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TMI Blog2015 (5) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... nally paid to the State Government. The assessing officer was of the view that the amount of electricity duty collected by the assessee company from its customers is to be treated as a part of sales proceeds and the amount actually paid to the company during the year was only to be allowed as expenditure. The assessing officer disallowed the amount of Rs. 36,01,942/-, Rs. 2,71,83,582/- and Rs. 2,85,57,061/- being amounts not paid to the Government during the three years under consideration. (3) On appeal by the Government the Commissioner of Income Tax (A) noted that Section 3 (1) of the Bengal Electricity Duty Act 1935 levies a charge on the customers for payment of electricity duty. According to Section 5 (1) of the said Act, in the case of energy supply by a licensee, the licensee is statutorily obliged to collect and pay to the State Government at the prescribed time and in the prescribed manner the electricity duty payable under Section 3 on the energy supplied by the licensee to the consumers and the duty so payable constitutes first charge on the amount recoverable by the licensee for the energy supplied by it. The Commissioner held that the electricity duty collected by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Tribunal concluded that it was a liability of the assessee to pay the electricity duty to the Government and consequently the deduction of electricity duty is allowable on actual payment as per provisions of Section 43B of the Income Tax Act. With those observations the Ld. Tribunal dismissed the appeals. (6) Being aggrieved the assessee CSC Ltd. is before us by way of the instant appeals. (7) Ld. Senior Counsel for the appellant advanced before us essentially the same arguments that were made before the Ld. Tribunal. He submitted that Section 43B of the Income Tax Act does not apply to electricity duty collected by the assessee-company as licensee, on behalf of the State Government inasmuch as the electricity duty which the assessee-company collects from the consumers is made over to the State Government and, as such, the same is not a tax, duty, cess or fee payable by the assesseecompany and, as such, the provisions of Section 43B of the Income Tax Act are not applicable to the instant case. He contended that only the amounts which can be construed as payable by the assessee are covered by the provisions of Section 43B of the Income Tax Act. Section 43B does not cover al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the State of Kerala pursuant to the statutory obligation to collect such an amount and the assessee is only an agent of the Government of Kerala holding the said amount and liable to account for and pay the said amount to the State of Kerala as an agent, but not as the assessee who has a primary liability to pay tax under the Kerala Electricity Duty Act, 1963, was not accepted by the Tribunal. The Kerala High Court reversed the decision of the Tribunal. The High Court observed that the words "by way of tax, etc." are relevant as they are indicative of the nature of liability. The liability to pay and corresponding authority of the State to collect the tax is essentially in the realm of the rights of the sovereign. On the other hand, the obligation of the agent to account for and pay the amounts collected by him on behalf of the principal is purely fiduciary. The nature of the obligation continues to be fiduciary even in a case where the relationship of principal and agent is created by a statute. When Section 43B(a) of the Income Tax Act speaks of the sum payable by way of tax, etc, the said provision is dealing with the amounts payable to the sovereign qua- sovereign, but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales tax by the assessee from the purchasers was received on behalf of the actual owner of tea and, therefore, the same could not constitute a trading and/or business receipt and, therefore, cannot be treated as an income of the assessee. The sales tax collected by the assessee as an auctioneer and a tea broker cannot be trading and/or business receipt when the sales price itself was not reflected in the accounts of the assessee as the realization of the sale proceeds was not of its own. (11) Finally, Ld. Counsel relied on a decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax-vs.-D. Shankaraiah reported in (2001) 247 ITR 798. The question which arose for consideration in that case was whether the sales tax collected by the assessee, who was a commission agent, from the purchasers and paid to the Sales Tax Department as well as the amount of refund of sales tax collected by the said assessee from the Department when it was found that the sales tax was not payable, could be treated as income in the hands of the assessee and the same is liable for payment of income tax. The Hon'ble Supreme Court held that the assessee was collecting sales tax only as a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o recover his dues for the energy supplied by him. With the aforesaid observations, the Gujrat High Court held that it could not scribe to the observations of the Tribunal that Section 43B would not be applicable to the assessee's case on the ground that the electricity duty recovered by it did not belong to it, but it was retained for a short-time as an agent of the Government. (14) We have considered the rival contentions of the parties. (15) Section 43B(a) of the Income Tax Act provides that notwithstanding anything contained in any other provision of the Act, a deduction otherwise allowable under the Act in respect of any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of the previous year in which such sum is actually paid by him. The object of Section 43B was to curb the malpractice exercised by some taxpayers who did not discharge their statutory liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied by him. ........ 8. Any sum due on account of electricity duty if not paid at the prescribed time and in the prescribed manner shall be recoverable, as a public demand- (a) in the case of energy supplied by a licensee, at the discretion of the State Government, either from the consumer, or, subject to the proviso to sub-Section (1) of Section 5, from the licensee. ......................" (17) On a reading of the aforesaid provisions of the Bengal Electricity Duty Act, it is quite clear that the primary liability to pay electricity duty to the State Government is that of the consumers of energy. The licensee/assessee merely acts as a collecting agent for the State Government. The licensee is obliged to collect the electricity duty from the consumers and pay the same to the State Government. The licensee merely acts as a conduit. The electricity duty is not chargeable to the licensee. If the intention of the legislature was to impose primary and absolute liability for electricity duty on the licensee, the proviso to Section 5 (1) of the Act would not have been there. The said proviso exempts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be considered to a trading receipt in the hands of the licensee. It does not constitute income of the licensee and cannot be included in the licensee's income for the purpose of computation of income tax. It is not a business receipt of the licensee which the licensee collects on its own behalf in connection with its business of generating and supplying electricity. The licensee does not collect the electricity duty for its own consumption or utilization. If the licensee collects the duty but does not pay the same to the Government, the statute provides mechanism for the Government to recover the same from the licensee. Even in a case where the licensee is unable to recover the duty but recovers the energy charges, the statutes still provides a procedure for the Government to recover the duty either from the consumer or from the licensee. This view of ours finds support from the decision of the Andhra Pradesh High Court in the case of Commissioner of Income Tax-vs.-Devatha Chandraiah (supra). Though the said case deals with sales tax, the principle laid down in that case supports our view. The mischief that Section 43B of the Income Tax Act intended to present, is taken care of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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