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TMI Blog2006 (7) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... r. In these circumstances, the responsibility for making payment of interest is only on Andhra Bank and not on the assessee and if at all any tax is to be deducted it has to be done by Andhra Bank and not the assessee. Thus, we are unable to uphold the order of the lower authorities and accordingly the same is set aside. Deduction of tax u/s 194J - HELD THAT:- The services rendered by the holding company in the areas of accountancy; human resources development and taxation would definitely fall within the field of technical services. If at all it is not technical service, it may be considered to be professional service. The advice or service rendered by holding company in respect of human resources development, maintenance of accounts and finance would definitely amount to providing services in managerial/technical field as defined in Explanation (2) to section 9(1)( vii ) of the Act. Therefore, in our opinion, the assessee is liable to deduct tax u/s 194J of the Act. However, as rightly submitted by the ld DR, the Commissioner (Appeals) has directed the Assessing Officer to verify whether the holding company M/s. SIEL has offered the amount for taxation or not. The CIT (Appeals) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanced the letter of credit and paid interest without the knowledge of the assessee. Since M/s. Andhra Bank paid the interest due to the letter of credit given by them, the said interest was debited in the accounts of the assessee. Therefore according to the learned counsel, the assessee is not responsible for paying any money to the non-resident and therefore, provisions of section 195 of the Act is not applicable. 4. On the contrary, Shri G. Srinivasa Rao, the learned Departmental Representative submitted that even though interest was paid by Andhra Bank, it was paid on behalf of the assessee alone. Therefore, the banker M/s. Andhra Bank acted on behalf of the assessee in their capacity as an agent. Moreover, according to the learned representative, the payment of interest was made by crediting the accounts of the supplier in the books of the importer and hence the importer is the actual payer and not the bank which remits the money as per the Letter of Credit and therefore, it cannot be said that the assessee s bank remitted the interest to the non-resident bank. According to the learned representative, the assessee is the payer of interest to the non-resident banker. 5. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on behalf of the assessee but that does not take away the responsibility of Andhra Bank from paying interest to the foreign bank. In these circumstances it may not be proper to say that the assessee failed to deduct tax while paying interest to the foreign banker. 5.1 The situation can be analysed from another angle also. When the foreign banker requests the Indian banker to pay interest for late payment in terms of Letter of Credit, the Indian banker is bound to pay the money. When the interest was paid by the Indian banker, namely Andhra Bank, the assessee might not have known the request made by the foreign banker for the interest. It is not the case of the revenue that the interest was paid with the knowledge of the assessee. The assessee might have consented for payment of interest but when actual payment was made it may not be with the knowledge of the assessee. It is the responsibility of Andhra Bank to pay interest in terms of letter of credit. In other words, at the time of making payment the assessee has no knowledge or control over payment. Therefore, no one could expect the assessee to deduct tax when Andhra Bank pays interest to the non-resident banker. On this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred by the holding company, the provisions of section 194J is not applicable. The learned counsel further submitted that the holding company namely M/s. SIEL is not doing any professional services. They are in the manufacturing business. Therefore, it cannot be construed that holding company provided any technical service to the assessee. The learned counsel invited our attention to provisions of section 194J and submitted that any person who is responsible for paying to a resident towards fees for professional services or technical services shall deduct tax equal to 5 per cent of the amount paid. According to the learned counsel, no technical or professional service was rendered by the holding company. Therefore, the assessee is not liable to deduct any tax at all. The learned counsel submitted that the term technical service is defined in section 9(1)( vii ) of the Income-tax Act. Fee for technical service means any consideration for rendering of managerial, technical or consultancy but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient. In this case acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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