ACIT, Trivandrum V. Kerala State Electricity Board, Trivandrum

ITA 284/COCH/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8776 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 04-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-06-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: SHRI
• Section: 43B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 284/COCH/2014 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TRIVANDRUM VS. KERALA STATE ELECTRICITY BOARD, VYDHYUTHI BHAVAN, PATTOM, TRIVANDRUM. [PAN:AABCK5896J] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) ASSESSEE BY SHRI PANKAJAKSHAN C.GOVIND, CA DATE OF HEARING 04/02/2015 DATE OF PRONOUNCEMENT 06/02/2015 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 03/02/2014 PASSED BY THE CIT(A), TRIVANDRUM FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD T O DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 43B OF THE I.T. ACT T O THE TUNE OF RS.77,53,80,000/- BEING ELECTRICITY DUTY PAYABLE U/S. 3(1) OF THE ELEC TRICITY DUTY ACT, 1963 AND RS.8,67,22,264/- BEING SUPPLY SURCHARGE PAYABLE TO GOVERNMENT: I.T.A. NO.284/COCH/2014 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS SHOWN THE FOLLOWING AMOUNTS PAYABLE TO THE GOVERNMENT AS PER THE PROVIS IONS OF SECTION 3,4 AND 5A OF KERALA ELECTRICITY DUTY ACT, 1963: 1. ELECTRICITY DUTY PAYABLE U/S. 3 RS. 77,53,80,000 .00 2. ELECTRICITY DUTY PAYABLE U/S. 4 RS.189,35,70,803. 00 3. ELECTRICITY DUTY PAYABLE U/S. 5 RS. 55,91,09 9.00 4. SURCHARGE RS.276,12,64,166.00 THE ASSESSING OFFICER OBSERVED THAT AS PER SECTION 3(1) OF KERALA ELECTRICITY DUTY ACT, 1963 READ WITH RULE 3 OF KERALA ELECTRICITY DUTY RUL ES, 1963, THE ASSESSEE SHALL PAY EVERY MONTH TO THE GOVERNMENT THE DUTY CALCULATED A T 6 PAISE PER UNIT OF ENERGY SOLD TO CUSTOMERS. FURTHER, THE DUTY PAYABLE IN RE SPECT OF A MONTH SHALL BE PAID BEFORE THE EXPIRY OF THE FOLLOWING MONTH. SIMILARL Y, THE ASSESSEE SHALL COLLECT ELECTRICITY DUTY PAYABLE BY CUSTOMERS U/S. 4(1) OF THE SAID ACT AND THE DUTY SO COLLECTED TO THE GOVERNMENT AFTER RETAINING 1% THER EOF TOWARDS COLLECTION CHARGES. IN THE SAME WAY, THE AMOUNT COLLECTED TOWARDS INSPE CTION FEE AND SUPPLY SURCHARGE HAVE ALSO TO BE PAID PROMPTLY TO THE GOVT. ACCOUNTS . ON FURTHER VERIFICATION, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT REMITTED THE AMOUNTS PAYABLE TO THE GOVT. WITHIN THE TIME STIPULATED UNDER THE RELE VANT ACT. ACCORDING TO THE ASSESSING OFFICER, AS PER THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, ANY AMOUNT PAYABLE BY WAY OF TAX DUTY, CESS OR FEE UNDER ANY L AW FOR THE TIME BEING IN FORCE IS ALLOWABLE AS DEDUCTION ONLY IN THAT PREVIOUS YEAR I N WHICH SUCH SUM IS ACTUALLY PAID. BEING SO, THE ABOVE AMOUNTS WERE DISALLOWED BY THE ASSESSING OFFICER. I.T.A. NO.284/COCH/2014 3 4. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. IT WAS FAIRLY CONCEDED BY THE LD. AR THAT THIS ISSUE WAS DECIDED BY THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE REPORTED IN 329 ITR 91 WHERE IN IT WAS HELD AS FOLLOWS: SECTION 43B(A) DEALS WITH ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTYUNDER ANY LAW FOR THE TIME BEING IN FORCE. THE WORDS, BY WAY OF TAX ARE INDICATIVE OF THE NATURE OF LIABILITY. THE LIAB ILITY TO PAY AND THE CORRESPONDING AUTHORITY OF THE STATE TO COLLECT THE TAX (FLOWING FROM A STATUTE) IS ESSENTIAL IN THE REALM OF THE RIGHTS OF THE SOVE REIGN, WHEREAS THE OBLIGATION OF THE AGENT TO ACCOUNT FOR AND PAY THE AMOUNTS COL LECTED BY HIM ON BEHALF OF THE PRINCIPAL IS PURELY FIDUCIARY. THE NATURE OF T HE OBLIGATION CONTINUES TO BE FIDUCIARY EVEN IN A CASE WHEREIN THE RELATIONSHIP O F PRINCIPAL AND AGENT IS CREATED BY A STATUTE. SECTION 43B(B) DEALS WITH AM OUNTS PAYABLE TO THE SOVEREIGN QUA PRINCIPAL. THEREFORE, SECTION 43B CA NNOT BE INVOKED IN THE CASE OF THE ELECTRICITY BOARD WITH REGARD TO ELECTRICITY DUTY COLLECTED BY IT PURSUANT TO THE OBLIGATION U/S. 5 OF THE KERALA ELECTRICITY DUTY ACT, 1963. THE COURT MADE IT CLEAR THAT IT HAD NOT DECIDED WHETHER THE AMOUNT SH OULD BE TREATED AS INCOME FOR THE PURPOSE OF THE ACT. IT MAY BE MENTIONED HEREIN THAT THE DISPUTE REVOLVE S AROUND CERTAIN AMOUNTS COLLECTED BY THE APPELLANT PURSUANT TO THE STATUTOR Y OBLIGATIONS CREATED U/S. 5 OF THE KERALA ELECTRICITY DUTY ACT, 1963. U/S. 4 OF THE SAID ACT, A DUTY IS LEVIED ON THE CONSUMERS OF ELECTRICITY SPECIFIED IN COLUMN (2) OF THE SCHEDULE. U/S. 5, THE APPELLANT IS OBLIGED TO COLLECT FROM THE CONSUM ER THE ABOVE MENTIONED DUTY AND PAY TO THE GOVERNMENT AT THE TIME AND IN THE MA NNER AS PRESCRIBED BY RULE. FURTHER DETAILS OF THE SCHEME OF THE SAID AC T MAY NOT BE NECESSARY FOR THE PURPOSE OF DECIDING THIS APPEAL. 6. BEING SO, THE PROVISIONS OF SECTION 43B IS APPLI CABLE TO THE ELECTRICITY DUTY PAYABLE TO THE GOVERNMENT. ACCORDINGLY, THE DISALL OWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED TO THE EXTENT OF RS. 77,53,80, 000/- TOWARDS ELECTRICITY DUTY I.T.A. NO.284/COCH/2014 4 PAYABLE TO THE GOVERNMENT AND TO THAT EXTENT THE OR DER OF THE CIT(A) IS REVERSED AND THAT OF ASSESSING OFFICER RESTORES. 7. WITH REGARD TO ELECTRICITY SURCHARGE COLLECTED F ROM THE CONSUMERS AMOUNTING TO RS.8,67,22,264/-, THE SAME IS LEVIED I N TERMS OF KERALA STATE ELECTRICITY SURCHARGE(LEVY AND COLLECTION) ACT, 1989 , WHICH PROVIDES FOR LEVY AND COLLECTION OF SURCHARGE ON HIGH TENSION AND EXTRA H IGH TENSION SUPPLIES OF ENERGY BY KERALA STATE ELECTRICITY BOARD. THE SURCHARGE I S COLLECTED FROM THE SPECIAL CATEGORY OF CONSUMERS IN TERMS OF SEC. 3 OF THE ABO VE ACT AND STANDS ON THE SAME FOOTING AS UNDER SECTION 4(1) OF THE KERALA ST ATE ELECTRICITY DUTY ACT, 1963. THEREFORE, THE PROVISIONS OF SECTION 43B IS NOT APP LICABLE TO THE ASSESSEES CASE IN TERMS OF THE ORDER OF JURISDICTIONAL HIGH COURT CITED SUPRA. BEING SO, IN OUR OPINION, THE DISALLOWANCE OF ELECTRICITY SUPPLY SUR CHARGE TO THE EXTENT OF RS.8,67,22,264/- IS NOT WARRANTED AND ACCORDINGLY, THE ORDER OF THE CIT(A) ON THE ISSUE OF DELETION OF ELECTRICITY SURCHARGE IS C ONFIRMED. 8. THE NEXT ISSUE IS WITH REGARD TO APPLICATION OF SECTION 115JB OF THE I.T. ACT SO AS TO TAX BOOK PROFIT. THE AO OBSERVED TH AT THE ASSESSEE IS A COMPANY UNDER INCOME TAX ACT WHERE ITS INCOME TAX PAYABLE O N TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T IS LESS THAN A FIXED PERCENTAGE OF THE BOOK PROFIT. NO EXEMPTION TO COM PANIES ENGAGED IN THE GENERATION AND/OR DISTRIBUTION OF ELECTRICITY HAS B EEN GRANTED UNDER THIS SECTION I.T.A. NO.284/COCH/2014 5 AS PER FINANCE BILL, 2000. HOWEVER, THE CIT(A) OB SERVED THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEES CASE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 9. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT THIS ISSUE WAS ALSO CONSIDERED BY THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE REPORTED IN 329 ITR 91 WITH THE FOLLOWING OBSERVATI ON: AT THE EARLIEST POINT OF TIME WHEN SECTION 115JB W AS INTRODUCED, THE SECTION EXPRESSLY EXCLUDED FROM ITS BODIES LIKE THE ELECTRICITY BOARD. THOUGH SUCH EXPRESS EXCLUSION IS ABSENT IN S ECTION 115JA, THE CENTRAL BOARD OF DIRECT TAXES ISSUED CIRCULAR N O.762 DATED FEBRUARY 18, 1998 EXCLUDING BODIES LIKE THE ELECTRIC ITY BOARD FROM THE OPERATION OF THE SECTION. CIRCULAR NO.762 NOT ONLY IS BINDING ON THE DEPARTMENT, BUT ALSO EXPLAINS THE PURPOSE IN INTRODUCING SECTION 115JA WHICH WAS TO TAX ZERO- TAX COMPANIES. THE CBDT UNDERSTOOD THAT COMPANIES ENGAGED IN THE BUSINESS O F GENERATION AND DISTRIBUTION OF ELECTRICITY AND ENTERPRISES ENG AGED IN DEVELOPING, MAINTAINING AND OPERATING INFRASTRUCTUR E FACILITIES, AS A MATTER OF POLICY, ARE NOT BROUGHT WITHIN THE PURVIE W OF SECTION 115JA FOR THE REASON THAT SUCH A POLICY WOULD PROMO TE THE INFRASTRUCTURAL DEVELOPMENT OF THE COUNTRY. SUCH A N UNDERSTANDING OF THE CBDT IS BINDING ON THE DEPARTMENT. SECTION 1 15JB, WHICH IS SUBSTANTIALLY SIMILAR TO SECTION 115JA CANNOT HAVE A DIFFERENT PURPOSE AND NEED NOT BE INTERPRETED IN A MANNER DIF FERENT FROM THE UNDERSTANDING OF THE CBDT OF SECTION 115JA. WHEN THE COMPUTATION PROVISION COULD NOT BE APPLIE D IN A PARTICULAR CASE, IT IS INDICATIVE OF THE FACT THAT THE CHARGING SECTION ALSO WOULD NOT APPLY. THE ELECTRICITY BOARD OR BODIES SIMILAR TO IT, WHIC H ARE TOTALLY OWNED BY THE GOVERNMENT, EITHER STATE OR CENTRAL, H AVE NO SHAREHOLDERS. PROFIT, IF AT ALL, MADE WOULD BE FOR THE BENEFIT OF THE ENTIRE BODY POLITIC OF THE STATE. THEREFORE, THE EN QUIRY AS TO THE MISCHIEF SOUGHT TO BE REMEDIED BY THE AMENDMENT BEC OMES IRRELEVANT. THEREFORE, THE FICTION FIXED UNDER SECT ION 115JB CANNOT I.T.A. NO.284/COCH/2014 6 BE PRESSED INTO SERVICE AGAINST THE ELECTRICITY BOAR D WHILE MAKING THE ASSESSMENT OF THE TAX PAYABLE UNDER THE INCOME TAX ACT. 10. ACCORDINGLY, FOLLOWING THE ABOVE JUDGMENT OF TH E JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS IS SUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OP EN COURT ON 06-02-2015. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 6TH FEBRUARY, 2015 GJ COPY TO: 1. KERALA STATE ELECTRICITY BOARD, VYDHYUTHI BHAVAN, PATTOM, TRIVANDRUM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM 4. THE COMMISSIONER OF INCOME-TAX,M TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN