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2014 (10) TMI 942

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....essee company? (2) Whether on the fats and the circumstances of the case, the Ld. CIT(A)- I, Kolkata has erred in both law and facts in deleting the addition on ac. Of interest Rs. 3,46,97,166/- to the total income of the assessee without showing any reasons thereof." 3. Briefly stated facts are that assessee during the course of assessment proceedings before the AO explained as to why interest amounting to Rs. 3,46,97,166/- on which TDS of Rs. 39,31,189/- was deducted, is not offered as income of the assessee. This interest income was earned on account of deposits made with Axis Bank Ltd. The assessee explained that West Bengal State Electricity Transmission Co. Ltd, (WBSETCL for short) is a West Bengal Government Enterprise and the State Transmission Utility (STU for short). It is licensed u/s 14 of the Electricity Act, 2003 and WBSETCL as a STU is statutorily required and established and maintained as Extra High Voltage (EHV for short) transmission network throughout the state of West Bengal interconnecting the generating stations within the state to the different load centers. It is required to establish interconnecting points with the regional and national transmission syst....

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....harges received by any entity shall be through account payee cheque or through electronic clearance system where such facility is available. iv) SLDC shall maintain the accounts of the said fund separately and such account shall not be considered as the part of the accounts of the SLDC. v) Accounts of such fund shall be audited by Chartered Accountant / Cost Accountant in full time practice for every financial year within 30th June of the succeeding year and such audited accounts shall be subsequently submitted to the Commission within 31std July of that year for approval.       vi)   The entity shall pay the UI charges within 10 days of the billing date in pursuance to regulation 7.2 of the State Grid Code. The DDO will activate the Letter of Credit (c) if the amount receivable from any entity is not received fully or partly within ten days from date of issuance of the weekly UI settlement." 4. In terms of Regulation-5 of West Bengal Regulatory Commission (Balancing and Settlement Code) 2008 SLDC is maintaining current account named as SLDC UI Fund WBSETCL with Axis Bank Ltd., Howrah Branch and fixed deposit in the same bank was opened as per....

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....such payments & C, the funds have not been transferred to WBERC as such, nor does the incomes incidental to the deposit form part of the income of the Commission. In essence, therefore, the funds are in the nature of a security deposit, from which penal charges are deduced from time to time in connection with the maintenance of power generation and withdrawal schedules. The funds deposited are unquestionably the funds of the Assessee- company, even if withdrawal from the same is governed by the directives of the regulatory commission. Further yet, as provided for in regulation 5.14.8 of the WBERC (terms and conditions of tariff) regulations, 2007, the Assessee-company, being a licensee, is entitled to part of the amounts remaining in the account at the end of each financial year. In the circumstances, the Assessee-company's accounting treatment is unacceptable. The amount of Rs. 3,46,97,166- accruing as interest on the deposit is being added to income of the Assessee-company under the head 'Income from Other Sources.' Further, it is notable that there was no disclosure of the amount anywhere in the audited accounts, and was detected only on the basis of the statement....

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....rest being the income of the Government, there should not arise any taxability thereof. However, the Assessing officer observed that according to him SLDC was merely the custodian of the account and allegedly it did not have any proprietary rights to the funds or incidental incomes generated there from. The Assessing Officer also stated that deposits had been made from the funds of the assessee and not of SLDC and the funds did not form parts of the account of the SLDC at all. The Assessing Officer went on to hold that the assessee's PAN had correctly been utilized for the maintenance of the Account. The Assessing Officer also stated that in his Order that the accounts have been opened in terms of the scheme formulated by the West Bengal Electricity Regulatory Commission (WBERC) and it was that body which directed the levy of UI charges as well as any other such payments. He further mentioned that since the funds had not been transferred to WBERC as such, the income incidental to the deposit should not form part of the income of WBERC. The Assessing Officer held that the funds deposited were allegedly unquestionably the funds of the assessee. On the basis of these observations,....