ITA No. 940 of 2008 -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) ....Appellant. Versus Chief Manager, State Bank of India ...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. 1. This order shall dispose of a bunch of six appeals bearing ITA Nos. 590, 591 of 2006, 940, 941 of 2008, 5 and 129 of 2009 as learned counsel for the parties are agreed that identical proposition of law is involved in all the appeals. For brevity, the facts are being extracted from ITA No. 940 of 2008. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.2.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B” (hereinafter referred to as “the Tribunal”) in ITA No. 229/Chandi/2006, relating to the assessment year ITA No. 940 of 2008 -2- 2004-05, claiming the following substantial question of law:- “Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in holding that the facility provided by PNB, MICR Cheque Processing Centre, cannot be considered as a 'technical service' for the purpose of section 194J of the Income-tax Act, 1961?” 3. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that during the TDS inspection of the SBI, Service Branch, Chandigarh, the Assessing Officer found that the bank was not deducting tax at source from the payments made to Punjab National Bank, MICR Cheque Processing Centre, Chandigarh. The assessee claimed as the service rendered by the PNB, MICR Cheque Processing Centre was not a 'technical service', therefore, Section 194J of the Act was not applicable. Further, it was submitted that mere collection of a fee for use of a standard facility provided to all those willing to pay for it, does not amount to be the fee having been received for technical services. According to the assessee, as per Explanation to Section 191 of the Act, the SBI Branch was not in default because the PNB, MICR Cheque Processing Centre had considered the receipt of the subject processing charges as their income and paid the tax on the same to the department and, thus, there was no loss of revenue. The Assessing Officer vide order dated 5.9.2005 treated the Chief Manager, SBI, Service Branch as an assessee in default and raised the demands under Section 194J read with Sections 201(1) and 201(1A) of the Act. Feeling aggrieved, the assessee filed an appeal before the ITA No. 940 of 2008 -3- Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated 30.1.2006 held that the provisions of Section 194J of the Act were not applicable as the service for cheque processing provided by the PNB, MICR Cheque Processing Centre could not be treated as 'technical service'. The department feeling dissatisfied approached the Tribunal by way of an appeal who vide order dated 28.2.2007 upheld the order of the CIT(A) and dismissed the appeal. Hence, the present appeal by the department. 4. The issue that arises for consideration in these appeals is whether the processing charges which were paid by the assessee to PNB MICR Centre for clearing of cheques by using standard facility provided by the PNB MICR Centre to all its customer-Banks would fall within the definition of “technical service” and the payments made for the same were covered under Section 194J of the Act. 5. The Tribunal while relying upon the judgment of the Madras High Court in Skycell Communications Ltd. and another v. Deputy Commissioner of Income Tax [2001] 251 ITR 53 (Mad) had adjudicated the issue in favour of the assessee. 6. Learned counsel for the assessee in addition to the aforesaid decision in Skycell Communications Ltd's case (supra) had relied upon the judgment of the Apex Court in Commissioner of Income-tax, Delhi v. Bharti Cellular Limited [2010] 330 ITR 239 (SC). 7. On the other hand, learned counsel for the revenue has also sought to draw support from the aforesaid judgment of the Apex Court in Bharti Cellular Limited's case (supra). 8. After giving our thoughtful consideration to the respective ITA No. 940 of 2008 -4- submissions of learned counsel for the parties, we are of the opinion that the issue arising in these appeals requires to be re-adjudicated by the Assessing Officer keeping in view the principles of law enunciated by the Apex Court in Bharti Cellular Limited's case (supra). The Apex Court while discussing the scope of “technical service” had recorded as under:- “7. The problem which arises in these cases is that there is no expert evidence from the side of the Department to show how human intervention takes place, particularly, during the process when calls take place, let us say, from Delhi to Nainital and vice versa. If, let us say, BSNL has no network in Nainital whereas it has a network in Delhi, the Interconnect Agreement enables M/s. Bharti Cellular Limited to access the network of BSNL in Nainital and the same situation can arise vice versa in a given case. During the traffic of such calls whether there is any manual intervention, is one of the points which requires expert evidence. Similarly, on what basis is the “capacity” of each service provider fixed when Interconnect Agreements are arrived at? For example, we are informed that each service provider is allotted a certain “capacity”. On what basis such “capacity” is allotted and what happens if a situation arises where a service provider's “allotted capacity” gets exhausted and it wants, on an urgent basis, ITA No. 940 of 2008 -5- “additional capacity”? Whether at that stage, any human intervention is involved is required to be examined, which again needs a technical data. We are only highlighting these facts to emphasise that these types of matters cannot be decided without any technical assistance available on record. 8. There is one more aspect that requires to be gone into. It is the contention of Respondent No.1 herein that Interconnect Agreement between, let us say, M/s. Bharti Cellular Limited and BSNL in these cases is based on obligations and counter obligations, which is called a “revenue sharing contract”. According to Respondent No.1, Section 194J of the Act is not attracted in the case of “revenue sharing contract”. According to Respondent No.1, in such contracts there is only sharing of revenue and, therefore, payments by revenue sharing cannot constitute “fees” under Section 194J of the Act. This submission is not accepted by the Department. We leave it there because this submission has not been examined by the Tribunal. 9. In short, the above aspects need reconsideration by the Assessing Officer. We make it clear that the assessee(s) is not at fault in these cases for the simple reason that the question of human intervention was never raised by the ITA No. 940 of 2008 -6- Department before the CIT. It was not raised even before the Tribunal; it is not raised even in these civil appeals. However, keeping in mind the larger interest and the ramification of the issues, which is likely to recur, particularly, in matters of contracts between Indian Companies and Multinational Corporations, we are of the view that the cases herein are required to be remitted to the Assessing Officer (TDS). 10. Accordingly, we are directing the Assessing Officer (TDS) in each of these cases to examine a technical expert from the side of the Department and to 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 the date of receipt of the order of this Court. Liberty is also given to Respondent No.1 to examine its expert and to adduce any other evidence.” 9. The primary basis whereby the Apex Court had concluded services to the falling under 194J of the Act to be technical services that whether any human intervention was involved in the activity or not. The Apex Court observed that wherever there was human intervention requiring examination of technical data, the same would fall within the definition of technical services and in the absence thereof, the same would not partake the character of technical services. The Apex Court in that case had remitted the matter to the Assessing Officer to examine the technical expert and after examining him adjudicate the matter ITA No. 940 of 2008 -7- afresh. In the present case as well from the perusal of the orders of the authorities below, it is not discernible whether there was any intervention of the human element in the services provided to the assessee. 10. Accordingly, while setting aside the order of the authorities below, the matter is remitted to the Assessing Officer to examine afresh in the light of the observations made by the Apex Court in Bharti Cellular Limited's case (supra), noted above. 11. The appeals stand disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE July 11, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 940 of 2008 -8- 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) ....Appellant. Versus Chief Manager, State Bank of India ...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, 2011 (ADARSH KUMAR GOEL) gbs 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 ....Appellant. Versus M/s HFCL Infotel Limited ...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, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 940 of 2008 -10- 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 ....Appellant. Versus M/s HFCL Infotel Limited ...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, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 940 of 2008 -11- 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) ....Appellant. Versus Chief Manager, State Bank of India ...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, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE ITA No. 940 of 2008 -12- 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) ....Appellant. Versus Chief Manager, State Bank of India ...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, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE