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TMI Blog2012 (8) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmission Company Ltd (MSETCL) and Power Grid Corporation of India Ltd (PGCIL). The transmission tarrif and terms & conditions for the power to be transmitted by PGCIL from the Central Sector Station shall be as per the notification issued by the Ministry of Power/CERC from time to time. In terms of these agreements, assessee paid billing and transmission charges to MSETCL and PGCIL for transmission of electricity by using a transmission line from the generation point to the distribution point. AO in a survey conducted under section 133A noticed that assessee paid an amount of Rs. 1554.10 crores towards transmission charges upto December, 2008 and in the year relevant for the assessment year paid to an extent of Rs. 1961.20 crores on which the TDS of Rs. 176.08 crores was supposed to have been deducted by assessee under section 194I 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 Rs. 176.08 crores and interest thereon under section 201(1A) to the extent of Rs. 8.238 crorees totalling to Rs. 184.2983 crores was made. Assessee was unsuccessful before the CIT (A) and rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conditions". This agreement provides that "Power Grid shall operate and maintain the transmission system belonging to it in the western region as per agreed guidelines and the directives of the Western Regional Electricity Board and the regional load dispatch centres, and co-operate with the bulk power beneficiaries of the region, so as to maintain the system parameters within acceptable/ reasonable limits except where it is necessary to take measures to prevent imminent damage to any equipment". In respect of these services, the bulk power beneficiaries are to pay to PGCIL a monthly charges computed in the manner set out in clause 9 of the said agreement. This clause, in turn, refers to formula set out in 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 ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, the payee, does not exceed (one hundred eighty thousand rupees) : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. Explanation : For the purposes of this section, (i) 'rent' means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately 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 lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee does not extend beyond the transmission of electricity through such lines in the sense that the same transmission lines continue to be in the control of PGCIL for transmission of electricity for other entities and for all practical purposes. Even as electricity purchased by the assessee is transmitted to the assessee from the NTPC busbar to its landing points, the same transmission lines continue to be engaged in similar transmission of electricity for other entities and the assessee has no say in the manner in which such transmission lines can be controlled and used by the PGCIL. Undoubtedly, for the purpose of an arrangement being termed as in the nature of rent for the purpose 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is obviously in the negative, as there is no transfer of the 'use of the lorry' for the following reasons : (i) The lorry is never in the control, let alone effective control of the customer ; (ii) the carrier decides how, when and where the lorry moves to the destination, and continues to be in effective control of the lorry ; (iii) the carrier can at any point (of time or place) transfer the consignment in the lorry to another lorry ; or the carrier may unload the consignment enroute in any of his godowns, to be picked up later by some other lorry assigned by the carrier for further transportation and delivery at destination. (ii) On the other hand, let us consider the case 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194-I be held to be applicable. We are unable to see any merits in this submission. When an aircraft is parked in a portion of land in the airport, such a portion of land could still be viewed as being effectively used by the airlines owning the aircraft, and the same is the position with regard to the landing strip. The learned Departmental representative has also referred to the decision of the Hon'ble Andhra Pradesh High Court in the case of Krishna Oberoi v. Union of India [2002] 257 ITR 105 (AP) but we see no merits in this defence either. This case only deals with the question whether payment for hotel rooms will be covered by the definition of rent, but then it was not, 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 importa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as taxes payable by the recipient of income are paid, the provisions of section 201(1) cannot be pressed into service. The authorities below were thus quite unjustified in brushing aside the assessee's contentions to the effect that since PGCIL has already discharged all his income-tax obligations, demands under section 201(1) cannot be raised at all. However, now that we have held, on merits, that payments made for transmission of electricity by the transmission lines owned by PGCIL do not constitute payment for rent under section 194-I, it is not really necessary to go into this aspect of the matter. The question as to whether the definition of expression "rent", 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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