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Case Law Details

Case Name : M/s. Grid-Co Limited Vs Asst. Commissioner of Income- Tax (ITAT Cuttack)
Appeal Number : ITA No. 404/CTK/2011
Date of Judgement/Order : 17/11/2011
Related Assessment Year : 2008-09
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GRID-CO Limited Vs. ACIT (ITAT Cuttack)-The Tribunal observed that Circular No.5 and Circular No.736 had given restricted meaning to the word ‘rent’. However, in view of the decisions relied by the tax department, the word ‘rent’ is to be given a wider meaning. Accordingly, the contention of the taxpayer on this aspect was rejected. Since, the taxpayer supplied power through the transmission lines of OPTCL, the taxpayer merely obtained a service from OPTCL which had the infrastructure in the form of equipment and transmission lines.

Therefore, it could not be said that the taxpayer was using the equipment. Further the payment made by the taxpayer was for service of transmission of power and not for use of plant and/or equipment. Relying on the decision of Dell International P. Ltd. it was held that the words used in relation to ‘any equipment’ indicate that there must be some positive act of utilisation, application or employment of the equipment for the desired purposes. The advantage taken from sophisticated equipment installed and provided by another cannot be said that the customer uses the equipment. It would be a case of a customer merely making use of the facility without himself using the equipment. If the customers did nothing to add for the equipment, not exercise any possessory right in relation thereto it can only be said that he made use of the facility created by service provider who was the owner of the entire network and related equipment’s. In view of above, the Tribunal held that Section 194-I of the Act is not applicable in respect of the transmission and wheeling charges. The Tribunal relied on the decision in the case of Vodafone Essar Ltd where it was held that the subscriber of Vodafone who is entitled to use the roaming service merely obtains a service from the other service provider, with whom Vodafone had a GSM Roaming Agreement. He has neither seen the equipment nor has any direct contact with the same. Therefore, the payment was not held as ‘rent’. This view was also supported by the Circular No. 5 and Circular No. 736. Observation of the Tribunal in the case of DIS COM would have no impact in the case of the taxpayer as the taxpayer was not participated in those proceedings.


ITA No. 404/CTK/2011

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  1. shruti says:

    electricity is a kind of service then why we dont charge service tax and deduct TDS on payment of electricity expenses?? Please do reply as soon as possible?

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