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Relevant Extract of the Judgment
21. These are usual clauses in such contracts. The testing, pre-commissioning, commissioning and post-commissioning are required to be carried out by a contractor to satisfy the customer that the work has been executed in a proper manner; that the equipment has been installed as required and that its performance meets the parameters specified in the contract. The personnel that are required to test and commission the plant and equipment perform their functions not under a contract for the supply of technical services to the customer, but to satisfy the customer on behalf of the contractor that the plant and equipment has been duly supplied as per the contractual specifications. Indeed, this entire exercise would require the deployment of technical personnel, but what is important to note is that the technical personnel are deployed not for and on behalf of the customer, but for and on behalf of the contractor itself with a view to ensuring that the contractor has supplied the equipment as per the contractual specifications. Everything done in this regard is to this end and not to supply technical services to the customer.
22. The contract entered into between the respondent and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of Section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the respondent. Section 194J is, therefore, not applicable to the present case.
23. It is not necessary to consider Mr. Putney’s submission that the contracts do not fall under Section 194C. The submission if accepted would be self destructive for then the assessee would not have been liable to deduct tax at source at all and would, therefore, be entitled to a refund. As we mentioned earlier, Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. Sections 194C and 194J are independent provisions. In view of our finding that the contract does not fall within Section 194J, the dismissal of the appeal would follow in any event. The respondent has not denied that the present case falls under Section 194C. Had the respondent contended that Section 194C is also not applicable, it would have been necessary to consider whether the contract falls within the ambit of Section 194C. As the respondent has accepted that it falls within Section 194C and has complied with its obligations thereunder, we refrain from deciding the issue as to whether it falls within Section 194C.
24. Faced with this, Mr. Putney relied upon the judgement of the Supreme Court in Commissioner of Income Tax Vs Bharti Cellular Ltd., (2011) 330 ITR 239 (SC), where the Supreme Court held as under:-
“11. Before concluding, we are directing CBDT to issue directions to all its officers, that in such cases, the Department need not proceed only by the contracts placed before the officers. With the emergence of our country as one of the BRIC countries and with the technological advancement matters such as present one will keep on recurring and hence time has come when Department should examine technical experts so that the matters could be disposed of expeditiously and further it would enable the Appellate Forums, including this Court, to decide legal issues based on the factual foundation. We do not know the constraints of the Department but time has come when the Department should understand that when the case involves revenue running into crores, technical evidence would help the Tribunals and Courts to decide matters expeditiously based on factual foundation. The learned Attorney General, who is present in Court, has assured us that our directions to CBDT would be carried out at the earliest.”
He contended that the matter ought to be remanded to the Assessing Officer to examine technical experts on this issue and that it was not necessary for any of the authorities under the contract to proceed only by the contracts which were placed on record.
25. The contention is not well founded. Firstly, the department never made an application for examining an expert. Secondly, it is not the department’s case that there was any material other than the contracts which required consideration. Apart from raising this contention, no such case was made out even before us at the hearing of this appeal. The case before us merely requires a construction of the contract. The extent of human intervention that was relied upon by the department is based on the provisions of the contract itself. Based on these provisions, it was contended that the human intervention contemplated under the contract constituted the consideration payable thereunder to be for professional and technical services. On the other hand, before the Supreme Court, the case was entirely different as noted in paragraph 6 of the judgement itself. As observed by the Supreme Court, in that case there was no expert evidence to show how human intervention takes place particularly during the process when the calls take place from one place to another. The illustration furnished by the Supreme Court was where Bharat Sanchar Nigam Limited (BSNL) has no network in Nainital, whereas it had a network in Delhi. The inter-connect agreement enables M/s Bharti Cellular Limited to access the network of the BSNL in Nainital and the same situation can arise vice-versa in the given case. The issue as to whether during such calls there is any manual intervention was one of the points which the Supreme Court opined required expert evidence. In the case before us, the nature of human intervention is reflected in the terms and conditions of the agreement itself. What was required to be considered is whether such human intervention constituted the provision of professional or technical services or not.