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2014 (11) TMI 440 - AT - Income TaxTDS u/s 194I or u/s 194J - nature of transmission charges paid for use of transmission lines or other infrastructure - whether in the nature of rent - Held that - Following the decision in Maharashtra State Electricity Distribution Co. Ltd. Versus Deputy Commissioner of Income Tax TDS Range-2 2012 (8) TMI 519 - ITAT, MUMBAI - in a situation in which the payment in made for the use of an asset simpliciter, whether with control and possession in its legal sense or not, the payment could be said to be for the use of an asset - However, in a situation in which the payment is made only for the purpose a specific act, i.e. power transmission in this case, and even an asset is used in the said process, the payment cannot be said to be for the use of an asset - When control of the as set (transmission lines in the present case) always remains with the PGCIL, any payment made to the PGCIL for transmission of power on the transmission lines and infrastructure owned controlled and in physical possession of PGCIL can be said to have been made for the use of these transmission lines or other related infrastructure - section 194-I has no application so far as the impugned payments for transmission of electricity is concerned - the payments made to above companies cannot be considered as rent under the provisions of section 194I of the Act, consequently, there is no question of levy of interest u/s 201 and 201(IA) of the Act the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Whether payments made for the use of transmission lines or other infrastructure can be termed as "rent" under Section 194-I of the Income Tax Act. 2. Whether the provisions of Sections 201 and 201(1A) of the Income Tax Act are applicable to such payments. 3. Whether the alternative provision of Section 194-J of the Income Tax Act should be considered. Issue-wise Detailed Analysis: 1. Classification of Payments as "Rent" under Section 194-I: The primary issue revolves around whether payments made for the use of transmission lines or other infrastructure by the assessee can be classified as "rent" under Section 194-I of the Income Tax Act. The Tribunal examined the agreements between the assessee and entities like Maharashtra State Electricity Transmission Company Ltd (MSETCL) and Power Grid Corporation of India Ltd (PGCIL). It was noted that the payments were made for the transmission of electricity, not for the use of the transmission lines per se. The Tribunal referenced the definition of "rent" under Section 194-I, which includes payments for the use of land, building, machinery, plant, or equipment. However, it concluded that the payments in question were for the service of transmitting electricity, and not for the use of the transmission infrastructure itself. Therefore, such payments do not fall under the ambit of "rent" as defined in Section 194-I. 2. Applicability of Sections 201 and 201(1A): Given that the payments were not classified as "rent" under Section 194-I, the provisions of Sections 201 and 201(1A) concerning the consequences of failure to deduct tax at source were examined. The Tribunal noted that since the payments do not qualify as "rent," the assessee was not liable to deduct tax under Section 194-I. Consequently, there was no question of the assessee being treated as an assessee in default under Section 201, nor was there any liability for interest under Section 201(1A). 3. Consideration of Section 194-J: The Tribunal also considered whether the alternative provision of Section 194-J, which deals with fees for professional or technical services, could be applied. However, it was determined that the payments made for the transmission of electricity did not constitute fees for technical services. The Tribunal reiterated that the payments were for the transmission service itself, and not for any technical or professional service rendered by MSETCL or PGCIL. Conclusion: The Tribunal upheld the findings of the CIT(A), concluding that the payments made to MSETCL and PGCIL for the transmission of electricity could not be classified as "rent" under Section 194-I. Consequently, the provisions of Sections 201 and 201(1A) were not applicable. The appeals filed by the Revenue were dismissed, and the Tribunal found no infirmity in the conclusions drawn by the CIT(A). Order: The appeals of the Revenue were dismissed, and the order was pronounced in the open court on October 29, 2014.
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