Itta/399/2014 Of Commissioner Of Income Tax-[Tds] v. M/S.central Power Distribution Corporation Of A.p.ltd

HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA AND THE STATE OF ANDHRAPRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.399 OF 2014 DATED:09.7.2014 Between: Commissioner of Income Tax (TDS)I.T. Towers, A.C. GuardsHyderabad … Appellant And M/s. Central Power Distribution Corporation of A.P. LimitedMint CompoundHyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.399 OF 2014 JUDGMENT:(per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred and admitted against thejudgment and order of the learned Tribunal dt.13.12.2013, in I.T.A.No.1798/Hyd/2012, on the following suggested question of law: “In the facts and circumstances of the case, whether the Tribunal(ITAT) is correct in law in holding that Transmission Charges paid by therespondent assessee to A.P. TRANSCO, TDS [Tax Deduction at Source]liable to be deducted under Section 194C of the Income Tax Act 1961, whenthe respondent – assessee is liable to deduct TDS in terms of Section194J(1)(c) read with Explanation 2 below Section 9(1)(vi) of the Income TaxAct, 1961? From the question formulated as above, it is clear that the issueis whether in this case provisions of Section 194J of the Income TaxAct, 1961 (for short, ‘the Act’) are applicable or not. We set out sub-section (1) of Section 194J of the Act)hereunder: “Fees for professional or technical services. 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 adirector of a company, 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 atthe 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 percent of such sum as income-tax on income comprised therein: … Explanation.- For the purposes of this section.- (a)“professional services” means services rendered by aperson in the course of carrying on legal, medical,engineering or architectural profession or the profession ofaccountancy or technical consultancy or interiordecoration or advertising or such other profession as isnotified” by the Board for the purposes of section 44AA orof this section;person in the course of carrying on legal, medical,engineering or architectural profession or the profession ofaccountancy or technical consultancy or interiordecoration or advertising or such other profession as isnotified” by the Board for the purposes of section 44AA orof this section; (b)“fees for technical services” shall have the same meaningas in Explanation 2 to clause (vii) of sub-section (1) ofsection 9;as in Explanation 2 to clause (vii) of sub-section (1) ofsection 9; (ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c)where any sum referred to in sub-section (1) is creditedto any account, whether called “suspense account” or byany other name, in the books of account of the personliable to pay such sum, such crediting shall be deemed tobe credit of such sum to the account of the payee and theprovisions of this section shall apply accordingly.”to any account, whether called “suspense account” or byany other name, in the books of account of the personliable to pay such sum, such crediting shall be deemed tobe credit of such sum to the account of the payee and theprovisions of this section shall apply accordingly.” (ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c)where any sum referred to in sub-section (1) is creditedto any account, whether called “suspense account” or byany other name, in the books of account of the personliable to pay such sum, such crediting shall be deemed tobe credit of such sum to the account of the payee and theprovisions of this section shall apply accordingly.”to any account, whether called “suspense account” or byany other name, in the books of account of the personliable to pay such sum, such crediting shall be deemed tobe credit of such sum to the account of the payee and theprovisions of this section shall apply accordingly.” According to us, in order to attract Section 194J of the Act, thefactual finding must be that a person who is responsible for paying to aresident any sum by way of fees for professional services, or fees fortechnical services, or any remuneration or fees or commission bywhatever name called, other than those on which tax is deductibleunder Section 192 of the Act, to a Director of a Company, or royalty orany sum referred to in clause (va) of section 28 of the Act, shall, at thetime of credit of such sum to the account of the payee or at the time ofpayment thereof in cash or by issue of a cheque or draft or by any othermode, whichever is earlier, deduct an amount equal to ten per cent ofsuch sum as income tax on income comprised therein. The Department has stated specifically that it is a case ofpayment of royalty. The learned Tribunal on fact found as follows: “From the assessee’s agreement with AP TRANSCO, it is noticedthat the services rendered by the payees not only included the services inconnection with transmission of the power but also several other distinct services such as maintenance of metering system, noting down meterreading, sealing and resealing of meters etc.” Royalty, in our view, is paid on account of any technical know-how which is not purely and readily available in the market. If theTribunal has reached fact-finding that Section 194J of the Act is notattracted on a given fact and Section 194C of the Act fits, we cannotreappreciate in the absence of allegation of absurdity about the orderof the learned Tribunal. Thus, we find no merit in this appeal. The appeal is accordingly dismissed. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ _______________________ SANJAY KUMAR, J 09.7.2014 bnr