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2012 (8) TMI 1038

in the case of Bangalore Electric Supply Company Ltd. [2012 (11) TMI 385 - ITAT BANGALORE], we uphold the order of the CIT(A) so far as it relates to transmission charges and reverse the order of the CIT(A) with reference to SLDC charges. - The issues regarding levy of interest, the question whether (SLDC) was Government within the meaning of section 196 and the question whether the liability of the person making payment will stand extinguished on payment of taxes by the recipient of the payment and the question of period of levy of interest u/s. 201(1A) of the Act do not require any consideration. Revenue has apart from the original grounds of appeal raised has sought to file additional grounds of appeal. These additional grounds of appeal are a reiteration of the stand of the revenue as reflected in the original grounds of appeal but on different facets of the issue raised in the original grounds of appeal. The additional grounds are admitted for adjudication. - ITA Nos.839 to 844/Bang/2011 & ITA Nos.874 to 879/Bang/2011 - Dated:- 31-8-2012 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER For the Petitioner :: Shri Ramesh Kamalapukar, FCA For th .....

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generating companies operating in that State, for monitoring grid operations, for keeping accounts of the quantity of electricity transmitted through the State grid, exercising supervision and control over the intra-state transmissions systems; and for carrying out real time operations for grid control and dispatch of electricity within the State. To secure and economics of operations of the state grid in accordance with the Grid Standards and the State Grid Code. The Assessing Officer accordingly held that the assessee was an assessee in default u/s. 201(1) of the Act and also levied interest on taxes u/s. 201(1A) of the Act in respect of Transmission charges and SLDC Charges paid as aforesaid. 5. On appeal filed by the assessee, the ld. CIT(Appeals) was of the view that SLDC charges and transmission charges were distinct and different from each other. In respect of SLDC charges, the ld. CIT(A) held that SLDC was not an arm or wing of KPTCL and was an independent statutory body under the Electricity Act, 2003. He further held that SLDC performed the functions which were managerial and technical in nature and rendered only by humans. He therefore held that SLDC charges are fees fo .....

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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 amount equal to ten per cent of such sum as income-tax on income comprised therein: Provided that no deduction shall be made .....

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eir 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 definite human element attached to it. To put it bluntly, a machine cannot be a manager. 14. Similarly, the word consultancy has been define .....

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frastructure 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 Court in the case of Skycell Communications Ltd (supra), has held as under: 4. Fees for technical services is not defined in section l94J. Explanation (b) in that section provides that ex .....

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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 used it for travelling from one destination to another. When a person travels by bus, it cannot be said that the undertaking which owns the bus service is rendering technical service to the passenger and, therefore, the passenger mu .....

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s 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 of technology play an important role in making life smoother and more convenient. Sec. 194J, as also Expln. 2 in section 9(l)(vii) of the Act were not intended to cover the charges paid by the average householder or consumer for utilizing the p .....

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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 providing such service making the payment of wheeling/SLDC charges liable for deduction of tax at source as technical service has no merit as the technical service is not provided to the personnel of the assessee. We are also unable to pursue (sic) ourself with the con .....

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f 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 provisions of section 194J were not applicable to the reimbursement of actual expenses and the assessee company was not liable to deduct tax at source from such reimbursement. Under these circumstances, we hold that the lower authorities were not justified in holding that the assesse .....

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were not applicable to SLDC charges paid and therefore no deduction of tax was to be made thereon. We find that this issue is decided and covered in favour of the assesseecompany by the decision of the ITAT, Jaipur Bench in the case of JVVNL (supra) and therefore hold that on SLDC charges paid by the assessee, no deduction of tax is to be made at source as the provisions of section 194J are not attracted or applicable. Accordingly, the impugned demand raised u/s.201(1) r.w.s. 194J and 201(1A) are cancelled. The assessee gets relief accordingly. 10. The parties agreed before us that the facts and circumstances and the basis of the conclusions arrived by the revenue authorities are identical in the cases decided by the Tribunal and the present appeals. In the circumstances, respectfully following the decision of the Tribunal in the case of Bangalore Electric Supply Company Ltd. supra, we uphold the order of the ld. CIT(A) so far as it relates to transmission charges and reverse the order of the ld. CIT(A) with reference to SLDC charges. In view of the above conclusion, the issues regarding levy of interest, the question whether (SLDC) was Government within the meaning of section 196 .....

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