Section 194I – TDS not deductible on transmission and wheeling charges paid by power trading companies as same in not rent

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.

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK

ITA No. 404/CTK/2011

(Assessment Year 2008-09)

M/s. GRID-CO Limited,

Versus

Asst. Commissioner of Income- Tax

Date of pronouncement : 17.11.2011

ORDER

Shri K.S.S. Prasad Rao, JM : The assessee has filed this appeal having been aggrieved against the order dt.03.08.2011 of the Commissioner of Income-tax (Appeals) for the Assessment Year 2008-09.