2012 (8) TMI 1038 - AT - Income Tax

TDS u/s 194J - non deduction of tax at source in respect of transmission charges, State Load Dispatching Centre ( SLDC ) charges - Held that - Respectfully following the decision of the Tribunal in the case of Bangalore Electric Supply Company Ltd. 2012 (11) TMI 385 - ITAT BANGALORE , we uphold the order of the CIT(A) so far as it relates to transmission charges and reverse the order of the CIT(A) with reference to SLDC charges. The issues regarding levy of interest, the question whether (SLDC) was Government within the meaning of section 196 and the question whether the liability of the person making payment will stand extinguished on payment of taxes by the recipient of the payment and the question of period of levy of interest u/s. 201(1A) of the Act do not require any consideration. Revenue has apart from the original grounds of appeal raised has sought to file additional grounds of appeal. These additional grounds of appeal are a reiteration of the stand of the revenue as reflected in the original grounds of appeal but on different facets of the issue raised in the original grounds of appeal. The additional grounds are admitted for adjudication.

Issues Involved:
1. Deduction of tax at source on transmission charges.
2. Deduction of tax at source on State Load Dispatching Centre (SLDC) charges.
3. Classification of SLDC as a government entity under Section 196 of the Income Tax Act.
4. Levy of interest under Section 201(1A) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deduction of Tax at Source on Transmission Charges:
The primary issue was whether the payments made by the assessee to Karnataka Power Transmission Corporation Ltd. (KPTCL) for transmission charges constituted fees for technical services under Section 194J of the Income Tax Act, 1961. The CIT(A) concluded that transmission charges paid to KPTCL were not fees for technical services, and therefore, the assessee was not obligated to deduct tax at source on these payments. This conclusion was based on the fact that the services provided by KPTCL did not involve any human element, which is a necessary condition for a service to be classified as technical under Section 194J. The Tribunal upheld this view, referring to the decision in the case of Jaipur Vidyut Vitran Nigam Ltd., which established that the use of technical systems to render services does not amount to the provision of technical services.

2. Deduction of Tax at Source on SLDC Charges:
The second issue was whether payments made to the State Load Dispatching Centre (SLDC) were subject to tax deduction at source under Section 194J. The CIT(A) held that SLDC charges were fees for technical services, as SLDC performed managerial and technical functions. However, the Tribunal reversed this decision, noting that SLDC charges were merely reimbursements of actual expenses and not income. The Tribunal referenced its earlier decision in the case of Bangalore Electricity Supply Company Ltd., which concluded that SLDC charges did not attract the provisions of Section 194J, as they were not considered fees for technical services.

3. Classification of SLDC as a Government Entity:
The CIT(A) had rejected the assessee's argument that SLDC should be considered a government entity, and thus, payments to it should be exempt from tax deduction at source under Section 196 of the Act. The Tribunal did not delve into this issue further, as it had already concluded that SLDC charges did not attract tax deduction under Section 194J.

4. Levy of Interest under Section 201(1A):
The CIT(A) had directed that interest under Section 201(1A) should be calculated from the due date of remittance of TDS until the date of the return filed by the recipients of the payments. The Tribunal did not address this issue specifically, as it had already determined that the assessee was not liable to deduct tax at source on transmission and SLDC charges.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that the assessee was not liable to deduct tax at source on transmission charges paid to KPTCL, as these did not constitute fees for technical services. However, it reversed the CIT(A)'s decision regarding SLDC charges, concluding that these were reimbursements of actual expenses and not subject to tax deduction at source under Section 194J. Consequently, the Tribunal dismissed the revenue's appeals and allowed the assessee's appeals. The issues regarding the classification of SLDC as a government entity and the levy of interest under Section 201(1A) were rendered moot by these conclusions.

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