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TMI Blog2012 (8) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee purchases electricity from the generators of electricity like Karnataka Power Corporation Ltd. ("KPTCL"), Central Generating Stations like NTPC, NLC Maps and non-conventional electricity generators like Jindal Energy Ltd., Bhagyanagar, Bhourukha etc. and sells the same to different categories of consumers in its jurisdiction. The power from the generation point to the consumers is transmitted through a transmission network of Karnataka Power Transmission Corporation Ltd. ("KPTCL"). 4. There was a survey conducted u/s. 133A of the Act on 09-02-09 in the business premises of the assessee. In the course of survey, the revenue came across instances where payments were made to KPTCL for transmission charges. KPTCL develops and maintains transmission lines for smooth flow of electricity from a generating station to the load centres both with the State and intra-state. The revenue was of the view that the payment for using the transmission lines for transmission of power owned by KPTCL was a payment for technical services rendered and the assessee was obliged to deduct tax at source while making such payment u/s. 194J of the Act. Similarly, in respect of the SLDC charges paid to Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, then to that extent, the assessee cannot be treated as an assessee in default. He further held that interest u/s. 201(1A) of the Act has to be worked out from the due date of remittance of TDS till the date of return filed by the recipients of the payments from the assessee. In this regard, the ld. CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT 293 ITR 226 (SC). 7. Aggrieved by the relief allowed by the CIT(Appeals), the revenue has preferred the aforesaid appeals for the AYs 2007-08 to 2009-10; aggrieved by the action of the CIT(A) in confirming the action of the AO with regard to payment of SLDC charges, the assessee has preferred the aforesaid appeals before the Tribunal. 8. At the time of hearing of these appeals, the parties agreed that the question as to whether tax had to be deducted at source on payment of transmission charges and SLDC charges has been considered by this Tribunal in the case of Bangalore Electricity Supply Company v. ITO (TDS), Ward 16(1), Bangalore in ITA No.530 to 535/Bang/2011, 546 to 548/Bang/2010, 541 to 545/Bang/2010 and 256 to 260/Bang/2011, wherein the Tribunal has held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) income by way of fees for technical services payable by- 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 of 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. Para 9.3. The expression "fees for technical service" as used in section 194J of the Act has been exhaustively examined by the Hon'ble Delhi High Court in the case of 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 section 194J of the said Act has the same meaning as given to the expression in Expln. 2 to section 9(( viz) 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'. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsultant, who provides the consultancy service, has to be a human being. A machine cannot be regarded as a consultant. 15. From the above discussion, it is apparent that both the words 'managerial' and 'consultancy' involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a sociis, the word 'technical' as appearing in Expln. 2 to section 9(1)(vii) would also have to be construed as involving a human element. But, 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 section 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that consideration paid for the rendering of any managerial, technical or consultancy service, as also the consideration paid for the provision of services of technical or other personnel, would be regarded as fees paid for 'technical services'. The definition excludes from its ambit consideration paid for construction, assembly, or mining or like project undertaken by the recipient, 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 interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d coverage, and covers millions of homes. When a person receives such transmission of television signals through the cable provided by the cable operator, it cannot be said that the home owner who has such a cable connection is receiving a technical service for which he is required to deduct tax 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity provided to all those willing to pay for it does not amount to the fee having been received from technical services." Thus Hon'ble Court while dealing with the case of "transmission of voice" has equated the same with the "transmission of the electricity" and held that the same does not amount to providing the technical service. Para 9.5. In the case of 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 section 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 tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges is reimbursement of the cost. Therefore the provisions of Chapter XVII-B are not applicable since there is no payment of income/revenue by the assessee. We find that the tariff is fixed by an independent regulatory body i.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 book 90-93) 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 book 136-138). 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 section 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 modes of collection and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M was not liable to deduct tax at source on payments of transmission charges to KPTCL as the provisions of section 194J of the Act are not attracted thereon." 9. With regard to SLDC charges, the Tribunal held as follows:- "8.3 We have heard both parties, perused the material on record and the judicial decisions cited. Admittedly the SLDC is a statutory body constituted by the State Government in pursuance to the mandate to the Electricity Act, 2003 and is an independent body. This constitution is in accordance with section 31(2) thereof and the functions to be performed are as per sections 32 and 32 viz. for optimum scheduling and dispatch of electricity within the state. While it is true that in the relevant period many of its personnel may be, on deputation from KPTCL and other organizations, they work exclusively for SLDC. It is seen that though the functions these personnel of SLDC perform, may be of managerial and technical nature, the assessee, BESCOM or its employees do not receive OR derive any benefit in their sphere of work i.e. distribution and retailing of electricity and neither do they perform any of BESCOM's work. What is paid by BESCOM as SLDC charges are only r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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