TMI Blog2017 (12) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the different Benches of the Tribunal and Hon’ble High Court of Kerala that where the assessee is governed by different Acts and Rules, and is not required 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 115JB 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 115JB 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. Appeal of the assessee is partly allowed for statistical purposes. - ITA No.1394/Bang/2013 - - - Dated:- 22-12-2017 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER For the Appellant : Shri V. Srinivasan, Advocate For the Respondent : Shri H.L. Sowmya Achar, Addl. CIT(DR)(ITAT), Bengaluru ORDER Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of CIT(Appeals) inter alia on the following grounds:- 1. The orders of the authorities below in so far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 115JB of the Act since the appellant is an electricity company and the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 are not applicable to the appellant and consequently, the income determined u/s. 115JB of the Act being illegal deserves to be vacated. 2. The authorities below ought to have appreciated that the provisions of 115JB of the Act are not applicable to the appellant since the appellant is engaged in the generation and 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 circumstances of the appellant's case. 3. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered. 3. Having carefully examined the additional grounds, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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. Therefore, it cannot be treated as income from other sources and interest accrued on such fixed deposits has to be treated as business income only. Expressing a similar view, the jurisdictional High Court in the case of M/s. Hajee Jaffar Shariff (supra) vide its judgment dated 02.03.2010 again held that fixed deposits were given as security in order to avail credit facilities, therefore income earned is not income from other sources. For the sake of reference, we extract the observations of the Hon ble High Court as under:- 9. However, the learned counsel for the appeliants relied upon another decision of Apex Court in PANDIAN CHEMICALS L'ID.VS. COMMISSIONER OF INCOME TAX, to contend that with regard to deposits made with the Electricity Board, the interest on the said deposit would not be said to be derived from the industrial undertaking as it is a step removed from the industrial undertaking and therefore not liable for deduction under section 80HHC of the Act. 10. We are of the view that on the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factual matrix is covered by the decisions rendered in Bokaro Steel Ltd. (supra), Karnal Co-operative Sugar Mills Ltd. (supra) and Koshika Telecom Ltd. (supra) and, accordingly, we hold that the view expressed by the tribunal cannot be found fault with. 9. In the light of the aforesaid judgments of different High Courts, it is clear that wherever the FDRs are purchased on account 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 FDRs 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 purpose and to give a specific finding whether the FDRs were purchased for business purposes or not. If it is purchased for business purposes, the interest income earned thereon shall be treated as business income and not income from other sources in the light of aforesaid judgments of jurisdictional High Court. 10. So far as ground No.4 and additional grounds are concerned, we find that through these grounds, the assessee has questioned the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37, 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 Tribunal. The ld. Counsel for the assessee has also invited our attention to the judgment of Hon ble 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 is not a company, bound by the provisions of the Companies Act as to manner of drawing up of profit loss account or obligation to lay it before company in general meeting. Therefore, the provisions of section 115JB would not be applicable. 13. The ld. DR, on the other hand, has placed reliance upon the order of Tribunal in the assessee s own case for the AY 2005-06 in which the Tribunal has invoked the provisions of section 115JB of the Act. Besides, heavy reliance was placed upon the order of CIT(Appeals). 14. In rebuttal, the ld. Counsel for the assessee has contended that the order of Tribunal in assessee s own case was passed on 23.12.2008, whereas the amendment to section 115JB(2) was brought on the statute by the Finance Act, 2012 w.e.f. 1.4.2013. Since this aspect was not examined by the Tribunal while de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule VI to the Companies Act, 1956 (1 of 1956); or (b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company: 16. By virtue of this amendment, the Legislature has brought those companies to which proviso to sub-section (2) of section 211 of the Companies Act applies within the network of provisions of section 115JB 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-section (1), insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of company, are not required to prepare its profit loss account in accordance with Part I of Schedule VI to the Companies Act. As per subsection (3), the Central Government may, by notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet and profit loss account in the form set out in Part-I III of Schedule VI to the Companies Act, as 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 115JB would apply to the assessee s case, where he was not required to prepare the balance sheet and profit loss account as per Part I III of Schedule VI to the Companies Act. This aspect was examined by this Tribunal in the case of Karnataka Power Corporation Ltd. v. ACIT, ITA No.711/Bang/2011 in which it was held that the assessee is engaged in the generation 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 115JB of the Act are not applicable to the assessee s 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 115JB of the Act, to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative the newly inserted Explanation - 3 to section 115JB of the Act is clear that the assessee is given an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956, OR in accordance with the provisions of the Act governing such company, w.e.f. 1.4.2013. Since there is no dispute that the assessee is engaged in the generation of power and in an electricity company, it is governed by and bound to follow the relevant Electricity Act and Rules thereto in preparation of its financial statements. In this view of the matter and taking into consideration the judicial decisions cited and relied upon by the assessee, we are of the considered view that the provisions of section 115JB of the Act are not applicable to the assessee which is an electric company in the business of generation of power. In this view of the matter, the additional grounds of appeal raised by the assessee on the non-applicability of the provisions of section 115JB of the Act is allowed. 18. This issue was again examined by the Delhi Bench of the Tribunal in the case of BSES Rajdhani Power Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n corporation 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 and small. (ii) I propose to introduce a Minimum Alternate Tax (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 profit, the total income of such a company shall be deemed to be 30 per 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 infrastructure sector will, however, be exempted from the levy of MAT. (emphasis supplied) 22.15 On the basis of the aforesaid, it would be noted that Legislature intended to exclude from the purview of MAT provisions under section 115JA of the Act (which were para-materia to section 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. 22.16 The appellant, is governed by the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Finance Bill, 2012: 342 ITR (St.) 288, whereby sub-section (2) of section 115JB was substituted provides that the amendment is applicable w.e.f. 01.04.2013, that is for assessment years 2013-14 onwards. Relevant extract of the Memorandum is reproduced as under: Minimum Alternate Tax (MAT) 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 tax on its total income computed under the provisions of the Act is less than the MAT liability. Book profit for this purpose is computed by making certain adjustments to the profit disclosed in the profit and loss account prepared by the company in accordance with the Schedule VI of the Companies Act, 1956. As per section 115JB, 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 companies, e.g. insurance, banking or electricity 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13. 22.26 Further, Explanation 3 to section 115JB of the Act, which provides an option to discoms to prepare accounts as per Schedule VI of the Companies Act or the governing law/special Act in respect of assessment years prior to 2013-14, has also been inserted as part of the substantive amendments applicable from assessment year 2013-14 and onwards. The said Explanation, cannot be given such retrospective effect resulting in imposition of fresh levy for assessment years up to AY 2012-13, which was not in accordance with the language of section 115JB of the Act, as it then stood and the legislative intent. The amendments to section 115JB of the Act made by the Finance Act, 2012 are, it was submitted, substantive in nature resulting in fresh liability to tax and would therefore, 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 decision of the Constitution Bench of the Hon'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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Learned AR. 22.33 It is a well-known principle of interpretation of fiscal statutes that in the event of any doubt in regard to interpretation, particularly in cases of taxation by employing legal fiction, the benefit of doubt, if any, should be given to the assessee 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-2001-O] - 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(Bombay)-O] - CIT v. L.G Balakrishnan: [TS-5374-HC-2001(Madras)-O] - CIT v. Quantas Airlines Ltd.: [TS-5297-HC-2002(Delhi)-O] - Southern Roadways Ltd. vs. CWT: [TS-5676-HC-2000(Madras)-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 are reproduced hereunder: S.174 Save as otherwise provided in section 173, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument 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 other 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 (Section 1(4)) also provided/provides that the provisions of the said Act would apply in respect of an Electricity Company only in so far as the said provisions are not inconsistent with the Electricity Act. For a ready reference, the aforesaid provisions of the Companies Act, 1956 and 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not inconsistent with the Electricity Act. 24.4 The Learned AR has also referred the provisions laid down under sec. 181 of the Electricity Act with this submission that the said provisions provide power to the State Commission to make regulation. For a ready reference, relevant extracts of section 180 of the Electricity Act, 2003 is being reproduced hereunder: 180. Powers of State Commissions to make regulations. (1) The State Commissions may, by notification, make 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 generality 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 sub-section (1) of section 15; .. (zc) the terms and conditions for the determination of tariff under section 61; (zg) issue of tariff ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on such total income shall 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 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) .. . 24.7 On the reading of above provisions laid down under sec. 115JB of the Act relevant for the year, we find that the provisions are applied during the relevant year only to the 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956 (1 of 1956); or (b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company. 24.7 Simultaneously, Explanation 3 to aforesaid sub-section (2) of section 115JB 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 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we 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 law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively 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 obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laratory for these words 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 necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the 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 existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be constued as prospective only. 37. In the case of C.I.T., Bombay v. Scindia Steam 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 law ought to govern current activities, law passed today cannot apply to past events. 24.8 The Mumbai Bench of the ITAT in the case of Reliance Instruments Ltd. vs. ACIT Ors. (supra) has also expressed similar view. Relevant para Nos. 38 and 39 are being reproduced hereunder: 38. Having heard 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for reopening the assessment are clearly wrong and insufficient. We are urged to quash the reassessment proceedings on this short ground. 6. Learned Departmental Representative, on the other hand, vehemently relies upon the orders of the authorities below and submits that there is no specific exclusion clause for the banking companies, and in the absence of such a clause, it is not open to us to infer the same. The submission of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), 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 clauses (g) and (h) is not credited to the profit and loss account, and as reduced by,- It can be seen from clause (1) that the provision creates a legal 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1-4-2001. The relevant portion as it stands today reads as follows:- 115JB. Special provision for payment of tax by certain companies.- (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, 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 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 rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 210 of the Companies Act, 1956. 14. It may be mentioned here that under section 166 of the Companies Act every Company is mandated to hold a general meeting in each year. Section 210 mandates that every year the Board of Directors of the Company in the general meeting 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r specified therein. Though in view of the requirement under section 69 of the Electricity Supply Act the appellant is required to maintain accounts in a different form than the one contemplated under section 115JB(2), the prescription under section 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 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exempted incomes (section 10) are excluded from the purview of the alternate tax. 46.5 Since the alternate tax is applicable only where the normal total income computed is less than 30 per cent of the book 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 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 witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a legal fiction regarding the total income chargeable to tax. 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 of the assessee in the circumstances 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 section 115JB cannot be pressed into service 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 Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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