Transmission charges are neither rent nor technical fees where access is regulated and no possessory control or services are provided.

Wheeling and transmission charges paid for regulated access to an electricity transmission system were held not to constitute rent under section 194I because the payer did not obtain possessory control over any identified asset such as land, building, machinery or equipment. They were also not fees for technical services under section 194J because the transmission utility was not rendering managerial, technical or consultancy services, but merely providing open access under statutory and tariff-based obligations. The result was that no tax deduction at source was required on that footing.

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Issues: (i) Whether wheeling and transmission charges paid for use of the electricity transmission system constituted rent within section 194I of the Income-tax Act, 1961; (ii) Whether such charges constituted fees for technical services within section 194J of the Income-tax Act, 1961.

Issue (i): Whether wheeling and transmission charges paid for use of the electricity transmission system constituted rent within section 194I of the Income-tax Act, 1961

Analysis: The payment was made under a bulk power transmission arrangement for access to transmission capacity in the regulatory framework of the electricity sector. The charge was not for identified land, building, machinery or equipment placed in the assessee's possession or control. The arrangement was governed by tariff orders and system availability, and the payment lacked the element of possessory control that characterises rent. In context, the expression rent under section 194I could not be extended to transmission or wheeling charges.

Conclusion: The charges did not amount to rent and section 194I was not attracted.

Issue (ii): Whether such charges constituted fees for technical services within section 194J of the Income-tax Act, 1961

Analysis: The transmission utility was not rendering managerial, technical or consultancy services to the assessee. The assessee was merely availing open access to the transmission system for distribution of electricity, while the transmission utility remained bound by statutory obligations under the electricity law. The payments were regulatory transmission charges, not consideration for technical services. Therefore, section 194J did not apply.

Conclusion: The charges did not amount to fees for technical services and section 194J was not attracted.

Final Conclusion: The revenue's appeal failed because the disputed transmission and wheeling charges were outside both section 194I and section 194J, with the result that the assessee was not liable to deduct tax at source on that basis.

Ratio Decidendi: A payment for regulated access to a transmission system, without transfer of possessory control and without rendering of managerial, technical or consultancy services, is neither rent nor fees for technical services for purposes of tax deduction at source.

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