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TMI Blog2010 (11) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 201(1) has to be at par with the time limit available for initiating and completing the reassessment. This is the view which has been canvassed by the special bench of the tribunal in Mahindra and Mahirdra (2009 -TMI - 59571 - ITAT BOMBAY-H). - Decided in favor of assessee. - ITA No. 192/Mum/2010 - - - Dated:- 24-11-2010 - R.V. Easwar, R.S. Syal, JJ. S.K. Mahapatra for the Appellant Subhash Shetty for the Respondent ORDER R.S. Syal: This appeal by the Revenue and cross objection by the assessee emanate from the order passed by the Commissioner of Income-tax (Appeals) on 28.10.2009 in relation to the assessment year 2004-2005. 2. The only ground raised by the Revenue is against the direction of the learned CIT(A) that payments made to NSICT be treated as covered under section 194C and not section 194J. Briefly stated the facts of the case are that the assessee-company is a shipping agent handling vessels at various Indian ports. A survey was conducted u/s.133A on 09.03.2005 for verification of compliance of deduction of tax at source provisions. During the course of survey it was discovered that in the financial year 2003-2004 the assessee mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .194J and not u/s.194C. Resultantly he worked out short deduction of tax at source at Rs.36,08,701 u/s.201(1). Further the assessee was held to be liable for payment of interest u/s.201(1A) amounting to Rs.24,90,004. 3. The assessee assailed the order u/ss.201(1) and 201(1A) before the learned CIT(A), who concurred with the submissions advanced on behalf of the assessee and held that the provisions of section 194C were applicable. He however did not accept the assessee's contention that the assumption of jurisdiction u/s.201(1) and 201(1A) was improper notwithstanding NSICT clarifying that they had paid tax on their income including payments received from the assessee. In the opinion of the learned CIT(A), the assessee's liability for deducting tax at source was not washed away with the payment of taxes by the recipient. He further did not accept the assessee's contention that the order passed u/s.201(1) and 201(1A) was time barred. Thus the other grounds raised by the assessee, challenging the above referred issues, were held to be infructuous in view of his decision on the main ground that the assessee had rightly deducted tax at source u/s.194C. Both the sides are in appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the learned CIT(A) was right in coming to the conclusion that deduction of tax at source was required under section 194C and not section 194J. 6. We have heard the rival submissions and perused the relevant material on record in the light of precedents cited before us. It is noted that the assessee company is a shipping agent handling vessels for import and export at various Indian Ports on behalf of its customers. Before we proceed further, it is sine qua non to zero in on the exact nature of services for which the assessee made the payments in question. Ordinarily shipping agent is a person whose business is to prepare shipping documents, arrange shipping space and insurance and further deal with the customs requirements. It is apparent from the assessment order that during the course of its business as shipping agent, the assessee availed the services provided by NSICT for the movement of its cargo in respect of import and export done by its customers. The movement of cargo on port, in case of export, involves different stages viz., lifting of containers from customer's trailer/rail wagons by the operation of rubber tyre gantry cranes; movement of the containers from y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter alia, on the payment or the credit of amount to a resident by way of fees for technical services at the specified rate, subject to the fulfillment of the stipulated conditions. The case of the Assessing Officer is that the assessee availed technical services from NSICT and hence tax was deductible at source under this section. Explanation (b) to section 194J defines "fees for technical services" as under:- "Fees for technical services" shall have the same meaning as in Explanation (2) to clause (vii) of sub-section (1) of section 9." 10. When we turn to Explanation (2) to section 9(1)(vii), it is found that fees for technical services' has been defined as under:- Explanation [2]:- For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) 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 chargeable under the head "Salaries"." 11. On circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the amount so as to bring the payment within the scope of section 194J. The words technical services' have not been defined in the Act. But when we view Explanation to sec. 9(1)(vii), which defines fees for technical services' as consideration for rendering of any "managerial, technical or consultancy services", it becomes apparent that the word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". As both the managerial' and consultancy' services are possible with human endeavor, the word technical' should also be seen in the same light. To be more precise, any payment for technical services, in order to be covered u/s 194J, should be a consideration for acquiring or using technical know-how simplicitor provided or made available by human element. There should be direct and live link between payment and receipt/use of technical services/information. 14. Where no technical services are provided as such, but the payment is made for the use of some machinery or equipment or standard facility which may have been created or brought into existence with the input of technical services along with man, machine and material, such payment would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has heavily relied on the fact that NSICT was registered for the purpose of payment of service tax. It was clarified by NSICT to the learned CIT(A), vide their letter dated 02.01.2009, that they were registered under the category of "PS and MC". "PS" stands for Port Services. They admitted that all the services rendered by them were covered under Port Services. They also admitted that they had not rendered any MC (management consultancy) services. The learned A.R. has placed on record a text of section 65(82) of the Finance Act, 1994 defining "Port Services" as under:- "Port Services means services rendered by a port or any person authorized by the port in any manner in relation to the vessel or goods. Such services include movement of ships and vessels, movement of cargo and goods into and out of the port etc. Services provided at ports are contained in Chapter V on works and services to be provided at ports of the Major Port Trust Act, 1963." 17. From the mandate of section 65(82) of Finance Act, 1994 it is vivid that Port Services consist of cargo handling, dock services and container handling services. When we view the registration of NSICT as the one under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party T for providing access to its subscribers and the tribunal was justified in coming to the conclusion that no technical services were provided by T to the assessee within the meaning of section 9(1)(vii) and hence the assessee was not obliged to deduct tax at source from payment made to that party. 20. This case can be viewed from another angle also. There are many sections in Chapter XVII of the Act requiring deduction of tax at source on certain payments, which require the use of machinery in direct or indirect manner. E.g. Explanation III to Section 194C defines work' as including (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting. It is obvious that this activity cannot be done without the use of some sophisticated machinery. Similarly section 194I requires deduction of tax at source from rent. Explanation to this section defines rent' to mean payment for the use of inter alia (e) plant; (f) equipment. This is a direct payment for the use of machinery. No machinery or equipment can be manufactured without some sort of technical service. If we accept the view taken by the AO in this case that the payment for use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer's trailers/rail wagons, which were lifted from such trailers/rail wagons on the cranes by NSICT and were then moved from yard to vessel side. This movement of cargo is part of the journey of the container from the place of source to the place of destination, which is vessel. The assessee made payment for carriage of goods from the customer's trailers up to the vessel in case of export and vice versa in case of import of goods. This payment cannot be characterized as anything other than for the carriage of goods. When we view Explanation III (c) below section 194C(2) it becomes apparent that the payment made by the assessee to NSICT is covered within this provision and the assessee rightly deducted tax at source u/s.194C of the Act. 23. At this juncture we are reminded of the well settled rule of generalia specialibus non derogant, which provides that the special provisions override general provisions. In other words, if a special provision has been enacted dealing with a particular thing or situation, then that particular thing or situation is governed by such special provision alone. Application of general provisions stands excluded on that. This rule has got the sanction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that the assessee could not be treated as in default u/s.201(1). While reaching this conclusion it considered Circular No.275/201/95-IT(B) dated 29.1.1997 issued by the CBDT as putting an end to the controversy when it declared that "any demand visualized u/s.201(1) of the I.T. Act should not be enforced after the tax deductor has satisfied the Officer-in-charge of TDS that the taxes due have been paid by the deductee assessee". 28. The Special Bench of the Tribunal in Mahindra and Mahindra vs. DCIT [(2009) (Mum) (SB) 313 ITR (AT) 263] has also taken similar view by holding that the person responsible cannot be treated as an assessee in default in respect of tax u/s.201(1) if the payee has paid the tax directly. As admittedly NSICT paid due tax on their income inclusive of the amounts received from the assessee, naturally there cannot be any question of recovery of tax by treating the assessee as in default u/s 201(1). 29. The legal position in respect of liability of interest u/s 201(1A) stands on different footing from that u/s 201(1). Despite the fact the payee included the amount received in his income and paid due tax, the liability of payer to interest u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by passing order have to be prior to the time limit within which the tax can be determined in the hands of the payee. It cannot be beyond such period. If the payee has included the amount received from payer in his total income but the tax has not been paid in full or part then the payer can be treated as assessee in default to the extent of the non-payment of tax on the sum paid to him provided the tax is not recovered from the payee. If the payee has furnished the return of income without disclosing the sum paid by the payer on which tax was deductible as per the provisions of the Act then the tax deductible at source can be recovered from the payer by treating him as assessee in default if the income has not been assessed in the hands of the payee. Still in another situation where the payee has not at all filed his return of income again the person responsible can be treated as assessee in default in respect of the tax on the sum paid by him in violation of the provisions of this Chapter. Thus there remains no difficulty in answering the question that how much time is available with the Revenue for treating the payer as assessee in default u/s. 201(1). The obvious answer is that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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