SIEMENS LTD, MUMBAI V. DDIT (IT) 2(1), MUMBAI

ITA 4356/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1875 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 21-11-2012
• Assessment Year: misc
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Assessee Lawyers: SUNIL LALA; SHEETAL JAIN
• Keywords: Business income; Double taxation relief; Retrospective amendment; Permanent establishment; Competent authority

Judgement Text

ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 1 OF 20 IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.4356/MUM/2010 (ASSESSMENT YEAR:) SIEMENS LIMITED, 130 PANDURANG BUDHKAR MARG, WORLI, MUMBAI 400018 PAN: AAACS 0764 L VS. COMMISSIONER OF INCOME TAX (APPEALS) 11 MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SUNIL LALA, AND MS.SHEETAL JAIN DEPARTMENT BY: SHRI NARENDRA KUMAR, DR DATE OF HEARING: 19/12/2012 DATE OF PRONOUNCEMENT: 12/02/2013 O R D E R PER AMIT SHUKLA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 29.03.2010 PASSED BY THE CIT (A)-11, MUMBAI I N RELATION TO THE ORDER PASSED UNDER SECTION 195(2 ), INTER ALIA ON THE FOLLOWING GROUNDS OF APPEAL: 1. BASED ON THE FACTS AND CIRCUMSTANCE OF THE CASE , THE COMMISSIONER OF INCOME-TAX (APPEALS)-LL [HEREINAFTE R REFERRED TO AS THE CIT(A)] OUGHT TO HAVE HELD THAT NO TAX IS REQUIRED TO BE DEDUCTED @ 10% FROM THE PAYMENT T O BE MADE TO PEHLA TESTING LABORATORY (PEHLA) TOWARDS TY PE TESTS. 2. THE CIT (A) ERRED IN NOT CONSIDERING THE FACT TH AT THE PAYMENT TO BE MADE MAINLY FOR STANDARD FACILITY PROVIDED BY LABORATORY USING HIGHLY SOPHISTICATED EQUIPMENT AND IS ESSENTIAL AND CORE INGREDIENT FOR CARRYING OUT THE TEST. CIT (A) WRONGLY IGNORED THIS ASPECT WHICH IS GOING TO THE ROOT OF THE CASE. EVEN WHILE NOTING THAT PEHLA CARRIED OUT TYPE TEST USING SOPHISTICATE D EQUIPMENT WITHOUT ANY HUMAN INTERVENTION CIT (A) FA ILED TO ADDRESS THE TOPIC AND WRONGLY HELD THAT CONSIDER ATION PAID TO PEHLA IS TAXABLE IN INDIA, ALTHOUGH PEHLA D OES NOT ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 2 OF 20 HAVE A PERMANENT ESTABLISHMENT IN INDIA. 3. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE A O THAT THE PAYMENT TO BE MADE TO PEHLA IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES COVERED BY SECTION 9(1 )(VII ) READ WITH EXPLANATION TO SECTION 9 OF THE INCOME-TAX ACT , 1961 AND AS PER DT AA BETWEEN INDIA AND GERMANY. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) OUGHT TO HAVE HELD THAT THE PAYMENT TO BE MADE TO PEHLA WAS IN TH E NATURE OF BUSINESS PROFITS AND AS PER ARTICLE 7 OF THE DT AA BETWEEN INDIA AND GERMANY, THE PAYMENT WAS NOT LIABLE TO TAX IN INDIA IN THE ABSENCE OF A PERMANEN T ESTABLISHMENT (PE) IN INDIA TO WHICH SUCH PAYMENT C OULD BE ATTRIBUTED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS R EQUIRED TO MAKE PAYMENT TO PEHLA TESTING LABORATORY (HEREINA FTER REFERRED TO AS PTL) LOCATED AT BERLIN SIEMENSSTADT 13623 BERLIN , GERMANY FOR CARRYING OUT TYPE TESTS OF THE CIRCUIT BREAKERS MAN UFACTURED BY ASSESSEE IN ORDER TO ESTABLISH THAT THE DESIGN AND THE PRODUCT MEETS THE REQUIREMENT OF THE INTERNATIONAL STANDARDS IE C 62271-100. PEHALA LAB IS ACCREDITED BY NATIONAL ACCREDITATION BOARD FOR TESTING & CALIBRATION LABORATORIES (NABL) GERMANY, WHICH CA RRIES OUT VARIOUS KINDS OF TESTS FOR CIRCUIT BREAKERS AND OTH ER ELECTRONIC DEVICES TO PROVE THAT THE DESIGNS OF THE EQUIPMENT MEETS THE REQUIREMENTS OF THE INTERNATIONAL STANDARDS. THIS I S A STANDARD SERVICE PROVIDED BY THE LABORATORY, WHICH IS DONE A UTOMATICALLY BY MACHINES. FOR THE PURPOSE OF THE PAYMENT FOR MAKING REMITTANCE TO PTL, ASSESSEE MOVED AN APPLICATION UNDER SECTION 19 5 (2) BEFORE THE ASSTT. DIRECTOR (I.T.). ALONG WITH THE SAID APPLICA TION ASSESSEE HAS GIVEN A DETAILED SUBMISSION AND REASONS JUSTIFYING AS TO WHY THE REMITTANCE MADE TO THE PTL IS NOT LIABLE TO TAX IN INDIA UNDER THE PROVISIONS OF THE INCOME TAX ACT. THE MAIN CONTENT ION OF ASSESSEE HAS BEEN SUMMARIZED BY AO IN THE FOLLOWING MANNER: I) NO INCOME ACCRUES OR ARISES IN INDIA AS ALL SERV ICES ARE RENDERED OUTSIDE INDIA AND THE PAYMENT IS MADE OUTSIDE INDIA. ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 3 OF 20 II) THE PAYMENT IS IN THE NATURE OF BUSINESS INCOME OF PEHLA LABORATORY AND SINCE IT DOES NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA, THE SAME IS NOT TAXABLE IN INDIA AS PER THE DTAA. III) SINCE THE SERVICE IS RENDERED OUTSIDE INDIA, I T IS NOT TAXABLE IN INDIA ALSO AS PER INDIAN INCOME TAX ACT. THE SUPREME COURT DECISION IN ISHIKAWAJIMA- HARIMA HEAVY INDUSTRIES LTD (288 ITR 408) STATED THAT IN ORDER TO TAX THE INCOME IT IS NECESSARY THA T THE SERVICES HAVE TO BE RENDERED AND UTILIZED IN INDIA. IV) THE LABORATORY WILL USE THEIR TEST EQUIPMENT TO IMPOSE BOTH HIGH VOLTAGE AND HIGH CURRENTS ON OUR CIRCUIT BREAKERS, IN LINE WITH THE RATINGS OF THE BREAKERS AND CHECK THE PERFORMANCE OF THE CIRCUIT BREAKERS AND GIVE US A REPORT OF TEST CONDUCTED INDICATING ALL THE TEST RESULTS. IT IS A STANDARD FACILITY PROVIDED BY THE LABORATORY . 3. IT WAS FURTHER SUBMITTED THAT EVEN AS PER THE PROVI SIONS OF EXPLANATION 2 TO SECTION 9(1)(VII), THE PAYMENT DO NOT FALL IN THE NATURE AND CATEGORY OF FEES FOR TECHNICAL SERVICES (FTS). THE MAIN CONTENTION IN THIS REGARD WAS THAT IT IS NOT A FTS BUT THE PAYMENT WAS PURELY FOR STANDARD FACILITY PROVIDED BY THE LA BORATORY WHICH IS DONE AUTOMATICALLY BY THE MACHINES WITHOUT ANY HUMA N INTERVENTION. IN SUPPORT OF THIS CONTENTION, FLYER RECEIVED FROM PTL, DESCRIBING THE NATURE AND PROCEDURE OF THE TESTING WAS FILED BEFORE THE AO. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARATI CELLULAR LTD REPORTED IN 2009, 319 ITR 258 AND MADRAS HIGH COURT JUDGMENT IN THE CASE OF SKYCELL COMMUNICATIONS LTD VS. DCIT REPORTED IN 2001, 251 ITR 53 (MAD.) TO SUPPORT THAT THE EXPRESSION TECHNICAL SERVICES INVOLVES A HUMAN ELEMENT, WHEREAS IN THE CASE OF ASSESSEE THERE IS NO INVOLVEMENT OF HUMAN INTERFACE . 4. AO, HOWEVER, REJECTED THE ASSESSEES CONTENTIONS ON THE GROUND THAT FIRSTLY, TYPE OF THE SERVICES PROVIDED BY THE PEHLA LAB IS OF HIGHLY TECHNICAL IN NATURE AND THE PAYMENT IS DE FINITELY COVERED BY SECTION 9(1)(VII) AND SECONDLY, THE EXPLANATION 2 TO SECTION 9 ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 4 OF 20 WHICH WAS INSERTED BY THE FINANCE ACT, 2007 WITH RE TROSPECTIVE EFFECT 1.6.1976 PROVIDES THAT, WHERE THE INCOME IS DEEMED OR ACCRUED OR ARISE IN INDIA, SUCH INCOME SHALL BE INC LUDED IN THE TOTAL INCOME OF THE NON RESIDENT, WHETHER OR NOT THE NON RESIDENT HAS A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTI ON IN INDIA. REFERENCE WAS ALSO MADE TO CBDT CIRCULAR NO.03 OF 2 008 DATED 12.03.2008. AO FURTHER HELD THAT THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF I SHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD VS DIT [2007] 288 ITR 408 RELIED UPON BY ASSESSEE WILL NOT BE APPLICABLE AS THE SAME WAS RENDERED UPO N THE PROVISION, PRIOR TO THE AMENDMENT. ACCORDINGLY HE HELD THAT PA YMENT MADE BY ASSESSEE WOULD QUALIFY AS FEES FOR TECHNICAL SERVIC ES AS PER THE DTAA BETWEEN INDIA AND GERMANY, AS WELL AS PER SECT ION 9(1)(VII) OF THE INCOME TAX ACT. THUS, HE DIRECTED ASSESSEE TO D EDUCT THE TAX @ 10% ON THE GROSS AMOUNT OF PAYMENT TO BE MADE TO PT L. 5. AGGRIEVED BY THIS, ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT (A), WHEREIN IT WAS SUBMITTED THAT THIS KIND OF TES TING CERTIFICATE IS REQUIRED BY ASSESSEE FOR COMPLETING THE TENDER FORM ALITIES IN INDIA AND FOR THIS PURPOSE IT HAD TO SEND CIRCUIT BREAKER S, ONE OF THE PRODUCT MANUFACTURED BY ASSESSEE TO PEHLA IN GERMAN Y FOR QUALITY TESTS. THE CIRCUIT BREAKERS UNDERGO A DESTRUCTIVE T EST IN THE LABS AND THE SAME ARE NOT RECEIVED BACK IN INDIA. THEY A RE SENT ON SAMPLE BASIS FOR THE PURPOSE OF TESTING ONLY AND ON CE IT HAS CLEARED THE TEST IN THE LAB, A CERTIFICATE IS ISSUED BY THE PTL. THIS TEST IS CARRIED OUT THROUGH THE USE OF SOPHISTICATED MACHIN ES AND EQUIPMENT WHICH IMPOSE BOTH HIGH VOLTAGE AND HIGH C URRENT ON THE CIRCUIT BREAKERS TO TEST THE RESISTANCE. ALL THIS I S DONE WITHOUT HUMAN INTERVENTION AND REPORT IS PREPARED FOR THE T EST CONDUCTED. IN THIS MANNER, THE PEHLA LAB DOES NOT OFFER ANY KI ND OF CONSULTANCY SERVICES OR TECHNICAL SERVICES. THIS CE RTIFICATE IS ONE OF THE FORMALITIES FOR COMPLETING THE TENDER PROJECT I N INDIA BY THE ASSESSEE, AS THE ULTIMATE SALE OF THE PRODUCT, DEPE ND ON FULFILLMENT ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 5 OF 20 OF OTHER TENDER REQUIREMENTS. IT WAS FURTHER SUBMIT TED THAT THE WORD TECHNICAL SERVICES AS APPEARING IN EXPLANATI ON 2 TO SECTION 9(1)(VII) HAS TO BE READ WITH THE WORD MANAGERIAL AND CONSULTANCY WHICH REQUIRES AND INVOLVEMENT OF HUMAN ELEMENT. IN SUPPORT OF THIS CONTENTION, DECISION OF THE DELHI HIGH COURT I N THE CASE OF CIT VS. BHARATI CELLULAR LTD REPORTED IN (2009), 319 IT R 258 AND MADRAS HIGH COURT JUDGMENT IN THE CASE OF SKYCELL COMMUNI CATIONS LTD VS. DCIT REPORTED IN (2001), 251 ITR 53 (MAD.) WAS RELIED UPON. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITAT JAIPUR BENCH IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LT D VS. DCIT 123 TTJ 888. 6. THE LEARNED CIT (A) FIRST OF ALL NOTED THE NATURE O F THE SERVICES FOR WHICH THE PAYMENT WAS MADE TO PTL IN THE FOLLOW ING MANNER: 3.7 THE NATURE OF SERVICES HAS BEEN DESCRIBED IN DE TAIL IN THE PRECEDING PARAS. HOWEVER, TO REITERATE, THE PAY MENTS ARE TO PEHLA TESTING LABORATORY, LOCATED AT BERLIN, GERMANY FOR CARRYING OUT TYPE TESTS. THE TYPE TESTS WERE REQUIRED TO BE CARRIED OUT ON THE CIRCUIT BREAKERS MANUFACTURED BY THE APPELLANTS TO PROVE THAT THE DE SIGN OF THE EQUIPMENT MEETS THE REQUIREMENTS STIPULATED BY INTERNATIONAL STANDARDS AND WERE FOR THE PURPOSE OF FULFILLMENT OF ONE OF THE TENDER FORMALITIES LAID D OWN BY THE PURCHASERS. FOR THIS PURPOSE, THE APPELLANTS HA D TO SEND THE CIRCUIT BREAKERS (THE PRODUCT MANUFACTURED BY THE APPELLANTS) TO PEHLA GERMANY TO OBTAIN THE TYPE TESTING CERTIFICATE. THE CIRCUIT BREAKERS UNDERGO A DESTRUCTIVE TEST IN THE LABORATORIES. THE BREAKERS ARE NOT RECEIVED BACK IN INDIA AND ARE DESTROYED. PEHLA CAR RIED OUT ONLY TYPE TESTING BY USING THEIR SOPHISTICATED TEST EQUIPMENTS TO IMPOSE BOTH HIGH VOLTAGE AND HIGH CUR RENTS ON THE CIRCUIT BREAKERS WITHOUT HUMAN INTERVENTION AND ISSUED REPORTS OF THE TESTS CONDUCTED. THEREAFTER HE COME TO THE CONCLUSION THAT PTL IS CA RRYING OUT TECHNICAL KIND OF SERVICES AFTER OBSERVING AS UNDER : 3.10. KEEPING THIS BACKGROUND IN MIND, IT IS NOW TO BE SEEN WHETHER THE SERVICES BEING PROVIDED BY PEHLA T O THE APPELLANT FALL IN THIS SPECTRUM. AS PER THE FLYER P ROVIDED BY THE APPELLANT, IT IS SEEN THAT BY ITS OWN DEFINITIO N PEHLA IS THE COMPETENT AUTHORITY FOR TESTING OF ALL COMPONEN TS ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 6 OF 20 RELATING TO THE TRANSMISSION AND DISTRIBUTION OF HI GH VOLTAGE POWER. IT IS A HIGHLY SPECIALIZED TECHNICAL LABO RATORY FITTED WITH THE STATE OF ART EQUIPMENT TO CONDUCT TYPE TESTS ON THE CIRCUIT BREAKERS MANUFACTURED BY THE APPELLA NTS TO PROVE THAT THE DESIGN OF THE EQUIPMENT MEETS THE REQUIREMENTS STIPULATED BY INTERNATIONAL STANDARDS. THUS, THE TYPE TESTING SERVICES PROVIDED BY PEHLA CAN B Y NO STRETCH OF IMAGINATION BE CONSIDERED AS NON TECHNIC AL. MOREOVER, PEHLA CARRIED OUT THE SAID TYPE TESTING B Y USING THEIR SOPHISTICATED TEST EQUIPMENTS TO IMPOSE BOTH HIGH VOLTAGE AND HIGH CURRENTS ON THE CIRCUIT BREAKERS A ND ISSUES REPORTS OF THE TESTS CONDUCTED WHICH ARE SEN T TO THE APPELLANT IN INDIA. 7. HE FURTHER ALSO REFERRED TO FOLLOWING DECISIONS: I) SOUTH WEST MINING LTD. IN RE (2005) 148 TAXMAN 366 (AAR) II) COCHIN REFINERIES 222 ITR 354 (KER.) III) SEARLE (INDIA) LTD V. CBDT (1983) 2 TAXMAN 300 (BOM .) AND HELD THAT THE SERVICE RENDERED BY PEHLA IS TEC HNICAL SERVICES. THEREAFTER HE ANALYZED THE PROVISIONS OF SECTION 9( 1)(VII) R.W. EXPLANATION 2 AND HELD THAT FIRSTLY, FEE PAYABLE TO PEHLA IS WITHIN THE MEANING OF FTS AND SECONDLY, THE SERVICES RECEI VED BY ASSESSEE WAS UTILIZED IN INDIA IN THE BUSINESS OF ASSESSEE A ND ALSO FOR EARNING INCOME FROM SOURCE WITHIN INDIA, THEREFORE, IT HAS TO BE CONSIDERED THAT SERVICES ARE RENDERED IN INDIA, HEN CE TAXABLE IN INDIA. HE FURTHER MADE REFERENCE TO THE ARTICLE-12( 4) OF THE INDO GERMAN DTAA AND HELD THAT THE DEFINITION OF FTS GIV EN THEREIN IS SIMILAR TO EXPLANATION 2 TO SECTION 9(1)(VII) OF TH E INCOME TAX ACT. REGARDING OTHER CONTENTIONS OF ASSESSEE THAT TESTIN G WAS CARRIED OUT, OUTSIDE INDIA AND THE PAYMENT MADE TO PEHLA CA NNOT BE CHARGED TO TAX IN INDIA IN VIEW OF THE PRINCIPLES L AID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF I SHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD VS DIT [2007] 288 ITR 408 (SC), HE H ELD THAT THE SAID DECISION IS NOT APPLICABLE AFTER THE INSERTION OF E XPLANATION 2 TO SECTION 9(1)(VII) WITH RETROSPECTIVE EFFECT W.E.F. 1.6.1976. HE THUS UPHELD THE RELIANCE PLACED BY THE AO ON THE CBDT CI RCULAR NO.03 OF ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 7 OF 20 2008. ASSESSEES PLEA THAT THE PAYMENT MADE TO PEHL A CANNOT BE TAXED IN VIEW OF ARTICLE 7 OF THE DTAA AS PEHLA DOE S NOT HAVE A PE IN INDIA WAS ALSO REJECTED BY THE CIT (A) AS PER THE D ISCUSSION GIVEN FROM PARA 5.1 TO 5.6. ACCORDINGLY ASSESSEES ENTIRE CONTENTIONS WERE REJECTED. 8. THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSE SSEE AFTER REITERATING THE FACTS AS INCORPORATED ABOVE, SUBMIT TED THAT, IT HAS BEEN UNDISPUTED BY THE AO THAT THE TYPE TESTING CAR RIED OUT BY PEHLA BY USE OF HIGHLY SOPHISTICATED TEST EQUIPMENT IS WITHOUT ANY HUMAN INTERVENTION AND THIS FACT HAS ALSO BEEN ADMI TTED BY THE CIT (A) IN PARA 3.7 OF HIS ORDER, WHEREIN HIS DECISION HAS BEEN RECORDED. ONCE IT IS AN ADMITTED FACT THAT NO HUMAN INTERVENT ION IS INVOLVED IN SUCH KIND OF TESTING, IT DOES NOT AMOUNT TO REND ERING OF ANY TECHNICAL SERVICES. HE SUBMITTED THAT THE WORD T ECHNICAL SERVICE AS APPEARING IN EXPLANATION 2 TO SECTION 9(1) (VII) IS SANDWICHED BETWEEN THE WORD MANAGERIAL AND CONSULTANCY AND THEREFORE THE WORD TECHNICAL SERVICE HAS TO BE READ ALONG WITH THESE TWO WORDS. THESE WORDS SIGNIFY THE INVOLVEMENT OF HUMAN INTERV ENTION AS WITHOUT HUMAN INVOLVEMENT MANAGERIAL AND CONSULTANC Y SERVICES CANNOT BE PROVIDED. A TESTING CARRIED OUT PURELY BY THE MACHINES CANNOT BE HELD TO BE PROVIDING TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII). IN SUPPORT OF HIS CON TENTION, HE HAS RELIED UPON CATENA DECISIONS, SOME OF WHICH ARE CIT ED HEREIN BELOW: A) CIT VS. BHARATI CELLULAR LTD (2009) 319 ITR 258 (DE L.) B) CIT VS. BHARAT CELLULAR LTD (2011) 330 ITR 239 (SC) C) UPS SCS (ASIA) LTD V.ADIT (2012) 18 TAXMAN.COM 302 (MUM.) D) JAIPUR VIDYUT VITRAN NIGAM LTD V. DCIT (2009) 123 T TJ 888 (JP.) E) SKYCELL COMMUNICATIONS LTD & ANR V. DCIT & QRS. (20 01) 251 ITR 53 (MAD). F) IDEA CELLULAR LTD V. DCIT (2010) 123 ITD 620 (DEL.) G) DAMPSKIBSSELSKABET AF 1912 A/S AKITIESELSKABET V. A DIT (I.T) (2011) 130 ITD 59 (MUM.) ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 8 OF 20 9. THE LEARNED COUNSEL ALSO FILED A COPY OF FLYER GIVI NG THE DESCRIPTION OF THE TYPE OF TESTING DONE BY THE PEHL A, WHICH WAS FILED BEFORE THE AO AS WELL AS BEFORE THE CIT (A). THUS H E CONCLUDED THAT ONCE PAYMENT IS MADE FOR CARRYING OUT TEST IN A LAB WHICH IS DONE THROUGH SOPHISTICATED MACHINES WITHOUT ANY HUMAN IN TERVENTION, THE SAME CANNOT BE HELD TO BE FEES FOR TECHNICAL S ERVICES AS HELD BY VARIOUS COURTS IN THE AFORESAID DECISIONS. 10. PER CONTRA LEARNED CIT (DR) SUBMITTED THAT THE AO H AS NOT EXAMINED WHETHER THERE WAS ANY INVOLVEMENT OF ANY H UMAN ELEMENT OR HUMAN INTERVENTION IN CARRYING OUT THE T EST BY THE PEHLA OR NOT. THE LEARNED CIT (A) HAS MERELY REPRODUCED T HE CONTENTION OF ASSESSEE AND HAS NOT GIVEN ANY CATEGORICAL FINDING ON THAT ASPECT. FURTHER HE SUBMITTED THAT EVEN CARRYING OUT THE TES T OF CIRCUIT BREAKERS IN THE MACHINES, SOME TECHNICAL EXPERTS AR E REQUIRED TO OBSERVE AND ANALYZE THE PROCESS AND THEN ONLY THEY CERTIFY THE TESTS. THE LAYMEN CANNOT DO SUCH KIND OF AN EXERCISE. HE R EFERRED TO PAGE 4 OF THE FLYER FILED BY ASSESSEE, WHEREIN HE POINTE D OUT VARIOUS KINDS OF ACTIVITIES LIKE PROVIDING TEST CERTIFICATE AND T EST REPORT CAN ONLY BE DONE THROUGH A TECHNICAL EXPERT PERSON. THEREFORE, HUMAN BRAIN IS INVOLVED IN SUCH KIND OF SERVICE. APART FROM THIS, THERE WERE CERTAIN HUMAN OBSERVERS TO CONFIRM THE RESULT. THIS INTER A LIA MEANS THAT HUMAN INTERVENTION IS DEFINITELY THERE. DISTINGUISH ING THE CASE OF THE HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE O F BHARATI CELLULAR (SUPRA), HE SUBMITTED THAT IN THAT CASE TH E ISSUE WAS DIVERSION OF CALLS FROM CELL TO CELL THROUGH TOWERS . THIS DEFINITELY WAS A CASE OF USAGE OF MACHINES AND NO HUMAN INTERVENTI ON IS REQUIRED IN SUCH KIND OF TRANSMISSION. FURTHER THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT HAS BEEN SET ASIDE BY THE HON'BLE SUPREME COURT IN THE CASE NOW REPORTED AS CIT VS. BHARATI CELLULA R LTD. (2011) 330 ITR 239 (SC). THUS THE SAID DECISION CANNOT BE RELI ED UPON. IN THE ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 9 OF 20 CASE OF JAIPUR VIDYUT VITRAN NIGAM LTD (SUPRA) PASS ED BY THE ITAT JAIPUR BENCH, THE MATTER RELATED TO TRANSMISSION OF ELECTRICITY WHICH IS DISTINGUISHABLE FROM ASSESSEES CASE. IN S UPPORT OF HIS CONTENTION, HE GAVE AN EXAMPLE OF CONDUCTING OF BLO OD TEST, WHICH NOWADAYS ARE DONE THROUGH SOPHISTICATED MACHINES, B UT IT IS CERTIFIED BY THE PATHOLOGIST WHO ANALYSES THE REPOR T. THIS KIND OF CONDUCTING BLOOD TEST IS DEFINITELY SAID TO BE DONE BY THE PATHOLOGIST ONLY WHO IS HUMAN AND NOT A SERVICE THROUGH MACHINE . HE ALSO RELIED UPON THE DECISION OF THE COCHIN REFINERIES R EPORTED IN (1996), 222 ITR 354 (KER.), WHEREIN THE MATTER RELATED TO C ARRYING OUT CERTAIN TESTS CONDUCTED BY A FOREIGN COMPANY AT THE INSTANCE OF THE INDIAN COMPANY AND THE PAYMENTS MADE TO THE PERSON OF THE FOREIGN COMPANY WAS TREATED AS FTS WITHIN THE MEANI NG OF SECTION 9(1)(VII). THUS IN THE CASE OF ASSESSEE ALSO SAME H AS TO BE TREATED AS FTS. HE FURTHER RELIED UPON THE DECISION OF THE ITA T IN THE CASE OF ASHAPURA MINICHEM LTD. VS. ASSISTANT DIRECTOR OF IN COME-TAX, INTERNATIONAL TAXATION 1(1), MUMBAI, REPORTED IN (2 010), 40 SOT 220. IN THIS CASE BAUXITE TESTING SERVICES CONDUCT ED BY CHINESE COMPANY IN ITS LABORATORIES AND PREPARING OF TEST R EPORT WAS HELD TO BE TAXABLE UNDER SECTION 9(1)(VII). STRONG RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HAVELLS INDIA LTD IN ITA NOS. 55 & 57 OF 2012 DATED 21.05.2012 WHEREIN ONE OF THE ISSUES RELATED TO DEDUCTION OF T AX AT SOURCE OF TESTING FEE WHICH WAS HELD TO BE FTS. THUS, HE SUBM ITTED THAT THE LEARNED CIT (A) HAS RIGHTLY CONCLUDED THAT THE PAYM ENT MADE BY ASSESSEE IS IN THE NATURE OF FTS AND ALSO THE SAME IS TAXABLE IN INDIA AND TDS HAS TO BE DEDUCTED ON SUCH PAYMENT. 11. IN THE REJOINDER THE LEARNED COUNSEL STATED THAT NO NE OF THE JUDGMENT RELIED UPON BY THE LEARNED DR HAS DEALT WI TH THE ISSUE OF HUMAN INTERVENTION AS HAS BEEN DISCUSSED AND THE CA SE LAW RELIED UPON BY HIM ARE ENTIRELY DIFFERENT FROM THE ISSUE I NVOLVED IN THE ASSESSEES CASE. HE SUBMITTED THAT THE LEARNED DR A T THIS STAGE ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 10 OF 20 CANNOT CONTROVERT THIS FACT THAT ISSUE OF HUMAN INT ERVENTION HAS NOT BEEN EXAMINED BY THE AO AND THE CIT (A). HE DREW OU R SPECIFIC ATTENTION TO THE RELEVANT PARAGRAPHS OF THE ASSESSM ENT ORDER AND THE ORDER OF THE LEARNED CIT (A). SO FAR AS THE REL IANCE OF THE DELHI HIGH COURT JUDGMENT IN THE CASE OF HAVELLS INDIA LT D (SUPRA), HE SUBMITTED THAT IN THAT CASE ASSESSEES COUNSEL HAS HIMSELF CONCEDED THAT THIS WAS THE CASE OF FTS AND THE ISSU E WAS WITH REGARD TO THE EXPLANATION TO SECTION 9(1)(VII) AND APPLICABILITY OF SECTION 40(A)(IA). REGARDING OTHER DECISIONS RELIED UPON BY THE AO HE SUBMITTED THAT THE ISSUES WERE MORE OF ACCRUAL OF I NCOME IN INDIA. LASTLY, HE CONCLUDED THAT AO AND THE CIT (A) HAVE R EFERRED TO THE FLYER SUBMITTED BY ASSESSEE AND THEY HAVE NOT GIVEN ANY INTERPRETATION THAT THERE WAS ANY KIND OF HUMAN INT ERVENTION IN THE PROCESS. THE LEARNED COUNSEL FURTHER CLARIFIED THAT HE IS NOT PLACING RELIANCE ON THE PROVISIONS OF THE TREATY, BUT SUBMI TTING HIS ARGUMENTS SOLELY ON THE BASIS OF SECTION 9(1)(VII) AND THE MEANING OF FTS GIVEN IN EXPLANATION 2 THERETO. 12. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE RIVA L CONTENTION, ORDERS PASSED BY THE CIT (A) AS WELL AS AO AND THE DECISIONS RELIED UPON BY THE PARTIES. ONE OF THE MA IN ISSUE FOR OUR ADJUDICATION WHICH ALSO GOES TO THE CORE OF THE ISS UE IS, WHETHER THE PAYMENT MADE TO PEHLA TESTING LABORATORIES IN GERMA NY, FOR CARRYING OUT CERTAIN TESTS ON CIRCUIT BREAKERS MANU FACTURED BY ASSESSEE FOR THE PURPOSE OF CERTIFICATION, SO AS TO MEET THE INTERNATIONAL STANDARD, FALLS WITHIN THE MEANING OF FEES FOR TECHNICAL SERVICES AND IS TAXABLE WITHIN THE MEANING OF SECTI ON 9(1)(VII). ASSESSEE IN PURSUANCE OF ITS TENDER FORMALITIES WIT H THE GUJARAT ENERGY TRANSMISSION CORPORATION LTD AND MAHARASHTRA STATE ELECTRICITY TRANSMISSION COMPANY LTD. WAS REQUIRED TO OBTAIN TYPE TESTING CERTIFICATE OF THE CIRCUIT BREAKERS MANUFAC TURED BY IT. FOR THIS PURPOSE IT HAS SENT THE CIRCUIT BREAKERS TO BE TESTED IN THE LABORATORY OF PTL, WHEREIN THE CIRCUIT BREAKERS UND ERGO DESTRUCTIVE ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 11 OF 20 TESTS IN THE LABORATORIES. ONCE IT PASSES THROUGH T HE TEST IN THE LABORATORIES, CERTIFICATE IS GIVEN BY THE PTL FOR T HE QUALITY OF THE PRODUCT MANUFACTURED BY ASSESSEE. WHETHER SUCH A PA YMENT FOR THIS KIND OF TESTING FALLS WITHIN THE REALM OF FEES FOR TECHNICAL SERVICES. SECTION 9(1)(VII) PROVIDES THAT INCOME B Y WAY OF FEE FOR TECHNICAL SERVICES SHALL DEEMED TO ACCRUE OR ARISE IN INDIA. EXPLANATION 2 DEFINES THE FEES FOR TECHNICAL SERVI CES AS UNDER: SECTION 9(1)(VII) (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE F EES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM A NY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FO R THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA : [ PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE TH E 1ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL GOVERNM ENT.] [EXPLANATION 1.FOR THE PURPOSES OF THE FOREGOING P ROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 19 76, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AG REEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE C ENTRAL GOVERNMENT BEFORE THAT DATE.] EXPLANATION [2].FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL) BUT DOES ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 12 OF 20 NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSE MBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN T CHARGEABLE UNDER THE HEAD 'SALARIES'.] [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INC OME OF A NON- RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDI A UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SE CTION (1) AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RE SIDENT, WHETHER OR NOT, (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN IND IA.] 13. FROM THE ABOVE, IT IS SEEN THAT THE EXPRESSION FEE S FOR TECHNICAL SERVICES HAS BEEN GIVEN AS CONSIDERATION FOR RENDERING MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES . NO OTHER DEFINITION AS SUCH OF THE TERM TECHNICAL SERVICES I N THE ACT HAS BEEN GIVEN. THE WORD TECHNICAL AS APPEARING IN EXPLANA TION 2 IS PRECEDED BY THE WORD MANAGERIAL AND SUCCEEDED BY THE WORD CONSULTANCY. IT CANNOT BE READ IN ISOLATION AS IT TAKES COLOUR FROM THE WORD MANAGERIAL AND CONSULTANCY BETWEEN WHICH IT IS SANDWICHED. THE COURTS HAVE HELD THAT IN SUCH A CAS E PRINCIPLE OF NOSCITUR A SOCIIS GETS ATTRACTED, WHICH MEANS THAT THE MEANING OF THE WORD OR EXPRESSION IS TO BE GATHERED FROM THE S URROUNDING WORD I.E. FROM THE CONTEXT. COUPLING OF THE WORDS TOGETH ER SHOWS THAT THEY ARE TO BE UNDERSTOOD IN THE SAME SENSE. THE WO RD MANAGERIAL AND CONSULTANCY IS A DEFINITE INDICATIVE OF THE IN VOLVEMENT OF A HUMAN ELEMENT. MANAGERIAL SERVICES AND CONSULTANCY SERVICES HAS TO BE GIVEN BY HUMAN ONLY AND NOT BY ANY MEANS OR E QUIPMENT. THEREFORE, THE WORD TECHNICAL HAS TO BE CONSTRUED IN THE SAME SENSE INVOLVING DIRECT HUMAN INVOLVEMENT WITHOUT TH AT, TECHNICAL SERVICES CANNOT BE HELD TO BE MADE AVAILABLE. WHERE SIMPLY AN EQUIPMENT OR SOPHISTICATED MACHINE OR STANDARD FACI LITY IS PROVIDED ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 13 OF 20 ALBEIT DEVELOPED OR MANUFACTURED WITH THE USAGE OF TECHNOLOGY, SUCH A USER CANNOT BE CHARACTERIZED AS PROVIDING TE CHNICAL SERVICES. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARATI CELLULAR LTD (SUPRA) IN THIS REGARD HAS OBSERVED AND HELD AS UNDER: 13. IN THE SAID EXPLANATION THE EXPRESSION ' FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION FOR RENDERING OF ANY ' MANAGERIAL, TECHNICAL OR CONSULT ANCY SERVICES' . THE WORD ' TECHNICAL' IS PRECEDED BY T HE WORD ' MANAGERIAL' AND SUCCEEDED BY THE WORD ' CONSULTANCY' . SINCE THE EXPRESSION ' TECHNICAL SER VICES' IS IN DOUBT AND IS UNCLEAR, THE RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICABLE. THE SAID RULE IS EXPLAINED IN MAXWELL ON THE INTERPRETATION OF STATUTES (TWELFTH EDITION) IN THE FOLLOWING WORDS (PAGE 289) : ' WHERE TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE OF ANALOGOUS MEANING ARE COUPLED TOGETHER, NOSICUTUR A SOCIIS, THEY ARE UNDERSTOOD TO BE USED IN THEIR COG NATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOUR FROM EAC H OTHER, THE MEANING OF THE MORE GENERAL BEING RESTRI CTED TO A SENSE ANALOGOUS TO THAT OF THE LESS GENERAL.' THIS WOULD MEAN THAT THE WORD ' TECHNICAL' WOULD T AKE COLOUR FROM THE WORDS ' MANAGERIAL' AND ' CONSULTA NCY' , BETWEEN WHICH IT IS SANDWICHED. THE WORD ' MANAGERI AL' HAS BEEN DEFINED IN THE SHORTER OXFORD ENGLISH DICTIONARY, FIFTH EDITION AS : ' OF PERTAINING TO, OR CHARACTERISTIC OF A MANAGER, ESP. A PROFESSIONAL MANAGER OF OR WITHIN AN ORGANIZATION, BUSINESS, ESTABLISHMENT, ETC.' THE WORD 'MANAGER' HAS BEEN DEFINED, INTER ALIA, AS : ' A PERSON WHOSE OFFICE IT IS TO MANAGE AN ORGANIZA TION, BUSINESS ESTABLISHMENT, OR PUBLIC INSTITUTION, OR P ART OF ONE ;A PERSON WITH THE PRIMARILY EXECUTIVE OR SUPER VISORY FUNCTION WITHIN AN ORGANIZATION, ETC., A PERSON CON TROLLING THE ACTIVITIES OF A PERSON OR TEAM IN SPORTS, ENTERTAINMENT, ETC.' ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 14 OF 20 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 DEFINIT E HUMAN 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 CONSULTANTS. 'CONSULTAN T' ITSELF HAS BEEN DEFINED, INTER ALIA, 'AS A PERSON W HO GIVES PROFESSIONAL ADVICE OR SERVICES IN A SPECIALI ZED FIELD'. IT IS OBVIOUS THAT THE WORD 'CONSULTANT' IS A DERIVATIVE OF THE WORD 'CONSULT' WHICH ENTAILS DELIBERATIONS, CONSIDERATION, CONFERRING WITH SOMEO NE, 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 O F CONSULTANCY ALSO NECESSARILY ENTAILS HUMAN INTERVEN TION. THE CONSULTANT, WHO PROVIDES THE CONSULTANCY SERVIC E, HAS TO BE A HUMAN BEING. A MACHINE CANNOT BE REGARD ED AS A CONSULTANT. 15. FROM THE ABOVE DISCUSSION, IT IS APPARENT THAT BOTH THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' INVOLVE A HUMAN ELEMENT. AND, BOTH, MANAGERIAL SERVICE AND CONSULTANCY SERVICE, ARE PROVIDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCII S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLANATION 2 TO S ECTION 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLV ING A HUMAN ELEMENT. BUT, THE FACILITY PROVIDED BY MTNL/OTHER COMPANIES FOR INTERCONNECTION/PORT ACCES S IS ONE WHICH IS PROVIDED AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROVIDED BY THE USE OF TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES N OT MEAN THAT MTNL/OTHER COMPANIES WHICH PROVIDE SUCH FACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS CONTEMPLATED IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE SAID ACT. THIS IS SO BECAUSE THE EXPRESSION ' TECHN ICAL SERVICES' TAKES COLOUR FROM THE EXPRESSIONS ' MANA GERIAL SERVICES' AND ' CONSULTANCY SERVICES' WHICH NECES SARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOW A DAYS FASHIONABLY CALLED, HUMAN INTERFACE ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 15 OF 20 THIS PRINCIPLE HAS BEEN REITERATED SEVERAL TIMES BY VARIOUS COURTS AND THE TRIBUNALS AS HAVE BEEN HIGHLIGHTED BY THE L EARNED COUNSEL DURING THE COURSE OF HEARING. THUS, ONE HAS TO SEE WHETHER ANY KIND OF HUMAN INTERFACE OR HUMAN INVOLVEMENT IS THE RE FOR PROVIDING TECHNICAL SERVICES BY THE PTL IN THIS CAS E. 14. NOW COMING TO THE FACTS OF THE PRESENT CASE, WHETHE R STANDARD SERVICE PROVIDED AT THE LABORATORY OF PTL FOR THE PURPOSE OF TESTING THE EQUIPMENTS IS DONE AUTOMATICALLY BY THE MACHINES OR PURELY BY HUMAN INTERVENTION. ASSESSEE BEFORE THE A O AFTER DRAWING HIS ATTENTION TO THE FLYER RECEIVED FROM THE PTL HA D CATEGORICALLY POINTED OUT THAT THE STANDARD SERVICE PROVIDED BY T HE PTL IS WITHOUT ANY HUMAN INTERVENTION. THIS FACTOR HAS NOT BEEN DI SPUTED BY HIM. EVEN BEFORE THE CIT (A), THIS CONTENTION HAS BEEN D EPOSED AGAIN BY THE ASSESSEE WHICH HAS BEEN NOTED BY HIM IN PARA 3. 4 AND AGAIN IN HIS FINDINGS IN PARA 3.7. NONE OF THE AUTHORITIES H AVE EITHER REBUTTED THIS CONTENTION OF ASSESSEE, OR HAS GIVEN ANY ADVER SE REMARK OR FINDINGS THAT THERE WAS ANY HUMAN INTERVENTION IN T HE PROCESS. THE LEARNED CIT (A) AS WELL AS AO HAVE GONE MERELY BY T HE FACT THAT SUCH A TYPE TESTING SERVICES PROVIDED BY THE PTL IS HIGH LY SOPHISTICATED AND TECHNICAL, AND IT CANNOT BE CONSIDERED AS NON T ECHNICAL. THEREFORE, BEING HIGHLY TECHNICAL IN NATURE, IT AMO UNTS TO RENDERING OF TECHNICAL SERVICES. FROM THE PERUSAL OF THE FLYE R AS SUBMITTED BY THE LEARNED COUNSEL, IT IS SEEN THAT IT DESCRIBES V ARIOUS STAGES OF TESTS WHICH HAVE TO BE CARRIED OUT FOR TESTING THE CIRCUIT BREAKERS IN VARIOUS SOPHISTICATED MACHINES. SUCH TESTS INCLUDE SWITCHING CAPACITY AND SHORT CIRCUIT CURRENT CARRYING CAPACIT Y, DIELECTRIC TEST, TEMPERATURE RISE TESTS, MAGNETIC TESTS, CLIMATIC TE STS AND OTHER KIND OF TESTS. THESE TESTS ARE CARRIED OUT IN A LAB BY T HE AUTOMATIC MACHINES THOUGH UNDER OBSERVATIONS OF TECHNICAL EXP ERTS. ONCE THESE TESTS ARE DONE SUCCESSFULLY BY THE MACHINES, A CERTIFICATE IS ISSUED BY THE AUTHORITIES OF THE PTL. THE LEARNED C IT (DR) HAD ARGUED THAT FOR OBSERVING THE PROCESS, PREPARING TH E REPORT, ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 16 OF 20 ISSUANCE OF CERTIFICATE AND FOR MONITORING OF MACHI NES, HUMAN INVOLVEMENT IS DEFINITELY THERE, THEREFORE, IT CANN OT BE HELD THAT THERE IS NO HUMAN INTERVENTION. IN OUR OPINION, THI S CANNOT BE THE CRITERIA FOR UNDERSTANDING THE TERM TECHNICAL SERV ICES AS CONTEMPLATED IN EXPLANATION 2 TO SECTION 9(1)(VII). IF ANY PERSON DELIVERS ANY TECHNICAL SKILLS OR SERVICES OR MAKE A VAILABLE ANY SUCH SERVICES THROUGH AID OF ANY MACHINE, EQUIPMENT OR A NY KIND OF TECHNOLOGY, THEN SUCH A RENDERING OF SERVICES CAN B E INFERRED AS TECHNICAL SERVICES. IN SUCH A SITUATION THERE IS A CONSTANT HUMAN ENDEAVOUR AND THE INVOLVEMENT OF THE HUMAN INTERFAC E. ON THE CONTRARY, IF ANY TECHNOLOGY OR MACHINE DEVELOPED BY HUMAN AND PUT TO OPERATION AUTOMATICALLY, WHEREIN IT OPERATES WIT HOUT ANY MUCH OF HUMAN INTERFACE OR INTERVENTION, THEN USAGE OF SUCH TECHNOLOGY CANNOT PER SE BE HELD AS RENDERING OF TECHNICAL SE RVICES BY HUMAN SKILLS. IT IS OBVIOUS THAT IN SUCH A SITUATION SOME HUMAN INVOLVEMENT COULD BE THERE BUT IT IS NOT A CONSTANT ENDEAVOUR OF THE HUMAN IN THE PROCESS. MERELY BECAUSE CERTIFICATES H AVE BEEN PROVIDED BY THE HUMANS AFTER A TEST IS CARRIED OUT IN A LABORATORY AUTOMATICALLY BY THE MACHINES, IT CANNOT BE HELD TH AT SERVICES HAVE BEEN PROVIDED THROUGH THE HUMAN SKILLS. THEREFORE, THE CONTENTION RAISED BY THE LEARNED CIT (DR) DOES NOT APPEAL MUCH TO US. 15. THE HON'BLE JUDGE IN THE CASE OF SKYCELLS COMMUNICA TIONS LTD (SUPRA) WHILE INTERPRETING THE WORD FEES FOR T ECHNICAL SERVICES AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII) HA S MADE A VERY IMPORTANT OBSERVATION: 5. IN THE MODERN DAY WORLD, ALMOST EVERY FACET OF ONES LIFE IS LINKED TO SCIENCE AND TECHNOLOGY IN AS MUCH AS NUMEROUS THINGS USED OR RELIED UPON IN EVERY DAY LI FE IS THE RESULT OF SCIENTIFIC AND TECHNOLOGICAL DEVELOPM ENT. EVERY INSTRUMENT OR GADGET THAT IS USED TO MAKE LIF E EASIER IS THE RESULT OF SCIENTIFIC INVENTION OR DEV ELOPMENT AND INVOLVES THE USE OF TECHNOLOGY. ON THAT SCORE, EVERY PROVIDER OF EVERY INSTRUMENT OR FACILITY USED BY A PERSON CANNOT BE REGARDED AS PROVIDING TECHNICAL SERVICE. ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 17 OF 20 WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE T O ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOG Y, VIZ., AN AUTOMOBILE. IT CANNOT ON THAT GROUND BE SA ID THAT THE TAXI DRIVER WHO CONTROLS THE VEHICLE, AND MONIT ORS ITS MOVEMENT IS RENDERING A TECHNICAL SERVICE TO THE PE RSON WHO USES THE AUTOMOBILE. SIMILARLY, WHEN A PERSON TRAVELS BY TRAIN OR IN AN AEROPLANE, IT CANNOT BE SAID THAT THE RAILWAYS OR AIRLINES IS RENDERING A TECHNICAL S ERVICE TO THE PASSENGER AND, THEREFORE, THE PASSENGER IS UNDE R AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE RAILWAY OR THE AIRLINE FOR HAVING USED IT F OR TRAVELLING FROM ONE DESTINATION TO ANOTHER. WHEN A PERSON TRAVELS BY BUS, IT CANNOT BE SAID THAT THE UNDERTAK ING WHICH OWNS THE BUS SERVICE IS RENDERING TECHNICAL S ERVICE TO THE PASSENGER AND, THEREFORE, THE PASSENGER MUST DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE BUS SERVICE PROVIDER, FOR HAVING USED THE BUS. THE ELEC TRICITY SUPPLIED TO A CONSUMER CANNOT, ON THE GROUND THAT GENERATORS ARE USED TO GENERATE ELECTRICITY, TRANS MISSION LINES TO CARRY THE POWER, TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METERS TO MEASURE THE CONSUMPTION, BE REGARDED AS AMOUNTING TO PROVISION OF TECHNICAL SE RVICES TO THE CONSUMER RESULTING IN THE CONSUMER HAVING T O DEDUCT TAX AT SOURCE ON THE PAYMENT MADE FOR THE P OWER CONSUMED AND REMIT THE SAME TO THE REVENUE. SATELLITE TELEVISION HAS BECOME UBIQUITOUS, AND IS SPREADING ITS AREA AND COVERAGE, AND COVERS MILLION S OF HOMES. WHEN A PERSON RECEIVES SUCH TRANSMISSION OF TELEVISION SIGNALS THROUGH THE CABLE PROVIDED BY TH E CABLE OPERATOR, IT CANNOT BE SAID THAT THE HOME OWNER WHO HAS SUCH A CABLE CONNECTION IS RECEIVING A TECHNICAL SE RVICE FOR WHICH HE IS REQUIRED TO DEDUCT TAX AT SOURCE ON TH E PAYMENTS MADE TO THE CABLE OPERATOR. INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPME NTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS T O AVAIL OF THE BENEFIT OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT IN THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. 6. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULA R TELEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNICATE WITH OTHERS, HE DOES NOT CONTRA CT TO RECEIVE A TECHNICAL SERVICE. WHAT HE DOES AGREE TO IS TO PAY FOR THE USE OF THE AIRTIME FOR WHICH HE PAYS A CHARGE. THE FACT THAT THE TELEPHONE SERVICE PROVIDER HAS I NSTALLED ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 18 OF 20 SOPHISTICATED TECHNICAL EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOES NOT ON THAT SCORE, MAKE IT PROVISION OF A TECHNICAL SERVICE TO THE SUBSCRIBER. THE SUBSCRIBER IS NOT CONCERNED WITH TH E COMPLEXITY OF THE EQUIPMENT INSTALLED IN THE EXCHAN GE, OR THE LOCATION OF THE BASE STATION. ALL THAT HE WANTS IS THE FACILITY OF USING THE TELEPHONE WHEN HE WISHES TO, AND BEING ABLE TO GET CONNECTED TO THE PERSON AT THE NU MBER TO WHICH HE DESIRES TO BE CONNECTED. WHAT APPLIES TO C ELLULAR MOBILE TELEPHONE IS ALSO APPLICABLE IN FIXED TELEPH ONE SERVICE. NEITHER SERVICE CAN BE REGARDED AS TECHNI CAL SER- VICE FOR THE PURPOSE OF SECTION 194J OF THE ACT. 7. THE USE OF THE INTERNET AND THE WORLD WIDE WEB I S INCREASING BY LEAPS AND BOUNDS, AND THERE ARE HUNDR EDS OF THOUSANDS, IF NOT MILLIONS, OF SUBSCRIBERS TO TH AT FACILITY. THE INTERNET IS VERY MUCH A PRODUCT OF TE CHNOLOGY, AND WITHOUT THE SOPHISTICATED EQUIPMENT INSTALLED B Y THE INTERNET SERVICE PROVIDERS AND THE USE OF THE TELE PHONE FIXED OR MOBILE THROUGH WHICH THE CONNECTION IS ESTABLISHED, THE SERVICE CANNOT BE PROVIDED. HOWEVE R, ON THAT SCORE, EVERY SUBSCRIBER OF THE INTERNET SERVIC E PROVIDER CANNOT BE REGARDED AS HAVING ENTERED INTO A CONTRACT FOR AVAILING OF TECHNICAL SER- VICES FROM THE PROVIDER OF THE INTERNET SERVICE, AND SUCH SUBSCRIB ER REGARDED AS BEING OBLIGED TO DEDUCT TAX AT SOURCE O N THE PAYMENT MADE TO THE INTERNET SERVICE PROVIDER. THUS IF A STANDARD FACILITY IS PROVIDED THROUGH A U SAGE OF MACHINE OR TECHNOLOGY, IT CANNOT BE TERMED AS RENDERING OF TECHNICAL SERVICES. ONCE IN THIS CASE IT HAS NOT BEEN DISPUTE D THAT THERE IS NOT MUCH OF THE HUMAN INVOLVEMENT FOR CARRYING OUT THE TESTS OF CIRCUIT BREAKERS IN THE LABORATORY AND IT IS MOSTLY DONE BY MACHINES AND IS A STANDARD FACILITY, IT CANNOT BE HELD THAT PEHL A TESTING LABORATORY IS RENDERING ANY KIND OF TECHNICAL SERVI CES TO ASSESSEE. IN OUR CONCLUSION, WE THUS HOLD THAT PAYMENT MADE B Y ASSESSEE TO THE PTL IN GERMANY IS NOT IN CONSIDERATION FOR REND ERING OF ANY KIND OF TECHNICAL SERVICES EITHER IN THE NATURE O F MANAGERIAL OR TECHNICAL OR CONSULTANCY SERVICES. THEREFORE, IT DO ES NOT FALL WITHIN THE AMBIT OF SECTION 9(1)(VII). ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 19 OF 20 16. THE LEARNED CIT (DR) HAS RELIED UPON THE DECISION O F THE DELHI HIGH COURT IN THE CASE OF HAVELLS INDIA LTD (SUPRA) WHEREIN THE ISSUE WAS WITH REGARD TO THE DISALLOWANCES UNDER SE CTION 40(A)(IA). IN THIS CASE IT WAS CATEGORICALLY ADMITTED BY THE L EARNED COUNSEL ON BEHALF OF ASSESSEE THAT HE HAS NOT DISPUTED THAT TH E PAYMENT MADE WAS WITHIN THE PURVIEW OF FEES FOR TECHNICAL SERVIC ES. THIS ASPECT OF THE MATTER WAS THUS NOT DISPUTED. THEREFORE, THE HO N'BLE HIGH COURT HAS NOT DEALT WITH THIS ISSUE AT ALL. EVEN IN THE OTHER CASES AS RELIED UPON BY THE LEARNED CIT (DR) THE ISSUE MOSTL Y REVOLVED AROUND WHETHER THE INCOME WERE ACCRUING IN INDIA OR NOT. NONE OF THE JUDGMENTS RELIED UPON ARE DIRECTLY ON THE POINT WHETHER THE TECHNICAL SERVICES HAS BEEN PROVIDED THROUGH HUMAN INTERVENTION OR NOT. 17. LASTLY COMING TO THE LEARNED DRS CONTENTIONS THAT THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF BHARATI CELLULAR LTD (SUPRA) HAS BEEN SET ASIDE BY THE HON' BLE SUPREME COURT, IT IS HOWEVER, SEEN THAT THE HON'BLE SUPREME COURT HAS SET ASIDE THE MATTER TO THE ASSESSING OFFICER WITH REGA RD TO EXAMINATION AND TO ESTABLISH WHETHER TECHNICAL SERVICES PROVIDE D, INVOLVED ANY KIND OF HUMAN INTERVENTION OR NOT DURING THE PROCES S OF CALL COMMUNICATION. THE HON'BLE SUPREME COURT HAS NOT RE VERSED OR ADVERSELY COMMENTED ON THE PROVISIONS OR PRINCIPLES OF LAW DISCUSSED BY THE HON'BLE DELHI HIGH COURT. IT WAS O N THE FACT OF THE CASE THAT THE MATTER WAS SET ASIDE TO EXAMINE THE N ATURE OF THE TECHNICAL SERVICES AND TO EXAMINE THE INVOLVEMENT O F THE HUMAN IN THE PROCESS. 18. IN OUR FINAL CONCLUSION WE HOLD THAT THE LEARNED C IT (A) WAS NOT CORRECT IN HOLDING THAT THE PAYMENT MADE BY ASS ESSEE TO PEHLA TESTING LAB WAS IN ANY MANNER IN THE NATURE OF FEE S FOR TECHNICAL SERVICES WITHIN THE AMBIT OF SECTION 9(1)(VII) REA D WITH EXPLANATION 2 AND ACCORDINGLY THERE WAS NO REQUIREMENT IN LAW T O DEDUCT TAX AT ITA NO.4356 OF 2010 SIEMENS LTD MUMBAI PAGE 20 OF 20 SERVICE ON SUCH PAYMENT. IN THE RESULT THIS ISSUE I S DECIDED IN THE FAVOUR OF THE ASSESSEE. 19. NOW COMING TO THE OTHER ISSUES IN THE GROUNDS RAISE D BY ASSESSEE, WE FIND THAT SAME HAVE BECOME PURELY ACAD EMIC IN VIEW OF OUR FINDINGS GIVEN ABOVE. THEREFORE, THE SAME ARE T REATED AS INFRUCTUOUS. TECHNICALLY SPEAKING THE APPEAL OF ASS ESSEE IS TREATED AS ALLOWED. 20. IN THE RESULT APPEAL FILED BY ASSESSEE IS AS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2013 SD/- SD/- (B. RAMAKOTAIAH) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12 TH FEBRUARY, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI