TMI Blog2015 (8) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... it is accepted that all what PGCIL does is to transmit the electricity to DTL through the network without any human intervention, it cannot be characterized as a provision of technical services and sought to be brought within the fold of Section 194 J of the Act. By virtue of the BPTA agreement between DTL and PGCIL there is transportation of the electricity from PGCIL to DTL, through the equipment and network required statutorily to be maintained by PGCIL through its technical personnel using technical expertise. This, however, does not result in PGCIL providing technical services to DTL. Therefore the wheeling charges paid by DTL to PGCIL for such transportation of electricity cannot be characterized as fee for technical service. The ultimate conclusion of the ITAT holding that the "wheeling charges" paid by the Assessee, in the facts of this case, was deductable as it did not amount to "fees for technical services" within the meaning of Section 194J of the Act is therefore not erroneous. - Decided in favour of the Assessee. - ITA 384/2012, ITA 566/2013, ITA 570/2013, ITA 323/2015, ITA 324/2015, ITA 325/2015, ITA 341/2015 - - - Dated:- 6-8-2015 - S. Muralidhar And Vibhu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce with effect from 1st April 2002 and was to remain valid for a period of five years, that is, up to 31st March 2007. Commencement of proceedings 4. A survey was carried out in the business premises of DTL under Section 133-A of the Income Tax Act, 1961 ('Act') on 22nd January 2009. It was noticed that DTL had deducted tax at source ('TDS') at 2% under Section 194C of the Act on the wheeling charges paid to PGCIL. The statement of one Mr. Surendra Babbar, Deputy General Manager (Finance) of DTL was recorded. Following the survey, DTL wrote a letter dated 29th January 2009 protesting that the survey was without jurisdiction as it could only have been carried out by ACIT Circle 10 (1), New Delhi. A show cause notice was issued to DTL on 20th February 2009. DTL filed a reply on 26th February 2009. After considering the response to the show cause notice and after hearing the various representatives of the DTL, the AO passed an order dated 27th March 2009, under Sections 201 (1)/201 (1A) of the Act. The order of the AO 5. The AO held that DTL was not only using the transmission system set up of PGCIL but also availing of other services from PGCIL such as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 2004-05). The ITAT agreed with the DTL that what had been availed by it from PGCIL was not a technical service. It was held that DTL was not liable to be saddled with higher liability of TDS. The appeal was accordingly allowed. 9. The ITAT based its opinion on the decision of this Court in CIT v. Bharti Cellular Ltd. (2008) 220 CTR (Del) 258 and of the Madras High Court in Skycell Communications Ltd. v. DCIT (2001) 251 ITR 53 (Mad). The ITAT noted that both the decisions laid emphasis on the involvement of a 'human element' for rendering technical services and imparting of technical knowledge. The ITAT held that none of those conditions were satisfied in the present case. While there might be supervision of transmission work by the technical personnel of the payee there is no human intervention in so far as the assessee is concerned regarding the transmission . It was further held that even if technical knowledge could be upgraded without presence of human beings by way of handing over drawings and designs or a technical service can be rendered by robot (machines) without intervention of human element, the classification of the services rendered by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible. He urged that the matter should be remanded to the AO for carrying out a detailed enquiry. 13. Mr. Sawhney spent considerable time distinguishing the judgment of the Bombay High Court in Maharashtra State Electricity Distribution Co. Ltd.(supra). It was submitted that in facts of the case before it, the Bombay High Court did not have an occasion to actually examine whether 'wheeling' was in fact a technical service. Reliance was also placed by Mr. Sawhney on certain observations made by this Court in DIT (International Taxation) v. Panalfa Autoelecktrik Ltd. (2014) 272 CTR 117(Del). Submissions on behalf of the Assessee 14. Replying to the above submissions, Mr. Dial, learned Senior counsel for DTL, at the outset pointed out that the judgment of the Bombay High Court in Maharashtra State Electricity Distribution Co. Ltd.(supra) answered the issue entirely in favour of the Assessee. He referred to the definition of wheeling contained in the BPTA. He reiterated that the Assessee was only paying for the electricity transmitted to it through the equipment and lines maintained by PGCIL. Whatever services the technical personnel of PGCIL were performing was for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (b) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; 17. Explanation 2 of Clause (vii) of sub-section (1) of Section 9 reads as under: (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 utilized 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 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 or 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 . 18. In addition Section 2 (76) of the Electricity Act, 2003 ('EA') defines 'wheeling' as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention might be required but after completing this process mere interconnection between the operators is automatic and does not require any human intervention . Consequently, interconnect user charges received or paid were held not to be fees for technical services within the meaning of Section 194J read with Section 9 (1) (vii) read with Explanation 2 of the Act. 22. In Skycell Communications (supra), the Madras High Court went into the dictionary meaning of the word 'technical. and then concluded that the expression 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 . But it is not in every case that the provision of service might involve the element of human intervention. 23. In Panalfa Autoelecktrik (supra), this Court observed that technical services consist of services of technical nature when special skills or knowledge relating to technical field are required for their provision, managerial services are rendered for performing management functions and consultancy services relate to provision of advice by someone having special qualification that allow him to do so . It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 62 of the EA. The Bombay High Court concluded that 'wheeling charge' would neither be rent nor fees for technical services . They represented the charge for permitting use of the STU by persons other than the distribution licence. The transmission charges simply constitute fees for availing of the said transmission utility to be used by open access concept for distribution of electricity to licensees and consumers . 27. In light of the above decisions, it is clear that what constitutes technical services cannot be understood in a rigid formulaic manner. It will vary from industry to industry. There will have to be a specific line of enquiry for determining what in a particular industry would constitute rendering of a technical service. While in the case of Lufthansa Cargo India (supra) the question was not difficult to answer since clearly the service provided was of a technical nature, viz., the repair overhaul and maintenance of aircraft, in the case of Bharti Cellular (supra), the ultimate conclusion was that facilitating interconnection did not require any element of human intervention and was not in fact the provision of technical service. The latter case did re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and answers that despite a leading suggestion put to Mr. Rajagopalan that the transmission of electricity was a technical service, his answer was to the effect that the technical service provided was not to the purchaser of electricity but in operating and maintaining the various equipments and transmission of lines. 31. This was an important input for understanding the nature of the service that is provided. The plea of DTL that the BPTA between it and PGCIL was essentially for transporting electricity from one point to another and that this is automatic through the network or equipments without any human intervention appears to be correct. The system operated by PGCIL and used for transmission of electricity is no doubt maintained by skilled technical personnel professional. This also ensures that PGCIL complies with the standards and norms put in place by the statutory regulations. However, the beneficiary of such services is PGCIL itself. PGCIL is operating and maintaining its own system using the service of engineers and qualified technicians. PGCIL is in that process not providing technical services to others, including DTL. 32. A comparison could be made with the syst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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