TMI Blog2014 (12) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... ission for achieving the economy and efficiency in the operation of power system and therefore question of any person rendering service to another does not arise - The operation and maintenance of transmission lines by RVPNL and the user of these lines by assessee for transmitting energy does not result into any technical services being rendered to the assessee - The technical staff of RVPN by operating and maintaining its grid station and transmission lines simply discharge thereon functioning - They do not render any technical service to the assessee – the order of the CIT(A) is upheld – Decided against revenue. Deletion of front end fees to HUDCO for raising loan – Revenue expenses or not – Held that:- CIT(A) rightly was of the view that front end fees had been paid to HUDCO in connection with the money borrowed - There was no extension of the existing business, therefore, proviso to Section 36(i)(iii) of the Act is not applicable - The revenue expenditure, which was incurred wholly and exclusively for the purpose of business could be allowed in its entirety in the year in which it was incurred - It could not be spread over in number of years, even if the assessee had written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act). The learned Assessing Officer observed that as per Annexure C-3 of tax audit report, the assessee failed to deposit employees ESI contribution in few of cases amounting to ₹ 1,09,018/-. In respect of various units/branches within the prescribed time limit as per provisions of the relevant act and addition on this account is liable to be made. The learned Assessing Officer added back this amount as per provisions of Section 36(1)(va) read with Section 2(24)(x) of the Act. 3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter to the learned CIT(A), who had allowed the appeal on the ground that the assessee made payment before due date of return by relying on the various decisions of the Hon'ble High Court referred on page 3 of the assessment order. 4. Now the Revenue is in appeal before us and the learned DR relied upon the recent decision of the Hon ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation 366 ITR ITR 170 (Guj) and argued that it should be paid as per the date prescribed in the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete involvement of high technocrats. It is also incorrect on the part of the assessee to compare such a sensitive issue of transmission of high voltage electricity with a meager operation of bus/truck/engines etc.. It is not applicable even if these vehicles are driven without driver i.e. automatically run engines which are controlled very sensibly and responsibly by a huge fleet of technical staff. Even if the argument of the assessee is accepted then why the TDS is deducted in the cases of tour operators when the buses run automatically? It is also incorrect on the part of the assessee to state that it has a high fleet of staff which controls the transmission and other works. If it is so then why the so many staff with technical expertise remain present in the transmission system/SLDC to control the entire system including transmission? This fact is further strengthened from the statements of the Dy. Chief Engineer, taken during the course of assessment proceedings, wherein he had categorically confirmed the huge and comprehensive involvement of human being with complete technical knowledge. The said issue has been examined in detail by ITO, TDS-2, Jaipur as well as in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is not applicable. The A.O. also recoded statement of Chief Engineer Shri Arun Kumar Sharma to examine the issue of human interface in the transmission of the electricity by RVPNL to JVVNL. He had perused his statement and it is seen that he has nowhere stated that any human intervention was involved when the electricity was transmitted through the transmission lines to RVPNL to the grid station of the assessee. However, he, in reply to question No. 5 to 10 of his statement, only explained the functioning of State Load Dispatch Centre (SLDC). From replies to these questions, it was evident that SLDC had its own staff which monitored the flow of electricity from generating station to the distributing station as a regulatory body, through its own technical person. In response to question No. 5, it was further stated that it case any generating station was to be shut down for maintenance or otherwise, the permission for the same was given by SLDC. Similarly, if there was any sudden reduction in the load then discom required SLDC to direct the generating station to produce lesser electricity. This additional functioning of SLDC did not involve any human interference as far as tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLDC charges on the basis of documents on records and the facts explained and the nature of such payments as well as facts on records whether the same is liable for deduction of tax at source under the Income Tax Act, 1961 specifically U/s 194J which provides for deduction of tax at sources on payment of fees for professional or technical services and whether section 40(a)(ia) is applicable on the present facts of the case. 9.1 On going through the various clauses of transmission service agreement we find that as per clause 3 of the agreement assessee is allowed the user of the transmission system. Clause 5 provides for Open Access Transmission Capacity where by any other customer is also allowed to use the transmission lines for Long Term Open Access and short term Open Access. Clause 8 provides for compliance of Grid code as approved by the commission both by RVPN and assessee and further provides that all the parties shall comply with the direction of SLDC for ensuring integrated grid operation for achieving the maximum economy and efficiency in the operation of power system in the state. As per clause 10 and 12 the tariff for transmission and wheeling and SLDC charges is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the said amount as capital expenditure. Claim of capital expenditure cannot be allowed U/s 37(1) as well as U/s 36(1)(iii) of the Income Tax Act, 1961. Accordingly, the payments so made are of a capital expenditure and same is disallowed. 12. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal by observing that the appellant had raised loan of ₹ 300 crores at 11% per annum from HUDCO for improvement of infrastructure for power transmission and distribution lines . In addition to interest, the assessee was paid one time front end fees @ .5 plus services tax. The amount so paid was neither refundable nor adjustable against the subsequent interest payment. It was to be paid in advance before release first loan installment, accordingly, the appellant had made payment of ₹ 1,73,07,800/- to HUDCO towards front end fees. The appellant in its books of account claimed deduction of this amount over a period of five years. However, in the computation of income, the entire amount of ₹ 1,73,07,800/- was claimed as deduction as revenue expenditure. The Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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