ACIT, Jaipur V. RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD., Jaipur

ITA 579/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5558 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Keywords: Business expenditure
• Section: 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 579/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 THE ACIT, CIRCLE-6, JAIPUR CUKE VS. M/S RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD., VIDHYUT BHAWAN, JANPATH, JYOTI NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCR 8312A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.11.2015 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 28/01/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-II, JAIPUR DATED 26.06.2014 WHEREIN THE REV ENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE OVERALL LIMIT OF CONTRIBUTION MADE TOWARDS PF & GRA TUITY PAYMENTS IS REQUIRED TO BE COMPUTED IN ACCORDANCE OF EXISTING STRENGTH OF EMPLOYEES OF RRVPN AND NOT ON THE BASIS OF COMPLETE ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 2 SALARY AMOUNT OF ALL THE EMPLOYEES OF ALL THE FIVE COMPANIES OF ERSTWHILE RSEB. 2. THE RELEVANT FACTS FOR THE ISSUE UNDER CONSIDERA TION ARE AS UNDER:- 2.1 DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAS MADE AN ADDITIONAL CONTRIBUTION OF RS.83,68,50,001/- TOWARD S SUPERANNUATION FUND AND RS. 27,89,50,003/- TOWARDS GRATUITY FUNDS. THE SAME WAS ALLOWED AS DEDUCTION IN ORIGINAL ASSESSMENT U/S 143 (3). SUBSEQUENTLY, THE AO ISSUED NOTICE U/S 148 FOR THE REASON THAT TH ERE IS NO RELATION OF THE AMOUNT OF ADDITIONAL CONTRIBUTION WITH THE SALA RY OF EXISTING EMPLOYEES WHICH ARE ON THE PAYROLLS OF THE COMPANY. THEREAFTER THE REASSESSMENT WAS COMPLETED BY THE AO U/S 147/143(3) DISALLOWING THE CONTRIBUTION TO SUPERANNUATION FUND AMOUNTING TO RS . 59,47,98,748/- AND CONTRIBUTION TO GRATUITY FUND MOUNTING TO RS. 2,72,09,510/-. AS PER THE AO, THE ASSESSEE CAN CONTRIBUTE UPTO 27% OF SAL ARY IN SUPERANNUATION FUND AND 8.33% OF SALARY IN GRATUITY FUND AND THE SAME HAS TO BE COMPUTED IN RESPECT OF EXISTING STRENGTH OF EMPLOYEES OF THE ASSESSEE AND NOT ON THE BASIS OF SALARY AMOUNT RELA TING TO EMPLOYEES OF ALL THE COMPANIES OF RSEB WHO HAVE SUBSEQUENTLY BEE N TRANSFERRED TO 5 ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 3 DIFFERENT COMPANIES FORMED PURSUANT TO RESTRUCTURIN G OF RSEB. FURTHER, THE CONTENTIONS OF THE ASSESSEE THAT AS PER POWER S ECTOR TRANSFER REFORMS SCHEME 2000, ALL THE LIABILITIES OF RSEB EM PLOYEES FOR THE PERIOD PRIOR TO THE DATE OF TRANSFER IS TO BE BORNE BY THE ASSESSEE WAS NOT ACCEPTED. 2.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(A) WHEREIN THE ASSESSEE HAD MADE THE FOLLOWING SUBMISS IONS WHICH ARE REITERATED DURING THE COURSE OF HEARING BEFORE US. HENCE, THE SAME ARE REPRODUCED AS UNDER:- 1. THE MAIN ISSUE ARISING IN THIS APPEAL IS WHETHE R THE AMOUNT OF ADDITIONAL CONTRIBUTION MADE BY THE ASSESSEE TOW ARDS SUPERANNUATION AND GRATUITY FUND WITH REFERENCE TO THE EMPLOYEES OF THE ERSTWHILE RSEB AS ON 19.07.2000 WHO WERE ABS ORBED BY ALL THE FIVE SUCCESSOR COMPANIES IS ALLOWABLE TO THE AS SESSEE OR NOT. THERE IS NO DISPUTE TO THE FACT THAT THE AMOUNT OF 27%, 8.33% OF THE SALARY OF ALL THE FIVE COMPANIES TAKEN TOGETHER IS MUCH MORE THAN THE AMOUNT OF NORMAL CONTRIBUTION AND ADDITION AL CONTRIBUTION MADE TO THESE FUNDS AS CALCULATED AT P AGE 4 OF THE ASSESSMENT ORDER. 2. AS STATED ABOVE, AS PER THE RAJASTHAN POWER SECT OR REFORMS TRANSFER SCHEME, 2000, THE ASSESSEE IS TO MEET THE PENSION AND GRATUITY PAYMENTS PERTAINING TO THE YEAR OF SERVICE RENDERED BY THE EMPLOYEES OF THE BOARD AS ON 19.07.2000. THE GOVT. HAS COMMITTED THAT IN CASE OF SHORTFALL OF FUNDS WITH T HE TRUST AT ANY POINT OF TIME RELATING TO THE PERIOD OF SERVICER AS ON 19.07.2000, IT WOULD MAKE AVAILABLE THE REQUIRED FUNDS IN THE TRUS T SUBJECT TO ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 4 MAXIMUM AMOUNT OF RS. 1,769 CRORES DETERMINED AS PE R THE ACTUARIAL VALUATION. HOWEVER, THE LIABILITY OF PAY MENT TOWARDS SUPERANNUATION AND GRATUITY TO THE EMPLOYEES OF THE BOARD REMAIN ON THE ASSESSEE. IN ORDER TO RECOVER SUCH ADDITIONA L LIABILITY, RAJASTHAN STATE REGULATORY COMMISSION (RERC) HAS AL LOWED THE ASSESSEE TO RECOVER SUCH ADDITIONAL LIABILITY THROU GH THE TARIFF FIXATION. ACCORDINGLY THE ADDITIONAL CONTRIBUTION FOR PENSION AND GRATUITY IS MADE A PART OF COST TO DETERMINE THE FI XATION OF TARIFF FOR TRANSMISSION CHARGES. AS PER THE TARIFF ORDER DATE D 02.05.2005 FOR FIXING THE TRANSMISSION TARIFF FOR F.Y. 2005-06, TH E ADDITIONAL CONTRIBUTION TO PF AND GRATUITY IS CONSIDERED AT RS .107.06 CRORES BY RERC. THUS, THE ADDITIONAL CONTRIBUTION FOR PEN SION AND GRATUITY CLAIMED BY THE ASSESSEE IS OTHERWISE RECOV ERED THROUGH THE INCOME FROM TRANSMISSION CHARGES. HAD NO SUCH ADDITIONAL CONTRIBUTION BE MADE, THE TRANSMISSION CHARGES WOUL D HAVE BEEN REDUCED BY THAT AMOUNT. THUS, IN EFFECT SUCH ADDIT IONAL CONTRIBUTION CLAIMED BY THE ASSESSEE, WHICH OTHERWI SE IN A LIABILITY AND ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1), HA S NO ADVERSE EFFECT ON THE ULTIMATE INCOME OF THE ASSESSEE. HENC E THE DISALLOWANCE MADE BY THE AO BY NOT APPRECIATING THE ENTIRE FACTUAL POSITION, AS EXPLAINED ABOVE, IS UNCALLED F OR. 3. OTHERWISE ALSO, IN MAKING THE DISALLOWANCE, THE AO HAS ALLOWED ONLY RS. 9,19,12,156/- OF CONTRIBUTION TO S UPERANNUATION FUND WHEREAS THE ACTUAL PAYMENT IS RS. 13,52,14,733 /-. SIMILARLY, AO HAS ALLOWED ONLY RS. 4,12,93,403/- FOR CONTRIBUT ION TO GRATUITY FUND WHEREAS THE ACTUAL PAYMENT IS RS. 5,54,46,333/ -. THUS, THE ASSESSEE HAS ACTUALLY PAID RS.19,06,61,066/- TO BOT H THE FUNDS BUT AO HAS ALLOWED ONLY RS. 13,32,05,559/-. HENCE, THE DIFFERENCE OF RS. 5,74,55,507/- IS OTHERWISE ALLOWABLE TO THE ASS ESSEE AND TO THIS EXTENT THE DISALLOWANCE MADE BY THE AO IS ARITHMETI CALLY INCORRECT. 4. IT MAY ALSO BE NOTED THAT TO MEET THE SHORTFALL OF THE FUND IN THE SUPERANNUATION AND GRATUITY FUND VIS--VIS ACTU ARIAL LIABILITY, THE ASSESSEE HAS BEEN MAKING THE ADDITIONAL CONTRIB UTION EACH ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 5 YEAR RIGHT FROM FY 2004-05 TILL DATE. THE DETAIL O F ADDITIONAL CONTRIBUTION SO MADE IS AT PB.31. IN ALL THESE YEA RS SUCH ADDITIONAL CONTRIBUTION HAS BEEN ALLOWED TO THE ASS ESSEE. HENCE, THERE IS NO JUSTIFICATION FOR DISALLOWING THE ADDIT IONAL CONTRIBUTION MADE IN THE YEAR UNDER CONSIDERATION. 2.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS ALLOWED THE RELIEF WITH THE FOLLOWING OBSERVATI ONS, (PARA 2.3.3) WHICH IS REPRODUCED AS UNDER: IN ORDER TO RECOVER SUCH ADDITIONAL LIABILITY, RAJ ASTHAN STATE REGULATORY COMMISSION (RSRC) HAS ALLOWED THE ASSESE EE TO RECOVER SUCH ADDITIONAL LIABILITY THROUGH THE TARIFF FIXATI ON. THE COSTING OF TARIFF IS DONE BY RSRC ON COST +8% RETURN ON EQUITY CAPITA L AND INCOME TAX. THE TARIFF FOR THIS YEAR HAS BEEN WORKED OUT AT RS. 84.88 PER KW PER MONTH WHICH INCLUDES ADDITIONAL CONTRIBUTION FOR PF & GRATUITY OF RS.107.06 CRORES, AS PROPOSED BY THE APPELLANT. IN OTHER WORDS, FOR THE ADDITIONAL CONTRIBUTION EXPENSES MADE BY THE APPELL ANT TOWARDS PF & GRATUITY, THE APPELLANT IS BEING COMPENSATED IN THE TARIFF PRICING. THEREFORE, THIS EXPENDITURE IS NOT REDUCING THE PRO FITS BUT IS BEING REIMBURSED THROUGH INCREASED TARIFF. IT HAS ALSO B EEN EXPLAINED BY THE APPELLANT THAT SUCH A DEDUCTION HAS BEEN CLAIMED BY IT EACH YEAR FROM AY 2005-06 AND HAS BEEN ALLOWED BY THE ASSESSING OF FICER, EXCEPT FOR THIS YEAR. CONSIDERING THE ABOVE FACTS, THE DISALLOWANCE MADE ON ACCOUNT OF EXCESS CONTRIBUTION AMOUNTING TO RS. 59,47,98,748/- TOWARDS SUPERANNUATION FUND AND OF RS. 27,72,09,510/- TOWA RDS GRATUITY FUND IS DELETED. 2.4 IN ORDER TO APPRECIATE THE ISSUE UNDER CONSIDER ATION, IT WOULD BE RELEVANT TO EXAMINE THE RELEVANT PROVISIONS OF THE RAJASTHAN POWER SECTOR TRANSFER REFORMS SCHEME 2000 WHEREIN THE ASS ESSSEE WAS ENTRUSTED TO ADEQUATELY FUND THE PENSION AND GRATUI TY LAW AS CLAIMED BY THE ASSESSEE. THE RAJASTHAN POWER SECTOR TRANSFER REFORMS SCHEME ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 6 2000 WAS NOTIFIED BY THE GOVT. OF RAJASTHAN VIDE NO TIFICATION NO.F.15(1)ENERGY/2000/PART.II JAIPUR, DATED 18.01. 2002. IN EXERCISE OF THE POWERS CONFERRED BY SECTIONS 14, 15, 16 AND 58 OF THE RAJASTHAN POWER SECTOR REFORMS ACT,1999(ACT NO. 23 OF 1999) THE STATE GOVERNMENT HEREBY MAKES THE FOLLOWING SCHEME FOR PROVIDING ON GIVING EFFECT TO THE TRANSFER OF ASSETS, PROPERT IES, LIABILITIES, OBLIGATIONS. PROCEEDINGS AND PERSONNEL OF RAJASTHAN STATE ELECTRICITY BOARD TO RAJASTHAN VIDYUT UTPADAN LIMITED (RVUN), R AJASTHAN RAJYA VIDYUT PRASARAN NIGAM LIMITED (RVPN) AND THE DISTR IBUTION COMPANIES. THE RELEVANT PROVISION IN RELATION TO PERSONNEL AN D THEIR RETIREMENT BENEFITS ARE CONTAINED IN CLAUSE 6 OF THE SCHEME WH ICH IS REPRODUCED S UNDER:- 1) THE TRANSFER OR PERSONNEL IN TERMS OF THIS SCHE ME SHALL BE SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE ACT. 2) SUBJECT TO SUB-RULE (1), THE PERSONNEL ON THE EF FECTIVE DATE OF TRANSFER SHALL STAND TRANSFERRED AS UNDER; A) THE PERSONNEL CLASSIFIED IN SCHEDULE-G SHALL STA ND TRANSFERRED TO AND PERMANENTLY ABSORBED IN RVUN. B) THE PERSONNEL CLASSIFIED IN SCHEDULE-H STAND TRA NSFERRED TO AND PERMANENTLY ABSORBED IN RVUN. C) THE PERSONNEL CLASSIFIED IN SCHEDULE-I STAND TR ANSFERRED TO AND PERMANENTLY ABSORBED IN JAIPUR DIVISION. D) THE PERSONNEL CLASSIFIED IN SCHEDULE-J STAND TR ANSFERRED TO AND PERMANENTLY ABSORBED IN AJMER DIVISION. E) THE PERSONNEL CLASSIFIED IN SCHEDULE-K STAND TRA NSFERRED TO AND PERMANENTLY ABSORBED IN JODHPUR DIVISION. PROVIDED THAT THE PERSONNEL SPECIFIED IN THE NOTIFI CATIONS LISTED IN SCHEDULE-N, SHALL STAND TRANSFERRED TO AND PERMANEN TLY ABSORBED IN RVUN, RVPN, AJMER DISCOM, JAIPUR DISCOM OR JODHPUR DISCOM, AS THE CASE MAY BE, AS PER THE LISTED NOTIFICATIONS. ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 7 (3) ON SUCH TRANSFER AND THE SUBJECT TO THE PROVISI ONS OF THE ACT AND OTHER PROVISIONS OF THIS SCHEME THE PERSONNEL SHALL FORM A PART OF THE SERVICES OF RVUN OR RVPN OR THE DISTRIBUTION COMPAN IES, AS THE CASE MAY BE, BUT THEIR RANK, SCALE OF PAY AND INTERSE SE NIORITY IS EXISTING IN THE BOARD ON THE EFFECTIVE DATE OF TRANSFER SHALL B E MAINTAINED. (4) NOTWITHSTANDING THE PROVISIONAL NATURE OF TRANS FER OR PERSONNEL TO RVUN, RVPN AND THE DISTRIBUTION COMPANIES AS PER SU B-RULE (1) OF RULE 10, THE PERSONNEL SHALL DISCHARGE THE DUTIES A ND FUNCTIONS AS MAY BE ASSIGNED TO THEM FROM TIME TO TIME BY RVUN OR RVPN OR THE DISTRIBUTION COMPANIES, AS THE CASE MAY BE, AND RVU N, RVPN AND THE DISTRIBUTION COMPANIES SHALL HAVE THE POWER TO EXER CISE ALL ADMINISTRATIVE AND DISCIPLINARY CONTROL OVER SUCH P ERSONNEL TRANSFERRED TO THEM PER THIS SCHEME. (5) THE TRANSFER OR PERSONNEL SHALL BE FURTHER SUBJ ECT TO THE FOLLOWING CONDITIONS, NAMELY; (A) THAT THE TERMS AND CONDITIONS OF THE SERVICES APPLICABLE TO PERSONNEL ON THE EFFECTIVE DATE OF TRANSFER, SHALL NOT IN ANY WAY BE LESS FAVOURABLE THAN THOSE APPLICABLE TO THEM IMMEDIATELY BEFORE TH E SAID EFFECTIVE DATE OF TRANSFER. ACCORDINGLY THE SALARY, ALLOWANCES AN D OTHER PECUNIARY BENEFITS INCLUDING TERMINAL BENEFITS APPLICABLE ON THE EFFECTIVE DATE OF TRANSFER SHALL BE PROTECTED AND SHALL NOT BE ADVERS ELY CHANGED. (B) ALL SUCH PERSONNEL SHALL HAVE CONTINUITY OF SE RVICE IN ALL RESPECTS; (C) ALL BENEFITS OF SERVICE ACCRUED BEFORE THE SAID EFFECTIVE DATE OF TRANSFER SHALL BE FULLY RECOGNIZED AND TAKE INTO ACCOUNT FOR ALL PURPOSES INCLUDING THE PAYMENT OF TERMINAL BENEFITS; (D) TO ANY ORDERS THAT MAY BE PASSED BY THE COURTS IN THE PROCEEDINGS PENDING ON THE SAID EFFECTIVE DATE OF THE TRANSFER IN REGARD TO SENIORITY OR OTHER MATTERS CONCERNING THE SERVICE CONDITIONS OF THE PERSONNEL; (E) SUBJECT TO THIS SCHEME, THE PERSONNEL SHALL C EASE TO BE IN THE SERVICE OF THE BOARD AND SHALL NOT ASSET OR CLAIM ANY BEN EFIT OF SERVICE UNDER THE STATE GOVERNMENT OR THE BOARD. ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 8 (6) SUBJECT TO THE ACT AND THIS SCHEME, THE TRANSFE REE SHALL FRAME REGULATIONS GOVERNING THE CONDITIONS OF PERSONNEL T RANSFERRED TO THE TRANSFEREE UNDER THIS SCHEME AND TILL SUCH TIME THE EXISTING SERVICE RULES /REGULATIONS OF THE BOARD SHALL APPLY MUTATIS MUTA NDIS . (7) (I) SUBJECT TO SUB-RULE(8) IN RESPECT OF ALL STATUTORY AND OTHER SCHEMES AND EMPLOYMENT RELATED MATTERS INCLUDING TH E PROVIDENT FUND, GRATUITY FUND, PENSION AND ANY OTHER SUPERANNUATIO N FUND OR ANY OTHER SPECIAL FUND CREATED OR EXISTING FOR THE BENEFIT OF THE PERSONNEL, THE RELEVANT TRANSFEREE SHALL STAND SUBSTITUTED FOR TH E BOARD FOR ALL PURPOSES AND ALL THE RIGHTS, POWERS AND OBLIGATION S OF THE BOARD IN RELATION TO ANY AND ALL SUCH MATTERS SHALL BECOME THOSE OF THE TRANSFEREE CONCERNED AND THE SERVICES OF THE PERSONNEL SHALL B E TREATED AS HAVING BEEN CONTINUOUS FOR THE PURPOSE OF THE APPLICATION OF THIS SUB-RULE. (II) THE INVESTMENTS AND RECEIVABLES AS CONTAINED I N SCHEDULE-M, WHICH REPRESENT THE CONTRIBUTIONS TOWARDS GPF AND PENSION SHALL BE TRANSFERRED BY THEN STATE GOVERNMENT TO THE GPF AND PENSION TRU ST AS THE FUNDED PART OF THE LIABILITY OF THE TRUST TO THE PERSONNE L. (8)(I) RVPN SHALL BE RESPONSIBLE TO ENSURE THAT TH E PENSION AND GRATUITY TRUSTS OF THE BOARD PERSONNEL AS ON 19 TH JULY, 2000 ARE ADEQUATELY FUNDED TO MEET THE PENSION AND GRATUITY PAYMENTS PE RTAINING TO THE YEARS OF SERVICE RENDERED BY THE PERSONNEL OF THE BOARD I NCLUDING RETIRED PERSONNEL IN THE BOARD AS ON 19 TH JULY, 2000; (II) IN THE EVENT OF ANY SHORTFALL OF FUNDS WITH T HE TRUSTS AT ANY POINT OF TIME RELATING TO THE PERIOD OF SERVICES AS ON 19 JULY, 2000, THE STATE GOVERNMENT SHALL ENSURE AVAILABILITY OF THE REQUIRE D FUNDS IN THE TRUSTS SUBJECT TO A MAXIMUM AMOUNT EQUIVALENT TO RS. 1,76 9/- CRORES DETERMINED AS PER ACTUARIAL VALUATION DONE FOR THE PURPOSE; (III) THE MANAGEMENT OF RVUN, RVPN AND THE DISTRI BUTION COMPANIES SHALL BE RESPONSIBLE O ENSURE THAT THE CO NTRIBUTION TO THE ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 9 TRUSTS RELATING TO PERSONNEL RELATED FUNDS FOR THE SERVICES AFTER 19 TH JULY, 2000 OF THEIR RESPECTIVE PERSONNEL IS MADE AS REQU IRED FROM TIME TO TIME. (9) ALL OBLIGATIONS IN RESPECT OF PENSION AND OTHE R RETIREMENTS BENEFITS INCLUDING PROVIDENT FUND, SUPERANNUATION AND GRATUI TY TO THE EMPLOYEES, WHO HAVE RETIRED FROM THE SERVICES OF THE BOARD B EFORE THE EFFECTIVE DATE OF TRANSFER, SHALL BE DISCHARGED BY RVPN. 2.5 AS EVIDENT FROM ABOVE, ACCORDING TO THE CLAUSE 6(8) OF THE RAJASTHAN POWER SECTOR TRANSFER REFORMS SCHEME 2000 , THE APPELLANT WAS MADE RESPONSIBLE THAT PENSION AND GRATUITY TRUS T OF THE ERSTWHILE RSEB PERSONNEL AS ON 19.07.2000 ARE ADEQUATELY FUND ED TO MEET THE PENSION AND GRATUITY PAYMENT PERTAINING TO THE YEAR S OF SERVICES RENDERED BY THE PERSONNEL OF THE BOARD INCLUDING RE TIRED PERSONNEL IN THE BOARD AS ON 19.07.2000. IN ORDER TO MEET SUCH ADDI TIONAL LIABILITY, RAJASTHAN STATE REGULATORY COMMISSION HAS ALLOWED T HE ASSESSEE TO RECOVER SUCH ADDITIONAL LIABILITY THROUGH THE TARIF F FIXATION. FURTHER LD. CIT(A) HAS REFERRED TO THE TARIFF ORDER DATED 02.0 7.2005 FOR FIXING THE TRANSMISSION TARIFF FOR F.Y. 2005-06, THE ADDITION AL CONTRIBUTION TO PF AND GRATUITY IS CONSIDERED AT RS. 107.06 CRORES BY RERC. ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 10 2.6 THE LD CIT DR HAS VEHEMENTLY ARGUED THE MATTER AND HAS SUBMITTED THAT THE CONTRIBUTION TO GRATUITY AND PEN SION TRUST SHOULD BE IN RESPECT OF EXISTING STAFF STRENGTH OF THE APPELLANT COMPANY AND NOT IN RESPECT OF ALL THE EMPLOYEES OF THE ERSTWHILE RSEB. 2.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS BEEN INCORPO RATED AS ONE OF THE SUCCESSOR COMPANIES OF ERSTWHILE RSEB TO CARRY ON T HE BUSINESS OF TRANSMISSION OF ELECTRICITY IN THE STATE OF RAJASTH AN AS PER RAJASTHAN POWERS SECTOR REFORMS ACT, 1999. WITH EFFECT FROM 19.07.2000 BEING THE EFFECTIVE DATE OF TRANSFER, THE EMPLOYEES OF RS EB WILL BECOME THE EMPLOYEES OF RESPECTIVE COMPANIES AND ALL THEIR RIG HTS AND OBLIGATION SHALL LIE HENCEFORTH WITH THE RESPECTIVE COMPANIES AND ALL THE BENEFITS OF SERVICES ACCRUED BEFORE THE EFFECTIVE DATE OF TRANS FER SHALL BE FULLY PROTECTED INCLUDING PAYMENT OF TERMINAL BENEFITS. AS PER THE RAJASTHAN POWER SECTOR REFORM SCHEME 2000, THE ASSESSEE HAS B EEN GIVEN THE MANDATE TO CARRY ON THE BUSINESS OF TRANSMISSION OF ELECTRICITY. IN ADDITION TO SUCH MANDATE, THE ASSESSEE HAS BEEN ENT RUSTED WITH AN ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 11 ADDITIONAL RESPONSIBILITY TO ENSURE THAT THE PENSIO N AND GRATUITY TRUST OF THE ERSTWHILE RSEB PERSONNEL AS ON 19.07.2000 ARE A DEQUATELY FUNDED TO MEET THE PENSION AND GRATUITY PAYMENTS PERTAINING T O THE YEAR OF SERVICES RENDERED BY THE PERSONS OF THE RSEB INCLUDING RETIR ED PERSONNEL AS ON 19.07.2000. IN ORDER TO MEET THIS ADDITIONAL RESPO NSIBILITY OF FUNDING THE PENSION AND GRATUITY TRUSTS, RERC HAS ALLOWED THE A SSESSEE TO RECOVER THE ADDITIONAL CONTRIBUTION TO SUCH PENSION AND GRA TUITY TRUSTS AS PART OF THE TARIFF FIXATION MECHANISM. IN THIS UNDISPUTED FACTUAL MATRIX, THE ASSESSEE HAS BEEN DEPOSITING THE ADDITIONAL CONTRIB UTION TO PENSION AND GRATUITY TRUSTS YEAR-ON-YEAR SINCE ITS INCORPORATIO N AND HAS BEEN RECOVERING THE SAME THROUGH THE TARIFF FIXATION WHI CH HAS BEEN DULY OFFERED TO TAX AS PART OF ITS REVENUES AND THUS DIS CHARGING ITS TREASURY RESPONSIBILITY WHICH HAS BEEN ENTRUSTED UPON IT IN ADDITION TO THE BUSINESS OF TRANSMISSION OF ELECTRICITY. 2.8 IT IS NOT IN DISPUTE THAT THE ASSESSEE IS NOT T HE EMPLOYER OF THE EMPLOYEES IN QUESTION FOR WHICH IT HAS MADE THE ADD ITIONAL CONTRIBUTION TO THE RESPECTIVE TRUSTS. THE CONTRIBUTION HAS ACC ORDINGLY BEEN MADE BY ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 12 THE ASSESSEE TO THE RESPECTIVE TRUSTS NOT IN THE CA PACITY OF AN EMPLOYER BUT ON BEHALF OF THE RESPECTIVE COMPANIES WHERE THE EMPLOYEES HAVE BEEN ULTIMATELY ABSORBED. AS A NECESSARY COROLLARY , THE EXPENDITURE TOWARDS CONTRIBUTION TO GRATUITY AND PENSION TRUSTS HAVE NOT BEEN CLAIMED IN THE CAPACITY AND STATUS OF AN EMPLOYER A ND THUS LIMITS IN RELATION TO CONTRIBUTION TO SUCH TRUSTS CANNOT BE A PPLIED IN RELATION TO EXISTING STAFF STRENGTH OF THE ASSESSEE COMPANY. 2.9 IT IS NOT THE CASE OF THE REVENUE THAT THE PENS ION AND GRATUITY TRUST ARE NOT RECOGNIZED AND APPROVED UNDER THE INCOME TA X ACT. THE CONTRIBUTIONS HAVE BEEN MADE IN PAST SO MANY YEARS BY THE ASSESSEE ON BEHALF OF THESE COMPANIES TO THE PENSION AND GRATUI TY TRUST AND EVEN IN THE SUBSEQUENT YEARS AS APPARENT FROM DETAILS SUBMI TTED AT PAGE NO.31 OF THE PAPER BOOK WHICH IS ON RECORD. ALL THESE FACTS LEAD TO A CONCLUSION THAT THE GRATUITY AND PENSION TRUST WERE SET UP INI TIALLY BY RSEB FOR ITS OWN EMPLOYEES AND HAS GOT THE NECESSARY APPROVAL AS REQUIRED UNDER THE INCOME TAX ACT. SUBSEQUENTLY, AS PART OF THE POWER SECTOR REFORMS TRANSFER SCHEME, CONTRIBUTION TO THE SAME TRUSTS CO NTINUED WHEREBY FOR ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 13 THE PAST LIABILITIES, THE ASSESSEE MADE NECESSARY F INANCING ARRANGEMENT THROUGH TARIFF FIXATION FOR ALL THE EMPLOYEES OF TH E ERSTWHILE RSEB AND FOR THE PERIOD SUBSEQUENT TO THE DATE OF TRANSFER, THE RESPECTIVE COMPANIES CONTRIBUTED TO THE SAME TRUSTS IN RESPECT OF THEIR EMPLOYEES FROM THEIR OWN BOOKS OF ACCOUNTS. IT IS THUS A CAS E WHERE FUNDING IS HAPPENING BY VARIOUS GROUP COMPANIES IN COMMON GRAT UITY AND PENSIONS TRUSTS WITHIN THE STIPULATED LIMITS COMPUT ED IN ACCORDANCE WITH STAFF STRENGTH OF THE RESPECTIVE COMPANIES. 2.10 IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ELIGIBLE T O CLAIM ADDITIONAL CONTRIBUTION TO GRATUITY AND PENSION TRUST NOT IN T HE CAPACITY OF AN EMPLOYER BUT IN THE CAPACITY OF A FACILITATOR ON BE HALF OF ITS GROUP COMPANIES AS MANDATED UNDER THE RAJASTHAN POWER SEC TOR REFORMS SCHEME, 2000 FOR WHICH IT HAS BEEN ADEQUATELY COMPE NSATED. SUCH ADDITIONAL CONTRIBUTION WILL NECESSARILY BE REQUIRE D TO BE COMPUTED IN RELATION TO STAFF STRENGTH OF ALL THE OTHER FOUR COMPANIES OF ERSTWHILE ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 14 RSEB AND CANNOT BE RESTRICTED TO STAFF STRENGTH OF ASSESSEE. THE GROUND TAKEN BY THE REVENUE IS THUS DISMISSED. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/01/ 2016 SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 28/ 01 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR 2. THE RESPONDENT-M/S RAJASTHAN RAJYA VIDYUT PRASAR AN NIGAM LTD. JAIPUR 3. THE CIT(A)-II, JAIPUR 4. THE CIT-II, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 579/JP/14). VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 579/JP/14 ACIT, CIRCLE-6, JAIPUR VS. RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. 15 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER