Indus Towers Ltd. vs. CIT; [2014] 44 taxmann.com 3 (Delhi):
The petitioner provided passive infrastructure services to its customers, i.e., major telecom service providers in the country which, inter alia included, tower, shelter, diesel generator sets, batteries, air conditioners, etc. Till 2012, it sought for issue of a lower tax deduction certificate, u/s. 194-I of the Income-tax Act, 1961, on its projected receipts and such lower deduction certificates were issued treating those receipts as rent. Subsequently, the petitioner applied for issue of a lower deduction certificate on its projected receipts u/s. 194C. The Assessing Officer however issued lower deduction certificate treating receipts u/s. 194-I.
Aggrieved by that certificate, petitioner filed a writ petition before Delhi High Court, which by its order directed the petitioner to prefer a revision petition before the Commissioner who was to dispose it of expeditiously. The Commissioner by its impugned order u/s. 197 declined its request for determination of lower rate of Tax Deduction at Source (TDS).
Being aggrieved, the petitioner filed another writ petition before the Delhi High Court. The petitioner urged that there was no intention to rent or lease the premises or facilities or equipment and what was contemplated by the parties was a service.
On the other hand the revenue contended that the use of the premises, and the right to access it, amounted to renting the premises. The High Court held as under:
“i) The crucial question to be decided in instant case was whether the activity, i.e., provision of passive infrastructure by the petitioner to the mobile operator constituted renting within the extended definition under Explanation to section 194-I or whether the activity was service, pure and simple without any element of hiring or letting out of premises.
ii) The dominant intention in these transactions between the petitioner and its customers is the use of the equipment or plant or machinery. The ‘operative intention’ here, was the use of the equipment. The use of the premises was incidental; in that sense there is inseparability to the transaction. Therefore, the submission of the petitioner, that the transaction is not ‘renting’ at all, is incorrect; equally, the revenue’s contention that the transaction is one where the parties intended the renting of land (because of the right to access being given to the mobile operators) is also incorrect. The underlying object of the arrangement or agreement (in the MSA) was the use of the machinery, plant or equipment, i.e., the passive infrastructure. That it is necessary to house these equipment in some premises is entirely incidental.
iii) In view of the above conclusions, it is held that the writ petition is entitled to succeed to the extent that the tax deductions to be made by the petitioner are to be at the rate directed in section 194-I (a) for the use of any machinery or plant or equipment at the rate indicated for that provision, i.e., 2%. The revenue’s contentions to the contrary are rejected. The writ petition is allowed.”
