TMI Blog2018 (11) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... business profits of ₹ 11,97,79,339/- to be exempt from tax with the result that its total income became nil and no tax waspayable. This is exactly the situation contemplated by the section for which provision has been made to the effect that the company should pay tax on its book profit and thus contribute to the exchequer. Therefore, there can be no escape from the position that the assessee company is caught within the mischief of section 115JB, notwithstanding that the tax payable by it on its total income computed under the normal provisions of the Act is Rs. Nil. It would be anomalous to hold that where tax of Re.!!- is payable on the total income computed under the normal provisions of the Act, then section 115JB would be attracted, but it would not be attracted when the tax payable on the total income is Rs.Nil either because the total income is nil or is a negative figure. It is well settled that the section has to be interpreted in such a manner as to avoid absurdity and also in such a manner as to advance the cause and suppress the mischief - ITA Nos.534 to 536/Bang/2018 And Cross Objn. Nos. 76 to 78/Bang/2018 - - - Dated:- 31-10-2018 - SHRI N. V. VASUDEVAN, VICE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered opinion that the issue in the present appeal is covered against the Revenue in the assessee s own case for the assessment year 2010-11 by order dated 22.12.2017 wherein it was held as under: 15. Having carefully examined the orders of authorities 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 115JB 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 purpose of this section (s. 115JB) prepare its profit loss account for the relevant 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 are 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/statute. It was not clear as to when these companies are not required to prepare their profit loss account in accordance with the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment may, by notification in the Official Gazette, exempt any class of companies from compliance 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:- Form and contents of balance sheet and profit and loss 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 any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading Notes at the end of that Part: Provided that nothing contained in this sub-section 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of the provisions of section 115JB of the Act, to the assessee, since the assessee being an electric company, the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 are not applicable. In this regard, the learned Authorised Representative submitted that the newly inserted Explanation 3 to section 115JB(2) of the Act (Inserted by Finance Act, 2012 w.e.f. 1.4.2013) is very clear that the provisions of section 115JB of the Act is not applicable to companies engaged in the generation of power prior to 1.4.2013. This means that the assessee being in the business of generation of power prior to Assessment Year 2013-14, the provisions of section 115JB of the Act are not applicable to it and since the assessee being a company to which the proviso to section 211(2) of the Companies Act, 1956 applies, it will not be liable to tax under section 115JB of the Act. In this context, the learned Authorised Representative placed reliance on the parity of reasoning 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, Bangalore in the case of Syndic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue was again examined by the Delhi Bench 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 115JB were not at all applicable to the companies governed by special Acts, which includes power. The relevant observations of the Tribunal are 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 Reforms (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 pertinent to note that prior to the amendment to sub-section (2) of section 115JB of the Income-tax Act, 1961 ('the Act'), the deeming provisions of the said section were not applicable to companies to which proviso to sub- section (2) of section 211 of the Companies Act applied. 22.12 This is clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner 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/ DERC 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 115JB of the Act shall not apply to companies referred in proviso to subsections (1) and (2) of Section 211 of the Companies Act, i.e., companies governed by Special Acts viz.,. Banking Regulation Act, 1949, Electricity Act, 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-HCKERALA -IT - Maharashtra State Electricity Board v. JCIT: 82 ITD 422 (Mum.) = 2003-TIOL-87-ITAT-MUM - Reliance Energy Ltd. vs. ACIT: ITA No. 218/Mum/2005 (Mum.) - Krung Thai Bank PCL v. JDIT: 133 TTJ 435 (Mum.) 22.18 Accordingly, the provisions of section 115JB of the Act were, during the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are 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 accordance with the provisions of their regulatory Acts shall be taken as a basis for computing the book profit under section 115JB. II. It is noted that in certain cases, the amount standing in the revaluation reserve is taken directly to general reserve on disposal of a revalued asset. Thus, the gains attributable to revaluation of the asset is not subject to MAT liability. It is, therefore, proposed to amend section 115JB to provide that the book profit for the purpose of section 115JB shall be increased 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 refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of CIT vs. Vatika Township Private Limited: [TS-573-SC-2014-O]. To the same effect are the following decisions wherein it has been held that a provision imposing liability is governed by the normal 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 (2005) [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 retrospectively 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 applicability of provisions of section 115JB to a foreign bank which was subject to tax in India on income earned by the branch in India (PE)and preparing its accounts as per requirements of Banking Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -O] 22.34 Having regard to the legal position discussed supra, the Learned AR submitted that the provisions of section 115JB of the Act were not at all applicable to companies governed by special Acts (which includes power companies) in respect of assessment years falling prior to April 1, 2013 and thereby the appellant 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 115JB of the Act, still the assessing officer was under duty to correctly assess income of the appellant in accordance with the provisions of the Act. 23. The learned CIT(DR) on the other hand tried to justify the action of the Assessing Officer in framing the assessment under sec. 115JB of the Act. He submitted that the decisions relied upon by the Learned AR having distinguishable facts are not applicable in the case of the assessee. He pointed out that the assessee itself had declared income under the deeming provisions of sec. 115JB of the Act, thus, the assessee has no grievance in this regard and the issue raised in the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act, 2013 are being reproduced hereunder: Section 616 of the Companies Act, 1956: 616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts. The provisions 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 Act, 1938 ; (4 of 1938.) ( b) to banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Companies Act, 1949 ; (10 of 1949.) ( c) to companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent 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 Act for the time being in force, except in so far as the said provisions 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 notification in the Official Gazette, specify in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 subsection (1) of section 15; .................. .................... ( zc) the terms and conditions for the determination of tariff under section 61; .................. ( zg) issue of tariff order with modifications or conditions under subsection(3) of section 64; ( zo) any other matter which is to be, or may be, specified. ( 3) All regulations made by the State Commission under this Act shall be subject to the condition of previous publication. 24.5 On perusal of the above provisions, we concur with the submission of the assessee that under the Electricity 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 as per the provisions of the Companies Act. It is also an established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act and not otherwise. 24.8 The Learned AR in his submission has also reproduced hereinabove the speech of Hon'ble Finance Minister while reintroducing the MAT provisions vide Finance Bill, 1996 - 220 ITR (Statute) 107 with the submission that the Legislature intended to exclude it from the purview of MAT provisions under sec. 115JA of the Act (which were para materia to sec. 115JB of the 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 prepared. Having gone through the said speech of the Hon'ble Finance Minister, 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 with the submission of the Learned AR that the assessee is governed by the provisions of the Electricity Act, 2003 and accordingly 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 Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is hereby clarified that for the purposes of this section, the assessee, being 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 relevant previous year either in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956 or in accordance with the provisions of the Act governing such company. 24.8 We thus find that vide Finance Act, 2012, the scope of section 115JB of the Act was widen so as to include companies preparing profit and loss account in accordance with provisions of the relevant Regulatory Act. However, the amendments by the Finance Act, 2012 imposing new tax burden on companies which was otherwise not provided under the Act, were, in no uncertain terms, made in provisions of sec.115JB (2) w.e.f. 01.04.2013. In other words, the deeming provisions are applicable to companies governed by special Act only from assessment year 2013-14 and onwards. The memorandum explaining the provisions of the Finance Bill, 2012-240 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly upset. This principle of law is known as lexprospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre (1870) LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'OfficeCherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd (1994) 1 AC 486. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law. The above summing up is factually based on the judgments of this Court as well as English decisions. A Constitution Bench of this Court in KeshavlalJethalal 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 Gujarat Act 18 of 1965, observed as follows: The amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to pay tax is computed according to the law in force at the 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 retrospective, does not apply to the assessment for that year................ 24.6 Similar view has been expressed by the Hon'ble Supreme Court in the other cited decisions in the cases of S.S. Gadgil vs. Lal Co. (supra), Sedco Forex International Drill Inc. vs. CIT (supra) etc. Thus, it is clear and an established position of law 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 Bank of Tokyo Mitsubishi UFJ Ltd. vs. ADIT (supra) while following the principles laid down by the Hon'ble Supreme Court in Vatika Township (supra) observed that the amendment to sec. 115JB of the Act by Finance Act, 2012 was prospective since the same resulted in substantial change in computation provisions. In that case, the ITAT was adjudicating the issue regarding applicability of provisions of sec. 115JB of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard the rival submissions and after perusing the relevant material on record we find that the Tribunal in assessee's 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 Act and prepared its accounts in view of those very policies. Following those very policies, the account's in accordance 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 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 A.Y. 88-89, we hold that provisions of sec. 115JB 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 14 of the said order and also in the order for A.Y. 2004-05. Respectfully following the precedents, we accept the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel, according to the departmental representative, are clearly contrary to the legislative intent and plain wording of the statute. 7. The plea of the assessee is indeed well taken, and it meets our approval. The provisions of sec. 115JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Part II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax under sec.115JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to Sec. 211(2) of the Companies Act. The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The ITA provisions of Section 115JB cannot thus be applied to the case of banking company . The Hon'ble Kerala High Court in its recent decision in the case of Kerala State Electricity Board vs. DCIT (2010) - 329 ITR 91 (Ker.) after detailed deliberation and referring the CBDT understanding (Circular No. 762 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiction regarding the total income chargeable to tax. Such a fiction is applicable only to those assessees which - (a) are Companies except the Companies engaged in the business of either generation or distribution of electricity, (b) that such a fiction is made applicable to the Companies only with reference to the previous year relevant to the assessment year commencing after 1-4-1988 and ending 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 profit . The fiction being that the total income for the purpose of assessment shall be deemed to be 30 per cent of the book profit. In other 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 Company the total income is less than thirty per cent of the book profit. 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year commencing on or after the 1st day of April, 2007 is less than ten 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 income shall be the amount of income-tax at the rate of ten per cent. ( 2) Every assessee, being a company shall for the purposes of this section, prepare its profit and loss account for the relevant 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 the 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 general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where the company has ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the relevant period and also a profit and loss account for the period. 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 definition a Company under the Income-tax Act and deemed to be a Company for the purpose of Income-tax Act, (by virtue of the declaration under section 80 of the Electricity Supply Act) it is not a Company for the purpose of Companies Act. Therefore, the appellant is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. As a matter of fact, a general meeting contemplated under section 166 of the Companies Act is not possible in the case of the appellant as there are no shareholders for the appellant Board. On the other hand, under section 69 of the Electricity Supply Act, the appellant 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 Government and notified in the Official Gazette. The prescription of the rules in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Electricity Supply Act. Nothing in theory prevents the Parliament from obligating the appellant to prepare another profit and loss account as prescribed under section 115JB(2) for the purpose of the Income-tax Act. The question is whether such an obligation is created under section 115JB(2) insofar as the appellant is concerned. In examining the said question, the legislative history 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 115JB and its fore-runners - Sections 115J and 115JA - we have already noticed that they provided for the determination of the total 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 115J was introduced, the section expressly excluded from its operation bodies like the appellant. Coming to section 115JA, though such express exclusion is absent, the Central Board of Direct Taxes issued a Circular No. 762, dated 18th February, 1998 - [which is binding on the Department, see K.P. Varghese v. ITO [TS-11-SC- 1981-O] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom export profits do not have their component of export income higher than 70 per cent of the book profits, the provisions of section 115JA will not be attracted. In other words, the MAT 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 generation and distribution of power and those enterprises engaged in developing, maintaining and operating infrastructure facilities under sub-section (4A) of section 80-IA are exempted from the levy of MAT, so that the incentive given to infrastructure development is not 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 profits and paid handsome dividends to the shareholders without paying any tax to the exchequer. Such a result was achieved by such Companies 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 for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression book profit for the purpose of the section is explained to mean the net profit as increased or decreased by the various amounts shown in the various sub-clauses 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 is required to be prepared in the manner specified therein. Section 115JB 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 before the annual general meeting conducted, in accordance with section 210 of the Companies Act, 1956. Though the Kerala State Electricity Board, a statutory corporation constituted by virtue of section 5 of the Electricity (Supply) Act, 1948 answers the description of an Indian company and therefore a company within the meaning of section 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Electricity Board while making the assessment of the tax payable under the Income-tax Act. Section 43B(a) deals with any sum payable by the assessee by way of tax, duty, . . . under any law for the time being in force . The words, by way of tax are indicative of the nature of liability. The liability to pay and the corresponding authority of the State to collect the tax (flowing from a statute) is essentially in the realm of the rights of the sovereign, whereas 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 wherein the relationship of principal and agent is created by a statute. Section 43B(a) deals with amounts payable to the sovereign qua sovereign, not amounts payable to the sovereign qua principal. Therefore section 43B cannot be invoked in the case of the Electricity Board with regard to electricity duty collected by it pursuant to the obligation under section 5 of the Kerala Electricity Duty Act, 1963. [The court made it clear that it had not decided whether the amount should be treated as income for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the normal provisions of the Act and the tax of 7.5% of the book profit. Therefore, necessarily section 115JB has to use the expression tax payable by the assessee on such total income . In sections I15J and I15JA, the comparison is between the figure of total income computed under the normal provisions of the Act and 30% Of the book profit and, therefore, these sections have necessarily to use the expression total income of such assessee chargeable to tax . Nothing really turns on the language employed in these sections since the language employed is consistent with what is being compared. If the total income of the assessee computed in accordance with the normal provisions of the Act is to be compared with a percentage of the book profit then the expression which is necessarily to be used is chargeable whereas if the comparison to be made is between the tax on the total income computed under the normal provisions of the Act and the tax on the book profit, expressed as a percentage of the book profit, then the section has to necessarily refer to the tax payable by the assessee. From this it does not follow that there has to be some tax which is payable by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. These observations were made by the Supreme Court in relation to the assessment under the head capital gains . It was held that where the cost of an asset, which was deductible from the sale price for ascertaining the capital gains, was incapable of ascertainment any reason, it can be said that the sale of such an asset was not intended at all to be assessed to capital gains. In that case, the assessee sold goodwill which was no doubt considered as a capital asset but since it was self-generated, the precise cost of the goodwill was incapable of ascertainment. The sale value of the goodwill was, therefore, held to be held to be exempt from capital gains tax. It has to be borne in mind that the observations of the Supreme Court were made with reference to the nature of an asset, the cost of acquisition of which was incapable of being ascertained. The argument in the case before us similarly is that you cannot ascertain the tax payable by the assessee if the total income computed under the normal provisions of the Income-tax Act is Rs. Nil. The argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as an equitable measure in order to levy tax on companies which made huge profits and declared substantial dividends but did not pay income-tax because of the various tax concessions and incentives availed of by them. It was thought that such companies had the ability to pay taxes and they ought to contribute to the exchequer. The interpretation of section 115JB which is similar to section 115J and which we have adopted, is in consonance with the object of the section namely, that all companies which make handsome profits must- pay tax irrespective of the factthat -they would not have paid tax on their profits if their profits had been computed under the normal provisions of the Act in view of present case has made substantial book profit which according to its balance sheet comes to ₹ 6,18,3 6,130!-. However, by virtue of the relief available uls.801A, it has claimed the entire business profits of ₹ 11,97,79,339/- to be exempt from tax with the result that its total income became nil and no tax waspayable. This is exactly the situation contemplated by the section for which provision has been made to the effect that the company should pay tax on its book profit an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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