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2014 (4) TMI 319 - HC - Income TaxOrder u/s 197 of the Act challenged – Request to determine lower rate of TDS rejected u/s 194I of the Act - Whether the activity of provision of passive infrastructure by Indus to the mobile operator constitutes renting within the extended definition under Explanation to Section 194-I or whether the activity is service, pure and simple without any element of hiring or letting out of premises – Assessee contended that there is no intention to rent or lease the premises or facilities or equipment and what is contemplated by the parties is a service - Held that:- The decision in FAQIR CHAND GULATI Versus UPPAL AGENCIES PVT. LTD. [2008 (7) TMI 159 - SUPREME COURT] followed - There cannot be any generic observation on the question whether a particular transaction amounts to leasing, or letting out or hiring premises or other properties - Courts’ endeavor should in all cases be to ascertain the parties’ “operative intention” and the mandate of the law, which defines what is rent or amounts to letting out, etc. - Section 194-I through the Explanation does enlarge the scope of what can be termed as traditional concept of letting or renting, by using the expression “other arrangement” aimed at permitting “use” of either immovable property (land and buildings) or other properties (plant, equipment, machinery, etc). The Parliamentary intent was clear that transactions - the consideration for which otherwise may not be covered by rent - also ought to be within Section 194-I, by use of the expression “other … arrangement for the use” - Whilst there is no doubt that the intention of the parties was to ensure that the use of technical and specialized equipment maintained by Indus should be resorted to - at the same time, there is no escape from the fact that the infrastructure is given access to, and in that sense, it is given for the “use” of the mobile operators - The towers in a sense are the neutral platform without which mobile operators cannot operate - If one goes back in time each mobile operator - which is now Indus’ customer - used to carry out this activity, by necessarily renting premises and installing the same equipment. The rent paid then to the owner, whenever such transactions were leases, were business expenses - Yet leases or such like arrangement had to be resorted to - That situation has remained unchanged - instead of the mobile operator performing the task, it is done exclusively by Indus - The dominant intention in the transactions - between Indus and its customers - is the use of the equipment or plant or machinery - thus, the contention of Indus, that the transaction is not “renting” at all, is incorrect - The underlying object of the arrangement or agreement (in the MSA) was the use of the machinery, plant or equipment, i.e. the passive infrastructure - That it is necessary to house these equipment in some premises is entirely incidental. The petition is entitled to succeed to the extent that the tax deductions to be made by Indus are to be at the rate directed in Section 194-I (a) for the use of any machinery or plant or equipment at the rate indicated for that provision, i.e. two percent – decided in favour of Assessee.
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