct human involvement, and without that, the services provided cannot be held to be technical services under Explanation 2 to Section 9 (1)(vii) of the IT Act. Following the ratio laid down in Bharti Cellular (supra), various co-ordinate Benches of the Tribunal have held that to treat any payment as FTS, element of human involvement is mandatory: * CIT v. Vodafone South Ltd. [2016] 290 CTR 436 (Kar....