TMI Blog2012 (7) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on the payment of wheeling / transmission charge - CIT(A) deleted the addition - Held that:- Considering the 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 State Load Dispatch Center 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 service being rendered to the assessee - the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as 'technical services' as contemplated under section 194J - there is no liability to deduct tax at source on payment of transmission/wheeling/SLDC charges under section 194J or for that matter under section 194C - transmission/wheeling/SLDC charges is reimbursement of the cost, therefore the provisions of Chapter XVII-B are not applicable since there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come up in appeal and Ld. Counsel for the assessee at the very outset, submitted that the Ld. CIT(A) has followed the order of his predecessor in assessee s own case for A.Y. 2006-07, which order has since been upheld by the ITAT, Delhi, B Bench in ITA No. 250/Del/2010 dated 30.11.2011 for A.Y. 2006-07. So by filing the copy of the said order, ld. Counsel for the assessee submitted that since issue raised in this appeal is squarely covered in favour of the assessee by earlier decision of the Tribunal for the A.Y. 2006-07 which has been followed in A.Y. 2008-09. It was pleaded for confirmation of the impugned addition. 5. Ld. Departmental Representative could not controvert this factual aspect and relied upon the order of AO to plead for reversal of the order of the Ld. CIT(A). 6. We have heard both the sides and considered the material on record as well as precedents relied upon by the Ld. A.R. of the assessee. In assessee s own case for the assessment years 2006-07 2008-09, wherein similar issue has been decided in favour of the assessee. The relevant portion of ITAT decision in ITA No. 4606/Del/2011 (A.Y. 2008-09) is reproduced below:- 8. We have heard the parties on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the CIT(A) in deleting the disallowance. The ITAT has held as follows:- 5. We have heard rival contentions and perused the entire material available on record. Following facts emerge from the record: (i) Assessee maintains its method on accounting as mercantile system. (ii) Prior to A.Y. 2004-05, the assessee used to offer surcharge calculated in the bills. (iii) Vide Audit Committee of Board of Directors meeting dated 21-2-2003 (supra), on the basis of prudence norms the method of accountancy was change and the surcharge was held to be accountable on the basis of actual receipt. 5.1. Department has accepted the method of accounting in A.Y. 2004-05 and 2005-06, which is not disputed. This clearly establishes that neither action u/s 148 nor u/s 263 is proposed by the department against A.Y. 2004-05 and 2005-0, completed assessments which have become final. 5.2. Coming to the merits, the assessee is a state PSU and the electricity policy of the Electricity Board has been subject to many exigencies, depending on public policy. It has not been disputed that though the assessee s rules provide levy of surcharge on belated payment of bills but at the same time payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumers accrued to the assessee, due to the return on account of stipulation provided, rebate was held to be nontaxable rebate. 5.8. In case of Modi Rubber Ltd. (supra), The Hon ble Delhi High Court affirmed the order of ITAT holding that mere unilateral act of the assessee debiting the books of account with the amount of interest, which was disputed by the debtor, did not amount to accrual of income to the assessee. 5.9. There is no dispute on the issue raised by the learned DR that principles of res-judicata are not applicable to income-tax proceedings. However, in view of Hon ble Supreme Court judgment in the case of Radha Swami Satsang (supra), has laid down rule of consistency, which has been followed in facts of various cases in subsequent judgments. By now it is a settled principle that unless facts and circumstances have drastically changed, the principle of consistency is to be maintained in departmental action. In view thereof, we are of the view that department having accepted a clear cut amendment of method of accounting, as per the provisions of Income-tax Act, in the above mentioned facts, it will not be desirous that the course of action accepted by the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07, the order of the ld. CIT(A) in this regard is upheld and ground No.1 raised by the Department is rejected. 7. Since there is no change of facts and issue is also similar and Ld. D.R. could not place any contrary material on record or file any higher courts order on this issue so respectfully following the precedents as cited above, we confirm the order passed by the Ld. CIT(A), and dismiss the appeal of the Revenue on this issue. 8. Regarding the second ground of appeal on making addition of Rs. 152,53,40,469/- u/s. 40(a)(ia) on account of non deduction of tax on the payment of wheeling / transmission charges, it was submitted by the Ld. A.R. of the assessee that assessee was not required to deduct tax at source under section 194J of the IT Act in respect of payments by way of wheeling charges and SLDC charges and therefore the addition made by the AO may be deleted. Since the ITAT in the case of the assessee itself has decided that assessee was not required to deduct tax at source in respect of the payments by way of wheeling charges / transmission charges. So, Ld. CIT(A) following the same has deleted the addition made by the AO of Rs. 1,52,53,40,469/- u/s. 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction of SLDC for ensuring integrated grid operation for achieving the' maximum economy and efficiency in the operation of power system in the State. As per clauses 10 and 12 the tariff for transmission and wheeling and SLDC charges is to be as approved by the Regulatory Commission. From all these clauses it is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch Centre 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 service 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. 9.2. In above connection it is relevant to extract the relevant provisions of section 194J which are as follows : 194J. Fees for profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the expression 'fees for technical services' means any consideration for rendering of any 'managerial, technical or consultancy services'. The word 'technical' is preceded by the word 'managerial' and succeeded by the word 'consultancy'. Since the expression 'technical services' is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on The Interpretation of Statutes (Twelfth Edition) in the following words : Where two or more words which are susceptible of analogous meaning are coupled together, noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. This would mean that the word 'technical' would take colour from the words 'managerial' and 'consultancy' between which it is sandwiched. The word 'managerial' has been defined in the Shorter Oxford English Dictionary, Fifth Edition as: Of pertaining to, or characteristic of a manager of or within an organization, business, establishment, etc. The word 'manager' has been defined, inter alia, as : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services' which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as 'technical services' as contemplated under section 194J of the said Act. 20. Before concluding we would also like to point out that the interconnection/port access facility is only a facility to use the gateway and the network of MTNL/other companies. MTNL or other companies do not provide any assistance or aid or help to the respondents/assessee in managing, operating, setting up their infrastructure and networks. No doubt, the facility of interconnection and port access provided by MTNL/other companies is 'technical' in the sense that it involves sophisticated technology. The facility may even be construed as a 'service' in the broader sense such as a 'communication service'. But when we are required to interpret the expression 'technical service', the individual meaning of the words 'technical' and 'service' have to be shed. And, only one meaning of the whole expression 'technical services' has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial sciences: an important technical achievement, 3. resulting from mechanical failure: a technical fault, 4.according to a strict application or interpretation of the law or the rules : the arrest was a technical violation of the treaty. Having regard to the fact that the term is required to be understood in the context in which it is used, 'fee for technical services' could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with 'technical' is 'involving or concerning applied and industrial science'. 5. In the modern day world, almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in everyday life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. When a person hires a taxi to move from one place to another, he uses a product of scienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange' or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as 'technical service' for the purpose of section 194J of the Act. 7. The use of the internet and the world wide web is increasing by leaps and bounds, and there are hundreds of thousands, if not millions, of subscribers to that facility. The internet is very much a product of technology, and without the sophisticated equipment installed by the internet service providers and the use of the telephone fixed or mobile through which the connection is established, the service cannot be provided. However, on that score, every subscriber of the internet service provider cannot be regarded as having entered into a contract for availing of technical services from the provider of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for technical services'. Rendering services by using technical knowledge or skill is different than charging fees for technical services! In the later case the technical services are made available due to which assessee acquired certain right which can be further used. Accordingly where the persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not vested with the assessee by which itself it can do research work, the amount paid cannot be considered as fees for technical services within the meaning of section 194J of the Act." 9.6. An analysis of above cases lays down the proposition that 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 section 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/resear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts system and ultimately supplies to its customer. The function of State Load Dispatch Centre as regulator and controller for optimum scheduling and dispatch of electricity, and supervision over the intra-State transmission system is statutory function which is also entrusted to RVPN and therefore, RVPN by discharging such statutory function does not provide any technical service. 9.9. We have also considered the other decisions relied by the learned Departmental Representative which are clearly distinguishable on facts. In case of Singapore Airlines Ltd. (supra) the navigation charges paid was for getting the technical service like weather report, instruction overflights to fly over technical territories and such other technical services which are needed to fly the aircraft on the Indian territory. By giving these, instructions and technical services to fly the aircraft the technical knowledge of a person was made available to the assessee and therefore it was held to be a payment for technical services which is not the facts of the present case. The case of Canara Bank ( supra) in respect of payment of MICR charges to SBI which involved human skill and computerised machine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource is only one of the modes of collection and recovery of the tax. On actual reimbursement, provision of deduction of tax at source would not apply as held in case of Dr. Willmar Schwabe India (P) Ltd. (supra ) (paper book 124- 125), headnote of which reads as under : "As agreed by and between the assessee company and ITCL, a vehicle was to be provided by the assessee company to the said consultant for attending to its work and thus, the assessee company was to bear the vehicle expenses actually incurred by the said party. Bills for such expenses incurred by the said consultant were separately raised by them on the assessee company in addition to bills for fees payable on account of technical services and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills. It was thus a clear case of reimbursement of actual expenses incurred by the assessee and the same, therefore, was not of the nature of payment covered by s. 194J, requiring the assessee to deduct tax at source therefrom. The CBDT Circular No. 715, dt. 8th Aug., 1995 [(1995) 127 CTR (St) 13], relied upon by the AO in support of h ..... 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