DCIT 8(3)(1), MUMBAI V. TATA TELESERVICES (MAH) LTD, NAVI MUMBAI

ITA 2519/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3860 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Keywords: Business expenditure; Earning of tax free income; Retrospective amendment; Additional evidence; Question of law; Non-deduction of tax; Assessment record; TDS
• Section: 14A; 40(a)(ia); 201(1)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL E BENC H MUMBAI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2519/MUM/2015 (ASSESSMENT YEAR 2009-10) DCIT-8(3)(1) ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS. M/S TATA TELESERVICES (MAH) LTD., D-26, TTC INDL AREA MIDC, SANPADA, P.O. TURBHE, NAVI MUMBAI-400703. P AN: AAACH1458C APPELLANT RESPONDENT APPELLANT BY : SHRI R. MANJUNATHA SWAMY (CIT-DR) RESPONDENT BY : SHRI HITEN CHANDE (AR) DATE OF HEARING : 21.01.2019 DATE OF PRONOUNCEMEN T : 30.01.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-14, MUMBAI (THE LD. CIT(A) DATED 19.02.2015 FOR ASSESSMENT YEAR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W, IN DELETING THE DISALLOWANCE OF RS.42,83,76,657/- UNDER SECTION 40( A)(IA) FOR NON-DEDUCTING OF TDS AS PER THE PROVISIONS OF SECTION 194H OF INC OME TAX ACT, WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (II) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW, IN DELETING THE DISALLOWANCE OF RS.3,84,00,000/- UNDER SECTION 14A R.W.S RULE 8D,WITHOUT ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 2 PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. (III) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW, IN DELETING THE DISALLOWANCE OF RS.3,84,00,000/- UNDER SECTION 14A R.W.S RULE 8D,BY RELYING UPON HON'BLE ITAT'S DECISION IN THE CASE OF GARWARE WALL ROPES LTD, WITHOUT APPRECIATING THAT THE DEPARTMENT IS IN APPEAL AGAIN ST THE DECISION OF THE ITAT IN THE SAID CASE. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVEN UE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT GROUND NO.1 RELATES T O DELETING THE DISALLOWANCE UNDER SECTION 40(A)(IA) FOR NON-DEDUCT ING OF TDS AS PER THE PROVISIONS OF SECTION 194H OF INCOME TAX ACT (THE A CT) IS COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT. THE L D. CIT(A) GRANTED THE RELIEF TO THE ASSESSEE BY DECISION OF HONBLE K ARNATAKA HIGH COURT IN ITA NO. 158/2013 DATED 14.08.2014. THE LD. AR FURTH ER SUBMITS THAT ON IDENTICAL FACTS, THE SIMILAR ORDER UNDER SECTION 20 1(1) AND 201(1A), THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR ASSESSMENT Y EAR 2011-12 GRANTED THE SIMILAR RELIEF TO THE ASSESSEE. THE LD. AR OF T HE ASSESSEE PLACED ON RECORD THE COPY OF DECISION OF TRIBUNAL IN ITA NOS. 2043, 2044 & 2045/MUM/2014 FOR ASSESSMENT YEAR 2009-10, 2010-11 & 2011-12 RESPECTIVELY. 3. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE DECISION OF CO-ORDI NATE BENCH OF TRIBUNAL ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 3 WHEREIN THE DECISION OF HONBLE KARNATAKA HIGH COUR T IN ITA NO. 158/2013 WAS RELIED AND FOLLOWED, THE LD. DR RELIED UPON THE ORDER OF LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAW REFERRED AND RELIED BY LOWER AUTHO RITIES. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION MADE THE DISALLOWANCE UNDER SECTION 4 0(A)(IA) OF RS. 42,83,76,657/- ON ACCOUNT OF DISCOUNT GIVEN TO DIST RIBUTORS TOWARDS THE SALE SUK RCV STARTER KITS AND RECHARGE VOUCHERS. ON APPEAL BEFORE THE LD. CIT(A), THE ENTIRE DISALLOWANCE WAS DELETED BY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT (SUPRA). WE HAVE NO TED THAT ALMOST ON IDENTICAL GROUNDS OF APPEAL ON THE ORDER PASSED UND ER SECTION 201(1) FOR ASSESSMENT YEAR 2009-10, 2010-11 & 2011-12, THE CO- ORDINATE BENCH OF THE TRIBUNAL PASSED THE FOLLOWING ORDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN THE LIGHT OF THE DECISIONS R ELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE AND THE LEARNED DEPARTMEN TAL REPRESENTATIVE. AS COULD BE SEEN, THE ASSESSING OFFICER HAS TREATED TH E ASSESSEE AS ASSESSEE IN DEFAULT ALLEGING NON-DEDUCTION OF TAX AT SOURCE UND ER SECTION 194H , ON THE REASONING THAT IT HAS PAID COMMISSION TO THE DISTRI BUTORS FOR SELLING THE PRE-PAID SIM CARD / STARTER KIT AND RECHARGE VOUCHERS. HOWEV ER, ON A PERUSAL OF THE FACTS ON RECORDS, IT IS NOTICED THAT THOUGH THE ASSESSEE HAS FIXED AN MRP ON THE STARTER KITS / PRE-PAID SIM CARD AND RECHARGE VOUCHERS BUT THAT IS ONLY FOR THE PURPOSE OF ALLOWING MARGIN TO THE DISTRIBUTORS. THE ASSESSEE D OES NOT SELL THE STARTER KIT PRE- PAID SIM CARD TO THE DISTRIBUTOR AT THE MRP BUT AT A LESSER PRICE. THE DISTRIBUTOR IS PERMITTED TO SELL THE STARTER KIT / PRE-PAID SIM CARD TO THE RETAILER / CONSUMERS AFTER RETAINING HIS MARGIN BUT UNDER NO CIRCUMSTANC ES, THE DISTRIBUTOR CAN CHARGE OVER AND ABOVE THE MRP. FOR EXAMPLE, IF THE MRP OF THE STARTER KIT IS RS. 100, ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 4 THE ASSESSEE SELLS IT TO THE DISTRIBUTOR AT RS. 80 AND THE DISTRIBUTOR CAN SELL IT TO THE RETAILER OR CUSTOMER FOR A PRICE RANGING FROM R S. 80 TO RS. 100. HOWEVER, AS FAR AS THE ASSESSEE IS CONCERNED, IT RAISES THE INV OICE FOR RS. 80 ONLY TO THE DISTRIBUTER AND ALSO THE SAME AMOUNT IS REFLECTED I N THE BOOKS OF ACCOUNT TOWARDS THE SALE PRICE. THE ASSESSEE NEVER CREDITS THE AMOUNT OF RS. 100 TOWARDS THE SALE PRICE AND ALLOWS DISCOUNT OF RS. 20 IN ITS BOOKS OF ACCOUNT. THUS, AS FAR AS THE ASSESSEE IS CONCERNED, SALE PRICE OF THE STA RTER KIT / SIM CARD IS ` 80. FURTHERMORE, AS PER THE TERMS AND CONDITIONS, ONCE THE SIM CARD / STARTER KITS ARE SOLD TO THE DISTRIBUTOR, THE SALE IS COMPLETE AND U NDER NO CIRCUMSTANCES, THEY CAN BE RETURNED BACK TO THE ASSESSEE. FROM THE AFORESAI D FACTS, IT IS CLEARLY EVIDENT THAT AS FAR AS SALE OF STARTER KIT / SIM CARD IS CO NCERNED, IT IS PURELY A PURCHASE / SALE TRANSACTION ON PRINCIPAL-TO-PRINCIPAL BASIS AN D THERE IS NO RELATIONSHIP OF AGENCY. THAT BEING THE CASE, THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE. THE HON'BLE KARNATAKA HIGH COURT AFTER EXAMINING IN DETAIL THE AFORESAID FACTORS HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY REVERSING THE ORDER OF THE TRIBUNAL. IN VIEW OF THE CHANGED SCENARIO, AFTE R THE ORDER OF THE HON'BLE KARNATAKA HIGH COURT AS REFERRED TO ABOVE, THE DECI SION OF THE LEARNED COMMISSIONER (APPEALS) CANNOT BE SUSTAINED. IN FACT , ITAT, JAIPUR BENCH, IN CASE OF M/S. TATA TELESERVICES LTD. V/S ITO, ITA NO .309/JP./2012 AND OTHERS, DATED 13TH MARCH 2015, FOLLOWING THE DECISION OF HO N'BLE KARNATAKA HIGH COURT (SUPRA), HELD THAT PROVISIONS OF SECTION 194H IS NOT ATTRACTED ON THE DISCOUNT GIVEN ON SALE OF PRE-PAID STARTER KIT AND ACCORDINGLY, FOLLOWING THE DECISIONS REFERRED TO ABOVE, WE SET ASIDE THE IMPUG NED ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND QUASH THE DEMAND RAISED BY THE ASSESSING OFFICER UNDER SECTIONS 201(1) AND 201(1A) . 8. THE AFORESAID DECISION RENDERED IN ITA NO.2043/M UM./2014, FOR ASSESSMENT YEAR 2009-10 ALSO APPLIES TO THE ISSUE RAISED IN OT HER APPEALS UNDER CONSIDERATION. IN ADDITION TO THE AFORESAID ISSUE, THERE IS ONE MORE ISSUE ARISING IN APPEAL RELATING TO THE ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13. IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 201 , THE ASSESSING OFFICER FOUND THAT THE ASSESSEE PAYS ROAMING CHARGES TOWARDS SERVICES PROVIDED BY OTHER OPERATORS TO THE USERS OF THE ASSESSEE'S MOBILE SERVICE. THE ASSESSING OFFICER, ON THE BASIS OF INFORMATION OBTAINED DURING THE SURVEY, FOUND TH AT ASSESSEE HAS PAID ROAMING CHARGES TO OTHER OPERATORS FOR USING THEIR NET-WORK AND NO TDS HAS BEEN DEDUCTED ON SUCH ROAMING CHARGES. HE, FURTHER NOTIC ED THAT THE TERM 'ROAMING' AS ACTUALLY MEANS AN ARRANGEMENT WHEREBY A SUBSCRIB ER OF A CELLULAR PHONE USES CELLULAR SERVICE OUTSIDE THE HOME NETWORK. HE NOTIC ED THAT THE SUBSCRIBER WHO IS NOT ROAMING GETS SERVICE FROM HIS HOME OPERATOR WHI LE A SUBSCRIBER WHO IS ROAMING WILL GET SERVICE FROM BOTH THE HOST OPERATO R AND HOME OPERATOR AND THE HOST OPERATOR CHARGES THE HOME OPERATOR FOR PROVIDI NG TELECOM SERVICES TO THE SUBSCRIBER OF THE LATER. BASED ON THE USAGE, THE HO ST OPERATOR RAISES INVOICE ON THE HOME OPERATOR AND THE HOME OPERATOR IN TURN REC OVERS FROM ITS OWN SUBSCRIBERS. THE ASSESSING OFFICER NOTED, WHEN A CU STOMER OF A TELECOM OPERATOR LIKE THE ASSESSEE MAKES A STD / ISD CALL T O THE SUBSCRIBER OF SAME NETWORK OR ANOTHER NETWORK BUT OPERATING IN ANOTHER TELECOM CIRCLE, IT HAS TO PAY INTER-CONNECTIVITY CHARGES TO THE CARRIER COMPANY W HICH CARRIES THE CALL FROM THE ASSESSEE'S NETWORK IN MUMBAI TO THE OTHER NETWORK A T A PARTICULAR PLACE. THE ASSESSING OFFICER OBSERVED, THE SERVICES PROVIDED B Y THE CARRIER COMPANY IS IN THE NATURE OF TECHNICAL SERVICES AND, HENCE, PAYMEN T MADE TOWARDS ROAMING / ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 5 INTER-CONNECTIVITY CHARGES ARE FEES FOR TECHNICAL S ERVICE AND ATTRACTS THE PROVISIONS OF SECTION 194J . THE ASSESSING OFFICER OBSERVED, THOUGH, AS PER TH E INDUSTRY PRACTICE, TDS IS BEING DEDUCTED ON THE INT ER-CONNECTIVITY CHARGES IN TERMS OF SECTION 194J BUT THE ASSESSEE HAS NOT DEDUCTED ANY TDS ON ROAMI NG / INTER-CONNECTIVITY CHARGES PAID TO OTHER TELECOM NE TWORK. THE ASSESSING OFFICER, THEREFORE, CALLED UPON THE ASSESSEE TO JUS TIFY ITS ACTION IN NOT DEDUCTING THE TAX AT SOURCE. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE IN ITS LETTER DATED 8TH NOVEMBER 2011 SUBM ITTED, THE PROVISIONS TO SECTION 194J ARE NOT APPLICABLE ON THE PAYMENT MADE TO OTHER OP ERATORS FOR THE INTER-CONNECTION USAGE CHARGES AS IT IS IN THE NATURE OF STANDARD SERVICE PROVIDED THROUGH TECHNOLOGY WITHOUT ANY HUMAN INVOL VEMENT OR INTERVENTION. IT WAS SUBMITTED, TRANSFERRING THE CALLS GENERATED FRO M ONE NETWORK TO THE SUBSCRIBER OF ANOTHER NETWORK DOES NOT INVOLVE ANY MANUAL LABOUR. RATHER, IT IS A HIGHLY TECHNICAL ACTIVITY DONE THROUGH MACHINES. IT WAS SUBMITTED, THE HON'BLE SUPREME COURT IN BHARTI CELLULAR LTD., HAS DISMISSE D THE DEPARTMENT'S APPEAL WITH A DIRECTION TO THE DEPARTMENTAL AUTHORITIES TO SEEK EXPERT TECHNICAL OPINION IN THE MATTER AND ALLOW FURTHER CROSS-EXAMINATION O F THE EXPERT. THUS, IT WAS SUBMITTED BY THE ASSESSEE THAT WITHOUT OBTAINING RE PORT FROM THE TECHNICAL EXPERT AND CROSS-VERIFICATION BY THE ASSESSEE, IT CANNOT B E HELD THAT THE SERVICES RENDERED ARE TECHNICAL SERVICE WITH HUMAN INTERVENT ION. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE O BSERVED, AFTER THE HON'BLE SUPREME COURT IN BHARTI AIRTEL LTD. (SUPRA) DIRECTE D THE DEPARTMENTAL AUTHORITIES TO OBTAIN A TECHNICAL REPORT, THE DEPAR TMENT OBTAINED SUCH REPORT AND ON THE BASIS OF SUCH REPORT, IT WAS HELD THAT THERE WAS HUMAN INTERVENTION / INVOLVEMENT, HENCE, PROVISIONS OF SECTION 194J IS ATTRACTED. ACCORDINGLY, ALLEGING THAT ASSESSEE FAILED TO DEDUCT TAX IN TERM S OF SECTION 194J ON THE PAYMENT MADE TOWARDS INTER-CONNECTIVITY CHARGES TRE ATED THE ASSESSEE AS ASSESSEE IN DEFAULT RAISED DEMAND UNDER SECTIONS 201(1) AND 201(1A) . BEING AGGRIEVED OF SUCH DECISION OF THE ASSESSING OFFICER , ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 9. THE LEARNED COMMISSIONER (APPEALS), WITHOUT MUCH DISCUSSION / DELIBERATION, UPHELD THE ORDER OF THE ASSESSING OFF ICER OBSERVING AS UNDER:- '4.2 IN THE INSTANT CASES UNDER APPEAL IT IS SEEN T HAT THE A.O. HAS ALREADY OBTAINED TECHNICAL OPINION FOLLOWING DECISION GIVEN BY HONOURABLE APEX COURT IN BHARTI CELLULAR 2010-TIOL-65-SC-IT AS IN C OMING OUT FORM ORDER ITSELF. IN THE CASE WHEN THERE IS NO DIFFERENT OPIN ION THAT IT IS A SERVICE PROVIDED BY ONE OPERATOR TO THE OTHER, I AM OF THE VIEW THAT SAME NEEDS TO UPHELD. ACCORDINGLY, ACTION ON OF A.O. IS UPHELD. G ROUND NO.10 TO 15 ARE DISMISSED.' 10. LEARNED AUTHORISED REPRESENTATIVE CHALLENGING T HE OBSERVATIONS OF THE DEPARTMENTAL AUTHORITIES SUBMITTED, THE HON'BLE SUP REME COURT IN BHARTI AIRTEL LTD. (SUPRA), HAD SPECIFICALLY DIRECTED THE DEPARTM ENTAL AUTHORITIES TO OBTAIN INFORMATION OF A TECHNICAL EXPERT TO ASCERTAIN WHET HER THERE IS ANY HUMAN INVOLVEMENT AND ON THE BASIS OF THE REPORT OBTAINED IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., THE ASSESSING OFFICER IN ASSE SSEE'S CASE HAS DECIDED THE ISSUE. HE SUBMITTED, IN ASSESSEE'S CASE, NEITHER TH E ASSESSING OFFICER HAS ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 6 OBTAINED A REPORT FROM TECHNICAL EXPERT NOR THE ASS ESSEE WAS ALLOWED TO CROSS EXAMINE THE TECHNICAL EXPERT. LEARNED AUTHORISED RE PRESENTATIVE SUBMITTED, IN ANY CASE OF THE MATTER EVEN ASSUMING THAT THE TECHN ICAL REPORT SUBMITTED IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., WOULD BE AP PLICABLE TO THE ASSESSEE'S CASE ALSO, STILL THE ISSUE HAS TO BE DECIDED IN FAV OUR OF THE ASSESSEE AS THE TRIBUNAL, KOLKATA BENCH, AFTER TAKING INTO CONSIDER ATION THE TECHNICAL REPORT SUBMITTED, IN CASE OF VODAFONE ESSAR MOBILE SERVICE S LTD.,, HAS HELD THAT INTER- CONNECTIVITY / ROAMING CHARGES PAID TO OTHER TELECO M NETWORK FOR ROAMING SERVICES PROVIDED DO NOT REQUIRE ANY HUMAN INTERVEN TION AND ACCORDINGLY PAYMENT FOR ROAMING CHARGES CANNOT BE TREATED AS FE ES FOR TECHNICAL SERVICES SO AS TO ATTRACT PROVISIONS OF SECTION 194J OF THE ACT. HE, THEREFORE, SUBMITTED THAT THE ISSUE HAVING BEEN DECIDED BY THE TRIBUNAL, IN F AVOUR OF ASSESSEE, THE ORDERS PASSED BY LEARNED COMMISSIONER (APPEALS) AND THE AS SESSING OFFICER CANNOT BE SUSTAINED. 11. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE REASONING OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APP EALS). 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE IMPUGNED O RDER PASSED UNDER SECTION 201(1) , IT LEAVES NO ROOM FOR DOUBT THAT THE ASSESSING OF FICER BY RELYING UPON THE REPORT OF THE TECHNICAL EXPERT IN CASE OF VODAF ONE ESSAR MOBILE SERVICES LTD., HAS CONCLUDED THAT THE ROAMING SERVICES PROVI DED BY OTHER TELECOM OPERATORS ARE TECHNICAL AND MANAGERIAL SERVICES, HE NCE, CHARGES PAID TOWARDS SUCH SERVICES IS FEES FOR TECHNICAL SERVICES COMING WITHIN THE AMBIT OF SECTION 194J . IT IS VERY MUCH EVIDENT THAT THOUGH IN CASE OF BH ARAT AIRTEL LTD. (SUPRA), THE HON'BLE SUPREME COURT HAS DIRECTED THE DEPARTME NTAL AUTHORITIES TO ASCERTAIN FROM A TECHNICAL EXPERT THE EXTENT OF HUM AN INVOLVEMENT IN PROVIDING THE SERVICES, BUT THE ASSESSING OFFICER IN CASE OF ASSESSEE HAS NOT UNDERTAKEN ANY SUCH EXERCISE. HE HAS SIMPLY REFERRED TO THE RE PORT OBTAINED FROM TECHNICAL EXPERT IN CASE OF VODAFONE ESSAR MOBILE SERVICES LT D. FURTHER, THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESS EE TO CROSS-EXAMINE THE TECHNICAL EXPERT. FOR THESE REASONS ALONE, THE DEMA ND RAISED CANNOT BE SUSTAINED. EVEN OTHERWISE ALSO, AS BROUGHT TO OUR N OTICE BY THE LEARNED AUTHORISED REPRESENTATIVE, IDENTICAL ISSUE RELATING TO APPLICABILITY OF THE PROVISIONS OF SECTION 194J TO INTER-CONNECTIVITY / ROAMING CHARGES WAS EXAMIN ED BY THE TRIBUNAL, KOLKATA BENCH, IN CASE OF VODAFONE EAST LTD., ITA NO.1864/KOL./2012 AND ORS., DATED 15TH SEPTEMBER 20 15. THE BENCH,AFTER EXAMINING THE TECHNICAL REPORT OBTAINED IN CASE OF ANOTHER COMPANY IN THE GROUP VIZ. VODAFONE ESSAR MOBILE SERVICES LTD. OBSERVED T HAT IF THE FACTS ARE SIMILAR, THERE IS NO NEED TO SET ASIDE THE ISSUE TO THE ASSE SSING OFFICER FOR OBTAINING A FRESH TECHNICAL REPORT IN CASE OF THE ASSESSEE. AFT ER ANALYSING THE TECHNICAL REPORT FROM THE EXPERT, THE BENCH FOUND THAT THE RO AMING / INTER-CONNECTIVITY SERVICES PROVIDED BY OTHER TELECOM OPERATORS IS THR OUGH STANDARD AUTOMATED SERVICES WITH THE AID OF EXISTING NETWORK / INFRAST RUCTURE USED BY SUCH OPERATOR FOR PROVIDING TELECOMMUNICATION SERVICES TO THEIR O WN SUBSCRIBERS. HENCE, ROAMING CHARGES WOULD PARTAKE THE SAME CHARACTER AS NORMAL TELECOMMUNICATION CHARGES PAID BY THE SUBSCRIBER TO THE SERVICE PROVIDER. THE BENCH FURTHER FOUND THAT HUMAN INTERVENTION IS REQU IRED ONLY FOR INSTALLATION / REPAIRING / SERVICE / MAINTENANCE / CAPACITY AUGMEN TATION OF THE NETWORK, ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 7 HOWEVER, AFTER COMPLETING THIS PROCESS, INTER-CONNE CTION BETWEEN THE OPERATORS WHILE ROAMING IS DONE AUTOMATICALLY AND DOES NOT RE QUIRE ANY HUMAN INTERVENTION, HENCE, CANNOT BE CONSTRUED AS TECHNIC AL SERVICE SO AS TO ATTRACT PROVISIONS OF SECTION 194J . FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE OBSERVATIONS FROM THE ORDER OF THE TRIBUNAL HEREUND ER IN ENTIRETY:- '4.10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. IT WOULD BE PERTINENT TO NOTE HERE THAT ROAMING SERVICES ARE PROVIDED BY OTHER TELECOM OPERATORS BY USING TH EIR EXISTING TELECOM NETWORK/ INFRASTRUCTURE AND NO INCREMENTAL INVESTME NT IS REQUIRED TO PUT UP ANY ADDITIONAL NETWORK /INFRASTRUCTURE FOR PROVISIO N OF SUCH ROAMING SERVICES. THE AFORESAID FACT LENDS FURTHER SUPPORT TO THE CONTENTION THAT ROAMING SERVICES ARE STANDARD AUTOMATED SERVICES, W HICH ARE PROVIDED BY OTHER TELECOM OPERATORS TO SUBSCRIBERS OF VEL USING THE SAME NETWORK/INFRASTRUCTURE AS IS USED BY SUCH OPERATORS FOR PROVISION OF TELECOMMUNICATION SERVICES TO ITS OWN SUBSCRIBERS. THEREFORE, IN ESSENCE, ROAMING SERVICES ARE SIMILAR IN NATURE TO THE TELEC OM SERVICES PROVIDED B Y A TELECOM OPERATOR TO ITS OWN SUBSCRIBERS AND HENCE R OAMING CHARGES WOULD PARTAK E THE SAME CHARACTER AS THE NORMAL TELECOMMU NICATION CHARGES PAID BY A SUBSCRIBER TO ITS SERVICE PROVIDER. 4.11. WE ARE NOT IN AGREEMENT WITH THE ARGUMENTS OF THE LEARNED DR THAT THE WORD TECHNICAL USED IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT SHOULD TAKE THE SAME CHARACTER OF MANAGERIAL OR CONSULTANCY PROVIDED IN THE SAID SECTION WHEREIN HUMAN INTERVENTION IS R EQUIRED AND ACCORDINGLY EVEN FOR TECHNICAL SERVICES, HUMAN INTERVENTION IS DEFINITELY REQUIRED. IN THIS REGARD, THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V/S BHARTI CELLULAR LTD IN 319 ITR 139 (DEL) HAD HELD THAT SINCE THE EN TIRE PROCESS OF MAKING A CALL AND SWITCHING THE CALL FROM ONE NETWORK TO THE OTHER IS DONE AUTOMATICALLY ON THE BASIS OF MACHINES AND DOES NOT INVOLVE ANY HUMAN INTERFACE, THE INTERCONNECT CHARGES CANNOT BE REGAR DED AS FEE FOR TECHNICAL SERVICES (FTS) AND HENCE WOULD NOT FALL IN THE AMBI T OF SECTION 194J OF THE ACT. WE FIND THAT ON FURTHER APPEAL BY THE REVENUE TO THE HON BLE SUPREME COURT IN CIT VS BHARTI CELLULAR LTD IN 330 ITR 239 (SC), THE HON BLE APEX COURT HAD STATED THAT 'RIGHT FROM 1979 VARIOUS JUDG MENTS OF THE HIGH COURTS AND TRIBUNAL HAVE TAKEN THE VIEW THAT THE WORDS 'TE CHNICAL SERVICES' HAVE GOT TO BE READ IN THE NARROWER SENSE BY APPLYING TH E RULE OF NOSCI TUR A SOCIIS, PARTICULARLY , BECAUSE THE WORDS 'TECHNICAL SERVICES' IN SECTION 9(1) (V II) R.W. EXPLANATION 2 COMES IN BETWEEN THE WORDS ' MANAGERIAL AND CONSULTANCY SERVICES'. WE FIND THAT THE PRINCIPLES LAID DOWN BY THE DELHI HIGH COURT HAVE BEEN ACCEPTED BY THE APEX COURT AS SUCH AND THE APEX COURT HAS MERELY DIRECTED THE TDS OFFICER TO CARRY OUT FACTUAL VERIFICATION TO DETERMINE THE EXTENT OF HUMAN INVOLVEMENT. BASED ON THIS DIRECTION, THE CBDT HAD AL SO ISSUED INSTRUCTION NO. 5 OF 2011 DAT ED 30.3.2011 INSTRUCTING THE REVENUE AUTHORITIES TO SEEK OPINION OF TECHNICAL EXPERTS IN CASE OF COMPLEX TECHNICAL MATTERS. ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 8 4.12. AS PER THE DIRECTIONS OF THE SUPREME COURT IN THE CASE OF CIT VS BHARTI CELLULAR LTD IN 330 ITR 239 (SC), THE TDS OFFICER HAS BEEN DIRE CTED TO OBTAIN TECHNICAL EVIDENCE FROM THE EXPERTS IN THE T ELECOM FIELD WITH REGARD TO THE FACT OF EXISTENCE OF HUMAN INTERVENTION FOR THE ROAMING SERVICES AND ACCORDINGLY THE ACIT, CIRCLE 51(1), NEW DELHI HAD R ECORDED STATEMENT FROM SHRI.TANAY KRISHNA ON 29.9.2010. THE LEARNED AR HAS ALSO FILED PRAYER FOR RECEIPT OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF ITAT RULES ON 20.7. 2015 CONTAINING THE STATEMENTS RECORDED FROM SHRI T ANAY KRISHNA ON 29.9.2010 IN THE CASE OF VODAFONE ESSAR MOBILE SERV ICES LTD & CROSS EXAMINATION BY VODAFONE ESSAR MOBILE SERVICES LTD O N 29.9. 2010. THIS APPLICATION UNDER RULE 29 CONTAINS A PRAYER WITH RE ASONS THAT THESE DOCUMENTS COULD NOT BE FILED BEFORE THE LOWER AUTHO RITIES AND THAT THESE DOCUMENTS ARE VERY CRUCIAL FOR THE DISPOSAL OF THE CASE UNDER APPEAL AS THE EXAMINATION OF THE TECHNICAL EXPERTS HAD TAKEN PLAC E POST THE PROCEEDINGS BEFORE THE ASSESSING OFFICER AND AS PER THE DIRECTI ONS OF THE HON BLE SUPREME COURT, THESE STATEMENTS WERE RECORDED IN TH E CASE OF THE GROUP COMPANY OF THE ASSESSEE. HOWEVER, IT IS SEEN THAT T HE STATEMENT OF SHRI TANAY KRISHNA ON 29.9. 2010 HAVE BEEN RELIED UPON B Y THE LEARNED CIT(APPEALS) VIDE PAGE 29 OF HIS ORDER BUT THE CROS S EXAMINATION OF SHRI TANAY KRISHNA IS NOT IN RECORDS OF THE LOWER AUTHOR ITIES. WE FIND THAT THE STATEMENT IS VERY MUCH RELEVANT FOR THE DISPOSAL OF THESE APPEAL S AND ARE HEREBY ADMITTED AS ADDITIONAL EVIDENCE (IN RESPECT OF CROSS EXAMINATION STATEMENT OF SHRI TANAY KRISHNA ON 29. 9.2010) IN T ERMS OF RULE 29 OF ITAT RULES AS THEY GO INTO THE ROOT OF THE ISSUE. 4.13. WE FIND THAT THIS ISSUE NEED NOT BE SET ASIDE TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR SEEKING FRESH TECHNICAL EVIDE NCES FROM EXPERTS AS THE SAME HAD ALREADY BEEN OBTAINED IN THE CASE OF THE G ROUP COMPANY OF THE ASSESSEE AND CBDT HAD ALSO ISSUED INSTRUCTIONS IN T HIS REGARD TO SEEK EVIDENCES. ANY TECHNICAL EVIDENCE OBTAINED IN A CAS E CAN BE USED IN THE CASE OF ANOTHER ASSESSEE AS LONG AS THE FACTS AND CIRCUM STANCES INVOLVED ARE IDENTICAL. IN THE INSTANT CASE, THE FACTS IN THE CA SE OF VODAFONE ESSAR MOBILE SERVICES LTD ARE IDENTICAL WITH THE FACTS OF THE AS SESSEE HEREIN AND ALSO IT HAPPENS TO BE THE GROUP COMPANY OF THE ASSESSEE. 4.14. SHRI TANAY KRISHNA S STATEMENT-QUESTIONS AND ANSWERS - 4, 5, 6 & 16 ARE REPRODUCED BELOW :- QUESTION 4: CAN YOU ENLIGHTEN US ABOUT THE FUNCTION ING OF THE NETWORK SYSTEM OF THE CELLULAR OPERATORS AT THE TIME OF REC EIVING OR PROVIDING INTER- CONNECT SERVICES TO EACH OTHER INCLUDING INSTALLATI ON, INTERCONNECTIVITY ETC FROM THE VERY BEGINNING? ANS. 4: AS REGARDS TO INTERCONNECT TO GATEWAY SWITC HES/ MSC OF TWO DIFFERENT OPERATORS ARE INTERCONNECTED USING ANY TR ANSPORT TECHNOLOGY WHICH INVOLVES WIRES AS WELL AS HUMAN INTERFACE FOR SETTI NG UP. IT INVOLVES DIFFERENT PHASES - ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 9 I) PLANNING PHASE- WHERE HOW MUCH CAPACITY REQUIRED AND HOW MUCH TRAFFIC HAND LING CAPACITY IS REQUIRED ON THESE BASIS HARD WARE AND SOFTWARE IS DETERMINED. II) SELECTION O F VENDOR - IS DONE TO DETERMINE WHO WILL PROVIDE THESE SERVICES ALONG WITH HIS CONSULTANCY. III) HARDWARE AND SOFTWARE IS SUPPLIED BY THE VENDO R AND IT IS CUSTOMIZED TO THE NEED OF THE NETWORK AS PER THE TEC SPECIFICATIO NS. IV) INSTALLATION AS PER VEND OR GUIDELINES - IT INV OLVES INSTALLATION OF BOTH HARDWARE AND SOFTWARE. V) CALL CONFIGURATION/PROVISIONING O F SYSTEM - IN THIS THE OPERA TOR HAS TO CONFIGURE AND MAKE PROVISION IN DATA BASE AS TO HOW THE CALLS WILL FLOW. THIS HAS TO BE DONE BY A TECHNICALLY COMPETENT PERSON. VI) TESTING - IT IS EXHAUSTIVE TESTING. THE CALLS A RE TESTED ON VARIOUS MODES (TERMINATING, LOADING ETC) ON NETWORK PORTION. (A) SOFTWARE BY HARDWARE TESTING - STAND ALONE TEST ING (B) INTERCONNECT TESTING - IT IS DO NE TO TEST IF I T IS COMPATIBLE WITH OTHER HARDWARE/SOFTWARE. THIS TESTING EMPLOYS TECHNICALLY QUALIFIED PROFESSIONALS AND TESTED AS PER THE AGREED PLAN BETWEEN SERVICES PROVIDER AND VENDOR. QUESTION 5 : IN YOUR EXPERT OPINION, DOES THE SYSTE M WORK AUTOMATICALLY WHEN NETWORK SYSTEM O F O NE CELLULAR OPERA TOR GET S CONNECTED WITH THE NETWORK SYSTEM OF OTHER CELLULAR OPERATOR? ANS. 5: WHEN A CALLS GET CONNECTED BY ONE OPERATOR TO OTHER, PER SE IT IS AN AUTOMATIC CONNECTION, BUT THERE CAN BE INSTANCES WH EN THERE IS A PROBLEM IN THE CALL CONNECT WHICH MAY REQUIRE RESOLUTION THROU GH HUMAN INTERVENTION. QUESTION 6: HENCE THERE IS NO 100% AUTOMATIC OPERAT ION OF THIS NETWORK. CAN YOU EXPLAIN WHAT KIND OF HUMAN INTERVENTION IS REQUIRED? ANS. 6: YES AS I SAID EARLIER IT CAN'T BE 100% FULL Y AUTOMATED. THERE ARE SEVERAL CIRCUMSTANCES UNDER WHICH HUMAN INTERVENTIO N WOULD BE REQUIRED. I WOULD BRIEFLY TELL YOU ABOUT EACH OF SUCH CIRCUMSTA NCES - (A) THERE COULD BE A CASE WHERE THERE IS FAILURE IN PHYSICAL HARDWARE. (B) THERE COULD BE A PROBLEM DUE TO SOFTWARE BUG . (C) THERE COULD BE SNAPPING OF FIBRE OPTIC CABLES. IN (A), (B), (C) ABOVE YOU ARE REQUIRED INTERVENTION O F TEAMS O F TECHNICAL E XPERTS TO REMEDY THE SITUATION. QUESTION 16: PLEASE TELL US THE PLACES O R POINTS OR AREAS WHERE HUMAN INTERVENTION WITH EACH OTHER? ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 10 ANS. 1 6: AS HA S BEEN DETAILED IN SEVERAL ANSWERS THAT I HAVE GIVEN EARLIER, ONE CAN BROADLY SAY THAT WHEN THERE IS AN INTERCONN ECTION BETWEEN TWO SERVICE PROVIDERS, HUMAN INTERVENTION IS CONSTANTLY REQUIRED FOR MANAGEMENT OF NETWORK/SYSTEM, CAPACITY ENHANCEMENT AND MONITORING OF SYSTEM/NETWORK. 4.15. CROSS EXAMINATION PROCEEDINGS OF SHRI TANAY K RISHNA - QUESTIONS AND ANSWERS - 3,4,5,7,11 & 12 ARE REPRODUCED BELOW:- Q.3. WHAT IS THE PROCESS OF CARRIAGE OF CALLS ORIGI NATING ON NETWORK OF ONE OPERATOR AND TERMINATING ON THE NETWORK OF THE OTHE R OPERATOR? THE CALL FROM ONE NETWORK TO THE OTHER NETWORK FLOWS AUTOMATICALL Y, I.E. WITHOUT ANY HUMAN INTERVENTION. ONCE A CALL ORIGINATES, THE CAL L TRAVELS AUTOMATICALLY. IN ESTABLISHMENT OF A CALL, THEREIN NO HUMAN INTERVENT ION I.E., ONCE A SUBSCRIBER DIALS AND THE CALL GETS CONNECTED WITHOUT ANY FAULT , THEN THERE IS NO HUMAN INTERVENTION. INTERVENTION IS REQUIRED ONLY WHEN TH E CALL IS NOT SUCCESSFUL, I.E., THE CALL FAILS DUE TO ANY REASON. Q. 4. IS ANY HUMAN INTERVENTION INVOLVED IN THE ENT IRE PROCESS OF CARRIAGE OF CALL FROM ONE OPERATOR TO ANOTHER? NO, AS STATED AB OVE, NO HUMAN INTERVENTION IS REQUIRED IN THE PROCESS OF CARRIAGE OF CALLS. HOWEVER, HUMAN INTERVENTION IS REQUIRED AT THE INTER-CONNECT SET-U P STAGE (INCLUDING CONFIGURATION, INSTALLATION, TESTING, ETC.) AND CAP ACITY ENHANCEMENT, MONITORING (INCLUDING NETWORK MONITORING), MAINTENA NCE, FAULT IDENTIFICATION, REPAIR AND ENSURING QUALITY OF SERV ICE AS PER INTERCONNECT. Q.5. FROM THE PERUSAL OF YOUR ANSWER TO QUESTION 4 OF YOUR STATEMENT, IT APPEARS THAT THE PHASES DESCRIBED THEREON ARE RESTR ICTED TO MERELY SETTING-UP OF THE INTER- CONNECT BETWEEN THE NETWORKS OF THE T WO OPERATORS AND NOT DURING ACTUAL CARRIAGE OF THE CALL BY ONE OPERATOR FOR THE OTHER. PLEASE CONFIRM. YES. Q.7. FROM PERUSAL OF YOUR ANSWERS TO VARIOUS QUESTI ONS POSED TO YOU BY THE TAX DEPARTMENT, YOU HAVE MENTIONED THAT SERVICES OF A TECHNICAL EXPERT ARE REQUIRED FOR INTER-CONNECT ARRANGEMENTS. PLEASE CON FIRM WHETHER SUCH SERVICES ARE REQUIRED FOR PROVISION OF INTER-CONNEC T SERVICES, I.E., CARRIAGE OF CALLS FROM ONE NETWORK TO ANOTHER, OR ARE PRIMARILY FOR FAULT DETECTION AND REMOVAL. PLEASE REFER TO ANSWER TO QUESTION 4 OF TH IS CROSS EXAMINATION. Q.11. WHAT IS THE EXTENT OF HUMAN INVOLVEMENT IN PR OVISION OF INTERCONNECT SERVICES. I.E., CARRIAGE OF CALLS ORIGINATING ON NE TWORK OF ONE OPERATOR AND TERMINATION THE NETWORK OF THE OTHER OPERATOR? WE H AVE ANSWERED IN QUESTION NO 5. Q.I2. IN ANSWER TO QUESTION 21 OF YOUR STATEMENT, Y OU HAVE STATED THAT IN CELLULAR NETWORKS THE LEVEL OF HUMAN INTERVENTION I S MUCH HIGHER AND OF SOPHISTICATED TECHNICAL LEVEL. IN THIS REGARD, DO Y OU AGREE THAT CELLULAR ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 11 NETWORKS ARE BASED ON SOPHISTICATED TECHNOLOGY AND WORK ON AN AUTOMATED MODE? THE HUMAN INTERVENTION AS REFERRED BY YOU FOR NETWORK OPERATIONS IS LIMITED TO NETWORK MONITORING AND MAINTENANCE AND F AULT REPAIR, RECTIFICATION, ENHANCEMENT, CONFIGURATION, AND SET- UP? WE AGREE THAT THE TELECOM NETWORKS ARE AUTOMATED NE TWORKS AND DO NOT REQUIRE HUMAN INTERVENTION FOR CARRIAGE OF CALLS. H OWEVER, AS STATED IN QUESTION 4 OF THIS CROSS EXAMINATION, HUMAN INTERVE NTION IS REQUIRED AT THE INTER-CONNECT SET-UP STAGE (INCLUDING CONFIGURATION , INSTALLATION, TESTING, ETC) AND CAPACITY ENHANCEMENT, MONITORING (INCLUDING NET WORK MONITORING), MAINTENANCE, FAULT IDENTIFICATION, REPAIR AND ENSUR ING QUALITY OF SERVICE AS PER INTERCONNECT. 4.16. THE NEXT ARGUMENT OF LEARNED DR THAT ROAMING CHARGES ARE PAID FOR BOTH INTERCONNECTIVITY AND ALSO FOR USAGE OF TRANSM ISSION LINES AND HUMAN INTERVENTION IS VERY MUCH INVOLVED WITH REGARD TO U SAGE OF TRANSMISSION LINES. WE FIND THAT THE HUMAN INVOLVEMENT IS INVOLV ED ONLY WHEN SOMETHING GOES WRONG IN THE MAINTENANCE OF TRANSMISSION LINES AND FOR CONNECTIVITY PER SE, HUMAN INTERVENTION IS NOT INVOLVED. THIS IS SUE COULD ALSO BE LOOKED INTO FROM THE ANGLE OF APPLICABILITY OF TDS PROVISI ONS ON TRANSMISSION CHARGES / WHEELING CHARGES PAID BY POWER GENERATING COMPANIES. THIS ISSUE HAD REACHED THE CORRIDORS OF VARIOUS JUDICIAL FORUM S AND NOW HAS BEEN PUT TO REST BY THE FOLLOWING DECISIONS:- CIT (TDS) VS MAHARASHTRA STATE ELECTRICITY DISTRIBU TION CO. LTD REPORTED IN 375 ITR 23 (BOM) - 'BY THIS APPEAL, THE REVENUE HAS PROPOSED THE FOLLO WING QUESTIONS TO BE SUBSTANTIAL QUESTIONS OF LAW:- '(A) WHETHER, ON THE FACTS AN D IN T HE CIRCUMSTANC ES OF T HE CASE AND I N LAW, THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PAYMENTS OF THE WHEELING AND TRANSMISSION CHARGES M ADE BY THE ASSESSEE TO THE ENTITIES LIKE MAHARASHTRA STATE ELECTRICITY TRA NSMISSION CO. LTD. (MSETCL) AND POWER GRID CORPORATION OF INDIA LTD. ( P GCIL) FOR THE USE OF TRANSMISSION LINES OR OTHER INFRASTRUCTURE, I.E. , PLANT, MACHINERY AND EQUIPMENT COULD NOT BE TERMED AS RENT UNDER THE PRO VISIONS OF SECTION 194I OF THE ACT AND, CONSEQUENTLY, THE PROVISIONS OF SEC TION 201 AND SECTION 201(IA) COULD NOT BE APPLIED? (B) WITHOUT PREJUDICE TO THE ABOVE, WHET HER, ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, PAYMENT OF W HEELING AND TRANSMISSION CHARGES T O THE ENTITLES LIKE MSETCL A ND P G CIL, SHOULD HAVE BEEN TREATED AS FEES FOR TECHNICAL SERVICES AN D TAX SHOULD HAVE BEEN DEDUCTED AT SOURCE UNDER SECTION 194J OF THE ACT FR OM THE PAYMENTS? ' ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 12 HE SUBMITTED THAT IN THE CASE OF CHHATTISGARH STATE ELECTRICITY BOARD NO APPEAL H AD BEE N FILED BY THE REVENUE AND THE REVE NUE ACCEPTED THE DECISION OF THE TRIBUNAL WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE CASE OF THE PRESENT ASSESSEE AS WELL. MERELY DRAWING POWER AND CARRYING POWER THROUGH TRANSMISSION LINES AND TRANSMISSION SYSTEM WOULD NOT AMOUNT TO RENTING UP EQUIPMENT OR ITS CHARGE OR RENT'. THE HON'BLE SUPREME COURT HAS ALSO SHOWN US SOME DI RECTION IN THIS BEHALF. WHILE INTERPRETING THE EXPRESSION 'RENT', THE APPLI CABILITY OF SECTION 194- 1 MUST BE GATHERED FROM WHETHER THE WHEELING AND TRA NSMISSION CHARGES DRAW ITS COLOUR FROM THE BASIC MEANING OF T HE EXPR ESSION 'RENT'. IT IS SEEN FROM THE DECISION OF THE SUPREME COURT IN SINGAPORE AIRLINES (SUPRA) THAT THE MEANING OF 'RENT' MUST BE UNDERSTOOD IN THE CON T EXT IN WHICH THEY ARE USED. IN THE PRESENT SET OF FACTS, IT IS NOT PO SSIBLE TO EQUATE THE WHEELING AND TRANSMISSION CHARGES PAYABLE MSETCL WITH RENT. ON FACTS IT IS SEEN THAT THE MERC ORDER DATED JUNE 27, 2006, DEALS WITH MSEDCL'S CONTENTIONS, APROPOS THE METHODOLOGY PROPOSED BY ME RC. THE TRANSMISSION CHARGES CONTEMPLATED BY MERC INCLUDES T HE CROSS SUBSIDISATION OF TRANSMISSION CHARGES ACROSS LICENS EES WHEN FOUND TO BE UNECONOMICAL AND UNCOMPETITIVE. IT IS FURTHER OBSER VED THAT MERC HAS CONSIDERED POOLING OF TRANSMISSION CHARGES DURING B ULK POWER TRANSMISSION FROM ONE LICENSEE TO ANOTHER LICENSEE. IT IS AFTER CONSIDERING ALL THESE ASPECTS THAT A COMPOSITE CHARGE METHOD FOR ANY SUCH TRANSMI SSION WAS ADOPTED. THUS, IT IS SEEN THAT THE METHODOLOGY FOR DETERMINI NG OF THE TRANSMISSION TARIFF COULD NOT BE DETERMINED IN A MECHANICAL MANN ER AS IF THE CHARGE WAS ONLY FOR USE OF THE STATE TRANSMISSION UTILITY. THE MERC WHILE PASSING THIS ORDER ON TRANSMISSION CHARGES HAD RECEIVED VARIOUS OBJECTIONS SOME, INTER ALIA, SUPPORTING THE COMPOSITE TARIFF, SOME AGAINST . HOWEVER, WE NEED NOT DIVERT OUR ATTENTION TO THE DETAILS OF PRICING FORM ULA FIN ALLY ADOPTED. THERE IS NOTHING ON RECORD TO SUPPORT THE REVENUE'S CONTE NTION THAT THE WHEELING AND TRANSMISSION CHARGES ASSUMES THE CHARACTER OF R ENT. WE ARE IN AGREEMENT WITH MR. MISTRI THAT THE EXPRESSION 'RENT' MUST BE CONCEPTUALLY UNDERSTOOD. THE CONCEPT OF RENT UNDER THE INCOME-TAX ACT DOES NOT ENCOMPASS, IN OUR VIEW, THE WHEELING AND TRANSMISSION CHARGES PAYABLE BY THE ASSESSEE ESPECIALLY WHEN THE ASSESSEE IS DISCHARGING A PUBLI C FUNCTION. THE EXPRESSION OF 'TRANSMISSION CHARGES AND/OR 'WHEELIN G CHARGES' ENTAILS DISTRIBUTION OF ELECTRICITY IN THE AREA OF THE CORP ORATION AND THEY CANNOT BE SUBJECTED TO PROVISIONS OF SECTION 194-1 OF THE ACT. WE, HOWEVER, CLARIFY THAT THIS IS RESTRICTED TO THE CASE OF THE ASSESSEE IN VIEW OF THE PUBLIC FUNCTION TO BE UNDERTAKE N BY IT, AS A RESULT OF TH E RESTRUCTURING OF THE MAHARASHTRA STATE ELECTRICITY BOARD. IT IS PERTINEN T TO MENTION HERE THAT SECTION 62 OF THE ACT PROVIDES THAT T HE COMMISSION MAY, IN T HE CASE OF SUPPLY OF ELECTRICITY FIX A MAXIMUM CEILING OF THE TARIFF, IN AN ATTEMPT TO PROMOTE COMPETITION AMONGST THE DISTRIBUTION LICENS EES. THUS, THE VERY CONCEPT OF THE CHARGE FOR TRANSMISSION ELECTRICITY AND WHEELING OF ELECTRICITY, AS THE CASE MAY BE, IS SUBJECT TO THE TARIFF THAT W ILL BE DETERMINED BY THE MERC IN PUBLIC INTEREST. HENCE, IT IS INCOMPREHENSI BLE THAT THE TARIFF PASSES THE TEST AS FEES FOR TECHNICAL SERVICES. ONCE AGAIN APPLYING THE PRINCIPLES OF CONCEPTUAL INTERPRETATION TO T HE TARIFF TO BE FIXE D FOR THE WHEELING AND TRANSMISSION CHARGES OF ELECTRICITY, IT CANNOT BE I NTERPRETED TO MEAN FEES FOR ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 13 THE PROVIDING TECHNICAL SERVICES. UNDER THE OPEN AC CESS SYSTEM, IT IS THE M SEDCL WHICH WILL BE AVAILING OF THE SAID TRANSMISSI ON FACILITY. NO 'SERVICE' IS BEING PROVIDED BY THE MSETCL OR THE ST ATE TRANSMISSION UTILITY. NO DOUBT, MSEDCL, AS TRANSMISSION LICENSEE IS REQUIRED TO PROVIDE SUPERINTENDENCE, MAINTENANCE AND REPAIRS TO THE SYS TEM. HOWEVER, NO SUCH SERVICE IS RENDERED B Y T HE MSETCL TO M SE DCL. MS ETCL IS OBLIGED TO MAINTAIN THE SYSTEM BY VALUE OF OPERATION OF LAW UN DER T HE ELECTRICITY ACT . THE MSEDCL ACCESSES THE STATE TRANSMISSION UTILITY AN D DISTRIBUTES ELECTRICITY PASSING THROUGH THE STATE TRANSMISSION UTILITY. OUR VIEWS STAND FORTIFIED BY THE VERY FACT THAT THE REVENUE ITSELF IS CONFUSED AND UNSURE AS TO THE NATURE OF THE CHARGE. THE FOCUS OF THE REVENUE IS ONLY THE REQUIREMENT OF DEDUCTION OF TAX WHETHER UNDER SECTION 194- 1 OR SECTION 194J . THIS APPROACH IS ERRONEOUS. THE REVENUE CONTENDS THAT TH E WHEELING AND TRANSMISSION CHARGES COULD BE RENT OR FEES FOR TECH NICAL SERVICES BUT, IN OUR VIEW IT IS NEITHER. WHEELING CHARGES REPRESENT THE CHARGE FOR PERMITTING USE OF THE STATE TRANSMISSION UTILITY 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 THE LICENSEES AND CONSUMERS. IN V IEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE WHEELING AN D TRANSMISSION CHARGES ARE NEITHER RENT NOR FEES FOR TECHNICAL SERVICES. K EEPING THE SAID INTERPRETATION INTO EFFECT, WE FIND T HAT WHILE INT ERPRETING THE EXPRESSION 'RENT' IN THE P RESENT SCENARIO, WE MUST BEAR IN MI ND THAT TAKING INTO ACCOUNT THE FUNCTIONING OF MSEDCL WHICH IS A PUBLIC UTILITY , IT WILL NOT BE APPROPRIATE TO EQUATE T HE TRANSMISSION CHARGES OR WHEELING CHARGES TO RENT OR FEES FOR TECHNICAL SERVICE. IN OUR VIEW, THE TRA NSMISSION CHARGES AND/ OR WHEELING CHARGES ARE NOT AMOUNTS PAID UNDER ANY ARR ANGEMENT FOR USE OF LAND, BUILDING, PLANT MACHINERY, EQUIPMENT, FURNITU RE, FITTING, ETC. AND, THEREFORE, NOT RE NT. EQUALLY, THE AMOUNTS ARE NOT FEES FOR TECHNICAL SERVICES. IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE ANS WER THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS DISPOSED OF ACCORDINGLY. THERE WILL BE NO ORDER AS TO COSTS. B) AURO MIRA BIOPOWER INDIA P LTD VS ITO TDS REPORT ED IN (2015) 55 TAXMANN.COM 452 (CHENNAI-TRIBUNAL) - ' SECTION 194 READ WITH SECTION 9 OF T HE INCOME TAX ACT , 1961- DEDUCTION OF T AX AT SOURCE- FEES FOR PROFESSIONAL OR TECHNIC AL SERVICES (TRANSMISSION CHARGES)- ASSESSMENT YEAR 2012-1 3- WHETHER, WHERE ASSESSEE PAID WHEELING, SCHEDULING AND TRANSMISSION CHARGES TO ST ATE POWER UTILITY FOR USING ITS DISTRIBUTION NET WORK TO SELL ENERGY GENE RATED BY ASSESSEE TO END CONSUMERS AND SAME DID NOT INVOLVE ANY HUMAN ELEMEN T, ASSESSEE WAS NOT REQUIRED T O DEDUCT TDS UNDER SECTION 19 4JHELD , YES [PARA 6] IN FAVOUR OF ASSESSEE' C) DCIT VS DELHI TRANS CO LTD REPORTED IN (2014) 52 TAXMANN.COM 261 (DELHI - 'THIS FINDING HAS BEEN FOLLOWED BY THE ITAT IN ITA NO. 3965/ DEL/2011 IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2006-07. A PART FROM THE FINDING OF ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 14 TRIBUNAL RECORDED IN THE ASSESSEE S OWN CASES, WE DEEM IT PERTINENT TO TAKE NOTE OF THE FINDING RECORDED BY THE TRIBUNAL IN THE CASE OF CHHATTISGARH STATE ELECTRICITY BOARD -VS.- ITO (SUPRA) (2012) 50 SOT 33 (MUM.)- NO FURTHER APPEAL TO HIGH COURT BY DEPARTMENT. THE RELEVANT FI NDING READ AS UNDER : '11. WE FIND THAT THE POWER PURCHASE AGREEMENT ENTE RED INTO BY THE ASSESSEE WITH NTPC, (COPY PLACED BEFORE US AT PAGES 15-27 OF THE PAPER- BOOK), SPECIFICALLY PROVIDES THAT 'POWER SHALL BE M ADE AVAILABLE BY THE NTPC AT THE BUSBARS OF THE STATION AND IT SHALL BE OBLIGATION AND RESPONSIBILITY OF THE CSEB TO MAKE THE REQUIRED ARR ANGEMENT FOR EVACUATION OF POWER FROM SUCH DELIVERY POINTS OF NTPC'. IT IS PURSUANT TO THESE OBLIGATIONS THAT THE ASSESSEE, ALONG WITH OTHER BUL K POWER BENEFICIARIES - NAMELY M P STATE ELECTRICITY BOARD, GUJARAT ELECTRI CITY BOARD, MAHARASHTRA STATE ELECTRICITY BOARD, ELECTRICITY DEPARTMENT - G OVERNMENT OF GOA, ADMINISTRATION OF DAMAN & DIU, AND ELECTRICITY DEPA RTMENT - ADMINISTRATION OF DADRA AND NAGAR HAVELI, HAS ENTER ED INTO A 'BULK POWER TRANSMISSION AGREEMENT' WITH PGCIL. THE PREAMBLE OF THIS AGREEMENT, INTER ALIA, NOTES THAT THE PGCIL 'IS DESIROUS TO TR ANSMIT ENERGY FROM THE CENTRAL SECTOR POWER STATION(S) TO THE BULK POWER B ENEFICIARIES AND THAT THE SAID BULK POWER BENEFICIARIES ARE DESIROUS OF RECEI VING THE SAME THROUGH POWERGRID TRANSMISSION SYSTEM ON MUTUALLY AGREED TE RMS AND CONDITIONS'. THIS AGREEMENT PROVIDES THAT 'POWERGRI D SHALL OPERATE AND MAINTAIN THE TRANSMISSION SYSTEM BELONGING TO IT IN THE WESTERN REGION AS PER AGREED GUIDELINES AND THE DIRECTIVES OF THE WES TERN REGIONAL ELECTRICITY BOARD AND THE REGIONAL LOAD DISPATCH CENTERS, AND C OOPERATE WITH THE BULK POWER BENEFICIARIES OF THE REGION, SO AS TO MAINTAI N THE SYSTEM PARAMETERS WITHIN ACCEPTABLE/REASONABLE LIMITS EXCEPT WHERE IT IS NECESSARY TO TAKE MEASURES TO PREVENT IMMINENT DAMAGE TO ANY EQUIPMEN T'. IN RESPECT OF THESE SERVICES, THE BULK POWER BENEFICIARIES ARE TO PAY TO PGCIL A MONTHLY CHARGES COMPUTED IN THE MANNER SET OUT IN CLAUSE 9 OF THE SAID AGREEMENT. THIS CLAUSE, IN TURN, REFERS TO FORMULA SET OUT IN A.4 OF ANNEXURE 1 WHICH REFERS TO THE SAME RATIO OF AGREED ANNUAL CHARGES D IVIDED BY 12 AS IS BETWEEN POWER TRANSMITTED TO EACH BENEFICIARY TO TOTAL SALE S FROM THAT PARTICULAR POINT OF DELIVERY. IN OTHER WORDS, WHILE THE ANNUAL CHARG ES ARE FIXED, THESE ARE DIVIDED BETWEEN THE BENEFICIARIES IN THE SAME RATIO AS IS RATIO OF POWER EVACUATED BY A BENEFICIARY TO THE TOTAL SALE OF POW ER FROM THAT DELIVERY POINT. IT IS, HOWEVER, NOT IN DISPUTE THAT THE TRAN SMISSION LINES ARE IN THE PHYSICAL CONTROL OF PGCIL, THESE ARE MAINTAINED AND OPERATED BY THE PGCIL AND, SO FAR AS THE ASSESSEE IS CONCERNED, ITS INTER EST IN THE TRANSMISSION LINES IS RESTRICTED TO THE FACT THAT ELECTRICAL POWER PUR CHASED BY THE ASSESSEE, SIMULTANEOUSLY ALONGWITH ELECTRICAL POWER PURCHASED BY OTHER BULK POWER BENEFICIARIES, IS TRANSMITTED THROUGH THESE TRANSMI SSION LINES. THE WAY IT WORKS IS LIKE THIS. THE POWER AVAILABLE AT THE DELI VERY POINTS, COLLECTIVELY FOR ALL THE BULK POWER BENEFICIARIES, IS LOADED FOR TRA NSMISSION ON THESE TRANSMISSION LINES OR POWERGRID AND EACH OF THE BEN EFICIARIES IS ALLOWED TO UTILIZE THE POWER TO THE EXTENT ALLOCATED TO HIM. I T IS NOT THE CASE THAT PURCHASES BY EACH OF THE BULK BENEFICIARY CAN BE PH YSICALLY IDENTIFIED AND THAT PARTICULAR BENEFICIARY IS ONLY ALLOWED TO USE THAT PHYSICALLY IDENTIFIED PORTION OF POWER. STRICTLY SPEAKING, THEREFORE, IT IS NOT THE TRANSMISSION OF POWER FROM ONE POINT TO ANOTHER BUT AVAILABILITY OF POWER ON THE ENTIRE POWER GRID OR TRANSMISSION LINES ENABLING THE BENEF ICIARY TO UTILIZE THE ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 15 POWER TO THE EXTENT OF HIS ALLOCATION. ON THESE FAC TS, THE QUESTION THAT REQUIRES OUR ADJUDICATION IS WHETHER OR NOT THE PAY MENT FOR TRANSMISSION CHARGES CAN BE TERMED AS 'RENT' FOR THE PURPOSES OF SECTION 194-I OF THE ACT. 12. LET US NOW TAKE A LOOK AT THE STATUTORY PROVISI ON WITH REGARD TO TAX WITHHOLDING FROM RENT PAYMENTS, WHICH IS SET OUT IN SECTION 194-I OF THE ACT, AND ANALYZE THE SAME. SECTION 194-I PROVIDES AS FOLLOWS: ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THERE ON AT THE RATE OF - (A) TWO PER CENT. FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDI NG) OR FURNITURE OR FITTINGS: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CRE DITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOU NT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED EIGHTY THOUSAND RUPEES ] : PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER C LAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING TH E FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, [(I) 'RENT' MEANS ANY PAY MENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB- LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TO GETHER) ANY, -, (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTO RY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOV E ARE OWNED BY THE PAYEE;] ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 16 (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, W HETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCO UNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIO NS OF THIS SECTION SHALL APPLY ACCORDINGLY. 13. THE CASE OF THE ASSESSING OFFICER, WHICH HAS BE EN SUSTAINED IN THE FIRST APPEAL, IS THAT SINCE EXPRESSION 'RENT', FOR THE PU RPOSE OF SECTION 194 I, INCLUDES 'ANY PAYMENT, BY WHATEVER NAME CALLED, UND ER ANY LEASE, SUB- LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMEN T' FOR THE USE OF MACHINERY, PLANT OR EQUIPMENT, AND SINCE THE ASSESS EE HAS MADE THE PAYMENTS TOWARDS TRANSMISSION CHARGES FOR USE OF TH E MACHINERY, PLANT AND EQUIPMENT COLLECTIVELY CONSTITUTING MODE OF TRANSMI SSION OF POWER, THE PROVISIONS OF SECTION 194-I COME INTO PLAY ON THE FACTS OF THIS CASE. 14. THE CORE ISSUE THAT WE MUST DEAL WITH IS WHETHE R THE PRESENT ARRANGEMENT UNDER THE BULK POWER TRANSMISSION AGREE MENT CAN BE TERMED CAN BE COVERED BY THE SCOPE OF EXPRESSION ANY OTHER AGREEMENT OR ARRANGEMENT 'FOR THE USE OF' APPEARING IN EXPLANATI ON (I) TO SECTION 194-I . 15. EXPLANATION (I) TO SECTION 194-I , AS WE HAVE NOTED ABOVE, DEFINES RENT AS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEA SE, SUBLEASE, OR TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT 'FOR THE USE OF' LAND, BUILDING, PLANT, MACHINERY OR EQUIPMENT ETC. AS EVI DENT FROM A PLAIN READING OF THE AGREEMENTS UNDER WHICH IMPUGNED PAYMENTS HAV E BEEN MADE, THE PAYMENTS HAVE BEEN MADE FOR THE SERVICES OF TRANSMI SSION OF ELECTRICITY AND NOT THE USE OF TRANSMISSION WIRES PER SE. IT IS A S IGNIFICANT FACT THAT THESE TRANSMISSION LINES ARE NOT ONLY BEING USED FOR TRAN SMISSION OF ELECTRICITY TO THE ASSESSEE BUT ALSO FOR TRANSMISSION TO ELECTRICI TY TO VARIOUS OTHER ENTITIES. THE TRANSMISSION LINES CONTINUE TO BE NOT ONLY UNDE R CONTROL AND POSSESSION OF THE PGCIL IN LEGAL TERMS, BUT, WHAT IS MORE IMPO RTANT, THESE TRANSMISSION LINES ARE EFFECTIVELY IN THE CONTROL OF PGCIL, WITH OUT ANY INVOLVEMENT OF THE ASSESSEE IN ACTUAL OPERATIONS OF THE SAME. ON THESE FACTS, IN OUR HUMBLE UNDERSTANDING, THE ASSESSEE HAS MADE THE PAYMENTS F OR TRANSMISSION OF ELECTRICITY IN WHICH TRANSMISSION LINES HAVE BEEN U SED RATHER THAN FOR THE USE OF TRANSMISSION LINES PER SE. THE PAYMENTS COULD BE SAID TO HAVE BEEN MADE FOR 'THE USE OF TRANSMISSION LINES' IN A CASE IN WH ICH THE OBJECT OF CONSIDERATION FOR WHICH PAYMENTS ARE MADE WAS THE U SE OF TRANSMISSION LINES SIMPLICTOR, AND SUCH A USE BY THE ASSESSEE DO ES NOT EXTEND BEYOND THE TRANSMISSION OF ELECTRICITY THROUGH SUCH LINES IN T HE SENSE THAT THE SAME TRANSMISSION LINES CONTINUE TO BE IN THE CONTROL OF PGCIL FOR TRANSMISSION OF ELECTRICITY FOR OTHER ENTITIES AND FOR ALL PRACTICA L PURPOSES. EVEN AS ELECTRICITY PURCHASED BY THE ASSESSEE IS TRANSMITTED TO THE ASS ESSEE FROM THE NTPC BUSBAR TO ITS LANDING POINTS, THE SAME TRANSMISSION LINES CONTINUE TO BE ENGAGED IN SIMILAR TRANSMISSION OF ELECTRICITY FOR OTHER ENTITIES AND THE ASSESSEE HAS NO SAY IN THE MANNER IN WHICH SUCH TRA NSMISSION LINES CAN BE CONTROLLED AND USED BY THE PGCIL. UNDOUBTEDLY, FOR THE PURPOSE OF AN ARRANGEMENT BEING TERMED AS IN THE NATURE OF RENT F OR THE PURPOSE OF SECTION ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 17 194-I , THE 'CONTROL' AND 'POSSESSION', IN LEGAL TERMS, O F AN ASSET MAY NOT NOT NEEDED TO BE WITH THE PERSON BENEFITING FROM THE AS SET IN QUESTION, IT IS A CONDITION PRECEDENT FOR INVOKING SECTION 194 I THAT THE ASSET, FOR THE USE OF WHICH THE PAYMENT IN QUESTION IS MADE, SHOULD HAVE SOME ELEMENT OF ITS CONTROL BY THE ASSESSEE. HERE IS A CASE IN WHICH TH E ASSESSEE HAS NO CONTROL OVER THE OPERATIONS OF THE TRANSMISSION LINES, AND ALL THAT HE GETS FROM THE ARRANGEMENTS IS THAT HE CAN DRAW THE ELECTRICAL POW ER PURCHASED FROM PGCIL'S TRANSMISSION LINES IN AN AGREED MANNER. 16. WHILE ON THE ISSUE OF DISTINCTION BETWEEN USE O F AN ASSET AND BENEFIT FROM AN ASSET, WE MAY USEFULLY REFER TO THE FOLLOWI NG DISTINCTION BROUGHT OUT BY THE KARNATAKA HIGH COURT BETWEEN LEASING OUT OF EQUIPMENT AND THE USE OF EQUIPMENT BY ITS CUSTOMER. THIS WAS DONE IN THE CASE OF LAKSHMI AUDIO VISUAL INC. V. ASSTT. COMMR. OF COMMERCIAL TAXES [2 001] 124 STC 426 (KAR.), WHICH HAS BEEN FOLLOWED BY HON'BLE DELHI HI GH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. V. DIT [2011] 332 ITR 340 / 197 TAXMAN 263/ 9 TAXMANN.COM 168, IN THE FOLLOWING TERMS: '9. THUS IF THE TRANSACTION IS ONE OF LEASING/HIRIN G/LETTING SIMPLICITER UNDER WHICH THE POSSESSION OF THE GOODS, I.E., EFFECTIVE AND GENERAL CONTROL OF THE GOODS IS TO BE GIVEN TO THE CUSTOMER AND THE CUSTOM ER HAS THE FREEDOM AND CHOICE OF SELECTING THE MANNER, TIME AND NATURE OF USE AND ENJOYMENT, THOUGH WITHIN THE FRAMEWORK OF THE AGREEMENT, THEN IT WOULD BE A TRANSFER OF THE RIGHT TO USE THE GOODS AND FALL UNDER THE EXTEN DED DEFINITION OF 'SALE'. ON THE OTHER HAND, IF THE CUSTOMER ENTRUSTS TO THE ASSESSEE THE WORK OF ACHIEVING A CERTAIN DESIRED RESULT AND THAT INVOLVE S THE USE OF GOODS BELONGING TO THE ASSESSEE AND RENDERING OF SEVERAL OTHER SERVICES AND THE GOODS USED BY THE ASSESSEE TO ACHIEVE THE DESIRED R ESULT CONTINUE TO BE IN THE EFFECTIVE AND GENERAL CONTROL OF THE ASSESSEE, THEN , THE TRANSACTION WILL NOT BE A TRANSFER OF THE RIGHT TO USE GOODS FALLING WITHIN THE EXTENDED DEFINITION OF 'SALE'. LET ME NOW CLARIFY THE POSITION FURTHER, WI TH AN ILLUSTRATION WHICH IS A VARIATION OF THE ILLUSTRATION USED BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF RASHTRIYA ISPAT NIGAM LTD. V. CTO.[1990] 77 STC 182 (AP). ILLUSTRATION (I) A CUSTOMER ENGAGES A CARRIER (TRANSPORT OPERATO R) TO TRANSPORT ONE CONSIGNMENT (A FULL LORRY LOAD) FROM PLACE A TO B, FOR AN AGREED CONSIDERATION WHICH IS CALLED FREIGHT CHARGES OR LO RRY HIRE. THE CARRIER SENDS ITS LORRY TO THE CUSTOMER'S DEPOT, PICKS UP THE CON SIGNMENT AND PROCEEDS TO THE DESTINATION FOR DELIVERY OF THE CONSIGNMENT. TH E LORRY IS USED EXCLUSIVELY FOR THE CUSTOMER'S CONSIGNMENT FROM THE TIME OF LOADING, TO THE TIME OF UNLOADING AT DESTINATION. CAN IT BE SAID TH AT RIGHT TO USE OF THE LORRY HAS BEEN TRANSFERRED BY THE CARRIER TO THE CUSTOMER ? THE ANSWER IS OBVIOUSLY IN THE NEGATIVE, AS THERE IS NO TRANSFER OF THE 'US E OF THE LORRY' FOR THE FOLLOWING REASONS : (I) THE LORRY IS NEVER IN THE C ONTROL, LET ALONE EFFECTIVE CONTROL OF THE CUSTOMER; (II) THE CARRIER DECIDES H OW, WHEN AND WHERE THE LORRY MOVES TO THE DESTINATION, AND CONTINUES TO BE IN EFFECTIVE CONTROL OF THE LORRY; (III) THE CARRIER CAN AT ANY POINT (OF TIME OR PLACE) TRANSFER THE CONSIGNMENT IN THE LORRY TO ANOTHER LORRY; OR THE C ARRIER MAY UNLOAD THE ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 18 CONSIGNMENT EN ROUTE IN ANY OF HIS GODOWNS, TO BE P ICKED UP LATER BY SOME OTHER LORRY ASSIGNED BY THE CARRIER FOR FURTHER TRA NSPORTATION AND DELIVERY AT DESTINATION. (II) ON THE OTHER HAND, LET US CONSIDER THE CASE OF A CUSTOMER (SAY A FACTORY) ENTERING INTO A CONTRACT WITH THE TRANSPORT OPERATO R, UNDER WHICH THE TRANSPORT OPERATOR HAS TO PROVIDE A LORRY TO THE CU STOMER, BETWEEN THE HOURS 8 A.M. TO 8 P.M. AT THE CUSTOMER'S FACTORY FOR ITS USE, AT A FIXED HIRE PER DAY OR HIRE PER KM. SUBJECT TO AN ASSURED MINIMUM, FOR A PERIOD OF ONE MONTH OR ONE WEEK OR EVEN ONE DAY; AND UNDER THE CONTRACT, T HE TRANSPORT OPERATOR IS RESPONSIBLE FOR MAKING REPAIRS APART FROM PROVIDING A DRIVER TO DRIVE THE LORRY AND FILLING THE VEHICLE WITH DIESEL FOR RUNNI NG THE LORRY. THE TRANSACTION INVOLVES AN IDENTIFIED VEHICLE BELONGING TO THE TRA NSPORT OPERATOR BEING DELIVERED TO THE CUSTOMER AND THE CUSTOMER IS GIVEN THE EXCLUSIVE AND EFFECTIVE CONTROL OF THE VEHICLE TO BE USED IN ANY MANNER AS IT DEEMS FIT; AND DURING THE PERIOD WHEN THE LORRY IS WITH THE CUSTOM ER, THE TRANSPORT OPERATOR HAS NO CONTROL OVER IT. THE TRANSPORT OPERATOR REND ERS NO OTHER SERVICE TO THE CUSTOMER. .......' 17. IT IS THUS CLEAR THAT IN A SITUATION IN WHICH T HE PAYMENT IN MADE FOR THE USE OF AN ASSET SIMPLICITER, WHETHER WITH CONTROL A ND POSSESSION IN ITS LEGAL SENSE OR NOT, THE PAYMENT COULD BE SAID TO BE FOR T HE USE OF AN ASSET. HOWEVER, IN A SITUATION IN WHICH THE PAYMENT IS MAD E ONLY FOR THE PURPOSE A SPECIFIC ACT, I.E. POWER TRANSMISSION IN THIS CASE, AND EVEN IF AN ASSET IS USED IN THE SAID PROCESS, THE PAYMENT CANNOT BE SAID TO BE FOR THE USE OF AN ASSET. WHEN CONTROL OF THE ASSET (TRANSMISSION LINES IN TH E PRESENT CASE) ALWAYS REMAINS WITH THE PGCIL, ANY PAYMENT MADE TO THE PGC IL FOR TRANSMISSION OF POWER ON THE TRANSMISSION LINES AND INFRASTRUCTU RE OWNED CONTROLLED AND IN PHYSICAL POSSESSION OF PGCIL CAN BE SAID TO HAVE BEEN MADE FOR 'THE USE OF ' THESE TRANSMISSION LINES OR OTHER RELATED INFR ASTRUCTURE. VIEWED IN THIS PERSPECTIVE, SECTION 194 I HAS NO APPLICATION SO FA R AS THE IMPUGNED PAYMENTS FOR TRANSMISSION OF ELECTRICITY IS CONCERN ED. FOR THIS SHORT REASON ALONE THE IMPUGNED DEMANDS MUST BE HELD TO UNSUSTAI NABLE IN LAW.' 9. ON DUE CONSIDERATION THE ORDER OF THE COORDINATE BENCH IN THE ASSESSEE S OWN CASE IN ASSESSMENT YEAR 2005-06, AND 2006-07 AS WELL AS IN THE CASE CHHATTISGARH STATE ELECTRICITY BOARD, WE ARE OF THE VIEW THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS APPRECIATE D THE CONTROVERSY IN RIGHT PROSPECTIVE AND NO INTERFERENCE IS CALLED FOR . THEREFORE, ITA NO. 3526,3528,3629,3530 ARE DISMISSED THE VARIOUS DECISIONS CITED SUPRA HAVE HELD THAT TH ERE WILL BE NO TDS ON TRANSMISSION CHARGES AND THE SAME ANALOGY WOULD APP LY WITH EQUAL FORCE IN THE CASE OF TRANSMISSION CHARGES IN TELECOM INDUSTR Y. 4.17. FROM THE AFORESAID STATEMENT RECORDED FROM TE CHNICAL EXPERTS PURSUANT TO THE DIRECTIONS OF THE SUPREME COURT IN CIT V S B HARTI CELLULAR LTD ( 330 ITR 239) WHICH HAS BEEN HEAVILY RELIED UPON BY THE LEARNED CITA, WE FIND THAT HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTAL LATION / SETTING UP / REPAIRING / SERVICING / MAINTENANCE / CAPACITY AUGM ENTATION OF THE NETWORK. ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 19 BUT AFTER COMPLETING THIS PROCESS, MERE INTERCONNEC TION BETWEEN THE OPERATORS WHILE ROAMING, IS DONE AUTOMATICALLY AND DOES NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY CANNOT BE CONSTR UED AS TECHNICAL SERVICES. IT IS COMMON KNOWLEDGE THAT WHEN ONE OF T HE SUBSCRIBERS IN THE ASSESSEE S CIRCLE TRAVELS TO THE JURISDICTION OF ANOTHER CIR CLE, THE CALL GETS CONNECTED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENT ION AND IT IS FOR THIS, THE ROAMING CHARGES IS PAID BY THE ASSESSEE TO THE VISITING OPERATOR FOR PROVIDING THIS SERVICE. HENCE WE HAVE NO HESITATION TO HOLD THAT THE PROVISION OF ROAMING SERVICES DO NOT REQUIRE ANY HU MAN INTERVENTION AND ACCORDINGLY WE HOLD THAT THE PAYMENT OF ROAMING CHA RGES DOES NOT FALL UNDER THE AMBIT OF TDS PROVISIONS U/S 194J OF THE A CT.' 13. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSIN G OFFICER HAS NOT OBTAINED ANY REPORT FROM THE TECHNICAL EXPERT TO ASCERTAIN THE F ACT WHETHER THERE IS ANY HUMAN INTERVENTION IN PROVIDING CELLULAR SERVICES. IT IS PATENT AND OBVIOUS THAT THE ASSESSING OFFICER HAS RELIED UPON THE TECHNICAL REP ORT OBTAINED IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD. THEREFORE, WE A RE NOT IN A POSITION TO KNOW WHETHER THE FACTS RELATING TO HUMAN INTERVENTI ON IN ASSESSEE'S CASE IS SIMILAR TO THE FACTS IN CASE OF VODAFONE ESSAR MOBI LE SERVICES LTD. HOWEVER, AFTER ANALYSING THE REPORT SUBMITTED BY THE TECHNIC AL EXPERT SHRI TANAY KRISHNA, IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., WHO INCIDENTALLY ALSO SUBMITTED THE REPORT IN CASE OF BHARTI CELLULAR LTD ., AND THE CROSS-EXAMINATION OF SHRI TANAY KRISHNA, THE ITAT, KOLKATA BENCH, HAS FOUND THAT THE ROAMING / INTER CONNECTIVITY SERVICES ARE RENDERED AUTOMATICA LLY WITHOUT ANY HUMAN INTERVENTION. IT IS EVIDENT FROM THE ORDER PASSED U NDER SECTIONS 201(1) AND 201(1A) , THAT THE ASSESSING OFFICER RELYING UPON THE TECHN ICAL REPORT OBTAINED IN CASE OF VODAFONE ESSAR (SUPRA), HAS RAI SED THE DEMAND AGAINST THE ASSESSEE INFERRING THAT ROAMING CHARGES WARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, HENCE, COMING WITHIN THE PURVIEW OF SECTION 194J . HOWEVER, AS STATED EARLIER, THE VERY SAME REPORT FROM THE TECHNICAL EX PERT IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., WAS CONSIDERED AND ANALYSED B Y THE TRIBUNAL, KOLKATA BENCH (SUPRA) AND THE BENCH HELD THAT THERE IS NO H UMAN INTERVENTION IN PROVIDING THE ROAMING SERVICES. THAT BEING THE CASE , FOLLOWING THE OBSERVATIONS OF THE TRIBUNAL, KOLKATA BENCH, REFERRED TO ABOVE, WE HOLD THAT THE ROAMING / INTER- CONNECTIVITY CHARGES PAID BY THE ASSESSEE TO OTHER TELECOM NETWORKS NOT BEING IN THE NATURE OF FEES FOR TECHNICAL SERVICES WILL NOT ATTRACT THE PROVISIONS OF SECTION 194J . THAT BEING THE CASE, ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENT OF ROAMING CHARGES IN TERMS OF SECTION 194J . IN VIEW OF THE AFORESAID, WE QUASH THE DEMAND RAISED UNDER SECTIONS 201(1) AND 201(1A) . 5. CONSIDERING THE DECISION OF CO-ORDINATE BENCH ON SI MILAR ISSUE, WHEREIN THE LD. CIT(A) HAS ALSO FOLLOWED THE DECISION OF HO NBLE HIGH COURT IN ASSESSEES OWN CASE, THUS WE AFFIRM THE ORDER OF LD . CIT(A). IN THE RESULT, GROUND NO.1 OF THE APPEAL IS ALLOWED. ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 20 6. GROUND NO.2 & 3 RELATES TO DISALLOWANCE UNDER SECTI ON 14A R.W. RULE 8D. THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HO NBLE DELHI HIGH COURT IN CHEMNIVEST LTD. VS. CIT [378 ITR 33 (DEL)] . THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT DURING THE RELEVANT F INANCIAL YEAR, THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME, THEREF ORE; NO DISALLOWANCE UNDER SECTION 14A IS WARRANTED. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. THE LD. DR ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN MAXOPP INVESTMENT LTD. VS. CIT [(2 018) 402 ITR 640(SC)]. 8. IN THE REJOINDER SUBMISSION, THE LD. AR SUBMITS THA T THE HONBLE DELHI HIGH COURT IN A RECENT JUDGMENT IN PCIT VS. MCDONAL DS INDIA PVT. LTD. IN ITA NO. 725/2018 DATED 22.10.2018. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE HONBLE DELHI HIGH COURT IN PARA-1 3 OF ITS DECISION HAS CLEARLY HELD THAT WHILE DECIDING THE BATCH OF APPEA L IN MAXOPP INVESTMENT LTD. (SUPRA), THE SLP CIVIL NO. 27054/20 16 ARISING OUT FROM THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN PCIT VS. D.B. CORP LTD. DATED 16.02.2016 WHEREIN HONBLE GUJ ARAT HIGH COURT REFUSED TO ADMIT THE APPEAL ON QUESTION NO.2 WHETHER DISALLOWANCE UNDER SECTION 14A COULD BE MADE WHEN ASSESSEE DURIN G THE PARTICULAR ASSESSMENT YEAR NOT EARNED ANY EXEMPT INCOME, OBSERVED THAT THERE WAS ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 21 NO INFIRMITY IN THE APPROACH ADOPTED BY TRIBUNAL HA S RESTORED THE MATTER TO THE FILE OF ASSESSING OFFICER TO VERIFY THE CLAI M OF ASSESSEE THAT IT DID NOT CLAIM ANY INCOME TO BE EXEMPT FROM PAYMENT OF I NCOME-TAX. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT, THE ASSESSING OFFICER MADE THE DISALLOWANCE UNDER SECTI ON 14A ON HIS OBSERVATION THAT THE ASSESSEE HAS INVESTED AN AMOUN T OF RS. 75 CRORE IN ITS SUBSIDIARY. THE ASSESSEE IN THE RETURN OF INCOM E HAS NOT SHOWN ANY EXEMPT INCOME, THE ASSESSING OFFICER BY INVOKING TH E PROVISION OF RULE 8D MADE THE DISALLOWANCE OF RS. 3.84 CRORE. ON APPE AL BEFORE THE LD. CIT(A), THE ENTIRE DISALLOWANCE WAS DELETED. 10. WE HAVE NOTED THAT THE ASSESSING OFFICER IN PARA-4. 3 OF ITS ORDER HAS RECORDED THAT NO EXEMPT INCOME HAS BEEN ADDED BACK WHILE COMPUTING THE TOTAL INCOME BY THE ASSESSEE. THE LD. CIT(A) AL SO NOTED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT NO DIVIDEND INCOME HAS BEEN EARNED DURING THE YEAR. THE LD. CIT(A) BY FOLLOWING THE ORDER OF CIT(A)- 14 IN IT NO. 255/2011-12 DATED 24.12.2014 IN URBAN INFRASTRUCTURE HOLDING PVT. LTD., DELETED THE ENTIRE DISALLOWANCE. THE HONBLE DELHI HIGH COURT IN PCIT VS. MCDONALDS INDIA PVT. LTD. HE LD AS UNDER: WE HAVE CONSIDERED THE SAID JUDGMENTS, BUT DO NOT THINK THAT THERE IS ANY GROUND OR REASON TO NOT FOLLOW THE CLEAR AND CATEGORICAL R ATIO OF THE DECISIONS OF THE DELHI HIGH COURT IN CHEMINVEST LTD. ( SUPRA ) AND HOLCIM INDIA (P.) LTD. ( SUPRA ). ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 22 7. IN WALFORT SHARE & STOCK BROKERS (P.) LTD. ( SUPRA ) THE ASSESSEE HAD PURCHASED UNITS AT A HIGHER PRICE OF RS. 17.23 PER UNIT ON WH ICH TAX-FREE DIVIDEND OF RS.4/- PER UNIT WAS RECEIVED. THE UNITS WERE SOLD AFTER TH E RECORD DATE AT RS.13.23 PER UNIT INCURRING LOSS. CONTENTION OF THE REVENUE WAS THAT THE LOSS, I.E. DIFFERENCE BETWEEN THE PURCHASE PRICE AND SALE PRICE OF THE UN ITS, WAS EXPENDITURE INCURRED FOR EARNING TAX FREE DIVIDEND INCOME AND ACCORDINGL Y COULD BE DISALLOWED UNDER SECTION 14A OF THE ACT. THIS CONTENTION OF THE REVE NUE WAS REJECTED. IN THE CONTEXT OF THE CONTROVERSY, THE SUPREME COURT HAD E XAMINED THE LEGISLATIVE HISTORY AND OBJECT AND PURPOSE BEHIND INSERTION OF SECTION 14A BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1962 AND THE PROVISO TO SECTION 14A BY FINANCE ACT, 2002 WITH RETROSPECTIVE EFFECT FROM 11TH MAY, 2001. ONE OR TWO SENTENCES THAT SECTION 14A CLARIFIES THAT EXPENSES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THAT THEY ARE RELATABLE TO EARNING OF TA XABLE INCOME CANNOT BE READ OUT OF CONTEXT, FOR THE SUPREME COURT IN WALFORT SHARE & STOCK BROKERS (P.) LTD. ( SUPRA ) HAS EMPHATICALLY HELD AND OBSERVED THAT SECTION 1 4A WOULD APPLY WHEN AN INCOME DOES NOT FORM PART OF THE TOTA L INCOME. THEN THE RELATED EXPENDITURE WOULD NOT BE ALLOWED. THIS DECISION DID NOT DIRECTLY EXAMINE AND ANSWER THE ISSUE IN QUESTION I.E. WHETHER ANY DISAL LOWANCE UNDER SECTION 14A CAN BE MADE WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR IN QUESTION. 8. THE DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. ( SUPRA ) IS SIGNIFICANT AND DOES ANSWER THE QUESTION IN ISSUE. THIS DECISION DO ES NOT SUPPORT THE REVENUE AS THE ASSESSING OFFICER IN THE CASE OF MAXOPP INVESTMENT LTD. ( SUPRA ) HAD HIMSELF RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME. AFTER REFERRING TO WALFORT SHARE & STOCK BROKERS (P.) LTD. ( SUPRA ) IT WAS HELD 'AXIOMATICALLY, IT IS THAT EXPENDITURE ALONE WHICH HAS BEEN INCURRED IN RELATION TO THE INCOME WHICH IS INCLUDABLE IN TOTAL INCOME T HAT HAS TO BE DISALLOWED. IF AN EXPENDITURE INCURRED HAS NO CAUSAL CONNECTION WITH THE EXEMPTED INCOME, THEN SUCH AN EXPENDITURE WOULD OBVIOUSLY BE TREATED AS N OT RELATED TO THE INCOME THAT IS EXEMPTED FROM TAX, AND SUCH EXPENDITURE WOULD BE ALLOWED AS BUSINESS EXPENDITURE. TO PUT IT DIFFERENTLY, SUCH EXPENDITUR E WOULD THEN BE CONSIDERED AS INCURRED IN RESPECT OF OTHER INCOME WHICH IS TO BE TREATED AS PART OF THE TOTAL INCOME.' 9. THE POSITION BECOMES CLEAR AND BEYOND DOUBT WHEN W E REFER TO THE FACTUAL POSITION IN THE APPEAL PREFERRED BY THE REVENUE AGA INST THE DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PR. CIT V. STATE BANK OF PATIALA [2017] 391 ITR 218/245 TAXMAN 273/78 TAXMANN.COM 3 WHICH WAS ALSO DECIDED WITH THE DECISION IN MAXOPP INVESTMENT LTD ( SUPRA ). IN STATE BANK OF PATIALA ( SUPRA ) THE ASSESSING OFFICER HAD APPLIED RULE 8D OF THE INCOME TAX RULES 1962, BUT HAD RESTRICTED THE DISALLOWANCE TO THE AMOUNT CLAIMED A S EXEMPT INCOME. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD ENHANC ED AND INCREASED THIS DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES , 1962. THE SAID DISALLOWANCE WAS MORE THAN EXEMPT INCOME. THE TRIBU NAL HAD REVERSED THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND RESTORED THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER I.E. RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME. DECISION IN THE CASE O F STATE BANK OF PATIALA ( SUPRA ) OF THE PUNJAB AND HARYANA HIGH COURT WAS AFFIRMED B Y THE SUPREME COURT AS THE CORRECT CONCLUSION, THOUGH THE SUPREME COURT DID NO T AGREE WITH THE REASONING OF ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 23 THE PUNJAB & HIGH COURT ON THE THEORY OF DOMINANT I NTENTION. IT WAS HELD THAT THE VIEW OF THE COMMISSIONER OF INCOME TAX (APPEALS) DI SALLOWING EXPENDITURE BEYOND AND ABOVE THE EXEMPT INCOME EARNED BY APPLYI NG RULE 8D WAS CLEARLY UNTENABLE AND RIGHTLY REJECTED BY THE TRIBUNAL. 10. THE DECISION OF THE DELHI HIGH COURT IN HOLCIM INDIA (P.) LTD. ( SUPRA ) HAD REFERRED TO THE ISSUE WHETHER DISALLOWANCE OF EXPEN DITURE UNDER SECTION 14A OF THE ACT WOULD BE MADE EVEN WHEN NO EXEMPT INCOME IN THE FORM OF DIVIDEND WAS EARNED IN THE YEAR, AND IT WAS OBSERVED: '14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE C OULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCOME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOWANCE OF EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGAINST THE APPELLANT-REVENUE. NO CONTRARY DECISION OF A HIGH C OURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD V. M/S. LAKHANI MARKETING INCL., ITA NO. 970/2008, DECIDED ON 02.04.2014, MADE REFERENCE TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LIMITED, [2010] 323 ITR 518 AND CIT V. WINSOME TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECON D DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I V. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (GUJ.) . THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME TAX (II) KANPUR, V. M/S. SHIVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN THE SAID DECISION IT HAS BEEN HELD: 'AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOMEUNDER THE CHA PTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE A SSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY I NCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE W HICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. FOR THE Y EAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FR EE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING E XPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE CIT(A) , WHICH HAS BEEN AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SU BSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISALLOWANCE OF RS.2,03, 752/- MADE BY THE ASSESSING OFFICER WAS IN ORDER'. 15. INCOME EXEMPT UNDER SECTION 10 IN A PARTICULAR ASSESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED I NTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LONG TERM CAPITAL GAI N ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY TRANSACTION TA X HAS BEEN PAID, BUT A PRIVATE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACT S CAPITAL GAINS TAX. IT IS AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHAR ES AND THEREBY SECURING RIGHT TO MANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRI VATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBABILITY. DIVIDEND MAY OR MAY NOT BE DECLARED. ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 24 DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON PAYMENT OF DIVI DEND. WHEN DECLARED, IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX.' 11. DECISION IN HOLCIM INDIA PVT. LTD. ( SUPRA ) WAS FOLLOWED AND ELABORATED IN CHEMINVEST LTD. ( SUPRA ). 12. THE MADRAS HIGH COURT JUDGMENT IN CHETTINAD LOGISTICS (P) LTD. ( SUPRA ) HAS TAKEN SIMILAR VIEW FOLLOWING THEIR EARLIER DECISION IN REDINGTON (INDIA) LTD. V. ADDL. CIT [2017] 392 ITR 633/77 TAXMANN.COM 257 (MAD.) . IN REDINGTON (INDIA) LIMITED ( SUPRA ) IT WAS HELD: '4. THE ADMITTED POSITION IS THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE IN THE FINANCIAL YEAR RELEVANT TO THE ASSE SSMENT YEAR IN ISSUE. THE ORDER OF ASSESSMENT RECORDS A FINDING OF FACT TO THAT EFF ECT. THE ISSUE TO BE DECIDED THUS LIES WITHIN THE SHORT COMPASS OF WHETHER A DIS ALLOWANCE IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES CAN B E CONTEMPLATED EVEN IN A SITUATION WHERE NO EXEMPT INCOME HAS ADMITTEDLY BEE N EARNED BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. 7. PER CONTRA, SRI T. RAVIKUMAR APPEARING ON BEHALF OF THE REVENUE DREW OUR ATTENTION TO THE MARGINAL NOTES OF S. 14A POINTING OUT THAT THE PROVISION WOULD APPLY NOT ONLY WHERE EXEMPTED INCOME IS 'INCLUDED' IN THE TOTAL INCOME, BUT ALSO WHERE EXEMPT INCOME IS 'INCLUDABLE' IN TOTAL INCOME . 8. HE RELIED UPON A CIRCULAR ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 5 OF 2014 DATED 11.2.2014 TO THE EFFEC T THAT SECTION 14A WAS INTENDED TO COVER EVEN THOSE SITUATIONS WHETHER THE RE IS A POSSIBILITY OF EXEMPT INCOME BEING EARNED IN FUTURE. THE CIRCULAR, AT PARAGRAPH 4, STATES THAT IT IS NOT NECESSARY FOR EXEMPT INCOME TO HAVE BEEN INC LUDED IN THE INCOME OF A PARTICULAR YEAR FOR THE DISALLOWANCE TO BE TRIGGERE D. ACCORDING TO THE LEARNED STANDING COUNSEL, THE PROVISIONS OF SECTION 14A ARE MADE APPLICABLE, IN TERMS OF SUB-SECTION (1) THEREOF TO INCOME'UNDER THE ACT AND NOT 'OF THE YEAR' AND A DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D CAN THU S BE EFFECTED EVEN IN A SITUATION WHERE A TAX PAYER HAS NOT EARNED ANY TAXA BLE INCOME IN A PARTICULAR YEAR. 9. WE ARE UNABLE TO SUBSCRIBE TO THE AFORESAID VIEW . THE PROVISIONS OF SECTION 14A WERE INSERTED AS A RESPONSE TO THE JUDGMENTS OF THE SUPREME COURT IN COMMISSIONER OF INCOME-TAX V. MAHARASHTRA SUGAR MILLS LIMITED [1971] 82 ITR 452 AND RAJASTHAN STATE WAREHOUSING CORPORATION V. COMMISSIONER OF INCOME-TAX [2002] 242 ITR 450/109 TAXMAN 145 (SC) IN TERMS OF WHICH, EXPENDITURE INCURRED BY AN ASSE SSEE CARRYING ON A COMPOSITE BUSINESS GIVING RISE TO BOTH TAXABLE AS W ELL AS NON-TAXABLE INCOME, WAS ALLOWABLE IN ENTIRETY WITHOUT APPORTIONMENT. IT WAS THUS THAT SECTION 14A WAS INSERTED PROVIDING THAT NO DEDUCTION SHALL BE A LLOWABLE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME EXEMPT FROM TAXATION. AS OBSERVED BY THE SUPREME COURT IN THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. WALFORT SHARE AND STOCK BROKERS (P) LTD. (2010) 326 ITR 1 . '.... THE MANDATE OF SECTION 14A IS CLEAR. IT DESIR ES TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMP T INCOME AGAINST ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 25 TAXABLE INCOME AND AT THE SAME TIME AVAIL OF THE TA X INCENTIVE BY WAY OF AN EXEMPTION OF EXEMPT INCOME WITHOUT MAKING ANY APPOR TIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME.' 10. THE PROVISION THIS IS CLEARLY RELATABLE TO THE EARNING OF ACTUAL INCOME AND NOT NOTIONAL OR ANTICIPATED INCOME. THE SUBMISSION OF T HE DEPARTMENT TO THE EFFECT THAT SECTION 14A WOULD BE ATTRACTED EVEN TO EXEMPT INCOME 'INCLUDABLE' IN TOTAL INCOME WOULD ENTAIL THE ASSESSMENT OF NOTIONA L INCOME, ASSUMED TO BE EXEMPT IN THE FUTURE, IN THE PRESENT ASSESSMENT YEA R. THE COMPUTATION OF TOTAL INCOME IN TERMS OF SECTION 5 OF THE ACT IS ON REAL INCOME AND THERE IS NO SANCTION IN LAW FOR THE ASSESSMENT OF ADMITTEDLY NO TIONAL INCOME, PARTICULARLY IN THE CONTEXT OF EFFECTING A DISALLOWANCE IN CONNECTI ON THEREWITH. 11. THE COMPUTATION OF DISALLOWANCE IN TERMS OF RUL E 8D IS BY WAY OF A DETERMINATION INVOLVING DIRECT AS WELL AS INDIRECT ATTRIBUTION. THUS, ACCEPTING THE SUBMISSION OF THE REVENUE WOULD RESULT IN THE IMPOS ITION OF AN ARTIFICIAL METHOD OF COMPUTATION ON NOTIONAL AND ASSUMED INCOME. WE B ELIEVE THIS WOULD BE CARRYING THE ARTIFICE TOO FAR. (EMPHASIS IS OURS)' 13. WE HAVE BEEN INFORMED THAT SLP PREFERRED BY THE DE PARTMENT AGAINST THE DECISION IN CHETTINAD LOGISTICS (P.) LTD. ( SUPRA ) HAS BEEN DISMISSED. COUNSEL APPEARING FOR THE RESPONDENT-ASSESSEE HAS SUBMITTED THAT THE SUPREME COURT WHILE DECIDING THE BATCH OF APPEALS IN MAXOPP INVESTMENT LTD. ( SUPRA ) HAD ALSO HEARD ARGUMENTS AND DECIDED SLP (CIVIL) NO.27054/2016 ARI SING FROM THE JUDGMENT OF THE GUJARAT HIGH COURT DATED 16TH FEBRUARY, 2016 IN TAX APPEAL NO. 206/2016, PR. CIT V. D.B. CORP LTD. IN THIS CASE THE GUJARAT HIGH COURT HAD REFUSED TO ADMIT THE APPEAL ON PROPOSED QUESTION NO .2 - WHETHER DISALLOWANCE UNDER SECTION 14A COULD BE MADE WHEN ASSESSEE DURIN G THE PARTICULAR ASSESSMENT YEAR HAD NOT EARNED ANY EXEMPT INCOME, OBSERVING TH AT THERE WAS NO INFIRMITY IN THE APPROACH ADOPTED BY THE TRIBUNAL WARRANTING INT ERFERENCE. THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF THE ASSESSING OF FICER TO VERIFY THE CLAIM OF THE ASSESSEE THAT IT DID NOT CLAIM ANY INCOME TO BE EXE MPT FROM PAYMENT OF INCOME TAX. 14. OUR ATTENTION IS ALSO DRAWN TO ORDER DATED 6TH APR IL, 2018 PASSED IN SPECIAL LEAVE PETITION (CIVIL) NO.37851/2017 IN THE CASE OF DLF HOTELS HOLDINGS LIMITED, BY WHICH THE SLP PREFERRED BY THE REVENUE WAS DISMISSED BY THE SUPREME COURT, OBSERVING THAT THE ISSUE WAS COVERED BY THE DECISION OF THE SUPREME COURT IN ITS ORDER DATED 12TH FEBRUARY, 201 8 IN THE CASE OF D.B. CORPN. LTD. ( SUPRA ). 15. BE THAT AS IT MAY, IN VIEW OF THE RATIO IN MAXOPP INVESTMENT LTD., HOLICIM INDIA P.LTD. ( SUPRA ) AND CHEMINVEST LTD. ( SUPRA ), WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW THAT ARISES FOR CONSIDE RATION. 16. THE APPEAL IS ACCORDINGLY DISMISSED, WITH NO ORDER AS TO COSTS. 11. CONSIDERING THE DECISION OF CHEMNIVEST LTD. VS. CIT (SUPRA) AND THE LATEST DECISION OF HONBLE DELHI HIGH COURT IN MCDO NALDS (SUPRA), WE DO ITA NO. 2519 MUM 2015-M/S T ATA TELESERVICES (MAH) LTD. 26 NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A), WHICH WE AFFIRM. THE CASE LAW RELIED BY LD. DR IS NOT APPLICABLE ON THE RATIO INVOLVED IN THE PRESENT CASE. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/ 01/2019. SD/ SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUD ICIAL MEMBER MUMBAI, DATE: 30.01.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI