Issues involved: Interpretation of "fees for technical services" u/s 194J of the Income-tax Act and applicability to cellular mobile telephone service providers.
Summary: The petitioners, engaged in providing cellular mobile telephone services, challenged the Chief Commissioner of Income-tax's direction to treat payments from subscribers as "fees for technical services" u/s 194J. The petitioners argued that their services did not fall under this category as they provided infrastructure for mobile communication, including various components like mobile switching centers, base stations, and more, but the service itself did not constitute technical services as defined in the Act.
The definition of "fees for technical services" in section 194J was examined, which includes managerial, technical, or consultancy services but excludes services like construction or assembly. The court analyzed the term "technical" and concluded that not every service involving technology qualifies as technical service. Examples were provided, such as taxi services, train travel, electricity supply, and satellite television, where the use of technology does not equate to technical services.
The judgment emphasized that services like cellular mobile telephony, fixed telephone services, internet subscriptions, etc., do not amount to technical services under section 194J. The court highlighted that the Act was not intended to cover charges for utilizing modern technology in everyday life. It was clarified that the mere collection of a fee for a standard facility does not constitute a fee for technical services.
Despite the usual requirement to exhaust statutory remedies before approaching the court on tax matters, the court granted relief to the petitioners as the Revenue's interpretation of technical services was deemed unreasonable. The petitioners' writ petitions were allowed, with costs awarded in their favor.
Overall, the judgment clarified the scope of "fees for technical services" under section 194J and its inapplicability to certain services, including those provided by cellular mobile telephone service providers.
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