2022 (3) TMI 1289 - HC - Income Tax

TDS u/s 194I - TDS against payment of transmission charges made to OPTCL as the equipment held by the OPTCL have not been given on rent, lease etc. to the assessee - Whether ITAT is justified in holding that payment made by the assessee Company is only towards purchase price of electricity from the GRIDOC and not from OPTCL for which no TDS liability is attracted in terms of section 194I? - HELD THAT - The Court is not persuaded that any error has been committed by the ITAT in coming to the above conclusion. In absence of there being any payment of rent or even deemed rent by the Respondents to OPTCL there was no obligation under Section 194-I of the IT Act to deduct TDS from the wheeling charges paid to OPTCL. - Decided in favour of assessee.

Summary

Issues:
Appeal by Revenue against ITAT judgment regarding applicability of Section 194-I of IT Act to payments made by Respondents to OPTCL for transmission charges.

Detailed Analysis:

1. Framing of Questions of Law:
- The Court framed questions regarding the justification of ITAT's decision on TDS liability for transmission charges.
- Questions involved the applicability of Section 194-I of the IT Act and interest under Section 201(1A) of the Act.

2. Background and Applicability of Section 194-I:
- Respondents are power distribution companies purchasing electricity from GRIDCO and utilizing OPTCL's transmission network.
- AO and CIT (A) held that TDS was applicable on payments to OPTCL, leading to penalty and interest under Sections 201(1) and 201(1A) of the IT Act.
- ITAT, following a Supreme Court decision, ruled that Section 194-I was not attracted as Respondents did not use OPTCL's equipment, thus no rent was paid to OPTCL.

3. ITAT's Decision and Rationale:
- ITAT's order highlighted the absence of a direct connection between Respondents and OPTCL.
- The agreement was between GRIDCO and Respondents, with GRIDCO responsible for electricity supply and delivery.
- OPTCL raised invoices on behalf of GRIDCO under OERC's direction to protect OPTCL's payment interests.
- Payments by Respondents were deemed as the purchase price for electricity from GRIDCO, not rent to OPTCL, as they did not use OPTCL's equipment.

4. Court's Analysis and Conclusion:
- The Court, after hearing Revenue's counsel, upheld ITAT's decision, finding no error in concluding that Section 194-I did not apply.
- Due to the absence of rent payment or use of OPTCL's equipment, there was no TDS obligation on wheeling charges to OPTCL.
- The questions framed were answered in favor of the Assessee, leading to the dismissal of appeals without costs.

This judgment clarifies the interpretation of Section 194-I of the IT Act concerning TDS liability on transmission charges paid to OPTCL by power distribution companies. The Court's detailed analysis of the contractual relationships, payment structures, and lack of equipment usage establishes that no rent was paid to OPTCL, hence no TDS deduction obligation existed. The decision aligns with precedents and emphasizes the importance of factual circumstances in determining tax liabilities, ultimately ruling in favor of the Assessee and dismissing the Revenue's appeals.