2018 (9) TMI 108 - HC - Income Tax

TDS u/s 194C - payment of transmission charges by the assessee to the West Bengal Power Development Corporation Ltd. - Held that - The assessee is engaged in the business of transmission of power from the power generating companies in West Bengal to the distribution companies. It is clear from the order of Tariff Regulatory Commission that the amount in question is not in the nature of transmission charges. Therefore the very basis on which the AO proceeded to make the disallowance by holding that the payment in question was liable to TDS u/s 194C of the Act was erroneous. Once it is held that the provision of section 194C of the Act is not attracted as a natural corollary no disallowance can be made u/s 40(a)(ia) of the Act. - decided in favour of assessee Depreciation on assets classified as temporary building - Held that - Both the Commissioner and the Tribunal came to concurrent finding that the structures of the assessee ought to be treated as purely temporary erections such as wooden structures. The Commissioner, in his order, observed that the temporary structures comprised of wooden structures with asbestos roofs constructed for facilitating the transmission works of the appellant and decided the issue in favour of the assessee.This finding of CIT(A) has not been contested as incorrect by the revenue. The fact that WBSEB and WBSEDCL had claimed depreciation at 10% on these temporary structures cannot be the basis to disallow a legitimate claim of depreciation at 100% on temporary structures which is otherwise allowable to the assessee in law. We are therefore of the view that the conclusions of CIT(A) on this issue do not call for any interference - decided in favour of the assessee

Summary

Issues:
1. Tax deduction at source under Section 194C of the Income Tax Act, 1961 in payment of transmission charges.
2. Rate of depreciation on temporary buildings.

Analysis:

Issue 1: Tax Deduction at Source under Section 194C:
The appeal involved the question of tax deduction at source under Section 194C of the Income Tax Act, 1961 in relation to payment of transmission charges by the assessee to the West Bengal Power Development Corporation Ltd. The Revenue contended that the entire sum paid should be added to the income of the assessee under Section 40(a)(ia) of the Act. However, the Tribunal, after careful consideration, held that the provision of Section 194C was not attracted to the payment in question, as it was not in the nature of transmission charges but rather a sharing of the cost of the transmission system. Therefore, the disallowance made by the AO under Section 40(a)(ia) was deemed erroneous. The Tribunal upheld the order of the CIT(A) on this issue, dismissing the grounds raised by the Revenue. The Court also referred to a previous judgment where a similar issue was decided in favor of the assessee, further supporting their decision.

Issue 2: Rate of Depreciation on Temporary Buildings:
Regarding the rate of depreciation on temporary buildings, both the Commissioner and the Tribunal agreed that the structures in question should be treated as purely temporary erections, akin to wooden structures. The Commissioner noted that these temporary structures were constructed to facilitate the transmission works of the appellant. The Tribunal concurred with this view, emphasizing that the structures were sheds made of wood with asbestos roofs, specifically for transmission works. The Tribunal rejected the Revenue's argument that depreciation should be limited to 10%, highlighting that the claim of 100% depreciation on temporary structures was legitimate and allowable under the law. The Court found the concurrent finding of fact in favor of the assessee not to be perverse and concluded that no substantial question of law was involved in this appeal. As a result, the appeal was dismissed, along with the stay petition.

In summary, the judgment addressed issues related to tax deduction at source under Section 194C and the rate of depreciation on temporary buildings, ultimately ruling in favor of the assessee on both counts based on the findings of the Tribunal and previous judicial decisions.