Income Tax Appellate Tribunal - Jaipur
Jaipur Vidyut Vitran Nigam Ltd. , Jaipur vs Department Of Income Tax on 21 November, 2014
IN THE INCOMETAX APPELLATE TRIBUNAL
JAIPUR BENCH: JAIPUR
(BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA)
I.T.A. No. 224/JP/2012
Asstt. Year- 2008-09
PAN No. AABCJ 6373 K
The D.C.I.T., M/s Jaipur Vidyut Vitran Nigam Ltd.,
Circle-6, Jaipur. Vrs. Janpath, Jyoti Nagar, Jaipur.
(Appellant) (Respondent)
Department by :- Shri A.K. Khandelwal.
Assessee by :- Shri P.C. Parwal.
Date of hearing : 30/09/2014
Date of pronouncement : 21/11/2014
ORDER
PER: T.R. MEENA, A.M. This is an appeal filed by the Revenue against the order dated 08/12/2011 of the learned C.I.T.(A)-II, Jaipur for the A.Y. 2008-09. The effective grounds of appeal are as under:-
"On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in:
(i) deleting addition of Rs. 1,09,018/- made on account of depositing the PF/ESI payment beyond the prescribed time despite the fact that as per section 36(1)(va) employees contribution should have been deposited in time as prescribed in the relevant law. Section 43B permits delayed payment, if paid before filing the ROI
2 ITA 224/JP/2012 DCIT Vs. M/s JVVNL as per section 139(1) in case of employer's contribution not in the case of employees contribution.
(ii) holding that payments of Rs. 2,81,23,73,125/- on account of transmission/wheeling/SLDC charges to RRVPN were not for technical services liable for making TDS u/s 194J of the I.T. Act as such provision of section 40(a)(ia) are not applicable.
(iii) deleting the addition of Rs. 1,73,07,800/- made on account of front end fees paid to HUDCO for raising the loan holding it to be revenue expenditure."
2. The first ground of appeal is against deleting addition of Rs. 1,09,018/- made on account of depositing the PF/ESI payment beyond the prescribed time despite the fact that as per section 36(1)(va) employees contribution should have been deposited in time as prescribed in the relevant law. Section 43B permits delayed payment, if paid before filing the ROI as per section 139(1) in case of employer's contribution not in the case of employees' contribution. In this case, the learned Assessing Officer observed that the assessee company is engaged in distribution and sale of electricity. The assessee company e-filed its return of income on 27/09/2008 declaring total loss of Rs. 1,43,75,48,737/-. This 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-
3 ITA 224/JP/2012 DCIT Vs. M/s JVVNL C-3 of tax audit report, the assessee failed to deposit employees ESI contribution in few of cases amounting to Rs. 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 relevant Act. Therefore, the same may be reverted.
5. At the outset, the learned A.R. for the assessee relied upon the decision of the Hon'ble Rajasthan High Court in the case of CIT Vs. Udaipur Dugdh Udpadak Sahkari Sangh Ltd. 366 ITR 163 (Raj.) and argued that the assessee has paid employees' contribution towards ESI 4 ITA 224/JP/2012 DCIT Vs. M/s JVVNL paid before due date of return, therefore, it is allowable. The Hon'ble jurisdictional High Court decision is in favour of the assessee as the assessee should have paid this amount before due date of return, is allowable U/s 43B of the Act. We confirm the order of the learned CIT(A).
6. The second ground of appeal is against payment of Rs. 281,23,73,125/- on account of transmission/wheeling/SLDC charges to RRVPN were not for technical services liable for making TDS U/s 194J of the Act and provisions of Section 40(a)(ia) of the Act is not applicable. The Assessing Officer found that the assessee had paid wheeling charges and State Load and Dispatch Charges to RRVPN as under:-
Schedule 18/PP28 2,73,22,73,125/- SLDC Charges 8,01,00,000/-
The Assessing Officer gave reasonable opportunity of being heard on this issue in not deducting TDS U/s 194J of the Act, which was reply vide order dated 01/12/2010. After considering the assessee's reply, the learned Assessing Officer held that "Based on the above discussed gist of the statement of Deputy Chief Engineer and as per the decision of Hon'ble Apex Court in the case of CIT Vs. Bharti Cellular Ltd. and others, 220 CTR 258 (Delhi) and as per the decision of learned CIT(A) in the case of the assessee company it can be clearly concluded that human 5 ITA 224/JP/2012 DCIT Vs. M/s JVVNL intervention is certainly involved in the transmission services and hence the power transmission service provided by RVPN to JVVNL is a technical service as decided by the Hon'ble Apex Court. From the nature of job carried out by the transmission and wheeling & SLDC, it can be clearly envisaged that ii will be a very smaller and lighter term to say that the human presence is required whereas without complete involvement and technical knowledge the jobs performed for above works by the above agencies cannot be even imagined. It is incorrect on the part of the assessee the transmission of the electricity takes place automatically as the electricity is supplied, controlled, increase/decrease of loan, stopping, thereof is at all not possible without 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 6 ITA 224/JP/2012 DCIT Vs. M/s JVVNL 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 assessment order for the A.Y. 2006-07 and 2007-08. The department has filed an appeal before the Hon'ble Rajasthan High Court against the order of the Hon'ble ITAT, Jaipur Bench, Jaipur. Thus, the order passed by Hon'ble ITAT is not final. In view of the detailed discussion in the assessment order for the A.Y. 2006-07 and 2007-08, I am of the view that transmission charges/wheeling charges/SLDC charges are subject to deduction of tax at source U/s 194J of the Act. The assessee has not deducted tax at source on the aforesaid payment. The payment made towards these charges amounting to Rs. 2,81,23,73,125/- is liable for disallowance U/s 40(a)(ia). Accordingly, a sum of Rs. 2,81,23,73,125/- is added to the returned income of the assessee."
7. 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 observing that in A.Y. 2006-07 identical issue was decided by the Hon'ble ITAT in ITA No. 132/JP/2009 dated 30/4/2009. Even in the TDS proceeding in A.Y. 2005-06 to 2009-10, it was held by the department that there was a liability to deduct TDS on payment of 7 ITA 224/JP/2012 DCIT Vs. M/s JVVNL transmission/wheeling charges/SLDC charges U/s 194J of the Act. However, the Hon'ble Jaipur ITAT vide its order in ITA No. 127 to 131/JP/2009 for A.Y. 2005-06 to 2009-10 held that payment of transmission charges/wheeling charges was only a reimbursement of actual expenses and therefore, provisions of Section 194J of the Act or for that matter Section 190C of the Act has not applicable in the present case. The learned Assessing Officer relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Bharti Cellular Ltd., 330 ITR 239. This decision was rendered in the context of applicability of TDS provision on services of inter connection/port access facility. Wherein it has held that cellular provider had rendered technical services and had to deduct tax at source or not, would depend on whether the charges were for technical services or not. This involved determination of the fact whether any human intervention was involved, which could not be determined without technical assistance. Therefore, it directed that technical person be examined to decide this issue. In the present case, the issue was of transmission services and not of services of interconnection/port access facility. Therefore, this decision 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 8 ITA 224/JP/2012 DCIT Vs. M/s JVVNL 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 transmission of the electricity from generating station to the grid station of the assessee was concerned. Thus even as per statement of Shri Arun Kumar Sharma and in view of the various decision relied by the Hon'ble ITAT in deciding the appeal for A.Y. 2006-07, it is clear that section 194J is not applicable on the transmission/wheeling/SLDC charges paid by the assessee. Respectfully following the above decisions and facts of the present case, 9 ITA 224/JP/2012 DCIT Vs. M/s JVVNL he direct the A.O. to delete the addition of Rs. 2,81,23,73,125/- made by him. This ground of appeal is allowed.
8. Now the Revenue is in appeal before us.
9. The learned CIT DR vehemently supported the order of the Assessing Officer whereas the learned AR for the assessee submitted that this issue is covered under both the ways i.e. U/s 40(a)(ia)/194J of the Act and under TDS proceeding. The payee had disclosed this income in return of income. The AR filed copy of return alongwith reply, therefore, considering the insertion of proviso to Section 40(a)(ia) of the Finance Act, 2012 w.e.f. 01/04/2013 according to which, where the payee has furnished his return of income, had taken into account such sum for computing income and has paid the tax due on the income declared by him in return then it will be deemed that deductor had deducted and paid the tax on such income and no disallowance U/s 40(a)(ia) can be made. The second proviso has retrospective effect as has been held in the following case laws:-
(i) Bharti Auto Products Vs. CIT (2013) 92 DTR 345/145 ITD 1 (Rajkot) (SB) (Trib)
(ii) Rajeev Kumar Agarwal Vs. ACIT (2014) 149 ITD 363 (Agra) (Trib.).
10 ITA 224/JP/2012 DCIT Vs. M/s JVVNL
(iii) ITO Vs. Jaideep Kumar Sharma (2014) 34 ITR (Trib) 565 (Delhi) dated 25/07/2014.
(iv) DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.) dated 13/09/2013.
Therefore, he prayed to confirm the order of the learned CIT(A).
10. We have heard the rival contention of both the parties and perused the material available on the record. The issue is identical to A.Y. 2006-07 and the Coordinate Bench had decided this issue in favour of the assessee and held that provisions of Section 40(a)(ia) of the Act is not applicable on the present fact of the case in ITA No. 132/JP/2009 order dated 30/4/2009, which is reproduced as under:-
"9. Considering the submission of the parties on the issues as to what is the nature of payment of wheeling/transmission/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.
11 ITA 224/JP/2012 DCIT Vs. M/s JVVNL "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 be as approved by the Regulatory commission. From all these clauses, it is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch center and the Regulatory commission 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."
12 ITA 224/JP/2012 DCIT Vs. M/s JVVNL By respectfully following the decision of the Coordinate Bench on identical issue, we uphold the order of the learned CIT(A).
11. The third ground of appeal is against deleting the addition of Rs. 1,73,07,800/- made on account of front end fees paid to HUDCO for raising the loan holding that it is a revenue expenditure. The Assessing Officer observed that the assessee had claimed deduction in respect of deferred revenue expenditure of Rs. 1,73,07,800/-. The Assessing Officer gave reasonable opportunity of being heard on this issue, which was replied by the assessee vide letter dated 06/12/2010. After considering the assessee's reply and various case laws cited by the assessee, the Assessing Officer held as under:-
"I have gone through the submission of the assessee, which is not found satisfactory. The assessee has made payment of Rs. 17307800/- to HUDCO for raising loan of Rs. 300 crores for improvement of transmission network and infrastructure. The loans so raised are for capital purpose. Further, the assessee himself not debited the said amount in P&L account rather spread over the said payment in five years. If the assessee company is claiming these expense as revenue expenditure then the total amount should have been claimed one time rather than spreading it over in a time period of five years. This act signifies that the assessee itself is not sure of the nature of these expenses whether 13 ITA 224/JP/2012 DCIT Vs. M/s JVVNL of capital or of revenue nature. This is reduced in computation rather than debiting in the P&L account. Thus, the assessee itself is treating 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 Rs. 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 Rs. 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 Rs. 1,73,07,800/- was claimed as deduction as revenue expenditure. The Assessing Officer was of the opinion that the loan so raised was for capital 14 ITA 224/JP/2012 DCIT Vs. M/s JVVNL purpose and further the assessee had itself not debited the entire amount in the P&L account but spread over this payment for five years as differed revenue expenditure. Thus, the assessee itself was not sure of the nature of this expenditure whether it was capital or revenue in nature. Thus, the Assessing Officer made addition of above expenses in the income of the assessee, but after considering the assessee's submission the learned CIT(A) held 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 it off in his books over a period of years. He relied upon the decision in the case of Madras Industrial Investment Corporation Ltd. Vs. CIT (225 ITR 802), ACIT Vs. Jai Parabolic Springs Ltd. (2009 TIOL 524 ITAT Delhi), DCIT Vs. Core Healthcare Ltd. (221 CTR 580) (GUj. High Court) and the decision of Hon'ble Hyderabad ITAT in the case of Amar Raja Batteries Ltd. Vs. ACIT (91 ITD 280), therefore, he deleted the addition made by the Assessing Officer.
15 ITA 224/JP/2012 DCIT Vs. M/s JVVNL
13. Now the Revenue is in appeal before us. The learned CIT DR relied upon the order of the Assessing Officer whereas the learned AR for the assessee contended that this issue is covered in favour of the assessee in case of CIT Vs. Super Spinning Mills Ltd. 296 ITR 168 (Mad.) (HC). Wherein on term loan, the assessee incurred front end fees payment at the rate of 1% on the loan amount. Without this payment, IDBI would not have sanctioned the loan. The amount is paid only for obtaining the loan and the same does not bring into existence any asset of enduring nature. It is the condition precedent for obtaining the loan and is in the nature of processing fees paid to the bank to release the loan. Hence, front end fees payment is revenue expenditure. In case of Borosil Glass Work Ltd. Vs. Addl. CIT 3 SOT 940 (Mum) (Trib) had allowed this expenditure as revenue expenditure. Therefore, he prayed to confirm the order of the learned CIT(A)
14. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has raised loan of Rs. 300 crores for improvement in transmission, network and infrastructure. The assessee paid this amount to HUDCO, which was pre-decided condition on the loan sanctioned. The learned CIT DR has not controverted the findings by the learned CIT(A) in his order. Further the 16 ITA 224/JP/2012 DCIT Vs. M/s JVVNL case laws relied upon by the AR for the assessee are squarely applicable on it being identical issue, therefore we uphold the order of the learned CIT(A).
15. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 21/11/2014.
Sd/- Sd/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, Dated : 21st November, 2014 * Ranjan Copy forwarded to :- 1. The DCIT, Circle-6, Jaipur.
2. M M/s Jaipur Vidyut Vitran Nigam Ltd., Jaipur.
3. The CIT (A)
4. The CIT
5. The D/R Guard file (I.T.A. No. 224/JP/2012) By Order, AR ITAT Jaipur.