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

ITA 874/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1739 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 08-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2013
• Court: TRIBUNAL
• Department Lawyers: GOULEN HANGSHING
• Keywords: Depreciation; Revised return
• Section: 143(3); 194C; 32; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 874/KOL/201 3 ASSESSMENT YEAR : 2008-0 9 D.C.I.T., CIRCLE-2, -VS.- M/S. WEST BEN GAL STATE KOLKATA ELECTRICITY TRANSMISSION CO.LTD. KOLKATA [PAN : AAACW 6952 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI GOULE N HANGSHING, CIT(DR) FOR THE RESPONDENT : SHRI SANJAY BHATTACHARYA , FCA DATE OF HEARING : 08.05.2017. DATE OF PRONOUNCEMENT : 12.05.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 17.01.2013 OF C.I.T.(A)-I, KOLKATA RELATING TO A.Y.2008-09. 2. GROUND NO.1 RAISED BY THE REVENUE READS AS FOLLO WS :- 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A)- I, KOLKATA HAS ERRED IN GIVING RELIEF TO THE ASSESSEE IN RESPECT OF DEPRECIATION ON 'TEMPORARY BUILDING' @ 100% ALTHOUGH IT'S PARENT CO MPANY CLAIMED IT @ 100%? 3. THE GOVERNMENT OF WET BENGAL VIDE ITS NOTIFIC ATION NO.12-PO/O/III/3R-29/2006 DATED 25-01-07 FRAMED A SCHEME FOR PROVIDING AND GI VING EFFECT OF THE TRANSFER AND VESTING OF ALL THE PROPERTIES AND INTERESTS, RIGHTS AND LIABILITIES OF THE WEST BENGAL STATE ELECTRICITY BOARD (WBSEB) IN THE STATE GOVERNMENT A ND REVESTING THEREOF, TO TWO SEPARATE COMPANIES, VIZ. WEST BENGAL STATE ELECTRIC ITY DEVELOPMENT CO.LTD. (WBSEDCL) AND WEST BENGAL STATE ELECTRICITY TRANSMI SSION CO. LTD. (WBSETCL)- ASSESSEE). IN PURSUANCE OF THE ABOVE MENTIONED NOTI FICATION PROVIDING A SCHEME FOR 2 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 2 GIVING EFFECT TO THE WEST BENGAL GOVERNMENTS DECIS ION, WBSEDCL AND WBSETCL (ASSESSEE) WERE INCORPORATED ON 16-02-07. BY A FURT HER NOTIFICATION NO.313/PO/O/III/3R-29/2006 DATED 19-09-2008, THE TE RMS AND CONDITIONS OF THE TRANSFER SCHEME IN REGARD TO THE TRANSFER OF PROPER TIES, INTERESTS, RIGHTS AND LIABILITIES INCLUDING PORTIONS OF THE ACCUMULATED LOSS OF ERSTW HILE WBSEB WERE MODIFIED/FINALIZED. THE ASSESSEE, VIZ. WBSETCL BECA ME THE AUTHORIZED LICENSEE U/S 12 OF THE ELECTRICITY ACT, 2003 FOR TRANSMISSION OF ELECTRICITY. THE ASSESSEE WAS NOTIFIED AS THE STATE TRANSMISSION UTILITY U/S 39(1) OF TH E ELECTRICITY ACT, 2003 ON THE STRENGTH OF THE NOTIFICATION NO.89-PO/O/III/3R 5/2007 DATED 26-02-07 ISSUED BY THE GOVT. OF WEST BENGAL. 4. THE ERSTWHILE WBSEWB WAS A REGULAR INCOME-TA X ASSESSEE AND AFTER THE ABOVE BIFURCATION, BOTH WBSEDCL AND WBSETCL (ASSESSEE) BE CAME INCOME-TAX ASSESSEES. THE ASSESSEE, VIZ., WBSETCL, ON THE BASIS OF THE PR OVISIONAL ACCOUNTS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09, ELECTRON ICALLY ON 26-09-08 SHOWING THE LOSS OF RS.1,53,66,06,036. SUBSEQUENTLY, ACCOUNTS W ERE FINALISED AND TAX AUDIT WAS CARRIED OUT AND THE ASSESSEE FILED A REVISED RETURN FOR THE ASSESSMENT YEAR 2008-09, SHOWING THE REVISED LOSS AT RS.55,62,63,705. 5. THE ASSESSEE WAS REVESTED WITH TEMPORARY BUI LDING HAVING THE WRITTEN DRAWN VALUE OF RS.8,18,47,690 FROM THE ERSTWHILE WBSEB. S INCE AS PER THE INCOME-TAX RULES, TEMPORARY ERECTIONS WERE TO BE CHARGED DEPRECIAITON @100% , THE ASSESSEE CLAIMED DEPRECIATION @100% IN RESPECT OF THE TEMPORARY BUIL DINGS, TRANSFERRED TO IT BY THE ERSTWHILE WBSEB. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN ITS CLAIM FOR DEPRECIA TION @100% AND THE ASSESSEE EXPLAINED THAT AS THE CONCERNED ASSET HAD BEEN REVE STED BY THE WBSEB THROUGH THE GOVERNMENT OF WEST BENGAL, UNDER THE NOMENCLATURE O F TEMPORARY BUILDING THE RATE FOR DEPRECIATION WAS CONSIDERED @100% IN ACCORDANCE WITH THE INCOME-TAX RULES, 1962. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES SUBMISSION AND 3 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 3 HELD THAT IN RELATION TO THE ABOVE MENTIONED TEMPO RARY BUILDINGHAVING WRITTEN DOWN VALUE OF RS.8,18,47,690, THE DEPRECIATION WOUL D BE ALLOWED ONLY @10% INSTEAD OF 100% AS CLAIMED. ON THE BASIS OF HIS SUCH OBSERV ATION THE ASSESSING OFFICER DISALLOWED RS.7,36,62,921 OUT OF THE DEPRECATION CL AIMED BY THE ASSESSEE. 6. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT AS PER THE TAX AUDIT REPORT OF WBSEB FOR THE ASSESSMENT YEAR 2007-08, THE CLOSING WDV AS ON 31-03-2007 OF TEMPORARY BUILDING WAS RS.12,59,19,523. ON THE BI FURCATION, AS MENTIONED HEREINABOVE, THE ABOVE MENTIONED WDV AS ON 31-03-20 07 OF TEMPORARY BUILDING WAS DIVIDED AS UNDER : SL.NO. NAME OF BIFURCATED BODY SHARE OF WDV AS ON 0 1- 04-2007 OF TEMPORARY BUILDING RS. 1. WBSEDCL 4,40,71,833 2. WBSETCL (APPELLANT) 8,18,47,690 12,59,19,523 THE 'TEMPORARY BUILDINGS' WHICH HAD BEEN REVESTED T O THE ASSESSEE COMPRISED OF TEMPORARY STRUCTURES BEING SHEDS OF WOODEN STRUCTUR ES WITH ASBESTOS ROOFS CONSTRUCTED FOR FACILITATING THE TRANSMISSION WORKS OF THE ASSESSEE. SINCE THE CLASS OR THE PARTICULAR FIXED ASSETS HAD BEEN 'TEMPORARY STR UCTURES'. AS PER THE INCOME-TAX RULES, THE APPLICABLE RATE OF DEPRECIATION WAS 100% . ACCORDINGLY, ON THE BASIS OF THE TEMPORARY BUILDINGS BEING TEMPORARY STRUCTURES HAVI NG THE INCOME-TAX WDV OF RS.8,18,47,690 ALLOTTED TO THE ASSESSEE, FOR THE PU RPOSES OF INCOME-TAX THE PRESCRIBED RATE OF DEPRECIATION OF 100% WAS CHARGED BY THE ASS ESSEE FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSEE SUBMITTED THAT THE INCOME-TAX RULES AS REGARDS THE CHARGING OF DEPRECIATION BY THE ERSTWHILE ORGANIZATION, VIZ. WB SEB AND THE OTHER BIFURCATED PART, VIZ., WBSEDCL, HAD IN THEIR OWN INCOME TAX COMPUTAT IONS, MIGHT HAVE APPLIED CERTAIN RATE OF DEPRECIATION WHICH MAY NOT BE IN ACCORDANCE WITH THE INCOME-TAX RULES, 1962. 4 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 4 IN ANY CASE, ANY WRONG APPLICATION OF RATE OF DEPRE CIATION MADE BY WBSEB OR WBSEDCL, CANNOT BE CONSIDERED AS THE BASIS ON WHICH THE ASSESSEE ALSO SHOULD HAVE DEPENDED UPON. THE ASSESSEE SUBMITTED THAT THE ASSE SSING OFFICER'S REMARKS IN THE ASSESSMENT ORDER ABOUT THE APPLICATION OF THE RATE OF 10%, WAS NOT APPLICABLE IN THE ASSESSEES CASE SINCE THE INCOME-TAX RULES. 1962 PROVIDED THE RATE AT 100% IN RESPECT OF THE TEMPORARY STRUCTURES. 7. THE ASSESSEE THUS CLAIMED THAT ITS CHARGING O F DEPRECIATION @100% ON THE 'TEMPORARY BUILDING WAS IN ACCORDANCE WITH THE INCOME-TAX RULES, 1962 AND SO THE ASSESSING OFFICERS ACTION IN REDUCING THE APPLIC ABLE RATE FROM 100% TO 10%, WAS AS UNJUSTIFIED. ACCORDINGLY, THE ASSESSEE PRAYED THAT THE DISALLOWANCE OF RS.7,36,62,921 OUT OF DEPRECIATION MADE BY THE ASSESSING OFFICER S HOULD BE DELETED. 8. THE CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE AND HELD AS FOLLOWS : AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER AND WRITTEN SUBMISSION IT IS NOTICED THAT WBSEB WAS BIFURCATED INTO TWO SEPARATE COMPANIES (I) WBSEDCL & (II) WBSETCL ON 16.02.2007 AND THE APPELLANT WBSETC L BECAME AUTHORIZED LICENCEE U/S 12 OF THE ELECTRICITY ACT, 2003 FOR TR ANSMISSION OF ELECTRICITY AND WAS NOTIFIED AS STATE TRANSMISSION UTILITY U/S 39(1) OF ELECTRICITY ACT, 2003 ON 26.02.2007 AS PER ORDER ISSUED BY GOVT. OF WEST BEN GAL. THE AO RESTRICTED THE CLAIM OF DEPRECIATION ON TEMPORARY BUILDING TO 10 % AS AGAINST 100% CLAIMED BY THE ASSESSEE AND THE DISALLOWANCE AMOUNT WAS DETERM INED AT RS.7,36,62,921/-. AS PER ACCOUNTS OF WBSEB THE WDV AS ON 31.03.2007 OF T EMPORARY BUILDING WAS RS.12,59,19,523/-. ON BIFURCATION THE APPELLANT HAD SHOWN WDV AS ON 01.04.2007 OF TEMPORARY BUILDING AS RS.8,18,47,690/- AND THE B ALANCE WAS SHOWN IN THE HANDS OF WBSEDCL. THESE TEMPORARY STRUCTURES COMPRISED OF SHEDS OF WOODEN STRUCTURE WITH ASBESTOS ROOFS CONSTRUCTED FOR FACILITATING TH E TRANSMISSION WORKS OF THE APPELLANT. THE ASSESSEE-COMPANY CLAIMED 100% DEPREC IATION IN ACCORDANCE WITH AS PER RULE-5(NEW APPENDIX- 1) AS PURELY TEMPORARY ERE CTIONS SUCH AS WOODEN STRUCTURE.WHE CLAIM OF ASSESSEE IS ALLOWABLE U/S 32 OF THE INCOME-TAX ACT. THEREFORE GROUND NO. 2 AND 3 ARE ALLOWED. 5 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 5 9. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 10. THE LD. DR PLACED RELIANCE ON THE ORDER OF A O. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND R ELIED ON THE ORDER OF CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE ORDER OF AO SHOWS THAT HE HAS MADE THE DISALLOWANCE FOR THE FOLLOWING REASONS :- UNDER THE CIRCUMSTANCES THE DEPRECIATION SCHEDULE AS PER ANNEXURE-C OF WBSEB WAS REFERRED TO AND TEMPORARY BUILDING ROW IS REP RODUCED AS BELOW :- DEPRECIA TION OF ASSETS GROSS VALUE OF ASSETS AS ON 31/03/2006 DEPRECIATION UPTO 31/3/2006 WDV AS ON 31/3/2006 ADDITION & PUT TO USE WITH THE PERIOD TOTAL FULL RATE TOTAL HALF RATE PRIOR TO 180 DAYS AFTER 180 DAYS TEMPORARY BUILDING 345600934 208702042 1368 98892 3011689 0 139910581 0 AS OBVIOUS, THE PARENT COMPANY CLAIMED DEPRECIATION @10% ON TEMPORARY BUILDING, WHICH WAS SUBSEQUENTLY REVESTED WITH THE ASSESSEE COMPANY. CONSEQUENT TO THE SPLIT :- REFERENCE IS ALSO INVITED TO ANNEXURE-C (DEPRECIATI ON CHART) TO TAR FOR WBSEDCL FOR F.Y.2007-08 ( THE OTHER COMPANY FORMED OUT OF THE SPLIT) AND ITS SEEN THAT DEPRECIATION HAS BEEN CLAIMED @10% ON TE MPORARY BUILDINGS(SL.NO.3). UNDER THE ABOVE STATED SITUATION, SUMMARIZED AS FOL LOWS AND BROUGHT TO THE NOTICE OF THE A/R ON 26/11/2010 (I)NO DETAILS AS REGARDS SITE ADDRESS, NATURE OR US E COULD BE SUBMITTED (II)DEPRECIATION WAS CLAIMED @10% BY THE PARENT CO. WBSEB (III)DEPRECIATION HAS BEEN CLAIMED @10% BY THE OTHE R SPLIT TO WBSEDCL. DEPRECIATION ON TEMPORARY BUILDING CLAIMED BY TH E ASSESSEE 100% IS RESTRICTED TO 10% I.E. RS.8184769/- AND THE REST 90% I.E. RS.7 3662921/- IS DISALLOWED. 12. IT IS CLEAR FROM THE AFORESAID OBSERVATIONS OF THE AO THAT HE HAS PLACED RELIANCE ON THE DEPRECIATION CHART OF THE ERSTWHILE WBSEB AND W BSEDCL ENTITY WHICH WAS FORMED CONSEQUENT TO THE SPLITTING UP OF WBSEB. THE AO HAS GONE BY THE FACT THAT 6 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 6 EVEN WBSEB CLAIMED DEPRECIATION ONLY AT 10% ON ASSE TS CLASSIFIED AS TEMPORARY BUILDING. THE CIT(A) ON THE OTHER HAND IN THE PRESE NT CASE HAS EXAMINED THE ITEMS OF TEMPORARY BUILDING AND HAS GIVEN A CATEGORICAL FIND ING THAT THE STRUCTURES IN QUESTION WERE TEMPORARY STRUCTURES BEING SHEDS MADE OUT OF W OOD WITH ASBESTOS ROOF CONSTRUCTED FOR FACILITATING THE TRANSMISSION WORKS OF THE ASSE SSEE. THIS FINDING OF CIT(A) HAS NOT BEEN CONTESTED AS INCORRECT BY THE REVENUE. THE FAC T THAT WBSEB AND WBSEDCL HAD CLAIMED DEPRECIATION AT 10% ON THIS TEMPORARY STRUC TURES CANNOT BE THE BASIS TO DISALLOW A LEGITIMATE CLAIM OF DEPRECIATION AT 100% ON TEMPO RARY STRUCTURES WHICH IS OTHERWISE ALLOWABLE TO THE ASSESSEE IN LAW. WE ARE THEREFORE OF THE VIEW THAT THE CONCLUSIONS OF CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFER ENCE. ACCORDINGLY GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 13. GROUND NOS. 2 AND 3 RAISED BY THE REVENUE RE AD AS FOLLOWS :- 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A)- I, KOLKATA HAS ERRED IN DECIDING THAT SECTION 194C IS NOT APPLICABLE TO THE PAYMENT OF RS.35,30,68,000/- TO WPDCL ALTHOUGH THE SAME IS NOT HING BUT A CONTRACTUAL PAYMENT? 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A)-I, KOLKATA HAS ERRED IN DELETING THE ADDITION U/S 40(A)(IA) OF RS.35,30,68,000/- ALTHOUGH NO TDS HAD BEEN ON SUCH PAYMENT ? 14. DURING THE ASSESSMENT PROCEEDINGS THE ASSESS ING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY IT HAD NOT DEDUCTED TAX AT SOURCE WHILE- PAYING RS,35,30,68,000 TOWARDS 'TRANSMISSION CHARGES' TO WBPDCL. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT SINCE T HE TRANSMISSION CHARGES HAD BEEN PAID FOR AVAILING OF THE FACILITY OF TRANSMISSION O F ELECTRICITY THROUGH WBPDCL, THERE HAD NOT BEEN ANY REQUIREMENT OF DEDUCTION OF TAX A T SOURCE U/S 194C OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE TRANSMISS ION OF ELECTRICITY, COULD NOT BE CONSIDERED AS ANY CARRYING OUT OF WORK IN PURSUANCE OF ANY CONTRACT, THERE SHOULD NOT BE APPLICABILITY OF SECTION 194C . HOWEVER, THE ASS ESSING OFFICER AFTER MAKING A 7 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 7 REFERENCE TO THE EARLIER ASSESSMENT PROCEEDINGS IN RESPECT OF THE ERSTWHILE WBSEB DISALLOWED THE ENTIRE TRANSMISSION CHARGES OF RS.35 ,30,68,0000 ALLEGEDLY U/S 40(A)(IA) OF THE ACT. 15. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THE ATTENTION OF THE ASSESSING OFFICER WAS DRAWN BY THE ASSESSEE TO THE FACT THAT THE TRAN SMISSION CHARGES OF RS.35,25,30,000 OUT OF RS.35,30,68,000 PAID TO THE WEST BENGAL POWER DEVELOPMENT CORPORATION LTD. (WBPDCL), HAD BEEN IN ACCORDANCE W ITH THE TARIFF ORDER OF THE WEST BENGAL ELECTRICITY REGULATORY COMMISSION (WBERC) WH ICH THE ASSESSEE WAS BOUND TO FOLLOW. IT WAS EXPLAINED THAT WBERC HAD HELD THA T THE ASSESSEE WOULD HAVE TO PAY RS.35,25,30,000 TO WBPDCL TOWARDS ANNUAL CARRYING C HARGES OF ASSETS BELONGING TO WBPDCL. THE ASSESSEE SUBMITTED THAT ONE OF THE MAI N FUNCTIONS OF WBERC WAS DETERMINATION OF TARIFF FOR GENERATION, SUPPLY, TRA NSMISSION AND WHEELING OF ELECTRICITY, WHOLE SALE, BULK OR RETAIL AS THE CASE MAY BE WITHIN A STATE. THE ELECTRICITY ACT, 2003 ALSO REQUIRES THE WBERC TO DETERMINE THE TARIFF IN ACCORDANCE WITH THE PROVISIONS OF THE SAID ACT, FOR SUPPLY OF ELECTRICI TY BY GENERATING COMPANY TO A DISTRIBUTION LICENSEE, FOR TRANSMISSION, FOR WHEELI NG AS ALSO FOR RETAIL SALE OF ELECTRICITY. THE WBERC AFTER CONSIDERING ALL THE RELEVANT ASPECT S HAD DETERMINED THE ANNUAL CARRYING CHARGES OF THE ASSETS UTILISED BY WBPDCL I N RELATION TO THE POWER GENERATED THROUGH IT AND THE SAID ANNUAL CARRYING C HARGES WAS ACTUALLY A SHARING OF THE COST OF THE TRANSMISSION SYSTEM. THE ASSESSEE S UBMITTED THAT THESE TRANSMISSION CHARGES PAID BY THE ASSESSEE, CANNOT BE TREATED AS ANY ALLEGED WORK CARRIED OUT IN PURSUANCE OF ANY CONTRACT. IT WAS CONTENDED THAT TH E AO FAILED TO APPRECIATE THAT THE PAYMENT OF TRANSMISSION CHARGES HAD NOT BEEN IN PUR SUANCE OF ANY CONTRACT, BUT IT WAS ONLY THE DETERMINED SHARE WORKED OUT BY THE WBERC I N ACCORDANCE WITH THE PROVISIONS OF THE ELECTRICITY ACT, 2003. THE ASSESS EE ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT EXPENSES AGGREGATING TO RS.5 ,38,000 HAD BEEN INCURRED TOWARDS VARIOUS CHARGES IN RELATION OT APPELLANTS BUSINESS OF TRANSMITTING ELECTRICITY AND SUCH 8 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 8 CHARGES HAD NOT BEEN INCURRED IN PURSUANCE OF ANY C ONTRACT FOR WORK. THE ASSESSEE THEREFORE CLAIMED THERE CANNOT BE ANY APPLICABILITY OF TDS PROVISIONS U/S 194C AND CONSEQUENTLY SECTION 40(A)(IA) OF THE ACT CANNOT BE APPLIED IN THE ASSESSEES CASE TO DISALLOW A SUM OF RS.35,30,68,000/-. . 16. THE CIT(A) AGREED WITH THE SUBMISSIONS AND HE HELD AS FOLLOWS :- NEXT GROUND RELATES TO DISALLOWANCE OF TRANSMISSIO N CHARGES OF RS. 35,30,68,000/- PAID TO WBPDCL U/S 40(A)(IA) FOR VIOLATION OF SECTI ON194C. IT WAS CONTENDED BY THE APPELLANT'S A/R THAT THESE CHARGES WERE PAID IN ACCORDANCE WITH THE TARIFF ORDER DATED 26.07.2007 OF WEST BENGAL ELECTRICITY REGULAT OR COMMISSION IN ACCORDANCE WITH THE PROVISION OF ELECTRICITY ACT,2003. THE WBE RC AFTER CONSIDERING ALL THE ASPECTS HAD DETERMINED THE ANNUAL CARRYING CHARGES OF THE ASSETS UTILISED BY WBPDCL IN RELATION TO POWER GENERATED THROUGH IT AN D THE ANNUAL CARRYING CHARGES WERE ACTUALLY A SHARING OF COST OF THE TRAN SMISSION SYSTEM AS DISTINCT AND DIFFERENT FROM WORK CARRIED-OUT IN PURSUANCE OF ANY CONTRACT. AFTER CAREFUL CONSIDERATION OF THE ABOVE SUBMISSIONS AND THE FACT S AND CIRCUMSTANCES OF THE CASE SECTION 194C IS NOT APPLICABLE TO SUCH ANNUAL CARRY ING CHARGES AS PER TARIFF ORDER DATED 26.07.2007 OF WBERC AND ACCORDINGLY ADDITION MADE U/S 40(A)(IA) IS DELETED. THEREFORE GROUND NO.4 AND 5 ARE ALLOWED. 17. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS RAISED GROUND NOS. 2 AND 3 BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO BROUGHT TO OUR NOTICE THAT THE AO IN MAKING THE IMPUGNED DISALLOWANCE HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSMENT ORDER U/S 143(3) OF THE ACT FOR A.Y. 2007-08 AND IN THAT ORDER THE ADMITTED POSITION WAS THAT THE TRANSMISSION CHARGES WERE LIABLE TO TDS U/S 194C OF THE ACT. HE THEREFORE SUBMITTED THAT ORDER OF THE AO SH OULD BE RESTORED. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, DREW OUR ATTEN TION TO THE TARIFF ORDER OF WEST BENGAL ELECTRICITY REGULATORY COMMISSION DATED 26.0 7.2007 WHEREIN PAYMENT IN QUESTION WAS CLEARLY EXPLAINED AS NOT TRANSMISSION CHARGES BUT COST OF CAPITAL PAYABLE BY THE ASSESSEE TO OTHER AGENCIES NAMELY WEST BENGA L POWER DEVELOPMENT CORPORATION LTD. (WBPDCL). THE FOLLOWING WERE THE RELEVANT OBSE RVATIONS OF THE TARIFF REGULATORY COMMISSION :- 9 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 9 5.COST OF CAPITAL PAYABLE TO OTHER AGENCY. THE INTRA-STATE TRANSMISSION SYSTEM COMPRISING OF T WO NUMBERS OF 400 KV AND THREE NUMBERS OF 220 KV LINES TERMINATING AT JEERAT , ARAMBAG, GOKARNA, SATGACHIA AND DURGAPUR RESPECTIVELY CONSTRUCTED BY THE WEST B ENGAL POWER DEVELOPMENT CORPORATION LIMITED (WBPDCL) ALONG WITH ITS BAKRESW AR POWER STATION, FORMS AN INTEGRAL PART OF THE TRANSMISSION SYSTEM BEING OPER ATED BY WBPDCL. THE ANNUAL CARRYING CHARGES OF THE ASSETS ARE FOUND AS UNDER: RS. IN LAKH (I) INTEREST ON LOAN FROM GOVT. OF WEST BENGAL 1188.00 (II) DEPRECIATION 1498.54 (III) RETURN ON EQUITY 838.76 TOTAL 3525.30 IN THIS REGARD, THE PARAGRAPHS 7.1, 7.2 AND 7.3 OF THE COMMISSION'S TARIFF ORDER DATED 26.07.2007 FOR WBPDCL FOR THE YEAR 2007-08 MA Y BE REFERRED TO. WBSETCL NEEDS TO PAY THIS TOTAL AMOUNT TO WBPDCL IN TWELVE (12) EQUAL MONTHLY INSTALLMENTS. 18. THE BASIS OF DETERMINATION OF THE AFORESAID SUM HAS ALSO BEEN EXPLAINED BY THE TARIFF REGULATORY COMMISSION IN CHAPTER-II OF THIS ORDER IN PARA 7.1. ACCORDING TO HIM THEREFORE IT IS CLEAR THAT THE AMOUNT IN QUESTION W AS NOT IN THE NATURE OF TRANSMISSION CHARGES BUT THE COST OF CAPITAL PAYABLE TO WBPDCL W HICH WAS ONLY CARRYING CHARGES OF ASSETS OWNED BY THE LATTER FOR USE BY THE FORMER . ACCORDING TO HIM THEREFORE THE CONCLUSIONS OF CIT(A) SHOULD BE UPHELD. 19. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE ORDER OF TARIFF REGULATORY COMMISSION THAT THE AMOUNT IN QUESTION IS NOT IN THE NATURE OF TRANSMISSION CHARGES. THEREFORE THE V ERY BASIS ON WHICH THE AO PROCEEDED TO MAKE THE DISALLOWANCE BY HOLDING THAT THE PAYMEN T IN QUESTION WAS LIABLE TO TDS U/S ,194C OF THE ACT WAS ERRONEOUS. ONCE IT IS HELD THA T THE PROVISION OF SECTION 194C OF THE ACT ARE NOT ATTRACTED AS AN NATURAL COROLLARY NO DI SALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. APART FROM THE ABOVE THE ORDER OF THE T ARIFF REGULATORY COMMISSION CLEARLY SPELLS OUT THE NATURE OF THE CHARGES AS ONE OF SHAR ING OF COST OF THE TRANSMISSION SYSTEM AND NOT THE COST PAID FOR CARRYING OUT ANY WORK. IN THE GIVEN FACTS AND CIRCUMSTANCES OF 10 ITA NO.874/KOL/2013 M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD. A.YR.2008-09 10 THE CASE WE ARE OF THE VIEW THAT ORDER OF CIT(A) HA S TO BE UPHELD. ACCORDINGLY GROUND NOS. 2 AND 3 RAISED BY THE REVENUE ARE ALSO DISMISS ED. 20. IN THE RESULT THE APPEAL BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE CO URT ON 12.05.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEV AN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12.05.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. WEST BENGAL STATE ELECTRICITY TRANSMISSION CO.LTD., BLOCK-DJ, SECTOR-II, BIDHAN NAGAR, KOLKATA-700091. 2.D.C.I.T., CIRCLE-2, KOLKATA. 3. CIT(A)-I, KOLKATA. 4. C.I.T.-TDS, KOLKAT A. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES