M S Atria Power Corproation Ltd Bangalore v. Ito Bangalore

In The Income Tax Appellate Tribunal B Bench Bangalore Before Shri Sunil Kumar Yadav Judicial Member And Shri A K Garodia Accountant Member Ita No 1394 Bang 2013 Assessment Year 2010 11 M S Atria Power Corporation Ltd 1 Palace Road Bangalore 560 001 Pan Aabca 1880 E Vs The Income Tax Officer Ward 11 1 Bangalore Appellant Respondent Appellant By Shri V Srinivasan Advocate Respondent By Shri H L Sowmya Achar Addl Cit Dr Itat Beng Aluru Date Of Hearing 09 10 2017 Date Of Pronouncement 22 12 2017 O R D E R Per Sunil Kumar Yadav Judicial Member This Appeal Is Preferred By The Assessee Agains T The Order Of Cit Appeals Inter Alia On The Following Grounds 1 The Orders Of The Authorities Below In So Far A S They Are Against The Appellant Are Opposed To Law Equity W Eight Of Evidence Probabilities Facts And Circumstances Of The Case 2 The Learned Cit A Is Not Justified In Upholding That Assessing The Interest Income From Fixed Deposit Ap Pertaining To The Business Of Generation Of Power As Income Liabl E To Tax Under The Head Other Sources Instead Of Under The Head Business He Failed To Appreciate That Interest Income From Fd I S In Respect Of Deposits Which Are Obliged To Be Made For Carrying On The Business Of Generation Of Power To Fulfill Certain Obligations From Ita No 1394 Bang 2013 Page 2 Of 48 Out Of The Business Funds And These Monies Have Not Been Deposited Solely With A View To Earn Any Interest I Ncome And Are Liable To Be Taxed Only Under The Head Business A Nd Not Under The Head Other Sources 3 The Learned Cit A Is Not Justified In Upholding The Restricting The Claim U S 80 Ia 4 Iv Of The Act I N Respect Of The Income Computed Under The Head Business Only And Not In Respect Of Income Under The Head Other Sources Ap Pertaining To The Undertaking Carrying On The Business Of Generat Ion Of Power To Which It Is Legitimately Entitled To Deduction U S 80 Ia 4 Iv Of The Act 4 The Appellant Denies Itself Liable To Be Charged To Tax U S 115 Jb Of The Act In As Much As No Tax Is Liab Le To Be Paid Under Normal Provisions And Consequently The Provi Sions Of Section 115 Jb Of The Act Cannot Be Invoked 5 Without Prejudice To The Right To Seek Waiver Wi Th The Honble Ccit Dg The Appellant Denies Itself Liable To Be Charged To Interest U S 234 B And 234 C Of The Act Which Under The Facts And In The Circumstances Of The Appellants Case An D The Levy Deserves To Be Cancelled 6 For The Above And Other Grounds That May Be Urge D At The Time Of Hearing Of The Appeal Your Appellant Humbl Y Prays That The Appeal May Be Allowed And Justice Rendered And The Appellant May Be Awarded Costs In Prosecuting The Appeal And Also Order For The Refund Of The Institution Fees As Part Of The C Osts 2 During The Course Of Pendency Of The Appeal The Assessee Has Filed Application For Admission Of Additional Grounds On The Ground That The Additional Grounds Go To The Root Of The Case Ther Efore The Same May Be Adjudicated At The Threshold The Additional Groun Ds Raised Are As Under 1 The Appellant Denies Itself Liable To Be Taxed Under The Provisions Of Section 115 Jb Of The Act Since The Ap Pellant Is An Electricity Company And The Provisions Of Parts Ii And Iii Of Schedule Vi To The Companies Act 1956 Are Not Appl Icable To The Ita No 1394 Bang 2013 Page 3 Of 48 Appellant And Consequently The Income Determined U S 115 Jb Of The Act Being Illegal Deserves To Be Vacated 2 The Authorities Below Ought To Have Appreciated That The Provisions Of 115 Jb Of The Act Are Not Applicable T O The Appellant Since The Appellant Is Engaged In The Generation An D Supply Of Electricity And Under Proviso To Section 211 2 Of The Companies Act 1956 The Appellant Is Exempted From Preparing Its Books Of Account In Terms Of Requirements Under Schedule Vi To The Companies Act Under The Facts And In The Circumstan Ces Of The Appellants Case 3 For The Above And Other Grounds That May Be Urge D At The Time Of Hearing Of The Appeal Your Appellant Humbl Y Prays That The Appeal May Be Allowed And Justice Rendered 3 Having Carefully Examined The Additional Ground S We Find That These Additional Grounds Go To The Root Of The Case Therefore The Same Are Admitted And We Prefer To Adjudicate It Along With Other Grounds Of Appeal 4 Ground Nos 2 3 Relate To The Nature Of Interes T Income Received By The Assessee In Various Fixed Deposits Which Were Purchased On Account Of Business Exigencies Therefore The Same May Be T Reated As Business Income 5 On The Other Hand The Ld Dr Has Placed Relianc E Upon The Judgment Of The Honble Apex Court In The Case Of Cit V Sterling Foods 237 Itr 579 And Pandian Chemicals Ltd V Cit 262 Itr 278 In Which It Was Held That Income Earned On Fdrs Cannot Be Held To Be Income Derived From Industrial Undertaking 6 In Rebuttal The Ld Counsel For The Assessee Ha S Contended That Fdrs Were Purchased On Account Of Business Exigenci Es The Judgments Of The Honble Apex Court In The Cases Of Sterling Foods Supra And Pandian Chemicals Ltd Supra Were Examined By The Jurisdictional High Ita No 1394 Bang 2013 Page 4 Of 48 Court In The Case Of Cit V Chinna Nachimuthu Constructions 179 Taxman 272 Kar Cit V Hajee Jaffar Shariff In Ita No 15 21 Of 2005 And By The Honble Delhi High Court In The Case Of Cit V Jaypee Dsc Ventures Ltd 335 Itr 132 Del In Which It Was Held That Wherever The Fixed Depo Sits Were Purchased On Account Of Business Exigencies T He Interest Income Generated Thereon Shall Be Treated As Business Inco Me And Not Income From Other Sources 7 Having Carefully Examined The Orders Of Authorit Ies Below We Find That Though Assessee Has Claimed That Fdrs Were Pur Chased On Account Of Business Exigencies But It Is Not Specifically Borne Out From The Orders Of The Lower Authorities We Have However Examined The Judgments Of Jurisdictional High Court In The Case Of Chinna Nachimuthu Constructions Supra M S Hajee Jaffar Shariff Supra And The Delhi High Court Judgment In The Case Of Jaypee Dsc Ventures Ltd Supra In All These Cases The Honble High Courts Have Examined The Ju Dgment Of The Honble Apex Court In The Case Of Cit V Sterling Foods 237 Itr 579 Sc And Pandian Chemicals Ltd V Cit 262 Itr 268 Sc In The Later Judgment Of The Honble Apex Court In The Case Of Pandian Chemicals Ltd Supra It Was Held That Interest On Deposits Of Electricity B Oards Cannot Be Said To Be Derived From Industrial Undertaking Being A Step Re Moved From Business Of Industrial Undertaking Therefore It Was Income F Rom Other Sources These Judgments Were Examined By The Jurisdictional High Court In The Case Of Chinna Nachimuthu Constructions Supra Which Was Delivered On 12 11 2007 In Which It Was Held That Investment Of Amount In Fixed Deposits By The Assessee Was Only To Secure A Bank Guarantee To Be Offered To M S Kptcl In Order To Acquire A Contract Work Therefo Re It Cannot Be Treated As Income From Other Sources And Interest Accrued O N Such Fixed Deposits Has To Be Treated As Business Income Only Express Ing A Similar View The Jurisdictional High Court In The Case Of M S Hajee Jaffar Shariff Supra Vide Ita No 1394 Bang 2013 Page 5 Of 48 Its Judgment Dated 02 03 2010 Again Held That Fixed Deposits Were Given As Security In Order To Avail Credit Facilities There Fore Income Earned Is Not Income From Other Sources For The Sake Of Referen Ce We Extract The Observations Of The Honble High Court As Under 9 However The Learned Counsel For The Appelia Nts Relied Upon Another Decision Of Apex Court In Pandian Chemicals Lid Vs Commissioner Of Income Tax To Contend That With Regard To Deposits Made With T He Electricity Board The Interest On The Said Deposit Would Not B E Said To Be Derived From The Industrial Undertaking As It Is A Step Removed From The Industrial Undertaking And Therefore Not L Iable For Deduction Under Section 80 Hhc Of The Act 10 We Are Of The View That On The Facts Of The Pre Sent Case And Taking Into Consideration The Decisions Referred To Supra The Decision In Pandian Chemicals Ltd Vs Commissioner Of Income Tax Would Not Be Applicable To The Present Case In The Instant Case As Already Stated For The Purpose Of Its Business That Is Export Business Th E Fixed Deposits Were Given As Security In Order To Avail Credit Fac Ilities And Consequently On Facts We Are Of The Considered View That The Decision In Gonvida Choudhury Sons And Chiinna Nachimuthu Constructions Are Applicable And The Decision Of The Apex Court In Pandian Chemicals Ltd Vs Commissioner Of Income Tax Can Be Distinguished Accordingly We Answer The Substantial Questions Of Law Raised In This Appeal Against The Revenue And Dismiss The App Eal 8 The Honble Delhi High Court While Delivering Th E Judgment On 11 03 2011 In The Case Of Jaypee Dsc Ventures Ltd Supra Has Confirmed The View Taken By The Honble Karnataka High Court While Holding That The Amount Of Investment In Fixed Deposits Which Were K Ept In Bank For Furnishing Of Bank Guarantee Is Business Income No T Income From Other Sources The Relevant Observations Of The Honble Delhi High Court Are Extracted Hereunder For The Sake Of Reference Ita No 1394 Bang 2013 Page 6 Of 48 21 Keeping In View The Aforesaid Pronouncements I N The Field The Present Controversy Is To Be Adjudged A S Is Noticeable From The Stipulations In The Agreement The Performance Guarantee By Way Of Bank Guarantee Was Required For Faithful Performance Of Its Obligation S The Non Submission Of The Guarantee Would Have Entailed In Termination Of The Agreement And Nhai Would Have Be En At Liberty To Appropriate Bid Security That Apart Th E Release Of Such Performance Security Depended Upon Certain Conditions Thus It Is Clearly Evincible That The Bank Guarantee Was Furnished As A Condition Precedent To Entering The Contract And Further It Was To Be Kept Alive To Fulfill The Obligations Quite Apart From The Above The Release Of The Same Was Dependent On The Satisfacti On Of Certain Conditions Thus The Present Case Is Not O Ne Where The Assessee Had Made The Deposit Of Surplus Money Lying Idle With It In Order To Earn Interest On The Cont Rary The Amount Of Interest Was Earned From Fixed Deposits W Hich Was Kept In The Bank For Furnishing The Bank Guaran Tee It Had An Inextricable Nexus With Securing The Contrac T Therefore We Are Disposed To Think That The Factua L Matrix Is Covered By The Decisions Rendered In Bokaro Stee L Ltd Supra Karnal Co Operative Sugar Mills Ltd Supr A And Koshika Telecom Ltd Supra And Accordingly We H Old That The View Expressed By The Tribunal Cannot Be F Ound Fault With 9 In The Light Of The Aforesaid Judgments Of Diffe Rent High Courts It Is Clear That Wherever The Fdrs Are Purchased On Accou Nt Of Business Exigencies The Interest Generated Thereon Would Be Business Income And Not Income From Other Sources But In The Instant Case It Is Not Borne Out From The Orders Of Lower Authorities Whether All Fd Rs Are Purchased For Business Exigencies Or Not Therefore We Restore The Matter To The File Of The Ao To Examine The Nature Of Fdrs And Its Purpos E And To Give A Specific Finding Whether The Fdrs Were Purchased Fo R Business Purposes Or Not If It Is Purchased For Business Purposes The Interest Income Earned Ita No 1394 Bang 2013 Page 7 Of 48 Thereon Shall Be Treated As Business Income And Not Income From Other Sources In The Light Of Aforesaid Judgments Of Juri Sdictional High Court 10 So Far As Ground No 4 And Additional Grounds Ar E Concerned We Find That Through These Grounds The Assessee Has Q Uestioned The Applicability Of Provisions Of Section 115 Jb Of The Income Tax Act 1961 The Act To The Assessees Case In This Regard The Ld Counsel For The Assessee Has Contended That Assessee Is Engaged In The Business Of Generation Of Power And As Per The Provisions Of Se Ction 115 Jb Of The Act R W Proviso To Section 211 1 Of The Companies Act Assessee Was Not Required To Prepare The Balance Sheet In The Form S Et Out In Part I Of Schedule Vi Of The Companies Act 1956 Assessee W As Required To Prepare Its Balance Sheet And Profit Loss Account In The Form As Specified Under The Statutory Act The Ld Counsel For The A Ssessee Further Invited Our Attention To The Provisions Of Clause B Of Su B Section 2 Of Section 115 Jb With The Submission That By Virtue Of Amendme Nt By The Finance Act 2012 W E F 1 4 2013 The Companies To Which The Pr Ovisions Of Sub Section 2 Of Section 211 Applies Shall For The Purpose O F The Section Prepare Its Profit Loss Account For The Relevant Previous Yea R In Accordance With The Provisions Of The Act Governing Such Company Meani Ng Thereby The Provisions Of Section 115 Jb Would Apply To All Thos E Companies Specified In Proviso To Sub Section 2 Of Section 211 Of The Co Mpanies Act 11 The Ld Counsel For The Assessee Further Conten Ded Before The Aforesaid Amendment Companies Were Required To Pre Pare Its Profit Loss Account For The Relevant Previous Year In Accordanc E With The Provisions Of Part Ii Iii Of Schedule Vi Of The Companies Act 1956 Therefore Prior To 1 4 2013 Companies Which Are Not Required To Mainta In Its Profit Loss Account In Accordance With The Provisions Of Part I Iii Of The Schedule Vi To The Companies Act Do Not Fall Within The Purview Of Section 115 Jb Of The Ita No 1394 Bang 2013 Page 8 Of 48 Act In Support Of His Contention The Ld Counsel For The Assessee Has Placed Reliance Upon The Order Of The Tribunal In T He Case Of Karnataka Power Corporation Ltd V Cit In Ita No 711 Bang 20 11 In Which This Tribunal Has Categorically Held That Assessee Being An Electric Company Provisions Of Part Ii Iii Of Schedule Vi To The C Ompanies Act Are Not Applicable Therefore The Provisions Of Section 1 15 Jb Are Not Applicable To The Assessee 12 Reliance Was Also Placed On Another Order Of De Lhi Bench Of The Tribunal In The Case Of Bses Rajdhani Power Ltd V Acit Its 6465 Itat 2015 Delhi O In Ita Nos 3688 3689 3660 3661 6 06 821 1437 1438 1538 1539 Del 2011 And 4780 5075 Del 2013 And 404 584 3922 Del 2012 In Which A Similar View Was Expressed By The Tribun Al The Ld Counsel For The Assessee Has Also Invited Our A Ttention To The Judgment Of Honble Kerala High Court In The Case Of Kerala State Electricity Board V Dcit 329 Itr 91 Ker In Which It Was Held That State Electricity Board I S Not A Company Bound By The Provisions Of The Compa Nies Act As To Manner Of Drawing Up Of Profit Loss Account Or Ob Ligation To Lay It Before Company In General Meeting Therefore The Provisi Ons Of Section 115 Jb Would Not Be Applicable 13 The Ld Dr On The Other Hand Has Placed Relia Nce Upon The Order Of Tribunal In The Assessees Own Case For The Ay 2005 06 In Which The Tribunal Has Invoked The Provisions Of Section 115 J B Of The Act Besides Heavy Reliance Was Placed Upon The Order Of Cit App Eals 14 In Rebuttal The Ld Counsel For The Assessee H As Contended That The Order Of Tribunal In Assessees Own Case Was Passed On 23 12 2008 Whereas The Amendment To Section 115 Jb 2 Was Broug Ht On The Statute By The Finance Act 2012 W E F 1 4 2013 Since This Aspect Was Not Examined Ita No 1394 Bang 2013 Page 9 Of 48 By The Tribunal While Dealing With The Issue Of App Licability Of Provisions Of Section 115 Jb Of The Act To The Assessees Case No Inference Can Be Drawn From This Order Of The Tribunal While Adjudic Ating The Issue 15 Having Carefully Examined The Orders Of Authori Ties Below In The Light Of Rival Submissions And Documents Placed On Record We Find That There Was An Amendment To Sub Section 2 Of Section 115 J B By The Finance Act 2012 W E F 1 4 2013 Prior To This Amendment As Per Sub Section 2 Every Assessee Being A Company Shall For The Purpo Se Of This Section S 115 Jb Prepare Its Profit Loss Account For The Re Levant Previous Year In Accordance With The Provisions Of Part Ii Iii Of Schedule Vi To The Companies Act 1956 Before This Amendment It Was Not Realized By The Legislature That There Are Certain Companies Who Ar E Not Obliged To Prepare Its Profit Loss Account For The Relevant Previous Year In Accordance With The Provisions Of Part Ii Iii Of The Schedule Vi To The Companies Act 1956 As They Were Governed By Different Acts Statu Te It Was Not Clear As To When These Companies Are Not Required To Prepare Their Profit Loss Account In Accordance With The Provisions Of Part I I Iii Of Schedule Vi To The Companies Act 1956 Whether The Provisions Of Section 115 Jb Are Applicable To These Companies Having Realized Thi S Position Sub Section 2 Was Amended And According To The Amendment It Was Categorized In Two Clauses And For The Sake Of Reference We Extra Ct The Provisions Of Section 115 Jb 1 2 Hereunder 115 Jb 1 Notwithstanding Anything Contained In Any Othe R Provision Of This Act Where In The Case Of An Asse Ssee Being A Company The Income Tax Payable On The Total Incom E As Computed Under This Act In Respect Of Any Previous Year Relevant To The Assessment Year Commencing On Or After The 1 St Day Of April 2012 Is Less Than Eighteen And One Half Per Cent Of Its Book Profit Such Book Profit Shall Be Deemed To Be The Total Income Of The Assessee And The Tax Payable By The Assessee On Such Total Ita No 1394 Bang 2013 Page 10 Of 48 Income Shall Be The Amount Of Income Tax At The Rat E Of Eighteen And One Half Per Cent 2 Every Assessee A Being A Company Other Than A Company Referred To In Clause B Shall For The Purposes Of This Section Prepare Its Profit And Loss Account For The Relevant Previous Year In Acco Rdance With The Provisions Of Part Ii Of Schedule Vi To The Com Panies Act 1956 1 Of 1956 Or B Being A Company To Which The Proviso To Sub Sect Ion 2 Of Section 211 Of The Companies Act 1956 1 Of 1956 Is Applicable Shall For The Purposes Of This Section Prepare It S Profit And Loss Account For The Relevant Previous Year In Accordanc E With The Provisions Of The Act Governing Such Company 16 By Virtue Of This Amendment The Legislature Ha S Brought Those Companies To Which Proviso To Sub Section 2 Of Se Ction 211 Of The Companies Act Applies Within The Network Of Provisi Ons Of Section 115 Jb Of The Act As Per The Provisions Of Section 211 1 Every Balance Sheet Of A Company Shall Be Prepared In Accordance With Part I Ii Of Schedule Vi Of The Companies Act But As Per Proviso To Sub Sectio N 1 Insurance Or Banking Company Or Any Company Engaged In The Gener Ation Or Supply Of Electricity Or To Any Other Class Of Company For Wh Ich A Form Of Balance Sheet Has Been Specified In Or Under The Act Govern Ing Such Class Of Company Are Not Required To Prepare Its Profit L Oss Account In Accordance With Part I Of Schedule Vi To The Compan Ies Act As Per Sub Section 3 The Central Government May By Notific Ation In The Official Gazette Exempt Any Class Of Companies From Complia Nce With Any Of The Requirements In Schedule Vi If In Its Opinion It Is Necessary To Grant The Exemption In The Public Interest For The Sake Of Reference We Extract The Provisions Of Section 211 1 To 3 Hereunder Ita No 1394 Bang 2013 Page 11 Of 48 Form And Contents Of Balance Sheet And Profit And L Oss Account 211 1 Every Balance Sheet Of A Company Shall Give A True And Fair View Of The State Of Affairs Of The Company As At The End Of The Financial Year And Shall Subject To The Provisions Of This Section Be In The Form Set Out In Part I Of Schedule Vi Or As Near Thereto As Circumstances Admit Or In Such Other Form As May Be Approved By The Central Government Either Generally Or In An Y Particular Case And In Preparing The Balance Sheet Due Regard Shall Be Had As Far As May Be To The General Instructions For P Reparation Of Balance Sheet Under The Heading Notes At The End Of That Part Provided That Nothing Contained In This Sub Section Shall A Pply To Any Insurance Or Banking Company Or Any Company Eng Aged In The Generation Or Supply Of Electricity Or To Any O Ther Class Of Company For Which A Form Of Balance Sheet Has Been Specified In Or Under The Act Governing Such Class Of Company 2 Every Profit And Loss Account Of A Company Sha Ll Give A True And Fair View Of The Profit Or Loss Of The Com Pany For The Financial Year And Shall Subject As Aforesaid Com Ply With The Requirements Of Part Ii Of Schedule Vi So Far As T Hey Are Applicable Thereto Provided That Nothing Contained In This Sub Section Shall A Pply To Any Insurance Or Banking Company Or Any Company Eng Aged In The Generation Or Supply Of Electricity Or To Any Other Class Of Company For Which A Form Of Profit And Loss Account Has Been Specified In Or Under The Act Governing Such Class Of Company 3 The Central Government May By Notification In The Official Gazette Exempt Any Class Of Companies Fro M Compliance With Any Of The Requirements In Schedule Vi If In Its Opinion It Is Necessary To Grant The Exemption In The Public Inte Rest Any Such Exemption May Be Granted Either Unconditio Nally Or Subject To Such Conditions As May Be Specified In T He Notifica Tion Ita No 1394 Bang 2013 Page 12 Of 48 17 Undisputedly The Assessee Is Engaged In The Ge Neration Of Power Therefore As Per Proviso To Section 211 1 The Ass Essee Was Not Required To Prepare Its Balance Sheet And Profit Loss Acco Unt In The Form Set Out In Part I Iii Of Schedule Vi To The Companies Act A S The Assessee Was Required To Prepare Its Balance Sheet And Profit Loss Account As Per The Act Notified By The Government Now The Question Arises Under Such Circumstances Whether The Provisions Of Section 11 5 Jb Would Apply To The Assessees Case Where He Was Not Required To Prepa Re The Balance Sheet And Profit Loss Account As Per Part I Iii Of Sc Hedule Vi To The Companies Act This Aspect Was Examined By This Tr Ibunal In The Case Of Karnataka Power Corporation Ltd V Acit Ita No 71 1 Bang 2011 In Which It Was Held That The Assessee Is Engaged In The Gen Eration Of Power And In An Electric Company It Is Governed By And Bound To Follow The Relevant Electricity Act And Rules Thereto In Preparation Of Its Financial Statements Therefore The Provisions Of Section 115 Jb Of The A Ct Are Not Applicable To The Assessees Case The Relevant Observations Of The Tribunal Are Extracted Hereunder For The Sake Of Reference 11 1 Ground Nos 8 And 9 Raised By The Assessee Is In Respect Of The Very Applicability Of The Provisions Of Section 115 Jb Of The Act To The Assessee Since The Assessee Being An E Lectric Company The Provisions Of Parts Ii And Iii Of Schedule Vi T O The Companies Act 1956 Are Not Applicable In This Regard The L Earned Authorised Representative Submitted That The Newly Inserted Explanation 3 To Section 115 Jb 2 Of The Act Inser Ted By Finance Act 2012 W E F 1 4 2013 Is Very Clear That The P Rovisions Of Section 115 Jb Of The Act Is Not Applicable To Compa Nies Engaged In The Generation Of Power Prior To 1 4 2013 This Means That The Assessee Being In The Business Of Generation Of Pow Er Prior To Assessment Year 2013 14 The Provisions Of Section 115 Jb Of The Act Are Not Applicable To It And Since The Assessee Being A Company To Which The Proviso To Section 211 2 Of T He Companies Act 1956 Applies It Will Not Be Liable To Tax Under Section 115 Jb Of The Act In This Context The Lear Ned Authorised Ita No 1394 Bang 2013 Page 13 Of 48 Representative Placed Reliance On The Parity Of Rea Soning Of The Following Tribunal Decisions I State Bank Of Hyderabad V Dcit Ita No 578 579 Hyd 2010 Dt 7 9 2012 And Ii Decision Of The Co Ordinate Bench Of Itat Bang Alore In The Case Of Syndicate Bank V Dcit Ita Nos 668 And 669 Bang 2010 And 708 709 Bang 2 010 Dt 19 6 2013 11 2 1 We Have Heard Both Parties And Perused And Carefully Considered The Material On Record It Is Not In Dispute That The Assessee In The Case On Hand Is An Electri C Company Engaged In The Generation Of Power The Provisions Of Section 115 Jb 2 Read As Under Every Assessee Being A Company Shall For The Pu Rposes Of This Section Prepare Its Profit And Loss Accoun T For The Relevant Previous Year In Accordance With The Provi Sions Of Parts Ii And Iii Of Schedule Vi To The Companies Act 1956 1 Of 1956 The Assessee In The Case On Hand However Does Not Have To Prepare Its Accounts In Accordance With Parts Ii An D Iii Of Schedule Vi Of The Companies Act 1956 By Virtue O F Proviso To Section 211 2 Thereto The Proviso To Section 211 2 Of The Companies Act 1956 Reads As Under Provided That Nothing Contained In This Sub Sectio N Shall Apply To Any Insurance Or Banking Company Or Any Company Engaged In The Generation Or Supply Of Electricity Or To Any Other Class Of Company For W Hich The Form Of Profit And Loss Account Has Been Specified In Or Under The Act Governing Such Class Of Company 11 2 2 As Contended By The Learned Authorised Representative The Newly Inserted Explanation 3 T O Section 115 Jb Of The Act Is Clear That The Assessee Is Give N An Option To Prepare Its Profit And Loss Account For The Relevan T Previous Year Either In Accordance With The Provisions Of Parts I I And Iii Of Schedule Vi Of The Companies Act 1956 Or In Accor Dance With The Provisions Of The Act Governing Such Company W E F Ita No 1394 Bang 2013 Page 14 Of 48 1 4 2013 Since There Is No Dispute That The Assess Ee Is Engaged In The Generation Of Power And In An Electricity Compa Ny It Is Governed By And Bound To Follow The Relevant Electr Icity Act And Rules Thereto In Preparation Of Its Financial State Ments In This View Of The Matter And Taking Into Consideration Th E Judicial Decisions Cited And Relied Upon By The Assessee We Are Of The Considered View That The Provisions Of Section 115 J B Of The Act Are Not Applicable To The Assessee Which Is An Elec Tric Company In The Business Of Generation Of Power In This View O F The Matter The Additional Grounds Of Appeal Raised By The Asse Ssee On The Non Applicability Of The Provisions Of Section 115 J B Of The Act Is Allowed 18 This Issue Was Again Examined By The Delhi Benc H Of The Tribunal In The Case Of Bses Rajdhani Power Ltd Supra Wherein The Tribunal Has Examined The Issue In The Light Of Various Judicial Pronouncements And Has Categorically Held That The Provisions Of Section 1 15 Jb Were Not At All Applicable To The Companies Governed By Special Act S Which Includes Power The Relevant Observations Of The Tribunal A Re Extracted Hereunder For The Sake Of Reference 22 10 In View Of The Above It Is Patently Clear That The Appellant Prepares Its Annual Accounts In Accordance With The Applicable Laws Including Provisions Of The Delhi Electricity Refor Ms Transfer Scheme Rules 2001 And Is Not Required To And Has Not Been Strictly Preparing Its Audited Annual Accounts As Per Parts Ii And Iii Of Schedule Vi Of The Companies Act 1956 22 11 In The Aforesaid Context It May Also Be Per Tinent To Note That Prior To The Amendment To Sub Section 2 Of S Ection 115 Jb Of The Income Tax Act 1961 The Act The Deeming Provi Sions Of The Said Section Were Not Applicable To Companies To Which Proviso To Sub Section 2 Of Section 211 Of The Companies Act App Lied 22 12 This Is Clearly Evident From A Bare Reading Of The Provisions Of Section 115 Jb Of The Act As Applicab Le To The Relevant Year Under Consideration Ita No 1394 Bang 2013 Page 15 Of 48 22 13 The Learned Ar Submitted That On Perusal Of The Aforesaid It Will Kindly Be Noticed That The Provi Sions Of Section 115 Jb Of The Act Applied During The Relevant Year O Nly To Companies Required Under The Law To Prepare Its Profit And Loss Account In Accordance With Parts Ii And Iii Of Schedule Vi Of The Companies Act And Not Otherwise 22 14 It Is Of Utmost Importance To Note That The Legislature Re Introduced The Mat Provisions Vide Finance Bill 19 96 220 Itr St 107 And The Honble Finance Minister While In Troducing This Provision Inter Alia Stated As Under 90 Corporate Tax Rates Have Been Reduced And Simp Lified Over The Past Few Years And The Results Have Been Very Encou Raging With A Significant Increase In Corporate Taxes As A Percen Tage Of Gdp However There Are Two Issues Which Need To Be Addr Essed The First Is The Promise Made In The Past That The Corporate Surcharge Will Be Temporary The Other Is The Phenomenon Of Zero Tax Companies Which According To Many Observers Reflects An Exc Essive Degree Of Laxity In The Tax Regime I Propose To Respond To The Two Issues As Follows I I Am Reducing The Rate Of Surcharge On Corporat Ion Tax From 15 To 7 5 And Hope To Take A Similar Step In My Next Budget The Reduced Tax Burden Will Benefit All Companies Big A Nd Small Ii I Propose To Introduce A Minimum Alternate Ta X Mat On Companies In A Case Where The Total Income Of The Company As Computed Under The Income Tax Act After Availing Of All Eligible Deductions Is Less Than 30 Per Cent Of The Book Pr Ofit The Total Income Of Such A Company Shall Be Deemed To Be 30 P Er Cent Of The Book Profit And Shall Be Charged To Tax Accordingly The Effective Rate Works Out To 12 Per Cent Of Book Profit Calculated Under The Companies Act Companies Engaged In The Power And I Nfrastructure Sector Will However Be Exempted From The Levy Of Mat Emphasis Supplied 22 15 On The Basis Of The Aforesaid It Would Be N Oted That Legislature Intended To Exclude From The Purview Of Mat Provisions Under Section 115 Ja Of The Act Which Were Para Mat Eria To Section Ita No 1394 Bang 2013 Page 16 Of 48 115 Jb Of The Act Companies Engaged Inter Alia In The Power Sector Which Were Governed By A Special Statute Which Als O Regulates The Manner In Which Accounts For Such Companies Were To Be Prepared 22 16 The Appellant Is Governed By The Provisions Of The Electricity Act 2003 And Accordingly Prepares Its Annual Accounts In Accordance With The Applicable Electricity Act Der C Regulations Which Are Binding And Mandatorily To Be Followed By The Appellant 22 17 It Is Was Submitted That Various Benches Of The Tribunal Have Held That Provisions Of Section 115 Jb Of The A Ct Shall Not Apply To Companies Referred In Proviso To Sub Sections 1 And 2 Of Section 211 Of The Companies Act I E Companies Governed By Special Acts Viz Banking Regulation Act 1949 Electricity Ac T 2003 Insurance Regulatory Act 1999 Etc Reference In This Regard Made To The Following Decisions Kerala State Electricity Board V Dcit Ita Nos 1703 1710 And 1716 Of 2009 Ker 2010 Tiol 827 Hc Kerala It Maharashtra State Electricity Board V Jcit 82 I Td 422 Mum 2003 Tiol 87 Itat Mum Reliance Energy Ltd Vs Acit Ita No 218 Mum 20 05 Mum Krung Thai Bank Pcl V Jdit 133 Ttj 435 Mum 22 18 Accordingly The Provisions Of Section 115 Jb Of The Act Were During The Relevant Year Not Applicable To T He Appellant Contended The Learned Ar 22 19 The Learned Ar Submitted That The Aforesaid Contention Of The Appellant Is Fortified By Substantive Amendmen Ts In Section 115 Jb Of The Act Made By The Finance Act 2012 With Effe Ct From April 1 2013 Which Are Discussed Hereunder 22 20 The Scope Of The Deeming Provisions Of Secti On 115 Jb Of The Act Was Widened W E F 01 04 2013 By Including Within The Ambit Of The Said Section Companies To Which Proviso To Sub Section 2 Of Section 211 Of Companies Act Applied The Learned A R Referred Sub Section 2 To Section 115 Jb Of The Act As Substitu Ted By The Finance Act 2012 W E F 01 04 2013 Ita No 1394 Bang 2013 Page 17 Of 48 22 21 Thus Vide Finance Act 2012 The Scope Of Se Ction 115 Jb Of The Act Was Widened So As To Include Companies P Reparing Profit And Loss Account In Accordance With Provisions Of T He Relevant Regulatory Act 22 22 However It May Be Noted That Amendments By The Finance Act 2012 Imposing New Tax Burden On Companies Whic H Was Otherwise Not Provided Under The Act Were In No U Ncertain Terms Made In Provisions Of Section 115 Jb 2 With Effect From April 1 2013 Meaning Thereby That The Deeming Provisions A Re Applicable To Companies Governed By Special Acts Only From Assess Ment Year 2013 14 And Onwards 22 23 Memorandum Explaining The Provisions Of The Finance Bill 2012 342 Itr St 288 Whereby Sub Section 2 Of Section 115 Jb Was Substituted Provides That The Amendment I S Applicable W E F 01 04 2013 That Is For Assessment Years 201 3 14 Onwards Relevant Extract Of The Memorandum Is Reproduced As Under Minimum Alternate Tax Mat I Under The Existing Provisions Of Section 115 Jb O F The Act A Company Is Liable To Pay Mat Of Eighteen And One Ha Lf Per Cent Of Its Book Profit In Case Tax On Its Total Income Compute D Under The Provisions Of The Act Is Less Than The Mat Liabilit Y Book Profit For This Purpose Is Computed By Making Certain Adjustme Nts To The Profit Disclosed In The Profit And Loss Account Prepared B Y The Company In Accordance With The Schedule Vi Of The Companies Ac T 1956 As Per Section 115 Jb Every Company Is Required To Prepare Its Accounts As Per Schedule Vi Of The Companies Act 1956 However As Per The Provisions Of The Companies Act 1956 Certain Comp Anies E G Insurance Banking Or Electricity Company Are Allo Wed To Prepare Their Profit And Loss Account In Accordance With Th E Provisions Specified In Their Regulatory Acts In Order To Ali Gn The Provisions Of Income Tax Act With The Companies Act 1956 It Is Proposed To Amend Section 115 Jb To Provide That The Companies W Hich Are Not Required Under Section 211 Of The Companies Act To Prepare Their Profit And Loss Account In Accordance With The Sche Dule Vi Of The Companies Act 1956 Profit And Loss Account Prepar Ed In Accordance With The Provisions Of Their Regulatory Acts Shall Be Taken As A Basis For Computing The Book Profit Under Sect Ion 115 Jb Ita No 1394 Bang 2013 Page 18 Of 48 Ii It Is Noted That In Certain Cases The Amount S Tanding In The Revaluation Reserve Is Taken Directly To General Re Serve On Disposal Of A Revalued Asset Thus The Gains Attributable To R Evaluation Of The Asset Is Not Subject To Mat Liability It Is There Fore Proposed To Amend Section 115 Jb To Provide That The Book Profit For The Purpose Of Section 115 Jb Shall Be Increased By The Amount S Tanding In The Revaluation Reserve Relating To The Revalued Asset Which Has Been Retired Or Disposed If The Same Is Not Credited To The Profit And Loss Account Iii It Is Also Proposed To Omit The Reference Of P Art Iii Of The Schedule Vi Of The Companies Act 1956 From Section 115 Jb In View Of Omission Of Part Iii In The Revised Schedule Vi Under The Companies Act 1956 These Amendments Will Take Effect From 1st April 2 013 And Will Accordingly Apply In Relation To The Assessment Ye Ar 2013 14 And Subsequent Assessment Years Clause 46 Emphasis Supplied 22 24 On Perusal Of The Aforesaid It Will Kindly Be Appreciated That The Legislature Recognized That As Per The Provisions Of The Companies Act 1956 Certain Companies E G Insura Nce Banking Or Electricity Company Are Allowed To Prepare Their P Rofit And Loss Account In Accordance With The Provisions Specified In Their Regulatory Acts In These Circumstances Since The Provisions Of Section 115 Jb Of The Act Were Not Applicable To Suc H Special Category Of Companies The Legislature Made Substantive Amen Dments Therein So As To Make The Said Section Applicable To Such S Pecial Category Companies Including Electricity Company With Pros Pective Effect From Assessment Year 2013 14 Only 22 25 The Learned Ar Contended That It Is Patently Clear From The Aforesaid Amendment That Prior To The Amendment Applicable From Assessment Year 2013 14 Provisions Of Section 115 J B Of The Act Were Not At All Applicable To An Electricity Company Su Ch As The Appellant Up To The Assessment Year 2012 13 22 26 Further Explanation 3 To Section 115 Jb Of T He Act Which Provides An Option To Discoms To Prepare Accounts A S Per Schedule Vi Ita No 1394 Bang 2013 Page 19 Of 48 Of The Companies Act Or The Governing Law Special A Ct In Respect Of Assessment Years Prior To 2013 14 Has Also Been In Serted As Part Of The Substantive Amendments Applicable From Assessme Nt Year 2013 14 And Onwards The Said Explanation Cannot Be Given Such Retrospective Effect Resulting In Imposition Of Fre Sh Levy For Assessment Years Up To Ay 2012 13 Which Was Not In Accordance With The Language Of Section 115 Jb Of The Act As I T Then Stood And The Legislative Intent The Amendments To Section 115 Jb Of The Act Made By The Finance Act 2012 Are It Was Submitted Sub Stantive In Nature Resulting In Fresh Liability To Tax And Would There Fore Apply Only Prospectively The Same Cannot Unless Specifically Mandated By The Statute Be Applied From Retrospective Effect 22 27 Reliance In This Regard Was Placed On The De Cision Of The Constitution Bench Of The Honble Supreme Court In The Case Of Cit Vs Vatika Township Private Limited Ts 573 Sc 201 4 O To The Same Effect Are The Following Decisions Wherein It Has Been Held That A Provision Imposing Liability Is Governed By The Nor Mal Presumption That Is Not Retrospective S S Gadgil Vs Lal And Co 1964 53 Itr 231 Sc K M Sharma Vs Ito Ts 5013 Sc 2002 O Gem Granites Vs Cit Ts 5022 Sc 2004 O Sedco Forex International Drill Inc Vs Cit 20 05 Ts 14 Sc 2005 O 22 28 The Fundamental Principle Reiterated In The Aforesaid Decision Is Lexprospicit Non Respicit I E Laws Look Forward And Not Backward No Section Can Be Interpreted Retrospecti Vely Unless It Is Mentioned In The Section Itself 22 29 Specific Reliance In This Regard Was Placed On The Decision Of The Delhi Bench Of The Tribunal In The Case Of Bank Of Tokyo Mitsubishi Ufj Ltd Vs Adit Ita No 5364 Of 2010 Wherein The Tribunal Was Adjudicating The Issue Regarding Appli Cability Of Provisions Of Section 115 Jb To A Foreign Bank Which Was Subject To Tax In India On Income Earned By The Branch In Indi A Pe And Preparing Its Accounts As Per Requirements Of Banki Ng Regulation Act The Tribunal While Following The Principles La Id Down By The Ita No 1394 Bang 2013 Page 20 Of 48 Supreme Court In Vatika Township Supra Observed T Hat The Amendment To Section 115 Jb Of The Act By The Financ E Act 2012 Was Prospective Since The Same Resulted In Substantial Change In Computation Provisions 22 30 To The Same Effect Are The Following Decision S Wherein Amendment To Sub Section 2 Of Section 115 Jb Of Th E Act Vide Finance Act 2012 Has Been Held To Be Prospective State Bank Of Hyderabad V Dcit Ita No 578 Hyd 2010 Hyd Icici Lombart General Insurance Co Ltd V Acit 54 Sot 538 Mum 22 31 Applying The Aforesaid Legal Principles The Finance Act 2012 In No Uncertain Terms Clearly Provides That The Provision Of Section 115 Jb 2 And Explanation 3 To Said Sub Sect Ion Shall Come In Force With Effect From April 1 2013 And Will Accor Dingly Apply In Relation To The Assessment Year 2013 14 And Onwards Meaning Thereby The Amendment Is Specifically Made Applica Ble Prospectively And Not Retrospectively Contended The Learned Ar 22 32 Furthermore Section 115 Jb Of The Act Is A D Eeming Provision Which Results In An Assessee Having To Pa Y Tax Otherwise Not Payable On Artificial Income The Said Section Should Therefore Be Construed And Interpreted Strictly Viz In A Ma Nner That Leaves The Assessee With A Lower Burden Of Having To Bear An A Rtificial Tax Liability Contended The Learned Ar 22 33 It Is A Well Known Principle Of Interpretati On Of Fiscal Statutes That In The Event Of Any Doubt In Regard T O Interpretation Particularly In Cases Of Taxation By Employing Lega L Fiction The Benefit Of Doubt If Any Should Be Given To The As Sessee And The Interpretation Beneficial To The Taxpayer Should Be Accepted Reference Was Made To The Following Cases Cit V Vegetable Products Ltd Ts 6 Sc 1973 O Cit Vs J K Hosiery Factory Ts 5013 Sc 1986 O Acit V Thanthi Trust 247 Itr 785 Ts 5005 Sc 20 01 O Ita No 1394 Bang 2013 Page 21 Of 48 Uoi V Onkar Kanwar Ts 5021 Sc 2002 O Cit V A J Abraham Anthraper Ts 5230 Hc 2004 Kerala O Vijay Omprakash Bansal V Cit Ts 6051 Hc 2001 B Ombay O Cit V L G Balakrishnan Ts 5374 Hc 2001 Madras O Cit V Quantas Airlines Ltd Ts 5297 Hc 2002 De Lhi O Southern Roadways Ltd Vs Cwt Ts 5676 Hc 2000 Madras O 22 34 Having Regard To The Legal Position Discusse D Supra The Learned Ar Submitted That The Provisions Of Section 115 Jb Of The Act Were Not At All Applicable To Companies Governed By Special Acts Which Includes Power Companies In Respect Of Asse Ssment Years Falling Prior To April 1 2013 And Thereby The Appe Llant Was Not Liable To Pay Tax Under The Provisions Of The Said Section For The Assessment Year Under Consideration Even Though The Appellant Under A Misconception Of Law Had Declared Income Under The Deeming Provisions Of Section 115 Jb Of The Act Still The A Ssessing Officer Was Under Duty To Correctly Assess Income Of The Appell Ant In Accordance With The Provisions Of The Act 23 The Learned Cit Dr On The Other Hand Tried T O Justify The Action Of The Assessing Officer In Framing The Asse Ssment Under Sec 115 Jb Of The Act He Submitted That The Decisions R Elied Upon By The Learned Ar Having Distinguishable Facts Are Not App Licable In The Case Of The Assessee He Pointed Out That The Asses See Itself Had Declared Income Under The Deeming Provisions Of Sec 115 Jb Of The Act Thus The Assessee Has No Grievance In This Re Gard And The Issue Raised In The Additional Ground May Be Decided In F Avour Of The Revenue 24 We Find That In Support Of The Issue That Dee Ming Provisions Of Sec 115 Jb Of The Act Were Not Applic Able In The Case Of The Assessee During The Assessment Year Under Consi Deration The Learned Ar Has Cited Provisions Of Different Laws A Nd Has Placed Reliance On Several Decisions We Thus Prefer To Ex Amine Provisions Of Different Laws On The Issue First It Was Claimed T Hat Books Of Account Of The Assessee Are Drawn In Accordance With The St Atutory Provisions As Applied To An Electricity Company I E The Repe Aled Electricity Ita No 1394 Bang 2013 Page 22 Of 48 Supply Act 1948 And The Delhi Electricity Reform S Transfer Scheme Rules 2001 And Provisions Of The Companies Act 1956 To The Extent The Same Are Not Inconsistent With The E Lectricity Act Derc Regulation It Was Submitted In Other Word S That In Case Of Any Variation Conflict In The Aforesaid Provisions The Assessee Is Bound To Mandatorily Follow Adopt The Specific Prov Isions Of Electricity Act Derc Regulation Which Are Specific Ally Related To Its Area Of Operations Although The Basic Form For Pre Paration And Presentation Of Accounts Would Be Prescribed By Sch Edule Vi To The Companies Act It Was Submitted That Overriding Man Date Of Electricity Act 2003 In Respect Of Electricity Com Pany Vis Vis Other Acts Is Specifically Provided In Sec 174 Of The E Lectricity Act 2003 24 1 For A Ready Reference The Provisions Laid Do Wn Under Sec 174 Of The Electricity Act 2003 Are Reproduced Her Eunder S 174 Save As Otherwise Provided In Section 173 T He Provisions Of This Act Shall Have Effect Notwithsta Nding Anything Inconsistent Therewith Contained In Any Ot Her Law For The Time Being In Force Or In Any Instrumen T Having Effect By Virtue Of Any Law Other Than This Act 24 2 Perusal Of The Above Provisions Make It Clear That These Provisions Shall Override The Provisions Of All Oth Er Acts The Learned Ar Has Also Referred The Provisions Laid Down Under Sec 616 Of The Companies Act 1956 To Support His Contention That Even The Companies Act 1956 And The Companies Act 2013 Se Ction 1 4 Also Provided Provides That The Provisions Of The S Aid Act Would Apply In Respect Of An Electricity Company Only In So Far As The Said Provisions Are Not Inconsistent With The Electricit Y Act For A Ready Reference The Aforesaid Provisions Of The Companie S Act 1956 And The Companies Act 2013 Are Being Reproduced Hereun Der Section 616 Of The Companies Act 1956 616 Application Of Act To Insurance Banking Ele Ctricity Supply And Other Companies Governed By Special Acts The P Rovisions Of This Act Shall Apply A To Insurance Companies Except In So Far As The Said Provisions Are Inconsistent With The Provisions Of The Insurance A Ct 1938 4 Of 1938 Ita No 1394 Bang 2013 Page 23 Of 48 B To Banking Companies Except In So Far As The S Aid Provisions Are Inconsistent With The Provisions Of The Banking Com Panies Act 1949 10 Of 1949 C To Companies Engaged In The Generation Or Suppl Y Of Electricity Except In So Far As The Said Provisions Are Inconsi Stent With The Provisions Of The Indian Electricity Act 1910 9 Of 1910 Or The Electricity Supply Act 1948 54 Of 1948 D To Any Other Company Governed By Any Special Ac T For The Time Being In Force Except In So Far As The Said Provis Ions Are Inconsistent With The Provisions Of Such Special Act E To Such Body Corporate Incorporated By Any Act For The Time Being In Force As The Central Government May By N Otification In The Official Gazette Specify In This Behalf Subject T O Such Exceptions Modifications Or Adaptations As May Be Specified I N The Notification Application Of Act To Government Companies Further Section 1 4 Of The Companies Act 2013 Re Ads As Under 1 Short Title Extent Commencement And Applicati On 1 This Act May Be Called The Companies Act 2013 4 The Provisions Of This Act Shall Apply To A Companies Incorporated Under This Act Or Under Any Previous Company Law B Insurance Companies Except In So Far As The Sa Id Provisions Are Inconsistent With The Provisions Of The Insurance A Ct 1938 Or The Insurance Regulatory And Development Authority Act 1999 C Banking Companies Except In So Far As The Said Provisions Are Inconsistent With The Provisions Of The Banking Reg Ulation Act 1949 D Companies Engaged In The Generation Or Supply O F Electricity Except In So Far As The Said Provisions Are Inconsi Stent With The Provisions Of The Electricity Act 2003 Ita No 1394 Bang 2013 Page 24 Of 48 E Any Other Company Governed By Any Special Act F Or The Time Being In Force Except In So Far As The Said Provisions A Re Inconsistent With The Provisions Of Such Special Act And F Such Body Corporate Incorporated By Any Act Fo R The Time Being In Force As The Central Government May By Notificati On Specify In This Behalf Subject To Such Exceptions Modifications O R Adaptation As May Be Specified In The Notification 24 3 On Perusal Of The Above Provisions Of The Com Panies Act We Find Substance In The Contention Of The Learned Ar That The Provisions Of The Act Would Apply In Respect Of An Electricity Company Only In So Far As The Said Provisions Are N Ot Inconsistent With The Electricity Act 24 4 The Learned Ar Has Also Referred The Provisio Ns Laid Down Under Sec 181 Of The Electricity Act With Thi S Submission That The Said Provisions Provide Power To The State Comm Ission To Make Regulation For A Ready Reference Relevant Extract S Of Section 180 Of The Electricity Act 2003 Is Being Reproduced Hereu Nder 180 Powers Of State Commissions To Make Regulatio Ns 1 The State Commissions May By Notification Mak E Regulations Consistent With This Act And The Rules Generally To Carry Out The Provisions Of This Act 2 In Particular And Without Prejudice To The Gene Rality Of The Power Contained In Sub Section 1 Such Regulations May Provide For All Or Any Of The Following Matters Namely A Period To Be Specified Under The First Proviso Of Section 14 B The Form And The Manner Of Application Under Su B Section 1 Of Section 15 Zc The Terms And Conditions For The Determination Of Tariff Under Section 61 Ita No 1394 Bang 2013 Page 25 Of 48 Zg Issue Of Tariff Order With Modifications Or Co Nditions Under Subsection 3 Of Section 64 Zo Any Other Matter Which Is To Be Or May Be Sp Ecified 3 All Regulations Made By The State Commission U Nder This Act Shall Be Subject To The Condition Of Previous Publi Cation 24 5 On Perusal Of The Above Provisions We Concur With The Submission Of The Assessee That Under The Electrici Ty Act 2003 The State Commission Is Empowered To Make Regulations In View Of The Above Discussed Provisions Of Electricity Act 2003 And Companies Act It Is Clear That The Very Basis Of Recognition Of Revenue And Expense Is Regulated By The Derc And Not Strictly A S Per The Provisions Of The Companies Act It Is Also An Esta Blished Position Of Law That Provisions Of A Specific Act Would Overrid E The Provisions Of All Other Acts Which Is Supported By The Decisions Relied Upon By The Assessee Including The Decision So Honble Supreme Court In The Case Of Tro Vs Custodian Special Court At 934 Supr A Thus It Can Be Safely Arrived At A Conclusion That The Assessee Pr Epares Its Annual Account In Accordance With The Applicable Laws Incl Uding Provisions Of The Delhi Electricity Reforms Transfer Scheme Rule 2001 And Is Not Required To And Has Not Been Strictly Preparing Its Audited Annual Account As Per Parts Ii And Iii Of Schedule 6 Of Th E Companies Act 1956 24 6 Further Contention Of The Learned Ar Remained That Prior To The Amendment To Sub Section 2 Of Sec 115 Jb O F The Income Tax Act 1961 The Deeming Provisions Of The Said Secti On Were Not Applicable To Companies To Which Proviso To Sub Sec Tion 2 Of Sec 211 Of The Companies Act Were Abolished To Examine This Contention We Have Gone Through The Provisions Of Sec 115 Jb Of The Income Tax Act 1961 As Applicable To The Relevant Year Under Consideration Reproduced Hereunder Special Provision For Payment Of Tax By Certain Co Mpanies 115 Jb 1 Notwithstanding Anything Contained In An Y Other Provision Of This Act Where In The Case Of An Asse Ssee Being A Company The Income Tax Payable On The Total Incom E As Computed Ita No 1394 Bang 2013 Page 26 Of 48 Under This Act In Respect Of Any Previous Year Rele Vant To The Assessment Year Commencing On Or After The 1st Day Of April 2001 Is Less Than Seven And One Half Per Cent Of Its Book P Rofit Such Book Profit Shall Be Deemed To Be The Total Income Of Th E Assessee And The Tax Payable By The Assessee On Such Total Income Sh All Be The Amount Of Income Tax At The Rate Of Seven And One Half Per Cent 2 Every Assessee Being A Company Shall For The Purposes Of This Section Prepare Its Profit And Loss Account For Th E Relevant Previous Year In Accordance With The Provisions Of Parts Ii And Iii Of Schedule Vi To The Companies Act 1956 1 Of 1956 24 7 On The Reading Of Above Provisions Laid Down Under Sec 115 Jb Of The Act Relevant For The Year We Find Tha T The Provisions Are Applied During The Relevant Year Only To The Compan Ies Required Under The Law To Prepare Its Profit And Loss Account In Accordance With Parts Ii And Iii Of Schedule Vi Of The Companies Ac T And Not Otherwise 24 8 The Learned Ar In His Submission Has Also Rep Roduced Hereinabove The Speech Of Honble Finance Minister While Reintroducing The Mat Provisions Vide Finance Bill 1996 220 Itr Statute 107 With The Submission That The Legislat Ure Intended To Exclude It From The Purview Of Mat Provisions Under Sec 115 Ja Of The Act Which Were Para Materia To Sec 115 Jb Of T He Act Companies Engaged Inter Alia In The Power Sector Which Were Governed By A Special Statute Which Also Regulates The Manner In Which Accounts For Such Companies Were To Be Prepar Ed Having Gone Through The Said Speech Of The Honble Finance Mini Ster We Concur With The Above Submission Of The Assessee About The Intention Of The Legislature 24 9 In View Of The Above Discussion We Agree Wit H The Submission Of The Learned Ar That The Assessee Is G Overned By The Provisions Of The Electricity Act 2003 And Accordi Ngly Supposed To Prepare Its Annual Accounts In Accordance With The Applicable Electricity Act Derc Regulation Which Are Binding And Mandatory To Be Followed By The Assessee 24 6 The Cited Decisions By The Learned Ar In The Cases Of Kerala State Electricity Board Vs Dcit Supra M Aharashtra State Ita No 1394 Bang 2013 Page 27 Of 48 Electricity Board Vs Jcit Supra Reliance Energy Ltd Vs Acit Supra And Crung Thai Bank Pcl Vs Jdit Supra Al So Support The Contention Of The Assessee That Provisions Of Sec 115 Jb Of The Act Shall Not Apply To Companies Referred In Proviso To Sub Sections 1 And 2 Of Sec 211 Of The Companies Act I E Comp Anies Covered By Special Acts Viz Banking Regulation Act 1949 Ele Ctricity Act 2003 Insurance Regulatory Act 1999 Etc We Accord Ingly Hold That Provisions Of Sec 115 Jb Of The Act Were Not Applic Able To The Assessee During The Year Under Consideration As The Same Is Also Fortified By Substantive Amendments In Section 115 J B Of The Act By The Finance Act 2012 W E F 01 04 2013 Sub Sectio N 2 To Section 115 Jb Of The Act As Substituted By The Finance Act 2012 W E F 01 04 2013 Reads As Under Special Provision For Payment Of Tax By Certain Co Mpanies 115 Jb 1 Notwithstanding Anything Contained In An Y Other Provision Of This Act Where In The Case Of An Asse Ssee Being A Company The Income Tax Payable On The Total Incom E As Computed Under This Act In Respect Of Any Previous Year Rele Vant To The Assessment Year Commencing On Or After The 1st Day Of April 2012 Is Less Than Eighteen And One Half Per Cent Of Its Boo K Profit Such Book Profit Shall Be Deemed To Be The Total Income Of Th E Assessee And The Tax Payable By The Assessee On Such Total Income Sh All Be The Amount Of Income Tax At The Rate Of Eighteen And One Half Per Cent 2 Every Assessee A Being A Company Other Than A Company Referred To In Clause B Shall For The Purposes Of This Section Prepare It S Profit And Loss Account For The Relevant Previous Year In Accordanc E With The Provisions Of Part Ii Of Schedule Vi To The Compani Es Act 1956 1 Of 1956 Or B Being A Company To Which The Proviso To Sub Se Ction 2 Of Section 211 Of The Companies Act 1956 1 Of 1956 Is Applicable Shall For The Purposes Of This Section Prepare It S Profit And Loss Account For The Relevant Previous Year In Accordanc E With The Provisions Of The Act Governing Such Company Ita No 1394 Bang 2013 Page 28 Of 48 24 7 Simultaneously Explanation 3 To Aforesaid Su B Section 2 Of Section 115 Jb Of The Act Was Inserted By Finance Act 2012 W E F 01 04 2013 Which Reads As Under Explanation 3 For The Removal Of Doubts It Is He Reby Clarified That For The Purposes Of This Section The Assessee Bei Ng A Company To Which The Proviso To Sub Section 2 Of Section 211 Of The Companies Act 1956 1 Of 1956 Is Applicable Has For An Assessment Year Commencing On Or Before The 1st Day Of April 2012 An Option To Prepare Its Profit And Loss Account For The Relevan T Previous Year Either In Accordance With The Provisions Of Part Ii And Part Iii Of Schedule Vi To The Companies Act 1956 Or In Accord Ance With The Provisions Of The Act Governing Such Company 24 8 We Thus Find That Vide Finance Act 2012 The Scope Of Section 115 Jb Of The Act Was Widen So As To Include Companies Preparing Profit And Loss Account In Accordance Wit H Provisions Of The Relevant Regulatory Act However The Amendments By The Finance Act 2012 Imposing New Tax Burden On Companies Whic H Was Otherwise Not Provided Under The Act Were In No U Ncertain Terms Made In Provisions Of Sec 115 Jb 2 W E F 01 04 20 13 In Other Words The Deeming Provisions Are Applicable To Com Panies Governed By Special Act Only From Assessment Year 2013 14 An D Onwards The Memorandum Explaining The Provisions Of The Finance Bill 2012 240 Itr St 288 Whereby Sub Section 2 Of Sec 115 Jb Was Substituted Provides That The Amendment Is Applicable W E F 01 0 2013 I E For The Assessment Year 2013 14 Onwards The Relevant Extra Cts Of The Memorandum Has Been Reproduced Hereinabove In The S Ubmissions Of The Learned Ar From The Aforesaid Amendments It I S Clear That Prior To Amendment Applicable From The Assessment Year 20 13 14 Provisions Of Sec 115 Jb Of The Act Were Not Applic Able To An Electricity Company Such As The Assessee Up To The Assessment Year 2012 13 24 9 The Explanation 3 To Section 115 Jb Of The Act Which Provides An Option To Prepare Its Accounts As Per S Chedule Vi Of The Companies Act Or The Governing Law Special Act In R Espect Of Assessment Year Prior To 2013 14 Has Also Been In Serted As Per The Substantive Amendments Applicable From Assessment Y Ear 2013 14 And Onwards The Amendments To Section 115 Jb Of The Act Made By Finance Act 2012 Are Substantive In Nature Resulti Ng In Fresh Liability Ita No 1394 Bang 2013 Page 29 Of 48 To Tax And Would Therefore Apply Only Prospective Ly The Same Cannot Unless Specifically Mandated By The Statute Be Applied From Retrospective Effect In This Regard We Find Suppo Rt From The Ratios Laid Down By The Honble Supreme Court In The Case Of Cit Vs Vatika Township Pvt Ltd Supra Wherein The Hon Ble Supreme Court Has Been Pleased To Discuss Elaborately The G Eneral Principles Concerning Interpretation Of Amendments With Retros Pective Effect The Relevant Excerpts Of The Observations Of The Ho Nble Supreme Court Are Being Reproduced Hereunder General Principles Concerning Retrospectivity 31 Of The Various Rules Guiding How A Legislation Has To Be Interpreted One Established Rule Is That Unless A Contrary Intention Appears A Legislation Is Presumed Not To Be Intend Ed To Have A Retrospective Operation The Idea Behind The Rule I S That A Current Law Should Govern Current Activities Law Passed Today Cannot Apply To The Events Of The Past If We Do Something Today W E Do It Keeping In View The Law Of Today And In Force And Not Tomorrow S Backward Adjustment Of It Our Belief In The Nature Of The L Aw Is Founded On The Bed Rock That Every Human Being Is Entitled To Arra Nge His Affairs By Relying On The Existing Law And Should Not Find Tha T His Plans Have Been Retrospectively Upset This Principle Of Law I S Known As Lexprospicit Non Respicit Law Looks Forward Not Ba Ckward As Was Observed In Phillips Vs Eyre 1870 Lr 6 Qb 1 A R Etrospective Legislation Is Contrary To The General Principle Th At Legislation By Which The Conduct Of Mankind Is To Be Regulated Whe N Introduced For The First Time To Deal With Future Acts Ought Not T O Change The Character Of Past Transactions Carried On Upon The Faith Of The Then Existing Law 32 The Obvious Basis Of The Principle Against Retr Ospectivity Is The Principle Of Fairness Which Must Be The Basis Of Every Legal Rule As Was Observed In The Decision Reported In Loffice C Herifien Des Phosphates V Yamashita Shinnihon Steamship Co Ltd 1994 1 Ac 486 Thus Legislations Which Modified Accrued Righ Ts Or Which Impose Obligations Or Impose New Duties Or Attach A New Disability Have To Be Treated As Prospective Unless The Legisl Ative Intent Is Clearly To Give The Enactment A Retrospective Effec T Unless The Ita No 1394 Bang 2013 Page 30 Of 48 Legislation Is For Purpose Of Supplying An Obvious Omission In A Former Legislation Or To Explain A Former Legislati On We Need Not Note The Cornucopia Of Case Law Available On The Su Bject Because Aforesaid Legal Position Clearly Emerges From The V Arious Decisions And This Legal Position Was Conceded By The Counsel For The Parties In Any Case We Shall Refer To Few Judgments Containin G This Dicta A Little Later Thus The Rule Against Retrospective Operation Is A Fundamental Rule Of Law That No Statute Shall Be Construed To Have A Retrospective Operation Unless Such A Construction Appears Very C Learly In The Terms Of The Act Or Arises By Necessary And Distin Ct Implication Dogmatically Framed The Rule Is No More Than A Pre Sumption And Thus Could Be Displaced By Out Weighing Factors 35 Let Us Sharpen The Discussion A Little More We May Note That Under Certain Circumstances A Particular Amen Dment Can Be Treated As Clarificatory Or Declaratory In Nature Such Statutory Provisions Are Labeled As Declaratory Statutes T He Circumstances Under Which A Provision Can Be Termed As Declarato Ry Statutes Is Explained By Justice G P Singh 7 In The Following M Anner Declaratory Statutes The Presumption Against Retr Ospective Operation Is Not Applicable To Declaratory Statutes As Stated In Craies And Approved By The Supreme Court For Mod Ern Purposes A Declaratory Act May Be Defined As An Act To Remov E Doubts Existing As To The Common Law Or The Meaning Or Effect Of A Ny Statute Such Acts Are Usually Held To Be Retrospective The Usua L Reason For Passing A Declaratory Act Is To Set Aside What Parl Iament Deems To Have Been A Judicial Error Whether In The Statemen T Of The Common Law Or In The Interpretation Of Statutes Usually If Not Invariably Such An Act Contains A Preamble And Also The Word Declared As Well As The Word Enacted But The Use Of The Words It Is Declared Is Not Conclusive That The Act Is Declaratory For These Wo Rds May At Times Be Used To Introduced New Rules Of Law And The Act In The Latter Case Will Only Be Amending The Law And Will Not Necessar Ily Be Retrospective In Determining Therefore The Natur E Of The Act Regard Must Be Had To The Substance Rather Than To The For M If A New Act Is To Explain An Earlier Act It Would Be Without Ob Ject Unless Construed Ita No 1394 Bang 2013 Page 31 Of 48 Retrospective An Explanatory Act Is Generally Pass Ed To Supply An Obvious Omission Or To Clear Up Doubts As To The Me Aning Of The Previous Act It Is Well Settled That If A Statute Is Curative Or Merely Declaratory Of The Previous Law Retrospective Opera Tion Is Generally Intended The Language Shall Be Deemed Always To H Ave Meant Is Declaratory And Is In Plain Terms Retrospective I N The Absence Of Clear Words Indicating That The Amending Act Is Dec Laratory It Would Not Be So Construed When The Pre Amended Provision Was Clear And Unambiguous An Amending Act May Be Purely Clarific Atory To Clear A Meaning Of A Provision Of The Principal Act Which W As Already Implicit A Clarificatory Amendment Of This Nature Will Have Retrospective Effect And Therefore If The Princip Al Act Was Existing Law Which The Constitution Came Into Force The Ame Nding Act Also Will Be Part Of The Existing Law The Above Summing Up Is Factually Based On The Judg Ments Of This Court As Well As English Decisions A Constitution Bench Of This Court In Keshavlal Jet Halal Shah V Mohanlalbhagwandas Anr 1968 3 Scr 623 While Considering The Nature Of Amendment To Section 29 2 Of The Bombay Rents Hotel And Lodging House Rates Control Act As Amended By G Ujarat Act 18 Of 1965 Observed As Follows The Amending Clause Does Not Seek To Explain Any P Re Existing Legislation Which Was Ambiguous Or Defective The P Ower Of The High Court To Entertain A Petition For Exercising Revisi Onal Juris Diction Was Before The Amendment Derived From S 115 Code Of Civil Procedure And The Legislature Has By The Amending Act Attempted To Explain The Meaning Of That Provision An Explanato Ry Act Is Generally Passed To Supply An Obvious Omission Or T O Clear Up Doubts As To The Meaning Of The Previous Act 36 It Would Also Be Pertinent To Mention That As Sessment Creates A Vested Right And An Assessee Cannot Be Su Bjected To Reassessment Unless A Provision To That Effect Inse Rted By Amendment Is Either Expressly Or By Necessary Implication Ret Rospective See Controller Of Estate Duty Gujarat I V M A Merchan T 1989 Supp 1 Scc 499 We Would Also Like To Reproduce Hereunder The Following Observations Made By This Court In The Case Of Govi Nddas V Income Tax Officer 1976 1 Scc 906 While Holding Section 171 6 Of The Ita No 1394 Bang 2013 Page 32 Of 48 Income Tax Act To Be Prospective And Inapplicable For Any Assessment Year Prior To 1st April 1962 The Date On Which The Income Tax Act Came Into Force 11 Now It Is A Well Settled Rule Of Interpretatio N Hallowed By Time And Sanctified By Judicial Decisions That Unless T He Terms Of A Statute Expressly So Provide Or Necessarily Require It Ret Rospective Operation Should Not Be Given To A Statute So As To Take Away Or Impair An Existing Right Or Create A New Obligation Or Impose A New Liability Otherwise Than As Regards Matters Of Procedure The General Rule As Stated By Halsbury In Vol 36 Of The Laws Of Englan D 3rd Edn And Reiterated In Several Decisions Of This Court As We Ll As English Courts Is That All Statutes Other Than Those Which Are Mer Ely Declaratory Or Which Relate Only To Matters Of Procedure Or Of Evi Dence Are Prima Facie Prospectively And Retrospective Operation Sho Uld Not Be Given To A Statute So As To Affect Alter Or Destroy An Exis Ting Right Or Create A New Liability Or Obligation Unless That Effect Cann Ot Be Avoided Without Doing Violence To The Language Of The Enact Ment If The Enactment Is Expressed In Language Which Is Fairly Capable Of Either Interpretation It Ought To Be Constued As Prospect Ive Only 37 In The Case Of C I T Bombay V Scindia Stea M Navigation Co Ltd 1962 1 Scr 788 This Court Held That As The Liability To Pay Tax Is Computed According To The Law In Force At Th E Beginning Of The Assessment Year I E The First Day Of April Any Change In Law Affecting Tax Liability After That Date Though Made During The Currency Of The Assessment Year Unless Specifically Made Re Trospective Does Not Apply To The Assessment For That Year 24 6 Similar View Has Been Expressed By The Honbl E Supreme Court In The Other Cited Decisions In The Cases Of S S Gadgil Vs Lal Co Supra Sedco Forex International Drill Inc V S Cit Supra Etc Thus It Is Clear And An Established Position Of La W That No Section Can Be Interpreted Retrospectively Unless Is Mentioned In The Section Itself 24 7 The Delhi Bench Of The Itat In The Case Of Ba Nk Of Tokyo Mitsubishi Ufj Ltd Vs Adit Supra While Fo Llowing The Principles Laid Down By The Honble Supreme Court I N Vatika Township Supra Observed That The Amendment To Sec 115 Jb Of The Act By Finance Act 2012 Was Prospective Since The Same Resulted In Substantial Change In Computation Provisions In Th At Case The Itat Ita No 1394 Bang 2013 Page 33 Of 48 Was Adjudicating The Issue Regarding Applicability Of Provisions Of Sec 115 Jb Of The Act To A Foreign Bank Which Was S Ubject To Tax In India On Income Earned By The Branch In India P E And Preparing Its Accounts As Per Requirements Of Banking Regulation Act The Relevant Finding In That Case Are Being Reproduced Hereunder 74 In Our Opinion This Explanation Cannot Be He Ld To Be Retrospective In Operation Because It Has Brought I N A Substantial Change In The Computation Provision Till The Inser Tion Of This Amendment Various Decisions Clearly Held That In C Ase Of Banking Companies Electricity Companies And Insurance Comp Anies Since They Were Governed By Special Acts And The Profit A Nd Loss Account Was Not Prepared As Per Part Ii Of Schedule Vi To T He Companies Act Therefore The Computation Provisions Failed Accordingly In View Of The Decision Of Supreme Court In The Case Of B C S Rinivasa Setty Supra The Law Till The Insertion Of This Explana Tion Was That The Provisions Of Section 115 Jb Were Not Applicable On Account Of Impossibility Of Computation As The Accounts Were N Ot Prepared In Accordance With Part Ii Schedule Vi To The Compani Es Act Now By Incorporating Explanation 3 The Companies Governed By Special Acts Which Come Within The Ambit Of Company U S 2 1 7 Are Covered By The Provisions Of Section 115 Jb Therefore This Amendment Brings Substantial Change In The Taxability Of Companies G Overned By The Special Acts And Therefore Cannot Be Held To Be R Etrospective In This Regard We Also Find Strength From The Ratio Laid Do Wn By The Supreme Court In Its Decision Dated 16 9 2014 In The Case O F Cit V Vatika Township P Ltd In Civil Appeals Arising Out Of Slp C No 1362 Of 2009 And Others The Five Judges Bench Of The Supreme Court Strikes Down Division Bench Ruling On Retrospective Applica Bility Of Proviso To Section 113 Of The Income Tax Act Holding The Pr Oviso To Operate Prospectively Laying Down Perusal Principles Gover Ning Retrospectivity The Supreme Court Has Been Pleased To Rule That Unless Contrary Intention Appears A Legislation Is Presumed Not To Be Intended To Have Retrospective Operation Current L Aw Ought To Govern Current Activities Law Passed Today Cannot Apply T O Past Events 24 8 The Mumbai Bench Of The Itat In The Case Of R Eliance Instruments Ltd Vs Acit Ors Supra Has Also E Xpressed Similar View Relevant Para Nos 38 And 39 Are Being Reprod Uced Hereunder Ita No 1394 Bang 2013 Page 34 Of 48 38 Having Heard The Rival Submissions And After P Erusing The Relevant Material On Record We Find That The Tribun Al In Assessees Own Case In Assessment Year 2001 02 In Para 29 Has Held As Under As Discussed Above The Assessee Is Following The Accounting Policies Wider The Electricity Supply Ac T And Prepared Its Accounts In View Of Those Very Policie S Following Those Very Policies The Accounts In Acc Ordance With Part Ii Iii Of Schedule Vi Of The Companies Act Are Not Applicable At All Once There Is No Possibility For Preparing The Accounts In Accordance With The Part Ii And Ii Of Schedule Vi Of Companies Act Then The Provisi Ons Of Sec 115 Jb Cannot Be Forced Therefore In View Of The Above Facts And Circumstances And Respectfully Foll Owing The Above Decisions Of The Honble Supreme Court An D The Decision Of The Tribunal For A Y 88 89 We Hold Th At Provisions Of Sec 115 Jb Are Not Applicable On The Facts Of The Relevant Case 39 Similar View Has Been Taken By The Tribunal In Assessment Years 2002 03 And 2003 04 As Has Been Discussed In Para 1 4 Of The Said Order And Also In The Order For A Y 2004 05 Respe Ctfully Following The Precedents We Accept The Assessees Claim And Hold That The Provisions Of Sec 115 Jb Cannot Be Upheld Again The Bangalore Bench Of The Itat In The Case O F Syndicate Bank Vs Dcit Supra Has Decided The Issue In Favour Of The Assessee A Banking Company Relevant Para Nos 98 99 Thereof Are Being Reproduced Hereunder 98 We Have Considered The Rival Submissions Of Th E Learned Counsel For The Assessee We Find That This Issue Was Consi Dered By The Mumbai Bench Of The Tribunal In The Case Of Krung T Hai Bank Pcl Supra And On The Above Issue Held As Follows 5 Learned Counsel For The Assessee However Cont Ends That The Provisions Of Mat Do Not Apply To The Asse Ssee And For This Reason Very Foundation Of Impugned Reassessment Proceedings Is Devoid Of Legally Susta Inable Merits His Line Of Reasoning Is This The Provisio Ns Of Mat Can Come Into Play Only When The Assessee Prepa Res Its Profit And Loss Account In Accordance With Sche Dule Vi To The Companies Act It Is Pointed Out That In Te Rms Of Ita No 1394 Bang 2013 Page 35 Of 48 The Provisions Of Sec 115 Jb 2 Every Assessee Is Required To Prepare Its Profit And Loss Account In Terms Of The Provisions Of Part Ii And Iii Of Schedule Vi To The Companies Act Unless The Profit And Loss Is So Pre Pared The Provisions Of Sec 115 Jb Cannot Come Into Play At All However The Assessee Is A Banking Company And Unde R Proviso To Sec 211 2 Of The Act The Assessee Is Exempted From Preparing Its Books Of Account In Ter Ms Of Requirements Of Schedule Vi To The Companies Act A Nd The Assessee Is To Prepare Its Books Of Account In Terms Of The Provisions Of Banking Regulation Act It Is Thu S Contended That The Provisions Of Sec 115 Jb Do Not Apply In The Case Of Banking Companies Which Are Not Require D To Prepare The Profit And Loss Account As Per The Requirements Of Part Ii And Iii Of Schedule Vi To T He Companies Act Since The Provisions Of Sec 115 Jb D O Not Apply To The Assessee Company The Reasons Recorded For Reopening The Assessment Are Clearly Wrong And Insufficient We Are Urged To Quash The Reassessmen T Proceedings On This Short Ground 6 Learned Departmental Representative On The Othe R Hand Vehemently Relies Upon The Orders Of The Auth Orities Below And Submits That There Is No Specific Exclusi On Clause For The Banking Companies And In The Absenc E Of Such A Clause It Is Not Open To Us To Infer The Sa Me The Submission Of The Learned Counsel According To The Departmental Representative Are Clearly Contrary T O The Legislative Intent And Plain Wording Of The Statute 7 The Plea Of The Assessee Is Indeed Well Taken A Nd It Meets Our Approval The Provisions Of Sec 115 Jb Ca N Only Come Into Play When The Assessee Is Required To Pre Pare Its Profit And Loss Account In Accordance With The Prov Isions Of Part Ii And Iii Of Schedule Vi To The Companies Act The Starting Point Of Computation Of Minimum Altern Ate Tax Under Sec 115 Jb Is The Result Shown By Such A P Rofit And Loss Account In The Case Of Banking Companies However The Provisions Of Schedule Vi Are Not Appl Icable In View Of Exemption Set Out Under Proviso To Sec 211 2 Of The Companies Act The Final Accounts Of The Ban King Companies Are Required To Be Prepared In Accordance With The Provisions Of The Banking Regulation Act The Ita No 1394 Bang 2013 Page 36 Of 48 Provisions Of Section 115 Jb Cannot Thus Be Applied To The Case Of Banking Company The Honble Kerala High Court In Its Recent Decisio N In The Case Of Kerala State Electricity Board Vs Dcit 2010 32 9 Itr 91 Ker After Detailed Deliberation And Referring The Cbdt Understanding Circular No 762 Dated 18 2 1998 2 30 Itr Statute 12 That Companies Engaged In The Business Of Gener Ation And Distribution Of Electricity And Enterprises Engaged In Developing Maintaining And Operating Infra Structure Facility As A Matter Of Policy Are Not Brought Within The Purview Of The A Mendment 115 Ja For The Reason That Such A Policy Would Promote The Infra Structural Development Of The Country And That Such An Underst Anding Of The Cbdt Is Binding On The Department Has Also Been Pl Eased To Arrive At A Conclusion Relevant Paragraphs Thereof Are Being Reproduced Hereunder 11 Before We Examine The First Question A Brief S Urvey Of The History Of Section 115 Jb Is Necessary Chapter Xii B Was In Serted By The Finance Act Of 1987 In The Income Tax Act Section 115 J Was Introduced For The First Time By The Said Chapter The Relevant Portion Of The Said Section Reads As Follows Section 115 J Special Provisions Relating To Certa In Companies 1 Notwithstanding Anything Contained I N Any Other Provision Of This Act Where In The Case Of An Assessee Being A Company Other Than A Company Enga Ged In The Business Of Generation Or Distribution Of El Ectricity The Total Income As Computed Under This Act In Res Pect Of Any Previous Year Relevant To The Assessment Year Commencing On Or After The 1st Day Of April 1988 B Ut Before The 1st Day Of April 1991 Hereafter In Thi S Section Referred To As The Relevant Previous Year Is Less Than Thirty Per Cent Of Its Book Profit The Total Incom E Of Such Assessee Chargeable To Tax For The Relevant Previou S Year Shall Be Deemed To Be An Amount Equal To Thirty Per Cent Of Such Book Profit 1 A Every Assessee Being A Company Shall For Th E Purposes Of This Section Prepare Its Profit And Lo Ss Account For The Relevant Previous Year In Accordanc E With The Provisions Of Parts Ii And Iii Of Schedule Vi T O The Companies Act 1956 1 Of 1956 Ita No 1394 Bang 2013 Page 37 Of 48 Explanation For The Purposes Of This Section Boo K Profit Means The Net Profit As Shown In The Profit And Loss Account For The Relevant Previous Year Prepared Und Er Sub Section 1 A As Increased By If Any Amount Referred To In Clauses A To F Is Debited Or As The Case May Be The Amount Referred To In Claus Es G And H Is Not Credited To The Profit And Loss Acco Unt And As Reduced By It Can Be Seen From Clause 1 That The Provision C Reates A Legal Fiction Regarding The Total Income Chargeable To Ta X Such A Fiction Is Applicable Only To Those Assessees Which A Are Companies Except The Companies Engaged In The Business Of Either Gen Eration Or Distribution Of Electricity B That Such A Fictio N Is Made Applicable To The Companies Only With Reference To The Previous Y Ear Relevant To The Assessment Year Commencing After 1 4 1988 And E Nding With The 1 4 1991 C The Total Income Of The Company As Computed Under The Act Is Less Than Thirty Per Cent Of Its Book P Rofit The Fiction Being That The Total Income For The Purpose Of Asse Ssment Shall Be Deemed To Be 30 Per Cent Of The Book Profit In Oth Er Words The Section Prescribes 30 Per Cent Of The Book Profits Of Those Companies Falling Within The Purview Of The Section Shall Be Treated As The Total Income Of The Company For The Purpose Of Income Tax Irrespective Of The Fact That According To The Accounts Of The Comp Any The Total Income Is Less Than Thirty Per Cent Of The Book Pr Ofit The Expression Book Profit Itself Is Explained In The Section As Meaning The Net Profit As Shown In The Profit And Loss Account For The Relevant Previous Year Prepared As Per The Prescription Unde R Sub Section 1 A And Either Increased Or Decreased By Various A Mounts Specified In The Various Subsequent Sub Clauses Appended To T He Explanation The Details Of Which Are Not Necessary For The Purp Ose Of This Case However The Operation Of Section 115 J Came To An E Nd With 1991 92 Assessment Year Onwards 12 Subsequently Section 115 Ja Came To Be Insert Ed In The Income Tax Act By Finance Act 2 Of 1996 With Effec T From 1 4 1997 The Scheme Of Section 115 Ja Is Almost Similar To Th E Scheme Of Section 115 J Two Major Points Of Difference Are Th At The New Section Is Applicable With Reference To The Previous Year R Elevant To The Assessment Year Commencing From 1 4 1997 And Ending With 1 4 Ita No 1394 Bang 2013 Page 38 Of 48 2001 Secondly The Express Exclusion Of The Compan Ies Engaged In The Business Of Either Generation Or Distribution O F Electricity Is Absent Under Section 115 Ja The Third And Most Impo Rtant Change Is That Two Provisos Are Added To Sub Section 2 Stip Ulating That Provided That While Preparing Profit And Loss Account The Depreciation Shall Be Calculated On The Same Method And Rates Which Have Been Adopted For Calculating The Depreci Ation For The Purpose Of Preparing The Profit And Loss Account La Id Before The Company At Its Annual General Meeting In Accordance With The Provisions Of Section 210 Of The Companies Act 195 6 1 Of 1956 Provided Further That Where A Company Has Adopted Or Adopts The Financial Year Under The Companies Act 1956 1 Of 1956 Which Is Different From The Previous Year Under The Act The Method And Rates For Calculation Or Depreciation Sh All Correspond To The Method And Rates Which Have Been Adopted For Calculating The Depreciation For Such Financial Yea R Or Part Of Such Financial Year Falling Within The Relevant Pre Vious Year The Further Details Of Section 115 Ja May Not Be Nec Essary For The Present Purpose 13 Then Came To Section 115 Jb Which Was Inserte D In The Income Tax Act By Finance Act Of 2000 With Effect F Rom 1 4 2001 The Relevant Portion As It Stands Today Reads As Fo Llows 115 Jb Special Provision For Payment Of Tax By Cer Tain Companies 1 Notwithstanding Anything Contained In Any Other Provision Of This Act Where In The Case Of An Asse Ssee Being A Company The Incometax Payable On The Total Income As Computed Under This Act In Respect Of Any Previous Year Relevant To The Assessment Year Commencing On Or After The 1 St Day Of April 2007 Is Less Than Ten Per Cent Of Its Book P Rofit Such Book Profit Shall Be Deemed To Be The Total Income Of Th E Assessee And The Tax Payable By The Assessee On Such Total Incom E Shall Be The Amount Of Income Tax At The Rate Of Ten Per Cent 2 Every Assessee Being A Company Shall For The P Urposes Of This Section Prepare Its Profit And Loss Account F Or The Relevant Ita No 1394 Bang 2013 Page 39 Of 48 Previous Year In Accordance With The Provisions Of Parts Ii And Iii Of Schedule Vi To The Companies Act 1956 1 Of 1956 Provided That While Preparing The Annual Accounts Including Profit And Loss Account I The Accounting Policies Ii The Accounting Standards Followed For Preparing Such Accounts Including Profit And Loss Account Iii The Method And Rates Adopted For Calculating T He Depreciation Shall Be The Same As Have Been Adopted For The Purpose Of Preparing Such Accounts Including Profit And Loss Account And Laid Before The Company At Its Annual G Eneral Meeting In Accordance With The Provisions Of Sectio N 210 Of The Companies Act 1956 1 Of 1956 Provided Further That Where The Company Has Adopted Or Adopts The Financial Year Under The Companies Act 1956 1 Of 1956 Which Is Different From The Previous Year Under Thi S Act I The Accounting Policies Ii The Accounting Standards Adopted For Preparing Such Accounts Including Profit And Loss Account Iii The Method And Rates Adopted For Calculating T He Depreciation Shall Correspond To The Accounting Po Licies Accounting Standards And The Method And Rates For C Alculating The Depreciation Which Have Been Adopted For Prepar Ing Such Accounts Including Profit And Loss Account For Such Financial Year Or Part Of Such Financial Year Failing Within The Relevant Previous Year The Scheme Of The Section 115 Jb Is Similar To Secti On 115 J And Section 115 Ja The Difference Insofar As It Is Rele Vant For The Present Purpose Between Section 115 Jb And Its Fore Runners Sections 115 J And 115 Ja Is As Follows All The 3 Sections Ss 115 J 115 Ja And 115 Jb Creat E Legal Fictions Regarding The Total Income A Defined Expression Under Section 2 45 Ita No 1394 Bang 2013 Page 40 Of 48 Of The Act Of The Companies While The Earlier Two Sections Mandate The Department To Make The Assessment On A Fictitio Us Amount Of Total Income Where The Actual Amount Of Total Income Com Puted In Accordance With The Income Tax Act Is Less Than 30 Per Cent Of The Book Profits Of The Company Section 115 Jb Mandates The Department To Resort To The Fiction In Those Cases Where The T Ax Payable On The Basis Of The Total Income Computed In Accordance With The Income Tax Act Is Less Than A Specified Percentage 7 Per Cent For The Years In Issue Of The Book Profit Further Sections 115 Ja And 115 Jb Also Stipulate A Definite Manner Of Preparing The Annual Accounts Including The Profit And Loss Accounts More Specif Ically Section 115 Jb Stipulates That The Accounting Policies Acco Unting Standards Etc Shall Be Uniform Both For The Purpose Of Incom E Tax As Well As For The Information Statutorily Required To Be Placed Before The Annual General Meeting Conducted In Accordance With Secti On 210 Of The Companies Act 1956 14 It May Be Mentioned Here That Under Section 1 66 Of The Companies Act Every Company Is Mandated To Hold A G Eneral Meeting In Each Year Section 210 Mandates That Eve Ry Year The Board Of Directors Of The Company In The General Me Eting Shall Lay Before The Company A Balance Sheet As At The End Of The Relevant Period And Also A Profit And Loss Account For The P Eriod Parts Ii And Iii Of Schedule Vi To The Companies Act Specify The Method And Manner Of Maintaining The Profit And Loss Account 15 However The Appellant Though Is By Definitio N A Company Under The Income Tax Act And Deemed To Be A Company For The Purpose Of Income Tax Act By Virtue Of The Declar Ation Under Section 80 Of The Electricity Supply Act It Is Not A Compa Ny For The Purpose Of Companies Act Therefore The Appellant Is Not O Bliged To Either To Convene An Annual General Meeting Or Place Its Prof It And Loss Account In Such General Meeting As A Matter Of Fac T A General Meeting Contemplated Under Section 166 Of The Compa Nies Act Is Not Possible In The Case Of The Appellant As There Are No Shareholders For The Appellant Board On The Other Hand Under Secti On 69 Of The Electricity Supply Act The Appellant Is Obliged To Keep Proper Accounts Including The Profit And Loss Account An D Prepare An Annual Statement Of Accounts Balance Sheet Etc I N Such Form As May Be Prescribed By The Central Government And Notifie D In The Official Gazette The Prescription Of The Rules In This Rega Rd Is Required To Be Ita No 1394 Bang 2013 Page 41 Of 48 Made In Consultation With The Comptroller And Audit Or General Of India And Also The State Governments Such Accounts Of The Appellant Are Required To Be Audited By The Comptroller And A Uditor General Of India Or Such Other Person Duly Authorised By The C Omptroller And Auditor General Of India The Accounts So Prepared Along With The Audit Report Is Required To Be Laid Annually Before The State Legislature And Also To Be Published In The Prescri Bed Manner And Copies Of Such Publication Shall Be Made Available For Sale At A Reasonable Price Obviously For The Benefit Of The General Public Who Wish To Scrutinise The Accounts 16 Thus It Can Be Seen That Coming To The Maint Enance Of The Accounts The Appellant Though Is Deemed To Be A C Ompany Both By Virtue Of Operation Of Section 80 Of The Income Tax Act For The Purpose Of Income Tax Act And By Virtue Of The Defi Nition Of The Expression Company Under The Income Tax Act Whic H Is Already Examined Earlier The Appellant Is Required To Ke Ep And Maintain Its Accounts In A Manner Specified By The Central Gover Nment But Not In The Manner Specified In The Companies Act Therefor E The Question Is Whether The Legal Fiction Contemplated Under Sectio N 115 Jb Can Be Pressed Into Service While Making The Assessment Of Income Tax Payable By The Appellant 17 It Must Be Remembered That Section 115 Jb Crea Tes A Legal Fiction Regarding The Total Income Of The Assessees Which Are Companies The Book Profit Of The Company Is Deemed To Be Total Income Of The Assessee In The Circumstances Specifi Ed In The Said Section Which Are Already Noticed Earlier The Exp Ression Book Profit For The Purpose Of The Said Section Is Expl Ained In The Section Itself To Mean The Net Profit As Increased Or Decre Ased By The Various Amounts Shown In The Various Sub Clauses Of The Sec Tion The Net Profit Itself Must Be The Net Profit As Shown In T He Profit And Loss Account Of The Company Sub Section 2 Mandates Th At The Profit And Loss Account Of The Company Is Required To Be Prepa Red In The Manner Specified Therein Though In View Of The Req Uirement Under Section 69 Of The Electricity Supply Act The Appell Ant Is Required To Maintain Accounts In A Different Form Than The One Contemplated Under Section 115 Jb 2 The Prescription Under Sect Ion 69 Is Only Regarding The General Duty Of The Appellant For The Purpose Of Electricity Supply Act Nothing In Theory Prevents The Parliament From Obligating The Appellant To Prepare Another Pr Ofit And Loss Ita No 1394 Bang 2013 Page 42 Of 48 Account As Prescribed Under Section 115 Jb 2 For Th E Purpose Of The Income Tax Act The Question Is Whether Such An Obl Igation Is Created Under Section 115 Jb 2 Insofar As The Appellant Is Concerned In Examining The Said Question The Legislative Histor Y And The Mischief Sought To Be Cured By The Legislature In Making The Special Deeming Provision In Our Opinion Would Be Relevant 18 Coming To The Legislative History Of Section 115 Jb And Its Fore Runners Sections 115 J And 115 Ja We Have Al Ready Noticed That They Provided For The Determination Of The Tot Al Income Of The Companies By A Fictitious Process However At The Earliest Point Of Time When Such A Fictitious Process Is Invented I E When Section 115 J Was Introduced The Section Expressly Excluded From Its Operation Bodies Like The Appellant Coming To Section 115 Ja Though Such Express Exclusion Is Absent The Central Board Of D Irect Taxes Issued A Circular No 762 Dated 18th February 1998 Wh Ich Is Binding On The Department See K P Varghese V Ito Ts 11 Sc 1981 O And Ranadey Micronutrients V Collector Of Central Exci Se 1996 87 Elt 19 Sc Excluding The Bodies Like The Appellant From The Op Eration Of The Said Section Though Under The Normal Rules Of Interpretation Of Statutes The Omission Of A Clause Which Existed In The Statute At Some Point Of Time By A Subsequent Amendment Would Indic Ate That The Legislature Intended Not To Give The Benefit Of Suc H Clause Any More To Those Who Were Getting The Benefit Of Such Exclusio N Clause In Our Opinion It Is Not An Absolute Rule The Other Atte Ndant Circumstances The Context The History And The Mischief Sought To Be Remedied By The Amendment Are All Required To Be Examined Before Re Aching At Definite Conclusion 19 The Circular No 762 Not Only Is Binding On T He Respondents But Also Explains The Purpose In Intro Ducing Section 115 Ja The Relevant Portion Reads As Follows 46 1 In Recent Times The Number Of Zero Tax Compa Nies And Companies Paying Marginal Tax Has Grown Studies Ha Ve Shown That In Spite Of The Fact That Companies Have Earned Sub Stantial Book Profits And Have Paid Handsome Dividends No Tax Ha S Been Paid By Them To The Exchequer 46 2 The Finance Act Has Inserted A New Section 115 Ja Of The Incometax Act So As To Levy A Minimum Tax On Compa Nies Who Are Ita No 1394 Bang 2013 Page 43 Of 48 Having Book Profits And Paying Dividends But Are No T Paying Any Taxes The Scheme Envisages The Payment Of A Minimu M Tax By Deeming 30 Per Cent Of The Book Profits Computed Un Der The Companies Act As Taxable Income In A Case Where T He Total Income As Computed Under The Provisions Of The Income Tax Act Is Less Than 30 Per Cent Of The Book Profit Where The Total Inc Ome As Computed Under The Normal Provisions Of The Income Tax Act Is More Than 30 Per Cent Of The Book Profit Tax Shall Be Charged O N The Same 46 3 The Effective Minimum Alternate Tax At The Ex Isting Rates Of Taxation Works Out To 12 Per Cent Of The Book Profi Ts 46 4 Income Arising From Free Trade Zone Ftz Exp Ort Oriented Undertakings Eous Charitable Activities Investm Ent By A Venture Capital Company And Other Exempted Incomes Section 10 Are Excluded From The Purview Of The Alternate Tax 46 5 Since The Alternate Tax Is Applicable Only Whe Re The Normal Total Income Computed Is Less Than 30 Per Cent Of The Boo K Profits So Long As The Enterprises Other Than Ftz Units And Eous Earning Income From Export Profits Do Not Have Their Component Of Export Income Higher Than 70 Per Cent Of The Book Profits The Pr Ovisions Of Section 115 Ja Will Not Be Attracted In Other Words The Ma T Will Apply Only To Such Cases Where Export Profits Forming Part Of Book Profits Of An Assessee Exceed 7 Per Cent Of The Total Profits 46 6 Companies Engaged In The Business Of Generatio N And Distribution Of Power And Those Enterprises Engaged In Developing Maintaining And Operating Infrastructure Facilities Under Sub Section 4 A Of Section 80 Ia Are Exempted From The Levy Of Mat So That The Incentive Given To Infrastructure Development Is No T Affected It Can Be Seen From The Above That The Legislature Took Note Of The Fact That A Number Of Companies Paying Marginal Tax And Also Zero Tax Has Grown Such Companies Earned Substantial Book P Rofits And Paid Handsome Dividends To The Shareholders Without Payi Ng Any Tax To The Exchequer Such A Result Was Achieved By Such Compa Nies By Taking Advantage Of The Then Existing Legal Position Which Permitted The Adoption Of Dual Accounting Policies And Practices One For The Purpose Of Computation Of Income Tax And Another Fo R The Purpose Of Determining The Book Profits For The Purpose Of Pay Ment Of Dividends Ita No 1394 Bang 2013 Page 44 Of 48 Therefore The Amendment Was Made To Plug The Looph Ole In The Law However The Cbdt Understood That Companies Engaged In The Business Of Generation And Distribution Of Electric Ity And Enterprises Engaged In Developing Maintaining And Operating In Frastructure Facilities As A Matter Of Policy Are Not Brought Within The Purview Of The Amendment Section 115 Ja For The Reason That S Uch A Policy Would Promote The Infrastructural Development Of Th E Country Such An Understanding Of The Cbdt Is Binding On The Depa Rtment 20 If That Is The Background In Which Section 115 J A Is Introduced Into The Income Tax Act Section 115 Jb Which Is Su Bstantially Similar To Section 115 Ja In Our Opinion Cannot Have A Dif Ferent Purpose And Need Not Be Interpreted In A Manner Different From The Understanding Of The Cbdt Of Section 115 Ja 24 8 Under The Above Facts And Circumstances We T Hus Hold That Even Though The Assessee Under A Misconception Of Law Had Declared Income Under The Deeming Provisions Of Sec 115 Jb Of The A Ct Still The Assessing Officer Was Under Its Duty Bound To Make Correct Assessment Of Income Of The Assessee In Accordance With The Pr Ovisions Of The Act As Per Above Discussion And The Ratios Laid Down In The Cited Decisions We Hold That The Provisions Of Sec 115 Jb Of The Ac T Were Not At All Applicable To Companies Governed By Special Acts Wh Ich Also Includes Power Companies In Respect Of Assessment Years Fal Ling Prior To 01 04 2013 And Thereby The Assessee Was Not Liable To Pay Tax Under The Provisions Of The Said Sections For The Assessment Years Under Consideration 19 This Aspect Was Also Examined By The Honble Ke Rala High Court In The Case Of Kerala State Electricity Board Supra And Has Concluded That Provisions Of Section 115 Jb Cannot Be Invoked In Th E Case Of State Electricity Board As It Was Governed By Different L Aw The Relevant Observations Of This Honble Court Is Also Extracte D Hereunder For The Sake Of Reference Section 115 Jb Of The Income Tax Act 1961 Creates A Legal Fiction Regarding The Total Income Chargeable To Ta X Such A Fiction Is Applicable Only To Those Assessees Which Are Companies The Book Profit Of The Company Is Deemed To Be The Total Income Ita No 1394 Bang 2013 Page 45 Of 48 Of The Assessee In The Circumstances Specified In T He Section The Expression Book Profit For The Purpose Of The Sec Tion Is Explained To Mean The Net Profit As Increased Or De Creased By The Various Amounts Shown In The Various Sub Clauses Of The Section The Net Profit Itself Must Be The Net Profit As S Hown In The Profit And Loss Account Of The Company Sub Section 2 Ma Ndates That The Profit And Loss Account Of The Company Is Requi Red To Be Prepared In The Manner Specified Therein Section 1 15 Jb Stipulates That The Accounting Policies Accounting Standards Etc Shall Be Uniform Both For The Purpose Of Income Tax As Well As For The Information Statutorily Required To Be Placed B Efore The Annual General Meeting Conducted In Accordance With Secti On 210 Of The Companies Act 1956 Though The Kerala State Electricity Board A Stat Utory Corporation Constituted By Virtue Of Section 5 Of T He Electricity Supply Act 1948 Answers The Description Of An In Dian Company And Therefore A Company Within The Meaning Of Secti On 2 17 Of The Income Tax Act 1961 It Is Not A Company For Th E Purpose Of The Companies Act 1956 It Is Not Obliged To Eithe R To Convene An Annual General Meeting Or Place Its Profit And Loss Account In Such General Meeting On The Other Hand Under Section 6 9 Of The Electricity Supply Act 1948 The Board Is Oblige D To Keep Proper Accounts Including The Profit And Loss Acco Unt And Prepare An Annual Statement Of Accounts Balance Sh Eet Etc In Such Form As May Be Prescribed By The Central Gove Rnment And Notified In The Official Gazette Such Accounts Of The Board Are Required To Be Audited By The Comptroller And Audit Or General Of India Or Such Other Person Duly Authorised By The C Omptroller And Auditor General Of India The Accounts So Prepa Red Along With The Audit Report Are Required To Be Laid Annua Lly Before The State Legislature And Also To Be Published In The P Rescribed Manner At The Earliest Point Of Time When Section 115 J Was Introduced The Section Expressly Excluded From Its Operation Bodies Like The Electricity Board Though Such Expr Ess Exclusion Is Absent In Section 115 Ja The Central Board Of Di Rect Taxes Issued Circular No 762 Dated February 18 1998 Exc Luding Bodies Like The Electricity Board From The Operatio N Of The Section Circular No 762 Not Only Is Binding On Th E Department Ita No 1394 Bang 2013 Page 46 Of 48 But Also Explains The Purpose In Introducing Sectio N 115 Ja Which Was To Tax Zero Tax Companies The Cbdt Understood That Companies Engaged In The Business Of Generation And Distribution Of Electricity And Enterprises Engaged In Developin G Maintaining And Operating Infrastructure Facilities As A Matte R Of Policy Are Not Brought Within The Purview Of Section 115 Ja For The Reason That Such A Policy Would Promote The Infrastructura L Development Of The Country Such An Understanding Of The Cbdt I S Binding On The Department Section 115 Jb Which Is Substantial Ly Similar To Section 115 Ja Cannot Have A Different Purpose And N Eed Not Be Interpreted In A Manner Different From The Understa Nding Of The Cbdt Of Section 115 Ja Where The Computation Provision Could Not Be Appl Ied In A Particular Case It Is Indicative Of The Fact That The Charging Section Also Would Not Apply The Electricity Board Or Bodies Similar To It Wh Ich Are Totally Owned By The Government Either State Or Ce Ntral Have No Shareholders Profit If At All Made Would Be For The Benefit Of Entire Body Politic Of The State Therefore The Enq Uiry As To The Mischief Sought To Be Remedied By The Amendment Bec Omes Irrelevant Therefore The Fiction Fixed Under Sect Ion 115 Jb Cannot Be Pressed Into Service Against The Electric Ity Board While Making The Assessment Of The Tax Payable Under The Income Tax Act Section 43 B A Deals With Any Sum Payable By The Assessee By Way Of Tax Duty Under Any Law F Or The Time Being In Force The Words By Way Of Tax Are Indicative Of The Nature Of Liability The Liability To Pay And The Correspo Nding Authority Of The State To Collect The Tax Flowing From A Statut E Is Essentially In The Realm Of The Rights Of The Sovereign Wherea S The Obligation Of The Agent To Account For And Pay The Amounts Col Lected By Him On Behalf Of The Principal Is Purely Fiduciary The Nature Of The Obligation Continues To Be Fiduciary Even In A Case Wherein The Relationship Of Principal And Agent Is Created By A Statute Section 43 B A Deals With Amounts Payable To The Sovereign Qua Sovereign Not Amounts Payable To The Sovereign Qua Principal Therefore Section 43 B Cannot Be Invoked In The Case Of The Electricity Board With Regard To Electricity Duty C Ollected By It Ita No 1394 Bang 2013 Page 47 Of 48 Pursuant To The Obligation Under Section 5 Of The K Erala Electricity Duty Act 1963 The Court Made It Clea R That It Had Not Decided Whether The Amount Should Be Treated As Income For The Purpose Of The Act 20 We Have Also Considered The Order Of The Tribun Al In Assessees Own Case For The Ay 2005 06 And We Find That The As Sessment Order Was Passed On 23 12 2008 Much Before The Amendment Bro Ught In Sub Section 2 Of Section 115 Jb Of The Act Therefore No Inf Erence Can Be Drawn From This Order While Adjudicating The Impugned Issue 21 Since It Has Been Repeatedly Held By The Differ Ent Benches Of The Tribunal And Honble High Court Of Kerala That Wher E The Assessee Is Governed By Different Acts And Rules And Is Not Re Quired To Prepare Its Profit Loss Account And Balance Sheet As Per Part Ii Iii Of Schedule Vi To The Companies Act The Provisions Of Section 115 Jb Cannot Be Invoked Against Him In The Light Of This Legal Position We Are Of The View That The Revenue Authorities Wrongly Invoked The Provisions Of Section 115 Jb Of The Act Therefore The Order Of The Cit Appeals Is Not Sustainable In The Eyes Of Law Accordingly We Set Aside The Order Of Cit Appeals In This Regard 22 In The Result The Appeal Of The Assessee Is Pa Rtly Allowed For Statistical Purposes Pronounced In The Open Court On This 22 Nd Day Of December 2017 Sd Sd A K Garodia Sunil Kumar Yadav Accountant Member Judicial Member Bangalore Dated The 22 Nd December 2017 D Esai S Murthy Ita No 1394 Bang 2013 Page 48 Of 48 Copy To 1 Appellant 2 Respondent 3 Cit 4 Cit A 5 Dr Itat Bangalore 6 Guard File By Order Senior Private Secretary Itat Bangalore