Damodar Valley Corporation, Kolkata V. Addl. CIT, Range - 9, Kolkata, Kolkata

ITA 1622/KOL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5150 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS C
• Assessee Lawyers: D S DAML E FCA LD
• Keywords: Depreciation; Earning of tax free income; Deemed to accrue or arise in india; Commercial expediency; Revised return
• Section: 143(3); 234B; 14A; 115JB; 80IB; 139(5); 69

Judgement Text

ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1622/KOL/2011 A.Y 2008-09 DAMODAR VALLEY CORPORATION VS. ADDL. CIT, RANGE-9 , KOLKATA PAN: AABCD 0541M (APPELLANT) (RESPONDENT) ITA NO. 451/KOL/2013 A.Y 2009-10 DAMODAR VALLEY CORPORATION VS. D CIT, CIR-9, KOLK ATA PAN: AABCD 0541M (APPELLANT) (RESPONDENT) FOR THE APPELLANT/ASSESSEE: SHRI D.S DAMLE, FCA, LD.AR FOR THE RESPONDENT/DEPARTMENT: S HRI RAJAT SUBHRA BISWAS, CIT, LD. DR DATE OF HEARING: 10-12 -2015 DATE OF PRONOUNCEMENT: 13-01- 2016 ORDER SHRI M.BALAGANESH, AM : THESE APPEALS OF THE ASSESSEE ARISE OUT OF THE OR DERS 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 TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT). ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 2 2. THE ISSUES INVOLVED IN BOTH THE APPEALS ARE IDE NTICAL AND HENCE THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY A COMMON ORDE R FOR THE SAKE OF CONVENIENCE. 3. THE FIRST ISSUE TO BE ADJUDICATED IN THIS APPEA L IS AS TO WHETHER THE PROVISIONS OF SECTION 115JB OF THE ACT ARE APPLICABLE TO THE ASSE SSEE BEING A CORPORATION ESTABLISHED UNDER DAMODAR VALLEY CORPORATION ACT, 1 948 FOR THE ASST YEARS 2008- 09 AND 2009-10. THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS IN THIS REGARD:- GROUND NOS. 1 TO 4 OF ITA NO.1622/KOL/2011 A.Y 200 8-09 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) WAS GROSSLY UNJUSTIFIED IN RE JECTING THE APPELLANT'S CLAIM THAT THE DEEMING PROVISIONS OF SE CTION 115JB ARE NOT APPLICABLE TO THE APPELLANT AND THEREFORE TOTAL INC OME 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) WAS GROSSLY UNJUSTIFIED IN NO T ENTERTAINING THE STATUTORY CLAIM OF THE APPELLANT THAT THE PROVISION S OF SECTION 115JB HAD NO APPLICATION PRIMARILY ON THE GROUND THAT THE AFORESAID CLAIM WAS NOT MADE IN THE RETURN OF INCOME OR REVISED RET URN OF INCOME FILED BY THE APPELLANT. 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 E LECTRICITY BOARD VS DCIT WAS SQUARELY APPLICABLE TO THE APPELLANT IN TE RMS OF WHICH STATUTORY CORPORATIONS NOT REGISTERED UNDER THE COM PANIES ACT, 1956 WERE NOT LIABLE TO BE ASSESSED ON 'BOOK PROFITS' UN DER 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 T HE APPELLANT FOR AY 2008-09 ONLY WITH REFERENCE TO COMPUTATIONAL PROVIS IONS OF THE LT. ACT, 1961, WITHOUT INVOKING DEEMING PROVISIONS OF SECTIO N 115JB OF THE ACT. GROUND NOS. 1 TO 5 OF ITA NO.451/KOL/2013 A.Y 2009 -10 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) WAS GROSSLY UNJUSTIFIED IN RE JECTING THE APPELLANT'S CLAIM THAT THE DEEMING PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 3 THE APPELLANT AND THEREFORE TOTAL INCOME WAS NOT AS SESSABLE WITH REFERENCE TO 'BOOK PROFIT'. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) WAS GROSSLY UNJUSTIFIED IN NO T ENTERTAINING APPELLANT'S CONTENTION THAT SECTION 115JB HAD NO AP PLICATION, PRIMARILY ON THE GROUND THAT THE SUCH CLAIM WAS NOT MADE BY F ILING 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 E LECTRICITY BOARD VS DCIT WAS SQUARELY APPLICABLE TO THE APPELLANT IN TE RMS OF WHICH A STATUTORY CORPORATION WHICH IS NOT REGISTERED UNDER THE COMPANIES ACT, 1956 IS 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 THE CIT(A) FAILED TO APPRECIATE THAT EXPLANATION 3 TO S EC 115JB ENACTED BY THE FINANCE ACT 2012 AMPLIFIED THE LEGISLATIVE INTE NT OF IMPOSING CHARGE OF TAX ONLY ON THE ASSESSEES WHO WERE 'COMPANIES' W ITHIN THE MEANING OF THE COMPANY'S ACT 1956 AND TO WHICH PROVISO TO S EC 211 (2) OF THE SAID ACT WAS APPLICABLE AND IN THAT VIEW OF THE MAT TER 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 T HE APPELLANT FOR AY 2009-10 ONLY WITH REFERENCE TO COMPUTATIONAL PROVIS IONS OF THE I.T. ACT, 1961, WITHOUT INVOKING DEEMING PROVISIONS OF SECTIO N 115JB OF THE ACT. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LEA RNED AO INVOKED THE PROVISIONS OF SECTION 115JB OF THE ACT. BEFORE THE LOWER AUTHORI TIES, IT WAS STATED :- A. THAT ASSESSEE IS A STATUTORY CORPORATION ESTABLISHE D UNDER THE ACT OF PARLIAMENT NAMELY DAMODAR VALLEY CORPORATION (DVC) ACT, 1948 MEANT TO PROVIDE FOR THE ESTABLISHMENT AND REGULATI ON OF THE CORPORATION FOR THE DEVELOPMENT OF THE DAMODAR VALLEY IN THE PR OVINCES OF BIHAR AND WEST BENGAL. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 4 B. THAT ASSESSEE CORPORATION CONSISTS OF 3 PARTICIPATI NG GOVERNMENTS VIZ UNION GOVERNMENT AND THE PROVINCIAL GOVERNMENTS OF BIHAR (NOW JHARKHAND) AND WEST BENGAL. C. THAT ASSESSEE CORPORATION DOES NOT HAVE EQUITY CAPI TAL 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. T HE ANNUAL FINANCIAL STATEMENTS ARE PREPARED IN THE FORM PRESCRIBED UNDE R THE SAID ACT. E. THAT ASSESSEE CORPORATION DOES NOT PREPARE ITS ANNU AL ACCOUNTS IN ACCORDANCE OR CONFORMITY WITH SCHEDULE VI OF THE CO MPANIES ACT, 1956 AND ACCORDINGLY THE NET PROFIT OF THE CORPORATION I S NOT ARRIVED AT THE PROVISIONS OF PART II & III OF SCHEDULE VI TO COMPA NIES ACT, 1956. F. THAT ASSESSEE CORPORATION DOES NOT DISTRIBUTE ITS P ROFITS BY WAY OF DIVIDEND EITHER TO PARTICIPATING GOVERNMENTS OR ANY OTHER PERSON. IN VIEW OF THE ABOVE, THE LEARNED AR ARGUED THAT TH E PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE CORPO RATION. 3.2. IN RESPONSE TO THIS, THE LEARNED DR ARGUED T HAT 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 RE TURN WAS FILED FOR MAKING THIS FRESH CLAIM. HE PLACED RELIANCE ON THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD VS CIT REPORTED IN 2 84 ITR 323 (SC) IN THIS REGARD. HE FURTHER PLACED RELIANCE ON SECTION 43 O F DVC ACT, 1948 WHICH IS AS UNDER:- SECTION 43 : LIABILITY TO PAY CENTRAL TAXES ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 5 (1) THE CORPORATION SHALL BE LIABLE TO PAY ANY TAXE S ON INCOME LEVIED BY THE CENTRAL GOVERNMENT IN THE SAME MANNER AND TO TH E SAME EXTENT AS A COMPANY. (2) THE PROVINCIAL GOVERNMENTS SHALL NOT BE ENTITLE D TO ANY REFUND OF ANY SUCH TAXES PAID BY THE CORPORATION. HE FURTHER ARGUED THAT THE PROVISIONS OF SECTION 58 OF DVC ACT, 1948 IS A GENERAL PROVISION WHEREAS PROVISIONS OF SECTION 43 OF DVC A CT, 1948 IS A SPECIAL PROVISION WHICH PROVIDES THAT DVC HAS TO PAY CENTRAL INCOME T AX IN THE STATUS OF COMPANY. ACCORDINGLY HE ARGUED THAT THE PROVISIONS OF SECTIO N 115JB OF THE ACT IS ALSO APPLICABLE TO THE ASSESSEE CORPORATION. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE VARIOUS CASE LAWS RELIED UPON BY THE COUNSELS FOR BOTH THE SIDES. THE FACT S REGARDING THE PURPOSE OF THE ASSESSEE CORPORATION AND THE MANNER IN WHICH IT HAS BEEN ENACTED ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT IN TERMS OF THE PROVISIONS OF THE DVC ACT, 1948, THE ASSESSEE CORPORATION IS ENGAGED IN THE BU SINESS OF GENERATION OF ELECTRICITY, IRRIGATION AND FLOOD CONTROL. WE FIN D THAT THE ANNUAL REPORT OF ASSESSEE CORPORATION ARE TO BE PREPARED AS PER SECTION 45 OF DVC ACT, 1948 WHICH IS AS BELOW:- SECTION 45 - ANNUAL REPORT (1) THE ASSESSEE CORPORATION SHALL PREPARE IN SUCH FORM AS MAY BE PRESCRIBED , AN ANNUAL REPORT WITHIN SIX MONTHS AFT ER THE END OF EACH FINANCIAL YEAR GIVING A TRUE AND FAITHFUL ACCOUNT OF ITS ACTIVITIES DURING THE FINANCIAL YEAR WITH PARTICULAR REFERENCE TO IRR IGATION ; WATER SUPPLY ; ELECTRICAL ENERGY ; FLOOD CONTROL ; NAVIGATION ; FO RESTATION ; SOIL EROSION; USE OF LAND ; RESETTLEMENT OF DISPLACED POPULATION ; SANITATION AND PUBLIC HEALTH MEASURES AND ECONOMIC AND SOCIAL WELFARE OF THE PEOPLE. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 6 (2) THE ANNUAL REPORT SHALL ALSO GIVE A TRUE AND FA ITHFUL ACCOUNT OF THE INCOME AND EXPENDITURE DURING THE PREVIOUS FINANCIA L YEAR , THE NET AMOUNT ATTRIBUTABLE TO EACH OF THE THREE MAIN OBJEC TS AND THE DISTRIBUTION OF THE CAPITAL COST BETWEEN THE THREE PARTICIPATING GOVERNMENTS AND SHOW THE PROGRESSIVE TOTAL FROM THE INCEPTION OF THE CORPORATION AND UPTO DATE FINANCIAL RESULTS. (3) THE PAYMENTS PROVISIONALLY MADE BY EACH OF THE THREE PARTICIPATING GOVERNMENTS ON THE BASIS OF THE BUDGET ESTIMATES SH ALL BE ADJUSTED AS SOON AS POSSIBLE IN ACCORDANCE WITH THE ALLOCATION MADE IN THE ANNUAL REPORT. (4) PRINTED COPIES OF THE ANNUAL REPORT SHALL BE MA DE AVAILABLE TO EACH OF THE THREE PARTICIPATING GOVERNMENTS BY THE 15 TH DAY OF OCTOBER EACH YEAR. (5) THE ANNUAL REPORT SHALL BE LAID BEFORE THE CENT RAL 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 AC T, 1948 ARE AS BELOW:- SECTION 46 OTHER ANNUAL FINANCIAL STATEMENTS (1) THE CORPORATION SHALL ALSO PREPARE SUCH OTHER A NNUAL FINANCIAL STATEMENTS IN SUCH FORM AND BY SUCH DATES AS MAY BE PRESCRIBED. (2) PRINTED COPIES OF EACH SUCH ANNUAL FINANCIAL ST ATEMENTS SHALL BE MADE AVAILABLE TO EACH OF THE THREE PARTICIPATIN G GOVERNMENTS BY SUCH DATE AS MAY BE PRESCRIBED . 3.3.2. WE FIND THAT THE PROVISIONS OF SECTION 46 OF DVC AC T, 1948 ARE AS BELOW:- SECTION 47 ACCOUNTS AND AUDIT THE ACCOUNTS OF THE CORPORATION SHALL BE MAINTAINED AND AUDITED IN SUCH MANNER AS MAY, IN CONSULTATION WITH AUDITOR GENERAL OF INDIA, BE PRESCRIBED. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 7 3.3.3. WE FIND THAT THE RULES GOVERNING ACCOUNTS AN D 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 ACCOU NT OF ITS REVENUE RECEIPTS, LOANS OR ADVANCES DUE TO IT, SHAL L 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 COM PLETE AND ACCURATE BOOKS OF ACCOUNTS. 21. IN THE MAINTENANCE OF ACCOUNTS AND THE CLASSIFI CATION OF CHARGES, THE OBJECT SERVED BY THE EXPENDITURE RATHE R THAN THE AGENCY INCURRING THE EXPENDITURE SHOULD BE THE GUID ING PRINCIPLE. SUBJECT TO THIS GENERAL REQUIREMENT, THE ACCOUNTS S HALL BE MAINTAINED UNDER THE HEADS PRESCRIBED IN ANNEXURE I FOR THE BUDGET OF THE CORPORATION. 22. A CONSOLIDATED ACCOUNT OF THE CORPORATION SHALL BE PREPARED AFTER OBTAINING ACCOUNTS FROM THE DISBURSING OFFICE RS. 23. THE ACCOUNTS OF EACH MONTH SHALL BE MADE UPTO T HE END OF THE MONTH BY THE VARIOUS DRAWING OFFICERS OF THE CORPOR ATION AND A CONSOLIDATED ACCOUNT OF THE CORPORATION AS A WHOLE SHALL BE PREPARED AND PLACED BEFORE THE CORPORATION AT THE E ND 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 S HALL BE MAINTAINED AND PRESENTED TO THE CORPORATION SIMULTA NEOUSLY WITH THE ACCOUNTS FOR EACH MONTH. 25. WITHIN SIX MONTHS OF THE END OF EACH FINANCIAL YEAR, THE ANNUAL ACCOUNTS, PREPARED IN THE FORMS PRESCRIBED IN ANNEX URE II TO THESE RULES, SHOWING THE FINANCIAL RESULTS OF IRRIGATION, ELECTRICITY AND FLOOD CONTROL SCHEMES WITH SUCH SUBSIDIARY ACCOUNTS AS MAY BE NECESSARY, SHALL BE PLACED BEFORE THE CORPORATION, AND, AFTER THE ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 8 ACCOUNTS HAVE BEEN DULY PASSED, COMMUNICATED TO THE PARTICIPATING GOVERNMENTS AND THE AUDIT OFFICER. 26. INITIAL ACCOUNTS FOR STORES INCLUDING MATERIALS ON THE SITE OF WORKS, AND TOOLS AND PLANT (INCLUDING SPECIAL TOOLS AND PLANT) SHALL BE MAINTAINED IN ACCORDANCE WITH SUCH INSTRUC TIONS 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 AUDITE D BY AN OFFICER APPOINTED BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA, AND UNDER HIS DIRECTION AND CONTROL. A STATEMENT OF T HE RESULTS OF AUDIT FOR EACH MONTH, SHALL BE PRESENTED TO THE CO RPORATION. 29. THE AUDIT OFFICER SHALL BE SUPPLIED WITH COPIES OF ALL CONTRACTS AND OTHER ORDERS INVOLVING REVENUE OR EXPENDITURE O F THE CORPORATION DULY AUTHENTICATED BY AN OFFICER OF THE CORPORATION, WHO IS COMPETENT TO ENTER INTO THE CONTRACT OR TO I SSUE THE ORDER. 30. THE AUDIT OFFICER SHALL HAVE ACCESS TO ALL PAPE RS, BOOKS, RECORDS, FILES AND ACCOUNTS AT ALL REASONABLE TIMES . 31. THE AUDIT OFFICER SHALL CERTIFY TO THE CORRECTN ESS OF THE ANNUAL ACCOUNTS PREPARED BY THE CORPORATION AND APPEND TO THE CERTIFICATE AN AUDIT REPORT. THE ANNUAL ACCOUNTS S O CERTIFIED AND THE AUDIT REPORT SHALL, AFTER COUNTERSIGNATURE BY T HE COMPTROLLER AND AUDITOR GENERAL BE SUBMITTED WITH THREE ADDITIO NAL COPIES TO THE PRESIDENT. ONE COPY SHALL BE RETAINED BY THE C ENTRAL GOVERNMENT AND ONE COPY EACH SHALL BE SENT TO THE O THER TWO PARTICIPATING GOVERNMENTS. THE AUDIT REPORT SHALL BE PRINTED ALONG WITH THE ANNUAL REPORT AND ANNUAL ACCOUNTS. 32. AFTER THE ACCOUNTS ARE AUDITED NO CORRECTION SH ALL BE MADE THEREIN WITHOUT REFERENCE TO THE AUDIT OFFICER. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 9 33. THE AUDIT OFFICER SHALL BE CONSULTED BEFORE ANY MODIFICATION IS MADE IN ANY FORM IN WHICH ACCOUNTS ARE MAINTAINE D . 3.3.4. WE FIND THAT THE PROVISIONS OF SECTION 58 OF DVC AC T, 1948 ARE AS BELOW:- SECTION 58 EFFECT OF OTHER LAWS THE PROVISIONS OF THIS ACT OR ANY RULE MADE THEREUN DER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING CONTAINED IN ANY EN ACTMENT OTHER THAN THIS ACT OR ANY INSTRUMENT HAVING EFFECT BY VI RTUE 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 CO RPORATION SHALL PAY TAXES ON ANY INCOME. THE BOOK PROFITS CONTEMPLATED U/S 115JB O F THE IT ACT IS ONLY DEEMED INCOME. THE BOOK PROFIT IS AN ALIEN TO THE BASIC C ONCEPT OF INCOME. THE PROVISIONS OF SECTION 115JB OF THE ACT IS ALSO A DE EMING PROVISION. MOREOVER, THE AMENDMENT WITH EFFECT FROM 1.4.2013 MAKES IT VERY C LEAR BY REMOVING THE AMBIGUITY PRESENT IN THE STATUTE. 3.5. WE FIND THAT THE FORM OF BALANCE SHEET OF THE CORPORATION IS PRESCRIBED IN ANNEXURE II OF THE DAMODAR VALLEY CORPORATION RULES WHICH IS KEPT IN PAGES 38 TO 40 OF PAPER BOOK OF ASSESSEE AND FORM OF REVENUE AC COUNT FOR THE YEAR ENDING 31 ST MARCH IS IN PAGE 43 TO 44 OF PAPER BOOK OF ASSESSEE . WE FIND FROM THE PROVISIONS OF DVC ACT, 1948, THE ASSESSEE CORPORATI ON DOES NOT CONDUCT ANY ANNUAL GENERAL MEETING. WE HOLD THAT SECTION 115J B 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 ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 10 REFERRED TO SHOULD BE CONSTRUED AS COMPANY AS DEFIN ED UNDER COMPANIES ACT, 1956 ONLY. THE SECTION 115JB OF THE ACT CLEARLY STATES THAT THE ACCOUNTS ARE TO BE PREPARED IN ACCORDANCE WITH PART II OF SCHEDULE VI OF COMPANIES ACT, 1956. WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LEARNED A R THAT THE COMPUTATION PROVISION STATES THAT NET PROFIT AS PER PER PROFIT AND LOSS ACCOUNT PREPARED AS PER PART II OF SCH VI OF COMPANIES ACT, 1956. WE HOLD THAT SEC 211 OF COMPANIES ACT, 1956 IS NOT APPLICABLE TO ASSESSEE HEREIN, WHEREAS IT I S VERY MUCH APPLICABLE TO COMPANIES DEFINED UNDER COMPANIES ACT, 1956. WE HOLD THAT ASSESSEE CORPORATION IS NOT A COMPANY UNDER THE COMPANIES AC T, 1956. ONLY FOR INCOME TAX ASSESSMENT PURPOSES, THE ASSESSEE CORPORATION I S GIVEN THE STATUS OF A COMPANY. WE HOLD THAT WHEN THE COMPUTATION PROVISION COULD N OT BE APPLIED IN A PARTICULAR CASE, IT IS INDICATIVE OF THE FACT THAT THE CHARGIN G 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) . E XPLN 3 WAS NOT PROPOSED AT THAT TIME. BUT WHEN THE ACT WAS ENACTED, EXPLN 3 W AS INSERTED. EXPLN 3 STATES THAT ASSESSEE BEING A COMPANY TO WHICH SECTION 211( 2) OF COMPANIES ACT APPLIES. ADMITTEDLY, THE ACCOUNTS OF ASSESSEE CORPORATION AR E NOT PREPARED AS PER SECTION 211(2) OF COMPANIES ACT, 1956. WE FIND THAT THE E XPLANATION 3 TO SECTION 115JB OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT 201 2 TO CLARIFY THAT ONLY ASSESSES BEING COMPANIES AND TO WHOM PROVISIONS OF THE COMPA NIES ACT , 1956 ARE APPLICABLE COME WITHIN THE AMBIT OF SECTION 115JB O F THE ACT. IN OTHER WORDS, UNLESS AN ASSESSEE COMES WITHIN THE AMBIT OF SECTIO N 211 OF THE COMPANIES ACT, 1956, IT WAS NOT COVERED BY THE EXPLANATION 3 TO SE CTION 115JB AND AS A NECESSARY COROLLARY SECTION 115JB WAS NOT APPLICABLE TO IT. W E FURTHER HOLD THAT AMENDMENT IS BROUGHT ONLY FROM 1.4.2013 AND HENCE IS NOT RETROSP ECTIVE. INFACT LOT OF AMENDMENTS WERE BROUGHT IN FINANCE ACT 2012 WITH RE TROSPECTIVE EFFECT. BUT THE AMENDMENT IN EXPLANATION 3 TO SECTION 115JB OF THE ACT WAS SPECIFICALLY MADE ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 11 EFFECTIVE ONLY FROM 1.4.2013 HAVING PROSPECTIVE EFF ECT. HENCE THE LEGISLATURE IN ITS WISDOM HAD INTENTION ONLY TO PROSPECTIVELY TAX THE ASSESSEE CORPORATION UNDER MAT. WE ALSO FIND THAT THE EXPRESSION FOR THE R EMOVAL OF DOUBTS , IT IS HEREBY CLARIFIED USED IN EXPLANATION 3 TO SECTION 115JB S HOULD NOT BE CONSTRUED AS CLARIFICATORY IN NATURE AND THEREBY GIVING RETROSPE CTIVE EFFECT. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HONBLE APEX 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 A SSESSEE 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 O F THE ACT, A COMPANY IS LIABLE TO PAY MAT OF EIGHTEEN AND ONE HA LF PER CENT OF ITS BOOK PROFIT IN CASE OF TAX ON ITS TOTAL INCOME COMP UTED UNDER THE PROVISIONS OF THE ACT IS LESS THAN MAT LIABILITY. BOOK PROFIT FOR THIS PURPOSE IS COMPUTED BY MAKING CERTAIN ADJUSTMENTS TO THE PROFIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED B Y THE COMPANY IN ACCORDANCE WITH THE SCHEDULE VI OF THE COMPANIES AC T, 1956. AS PER SECTION 115JB, EVERY COMPANY IS REQUIRED TO PREPARE ITS ACCOUNTS AS PER SCHEDULE VI OF THE COMPANIES ACT, 1 956. HOWEVER, AS PER THE PROVISIONS OF THE COMPANIES ACT, 1956, CERT AIN COMPANIES E.G. INSURANCE, BANKING OR ELECTRICITY COMPANY ARE ALLOW ED TO PREPARE THEIR PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROV ISIONS SPECIFIED IN THEIR REGULATORY ACTS. IN ORDER TO ALIGN THE PROVI SIONS OF INCOME-TAX ACT WITH THE COMPANIES ACT, 1956, IT IS PROPOSED TO AME ND 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 ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 12 ACCORDANCE WITH THE SCHEDULE VI OF THE COMPANIES AC T, 1956, PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVI SIONS OF THEIR REGULATORY ACTS SHALL BE TAKEN AS A BASIS FOR COMP UTING THE BOOK PROFIT UNDER SECTION 115JB. II. IT IS NOTED THAT IN CERTAIN CASES, THE AMOUNT S TANDING IN THE REVALUATION RESERVE IS TAKEN DIRECTLY TO GENERAL RE SERVE ON DISPOSAL OF A REVALUED ASSET. THUS, THE GAINS ATTRIBUTABLE T O REVALUATION OF THE ASSET IS NOT SUBJECT TO MAT LIABILITY. IT IS, THEREFORE, PROPOSED TO AMEND SECTION 115JB T O PROVIDE THAT THE BOOK PROFIT FOR THE PURPOSE OF SECTION 11 5JB SHALL BE INCREASED BY THE AMOUNT STANDING IN THE REVALUATION RESERVE RELATING TO THE REVALUED ASSET WHICH HAS BEEN RETIR ED OR DISPOSED, IF THE SAME IS NOT CREDITED TO THE PROFIT AND LOSS ACC OUNT. III. IT IS ALSO PROPOSED TO OMIT THE REFERENCE OF P ART III OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956 FROM SECTION 115JB IN VIEW OF OMISSION OF PART III IN THE REVISED SCHEDUL E VI UNDER THE COMPANIES ACT 1956. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSM ENT YEAR 2013- 14 AND SUBSEQUENT ASSESSMENT YEARS. 3.7. IN VIEW OF THE ABOVE, WE HOLD THAT IN VIEW O F THE LEGISLATIVE CHANGE BROUGHT ABOUT BY THE INTRODUCTION OF EXPLANATION 3 IN SECTI ON 115JB OF THE ACT BY THE FINANCE ACT, 2012 , THE ASSESSEES CONTENTION IN FA CT STANDS MORE FORTIFIED. THE EXPLANATION 3 TO SECTION 115JB MAKES IT EVIDENTLY C LEAR THAT SECTION 115JB IS APPLICABLE ONLY TO ENTITIES REGISTERED AND RECOGNIZ ED TO BE COMPANIES UNDER THE COMPANIES ACT, 1956. SINCE THE ASSESSEE IS NOT A C OMPANY WITHIN THE MEANING OF COMPANIES ACT, 1956 , SECTION 211(2) AND PROVISO TH EREON IS NOT APPLICABLE AND ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 13 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 INTEN TION OF MAT IS THAT THE COMPANIES WERE DECLARING HUGE PROFITS AS PER THEIR COMPANIES ACT AND DECLARING DIVIDENDS TO ITS SHAREHOLDERS BUT PAYING NIL TAX OR LESSER TAX UNDER THE IT ACT DUE TO VARIOUS EXEMPTIONS / DEDUCTIONS LIKE SECTIONS 10A/ 10B/ 80IA / 80IB. TO JUSTIFY THE IMPOSITION, REAL INCOME THEORY WAS STRESSED AND IT WAS HELD THAT THE COMPANIES CANNOT BE ALLOWED TO HAVE TWO FACES, ONE FOR SHAREH OLDER AND ANOTHER FOR TAXMAN. SECTION 115JA WAS ENACTED BY RESTRUCTURING THE PROV ISIONS OF SECTION 115J WITH CERTAIN MINOR CHANGES AND THEREAFTER SECTION 115JB WAS ENACTED BY BRINGING MINOR CHANGES IN SECTION 115JA. THE PROVISIONS OF SECTI ON 115J, 115JA AND 115JB ARE BY AND LARGE SIMILAR TO EACH OTHER. 3.9. THE SCOPE AND EFFECT OF SECTION 115JA WAS ELA BORATED IN THE DEPARTMENT CIRCULAR NO. 762 DATED 18.2.1998. THE RELEVANT POR TION IS REPRODUCED HEREUNDER:- ALTERNATE MINIMUM TAX ON COMPANIES- 46.1 IN RECENT TIMES, THE NUMBER OF ZERO-TAX COMPA NIES AND COMPANIES MARGINAL TAX HAS GROWN. STUDIES HAVE SHOW N THAT IN SPITE OF THE FACT THAT COMPANIES HAVE ENTERED SUBS TANTIAL BOOK PROFITS AND HAVE PAID HANDSOME DIVIDENDS, NO TAX HA S BEEN PAID BY THEM TO THE EXCHEQUER. 46.2 THE FINANCE (NO.2) ACT, 1996, HAS INSERTED A NEW SECTION 115JA OF THE INCOME-TAX ACT, SO AS TO LEVY A MINIMU M TAX ON COMPANIES WHO ARE HAVING BOOK PROFITS AND PAYING D IVIDENDS BUT ARE NOT PAYING ANY TAXES. THE SCHEME ENVISAGES THE PAYMENT OF A MINIMUM TAX BY DEEMING 30 PER CENT OF THE BOOK PRO FITS COMPUTED UNDER THE COMPANIES ACT, AS TAXABLE INCOME, IN A CA SE WHERE THE TOTAL INCOME AS COMPUTED UNDER THE PROVISIONS OF TH E INCOME-TAX ACT, IS LESS THAN 30 PER CENT OF THE BOOK PROFIT. W HERE THE TOTAL ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 14 INCOME AS COMPUTED UNDER THE NORMAL PROVISIONS OF T HE INCOME- TAX ACT, IS MORE THAN 30 PER CENT OF THE BOOK PROFI T, 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 RA TIONALISATION AND SIMPLIFICATION. THE RELEVANT PORTION IS REPRODUCE HEREUNDER:- RATIONALISATION AND SIMPLICATIONS MINIMUM ALTERNATIVE TAX ON COMPANIES IN RECENT TIMES, THE NUMBER OF ZERO-TAX COMPANIES AND COMPANIES PAYING MARGINAL TAX HAS GROWN. STUDIES HAVE SHOWN THAT INSPITE OF THE FACT THAT COMPANIES HAVE EARNED SUBSTANTIAL BOOK PROFITS AND HAVE PAID HANDSOME DIVIDENDS, NO TAX HAS BEEN P AID BY THEM TO THE EXCHEQUER. THE NEW PROPOSAL PROVIDES FOR THOSE COMPANIES TO PAY TAX ON 30% OF THE BOOK PROFITS, WHOSE TOTAL INCOME AS C OMPUTED UNDER THE INCOME-TAX ACT IS LESS THAN 30% OF THE BO OK PROFITS AS PER THE BOOKS OF ACCOUNT PREPARED IN ACCORDANCE WIT H PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. BOO K PROFITS IS DEFINED AND CERTAIN ADJUSTMENTS ARE PROVIDED IN THE PROPOSED SECTION. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1-4-19 97, AND WILL ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 1 997-98 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 STATUTE AND FILL THE GAPS. THE TWO RULES OF MOST GENERAL APPLICATION IN CONSTRUING A STATUTE ARE THAT FIRST THAT IT SHALL , IF POSSIBLE, BE SO INTERPRETED UT RES MAGIS VALEAT QUAM PEREAT (THAT THE THING MAY RATHER HAVE EFFECT THAN BE DESTROYED) AND SECONDLY, THAT SUCH A MEANING SHALL BE GIVEN TO IT AS MAY CARRY OUT AND EFFECTUATE TO THE FULLEST EXTENT THE INTENTION OF THE LEGISLATURE. EACH LAW CONSISTS OF TWO PARTS VIZ., OF BODY, AND S OUL . THE LETTER OF THE LAW IS THE BODY OF LAW AND THE SENSE AND REASON OF THE LAW IS THE SOUL OF THE LAW. LAW TO A LARGE EXTENT, LIVES IN THE LANGUAGE EVEN IF IT EXPA NDS WITH THE SPIRIT OF THE STATUTE. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 15 3.12. ADMITTEDLY, THE ASSESSEE CORPORATION DOES NO T 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 PARLIAMENT LIKE A SSESSEE HEREIN. 3.13. WE PLACE RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF OUR FINDINGS RENDERED HEREINABOVE ON THE IMPUGNED ISSUE:- A. KERALA STATE ELECTRICITY BOARD VS DCIT REPORTED IN (2010) 329 ITR 91 (KER), WHEREIN THEIR LORDSHIPS OF KERALA HIGH COURT HELD THAT :- SECTION 115JB OF THE INCOME-TAX ACT, 1961 CREAT ES A LEGAL FICTION REGARDING THE TOTAL INCOME OF ASSESSES WHIC H ARE COMPANIES. THE BOOK PROFIT OF THE COMPANY IS DEEMED TO BE THE TOTA L INCOME OF ASSESSEE IN THE CIRCUMSTANCES SPECIFIED IN THE SECTION. THE EXPRESSION BOOK PROFITFOR THE PURPOSE OF THE SECTION IS EXPLAINED TO MEAN THE NET PROFIT AS INCREASED OR DECREASED BY THE VARIOUS AMOUNTS W HON 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 COM PANY. SUB-SECTION (2) MANDATES THAT THE PROFIT AND LOSS ACCOUNT OF THE CO MPANY. SUB-SECTION (2) MANDATES THAT THE PROFIT AND LOSS ACCOUNT OF T HE 115JB STIPULATES THAT THE ACCOUNTING POLICIES, ACCOUNTING STANDARDS, ETC. SHALL BE UNIFORM BOTH FOR THE PURPOSE OF INCOME-TAX AS WELL AS FOR T HE INFORMATION STATUTORILY REQUIRED TO BE PLACED BEFORE THE ANNUAL GENERAL MEETING CONDUCTED, IN ACCORDANCE WITH SECTION 210 OF THE CO MPANIES ACT, 1956. THOUGH THE KERALA STATE ELECTRICITY BOARD, A STATU TORY CORPORATION CONSTITUTED BY VIRTUE OF SECTION 5 OF THE ELECTRICI TY (SUPPLY) ACT, 1948 ANSWERS THE DESCRIPTION OF AN INDIAN COMPANY AND TH EREFORE 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, 195 6. 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 ACCO UNT, AND PREPARE AN ANNUAL STATEMENT OF ACCOUNTS, BALANCE SHEET ETC. IN SUCH FORM AS MAY BE ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 16 PRESCRIBED BY THE CENTRAL GOVERNMENT AND NOTIFIED IN THE OFFICIAL GAZETTE. SUCH ACCOUNTS OF THE BOARD ARE REQUIRED TO BE AUDITED BY THE COMPTROLLER AND AUDITOR-GENERAL OF INDIA OR SUCH O THER PERSON DULY AUTHORIZED BY THE COMPTROLLER AND AUDITOR-GENERAL OF INDIA. THE ACCOUNTS SO PREPARED ALONG WITH THE AUDIT REPORT AR E REQUIRED TO BE LAID ANNUALLY BEFORE THE STATE LEGISLATURE AND ALSO TO B E PUBLISHED IN THE PRESCRIBED MANNER. AT THE EARLIEST POINT OF TIME WHEN SECTION 115J WA S INTRODUCED, THE SECTION EXPRESSLY EXCLUDED FROM ITS OPERATION BODIE S 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 BOA RD FROM THE OPERATION OF SECTION. CIRCULAR NO.762 NOT ONLY IS BINDING O N THE DEPARTMENT, BUT ALSO EXPLAINS THE PURPOSE IN INTRODUCING SECTION 1 15JA WHICH WAS TO TAX ZERO-TAX COMPANIES. THE CBDT UNDERSTOOD THAT COMPAN IES ENGAGED IN THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELEC TRICITY AND ENTERPRISES ENGAGED IN DEVELOPING,, MAINTAINING AND OPERATING INFRASTRUCTURE FACILITIES, AS A MATTER OF POLICY, ARE NOT BROUGHT WITHIN THE PURVIEW OF SECTION 115JA FOR THE REASON THAT SUCH A POLICY WOU LD PROMOTE THE INFRASTRUCTURAL DEVELOPMENT OF THE COUNTRY. SECTIO N 115JB, WHICH IS SUBSTANTIALLY SIMILAR TO SECTION 115JA CANNOT HAVE A DIFFERENT PURPOSE AND NEED NOT BE INTERPRETED IN A MANNER DIFFERENT F ROM THE UNDERSTANDING OF THE CBDT OF SECTION 115JA. WHERE THE COMPUTATION PROVISION COULD NOT BE APPLI ED IN A PARTICULAR CASE, IT IS INDICATIVE OF THE FACT THAT THE CHARGIN G SECTION ALSO WOULD NOT APPLY. THE ELECTRICITY BOARD OR BODIES SIMILAR TO IT, WHI CH ARE TOTALLY OWNED BY THE GOVERNMENT, EITHER STATE OR CENTRAL, HAVE NO SH AREHOLDERS. PROFIT, IF AT ALL, MADE WOULD BE FOR THE BENEFIT OF ENTIRE BOD Y POLITIC OF THE STATE. THEREFORE, THE ENQUIRY AS TO THE MISCHIEF SOUGHT TO BE REMEDIED BY THE AMENDMENT BECOMES IRRELEVANT. THEREFORE, THE FICTIO N FIXED UNDER SECTION 115JB CANNOT BE PRESSED INTO SERVICE AGAINST THE E LECTRICITY BOARD WHILE MAKING THE ASSESSMENT OF THE TAX PAYABLE UNDE R THE INCOME-TAX ACT. B. MAHARASHTRA STATE ELECTRICITY BOARD VS JCIT REPO RTED IN (2002) 82 ITD 422 (MUMBAI TRIBUNAL), WHEREIN IT WAS HELD THAT : 15. WE FIND THAT SUB-SECTION (2) OF SECTION 115JA REQUIRES THE COMPANY TO PREPARE ITS PROFIT & LOSS ACCOUNT IN ACC ORDANCE WITH THE ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 17 PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. THE ASSESSEE WAS REQUIRED 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 TH E COMPANY AT ITS AGM UNDER SECTION 210 OF THE COMPANIES ACT. THIS SE CTION CANNOT BE APPLIED IN RELATION TO THE ASSESSEE. IN FACT, THE V ERY CONCEPT OF A MEANING IS ALIEN TO MSEB. A MEETING CAN BE BETWEE N TWO OR MORE PERSONS. IN CASE OF MSEB THERE IS NO OTHER PERSON. SIMILARLY, SECOND PROVISO TO SUB-SECTION (2) PROVIDES THAT WHERE A CO MPANY HAS ADOPTED OR ADOPTS A FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956, WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THE ACT, THE METHODS AND THE RATES OF DEPRECIATION SHALL CORRESPOND TO THE METHOD AND RATES, WHICH HAVE BEEN ADOPTED FOR CALCULATING THE DEPRECIATION, FOR WHICH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN OR RE LEVANT PREVIOUS YEAR. 16. ONLY THOSE COMPANIES, WHICH ARE ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY, WILL COME WITHIN THE AMBIT O F SECTION 616 OF THE COMPANIES ACT. FOR THAT IT IS NECESSARY THAT ASSESS EE MUST BE A COMPANY. IF ASSESSEE IS NOT A COMPANY, THEN PROVISI ON OF SECTION 616( C) CANNOT BE APPLIED. FOR EXAMPLE, TATA ELECTRIC COMPA NY IS A COMPANY REGISTERED UNDER THE COMPANIES ACT. IT IS COMPANY W ITHIN THE MEANING OF SECTION 3 OF THE COMPANIES ACT. IT IS ENGAGED IN TH E BUSINESS OF GENERATION OR SUPPLY OF ELECTRICITY. AS SUCH IT WIL L COME WITHIN THE SWEEP OF THIS PROVISION. MSEB CANNOT BE CONSTRUED TO BE A COMPANY WITHIN THE MEANING OF SECTION 3 OF THE COMPANIES ACT, THER EFORE, THOUGH IT IS ENGAGED IN THE GENERATION/DISTRIBUTION OF ELECTRICI TY, IT CANNOT BE DEEMED AS A COMPANY WITHIN THE MEANING OF SECTION 6 16( C). 17. EXPLANATION TO SECTION 115JA DEFINES THE TERM BOOK PROFIT TO MEAN THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS A CCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION ( 2)[ I.E. IN ACCORDANCE WITH PARTS II & III OF SCHEDULE VI] AS I NCREASED BY.. WE HAVE NOTED THAT ASSESSEE DID NOT PREPARE ITS ACCOUN TS UNDER PARTS II & III OF SCHEDULE VI. ASSESSEE WAS UNDER NO LEGAL OBL IGATION TO DO SO. AS SUCH THE DEFINITION OF BOOK PROFIT CANNOT BE APPL IED IN THE CASE OF THE ASSESSEE. 18. ACCORDING TO SECTION 2(17) READ WITH SECTION 2( 26) OF THE ACT, MSEB COULD BE DEEMED TO BE A COMPANY FOR THE PURPOS E OF INCOME-TAX ACT. THE TERM COMPANY AS DEFINED IN THE SAID SECTIO N IS, NOMEN GENERALISSIMUM (TERM OF THE MOST GENERAL MEANING) A ND ITS ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 18 MEANING IN THE CONTEXT OF SECTION 115JA IS TO BE GA THERED FROM THE CONNECTION IN WHICH IT IS USED AND FROM THE SUBJEC T-MATTER TO WHICH IT IS APPLIED. THE DEFINITION AS GIVEN IN SECTION 2 OF TH E ACT BEGINS WITH THE QUALIFYING WORDS, UNLESS THE CONTEXT OTHERWISE REQUIRES. TEXT AND CONTEXT ARE THE BASIS OF INTERP RETATION. IF THE TEXT IS THE TEXTURE, CONTEXT IS WHAT GIVES THE COLOUR. N EITHER CAN BE IGNORED. BOTH ARE IMPORTANT. THAT INTERPRETATION IS BEST WHI CH MAKES THE TEXTUAL INTERPRETATION MATCH THE CONTEXTUAL. A STATUTE IS B EST 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 CON TEXT. IT IS A SETTLED RULE OF INTERPRETATION CANONIZED IN THE DICTUM: EX PRAECEDENTIBUS ET CONSEQENTIBUS OPTIMA FIT INTERPRETATIO ( THE BE ST INTERPRETATION IS MADE FROM THE CONTEXT). WHETHER T HE SAME MEANING, AS HAS BEEN GIVEN IN THE INTERPRETATION CLAUSE, SHOULD BE GIVEN TO THE WORD WHEREVER IT OCCURS, WILL DEPEND UPON THE CONTEXT. T HEREFORE, IT BECOMES NECESSARY NOT ONLY TO LOOK AT THE WORDS BUT ALSO TO LOOK AT THE CONTEXT, THE COLLOCATION AND THE OBJECTS OF SUCH WORDS RELAT ING TO SUCH MATTER. 19. IT IS TRUE THAT THE WORD USED IN SECTION 115JA OF THE ACT IS COMPANY. THE HEADING OF THIS SECTION IS DEEMED I NCOME RELATING TO CERTAIN COMPANIES. THE PROVISION BEGINS WITH A NON OBSTANTE CLAUSE. IT APPLIES TO EVERY ASSESSEE BEING A COMPANY. THE PANO PLY 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 WA S NECESSITATED DUE TO THE RISE IN THE NUMBER OF ZERO TAX COMPANIES. ST UDIES HAVE SHOWN THAT IN SPITE OF THE FACT THAT COMPANIES HAVE EARNED SU BSTANTIAL BOOK PROFITS AND HAVE PAID HANDSOME DIVIDENDS, NO TAX HAS BEEN P AID BY THEM TO THE EXCHEQUER. TO CURB THIS MISCHIEF MAT WAS INTRODUCED BY INSERTING SECTION 115JA. THIS IS A DEEMING PROVISION. IT IS A TRITE LAW THAT DEEMING PROVISION SHOULD BE NARROWLY WATCHED, JEALOUSLY REG ARDED AND NEVER TO BE PRESSED BEYOND ITS TRUE LIMITS. IT IS APPLICABLE TO A COMPANY. THE ASSESSEE IS NOT A COMPANY. IT IS NOT REQUIRED TO DI STRIBUTE ANY DIVIDEND. AS SUCH IT DOES NOT COME WITHIN THE MISCHIEF OF THI S SECTION HENCE WE FIND LOT 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. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 19 C . ICICI LOMBARD GENERAL INSURANCE CO LTD VS ACIT REPO RTED 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 OF INSURANCE COMPANIES OR BANKING COMPANIES OR ANY OTH ER COMPANIES ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY FOR WHICH A FORM OF PROFIT AND LOSS ACCOUNT HAS BEEN SPECIFIED IN OR UN DER THE ACT GOVERNING SUCH CLASS OF COMPANY. EVEN IF AN INSURANCE COMPAN Y DOES NOT DISCLOSE ANY MATTER IN THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT BECAUSE THE SAME IS NOT REQUIRED TO BE DISCLOSED BY THE INSURAN CE ACT SHALL NOT BE TREATED AS NON-DISCLOSURE OF A TRUE AND FAIR VIEW O F THE STATE OF AFFAIRS OF THE COMPANY AS THE SAID CONDITION HAS BEEN RELAXED BY SUBSECTION (5) OF SECTION 211 OF THE COMPANIES ACT. IN ORDER TO ALIG N THE PROVISIONS OF THE IT ACT WITH THE COMPANIES ACT , AN AMENDMENT HAS BE EN 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 CA SE OF INSURANCE, BANKING, ELECTRICITY GENERATION AND DISTRIBUTION CO MPANIES AND OTHER CLASS OF COMPANIES , WHICH ARE NOT REQUIRED TO PREP ARE THEIR ACCOUNTS AND PARTICULARLY BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AS PER PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT . THUS , WHEN THE INSURANCE COMPANIES, BANKING COMPANIES AND ELECTRICITY GENERA TION AND DISTRIBUTION COMPANIES ARE TREATED IN THE SAME CLAS S AS PER THE PROVISIONS OF SECTION 211 OF THE COMPANIES ACT IN P REPARING THE FINAL ACCOUNTS, THEN THOSE COMPANIES CANNOT BE TREATED DI FFERENTLY FOR THE PURPOSE OF SECTION 115JB AND ACCORDINGLY, THE PROVI SIONS OF SECTION 115JB ARE NOT APPLICABLE IN THE CASE OF THE ASSESSE E. D. BANK OF INDIA VS ADDL CIT REPORTED IN 2014 (5) T MI 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 PROVI SIONS 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 CONSIDE RED BY THIS TRIBUNAL IN THE SERIES OF DECISIONS INCLUDING THE DECISION RELI ED UPON BY THE LD. AR OF THE ASSESSEE. IN THE CASE OF ICICI LOMBARD GENER AL INSURANCE (SUPRA) ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 20 THE COORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERE D AND DECIDED AN IDENTICAL ISSUE IN PARA 6 AS UNDER:- AS DISCUSSED ABOVE, THE ASSESSEE IS FOLLOWING THE A CCOUNTING POLICIES UNDER THE ELECTRICITY SUPPLY ACT AND PREPARED ITS A CCOUNTS IN VIEW OF THOSE VERY POLICIES. FOLLOWING THOSE VERY POLICIES, THE ACCOUNTS 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 & II OF SCH EDULE VI OF COMPANIES ACT THEN THE PROVISIONS OF SEC. 115JB CAN NOT BE FORCED. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES AND RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE HONBLE SUPREM E 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 PRESEN T CASE. FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES O F THIS TRIBUNAL, WE HOLD THAT WHEN THE INSURANCE COMPANIES, BANKING COM PANIES AND ELECTRICITY GENERATION AND DISTRIBUTIONS COMPANIES ARE TREATED IN THE SAME CLASS AS PER THE PROVISIONS OF SEC. 211 OF THE COMPANIES ACT IN PREPARING THEIR FINAL ACCOUNTS, THEN THESE COMPANIE S CANNOT BE TREATED DIFFERENTLY FOR THE PURPOSE OF SEC. 115JB AND ACCOR DINGLY, THE PROVISIONS OF SEC. 115JB ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE 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, HO WEVER, 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 INITIA LLY WAS OF THE OPINION THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE INDEED A PPLICABLE TO THE CORPORATION. LATER DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSEE CORPORATION VIDE LETTER DATED 20.12.2010 INFORMED THE LEARNED AO THA T THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE CORPORATION AS BY THAT TIME THE LAW ON THE IMPUGNED ISSUE HAD STARTED EVOLVING AND VARIOUS JUDICIAL DECISIONS HAD ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 21 BEEN RENDERED. WE FIND THAT THE ASSESSEE COULD NO T MAKE THIS CLAIM IN THE FORM OF A REVISED RETURN AS THE TIME LIMIT FOR FILING THE R EVISED RETURN U/S 139(5) OF THE ACT HAD ADMITTEDLY EXPIRED AND HENCE ASSESSEE HAD NO OT HER 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 HONBLE 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 BE FORE THE APPELLATE AUTHORITIES. IN THIS REGARD, WE WOULD LIKE TO STATE THAT THE REVENU E SHOULD NOT BE UNJUSTLY ENRICHED AND ONLY THE DUE TAXES SHOULD BE COLLECTED. WE FIN D THAT THE PROVISIONS OF SECTION 115JB OF THE ACT IS A CODE BY ITSELF. IT IMPOSES T AX NOT ON INCOME BUT ON BOOK PROFITS. SECTION 115JB OF THE ACT CREATES A STATU TORY FICTION UNDER WHICH BOOK PROFIT OF A COMPANY ASSESSEE IS REGARDED AS TOTAL INCOME. THE DEEMING FICTION OF THE IT ACT CAN ONLY BE APPLIED TO A COMPANY PROPE R. SECTION 115JB WHICH IS A DEEMING PROVISION OF THE IT ACT CANNOT BE APPLIED T O ANY OTHER BODIES WHICH ARE NOT COMPANIES INCORPORATED UNDER 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 I S AS BELOW:- (I) WHETHER, AN ASSESSEE CAN AMEND A RETURN FILED B Y HIM FOR MAKING ADDITIONAL CLAIM FOR DEDUCTION OTHER THAN FI LING A REVISED RETURN ? (II) WHETHER , ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE HONBLE INCOME TAX APPELLATE TRIBUNAL, IN LAW, WAS RIGHT IN HOLDING THAT A CLAIM OF DEDUCTION NOT MADE IN THE O RIGINAL RETURN AND NOT SUPPORTED BY A REVISED RETURN, IS ADMISSIBL E ? ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 22 (III) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE HONBLE TRIBUNAL, IN LAW, WAS RIGHT IN NOT APPR ECIATING THE FACT THAT THE AO HAS NO POWER TO ENTERTAIN A CLAIM MADE BY AN ASSESSEE AFTER FILING A ORIGINAL RETURN OTHERWISE T HAN BY FILING A REVISED RETURN ? 3. THE QUESTION THAT ARISES IN THIS APPEAL IS WHET HER THE CIT(APPEALS) AND / OR THE ITAT HAD THE JURISDICTION TO CONSIDER A NEW / ADDITIONAL CLAIM. DEDUCTION SUBSEQUENTLY RAIS ED 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, PRESUM E THAT THE ASSESSING OFFICER WAS NOT ENTITLED TO AND HAD NO AU THORITY TO ALLOW THE DEDUCTION OF RS. 40,00,000/-. MR. MISTRI SUBMITTED THAT THERE IS NO BAR TO AN ASSESSEE MAKING A CLAIM BY A LETTER WITHOUT FILING A REVISED RETURN IN A CASE U/S 143(3). MR. MISTRI ALSO SUBMITTED THAT THE IMPUGNED ORDER OF THE TRIBUNAL C AN BE UPHELD ON THE BASIS OF A CIRCULAR ISSUED BY THE CBDT. IT IS NOT NECESSARY TO DECIDE THESE SUBMISSIONS AS THE MATTER IS CONCLU DED IN THE RESPONDENTS FAVOUR ON THE BASIS OF HIS NEXT SUBMIS SION. WE FIND WELL FOUNDED, MR.MISTRIS SUBMISSION THAT E VEN ASSUMING THAT THE ASSESSING OFFICER IS NOT ENTITLED TO GRANT A DEDUCTION ON THE BASIS OF A LETTER REQUESTING AN AMENDMENT TO TH E RETURN FILED, THE APPELLATE AUTHORITIES ARE ENTITLED TO CONSIDER THE CLAIM AND TO ADJUDICATE THE SAME. 10. A LONG LINE OF AUTHORITIES ESTABLISH CLEARLY TH AT AN ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUNDS NOT MERELY IN TERMS OF LEGAL SUBMISSIONS, BUT ALSO ADDITIONAL CLAIMS TO WIT CLAI MS 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 O N BEHALF OF THE DEPARTMENT. THE FIRST IS WITH RESPECT TO AN OBSERV ATION OF THE SUPREME COURT IN JUTE CORPORATION OF INDIA LTD VS C IT , (1991) 187 ITR 688. THE SECOND SUBMISSION IS BASED ON A J UDGEMENT OF THE SUPREME COURT IN GOETZE (INDIA) LTD VS CIT I N (2006) 157 TAXMAN 1. 13. THE APPELLATE AUTHORITIES, THEREFORE, HAVE JURI SDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS, WHICH BECAME AV AILABLE ON ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 23 ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RETURN WAS FI LED. THE FIRST PART VIZ. IF THE GROUND SO RAISED COULD NOT HAVE B EEN RAISED AT THAT PARTICULAR STAGE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT ORDER WAS MADE. CLEARLY RELATE TO CASE S 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 RAS IED AND NOT WERE NOT IN EXISTENCE. GROUNDS WHICH WERE NOT IN EXISTENCE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT OR DER WAS MADE FALL WITHIN THE SECOND CATEGORY VIZ. WHERE THE GRO UND BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW . 14. THE FACTS IN JUTE CORPORATION OF INDIA LTD, VA RIOUS JUDGEMENTS REFERRED TO THEREIN AS WELL AS IN SUBSEQ UENT CASES, WHICH WE WILL REFER TO ESTABLISHES THIS BEYOND DOUB T. IN MANY OF THE CASES, THE GROUNDS WERE, IN FACT, AVAILABLE WHE N THE RETURN WAS FILED AND / OR THE ASSESSMENT ORDER WAS MADE. IN JUTE CORPORATION OF INDIA LTD, THE GROUND WAS AVAILABLE WHEN THE RETURN WAS FILED. THE ASSESSEE DID NOT CLAIM ANY D EDUCTION 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 FILE D THAT THE ASSESSEE CLAIMED A DEDUCTION IN RESPECT OF THE AMOUNT PAID T OWARDS THE PURCHASE TAX UNDER THE SAID ACT. IT IS ALSO SIGNIF ICANT TO NOTE THAT THE ASSESSEES ENTITLEMENT TO CLAIM DEDUCTION HAD B EEN HELD TO BE VALID IN VIEW OF AN EARLIER JUDGEMENT OF THE SUPREME COURT IN KEDARNATH JUTE MANUFACTURING COMPANY LIMITED VS CIT (1971) 82 ITR 363. THIS WAS, THEREFORE, A CASE OF ERROR IN PERCEPTION / JUDGEMENT. DESPITE THE SAME, THE SUPREME COURT UPH ELD THE DECISION OF THE APPELLATE ASSISTANT COMMISSIONER IN ALLOWING THE DEDUCTION. THE WORDS COULD NOT HAVE BEEN RAISED MUST, THEREFORE, BE CONSTRUED LIBERALLY AND NOT STRICTLY. 17. THE NEXT JUDGEMENT TO WHICH OUR ATTENTION WAS I NVITED BY MR.MISTRI IS THE JUDGEMENT OF A BENCH OF THREE LEAR NED 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 ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 24 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 COMMISSIO NER OF INCOME TAX (APPEALS), THE INCLUSION OF THIS AMOUNT WAS NEITHER CHALLENGED BY THE ASSESSEE NOR CONSIDERED BY THE CO MMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE FILED AN APP EAL BEFORE THE TRIBUNAL. THE INCLUSION OF THE AMOUNT WAS NOT OBJE CTED TO EVEN IN THE GROUNDS OF APPEAL AS ORIGINALLY FILED BEFORE TH E TRIBUNAL. SUBSEQUENTLY, THE ASSESSEE BY A LETTER, RAISED ADDI TIONAL GROUNDS TO THE EFFECT THAT THE SAID SUM COULD NOT BE INCLUD ED IN THE TOTAL INCOME. THE ASSESSEE CONTENDED THAT ON A ERRONEOU S ADMISSION, NO INCOME CAN BE INCLUDED IN THE TOTAL INCOME. IT WAS FURTHER CONTENDED THAT THE ITO AND THE COMMISSIONER OF INCO ME TAX (APPEALS) HAD ERRED AND FAILED IN THEIR DUTY IN ADJ UDICATING THE MATTER CORRECTLY AND BY MECHANICALLY INCLUDING THE AMOUNT IN THE TOTAL INCOME. IT IS PERTINENT TO NOTE THAT THE ASS ESSEE CONTENDED THAT IT WAS ENTITLED TO THE DEDUCTION IN VIEW OF TW O ORDERS OF THE SPECIAL BENCHES OF THE TRIBUNAL AND THE ASSESSEE FU RTHER STATED THAT IT HAD RASIED THESE ADDITIONAL GROUNDS ON LEAR NING ABOUT THE LEGAL POSITION SUBSEQUENTLY. THE TRIBUNAL DECLINED TO ENTERTAIN THESE ADDITIONAL GROUNDS. BUT THE SUPREME COURT HE LD THAT WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CO NSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 24. A DIVISION BENCH OF DELHI HIGH COURT DEALT WI TH A SIMILAR SUBMISSION IN CIT VS JAI PARABOLIC SPRINGS LIMITED (2008) 306 ITR 42. THE DIVISION BENCH, IN PARAGRAPH 17 OF T HE JUDGEMENT HELD THAT THE SUPREME COURT DISMISSED THE APPEAL MA KING IT CLEAR THAT THE DECISION WAS LIMITED TO THE POWER OF THE A SSESSING AUTHORITY TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERW ISE 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 ENTERT AIN 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 QUESTIONS RAISED BY MR.MISTRI. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 25 26. THE APPEAL, IS THEREFORE, DISMISSED. 3.15. APART FROM THE ABOVE DECISIONS, WE ALSO FIND THAT THE FOLLOWING CASES ALSO SUPPORTS THE CONTENTIONS OF THE ASSESSEE ON THE IMP UGNED ISSUE :- * UCO BANK VS DCIT REPORTED IN (2015) 64 TAXMANN.CO M 51 (KOLKATA TRIBUNAL) IN ITA NO.1768 / KOL / 2009 DATED 27.11.2 015 FOR ASST YEAR 2002-03 * A.P.S.E.B. VS JCIT REPORTED IN (2004) 91 ITD 259 (HYD ITAT) IN ITA NO. 1055 (HYD) OF 20052 DATED 5.4.2004 FOR ASST YE AR 1997-98 3.16. IN VIEW OF THE AFORESAID PROVISIONS OF THE AC T, OUR FINDINGS GIVEN THEREON WITH RESPECT TO THE FACTS AND VARIOUS JUDICIAL PRECEDENT S RELIED UPON HEREINABOVE AND FURTHER IN VIEW OF THE FACT THAT NO CONTRARY DECISI ONS BEING BROUGHT TO OUR KNOWLEDGE ON THE SAME ISSUE, WE ACCORDINGLY HOLD THAT - THE ASSESSEE IS A STATUTORY CORPORATION NOT REGISTE RED UNDER THE COMPANIES ACT, 1956 AND HENCE THE PROVISIONS OF SEC TION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE CORPORAT ION ; THE AMENDMENT BROUGHT IN SECTION 115JB OF THE ACT R EAD WITH EXPLANATION 3 THEREON BY THE FINANCE ACT 2012 IS AP PLICABLE ONLY WITH EFFECT FROM ASST YEAR 2013-14 ONWARDS IN LINE WITH THE NOTES TO CLAUSES OF FINANCE ACT 2012 ; AND A STATUTORY CLAIM COULD BE MADE BY WAY OF A LETTER BEFORE AN APPELLATE AUTHORITY EVEN WITHOUT FILING A REVISED R ETURN IF THE FACTS WITH REGARD TO THE SAME ARE ALREADY AVAILABLE ON RE CORD BEFORE THE LOWER AUTHORITIES AND THEY REMAIN UNDISPUTED. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 26 ACCORDINGLY THE GROUND NOS. 1 TO 4 RAISED BY THE AS SESSEE 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 Y EAR 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 CIRCU MSTANCES OF THE CASE UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS UNDER THE P ROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS REGARD:- GROUND NOS. 5 & 6 OF ITA NO.1622/KOL/2011 A.Y 2008- 09 5. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING TH E DISALLOWANCE MADE BY THE AO UNDER SECTION 14A OF INCOME-TAX ACT, 1961 READ WITH RULE 80 OF THE LT. RULES, 1962 BY SUMMARILY REJECTI NG APPELLANT'S EXPLANATIONS WHICH CLEARLY PROVED THAT THE DISALLOW ANCE WAS ARBITRARY AND NOT SUPPORTED BY THE ENTRIES IN THE BOOKS OF AC COUNT. 6. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (APPEALS) FAILED TO APPRECIATE THE REA SONS AND EXPLANATIONS OFFERED BY THE APPELLANT AGAINST THE D ISALLOWANCE OF RS.41, 16,36,422/- MADE UNDER SECTION 14A OF THE ACT AND T HEREFORE THE AO BE DIRECTED TO DELETE THE DISALLOWANCE AND/OR REDUCE T HE DISALLOWANCE IN ASSESSING TOTAL INCOME BOTH AS PER COMPUTATIONAL PR OVISIONS AS ALSO IN COMPUTING BOOK PROFITS, IF ANY. GROUND NOS. 6 & 7 OF ITA NO.451/KOL/2013 A.Y 2009-1 0 6. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING TH E DISALLOWANCE MADE BY THE AO UNDER SECTION 14A OF INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE I.T. RULES, 1962 BY SUMMARILY REJECTING APPE LLANT'S EXPLANATIONS WHICH CLEARLY PROVED THAT THE DISALLOWANCE WAS ARBI TRARY AND NOT SUPPORTED BY THE ENTRIES IN THE BOOKS OF ACCOUNT. 7. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (APPEALS) FAILED TO APPRECIATE THE REA SONS AND EXPLANATIONS OFFERED BY THE APPELLANT AGAINST THE DISALLOWANCE O F RS.18,45,63,204/- MADE UNDER SECTION 14A OF THE ACT AND THEREFORE THE AO BE DIRECTED TO ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 27 DELETE THE DISALLOWANCE AND/OR REDUCE THE DISALLOWA NCE IX] S.14A; IN ASSESSING TOTAL INCOME BOTH AS PER COMPUTATIONAL PR OVISIONS AS ALSO BOOK PROFITS, IF ANY. 4.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AS SESSEE 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 INVESTMENTS U/S 10(25) 18,15,99, 358 DIVIDEND ON SHARES OF POWER TRADING CORPN LTD & BOKARO POWER SUPPLY CO. LTD 2,35,28,025 ---------------------- 140,89,14,910 ---------------------- 4.2. THE TOTAL INVESTMENTS HELD BY THE ASSESSEE AS AT THE END OF THE FINANCIAL YEAR ENDING 31ST MARCH ARE AS FOLLOWS:- 31.3.2008 TAX FREE BONDS ISSUED BY RBI AND GUARANTEED BY WEST BENGAL GOVERNMENT AND JHARKHAND GOVERNMENT 1294.83 CRORES SHARES IN JOINT VENTURE COMPANIES - BOKARO POWER SUPPLY CO LTD 84.025 - POWER TRADING CORPORATION LTD 10.000 - MAITHON POWER LTD 59.778 - DVC EMTA LTD 0.013 ------------- 153.82 C RORES ADVANCES 17.50 CRORES --------------------- 1466.15 CRORES --------------------- 4.3. THE RBI TAX FREE BONDS WERE ALLOTTED TO THE A SSESSEE IN MARCH 2003 IN SATISFACTION OF POWER ARREAR CLAIMS OF WEST BENGAL AND JHARKHAND STATE ELECTRICITY ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 28 BOARD (WBSEB & JSEB). INCOME BY WAY OF POWER TARIF F 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 RECOVE RED ITS POWER TARIFF DUES FROM WBSEB & JSEB IN THE FORM OF TAX FREE BONDS. 4.4. THE ASSESSEE CORPORATION HAD SET UP A PROVIDE NT FUND SCHEME WHICH IS RECOGNIZED BY THE GOVERNMENT OF INDIA UNDER THE PRO VISIONS OF THE PROVIDENT FUND ACT, 1925. THE PROVIDENT FUND SCHEM IS IMPLEMENTE D AS PER THE DVCS PROVIDENT FUND REGULATIONS AS APPROVED BY AND NOTIFIED BY THE CENTRAL GOVERNMENT. AS PER APPROVED RULES, THE CORPORATION RECEIVES CONTRIBUTI ONS WHICH ARE INVESTED IN SPECIFIED SECURITIES. THE INTEREST EARNED THEREON IS ELIGIBLE FOR EXEMPTION U/S 10(25) OF THE ACT. THE ASSESSEE CORPORATION HAS MO E 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 PROV IDENT FUND CELL WITHIN ITS ACCOUNTS DEPARTMENT AND TOTAL SALARY PAID TO EMPLOY EES WORKING IN THAT CELL WORKED OUT TO RS. 55,41,573/-. THE LEARNED AR ARGUED THA T THE PERSONNEL IN THE SAID PROVIDENT FUND CELL ARE ENTRUSTED WITH COLLECTION O F PF CONTRIBUTIONS FROM EMPLOYEES, ITS ACCOUNTING, COMPLYING WITH VARIOUS S TATUTORY RULES, SETTLEMENT OF PROVIDENT FUND CLAIMS, COLLECTION OF INCOME AND ACC OUNTING OF INCOME & INVESTMENT ETC. THE LEARNED AR ARGUED THAT THE EMPL OYEE COST OF THE SAID PROVIDENT FUND CELL DOES NOT PERTAIN ONLY TO EARNIN G OF INTEREST INCOME. ACCORDINGLY THE ASSESSEE DISALLOWED 20% OF SUCH SAL ARIES AMOUNTING TO RS. 11,08,315/- AS ATTRIBUTABLE TO THE INTEREST INCOME EARNING ACTIVITY WHICH DOES NOT FORM PART OF TOTAL INCOME. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 29 4.5. THE LEARNED AR ARGUED THAT THE ASSESSEE IS TH E CO-PROMOTER OF BOKARO POWER SUPPLY CO. LTD JOINTLY PROMOTED WITH STEEL AUTHORIT Y OF INDIA LTD (SAIL), ANOTHER PSU. THE INVESTMENT HAS BEEN MADE WITH A VIEW TO E XPAND THE EXISTING BUSINESS OF PWEOR GENERATION AND DISTRIBUTION OF THE ASSESSE E. IN ORDER TO TAKE BENEFIT OF SYNERGIES ENJOYED BY PUBLIC SECTOR UNDERTAKING, A J OINT VENTURE WAS FORMED AT THE INSTANCE OF THE CENTRAL GOVERNMENT. THE MAIN OBJEC TIVE FOR MAKING INVESTMENT WAS TO EXPAND THE EXISTING BUSINESS ACTIVITIES. SI MILARLY, THE ASSESSEE CORPORATION ACQUIRED SHAREHOLDING IN POWER TRADING CORPORATION LTD WHICH HAS BEEN ESTABLISHED BY THE GOVERNMENT OF INDIA AND PUBLIC S ECTOR POWER COMPANIES HAVE CONTRIBUTED TO ITS SHARE CAPITAL. THE POWER TRADIN G CORPORATION LTD HAS PROVIDED WINDOW TO POWER GENERATING COMPANIES FOR CARRYING O N TRADE IN SURPLUS POWER SO THAT THE POWER GENERATING COMPANIES DO NOT INCUR LO SSES DUE TO LACK OF DEMAND IN THEIR COMMAND AREAS. THUS THE INVESTMENT IN POW ER TRADING CORPORATION LTD WAS ALSO MADE IN THE COURSE OF ASSESSEES PRINCIPAL BUSINESS. THE INVESTMENT IN SHARES OF BOKARO POWER SUPPLY CO LTD AND POWER TRAD ING CORPORATION LTD HAVE BEEN MADE BY THE CORPORATION OUT OF ITS OWN FUNDS A ND NOT BORROWED FUNDS. 4.6. THE LEARNED AO DIRECTLY INVOKED THE PROVISION S OF RULE 8D (2)(II) AND RULE 8D(2)(III) OF THE IT RULES AND MADE DISALLOWANCE U/ S 14A OF THE ACT TO THE TUNE OF RS. 20,03,61,070/- UNDER NORMAL PROVISIONS OF THE A CT AND A SUM OF RS. 41,16,36,422/- UNDER THE PROVISIONS OF SECTION 115J B OF THE ACT. THIS ACTION OF THE LEARNED AO WAS UPHELD BY THE LEARNED CITA. AGGRI EVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4.7. THE LEARNED AR REITERATED THE FACTS WHICH ARE MENTIONED HEREINABOVE. HE FURTHER ARGUED THAT THE ASSESSEE HAD MADE A DISALLO WANCE OF RS. 11,08,315/- U/S 14A OF THE ACT WITH SOME RATIONAL BASIS AS ADMITTED LY ACCORDING TO HIM, NO EXPENDITURE WERE INCURRED FOR MAKING INVESTMENTS IN RBI TAX FREE BONDS AND SHARES ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 30 IN BOKARO POWER SUPPLY CO LTD AND POWER TRADING COR PORATION LTD AND INCOME EARNED THEREON. HE FURTHER ARGUED THAT THE ASS ESSEE HAD DERIVED EXEMPT INCOME IN THE FORM OF INTEREST ON PROVIDENT FUND INVESTMEN TS FOR WHICH SOME EXPENDITURE COULD HAVE BEEN INCURRED BY THE ASSESSEE WHICH IS W ORKED OUT FOR DISALLOWANCE AT RS. 11,08,315/- AND ACCORDINGLY PLEADED THAT RULE 8 D OF THE RULES CANNOT BE MADE APPLICABLE IN THE FACTS OF THE INSTANT CASE. HE AL SO FURTHER STATED THAT THE ASSESSEE HAS BEEN CONSISTENTLY MAKING THIS DISALLOWANCE ON T HE BASIS OF 20% OF EMPLOYEE COST IN PROVIDENT FUND CELL OF THE ASSESSEE CORPORA TION IN EARLIER AND EVEN IN SUBSEQUENT YEARS. HE FURTHER PLACED ON RECORD A C OPY OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT FOR THE ASST YEAR 2010 -11 WHEREIN THE DISALLOWANCE U/S 14A OF THE ACT MADE BY THE ASSESSEE HAS BEEN AC CEPTED BY THE LEARNED AO. HE FURTHER ARGUED THAT THE ASSESSEE HAD MADE EARNED TAXABLE INTEREST INCOME OF RS. 248.78 CRORES AND PAID INTEREST ON ITS BORROWINGS A MOUNTING TO RS. 211.01 CRORES AND EARNED A NET INTEREST INCOME OF RS. 37.77 CRORE S. HE ARGUED THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE THE INVESTMENTS AN D NO PART OF BORROWED FUNDS WERE UTILIZED FOR THE SAME. HENCE IN ANY CASE, TH E 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 LEARNED DR VEHEMENTLY SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 4.8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE LEARNED AO HAD ADOPTED THE DISALLOWANCE FIGURE U/S 14A OF THE ACT AT RS. 20,03,61,170/- UND ER NORMAL PROVISIONS OF THE ACT AND AT RS. 41,16,36,422/- UNDER THE PROVISIONS OF S ECTION 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 WHET HER THE DISALLOWANCE U/S 14A OF THE ACT COULD BE ADDED TO THE BOOK PROFITS U /S 115JB OF THE ACT, ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 31 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 RS. 11,08,315/- U/S 14A OF THE ACT (BEING 20% OF EMPLOYEE COST OF PROVIDENT FUND CELL EMPLOYEES) WITH SOME RATIONAL BASIS IN CONSONANCE WITH THE CONSISTE NT METHOD FOLLOWED BY THE ASSESSEE OVER THE YEARS. THE LEARNED AR ALSO STA TED THAT SIMILAR DISALLOWANCE MADE BY ASSESSEE HAS BEEN ACCEPTED BY THE LEARNED A O IN EARLIER AND IN SUBSEQUENT YEARS. WE ALSO FIND FROM THE SCRUTINY A SSESSMENT ORDER FOR THE ASST YEAR 2010-11, THE DISALLOWANCE U/S 14A OF THE ACT M ADE BY THE ASSESSEE WAS NOT DISTURBED BY THE LEARNED AO. WE ALSO FIND THAT THE LEARNED AO HAD DIRECTLY EMBARKED ON RULE 8D(2) WITHOUT RECORDING SATISFACTI ON 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 RS. 248.78 CRORES IS MORE T HAN THE TOTAL INTEREST PAID ON LOANS AMOUNTING TO RS. 211.01 CRORES THEREBY MAKING A NET INTEREST INCOME OF RS. 37.77 CRORES WHICH IS OFFERED TO TAX. IN THIS SCE NARIO, IT HAS TO BE SEEN WHETHER THE INTEREST EXPENDITURE WAS RELATABLE TO THE INVESTMEN T ACTIVITY IS TO BE LOOKED INTO. WE ALSO FIND FROM THE BALANCE SHEET OF THE ASSESSEE THAT IT HAS GOT SUFFICIENT OWN FUNDS TO THE TUNE OF RS. 16270,34,38,528/- (16270 C RORES) AND WHEREAS THE INVESTMENTS MADE BY THE ASSESSEE IS ONLY RS. 1466.1 5 CRORES INCLUDING THE INVESTMENTS IN TAX FREE BONDS OF RBI AND INVESTMENT IN BOKARO POWER SUPPLY CO LTD AND POWER TRADING CORPORATION LTD. 4.8.2. ON AVAILABILITY OF OWN FUNDS WITH THE ASSES SEE FOR MAKING INVESTMENTS ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 32 WE ALSO FIND THAT THE ASSESSEE HAS GOT SUFFICIENT O WN 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 ASSESSE E. WITHOUT DOING THE SAME, HE CANNOT DIRECTLY PRESUME THAT THE INVESTMENTS WERE M ADE OUT OF BORROWED FUNDS. IF THE ACTION OF THE LEARNED AO AND LEARNED CITA ARE T O BE UPHELD, THEN NO ASSESSEE COULD MAKE ANY INVESTMENTS WHEN THERE IS A INTEREST BEARING LOAN TO BE REPAID. THE FACT OF MAKING THE INVESTMENTS HAS TO BE VIEWED FRO M THE POINT OF COMMERCIAL EXPEDIENCY AND FROM THE POINT OF VIEW OF BUSINESSMA N AND NOT FROM THE VIEW POINT OF THE REVENUE. IT IS WELL SETTLED THAT BUSINESSMA N KNOWS HIS INTEREST BEST. WE PLACE RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD ( 313 ITR 340 ) ( BOM) IN SUPPORT OF OUR VIEW THAT IF THE OWN FUNDS ARE AVAILABLE WITH THE ASSESE E AND IF THE SAME ARE MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE, THEN IT HAS T O 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 / K OL / 2011 DATED 30.3.2012 FOR THE ASST YEAR 2008-09 , WHEREIN THE GROUNDS RAISED AND DECISION TAKEN THE REON ARE AS BELOW:- (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS. 9,86,306/- UNDER RULE 8D(2)(II) BEING A PART OF TOTAL DISALLOWANCE U/S 14A SINCE HE OPINED IN THE INSTANT CASE THAT THERE CANNOT BE ANY INTEREST EXPENDITURE LEFT WHERE INTEREST INCOME IS MORE THAN INTEREST EXPENDITURE. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 33 HELD 4. AS LEARNED CIT(A) HAS RIGHTLY OBSERVED, ONCE THE RE IS NO NET INTEREST EXPENDITURE , AS IS THE CASE BEFORE US UPON SETTI NG OFF INTEREST CREDITED TO PROFIT AND LOSS ACCOUNT, NO PART OF INTEREST DEB ITED 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 O F RULE 8D(1) WE FIND THAT THE LEARNED AO HAD DIRECTLY EMBARKED O N RULE 8D(2) WITHOUT RECORDING SATISFACTION IN TERMS OF RULE 8D(1) OF TH E RULES WITH COGENT REASONS AS TO WHY THE FIGURE DISALLOWED BY THE ASSESSEE U/S 14A O F THE ACT IS INCORRECT. WE FIND THAT THE LEARNED AO HAD STRAIGHT AWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. WE FIND THAT THIS ISSUE HAS BEEN ELABORATELY DEALT WITH IN THE FOLLOWING CASES :- CIT VS ASHISH JHUNJHUNWALA IN G.A.NO. 2990 OF 2013 IN ITAT NO. 157 OF 2013 DATED 8.1.2014 RENDERED BY CALCUTTA HIGH COURT ' WHILE REJECTING THE CLAIM OF THE ASSESSEE WITH RE GARD TO EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPTED INCOME, THE AO HAS TO INDICATE COGENT REAS ONS FOR THE SAME. FROM THE FACTS OF THE PRESENT CASE, IT IS NOTICED T HAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT A WAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RULE 8D OF THE RULES O N PRESUMING THE AVERAGE VALUE OF INVESTMENT AT % OF THE TOTAL VALU E. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE COORDINATE BEN CH DECISION IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD., SUPRA, WE UPH OLD THE ORDER OF CIT (A)'. CIT VS R.E.I. AGRO LTD IN GA 3022 OF 2013 IN ITAT 1 61 OF 2013 DATED 23.12.2013 RENDERED BY CALCUTTA HIGH COURT ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 34 THE ASSESSING OFFICER ALSO DISALLOWED THE EXPENDIT URE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 WITHOUT FIRST RECOR DING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM AS REGA RDS THE CLAIM THAT NO EXPENDITURE WAS MADE BY THE ASSESSEE. CHALLENGING THE ORDER OF THE TRIBUNAL, THE PRESENT APPEAL HAS BEEN FILED. WE HAVE HEARD MR.BHOWMIK AND ARE OF THE OPINION THA T NO POINT OF LAW HAS BEEN RAISED. THEREFORE, THIS APPEAL IS DISMISS ED. HENCE WE HOLD THAT THE ACTION OF THE LEARNED AO IN DIRECTLY EMBARKING ON RULE 8D(2) OF THE RULES WITHOUT RECORDING ANY SATISFACTI ON AS MANDATED IN RULE 8D(1) OF THE RULES IS NOT APPRECIATED AND HENCE NO DISALLOWA NCE U/S 14A OF THE ACT BY APPLYING RULE 8D(2) OF THE RULES COULD BE MADE IN T HE FACTS OF THE INSTANT CASE. IN THE INSTANT CASE THE ASSESSEE CORPORATION HAD DI SALLOWED A SUM OF RS. 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 T O WHY THE SAID FIGURE COMPUTED BY THE ASSESSEE IS INCORRECT. WITHOUT SAT ISFYING THE REQUIREMENT CONTEMPLATED IN RULE 8D(1) , THE LEARNED AO HAD DIR ECTLY 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 ASSESSEE CORPORATIO N FOR THE ASST YEARS 2008-09 AND 2009-10. ACCORDINGLY THE GROUND NOS. 5 & 6 RAISED BY THE AS SESSEE 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 Y EAR 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 LEVIE D IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 35 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE CORPORATION PAID THE FIRST INSTALLMENT OF ADVANCE TAX PAYABLE ON OR BEFORE 15. 6.2008 BY 16.6.2008 WITH A DELAY OF ONE DAY. THE REASON FOR THIS DELAY WAS TH AT 15.6.2008 WAS A SUNDAY AND ACCORDINGLY THE LEARNED AO CHARGED INTEREST U/S 234 C FOR THE SAID QUARTER. THIS ACTION OF THE LEARNED AO WAS ALSO UPHELD BY THE LEA RNED CITA. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS OF ITA NO.451/KOL/2013 FOR AY 2009-10:- GROUND NOS. 8 & 9 OF ITA NO.451/KOL/2013 A.Y 2009 -10 8. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES 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 INSTALLM ENT OF ADVANCE TAX DUE ON 15.06.2008 EVEN THOUGH THE APPELLANT HAD NOT COMMITTED ANY SUCH DEFAULT AS THE ADVANCE TAX WAS P AID ON 16.06.2008 BEING MONDAY AND IN TERMS OF THE CBDTS CIRCULAR THE AO COULD NOT TREAT THE PAYMENT MADE ON THE FIRS T AVAILABLE WORKING DAY TO BE THE PAYMENT BEYOND THE DUE DATE. 9. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE INTEREST LEVIED U/S.234C OF THE IT ACT IN RELATION TO ALLEGED DEFAULT OF NOT PAYING FIRST INSTALLMENT OF ADVANCE TAX WITH IN DUE DATE, BE CANCELLED. 5.2. THE LEARNED AR PLACED RELIANCE ON THE CBDT CIR CULAR NO. 676 DATED 14.1.1994 IN SUPPORT OF HIS CONTENTIONS AND STATED THAT THE ASSESSEE CORPORATION HAD NOT COMMITTED ANY DEFAULT IN PAYING INSTALLMENT OF ADVANCE TAX AND HENCE NO INTEREST U/S 234C OF THE ACT IS CHARGEABLE IN THE H ANDS OF THE ASSESSEE CORPORATION. IN RESPONSE TO THIS, THE LEARNED DR ARGUED THAT THE RE IS NO PROVISION IN THE IT ACT TO CONDONE THE DELAY AND HENCE THE INTEREST U/S 234 C OF THE ACT IS CHARGEABLE IN THE INSTANT CASE. ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 36 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 (MOND AY) 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 CIRCULAR NO. 676 DATED 14. 1.1994 ON WHICH THE LEARNED AR PLACED HEAVY RELIANCE IS REPRODUCED HEREUNDER:- CIRCULAR NO. 676. DATED 14-1-1994 SECTION 211. INSTALMENTS OF ADVANCE TAX 1197. WHETHER, IN CASE LAST DAY FOR PAYMENT OF ANY INSTALMENT OF ADVANCE TAX IS DAY ON WHICH RECEIVING BANK IS CLOSE D, ASSESSEE CAN MAKE PAYMENT ON NEXT IMMEDIATELY FOLLOWING WORKING DAY, AND IN SUCH CASES MANDATORY INTEREST LEVIABLE UNDER SECTIONS 234B AND 234C WOULD NOT BE CHARGED 1. REPRESENTATIONS HAVE BEEN RECEIVED BY THE BOAR D 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 SUC H INSTALMENTS (I.E., 15TH SEPTEMBER, 15TH DECEMBER AND 15TH MARCH) HAPPE NS TO BE A HOLIDAY AND THE ASSESSEE PAYS THE DUE AMOUNT OF ADV ANCE TAX ON THE NEXT WORKING DAY. 2. THE MATTER HAS BEEN CAREFULLY CONSIDERED BY TH E BOARD AND IT IS FELT THAT IN SUCH CASES SECTION 10 OF THE GENERAL CLAUSE S ACT, 1897 WILL BE APPLICABLE. THIS SECTION LAYS DOWN THAT WHERE ANY A CT OR PROCEEDING IS DIRECTED OR ALLOWED TO BE DONE OR TAKEN IN ANY COUR T OR OFFICE ON A CERTAIN DAY OR WITHIN A PRESCRIBED PERIOD, THEN, IF THE COURT OR OFFICE (IN THE PRESENT CASE THE BANK WHICH IS AUTHORISED TO RE CEIVE PAYMENT OF ADVANCE TAX FROM THE ASSESSEE) IS CLOSED ON THAT DA Y OR ON THE LAST DAY OF THE PRESCRIBED PERIOD, THE ACT OR PROCEEDING SHALL BE CONSIDERED AS DONE OR TAKEN IN DUE TIME AFTER IT IS DONE OR TAKEN ON T HE NEXT DAY, AFTERWARDS, ON WHICH THE COURT OR OFFICE (OR THE BANK) IS OPEN. IN VIEW OF THIS PROVISION, IT IS HEREBY CLARIFIED THAT IF THE LAST DAY FOR PAYMENT OF ANY INSTALMENTS OF ADVANCE TAX IS A DAY ON WHICH THE RE CEIVING BANK IS CLOSED, THE ASSESSEE CAN MAKE THE PAYMENT ON THE NE XT IMMEDIATELY FOLLOWING WORKING DAY, AND IN SUCH CASES, THE MANDA TORY INTEREST ITA NOS. 1622/KOL/2011 & 451/KOL/2013-A-AM M/S. DAMODAR VALLEY CORPORATION 37 LEVIABLE UNDER SECTIONS 234B AND 234C OF THE INCOME -TAX ACT, 1961 WOULD NOT BE CHARGED. CIRCULAR: NO. 676, DATED 14-1-1994. RESPECTFULLY FOLLOWING THE AFORESAID CIRCULAR AND SECTION 10 OF GENERAL CLAUSES ACT, WE HOLD THAT THE ASSESSEE HAD NOT COMMITTED AN Y DEFAULT IN PAYMENT OF FIRST INSTALMENT OF ADVANCE TAX AND HENCE WE DIRECT THE L EARNED AO NOT TO CHARGE INTEREST U/S 234C IN THE INSTANT CASE FOR THE FIRST QUARTER. ACCORDINGLY, THE GROUND NOS. 8 & 9 IN ITA NO. 451/KOL/2013 RAISED BY THE AS SESSEE ARE ALLOWED. TO SUM UP, THE APPEALS OF THE ASSESSEE IN ITA NO. 1 622/KOL/2011 FOR THE ASST YEAR 2008-09 AND ITA NO. 451/KOL/2013 FOR THE ASST YEAR 2009-10 ARE ALLOWED. ORDER PRONOUNCED ON 13.01.2016 .1. THE APPELLANT: M/S. DAMODAR VALLEY CORPORATION , DVC TOWERS, 4 TH FL., VIP ROAD, KOL - 54. 2 THE RESPONDENT-ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-9/DCIT, CIR-9, AAYKAR BHAVAN, P-7 CHOWRINGHEE SQ, KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS SD/- ( N.V. VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 13/01/2016 COPY OF THE ORDER FORWARDED TO: