TMI Blog2015 (5) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transmission company. Therefore, they do not render any technical service to the assessee-company. We have carefully examined the order of the A.A.R. and orders of the Tribunal on the issue and we find that the Tribunal has taken a consistent view that the payment of transmission charges is not payment for fee for technical services, therefore, the provisions of section 194J of the Act are not attracted. The Tribunal has also taken a view in all those cases that it is not a payment, it is only a reimbursement of the cost incurred on transmission charges. Therefore, provisions of section 40(a)(ia) of the Act is not applicable. - Decided in favour of assesse. - ITA No.01/LKW/2013, ITA No.505/LKW/2012 - - - Dated:- 27-2-2015 - SHRI SUNIL KUMAR YADAV AND SHRI. A.K. GARODIA, JJ. For The Department : Dr. Anant Kumar Agrawal, CIT (DR) For The Assessee : Shri. R. C. Jain, C.A. ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on various grounds which are as under:- 1. The CIT(A) has erred in law and on facts in deleting the addition made by the A.O. of ₹ 1,65,32,88,040/- U/s 40a(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,028/- have been done in the next financial year. It was further contended before the ld. CIT(A) that there was no liability for the assessee to recover TDS on the payment of transmission charges, as it is not fixed till date as the order passed by TDS authorities has been set aside by the appellate authority. The ld. CIT(A) re-examined the issue in the light of the orders of the Tribunal in the case of Bangalore Electricity Supply vs. I.T.O. and Maharashtra State Electricity vs. I.T.O. and being convinced with the explanations of the assessee, the ld. CIT(A) was of the view that there is no liability of TDS on the payment of transmission charges under section 194J of the Act. He accordingly set aside the addition of ₹ 1,65,32,88,040/- made by the Assessing Officer under section 40 (a)(ia) of the Act. 5. Aggrieved, the Revenue has preferred an appeal before the Tribunal with the submission that the power transmission tariff or the transmission charges paid are purely in the nature of charges paid on technical services and fall within the ambit of provisions of section of Chapter XVII-B of the Act requiring deduction of tax at source under section 194J of the Act and since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the payment to UPPTCL is being made by the assessee through UPPCL, therefore, there is no separate mention of UPPTCL in the order by the ld. CIT(A). It was further contended that identical issue was examined by the different Benches of the Tribunal, in which the Tribunal has taken a view in favour of the assessees. The ld. counsel for the assessee has placed reliance upon the following judgments:- 1. Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT, 123 TTJ 888. 2. Maharashtra State Electricity Distribution Co. Ltd. Vs. ACIT, 133 ITD 519. 3. Chattisgarh State Electricity Board vs. Income Tax Officer, 143 TTJ 151. 4. Bangalore Electricity Supply Co. Ltd. vs. Income Tax Officer, 149 TTJ 103. 5. Gridco Ltd. vs. ACIT [2012] 49 SOT 363. 7. It was further contended that in all these judgments, it has been held that section 194J of the Act is applicable only when technology or technical knowledge of a person is made available to others and not where-by using technical systems, services are rendered to others. It was further contended that the operation and maintenance of transmission lines by the service provider does not come under any technical services being rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed open access transmission norms. The technical staff of Transmission Company by operating and maintaining its grid station and transmission lines, are simply discharging their own statutory functions. They do not render any technical service to the applicant. The ld. counsel for the assessee has further argued in the alternative that if Transmission of Electricity is to be considered as Technical Services so as to warrant deduction of TDS under section 194J of the Act, then on the same footing Distribution of Electricity may also have to be considered as Technical Services so as to require deduction of TDS from our electricity bills. But this cannot be so. Similarly, Telephone bills paid by consumers should also come within the purview of TDS under section 194J of the Act, since on making a telephone call by a consumer, it is availing the services of sophisticated equipments installed by the Telecom companies to talk on phone. The AAR has not considered the aspect that the said transmission wheeling charges are merely reimbursement of actual cost and as such are not liable for any TDS deduction. 9. The ld. counsel for the assessee has further contended that as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts referred to by the parties and material available on record, we find that undisputedly assessee is wholly owned company of Government of Uttar Pradesh. It is a public utility company engaged in the distribution of electricity. The assessee purchased power for distribution to consumers from its holding company, UPPCL, which is also a wholly owned company of Government of Uttar Pradesh. The power is purchased at the rate fixed by UPERC. During the year under consideration, the assessee made payment to UPPCL under two heads, namely power purchase tariff and power transmission tariff. The payment of power transmission charges or wheeling charges is in the nature of reimbursement of cost, as the transmission charges can be construed to be the cost incurred in transmission of power from the end of UPPCL to the end of the assessee and thereafter the power is used by the consumers. The transmission charges are also paid at the rate fixed by the UPERC. The ld. CIT(A) has given a categorical finding that in fixing such charges, nothing is brought on record to show that there is an element of profit to the UPPCL to whom payment is made. These findings of the ld. CIT(A) have not been dislo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has finally concluded that there is no human interference involved in transmission of power from the end of UPPCL to the end of the assessee. The ld. CIT(A) has also concluded that there is no liability of TDS on payment of transmission charges under section 194J of the Act, therefore, disallowance under section 40(a)(ia) of the Act is not justified. For the sake of reference, we extract the relevant portion of the order of the ld. CIT(A) as under:- 4(2) I have examined the facts and circumstances of the case. I have considered the findings of the AO and the submissions of the appellant. The appellant is a wholly owned company of the Government of UP. It is a public utility company engaged in the distribution of electricity. The appellant purchases power for distribution to consumers from its holding company which is UPPCL, which is also a wholly owned company of the Government of UP. The purchase of power is at rates fixed by UPERC. During the year under consideration the appellant made payments to UPPCL under two heads namely, power purchase tariff and power transmission tariff. The payment for power transmission charges or wheeling charges was in the opinion of the AO liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 definite human element attached to it. To put it bluntly, a machine cannot be a manager. 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 professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2012 held that - It may be mentioned here that the applicability of section 194J and also sec. 194C was examined by the coordinate Bench of the Tribunal in the case of Jaipur Vidyut Vitaran Nigam Ltd (supra) and it has been the contention of the assessee that the agreement in that case also contain similar terms and the facts are also similar. This contention of the assessee has not been controverted by the revenue by specifically pointing out that there was any major difference between the terms of the agreement considered in that case and the terms of contract in the present case as well as in the facts of both the cases. It has been categorically held in the said case that there was no liability on the assessee to deduct tax on the payments of transmission/wheeling and SLDC charges u/s 194J. No contrary decision has been brought to our notice in which it has been held that tax on such charges is deductible under either of the sections viz 19C, 194J; 194 I of the Act. 4(3)(iii) A reference may also be made to the decision of Hon'ble ITAT, Jaipur in the case of Jaipur Vidyut Vitran Nigam Limited Vs DCIT (2009) 123 TTJ 888/ (2009) 26 DTR 79 wherein it was laid down that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experience or skill is made available/rendered by RVPN to the assessee. The assessee itself has its own engineers and technicians who consistently monitor and supervise the flow of the electricity to its system and ultimate supply to its customer. The function of SLDC 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. Therefore, there is no liability to deduct tax at source on payment of transmission/wheeling/SLDC charges under section 194J of the Act. 14. In the case of Chattisgarh State Electricity Board vs. Income Tax Officer (supra), the Tribunal again held that transmission lines are in the physical control of PGCIL, these are maintained and operated by it. So far as the assessee is concerned, its interest in the transmission lines is restricted to the fact that electrical power purchased by the assessee, simultaneously with other bulk power beneficiaries, is transmitted through these transmission lines. The assessee has no control over th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other bulk power beneficiaries, is transmitted through these transmission lines. Explanation (i) to s. 194-I defines rent as any payment, by whatever name called, under any lease, sub-lease, or tenancy or any other agreement or arrangement for the use of ,and, building, plant, machinery or equipment etc. As evident from a plain reading of the agreements under which impugned payments have been made, the payments have been 1 'made for the services of transmission of electricity and not the use of transmission wires ner se. It is a significant fact that these transmission lines are not only being used for :-=nsmission of electricity to the assessee but also for transmission of electricity to various other entities. The transmission lines continue to be not only under control and possession of the PGCIL in legal terms, but, what is more important, these transmission lines are effectively in the control of PGCIL, without any involvement of the assessee in actual operations of the same. On these facts, the assessee has made the payments for transmission of electricity in which transmission lines have been used rather than for the use of transmission lines per se. The payments c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute payments for rent under s. 194-I, it is not really necessary to go into this aspect of the matter. 15. In the case of Gridco Ltd. vs. ACIT (supra), the Cuttack Bench of the Tribunal has reiterated the same view. In that case, the power is purchased from the power generating companies and sold to the DISCOMs and others utilizing the transmission, network of OPTCL, PGCIL and other. The above Companies, the generators, DISCOMs and GRIDCO are regulated by Orissa Electricity Regulatory Commission(OERC) whose functions, inter alia, are to issue licenses, determine the conditions therein, regulate the purchase, distribution and supply of electricity and the tariffs payable. The assessee company after purchasing power from the generators sells it to the Distribution Companies. The assessee company had entered into a Bulk Supply Agreement with the Distribution companies in the year 1999 and on the terms of these agreements, it used to sell electricity to the Distribution companies. The supply is affected through the transmission lines of OPTCL. The Tribunal was of the view that the assessee merely obtains a service from OPTCL which has got the infrastructure in the form of equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the Tribunal has taken a consistent view that the payment of transmission charges is not payment for fee for technical services, therefore, the provisions of section 194J of the Act are not attracted. The Tribunal has also taken a view in all those cases that it is not a payment, it is only a reimbursement of the cost incurred on transmission charges. Therefore, provisions of section 40(a)(ia) of the Act is not applicable. 18. Following the view taken by the Tribunal in different cases, we are also of the view that TDS is not required to be deducted on payment of transmission charges. Since the ld. CIT(A) has adjudicated the issue following various orders of the Tribunal, we find no infirmity therein. Accordingly, we confirm his order. I.T.A. No. 505/LKW/2012: 19. In this appeal, the assessee has assailed the order of the ld. CIT(A) on various grounds, which are as under:- 1. Because the learned first Appellate Authority ought to have held that there was no short deduction by the assessee (deductor) and the learned Assessing Officer erred in treating the assessee (deductor) as assessee in default. 2. Because no short deduction was incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een assessed at Nil and a substantial refund was due to the deductee and hence the question of charging interest u/s 201(1 A) does not arise. 10. Because the order appealed against is contrary to the fact, law and principles of natural justice. 20. Though various grounds are raised, but they all relate to the deduction of TDS on payment of transmission charges. 21. The facts in brief are that on non-deduction of tax, assessee was held to be an assessee in default under section 201(1) and interest under section 201(1A) of the Act was also charged. 22. In the foregoing appeal, the liability of deduction of tax on payment of transmission charges has been examined in detail and it was held that payment on transmission charges is not payment for technical services or otherwise, therefore, TDS is not required to be deducted. Once TDS is not required to be deducted under any provisions of the Act, as the payment was made for reimbursement of cost incurred for transmission of electricity by the UPPTCL, the assessee cannot be held to be in default. Therefore, interest under section 201(1A) of the Act cannot be charged. We, therefore, set aside the order of the ld. CIT(A) and hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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