INDUS TOWERS LTD. Vs. CIT

JUDGEMENT

(1.) THE Petitioner in these proceedings under Article 226 of the Constitution of India (hereafter "Indus") is aggrieved by an order ("impugned order") of the Commissioner of Income Tax ("CIT") under Section 197 of the Income Tax Act, ("the Act") declining its request for determination of lower rate of tax deduction at source ("TDS"). The order was made after a hearing given to Indus, in terms of this Court's previous order in WP(C) No. 4518/2013 dated 19.07.2013. Indus owns a countrywide network of telecom towers and network infrastructure services to major telecom operators in the country. Till 2012, it sought for issue of a lower tax deduction certificate, under Section 194 -I of the Act, on its projected receipts and such lower deduction certificates were issued treating those receipts as rent. In F.Y. 2012 -13, lower TDS certificate @ 3% in respect of the receivables under Section 194I was issued. Indus applied for issue of a lower deduction certificate @ 0.5% on 01.04.2013 for F.Y. 2013 -14 on the projected receipts of Rs. 16,334.16 crores under Section 194C of the Act. Opportunity of hearing was granted to Indus by the Assessing Officer ("AO"). The Assessing Officer issued a deduction certificate under Section 197 on 22.05.2013 @ 2.5% for projected receipts covered under Section 194 -I for F.Y. 2013 -14 based on the average rates of tax to turnover for the last three years shown at 1.44%, pendency of assessment proceedings for A.Y. 2011 -12 and penalty proceedings under Section 271(1)(C) for A.Y. 2010 -11. Aggrieved by that certificate, Indus filed a writ petition (W.P. (C) No. 4518/2013) before this Court, which by its order dated 19.07.2013 directed the petitioner to prefer a Revision Petition before the CIT who was to dispose it of expeditiously. It was in these circumstances that the petitioner approached the CIT who made the impugned order.

(2.) INDUS submitted that it merely provided passive infrastructure services to its customers, i.e. telecom service providers and that there was no intent to rent the premises. To say this, it relied extensively on the Master Service Agreement, saying that it contained stringent conditions as to the kind of services it had to provide, the controlled and sustained temperatures it had to maintain etc. The intention of the parties to the agreement, i.e. the passive infrastructure service provider and the telecom service provider, was not to let out or rent the tower and the facilities, but to extend and receive highly specialized technical services. The CIT rejected the contentions of Indus, in the impugned order, which inter alia, stated that:

(3.) AFTER stating that regardless of what term is used, the mobile operators are actually given access to the premises and property, which is what the essence of a renting transaction is, the CIT held that: