TaxTMI 
TaxTMI 
2014 (7) TMI 991
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....ed out in the business premises of the assessee at Shakti Sadan, Rouse Avenue Kotla Road, New Delhi, on 22/1/2009. During the course of survey, it was noticed that the assessee has deducted TDS @ 2% u/s 194(C) on payments of wheeling charges paid to M/s Power Grid Corporation of India Ltd. (hereinafter referred to as PGCIL for the sake of brevity). The assessee had also made payment to M/s Bhakara Beas Management for transmission of electricity. The assessing officer was of the view that assessee was required to deduct the tax at sources @ 5% of the payment u/s 194(J) as PGCIL was providing technical services to the assessee by transmitting the electricity. Therefore, an order was passed u/s 201(1) and 201(1) (A) of the Act raising demand against the assessee in all these years. 4. On appeal Ld. Commissioner of Income Tax (appeals) has deleted the demand by observing that assessee was not required to deduct taxes at source u/s 194(J) as held by ITAT in Assessment Year 2005-06 in the case of assessee Ld. Commissioner of Income Tax (appeals) further observed the deductee has already paid the taxes and claimed refund thus the deductee has already discharged its entire tax liability w....
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....s and designs or a technical service can be rendered by robot (machines) without intervention of human element, the classification of the services rendered by the assessee as technical service is not free from doubt. In such circumstances, the assessee cannot be saddled with higher liability for tax deducted at source as it is only expected to deduct tax on the basis of commonly understood meaning of the provision. 4.1 we may also look at the issue from the point of view of the recipient. The transmission of electricity for the assessee has been undertaken in the normal course of its business and the income is to be classified as business income. This may lead to no liability for tax deduction at all. Thus, the issue is vexed and in such a situation, the assessee is not liable to be saddled with higher liability for deduction of tax at source. Accordingly, it is held that no further liability could be fastened on the assessee and the Ld. CIT(Appeals) erred in allowing the appeal partly." 8. This finding has been followed by the ITAT in ITA No. 3965/ Del/2011 in the case of assessee for Assessment Year 2006-07. Apart from the finding of tribunal recorded in the assessee's own cases....
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.... a beneficiary to the total sale of power from that delivery point. It is, however, not in dispute that the transmission lines are in the physical control of PGCIL, these are maintained and operated by the PGCIL and, so far as the assessee is concerned, its interest in the transmission lines is restricted to the fact that electrical power purchased by the assessee, simultaneously alongwith electrical power purchased by other bulk power beneficiaries, is transmitted through these transmission lines. The way it works is like this. The power available at the delivery points, collectively for all the bulk power beneficiaries, is loaded for transmission on these transmission lines or powergrid and each of the beneficiaries is allowed to utilize the power to the extent allocated to him. It 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 speaking, 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 utilize the power to....
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....whether called "Suspense account" or by any other name, in the books of account 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 been sustained in the first appeal, is that since expression "rent", for the purpose of Section 194 I, includes "any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement" for the use of machinery, plant or equipment, and since the assessee has made the payments towards transmission charges for use of the machinery, plant and equipment collectively constituting mode of transmission of power, the provisions of Section 194-I come into play on the facts of this case. 14. The core issue that we must deal with is whether the present arrangement under the Bulk Power Transmission Agreement can be termed can be covered by the scope of expression any other agreement or arrangement 'for the use of' appearing in Explanation (i) to Section 194-I. 15. Explanation (i) to Section 194-I, as we have noted above, defines ren....
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....s no control over the operations of the transmission lines, and all that 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 of 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 by its customer. This was done in the case of Lakshmi Audio Visual Inc. v. Asstt. Commr. of Commercial Taxes [2001] 124 STC 426 (Kar.), which has been followed by Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. DIT [2011] 332 ITR 340 / 197 Taxman 263/ 9 taxmann.com 168, in the following terms : "9. Thus if the transaction is one of leasing/hiring/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 the manner, time and nature of use and enjoyment, though within the framework of the agreement, then it would be a transfer of the right to use the goods and fa....
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....aking 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 control 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 payment in made for the use of an asset simpliciter, whether with control and possession in its legal sense or not, the payment 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 if an asset is used in the said process, the payment cannot be said to be for the use of an asset. When control of the asset (transmission lines in the present case) always remains with the PGCIL, any payment made to the PGCIL for transmission of power on the transmission lines and infrastructure o....