TDS Can’t Be Deducted In Absence Of Payment Of Rent: Orissa High Court

The Orissa High Court, through a Division Bench of Chief Justice Dr. S. Muralidhar and Justice R.K. Pattanaik, ruled in the case of Commissioner of Income Tax, Bhubaneswar v. Western Electricity Supply Company of Odisha Limited (WESCO) & Other Connected Matters (ITA No. 4 of 2011 & Other Connected Appeals) that in absence of payment of rent, the obligation to deduct tax at source (‘TDS’) under Section 194-I of the Income Tax Act, 1961 (‘the Act’) does not arise at all. Notably, the said provision deals with ‘TDS on rent’.

Facts of the Case: The Income Tax Appellate Tribunal, Cuttack Bench, Cuttack issued a common decision on November 19, 2010, which is the basis for all of the Income Tax Department’s appeals (ITAT). In each of these appeals, the Respondent is actively sharing authority. Grid Corporation of Odisha Limited sells power to each of the enterprises (GRIDCO). Utilising the Orissa Power Transmission Corporation Limited’s transmission network, the power so acquired is distributed (OPTCL). The Orissa Electricity Regulatory Commission oversees both GRIDCO and OPTCL (OERC).

Judgement: The Court began by noting that, although granting the Respondents’ appeals, the ITAT had determined in the impugned decision that Section 194-I of the Act was not applicable. In order to reach this determination, the ITAT adopted the Supreme Court’s ruling in India Metres Limited v. State of Tamil Nadu (2010-VIL-I-SC). The ITAT determined that the Respondent-Assessees haven’t utilised any of OPTCL’s equipment, hence no rent can be assumed to have been given to OPTCL by the Respondent. In the end, the Court upheld the ITAT’s decision and found that the Respondents were not required to deduct TDS from the wheeling fees they paid to OPTCL in accordance with Section 194-I of the IT Act since no rent, or even considered rent, had been paid by them to OPTCL. The appeals were consequently dismissed.

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