Statutory electricity infrastructure payments outside section 194C, with TDS demand deleted and procedural objections rejected.

Payments to State Electricity Boards for extending supply infrastructure and commissioning traction substations were treated as reimbursement for statutory supply-related works, not as a works contract. On that basis, the Tribunal held that section 194C did not apply and the consequential demand and interest under sections 201(1) and 201(1A) could not survive. The limitation objection failed because the order was passed within a reasonable time after survey and detection, and the challenge based on the absence of typed grounds in Form No. 35 also failed because the appeal had been considered on merits.

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Issues: (i) Whether payments made to State Electricity Boards for extending infrastructure and supplying electricity to railway traction substations were liable to tax deduction at source under section 194C of the Income-tax Act, 1961 and consequential demand and interest under sections 201(1) and 201(1A); (ii) whether the order under sections 201(1) and 201(1A) was barred by limitation; and (iii) whether the appeal could be dismissed for want of grounds in Form No. 35.

Issue (i): Whether payments made to State Electricity Boards for extending infrastructure and supplying electricity to railway traction substations were liable to tax deduction at source under section 194C of the Income-tax Act, 1961 and consequential demand and interest under sections 201(1) and 201(1A).

Analysis: The payments were made pursuant to applications for electricity supply and estimates raised by the distribution licensee for extending mains and commissioning substations required for supply. The governing statutory framework under sections 43 and 46 of the Electricity Act, 2003 and the relevant electricity rules showed that the distribution licensee was under a statutory duty to provide supply and could recover expenses incurred in providing the line or plant. The infrastructure created remained the property of the licensee, and the arrangement was a reimbursement for supply-related statutory infrastructure, not a works contract between contractor and contractee. The existence of an application, estimate and deposit did not convert the transaction into a contract for work within section 194C.

Conclusion: The payments were not liable for deduction of tax at source under section 194C, and the demand raised under section 201(1) and interest under section 201(1A) could not survive.

Issue (ii): Whether the order under sections 201(1) and 201(1A) was barred by limitation.

Analysis: The order was passed within a reasonable time after the survey and detection of the default. The passage of about one year from the survey did not render the order time-barred on the facts placed before the Tribunal.

Conclusion: The limitation plea was rejected.

Issue (iii): Whether the appeal could be dismissed for want of grounds in Form No. 35.

Analysis: Although the first appellate authority noted the absence of typed grounds in the form, the assessee had filed a covering letter and written submissions, and the appeal had in fact been examined on merits. The objection therefore did not warrant interference.

Conclusion: The challenge to dismissal on this ground failed.

Final Conclusion: The Tribunal held that the impugned payments were outside the scope of section 194C, so the tax-deduction demand and interest were deleted, but the ancillary objections on limitation and Form No. 35 were rejected.

Ratio Decidendi: A payment made to a distribution licensee for statutory extension of electricity supply infrastructure, where the arrangement is in substance reimbursement for supply-related works and not a contract for carrying out work, does not attract section 194C liability.

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