Gas transportation charges were held deductible under section 194C, not treated as rent, and no default under section 201 survived.

Gas transportation charges for use of a pipeline remained a payment for carriage of goods because the transporter retained ownership and possession of the pipeline, and the payer acquired no exclusive right or interest in it. The amount was therefore covered by tax deduction at source under section 194C and not as rent under section 194I. The CBDT circular on gas transportation supported the position that such an arrangement is a transport contract, not a works contract, where gas is moved to the delivery point. On that basis, the assessee was not treated as an assessee in default under section 201.

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Issues: Whether payment of gas transportation charges for use of a gas pipeline owned by the transporter was deductible at source under section 194C of the Income-tax Act, 1961, or under section 194I of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under section 201 of the Income-tax Act, 1961.

Analysis: The pipeline remained owned and possessed by the transporter, and the assessee only used it for transmission of gas without acquiring any exclusive right, interest, or possession in the pipeline. The payment was therefore for transportation of goods and fell within the concept of carriage of goods, which is covered by section 194C rather than rent under section 194I. The CBDT circular on gas transportation charges clarified that where gas is transported by the seller to the point of delivery, the arrangement remains a contract for sale and not a works contract; it also distinguished payments to third-party transporters. The Tribunal found no material to dislodge the CIT(A)'s factual and legal conclusions.

Conclusion: The assessee correctly deducted tax under section 194C, section 194I was not applicable, and the demand raised by treating the assessee as a defaulter under section 201 did not survive.

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