Indian Kanoon - Search engine for Indian Law

(a) Whether the payments made by the assessee to the MTNL/other companies for the services provided through interconnect/port/access/toll were liable for tax deduction at source in view of the provisions of section 194J of the Act?

(b) Whether the Ld. ITAT erred in holding that the payment for use of services for MTNL/other companies via the interconnect/port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194J of the Act, so as to be eligible for tax deduction at source?

[2001] 251 ITR 53 (Mad), wherein the payment made by a subscriber to the provider of cellular mobile facility was held not to amount to fees for technical services within the meaning of Section 194J read with Section 9 (1) (vii), Explanation 2 of the said Act. It was contended that 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 also contended that unless and until, there is an element of human interface, the facility of interconnection/port access cannot be regarded as a technical service. Reliance were also placed on an earlier decision of this Court in the case of J.K. (Bombay) Ltd v Central BVoard of Direct Taxes and Anr : (1979) 118 ITR 312, which has considered the expression ―technical service‖ within the context of Section 80-O. It was contended that in the said decision, it was pointed out that ―technical service‖ has two components. The first is the use of tools and the second being the application of human reason to the properties of matter and energy. It was, therefore, contended that unless and until the element of human interface was present, the facility provided by the MTNL/other companies could not be regarded as a ―technical service‖.

7. It was also contended that since the expression ―fee for technical service‖ as appearing in Section 194J, is to be construed in the same manner as given in Explanation 2 of Section 9 (1) (vii) of the said Act, the entire expression ―managerial, technical or consultancy services‖ would have to be considered. Thus, the word ―technical‖ would take colour from the words ―managerial" and ―consultancy‖ and cannot be considered in the general or wider sense. Since both managerial and consultancy services, by their very nature, involve a human element, the technical services which are relevant for the purpose of Section 194J would be those technical services which involve human interface/element.

However, we still have to deal with the submissions made by the learned counsel for the Appellants/Revenue that the payments that were considered in the case of Skycell (supra) were those made by a subscriber to the cellular mobile telephone facility provider and not by one cellular network provider to another. For this purpose, we must examine the appeals at hand de hors the decision of the Madras High Court in Skycell (supra).

13. We have already pointed out that the expression ―fees for technical services‖ as appearing in section 194J of the said Act has the same meaning as given to the expression in Explanation 2 to section 9 (1) (vii) of the said Act. In the said Explanation the expression ―fees for technical services‖ means any consideration for rendering of any ―managerial, technical or consultancy services‖. The word ―technical‖ is preceded by the word ―managerial‖ and succeeded by the word ―consultancy‖. Since the expression ―technical services‖ is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on The Interpretation of Statutes (Twelfth Edition) in the following words:-