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TMI Blog2017 (1) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of payments made to Nhava Sheva International Container Terminal Ltd. (NSICT) for availing of composite set of services such as stevedoring, loading and unloading, etc. the assessee had deducted tax at source thereon @2.05% under section 194C of the Income Tax Act, 1961 (in short 'the Act'). The Assessing Officer (AO) was of the view that NSICT is providing managerial services to the assessee and therefore the assessee ought to have deducted tax at source under section 194J of the Act @5.125% on such payments. In that view of the matter, the AO treated the assessee as an assessee in default and accordingly raised demand under section 201(1) of the Act for short deduction of tax at source and further charged interest under section 201(1A) of the Act for the year under consideration vide order dated 22.03.2011. 2.2 On appeal by the assessee, the learned CIT(A)-59, Mumbai vide impugned order dated 25.02.2015, following the decision of the Coordinate Bench of the Tribunal, Mumbai in the case of ACIT vs. Merchant Shipping Services Pvt. Ltd. (2011) (8 ITR 1) (Mumbai ITAT), allowed the assessee s appeal on this issue holding that the assessee is liable to deduct tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round which may be necessary. 3.2.1 At the outset of the hearing, both parties submitted that the issue raised by Revenue in this appeal (supra) is covered in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in the assessee s own case in ITA No. 2360/Mum/2015 and CO No. 106/Mum/2016 dated 02.08.2016 for A.Y. 2004-05; a copy of which was placed before the Bench. We find that the Coordinate Bench has allowed the assessee s appeal, followed the decision of another Coordinate Bench of the Tribunal in the case of ACIT vs. Merchant Shipping Service P. Ltd. (2011) 8 ITR 1 (Mumbai ITAT) wherein on similar facts it was held as under: - 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 sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of containers can be covered under s.194J ? The assessee deducted tax at source under s. 194C on the payments made to NSICT @ 2.05 per cent. As against that the AO has held that such payments are covered under s. 194J, on which tax was deductible @ 5.05 per cent. In order to appreciate the entire controversy in right perspective it would be apt to consider the provisions of s. 194J vis-a- vis s. 194C. 9. Sec. 194J requires deduction of tax at source by the payer, inter 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 AO is that the assessee availed technical services from NSICT and hence tax was deductible at source under this section. Explanation (b) to s. 194J defines fees for technical services as under: Fees for technical services shall have the same meaning as in Expln. (2) to cl. (vii) of sub-s. (1) of s. 9. 10. When we turn to Expln. 2 to s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 s. 194J. The words technical services have not been defined in the Act. But when we view Explanation to s. 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 endeavour, 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 under s. 194J, should be a consideration for acquiring or using technical know-how simpliciter provided or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not for availing any technical services which may have gone into the making of cranes. NSICT opened its doors of service to one and all. Anybody interested in movement of containers could avail the facility. The assessee has also made payment on bill to bill basis. In other words, payment was made for user of a standard facility provided by NSICT, specifically for the movement of containers from or to the vessel. 16. The AO 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 dt. 2nd Jan., 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 Authorised Representative has placed on record a text of s. 65(82) of the Finance Act, 1994 defining port services as under : Port services mean 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 moveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it a provision of technical service to the subscriber. 19. Similarly in the case of Estel Communications (P) Ltd. (supra) it has been held that where the assessee made payment for use of internet bandwidth, it was using internet bandwidth of US 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 s. 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. Expln. III to s. 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 sophistica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upto 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 Expln. III (c) below s. 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 under s. 194C of the Act. 23. At this juncture we are reminded of the well-settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194C of the Act. Accordingly the Ld CIT(A) set aside the orders passed by AO by following the Tribunal decision, referred above. 4. We heard the parties on this issue and perused the record. Since the Ld. CIT(A) CIT(A) followed the decision rendered by the co- ordinate bench of Tribunal on identical issue, we do not find any reason to interfere with his decision. The operative portion of the order passed by the Tribunal in the case of Merchant Shipping Services (supra) has been extracted by the Ld CIT(A) in his order. Accordingly we confirm the order passed by the Ld CIT(A). Following the decision of the Coordinate Bench in the assessee s own case for A.Y. 2004-05 (supra) and the case of Merchant Shipping Services P. Ltd. (supra) we sustain the impugned order of the CIT(A) in holding that the payments made by the assessee to NSICT are covered under section 194C of the Act and not under section 194J of the Act and therefore the assessee has rightly made deduction of tax at the rates applicable under section 194C of the Act. We hold and direct accordingly. Consequently, finding no merit in the grounds raised by Revenue, we dismiss them. 4. In the result, the Revenue s a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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