By K. B. Bhujle
Advocate
The assessee was a licensee for
distribution and sale of electricity under the provisions of the Electricity
Act, 2003, by the Uttar Pradesh Electricity Regulatory Commission. The assessee
purchased power from Uttar Pradesh Power Corporation. For the A. Y. 2008-09,
the assessee made payments in terms of tariff issued by the Commission which
was bifurcated in two parts: (a) power supply tariff and (b) power transmission
tariff. The transmission charges were paid to the Uttar Pradesh Power
Transmission Company Ltd. (UPPTCL) and power supply charges were payable to the
Corporation. The Assessing Officer observed that payment made to the company
was not a payment of purchase or supply of power but payment of technical
charges for rendering “technical service” on monthly basis and consequently
held that the assessee was liable to deduct tax at source on charges paid for
transmission to the company and since it failed to do so, the amount of Rs.
1,65,32,88,040 was to be disallowed u/s. 40(a)(ia) of the Act.
The Commissioner (Appeals) and the
Tribunal accepted the assessee’s claim and cancelled the disallowance.
On appeal by the Revenue, the
Allahabad High Court upheld the decision of the Tribunal and held as under:
“i) Since
electricity was a commodity which could not be carried from one place to
another like other commodities, it had to flow through metal conductors which
were called “transmission lines” and therefore, transmission lines constituted
a facility for travelling of electricity from the point of generation to the
point of distribution. This flow of electricity in a conductor could not be
said to be any specialized, exclusive individual service rendered by the
company to the assessee because the grid was common and transmission lines were
used in general by respective distributor licensees. Only for the purpose of
facility to use and maintenance of transmission lines, charges were paid and
there was no “technical service”, as such, rendered by the company to the
assessee.
ii) Mere
involvement of technology would not bring something within the ambit of
“technical services” as defined in Explanation 2 to section 9(1)(vii) because
under the Act, the term “technical services” was defined in a different manner,
i.e., along with terms “managerial and consultancy services”. “Managerial and
consultancy services” by themselves did not include any technology but still
would be covered by the definition of “fees for technical services” in the Act.
Therefore, the term “technical services” was not dependent solely on whether or
not use of technology was involved.
iii) Moreover, the term “technical” had to be read applying the principle
of noscitur a sociis in the term “managerial and consultancy”. That
takes away normal and common meaning of “technical services” as was known in
common parlance and makes it totally different. Therefore, in transmission of
electricity, there was no human touch or effort and if the term “technical was
read applying the principle of noscitur a sociis with the term
“managerial or consultancy”, the provisions of section 194J were not
applicable.
iv) The
questions formulated are answered against the Revenue and in favour of the
assessee.”
