Glaxo Smith Kline Pharmaceuticals Ltd., Mumbai V. ITO(TDS)-1, Nashik

ITA 552/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56508 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Assessee Lawyers: KAMLESH CHAINANI
• Section: 133A; 194C; 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NOS. 552 TO 555/PN/2010 (ASSTT. YEAR: 2006-07 TO 2008-09) GLAXOSMITHKLINE PHARMACEUTICALS LIMITED ... APPELLANT 252, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 030 PAN : AAACG 4414B V. I.T.O.(T.D.S.)-I, NASIK RESPONDENT APPELLANT BY : SHRI KAMLESH CHAINANI RESPONDENT BY : MS. S. PRAVEENA DATE OF HEARING :13.9.2011 DATE OF PRONOUNCEMENT: 07.10.2011 ORDER PER I.C. SUDHIR, JM IN THESE APPEALS, THE ASSESSEE HAS QUESTIONED COMM ON FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. THE COMMISSIONER OF INCOME-TAX(APPEALS) II, NA SHIK [HEREINAFTER REFERRED TO AS CIT(A)] ERRED IN UPHOLDING THE ORD ER OF THE INCOME-TAX OFFICER(TDS) -1, NASHIK [HEREINAFTER REFERRED TO AS AO] WHO INVOKED THE PROVISIONS OF SECTION 201(1) AND SECTION 201(1A) OF THE INCOME-TAX ACT READ WITH SECTION 194J AND CALLING UPON THE APPELLANT TO PAY A SUM OF RS. 56,420/- BY TREATING THE APPELLANT TO BE AN ASSESSEE DEEMED TO BE IN DEFAULT UNDER SECTION 201(1) AND A SUM OF RS. 23,128/- BY WAY OF INTEREST UNDER SECTION 201(1A). 2. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE A O WHO HELD THAT THE PAYMENT MADE PURSUANT TO THE CONTRACTS ENTERED INTO BY THE APPELLANT FOR PROVISION OF SECURITY SERVICES FALL WITHIN THE AMBI T OF THE PROVISIONS OF SECTION 194J. ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 2 3. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE A O WHO STATED THAT THE RELIANCE PLACED BY THE APPELLANT ON THE CENTRAL BOA RD OF DIRECT TAXES CIRCULAR NO 715 DATED 8/8/1995 IS IRRELEVANT TO THE FACTS OF THE APPELLANT. 4. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO WHO INTERPRETED THE PROVISIONS OF EXPLANATION 2 TO SECTION 9(1)(VII ). 5. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE A O WHO STATED THAT THE SECURITY SERVICES CONTRACT IS JUST TO CAMOUFLAGE TH E APPLICABLE PROVISIONS OF 194J AS CONSIDERED BY THE DEDUCTOR COMPANY AS 194C . 6. WITHOUT PREJUDICE TO THE APPELLANTS CONTENTION THAT THE PROVISIONS OF SECTION 194C ARE APPLICABLE IN THE CASE OF PAYMENTS MADE TO SECURITY AGENCIES, WHERE THE RECIPIENT HAS FULLY PAID THE TA XES, THE CIT(A) HAS NO JURISDICTION U/S. 201(1) TO DEMAND FURTHER TAX FROM THE TAX PAYER IN RESPECT OF TAX ALLEGEDLY SHORT DEDUCTED. THE APPELLANTS SUBMI T THAT IF THE TAX HAS BEEN COLLECTED, ALBEIT NOT IN THE MANNER PROVIDED FOR IN CHAPTER XVII B OF THE INCOME-TAX ACT, THEN NO FURTHER LIABILITY COULD BE FOISTED ON THE APPELLANT. 7. WITHOUT PREJUDICE, THE APPELLANTS SUBMIT THAT T HE CIT(A) OUGHT TO HAVE CHECKED THAT THE SUPPLIERS HAVE INCLUDED THE FEES C HARGED TO THE APPELLANTS FOR THE SECURITY SERVICES RENDERED, IN COMPUTING TH EIR TOTAL INCOME AND HAVE PAID THE APPROPRIATE TAXES THEREON. 8. THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO WHO CHARGED THE INTEREST OF RS. 23,128/- UNDER SECTION 201(1A) ON T HE ALLEGED DEFAULT. THE APPELLANTS SUBMIT THAT SINCE THEY HAVE CORRECTLY DE DUCTED TAX AS PER THE PROVISIONS OF SECTION 194C AND THEREFORE ARE NOT LI ABLE TO DEDUCT TAX AT SOURCE U/S. 194J, THE CHARGE OF INTEREST IS NOT SUS TAINABLE. THE APPELLANTS FURTHER SUBMIT THAT THE RECIPIENTS HAVE ALREADY PAID ADVANCE TAX AND HAVE, IN FACT, CLAIMED REFUNDS WHILE SUBMIT TING THEIR RETURN OF INCOME FOR THE YEAR. THEREFORE, THE QUESTION OF CH ARGEABILITY OF INTEREST U/S. 201(1A) DOES NOT ARISE. 9. WITHOUT PREJUDICE, THE APPELLANTS SUBMIT THAT TH ERE IS A CALCULATION ERROR IN COMPUTING THE INTEREST LIABILITY. ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 3 THE APPELLANTS SUBMIT THAT IN VIEW OF THE TAXES P AID BY THE RECIPIENTS BY MARCH OF THE RELEVANT YEAR, INTEREST LIABILITY CAN AT BEST BE CALCULATED UPTO MARCH END OF THAT RELEVANT YEAR AND NOT BEYOND. 2. THE RELEVANT FACTS ARE THAT THE APPELLANT, A LI MITED COMPANY ENGAGED IN MANUFACTURING OF MEDICINES WAS SUBJECTED TO SURVEY ACTION U/S. 133A OF THE ACT ON 21.11.2007 BY THE ITO (TDS) (HEREINAFTER REFERRED TO AS A.O). THE A.O. NOTICED THAT THE APPELLANT WAS MAKING THE TDS ON THE PAYME NTS MADE TO SECURITY SERVICES AT THE RATE OF 2.26% U/S. 194C OF THE ACT. THE A. O, HOWEVER, WAS OF THE VIEW THAT THE PAYMENTS FOR SECURITY CHARGES ARE WELL COVERED WITHIN THE AMBIT OF SECTION 194J OF THE ACT. HE WAS NOT SATISFIED WITH THE SUBMISSI ON GIVEN BY THE APPELLANT IN THIS REGARD AND HELD THE APPELLANT AT FAULT FOR SHORT D EDUCTION OF TDS. HE PASSED ORDER U/S. 201 AND 201(1A) READ WITH SECTION 194J DEMAND ING PAYMENT OF TDS AND INTEREST ON TDS RESPECTIVELY AS UNDER : SR.NO . A.Y. SHORT DEDUCTION OF T.D.S.(RS.) INTEREST ON SHORT DEDUCTION(RS.) TOTAL (RS.) 1 2005 - 2006 56,420 23,128 79,548 2 2006 - 2007 1,33,303 38,338 1,71,641 3 2007 - 2008 77,271 10 ,719 4 2008 - 2009 1,93,133 8,359 2,01,492 TOTAL 4,60,127 80,544 5,40,671 THE AGGRIEVED APPELLANT WENT IN FIRST APPEAL BUT CO ULD NOT SUCCEED. THE LD CIT(A) DID NOT ACCEPT THE ARGUMENT OF THE ASSESSEE THAT SE CURITY SERVICES ARE NOT COVERED U/S. 194J OF THE ACT AS THEY WERE NOT CONSULTANCY S ERVICES. THE LD CIT(A) AFTER DISCUSSING THE NATURE OF SECURITY SERVICES AS MENTI ONED IN THE REPLY OF THE ASSESSEE CAME TO THE CONCLUSION THAT SECURITY PERSONNEL WERE RENDERING SKILLED SERVICES TO THE ASSESSEE AND CAN BE CATEGORIZED AS PROFESSIONAL OR TECHNICAL SERVICES AS PER THE ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 4 EXPLANATION TO SECTION 194J OF THE ACT. THE LD CIT (A), ACCORDINGLY, UPHELD THAT THERE IS A FAILURE ON THE PART OF THE APPELLANT TO DEDUCT TAX AT THE RATE OF 10% U/S. 194J OF THE ACT WHILE JUSTIFYING THE ACTION OF THE A.O IN PASSING ORDER U/S. 201(1) OF THE ACT. 3. AS REGARDS THE GROUND RELATING TO CHARGING OF I NTEREST U/S. 201(1A) OF THE ACT, THE LD CIT(A) DIRECTED THE A.O TO CHARGE INTER EST U/S. 201(1A) OF THE ACT TILL THE DATE OF ACTUAL PAYMENT OF TAX OR COMPLETION OF ASSE SSMENT OF THE PAYEE WHICHEVER IS EARLIER IN VIEW OF THE DECISIONS RELIED ON BY T HE ASSESSEE. 4. AGGRIEVED, THE APPELLANT IS NOW IN APPEAL BEFORE US ON THE ABOVE STATED GROUNDS RAISING THE ISSUE AS TO WHETHER PROVISIONS OF SECTION 194J ARE APPLICABLE IN THE CASE OF THE APPELLANT AND THUS WAS IN DEFAULT U /S. 201(1) AND 201(1A) OF THE ACT. 5. AN ALTERNATIVE GROUND (GROUND NO. 6) HAS ALSO BE EN RAISED THAT WHERE THE RECIPIENT HAS FULLY PAID THE TAXES, THE LD CIT(A) HAS NO JURISDICTION U/S. 201(1) TO DEMAND FURTHER TAX FROM THE TAX PAYER IN RESPECT OF TAX ALLEGEDLY SHORT DEDUCTED. 6. ON THE MAIN ISSUE AS TO WHETHER IN A CASE ON PA YMENT MADE FOR SERVICES OF THE SECURITY PROVIDED BY A CONTRACTOR TO THE ASSES SEE, THE PROVISIONS OF SECTION 194C OR 194J WOULD BE APPLICABLE, THE LD. A.R. BASI CALLY PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF ACIT VS. MERCHANT SHIPPING SERVICES (P) LTD. AND OTHERS, 135 TTJ (MUM) 589. H E SUBMITTED FURTHER THAT PAYMENTS MADE TO SECURITY SERVICES ARE IN THE NATUR E OF PAYMENTS MADE FOR SUPPLY OF MANPOWER IN THE COURSE OF CARRYING OUT GUARDING FACTORY PREMISES. THESE TYPE OF PAYMENTS ARE THEREFORE COVERED U/S. 194C BEING SUPP LY OF MANPOWER IN PURSUANCE OF A LABOUR CONTRACT. SECTION 194C BRINGS INTO THE AMBIT ANY PAYMENT MADE IN PURSUANCE OF A CONTRACT WITH THE CONTRACTOR FOR CA RRYING OUT OR FOR THE SUPPLY OF ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 5 LABOUR FOR CARRYING OUT THE WHOLE OR ANY PART OF TH E WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLYING WHETHER WHOLLY OR PART LY ANY LABOUR WHICH THE CONTRACTOR HAD UNDERTAKEN TO SUPPLY. IT IS, THER EFORE, THAT CONTRACT FOR PROVIDING SECURITY SERVICES ARE CONTRACT FOR PROVISION OF SUP PLY OF (LABOUR/SECURITY GUARDS) FOR CARRYING OUT THE WORK OF GUARDING FACTORY PREMISES FROM ANY UNTOWARD INCIDENCE. THE LD. A.R. ALSO REFERRED QUESTION NO. 28 OF CIRCU LAR NO. 715 DT. 8/8/1995 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES REPRODUCED AT PAGE NO. 4 OF THE PAPER BOOK. HE SUBMITTED THAT ON THE ISSUE IN QUESTION AS TO WHETHER SERVICES OF THE ELECTRICIAN PROVIDED BY A CONTRACTOR WILL COME UNDE R THE PROVISIONS OF SECTION 194C OR 194 J, THE CBDT REPLIED THAT THE PAYMENTS MADE T O AN ELECTRICIAN OR TO A CONTRACTOR, WHO PROVIDES THE SERVICES OF AN ELECTRI CIAN WILL BE IN THE NATURE OF PAYMENT MADE IN PURSUANCE OF A CONTRACT FOR CARRYI NG OUT ANY WORK. ACCORDINGLY, PROVISIONS OF SECTION 194C WILL APPLY IN SUCH CASES . THE LD. A.R. SUBMITTED THAT PAYMENTS MADE FOR SECURITY SERVICES CAN BY NO STRET CH OF IMAGINATION BE COVERED UNDER THE PROVISIONS OF SECTION 194J UNDER THE HEAD FEES FOR TECHNICAL SERVICES WHICH TERM IS DEFINED U/S. 9(1) EXPLANATION 2 CLA USE (VII). HE SUBMITTED THAT CLAUSE (VII) TO EXPLANATION 2 TO SECTION 9(1) DEFI NES FEES FOR TECHNICAL SERVICES WHICH MEANS ANY CONSIDERATION (INCLUDING OF LUMPSU M CONSIDERATION) FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICE S (INCLUDING THE PROVISIONS OF SERVICES OF TECHNICAL OR OTHER PERSONAL). 7. WITHOUT PREJUDICE TO HIS ABOVE CONTENTION, THE L D. A.R. SUBMITTED FURTHER THAT PAYMENTS MADE TOWARDS SECURITY SERVICES ARE COVERED UNDER THE PROVISIONS OF SECTION 194C, PAYMENTS MADE TO SECURITY AGENCIES FO R PROVISION OF SECURITY GUARDS ARE NOT IN THE NATURE OF MANAGERIAL, TECHNICAL OR C ONSULTANCY SERVICES. ONLY IF THE ABOVE PAYMENTS ARE IN THE NATURE OF MANAGERIAL, TEC HNICAL OR CONSULTANCY SERVICES, THE EXPLANATION 2 CAN BE APPLIED, WHICH INCLUDES PR OVISION OF SERVICES OR TECHNICAL OR OTHER PERSONAL. HE SUBMITTED FURTHER THAT SECURIT Y GUARDS DO NOT REQUIRE ANY SPECIFIC TECHNICAL QUALIFICATIONS OR TRAINING FOR PERFORMING THEIR DUTIES. THE LD. A.R. ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 6 ALSO REFERRED PAGE NOS. 12 TO 29 OF THE PAPER BOOK I.E. COPY OF THE AGREEMENT ENTERED WITH INDUSTRIAL SECURITY FOR PROVIDING INDU STRIAL SECURITY AND FIRE FIGHTING SERVICES AT FACTORY PREMISES AND HOUSING COLONY. I N THIS AGREEMENT, DUTIES OF SECURITY GUARDS TOWARDS THE ASSESSEE HAVE BEEN MENT IONED WHICH ARE TO BE PROVIDED UNDER THE CONTRACT. 8. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE. HE REFERRED PROVISIONS OF SECT ION 194J AS AMENDED AS WELL AS CLAUSE (VII) TO EXPLANATION 2 TO SECTION 9 OF THE ACT. 9. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND SUBST ANCE IN THE ARGUMENT OF THE LD. A.R.. IN CASE OF SERVICES OF THE ELECTRICIAN, PROVIDED BY A CONTRACTOR, THE CBDT VIDE THEIR ANSWER TO QUESTION NO. 28 OF CIRCULAR NO . 715 DATED 8.8.1995 (MADE AVAILABLE AT PAGE NO. 4 OF THE PAPER BOOK) HAS CLAR IFIED AS : THE PAYMENTS MADE TO AN ELECTRICIAN OR TO A CONTRA CTOR, WHO PROVIDES THE SERVICES OF AN ELECTRICIAN WILL BE IN THE NATURE OF PAYMENT MADE IN PURSUANCE OF A CONTRACT FOR CARRYING OUT ANY WORK. ACCORDIN GLY, PROVISION OF SECTION 194C WILL APPLY IN SUCH CASES. WE ARE OF THE VIEW THAT ELECTRICIAN IS ALSO A SKILL ED PERSON AND IF THE SERVICES OF AN ELECTRICIAN PROVIDED BY A CONTRACTOR ARE TREATED BY THE CBDT UNDER PROVISIONS OF SECTION 194C VIS--VIS 194J, THEN IT GIVES STRENGTH TO THE ARGUMENT OF THE LD. A.R. THAT SECURITY SERVICES PROVIDED BY A CONTRACTOR WIL L ALSO COME UNDER THE PROVISIONS OF SECTION 194C BECAUSE THE SECURITY GUARDS ARE ALSO S KILLED PERSONS AS ELECTRICIAN. ALL SERVICES PROVIDED BY THESE PERSONNEL CANNOT BE KEPT IN THE NATURE OF MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES TO ATTRACT CLAUS E (VII) TO EXPLANTION 2 TO SECTION 9(1) OF THE ACT. WE ALSO FIND SUPPORTS FROM THE D ECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. MERCHANT SHIPPING SERVICE (P) LTD. AND OTHERS ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 7 (SUPRA) TO CONCUR WITH THE ABOVE SUBMISSION OF THE LD. A.R. THAT CASE OF THE ASSESSEE DOES NOT FALL UNDER THE PROVISIONS OF SEC TION 194J OF THE ACT. IN THAT CASE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL, THE ASSESS EE COMPANY WAS A SHIPPING AGENT HANDLING VESSELS AT VARIOUS INDIAN PORTS. DU RING THE COURSE OF SURVEY, IT WAS DISCOVERED THAT IN THE F.Y. 2003-04, THE ASSESSEE M ADE PAYMENT OF RS. 12,23,29,581/- TO NAV SEVA INTERNATIONAL CONTAINER TERMINAL LTD., (NSICT IN SHORT) AND DEDUCTED TAX AT SOURCE AT THE RATE OF 2.05% AS PROVIDED U/S. 194C, FOR WHICH, PAYMENT WAS MADE. DURING THE COURSE OF PROCEEDINGS U/S. 201(1) AND 201(1A), THE A.O. NOTED THAT NSICT ENTERED INTO TECHNICAL SERVIC E AGREEMENT WITH P & O, AUSTRALLIA, UNDER WHICH P&O, AUSTRALLIA WAS TO PRO VIDE TECHNICAL KNOWHOW TO THE ASSESSEE COMPANY. IT WAS ALSO NOTED BY THE A.O THA T NSICT HAD ALSO CHARGED SERVICE TAX ON THE PAYMENT FROM THE ASSESSEE. THE A.O OBSERVED THAT P&O AUSTRALLIA WAS THE MAIN SHAREHOLDER OF NSIT THROUGH ITS HOLDING IN SOUTH ASEA BOARD LTD AND UNDER THE AGREEMENT, P&O AUSTRALLIA S UPPLIED TECHNICAL KNOWHOW IN RETURN FOR PEACE. IN VIEW OF THESE FACTS, THE A.O O PINED THAT NSICT WAS RENDERING/PROVIDING TECHNICAL AND SPECIALIZED SERVI CES TO ITS CUSTOMERS INCLUDING THE ASSESSEE, ALONG WITH MACHINES, TECHNICAL MANPOWER A ND HENCE, TAX WAS DEDUCTIBLE U/S. 194J. THE ASSESSEE EXPLAINED THAT PAYMENTS MA DE TO NSICT WERE FOR CONTAINER MOVEMENT UNDER THE CONTRACT AND THERE WAS NO PROFES SIONAL OR TECHNICAL SERVICES INVOLVED IN THE MOVEMENT OF CONTAINERS. IT WAS EXP LAINED THAT THE SERVICES PROVIDED BY NSICT WERE TOWARDS THE MOVEMENT OF CONTAINERS FR OM THE CUSTOMERS, TRAILERS/RAIL WAGONS TO YARD AND FROM THERE TO VESSELS IN RESPECT OF EXPORT CONTAINERS, AND FOR THE IMPORT CONTAINERS, THE PAYMENT WAS MADE FOR MOV ING CONTAINERS FROM VESSELS ON TO THE TRAILERS AT THE QUAY SITE AND FOR LIFT OF TRAILERS TO CUSTOMERS TRAILERS/RAIL WAGONS. THE A.O ACCEPTED THE ASSESSEES CONTENTION THAT THE PAYMENT WAS MADE TOWARDS CONTAINER HANDLING CHARGES. HE, HOWEVER, H ELD THAT CONTAINER HANDLING WAS A TECHNICAL AND SPECIALIZED SERVICE. IN HIS OPINI ON, THE ASSESSEE COMPANY WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S. 194J AND NOT U/S. 194C. THE MATTER TRAVELLED UPTO THE TRIBUNAL (BOMBAY BENCH) AND AFTER DISCUSSI NG THE MATTER IN DETAIL THE ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 8 TRIBUNAL HAS HELD THAT THE PAYMENTS MADE BY THE ASS ESSEE TO NSCIT ARE COVERED U/S. 194C AND THERE IS NO SCOPE FOR APPLYING THE PR OVISIONS OF SECTION 194J. THE NATURAL COROLLARY IS THAT THE ASSESSEE RIGHTLY MADE DEDUCTION OF TAX AT SOURCE AT THE APPLICABLE RATE, HELD THE TRIBUNAL. THE RELEVANT OB SERVATIONS OF THE MUMBAI BENCH OF TRIBUNAL IN THAT CASE IN PARA NOS. 12 TO 17 ARE BEI NG REPRODUCED HEREUNDER FOR A READY REFERENCE : 12. THE ASSESSING OFFICER, IN THE INSTANT CASE, HA S RESTRICTED HIMSELF ONLY TO THE TECHNICAL SERVICES AND IT IS NOBODYS CASE T HAT THE ASSESSEE MADE ANY PAYMENT FOR MANAGERIAL OR CONSULTANCY SERVICES. IN THE LIKE MANNER THE AO HAS NOT PRESSED INTO SERVICE THE LATER PART OF THE EXPL.2, WHICH DEALS WITH PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSON NEL. IT IS RIGHTLY SO BECAUSE OF THE FACT THAT NSICT RAISED INVOICES IN RESPECT O F MOVEMENT OF CARGO AND THERE IS NO REFERENCE TO ANY SPECIFIC PROVISION OF SERVICES BY TECHNICAL OR OTHER PERSONNEL. RULE OF EJUSDEM GENERIS HELPS IN ASCERTAINING THE MEANING OF A GENERAL WORDS IN THE COMPANY OF SPECIFIC WORDS . AS PER THE RULE, THE GENERAL WORDS DRAW THE COLOUR AND MEANING FROM THE COMPANY THEY KEEP. THE APPLICATION OF THIS RULE HAS BEEN APPROVED IN THE CONTEXT OF THE INCOME- TAX ACT BY SEVERAL COURTS INCLUDING THE HONBLE SUM MIT COURT IN A RECENT JUDGMENT RENDERED IN CIT VS. MCDOWELL AND CO.LTD. (NO.1)(2009) 314 ITR 167 (SC). BY APPLYING THIS RULE, THE EXPRESSION OT HER PERSONNEL IN THIS PROVISION MUST FALL WITHIN THE GENUS OF SERVICES O F TECHNICAL PERSONNEL. IT CANNOT BE CONSIDERED AS ANY PERSONNEL UNRELATED TO THE MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. EVEN THOUGH NSICT HAD THE SERVICES OF SEVERAL PERSONNEL IN THE PROCESS OF MOVEMENT OF CARGO, THOS E PERSONNEL, IN THE ABSENCE OF ANY FINDING BY THE AO THAT THEY POSSESSE D SOME TECHNICAL EXPERTISE, CANNOT BE CONSIDERED WITHIN THE AMBIT OF THIS PROVISION AS FALLING UNDER OTHER PERSONNEL. 13. FURTHER NARROWING THE SCOPE OF CONTROVERSY TO T HE PAYMENTS MADE BY THE ASSESSEE FOR AVAILING TECHNICAL SERVICES, AS HA S BEEN HELD BY THE AO, WE NEED TO CONCENTRATE ON THE MEANING OF TECHNICAL SER VICES. IN OTHER WORDS, THE TECHNICAL SERVICES SHOULD BE PROVIDED BY THE RE CIPIENT OF THE AMOUNT SO AS TO BRING THE PAYMENT WITHIN THE SCOPE OF SECTION 19 4J. THE WORDS TECHNICAL SERVICES HAVE NOT BEEN DEFINED IN THE ACT. BUT TH EN WE VIEW EXPLANATION TO ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 9 SEC. 9(1)(VII), WHICH DEFINES FEES FOR TECHNICAL SE RVICES AS CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTA NCY SERVICES, IT BECOMES APPARENT THAT THE WORD TECHNICAL IS PRECEDED BY T HE WORD MANAGERIAL AND SUCCEEDED BY THE WORD CONSULTANCY. AS BOTH THE M ANAGERIAL AND CONSULTANCY SERVICES ARE POSSIBLE WITH HUMAN ENDEA VOR, THE WORD TECHNICAL SHOULD ALSO BE SEEN IN THE SAME LIGHT. TO BE MORE PRECISE, ANY PAYMENT FOR TECHNICAL SERVICES, IN OR TO BE COVERED U/S 194J, SHOULD BE A CONSIDERATION FOR ACQUIRING OR USING TECHNICAL KNOW-HOW SIMPLICITOR P ROVIDED OR MADE AVAILABLE BY HUMAN ELEMENT. THERE SHOULD BE DIRECT AND LIVE LINK BETWEEN PAYMENT AND RECEIPT/USE OF TECHNICAL SERVICES/INFORMATION. 14. WHERE NO TECHNICAL SERVICES ARE PROVIDED AS SUC H, BUT THE PAYMENT IS MADE FOR THE USE OF SOME MACHINERY OR EQUIPMENT OR STANDARD FACILITY WHICH MAY HAVE BEEN CREATED OR BROUGHT INTO EXISTENCE WIT H THE INPUT OF TECHNICAL SERVICES ALONG WITH MAN, MACHINE AND MATERIAL, SUCH PAYMENT WOULD NOT PARTAKE OF THE CHARACTER OF FEES FOR TECHNICAL SERV ICES. TAKE FOR EXAMPLE A PERSON GOING TO A CINEMA AND PURCHASING TICKET FOR WATCHING A MOVIE. WHEN HE PURCHASES TICKET, HE PAYS FOR WATCHING THE MOVIE AND NOT FOR AVAILING ANY TECHNICAL SERVICE. IT IS A DIFFERENT M ATTER THAT THE MOVE IS EXHIBITED ON SCREEN BY WAY OF SOME TECHNICAL INPUT. TAKE ANOTHER EXAMPLE OF A PERSON BOARDING A BUS OR TRAIN BY PURCHASING THE REQUISITE TICKET. IT CANNOT BE SAID THAT THE PERSON IS MAKING PAYMENT FOR TECHN ICAL SERVICES. NOT DOUBT BUS OR TRAIN IS MADE BY SUFFICIENT TECHNICAL INPUT BUT THE USER OF THE SAME ON A NON-CUSTOMIZED BASIS CANNOT BE SAID TO BE MAKING PAYMENT FOR ANY TECHNICAL SERVICES. IT IS THE BUS MANUFACTURER WHO AVAILS TECHNICAL SERVICES IN MAKING THE BUS. ONCE THE BUS IS MADE AND BROUGHT O N ROAD FOR USE BY ANYONE, BOARDING ON IT IN LIEU OF TICKET, IS A PAYM ENT FOR USE OF BUS AS A FACILITY AND NOT FOR TECHNICAL SERVICES WHICH WAS OBTAINED BY THE BUS MANUFACTURER AT THE TIME OF MAKING BUS. IN THE PRE SENT AGE OF TECHNOLOGY ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 10 MOST OF THE SERVICES AVAILED BY US ARE RESULT OF SO ME TECHNICAL INPUT. THE USAGE OF SUCH FACILITY ON PAYMENT BASIS CANNOT BE D ESCRIBED AS FEES FOR TECHNICAL SERVICES. 15. COMING BACK TO THE FACTS OF THE INSTANT CASE IT IS NOTICED THAT THE ASSESSEE MADE PAYMENT TO NSICT FOR THE MOVEMENT OF THE CONTAINERS FROM OR UP TO THE VESSEL. IN ORDER TO FACILITATE THE MO VEMENT OF CONTAINERS, NSICT PROVIDED THE SERVICES OF DIFFERENT TYPES OF CRANES SUCH AS QUAY CRANES, RUBBER TYRE GANTRY CRANES AND RAIL MOUNTED GANTRY CRANES. THESE CRANES ARE USED FOR SPECIFIC PURPOSES ONLY. RUBBER TYRE GANTRY CR ANES, RAIL MOUNTED GANTRY CRANES ARE USED FOR LIFTING THE CONTAINER FROM CUS TOMERS TRAILER/RAIL WAGONS AND QUAY CRANES ARE USED FOR MOVING CONTAINERS FROM TRAILERS AT THE QUAY SIDE ON TO THE VESSEL. WHEN THE ASSESSEE MADE PAYMENT T O NSICT IT WAS MEANT FOR USING THE FACILITY OF CRANES PROVIDED BY THEM F OR THE MOVEMENT OF CONTAINERS AND NOT FOR AVAILING ANY TECHNICAL SERVI CES WHICH MAY HAVE GONE INTO THE MAKING OF CRANES. NSICT OPENED ITS DOORS OF SERVICE TO ONE AND ALL. ANYBODY INTERESTED IN MOVEMENT OF CONTAINERS COULD AVAIL THE FACILITY. THE ASSESSEE HAS ALSO MADE PAYMENT ON BILL TO BILL BASI S. IN OTHER WORDS, PAYMENT WAS MADE FOR USER OF A STANDARD FACILITY PR OVIDED BY NSICT, SPECIFICALLY FOR THE MOVEMENT OF CONTAINERS FROM OR TO THE VESSEL. 16. THE ASSESSING OFFICER HAS HEAVILY RELIED ON THE FACT THAT NSICT WAS REGISTERED FOR THE PURPOSE OF PAYMENT OF SERVICE TA X. IT WAS CLARIFIED BY NSICT TO THE LEARNED CIT(A), VIDE THEIR LETTER DATE D 02.01.2009, THAT THEY WERE REGISTERED UNDER THE CATEGORY OF PS AND MC. PS STANDS FOR PORT SERVICES. THEY ADMITTED THAT ALL THE SERVICES REND ERED BY THEM WERE COVERED UNDER PORT SERVICES. THEY ALSO ADMITTED THAT THEY HAD NOT RENDERED ANY MC (MANAGEMENT CONSULTANCY) SERVICES. THE LEARNED A.R . HAS PLACED ON RECORD A TEXT OF SECTION 65(82) OF THE FINANCE ACT, 1994 D EFINING PORT SERVICES AS UNDER: ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 11 PORT SERVICES MEANS SERVICES RENDERED BY A PORT OR ANY PERSON AUTHORIZED BY THE PORT IN ANY MANNER IN RELATION TO THE VESSEL OR GOODS. SUCH SERVICES INCLUDE MOVEMENT OF SHIPS AND VESSELS, MOVEMENT OF CARGO AND GOODS INTO AND OUT OF THE POR T ETC. SERVICES PROVIDED AT PORTS ARE CONTAINED IN CHAPTER V ON WOR KS AND SERVICES TO BE PROVIDED AT PORTS OF THE MAJOR PORT TRUST ACT, 1 963. 17. FROM THE MANDATE OF SECTION 65(82) OF FINANCE A CT, 1994 IT IS VIVID THAT PORT SERVICES CONSIST OF CARGO HANDLING, DOCK SERVICES AND CONTAINER HANDLING SERVICES. WHEN WE VIEW THE REGISTRATION O F NSICT AS THE ONE UNDER THE CATEGORY OF PS AND MC ALONG WITH THE FACT THAT THE ASSESSEE PAID FOR THE MOVEMENT OF CONTAINERS OF ITS CUSTOMERS, THERE REMA INS NO DOUBT THAT NSICT, IN FACT, MAINTAINED DIFFERENT TYPES OF CRANES FOR T HE PURPOSE OF PROVIDING CARGO HANDLING SERVICES. THE REGISTRATION OF ANY PE RSON FOR THE PURPOSE OF SERVICE TAX, NO DOUBT PRESUMES THAT SOME SORT OF SE RVICES ARE PROVIDED BY HIM WITHIN THE MEANING OF FINANCE ACT, 1994, BUT TH AT DOES NOT MEAN THAT SUCH SERVICES ARE ONLY IN THE CATEGORY OF TECHNICAL SERVICES UNLESS THE PRESCRIPTION OF EXPLANATION (2) TO SECTION 9(1)(VII ) IS FULFILLED. A PAYMENT TO BE COVERED U/S. 194J SHOULD BE FEES FOR TECHNICAL SERV ICES AND SUCH FEES SHOULD BE FOR RENDERING OF ANY TECHNICAL, MANAGERIAL OR C ONSULTANCY SERVICES AND NOT ANYTHING ELSE. IN ORDER TO ROPE IN ANY SERVICE PRO VIDER WITHIN THE NET OF SECTION 194J, IT IS OF PARAMOUNT IMPORTANCE TO CHEC K THE TRUE NATURE OF SERVICE PROVIDED ON THE TOUCHSTONE OF THE MANDATE O F THIS PROVISION ALONE. IF THE CONDITIONS OF SECTION 194J R.W.S. 9(1)(VII) EXP LANATION (2) ARE NOT FULFILLED, THE LIABILITY UNDER THIS SECTION IS RULED OUT. 10. HERE IN THE PRESENT CASE, BEFORE US, THE SERVIC ES PROVIDED BY SECURITY PERSONAL UNDER A CONTRACT WITH THE AGENCY CANNOT B E CATEGORIZED AS TECHNICAL SERVICE UNLESS THE PROVISIONS OF CLAUSE (VII) TO EX PLANATION 2 TO SECTION 9(1) ARE ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 12 FULFILLED. A PAYMENT TO BE COVERED U/S. 194J SHOUL D BE FEES FOR TECHNICAL SERVICES AND SUCH FEES SHOULD BE FOR RENDERING OF ANY TECHNI CAL, MANAGERIAL OR CONSULTANCY SERVICES AND NOT ANYTHING ELSE. WE RESPECTFULLY FO LLOW THE VIEW OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE AFORE-CITED CASE OF A CIT VS. MERCHANT SHIPPING SERVICES (P) LTD. AND OTHERS (SUPRA) THAT IN ORDER TO ROPE IN ANY SERVICE PROVIDER WITHIN THE NET SECTION 194J, IT IS OF PARAMOUNT IM PORTANCE TO CHECK TRUE NATURE OF SERVICE PROVIDED ON THE TOUCHSTONE OF THE MANDATE OF THIS PROVISION ALONE. CLAUSE (VII) TO EXPLANATION 2 TO SECTION 9(1) DEFINES FEES FOR TECHNICAL SERVICES, AS CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TEC HNICAL OR CONSULTANCY SERVICES, THE WORD TECHNICAL IS PRECLUDED BY THE WORD MANA GERIAL AND SUCCEEDED BY THE WORD CONSULTANCY. WE THUS FOLLOWING THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE AFORE-CITED CASE HOLD THAT AS BOTH THE MANAGERIAL AND CONSULTANCY SERVICES ARE POSSIBLE WITH HUMAN ENDEAVOR, THE WORD TECHNICAL SHOULD ALSO BE SEEN IN THE SAME LIGHT. TO BE MORE PRECISE, ANY PA YMENT FOR TECHNICAL SERVICES IN ORDER TO BE COVERED U/S. 194J, SHOULD BE A CONSIDER ATION FOR ACQUIRING OR USING TECHNICAL KNOWHOW SIMPLICITOR PROVIDED OR MADE AVAI LABLE BY HUMAN ELEMENT. THERE SHOULD BE DIRECT AND LIVE LINK BETWEEN PAYMENT AND RECEIPT/USE OF TECHNICAL SERVICES/INFORMATION. IF THE CONDITIONS OF SECTION 194J READ WITH SECTION 9(1), EXPLANATION -2 CLAUSE (VII) ARE NOT FULFILLED, THE LIABILITY UNDER THIS SECTION IS RULED OUT. WE THUS FINALLY HOLD THAT THE PAYMENTS MADE BY THE ASSESSEE TO SECURITY SERVICES ARE COVERED U/S. 194C AND THERE IS NO SCOP E FOR APPLYING THE PROVISIONS OF SECTION 194J. WE THUS WHILE SETTING ASIDE ORDERS O F THE AUTHORITIES BELOW DIRECT THE A.O TO ACCEPT THE DEDUCTION OF TAX AT SOURCE AT THE APPLICABLE RATE MADE BY THE ASSESSEE. THE ISSUE IS DECIDED IN FAVOUR OF THE AS SESSEE. THE RELATED GROUNDS ARE ALLOWED. 11. IN VIEW OF THE ABOVE FINDING, THE ALTERNATIVE G ROUND RAISED BY THE ASSESSEE DOES NOT NEED ADJUDICATION. ITA. NOS 552 TO 555/PN/2010 GLAXOSMITHKLINE PHARMACEUTICALS . LTD. A.YS. 2006-07 TO2008-09 PAGE OF 13 13 12. IN RESULT, APPEALS ARE ALLOWED IN FAVOUR OF THE ASSESSEE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 7TH OCTOBER 2011. SD/- SD/- (D.KARUNAKARA RAO) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 07TH OCTOBER , 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (T.D.S.), PUNE 4. CIT(A)- II, NASHIK 4. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE