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2014 (6) TMI 542 - HC - Income TaxInterpretation of Explanation 2 to section 9(1)(vii) of the Act Scope of the term technical service - Liability to deduct TDS u/s 194J of the Act Payment made for transmission/wheeling of SLDC Liability to pay interest u/s 201(1A) of the Act - Whether any human intervention was involved in the activity or not - Held that - Following Commissioner of Income-tax Versus Bharti Cellular Ltd. & Hutchison Essar Telecom Ltd. 2010 (8) TMI 332 - Supreme Court of India - wherever there was human intervention requiring examination of technical data the same would fall within the definition of technical services and in the absence it would not partake the character of technical services The primary basis to conclude the services to the falling u/s 194J of the Act to be technical services or not is to find as to whether any human intervention was involved in the activity or not - thus the matter is remitted back to the AO to examine the technical expert and after examining him for fresh adjudication - the assessing authority shall also examine whether the Provisos inserted in Sections 201(1) and 201(1A) by Finance Act 2012 are applicable retrospectively as urged by the assessee Decided in favour of Revenue.
Issues Involved:
1. Misreading and misconstruing of statutory provisions regarding "technical service." 2. Liability for deduction of tax at source under Section 194J of the Income Tax Act. 3. Liability to pay interest under Section 201(1-A) of the Income Tax Act. Detailed Analysis: Issue 1: Misreading and Misconstruing Statutory Provisions The court addressed whether the Tribunal had misread and misconstrued the statutory provisions of the Income Tax Act, specifically in relation to Explanation 2 to Section 9(1)(vii) regarding the term "technical service." The revenue contended that the Tribunal had erroneously interpreted the term by incorporating the word "human," which violates principles of statutory interpretation. The court noted that the Apex Court in CIT, Delhi v. Bharti Cellular Limited emphasized the necessity of human intervention in determining whether a service qualifies as "technical service." The matter was remanded to the Assessing Officer to ascertain if human intervention was involved in the services provided. Issue 2: Liability for Deduction of Tax at Source Under Section 194J The court examined whether the payments made by the assessee for transmission/wheeling and SLDC charges were liable for deduction of tax at source under Section 194J. The Tribunal had previously ruled that these payments did not require TDS deduction, relying on a decision by the Jaipur Bench of the Tribunal. The revenue argued that the services rendered should be considered "technical services" under Section 194J, necessitating TDS deduction. The court, referencing the Apex Court's judgment in Bharti Cellular Limited, highlighted the need to determine if human intervention was present in the services. The case was remanded to the Assessing Officer to re-evaluate this aspect. Issue 3: Liability to Pay Interest Under Section 201(1-A) The court considered whether the respondent was liable to pay interest under Section 201(1-A) due to the non-deduction of tax at source. The Tribunal had held that the respondent was not liable for interest as there was no tax liability on the income of the deductee. The respondent's counsel argued that the Finance Act 2012, effective from 1.7.2012, introduced provisos in Sections 201(1) and 201(1-A) that should be considered. The court directed the Assessing Officer to examine if these provisos apply retrospectively and to reassess the liability for interest based on this determination. Conclusion: The court set aside the orders of the lower authorities and remitted the matter to the Assessing Officer for re-adjudication. The Assessing Officer was instructed to consider the principles laid out by the Apex Court in Bharti Cellular Limited, particularly the necessity of human intervention in determining "technical services." Additionally, the Assessing Officer was to examine the applicability of the provisos inserted by the Finance Act 2012 and assess the element of income in the transaction before passing a fresh order. All eight appeals were disposed of accordingly.
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