AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 1584
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....16.06.2015 2009-10 136/LKW/2013 3. 3. 149 of 2015 16.06.2015 2008-09 135/LKW/2013 2. The substantial questions of law as formulated by appellants are differently worded but as agreed by learned counsel for parties, there are three substantial questions of law; (i) Whether payment of fee for transmission of electricity constitute payment for "Technical Service" and tax was deductible under Section 194J of Act, 1961. (ii) Whether service rendered but related to transmission of electricity is covered under Section 194J of Act, 1961. (iii) Whether Assessee-Company was liable to deduct tax at source and having not done so, whether payment made was liable to be disallowed under Section 40(a)(ia) of Act, 1961. 3. For the purpose of reference of facts with the consent of learned counsel for parties, we have taken up record of Income Tax Appeal No. 86 of 2015. 4. Brief factual matrix, necessary to understand dispute, may be stated as under. 5. Assessee-M/s Madhyanchal Vidyut Vitran Nigam Limited is a licensee for distribution and sale of electricity under provisions of Electricity Act, 2003, by Uttar Pradesh Electricity Regulatory Commissi....
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....ndering "Technical Service" on monthly basis. It consequently held that Assessee was liable to deduct tax at source on charges paid for transmission to UPPTCL and since it has failed to do so, amount of Rs. 1,65,32,88,040/- is disallowed under Section 40(a)(ia) of Act, 1961. Assessment order was passed making addition of aforesaid amount. 9. Assessee preferred appeal before Commissioner of Income Tax (Appeals) II, Lucknow (hereinafter referred to as "CIT(A)") which was allowed and addition made by A.A. with regard to payment made to UPPTCL was deleted. CIT(A) relied on judgments of Income Tax Appellate Tribunal, Mumbai Bench in Maharashtra State Electricity Vs. ITO decided on 27.06.2012; Jaipur Bench in Jaipur Vidyut Vitran Nigam Limited Vs. DCIT, (2009) 26 DTR 79 and Bangalore Bench in Bangalore Electric Supply Vs. ITO, decided on 16.03.2012. 10. Matter was taken up by Revenue to Tribunal. It found that similar issue has been considered across the country by various Benches and all have taken the view that "Transmission charges" does not attract Section 194J and therefore, such payment cannot be disallowed under Section 40(a)(ia) of Act, 1961. In this regard, it relied on ju....
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....aft 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 : Provided that no deduction shall be made under this section-- (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed-- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) thirty thousand rupees, in the case of royalty referred to in clause (c), or (iv) thirty thousand rupees, in the case of sum referred to in clause (d) : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44A....
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....head ''Salaries'." 15. A reading of aforesaid provision shows that fee is nothing but consideration for payment of amount rendered to anyone including any lump sum amount for specific services i.e. "Managerial, Technical or Consultancy". "Technical Services", therefore, as per Explanation (2) is not confined to any performance or function involving technology only but it has been given a very wide meaning by including within its ambit even "Managerial or Consultancy Services". Legislature has not given meaning to the word "Technical Services" as it is known in common parlance but an extended, varied and extensive scope has been given to the word "Technical Services". What is not included therein has also been provided in Explanation (2) which says that it will not include consideration paid for any construction, assembly, mining or like project undertaken by recipient. Explanation (2) also says that consideration which would be income of recipient, chargeable under the head "Salaries" would also be excluded from "fees for technical services" and this is in the context of the consideration paid for "Technical Services". Legislature has also clarified that something wh....
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....er who may approach service provider for such assistance/service. It is only service of above kind that, according to us, should come within ambit of expression "Technical Services" appearing in Explanation 2 of Section 9(1)(vii) of Act. In absence of above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by aforesaid provision of Act. The view of A.A. which was upheld by Bombay High Court was negatived. 18. Applying aforesaid dictum in the present case also, it is not in dispute that Assessee is engaged in the business of distribution and sale of electricity to consumers within its licensed area of operation. Electricity is generated in State of U.P. by different companies but for the purpose of sale; pooled through UPPCL. Since electricity is a commodity which cannot be carried from one place to another like other commodities but it has to flow through metal conductors which is called "transmission lines" and therefore, transmission lines constitute a facility for travelling of electricity from the point of generation to the point of distribution. 19. This flow of electricity in condu....