Kandla Port Trust, GANDHIDHAM V. The Deputy Commissioner of Income Tax, TDS Circle, RAJKOT-GUJARAT

ITA 451/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0207 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-09-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: RAMA SHANKAR SINGH
• Section: 133A; 194C; 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.451/RJT/2012. / ASSESSMENT YEAR 2009-10 KANDLA PORT TRUST, ADMN. OFFICE BUILDING, TAGORE ROAD, GANDHIDHAM, KUTCH-370201, PAN: AAALK0046N ( * / APPELLANT) VS. DY. COMMISSIONER OF INCOME TAX, TDS CIRCLE, RAJKOT. +,* / RESPONDENT -. / ASSESSEE BY S/SHRI RAMA SHANKAR SINGH & MUKUND BAKSHI . / REVENUE BY SHRI ANKUR GARG . / DATE OF HEARING 7.9.2012 . / DATE OF PRONOUNCEMENT 14.9.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 2.9.2011 OF CIT(A)-X X, AHMEDABAD FOR THE ASSESSMENT YEAR 2009-10.. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS IN THIS APPE AL WHICH ARE REPRODUCED BELOW: 1) LD.CIT(A) HAS ERRED IN FACTS AND IN LAW BY TREA TING THE ANNUAL MAINTENANCE CONTRACTS (AMC) WHICH IS OTHERWISE LI ABLE TO TDS U/S 194C AS CHARGEABLE UNDER TECHNICAL SERVICE U/S 19 4J. ON THE FACTS AND CIRCUMSTANCES OF CASE, THE AMC CONTRACTS ARE LIABLE TO TDS U/S 194C OF THE INCOME TAX ACT AND TDS CANNOT BE ONCE AGAIN RECOVERED WHERE THE PROPER TAX HAS BEEN PAID BY THE PAYEES ON SUCH INCOME. 2. LD.CIT(A) HAS ERRED IN FACTS AND IN LAW BY TREAT ING THE PILOTAGE CONTRACT WHICH IS OTHERWISE LIABLE TO TDS U/S 1 94C AS ITA NO.451/RJT/2012. 2 LIABLE UNDER TECHNICAL SERVICE U/S 194J. ON THE FACTS O F CASE, THE PILOTAGE CONTRACT IS LIABLE TO TDS U/S 194C OF THE INCO ME TAX ACT AND TDS CANNOT BE ONCE AGAIN RECOVERED WHERE THE PROPE R TAX HAS BEEN PAID BY THE PAYEE ON SUCH INCOME. 3. LD.CIT(A) HAS ERRED IN FACTS AND IN LAW BY TREA TING THE TAXI &TUG HIRE CHARGES WHICH IS OTHERWISE LIABLE TO TDS U/S 1 94C AS LIABLE UNDER RENT U/S 194(I) OF THE ACT. ON THE FACT S AND CIRCUMSTANCES OF CASE, SUCH PAYMENTS ARE LIABLE TO TDS U/ S 194C OF THE ACT AND TDS CANNOT BE ONCE AGAIN RECOVERED WHERE THE PROPER TAX HAS BEEN PAID BY THE PAYEE ON SUCH INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT TDS SURVEY U/S 133A WAS CARRIED OUT FROM 08-09-2008 TO 16-09-2008 AT THE PRE MISES OF THE ASSESSEE. THE ASSESSEE RUNS A PORT AT KANDLA. DURING THE CO URSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE HAS TAKEN ON RENT VARIOUS VEHICLES, LIKE CARS, JEEPS FROM TRAVEL AGENCIES. IT HAS ALSO HIRED A TUG BOAT, NAMED OCEAN SPARKLE ON DAILY BASIS. THE ASSESSEE USED TO MAKE TDS U/S 194C OF THE ACT FROM THE PAYMENT MADE TO TRAVEL A GENCY AND THE OWNER OF THE TUG BOAT. THE DEPARTMENT WAS OF THE VIE W THAT SUCH PAYMENTS COVERED UNDER THE PROVISIONS OF SECTION 194-I AS THE PAYMENTS MADE TO THEM ARE IN THE NATURE OF RENT. 4. IT WAS ALSO NOTICED THAT THE ASSESSEE HAS MADE PAYMENT S TO VARIOUS CONTRACTORS FOR ANNUAL MAINTENANCE AND HAS MADE T DS U/S 194C OF THE ACT. THE DEPARTMENT WAS OF THE VIEW THAT SUCH PA YMENTS COVERED UNDER PROVISIONS OF SECTION 194J AND NOT U/S 194C OF THE ACT, AS THEY ARE TECHNICAL FEES AND PROFESSIONAL FEES IN NATURE. IT HAS AL SO BEEN NOTICED THAT THE ASSESSEE HAS MADE PAYMENTS TO VARIOUS PILOTS, WHO ARE ENGAGED ON DAILY BASIS FOR BRINGING VESSELS IN AND OUT OF THE P ORT. ON THIS PAYMENT ALSO, THE ASSESSEE DEDUCTED TAX U/S 194C OF THE ACT. THE R EVENUE IS OF THE VIEW THAT SUCH PAYMENT IS COVERED U/S 194J OF THE ACT. ITA NO.451/RJT/2012. 3 5. THE ASSESSING OFFICER, AFTER CONSIDERING ASSESSEES SUBMISSION RECALCULATED THE TDS LIABILITY U/S 194J AND 194-I AS PER PAGES 9 & 10 OF THE ORDER OF THE DY.CIT, TDS CIRCLE, RAJKOT. THE DY.C IT, TDS CIRCLE CALCULATED THE LIABILITY U/S 194J AND U/S 194-I FOR ASSESS MENT YEAR UNDER APPEAL. 6. THE LD. CIT(A) VIDE ORDER DATED 2.9.2011 FOLLOWI NG HIS EARLIER ORDER DATED 2.3.2010 FOR THE AYS 2008-09 AND 2007-08 HAS D ISMISSED THE APPEAL FOR THE PRESENT YEAR AS UNDER : I READ THE SAID CIRCULAR OF CBDT WHICH DECLARES THAT NO DEMAND VISUALIZED U/S 201 OF THE IT ACT SHOULD BE ENFORCED AFTE R THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVER, T HIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE ASSESSEE OR TH E LIABILITY FOR PENALTY U/S 271C OF THE ACT. IN THE INSTANT CAS E, THE APPELLANT (TAX DEDUCTOR) EITHER BEFORE THE AO, OR BEFORE ME DI D NOT BRING ANY SATISFACTORY DOCUMENTARY EVIDENCES TO PROVE THAT TAXES DU E WERE PAID BY THE DEDUCTEE-ASSESSEES. IN VIEW OF THIS I HAVE NO OTHER GO, EXCEPT CONFIRMING THE DEMAND RAISED BY THE AO U/S 201(1) & 201(1A) OF THE IT ACT 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) IS IN AP PEAL BEFORE US. 8. AT THE OUT SET, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED BEFORE US THAT THE ISSUES RAISED IN THIS APPEAL ARE ALSO OUTCOME O F THE TDS SURVEY U/S 133A CARRIED OUT FROM 08-09-2008 TO 16-09-2008 AT THE PREMISES OF THE ASSESSEE. HE CONTENDED THAT THE IDENTICAL ISSUES FOR THE SAME TDS SURVEY U/S 133A FOR THE ASSESSMENT YEARS 2008-09 AND 2007 -08 HAD COME BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN KANDLA PORT TRUST V/S DCIT IN ITA NO.771 AND 924/RJT/2010 (AYS-2008-09 & 2007-08) DATED 11.11.2011 AND THE TRIBUNAL DECIDED THE APPEALS IN FA VOUR OF THE ASSESSEE AND HENCE THE ISSUES RAISED IN THIS APPEAL STAND COVE RED BY THE ITA NO.451/RJT/2012. 4 AFORE SAID DECISION. AS AGAINST THIS THE LD. DR COULD NO T POINT OUT ANYTHING TO TAKE DIFFERENT VIEW THAN THE VIEW SO TAKEN BY THE TRIBUNAL EARLIER. 9. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE TR IBUNAL HAS DECIDED THESE ISSUES IN ASSESSEES OWN CASE (SUPRA) FOR THE ASSESSMENT YEARS 2008-09 AND 2007-08, THE RELEVANT PORTION OF THE SAI D ORDER IS REPRODUCED BELOW: 14. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PART IES, RECORD PERUSED AND GONE HAVE THROUGH THE DECISIONS CITED. THE I SSUE UNDER CONSIDERATION IS WHETHER ANNUAL MAINTENANCE CONTACT , PILOTAGE CONTRACT AND VEHICLE HIRE CONTRACTS COVER UNDER SECTION 194C OR U/S 194J AND 194-I OF THE ACT. THE ASSESSEE DEDUCT ED TAX AT SOURCE UNDER SECTION 194C. THE REVENUE IS OF THE VI EW THAT ANNUAL MAINTENANCE CONTRACT AND PILOTAGE CONTRACT ARE IN THE NATURE OF TECHNICAL SERVICES, THEREFORE, FALLS UNDER SECTION 194J A ND VEHICLE CONTRACT IS RENT CONTRACT THEREFORE SECTION 194I IS APPLICA BLE. TO EXAMINE THIS ISSUE FIRST OF ALL WE SEE WHAT ARE THE ACTI VITIES OF THE ASSESSEE, AMC & PILOTAGE CONTRACT. THE ASSESSEE IS RUNNING A PORT AND IN ORDER TO CARRY ON THE OPERATIONS MACHINERIES SUCH AS HEAVY CRANES, WEIGH BRIDGE, ELEVATOR, EPBX SYSTEMS ARE INSTALL ED. THE ASSESSEE AWARDED SOME CONTRACTS FOR REPAIRS AND MAINTENANC E OF THESE MACHINERIES. SECTION 194C PROVIDES THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY CONTRACTOR FOR CARR YING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT AN Y WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECI FIED PERSON SHALL, AT THE ITEM OF CREDIT OF SUCH SUM TO THE A CCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EAR LIER, DEDUCT AN AMOUNT ONE PER CENT OF THE PAYMENT AS APPLICABLE OF SUCH SUM AS INCOME-TAX. THE APEX COURT IN THE CASE OF ASSOCIATED C EMENT COMPANY LTD VS CIT 201 ITR 435 (SC) HELD THAT ANY W ORK MEANS ANY WORK AND NOT A WORK CONTRACT WHICH HAS A SPECIAL CONN OTATION IN THE LIP LAW. INDEED, IN THE SUB-SECTION, THE WORK REFERRED TO THEREIN EXPRESSLY INCLUDES SUPPLY & LABOUR TO CARRY OUT A WORK. WORK ENVISAGED IN THE SUBSECTION, THEREFORE, HAS A WID E IMPORT AND COVERS ANY WORK WHICH ONE OR THE OTHER OF THE OR GANIZATIONS SPECIFIED IN THE SUB SECTION CAN GET CARRIED OUT THROUGH A CONTRACTOR UNDER A CONTRACT AND FURTHER INCLUDES OBTAINING BY ANY OF SUCH ORGANIZATIONS. SUPPLY OF LABOUR UNDER CONTRACT WITH A CONTRACTOR FOR CARRYING OUT ITS WORK WHICH WOULD HAVE FALLEN OUTSIDE W ORK BUT FOR SPECIFIC INCLUSION IN THE SUB SECTION. 15. NOW LET US SEE WHAT IS THE MEANING OF FEE FOR TE CHNICAL SERVICES. THE MEANING OF FEE FOR TECHNICAL SERVICES PROVIDED IN EXP LANATION (2) OF SECTION 9(1)(VII) READS AS UNDER: ITA NO.451/RJT/2012. 5 EXPLANATION (2) FOR THE PURPOSES OF THIS CLAUSE, FEE S FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL , TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOPES NOT INCLUDE CONSI DERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UND ERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. FROM THE ABOVE DISCUSSION WE FIND THAT FEE FOR TECHNI CAL SERVICES INCLUDES PAYMENT OF CONSIDERATION FOR RENDERING OF FOLLOWING SE RVICES: (A) MANAGERIAL, (B) TECHNICAL OR CONSULTANCY SERVICES (C) PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL . 16. FEE FOR TECHNICAL SERVICES DOES NOT INCLUDES FOLLOWI NG CONSIDERATION - (I) CONSTRUCTION (II) ASSEMBLY (III) MINING OR LIKE PROJECT 17. A PERUSAL OF ANNUAL MAINTENANCE CONTRACT BETWEEN A SSESSEE AND M/S MCNALLY BHARAT ENGINEERING COMPANY LTD, OTIS ELEVATORS, WE NOTICE THAT THE AM CONTRACTOR SHALL CARRY OUT ALL REP AIRS AS PER DETAILED DESCRIPTION IN THE AGREEMENTS. FROM THESE AGR EEMENTS WE DID NOT FIND THAT THESE CONTRACTS WERE IN RESPECT OF MAN AGERIAL OR TECHNICAL OR CONSULTANCY SERVICES. THUS, IT IS CLEAR THAT TH ESE AGREEMENTS WERE RELATED TO ANNUAL MAINTENANCE OF MACH INERIES AND NOT FOR TECHNICAL SERVICES. THE REVENUE IN VIEW OF THE FACT THAT THE CONTRACTORS HAVE UTILIZED SERVICES OF TECHNICAL PERSONS PRESUMED THAT THE ASSESSEE MADE PAYMENTS FOR TECHNICAL SER VICES. FOR THIS PRESUMPTION WE DO NOT AGREE WITH THE REVENU E. IT MAY BE TECHNICAL SERVICES FOR CONTRACTOR BUT NOT FOR THE ASSESSEE. THE CASE OF ASSESSEE IS SIMPLY A CASE OF ANNUAL MAINTENANCE OF MACHIN ERIES FOR SECTION 194J IS NOT APPLICABLE, WE THEREFORE HOLD ACCO RDINGLY. 18. AS REGARDS PILOTAGE PAYMENTS, ON PERUSAL OF RELEVAN T AGREEMENT WE NOTICE THAT THE ASSESSEE HAS ENGAGED PILOTS ON CONTRACT BASIS FOR KANDLA PILOTAGE OPERATION ON PERIODI CAL BASIS. IT IS PROVIDED IN THE CONTRACT AGREEMENT THAT CONTRACT PILO TS WILL BE TREATED AS AN EMPLOYEE OF KANDLA PORT TRUST FROM TIME TO TIME. HE GOES TO THE SHIP OR LEVY LEAVE THE JETTY FOR PILOTAGE WORK. TILL HE RETURNS TO THE JETTY, AFTER COMPLETION OF PILOTAGE OP ERATION FOR THE PURPOSE OF TAKING RESPONSIBILITY FOR INJURIES SUSTAINED BY HIM DURING THE COURSE OF PILOTAGE OPERATION. THE PILOTS ENGAGED FOR KANDLA, VADINAR WILL BE AVAILABLE FOR PILOTAGE JOB AT EITHE R PLACE IN EXIGENCIES. THE PAYMENT IS PROVIDED TO BE MADE FOR DAY S. HE IS ITA NO.451/RJT/2012. 6 AVAILABLE FOR PILOTAGE OPERATION. THE OTHER CONDITIO N IN THE AGREEMENT ARE IN RESPECT OF ENGAGEMENT OF INITIAL PER IOD, TERMINATION OF THE CONTRACT BY GIVING ONE MONTH NOTI CE, ACCOMMODATION, MEDICAL FACILITIES, ETC. ON CONSIDERATION OF THE TERMS AND CONDITION OF THE AGREEMENT AND ABOVE DEFINI TION OF TECHNICAL SERVICES WE FIND THAT THE PAYMENT TO PILOTS IS IN THE NATURE OF SALARY AS THEIR CONTRACTS AGREEMENT WERE NOT FOR M ANAGERIAL AND TECHNICAL OR CONSULTANCY SERVICES. WE, THEREFORE, ARE OF T HE VIEW THAT THE PAYMENT MADE TO PILOTS IS NOT COVERED BY SECTI ON 194J OF THE ACT. WE HOLD ACCORDINGLY. 19. EVEN OTHERWISE ALSO THE ALTERNATIVE CONTENTION OF THE ASSESSEE IS ACCEPTABLE IN THE LIGHT OF THE LAW LAID DOWN BY THE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT LTD VS CIT WHEREIN IT HAS BEEN HELD THAT IF PAYEE HAS ALREADY PAID TAX D UE ON THE PAYMENT RECEIVED BY HIM FROM THE ASSESSEE, THE TAX COULD NOT BE RECOVERED ONCE AGAIN FROM THE DEDUCTOR. THE ASSESSEE HAS FURNISHED THE LIST OF SUCH PILOTS ALONG WITH THEIR PAN. 20. NOW COMING TO THE NEXT ISSUE WHETHER UNDER THE FAC TS AND CIRCUMSTANCES, THE PAYMENT MADE BY THE ASSESSEE FOR VEHICLE HIRE IS COVERED AS RENT AS PROVIDED IN SECTION 194I OF THE A CT. SECTION 194I PROVIDES THAT ANY PERSON NOT BEING ANY INDIVIDUA L OR HUF WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WA Y OF RENT SHALL AT THE ITEM OF CREDIT FOR SUCH INCOME TO THE ACCO UNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EAR LIER, DEDUCT INCOME-TAX THEREON AT THE PRESCRIBED RATE. EXPLANATIO N (I) TO SECTION 194-I DEFINES RENT AS PAYMENT FOR LAND OR B UILDING INCLUDING FACTORY BUILDING OR LAND APPURTENANT TO THE BUILDING INCLUDING THE FACTORY BUILDING OR MACHINERY OR PLANT O R EQUIPMENT OR FURNITURE OR FITTINGS WHETHER OR NOT ANY OR WHOLE OF THE ABOVE ARE OWNED BY THE PAYEE. IN THE CASE UNDER CONSIDERATION. T HE ASSESSEE ENTERED INTO AGREEMENT WITH THAKKAR TRAVELS FOR HIRING OF VEHICLES, TATA INDO, DIESEL TATA SUMO, TATA QUALIS, HON DA CITY AND MARUTI, ETC. IN THE SAID AGREEMENT IT IS PROVIDED TH AT THE RATES AT WHICH THE PAYMENTS WILL BE MADE FOR NORMAL RUNNING OF 12 HOURS FROM TIME OF REPORTING AND FOR DEPLOYMENT BEYOND 12 HOURS. IN THE AGREEMENT NOWHERE IT IS STATED THAT THE POSSESSION OF TH E VEHICLES WERE GIVEN TO THE ASSESSEE. THE ITAT, MUMBAI BENCH IN T HE CASE OF VODAFONE ESSAR LTD VS DCIT 135 TTJ (MUM)385 WHILE DEALING WITH SECTION 194I HELD THAT MERELY MAKING USE OF THE F ACILITY WITHOUT HIMSELF USING THE EQUIPMENT AND WITHOUT TAKING POSSESSION THE PAYMENT CANNOT BE SAID TO BE A RENT. THE RELEVANT FI NDING OF THE ITAT ARE REPRODUCED BELOW: 14. WE MAY NOW REFER TO A FEW AUTHORITIES CITED BY BOTH THE SIDES. FROM THE ASSESSEES SIDE REFERENCE WAS MADE TO THE DECISION OF THE AAR IN DELL INTERNATIONAL SERVICES INDI A (P) LTD, IN RE (2008) 218 CTR (AAR) 209 : (2008) 305 IT R 37 (AAR). THIS DECISION SEEMS TO SUGGEST THAT THE USER OF ANY ITA NO.451/RJT/2012. 7 EQUIPMENT SHOULD HAVE SOME RIGHT OVER THE EQUIPMENT A ND FURTHER THAT THERE SHOULD BE SOME DEDUCTED MACHINERY O R EQUIPMENT INSTEAD OF A COMMON INFRASTRUCTURE WHICH CAN BE USED BY VARIOUS OPERATORS TO PROVIDE SERVICES. IT WAS ALSO OBSERVED FURTHER THAT THERE SHOULD BE SOME DEDICATED MACHINERY OR EQUIPMENT INSTEAD OF A COMMON INFRASTRUCT URE WHICH CAN BE USED BY VARIOUS OPERATORS TO PROVIDE SERVICES. IT WAS ALSO OBSERVED THAT THERE SHOULD BE A RIGHT TO EX CLUSIVE POSSESSION OR CUSTODY OF THE EQUIPMENT AND ENJOYMENT THAT OVER A STIPULATED PERIOD OF TIME IN ORDER THAT A PAY MENT CAN BE SAID TO BE RENT. BUT THE MORE IMPORTANT OBSERVATIO N IN THIS ORDER IS AS TO THE MEANING AND IMPORT OF THE WORD USE IN RELATION TO ANY EQUIPMENT IS NOT TO BE UNDERSTOOD IN THE BROAD SENSE OF AVAILING OF THE BENEFIT OF AN EQUIPMEN T, BUT IT INDICATED THAT THERE MUST BE SOME POSITIVE ACT OF UTILIZ ATION, APPLICATION OR EMPLOYMENT OF THE EQUIPMENT FOR THE D ESIRED PURPOSE. IT WAS HELD THAT IF AN ADVANTAGE WAS TAKEN FR OM SOPHISTICATED EQUIPMENT INSTALLED AND PROVIDED BY ANOTH ER, IT COULD NOT BE SAID THAT THE CUSTOMER USED THE EQUIPMENT , IT WOULD BE A CASE OF A CUSTOMER MERELY MAKING USE OF THE FACILITY WITHOUT HIMSELF USING THE EQUIPMENT. IT WAS NECESSARY, ACCORDING TO THE DECISION THAT THE CUSTOMER CAME FACE TO FACE WITH THE EQUIPMENT, OPERATED IT OR CONTRO LLED ITS FUNCTIONS IN SOME MANNER. BUT IF THE CUSTOMER DID NOTHIN G TO OR WITH THE EQUIPMENT AND DID NOT EXERCISE ANY POSSESSOR Y RIGHTS IN RELATION THERETO, IT CAN ONLY BE SAID THAT H E MADE USE OF THE FACILITY CREATED BY THE SERVICE PROVIDER WHO WAS THE OWNER OF THE ENTIRE NETWORK AND RELATED EQUIPMEN T. IN THIS CASE THE AAR WAS DEALING WITH A PRIVATE COMPANY REGISTERED IN INDIA WHICH WAS MAINLY ENGAGED IN THE BUSINESS OF PROVIDING CALL CENTRE, DATA PROCESSING AND INFORMATION TECHNOLOGY SUPPORT SERVICES TO THE DELL GROU P OF COMPANIES. A NON-RESIDENT COMPANY KNOWN AS BT, WHICH WAS REGISTERED IN THE USA, PROVIDED THE ASSESSEE WITH TW O- WAY TRANSMISSION OF VOICE AND DATA THROUGH TELECOM BANDWIDTH. THE ASSESSEE HAD TO PAY FIXED MONTHLY RECURR ING CHARGES FOR THE CIRCUIT BETWEEN USA AND IRELAND AND IRE LAND TO INDIA NET OF INDIAN TAXES. THERE WAS NO EQUIPMENT OF BT IN THE ASSESSEES PREMISES AND THE ASSESSEE HAD NO RIGHT OVER ANY EQUIPMENT HELD BY BT FOR PROVIDING THE BANDWIDT H. THE FIBER LINK CABLES AND OTHER EQUIPMENT WERE USED FOR A LL CUSTOMERS OF BT INCLUDING THE ASSESSEE. THE BANDWIDTH WAS PROVIDED THROUGH A HUGE NETWORK OF OPTICAL FIBER CABLE S LAID UNDER SEAS ACROSS SEVERAL COUNTRIES OF WHICH BT USED ONLY A SMALL FRACTION. THE QUESTION AROSE AS TO THE NATURE OF T HE MONTHLY RECURRING CHARGES PAID BY THE ASSESSEE TO BT. THE DEPARTMENTS CASE WAS THAT THE PAYMENT FELL UNDER S.9(1 )(VI) OF THE IT ACT AND WAS TO BE TREATED AS ROYALTY. THE W ORD ROYALTY WAS DEFINED IN EXPLN.2 BELOW THE SECTION AND CL.(IVA) OF THE EXPLANATION STIPULATED THAT ANY CONSI DERATION FOR THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT WOULD BE CONSIDERED AS ROYALTY. THE ITA NO.451/RJT/2012. 8 QUESTION WHICH THE AAR WAS REQUIRED TO CONSIDER WAS WHETHER THE ASSESSEE COULD BE SAID TO HAVE PAID THE MONTHLY RECURRING CHARGES TO BT FOR THE USE OF ANY SUCH EQUIPMENT. THE CASE OF THE ASSESSEE BEFORE US IS PROBABLY STRONGER BECAUSE OF THE MORE STRINGENT LANGUAGE USED IN S.194-I EVEN IF THE RULE OF EJUSDEM GENERIC IS CONSIDERED RIGHTLY APPLICABLE. 10. IN VIEW OF THE ABOVE DISCUSSION, NO CONTRARY MATERI AL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTRADICT THE FI NDINGS OF THE TRIBUNAL AND RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE FIND THAT THE ASSESSEE HAS RIGHTLY DEDUCTED THE TDS ON PAYMENTS MADE IN RESPECT OF ALL THE THREE PAY MENTS CONTESTED BY THE ASSESSEE IN THIS APPEAL. 11. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. SD SD ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE : 14. 9.2012 /RAJKOT SRL . .. . +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-. 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , SENIOR PRIVATE SECRETARY , ITA NO.451/RJT/2012. 9 INCOME TAX APPELLATE TRIBUNAL, RAJKOT.