Ita v. Dakshin Haryana Bijlivitran Nigam Ltd. Hisar, Decided On 1.10.2014

-|- IN THERE HIGH COURT OR PUNJAB AND HARYANAAT CHANDIGARH ITA No. 226 of 2014 (O&M) Date of Decision: 09.10.2018 Commissioner of Income Tax, Hisar | ....... Appellant *"+%,% Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar ...... Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL, JUDGEHON'BLE MR. JUSTICE AVNEESH JHINGAN, JUDGEHON'BLE MR. JUSTICE AVNEESH JHINGAN, JUDGE Present:Mr. Yogesh Putney, Senior Standing counselfor the appellant,for the appellant, Mr. K.L. Goyal, Senior Advocate with| Mr. Umang Goyal, Advocatefor the respondent. 2222 AVNEESH JHINGAL, J. The revenue has filed the present appeal under Section 260A ofthe Income Tax Act, 1961 (for brevity ‘the Act') against the order dated10.02.2012 of the Income Tax Appellate Tribunal, Delhi Bench 'B,New Delhi (for short 'the Tribunal’) passed in ITA No. 4606(Del)2011. Theassessment year involved is 2008-09. 2 Following substantial questions of law have been claimed in thepresent appeal: Ground No.1 (1)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT was right in law in upholding theorder of the ld. CIT (A) Rohtak, whereby the additionmade by the AO treating the surcharge accrued during theyear amounting Rs.1,53,97,80,054/- on account ofdelayed payment of electricity bills by the consumers asincome had been deleted, ignoring the facts and circumstances of the case including the fact that theassessee has been following mercantile system ofaccounting? (11)Whether the order passed by the Hon'ble ITAT issustainable in the eyes of law as the earlier order passedby the Hon'ble ITAT in the case of the assessee for theassessment year 2006-2007, has already been challengedby the appellant by filing ITA before the Hon'ble Punjaband Haryana High Court? Ground No.2 (1)Whether on the facts and in the circumstances ofthe case, the Hon'ble ITAT was right in law in upholdingthe order of the ld. CIT(A) Rohtak, whereby thedisallowance u/s 40(a)(ia) made by the AO on account ofnon-deduction of tax on the payment ofwheeling/transmission charges of Rs.2,41,55,32,835/- toM/s HVPN Ltd. has been deleted (11)Whether the learned Tribunal has misread andmisconstrued the statutory provisions of Income Tax Act,while making a mention of explanation 2 to section 9(1)(vill) of I.T.Act, regarding term "technical service" by|using the word "human" in violation of principle ofinterpretation of statutes? (111)Whether on the facts and circumstances of thecase, the learned ITAT was right in law in holding thatthe payments made by the assessee in form oftransmission/wheeling & SLDC charges were not liablefor deduction of tax at source under section 194J of theIncome Tax Act? On 06.10.2014 notice of motion was issued qua questions No.(i) to (411) under Ground No.2. Questions No.(i) and (11) under Ground No.1, were answered against the revenue in view of the decision of this Court inITA No. 258 of 2014, decided on 25.09.2014. Question No. (1) and (11) under Ground No.1, were inadvertently recorded to be covered by ITA No. 258 of2014. There is no dispute raised by counsel for the parties that the saidquestions were covered by the decision of this Court in ITA No. 209 of 2014titled The Commissioner of Income Tax, Hisar, Vs. Dakshin Haryana BijliVitran Nigam Ltd. Hisar, decided on 1.10.2014. On 06.10.2014 notice of motion was issued qua questions No.(i) to (411) under Ground No.2. Questions No.(i) and (11) under Ground No.1, were answered against the revenue in view of the decision of this Court inITA No. 258 of 2014, decided on 25.09.2014. Question No. (1) and (11) under Ground No.1, were inadvertently recorded to be covered by ITA No. 258 of2014. There is no dispute raised by counsel for the parties that the saidquestions were covered by the decision of this Court in ITA No. 209 of 2014titled The Commissioner of Income Tax, Hisar, Vs. Dakshin Haryana BijliVitran Nigam Ltd. Hisar, decided on 1.10.2014. 3,Taking up questions No. (1) to (iii) under Ground No.2, the brieffacts necessary for adjudication of the controversy involved may be noticed.The respondent-M/s Dakshin Haryana Bijli Vitran Nigam Ltd. is a companyunder the Companies Act, 1956, is engaged in the distribution of power inthe State of Haryana. It purchases electricity from M/s Haryana PowerGeneration Corporation Limited, Panchkula (HPGCL) and distributes thesame to the consumers. The electricity from the source i.e. generation pointto the consumers is transmitted through the transmission network of HaryanaVidyut Prasaran Nigam Ltd. (HVPNL). The rates of purchase and supply ofelectricity are fixed by the Haryana Electricity Regulatory Commission(HERC). Thus, the electricity purchased from HPGCL is transmitted throughthe distribution points of HVPNL. Respondent makes payment fortransmission of electricity to HVPNL on the rates fixed by the HERC. Therespondent is thus rendering "technical services" and is earning incomewithin the meaning of Section 9(1) (vil) of the Act and as such duty bound todeduct tax at source. The assessee is making payment to HVPNL on accountof transmission charges called 'wheeling charges’ and State Load DispatchCentre charges (SLDC). According to the Assessing officer, the assesseeShould have deducted TDS on wheeling charges and SLDC paid by it toHVPNL. Since the assessee had not deducted TDS from the payments madeby it to HVPNL, the Assessing Officer passed order dated 23.12.2010; dis- paid to HVPNL for the assessment year 2008-09. Aggrieved of theassessment order, the respondent filed appeal before the Commissioner otIncome Tax (Appeals) [CIT(A)]. Vide order dated 11.08.2011 the appealwas allowed. 4The revenue assailed order of CIT(A) before the Tribunal. TheTribunal vide order dated 10.02.2012 following the earlier orders in the caseof the assessee for the assessment years 2006-07 to 2008-09 and relyingupon decision of Jaipur Bench of the Tribunal in the case ofJaipur VidyutVitran Nigam Limited Vs. ITOin [TA Nos.127 to 131/JP/2009 dated30.04.2009, dismissed the appeal. It was held that there was no liability ofthe respondent to deduct at source on transmission/wheeling charges andSLDC charges under Section 194-J of the Act. Hence, the present appeal bythe revenue. 5 Learned counsel for the revenue submitted that identicalquestion has been decided by this Court in ITA No. 652 of 2010 decided on08.05.2014. In the said ITA, the orders of the lower authorities were setaside and the matter was remanded back to the Assessing Officer fordecision afresh in the light of the observation of the Supreme Court in thecase ofCIT, Delhi Vs. Bharti Cellular Limited(2011) 330 ITR 239. Therelevant portion of the order is extracted below; 7. After giving our thoughtful consideration to therespective submissions of learned counsel for the parties,we are of the opinion that the issue arising in theseappeals requires to be re-adjudicated by the AssessingOfficer keeping in view the principles of law enunciatedby the Apex Court inBharti Cellular Limited's case(supra). The Apex Court while discussing the scope of“technical service’ had recorded as under:- ‘7. The problem which arises 1n these cases 1s thatthere 1s no expert evidence from the side of the 7. After giving our thoughtful consideration to therespective submissions of learned counsel for the parties,we are of the opinion that the issue arising in theseappeals requires to be re-adjudicated by the AssessingOfficer keeping in view the principles of law enunciatedby the Apex Court inBharti Cellular Limited's case(supra). The Apex Court while discussing the scope of“technical service’ had recorded as under:- ‘7. The problem which arises 1n these cases 1s thatthere 1s no expert evidence from the side of the Department to show how human interventiontakes place, particularly, during the process whencalls take place, let us say, from Delhi to Nainitaland vice versa. If, let us say, BSNL has nonetwork in Nainital whereas it has a network inDelhi, the Interconnect Agreement enables M/s,Bharti Cellular Limited to access the network ofBSNL in Nainital and the same situation can arisevice versa in a given case. During the traffic ofsuch calls whether there 1s any manualintervention, 1s one of the points which requiresexpert evidence. Similarly, on what basis is the“capacity” of each service provider fixed whenInterconnect Agreements are arrived at? Forexample, we are informed that each serviceprovider is allotted a certain “capacity”. On whatbasis such “capacity” is allotted and whathappens if a situation arises where a serviceprovider's “allotted capacity” gets exhausted and itwants, on an urgent basis, “additional capacity ’Whether at that stage, any human intervention 1sinvolved 1s required to be examined, which againneeds a technical data. We are only highlightingthese facts to emphasise that these types of matterscannot be decided without any technical assistanceavailable on record. 8. There 1s one more aspect that requires to begone into. It is the contention of Respondent No.|herein that Interconnect Agreement between, letus say, M/s. Bharti Cellular Limited and BSNL inthese cases 1s based on obligations and counterobligations, which 1s called a “revenue sharingcontract’. According to Respondent No.1, Section194] of the Act 1s not attracted in the case of“revenue sharing contract’. According toRespondent No.1, 1n such contracts there 1s onlysharing of revenue and, therefore, payments byrevenue sharing cannot constitute “fees” underSection 194J of the Act. This submission is notaccepted by the Department. We leave it therebecause this submission has not been examinedby the Tribunal. 9. In short, the above aspects need reconsiderationby the Assessing Officer. We make it clear thatthe assessee(s) 1s not at fault in these cases for thesimple reason that the question of humanintervention was never raised by the Departmentbefore the CIT. It was not raised even before theTribunal; it 1s not raised even in these civilappeals. However, keeping in mind the largerinterest and the ramification of the issues, whichis likely to recur, particularly, in matters ofcontracts between Indian Companies andMultinational Corporations, we are of the viewthat the cases herein are required to be remitted tothe Assessing Officer (TDS), 10. Accordingly, we are directing the AssessingOfficer (TDS) 1n each of these cases to examine atechnical expert from the side of the Departmentand to decide the matter within a period of fourmonths. Such expert(s) will be examined(including cross-examined) within a period of fourweeks from the date of receipt of the order of thisCourt. Liberty is also given to Respondent No.1 toexamine its expert and to adduce any otherevidence.’ 10. Accordingly, we are directing the AssessingOfficer (TDS) 1n each of these cases to examine atechnical expert from the side of the Departmentand to decide the matter within a period of fourmonths. Such expert(s) will be examined(including cross-examined) within a period of fourweeks from the date of receipt of the order of thisCourt. Liberty is also given to Respondent No.1 toexamine its expert and to adduce any otherevidence.’ 8. Ihe primary basis whereby the Apex Court hadconcluded services to the falling under 194J of the Act tobe technical services that whether any human interventionwas involved in the activity or not. The Apex Courtobserved that wherever there was human interventionrequiring examination of technical data, the same wouldfall within the definition of technical services and in theabsence thereof, the same would not partake the characterof technical services. The Apex Court in that case hadremitted the matter to the Assessing Officer to examinethe technical expert and after examining him adjudicatethe matter afresh. In the present case as well from theperusal of the orders of the authorities below, it 1s notdiscernible whether there was any intervention of thehuman element in the services provided to the assessee.9. Accordingly, while setting aside the orders of theauthorities below, the matter 1s remitted to the AssessingOfficer to examine afresh in the light of the observations made by the Apex Court 1n|Bharti Cellular Limited'scase (supra), noted above. Further, the assessingauthority shall also examine whether the Provisos insertedin Sections 201(1) and 201(1A) by Finance Act, 2012 areapplicable retrospectively, as urged by learned counsel forthe assessee. Since the Tribunal had followed its order ofthe Jaipur Bench and in such circumstances, it cannot besaid that any independent finding has been recordedregarding element of income in thiscase, therefore, 1tshall be open for the Assessing Officer to consider theelement of income in the transaction as well beforepassing fresh order in accordance with law. 6]Considering decisions referred above, the order of lower authorities with regard to dis-allowance of expenses claimed of Wheelingand SLDC charges are set aside. The matter 1s remanded back to the A.O. todecide the said issue afresh in view of the observations in ITA No. 652 of2010 TiThe substantial questions of law are decided accordingly. Theappeal is disposed of 1n the manner indicated above, (AJAY KUMAR MITTAL) JUDGE 09.10.2018TeeIN (AVNEESH JHINGAN) JUDGE Whether speaking/reasonedWhether Reportable; Yes/NoYes/No