TaxTMI 
TaxTMI 
2015 (8) TMI 378
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....') entered into Bulk Power Transmission Agreement ('BPTA') on 21st July 2004 with the Power Grid Corporation India Ltd. ('PGCIL'). In one of the preamble clauses of the BPTA, it was recorded that DTL "is desirous of receiving energy through power grid transmission system on mutually agreed terms and conditions". The BPTA defined several terms including the term 'wheeling. as under: "The operation whereby the distribution system and associated facilities of a transmission licensee or distribution licensee, as the case may be, are used by another person for the conveyance of electricity on payment of charges to be determined under Section of Section 62 (sic) of the Electricity Act, 2003 and its subsequent amendments." 3. Under Clause 8 of the BPTA, it was agreed that the transmission charges would be paid to PGCIL by DTL for transmitting private sector power through PGCIL lines 'as per the guidelines. of the Central Electricity Regulatory Commission ('CERC'). Clause 10 stated that the 'transmission tariff. and terms and conditions for the power to be transferred by PGCIL would be in terms of the notification to be issued by CERC from time to ....
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....and computed it at Rs. 44752382. The AO treated DTL as a defaulter under Section 201(1) of the Act and the matter was referred to the Additional Commissioner of Income Tax ('ACI') for initiating penalty proceedings under Section 271-C of the Act. The AO held that in terms of the CBDT circular the demand under Section 201(1) would not be enforced but that would not affect the liability of DTL regarding interest under Section 201(1A) of the Act and this worked out to Rs. 78,40,426. The total demand was worked out as Rs. 3,19,87,617. The order of the CIT (A) 7. Aggrieved by the AO's order, DTL filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] being Appeal No. 34/09-10 for the AY 2004-05. In the order dated 8th December 2010, dismissing the appeal, the CIT(A) agreed with the contention of DTL that Section 194C of the Act would apply since electricity was 'goods' as defined under Section 2 of the Sales of Goods Act and in terms of the contract, PGCIL was in fact transporting such goods to DTL. The CIT (A), however, held that "in the absence of sufficient legal precedent on the subject, I am unable to reject the view taken by Ld. Assessing Off....
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..... In the first place, he submitted that whether the fees paid in the context of rendering of services amounted to fees for technical service could be answered only by examining the very nature of service being performed, and in that context the working of the industry, in this case, the power generation and transmission industry. According to him, a detailed analysis would have to be undertaken by examining experts and since that was not performed by the ITAT or perhaps even the AO, the case would have to be remanded for a fresh determination. 12. The second broad submission of Mr. Sawhney was that the test adopted by the ITAT was plainly erroneous. The question was not only about whether there was any human intervention in rendering of the services, but whether without technical support or technical inputs it would at all be possible to avail of the services. He submitted with reference to the aforementioned regulations that there was a statutory requirement of the power generation company and the power transmission company to maintain their equipments in conformity with certain minimum standards. This required considerable technical knowledge and skill. He referred to the decisi....
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....dictionary meaning of the word 'services'. Ms. Rashmi Chopra, learned counsel supplemented the above submissions and referred to the decision in Union of India v. Martin Lottery Agencies (2009) 12 SCC 209. The relevant statutory provisions 16.The relevant portion of Section 194 J of the Act reads as under: "194J (1) Any person, not being an individual or a Hindu undivided family, 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 (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, 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....................... Explanation- For the purposes of this section, (a) "professional services" means services rendered by a person in the course of....
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....icensee, as the case may be, are used by another person for the conveyance of electricity on payment of charges', a rendering of service by PGCIL to DTL? The decisions regarding 'technical services' 20. The ITAT has referred to the decision of the Supreme Court in Bharti Cellular (supra) where the question examined was whether "manual intervention is involved in the technical operations by which a cellular service provider, like M/s. Bharti Cellular Limited, is given the facility by BSNL/MTNL for interconnection." While setting aside the decision of this Court in CIT vs. Bharti Cellular Ltd [2009] 319 ITR 139 (Del), the Supreme Court observed that the problem which arose in such cases was that "there is no expert evidence from the side of the Department to show how human intervention takes place, particularly, during the process when calls take place......" It was observed further that "these types of matters cannot be decided without any technical assistance available on record". Accordingly the case was remanded to the AO to examine technical experts from the side of the department and to decide the matter within four months. 21. From the decision of the ITAT Jaipu....
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....ut lead to the inference that they are technical services. 25. In Union of India v. Martin Lottery Agencies (supra), the Supreme Court considered the meaning of word 'service., and whether it would include promoting and organizing a lottery. It was held that dealing with lottery was res extra commercium, and therefore it could not amount to "rendition of any service". In para 20 (SCC), the dictionary meaning of the word 'service. was noted as follows: "Work done or duty performed for another or others; a serving; as, professional services, repair service, a life devoted to public service. An activity carried on to provide people with the use of something, as electric power, water, transportation, mail delivery, telephones, etc. Anything useful, as maintenance, supplies, installation, repairs, etc., provided by a dealer or manufacturer for people who have bought things from him." 26. The Bombay High court in the Maharashtra State Electricity (supra) considered, inter alia, whether wheeling charges could be characterized as fee for technical services. It was acknowledged that as a transmission licensee the state undertaking, MSEDCL, could engage in 'wheeling operations....
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....opalan, Chief Manager (Finance) of PGCIL. The AO appears to have extracted in his order only two of the questions regarding details of the transmission receipts and of the tax liability. What appears to have been omitted are the specific questions to Mr. Rajagopalan, asking him to explain the process of transmission. The relevant questions and the answers given by him are as under: "Q. Please explain the process of transmission? A. Central Power Generating Companies such as NTPC/NHPC/THDC etc. are generating power which are being carried through one Bulk Transmission and delivered to various State Transmission Board beneficiaries. Basically we are functioning as Bulk Carriers of Electronics. Q. Please give the details of employees whether they are skilled professional because transmission of electricity is a technical service and it requires constant involvement of technical system consisting of sophisticated instruments and technical knowledge to operate and maintain the system and requires technical competent manpower such as qualified engineer etc.? A. The power grid substation consists of substation and transmission towers and conductors. The main equipments are Auto Transf....