Indus Towers Ltd.… v. Cit & Ors.…

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 26.03.2014 Pronounced on: 31.03.2014 +W.P.(C) 6085/2013, C.M. NO.13383/2013, 13384/2013 &13385/2013 INDUS TOWERS LTD.…..Petitioner Through: Sh. N. Venkatraman, Sr. Advocate withSh. Gajendra Maheshwari, Sh. Puneet Siddharthaand Sh. Sumeet Batra, Advocates. Versus CIT & ORS.…..RespondentsThrough:Sh.KamalSawhney,Sr.StandingCounsel with Sh. Raghvendra Singh, Advocates. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE R.V. EASWAR MR. JUSTICE S. RAVINDRA BHAT % 1.The Petitioner in these proceedings under Article 226 of theConstitution 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 itsrequest for determination of lower rate of tax deduction at source(“TDS”). The order was made after a hearing given to Indus, in termsof this Court’s previous order in WP(C) No. 4518/2013 dated19.07.2013. 2.Indus owns a countrywide network of telecom towers andnetwork infrastructure services to major telecom operators in the country. Till 2012, it sought for issue of a lower tax deductioncertificate, under Section 194-I of the Act, on its projected receiptsand such lower deduction certificates were issued treating thosereceipts as rent. In F.Y. 2012-13, lower TDS certificate @ 3% inrespect of the receivables under Section 194I was issued. Indusapplied for issue of a lower deduction certificate @ 0.5% on01.04.2013 for F.Y. 2013-14 on the projected receipts of ` 16,334.16crores under Section 194C of the Act. Opportunity of hearing wasgranted to Indus by the Assessing Officer (“AO”). The AssessingOfficer 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 threeyears 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 dated19.07.2013 directed the petitioner to prefer a Revision Petition beforethe CIT who was to dispose it ofexpeditiously. It was in thesecircumstances that the petitioner approached the CIT who made theimpugned order. 3.Indus submitted that it merely provided passive infrastructureservices to its customers, i.e. telecom service providers and that therewas no intent to rent the premises. To say this, it relied extensively onthe Master Service Agreement, saying that it contained stringentconditions as to the kind of services it had to provide, the controlledand sustained temperatures it had to maintain etc. The intention of the parties to the agreement, i.e. the passive infrastructure service providerand the telecom service provider, was not to let out or rent the towerand the facilities, but to extend and receive highly specializedtechnical services. 4.The CIT rejected the contentions of Indus, in the impugnedorder, which inter alia, stated that: “5.3.3It is not in dispute that the right, title andcontrol in the passive infrastructure located atthetelecom site including and not limited to the tower,shelter, diesel generator sets, batteries, air conditionersand electrical and civil works including any enhancementcarried out by the assessee vests solely with the assessee.It is also not in dispute that the mobile operator has theright to install equipment such as BTS equipment,associated antennae and active infra network equipmentand other requisite equipment required to providetelecom services by them to their customers. The right,title and interest in all such equipment installed on thesite by the mobile operators would remain with suchoperators only.” 4.The CIT rejected the contentions of Indus, in the impugnedorder, which inter alia, stated that: “5.3.3It is not in dispute that the right, title andcontrol in the passive infrastructure located atthetelecom site including and not limited to the tower,shelter, diesel generator sets, batteries, air conditionersand electrical and civil works including any enhancementcarried out by the assessee vests solely with the assessee.It is also not in dispute that the mobile operator has theright to install equipment such as BTS equipment,associated antennae and active infra network equipmentand other requisite equipment required to providetelecom services by them to their customers. The right,title and interest in all such equipment installed on thesite by the mobile operators would remain with suchoperators only.” 5.After stating that regardless of what term is used, the mobileoperators are actually given access to the premises and property,which is what the essence of a renting transaction is, the CIT held that: “5.3.5. The meaning of ‘rent’ in section 1941 is wide inits ambit and scope. The assessee has a legal obligationto provide its site/towers to the mobile operators duringthe currency of the said arrangement. The arrangemententered into by the assessee with its mobile operators isto allow use of “any land or building together with ...machinery,plant,equipmentandlandappurtenantthereto” for the purpose of providing telecom services tothe customers. Since the definition of ‘rent’ is placed under section 1941 itself, the intent of the legislature toinclude such an arrangement (MSA) is beyond any doubt.Hence, such payments made to the assessee would beconstrued as ‘rent’ for the purposes of section 194-I.” 6.The CIT rejected the submission based on the judgements of theKarnataka High Court and of this Court, reasoning as follows: “5.4.1The assessee has placed reliance on theHon’ble Karnataka High Court Judgment cited above.The issue agitated by the assessee before the Hon’bleCourt was that their activity did not involve any sale orany transfer of right to use and, therefore, the same couldnot be subjected to VAT under KVAT Act, 2003. Theassessee has also placed reliance on the Hon’ble DelhiHigh Court Judgment cited above. A careful reading ofthe decision of the Hon’ble Delhi High Court shows thatthe question of law for examination was whether thereceipts were subject to levy of service tax by Union ofIndia or levy of Value Added Tax by the DelhiGovernment. The decisions of the Hon’ble KarnatakaHigh Court and the Hon’ble Delhi High Court cannot beapplied in the facts and circumstances of this case andare clearly distinguishable. The observations of both theCourts as mentioned above have to be read in the contextin which the reference was made before them by theassessee and cannot be ipso facto applied to ascertain thenature of receivables u/s 194C or 1941 within themeanings prescribed to such receipts in the respectiveprovisions of the I.T. Act. The nature of receivables,whether covered u/s 194C or 194-1,was not examined bythe Courts. 5.4.2.It may also be relevant to discuss here theprovisions of the Service Tax Act in the context of thereliance placed by the assessee on the decision ofHon’ble Karnataka High Court that standard serviceshave been rendered by the assessee to the mobile 5.4.2.It may also be relevant to discuss here theprovisions of the Service Tax Act in the context of thereliance placed by the assessee on the decision ofHon’ble Karnataka High Court that standard serviceshave been rendered by the assessee to the mobile operators and are hence in the nature of servicesprovided by the assessee. I find that service tax is leviableunder Section 66B of the Chapter V of the Finance Act,1994, as amended w.ef. 01/07/2012 @12% on the valueof all services, other than those services specified in thenegative list (as specified under section 66D of the saidAct). Section 65B(44) of the said Act defines ‘service’ asany activity carried out by a person for another forconsideration and includes a declared service but doesnot include certain activities specified in the said sub-section. ‘Renting of immoveable property’ has beenconstituted as a declared service under section 66E of thesaid Act. Service tax is chargeable on the gross amount ofrent received or receivable on account of rendering oftaxable service of ‘renting of immovable property’ inIndia,’ These provisions indicate that Service Tax is alsoleviable on renting of immovable property. Merelybecause the nature of certain receipts of the assessee hasbeen treated as ‘service’ by the Hon’ble Karnataka HighCourt, it does not preclude the payments received fromthe said activity as ‘rent’ for the purposes of 1941 of theI.T, Act. These two Statutes are different from each otherand are not mutually exclusive. Certain receipts from anactivity can have a ‘rent’ component within the meaningof Section 1941 and ‘a service fee’ component if it is adeclared service under section 65B(44) of the FinanceAct, 1994. 5.4.3.Similarly, the reliance placed by the assesseeon Circular no. 1/2008 relating to cold storage units ismisplaced. The said Circular clarified that “the mainfunction of the Cold Storage is to preserve the perishablegoods by means of a mechanical process, and storage ofsuch goods is only incidental in nature. The customer isalso not given any right to use any demarcatedspace/place or the machinery of the cold storage(emphasis supplied) and thus does not become tenant.Therefore, the provision of 194/ is not applicable to the cooling charges paid by the customers of the coldstorage”. In the present case the right has been conferredon the mobile operator to install equipment required toprovide telecom services by them to their customers. Inother words, specified and fixed space, unlike coldstorage units have been provided to the mobile operatorsfor their equipment. 5.4.4.Theseunitsmerelyprovideserviceforpreserving the essential food items including perishablegoods at various temperature suitable for specific fooditems for required periods. The customer brings itspackages for preservation for a required period and takesaway its packages after paying cooling charges. Thecustomers do not use the building, plant/machinery in anymanner and does not become a tenant of any kind,Therefore, in the said Circular, the provision of 1941 wassaid to be not applicable to the cooling charges paid bythe customers of the cold storage. 5.4.5.The plea of the assessee that the mobileoperators do not have access or control over thesite/towers/designated area of the site except for thepurposes of maintenance/rectification of any defects inthe equipment installed by such customers is not borneout from MSA as it is evident that the mobile operator hasthe right to install equipment such as BTS equipment,associated antennae and active infra network equipmenton the tower/ site/designated site of the assessee. Further,the mobile operators are not merely enjoying the benefitof appropriate temperature and humidity levels at alltimes and continuous power supply at the prescribedvoltage so as to operate the equipment. These equipmentremain installed on the site/tower of the assessee duringthe currency of the agreement. Hence, the said circularofthe CSOT is not applicable in this case. 5.5.1.In the case of United Airlines Vs. CIT, 287ITR 281 2006(Oelhi) it was held that landing and parkingcharges paid by the Airlines are rent and liable to TDSon rent. It was held that under Explanation (i) of section194-I, even the landing of aircrafts or parking of aircraftsamounts to use of the land of the airport. Hence, it washeld that the landing fee and parking fee will amount to‘rent’ within the meaning of the aforesaid provision, evenif it cannot have such a meaning in common parlance. Inthe assessee’s case, it is reiterated that the mobileoperators have the right to install equipments on thetower owned by the assessee and hence, as in the case ofUnited Airlines, amounts to use of the land/telecom siteand the tower owned by the assessee. 5.5.2.Similarly, it has been clarified by the CSOTfrom file No. 275/27/2001-ITO that payments made tohotels for hotel accommodation would be construed to berent whether they are covered in the nature of lease orlicense agreements so long as such accommodation hasbeen taken on regular basis and the rooms are let out fora specified rate and specified period. As long as the hotelhas a legal obligation to provide such types of roomsduring the currency of the agreement, the same will beconsidered within the meaning of ‘rent’ for the purposesof section 194-I. In the present case also, the towers/siteof the assessee are used by the mobile operators duringthe currency of the agreement for providing telecomservices. Therefore, the payment received by the assesseefrom the mobile operators constitutes ‘rent’ within themeaning of section 194-I. 5.6.In view of the above discussions, I hold thatthe receivables of the assessee are clearly liable forwithholding tax under the provisions of section 1941 ofthe LT. Act. The rate of tax to be applied for issue of certificate: 6.1. The lower deduction certificate for F.Y. 2013-14~:was issued @ 2.5% on receivables covered u/s 194-I.The assessee has brought to notice that TDS of Rs. 256.7crorehasalreadybeendeductedfromitupto31.07.2013. Therefore, it has requested to issue revisedcertificate u/s 197(1) at Nil rate. It is seen from therecords that the assessee has been able to furnishevidence only to the extent of Rs. 164.01 crore of taxdeducted up to 30.06.2013 in Form No. 26AS. However,it also includes receivables covered under other sectionsof the Act (like 194, 194A, 194C, 194J etc.)…” 7.IndusarguesthatitisregisteredwithDepartmentofTelecommunications for providing passive telecom infrastructureservices to telecom service providers. For the purpose of providingtelecom network infrastructure services, it enters into standard serviceagreements titled Master Services Agreement (“MSA”) with itscustomers for provision of services such as continuous power supplyat the desired voltage and air conditioning required for optimalfunctioning of the customers’ equipment and security service forsecuring the equipment installed on the towers/sites. It argues that thecustomers do not have access, control or possession over the towers,sites or designated areas (of the site) which are limited to rectificationor maintenance of any defects in the equipment installed by suchcustomers. It argues that it does not transfer any right to use anyspecific goods or any part of the property. Its responsibility is toprovide the entire passive infrastructure service with the aid ofequipment belonging to it which is fully operated, controlled andmanaged by it. It was consequently contended that the intention of theparties was not to receive any goods for use and that – quite to the contrary – the dominant intention was to receive standard services. Itis argued that Indus is registered with the Service Tax Department andpays service tax on the entire service revenue. contrary – the dominant intention was to receive standard services. Itis argued that Indus is registered with the Service Tax Department andpays service tax on the entire service revenue. 8.Indus relies on the judgment of the Karnataka High Court dated25.05.2012 (in W.C. No. 3403-3439/2011), where the Court ruled thatin terms of the contract there is no transfer of the right to use thepassive infrastructure conferred on the sharing/mobile operator, andwhat is allowed is a license to have access to the passive infrastructureand permission to keep the equipment of the mobile operator in theprefabricated shelter, and to have ingress and egress only to theauthorized representative of the mobile operator. The right so given tothe mobile operator is permission to keep Indus’ active infrastructurein the site, permission to mount the antenna on the tower erected by itand to have the benefit of a particular temperature so as to operate theequipment belonging to the mobile operator. The infrastructurecontinues – according to the High Court – to be in possession of thetransferor and what is used by the transferee is the service which isprovided by the transferor. The assessee submitted, therefore, that itscustomers do not pay for any leasing rights, but only for the services.Therefore, provisions of Section of 194-I of the Act relating to rentwould not be applicable in the assessee’s case. Indus states that thejudgment of the Karnataka High Court has been followed by thisCourt in W.P. No. 4976/2011. 9.Reliance is placed on Circular No. 1/2008 dated 10.01.2008issued by Central Board of Direct Taxes in case of cold storage units.That circular clarified that payment for cold storage services are liable to withholding tax @ 2% under Section 194C of the Act. It wasargued that the rationale applicable for cold storage services andtelecom network infrastructure support services is identical since inboth cases, customers are only interested in an appropriate temperaturearid humidity levels. 10.Arguing that the activity and the transaction between Indus andits customers is not renting or dealing in property, learned seniorcounsel stated that the essence of the activity was the provision ofhighly skilled and technical services. These included the provision ofcreation and maintenance of highly controlled artificial temperatures,conducive to the functioning of the mobile service providers’ signaltransmission. The agreements, it was submitted, insisted upon thiseven as a prerequisite for the payment of monthly consideration or fee.In this respect, reliance was placed on the express terms of suchagreements, which provided that if Indus failed to ensure that thetemperature specified was not maintained and there was failure morethan five times a month, no payment towards consideration would bemade. Further, counsel submitted that the express provisions in theagreement stipulated that the arrangement was neither a lease, norcreated any rights in the property; access provided was merelyincidental to the main purpose of providing service. 11.Learned counsel relied on the observations of this Court in itscase, rejecting the contention that VAT was applicable and holdingthat the activity in question was a service provided by the petitioner.Particular reliance was placed on the following observations andfindings in W.P. No. 4976/2011: 11.Learned counsel relied on the observations of this Court in itscase, rejecting the contention that VAT was applicable and holdingthat the activity in question was a service provided by the petitioner.Particular reliance was placed on the following observations andfindings in W.P. No. 4976/2011: “19………………………The right to use the goods - in thiscase, the right to use the passive infrastructure - can besaid to have been transferred by Indus to the sharingtelecom operators only if the possession of the saidinfrastructure had been transferred to them. They wouldhave the right to use the passive infrastructure if theywere in lawful possession of it. There has to be, in thatcase, an act demonstrating the intention to part with thepossession of the passive infrastructure. There is none inthe present case. The passive infrastructure is anindispensible requirement for the proper functioning ofthe active infrastructure which is owned and operated bythe sharing telecom operators. The passive infrastructureis shared by several telecom operators and that is whythey are referred to as sharing telecom operators in theMSA. The MSA merely permits access to the sharingtelecom operators to the passive infrastructure to theextent it is necessary for the proper functioning of theactive infrastructure. The MSA also defines “site accessavailability” as meaning the availability of access to thesharing operator to the passive infrastructure at the site.Clause 2 of the MSA which has been quoted aboveprovides for “site access” and Clause 1.7 limits the siteaccess availability to the sharing operator on use - onlybasis so far as it is necessary for installation, operationand maintenance etc. of the active infrastructure; theclause further states that the sharing operator does nothave, nor shall it ever have, any right, title or interestover the site or the passive infrastructure. The Clausealso takes care to declare that the sharing operator shallnot be deemed to be the tenant of Indus and no tenancyrights shall be deemed to exist over the site/passiveinfrastructure. Clause 2.1.8, presumably by way ofabundant caution, states that it is expressly agreed by thesharing operator that nothing contained in the MSA orotherwise shall create any title, right, tenancy, or anysimilar right in favour of the sharing operator. 20.There are other provisions in the MSA which controlthe right of the sharing operator to gain access to the siteand the passive infrastructure. For instance, Clause 3.1.2states that the access shall be limited to the purpose ofcarrying out operation and maintenance activities andthat too only to the authorised representatives or properlyauthorise sub-contractors of the sharing operator. Clause1.8 of the Schedule 2 of the MSA has to be read alongwith the above clause. The tables set out in this scheduleproviding for payment of service credits by Indus to thesharing operators for failure to achieve the uptimeservice levels and those prescribing payment of servicecredits by Indus to the sharing operators for non-submission of the reports and providing for stiff penaltiesfor any failure on the part of Indus show that it is theresponsibilityofIndustoensurethatthepassiveinfrastructure functions to its full efficiency and potential,which in turn means that it has to be in possession of thepassive infrastructure and cannot part with the same infavour of the sharing telecom operators. With severalsuch restrictions and curtailment of the access madeavailable to the sharing telecom operators to the passiveinfrastructure and with severe penalties prescribed forfailure on the part of the Indus to ensure uninterruptedandhighqualityserviceprovidedbythepassiveinfrastructure, it is difficult to imagine how Indus couldhave intended to part with the possession of part of theinfrastructure. That would have been a major impedimentin the discharge of its responsibilities assumed under theMSA. The limited access made available to the sharingtelecom operators is inconsistent with the notion of a“right to use” the passive infrastructure in the fullestsense of the expression. At best it can only be termed as apermissive use of the passive infrastructure for verylimited purposes with very limited and strictly regulatedaccess. It is therefore difficult to see how the arrangementcould be understood as a transfer of the right to use thepassive infrastructure. 21.When Indus has not transferred the possession of thepassive infrastructure to the sharing telecom operators inthe manner understood in law, the limited accessprovided to them can only be regarded as a permissiveuse or a limited licence to use the same. The possession ofthe passive infrastructure always remained with Indus.The sharing telecom operators did not therefore, haveany right to use the passive infrastructure…” 12.It was argued that Section 194-I could not be invoked in thecircumstances of the case at all, because that provision is premised onthe leasing, renting out, or giving property (including machinery orequipment) on exclusive and control of the lessee. It was submittedthat the predominant intention of the agreement in the present casewas to ensure the availability of service to the clients and customers ofIndus, i.e. the mobile operators whose activities depended on highlyskilled technical services. The onward delivery of their service, inother words, depended on the expertise and efficient service providedby Indus’ equipment which they were allowed to use. Stressing that atno point of time do such mobile operators get any kind of uninhibitedaccess or use, learned senior counsel relied on the several conditionsin the MSA to say that it underlined at every stage and clarifiedbeyond any doubt that neither the property nor the equipment wasgiven on lease or a lease like agreement. Learned counsel also arguedthat reliance on Circular no. 1/2008 relating to cold storage units ismisplaced. The said Circular clarified that “the main function of theCold Storage is to preserve the perishable goods by means of amechanical process, and storage of such goods is only incidental innature. The customer is also not given any right to use any demarcated space/place or the machinery of the cold storage(emphasis supplied) and thus does not become tenant. Therefore, theprovision of 194-I is not applicable to the cooling charges paid by thecustomers of the cold storage”. demarcated space/place or the machinery of the cold storage(emphasis supplied) and thus does not become tenant. Therefore, theprovision of 194-I is not applicable to the cooling charges paid by thecustomers of the cold storage”. 13.Learned counsel for the respondent, Mr. Kamal Sawhney, reliedand emphasized on the expressions “any kind of”/“agreement...orarrangement” to say that the nature of the transaction need not fallwithin the traditionally acknowledged or understood concept ofleasing or hiring of property. It was submitted that the MSArepeatedly stated that the mobile service operators were given siteaccess. Counsel also stated that the agreement or arrangement betweenIndus and its clients envisioned permitting the latter to use of suchportion of the premises as was contemplated by the parties. Theportion allowed to be used, i.e. the passive infrastructure, to that extentwas exclusively that of the mobile operators, for the duration of theagreement. It was emphasized that though the aggregation of allpassive infrastructure was achieved through Indus, an entity intowhich the passive infrastructure entities of each mobile operatormerged, that was with the object of improving efficiency andoptimising the use of scare resources, such as land and building, whichis extremely hard to come by and expensive, in terms of lease rentals,in urban, especially metropolitan areas. It was submitted that themobile operator has the right to maintain its equipment on site, anddeploy personnel; clause 3 further provides for operation andmaintenance of the equipment of the sharing operator. He also emphasized on the expression “use” in Explanation to Section 194-Iand submitted that regardless of the findings of this Court in respect ofVAT applicability, tax deduction was obligatory since the lettingpurpose was to allow access to the mobile operators, of the facilities,housed in the property admittedly owned or leased by Indus. 14.Counsel for the revenue also relied on the decision of this Courtin United Airlines v. Commissioner of Income Tax & Ors, 2006 (287)ITR 281 (Del) and of the Andhra Pradesh High Court in KrishnaOberoi v. Union of India, 2002 (257) ITR 105 (AP) to say that rentinghas to be seen in the context of the extended definition given to theexpressioninSection194-Iandnotintermsofcommonunderstanding, or those situations where the background of itsapplication differs from this case. Provisions of the Income tax Act 15.The relevant provisions of the Income Tax Act are as follows: “Payments to contractors. 194C. (1) Any person responsible for paying any sum to anyresident (hereafter in this section referred to as thecontractor) for carrying out any work (including supply oflabour for carrying out any work) in pursuance of acontract between the contractor and a specified personshall, at the time of credit of such sum to the account of thecontractor or at the time of payment thereof in cash or byissue of a cheque or draft or by any other mode, whicheveris earlier, deduct an amount equal to— (i) one per cent where the payment is being madeor credit is being given to an individual or a Hinduundivided family; (ii) two per cent where the payment is being madeor credit is being given to a person other than anindividual or a Hindu undivided family,of such sum as income-tax on income comprised therein. (2)Where any sum referred to in sub-section (1)iscreditedtoanyaccount,whethercalled“Suspense account” or by any other name, in thebooks of account of the person liable to pay suchincome, such crediting shall be deemed to be creditof such income to the account of the payee and theprovisions of this section shall apply accordingly. (3)Where any sum is paid or credited forcarrying out any work mentioned in sub-clause (e)of clause (iv) of the Explanation, tax shall bededucted at source— (i) on the invoice value excluding the value ofmaterial, if such value is mentioned separately inthe invoice; or (ii) on the whole of the invoice value, if the valueof material is not mentioned separately in theinvoice. (2)Where any sum referred to in sub-section (1)iscreditedtoanyaccount,whethercalled“Suspense account” or by any other name, in thebooks of account of the person liable to pay suchincome, such crediting shall be deemed to be creditof such income to the account of the payee and theprovisions of this section shall apply accordingly. (3)Where any sum is paid or credited forcarrying out any work mentioned in sub-clause (e)of clause (iv) of the Explanation, tax shall bededucted at source— (i) on the invoice value excluding the value ofmaterial, if such value is mentioned separately inthe invoice; or (ii) on the whole of the invoice value, if the valueof material is not mentioned separately in theinvoice. (4) No individual or Hindu undivided family shall beliable to deduct income-tax on the sum credited orpaid to the account of the contractor where suchsum is credited or paid exclusively for personalpurposes of such individual or any member of Hinduundivided family. (5) No deduction shall be made from the amount ofany sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if suchsum does not exceed [thirty] thousand rupees : Provided that where the aggregate of the amounts of suchsums credited or paid or likely to be credited or paidduring the financial year exceeds[18][seventy-five] thousandrupees, the person responsible for paying such sumsreferred to in sub-section (1) shall be liable to deductincome-tax under this section. (6) No deduction shall be made from any sum credited orpaid or likely to be credited or paid during the previousyear to the account of a contractor during the course ofbusiness of plying, hiring or leasing goods carriages, onfurnishing of his Permanent Account Number, to theperson paying or crediting such sum.(7) The person responsible for paying or crediting any sumto the person referred to in sub-section (6) shall furnish, totheprescribedincome-taxauthorityorthepersonauthorised by it, such particulars, in such form and withinsuch time as may be prescribed. Explanation.—For the purposes of this section,— (i) ”specified person” shall mean,— (a) theCentralGovernmentoranyStateGovernment; orGovernment; or (b) any local authority; or (c) any corporation established by or under aCentral, State or Provincial Act; orCentral, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by orunder any law, engaged either for the purposeof dealing with and satisfying the need forhousing accommodation or for the purpose ofplanning,developmentorimprovementofcities, towns and villages, or for both; orunder any law, engaged either for the purposeof dealing with and satisfying the need forhousing accommodation or for the purpose ofplanning,developmentorimprovementofcities, towns and villages, or for both; or (g) any society registered under the SocietiesRegistration Act, 1860 (21 of 1860) or underany law corresponding to that Act in force inany part of India; orRegistration Act, 1860 (21 of 1860) or underany law corresponding to that Act in force inany part of India; or (h) any trust; or (i) any university established or incorporatedby or under a Central, State or Provincial Actand an institution declared to be a universityunder section 3 of the University GrantsCommission Act, 1956 (3 of 1956); orby or under a Central, State or Provincial Actand an institution declared to be a universityunder section 3 of the University GrantsCommission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or aforeign enterprise or any association or bodyestablished outside India; orforeign enterprise or any association or bodyestablished outside India; or (k) any firm; or (l) any person, being an individual or a Hinduundivided family or an association of personsor a body of individuals, if such person,—undivided family or an association of personsor a body of individuals, if such person,— (A) does not fall under any of the precedingsub-clauses; andsub-clauses; and (j) any Government of a foreign State or aforeign enterprise or any association or bodyestablished outside India; orforeign enterprise or any association or bodyestablished outside India; or (k) any firm; or (l) any person, being an individual or a Hinduundivided family or an association of personsor a body of individuals, if such person,—undivided family or an association of personsor a body of individuals, if such person,— (A) does not fall under any of the precedingsub-clauses; andsub-clauses; and (B) is liable to audit of accounts underclause(a)orclause(b)of Section44AB during the financial year immediatelypreceding the financial year in which suchsum is credited or paid to the account of thecontractor;clause(a)orclause(b)of Section44AB during the financial year immediatelypreceding the financial year in which suchsum is credited or paid to the account of thecontractor; (ii) ”goods carriage” shall have the meaningassigned to it in the Explanation to sub-section (7)of Section 44AE;assigned to it in the Explanation to sub-section (7)of Section 44AE; (iii) ”contract” shall include sub-contract; (iv) ”work” shall include— (a) advertising; (b) broadcastingandtelecastingincludingproductionofprogrammesforsuchbroadcasting or telecasting;productionofprogrammesforsuchbroadcasting or telecasting; (c) carriage of goods or passengers by anymode of transport other than by railways;mode of transport other than by railways; (d) catering; (e) manufacturingorsupplyingaproductaccording to the requirement or specificationof a customer by using material purchasedfrom such customer,according to the requirement or specificationof a customer by using material purchasedfrom such customer, butdoesnotincludemanufacturingorsupplying a product according to the requirementor specification of a customer by using materialpurchasedfromaperson,otherthansuchcustomer.] xxxxxxxxxxxxxxxxxxxxxx Rent 194-I. Any person, not being an individual or aHindu undivided family, who is responsible for payingto [a resident] any income by way of rent shall, at the timeof credit of such income to the account of the payee or atthe time of payment thereof in cash or by the issue of acheque or draft or by any other mode, whichever is earlier,[deduct income-tax thereon at the rate of— [(a) two per cent for the use of any machinery orplant or equipment; andplant or equipment; and (b) ten per cent for the use of any land orbuilding (including factory building) or landappurtenant to a building (including factorybuilding) or furniture or fittings:]]building (including factory building) or landappurtenant to a building (including factorybuilding) or furniture or fittings:]] Provided that no deduction shall be made under thissection where the amount of such income or, as the casemay be, the aggregate of the amounts of such incomecredited or paid or likely to be credited or paid during thefinancial year by the aforesaid person to the account of, orto, the payee, does not exceed [one hundred and eightythousand rupees]: [Provided further that an individual or a Hindu undividedfamily, whose total sales, gross receipts or turnover fromthe business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b)of Section 44AB during the financial year immediatelypreceding the financial year in which such income by wayof rent is credited or paid, shall be liable to deductincome-tax under this section.] Explanation.—For the purposes of this section,— (i) ”rent” means any payment, by whatever namecalled, under any lease, sub-lease, tenancy or anyother agreement or arrangement for the use of(either separately or together) any,—called, under any lease, sub-lease, tenancy or anyother agreement or arrangement for the use of(either separately or together) any,— (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (includingfactory building); orfactory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, Explanation.—For the purposes of this section,— (i) ”rent” means any payment, by whatever namecalled, under any lease, sub-lease, tenancy or anyother agreement or arrangement for the use of(either separately or together) any,—called, under any lease, sub-lease, tenancy or anyother agreement or arrangement for the use of(either separately or together) any,— (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (includingfactory building); orfactory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above areowned by the payee;] (ii) where any income is credited to any account,whether called “Suspense account” or by anyother name, in the books of account of the personliable to pay such income, such crediting shall bedeemed to be credit of such income to the accountof the payee and the provisions of this sectionshall apply accordingly.”whether called “Suspense account” or by anyother name, in the books of account of the personliable to pay such income, such crediting shall bedeemed to be credit of such income to the accountof the payee and the provisions of this sectionshall apply accordingly.” Analysis and Reasoning 16.Some of the relevant conditions in the MSA dated 07.03.2008are discussed below. Clause 2 provides for “site access”. Clause 2.1 provides for “provision of passive infrastructure” by Indus. Thisclause reads as under: - “2.1 Provision of Passive Infrastructure 2.1.1Indus shall provide Site Access Availability to theSharing Operator in accordance with the terms andconditions of this Agreement. 2.1.2Throughout the Term of this Agreement, theSharing Operator shall be entitled to provide notice toIndus of those Sites in relation to which it wishes to begranted Site Access Availability (a “Service Order”). Theprocess for issuing a Service Order shall be as specified inSchedule 1 (Site Access Availability). XXXXXX XXXXXXXXXXX 2.1.4 In the event that the Service Orders received byIndus in respect of any Site(s) mean that the availablePassive Infrastructure at such Site(s) are over-subscribed,an applicant whose Service Order was received by Indusprior to another Service Order shall be given priority byIndus while allocating such Passive Infrastructure to therelevant applicants. 2.1.5With respect to each Site in relation to which Indusis able to grant Site Access Availability, the Parties shallexecute a Service Contract in accordance with theprocedure set out in Schedule 1 (Site Access Availability),and the provisions of each Service Contract shall includethe standard terms set out in Schedule 5 (Standard SiteAccess Terms). Each Service Contract shall be dulystamped and the applicable stamp duty shall be at theSharing Operator’s expense. 2.1.6 Upon the execution of a Service Contract in respectof a Site, the Sharing Operator shall have the right to install the Sharing Operator Equipment or any portionthereof at such Site at the mutually agreed place. TheSharing Operator shall have access to each such Site forall installation activities and Indus shall provide to theSharing Operator the necessary means of access for thepurpose of ingress and egress from each such Site inaccordance with the terms of the Service Contract.Provided, however, that only the representatives of theSharing Operator with proper identification or its properlyauthorised sub-contractors shall be allowed such access tothe Sites. 2.1.7 The right, title and interest in and to the Site andPassiveInfrastructure,includinganyenhancementscarried out by Indus, shall vest with Indus and all suchenhancements thereto shall be at the sole cost and expenseofIndus.Enhancementsinthiscontextmeanstheaugmentation in capacity carried out by Indus to achieveincreased sharing.” 2.1.7 The right, title and interest in and to the Site andPassiveInfrastructure,includinganyenhancementscarried out by Indus, shall vest with Indus and all suchenhancements thereto shall be at the sole cost and expenseofIndus.Enhancementsinthiscontextmeanstheaugmentation in capacity carried out by Indus to achieveincreased sharing.” 17.In terms of Clause 2.5, site access availability right is non-exclusive and Indus retains the right to provide site access availabilityto other telecom operators and the sharing operator would retain theright to seek passive infrastructure services from other passiveinfrastructureproviders.Clause3providesforoperationandmaintenance of the equipment of the sharing operator. Under clause3.1.2, the equipment installed by the sharing operator shall be operatedand maintained by the sharing operator and in order to conduct theoperation and maintenance activities, it shall have the right to replace,repair, add or otherwise modify the sharing operator equipment andthe frequencies over which the equipment operates. In order to do so,the sharing operator shall be provided access to the sites by providingingressandaggressfromsuchsitebyonlytheauthorized representatives of the sharing operator or its properly authorized sub-contractors. Clause 3.2 requires Indus to ensure that the operation andmaintenance services which are provided by it to the sharing telecomoperators are in accordance with “good industry practice” by suitablyqualified, skilled and experienced personnel. Information aboutprocesses and proceedings to monitor the performance is to be sharedwith the sharing operators on a monthly basis. Consequences follow ifoperation and maintenance service levels fall short of the requiredstandards. 18.Clause 4 outlines Indus’ rights; clause 4.1 provides Indus theright to require that whenever any access to the site is needed by thesharing operator or its approved contractor, such access is supervisedby it (Indus) or its nominees. Indus is also enabled with the right touse and grant access to any site including the infrastructure providedby it (including passive infrastructure) for provision of such servicesto any party or for such other purposes as Indus may in its discretiondecided to support from time to time. Clause 4.2 enables Indus to askfor relocation of the equipment of the sharing telecom operator; whichmay be for the acquisition of a site or action by a Governmentauthority or any order of Court etc. Clause 5.2 obliges Indus to ensurethat any other operators on the side do not cause any damage or installany equipment which would harmfully interfere or physically obstructthe equipment of any sharing operator existing at the site. Theagreement further stipulates that the infrastructure of Indus (thepassive infrastructure) shall be maintained by it in proper state of repair and condition. Clause 5.3 provides for the warranties andcovenants of the sharing operator such as generally to ensure that itsemployees and agents and sub-contractors comply with the terms andconditions of the contract, to comply with all applicable laws anddesist from doing anything which might cause or otherwise result in abreach by Indus, maintain its equipment in a good and safe state ofrepair and condition, to desist from installing equipment or machineryof a type or frequency which would cause harmful interference orphysical obstruction to any equipment belonging to Indus or of anyother sharing operator of the site, and to generally share informationwith Indus and cooperate with and assist Indus in connection with thepurpose of the obligations under the contract etc. Clause 6 speaks of“charges”. Clause 6.1 provides that Indus shall charge the sharingtelecom operator the charges in accordance with Schedule 3. Thecharges can be revised or reviewed on an annual basis. Clause 6.2provides that all invoices submitted by Indus shall be paid within 15days of the receipt thereof. Clause 6.3 provides for consequences oflate payment which are not relevant for our purpose. Clause 10 confersupon Indus the right to advertise on the passive infrastructure. It saysthat Indus shall have the exclusive right to lease, license or grant spaceon each site or passive infrastructure on the site to any their party forthe purposes of placing hoardings, banners and other advertisementsand the sharing telecom operator shall not have any right of objection.However, Indus’ right to do so shall not adversely affect theconnectivity network or passive infrastructure of the sharing telecom operator in any manner; in case of any such complaint from a telecomoperator the hoardings/advertisement shall be removed. 19.Schedule1tothecontractprovidesfor“siteaccessavailability” and lists several technical details and requirementsrelating to the antenna, ground based tower, roof top tower, time linesfor site deployment, site access service credit for acquisition anddeployment etc. Schedule 2 provides for “operation and maintenanceservice”. Clause 1.8 obliges Indus to ensure proper access to the sitesfor all authorized personnel of sharing telecom operator for