COMMISSIONER OF INCOME-TAX Vs. CHIEF ELECTRICAL INSPECTOR TO GOVERNMENT

JUDGEMENT

(1.) THESE income -tax appeals are directed against the common orders passed by the Income -tax Appellate Tribunal (for short 'the Tribunal') and the Commissioner of Income -tax (Appeals) -II, Bangalore (for short 'the First Appellate Authority') against the orders dated 19.04.2013 and 10.10.2011 respectively. The appeals before the First Appellate Authority were preferred by the respondent -assessee the Chief Electrical Inspector to the State Government whilst the appeals before the Tribunal were filed by the Revenue.

(2.) THE substantial questions of law raised in these appeals read thus:

(3.) BRIEFLY stated, the facts leading to these appeals, are that the respondent -assessee had delegated its power for collection of Electricity -tax to the Electricity Commissioners, who are also supplying electricity to BESCOM, GESCOM, MESCOM, HESCOM AND CESCOM (for short "ESCOM"). In addition to the electricity charges on the electricity supplied by these ESCOMs, they also collected Electricity -tax on behalf of the Government, which they remit to the Government and the Government in turn pay them certain sum to compensate towards the expenses incurred by them for collecting tax. Therefore, the question was : whether the amounts paid to the ESCOMs by the assessee could be treated as Commission? The findings of the Assessing Officer, the First Appellate Authority and the Tribunal are concurrent insofar as this question is concerned. All the authorities have concurrently held that the payment made by the Government to the ESCOMs for collecting Electricity -tax amounts to commission. The learned counsel for the respondent -assessee does not dispute this finding recorded by the authorities below including the Tribunal. The controversy was whether the assessee should have deducted tax at source while making payment to the ESCOMs for collecting Electricity -tax. Admittedly, the assessee did not deduct the tax at source while making the payment as aforestated. At the same time, it is admitted fact that that the ESCOMs, on receipt of the said amount from the assessee have paid the tax to the Department. It is in this backdrop the First Appellate Authority, after considering the facts of the case in the light of the relevant provisions, ultimately directed the Assessing Officer to pass consequential orders charging interest under Section 201(1A) of the Income tax Act (for short 'the Act'). It also appears from the observations made in paragraph 3.9 and 3.10 in the order of the First Appellate Authority that it directed the Assessing Officer to verify whether the ESCOMs paid tax on the amounts received from the assessee for collecting Electricity -tax. The observations made by the First Appellate Authority in paragraph 3.9 and 3.10 read thus: