TMI Blog2009 (4) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/intelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these qualified staff/engineers do not provide any technical service to the assessee and thus no human interface is involved so far as assessee is concerned; (1.2) not appreciating the fact that the payment of SLDC charges to RVPN is a statutory levy which is not liable for deduction of tax at source; (1.3) not appreciating the fact that payment of wheeling/SLDC charges is nothing but only sharing of cost i.e., reimbursement of actual expenses to Rajasthan Rajya Vidhyut Prasaran Nigam Ltd., no income is paid and therefore outside the provisions of Chapter XVII-B of the IT Act, 1961; (1.4) not directing the ITO, TDS to determine the actual payment of wheeling/SLDC charges even though the ITO, TDS in its letter dt. 12th Feb., 2009 required assessee to submit the month-wise details and the reasons of difference between the figures of ledger account and the audit report of RVPN; (1.5) not adjudicating the alternate plea of the ITO, TDS that these payments are liable for deduction of tax at source under s. 194C ignoring the fact that these payments are otherwise not covered under s. 194C; and (2) confirming the levy of interest under s. 201(1A) upto the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the generatioing company and selling it to consumers. The power from the generation point to the consumers is transmitted through the transmission network of RVPN. It governs all the infrastructure of electric transmission line and all grid upto the power capacity of 33KVA and carries out the activities of the construction and maintenance of EHV lines and grid sub-stations. The Government of Rajasthan notified the RVPN as the State transmission utility (STU) under s. 14 of the Electricity Act, 2003. 3.4 Sec. 39 of the Electricity Act, 2003 mandates the STU to undertake various functions wherein sub-s. (2) of s. 39 provides as under (paper book 106-107) : (2) The functions of the STU shall be- (a) to undertake transmission of electricity through intra-State transmission system; (b) to discharge all functions of planning and co-ordination relating to intra-State transmission system with- (i) Central transmission utility; (ii) State Governments; (iii) Generating companies; (iv) Regional power committees; (v) Authority; (vi) Licensees; (vii) any other person notified by the State Government in this behalf; (c) to ensure develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into with the licensees or the generating companies operating in that State; (b) monitor grid operations; (c) keep accounts of the quantity of electricity transmitted through the State grid; (d) exercise supervision and control over the intra-State transmission system; and (e) be responsible for carrying out real time operations for grid control and despatch of electricity within the State through secure and economic operation of the State grid in accordance with the grid standards and the State grid code. (3) The SLDC may levy and collect such fee and charges from the generating companies and licensees engaged in intra-State transmission of electricity as may be specified by the State Commission. 33. Compliance of directions.'(1) The SLDC in a State may give such directions and exercise such supervision and control as may be required for ensuring the integrated grid operations and for achieving the maximum economy and efficiency in the operation of power system in that State. (2) Every licensee, generating company, generating station, sub-station and any other person connected with the operation of the power system shall comply with the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VPN transmission system shall be utilised by Discoms for transmission of their entire power requirement without any reference to specific lines or sub-stations. The RVPN shall undertake new additions, modifications, upgradation, augmentations and expansion of transmission system for the State of Rajasthan taking into consideration requirement of Discoms for growth in demand and electrification etc. and all such changes shall form part of the transmission system. 4. Allotted transmission capacity Allotted transmission capacity for a Discom shall be sum of the generating capacities allotted to them from State generating stations and inter-State capacities allocated to them from State generating stations and inter-State generating stations by Government of Rajasthan and any additional contracted power with generators/traders, including the inter-Discom trades. The Government of Rajasthan may review and revise the capacity allocations in one or more power stations from time to time and the allotted transmission capacity for Discoms would change to some extent. Additional generation capacity can be contracted by any Discom only with the prior agreement of RVPN and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish daily schedule to SLDC, the SLDC shall be entitled to charge a fee as specified by the Commission from time to time for preparing schedule on behalf of Discom. In addition the SLDC shall also be free to impose a penalty on Discoms for non-compliance with the directions under s. 33 of the Electricity Act, 2003. If any dispute arises with reference to the quality of electricity or safe and integrated operations of the State grid or in relations to the directions of the SLDC, it shall be referred to the Commission for decision and pending decision of the Commission, the directions of the SLDC shall be complied with by RVPN and the Discoms. 10. Tariff for transmission and wheeling RVPN shall charge the transmission and wheeling charges for the power transmitted for Discoms as per transmission and wheeling tariff approved by the Commission for the respective year. For the financial year 2004-05, the Commission has approved transmission tariff of ₹ 83.5 per kilowatt of contracted transmission capacity per month. Besides transmission charges of ₹ 83.5 per month, the Discoms shall also pay on quarterly basis a balancing charge equal to difference betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. (iv) It also falls in the ambit of s. 194C in view of the decision of Supreme Court in case of Associated Cement Company Ltd. and CBDT Circular No. 681, dt. 8th March, 1994 [(1994) 117 CTR (St) 229]. (v) He relied on the following decisions : (i) Singapore Airlines Ltd. vs. ITO (2006) 7 SOT 84 (Chennai); (ii) Canara Bank vs. ITO (2008) 116 TTJ (Ahd) 689 : (2008) 9 DTR (Ahd)(Trib) 251 : (2008) 305 ITR 189 (Ahd)(AT); (iii) CBDT Ors. vs. Oberoi Hotels (India) (P) Ltd. (1998) 146 CTR (SC) 222 : (1998) 231 ITR 148 (SC); (iv) Continental Construction Ltd. vs. CIT (1992) 101 CTR (SC) 386: (1992) 195 ITR 81(SC). In view of above the AO raised a demand under s. 201(1) for asst. yr. 2009-10 and interest under s. 201(1A) for asst. yrs. 2005-06 to 2009-10 from the date of payment to the date of filing of return by RVPN. 5. The learned CIT(A) in course of appellate proceedings called for a remand report from ITO (TDS) wherein he reiterated his contention made in the assessment order by stating that various functions undertaken by RVPN involve human element. He also tried to distinguish the further case laws relied by the assessee. The assessee agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h secure and economic operations of the State grid in accordance with the grid standards and the State grid code. In addition, as per s. 32(2)(d) of the Electricity Act, 2003, the SLDC (RVPN) was also responsible for supervision and control over the intra-State transmission system. The above-mentioned functions of RVPN (as SLDC) clearly indicate the requirement of human interface in those activities, because the same could not be performed without the involvement of human beings and application of mind. Further, the responsibility of supervision and control over the intra-State transmission system, shows that those functions involved not only the technical support but also the need for managerial support to be provided by human beings. Therefore, I find that the power transmission service provided by RVPN to JVVNL, involved not only the use of its power transmission system, but also involved considerable human interface at every stage of the providing of that service, on real time basis. Hence, in light of the aforementioned decision of Hon'ble Delhi High Court, in the case of CIT vs. Bharti Cellular Ltd. (2008) 220 CTR (Del) 258: (2008) 15 DTR (Del)73, it is seen tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised Representative submitted that from the law, concept and principle laid down in these decisions it is clear that s. 194J would have application only when the technology or technical knowledge of a person is made available to the others and not whereby using such technical systems services are rendered to the 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 rights which can be further used for its own use/purpose/research. Where facility is provided automatically by 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. In case of Skycell Communications Ltd. (supra), it is specifically provided that use of transmission lines to carry the power, transformers to regulate the flow of current, meters to measure that consumption, would not be regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RVPNL, rather as a statutory requirement, RVPNL discharges the functions of SLDC. In fact SLDC is a regulator and controller for optimum scheduling and despatch of electricity, supervision over the intra-State transmission system and responsible for carrying out real time operations for grid control and despatch of electricity within the State. The Rajasthan Electricity Regulatory Commission vide letter dt. 9th Jan., 2009 (paper book 102), in pursuance of the report of the Committee on 'manpower, certification and incentives for system operation and the Ring Fencing Load Dispatch Centre' issued by Ministry of Power, Government of India, has directed that SLDC, Hirapura be recognised a separate entity under Electricity Act, 2003 and accordingly its financial accounts be maintained separately for financial year 2008-09 and onwards. Thus SLDC is a monitoring authority discharging statutory function. The payment made as SLDC charges is a statutory payment. It is for this reason that it is empowered to levy penalty under s. 33(5) of the Electricity Act, 2003 for non-compliance of its direction. This establishes that SLDC charges are not for any service rendered but a statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirement of power by the distribution companies and the availability of the transmission system are to be intimated so that there is optimum scheduling and dispatch of electricity within the State. In discharge of this function, the SLDC, directs the transmission company to maintain the load and frequency at the required level. The operation and maintenance of the transmission system is the duty of the transmission company. For all these work, the SLDC and the transmission company has its own manpower and technical staff. The Power Line Career Communication Department in RVPN is to facilitate the communication between its two or more sub-stations. The supervisory/technical staff positioned there does the work relating to SLDC and the transmission utility. These manpower do not render any technical service to the assessee. The various points raised in paras 1 to 12 on pp. 6 to 9 of remand report are factually incorrect rather RVPN is to work under direction of SLDC and the involvement of human element therein does not result in rendering of any technical service to the assessee. (vi) The lower authorities have tried to distinguish the case of Skycell Communications Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n maintaining its transmission system, takes the service of its engineers for its own purpose and not that these engineers provide any technical service to the assessee. What is required to be ascertained is whether the engineers/technicians employed by the assessee provides any technical service to the engineers/technicians of the assessee company and if that is so it does not matter at which place the services are provided. Based on these arguments it was submitted that the conclusion drawn by the lower authorities that the payment of transmission charges to RVPN is a fees for technical service under s. 194J is not correct. 6.2 The learned Authorised Representative further argued that the entire mechanism of payment of transmission tariff is determined by an independent regulatory body i.e., Rajasthan Electricity Regulatory Commission to reimburse the actual cost incurred by RRVNL in developing/maintaining its transmission system. The transmission company is not allowed any return on its capital. The tariff is determined on the principles of no profit no loss. Thus no income is paid by the distribution companies to the transmission company but only cost incurred by trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the survey report under s. 133A in case of M/s BSES Rajdhani Power Ltd., Delhi; M/s BSES Yamuna Power Ltd., Delhi, M/s Delhi Transco Ltd., Delhi; Chatisgarh State Electricity Board and Gujarat Urja Vikas Ltd. wherein the liability of TDS on transmission payment is sought to be covered under s. 194C/194-I/194J. Supporting the order of lower authorities and the cases relied therein he further referred to the decision of Dr. Hutarew Partner (India) (P) Ltd. vs. ITO (2008) 25 SOT 347(Del) wherein it was held that data processing payments for specialized service are in the nature of technical services liable to deduct tax at source. He elaborated all the issues mentioned in the orders of lower authorities below and supported the same. 8. In the rejoinder the learned Authorised Representative submitted that the flowchart at p. 30 of the paper book is in respect of transmission system maintained by RVPN which is upto 132KVA. From this transmission system electricity is transmitted to the transmission system of the assessee which is 33KVA and below that. The assessee has its own technical staff to man its own system whereas RVPN has its own technical staff to man its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 5 provides for open access transmission capacity whereby any other customer is also allowed to use the transmission lines for long-term open access and short-term open access. Clause 8 provides for compliance of grid code as approved by the Commission both by RVPN and assessee and further provides that all the parties shall comply with 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 cls. 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 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 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been exhaustively examined by the Hon'ble Delhi High Court in the case of CIT vs. Bharti Cellular Ltd. (supra) and the observations are reproduced as under : 13. We have already pointed out that the expression 'fees for technical services' as appearing in s. 194J of the said Act has the same meaning as given to the expression in Expln. 2 to s. 9(1)(vii) of the said Act. In the said Explanation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Expln. 2 to s. 9(1)(vii) of the said Act. This is so because the expression technical services takes colour from the expressions managerial services and consultancy 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 s. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, as also consideration which would constitute income of the recipient chargeable under the head 'Salaries'. Thus while stating that 'technical service' would include managerial and consultancy service, the legislature has not set out with precision as to what would constitute 'technical' service to render it 'technical service'. The meaning of the word 'technical' as given in the New Oxford Dictionary is adjective 1. of or relating to a particular subject, art or craft or its techniques; technical terms (especially of a book or article) requiring special knowledge to be understood; a technical report, 2. of involving, or concerned with applied and industrial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source on the payments made to the cable operator. Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision to technical service to the customers for a fee. 6. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. That fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that the same does not amount to providing the technical service. 9.5 In case of Dy. CIT vs. Parasrampuria Synthetics Ltd. (supra) it was held as under : There may be use of services of technically qualified person to render the services but that itself do not bring the amount paid as 'fees for technical services' within the meaning of Expln. 2 to s. 9(1)(vii). The amount paid are towards annual maintenance contract of certain machinery or for converting partially oriented yard (POY) into texturised/twisted yarn. The technology or technical knowledge of persons is not made available to the assessee but only by using such technical knowledge services are rendered to the assessee. In such a case, it cannot be said that the amount is paid as 'fees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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. 9.8 The decision relied by the ITO (TDS) in the case of CBDT Ors. vs. Oberoi Hotels (India) (P) Ltd. (supra) Circular No. 187, dt. 23rd Dec., 1975 and in the case of Continental Construction Ltd. vs. CIT (supra) though relates to s. 80-O of the IT Act, supports the case of the assessee that a technical service is involved where 'information concerning industrial, commercial or scientific knowledge, experience or skill is made available'. In the present case no scientific knowledge, experience or skill is made available/rendered by the 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 ultimately supplies 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., Rajasthan Electricity Regulatory Commission. The transmission company is not allowed any return on its capital; the tariff is determined on the principle of no profit no loss. From the tariff order (paper books 85-94) we find that tariff is fixed by estimating the actual cost of operation of RVPN. In case, on the basis of such tariff, any surplus is left with the RVPN, they give credit of the same to the assessee as evident from the extract of the minutes of the board and the copy of the journal voucher by which such credit is given to the assessee (paper books 121-137). Thus when no income is paid by assessee to transmission company the question of deduction of tax at source do not otherwise arise even when under certain sections of Chapter XVII-B liability of TDS is on payment of any sum and under certain sections it is on payment of income as ultimately the tax is on the income and deduction of tax at source is only one of the mode 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 ITO vs. Dr. Willmar Schwabe India (P) Ltd. (supra) (paper book 109-110), headnote of which reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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. The Rajasthan High Court in case of CIT vs. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354(Raj) (paper book 41-42) has upheld the findings of Tribunal in para 7 of Tribunal order reproduced hereunder by holding that when the assessee has paid more tax than the tax payable and refund is due, even (after) tax deducted at source is counted, in such case, there is no justification for charging interest under s. 201(1A) : After perusal of the facts of the case and relevant law as on the subject, we are of the opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hennai Bench of Tribunal in case of Singapore Airlines Ltd. vs. ITO (supra) on the issue of levy of interest under s. 201(1A) has held as under (para 11) : The Gujarat High Court held that if the Revenue is permitted to levy interest under s. 201(1A) of the Act even in a case where the person liable to pay tax has paid the tax on the date due for the tax, the Revenue would derive undue benefit or advantage by getting interest on the amount of tax which had already been paid on the due date. According to Gujarat High Court, such a position cannot be permitted. The CBDT has also clarified in the circular (supra) that interest has to be recovered till the taxes are paid. In view of above, we do not find any justification for levying tax till the month of October, 1999. Since the actual date of payment of tax by the International Airport Authority of India is not available on the file of this Tribunal, the AO may verify the actual date on which the taxes were paid by International Airport Authority of India and thereafter compute the interest from the date on which the deduction has to be made till the date of actual payment at the rate applicable as per statutory provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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