Nunhems India Private Limited, R.R.Dist V. JCIT, Range 16, Hyderabad

ITA 327/HYD/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6577 (ITAT-HYDERABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-04-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Business income; Depreciation; Transfer pricing; Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Additional evidence; Permanent establishment; Bad and doubtful debts; Revised return; Unabsorbed depreciation; Revenue expenditure
• Section: 43B; 143(3); 206AA; 80HHC; 201(1)

Judgement Text

ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 1 OF 38 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS A.Y APPELLANT RESPONDENT 290/HYD/2011 2006-07 NUNHEMS INDIA PVT. LTD, MEDCHAL, R.R. DISTT. ADDL. CIT RANGE 16 HYDERABAD 327/HYD/2012 2008-09 -DO- JT.CIT, RANGE 16 HYDERABAD 1775/HYD/2013 2009-10 -DO- ADDL.CIT, RANGE 16 HYDERABAD FOR ASSESSEE : SHRI NAGESWAR RAO FOR REVENUE : SMT. SUMAN MALIK O R D E R PER SMT. P. MADHAVI DEVI, J.M. ITA 290/HYD/2011: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A)-5, HYDERABAD DATED 22.12.2010. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL. ON THE FACTS OF AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) V, HYDERABAD (CIT(A)) HAS: 1. ERRED IN CONFIRMING THE DISALLOWANCE OF THE REVE NUE EXPENDITURE INCURRED BY THE APPELLANT ON LEASEHOLD IMPROVEMENTS AMOUNTING TO RS. 1,05,04,205/- TREATING IT AS CAPIT AL EXPENDITURE. DATE OF HEARING: 10.04.2018 DA TE OF PRONOUNCEMENT : 0 6 . 0 7 .2018 ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 2 OF 38 2. ERRED IN CONFIRMING THE DISALLOWANCE OF PAYMENT MADE TO NUNHENS BV FOR RS. 63,21,003/- U/S 40(A)(IA) OF THE IT ACT WITHOUT APPRECIATING THAT THE SAID PAYMENT WAS NOT CHARGEABLE TO TAX IN THE HANDS OF NUNHEMS BV AND ACCORDINGLY W AS NOT COVERED BY THE PROVISIONS OF SEC. 195 OF THE IT ACT . 3. ERRED IN CONFIRMING THE DISALLOWANCE OF THE PAYM ENT MADE TO BAYER CROP SCIENCE LTD., FOR RS. 38,72,492/- U/S 40(A)(IA) OF THE IT ACT WITHOUT APPRECIATING THAT THE PAYMENT WA S MERE REIMBURSEMENT OF APPELLANTS OWN SHARE OF ACTUAL COS T AND IS NOT COVERED BY THE PROVISIONS OF SEC. 194J OF THE ACT. 4. ERRED IN CONFIRMING THE ADDITIONAL AMOUNTING TO RS. 40,51,279/- ON ACCOUNT OF VARIOUS PAYMENTS U/S 40(A )(IA) OF THE ACT. 5. ERRED IN CONFIRMING DISALLOWANCE OF THE PROVISIO N ON SCHEME DISCOUNT AMOUNTING TO RS. 51,91,186/- AS APP EARING ON THE LIABILITY SIDE OF THE BALANCE SHEET UNDER THE H EAD ACCRUED EXPENSES AND OTHER LIABILITIES TREATING THE SAME A S EXPENDITURE NOT CRYSTALIZED DURING THE YEAR. 6. ERRED IN CONFIRMING THE DISALLOWANCE OF THE LEAV E TRAVEL ALLOWANCE AND BONUS AMOUNTING TO RS. 34,90,006/- AN D RS. 60,80,259/- RESPECTIVELY, ON THE GROUND THAT THE AS SESSEE HAS NOT INCURRED THE EXPENDITURE DURING THE F.Y 2005-06 , WITHOUT APPRECIATING THAT PAYMENT WAS MADE IN APRIL 2006, B EING ALLOWABLE U/S 43B OF THE ACT. 1.1 FURTHER VIDE LETTER DATED 19.06.2015, THE ASSES SEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEA L: ADDITIONAL GROUND NO. 1.1 WITHOUT PREJUDICE TO GROUND NO.1, THAT ON THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, IF THE EXPEND ITURE INCURRED ON LEASEHOLD IMPROVEMENT IS TREATED AS BEING CAPITA L IN NATURE, DEPRECIATION SHALL BE ALLOWED IN RESPECT OF THE SAM E @ 10% IN ACCORDANCE WITH THE WRITTEN DOWN VALUE METHOD PRESC RIBED UNDER THE INCOME TAX ACT, 1961 FOR EVERY SUCCESSIVE YEAR AS A CONSEQUENCE. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 3 OF 38 1.2 IN SUPPORT OF THE ABOVE ADDITIONAL GROUND OF AP PEAL, THE ASSESSEE HAS ALSO FILED ADDITIONAL EVIDENCE VID E LETTER DATED 20.09.2016 AND SOUGHT ADMISSION OF THE ADDITIONAL E VIDENCE. HOWEVER, AT THE TIME OF HEARING, THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS THE SAME. THEY ARE ACCORDINGLY NOT CONSIDERED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF DEVELOPING, PRODUCING AN D MARKETING OF HYBRID SEEDS, FILED ITS RETURN OF INCOME FOR THE A.Y 2006-07 ON 13.11.2006 ADMITTING AN INCOME OF RS. 10,83,09,120/ -. THE SAME WAS INITIALLY PROCESSED U/S 143(1) OF THE IT A CT AND RESULTANT REFUND OF RS.1,33,08,189/- WAS MADE ON 09 .10.2007. 2.1 THE ASSESSEE, THEREAFTER, FILED A REVISED RETUR N OF INCOME ON 06.12.2010 ADMITTING TAXABLE INCOME OF RS . 9,67,39,768/-, WHICH WAS SELECTED FOR SCRUTINY. DU RING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT, TH E A.O ASKED FOR VARIOUS DETAILS, WHICH WERE PRODUCED BY THE ASS ESSEE. FROM THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME THE A.O OBSERVED THAT THE ASSESSEE COMPANY CLAIMED AN A MOUNT OF RS.1,05,04,205/-AS REVENUE EXPENDITURE UNDER THE HE AD LEASEHOLD IMPROVEMENTS, THOUGH THE SAME HAS BEEN CA PITALIZED IN THE BOOKS OF ACCOUNTS. THE A.O OBSERVED THAT TH E EXPENDITURE IN QUESTION RELATED TO THE PROPERTY, LEASED OUT TO THE ASSESSEE COMPANY FROM MONICA ENTERPRISES PRIVATE LIMITED BY VIRTUE OF LEASE AGREEMENT DATED 15.12.2004, AND THAT AS PER T HE TERMS AND CONDITIONS OF THE AGREEMENT, THE LEASE IS FOR A PER IOD OF 5 YEARS AND THE ASSESSEE SHALL NOT BE ENTITLED TO TERMINATE THE LEASE ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 4 OF 38 DURING THE LOCK-IN PERIOD OF 5 YEARS UNLESS THERE I S A GROSS AND SERIOUS BREACH OF THE TERMS OF THE LEASE AND THAT IT WAS FURTHER EXTENDABLE FOR ANOTHER FIVE YEARS BY EXECUTING A FR ESH DEED AND ON PAYMENT OF ADDITIONAL STAMP DUTY AT THE TIME OF EXTENSION AND THAT DURING OR AT AND THAT DURING OR THE END OF THE LEASE PERIOD, ALL PERMANENT FITTINGS INCLUDING THE INTERIOR DESIG NING OF THE SAID OFFICE AND THE WAREHOUSE DONE BY THE ASSESSEE AT HI S OWN COST, CAN BE REMOVED. 3. THE A.O OBSERVED THAT MAJORITY OF THE EXPENDITUR E IS TOWARDS FURNITURE AND FIXTURES AND ELECTRICAL FITTI NGS ONLY AND THAT THE AMOUNT OF LEASEHOLD IMPROVEMENT IS ONLY RS. 4,1 8,465/-. HE OBSERVED THAT EVEN IF THIS AMOUNT IS TO BE CONSIDER ED IT HAS TO BE CONSIDERED AS INCURRED FOR ACQUIRING OF FIXED ASSET S WITH A VIEW TO BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE OF ENDURING BENEFIT AND HENCE IS CAPITAL IN NATURE. HE FURTHER CONSIDERED THE BALANCE OF EXPENDITURE ALSO AS CAPITAL IN NATURE AN D ALLOWED 5% DEPRECIATION THEREON. 3.1 FURTHER, HE ALSO OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS TO VARIOUS PARTIES WITHOUT DEDUCTING TAX A T SOURCE. HE OBSERVED THAT ASSESSEE HAD MADE PAYMENTS TO: 1) NUNHEMS BV RS. 63,21,003/-. 2) BAYER CROP SCIENCE LIMITED RS. 38,72,492/-. 3) TO VARIOUS OTHER PARTIES TOTALING TO RS. 99,41,1 31/- 3.2 THE A.O WAS OF THE OPINION THAT THE PAYMENT MA DE TO NUNHEMS BV LTD IS A PAYMENT TOWARDS IT SERVICES REN DERED AND IS ALSO A PAYMENT MADE TO NON-RESIDENT INDIAN AND THER EFORE, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S 1 95 OF THE ACT. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 5 OF 38 AS REGARDS THE PAYMENTS TO BAYER CROPS SCIENCE LTD. , THE A.O WAS OF THE OPINION IT WAS TOWARDS TECHNICAL SERVICES RE CEIVED AND WAS SUBJECT TO TDS U/S 194J OF THE ACT AND IS NOT REIMB URSEMENT OF EXPENDITURE INCURRED BY BAYER CROPS SCIENCE LTD., O N ITS BEHALF AS CLAIMED BY THE ASSESSEE. AS REGARDS THE PAYMENTS TO VARIOUS OTHER PARTIES, A.O OBSERVED THAT THESE PAYMENTS ARE TOWAR DS COMMISSION, SECURITY CHARGES ETC., ATTRACTING THE P ROVISIONS OF SEC. 194C, 194H AND 194J OF THE IT ACT, AND SINCE THE AS SESSEE FAILED TO DEDUCT TAX FROM THESE PAYMENTS, HE HELD THAT SUCH E XPENDITURE IS NOT ALLOWABLE U/S 40(A)(IA). 3.3 FURTHER, THE A.O ALSO OBSERVED THAT THE ASSESSE E HAS MADE A PROVISION OF RS.51,91,186/- TOWARDS SCHEME D ISCOUNT I.E THE ADDITIONAL DISCOUNT TO THE CUSTOMERS WHO PARTIC IPATED IN THE SPECIAL SCHEMES LAUNCHED BY THE ASSESSEE. A.O OBSE RVED THAT IT WAS ONLY A PROVISION AND IS NOT THE EXPENDITURE WHI CH HAS CRYSTALIZED DURING THE YEAR AND AS SUCH IS NOT ALLO WABLE. HE ACCORDINGLY, BROUGHT IT TO TAX. 4. FROM THE REVISED RETURN OF INCOME, THE A.O OBSER VED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE OF LE AVE TRAVEL ALLOWANCE OFFERED TO TAX IN THE A.Y 2007-08, RELATI NG TO THE A.Y 2006-07 OF RS. 54,89,084/-; AND RS. 60,80,259/- TOW ARDS BONUS PAID PRIOR TO DUE DATE OF FILING THE RETURN OFFERED TO TAX IN THE A.Y 2007-08. IN THIS CONNECTION, THE A.O OBSERVED THAT THE ASSESSEE HAS DEBITED VACATION PAY OF RS. 19,99,081/- ONLY AN D THAT THE BALANCE AMOUNT OF RS. 34,90,006/- WAS NOT DEBITED D URING THE YEAR. LIKEWISE, HE OBSERVED THAT THE BONUS OF RS. 60,80,259/- WAS ALSO NOT DEBITED DURING THE YEAR. HE, THEREFORE, H ELD THAT THEY ARE ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 6 OF 38 NOT ALLOWABLE FOR DEDUCTION U/S 43B OF THE IT ACT A ND ACCORDINGLY BROUGHT RS. 95,70,265/- TO TAX. THE A.O ALSO VERIF IED THE COMPUTATION OF INCOME AND OBSERVED THAT THE ASSESSE E HAS CLAIMED BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 1,04 ,87,077/- AS AGAINST THE ACTUAL BROUGHT FORWARD DEPRECIATION AVA ILABLE FOR SET OFF OF RS. 35,25,951/- ONLY. THUS, HE ALLOWED THE SET OFF OF RS. 35,25,951/- ONLY AND BROUGHT THE BALANCE TO TAX. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A), WHO CONFIRMED THE ORDER OF THE A.O AS FAR A S THE DISALLOWANCES ARE CONCERNED, BUT GRANTED PARTIAL RE LIEF BY DIRECTING THE A.O TO VERIFY THE CORRECTNESS OF THE CLAIM OF T HE ASSESSEE FOR SET OFF OF BROUGHT FORWARD DEPRECIATION. AGGRIEVED BY T HE ORDER OF THE CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. AS REGARDS GROUND NO. 1, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE EXPENDITURE INCURRED B Y THE ASSESSEE ON THE LEASEHOLD PREMISES TO MAKE IT FIT FOR ITS WO RKING IS REVENUE IN NATURE AND PLACED RELIANCE UPON THE FOLLOWING DECIS ION IN SUPPORT OF HIS CONTENTION: I. CIT VS SHRI RAM REFRIGERATION INDUSTRIES LTD., REPORTED IN [2001] 116 TAXMAN 381 (DEL). 6.2 THE LD. DR, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE UPON THE FOLLOWING DECISIONS: I. COASTAL RESORTS INDIA LTD., REPORTED IN [2014] 47 TAXMANN.COM 384 (KAR). ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 7 OF 38 II. TAJMAHAL HOTEL VS CIT, REPORTED IN [1967] 66 ITR 30 3 (AP). III. SURENDER MADAN VS ACIT, REPORTED IN [2013] 37 TAXMANN.COM 388 (DEL). 6.3 HAVING REGARD TO THE RIVAL CONTENTIONS AND MATE RIAL PLACED ON RECORD, WE FIND THAT THE EXPENDITURE WHIC H IS INCURRED BY AN ASSESSEE ON THE LEASEHOLD PREMISES FOR CARRYING ON ITS BUSINESS IS ALLOWABLE AS CURRENT REPAIRS AND AS REVENUE EXPENDI TURE. IN THE CASE BEFORE US, WE FIND THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE IS AS FOLLOWS: MAIN GATE - RS. 7,643/- ELECTRICAL FITTING- RS. 19,47,034/- STRUCTURE - RS. 1,73,335/- TEMPORARY STRUCTURE- RS. 98,691/- DESIGNING & LAYOUT FOR INTERIORS- RS. 4,18,465/- FURNITURE, FIXTURES & FITTINGS- RS. 78,59,037/- 6.4 FROM THE ABOVE DETAILS, WE FIND THAT THE GATE I S NOT A FIXED ASSET, AND THE ELECTRICAL FITTING IS ESSENTIA L FOR CARRYING ON THE BUSINESS AND CANNOT BE REMOVED DURING OR THE END OF THE LEASE PERIOD WITHOUT DAMAGE AND CANNOT BE REUSED. THEREF ORE, THERE IS NO ENDURING BENEFIT FROM SUCH EXPENDITURE. THE DETAIL S OF STRUCTURES OR THE TEMPORARY STRUCTURES ARE NOT AVAILABLE BUT FROM THE SUBMISSIONS BEFORE THE CIT(A), IT IS SEEN THAT SUCH EXPENDITURE IS TOWARDS MAKING, THE WOODEN CUBICAL, STAFF CABINS ETC. TH E FURNITURE AND FITTINGS ARE ALSO TOWARDS THE ALMIRAHS, WINDOWS AND DOORS ETC., WHICH CAN BE REMOVED ONLY AFTER DISMANTLING FROM TH E LEASED PREMISES. THUS, IT IS SEEN THAT THE EXPENDITURE IS TOWARDS FACILITATING AND EFFICIENT CONDUCT OF THE BUSINESS AND THERE IS NO CREATION OF ANY FIXED ASSET. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 8 OF 38 6.5 WE FIND THAT THE HONBLE DELHI HIGH COURT IN TH E CASE OF SRI RAM REFRIGERATION LTD., (SUPRA) HAS CONSIDERED A SIMILAR ISSUE OF EXPENDITURE ON FURNITURE, WOODEN PARTITIONS, CABLE WORKS, WALL TILES, SUNDRY FITTINGS IN RENTED PREMISES AND HAS HELD IT TO BE REVENUE EXPENDITURE. WE FIND THAT THE DECISIONS ON WHICH T HE LD. DR HAS PLACED RELIANCE UPON ARE DISTINGUISHABLE FROM THE F ACTS OF THE CASE BEFORE US, AS IN THOSE CASES, IT WAS HELD THAT THE REPAIRS WERE GIVING ENDURING BENEFIT TO THE ASSESSEES THEREIN, WHEREAS IN THE CASE BEFORE US, THOUGH THE ASSESSEE IS ENTITLED TO REMOV E AND TAKE THE ADDITIONAL FITTINGS ETC., AT THE TIME OF LEAVING TH E PREMISES, WE FIND THAT THE ELECTRICAL FITTINGS, WOODEN PARTITIONS ET C., WOULD BE OF NO USE TO THE ASSEESSEE AS THEY WOULD GET DAMAGED IN T HE PROCESS OF DISMANTLING ITSELF. THEREFORE, WE ARE INCLINED TO ACCEPT THE ASSESSEES CONTENTIONS AND TREAT THE EXPENDITURE IN CURRED BY THE ASSESSEE ON THE LEASED PREMISES FOR MAKING THE PREM ISES FIT FOR FUNCTIONING AND EFFICIENT FOR CARRYING ON THE BUSIN ESS IS REVENUE EXPENDITURE. THE GROUND OF APPEAL NO. 1 IS ACCORDI NGLY ALLOWED . 7. AS REGARDS GROUND NO.2 RELATING TO DISALLOWANCE OF PAYMENT OF RS.63,21,003 MADE BY THE ASSESSEE TO NUN HEMS BV U/S 40(A)(IA) OF THE I.T. ACT, THE CONTENTIONS OF T HE ASSESSEE HAVE BEEN THAT THE ABOVE PAYMENT WAS REIMBURSEMENT OF EX PENDITURE INCURRED BY NUNHEMS BV ON BEHALF OF THE ASSESSEE TO WARDS THE INTER-CONNECTIVITY FACILITY WHICH WAS PROVIDED TO T HE ASSESSEE AT ITS GURGAON FACILITY. IT WAS SUBMITTED THAT BAYOR G ROUP HAD ENTERED INTO AN AGREEMENT WITH A PARTY NAMED EQUANT TO PROVIDE GLOBAL INTER-CONNECTIVITY TO THE BAYER GROUP IN WHI CH NUNHEMS BV IS AN AFFILIATE AND THAT NUNHEMS BV HAS MADE THE PAYMENT TO M/S. EQUANT ON BEHALF OF THE ASSESSEE FOR ITS USAGE OF THE FACILITY ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 9 OF 38 AT GURGAON WHICH WAS REIMBURSED BY THE ASSESSEE AND THEREFORE, THERE IS NO INCOME ELEMENT THEREIN TO NUNHEMS BV AN D IS NOT TAXABLE IN INDIA. IT WAS ALSO SUBMITTED THAT THE FA CILITY PROVIDED BY M/S. EQUANT TO THE ASSESSEE AND ITS GROUP IS NOT A TECHNICAL SERVICE AND THEREFORE, IT IS NOT LIABLE TO TDS U/S 195 OF THE I.T. ACT. 7.1 THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE FOLLOWING DECISIONS OF IN SUPPORT OF HIS CONTENTION S ABOVE: I) ITAT, BANGALORE BENCH, IN THE CASE OF CIT VS. TORRY HARRIS BUSINESS SOLUTIONS (P) LTD REPORTED IN (2015) 61 TAXMANN.COM 235 (BANG.TRIB); II) ITAT AT DELHI IN THE CASE OF BHARTI AIRTEL LTD REPO RTED IN (2016) 67 TAXMANN.COM 223 (DELHI TRIB.); III) HON'BLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD, REPORTED IN 251 ITR 53 (MAD.) IV) HON'BLE SUPREME COURT IN THE CASE OF KOTAK SECURITI ES REPORTED IN 67 TAXMANN.COM 336; V) ITAT AT PUNE IN THE CASE OF T-3 ENETRY SERVICES PVT LTD REPORTED IN 91 TAXMANN.COM 334; AND VI) ITAT AT DELHI IN THE CASE OF VODAFONE ESSAR DIGILIN K IN ITA NO.1950/DEL/2014 . 7.2 THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT THE PAYMENT MADE TO NUMHEMS BV IS FOR THE TECHNICAL SER VICES RENDERED BY M/S. EQUANT AND THEREFORE, THE PAYMENT IS ACTUALLY TO M/S. EQUANT AND IT BEING A NON-RESIDENT, THE ASS ESSEE WAS REQUIRED TO DEDUCT TAXES AT SOURCE BEFORE MAKING SU CH PAYMENT AND THEREFORE, THE DISALLOWANCE U/S 40(A)(IA) IS JU STIFIED. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 10 OF 38 7.3 HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS TREATED THE PAYM ENT AS FEE FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE ACT, WHILE THE CIT (A) IN HIS ORDER, HAD BROUGHT OUT THE NATURE OF SERVICES RECEI VED BY THE ASSESSEE FOR WHICH THE PAYMENT WAS MADE. WE FIND TH AT THE BAYOR GROUP HAD ENTERED INTO AN AGREEMENT WITH M/S. EQUAN T TO PROVIDE GLOBAL INTER-CONNECTIVITY AND MADE THE PAYMENT AND EACH UNIT IN EACH COUNTRY REIMBURSES THE PAYMENT, TAKING INTO AC COUNT THEIR USAGE. THOUGH, THE CIT (A) AGREED WITH THE ASSESSEE THAT THE PAYMENT IS ACTUALLY MADE TO M/S. EQUANT THROUGH NUN HEMS BV, HE DID NOT AGREE WITH THE ASSESSEE THAT IT DID NOT REQUIRE TDS. HE WAS OF THE OPINION THAT THE SERVICES RENDERED TO TH E ASSESSEE BY NON-RESIDENT EQUANT FALL UNDER SECTION 9(1)(I) OF T HE ACT AND THEREFORE, THE PROVISIONS OF SECTION 195 OF THE AC T ARE ATTRACTED. 7.4 WE FIND THAT THE CIT (A), AT PARA 8.5 OF HIS OR DER HAS BROUGHT OUT THAT EQUANT IS A GERMAN COMPANY PROVIDI NG GLOBAL INTER-CONNECTIVITY SERVICES AND THAT IT HAS PROVIDE D THE SERVICE DIRECTLY TO THE ASSESSEE AT ITS GURGAON OFFICE. THE REFORE, WHAT IS THE NATURE OF SERVICES PROVIDED BY EQUANT IS TO BE SEEN. IN ITS WRITTEN SUBMISSIONS, THE ASSESSEE HAS CONTENDED THA T NUNHEMS BV HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE IN INDIA AND FURTHER THAT THE DTAA BETWEEN INDIA AND NETHERLANDS PROVIDED FOR A MAKE AVAILABLE CLAUSE WHICH WAS NOT SATISFIED I N THE CASE BEFORE US. HOWEVER, WE FIND THAT IT IS NOT NUNHEMS BV WHICH HAS RENDERED THE SERVICES TO THE ASSESSEE, BUT IT IS EQ UANT WHICH HAS RENDERED SERVICES AND THE PAYMENT WAS ROUTED THROUG H NUNHEMS BV. THE CIT (A) HAS HELD IT TO BE BUSINESS INCOME O F EQUANT U/S 9(1)(I) OF THE ACT AND THE REVENUE HAS NOT CHALLENG ED THIS FINDING ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 11 OF 38 OF THE CIT (A). BUSINESS INCOME OF A NON-RESIDENT I S TAXABLE IN INDIA, PROVIDED IT HAS A PE IN INDIA. ADMITTEDLY, E QUANT HAS NO PE IN INDIA AND THEREFORE, SUCH INCOME IS NOT CHARGEAB LE TO TAX IN INDIA. PROVISIONS OF SECTION 195 ARE ATTRACTED IF A PAYMENT IS MADE TO A NON-RESIDENT, PROVIDED THE INCOME IS CHARGEABL E TO TAX IN INDIA. IN THE DECISIONS RELIED UPON BY THE ASSESSEE , IT WAS HELD THAT PAYMENT FOR BANDWIDTH SERVICES IS NOT ROYALTY OR FTS. FOR THE SAKE OF CLARITY AND READY REFERENCE, THE RELEVANT P ARAGRAPHS ARE REPRODUCED HEREUNDER: I) T-3 ENERGY SERVICES INDIA (P) LTD PARA 23 TO 25 23. THE ASSESSEE ON THE OTHER HAND, HAS RELIED ON T HE DECISION IN WNS NORTH AMERICA INC. VS. ADIT (SUPRA) I.E. DECISION OF MUMB AI BENCH OF TRIBUNAL, WHICH HAS BEEN APPROVED BY THE HON'BLE HIGH COURT IN DIT VS. WNS UK LTD. (2013) 214 TAXMAN 317 (BOM). THE ISSUE BEFORE THE HON'BLE HIGH COURT OF DELHI WAS IN THE HANDS OF RECIPIENT OF LEASE LINE CHARGES. THE A SSESSEE THEREIN HAD RECOVERED INTERNAL TELECOMMUNICATION CHARGES FROM WNS CHARGES AND THE TRIBUNAL HELD THE AMOUNT IN QUESTION WAS RECEIVED BY THE SAID ASSESSE E AS REIMBURSEMENT OF LEASE LINE CHARGES AND WOULD NOT QUALIFY EITHER AS 'ROYAL TY' OR AS INCOME ATTRIBUTABLE TO PE IN INDIA AND HENCE, IT WAS HELD THAT THERE WAS N O INCOME EARNED BY THE ASSESSEE. THE QUESTION BEFORE THE HON'BLE HIGH COUR T WAS WHETHER THE AMOUNT RECEIVED ON ACCOUNT OF REIMBURSEMENT OF LEASE LINE CHARGES WOULD QUALIFY AS 'ROYALTY' UNDER ARTICLE 12 OF INDIA - UK TREATY AND THE SECOND QUESTION WAS I N RESPECT OF CHARGES BEING ATTRIBUTABLE TO PE IN INDI A. THE HON'BLE HIGH COURT VIDE PARA 5 HAD NOTED THE DECISION OF TRIBUNAL BUT HAD H ELD THAT SINCE THE DECISION OF TRIBUNAL WAS BASED ON THE FINDINGS OF FACT, THERE W AS NO REASON TO ENTERTAIN QUESTION NOS.4 AND 5. 24. APPLYING THE PRINCIPLE LAID DOWN BY THE HON'BLE HIGH COURT OF DELHI IN DIT VS. NEW SKIES SATELLITE BV (SUPRA), WE HOLD THAT WH ERE THE PROVISIONS OF DTAA OVERRIDES THE PROVISIONS OF INCOME-TAX ACT AND THE DEFINITION OF 'ROYALTY' HAVING NOT BEEN UNDERGONE ANY AMENDMENT IN DTAA, TH E ASSESSEE WAS NOT LIABLE TO WITHHOLD TAX ON THE LEASE LINE CHARGES PAID BY I T. THE AMENDED PROVISIONS OF SECTION 9(1)(VI) OF THE ACT BROUGHT INTO FORCE BY THE FINANCE ACT , 2012 ARE APPLICABLE TO DOMESTIC LAWS AND THE SAID AMENDED DE FINITION CANNOT BE EXTENDED TO DTAA, WHERE THE TERM HAS BEEN DEFINED ORIGINALLY AND NOT AMENDED. 25. NOW, COMING TO THE NEXT ASPECT OF THE ISSUE THA T REIMBURSEMENT OF CHARGES IS NOT SUBJECT TO TAX IN INDIA. THE BASIC PRINCIPLE UN DERLYING THE SAME IS THAT WHERE REIMBURSEMENT OF EXPENSES DO NOT INCLUDE ANY INCOME ELEMENT, THEN THE SAME IS NOT SUBJECT TO TAX IN INDIA. THE ASSESSEE BEFORE US HAS FILED EXTENSIVE EVIDENCE IN THIS REGARD I.E. QWEST COMMUNICATIONS INC HAD RAISE D CHARGES UPON T-3, USA AND THE PORTION ALLOCABLE TO THE ASSESSEE WAS CHARGED O N COST TO COST BASIS. HENCE, IT CANNOT BE SAID THAT THERE WAS ANY INCOME ELEMENT WH ICH HAS ARISEN IN THE CASE ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 12 OF 38 AND CONSEQUENTLY, WE HOLD THAT WHERE THE ASSESSEE H AD REIMBURSED THE EXPENSES HAVING NO INCOME ELEMENT, THERE IS NO REQUIREMENT T O WITHHOLD TAX OUT OF SUCH PAYMENTS. THE CASE OF REVENUE IN THIS REGARD IS THA T IT IS NOT CASE OF REIMBURSEMENT BUT IS A CASE OF PAYMENT TO THIRD PAR TY THROUGH ITS ASSOCIATED ENTERPRISE AND HENCE, THE NEED FOR WITHHOLDING TAX. WE HAVE ALREADY DECIDED THIS ISSUE IN THE PARAS HEREINABOVE THAT UNDER THE PROVI SIONS OF DTAA, THE TERM 'ROYALTY' IS DEFINED AND IT DOES NOT COVER ANY SUCH SERVICES AVAILED AND PAYMENT MADE AND HENCE, THERE IS NO MERIT IN THE STAND OF R EVENUE IN THIS REGARD AND THE SAME IS DISMISSED. IN ANY CASE, THE PRIVITY OF CONT RACT IS BETWEEN QWEST COMMUNICATIONS INC, THE SERVICE PROVIDER AND T-3, U SA, WHO IN TURN HAD RECEIVED BANDWIDTH AND PASSED ON THE SERVICES TO VARIOUS ENT ITIES OF GROUP ON COST TO CAST BASIS. THE ASSESSEE AS RECIPIENT OF SERVICES HAD RE IMBURSED THE SAME AND IN THE ABSENCE OF PROFIT / INCOME ELEMENT, THERE IS NO LIA BILITY TO DEDUCT TAX AT SOURCE. HENCE, THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT . II) KOTAK SECURITIES LTD (PARAS 9 & 10) 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILAB LE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHI CH THE CHARGES IN QUESTION HAD BEEN PAID BY THE APPELLANT ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF THE STOCK EXCHANGE IS NECESSARILY R EQUIRED TO AVAIL OF TO CARRY OUT TRADING IN SECURITIES IN THE STOCK EXCHANGE. TH E VIEW TAKEN BY THE HIGH COURT THAT A MEMBER OF THE STOCK EXCHANGE HAS AN OPTION O F 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 COMPULSORI LY 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 FEA TURES 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 RATH ER 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 E XCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSIVITY TO THE SERVICES RENDERED BY THE S TOCK EXCHANGE AND EACH AND EVERY MEMBER HAS TO NECESSARILY AVAIL OF SUCH SERVI CES IN THE NORMAL COURSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH S ERVICES, THEREFORE, WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FACILITI ES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO TECHNIC AL SERVICES PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A S ERVICE RENDERED WHICH IS THE ESSENTIAL HALLMARK OF THE EXPRESSION TECHNICAL SER VICES AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIE W TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMB AY STOCK EXCHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NO T AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THER EFORE, BE DEDUCTIBLE UNDER SECTION 194J OF THE ACT. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 13 OF 38 III) TONY HARIRIS BUSINESS SOLUTIONS (P) LTD PARA 5.. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MAT ERIAL ON RECORD, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10 TO WHICH BOTH OF US ARE SIGNATORIES. THE RELEVANT PORTION OF THE TRIBUNAL ORDER IS REPRO DUCED HEREUNDER: 21. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. CLAIM OF THE ASSESSEE WAS DENIED BY THE AO FOR WANT OF DEDUCTION OF TAX A T SOURCE. PAYMENTS MADE BY THE ASSESSEE WERE UNDISPUTEDLY FOR PURCHASING INTER-NET BAND WIDTH. DRP HAD RELIED ON THE DEFINITION OF 'ROYALTY' GIVEN IN EXPLANATION-2TO SE CTION (9)(1)(VI) OF THE ACT AND HELD THAT ROYALTY INCLUDED PAYMENTS EFFECTED FOR USE OF ANY PROCESS. RELIANCE WAS ALSO PLACED ON EXPLANATION-6 INSERTED BELOW SEC.9(1)(VI) , THROUGH FINANCE ACT , 2012 WITH RETROSPECTIVE EFFECT FROM 1-4- 1961 WHICH MENTIONS THAT PROCESS. USED NEED NOT BE SECRET AND WILL INCLUDE TRANSMISSION BY SATELLITE C ABLE, OPTIC FIBER OR ANY OTHER SIMILAR TECHNOLOGY. HOWEVER, WE FIND THAT HON'BLE DELHI HIG H COURT IN THE CASE OF M/S ARATHI CELLULAR LTD., (SUPRA) HAD HELD UNDER AT PARAS-10 T O 21 OF ITS JUDGMENT; 10. SEC. 194J WHICH RELATES TO 'FEES FOR PROFESSION AL OR TECHNICAL SERVICES', SO MUCH AS IS RELEVANT, READS AS UNDER : '194J. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A N HUF, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF-- (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, ............... SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO FIV E PER CENT OF SUCH SUM AS INCOME- TAX ON INCOME COMPRISED THEREIN : ............... EXPLANATION : FOR THE PURPOSES OF THIS SECTION,-- (A) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITEC TURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR TH E PURPOSES OF S. 44AA OR OF THIS SECTION; (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SA ME MEANING AS IN EXPLN. 2 TO CL. (VII) OF SUB-S. (1) OF S. 9 ; ............... 11. IT IS APPARENT THAT IN RESPECT OF FEES FOR TECH NICAL SERVICES TAX IS TO BE DEDUCTED AT SOURCE AT 5 PER CENT (AS IT THEN WAS). IT IS ALSO C LEAR THAT THE EXPRESSION 'FEES FOR ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 14 OF 38 TECHNICAL SERVICES' HAS THE SAME MEANING AS IN EXPL N. 2 TO CL. (VII) OF SUB-S. (1) OF S. 9 . THE SAID EXPLN. 2 READS 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 (INCL UDING 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 T HE HEAD 'SALARIES'.' THE AFORESAID EXPLANATION MAKES IT CLEAR THAT 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION ) FOR THE RENDERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT IN THE COUNTRY BY THE RECIPIENTS OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN TS CHARGEABLE UNDER THE HEAD 'SALARIES'. THE SAID DEFINITION IS IN TWO PARTS. TH E FIRST PART IS 'MEANS AND INCLUDES' TYPE OF DEFINITION AND THE SECOND PART IS 'DOES NOT INCL UDE' DEFINITION. IN THE PRESENT APPEALS WE ARE NOT CONCERNED WITH THE SECOND PART. THE ENTI RE FOCUS IS ATTRACTED TO THE FIRST PART AND THAT TOO, TO THE EXPRESSION 'CONSIDERATION FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES'. IT IS ONLY IF T HE PAYMENTS MADE BY THE RESPONDENTS/ ASSESSEES TO MTNL/OTHER COMPANIES IN RESPECT OF INT ERCONNECT/PORT ACCESS CHARGES FALL WITHIN THE AMBIT OF THIS EXPRESSION THAT THE SAID P AYMENTS COULD BE REGARDED AS FEES FOR TECHNICAL SERVICES AS CONTEMPLATED UNDER S. 194J OF THE SAID ACT. 12. IN SKYCELL (SUPRA), A LEARNED SINGLE JUDGE OF T HE MADRAS HIGH COURT NOTED THAT INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPME NTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE BENEFIT OF THE U SER OF SUCH EQUIPMENT DOES NOT RESULT IN THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. IT WAS ALSO HELD THAT TECHNICAL SERVICE REFERRED TO IN EXPLN. 2 TO S. 9(1)(VII) CONTEMPLATED THE RENDERING OF A 'SERVICE' TO THE PAYER OF THE FEE AND THAT MER E COLLECTION OF A 'FEE' FOR USE OF A STANDARD FACILITY PROVIDED TO ALL THOSE WILLING TO PAY FOR IT DID NOT AMOUNT TO THE FEE HAVING BEEN RECEIVED FOR TECHNICAL SERVICES. WE FIN D OURSELVES TO BE IN AGREEMENT WITH THE VIEWS EXPRESSED BY THE LEARNED SINGLE JUDGE OF THE MADRAS HIGH COURT IN SKYCELL (SUPRA). HOWEVER, WE STILL HAVE TO DEAL WITH THE SU BMISSIONS MADE BY THE LEARNED COUNSEL FOR THE APPELLANT/REVENUE THAT THE PAYMENTS THAT WERE CONSIDERED IN THE CASE OF SKYCELL (SUPRA) WERE THOSE MADE BY A SUBSCRIBER TO THE CELLULAR MOBILE TELEPHONE FACILITY PROVIDER AND NOT BY ONE CELLULAR NETWORK P ROVIDER TO ANOTHER. FOR THIS PURPOSE, WE MUST EXAMINE THE APPEALS AT HAND DE HORS THE DEC ISION OF THE MADRAS HIGH COURT IN SKYCELL (SUPRA). 13. WE HAVE ALREADY POINTED OUT THAT THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS APPEARING IN S. 194J OF THE SAID ACT HAS THE SAME MEANING AS GIVEN TO TH E EXPRESSION IN EXPLN. 2 TO S. 9(1)(VII) OF THE SAID ACT. IN THE SAID EXPLANATION THE EXPRE SSION 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION FOR REN DERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES'. THE WORD 'TECHNICAL' IS P RECEDED BY THE WORD 'MANAGERIAL' AND SUCCEEDED BY THE WORD 'CONSULTANCY'. SINCE THE EXPR ESSION 'TECHNICAL SERVICES' IS IN DOUBT AND IS UNCLEAR, THE RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICABLE. THE SAID RULE IS EXPLAINED IN MAXWELL ON THE INTERP RETATION OF STATUTES (TWELFTH EDITION) IN THE FOLLOWING WORDS: ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 15 OF 38 'WHERE TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE OF A NALOGOUS MEANING ARE COUPLED TOGETHER, NOSCITUR A SOCIIS, THEY ARE UNDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOUR FROM EACH OTHER, THE MEANING OF THE MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF THE LESS GENERAL.' THIS WOULD MEAN THAT THE WORD 'TECHNICAL' WOULD TAK E COLOUR FROM THE WORDS 'MANAGERIAL' AND 'CONSULTANCY', BETWEEN WHICH IT IS SANDWICHED. THE WORD 'MANAGERIAL' HAS BEEN DEFINED IN THE SHORTER OXFORD ENGLISH DICT IONARY, FIFTH EDITION AS : 'OF PERTAINING TO, OR CHARACTERISTIC OF A MANAGER, ESP. A PROFESSIONAL MANAGER OF OR WITHIN AN ORGANIZATION, BUSINESS, ESTABLISHMENT, ET C.' THE WORD 'MANAGER' HAS BEEN DEFINED, INTER ALIA, AS : 'A PERSON WHOSE OFFICE IT IS TO MANAGE AN ORGANIZAT ION, BUSINESS ESTABLISHMENT, OR PUBLIC INSTITUTION, OR PART OF ONE; A PERSON WITH T HE PRIMARILY EXECUTIVE OR SUPERVISORY FUNCTION WITHIN AN ORGANIZATION ETC.; A PERSON CONT ROLLING THE ACTIVITIES OF A PERSON OR TEAM IN SPORTS, ENTERTAINMENT, ETC.' IT IS, THEREFORE, CLEAR THAT A MANAGERIAL SERVICE W OULD BE ONE WHICH PERTAINS TO OR HAS THE CHARACTERISTIC OF A MANAGER. IT IS OBVIOUS THAT THE EXPRESSION 'MANAGER' AND CONSEQUENTLY 'MANAGERIAL SERVICE' HAS A DEFINITE HU MAN ELEMENT ATTACHED TO IT. TO PUT IT BLUNTLY, A MACHINE CANNOT BE A MANAGER. 14. SIMILARLY, THE WORD 'CONSULTANCY' HAS BEEN DEFI NED IN THE SAID DICTIONARY AS 'THE WORK OR POSITION OF A CONSULTANT; A DEPARTMENT OF C ONSULTANTS.' 'CONSULTANT' ITSELF HAS BEEN DEFINED, INTER ALIA, AS 'A PERSON WHO GIVES PR OFESSIONAL ADVICE OR SERVICES IN A SPECIALIZED FIELD.' IT IS OBVIOUS THAT THE WORD 'CO NSULTANT' IS A DERIVATIVE OF THE WORD 'CONSULT' WHICH ENTAILS DELIBERATIONS, CONSIDERATIO N, CONFERRING WITH SOMEONE, CONFERRING ABOUT OR UPON A MATTER. CONSULT HAS ALSO BEEN DEFINED IN THE SAID DICTIONARY AS 'ASK ADVICE FOR, SEEK COUNSEL OR A PROFESSIONAL OPINION FROM; REFER TO (A SOURCE OF INFORMATION); SEEK PERMISSION OR APPROVAL FROM FOR A PROPOSED ACTION'. IT IS OBVIOUS THAT THE SERVICE OF CONSULTANCY ALSO NECESSARILY EN TAILS HUMAN INTERVENTION. THE CONSULTANT, WHO PROVIDES THE CONSULTANCY SERVICE, H AS TO BE A HUMAN BEING. A MACHINE CANNOT BE REGARDED AS A CONSULTANT. 15. FROM THE ABOVE DISCUSSION, IT IS APPARENT THAT BOTH THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' INVOLVE A HUMAN ELEMENT. AND, BOTH, M ANAGERIAL SERVICE AND CONSULTANCY SERVICE, ARE PROVIDED BY HUMANS. CONSEQUENTLY, APPL YING THE RULE OF NOSCITUR A SOCIIS, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. BUT, THE FA CILITY PROVIDED BY MTNL/OTHER COMPANIES FOR INTERCONNECTION/PORT ACCESS IS ONE WH ICH IS PROVIDED AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROVIDED BY THE USE O F TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES NOT MEAN TH AT MTNL/OTHER COMPANIES WHICH PROVIDE SUCH FACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS CONTEMPLATED IN EXPLN. 2 TO S. 9(1)(VII) OF THE SAID ACT. THIS IS SO BECAUSE THE EXPRESSION 'TECHNICAL SERVICES' TAKES COLOUR FROM THE EXPRESSIONS 'MANAGERIAL SERVI CES' AND 'CONSULTANCY SERVICES' WHICH NECESSARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOW A DAYS FASHIONABLY CALLED, HUMAN INTERFACE. IN THE FACTS OF THE PRESENT APPEAL S, THE SERVICES RENDERED QUA INTERCONNECTION/PORT ACCESS DO NOT INVOLVE ANY HUMA N INTERFACE AND, THEREFORE, SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTE MPLATED UNDER S. 194J OF THE SAID ACT. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 16 OF 38 16. SINCE WE HAVE APPLIED THE RULE OF NOSCITUR A SO CIIS, IT WOULD BE NECESSARY TO INDICATE THAT THIS RULE OR PRINCIPLE HAS BEEN APPLI ED AND ACCEPTED BY THE SUPREME COURT WHENEVER THE MEANING OF A WORD, WHICH FALLS WITHIN A GROUP OF WORDS, IS UNCLEAR AND THE INTENTION OF THE LEGISLATURE IS DOUBTFUL. IN GODFREY PHILLIPS INDIA LTD. & ANR. VS. STATE OF U.P. & ORS . (2005) 194 CTR (SC) 257 : (2005) 2 SCC 515, A CON STITUTION BENCH OF THE SUPREME COURT WAS CONSIDERING THE MEAN ING OF THE WORD 'LUXURIES' AS APPEARING IN ENTRY 62 OF THE LIST II OF THE VIITH S CHEDULE TO THE CONSTITUTION WHICH EMPOWERS THE STATE LEGISLATURE TO MAKE LAWS WITH RE SPECT TO 'TAXES ON LUXURIES INCLUDING TAXES ON ENTERTAINMENT, AMUSEMENT, BETTIN G AND GAMBLING'. THE SUPREME COURT WAS OF THE VIEW THAT THE GENERAL MEANING OF ' LUXURY' HAD BEEN EXPLAINED OR CLARIFIED AND MUST BE UNDERSTOOD IN A SENSE ANALOGO US TO THAT OF THE LESS GENERAL WORDS SUCH AS 'ENTERTAINMENT', 'AMUSEMENTS', 'GAMBLING' A ND 'BETTING', WHICH WERE CLUBBED WITH IT. THE SUPREME COURT, EMPLOYING THE SAID PRIN CIPLE OF NOSCITUR A SOCIIS, NOTED THAT THIS PRINCIPLE OF INTERPRETATION HAD RECEIVED THE APPROVAL OF THE SUPREME COURT IN AN EARLIER DECISION IN RAINBOW STEELS LTD. VS. CST (1981) 2 SCC 141. THE SUPREME COURT ALSO NOTED THAT EARLIER, INDISCRIMINATE APPLI CATION OF THIS RULE WAS DOUBTED IN THE CASE OF THE STATE OF BOMBAY VS. THE HOSPITAL MAZDOOR SABHA AIR 1960 SC 610. HOWEVER, AFTER REFERRING TO THE SAID DECISION (HOSP ITAL MAZDOOR SABHA), THE SUPREME COURT IN GODFREY PHILLIPS INDIA LTD. & ANR. (SUPRA) OBSERVED THAT THEY DID NOT READ THE SAID DECISION AS EXCLUDING THE APPLICATION OF THE P RINCIPLE OF NOSCITUR A SOCIIS TO THE CASE BEFORE THEM INASMUCH AS IT HAD BEEN AMPLY DEMO NSTRATED THAT THE WORD 'LUXURY' IN ENTRY 62 WAS DOUBTFUL AND HAD BEEN DEFINED AND CONS TRUED IN DIFFERENT SENSES. THE SUPREME COURT FURTHER OBSERVED AS UNDER : '81. WE ARE AWARE THAT THE MAXIM OF NOSCITUR A SOCI IS MAY BE A TREACHEROUS ONE UNLESS THE 'SOCIETAS' TO WHICH THE 'SOCII' BELONG, ARE KNO WN. THE RISK MAY BE PRESENT WHEN THERE IS NO OTHER FACTOR EXCEPT CONTIGUITY TO SUGGE ST THE 'SOCIETAS'. BUT WHERE THERE IS, AS HERE, A TERM OF WIDE DENOTATION WHICH IS NOT FRE E FROM AMBIGUITY, THE ADDITION OF THE WORDS SUCH AS 'INCLUDING' IS SUFFICIENTLY INDIC ATIVE OF THE SOCIETAS. AS WE HAVE SAID, THE WORD 'INCLUDES' IN THE PRESENT CONTEXT INDICATE S A COMMONALITY OR SHARED FEATURES OR ATTRIBUTES OF THE INCLUDING WORD WITH THE INCLUD ED.' 17. IN THE APPEALS BEFORE US IT IS OBVIOUS THAT THE MEANING OF THE EXPRESSION 'TECHNICAL SERVICES' BY ITSELF, IS FAR FROM CLEAR. IT IS ALSO CLEAR THAT THE WORD 'TECHNICAL' HAS BEEN USED IN THE 'SOCIETY' OF THE WORDS 'MANAGERIAL' AND 'CONSULTANCY'. IN SUCH A SITUATION, THE RULE WOULD CLEARLY APPLY AND, THEREFORE, THE EXPRES SION 'TECHNICAL SERVICES' WOULD HAVE TO TAKE COLOUR FROM THE EXPRESSIONS 'MANAGERIAL SER VICES' AND 'CONSULTANCY SERVICES'. 18. TO CONCLUDE THE DISCUSSION ON THE APPLICATION O F THE RULE OF NOSCITUR A SOCIIS, WE THINK THAT A REFERENCE TO THE SUPREME COURT DECISIO N IN THE CASE OF STONECRAFT ENTERPRISES VS. CIT (1999) 153 CTR (SC) 86 : (1999) 3 SCC 343 WOULD BE APPOSITE. IN THAT CASE THE SUPREME COURT WAS REQUIRED TO INTE RPRET THE PROVISIONS OF S. 80HHC(2)(B) OF THE SAID ACT RELATING TO ASST. YRS. 1985-86, 19 87-88 AND 1988-89. IN THE SAID SUB-S. (2)(B) OF S. 80HHC , IT WAS PROVIDED THAT THE SECTION DID NOT APPLY TO THE FOLLOWING GOODS OR MERCHANDISE, NAMELY : (I) MINERAL OIL; AND (II) MINERALS AND ORES. THE QUESTION THAT AROSE BEFORE THE SUPREME COURT WA S WHETHER GRANITE FELL WITHIN THE MEANING OF THE WORD 'MINERALS'. THE CONTENTION OF T HE ASSESSEE BEFORE THE SUPREME ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 17 OF 38 COURT WAS THAT WHILE GRANITE WAS A MINERAL IN THE G ENERAL SENSE, IT WAS NOT A MINERAL FOR THE PURPOSES OF S. 80HHC AND, THEREFORE, THE DEDUCTION PROVIDED FOR THEREIN WAS AVAILABLE TO THE ASSESSEE WHO WAS IN THE BUSINESS O F EXPORTING GRANITE. THE SUPREME COURT NOTED THE ARGUMENTS OF THE LEARNED COUNSEL FO R THE ASSESSEE BASED UPON THE DOCTRINE OF NOSCITUR A SOCIIS THAT THE WORD 'MINERA LS' IN S. 80HHC SHOULD BE READ IN THE CONTEXT OF THE WORDS 'ORES' WHICH IT WAS ASSOCIATED WITH AND MUST DRAW COLOUR THEREFROM. IT WAS SUBMITTED THAT THE WORD 'MINERALS ' MUST BE READ AS REFERRING ONLY TO SUCH MINERALS AS ARE EXTRACTED FROM ORES AND NOT OT HERS. WHILE THE SUPREME COURT AGREED THAT THE DOCTRINE OF NOSCITUR A SOCIIS WAS A PPLICABLE, IT HELD THAT THE WORD 'MINERALS', IN SUB-S. (2)(B) OF S. 80HHC MUST BE READ IN THE CONTEXT OF BOTH 'MINERAL OIL' AND 'ORES' AND NOT JUST 'ORES'. THE SUPREME COURT H ELD THAT THESE THREE WORDS TAKEN TOGETHER ARE INTENDED TO ENCOMPASS ALL THAT MAY BE EXTRACTED FROM THE EARTH. CONSEQUENTLY, THE SUPREME COURT HELD THAT ALL MINER ALS EXTRACTED FROM THE EARTH, GRANITE INCLUDED, MUST, THEREFORE, BE HELD TO BE CO VERED BY THE PROVISIONS OF SUB-S. (2)(B) OF S. 80HHC , AND THE EXPORTER THEREOF WAS, THEREFORE, DISENTIT LED TO THE BENEFIT OF THAT SECTION. 19. FROM THIS DECISION, IT IS APPARENT THAT THE SUP REME COURT EMPLOYED THE DOCTRINE OF NOSCITUR A SOCIIS AND HELD THAT THE WORD 'MINERALS' TOOK COLOUR FROM THE WORDS 'MINERAL OIL' WHICH PRECEDED IT AND THE WORD 'ORES' WHICH SU CCEEDED IT. A SOMEWHAT SIMILAR SITUATION HAS ARISEN IN THE PRESENT APPEALS WHERE T HE WORD 'TECHNICAL' IS PRECEDED BY THE WORD 'MANAGERIAL' AND SUCCEEDED BY THE WORD 'CONSUL TANCY'. THEREFORE, THE WORD 'TECHNICAL' HAS TO TAKE COLOUR FROM THE WORD 'MANAG ERIAL' AND 'CONSULTANCY' AND THE THREE WORDS TAKEN TOGETHER ARE INTENDED TO APPLY TO THOSE SERVICES WHICH INVOLVE A HUMAN ELEMENT. THIS CONCLUDES OUR DISCUSSION ON THE APPLICABILITY OF THE PRINCIPLE OF NOSCITUR A SOCIIS. 20. BEFORE CONCLUDING WE WOULD ALSO LIKE TO POINT O UT THAT THE INTERCONNECT/PORT ACCESS FACILITY IS ONLY A FACILITY TO USE THE GATEWAY AND THE NETWORK OF MTNL/OTHER COMPANIES. MTNL OR OTHER COMPANIES DO NOT PROVIDE A NY ASSISTANCE OR AID OR HELP TO THE RESPONDENTS/ASSESSEES IN MANAGING, OPERATING, S ETTING UP THEIR INFRASTRUCTURE AND NETWORKS. NO DOUBT, THE FACILITY OF INTERCONNECTION AND PORT ACCESS PROVIDED BY MTNL/OTHER COMPANIES IS 'TECHNICAL' IN THE SENSE TH AT IT INVOLVES SOPHISTICATED TECHNOLOGY. THE FACILITY MAY EVEN BE CONSTRUED AS A 'SERVICE' IN THE BROADER SENSE SUCH AS A 'COMMUNICATION SERVICE'. BUT, WHEN WE ARE REQU IRED TO INTERPRET THE EXPRESSION 'TECHNICAL SERVICE', THE INDIVIDUAL MEANINGS OF THE WORDS 'TECHNICAL' AND 'SERVICE' HAVE TO BE SHED. AND, ONLY THE MEANING OF THE WHOLE EXPR ESSION 'TECHNICAL SERVICES' HAS TO BE SEEN. MOREOVER, THE EXPRESSION 'TECHNICAL SERVIC E' IS NOT TO BE CONSTRUED IN THE ABSTRACT AND GENERAL SENSE BUT IN THE NARROWER SENS E AS CIRCUMSCRIBED BY THE EXPRESSIONS 'MANAGERIAL SERVICE' AND 'CONSULTANCY S ERVICE' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) OF THE SAID ACT. CONSIDERED IN THIS LIGHT, THE EXP RESSION 'TECHNICAL SERVICE' WOULD HAVE REFERENCE TO ONLY TECHNICAL SER VICE RENDERED BY A HUMAN. IT WOULD NOT INCLUDE ANY SERVICE PROVIDED BY MACHINES OR ROB OTS. 21. THUS, IT IS CLEAR, WHETHER WE FOLLOW THE LINE O F REASONING TAKEN IN SKYCELL (SUPRA) OR NOT, THE RESULT IS THE SAME. THE INTERCONNECT CH ARGES/ PORT ACCESS CHARGES CANNOT BE REGARDED AS FEES FOR TECHNICAL SERVICES. CONSEQUENT LY, BOTH THE QUESTIONS ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEES. THEIR LORDSHIPS HAD FOLLOWED THE DECISION OF THE HO N'BLE MUMBAI HIGH COURT IN THE CASE OF SKY CELL (SUPRA), THOUGH FOR DIFFERENT REAS ONS. ASSESSEE HERE HAD PRODUCED BILLS TO SHOW THAT PAYMENTS EFFECTED THEREOF FOR PURCHASI NG INTER-NET BAND WIDTH. WE ARE THEREFORE, OF THE OPINION THAT ASSESSEE WAS NOT BOU ND TO DEDUCT TAX AT SOURCE U/S 194J ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 18 OF 38 OF THE ACT ON THE PAYMENTS EFFECTED TO THE SERVICE PROVIDERS. VIS--VIS APPLICATION OF SEC.194C, THE AO WAS NOT ABLE TO SHOW THAT THE SERV ICE PROVIDED WERE BASED ON ANY SPECIFIC CONTRACT ENTERED BY THE ASSESSEE WITH THE SERVICE PROVIDERS. WE ARE THEREFORE, OF THE OPINION THAT DISALLOWANCE U/S 40(IA) OF THE ACT WAS NOT WARRANTED. SUCH A DISALLOWANCE STANDS DELETED. GROUND NO.13 OF THE AS SESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO.2 IS ACCORDINGLY REJECTED . 7.5 IN THE CASE OF BHARATI AIRTEL LTD, ALSO, THE IT AT A BENCH OF DELHI AT PARAS 19 TO 44 HAS HELD AS UNDER: 19. THE GROUNDS IN THE ASSESSEES' APPEAL ARE SUMMAR IZED AS FOLLOWS:- I). WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS THE ASSESSEE IN DEFAULT U/S. 201(1). II) WHETHER INTER-CONNECTED AGREEMENTS BETWEEN THE ASSESSEE AND THE FTOS ARE IN THE NATURE OF REVENUE SHARING ARRANGEMENTS. III) WHETHER THE PAYMENT MADE BY THE ASSESSEE TO FO REIGN TELECOM OPERATORS UNDER INTER-CONNECTION AGREEMENTS ARE TAXABLE IN IN DIA AS FTS. IV) WHETHER PAYMENT MADE BY THE ASSESSEE TO FTOS, C AN BE DEEMED TO ACCRUE OR ARISE IN INDIA U/S. 9(1)(VI) & 9(1)(VII) OF THE ACT. V) WHETHER BENEFICIAL RATE PROVIDED UNDER DTAA WOUL D OVERRIDE THE PROVISIONS OF SECTION 206AA . 20. WE SUMMARIZE THE GROUNDS IN THE REVENUE'S APPEA LS AS FOLLOWS:- I) WHETHER THE PAYMENT MADE BY THE ASSESSEE TO FTOS ARE TAXABLE AS ROYALTY FOR THE USE OF PROCESS UNDER SECTION 9(1)(VII) OF THE ACT AND RELEVANT DTAA'S. II) WHETHER THE ASSESSEE CAN BE TREATED AS 'ASSESSE E IN DEFAULT' U/S. 201 OF THE ACT IN RESPECT OF THE LIABILITY IMPOSED BY VIRTUE O F RETROSPECTIVE AMENDMENT TO LAW. III) WHETHER 'MAKE AVAILABLE' CLAUSE UNDER RELEVANT DTAA ARE SATISFIED. IV) WHETHER SECTION 206AA OF THE ACT IS APPLICABLE RETROSPECTIVELY. V) WHETHER THE LD. CIT(A) ACTED IN VIOLATION OF THE PROVISION OF RULE 46A IN ADMITTING ADDITIONAL EVIDENCE BY THE ASSESSEE. 20.1 WE NOW FRAME THE FOLLOWING ISSUES FOR OUR ADJU DICATION:- ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 19 OF 38 WHETHER THE PAYMENT OF IUC BY ASSESSEE TO FTOS ARE TAXABLE AS FEE FOR TECHNICAL SERVICES U/S. 9(1)(VII ) OF THE ACT. WHETHER THE PAYMENT TO FTOS FOR 'IUC'S ARE IN THE N ATURE OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. WHETHER THE ASSESSEE IS LIABLE TO BE TREATED AS ASS ESSEE IN DEFAULT U/S. 201 OF THE I.T. ACT. WHETHER THE PAYMENT MADE BY THE ASSESSEE TO THE FTO CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA. WHETHER BENEFICIAL RATE PROVIDED UNDER DTAA OVERRID E THE PROVISIONS OF SECTION 206AA AND WHETHER SECTION 206AA OF THE ACT IS APPLICABLE RETROSPECTEVELY. WHETHER THE LD. CIT(A) ACTED IN VIOLATION OF THE PR OVISIONS OF RULE 46A IN ADMITTING THE ADDITIONAL EVIDENCE FILED BY THE ASSE SSEE. WHETHER THE PAYMENT IS REVENUE SHARING OR NOT. 21. BEFORE WE ADJUDICATE EACH OF THE ISSUE, IT WOUL D BE RELEVANT TO DISCUSS AS TO WHAT IS THE INTER-CONNECTION, INTER-CONNECTION U SAGE CHARGES (IUC), INTERNATIONAL LONG STANDING DISTANCE SERVICES (ILD) ETC. 22. THE LD. CIT(A)'S IN THIS IMPUGNED ORDER AT PARA NO. 8.1 TO 8.4 AT PAGES 16 TO 19 HAS EXPLAINED THE MEANING OF THE AFORESAID TE CHNICAL TERMS. FOR THE SAKE OF CONVENIENCE, THE SAME ARE REPRODUCED HEREUNDER:- '8.1 THE APPELLANT IS CARRYING ON THE BUSINESS OF P ROVIDING TELECOMMUNICATION SERVICES TO ITS SUBSCRIBERS. IN ORDER TO PROVIDE IN TERNATIONAL CONNECTIVITY TO ITS SUBSCRIBERS, THE APPELLANT HAS BEEN GRANTED LICENSE TO PROVIDE INTERNATIONAL LONG DISTANCE SERVICES (ILD) [LICENSE AGREEMENT NO. 10- Q7/2002-BS-I(ILD- 02) DATED 14TH MARCH 2002]. CLAUSE 2.2 (A) OF THE SAID LICENSE IS REPRODUCED BELOW [REFER PAGE 36 OF LETTER DATED 28.03.2012]: '2.2(A) THE ILD SERVICE IS BASICALLY A NETWORK CARR IAGE SERVICE (ALSO CALLED BEARER), PROVIDING INTERNATIONAL CONNECTIVITY TO TH E NETWORK OPERATED BY FOREIGN CARRIERS. THE ILD SERVICE PROVIDER IS PERMI TTED FULL FLEXIBILITY TO OFFER ALL TYPES OF BEARER SERVICES FROM AN INTEGRATED PLA TFORM. ILD SERVICE PROVIDERS WILL PROVIDE BEARER SERVICES SO THAT END- TO-END TELE-SERVICES SUCH AS VOICE, DATA, FAX, VIDEO AND MULTI-MEDIA ETC. CAN BE PROVIDED BY ACCESS PROVIDERS TO THE CUSTOMERS. .... ILD SERVICE PROVIDERS WOULD BE PERMITTED TO OF FER INTERNATIONAL BANDWIDTH TO OTHER OPERATORS. ILD SERVICE PROVIDER SHALL NOT ACCESS THE SUBSCRIBERS DIRECTLY WHICH SHOULD BE THROUGH NLD SERVICE PROVID ER OR THE ACCESS PROVIDER. RESELLERS ARE NOT PERMITTED.' CLAUSE 1 OF THE 'DEFINITIONS AND INTERPRETATIONS' O F THE SAID LICENSE DEFINES ACCESS PROVIDERS AS FOLLOWS: ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 20 OF 38 'ACCESS PROVIDERS' MEANS BASIC, CELLULAR, AND CABLE SERVICE PROVIDERS WHO HAVE A DIRECT ACCESS WITH THE SUBSCRIBERS. 8.2 THUS, ILD BUSINESS IS NOTHING BUT PROVISION OF CONNECTIVITY TO THE SUBSCRIBER FOR INTERNATIONAL PORTION OF A CALL, WHI CH MAY OR MAY NOT ORIGINATE DOMESTICALLY. THE LOCAL CONNECTIVITY [WITHIN INDIA] IS PROVIDED BY ACCESS PROVIDERS AND NATIONAL LONG DISTANCE (NLD) OPERATOR S, AND THE INTERNATIONAL LEG OF THE CONNECTIVITY IS PROVIDED B Y THE ILD OPERATOR IN CONJUNCTION WITH A FOREIGN TELECOM OPERATOR(S), WHO PROVIDE THE LAST MILE CONNECTIVITY. THE FOLLOWING ARE THREE ILLUSTRATIONS OF CARRIAGE OF CALLS PROVIDED BY THE ILD OPERATOR: A) CARRIAGE OF CALLS FROM INDIA TO OUTSIDE INDIA: TO GIVE AN EXAMPLE, IF A CELLULAR SUBSCRIBER IS LOC ATED IN DELHI AND SEEKS TO MAKE A CALL TO NEW YORK, THROUGH HIS CELL PHONE, TH E CALL WILL BE ROUTED AS FOLLOWS: IN THE ABOVE DIAGRAM, THE CALL MOVES FROM AURANGABA D MOBILITY CIRCLE TO THE NLD GATEWAY (SAY AT NAGPUR), TRAVELS ON ITA NOS. 35 93 TO 3596/DEL/2012 [BHARTI AIRTEL LTD. VS. ITO(TDS)] & ITA NOS. 4076 T O 4079/DEL/2012 [ITO(TDS) VS. BHARTI AIRTEL LTD.] NLD NETWORK TILL ILD GATEWAY (SAY MUMBAI) FROM WHERE IT IS TRANSPORTED TO INTERNATION AL OPERATOR(S) OUTSIDE INDIA. IN ORDER TO PROVIDE SEAMLESS SERVICES TO ITS SUBSCR IBERS, THE APPELLANT ENTERS INTO AGREEMENT WITH OVERSEAS NETWORK OPERATORS, TO CONNECT THE CALL OVER THEIR NETWORK. THEREFORE, CALL TRAFFIC ORIGINATING FROM I NDIA IS CARRIED FIRST BY THE ACCESS PROVIDER, THEN BY THE NLD OPERATOR, THEN BY THE ILD OPERATOR AND FINALLY BY THE FOREIGN TELECOM OPERATOR, AND/OR LAS T MILE SERVICE PROVIDER. THE FACTUAL POSITION, THEREFORE, IS THAT THE ENTIRE CHA INS OF OPERATOR(S) POOL THEIR NETWORK/INFRASTRUCTURE TO PROVIDE INTEGRATED AND SE AMLESS CONNECTIVITY SERVICE TO THE SUBSCRIBER(S). THE ACCESS PROVIDER, DUE TO P RACTICAL/LEGAL CONSIDERATIONS, ENTERS INTO CONTRACT TO PROVIDE SEA MLESS END TO END CONNECTIVITY TO THE SUBSCRIBER, AND EARNS REVENUE F ROM THE SUBSCRIBER. THE ENTIRE REVENUE PAID BY THE SUBSCRIBER TO THE ACCESS PROVIDER AND COLLECTED BY THE ACCESS PROVIDER IS SHARED WITH THE NLD OPERATOR S (WHERE THE NLD OPERATOR IS DIFFERENT FROM THE ACCESS PROVIDER) AND WITH ILD OPERATOR, WHO IN TURN SHARES THE REVENUE WITH THE FOREIGN TELECOM OP ERATOR(S). B) CARRYING CALLS FROM OUTSIDE AND TERMINATING SUCH CALLS IN INDIA: THE CALL IN THIS CASE ORIGINATES FROM OUTSIDE INDIA . THE CALL MAY ORIGINATE FROM, SAY, A SUBSCRIBER OF AT & T, USA. THE CALL TR AVEL AUTOMATICALLY ON THE NETWORK OF AT & T, USA AND WILL BE HANDED OVER AT T HE POINT OF PRESENCE (POP) / LANDING STATION IN NEW YORK OF THE APPELLAN T. FROM SUCH LANDING STATION, THE CALL IS CARRIED TO THE LANDING STATION OF THE APPELLANT, IN SAY, MUMBAI, WHERE IT IS HANDED OVER TO THE NETWORK OF N LD SERVICE PROVIDER IN INDIA FOR FURTHER CARRIAGE/TRANSPORTATION TO ITS DE STINATION. IT IS ALSO POSSIBLE THAT THE NETWORK OF THE NLD SERVICE PROVIDER MAY TR ANSFER THE CALL TO THE ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 21 OF 38 ACCESS PROVIDER, (IF THE TWO ARE DIFFERENT), WHO MA Y TRANSPORT IT TO THE CUSTOMER. AS CAN BE OBSERVED FROM THE ABOVE, THE RO LE OF ILD OPERATOR IS TO TRANSPORT THE CALL FROM OUTSIDE INDIA TILL THE FIRS T LANDING STATION IN INDIA. AS SUBMITTED EARLIER, THE ILD OPERATOR IS NOT ALLOWED TO TRANSPORT CALLS WITHIN INDIA. C) CARRYING CALLS FROM A TELECOM SERVICE PROVIDER I N ONE COUNTRY OUTSIDE INDIA TO ANOTHER TELECOM SERVICE PROVIDER AND ITS SUBSCRI BER IN A THIRD COUNTRY (HUBBING'): TO ILLUSTRATE, THE SUBSCRIBER OF A US TELECOM SERVI CE PROVIDER, IN NEW YORK WANTS TO MAKE A CALL TO SINGAPORE. THE CALL WILL OR IGINATE AT THE LOCAL NETWORK OF THE US TELECOM SUBSCRIBER WHICH TELECOM NETWORK WILL CARRY THE CALLS FOR INTERCONNECT TO THE LANDING STATION OF THE APPELLAN T IN NEW YORK. HERE THE CALL IS TRANSPORTED TO THE ILD NETWORK. THE CALL WILL TH EN BE AUTOMATICALLY CARRIED ON THE NETWORK OF THE ILD OPERATOR TO SINGAPORE AND THEN TRANSPORTED TO THE LOCAL OPERATOR IN SINGAPORE. THE ILD OPERATOR WILL EARN INCOME FROM THE US TELECOM SERVICE PROVIDER BUT WILL HAVE TO PAY THE I UC/ACCESS CHARGES TO THE LOCAL SINGAPOREAN TELECOM SERVICE PROVIDER. 8.3 IT MAY BE NOTED THAT THE APPELLANT IS NOT AUTHO RIZED, UNDER THE ILD LICENSE, TO CARRY CALL TRAFFIC FROM ONE PLACE TO ANOTHER WIT HIN INDIA WHICH CAN BE CARRIED ONLY BY A NLD LICENSE HOLDER. IN THIS REGAR D, THE RELEVANT CLAUSE OF THE NLD LICENSE IS GIVEN BELOW: '2.2(A) THE NLD SERVICE REFERS TO THE CARRIAGE OF S WITCHED BEARER TELECOMMUNICATIONS SERVICE OVER A LONG DISTANCE AND NLD SERVICE LICENSEE WILL HAVE A RIGHT TO CARRY INTER CIRCLE TRAFFIC EXC LUDING INTRA-CIRCLE TRAFFIC EXCEPT WHERE SUCH CARRIAGE IS WITH MUTUAL AGREEMENT WITH ORIGINATING SERVICE PROVIDER. (B) THE LLCENCEE CAN ALSO MAKE MUTUALLY AGREED ARRA NGEMENTS WITH BASIC SERVICE PROVIDERS FOR PICKING UP, CARRIAGE AND DELI VERY OF THE TRAFFIC FROM DIFFERENT LEGS BETWEEN LONG DISTANCE CHARGING CENTE R (LDCE) AND SHORT DISTANCE CHARGING CENTERS (SDCCS). (C) IN THE CASE OF CELLULAR MOBILE TELEPHONE SERVIC E TRAFFIC, THE INTER-CIRCLE TRAFFIC SHALL BE HANDED/TAKEN OVER AT THE POINT OF PRESENCE (POP) SITUATED IN LDCA AT THE LOCATION OF LEVEL I TAX IN ORIGINATING/ TERMINATING SERVICE AREA. FOR WEST BENGAL, HIMACHAL PRADESH AND JAMMU & KASH MIR SUCH LOCATIONS SHALL BE ASANSOL, SHIMLA & JAMMU RESPECTIVELY. (D) NLD SERVICE LICENSEE SHALL BE REQUIRED TO MAKE OWN SUITABLE ARRANGEMENTS / AGREEMENTS FOR LEASED LINES WITH THE ACCESS PROVIDERS FOR LAST MILE. FURTHER, NLD SERVICE PROVIDERS CAN ACCESS THE SUBSCRIBERS DIRECTLY ONLY FOR PROVISION OF LEASED CIRCUITS/CLOSE USER GROUPS (CUGS). LEASED CIRCUIT IS DEFINED AS VIRTUAL PRIVATE NETWORK (VPN) USING CIRC UIT OR PACKET SWITCHED (IP PROTOCOL) TECHNOLOGY APART FROM POINT TO POINT NON- SWITCHED PHYSICAL CONNECTIONS/TRANSMISSION BANDWIDTH. PUBLIC NETWORK IS NOT TO BE CONNECTED WITH LEASED CIRCUITS/CUGS. IT IS CLARIFIED THAT NLD SERVICE LICENSEE CAN PROVIDE BANDWIDTH TO OTHER TELECOM SERVICE LICENSEE ALSO.' ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 22 OF 38 8.4 IT WILL THUS BE APPRECIATED THAT THE ENTIRE SER VICES ARE PROVIDED BY THE APPELLANT AS AN ILD OPERATOR, OUTSIDE INDIA. FROM T HE ILD GATEWAY OF THE APPELLANT IN INDIA, THE CALL IS CARRIED TO THE GATE WAY OF THE APPELLANT OUTSIDE INDIA AND IF THE APPELLANT HAS NO GATEWAY OUTSIDE I NDIA, THE CALL IS CARRIED ON THE TELECOM NETWORK OF THE FOREIGN OPERATOR(S}. THE CALL FROM THE GATEWAY OUTSIDE INDIA IS TRANSPORTED TO THE CUSTOMER DESTIN ATION BY THE LOCAL FOREIGN TELECOM OPERATOR(S).' (EMPHASIS OURS) 23. A PERUSAL OF THE ABOVE EXTRACTED PARAS LEADS TO THE FOLLOWING CONCLUSIONS: THE ASSESSEE, AS PART OF ITS ILD TELECOM SERVICES B USINESS, IS RESPONSIBLE FOR PROVIDING SERVICES TO ITS SUBSCRIBERS IN RESPECT OF CALLS ORIGINATED/TERMINATED OUTSIDE INDIA. THUS, FOR THE PROVISIONS OF ILD SERV ICES, THE ASSESSEE IS REQUIRED TO OBTAIN THE SERVICES OF FTOS FOR PROVISI ON OF CARRIAGE CONNECTIVITY SERVICES OVER THE LAST LEG BY THE COMMUNICATION CHA NNEL I.E. THE LACK OF COMMUNICATION CHANNEL WHERE THE ASSESSEE DOES NOT H AVE A LICENCE/ CAPACITY TO PROVIDE CONNECTIVITY SERVICES. THUS, THE ILD BUS INESS IS THE PROVISIONS OF CONNECTIVITY TO THE SUBSCRIBERS FOR INTERNATIONAL P ORTION OF THE CALL, WHICH MAY OR MAY NOT ORIGINATE DOMESTICALLY. THE LOCAL CONNEC TIVITY WITHIN INDIA IS PROVIDED BY THE ACCESS PROVIDERS AND THE NATIONAL L ONG DISTANCE OPERATORS (NLD OPERATORS) AND THE INTERNATIONAL CONNECTIVITY BY THE ILD OPERATORS INTERCONNECTION WITH FTO, WHO PROVIDE THE LAST MILE CONNECTIVITY. AN INTERNATIONAL CALL HAS TO BE ROUTED THROUGH NLD/ILD USING THE INTERNATIONAL GATE WAY. FOR TERMINATION OF THE INTERNATIONAL CALL S IN INDIA, ILD HAVE COMMERCIAL ARRANGEMENTS WITH FOREIGN CARRIERS WHO D ELIVER THE TRAFFIC USING THE INTERNATIONAL CONNECTIVITY AND CALLS ARE DELIVE RED TO THE INDIAN ILD OPERATOR. THE ASSESSEE ENTERED INTO AN AGREEMENT WI TH OVERSEAS NETWORK CORPORATE TO CONNECT THE CALL OVER THE NETWORK. THI S IS DONE TO PROVIDE SEAMLESS CONNECTIVITY SERVICES TO THE SUBSCRIBERS. THE ACCESS PROVIDER PROVIDE SEAMLESS END TO END CONNECTIVITY TO THE SUB SCRIBERS AND THE ENTIRE REVENUE ARISE OUT OF SUCH SERVICES IS PAID BY THE S UBSCRIBERS TO THE ACCESS PROVIDER. IF THE NLD OPERATOR IS DIFFERENCE FROM ACCESS PROVIDER, THEN THE NLD OPERATOR BILLS THE ACCESS PROVIDER FOR HIS PART OF SERVICE RENDERED. THE ILD OPERATOR IS IN TURN BILLED BY THE FTO IN THE FORM OF INTER- CONNECTED USAGE CHARGES (IUC). 24. THE BASIC ISSUE BEFORE US IS WHETHER SUCH INTER CONNECTED CHARGES BILLED BY THE FTOS AND PAID BY THE ASSESSEE ARE IN THE NAT URE OF FEE OF TECHNICAL SERVICES (FTS) OR IN THE NATURE OF ROYALTY. WE WOUL D FIRST TAKE UP THE ADJUDICATION OF THESE TWO ISSUES AND THEN WE WOULD BE REVERTING TO OTHER ISSUES. WHETHER THE PAYMENT OF IUC BY ASSESSEE TO FTOS ARE TAXABLE AS FEE FOR TECHNICAL SERVICES U/S. 9(1)(VII ) OF THE ACT. (AS THE SECTION 9(1)(VII) HAS ALREADY BEEN EXTRACTED IN THE EARLIER PARAGRAPHS, WE DO NOT REPEAT THE SAME.) 26. THE HON'BLE DELHI HIGH COURT ON THIS ISSUE HELD AS FOLLOWS IN THE ASSESSEE'S OWN CASE I.E. CIT VS. BHARTI CELLULAR LTD . (2009) 319 ITR 139 (DELHI):- ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 23 OF 38 'THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS AP PEARING IN S. 194J HAS THE SAME MEANING AS GIVEN TO THE EXPRESSION IN EXPLN. 2 TO S. 9(1)(VII) . IN THE SAID EXPLANATION. THE EXPRESSION 'FEES FOR TECHNICAL SER VICES' MEANS ANY CONSIDERATION. FOR RENDERING ANY (MANAGERIAL, TECHN ICAL OR CONSULTANCY SERVICES'. THE WORD (TECHNICAL' IS PRECEDED BY THE WORD (MANAGERIAL' SUCCEEDED BY THE WORD 'CONSULTANCY'. SINCE THE EXPR ESSION (TECHNICAL SERVICES' IS IN DOUBT AND IS UNCLEAR, THE RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICABLE. THIS WOULD MEAN THAT THE WORD 'TECHNICAL' WOULD TAK E COLOUR FROM THE WORDS 'MANAGERIAL' AND 'CONSULTANCY', BETWEEN WHICH IT IS SANDWICHED. A MANAGERIAL SERVICE WOULD BE ONE WHICH PERTAINS TO OR HAS THE C HARACTERISTIC OF A MANAGER. IT IS OBVIOUS THAT THE EXPRESSION (MANAGER ' AND CONSEQUENTLY (MANAGERIAL SERVICE' HAS A DEFINITE' HUMAN ELEMENT ATTACHED TO IT. TO PUT IT BLUNTLY, A MACHINE CANNOT BE A MANAGER. THE SERVICE OF CONSULTANCY ALSO NECESSARILY ENTAILS HUMAN INTERVENTION. THE CONSULT ANT, WHO PROVIDES CONSULTANCY SERVICE, HAS TO BE A HUMAN BEING. A MAC HINE CANNOT BE REGARDED AS A CONSULTANT. FROM THE ABOVE DISCUSSION, IT IS A PPARENT THAT BOTH THE WORDS 'MANAQERIAL' AND 'CONSULTANCY' INVOLVE A HUMAN ELEM ENT. AND, BOTH, MANAGERIAL SERVICE AND CONSULTANCY SERVICE, ARE PRO VIDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCCI S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. BUT, THE FACILITY PROVID ED BY MTNL/ OTHER COMPANIES FOR INTERCONNECT/ PORT ACCESS IS ONE WHIC H IS PROVIDED AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROV IDED BY THE USE OF TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES NOT MEAN THAT MTNL/ OTHER COMPANIES WHICH PROVIDE SUCH FACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS IN EXPLN. 2 TO S. 9(L)(VII) . THIS IS SO BECAUSE THE EXPRESSION 'TECHNICAL SERVICES' TAKES COLOUR FROM T HE EXPRESSIONS 'MANAGERIAL SERVICES' AND 'CONSULTANCY SERVICES' WHICH NECESSAR ILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOWADAYS FASHIONABLY CALLED, HU MAN INTERFACE. IN THE FACTS OF THE PRESENT APPEALS, THE SERVICES RENDERED QUA I NTERCONNECTION PORT ACCESS DO NOT INVOLVE ANY HUMAN INTERFACE AND, THEREFORE, THE SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTEMPLATED UN DER S. 194J . THE INTERCONNECT/ PORT ACCESS FACILITY IS ONLY A FACILI TY TO USE THE GATEWAY AND THE NETWORK OF MTNL/ OTHER COMPANIES. MTNL OR OTHER COM PANIES DO NOT PROVIDE ANY ASSISTANCE OR AID OR HELP TO THE RESPON DENTS/ ASSESSEES IN MANAGING, OPERATING, SETTING UP THEIR INFRASTRUCTUR E AND NETWORKS. NO DOUBT, THE FACILITY OF INTERCONNECTION AND PORT ACCESS PRO VIDED BY MTNL/ OTHER COMPANIES IS 'TECHNICAL' IN THE SENSE THAT IT INVOL VES SOPHISTICATED TECHNOLOGY. THE FACILITY MAY EVEN BE CONSTRUED AS A 'SERVICE' I N THE BROADER SENSE SUCH AS A 'COMMUNICATION SERVICE'. BUT, WHILE INTERPRETING THE EXPRESSION 'TECHNICAL SERVICE', THE INDIVIDUAL MEANINGS OF THE WORDS 'TEC HNICAL' AND 'SERVICE' HAVE TO BE SHED. AND ONLY THE MEANING OF THE WHOLE EXPRESSI ON 'TECHNICAL SERVICES' HAS TO BE SEEN. MOREOVER, THE EXPRESSION 'TECHNICAL SER VICE' WOULD HAVE REFERENCE TO ONLY TECHNICAL SERVICE RENDERED BY A HUMAN. IT W OULD NOT INCLUDE ANY SERVICE PROVIDED BY MACHINES OR ROBOTS. THUS, THE INTERCONNECT CHARGES/ PORT ACCESS CHARGES CANNOT BE REGARDED AS FEES FOR TECHNICAL SERVICES.' [EMPHASIS SUPPLIED] 27. THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE AFORESAID CASE MAY THUS BE SUMMARIZED AS UNDER: ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 24 OF 38 THE RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICAB LE AND THE WORD 'TECHNICAL' WOULD TAKE COLOUR FROM THE WORDS 'MANAGERIAL' AND ' CONSULTANCY', BETWEEN WHICH IT IS SANDWICHED. BOTH MANAGERIAL SERVICE AND CONSULTANCY SERVICE A RE PROVIDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCCI S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT THE EXPRESSION 'TECHNIC AL SERVICE' WOULD HAVE REFERENCE TO ONLY TECHNICAL SERVICE RENDERED BY A H UMAN. MTNL OR OTHER COMPANIES DO NOT PROVIDE ANY ASSIST ANCE TO THE ASSESSEE IN MANAGING, OPERATING, SETTING UP THEIR INFRASTRUCTUR E AND NETWORKS. NO DOUBT, SUCH A FACILITY IS 'TECHNICAL' IN THE S ENSE THAT IT INVOLVES SOPHISTICATED TECHNOLOGY AND MAY EVEN BE CONSTRUED AS 'COMMUNICATION SERVICE' BUT WHILE INTERPRETING THE ENTIRE EXPRESSI ON 'TECHNICAL SERVICE', THE INDIVIDUAL MEANINGS OF THE WORDS 'TECHNICAL' AND 'S ERVICE' HAVE TO BE SHED AND ONLY THE MEANING' OF THE WHOLE-EXPRESSION 'TECHNICA L SERVICES' HAS TO, BE SEEN. THE SERVICES RENDERED QUA INTERCONNECTION/ PORT A CCESS DO NOT INVOLVE ANY HUMAN INTERFACE AND, THEREFORE, THE SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTEMPLATED UNDER S. 194J .' 28. THE PHRASEOLOGY OF FEES FOR TECHNICAL SERVICES COVERS ONLY SUCH TECHNICAL SERVICES PROVIDED FOR FEES. THERE SHOULD BE A DIREC T CO-RELATION BETWEEN THE SERVICES WHICH ARE ON TECHNICAL NATURE AND THE CONS IDERATION RECEIVED IN LIEU OF RENDERING THE SERVICES. THE SERVICES CAN BE SAID TO BE OF TECHNICAL NATURE IS THE SPECIAL SKILLS AND KNOWLEDGE RELATING TO TECHNI CAL FIELD WHICH REQUIRED FOR THE PROVISIONS OF SUCH SERVICES. THESE ARE REQUIRED TO BE RENDERED BY HUMANS. THE SERVICES PROVIDED BY MACHINES AND ROBUST DO NOT FALL WITHIN THE AMBIT OF TECHNICAL SERVICES AS PROVIDED U/S. 9(1)(VII) OF TH E ACT. 29. ON APPEAL BY THE REVENUE, THE HON'BLE SUPREME C OURT IN THE CASE REPORTED AS CIT VS. BHARTI CELLULAR LTD . (2011) 330 ITR 239 UPHELD THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE DELHI H IGH COURT. THE HON'BLE SUPREME COURT HAS HELD AS UNDER:- 'THE QUESTION BASICALLY INVOLVED IN THE LEAD CASE I S: WHETHER TDS WAS DEDUCTIBLE BY M/S. BHARTI CELLULAR LIMITED WHEN IT PAID INTERCONNECT CHARGES/ACCESS/PORT CHARGES TO BSNL? F OR THAT PURPOSE, WE ARE REQUIRED TO EXAMINE THE MEANING OF THE WORDS 'FEES FOR TECHNICAL SERVICES' UNDER SECTION 194J READ WITH CLAUSE (B) OF THE EXPLANATION TO SECTION 194J OF THE INCOME TAX ACT, 1961, [`ACT', FOR SHORT] WHICH, INTER ALIA, STATES THAT 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SAME MEANING AS CONTAINED IN EXPLANATION 2 TO CLAUSE (VII) OF SECTION 9(1) OF THE ACT. 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, PARTICULARL Y, BECAUSE THE WORDS 'TECHNICAL SERVICES' IN SECTION 9(1)(VII) READ WITH EXPLANATION 2 COMES IN BETWEEN THE WORDS 'MANAGERIAL AND CONSULTANCY SERVI CES'. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 25 OF 38 THE PROBLEM WHICH ARISES IN THESE CASES IS THAT THE RE IS NO EXPERT EVIDENCE FROM THE SIDE OF THE DEPARTMENT TO SHOW HOW HUMAN I NTERVENTION TAKES PLACE, PARTICULARLY, DURING THE PROCESS WHEN CALLS TAKE PL ACE, LET US SAY, FROM DELHI TO NAINITAL AND VICE VERSA. IF, LET US SAY, BSNL HA S NO NETWORK IN NAINITAL WHEREAS IT HAS A NETWORK IN DELHI, THE INTERCONNECT AGREEMENT ENABLES M/S. BHARTI CELLULAR LIMITED TO ACCESS THE NETWORK OF BS NL IN NAINITAL AND THE SAME SITUATION CAN ARISE VICE VERSA IN A GIVEN CASE . DURING THE TRAFFIC OF SUCH CALLS WHETHER THERE IS ANY MANUAL INTERVENTION, IS ONE OF THE POINTS WHICH REQUIRES EXPERT EVIDENCE. SIMILARLY, ON WHAT BASIS IS THE 'CAPACITY' OF EACH SERVICE PROVIDER FIXED WHEN INTERCONNECT AGREEMENTS ARE ARRIVED AT? FOR EXAMPLE, WE ARE INFORMED THAT EACH SERVICE PROVIDER IS ALLOTTED A CERTAIN 'CAPACITY'. ON WHAT BASIS SUCH 'CAPACITY' IS ALLOTT ED AND WHAT HAPPENS IF A SITUATION ARISES WHERE A SERVICE PROVIDER'S 'ALLOTT ED CAPACITY' GETS EXHAUSTED AND IT WANTS, ON AN URGENT BASIS, 'ADDITIONAL CAPAC ITY'? WHETHER AT THAT STAGE, ANY HUMAN INTERVENTION IS INVOLVED IS REQUIR ED TO BE EXAMINED, WHICH AGAIN NEEDS A TECHNICAL DATA. WE ARE ONLY HIGHLIGHT ING THESE FACTS TO EMPHASISE THAT THESE TYPES OF MATTERS CANNOT BE DEC IDED WITHOUT ANY TECHNICAL ASSISTANCE AVAILABLE ON RECORD. THERE IS ONE MORE A SPECT THAT REQUIRES TO BE GONE INTO. IT IS THE CONTENTION OF RESPONDENT NO.1 HEREIN THAT INTERCONNECT AGREEMENT BETWEEN, LET US SAY, M/S. BHARTI CELLULAR LIMITED AND BSNL IN THESE CASES IS BASED ON OBLIGATIONS AND COUNTER OBL IGATIONS, WHICH IS CALLED A 'REVENUE SHARING CONTRACT'. ACCORDING TO RESPONDENT NO.1, SECTION 194J OF THE ACT IS NOT ATTRACTED IN THE CASE OF 'REVENUE SH ARING CONTRACT'. ACCORDING TO RESPONDENT NO.1, IN SUCH CONTRACTS THERE IS ONLY SHARING OF REVENUE AND, THEREFORE, PAYMENTS BY REVENUE SHARING CANNOT CONST ITUTE 'FEES' UNDER SECTION 194J OF THE ACT. THIS SUBMISSION IS NOT ACCEPTED BY THE DEPARTMENT. WE LEAVE IT THERE BECAUSE THIS SUBMISSION HAS NOT BEEN EXAM INED BY THE TRIBUNAL. IN SHORT, THE ABOVE ASPECTS NEED RECONSIDERATION BY TH E ASSESSING OFFICER. WE MAKE IT CLEAR THAT THE ASSESSEE(S) IS NOT AT FAULT IN THESE CASES FOR THE SIMPLE REASON THAT THE QUESTION OF HUMAN INTERVENTION WAS NEVER RAISED BY THE DEPARTMENT BEFORE THE CIT. IT WAS NOT RAISED EVEN B EFORE THE TRIBUNAL; IT IS NOT RAISED EVEN IN THESE CIVIL APPEALS. HOWEVER, KE EPING IN MIND THE LARGER INTEREST AND THE RAMIFICATION OF THE ISSUES, WHICH IS LIKELY TO RECUR, PARTICULARLY, IN MATTERS OF CONTRACTS BETWEEN INDIA N COMPANIES AND MULTINATIONAL CORPORATIONS, WE ARE OF THE VIEW THAT THE CASES HEREIN ARE REQUIRED TO BE REMITTED TO THE ASSESSING OFFICER (T DS). ACCORDINGLY, WE ARE DIRECTING THE ASSESSING OFFICER (TDS) IN EACH OF THESE CASES TO EXAMINE A TECHNICAL EXPERT FROM THE SIDE O F THE DEPARTMENT AND TO DECIDE THE MATTER WITHIN A PERIOD OF FOUR MONTHS. S UCH EXPERT(S) WILL BE EXAMINED (INCLUDING CROSS-EXAMINED) WITHIN A PERIOD OF FOUR WEEKS FROM THE DATE OF RECEIPT OF THE ORDER OF THIS COURT. LIBERTY IS ALSO GIVEN TO RESPONDENT NO.1 TO EXAMINE ITS EXPERT AND TO ADDUCE ANY OTHER EVIDENCE. BEFORE CONCLUDING, WE ARE DIRECTING CBDT TO ISSUE DIRECTIO NS TO ALL ITS OFFICERS, THAT IN SUCH CASES, THE DEPARTMENT NEED NOT PROCEED ONLY BY THE CONTRACTS PLACED BEFORE THE OFFICERS.' (EMPHASIS OURS). 29.1 THUS IN OUR VIEW THE PROPOSITION OF LAW LAID DOWN IN THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT HAVE ATTAINED FINALITY. TH E HON'BLE SUPREME COURT HELD THAT THE ISSUE AS TO WHETHER THERE IS INVOLVEM ENT / PRESENCE OF HUMAN ELEMENT OR NOT WAS A FACTUAL AND TECHNICAL MATTER A ND REQUIRED TO BE EXAMINED. THE OTHER PROPOSITION HAVE BEEN ACCEPTED BY THE HON'BLE SUPREME COURT. AS THE HON'BLE SUPREME COURT WAS OF THE OPIN ION THAT THIS FACTUAL ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 26 OF 38 ASPECT OF HUMAN INTERVENTION WAS NOT EXAMINED BY TH E AO, THE MATTER WAS REMANDED TO THE AO FOR FACTUAL EXAMINATION ONLY. TH E AO IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE SUPREME COURT EXAMINED WI TNESS ON OATH AND ALSO GAVE THE ASSESSEE THE OPPORTUNITY TO CROSS EXAMINE THEM. HE ALSO RE- EXAMINED THE EXPERT WITNESS. OUR DECISION WILL BE B ASED ON THE EVIDENCE SO COLLECTED BY THE AO ON THIS ASPECT OF HUMAN INTERVE NTION IN THE SERVICES RENDERED. IT HELD THAT THE WORD 'TECHNICAL SERVICES ' HAVE GOT TO BE READ IN THE NARROWER SENSE BY APPLYING THE RULE OF NOSCITUR A S OCIIS, PARTICULARLY, BECAUSE THE WORDS 'TECHNICAL SERVICES' IN SECTION 9(1)(VII) R/W EXPLN. 2 COMES IN BETWEEN THE WORDS 'MANAGERIAL AND CONSULTANCY SERVI CES'. HENCE, THERE SHOULD BE INVOLVEMENT/ PRESENCE OF HUMAN ELEMENT FO R COMING TO A CONCLUSION THAT 'TECHNICAL SERVICES' CAN BE SAID TO HAVE BEEN RENDERED IN TERMS OF EXPLANATION 2 TO SECTION 9(1) ((VII) OF THE ACT. IN OUR VIEW THE HON'BLE SUPREME COURT OF INDIA HAS APPROVED THE PROPOSITION LAID DOWN BY THE HON'BLE HIGH COURT, THAT THIS IS A SERVICE AND THAT IF WOULD BE FTS AS DEFINED U/S. 9(1)(VII) IF THERE IS HUMAN INTERFERENCE IN SU CH COMMUNICATION SERVICE. HENCE THE ISSUE TO BE CONSIDERED IS NARROW AND BASE D ON EVIDENCE COLLECTED BY THE REVENUE POST THE HON'BLE SUPREME COURT JUDGM ENT. ALL OTHER ISSUES ARE NO MORE RES-INTEGRA. 29.2 THIS ASPECT AS TO WHETHER A HUMAN ELEMENT IS I NVOLVED IN SUCH INTERCONNECT SERVICES OR NOT, HAS BEEN EXAMINED BY DIFFERENT BENCHES OF THE TRIBUNAL BASED ON THE EVIDENCE COLLECTED BY THE AO IN THE ABOVE STATED SET- ASIDE PROCEEDINGS. THE FACTS THAT ARE ON RECORD ARE THE SAME AS THE FACTS AND EVIDENCE WHICH HAVE BEEN EXAMINED BY VARIOUS COORDI NATE BENCHES OF THE TRIBUNAL. THESE INCLUDE THE STATEMENT OF EXPERTS RE CORDED BY THE ASSESSING OFFICER AND THE CROSS EXAMINATION DONE BY THE REPRE SENTATIVE OF THE COMPANY. FOR THE SAKE OF BREVITY, WE DO NOT EXTRACT THE STATEMENT AND CROSS EXAMINATION ETC. OF THE VARIOUS EXPERTS, AS THESE W ERE CONSIDERED IN DETAIL BY THE COORDINATE BENCHES AND IT WAS HELD AS FOLLOWS: 29.3 THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF VODAFONE EAST LTD. VS. ADDL . CIT IN ITA NO. 243/KOL/2014, VIDE ORDER DATED 15. 9.2015 HELD AS FOLLOWS:- 'FROM THE AFORESAID STATEMENT RECORDED FROM TECHNIC AL EXPERTS PURSUANT TO THE DIRECTIONS OF THE SUPREME COURT IN CIT VS. BHAR TI CELLULAR LTD. (330 ITR 239) WHICH HAS BEEN HEAVILY RELIED UPON BY THE LEAR NED CITA, WE FIND THAT HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTALLATI ON! SETTING UP/ REPAIRING/ SERVICING/ MAINTENANCE/ CAPACITY AUGMENTATION OF TH E NETWORK. BUT AFTER COMPLETING THIS PROCESS, MERE INTERCONNECTION BETWE EN THE OPERATORS WHILE ROAMING, IS DONE AUTOMATICALLY AND DOES NOT REQUIRE HUMAN INTERVENTION AND ACCORDINGLY CANNOT BE CONSTRUED AS TECHNICAL SERVIC ES. IT IS COMMON KNOWLEDGE THAT WHEN ONE OF THE SUBSCRIBERS IN THE A SSESSEE'S CIRCLE TRAVELS TO THE JURISDICTION OF ANOTHER CIRCLE, THE CALL GETS C ONNECTED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENTION AND IT IS FOR THIS, THE ROAMING CHARGES IS PAID BY THE ASSESSEE TO THE VISITING OPERATOR FOR PROVID ING THIS SERVICE. HENCE WE HAVE NO HESITATION TO HOLD THAT THE PROVISION OF RO AMING SERVICES DO NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY WE H OLD THAT THE PAYMENT OF ROAMING CHARGES DOES NOT FALL UNDER THE AMBIT OF TD S PROVISIONS U/ S 194J OF THE ACT.' ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 27 OF 38 30. THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF BHARTI HEXACOM LTD. VS. ITO (TDS) IN ITA 656/JP/2010 DATED 12.6.2015 HELD A S FOLLOWS : '11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AFTER GOING THROU GH THE ORDER OF THE ASSESSING OFFICER, LD CIT(A); SUBMISSIONS OF THE AS SESSEE AS WELL AS GOING THROUGH THE PROCESS OF PROVIDING ROAMING SERVICES; EXAMINATION OF TECHNICAL EXPERTS BY THE ACIT TDS, NEW DELHI IN THE CASE OF B HARTI CELLULAR LTD.; THEREAFTER CROSS EXAMINATION MADE BY M/S BHARTI CE LLULAR LTD.; ALSO OPINION OF HON'BLE THE THEN CHIEF JUSTICE OF INDIA MR. S.H. KAPADIA DATED 03/09/2013 AND ALSO VARIOUS JUDGMENTS GIVEN BY THE ITAT AHMADA BAD BENCH IN THE CASE OF CANARA BANK ON MICR AND PUNE BENCH DECISION ON D ATA LINK SERVICES. WE FIND THAT FOR INSTALLATION/ SETTING UP/ REPAIRIN G/ SERVICING/ MAINTENANCE CAPACITY AUGMENTATION ARE REQUIRE HUMAN INTERVENTIO N BUT AFTER COMPLETING THIS PROCESS MERE INTERCONNECTION BETWEEN THE OPERA TORS IS AUTOMATIC AND DOES NOT REQUIRE ANY HUMAN INTERVENTION. THE TERM I NTER CONNECTING USER CHARGES (IUC) ALSO SIGNIFIES CHARGES FOR CONNECTING TWO ENTITIES. THE COORDINATE BENCH ALSO CONSIDERED THE HON'BLE SUPREM E COURT DECISION IN THE CASE OF BHARTI CELLULAR LTD. IN THE CASE OF I-GATE COMPUTER SYSTEM LTD. AND HELD THAT DATA LINK TRANSFER DOES NOT REQUIRE ANY H UMAN INTERVENTION AND CHARGES RECEIVED OR PAID ON ACCOUNT OF THIS IS NOT FEES FOR TECHNICAL SERVICES AS ENVISAGED IN SECTION 194J READ WITH SECTION 9(1)(VII) READ WITH EXPLANATION-2 OF THE ACT. IN CASE BEFORE US, THE AS SESSEE HAS PAID ROAMING CHARGES I.E. IUC CHARGES TO VARIOUS OPERATORS AT RS . 10,18,92,350/-. RESPECTFULLY FOLLOWING ABOVE JUDICIAL PRECEDENTS, W E HOLD THAT THESE CHARGES ARE NOT FEES FOR RENDERING ANY TECHNICAL SERVICES A S ENVISAGED IN SECTION 194J OF THE ACT. THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) AN D ASSESSEE'S APPEAL IS ALLOWED ON THIS GROUND ALSO.' 31. THE AO AS WELL AS THE LD. CIT(A) HAS RECORDED T HAT THERE IS NO HUMAN INTERVENTION WHEN THE CALL IS SUCCESSFULLY COMPLETE D. IT IS ALSO NOT DISPUTED THAT THERE IS NO DIFFERENCE IN THE TECHNOLOGY, SYS TEM AND METHODOLOGY USED BY TELECOM COMPANIES IN PROVIDING INTER-CONNECTION OF DOMESTIC CALLS OR OF INTERNATIONAL CALLS. SO WHAT DECISION IS APPLICABLE FOR USE OF LOCAL CALLS ALSO APPLIES TO 'IUC' OF INTERNATIONAL CALLS. THUS THE V IEW TAKEN ON THE DEDUCTIBILITY OF TDS ON IUC CHARGES PAID FOR LOCAL INTER CONNECTIVITY SERVICE WOULD ON ALL FOURS APPLY TO CHARGES PAID FOR 'IUC' FOR INTERNATIONAL INTER CONNECTIVITY. 32. THE CHENNAI BENCH OF THE ITAT IN THE CASE OF M/ S DISHNET WIRELESS LTD. VS. DCIT IN ITA NO. 320 TO 329/MAD/ 2014 VIDE ORDER DATED 20.7.2015 ON THE ASPECT OF HUMAN INTERVENTION HELD AS FOLLOWS:- '25. NOW COMING TO ROAMING CHARGES, THE CONTENTION OF THE ASSESSEE IS THAT HUMAN INTERVENTION IS NOT REQUIRED FOR PROVIDING RO AMING FACILITY, THEREFORE, IT CANNOT BE CONSIDERED TO BE A TECHNICAL SERVICE. WE HAVE GONE THOUGH THE JUDGMENT OF APEX COURT IN BHARTI CELLULAR LIMITED ( SUPRA). THE APEX COURT AFTER EXAMINING THE PROVISIONS OF SECTION 9(L)(VII) OF THE ACT, FOUND THAT WHENEVER THERE WAS A HUMAN INTERVENTION, IT HAS TO BE CONSIDERED AS TECHNICAL SERVICE. IN THE LIGHT TO THE ABOVE JUDGMENT OF THE APEX COURT, THE DEPARTMENT OBTAINED AN EXPERT OPINION FROM SUB-DIVISIONAL ENGI NEER OF BSNL. THE SUB- ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 28 OF 38 DIVISIONAL ENGINEER CLARIFIED THAT HUMAN INTERVENTI ON IS REQUIRED FOR ESTABLISHING THE PHYSICAL CONNECTIVITY BETWEEN TWO OPERATORS FOR DOING NECESSARY SYSTEM CONFIGURATIONS. AFTER NECESSARY CO NFIGURATION FOR PROVIDING ROAMING SERVICES, HUMAN INTERVENTION IS NOT REQUIRE D. ONCE HUMAN INTERVENTION IS NOT REQUIRED AS FOUND BY THE APEX C OURT, THE SERVICE PROVIDED BY THE OTHER SERVICE PROVIDER CANNOT BE CONSIDERED TO BE A TECHNICAL SERVICE. IT IS COMMON KNOWLEDGE THAT, WHEN ONE' OF THE SUBSCRIB ERS IN THE ASSESSEE'S CIRCLE TRAVELS TO THE JURISDICTION OF ANOTHER CIRCL E, THE CALL GETS CONNECTED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENTION. IT IS DUE TO CONFIGURATION OF SOFTWARE SYSTEM IN THE RESPECTIVE SERVICE PROVIDER' S PLACE. IN FACT, THE SUB- DIVISIONAL ENGINEER OF BSNL HAS EXPLAINED AS FOLLOW S IN RESPONSE TO QUESTION NO. 23:- 'REGARDING ROAMING SERVICES AS EXPLAINED TO QUESTIO N NO. 21. REGARDING INTERCONNECTIVITY, INITIAL HUMAN INTERVENTION IS RE QUIRED FOR ESTABLISHING THE PHYSICAL CONNECTIVITY AND ALSO FOR DOING THE REQUIR ED CONFIGURATION. ONCE IT IS WORKING FINE, NO INTERVENTION IS REQUIRED. IN CASE OF ANY FAULTS HUMAN INTERVENTION IS REQUIRED FOR TAKING NECESSARY CORRE CTIVE ACTIONS.' IN VIEW OF THE ABOVE, ONCE CONFIGURATION WAS MADE, NO HUMAN INTERV ENTION IS REQUIRED FOR CONNECTING ROAMING CALLS. THE SUBSCRIBER CAN MAKE A ND RECEIVE CALLS, ACCESS AND RECEIVE DATA AND OTHER SERVICES WITHOUT HUMAN I NTERVENTION. LIKE ANY OTHER MACHINERY, WHENEVER THE SYSTEM BREAKDOWN, TO SET RIGHT THE SAME, HUMAN INTERVENTION IS REQUIRED. HOWEVER, FOR CONNEC TING ROAMING CALL, NO HUMAN INTERVENTION IS REQUIRED EXCEPT INITIAL CONFI GURATION IN SYSTEM. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT HUMAN IN TERVENTION IS NECESSARY FOR ROUTINE MAINTENANCE OF THE SYSTEM AND MACHINERY. HO WEVER, NO HUMAN INTERVENTION IS REQUIRED FOR CONNECTING THE ROAMING CALLS. THEREFORE, AS HELD BY THE APEX COURT IN BHARTI CELLULAR LIMITED (SUPRA ), THE ROAMING CONNECTIONS ARE PROVIDED WITHOUT ANY HUMAN INTERVEN TION AND THEREFORE, NO TECHNICAL SERVICE IS AVAILED BY THE ASSESSEE. THERE FORE, TDS IS NOT REQUIRED TO BE MADE IN RESPECT OF ROAMING CHARGES PAID TO OTHER SERVICE PROVIDERS.' 33. ALL THE BENCHES OF THE TRIBUNAL ARE UNANIMOUS I N THEIR VIEW ON THIS ISSUE. WE SEE NO REASON WHATSOEVER TO DEVIATE FROM THESE V IEWS. HENCE CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE REFERRED ORDERS, W E HOLD THAT THE PAYMENT IN QUESTION CANNOT BE CHARACTERIZED AS FEE FOR TECHNIC AL SERVICES U/S. 9(1)(VII) OF THE ACT. THERE IS NO MANUAL OR HUMAN INTERVENTIO N DURING THE PROCESS OF TRANSPORTATION OF CALLS BETWEEN TWO NETWORKS. THIS IS DONE AUTOMATICALLY. HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTALLATIO N OF THE NETWORK AND INSTALLATION OF OTHER NECESSARY EQUIPMENTS/INFRASTR UCTURE. HUMAN INTERVENTION IS ALSO NECESSARY FOR MAINTAINING, REPAIRING AND MO NITORING EACH OPERATOR OR INDIVIDUAL NETWORK, SO THAT THEY REMAIN IN A ROBUST CONDITION TO PROVIDE FAULTLESS SERVICES TO THE CUSTOMERS. HUMAN INTERVE NTION IS ALSO REQUIRED IN CASE WHERE THE NETWORK CAPACITY HAS TO BE ENHANCED BY THE TELECOM OPERATORS. SUCH HUMAN INTERVENTION CANNOT BE SAID TO BE FOR IN TER-CONNECTION OF A CALL. 34. WHERE ROUTING OF EVERY CALL HAS BEEN DECIDED, T HE EXHAUSTIVE STANDARD OF CAPACITY OF THE TRANSPORTER NETWORK WILL AUTOMATICA LLY RE-ROUTE THROUGH ANOTHER CHANNEL THROUGH ANOTHER OPERATOR. HUMAN INT ERVENTION IN SETTING UP ENHANCED CAPACITY HAS NO CONNECTION OR RELATION WIT H THE TRAFFIC OF CALL. THUS IT IS CLEAR THAT IN THE PROCESS OF ACTUAL CALLS, NO MANUAL INTERVENTION IS REQUIRED. THE FINDING OF THE REVENUE AUTHORITIES TH AT INTERCONNECTION IS A COMPOSITE PROCESS, INVOLVING SEVERAL PROCESSES WHIC H REQUIRE HUMAN ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 29 OF 38 INTERVENTION IS ERRONEOUS. THE TEST LAID DOWN BY TH E HON'BLE SUPREME COURT OF INDIA IN ITS ORDER WHEN THE CASE WAS REMANDED TO TH E AO IS TO FIND OUT AS TO WHETHER 'DURING TRAFFIC OF CALLS, IS THERE WAS ANY MANUAL INTERVENTION?'. THERE IS NO REFERENCE TO THE ISSUES OF SET UP, INST ALLATION OR OPERATION MAINTENANCE OR REPAIR OF NETWORK AS EXPLAINED BY TH E LD. CIT(A). THESE DECISIONS OF THE VARIOUS BENCHES OF THE ITAT, WHEN READ WITH THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT AS WELL AS THE HON'BLE SUPREME COURT, WOULD SETTLE THIS MATTER IN FAVOUR OF THE ASSESSEE. BUT A S A NUMBER OF OTHER DECISIONS HAVE BEEN RELIED UPON, WE EXAMINE THE SAME. 35. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SK YCELL COMMUNICATIONS LTD. VD. DCIT (2001) 251 ITR 53 (MAD.) HELD THAT CA LL CHARGES RECEIVED FROM TELECOM OPERATORS FROM FIRMS AND COMPANIES SUBSCRIB ING TO CELLULAR MOBILE SERVICES PROVIDED BY THEM DO NOT COME WITHIN THE DE FINITION OF TECHNICAL SERVICES U/S. 194J READ WITH SECTION 9(1)(VII) EXPL N. 2, AS IT A MERE COLLECTION OF FEE FOR USE OF STANDARD FACILITY PROVIDED TO ALL THOSE WILLING TO PAY FOR IT. APPLYING THE PROPOSITION LAID DOWN IN THIS CASE LAW TO THE FACTS OF THIS CASE, WE HAVE TO HOLD THAT INTER CONNECTION FACILITY AND THE SERVICE OF THE FTO IN PICKING UP, CARRYING AND SUCCESSFUL TERMINATION THE CALL OVER THEIR RESPECTIVE NETWORK IS A STANDARD FACILITY AND THE AND FTO IN Q UESTION DOES NOT RENDER ANY TECHNICAL SERVICES TO THE ASSESSEE UNDER INTERC ONNECT AGREEMENT. 36. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ESTEL COMMUNICATIONS (P) LTD . (2008) 217 CTR (DEL) 102 HELD AS FOLLOWS:- 'TRIBUNAL CONSIDERED THE AGREEMENT THAT HAD BEEN EN TERED INTO BY THE ASSESSEE WITH T AND CAME TO THE CONCLUSION THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE CUSTOMERS OF THE ASSESSEE AND T. IN FAC T, THE ASSESSEE WAS MERELY PAYING FOR AN INTERNET BANDWIDTH TO T AND THEN SELL ING IT TO ITS CUSTOMERS. THE USE OF INTERNET FACILITY MAY REQUIRE SOPHISTICATED EQUIPMENT BUT THAT DOES NOT MEAN THAT TECHNICAL SERVICES WERE RENDERED BY T TO THE ASSESSEE. IT WAS A SIMPLE CASE OF PURCHASE OF INTERNET BANDWIDTH BY AS SESSEE FROM T. UNDER THE CIRCUMSTANCES, THE TRIBUNAL CAME TO THE CONCLUSION THAT THERE WERE NO TECHNICAL SERVICES PROVIDED BY T TO THE ASSESSEE AN D, THEREFORE, THE PROVISIONS OF S. 9(L)(VII) DID NOT APPLY. TRIBUNAL HAS RIGHTLY DISMISSED THE APPEAL AFTER TAKING INTO CONSIDERATION THE AGREEMENT BETWEEN THE ASSESSEE AND T AND THE NATURE OF SERVICES PROVIDED BY T TO THE ASSESSEE. I T WAS A SIMPLE CASE OF PAYMENT FOR THE PROVISION OF A BANDWIDTH. NO TECHNI CAL SERVICES WERE RENDERED BY T TO THE ASSESSEE. ON A CONSIDERATION O F THE MATERIAL ON RECORD, NO SUBSTANTIAL QUESTION ARISES IN THE MATTER.' 37. IN THE CASE OF ACIT VS. HUGHES SOFTWARE SYSTEMS LTD. (2013) 35 CCH 416 DEL. TRIB, THE TRIBUNAL HAS HELD AS UNDER:- ' DEDUCTION. OF TAX AT SOURCE-FEES FOR TECHNICAL SERV ICES- ASSESSEE WAS ENGAGED IN BUSINESS OF SOFTWARE DEVELOPMENT OF PROD UCTS AND PROVIDING SOFTWARE SERVICES IN INDIA AND OVERSEAS-ASSESSEE WA S TREATED AS 'ASSESSEE IN DEFAULT' U/S 201(1) ON ACCOUNT OF NON-DEDUCTION OF TDS U/ S 194J FROM PAYMENT MADE FOR USE OF TELE-COMMUNICATION SERVICES I.E TELEPHONE CHARGES, LINK CHARGES AND BAND WIDTH CHARGES AS 'FEE FOR TEC HNICAL SERVICES' U/ S 9(1}(VII}-CIT(A} REVERSED FINDINGS OF AO-HELD, PAYM ENTS WERE MADE TO MTNL & BSNL ETC. FOR PROVIDING SPACE FOR TRANSMISSI ON OF DATA FOR CARRIAGE OF VOICE AND FOR AVAILING SERVICE OF INTER-COMMUNIC ATION, PORT ACCESS FOR ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 30 OF 38 WHICH NO HUMAN INTERVENTION WAS NECESSARY- PAYMENT CANNOT BE CHARACTERIZED AS 'FEE FOR TECHNICAL SERVICES'-THUS, ASSESSEE CANN OT BE HELD TO BE IN DEFAULT - FOR NON- DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF TELECOMMUNICATION. CHARGES IN TERMS OF SECTION 194J - REVENUE'S GROUND DISMISSED. 38. THE BANGALORE ITAT IN THE CASE OF WIPRO LTD. VS. ITO (2003) 80 TTJ (BANG) 191 HELD AS FOLLOWS:- 'INCOME DEEMED TO ACCRUE OR ARISE IN INDIA-FEES FOR TECHNICAL SERVICES/ ROYALTY-PAYMENT FOR TRANSMISSION OF DATA AND SOFTWA RE THROUGH UPLINK AND DOWN LINK SERVICES- ASSESSEE ENGAGED, INTER ALIA, I N THE BUSINESS OF DEVELOPMENT OF SOFTWARE PROVIDING ON LINE SOFTWARE SERVICES THROUGH CUSTOMER BASED CIRCUITS WITH THE HELP OF VSNL AND F OREIGN TELECOM COMPANIES OUTSIDE INDIA-AS PER THE AGREEMENTS WITH SUCH TELECOM COMPANIES ASSESSEE IS TO USE THE STANDARD FACILITY HAVING STA NDARD PRICING PATTERNS-THERE IS NOTHING TO SHOW THAT ASSESSEE WAS PROVIDED WITH ANY TECHNOLOGY OR TECHNICAL SERVICES- THEREFORE, THE AMOUNTS PAID BY ASSESSEE-COMPANY TO NON- RESIDENT TELECOM COMPANIES FOR DOWNLINKING AND TRAN SMITTING OF DATA TO THE ASSESSEE'S CUSTOMERS LOCATED OUTSIDE INDIA CANNOT B E CONSIDERED AS 'FEES FOR TECHNICAL SERVICES' UNDER S. 9(L)(VII) , MORESO WHEN SIMILAR SERVICES OFFERED BY VSNL IS NOT REGARDED AS TECHNICAL SERVICES-FURTHER , NO PROCESS HAS BEEN MADE AVAILABLE TO THE ASSESSEE-HENCE, THERE IS NO Q UESTION OF APPLICABILITY OF S. 9(L)(VI) TOO-SO LONG AS THE AMOUNT PAID IS NOT TAXABLE UNDE R THE ACT, THE CLAUSE IN THE DTAA CANNOT BRING THE CHARGE-HENCE, T HERE WAS NO LIABILITY TO DEDUCT TAX UNDER S. 195 ' 39. IN VIEW OF THE ABOVE DISCUSSIONS, RESPECTFULLY FOLLOWING THE BINDING JUDGMENT OF THE HON'BLE SUPREME COURT OF INDIA, WE HAVE NO HESITATION IN UPHOLDING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT, THE PAYMENT IN QUESTION CANNOT BE CONSIDERED AS 'FEE FO R TECHNICAL SERVICES' IN TERMS OF SECTION 9(1)(VII) READ WITH EXPLN. 2 OF THE ACT. 40. THE SECOND ASPECT OF THE ISSUE ARE BEFORE US, I S WITHOUT PREJUDICE TO THE FINDING UNDER THE DOMESTIC LAW, WHETHER THE PAYMENT TO FTOS FOR 'IUC' IS FEE FOR TECHNICAL SERVICES UNDER THE DTAA, WHEREVER 'MAKE AVAILABLE CLAUSE' IS FOUND IN THESE AGREEMENTS. IN VIEW OF OUR FINDIN G THAT THE PAYMENT IS NOT FEE FOR TECHNICAL SERVICES UNDER THE ACT, IT WOULD BE A N ACADEMIC EXERCISE TO EXAMINE WHETHER THE PAYMENT IN QUESTION WOULD BE FE E FOR TECHNICAL SERVICES UNDER DTAA'S. SUFFICE TO SAY WHEREVER TREATIES CONT AIN 'MAKING AVAILABLE' CLAUSE, THEN IN TERMS OF THE JUDGMENT OF THE HON'BL E KARNATAKA HIGH COURT IN THE CASE OF CIT & ORS. VS. DE BEERS INDIA MINERALS PVT. LTD . (2012) 346 ITR 0467; THE PAYMENT CANNOT BE TREATED AS FTS UNDER TH E DTAA AS THERE IS NO IMPARTING AS CONTEMPLATED IN THE TREATIES. SIMILAR ARE THE PROPOSITIONS ON THE ISSUE OF 'MAKE AVAILABLE' IN THE DECISIONS IN THE C ASE OF MAHINDRA & MAHINDRA LTD. VS. DCIT 313 ITR 263; RAMOND LIMITED VS. DCIT 86 ITD 791; CABLE AND WIRELESS NETWORKS INDIA P. LTD. (2009) 31 5 ITR 72. 41. THE NEXT ASPECT OF THIS ISSUE, WHICH IS RAISED AS GROUND NO. 8 IN THE DEPARTMENT'S APPEAL IS THAT, WHEN THE TREATIES DO N OT CONTAIN FTS CLAUSE, WHAT IS THE IMPACT ON TAXABILITY. WHEREVER FTS CLAU SE IS NOT AVAILABLE IN THE TREATY WITH A COUNTRY, THEN THE INCOME IN QUESTION WOULD BE ASSESSABLE AS BUSINESS INCOME AND IT CAN BE BROUGHT TO TAX IN IND IA, ONLY IF THE FTO HAS THE PERMANENT ESTABLISHMENT IN INDIA AND IF THE EARNING OF INCOME IS ATTRIBUTABLE ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 31 OF 38 TO ACTIVITIES OR FUNCTIONS PERFORMED BY SUCH PERMAN ENT ESTABLISHMENT. THIS VIEW IS SUPPORTED BY THE DECISION OF THE COORDINATE BENCH. 42. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. PARADIGM GEOPHYSICAL PTY. LTD. 122 ITD 155 (2010) HELD AS FO LLOWS:- 'WHAT ART. 7(7) SEEMS TO CONVEY IS THAT WHERE THE BUSINESS PROFITS OF THE NON- RESIDENT INCLUDE ITEMS OF INCOME FOR WHICH SPECIFIC OR SEPARATE PROVISIONS HAVE BEEN MADE IN OTHER ARTICLES OF THE TREATY, THE N THOSE PROVISIONS WOULD APPLY TO THOSE ITEMS. PER CONTRA, IF IT IS' FOUND T HAT THOSE PROVISIONS ARE NOT APPLICABLE TO THOSE ITEMS OF INCOME, THEN THE LOGIC AL RESULT WOULD BE THAT THOSE ITEMS OF INCOME WILL REMAIN IN ART.7 AND WILL NOT G O OUT OF THE SAME. SUCH ITEMS OF INCOME WHICH DO NOT FALL UNDER ANY OTHER P ROVISION OF THE DOUBLE TAX TREATY, WOULD CONTINUE TO BE VIEWED AS BUSINESS PRO FITS COVERED BY ART. 7. THE POSITION CANVASSED BY THE COUNSEL FOR THE ASSESSEE SEEMS TO BE MORE LOGICAL THAN THE VIEW CANVASSED ON BEHALF OF THE DEPARTMENT . FEES FOR TECHNICAL SERVICES ARE ESSENTIALLY BUSINESS PROFITS SINCE THE RENDERING OF SUCH SERVICES IS THE BUSINESS OF THE NON-RESIDENT. IN ORDER TO TAKE OUT AN ITEM OF INCOME FROM THE BUSINESS PROFITS, IT IS NECESSARY UNDER ART. 7(7) THAT THERE SHOULD BE SOME OTHER PROVISION IN THE TREATY DEALING SPECIFICALLY WITH THE ITEM OF INCOME SOUGHT TO BE TAKEN OUT FROM THE BUSINESS PROFITS. I F THERE IS NO OTHER PROVISION IN THE TREATY OR IF THE PROVISION MADE IN THE TREAT Y IS NOT FOUND APPLICABLE OR TO COVER THE ITEM OF INCOME SOUGHT TO BE TAKEN OUT FRO M THE BUSINESS PROFITS, FOR WHATEVER REASON, THEN IT FOLLOWS THAT THE PARTICULA R ITEM OF INCOME SHOULD CONTINUE TO REMAIN UNDER ART. 7. IN LIGHT OF THE ABOVE DISCUSSION, THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY FROM RIL UNDER THE CONTRACT DID NOT REPRESENT CONSIDERATION FOR ANY TECHNICAL SERVICES RENDERED TO RIL WHICH MADE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, ETC. OR CONSISTED OF THE DEVELOPMENT AND TRANSFER OF ANY TECHNICAL PLAN OR D ESIGN WITHIN THE MEANING OF ART. 12(3)(G) OF THE INDO AUSTRALIAN TREATY. THE CONSIDERATION WILL CONTINUE TO BE VIEWED AS BUSINESS PROFITS UNDER ART. 7 OF THE TREATY AND SINCE THE ASSESSEE HAD NO PE IN INDIA THE BUSINESS PROFITS CA NNOT BE TAXED IN INDIA.' 43. SIMILARLY, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SIEMENS AKTIONGESELLSCHAFT (2009) 310 ITR 320 (BOM) 'DOUBLE TAXATION RELIEF AGREEMENT BETWEEN INDIA' AND' FEDERAL REPUBLIC OF G ERMANY-ROYALTY VIS-A- VIS INDUSTRIAL AND COMMERCIAL PROFITS-EVEN THOUGH S. 9 WOULD APPLY, PROVISIONS OF DTAA, IF MORE BENEFICIAL, WOULD PREVA IL- ASSESSEE HAVING NO PE IN INDIA, AMOUNT OF ROYALTY, SOUGHT TO BE ASSESSED AS INDUSTRIAL OR COMMERCIAL PROFIT, IS NOT ASSESSABLE TO TAX IN INDIA-IF THE CO NSIDERATION RECEIVED BY THE ASSESSEE FOR GRANT OF THE PATENTS AND LICENSE IS RE GARDED AS ROYALTY AS THE GRANT ADMITTEDLY TOOK PLACE OUTSIDE INDIA; THE QUES TION OF APPLYING DEEMING PROVISIONS OF EXPLANATION TO S. 9 INSERTED BY THE FINANCE ACT , 2007 WOULD NOT ARISE AND FURTHER, ASSESSEE HAVING NO PE IN INDIA, SUCH INCOME WOULD NOT BE TAXABLE IN INDIA AS INDUSTRIAL AND COMMERCIAL PROFI TS IN TERMS OF ART. III OF INDO-GERMAN DTAA-INCOME FROM ACTIVITIES COVERED BY ARTS. V TO XII BY VIRTUE OF ART. 111(3) ARE SPECIFICALLY EXCLUDED FROM THE EXPRESSION 'IND USTRIAL OR COMMERCIAL PROFITS' IN ART. III AS THEY ARE TO BE T AXED IN THE MANNER PROVIDED UNDER ARTS. V TO XII-THEREFORE, INCOME OTHER THAN O F THE NATURE PROVIDED IN ARTS. V TO XII, IF RELATABLE TO INDUSTRIAL OR COMME RCIAL PROFITS WOULD FALL UNDER ART. III, NOT CHARGEABLE TO TAX IN THE ABSENCE OF P E-THIS VIEW IS FURTHER FORTIFIED BY THE FACT THAT ART. III OF THE 1960 DTA A HAS BEEN SUBSTITUTED BY ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 32 OF 38 DTAA OF 1995 AND A NEW ART. VIIIA HAS BEEN INSERTED EXPLAINING THE EXPRESSION 'ROYALTIES '' 44. IN VIEW OF THE ABOVE REASONS, WE HOLD THAT WHER EVER UNDER THE DTAA'S. MAKE AVAILABLE CLAUSE IS FOUND, THEN AS THERE IS NO IMPARTING, THE PAYMENT IN QUESTION IS NOT 'FTS' UNDER THE TREATY AND WHEN THE RE IS NO 'FTS' CLAUSE IN THE TREATIES, THE PAYMENT FALLS UNDER ARTICLE 7 OF THE TREATY AND IS BUSINESS INCOME. 7.6 SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE B EFORE US ARE SIMILAR, WE ARE OF THE OPINION THAT THE PAYM ENT DOES NOT FALL UNDER THE CATEGORY OF FEE FOR TECHNICAL SERVI CES OR ROYALTY AND IS THUS NOT LIABLE FOR TDS. FURTHER, THE CIT (A ) HAS HELD IT TO BE BUSINESS INCOME OF M/S. EQUANT U/S 9(1)(I) OF TH E ACT AND SINCE THE NON-RESIDENT EQUANT DOES NOT HAVE PE IN I NDIA, IT CANNOT BE BROUGHT TO TAX. IT IS UNDISPUTED THAT ONL Y SUCH INCOME WHICH IS TAXABLE IN INDIA IS AMENABLE TO TDS PROVIS IONS. THUS, THE GROUND OF APPEAL NO.2 IS ACCORDINGLY ALLOWED. 8. AS REGARDS GROUND NO.3, WE FIND THAT THE ASSESSE E HAS MADE PAYMENT OF RS.38,72,492 TO BAYOR CROP SCIENCE LTD AND THE FACTS ARE SIMILAR TO THE PAYMENTS MADE TO NUNHEMS B V AS DISCUSSED ABOVE. THE SAID AMOUNT WAS PAID BY THE AS SESSEE ON ACCOUNT OF PROVISION OF I.T. FACILITIES AND SERVICE S AS BAYOR WAS TO MANAGE THE LOTUS NOTES AND OTHER LAN FACILITIES OF THE ASSESSEE FOR ECONOMIES OF COST. THE AO HELD THAT THE SERVIC ES RENDERED BY BAYOR CROP SCIENCE LTD ARE FEES FOR TECHNICAL SERV ICES AND THEREFORE, THE ASSESSEE WAS TO DEDUCT THE TAX AT SO URCE. BEFORE THE CIT (A), THE ASSESSEE SUBMITTED THAT THERE WAS A CO ST SHARING AGREEMENT BETWEEN THE ASSESSEE AND THE BAYOR, WHICH WAS PRIMARILY ENTERED FOR ECONOMIES OF COST AND DUE TO PAUCITY OF EXPERIENCED RESOURCES AT THE ASSESSEES LEVEL AND T HAT THE AGREEMENT SPECIFICALLY PROVIDES THAT BAYOR WOULD NO T BE PROVIDING ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 33 OF 38 ANY SERVICES TO THE ASSESSEE. IT IS ALSO SUBMITTED THAT THERE IS NO PROFIT ELEMENT INCLUDED IN THE REIMBURSEMENT OF COS T AND THEREFORE, THERE WAS NO INCOME CHARGEABLE TO TAX AN D TDS PROVISIONS ARE NOT APPLICABLE. THE CIT (A) HOWEVER, HELD THAT THE LOTUS NOTE IS A HIGHLY TECHNICAL I.T TOOL WHICH INC LUDES DATA BASE MANAGEMENT AND COMPLICATED SET OF PROGRAMMING CODE TO BE WRITTEN AND IT IS NOT A SIMPLE SHARING OF FACILITY AS INTERNET FACILITY SHARED BY NUNHEMS BV AND THE ASSESSEE. THEREFORE, H E HELD THAT THE ASSESSEE WAS PROVIDED TECHNICAL SERVICES BY BAY OR AND THE PAYMENTS ARE SUBJECT TO THE TDS AND SINCE THE ASSES SEE FAILED TO DEDUCT TDS, IT WAS TO BE DISALLOWED UNDER SECTION 4 0(A)(IA) OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 8.1 THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW AND RELIED UPON THE SAME CASE LAW FOR TREATING THE PAYMENTS MADE TO NUNHEMS BV AS NOT AMENABLE TO TDS PROVISION S. 8.2 HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE PAYMENT HAS BEEN MADE T O A RESIDENT SISTER CONCERN FOR IT SUPPORT GIVEN BY THE SAID CON CERN. THE SERVICES RENDERED BY EQUANT AND NUNHEMS BV ARE DIFF ERENT FROM SERVICES RENDERED BY BAYOR CROP SCIENCE TO THE ASSE SSEE. BAYOR WAS MANAGING THE LOTUS NOTES OF THE ASSESSEE AND TH AT THE ULTIMATE RECIPIENT OF THE PAYMENTS HAVE NOT BEEN RE VEALED BY THE ASSESSEE. WE THEREFORE, AGREE WITH THE FINDINGS OF THE CIT (A) THAT THE MANAGEMENT OF THE LOTUS NOTE IS NOT A MERE SHAR ING OF ANY INFRASTRUCTURE OR FACILITY AND SINCE THE ASSESSEE H AS RECEIVED THE TECHNICAL SERVICES FROM BAYOR, THE SAME IS LIABLE T O TDS ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 34 OF 38 PROVISIONS. THEREFORE, WE UPHOLD THE FINDINGS OF TH E CIT (A) ON THIS ISSUE AND THE ASSESSEES GROUND OF APPEAL NO.3 IS R EJECTED. 8.3 AS REGARDS GROUND OF APPEAL NO.4, BRIEF FACTS A RE THAT THE CIT (A) HAS CONFIRMED THE DISALLOWANCE U/S 40(A )(IA) OF THE ACT ONLY WITH RESPECT TO PROVISION FOR COMMISSION TO BE PAID ON SALES. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH THE ASSESSEE HAS MADE THE PROVISIONS ON THE BASIS OF TH E SALES, BUT SINCE THE PAYMENT HAD NOT ACCRUED TO RECIPIENT AT T HAT POINT OF TIME, THE ASSESSEE HAS DEBITED THE SAID AMOUNT TO T HE PROVISION A/C AND THAT THE TDS WAS MADE WHEN THE ULTIMATE PAY MENT WAS MADE. BEFORE THE CIT (A), THE ASSESSEE HAD EXPLAINE D IN PARA 10.4 AS UNDER: IN BOTH THE CASES MENTIONED ABOVE, THE AGENTS ARE ENTITLED TO RECEIVE COMMISSION ONLY AFTER NIPL ACTUALLY RECEIVE S SUCH PAYMENT AGAINST THE SUPPLIES MADE (REFER TO CLAUSE 4 OF THE AGREEMENT WITH HIMGIRI AGRO TRADERS ENCLOSED AS ANNEXURE 42). AC CORDINGLY, THE ENTITLEMENT OF THE COMMISSION TO THE AGENT DEPEND S ON THE RECEIPT OF PAYMENT BY NIPL AGAINST SUPPLIES AFTER TAKING IN TO CONSIDERATION THE AMOUNT OF ACTUAL BAD DEBTS AND DISCOUNTS. 2.7.1.2 OUR SUBMISSIONS THE OBLIGATION TO DEDUCT TAX UNDER THE WITHHOLDING TAX PROVISIONS OF THE ACT ARISES ONLY WHEN THE VENDOR ACQUIRES A RIGH T TO ENFORCE/RECEIVE PAYMENT FROM THE PAYER AND NOT ON T HE BASIS OF MERE CREDIT BY THE PAYER IN THE BOOKS OF ACCOUNT OF ANY ADHOC PROVISION. THE CONCEPT OF ACCRUAL OF INCOME TO TH E VENDOR IS A VERY IMPORTANT FACTOR IN DETERMINING THE LIABILITY OF TH E PAYER TO DEDUCT TAXES AT SOURCE UNDER THE PROVISIONS OF THE ACT. ME RE CREDITING IN THE BOOKS OF ACCOUNT AS A PROVISION IN EXPENSE PAYA BLE OR OTHER PAYABLE ACCOUNT DOES NOT MEAN THAT ACTUAL ACCRUAL O F LIABILITY OR INCOME ESPECIALLY UNTIL SUCH TIME AS THE BILL OR IN VOICE IS RECEIVED AND DULY PASSED FOR PAYMENT FOLLOWED BY AN ENTRY IN THE BOOKS OF ACCOUNT. 8.4 THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND W E FIND THAT THE AGENTS WHO ARE ENTITLED TO THE COMMISSION ARE I DENTIFIED AND THAT THE COMMISSION IS PAID ONLY AFTER RECEIPT OF T HE PAYMENT ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 35 OF 38 AGAINST THE SUPPLIES MADE. THEREFORE, THE ULTIMATE RECIPIENTS ARE ASCERTAINABLE AND HENCE THE ASSESSEE OUGHT TO HAVE MADE THE TDS AT THE TIME OF CREDITING THE SAID A/C. THEREFOR E, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) O N THIS ISSUE AND THE GROUND OF APPEAL NO.4 IS ACCORDINGLY REJECTED. 8.5 AS REGARDS GROUND NO.5, WE FIND THAT THE ASSESS EE HAD OFFERED THE SCHEME DISCOUNT AMOUNTING TO RS.51,91,1 86 TO VARIOUS DISTRIBUTORS AND RETAILERS AND THAT THE DIS COUNT WAS BASED MOSTLY ON NET SALE AND THAT THE ACTUAL DISCOUNT ON NET SALES IS KNOWN ONLY AT THE END OF THE SEASON I.E. AFTER THE END OF THE FINANCIAL YEAR. THE ASSESSEE HAD CREATED A DISCOUN T DURING THE FINANCIAL YEAR BASED ON PAST PRACTICE FOR DISCOUNTS , BUT THE AO, DISALLOWED THE SAME AND BROUGHT IT TO TAX. THE CIT (A) CONFIRMED THE SAID DISALLOWANCE. 8.6 AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD ARISEN IN THE ASSESSEES OWN CASE FOR THE A.Y 2009-10 AND THE AO AFTER SCRUT INY HAS ALLOWED THE SAME. HE HAS FILED A COPY OF THE SAID O RDER BEFORE US. HE ALSO SUBMITTED THAT EVEN FOR THE A.Y 2008-09, TH E CIT (A) HAS ALLOWED THE SAID DISCOUNT THOUGH ON DIFFERENT BASIS AND THEREFORE, THERE SHOULD BE UNIFORM STAND BY THE REVENUE AND TH IS AMOUNT SHOULD BE ALLOWED. AS THE DECISIONS OF CIT (A) AND THE AO ARE IN RESPECT OF SUBSEQUENT A.YS, WE DEEM IT FIT AND PROP ER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE AO FOR RECONSIDE RATION IN ACCORDANCE WITH THE VIEW TAKEN BY THE DEPARTMENT FO R THE A.YS 2008-09 AND 2009-10. THUS, THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 36 OF 38 9. AS REGARDS GROUND NO.6 AGAINST THE DISALLOWANCE OF LEAVE TRAVEL EXPENDITURE AND BONUS AS NOT PAID DURI NG THE A.Y, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSE SSEE THAT THE PAYMENTS RELATED TO THE YEAR UNDER CONSIDERATION, B UT WERE MADE BEFORE THE DATE OF FILING OF THE RETURN AND HENCE, THE DISALLOWANCE U/S 43B IS NOT JUSTIFIED. WE FIND THAT THE LEAVE TR AVEL EXPENDITURE AND BONUS ARE CRYSTALISED EXPENDITURE A ND SINCE IT HAS BEEN PAID BEFORE DUE DATE OF FILING OF THE RETU RN OF INCOME, AS PROVIDED UNDER THE PROVISO TO SECTION 43B, THE SAME IS ALLOWABLE. THEREFORE, WE DIRECT THE AO TO ALLOW THE SAME IF IT IS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. THUS, THE ASS ESSEES APPEAL FOR THE A.Y 2006-07 IS PARTLY ALLOWED. ITA NOS. 327/HYD/2012 FOR THE A.Y 2008-09 10. IN THIS YEAR, THE GROUND OF APPEAL NO.1 IS SIMI LAR TO GROUND OF APPEAL NO.1 FOR THE A.Y 2006-07 AND RESPE CTFULLY FOLLOWING THE DECISION IN THE ABOVE APPEAL, THE GRO UND OF APPEAL NO.1 IS ALLOWED. 11. AS REGARDS GROUND NO.2 RELATING TO RESEARCH & DEVELOPMENT EXPENDITURE WHICH WAS DISALLOWED FOR NO N- SUBMISSION OF RELEVANT FORMS, IT IS SUBMITTED THAT IN THE SUBSEQUENT A.Y I.E. A.Y 2009-10, THE AO HAD SCRUTIN IZED THE FORMS AND AFTER VERIFICATION OF THE SAME, HAD ALLOW ED THE EXPENDITURE. SINCE THE DETAILS OF THE SAID EXPENDIT URES ARE NOT BEFORE US, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND RECONSIDERATION IN ACCORDANCE WITH LAW. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 37 OF 38 12. AS REGARDS GROUND NO.3 AND 3.1, AGAINST THE MAR K UP OF 10% MARGIN ON THE REIMBURSEMENT OF RECEIPTS FROM AE, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT THERE IS NO PROFIT ELEMENT IN THE REIMBURSEMENT OF THE EXPENSES AND THEREFORE, THERE CANNOT BE ANY MARK-UP ON SUCH REIM BURSEMENT. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THE ITAT WHEREIN IT HAS BEEN H ELD THAT WHERE THERE IS NO PROFIT ELEMENT IN THE REIMBURSEMENT OF THE EXPENSES, THERE CANNOT BE ANY UNILATERAL MARK UP ON THE SAME. THEREFORE, THIS ISSUE IS ALSO REMANDED TO THE FILE OF THE AO T O VERIFY WHETHER THERE IS ANY PROFIT ELEMENT IN THE REIMBURSEMENT OF THE EXPENDITURE AND IF IT IS FOUND THAT THERE IS NO SUC H ELEMENT, THEN WE HOLD THAT THERE CAN BE NO MARK UP ON SUCH REIMBU RSEMENT. THIS GROUND OF APPEAL IS ACCORDINGLY TREATED AS ALL OWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE ASSESSEES APPEAL FOR THE A. Y 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1775/HYD/2013 A.Y 2009-10 14. GROUND OF APPEAL NO.2 IS AGAINST THE DISALLOWAN CE OF EXPENDITURE INCURRED AT LEASEHOLD PREMISES AND WE F IND THAT THIS ISSUE IS SIMILAR TO GROUND OF APPEAL NO.1 IN ASSESS EES APPEAL FOR THE A.Y 2006-07. FOR THE DETAILED REASONS GIVEN THE REIN, THIS GROUND OF APPEAL IS ALLOWED. 15. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ITA NOS.290 OF 2011 327 OF 2012 AND 1775 OF 2013 NUNHEMS INDIA, MEDCHAL, RR DISTT. PAGE 38 OF 38 16. TO SUM UP, ASSESSEES APPEALS FOR A.YS 2006-07 AND 2008-09 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES , WHILE THE ASSESSEES APPEAL FOR A.Y 2009-10 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JULY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 6 TH JULY 2018. VINODAN/SPS COPY TO: 1 NUNHEMS INDIA PRIVATE LTD, S-196 KANDLAKOYA, MEDC HAL TO MIYAPUR BY-PASS ROAD, NEAR RAILWAY GATE, MEDCHAL, R ANGA REDDY DISTT. 501403 2 ADDNL. CIT, RANGE-16, HYDERABAD 3 CIT (A)-V, HYDERABAD 4 CIT IV HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER