THE DCIT, CIRCLE - 3(1) (TDS), Vijayawada V. M/s Nava Bharat Ventures Ltd.,

ITA 462/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9924 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SATYANADHAMDR
• Section: 133A; 194C; 201(1)

Judgement Text

ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.462&463/VIZAG/2013 ( / ASSESSMENT YEARS: 2009-10 & 2010-11) DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA VS. M/S. NAVA BHARAT VENTURES LTD., PALONCHA [PAN: HYDNO0968C ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI T. SATYANADHAM,DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 09.08.2016 / DATE OF PRONOUNCEMENT : 26.08.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE COMMON ORDER PASSED BY THE CIT(A), VIJAYAWADA D ATED 26.3.2013 FOR THE ASSESSMENT YEARS 2009-10 & 2010-11. SINCE, THE FACTS ARE ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 2 IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING F ERRO ALLOYS AND GENERATION OF ELECTRICITY. A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 10.2.2010. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAS PAID OPEN ACCESS CHAR GES OF ` 2.12 CRORES AND ` 1.11 CRORES RESPECTIVELY FOR THE ASSESSMENT YEARS 2009-10 & 2010-11. WHEN QUESTIONED ABOUT THE NATURE OF SAID EXPENDITURE, IT WAS REPLIED THAT OPEN ACCESS CHARGES HAS BEEN PAID TO M /S. POWER GRID CORPORATION OF INDIA LTD. TOWARDS TRANSMISSION OF E LECTRICITY THROUGH ELECTRICAL LINES/DISTRIBUTION SYSTEM AND ASSOCIATE FACILITIES OWNED BY TRANSMISSION COMPANIES FROM ASSESSEES PLANT TO VAR IOUS PARTS OF THE COUNTRY. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS NOT DEDUCTED TDS ON SUCH CHARGES, AS THE EXPENDITURE INCURRED UNDER THE HEAD OPEN ACCESS CHARGES IS NEITHER COMING UNDER WORKS CONTR ACT AS DEFINED U/S 194C OF THE ACT NOR TECHNICAL CHARGES AS DEFINED U/ S 194J OF THE ACT. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS UNDER TH E PROVISIONS OF SECTION 194J OF THE ACT, TOWARDS OPEN ACCESS CHARGE S PAID TO M/S. POWER ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 3 GRID CORPORATION OF INDIA LTD. TOWARDS TRANSMISSION OF ELECTRICITY FROM ONE PLACE TO ANOTHER PLACE. THE A.O. FURTHER OBSER VED THAT TRANSMISSION ELECTRICITY FROM ONE PLACE TO ANOTHER PLACE IS CARR IED OUT BY PUBLIC SECTOR COMPANIES, WHO HOLD EXCLUSIVE LICENSE FOR CARRYING ON SUCH BUSINESS THROUGH NETWORK OF TRANSMISSION LINES AND ALLIED EQ UIPMENT OWNED BY THEM AND ANY PAYMENT MADE BY THE CUSTOMERS TO SAID COMPANIES TOWARDS TRANSMISSION OF ELECTRICITY, PARTAKES THE N ATURE OF ROYALTY AS DEFINED UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. THE A.O. FURTHER HELD THAT THE ASSESSEE USED TRANSMISSION LI NES OWNED BY TRANSMISSION COMPANIES, WHICH IS COMING WITHIN THE DEFINITION OF EXPLANATION (1) TO SUB CLAUSE (IVA) OF SECTION 9(I) (VI) OF THE ACT, ACCORDINGLY, ANY CHARGES PAID FOR USE OF SUCH FACIL ITIES IS COMING UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. SINCE, THE ASSESSEE FAILED TO DEDUCT TDS ON OPEN ACCESS CHARGES, HELD ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT AND LEVIED TAX AND INTEREST FOR FAILURE TO DEDUCT TDS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS ENTERED INTO A POWER PURCHASED AGREEMEN T WITH M/S. RELIANCE ENERGY TRADING LTD. AND TRANSMITTED POWER PRODUCED IN ITS ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 4 PLANT THROUGH TRANSMISSION LINES OWNED BY M/S. POWE R GRID CORPORATION OF INDIA LTD. TO VARIOUS PARTS OF COUNTRY FOR WHICH IT HAS PAID OPEN ACCESS CHARGES TOWARDS USAGE OF TRANSMISSION LINES THROUGH M/S. RELIANCE ENERGY TRADING LIMITED. THE ASSESSEE FURT HER SUBMITTED THAT OPEN ACCESS CHARGES IS NEITHER COMING UNDER THE DEF INITION OF WORKS CONTRACT AS DEFINED U/S 194C OF THE ACT, NOR TECHNI CAL FEES AS DEFINED U/S 194J OF THE ACT, THEREFORE, NOT DEDUCTED TDS ON SUCH CHARGES. THE ASSESSEE FURTHER SUBMITTED THAT OPEN ACCESS CHARGES INCURRED TOWARDS USAGE OF TRANSMISSION LINES OF ELECTRICITY TRANSMIS SION COMPANIES, CANNOT BE TERMED ROYALTY AS DEFINED IN SECTION 9(I)(VI) OF THE ACT, AS IT DID NOT MAKE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, S ECRET FORMULA OR PROCESS OR TRADE MARK, ETC. OF TRANSMISSION COMPANI ES. IT HAS USED TRANSMISSION LINES OWNED BY SUCH COMPANIES BY PAYIN G CHARGES FIXED BY THE ELECTRICITY REGULATORY COMMISSION (ERC), THEREF ORE, THE A.O. WAS NOT CORRECT IN APPLYING THE DEFINITION OF ROYALTY AS DE FINED U/S 9(I)(VI) OF THE ACT, TO HOLD THAT OPEN ACCESS CHARGES INCURRED BY I T IS COMING UNDER THE DEFINITION OF TECHNICAL FEES AS DEFINED U/S 194J OF THE ACT. 4. THE CIT(A) AFTER CONSIDERING THE EXPLANATION FUR NISHED BY THE ASSESSEE, HELD THAT TRANSACTION BETWEEN THE ASSESSE E AND M/S. RELIANCE ENERGY TRADING LTD. IS POWER PURCHASES, WHICH IS CR YSTAL CLEAR AS SEEN FROM THE AGREEMENT ENTERED BETWEEN THE PARTIES. THE CIT(A) FURTHER ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 5 HELD THAT REIMBURSEMENT OF EXPENDITURE M/S. RELIANC E ENERGY TRADING LTD. TOWARDS AMOUNT PAID TO M/S. POWER GRID CORPORA TION OF INDIA LTD FOR ALLOWING ITS NETWORK FOR TRANSMISSION OF POWER HAS NOTHING TO DO WITH THE AGREEMENT OF SALE BETWEEN THE ASSESSEE AND M/S. RELIANCE ENERGY TRADING LTD. THE CIT(A) FURTHER OBSERVED THAT SINCE IT IS A SALE OF ENERGY, THE QUESTION OF APPLICABILITY OF THE PROVIS IONS OF SECTION 194J OF THE ACT DOES NOT ARISE. WITH THESE OBSERVATIONS, DI RECTED THE A.O. TO DELETE THE DEMAND RAISED U/S 201(1) & 201(1A) OF TH E ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFOR E US. 5. THE LD. D.R. SUBMITTED THAT THE CIT(A) IS ERRED IN CONCLUDING THAT TRANSACTION BETWEEN THE ASSESSEE AND M/S POWER GRID CORPORATION LIMITED IS PURCHASE AND SALE, INSTEAD OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT. THE D.R. FURTHER SUBMITTED THAT USE OF TRA NSMISSION LINES OWNED BY ELECTRICITY TRANSMISSION COMPANIES FOR TRANSMISS ION OF POWER IS COMING WITHIN THE DEFINITION OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT AND ACCORDINGLY, THE ASSESSEE OUGHT TO HAVE DEDUCTE D TDS ON OPEN ACCESS CHARGES. SINCE THE ASSESSEE HAS FAILED TO DE DUCT TDS ON SUCH CHARGES, THE A.O. HAS RIGHTLY HELD THAT THE ASSESSE E AS AN ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT AND HIS ORD ER SHOULD BE UPHELD. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE ST RONGLY SUPPORTED THE ORDER OF THE CIT(A). ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE IS A MANUFACTURER OF ELECTRICITY ENTERED INTO POWER PURCHASE AGREEMENT W ITH M/S. RELIANCE ENERGY TRADING LTD. IN THE PROCESS, THE ASSESSEE H AS USED TRANSMISSION LINES OWNED BY M/S. POWER GRID CORPORATION OF INDIA LTD. FOR TRANSMISSION OF ELECTRICITY FROM ITS PLANT TO VARIO US PARTS OF THE COUNTRY AS AGREED IN THE AGREEMENT AND PAID OPEN ACCESS CHA RGES FOR USE OF TRANSMISSION LINES. THE A.O. OBSERVED THAT OPEN AC CESS CHARGES PAID BY THE ASSESSEE IS IN THE NATURE OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT, ACCORDINGLY, THE ASSESSEE OUGHT TO HAVE DEDUCTED TD S ON SUCH CHARGES UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. SI NCE, THE ASSESSEE FAILED TO DEDUCT TDS ON SUCH CHARGES, THE A.O. HELD ASSESSEE AS AN ASSESSEE IN DEFAULT AND COMPUTED TAX AND INTEREST U /S 201(1) & 201(1A) OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE T HAT OPEN ACCESS CHARGES INCURRED TOWARDS TRANSMISSION OF ELECTRICITY FROM I TS PLANTS TO VARIOUS PARTS OF INDIA IS NOT COMING WITHIN THE DEFINITION OF TECHNICAL FEES AS DEFINED U/S 194J OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS USED TRANSMISSION LINES OWNED BY M/S. POWER GRID CO RPORATION OF INDIA LTD. AND PAID CHARGES AS FIXED BY ELECTRICITY REGUL ATORY COMMISSION AND SUCH AGREEMENT CANNOT BE CONSTRUED AS USE OF ANY PA TENT, TRADE MARK, ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 7 LICENSE, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OF SIMILAR PROPERTY AS DEFINED UNDER EXPLANATION 2, CLAUSE (IV A) OF SECTION 9(1)(VI) OF THE ACT. 7. THE QUESTION THAT NEEDS TO ANSWERED IS WHETHER O N FACTS AND CIRCUMSTANCES OF THE CASE, OPEN ACCESS CHARGES PAID BY THE ASSESSEE TOWARDS TRANSMISSION OF ELECTRICITY FROM ITS PLANTS TO VARIOUS PARTS OF THE COUNTRY IS COMING WITHIN THE DEFINITION OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT. THE HONBLE HIGH COURT OF DELHI, IN TH E CASE OF CIT VS. DELHI TRANSCO LTD. (2015) 124 DTR 170, HELD THAT TRANSMIS SION OF ELECTRICITY THROUGH THE NETWORK WITHOUT ANY HUMAN INTERVENTION CANNOT BE CHARACTERIZED AS A PROVISION OF TECHNICAL SERVICES AND THUS, WHEELING CHARGES COULD NOT BE CHARACTERIZED AS PAYMENT OF TE CHNICAL SERVICE AND CANNOT BE BROUGHT WITHIN THE HOLD OF SECTION 194J O F THE ACT. THE ITAT, JAIPUR A BENCH IN THE CASE OF PRINCIPAL OFFICER, JAIPUR VIDYUT VITARANA LTD. VS. ITO (2009) 26 DTR 154, HELD THAT OPERATION AND MAINTENANCE OF TRANSMISSION LINES BY THE TRANSMISSION COMPANY A ND THE USER OF THESE LINES BY ASSESSEE AND ELECTRICITY DISTRIBUTION COMP ANY FOR TRANSMITTING ENERGY DOES NOT RESULT INTO ANY TECHNICAL SERVICES BEING RENDERED TO THE ASSESSEE AND NO SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL IS MADE AVAILABLE TO THE ASSESSEE AND THEREFORE, ASSESSEE I S NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT, ON PAYMENT OF ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 8 TRANSMISSION/SLDC CHARGES TO THE TRANSMISSION COMPA NY AND ALSO THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE FOR THE REA SON THAT THE PAYMENT OF TRANSMISSION/WHEELING/SLDC CHARGES IS REIMBURSEMENT OF COST. A SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE HIGH COURT OF KARNATAKA, IN THE CASE OF CIT VS. HUBLI ELECTRICITY SUPPLY COM PANY LTD. (2016) 136 DTR 105, WHEREIN THE HONBLE HIGH COURT HELD THAT T HE ASSESSEE HAS DONE NOTHING MORE THAN TRANSMITTING CERTAIN QUANTUM OF POWER FROM ONE PLACE TO ANOTHER PLACE BY PAYING CHARGES FIXED BY KERC. THERE WAS NEITHER TRANSFER OF ANY TECHNOLOGY NOR ANY SERVICE ATTRIBUTABLE TO A TECHNICAL SERVICE OFFERED BY THE KPTCL AND ACCEPTED BY THE ASSESSEE. THEREFORE, APPLICATION OF SECTION 194J OF THE ACT T O THE FACTS OF THIS CASE BY THE REVENUE IS MISCONCEIVED. 8. IN THE PRESENT CASE ON RECORD, WE FIND THAT THE ASSESSEE HAS USED TRANSMISSION LINES OWNED BY M/S. POWER GRID CORPORA TION OF INDIA LTD. FOR TRANSMITTING POWER FROM ITS PLANT TO VARIOUS PA RTS OF INDIA. THE ASSESSEE HAS PAID OPEN ACCESS CHARGES THROUGH M/S. RELIANCE ENERGY TRADING LTD. FOR USE OF TRANSMISSION LINES. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS USED ANY PATENT, INVENTI ON, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY AND ASSOCIATED RIGHTS IN THAT PROPERTY TO SAY THAT THE OPEN ACCESS CHARGES PAID BY THE ASSESSEE IS COMING WITHIN THE MEANING O F ROYALTY AS DEFINED ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 9 U/S 9(1)(VI) OF THE ACT. IN OUR CONSIDERED VIEW, TH E A.O. WITHOUT UNDERSTANDING THE PROVISIONS, BROUGHT IN THE CONCEP T OF DEFINITION OF ROYALTY PROVIDED IN SUB CLAUSE (IVA) OF EXPLANATION 2 OF SECTION 9(1)(VI) OF THE ACT, THE USE OR RIGHT TO USE ANY INDUSTRIAL, CO MMERCIAL OR SCIENTIFIC EQUIPMENT TO COVER OPEN ACCESS CHARGES INCURRED BY THE ASSESSEE WITHIN THE DEFINITION OF ROYALTY AS DEFINED U/S 9(1)(VI) O F THE ACT. THEREFORE, WE ARE OF THE VIEW THAT OPEN ACCESS CHARGES INCURRED B Y THE ASSESSEE TOWARDS TRANSMISSION OF ELECTRICITY FROM ITS PLANT TO VARIOUS PARTS OF THE COUNTRY, THROUGH TRANSMISSION LINES OWNED BY M/S. P OWER GRID CORPORATION OF INDIA IS NOT A ROYALTY AND ACCORDING LY, THE ASSESSEE NEED NOT TO DEDUCT TDS UNDER THE PROVISIONS OF SECTION 1 94J OF THE ACT. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS RIGHTLY DELETED ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMI TY IN THE ORDER PASSED BY THE CIT(A),. HENCE, WE INCLINED TO UPHOL D THE CIT(A) ORDER AND DISMISS THE APPEALS FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 26 TH AUG16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ITA NOS.462&463/VIAG/2013 M/S. NAVA BHARAT VENTURES LTD., PALONCHA 10 # /VISAKHAPATNAM: ' /DATED : 26.08.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-3(1)(TDS), VIJA YAWADA 2. / THE RESPONDENT M/S. NAVA BHARAT VENTURES LTD., PALONCHA, KHAMMAM DIST. 3. + / THE CIT(TDS), HYDERABAD 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM