TDS not applicable on Wheeling & Transmission charges u/s 194J/194I if agreement entered is on principal to principal basis

Brief about Case

The assessee company was incorporated on 31.05.2005 pursuant to the reorganization of the Maharashtra State Electricity Board. The assessee purchases power from various sources and distributes and sells to its consumers. For the purpose of transmission of power, it has entered into ‘Bulk Power Transmission Agreement’ (BPTA) with Maharashtra State Electricity Transmission Company Limited (MSETCL) and Power Grid Corporation of India Ltd (PGCIL). During the course of survey conducted on 18.12.2008, it was noticed that the assessee had made payment to MSETCL and PGCIL under the BPTAs without deducting tax at source. A.O. found the payment to be in the nature of ‘Fees for technical services’ as mentioned in section 194J and accordingly the assessee was treated in default u/s 201(1) of the Act. Being aggrieved with the assessment order, the assessee filed an appeal before the CIT(A) who dismissed the appeal of the assessee preferring to an alternate interpretation to that of the AO, namely, the Wheeling and Transmission (WT) Charges constituted ‘rent’ and thereby inviting application of section 194-I of the Act. Being aggrieved the assessee filed an appeal before the ITAT. The Tribunal allowed the appeal of the assessee by relying on the Tribunal, Mumbai ‘H’ Bench order dated 30th November, 2011 in the case of Chhattisgarh State Electricity Board (CSEB) being ITA No.20 to 23/BLPR/2010 and an order dated 17th November, 2011 in the case of GRIDCO Ltd. in ITANo.404/CTK/2011 passed by the Cuttack Bench.

Substantial Question of Law

The revenue proposed the following questions to be substantial question of law.

(a) Whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified inholding that the payments of wheeling and transmission charges made by the assessee to entities like Maharashtra State Electricity Transmission Company Limited (MSETCL) and Power Grid Corporation of India Limited (PGCIL) for the use of transmission lines or other infrastructure i.e. plant, machinery and equipment could not be termed as rent under the provisions of section 194I of the Act and consequently the provisions of sections 201 and 201(1A) could not be applied ?

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