Law: Income Tax Act, 1961

Section: 9,194J

Section 194J, read with section 9, of the Income-tax Act, 1961 - Deduction of tax at source - Fees for professional or technical services - Whether expression 'fees for technical services' as appearing in section 194J would have reference to only technical service rendered by a human; it would not include any service provided by machines or robots - Held, yes - Assessees were companies engaged in business of providing cellular telephone facilities to their subscribers - They had set up their own equipments and necessary infrastructure for operating and maintaining their networks - They had been granted licences by Department of Telecommunication for operating in their respective specified circles - Said licences stipulated that Department of Telecommunication/MTNL/BSNL would continue to operate in service areas for which licences were issued; that in respect of subscribers which fell within specified circles of assessees, calls would be handled exclusively through assessees' own networks, but where calls were to be made by subscribers of one network to another network, such calls would necessarily be routed through MTNL/BSNL; and that interconnection between two networks would be provided by MTNL/BSNL at interconnection points known as 'ports' - For that facility provided by MTNL/BSNL, assessees were required to pay interconnection access charges and port charges - Admittedly, facility of interconnection/port access provided by MTNL/BSNL was provided automatically by machines and did not involve any human interface - Whether payment for use of services of MTNL/other companies via interconnect/port/access/toll by assessee would fall within purview of payments as provided for under section 194J, so as to be liable for tax deduction at source - Held, no Words and Phrases : 'Technical services' as occurring in Explanation 2 to section 9(1)(vii) and section 194J of the Income-tax Act, 1961 Interpretation of statute : Rule of Noscitur a sociis FACTS The assessee-companies were engaged in the business of providing cellular telephone facilities to their subscribers. They had been granted licences by the Department of Telecommunication for operating in their respective…

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