TaxTMI 
TaxTMI 
2023 (4) TMI 730
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.... generating companies and sells the same to DISCOMs. It was the submission that for this purpose, the assessee uses the transmission line of Orissa Power Transmission Corporation Limited (OPTCL) and Power Grid Corporation of India Limited (PGCIL). It was the submission that during the relevant assessment year, the assessee had deducted TDS at 2% of the transmission/wheeling charges paid to PGCIL. It was the submission that similar TDS had not been made by the assessee in respect of payments to OPTCL. Ld AR relied on the decision of the Co-ordinate Bench of Mumbai Tribunal in the case of Maharashtra State Electricity Distribution Co Ltd vs ACIT (2011) 16 taxmann.com 46 (Mum), wherein, in para 9, it has been held as follows: "9. It is further important to note that after the survey was conducted by the Department at the assessee's premises, it started deducting tax at source on such payments made under BPTA from assessment year 2009-2010 u/s.194-I. A copy of the certificate u/s 197(1) issued to payee for the year financial relevant to assessment year 2010-2011 authorising deduction of tax at source at a lower rate of 5.5%, has also been placed on record. It means that in ass....
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....e Act. On considering that definition and what is involved in the proper transmission of the electrical energy as involved in this case. I am satisfied that the transmission involves the rendering of technical services and the consideration paid towards transmission charges partakes the character of fees for technical services. 11. The ruling of this Authority in 315 ITR 2 (sic) relied on by the applicant is in my view distinguishable. That was a case of providing services of transmission of voice through a telecom band width. The transmission of potent electrical energy at proper voltage without causing damage to the system, to nature and lives, in my view, stands on a different footing. The decision of the Madras High Court in 215 ITR 53 (sic) seems to proceed on the basis that every provider of every instrument or facility used by a person may not be regarded as providing technical services. With respect, I am not in a position to agree with the conclusion therein that a transmission of electricity merely involves providing of an instrument or facility by a person receiving consideration for it. In my view it involves the rendering of services which is technical in natu....
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.... and PGCIL. Strangely the assessee company has paid TDS of Rs.2,28,21,045/- on payments of Rs.115,16,09,352/- made to PGCIL on account of wheeling charges and same was also deposited to the Govt. account' However, no TDS was paid on account of wheeling/transmission charges of Rs.385,56,29,749/- paid to OPTCL. In A.Y. 2072-13, the assessee company had deducted TDS of Rs.2,28,21,045/- on wheeling charges of Rs179,28,35,000/- paid to PGCIL for transmission of power from NTPC. In A.Y. 2013-74, the assessee company had deducted TDS of Rs.3,22,12,394/- on wheeling charges of Rs.161,06,19,665/- paid to PGCIL for transmission power from NTPC. iv') It was submitted that as per state government notification dated 09.06.2005, the transmission business of GRIDCO was transferred to OPTCL with effect from 01.04.2005. As a result, the bulk supply agreement between GRIDCO and DISCOMs stood modified and DISCOMs were obliged to pay separately to GRIDCO and OPTCL towards power cost and transmission charges. In order to secure recovery of power dues, GRIDCO executed ESCROW arrangements with DISCOMs whereby the transmission charges (revenues) of DISCOMs were deposited. v.) It ....
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....e, seeking permission for getting the deduction of tax at source u/s 194-I at a lower rate of 5.5% which has been issued and the assessee has admittedly deducted tax at source on wheeling and transmission charges at a lower rate as per the certificate issued of the Act. When the payee was treating the receipt of wheeling and transmission charges as liable for deduction of tax at source, it was beyond the comprehension of Hon'ble ITAT that as to how the assessee could contend that such charges were not liable for deduction of tax at source (para_9). ix.) The Authority for Advance Rulings (AAR) in the case of Ajmer Vidyut Vitran Nigam Limited (24 taxmnann.com 300) held in para_9 & 10 as under: ""9. From a survey of the duties and obligations of RVPN viz- a-viz the applicant, it is not possible to accept the argument that for maintaining proper and regular transmission of electrical energy, no rendering of technical services is involved. It is not a mere case of RVPN maintaining its system with the help of its professional and technical personnel. It is also a case of such personnel ensuring regular and consistent transmission of electrical energy at the grid vol....
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....nt year 2009-2010 in ITA No.149/CTK/2013 dated 7.1.2016, wherein, in paras 15 to 26, it has been held as follows: "15. we have considered rival contentions, carefully gone through the orders of the authorities below and also deliberated on the judicial Pronouncements referred by lower authorities in their respective orders as well as cited by td, AR & DR during the course of hearing before us in the context of factual matrix of the case. We had also gone through the order of the Tribunal in the assessee's own case for the assessment year 2008-2009, dated 17-11-2011, and particularly the observation made by the Tribunal with reference to the nature of payment whether fees for technical services within the meaning of Section 194-J. 16, From the record we found that transmission charge is to be paid by the distributing companies and privity of contract is between OPTCL and the Distributing Companies. The transmission charges bill is being raised by the OPTCL directly on the Distributing Companies i.e. Central Electricity Supply Company of Orissa Ltd, (CESU), Western Electricity Supply Company of Orissa Ltd. (WESCO), North Eastern Electricity Supply Company of Ori....
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....ricity Supply Co. of Orissa, (2) Western Electricity Supply Co., (3) Eastern Electricity Supply Co, and (4) Southern Electricity Supply Co. All these entities are called 'DISCOMs' 8. Consequent to these reforms, the assessee company was incorporated on 20.4.1995 with the object of carrying on the business of purchasing, selling transmission and wheeling of power in the State of Orissa. The duty of the assessee was to purchase powers from power producers and to sell and transmit the same to the distributing companies. Accordingly, the assessee is having the twin object of trading as well as the transmission and wheeling of powers. In order to achieve this duty, the assessee obtained bulk supply agreement with the distribution companies thereby purchasing powers from the producers, transmitting powers to DISCOMs stated supra. 9. While so, the Central Act namely, the Electricity Act, 2003 was enacted in order to further carry out the reforms in the power sector. One of the important features of this act was that there has to be a separate entity for which all the activities i.e. for generation, trading, transmission and distribution. This enactment envisages an indep....
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....o the distributing companies. This is borne out by the invoices being raised thereafter by the OPTCL directly on the DISCOMs and the copies of such invoices are also placed at pages 96 to 203 of the PB filed by the assessee. 10. A notification dt.6.6.2006 issued by the Orissa Electricity Regulatory Commission clarified that OPTCL and GRIDCO i.e. the assessee are separate companies with different licenses and revenue requirements have been approved separately, so also the transmission charges and the bulk tariff , it was further clarified by this notification that two separate bills have to be issued by the two separate licenses for the services rendered by each of them. Under these facts and circumstances, the privities of contract for payment for transmission charges are between the OPTCL and DISCOMs. Thereafter, the AO cannot hold that the assessee is liable to deduct tax at source in respect of transmission charges merely because the basis of the escrow arrangement for payment whereby the sale proceeds of EISCOMs are coming into the bank account of the assessee. 11. The Assessing Officer has not been able to appreciate the purpose and the procedure for which es....
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....gazette notification dt.9.6.2005 wherein a new company was created and the bulk supply agreement stands divided into two parts of purchase and sales is to the assessee and the transmission and wheeling charges is on the account of OPTCL. Consequently, the four DISCOMs are supposed to make separate payment for purchase of power to the assessee and for the transmission and wheeling charges to the OPTCL. In this view of the matter, the ld CIT(A) was not justified in upholding the order of the AO that the assessee has failed to deduct tax at source on transmission and wheeling charges u/s.194 I and consequent addition u/s.40(a)(ia) in making consequential addition of this amount. To fortify this proposition the balance sheet and profit and loss account of the assesseer are coming into play and the assessee has neither shown any income on this account nor any expenditure. The assessee is just holding the payment which comes into its bank account from the distributing companies because of the escrow arrangement and the same goes to the OPTCL and as such there is no income in the hands of the assessee. This is nothing but as transfer of payment by overriding effect. The assessee at best c....
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....ssessee acquired certain skill/knowledge /intellect/which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical services to the customer for a fee. Similar is the proposition laid down in other cases relied by the ld A.R. supra. "'Fees for technical services ' it is clear that S. 194 J would have application only when the technology or technical knowledge of a person is made available to the others and not where by using such technical systems services are rendered to the others. It is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch Centre and the Regulatory Commission for achieving the economy and efficiency in the operation of power system and therefore question of any person rendering service to another does not arise - when no income is paid by assessee to transmission company the questio....
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....ndment made by the Finance Act, 2012 whereby the following proviso has been inserted:- 'Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of chapter XVII- B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (l) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso," corresponding amendment has been made in section 201(1) as under:- 'provided that any person, including the Principal officer of a company, who falls to deduct the whole or any part of the tax in accordance with the provisions of this chapter on the with sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident - (i) Has furnished his return of income under section 139, (ii) Has taken into account such sum for computing income such return of income and (iii) Has....
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....It was the submission that in assessee's own case for the immediately assessment year, the issue having been held in favour of the assessee, the same is liable to be followed in view of the principles of consistency. 8. We have considered the rival submissions. At the outset, coming to the decision in the case of Maharashtra State Electricity Distribution Co Ltd(supra) relied upon by ld CIT DR clearly shows that it is a case of stay petition. For the purpose of staying of demand, the Co-ordinate Bench of this Tribunal has taken a view that the assessee has not shown a prima facie case. It is not the decision on merits and what has happened to the merits of the addition, has not been placed before us. 9. Coming to the decision in respect of The Authority for Advance Rulings (AAR) in the case of Ajmer Vidyut Vitran Nigam Limited (supra), a perusal of the said decision shows that the same has admittedly been overruled by the Hon'ble Rajasthan High Court in 2016(10)TMI 1124 and the Hon'ble Rajasthan High Court has categorically held that interconnected charges/port access charges cannot be regarded as fees for technical services, hence not liable for tax deduction at source. 1....