2014 (12) TMI 1159 - AT - Income Tax

Non deduction of TDS - whether wheeling scheduling and transmission services amount availing of professional/technical services u/s 194J r.w. 9 (1)(vii)? - Held that - As decided in ITO (TDS) Udaipur vs Hindustan Zinc Ltd 2015 (6) TMI 345 - ITAT JODHPUR in identical wheeling and transmission charges paid to the State Power Utility Department holds that mere availing the power network system and making payments in lieu thereof does not amount to paying any fee for technical services . It has been observed that these activities do not involve any human element as per case laws CIT vs Bharti Cellular Ltd 2008 (10) TMI 321 - DELHI HIGH COURT and Skycell Communications Ltd Compact Spinning System The Dy. CIT 2001 (2) TMI 57 - MADRAS High Court . The co-ordinate bench concludes that section 194J aforesaid applies only in case some technology or technical knowledge is made available to others and not merely in a situation involving use of technical systems. Similar principle stands echoed by another coordinate bench in Maharashtra Electricity Distribution Co. Ltd vs Addl. CIT 2012 (8) TMI 519 - ITAT MUMBAI . The Assessing Officer s order is silent on both these counts i.e involvement of any human element or making available of any technology or technical knowledge. The lower appellate order does not state anything specific about this technical know-how aspect but draws inferences based on assessee s agreements that some manual element is always embedded therein in distribution and wheeling activity. No details are quoted in support thereof. Therefore we observe that the assessee s identical wheeling scheduling and transmission facilities availed from the TANGEDCO do not attract sec.194J(1) Explanation (b) of the Act. At this stage the Revenue places strong reliance on Ajmeer Vidyut Vitran Nigam Ltd decision (2012 (8) TMI 742 - AUTHORITY FOR ADVANCE RULINGS). We quote section 245S(1) to observe that the said decision applies as a precedent only in specific conditions enumerated therein. The Revenue fails to draw any distinction on facts or refer to any case law to the contrary. - Decided in favour of assessee.

Summary

Issues Involved:
Appeals against TDS demands under section 201(1) and 201(1A) of the Income-tax Act, 1961 for assessment years 2010-11, 2011-12, and 2012-13. Whether wheeling, scheduling, and transmission charges paid to the state electricity board constitute fees for technical services under section 194J?

Analysis:
1. Identical TDS Demands: The appeals were directed against separate orders of the Commissioner of Income-tax (Appeals) upholding the Assessing Officer's action in raising identical TDS demands for different assessment years. The demands were based on the non-deduction of TDS on wheeling, scheduling, and transmission charges paid to the state electricity board.

2. Nature of Services: The dispute revolved around whether the wheeling, scheduling, and transmission charges constituted fees for technical services under section 194J. The Assessing Officer treated these activities as technical services based on the agreements between the assessee and the state power utility. The CIT(A) also upheld this view, emphasizing the technical nature of the work involved in the agreements.

3. Legal Interpretation: The CIT(A) referred to the provisions of section 194J and Explanation 2 to clause (vii) of section 9 to support the contention that the wheeling charges were subject to TDS. The agreements highlighted the technical aspects of the services provided by the state power utility, leading to the conclusion that the charges fell within the ambit of section 194J.

4. Appellate Tribunal's Decision: The Appellate Tribunal analyzed the case law and observed that mere availing of power network systems and making payments did not necessarily amount to fees for technical services. The Tribunal noted that the Assessing Officer's order lacked specifics regarding the involvement of human elements or the provision of technical knowledge. Relying on precedents and the absence of evidence supporting technical services, the Tribunal accepted the assessee's arguments and deleted the impugned demand.

5. Judgment and Outcome: The Appellate Tribunal allowed the appeals, stating that the wheeling, scheduling, and transmission facilities availed by the assessee did not attract section 194J(1) Explanation (b) of the Act. The Tribunal emphasized the need for evidence of technical knowledge or technology transfer to classify the services as technical. The decision was in favor of the assessee, and the impugned demands were deleted.

6. Conclusion: The Tribunal's decision highlighted the importance of establishing the technical nature of services to determine the applicability of TDS provisions. The judgment emphasized the need for clear evidence of technical elements or technology transfer to classify charges as fees for technical services under the Income-tax Act, ultimately leading to the allowance of the appeals.