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TMI Blog2012 (11) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issues of SLDC charges in ITA Nos.546 to 548/BANG/2010 for Assessment Years 2005-06 to 2007-08 on 20.4.2010. During the course of hearings, this Tribunal instructed both the assessee and Revenue to file separate appeals for each year in respect of the orders under section 201(1) and 201(1A) respectively. In pursuance of defect Memos' issued, Revenue filed appeals in ITA Nos.256 to 260/BANG/2011 for Assessment Years 2004-05 to 2008-09 on 10.3.2011 on the issue of charge of interest under section 201(1A) of the Act. The learned Departmental Representative also filed revised grounds of appeal in respect of non-deduction of tax under section 201(1) and requested that the appeals Nos.541 to 545/BANG/2010 filed on 16.4.2010 be treated as in respect of the dispute relating to section 201(1). The assessee too filed fresh appeals on 9.5.2011in ITA Nos.530, 532 and 534/BANG/2011 in respect of the dispute under section 201(1) and appeals in ITA Nos.531, 533 and 535/BANG/2010 in respect of charge of interest under section 201(1A) of the Act. 2.2 During the course of hearings, the learned Authorised Representative submitted that in view of the filing of separate appeals for levy of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BESCOM was vested with certain assets and liabilities as opening balances as on 1.6.2002 in order to carry on the distribution of electricity in the local area assigned (presentty covering the 8 districts of Bangalore Urban, Bangalore Rural, Chikkaballapur, Tumkur, Chitradurga, Kolar and Davangere). The assessee was granted licnence for distribution and retail supply of power by Karnataka Electricity Regulatory Commission (KERC) under section 19 of the KERC Act, 1999. From its inception till 10.6.2005, BESCOM purchased electricity directly from KPTCL and was charged both for cost of electricity and cost of transmission. From 10.6.2005, BESCOM was directed by the State Government that in accordance with the Electricity Act, 2003 should purchase electricity directly from generators of electricity and to avail the transmission network of KPTCL upto the interface points. The tariff for both power purchase and transmission charges was periodically reviewed by KERC keeping in view all aspects of costs involved in transmission in order to have equitable and justifiable prices in fixation of power costs to the public. Similarly, BESCOM has also availed the transmission network of Power Gri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.12.2008 at the business premises of the assessee. In the course of verification, it was seen that the assessee had made payments of transmission charges to KPTCL and PGCIL in the F.Ys 2004-05 to 2008-09 and SLDC charges on which no TDS was made. In response to a show cause notice issued, Shri Ramesh, Asst. General Manager stated that as per the following decided cases provisions of section 194J were not applicable to the assessee's case : i) CIT Vs. Bharati Cellular Ltd. (2008) (220 CTR 258) (Del) and ii) Skycell Communication Ltd. Vs. DCIT (251 ITR 53) (Mad) The statement of C. Sreenivasan, Chief General Manager (F & C) of the assessee company was also recorded on 28.1.2009 in which he was examined as to why the assessee company had not made TDS in accordance with provisions of section 194J when making these payments. He has also stated that the provisions of section 194 J for TDS to be made from payments of transmission charges to KPTCL and SLDC charges were not applicable in the assessee's case. The Assessing Officer, however, held that both these payments made by the assessee (a) to KPTCL for transmission charges and (b) SLDC charges, were payments for technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no office of its own; took its staff on deputation from KPTCL and depended for its funding on reimbursement of its expenses by other enterprises over whom it has control. In para 7.10.0 of his order the learned CIT(A) proceeded to hold that the payments of SLDC charges are to be considered as 'fees for technical services' and are liable to TDS as per section 194J(1)(b) of the Act and in view of the assessee's failure for non-deduction of tax under section 201(1) and charge of interest under section 201(1A) was sustained by him. 3.7.2 Transmission charges paid to KPTCL. In the course of hearings before the learned CIT(A), the assessee placed reliance for its claim for not being liable to deduct tax on payments of transmission charges to KPTCL and SLDC charges on the facts and decision of the Hon'ble ITAT, Jaipur Bench in the case of Jaipur Vidyut Vitram Nigam Ltd. Vs. DCIT (2009) (123 TTJ 888) (JP). The learned CIT(A) was of the view that the facts of the cited case (supra) were exactly similar to that of the assessee (BESCOM) and the finding therein applicable to it. He was of the opinion that, the services involved in transmission of electricity was 'automatic' from the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that the services rendered by the technical personnel for installations and maintenance of the transmission system is rendered to KPTCL itself and not to the BESCOM. c) The CIT(A) has erred in not appreciating the fact that the use of such equipment would not be feasible but for the technical service being available. d) The CIT(A) has erred in not appreciating the fact that the essential factors of human interface and technical skill being remunerated exists in the deductor's case. e) The CIT(A) has erred therefore in holding that the provisions of section 194J do not apply. f) The CIT(A) has erred in not holding that such payments are liable for a deduction under section 194I for use of equipments as per his own findings. g) The CIT(A) has erred in not directing the Assessing Officer to recomputed the interest under section 201(1A) by applying the provisions of section 194I of the Act. h) For these and other grounds that may be urged during the course of appeal." ii) In ITA Nos.256 to 260/BANG/2011 (for A.Ys 2004-05 to 2008-09), Revenue has challenged the action of the learned CIT(A) in not directing the Assessing Officer to recompute the interest chargeable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) are not enforceable. He further submitted that the cases cited by the learned Departmental Representative are distinguishable and not applicable to the assessee's case. In the case of Medi Assist India TPA P. Ltd. Vs. DCIT (TDS) & Other 324 ITR 356 (Kar), the learned Authorised Representative pointed out that TPA's were private parties engaged by the Insurance companies, Hospitals to perform functions the Hospital is otherwise supposed to do namely, processing of bills of patients for their entitlements. TPA's also render professional services to Insurance companies for settlement of claims for payment as per insurance policies. He stressed that there is a clear and direct human element involved in the services given by TPA's and therefore the provision of section 194J were attracted in taht case. Similarly in the case of Kotak Securities Ltd. (supra), the learned Authorised Representative pointed out that their Lordships had held that the stock exchange had provided managerial and technical services to the Brokers/Members for regulating the carrying on of trading for which 'transaction charges' paid constitute 'fees for technical services' covered under section 194J. In the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order. The decision of Jaipur Vidyut Vitraqn Nigam Ltd. (supra) has been perused and we find that the facts of the case and issues are identical to that of the assessee's case and is squarely covered by it. The Hon'ble Tribunal in the case of JVVNL has very succinctly dealt with the issues and the relevant case laws which bring out the meaning of the expression "fee for technical services' as used in section 194J r.w. Explanation 2 to section 9(1)(vii) of the Act. We find it necessary to extract relevant portions of the judgement thereof. Para 9.2: In above connection it is relevant to extract the relevant provisions of section 194J which are as follows : "194J. Fees for professional or technical services --- (1) Any person, not being an individual or an HUF, who is responsible for paying to a resident any sum by way of --- a) Fees for professional services, or b) Fees for technical services, or c) Royalty, or d) Any sum referred to in clause (va) of section 28. shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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: A person whose office it is to manage an organization, business establishment, or public institution, or part of one; a person with the primarily executive or supervisory function within an organization etc.; a person controlling the activities of a person or team in sports, entertainment, etc. It is therefore, clear that a managerial service would be one which pertains to or has the characteristic of a manager. It is obvious that the expression 'manager' and consequently 'managerial service' has a def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to be seen. Moreover, the expression 'technical service' is not to be construed in the abstract and general sense but in the narrower sense as circumscribed by the expressions 'managerial service' and 'consultancy service' as appearing in Expln. 2 to section 9(1)(vii) of the said Act. Considered in this light, the expression 'technical service' could have reference to only technical service rendered by a human. It would not include any service provided by machines or robots." Para 9.4. The Hon'ble Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, arid monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or, in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice' 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 internet service, and such subscriber regarded as being obliged to deduct tax at source on the payment made to the internet service provider. 8. At the time the IT Act was enacted in the year 1961, as also at the time when Expln. 2 to section 9(l)(vii) was introduced by the Finance (No. 2) Act, w.e.f. 1st April, 1977, the products of technology had not been in such wide use as they are today. Any construction of the provisions of the Act must be in the background of the realities of day-to-day life in which the products o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services within the meaning of section 194J of the Act." Para 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/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 user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Similar is the proposition laid down in other cases relied by the learned Authorised Representative supra. Para 9.7. The arguments of the learned Departmental Representative that human element is involved in prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 131 relied upon by the A0 in support of his case on this issue was applicable only in the cases where bills are raised for the gross amount inclusive of professional fees as well as reimbursement of actual expenses and the same, therefore, was not applicable to the facts of the present case where bills were raised separately by the consultants for reimbursement of actual expenses incurred by them. As such, considering all the facts of the case, the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be for the use of an asset even if an asset is used in the said process. Therefore, s. 194I has no application to the impugned payments for transmission of electricity. 6.2 On careful appraisal of the facts and issues of the instant case of BESCOM with that of the cited case of Chattisgarh State Electricity Board (supra), we find that they are squarely applicable to the case on hand. We are, therefore, of the view that the facts and issues of both cases are identical and in consonance herewith hold that the assessee (BESCOM) is not liable to deduct tax at source on payments of transmission charges to KPTCL as the provisions of section 194I are not attracted. Therefore, Revenue's alternate ground of appeal is rejected. 6.3 In the result, Revenue's appeals in ITA Nos.541 to 545/BANG/2010 and 256 to 260/BANG/2011 both for Assessment Years 2004-05 to 2008-09 are dismissed. 7.0 SLDC Charges 7.1 In respect of SLDC charges, the appeals are directed by the assessee, BESCOM, against the orders of the learned CIT(A)-V, Bangalore dt.29.1.2010 for A.Ys 2005-06 to 2007-08 in ITA Nos.530, 532 and 534/BANG/2011 for non-deduction of tax under section 201(1) and in ITA Nos.531, 533 & 535/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 201 & 201(1A). 10. For these and other grounds that may be adduced at the time of hearing the appeal may kindly be allowed and justice rendered." 8. In respect of the appeals preferred by the assessee against charge of interest u/s.201(1A), the grounds of appeal are as under: " 1. The CIT(A) failed to appreciate the conclusion of the Assessing Officer that SLDC is not an arm or wing of KPTCL but an independent body constituted under Electricity Act, 2003. 2. The CIT(A) erred in holding even though that persons managing SLDC are deputed from KPTCL to work and it does not constitute part of KPTCL. 3. The functions discharged by the personnel in SLDC even if it is managerial and technical does not in any way make it rendering of technical service to the appellant as the appellant does not use / receive / benefit from the said services in discharging their functions. 4. The CIT(A) failed to appreciate that the amount paid to SLDC is only the reimbursement of the actual expenses as per Karnataka Gazette Notification dated 18.11.2004 which specifies the amount to be paid to SLDC. 5. The CIT(A) failed to appreciate that KPTCL is accounting the receipts and payments in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting of charges by KPTCL's income. Circular No. FA(A&R)/(A/cs)/AAO-11/CYS.56 dt.3.12.2005 and Circular No.FA(A&R)/(A/cs)/AAO-11/CYS.55 dt.28.11.2005 issued by KPTCL regarding accounting transaction of SLDC. It is submitted that, as the charges paid to SLDC are only reimbursement of expenses and, are paid as per the direction of KERC as a statutory levy, the provisions of sections 201 & 201(1A) are not attracted. The learned A.R. placed reliance on the decision of JVVNL (supra) in which it was held that the learned CIT(A) was not justified in holding that the assessee was liable u/s. 194J for deduction of tax at source on payment of SLDC charges. He, therefore, pleaded for reversing the decision of A.O./CIT(A) as the facts of the case are identical and the decision of the Tribunal in that case should cover the assessee's favourably. 8.2 The learned D.R. supported the finding of the A.O. and CIT(A) that the provisions of section 194J were applicable to SLDC charges and consequently the levy for non-deduction of tax u/s. 201(1) and charging of interest u/s.201(1A) were in order and submitted that the orders of learned CIT(A) be upheld. 8.3 We have heard both parties, perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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