Provision relating to TDS is not applicable on Fee for ‘Technical Service’ rendered by Machines or Robots: ITAT [Read Order]

The Income Tax Appellate Tribunal, New Delhi recently ruled that provision relating to TDS is not applicable on fee for ‘Technical Service’ rendered by machines and robots.

The Revenue has filed this Appeal against the impugned Order dated 25.05.2015 of the CIT (A)-I, Noida relevant to assessment year 2012-13.

In the present appeal, the assessee is a public limited company engaged in the business of distribution and supply of electricity to consumers in the District of Gautam Budh Nagar. The TDS verification was issued through a letter by AO while stating that assessee was failed to deduct tax at source u/s. 194J for being fees for technical or professional services.

The AO wasn’t satisfied with the explanation given by assessee, AO held that the assessee in default and passed an order and made the total tax liability and interest u/s. 201(1A) on non-deduction of tax on payment of transmission charges and wheeling charges paid by the assessee.

Against the aforesaid order assessee went for an appeal before CIT (A) and allowed the appeal of the assessee.

Aggrieved with the order of the CIT (A), the Revenue is in appeal before the Tribunal. The tribunal heard both rival contention and perused the relevant records, observed that the judgment of Hon’ble Delhi High Court in the case of CIT vs. Bharati Cellular Limited [175 Taxmann 573 (Del)] wherein, it has been held that technical services which are relevant for the purpose of section 194J of the Income Tax Act would be those technical services which involve human interface/element.

By simplifying it, technical service means service rendered by human that would not include any service provided by machines or robots.

However tribunal observed that the AO has completely failed to bring relevant materials, whatsoever, on record to prove the existence of human interface/element in the present case.

While dismissing the department appeal, the tribunal comprising of judicial member Shri.H.S .Sidhu and accountant member Shri.Prasanth Maharishi ordered that In view of the above, such transmission and wheeling charges paid by the assessee does not come within the purview of fees for technical service as defined under Explanation 2 to sec 9(1)(vii) of the Act and accordingly no tax is required to be deducted by the assessee u/s. 194J therefrom and uphold the action of the Ld. CIT(A) and reject the ground raised by the Revenue.