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TMI Blog2020 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals)(in short Ld. CIT(A)-1, Indore dated 03.07.2019 pertaining to assessment year 2015-16. The assessee has raised following grounds of appeal: That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in concurring with the opinion of the assessing officer in treating the amount paid towards collection and disposal of waste as a technical service liable for deduction of tax under section 194J of the Act even when the appellant had paid the said amount in pursuance to a contract and therefore TDS was rightly deducted under section 194C of the Act. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming demand of ₹ 6,948/- on account of short deduction of tax at source without properly appreciating the facts of the case and submissions made before him even when payee had already offered the said amount as its income and had paid legitimate amount of tax due on the same. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming demand of ₹ 2,073/- on account of interest on short deduction of tax at source without prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that the appellant was liable to deduct TDS at the rate of 10% under section 194J of the Income-Tax Act, 1961 instead of TDS deducted by the appellant at the rate of 2% under section 194C of the Income-Tax Act, 1961 on the payments made to M/s Hoswin Incinerator Private Limited for collection and disposal of waste. A.4] The assessing officer subsequently passed an order under section 201(1)/201(1A) of the Income-Tax Act, 1961 dated 31-03-2017 wherein he determined demand on account of short-deduction of tax at ₹ 6,948/- and interest on such short-deduction of tax at ₹ 2,073/- on the payments made to M/s Hoswin Incinerator Private Limited for collection and disposal of waste wherein TDS was deducted at the rate of 2% under section 194C of the Income-Tax Act, 1961 instead of 10% under section 194J of the Income-Tax Act, 1961 as opined by the assessing officer. A.5] The appellant preferred an appeal before the Ld CIT(A)-1, Indore against the order of the assessing officer. The Ld CIT(A)-1, Indore dismissed the appeal filed by the appellant observing that the appellant had entered into a contract with M/s Hoswin Incinerator Private Limited for rendering techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 and therefore, he determined demand on account of short-deduction of tax at ₹ 6,948/- and interest on such short-deduction of tax at ₹ 2,073/-. Quarter-wise details of demand as determined by the assessing officer are as under: [Page No. 29-36] S. No Quarter Amount paid [in Rs.] TDS deducted [in Rs.] TDS deductible [in Rs.] Short Deduction [in Rs.] Interest [in Rs.] Total demand [in Rs.] 1 1 21,840 447 2,184 1,737 603 2,340 2 2 14,560 298 1,456 1,158 376 1,534 3 3 21,840 447 2,184 1,737 486 2,223 4 4 29,120 596 2,912 2,316 608 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ambit of fees for technical services as per Explanation 2 to clause (vii) of sub-section (1) of section 9 of the Income-Tax Act, 1961 so as to attract the provisions of section 194J of the Income-Tax Act, 1961. 1.5.2] The relevant extract of section 194J and Explanation 2 to clause (vii) of sub-section (1) of section 9 of the Income-Tax Act, 1961 which are relevant for the facts of the present case are reproduced hereunder for your ready reference: '194J. Fees for professional or technical services. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services or (ba) .. (c) (d) .. shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein: .. .. Explanation.-For the purposes of this section,- (a) professional services me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 include various specific services rendered by professionals which does not include any services related to waste collection and disposal. The contention of the assessing officer that these services involve element of technical consultancy is absolutely irrelevant as no technical consultancy whatsoever was offered by M/s Hoswin Incinerator Private Limited to the appellant. The service provider, M/s Hoswin Incinerator Private Limited disposed off waste in its plant at high temperature under the supervision of technicians/ professionals as envisaged by the assessing officer but it cannot by any stretch of imagination lead to an inference that any sort of technical consultancy was being offered to the appellant. 1.6.4] The Hon ble ITAT Delhi Bench F in the case of ITO, Rohtak v. Akon Electronics India (P.) Ltd. as reported in [2018] 97 taxmann.com 176 (Delhi - Trib.) has dealt with the aspect of technical consultancy and has held that: [Page No. 37-40] 11. Ld.AO has alleged the activities rendered by BEL to assessee within the ambit of section 194J of the act vis-a-vis section 194C as per assessee. Explanation 2 Section 194J carves out exemption, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e . 1.7.4] It has been categorically stated on Page No. 424-425 of the Eleventh Edition of Kanga Palkhivala s The Law and Practice of Income Tax that if the payment is made for availing Standard Facilities, then, it would not be termed as Fees for Technical Services . [Page No. 41-42] 1.7.5] The Hon ble Supreme Court of India in the case of CIT-4, Mumbai v. Kotak Securities Ltd. as reported in [2016] 383 ITR 1 (SC) had an occasion to elaborately discuss the difference between facilities and services and the Hon ble Supreme Court of India has categorically held that Technical services like Managerial and Consultancy service would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider and if there is nothing special, exclusive or customized in the service, then, such services, would undoubtedly be termed as facilities and will not tantamount to technical services so as to attract the provisions of section 194J of the Income-Tax Act, 1961. The relevant extract from the judgment of the Hon ble Supreme Court of India is reproduced hereunder for your rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression technical services appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act. 9. There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which the charges in question had been paid by the appellant-assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant extract from the said judgment is reproduced hereunder for your ready reference: [Page No. 49-51] 7. In the modern day world, almost every facet of one s life is linked to science and technology inasmuch as numerous things used or relied upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. 10. Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment, does not result in the provision of technical service to the customer for a fee. 11. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia, it can be satisfactorily concluded that payment made by the appellant to M/s Hoswin Incinerator Private Limited for collection and disposal of waste cannot by any stretch of imagination be considered as Fees for Technical Services so as to attract the provisions of section 194J of the Income-Tax Act, 1961. 1.8.1] Further, it is also a well settled position of law that provision of section 194J of the Income-Tax Act, 1961 would have application only when the technology or technical knowledge of a person is made available to others and not where by using technical systems, services are rendered to others. 1.8.2] The Hon ble ITAT Jaipur Bench A in the case of Jaipur Vidyut Vitran Nigam Ltd. v. DCIT as reported in [2009] 123 TTJ 888 (Jaipur) has categorically held that: 9.6. An analysis of above cases lays down the proposition that section 194J would have application only when the technology or technical knowledge of a person is made available to others and not where by using technical systems, services are rendered to others. Rendering of services by allowing use of technical system is different than charging fees for rendering technical services. The applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the appellant for availing the facility of waste collection and disposal provided by M/s Hoswin Incinerator Private Limited cannot be termed as Fees for Technical Services . 1.9.1] It has been further held by several benches of Tribunal across the country that collection, transportation and disposal of waste would be liable for deduction of tax under section 194C of the Income-Tax Act, 1961 and not under section 194J of the Income-Tax Act, 1961. Relevant extracts from few of the these judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference: 1.9.2] The Hon ble ITAT Ahmedabad Bench A in the case of ITO (TDS), Baroda Vs Gujarat Fluorochemicals Limited [ITA Nos. 1983, 1984, 1985/Ahd/2012] has categorically laid down that collection, transportation and disposal of waste would be liable for deduction of tax under section 194C of the Act and not under section 194J of the Act. Relevant extract from the said judgment is reproduced hereunder for your ready reference: [Page No. 52-61] 8. These grounds of the Revenue pertained to non deduction of tax at source on payments made to M/s. Nand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with this submission of the appellant company and in my opinion collection, transportation and disposal of waste by these two companies cannot be said to be in the nature of technical, managerial or consultancy services as envisaged in Section 194J of the IT Act. I, therefore, hold that the ACIT(TDS) Circle, Baroda is not correct in holding the view that the services rendered by above two companies are in technical nature. I, therefore, direct the ACIT(TDS) Circle, Baroda to work out the tax at source on the payments made to Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection Infrastructure ltd. as per provisions of Section194C of the I.T. Act and also to charge the interest in case if required accordingly. Thus the grounds of appeal of the appellant related to the payments made by it to above two companies are decided in its favour. 10. Having heard the submission of both the sides and after considering the totality of the facts and circumstances of the case, we are of the considered opinion that the collection, transportation and disposal of waste by those two companies can be said to be covered under the provisions of Section 194C of IT Act. The view tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to UEEL for exhibiting the work contract would fall within the provisions of section 194C of the Act and not under the section 194 J. Effective ground of appeal is decided in favour of the assessee. [Emphasis Supplied] 1.9.5] The Hon ble ITAT Mumbai Bench D in the case of M/s Ruby Macons Ltd vs DCIT, Mumbai [ITA No. 4056/Mum/2008] has categorically held that: [Page No. 68-76] 11. We have carefully considered the rival submissions and perused the record. We have also carefully perused the case law relied upon by the learned Counsel, appearing on behalf of the assessee. In the case of CIT vs Bharti Cellular Ltd. (2009) 319 ITR 139 (Del) the Hon ble Delhi High Court observed that the expression technical services has to be understood in the sense in which it was used in Explanation 2 to section 9 (1) (vii) of the Act and, by applying the rule of noscitur a sociis, the word Technical would take colour from the adjunct words i.e., managerial and consultancy , between which it is sandwiched. Since the words managerial and consultancy involve a human element, even the expression technical service has to be understood as a service which predominan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected is on no profit no loss basis and if any excess amount is collected it is passed on to members by way of discount. This was accepted by the Assessing Officer while making an assessment under section 143 (3) of the Act in the case of VWEMCL. Such being the case it has to be considered as a standard facility available to each member/industrial undertaking ; VWEMCL is running a treatment plant providing a standard facility and if any work force is involved in maintaining the standard facility it cannot be said that a special skill/ knowledge was passed on by individuals to the assessee in lieu of a specific fee collected. Such being the case, we are of the considered opinion that it cannot be considered as a payment in the form of fee for technical services . In the case of recipient company the Assessing Officer accepted that charges were recovered from the member units by adopting mutuality concept. [Emphasis Supplied] 1.10] In view of the above discussion and findings reiterated in the judicial precedents cited supra, it clearly transpires that payment made for collection, transportation and disposal of waste would be liable for deduction of tax at the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by M/s Hoswin incinerator Pvt. Ltd. was within the purview of technical services. The appellant during the course of appeal proceedings has filed the written submission which is reproduced above. It is evident from the written submissons that the appellant has failed to controvert the findings of AO given at para nos.3.3 3.4 of the assessment order. Therefore, the AO has been found justified in assessing the short deduction of ₹ 6,948/-. The same is hereby confirmed. Both the grounds of appeal are dismissed. 4. Ground No.3: This ground of appeal has been raised against the addition of ₹ 2,073/- on account of charging interest u/s 201(1A) of the Income Tax Act 1961. The AO has discussed the issue at para no.4 of the assessment order. The short deduction of taxes as worked out by the AO has been confirmed while adjudicating the grounds nos.1 2. Therefore, the interest, being mandatory on the short deduction, the appellant is liable to pay. Therefore, the action of the AO in charging the interest of ₹ 2,073/- is hereby confirmed. This ground of appeal is dismissed. 10. It is noteworthy that the deductee company has rendered services of lifting material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icals Ltd. Baroda. For A.Ys. 2008-09, 2009-10, 2010-11 not giving any technical or managerial or consultancy services as envisaged in Section 194J of the I.T. Act. As per the appellant in its case the waste is also processed in its own FTP Plant at factory location and the above two companies do not have any role in such process. As per the appellant these two companies were carrying out it only for collection, transportation and disposal of waste and, therefore, same are covered under the provision of Section 194C of the I.T. Act. I agree with this submission of the appellant company and in my opinion collection, transportation and disposal of waste by these two companies cannot be said to be in the nature of technical, managerial or consultancy services as envisaged in Section 194J of the IT Act. I, therefore, hold that the ACIT(TDS) Circle, Baroda is not correct in holding the view that the services rendered by above two companies are in technical nature. I, therefore, direct the ACIT(TDS) Circle, Baroda to work out the tax at source on the payments made to Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection Infrastructure ltd. as per provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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