MERCHANT SHIPPING SERVICES P. LTD, MUMBAI V. DCIT (TDS) 2(1), MUMBAI

CO 137/MUM/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5425 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 29-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MAHAPATRA
• Assessee Lawyers: SUBHASH SHETTY
• Keywords: Recovery proceedings
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI R.S.SYAL , AM ITA NO.192/MUM/2010 : ASST. YEAR 2004-2005 THE ASSTT.COMMISSIONER OF INCOME-TAX (TDS) 2(1) MUMBAI. VS. M/S.MERCHANT SHIPPING SERVICES PVT.LTD. TECHNOPOLIS KNOWLEDGE PARK MAHAKALI CAVE ROAD, CHAKALA ANDHERI (EAST), MUMBAI 400 093. PA NO.AABCM6541J. (APPELLANT) (RESPONDENT) CO NO.137/MUM/2010 : ASST. YEAR 2004-2005 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. TECHNOPOLIS KNOWLEDGE PARK MAHAKALI CAVE ROAD, CHAKALA ANDHERI (EAST), MUMBAI 400 093. VS. THE ASSTT.COMMISSIONER OF INCOME-TAX (TDS) 2(1) MUMBAI. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI S.K.MAHAPATRA ASSESSEE BY : SHRI SUBHASH SHETTY O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE EMANATE FROM THE ORDER PASSED BY THE COMMISSIONER OF INCOME -TAX (APPEALS) ON 28.10.2009 IN RELATION TO THE ASSESSMENT YEAR 2004- 2005. 2. THE ONLY GROUND RAISED BY THE REVENUE IS AGAINS T THE DIRECTION OF THE LEARNED CIT(A) THAT PAYMENTS MADE TO NSICT BE TREAT ED AS COVERED UNDER SECTION 194C AND NOT SECTION 194J. BRIEFLY STATED THE FAC TS OF THE CASE ARE THAT THE ASSESSEE-COMPANY IS A SHIPPING AGENT HANDLING VESSE LS AT VARIOUS INDIAN PORTS. A SURVEY WAS CONDUCTED U/S.133A ON 09.03.2005 FOR VER IFICATION OF COMPLIANCE OF DEDUCTION OF TAX AT SOURCE PROVISIONS. DURING THE COURSE OF SURVEY IT WAS DISCOVERED THAT IN THE FINANCIAL YEAR 2003-2004 TH E ASSESSEE MADE PAYMENT OF RS.12,23,29,581 TO M/S.NAVA SHEVA INTERNATIONAL CON TAINER TERMINAL LIMITED ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 2 (HEREINAFTER REFERRED TO AS NSICT) AND DEDUCTED T AX AT SOURCE AT THE RATE OF 2.05% AS PROVIDED U/S.194C FOR WHICH PAYMENT WAS MADE. TH E ASSESSING OFFICER, DURING THE COURSE OF PROCEEDINGS U/SS.201(1) AND 201(1A), NOTED THAT NSICT ENTERED INTO TECHNICAL SERVICE AGREEMENT WITH P & O AUSTRALIA UN DER WHICH P & O AUSTRALIA WAS TO PROVIDE TECHNICAL KNOW-HOW TO THE ASSESSEE-C OMPANY. IT WAS ALSO NOTED BY THE AO THAT NSICT HAD ALSO CHARGED SERVICE TAX ON T HE 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 & O AUSTRALIA WAS THE MAIN SHAREHOLDER OF NSICT THROUGH ITS HOLDING IN SOUTH A SIA PORT LIMITED AND UNDER THE AGREEMENT P & O AUSTRALIA SUPPLIED TECHNICAL KNOWHO W IN RETURN FOR FEES. IN VIEW OF THESE FACTS THE ASSESSING OFFICER OPINED THAT NS ICT WAS RENDERING / PROVIDING TECHNICAL AND SPECIALIZED SERVICES TO ITS CUSTOMERS INCLUDING THE ASSESSEE ALONG WITH MACHINES AND TECHNICAL MANPOWER AND HENCE TAX WAS DEDUCTIBLE U/S 194J. ON BEING SHOW CAUSED, THE ACCOUNTS MANAGER OF THE ASSE SSEE EXPLAINED THAT PAYMENTS MADE TO NSICT WERE FOR CONTAINER MOVEMENT UNDER THE CONTRACT AND THERE WERE NO PROFESSIONAL OR TECHNICAL SERVICES INVOLVED IN THE MOVEMENTS OF CONTAINERS. IT WAS EXPLAINED THAT THE SERVICES PROVIDED BY NSICT WERE TOWARDS THE MOVEMENT OF CONTAINERS FROM CUSTOMERS TRAILERS / RAIL WAGONS T O YARD AND FROM THERE TO VESSELS IN RESPECT OF EXPORT CONTAINERS; AND FOR THE IMPORT CONTAINERS, THE PAYMENT WAS MADE FOR MOVING CONTAINERS FROM VESSELS ON TO THE T RAILERS AT THE QUAY SIDE AND FOR LIFTING OF TRAILERS TO CUSTOMERS TRAILERS / RAIL W AGONS. IT WAS ARGUED THAT THE ASSESSEE HAD RIGHTLY DEDUCTED TAX AT SOURCE U/S.194C AND THE PROVISIONS OF SECTION 194J, SOUGHT TO BE APPLIED BY THE ASSESSING OFFICER, WER E NOT APPLICABLE. VIDE PARA 11 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER ACCEPTE D THE ASSESSEES CONTENTION THAT THE PAYMENT WAS MADE TOWARDS CONTAINER HANDLING CHA RGES. HE HOWEVER HELD THAT CONTAINER HANDLING WAS A TECHNICAL AND SPECIALIZED SERVICE. IN HIS OPINION THE ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 3 ASSESSEE-COMPANY WAS REQUIRED TO DEDUCT TAX AT SOUR CE U/S.194J AND NOT U/S.194C. RESULTANTLY HE WORKED OUT SHORT DEDUCTION OF TAX AT SOURCE AT RS.36,08,701 U/S.201(1). FURTHER THE ASSESSEE WAS HELD TO BE LIA BLE FOR PAYMENT OF INTEREST U/S.201(1A) AMOUNTING TO RS.24,90,004. 3. THE ASSESSEE ASSAILED THE ORDER U/SS.2 01(1) AND 201(1A) BEFORE THE LEARNED CIT(A), WHO CONCURRED WITH THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE AND HELD THAT THE PROVISIONS OF SECTION 194C WERE A PPLICABLE. HE HOWEVER DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE ASSUMPTIO N OF JURISDICTION U/S.201(1) AND 201(1A) WAS IMPROPER NOTWITHSTANDING NSICT CLARIFY ING THAT THEY HAD PAID TAX ON THEIR INCOME INCLUDING PAYMENTS RECEIVED FROM THE A SSESSEE. IN THE OPINION OF THE LEARNED CIT(A), THE ASSESSEES LIABILITY FOR DEDUC TING TAX AT SOURCE WAS NOT WASHED AWAY WITH THE PAYMENT OF TAXES BY THE RECIPIENT. HE FURTHER DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE ORDER PASSED U/S.201 (1) AND 201(1A) WAS TIME BARRED. THUS THE OTHER GROUNDS RAISED BY THE ASSESS EE, CHALLENGING THE ABOVE REFERRED ISSUES, WERE HELD TO BE INFRUCTUOUS IN VI EW OF HIS DECISION ON THE MAIN GROUND THAT THE ASSESSEE HAD RIGHTLY DEDUCTED TAX A T SOURCE U/S.194C. BOTH THE SIDES ARE IN APPEAL. 4. THE REVENUE IS AGGRIEVED AGAINST THE VIEW TAKEN BY THE LEARNED CIT(A) THAT THE TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE UNDER SECTION 194C AND NOT SECTION 194J. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTE NDED 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 PROVIDI NG SPECIALIZED SERVICES TO THE ASSESSEE. HE FURTHER ARGUED THAT P & O AUSTRALIA EN TERED INTO TECHNICAL SERVICE AGREEMENT WITH NSICT PROVIDING THEM THE TECHNICAL K NOWHOW, FROM WHERE IT WOULD NATURALLY FOLLOW THAT NSICT ALSO PROVIDED TEC HNICAL SERVICES TO ITS CUSTOMERS INCLUDING THE ASSESSEE. HE FURTHER STATE D THAT NSICT CHARGED SERVICE TAX ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 4 IN ITS INVOICES RAISED ON THE CUSTOMERS, WHICH WAS CLEAR INDICATOR OF THEY BEING PROVIDER OF TECHNICAL SERVICES. THE LEARNED DEPARTM ENTAL REPRESENTATIVE ARGUED THAT SECTION 194C APPLIES IN RESPECT OF PAYMENTS MA DE 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 OVE RTURNED. 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 AGREEMENT WITH P & O AUSTRALIA UNDER WHICH P & O AU STRALIA WERE TO PROVIDE TECHNICAL KNOWHOW TO THE ASSESSEE-COMPANY, WAS INC ORRECT. HE ARGUED THAT THIS FACT WAS ALSO BROUGHT TO THE NOTICE OF THE LEARNED CIT(A) WHO HAS RECORDED THE SAME ON PAGE 6 OF THE IMPUGNED ORDER, WHICH COULD NOT BE CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. HE FURTHER EXP LAINED THE NATURE OF SERVICES PROVIDED BY NSICT TO THE ASSESSEE. PLACING STRONG RELIANCE ON CIT VS. ESTEL COMMUNICATIONS (P) LTD. [(2008) 217 CTR (DEL.) 102] AND SKYCELL COMMUNICATIONS LTD. & ANRS. VS. DCIT [(2001) 251 IT R 53 (MAD.)] , THE LD AR ARGUED THAT NO TECHNICAL SERVICES WERE PROVIDED TO THE ASSESSEE. FOR THE SAME PROPOSITION HE ALSO RELIED ON CERTAIN TRIBUNAL ORDE RS. OPPOSING THE DEPARTMENTAL STAND THAT NSICT WAS TECHNICAL SERVICE PROVIDER, O N THE STRENGTH OF ITS REGISTRATION FOR THE PURPOSE OF PAYMENT OF SERVICE TAX, THE LEA RNED A.R ARGUED THAT NSICT WAS REGISTERED UNDER THE CATEGORY OF PS & MC AS WAS CLARIFIED TO THE FIRST APPELLATE AUTHORITY AND THE SERVICES RENDERED BY THEM WERE CO VERED UNDER PORT SERVICES ONLY. IN VIEW OF THESE FACTS IT WAS CONTENDED THAT THE LEARNED CIT(A) WAS RIGHT IN COMING TO THE CONCLUSION THAT DEDUCTION OF TAX AT S OURCE WAS REQUIRED UNDER SECTION 194C AND NOT SECTION 194J. 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 IM PORT AND EXPORT AT VARIOUS ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 5 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 WHI CH 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 A SSESSEE 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 POR T, IN CASE OF EXPORT, INVOLVES DIFFERENT STAGES VIZ., LIFTING OF CONTAINERS FROM CUSTOMERS TRAILER/RAIL WAGONS BY THE OPERATION OF RUBBER TYRE GANTRY CRANES; MOVEMEN T OF THE CONTAINERS FROM YARD TO THE VESSEL SIDE; AND MOVING THE CONTAINERS FROM TRA ILERS 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 OPERAT ION OF QUAY CRANE ; MOVEMENT OF THE CONTAINERS FROM YARD TO VESSEL SIDE; AND OPERAT ION OF RUBBER TYRE GRANTRY CRANES / RAIL MOUNTED GANTRY CRANES FOR LIFTING THE CONTAI NERS OFF FROM TRAILERS TO CUSTOMERS TRAILERS / RAIL WAGONS. THE ABOVE DESCRIPTION OF T HE WORK DONE BY NSICT FOR THE ASSESSEE WAS BROUGHT TO THE NOTICE OF AUTHORITIES B ELOW 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 PR OVIDED BY NSICT, STOOD ESTABLISHED WHEN DURING THE COURSE OF SURVEY PROCEE DINGS 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 EMPLOY EES. 7. THE REFERENCE MADE BY THE A.O. IN PARA 5 OF THE ASSESSMENT ORDER THAT NSICT ENTERED INTO TECHNICAL SERVICES AGREEMENT WIT H P & O AUSTRALIA UNDER WHICH P & O AUSTRALIA WAS TO PROVIDE TECHNICAL KNOW -HOW TO THE ASSESSEE- COMPANY, IS NOT CORRECT. THE ASSESSEE STATED BEFOR E THE LEARNED CIT(A) THAT P & O AUSTRALIA ENTERED INTO TECHNICAL AGREEMENT WITH NSI CT FOR PROVIDING TECHNICAL ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 6 KNOW-HOW TO THEM AND NOT TO THE ASSESSEE-COMPANY. T HIS FACT HAS NOT BEEN CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTA TIVE WITH ANY MATERIAL OR EVIDENCE. FROM THE ABOVE DISCUSSION IT IS MANIFEST THAT THE ASSESSEE MADE THE PAYMENTS FOR MOVEMENT OF CARGO OF ITS CUSTOMERS , WHICH, IN TURN, WAS FACILITATED BY NSICT WITH THE USE OF THEIR EQUIPMENTS IN THE SH APE OF CRANES AND MANPOWER. 8. NOW THE MOOT QUESTION IS - WHETHER THE PAYMENT M ADE TO NSICT FOR THE MOVEMENT OF CONTAINERS CAN BE COVERED U/S.194J? THE ASSESSEE DEDUCTED TAX AT SOURCE U/S.194C ON THE PAYMENTS MADE TO NSICT AT TH E RATE OF 2.05%. AS AGAINST THAT THE ASSESSING OFFICER HAS HELD THAT SUCH PAYME NTS ARE COVERED U/S.194J, ON WHICH TAX WAS DEDUCTIBLE AT THE RATE OF 5.05%. IN ORDER TO APPRECIATE THE ENTIRE CONTROVERSY IN RIGHT PERSPECTIVE IT WOULD BE APT TO CONSIDER THE PROVISIONS OF SECTION 194J VIS-A-VIS SECTION 194C. 9. SECTION 194J REQUIRES DEDUCTION OF TAX A T SOURCE BY THE PAYER, INTER ALIA, ON THE PAYMENT OR THE CREDIT OF AMOUNT TO A RESID ENT BY WAY OF FEES FOR TECHNICAL SERVICES AT THE SPECIFIED RATE, SUBJECT TO THE FUL FILLMENT OF THE STIPULATED CONDITIONS. THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSES SEE AVAILED TECHNICAL SERVICES FROM NSICT AND HENCE TAX WAS DEDUCTIBLE AT SOURCE U NDER THIS SECTION. EXPLANATION (B) TO SECTION 194J DEFINES FEES FOR TECHNICAL SERVIC ES AS UNDER:- FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION (2) TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9. 10. WHEN WE TURN TO EXPLANATION (2) TO SECTION 9(1)(VII), IT IS FOUND THAT `FEES FOR TECHNICAL SERVICES HAS BEEN DEFINED AS U NDER:- EXPLANATION [2].- FOR THE PURPOSES OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MA NAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 7 SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATIO N WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD SALARIES. 11. ON CIRCUMSPECTION OF EXPLANATION (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 O R OTHER PERSONNEL. THUS THE FOREMOST CRITERIA FOR BRINGING ANY PAYMENT UNDER TH E PURVIEW OF EXPLANATION (2) TO SECTION 9(1)(VII) IS THAT THE PAYMENT MUST HAVE BEE N MADE FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES AND A LSO 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 NOBODYS 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 BE CAUSE 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 PERSONN EL. RULE OF EJUSDEM GENERIS HELPS IN ASCERTAINING THE MEANING OF A GENERAL WORDS IN T HE COMPANY OF SPECIFIC WORDS. AS PER THIS RULE, THE GENERAL WORDS DRAW THEIR COL OUR AND MEANING FROM THE COMPANY THEY KEEP. THE APPLICATION OF THIS RULE H AS BEEN APPROVED IN THE CONTEXT OF THE INCOME-TAX ACT BY SEVERAL COURTS INCLUDING T HE HONBLE SUMMIT COURT IN A RECENT JUDGMENT RENDERED IN CIT VS. MCDOWELL AND CO . LTD. (NO. 1) (2009) 314 ITR 167 (SC). BY APPLYING THIS RULE, THE EXPRESSION `OTHER PERSONNEL IN THIS PROVISION MUST FALL WITHIN THE GENUS OF `SERVICES OF TECHNICAL PERSONNEL. IT CANNOT BE CONSIDERED AS ANY PERSONNEL UNRELATED TO THE MAN AGERIAL, TECHNICAL OR CONSULTANCY SERVICES. EVEN THOUGH NSICT HAD THE S ERVICES OF SEVERAL PERSONNEL IN ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 8 THE PROCESS OF MOVEMENT OF CARGO, THOSE PERSONNEL, IN THE ABSENCE OF ANY FINDING BY THE AO THAT THEY POSSESSED SOME TECHNICAL EXPERT ISE, CANNOT BE CONSIDERED WITHIN THE AMBIT OF THIS PROVISION AS FALLING UNDER `OTHER PERSONNEL. 13. FURTHER NARROWING THE SCOPE OF CONTROV ERSY TO THE PAYMENTS MADE BY THE ASSESSEE FOR AVAILING TECHNICAL SERVICES, AS HAS B EEN HELD BY THE AO, WE NEED TO CONCENTRATE ON THE MEANING OF `TECHNICAL SERVICES . IN OTHER WORDS, THE TECHNICAL SERVICES SHOULD BE PROVIDED BY THE RECIPIENT OF THE AMOUNT SO AS TO BRING THE PAYMENT WITHIN THE SCOPE OF SECTION 194J. THE W ORDS `TECHNICAL SERVICES HAVE NOT BEEN DEFINED IN THE ACT. BUT WHEN WE VIEW EXPL ANATION TO SEC. 9(1)(VII), WHICH DEFINES `FEES FOR TECHNICAL SERVICES AS CONS IDERATION FOR RENDERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES', IT BECOMES APPARENT THAT THE WORD 'TECHNICAL' IS PRECEDED BY THE WORD 'MANAGERIAL' AN D SUCCEEDED BY THE WORD 'CONSULTANCY'. AS BOTH THE `MANAGERIAL AND `CONS ULTANCY SERVICES ARE POSSIBLE WITH HUMAN ENDEAVOR, THE WORD `TECHNICAL SHOULD AL SO BE SEEN IN THE SAME LIGHT. TO BE MORE PRECISE, ANY PAYMENT FOR TECHNICAL SERVI CES, IN ORDER TO BE COVERED U/S 194J, SHOULD BE A CONSIDERATION FOR ACQUIRING OR U SING TECHNICAL KNOW-HOW SIMPLICITOR PROVIDED OR MADE AVAILABLE BY HUMAN ELEMENT. THERE SHOULD BE DIRECT AND LIVE LINK BETWEEN PAYMENT AND RECEIPT/US E OF TECHNICAL SERVICES/INFORMATION. 14. WHERE NO TECHNICAL SERVICES ARE PROVI DED 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 TH E INPUT OF TECHNICAL SERVICES ALONG WITH MAN, MACHINE AND MATERIAL, SUCH PAYMENT WOULD 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 AN Y TECHNICAL SERVICE. IT IS A DIFFERENT MATTER THAT THE MOVIE IS EXHIBITED ON SCR EEN BY WAY OF SOME TECHNICAL ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 9 INPUT. TAKE ANOTHER EXAMPLE OF A PERSON BOARDING A BUS OR TRAIN BY PURCHASING THE REQUISITE TICKET. IT CANNOT BE SAID THAT THE PERSO N IS MAKING PAYMENT FOR TECHNICAL SERVICES. NO DOUBT BUS OR TRAIN IS MADE BY SUFFICIE NT TECHNICAL INPUT BUT THE USER OF THE SAME ON A NON-CUSTOMIZED BASIS CANNOT BE SAID T O 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 MA NUFACTURER 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 F ACILITY ON PAYMENT BASIS CANNOT BE DESCRIBED AS FEES FOR TECHNICAL SERVICES. 15. COMING BACK TO THE FACTS OF THE INSTANT CASE IT IS NOTICED THAT THE ASSESSEE MADE PAYMENT TO NSICT FOR THE MOVEMENT OF THE CONTA INERS FROM OR UP TO THE VESSEL. IN ORDER TO FACILITATE THE MOVEMENT OF CONT AINERS, NSICT PROVIDED THE SERVICES OF DIFFERENT TYPES OF CRANES SUCH AS QUAY CRANES, RUBBER TYRE GANTRY CRANES AND RAIL MOUNTED GANTRY CRANES. THESE CRANES ARE US ED FOR SPECIFIC PURPOSES ONLY. RUBBER TYRE GANTRY CRANES, RAIL MOUNTED GANTRY CRAN ES ARE USED FOR LIFTING THE CONTAINER FROM CUSTOMERS TRAILER/RAIL WAGONS AND Q UAY CRANES ARE USED FOR MOVING CONTAINERS FROM TRAILERS AT THE QUAY SIDE ON TO THE VESSEL. WHEN THE ASSESSEE MADE PAYMENT TO NSICT IT WAS MEANT FOR USING THE FACILIT Y OF CRANES PROVIDED BY THEM FOR THE MOVEMENT OF CONTAINERS AND NOT FOR AVAILIN G ANY TECHNICAL SERVICES WHICH MAY HAVE GONE INTO THE MAKING OF CRANES. NSICT OPEN ED ITS DOORS OF SERVICE TO ONE AND ALL. ANYBODY INTERESTED IN MOVEMENT OF CON TAINERS COULD AVAIL THE FACILITY. THE ASSESSEE HAS ALSO MADE PAYMENT ON BILL TO BILL BASIS. IN OTHER WORDS, PAYMENT WAS MADE FOR USER OF A STANDARD FACILITY PROVIDED BY NSICT, SPECIFICALLY FOR THE MOVEMENT OF CONTAINERS FROM OR TO THE VESSEL. ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 10 16. THE ASSESSING OFFICER HAS HEAVILY RELIED ON T HE FACT THAT NSICT WAS REGISTERED FOR THE PURPOSE OF PAYMENT OF SERVICE TA X. IT WAS CLARIFIED BY NSICT TO THE LEARNED CIT(A), VIDE THEIR LETTER DATED 02.01. 2009, THAT THEY WERE REGISTERED UNDER THE CATEGORY OF PS & MC. PS STANDS FOR PO RT 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 (MANAGEM ENT CONSULTANCY) SERVICES. THE LEARNED A.R. HAS PLACED ON RECORD A TEXT OF SEC TION 65(82) OF THE FINANCE ACT, 1994 DEFINING PORT SERVICES AS UNDER:- PORT SERVICES MEANS 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 POR T ETC. SERVICES PROVIDED AT PORTS ARE CONTAINED IN CHAPTER V ON WOR KS AND SERVICES TO BE PROVIDED AT PORTS OF THE MAJOR PORT TRUST ACT , 1963. 17. FROM THE MANDATE OF SECTION 65(82) OF FINANCE ACT, 1994 IT IS VIVID THAT PORT SERVICES CONSIST OF CARGO HANDLING, DOCK SERVI CES AND CONTAINER HANDLING SERVICES. WHEN WE VIEW THE REGISTRATION OF NSICT AS THE ONE UNDER THE CATEGORY OF `PS & MC ALONG WITH THE FACT THAT THE ASSESSEE PAI D 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 PROVID ING CARGO HANDLING SERVICES. THE REGISTRATION OF ANY PERSON FOR THE PURPOSE OF SERVI CE TAX, NO DOUBT PRESUMES THAT SOME SORT OF SERVICES ARE PROVIDED BY HIM WITHIN T HE MEANING OF FINANCE ACT, 1994, BUT THAT DOES NOT MEAN THAT SUCH SERVICES A RE 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 SHOU LD BE FEES FOR TECHNICAL SERVICES AND SUCH FEES SHOULD BE FOR RENDERING OF ANY TECHNI CAL, 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 ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 11 SERVICE PROVIDED ON THE TOUCHSTONE OF THE MANDATE O F 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. (SUPRA) , THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING CELLULAR MOBIL E TELEPHONE SERVICE TO SUBSCRIBERS. THE DEPARTMENT TOOK THE VIEW THAT THE PAYMENTS MADE BY THE SUBSCRIBERS TO THE ASSESSEE BE TREATED AS COVERED U /S 194J AS FEES FOR TECHNICAL SERVICES. REJECTING THIS CONTENTION, THE HONBLE MADRAS HIGH COURT HELD THE 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 RECEI VED FOR TECHNICAL SERVICES. IT WAS FURTHER HELD THAT WHEN A PERSON DECIDES TO SUBSCRIB E TO A CELLULAR TELEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMM UNICATE WITH OTHERS, HE DOES NOT CONTRACT TO RECEIVE A TECHNICAL SERVICE. WHAT HE DO ES AGREE TO IT TO PAY FOR THE USE OF THE AIRTIME FOR WHICH HE PAYS A CHARGE. THE FACT TH AT THE TELEPHONE SERVICE PROVIDER HAS INSTALLED SOPHISTICATED TECHNICAL EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOES NOT ON THAT S CORE, MAKE IT A PROVISION OF TECHNICAL SERVICE TO THE SUBSCRIBER. 19. SIMILARLY IN THE CASE OF ESTEL COMMUNICATIONS (P) LTD. (SUPRA) IT HAS BEEN HELD THAT WHERE THE ASSESSEE MADE PAYMENT FOR USE OF INTERNET BANDWIDTH, IT WAS USING INTERNET BANDWIDTH OF US PARTY T FOR PROV IDING ACCESS TO ITS SUBSCRIBERS AND THE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CON CLUSION THAT NO TECHNICAL SERVICES WERE PROVIDED BY T TO THE ASSESSEE WITHIN THE MEANI NG OF SECTION 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 A NGLE ALSO. THERE ARE MANY SECTIONS IN CHAPTER XVII OF THE ACT REQUIRING DEDUCTION OF TAX AT SOURCE ON CERTAIN ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 12 PAYMENTS, WHICH REQUIRE THE USE OF MACHINERY IN DIR ECT OR INDIRECT MANNER. E.G. EXPLANATION III TO SECTION 194C DEFINES `WORK AS INCLUDING (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING. IT IS OBVIOUS THAT THIS ACTIVITY CANN OT BE DONE WITHOUT THE USE OF SOME SOPHISTICATED MACHINERY. SIMILARLY SECTION 194I REQ UIRES DEDUCTION OF TAX AT SOURCE FROM RENT. EXPLANATION TO THIS SECTION DEFINES `REN T TO MEAN PAYMENT FOR THE USE OF INTER ALIA (E) PLANT; (F) EQUIPMENT. THIS IS A DIRECT PAYMEN T FOR THE USE OF MACHINERY. NO MACHINERY OR EQUIPMENT CAN BE MANUFA CTURED WITHOUT SOME SORT OF TECHNICAL SERVICE. IF WE ACCEPT THE VIEW TAKEN BY T HE AO IN THIS CASE THAT THE PAYMENT FOR USE OF ANY MACHINERY, OR EQUIPMENT OR F ACILITY, WHICH IN TURN, INVOLVES THE INPUT OF SOME TECHNICAL INFORMATION IN ITS MAKI NG, IS TO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES, THEN THE PAYMENTS IN ALL SU CH CASES SHALL BE COVERED U/S 194J AND THE OTHER SECTIONS, AS TAKEN NOTE OF ABOVE, WOU LD BE RENDERED AS A REDUNDANT PIECE OF LEGISLATION. IT IS AXIOMATIC THAT IT CANNO T BE THE CASE. 21. IN VIEW OF THE FOREGOING DISCUSSION W E HOLD THAT THERE WAS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE PAYM ENTS MADE TO NSICT WITHIN THE MEANING OF SECTION 194J AND THE LD. CIT(A) WAS JUST IFIED IN HOLDING SO. 22. NOW LET US EXAMINE AND EVALUATE THE CONTENTIO N 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 A NY RESIDENT FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT AN Y WORK IN PURSUANCE OF CONTRACT BETWEEN THE CONTRACTOR AND THE PERSONS SPECIFIED, S HALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIM E OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WH ICHEVER IS EARLIER, SHALL DEDUCT INCOME TAX AT SOURCE AT THE SPECIFIED RATE. EXPLANATION III BELOW SUB-SECTION 194C(2) DEFINES THE EXPRESSION WORK, WHICH IS REL EVANT FOR OUR PURPOSES. CLAUSE (C) OF THIS EXPLANATION PROVIDES THAT THE EXPRESSION WORK SHALL ALSO INC LUDE : ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 13 ` CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRA NSPORT OTHER THAN BY RAILWAYS . A CURSORY GLANCE ON CLAUSE (C) OF EXPLANATION III BRINGS OUT THAT CARRIAGE OF GOODS BY ANY MODE OF TRANSPORT OTHER TH AN BY RAILWAYS HAS BEEN INCLUDED IN THE DEFINITION OF WORK AS APPLICABLE TO SECTION 194C. CARRIAGE OF GOODS MEANS THE MOVEMENT OF GOODS FROM SOURCE TO DE STINATION. IN CASE OF EXPORTS, SOURCE IS THE GODOWN OF CUSTOMER AND THE DESTINATIO N IN INDIA IS VESSEL AND VICE VERSA IN CASE OF IMPORTS. THE GOODS MAY REACH FROM SOU RCE TO DESTINATION IN ONE OR MORE TRIPS AND THAT TOO WITH THE HELP OF ONE OR MORE MODES OF CARRIERS. IF THE JOURNEY OF GOODS IS BROKEN AND DIFFERENT MODES ARE EMPLOYED IN FACILITATING THE LIFTING OF GOODS FROM SOURCE TO FINAL DESTINATION, SUCH BROKEN UP JOURNEYS ALSO AMOUNT TO CARRIAGE OF GOODS TO THE FINAL DESTINAT ION. REVERTING TO THE FACTS OF THE INSTANT CASE IT IS DISCERNIBLE THAT THE ASSESSEE W AS MAKING AVAILABLE THE CONTAINERS ON CUSTOMERS TRAILERS / RAIL WAGONS, WHICH WERE L IFTED FROM SUCH TRAILERS / RAIL WAGONS ON THE CRANES BY NSICT AND WERE THEN MOVED F ROM 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 VESSE L. THE ASSESSEE MADE PAYMENT FOR CARRIAGE OF GOODS FROM THE CUSTOMERS TRAILERS UP T O 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 EXPLANATION III (C) BELOW SECTION 194C(2) IT BECOMES APPARENT THAT THE PAYMENT MADE BY THE ASSESSEE TO NSICT IS COVERED WITHIN THIS PROVISION AND THE A SSESSEE RIGHTLY DEDUCTED TAX AT SOURCE U/S.194C OF THE ACT. 23. AT THIS JUNCTURE WE ARE REMINDED OF THE W ELL SETTLED RULE OF GENERALIA SPECIALIBUS NON DEROGANT , WHICH PROVIDES THAT THE SPECIAL PROVISIONS OVERRID E GENERAL PROVISIONS. IN OTHER WORDS, IF A SPECIAL P ROVISION HAS BEEN ENACTED DEALING WITH A PARTICULAR THING OR SITUATION, THEN THAT PAR TICULAR THING OR SITUATION IS GOVERNED BY SUCH SPECIAL PROVISION ALONE. APPLICAT ION OF GENERAL PROVISIONS STANDS EXCLUDED ON THAT. THIS RULE HAS GOT THE SANCTION F ROM SEVERAL COURTS IN THE COUNTRY ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 14 INCLUDING THE HONBLE APEX COURT IN BRITANNIA IND USTRIES LTD. VS. CIT (2005) 278 ITR 546 (SC) AND THAT OF THE HONBLE JURISDICTIONAL HIGH COURT I N FORBES FORBES CAMPBELL & 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 SPECIFICALL Y DEFINING THE MEANING OF `TECHNICAL SERVICES, CANNOT BE APPLIED. 24. WE, THEREFORE, HOLD THAT THE PAY MENTS MADE BY THE ASSESSEE TO NSCIT ARE COVERED U/S 194C AND THERE IS NO SCOPE FOR APPL YING THE PROVISIONS OF SECTION 194J. THE NATURAL COROLLARY IS THAT THE ASSESSEE RI GHTLY MADE DEDUCTION OF TAX AT SOURCE AT THE APPLICABLE RATE. 25. GROUND NO.1 OF THE ASSESSEES CROSS OBJE CTION ASSAILS THE VIEW OF THE LEARNED CIT(A) THAT THE ASSESSEE WAS RESPONSIBLE FO R DEDUCTION OF TAX AT SOURCE NOTWITHSTANDING THE FACT THAT THE RECIPIENT HAD MAD E THE PAYMENT OF TAX DUE ON ITS INCOME. THE ASSESSEE ARGUED BEFORE THE LEARNED CIT( A) THAT NSICT TREATED PAYMENT MADE BY ASSESSEE TO THEM AS THEIR INCOME AN D PAID DUE TAX BY FILING THE RETURN IN TIME. IT WAS, THEREFORE, PUT FORTH THAT EVEN IF THE AOS STAND FOR THE DEDUCTION OF TAX AT SOURCE AT THE HIGHER RATE WAS T O BE UPHELD, STILL THE ASSESSEE COULD NOT BE SADDLED WITH ANY LIABILITY U/S.201(1). THIS LINE OF ARGUMENT WAS NOT APPROVED IN THE FIRST APPEAL. 26. THE LD. COUNSEL FOR THE ASSESSEE REITE RATED THE SUBMISSIONS ADVANCED BEFORE THE LEARNED FIRST APPEALLATE AUTHORITY AND C ONTENDED THAT THERE WAS NO LIABILITY ON THE ASSESSEE U/S 201(1) OR 201(1A). P ER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE PAYMENT OF TAX BY THE RECIPIENT COULD ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 15 NOT RELIEVE THE ASSESSEE FROM ITS LIABILITY OF DEDU CTING TAX AT SOURCE AND THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING SO. 27. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) ER RED IN HOLDING THAT THE LIABILITY OF THE ASSESSEE EXISTED NOTWITHSTANDING T HE PAYMENT MADE BY THE RECIPIENT OF THE AMOUNT. THE HONBLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGE P. LTD. VS. CIT (2007) 293 ITR 226 (SC) CONSIDERED A CASE IN WHICH TAX WAS ALREADY PAID BY THE RECIPIENT OF THE INCOME ON THE PAYMENT RECEIVED FROM THE ASSESSEE. IT WAS HELD THAT THE ASSESSEE COULD NOT BE TREATED AS IN DEFAULT U/S.201(1). WHILE REACHING THIS CONCLUSION IT CONSIDERED CIRCULAR NO. 275/201/95-IT(B) DATED 29.1.1997 ISSUED BY THE CBDT AS PUTTING AN END TO T HE CONTROVERSY WHEN IT DECLARED THAT ANY DEMAND VISUALIZED U/S.201(1) OF THE I.T. ACT SHOULD NOT BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE O FFICER-IN-CHARGE OF TDS THAT THE TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. 28. THE SPECIAL BENCH OF THE TRIBUNAL IN MAHINDRA & MAHINDRA VS. DCIT [(2009) (MUM) (SB) 313 ITR (AT) 263] HAS ALSO TAKEN SIMILAR VIEW BY HOLDING THAT THE PERSON RESPONSIBLE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT IN RESPECT OF TAX U/S.201(1) IF THE PAYEE HAS PAID THE TAX DIRECT LY. AS ADMITTEDLY NSICT PAID DUE TAX ON THEIR INCOME INCLUSIVE OF THE AMOUNTS RECEIV ED FROM THE ASSESSEE, NATURALLY THERE CANNOT BE ANY QUESTION OF RECOVERY OF TAX BY TREATING THE ASSESSEE AS IN DEFAULT U/S 201(1). 29. THE LEGAL POSITION IN RESPECT OF LIABI LITY OF INTEREST U/S 201(1A) STANDS ON DIFFERENT FOOTING FROM THAT U/S 201(1). DESPITE THE FACT THE PAYEE INCLUDED THE AMOUNT RECEIVED IN HIS INCOME AND PAID DUE TAX, THE LIABILITY OF PAYER TO I NTEREST 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 ACTUA LLY PAID. IN SUCH A SITUATION THE D ATE OF PAYMENT OF TAX BY THE PAYEE CAN BE TREATED AS THE DATE OF PAYMENT. ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 16 THIS VIEW HAS BEEN TAKEN BY THE HONBLE SUPREME COU RT IN CIT VS. ELI LILLY & CO. (INDIA) P. LTD. (2009) 312 ITR 225 (SC) . STILL IN AN EARLIER CASE, THE HONBLE SUPREME COURT IN HINDUSTAN COCA COLA BEWERAGE LTD. VS. CIT (SUPRA) HAS HELD THAT INTEREST U/S 201(1A) IS PAYABLE TILL DATE OF P AYMENT BY DEDUCTEE. 30. BE THAT AS IT MAY, THIS GROUND HAS BE COME ACADEMIC IN VIEW OF OUR DECISION ON THE REVENUES APPEAL THAT THE ASSESSEE HAD RIGHTLY DEDUCTED TAX AT SOURCE U/S.194C. 31. SECOND GROUND RAISED BY THE ASSESSEE IN ITS CRO SS OBJECTION IS ABOUT THE HOLDING OF THE ORDER PASSED BY THE A.O. AS WITHIN R EASONABLE TIME. THE LD. AR ARGUED THAT THE ORDER U/S 201(1) AND 201(1A) WAS PA SSED BY THE AO ON 12.12.2008. IN THE ABSENCE OF ANY TIME LIMIT PROVID ED IN THE ACT FOR THE PASSING OF SUCH ORDER, THE LD. AR ARGUED, THAT IT OUGHT TO HAV E BEEN PASSED WITHIN A REASONABLE TIME. IT WAS CONTENDED THAT THE PASSING OF SUCH ORDER AFTER FOUR YEARS FROM THE END OF THE FINANCIAL YEAR BE HELD TO BE TI ME BARRED. ON THE OTHER HAND, THE LD. DR ARGUED THAT THE PERIOD OF A LITTLE MORE THAN FOUR YEARS COULD NOT BE HELD TO BE UNREASONABLE. 32. WE HAVE HEARD BOTH THE SIDES. THE LIABI LITY OF THE PERSON RESPONSIBLE IS DEPENDENT UPON THE DEDUCTEE FAILING OR OTHERWISE TO PAY SUCH TAX DIRECTLY. THUS THE ACTION U/S. 201(1) IS DEPENDENT ON THE OUTCOME OF T HE ASSESSMENT OF THE PAYEE AND THE TIME LIMIT FOR PASSING ORDER U/S. 201(1) HAS TO BE VIEWED IN THE LIGHT OF THE FATE OF THE ASSESSMENT IN THE HANDS OF THE RECIPIENT. LO GICALLY THE PERSON RESPONSIBLE FOR PAYING SUM CHARGEABLE TO TAX CAN BE TREATED AS ASSE SSEE IN DEFAULT AT ANY TIME PRIOR TO THE ASSESSMENT OF THE PAYEE OR THE TIME AVAILABL E FOR THE MAKING OF THE ASSESSMENT OF THE PAYEE. IF THE PERSONS RESPONSIBLE IS DEEMED TO BE AN ASSESSEE IN DEFAULT AFTER THE ASSESSMENT OF THE PAYEE OR THE TI ME AVAILABLE FOR MAKING ASSESSMENT HAS EXPIRED THEN SUCH AMOUNT OF TAX WILL BE INCAPABLE OF ADJUSTMENT ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 17 AGAINST TAX LIABILITY OF THE PAYEE AND WOULD REQUIR E RETURN TO SUCH PERSON WHO HAS BEEN TREATED AS ASSESSEE IN DEFAULT. THUS BOTH THE INITIATION OF PROCEEDINGS U/S. 201(1) AS WELL AS THE COMPLETION OF SUCH PROCEEDING S BY PASSING ORDER HAVE TO BE PRIOR TO THE TIME LIMIT WITHIN WHICH THE TAX CAN BE DETERMINED IN THE HANDS OF THE PAYEE. IT CANNOT BE BEYOND SUCH PERIOD. IF THE PAY EE HAS INCLUDED THE AMOUNT RECEIVED FROM PAYER IN HIS TOTAL INCOME BUT THE TAX HAS NOT BEEN PAID IN FULL OR PART THEN THE PAYER CAN BE TREATED AS ASSESSEE IN DEFAUL T TO THE EXTENT OF THE NON-PAYMENT OF TAX ON THE SUM PAID TO HIM PROVIDED THE TAX IS N OT RECOVERED FROM THE PAYEE. IF THE PAYEE HAS FURNISHED THE RETURN OF INCOME WITHOU T DISCLOSING THE SUM PAID BY THE PAYER ON WHICH TAX WAS DEDUCTIBLE AS PER THE PROVIS IONS OF THE ACT THEN THE TAX DEDUCTIBLE AT SOURCE CAN BE RECOVERED FROM THE PAYE R BY TREATING HIM AS ASSESSEE IN DEFAULT IF THE INCOME HAS NOT BEEN ASSESSED IN THE HANDS OF THE PAYEE. STILL IN ANOTHER SITUATION WHERE THE PAYEE HAS NOT AT ALL FI LED HIS RETURN OF INCOME AGAIN THE PERSON RESPONSIBLE CAN BE TREATED AS ASSESSEE IN DE FAULT IN RESPECT OF THE TAX ON THE SUM PAID BY HIM IN VIOLATION OF THE PROVISIONS OF T HIS CHAPTER. THUS THERE REMAINS NO DIFFICULTY IN ANSWERING THE QUESTION THAT HOW MU CH TIME IS AVAILABLE WITH THE REVENUE FOR TREATING THE PAYER AS ASSESSEE IN DEFAU LT U/S. 201(1). THE OBVIOUS ANSWER IS THAT THE MAXIMUM TIME LIMIT AVAILABLE FOR ASSESSMENT OF THE PAYEE IS THE MAXIMUM TIME LIMIT WITHIN WHICH THE PAYER CAN BE TR EATED AS ASSESSEE IN DEFAULT. WITH THE EXPANSION OF THE SCOPE OF SECTION 147, ALS O ROPING IN THE CASES OF ASSESSMENT APART FROM REASSESSMENT, IT IS CLEAR THA T THE ASSESSMENT OF PAYEE SHALL ALSO INCLUDE ASSESSMENT MADE UNDER 147. THUS THE MAXIMUM TIME LIMIT FOR INITIATING AND COMPLETING THE PROCEEDINGS U/S. 201( 1) HAS TO BE AT PAR WITH THE TIME LIMIT AVAILABLE FOR INITIATING AND COMPLETING THE R EASSESSMENT. THIS IS THE VIEW WHICH HAS BEEN CANVASSED BY THE SPECIAL BENCH OF TH E TRIBUNAL IN MAHINDRA & MAHIRDRA (SUPRA). 33. THE LEARNED A.R., WHEN CONFRONTED WIT H THE ABOVE REFERRED SPECIAL BENCH O RDER, CANDIDLY ADMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS WITHIN ITA NO.192 & CO 137/MUM/2010 M/S.MERCHANT SHIPPING SERVICES PVT.LTD. 18 THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR. RESPECTFULLY FOLLOWING THE SPECIAL BENCH ORDER IN MAHINDRA & MAHINDRA (SUPRA) , WE HOLD THAT THE ORDER PASSED BY THE AO IS NOT TIME BARRED. THIS GROUND IS NOT ALLOWED. 34. THIRD GROUND OF THE CROSS OBJECTION IS AGAINST NON-ADJUDICATION BY THE LEARNED CIT(A) OF GROUND NOS.4 TO 6 RAISED BEFORE H IM. IN VIEW OF OUR DECISION THAT THE ASSESSEE RIGHTLY DEDUCTED TAX AT SOURCE U/S.19 4C AND THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE U/S.194J, THIS GROUND CHALLE NGING THE DEMAND OF DIFFERENTIAL AMOUNT OF TAX U/S.201(1) AND INTEREST U/S.201(1A) H AS BECOME INFRUCTUOUS. 35. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( R.V.EASWAR ) ( R.S.SYAL ) PRESIDENT ACCO UNTANT MEMBER MUMBAI : 24 TH NOVEMBER, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XIV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.