TMI Blog2018 (3) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 4878/DEL/2016 - - - Dated:- 19-3-2018 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Ms. Sushmita Basu For The Respondent : Sh. SR. Senapati, Sr DR ORDER PER SUCHITRA KAMBLE, JM This appeal has been filed by the assessee against the order dated 30/06/2016 passed by CIT(A)-1, Noida. 2. The grounds of appeal are as under:- 1. That on the facts and in the circumstances of the case, the order dated 30th June, 2016 passed by the learned CIT (Appeals) upholding the order dated 30th March, 2015 passed u/s 143(3) of the Act by the ACIT is bad in law. 2. That the Learned CIT (Appeals) erred in not passing a speaking order for the year under consideration and accordingly order of Learned CIT(Appeals) is invalid, illegal, bad in law and liable to be quashed. 3. That the Learned CIT (Appeals) erred in not adjudicating all the grounds raised by the appellant in the grounds of appeal filed before him. 4(a) That on the facts and in the circumstances of the case, the Learned CIT (Appeals) erred in confirming the action of the Assessing Officer, in disallowing the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re paid on account of application fees and operating charges which in any event, cannot be covered within the purview of section 194J of the Act. 6 (e) Without prejudice to the above, the learned CIT (Appeals) failed to appreciate that out of the said amount of ₹ 24,70,24,128/- the appellant, in any event, is not liable to deduct tax on an aggregate amount of ₹ 84,41,963/- which represents reimbursement of expenses. 7. That on facts and circumstances of the case, the learned CIT (Appeals) erred in upholding the action of the Assessing Officer in not allowing set-off of brought forward business loss and depreciation allowance while calculating the total income taxable under the provisions of the Act other than section 115JB thereof in the impugned order under appeal. 8. Without prejudice to the grounds taken above, that on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the action of Assessing Officer in not allowing tax credit under the provisions of section 115JAA of the Act. 9. That on the facts and in the circumstances of the case, the Learned CIT (Appeals) erred in confirming the action of Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UPERC ) which was lower than the invoice amount. b) The Assessing Officer allowed the power purchase cost at the rates at which power purchase was debited in the profit and loss account and not the invoiced amount as claimed by the assessee. The assessee contested the action of the Assessing Officer and hence these grounds of appeal. c) As stated above, the assessee disputed the rates at which UPPCL raised the invoices and the matter travelled before the UPERC for determination of the final rate. d) UPERC decided the rate issue in favour of the assessee and UPPCL did not file any appeal against the same, the issue had attained finality. Therefore, the present grounds 4(a) to 5(h) claiming billed amount has become academic and infructuous for the year. e) The Ld. AR submitted that recently, the appeal of UPPCL in the earlier years on the rate issue has travelled to Hon ble Supreme Court and the Hon ble Apex Court dismissed the appeal on the grounds of non-prosecution. 5. As regards to Ground Nos. 6(a) to 6(e) of disallowance under section 40(a)(ia) for non-deduction of tax on payment of transmission charges, the Ld. AR submits that the issue is covered squarely in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsmission of electricity was automatic through the network or equipment following the principle laid down in the case of Delhi Transco (supra), transmission or wheeling charges does not come under the purview of the definition of fees for professional services or fees for technical services as defined under section 194J of the Act and accordingly, no tax is required to be deducted at source from such payments/ reimbursements made towards transmission or wheeling charges. The Ld. AR further submitted that Revenue s Special Leave Petition against the order of Delhi Transco (supra) has been dismissed by the Hon ble Supreme Court. In rendering the above decision, the Hon ble Delhi Court referred to a judgment of the Hon ble Bombay High Court in the case of CIT (TDS) vs. Maharashtra Electricity Distribution Co. Ltd. [2015] 375ITR 23 wherein it was held that wheeling charges would not amount to payment of fees for technical services and accordingly no tax is required to be withheld from such payments. The Hon ble Apex Court in this ease also dismissed the Revenue s Special Leave Petition against the order of the Bombay High Court. Further, the issue is also covered directly in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal and 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. 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 restricted to a sense analogous to that of the less general. Since both the managerial and consultancy services involve human intervention, it implies that in order to qualify as technical service there has to be some human intervention. Accordingly, without human intervention, there cannot be any technical service. The said principle has been laid out in plethora of cases including Hon'ble Delhi High Court in the case of CIT vs. Bharati Cellular Limited [175 Taxman 573 (Del)] which has been affirmed by the Hon ble Supreme Court in [193 Taxman 97 (SC)]. 9. The Ld. AR further submitted that for the purpose of ascertaining whether or not the activity of transmission and wheeling c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, minimum loss of electricity in transmission, regular and uninterrupted supply etc. are the statutory functions for maintaining the transmission system by NRLDC themselves. By discharging those functions NRLDC are not providing any technical service to the assessee. In fact from the generation point to the distribution point of the assessee, electricity is transmitted automatically and none of the engineers/technicians of NRLDC/ PGCIL provide any service to the distribution companies or guide them as to how to capture the electricity so transmitted. The assessee itself has a fleet of engineers and technicians who constantly monitor and supervise the flow of electricity to its system and ultimate supply to its customers. 11. The Ld. AR further submitted that NRLDC is a system operator and controller for optimum scheduling and dispatch of electricity, supervision over the inter-state transmission system and responsible for carrying out real time operations for grid control and dispatch of electricity7 within the Region. All the parties involved with generation / distribution of electricity requiring transmission of power in the grid are to comply with direction of NRLDC and Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical services and accordingly no tax is required to be deducted at source from the payments thereof. 13. The Ld. AR further submitted that the CIT (Appeals) upheld the order of the Assessing Officer without considering the decision of his predecessor CIT (Appeals) in assessee s own case for the subject year itself and various Hon ble Court of the country including Hon ble Apex Court as above. Thus, the Ld. AR reiterated that transmission of electricity was automatic through the network or equipment without any human intervention. Though, the skilled technical personnel professional were maintaining the system operated by PGCIL, it was maintaining its own system through such professionals. The transmission of electricity does not involve use of such human intervention and accordingly cannot be qualified as fees for technical services. Thus, the issue is squarely covered in favour of the assessee not once but on several occasions as stated above. Accordingly, the CIT (Appeals) erred in upholding the order of the ACIT in holding that that provisions of section 194J of the Act will be applicable while making payment of transmission and wheeling charges and thereby disallowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(ia) of the Act would not be applicable. The CIT (A) has not taken cognizance that the Delhi ITAT, being the jurisdictional Tribunal of the assessee in The Dakshin Haryana Bijli Vitran Nigam Ltd. (Supra) has also dealt with identical situation and that too involving NRLDC/UPSLDC/UPPTCL, namely the regulatory authorities in the case of the assessee, and held that as the payment was towards reimbursement of cost incurred for transmission of electricity by the UPPTCL, the assessee cannot be held to be in default. The Ld. AR further submitted that without prejudice to the submissions made by the assessee with respect to Ground No. 6(a) to 6(d) above, the CIT (A) has not considered that even otherwise, no tax is required to be deducted at source from the impugned amount of ₹ 84,41,963 out of the total expenditure on transmission and wheeling charges of ₹ 24,70,24,128 incurred by the assessee during the year under consideration, being reimbursement of cost. 16. The Ld. DR submits that the factual position and legal position stated by the Ld. AR is correct. The DR relied upon the orders of the Assessing Officer and the CIT(A). 17. We have heard both the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. In view of the above, we find that such transmission and wheeling charges paid by the assessee does not come within the purview of fees for technical service as defined under Explanation 2 to sec g(i)(vii) of the Act and accordingly no tax is required to be deducted by the assessee u/s. 194J therefrom. Hence, the action of the AO in treating the assessee to be an assessee-in- default u/s. 201(1) of the Act and the order dated 27.3.2014 passed u/s. 201(1 )/201(1A) of the I.T. Act were rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground raised by the Revenue. As relates to Ground No. 6(a) to (e) the Hon ble Delhi High Court in case of CIT vs. Delhi Transco Ltd. (supra) considering the provisions of section 194J of the Act held that wheeling charges paid for transportation of electricity cannot be characterized as fee for technical service. Relevant portion is reproduced below: 31 ........ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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