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TMI Blog2015 (7) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the ld. CIT(A) erred in holding that the payments made to Nhava Sheva International Container Terminal Private Limited are not in the nature of 'fees for professional services' but the payments are for carriage of goods and thus defined as 'work' in Explanation III to section 194C(2) of the Act, and hence the same are not covered under the provisions of section 194J of the Income Tax Act, 1961. iii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not appreciating the fact that the container handling services are technical services rendered by Nhava Sheva International Container Terminal Private Limited which requires TDS u/s.194J of the I. T. Act. iv) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the interest u/s 201(1A) of the IT Act, 1961 on the short deduction of tax determined by the AO as the tax determined has already been deleted by him and interest deletion is consequential to the quantum deletion for which further appeal has been recommended vide ground No. i to iii. 2. The appellant craves leave to add, amend, alter or modify any ground which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for professional services/ fee for technical services, that the services rendered by NSICPL could not fall in any of the profession that NSICPL rendered various technical services and same could not be bifurcated into different compartments requiring of deduction of tax at source under different provisions, NSICPL had been issued a certificate u/s. 194C of the Act by the AO stating that no tax was required to be deducted in respect of payment made to them during Financial Year ending on 31.3.2003, that services rendered by NSICPL fell neither in category of professional services nor in category of fee for technical services. The assessee referred to case ofMerchant Shipping Services Pvt. Ltd. (49 DTR 97) wherein it was held that payment made to NSICPL were covered by s.194C of the and not by s.194J. After considering the submission of the assessee and order of AO u/s.201,the FAA held that the payments to NSICPL are coved by the provisions of s.194C of the Act, that the assessee had rightly deducted tax at source @2%, that assessee could not be treated as an assessee in default u/s. 201(1) and 201(1A). He deleted the demand raised on account of tax and the interest for the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer opined that NSICT was rendering / providing technical and specialized services to its customers including the assessee along with machines and technical manpower and hence tax was deductible u/s 194J. On being show caused, the accounts Manager of the assessee explained that payments made to NSICT were for container movement under the contract and there were no professional or technical services involved in the movements of containers. It was explained that the services provided by NSICT were towards the movement of containers from customer's trailers / rail wagons to yard and from there to vessels in respect of export containers; and for the import containers, the payment was made for moving containers from vessels on to the trailers at the quay side and for lifting of trailers to customer's trailers / rail wagons. It was argued that the assessee had rightly deducted tax at source u/s.194C and the provisions of section 194J, sought to be applied by the Assessing Officer, were not applicable. Vide para 11 of the assessment order, the Assessing Officer accepted the assessee's contention that the payment was made towards container handling charges. He howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomer's trailer/rail wagons by the operation of rubber tyre gantry cranes; movement of the containers from yard to the vessel side; and moving the containers from trailers at the quay side on to the vessel with the operation of quay cranes. Similarly the movement of cargo on port, in case of import, involves different stages viz., moving the containers from vessel on to the trailers at the quay side with the operation of quay crane ; movement of the containers from yard to esselide; and operation of rubber tyre grantry cranes / rail mounted gantry cranes for lifting the containers off from trailers to customer's trailers / rail wagons. The above description of the work done by NSICT for the assessee was brought to the notice of authorities below and the A.O. has recorded the same in para 10 of the assessment order. The veracity of above nature of services, as stated by the assessee to have been provided by NSICT, stood established when during the course of survey proceedings it was noted that NSICT operated its terminal with 8 quay cranes, 29 rubber tyred country quantry cranes, 3 rail mounted gantry cranes and more than 600 employees. 8. Now the moot question is - Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess of movement of cargo, those personnel, in the absence of any finding by the AO that they possessed some technical expertise, cannot be considered within the ambit of this provision as falling under 'other personnel'. 13. Further narrowing the scope of controversy to the payments made by the assessee for availing technical services, as has been held by the AO, we need to concentrate on the meaning of 'technical services'. In other words, the technical services should be provided by the recipient 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are provided by him within the meaning of Finance Act, 1994, but that does not mean that such services are only in the category of 'technical services' unless the prescription of Explanation (2) to section 9(1)(vii) is fulfilled. A payment to be covered u/s.194J should be fees for technical services and such fees should be for rendering of any technical, managerial or consultancy services and not anything else. In order to rope in any service provider within the net of section 194J, it is of paramount importance to check the true nature of service provided on the touchstone of the mandate of this provision alone. If the conditions of section 194J r.w.s. 9(1)(vii) Explanation (2) are not fulfilled, the liability under this section is ruled out. 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 activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The goods may reach from source to destination in one or more trips and that too with the help of one or more modes of carriers. If the journey of goods is broken and different modes are employed in facilitating the lifting of goods from source to final destination, such broken up journeys also amount to carriage of goods to the final destination. Reverting to the facts of the instant case it is discernible that the assessee was making available the containers on customer'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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