Assistant Commissioner of Income Tax-5, Kanpur V. M.K.U Pvt. Ltd., Kanpur

ITA 574/LKW/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8825 (ITAT-LUCKNOW)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 01-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Assessee Lawyers: P K KAPOOR
• Keywords: Deemed to accrue or arise in india; TDS; Set aside
• Section: 40(a)(ia); 195; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 573 TO 575/LKW/2018 ASSESSMENT YEAR: 2013 - 14, 2014 - 15 & 2015 - 16 ASST. CIT - 5, KANPUR V. M/S M. K.U. PVT. LTD. 13, GANDHI GRAM KANPUR T AN /PAN : AACCM6302Q (APP ELL ANT) (RESPONDENT) C. O. NO.24 TO 26/LKW/2018 [IN ITA NO. 573 TO 575/LKW/2018] ASSESSMENT YEAR: 2013 - 14, 2014 - 15 & 2015 - 16 ASST. CIT - 5, KANPUR V. M/S M.K.U. PVT. LTD. 13, GANDHI GRA M KANPUR T AN /PAN : AACCM6302Q (APP LICA NT) (RESPONDENT) DEPARTMENT BY: SHRI S. K. MADHUK, CIT (DR) ASSESSEE BY: SHRI P. K. KAPOOR, C.A. DATE OF HEARING: 07 06 2019 DATE OF PRONOUNCEMENT: 14 06 2019 O R D E R PER BENCH : THESE ARE REVENUES APPEALS AND ASSESSEES CROSS OBJECTIONS AGAINST SEPARATE ORDERS OF THE LD. CIT(A) - II, KANPUR, ALL DATED 8/5/2018, FOR THE ASSESSMENT YEARS 2013 - 14, 2014 - 15 & 2015 - 16 . 2 . SINCE A SINGLE COMMON ISSUE IS INVOLVED THEREIN , ALL THESE APPEALS ARE BEING DISPOSED OF BY TH IS COMPOSITE ORDER , ALONG WITH ALL THE CROSS OBJECTIONS . ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 2 OF 18 3 . AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE STATED AT THE BAR THAT HE DID NOT WISH TO PRESS THE GROUNDS RAISED IN THE CROSS OBJECTIONS. THEREFORE, THE CROSS OBJECTIONS ARE REJECTED AS NOT PRESSED. 4 . THE ONLY COMMON ISSUE INVOLVED IN THE APPEAL S PERTAINS TO THE ADDITION S MADE UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, WHICH ADDITIONS WERE DELETED BY THE LD. CIT(A) FOR ALL THE YEARS UNDER CONSIDERATION. THE A.O HAD HELD THE AMOUNTS TO BE FEE S FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VII) OF THE ACT, ON WHICH, AS PER THE A.O, TDS OUGHT TO HAVE BEEN DEDUCTED UNDER SECTION 195 OF THE ACT, WHICH WAS NOT DONE. 5 . THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND DURING THE RELEVANT PERIOD, IT WAS ENGAGE D IN THE BUSINESS OF MANUFACTURING OF H ELMETS AND BULLET PROOF JACKETS , WHICH W ERE SOLD TO THE DEFE N C E, ARMY , PARAMILITARY AND POLICE DEPARTMENT , WITHIN THE COUNTRY AND EXPORT OF SPECIFIC TYPE OF JACKETS AND HELMETS , OUTSIDE THE COUNTRY. THE BUSINESS ACTI VITIES CARRIED OUT BY THE ASSESSEE DURING THE YEAR WERE THE SAME AS IN THE PRECEDING YEARS. 6 . THE ASSESSEE HAD MADE PAYMENT OF RS.1,84,22,000/ - TO NON - RESIDENT O N ACCOUNT OF TESTING CHARGES FOR TEST ING BULLET PROOF VESTS IN THEIR QUALITY OF STRENGTH. THE AS SESSEE IS IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF BALLISTIC BULLET PROOF JACKETS USED BY THE DEFENCE DEPARTMENT. THE ASSESSEE ALSO CARRIES OUT RESEARCH AND DEVELOPMENT OF THEIR B ALLISTIC PRODUCTS. THE CASE OF THE ASSESSEE IS THAT THE JACK ETS ARE NECESSARILY TO BE TESTED FOR THEIR STRENGTH AND THE PENETRATION CAPACITY OF THE JACKETS . SUCH TESTING IS GOT DONE FROM THE COMPETENT SPECIALIZED ORIGINATIONS SITUATED ABROAD, SINCE THERE ARE NO EXPERTS IN THE FIELD IN INDIA, WHO C OULD GIVE THE REQ UISITE REPORTS ON THE BULLET PROOF JACKETS . THE FOREIGN COMPANY PROVIDES A KIND OF STANDARD SERVICES TO THE ASSESSEE, IN WHICH, NO HUMAN ELEMENT IS INVOLVED AND, ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 3 OF 18 THEREFORE, THE SERVICES CONCERNED DO NOT FALL UNDER THE CATEGORY OF TECHNICAL SERVICES WITH IN THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. RATHER, THE GOVERNING CATEGORY IS BUSINESS PROFIT IN THE HANDS OF THE FOREIGN COMPANY. 7 . THE LD. CIT(A) HAS DELETED THE ADDITIONS MADE BY THE A.O, BRINGING THE DEPARTMENT IN APPEAL FOR ALL THE THREE YEARS UNDER CONSIDERATION. 8 . THE LD. D.R. HAS CONTENDED THAT WHILE WRONGLY DELETING THE ADDITION CORRECTLY MADE, THE LD. CIT(A) HAS ERRED IN FAILING TO CONSIDER THE A.OS FINDING THAT THE NATURE OF THE PAYMENTS INVOLVED IS FEE FOR TECHNICAL SERVICES, WHICH IS S QUARELY COVERED UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT, ON WHICH TAX WAS DEDUCTIBLE AT SOURCE, UNDER SECTION 195 OF THE ACT, BUT THE ASSESSEE FAILED TO DEDUCT THE SAME. 9 . THE LD. A.R. OF THE ASSESSEE, ON THE OTHER HAND, HAS PLACED STRONG RELIAN CE ON THE IMPUGNED ORDER S . IT HAS BEEN CONTENDED THAT THE MATTER HAS BEEN CONTINUING SINCE ASSESSMENT YEAR 2012 - 13 AND THE FACTS FOR ALL THESE YEARS HAVE REMAINED AND CONTINUE TO BE, MUTATIS MUTANDIS, THE SAME. OUR ATTENTION HAS BEEN DRAWN TO APB: 15 TO 28, WHICH IS A COPY OF THE ORDER DATED 13/6/2018, PASSED BY THE TRIBUNAL, IN ITA NO.47/LKW/2017, IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012 - 13. THEREIN, THE TRIBUNAL REMITTED THE MATTER TO THE A.O TO EXAMINE THE ASPECT OF HUMAN ELEMENT IN THE SER VICES UNDER CONSIDERATION QUA THE ISSUE OF PAYMENT MADE BY THE ASSESSEE TO THE FOREIGN COMPANY, FOR TESTING PURPOSES OF ITS BULLET PROOF JACKETS, AND TO DECIDE THE MATTER, KEEPING IN VIEW OF THE DEFINITION OF TECHNICAL SERVICES, AS HELD BY THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS. BHARTI CELLULAR LTD., 330 ITR 239 (SC). THE LD. A.R. OF THE ASSESSEE HAS FURTHER TAKEN US THROUGH APB: 29 TO 36, WHICH IS A COPY OF THE ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 4 OF 18 ASSESSMENT ORDER, DATED 19/3/2019, PASSED BY THE A.O IN PURSUANCE OF THE AFORESAID TRIBUNAL ORDER FOR ASSESSMENT YEAR 2012 - 13. 10 . HEARD. THE MATTER, IT IS SEEN, AS RIGHTLY POINTED OUT BY THE LD. A.R. OF THE ASSESSEE, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE A.O., WHO HIMSELF DELETED THE DISALLOWANCE QUA THE ISSUE AT HAND, FOR ASS ESSMENT YEAR 2012 - 13 , IN PURSUANCE OF THE DIRECTION OF THE TRIBUNAL. IT WOULD BE APPROPRIATE TO HERE REPRODUCE THE RELEVANT PORTI ON OF THE ORDER OF THE TRIBUNAL : 6.1 AS REGARDS THE ADDITION U/S 40(A)(I), WE FIND THAT THE ISSUE OF MANAGERIAL, TECHNICAL AN D CONSULTANCY SERVICE HAS BEEN DULY DISCUSSED BY HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARATI CELLULAR LTD. [2009] 319 ITR 139. THE FINDINGS OF HON'BLE DELHI HIGH COURT HAS BEEN RECORDED BY HON'BLE BOMBAY TRIBUNAL IN THE CASE OF SIEMENS LTD. AN D AFTER NOTING DOWN THE OBSERVATIONS OF HON'BLE DELHI HIGH COURT, THE HON'BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT WHERE THERE IS NO HUMAN ELEMENT INVOLVED IN TESTING, THE SAME CANNOT BE SAID TO BE FEE FOR TECHNICAL SERV ICES. THE RELEVANT FINDINGS OF HON'BLE COURT, AS NOTED BY THE TRIBUNAL IN ITS ORDER ARE REPRODUCED BELOW: 12. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE RIVAL CONTENTION, ORDERS PASSED BY THE CIT (A) AS WELL AS AO AND THE DECISIONS RELIED UPON BY T HE PARTIES. ONE OF THE MAIN ISSUE FOR OUR ADJUDICATION WHICH ALSO GOES TO THE CORE OF THE ISSUE IS, WHETHER THE PAYMENT MADE TO PEHLA TESTING LABORATORIES IN GERMANY, FOR CARRYING OUT CERTAIN TESTS ON CIRCUIT BREAKERS MANUFACTURED BY ASSESSEE FOR THE PURPO SE 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 SECTION 9(1)(VII). ASSESSEE IN PURSUANCE OF ITS TENDER FORMALITIES WITH THE GUJARAT ENERGY TRANSMISS ION CORPORATION LTD AND MAHARASHTRA STATE ELECTRICITY TRANSMISSION COMPANY LTD. WAS REQUIRED TO OBTAIN TYPE TESTING CERTIFICATE OF THE CIRCUIT BREAKERS MANUFACTURED BY IT. FOR THIS PURPOSE IT HAS ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 5 OF 18 SENT THE CIRCUIT BREAKERS TO BE TESTED IN THE LABORATORY OF PTL, WHEREIN THE CIRCUIT BREAKERS UNDERGO DESTRUCTIVE TESTS IN THE LABORATORIES. ONCE IT PASSES THROUGH THE TEST IN THE LABORATORIES, CERTIFICATE IS GIVEN BY THE PTL FOR THE QUALITY OF THE PRODUCT MANUFACTURED BY ASSESSEE. WHETHER SUCH A PAYMENT FOR THIS K IND OF TESTING FALLS WITHIN THE REALM OF FEES FOR 'TECHNICAL SERVICES'. SECTION 9(1)(VII) PROVIDES THAT INCOME BY WAY OF FEE FOR TECHNICAL SERVICES SHALL DEEMED TO ACCRUE OR ARISE IN INDIA, EXPLANATION 2 DEFINES THE 'FEES FOR TECHNICAL SERVICES' AS UNDER: SECTION 9(L)(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 FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON - RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON IN IND IA OR FOR 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 T HE 1ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL! GOVERNMENT.] [EXPLANATION 1. - FOR THE PURPOSES OF THE FOREGOING PROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE.] 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 (INCLUDING THE PROVISION OF ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 6 OF 18 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 WHIC H WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'.] [EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NONRESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB - SECTION (1) AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON - RESIDENT, 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 INDIA'.] 13. FROM THE ABOVE, IT IS SEEN THAT THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' HAS BEEN GIVEN AS CONSIDERATION FOR RENDERING MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. NO OTHER DEFINITION AS SUCH OF THE TERM TECHNICAL S ERVICES IN THE ACT HAS BEEN GIVEN. THE WORD 'TECHNICAL' AS APPEARING IN EXPLANATION 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 CASE PRINCIPLE OF NOSCITUR A SOCIIS GETS ATTRACTED, WHICH MEANS THAT THE MEANING OF THE WORD OR EXPRESSION IS TO BE GATHERED FROM THE SURROUNDING WORD I.E. FROM THE CONTEXT. COUPLING OF T HE WORDS TOGETHER SHOWS THAT THEY ARE TO BE UNDERSTOOD IN THE SAME SENSE. THE WORD 'MANAGERIAL AND CONSULTANCY' IS A DEFINITE INDICATIVE OF THE INVOLVEMENT OF A HUMAN ELEMENT. MANAGERIAL SERVICES AND CONSULTANCY SERVICES HAS TO BE GIVEN BY HUMAN ONLY AND N OT BY ANY MEANS OR EQUIPMENT. THEREFORE, THE WORD 'TECHNICAL' HAS TO BE CONSTRUED IN THE SAME SENSE INVOLVING DIRECT HUMAN INVOLVEMENT WITHOUT THAT, TECHNICAL SERVICES CANNOT BE HELD TO BE MADE AVAILABLE. WHERE SIMPLY AN EQUIPMENT OR SOPHISTICATED MACHINE OR STANDARD FACILITY IS PROVIDED ALBEIT DEVELOPED OR MANUFACTURED WITH THE USAGE OF TECHNOLOGY, ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 7 OF 18 SUCH A USER CANNOT BE CHARACTERIZED AS PROVIDING TECHNICAL SERVICES. THE HON'BLE DELHI HIGH COURT IN THE CASE OF BHARATI CELLULAR LTD. (SUPRA) IN THIS REGARD HA S 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 CONSULTANCY SERVICES' . THE WORD ' TECHNICAL' IS PRECEDED BY THE WORD ' MANAGERIAL' AND SUCCEEDED BY THE WORD ' CONSULTANCY' . SINCE THE EXPRESSION ' 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 INTERPRET ATION 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 COGNATE SENSE. THEY TAKE, AS IT WE RE, 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 TAKE COLOUR FROM THE WORDS ' MANAGERIAL' AND ' CONSULTANCY' , BETWEEN WHI CH IT IS SANDWICHED. THE WORD ' MANAGERIAL' 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, E TC.' THE WORD 'MANAGER' HAS BEEN DEFINED, INTER ALIA, AS : 'A PERSON WHOSE OFFICE IT IS TO MANAGE AN ORGANIZATION, BUSINESS ESTABLISHMENT, OR PUBLIC INSTITUTION, OR PART OF ONE ;A PERSON WITH THE PRIMARILY EXECUTIVE OR SUPERVISORY FUNCTION WITHIN AN ORGANI ZATION, ETC., A PERSON CONTROLLING THE ACTIVITIES OF A PERSON OR TEAM IN SPORTS, ENTERTAINMENT, ETC.' ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 8 OF 18 IT IS, THEREFORE, CLEAR THAT A MANAGERIAL SERVICE WOULD 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 HUMAN ELEMENT ATTACHED TO IT. TO PUT IT BLUNTLY, A MACHINE CANNOT BE A MANAGER. 14. SIMILARLY, THE WORD 'CONSULTANCY' HAS BEEN DEFINED IN THE SAID DICTIONARY AS THE WORK OR POSITION OF A CONSU LTANT; A DEPARTMENT OF CONSULTANTS. 'CONSULTANT' ITSELF HAS BEEN DEFINED, INTER ALIA, 'AS A PERSON WHO GIVES PROFESSIONAL ADVICE OR SERVICES IN A SPECIALIZED FIELD'. IT IS OBVIOUS THAT THE WORD 'CONSULTANT' IS A DERIVATIVE OF THE WORD 'CONSULT' WHICH ENTAI LS DELIBERATIONS, CONSIDERATION, 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 PERM ISSION OR APPROVAL FROM FOR A PROPOSED ACTION'. IT IS OBVIOUS THAT THE SERVICE OF CONSULTANCY ALSO NECESSARILY ENTAILS HUMAN INTERVENTION. THE CONSULTANT, WHO PROVIDES THE CONSULTANCY SERVICE, HAS TO BE A HUMAN BEING. A MACHINE CANNOT BE REGARDED AS A CONS ULTANT. 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 S OCIIS, THE WORD 'TECHNICAL' AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. BUT, THE FACILITY PROVIDED BY MTNL/OTHER COMPANIES FOR INTERCONNECTION/PORT ACCESS IS ONE WHICH IS PROVIDED AUTOMAT ICALLY BY MACHINES. IT IS INDEPENDENTLY PROVIDED 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 CONTEMPLATED IN EXPLANA TION 2 TO SECTION 9(1)(VII) OF THE SAID ACT. THIS IS SO BECAUSE THE EXPRESSION ' TECHNICAL SERVICES' TAKES COLOUR FROM THE EXPRESSIONS ' MANAGERIAL SERVICES' AND ' CONSULTANCY SERVICES' WHICH NECESSARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOW A DAYS FASHI ONABLY CALLED, HUMAN INTERFACE' ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 9 OF 18 THIS PRINCIPLE HAS BEEN REITERATED SEVERAL TIMES BY VARIOUS COURTS AND THE TRIBUNALS AS HAVE BEEN HIGHLIGHTED BY THE LEARNED COUNSEL DURING THE COURSE OF HEARING. THUS, ONE HAS TO SEE WHETHER ANY KIND OF HUMAN INTERFACE OR H UMAN INVOLVEMENT IS THERE FOR PROVIDING TECHNICAL SERVICES BY THE PTL IN THIS CASE. 14. NOW COMING TO THE FACTS OF THE PRESENT CASE, WHETHER 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 AO AFTER DRAWING HIS ATTENTION TO THE FLYER RECEIVED FROM THE PTL HAD CATEGORICALLY POINTED OUT THAT THE STANDARD SERVICE PROVIDED BY THE PTL IS WITHOUT ANY HUMAN INTERVENTION. THIS FACTO R HAS NOT BEEN DISPUTED BY HIM. EVEN BEFORE THE CIT (A), THIS CONTENTION HAS BEEN DEPOSED 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 HAVE EITHER REBUTTED THIS CONTENTION OF A SSESSEE, OR HAS GIVEN ANY ADVERSE REMARK OR FINDINGS THAT THERE WAS ANY HUMAN INTERVENTION IN THE PROCESS. THE LEARNED CIT (A) AS WELL AS AO HAVE GONE MERELY BY THE FACT THAT SUCH A TYPE TESTING SERVICES PROVIDED BY THE PTL IS HIGHLY SOPHISTICATED AND TECH NICAL, AND IT CANNOT BE CONSIDERED AS NON TECHNICAL. THEREFORE, BEING HIGHLY TECHNICAL IN NATURE, IT AMOUNTS TO RENDERING OF TECHNICAL SERVICES. FROM THE PERUSAL OF THE FLYER AS SUBMITTED BY THE LEARNED COUNSEL, IT IS SEEN THAT IT DESCRIBES VARIOUS 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 CAPACITY, DIELECTRIC TEST, TEMPERATURE RISE TESTS, MAGNETIC TESTS, CLIMATIC T ESTS AND OTHER KIND OF TESTS. THESE TESTS ARE CARRIED OUT IN A LAB BY THE AUTOMATIC MACHINES THOUGH UNDER OBSERVATIONS OF TECHNICAL EXPERTS. ONCE THESE TESTS ARE DONE SUCCESSFULLY BY THE MACHINES, A CERTIFICATE IS ISSUED BY THE AUTHORITIES OF THE PTL. THE LEARNED CIT (DR) HAD ARGUED THAT FOR OBSERVING THE PROCESS, PREPARING THE REPORT, ISSUANCE OF CERTIFICATE AND FOR MONITORING OF MACHINES, HUMAN INVOLVEMENT IS DEFINITELY THERE, THEREFORE, IT CANNOT BE HELD THAT THERE IS NO HUMAN ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 10 OF 18 INTERVENTION. IN OUR OPINIO N, THIS CANNOT BE THE CRITERIA FOR UNDERSTANDING THE TERM 'TECHNICAL SERVICES' AS CONTEMPLATED IN EXPLANATION 2 TO SECTION 9(L)(VII). IF ANY PERSON DELIVERS ANY TECHNICAL SKILLS OR SERVICES OR MAKE AVAILABLE ANY SUCH SERVICES THROUGH AID OF ANY MACHINE, EQ UIPMENT OR ANY KIND OF TECHNOLOGY, THEN SUCH A RENDERING OF SERVICES CAN BE INFERRED AS 'TECHNICAL SERVICES'. IN SUCH A SITUATION THERE IS A CONSTANT HUMAN ENDEAVOUR AND THE INVOLVEMENT OF THE HUMAN INTERFACE. ON THE CONTRARY, IF ANY TECHNOLOGY OR MACHINE DEVELOPED BY HUMAN AND PUT TO OPERATION AUTOMATICALLY, WHEREIN IT OPERATES WITHOUT ANY MUCH OF HUMAN INTERFACE OR INTERVENTION, THEN USAGE OF SUCH TECHNOLOGY CANNOT PER SE BE HELD AS RENDERING OF 'TECHNICAL SERVICES' 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 HAVE BEEN PROVIDED BY THE HUMANS AFTER A TEST IS CARRIED OUT IN A LABORATORY AUTOMATICALLY BY THE MACHINES, I T CANNOT BE HELD THAT SERVICES HAVE BEEN PROVIDED THROUGH THE HUMAN SKILLS. THEREFORE, THE CONTENTION RAISED BY THE LEARNED CIT (DR) DOES NOT APPEAL MUCH TO US. 6.2 WE FURTHER FIND THAT HON'BLE AGRA TRIBUNAL IN THE CASE OF METRO & METRO VS. ADDL. CIT HAS ALSO NOTED THE CASE LAW OF SIEMENS LTD. IN ITS ORDER AND HAS ALSO NOTED THAT THE CASE LAW OF BHARTI CELLULAR LTD. RELIED ON BY HON'BLE MUMBAI TRIBUNAL AND WHICH AS PER THE HON'BLE AGRA TRIBUNAL HAS ALREADY BEEN SET ASIDE BY HON'BLE SUPREME COURT TO ASSESS ING OFFICER FOR THE PURPOSE OF EXAMINING AS TO WHETHER ANY HUMAN ELEMENT WAS INVOLVED IN THAT PROCESS OR NOT. THE FINDINGS OF HON'BLE AGRA TRIBUNAL AS CONTAINED IN PARA 25, ARE REPRODUCED AS UNDER: 25. WE MAY ALSO POINT OUT THAT WHILE THIS JUDGMENT DID NOT MEET APPROVAL OF HON'BLE SUPREME COURT, IN THE JUDGMENT REPORTED AS CIT V. BHARTI CELLULAR LTD. [2011] 330 ITR 239, ON THE SHORT FACTUAL ASPECT REGARDING FACT OF HUMAN INTERVENTION. IT WAS FOR RECORDING THE FACTUAL FINDINGS ON THIS ASPECT THAT THE MATT ER WAS REMITTED TO THE FILE OF THE ASSESSING OFFICER. HOWEVER, SO FAR AS THE PRINCIPLE LAID DOWN BY HON'BLE DELHI HIGH COURT ON THE APPLICATION OF PRINCIPLE OF NOSCITUR A SOCIIS IN ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 11 OF 18 RESTRICTING THE SCOPE OF 'TECHNICAL SERVICES' TO TECHNICAL SERVICES WITH A HUMAN INTERFACE WAS CONCERNED, THEIR LORDSHIPS OF HON'BLE SUPREME COURT TOOK NOTE OF THE SAID PRINCIPLE AND LEFT IT INTACT. THE STAND TAKEN BY HON'BLE DELHI COURT, IN OUR HUMBLE UNDERSTANDING, STANDS APPROVED. OF COURSE, WHAT CONSTITUTES A TECHNICAL SERVIC E WITHOUT HUMAN INTERFACE IS ESSENTIALLY A QUESTION OF FACT AND EACH CASE WILL HAVE TO BE EXAMINED ON ITS OWN FACTS. HOWEVER, AS LONG AS THERE IS NO HUMAN INTERVENTION IN A TECHNICAL - SERVICE, IN THE LIGHT OF LAW SO LAID DOWN, IT CANNOT BE TREATED AS A TECH NICAL SERVICE UNDER SECTION 9(1)(VII). 6.3 FROM THE ABOVE TWO DECISIONS OF HON'BLE AGRA AND MUMBAI TRIBUNAL, WE FIND THAT THESE TWO DECISIONS HAVE BEEN RENDERED FOLLOWING THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF BHARTI CELLULAR WHEREIN HON 'BLE DELHI HIGH COURT HAS HELD THAT IF THERE IS NO HUMAN ELEMENT IN A TECHNICAL SERVICE THEN THE FEE PAID FOR THAT SERVICE CANNOT BE SAID TO BE FEE FOR TECHNICAL SERVICE. HON'BLE SUPREME COURT THROUGH UPHELD THE FINDINGS OF HON'BLE DELHI HIGH COURT BUT HA D SET ASIDE THE ORDER TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF EXAMINING AS TO WHETHER ANY HUMAN ELEMENT WAS INVOLVED OR NOT. 6.4 IN THE PRESENT CASE ALSO, WE FIND THAT IT IS NOT COMING FROM THE RECORD AS TO WHETHER IN THE PROCESS OF TESTING BY FOREIGN ENTITY WHETHER ANY HUMAN ELEMENT WAS INVOLVED OR NOT. THE LEARNED CIT(A) HAS ALSO IN HIS ORDER HELD THAT NO PROCESS DETAILS INVOLVED IN TESTING WERE PLACED ON RECORD TO ADJUDICATE THE CONTENTION THAT THE PROCESS UNDERTAKEN BY THE FOREIGN ENTITIES WERE SUCH WHICH DID NOT REQUIRE HUMAN INTERVENTION AT ALL. 6.5 THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND JUDICIAL PRECEDENTS, WE DEEM IT APPROPRIATE TO REMAND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHOULD EXAMINE THE PRO CESS DETAILS UNDERTAKEN BY THE FOREIGN ENTITY IN TESTING THE GOODS OF THE ASSESSEE. THE ASSESSEE WILL BE AT LIBERTY TO FILE ANY EVIDENCE TO DEMONSTRATE AS TO WHETHER ANY HUMAN ELEMENT WAS INVOLVED IN TESTING ITS PRODUCT OR NOT. THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFRESH AFTER KEEPING IN VIEW THE DEFINITION OF TECHNICAL SERVICES AS UPHELD BY HON'BLE SUPREME COURT AND WILL EXAMINE THE HUMAN ELEMENT IN THE PROCESS AND WILL DECIDE ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 12 OF 18 ACCORDINGLY. THEREFORE, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES . 11 . THE A.O, VIDE ORDER(S), DATED 19/3/2019, PASSED IN PURSUANCE OF THE ABOVE TRIBUNAL ORDER, HAS DELETED THE DISALLOWANCE HIMSELF, OBSERVING, AS FOLLOWS (SCANNED COPY REPRODUCED) : ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 13 OF 18 ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 14 OF 18 ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 15 OF 18 ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 16 OF 18 12 . IT REMAINS UNCHALLENGED AT THE HANDS OF THE DEPARTMENT THAT THE F ACTS IN ALL THE YEARS UNDER CONSIDERATION REMAIN, MUTATIS MUTANDIS, EXACTLY THE SAME AS THOSE PRESENT FOR ASSESSMENT YEAR 2012 - 13. THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2012 - 13 HAVING BEEN PASSED ON 19/3/2019, THE BENEFIT OF THE SAME WAS NOT AVAILABLE TO THE TAXING AUTHORITIES FOR THE YEARS UNDER CONSIDERATION, I.E., ASSESSMENT YEARS 2013 - 14, 2014 - 15 AND 2015 - 16. THE ASSESSMENT ORDER FOR ASSESSMENT ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 17 OF 18 YEAR 2013 - 14, AS NOTED BY THE LD. CIT(A) IN THE OPENING PORTION OF HIS ORDER, WAS PASSED ON 30/3/2016. T HE LD. CIT(A)S ORDER ITSELF WAS PASSED ON 8/5/2018. FOR ASSESSMENT YEAR 2014 - 15, THE ASSESSMENT ORDER IS DATED 15/9/2017 AND THE LD. CIT(A)S ORDER IS OF 8/5/2018. CONCERNING ASSESSMENT YEAR 2015 - 16, THE ASSESSMENT ORDER WAS PASSED ON 7/12/2017, WHEREAS THE LD. CIT(A) DECIDED THE APPEAL ON 8/5/2018, AS IS THE DATE QUA THE OTHER TWO ASSESSMENT YEARS AS WELL. BE THAT AS IT MAY, THE FACT REMAINS THAT IN THE INITIAL YEAR OF ASSESSMENT QUA THIS ISSUE, PURSUANT TO THE TRIBUNAL ORDER (SUPRA), THE A.O HAS HIMSE LF ACCEPTED THE PAYMENT MADE TO BE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES, ON WHICH TDS WAS REQUIRED TO BE DEDUCTED. THE DISALLOWANCE MADE HAS, AS SUCH, BEEN DELETED BY THE A.O HIMSELF. THAT BEING SO, THE LD. A.R. OF THE ASSESSEE IS CORRECT IN CONTENDING , AND THE DEPARTMENT HAS NOT BEEN ABLE TO RE FUTE THIS, THAT FOR THE YEARS UNDER CONSIDERATION ALSO, THE DISALLOWANCE HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). 13 . IN VIEW OF THE ABOVE, WE FIND THE GRIEVANCE OF THE DEPARTMENT FOR ALL THE YEARS UND ER CONSIDERATION TO BE SHORN OF MERIT. THE SAME IS, ACCORDINGLY, REJECTED. THE ORDERS UNDER APPEAL FOR ALL THE YEARS UNDER CONSIDERATION ARE UPHELD. 14 . IN THE RESULT, ALL THE APPEALS ARE DISMISSED AND ALL THE CROSS OBJECTIONS ARE DISMISSED AS WITHDRAWN. OR DER PRONOUNCED IN THE OPEN COURT ON 14 / 0 6 /201 9 . SD/ - SD/ - [ T. S. KAPOOR ] [ A. D. JAIN ] ACCOUNTANT MEMBER VICE PRESIDENT DATED: 14 /0 6 / 201 9 JJ: 0706 ITA NO.573 TO 575/LKW/2018 & C. O. NO.24 TO 26/LKW/2018 PAGE 18 OF 18 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTANT REGISTRAR