TMI Blog2012 (8) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... draw the electrical power purchased from PGCIL's transmission lines in an agreed manner - in a situation in which the payment is made only for the purpose a specific act, i.e. power transmission in this case, and even if an asset is used in the said process, the payment cannot be said to be for the use of an asset - section 194-I has no application so far as the impugned payments for transmission of electricity is concerned. 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 - as the provisions of section 194-I cannot apply in respect of payments made for transmission of power by the PGCIL , the impugned demands raised under section 201(1) read with sections 194-I and 201(1A) read with section 201(1A) are cancelled - in favour of assessee. - I.T.A. No. 2872/Mum/2010 - - - Dated:- 27-6-2012 - B. Ramakotaiah And Vivek Varma, JJ. Appellant by : Arvind Sonde Respondent by : Subachan Ram,CIT-DR Per B. Ramakotaiah, A.M. This is an appeal by assessee against the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted . 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 the ITAT Cuttack Bench, Cuttack in the case of GRIDCO Ltd in ITA No.404/CTK/2011 dated 17.11.2011. Since the facts are similar in all the cases and deduction of TDS was considered under section 194I by AO on the transmission charges paid, we extract the relevant order of the Coordinate Bench in the case of Chhattisgarh State Electricity Board (Supra) which decided the issue as under: 10.We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 11. We find that the power purchase agreement entered into by the assessee with NTPC (copy placed before us at pages 15 to 27 of the paper book), specifically provides that power shall be made available by the NTPC at the busbars of the station and it shall be obligation and responsibility of the CSEB to make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The power available at the delivery points, collectively for all 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 beneficiary can be physically identified and that particular beneficiary is only allowed to use that physically identified portion of power. Strictly speaking, therefore, it is not the transmission of power from one point to another but availability of power on the entire power grid or transmission lines enabling the beneficiary to utilize the power to the extent of his allocation. On these facts, the question that requires our adjudication is whether or not the payment for transmission charges can be termed as rent for the purposes of section 194-I of the Act. 12. Let us now take a look at the statutory provision with regard to tax withholding from rent payments, which is set out in section 194-I of the Act, and analyze the same. Section 194-I provides as follows : Any person, not being an individual or a Hindu undivided family, who is responsible for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of section 194-I, 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 on the facts of this case. 14. The core issue that we must deal with is whether the present arrangement under the bulk power transmission agreement can be termed to be covered by the scope of expression any other agreement or arrangement for the use of appearing in Explanation (i) to section 194-I. 15. Explanation (i) to section 194-I, as we have noted above, defines rent as any payment, by whatever name called, under any lease, sub-lease, or tenancy or any other agreement or arrangement for the use of land, building, plant, machinery or equipment, etc. As evident from a plain reading of the agreements under which impugned payments have been made, the payments have been made for the services of transmission of electricity and not the use of transmission w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 if the transaction is one of leasing/hiring/letting simpliciter under which the possession of the goods, i.e., effective and general control of the goods is to be given to the customer and the customer has the freedom and choice of selecting the manner, time and nature of use and enjoyment, though within the frame work of the agreement, then it would be a transfer of the right to use the goods and fall under the extended definition of 'sale'. On the other hand, if the customer entrusts to the assessee the work of achieving a certain desired result and that involves the use of goods belonging to the assessee and rendering of several other services and the goods used by the assessee to achieve the desired result continue to be in the effective and general control of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it. 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 asset. However, in a situation in which the payment is made only for the purpose a specific act, i.e. power transmission in this case, and even if an asset is used in the said process, the payment cannot be said to be for the use of an asset. When control of the asset (transmission lines in the present case) 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. Viewed in this perspective, section 194-I has no application so far as the impugned payments for transmission of electricity is concerned. For this short reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce 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. The lapse of non deduction or short deduction of tax at source is to be visited with several consequences. The first and foremost consequence is that the tax deductor has to make good the shortfall in tax deduction and the tax deductor also has to compensate the revenue by way of interest for the period of late realisation of this tax to the Revenue authorities. These provisions, contained in section 201(1) and 201(1A), are set out in Chapter XVIIB titled as Collection and Recovery of Tax . The next set of consequences are contained in section 271C and section 276B, covered by Chapter XXI- Penalties imposable and Chapter XXII- Offences and prosecutions respectively. Section 276B, as it stands now, is not applicable on the facts of this case which co ..... 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