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TMI Blog2022 (12) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rajasthan and held no disallowance Rule 6DD(b) could have been made in view of Rules 6DD(b). In the present case, MSEDCL which, is a wholly owned corporate entity of Maharashtra State, in turn, which is deemed licensee u/s. 14 of the Electricity Act, 2003, in turn, entered into an agreement with SNDL which is a subsidiary of Spanco with whom the MSEDCL entered into original agreement. The home page of SNDL shows that has been formed to look after power distribution to Nagpur city on behalf of the MSEDCL and the Spanco is answerable for its obligation towards MSEDCL, which clearly establishes that the SNDL performing its obligations in pursuance of contract entered with MSEDCL which is a State under Article 12 of the Constitution, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCL) and SNDL in support of its claim that SNDL is an agent of Government of Maharashtra for distribution of electricity in Nagpur. He further submits that the payments made by the assessee to the agent of Government of Maharashtra is covered under Rule 6DD(b) and vehemently argued the disallowance as confirmed by the CIT(A) is not justified. He drew our attention to the legal position as contended before the CIT(A) at page 5 of the impugned order. Further, he referred to a decision of Hon ble High Court of Rajasthan at Jaipur Bench in the case of CIT Vs. Kalyan Prasad Gupta reported in 239 CTR 447 and argued that the Hon ble High Court held the amount paid to contractor collected on behalf of the State Government, is covered under Rule 6DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... central division of Mumbai for its assessment. He argued when it is a company the provisions u/s. 40A(3) is attracted to the disallowance as confirmed by the CIT(A), is justified. Further, he argued the Rule 6DD(b) is not applicable as MSEDCL and SNDL are companies but not Government authorities. He prayed to dismiss the grounds of appeal raised by the assessee. 6. Heard both the parties and perused the material available on record. We note that the bill dated 17-02-2018 issued by the SNDL to the assessee at page 24 of the paper book, wherein, it is reflected that it is a MSEDCL s franchisee. Further, the receipt dated 26-02-2018 issued by SNDL is at page 25 of the paper book, on perusal of the same it is reflected that SNDL, Nagpur is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea of supply. Further, we note that it is a deemed distribution licensee u/s. 14 of the Electricity Act, 2003 in order to achieve carrying out the supply of power to the end users as well as maintaining the wire business for supply of such power. 8. The MSEDCL entered into an agreement with Spanco, in turn the Spanco forms Spanco Nagpur Discon Limited (SNDL) to look after power distribution in Nagpur city. MSEDCL signed an agreement between Spanco and SNDL. The said agreement entered by the MSEDCL is to supply reliable power to Nagpur city and Spanco Limited is answerable for its obligations for MSEDCL. Therefore, it is clear from the profile of MSEDCL and its agreement with SNDL as a franchise supplying power to the end consumers in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 12, will, include all constitutional or statutory authorities on whom powers are conferred by law. Further, it is not at all material that some of the powers conferred may be for the purpose of carrying on commercial activities. The State, is itself envisaged as having the right to carry on trade or business as mentioned in Article 19(1)(g) of the Constitution of India. The Hon ble Supreme Court further observed that the circumstance that the Board under the Electricity Supply Act is required to carry on some activities of the nature of trade or commerce does not, therefore, give any indication that the Board must be excluded from the scope of the word State as used in Article 12. 10. Now, let us refer to the decision of Hon ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable for its obligation towards MSEDCL, which clearly establishes that the SNDL performing its obligations in pursuance of contract entered with MSEDCL which is a State under Article 12 of the Constitution, as an agent of Maharashtra State for distribution of electricity in Nagpur city. Therefore, the payment made to the agent/franchisee of the State of Maharashtra is covered under Rule 6DD(b) of the I.T. Rules. Thus, the provisions u/s. 40A(3) are not attracted to the payments made to SNDL received on behalf of the MSEDCL. Therefore, the order of CIT(A) is not justified and the grounds raised by the assessee are allowed. 12. In the result, the appeal of assessee is allowed. Order pronounced in the open court on 15th December, 2022. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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