ADDL CIT 10(1), MUMBAI V. MAHARASHTRA STATE ELECTRICITY DISTRUBUTION CO. LTD, MUMBAI

ITA 8572/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62627 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Assessee Lawyers: K K VED; ARVIND SONDE SATISH MODY
• Keywords: Capital asset; Depreciation; Deemed to accrue or arise in india; Additional evidence; Revenue expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI G.E.VEERABHADRAPPA, PRESIDENT & SHRI I.P.BANSAL (J.M) ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) M/S. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.LTD., PRAKASHGAD, ANANT KANEKAR MARG, STATION ROAD, BANDRA (E), MUMBAI - 400 051 PAN: AAECM 2933 K (APPELLANT) VS. THE ADDL. CIT, RANGE 10(1), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (RESPONDENT) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) THE ADDL. CIT, RANGE 10(1), AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (APPELLANT ) V/S. M/S. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.LTD., PRAKASHGAD, ANANT KANEKAR MARG, STATION ROAD, BANDRA (E), MUMBAI - 400 051 PAN: AAECM 2933 K ASSESSEE BY : S/SHRI ARVIND SONDE, SATISH MODY & K. K.VED REVENUE BY : SHRI PRAVIN VARMA DATE OF HEARING : 30/05/2012 DATE OF PRONOUNCEMENT : 27/06/2012 ORDER PER I.P.BANSAL, J.M THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST THE ORDERS PASSED BY CIT(A)-21, MUMBAI FOR ASSESSMENT YEARS 2007-08 & 2008-09. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS REVENUE FOR THE RESPECTIVE YEARS ARE REPRODUCED AS UNDER: ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 2 ASSESSEES GROUNDS IN A.Y. 2007-08: GROUND NO.1: THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE FO LLOWING ADDITIONS MADE TO THE TOTAL INCOME OF THE APPELLANT BY THE AS SESSING OFFICER, SINCE THEY ARE CONTRARY TO THE FACTS OF THE CASE A ND ARE NOT AS PER THE APPLICABLE PROVISIONS OF THE INCOME TAX ACT, 1961. RS. (IN LACS) * OVERSTATEMENT OF REVENUE EXPENDITURE DUE TO METERING EQUIPMENT 115.07 * WHEELING AND TRANSMISSION CHARGES 135162.00 GROUND NO.2: WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE LEARNE D AO ERRED IN ISSUANCE OF NOTICE UNDER SECTION 271(1)(C) OF THE A CT AND THE SAME BE CANCELLED, SINCE IT IS CONTRARY TO THE FACTS OF THE CASE AND IS NOT AS PER THE APPLICABLE PROVISIONS OF THE ACT. ASSESSEES AMMENDED GROUNDS OF APPEAL - A.Y.2007-08 : 1: 0 RE.: DISALLOWANCE OF WHEELING AND TRANSMISSION CHARGES APPLYING THE PROVISIONS OF SECTION 40 (A) (IA) OF T HE INCOME-TAX ACT, 1961: 1:1 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN CONFIRMING THE DISALLOWANCE OF THE WHEELING AND TRANSMISSION C HARGES PAID BY THE APPELLANT BY APPLYING THE PROVISIONS OF SECTION 40( A) (IA) OF THE INCOME- TAX ACT, 1961 IN RESPECT OF AN ALLEGED NON-DEDUCTIO N OF TAX AT SOURCE U/S. 194C OF THE INCOME- TAX ACT, 1961. 1:2 WITHOUT PREJUDICE THE FOREGOING, ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSION ER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF T HE ENTIRE TRANSMISSION AND WHEELING CHARGES BY APPLYING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT, FOR THE ALLEGED NON D EDUCTION OF TAX AT SOURCE, WITHOUT APPRECIATING THAT DISALLOWANCE UNDE R SECTION 40(A)(IA) OF THE ACT CAN BE MADE ONLY ON THE AMOUNTS WHICH AR E PAYABLE I.E. OUTSTANDING AS ON 31ST MARCH AND NOT THE AMOUNTS WH ICH HAVE ALREADY BEEN ACTUALLY PAID DURING THE YEAR. 1: 3 THE APPELLANT SUBMITS THAT THE PROVISIONS OF SECTION 40 (A) (IA) OF THE INCOME-TAX ACT, 1961 HAVE NO APPLICATION TO THE AMOUNT OF ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 3 WHEELING AND TRANSMISSION CHARGES PAID BY THE APPEL LANT TO THE RECIPIENTS DURING THE YEAR UNDER CONSIDERATION AND HENCE THE ASSESSING OFFICER BE DIRECTED TO DELETE THE DISALLO WANCE SO MADE BY HIM. 2: 0 RE.: GENERAL: 2: 1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AM END, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY O F THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE A PPEAL. ASSESSEES GROUNDS IN A.Y. 2008-09: 1 : 0 RE.: DISALLOWANCE OF WHEELING AND TRANSMISSIO N CHARGES APPLYING THE PROVISIONS OF SECTION 40 (A) (IA) OF T HE INCOME-TAX ACT 1961: 1:1 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN CONFIRMING THE DISALLOWANCE OF THE WHEELING AND TRANSMISSION C HARGES PAID BY THE APPELLANT BY APPLYING THE PROVISIONS OF SECTION 40 (A) (IA) OF THE INCOME-TAX ACT, 1961 IN RESPECT OF AN ALLEGED NON-D EDUCTION OF TAX AT SOURCE U/S. 1 94C OF THE INCOME-TAX ACT, 1961. 1: 2 WITHOUT PREJUDICE TO THE FOREGOING, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSION ER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF T HE ENTIRE TRANSMISSION AND WHEELING CHARGES BY APPLYING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT, FOR THE ALLEGED NON D EDUCTION OF TAX AT SOURCE, WITHOUT APPRECIATING THAT DISALLOWANCE UNDE R SECTION 40(A)(IA) OF THE ACT CAN BE MADE ONLY ON THE AMOUNTS WHICH AR E PAYABLE I.E. OUTSTANDING AS ON 31ST MARCH AND NOT THE AMOUNTS W HICH HAVE ALREADY BEEN ACTUALLY PAID DURING THE YEAR. 1:3 THE APPELLANT SUBMITS THAT THE PROVISIONS OF S ECTION 40 (A) (IA) OF THE INCOME-TAX ACT, 1961 HAVE NO APPLICATION TO THE AMOUNT OF WHEELING AND TRANSMISSION CHARGES PAID BY THE APPEL LANT TO THE RECIPIENTS DURING THE YEAR UNDER CONSIDERATION AND HENCE THE ASSESSING OFFICER BE DIRECTED TO DELETE THE DISALLO WANCE SO MADE BY HIM. 2:0 RE.: REDUCING THE DEPRECIATION CLAIMED BY THE APPELLANT BY RS. 247,12,96,468/- 2:1 THE ASSESSING OFFICER HAS ERRED IN REDUCING THE DEPRECIATION CLAIMED BY THE APPELLANT BY RS. 247,12,96,468/-. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 4 2:2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACT S AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE DEPRECIATION CLAIMED BY THE APPELLANT CANNOT BE RED UCED AND THE COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 2.3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFIC ER BE DIRECTED TO GRANT DEPRECIATION AS CLAIMED BY THE APPELLANT AND TO RECOMPUTE ITS TOTAL INCOME ACCORDINGLY. 3:0 RE: GENERAL: 3.1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY O F THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE A PPEAL. REVENUES GROUNDS IN A.Y. 2007-08: 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS J USTIFIED IN OFFERING INCOME ON ESTIMATION BASIS PERTAINING TO THE REMAIN ING DAYS OF MARCH FOR WHICH THE BILLS WERE ISSUED IN APRIL. 1(II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE A SSESSING OFFICER IN TAXING THE REVENUE OF RS.36.95 CRORES PERTAINING TO ENERGY SUPPLIED IN THE MONTH OF MARCH, 2007 BUT BILLS FOR WHICH WERE I SSUED IN APRIL, 2007. 2(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE REMAI NED LIABLE TO REFUND THE SECURITY DEPOSIT OF RS.50.60 LAKHS TO ITS CUSTO MERS AND HENCE THE AO WAS NOT JUSTIFIED IN CONSIDERING THE UNPAID SEC URITY DEPOSIT OF RS.50.60 LAKHS THE INCOME OF THE ASSESSEE . 2(II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SECURITY D EPOSIT OF RS.50.60 LAKHS PERTAINED TO CUSTOMERS WHOSE ELECTRICITY SUPP LY HAD BEEN DISCONNECTED PRIOR TO 2002-03 AND AS THE SECURITY D EPOSITS HAD REMAINED UNCLAIMED FOR A LONG TIME, THE LIABILITY TOWARDS THOSE SECURITY DEPOSITS STOOD EXTINGUISHED AND HENCE WAS TAXABLE IN THE HANDS OF THE ASSESSEE.. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 5 2. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CA SE. (THE REVENUE HAS FILED F.NO.36A BUT THE SAME WAS WI THDRAWN DURING COURSE OF HEARING). REVENUES GROUND IN A.Y. 2008-09: ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 197 LA KHS ON ACCOUNT OF UNDER STATEMENT OF REVENUE. 2. AS IT CAN BE SEEN FROM THE ABOVE GROUNDS OF APPE AL THE MAIN ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL IS REGARDING D ISALLOWANCE OF WHEELING AND TRANSMISSION CHARGES ON THE APPLICATION OF PR OVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT). ACCORDING TO REVENUE WHEELING AND TRANSMISSION CHARGES PAID BY THE ASS ESSEE WERE LIABLE FOR DEDUCTION OF TAX AND THE ASSESSEE HAS FAILED TO DE DUCT AND DEPOSIT TAX ON THESE CHARGES, THEREFORE, THE SAME IS DISALLOWABLE UNDER SECTION 40(A)(IA) OF THE ACT. BEFORE WE PROCEED FURTHER IT WILL BE RELE VANT TO MENTION FEW FACTS WHICH ARE AS UNDER. 3. THE ASSESSEE IN SHORT, HEREINAFTER IS CALLED AS MSEDCL. IT PURCHASED ELECTRICITY FROM POWER GENERATING COMPANIES. TO GE T SUCH POWER PURCHASED TO ITS SUB-STATIONS FOR FURTHER DISTRIBUTION TO THE CUSTOMERS, IT HAS UTILIZED THE TRANSMISSION LINES BELONGING TO TRANSMISSION CO MPANIES AND FOR SUCH UTILIZATION OF TRANSMISSION LINES THE ASSESSEE HAS PAID WHEELING AND TRANSMISSION CHARGES TO STATE TRANSMISSION UTILITY( STU) FOR THE STATE OF MAHARASHTRA KNOWN AS MAHARASHTRA STATE ELECTRICITY TRANSMISSION COMPANY LTD. (MSETCL). SIMILARLY FOR THE PURPOSE O F TRANSMITTING POWER FROM PLACES OUTSIDE THE STATE OF MAHARASHTRA IT HAS TO PAY SIMILAR CHARGES TO POWER GRID CORPORATION OF INDIA LTD.(PGCIL). A SUR VEY WAS CONDUCTED BY THE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 6 DEPARTMENT ON THE PREMISES OF THE ASSESSEE ON 18/12 /2008. IN PURSUANCE TO THE SAID SURVEY, VIDE ORDER DATED 27/1/2009 PASS ED UNDER SECTION 201(1A) THE ASSESSEE WAS HELD LIABLE FOR DEDUCTION OF TAX AT SOURCE ON WHEELING AND TRANSMISSION CHARGES UNDER THE PROVI SIONS OF SECTION 194J OF THE ACT FOR ASSESSMENT YEAR 2009-10. 4. RELYING UPON THE AFOREMENTIONED ORDER DATED 27/1 /2009, THE AO IN THE IMPUGNED ASSESSMENT ORDER HAS DISALLOWED THESE CHARGES ON THE GROUND THAT ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE UN DER SECTION 194J OF THE ACT AND LD. CIT(A) HAS HELD THAT SUCH CHARGES WERE LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT AND THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX EITHER UNDER SECTION 194J AND/OR U NDER SECTION 194 I. 5. THE ASSESSEE IS ASSAILING THE ORDER OF LD. C IT(A) ON THE GROUND THAT LD. CIT(A) HAS ERRED IN HOLDING THAT THE TAX WAS DE DUCTIBLE TAX AT SOURCE EVEN UNDER SECTION 194C OF THE ACT. THE REVENUE APART FROM SUPPORTING THE ORDER OF LD. CIT(A) ON THIS ISSUE, BEING RESPONDENT IN AS SESSEES APPEALS WOULD ALSO CONTEND THAT LD. CIT(A) SHOULD HAVE HELD THAT THE TAX ON SUCH PAYMENT WAS DEDUCTIBLE U/S. 194J/194 I OF THE ACT. 6. IT IS ALSO THE CASE OF THE ASSESSEE THAT THE DEP ARTMENT HAS BEEN TAKING CONTRARY STAND VIS--VIS THE ISSUE OF DEDUCTION OF TAX AT SOURCE AS AT DIFFERENT TIMES THE DEPARTMENT HAS APPLIED DIFFERENT SECTION S TO HOLD THAT WHEELING AND TRANSMISSION CHARGES ARE LIABLE FOR DEDUCTION OF TAX UNDER THE VARIOUS PROVISIONS OF THE ACT. LD. A.R HAS SUMMARIZED TH AT POSITION IN A CHART WHICH IS PLACED AT PAGES 13 TO 14 OF THE PAPER BOOK AND IT WILL BE RELEVANT TO REPRODUCE THE SAID CHART AS UNDER: ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 7 DATE ASST. YEAR INVOLVED EVENT SECTION SOUGHT TO BE APPLIED. 18 TH DEC. 2008 2008-09 SURVEY CONDUCTED BY TDS OFFICER IN THE CASE OF THE ASSESSEE. 27 TH JAN. 2009 2009-10 ORDER PASSED U/S.201/201(1A) PURSUANT TO THE AFORESAID SURVEY ACTION. 194J 31 ST DEC.2009 2007-08 ORDER PASSED U/S. 143(3) DISALLOWING WHEELING AND TRANSMISSION CHARGES U/S.40(A)(IA) 194J 29 TH JAN.2010 2009-10 ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN APPEAL AGAINST THE ORDER PASSED U/S. 201/201(1A) 194 I 28 TH DEC.2010 2008-09 ORDER PASSED U/S. 143(3) 194J 4 TH JAN.2011 2007-08 ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN APPEAL AGAINST THE AFORESAID ORDER PASSED U/S.143(3) 194C [194J AND /OR 194I DOES NOT APPLY] 27 TH JAN.2011 2007-08 ORDER PASSED U/S. 201 /201(1A) OF THE I.T.ACT 1961. 194 I 31 ST JAN. 2011 2008-09 ORDER PASSED U/S. 201 / 201(1A) OF THEI.T.ACT,1961 194 I 31 ST JAN.2011 2006-07 ORDER PASSED U/S.201 / 201(1A) OF THE I.T. ACT, 1961 194 I 21 ST SEPT. 2011 2008-09 ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN APPEAL AGAINST THE AFORESAID ORDER PASSED U/S. 143(3) OF THE I.T. ACT 1961. 194C [194J AND / OR 194 I DOES NOT APPLY] 29 TH DEC.2011 2006-07 ORDER PASSED U/S. 143(3) R.W.S. 263 OF THE I.T. ACT, 1961 194J 29 TH DEC.2011 2009-10 ORDER PASSED U/S. 143(3) OF THE I.T. ACT,1961. 194 J 6.1 ON THE AFOREMENTIONED FACTS LD. A.R SUBMITTED T HAT INDIAN ELECTRICITY ACT WAS PASSED IN 1910. THEREAFTER, ELECTRICITY (S UPPLY) ACT, 1948 WAS PASSED TO RATIONALIZE THE PRODUCTION AND SUPPLY OF ELECTRICITY AND PROVISIONS WERE MADE FOR TAKING MEASURES CONDUCIVE TO ELECTRIC AL DEPARTMENT AND GIVE MORE POWERS TO STATE ELECTRICITY BOARDS. THEREAFTE R, ELECTRICITY REGULATORY ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 8 COMMISSION ACT, 1998 WAS ENACTED TO FORM TWO INSTIT UTIONS NAMELY (1) CENTRAL ELECTRICITY REGULATORY COMMISSION AND (2) S TATE ELECTRICITY REGULATORY COMMISSION. THEREAFTER, ELECTRICITY ACT 2003 WAS PASSED ON 4/6/2005. PURSUANT TO SECTION 131, 133 & 134 OF T HE ELECTRICITY ACT 2003 THE GOVERNMENT OF MAHARASHTRA HAD NOTIFIED MANARAS HTRA ELECTRICITY REFORMS TRANSFER SCHEME, 2005 TO RESTRUCTURE ERSTW HILE MAHARASHTRA STATE ELECTRICITY BOARD (MSEB). CONSEQUENTLY ON 6 /6/2005 MSEB WAS DEMERGED INTO FOUR DIFFERENT COMPANIES AS FOLLOWS : A. MAHARASHTRA STATE POWER GENERATION CO. LTD. - TO BE ENGAGED IN THE GENERATION OF ELECTRICITY; B. MAHARASHTRA STATE ELECTRICITY TRANSMISSION CO. LTD. - TO BE ENGAGED IN THE BUSINESS OF TRANSMISSION OF ELECTRIC ITY; C. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. - TO BE ENGAGED IN THE BUSINESS OF DISTRIBUTION OF ELECTRICITY; D. MSEB HOLDING CO. LTD. - THE HOLDING COMPANY TO HOLD SHARES OF ALL THE AFORESAID 3 COMPANIES ON BEHALF OF THE GOVERNME NT OF MAHARASHTRA. ON THE SAME DATE I.E. ON 6/6/2005 MAHARASHTRA STAT E ELECTRICITY TRANSMISSION COMPANY LTD. (MSETCL) WAS NOTIFIED AS STU. ON 27/6/2006 MAHARSHTRA ELECTRICITY REGULATORY COMMISSION(MERC ) HAS PASSED AN ORDER IN THE MATTER OF DETERMINATION OF TRANSMISSION PR ICING FRAME WORK FOR THE STATE OF MAHARASHTRA AND OTHER RELATED MATTERS. 6.2 ON THESE FACTS LD. A.R SUBMITTED THAT SECTION 194C COULD NOT BE APPLIED AS WHEELING AND TRANSMISSION CHARGES PAID BY THE ASSESSEE DOES NOT COME WITHIN THE AMBIT OF CARRYING OUT ANY WORK . HE SUBMITTED THAT WORK IS DEFINED IN EXPLANATION-(IV) TO SECTION 19 4C OF THE ACT. LD. AR ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 9 REFERRED TO PAGE 28 OF ORDER OF CIT(A), WHEREIN IT HAS BEEN HELD THAT TRANSMISSION OF ELECTRICITY AMOUNTS TO TRANSPORTATI ON OF ELECTRICITY AND HENCE, THE PROVISIONS OF SECTION 194C ARE APPLICABL E. HE SUBMITTED THAT IT IS ALSO THE CASE OF LD. CIT(A) THAT THE CASE OF ASSESS EE IS ALSO COVERED BY CLAUSE (A); (C) AND (D) OF SECTION 194C(1) OF THE ACT. H E SUBMITTED THAT BY HOLDING SO LD. CIT(A) HAS ASSUMED THAT TRANSMISSION OF ELECTRI CITY IS EMBEDDED IN CARRIAGE OF GOODS OR PASSENGERS IN ANY MODE OF TRA NSPORT OTHER THAN BY RAILWAYS AS DESCRIBED IN SUB-CLAUSE (C) OF EXPLAN ATION-(IV)TO SECTION 194C OF THE ACT. HE SUBMITTED THAT ACCORDING TO THE ARGUME NTS OF THE ASSESSEE TRANSMISSION OF ELECTRICITY CANNOT BE EQUATED WITH CARRIAGE OF GOODS BY ANY MODE OF TRANSPORT. HE SUBMITTED THAT THIS ARGUMEN T OF THE ASSESSEE IS BASED ON THE CIRCULARS ISSUED BY CBDT UNDER THE PRO VISIONS OF SECTION 194C OF THE ACT, WHEREIN IT HAS BEEN UNDERSTOOD THAT THE WORDS CARRIAGE OF GOODS BY ANY MODE OF TRANSPORT WOULD MEAN TRANSFER OF GO ODS OR MERCHANDISE BY A MODE OF TRANSPORT LIKE A CAR, TRUCK ETC. WHICH GE NERALLY INCLUDES LOADING AND UNLOADING OF GOODS ETC. FOR CONTENDING SO LD. A.R HAS REFERRED TO THE FOLLOWING CIRCULARS: A. CIRCULAR NO. 108 DATED 20 MARCH 1973 - REFER P AGE NO. 16 TO 62 OF THE COMPILATION AND IN SPECIFIC THE PARAGRAPH 11 T HEREIN ON THE CONCEPT OF LOADING AND UNLOADING; B. CIRCULAR NO. 86 DATED 29 MAY 1972 (REPORTED IN 84 ITR 99 (ST.)- REFER PAGE NO. 63 TO 65 OF THE COMPILATION; C. CIRCULAR NO. 93 DATED 26 SEPTEMBER 1972 (REPO RTED IN 86 ITR 30 (ST.)- REFER PAGE NO. 66 TO 68 OF THE COMPILATION A ND IN SPECIFIC QUESTION NO. 5 THEREIN ON THE CONCEPT OF LOADING AN D UNLOADING; D. CIRCULAR NO. 558 DATED 28 MARCH 1990 (REPORTED IN 183 ITR 158 (ST.) - REFER PAGE NO. 69 TO 71 OF THIS COMPILATION - SPECIFIC REFERENCE THEREIN TO THE STATE ROAD TRANSPORT; E. CIRCULAR NO. 6816 DATED 08 MARCH 1994 (REPORTE D IN 206 ITR 299 (ST.)- REFER PAGE - NO. 72 TO 76 OF THE COMPILATION - SPECIFIC REFERENCE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 10 THEREIN TO PARAGRAPH 8 (II) ON THE CONCEPT OF LOADI NG /UNLOADING AND THE CONTRACTS FOR PLYING OF BUSES, FERRIES WITH ST AFF, ETC. F. CIRCULAR NO. 714 DATED 03 AUGUST 1995 (REPORT ED IN 215 ITR 5 (ST.) - REFER PAGE NO. 77 TO 88 OF THIS COMPILATION SP ECIFIC REFERENCE TO QUESTION NUMBERS 6 TO 10 THEREOF. 6.3 LD. A.R SUBMITTED THAT THOUGH IT IS NOW A SETT LED ISSUE THAT ELECTRICITY IS GOODS BUT IT IS A MATTER OF FACT THAT IT CANNO T BE TRANSPORTED, THEREFORE, TRANSMISSION OF ELECTRICITY CANNOT FALL WITHIN THE PURVIEW OF TERM WORK DEFINED UNDER SECTION 194C OF THE ACT. 6.4 TO DEMONSTRATE THAT THERE IS A SIZABLE DIFFEREN CE AMONGST WORDS TRANSPORT, TRANSMIT, TRANSMISSION AND CARRIA GE LD. A.R REFERRED TO THE FOLLOWING DICTIONARIES: A. THE CONCISE OXFORD DICTIONARY OF CURRENT ENGLISH : I. TRANSPORT- V.&N. . V.TR . / TRANSPORT,TRA:N/ 1. TAKE OR CARRY ( A PERSON, GOODS, TROOPS, BAGGAGE, ETC.) FROM ONE PLACE TO ANO THER. 2 . HIST. TAKE ( A CRIMINAL) TO A PENAL COLONY; DEPORT. 3. (AS TRANSPORTED ADJ.) (USU.FOLL. BY WITH) AFFECTED WITH STRONG EMOTION. .N. /TRANSO:T, TRA:N/ 1. A A SYSTEM OF CONVEYING PEOPLE, GOODS, ETC. FROM PLACE TO PLACE. B . ESP. BRIT. THE MEANS OF THIS (OUR TRANSPORT HAS ARRIVED). 2 A SHIP, AIRCRAFT, ETC. USED TO CARRY SOLDIERS, STORES, ETC. 3 (ESP. IN PL.) VEHEMENT EMOTION (TRANSPORTS OF JOY) 4 HIST. A TRANSPORTED CONVICT. [MIDDLE ENGLISH FROM OLD FRENC H TRANSPORTER OR LATIN TRANSPORTARE ( AS TRANS, PORTARE CARRY)] (REFER PAGE NO. 89 TO 91 OF THE COMPILATION) II. TRANSMIT - 1 . A PASS OR HAND ON; TRANSFER (TRANSMITTED THE MESSAG E; HOW DISEASE ARE TRANSMITTED) B. COMMUNICATE (IDEAS, EMOTIONS, ETC.) 2. A ALLOW (HEAT, LIGHT, SOUND , ELECTRICITY, ETC.) TO P ASS THROUGH; BE A MEDIUM FOR. B BE A MEDIUM FOR (IDEAS, EMOTIONS, ETC.)(HIS MESSAG E TRANSMITS HOPE) 3 BROADCAST ( RADIO OR TELEVISION PROGRAMME) ( REFER PAGE NO. 92 TO 93 OF THE COMPILATION) ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 11 III. TRANSMISSION - 1 THE ACT OR AN INSTANCE OF TRANSMITTING; THE STATE OF BEING TRANSMITTED. 2 A BROADCAST RADIO OR TELEVISION PROGRAMME. 3 THE MECHANISM BY WHICH POWER IS TRANSMITTED FROM AN EN GINE TO THE AXLE IN A MOTOR VEHICLE. (REFER PAGE NO. 92 TO 93 OF THE CO MPILATION) B. THE SHORTER OXFORD ENGLISH DICTIONARY: I. CARRIAGE - 1 THE ACTION OF CARRYING. 1. CONVEYING, TRANSPORT, ES P. OF MERCHANDISE 2 A TOLL OR DUTY PAYABLE ON TRANSPORT OF GOODS. 3. (PAYMENT IN LIEU OF) CARRYING PERFORMED BY A TENANT AS FEUDAL S ERVICE. OBSOLETE EXC. 4 .THE COST OF CONVEYING GOODS ETC.; CHARGE SO INCURRED. CARRIAGE FORWARD WITH CARRIAGE TO BE PAID BY THE RECEIVER OF A PARCEL ETC . CARRIAGE PAID WITH CARRIAGE PAID BY THE SEND OF A PARCEL ETC. 5. ABILITY TO CARRY 6 THE ACTION OF CARRYING OUT, EXECUTION, CONDUCT, MANAGEMENT, ADMIN ISTRATION. 7 THE CARRYING OF A MOTION - A THING CARRIED; A MANNER OF CARRYING. 8 BAGGAGE; MOVABLE PROPERTY 10 MANNER OF CARRYING ESP OF THE HEAD, BODY ETC. DEPORTMENT; BEARING 11 DEMEANOUR; BEHAVIOUR, HABITUAL CONDUCT. (REFER PAGE NO. 94 TO 95 OF THE COMPILATION) C. BLACKS LAW DICTIONARY: I. CARRIAGE - TRANSPORT OF FREIGHT OR PASSENGERS. CARRIAGE AND INSURANCE PAID TO. (REFER PAGE NO. 96 TO 97 OF THE COMPILATI ON) D. WORDS AND PHRASES LEGALLY DEFINED: I. CARRIAGE - CARRIAGE INCLUDE ANY CARRIAGE, WAGON, CART, T RUCK, VEHICLE, OR OTHER MEANS OF CONVEYING GOODS OR PASSENGERS BY LAN D, IN WHATEVER MANNER THE SAME MAY BE PROPELLED(EXPLOSIVES ACT 1875, S.10 8) I THINK THE WORD CARRIAGE IS LARGE ENOUGH TO INCLUDE A MACHINE SU CH AS A BICYCLE, TAYLOR V. GOODWIN (1879) 4 QBD 228 AT 229, DC, PER MELLOR J ( REFER PAGE NO. 98 TO 99 OF THE COMPILATION) E. THE NEW CHOICE ENGLISH THESAURUS: I. TRANSMIT - VB. FORWARD, REMIT, SEND, COMMUNICATE, CONDUCT, RADIATE; BEAR, CARRY, CONVEY. ( REFER PAGE NO. 100 TO 101 OF THE COMPILATION ) II. TRANSPORT - VB. BEAR, CARRY CART, CONDUCT, CONVEY, FETCH, REMOVE, SHIP, TAKE, TRANSFER, TRUCK, BANISH, EXPEL; BEATIFY, DELI GHT, ENRAPTURE, ENRAVISH, ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 12 ENTRANCE, RAVISH * N. CARRIAGE, CONVEYANCE, MOVEMEN T, TRANSPORTATION, TRANSPORTING, BEATIFICATION, BEATITUDE, BLISS, ECST ASY, FELICITY, HAPPINESS, RAPTURE, RAVISHMENT, FRENZY, PASSION, VEHEMENCE, WA RMTH. ( REFER PAGE NO. 102 TO 103 OF THE COMPILATION) F. THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGU AGE: I. TRANSMISSION - 1. THE ACT OF PROCESS OF TRANSMITTING , 2 . THE FACT OF BEING TRANSMITTED 3. SOMETHING THAT IS TRANSMITTED 4. A. TRANSFERENCE OF FORCE BETWEEN MACHINES OR MECHANISMS, OFTEN WITH CHANGE O F TORQUE AND SPEED. B. A COMPACT, ENCLOSED UNIT OF GEARS OR THE LIKE FOR THIS PURPOSE, AS IN AN AUTOMOBILE. 5 . RADIO BROADCASTING OF ELECTROMAGNETIC WAVES FROM T HE TRANSMIT STATION TO THE RECEIVING STATION. ( REFER PAGE NO. 104 TO 105 OF THE COMPILATION) II. TRANSMIT - V.T 1. TO SEND OR FORWARD, AS TO A RECIPIENT OR DESTINA TION, DISPATCH, CONVEY. 2 . TO COMMUNICATE, AS INFORMATION ETC. 3. TO PASS OR SPREAD (DISEASE, INFECTION, ETC.) TO ANOTHER 4. TO PASS ON (A GENETIC CHARACTER) FROM PARENT TO OFFSPRING 5. PHYSICS. A . TO CAUSE ( LIGHT, HEAT, SOUND ETC,.) TO PASS THROUGH A MEDIUM B. TO CONVEY OR PASS ALONG (AN IMPACT, FORCE, MOTION, ETC.) C. TO PERMIT (LIGHT, HEAT, ETC.) TO PASS THROUGH: GL ASS TRANSMIT LIGHT. 6. RADIO TO EMIT (ELECTROMAGNETIC WAVES) 7 . TO SEND A SIGNAL BY WIRE OR RADIO WAVES. 8 . TO PASS ON A RIGHT OR OBLIGATION TO HEIRS . ( R EFER PAGE NO.106 TO 107 OF THE COMPILATION) III. TRANSPORT : V.T. 1 . TO CARRY, MOVE OR CONVEY FROM ONE PLACE TO ANOTHE R. 2. CARRY AWAY BY STRONG EMOTION; ENRAPTURE. 3 . TO SEND INTO BANISHMENT, ESP. TO A PENAL COLONY. 4. OBS. TO KILL- N. 5 . THE ACT OF TRANSPORTING OR CONVEYING ; CONVEYANCE. 6. A MEANS OF TRANSPORTING OR CONVEYING AS A TRUCK, B UT ETC. 7 . A SHIP OR AIRPLANE EMPLOYED FOR TRANSPORTING TROOPS, MILITARY SUPPLIES ETC. 8 . AN AIRPLANE CARRYING FREIGHT OR PASSENGERS AS PART OF A TRANSPORTATION SYSTEM. 9. A SYSTEM OF PUBLIC TRAVEL. 10 . TRANSPORTATION (DEF.4) 11 . STRONG EMOTION, ESTASTIC JOY, BLISS ETC. 12 . CONVICT SENT INTO BANISHMENT, ESP. TO PENAL COLON Y. (REFER PAGE NO.108 TO 109 OF THE COMPILATION.) 6.5 LD. A.R FURTHER CONTENDED THAT THE WORK AS DESC RIBED IN SECTION 194C REQUIRE HUMAN INVOLVEMENT/INTERVENTION AND FOR THIS PURPOSE LD. A.R RELIED ON THE DECISION OF BANGALORE ITAT IN THE CASE OF KA RNATAKA POWER TRANSMISSION CORPORATION LTD. VS. ITO, 45 SOT 184(B ANG). ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 13 6.6 LD. A.R FURTHER SUBMITTED THAT WHEELING AND TRA NSMISSION CHARGES ARE REGULATED BY THE ELECTRICITY ACT 2003, THEREFORE, A LSO THE PAYMENT OF SUCH CHARGES BY THE ASSESSEE WILL NOT FULFILL REQUIREMEN T OF SECTION 194C BEING IN TERMS OF A CONTRACT AND ENTERED INTO BETWEEN THE PA RTIES AS THE SAME IS THE STATUTORY PAYMENT TO BE MADE BY THE ASSESSEE. HE S UBMITTED THAT ACCORDING TO SECTION 39(2)(D)(I) OF ELECTRICITY ACT 2003 ONE OF THE FUNCTIONS OF THE STU WILL BE TO PROVIDE NON-DISCRIMINATORY OPEN ACCESS TO ITS TRANSMISSION SYSTEM FOR USE BY (1) LICENCING OR GENERATING CO MPANY ON PAYMENT OF THE TRANSMISSION CHARGES OR (2) ANY CONSUMER AS AND W HEN SUCH OPEN ACCESS IS PROVIDED BY THE STATE COMMISSION UNDER SUB-SECTION (2) OF SECTION 42, ON PAYMENT OF THE TRANSMISSION CHARGES AND SURCHARGE T HEREON, AS MAY BE SPECIFIED BY THE STATE COMMISSION. HE SUBMITTED TH AT THOUGH THERE IS A CONTRACT BETWEEN THE ASSESSEE AND THE TRANSMISSION COMPANY VIZ. MSETCL BUT THE IMPORTANT ELEMENT OF CONTRACT VIZ. TARIFF AND BILLING AND PAYMENT IS NOT DETERMINED IN TERMS OF THE SAID CONTRACT. THE TRANSMISSION TARIFF AND ITS TERMS AND CONDITIONS ARE DESCRIBED IN THE NOTIFICAT ION ISSUED BY MAHARASHTRA ELECTRICITY REGULATORY COMMISSION AND REFERENCE IN THIS REGARD WAS MADE TO PAGES 35 TO 38 OF THE PAPER BOOK SUBMITTED FOR ASSESSMENT YEAR 2007-08. THUS IT WAS SUBMITTED BY LD. A.R THAT REQUIREMENT OF SECTION 194C OF THE ACT BEING IN PUR SUANCE OF A CONTRACT FOR WORK BETWEEN THE PARTIES IS NOT SATISFIED, THEREFOR E, THERE WAS NO LIABILITY TO MAKE PAYMENT UNDER SECTION 194C OF THE ACT. HE SUB MITTED THAT IN ANY CASE, NO PAYMENT HAS BEEN MADE TO MSETCL IN THE CAP ACITY OF TRANSMISSION COMPANY BUT PAYMENT IS MADE TO MSETCL BEING IN THE CAPACITY OF STU, THEREFORE, THE CONDITION DESCRIBED OF PAYMENT TO CONTRACTOR IN THE CAPACITY OF TRANSMISSION COMPANY IS NOT SATISFIED, THEREFORE , ALSO PROVISIONS OF SECTION 194C COULD NOT BE APPLIED. 6.7 LD. A.R SUBMITTED THAT THE CASE OF THE ASSESSEE IS DIRECTLY COVERED BY THE DECISION OF JAIPUR BENCH OF ITAT IN THE CASE O F JAIPUR VIDYUT VITARAN ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 14 NIGAM LTD. VS. DCIT, 123 TTJ 888(JP) (TRIB). HE S UBMITTED THAT VARIOUS CLAUSES OF THE BULK POWER TRANSISSION AGREEMENT E NTERED INTO BY THE ASSESSEE WITH THE MSETCL ARE SIMILAR TO THE VARIOUS CLAUSES OF AGREEMENT EXAMINED BY THE JAIPUR BENCH OF ITAT(SUPRA). HE SU BMITTED THAT THE COPY OF THE ASSESSEES AGREEMENT IS FILED AT PAGES 1 TO 20 OF THE PAPER BOOK AND COPY OF AGREEMENT CONSIDERED BY ITAT JAIPUR IS PL ACED AT PAGES 180 TO 183 OF THE PAPER BOOK AND SUBMITTED THAT THE FACTS OF T HE CASE OF THE ASSESSEE AND FACTS CONSIDERED BY JAIPUR ITAT IN THE AFOREMEN TIONED CASE ARE IDENTICAL. IT WAS SUBMITTED THAT PROVISIONS OF SEC TION 194C DO NOT APPLY TO WHEELING AND TRANSMISSION CHARGES LD. AR REFERRED TO ANOTHER UNREPORTED DECISION OF JODHPUR BENCH OF ITAT IN THE CASE OF I TO VS. ADITYA CEMENT LTD. IN ITA NO.161,162 &152/JU/10 ORDER DATED 30/9/ 2010 (COPY FILED AT PAGES 214 TO 218 OF THE PAPER BOOK), WHEREIN ON IDE NTICAL FACTS JODHPUR BENCH OF ITAT FOLLOWING THE AFOREMENTIONED DECISION OF ITAT JAIPUR BENCH AS WELL AS DECISION OF ITAT DELHI BENCH IN THE CASE OF DCIT VS. DAKSHIN HARYANA BIJALI VITRAN NIGAM LTD. HISSAR, ITA NO.35 76 TO 3578/DEL/09 HAS DISMISSED THE APPEAL FILED BY THE REVENUE. HE SUBM ITTED THAT IN THE SAID CASE IT HAS BEEN CLEARLY HELD BY THE TRIBUNAL THAT NO CONTRARY DECISION HAS BEEN CITED BY EITHER SIDE. 6.8 LD. AR FURTHER SUBMITTED THAT SECTION 194J ALSO COULD NOT BE APPLIED IN VIEW OF THE FOLLOWING DECISION OF ITAT ON THE AP PLICABILITY OF SECTION 194J HAS ALSO BEEN CONSIDERED. A. DECISION OF THE JAIPUR BENCH OF THE ITAT IN THE CASE OF JAIPUR VIDYUT VITRAN NIGAM LTD. V/S. DCIT REPORTED IN (200 9) 123 TTJ 888. B. UNREPORTED DECISION OF THE JODHPUR BENCH OF TH E ITAT IN THE CASE OF ITO V/S. ADITYA CEMENTS LTD. (IN ITA NO. 161, 16 2 & 152/JU/2010) C. UNREPORTED DECISION OF THE DELHI BENCH OF THE ITAT IN THE CASE OF DAKSHIN HARYANA BIJALI VITRAN NIGAM LTD. (ITA NO. 3 576 TO ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 15 3578/DEL./2009) REFERRED TO IN THE DECISION OF THE JODHPUR BENCH REFERRED TO ABOVE. D. UNREPORTED DECISION OF THE DELHI BENCH OF THE I TAT IN THE CASE OF DAKSHIN HARYANA BIJALI VITRAN NIGAM LTD. (ITA NO. 4 606/DEIJ2O11) E. UNREPORTED DECISION OF THE DELHI BENCH OF THE I TAT IN THE CASE OF BANGALORE SUPPLY CO. LTD. V/S. ITO & VICE-VERSA ITA NOS. 530 TO 535/BANG/2011;541 TO 548/BANG/2011 AND 256 TO 260/B ANG/2011), FURTHER IT WAS SUBMITTED THAT SECTION 194 I IS ALSO NOT APPLICABLE IN VIEW OF THE FOLLOWING DECISIONS OF ITAT: A. UNREPORTED DECISION OF THE MUMBAI BENCH OF THE I TAT IN THE CASE OF CHATTISGARH STATE ELECTRICITY BOARD V/S. ITO IN ITA NO. 20 TO 23/BPLR/2010 B. UNREPORTED DECISION OF THE CUTTACK BENCH OF THE ITAT IN THE CASE OF GRIDCO LTD. V/S. ACIT IN ITA NO. 404/CTK/2O11 6.9 WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS LD. AR REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. KOTAK SECURITIES LTD., 245 CTR 3 (BOM) AND REFERRED TO TH E FOLLOWING OBSERVATIONS FROM THE SAID DECISION: THE OBJECT OF INTRODUCING SECTION 40(A) (IA) AS EXP LAINED IN THE CBDT CIRCULAR NO.5 DATED 15/7/2005 IS TO AUGMENT COMPLIANCE OF TD S PROVISIONS IN THE CASE OF RESIDENTS AND CURB BOGUS PAYMENTS. HOWEVER, SINC E BOTH THE REVENUE AND THE ASSESSEE WERE UNDER THE BONA FIDE BELIEF FOR NE ARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF TH E TRANSACTION CHARGES CANNOT BE SUSTAINED. HE SUBMITTED THAT IN THE PRESENT CASE ALSO RIGHT SI NCE INCEPTION, SECTION 194C HAS NOT BEEN INVOKED BY THE TAX DEPARTMEN T, THEREFORE, THE ASSESSEE WAS OF THE VIEW THAT NO TAX WAS REQUIR ED TO BE DEDUCTED AT ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 16 SOURCE ON SUCH CHARGES AND THAT BELIEF CONTINUED TI LL 27/1/2009 WHEN THE ORDER UNDER SECTION 201(1A) FOR ASSESSMENT YEAR 20 09-10 WAS PASSED. THEREFORE, HE PLEADED THAT ASSESSEE WAS UNDER BONA FIDE BELIEF THAT NO TAX WAS DEDUCTIBLE AND IN VIEW OF THE AFOREMENTIONED D ECISION OF HONBLE BOMBAY HIGH COURT SECTION 40(A)(IA) COULD NOT BE I NVOKED. HE SUBMITTED THAT FOLLOWING AFOREMENTIONED ORDER OF HONBLE BOMB AY HIGH COURT, MUMBAI ITAT IN THE CASE OF ACIT VS. DICGL LT. IN ITA NO. 2361& 2524/MUM/2011 HAS UPHELD THE ACTION OF THE LD. CIT(A) VIDE WHICH IT WAS HELD THAT SECTION 40(A)(IA) COULD NOT BE INVOKED AS THERE WAS BONAFI DE BELIEF THAT TAX WAS NOT DEDUCTIBLE . 6.10 WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS LD. AR ALSO RELIED UPON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF M ERILYN SHIPPING & TRANSPORTS VS. ACIT, (2012) 20 TAXMAN.COM 244, COP Y OF WHICH IS FILED AT PAGES 344 TO 373 OF THE PAPER BOOK TO CONTENT THAT DISALLOWANCE UNDER SECTION 40(A)(IA) SHOULD BE RESTRICTED ONLY TO THE AMOUNTS WHICH REMAIN PAYABLE AT THE END OF THE YEAR AND NOT FOR THE AM OUNTS WHICH ARE PAID. 6.11 WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS, I T WAS SUBMITTED THAT THE WHEELING AND TRANSMISSION CHARGES ARE MERELY RE IMBURSEMENT ON WHICH THERE CAN BE NO QUESTION OF ANY TAX DEDUCTION AT SO URCE. FOR ASSESSMENT YEAR 2007-08 REFERENCE WAS MADE TO THE ORDER DATED 29/9/2006 PASSED BY MAHARASHTRA ELECTRICITY REGULATORY COMMISSION IN CA SE NO.31 OF 2006, COPY OF WHICH IS FILED AT PAGES 35 TO 48 OF THE PAPER BO OK, WHEREIN AS PER PARA-5 THE COMMISSION HAS ASCERTAINED TOTAL TRANSMISSION S YSTEM COST (TTSC) OF RS. 1598.11 CRORES PAYABLE TO THREE TRANSMISSION UT ILITIES FOR FINANCIAL YEAR 2006-07 AND THE TABLE DESCRIBED IN PARA -5 IS AS U NDER: ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 17 TRANSMISSION UTILITIES APPROVED ARR FOR F.Y 2006- 07 (RS. CR) MSETCL -TRANSMISSION ARR 1393.13 TPC- TRANSMISSION ARR 168,59 REL-TRANSMISSION ARR 36.39 TTSC ( IN STS) 1598.11 SIMILARLY FOR ASSESSMENT YEAR 2008-09 TTSC HAS BEEN FIXED AT RS. 1800.40 CRORES AS DESCRIBED IN PARA-6 OF THE ORDER OF THE C OMMISSION DATED 2/4/2007 IN CASE NO.86 OF 2006. COPY IS FILED AT PAGES 143 TO 151 OF THE PAPER BOOK FOR A.Y 2008-09. THE TABLE HAS DESCRIB ED THE CASE AS UNDER: (COMMISSION) TRANSMISSION LICENSEE FY 2007-08 FY 2008-09 FY 2009-10 TOTAL OVER MYT PERIOD MSETCL 1546.47 1647.47 1700.69 4894.51 TPC-TRANSMISSION 211.72 225.41 247.32 684.4 5 REL-TRANSMISSION 41.73 43.27 44.30 129. 30 TTSC( INSTS) 1800.40 1916.15 1991.70 5708.26 TO FURTHER SUPPORT SUCH CONTENTION LD. AR REFERRED TO THE COPIES OF VOUCHERS EVIDENCING THE ONE TO ONE CO-RELATION BETWEEN THE A MOUNTS COLLECTED BY STU FROM FOUR DISTRIBUTION LICENSEES AND THE DISTRIBUTI ON OF THESE AMOUNTS BY THE STU TO THE TRANSMISSION UTILITIES. REFERENCE IN TH IS REGARD WAS MADE AT PAGE 173 TO 213 OF THE PAPER BOOK FOR ASSESSMENT YE AR 2007-08 AND PAGES 152 TO 157 OF THE PAPER BOOK FOR ASSESSMENT YEAR 20 08-09. 6.12 IT WAS FURTHER ARGUED THAT SINCE RECIPIENTS H AVE ALREADY PAID TAX ON THE AMOUNT RECEIVED FROM THE ASSESSEE, THEREFORE, T HERE IS NO QUESTION OF DISALLOWANCE TO BE MADE UNDER SECTION 40(A)(IA) A ND FOR THIS PURPOSE LD. AR RELIED UPON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES VS. CIT (2007) 293 I TR 226(SC). HE SUBMITTED THAT THOUGH THE SAID DECISION IS IN THE CONTEXT OF TDS BUT IT HAS BEEN HELD THAT WHERE THE RECIPIENT HAD PAID THE TAX NO FURTHER TAX CAN BE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 18 RECOVERED FROM THE PAYER. HE ALSO REFERRED TO THE 2 ND PROVISO TO SECTION 40(A)(IA) OF THE ACT BY FINANCE ACT, 2012 WHICH PR OVIDES THAT ONCE THE RECIPIENT HAS PAID TAX ON THE AMOUNT, NO DISALLOW ANCE CAN BE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN THE CASE OF THE P AYER. HE SUBMITTED THAT THOUGH THE SAID PROVISO IS INSERTED W.E.F. A.Y. 201 3-14 BUT THE SAME BEING CLARIFICATORY IN NATURE SHOULD BE CONSIDERED TO B E APPLICABLE RETROSPECTIVELY. TO SUPPORT SUCH CONTENTION HE PLACED RELIANCE O N UNREPORTED DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS IN GA 3200/2011, THE COPY OF WHICH IS FILED AT PAGE 374 O F THE COMPILATION SUBMITTED WITH THE WRITTEN SUBMISSION, WHEREIN SECT ION 40(A)(IA) WAS HELD TO BE RETROSPECTIVE AND THE ORDER OF THE TRIBUNAL W AS CONFIRMED. HE SUBMITTED THAT ASSESSEE IS AWARE OF THE CONTRARY DE CISION OF SPECIAL BENCH IN THE CASE OF BHARATI SHIPYARD LTD. VS. DCIT, 132 I TD 53 BUT HE PLEADED THAT SUCH DECISION WILL HAVE NO PRECEDENCE OVER THE DECI SION OF HIGH COURT IN VIEW OF THE FOLLOWING JUDICIAL PRONOUNCEMENTS. A) UNREPORTED DECISION OF ABMEDABAD BENCH IN THE C ASE OF ALPHA PROJECTS SOCIETY P. LTD. V/S. DCIT IN ITA NO. 2869/ AHD/2011. - REFER PAGE NO. 375 TO 378 OF THE COMPILATION. B) UNREPORTED DECISION OF MUMBAI BENCH IN THE CAS E OF SHRI PIYUSH C. MEHTA V/S. ACIT IN ITA NO. 1321/M/2009 - REFER P AGE NO. 379 TO 391 OF THE COMPILATION. C) UNREPORTED DECISION OF VISAKHAPATNAM BENCH IN T HE CASE OF RAJAMAHENDRI SHIPPING & OIL FIELD SERVICES LTD. V/S . ACIT IN ITA NO. 352/VIZAG/2008 - REFER PAGE NO. 392 TO 398 OF THE C OMPILATION. 6.13 HE SUBMITTED THAT TDS OFFICER IN THE PROCEEDI NGS INITIATED UNDER SECTION 201(1A) HAS GIVEN CATEGORICAL FINDING THAT REQUISITE TAX HAS BEEN PAID BY THE RECIPIENT HENCE, NO FURTHER TAX IS RECOVERAB LE FROM THE ASSESSEE. REFERENCE IN THIS REGARD HAS BEEN MADE TO THE COP Y OF ORDER DATED ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 19 27/1/2011 PASSED BY DCIT (TDS) -2(1) MUMBAI UNDER SECTION 201(1)/201(1A) OF THE ACT, COPY OF WHICH IS PLACED AT PAGES 399 TO 412 OF THE PAPER BOOK SUBMITTED ALONGWITH WRITTEN SUBMISSIONS. IN THE SAID ORDER IN PARA-13, DCIT (TDS) HAS RECORDED A FINDING THAT THE DEMAND PAYABLE BY THE ASSESSEE AMOUNTING TO RS. 324,47,42,049/- WAS NOT ENFORCEABLE AS THE ASSESSEE HAS PRODUCED THE AUDITORS CERTIFICATE DAT ED 27/1/2011 FROM THE DEDUCTEE ASSESSEE (MSETCL) THAT AS PER THE RETURN OF INCOME FILED BY THE DEDUCTEE ASSESSEE, THE TAXES HAVE BEEN PAID ACCOR DINGLY . IN THE SAID CERTIFICATE IT IS ALSO CERTIFIED THAT THE WHEELING AND TRANSMISSION CHARGES RECEIVED OR RECEIVABLE HAVE BEEN CONSIDERED FOR DEC LARING TOTAL INCOME. IN VIEW OF ABOVE ARGUMENTS LD. A.R PLEADED THAT THE I MPUGNED DISALLOWANCE WAS NOT CALLED FOR UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS ASSESSEE DID NOT HAVE ANY OBLIGATION TO DEDUCT TAX UNDER ANY OF THE SECTION VIZ. 194C, 194J OR 194 I OF THE ACT. 7. ON THE OTHER HAND, REFERRING TO THE ARGUMENTS SU BMITTED BY LD. AR WITH REGARD TO NON-APPLICABILITY OF THE PROVISIONS OF SECTION 194C, IT WAS SUBMITTED BY LD. DR THAT EXPLANATION III TO SUB-SEC TION (2) OF SECTION 194C IS AN INCLUSIVE DEFINITION AND NOT EXHAUSTIVE. T HE WORD CARRIAGE IN THE PHRASE CARRIAGE OF GOODS UNDER CLAUSE (C) UNDER THE ABOVE EXPLANATION IS A VERB AND CANNOT BE EQUATED WITH GOODS CARRIAGE APPEARING UNDER SUB- SECTION (6) OF SECTION 194C OF THE ACT WHERE ENTIRE TERM GOODS CARRIAGE IS NOUN. 7.1 LD. DR PLEADED THAT SUB-SECTION (6) OF SECTION 194C OF THE ACT PROVIDES FOR SITUATION WHERE NO DEDUCTION FOR TAX IS TO BE MADE, WHEREAS SUB-SECTION (1) IS A CHARGING SECTION FOR DEDUCTION OF TAX. TH EREFORE, THE TERM GOODS CARRIAGE APPEARING IN SUB-SECTION (6) IS FOR THO SE CONTRACTORS WHO ARE IN THE BUSINESS OF PLYING OF VEHICLES AND IF THEY FULF ILL CERTAIN CONDITIONS THEN TDS IS NOT REQUIRED TO BE DEDUCTED IN THEIR CASES. THUS LD. DR PLEADED ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 20 THAT DEFINITION OF GOODS CARRIAGE IN SECTION 44A E DOES NOT APPLY TO THE PHRASE CARRIAGE OF GOODS APPEARING IN SECTION 19 4C OF THE ACT. 7.2 HE SUBMITTED THAT IT IS NOT DISPUTED THAT ELECT RICITY FALLS UNDER THE TERM GOODS. THE DEFINITION OF TRANSPORT (VERB) I NCLUDES BEAR, CARRY, CART, TRANSFER. SIMILARLY THE WORK CARRIAGE (NOUN) MEA NS THE ACTION OF CARRYING, CONVEYING, TRANSPORT AND THE WORK TRANSMITTING (VE RB) MEANS TO SEND OR FORWARD, AS TO A RECIPIENT OR DESTINATION, DISPATC H, CONVEY AND THE WORD TRANSMISSION (NOUN) MEANS THE ACT OR PROCESS OF TR ANSMITTING. THEREFORE, HE PLEADED THAT IF THIS DEFINITIONS ARE SEEN, THE ASSE SSEE IS SENDING OR FORWARDING TO A DESTINATION ELECTRICITY WHICH WIL L ALSO FALL UNDER THE DEFINITION OF WORDS CARRIAGE AND TRANSPORT. HE SUBMITTED THAT THERE ARE THREE INGREDIENTS DESCRIBED UNDER SECTION 194C OF THE ACT WHICH ARE AS FOLLOWS: (I) RESPONSIBILITY OF PAYMENT OF ANY SUM BY A PER SON TO ANY RESIDENT (CONTRACTOR) (II) FOR CARRYING OUT ANY WORK (III)IN PURSUANCE OF CONTRACT BETWEEN THE ABOVE TW O PERSONS. HE SUBMITTED THAT THE TERM WORK IS DEFINED IN EXPLA NATION III TO SUB-SECTION (2) OF THE ABOVE SECTION TO INCLUDE CARRIAGE OF G OODS. LD. DR SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT ON 19/1/2007 WITH MSETCL FOR BULK POWER TRANSFER. A SIMILAR AGREEMEN T WAS ENTERED INTO BY THE ASSESSEE IN 1999 WITH POWER GRID CORPORATION OF INDIA LTD. FOR TRANSMISSION OF BULK POWER. HE SUBMITTED THAT ASSE SSEE HAS FILED COPIES OF BOTH THESE AGREEMENTS. IN TERMS OF THOSE AGREEM ENTS, THE ASSESSEE IS STATED TO BE DESIROUS OF RECEIVING POWER THROUGH INTERSTATE TRANSMISSION SYSTEM OF MSETC THROUGH MUTUALLY AGREED TERMS AND CONDITIONS WHICH INTER-ALIA INCLUDE PAYMENT OF TARIFF WHICH HAS TO B E PAID AS PER THE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 21 NOTIFICATION ISSUED MAHARASHTRA ELECTRICITY REGULA TORY COMMISSION. THE CHARGES FOR EXCESS USE OF INTER STATE TRANSMISSION SYSTEM ARE DESCRIBED TO BE AS PER THE TRANSMISSION PRICING FRAME WORK APPR OVED BY THE COMMISSION FROM TIME TO TIME. REFERENCE IN THIS REGARD WAS MA DE TO PARA -14 OF THE FIRST AGREEMENT, WHEREAS POWER GRID CORPORATION OF INDIA LTD WAS TO PRESENT BILL FOR ENERGY TRANSMITTED AND THE TRANSMISSION CHARGES FOR THE TOTAL REGIONAL TRANSMISSION SYSTEM WAS TO BE CALCULATED ON MONTHL Y BASIS WHICH SHALL BE LEVIABLE ON THE ASSESSEE AS PER THE PRESCRIBED FOR MULA OR AS PER GOVERNMENT OF INDIA NOTIFICATION ISSUED FROM TIME TO TIME. RE FERENCE IN THIS REGARD WAS MADE TO PARA A-4 OF THE SECOND AGREEMENT. THUS L D. DR PLEADED THAT CHARGES PAID OR PAYABLE BY THE ASSESSEE TO MSETCL A ND POWER GRID CORPORATION OF INDIA LTD. ARE FOR CARRIAGE OF GOOD S AS PER THE TERMS OF CONTRACT WITH THOSE TWO RESIDENT COMPANIES AND THE PAYMENTS MADE OR DUE TO THESE RESIDENT COMPANIES IS AS PER TERMS AND CON DITIONS OF THE ABOVE TWO AGREEMENTS. THEREFORE, LD. DR SUBMITTED THAT LD. C IT(A) HAS RIGHTLY HELD THAT SECTION 194C IS APPLICABLE ON THE AFOREMENTION ED PAYMENTS MADE BY THE ASSESSEE. 7.3 DISTINGUISHING THE DECISIONS RELIED UPON BY LD. AR IT WAS SUBMITTED BY LD. DR THAT ISSUE BEFORE THE TRIBUNAL IN THE CASE O F JAIPUR VIDYUT VITARAN NIGAM LTD. (SUPRA) WAS REGARDING APPLICABILITY OR O THERWISE OF SECTION 194J OF THE ACT. HE SUBMITTED THAT ON APPRECIATION OF A GREEMENT AND THE FACTS OF THAT CASE IT WAS HELD BY THE TRIBUNAL THAT TECHNICA L STAFF BY OPERATING AND MAINTAINING ITS GRID STATIONS AND TRANSMISSIONS LINES SIMPLY DISCHARGE THEIR FUNCTIONS AND DO NOT RENDER ANY TECHNICAL SER VICE TO THE ASSESSEE, THEREFORE, SECTION 194J DID NOT APPLY. HE SUBMITTE D THAT SO FAR AS IT RELATE TO NON-APPLICABILITY OF SECTION 194C, JAIPUR BENCH O F ITAT HAD RELIED UPON THOSE EVIDENCES WHICH ESTABLISHED THAT THE PAYMENT WAS MADE ON THE PRINCIPLE OF NO PROFIT OR NO LOSS AND WAS IN THE N ATURE OF REIMBURSEMENT OF COST. HE SUBMITTED THAT AS AGAINST THE FACTS OF T HAT CASE THE ASSESSEE IN THE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 22 PRESENT CASE IN SUPPORT OF ITS ARGUMENTS THAT THE NATURE OF WHEELING AND TRANSMISSION CHARGES PAYMENT IS REIMBURSEMENT OF C OST, HAS FILED ADDITIONAL EVIDENCES VIDE PAPER BOOK DATED 26/9/2011 WHICH WE RE NOT FILED EITHER BEFORE THE AO OR LD. CIT(A) AND THESE HAVE BEEN F ILED ONLY FOR THE FIRST TIME BEFORE ITAT. 7.4 COMING TO ANOTHER DECISION OF JODHPUR BENCH OF ITAT IN THE CASE OF ADITYA CEMENT LTD., LD. DR SUBMITTED THAT APPLICABI LITY OF SECTION 194J AND 194C OF THE ACT WAS DECIDED FOLLOWING AFOREMENTIONE D DECISION IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD.(SUPRA). REFERR ING TO THE DECISION IN THE CASE OF KARNATAKA POWER TRANSMISSION CORPORATION LT D. (SUPRA) LD. DR SUBMITTED THAT THE SAID CASE RELATES TO TRANSMISSIO N COMPANY AND DOES NOT RELATES TO DISTRIBUTION COMPANY. HE SUBMITTED THA T FACTS OF THAT CASE ARE DIFFERENT AS IN THAT CASE MATERIAL IN QUESTION WAS PURCHASED FROM SUPPLIERS BY THE ASSESSEE AND GIVEN TO THE CONTRACTORS FOR C ARRYING OUT OF CIVIL, ERECTION WORK ETC. AND THE ISSUE WAS WHETHER CONTRA CT BETWEEN ASSESSEE AND CONTRACTOR WAS CONTRACT FOR SUPPLY AND NOT CONTR ACT FOR WORK. THEREFORE, HE PLEADED THAT ON THESE FACTS IT WAS HELD BY THE T RIBUNAL THAT THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TA X UNDER SECTION 194C OF THE ACT IN RESPECT OF SUPPLY OF MATERIAL. HE SUBMI TTED THAT WHILE DECIDING SUCH ISSUE THE BENCH ALSO HELD THAT FOR AN ACTIVITY TO BE REGARDED AS WORK, IT IS TO BE AN ACTIVITY CARRIED OUT BY HUMAN INTE RVENTION FOR COMPLETING SUCH WORK. THEREFORE, LD. DR SUBMITTED THAT THIS DECIS ION ALSO GIVE NO SUPPORT TO THE CASE OF THE ASSESSEE. 7.5 COMING TO THE ARGUMENTS OF THE ASSESSEE THAT DI SALLOWANCE UNDER SECTION 40(A)(IA) COULD BE MADE ONLY IN RESPECT OF AMOUNT PAYABLE AS ON 31 ST MARCH AND NOT ON THE AMOUNT ACTUALLY PAID DURING TH E YEAR, LD. DR SUBMITTED THAT SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORT (SUPRA) CANNOT BE CONSIDERED TO BE A GOO D LAW AS THE SAID DECISION ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 23 THOUGH HAS BEEN RENDERED ON 9/4/2012 BUT DID NOT CO NSIDER THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF M/S. KOTAK SECURIT IES LTD., 340 ITR 333(BOM) AS THE SAME WAS NOT PLACED BEFORE THE BENC H. HE SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE SAID CASE HAS UPHE LD THE APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT ON THE AMOUNT PAID DU RING THE YEAR. LD. D.R SUBMITTED THAT IN THE AFOREMENTIONED DECISION THE DECISION OF HONBLE BOMBAY HIGH COURT HAS BEEN FOLLOWED BY THE D BE NCHOF ITAT, MUMBAI IN ITS ORDER DATED 03/02/2012 IN THE CASE OF DICGC LTD ., WHEREIN ADDITION MADE UNDER SECTION 40(A)(IA) HAD BEEN CONFIRMED ON ACCOUNT OF NON- DEDUCTION OF TAX UNDER SECTION 194J OF THE ACT ON V -SAT CHARGES PAID DURING THE YEAR. THEREFORE, LD. D.R PLEADED THAT THE SAID CONTENTION OF THE ASSESSEE SHOULD BE REJECTED. 7.6 REFERRING TO THE REVENUES GROUND OF APPEAL IN RESPECT OF BOTH THE YEARS WHEREIN THE GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION UNDER SECTION 40(A)(IA) R.W.S. 194C OF THE ACT INSTEAD OF SECTION 40(A)(IA) R.W.S. 194J OF THE ACT WHICH WAS THE STAND TAKEN BY THE AO. LD. DR PLEADED THAT THE MOOT QUESTION IS THAT WHAT IS THE EXACT NATURE OF PAYMENT. HE SUBMITTED THAT IT HAS TO BE DECIDED W HETHER IT IS A PAYMENT FOR CONTRACT FOR CARRYING OUT ANY WORK OR FOR TECHNICAL SERVICES PROVIDED BY MSETCL IN THE FORM OF TRANSMISSION OF ELECTRICITY T O THE DISTRIBUTION COMPANY I.E. THE ASSESSEE, OR REIMBURSEMENT OF COST OF TRANSMISSION. HE SUBMITTED THAT REVENUES ALTERNATIVE GROUND IS WI THOUT PREJUDICE TO THE STAND TAKEN BY LD. CIT(A) THAT SECTION 194C OF THE ACT IS APPLICABLE ON WHEELING AND TRANSMISSION CHARGE. HE SUBMITTED THA T IT IS THE CASE OF THE REVENUE THAT MSETCL HAS PROVIDED TECHNICAL SUPPORT AND SERVICE FOR TRANSMISSION OF ELECTRICITY THROUGH ITS TRANSMISSIO N UTILITY AND SYSTEM AND, THEREFORE, PAYMENT OF WHEELING AND TRANSMISSION CHA RGES ARE LIABLE FOR TDS UNDER SECTION 194 J OF THE ACT. HE SUBMITTED THAT ARGUMENTS OF THE REVENUE IN THIS REGARD ARE AS FOLLOWS:- ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 24 I) THE TRANSMISSION SYSTEM OF MSETCL IS DESCRIBED IN PARA 2 OF THE BULK POWER TRANSMISSION AGREEMENT DATED 19.01.2007 BETWEEN MSETCL AND THE ASSESSEE. SIMILARLY, DISTRIBUTION SY STEM OF THE ASSESSEE COMPANY IS DESCRIBED UNDER DEFINITION, IN PARA I OF THE ABOVE AGREEMENT. II) THE CONNECTION AGREEMENT FOR TRANSMISSION OF ELECTRICITY IS DESCRIBED IN PARA 7 OF THE ABOVE AGREEMENT AND TRA NSMISSION OUTAGE AND CONSTRAINTS IS DESCRIBED IN PARA 12 OF THE AGR EEMENT. III) A READING OF THE ABOVE PARAS MAKES CLEAR THAT MSETCL HAS PROVIDED TECHNICAL SERVICES TO THE ASSESSEE FOR TRA NSMISSION OF ELECTRICITY THROUGH ITS TRANSMISSION SYSTEM, VIZ, E LECTRICITY SUB STATIONS ETC. IV) THE ABOVE NATURE OF TECHNICAL SERVICE IS AKIN T O BOLT SYSTEM OF BSE WHICH FACILITATES THE MEMBER BROKERS TO TRADE I N SECURITIES FROM THE TRADER WORK STATIONS INSTALLED IN THEIR OFFICES , INSTEAD OF ASSEMBLING IN THE TRADING RING. THE TRANSACTION CHA RGES ARE LEVIED BY THE BSE ON THE MEMBERS, WHO ENTER INTO TRANSACTIONS IN SECURITIES/DERIVATIVES THROUGH THE BOLT SYSTEM PROV IDED BY THE BSE. THE WHEELING AND TRANSMISSION CHARGES PAID BY THE A SSESSEE ARE, THEREFORE, OF SAME NATURE AS TRANSACTION CHARGES PA ID BY THE BSE MEMBERS TO CARRY OUT SHARE TRANSACTIONS THROUGH BOL T. THE BOMBAY HIGH COURT VIDE JUDGEMENT DATED 21.10.2011 IN THE C ASE OF KOTAK SECURITIES LTD. REPORTED IN 340 ITR 333 HAS UPHELD THE APPLICABILITY OF SECTION 194J OF THE ACT, ON THE ABOVE TRANSACTION C HARGES (PARA 32 OF THE JUDGMENT) V) THE WHEELING AND TRANSMISSION CHARGES ARE ALSO S IMILAR TO INTERCONNECT/ACCESS PORT CHARGES PAID TO BSNLIMTNL. THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARATI CELLULAR LT D. HAD HELD THAT SINCE THERE WAS NO HUMAN INTERVENTION, SECTION 194J WAS NOT APPLICABLE TO THE INTERCONNECT CHARGES/ACCESS/PORT CHARGES PAID TO BSNL BY BHARATI CELLULAR LTD. (ASSESSEE). THE HONB LE SUPREME COURT HAS VIDE ITS ORDER IN MARCH, 2011 REPORTED IN 330 I TR 239 (SC), IN THE APPEAL FILED BY THE DEPARTMENT AGAINST THE ABOVE OR DER OF THE DELHI HIGH COURT HAS OBSERVED THAT THERE WAS NO EXPERT EV IDENCE FROM THE SIDE OF THE DEPARTMENT TO SHOW HOW THE HUMAN INTERV ENTION TAKES PLACE, PARTICULARLY DURING THE PROCESS WHEN CALLS T AKES PLACE, AND DURING THE TRAFFIC OF SUCH CALLS, WHETHER THERE IS ANY MANUAL INTERVENTION AND ON WHAT BASIS WAS THE CAPACITY OF EACH SERVICES PROVIDED FIXED WERE INTER CONNECTION AGREEMENT ARRI VED AT? ACCORDING ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 25 TO THE SUPREME COURT, THESE TYPE OF MATTERS COULD N OT BE DECIDED WITHOUT ANY TECHNICAL ASSISTANCE AVAILABLE ON RECOR D, THEREFORE IT DIRECTED THE A.O. (TDS) IN EACH CASE TO EXAMINE A T ECHNICAL EXPERT FROM THE SIDE OF THE DEPARTMENT AND TO DECIDE THE M ATTER AND ALSO GAVE A LIBERTY TO THE RESPONDENT ASSESSEE TO ADDUCE ANY OTHER EVIDENCE. IN VIEW OF THE ABOVE OBSERVATION OF THE HONBLE SUPREM E COURT, THE MATTER MAY BE DECIDED AS TO WHETHER HUMAN INTERVENT ION IS INVOLVED IN WHEELING AND TRANSMISSION OF ELECTRICITY BY THE MSETCL TO THE ASSESSEE COMPANY. IN THIS MANNER LD. D.R CONCLUDED HIS ARGUMENTS. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE IMPUGNED DISALLOWA NCE HAS BEEN MADE ONLY ON ACCOUNT OF APPLICATION OF SECTION 40(A)(IA). ON 18.12.2008, THE DEPARTMENT HAD CONDUCTED A SURVEY AND IT CAME TO TH E NOTICE OF THE DEPARTMENT THAT TDS HAS NOT BEING DEDUCTED ON THE P AYMENTS MADE BY THE ASSESSEE TO THE TRANSMISSION COMPANIES. ACCORDINGL Y, VIDE ORDER DATED 27.1.2009, THE ASSESSEE WAS SADDLED WITH THE LIABI LITY FOR DEDUCTION OF TAX U/S 194J OF THE ACT. TAKING INTO CONSIDERATION ORD ER DATED 27/1/2009, THE DEPARTMENT FOR THE IMPUGNED ASSESSMENT YEAR HAS HEL D THAT ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON WHEELING AND TRAN SMISSION CHARGES AND SUCH FAILURE OF THE ASSESSEE LEADS TOWARDS DISALLOW ANCE UNDER SECTION 40(A)(IA) OF THE ACT. THE DEPARTMENT HAS BEEN CHAN GING ITS STAND REGARDING APPROPRIATE SECTION THAT WOULD BE APPLIED IN RESPE CT OF DEDUCTION OF TAX AT SOURCE AND THAT STAND OF THE DEPARTMENT IS DEPICTE D IN THE CHART FILED BY LD. A.R WHICH HAS BEEN REPRODUCED IN PARA-6 OF THIS ORD ER. 8.1 THOUGH, THE DISALLOWANCE HAS BEEN MADE, ON ACCO UNT OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX U/S 194J, BY THE ASSESSI NG OFFICER; BUT THIS STAND OF THE ASSESSING OFFICER HAS BEEN DISCARDED BY THE LD CIT(A) WHO HAS HELD THAT THE ASSESSEE WAS NOT UNDER OBLIGATION TO DEDUC T THE TAX U/S 194J, ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 26 INSTEAD THE ASSESSEE IS LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT. 8.2 IT MAY BE MENTIONED HERE THAT THE APPLICABILIT Y OF SECTION 194J AND ALSO SEC. 194C WAS EXAMINED BY THE COORDINATE BENC H OF THE TRIBUNAL IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD (SUPRA) AN D IT HAS BEEN THE CONTENTION OF THE ASSESSEE THAT THE AGREEMENT IN TH AT CASE ALSO CONTAIN SIMILAR TERMS AND THE FACTS ARE ALSO SIMILAR. T HIS CONTENTION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE REVENUE B Y SPECIFICALLY POINTING OUT THAT THERE WAS ANY MAJOR DIFFERENCE BETWEEN TH E TERMS OF THE AGREEMENT CONSIDERED IN THAT CASE AND THE TERMS OF CONTRACT IN THE PRESENT CASE AS WELL AS IN THE FACTS OF BOTH THE CASES. IT HAS BE EN CATEGORICALLY HELD IN THE SAID CASE THAT THERE WAS NO LIABILITY ON THE ASSESS EE TO DEDUCT TAX ON THE PAYMENTS OF TRANSMISSION/WHEELING AND SLDC CHARGES U/S 194J. NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE IN WHICH IT HAS BEEN HELD THAT TAX ON SUCH CHARGES IS DEDUCTIBLE UNDER EIT HER OF THE SECTIONS VIZ 19C, 194J; 194 I OF THE ACT.. 8.3 MOREOVER, IT HAS BEEN THE CASE OF THE ASSESSEE THAT ALL THESE PAYMENTS WERE REQUIRED TO BE MADE AS PER THE ELECTRICITY AC T, 2003. ALL ORDERS, PERTAINING TO PAYMENT OF IMPUGNED CHARGES, ARE PASS ED BY STATE AUTHORITIES CONSTITUTED UNDER ELECTRICITY ACT, 2003.IT IS OBSER VED THAT ALL THESE PROVISIONS OF ELECTRICITY ACT 2003 HAVE BEEN CONSI DERED AND DISCUSSED BY THE CO-ORDINATE BENCH IN THE AFOREMENTIONED CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD.(SUPRA). LD. A.R HAS DEMONSTRATED THAT THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE ACCORDING TO THE ORDERS OF THE STATE ELECTRICITY COMMISSION AND IT HAS BEEN SHOWN THAT IT IS ONLY REIMBURSEMENT OF THE COST AND THE PAYMENTS ARE MADE TO STATE TRANSMISSION UTILITY FOR ONWARDS DISTRIBUTION TO THE TRANSMISSION COMPANIES. IT IS DIFFICULT TO ACCEPT THE ARGUMENT OF THE REVENUE THAT IN THE PRESENT CASE THE REIMBURSEMENT ASPECT HAS BEEN ESTABLISHED BY THE ASSESSEE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 27 ONLY ON THE BASIS OF ADDITIONAL EVIDENCE. WHAT ASS ESSEE HAS SUBMITTED BEFORE US ARE ONLY ORDERS OF STATE STATUTORY AUTHO RITIES AND THESE ORDERS ARE IN PUBLIC DOMAIN AND CANNOT BE TERMED AS ADDITIONAL EVIDENCE. 8.4 THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING AND THE PAYMENTS HAVE BEEN MADE AS PER THE ORDER OF THE STATE ELECTR ICITY COMMISSION AND IN PURSUANCE TO ELECTRICITY ACT, 2003. THERE BEING N O DIFFERENCE IN THE FACTS OF THE PRESENT CASE AND IN THE CASE OF JAIPUR VIDYUT V ITARAN NIGAM LTD (SUPRA), WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE IS DI RECTLY COVERED IN ITS FAVOUR BY THE ABOVE MENTIONED DECISION OF THE CO-ORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD (SU PRA) IN WHICH, APART FROM HOLDING THAT SUCH PAYMENTS BY THE ASSESSEE ARE NOT LIABLE FOR DEDUCTION OF TAX U/S 194J, IT IS ALSO HELD THAT IT IS ALSO NOT L IABLE FOR DEDUCTION U/S 194C AND SUCH FINDINGS OF THE TRIBUNAL ARE CONTAINED IN PARA 9.9 OF THE ABOVEMENTIONED DECISION. 8.5 FOR THE SAKE OF COMPLETENESS, THE CONCLUDING PO RTION OF THE ABOVEMENTIONED DECISION OF THE TRIBUNAL IN PARAS 9 TO 9.10 ARE REPRODUCED AS UNDER: 9. CONSIDERED THE SUBMISSIONS OF THE PARTIES ON TH E ISSUE, WHICH ARISE FOR CONSIDERATION IS WHAT IS THE NATURE OF PAYMENT OF W HEELING/TRANSMISSION/ SLDC CHARGES ON THE BASIS OF DOCUMENTS ON RECORDS A ND THE FACTS EXPLAINED AND AFTER CONSIDERING THE NATURE OF SUCH PAYMENTS A S WELL AS FACTS ON RECORDS WHETHER THE SAME IS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER THE IT ACT, 1961 SPECIFICALLY UNDER S. 194J WHICH PROVIDES FOR DEDUC TION OF TAX AT SOURCE ON PAYMENT OF FEES FOR PROFESSIONAL OR TECHNICAL SERVI CES. 9.1 ON GOING THROUGH THE VARIOUS CLAUSES OF TRANSMI SSION SERVICE AGREEMENT WE FIND THAT AS PER CL. 3 OF THE AGREEMENT ASSESSEE IS ALLOWED THE USE OF THE TRANSMISSION SYSTEM. CLAUSE 5 PROVIDES FOR OPEN ACC ESS TRANSMISSION CAPACITY WHEREBY ANY OTHER CUSTOMER IS ALSO ALLOWED TO USE T HE TRANSMISSION LINES FOR LONG-TERM OPEN ACCESS AND SHORT-TERM OPEN ACCESS. C LAUSE 8 PROVIDES FOR COMPLIANCE OF GRID CODE AS APPROVED BY THE COMMISSI ON BOTH BY RVPN AND ASSESSEE AND FURTHER PROVIDES THAT ALL THE PARTIES SHALL COMPLY WITH THE DIRECTION OF SLDC FOR ENSURING INTEGRATED GRID OPER ATION FOR ACHIEVING THE MAXIMUM ECONOMY AND EFFICIENCY IN THE OPERATION OF POWER SYSTEM IN THE STATE. AS PER CLS. 10 AND 12 THE TARIFF FOR TRANSMI SSION AND WHEELING AND SLDC ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 28 CHARGES IS TO BE AS APPROVED BY THE REGULATORY COMM ISSION. FROM ALL THESE CLAUSES IT IS CLEAR THAT ALL THE PARTIES INVOLVED W ITH GENERATION, TRANSMISSION AND DISTRIBUTION OF ELECTRICITY ARE TO COMPLY WITH THE DIRECTION OF SLDC AND THE REGULATORY COMMISSION FOR ACHIEVING THE ECONOMY AND EFFICIENCY IN THE OPERATION OF POWER SYSTEM AND THEREFORE QUESTION OF ANY PERSON RENDERING SERVICE TO ANOTHER DOES NOT ARISE. THE OPERATION AN D MAINTENANCE OF TRANSMISSION LINES BY RVPNL AND THE USE OF THESE LI NES BY ASSESSEE FOR TRANSMITTING ENERGY DOES NOT RESULT INTO ANY TECHNI CAL SERVICES BEING RENDERED TO THE ASSESSEE. THE TECHNICAL STAFF OF RVPN BY OPE RATING AND MAINTAINING ITS GRID STATION AND TRANSMISSION LINES SIMPLY DISCHARG E THEIR FUNCTION. THEY DO NOT RENDER ANY TECHNICAL SERVICE TO THE ASSESSEE. 9.2 IN ABOVE CONNECTION IT IS RELEVANT TO EXTRACT T HE RELEVANT PROVISIONS OF S. 194J WHICH ARE AS FOLLOWS : 194J. FEES FOR PROFESSIONAL OR TECHNICAL SERVICES. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR AN HUF, WHO IS RESPONSIBLE F OR PAYING TO A RESIDENT ANY SUM BY WAY OF (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, OR (C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CL. (VA) OF S. 28, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRI SED THEREIN : PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION (2) (..) (3) (..) EXPLANATION : FOR THE PURPOSES OF THIS SECTION, (A) .. (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SA ME MEANING AS IN EXPLN. 2 TO CL. (VII) OF SUB-S. (1) OF S. 9; (BA) .. (C) ..' THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' HAS NO T BEEN DEFINED UNDER S. 194J OF THE ACT BUT EXPLN. (B) TO S. 194J OF THE ACT, PROVIDES THAT THE SAID EXPRESSION SHALL HAVE THE SAME MEANING AS IN E XPLN. 2 TO CL. (VII) OF SUB-S. (1) OF S. 9. THE SAID SECTION IS REPRODUCED HEREINBELOW FOR READY REFERENCE 9. INCOME DEEMED TO ACCRUE OR ARISE IN INDIA.(1) T HE FOLLOWING INCOMES SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA : (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY EXPLANATION 2 : FOR THE PURPOSES OF THIS CLAUSE, 'F EES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LU MP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SE RVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 29 CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN T CHARGEABLE UNDER THE HEAD 'SALARIES'.' 9.3 THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS USED IN S. 194J OF THE ACT HAS BEEN EXHAUSTIVELY EXAMINED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARTI CELLULAR LTD. (SUPRA) AND THE OBSERV ATIONS ARE REPRODUCED AS UNDER : '13. WE HAVE ALREADY POINTED OUT THAT THE EXPRESSIO N FEES FOR TECHNICAL SERVICES AS APPEARING IN S. 194J OF THE SAID ACT H AS THE SAME MEANING AS GIVEN TO THE EXPRESSION IN EXPLN. 2 TO S. 9(1)(V II) OF THE SAID ACT. IN THE SAID EXPLANATION THE EXPRESSION FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TEC HNICAL OR CONSULTANCY SERVICES. THE WORD TECHNICAL IS PRECEDED BY THE WORD MANAGERIAL AND SUCCEEDED BY THE WORD CONSULTANCY. SINCE THE EXPRESSION TECHNICAL SERVICES IS IN DOUBT AND IS UNCLEAR, TH E RULE OF NOSCITUR A SOCIIS IS CLEARLY APPLICABLE. THE SAID RULE IS EXPL AINED IN MAXWELL ON THE INTERPRETATION OF STATUTES (TWELFTH EDITION) IN THE FOLLOWING WORDS : WHERE TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE OF AN ALOGOUS MEANING ARE COUPLED TOGETHER, NOSCITUR A SOCIIS, THEY ARE U NDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEI R COLOUR FROM EACH OTHER, THE MEANING OF THE MORE GENERAL BEING RESTRI CTED TO A SENSE ANALOGOUS TO THAT OF THE LESS GENERAL. THIS WOULD MEAN THAT THE WORD TECHNICAL WOULD TAK E COLOUR FROM THE WORDS MANAGERIAL AND CONSULTANCY BETWEEN WHICH IT IS SANDWICHED. THE WORD MANAGERIAL HAS BEEN DEFINED IN THE SHORT ER OXFORD ENGLISH DICTIONARY, FIFTH EDITION AS : OF PERTAINING TO, OR CHARACTERISTIC OF A MANAGER OF OR WITHIN AN ORGANIZATION, BUSINESS, ESTABLISHMENT, ETC. THE WORD MANAGER HAS BEEN DEFINED, INTER ALIA, AS ' A PERSON WHOSE OFFICE IT IS TO MANAGE AN ORGANIZATI ON, BUSINESS ESTABLISHMENT, OR PUBLIC INSTITUTION, OR PART OF ON E; A PERSON WITH THE PRIMARILY EXECUTIVE OR SUPERVISORY FUNCTION WITHIN AN ORGANIZATION ETC; A PERSON CONTROLLING THE ACTIVITIES OF A PERSON OR TE AM IN SPORTS, ENTERTAINMENT, ETC. IT IS THEREFORE, CLEAR THAT A MANAGERIAL SERVICE WO ULD BE ONE WHICH PERTAINS TO OR HAS THE CHARACTERISTIC OF A MANAGER. IT IS OBVIOUS THAT THE EXPRESSION 'MANAGER' AND CONSEQUENTLY 'MANAGERIAL S ERVICE' HAS A DEFINITE HUMAN ELEMENT ATTACHED TO IT. TO PUT IT BL UNTLY, A MACHINE CANNOT BE A MANAGER. 14. SIMILARLY, THE WORD, CONSULTANCY HAS BEEN DEF INED IN THE SAID DICTIONARY AS THE WORK OR POSITION OF A CONSULTANT ; A DEPARTMENT OF CONSULTANTS'. 'CONSULTANT' ITSELF HAS BEEN DEFINED, INTER ALIA, AS 'A PERSON WHO GIVES PROFESSIONAL ADVICE OR SERVICES IN A SPECIALIZED FIELD'. IT IS OBVIOUS THAT THE WORD 'CONSULTANT' IS A DERIV ATIVE OF THE WORD 'CONSULT' WHICH ENTAILS DELIBERATIONS, CONSIDERATIO N, CONFERRING WITH ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 30 SOMEONE, CONFERRING ABOUT OR UPON A MATTER. CONSULT HAS ALSO BEEN DEFINED IN THE SAID DICTIONARY AS 'ASK ADVICE FOR, SEEK COUNSEL OR A PROFESSIONAL OPINION FROM; REFER TO (A SOURCE OF IN FORMATION); SEEK PERMISSION OR APPROVAL FROM FOR A PROPOSED ACTION'. IT IS OBVIOUS THAT THE SERVICE ALSO NECESSARILY ENTAILS HUMAN INTERVENTION . THE CONSULTANT, WHO PROVIDES THE CONSULTANCY SERVICE, HAS TO BE A H UMAN BEING. A MACHINE CANNOT BE REGARDED AS A CONSULTANT. 15. FROM THE ABOVE DISCUSSION, IT IS APPARENT THAT BOTH THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' INVOLVE A HUMAN ELEM ENT. AND, BOTH, MANAGERIAL SERVICE AND CONSULTANCY SERVICE ARE PROV IDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCII S, THE WORD 'TECHNICAL' AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. BUT, THE FACILITY PRO VIDED BY MTNL/OTHER COMPANIES FOR INTERCONNECTION/PORT ACCESS IS ONE WH ICH IS PROVIDED AUTOMATICALLY BY MACHINES. IT IS INDEPENDENTLY PROV IDED BY THE USE OF TECHNOLOGY AND THAT TOO, SOPHISTICATED TECHNOLOGY, BUT THAT DOES NOT MEAN THAT MTNL/OTHER COMPANIES WHICH PROVIDE SUCH F ACILITIES ARE RENDERING ANY TECHNICAL SERVICES AS CONTEMPLATED IN EXPLN. 2 TO S. 9(1)(VII) OF THE SAID ACT. THIS IS SO BECAUSE THE E XPRESSION 'TECHNICAL SERVICES' TAKES COLOUR FROM THE EXPRESSIONS 'MANAGE RIAL SERVICES' AND 'CONSULTANCY SERVICES' WHICH NECESSARILY INVOLVE A HUMAN ELEMENT OR, WHAT IS NOW-A-DAYS FASHIONABLY CALLED, HUMAN INTERF ACE. IN THE FACTS OF THE PRESENT APPEALS, THE SERVICES RENDERED QUA INTE RCONNECTION/PORT ACCESS DO NOT INVOLVE ANY HUMAN INTERFACE AND, THER EFORE, THE SAME CANNOT BE REGARDED AS 'TECHNICAL SERVICES' AS CONTE MPLATED UNDER S. 194J OF THE SAID ACT. 20. BEFORE CONCLUDING WE WOULD ALSO LIKE TO POINT O UT THAT THE INTERCONNECTION/PORT ACCESS FACILITY IS ONLY A FACI LITY TO USE THE GATEWAY AND THE NETWORK OF MTNL/OTHER COMPANIES. MTNL OR OT HER COMPANIES DO NOT PROVIDE ANY ASSISTANCE OR AID OR HELP TO THE RESPONDENTS/ASSESSEE IN MANAGING, OPERATING, SETTIN G UP THEIR INFRASTRUCTURE AND NETWORKS. NO DOUBT, THE FACILITY OF INTERCONNECTION AND PORT ACCESS PROVIDED BY MTNL/OTHER COMPANIES IS TECHNICAL IN THE SENSE THAT IT INVOLVES SOPHISTICATED TECHNOLOGY. TH E FACILITY MAY EVEN BE CONSTRUED AS A SERVICE IN THE BROADER SENSE SUCH AS A COMMUNICATION SERVICE. BUT, WHEN WE ARE REQUIRED TO INTERPRET TH E EXPRESSION TECHNICAL SERVICE, THE INDIVIDUAL MEANING OF THE WORDS TECH NICAL AND SERVICE HAVE TO BE SHED. AND, ONLY THE MEANING OF THE WHOLE EXPRESSION TECHNICAL SERVICES HAS TO BE SEEN. MOREOVER, THE EXPRESSION TECHNICAL SERVICE IS NOT TO BE CONSTRUED IN THE ABSTRACT AND GENERAL SENSE BUT IN THE NARROWER SENSE AS CIRCUMSCRIBED BY THE EXPRESSI ONS MANAGERIAL SERVICE AND CONSULTANCY SERVICE AS APPEARING IN EXPLN. 2 TO S. 9(1)(VII) OF THE SAID ACT. CONSIDERED IN THIS LIGHT, THE EXPR ESSION TECHNICAL SERVICE WOULD HAVE REFERENCE TO ONLY TECHNICAL SER VICE RENDERED BY A HUMAN. IT WOULD NOT INCLUDE ANY SERVICE PROVIDED BY MACHINES OR ROBOTS.' ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 31 9.4 THE HONBLE MADRAS HIGH COURT IN THE CASE OF SK YCELL COMMUNICATIONS LTD. VS. DY. CIT (SUPRA) HAS HELD AS UNDER : '4. FEES FOR TECHNICAL SERVICES IS NOT DEFINED IN S. 194J. EXPLANATION (B) IN THAT SECTION PROVIDES THAT EXPRESSION SHALL HAVE THE SAM E MEANING AS IN EXPLN. 2 TO CL. (VII) OF SUB-S.(1) OF S. 9. THAT EXPLN. 2 IN S. 9(1)(VII) READS THUS : FOR THE PURPOSES OF THIS CLAUSE, FEES FOR TECHNIC AL SERVICES MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION ) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICE S (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. THIS DEFINITION SHOWS THAT CONSIDERATION PAID FOR T HE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICE, AS AL SO THE CONSIDERATION PAID FOR THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL, WOULD BE REGARDED AS FEES PAID FOR TECHNICAL SERVICES. THE DEFINITION EXCLUDES FROM ITS AMBIT CONSIDERATION PAID FOR CONSTRUCTION, ASSEMBLY, OR MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT, AS ALS O CONSIDERATION WHICH WOULD CONSTITUTE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. THUS WHILE STATING THAT TECHNICAL SERVICE WOULD I NCLUDE MANAGERIAL AND CONSULTANCY SERVICE, THE LEGISLATURE HAS NOT SE T OUT WITH PRECISION AS TO WHAT WOULD CONSTITUTE TECHNICAL SERVICE TO RENDER IT TECHNICAL SERVICE. THE MEANING OF THE WORD TECHNICAL AS GI VEN IN THE NEW OXFORD DICTIONARY IS ADJECTIVE 1. OF OR RELATING TO A PART ICULAR SUBJECT, ART OR CRAFT OR ITS TECHNIQUES; TECHNICAL TERMS (ESPECIALLY OF A BOOK OR ARTICLE) REQUIRING SPECIAL KNOWLEDGE TO BE UNDERSTOOD; A TEC HNICAL REPORT, 2. OF INVOLVING, OR CONCERNED WITH APPLIED AND INDUSTRIAL SCIENCES : AN IMPORTANT TECHNICAL ACHIEVEMENT, 3. RESULTING FROM MECHANICAL FAILURE : A TECHNICAL FAULT, 4. ACCORDING TO A STRICT APPLICATI ON OR INTERPRETATION OF THE LAW OR THE RULES : THE ARREST WAS A TECHNICAL VIOLA TION OF THE TREATY. HAVING REGARD TO THE FACT THAT THE TERM IS REQUIRED TO BE UNDERSTOOD IN THE CONTEXT IN WHICH IT IS USED, FEE FOR TECHNICAL SERVICES COULD ONLY BE MEANT TO COVER SUCH THINGS TECHNICAL AS ARE CAPABLE OF BEING PROVIDED BY WAY OF SERVICE FOR A FEE. THE POPULAR MEANING AS SOCIATED WITH TECHNICAL IS INVOLVING OR CONCERNING APPLIED AND INDUSTRIAL SCIENCE. 5. IN THE MODERN DAY WORLD, ALMOST EVERY FACET OF O NES LIFE IS LINKED TO SCIENCE AND TECHNOLOGY INASMUCH AS NUMEROUS THINGS USED OR RELIED UPON IN EVERYDAY LIFE IS THE RESULT OF SCIENTIFIC A ND TECHNOLOGICAL DEVELOPMENT. EVERY INSTRUMENT OR GADGET THAT IS USE D TO MAKE LIFE EASIER IS THE RESULT OF SCIENTIFIC INVENTION OR DEV ELOPMENT AND INVOLVES THE USE OF TECHNOLOGY. ON THAT SCORE, EVERY PROVIDE R OF EVERY INSTRUMENT OR FACILITY USED BY A PERSON CANNOT BE REGARDED AS PROVIDING TECHNICAL SERVICE. WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE T O ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOGY, VIZ., AN AUTOMOB ILE. IT CANNOT ON THAT GROUND BE SAID THAT THE TAXI DRIVER WHO CONTROLS TH E VEHICLE, AND ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 32 MONITORS ITS MOVEMENT IS RENDERING A TECHNICAL SERV ICE TO THE PERSON WHO USES THE AUTOMOBILE. SIMILARLY, WHEN A PERSON T RAVELS BY TRAIN OR IN AN AEROPLANE, IT CANNOT BE SAID THAT THE RAILWAYS O R AIRLINES IS RENDERING A TECHNICAL SERVICE TO THE PASSENGER AND, THEREFORE , THE PASSENGER IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE RAILWAY OR THE AIRLINE FOR HAVING USED IT FOR T RAVELLING FROM ONE DESTINATION TO ANOTHER. WHEN A PERSON TRAVELS BY BU S, IT CANNOT BE SAID THAT THE UNDERTAKING WHICH OWNS THE BUS SERVICE IS RENDERING TECHNICAL SERVICE TO THE PASSENGER AND, THEREFORE, THE PASSEN GER MUST DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE BUS SERVICE PR OVIDER, FOR HAVING USED THE BUS. THE ELECTRICITY SUPPLIED TO A CONSUME R CANNOT, ON THE GROUND THAT GENERATORS ARE USED TO GENERATE ELECTRI CITY, TRANSMISSION LINES TO CARRY THE POWER, TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METERS TO MEASURE THAT CONSUMPTION, BE REGARDED AS AMOUNTING TO PROVISION OF TECHNICAL SERVICES TO THE CONSUMER RES ULTING IN THE CONSUMER HAVING TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE FOR THE POWER CONSUMED AND REMIT THE SAME TO THE REVENUE. SATELLITE TELEVISION HAS BECOME UBIQUITOUS, AND IS SPREADING ITS AREA AND COVERAGE, AND COVERS MILLIONS OF HOMES. WHEN A PERSON RECEIVES SUCH TRANSMISSION OF TELEVISION SIGNALS THROUGH THE CABLE PROVIDED BY THE CABLE OPERATOR, IT CANNOT BE SAID THAT THE HOME OWNER WHO HAS SUCH A CABLE CONNECTION IS RECEIVING A TECHNICAL SERVICE FOR WHICH HE IS REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MA DE TO THE CABLE OPERATOR. INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPME NTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE B ENEFIT OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT IN THE PROVISION TO TECHNICAL SERVICE TO THE CUSTOMERS FOR A FEE. 6. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULAR TELEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNI CATE WITH OTHERS, HE DOES NOT CONTRACT TO RECEIVE A TECHNICAL SERVICE. W HAT HE DOES AGREE TO IS TO PAY FOR THE USE OF THE AIRTIME FOR WHICH HE PAYS A CHARGE. THAT FACT THAT THE TELEPHONE SERVICE PROVIDER HAS INSTALLED S OPHISTICATED TECHNICAL EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOES NOT ON THAT SCORE, MAKE IT PROVISION OF A TECHNICAL SERVICE TO THE SUBSCRIBER. THE SUBSCRIBER IS NOT CONCERNED WITH TH E COMPLEXITY OF THE EQUIPMENT INSTALLED IN THE EXCHANGE, OR THE LOCATIO N OF THE BASE STATION. ALL THAT HE WANTS IS THE FACILITY OF USING THE TELE PHONE WHEN HE WISHES TO, AND BEING ABLE TO GET CONNECTED TO THE PERSON A T THE NUMBER TO WHICH HE DESIRES TO BE CONNECTED. WHAT APPLIES TO CELLULA R MOBILE TELEPHONE IS ALSO APPLICABLE IN FIXED TELEPHONE SERVICE. NEITHER SERVICE CAN BE REGARDED AS TECHNICAL SERVICE FOR THE PURPOSE OF S. 194J OF THE ACT. 7. THE USE OF THE INTERNET AND THE WORLD WIDE WEB I S INCREASING BY LEAPS AND BOUNDS, AND THERE ARE HUNDREDS OF THOUSANDS, IF NOT MILLIONS, OF SUBSCRIBERS TO THAT FACILITY. THE INTERNET IS VERY MUCH A PRODUCT OF TECHNOLOGY, AND WITHOUT THE SOPHISTICATED EQUIPMENT INSTALLED BY THE INTERNET SERVICE PROVIDERS AND THE USE OF THE TELEP HONE FIXED OR MOBILE THROUGH WHICH THE CONNECTION IS ESTABLISHED, THE SE RVICE CANNOT BE PROVIDED. HOWEVER, ON THAT SCORE, EVERY SUBSCRIBER OF THE INTERNET ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 33 SERVICE PROVIDER CANNOT BE REGARDED AS HAVING ENTER ED INTO A CONTRACT FOR AVAILING OF TECHNICAL SERVICES FROM THE PROVIDE R OF THE INTERNET SERVICE, AND SUCH SUBSCRIBER REGARDED AS BEING OBLIGED TO DE DUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE INTERNET SERVICE PROVIDE R. 8. AT THE TIME THE IT ACT WAS ENACTED IN THE YEAR 1 961, AS ALSO AT THE TIME WHEN EXPLN. 2 TO S. 9(1) (VII) WAS INTRODUCED BY THE FINANCE (NO. 2) ACT, W.E.F. 1ST APRIL, 1977, THE PRODUCTS OF TECHNO LOGY HAD NOT BEEN IN SUCH WIDE USE AS THEY ARE TODAY. ANY CONSTRUCTION O F THE PROVISIONS OF THE ACT MUST BE IN THE BACKGROUND OF THE REALITIES OF DAY-TO-DAY LIFE IN WHICH THE PRODUCTS OF TECHNOLOGY PLAY AN IMPORTANT ROLE IN MAKING LIFE SMOOTHER AND MORE CONVENIENT. SEC. 194J, AS ALSO EX PLN. 2 TO S. 9(1)(VII) OF THE ACT WERE NOT INTENDED TO COVER THE CHARGES P AID BY THE AVERAGE HOUSEHOLDER OR CONSUMER FOR UTILIZING THE PRODUCTS OF MODERN TECHNOLOGY, SUCH AS, USE OF THE TELEPHONE FIXED OR MOBILE, THE CABLE TV, THE INTERNET THE AUTOMOBILE, THE RAILWAY, THE AEROP LANE, CONSUMPTION OF ELECTRICAL ENERGY, ETC., SUCH FACILITIES WHICH WHEN USED BY INDIVIDUALS ARE NOT CAPABLE OF BEING REGARDED AS TECHNICAL SERV ICE CANNOT BECOME SO WHEN USED BY FIRMS AND COMPANIES. THE FACILITY REMA INS THE SAME WHOEVER THE SUBSCRIBER MAY BE INDIVIDUAL, FIRM OR C OMPANY. 9. TECHNICAL SERVICE REFERRED IN S. 9(1)(VII) CON TEMPLATES RENDERING OF A SERVICE TO THE PAYER OF THE FEE. MERE COLLECTION OF A FEE FOR USE OF A STANDARD FACILITY PROVIDED TO ALL THOSE WILLING TO PAY FOR IT DOES NOT AMOUNT TO THE FEE HAVING BEEN RECEIVED FROM TECHNIC AL SERVICES.' THUS HONBLE COURT WHILE DEALING WITH THE CASE OF ' TRANSMISSION OF VOICE' HAS EQUATED THE SAME WITH THE 'TRANSMISSION OF THE ELECTRICITY' AND HELD THAT THE SAME DOES NOT AMOUNT TO PROVIDING THE TECHNICAL SERVICE. 9.5 IN CASE OF DY. CIT VS. PARASRAMPURIA SYNTHETICS LTD. (SUPRA) IT WAS HELD AS UNDER : THERE MAY BE USE OF SERVICES OF TECHNICALLY QUALIFI ED PERSON TO RENDER THE SERVICES BUT THAT ITSELF DO NOT BRING THE AMOUN T PAID AS FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF EXPLN. 2 TO S. 9(1) (VII). THE AMOUNT PAID ARE TOWARDS ANNUAL MAINTENANCE CONTRACT OF CERTAIN MACHINERY OR FOR CONVERTING PARTIALLY ORIENTED YARD (POY) INTO TEXTURISED/TWISTED YARN. THE TECHNOLOGY OR TECHNICA L KNOWLEDGE OF PERSONS IS NOT MADE AVAILABLE TO THE ASSESSEE BUT O NLY BY USING SUCH TECHNICAL KNOWLEDGE SERVICES ARE RENDERED TO THE AS SESSEE. IN SUCH A CASE, IT CANNOT BE SAID THAT THE AMOUNT IS PAID AS FEES FOR TECHNICAL SERVICES. RENDERING SERVICES BY USING TECHNICAL KN OWLEDGE OR SKILL IS DIFFERENT THAN CHARGING FEES FOR TECHNICAL SERVICES . IN THE LATER CASE THE TECHNICAL SERVICES ARE MADE AVAILABLE DUE TO WHICH ASSESSEE ACQUIRED CERTAIN RIGHT WHICH CAN BE FURTHER USED. ACCORDINGL Y WHERE THE PERSONS RENDERING CERTAIN SERVICES HAS ONLY MAINTAINED MACH INERY OR CONVERTED YARN BUT THAT KNOWLEDGE IS NOT VESTED WITH THE ASSE SSEE BY WHICH ITSELF IT CAN DO RESEARCH WORK, THE AMOUNT PAID CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF S. 194 J OF THE ACT. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 34 9.6 AN ANALYSIS OF ABOVE CASES LAYS DOWN THE PROPOS ITION THAT S. 194J WOULD HAVE APPLICATION ONLY WHEN THE TECHNOLOGY OR TECHNI CAL KNOWLEDGE OF A PERSON IS MADE AVAILABLE TO OTHERS AND NOT WHERE BY USING TECHNICAL SYSTEMS, SERVICES ARE RENDERED TO OTHERS. RENDERING OF SERVICES BY AL LOWING USE OF TECHNICAL SYSTEM IS DIFFERENT THAN CHARGING FEES FOR RENDERIN G TECHNICAL SERVICES. THE APPLICABILITY OF S. 194J WOULD COME INTO EFFECT ONL Y WHEN BY MAKING PAYMENT OF FEE FOR TECHNICAL SERVICES, ASSESSEE ACQUIRED CE RTAIN SKILL/KNOWLEDGE/INTELLECT WHICH CAN BE FURTHER USED BY HIM FOR ITS OWN PURPOSE/RESEARCH. WHERE FACILITY IS PROVIDED BY USE OF MACHINE/ROBOT, OR WHERE SOPHISTICATED EQUIPMENTS ARE INSTALLED AND OP ERATED WITH A VIEW TO EARN INCOME BY ALLOWING THE CUSTOMERS TO AVAIL OF T HE BENEFIT BY USE OF SUCH EQUIPMENT, THE SAME DOES NOT RESULT IN THE PROVISIO N OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. SIMILAR IS THE PROPOSITION LAID DOWN IN OTHER CASES RELIED BY THE LEARNED AUTHORISED REPRESENTATIVE (SUPRA). 9.7 THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRE SENTATIVE THAT HUMAN ELEMENT IS INVOLVED IN PROVIDING SUCH SERVICE MAKIN G THE PAYMENT OF WHEELING/SLDC CHARGES LIABLE FOR DEDUCTION OF TAX A T SOURCE AS TECHNICAL SERVICE HAS NO MERIT AS THE TECHNICAL SERVICE IS NO T PROVIDED TO THE PERSONNEL OF THE ASSESSEE. WE ARE ALSO UNABLE TO PURSUE (SIC) OU RSELF, WITH THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT OTHER PERSONS ARE MAKING DEDUCTION AT SOURCE ON SUCH PAYMENT UNDER S. 194C/1 94J/194H. ON GOING THROUGH THE PAPERS FILED AT PP. 34 TO 41 OF THE PAP ER BOOK FILED BY THE DEPARTMENT WE NOTE THAT AS PER THOSE PAPERS ONLY SO ME REPORT/LETTERS HAS BEEN ISSUED BY THE TDS OFFICER REQUIRING THE DEDUCT ION OF TAX AT SOURCE ON SUCH, PAYMENT. SIMILARLY M/S HINDUSTAN ZINC LTD. DEDUCTIN G THE TAX AT SOURCE UNDER S. 194C IN RESPECT OF PAYMENT OF TRANSMISSION CHARG ES TO RVPN CANNOT LAY DOWN THE LAW. HERE IT WOULD BE PERTINENT TO MENTION THAT EVEN THE CIT(A) IN ASSESSEES OWN CASE FOR ASST. YR. 2006-07 AGAINST T HE ORDER OF AO UNDER S. 143 (3) HAS GIVEN A FINDING ON P. 54 OF HIS ORDER T HAT THESE PAYMENTS ARE NOT COVERED UNDER S. 194C AGAINST WHICH NO APPEAL IS FI LED BY THE DEPARTMENT THOUGH WE ARE OTHERWISE CONVINCED WITH THE ARGUMENT OF LEARNED AUTHORISED REPRESENTATIVE THAT S. 194C IS NOT APPLICABLE ON TH IS PAYMENT IN VIEW OF THE DETAILED SUBMISSION MADE IN THIS REGARD AT PAPER BO OK PP. A-18 TO A-21. 9.8 THE DECISION RELIED BY THE ITO (TDS) IN THE CAS E OF CBDT & ORS. VS. OBEROI HOTELS (INDIA) (P) LTD. (SUPRA) CIRCULAR NO. 187, D T. 23RD DEC., 1975 AND IN THE CASE OF CONTINENTAL CONSTRUCTION LTD. VS. CIT (SUPR A) THOUGH RELATES TO S. 80-O OF THE IT ACT, SUPPORTS THE CASE OF THE ASSESSEE TH AT A TECHNICAL SERVICE IS INVOLVED WHERE INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL IS MADE AVAILABLE. IN THE PRESENT CASE NO SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL IS MADE A VAILABLE/RENDERED BY THE RVPN TO THE ASSESSEE. THE ASSESSEE ITSELF HAS ITS O WN ENGINEERS AND TECHNICIANS WHO CONSISTENTLY MONITOR AND SUPERVISE THE FLOW OF THE ELECTRICITY TO ITS SYSTEM AND ULTIMATELY SUPPLIES TO ITS CUSTOMER. THE FUNCTION OF SLDC AS REGULATOR AND CONTROLLER FOR OPTIMUM SCHEDULING AND DISPATCH OF ELECTRICITY, AND SUPERVISION OVER THE INTRA-STATE TRANSMISSION SYSTE M IS STATUTORY FUNCTION WHICH IS ALSO ENTRUSTED TO RVPN AND THEREFORE, RVPN BY DISCHARGING SUCH STATUTORY FUNCTION DO NOT PROVIDE ANY TECHNICAL SER VICE. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 35 9.9 WE HAVE ALSO CONSIDERED THE OTHER DECISIONS REL IED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WHICH ARE CLEARLY DISTI NGUISHABLE ON FACTS. IN THE CASE OF SINGAPORE AIRLINES LTD. VS. ITO (SUPRA) THE NAVIGATION CHARGES PAID WAS FOR GETTING THE TECHNICAL SERVICE LIKE WEATHER REPO RT, INSTRUCTION OVER FLIGHTS TO FLY OVER TECHNICAL TERRITORIES AND SUCH OTHER TECHN ICAL SERVICES WHICH ARE NEEDED TO FLY THE AIRCRAFT ON THE INDIAN TERRITORY. BY GIVING THESE INSTRUCTIONS AND TECHNICAL SERVICES TO FLY THE AIRCRAFT THE TECH NICAL KNOWLEDGE OF A PERSON WAS MADE AVAILABLE TO THE ASSESSEE AND THEREFORE IT WAS HELD TO BE A PAYMENT FOR TECHNICAL SERVICES WHICH IS NOT THE FACTS OF TH E PRESENT CASE. THE CASE OF CANARA BANK VS. ITO (SUPRA) IN RESPECT OF PAYMENT O F MICR CHARGES TO SBI WHICH INVOLVED HUMAN SKILL AND COMPUTERISED MACHINE AND NOT SIMPLY MAKING AVAILABLE THE TECHNICAL EQUIPMENT WORKING ON ITS OW N AND THEREFORE HELD TO BE A PAYMENT TOWARDS MANAGERIAL SERVICES. THE DECISION IN THE CASE OF DR. HUTAREW & PARTNER (INDIA) (P) LTD. VS. ITO (SUPRA) IS WITH REFERENCE TO S. 195 AND NOT S. 194J. IN THIS CASE ALSO THE NON-RESIDENT TO WHOM PAYMENT WAS MADE WAS NOT MAINTAINING ANY SERVER FOR EVERYBODY T HAT ANYONE CAN FEED THE DATA AND GET THE SOLUTIONS. THE SOLUTIONS WERE PROV IDED ON THE SPECIFIC NEEDS OF THE CUSTOMERS. THE INFORMATION SUPPLIED IS SPECI FIC WHICH HELPS THE ASSESSEE IN FINALIZING ITS DESIGN. THE INFORMATION SUPPLIED TO THE ASSESSEE WAS A TECHNICAL INFORMATION WHICH HAS BEEN USED IN FURTHE R GENERATING THE PRODUCT OF THE ASSESSEE. THEREFORE, SUCH SPECIFIC CLIENT BASED INFORMATION WAS HELD NOT EQUITABLE WITH THE STANDARD SERVICES PROVIDED BY TE LECOMMUNICATION COMPANY. THUS THESE DECISIONS ARE QUITE DISTINGUISHABLE AND NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. WE THEREFORE HOLD THAT THERE I S NO LIABILITY TO DEDUCT TAX AT SOURCE ON PAYMENT OF TRANSMISSION/WHEELING/SLDC CHA RGES UNDER S. 194J OR FOR THAT MATTER UNDER S. 194C. 9.10 WE ALSO FIND FORCE IN ALTERNATE ARGUMENT OF TH E LEARNED AUTHORISED REPRESENTATIVE THAT THE PAYMENT OF TRANSMISSION/WHE ELING/SLDC CHARGES IS REIMBURSEMENT OF THE COST. THEREFORE THE PROVISIONS OF CHAPTER XVII-B ARE NOT APPLICABLE SINCE THERE IS NO PAYMENT OF INCOME/REVE NUE BY THE ASSESSEE. WE FIND THAT THE TARIFF IS FIXED BY AN INDEPENDENT REG ULATORY BODY I.E., RAJASTHAN ELECTRICITY REGULATORY COMMISSION. THE TRANSMISSION COMPANY IS NOT ALLOWED ANY RETURN ON ITS CAPITAL; THE TARIFF IS DETERMINED ON THE PRINCIPLE OF NO PROFIT NO LOSS. FROM THE TARIFF ORDER (PAPER BOOKS 85-94) WE FIND THAT TARIFF IS FIXED BY ESTIMATING THE ACTUAL COST OF OPERATION OF RVPN. IN CASE, ON THE BASIS OF SUCH TARIFF, ANY SURPLUS IS LEFT WITH THE RVPN, THEY GIV E CREDIT OF THE SAME TO THE ASSESSEE AS EVIDENT FROM THE EXTRACT OF THE MINUTES OF THE BOARD AND THE COPY OF THE JOURNAL VOUCHER BY WHICH SUCH CREDIT IS GIVE N TO THE ASSESSEE (PAPER BOOKS 121-137). THUS WHEN NO INCOME IS PAID BY ASSE SSEE TO TRANSMISSION COMPANY THE QUESTION OF DEDUCTION OF TAX AT SOURCE DO NOT OTHERWISE ARISE EVEN WHEN UNDER CERTAIN SECTIONS OF CHAPTER XVII-B LIABI LITY OF TDS IS ON PAYMENT OF ANY SUM AND UNDER CERTAIN SECTIONS IT IS ON PAYMENT OF INCOME AS ULTIMATELY THE TAX IS ON THE INCOME AND DEDUCTION OF TAX AT SO URCE IS ONLY ONE OF THE MODE OF COLLECTION AND RECOVERY OF THE TAX. ON ACTUAL RE IMBURSEMENT, PROVISION OF DEDUCTION OF TAX AT SOURCE WOULD NOT APPLY AS HELD IN CASE OF ITO VS. DR. WILLMAR SCHWABE INDIA (P) LTD. (SUPRA) (PAPER BOOK 109-110), HEADNOTE OF WHICH READS AS UNDER : ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 36 'AS AGREED BY AND BETWEEN THE ASSESSEE COMPANY AND ITCL, A VEHICLE WAS TO BE PROVIDED BY THE ASSESSEE COMPANY TO THE SAID CON SULTANT FOR ATTENDING TO ITS WORK AND THUS, THE ASSESSEE COMPANY WAS TO BEAR THE VEHICLE EXPENSES ACTUALLY INCURRED BY THE SAID PARTY. BILLS FOR SUCH EXPENSES INCURRED BY THE SAID CONSULTANT WERE SEPARATELY RAISED BY THEM ON T HE ASSESSEE COMPANY IN ADDITION TO BILLS FOR FEES PAYABLE ON ACCOUNT OF TE CHNICAL SERVICES AND SINCE THE AMOUNT OF BILLS SO RAISED WAS TOWARDS THE ACTUAL EX PENSES INCURRED BY THEM, THERE WAS NO ELEMENT OF ANY PROFIT INVOLVED IN THE SAID BILLS. IT WAS THUS A CLEAR CASE OF REIMBURSEMENT OF ACTUAL EXPENSES INCURRED B Y THE ASSESSEE AND THE SAME, THEREFORE, WAS NOT OF THE NATURE OF PAYMENT C OVERED BY S. 194J, REQUIRING THE ASSESSEE TO DEDUCT TAX AT SOURCE THER EFROM. THE CBDT CIRCULAR NO. 715, DT. 8TH AUG., 1995 [(1995) 127 CTR (ST) 13 ], RELIED UPON BY THE AO IN SUPPORT OF HIS CASE ON THIS ISSUE WAS APPLICABLE ON LY IN THE CASES WHERE BILLS ARE RAISED FOR THE GROSS AMOUNT INCLUSIVE OF PROFES SIONAL FEES AS WELL AS REIMBURSEMENT OF ACTUAL EXPENSES AND THE SAME, THER EFORE, WAS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE BILLS WERE R AISED SEPARATELY BY THE CONSULTANTS FOR REIMBURSEMENT OF ACTUAL EXPENSES IN CURRED BY THEM. AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, THE PROVISIO NS OF S. 194J WERE NOT APPLICABLE TO THE REIMBURSEMENT OF ACTUAL EXPENSES AND THE ASSESSEE COMPANY WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM SUCH RE IMBURSEMENT.' UNDER THESE CIRCUMSTANCES, WE HOLD THAT THE LOWER A UTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS LIABLE FO R DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF TRANSMISSION/SLDC CHARGES TO RVPN. W E THUS SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE GROUND OF THE ASSESSEE. THE GROUND NO. 1 IS THUS ALLOWED. 8.6 IT HAS ALREADY BEEN POINTED OUT THAT SUBSEQUENT LY ALSO THE CO-ORDINATE BENCHES OF THE TRIBUNAL HAVE FOLLOWED THE ABOVEMENT IONED DECISION; THE DETAILS OF WHICH HAVE ALREADY BEEN MENTIONED IN THE ABOVE PART OF THIS ORDER. THERE BEING NO CONTRARY DECISION BROUGHT ON RECORD AND BEING IN AGREEMENT WITH THE ABOVEMENTIONED VIEW OF THE CO-OR DINATE BENCH OF THE TRIBUNAL, WE ARE NOT INCLINED TO TAKE A DIFFERENT V IEW. ACCORDINGLY, THE GROUNDS REGARDING DISALLOWANCE ON ACCOUNT OF WHEELI NG AND TRANSMISSION CHARGES ARE ALLOWED AND THE CONTENTIONS OF THE DEPA RTMENT THAT THESE CHARGES SHOULD BE HELD LIABLE FOR DEDUCTION OF TAX UNDER EITHER OF THE SECTIONS 194C/194J ARE REJECTED. 8.7 SINCE IT IS HELD THAT THE ASSESSEE WAS NOT UNDE R OBLIGATION TO DEDUCT TAX UNDER EITHER OF THE ABOVE MENTIONED SECTIONS, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE OTHER ASPECTS ON THE BAS IS OF WHICH ALSO LD. A.R ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 37 HAS ARGUED THAT THE DISALLOWANCE U/S 40(A)(IA) WAS NOT CALLED FOR. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY THE LD AR THAT ACCORDING TO THE SUBMISSIONS OF THE ASSESSEE THE ISSUE REGARDING DED UCTION OF TAX ON WHEELING AND TRANSMISSION CHARGES IS DIRECTLY COVER ED IN FAVOUR OF ASSESSEE BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD. AND IF THE BENCH IS SATISFIED TH AT THE MATTER IS COVERED BY THE SAID DECISION, THEN BENCH MAY NOT ADJUDICATE AL L THE GROUNDS ON WHICH THE ASSESSEE IS ASSAILING SUCH ACTION OF THE DEPART MENT. 8.8 IT MAY BE MENTIONED HERE THAT GROUND NO.1 FOR ASSESSMENT YEAR 2007-08 RELATING TO DISALLOWANCE ON ACCOUNT OF OVE RSTATEMENT OF REVENUE EXPENDITURE DUE TO METERING EQUIPMENT AMOUNTING T O RS. 115.07 LACS WAS NOT PRESSED BY THE LD AR AND HENCE, THE SAME IS DIS MISSED BEING NOT PRESSED. 9. GROUND NO.2 OF ASSESSEES APPEAL FOR THE AY 2008 -09 RELATES TO THE AMOUNT OF RS. 247,12,96,468/- BEING PART OF DEPREC IATION CLAIMED BY THE ASSESSEE. 9.1 IT WAS OBSERVED THAT THE ASSESSEE HAD RECEIVED CONTRIBUTION/GRANT SUBSIDIES TOWARDS COST OF CAPITAL ASSET AGGREGATING TO RS. 2,16,986.07 LACS AS ON 31.3.2008 WHICH CONSISTS THE FOLLOWING ITEMS: I) CONSUMERS CONTRIBUTION ` 111899.47 LACS II) SUBSIDIES TOWARDS COST OF CAPITAL ASSET ` 1.00 LACS III) GRANTS TOWARDS COST OF CAPITAL ASSET ` 105085.66 LACS ` 216986.07 LACS THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXP LAIN AS TO WHY THE ABOVEMENTIONED CONTRIBUTION SHOULD NOT BE REDUCED FROM THE COST OF THE ASSETS FOR THE PURPOSE OF COMPUTING ALLOWABLE DEPR ECIATION IN ACCORDANCE WITH THE PROVISIONS OF EXPLANATION 10 TO SEC. 43(1 ) OF THE ACT WHICH DESCRIBED THAT WHERE A PORTION OF COST OF AN ASSET ACQUIRED BY THE ASSESSEE ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 38 HAS BEEN MET DIRECTLY OR INDIRECTLY BY A CENTRAL/S TATE GOVERNMENT OR ANY AUTHORITY IN THE FORM OF SUBSIDY OR GRANT OR REIMB URSEMENT, THEN SO MUCH OF THE COST IS RELATABLE TO SUCH SUBSIDY OR GRANT O R REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF ASSET TO THE ASS ESSEE. THEREFORE, APPLYING THE ABOVEMENTIONED PROVISIONS, AS THE ASSESSEE HAD CONSIDERED THE ABOVE MENTIONED AMOUNT WHILE CLAIMING DEPRECIATION, THE A SSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED EXCESS DEPRECATION AM OUNTING TO RS. 247,12,96,468/- AND SUCH DEPRECIATION WAS DISALLOWE D. SUCH ACTION OF THE ASSESSING OFFICER WAS AGITATED IN THE APPEAL FILED BEFORE THE CIT(A), WHO AFTER CONSIDERING THE ABOVEMENTIONED PROVISIONS OF EXPLA NATION 10 TO SEC. 43(1) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER AN D HAS DISMISSED THE SAID GROUND OF THE ASSESSEE. 9.2 BEFORE US LD. A.R DID NOT RAISE ANY ARGUMENTS REGARDING THE DISALLOWANCE UPHELD BY THE LD CIT(A). THEREFORE, AF TER HEARING BOTH THE PARTIES, AND APPLYING THE ABOVE MENTIONED PROVISION S OF EXPLANATION 10 TO SECTION 43(1), WE DECLINE TO INTERFERE IN THE DISAL LOWANCE SUSTAINED BY THE LD CIT(A) AND ACCORDINGLY, THIS GROUND OF THE ASSESSE E IS DISMISSED. 10. GROUND NO.1 OF REVENUES APPEAL FOR AY 2007-08 AND THE SOLE GROUND IN AY 2008-09 RELATES TO UNDERSTATEMENT OF REVENUE. 10.1 THE FACTS RELATING TO AY 2007-08 ARE THAT FROM THE AUDIT OF THE ASSESSEE BY THE CAG U/S 619(4) OF THE COMPANIES ACT , IT WAS NOTED THAT THE ASSESSEE DID NOT RECOGNIZE THE UNBILLED REVENUE (RE VENUE FOR ENERGY SUPPLIED AND BILLS NOT ISSUED TILL MARCH, 2007) TO THE EXTEN T OF RS. 36.95 CRORES RESULTED IN THE UNDERSTATEMENT OF REVENUE, WHICH WA S ADDED TO THE INCOME OF THE ASSESSEE. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 39 10.2 THE ASSESSEE AGITATED SUCH ADDITION ON ACCOUNT OF VARIOUS ARGUMENTS INTER-ALIA INCLUDING THAT THE ACCOUNTING POLICY WA S REGULARLY FOLLOWED AND ACCORDING TO THE ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE, SUCH TYPE OF PRIOR INCOME AND EXPENSES CANNOT BE TERMED TO BE AS ERRORS OR OMISSIONS. IT WAS SUBMITTED THAT IN SCHEDULE 18, TITLED AS NET PRIOR PERIOD CREDITS/CHARGES, THE ASSESSEE HAS ACCOUNTED FOR IN COME RELATING TO THE PREVIOUS YEAR AMOUNTING TO RS. 285.52 CRORES WHICH INCLUDES RS. 115.88 CRORES BEING RECEIPTS FROM CONSUMERS RELATING TO PR IOR PERIODS. THE ASSESSEE HAS ACCOUNTED FOR PRIOR PERIOD INCOME OF RS. 130.26 CRORES DURING THE NEXT FINANCIAL YEAR ENDED 31.3.2008 WHICH INCLUDES RS. 2 6.78 CRORES TOWARDS RECEIPTS FROM CONSUMERS RELATING TO THE PRIOR PERIO DS. IT WAS SUBMITTED THAT THE BASIS ACCOUNTING POLICIES AND PRINCIPLES, UNDER THE ESAAR 1985 WERE REQUIRED TO BE MANDATORILY FOLLOWED BY THE ASSESSEE . ACCORDINGLY, ALL PRIOR PERIOD REVENUE OR COSTS ARISING ON ACCOUNT OF A DIF FERENCE BETWEEN THE ACCOUNTING ESTIMATE MADE FOR ACCRUAL AND THE ACTUAL VALUES INVOLVED OR ON ACCOUNT OF ANY OTHER REASONS, SHALL BE ACCOUNTED FO R PROSPECTIVELY AND NO RETROSPECTIVE RELATING OF PAST YEARS FIGURES SHALL BE PERMITTED. IT WAS SUBMITTED THAT RECOGNIZE REVENUE IS A CUMBERSOME JO B AND VASTNESS OF AREA INCLUDING THE AREA EFFECTED BY TERRORISM AND ALSO INCLUDE ACTIVITIES OF READING OF METERS OF CONSUMERS, FORWARDING OF READI NG REPORTS TO THE CIRCLES FOR THE PREPARATION OF BILLS. THE REVENUE ON ACCO UNT OF BILLS ISSUED IS THEN ACCOUNTED BY THE HO/CENTRAL OFFICE, AFTER THE RECEI PT OF DATA FROM THE RESPECTIVE CIRCLES WHICH TAKES TIME AND THE BILLIN G OF THE CONSUMERS ARE DONE ON PERIODICAL CYCLE WISE BILLING AND THAT PER IOD COVERS TWO MONTHS OF A FINANCIAL YEAR THAT IS THE PERIOD OF MARCH 2007. T HE PERIODICAL CYCLE WISE MAY CONTAIN THE PERIOD FROM 15 TH MARCH 2007 TO 14 TH APRIL 2007 AND IT WAS EXPRESSED THAT THUS THERE ARE VARIOUS DIFFICULTIES IN RECOGNIZING THE EXACT REVENUE RELATING TO THE YEAR AND THE SUBMISSIONS WE RE MADE IN DETAIL. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 40 10.3 AFTER GOING THROUGH ALL THE SUBMISSIONS, THE L D CIT(A) HAS DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS IN PAA 3.3 OF HIS ORDER AS UNDER: 3.3 1 HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. THE CAG REPORTED THAT THE UNBILLED REVENUE TO THE EXTENT OF RS.36.95 CRORE (PERTAINING TO THE ENERGY SUPPLIED IN MARCH 2007, F OR WHICH BILLS WERE RAISED IN APRIL ) WERE NOT INCLUDED IN THE TOTAL RE VENUE / SALES OF THE YEAR RESULTING INTO UNDERSTATEMENT OF REVENUE. THE APPELLANT HAS EXPLAINED THAT THERE WAS NO UNDERSTATEMENT OF REVEN UE AND THE REVENUE PERTAINING TO THIS PERIOD FOR WHICH BILLS WERE ISSU ED IN APRIL, WERE SHOWN IN THE ACCOUNTS ON ESTIMATE BASIS AS PER PRACTICE R EGULARLY FOLLOWED BY THE APPELLANT. I AM IN AGREEMENT WITH THE APPELLANT THAT THERE WAS NO CASE FOR UNDERSTATEMENT OF REVENUE. THE APPELLANT W AS IN THE BUSINESS OF DISTRIBUTION OF ELECTRICITY TO CRORES OF CONSUME RS FALLING UNDER DIFFERENT CATEGORIES. THE EARNING OF REVENUE INCLUDED VARIOUS STEPS AS MENTIONED BY APPELLANT I.E. READING OF METERS OF CONSUMERS, F ORWARDING OF READING REPORT TO THE CIRCLE FOR PREPARATION OF BILLS ETC. THE BILLING OF CONSUMER WAS DONE PERIODICAL CIRCLE WISE I.E. MONTHLY/QUARTE RLY. THUS, FOR THE BILLING CYCLE MARCH 2007, THE PERIODICAL CYCLE MAY BE ENDING IN THE MONTH OF APRIL FALLING IN NEXT ASSESSMENT YEAR. WHA TEVER ELECTRICITY WAS SUPPLIED BY THE APPELLANT TO THE CONSUMERS IN THAT BILLING PERIOD, THE BILLS COULD BE ISSUED ONLY AFTER END OF BILLING PER IOD. IN OTHER WORDS FOR THE BILLING PERIOD MARCH, APRIL, THE ELECTRICITY BI LLING COULD HAVE BEEN ISSUED ONLY IN APRIL, FOR THE ELECTRICITY SUPPLIED IN MARCH & APRIL. BEFORE ISSUE OF ELECTRICITY BILL, THE APPELLANT COULD NOT HAVE ACCOUNTED THE EXACT AMOUNT OF REVENUE PERTAINING TO ELECTRICITY SUPPLIE D FOR THE MONTH OF MARCH IN ITS BOOKS OF ACCOUNT. THERE WAS NO CASE TH AT THE REVENUE PERTAINING TO THE ELECTRICITY SUPPLIED IN MARCH 200 7, WAS NOT ACCOUNTED FOR BY THE APPELLANT IN THE YEAR UNDER CONSIDERATIO N OR IN SUBSEQUENT YEAR. IN ABSENCE OF THE ISSUE OF BILLS, THE APPELLA NT OFFERED THE REVENUE ON ESTIMATE BASIS IN ACCOUNTS FOR THE ELECTRICITY S UPPLIED IN MARCH 2007. IT IS WORTH TO NOTE THAT THIS PRACTICE WAS BEING FO LLOWED BY THE APPELLANT REGULARLY. IT IS ALSO WORTH TO MENTION HERE THAT SU CH ESTIMATION WAS BASED ON SCIENTIFIC BASIS I.E. BASED ON ACTUAL BILL / CONSUMPTION OF POWER BY THE CONSUMER IN THE PAST. THUS, THE ESTIMATION O F REVENUE WAS NOT ARBITRARY. IN THE CASE OF BHARAT EARTH MOVERS (SUPR A) THE SUPREME COURT HAS RECOGNIZED THE ACCOUNTING OF INCOME/EXPENDITURE BASED ON SCIENTIFIC METHOD. IT IS ALSO WORTH TO MENTION HERE THAT THE BILLS ISS UED IN THE MONTH OF APRIL WERE FOR THE ELECTRICITY SUPPLIED TO THE CONSUMERS IN THE MONTH OF MARCH & APRIL. ON THE BASIS OF BILLS SO RAISED, THERE COU LD NOT HAVE BEEN ANY MECHANISM TO ASCERTAIN THE AMOUNT PERTAINING TO ELE CTRICITY SUPPLIED IN THE REMAINING PARTICULAR DAYS OF MARCH 2007 OF THE BILLING CYCLE OF MARCH ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 41 & APRIL. HENCE, THE REVENUE PERTAINING TO THE PERIO D OF MARCH COULD HAVE BEEN ACCOUNTED FOR ONLY ON THE ESTIMATION BASIS. TH E APPELLANT HAS ALREADY EXPLAINED THAT THE ESTIMATION WAS ON SCIENT IFIC BASIS. THE APPELLANT HAS EXPLAINED THAT THE ACCOUNTING POL ICY WAS REGULARLY FOLLOWED AND PRIOR PERIOD INCOME / EXPENSES WERE BE ING ACCOUNTED FOR REGULARLY. DURING THE YEAR THE APPELLANT OFFERED RE VENUE OF RS. 115.88 CRORE RELATING TO PRIOR PERIOD. SIMILARLY, THE APPE LLANT HAD ACCOUNTED INCOME OF RS.130.26 CRORE IN THE NEXT ASSESSMENT YE AR WHICH WAS PERTAINING TO THE YEAR UNDER CONSIDERATION. IN THIS MANNER, THE APPELLANT WAS REGULARLY OFFERING INCOME AND EXPENDITURE PERTA INING TO PRIOR PERIOD. THUS, THERE WAS NO LOSS TO THE REVENUE SINCE INCOME WAS BEING OFFERED REGULARLY. THE APPELLANT HAS ALSO EXPLAINED THAT AS PER BINDING NATURE OF ACCOUNTING POLICIES AND PRINCIPALS UNDER ESSAR 1 985, IT WAS MANDATORY TO RECOGNIZE REVENUE ONLY WHEN THE RIGHT TO COLLECT THE REVENUE AROSE. IN VIEW OF ABOVE DISCUSSION, THE APPELLANT WAS JUST IFIED IN OFFERING INCOME ON ESTIMATION BASIS PERTAINING TO THE REMAIN ING DAYS OF MARCH FOR WHICH BILLS WERE ISSUED IN APRIL. THE ADDITION MADE BY ASSESSING OFFICER IS, THEREFORE, DELETED. THIS GROUND OF APPE AL IS ALLOWED. 10.4 THE DEPARTMENT IS AGGRIEVED WITH THE ORDER OF THE LD CIT(A) AND HENCE HAS FILED THE ABOVEMENTIONED GROUND FOR BOTH THE Y EARS AS THE FACTS IN AY 2008-09 ARE SIMILAR. 11. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN VIEW OF THE ABOVE FINDINGS OF THE LD CIT(A) THAT THE ASSESSEE HAS BEE N FOLLOWING THE ABOVE MENTIONED METHOD OF ACCOUNTING CONSISTENTLY, WHICH IS IN AGREEMENT WITH THE CHANGED ACCOUNTING POLICIES AND PRINCIPLES U NDER ESSAR 1985 WHICH ARE STATED TO BE BINDING ON THE ASSESSEE, WE ARE OF THE VIEWS THAT THE LD CIT(A) HAS RIGHTLY GRANTED RELIEF TO THE ASSESSEE. THEREFORE, WE DECLINE TO INTERFERE WITH THE FINDINGS OF LD CIT(A) FOR BOTH THESE YEARS. THUS GROUND OF THE REVENUE FOR BOTH THE YEARS IS DISMISSED. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 42 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A Y 2007-08 IS PARTLY ALLOWED AND THE APPEAL FOR AY 2008-09 IS ALLOWED WH EREAS THE APPEALS FILED BY THE REVENUE FOR BOTH THE YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27 TH DAY OF JUNE, 2012 SD/- SD/- ( G.E.VEERABHADRAPPA ) (I.P.BANSAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 27 TH JUNE, 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RB BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO. 2276/MUM/2011(A.Y. 2007-08) ITA NO.7539/MUM/2011(A.Y.2008-09) ITA NO.2405/MUM/2011(A.Y. 2007-08) ITA NO.8572/MUM/2011(A.Y. 2008-09) 43 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 19/6,20/6&22/6/12 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 21/6 & 25/6/12 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER