TaxTMI 
TaxTMI 
2012 (7) TMI 544
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.... Boards which is contrary to the facts in as much as 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.  ....
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...., Indian Railways Ambala Cantt. on 31st Jan., 2008. During the course of 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....
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....32 KV transmission line was Rs.364.62 lacs and it was requested to deposit the above amount 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 he....
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....uments are also executed in which terms and conditions are included. These documents are in the form of 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 purp....
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....ansaction between the parties was because of sale and no works contract and charges paid to SBEs were for consumption 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 ....
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....am, Government Department are giving contracts and TDS is deducted out of full amount paid to the said person. The 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....
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....reads as under: "No. DUL/RE/UMB/Elect-173 dt.: 19th Oct., 1992 Chairman, UPSEB 14, Ashok Marg Shakti 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) ....
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.... drawing of the proposed infrastructure to be provided at pp. 11 to 16 of the paper book II. It reads as under: "Office of the Executive Engineer Electricity Trans. Division U.P. State 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 a....
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....f estimate for 220 KV power supply for Railway Traction Sub-station at Roorkee was submitted by Uttar Pradesh Power Corpn. Ltd., Roorkee and in that estimate the supervision charges were charged @ 15 per cent. It is requested to look into the matter and revise the estimates for Kanth 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 Electri....
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....p; No.................ETC(M).............of date/ Copy to the following for information and necessary action: 1. General Manager (TW), H-2, Shastri Nagar, Meerut. 2. General Manager (TD), 11th Floor, Shakti Bhawan Extn. UPPCL, Lucknow 3. Executive Engineer, Electy. Trans. Division, UPPCL, Bijnore. (K.K. 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-....
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.... is presently a deemed licensee under s. 14, 1 proviso of the Electricity Act, 2003 (hereinafter referred to as the Act) for distribution and/or retail supply and/or bulk supply of energy to various consumers within its licensed area. 2. The consumer has vide application dt. 3rd Jan., 2002 applied to the licensee for/procuring supply of energy for electrical installation (for a load of '5 MVA 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 asse....
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....d such bill shall be deemed to be a "bill cum notice" for payment of the amounts mentioned therein." 34. Clause 6 of the agreement reads as under: "6. If the consumer after execution of declaration/agreement reduces or increases his load or changes the purpose of use or shift his connection, he shall have to execute a fresh declaration/agreement, which will be valid for two year like the agreement/executed 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 ca....
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.... supply on request.-Save as otherwise provided in this Act, every distribution licensee, shall, on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply: Provided that where such supply requires extension of distribution mains, or commissioning of new sub-stations, the distribution licensee shall supply the 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 ....
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....he case, by the licensee. For failure to supply the electricity within the specified period the licensee shall be liable to penalty of Rs.1,000 each day of default. 40. Under s. 46 of the Electricity Act the distributor licensee is authorized to charge any expenses incurred in providing any electric plant or electric line for the purpose of giving supply to the said person subject to the expenses being reimbursed by such person requiring electric 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....
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.... on the consumer's premises. 43. Considering the provisions of the Electricity Act, it postulates that it is duty of the distribution licensee to develop and maintain an efficient co-ordinate distribution system in its area of supply. The supply of electricity is to be made by such distribution licensee in accordance with the provisions of the Electricity Act. Where any person whose premises are situated within the area of supply of the distribution licensee, 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 Electrici....
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....ction points at Najibabad and Kanth, as is clear from the communication reproduced under para 23 hereinabove. The work of supplying the connection to the Railway traction point was executed by the UPSEB Board in line with its duty to provide electricity to the premises of the consumer i.e. the Railway before us. The amount was also paid for the estimated cost of such infrastructure being provided to the assessee. Merely because the infrastructure has been provided 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 la....