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2016 (2) TMI 458 - ITAT KOLKATA

2016 (2) TMI 458 - ITAT KOLKATA - TMI - MAT applicability - whether the provisions of section 115JB of the Act are applicable to the assessee being a Corporation established under Damodar Valley Corporation Act, 1948 for the Asst Years 2008- 09 and 2009-10 - Held that:- As we hold that in view of the legislative change brought about by the introduction of Explanation 3 in section 115JB of the Act by the Finance Act, 2012 , the assessee’s contention in fact stands more fortified. The Explanation .....

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of the Act at ₹ 20,03,61,170/- under normal provisions of the Act and at ₹ 41,16,36,422/- under the provisions of section 115JB of the Act. There seems to be apparent mistake on adoption of figures by the Learned AO while computing the book profits u/s 115JB of the Act. However, we have already held that the assessee corporation is not liable to pay tax on the book profits u/s 115JB of the Act and accordingly, the issue of whether the disallowance u/s 14A of the Act could be added t .....

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nt case the assessee corporation had disallowed a sum of ₹ 11,08,315/- and no adverse inference has been brought on record and no satisfaction has been recorded with cogent reasons by the Learned AO as to why the said figure computed by the assessee is incorrect. Without satisfying the requirement contemplated in Rule 8D(1) , the Learned AO had directly proceeded to apply Rule 8D(2) in the instant case. Hence the disallowance u/s 14A of the Act cannot be made in the instant case of the ass .....

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and Shri M. Balaganesh, Accountant Member For The Appellant : Shri D.S Damle, FCA, ld.AR For The Respondent : Shri Rajat Subhra Biswas, CIT, ld. ORDER SHRI M.BALAGANESH, AM : These appeals of the assessee arise out of the orders of the Learned CIT(A)- VIII, Kolkata in Appeal No. 165/CIT(A)-VIII/Kol/10-11 dated 19-09-2011 for the Asst Year 2008-09 and Appeal No.294/CIT(A)-VIII/Kol/11-12 dated 17-01-2013 for the Asst Year 2009-10 as against the orders of assessments framed u/s 143(3) of the Income .....

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ollowing grounds in this regard:- Ground nos. 1 to 4 of ITA No.1622/Kol/2011 A.Y 2008-09 1. For that on the facts and in the circumstances of the case and in law, the CIT(Appeals) was grossly unjustified in rejecting the appellant's claim that the deeming provisions of Section 115JB are not applicable to the appellant and therefore total income was not assessable with reference to 'book profit'. 2. For that on the facts and in the circumstances of the case and in law, the CIT(Appeals .....

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uarely applicable to the appellant in terms of which statutory corporations not registered under the Companies Act, 1956 were not liable to be assessed on 'book profits' under Section 115JB of the Income-tax Act, 1961. 4. For that on the facts and in the circumstances of the case and in law, the AO be directed to assess total income of the appellant for AY 2008-09 only with reference to computational provisions of the LT. Act, 1961, without invoking deeming provisions of Section 115JB of .....

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in not entertaining appellant's contention that Section 115JB had no application, primarily on the ground that the such claim was not made by filing a return of income or revised return of income. 3. For that on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) failed to appreciate that the judgment of the Kerala High Court in the case of Kerala State Electricity Board Vs DCIT was squarely applicable to the appellant in terms of which a statutory corporatio .....

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to Sec 211 (2) of the said Act was applicable and in that view of the matter he ought to have held the charging provision of Sec 115 JB were not applicable to the appellant's case for the AY 2009-10. 5. For that on the facts and in the circumstances of the case and in law, the AO be directed to assess total income of the appellant for AY 2009-10 only with reference to computational provisions of the I.T. Act, 1961, without invoking deeming provisions of Section 115JB of the Act. 3.1. The bri .....

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ments viz Union Government and the Provincial Governments of Bihar (now Jharkhand) and West Bengal. c. that assessee Corporation does not have equity capital and consequently does not have any shareholders. d. that the accounts of the Corporation are maintained in accordance and conformity with the provisions of DVC Act, 1948. The annual financial statements are prepared in the form prescribed under the said Act. e. that assessee Corporation does not prepare its annual accounts in accordance or .....

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the Learned DR argued that the assessee filed its return by computing its income under normal provisions of the Act as well as under section 115JB of the Act and during assessment proceedings, it is only by way of a letter dated 20.12.2010, the asssessee sought to withdraw the applicability of section 115JB of the Act for the assessee and no revised return was filed for making this fresh claim. He placed reliance on the decision of the Hon ble Supreme Court in the case of Goetze (India) Ltd vs .....

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8 is a general provision whereas provisions of section 43 of DVC Act, 1948 is a special provision which provides that DVC has to pay Central Income Tax in the status of company. Accordingly he argued that the provisions of section 115JB of the Act is also applicable to the assessee corporation. 3.3. We have heard the rival submissions and perused the various case laws relied upon by the counsels for both the sides. The facts regarding the purpose of the assessee corporation and the manner in whi .....

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six months after the end of each financial year giving a true and faithful account of its activities during the financial year with particular reference to irrigation ; water supply ; electrical energy ; flood control ; navigation ; forestation ; soil erosion; use of land ; resettlement of displaced population ; sanitation and public health measures and economic and social welfare of the people. (2) The Annual Report shall also give a true and faithful account of the income and expenditure durin .....

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(4) Printed copies of the annual report shall be made available to each of the three participating governments by the 15th day of October each year. (5) The annual report shall be laid before the Central and the Provincial Legislatures concerned as soon as may be, after it is prepared. 3.3.1. We find that the provisions of section 46 of DVC Act, 1948 are as below:- Section 46 - Other Annual Financial Statements (1) The corporation shall also prepare such other annual financial statements in such .....

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les governing Accounts and Audit as prescribed in Section II of Damodar Valley Corporation (DVC) Rules, 1948 are as below:- ACCOUNTS 19. All moneys received by the Corporation on account of its revenue receipts, loans or advances due to it, shall be remitted in full into the bank. On no accounts shall any money so collected be utilized for making any payment relating to the Corporation. 20. The Corporation shall at all times maintain complete and accurate books of accounts. 21. In the maintenanc .....

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nth by the various drawing officers of the Corporation and a consolidated account of the Corporation as a whole shall be prepared and placed before the Corporation at the end of the following month with such detailed memoranda as may be required by the Corporation from time to time. 24. Subsidiary accounts indicating the unit costs shall be maintained and presented to the Corporation simultaneously with the accounts for each month. 25. Within six months of the end of each financial year, the ann .....

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all be maintained in accordance with such instructions as may, from time to time, be issued by the Corporation. 27. A physical verification of stores and tools and plant shall be made by an officer who is not the custodian thereof. The results of the verification together with the orders of the Corporation for shortages and excesses shall be communicated to the Audit Officer. AUDIT 28. The accounts of the Corporation shall be audited by an officer appointed by the Comptroller and Auditor General .....

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able times. 31. The Audit Officer shall certify to the correctness of the Annual Accounts prepared by the Corporation and append to the Certificate an audit report. The annual accounts so certified and the audit report shall, after countersignature by the Comptroller and Auditor General be submitted with three additional copies to the President. One copy shall be retained by the Central Government and one copy each shall be sent to the other two Participating Governments. The Audit Report shall .....

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ing contained in any enactment other than this Act or any instrument having effect by virtue of any enactment other than this Act. 3.4. We find that when section 43 of DVC Act, 1948 was enacted, the provisions of section 115J / 115JA / 115JB of the Act were not there in the IT Act, 1961. Section 43 of DVC Act, 1948 only states that the corporation shall pay taxes on any income. The Book Profits contemplated u/s 115JB of the IT Act is only deemed income. The Book Profit is an alien to the basic c .....

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essee. We find from the provisions of DVC Act, 1948, the assessee Corporation does not conduct any annual general meeting. We hold that Section 115JB of Income Tax Act overrides all other provisions of Income Tax Act as it starts with a non obstante clause. Hence it is an independent code by itself. In this section, the term company referred to should be construed as company as defined under Companies Act, 1956 only. The Section 115JB of the Act clearly states that the accounts are to be prepare .....

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panies Act, 1956. Only for income tax assessment purposes, the assessee corporation is given the status of a company. We hold that when the computation provision could not be applied in a particular case, it is indicative of the fact that the charging section also would not apply. We hold that the amendment in section 115JB came into effect only from 1.4.2013 vide Expln 3 inserted by Finance Act 2012. At the time of Finance Bill 2012 stage, amendment was proposed only in section 115JB(2) . Expln .....

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cable come within the ambit of section 115JB of the Act. In other words, unless an assessee comes within the ambit of section 211 of the Companies Act, 1956, it was not covered by the Explanation 3 to section 115JB and as a necessary corollary section 115JB was not applicable to it. We further hold that amendment is brought only from 1.4.2013 and hence is not retrospective. Infact lot of amendments were brought in Finance Act 2012 with retrospective effect. But the amendment in Explanation 3 to .....

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Court in the case of Vatika Township case reported in 367 ITR 466 (SC). Moreover, the levy of MAT on assessee Corporation is a substantive levy on the assessee and hence can only be prospective. 3.6. The Notes to Clauses to Finance Act, 2012 on the subject of Minimum Alternate Tax (MAT) is reproduced below:- i. Under the existing provisions of section 115JB of the Act, a company is liable to pay MAT of eighteen and one half per cent of its book profit in case of tax on its total income computed .....

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ctricity company are allowed to prepare their profit and loss account in accordance with the provisions specified in their regulatory Acts. In order to align the provisions of Income-tax Act with the Companies Act, 1956, it is proposed to amend section 115JB to provide that the companies which are not required under section 211 of the Companies Act to prepare their profit and loss account in accordance with the Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordanc .....

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sed by the amount standing 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 Part III of the Schedule VI of the Companies Act, 1956 from section 115JB 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, 2013 and will, accordingly, apply in relation to the ass .....

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a company within the meaning of Companies Act, 1956 , section 211(2) and proviso thereon is not applicable and therefore consequently we hold that the provisions of section 115JB of the Act are also not applicable. 3.8. The basic intention of MAT u/s 115JB is only to tax the book profits irrespective of nil or lesser taxable income due to various exemptions / deductions like sections 10A/ 10B/ 80IA / 80IB etc. The intention of MAT is that the companies were declaring huge profits as per their c .....

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by bringing minor changes in section 115JA. The provisions of section 115J, 115JA and 115JB are by and large similar to each other. 3.9. The scope and effect of section 115JA was elaborated in the Department Circular No. 762 dated 18.2.1998. The relevant portion is reproduced hereunder:- Alternate minimum tax on companies- 46.1 In recent times, the number of zero-tax companies and companies marginal tax has grown. Studies have shown that in spite of the fact that companies have entered substanti .....

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nder the provisions of the Income-tax Act, is less than 30 per cent of the book profit. Where the total income as computed under the normal provisions of the Incometax Act, is more than 30 per cent of the book profit, tax shall be charged on the same. 3.10. The Memorandum explaining the provisions in the Finance (No. 2) Bill, 1996 categorise the amendment under the caption Rationalisation and Simplification . The relevant portion is reproduce hereunder:- RATIONALISATION AND SIMPLICATIONS Minimum .....

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account prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. Book profits is defined and certain adjustments are provided in the proposed section. The proposed amendment will take effect from 1-4-1997, and will accordingly, apply in relation to assessment year 1997-98 and subsequent years. 3.11. We hold that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. The task of a judge is to go by the intent of the stat .....

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reason of the law is the soul of the law. Law to a large extent, lives in the language even if it expands with the spirit of the statute. 3.12. Admittedly, the assessee corporation does not declare any dividends to shareholders and also paying huge income tax under IT Act. Applying this to the background of introducing the provisions of section 115JB of the Act, it can safely be concluded that it was never the intention of the legislature to impose MAT on corporations enacted by an Act of Parli .....

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cumstances specified in the section. The expression book profit for the purpose of the section is explained to mean the net profit as increased or decreased by the various amounts whon in the various sub-clause of the section. The net profit itself must be the net profit as shown in the profit and loss account of the company. Sub-section (2) mandates that the profit and loss account of the company. Sub-section (2) mandates that the profit and loss account of the 115JB stipulates that the account .....

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2(17) of the Income-tax Act, 1961 it is not a company for the purpose of the Companies Act, 1956. It is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. On the other hand, under section 69 of the Electricity (Supply) Act, 1948, the Board is obliged to keep proper accounts, including the profit and loss account, and prepare an annual statement of accounts, balance sheet etc. in such form as may be prescribed by the Central G .....

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m its operation bodies like the Electricity Board. Though such express exclusion is absent in section 115JA, the Central Board of Direct Taxes issued Circular No.762 dated February 18, 1998 excluding bodies like the Electricity Board from the operation of section. Circular No.762 not only is binding on the Department, but also explains the purpose in introducing section 115JA which was to tax zero-tax companies. The CBDT understood that companies engaged in the business of generation and distrib .....

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tion provision could not be applied 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, which are totally owned by the Government, either State or Central, have no shareholders. Profit, if at all, made would be for the benefit of entire body politic of the State. Therefore, the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, the fiction fixed under sectio .....

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d to prepare its account in conformity with the provision of section 69 of the Electricity (Supply) Act. Besides proviso to section 115JA(2) provides that while preparing the annual accounts, depreciation has to be provided on the same rates, and as per the same method as was adopted for calculating depreciation for the purpose of preparing the Profit & Loss Account laid before the company at its AGM under section 210 of the Companies Act. This section cannot be applied in relation to the as .....

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which financial year or part of such financial year falling within or relevant previous year. 16. Only those companies, which are engaged in the generation or supply of electricity, will come within the ambit of section 616 of the Companies Act. For that it is necessary that assessee must be a company. If assessee is not a company, then provision of section 616( c) cannot be applied. For example, Tata Electric Company is a company registered under the Companies Act. It is company within the mea .....

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shown in the Profit & Loss Account for the relevant previous year prepared under sub-section (2)[ i.e. in accordance with Parts II & III of Schedule VI] as increased by…….. We have noted that assessee did not prepare its accounts under Parts II & III of Schedule VI. Assessee was under no legal obligation to do so. As such the definition of Book Profit cannot be applied in the case of the assessee. 18. According to section 2(17) read with section 2(26) of the Act, MSEB .....

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ion. If the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. Word in section is skin of the living though. It may vary in colour and content according to the context. It is a settled rule of interpretation canonized in the dictum: EX PRAECEDENTIBUS ET CONSEQENTIBUS OPTIMA FIT INTERPRETATIO ( the b .....

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ain companies. The provision begins with a non obstante clause. It applies to every assessee being a company. The panoply o the section is erected over the structure of Companies Act, 1956. The Minimum Alternate Tax (MAT) on companies was introduced by the Finance (No.2) Act, 1996 with effect from 1-4-1997. This was necessitated due to the rise in the number of zero tax companies. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid hands .....

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of force in the arguments of the Learned AR that the text has to be understood in the context in which provision has been enacted which is also endorsed by the Mumbai Tribunal in 82 ITD 422. C. ICICI Lombard General Insurance Co Ltd vs ACIT reported in 2012 - TIOL-690-ITAT-Mum in ITA No. 2398/Mum/2009 dated 10.10.2012 for Asst Year 2003-04, wherein it was held that : The proviso to section 211(2) of the Companies Act creates an exemption of applicability of subsection (2) inter alia in respect o .....

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company as the said condition has been relaxed by subsection (5) of section 211 of the Companies Act. In order to align the provisions of the IT Act with the Companies Act , an amendment has been brought in to the statute by the Finance Act 2012 whereby section 115JB has been amended w.e.f. 1.4.2013 and therefore, prior to 1.4.2013, the amended provisions of section 115JB cannot be applied in case of Insurance, Banking, Electricity generation and distribution companies and other class of compan .....

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gly, the provisions of section 115JB are not applicable in the case of the assessee. D. Bank of India vs Addl CIT reported in 2014 (5) TMI 929 :n ITA No. 1498/Mum/2011 dated 9.4.2014- ITAT Mumbai, wherein it was held that : 6. Ground No. 5 is regarding applicability of provisions of section 115JB in case of Bank. 6.3 Having considered the rival submissions as well as relevant material on record, we note that this issue has been considered by this Tribunal in the series of decisions including the .....

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pplicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & II of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Hon ble Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case. Following the decisions of the c .....

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ssessee and against the revenue . Though, section 115JB has been amended to bring all the Companies in its ambit vide Finance Act 2012, w.e.f 1.4.2013, however, the said amendment is not applicable in the assessment year under consideration. Following the decision of co-ordinate bench of this Tribunal we decide this issue in favour of the assessee. 3.14. We find that the assessee corporation initially was of the opinion that the provisions of section 115JB of the Act are indeed applicable to the .....

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the Act had admittedly expired and hence assessee had no other option but to make its request in the form of a letter before the Learned AO. At this juncture, we are aware of the decision rendered by the Hon ble Apex Court in the case of Goetze (India) Ltd vs CIT in 284 ITR 323 (SC). But we find that the same decision specifically states that the claim could be made before the appellate authorities. In this regard, we would like to state that the revenue should not be unjustly enriched and only .....

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nder the provisions of the Companies Act. In this regard, we place reliance on the following decision to support our view :- CIT vs M/s Pruthvi Brokers & Shareholders Pvt Ltd in ITA No. 3908 of 2010 dated 21.6.2012 for Asst Year 2004-05 (Bombay High Court) The questions raised before the Bombay High Court is as below:- (i) Whether, an assessee can amend a return filed by him for making additional claim for deduction other than filing a revised return ? (ii) Whether , on the facts and circums .....

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t arises in this appeal is whether the CIT(Appeals) and / or the ITAT had the jurisdiction to consider a new / additional claim. Deduction subsequently raised before the Assessing Officer which, through inadvertence, was not claimed in the return of income filed by the respondent. 7. We will, for the purpose of this appeal, presume that the Assessing Officer was not entitled to and had no authority to allow the deduction of ₹ 40,00,000/-. Mr. Mistri submitted that there is no bar to an ass .....

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etter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and to adjudicate the same. 10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is .....

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z. if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made…. Clearly relate to cases where the ground was available when the return was filed and the assessment order was made but could not have been raised at that stage. The words are could not have been rasied and not were not in existence . Grounds which were not in existence when the return was filed or when the assessment order was made fall within th .....

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did not claim any deduction of its liability to pay purchase tax as it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941 . Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee .....

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our attention was invited by Mr.Mistri is the judgement of a Bench of three learned judges of the Supreme Court in National Thermal Power Company Limited vs CIT (1998) 229 ITR 383. In that case, the assessee had deposited its funds not immediately required by it on short term deposits with banks. The interest received on such deposits was offered by the assessee itself for tax and the assessment was completed on that basis. Even before the Commissioner of Income Tax (Appeals), the inclusion of t .....

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in the total income. It was further contended that the ITO and the Commissioner of Income Tax (Appeals) had erred and failed in their duty in adjudicating the matter correctly and by mechanically including the amount in the total income. It is pertinent to note that the assessee contended that it was entitled to the deduction in view of two orders of the Special Benches of the Tribunal and the assessee further stated that it had rasied these additional grounds on learning about the legal positio .....

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t clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case. 25. In the circumstances, it is not necessary to decide the other questi .....

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f the aforesaid provisions of the Act, our findings given thereon with respect to the facts and various judicial precedents relied upon hereinabove and further in view of the fact that no contrary decisions being brought to our knowledge on the same issue, we accordingly hold that - the assessee is a statutory corporation not registered under the Companies Act, 1956 and hence the provisions of section 115JB of the act are not applicable to the assessee corporation ; - the amendment brought in se .....

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ssee in ITA No. 1622 / Kol / 2011 for the Asst Year 2008-09 and ground nos. 1 to 5 raised by the assessee in ITA No. 451 / Kol / 2013 for the Asst Year 2009-10 are allowed. 4. The next ground to be decided in this appeal is that whether the disallowance u/s 14A of the Act could be made in the facts and circumstances of the case under the normal provisions of the Act as well as under the provisions of section 115JB of the Act. The assessee has raised the following grounds in this regard:- Ground .....

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of the case and in law, the CIT (Appeals) failed to appreciate the reasons and explanations offered by the appellant against the disallowance of ₹ 41, 16,36,422/- made under Section 14A of the Act and therefore the AO be directed to delete the disallowance and/or reduce the disallowance in assessing total income both as per computational provisions as also in computing book profits, if any. Ground nos. 6 & 7 of ITA No.451/Kol/2013 A.Y 2009-10 6. For that on the facts and in the circum .....

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offered by the appellant against the disallowance of ₹ 18,45,63,204/- made under Section 14A of the Act and therefore the AO be directed to delete the disallowance and/or reduce the disallowance ix] s.14A; in assessing total income both as per computational provisions as also book profits, if any. 4.1. The brief facts of this issue are that the assessee derived exempt income during the asst year 2008-09 under appeal as below:- Interest on tax free bonds of RBI 120,37,87,527 Interest on PF .....

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Power Ltd 59.778 - DVC EMTA Ltd 0.013 153.82 Crores Advances 17.50 Crores 1466.15 Crores 4.3. The RBI Tax Free Bonds were allotted to the assessee in March 2003 in satisfaction of power arrear claims of West Bengal and Jharkhand State Electricity Board (WBSEB & JSEB). Income by way of power tariff was paid to DVC (assessee herein) in the form of Tax free bonds . As such no borrowed funds were utilized. In other words, the assessee had recovered its power tariff dues from WBSEB & JSEB in .....

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(25) of the Act. The assessee corporation has moe than 11000 employees on its roll and the corporation has to maintain extensive records relating to PF contributions made by the employees and investments made in various securities. In order to maintain records of such Provident Fund contributions and its investments, the corporation has established a Provident Fund Cell within its accounts department and total salary paid to employees working in that cell worked out to ₹ 55,41,573/-. The L .....

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7; 11,08,315/- as attributable to the interest income earning activity which does not form part of total income. 4.5. The Learned AR argued that the assessee is the co-promoter of Bokaro Power Supply Co. Ltd jointly promoted with Steel Authority of India Ltd (SAIL), another PSU. The investment has been made with a view to expand the existing business of pweor generation and distribution of the assessee. In order to take benefit of synergies enjoyed by Public Sector Undertaking, a joint venture w .....

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generating companies do not incur losses due to lack of demand in their command areas. Thus the investment in Power Trading Corporation Ltd was also made in the course of assessee s principal business. The investment in shares of Bokaro Power Supply Co Ltd and Power Trading Corporation Ltd have been made by the corporation out of its own funds and not borrowed funds. 4.6. The Learned AO directly invoked the provisions of Rule 8D (2)(ii) and Rule 8D(2)(iii) of the IT Rules and made disallowance .....

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ly according to him, no expenditure were incurred for making investments in RBI tax free bonds and shares in Bokaro Power Supply Co Ltd and Power Trading Corporation Ltd and income earned thereon. He further argued that the assessee had derived exempt income in the form of interest on Provident fund investments for which some expenditure could have been incurred by the assessee which is worked out for disallowance at ₹ 11,08,315/- and accordingly pleaded that Rule 8D of the Rules cannot be .....

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d that the assessee had made earned taxable interest income of ₹ 248.78 crores and paid interest on its borrowings amounting to ₹ 211.01 crores and earned a net interest income of ₹ 37.77 crores. He argued that the assessee had sufficient own funds to make the investments and no part of borrowed funds were utilized for the same. Hence in any case, the provisions of Rule 8D(2)(ii) of the IT Rules cannot be applied in the facts of the instant case. In response to this, the Learne .....

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/s 115JB of the Act. However, we have already held that the assessee corporation is not liable to pay tax on the book profits u/s 115JB of the Act and accordingly, the issue of whether the disallowance u/s 14A of the Act could be added to the book profits u/s 115JB of the Act, becomes infructuous. Accordingly the ground raised by the assessee in this regard is allowed. Disallowance u/s 14A under normal provisions of the Act 4.8.1. We find that the assessee had disallowed a sum of ₹ 11,08,3 .....

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AO. We also find that the Learned AO had directly embarked on Rule 8D(2) without recording satisfaction in terms of Rule 8D(1) of the Rules with cogent reasons as to why the figure disallowed by the assessee u/s 14A of the Act is incorrect. We also find that the interest income earned by the assessee corporation of ₹ 248.78 crores is more than the total interest paid on loans amounting to ₹ 211.01 crores thereby making a net interest income of ₹ 37.77 crores which is offered to .....

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On availability of own funds with the assessee for making investments We also find that the assessee has got sufficient own funds to make these investments and the Learned AO had not brought any nexus between the borrowed funds vis a vis the investments made by the assessee. Without doing the same, he cannot directly presume that the investments were made out of borrowed funds. If the action of the Learned AO and Learned CITA are to be upheld, then no assessee could make any investments when th .....

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e and if the same are more than the investments made by the assessee, then it has to be presumed that the investments were made out of own funds and not out of borrowed funds. Hence the provisions of Rule 8D(2)(ii) cannot be invoked in these circumstances. 4.8.3. On non-application of Rule 8D(2)(ii) as the assessee had earned net taxable interest income Reliance placed on the coordinate bench decision of this tribunal in the case of DCIT vs M/s Trade Apartment Ltd in ITA No. 1277 / Kol / 2011 da .....

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there is no net interest expenditure , as is the case before us - upon setting off interest credited to profit and loss account, no part of interest debited can be disallowed as attributable to earning tax free dividend. The CIT(A) was thus quite justified in deleting the interest disallowance. 4.8.4. On non recording of satisfaction in terms of Rule 8D(1) We find that the Learned AO had directly embarked on Rule 8D(2) without recording satisfaction in terms of Rule 8D(1) of the Rules with cogen .....

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nditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd .....

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.Bhowmik and are of the opinion that no point of law has been raised. Therefore, this appeal is dismissed . Hence we hold that the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules without recording any satisfaction as mandated in Rule 8D(1) of the Rules is not appreciated and hence no disallowance u/s 14A of the Act by applying Rule 8D(2) of the Rules could be made in the facts of the instant case. In the instant case the assessee corporation had disallowed a sum of S .....

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ordingly the ground nos. 5 & 6 raised by the assessee in ITA No. 1622 / Kol / 2011 for the Asst Year 2008-09 and ground nos. 6 & 7 raised by the assessee in ITA No. 451 / Kol / 2013 for the Asst Year 2009-10 are allowed. 5. The last issue to be decided in the appeal for the Asst Year 2009-10 is as to whether interest u/s 234C of the Act could be levied in the facts and circumstances of the case. 5.1. The brief facts of this issue is that the assessee corporation paid the first installmen .....

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stances of the case the CIT(A) erred in upholding the levy of interest u/s. 234C of the Act for the alleged deferment of the first installment of advance tax due on 15.06.2008 even though the appellant had not committed any such default as the advance tax was paid on 16.06.2008 being Monday and in terms of the CBDT s Circular the AO could not treat the payment made on the first available working day to be the payment beyond the due date. 9. For that on the facts and in the circumstances of the c .....

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d DR argued that there is no provision in the IT Act to condone the delay and hence the interest u/s 234C of the Act is chargeable in the instant case. 5.3. We have heard the rival submissions and find that the assessee had paid the first installment of advance tax on 16.6.2008 (Monday) as the last date of paying advance tax i.e 15.6.2008 (Sunday) was a holiday. Hence the provisions of section 10 of General Clauses Act could come to the rescue of the assessee. For the sake of convenience, the Ci .....

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y the Board seeking waiver of interest chargeable under sections 234B and 234C of the Income-tax Act, 1961 for default in payment of instalments of advance tax by the due dates which are prescribed under section 211 of the Income-tax Act. In cases where the last date for making payment of such instalments (i.e., 15th September, 15th December and 15th March) happens to be a holiday and the assessee pays the due amount of advance tax on the next working day. 2. The matter has been carefully consid .....

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