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TMI Blog2012 (2) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee’s case for assessment years 2006-07 to 2008-09. The Revenue has not been able to make out as to why this decision is not applicable for the year under consideration before us. Therefore, following the Tribunal order in the assessee’s own case for assessment years 2006-07 to 2008-09, ground No.2 is also rejected, upholding the CIT(A)’s order for this issue also. - ITA NO. 4606(Del)2011 - - - Dated:- 10-2-2012 - SHRI A.D. JAIN AND SHRI A.N. PAHUJA For the Appellant: Shri Krishna, CIT/DR For the Respondent: S/Shri K. Sampath, Adv./V.Raj Kumar, Adv. ORDER PER A.D. JAIN, J.M. This is Department s appeal for assessment year 2008-09, taking the following grounds:- 1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of ₹ 1,53,97,80,054/- made by the Assessing Officer on account of non-realization of provisions of surcharge. 2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of ₹ 2,44,55,32,835/- made u/s 40(a)(ia) on account of payment made on account of SLDL wheeling charges, which are made in the work of providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Govind Prasad Prabhu Nath , 171 ITR 147(All); 2. CIT v. Bharat Petroleum Corporation Ltd. , 202 ITR 492(Cal); 3. Morvi Industries Ltd. v. CIT , 82 ITR 835(SC); and 4. CAG IT v. Raja Rajeswari Narikelly Estate , 199 ITR 383(Ker). 3. The AO further observed that the assessee s submission was also not acceptable when it had been contended that the income by way of surcharge was a hypothetical income, since this was not borne out from the facts on record; that a part of the surcharge levied by the assessee during the year had been realized and accounted for as income, amounting to ₹ 20.48 crores; that the consumers subjected to levy of surcharge had accepted the surcharge in principle; that merely since the same had not been deposited by the consumers with the assessee company during the year could not defeat the right of the assessee to realize the surcharge levied; that the surcharge amount was also reflected in the debtors of the assessee Company which had subsequently been reduced from the debtors on account of nonrealization thereof during the year, as given in the Annual Report of the assessee Company; that this position stood also reflected in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the material placed on record with regard thereto. As per the Statement of Facts filed before the ld. CIT(A), the assessee is a Government Undertaking, carrying on the business of distribution of electricity in Southern Haryana. It is levying surcharge on the bills issued by it, if the payment is not made within the time allowed. However, there is a general practice, whereby, most of the rural area consumers of domestic and agricultural categories do not make the payment of even the original bill, much less of surcharge. The Government frequently announces Waiver Schemes of Surcharge to reduce the debtors. Thereby, it becomes extremely difficult to recover the amount or to start legal proceedings against the defaulters. During the year, the surcharge realized was of ₹ 20.48 crores. This was booked as income as against the surcharge levy of ₹ 174.46 crores. The AO made addition by disallowance of ₹ 153.98 crores representing surcharge levied but not realized, which was deleted by the ld. CIT(A). 9. The assessee maintains that specific Notes in this regard were given in the balance sheet and the Notes to Accounts. It has been submitted that this action wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge is subject to protest/ waiver and is not mandatorily enforceable by assessee at the time of payment of bill. The sur-charge exist in the rule and is printed in the bill but it has not been disputed that the assessee has regular mechanism to accept the bills without payment of sur-charge. The same is deferred till the consumer dispute is settled by the appropriate means which may be provided by the instructions of the declared policy of the government. 5.3. In view of these facts, coupled with the fact that assessee changed its method of accounting after seeking necessary approval of CAG, shows that as far as the assessee is concerned, the collection of sur-charge was contingent and did not accrue due to assessee. The liability will accrue on the basis of crystallization i.e. the payment of the surcharge or passing of a suitable order by the appropriate authority on the dispute raised by the customer. 5.4. Coming to the case laws, Hon ble Supreme Court in the case of Shoorji Vallabh Das Co. (supra) had to deal with an issue of managing agency commission transferred by the assessee to two other companies. Subsequent agreement after the end of accounting year resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action accepted by the department is subject to variation by adopting different interpretation on any settled issue. 5.10. In our view the Woodward Governor case (supra), relied on by ld. D.R. is of no avail to revenue as itself lays down that profits and gains of any previous year are required to be computed in accordance with relevant accounting standards. Similarly, the case of G.R. Karthikeyan (supra) also will not benefit the revenue as it did not decide any controversy of accrual or mercantile system of accounting. The judgment deals with winning from gambling and batting income, there is no issue about accounts or accrual in this case. 5.11. Coming to learned DR reliance on the case of Tuticorin Alkali Chemicals (supra), the same deals with the receipts being in the nature of capital or revenue. The factum of receipt was not disputed and whether the receipt was capital or revenue, Hon ble Supreme Court held that while deciding the question, the same has to be on the basis of principle of law and not in accordance with the accountancy practice. In our vie the case before us pauses a picture on different facts which have been mentioned in detail above. 5.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re rendered, rendering of services by allowing use of a technical system is different from charging fee for rendering technical services, Section 194 J would come into play only when making payment of fee for technical services, and the assessee acquires certain skill/knowledge/intellect by use of Machines/Robot or where sophisticated equipments are installed and operated. 12. The AO, however, rejected the contention of the assessee. It was held that the assessee had accepted that it had made payment on account of Wheeling charges and SLDC charges of ₹ 2,37,00,21,981/- and ₹ 4,55,10,855/-, respectively, to HVPN Ltd,; that HVPNL had provided technical services, for which, the assessee was paying the Wheeling charges and SLDC charges; that however, the assessee had failed to deduct tax under the provisions of section 194 J of the Act; and that therefore, the assessee was liable for non-deduction of tax on the total amount of ₹ 2,41,55,32,835/- made to HVPNL and these expenses were disallowable u/s 40(a)(ia) of the I.T. Act. 13. The ld. CIT(A) deleted this disallowance also, taking into consideration the assessee s contention that the Tribunal, vide its order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement we find that as per clause 3 of the agreement assessee is allowed the user of the transmission system. Clause 5 provides for open access transmission capacity whereby any other customer is also allowed to use the transmission lines for long-term open access and shortterm open access. Clause 8 provides for compliance of grid code as approved by the Commission both by RVPN and assessee and further provides that all the parties shall comply with the direction of SLDC for ensuring integrated grid operation for achieving the' maximum economy and efficiency in the operation of power system in the State. As per clauses 10 and 12 the tariff for transmission and wheeling and SLDC charges is to be as approved by the Regulatory Commission. From all these clauses it is clear 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 does not arise. The operation and maintenance of transmission lines by RVPNL and the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alaries . 9.3. The expression fees for technical service as used in section 194J of the Act has been exhaustively examined by the Hon'ble Delhi High Court in the case of Bharti Cellular Ltd. ( supra) and the observations are reproduced as under : 13. We have already 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 Expln. 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 thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, applying the rule of noscitur a sociis, the word 'technical' as appearing in Expln. 2 to section 9(1)(vii) 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)(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 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. 20. Before concluding we would also like to point out that the interconnectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services of technical or other personnel, would be regarded as fees paid for 'technical services'. The definition excludes from its ambit consideration paid for construction, assembly, or mining or like project undertaken by the recipient, as also consideration which would constitute income of the recipient chargeable under the head 'Salaries'. Thus while stating that 'technical service' would include managerial and consultancy service, the legislature has not set out with precision as to what would constitute technical' service to render it 'technical service'. The meaning of the word 'technical' as given in the New Oxford Dictionary is adjective 1 of or relating to a particular subject, art or craft or its techniques; technical terms (especially of a book or article) requiring special knowledge to be understood; a technical report, 2 of involving, or concerned with applied and industrial sciences: an important technical achievement, 3. resulting from mechanical failure: a technical fault, 4. according to a strict application or interpretation of the law or the rules : the arrest was a technical violation of the treaty. Havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receives such transmission of television signals through the cable provided by the cable operator, it cannot be said that the home owner who has such a cable connection is receiving a technical service for which he is required to deduct tax at source on the payments made to the cable operator. Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision to technical service to the customers for a fee. 6. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. That fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange' or the location of the base station ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided to all those willing to pay for it does not amount to the fee having been received from technical services. Thus Hon'ble Court while dealing with the case of transmission of voice has equated the same with the transmission of the electricity and held that the same does not amount to providing the technical service. 9.5. In case of Parasrampuria Synthetics Ltd. (supra) it was held as under : There may be use of services of technically qualified person to render the services but that itself do not bring the amount paid as 'fees for technical services' within the meaning of Expln, 2 to section 9(1)(vii). The amount paid are towards annual maintenance contract of certain machinery or for converting partially oriented yard (POY) into texturised/twisted yarn. The technology or technical knowledge of persons is not made available to the assessee but only by using such technical knowledge services are rendered to the assessee. In such a case, it cannot be said that the amount is paid as 'fees for technical services'. Rendering services by using technical knowledge or skill is different than charging fees for technical services! In the later cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has given a finding on p. 54 of his order that these payments are not covered under section 194C against which no appeal is filed by the Department though we are otherwise convinced with the argument of learned Authorised Representative that section 194C is not applicable on this payment in view of the detailed submission made in this regard at paper book pp. A-23 to A-27. 9.8. The decision relied by the AO in the case of Oberoi Hotels ( India) ( P) Ltd. (supra), Circular No. 187, dt. 23rd Dec, 1975 and in the case of Continental Construction Ltd. ( supra) though relates to section 80-O of the IT Act, supports the case of the assessee that a technical service is involved where 'information concerning industrial, commercial or scientific knowledge, experience or skill is made available'. In the present case no scientific knowledge, experience or skill is made available/rendered by the RVPN to the assessee. The assessee itself has its own engineers and technicians who consistently monitor and supervise the flow of the electricity to its system and ultimately supplies to its customer. The function of State Load Dispatch Centre as regulator and controller for optimum sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable since there is no payment of income/revenue by the assessee. We find that the tariff is fixed by an independent regulatory body i.e., Rajasthan Electricity Regulatory Commission. The transmission company is not allowed any return on its capital; the tariff is determined on the principle of no profit no loss. From the tariff order (paper book 90-93) we find that tariff is fixed, by estimating the actual cost of operation of RVPN. In case, on the basis of such tariff, any surplus is left with the RVPN, they give credit of the same to the assessee as evident from the extract of the minutes of the board and the copy of the journal voucher by which such credit is given to the assessee (paper book 136-138). Thus when no income is paid by assessee to transmission company the question of deduction of tax at source do not otherwise arise even when under certain section of Chapter XVII-B liability of TDS is on payment of any sum and under certain sections it is on payment of income as ultimately the tax is on the income and deduction of tax at source is only one of the modes of collection and recovery of the tax. On actual reimbursement, provision of deduction of tax at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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