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Deputy Commissioner of Income-tax Versus West Bengal State Electricity Distribution Co. Ltd.

2016 (5) TMI 1104 - ITAT KOLKATA

TDS u/s. 194J / 194C - non-deduction of TDS on transmission charges and/or wheeling charges - invoking the provisions of section 40(a)(ia) - Held that:- The wheeling charges represent the charges for permitting use of state transmission utility for permitting use of state transmission utility by the person other than the distribution licensee. The transmission charges simply constitute a fee for availing of the transmission utility to be used by open asset concept for distribution of electricity .....

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ssumed the character of contractual payments and fee for technical services as noted by AO.- Decided against revenue

Power factor rebate and power interruption charges - Held that:- As per terms and conditions of Tariff order of 2005-06, Power Factor Surcharge was payable by the High Voltage/Extra 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 rebate. If th .....

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n but this fact is incorrect. The power factor 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 assessee but this was a rebate adjusted against electricity consumption bills. This cannot be subject matter of TDS under any of the provisions of the Act whether Sec. 194C or 194J of the Act. Accordingly, CIT(A) has rightly deleted the disallowance made by AO by inv .....

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en Access and operating charges - TDS liability - Held that:- These are only fee paid and nothing else for operational work. Accordingly, this cannot be contractual payments or payments for fee for technical services and cannot come under the purview of sections 194C or 194J of the Act. Accordingly, 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 made and CIT(A) has right .....

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ence under Section 14 of the said Act shall be accompanied by a fee of ₹ 2,00,000. Sub-rule (2) of Rule 3 further provides that every licensee shall pay to the commission an annual fee at the rate 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 annual fee of ₹ 5,00,000. In accordance with the aforesaid rules read with Section 14 of the said Act, WBSEB .....

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or any expense, which was claimed by the assessee. Accordingly, we confirm the order of CIT(A) deleting the disallowance - Decided against revenue - I.T.A Nos.1397, 1398 & 1428/Kol/2013 - Dated:- 4-5-2016 - Shri Mahavir Singh, JM And Shri M. Balaganesh, AM For the Appellant : Shri Niraj Kumar, CIT, DR For the respondent : Shri N. K. Podder, Senior Counsel ORDER Per Shri Mahavir Singh, JM All these appeals by revenue are arising out of separate orders of CIT(A)-1, Kolkata vide Appeal Nos. 363/CIT .....

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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 ₹ 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 .....

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harges ₹ 3,26,12,943/- 6. Various charges to RLDC ₹ 1,68,79,202/- Rs.111,91,59,021/- 4. According to AO, the assessee has not deducted TDS 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 ₹ .....

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the Act. This 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 wheeling charges represent the charges for permitting use of state transmission utility for permitting use of state transmission utility by the person other than the distribution licensee. The transmission charges simply constitute a fee for availing of the transmission utility to be used by open as .....

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wheeling charges and transmission charges assumed the character of contractual payments and fee for technical services as noted by AO. This view of ours is supported by the decision of Hon ble 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 is squarely covered by this decision in favour of assessee. Therefore, on these two payments, in view of our reasoning, we confirm the order of CIT(A). This common is .....

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also allows some rebates and surcharge on power factor. 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 energy. So power factor of a consumer depends on active energy and reactive energy drawn by the consumer. The energy charges are claimed as active energy only. The reactive .....

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power factor was above 92%, he would get a power factor rebate. If the power factor is between 85% and 92%, there was neither any surcharge nor any rebate. So power factor rebate allowed to any consumer is a part of tariff, and given effect in the energy bill. Power factor rebate is computed as a percentage of energy charge specified in the tariff Order and the monthly power factor of the consumer. The AO was of the view that the payment for power factor rebate and power interruption charges was .....

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dingly, 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 of revenue s appeals is dismissed. 7. In respect to item no. 3 i.e. Unscheduled Interchange (UI). We find that the tariffs for power purchased from different Central Sector Power Stations are determined by the Central Electricity Regulatory Commission (CERC). Availability based Tariff (ABT) has been introduced with effect .....

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rovisions of section 40(a)(ia) of the Act. This common issue of revenue s appeals is dismissed. 8. In respect to various other charges i.e. fee payable to Regional Load Despatch Centre for Short Term Open Access and operating charges i.e. application fee of ₹ 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 for operational work. Accordingly, this cannot be contractual payments or payment .....

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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 the case the Ld. CIT(A)-1, Kolkata has erred in deleting the addition of ₹ 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 through facts and circumstances of the case. .....

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l. 11. We find from the facts of the case that the provisions of section 12 of Electricity Act, 2003. Section 12 of the Electricity Act, 2003 provides that no persons shall transmit electricity, or distribute electricity or undertake trading in electricity, 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 commission (the Central Electricity Regulatory Commission c .....

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