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TMI Blog2012 (11) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-10. The appeal memo filed by the revenue shows that revenue has filed one appeal against the order u/s. 201(1) and 201(1A) of the Act. At the time of hearing, the Bench pointed out that separate appeals have to be filed against the order u/s. 201(1) and 201(1A) of the Act respectively. Consequently, the revenue filed the appeals being ITA Nos.908 to 913/Bang/2012 against the orders of the CIT(A) in respect of the some of the payments, which the CIT(A) held, were not liable to tax deduction at source. These six appeals preferred by the revenue relate to assessment years 2007-08 to 2009-10, have been filed beyond the time contemplated u/s. 253 of the Act. This defect in filing all the aforesaid appeals is purely technical because the revenue had already filed appeals within time in ITA Nos.904 to 906/Bang/2011. We therefore condone the delay in filing the appeals being ITA Nos.908 to 913/Bang/2012. The appeals in ITA Nos.904 to 906/Bang/2011 project the same grievance which the revenue has projected in ITA Nos.908 to 913/Bang/2012, therefore the appeals in ITA Nos. 904 to 906/Bang/2011 are dismissed as infructuous. 3. The dispute raised in the appeals by the assessee and the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Grid Standards and the State Grid Code. The Assessing Officer accordingly held that the assessee was an assessee in default u/s. 201(1) of the Act and also levied interest on taxes u/s. 201(1A) of the Act in respect of Transmission charges and SLDC Charges paid as aforesaid. 6. On appeal filed by the assessee, the ld. CIT(Appeals) was of the view that SLDC charges and transmission charges were distinct and different from each other. In respect of SLDC charges, the ld. CIT(A) held that SLDC was not an arm or wing of KPTCL and was an independent statutory body under the Electricity Act, 2003. He further held that SLDC performed the functions which were managerial and technical in nature and rendered only by humans. He therefore held that SLDC charges are fees for technical services. The further argument of the assessee was that u/s. 196 of the Act, there is no obligation to deduct tax at source on payments made to Government and payment to SLDC was payment to Government. On this plea, the ld. CIT(A) held that SLDC cannot be considered as Government and therefore immunity u/s. 196 of the Act was not available. 7. With regard to the transmission charges paid to KPTCL, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to extract relevant portions of the judgement thereof. "Para 9.2 : In above connection it is relevant to extract the relevant provisions of section 194J which are as follows : " 194J. Fees for professional or technical services --- (1) Any person, not being an individual or an HUF, who is responsible for paying to a resident any sum by way of --- a) Fees for professional services, or b) Fees for technical services, or c) Royalty, or d) Any sum referred to in clause (va) of section 28. shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein: Provided that no deduction shall be made under this section ... (A) ....... (B) ....... (2)( .....) (3)(.....) Explanation : For the purposes of this section, .... (b) "fees for technical services" shall have the same meaning as in Expln. 2 to clause (vii) of sub-section (1) of section 9;" (c) ....... The expression "fees for technical services" has not been defined under section 194J of the Act but Expln. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, Fifth Edition as: Of pertaining to, or characteristic of a manager of or within an organization, business, establishment, etc. The word 'manager' has been defined, inter alia, as: A person whose office it is to manage an organization, business establishment, or public institution, or part of one; a person with the primarily executive or supervisory function within an organization etc.; a person controlling the activities of a person or team in sports, entertainment, etc. It is therefore, clear that a managerial service would be one which pertains to or has the characteristic of a manager. It is obvious that the expression 'manager' and consequently 'managerial service' has a definite human element attached to it. To put it bluntly, a machine cannot be a manager. 14. Similarly, the word 'consultancy' has been defined in the said dictionary as 'the work or position of a consultant; a Department of consultants'. 'Consultant' itself has been defined, inter alia, as 'a person who gives professional advice or services in a specialized field'. It is obvious that the word 'consultant' is a derivative of the word 'consult' which entails deliberations, consideration, conferring with some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 'technical service', the individual meaning of the words 'technical' and 'service' have to be shed. And, only one meaning of the whole expression 'technical services' has to be seen. Moreover, the expression 'technical service' is not to be construed in the abstract and general sense but in the narrower sense as circumscribed by the expressions 'managerial service' and 'consultancy service' as appearing in Expln. 2 to section 9(1)(vii) of the said Act. Considered in this light, the expression 'technical service' could have reference to only technical service rendered by a human. It would not include any service provided by machines or robots." Para 9.4. The Hon'ble Madras High Court in the case of Skycell Communications Ltd (supra), has held as under: "4. 'Fees for technical services' is not defined in section l94J. Explanation (b) in that section provides that expression shall have the same meaning as in Expln. 2 to clause (vii) of sub-s.( of section 9. That Expln. 2 in section 9(l)(vii) reads thus: 'For the purposes of this clause, 'fees for technical services' means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a person cannot be regarded as providing technical service. When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, arid monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or, in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having used it for travelling from one destination to another. When a person travels by bus, it cannot be said that the undertaking which owns the bus service is rendering technical service to the passenger and, therefore, the passenger must deduct tax at source on the payment made to the bus service provider, for having used the bus. The electricity supplied to a consumer cannot, on the ground that generators are used to generate electricity, transmission lines to carry the power, transformers to regulate the flow of current, mete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternet service provider cannot be regarded as having entered into a contract for availing of technical services from the provider of the internet service, and such subscriber regarded as being obliged to deduct tax at source on the payment made to the internet service provider. 8. At the time the IT Act was enacted in the year 1961, as also at the time when Expln. 2 to section 9(l)(vii) was introduced by the Finance (No. 2) Act, w.e.f. 1st April, 1977, the products of technology had not been in such wide use as they are today. Any construction of the provisions of the Act must be in the background of the realities of day-to-day life in which the products of technology play an important role in making life smoother and more convenient. Sec. 194J, as also Expln. 2 in section 9(l)(vix) of the Act were not intended to cover the charges paid by the average householder or consumer for utilizing the products of modern technology, such as, use of the telephone fixed or mobile, the cable TV, the internet, the automobile, the railway, the aeroplane, consumption of electrical energy, etc., such facilities which when used by individuals are not capable of being regarded as technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Similar is the proposition laid down in other cases relied by the learned Authorised Representative supra. Para 9.7. The arguments of the learned Departmental Representative that human element is involved in providing such service making the payment of wheeling/SLDC charges liable for deduction of tax at source as technical service has no merit as the technical service is not provided to the personnel of the assessee. We are also unable to pursue (sic) ourself with the contention of the learned Departmental Representative that other persons are making deduction at source on such payment under section 194C/ l94J/194H. The Tribunal then in para 9.10 thereof went on to hold that the assessee M/s. Jaipur Vidyut Vitran Nigam Ltd. was not li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, therefore, was not of the nature of payment covered by s, 194J, requiring the assessee to deduct tax at source therefrom. The CBDT Circular No. 715, dt. 8th Aug., 1995 [(1995) 127 CTR (St) 131 relied upon by the A0 in support of his case on this issue was applicable only in the cases where bills are raised for the gross amount inclusive of professional fees as well as reimbursement of actual expenses and the same, therefore, was not applicable to the facts of the present case where bills were raised separately by the consultants for reimbursement of actual expenses incurred by them. As such, considering all the facts of the case, the provisions of section 194J were not applicable to the reimbursement of actual expenses and the assessee company was not liable to deduct tax at source from such reimbursement." Under these circumstances, we hold that the lower authorities were not justified in holding that the assessee is liable for deduction of tax at source on the payment of transmission /SLDC charges to RVPN." From the relevant portions of the Tribunal decision in the case of J.V.V.N.L. reproduced (supra), we are of the opinion that it is clear that the facts and issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore hold that on SLDC charges paid by the assessee, no deduction of tax is to be made at source as the provisions of section 194J are not attracted or applicable. Accordingly, the impugned demand raised u/s.201(1) r.w.s. 194J and 201(1A) are cancelled. The assessee gets relief accordingly." 11. The parties agreed before us that the facts and circumstances and the basis of the conclusions arrived by the revenue authorities are identical in the cases decided by the Tribunal and the present appeals. In the circumstances, respectfully following the decision of the Tribunal in the case of Bangalore Electric Supply Company Ltd. supra, we uphold the order of the ld. CIT(A) so far as it relates to transmission charges and reverse the order of the ld. 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 of the Act 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 consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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