Wheeling charges for electricity transmission are not technical services when the payer only receives power through an automated grid.

Wheeling charges paid for transmission of electricity through an automated power grid were held not to be fees for technical services under section 194J of the Income-tax Act. The court reasoned that "fees for technical services" requires rendering of managerial, technical or consultancy services to the payer, whereas the transmission utility was only operating and maintaining its own network and the recipient merely received electricity through that system. On that basis, the charges were characterised as transportation of electricity, not consideration for technical services, and deduction under section 194J was not attracted.

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Issues: Whether wheeling charges paid for transmission of electricity through the power grid amounted to fees for technical services within the meaning of section 194J of the Income-tax Act, 1961.

Analysis: The expression "fees for technical services" requires rendering of managerial, technical or consultancy services. The mere fact that the transmission system is operated and maintained by skilled personnel does not mean that the recipient of electricity is availing a technical service. The transmission arrangement under the bulk power transmission agreement was essentially transportation of electricity through an automated network, with the technical expertise being used by the transmission utility for maintaining its own system and complying with regulatory standards. On the evidence, the beneficiary received electricity through the network without any technical service being rendered to it. The nature of wheeling charges was therefore comparable to a charge for transportation, not consideration for technical services.

Conclusion: Wheeling charges paid by the assessee did not constitute fees for technical services and were not liable to deduction under section 194J; the question was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: Where the payer only receives electricity through an automated transmission network and the technical work is confined to operating and maintaining the utility's own system, the payment is for transportation of electricity and not for technical services under section 194J.

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