Commissioner Of Income Tax-I (Tds v. Chief Manager, State Bank Of India

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 940 of 2008 Date of Decision: 11.7.2011 Commissioner of Income Tax-I (TDS) Versus Chief Manager, State Bank of India ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE.ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of six appeals bearingITA Nos. 590, 591 of 2006, 940, 941 of 2008, 5 and 129 of 2009 aslearned counsel for the parties are agreed that identical proposition oflaw is involved in all the appeals. For brevity, the facts are beingextracted from ITA No. 940 of 2008.2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 28.2.2007 passed by the Income Tax AppellateTribunal, Chandigarh Bench “B” (hereinafter referred to as “theTribunal”) in ITA No. 229/Chandi/2006, relating to the assessment year 2004-05, claiming the following substantial question of law:- “Whether on the facts and circumstances of the caseand in law, the Hon'ble ITAT was justified in holdingthat the facility provided by PNB, MICR ChequeProcessing Centre, cannot be considered as a'technical service' for the purpose of section 194J ofthe Income-tax Act, 1961?” 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that during the TDS inspection of the SBI,Service Branch, Chandigarh, the Assessing Officer found that the bankwas not deducting tax at source from the payments made to PunjabNational Bank, MICR Cheque Processing Centre, Chandigarh. Theassessee claimed as the service rendered by the PNB, MICR ChequeProcessing Centre was not a 'technical service', therefore, Section 194Jof the Act was not applicable. Further, it was submitted that merecollection of a fee for use of a standard facility provided to all thosewilling to pay for it, does not amount to be the fee having been receivedfor technical services. According to the assessee, as per Explanation toSection 191 of the Act, the SBI Branch was not in default because thePNB, MICR Cheque Processing Centre had considered the receipt ofthe subject processing charges as their income and paid the tax on thesame to the department and, thus, there was no loss of revenue. TheAssessing Officer vide order dated 5.9.2005 treated the Chief Manager,SBI, Service Branch as an assessee in default and raised the demandsunder Section 194J read with Sections 201(1) and 201(1A) of the Act.Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. TheCIT(A) vide order dated 30.1.2006 held that the provisions of Section194J of the Act were not applicable as the service for chequeprocessing provided by the PNB, MICR Cheque Processing Centrecould not be treated as 'technical service'. The department feelingdissatisfied approached the Tribunal by way of an appeal who videorder dated 28.2.2007 upheld the order of the CIT(A) and dismissed theappeal. Hence, the present appeal by the department. 4.The issue that arises for consideration in these appeals iswhether the processing charges which were paid by the assessee toPNB MICR Centre for clearing of cheques by using standard facilityprovided by the PNB MICR Centre to all its customer-Banks would fallwithin the definition of “technical service” and the payments made forthe same were covered under Section 194J of the Act. 5.The Tribunal while relying upon the judgment of the MadrasHigh Court in Skycell Communications Ltd. and another v. DeputyCommissioner of Income Tax [2001] 251 ITR 53 (Mad) hadadjudicated the issue in favour of the assessee. 4.The issue that arises for consideration in these appeals iswhether the processing charges which were paid by the assessee toPNB MICR Centre for clearing of cheques by using standard facilityprovided by the PNB MICR Centre to all its customer-Banks would fallwithin the definition of “technical service” and the payments made forthe same were covered under Section 194J of the Act. 5.The Tribunal while relying upon the judgment of the MadrasHigh Court in Skycell Communications Ltd. and another v. DeputyCommissioner of Income Tax [2001] 251 ITR 53 (Mad) hadadjudicated the issue in favour of the assessee. 6.Learned counsel for the assessee in addition to theaforesaid decision in Skycell Communications Ltd's case (supra)had relied upon the judgment of the Apex Court in Commissioner ofIncome-tax, Delhi v. Bharti Cellular Limited [2010] 330 ITR 239 (SC). 7.On the other hand, learned counsel for the revenue hasalso sought to draw support from the aforesaid judgment of the ApexCourt in Bharti Cellular Limited's case (supra). 8.After giving our thoughtful consideration to the respective submissions of learned counsel for the parties, we are of the opinionthat the issue arising in these appeals requires to be re-adjudicated bythe Assessing Officer keeping in view the principles of law enunciatedby the Apex Court in Bharti Cellular Limited's case (supra). TheApex Court while discussing the scope of “technical service” hadrecorded as under:- “7.The problem which arises in these cases isthat there is no expert evidence from the side of theDepartment to show how human intervention takesplace, particularly, during the process when calls takeplace, let us say, from Delhi to Nainital and viceversa. If, let us say, BSNL has no network in Nainitalwhereas it has a network in Delhi, the InterconnectAgreement enables M/s. Bharti Cellular Limited toaccess the network of BSNL in Nainital and the samesituation can arise vice versa in a given case. Duringthe traffic of such calls whether there is any manualintervention, is one of the points which requiresexpert evidence. Similarly, on what basis is the“capacity” of each service provider fixed whenInterconnect Agreements are arrived at? Forexample, we are informed that each service provideris allotted a certain “capacity”. On what basissuch“capacity” is allotted and what happens if a situationarises where a service provider's “allotted capacity”gets exhausted and it wants, on an urgent basis, “additional capacity”? Whether at that stage, anyhuman intervention is involved is required to beexamined, which again needs a technical data. Weare only highlighting these facts toemphasise thatthese types of matters cannot be decided without anytechnical assistance available on record. 8.There is one more aspect that requires to begone into. It is the contention of Respondent No.1herein that Interconnect Agreement between, let ussay, M/s. Bharti Cellular Limited and BSNL in thesecases is based on obligations and counterobligations, which is called a “revenue sharingcontract”. According to Respondent No.1, Section194J of the Act is not attracted in the case of“revenue sharing contract”. According to RespondentNo.1, in such contracts there is only sharing ofrevenue and, therefore, payments by revenuesharing cannot constitute “fees” under Section 194Jof the Act. This submission is not accepted by theDepartment. We leave it there because thissubmission has not been examined by the Tribunal. 9.In short, the above aspects needreconsideration by the Assessing Officer. We make itclear that the assessee(s) is not at fault in thesecases for the simple reason that the question ofhuman intervention was never raised by the 9.In short, the above aspects needreconsideration by the Assessing Officer. We make itclear that the assessee(s) is not at fault in thesecases for the simple reason that the question ofhuman intervention was never raised by the Department before the CIT. It was not raised evenbefore the Tribunal; it is not raised even in these civilappeals. However, keeping in mind the larger interestand the ramification of the issues, which is likely torecur, particularly, in matters of contracts betweenIndian Companies and Multinational Corporations,we are of the view that the cases herein are requiredto be remitted to the Assessing Officer (TDS). 10.Accordingly, we are directing the AssessingOfficer (TDS) in each of these cases to examine atechnical expert from the side of the Department andto decide the matter within a period of four months.Such expert(s) will be examined (including cross-examined) within a period of four weeks from thedate of receipt of the order of this Court. Liberty isalso given to Respondent No.1 to examine its expertand to adduce any other evidence.” 9.The primary basis whereby the Apex Court had concludedservices to the falling under 194J of the Act to be technical services thatwhether any human intervention was involved in the activity or not. TheApex Court observed that wherever there was human interventionrequiring examination of technical data, the same would fall within thedefinition of technical services and in the absence thereof, the samewould not partake the character of technical services. The Apex Courtin that case had remitted the matter to the Assessing Officer to examinethe technical expert and after examining him adjudicate the matter ITA No. 940 of 2008 afresh. In the present case as well from the perusal of the orders of theauthorities below, it is not discernible whether there was anyintervention of the human element in the services provided to theassessee. 10.Accordingly, while setting aside the order of the authoritiesbelow, the matter is remitted to the Assessing Officer to examine afreshin the light of the observations made by the Apex Court in BhartiCellular Limited's case (supra), noted above. 11.The appeals stand disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL)ACTING CHIEF JUSTICE ITA No. 940 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 941 of 2008 Date of Decision: 11.7.2011 Commissioner of Income Tax-I (TDS) Versus Chief Manager, State Bank of India ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 940 of 2008 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 590 of 2006 Date of Decision: 11.7.2011 Commissioner of Income Tax-II Versus M/s HFCL Infotel Limited ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 940 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 591 of 2006 Date of Decision: 11.7.2011 Commissioner of Income Tax-II Versus M/s HFCL Infotel Limited ....Appellant. Commissioner of Income Tax-II Versus M/s HFCL Infotel Limited ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 940 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 591 of 2006 Date of Decision: 11.7.2011 Commissioner of Income Tax-II Versus M/s HFCL Infotel Limited ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 5 of 2009 Date of Decision: 11.7.2011 Commissioner of Income Tax-I (TDS) Versus Chief Manager, State Bank of India ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 129 of 2009 Date of Decision: 11.7.2011 Commissioner of Income Tax-I (TDS) Versus Chief Manager, State Bank of India ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Standing Counsel,for the appellant.for the appellant. Mr. Ravi Shanker, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 940 of 2008 (Commissioner of Income Tax-I (TDS) v. Chief Manager, State Bank of India). (AJAY KUMAR MITTAL) JUDGE July 11, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE