ITO, WD-1(4), TDS, NADIA & MURSHIDABAD, MURSHIDABAD vs. M/S THE WEST BENGAL POWER DEVELOPMENT CORPORATION LTD., MURSHIDABAD

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri S.S.Godara, Judicial Member and Dr. A.L. Saini, Accountant Member ITA No.717-719/Kol/2016 Assessment Years :2011-12 to 2013-14 Income Tax Officer, V/s. M/s The West Bengal Ward-1(4) (TDS), Power Development Nadia & Murshidabad Corporation Ltd. Sagardighi TPS, Administrative Building P.O. Manigram Dist. Murshidabad, West Bngal-742237 [PAN No.CALTO 4292 B] .. अपीलाथ� /Appellant ��यथ�/Respondent Shri Ravi Tulsiyan, FCA आवेदक क� ओर से/By Assessee Shri Sandeep Lakra, Addl. CIT-SR-DR राज�व क� ओर से/By Respondent 22-11-2018 सुनवाई क� तार�ख/Date of Hearing 30-11-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- These three Revenue’s appeal(s) for assessment years 2011-12, 2012- 13 & 2013-14 arise from Commissioner of Income Tax (Appeals)-24, Kolkata’s common order dated 22.01.2016, passed in case(s) No.1314, 1315 & 1316/CIT(A)-24/Kol/14-15; respectively reversing the Assessing Officer’s action raising TDS demands of ₹11,04,99,237/-, ₹132,94,589/- & ₹185,10,637/- respectively, involving proceedings u/s. 201(1) r.w.s 201(1A) of the Income Tax Act, 1961; in short ‘the Act’. 2. We notice at the outset that Revenue’s all three instant appeal(s) suffer from three days’ delay each in filing. It has placed on record condonation petitions citing reasons thereof which are not dispute at assessee’s behest.

ITA No.717-719/Kol/2016 A.Ys11-12 to 13-14 ITO Wd-1(4)(TDS), Nadia & Murshidabad Vs. M/s The WBPDCL Page 2 We therefore condone the impugned delay of three days’ filing in each of these cases. 3. We now advert merits involved in these cases. The Revenue’s identical sole substantive ground pleads that CIT(A) has erred in law as well as on facts in reversing Assessing Officer’s action treating annual maintenance contracts “AMC” payments made to various payees as fee for technical services. as follows:- “3. The AO' order u/s 201(1)/201(1A) has merely repeated general observation in respect of 17 payees. The AO's argument is that as expert or knowledgeable manpower was utilized the appellant is required to deduct TD u/s.194J. Thereby, the AO implies that what was paid by the appellant to vario9us contractors were fees for technical services. The AO has thus treated payments to all 17 parties as listed in his order as liable to deduction u/s. 194J.Reasons for his decision is mere repetitive in respect of all payees. There is no finding in the order that fees were paid for the services received by the appellant and treated as fees by the AO. 3.1 In my view, the judicial decisions as cited above, distinguish the cases where expertise is transferred and fees are paid from those were technical knowledge or skills are utilized by the providers of the services to offer some services or facility to payer. It is only in the former cases where the recipient of services acquire expertise and are able to research on that and utilize that, that the courts have held section 194J applicable on payment made as fees for the purposes involved I the latter cases where service providers or contractors are not parting with or transferring expertise or skills but are only offering services because of utilization of special skills, the courts are holding section 194J not applicable. The AO is not clear whether any skills or expertise or technology was transferred to the appellant deductor. I, therefore, see no reason to uphold the AO's decision. The grounds are allowed as services provided cannot be treated as ones for fees for technical services u/s194J.” 4. Learned CIT-DR vehemently contends that the Assessing Officer had rightly invoked sec. 194J of the Act on assessee’s payment made to various payees / persons since the AMC in question involved specialized knowledge in maintenance of its thermal power units. We find no merit in Revenue’s instant argument. There is no dispute about the assessee having made the impugned payments in lieu of availing annual maintenance services from the

ITA No.717-719/Kol/2016 A.Ys11-12 to 13-14 ITO Wd-1(4)(TDS), Nadia & Murshidabad Vs. M/s The WBPDCL Page 3 payees in issue. It deducted TDS thereupon u/s 194C of the Act. The Revenue’s endeavour herein is that the payee(s) party had rendered technical service and therefore sec. 194J steps in. We notice in this backdrop of facts this tribunal’s decision in DCIT vs. Parasrampuria Synthetics ITA No. 1354/Del/2005 decided on 30.11.2007 rejected Revenue’s similar substantive grievance seeking to treat contractual payments as fee for technical services as follows:- “1. Ground Nos.1 to 3. The appellant has relied on the decision of Hon'ble ITAT Delhi Bench 'H' in the case of DCIT Circle-51(1), New Delhi Vs. Parasrampuria Synthetics Ltd. (in appeal no.1354 (Delhi) of 2005, A.Y. 1999-2000, November 30, 2007). The facts in the above case are as under:- "During the relevant previous year, the assessee-company made certain payment to a contractor in respect of inspection and maintenance support agreement, fabrication of chilled water line, work order for thermal insulation/ erection, conversion of Partially Oriented Yam (POY) into polyester textured yam, and twisted yam, and deducted tax at source as per the provision of section 194C. The Assessing Officer held that the payment in question amounted to payment of fees for technical services and not merely payment to a contractor and, therefore, the assessee should have deducted tax at source as per provisions of section 194J. He, therefore, treated the assessee as assessee- in-default under section 201(1} and also levied interest under section 201(1A) upon it." 1. 1 The decision and the reason for the decision in the above case as in para-5 is reproduced as under :- "We have considered rival submissions. The term 'fees for technical services' as per Explanation 2 to section 194J means as defined in Explanation 2 below clause (vii) of sub-section (1) of section 9, extracted herein: '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 chargeable under the head 'salaries '. " Hon'ble Madras High Court in the case of Skycell Communications Ltd. (supra) observed thus: "In the modem day world almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in everyday 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 involve 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. " "When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz, an automobile. It

ITA No.717-719/Kol/2016 A.Ys11-12 to 13-14 ITO Wd-1(4)(TDS), Nadia & Murshidabad Vs. M/s The WBPDCL Page 4 cannot on that ground be said that the taxi driver who controls the vehicle and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the paseenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having used it for travelling from one destination to another. When a person travels by bus, it cannot be said that the undertaking which owns the bus services rendering technical service to the passenger and, therefore, the passenger must deduct tax at source on the payment made to the bus service provider for having used the bus. The electricity supplied to a consumer cannot, on the ground that generators are used to generate electricity, transmission lines to carry the transformers to regulate the flow of current, meters to measure the consumption) be regarded as amounting to provision of technical services to the consumer resulting in the consumer having to deduct tax at source on the payment made for power consumed and remit the same to the revenue. 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. 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 installed sophistical technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected 0 the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as 'technical service' for the purpose of section 194J of the Act." In the present case, it is seen that there may be use of services of technically qualified persons to render the services but that itself do not bring the amount paid as 'fees for technical services' within the meaning of Explanation 2 to section 9(1)(vii). The amounts paid are towards annual maintenance contract of certain machinery or for converting POY into textured/twisted yam. The technology or the technical knowledge of the persons is not made available to the assessee but only by using such technical knowledge services are rendered to the assessee. In such a case, it cannot be said that the amount is paid as 'fees for technical services'. Rendering services by using technical knowledge or skill is different than charging fees for technical services. In: a later case, the technical services are made available due to which the assessee acquired certain right which can be further used. In the present case, it is not so. The person rendering certain services has only maintained machinery or converted yam but that knowledge is not now vested with the assessee by which itself it can do research work. In the circumstances, the amount paid cannot be considered as fees for technical services within the meaning of section 194J of the Act. In the result, the appeal is dismissed.”

ITA No.717-719/Kol/2016 A.Ys11-12 to 13-14 ITO Wd-1(4)(TDS), Nadia & Murshidabad Vs. M/s The WBPDCL Page 5