2012 (11) TMI 546 - AT - Income Tax

Non deduction of TDS - payment for using the transmission lines of power owned by KPTCL and PGCIL - interest u/s. 201(1A) - Held that - The words managerial and consultancy involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a sociis, the word technical as appearing in Expln. 2 to section 9(l)(viz) would also have to be construed as involving a human element. But, the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Expln. 2 to section 9(1 )(vn) of the said Act. This is so because the expression technical services takes colour from the expressions managerial services and consultancy services which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as technical services as contemplated under section 194J of the said Act. Respectfully following the decision of the Tribunal in the case of Bangalore Electricity Supply Co. Ltd. Versus Income Tax Officer (TDS), Ward 16(1), Bangalore 2012 (11) TMI 385 - ITAT BANGALORE the applicability of Sec. 194J would come into effect only when by making payment of fee for technical services, assessee 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 service to the customer for a fee. Therefore, the assessee was not liable to deduct tax at source on payments of transmission charges to KPTCL as the provisions of Sec. 194J are not attracted thereon 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. In view of the above conclusion, 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) do not require any consideration - in favour of assessee

Issues Involved:
1. Tax Deduction at Source (TDS) on Transmission Charges
2. TDS on State Load Dispatching Centre (SLDC) Charges
3. Liability for Interest on Non-Deduction of TDS
4. Applicability of Section 196 of the Income Tax Act
5. Condonation of Delay in Filing Appeals by Revenue

Issue-wise Detailed Analysis:

1. Tax Deduction at Source (TDS) on Transmission Charges:
The core issue was whether payments made by the assessee to Karnataka Power Transmission Corporation Ltd. (KPTCL) for transmission charges should be subjected to TDS under Section 194J of the Income Tax Act. The Tribunal referenced its earlier decision in the case of Bangalore Electricity Supply Company Ltd. (BESCOM) and Jaipur Vidyut Vitran Nigam Ltd. (JVVNL), concluding that the transmission charges do not qualify as "fees for technical services" as defined under Section 194J. It was held that the services provided did not involve any human intervention and were automated, thus not falling under the purview of technical services requiring TDS.

2. TDS on State Load Dispatching Centre (SLDC) Charges:
The Tribunal also examined whether SLDC charges paid by the assessee to the State Load Dispatching Centre were subject to TDS under Section 194J. The CIT(A) had held that SLDC, being an independent statutory body, provided managerial and technical services, thereby attracting TDS. However, the Tribunal, following its earlier ruling in BESCOM's case, concluded that SLDC charges were merely reimbursements for actual expenses and did not constitute fees for technical services. Consequently, no TDS was required on SLDC charges.

3. Liability for Interest on Non-Deduction of TDS:
The Tribunal addressed the issue of interest levied under Section 201(1A) for non-deduction of TDS on transmission and SLDC charges. The CIT(A) had ruled that interest should be calculated from the due date of TDS remittance until the date of filing of returns by the recipients. However, since the Tribunal concluded that no TDS was required on either transmission or SLDC charges, the question of interest liability became moot.

4. Applicability of Section 196 of the Income Tax Act:
The assessee argued that payments to SLDC should be exempt from TDS under Section 196, which exempts payments to the government from TDS obligations. The CIT(A) rejected this argument, stating that SLDC could not be considered as the government. The Tribunal did not delve into this issue further, given its conclusion that no TDS was required on SLDC charges.

5. Condonation of Delay in Filing Appeals by Revenue:
The Tribunal noted that the revenue had filed appeals beyond the prescribed time limit under Section 253 of the Act. However, since the revenue had already filed timely appeals covering the same grievances, the delay was condoned as a technical defect. Consequently, the later appeals (ITA Nos. 908 to 913/Bang/2012) were accepted, while the earlier appeals (ITA Nos. 904 to 906/Bang/2011) were dismissed as infructuous.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that transmission charges paid to KPTCL did not attract TDS under Section 194J. Conversely, it reversed the CIT(A)'s decision regarding SLDC charges, holding that these too did not require TDS. The appeals by the assessee (ITA Nos. 896 to 903/Bang/11) were allowed, while the revenue's appeals (ITA Nos. 904 to 906/Bang/2011) were dismissed, and the delayed appeals (ITA Nos. 908 to 913/Bang/2012) were also dismissed.

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