DCIT (TDS) RG 2(1), MUMBAI V. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.LTD, MUMBAI

ITA 6212/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83983 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Recovery proceedings; Business income; Non-deduction of tax
• Section: 133A; 201(1)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.6212 TO 6215/MUM/2012 (A.YS. 2006-07 TO 2009-10) ACIT (TDS) RANGE-2(1), ROOM NO.702, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BLDG., CHARNI RD. MUMBAI-400 002. / VS. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. 1 ST FLR. PRAKASHGAD, ANAND KANEKAR MARG, BANDRA (E) MUMBAI-400 051. ( ! / // / APPELLANT) ( '# ! / RESPONDENT) P.A. NO.AAECM 2933 K ! $ % $ % $ % $ % /APPELLANT BY : SHRI VIVEK BATRA '# ! $ % $ % $ % $ % /RESPONDENT BY : S/ SHRI J.D. MISTRY, NEERAJ SETH, K.K. VED - ADVOCATES $ &'( / / / / DATE OF HEARING : 29.10.2014 )*+ $ &'( / DATE OF PRONOUNCEMENT : 29.10.2014 ,- ,- ,- ,- / / / / O R D E R PER JOGINDER SINGH (JM) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS AL L DATED 27/7/2012 ON THE GROUND THAT THE LD. CIT(A) ERRED I N LAW AND ON FACTS IN HOLDING THAT PAYMENTS MADE FOR USE OF TRANSMISSION LINES OR OTHER INFRASTRUCTURE I.E. PLANT AND MACHINERY COULD NOT B E TERMED AS RENT AND ITA NO.6212 TO 6215 /MUM/2013 2 FURTHER HOLDING THAT TRANSMISSION CHARGES CANNOT BE CONSIDERED AS RENT UNDER THE PROVISION OF SECTION 194 I OF THE ACT, CO NSEQUENTLY PROVISION OF SEC. 201 AND 201(1A) CANNOT BE APPLIED WITHOUT APPR ECIATING ALTERNATIVE PROVISION OF SEC. 194 J OF THE ACT. 2. AT THE TIME OF HEARING THE LD. DR SHRI VIVEK BATR A DEFENDED THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER BY ADV ANCING HIS ARGUMENT IDENTICAL TO THE GROUND RAISED. ON THE OTH ER HAND SHRI J.D. MISTRY ALONG WITH SHRI NEERAJ SETH AND SHRI K.K. VED SUPPORTED THE CONCLUSION DRAWN IN THE IMPUGNED ORDERS BY FURTHER PLEADING THAT THE IMPUGNED ISSUE IS COVERED IN THE OWN CASE OF THE AS SESSEE FOR ASSESSMENT YEAR 2007-08 AND 2008-09. RELIANCE WAS A LSO PLACED UPON THE DECISION IN DCIT (TDS) VS. RELIANCE INFRASTRUCT URE LTD. (ITA NOS.2814 TO 2819/MUM/2013 DT.20/8/2014). THE ASSESS EE ALSO FILED PAPER BOOK RUNNING INTO 1 TO 60 PAGES MOSTLY CONTAI NING THE AFORESAID ORDERS OF THE TRIBUNAL . 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID O RDER DATED 27/6/2012 OF THE TRIBUNAL IN THE CASE OF THE ASSESS EE ITSELF (ITA NO.2872/MUM/2010) FOR READY REFERNCE:- ITA NO.6212 TO 6215 /MUM/2013 3 2. ASSESSEE IS A COMPANY ESTABLISHED BY THE GOVT. OF MAHARASHTRA AND WAS INCORPORATED ON 31.5.2005 PURSU ANT TO THE PROVISIONS OF SECTION 131, 133 AND 134 OF PART- XII OF THE ELECTRICITY ACT, 2003 RELATING TO THE REORGANIZATIO N OF MAHARASHTRA STATE ELECTRICITY BOARD, BY THE GOVT. O F MAHARASHTRA WHICH NOTIFIED FOUR COMPANIES, WHILE RE STRUCTURING THE ERSTWHILE MAHARASHTRA STATE ELECTRICITY BOARD O N 6.6.2005. ASSESSEE PURCHASES POWER FROM VARIOUS SOU RCES AND DISTRIBUTES AND SELLS TO THE CONSUMERS. THE POWER F ROM THE GENERATION POINT TO THE CUSTOMERS IS TRANSMITED THR OUGH THE TRANSMISSION NETWORK OF MAHARASHTRA STATE ELECTRICI TY TRANSMISSION COMPANY LTD (MSETCL) AND POWER GRID CORPORATION OF INDIA LTD (PGCIL). THE TRANSMISSION TARRIF AND TERMS & CONDIT IONS FOR THE POWER TO BE TRANSMITTED BY PGCIL FROM THE CENTRAL SECTOR STA TION SHALL BE AS PER THE NOTIFICATION ISSUED BY THE MINISTRY OF POWER/CE RC FROM TIME TO TIME. IN TERMS OF THESE AGREEMENTS, ASSESSEE PAID B ILLING AND TRANSMISSION CHARGES TO MSETCL AND PGCIL FOR TRANSM ISSION OF ELECTRICITY BY USING A TRANSMISSION LINE FROM THE G ENERATION POINT TO THE DISTRIBUTION POINT. AO IN A SURVEY CONDUCTED UN DER SECTION 133A NOTICED THAT ASSESSEE PAID AN AMOUNT OF Z1554. 10 CRORES TOWARDS TRANSMISSION CHARGES UPTO DECEMBER, 2008 AN D IN THE YEAR RELEVANT FOR THE ASSESSMENT YEAR PAID TO AN EX TENT OF Z1961.20 CRORES ON WHICH THE TDS OF Z176.08 CRORES WAS SUPPO SED TO HAVE BEEN DEDUCTED BY ASSESSEE UNDER SECTION 1941 OF THE INCOME TAX ACT. SINCE ASSESSEE HAS NOT FURNISHED THE DETAI LS WHETHER THE DEDUCTEE COMPANY HAS ALREADY PAID TAXES ON THE SAID AMOUNT, THE ENTIRE DEMAND OF Z176.08 CRORES AND INTEREST TH EREON UNDER SECTION 201(1A) TO THE EXTENT OF Z8.238 CROREES TOTALLING T O Z184.2983 CRORES WAS MADE. ASSESSEE WAS UNSUCCESSFUL BEFORE THE CIT (A) AND RAISED THE FOLLOWING GROUNDS: 'GROUND NO.1 THE LEARNED CIT (A) ERRED IN CONFIRMIN G THE LEVY OF TDS OF .184.32 CRORES ON WHEELING AND TRANSMISSION CHARTGES PAID TO ENTITIES LIKE THE MSETCL (MAHARASH TRA STATE ELECTRICITY TRANSMISSION COMPANY LIMITED) AND PGCIL (POWER GRID CORPORATION OF INDIA LIMITED), WITHOUT PROPER CONSI DERATION OF THE UNDERLYING FACTS AND THE PROVISIONS OF THE ACT AND MUST THEREFROE BE DELETED'. 3. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D R. 4. IN THE COURSE OF ARGUMENTS IT WAS FAIRLY ADMITTED B Y 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 B Y 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 U NDER SECTION1941 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 I SSUE AS UNDER: ITA NO.6212 TO 6215 /MUM/2013 4 '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 ENTER ED 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 ST ATION AND IT SHALL BE OBLIGATION AND RESPONSIBILITY OF THE CS EB TO MAKE THE REQUIRED ARRANGEMENT FOR EVACUATION OF POWER FROM S UCH DELIVERY POINTS OF NTPC'. IT IS PURSUANT TO THESE O BLIGATIONS THAT THE ASSESSEE, ALONG WITH OTHER BULK POWER BENEFICIA RIES, NAMELY, M. P. STATE ELECTRICITY BOARD, GUJARAT ELECTRICITY BOA RD, MAHARASHTRA STATE ELECTRICITY BOARD, ELECTRICITY DE PARTMENT- GOVERNMENT OF GOA, ADMINISTRATION OF DAMAN & DIU, A ND ELECTRICITY DEPARTMENT-ADMINISTRATION OF DADRA AND NAGAR HAVELI , HAS ENTERED INTO A 'BULK POWER TRANSMISSION AGREEMENT' WITH PGC IL. THE PREAMBLE OF THIS AGREEMENT, INTER ALIA, NOTES THAT THE PGCIL 'IS DESIROUS TO TRANSMIT ENERGY FROM THE CENTRAL SECTOR POWER STATION(S) TO THE BULK POWER BENEFICIARIES AND THAT THE SAID BULK POWER BENEFICIARIES ARE DESIROUS OF RECEIVING THE SAME THROUGH POWER GRID TRANSMISSION SYSTEM ON MUTUALLY AGREED T ERMS AND CONDITIONS'. THIS AGREEMENT PROVIDES THAT 'POWER GR ID SHALL OPERATE AND MAINTAIN THE TRANSMISSION SYSTEM BELONGING TO I T IN THE WESTERN REGION AS PER AGREED GUIDELINES AND THE DIR ECTIVES OF THE WESTERN REGIONAL ELECTRICITY BOARD AND THE REGIONAL LOAD DISPATCH CENTRES, AND CO-OPERATE WITH THE BULK POWE R BENEFICIARIES OF THE REGION, SO AS TO MAINTAIN THE SYSTEM PARAMETERS WITHIN ACCEPTABLE/ REASONABLE LIMITS EXCEPT WHERE IT IS NE CESSARY TO TAKE MEASURES TO PREVENT IMMINENT DAMAGE TO ANY EQU IPMENT'. IN RESPECT OF THESE SERVICES, THE BULK POWER BENEFICIA RIES ARE TO PAY TO PGCIL A MONTHLY CHARGES COMPUTED IN THE MANNER S ET OUT IN CLAUSE 9 OF THE SAID AGREEMENT. THIS CLAUSE, IN TUR N, 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 BENEFICIA RY TO THE TOTAL SALE OF POWER FROM THAT DELIVERY POINT. IT IS, HOWEVER, NOT IN DI SPUTE THAT THE TRANSMISSION LINES ARE IN THE PHYSICAL CON TROL OF PGCIL, THESE ARE MAINTAINED AND OPERATED BY THE PGCIL AND, SO FA R AS THE ASSESSEE IS CONCERNED, ITS INTEREST IN THE TRANSMIS SION LINES IS RESTRICTED TO THE FACT THAT ELECTRICAL POWER PURCHA SED BY THE ASSESSEE, SIMULTANEOUSLY ALONG WITH ELECTRICAL POWE R PURCHASED BY OTHER BULK POWER BENEFICIARIES, IS TRANSMITTED T HROUGH THESE TRANSMISSION LINES. THE WAY IT WORKS IS LIKE THIS. THE POWER AVAILABLE AT THE DELIVERY POINTS, COLLECTIVELY FOR ALL THE BU LK POWER ITA NO.6212 TO 6215 /MUM/2013 5 BENEFICIARIES, IS LOADED FOR TRANSMISSION ON THESE TRANSMISSION LINES OR POWER GRID AND EACH OF THE BENEFICIARIES I S ALLOWED TO UTILIZE THE POWER TO THE EXTENT ALLOCATED TO HIM. I T 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 SP EAKING, 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 U TILIZE THE POWER TO THE EXTENT OF HIS ALLOCATION. ON THESE FACTS, THE QUEST ION 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 PROVISI ON 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 UND IVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHE QUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME -TAX THEREON AT THE RATE OF - (A) TWO PER CENT FOR THE USE OF ANY MACHI NERY OR PLANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY T O BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON T OTHE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED (ONE HUNDRED EIGHTY THOUSAND RUPEES): PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDI VIDED 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 S UCH 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 CALL ED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANG EMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR ITA NO.6212 TO 6215 /MUM/2013 6 (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY B UILDING); 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, W HETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCO UNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY.' 13. THE CASE OF THE ASSESSING OFFICER, WHICH HAS BE EN SUSTAINED IN THE FIRST APPEAL, IS THAT SINCE EXPRESSION 'RENT', FOR THE PURPOSE OF SECTION 194-1, INCLUDES 'ANY PAYMENT, BY WHATEVER NAME CALL ED, UNDER ANY LEASE, SUBLEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT' FOR THE USE OF MACHINERY, PLANT OR EQU IPMENT, AND SINCE THE ASSESSEE HAS MADE THE PAYMENTS TOWARD S TRANSMISSION CHARGES FOR USE OF THE MACHINERY, PLANT AND EQUIPMENT COLLECTIVELY CONSTITUTING MODE OF TRANSMISSION OF POWER, THEPROV ISIONS OF SECTION 194-I COME INTO PLAY ON THE FACTS OF THIS C ASE. 14. THE CORE ISSUE THAT WE MUST DEAL WITH IS WHETHER TH E PRESENT ARRANGEMENT UNDER THE BULK POWER TRANSMISSION AGREE MENT CAN BE TERMED TO BE COVERED BY THE SCOPE OF EXPRESSION ANY OTHER AGREEMENT OR ARRANGEMENT 'FOR THE USE OF' APPEARING IN EXPLANATI ON (I) TO SECTION 194-I. 15. EXPLANATION (I) TO SECTION 194-1, 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 MAD E FOR THE SERVICES OF TRANSMISSION OF ELECTRICITY AND NOT THE USE OF TRANSMISSION WIRES PER SE. IT IS A SIGNI FICANT FACT THAT THESE TRANSMISSION LINES ARE NOT ONLY BEING USED FO R TRANSMISSION OF ELECTRICITY TO THE ASSESSEE BUT ALSO OF TRANSMISSIO N TO ELECTRICITY TO VARIOUS OTHER ENTITIES. THE TRANSMISSION LINES CONT INUE TO BE NOT ONLY UNDER CONTROL AND POSSESSION OF THE PGCIL IN LEGAL TERMS, BUT, WHAT IS MORE IMPORTANT, THESE TRANSMISSION LINES AR E EFFECTIVELY IN THE CONTROL OF PGCIL, WITHOUT ANY IN VOLVEMENT OF THE ASSESSEE IN ACTUAL OPERATIONS OF THE SAME. O N THESE FACTS, IN OUR HUMBLE UNDERSTANDING, THE ASSESSEE HAS MADE THE PAYMENTS FOR TRANSMISSION OF ELECTRICITY IN WHICH TRANSMISSION L INES HAVE BEEN USED RATHER THAN FOR THE USE OF TRANSMISSION LINES PER SE. THE PAYMENTS COULD BE SAID TO HAVE BEEN MADE FOR 'THE U SE OF TRANSMISSION LINES' IN A CASE IN WHICH THE OBJECT O F CONSIDERATION FOR WHICH PAYMENTS ARE MADE WAS THE USE OF TRANSMISSION LINES SIMPLICITOR, AND SUCH A USE BY THE ASSESSEE DOES NO T EXTEND BEYOND THE TRANSMISSION OF ELECTRICITY THROUGH SUCH LINES IN THE SENSE THAT THE SAME TRANSMISSION LINES CONTINUE TO BE IN THE CONTROL OF ITA NO.6212 TO 6215 /MUM/2013 7 PGCIL FOR TRANSMISSION OF ELECTRICITY FOR OTHER ENT ITIES AND FOR ALL PRACTICAL PURPOSES. EVEN AS ELECTRICITY PURCHASED B Y 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 ENTIT IES 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 REN T FOR THE PURPOSE OF SECTION 194-I, THE 'CONTROL' AND 'POSSESSION', I N LEGAL TERMS, OF AN ASSET MAY NOT BE NEEDED TO BE WITH THE PERSON BENEF ITTING 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 C ONTROL BY THE ASSESSEE. HERE IS A CASE IN WHICH THE ASSESSEE HAS NO CONTROL OVER THE OPERATIONS OF THE TRANSMISSION LINES, AND ALL T HAT HE GETS FROM THE ARRANGEMENTS IS THAT HE CAN DRAW THE ELECTRICAL POWER PURCHASED FROM PGCIL'S TRANSMISSION LINES IN AN AGREED MANNER . 16. WHILE ON THE ISSUE OF DISTINCTION BETWEEN USE O F AN ASSET AND BENEFIT FROM AN ASSET, WE MAY USEFULLY REFER TO THE FOLLOWING DISTINCTION BROUGHT OUT BY THE KARNATAKA HIGH COURT BETWEEN LEASING OUT OF EQUIPMENT AND THE USE OF EQUIPMENT B Y ITS CUSTOMER. THIS WAS DONE IN THE CASE OF LAKSHMI AUDIO VISUAL I NC V. ASST. COMMR. OF COMMERCIAL TAXES [2001] 124 STC 426 (KARN ), WHICH HAS BEEN FOLLOWED BY HON'BLE DELHI HIGH COURT IN TH E CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD. V. DIRECTOR O F 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/HIRIN G/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 TH E 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 DEFINITIO N OF 'SALE'. ON THE OTHER HAND, IF THE CUSTOMER ENTRUSTS TO THE ASSESSEE THE WORK OF ACHIEVING A CERTAIN DESIRED RESULT AND THAT INVO LVES 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 R ESULT CONTINUE TO BE IN THE EFFECTIVE AND GENERAL CONTROL OF THE ASSE SSEE, THEN, THE TRANSACTION WILL NOT BE A TRANSFER OF THE RIGHT TO USE GOODS FALLING WITHIN THE EXTENDED DEFINITION OF 'SALE'. LET ME NOW CLARIFY THE POSITION FURTHER, WITH AN ILLUSTRATION WHICH IS A VARIATION OF THE ILLUSTRATION USED BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF RASHTRIYA ISP AT NIGAM LTD. V. CTO. (I) A CUSTOMER ENGAGES A CARRIER (TRANSPORT OPERATOR) TO TRANSPORT ONE CONSIGNMENT (A FRILL LORRY LOAD) FROM PLACE A TO B, FOR AN AGREED CONSIDERATION WHICH IS CALLED FREIGHT CHARGES OR LORRY HIRE. THE CARRIER SENDS ITS LORRY TO THE CUSTOMER'S DEPOT, PICKS UP THE CONSIGNMENT AND ITA NO.6212 TO 6215 /MUM/2013 8 PROCEEDS TO THE DESTINATION FOR DELIVERY OF THE CONSIGNMENT. THE LORRY IS USED EXCLUSIVELY FOR THE CUSTOMER'S CONSIGNMENT FROM THE TIME OF LOADING, TO THE TIME OF UNLOADING AT DESTINATION. CAN IT BE SAID THAT THE RIGHT TO USE OF THE LORRY HAS BEEN TRANSFERRED BY THE CARRIER TO THE CUSTOMER ? THE ANSWER IS OBVIOUSLY IN THE NEGATIVE, AS THERE IS NO TRANSFER OF THE 'USE OF THE LOR' 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. SUBJEC T 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 AND FILLING THE VEHICLE WITH DIESEL FOR RUNNING THE LORRY. THE TRANSACTION INVOLVES AN IDENTIFIED VEHICLE BELONGING TO THE TRANSPORT OPERATOR BEING DELIVERED TO THE CUSTOMER AND THE CUSTOMER IS GIVEN THE EXCLUSIVE AND EFFECTIVE CONTR OL OF THE VEHICLE 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 P AYMENT IN MADE FOR THE USE OF AN ASSET SIMPLICITER, WHETHE R WITH CONTROL AND POSSESSION IN ITS LEGAL SENSE OR NOT, THE PAYME NT 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 I AN ASSET IS U SED IN THE SAID PROCESS, THE PAYMENT CANNOT BE SAID TO BE FOR THE U SE OF AN ASSET. WHEN CONTROL OF THE ASSET (TRANSMISSION LINE S IN THE PRESENT CASE) ALWAYS REMAINS WITH THE PGCIL, ANY PA YMENT MADE TO THE PGCIL FOR TRANSMISSION OF POWER ON THE TRANSMIS SION LINES AND ITA NO.6212 TO 6215 /MUM/2013 9 INFRASTRUCTURE OWNED CONTROLLED AND IN PHYSICAL POS SESSION 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 FA R AS THE IMPUGNED PAYMENTS FOR TRANSMISSION OF ELECTRICITY IS CONCERN ED. FOR THIS SHORT REASON ALONE THE IMPUGNED DEMANDS MUST BE HEL D TO UNSUSTAINABLE IN LAW. 18. WE HAVE TAKEN NOTE OF LEARNED DEPARTMENTAL REPRESEN TATIVE'S RELIANCE ON THE HON'BLE DELHI HIGH COURT'S JUDGMENT IN THE CASE OF CIT V. JAPAN AIRLINES CO. LTD. [2010]325 ITR 298 (DELHI), WHICH IN TURN FOLLOWS ITS EARLIER DECISION IN THE CASE OF UNITED AIRLINES U. CIT [2006] 287 ITR 281 (DELHI), IN SUPPORT OF THE P ROPOSITION THAT EVEN IN A SITUATION IN WHICH LANDING AND PARKING CH ARGES ARE PAID BY AIRLINES TO THE AIRPORT AUTHORITY, AND WHEN SUCH CHARGES ARE NOT IN RESPECT OF THE SPECIFIC AREA OF LAND, THE PR OVISIONS OF SECTION 194-I COME INTO PLAY. BY THE SAME LOGIC, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, TRANSMISSION C HARGES ARE PAID BY THE ASSESSEE, EVEN THOUGH THE SAME MAY NOT PERTAIN TO SPECIFIC TRANSMISSION LINES WHICH MAY BE SIMULTANEO USLY USED BY MORE THAN ONE PERSONS, THE PROVISIONS FOR TAX DEDUC TION AT SOURCE FROM RENT UNDER SECTION 194-I BE HELD TO BE APPLICABLE. WE ARE UNABLE TO SEE ANY MERITS IN THIS SUBMISSION. WH EN 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 REG ARD TO THE LANDING STRIP. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO REFERRED TO THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COU RT 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 ONL Y DEALS WITH THE QUESTION WHETHER PAYMENT FOR HOTEL ROOMS WILL BE CO VERED 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 CONTROVE RSY IN THE PRESENT DECISION. CLEARLY, A HOTEL CUSTOMER PAYS FO R THE USE OF OR THE RIGHT TO THE USE OF THE HOTEL ROOM. IT IS FOR T HE SAME DISTINGUISHING FEATURE THAT DECISIONS IN THE CASES OF J. C. BANSAL V. TRO [2009] 313 ITR (AT) 215 (INDORE) AND CIT V. REE BOK INDIA CO. [2007] 291 ITR 455 (DELHI) ARE NOT RELEVANT IN THE PRESENT CONTEXT. 19. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT BY THE VIRTUE OF INSERTION OF THE EXPLANATION TO SECTION 191 WITH EFFECT FROM JUNE 1, 2003, A PERSON CAN BE TREATED AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ONLY WHEN THERE IS LAPSE IN DEDUCTIO N OF TAX AT SOURCE 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 SECT ION 201(1) ARE NOT PENAL PROCEEDINGS. THESE ARE VICARIOUS PROCEEDI NGS TO MAKE GOOD THE SHORTFALL IN TAX COLLECTION, AND WHEN THE TAX LIABILITY IS DULY DISCHARGED BY THE RECIPIENT OF INCOME EMBEDDED IN T HE PAYMENT, SUCH A VICARIOUS LIABILITY CANNOT BE INVOKED. THE L APSE OF NON ITA NO.6212 TO 6215 /MUM/2013 10 DEDUCTION OR SHORT DEDUCTION OF TAX AT SOURCE IS TO BE VISITED WITH SEVERAL CONSEQUENCES. THE FIRST AND FOREMOST CONSEQ UENCE IS THAT THE TAX DEDUCTOR HAS TO MAKE GOOD THE SHORTFAL L IN TAX DEDUCTION AND THE TAX DEDUCTOR ALSO HAS TO COMPENSA TE THE REVENUE BY WAY OF INTEREST FOR THE PERIOD OF LATE REALISATI ON OF THIS TAX TO THE REVENUE AUTHORITIES. THESE PROVISIONS, CONTAINED IN SECTION 201(1) AND 201(1A), ARE SET OUT IN CHAPTER XVIIB TI TLED AS 'COLLECTION AND RECOVERY OF TAX'. THE NEXT SET OF C ONSEQUENCES ARE CONTAINED IN SECTION 271C AND SECTION 276B, COVERED BY CHAPTER XXI- 'PENALTIES IMPOSABLE' AND CHAPTER XXII-'OFFENCES AN D PROSECUTIONS' RESPECTIVELY. SECTION 276B, AS IT STA NDS NOW, IS NOT APPLICABLE ON THE FACTS OF THIS CASE WHICH COMES TO THE PLAY ONLY WHEN THE ASSESSEE HAS DEDUCTED THE TAX AT SOURCE BU T HE DOES NOT PAY, OR DOES NOT PAY IN TIME, THE TAXES SO DEDU CTED AT SOURCE. SECTION 271C DEALS WITH LEVY OF PENALTY FOR TOTAL OR PARTIA L FAILURE TO DEDUCT TAX AT SOURCE, I.E. FOR NON-DEDUCTION AND SHORT DEDUCTI ON OF TAX AT SOURCE. THIS PROVISION IS CLEARLY A PENALTY PROVISION WHICH IS APPLICABLE FOR THE CASES OF TAX DEDUCTOR'S NOT DISCHARGING, WHOLLY OR PARTIALLY, STATUTORY OBLIGATIONS OF DEDUCTING TAXES AT SOURCE, BUT THEN CONSIDERATIONS WHICH ARE RELEVANT FOR EXAMINING A C ASE HAVING BEEN MADE OUT FOR IMPOSITION OF PENALTY ARE, AS IS THE S ETTLED LEGAL POSITION, ALTOGETHER DIFFERENT AND THE DIFFERENT YA RDSTICKS FOR SUCH A CASE APPLY. HOWEVER, UNLIKE SECTION 271C, SECTION 201(1) IS NOT OF THE PENALTY NATURE, AND, THEREFORE, THE CORE CONSID ERATION FOR INVOKING SECTION 201(1) IS NOT THE LAPSE ON THE PAR T OF THE TAX DEDUCTOR, BUT LOSS OF REVENUE TO THE EXCHEQUER. AS LONG AS TAXES PAYABLE BY THE RECIPIENT OF INCOME ARE PAID, THE PR OVISIONS OF SECTION 201(1) CANNOT BE PRESSED INTO SERVICE. THE AUTHORIT IES BELOW WERE THUS QUITE UNJUSTIFIED IN BRUSHING ASIDE THE ASSESS EE'S CONTENTIONS TO THE EFFECT THAT SINCE PGCIL HAS ALREADY DISCHARG ED ALL HIS INCOME- TAX OBLIGATIONS, DEMANDS UNDER SECTION 201(1) CANNO T BE RAISED AT ALL. HOWEVER, NOW THAT WE HAVE HELD, ON MERITS, THAT PAYMENTS MADE FOR TRANSMISSION OF ELECTRICITY BY TH E TRANSMISSION LINES OWNED BY PGCIL DO NOT CONSTITUTE PAYMENT FOR RENT UNDER SECTION 194-1, IT IS NOT REALLY NECE SSARY TO GO INTO THIS ASPECT OF THE MATTER. THE QUESTION AS TO WHETH ER THE DEFINITION OF EXPRESSION 'RENT', INTRODUCED IN SECTION 194-I WITH EFFECT FROM JULY 2006, IS PROSPECTIVE OR CLARIFICATORY IS ALSO, GIVE N OUR FINDINGS THAT, EVEN ON THE TOUCHSTONE OF THE DEFINITION OF RENT UN DER THE AFORESAID PROVISION, THE PAYMENT FOR TRANSMISSION OF POWER WI LL NOT CONSTITUTE 'RENT', NOT REALLY RELEVANT IN THE PRESE NT CONTEXT, AND WE SEE NO NEED TO DEAL WITH THE SAME EITHER. 20. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING I N MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 194-I CANNOT APPLY IN RESPECT OF PAYMENTS MADE FOR TRANSMISSION OF POWER BY THE PGCIL, ON THE FACTS OF THE CASE BEFORE US. ACCORDINGLY, THE IMPUGNED DEMAN DS RAISED UNDER SECTION 201(1) READ WITH SECTIONS 194- LAND 201(1A) READ WITH SECTION 201(1A) ARE CANCELLED. THE ASSESS EE GETS THE RELIEF ACCORDINGLY'. 5. SIMILAR VIEW WAS ALSO TAKEN BY ITAT CUTTACK BENC H IN THE CASE OF GRIDCO LTD IN ITA NO.404/CTK/201 1 DATED 17 .11.2011. IN VIEW OF THE DETAILED DISCUSSIONS MADE BY THE COORDINATE BENCHES IN THE ABOVE CASES AND SINCE THE AGREEMENT ENTERED BY ASSE SSEE WITH ITA NO.6212 TO 6215 /MUM/2013 11 MSETCL. AND PGCIL ARE SIMILAR IN NATURE, WE HOLD TH AT THE PAYMENTS MADE TO THE ABOVE COMPANIES CANNOT BE CONS IDERED AS A 'RENT' UNDER THE PROVISIONS OF SECTION 1941 AND CON SEQUENTLY THE LEVY OF INTEREST UNDER SECTION 201(1A) ALSO DOES NOT ARISE. GROUND IS ACCORDINGLY ALLOWED. 2.2 IF THE OBSERVATION MADE IN THE ASSESSMENT MADE IN THE ASSESSMENT ORDER, CONCLUSION DRAWN IN THE IMPUGNED ORDER, FACT UAL FINDING RECORDED BY THE TRIBUNAL AND THE ASSERTION MADE BY THE LD. R ESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION, NO CONTRARY FACTS OR DECISIO N FROM ANY HONBLE HIGHER FORUM WAS BROUGHT TO OUR NOTICE. SIMILAR VIE W WAS TAKEN BY THE CUTTAK BENCH OF THE TRIBUNAL IN THE CASE OF GRIDCO LTD. (ITA NO.404/CTK/2011 DATED 17/11/2011) , THEREFORE, IN V IEW OF THE DETAILED DISCUSSION BY THE CO-ORDINATE BENCH AND TH E AGREEMENT ENTERED BY THE ASSESSEE WITH MSETCL AND PGCIL ARE OF SIMILA R NATURE THUS, WE HOLD THAT THE PAYMENTS MADE TO ABOVE COMPANIES CANN OT BE CONSIDERED AS RENT UNDER THE PROVISIONS OF SECTION 194 I OF TH E ACT, CONSEQUENTLY, THERE IS NO QUESTION OF LEVY OF INTEREST U/S.201 AN D 201( IA) OF THE ACT. THUS WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN B Y THE LD. CIT(A). 3. FINALLY THE APPEALS OF THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION O F THE HEARING ON 29 TH DAY OF OCTOBER, 2014 . ITA NO.6212 TO 6215 /MUM/2013 12 ,- $ )*+ .,/ 29.10.2014 * $ 6 SD/- SD/- (N.K. BILLAIYA) (JOGINDER SINGH) ( ,7 ( ,7 ( ,7 ( ,7 / ACCOUNTANT MEMBER ,7 ,7 ,7 ,7 / JUDICIAL MEMBER MUMBAI; ., DATED : OCT. 2014. ../ JV, SR.PS . ,- $ '&8 98+& ,- $ '&8 98+& ,- $ '&8 98+& ,- $ '&8 98+&/ COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. : ( ) / THE CIT, MUMBAI. 4. : / CIT(A)-13, MUMBAI 5. 8=6 '& , , / DR, ITAT, MUMBAI 6. 6> ? / GUARD FILE. ,- ,- ,- ,- / BY ORDER, #8& '& //TRUE COPY// @ @@ @/ // /A B A B A B A B (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI