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2015 (6) TMI 345 - AT - Income TaxNon deduction of TDS - whether Transmission charges, SLDC charges and wheeling charges amount availing of professional/technical services u/s 194J r.w. 9 (1)(vii)? - Held that - Going through the relevant clauses of the agreement between the assessee and the RRVPNL and have found that there is no such clause in the agreement which prevents RRVPNL to allow any other power generating company to use transmitting lines. Rather, it is noticed that if any other neighbouring entity in Chanderi wished to use open access system of RRVPNL to transfer the power to another entity, it could very well do so. Charges for such utilization are given by the Rajasthan Regulatory Body and not controlled by the assessee company in any manner. Tarrifs are uniform for everyone using their infrastructure and the assessee company does not have any say in that matter. Accordingly, we are also of the opinion that the A.O/ITO-TDS was not justified in holding that the payment of transmission charges, wheeling charges and SLDC charges would attract the provisions of section 194J of the Act. Therefore, we approve the finding of the ld. CIT(A) in holding that the demands created u/s 201(1) of the Act in all these years and so also the related interest charged u/s 201(1A) would not survive and have been correctly deleted/cancelled by him. Accordingly, we dismiss all the four appeals of the revenue. - Decided in favour of assessee.
Issues Involved:
1. Whether the payments made by the assessee in the form of transmission/wheeling/SLDC charges were liable to tax deduction at source (TDS) under section 194J or 194C of the Income Tax Act. 2. The applicability of section 194C if section 194J is not applicable. 3. The liability of the assessee to pay interest under section 201(1A) of the Income Tax Act. 4. Restoration of the Assessing Officer's order and the demands created consequently. Detailed Analysis: 1. Liability to Deduct Tax at Source under Section 194J or 194C: The primary issue was whether the payments made by the assessee for transmission, SLDC, and wheeling charges to RRVPNL were liable for TDS under section 194J (fees for technical services) or section 194C (payments to contractors). The Assessing Officer (A.O.) considered the services provided by RRVPNL as technical in nature and thus held that TDS should have been deducted under section 194J. The Tribunal noted that the expression "fees for technical services" is defined in Explanation 2 to clause (vii) of sub-section (1) of section 9 of the Act, which involves human intervention. The Tribunal referred to the Delhi High Court's ruling in CIT v. Bharti Cellular Ltd., which emphasized that "technical services" must involve human elements, and services provided automatically by machines do not fall under this category. The Tribunal also cited the case of Skycell Communications Ltd., where it was held that using sophisticated technology does not equate to rendering technical services. The Tribunal concluded that the services provided by RRVPNL, which involve the use of transmission lines and infrastructure without human intervention, do not qualify as "technical services" under section 194J. Therefore, the payments for transmission, SLDC, and wheeling charges were not liable for TDS under section 194J. 2. Applicability of Section 194C: The Tribunal addressed the alternative argument regarding the applicability of section 194C. The A.O. had suggested that if section 194J was not applicable, then section 194C should apply. The Tribunal, however, did not find merit in this argument, as the nature of payments did not fit the definition of "work" under section 194C, which typically involves contracts for carrying out any work, including supply of labor. 3. Liability to Pay Interest under Section 201(1A): The Tribunal examined whether the assessee was liable to pay interest under section 201(1A) due to non-deduction or short deduction of TDS. The Tribunal referred to the Supreme Court's decision in Hindustan Coca Cola Beverages (P) Ltd. vs. CIT, which held that if the deductee has paid the taxes on the income received, the deductor cannot be held liable for the same tax again. The Tribunal found that the assessee had provided evidence that the deductee had paid the taxes on the income received, thus negating the liability of the assessee to pay interest under section 201(1A). 4. Restoration of the Assessing Officer's Order: The revenue sought to restore the A.O.'s order and the demands created under sections 201(1) and 201(1A). However, the Tribunal upheld the CIT(A)'s decision to cancel the demands, concluding that the payments made by the assessee were not liable to TDS under section 194J or 194C, and no interest was payable under section 201(1A). Conclusion: The Tribunal dismissed the appeals of the revenue, affirming that the payments for transmission, SLDC, and wheeling charges were not liable for TDS under section 194J or 194C, and the assessee was not liable to pay interest under section 201(1A). The Tribunal upheld the CIT(A)'s order canceling the demands created by the A.O.
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