TaxTMI 
TaxTMI 
2012 (7) TMI 544
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....s there was no contract between the assessee and the State Electricity Boards/State Government Corporation and as such, there was no occasion to deduct taxes as per s. 194C of the Act and therefore the order is illegal, arbitrary and unjustified. 3. That the learned CIT(A) has further erred in not appreciating the fact that the State Electricity Boards or State Government Corporation under State Government laws are duty bound to supply electricity as per Electricity Act and the party requiring power supply connection has to pay the facilitation charges as per s. 43 of Electricity Act, 2003 further fortifying the fact that the assessee is only a consumer and SEBs is a distribution licensee. 4. That the learned CIT(A) has erred in not appreciating the fact that payments made to State Electricity Boards/State Government Corporations for necessary infrastructure i.e. commissioning of additional transmissions lines, power supply at Railway point is the charge, by regulation under State Commissions Laws from a person requiring electricity supply under art. 46 of Electricity Act, 2003 and not contractual payment. 5. That the learned CIT(A) has erred and failed to a....
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....f survey/inspection, it was noticed that the assessee had made payments to various State Electricity Boards for the construction of transmission lines for providing power to Railway traction sub-station (RTSS). As per the AO the said payments were subject to deduction of tax at source under s. 194C of the Act as no tax at source was deducted by the assessee. Notices under s. 201(1) and 201(1A) were issued to the assessee to show cause as to why tax be not charged under s. 201(1) and interest under s. 201(1A) of the Act. In reply, it was submitted by the assessee that there were no provisions under the IT Act for deduction at source out of payments made by Government organization to another Government organization. It was further stated that the tax, if any, had to be deducted at source by the electricity board, where it gives the work on contract. The assessee also placed reliance on the copy of the letter of Executive Director (Accounts) Railway Board under his letter No. 2005/AC. II/I/5 (PI), dt. 5th March, 2008 in which it has been clarified that payments to State Electricity Boards for Railway operations are not subject to deduction of tax at source. The AO observed that since ....
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....ount through bank draft so that the above construction work may be completed." (Copy enclosed as Annex. A) (ii) As per letter dt. ast Sept., 2008 written by Ministry of Railways seeking clarification from CBDT, it was itself mentioned as construction work. Extract from the above referred letter is reproduced below: "It is pertinent to mention that the work of construction of these transmission lines upto railway traction sub-stations pertains to the SEBs and is executed by the respective SEBs, Therefore, this Ministry is of the view that SEBs which is also Government Department would be the payer responsible for recovery of TDS under s. 194C, IT Act, from their contractors engaged for construction of these transmission lines. It is pertinent to mention that CORE is recovering TDS from its own contractors and employees as per relevant tax provisions. (iii) As per provisions of s. 194C of the IT Act, 1961, the Railway Electrification Department was liable to deduct tax on payments made to various SEBs." 10. Accordingly, the assessee was held to be liable for payment under s. 201(1) and interest was also chargeable under s. 201(1A) of th....
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.... application, estimate and acceptance of the estimate and the slip of deposit money and therefore, a formal agreement for electricity supply which includes the agreement for carrying out the work for which estimate is given by electricity supplying agency/corporation and money is paid by the assessee and therefore, clearly there is a contract. Hence all the conditions of a "work contract" are fulfilled and therefore, the assessee is required to make deduction under s. 194C. 13. The CIT(A) further held that in the case of the assessee tangible assets being created in the form of infrastructure, electrical towers, station/sub-station etc. and the work carrying out. Creation of such structure involves work contract and relationship of contractor and contractee between the assessee and electricity supplying agency/corporation. The plea of the assessee that the service lines remains the property of the licensee, though it was not necessary as to under whose possession the assets are kept since these were used by the assessee or for the assessee and merely for maintenance purpose service lines were kept in the possession of electricity supplying companies did not absolve the asse....
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....mption where requirement is assessed by SEBs and if there are already existing sub-stations, then no expenditure, but in the absence of sub-stations and for providing electric lines, such charges are estimated and intimated to the consumers. There is no formal agreement between the parties though an application is made vis-a-vis the load to be sanctioned and the expenditure incurred for the provision of such services cannot be said to be a works contract. The learned Authorised Representative for the assessee further took us through various documentation as furnished in paper book II starting from an application made by the assessee In various estimates and drawings and revised estimate and thereafter the load release payments, thereafter the provisions sub-stations electric lines. It was further pointed out that the State Electricity Boards are the licensee and the assessee was consumer. It was vehemently argued by the learned Authorised Representative for the assessee that there was no agreement between the licensee and the consumer. 17. The next contention of the learned Authorised Representative for the assessee was that the agreement was between the Government to Gover....
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....learned Departmental Representative for the Revenue conceded that the assessee is Central Government Department and was asking the SEBs to provide electricity, which are all companies, filing their returns of income and are assessed to tax. Attracting our attention to the provisions of s. 196 of the Act it was pointed out that there were no provisions under which it was provided that no tax is to be deducted out of such payments where it is established that the payments were for work contract, TDS is to be deducted. The learned Departmental Representative for the Revenue further pointed out that the assessee requested the SEBs for providing sub-station and service lines and a massive work has been done by way of establishing tower station in addition to service lines. The SEBs were carrying out work and TDS had to be deducted on whole works contract awarded by the assessee. 19. In rejoinder, the learned Authorised Representative for the assessee pointed out that the provisions of Electricity Act are applicable under which it is duty of the licensee to provide electricity and if any expenditure is incurred for such provision of electricity, the said expenditure is to be reim....
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....kti Bhawan Lucknow (UP) Sub: Sanction of load for Railway Traction Sub-Station-Ambala-Moradabad section The project for electrification of Ambala Moradabad section has been sanctioned for Railway electrification and for carrying out this activity, Railway proposes to have four traction sub-stations along with the Railway track. The detail is given as under: Sl. No Rly traction sub-stn. Location as per Rly communication post no. running along with track 1. Saharanpur 1590 km. 2. Laksar 1535 km. 3. Bundki 1480 km. 4. Kanth 1425 km. The connected load at each individual sub-station will be of 20 MVA. Kindly sanction the load for each traction sub-station. We have approached separately to CE (Transmission)/CE (Commercial) for framing the estimate for these locations. The work is to start immediately. We request for an urgent action. Sd/- (B.C. Aggarwal) Chief Electrical Engineer Rly. Electrification, Ambala Cantt Copy to: 1. Chief Engineer (Transmission) U.P.S.E.B. 14, Ashok Marg Shakti Bhawan, Lucknow. 2. Chief Engineer (Commercial) UPSEB, Shakti Bhawan, Lucknow. 3. Chief Engineer (Transmission Unit) UPSEB....
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....e Electy. Board 33 KV Sub-station No. 6, Roorkee. No. 1856/ETDR/S-22 CKV dt.: 27th May, 1996 Subject: Tentative estimated cost for giving supply to Railway Traction point at Roorkee, Najibabad and Kanth, Northern Railway Stations. The Chief Project Manager, Railway Electrification, Ambala Cantt. Dear Sir, In reference to your letter No. DUL/RE/UMB/EL/TSS/173, dt. 17th May, 1996, I am enclosing herewith the tentative estimated cost for giving supply for Railway Traction Sub-stations at Roorkee, Majibabad and Kanth for different proposals as per following details: 1. Giving 220 KV 20 double circuit supply at Roorkee, Najibabad and Kanth. 3,452.72 lacs 2. Giving 132 KV 20 double circuit supply at Roorkee, Najibabad and Kanth. 3,679.23 lacs 3. Giving 220 KV 20 single circuit supply at Roorkee, Najibabad and Kanth. 2,662.07 lacs 4. Giving 132 KV 20 single circuit supply at Roorkee, Najibabad and Kanth. 3,065. 19 lacs 5. Giving 220 KV 20 single circuit supply at Roorkee and double circuit supply at Najibabad and Kanth. 3,097.84 lacs 6. Giving 132 KV 20 single circuit supply at Roorkee and double circuit sup....
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....and Nazibabad accordingly. Further, as discussed we the various meetings it is to inform you that PSEB charging Railway's supervision charges @ 12.5 per cent in their various estimates submitted to Railway for similar type of works. A letter of PSEB in this regard is enclosed for your reference. It is requested that UPPCL may follow the same practice as the PSEB for the similar type of works. (Mukesh) For Chief Project Manager, Rly Electrification, Ambala Cantt." 25. At pp. 19 to 21 of the paper book II is the sanction of load of 5 KV to the assessee. At p. 22 is enclosed letter asking the assessee to deposit Rs.336.77 lacs in respect of the power supply arrangement required by Railways for traction sub-station at Kanth. The said communication is placed at p. 22 of the paper book II and reads as under: "Office of the Executive Engineer Electricity Transmission Division, Bijnor No. 24-ETDBJ/Rly. Traction dt. 4th Jan., 2002 Subject: Power supply arrangement required by Railways for traction sub-station at Kanth. Chief Project Manager, Railway Electrification, Ambala Cantt. Kindly refer to letter N....
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.... Garg) Dy. General manager" 27. In the said communication is also annexed repeat in which it has been stated that the estimate was for giving 12.5 MVA load at 132 KV voltage to Northern Railway at Najibabad Railway station for traction purposes. The estimate also covered construction of 35 km. 132 KV 2 place S.C. line on D.C. tower from 220 KV S/S, Nehtaur to Najibabad Railway station and construction of 1 No. 132 KV bay at 220 KV S/S, Nehtaur. The aforesaid estimate was subject to revision after the act routs survey and profioing of the 132 KV line. The said report is placed at pp. 25 to 29 of the paper book II. Similar report in respect of traction sub-station at Kanth is enclosed at pp. 32 to 37 of the paper book II. At p. 38 is enclosed a communication of CORE approving the payment to UPSEB in respect of traction sub-station at Najibabad and Kanth stations, which reads as under: "Ministry of Railways Central Organisation Railway Electrification, Allahabad Office of the Chief Electrical Engineer, (Head Quarters Office) Core/Allahabad. Ref. No. No. ELCORE/PS/03/Pt. 11/02/2002 dt. 25th Feb., 2002 Chief Project Manager Rly. Electrific....
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....VA KW/BHP/KVA) (hereinafter referred to as "contractual load") at its premises situate Kanth Railway TSS (hereinafter referred to as "the said premises") in, connection with.....................for the purpose Railway Electric Traction." 31. The parties thereafter agreed to certain terms and as per cl. 1 the agreement shall be effective for minimum period of two years from the date of commencement of supply by the licensee to the consumer. The duty of the consumer is to pay to the licensee ail charges as provided for in the tariff schedule in force of U.P. Electricity Regulatory Commission including any other additional charges payable by the consumer. In addition, the consumer is to pay other statutory levies. 32. As per cl. 3(1) the consumer i.e. the assessee before us agrees to abide by all terms and conditions of the Electricity Supply Code, 2005. The said clause reads as under: "3. The consumer hereby undertakes, represents, asssures, warrants agrees and covenants with the licensee as follows: 1. Consumer shall abide and be bounded by all the terms and conditions of the Electricity Supply Code, 2005, (hereinafter referred to as the "Code....
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....uted at the time of new connection. However any relief/concession provided in the Rate Schedule/any order of Commission Discom as admissible to new concession shall not be admissible on execution of the fresh agreement/declaration due to change in premises/reduction of load as above..." 35. Under cl. 8 of the agreement it is provided that the agreement shall be governed by the Electricity Act, 2003 along with its amendment which provides as under: "Provided that if the question dispute or difference relates to or concerns any dues chargeable to the consumer in terms of this agreement no reference to the arbitration shall at the instance of the consumer be made till the consumer has deposited with the Licensee the amount of dues in dispute, in cash/bank draft. This Agreement shall be governed by the Electricity Act, 2003 with all its arrangements, various other laws of India for the time being in force, but not limited to various regulation of UPERC, as applicable to the State of UP. and shall be subject to the jurisdiction of the Court subordinate of High Court of Judicature of Allahabad." 36. As per cl. 10 it is accepted that the consumer had deposi....
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....electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission: Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said period as it may consider necessary for electrification of such village or hamlet or area. Explanation:- For the purposes of this sub-section, "application" means the application complete in all respects in the appropriate form, as required by the distribution licensee, along with documents showing payment of necessary charges and other compliances. (2) It shall be the duty of every distribution licensee to provide, if required, electric plant or electric line for giving electric supply to the premises specified in sub-s. (1): Provided that no person shall be entitled to demand, or to continue to receive, from a licensee a supply of electricity for any premises having a separate supply unless he has agreed with the licensee to pay to him such price as determined by the Appropriate Commission. (3) If a distribution licensee fails to supply t....
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....ric supply. 41. The Indian Electricity Rules, 1956 formulate the draft conditions of supply. As per r. 2 the application of an agreement for supply of electric energy is to be made in the form attached thereto and is to be signed by the owner or occupier of the premises for which supply is required. As per r. 4, upon receipt of the requisition for supply notice for fixing the point of entry of supply mains and the position of the mains, cut-outs or circuit breakers of the meters is to be given. It is stipulated that the licensee shall inspect the premises for the said purpose, Under r. 5, once the position for the service being provided has been agreed upon, the licensee shall thereafter submit to the applicant quotation of the estimate of carrying out such work. On acceptance of the quotation, the applicant has to deposit the estimated amount of services to be provided and once the said amount so deposited, orders are to be issued for executing the work. It is stipulated under r. 5 that the service line notwithstanding the fact that portion of the cost has been paid by the consumer, shall remain the property of the licensee by whom it is to be maintained. Rule 5 reads as u....
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....ensee, and it requires supply of electricity to its premises, is to apply for such supply of electricity and it is the duty of the distribution licensee to provide the electricity to the premises of the consumer who has made an application for such supply of electricity to its premises. Generally, the distribution licensee maintain an efficient, co-ordinated and economical system on its network in the area of its supply. However, in some areas, there is a requirement for extension of distribution mains or commissioning of new sub-station, it is the duty of the distribution licensee to develop such infrastructure and thereafter provide electricity to the premises. Reference is made to the provisions of s. 43 of the Electricity Act in this regard. The said section further provides the manner of making an application for providing electricity complete with payment of necessary charges. Under s. 46 of the Electricity Act it is provided that the distribution licensee is authorized to charge from a person requiring supply of electricity, in pursuant to s. 43 of the Act, such charges which may be incurred in providing any electric line or electric plant, used for the purpose of giving sup....
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....as per the application moved by the assessee in line with the requirement of the assessee does not establish the case of the Department that the same tantamounts to works contact. The assessee is a large consumer of the electric connection and the requirement of the assessee being distinct from an ordinary consumer, the distribution licensee had to provide the infrastructure in line thereof. Such provision of infrastructure by the distribution licensee was in discharge of its duty of providing electricity to the premises of the consumer. The sub-station and the electric lines established by the distribution licensee remained its property and even the infrastructure is provided not on the land of the assessee but on the land of the distribution licensee. In the total infrastructure only the traction sub-station are the property of the assessee. The cost of the infrastructure has been borne by the assessee as there were no existing sub-station of the distribution licensee in the said area. The expenditure thereof has been incurred by the assessee for provision of the electricity connection in line with the provisions of the Electricity Act. There is no oral or written agreement betwe....