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TMI Blog2018 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... crucial factor to determine whether or not they amount to technical or professional services. The assessee cannot succeed in treating its payments u/s.194C by taking recourse to a written contract document. More particularly when it has come on record the payee itself had been issuing press release(s) alike the one already extracted hereinabove. The assessee has not made even a single attempt in the course of hearing to rebut the same. We therefore observe that its recipient’s information technology related integrated service activities amount to technical services only. The assessee’s reliance on its itemized billings of the above services in classifying the same as bundled payments/services cannot be accepted in view of the forgoing discussion that it is the recipient only who is wholly responsible for handling / providing all information technology related services. We also deem it appropriate to observe that hon’ble Delhi high court’s judgment DIT vs. Rio Tinto Technical Services [2012 (1) TMI 5 - DELHI HIGH COURT] has held that the above exclusion clause in Section 9(1)(vii) explanation 2 is to be read as a project in the nature of construction, assembly, mining only. We t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs; both dated 10.11.2014 in case nos. CAB/VI-337/2013-14 CAB/VI-339/2013-14 involve similar substantive pleadings except the fact that the assessment(s) in question involved therein read figures of ₹ 31,54,489/- and ₹ 1902710/-; respectively. The above taxpayer s next two appeals ITA Nos. 196 236/Ahd/2015 for A.Y. 2012-13 2014-15 arise from the CIT(A)-V VI, Baroda s orders dated 30.10.2014 and 10.11.2014 in case nos. CAB/(A)V-122/14-15 CAB/VI-342/2013-14, affirming upholding Assessing Officer s action treating payments of ₹ 14,38,31,381/- and ₹ 14,49,04,533/-; respectively towards the above very payers as fee for technical and professional services u/s.194J than u/s. 194C and 194I of the Act. Last A.Y. 2014-15 involves assessee s and Revenue s cross appeals ITA Nos. 238 456/Ahd/2015 against the above latter CIT(A) s order dated 10.11.2014 in case no. CAB/VI-340/2013-14 treating identical payment of ₹ 6,98,88,553/- as fee for technical and professional services paid to CSCIPL . Latter s cross appeal seeks to revive the lower appellate authorities directions issued to the Assessing Officer to verify where or not the payees concerned M/s. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per CIT vs. British Airways 232 CTR 317 (SC) and Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 37 CTR (MP) 351. The assessee further stated that its payee CSCIPL had already included the very payments is the return of the corresponding assessment years. It thereafter threw light on the relevant statutory provisions i.e. Section 9(1)(vii) Explanation 2 r.w.s. 194J regarding professional/technical service, Section 194C including works definition inserted in the Act in 1972, CBDT Circular No. 202 dated 05.07.1976 clarifying effective meaning of technical services to be covering consideration for only those kinds of contracts wherein the payee recipient had to merely issue its intellectual/technical skills without any physical work through employee or deploy assets since in carrying not physical work through employees or in deploying assets, expenditure would have to be incurred by the recipient. The Board further clarified that if the recipient was engaged in a business of rendering such services, the consideration received for those services was to be excluded from the above defined fee for technical services. This followed a similar reference to the CBDT s latter circular no. 715 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering technical services so as to attract withholding tax provisions under section 194J of the Act. Merely because the scope of work is technical in nature would not render the provisions of section 194C inapplicable. Thus the contract squarely gets covered under the ambit of Section 194C and not Section 194J in light of various case laws and departmental circulars referred to above. In any case where an issue relating to the interpretation of an agreement arises and the scope of work envisaged therein, short deduction of tax cannot be alleged. The assessee/deductor has nothing to gain by short deducting taxes since the payments are subject to withholding tax at the appropriate rates. 6. Case records indicate that the assessee also placed on record details of the payments made to M/s. CSCIPL alongwith all over payees. The Assessing Officer rejected all these assessee s pleadings in his abovestated order in question. He first of all quoted hon ble Delhi High Court s judgment in DIT vs. Rio Tinto Technical Services 251 CTR 366 (Delhi) the crucial expression Like Project in Section 9(1)(vii) Explanation 2 exclusion clause had to read in conjunction with construction proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ericas, Australia and Asia when local service agreements are completed. 'This outsourcing project is of strategic importance for Bombardier Transportation, said Pierre Lortie, Bombardier Transportation's president- and chief- operating officer. CSC will- work with us to deliver an IT transformation. program that will deliver a high quality, cost effective and scalable IT platform that will support the rapid deployment of Bombardier Transportation's business development programs. Improving service, reducing costs and enhancing business agility. In consequence to the above Master Service Agreement (MSA), signed in 2002, between Bombardier Transportation (Parent company of Bombardier Transportation India Ltd) and Computer Science Corporation (Parent Company of Computer Science Corporation India Pvt Ltd), Local Service Agreement (LSA) was signed in India in 2002. Later, this agreement was renewed in June 2008 for next 7 years. Some amendments were done in 2008 in the original MSA of 2002 and consequently LSA in India was also renewed for 7 years as well. As per the press release issued by CSC on June 17, 2008 (extracted from http://www.csc.com/newsroom/pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purpose of section 44AA or of this section. Similarly, fees for technical services has been defined to have same meaning as in Explanation 2 to clause (vii) of sub section (1) of section 9. Explanation 2 to clause (vii) of sub section (1) of section 9 is reproduced hereunder: - Explanation 2 - For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (inc1uding 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 . Now let us examine the various agreements entered into by the appellant in light of the above provisions of the Act: - Agreement with Computer Science Corporation India Private Limited(CSCIPL) To understand the nature of agreement of the appellant with the Computer Science Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellant company. This fact is also supported by the copy of bill raised by CSCIPL filed by the appellant before the AO. Though the agreement is about providing a bundle of services- infrastructure, infrastructure support, software consultancy as well as software support services for a whole range of activities of the appellant, providing of infrastructure is a small part of total contract and it is the fees technical services which dominate the contract. The services are to be provided by qualified software professionals and are to be constantly upgraded to keep pace with the changing technology. CSCIPL is responsible for providing consistent and high levels of IS supports to the BTIL by implementing global standard processes and deploying standard technologies and best practices and it is required to employ industry best practices, eliminate resource, effort and technology duplication and optimise processes by leveraging of its Global Management Centres, Data Centres, Service Desks, Regional offices, Global competency Centres, Integrated Global Networks, third-party agreements, best practices (including catalyst), QA/QC processes, globally standard processes and integrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g application of Section 194J of the Act wherein the payer/subsidiary had signed an MOU unit its holding entity for providing skilled professionals, each office support, software, hardware and other infrastructure in lieu of payment of services charges. The above co-ordinate bench treated the said management to be a contract u/s.194C of the Act not attract Section 40(a)(ia). Learned counsel then relies upon Section 9(1)(vii) explanation 2 containing exclusion thereof containing the following expression but does not include consideration for any construction, assembly, mining or like project consideration by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . He then reiterates that the definition of technical services is the above definition clause is very much an inclusive one. It is not attracted in facts of the instant case as it involves an instance wherein the payee/CSCIPL has received his impugned payment a contractual objective which nowhere involves any managerial, technical or consultancy services. 10. Learned counsel continues to justify assessee s said adopted throughout that it had been rightly treating the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the payee which is the crucial factor to determine whether or not they amount to technical or professional services. The assessee cannot succeed in treating its payments u/s.194C by taking recourse to a written contract document. More particularly when it has come on record the payee itself had been issuing press release(s) alike the one already extracted hereinabove. The assessee has not made even a single attempt in the course of hearing to rebut the same. We therefore observe that its recipient s information technology related integrated service activities amount to technical services only. The assessee s reliance on its itemized billings of the above services in classifying the same as bundled payments/services cannot be accepted in view of the forgoing discussion that it is the recipient only who is wholly responsible for handling / providing all information technology related services. 13. We also deem it appropriate to observe that hon ble Delhi high court s judgment DIT vs. Rio Tinto Technical Services 251 CTR 366 (Delhi) has held that the above exclusion clause in Section 9(1)(vii) explanation 2 is to be read as a project in the nature of construction, assembly, minin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion in assessee s favour. The assessee therefore fails in its last argument as well as in its lead appeal ITA No.196/Ahd.2015. All of its nine remaining appeals are therefore rejected. 17. We now advert to Revenue s appeal ITA No.456/Ahd/2014 for assessment year 2014-15 seeking to revive the Assessing Officer s action treating the assessee in default qua its impugned payments made to the two payees namely M/s. Aradhana Indian Engineering Works (AEW) and Commtel Networks Pvt. Ltd. (CNPL). The CIT(A) reverses the above findings as follows: 5.4 Since the facts and the circumstances of the present case are similar to the facts and circumstances of the assessee s case for A.Y. 2012-13, the issue is squarely covered by the decision of CIT(A)-V, Baroda in assessee s own case in A.Y. 2012-13 in CAB/(A)V-122/14-15. Following the same, it is held that the appellant was justified in deducting tax at source in respect of Aradhana Indian Engineering Works (AEW) and Commtel Networks Pvt. Ltd. (CNPL) under section 194C of the IT Act and finding of the AO that the appellant was required to deduct tax at source under section 194J of the IT Act is set aside in respect of this payee wher ..... X X X X Extracts X X X X X X X X Extracts X X X X
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