2022 (11) TMI 872 - AT - Income Tax

Disallowance u/s 43B - electricity duty payable to State Govt - non-payment of electricity duty before the due date of filing return of income - HELD THAT - As finding of ld. CIT(A) placing reliance on the decision of CESC Ltd 2015 (5) TMI 795 - CALCUTTA HIGH COURT stands uncontroverted by the ld. D/R and we, therefore, respectfully following the ratio laid down since the alleged amount is not a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee but the said amount i.e. the electricity duty is collected by the assessee company from the consumers to be passed on to the State Govt. and the said amount is not claimed as an expenditure in the profit and loss account. We, therefore, fail to find any infirmity in the finding of the ld. CIT(A) and, therefore, dismiss ground nos. 1, 2 3 raised by the Revenue. TDS u/s 194A - non-deduction of tax at source on the interest paid to consumers on security deposit - HELD THAT - As we note that there are large number of consumers and it is difficult to collect data of each and every consumer (20 lakh) which are maintained manually in the registers at each of the locations of the company and also the average interest amount is not exceeding Rs. 84/-, necessary efforts have already been made by the assessee company filing complete details of the consumers to which interest was paid above the prescribed limit and due tax deducted at source, restoring the issue to the ld. AO for again calling for the records of each and every consumer and then find out the correct amount eligible for deduction of tax at source will unnecessarily stretch the long drawn proceedings which pertains to AY 2012-13 and even after carrying out such exercises it is not certain that the necessary results would be obtained. Disallowance u/s. 40(a)(ia) of the Act is not called for on the alleged amount as the assessee has filed the details which it could possibly gather and the Revenue authorities have no material with them to make the disallowance except for non-filing of details by the assessee and ignoring the fact that average interest is merely Rs. 84/- per consumer and there will be large number of cases where interest amount paid on the security deposit may have been much below the prescribed limit for non-deduction of tax at source. However, since the interest amount of Rs. 48,60,850/- has already been subjected to TDS, the remaining amount of alleged disallowance will only be Rs. 16,13,39,150/- and we allow the said amount as an interest expenditure not calling for disallowance u/s. 40(a)(ia) - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance under Section 43B of the Income Tax Act, 1961 for non-payment of electricity duty before the due date of filing the return of income.
2. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source on interest paid to consumers on security deposits.

Detailed Analysis:

Issue 1: Disallowance under Section 43B for Non-Payment of Electricity Duty

The Revenue's appeal challenged the CIT(A)'s decision to delete the disallowance of Rs. 44 Crores under Section 43B of the Income Tax Act, 1961. The CIT(A) had ruled that electricity duty payable to the State Government is not to be disallowed under this section. The AO had initially disallowed this amount because it was not deposited before the due date of filing the return of income under Section 139(1).

The CIT(A) relied on the judgment of the Hon'ble Jurisdictional High Court in the case of CESC Ltd. vs. CIT, which clarified that Section 43B is not applicable to electricity duty collected by the assessee from consumers to be passed on to the State Government. The court held that the electricity duty is not a primary liability of the assessee but is collected as an agent for the State Government, and thus, it does not constitute a business receipt or income of the licensee.

The Tribunal upheld the CIT(A)'s findings, stating that the electricity duty collected by the assessee is not claimed as an expenditure in the profit and loss account and is merely collected to be passed on to the State Government. Therefore, the disallowance under Section 43B was not warranted.

Issue 2: Disallowance under Section 40(a)(ia) for Non-Deduction of Tax at Source on Interest Paid to Consumers

The assessee filed a Cross Objection challenging the disallowance of Rs. 16.62 Crores under Section 40(a)(ia) for non-deduction of tax at source on interest paid to consumers on security deposits. The AO had made this disallowance due to the assessee's failure to provide details of the interest payments and their applicability under Section 194A.

The CIT(A) upheld the disallowance because the additional evidence submitted by the assessee was not conclusive or verifiable. The assessee argued that the interest payment per consumer was minimal (approximately Rs. 84) and that it was impractical to maintain detailed records for around 20 lakh customers, especially since the records were maintained manually.

The Tribunal acknowledged the practical difficulties faced by the assessee and noted that the average interest payment per consumer was minimal. It also recognized the efforts made by the assessee to provide details and deducted TDS on the amount of Rs. 48,60,850/-. The Tribunal concluded that further verification by the AO would unnecessarily prolong the proceedings. Therefore, it held that the disallowance under Section 40(a)(ia) was not justified for the remaining amount of Rs. 16,13,39,150/- and allowed it as an interest expenditure.

Conclusion:

The Tribunal dismissed the Revenue's appeal and partly allowed the Cross Objection filed by the assessee. The disallowance under Section 43B was not upheld, and the disallowance under Section 40(a)(ia) was reduced, allowing the interest expenditure for the remaining amount.