TMI Blog2018 (11) TMI 1868X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as these were statutory contributions made to a Government Body, and not contractual payments and hence these payments would not attract any of the provisions relating to the requirement for making TDS. That being so, we decline to interfere with the order of Id. C.I T.(A) deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed. Accrual of Income - Interest income on SLDC-UI Fund-WBSFTCL - We note that on the identical issue, the Division Bench in assessee`s own case,. [ 2014 (10) TMI 942 - ITA T KOLKATA] deleted the addition. As the issue is squarely covered in favour of the assessee and there is no change in the facts and law and the Ld. CIT(A) has allowed the appeal of the assessee by relying the judgment of the Division Bench - Appeal filed by the Revenue is dismissed. - ITA No.2126/Kol/2017 - - - Dated:- 12-11-2018 - SHRI S. S. GODARA, JM DR. A.L.SAINI, AM Appellant by : Shri G. Hangsingh, CIT, DR Respondent by :None ORDER Per Dr. A. L. Saini: The captioned appeal filed by the Revenue, pertaining to Assessment Year 2010-11, is directed against an order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld. AO had held that such expenditure was allegedly not allowable. It was submitted during appeal that as the relevant expenses had been finally settled during the Financial Year 2009-10 (relevant for the Assessment Year 2010-11), the action of the Ld. AO was without any basis, and requires to be deleted. 3. I have carefully examined both the action of the Ld. AO and the contentions of the appellant. It is noted that the Ld. AO has not even issued a specific showcause in the matter before making the impugned disallowance, less of calling for any details relating to the classification of such expenses relating to the prior period, as claimed by the appellant. There is no gainsaying in such matter, that the expenses would be allowable in the year in which they have been crystallized in the mercantile method of accounting. The decision of the Hon ble Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. vs CIT reported in (1995) 213 ITR 0523 is worthwhile to be quoted wherein it was held that: Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al raised by the Revenue, on this issue is dismissed. 5. The next issue is relating to ERPC Charges of ₹ 14,50,000/-. We note that assessee, (M/s WBSETCL) being a member of EPRC has contributed as per Statute to EPRC Establishment Fund ERPC Fund every year, and that as these were statutory contributions made to a Government Body/ Fund, and these are not contractual payments.These payments would not attract any of the provisions relating to the requirement for making TDS while making the impugned payments. We note that this issue is squarely covered in favour of assessee, as it is evident from the order of the ld CIT(A), which is reproduced below: 14. DECISION: 1. I have carefully perused the action of the ld.AO, and equally carefully examined the submissions of the appellant-assessee/Ld. A.R for the appellantassessee. The appellant has submitted that even during the assessment proceedings, it had explained before the Ld.AO that in pursuance of sub-section 55(2) of section 2 of the Electricity Act, 2003, Govt. of India vide resolution F. No:23/1//2004-R R dated 25/05/2005 and subsequent resolution F. No: 23/1/2004-R R dated 29/11/2005 established Eastern Region ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Meanwhile, the constituents of RPCs will finalise the share of expenditure to be borne by the constituents of RPCs so that the RPCs become self-financing. The expenditure meted out from the budget and contribution of share by the constituent members will be reviewed by the Ministry of Power, every quarter. Unquote (for para 23 24): All activities to be self-financed. Establishment expenditures to be met out of the Central budget. It implies that all other expenditures which are not covered under establishment expenditures will be financed by constituent members. ERPC to decide as to how it shall meet its expenditure other than establishment . 25. a) For the purpose of reimbursement of establishment expenditure of ERPC Secretariat to the consolidated fund of Gal, a fundnamed ERPC ESTABLISHMENT FUND shall be created and got maintained by ERPC. Out of this fund, a cheque shall be issued and got deposited for an amount equal to the quarterly bill amount, within the period specified on the bill. The fund may also be utilized for any other purpose as per the decision of ERPC. b) In the event no bill is received from Central Government/ CEA, the actual amount spent by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirement for making TDS. That being so, we decline to interfere with the order of Id. C.I T.(A) deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed. 6. The next issue is relating to Interest income on SLDC-UI Fund-WBSFTCL₹ 7,46,19,000/-.We note that this issue is squarely covered in favour of assessee, as it is evident from the order of the ld CIT(A), which is reproduced below: i. I have carefully considered the action of the Ld. AO in including the impugned amount of ₹ 7,46,19,000/- as the appellant s alleged interest income arising out of the investments made out of the UI Charges belonging to the West Bengal Electricity Regulatory Commission (WBERC) which had been kept under the custody of the State Load Despatch Centre (SLDC). The Ld. AO has relied on the order of the immediate preceding A.Y. 2009-10. ii. I have also carefully examined the contentions of the appellant made out in appeal, which primarily are that the Ld. AO has failed to appreciate that the WBERC being a Commission formed by the Government, its income from investments under the custody of SLDC, could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes the State Power Grid (SPG for short). The parameters for operating grids as lay down under the State Electricity Grid Code by West Bengal Electricity Regulatory Commission (WBERC for short). The responsibility for supervising and maintaining grid discipline in the state as laid down under State Grid Code, is entrusted upon State Load Dispatch Centre (SLDC for short) which is a wing of the STU but independent and DT. In order to maintain grid discipline and ensure save operation of the power system, the State and Central Regulatory Commission have introduced the system whereby a penal charge is imposed on the defaulting power utility for deviating from the scheduled energy generation / withdrawal programme. This penal charge on the UI charge is levied on a graded scale depending on the extent to which the system frequency is affected by such unscheduled generation or power withdrawal. The UI charge was introduced in West Bengal by WBERC from 01-01-2008. The WBERC is authorized under the Electricity Act 2003 to frame regulations for operation of State Power Grid and the administration of the UI funds for such purpose of WBERC has framed the West Bengal Electricity Regulatory Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, TDS was made and certificate of TDS was issued in the name of assessee, although assessee has no control over utilization of such income. The utilization of income is regulated by Regulation-5.14.8 of West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2007 as under:- 5.14.8 If at the end of a financial year, there is any amount in UI account then 90% of such amount will be used for the following purposes: (a) The annual amount required to operate SLDC shall be transferred as per the budget to be approved by the SLDC from the Commissions. (b) The balance amount shall be distributed among the licensee in proportion to the amount of energy required by the licensee for selling the power to its consumer and licensee of the Commission. Such distributed amount shall be kept in the power purchaser fund of the concerned licensee. 5.But the AO has not accepted the contention of the assessee and added the interest income to the returned income of the assessee by observing as under:- The contention of the Assessee-company is considered and the facts brought on record were examined. However, the claim that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent submissions. 6.Aggrieved, assessee filed appeal before CIT(A), who after considering the submission of assessee deleted the addition by observing as under:- .. After carefully consideration of the order of the AO and written submission filed by the A/R, it is noted that the assessing officer addition of ₹ 3,46,97,166/- on account of interest income from Axis Bank was made under the head income from other sources as per IT computation and addition was also made for the same of amount interest for computation of book profit under the MAT provisions. Assessee is a West Bengal Govt. Enterprise (STU) regulated under section 14 of Electricity Act, 2003. The responsibility for maintaining grid discipline in the state is entrusted to State load Despatch Centre (SLDC). In order to ensure grid discipline penal charge called UI charge is levied by WBERC from 1st January, 2008. In compliance of regulation of WBERC current account in Axis Bank was maintained and PAN of the assessee was used for the operation of about account named SLDC UI Fund WBSETCL. Assessing Officer made addition of interest income on deposit maintained in the above account in the hands of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But we find that the Interest of ₹ 3,46,97,166 had arisen out of the investment made out of balance of UI charges which belonged to WBERC which was a Commission formed by the Government and consequently that interest income was actually an income in the hands of the Government. Since the interest income was an income of the Government, there could not arise any taxability thereof. It is also a fact that the relevant deposits had been made under the PAN of the assessee since at the relevant time no separate body had been created for the maintenance of the UI Accounts. We find that on 21-10-2011 a Trust under the name and style of SLDC-UI FUND-WBSETCL was created in accordance with the WBERC Regulations for the purpose of management of the Fund created through collection of UI charges and interest earned from the investment made out of the said UI Chares and the Trust does not have the ownership on the moneys lying in the Fund and for all the times to come it is the WBERC which is the owner of the Fund of the Trust. We further find that neither any asset or any income earned out of the UI account could ever be considered as any income in the hands of the assessee. The moneys ..... X X X X Extracts X X X X X X X X Extracts X X X X
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