2018 (10) TMI 1360 - HC - Income Tax

High Court Decision: Tax Surcharge Excluded, Transmission Charges Remanded for Review

The High Court upheld the Tribunal's decision to delete the addition of surcharge accrued on delayed payment of electricity bills as income, concluding it ... Accrual of income - non realization of ‘Provision for surcharge’ - Treatment to the surcharge accrued during the year on account of delayed payment of electricity bills by the consumers as income - assessee has been following mercantile system of accounting - Held that:- Issue answered against the revenue in view of the decision of this Court in titled The Commissioner of Income Tax, Hisar, Vs. Dakshin Haryana Bijli Vitran Nigam Ltd. Hisar, [2012 (7) TMI 340 - ITAT, DELHI]. Disallowance u/s 40(a)(ia) - non-deduction of tax on the payment of wheeling/transmission charges - Held that:- The order of lower authorities with regard to dis-allowance of expenses claimed of Wheeling and SLDC charges are set aside in the light of the observation of the Supreme Court in the case of CIT, Delhi Vs. Bharti Cellular Limited [2010 (8) TMI 332 - SUPREME COURT OF INDIA]. The matter is remanded back to the A.O. to decide the said issue afresh. Issues:1. Whether the addition of surcharge accrued on delayed payment of electricity bills as income was justifiedRs.2. Whether the disallowance of tax deduction on wheeling/transmission charges was correctRs.3. Whether the interpretation of technical service under Income Tax Act was correctRs.4. Whether the payments made for transmission/wheeling & SLDC charges were liable for tax deduction at source under section 194J of the Income Tax ActRs.Issue 1:The High Court considered whether the addition of surcharge accrued on delayed payment of electricity bills as income was justified. The Tribunal had deleted the addition made by the Assessing Officer, citing the assessee's adherence to the mercantile system of accounting. The Court upheld the Tribunal's decision, referencing a previous judgment. It was concluded that the addition made by the AO was rightly deleted, considering the facts and circumstances of the case.Issue 2:The Court examined whether the disallowance of tax deduction on wheeling/transmission charges was correct. The Assessing Officer disallowed expenses claimed by the assessee for wheeling and SLDC charges due to non-deduction of TDS. The CIT(A) allowed the appeal, which was upheld by the Tribunal. The Court noted that there was no liability to deduct at source on these charges under Section 194-J of the Act. The matter was remanded back to the Assessing Officer for fresh consideration in light of relevant legal principles.Issue 3:The interpretation of technical service under the Income Tax Act was scrutinized. The Court observed the need for expert evidence to determine human intervention in services provided. Citing a Supreme Court judgment, the Court emphasized the importance of technical data in deciding whether services fall under the category of technical services. The matter was remitted to the Assessing Officer for re-examination in line with the Supreme Court's observations.Issue 4:Regarding the liability for tax deduction at source under section 194J of the Income Tax Act for payments made for transmission/wheeling & SLDC charges, the Court set aside the orders of the lower authorities. The matter was remanded to the Assessing Officer for fresh adjudication, considering the observations made in a specific case. The Court directed a re-examination of the element of income in the transaction before passing a fresh order. The appeal was disposed of accordingly, with substantial questions of law decided as per the Court's findings.