Dear Sandeep,
I am forawrding on e case law relating to Tele-co. in which it was held that TDS can not be deducted u/s194J on technical services provided by machine, robot etc. i.e for tds u/s 194J, Human itervention is mist i.e. it must be performed by human being.
i will also serach some thing for you.
regards
Vijay Agrawal
HIGH COURT OF DELHI
Commissioner of Income-tax
v.
Bharti Cellular Ltd.
Badar Durrez Ahmed and Rajiv Shakhdher, JJ.
IT Appeal Nos. 1120, 1121, 1129, 1135, 1154, 1155, 1159, 1171 and 1177 of 2007 and 697, 698 and 1020 of 2008
October 31, 2008
Section 194J, read with section 9, of the Income-tax Act, 1961 - Deduction of tax at source - Fees for professional or technical services - Whether expression ‘fees for technical services’ as appearing in section 194J would have reference to only technical service rendered by a human; it would not include any service provided by machines or robots - Held, yes - Assessees were companies engaged in business of providing cellular telephone facilities to their subscribers - They had set up their own equipments and necessary infrastructure for operating and maintaining their networks - They had been granted licences by Department of Telecommunication for operating in their respective specified circles - Said licences stipulated that Department of Telecommunication/MTNL/BSNL would continue to operate in service areas for which licences were issued; that in respect of subscribers which fell within specified circles of assessees, calls would be handled exclusively through assessees’ own networks, but where calls were to be made by subscribers of one network to another network, such calls would necessarily be routed through MTNL/BSNL; and that interconnection between two networks would be provided by MTNL/BSNL at interconnection points known as ‘ports’ - For that facility provided by MTNL/BSNL, assessees were required to pay interconnection access charges and port charges - Admittedly, facility of interconnection/port access provided by MTNL/BSNL was provided automatically by machines and did not involve any human interface - Whether payment for use of services of MTNL/other companies via interconnect/port/access/toll by assessee would fall within purview of payments as provided for under section 194J, so as to be liable for tax deduction at source - Held, no
Words and Phrases : ‘Technical services’ as occurring in Explanation 2 to section 9(1)(vii) and section 194J of the Income-tax Act, 1961
Interpretation of statute : Rule of Noscitur a sociis
Facts
The assessee-companies were engaged in the business of providing cellular telephone facilities to their subscribers. They had been granted licences by the Department of Telecommunication for operating in their respective specified circles. They were required to set up their own equipments and necessary infrastructure for operating and maintaining their networks. The licences granted to the assessees stipulated that the Department of Telecommunication/MTNL/BSNL would continue to operate in the service areas for which the licences were issued. In respect of subscribers, which fell within the specified circles of the assessees, the calls would be handled exclusively through the assessees’ own networks. However, where calls were to be made by subscribers of one network to another network, such calls were necessarily to be routed through MTNL/BSNL. The interconnection between the two networks was provided by MTNL/BSNL at interconnection points known as ‘Ports’. For the purposes of providing that interconnection,the assessees had entered into agreements with MTNL/BSNL, etc., under which they were required to pay interconnection access charges and port charges. According to the revenue, the interconnect/port access charges paid by the assessees to MTNL/BSNL or other companies were in the nature of fees for technical services and, hence, the said charges were liable for tax deduction at source in view of provisions of section 194J.
However, on appeal, the Tribunal held that the payments for use of services of MTNL/other companies via the interconnect/port access toll by the assessees would not fall within the purview of payments as provided for under section 194J, so as to be liable for tax deduction at source.
On revenue’s appeals to the High Court :
Held
The expression ‘fees for technical services’ has the same meaning as the Explanation 2 to clause (vii) of sub-section (1) of section 9. The said Explanation 2 makes it clear that ‘fees for technical services’ means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy service, but it does not include consideration for any construction, assembly, mining or like products in the country by the recipients or consideration which would be income of the recipients chargeable under the head ‘Salaries’. The said definition is in two parts. The first part includes type of definition and the second part does not include definition. In the instant appeals, the second part is not relevant. The entire focus is attracted to the first part and that too to the expression ‘consideration for the rendering of any managerial, technical or consultancy services’. It was only if the payments made by the assessees to MTNL/other companies in respect of interconnect/port access charges fell within the ambit of that expression, that the said payments could be regarded as ‘fees for technical services’ as contemplated under section 194J. [Para 11]
In the Explanation 2 to section 9(1)(vii) , 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. This would mean that the word ‘technical’ would take colour from the words ‘managerial and consultancy’, between which it is sandwiched. On going through the dictionary meaning of the words ‘managerial and consultancy’, 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 sociis, the word ‘technical’ as appearing in the Explanation 2 to section 9(1)(vii) would also have to be construed as involving a human element. The facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically 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 the Explanation 2 to section 9(1)(vii). This is so because the expression ‘technical services’ takes colour from the expression ‘managerial services and consultancy services’ which necessarily involves a human element or, what is now a days fashionably called, human ‘interface’. In the instant case, the services rendered qua interconnection/port access did not involve any human interface and, therefore, the same could not be regarded as technical services as contemplated under said section. [Paras 13 and 15]
In the instant cases, the interconnect/port access facility was only a facility to use the gateway and the network of MTNL/other companies. MTNL or other companies did not provide any assistance or aid or help to the assessees in managing, operating and setting up their infrastructure and networks. No doubt, the facility of interconnection and port access provided by MTNL/other companies was technical in the sense that it involved sophisticated technology. The facility might even be construed as a ‘service’ in the broader sense such as a ‘communication service.’ But, when one is required to interpret the expression ‘technical service’, the individual meanings of the words ‘technical’ and ‘service’ have to be shed and only the meaning of the whole expression ‘technical services’ has to be seen. Moreover, the expression ‘technical service’ is not to be construed in the abstract and general sense, but in the narrower sense as circumscribed by the expressions ‘managerial service’ and ‘consultancy service’ as appearing in the Explanation 2 to section 9(1)(vii). Considered in that light, the expression ‘technical service’ would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots. [Para 20]
Therefore, the interconnect charges/port charges in question could not be regarded as fees for technical services within the meaning of section 194J, so as to be liable for tax deduction at source, Therefore, the appeals were liable to be dismissed. [Para 21]
Case Review
Stonecraft Enterprises v. CIT [1999] 3 SCC 343 followed [Para 18],
Skycell Communications Ltd. v. Dy. CIT [2001] 251 ITR 53/119 Taxman 496 distinguished [Para 12].
Cases referred to
Skycell Communications Ltd. v. Dy. CIT [2001] 251 ITR 53/119 Taxman 496 (Mad.) [Para 6], J.K. (Bombay) Ltd. v. CBDT [1979] 118 ITR 312/1 Taxman 537 (Delhi) [Para 6], Godfrey Phillips India Ltd. v. State of U.P. [2005] 2 SCC 515 [Para 16], Rainbow Steels Ltd. v. CST [1981] 2 SCC 141 [Para 16], State of Bombay v. Hospital Mazdoor Sabha AIR 1960 SC 610 [Para 16] and Stonecraft Enterprises v. CIT [1999] 3 SCC 343 [Para 18].
Mrs. Premlata Bansal and Ms. Rashmi Chopra for the Appellant. Tarun Sharma and Kanan Kapur for the Respondent.
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