D.C.I.T Cir - 2,kolkata, Kolkata V. M/s West Bengal State Electricity Distribution Co Ltd, Kolkata

ITA 1397/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4882 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 27-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: N K PODDER SENIOR CO UNSEL
• Section: 143(3); 194C; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NOS.1397, 1398 & 1428/KOL/2013 ASSESSMENT YEARS: 2006-07, 2007-08 & 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. WEST BENG AL STATE ELECTRICITY CIRCLE-2, KOLKATA. DISTRIBUTION CO. LTD. (PAN: AAACW2727P) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 29.04.2016 DATE OF PRONOUNCEMENT: 04.05.2016 FOR THE APPELLANT: SHRI NIRAJ KUMAR, CIT, DR FOR THE RESPONDENT: SHRI N. K. PODDER, SENIOR CO UNSEL ORDER PER SHRI MAHAVIR SINGH, JM: ALL THESE APPEALS BY REVENUE ARE ARISING OUT OF SEP ARATE ORDERS OF CIT(A)-1, KOLKATA VIDE APPEAL NOS. 363/CIT(A)-1/C-2/08-09, 580/CIT(A)-1/C- 2/09-10 AND 293/CIT(A)-1/C-2/10-11 ALL DATED 22.02.2013. ASSESSMENTS WERE FRAMED BY DC IT, CIRCLE-2, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEARS 2006-07 TO 2008-09 VIDE HIS SEPARATE ORDERS DATED 31.12.2008, 31.12.2009 AND 30.11.2010 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN THESE THREE APPEALS O F REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR NON -DEDUCTION OF TDS U/S. 194J OF THE ACT ON VARIOUS PAYMENTS THEREBY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1 IN AY 2006 -07: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-1, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.111,91,59,021/- U/S. 40 (A)(IA) ALTHOUGH TDS IS APPLICABLE AS PER SECTION 194C/194J OF THE ACT ON VARIOUS PAYMENTS? 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE AO NOTICED FROM S CHEDULE 6 PAGE 19 OF THE STATEMENT OF ACCOUNT FOR FY 2005-06 RELEVANT TO AY 2006-07 THAT THE ASSE SSEE UNDER THE HEAD CHARGES OF POWER INCURRED VARIOUS EXPENSES CLAIMED BY WEST BENGAL ST ATE ELECTRICITY BOARD DURING THE RELEVANT ASSESSMENT YEAR WHICH ARE AS UNDER: 1. WHEELING CHARGES RS. 13,80,876/- 2. POWER FACTOR REBATE RS.22,35,42,049/- 3. U.I. CHARGES RS.10,49,18,303/- 4. TRANSMISSION CHARGES RS.73,98,25,648/- 5. POWER INTERRUPTION CHARGES RS. 3,26,12,943/- 6. VARIOUS CHARGES TO RLDC RS. 1,68,79,202/- 2 ITA NOS.1397,1398 &1428/KOL/2013 WEST BENGAL STATE ELECTRICITY DISTRIBUTI ON CO. LTD. AYS 2006-07 TO 2008-09 RS.111,91,59,021/- 4. ACCORDING TO AO, THE ASSESSEE HAS NOT DEDUCTED T DS AND CLAIMED THAT THE SAME ARE NOT COVERED U/S. 194C & 194J OF THE ACT. ACCORDING TO AO, THESE PAYMENTS ARE COVERED U/S. 194C & 194J OF THE ACT AND TDS HAS TO BE DEDUCTED. BUT, THE ASSESSEE FAILED TO DEDUCT THE SAME AND ACCORDINGLY, AO INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, MADE DISALLOWANCE OF PAYMENTS AMOUNTING TO RS.111,91,59,021/-. AGGRIEVE D, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE ON AL L THE ISSUES. AGGRIEVED, NOW REVENUE IS IN SECOND APPEAL BEFORE US. 5. WE FIND THAT THE PAYMENTS IN RESPECT TO ITEM NO. 1 AND ITEM NO. 4 AS MENTIONED IN ABOVE PARA 3 I.E. ARE THE EXPRESSION TRANSMISSION CHARGES AND/OR WHEELING CHARGES ENTAIL DISTRIBUTION OF ELECTRICITY IN THE AREA OF CORPORATION AND THE CHAR GES COULD NOT BE SUBJECT MATTER TO THE PROVISIONS OF SECTION 194C OR 194J OF THE ACT. THI S WAS RESTRICTED TO THE CASE OF THE ASSESSEE IN VIEW OF THE PUBLIC FUNCTION TO BE UNDERTAKEN BY IT, AS A RESULT OF RESTRUCTURING OF WEST BENGAL STATE ELECTRICITY DISTRIBUTION CO. LTD. THE WHEELIN G CHARGES REPRESENT THE CHARGES FOR PERMITTING USE OF STATE TRANSMISSION UTILITY FOR PERMITTING US E OF STATE TRANSMISSION UTILITY BY THE PERSON OTHER THAN THE DISTRIBUTION LICENSEE. THE TRANSMISS ION CHARGES SIMPLY CONSTITUTE A FEE FOR AVAILING OF THE TRANSMISSION UTILITY TO BE USED BY OPEN ASSE T CONCEPT FOR DISTRIBUTION OF ELECTRICITY, LICENSEES AND CONSUMERS. IN OUR VIEW, THE WHEELING CHARGES AND TRANSMISSION CHARGES ARE NEITHER CONTRACTUAL PAYMENTS NOR FEE FOR TECHNICAL SERVICES U/S. 194C OR 194J OF THE ACT AS CONTENDED BY REVENUE BECAUSE THERE IS NO HUMAN INTE RVENTION OR HUMAN INTERFACE AND, THEREFORE, THIS CANNOT BE CONTRACTUAL PAYMENTS OR FEE FOR TECH NICAL SERVICES. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NOTHING ON RECORD TO SUPPORT THE CONT ENTIONS OF THE REVENUE THAT THE WHEELING CHARGES AND TRANSMISSION CHARGES ASSUMED THE CHARAC TER OF CONTRACTUAL PAYMENTS AND FEE FOR TECHNICAL SERVICES AS NOTED BY AO. THIS VIEW OF OU RS IS SUPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MAHARASTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. (2015) 375 ITR 23 (BOM). WE FIND THAT THIS ISSUE I S SQUARELY COVERED BY THIS DECISION IN FAVOUR OF ASSESSEE. THEREFORE, ON THESE TWO PAYMENTS, IN V IEW OF OUR REASONING, WE CONFIRM THE ORDER OF CIT(A). THIS COMMON ISSUE OF REVENUES APPEALS IS DISMISSED. 6. IN RESPECT TO ITEM NOS. 2 AND 5 I.E. POWER FACTO R REBATE AND POWER INTERRUPTION CHARGES. WE FIND THAT THESE CHARGES ARE ADJUSTED AGAINST ELE CTRICITY CONSUMPTION BILL PAYABLE BY HIGH 3 ITA NOS.1397,1398 &1428/KOL/2013 WEST BENGAL STATE ELECTRICITY DISTRIBUTI ON CO. LTD. AYS 2006-07 TO 2008-09 VOLTAGE INDUSTRIAL CONSUMERS. IN THE PRESENT CASE, WE FIND THAT THE TARIFF ORDER OF 2005-06 OF WEST BENGAL ELECTRICITY REGULATION COMMISSION APPRO VED ENERGY CHARGES AND DEMAND CHARGES AS ELECTRICITY CHARGES. BESIDES THOSE CHARGES, WES T BENGAL ELECTRICITY REGULATION COMMISSION ALSO ALLOWS SOME REBATES AND SURCHARGE ON POWER FAC TOR. ANY CONSUMER CONSUMES TWO TYPES OF ENERGY I.E. ACTIVE ENERGY AND REACTIVE ENERGY. THE TOTAL ENERGY IS THE VECTORIAL SUM OF ACTIVE ENERGY AND REACTIVE ENERGY AND THE POWER FACTOR IS THE RATIO OF ACTIVE ENERGY. POWER FACTOR IS ALSO COMPUTED FROM ACTIVE ENERGY AND REACTIVE ENERG Y. SO POWER FACTOR OF A CONSUMER DEPENDS ON ACTIVE ENERGY AND REACTIVE ENERGY DRAWN BY THE C ONSUMER. THE ENERGY CHARGES ARE CLAIMED AS ACTIVE ENERGY ONLY. THE REACTIVE ENERGY CONSUME D BY THE CONSUMERS DEPENDS UPON ELECTRICAL EQUIPMENTS USED BY THE CONSUMERS. POWER FACTOR DEC REASES WHERE REACTIVE DRAWN BY THE CONSUMER IS HIGHER. SIMILARLY, POWER FACTOR INCREA SES WHEN REACTIVE ENERGY BECAME LESSER. IDEAL POWER FACTOR IS UNITY. AS PER TERMS AND CONDI TIONS OF TARIFF ORDER OF 2005-06, POWER FACTOR SURCHARGE WAS PAYABLE BY THE HIGH VOLTAGE/EX TRA HIGH VOLTAGE INDUSTRIAL CONSUMERS, WHOSE MONTHLY AVERAGE POWER FACTOR FALLS BELOW 85%. ON THE OTHER HAND, IF THE MONTHLY POWER FACTOR WAS ABOVE 92%, HE WOULD GET A POWER FACTOR R EBATE. IF THE POWER FACTOR IS BETWEEN 85% AND 92%, THERE WAS NEITHER ANY SURCHARGE NOR ANY RE BATE. SO POWER FACTOR REBATE ALLOWED TO ANY CONSUMER IS A PART OF TARIFF, AND GIVEN EFFECT IN T HE ENERGY BILL. POWER FACTOR REBATE IS COMPUTED AS A PERCENTAGE OF ENERGY CHARGE SPECIFIED IN THE T ARIFF ORDER AND THE MONTHLY POWER FACTOR OF THE CONSUMER. THE AO WAS OF THE VIEW THAT THE PAYME NT FOR POWER FACTOR REBATE AND POWER INTERRUPTION CHARGES WAS MADE BY WEST BENGAL STATE ELECTRICITY BOARD TO POWER GRID CORPORATION BUT THIS FACT IS INCORRECT. THE POWER F ACTOR REBATE IS NOT PAID TO ANYBODY. THIS REBATE IS GRANTED TO THE HIGH VOLTAGE INDUSTRIAL CONSUMERS FOR THEIR ENERGY CONSUMPTION BILLS. ONCE THIS IS THE POSITION, THERE IS NO PAYMENT MADE BY ASSESS EE BUT THIS WAS A REBATE ADJUSTED AGAINST ELECTRICITY CONSUMPTION BILLS. THIS CANNOT BE SUBJ ECT MATTER OF TDS UNDER ANY OF THE PROVISIONS OF THE ACT WHETHER SEC. 194C OR 194J OF THE ACT. AC CORDINGLY, CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE CONFIRM THE ORDER OF CIT(A) AND THIS COMMON ISSUE O F REVENUES APPEALS IS DISMISSED. 7. IN RESPECT TO ITEM NO. 3 I.E. UNSCHEDULED INTERC HANGE (UI). WE FIND THAT THE TARIFFS FOR POWER PURCHASED FROM DIFFERENT CENTRAL SECTOR POWER STATIONS ARE DETERMINED BY THE CENTRAL ELECTRICITY REGULATORY COMMISSION (CERC). AVAILABIL ITY BASED TARIFF (ABT) HAS BEEN INTRODUCED WITH EFFECT FROM 01.04.2003 IN EASTERN R EGION FOR PURCHASE OF POWER FROM CENTRAL 4 ITA NOS.1397,1398 &1428/KOL/2013 WEST BENGAL STATE ELECTRICITY DISTRIBUTI ON CO. LTD. AYS 2006-07 TO 2008-09 SECTOR POWER STATION. IN THE AVAILABILITY BASED TA RIFF (ABT) THERE ARE THREE PARTS. (I) CAPACITY CHARGE (II) ENERGY CHARGE (III) UN SCHEDULED INTERC HANGE (UI) CHARGE. IN VIEW OF THE ABOVE, WE FIND THAT THE UI CHARGES DO NOT FALL WITHIN THE PUR VIEW OF FEE FOR TECHNICAL SERVICES AS DEFINED IN SECTION 194J OF THE ACT ARE NOT LIABLE TO TDS. HENC E, WE CONFIRM THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO BY INVOKING THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT. THIS COMMON ISSUE OF REVENUES APPEALS IS DISMISSED. 8. IN RESPECT TO VARIOUS OTHER CHARGES I.E. FEE PAY ABLE TO REGIONAL LOAD DESPATCH CENTRE FOR SHORT TERM OPEN ACCESS AND OPERATING CHARGES I.E. A PPLICATION FEE OF RS.2000/- PAYABLE TO REGIONAL LOAD DESPATCH CENTRE BY WAY OF OPERATIONAL EXPENSES AGAINST REQUEST FOR OPEN ACCESS. THESE ARE ONLY FEE PAID AND NOTHING ELSE F OR OPERATIONAL WORK. ACCORDINGLY, THIS CANNOT BE CONTRACTUAL PAYMENTS OR PAYMENTS FOR FEE FOR TEC HNICAL SERVICES AND CANNOT COME UNDER THE PURVIEW OF SECTIONS 194C OR 194J OF THE ACT. ACCOR DINGLY, THIS CANNOT BE SUBJECT MATTER FOR TDS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, ONCE THESE ITEMS ARE NOT LIABLE FOR TDS DISALLOWANCE U/S. 40(A)(IA) OF THE ACT CANNOT BE MA DE AND CIT(A) HAS RIGHTLY DELETED THE SAME AND WE CONFIRM THE SAME. 9. THE NEXT ISSUE IN THESE APPEALS OF REVENUE IS AG AINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF PAYMENT TOWARDS LICENSE FEE MADE BY AO FOR NON-DEDUCTION OF TDS U/S. 194C OF THE ACT INVOKING THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A)-1, KOLKATA HAS ERRED IN DELETING THE ADDITION OF RS.67,74,000/- U/S. 40(A)( IA) TOWARDS PAYMENT OF LICENSE FEES ALTHOUGH DEDUCTION OF TDS WAS APPLICABLE ON SUCH PAYMENTS.? 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO NOTED THAT THE RELEVANT PROVISI ONS OF THE ACT DO NOT EXCLUDE GOVERNMENT DEPARTMENT FROM DEDUCTING TDS U/S. 194C OF THE ACT. ACCORDING TO HIM, THE ASSESSEE COMPANY WAS LIABLE TO DEDUCT TDS ON THE ABOVE STATED PAYMEN T OF LICENSE FEE BUT FAILED TO DEDUCT THE SAME. ACCORDINGLY, HE DISALLOWED THE ENTIRE LICENSE FEE OF RS.76.74 LACS BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE CIT(A) DELETED THE DISALLOWANCE. AGGRIEVED, REVENUE IS IN SECOND APPEAL BEFORE TRIBUNAL. 11. WE FIND FROM THE FACTS OF THE CASE THAT THE PRO VISIONS OF SECTION 12 OF ELECTRICITY ACT, 2003. SECTION 12 OF THE ELECTRICITY ACT, 2003 PROVI DES THAT NO PERSONS SHALL TRANSMIT ELECTRICITY, 5 ITA NOS.1397,1398 &1428/KOL/2013 WEST BENGAL STATE ELECTRICITY DISTRIBUTI ON CO. LTD. AYS 2006-07 TO 2008-09 OR DISTRIBUTE ELECTRICITY OR UNDERTAKE TRADING IN E LECTRICITY, UNLESS HE IS AUTHORIZED TO DO SO BY A LICENCE ISSUED UNDER SECTION 14, OR IS EXEMPT UNDER SECTION 13 OF THE SAID ACT. SECTION 14 OF THE SAID ACT FURTHER PROVIDES THAT THE APPROPRIATE COMM ISSION (THE CENTRAL ELECTRICITY REGULATORY COMMISSION CONSTITUTED UNDER SECTION 76 OF THE SAID ACT OR THE STATE ELECTRICITY REGULATORY COMMISSION CONSTITUTED UNDER SECTION 82 OF THE SAID ACT) MAY, ON AN APPLICATION MADE TO IT UNDER SECTION 15, GRANT A LICENCE TO ANY PERSON - ( A) TO TRANSMIT ELECTRICITY AS A TRANSMISSION LICENSEE; OR (B) TO DISTRIBUTE ELECTRICITY AS A DIS TRIBUTION LICENSEE: OR (C) TO UNDERTAKE TRADING IN ELECTRICITY AS AN ELECTRICITY TRADER IN ANY AREA AS MAY BE SPECIFIED IN THE LICENCE. THE GOVERNMENT OF WEST BENGAL, DEPARTMENT OF POWER AND NON CONVENT IONAL ENERGY SOURCES, KOLKATA NOTIFIED THE WEST BENGAL ELECTRICITY (FEES FOR APPLICATION F OR GRANT OF LICENCE) RULES 2005 BY GAZETTE NOTIFICATION DATED 24 TH NOVEMBER, 2005. RULE 3(1) OF THE SAID RULES PROVID ES THAT EVERY APPLICATION MADE TO THE COMMISSION FOR GRANT OF LIC ENCE UNDER SECTION 14 OF THE SAID ACT SHALL BE ACCOMPANIED BY A FEE OF RS.2,00,000. SUB-RULE (2) O F RULE 3 FURTHER PROVIDES THAT EVERY LICENSEE SHALL PAY TO THE COMMISSION AN ANNUAL FEE AT THE RA TE OF 5 PAISE PER HUNDRED KWH OF THE ENERGY THAT HAS BEEN TRANSMITTED OR DISTRIBUTED OR TRADED AS THE CASE MAY BE, BY SUCH LICENSEE IN THE PRECEDING FINANCIAL YEAR SUBJECT TO A MINIMUM ANNUA L FEE OF RS.5,00,000. IN ACCORDANCE WITH THE AFORESAID RULES READ WITH SECTION 14 OF THE SAID AC T, WBSEB PAID A LICENCE FEE OF RS. 67.74 LAKHS TO THE WEST BENGAL STATE ELECTRICITY REGULATO RY COMMISSION. PAYMENT OF SUCH LICENCE FEE DOES NOT FALL WITHIN THE PURVIEW OF SECTION 194C OF THE SAID ACT AS HELD BY THE AO. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE A RE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE, BECAUSE THE ASSESSEE HAS NOT MADE ANY PAYMENT ON WHICH TDS IS TO BE DEDUCTED RATHER LICENSE FEE IS PAID BY THE PARTIES IS FOR GRANTING OF LICENSE AND NOT FOR ANY EXPENSE, WHICH WAS CLAIMED BY THE ASSESSEE. ACCORD INGLY, WE CONFIRM THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO BY INVOKING TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THIS COMMON ISSUE OF REVENUES APPEALS IS DI SMISSED. 12. IN THE RESULT, ALL THE APPEALS OF REVENUE ARE D ISMISSED. ORDER IS PRONOUNCED IN OPEN COURT ON 04.05.2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 4 TH MAY, 2016 JD. (SR. P.S.) 6 ITA NOS.1397,1398 &1428/KOL/2013 WEST BENGAL STATE ELECTRICITY DISTRIBUTI ON CO. LTD. AYS 2006-07 TO 2008-09 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-2, KOLKATA 2. RESPONDENT M/S. WEST BENGAL STATE ELECTRICITY DIS TRIBUTION CO. LTD., BLOCK-DJ, SECTOR-II, BIDHAN NAGAR, KOL-91. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .