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2009 (4) TMI 944 - AT - Income TaxLiability to deduct tax u/s 194J or 194C - Payment of wheeling charges (transmission charges) and State Load Dispatch Centre Charges (SLDC charges) as fees for technical services - liability of interest u/s 201(1A) and tax u/s 201(1) - The Jaipur Vidhyut Vitran Nigam Ltd., the assessee (JVVNL) is a company incorporated under the Companies Act, 1956 - 100 per cent Government company in consonance with a mandate prescribed under the Rajasthan Power Sector Reforms Act, 1999. What is the nature of payment of wheeling/transmission/ SLDC charges on the basis of documents on records and the facts explained and after considering the nature of such payments as well as facts on records whether the same is liable for deduction of tax at source under the IT Act, 1961 specifically under s. 194J which provides for deduction of tax at source on payment of fees for professional or technical services? HELD THAT:- From all these clauses of transmission service agreement, it is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of SLDC and the Regulatory Commission for achieving the economy and efficiency in the operation of power system and therefore question of any person rendering service to another does not arise. The operation and maintenance of transmission lines by RVPNL and the use of these lines by assessee for transmitting energy does not result into any technical services being rendered to the assessee. The technical staff of RVPN by operating and maintaining its grid station and transmission lines simply discharge their function. They do not render any technical service to the assessee. Section 194J would have application only when the technology or technical knowledge of a person is made available to others and not where by using technical systems, services are rendered to others. Rendering of services by allowing use of technical system is different than charging fees for rendering technical services. The applicability of s. 194J would come into effect only when by making payment of fee for technical services, assessee acquired certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot, or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by use of such equipment, the same does not result in the provision of technical service to the customer for a fee. On going through the paper book filed by the Department we note that as per those papers only some report/letters has been issued by the TDS officer requiring the deduction of tax at source on such, payment. Similarly M/s Hindustan Zinc Ltd. deducting the tax at source under s. 194C in respect of payment of transmission charges to RVPN cannot lay down the law. Here it would be pertinent to mention that even the CIT(A) in assessee's own case for asst. yr. 2006-07 against the order of AO under s. 143(3) has given a finding on p. 54 of his order that these payments are not covered under s. 194C against which no appeal is filed by the Department though we are otherwise convinced with the argument of learned Authorised Representative that s. 194C is not applicable on this payment in view of the detailed submission made in this regard at paper book pp. A-18 to A-21. The case of CANARA BANK. VERSUS INCOME-TAX OFFICER, TDS - 1, SURAT. [2008 (2) TMI 515 - ITAT AHMEDABAD-B] in respect of payment of MICR charges to SBI which involved human skill and computerised machine and not simply making available the technical equipment working on its own and therefore held to be a payment towards managerial services. The decision in the case of DR. HUTAREW AND PARTNER (I) (P) LTD. VERSUS ITO [2008 (9) TMI 414 - ITAT DELHI-C] is with reference to s. 195 and not s. 194J. In this case also the non-resident to whom payment was made was not maintaining any server for everybody that anyone can feed the data and get the solutions. The solutions were provided on the specific needs of the customers. The information supplied is specific which helps the assessee in finalizing its design. The information supplied to the assessee was a technical information which has been used in further generating the product of the assessee. Therefore, such specific client based information was held not equitable with the standard services provided by telecommunication company. Thus these decisions are quite distinguishable and not applicable on the facts of the present case. We therefore hold that there is no liability to deduct tax at source on payment of transmission/wheeling/SLDC charges under s. 194J or for that matter under s. 194C. Thus, the lower authorities were not justified in holding that the assessee is liable for deduction of tax at source on the payment of transmission/SLDC charges to RVPN. We thus set aside the order of the lower authorities and allow the ground of the assessee. Demand of interest under s. 201(1A) relying on Circular No. 275, dt. 29th Jan., 1997 - ITO (TDS) held that the assessee was liable to deduct the tax at source on the payment of transmission/wheeling and SLDC charges - HELD THAT:- The provision of the Act is a measure to compensate the Revenue for delay in payment of taxes. In the present case, RVPN to whom transmission charges are paid are assessed with the same AO with whom the assessee is assessed with. RVPN has regularly filed its return of income for asst. yrs. 2005-06 to 2008-09 declaring nil income and having substantial carry forward of unabsorbed depreciation. For asst. yrs. 2005-06 and 2006-07, RVPN is assessed under s. 143(3) at nil income with substantial carry forward of unabsorbed depreciation. Thus RVPN has no tax liability and it has been allowed the refund of tax which was deducted at source on some other payments by some other parties. Thus, there is no loss of revenue to the Department by not deducting tax at source by the assessee on the transmission payment. In the present case, from the copy of the IT return for asst. yrs. 2005-06 to 2008-09 and copy of the assessment order for asst. yrs. 2005-06 and 2006-07, it is noted that whatever tax was deduted at source has been claimed/allowed as refund to RVPN. Therefore no interest under s. 201(1A) for earlier years is leviable on the assessee. Appeal allowed.
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