Orissa High Court
Commissioner Of Income Tax vs Western Electricity Supply ... on 23 March, 2022
IN THE HIGH COURT OF ORISSA AT CUTTACK
ITA Nos. Nos.4, 8, 11, 13, 17 and 23 of 2011
ITA No.4 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Western Electricity Supply Company of .... Respondent
Odisha Limited (WESCO)
ITA No.8 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Western Electricity Supply Company of .... Respondent
Odisha Limited (WESCO)
ITA No.11 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Southern Electricity Supply Utility of .... Respondent
Odisha (SOUTHCO)
ITA No.13 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Southern Electricity Supply Utility of .... Respondent
Odisha (SOUTHCO)
ITA No.17 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Central Electricity Supply Utility of .... Respondent
Odisha (CESU)
ITA Nos.4,8,11,13, 17 and 23 of 2011
Page 1 of 6
ITA No.23 of 2011
Commissioner of Income Tax, .... Appellant
Bhubaneswar
-versus-
Southern Electricity Supply Utility of .... Respondent
Odisha (SOUTHCO)
Advocates, appeared in these cases:
For Appellants(s) : Mr. S.S. Mohapatra
Senior Standing Counsel
For Respondent(s) : Mr. Satyajit Mohanty, Advocate
Mr. R.R. Swain, Advocate
CORAM:
THE CHIEF JUSTICE
JUSTICE R.K. PATTANAIK
JUDGMENT
23.03.2022
Dr. S. Muralidhar, CJ.
1. All these appeals by the Revenue (Income Tax Department)
arise out a common judgment dated 19th November, 2010 passed
by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack
(ITAT).
2. ITA No.4 of 2011 arises out of the aforementioned order passed
in ITA No.282/CTK/2010 for the Assessment Year (AY) 2009-
2010 (WESCO-Respondent); ITA No.8 of 2011 is directed
against the said order of the ITAT in ITA No.193/CTK/2010 for
the AY 2008-2009 (WESCO-Respondent); ITA No.11 of 2011 is
directed against the order of the ITAT in ITA No.284/CTK/2010
for the AY 2009-2010 (SOUTHCO-Respondent); ITA No.13 of
ITA Nos.4,8,11,13, 17 and 23 of 2011
2011 is directed against the order of the ITAT in ITA
No.191/CTK/2010 for the AY 2007-2008 (SOUTHCO-
Respondent); ITA No.17 of 2011 is directed against the said order
of the ITAT in ITA No.208/CTK/2010 for the AY 2008-2009
(CESU-Respondent) and ITA No.23 of 2011 is directed against
the order of the ITAT in ITA No.192/CTK/2010 for the AY 2008-
2009 (SOUTHCO-Respondent)
3. On 3rd January, 2013 while admitting ITA No.13 of 2011 the
following questions of law were framed by this Court for
consideration:
"(i) Whether on the facts and circumstances of the
case, the learned ITAT is justified in holding that the
assessee-SOUTHCO is not liable to deduct tax at
source against payment of transmission charges
made to OPTCL as the equipment held by the
OPTCL have not been given on rent, lease etc. to the
assessee?
(ii) Whether on the facts and circumstances of the
case, the learned ITAT is justified in holding that
payment made by the assessee Company is only
towards purchase price of electricity from the
GRIDOC and not from OPTCL for which no TDS
liability is attracted in terms of section 194-1 of the
I.T. Act?
(iii) Whether the learned ITAT is justified in holding
that the TDS liability is not attracted in case of the
assessee-company for which there is no need to levy
interest u/s. 201(1A) of the I.T. Act?"
4. The same questions arise for consideration in each of the other
appeals as well.
ITA Nos.4,8,11,13, 17 and 23 of 2011
5. The Respondent in each of these appeals is engaged in the
distribution of power. Each of the companies purchases electricity
from the Grid Corporation of Odisha Limited (GRIDCO). The
electricity so purchased is distributed by utilizing the transmission
network of the Orissa Power Transmission Corporation Limited
(OPTCL). Both GRIDCO and OPTCL are regulated by the Orissa
Electricity Regulatory Commission (OERC).
6. Question (i) and (ii) concern the applicability of Section 194-I
of the Income Tax Act, 1961 (IT Act) to the payments made by
the Respondents to OPTCL towards its billing/transmission
charges. Both the Assessing Officer (AO) and the Commissioner
of Income Tax (Appeals) [CIT (A)] decided the issue against the
Assessee by holding that Section 194-I of the IT Act does apply
and that the payments made were amenable to deduction of tax at
source (TDS). It was further held that on account of failure of the
Respondent to deduct TDS under 194-I of the Act, the penalty and
interest under Sections 201(1) and 201(1A) of the IT Act stood
attracted.
7. Allowing the appeals of the Respondents, the ITAT has in the
impugned order come to the composite conclusion viz., that
Section 194-I of the IT Act is not attracted. In doing so, the ITAT
has followed the decision of the Supreme Court in India Meters
Limited v. State of Tamil Nadu (2010-VIL-I-SC). The ITAT held
that the Respondent-Assessees have not used any of the
ITA Nos.4,8,11,13, 17 and 23 of 2011
equipments of OTPCL and, therefore, no rent can be deemed to
have been paid by the Respondent to OPTCL. The relevant
portion of the impugned order of the ITAT reads thus:
"At the outset, it is noticed that except the order of
OERC, there is no connection between the assesssee
herein and OPTCL. The agreement, right from the
beginning, is between Gridco and the assessee.
Gridco is to supply the electricity. Gridco is to
deliver the electricity to the specified points as per
the agreement. OPTCL was originally a part of
Gridco and OPTCL was hived up from Gridco in
2005. Gridco is liable to pay OPTCL for the
transmission of the electricity till the point of
delivery as specified in the bulk supply agreement
with assessees. Only to protect the interest of
OPTCL in regard to the receipt of payments, OERC
has directed OPTCL to raise invoices on the
assessees. This is evident from the fact that the
Regulatory Commission has specifically stated that
OPTCL would have the first charge on the
receivables of Gridco from the assessee. Thus, what
the assessees are paying, is in fact the purchase price
for the electricity supplied by Gridco. The purchase
price has been broken down on account of the orders
of OERC into cost of electricity and transportation
cost which is based on the transmission loss of
electricity. The assessees have not used anything
belonging to OPTCL nor the assessees are a party in
the petition filed by OPTCL to OERC for the
fixation of the tariff. If the assessees were paying
rent or were using any equipments of OPTCL, then
assessee should have been a party before the OERC
in respect of the fixation of the price in the case of
OPTCL. This is because the assessee would be an
affected party. The assessee are only a party in the
fixation of the price between the Gridco and
assessees and it in that order that a parallel identical
direction is also available in para 37 and 294 and
295 of the order in the case of Gridco. Thus, it is
ITA Nos.4,8,11,13, 17 and 23 of 2011
evident that the raising of invoices by OPTCL on the
assesse is for the purpose of raising for first change
on the receipts of Gridco and for no other purposes.
As mentioned above, the assessees have not used
any of the equipments of OPTCL and in absence of
use in any manner whatsoever, of the equipments of
OPTCL by the assessee, no rent can be deemed to
have been paid for the purpose of invoking of
section 194(I) of the Act."
8. Having heard learned counsel for the Appellants (Revenue), the
Court is not persuaded that any error has been committed by the
ITAT in coming to the above conclusion. In absence of there
being any payment of rent or even deemed rent by the
Respondents to OPTCL there was no obligation under Section
194-I of the IT Act to deduct TDS from the wheeling charges paid
to OPTCL.
9. Consequently, the questions framed are answered in favour of
the Assessee and against the Appellant (Revenue). The appeals
are dismissed, but in the circumstances, with no order as to costs.
(S. Muralidhar)
Chief Justice
( R.K. Pattanaik)
Judge
S.K. Jena/PA
ITA Nos.4,8,11,13, 17 and 23 of 2011
