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

ITA 3413/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1515 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Earning of tax free income; Retrospective amendment; Additional evidence; Question of law; TDS; Rule 8D; Set aside
• Section: 14A; 40(a)(ia); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.3413/M/2015 ASSESSMENT YEAR: 2010-11 DCIT-8(3)(1), ROOM NO.615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. TATA TELESERVICES (MAH) LTD., D-26, TTC INDL. AREA MIDC, SANPADA, PO TURBHE, NAVI MUMBAI 400 703 PAN: AAACH 1458C (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HITEN CHANDE, A.R. REVENUE BY : SHRI T. KIPGEN, D.R. DATE OF HEARING : 18.02.2019 DATE OF PRONOUNCEMENT : 14.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 30.03.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: (I) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW, IN DELETING THE DISALLOWANCE MADE BY AO OF RS.64,76,09,990/- UNDER SECTION 40(A)(IA) FOR NON- DEDUCTING OF TDS AS PER THE PROVISIONS OF SECTION I 94H OF INCOME 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 LAW, IN DELETING THE DISALLOWANCE OF RS.8,06,00,000/- UNDER SECTION 14A R.W.S RULE 8D ,WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 2 (III) THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW, IN V DELETING THE DISALLOWANCE OF RS.8,06,00,000/- 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 AGAINST THE DECISI ON OF THE ITAT IN THE SAID CASE. 2. THE LD.CIT(A)'S ORDER IS CONTRARY TO LAW AND ON FACTS AND DESERVES TO BE SET ASIDE AND A.O 'S ORDER MAY BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE D ELETION OF DISALLOWANCE BY THE AO OF RS.64,76,09,990/- BY LD. CIT(A) AS MADE BY THE AO UNDER SECTION 40(A)(IA) FOR NON DEDU CTION OF TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194H ON ACCOUNT OF DISCOUNT GIVEN TO DISTRIBUTORS TOWARDS SALE OF SUK RCV STARTER KITS AND RECHARGE VOUCHERS. 4. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE ISSUE INVOLVED IN GROUND NO.1 IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH O F THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2519/M/2015 A.Y. 2 009-10 ORDER DATED 30.01.2019 IN WHICH THE HON'BLE TRIBUNA L HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE REFORE THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. 5. THE LD. D.R. FAIRLY AGREED WITH THE CONTENTIONS OF THE LD. A.R. THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION OF THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN ITA NO.2519/M/2015 A.Y. 2009-10 (SUPRA) WE OBSERVE THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE TO DISCOUNT GIVE N TO ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 3 DISTRIBUTORS TOWARDS SALE OF SUK RCV STARTER KITS AN D RECHARGE VOUCHERS. THE RELEVANT OPERATIVE PART IS REPRODUCE D AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAW REFERRED AND RELIED BY LOWER AUTHORITIES. THE A SSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION M ADE THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF RS. 42,83,76,657/- ON ACCOUNT OF DISCOUNT GIVEN TO DISTRIBUTORS 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 NOTED THAT AL MOST ON IDENTICAL GROUNDS OF APPEAL ON THE ORDER PASSED UNDER SECTION 201(1) FOR ASSESSMENT YEAR 2009-10, 2010-11 & 2011-12, THE CO-ORDINATE BENCH OF THE TRI BUNAL 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 DE CISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE AND THE LEARNED D EPARTMENTAL REPRESENTATIVE. AS COULD BE SEEN, THE ASSESSING OFF ICER HAS TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT ALLEGING NON-DEDUCT ION OF TAX AT SOURCE UNDER SECTION 194H, ON THE REASONING THAT IT HAS PA ID COMMISSION TO THE DISTRIBUTORS FOR SELLING THE PRE-PAID SIM CARD / ST ARTER KIT AND RECHARGE VOUCHERS. HOWEVER, ON A PERUSAL OF THE FACTS ON REC ORDS, 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 PURP OSE OF ALLOWING MARGIN TO THE DISTRIBUTORS. THE ASSESSEE DOES NOT SELL THE ST ARTER 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 CA RD TO THE RETAILER / CONSUMERS AFTER RETAINING HIS MARGIN BUT UNDER NO C IRCUMSTANCES, THE DISTRIBUTOR CAN CHARGE OVER AND ABOVE THE MRP. FOR EXAMPLE, IF THE MRP OF THE STARTER KIT IS RS. 100, THE ASSESSEE SELLS IT T O THE DISTRIBUTOR AT RS. 80 AND THE DISTRIBUTOR CAN SELL IT TO THE RETAILER OR CUST OMER FOR A PRICE RANGING FROM RS. 80 TO RS. 100. HOWEVER, AS FAR AS THE ASSESSEE IS CONCERNED, IT RAISES THE INVOICE FOR RS. 80 ONLY TO THE DISTRIBUTER AND ALSO THE SAME AMOUNT IS REFLECTED IN THE BOOKS OF ACCOUNT TOWARDS THE SALE PRICE. THE ASSESSEE NEVER CREDITS THE AMOUNT OF RS. 100 TOWARDS THE SALE PRIC E AND ALLOWS DISCOUNT OF RS. 20 IN ITS BOOKS OF ACCOUNT. THUS, AS FAR AS THE ASSESSEE IS CONCERNED, SALE PRICE OF THE STARTER KIT / SIM CARD IS ` 80. FURTHE RMORE, AS PER THE TERMS AND CONDITIONS, ONCE THE SIM CARD / STARTER KITS ARE SO LD TO THE DISTRIBUTOR, THE SALE IS COMPLETE AND UNDER NO CIRCUMSTANCES, THEY C AN BE RETURNED BACK TO THE ASSESSEE. FROM THE AFORESAID FACTS, IT IS CLEAR LY EVIDENT THAT AS FAR AS SALE OF STARTER KIT / SIM CARD IS CONCERNED, IT IS PUREL Y A PURCHASE / SALE TRANSACTION ON PRINCIPAL-TO-PRINCIPAL BASIS AND THE RE IS NO RELATIONSHIP OF AGENCY. THAT BEING THE CASE, THE PROVISIONS OF SECT ION 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 ASSESSEE BY REVERSING THE ORDER OF THE TRIBUNAL. IN VIEW OF THE CHANGED SCENARIO, AFTER THE ORDER OF THE HON'BLE KARNATAKA HIGH COURT AS RE FERRED TO ABOVE, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) CANN OT BE SUSTAINED. IN FACT, ITAT, JAIPUR BENCH, IN CASE OF M/S. TATA TELESERVIC ES LTD. V/S ITO, ITA ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 4 NO.309/JP./2012 AND OTHERS, DATED 13TH MARCH 2015, FOLLOWING THE DECISION OF HON'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 T O ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER (APPEALS ) AND QUASH THE DEMAND RAISED BY THE ASSESSING OFFICER UNDER SECTIO NS 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 R AISED IN OTHER APPEALS UNDER CONSIDERATION. IN ADDITION TO THE AFORESAID I SSUE, 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 ROAM ING CHARGES TOWARDS SERVICES PROVIDED BY OTHER OPERATORS TO THE USERS O F THE ASSESSEE'S MOBILE SERVICE. THE ASSESSING OFFICER, ON THE BASIS OF INF ORMATION OBTAINED DURING THE SURVEY, FOUND THAT ASSESSEE HAS PAID ROAMING CH ARGES TO OTHER OPERATORS FOR USING THEIR NET-WORK AND NO TDS HAS B EEN DEDUCTED ON SUCH ROAMING CHARGES. HE, FURTHER NOTICED THAT THE TERM 'ROAMING' AS ACTUALLY MEANS AN ARRANGEMENT WHEREBY A SUBSCRIBER OF A CELL ULAR PHONE USES CELLULAR SERVICE OUTSIDE THE HOME NETWORK. HE NOTIC ED THAT THE SUBSCRIBER WHO IS NOT ROAMING GETS SERVICE FROM HIS HOME OPERA TOR WHILE A SUBSCRIBER WHO IS ROAMING WILL GET SERVICE FROM BOTH THE HOST OPERATOR AND HOME OPERATOR AND THE HOST OPERATOR CHARGES THE HOME OPE RATOR FOR PROVIDING TELECOM SERVICES TO THE SUBSCRIBER OF THE LATER. BA SED ON THE USAGE, THE HOST OPERATOR RAISES INVOICE ON THE HOME OPERATOR AND TH E HOME OPERATOR IN TURN RECOVERS FROM ITS OWN SUBSCRIBERS. THE ASSESSI NG OFFICER NOTED, WHEN A CUSTOMER OF A TELECOM OPERATOR LIKE THE ASSESSEE MA KES A STD / ISD CALL TO THE SUBSCRIBER OF SAME NETWORK OR ANOTHER NETWORK B UT OPERATING IN ANOTHER TELECOM CIRCLE, IT HAS TO PAY INTER-CONNECT IVITY CHARGES TO THE CARRIER COMPANY WHICH CARRIES THE CALL FROM THE ASSESSEE'S NETWORK IN MUMBAI TO THE OTHER NETWORK AT A PARTICULAR PLACE. THE ASSESS ING OFFICER OBSERVED, THE SERVICES PROVIDED BY THE CARRIER COMPANY IS IN THE NATURE OF TECHNICAL SERVICES AND, HENCE, PAYMENT MADE TOWARDS ROAMING / INTER-CONNECTIVITY CHARGES ARE FEES FOR TECHNICAL SERVICE AND ATTRACTS THE PROVISIONS OF SECTION 194J. THE ASSESSING OFFICER OBSERVED, THOUGH, AS PE R THE INDUSTRY PRACTICE, TDS IS BEING DEDUCTED ON THE INTER-CONNECTIVITY CHA RGES IN TERMS OF SECTION 194J BUT THE ASSESSEE HAS NOT DEDUCTED ANY TDS ON R OAMING / INTER- CONNECTIVITY CHARGES PAID TO OTHER TELECOM NETWORK. THE ASSESSING OFFICER, THEREFORE, CALLED UPON THE ASSESSEE TO JUSTIFY ITS ACTION IN NOT DEDUCTING THE TAX AT SOURCE. IN RESPONSE TO THE QUERY RAISED BY T HE 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 OPERATORS 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 CA LLS GENERATED FROM ONE NETWORK TO THE SUBSCRIBER OF ANOTHER NETWORK DOES N OT INVOLVE ANY MANUAL LABOUR. RATHER, IT IS A HIGHLY TECHNICAL ACTIVITY D ONE THROUGH MACHINES. IT WAS SUBMITTED, THE HON'BLE SUPREME COURT IN BHARTI CELL ULAR LTD., HAS DISMISSED THE DEPARTMENT'S APPEAL WITH A DIRECTION TO THE DEP ARTMENTAL AUTHORITIES TO ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 5 SEEK EXPERT TECHNICAL OPINION IN THE MATTER AND ALL OW FURTHER CROSS- EXAMINATION OF THE EXPERT. THUS, IT WAS SUBMITTED B Y THE ASSESSEE THAT WITHOUT OBTAINING REPORT FROM THE TECHNICAL EXPERT AND CROSS-VERIFICATION BY THE ASSESSEE, IT CANNOT BE HELD THAT THE SERVICES R ENDERED ARE TECHNICAL SERVICE WITH HUMAN INTERVENTION. THE ASSESSING OFFI CER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED, AFTER THE HON 'BLE SUPREME COURT IN BHARTI AIRTEL LTD. (SUPRA) DIRECTED THE DEPARTMENTA L AUTHORITIES TO OBTAIN A TECHNICAL REPORT, THE DEPARTMENT OBTAINED SUCH REPO RT AND ON THE BASIS OF SUCH REPORT, IT WAS HELD THAT THERE WAS HUMAN INTER VENTION / INVOLVEMENT, HENCE, PROVISIONS OF SECTION 194J IS ATTRACTED. ACC ORDINGLY, ALLEGING THAT ASSESSEE FAILED TO DEDUCT TAX IN TERMS OF SECTION 1 94J ON THE PAYMENT MADE TOWARDS INTER-CONNECTIVITY CHARGES TREATED THE ASSE SSEE 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 DECISI ON GIVEN BY HONOURABLE APEX COURT IN BHARTI CELLULAR 2010-TIOL- 65-SC-IT AS IN COMING OUT FORM ORDER ITSELF. IN THE CASE WHEN THER E IS NO DIFFERENT OPINION THAT IT IS A SERVICE PROVIDED BY ONE OPERAT OR TO THE OTHER, I AM OF THE VIEW THAT SAME NEEDS TO UPHELD. ACCORDING LY, ACTION ON OF A.O. IS UPHELD. GROUND 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 DEPARTMENTAL AUTHORITIES TO OBTAIN INFORMATION OF A TECHNICAL EXPERT TO ASCERTA IN WHETHER THERE IS ANY HUMAN INVOLVEMENT AND ON THE BASIS OF THE REPORT OB TAINED IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., THE ASSESSING OFFICER IN ASSESSEE'S CASE HAS DECIDED THE ISSUE. HE SUBMITTED, IN ASSESSEE'S CASE, NEITHER THE ASSESSING OFFICER HAS OBTAINED A REPORT FROM TECHNI CAL EXPERT NOR THE ASSESSEE WAS ALLOWED TO CROSS EXAMINE THE TECHNICAL EXPERT. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, IN ANY CASE OF THE MATTER EVEN ASSUMING THAT THE TECHNICAL REPORT SUBMITTED IN CAS E OF VODAFONE ESSAR MOBILE SERVICES LTD., WOULD BE APPLICABLE TO THE AS SESSEE'S CASE ALSO, STILL THE ISSUE HAS TO BE DECIDED IN FAVOUR OF THE ASSESS EE AS THE TRIBUNAL, KOLKATA BENCH, AFTER TAKING INTO CONSIDERATION THE TECHNICA L REPORT SUBMITTED, IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD.,, HAS H ELD 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 194 J OF THE ACT. HE, THEREFORE, SUBMITTED THAT THE ISSUE HAVING BEEN DECIDED BY THE TRIBUNAL, IN FAVOUR OF ASSESSEE, THE ORDERS PASSED BY LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER CANNOT BE SUSTAINED. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 6 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 I MPUGNED ORDER PASSED UNDER SECTION 201(1), IT LEAVES NO ROOM FOR DOUBT T HAT THE ASSESSING OFFICER BY RELYING UPON THE REPORT OF THE TECHNICAL EXPERT IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD., HAS CONCLUDED THAT THE ROAMIN G SERVICES PROVIDED BY OTHER TELECOM OPERATORS ARE TECHNICAL AND MANAGERIA L SERVICES, HENCE, CHARGES PAID TOWARDS SUCH SERVICES IS FEES FOR TECH NICAL SERVICES COMING WITHIN THE AMBIT OF SECTION 194J. IT IS VERY MUCH E VIDENT THAT THOUGH IN CASE OF BHARAT AIRTEL LTD. (SUPRA), THE HON'BLE SUPREME COURT HAS DIRECTED THE DEPARTMENTAL AUTHORITIES TO ASCERTAIN FROM A TECHNI CAL EXPERT THE EXTENT OF HUMAN INVOLVEMENT IN PROVIDING THE SERVICES, BUT TH E ASSESSING OFFICER IN CASE OF ASSESSEE HAS NOT UNDERTAKEN ANY SUCH EXERCI SE. HE HAS SIMPLY REFERRED TO THE REPORT OBTAINED FROM TECHNICAL EXPE RT IN CASE OF VODAFONE ESSAR MOBILE SERVICES LTD. FURTHER, THE ASSESSING O FFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE TE CHNICAL EXPERT. FOR THESE REASONS ALONE, THE DEMAND RAISED CANNOT BE SUSTAINE D. EVEN OTHERWISE ALSO, AS BROUGHT TO OUR NOTICE BY THE LEARNED AUTHORISED REPRESENTATIVE, IDENTICAL ISSUE RELATING TO APPLICABILITY OF THE PROVISIONS O F SECTION 194J TO INTER- CONNECTIVITY / ROAMING CHARGES WAS EXAMINED BY THE TRIBUNAL, KOLKATA BENCH, IN CASE OF VODAFONE EAST LTD., ITA NO.1864/K OL./2012 AND ORS., DATED 15TH SEPTEMBER 2015. THE BENCH,AFTER EXAMINING THE TECHNICAL REPORT OBTAINED IN CASE OF ANOTHER COMPANY IN THE GROUP VI Z. VODAFONE ESSAR MOBILE SERVICES LTD. OBSERVED THAT IF THE FACTS ARE SIMILAR, THERE IS NO NEED TO SET ASIDE THE ISSUE TO THE ASSESSING OFFICER FOR OBTAINING A FRESH TECHNICAL REPORT IN CASE OF THE ASSESSEE. AFTER ANALYSING THE TECHNICAL REPORT FROM THE EXPERT, THE BENCH FOUND THAT THE ROAMING / INTER-CO NNECTIVITY SERVICES PROVIDED BY OTHER TELECOM OPERATORS IS THROUGH STAN DARD AUTOMATED SERVICES WITH THE AID OF EXISTING NETWORK / INFRAST RUCTURE USED BY SUCH OPERATOR FOR PROVIDING TELECOMMUNICATION SERVICES T O THEIR OWN SUBSCRIBERS. HENCE, ROAMING CHARGES WOULD PARTAKE THE SAME CHARA CTER AS NORMAL TELECOMMUNICATION CHARGES PAID BY THE SUBSCRIBER TO THE SERVICE PROVIDER. THE BENCH FURTHER FOUND THAT HUMAN INTERVENTION IS REQUIRED ONLY FOR INSTALLATION / REPAIRING / SERVICE / MAINTENANCE / CAPACITY AUGMENTATION OF THE NETWORK, HOWEVER, AFTER COMPLETING THIS PROCESS , INTER-CONNECTION BETWEEN THE OPERATORS WHILE ROAMING IS DONE AUTOMAT ICALLY AND DOES NOT REQUIRE ANY HUMAN INTERVENTION, HENCE, CANNOT BE CO NSTRUED AS TECHNICAL SERVICE SO AS TO ATTRACT PROVISIONS OF SECTION 194J . FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE OBSERVATIONS FROM TH E ORDER OF THE TRIBUNAL HEREUNDER IN ENTIRETY:- '4.10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. IT WOULD BE PERTINEN T TO NOTE HERE THAT ROAMING SERVICES ARE PROVIDED BY OTHER TELECOM OPER ATORS BY USING THEIR EXISTING TELECOM NETWORK/ INFRASTRUCTURE AND NO INCREMENTAL INVESTMENT IS REQUIRED TO PUT UP ANY ADDITIONAL NET WORK /INFRASTRUCTURE FOR PROVISION OF SUCH ROAMING SERVI CES. THE AFORESAID ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 7 FACT LENDS FURTHER SUPPORT TO THE CONTENTION THAT R OAMING SERVICES ARE STANDARD AUTOMATED SERVICES, WHICH ARE PROVIDED BY OTHER TELECOM OPERATORS TO SUBSCRIBERS OF VEL USING THE S AME 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 TELECOM SERVICES PROVIDED B Y A TELECOM OPERATOR TO ITS OWN SUBSCRIBERS AND HENCE ROAMING CHARGES WOULD PARTAK E THE SAME CHARA CTER AS THE NORMAL TELECOMMUNICATION CHARGES PAID BY A SUBSCRIB ER 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 REQUIRED AND ACCORDINGLY EVEN FOR T ECHNICAL SERVICES, HUMAN INTERVENTION IS DEFINITELY REQUIRED. IN THIS REGARD, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S BHARTI CELL ULAR LTD IN 319 ITR 139 (DEL) HAD HELD THAT SINCE THE ENTIRE 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 REGARDED AS FEE FOR TECHNICAL SERVICES (FTS) AND HENCE WOULD NO T FALL IN THE AMBIT OF SECTION 194J OF THE ACT. WE FIND THAT ON FURTHER APPEAL BY THE REVENUE TO THE HONBLE SUPREME COURT IN CIT VS BHAR TI CELLULAR LTD IN 330 ITR 239 (SC), THE HONBLE APEX COURT HAD STATED THAT 'RIGHT FROM 1979 VARIOUS JUDGMENTS OF THE HIGH COURTS AND TRIBU NAL HAVE TAKEN THE VIEW THAT THE WORDS 'TECHNICAL SERVICES' HAVE G OT TO BE READ IN THE NARROWER SENSE BY APPLYING THE RULE OF NOSCI TU R A SOCIIS, PARTICULARLY , BECAUSE THE WORDS 'TECHNICAL SERVICE S' 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 COU RT AS SUCH AND THE APEX COURT HAS MERELY DIRECTED THE TDS OFFICER TO CARRY OUT FACTUAL VERIFICATION TO DETERMINE THE EXTENT OF HUM AN INVOLVEMENT. BASED ON THIS DIRECTION, THE CBDT HAD AL SO ISSUED INSTRUCTION NO. 5 OF 2011 DATED 30.3.2011 INSTRUCTING THE REVENUE AUT HORITIES TO SEEK OPINION OF TECHNICAL EXPERTS IN CASE OF COMPLEX TEC HNICAL MATTERS. 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 OF FICER HAS BEEN DIRECTED TO OBTAIN TECHNICAL EVIDENCE FROM THE EXPE RTS IN THE TELECOM FIELD WITH REGARD TO THE FACT OF EXISTENCE OF HUMAN INTERVENTION FOR THE ROAMING SERVICES AND ACCORDING LY THE ACIT, CIRCLE 51(1), NEW DELHI HAD RECORDED STATEMENT FROM SHRI.T ANAY KRISHNA ON 29.9.2010. THE LEARNED AR HAS ALSO FILED PRAYER FOR RECEIPT OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF ITAT RUL ES ON 20.7. 2015 CONTAINING THE STATEMENTS RECORDED FROM SHRI TANAY KRISHNA ON 29.9.2010 IN THE CASE OF VODAFONE ESSAR MOBILE SERV ICES LTD & CROSS ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 8 EXAMINATION BY VODAFONE ESSAR MOBILE SERVICES LTD O N 29.9. 2010. THIS APPLICATION UNDER RULE 29 CONTAINS A PRAYER WI TH REASONS THAT THESE DOCUMENTS COULD NOT BE FILED BEFORE THE LOWER AUTHORITIES AND THAT THESE DOCUMENTS ARE VERY CRUCIAL FOR THE DISPO SAL OF THE CASE UNDER APPEAL AS THE EXAMINATION OF THE TECHNICAL EX PERTS HAD TAKEN PLACE POST THE PROCEEDINGS BEFORE THE ASSESSING OFF ICER AND AS PER THE DIRECTIONS OF THE HONBLE SUPREME COURT, THESE STATEMENTS WERE RECORDED IN THE CASE OF THE GROUP COMPANY OF THE AS SESSEE. HOWEVER, IT IS SEEN THAT THE STATEMENT OF SHRI TANA Y KRISHNA ON 29.9. 2010 HAVE BEEN RELIED UPON BY THE LEARNED CIT(APPEA LS) VIDE PAGE 29 OF HIS ORDER BUT THE CROSS EXAMINATION OF SHRI T ANAY KRISHNA IS NOT IN RECORDS OF THE LOWER AUTHORITIES. WE FIND THAT T HE STATEMENT IS VERY MUCH RELEVANT FOR THE DISPOSAL OF THESE APPEAL S AND ARE HEREBY ADMITTED AS ADDITIONAL EVIDENCE (IN RESPECT OF CROS S 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 TECHNIC AL EVIDENCES FROM EXPERTS AS THE SAME HAD ALREADY BEEN OBTAINED IN TH E CASE OF THE GROUP COMPANY OF THE ASSESSEE AND CBDT HAD ALSO ISS UED INSTRUCTIONS IN THIS REGARD TO SEEK EVIDENCES. ANY TECHNICAL EVIDENCE OBTAINED IN A CASE CAN BE USED IN THE CASE OF ANOTH ER ASSESSEE AS LONG AS THE FACTS AND CIRCUMSTANCES INVOLVED ARE ID ENTICAL. IN THE INSTANT CASE, THE FACTS IN THE CASE OF VODAFONE ESS AR MOBILE SERVICES LTD ARE IDENTICAL WITH THE FACTS OF THE ASSESSEE HE REIN AND ALSO IT HAPPENS TO BE THE GROUP COMPANY OF THE ASSESSEE. 4.14. SHRI TANAY KRISHNAS 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 TIM E OF RECEIVING OR PROVIDING INTER-CONNECT SERVICES TO EACH OTHER INCL UDING INSTALLATION, 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 IN TERFACE FOR SETTING UP. IT INVOLVES DIFFERENT PHASES I) PLANNING PHASE- WHERE HOW MUCH CAPACITY REQUIRED AND HOW MUCH TRAFFIC HAND LING CAPACITY IS REQUIRED ON THESE BAS IS HARD WARE AND SOFTWARE IS DETERMINED. II) SELECTION O F VENDOR - IS DONE TO DETERMINE WHO WILL PROVIDE THESE SERVICES ALONG WITH HIS CONSULTANCY. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 9 III) HARDWARE AND SOFTWARE IS SUPPLIED BY THE VENDO R AND IT IS CUSTOMIZED TO THE NEED OF THE NETWORK AS PER THE TE C SPECIFICATIONS. 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 COM PETENT 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 TECHN ICALLY QUALIFIED PROFESSIONALS AND TESTED AS PER THE AGREED PLAN BET WEEN 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 GETS 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 INS TANCES WHEN THERE IS A PROBLEM IN THE CALL CONNECT WHICH MAY REQUIRE RESOLUTION THROUGH HUMAN INTERVENTION. QUESTION 6: HENCE THERE IS NO 100% AUTOMATIC OPERATION OF THIS NETWORK. CAN YOU EXPLAI N 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 INTERVE NTION WOULD BE REQUIRED. I WOULD BRIEFLY TELL YOU ABOUT EACH OF SU CH CIRCUMSTANCES (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 TECHNIC AL EXPERTS TO REMEDY THE SITUATION. QUESTION 16: PLEASE TELL US T HE PLACES O R POINTS OR AREAS WHERE HUMAN INTERVENTION WITH EACH OTHER? 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 INTERCONNECTION BETWEEN TWO SERVICE PROVIDERS, HUMAN INTERVENTION I S CONSTANTLY REQUIRED FOR MANAGEMENT OF NETWORK/SYSTEM, CAPACITY ENHANCEMENT AND MONITORING OF SYSTEM/NETWORK. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 10 4.15. CROSS EXAMINATION PROCEEDINGS OF SHRI TANAY K RISHNA - QUESTIONS AND ANSWERS - 3,4,5,7,11 & 12 ARE REPRODU CED 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 OTHER OPERATOR? THE CALL FROM ONE NETWORK TO THE OTHER NETWORK FLOW S AUTOMATICALLY, I.E. WITHOUT ANY HUMAN INTERVENTION. ONCE A CALL OR IGINATES, THE CALL TRAVELS AUTOMATICALLY. IN ESTABLISHMENT OF A CALL, THEREIN NO HUMAN INTERVENTION I.E., ONCE A SUBSCRIBER DIALS AND THE CALL GETS CONNECTED WITHOUT ANY FAULT, THEN THERE IS NO HUMAN INTERVENT ION. INTERVENTION IS REQUIRED ONLY WHEN THE 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 ABOVE, NO HUMAN INTERVENTION IS REQUIRED IN THE PROCESS OF CARRIAGE OF CALLS. HOWEVER, HUMAN INTERVENTION IS REQUIRED AT THE INTE R-CONNECT SET-UP STAGE (INCLUDING CONFIGURATION, INSTALLATION, TESTI NG, ETC.) AND CAPACITY ENHANCEMENT, MONITORING (INCLUDING NETWORK MONITORI NG), MAINTENANCE, FAULT IDENTIFICATION, REPAIR AND ENSUR ING QUALITY OF SERVICE AS PER INTERCONNECT. Q.5. FROM THE PERUSAL OF YOUR ANSWER TO QUESTION 4 OF YOUR STATEMENT, IT APPEARS THAT THE PHASES DESCRIBED THE REON ARE RESTRICTED TO MERELY SETTING-UP OF THE INTER- CONNE CT BETWEEN THE NETWORKS OF THE TWO 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 SERV ICES OF A TECHNICAL EXPERT ARE REQUIRED FOR INTER-CONNECT ARR ANGEMENTS. PLEASE CONFIRM WHETHER SUCH SERVICES ARE REQUIRED FOR PROV ISION OF INTER- CONNECT SERVICES, I.E., CARRIAGE OF CALLS FROM ONE NETWORK TO ANOTHER, OR ARE PRIMARILY FOR FAULT DETECTION AND REMOVAL. P LEASE REFER TO ANSWER TO QUESTION 4 OF THIS CROSS EXAMINATION. Q.11. WHAT IS THE EXTENT OF HUMAN INVOLVEMENT IN PR OVISION OF INTERCONNECT SERVICES. I.E., CARRIAGE OF CALLS ORIG INATING ON NETWORK OF ONE OPERATOR AND TERMINATION THE NETWORK OF THE OTH ER OPERATOR? WE HAVE 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 INTERV ENTION IS MUCH HIGHER AND OF SOPHISTICATED TECHNICAL LEVEL. IN THI S REGARD, DO YOU AGREE THAT CELLULAR NETWORKS ARE BASED ON SOPHISTIC ATED TECHNOLOGY AND WORK ON AN AUTOMATED MODE? THE HUMAN INTERVENTI ON AS REFERRED BY YOU FOR NETWORK OPERATIONS IS LIMITED T O NETWORK MONITORING AND MAINTENANCE AND FAULT REPAIR, RECTIF ICATION, ENHANCEMENT, CONFIGURATION, AND SET-UP? ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 11 WE AGREE THAT THE TELECOM NETWORKS ARE AUTOMATED NE TWORKS AND DO NOT REQUIRE HUMAN INTERVENTION FOR CARRIAGE OF C ALLS. HOWEVER, AS STATED IN QUESTION 4 OF THIS CROSS EXAMINATION, HUM AN INTERVENTION IS REQUIRED AT THE INTER-CONNECT SET-UP STAGE (INCLUDI NG CONFIGURATION, INSTALLATION, TESTING, ETC) AND CAPACITY ENHANCEMEN T, MONITORING (INCLUDING NETWORK MONITORING), MAINTENANCE, FAULT IDENTIFICATION, REPAIR AND ENSURING QUALITY OF SERVICE AS PER INTER CONNECT. 4.16. THE NEXT ARGUMENT OF LEARNED DR THAT ROAMING CHARGES ARE PAID FOR BOTH INTERCONNECTIVITY AND ALSO FOR USAGE OF TRANSMISSION LINES AND HUMAN INTERVENTION IS VERY MUCH INVOLVED WITH REGARD TO USAGE OF TRANSMISSION LINES. WE FIND THAT THE HUMAN INVOLVEMENT IS INVOLVED ONLY WHEN SOMETHING GOES WRONG IN THE MAIN TENANCE OF TRANSMISSION LINES AND FOR CONNECTIVITY PER SE, HUM AN INTERVENTION IS NOT INVOLVED. THIS ISSUE COULD ALSO BE LOOKED INTO FROM THE ANGLE OF APPLICABILITY OF TDS PROVISIONS ON TRANSMISSION CHA RGES / WHEELING CHARGES PAID BY POWER GENERATING COMPANIES. THIS IS SUE HAD REACHED THE CORRIDORS OF VARIOUS JUDICIAL FORUMS AND NOW HA S 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 JUST IFIED IN HOLDING THAT THE PAYMENTS OF THE WHEELING AND TRANSMISSION CHARGES MADE BY THE ASSESSEE TO THE ENTITIES LIKE MAHARASHTRA ST ATE ELECTRICITY TRANSMISSION CO. LTD. (MSETCL) AND POWER GRID CORPO RATION OF INDIA LTD. (P GCIL) FOR THE USE OF TRANSMISSION LINES OR OTHER INFRASTRUCTURE, I.E., PLANT, MACHINERY AND EQUIPMENT COULD NOT BE T ERMED AS RENT UNDER THE PROVISIONS OF SECTION 194I OF THE ACT AND , CONSEQUENTLY, THE PROVISIONS OF SECTION 201 AND SECTION 201(IA) C OULD 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 A CT FROM THE PAYMENTS? ' HE SUBMITTED THAT IN THE CASE OF CHHATTISGARH STATE ELECTRICITY BOARD NO APPEAL H AD BEE N FILED BY THE REVENUE AND THE R EVENUE ACCEPTED THE DECISION OF THE TRIBUNAL WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE CASE OF THE PRESENT ASSESSEE AS WELL. MERELY DR AWING POWER AND ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 12 CARRYING POWER THROUGH TRANSMISSION LINES AND TRANS MISSION SYSTEM WOULD NOT AMOUNT TO RENTING UP EQUIPMENT OR ITS CHA RGE OR RENT'. THE HON'BLE SUPREME COURT HAS ALSO SHOWN US SOME DI RECTION IN THIS BEHALF. WHILE INTERPRETING THE EXPRESSION 'RENT', T HE APPLICABILITY OF SECTION 194-1 MUST BE GATHERED FROM WHETHER THE WHE ELING AND TRANSMISSION CHARGES DRAW ITS COLOUR FROM THE BASIC MEANING OF T HE EXPRESSION '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 CONT EXT IN WHICH THEY ARE USED. IN THE PRESENT SET OF FACTS, IT IS NOT POSSIBLE TO EQUATE THE WHEELING AND TRANSMISSION CHARGES PAYABLE MSETCL WITH RENT. ON FACTS IT IS SE EN THAT THE MERC ORDER DATED JUNE 27, 2006, DEALS WITH MSEDCL'S CONT ENTIONS, APROPOS THE METHODOLOGY PROPOSED BY MERC. THE TRANS MISSION CHARGES CONTEMPLATED BY MERC INCLUDES T HE CROSS SU BSIDISATION OF TRANSMISSION CHARGES ACROSS LICENSEES WHEN FOUND TO BE UNECONOMICAL AND UNCOMPETITIVE. IT IS FURTHER OBSER VED THAT MERC HAS CONSIDERED POOLING OF TRANSMISSION CHARGES DURI NG BULK POWER TRANSMISSION FROM ONE LICENSEE TO ANOTHER LICENSEE. IT IS AFTER CONSIDERING ALL THESE ASPECTS THAT A COMPOSITE CHAR GE METHOD FOR ANY SUCH TRANSMISSION WAS ADOPTED. THUS, IT IS SEEN THAT THE METHODOLOGY FOR DETERMINING OF THE TRANSMISSION TAR IFF COULD NOT BE DETERMINED IN A MECHANICAL MANNER AS IF THE CHARGE WAS ONLY FOR USE OF THE STATE TRANSMISSION UTILITY. THE MERC WHILE P ASSING THIS ORDER ON TRANSMISSION CHARGES HAD RECEIVED VARIOUS OBJECT IONS SOME, INTER ALIA, SUPPORTING THE COMPOSITE TARIFF, SOME AGAINST . HOWEVER, WE NEED NOT DIVERT OUR ATTENTION TO THE DETAILS OF PRI CING FORMULA FIN ALLY ADOPTED. THERE IS NOTHING ON RECORD TO SUPPORT THE REVENUE'S CONTENTION THAT THE WHEELING AND TRANSMISSION CHARG ES ASSUMES THE CHARACTER OF RENT. WE ARE IN AGREEMENT WITH MR. MIS TRI THAT THE EXPRESSION 'RENT' MUST BE CONCEPTUALLY UNDERSTOOD. THE CONCEPT OF RENT UNDER THE INCOME-TAX ACT DOES NOT ENCOMPASS, I N OUR VIEW, THE WHEELING AND TRANSMISSION CHARGES PAYABLE BY THE AS SESSEE 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 CORPORATION AND THEY CANNOT BE SUBJECTED TO PROVISIONS OF SECTION 1 94-1 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 THE RESTRUCTURING OF THE MAHARASHTRA STATE ELECTRIC ITY BOARD. IT IS PERTINENT TO MENTION HERE THAT SECTION 62 OF THE AC T PROVIDES THAT T HE COMMISSION MAY, IN THE CASE OF SUPPLY OF ELECTRI CITY FIX A MAXIMUM CEILING OF THE TARIFF, IN AN ATTEMPT TO PRO MOTE COMPETITION AMONGST THE DISTRIBUTION LICENSEES. 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 WILL BE DETERMINED BY THE MERC IN PUBLIC INTEREST. HENCE, IT IS INCOMPREHENSI BLE THAT THE TARIFF PASSES THE TEST AS FEES FOR TECHNICAL SERVICES. ONC E AGAIN APPLYING THE PRINCIPLES OF CONCEPTUAL INTERPRETATION TO T HE TAR IFF TO BE FIXED FOR ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 13 THE WHEELING AND TRANSMISSION CHARGES OF ELECTRICIT Y, IT CANNOT BE INTERPRETED TO MEAN FEES FOR THE PROVIDING TECHNICA L SERVICES. UNDER THE OPEN ACCESS SYSTEM, IT IS THE M SEDCL WHICH WIL L BE AVAILING OF THE SAID TRANSMISSION FACILITY. NO 'SERVICE' IS BEI NG PROVIDED BY THE MSETCL OR THE STATE TRANSMISSION UTILITY. NO DOUBT, MSEDCL, AS TRANSMISSION LICENSEE IS REQUIRED TO PROVIDE SUPERI NTENDENCE, MAINTENANCE AND REPAIRS TO THE SYSTEM. HOWEVER, NO SUCH SERVICE IS RENDERED B Y T HE MSETCL TO M SE DCL. MSETCL IS OBL IGED TO MAINTAIN THE SYSTEM BY VALUE OF OPERATION OF LAW UN DER T HE ELECTRICITY ACT. THE MSEDCL ACCESSES THE STATE TRAN SMISSION 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 T HE CHARGE. THE FOCUS OF THE REVENUE IS ONLY THE REQUIREMENT OF DED UCTION OF TAX WHETHER UNDER SECTION 194-1 OR SECTION 194J. THIS A PPROACH IS ERRONEOUS. THE REVENUE CONTENDS THAT THE WHEELING A ND TRANSMISSION CHARGES COULD BE RENT OR FEES FOR TECH NICAL SERVICES BUT, IN OUR VIEW IT IS NEITHER. WHEELING CHARGES REPRESE NT 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 T HE LICENSEES AND CONSUMERS. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE WHEELING AND TRANSMISSION CHARGES ARE NEITHER R ENT NOR FEES FOR TECHNICAL SERVICES. KEEPING THE SAID INTERPRETATION INTO EFFECT, WE FIND T HAT WHILE INTERPRETING THE EXPRESSION 'RENT' IN THE P RESENT SCENARIO, WE MUST BEAR IN MIND THAT TAKING INTO ACC OUNT 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 TRANSMISSION CHARGES AND/ OR WHEELING CHARGES ARE NOT AMOUNTS PA ID UNDER ANY ARRANGEMENT FOR USE OF LAND, BUILDING, PLANT MACHIN ERY, EQUIPMENT, FURNITURE, FITTING, ETC. AND, THEREFORE, NOT RE NT. EQUALLY, THE AMOUNTS ARE NOT FEES FOR TECHNICAL SERVICES. IN THE FACTS A ND CIRCUMSTANCES OF THIS CASE, WE ANSWER THE QUESTION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS DISPOSED OF ACCO RDINGLY. 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 TECHNICAL SERVICES (TRANSMISSION CHARGES)- ASSESSMENT YEAR 20 12-1 3- WHETHER, WHERE ASSESSEE PAID WHEELING, SCHEDULING A ND TRANSMISSION CHARGES TO STATE POWER UTILITY FOR USI NG ITS DISTRIBUTION NET WORK TO SELL ENERGY GENERATED BY ASSESSEE TO EN D CONSUMERS AND SAME DID NOT INVOLVE ANY HUMAN ELEMENT, ASSESSEE WA S NOT REQUIRED ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 14 T O DEDUCT TDS UNDER SECTION 194JHELD, 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 YEA R 2006-07. APART FROM THE FINDING OF TRIBUNAL RECORDED IN THE ASSESS EES OWN CASES, WE DEEM IT PERTINENT TO TAKE NOTE OF THE FINDING RE CORDED BY THE TRIBUNAL IN THE CASE OF CHHATTISGARH STATE ELECTRIC ITY BOARD -VS.- ITO (SUPRA) (2012) 50 SOT 33 (MUM.)- NO FURTHER APPEAL TO HIGH COURT BY DEPARTMENT. THE RELEVANT FINDING READ AS UNDER : '1 1. WE FIND THAT THE POWER PURCHASE AGREEMENT ENTERED INTO BY THE AS SESSEE WITH NTPC, (COPY PLACED BEFORE US AT PAGES 15-27 OF THE PAPER-BOOK), SPECIFICALLY PROVIDES THAT 'POWER SHALL BE MADE AVA ILABLE 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 NT PC'. IT IS PURSUANT TO THESE OBLIGATIONS THAT THE ASSESSEE, AL ONG WITH OTHER BULK POWER BENEFICIARIES - NAMELY M P STATE ELECTRI CITY BOARD, GUJARAT ELECTRICITY BOARD, MAHARASHTRA STATE ELECTR ICITY BOARD, ELECTRICITY DEPARTMENT - GOVERNMENT OF GOA, ADMINIS TRATION OF DAMAN & DIU, AND ELECTRICITY DEPARTMENT - ADMINISTR ATION OF DADRA AND NAGAR HAVELI, HAS ENTERED INTO A 'BULK POWER TR ANSMISSION AGREEMENT' WITH PGCIL. THE PREAMBLE OF THIS AGREEME NT, INTER ALIA, NOTES THAT THE PGCIL 'IS DESIROUS TO TRANSMIT ENERG Y FROM THE CENTRAL SECTOR POWER STATION(S) TO THE BULK POWER BENEFICIA RIES AND THAT THE SAID BULK POWER BENEFICIARIES ARE DESIROUS OF RECEI VING THE SAME THROUGH POWERGRID TRANSMISSION SYSTEM ON MUTUALLY A GREED TERMS AND CONDITIONS'. THIS AGREEMENT PROVIDES THAT 'POWE RGRID SHALL OPERATE AND MAINTAIN THE TRANSMISSION SYSTEM BELONG ING TO IT IN THE WESTERN REGION AS PER AGREED GUIDELINES AND THE DIR ECTIVES OF THE WESTERN REGIONAL ELECTRICITY BOARD AND THE REGIONAL LOAD DISPATCH CENTERS, AND COOPERATE WITH THE BULK POWER BENEFICI ARIES OF THE REGION, SO AS TO MAINTAIN THE SYSTEM PARAMETERS WIT HIN ACCEPTABLE/REASONABLE LIMITS EXCEPT WHERE IT IS NEC ESSARY TO TAKE MEASURES TO PREVENT IMMINENT DAMAGE TO ANY EQUIPMEN T'. IN RESPECT OF THESE SERVICES, THE BULK POWER BENEFICIA RIES 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 DIVIDED BY 12 AS IS BETWEEN POWER TRANSMITT ED TO EACH BENEFICIARY TO TOTAL SALES FROM THAT PARTICULAR POI NT OF DELIVERY. IN OTHER WORDS, WHILE THE ANNUAL CHARGES ARE FIXED, TH ESE ARE DIVIDED BETWEEN THE BENEFICIARIES IN THE SAME RATIO AS IS R ATIO 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 TRANSMISSION LINES ARE IN THE PHYSICAL CONTROL OF PGCIL, THESE A RE MAINTAINED AND ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 15 OPERATED BY THE PGCIL AND, SO FAR AS THE ASSESSEE I S CONCERNED, ITS INTEREST IN THE TRANSMISSION LINES IS RESTRICTED TO THE FACT THAT ELECTRICAL POWER PURCHASED BY THE ASSESSEE, SIMULTA NEOUSLY 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 T HE DELIVERY POINTS, COLLECTIVELY FOR ALL THE BULK POWER BENEFICIARIES, IS LOADED FOR TRANSMISSION ON THESE TRANSMISSION LINES OR POWERGR ID AND EACH OF THE BENEFICIARIES IS ALLOWED TO UTILIZE THE POWER T O THE EXTENT ALLOCATED TO HIM. IT IS NOT THE CASE THAT PURCHASES BY EACH OF THE BULK BENEFICIARY CAN BE PHYSICALLY IDENTIFIED AND THAT P ARTICULAR 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 TH E BENEFICIARY TO UTILIZE THE POWER TO THE EXTENT OF HIS ALLOCATION. ON THESE FACTS, THE QUESTION THAT REQUIRES OUR ADJUDICATION IS WHETHER OR NOT THE PAYMENT FOR TRANSMISSION CHARGES CAN BE TERMED AS ' RENT' FOR THE PURPOSES OFSECTION 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 OU T INSECTION 194-I OF THE ACT, AND ANALYZE THE SAME. SECTION 194-I PRO VIDES 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 THEREON AT THE RATE OF - (A) TWO PER CEN T. FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT; AND (B) TEN PE R CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUIL DING) 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, T HE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKE LY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOUNT 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 LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMED IATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF R ENT IS CREDITED OR ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 16 PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER TH IS SECTION. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, [(I ) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB- LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF (EITHER SEPARATELY OR TOGETHER) 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;] (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, W HETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE P AYEE AND THE PROVISIONS 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 PURPOSE OF SECTION 194 I, INCLUDES 'ANY PAYMENT, BY WHATEVER N AME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AG REEMENT OR ARRANGEMENT' FOR THE USE OF MACHINERY, PLANT OR EQU IPMENT, AND SINCE THE ASSESSEE HAS MADE THE PAYMENTS TOWARDS TR ANSMISSION CHARGES FOR USE OF THE MACHINERY, PLANT AND EQUIPME NT COLLECTIVELY CONSTITUTING MODE OF TRANSMISSION OF POWER, THE PRO VISIONS OF SECTION 194-I COME INTO PLAY ON THE FACTS OF THIS C ASE. 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 AN Y OTHER AGREEMENT OR ARRANGEMENT 'FOR THE USE OF' APPEARING IN EXPLANATION (I) TO SECTION 194-I. 15. EXPLANATION (I) TO SECTION 194-I, AS WE HAVE NO TED ABOVE, DEFINES RENT AS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUBLEASE, OR TENANCY OR ANY OTHER AGREEMENT OR ARRA NGEMENT 'FOR ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 17 THE USE OF' LAND, BUILDING, PLANT, MACHINERY OR EQU IPMENT ETC. AS EVIDENT FROM A PLAIN READING OF THE AGREEMENTS UNDE R WHICH IMPUGNED PAYMENTS HAVE BEEN MADE, THE PAYMENTS HAVE BEEN MADE FOR THE SERVICES OF TRANSMISSION OF ELECTRICIT Y AND NOT THE USE OF TRANSMISSION WIRES PER SE. IT IS A SIGNIFICANT F ACT THAT THESE TRANSMISSION LINES ARE NOT ONLY BEING USED FOR TRAN SMISSION OF ELECTRICITY TO THE ASSESSEE BUT ALSO FOR TRANSMISSI ON TO ELECTRICITY TO VARIOUS OTHER ENTITIES. THE TRANSMISSION LINES CONT INUE TO BE NOT ONLY UNDER CONTROL AND POSSESSION OF THE PGCIL IN LEGAL TERMS, BUT, WHAT IS MORE IMPORTANT, THESE TRANSMISSION LINES ARE EFFECT IVELY IN THE CONTROL OF PGCIL, WITHOUT ANY INVOLVEMENT OF THE AS SESSEE IN ACTUAL OPERATIONS OF THE SAME. ON THESE FACTS, IN OUR HUMB LE UNDERSTANDING, THE ASSESSEE HAS MADE THE PAYMENTS F OR TRANSMISSION OF ELECTRICITY IN WHICH TRANSMISSION L INES HAVE BEEN USED RATHER THAN FOR THE USE OF TRANSMISSION LINES PER SE. THE PAYMENTS COULD BE SAID TO HAVE BEEN MADE FOR 'THE U SE OF TRANSMISSION LINES' IN A CASE IN WHICH THE OBJECT O F CONSIDERATION FOR WHICH PAYMENTS ARE MADE WAS THE USE OF TRANSMISSION LINES SIMPLICTOR, AND SUCH A USE BY THE ASSESSEE DOES NOT EXTEND BEYOND THE TRANSMISSION OF ELECTRICITY THROUGH SUCH LINES IN THE SENSE THAT THE SAME TRANSMISSION LINES CONTINUE TO BE IN THE C ONTROL OF PGCIL FOR TRANSMISSION OF ELECTRICITY FOR OTHER ENTITIES AND FOR ALL PRACTICAL PURPOSES. EVEN AS ELECTRICITY PURCHASED BY THE ASSE SSEE IS TRANSMITTED TO THE ASSESSEE 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 TRANSMISSION 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 194-I, THE 'CONTROL' AND 'POSSESSION', I N LEGAL TERMS, OF AN ASSET MAY NOT NOT NEEDED TO BE WITH THE PERSON BENE FITING FROM THE ASSET 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 TH E ASSESSEE. HERE IS A CASE IN WHICH THE ASSESSEE HAS NO CONTROL OVER THE OPERATIONS OF THE TRANSMISSION LINES, AND ALL THAT HE GETS FROM T HE ARRANGEMENTS IS THAT HE CAN DRAW THE ELECTRICAL POWER PURCHASED FRO M 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 FOLLOWING DISTINCTION BROUGHT OUT BY THE KARNATAKA HIGH COURT BETWEEN LEASING OUT OF EQUIPMENT AND THE USE OF EQUIPMENT BY ITS CU STOMER. THIS WAS DONE IN THE CASE OF LAKSHMI AUDIO VISUAL INC. V . ASSTT. COMMR. OF COMMERCIAL TAXES [2001] 124 STC 426 (KAR.), WHICH H AS BEEN FOLLOWED BY HON'BLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. V. DIT [2011] 332 ITR 3 40 / 197 TAXMAN 263/ 9 TAXMANN.COM 168, IN THE FOLLOWING TERMS: ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 18 '9. THUS IF THE TRANSACTION IS ONE OF LEASING/HIRIN G/LETTING SIMPLICITER UNDER WHICH THE POSSESSION OF THE GOODS, I.E., EFFE CTIVE AND GENERAL CONTROL OF THE GOODS IS TO BE GIVEN TO THE CUSTOMER AND THE CUSTOMER HAS THE FREEDOM AND CHOICE OF SELECTING THE MANNER, TIME AND NATURE OF USE AND ENJOYMENT, THOUGH WITHIN THE FRAM EWORK OF THE AGREEMENT, THEN IT WOULD BE A TRANSFER OF THE RIGHT TO USE THE GOODS AND FALL UNDER THE EXTENDED DEFINITION OF 'SALE'. O N THE OTHER HAND, IF THE CUSTOMER ENTRUSTS TO THE ASSESSEE THE WORK O F ACHIEVING A CERTAIN DESIRED RESULT AND THAT INVOLVES THE USE OF GOODS BELONGING TO THE ASSESSEE AND RENDERING OF SEVERAL OTHER SERVICE S AND THE GOODS USED BY THE ASSESSEE TO ACHIEVE THE DESIRED RESULT 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 NO W CLARIFY THE POSITION FURTHER, WITH AN ILLUSTRATION WHICH IS A V ARIATION 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 T HE CONSIGNMENT AND PROCEEDS TO THE DESTINATION FOR DELIVERY OF THE CONSIGNMENT. THE LORRY IS USED EXCLUSIVELY FOR THE CUSTOMER'S CONSIG NMENT FROM THE TIME OF LOADING, TO THE TIME OF UNLOADING AT DESTIN ATION. CAN IT BE SAID THAT RIGHT TO USE OF THE LORRY HAS BEEN TRANSF ERRED BY THE CARRIER TO THE CUSTOMER? THE ANSWER IS OBVIOUSLY IN THE NEG ATIVE, AS THERE IS NO TRANSFER OF THE 'USE OF THE LORRY' FOR THE FOLLO WING REASONS : (I) THE LORRY IS NEVER IN THE CONTROL, LET ALONE EFFECTIVE CONTROL OF THE CUSTOMER; (II) THE CARRIER DECIDES HOW, WHEN AND WH ERE THE LORRY MOVES TO THE DESTINATION, AND CONTINUES TO BE IN EF FECTIVE CONTROL OF THE LORRY; (III) THE CARRIER CAN AT ANY POINT (OF T IME OR PLACE) TRANSFER THE CONSIGNMENT IN THE LORRY TO ANOTHER LORRY; OR T HE CARRIER MAY UNLOAD THE CONSIGNMENT EN ROUTE IN ANY OF HIS GODOW NS, TO BE PICKED UP LATER BY SOME OTHER LORRY ASSIGNED BY THE CARRIE R FOR FURTHER TRANSPORTATION 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 TRANSPOR T OPERATOR, UNDER WHICH THE TRANSPORT OPERATOR HAS TO PROVIDE A LORRY TO THE CUSTOMER, 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. SUBJEC T TO AN ASSURED MINIMUM, FOR A PERIOD OF ONE MONTH OR ONE WEEK OR E VEN ONE DAY; AND UNDER THE CONTRACT, THE TRANSPORT OPERATOR IS R ESPONSIBLE FOR MAKING REPAIRS APART FROM PROVIDING A DRIVER TO DRI VE THE LORRY AND FILLING THE VEHICLE WITH DIESEL FOR RUNNING THE LOR RY. THE TRANSACTION INVOLVES AN IDENTIFIED VEHICLE BELONGING TO THE TRA NSPORT OPERATOR ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 19 BEING DELIVERED TO THE CUSTOMER AND THE CUSTOMER IS GIVEN THE EXCLUSIVE AND EFFECTIVE CONTROL OF THE VEHICLE TO B E USED IN ANY MANNER AS IT DEEMS FIT; AND DURING THE PERIOD WHEN THE LORRY IS WITH THE CUSTOMER, THE TRANSPORT OPERATOR HAS NO CONTROL OVER IT. THE TRANSPORT OPERATOR RENDERS 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 C ONTROL AND POSSESSION IN ITS LEGAL SENSE OR NOT, THE PAYMENT C OULD BE SAID TO BE FOR THE USE OF AN ASSET. HOWEVER, IN A SITUATION IN WHICH THE PAYMENT IS MADE ONLY FOR THE PURPOSE A SPECIFIC ACT, I.E. P OWER 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 ASSE T. WHEN CONTROL OF THE ASSET (TRANSMISSION LINES IN THE PRESENT CAS E) ALWAYS REMAINS WITH THE PGCIL, ANY PAYMENT MADE TO THE PGCIL FOR T RANSMISSION OF POWER ON THE TRANSMISSION LINES AND INFRASTRUCTURE 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 INFRASTRUCTURE. VIEWED IN THIS PERSPECTIVE, SECTION 194 I HAS NO APPLICATION SO FAR AS THE IMPUGNED PAYMENTS FOR TRA NSMISSION OF ELECTRICITY IS CONCERNED. FOR THIS SHORT REASON ALO NE THE IMPUGNED DEMANDS MUST BE HELD TO UNSUSTAINABLE IN LAW.' 9. ON DUE CONSIDERATION THE ORDER OF THE COORDINATE BENCH IN THE ASSESSEES 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 APPRECIATED THE CONTROVERSY IN RIGHT PROSPECTIVE AND NO INTERFE RENCE IS CALLED FOR. THEREFORE, ITA NO. 3526,3528,3629,3530 ARE DISMISSE D THE VARIOUS DECISIONS CITED SUPRA HAVE HELD THAT TH ERE WILL BE NO TDS ON TRANSMISSION CHARGES AND THE SAME ANALOGY WOULD APPLY WITH EQUAL FORCE IN THE CASE OF TRANSMISSION CHARGES IN TELECOM INDUSTRY. 4.17. FROM THE AFORESAID STATEMENT RECORDED FROM TE CHNICAL EXPERTS PURSUANT TO THE DIRECTIONS OF THE SUPREME COURT IN CIT V S BHARTI CELLULAR LTD ( 330 ITR 239) WHICH HAS BEEN HEAVILY RELIED UPON BY THE LEARNED CITA, WE FIND THAT HUMAN INTERVENTION IS RE QUIRED ONLY FOR INSTALLATION / SETTING UP / REPAIRING / SERVICING / MAINTENANCE / CAPACITY AUGMENTATION OF THE NETWORK. BUT AFTER COM PLETING THIS PROCESS, MERE INTERCONNECTION BETWEEN THE OPERATORS WHILE ROAMING, IS DONE AUTOMATICALLY AND DOES NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY CANNOT BE CONSTRUED AS TECHNICAL SERVICES. IT IS COMMON KNOWLEDGE THAT WHEN ONE OF T HE SUBSCRIBERS IN THE ASSESSEES CIRCLE TRAVELS TO THE JURISDICTIO N OF ANOTHER CIRCLE, THE CALL GETS CONNECTED AUTOMATICALLY WITHOUT ANY H UMAN INTERVENTION AND IT IS FOR THIS, THE ROAMING CHARGE S IS PAID BY THE ASSESSEE TO THE VISITING OPERATOR FOR PROVIDING THI S SERVICE. HENCE WE HAVE NO HESITATION TO HOLD THAT THE PROVISION OF RO AMING SERVICES DO ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 20 NOT REQUIRE ANY HUMAN INTERVENTION AND ACCORDINGLY WE HOLD THAT THE PAYMENT OF ROAMING CHARGES DOES NOT FALL UNDER THE AMBIT OF TDS PROVISIONS U/S 194J OF THE ACT.' 13. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSIN G OFFICER HAS NOT OBTAINED ANY REPORT FROM THE TECHNICAL EXPERT TO AS CERTAIN THE FACT WHETHER THERE IS ANY HUMAN INTERVENTION IN PROVIDIN G CELLULAR SERVICES. IT IS PATENT AND OBVIOUS THAT THE ASSESSI NG OFFICER HAS RELIED UPON THE TECHNICAL REPORT OBTAINED IN CASE OF VODAF ONE ESSAR MOBILE SERVICES LTD. THEREFORE, WE ARE NOT IN A POSITION T O KNOW WHETHER THE FACTS RELATING TO HUMAN INTERVENTION IN ASSESSE E'S CASE IS SIMILAR TO THE FACTS IN CASE OF VODAFONE ESSAR MOBILE SERVI CES LTD. HOWEVER, AFTER ANALYSING THE REPORT SUBMITTED BY THE TECHNIC AL EXPERT SHRI TANAY KRISHNA, IN CASE OF VODAFONE ESSAR MOBILE SER VICES LTD., WHO INCIDENTALLY ALSO SUBMITTED THE REPORT IN CASE OF B HARTI CELLULAR LTD., AND THE CROSS-EXAMINATION OF SHRI TANAY KRISHNA, TH E ITAT, KOLKATA BENCH, HAS FOUND THAT THE ROAMING / INTER CONNECTIV ITY SERVICES ARE RENDERED AUTOMATICALLY WITHOUT ANY HUMAN INTERVENTI ON. IT IS EVIDENT FROM THE ORDER PASSED UNDER SECTIONS 201(1) AND 201(1A), THAT THE ASSESSING OFFICER RELYING UPON THE TECHNIC AL REPORT OBTAINED IN CASE OF VODAFONE ESSAR (SUPRA), HAS RAISED THE D EMAND AGAINST THE ASSESSEE INFERRING THAT ROAMING CHARGES WARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, HENCE, COMING WITHIN THE PU RVIEW OF SECTION 194J. HOWEVER, AS STATED EARLIER, THE VERY SAME REP ORT FROM THE TECHNICAL EXPERT IN CASE OF VODAFONE ESSAR MOBILE S ERVICES LTD., WAS CONSIDERED AND ANALYSED BY THE TRIBUNAL, KOLKATA BE NCH (SUPRA) AND THE BENCH HELD THAT THERE IS NO HUMAN INTERVENTION IN PROVIDING THE ROAMING SERVICES. THAT BEING THE CASE, FOLLOWING TH E OBSERVATIONS OF THE TRIBUNAL, KOLKATA BENCH, REFERRED TO ABOVE, WE HOLD THAT THE ROAMING / INTER- CONNECTIVITY CHARGES PAID BY THE A SSESSEE TO OTHER TELECOM NETWORKS NOT BEING IN THE NATURE OF FEES FO R TECHNICAL SERVICES WILL NOT ATTRACT THE PROVISIONS OF SECTION 194J. THAT BEING THE CASE, ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SO URCE ON PAYMENT OF ROAMING CHARGES IN TERMS OF SECTION 194J. IN VIE W OF THE AFORESAID, WE QUASH THE DEMAND RAISED UNDER SECTIONS 201(1) AN D 201(1A). 5.CONSIDERING THE DECISION OF CO-ORDINATE BENCH ON SIMILAR ISSUE, WHEREIN THE LD. CIT(A) HAS ALSO FOLLOWED THE DECISI ON OF HONBLE HIGH COURT IN ASSESSEES OWN CASE, THUS WE AFFIRM THE OR DER OF LD. CIT(A). IN THE RESULT, GROUND NO.1 OF THE APPEAL IS ALLOWED . 7. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE COORDINATE BENCH , DISMISS THE GROUND RAISED BY THE REVENUE. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 21 8. THE ISSUE RAISED IN GROUND NO.2 & 3 IS AGAINST T HE DELETION OF DISALLOWANCE OF RS.8,06,00,000/- BY LD. CIT(A) A S MADE BY THE AO UNDER SECTION 14A READ WITH RULE 8D. 9. THE LD. A.R., AT THE OUTSET, POINTED OUT THAT TH E IDENTICAL ISSUE HAS BEEN DECIDED BY CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2519/M/2015 A.Y. 2009 -10 (SUPRA) THEREFORE THE GROUND RAISED BY THE REVENUE MAY BE DISMISSED. 10. THE LD. D.R. FAIRLY AGREED TO THE CONTENTIONS O F THE ASSESSEE. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION PASSED BY THE ITAT IN ASSESSEES OWN CASE IN ITA NO.2519/M/2015 A.Y. 2009-10 (SUPRA) WE OBSERVE THAT THE IDENTICAL ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE. THE OPERATIVE PORTION IS REPRODUCED AS U NDER: 9.WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE P ARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSM ENT, THE ASSESSING OFFICER MADE THE DISALLOWANCE UNDER SECTION 14A ON HIS OBSERVATI ON THAT THE ASSESSEE HAS INVESTED AN AMOUNT OF RS. 75 CRORE IN ITS SUBSIDIAR Y. THE ASSESSEE IN THE RETURN OF INCOME HAS NOT SHOWN ANY EXEMPT INCOME, THE ASSESSI NG OFFICER BY INVOKING THE PROVISION OF RULE 8D MADE THE DISALLOWANCE OF RS. 3 .84 CRORE. ON APPEAL 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 COM PUTING THE TOTAL INCOME BY THE ASSESSEE. THE LD. CIT(A) ALSO NOTED THAT THE AS SESSING 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 ENTIR E 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 CATEGO RICAL RATIO OF THE DECISIONS OF THE DELHI HIGH COURT IN CHEMINVEST LTD . (SUPRA) AND HOLCIM INDIA (P.) LTD. (SUPRA). ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 22 7. IN WALFORT SHARE & STOCK BROKERS (P.) LTD. (SUPR A) THE ASSESSEE HAD PURCHASED UNITS AT A HIGHER PRICE OF RS. 17.23 PER UNIT ON WHICH TAX-FREE DIVIDEND OF RS.4/- PER UNIT WAS RECEIVED. THE UNITS WERE SOLD AFTER THE RECORD DATE AT RS.13.23 PER UNIT INCURRING LOSS. CO NTENTION OF THE REVENUE WAS THAT THE LOSS, I.E. DIFFERENCE BETWEEN THE PURC HASE PRICE AND SALE PRICE OF THE UNITS, WAS EXPENDITURE INCURRED FOR EARNING TAX FREE DIVIDEND INCOME AND ACCORDINGLY COULD BE DISALLOWED UNDER SECTION 1 4A OF THE ACT. THIS CONTENTION OF THE REVENUE WAS REJECTED. IN THE CONT EXT OF THE CONTROVERSY, THE SUPREME COURT HAD EXAMINED THE LEGISLATIVE HIST ORY AND OBJECT AND PURPOSE BEHIND INSERTION OF SECTION 14A BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1962 AND THE P ROVISO TO SECTION 14A BY FINANCE ACT, 2002 WITH RETROSPECTIVE EFFECT FROM 11 TH MAY, 2001. ONE OR TWO SENTENCES THAT SECTION 14A CLARIFIES THAT EXPEN SES INCURRED CAN BE ALLOWED ONLY TO THE EXTENT THAT THEY ARE RELATABLE TO EARNING OF TAXABLE INCOME CANNOT BE READ OUT OF CONTEXT, FOR THE SUPRE ME COURT IN WALFORT SHARE & STOCK BROKERS (P.) LTD. (SUPRA) HAS EMPHATI CALLY HELD AND OBSERVED THAT SECTION 14A WOULD APPLY WHEN AN INCOME DOES NO T FORM PART OF THE TOTAL INCOME. THEN THE RELATED EXPENDITURE WOULD NO T BE ALLOWED. THIS DECISION DID NOT DIRECTLY EXAMINE AND ANSWER THE IS SUE IN QUESTION I.E. WHETHER ANY DISALLOWANCE UNDER SECTION 14A CAN BE M ADE WHEN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING TH E YEAR IN QUESTION. 8. THE DECISION IN THE CASE OF MAXOPP INVESTMENT LT D. (SUPRA) IS SIGNIFICANT AND DOES ANSWER THE QUESTION IN ISSUE. THIS DECISIO N DOES NOT SUPPORT THE REVENUE AS THE ASSESSING OFFICER IN THE CASE OF MAX OPP INVESTMENT LTD. (SUPRA) HAD HIMSELF RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME. AFTER REFERRING TO WALFORT SHARE & STOCK BR OKERS (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 TO TAL INCOME THAT HAS TO BE DISALLOWED. IF AN EXPENDITURE INCURRED HAS NO CAUSAL CONNECTION WITH THE EXEMPTED INCOME, THEN SUCH AN E XPENDITURE WOULD OBVIOUSLY BE TREATED AS NOT RELATED TO THE IN COME THAT IS EXEMPTED FROM TAX, AND SUCH EXPENDITURE WOULD BE AL LOWED AS BUSINESS EXPENDITURE. TO PUT IT DIFFERENTLY, SUCH E XPENDITURE 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 WE REFER TO THE FACTUAL POSITION IN THE APPEAL PREFERRED BY THE REV ENUE AGAINST 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 TAXMAN N.COM 3 WHICH WAS ALSO DECIDED WITH THE DECISION IN MAXOPP INVESTMENT LTD(SUPRA). IN STATE BANK OF PATIALA (SUPRA) THE ASSESSING OFFICER HAD A PPLIED RULE 8D OF THE INCOME TAX RULES 1962, BUT HAD RESTRICTED THE DISAL LOWANCE TO THE AMOUNT CLAIMED AS EXEMPT INCOME. THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAD ENHANCED AND INCREASED THIS DISALLOWANCE AS PER RUL E 8D OF THE INCOME TAX RULES, 1962. THE SAID DISALLOWANCE WAS MORE THAN EX EMPT INCOME. THE ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 23 TRIBUNAL HAD REVERSED THE FINDING OF THE COMMISSION ER OF INCOME-TAX (APPEALS) AND RESTORED THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER I.E. RESTRICTED THE DISALLOWANCE TO THE EXTENT OF E XEMPT INCOME. DECISION IN THE CASE OF STATE BANK OF PATIALA (SUPRA) OF THE PU NJAB AND HARYANA HIGH COURT WAS AFFIRMED BY THE SUPREME COURT AS THE CORR ECT CONCLUSION, THOUGH THE SUPREME COURT DID NOT AGREE WITH THE REASONING OF THE PUNJAB & HIGH COURT ON THE THEORY OF DOMINANT INTENTION. IT WAS H ELD THAT THE VIEW OF THE COMMISSIONER OF INCOME TAX (APPEALS) DISALLOWING EX PENDITURE BEYOND AND ABOVE THE EXEMPT INCOME EARNED BY APPLYING 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 IN COME IN THE FORM OF DIVIDEND WAS EARNED IN THE YEAR, AND IT WAS OBSERVE D: '14. ON THE ISSUE WHETHER THE RESPONDENT-ASSESSEE C OULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCO ME 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-REV ENUE. NO CONTRARY DECISION OF A HIGH COURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, F ARIDABAD V. M/S. LAKHANI MARKETING INCL., ITA NO. 970/2008, DEC IDED 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 SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I V. CORRTECH ENERGY (P.) LTD. [2014] 22 3 TAXMANN 130 (GUJ.). THE THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME T AX (II) KANPUR, V. M/S. SHIVAM MOTORS (P) LTD. DECIDED ON 05.05.201 4. 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 INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DEDUCTION. F OR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX F REE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR DISALLOWANCE. THE VIEW OF THE CIT(A), WHICH HAS BEE N AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SUBSTANTI AL QUESTION OF LAW. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 24 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 TAX ABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUE NT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YEAR. FOR EXAMPLE, LONG TERM CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NO T TAXABLE WHERE SECURITY TRANSACTION TAX HAS BEEN PAID, BUT A PRIVA TE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITAL GAINS TA X. IT IS AN UNDISPUTED POSITION THAT RESPONDENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIA L NUMBER OF SHARES AND THEREBY SECURING RIGHT TO MANAGEMENT. PO SSIBILITY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT AN IMPROBABILITY. DIVIDEND MAY OR MAY NOT BE DECLARED. 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 LOG ISTICS (P) LTD. (SUPRA) HAS TAKEN SIMILAR VIEW FOLLOWING THEIR EARL IER DECISIONIN REDINGTON (INDIA) LTD. V. ADDL. CIT [2017] 392 ITR 633/77 TAXMANN.COM 257 (MAD.). IN REDINGTON (INDIA) LIMITE D (SUPRA) IT WAS HELD: '4. THE ADMITTED POSITION IS THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE IN THE FINANCIAL YEAR RELEVA NT TO THE ASSESSMENT YEAR IN ISSUE. THE ORDER OF ASSESSMENT R ECORDS A FINDING OF FACT TO THAT EFFECT. THE ISSUE TO BE DEC IDED THUS LIES WITHIN THE SHORT COMPASS OF WHETHER A DISALLOWANCE IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES CAN BE CONTEMPLATED EVEN IN A SITUATION WHERE NO EXEMPT INCOME HAS ADMITTEDLY BEEN EARNED BY THE ASSESSEE I N 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 ONL Y 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 11.2.2 014 TO THE EFFECT THAT SECTION 14A WAS INTENDED TO COVER EVEN THOSE SITUATIONS WHETHER THERE IS A POSSIBILITY OF EXEMPT INCOME ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 25 BEING EARNED IN FUTURE. THE CIRCULAR, AT PARAGRAPH 4, STATES THAT IT IS NOT NECESSARY FOR EXEMPT INCOME TO HAVE BEEN INCLUDED IN THE INCOME OF A PARTICULAR YEAR FOR THE DISALLOWANCE TO BE TRIGGERED. ACCORDING TO THE LEAR NED 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 DI SALLOWANCE UNDER SECTION 14A R.W. RULE 8D CAN THUS 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 RESPON SE TO THE JUDGMENTS OF THE SUPREME COURT IN COMMISSIONER OF I NCOME- TAX V. MAHARASHTRA SUGAR MILLS LIMITED [1971] 82 IT R 452 AND RAJASTHAN STATE WAREHOUSING CORPORATION V. COMMISSI ONER OF INCOME-TAX [2002] 242 ITR 450/109 TAXMAN 145 (SC) I N TERMS OF WHICH, EXPENDITURE INCURRED BY AN ASSESSEE CARRY ING 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 INS ERTED PROVIDING THAT NO DEDUCTION SHALL BE ALLOWABLE IN R ESPECT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF INCOME EXEMPT FROM TAXATION. AS OBSERVED BY THE SUPREME CO URT 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 DESIRE S TO CURB THE PRACTICE TO CLAIM DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAINST TAXABLE INCOME AND AT THE SAME TIME AVAIL OF THE TAX INCENTIVE BY WAY OF AN EXEMPT ION OF EXEMPT INCOME WITHOUT MAKING ANY APPORTIONMENT 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 INCOM E. THE SUBMISSION OF THE DEPARTMENT TO THE EFFECT THAT SEC TION 14A WOULD BE ATTRACTED EVEN TO EXEMPT INCOME 'INCLUDABL E' IN TOTAL INCOME WOULD ENTAIL THE ASSESSMENT OF NOTIONA L INCOME, ASSUMED TO BE EXEMPT IN THE FUTURE, IN THE PRESENT ASSESSMENT YEAR. 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 CONNECTION 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 ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 26 WOULD RESULT IN THE IMPOSITION OF AN ARTIFICIAL MET HOD OF COMPUTATION ON NOTIONAL AND ASSUMED INCOME. WE BELI EVE THIS WOULD BE CARRYING THE ARTIFICE TOO FAR. (EMPHASIS IS OURS)' 13. WE HAVE BEEN INFORMED THAT SLP PREFERRED BY THE DEPARTMENT AGAINST THE DECISION IN CHETTINAD LOGISTICS (P.) LT D.(SUPRA) HAS BEEN DISMISSED. COUNSEL APPEARING FOR THE RESPONDENT-ASS ESSEE 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 FEBRU ARY, 2016 IN TAX APPEAL NO. 206/2016, PR. CIT V. D.B. CORP LTD. IN T HIS CASE THE GUJARAT HIGH COURT HAD REFUSED TO ADMIT THE APPEAL ON PROPO SED QUESTION NO.2 - WHETHER DISALLOWANCE UNDER SECTION 14A COULD BE MADE WHEN ASSESSEE DURING THE PARTICULAR ASSESSMENT YEAR HAD NOT EARNED ANY EXEMPT INCOME, OBSERVING THAT THERE WAS NO INFIRMIT Y IN THE APPROACH ADOPTED BY THE TRIBUNAL WARRANTING INTERFE RENCE. THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE THAT IT DID NOT CLAIM ANY INCOME TO BE EXEMPT FROM PAYMENT OF INCOME TAX. 14. OUR ATTENTION IS ALSO DRAWN TO ORDER DATED 6TH APRIL, 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, 2018 IN THE CASE OF D.B. CORPN. LTD. (SUP RA). 15. BE THAT AS IT MAY, IN VIEW OF THE RATIO IN MAXO PP INVESTMENT LTD., HOLICIM INDIA P.LTD. (SUPRA) AND CHEMINVEST LTD.(SU PRA), WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW THAT ARISES FO R CONSIDERATION. 16. THE APPEAL IS ACCORDINGLY DISMISSED, WITH NO OR DER AS TO COSTS. 11.CONSIDERING THE DECISION OF CHEMNIVEST LTD. VS. CIT (SUPRA) AND THE LATEST DECISION OF HONBLE DELHI HIGH COURT IN MCDONALDS ( SUPRA), WE DO 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 I N THE PRESENT CASE. 12. SINCE THERE ARE NO CHANGE OF FACTS DURING THE Y EAR AND WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME DISMISS THE GROUND RAISED BY THE REVENUE. ITA NO.3413/M/2015 M/S. TATA TELESERVICES (MAH) LTD. 27 13. IN RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.