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TMI Blog2014 (11) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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. - ITA NO.6212 to 6215/MUM/2012 - - - Dated:- 29-10-2014 - Shri Joginder Singh And Shri N. K. Billaiya, JJ. For The Appellant: Shri Vivek Batra For The Respondent : S/Shri J.D. Mistry, Neeraj Seth, K.K. Ved-Advocates ORDER PER JOGINDER SINGH (JM) : The Revenue is aggrieved by the impugned orders all dated 27/7/2012 on the ground that the ld. CIT(A) erred in law and on facts in holding that payments made for use of transmission lines or other infrastructure i.e. plant and machinery could not be termed as rent and further holding that transmission charges cannot be considered as rent under the provision of section 194 I of the Act, consequently provision of sec. 201 and 201(1A) cannot be applied without appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Z1961.20 crores on which the TDS of Z176.08 crores was supposed to have been deducted by assessee under section 1941 of the Income Tax Act. Since assessee has not furnished the details whether the deductee company has already paid taxes on the said amount, the entire demand of Z176.08 crores and interest thereon under section 201(1A) to the extent of Z8.238 crorees totalling to Z184.2983 crores was made. Assessee was unsuccessful before the CIT (A) and raised the following grounds: Ground No.1 The learned CIT (A) erred in confirming the levy of TDS of .184.32 c rores on wheel ing and transmission chartges paid to entities like the MSETCL (Maharashtra State Electricity Transmission Company Limited) and PGCIL (Power Grid Corporation of India Limited), without proper consideration of the underlying facts and the provisions of the Act and must therefroe be deleted . 3. We have heard the learned Counsel and the learned DR. 4. In the course of arguments it was fairly admitted by both the parties that this issue is covered by the decision of ITAT Mumbai-H Bench in the case of Chhattisgarh State Electricity Board in ITA Nos. 20 to 23/BLPR/2010 dated 30.11.2011 and also by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.4 of annexure 1 which refers to the same ratio of agreed annual charges divided by 12 as is between power transmitted to each beneficiary to total sales from that particular point of delivery. In other words, while the annual charges are fixed, these are divided between the beneficiaries in the same ratio as is ratio of power evacuated by a beneficiary to the total sale of power from that delivery point. It is, however, not in dispute that the transmission lines are in the physical control of PGCIL, these are maintained and operated by the PGCIL and, so far as the assessee is concerned, its interest in the transmission lines is restricted to the fact that electrical power purchased by the assessee, simultaneously along with electrical power purchased by other bulk power beneficiaries, is transmitted through these transmission lines. The way it works is like this. The power available at the delivery points, collectively for al l the bulk power beneficiaries, is loaded for transmission on these transmission lines or power grid and each of the beneficiaries is allowed to utilize the power to the extent allocated to him. It is not the case that purchases by each of the bulk benefici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parately or together) any, (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g)furniture; or (h) fittings, whether or not any or all of the above are owned by the payee; (ii) where any income is credited to any account, whether called 'suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 13. The case of the Assessing Officer, which has been sustained in the first appeal, is that since expression rent , for the purpose of section 194-1, includes any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of machinery, plant or equipment , and since the assessee has made the payments towards transmission charges for use of the machinery, plant and equipment collectively constituting mode of transmission of power , the provisions of section 194-I come into play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of section 194-I, the control and possession , in legal terms, of an asset may not be needed to be with the person benefitting from the asset in question, it is a condition precedent for invoking section 194-I that the asset, for the use of which the payment in question is made, should have some element of its control by the assessee. Here is a case in which 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. 16. While on the issue of distinction between use of an asset and benefit from an asset, we may usefully refer to the f ol lowing distinction brought out by the Karnataka High Court between leasing out of equipment and the use of equipment by its customer. This was done in the case of Lakshmi Audio Visual Inc v. Asst. Commr. of Commercial Taxes [2001] 124 STC 426 (Karn), which has been followed by Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. Director of Income-tax [2011] 332 ITR 340 (Delhi), in the following terms (page 366 of 332 ITR): 9 . Thus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of a customer (say a factory) entering into a contract with the transport operator, under which the transport operator has to provide a lorry to the customer, between the hours 8.00 a.m. to 8.00 p.m. at the customer's factory for its use, at a fixed hire per day or hire per km. subject to an assured minimum, for a period of one month or one week or even one day; and under the contract, the transport operator is responsible for making repairs apart from providing a driver to drive the lorry and filling the vehicle with diesel for running the lorry. The transaction involves an identified vehicle belonging to the transport operator being delivered to the customer and the customer is given the exclusive and effective control of the vehicle to be used in any manner as it deems fit; and during the period when the lorry is with the customer, the transport operator has no control over i t. The transport operator renders no other service to the customer...... 17. It is thus clear that 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and could not have been, in dispute that the payment for hotel room constitutes payment for the use of' an asset-the precise point of controversy in the present decision. Clearly, a hotel customer pays for the use of or the right to the use of the hotel room. It is for the same distinguishing feature that decisions in the cases of J. C. Bansal v. TRO [2009] 313 ITR (AT) 215 (Indore) and CIT v. Reebok India Co. [2007] 291 ITR 455 (Delhi ) are not relevant in the present context. 19. It is also important to bear in mind the fact that by the virtue of insertion of the Explanation to section 191 with effect from June 1, 2003, a person can be treated as an assessee in default under section 201(1) only when there is lapse in deduction of tax at source on his part and, in addition to this lapse, the recipient of income has also failed to pay such tax directly. The reasons are not difficult to fathom. Proceedings under section 201(1) are not penal proceedings. These are vicarious proceedings to make good the shortfall in tax collection, and when the tax liability is duly discharged by the recipient of income embedded in the payment, such a vicarious liability cannot be invoked. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced in section 194-I with effect from July 2006, is prospective or clarificatory is also, given our findings that, even on the touchstone of the definition of rent under the aforesaid provision, the payment for transmission of power will not constitute rent , not really relevant in the present context, and we see no need to deal with the same either. 20. In view of the above discussions, and bearing in mind entirety of the case, we are of the considered view that the provisions of section 194-I cannot apply in respect of payments made for transmission of power by the PGCIL, on the facts of the case before us. Accordingly, the impugned demands raised under section 201(1) read with sections 194-land 201(1A) read with section 201(1A) are cancelled. The assessee gets the relief accordingly . 5. Similar view was also taken by ITAT Cuttack Bench in the case of GRIDCO Ltd in ITA No.404/CTK/201 1 dated 17.11.2011. In view of the detailed discussions made by the Coordinate Benches in the above cases and since the agreement entered by assessee with MSETCL. and PGCIL are similar in nature, we hold that the payments made to the above companies cannot be considered as a 'rent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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