AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 788
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges received by Rajasthan Rajya Vidyut Prasaran Nigam Ltd., were in the nature of fees for technical services and liable to TDS u/s 194J of the I.T. Act. 2. The grounds raised by the assessee relate to the disallowance of transmission charges paid to U.P. Power Corporation Limited (hereinafter referred to as UPPCL) on non-deduction of TDS under section 194J of the Income-tax Act, 1961 (hereinafter called in short "the Act"), under section 40(a)(ia) of the Act. 3. The facts in brief borne out from the record are that the assessee is a distributor licensee of electricity and made purchase of power and made payment of transmission charges to UPPCL. The payment on account of power purchased was Rs. 20,53,55,77,760/- whereas the payment of power transmission charges stood at Rs. 1,65,32,88,040/-. The tariff and charges are fixed by the U.P. State Electricity Regulatory Commission (hereinafter referred to as the UPERC). The Assessing Officer examined the issue and came to the conclusion that the assessee was a distributor licensee and UPPCL was a transmission licensee. The transmission charges paid by the assessee to UPPCL were found to be in the nature of fees for technical services. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ransmission licensee) supplies power, the assessee company (distribution licensee) distributes power and UPPTCL (service provider) renders technical service to the assessee for transmission of power. As per Electricity Regulator Act, 2003, the transmission licensee i.e. UPPTCL is a service provider and separate agreement is formulated between the transmission service provider and the distribution licensee for receiving the transmission charges for the technical services rendered and the same has nothing to do with the amount paid for purchase of power from UPPCL. Since the technical services provided by UPPTCL to the assessee involves use of sophisticated technology, involvement of human interference in use of the technology, technical expertise along with use of equipments etc, hence the same is pure rendering of technical services. Thus, the amounts paid to the UPPTCL by the assessee are nothing but the access charges paid for availing technical expertise in order to distribute electricity to end consumers and the said access charges are paid in accordance of the provisions of Open Access Regulations. Therefore, the amounts paid to UPPTCL are purely for rendering of technical ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rendering technical services to the payer of the fees and not technology driven services. Installation and operation of sophisticated equipments with a view to earn income by allowing the user to avail the benefit of such equipments does not tantamount to rendering of technical services within the meaning of Explanation 2 to section 9(1)(vii) of the Act. It was further contended that mere collection of fee for making available a standard facility provided to all those willing to pay for it does not amount to the fees having been received for technical services. It was further contended that where a person has developed a technical system consisting of sophisticated instruments and the technical ability and knowledge to operate and maintain the system, it does not result in providing any technical service to others by allowing use of this sophisticated equipments/technical systems by others against certain payment of charging fees. 8. The ld. counsel for the assessee has further contended that the assessee company is making payment of transmission & Wheeling Charges to the transmission company in consideration of availing the benefits of the standard technical facility/the Transmi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rges subject provision of open access by the State Commission i.e. UPSRC as per section 39(2)(d)(ii) of the Electricity Act, 2003. 10. It was further explained that a State Load Despatch Centre (SLDC) has to be constituted as mandated by section 31 of the Electricity Act, 2003. The function of SLDC has been prescribed in section 32 of the Electricity Act, 2003. Every transmission licensee, distribution licensee and generating company has to comply with the directions of SLDC as mandated in section 33 of the Electricity Act, 2003. Section 62 of the Electricity Act, 2003 mandates determination of tariff for transmission of electricity by the Appropriate Commission i.e. UPSRC. Consequently, the tariff is fixed by this independent authority. The ld. counsel for the assessee has further contended that from the above, it is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the directions of SLDC and the Regulatory Commission for achieving the economy and efficiency in the operation of power system and therefore the question of any person rendering service to another does not arise. The operation and maintenance of transm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he wheeling charges payable to UPPTCL by the assessee-company were adjusted. The short question arises before us is whether the payment of transmission charges to UPPTCL through UPPCL is a payment of fee for technical services as per Explanation 2 to section 9(1)(vii) of the Act. According to the assessee, it was only a reimbursement of cost of transmission charges incurred by UPPTCL, therefore, there was no element of profit in these payments and provisions of section 194J of the Act cannot be attracted. It is also a case of the assessee that no technical services were rendered for the assessee. Whatever sophisticated equipments were used and maintained by the technical staff were of UPPTCL and the assessee simply get electricity transmitted from these sophisticated equipments for its transmission from the end of UPPCL to the end of the assessee whereafter the power is transmitted for use by the consumers. 12. Identical issue was raised before different Benches of the Tribunal in different cases and all the Benches of the Tribunal have taken a consistent view that the provisions of deduction of tax at source does not apply on actual reimbursement, therefore, there is no liability....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion charges are paid at rates fixed by the UPERC. In fixing such charges, nothing is brought on record to show that there is an element of profit to the UPPCL to whom the payment is paid, Since the payment is in reality the reimbursement at rates fixed by UPERC, I am of the opinion that the provisions of section .194J of the Act are not applicable. Further, in order to determine the applicability of section 194J of the Act a reference may be made to the decision of Hon'ble ITAT, Banglore in the case of Banglore Electric Supply Vs 1TO dated 16.03.2012 wherein the Hon'ble Court provided as under - 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'. The word 'technical' is preceded by the word 'managerial1 and succeeded by the word consultancy1. Since the expression 'technical services' is in doubt and is u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be a human being. A machine cannot be regarded as a consultant. From the above discussion, it is apparent that both the words 'managerial1 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(i)(viz) 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 )(vn) 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 services rendered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,32,88,040/- made by the Assessing Officer under section 40(a)(ia) of the Act is deleted giving consequent relief to the appellant." 13. Our attention was also invited to the order of the Jaipur Bench of the Tribunal in the case of Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT (supra), in which identical issue was raised and the Tribunal vide its order dated 30.4.2009 held that there is force in the alternate argument of authorized representative that the payment of transmission/wheeling/SLDC charges is reimbursement of the cost, as 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 basis. The tariff is fixed by estimating the actual cost of operation of RVPN. It was also held in that judgment that in case on the basis of such tariff any surplus is left with RVPN, they give credit of the same to the assessee as evident from the extract of the minutes of the Board and copy of the journal voucher by which such credit is given to the assessee. Thus, when no income is paid by the assessee to transmission compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll be obligation and responsibility of the CSEB to make the required arrangement for evacuation of power from such delivery points of NTPC". It is pursuant to these obligations that the assessee, along with other bulk power beneficiaries has entered into a 'bulk power transmission agreement' with PGCIL. This agreement provides that "Powergrid shall operate and maintain the transmission system belonging to it in the western region as per agreed guidelines and the directives of the Western Regional Electricity Board and the regional load dispatch centers, and co-operate with the bulk power beneficiaries of the region, so as to maintain the system parameters within acceptable/ reasonable limits except where it is necessary to take measures to prevent imminent damage to any equipment". In respect of these services, the bulk power beneficiaries are to pay to PGCIL a monthly charge computed in the manner set out in cl. 9 of the said agreement. This clause, in turn, refers to formula set out in A. 4 of Annex. 1 which refers to the same ratio of agreed annual charges divided by 12 as is between power transmitted to each beneficiary to total sales from that particular point of deliv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngaged in similar transmission of electricity for other entities and the assessee has no say in the manner in which such transmission lines can be controlled and used by the PGCIL. Undoubtedly, for the purpose of an arrangement being termed as in the nature of rent for the purpose of s. 194-I, the control and 'possession', in legal terms, of an asset may not needed to be with the person benefiting from the asset in question, it is a condition precedent for invoking s. 194- I that the asset, for the use of which the payment in question is made, should have some element of its control by the assessee. Here is a of tax at source on his part and, in addition to this lapse, the recipient of income has also failed to pay such tax directly. The reasons are not difficult to fathom. Proceedings under s. 201(1) are not penal proceedings. These are vicarious proceedings to make good the shortfall in tax collection, and when the tax liability is duly discharged by the recipient of income embedded in the payment, such a vicarious liability cannot be invoked. Unlike s. 271C, s. 201(1) is not of the penalty nature, and, therefore, the core consideration for invoking s. 201(1) is not the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st risk is on account of OPTCL. 16. Similarly, in the case of Maharashtra State Electricity Distribution Co. Ltd. Vs. ACIT (supra), the Tribunal has held, following the order of the Jaipur Bench of the Tribunal in the case of Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT (supra), that the payments have been made by the assessee according to the orders of State Electricity Commission and it has been shown that it is only reimbursement of cost and payments are made to State transmission entity for onward distribution to transmission companies. 17. We have also carefully perused the order of the Authority for Advance Rulings and we find that the A.A.R. has not taken into account certain important aspects that the assessee-company is making payment of transmission charges to the transmission company in consideration of availing the benefits of the standard technical facility i.e. transmission System Network of transmission company for the purpose of Transmission of Electricity from the Generation Point to the Distribution Point and as such by merely making available the benefits of its sophisticated Transmission System Network to the applicant company, the transmission company is not rend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icer to examine whether the payments towards transmission charges partake the character of rental charges and whether the provisions of Section 194-1 are applicable or not as the issue stands settled in favour of the assessee (deductor) by the decisions of various Benches of ITAT on this issue. 4.2 Because such directions were beyond the scope of power of the learned 1st appellate authority 5. Because, in any case, the liability for tax u/s 191 is of the deductee and it having been conclusively demonstrated that the tax liability of the deductee being NIL on the basis of income assessed u/s 143(3)/154, the learned first Appellate Authority ought to have held that there was no short deduction by the assessee (deductor) and hence the deductor cannot be deemed to be an assessee in default. 6. Because the learned lower authorities failed to appreciate that payment of wheeling charges is only reimbursement of expenses and since no income is paid, it is outside the provisions of Chapter XVII-B of the Income Tax Act, 1961. 7. Because in any case the amount of Rs. 165,32,88,040/- determined by the ACIT, Range - IV, Lucknow on estimated basis as transmission charges and which was challe....