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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by Revenue is directed against the order of the CIT(A)-59, Mumbai dated 25.02.2014 for A.Y. 2005-06.
The facts of the case, briefly, are as under: - 2.1 The assessee-company is a cargo shipping commission agent. 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 M/s. CMA CGM Global India Pvt. Ltd 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 under section 194C of the Act and not under section 194J of the Act as held by the AO and deleted the demand raised under section 201(1) of the Act and interest charged under section 201(1A) of the Act. 3.1 Aggrieved by the order of the CIT(A)-59, Mumbai dated 25.02.2015 for A.Y. 2005-06, Revenue has preferred this appeal raising the following grounds: - “
1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee was under no liability to deduct tax u/s.194J of the l.T.Act, 1961 and deleting the addition made u/s.201(1)/201(1A) of the l.T.Act, 1961 on account of short deduction of tax on the payments made to Nhava Sheva International Container Terminal Private Limited determined by the AO without appreciating the fact that the AO was right in holding the assessee as assessee in default within the provisions of section 194J in his order u/s.201(1)/ 201(1A) of the I.T.Act, 1961.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the payments made to Nhava Sheva International Container Terminal Pvt. Ltd. are not in the nature of 'fees for technical and managerial services' but the payments are for carriage of goods and thus defined as 'work' in Explanation (iv) to section 194C of the Act, and hence the same are not covered under the provisions of section 194J of the I.T.Act, 1961.
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the fact that the container handling services are technical services rendered by Nhava Sheva International Container Terminal Pvt. Ltd. and fall within the ambit of section 194J of the l.T.Act, 1961.
4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the interest u/s.201(1A) of the I.T.Act, 1961 on the short deduction of tax determined by the AID as the tax determined has already been deleted by him and interest deletion is consequential to the quantum deletion for which further M/s. CMA CGM Global India Pvt. Ltd appeal has been recommended vide ground nos. (i) to (iii).
5. The appellant prays that for this and other reasons it is submitted that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored.
6. The appellant craves leave to amend or alter any grounds or add a new ground 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 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 space and insurance and further deal with the customs requirements. It is apparent from the assessment order that during the course of its business as shipping agent, the assessee availed the services provided by NSICT for the movement of its cargo in respect of import and export done by its customers. The movement of cargo on port, in case of export, involves different stages viz., lifting of containers from customer’s trailer/rail wagons by the operation of rubber tyre gantry cranes; movement of the containers from yard to the vessel side; and moving the containers from trailers at the quay side on to the vessel with the operation of quay cranes. Similarly the movement of cargo on port, in case of import, involves different stages viz., moving the containers from vessel on to the trailers at the quay side with the operation of quay crane; movement of the containers from yard to vessel side; and operation of rubber tyre gantry cranes/rail mounted gantry cranes for lifting the containers off from trailers to customer’s trailers/rail wagons. The above description of the work done by NSICT for the assessee was brought to the notice of authorities below and the AO has recorded the same in para 10 of the assessment order. The veracity of above nature of services, as stated by the assessee to have been provided by NSICT, M/s. CMA CGM Global India Pvt. Ltd stood established when during the course of survey proceedings it was noted that NSICT operated its terminal with 8 quay cranes, 29 rubber tyred gantry cranes, 3 rail mounted gantry cranes and more than 600 employees.
7. The reference made by the AO in para 5 of the assessment order that NSICT entered into technical services agreement with P&O Australia under which P&O Australia was to provide technical know- how to the assessee-company, is not correct. The assessee stated before the learned CIT(A) that P&O Australia entered into technical agreement with NSICT for providing technical know-how to them and not to the assessee-company. This fact has not been controverted by the learned Departmental Representative with any material or evidence. From the above discussion it is manifest that the assessee made the payments for movement of cargo of its customers, which, in turn, was facilitated by NSICT with the use of their equipments in the shape of cranes and manpower.
Now the moot question is—Whether the payment made to NSICT for the movement 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.
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."
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’ 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’."
On circumspection of Expln. 2 to s. 9(1)(vii) in juxtaposition to s. 194J, it becomes apparent that the fees for technical services is consideration for the rendering of any managerial, technical or consultancy services including the provision of services for technical or M/s. CMA CGM Global India Pvt. Ltd other personnel. Thus the foremost criteria for bringing any payment under the purview of Expln. 2 to s. 9(1)(vii) is that the payment must have been made for rendering of any managerial, technical or consultancy services and also including the provision of services for technical or other personnel.
The AO, in the instant case, has restricted himself only to the technical services and it is nobody’s case that the assessee made any payment for managerial or consultancy services. In the like manner the AO has not pressed into service the later part of the Expln. 2, which deals with provision of services of technical or other personnel. It is rightly so because of the fact that NSICT raised invoices in respect of movement of cargo and there is no reference to any specific provision of services by technical or other personnel. Rule of ejusdem generis helps in ascertaining the meaning of general words in the company of specific words. As per this rule, the general word draw their colour and meaning from the company they keep. The application of this rule has been approved in the context of the IT Act by several Courts including the Hon’ble Summit Court in a recent judgment rendered in CIT vs. McDowell & Co. Ltd. (2009) 224 CTR (SC) 16 : (2009) 23 DTR (SC) 122 : (2009) 314 ITR 167 (SC). By applying this rule, the expression ‘other personnel’ in this provision must fall within the genus of ‘services of technical’ personnel. It cannot be considered as any personnel unrelated to the managerial, technical or consultancy services. Even though NSICT had the services of several personnel in the process of movement of cargo, those personnel, in the absence of any finding by the AO that they possessed some technical expertise, cannot be considered within the ambit of this provision as falling under ‘other personnel’.
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 made available by human element. There should be direct and live link between payment and receipt/use of technical services/information.
Where no technical services are provided as such, but the payment is made for the use of some machinery or equipment or standard facility which may have been created or brought into existence with the M/s. CMA CGM Global India Pvt. Ltd input of technical services along with man, machine and material, such payment would not partake of the character of fees for technical services. Take for example a person going to a cinema and purchasing ticket for watching a movie. When he purchases a ticket, he pays for watching the movie and not for availing any technical service. It is a different matter that the movie is exhibited on screen by way of some technical input. Take another example of a person boarding a bus or train by purchasing the requisite ticket. It cannot be said that the person is making payment for technical services. No doubt bus or train is made by sufficient technical input but the user of the same on a non- customized basis cannot be said to be making payment for any technical services. It is the bus manufacturer who avails technical services in making the bus. Once the bus is made and brought on road for use by anyone, boarding on it in lieu of ticket, is a payment for use of bus as a facility and not for technical services which was obtained by the bus manufacturer at the time of making bus. In the present age of technology most of the services availed by us are result of some technical input. The usage of such facility on payment basis cannot be described as fees for technical services.
Coming back to the facts of the instant case it is noticed that the assessee made payment to NSICT for the movement of the containers from or upto the vessel. In order to facilitate the movement of containers, NSICT provided the services of different types of cranes such as quay cranes, rubber tyre gantry cranes and rail mounted gantry cranes. These cranes are used for specific purposes only. Rubber tyre gantry cranes and rail mounted gantry cranes are used for lifting the containers from customer’s trailer/rail wagons and quay cranes are used for moving containers from trailers at the quay side on to the vessel. When the assessee made payment to NSICT it was meant for using the facility of cranes provided by them for the movement of containers 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.
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 movement of ships and vessels, movement of M/s. CMA CGM Global India Pvt. Ltd cargo and goods into and out of the port etc. Services provided at ports are contained in Chapter V on works and services to be provided at ports of the Major Port Trust Act, 1963."
From the mandate of s. 65(82) of Finance Act, 1994 it is vivid that port services consist of cargo handling, dock services and container handling services. When we view the registration of NSICT as the one under the category of `PS and MC’ along with the fact that the assessee paid for the movement of containers of its customers, there remains no doubt that NSICT, in fact, maintained different types of cranes for the purpose of providing cargo handling services. The registration of any person for the purpose of service-tax, no doubt presumes that some sort of services are provided by him within the meaning of Finance Act, 1994, but that does not mean that such services are only in the category of ‘technical services’ unless the prescription of Expln. 2 to s. 9(1)(vii) is fulfilled. A payment to be covered under s. 194J should be fees for technical services and such fees should be for rendering of any technical, managerial or consultancy services and not anything else. In order to rope in any service provider within the net of s. 194J, it is of paramount importance to check the true nature of service provided on the touchstone of the mandate of this provision alone. If the conditions of s. 194J r/w s. 9(1)(vii) Expln. 2 are not fulfilled, the liability under this section is ruled out.
In the case of Skycell Communications Ltd. (supra), the assessee was engaged in the business of providing cellular mobile telephone service to subscribers. The Department took the view that the payments made by the subscribers to the assessee be treated as covered under s. 194J as fees for technical services. Rejecting this contention, the Hon’ble Madras High Court held the mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. It was further held that 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 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.
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.
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 M/s. CMA CGM Global India Pvt. Ltd 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 sophisticated machinery. Similarly s. 194-I requires deduction of tax at source from rent. Explanation to this section defines ‘rent’ to mean payment for the use of inter alia (e) plant; (f) equipment. This is a direct payment for the use of machinery. No machinery or equipment can be manufactured without some sort of technical service. If we accept the view taken by the AO in this case that the payment for use of any machinery, or equipment or facility, which in turn, involves the input of some technical information in its making, is to be considered as fees for technical services, then the payments in all such cases shall be covered under s. 194J and the other sections, as taken note of above, would be rendered as a redundant piece of legislation. It is axiomatic that it cannot be the case.
In view of the foregoing discussion we hold that there was no liability on the assessee to deduct tax at source from the payments made to NSICT within the meaning of s. 194J and the learned CIT(A) was justified in holding so.
Now let us examine and evaluate the contention of the assessee that the payments made to NSICT are covered under s. 194C of the Act. This section mandates that any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of contract between the contractor and the persons specified, shall at the time of credit of such sum to the account of the contractor 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, shall deduct income-tax at source at the specified rate. Explanation III below s. 194C(2) defines the expression "work", which is relevant for our purposes. Clause (c) of this Explanation provides that the expression "work" shall also include : ‘carriage of goods and passengers by any mode of transport other than by railways’. A cursory glance on cl. (c) of Expln. III brings out that carriage of goods by any mode of transport other than by railways has been included in the definition of "work" as applicable to s. 194C. Carriage of goods means the movement of goods from source to destination. In case of exports, source is the godown of customer and the destination in India is vessel and vice versa in case of imports. The goods may reach from source to destination in one or more trips and 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 M/s. CMA CGM Global India Pvt. Ltd 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.
At this juncture we are reminded of the well-settled rule of generalia specialibus non derogant which provides that the special provisions override general provisions. In other words, if a special provision has been enacted dealing with a particular thing or situation, then that particular thing or situation is governed by such special provision alone. Application of general provisions stands excluded on that. This rule has got the sanction from several Courts in the country including the Hon’ble apex Court in Britannia Industries Ltd. vs. CIT (2005) 198 CTR (SC) 313 : (2005) 278 ITR 546 (SC) and that of the Hon’ble jurisdictional High Court in Forbes Forbes Campbell & Co. Ltd. vs. CIT (1994) 119 CTR (Bom) 319 : (1994) 206 ITR 495 (Bom). Coming back to the facts of the present case we find that the payments made to NSICT are straightway covered under Expln. III(c) below s. 194C(2). This being a specific provision encompassing the payment of carriage, the provisions of s. 194J, which are general in the context of not specifically defining the meaning of ‘technical services’, cannot be applied.” 3.2.2 The Coordinate Bench in its order in the assessee’s own case for A.Y. 2004-05 (supra), following the aforesaid decision of ITAT Mumbai in the case of Merchant Shipping Services P. Ltd. (supra), decided this issue in favour of the assessee holding as under at paras 2 to 4: - “2. The assessee is a cargo shipping Commission agent. It had made payment to Nhava Sheva International Container Terminal (NSICT) for availing composite set of services such as stevedoring, loading & unloading etc. The assessee had deducted tax at source u/s 194C of the Act on the payment so made by it @ 2.05%. The AG took the view that the NSICT is providing managerial services to the assessee and hence the assessee should have deducted tax at source u/s 1943 of the Act @5.125%. Accordingly the AG treated the assessee as an assessee in default and accordingly raised demand u/s 201(1) for short deduction of tax at source and also charged interest u/s 201(1A) of the Act in both the years under consideration.
The Ld CIT(A) noticed that an identical issue has been considered by Mumbai bench of Tribunal in the case of Merchant Shipping Services (ITA No.192 & CO 137/Mum/2010), wherein it was held that the payments made to NSCIT for identical services rendered by it to the assessee therein was liable for tax deduction at source u/s 194C of the Act. Accordingly the Ld CIT(A) set aside the