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TMI Blog2015 (6) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA Nos. 488 to 491/Jodh/2010 - - - Dated:- 30-8-2013 - SHRI HARI OM MARATHA AND SHRI N.K. SAINI, JJ. For the Appellant : Shri K. Sampat For the Respondent : Dr. Deepak Sehgal, CIT-DR ORDER This is a bunch of four appeals filed by the revenue for A.Ys. 2006-07 to 2009-10 arising out of common order of ld. CIT(A), Udaipur dated 06/07/2010. In all the above four appeals, identical issues are involved, therefore, for the sake of convenience, congruence and brevity, we are proceeding to decide them by this common order. 2. The most relevant and common facts involved in all the above four appeals are that in the case of this assessee, namely, Hindustan Zinc Limited, a spot verification in respect of tax deducted at source [TDS] was conducted on 6.11.2008 at the Captive Power Plant (CPP) of the appellant situated at Chanderiya Unit. It was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, thus the appellant has failed to deduct the tax at source on payments of transmission charges, SLDC charges and wheeling charges to RRVPNL made during F.Ys. 2005-06, 2006-07, 2007-08 and 2008-09 entirely and total of such payments come to ₹ 22,93,09,626/-. The non- deduction of tax at source recoverable on these payments of ₹ 22,93,09,626/- has been worked at ₹ 1,75,67,890/- u/s. 201(1) and interest on such non deduction of tax at source, recoverable has been worked out at ₹ 32,82,293/- u/s. 201(1A) of the Act. 2.1 The assessee being a leading manufacturer of zinc and lead, has established a CPP for consumption of power at the Chanderiya unit and distribution of the power inter alia to other units. The power from the generation point to the consumption point is transmitted through the transmission network of RRVPNL. The assessee has entered into a Short Term Open Access Connection Agreement for transmission and supply of power on 11.03.2005 with the RRVPNL for transmission of power. 2.2 The RRVPNL has been notified by the Govt. of Rajasthan as the State transmission utility which is a deemed transmission licensee under the fifth proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agreement, the customer shall also pay the SLDC charges as determined by the Commission from time to time. 2.4 Thus the A.O. observed that the assessee was making payments of transmission charges, SLDC charges and wheeling charges to RRVPNL for taking services of this company for transmission of electricity through the transmission system owned or operated by the RRVPNL as per terms and conditions mentioned in the agreement. The A.O. has treated the services provided by RRVPNL in the nature of technical services and therefore, was of the opinion that TDS should have been deducted as per the provisions of section 194J of the Act. The assessee has failed to deduct TDS on payments of transmission charges SLDC charges and wheeling charges made during the F.Y. 2005-06 to 2006-07 and 2007-08 entirely whereas total payments come to ₹ 18,81,61,007/-. The non-deduction of tax at source recoverable on these payments come to ₹ 1,36,76,466/- u/s 201(1) and interest thereon u/s 201(1A) being ₹ 30,85,605/- 2.5 Regarding payments of ₹ 4,11,48,619/- made during the period from 1.4.2008 to 31.10.2008, the assessee deducted TDS as per the provisions of section 194C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies, under which the assessee was already making deductions on such payments. (3) Whether on the facts of the case and circumstances of the case, the Ld CIT(A) was justified in law, in holding that, the assessee was not liable to pay interest u/s 201(1 A) of the Income Tax Act 1961 because there was no liability of payment of tax on the income of the deductee. (4) It is prayed that the order of the Assessing Officer and the demands, created consequently, are restored. 5. We have heard the rival submissions as advanced and have carefully perused the entire material on record including the paper book and written submissions filed before us. The reply filed by the assessee to the A.O. through two letters is very relevant and we extract them verbatim for ready reference: 'This has reference to your show-cause notice No ITO TDS/UDR/2008-09/1520 dated 26.11.2008 received by us on 03.12.2008 requiring us to show-cause for non deduction, of TDS on Transmission charges, SLDC charges and wheeling charges during FY 2005-06, 2006-07 and 2007-08 and further show cause as to why the TDS in FY 2008-09 is deducted u/s 194C instead of section 194]. Our reply is as under: Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy service (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries. As per above, consideration paid tor rendering of any managerial, technical or consultancy service, as also the consideration paid for the provision of service of technical or other personnel, would be regarded as fee for technical service. The term fee for technical service is required to be understood in the context in which it is used. It could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with 'technical' is involving or concerning applied and industrial sciences. In the modern day world, almost every facet of one's life is linked to science and technology in as much as numerous things used or relied upon in every days life is the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs Bharti Cellular Ltd, Escotel Mobile Communications Ltd and Hutchison Essar Tellecom Ltd 220 CTR 258 where it was held: When we are required to interpret the expression technical service, the individual meaning of the words technical and service have to shed and only the meaning of 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 Explanation 2 to section 9(1)(vi) of the said Act. Considered in this light the expression technical service would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots . Reference is invited to landmark decision of Madras High Court in the case of Skycell Communication v. Dy. CIT [2001] 251 ITR 53. In this case it was held that when a person decides to subscribe to a cellular telephone service in order to have a facility of being able to communicate with others, he does not contract to receive technical service. What he does agree is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation - For the removal of doubts it is hereby declared that any person referred to in section 200 and in the cases referred to in section 194, the principal officer and the company to which he is the principal officer does not deduct the whole or any part of the tax and such tax has not been paid by the assessee direct then, such person, the principal officer and the company, shall, without prejudice to any other consequences which he or it may occur, be deemed to be an assessee in default as referred to in sub-section (1) of section 201 in respect of such tax. From the Explanation it is amply clear that the principal officer is deemed to be an assessee in default u/s 20 1(1 A) only when he does not deduct whole or any part of tax and such tax has not been paid by the assessee direct. Conversely where recipient has paid tax, the principal officer shall not be held to be assessee in default for non deduction of tax at source. Attention is drawn to CBD'T circular dated 29.01,1991 wherein it is mentioned that no demand should be created u/'s 201(1) if the deductor has satisfied the officer in charge of TDS that taxes due has been paid by the deductee assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady pointed out that the expression fees for technical services as appearing in Section 194J of the said Act has the same meaning as given to the expression in Explanation 2 to section 9(l)(vii) of the said Act. In the said Explanation the expression fees for technical services means any consideration for rendering of any managerial, technical or consultancy services . The word technical is preceded by the word managerial and succeeded by the word consultancy . Since the expression technical services is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on The Interpretation of Statutes (Twelfth Edition) in the following words: Where two or more words which are susceptible of analogous meaning are coupled together, noscitur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general. This would mean that the word technical, would take colour from the words managerial and consultancy between which it is sandwiched. The word managerial has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are rendering any technical services as contemplated in Explanation 2 to Section 9 (I) (vii) 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 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. 20. Before concluding we would also like to point out that the interconnect/ port access facility is only a facility to use the gateway and the network of MTNL/other companies. MTNL or other companies do not provide any assistance or aid or help to the respondents/ assessees in managing, operating, setting up their infrastructure and networks. No doubt, the facility of interconnection and port access provided by MTNL/ other companies is 'technical' in the sense that it involves sophisticated technology. The facility may even be construed as a 'service' in the broader sense suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into 'transmission service agreement' with the assessee distribution company. The Assessing Officer held that the payment made by the assessee to RVPN was a payment for technical service liable for deduction of tax at source under section 194J. Held that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch Centre and the Regulatory Commission for achieving the economy and efficiency in the operation of power system and, therefore, question of any person rendering service to another did not arise. The operation and maintenance of transmission lines by RVPN and the user of these lines by the assessee for transmitting energy did not result into any technical service being rendered to the assessee. The technical staff of RVPN by operating and maintaining its grid station and transmission lines simply discharged their function. They did not render any technical service to the assessee. Section 194J would have application only when the technology or technical knowledge of a person is made available to others and not where by using technical systems, services are rendered to others. Rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in right which can be further used for its own benefits/use/purpose or research. Thus, it becomes evident that where a facility is provided through machines or through sophisticated equipments which are meant for earning income by customers to avail benefit by their user. It would not amount to providing of technical services to the customers for a fee. We are in agreement with the ld. CIT(A) when he mentions in para 2.2.8 that the present agreement of transmission of services has been incorrectly conceived by the A.O. and has made wrong reasons to arrive at his conclusion. These reasons have already been extracted in our earlier part of the order. Therefore, we need not repeat them. 12. We have gone 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 Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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