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Thursday, February 19, 2015

In any case, the State Government cannot pass any order amending a procedural law regarding reservation in the matter of selection to posts, with retrospective effect, once the procedure of selection starts. 21. For the reasons aforesaid, we hold that the G.O.Ms.No.124 dated 7th March, 2002 is prospective and is not applicable to the process of selection started pursuant to Advertisement No.10 of 1999 including the 973 executive posts which were ordered to be filled up by the High Court pursuant to the advertisement. The Tribunal erred in directing the APPSC to re-caste the merit list pursuant to G.O.Ms.No.124 dated 7th March, 2002. The High Court by the impugned judgment dated 27th December, 2004 rightly held that the order passed by the Court will not affect the appointments already made to the executive post between 2001-2002 but erred in holding that the selection is to be made in accordance with G.O.Ms.No.124 dated 7th March, 2002 22. For the reasons aforesaid, we set aside the orders passed by the Andhra Pradesh Administrative Tribunal and the impugned common judgment dated 27th December, 2004 and the impugned common order dated 28th December, 2004 passed by the Division Bench of the High Court of Judicature, Andhra Pradesh at Hyderabad in Writ Petition Nos. 20106 of 2004, 21558 of 2004, etc. In view of the foregoing discussions, we direct the respondents to fill up the rest of the posts including the posts of Municipal Commissioners Grade-III, Asstt. Commercial Tax Officers, Asstt. Labour Officers in executive cadre and Asstt. Section Officers in non executive cadre, which are vacant, as per President Order, 1975 and the Government orders in consonance with the Presidential Order which were prevailing in the year 1999 when the Advertisement was issued. The inter se seniority between the persons appointed in the 1st round and the persons appointed afterwards in the same cadre, if any, shall be decided by the appropriate authority in accordance with the rules, depending on the merit ranking obtained by them. 23. We direct the authority to complete the process of selection expeditiously preferably within three months. The appeals are allowed with aforesaid observations and directions.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5099 OF 2006

M. SURENDER REDDY ... APPELLANT

VERSUS

GOVT. OF ANDHRA PRADESH AND ORS. ... RESPONDENTS

With
C.A. No.5100 of 2006 and
C.A. No.5101 of 2006

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

These appeals have been preferred by the appellants against common
judgment dated 27th December, 2004 passed by the Division Bench of the
High Court of Judicature, Andhra Pradesh at Hyderabad in Writ Petition Nos.
20106, 20350, 20539 and 21554 of 2004 and common order dated 28th December,
2004 passed by the same High Court in Writ Petition Nos.20215, 20305, 21558
and 23173 of 2004. By the impugned common judgment, the High Court
dismissed the writ petitions, upheld the finding of the Andhra Pradesh
Administrative Tribunal (hereinafter referred to as the "Tribunal") and
held as follows:

"26. In view of our foregoing discussions,

we record the following conclusions:

The finding of the Tribunal that the selection process has to be in
accordance with the G.O.Ms. No.124, dated 8.8.2002 cannot be said to be
erroneous or contrary to law.

But, however, the direction that the entire select list has to be reviewed
clubbing the appointments under 1st round selection is not sustainable and
accordingly the procedure as contemplated under G.O.Ms. No.124 has to be
followed only in respect of the candidates excluding the appointments
already made in 2001 and 2002 namely Asstt. Municipal Commissioners Grade-
III, Asstt. Commercial Tax Officers, Asstt. Labour Officers and Asstt.
Section Officers in non-executive cadre in view of the peculiar and
circumstances of this case.

The inter se seniority between the 1st round appointees and later inducted
persons under second round selection in the same cadre if any shall be
decided by the appropriate authority in accordance with rules, depending on
the merit ranking obtained by them.

The Reservation to PHC category wherever it is not provided under the
Special Rules cannot be claimed and hence the findings of the Tribunal do
not call for any interference.

27. We do hope that the process of selection would be completed
expeditiously without further hurdles. Subject to the above conclusions,
the Writ Petitions stand dismissed."

By the impugned common order, the High Court disposed of the said writ
petitions in terms of the common judgment dated 27th December, 2004 in Writ
Petition No.20106 of 2004.

2. The brief facts of the case are as follows:

The President of India in exercise of powers conferred by Clause (1)
and (2) of Article 371-D of Constitution of India made the Andhra Pradesh
Public Employment (Organization of Local Cadres and Regulation of Direct
Recruitment) Order, 1975 dated 20th October, 1975 (hereinafter referred to
as "Presidential Order"). Sub-Paragraph(1) of Paragraph 3 of the said order
gives power to the State Government to organize classes of posts in the
civil services of and classes of civil posts under the State into different
local cadres for different parts of the State within 27 months from the
commencement of the said order. Paragraph 8 relates to reservation in the
matter of direct recruitment. Relevant portion of which reads as follows:

"8. Reservation in the matter of Direct Recruitment:- (1) 80% of the
posts to be filled by direct recruitment any time-

(a) in any local cadre under the State Government comprising posts
belonging to the category of lower division clerk or a Category equivalent
to or lower than that lower division clerk; and

(b) in any cadre under a local authority comprising post carrying a scale
of pay the minimum of which, or a fixed pay which does not exceed the
minimum of the scale of pay or a lower division clerk, shall be reserved in
favour of local candidates in relation to the local area in respect of such
cadre.

(2) 70% of the posts to be filled by direct recruitment at any time-

(a) in any local cadre under the State Government comprising posts
belonging to non-gazetted categories other than those referred to in item
(a) of sub-paragraph (1); and

(b) in any cadre under a local authority comprising posts carrying a scale
of pay, the minimum of which, or a fixed pay which exceeds the minimum of
the scale of pay of a lower division clerk, but does not exceed Rs. 480/-
per mensum on any amount corresponding to it as may be specified in this
regard in the successive revisions of pay scales granted by the State
Government from time to time shall be reserved in favour of local
candidates in relation to the local area in respect of such cadre."

3. In exercise of the powers under sub-para(1) Paragraph 3 of the
'Presidential Order, 1975' the Andhra Pradesh State Government issued
G.O.P. No.729 dated 1st Novemer,1975, whereby 70% of non-gazetted category
posts other than Lower Division Clerk or equivalent posts were reserved in
favour of local candidates. By G.O.P. No.763 dated 15th November, 1975 the
State Government prescribed certain procedures to be followed in conducting
recruitment to the posts. Annexure III to the said G.O.P. deals with the
procedure to be followed for selection of candidates for recruitment to the
categories of posts for which multiple cadre recruitment is made. As per
paragraph 5 of the annexure a combined merit list a local and non-local
candidates shall be drawn up to fill up the vacancies.

4. Later, the Andhra Pradesh State Government issued G.O.Ms. No.124
dated 7th March, 2002, whereby G.O.P. No.763 dated 15th November, 1975 was
amended by bifurcating combined merit list into two parts i.e. one reserved
for local candidates and another for both local and non-local candidates.

5. On 28th December, 1999, the Andhra Pradesh Public Service Commission
(hereinafter referred to as the "APPSC") issued Advertisement NO.10 of 1999
to fill up certain Executive and Non-Executive Posts of 27 categories
under Group-II services of State Government. As per the said Advertisement
selection was to be made on the basis of marks obtained in written test
plus oral test for executive posts and only on the basis of marks obtained
in the interview, the written test for non-executive posts. Later the State
Government withdrew that part of the advertisement which called for
applications to 141 vacant posts of Assistant Section Officers.
Accordingly, more than 3 lacs candidates appeared in the written
examination and among them 269 persons were called for interview for
appointment to the executive posts on the basis of marks obtained in the
written examination. After concluding interviews, 104 candidates were
selected for executive posts in December 2000. Subsequently, in view of an
order passed by the Tribunal in O.a.No.7443 of 2000, filed against the non-
exclusion of 141 posts of Assistant Section Officers 113 candidates
including the appellants were recommended for non-executive posts i.e.
Asstt. Sections Officers in February, 2002 based on marks obtained in
written test.

Subsequently, as per the directions of the High Court, 973 Executive posts
were included in Advertisement No.10 of 1999 and more than 2000 candidates
along with the appellants were called for interview on the basis of the
marks obtained in the written examination. Thereafter, the APPSC selected
973 candidates for executive posts on the basis of written plus oral test
and prepared common merit list by including 104 candidates who were already
appointed against executive posts.

6. Some of the candidates filed applications before Tribunal to
implement G.O.Ms. No.124 dated 7th March, 2002 which was allowed by the
Tribunal with a direction to the APPSC to re-caste the merit list by
implementing the G.O.Ms. No.124. Being aggrieved by the said direction,
when the appellants filed Writ Petitions, the High Court while dismissed
the same directing to exclude the present appellants and other A.S.Os from
consideration to the executive posts.

As the above said direction of the High Court created an anomaly
restricting the meritorious candidates, already appointed Asstt. Sections
Officers who were appointed to the to lower non-executive posts and less
meritorious candidates were to get higher posts in executive cadres, the
appellants have challenged the same.

7. Learned counsel for the appellants submitted that G.O.Ms. No.124
dated 7th March, 2002 cannot be applied retrospectively to the selection
already in process or selection already made, particularly when the State
Government's order is a part of substantive law and not procedural law. It
is further contended that G.O.Ms.124 dated 7th March, 2002 is null and void
having issued after lapse of period of limitation prescribed in sub-para(1)
of Paragraph 3 of the Presidential Order, 1975. Further, according to the
counsel for the appellants, G.O.Ms.124 dated 7th March, 2002 is ultra vires
of Presidential Order, 1975 and G.O.P. No.729 dated 1st November, 1975 and
G.O.P. No.763 dated 15th November, 1975 issued in pursuance of Paragraph
3(1) of the Presidential Order, 1975.

8. We have heard learned counsel for the parties, perused the records
and relevant notifications relating to reservation of posts issued from
time to time.

The questions that arise for determination in this case are: (a)whether
G.O.Ms.124 dated 7th March, 2002 is retrospective in nature in order to
make it applicable to the posts for which selection process has already
started pursuant to 1999 advertisement, and (b) If the said G.O.Ms. is
retrospective, whether it is required to review the entire select list
disturbing the appointments already made during the period between the 2001
and 7th March, 2002.

9. The Presidential Order, 1975 by virtue of sub-paragraph (1) of
Paragraph 3 empowers the State Government to organize classes of posts in
civil services under the State into different local cadres in different
parts of State within 27 months from the commencement of the said order.
Paragraph 3 of the order empowers the State to organize Local Cadres, which
is as follows:

"3. Organization of local cadres :- (1) The State Government shall within a
period of * twenty-seven months [Vide G.O. Ms. No. 728, G.A. (SPF.A) Dept,
dt. 27-10-1977]from the commencement of this Order, organize classes of
posts in the civil services of and classes of civil posts under the State
into different local cadres for different parts of the State to the extent
and in the manner, hereinafter provided.

Provided that, notwithstanding the expiration of the said period, the
President may by order, require the State Government, whenever he considers
it expedient so to do, to organize any classes of posts in the civil
services of and classes of civil posts under the State into different local
cadres or different parts of the State.(Vide G.O. Ms. No. 34, G.A. (SPF.A)
Dept, date 24-1-81)

(2) The posts belonging to the category of lower division clerk and each of
the other categories equivalent to, or lower than that of a lower division
clerk, in each department in each district shall be organized into separate
cadre.

Explanation:- For the purposes of this sub-paragraph, sub-paragraph(1) of
paragraph 6, and sub-paragraph (1) of paragraph 8 a category shall be
deemed to be equivalent to or lower than that of a lower division clerk if
the minimum of the scale of pay of a post belonging to that category or
where the post carries a fixed pay, such fixed pay is equal to or lower
than the minimum of the scale of pay of a lower division clerk.

(3) The posts belonging to each non gazetted category, other than those
referred to in sub-paragraph (2), in each department in each zone shall be
organized into a separate cadre.

(4) The posts belonging to each specified gazetted category in each
department in each zone shall be organized into a separate cadre.

(5) Notwithstanding anything contained in sub-paragraph (3) and (4), the
State Government may where it considers it expedient so to do and with the
approval of the Central Government, organized the posts belonging to any of
the categories referred to therein, in any department, or any establishment
thereof, in two or more contiguous zones into a single cadre.

(6) Notwithstanding anything contained in sub Paragraphs (2), (3), (4) and
(5), the Central Government; may notify the departments in which
and the categories of posts for which a separate cadre has to be organized
for the City of Hyderabad and on such notification, the posts belonging to
each such category in each such department in the said City (other than
those concerned with the administration of areas falling outside, the said
City) shall be organize into a separate cadre and the posts so organized in
pursuance of this paragraph or Constituted otherwise and comprising posts
belonging to the category in that department.

(7) In organising a separate cadre in respect of any category of posts in
any department for any part of the State, nothing in this Order shall be
deemed to prevent the State Government from organising or continuing more
than one cadre in respect of such category is such department for such part
of the State.

(8) Where the Central Government is satisfied that it is not practicable or
expedient to organize local cadres under this paragraph in respect of any
non gazetted category of posts in any department, it may, by notification,
make a declaration to that effect and on such declaration the provisions of
this paragraph shall not apply to such category of posts."

Each district is regarded as a 'Local area' as per paragraph 6, which
is as follows:

"6. Local areas:- (1) Each district shall be regarded as a local area-

(i) for direct recruitment to posts in any local cadre under the State
Government comprising all or any of the posts in any department in that
district belonging to the category of a lower division clerk or to any
other category equivalent to or lower than that of a lower division clerk.

(ii) for direct recruitment to posts in any cadre under any local authority
within under that district carrying a scale of pay, the minimum of which
does not exceed the minimum of the scale of pay of a lower division clerk
or a fixed pay not exceeding that amount.

(2) Each Zone shall be regarded as a local area-

(1) for direct recruitment to posts in any local cadre under the State
Government comprising all or any of the posts in any department in that
zone belonging to any non-gazetted category other than those referred to
in sub paragraph (1);

(ii) for direct recruitment to posts in any local cadre comprising all or
any of the post in any department in that zone belonging to the categories
of Tehsildars, Asst. Executive Engineers, Assistant Agricultural Officers,
Inspectors of Police and Motor Vehicle Inspectors (Vide G.O. Ms. No.
498,dt. 16-7-1977 G.O.Ms. No. 34, dt. 24-1-1981 and G. O. Ms. No. 635,
G.A.(SPF. A) Dept. dated 30-11-1993)

(iii) For direct recruitment to posts in any cadre under any local
authority within that zone, carrying a scale of pay, the minimum of which
exceeds the minimum of the scale of pay of a lower division clerk but does
not exceed Rs. 480/- per mensum or a fixed pay which exceeds the minimum of
the scale of pay of a lower division clerk but does not exceed Rs. 480/-
per mensum or any amount corresponding to it as may be specified in this
regard in the successive revisions or pay scales granted by the State
Government from time of time. (G.O.Ms. 635, G.A. (SPF.A) Dept. dated 30-11-
93.17)

Provided that where a single cadre has been organized for two or more zones
under sub-paragraph (5) of paragraph 3 of posts belonging to any of the
categories referred to in clause (i) or clause (ii) each of such zones
shall be regarded as separate local area in respect of such cadre.

(3) Notwithstanding anything contained in sub-paragraphs (1) and (2),-

(i) the City of Hyderabad shall be regarded as a local area for direct
recruitment to posts in any local cadre under the State Government
comprising all or any of the posts in the said City in the departments and
belonging to the categories notified under Sub-paragraph (6) of paragraph 3
and the said City shall be excluded from the local area relatable to any
other local cadre comprising posts in the departments and belonging to the
categories so notified; and

(ii) the City of Hyderabad shall be regarded as a local area for direct
recruitment to posts in any cadre under a local authority within the said
City comprising posts carrying a scale of pay the minimum of which does not
exceed Rs. 480/- per mensum or any amount corresponding to it as may be
specified in this regarded in the successive revisions of pay scales
granted by the State Government from time to time, or a fixed pay not
exceeding that amount, and the said City shall be excluded from the local
area relatable to any cadre under any local authority not within the said
City. (G.O. Ms.No. 635, G. A. (SPF. A) Dept. dated 30-11-93)

(4) Notwithstanding anything contained sub-paragraphs (1), (2) and (3).
(1) the districts of Medak, Ranga Reddy and Hyderabad shall be regarded as
a local area for direct recruitment to posts in any cadre under the
Hyderabad Urban Development Authority comprising posts, carrying a scale of
pay, the minimum of which does not exceed the minimum of
the scale of pay of lower division clerk or a fixed pay not exceeding that
amount.

(ii) Zone VI shall be regarded as a local area for direct recruitment to
posts in any cadre under the Hyderabad Urban Development Authority
comprising posts, carrying a scale of pay, the minimum of which exceeds the
scale of pay of a lower division clerk but does not exceed Rs. 480/- per
mensum, or a fixed pay which exceeds the minimum of the scale of the pay of
a lower division clerk but does not exceed Rs. 480/- per mensum J-698/318
or any amount corresponding to it as may be specified in this regard in the
successive revisions of pay scales granted by the State Government from
time to time.(Vide G.O.Ms. No. 498, G. A. (SPF. A) Dept. dt. 16-7-77 and
G.O. Ms.No. 34, G. A. (SPF. A.) Dept, dt. 24-1-1981.)"

"Local candidates" for direct recruitment to any post in relation to
the local area is defined in paragraph 7 as follows:

"7. Local Candidate:- (1) A candidate for direct recruitment to any post
shall be regarded as a local candidate in relation to a local area.-

(a) in cases where a minimum educational qualification has been prescribed
for recruitment to the posts-

(i) If he has studied in an educational institution or educational
institutions in such local area for a period of not less than four
consecutive academic years ending with the academic year in which he
appeared or, as the case may be, first appeared for the relevant qualifying
examination; or

(ii) where during the whole or any part of the four consecutive academic
years ending with the academic year in which he appeared or as the case may
be, first appeared for the relevant qualifying examination he has not
studied in any educational institution, if he has resided in that local
area for a period of not less than four years immediately preceding the
date of commencement of the qualifying examination in which he appeared or
as the case may be, first appeared.

(b) In cases where no minimum educational qualification has been prescribed
for recruitment to the post, if he has resided in that local area for a
period of not less than four years immediately preceding the date on which
the post is notified for recruitment.

Explanations:- For the purpose of this paragraph.-

(i) 'educational institution' means a University or any educational
institution recognised by the State Government, a University or other
competent authority;

(ii) 'relevant qualifying examination' in relation to a post means;

(A) the examination, a pass in which is the minimum educational
qualification prescribed for the post;

(B) the Matriculation examination or an examination declared by the State
Government to be equivalent to the Matriculation examination;
which is lower ; and

(iii) in reckoning the consecutive academic years during which a candidate
has studied, any period of interruption of his study be reason of his
failure to pass any examination shall be disregarded.

(iv) the question, whether any candidate for direct recruitment to any post
has resided in any local area shall be determined with reference to the
places where the candidate actually resided and not with reference to the
residence of his parents or other guardian (Vide G.O.Ms. No. 168, G.A.
(SPF.A) Dept. dt.10-3-77).

(2) A candidate for direct recruitment to any post who is not regarded as
a local candidate under sub-paragraph (1) in relation to any local area
shall.-
(a) in cases where a minimum educational qualification has been prescribed
for recruitment to the post.

(i) If he has studies in educational institutions in that State for a
period of not less than seven consecutive academic years ending with
academic year in which he appeared or as the case may be, first appeared
for the relevant qualifying examination be regarded as a local candidate in
relation to

(1) Such local area where he has studied for the maximum period out of the
said period of seven years; or

(2) where the period of his study in two or more local areas are equal,
such local areas where he has studied last in such equal periods;

(ii) If during the whole or any part of the seven consecutive academic
years ending with the academic years in which he appeared or as the case
may be first appeared for the relevant qualifying examination, he has not
studied in the educational institutions in any local areas, but has resided
in the State during the whole of the said period of seven years, be
regarded as a local candidate in relation to

(1) such local area where he has resided for a maximum period out of the
said period of seven years : or (2) where the periods of his residence in
two or more local areas are equal, such local area where he has resided
last in such equal periods ;

(b) in cases where no minimum educational qualification has been prescribed
for recruitment to the post, if he has resided in the State for period of
not less than seven years immediately preceding the date on which the post
is notified for recruitment, be regarded as a local candidate in relation
to

(i) such local area where he has resided for the maximum period out of the
said period of seven years ; or (ii) where the periods of his residence is
two or more local areas are equal such local area where he has resided last
in such equal periods.(G.O.Ms. No. 168, dated 10-3-1977)"

Paragraph 8 mandates reservation in the matter of direct recruitment
relevant of which is quoted below:

"8. Reservation in the matter of Direct Recruitment:- (1) 80% of the
posts to be filled by direct recruitment any time-
(a) in any local cadre under the State Government comprising posts
belonging to the category of lower division clerk or a Category equivalent
to or lower than that lower division clerk; and
(b) in any cadre under a local authority comprising post carrying a scale
of pay the minimum of which, or a fixed pay which does not exceed the
minimum of the scale of pay or a lower division clerk, shall be reserved in
favour of local candidates in relation to the local area in respect of such
cadre.
(2) 70% of the posts to be filled by direct recruitment at any time-

(a) in any local cadre under the State Government comprising posts
belonging to non-gazetted categories other than those referred to in item
(a) of sub-paragraph (1); and

(b) in any cadre under a local authority comprising posts carrying a scale
of pay, the minimum of which, or a fixed pay which exceeds the minimum of
the scale of pay of a lower division clerk, but does not exceed Rs. 480/-
per mensum on any amount corresponding to it as may be specified in this
regard in the successive revisions of pay scales granted by the State
Government from time to time shall be reserved in favour of local
candidates in relation to the local area in respect of such cadre. (G.O.Ms.
No. 635, G. A. (SPF.A) Dept, dated 30-11-93).

(3) 60 % of the posts to be filled by direct recruitment at any time in any
local cadre under the State Government comprising posts belonging to the
categories of Tehsildars, Assistant Executive Engineers, Assistant
Agricultural Officers, Inspector of Police and Motor Vehicle Inspectors
shall be reserved in favour of local candidates in relation to the local
area in respect of such cadre.(G.O.Ms. No. 498, G.A. (SPF. A) Dept, Dt. 16-
7-1977)(G.O.Ms. No. 34, G.A. (SPF. A) Dept, Dt. 24-1-1981)(G.O.Ms. No. 635,
G.A. (SPF. A) Dept, Dt. 30-11-1993).

(4) Notwithstanding anything contained in sub-paragraph (2) or sub-
paragraph(3) where, in respect of any of the categories referred to in the
said paragraph a single cadre has been organized for two or more zones
under sub-paragraph (5) of paragraph 3, 70% or as the case may be, 60 % of
the posts to be filled by direct recruitment at anytime in such cadre shall
be reserved in favour of and allocated amongst the local candidates in
relation to each of the local areas in respect of such cadre in the ratio
specified in the Second Schedule against the zone comprising each such
local area.

(5) 60% of the posts under the State Government belonging to the category
of Civil Assistant Surgeons to be filled by direct recruitment at any time
shall be reserved in favour of and allocated amongst the local candidates
in relation to the local area specified in column (1) the Table below in
the respective ratios specified in the corresponding entry is column (2)
thereof."

Paragraph 9 deals with carry forward of reserved posts, if no
candidate is available, which is as follows:

"(9) Carry forward of reserved posts:- If a qualified local candidate in
respect of a local area is not available to fill a post reserved or
allocated in favour of a local candidate in respect of that local area,
such post shall be carried forward for recruitment of a local candidate in
respect of that local area for period not exceeding three years;

Provided that pending recruitment of a local candidate, such post may be
filled in temporarily by borrowing the service of a person holding a post
of the same category in any other local cadre or under any other local
authority as the case may be (Vide G.O. Ms. No. 34,dt. 24-1-1981)."

Paragraph 11 stipulates that the order to have overriding effect over
Statute, Ordinance, Rule, Regulation or other order made before or after
the commencement of the said Order in respect of direct recruitment to
posts under the State Government or any local authority.

10. After publication of the Presidential Order 1975 the Government of
Andhra Pradesh by G.O.P. No.729 dated 1st November, 1975, intimated the
Scheme of the Order and directed the authorities to furnish District-wise
list in case of categories of Lower Divisional Clerk and equivalent or
lower categories and Zone-wise list in the case of higher categories.

11. Referring to the Presidential Order, 1975, Government of Andhra
Pradesh issued G.O.P No.763 dated 15th November, 1975 communicating the
Scheme and the procedure to be followed in such appointments relevant
portion of which reads as follows:

"2. Recruitment of candidates is basically of two types size, single unit
i.e. single cadre recruitment and multiple unit i.e., multiple cadre
recruitment. Where recruitment is made to fill vacancies in a single cadre
i.e., single unit of appointment comprising posts in a given category for a
particular department, it can be categorized as single cadre recruitment.
Where recruitment is made to fill vacancies in more than one cadre (i.e.,
for than one unit of appointment in the same or different parts of the
State) comprising posts in a given category or different categories in one
or more department, such recruitment will be multiple units or multiple
cadre recruitment. For example when recruitment is made to fill vacancies
of Lower Division Clerk in a district in one department, it becomes single
cadre recruitment. Where, however, a combined recruitment is made to fill
up the posts of Lower Division Clerks in a district in more than one
department of where a combined recruitment to fill vacancies in
similar categories like Lower Division Clerks, Typists, Stenographers etc.,
in one district in one or more departments is made, it becomes multiple
cadre recruitment.

3. Recruitment to a single multi-zonal cadre contemplated under
the Presidential Order and to the category of Civil Assistant Surgeons will
also come under the category of single cadre recruitment but with the
difference that preference in the matter of direct recruitment in such
cases is to be given to local candidates not one local area but of the
different local areas covered by such cadre in the ratio prescribed in the
Presidential Order.

4. Multiple cadre recruitment may take different forms especially
in the implementation of the proposed Presidential Order on the
organization of local cadres. It may take the form of:

(a) Recruitment to fill up the vacancies in a single category for
different local cadres or different parts of the State (local areas) in one
department, e.g. recruitment of Clerks in the Judicial Department for
Courts in the districts undertaken by the Andhra Pradesh Public Service
Commission.

(b) Recruitment to fill up the vacancies in identical or different
categories in different local cadres in different departments in one part
of the State (local area) e.g., recruitment of Group-IV services undertaken
by the Collectors now.

(c) Recruitment to fill up the vacancies in different categories in
different local cadres in different departments of different parts of the
Ste (local areas) e.g. recruitment of Group-II Services undertaken by the
Andhra Pradesh Public Service Commission.

5. The State Government have considered the manner in which the
scheme of reservation in favour of local candidates provided in the Andhra
Pradesh Public Employment (Organization of Local Cadres and Regulation of
Direct Recruitment) Order, 1975 should be implemented taking into account
the provisions made in regard to appointments in favour of Backward
Classes, the Scheduled Castes and the Scheduled Tribes and have decided
that the procedure set out in the Annexure to this order may be followed in
this regard.

6. The procedure set out in Annexure-I to this order is to be followed
for selection of candidates for recruitment of the categories of posts of
which single cadre recruitment is made. The procedure set out in Annexure-
II will apply to selection of candidates of recruitment of every category
of posts for which a Multi-zonal cadre is set up and also in the matter of
recruitment of the category of Civil Assistant Surgeons where the posts
reserved in favour of local candidates are required to be appointed in the
prescribed ratio among local candidates of different local areas covered by
such cadre. The procedure set out in Annexure-III to this order is to be
followed for selection of candidates for recruitment to the categories of
posts for which multiple cadre recruitment is made.

7. All the recruiting authorities and appointing authorities are
requested to follow the instructions annexed to the said G.O.P. No.763
dated 15th November, 1975 while making recruitment either temporary or
regular, to posts coming within the ambit of paragraph 8 of the Andhra
Pradesh Public Employment (Organization of Local Cadres and Regulation of
Direct Recruitment) Order, 1975."

12. On 13th December, 2001, the President of India in exercise of the
powers conferred by clauses (1) and (2) of Article 371-D of the
constitution of India, amending the Andhra Pradesh Public Employment
(Organization of Local Cadres and Regulation of Direct Recruitment) Order,
1975 namely - the Andhra Pradesh Public Employment (Organization of Local
Cadres and Regulation of Direct Recruitment)Amendment) Order, 2001
published by the Government of India, Ministry of Home Affairs S.O.
1219(E). The said Amendment Order reads as follows:

"2. In the Andhra Pradesh Public Employment (Organization of Local Cadres
and Regulation of Direct Recruitment) Order 1975:-

(1) In paragraph 2 in Sub-Paragraph (1), to clause (a) the following
shall be added namely:-

"The territorial Jurisdiction in respect of the posts belonging to
the Department of School Education shall be the Revenue District of
Hyderabad."

(2) In paragraph 8, in Sub-paragraph(1) after item (b), the following
item shall be deemed to have been added with effect from the 1st June 2001,
namely;-

"C (i) in any local cadre under the State Government comprising posts
belonging to the categories of Teachers in the Andhra Pradesh School
Education Subordinate Service and other similar or equivalent categories of
posts of teachers under any Department of the State Government; and

(ii) in any cadre under a local authority or under any such other
management, as may be notified by the State Government from time to time
carrying a scale of pay equal to that of posts in the Andhra Pradesh School
Education Subordinate Service shall be reserved in favour of local
candidates in relation to the local area in respect of such cadre."

(3) In paragraph 8, in Sub-paragraph (2) in item (a) for the words and
figure "in item (a) of Sub-paragraph (1)", the words and figure "in item
(a) or in item (c) of sub-paragraph (1)", shall be substituted."

13. The Government of Andhra Pradesh by G.O.Ms. No.8 dated 8th January,
2002 referring to paragraph 8 of the Presidential Order, 1975 made
amendment in the procedure prescribed in paragraph 3 and 4 of Annexure-I to
G.O.P.No.763 dated 15th November, 1975. The said GOMs. Reads as follows:

"GOVERNMENT OF ANDHRA PRADESH

GENERAL ADMINISTRATION (SPF-A) DEPARTMENT

G.O.Ms.No.8 Dated:08.01.2002

Read the following

G.O.Ms.No.674, GA(SPF-A) Department, dated 20.10.1975

G.O.P.No.729, GA(SPF-A) Department, dated 01.11.1975.

G.O.P.No.763, (SPF-A) Department, dated 15.11.1975

U.O. Note NO.237/SPF-A/85-2, GA(SPF-A) Department, dated 20.05.1985

G.O.Ms.No.2, G.A.(SPF-A) Department, dated 03.01.2002.

O R D E R

In terms of para-8 of the Andhra Pradesh Public employment
(Organization of Local Cadres and Regulation of Direct Recruitment) Order,
1975, i.e, Presidential Order, referred to in the reference first read
above, in the case of District Cadres, 80% of the posts under Direct
Recruitment are reserved for local candidates, as defined in para-7 of the
Presidential Order. The remaining 20% of the posts are open posts for which
local and non-locals have to be considered on the basis of combined merit.
This aspect has already been clarified in the U.O. Note fourth read above.
The Government have also issued instructions in the G.O. third read above
in the manner in which the posts have to be filled up.

2. Government have re-examined the matter of filling up of the posts as
prescribed in the G.O. third read above. Accordingly it is decided that
while filling up of the posts under Direct Recruitment, the first 20% of
posts should be filled following combined merit list of locals and non-
locals and, thereafter, the remaining 80% of the posts shall be filled up
by locals only. However, while filling up of the posts the special
representation under Rule 22 of the A.P. State and Subordinate Service
Rules shall be followed suitably.

3. Accordingly the following amendment is issued to the procedure
prescribed in paras 3 and 4 of the Annexure I to the G.O.(P) No.763,
General Administrative (SPF.A) Department, dated 15th November, 1975.

4. In respect of the Annexure-II & III to the G.O. 3rd read above
orders will be issued separately.

AMENDMENT

5. In the said orders, in the Annexure-I,

(i) for paragraphs 3 and 4 the following shall be substituted
namely,

"Para 3: The provisional list shall be divided into two parts. The first
part will comprise first 20% of the list. The second part will comprise the
balance 80%. In case the provisional list does not contain any non-local
candidate in the second part the list shall be approved.

Para 4: If, however, on the scrutiny referred to in para 3 it is found
that there are non-local candidates in the second part of the list, then
these candidates shall be removed and replaced by local candidates ensuring
that the rule of reservation is followed.

(ii) the illustrations thereunder shall be omitted.

(BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH)"

14. It was followed by G.O.Ms.No.124 dated 7th March, 2002, whereby the
Government of Andhra Pradesh amended the procedure prescribed in Annexure
II and III of G.O.Ms.No.763 dated 15th November, 1975 which reads as
follows:

"GOVERNMENT OF ANDHRA PRADESH

O R D E R

In the G.O. 6th read above, orders were issued that while filling up
of the posts under Direct Recruitment, the first 20% of posts should be
filled following combined merit list of locals and non-locals (i.e. Open
Category) and, thereafter, the remaining 80% of the posts shall be filled
up by locals only. While filling up of the posts the special representation
under Rule 22 of the A.P. State and Subordinate Service Rules shall be
followed strictly. It was also ordered therein that the amendments to the
Annexures II and III to the G.O. third read above be issued separately.

2. Accordingly, the following amendments are issued to the procedure
prescribed in the Annexures II and III to the G.O.Ms.No.763, G.A.(SPF-A)
Department, dated 15th November, 1975.

A M E N D M E N T S

In the said Government orders,

(1) In the Annexure - II,

(i) for paragraphs 3 and 4, the following shall be substituted, namely,

"3: The Provisional list shall be divided into two parts. The first
part shall comprise 30% of the posts consisting of combined merit lists of
locals as well as non-locals and the remaining second part shall comprise
the balance 70% of the posts consisting of locals only and the posts shall
be filled duly following the rule of reservation."

(2) in the Annexure - III, for paragraph 3, the following shall be
substituted, namely,

"3: The provisional list shall be divided into two parts. The first
part shall comprise 40% of the posts consisting of combined merit lists of
locals as well as non-locals and the remaining second part shall comprises
the balance 60% of the posts consisting of locals only and the posts shall
be filled duly following the rule of reservation."

15. The applicability of the aforesaid G.O.Ms.No.124 dated 7th March,
2002 is in dispute in the present case.

16. In Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash
Chandra Yograj Sinha, AIR 1961 SC 1596, the Constitution Bench of this
Court while considering the question as to whether an Act is to be made
operative prospectively or retrospectively held:

"12............ a section may be prospective in some parts and
retrospective in other parts. While it is the ordinary rule that
substantive rights should not be held to be taken away except by express
provision or clear implication, many Acts, though prospective in form, have
been given retrospective operation, if the intention of the legislature is
apparent."

17. In Mst. Rafiquennessa vs. Lal Bahadur Chetri and others, AIR 1964 SC
1511, another five-Judge Bench of this Court while dealing with the
question of effect of retrospective legislation on vested rights observed:

"It is not disputed by him that the legislature is competent to take away
vested rights by means of retrospective legislation. Similarly, the
legislature is undoubtedly competent to make laws which override and
materially affect the terms of contracts between the parties; but the
argument is that unless a clear and unambiguous intention is indicated by
the legislature by adopting suitable express words in that behalf, no
provision of a statute should be given retrospective operation if by such
operation vested rights are likely to be affected. These principles are
unexceptionable and as a matter of law, no objection can be taken to them."

18. In absence of any express or necessarily implied provision in the
statute, normally statute affects the rights prospectively.

A statutory provision is held to be retrospective either when it is
so declared by express terms, or the intention to make retrospective
clearly follows from the relevant words and the context in which they
occur.

19. The Presidential Order, 1975 was issued in exercise of powers under
clauses (1) and (2) of Article 371-D of the Constitution empowering the
State Government under sub-paragraph (1) of paragraph 3 of the said order
to organize any class of posts in the civil services under the State into
different local cadres in different parts of the State within 27 months
from the commencement of the said order. Under proviso to sub-paragraph (1)
it is stated that notwithstanding the expiration of the said period, the
President may by order, require the State Government whenever he considers
it expedient to do so to organize any class of posts in civil services of
and any class of civil posts under the State into different local cadres or
different parts of the State. By Presidential order, 1975 the State
Government has not been empowered to pass any order under sub-paragraph (1)
of paragraph 3 or paragraph 8 with retrospective effect. Apart from the
fact that the State Government was not empowered by the Presidential Order,
1975 to pass any orders with retrospective date, in absence of any terms or
the intention to make it retrospective date, the G.O.Ms. No.124 dated 7th
March, 2002 cannot be given effect from a retrospective date.

20. In any case, the State Government cannot pass any order amending a
procedural law regarding reservation in the matter of selection to posts,
with retrospective effect, once the procedure of selection starts.

21. For the reasons aforesaid, we hold that the G.O.Ms.No.124 dated 7th
March, 2002 is prospective and is not applicable to the process of
selection started pursuant to Advertisement No.10 of 1999 including the 973
executive posts which were ordered to be filled up by the High Court
pursuant to the advertisement. The Tribunal erred in directing the APPSC to
re-caste the merit list pursuant to G.O.Ms.No.124 dated 7th March, 2002.
The High Court by the impugned judgment dated 27th December, 2004 rightly
held that the order passed by the Court will not affect the appointments
already made to the executive post between 2001-2002 but erred in holding
that the selection is to be made in accordance with G.O.Ms.No.124 dated 7th
March, 2002

22. For the reasons aforesaid, we set aside the orders passed by the
Andhra Pradesh Administrative Tribunal and the impugned common judgment
dated 27th December, 2004 and the impugned common order dated 28th
December, 2004 passed by the Division Bench of the High Court of
Judicature, Andhra Pradesh at Hyderabad in Writ Petition Nos. 20106 of
2004, 21558 of 2004, etc.

In view of the foregoing discussions, we direct the respondents to
fill up the rest of the posts including the posts of Municipal
Commissioners Grade-III, Asstt. Commercial Tax Officers, Asstt. Labour
Officers in executive cadre and Asstt. Section Officers in non executive
cadre, which are vacant, as per President Order, 1975 and the Government
orders in consonance with the Presidential Order which were prevailing in
the year 1999 when the Advertisement was issued. The inter se seniority
between the persons appointed in the 1st round and the persons appointed
afterwards in the same cadre, if any, shall be decided by the appropriate
authority in accordance with the rules, depending on the merit ranking
obtained by them.

23. We direct the authority to complete the process of selection
expeditiously preferably within three months. The appeals are allowed with
aforesaid observations and directions.

.................................................J.
(SUDHANSU JYOTI MUKHOPADHAYA)

.................................................J.
NEW DELHI; (V. GOPALA GOWDA)
FEBRUARY 18, 2015.

Section 498A, 306, 201 and 114 of the Indian Penal Code - case of the prosecution that the husband was keen in his extra-marital affair and that had led to more marital discord and bitterness. -The in-laws, as alleged, used to take away the income earned by her. - A time came when she was compelled to stay on the terrace of the house where she committed suicide on 4th of March, 2004 - Apex court held that the accused may have been involved in an illicit relationship with the appellant no.4, but in the absence of some other acceptable evidence on record that can establish such high degree of mental cruelty, the Explanation to Section 498A which includes cruelty to drive a woman to commit suicide, would not be attracted.-the involvement of the other accused persons, that is, appellant nos. 1, 3 and 4, we find that there is no allegation of any kind of physical torture. The evidence brought on record against them with regard to cruelty is absolutely sketchy and not convincing. - It has been alleged that the mother-in-law used to rob her money which she earned as wages. The said fact has really not been established. As far as appellant no. 4, Jesuben, is concerned, there is only one singular allegation that at one public place, i.e. in a 'mela', she had threatened the deceased that she would be divorced by her husband. On the basis of the said evidence, it is difficult to sustain the conviction under Sections 306 and 498A IPC. Once we are holding that the accused-appellants are not guilty of the offence under Section 306 and 498A IPC, the conviction under Section 201 IPC is also not sustainable. -2015 SC MSKLAWREPORTS

Section 498A, 306, 201 and 114 of the Indian Penal Code - case of the prosecution that the husband was keen in his extra-marital affair and that had led to more marital
discord and bitterness. -The in-laws, as alleged, used to take away the income earned by her. - A time came when she was compelled to stay on the terrace of the house where she committed suicide on 4th of March, 2004 - Apex court held that the accused may have been involved in an
illicit relationship with the appellant no.4, but in the absence of some other acceptable evidence on record that can establish such high degree of mental cruelty, the Explanation to Section 498A which includes cruelty to drive a woman to commit suicide, would not be attracted.-the involvement of the other accused persons, that is, appellant nos. 1, 3 and 4, we find that there is no allegation of any kind of physical torture. The evidence brought on record against them with regard to cruelty is absolutely sketchy and not convincing. - It has been alleged that the mother-in-law used to rob her money which she earned as wages. The said fact has really not been established. As far as appellant no. 4, Jesuben, is concerned, there is
only one singular allegation that at one public place, i.e. in a 'mela', she had threatened the deceased that she would be divorced by her husband. On the basis of the said evidence, it is difficult to sustain the conviction under Sections 306 and 498A IPC. Once we are holding that the accused-appellants are not guilty of the offence under Section 306 and 498A IPC, the conviction under Section 201 IPC is also not sustainable. -2015 SC MSKLAWREPORTS

As the facts would unfurl after the receipt of the said invoice the appellant-company approached the concerned income tax officer, the first respondent herein, for issuing a 'No Objection Certificate' to remit the said sum duly pointing out that the NRC had no place of business in India; that all the services rendered by it were from outside India; and that no part of success fee could be said to arise or accrue or deemed to arise or accrue in India attracting the liability under the Income-tax Act, 1961 (for brevity, 'the Act') by the NRC. = "By technical services, we mean in this context services requiring expertise in technology. By consultancy services, we mean in this context advisory services. The category of technical and consultancy services are to some extent overlapping because a consultancy service could also be technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in technology is required to perform it." 35. In this context, a reference to the decision in C.I.T. V. Bharti Cellular Limited and others[6], would be apposite. In the said case, while dealing with the concept of "consultancy services", the High Court of Delhi has observed thus: "Similarly, the word "consultancy" has been defined in the said Dictionary as "the work or position of a consultant; a department of consultants." "Consultant" itself has been defined, inter alia, as "a person who gives professional advice or services in a specialized field." It is obvious that the word "consultant" is a derivative of the word "consult" which entails deliberations, consideration, conferring with someone, conferring about or upon a matter. Consult has also been defined in the said Dictionary as "ask advice for, seek counsel or a professional opinion from; refer to (a source of information); seek permission or approval from for a proposed action". It is obvious that the service of consultancy also necessarily entails human intervention. The consultant, who provides the consultancy service, has to be a human being. A machine cannot be regarded as a consultant." 36. In this context, we may fruitfully refer to the dictionary meaning of 'consultation' in Black's Law Dictionary, Eighth Edition. The word 'consultation' has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It means a meeting in which a party consults or confers and eventually it results in human interaction that leads to rendering of advice. 37. As the factual matrix in the case at hand, would exposit the NRC had acted as a consultant. It had the skill, acumen and knowledge in the specialized field i.e. preparation of a scheme for required finances and to tie-up required loans. The nature of activities undertaken by the NRC has earlier been referred to by us. The nature of service referred by the NRC, can be said with certainty would come within the ambit and sweep of the term 'consultancy service' and, therefore, it has been rightly held that the tax at source should have been deducted as the amount paid as fee could be taxable under the head 'fee for technical service'. Once the tax is payable paid the grant of 'No Objection Certificate' was not legally permissible. Ergo, the judgment and order passed by the High Court are absolutely impregnable. 38. Consequently, the appeal, being devoid of merit, stands dismissed. However, in the facts and circumstances of the case there shall be no order as to costs.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7796 OF 1997

GVK Industries Ltd. & Anr. ... Appellants

Versus

The Income Tax Officer & Anr. ... Respondents

J U D G M E N T

Dipak Misra, J.

The appellant No. 1 is a company incorporated under the
Companies Act, 1956 for the purpose of setting up a 235 MW Gas based
power project at Jegurupadu, Rajahmundry, Andhra Pradesh at an
estimated cost of Rs.839 crores and the appellant No. 2 is a director
of the company. The main object of the appellant company is to
generate and sell electricity.
2. With the intention to utilize the expert services of qualified
and experienced professionals who could prepare a scheme for raising
the required finance and tie up the required loan, it sought services
of a consultant and eventually entered into an agreement with ABB -
Projects & Trade Finance International Ltd., Zurich, Switzerland,
(hereinafter referred to as "Non-Resident Company/NRC"). The NRC,
having regard to the requirements of the appellant-company offered its
services as financial advisor to its project from July 08, 1993.
Those services included, inter alia, financial structure and security
package to be offered to the lender, making an assessment of export
credit agencies world-wide and obtaining commercial bank support on
the most competitive terms, assisting the appellant loan negotiations
and documentation with lenders and structuring, negotiating and
closing the financing for the project in a coordinated and expeditious
manner. For its services the NRC was to be paid, what is termed as,
"success fee" at the rate of 0.75% of the total debt financing. The
said proposal was placed before the Board meeting of the company on
August 21, 1993 and the Board of Directors approved the appointment of
the NRC and advised that it be involved in the proposed public issue
of share by the company. The NRC rendered professional services from
Zurich by correspondence as to how to execute the documents for
sanction of loan by the financial institutions within and outside the
country. With advice of NRC the appellant-company approached the
Indian Financial Institutions with the Industrial Development Bank of
India (IDBI) acting as the Lead Financier for its Rupee loan
requirement and for a part of its foreign currency loan requirement it
approached International Finance Corporation (IFC), Washington DC,
USA. After successful rendering of services the NRC sent invoice to
the appellant-company for payment of success fee amount i.e., US
$.17,15,476.16 (Rs.5.4 Crores).
3. As the facts would unfurl after the receipt of the said invoice
the appellant-company approached the concerned income tax officer, the
first respondent herein, for issuing a 'No Objection Certificate' to
remit the said sum duly pointing out that the NRC had no place of
business in India; that all the services rendered by it were from
outside India; and that no part of success fee could be said to arise
or accrue or deemed to arise or accrue in India attracting the
liability under the Income-tax Act, 1961 (for brevity, 'the Act') by
the NRC. It was also stated as the NRC had no business connection
Section 9(1)(i) is not attracted and further as NRC had rendered no
technical services Section 9(1)(vii) is also no attracted. The first
respondent scanning the application filed by the company refused to
issue 'No Objection Certificate' by his order dated September 27,
1994. Being dissatisfied with the said order passed by the first
respondent the appellant-company preferred a revision petition before
the commissioner of Income-tax, Hyderabad, the second respondent
herein, under Section 264 of the Act. On March 21, 1995 the second
respondent permitted the appellant-company to remit the said sum to
the NRC by furnishing a bank guarantee for the amount of tax. The
company took steps to comply with the said order but afterwards on
October 25,1995 the revisional authority revoked the earlier order and
directed the company to deduct tax and pay the same to the credit of
the Central Government as a condition precedent for issuance of the
'No Objection Certificate'. Thus, the order passed by the first
respondent was affirmed and resultantly the revision petition was
dismissed.
4. The non-success in revision compelled the company to approach
the High Court in W.P. No. 6866 of 1995 for issue of writ of
certiorari for quashing of the orders passed by the Income-tax officer
and that of by the revisional authority. In the writ petition, the
stand and stance put forth before the authorities were reiterated.
5. On behalf of the revenue a counter affidavit was filed
contending, inter alia, that the NRC was very actively associated not
only in arranging loan but also in providing various services which
fall within the ambit of both managerial as well as consultancy
services.
6. A reference was made to the letter dated July 8, 1993 wherefrom
it is evident that NRC is a financial advisor with a worldwide
experience and has been engaged in India and requested that it be
appointed as "financial consultant" for the project. The company
responded by appointing the NRC as the financial advisor vide its
letter dated 2.8.1994. On behalf of the revenue, the proceedings of
the Board of Directors meeting was highlighted stating that they
disclosed that the NRC was appointed not only to arrange for the loan
but also to render several other financial and general services and
also to involve itself in the public issue of the company and on that
bedrock it was urged that it squarely falls within the ambit of
Section 9(1)(vii)(b) of the Act. It was also averred that NRC is a
financial segment of the ABB which is participating in the equity of
the appellant company besides IFC, Washington. The further stand of
the revenue was that Section 5(2) read with Section 9(1)(i)(vii)(b)
will apply to the remittance to be made by the company to the NRC as
the income would be deemed to have accrued or arisen in India and
hence, the Indian company was liable to deduct tax at the prescribed
rate before remitting any money to the NRC. The order passed by the
authorities below were supported on the foundation that there is a
business connection between the NRC with the company in India and the
voluminous correspondence between the two wings discloses the said
connection. It was also contended that the services rendered by the
NRC were not a one time affair as alleged, for the company itself had
acted on behalf of the NRC for processing, negotiating and obtaining
loans from IDBI India and IFC, Washington. Emphasis was laid on the
fact that the company had contracted the NRC not only for the limited
purpose of getting loan but also for the further participation in its
business activity which was evincible from the correspondence made
between the two and, therefore, the income will accrue or deemed to
have accrued or arisen to the NRC in India within the provisions of
the Act. Justifying the order of revocation by the Commissioner of
Income-tax, it was set forth that order dated 21.03.1995 was only an
interim order and the final order came to be passed on 25.10.1995 by
which the revision was dismissed. It was asserted by the revenue that
the services of the NRC, as demonstrable from the material brought on
record, was rendered within India and, therefore, the company is
obliged in law to deduct income-tax before remitting "success fee" to
the NRC. On this premise, the denial of 'No Objection Certificate'
(NOC) was sought to be justified.
7. A rejoinder affidavit was filed by the appellant company
asseverating that the NRC is an independent unit and is, in a way,
subsidiarised by ABB. That apart, merely because expert advice was
obtained, it could not be said that it pursued the application for
loan/financial assistance on behalf of NRC and further the advisory
services were rendered from outside India. The stand of the revenue
that there has been an admission by the company to the effect that
there was business connection with the NRC by the company, was
controverted. It was put forth that the company was always the
principal directly concerned with the making of application for
financial assistance for the project and pursuing the same; that the
NRC did not have any office or establishment in India at any relevant
point of time; that it operated from Zurich; that there was no
business connection between the company and the NRC; and that the
success fee did not accrue or arise to the NRC in India and hence, no
income is deemed to have accrued or arisen to NRC in India. In
addition to the aforesaid it was urged Section 9(1)(i) and Section
9(1)(vii) have to be read together and in that case the stand of the
revenue was absolutely unjustified and assuming Section 9(1)(vii) of
the Act is read in isolation, the plain interpretation could not be
applicable regard being had to the nature of service rendered by NRC.
It was also pleaded that merely because the amount of success fee was
paid by the appellant-company to NRC in India for the services
rendered from outside India, the income of NRC would not deemed to
have accrued or arisen in India.
8. The High Court framed the following two issues for
consideration:
"(1) Whether 'success fee' payable by the petitioner-company to
the NRC or any portion thereof is chargeable under the
provisions the Act; and

(2) Whether the petitioner-company is entitled to 'No
Objection Certificate'."

9. The High Court referred to clause (b) of sub-section 2 of
Section 5 and Section 9 of the Act and adverted to the expression all
income accruing or arising, whether directly or indirectly, through or
from any business connection in India, or through or from any property
in India, or through from any asset or source of income in India or
through the transfer of a capital asset situate in India and
thereafter referred to Section 163(1)(b) which uses the expression
"business connection" and thereafter referring to various authorities,
culled out the principles as to what the expression "business
connection" conveys. It observed that expression "business
connection" is too wide to admit of any precise definition though it
has some well known attributes; that whether there is a business
connection between an Indian company and a non-resident company is a
mixed question of fact and law which is to be determined on the facts
and circumstances of each case; that the essence of "business
connection" is existence of close, real, intimate relationship and
commonness of interest between the NRC and the Indian person; that in
a case where there is control of management or finances or substantial
holding of equity shares or sharing of profits by the NRC of the
Indian company/person, the existence of close/intimate relationship
stand substantiated; and to constitute business connection, there must
be continuity of activity or operation of the NRC with the Indian
company/person and a stray or an isolated transaction is not enough to
establish a business connection.
10. After culling out the principles, the High Court referred to the
contents of the correspondence, the nature and extent of services
which the NRC had undertaken under the agreement, the resolution
passed by the Board of Directors which had perused the letter dated
July 8, 1993 addressed by the NRC stipulating the scope of services to
be undertaken by NRC; the decisions of the Board to pay a fee to NRC
and came to hold thus:
"On a careful reading of the letter of proposal of the NRC and
the extract of resolution of the Board of Directors of the
petitioner-company, it is clear to us that it was no part of the
services to be provided by the NRC to manage public issue in
India to correspond with various agencies to secure loan for the
petitioner-company, to negotiate the terms on which loan should
be obtained or to draft document for it. The NRC has only to
develop a comprehensive financial model, tie up the rupee/foreign
currency loan requirements of the project, assess export credit
agencies worldwide and obtain commercial bank support, assist the
petitioner-company in loan negotiations and documentation with
the lender. It appears to us that the service to be rendered by
the NRC is analogous to draw up a plan for the petitioner-company
to reach the required destination indicating roads and highways,
the curves and the turns; it does not contemplate taking the
petitioner-company to the destination by the NRC. Once the NRC
has prepared the scheme and given necessary advice and assistance
to the petitioner-company for obtaining loan, the responsibility
of the NRC is over. It is for the petitioner-company to proceed
on the suggested lines and obtain loan from Indian or foreign
agencies. On the petitioner-company obtaining loan, the NRC
becomes entitled to 'success fees'."

11. The High Court scanned the letters with due consideration and
opined that the business connection between the petitioner company and
the NRC had not been established. Thereafter, the writ court adverted
to the proposition whether success fee could fall within clause
(vii)(b) of Section 9(1) of the Act. Interpreting the said provision,
the High Court opined that:
"Thus from a combined reading of clause (vii) (b) Explanation (2)
it becomes clear that any consideration, whether lump sum or
otherwise, paid by a person who is a resident in India to a non-
resident for running any managerial or technical or consultancy
service, would be the income by way of fees for technical service
and would, therefore, be within the ambit of "income deemed to
accrue or arise in India". If this be the net of taxation under
Section 9 (1) (vii) (b), then 'success fee', which is payable by
the petitioner-company to the NRC as fee for technical service
would be chargeable to income tax thereunder. The Income-tax
officer, in the impugned order, held that the services offered by
the NRC fell within the ambit of both managerial and consultancy
services. That order of Income-tax officer found favour by the
Commissioner in revision. In the view we have expressed above,
we are inclined to confirm the impugned order."

12. At this juncture, it is necessary to note that a contention was
advanced before the High Court by the assessee that the NRC did not
render any technical or consultancy service to the company but only
rendered advise in connection with payment of loan by it and hence, it
would not amount to technical or consultancy service within the
meaning of Section 9(1)(vii)(b) of the Act. While not accepting the
said submission, the High Court observed that for the purposes of
attracting the said provision, the business of the company cannot be
divided into water-tight compartments like fire, generation of power,
plant and machinery, management, etc. and to hold that managerial and
technical and consultancy service relate to management, generation of
power and plant and machinery, but not to finance. Elaborating
further, the High Court observed that advice given to procure loan to
strengthen finances may come within the compartment of technical or
consultancy service and "success fee" would thereby come within the
scope of technical service within the ambit of Section 9(1)(vii)(b) of
the Act. Being of this view, the High Court opined the assessee was
not entitled to the "No Objection Certificate".
13. Be it stated, the constitutional validity of Section
9(1)(vii)(b) of the Act was challenged on the ground of legislative
competence and violation of Article 14 of the Constitution. The Court
referred to the earlier Division Bench decision in Electrical
Corporation of India Ltd. V. C.I.T. rendered in W.P. No. 105/1987 on
March 24, 1987 and also took note of the fact that the said case was
quoted with approval in Electrical Corporation of India Ltd. V.
C.I.T.[1] In the ultimate eventuate, High Court rejected all the
contentions advanced by the assessee-company and dismissed the writ
petition.
14. Being aggrieved, the petitioner company approached this Court.
When the matter came up for consideration before a two-Judge Bench of
this Court, which taking note of the far-reaching issues of
constitutional purport and the fact that they were earlier referred to
in the case of Electrical Corporation of India Ltd. (supra), which was
ultimately withdrawn, it, by order dated 28.11.2000, referred the
instant matter to a larger Bench. On 13.7.2010, the matter again came
up for consideration before a three-Judge Bench and vide its order of
the same date, the matter was referred to the Constitution Bench,
which answered the reference as per decision on 1.3.2011 reported in
(2011) 4 SCC 36. The issue before the Constitution Bench stated by the
Court is thus:
"It is necessary for purposes of clarity that a brief recounting
be undertaken at this stage itself as to what was conclusively
decided in ECIL and what was referred to a Constitutional Bench.
After conclusively determining that clauses (1) and (2) of
Article 245, read together, impose a requirement that the laws
made by Parliament should bear a nexus with India, the three-
Judge Bench in ECIL asked that a Constitutional Bench be
constituted to consider whether the ingredients of the impugned
provision i.e. Section 9(1)(vii) of the Income Tax Act (1961)
indicate such a nexus."

15. Before the Constitution Bench the appellant withdrew its
challenge to the constitutional validity of Section 9(1)(vii)(b) of
the Act and elected to proceed on the factual matrix as to the
applicability of the said provision. However, as the learned Attorney
General pressed upon for reconsideration, the decision in three-Judge
Bench in ECIL case, the larger Bench considered the validity of the
requirement of a relationship to or nexus with territory of India as a
limitation on the powers of Parliament to enact laws pursuant to
clause (1) of Article 245 of the Constitution. The Court adverted to
the ratio in ECIL, took note of propositions of the learned Attorney
General and the principles relating to interpretation of the
Constitution, textual analysis of Article 245, analysed the
constitutional topological space of Article 245 and the wider
structural analysis of Article 245 in the context of Article 260 and
came to hold thus:
"It would appear that the concerns of the learned Attorney
General may have been more with whether the ratio in ECIL could
lead to a reading down of the legislative powers granted to
Parliament by Article 245. A thorough textual analysis, combined
with wider analysis of constitutional topology, structure, values
and scheme has revealed a much more intricately provisioned set
of powers to Parliament. Indeed, when all the powers necessary
for an organ of the State to perform its role completely and to
effectuate the constitutional mandate, can be gathered from the
text of the Constitution, properly analysed and understood in the
wider context in which it is located, why should such
unnecessarily imprecise arrogation of powers be claimed? To give
in to such demands, would be to run the risk of importing
meanings and possibilities unsupportable by the entire text and
structure of the Constitution. Invariably such demands are made
in seeking to deal with external affairs, or with some claimed
grave danger or a serious law and order problem, external or
internal, to or in India. In such circumstances, it is even more
important that courts be extra careful."

16. Thereafter, the Court reiterated the two questions it had set
out in the beginning. The first question reads thus:
"(1) Is Parliament constitutionally restricted from enacting
legislation with respect to extra-territorial aspects or causes
that do not have, nor expected to have any, direct or indirect,
tangible or intangible impact(s) on or effect(s) in or
consequences for:

(a) the territory of India, or any part of India; or

(b) the interests of, welfare of, well-being of, or security of
inhabitants of India, and Indians?"

Answering the same, the Court observed:
"The answer to the above would be yes. However, Parliament may
exercise its legislative powers with respect to extra-territorial
aspects or causes-events, things, phenomena (howsoever
commonplace they may be), resources, actions or transactions, and
the like-that occur, arise or exist or may be expected to do so,
naturally or on account of some human agency, in the social,
political, economic, cultural, biological, environmental or
physical spheres outside the territory of India, and seek to
control, modulate, mitigate [pic]or transform the effects of such
extra-territorial aspects or causes, or in appropriate cases,
eliminate or engender such extra-territorial aspects or causes,
only when such extra-territorial aspects or causes have, or are
expected to have, some impact on, or effect in, or consequences
for: (a) the territory of India, or any part of India; or (b) the
interests of, welfare of, well-being of, or security of
inhabitants of India, and Indians."

And thereafter:
"Whether a particular law enacted by Parliament does show such a
real connection, or expected real connection, between the extra-
territorial aspect or cause and something in India or related to
India and Indians, in terms of impact, effect or consequence,
would be a mixed matter of facts and of law. Obviously, where
Parliament itself posits a degree of such relationship, beyond
the constitutional requirement that it be real and not fanciful,
then the courts would have to enforce such a requirement in the
operation of the law as a matter of that law itself, and not of
the Constitution."

17. The second question that was posed by the Constitution Bench is
as follows:
"(2) Does Parliament have the powers to legislate "for" any
territory, other than the territory of India or any part of it?"

The aforesaid question was answered thus:
"The answer to the above would be no. It is obvious that
Parliament is empowered to make laws with respect to aspects or
causes that occur, arise or exist, or may be expected to do so,
within the territory of India, and also with respect to extra-
territorial aspects or causes that have an impact on or nexus
with India as explained above in the answer to Question 1 above.
Such laws would fall within the meaning, purport and ambit of the
grant of powers to Parliament to make laws "for the whole or any
part of the territory of India", and they may not be invalidated
on the ground that they may require extra-territorial operation.
Any laws enacted by Parliament with respect to extra-territorial
aspects or causes that have no impact on or nexus with India
would be ultra vires, as answered in response to Question 1
above, and would be laws made "for" a foreign territory."

After the reference was answered, the matter was directed to be
listed before the appropriate Bench.
18. We have heard Mr. U.A. Rana, learned counsel for the appellants
and Mr. Arijit Prasad, learned counsel for the respondents.
19. At the very outset, it is necessary to mention as the challenge
to the constitutional validity of the provision has been withdrawn, and
the same accordingly has not been gone into by the Constitution Bench,
there is no necessity to dwell upon the same. The crux of the matter
is whether, in the obtaining factual matrix, the High Court was
justified in concurring with the view expressed by the revisional
authority that the assessee-company was not entitled to "No Objection
Certificate" under the Act as it was under the obligation to deduct the
tax at source pertaining to payment to the NRC as the character of
success fee was substantiated by the revenue to put in the ambit and
sweep of Section 9(1)(vii)(b) of the Act.
20. At this juncture, it is demonstrable that NRC is a Non-Resident
Company and it does not have a place of business in India. The revenue
has not advanced a case that the income had actually arisen or received
by the NRC in India. The High Court has recorded the payment or
receipt paid by the appellant to the NRC as success fee would not be
taxable under Section 9(1)(i) of the Act as the transaction/activity
did not have any business connection. The conclusion of the High Court
in this regard is absolutely defensible in view of the principles
stated in C.I.T. V. Aggarwal and Company[2], C.I.T. V. TRC[3] and
Birendra Prasad Rai V. ITC[4]. That being the position, the singular
question that remains to be answered is whether the payment or receipt
paid by the appellant to NRC as success fee would be deemed to be
taxable in India under Section 9(1)(vii) of the Act. As the factual
matrix would show, the appellant has not invoked Double Taxation
Avoidance Agreement between India and Switzerland. That being not
there, we are only concerned whether the "success fee" as termed by the
assessee is "Fee for technical service" as enjoined under Section
9(1)(vii) of the Act. The said provision reads as follows:
"9. Income deemed to accrue or arise in India - (1) The
following income shall be deemed to accrue or arise in India --

(vii) income by way of fees for technical services payable by-

(a) the Government ; or

(b) a person who is a resident, except where the fees are
payable in respect of services utilised in a business or
profession carried on by such person outside India or for
the purposes of making or earning any income from any source
outside India ; or

(c) a person who is a non-resident, where the fees are
payable in respect of services utilised in a business or
profession carried on by such person in India or for the
purposes of making or earning any income from any source in
India :

[Provided that nothing contained in this clause shall
apply in relation to any income by way of fees for technical
services payable in pursuance of an agreement made before
the 1st day of April, 1976, and approved by the Central
Government.]
[Explanation 1.-For the purposes of the foregoing proviso, an
agreement made on or after the 1st day of April, 1976, shall be
deemed to have been made before that date if the agreement is
made in accordance with proposals approved by the Central
Government before that date.]

[Explanation 2.]-For the purposes of this clause, "fees for
technical services" means any consideration (including any lump
sum consideration) for the rendering of any managerial, technical
or consultancy services (including the provision of services of
technical or other personnel) but does not include consideration
for any construction, assembly, mining or like project undertaken
by the recipient or consideration which would be income of the
recipient chargeable under the head "Salaries".]

21. Explanation to the Section 9(2) was substituted by the Finance
Act 2010 with retrospective effect from 1.6.1976. Prior to the said
substitution, another Explanation had been inserted by the Finance Act,
2007 with retrospective effect from 1.6.1976. The said Explanations
read as under:
"As amended by Finance Act, 2010
Explanation.- For the removal of doubts, it is hereby declared
that for the purposes of this section, income of a non-resident
shall be deemed to accrue or arise in India under clause (v) or
clause (vi) or clause (vii) of sub-section (1) and shall be
included in the total income of the non-resident, whether or not,-

(i) the non-resident has a residence or place of business or
business connection in India; or
(ii) the non-resident has rendered services in India.]

As amended by Finance Act, 2007
Explanation.-For the removal of doubts, it is hereby declared
that for the purposes of this section, where income is deemed to
accrue or arise in India under clauses (v), (vi) and (vii) of sub-
section (1), such income shall be included in the total income of
the non-resident, whether or not the non-resident has a residence
or place of business or business connection in India."

22. The principal provision is Clause (b) of Section 9(1)(vii) of
the Act. The said provision carves out an exception. The exception
carved out in the latter part of clause (b) applies to a situation when
fee is payable in respect of services utilized for business or
profession carried out by an Indian payer outside India or for the
purpose of making or earning of income by the Indian assessee i.e. the
payer, for the purpose of making or earning any income from a source
outside India. On a studied scrutiny of the said Clause, it becomes
clear that it lays down the principle what is basically known as the
"source rule", that is, income of the recipient to be charged or
chargeable in the country where the source of payment is located, to
clarify, where the payer is located. The Clause further mandates and
requires that the services should be utilized in India.
23. Having stated about the "source rule", it is necessary to
appropriately appreciate how the concept has developed. At the time of
formation of "League of Nations" at the end of 1920, it comprised of
only 27 countries dominated by the European States and the United
States of America. The United Nations that was formed after the Second
World War, initially had 51 members. Presently, it has 193 members.
With the efflux of time, there has been birth of nation States which
enjoy political independence and that has led to cross-border and
international trade. The State trade eventually has culminated in
formulation of principles pertaining to international taxation
jurisdiction. It needs no special emphasis to state that the said
taxation principles are premised to promote international trade and to
allocate taxation between the States. These rules help and further
endeavour to curtail possibility of double taxation, tax discrimination
and also to adjudicate resort to abusive tax avoidance or tax evasion
practices. The nation States, in certain situations, resort to
principle of "tax mitigation" and in order to protect their citizens,
grant benefit of tax abroad under the domestic legislation under the
bilateral agreements.
24. The two principles, namely, "Situs of residence" and "Situs of
source of income" have witnessed divergence and difference in the field
of international taxation. The principle "Residence State Taxation"
gives primacy to the country of the residency of the assessee. This
principle postulates taxation of world-wide income and world-wide
capital in the country of residence of the natural or juridical person.
The "Source State Taxation" rule confers primacy to right to tax to a
particular income or transaction to the State/nation where the source
of the said income is located. The second rule, as is understood, is
transaction specific. To elaborate, the source State seeks to tax the
transaction or capital within its territory even when the income
benefits belongs to a non-residence person, that is, a person resident
in another country. The aforesaid principle sometimes is given a
different name, that is, the territorial principle. It is apt to state
here that the residence based taxation is perceived as benefiting the
developed or capital exporting countries whereas the source based
taxation protects and is regarded as more beneficial to capital
importing countries, that is, developing nations. Here comes the
principle of nexus, for the nexus of the right to tax is in the source
rule. It is founded on the right of a country to tax the income earned
from a source located in the said State, irrespective of the country of
the residence of the recipient. It is well settled that the source
based taxation is accepted and applied in international taxation law.
25. The two principles that we have mentioned hereinabove, are also
applied in domestic law in various countries. The source rule is in
consonance with the nexus theory and does not fall foul of the said
doctrine on the ground of extra-territorial operation. The doctrine of
source rule has been explained as a country where the income or wealth
is physically or economically produced. [See League of Nations, Report
on Double Taxation by Bruins, Einaudi, Saligman and Sir Josiah Stan
(1923)]. Appreciated on the aforesaid principle, it would apply where
business activity is wholly or partly performed is a source State, as a
logical corollary, the State concept would also justifiably include the
country where the commercial need for the product originated, that is,
for example, where the consultancy is utilized.
26. From the aforesaid, it is quite vivid that the concept of
income source is multifaceted and has the potentiality to take
different forms [See Klans Vogel, World-wide V. Source Taxation of
Income - Review and Revision of Arguments (1988)]. The said rule has
been justified by Arvid A. Skaar in Permanent Establishment; Erosion of
Tax Treaty Principle on the ground that profits of business enterprise
are mainly the yield of an activity, for capital is profitable to the
extent that it is actively utilised in a profitable manner. To this
extent, neither the activity of business enterprise nor the capital
made, depends on residence.
27. The purpose of adverting to these aspects is only to highlight
that the source rule has been accepted by them in the UN Commentaries
and the Organisation of Economic Corporation and Development (OECD)
Commentaries. It is well known that what is prohibited by
international taxation law is imposition of sovereign act of a State on
a sovereign territory. This principle of formal territoriality applies
in particular, to acts intended to enforce internal legal provisions
abroad. [See the Introduction in Klaus Vogel on Double Taxation
Convention, South Asean, Reprint Edition (2007)]. Therefore, deduction
of tax at source when made applicable, it has to be ensured that this
principle is not violated.
28. Coming to the instant case, it is evident that fee which has
been named as "success fee" by the assessee has been paid to the NRC.
It is to be seen whether the payment made to the non-resident would be
covered under the expression "fee for technical service" as contained
in Explanation (2) to Section 9(1)(vii) of the Act. The said
expression means any consideration, whether lumpsum or periodical in
rendering managerial, technical or consultancy services. It excludes
consideration paid for any construction, assembling, mining or like
projects undertaken by the non-resident that is the recipient or
consideration which would be taxable in the hands of the non-recipient
or non-resident under the head "salaries". In the case at hand, the
said exceptions are not attracted. What is required to be scrutinized
is that the appellant had intended and desired to utilize expert
services of qualified and experience professional who could prepare a
scheme for raising requisite finances and tie-up loans for the power
projects. As the company did not find any professional in India, it
had approached the consultant NRC located in Switzerland, who offered
their services. Their services rendered included, inter alia,
financial structure and security package to be offered to the lender,
study of various lending alternatives for the local and foreign
borrowings, making assessment of expert credit agencies world-wide and
obtaining commercial bank support on the most competitive terms,
assisting the appellant company in loan negotiations and documentations
with the lenders, structuring, negotiating and closing financing for
the project in a coordinated and expeditious manner.
29. In this context, it would be appropriate to reproduce the
letter dated 8.7.1993 addressed by the NRC. It reads as follows:
"We propose the following scope of services to be performed by
ABB PTF:

Assisting GVK Industries Limited ("GVK") in putting together the
financial structure and security package to be offered to the
lenders;

Evaluating the pros and cons of various lending alternatives,
both for the local and the foreign borrowings;

Developing a comprehensive financial model to evaluate the
project and to perform various sensivity studies;

Preparing a preliminary information Memorandum to be used as the
basis for placing the foreign and local debt;

Accessing Export Credit Agencies world wide obtaining commercial
bank support on the most comprehensive terms;

Assisting GVK in loan negotiations and documentation with
lendors; and

Structuring, negotiating and closing the financing for this
project in a coordinated and expeditious manner.

We propose a compensation structure based only on success. As
an exception, ABB PTF does not propose either any retainers or
any reimbursement for travel and other expenses incurred by ABB
PTF.

The success fee will be 0.75% of the total debt, payable at
financial closing."

30. The said letter was placed before the Board of Directors of the
appellant company in its meeting held on August 21, 1993. The relevant
part of the resolution passed by the Board is extracted hereinbelow:
".....It was explained to the Directors that ABB-PTF's scope of
service for the project include:

Developing a comprehensive financial model;

Tying up the rupee/foreign currency loan requirements of the
project;

Assessing Export Credit Agencies worldwide and obtaining
commercial banks support on the most competitive terms;

Assisting GVK in loan negotiations and documentation with
lenders.

For the above scope of service ABB PTF would be paid a fee of
0.75% of the loan amount which is payable only on successful
financial closing. The Directors while approving this
arrangement, advised that ABB-PTF should also be involved in the
public issue of the company."

31. From the aforesaid two documents, it is clear as crystal that
the obligation of the NRC was to:
(i) Develop comprehensive financial model to tie-up the rupee and
foreign currency loan requirements of the project.
(ii) Assist expert credit agencies world-wide and obtain commercial
bank support on the most competitive terms.
(iii) Assist the appellant company in loan negotiations and
documentation with the lenders.
32. Pursuant to the aforesaid exercises carried out by the NRC, the
company was successful in availing loan/financial assistance in India
from the Industrial Development Bank of India (IDBI) which acted as a
lead financier for the rupee loan requirement. For foreign currency
loan requirement, the appellant approached International Finance
Corporation, Washington D.C., USA and was successful. In this
backdrop, "success fee" of Rs.5.4 crores was paid to the NRC.
33. In this factual score, the expression, managerial, technical or
consultancy service, are to be appreciated. The said expressions have
not been defined in the Act, and, therefore, it is obligatory on our
part to examine how the said expressions are used and understood by the
persons engaged in business. The general and common usage of the said
words has to be understood at common parlance.
34. In the case at hand, we are concerned with the expression
"consultancy services". In this regard, a reference to the decision by
the authority for advance ruling In Re. P.No. 28 of 1999[5], would be
applicable. The observations therein read as follows:
"By technical services, we mean in this context services
requiring expertise in technology. By consultancy services, we
mean in this context advisory services. The category of technical
and consultancy services are to some extent overlapping because a
consultancy service could also be technical service. However,
the category of consultancy services also includes an advisory
service, whether or not expertise in technology is required to
perform it."

35. In this context, a reference to the decision in C.I.T. V.
Bharti Cellular Limited and others[6], would be apposite. In the said
case, while dealing with the concept of "consultancy services", the
High Court of Delhi has observed thus:
"Similarly, the word "consultancy" has been defined in the said
Dictionary as "the work or position of a consultant; a department
of consultants." "Consultant" itself has been defined, inter
alia, as "a person who gives professional advice or services in a
specialized field." It is obvious that the word "consultant" is
a derivative of the word "consult" which entails deliberations,
consideration, conferring with someone, conferring about or upon
a matter. Consult has also been defined in the said Dictionary
as "ask advice for, seek counsel or a professional opinion from;
refer to (a source of information); seek permission or approval
from for a proposed action". It is obvious that the service of
consultancy also necessarily entails human intervention. The
consultant, who provides the consultancy service, has to be a
human being. A machine cannot be regarded as a consultant."

36. In this context, we may fruitfully refer to the dictionary
meaning of 'consultation' in Black's Law Dictionary, Eighth Edition.
The word 'consultation' has been defined as an act of asking the
advice or opinion of someone (such as a lawyer). It means a meeting
in which a party consults or confers and eventually it results in
human interaction that leads to rendering of advice.
37. As the factual matrix in the case at hand, would exposit the NRC
had acted as a consultant. It had the skill, acumen and knowledge in
the specialized field i.e. preparation of a scheme for required
finances and to tie-up required loans. The nature of activities
undertaken by the NRC has earlier been referred to by us. The nature
of service referred by the NRC, can be said with certainty would
come within the ambit and sweep of the term 'consultancy service' and,
therefore, it has been rightly held that the tax at source should have
been deducted as the amount paid as fee could be taxable under the
head 'fee for technical service'. Once the tax is payable paid the
grant of 'No Objection Certificate' was not legally permissible.
Ergo, the judgment and order passed by the High Court are absolutely
impregnable.
38. Consequently, the appeal, being devoid of merit, stands
dismissed. However, in the facts and circumstances of the case there
shall be no order as to costs.

..........................................................J.
[DIPAK MISRA]

.........................................................J.
[SUDHANSU JYOTI MUKHOPADHAYA]
NEW DELHI
FEBRUARY 18, 2015.

-----------------------
[1] (1990) 183 ITR 43 (SC); [(1989) Supp. 2 SCC 642]
[2] (1965) 56 ITR 20
[3] (1987) 166 ITR 1993
[4] (1981) 129 ITR 295
[5] (1999) 242 ITR 280
[6] (2009) 319 ITR 139

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