The Hindu Business Line : A little fire is quickly trodden out

Whether in sea or fire, in earth or air... A line from Hamlet that is quite apt for the taxman's reach. Just the way it happened in the Agnice Fire Protection case that came up recently before the Chennai Tribunal.

Agnice used to receive enquiries from clients for erection and commissioning of fire-fighting system. Orders that came to the company for fire-fighting system were in two parts — "(a) for design engineering and supply of equipment and (b) for erection and commissioning of the same."

The company would prepare a detailed engineering drawing for fire-fighting system, procure equipment as mentioned in the work order, erect the system at the client's site, test and commission the same, and also train the client's personnel in handling the system.

There's no smoke without a fire, nor a case without a grievance. Agnice was aggrieved when the taxman demanded of it Rs 25,756 as tax on `services rendered as engineering consultant'. The company appealed before the Commissioner. He ruled that Agnice was "by no standards a `consulting engineer'". Undaunted by the setback, the taxman approached the Tribunal.

There, B. L. Meena, arguing for the Department, cited the definition of `consulting engineer service' thus: "Consulting engineer means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering."

Accordingly, "it is clear that any of the three activities, namely, `advice', `consultancy' or `technical assistance', has to be identified in the type of services rendered by the `engineer' or by an `engineering firm'," reasoned Meena. Importantly, the counsel referred to earlier decisions on the topic, such as the following:

M. N. Dastur case where it was held that one had to see in what capacity the service was rendered.

Daelim Industrial case, which was about turnkey basis contract vis-à-vis a consultancy one.

Tata Consultancy Services case, where the question was whether `consulting engineer' referred only to individuals and partnership firms, and not companies.

Also of relevance was a 2002 circular of the CBEC. It said that the work of erection and commissioning of machinery and plant is definitely one of providing `technical assistance' to buyer of plant and, therefore, in the nature of services provided by a `consulting engineer' and, hence, taxable.

None appeared on behalf of Agnice at the Tribunal. "A little fire is quickly trodden out," says Clarence in King Henry VI. So too, the decision in this case was swift. After studying the case, T.V. Sairam, Tribunal Member, observed: "It appears clear that the nature of services rendered by the respondents during the material time can be brought within the framework of a `consulting engineer's services'." He reasoned, "The service rendered clearly indicates certain basic engineering, involving designing, erection, commissioning, training and so on — a wide spectrum of tasks demanding certain professional engineering skills, which can be brought within the ambit of the term `technical assistance'."

To Agnice, we may say, "Tut, man, one fire burns out another's burning, one pain is lessen'd by another's anguish," borrowing from Romeo and Juliet. Or, "that the property of rain is to wet and fire to burn," from As You Like It. Similarly, the property of the Department is to tax.

Well, the Bard sings in a sonnet, "Love's fire heats water, water cools not love." Doesn't that sound like a sure-fire fire-fighting tip, which may qualify as a taxable service?

Tailpiece

"Then the Department started frying... "

"Who?"

"All those who have unused PANs!"

http://Detaxification.blogspot.com

D. Murali

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