Law: Income Tax Act, 1961

Section: 194J,194C,201

Section 194J, read with sections 194C and 201, of the Income-tax Act, 1961 - Deduction of tax at source - Fees for professional or technical services (Payment of wheeling charges) - Assessment year 2005-06 - Assessee company paid wheeling charges to PGCIL, power grid corporation and deducted TDS under section 194C - Assessing Officer held that wheeling charges were fees for technical services liable for TDS under section 194J - By virtue of agreement between assessee and PGCIL, there was transportation of electricity from PGCIL to assessee though equipment and network, which was maintained by PGCIL through its technical personnel using technical expertise - Whether since PGCIL was not providing technical services to assessee, wheeling charges paid by assessee could not be characterized as fee for technical service and no deduction under section 194J could be made - Held, yes [Para 34] [In favour of assessee] FACTS â–  The assessee entered into Bulk Power Transmission Agreement (BPTA) with PGCIL, power grid corporation. A survey was carried out at business premises of assessee and it was noticed that assessee had deducted TDS at 2 per cent under section 194C on wheeling charges paid to PGCIL. â–  The Assessing Officer held that wheeling charges paid by assessee were fees for technical services liable for TDS under section 194J and accordingly, treated assessee as defaulter under section 201(1). â–  On appeal, the Commissioner (Appeals) agreed with the contention of the assessee that section 194C would apply, however, in absence of sufficient legal precedent on said issue, confirmed the order of the Assessing Officer. â–  On further appeal, the Tribunal held that the assessee was not liable to be saddled with higher liability of TDS as it was not a technical service. â–  On appeal: HELD â–  By virtue of the BPTA agreement between assessee and PGCIL there is transportation of the electricity from PGCIL to assessee through the equipment and network required statutorily to be maintained by PGCIL through its technical personnel using technical expertise. This, however, does not result in PGCIL providing technical services to…