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2014 (7) TMI 991 - AT - Income TaxTDS u/s 194-I or u/s 194C - rental for the use of transmission line - Whether the present arrangement under the Bulk Power Transmission Agreement can be termed can be covered by the scope of expression any other agreement or arrangement 'for the use of' appearing in Explanation (i) to Section 194-I Held that - The assessee has no control over the operations of the transmission lines, and all that he gets from the arrangements is that he can draw the electrical power purchased from PGCIL's transmission lines in an agreed manner - relying upon Lakshmi Audio Visual Inc. v. Asstt. Commr. of Commercial Taxes 2001 (7) TMI 1253 - KARNATAKA HIGH COURT - 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 When control of the asset 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 payments for transmission of electricity is concerned Decided against Revenue. Penalty u/s 271(1)(c) Held that - Addition in AY 2006-07 has been deleted by the tribunal - Therefore there is no liability upon the assessee to pay taxes on the additions made therefore, it cannot be asked to pay penalty equivalent to taxes sought to be evaded - once there are no taxes sought to be evaded then, there cannot be any penalty u/s 271 (1)(c) CIT(A) has rightly held that no penalty is imposable upon the assessee because additions have already been deleted Decided against Revenue.
Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Requirement to deduct TDS under Section 194(J) on wheeling charges for the transmission of electricity. Issue-Wise Detailed Analysis: 1. Deletion of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act: The appeal in ITA No. 3527 concerns the deletion of a penalty amounting to Rs. 5,92,71,691 imposed under Section 271(1)(c) of the Income Tax Act. The revenue's grievance is that the Commissioner of Income Tax (Appeals) erred in deleting this penalty. Section 271(1)(c) stipulates that if an individual has concealed particulars of income or furnished inaccurate particulars, a penalty equivalent to the tax sought to be evaded, or up to three times that amount, may be imposed. However, it was noted that the addition in the assessment year 2006-07 had been deleted by the tribunal, resulting in no tax liability for the assessee on the additions made. Consequently, no penalty under Section 271(1)(c) could be imposed. The Commissioner of Income Tax (Appeals) correctly concluded that no penalty was applicable since the additions had been deleted. Therefore, the appeal of the revenue was dismissed. 2. Requirement to Deduct TDS Under Section 194(J) on Wheeling Charges for Transmission of Electricity: The other four appeals concern whether the assessee was required to deduct TDS under Section 194(J) on wheeling charges paid for the transmission of electricity. The assessing officer argued that the assessee should have deducted tax at a rate of 5% under Section 194(J) because the Power Grid Corporation of India Ltd. (PGCIL) was providing technical services by transmitting electricity. Consequently, orders were passed under Sections 201(1) and 201(1A) of the Act, raising a demand against the assessee. The Commissioner of Income Tax (Appeals) deleted the demand, citing an earlier ITAT decision for the assessment year 2005-06, which held that the assessee was not required to deduct TDS under Section 194(J). It was observed that the deductee had already paid the taxes and claimed a refund, thus discharging its entire tax liability in advance. The tribunal noted that the issue was previously considered in the assessee's favor in the 2005-06 assessment year (ITA No. 755 Delhi 2011) and in a similar case involving the Chhattisgarh State Electricity Board. The tribunal's findings emphasized that for a service to be classified as "technical service," human intervention is essential. Since the transmission of electricity did not involve upgrading the assessee's technical knowledge or human intervention, it did not qualify as a technical service. The tribunal also noted that the transmission of electricity was undertaken in the normal course of the business of the payee, classified as business income, potentially leading to no liability for tax deduction at source. Further, it was highlighted that payments for transmission charges were made for the service of transmission rather than for the use of transmission lines per se. The transmission lines were under the control of PGCIL, and the payments were for the transmission of electricity, not for the use of the transmission lines themselves. Thus, Section 194-I did not apply to the payments for transmission of electricity. The tribunal concluded that no further liability could be imposed on the assessee, affirming the decision of the Commissioner of Income Tax (Appeals). Conclusion: The tribunal dismissed all the appeals, upholding the deletion of the penalty under Section 271(1)(c) and confirming that the assessee was not required to deduct TDS under Section 194(J) on wheeling charges for the transmission of electricity. The orders pronounced on May 9, 2014, concluded that the Commissioner of Income Tax (Appeals) had appropriately addressed the issues, and no interference was warranted.
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