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Commissioner Of Income Tax-Tds Vs. Delhi Transco Ltd.
September, 07th 2015
$~
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                      Reserved on: 30th July 2015
                                                      Decided on: 6th August 2015

+                              ITA 384/2012
       COMMISSIONER OF INCOME TAX-II           ..... Appellant
                   Through: Mr Kamal Sawhney, Senior
                   Standing counsel with Mr. Raghvendra Singh,
                   Junior Standing counsel.

                               versus

       M/S DELHI TRANSCO LTD.                   ..... Respondent
                     Through: Mr A.B. Dial, Senior Advocate with
                     Ms. Ginny J. Rautray and Ms. Harsha,
                     Advocates.

                                   With

                               ITA 566/2013
       CIT                                                 ..... Appellant
                               Through: Mr Kamal Sawhney, Senior
                               Standing counsel with Mr. Raghvendra Singh,
                               Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD                  ..... Respondent
                    Through: Mr Prashant Mehta with Ms.
                    Abhinandana Kain and Mr. Himanshu
                    Kapoor, Advocates.

                                   With

                   ITA 570/2013
       COMMISSIONER OF INCOME TAX TDS                             ..... Appellant

ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015             Page 1 of 21
                               Through: Mr Kamal Sawhney, Senior
                               Standing counsel with Mr. Raghvendra Singh,
                               Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD.                   ..... Respondent
                    Through: Mr Prashant Mehta with
                    Ms.Abhinandana Kain and Mr. Himanshu
                    Kapoor, Advocates.

                                   With

                   ITA 323/2015
       COMMISSIONER OF INCOME TAX-TDS          ..... Appellant
                   Through: Mr Kamal Sawhney, Senior
                   Standing counsel with Mr. Raghvendra Singh,
                   Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD.                     ..... Respondent
                    Through: Ms. Rashmi Chopra, Advocate with
                    Mr. S. Babbar, GM (F) and Mr Rajesh Jain,
                    AM(Legal).

                                   With

                   ITA 324/2015
       COMMISSIONER OF INCOME TAX-TDS          ..... Appellant
                   Through: Mr Kamal Sawhney, Senior
                   Standing counsel with Mr. Raghvendra Singh,
                   Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD.                    ..... Respondent
                    Through: Ms. Rashmi Chopra, Advocate with

ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 2 of 21
                               Mr. S. Babbar, GM (F) and Mr Rajesh Jain,
                               AM (Legal).

                                   With

                   ITA 325/2015
       COMMISSIONER OF INCOME TAX-TDS          ..... Appellant
                   Through: Mr Kamal Sawhney, Senior
                   Standing counsel with Mr. Raghvendra Singh,
                   Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD.                     ..... Respondent
                    Through: Ms. Rashmi Chopra, Advocate with
                    Mr. S. Babbar, GM (F) and Mr Rajesh Jain,
                    AM (Legal).

                                     And

                   ITA 341/2015
       COMMISSIONER OF INCOME TAX-TDS          ..... Appellant
                   Through: Mr. Kamal Sawhney, Senior
                   Standing counsel with Mr. Raghvendra Singh,
                   Junior Standing counsel.

                               versus

       DELHI TRANSCO LTD.                     ..... Respondent
                    Through: Ms. Rashmi Chopra, Advocate with
                    Mr. S. Babbar, GM (F) and Mr Rajesh Jain,
                    AM (Legal).

       CORAM:
       HON'BLE DR. JUSTICE S. MURALIDHAR
       HON'BLE MR. JUSTICE VIBHU BAKHRU



ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015      Page 3 of 21
                               JUDGEMENT
%                                06.08.2015

Dr. S. Muralidhar, J.

The issue
1. These are seven appeals relating to various Assessment Years filed
by the Revenue where one substantial question of law arises, and which
has been framed by the order dated 18th September 2012 in ITA No.
384 of 2012, relevant to the Assessment Year (,,AY) 2005-06, as
under:
         ,,Did the Tribunal fall into error in holding that the
         "wheeling charges" paid by the Assessee, in the facts of
         this case, was deductable as it did not amount to "fees for
         technical services" within the meaning of Section 194J of
         the Act.

The BPTA
2. The Respondent Delhi Transco Ltd. (,,DTL) entered into Bulk Power
Transmission Agreement (,,BPTA) on 21st July 2004 with the Power
Grid Corporation India Ltd. (,,PGCIL). In one of the preamble clauses
of the BPTA, it was recorded that DTL "is desirous of receiving energy
through power grid transmission system on mutually agreed terms and
conditions". The BPTA defined several terms including the term
,,wheeling as under:
         "The operation whereby the distribution system and
         associated facilities of a transmission licensee or
         distribution licensee, as the case may be, are used by
         another person for the conveyance of electricity on payment
         of charges to be determined under Section of Section 62
         (sic) of the Electricity Act, 2003 and its subsequent
         amendments."
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 4 of 21
3. Under Clause 8 of the BPTA, it was agreed that the transmission
charges would be paid to PGCIL by DTL for transmitting private sector
power through PGCIL lines ,,as per the guidelines of the Central
Electricity Regulatory Commission (,,CERC). Clause 10 stated that the
,,transmission tariff and terms and conditions fo r the power to be
transferred by PGCIL would be in terms of the notification to be issued
by CERC from time to time. On the commissioning of the new
transmission system DTL was to pay "the provisional transmission
tariff in line with the tariff norms issued by CERC". The tariff was
subject to adjustment in terms of CERC notification. The wheeling for
the transmission power was to be in terms of the CERC guidelines. The
BPTA came into force with effect from 1st April 2002 and was to
remain valid for a period of five years, that is, up to 31st March 2007.


Commencement of proceedings
4. A survey was carried out in the business premises of DTL under
Section 133-A of the Income Tax Act, 1961 (,,Act) on 22nd January
2009. It was noticed that DTL had deducted tax at source (,,TDS) at
2% under Section 194C of the Act on the wheeling charges paid to
PGCIL. The statement of one Mr. Surendra Babbar, Deputy General
Manager (Finance) of DTL was recorded. Following the survey, DTL
wrote a letter dated 29th January 2009 protesting that the survey was
without jurisdiction as it could only have been carried out by ACIT
Circle 10 (1), New Delhi. A show cause notice was issued to DTL on
20th February 2009. DTL filed a reply on 26th February 2009. After
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 5 of 21
considering the response to the show cause notice and after hearing the
various representatives of the DTL, the AO passed an order dated 27th
March 2009, under Sections 201 (1)/201 (1A) of the Act.


The order of the AO
5.The AO held that DTL was not only using the transmission system set
up of PGCIL but also availing of other services from PGCIL "such as
maintaining the delivery voltage, economic transmission, minimum loss
of electricity in transmission of regular and uninterrupted supply etc.,
which are technical services". According to the AO, "the value of these
services cannot be bifurcated from the total value paid by the assessee
to PGCIL for transmission services in the name of wheeling charges.
The transmission lines could not be of any use in isolation and without
other associated services the transmission of electricity could not have
been possible". Accordingly, the AO held that wheeling charges paid
by DTL were fees for technical services liable for TDS under Section
194J of the Act. The AO referred to the replies provided by Mr. R.
Rajagopalan, Chief Manager (Finance) of PGCIL on 24th March 2009
to a questionnaire sent to him.





6. The AO then proceeded to set out the calculation of short deduction
of TDS and computed it at Rs.44752382. The AO treated DTL as a
defaulter under Section 201(1) of the Act and the matter was referred to
the Additional Commissioner of Income Tax (,,ACI) for initiating
penalty proceedings under Section 271-C of the Act. The AO held that
in terms of the CBDT circular the demand under Section 201(1) would
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 6 of 21
not be enforced but that would not affect the liability of DTL regarding
interest under Section 201(1A) of the Act and this worked out to
Rs.78,40,426. The total demand was worked out as Rs 3,19,87,617.


The order of the CIT (A)
7. Aggrieved by the AO's order, DTL filed an appeal before the
Commissioner of Income Tax (Appeals) [CIT(A)] being Appeal No.
34/09-10 for the AY 2004-05. In the order dated 8th December 2010,
dismissing the appeal, the CIT(A) agreed with the contention of DTL
that Section 194C of the Act would apply since electricity was ,,goods
as defined under Section 2 of the Sales of Goods Act and in terms of the
contract, PGCIL was in fact transporting such goods to DTL. The CIT
(A), however, held that "in the absence of sufficient legal precedent on
the subject, I am unable to reject the view taken by Ld. Assessing
Officer". The CIT (A), therefore, confirmed the said order of the AO.
Some relief was granted as far as the calculation of interest payable.


The order of the ITAT
8. DTL then carried the matter further in appeal to the Income Tax
Appellate Tribunal (,,ITAT) by filing ITA No. 755(Del) 2011 (for AY
2004-05). The ITAT agreed with the DTL that what had been availed
by it from PGCIL was not a technical service. It was held that DTL was
not liable to be saddled with higher liability of TDS. The appeal was
accordingly allowed.


9. The ITAT based its opinion on the decision of this Court in CIT v.
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 7 of 21
Bharti Cellular Ltd. (2008) 220 CTR (Del) 258 and of the Madras High
Court in Skycell Communications Ltd. v. DCIT (2001) 251 ITR 53
(Mad). The ITAT noted that both the decisions laid emphasis on the
involvement of a 'human element' for rendering technical services and
imparting of technical knowledge. The ITAT held that none of those
conditions were satisfied in the present case. While there might be
supervision of transmission work by the technical personnel of the
payee "there is no human intervention in so far as the assessee is
concerned regarding the transmission". It was further held that even if
technical knowledge could be upgraded without "presence of human
beings by way of handing over drawings and designs or a technical
service can be rendered by robot (machines) without intervention of
human element, the classification of the services rendered by the
assessee as technical service is not free from doubt".


10. When the case was heard on 16th July 2015, Mr. A.B. Dial, learned
Senior counsel for DTL, drew the attention of this Court to the decision
dated 8th May 2015 of the Division Bench of the Bombay High Court in
CIT v. Maharashtra State Electricity Distribution Co.Ltd. [2015] 375
ITR 23 (Bom) which held that wheeling charges would not amount to
payment of fees for technical services. Mr. Kamal Sawhney, learned
Senior Standing counsel for the Revenue then sought time to examine
the said decision and make submissions.


Submissions on behalf of the Revenue
11. The submissions of Mr. Sawhney were heard by this Court on the
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 8 of 21
30th July, 2015. The principal submission of Mr. Sawhney was with
reference to Section 194J of the Act and the Central Electricity
Authority (Grid Standards) Regulations, 2010. The submissions of Mr.
Sawhney was basically twofold. In the first place, he submitted that
whether the fees paid in the context of rendering of services amounted
to fees for technical service could be answered only by examining the
very nature of service being performed, and in that context the working
of the industry, in this case, the power generation and transmission
industry. According to him, a detailed analysis would have to be
undertaken by examining experts and since that was not performed by
the ITAT or perhaps even the AO, the case would have to be remanded
for a fresh determination.


12. The second broad submission of Mr. Sawhney was that the test
adopted by the ITAT was plainly erroneous. The question was not only
about whether there was any human intervention in rendering of the
services, but whether without technical support or technical inputs it
would at all be possible to avail of the services. He submitted with
reference to the aforementioned regulations that there was a statutory
requirement of the power generation company and the power
transmission company to maintain their equipments in conformity with
certain minimum standards. This required considerable technical
knowledge and skill. He referred to the decision of this Court in DIT vs.
Lufthansa Cargo India (2015) 375 ITR 85 (Del) and submitted that the
observations therein helped the Revenue in so far as it was claimed that
without technical inputs the question of availing the services of the kind
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015    Page 9 of 21
contemplated in the present case was not possible. He urged that the
matter should be remanded to the AO for carrying out a detailed
enquiry.


13. Mr. Sawhney spent considerable time distinguishing the judgment
of the Bombay High Court in Maharashtra State Electricity
Distribution Co. Ltd.(supra). It was submitted that in facts of the case
before it, the Bombay High Court did not have an occasion to actually
examine whether 'wheeling' was in fact a technical service. Reliance
was also placed by Mr. Sawhney on certain observations made by this
Court in DIT(International Taxation)v. Panalfa Autoelecktrik Ltd.
(2014) 272 CTR 117(Del).


Submissions on behalf of the Assessee
14. Replying to the above submissions, Mr. Dial, learned Senior
counsel for DTL, at the outset pointed out that the judgment of the
Bombay High Court in Maharashtra State Electricity Distribution Co.
Ltd.(supra) answered the issue entirely in favour of the Assessee. He
referred to the definition of wheeling contained in the BPTA. He
reiterated that the Assessee was only paying for the electricity
transmitted to it through the equipment and lines maintained by PGCIL.
Whatever services the technical personnel of PGCIL were performing
was for the benefit of PGCIL itself. PGCIL was acting like a transporter
of electricity through its equipments and the charges for that were being
paid by the Assessee in terms of the tariff determined by the CERC. In
the circumstances, it was essentially a payment for transportation of the
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 10 of 21
electricity and nothing more. He referred to the answers provided by
Mr. Rajagopalan, Chief Manager (Finance) of PGCIL in response to the
questionnaire sent to him by the AO.


15. Mr. Dial also referred to the decision dated 12th June 2015of the
ITAT in Jaipur in Bharti Hexacom Ltd. v. Income Tax Officer (TDS)
II (ITA No. 656/JP/2010), which was rendered after the decision of this
Court in CIT v. Bharti Cellular [2009] 319 ITR 139 was set aside by
the Supreme Court in CIT v. Bharti Cellular Ltd. [2011] 330 ITR 239,
and the matter was remanded to the AO with directions to examine
technical experts. Mr. Dial also referred to the dictionary meaning of
the word ,,services. Ms. Rashmi Chopra, learned counsel supplemented
the above submissions and referred to the decision in Union of India v.
Martin Lottery Agencies (2009) 12 SCC 209.


The relevant statutory provisions
16.The relevant portion of Section 194 J of the Act reads as under:
    "194J (1) Any person, not being an individual or a Hindu
    undivided family, 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

    (ba) any remuneration or fees or commission by whatever
    name called, other than those on which tax is deductible under
    section 192, to a director of a company, or

    (c) royalty, or
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 11 of 21
    (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.......................

    Explanation- For the purposes of this section,

    (a)      "professional services" means services rendered by a
    person in the course of carrying on legal, medical, engineering
    or architectural profession or the profession of accountancy or
    technical consultancy or interior decoration or advertising or
    such other profession as is notified by the Board for the
    purposes of Section 44AA or of this section;

    (b)      "fees for technical services" shall have the same
    meaning as in Explanation 2 to clause (vii) of sub-section (1)
    of section 9;"

17. Explanation 2 of Clause (vii) of sub-section (1) of Section 9 reads
as under:
"(vii) income by way of fees for technical services payable by-

      (a)      the Government; or

      (b)      a person who is a resident, except where the fees are
      payable in respect of services utilized in a business or
      profession carried on by such person outside India or for the
      purposes of making or earning any income from any source
      outside India; or
      ............................................................

      Explanation 2-For the purposes of this clause, "fees for
      technical services" means any consideration (including any
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015    Page 12 of 21
      lump sum consideration) for the rendering of any managerial,
      technical or consultancy services (including the provision of
      services or 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".

18. In addition Section 2 (76) of the Electricity Act, 2003 ('EA') defines
'wheeling' as under:
       " Section 2 (76): Wheeling" means the operation whereby
       the distribution system and associated facilities of a
       transmission licensee or distribution licensee, as the case
       may be, are used by another person for the conveyance of
       electricity on payment of charges to be determined under
       Section 62."

19. The question that requires to be addressed is whether there is any
'rendering of any managerial, technical or consultancy services
(including the provision of services or technical or other personnel)' by
PGCIL to DTL by virtue of the BPTA within the meaning of Section
194 J (1) read with Explanation 2 of Clause (vii) of sub-section (1) of
Section 9 of the Act? In other words is the 'wheeling' of electricity,
defined in the BPTA (and Section 2 (76) of the EA as an 'operation
whereby the distribution system and associated facilities of a
transmission licensee or distribution licensee, as the case may be, are
used by another person for the conveyance of electricity on payment of
charges', a rendering of service by PGCIL to DTL?


The decisions regarding 'technical services'

ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015    Page 13 of 21
20. The ITAT has referred to the decision of the Supreme Court in
Bharti Cellular (supra) where the question examined was whether
"manual intervention is involved in the technical ope rations by which a
cellular service provider, like M/s. Bharti Cellular Limited, is given the
facility by BSNL/MTNL for interconnection." While setting aside the
decision of this Court in CIT vs. Bharti Cellular Ltd [2009] 319 ITR
139 (Del), the Supreme Court observed that the problem which arose in
such cases was that "there is no expert evidence from the side of the
Department to show how human intervention takes place, particularly,
during the process when calls take place......" It was observed further
that "these types of matters cannot be decided without any technical
assistance available on record". Accordingly the case was remanded to
the AO to examine technical experts from the side of the department
and to decide the matter within four months.


21. From the decision of the ITAT Jaipur in Bharti Hexacom Ltd.
(supra), it is apparent that after the exercise of examination of experts
was completed, and the AO gave his decision, the ITAT came to the
conclusion that while for installation, setting-up, repairing, servicing,
maintenance and capacity augmentation, human intervention might be
required but "after completing this process mere interconnection
between the operators is automatic and does not require any human
intervention". Consequently, interconnect user charges received or paid
were held not to be fees for technical services within the meaning of
Section 194J read with Section 9 (1) (vii) read with Explanation 2 of the
Act.
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015    Page 14 of 21
22. In Skycell Communications (supra), the Madras High Court went
into the dictionary meaning of the word ,,technical and then concluded
that the expression "fee for technical services could only be meant to
cover such things technical as are capable of being provided by way of
service for a fee". But it is not in every case that the provision of
service might involve the element of human intervention.


23. In Panalfa Autoelecktrik (supra), this Court observed that technical
services consist of services of technical nature "when special skills or
knowledge relating to technical field are required for their provision,
managerial services are rendered for performing management functions
and consultancy services relate to provision of advice by someone
having special qualification that allow him to do so". It was held that
technical, managerial and consultancy services might overlap and it
would not be proper to view them in watertight compartments. In that
case it was held that the commission paid by the Assessee to its foreign
agent for arranging export sales and recovery of payment could not be
regarded as fee for technical services.


24. In Lufthansa Cargo India (supra) the Court was addressing the
question whether the fee paid to the non-resident company outside India
by the Assessee for carrying out maintenance, repairs to run the leased
aircraft flying hours and for component overhaul and maintenance was
"fee for technical services". Answering the question in affirmative, the
Court opined that unlike normal machinery repair, the aircraft
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 15 of 21
maintenance and repairs, and their component overhaul maintenance
would require specific level of technical expertise. The exclusive nature
of these services could not but lead to the inference that they are
technical services.


25. In Union of India v. Martin Lottery Agencies (supra), the Supreme
Court considered the meaning of word ,,service, and whether it would
include promoting and organizing a lottery. It was held that dealing
with lottery was res extra commercium, and therefore it could not
amount to "rendition of any service". In para 20 (SCC), the dictionary
meaning of the word ,,service was noted as follows:
      "Work done or duty performed for another or others; a
      serving; as, professional services, repair service, a life
      devoted to public service.

      An activity carried on to provide people with the use of
      something, as electric power, water, transportation, mail
      delivery, telephones, etc.

      Anything useful, as maintenance, supplies, installation,
      repairs, etc., provided by a dealer or manufacturer for
      people who have bought things from him."

26. The Bombay High court in the Maharashtra State Electricity
(supra) considered, inter alia, whether wheeling charges could be
characterized as fee for technical services. It was acknowledged that as
a transmission licensee the state undertaking, MSEDCL, could engage
in ,,wheeling operations' as defined under Section 2(76) meaning
thereby that the distribution system. The facilities of MSEDCL, in its
capacity as transmission licensee, were permitted to be used by other
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015   Page 16 of 21
persons for conveyance of electricity upon payment of charges to be
determined under Section 62 of the EA. The Bombay High Court
concluded that 'wheeling charge' "would neither be rent       nor fees for
technical services". They represented "the charge for permitting use of
the STU by persons other than the distribution licence. The
transmission charges simply constitute fees for availing of the said
transmission utility to be used by open access concept for distribution
of electricity to licensees and consumers".


27. In light of the above decisions, it is clear that what constitutes
technical services cannot be understood in a rigid formulaic manner. It
will vary from industry to industry. There will have to be a specific line
of enquiry for determining what in a particular industry would
constitute rendering of a technical service. While in the case of
Lufthansa Cargo India (supra) the question was not difficult to answer
since clearly the service provided was of a technical nature, viz., the
repair overhaul and maintenance of aircraft, in the case of Bharti
Cellular (supra), the ultimate conclusion was that facilitating
interconnection did not require any element of human intervention and
was not in fact the provision of technical service. The latter case did
require examination of technical experts. The decision of the Bombay
High Court, discussed the very issue involved in the present case viz.,
whether wheeling charges could be characterised as payment for
technical service and answered it in the negative.


Analysis of the evidence of experts
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 17 of 21
28. Turning to the case on hand, to understand the nature of the
transaction forming the subject matter of the BPTA between DTL and
PGCIL, it is necessary to examine the empirical evidence that has come
on record and which has been referred to in the order of the AO. Mr.
Surinder Babbar the Deputy GM of DTL appears to have given
statement regarding mode and method of transportation. He stated that
the question whether the maintenance of the sophisticated system would
involve competent man power was itself a 'highly technical' one.





29. The other person to whom a questionnaire was sent and replies
elicited was Mr. Rajagopalan, Chief Manager (Finance) of PGCIL. The
AO appears to have extracted in his order only two of the questions
regarding details of the transmission receipts and of the tax liability.
What appears to have been omitted are the specific questions to Mr.
Rajagopalan, asking him to explain the process of transmission. The
relevant questions and the answers given by him are as under:
       "Q.     Please explain the process of transmission?

       A. Central Power Generating Companies such as
       NTPC/NHPC/THDC etc. are generating power which are
       being carried through one Bulk Transmission and delivered
       to various State Transmission Board beneficiaries.
       Basically we are functioning as Bulk Carriers of
       Electronics.

       Q. Please give the details of employees whether they are
       skilled professional because transmission of electricity is a
       technical service and it requires constant involvement of
       technical system consisting of sophisticated instruments
       and technical knowledge to operate and maintain the

ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 18 of 21
         system and requires technical competent manpower such as
         qualified engineer etc.?

         A. The power grid substation consists of substation and
         transmission towers and conductors. The main equipments
         are Auto Transformers, shunt reactors, isolated circuit
         breakers etc. All equipments are auto functioning. Power
         Grid has both skilled and unskilled man power. The power
         is carried through equipments and transmission lines only."

30. It is apparent from the above questions and answers that despite a
leading suggestion put to Mr. Rajagopalan that the transmission of
electricity was a technical service, his answer was to the effect that the
technical service provided was not to the purchaser of electricity but in
operating and maintaining the various equipments and transmission of
lines.


31. This was an important input for understanding the nature of the
service that is provided. The plea of DTL that the BPTA between it and
PGCIL was essentially for transporting electricity from one point to
another and that this is automatic through the network or equipments
without any human intervention appears to be correct. The system
operated by PGCIL and used for transmission of electricity is no doubt
maintained by skilled technical personnel professional. This also
ensures that PGCIL complies with the standards and norms put in place
by the statutory regulations. However, the beneficiary of such services
is PGCIL itself. PGCIL is operating and maintaining its own system
using the service of engineers and qualified technicians. PGCIL is in
that process not providing technical services to others, including DTL.
ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 19 of 21
32. A comparison could be made with the system of distribution of
some other commodity like water. It might require the operation and
maintenance of water pumping station and the maintenance of a
network of pipes. However, what is conveyed through the pipes and the
equipment to the ultimate consumer is water. The equipment and pipes
have to no doubt be maintained by technical staff but that does not
mean that a person to whom the water is distributed through using the
pipes and equipment is availing of any technical service as such.


33. Although the wheeling charges may be fixed by the CERC, that by
itself is not a determinative factor. In the present case, DTL is seeking
to characterize the wheeling charges as payment for use of PGCIL's
equipment within the meaning of Section 194C of the Act.
Interestingly, the CIT (A) in its order has accepted the plea that the job
of DTL is to transport the electricity and it is therefore like carriage of
goods. Despite accepting the above plea, the CIT (A) has simply
concurred with the AO only because of "absence of sufficient legal
precedent on the subject". Once it is accepted that all what PGCIL does
is to transmit the electricity to DTL through the network without any
human intervention, it cannot be characterized as a provision of
technical services and sought to be brought within the fold of Section
194 J of the Act.




ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015     Page 20 of 21
Conclusion
34. To reiterate, by virtue of the BPTA agreement between DTL and
PGCIL there is transportation of the electricity from PGCIL to DTL,
through the equipment and network required statutorily to be
maintained by PGCIL through its technical personnel using technical
expertise. This, however, does not result in PGCIL providing technical
services to DTL. Therefore the wheeling charges paid by DTL to
PGCIL for such transportation of electricity cannot be characterized as
fee for technical service.


35. The ultimate conclusion of the ITAT is therefore not erroneous.
Accordingly the question framed by the Court is answered in the
negative i.e., against the Revenue and in favour of the Assessee. Since
the same question is involved in all the AYs in question, all these
appeals are dismissed affirming the impugned order of the ITAT, but in
the circumstances with no order as to costs.




                                                              S. MURALIDHAR, J




                                                              VIBHU BAKHRU, J
August 06, 2015/mg




ITA Nos.384/2012, 566/2013, 570/2013, 323-324-325 &341/2015           Page 21 of 21

 
 
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