North Eastern Electricity Supply Company of Orissa Ltd, Balasore V. ITO(TDS), Balasore

ITA 38/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4415 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2010
• Court: TRIBUNAL
• Department Lawyers: M R
• Assessee Lawyers: J SANGHVI
• Keywords: Principle of natural justice; TDS; Set aside
• Section: 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 38/CTK/2010 / ASSESSMENT YEAR 2008 - 09 NORTH EASTERN ELECTRICITY SUPPLY COMPANY OF ORISSA LTD., JANUGANJ, BALASORE 756019,ORISSA TAN: BBNN00232B - - - VERSUS - INCOME - TAX OF FICER (TDS),BALASORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI J.SANGHVI, AR / FOR THE RESPONDENT: / SHRI M.R.PANIGRAHI, DR / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.20.11.2009 FOR THE ASSESSMENT YEAR 2008 - 09 IN CASE OF THE ASSESSEE. 2. THE ASSESSEE RAISED THE FOLLOWING ISSUES IN THE GROUNDS OF APPEAL. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BHUBANESHWAR [CIT(A)J ERRED IN HOLDING THAT INTEREST COMPONENT OF THE PAYMENT TO GRIDCO ON RESTRUCTURING OF DISTRIBUTION OF ELECTRICITY BUSINESS B ETWEEN VARIOUS COMPANIES IS LIABLE TO TAX U/S.194A AND THEREBY UPHOLDING THE ORDER OF THE INCOME TAX OFFICER (TDS), BALASORE U/S . 20 1( 1). YOUR APPELLANT SUBMITS THAT THE PAYMENT TO GRIDCO WAS IN RESPECT OF THE ACCRUED INTEREST LIABILITY ON THE LOANS TA KEN BY GRIDCO UPTO 31 .3.2005 AND WAS NOT INTEREST PAYMENT TO I.T.A.NO. 38/CTK/2010 2 GRIDCO. THE APPELLANT THEREFORE SUBMITS THAT THE PROVISIONS OF SECTION 194A ARE WRONGLY APPLIED AND THE ORDER UNDER SECTION 201(1) IN RESPECT THEREOF OUGHT TO BE QUASHED. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT PAYMENT TO GRIDCO WAS ONLY REIMBURSEMENT OF THE INTEREST PAID I PAYABLE BY GRIDCO TO THEIR LENDERS AND THE SAME DID NOT CONSTITUTE INTEREST AND THAT THE PAYMENT WAS ONLY A REIMBURSEMENT OF PAYMENT MADE BY GRIDCO AND THAT THE PRIMARY RESPONSIBILITY TO DEDUCT TAX IS ON GRIDCO AND NOT APPELLANT. YOUR APPELLANT SUBMITS THAT THE CIT (A) HAS WRONGLY HELD THAT THE APPELLANT IS LIABLE TO DEDUCT TAX ULS.194A ON THE PAYMENT MADE TO GRIDCO IN RESPECT OF THE INTEREST COMPONENT OF THE PAS T RESTRUCTURED LIABILITY OF GRIDCO. THE LETTER OF GRIDCO DATED 19.12.2009 IN THIS REGARD IS SUBMITTED HEREWITH FOR REFERENCE. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S.201(1A). YOUR APPELLANT SUBMITS THAT THE INTEREST U/S.201(IA) IS REQUIRED TO BE COMPUTED WITH REFERENCE TO PRINCIPAL TAX LIABILITY AND CONSIDERING THE DUE DATES THEREOF APPLICABLE TO THE YOUR APPELLANT SUBMITS THAT ON ACCOUNT OF LOSS INCURRED BY GRIDCO FOR THE ASSESSMENT YEAR INVOLVED, THERE WAS NO PRINCIPAL TAX LI ABILITY AND THEREFORE THE INTEREST U/S.201(1A) IS NOT LEVIABLE AND THE SAME OUGHT TO BE CANCELLED. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMPUTATION OF INTEREST U/S. 201(1A) WITH REFERENCE TO THE PAYMENT TO GRIDCO WITHOUT CONSIDERING THE DIRECT TA X LIABILITY OF GRIDCO FOR THE FINANCIAL YEAR. YOUR APPELLANT SUBMITS THAT THE INTEREST U/S.201(1A) OUGHT TO BE WORKED OUT WITH REFERENCE TO THE DIRECT TAX LIABILITY OF GRIDCO AND THEIR RELEVANT DUE DATES AND THE SAID INTEREST WOULD BE NIL CONSIDERING THAT GRIDCO HAS NO DIRECT TAX LIABILITY FOR THE FINANCIAL YEAR. I.T.A.NO. 38/CTK/2010 3 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE AND THEIR LEGAL IMPLICATIONS. 4. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE REITERATED WHAT HE PLEADE D BEFORE THE DEPARTMENTAL AUTHORITIES BESIDES AGITATING THAT BOTH THE DEPARTMENTAL AUTHORITIES HAVE NOT BEEN ABLE TO ESTABLISH THAT THERE WAS ANY LIABILITY ON THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES ARE NOT AT ALL SUSTAINABLE FOR LEGAL SCRUTINY AND LIABLE TO THE SET ASIDE. 5. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED SUPPORTING THE VIEW TAKEN BY THE DEPARTMENTAL AUTHORITIES AND ASSAILING THE GROUNDS RAISED BY TH E ASSESSEE AND SOUGHT FOR UPHOLDING THE ORDERS OF THE DEPARTMENTAL AUTHORITIES BY DISMISSING THE APPEAL OF THE ASSESSEE. 6. ON CAREFUL CONSIDERATION THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL, THE UNDISPUTED FACTS RELATE TO THE ISSUES ARE THAT THE AMOUNT S SHOWN BY THE ASSESSEE AS PAID TO GRIDCO ARE THE PAYMENTS NOT FALLING UNDER SECTIONS 201(1) OR 201(1A) OF THE I.T.ACT,1961. WHAT HAS HAPPENED IS THAT IN THE YEAR 1999, THE DISTRIBUTION OF ELECTRICITY POWER WAS UNDERTAKEN BUY GRIDCO AND WAS SEPARATED AND V ESTED ON FOUR DISTRIBUTION COMPANIES (DISTCOS) INCLUDING THE ASSESSEE - COMPANY. IN THAT PROCESS, THE DISTRIBUTION ASSETS AND THE CORRESPONDING AMOUNT OF BACK TO BACK LIABILITY WERE TRANSFERRED TO THE DISTRIBUTION COMPANIES. THE ORIGINAL LOANS TAKEN BY OSEB/ GRIDCO FROM THE FIS/BANKS WERE RETAINED BY GRIDCO WHO SERVICED THESE LOANS. THE BACK TO BACK ARRANGEMENT RELATING TO THE ASSESSEE COMPANY WAS ESTIMATED BY OERC I.T.A.NO. 38/CTK/2010 4 IN THEIR ORDER DT.20.7.2006 AT 135.69 CRORES WHICH INCLUDED PRINCIPAL AMOUNT OF 94.64 CRORES AND 41.05 CRORES TOWARDS ACCUMULATED INTEREST. THE SERVICING OF LOANS BY GRIDCO IS INDEPENDENT OF THE PAYMENT BY THE DISTRIBUTION COMPANIES AND THERE IS NO INTEREST COST. THEREFORE, THE PAYME NT OF INSTALLMENTS BY THE ASSESSEE TO GRIDCO ARE TOWARDS THE RESTRUCTURING OF THE LOAN STATED SUPRA AND THE AMOUNT WAS BIFURCATED IN RESPECT OF LOAN TAKEN BY GRIDCO FOR THE ASSETS OF DISTCOS AND INTEREST LIABILITY PAID BY THEM. BUT THESE TRANSACTIONS WERE TAKEN BY THE ITO (TDS) AS PAYMENTS OF INSTALLMENTS AND AS THEY WERE BEING PAID WITHOUT TDS, THE ASSESSEE WAS FOUND TO BE IN DEFAULT AND THE IMPUGNED ORDERS WERE PASSED U/.S.201(1) AND 201(1A). THE CONTENTION OF THE ASSESSEE WAS NEGATIVE BY THE DEPARTMENTAL AUTHORITIES AND HENCE, THE PRESENT APPEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL. 7. ON CAREFUL CONSIDERATION OF THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES AND ANALYZING THEM IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL, IT IS FOUND THAT THE DEPARTMENT HAS NOT BEEN ABLE TO CATEGORICALLY POINT OUT OR CLEAR THAT THE PAYMENTS CONSIDERED BY THE DEPARTMENT ARE ACTUALLY PAYMENTS MADE BY THE ASSESSEE TO THE GRIDCO AND WHETHER THEY ARE MADE DURING THE PERIOD UNDER CONSIDERATION. UNLESS THESE TWO IMPORTANT ASPECTS ARE ESTABLISHED, APPLICATION OF PROVISIONS CONTAINED IN SECTIONS 201(1)( AND 201(1A) ARE NOT APPLICABLE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THIS IS A FIT CASE TO BE RESTOR ED TO THE FILE OF THE ITO(TDS) FOR DETERMINING THE QUANTUM OF AMOUNT THAT WAS PAID BY THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION AND ALSO THAT WHETHER THAT PAYMENT IS RELATED TO THE INSTALLMENTS OF THE LOAN AMOUNT DUE TO THE GRIDCO AND THEY CONSIDE R THE APPLICABILITY OF SECTIONS 201(1) AND 201(1A) OF THE I.T.ACT,1961 AND PASS NECESSARY ORDERS AS PER LAW, OF COURSE I.T.A.NO. 38/CTK/2010 5 STRICTLY FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. WITH THIS DIRECTION, THE MATTER IS RESTORED TO THE FILE OF THE ITO(TDS) FOR DE NOVO CONSIDERATION AS DIRECTED SUPRA. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 SD/ - SD/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDI CIAL MEMBER. ( ) DATE: 13 TH MAY, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : NORTH EAST ERN ELECTRICITY SUPPLY COMPANY OF ORISSA LTD., JANUGANJ, BALASORE 756019,ORISSA. 2 / THE RESPONDENT: INCOME - TAX OFFICER (TDS),BALASORE. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GU ARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.