DCIT CORPORATE CIRCLE 1(2), CHENNAI vs. COSMIC GLOBAL LTD., CHENNAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that translation services are not technical services as per Explanation 2 to Section 9(1)(vii) of the Income Tax Act. Therefore, the assessee was not required to deduct tax at source on such payments.
What were the facts?
The Assessing Officer disallowed employees' PF and ESI contributions not remitted by the due date and also disallowed translation charges paid to non-residents for lack of TDS. The assessee is engaged in providing translation services.
What were the issues?
Whether translation services rendered to non-residents constitute 'fees for technical services' requiring TDS, and whether disallowance of employee contributions to PF/ESI is justified.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-1, Chennai in 1/2015-16 dated 22.09.2017 for the assessment year 2013-14.
M/s. Cosmic Global Ltd., the assessee is engaged in the business of providing translation services. While making the assessment for assessment year 2013-14, the Assessing Officer, inter alia, disallowed Rs. 1,23,906/- u/s. 36(1)(va), representing employees contribution towards provident fund and ESI, which has not been remitted on or before the due dates prescribed under the relevant Acts but paid before the due date for filing the return under the Income Tax Act, 1961. Further, he disallowed Rs. 2.17 crores paid, towards translation charges to non-resident translators u/s. 40(a)(ia), treating it as technical services covered u/s. 9(1)(vii), for which TDS was not made u/s. 40(a)(ia).
Aggrieved, the assessee filed appeal before the Ld. CIT(A). In respect of the issue on the payment to employees contribution towards PF & ESI, the Ld. CIT(A) following the Jurisdictional High Court decision in the case of CIT vs Industrial Security and Intelligence India (P) Ltd (TCA No. 585 & 586 of 2015 dated 24.07.2015) deleted the addition made by the AO. With regard to the payments made towards translation charges to non-resident translators, the Ld. CIT(A) following the decision of this tribunal in the assessee’s own case vide dated 25.11.2016 deleted the disallowance holding that the facts prevailing during the relevant previous year are the same as for this year. Aggrieved, the Revenue filed this appeal challenging these two issues.
We heard the rival submissions and gone through the relevant material.
With regard to the disallowance on employees contribution towards PF & ESI, since the Ld. CIT(A) has followed the decision of the Jurisdictional High Court, supra, we do not find any reason to interfere with her order and hence, the corresponding grounds of appeal of the Revenue are dismissed.
4.1 With regard to the disallowance on translation charges to non-resident translators u/s. 40(a)(ia), the relevant portion of the order of this tribunal from dated 25.11.2016, supra, is extracted as under:
“6.0 We have heard the rival submissions and perusal of the material placed before us. The Ld.AR relied on the decision of assessee’s own case for the AY 2009-10 on similar facts and held as under: “We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. The Assessing Officer has made disallowance of Rs.2. 63 Crores under Sect/on 40(a)(i) on account of non- deduction of tax at source on the payments made to non-resident translators. The authorities below have held translation services to be technical in nature. On the other hand, the contention of the assessee is that the payment for translation services to non- residents does not fall within the ambit of “fees for technical, managerial or consultancy services’. Let us first understand the scope of the term “technical services’ The expression “technical services” has not been defined anywhere in the Act. However, “fees for technical services” has been defined in Explanation 2 to Section 9(’l)(vii) of the Act, which reads as under:“Explanation (2) — 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 or consideration which would be income of the recipient chargeable under the head “Salaries” The dictionary meaning of the word “technical” as given in Oxford English Dictionary is “(1) relating to a particular subject, art, or craft, or its techniques requiring special knowledge to be understood; (2) involving or concerned with applied and industrial sciences relating to the operation of machines; (3) according to a strict application or interpretation of the law or rules’ The Chambers English Dictionary explains the term “technical” as — “(1) relating to practical skill or applied science, especially those sciences useful to industry; (2) relating to a particular subject or requiring know/edge of particular subject to be understood; (3) according to a strict interpretation of the law or rules; (4) belonging or relating to or showing a quality of technique’ In the present case, the assessee is getting the translation of the text from one language to another. The only requirement for translation from one language to other is, the proficiency of the translators in both the languages, / e. the language from which the text is to be translated, to the language in which It is to be translated. The translator is not contributing anything more to the text which is to be translated. He is not supposed to explain or elaborate the meaning of the text. Apart from the knowledge of the language, the translator Is not expected to have the knowledge of applied science or the craft or the techniques in respect of the text which is to be translated. A bare perusal of Explanation 2 to Section 9(1)(vii), which explains “fees for technical service” and the dictionary meaning of the word “technical” makes it unambiguously dear that translation services rendered by the assessee are not technical services. Therefore, the payment made by the assessee to the non-resident translators would not fail within the scope of “fees for technical, manager/al or consultancy service” as detailed in Explanation 2. In our considered view, the CIT(Appeals) has travelled beyond the definition of “fees for technical service” to bring the translation services within the compass of the term “fees for technical services’ In our considered opinion, the payments made by the assessee to non-residents on account of translation services do not attract the provisions of Section .194J. The disallowance made under Section 40(a)(ia) is thus deleted. This ground of appeal of the assessee is allowed.”
:-5-: Respectfully, following the decision of the coordinate Bench of this tribunal, since the facts in the case are identical to the facts of the AY 2009- 10, we hold that the services rendered by the assessee are not technical services as per explanation of Sec.9(i)(vii) of Income Tax Act and the assessee is not required to deduct the tax at source and accordingly, we confirm the order of the Ld.CIT(A). The Revenue’s ground of appeal on this issue is dismissed.
7. In the result, the appeal is dismissed.”
Since the facts in this case are identical to the facts of the above assessment year , following the decision of the coordinate bench, supra, we hold that the services rendered by the assessee are not technical services as per Explanation of section 9(1)(vii) and the assessee is not required to deduct the tax at source and accordingly, we confirm the order of the Ld. CIT(A). The corresponding grounds of appeal of the Revenue on this issue are dismissed.
In the result, the Revenue’s appeal is dismissed.
Order pronounced in the Open Court on 12th June, 2018 at Chennai.
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