2011 (7) TMI 1118 - HC - Income Tax

Summary

Issues involved: Interpretation of whether processing charges paid for cheque clearing services constitute "technical service" under s. 194J of the IT Act, 1961.

Summary:
The High Court of Punjab & Haryana heard a bunch of appeals involving identical legal issues. The main appeal was filed by the Revenue under s. 260A of the IT Act against the order passed by the Income-tax Appellate Tribunal. The dispute revolved around whether the facility provided by PNB, MICR Cheque Processing Centre could be considered as a "technical service" for the purpose of s. 194J of the IT Act.

The facts revealed that the AO found the bank not deducting tax at source from payments made to the processing center, claiming it was not a technical service. The CIT(A) and the Tribunal both ruled in favor of the assessee, leading to the present appeal by the Revenue.

The key issue was whether the processing charges paid to the PNB MICR Centre for cheque clearing services fell within the definition of "technical service" under s. 194J of the Act. The Tribunal relied on a judgment of the Madras High Court and the assessee cited a decision of the apex Court in support of their arguments.

After considering the submissions, the High Court opined that the matter required reevaluation by the AO in light of the principles laid down by the apex Court. The Court emphasized the need for expert evidence to determine the presence of human intervention in the services provided. Therefore, the Court remitted the matter to the AO for fresh examination with the direction to involve technical experts from both sides.

The Court highlighted that the presence of human intervention was crucial in determining whether the services qualified as technical services under s. 194J. As the previous orders did not address this aspect, the matter was sent back for reevaluation based on the observations of the apex Court.

In conclusion, the High Court set aside the previous orders and directed the AO to reexamine the matter in accordance with the principles outlined by the apex Court. The appeals were disposed of accordingly.