Section 194Q Cannot Be Invoked on Electricity Wheeling/Transmission Charges – ITAT Delhi Ruling

Case Overview

Case Name: ACIT Vs Pashchimanchal Vidyut Vitran Nigam Limited
Court: Income Tax Appellate Tribunal, Delhi
Assessment Year: 2022-23
Date of Pronouncement: 23rd March, 2026

Background of the Dispute

The Revenue filed an appeal challenging the order passed by the Commissioner of Income Tax (Appeals), Delhi dated 29th July, 2025 in appeal No. NFAC/2021-22/10353395. The original assessment for the year 2022-23 had been framed by the ACIT, Circle-1(1)(1), Meerut through an order dated 23rd March, 2024 under Section 143(3) read with Section 144B of the Income-tax Act, 1961.

The central issue before the Tribunal was whether the CIT(A) was justified in deleting the disallowance made by the Assessing Officer on electricity transmission/wheeling charges, where TDS had not been deducted by the assessee under Section 194Q of the Income-tax Act, 1961.

Assessing Officer's Stand

The Assessing Officer proceeded on the basis that the assessee had failed to deduct tax at source on transmission/wheeling charges paid in connection with electricity. Invoking the provisions of Section 194Q, the AO made a disallowance under Section 40(a)(ia) of the Income-tax Act, 1961, treating such non-deduction as a default warranting disallowance of the corresponding expenditure.

Assessee's Submissions Before the Tribunal

Counsel appearing on behalf of the assessee submitted that the issue in question was not a fresh controversy and had already been settled in favour of the assessee through multiple earlier decisions of the Tribunal in the assessee's own case. Specifically, the following precedents were cited:

  • ITA No. 983/Del/2018 & Others, order dated 16th January, 2020 — for Assessment Year 2012-13 and connected years
  • ITA No. 5647/Del/2015, order dated 21st June, 2017 — for Assessment Year 2015-16
  • ITA No. 7308/Del/2017, order dated 2nd November, 2020 — for Assessment Year 2014-15

The assessee placed particular reliance on the Tribunal's order dated 2nd November, 2020 for Assessment Year 2014-15, wherein the Revenue's appeal on an identical issue had been dismissed.

Relevant Extract from Earlier ITAT Order (AY 2014-15)

The Tribunal in the earlier order dated 2nd November, 2020, in the assessee's own case, had held as follows in paragraph 17: