ITO, WD-1(4), TDS, NADIA & MURSHIDABAD, Murshidabad V. M/s The West Bengal Power Development Corporation Ltd., Murshidabad

ITA 717/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0777 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP LAKRA CITSRDR
• Section: 194C; 201(1)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 717 - 719 / KOL / 20 16 ASSESSMENT YEARS :2011-12 TO 2013-14 INCOME TAX OFFICER, WARD-1(4) (TDS), NADIA & MURSHIDABAD V/S . M/S THE WEST BENGAL POWER DEVELOPMENT CORPORATION LTD. SAGARDIGHI TPS, ADMINISTRATIVE BUILDING P.O. MANIGRAM DIST. MURSHIDABAD, WEST BNGAL-742237 [ PAN NO.CALTO 4292 B ] /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI RAVI TULSIYAN, FCA /BY RESPONDENT SHRI SANDEEP LAKRA, ADDL. CIT-SR-DR /DATE OF HEARING 22-11-2018 /DATE OF PRONOUNCEMENT 30-11-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THESE THREE REVENUES APPEAL(S) FOR ASSESSMENT YEAR S 2011-12, 2012- 13 & 2013-14 ARISE FROM COMMISSIONER OF INCOME TAX (APPEALS)-24, KOLKATAS COMMON ORDER DATED 22.01.2016, PASSED IN CASE(S) NO .1314, 1315 & 1316/CIT(A)-24/KOL/14-15; RESPECTIVELY REVERSING TH E ASSESSING OFFICERS ACTION RAISING TDS DEMANDS OF 11,04,99,237/-, 132,94,589/- & 185,10,637/- RESPECTIVELY, INVOLVING PROCEEDINGS U/ S. 201(1) R.W.S 201(1A) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. WE NOTICE AT THE OUTSET THAT REVENUES ALL THREE INSTANT APPEAL(S) SUFFER FROM THREE DAYS DELAY EACH IN FILING. IT HAS PLACE D ON RECORD CONDONATION PETITIONS CITING REASONS THEREOF WHICH ARE NOT DISP UTE AT ASSESSEES BEHEST. ITA NO.717-719/KOL/2016 A.YS11-12 TO 13-14 ITO WD-1(4)(TDS), NADIA & MURSHIDABAD VS. M/S THE WBPDCL PAGE 2 WE THEREFORE CONDONE THE IMPUGNED DELAY OF THREE DA YS FILING IN EACH OF THESE CASES. 3. WE NOW ADVERT MERITS INVOLVED IN THESE CASES. TH E REVENUES IDENTICAL SOLE SUBSTANTIVE GROUND PLEADS THAT CIT(A) HAS ERRE D IN LAW AS WELL AS ON FACTS IN REVERSING ASSESSING OFFICERS ACTION TREAT ING ANNUAL MAINTENANCE CONTRACTS AMC PAYMENTS MADE TO VARIOUS PAYEES AS FEE FOR TECHNICAL SERVICES. AS FOLLOWS:- 3. THE AO' ORDER U/S 201(1)/201(1A) HAS MERELY REP EATED GENERAL OBSERVATION IN RESPECT OF 17 PAYEES. THE AO'S ARGUM ENT IS THAT AS EXPERT OR KNOWLEDGEABLE MANPOWER WAS UTILIZED THE A PPELLANT IS REQUIRED TO DEDUCT TD U/S.194J. THEREBY, THE AO IMP LIES THAT WHAT WAS PAID BY THE APPELLANT TO VARIO9US CONTRACTORS WERE FEES FOR TECHNICAL SERVICES. THE AO HAS THUS TREATED PAYMENTS TO ALL 1 7 PARTIES AS LISTED IN HIS ORDER AS LIABLE TO DEDUCTION U/S. 194J.REASONS FOR HIS DECISION IS MERE REPETITIVE IN RESPECT OF ALL PAYEES. THERE IS NO FINDING IN THE ORDER THAT FEES WERE PAID FOR THE SERVICES RECEIVED BY TH E APPELLANT AND TREATED AS FEES BY THE AO. 3.1 IN MY VIEW, THE JUDICIAL DECISIONS AS CITED ABO VE, DISTINGUISH THE CASES WHERE EXPERTISE IS TRANSFERRED AND FEES ARE P AID FROM THOSE WERE TECHNICAL KNOWLEDGE OR SKILLS ARE UTILIZED BY THE P ROVIDERS OF THE SERVICES TO OFFER SOME SERVICES OR FACILITY TO PAYER. IT IS ONLY IN THE FORMER CASES WHERE THE RECIPIENT OF SERVICES ACQUIRE EXPERTISE A ND ARE ABLE TO RESEARCH ON THAT AND UTILIZE THAT, THAT THE COURTS HAVE HELD SECTION 194J APPLICABLE ON PAYMENT MADE AS FEES FOR THE PURPOSES INVOLVED I THE LATTER CASES WHERE SERVICE PROVIDERS OR CONTRACTORS ARE NOT PARTING WITH OR TRANSFERRING EXPERTISE OR SKILLS BUT ARE ONLY OF FERING SERVICES BECAUSE OF UTILIZATION OF SPECIAL SKILLS, THE COURTS ARE HO LDING SECTION 194J NOT APPLICABLE. THE AO IS NOT CLEAR WHETHER ANY SKILLS OR EXPERTISE OR TECHNOLOGY WAS TRANSFERRED TO THE APPELLANT DEDUCTO R. I, THEREFORE, SEE NO REASON TO UPHOLD THE AO'S DECISION. THE GROUNDS ARE ALLOWED AS SERVICES PROVIDED CANNOT BE TREATED AS ONES FOR FEE S FOR TECHNICAL SERVICES U/S194J. 4. LEARNED CIT-DR VEHEMENTLY CONTENDS THAT THE ASSE SSING OFFICER HAD RIGHTLY INVOKED SEC. 194J OF THE ACT ON ASSESSEES PAYMENT MADE TO VARIOUS PAYEES / PERSONS SINCE THE AMC IN QUESTION INVOLVED SPECIALIZED KNOWLEDGE IN MAINTENANCE OF ITS THERMAL POWER UNITS. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. THERE IS NO DISPUTE ABOUT THE ASS ESSEE HAVING MADE THE IMPUGNED PAYMENTS IN LIEU OF AVAILING ANNUAL MAINTE NANCE SERVICES FROM THE ITA NO.717-719/KOL/2016 A.YS11-12 TO 13-14 ITO WD-1(4)(TDS), NADIA & MURSHIDABAD VS. M/S THE WBPDCL PAGE 3 PAYEES IN ISSUE. IT DEDUCTED TDS THEREUPON U/S 194C OF THE ACT. THE REVENUES ENDEAVOUR HEREIN IS THAT THE PAYEE(S) PAR TY HAD RENDERED TECHNICAL SERVICE AND THEREFORE SEC. 194J STEPS IN. WE NOTICE IN THIS BACKDROP OF FACTS THIS TRIBUNALS DECISION IN DCIT VS. PARASRAMPURIA SYNTHETICS ITA NO. 1354/DEL/2005 DECIDED ON 30.11.2007 REJECTED REVENU ES SIMILAR SUBSTANTIVE GRIEVANCE SEEKING TO TREAT CONTRACTUAL PAYMENTS AS FEE FOR TECHNICAL SERVICES AS FOLLOWS:- 1. GROUND NOS.1 TO 3. THE APPELLANT HAS RELIED ON THE DECISION OF HON'BLE ITAT DELHI BENCH 'H' IN THE CASE OF DCIT CIRCLE-51(1), NEW DELHI VS. PARASRAMPURIA S YNTHETICS LTD. (IN APPEAL NO.1354 (DELHI) OF 2005, A.Y. 1999-2000, NOVEMBER 3 0, 2007). THE FACTS IN THE ABOVE CASE ARE AS UNDER:- 'DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE-CO MPANY MADE CERTAIN PAYMENT TO A CONTRACTOR IN RESPECT OF INSPECTION AN D MAINTENANCE SUPPORT AGREEMENT, FABRICATION OF CHILLED WATER LINE, WORK ORDER FOR THERMAL INSULATION/ ERECTION, CONVERSION OF PARTIALLY ORIENTED YAM (POY ) INTO POLYESTER TEXTURED YAM, AND TWISTED YAM, AND DEDUCTED TAX AT SOURCE AS PER THE PROVISION OF SECTION 194C. THE ASSESSING OFFICER HELD THAT THE P AYMENT IN QUESTION AMOUNTED TO PAYMENT OF FEES FOR TECHNICAL SERVICES AND NOT MERELY PAYMENT TO A CONTRACTOR AND, THEREFORE, THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE AS PER PROVISIONS OF SECTION 194J. HE, THERE FORE, TREATED THE ASSESSEE AS ASSESSEE- IN-DEFAULT UNDER SECTION 201(1} AND AL SO LEVIED INTEREST UNDER SECTION 201(1A) UPON IT.' 1. 1 THE DECISION AND THE REASON FOR THE DECISION I N THE ABOVE CASE AS IN PARA-5 IS REPRODUCED AS UNDER :- 'WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE TERM ' FEES FOR TECHNICAL SERVICES ' AS PER EXPLANATION 2 TO SECTION 194J MEANS AS DEF INED IN EXPLANATION 2 BELOW CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9, EXTRACTED HEREIN: 'FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNIC AL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERA TION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL O R OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION , ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT CHARGEA BLE UNDER THE HEAD 'SALARIES '. ' HON'BLE MADRAS HIGH COURT IN THE CASE OF SKYCELL CO MMUNICATIONS LTD. (SUPRA) OBSERVED THUS: 'IN THE MODEM DAY WORLD ALMOST EVERY FACET OF ONE'S LIFE IS LINKED TO SCIENCE AND TECHNOLOGY INASMUCH AS NUMEROUS THINGS USED OR RELIED UPON IN EVERYDAY LIFE IS THE RESULT OF SCIENTIFIC AND TECHN OLOGICAL DEVELOPMENT. EVERY INSTRUMENT OR GADGET THAT IS USED TO MAKE LIFE EASI ER IS THE RESULT OF SCIENTIFIC INVENTION OR DEVELOPMENT AND INVOLVE THE USE OF TEC HNOLOGY. ON THAT SCORE) EVERY PROVIDER OF EVERY INSTRUMENT OR FACILITY USED BY A PERSON CANNOT BE REGARDED AS PROVIDING TECHNICAL SERVICE. ' 'WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE TO ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOGY, VIZ, AN A UTOMOBILE. IT ITA NO.717-719/KOL/2016 A.YS11-12 TO 13-14 ITO WD-1(4)(TDS), NADIA & MURSHIDABAD VS. M/S THE WBPDCL PAGE 4 CANNOT ON THAT GROUND BE SAID THAT THE TAXI DRIVER WHO CONTROLS THE VEHICLE AND MONITORS ITS MOVEMENT IS RENDERING A TE CHNICAL SERVICE TO THE PERSON 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 SERVICE TO THE PA SSENGER AND, THEREFORE, THE PASEENGER IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE RAILWAY OR THE AIRLINE FOR HAVING USED IT FOR TRAVELLING FROM ONE DESTINATION TO ANOTHER. WHE N A PERSON TRAVELS BY BUS, IT CANNOT BE SAID THAT THE UNDERTAKING WHIC H OWNS THE BUS SERVICES RENDERING TECHNICAL SERVICE TO THE PASSENG ER AND, THEREFORE, THE PASSENGER MUST DEDUCT TAX AT SOURCE ON THE PAYM ENT MADE TO THE BUS SERVICE PROVIDER FOR HAVING USED THE BUS. THE E LECTRICITY SUPPLIED TO A CONSUMER CANNOT, ON THE GROUND THAT GENERATORS ARE USED TO GENERATE ELECTRICITY, TRANSMISSION LINES TO CARRY T HE TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METERS TO MEASURE THE CONSUMPTION) BE REGARDED AS AMOUNTING TO PROVISION OF TECHNICAL SER VICES TO THE CONSUMER RESULTING IN THE CONSUMER HAVING TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE FOR POWER CONSUMED AND REMIT THE S AME TO THE REVENUE. INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPM ENTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE BENEFI T OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT IN THE PROVISION OF TECHN ICAL SERVICE TO THE CUSTOMER FOR A FEE. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULAR TE LEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNICATE WITH OTHERS HE DOES NOT CONTRACT TO RECEIVE A TECHNICAL SERVICE. WHAT HE DO ES 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 INSTALLED SOPHISTICAL TECHNICA L EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOES NOT ON THAT SCORE, MAKE IT PROVISION OF TECHNICAL SERVICE TO THE SUBSCRIBER. T HE SUBSCRIBER IS NOT CONCERNED WITH THE COMPLEXITY OF THE EQUIPMENT INST ALLED IN THE EXCHANGE 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 0 THE PERSON AT THE NUMBER TO WHICH HE DESIRES TO BE CONNECTED. WHAT APPLIES TO CELLULAR MOBILE TELEPHONE IS ALSO APPLICABLE IN FIXED TELEPH ONE SERVICE. NEITHER SERVICE CAN BE REGARDED AS 'TECHNICAL SERVICE' FOR THE PURP OSE OF SECTION 194J OF THE ACT.' IN THE PRESENT CASE, IT IS SEEN THAT THERE MAY BE U SE OF SERVICES OF TECHNICALLY QUALIFIED PERSONS TO RENDER THE SERVICES BUT THAT I TSELF DO NOT BRING THE AMOUNT PAID AS ' FEES FOR TECHNICAL SERVICES ' WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9( 1)(VII). THE AMOUNTS PAID ARE TOWARDS ANNUAL MAINTENANCE CON TRACT OF CERTAIN MACHINERY OR FOR CONVERTING POY INTO TEXTURED/TWISTED YAM. THE T ECHNOLOGY OR THE TECHNICAL KNOWLEDGE OF THE PERSONS IS NOT MADE AVAILABLE TO T HE ASSESSEE BUT ONLY BY USING SUCH TECHNICAL KNOWLEDGE SERVICES ARE RENDERED TO T HE ASSESSEE. IN SUCH A CASE, IT CANNOT BE SAID THAT THE AMOUNT IS PAID AS ' FEES FOR TECHNICAL SERVICES '. RENDERING SERVICES BY USING TECHNICAL KNOWLEDGE OR SKILL IS D IFFERENT THAN CHARGING FEES FOR TECHNICAL SERVICES. IN: A LATER CASE, THE TECHNICAL SERVICES ARE MADE AVAILABLE DUE TO WHICH THE ASSESSEE ACQUIRED CERTAIN RIGHT WHICH CAN BE FURTHER USED. IN THE PRESENT CASE, IT IS NOT SO. THE PERSON RENDERING CERTAIN SE RVICES HAS ONLY MAINTAINED MACHINERY OR CONVERTED YAM BUT THAT KNOWLEDGE IS NO T NOW VESTED WITH THE ASSESSEE BY WHICH ITSELF IT CAN DO RESEARCH WORK. IN THE CIR CUMSTANCES, THE AMOUNT PAID CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 194J OF THE ACT. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO.717-719/KOL/2016 A.YS11-12 TO 13-14 ITO WD-1(4)(TDS), NADIA & MURSHIDABAD VS. M/S THE WBPDCL PAGE 5 5. WE OFFERED SUFFICIENT OPPORTUNITIES TO THE LEARN ED DEPARTMENTAL REPRESENTATIVE FOR INDICATING ANY TECHNICAL EXPERTI SE TO HAVE BEEN MADE AVAILABLE TO THE ASSESSEE PAYER FORMING SINE QUA NON TO INVOKE SEC. 194J R.W.S. 9(1)(VII) OF THE ACT. THERE IS NO SUCH EVIDE NCE FORTHCOMING FROM THE CASE FILE. WE THEREFORE FOLLOW THE ABOVE REFERRED CO-ORD INATE BENCHS DECISION TO AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE IN ALL THREE INSTANT CASE(S). 6. THESE THREE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30/11/2018 SD/- SD/- ( ) (( ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S )- 30 / 11 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S THE WEST BENGAL POWER DEVELOPMENT CRP N. LTD. SAGARDIGHI TPS ADMINISTRATIVE BUI LDING P.O. MANIGRAM DIST-MURSHIDABAD W.B.742237 2. /REVENUE-ITO WARD-1(4),(TDS), NADIA & MURSHIDABAD,K URCHIPOTA LANE, P.O. KRISHNAGAR DIST. MUR SHIDABAD 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 4,