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

ITA 7276/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88212 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 05-02-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: PRIYESH BHATT
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI N. K. BILLAIYA ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 SIEMENS LTD. 130, PANDURANG BUDHKAR MARG, WORLI, MUMBAI- 400 018 PAN:AAACS 0764 L VS. DDIT (IT)2(1) 120 SCINDIA HOUSE, BALLARD ESTATE MUMBAI- 400 038 (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI PRIYESH BHATT REVENUE BY : SHRI VIVEK PERAMPURNA DA TE OF HEARING : 05.02.2015 DATE OF ORDER : 05.02.2015 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 28.09.2012, PASSED BY LD. CIT(A)-11 U/S 195(2 ) FOR THE A.Y. 2011-12, MAINLY ON THE FOLLOWING GROUNDS:- 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER OF INCOME-TAX (APPEALS)-11 [HEREINAFTE R REFERRED TO AS THE CIT(A)] OUGHT TO HAVE HELD THAT NO TAX IS RE QUIRED TO BE DEDUCTED AT SOURCE FROM THE PAYMENT TO BE MADE TO P EHLA TESTING LABORATORY (PEHLA) TOWARD TYPE TESTS. 2. THE CIT(A) ERRED IN CONCLUDING THAT THERE IS A T ECHNICAL HUMAN INTERVENTION INVOLVED AT VARIOUS LEVELS OF TESTING IGNORING THE FACT THAT THE PAYMENT WAS MADE ONLY FOR THE STANDARD FAC ILTY PROVIDED BY THE LABORATORY BY USE OF HIGHLY SOPHISTICATED EQ UIPMENT AND ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 2 MACHINERIES FOR CONDUCTING TEST WITHOUT ANY FAIR DE GREE OF HUMAN EXPERTISE/ELEMENT INVOLVED IN IT. 3. THE CIT(A) ERRED IN CONFIRMING THE STAND OF THE AO THAT THE PAYMENT TO BE MADE TO PEHLA IS IN THE NATURE OF FEE S FOR TECHNICAL SERVICES COVERED BY SECTION 9(1)(VII) READ WITH EXP LANATION TO SECTION 9 OF THE INCOME-TAX ACT, 1961 AND AS PER DO UBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND GERM ANY. 4. 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 DTAA B ETWEEN INDIA AND GERMANY, THE PAYMENT WAS NOT LIABLE TO TAX IN I NDIA IN THE ABSENCE OF A PERMANENT ESTABLISHMENT (PE) IN INDIA TO WHICH SUCH PAYMENT COULD BE ATTRIBUTED. 2. AT THE OUTSET, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IS SQUARELY COVER ED BY THE DECISION OF THE TRIBUNAL ORDER DATED 12.02.2013 PASSED IN ASSES SEES OWN CASE RENDERED ON SIMILAR SET OF FACTS. LD. DR ALSO ADMIT TED THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S MADE AN APPLICATION U/S 195(2) FOR MAKING REMITTANCE TO PEH LA TESTING LABORATORY LOCATED AT BERLIN, SIEMENSSTADT, 13623, BERLIN GERM AN. ALONG WITH THE APPLICATION, THE ASSESSEE HAS GIVEN A DETAILED WRIT TEN SUBMISSION JUSTIFYING AS TO WHY SUCH A REMITTANCE IS NOT TAXAB LE IN INDIA. THE SAID SUBMISSION WERE SIMILAR TO SUBMISSIONS MADE IN THE EARLIER YEARS. THE ASSESSEES SUBMISSION HAS BEEN SUMMARIZED BY THE AO FROM PAGES 1 TO 3 OF THE ORDER. HOWEVER, THE ASSESSING OFFICER REJE CTED THE ASSESSEES SUBMISSION AND HELD THAT THE PAYMENT MADE BY THE AS SESSEE TO PEHLA LABORATORY IS TAXABLE AS FEES FOR TECHNICAL SERVIC ES (FTS) AS PER DTAA BETWEEN INDIA AND GERMANY AND ALSO U/S 9(1)(VII) U NDER THE INCOME- ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 3 TAX ACT. ACCORDINGLY, HE DIRECTED THE ASSESSEE TO D EDUCT TAX @ 10% ON THE GROSS AMOUNT OF PAYMENT. 4. BEFORE THE LD. CIT(A), DETAILED SUBMISSIONS WAS MADE AS TO WHY SUCH A PAYMENT CANNOT BE TREATED AS FTS. HOWEVER, L D. CIT(A) AFTER DETAILED DISCUSSION, HELD THAT THE PAYMENT MADE TO PEHLA LABORATORY HAS RIGHTLY BEEN TREATED AS FTS UNDER THE DOMESTIC LAW AS WELL AS UNDER DTAA. THE ASSESSEES CASE BEFORE THE CIT(A), HAD BE EN THAT, THERE IS NO HUMAN INVOLVEMENT BY THE PEHLA LABORATORY WHILE UND ERTAKING TEST OF CIRCUITS BREAKERS MANUFACTURED BY THE ASSESSEE, AS IT IS BEING DONE THROUGH AUTOMATED MACHINES IN SPECIALIZED LABORATOR IES AND THEN A CERTIFICATE IS ISSUED. WHEREAS, THE LD. CIT(A) CONT ENTION IS THAT SOME KIND OF HUMAN INTERVENTION IS INVOLVED FOR CONDUCTI NG THE TEST. HE HAS ALSO ANALYZED THE KIND OF HUMAN INTERVENTION WHICH IS INVOLVED DURING THE PROCESS. 5. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AND ALSO THE ORDER OF THE ITAT IN ASSESSEES OWN CA SE, WE FIND THAT, PRECISELY THE SAME ISSUE WAS INVOLVED IN THE EARLIE R YEAR ALSO. IN THE SAID DECISION, THE TRIBUNAL HAS ANALYZED THE ENTIRE PROC ESS OF LABORATORY TEST AND HOW THERE IS NO HUMAN INTERVENTION FOR RENDERIN G OF TECHNICAL SERVICES. THE RELEVANT OBSERVATION AND THE FINDING ARE REPRODUCED HEREUNDER:- 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 THE PARTIES. ONE OF THE MA IN ISSUE FOR OUR ADJUDICATION WHICH ALSO GOES TO THE CORE OF THE ISSUE IS, WHETHER THE PAYMENT MADE TO PEHLA TESTING LABORATOR IES IN GERMANY, FOR CARRYING OUT CERTAIN TESTS ON CIRCUIT BREAKERS MANUFACTURED BY ASSESSEE FOR THE PURPOSE OF CERTIFI CATION, SO AS TO MEET THE INTERNATIONAL STANDARD, FALLS WITHIN TH E MEANING OF FEES FOR TECHNICAL SERVICES AND IS TAXABLE WITHIN T HE MEANING OF ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 4 SECTION 9(1){VII). ASSESSEE IN PURSUANCE OF ITS TEN DER FORMALITIES WITH THE GUJARAT ENERGY TRANSMISSION CORPORATION LT D 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 SENT TH E CIRCUIT BREAKERS TO BE TESTED IN THE LABORATORY OF PTL, WHE REIN THE CIRCUIT BREAKERS UNDERGO DESTRUCTIVE TESTS IN THE L ABORATORIES. ONCE IT PASSES THROUGH THE TEST IN THE LABORATORIES , CERTIFICATE IS GIVEN BY THE PTL FOR THE QUALITY OF THE PRODUCT MAN UFACTURED BY ASSESSEE. WHETHER SUCH A PAYMENT FOR THIS KIND OF T ESTING FALLS WITHIN THE REALM OF FEES FOR 'TECHNICAL SERVICES'. SECTION 9(1)(VII) PROVIDES THAT INCOME BY WAY OF FEE FOR TECHNICAL SE RVICES SHALL DEEMED TO ACCRUE OR ARISE IN INDIA. EXPLANATION 2 D EFINES THE 'FEES FOR TECHNICAL SERVICES' AS UNDER: SECTION 9(1)(VII) '(VII) INCOME BY WAY OFFEESFOR TECHNICAL SERVICES P AYABLE BY- (A) THE GOVERNMENT; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PR OFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA; O R (B) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFE SSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF M AKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA: [PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHA LL 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 /I MEANS ANY CONSIDERATION (INCL UDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF ERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSEMBLY, MINING OR LIKE PROJE CT UNDERTAKEN ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 5 BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE IN COME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'] [EXPLANATION=-FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON- RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER C LAUSE (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 BU SINESS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN INDI A'.} 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 O THER DEFINITION AS SUCH OF THE TERM TECHNICAL SERVICES IN THE ACT H AS 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 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 T OGETHER SHOWS THAT THEY ARE TO BE UNDERSTOOD IN THE SAME SENSE. T HE WORD 'MANAGERIAL AND CONSULTANCY' IS A DEFINITE INDICATI VE OF THE INVOLVEMENT OF A HUMAN ELEMENT. MANAGERIAL SERVICES AND CONSULTANCY SERVICES HAS TO BE GIVEN BY HUMAN ONLY AND NOT BY ANY MEANS OR EQUIPMENT. THEREFORE, THE WORD 'TECHNI CAL' HAS TO BE CONSTRUED IN THE SAME SENSE INVOLVING DIRECT HUM AN INVOLVEMENT WITHOUT THAT, TECHNICAL SERVICES CANNOT BE HELD TO BE MADE AVAILABLE. WHERE SIMPLY AN EQUIPMENT OR SOPHIS TICATED MACHINE OR STANDARD FACILITY IS PROVIDED ALBEIT DEV ELOPED OR MANUFACTURED WITH THE USAGE OF TECHNOLOGY, SUCH A U SER CANNOT BE CHARACTERIZED AS PROVIDING TECHNICAL SERVICES. T HE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARATI CEL LULAR 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 CONSULTANCY SERVICES' . TH E WORD ' ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 6 TECHNICAL' IS PRECEDED BY THE WORD ' MANAGERIAL' AN D SUCCEEDED BY THE WORD ' CONSULTANCY' . SINCE THE EXPRESSION' TECHNICAL SERVICES' IS IN DOUBT AND IS UNCLEAR, THE RULE OF N OSCITUR A SOCIIS IS CLEARLY APPLICABLE. THE SAID RULE IS EXPLAINED IN MAXWELL ON THE INTERP RETATION 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, T HEY ARE UNDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOUR FROM EACH OTHER, THE MEANING OF THE MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO TH AT OF THE LESS GENERAL. ' THIS WOULD MEAN THAT THE WORD ' TECHNICAL' WOULD TA KE COLOUR FROM THE WORDS' MANAGERIAL' AND' CONSULTANCY', BETW EEN WHICH IT IS SANDWICHED. THE WORD' MANAGERIAL' HAS BEEN DEFIN ED 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 PART OF ON E ;A PRSON WITH THE PRIMARILY EXECUTIVE OR SUPERVISORY FUNCTION WIT HIN AN ORGANIZATION, ETC., A PERSON CONTROLLING THE ACTIVI TIES OF A PERSON OR TEAM IN SPORTS, ENTERTAINMENT, ETC.' IT IS, THEREFORE, CLEAR THAT A MANAGERIAL SERVICE W OULD BE ONE WHICH PERTAINS TO OR HAS THE CHARACTERISTIC OF A MA NAGER. IT IS OBVIOUS THAT THE EXPRESSION 'MANAGER' AND CONSEQUEN TLY 'MANAGERIAL SERVICE' HAS A DEFINITE HUMAN ELEMENT A TTACHED 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. 'CONSULTANT' ITSELF HAS BEEN DEFINE D, INTER ALIA, 'AS A PERSON WHO GIVES PROFESSIONAL ADVICE OR SERVICES IN A ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 7 SPECIALIZED FIELD'. IT IS OBVIOUS THAT THE WORD 'CO NSULTANT' IS A DERIVATIVE OF THE WORD 'CONSULT' WHICH ENTAILS DELI BERATIONS, CONSIDERATION, CONFERRING WITH SOMEONE, CONFERRING ABOUT OR UPON A MATTER. CONSULT HAS ALSO BEEN DEFINED IN THE SAID DICTIONARY AS ' ASK ADVICE FOR, SEEK COUNSELOR A PROFESSIONAL OPI NION FROM; REFER TO (A SOURCE OF INFORMATION) ; SEEK PERMISSION OR A PPROVAL FROM FOR A PROPOSED ACTION' . IT IS OBVIOUS THAT THE SER VICE OF CONSULTANCY ALSO NECESSARILY ENTAILS HUMAN INTERVEN TION. THE CONSULTANT, WHO PROVIDES THE CONSULTANCY SERVICE, H AS 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 ELEM ENT. AND, BOTH, MANAGERIAL SERVICE AND CONSULTANCY SERVICE, A RE PROVIDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCIIS, THE WORD 'TECHNICAL' AS APPEARING IN EXPLANATION 2 TO S ECTION 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 PROVIDE D AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROVIDED BY THE US E OF TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES NOT MEAN THAT MTNL/ OTHER COMPANIES WHICH PROVIDE S UCH FACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS CONTEMPLATED IN EXPLANATION 2 TO SECTION 9(L)(VII) OF THE SAID ACT. THIS IS SO BECAUSE THE EXPRESSION ' TECHNICAL SERVICES' TAKES COLOUR FROM THE EXPRESSIONS' MANAGERIAL SERVICES' AND' CONSULTA NCY SERVICES' WHICH NECESSARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOWADAYS FASHIONABLY CALLED, HUMAN INTERFACE' 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 INVOLV EMENT IS THERE FOR PROVIDING TECHNICAL SERVICES BY THE PTL I N THIS CASE. 14. NOW COMING TO THE FACTS OF THE PRESENT CASE, WH ETHER STANDARD SERVICE PROVIDED AT THE LABORATORY OF PTL FOR THE PURPOSE OF TESTING THE EQUIPMENTS IS DONE AUTOMATIC ALLY BY THE MACHINES OR PURELY BY HUMAN INTERVENTION. ASSESSEE BEFORE THE AO AFTER DRAWING HIS ATTENTION TO THE FLYER RECEIVE D FROM THE PTL HAD CATEGORICALLY POINTED OUT THAT THE STANDARD SER VICE PROVIDED BY THE PTL IS WITHOUT ANY HUMAN INTERVENTION. THIS FACTOR HAS NOT BEEN DISPUTED BY HIM. EVEN BEFORE THE CIT (A), THIS CONTENTION HAS BEEN DEPOSED AGAIN BY THE ASSESSEE WHICH HAS BE EN NOTED ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 8 BY HIM IN PARA 3.4 AND AGAIN IN HIS FINDINGS IN PAR A 3.7. NONE OF THE AUTHORITIES HAVE EITHER REBUTTED THIS CONTENTIO N OF ASSESSEE, OR HAS GIVEN ANY ADVERSE REMARK OR FINDINGS THAT TH ERE 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 TE STING SERVICES PROVIDED BY THE PTL IS HIGHLY SOPHISTICATED AND TEC HNICAL, AND IT CANNOT BE CONSIDERED AS NON TECHNICAL. THEREFORE, B EING HIGHLY TECHNICAL IN NATURE, IT AMOUNTS TO RENDERING OF TEC HNICAL SERVICES. FROM THE PERUSAL OF THE FLYER AS SUBMITTED BY THE L EARNED COUNSEL, IT IS SEEN THAT IT DESCRIBES VARIOUS STAGE S OF TESTS WHICH HAVE TO BE CARRIED OUT FOR TESTING THE CIRCUIT BREA KERS IN VARIOUS SOPHISTICATED MACHINES. SUCH TESTS INCLUDE SWITCHIN G CAPACITY AND SHORT CIRCUIT CURRENT CARRYING CAPACITY, DIELECTRIC TEST, TEMPERATURE RISE TESTS, MAGNETIC TESTS, CLIMATIC TESTS AND OTHE R KIND OF TESTS. THESE TESTS ARE CARRIED OUT IN A LAB BY THE AUTOMAT IC MACHINES THOUGH UNDER OBSERVATIONS OF TECHNICAL EXPERTS. ONC E THESE TESTS ARE DONE SUCCESSFULLY BY THE MACHINES, A CERTIFICAT E IS ISSUED BY THE AUTHORITIES OF THE PTL. THE LEARNED CIT (DR) HA D ARGUED THAT FOR OBSERVING THE PROCESS, PREPARING THE REPORT, IS SUANCE OF CERTIFICATE AND FOR MONITORING OF MACHINES, HUMAN I NVOLVEMENT IS DEFINITELY THERE, THEREFORE, IT CANNOT BE HELD THAT THERE IS NO HUMAN INTERVENTION. IN OUR OPINION, THIS CANNOT BE THE CRITERIA FOR UNDERSTANDING THE TERM 'TECHNICAL SERVICES' AS CONT EMPLATED IN EXPLANATION 2 TO SECTION 9(1)(VII). IF ANY PERSON D ELIVERS ANY TECHNICAL SKILLS OR SERVICES OR MAKE AVAILABLE ANY SUCH SERVICES THROUGH AID OF ANY MACHINE, EQUIPMENT OR ANY KIND O F 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 WITHOUT ANY MUCH OF HUMAN INTERFACE OR INTERVENTION, THEN USAGE OF SUCH TECHNOLOGY CANNOT PER SE BE HELD AS RENDERING OF 'T ECHNICAL SERVICES' BY HUMAN SKILLS. IT IS OBVIOUS THAT IN SU CH A SITUATION SOME HUMAN INVOLVEMENT COULD BE THERE BUT IT IS NOT A CONSTANT ENDEAVOUR OF THE HUMAN IN THE PROCESS. MERELY BECAU SE CERTIFICATES HAVE BEEN PROVIDED BY THE HUMANS AFTER A TEST IS CARRIED OUT IN A LABORATORY AUTOMATICALLY BY THE MA CHINES, IT CANNOT BE HELD THAT SERVICES HAVE BEEN PROVIDED THR OUGH THE HUMAN SKILLS. THEREFORE, THE CONTENTION RAISED BY T HE LEARNED CIT (DR) DOES NOT APPEAL MUCH TO US. 15. THE HON'BLE JUDGE IN THE CASE OF SKYCELLS COMMU NICATIONS LTD (SUPRA) WHILE INTERPRETING THE WORD 'FEES FOR T ECHNICAL ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 9 SERVICES' AS DEFINED IN EXPLANATION 2 TO SECTION 9( I)(VII) HAS MADE A VERY IMPORTANT OBSERVATION: '5. IN THE MODEM DAY WORLD, ALMOST EVERY FACET OF O NE'S LIFE IS LINKED TO SCIENCE AND TECHNOLOGY IN AS MUCH AS NUME ROUS THINGS USED OR RELIED UPON IN EVERY DAY LIFE IS THE RESULT OF SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT. EVERY INSTRUMENT OR GADG ET THAT IS USED TO MAKE LIFE EASIER IS THE RESULT OF SCIENTIFI C INVENTION OR DEVELOPMENT 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. WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE T O ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOGY, UIZ., AN AUTOMOBILE. IT CANNOT ON THAT GROUND BE SAID THAT THE TAXI DRIV ER WHO CONTROLS THE VEHICLE, AND MONITORS ITS MOVEMENT IS RENDERING A TECHNICAL SERVICE TO THE PERSON WHO USES THE AUTOMOBILE. SIMI LARLY, WHEN A PERSON TRAVELS BY TRAIN OR IN AN AEROPLANE, IT CANN OT BE SAID THAT THE RAILWAYS OR AIRLINES IS RENDERING A TECHNICAL S ERVICE TO THE PASSENGER AND, THEREFORE, THE PASSENGER IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE RA ILWAY OR THE AIRLINE FOR HAVING USED IT FOR TRAVELLING FROM ONE ADESTINATION TO ANOTHER. WHEN A PERSON TRAVELS BY BUS, IT CANNOT BE SAID THAT THE UNDERTAKING WHICH OWNS THE BUS SERVICE IS RENDERING TECHNICAL SERVICE TO THE PASSENGER AND, THEREFORE, THE PASSEN GER MUST DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE BUS SERVICE PROVIDER, FOR HAVING USED THE BUS. THE ELECTRICITY SUPPLIED TO A CON.SUMER CANNOT, ON THE GROUND THAT GENERATORS ARE USED TO GENERATE ELECTRICITY, TRANSMISSION LINES TO CARRY T HE POWER, TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METER S TO MEASURE THE CONSUMPTION, BE REGARDED AS AMOUNTING TO PROVIS ION OF TECHNICAL SERVICES TO THE CONSUMER RESULTING IN THE CONSUMER HAVING TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE FOR THE POWER CONSUMED AND REMIT THE SAME TO THE REVENUE. SATELLITE TELEVISION HAS BECOME UBIQUITOUS, AND IS SPREADING ITS AREA AND COVERAGE, AND COVERS MILLIONS OF HOMES. WH EN A PERSON RECEIVES SUCH TRANSMISSION OF TELEVISION SIGNALS TH ROUGH THE CABLE PROVIDED BY THE CABLE OPERATOR, IT CANNOT BE SAID T HAT THE HOME OWNER WHO HAS SUCH A CABLE CONNECTION IS RECEIVING A TECHNICAL SERVICE FOR WHICH HE IS REQUIRED TO DEDUCT TAX AT S OURCE ON THE PAYMENTS MADE TO THE CABLE OPERATOR. ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 10 INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPME NTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE BENEFIT OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT IN TH E PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR AFEE. 6. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULAR TELEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNICATE WITH OTHERS, HE DOES NOT CONTRACT TO RECEIVE A TECH NICAL 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 INSTALLED SOPHISTICATED TECHNICAL EQUI PMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOES NOT ON THAT SCORE, MAKE IT PROVISION OF A TECHNICAL SERVIC E TO THE SUBSCRIBER. THE SUBSCRIBER IS NOT CONCERNED WITH TH E COMPLEXITY OF THE EQUIPMENT INSTALLED 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 TO THE PERSON AT THE NUMBER TO WHICH HE DESIRES TO BE CONNECTED. WHAT APPLIES TO CELLULAR MOBILE TELEPHONE IS ALSO A PPLICABLE IN FIXED TELEPHONE SERVICE. NEITHER SERVICE CAN BE REG ARDED AS 'TECHNICAL SER- VICE' FOR THE PURPOSE OF SECTION 19 4J OF THE ACT. 7. THE USE OF THE INTERNET AND THE WORLD WIDE WEB I S INCREASING BY LEAPS AND BOUNDS, AND THERE ARE HUNDREDS OF THOU SANDS, IF NOT MILLIONS, OF SUBSCRIBERS TO THAT FACILITY. THE INTE RNET IS VERY MUCH A PRODUCT OF TECHNOLOGY, AND WITHOUT THE SOPHISTICA TED EQUIPMENT INSTALLED BY THE INTERNET SERVICE PROVIDERS AND THE USE OF THE TELEPHONE HED, THE SERVICE CANNOT BE PROVIDED. HOWE VER, ON THAT SCORE, EVERY SUBSCRIBER OF THE INTERNET SERVICE PRO VIDER CANNOT BE REGARDED AS HAVING ENTERED INTO A CONTRACT FOR AVAI LING OF TECHNICAL SER- VICES FROM THE PROVIDER OF THE INTER NET SERVICE, AND SUCH SUBSCRIBER REGARDED AS BEING OBLIGED TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE INTERNET SERVICE PROVIDE R. 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 H ELD THAT PEHLA TESTING LABORATORY IS RENDERING ANY KIND OF TECHNIC AL SERVICES TO ASSESSEE. IN OUR CONCLUSION, WE THUS HOLD THAT PAYM ENT MADE BY ASSESSEE TO THE PTL IN GERMANY IS NOT IN CONSIDERAT ION FOR ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 11 RENDERING OF ANY KIND OF 'TECHNICAL SERVICES' EITHE R IN THE NATURE OF MANAGERIAL OR TECHNICAL OR CONSULTANCY SERVICES. THEREFORE, IT DOES NOT FALL WITHIN THE AMBIT OF SECTION 9(1)(VII) . 16. THE LEARNED CIT (DR) HAS RELIED UPON THE DECISI ON OF THE DELHI HIGH COURT IN THE CASE OF HAVELLS INDIA LTD ( SUPRA) WHEREIN THE ISSUE WAS WITH REGARD TO THE DISALLOWANCES UNDE R SECTION 40(A)(IA). IN THIS CASE IT WAS CATEGORICALLY ADMITT ED BY THE LEARNED COUNSEL ON BEHALF OF ASSESSEE THAT HE HAS NOT DISPU TED THAT THE PAYMENT MADE WAS WITHIN THE PURVIEW OF FEES FOR TEC HNICAL SERVICES. THIS ASPECT OF THE MATTER WAS THUS NOT DI SPUTED. THEREFORE, THE HON'BLE HIGH COURT HAS NOT DEALT WIT H THIS ISSUE AT ALL. EVEN IN THE OTHER CASES AS RELIED UPON BY THE LEARNED CIT (DR) THE ISSUE MOSTLY REVOLVED AROUND WHETHER THE I NCOME WERE ACCRUING IN INDIA OR NOT. NONE OF THE JUDGMENTS REL IED UPON ARE DIRECTLY ON THE POINT WHETHER THE TECHNICAL SERVICE S HAS BEEN PROVIDED THROUGH HUMAN INTERVENTION OR NOT. 17. LASTLY COMING TO THE LEARNED DR'S CONTENTIONS T HAT 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 SERV ICES PROVIDED, INVOLVED ANY KIND OF HUMAN INTERVENTION OR NOT DURI NG THE PROCESS OF CALL COMMUNICATION. THE HON'BLE SUPREME COURT HAS NOT REVERSED OR ADVERSELY COMMENTED ON THE PROVISIO NS OR PRINCIPLES OF LAW DISCUSSED BY THE HON'BLE DELHI HI GH COURT. IT WAS ON THE FACT OF THE CASE THAT THE MATTER WAS SET ASIDE TO EXAMINE THE NATURE OF THE TECHNICAL SERVICES AND TO EXAMINE THE INVOLVEMENT OF THE HUMAN IN THE PROCESS. 18. IN OUR FINAL CONCLUSION WE HOLD THAT THE LEARNE D CIT (A) WAS NOT CORRECT IN HOLDING THAT THE PAYMENT MADE BY ASS ESSEE TO PEHLA TESTING LAB WAS IN ANY MANNER IN THE NATURE O F 'FEES FOR TECHNICAL SERVICES' WITHIN THE AMBIT OF SECTION 9(1 )(VII) READ WITH EXPLANATION 2 AND ACCORDINGLY THERE WAS NO REQUIREM ENT IN LAW TO DEDUCT TAX AT SERVICE ON SUCH PAYMENT. IN THE RESUL T THIS ISSUE IS DECIDED IN THE FAVOUR OF THE ASSESSEE. ITA NO. 7276/MUM/2012 ASSESSMENT YEAR: 2011-12 12 THUS, FOLLOWING THE SAME CONCLUSION WHICH IS APPLIC ABLE MUTATIS MUTANDIS ON THE FACTS OF THE PRESENT YEAR ALSO, WE HOLD THAT THE PAYMENT MADE BY THE ASSESSEE PEHLA TESTING LAB DOES NOT FALL IN THE NATURE OF RENDERING OF TECHNICAL SERVICES AND HENCE CANNOT BE TAXED AS FTS U/S 9(1)(VII) READ WITH EXPLANATION 2. ONCE IT IS NOT TAXABLE UNDER THE DOMESTIC LAW, THERE IS NO REQUIREMENT TO EXAMIN E UNDER THE DTAA PROVISIONS. ACCORDINGLY, ASSESSEES APPEAL IS TREAT ED AS ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF FEBRUARY, 2015. SD/- SD/- (N.K. BILLAIYA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 05.02.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR L BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.