Transmission and wheeling charges were not fees for technical services, so no TDS applied and default demand failed.

Transmission and wheeling charges paid to the State transmission utility were held not to be fees for technical services, because the assessee only used the utility's transmission system under the statutory electricity transmission framework and no technical skill or service was rendered to it. Section 194J therefore did not apply, so no tax was deductible at source on those payments. The resulting treatment of the assessee as an assessee in default under Section 201, together with interest under Section 201(1A), was unsustainable.

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Issues: Whether transmission and wheeling charges paid to the State transmission utility attracted deduction of tax at source under Section 194J of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default with consequential interest under Section 201(1A).

Analysis: The payments were made for use of the transmission system in the course of electricity transmission and were not for any technical skill, knowledge or service rendered to the assessee. The arrangement was found to be part of the statutory transmission framework under which the transmission utility maintained and operated its own system, while the assessee merely used that system for transmission of power. Following the earlier Tribunal view on the same issue, the charges were treated as not constituting fees for technical services.

Conclusion: Section 194J did not apply to the transmission and wheeling charges, and the assessee was not liable to deduct tax at source on those payments. The consequential demand under Section 201 and interest under Section 201(1A) were unsustainable, in favour of the assessee.

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