ACIT, Trivandrum V. Kerala State Electricity Board, Trivandrum

ITA 52/COCH/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5778 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-08-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 11-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: RAJEEV R
• Keywords: Reopening of assessment; Depreciation; Question of law; Corroborative evidences; Tax effect; Reason to believe; Reassessment proceedings; Set aside
• Section: 147; 69; 148; 43B; 139; 143(3); 115JB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO S . 52 & 53 / C OCH/ 2019 ASSESSMENT YEAR S : 2005 - 06 & 2006 - 07 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1 (1), TRIVANDRUM. VS. KERALA STATE ELECTRICITY BOARD, VAIDYUTHI BHAVAN, PATTOM, TRIVANDRUM. [PAN:AABCK 5896J] (REVENUE - APPELLANT) (AS SESSEE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, SR. DR ASSESSEE BY SHRI RAJEEV R., CA D ATE OF HEARING 05/08/2019 DATE OF PRONOUNCEMENT 0 8 / 0 8 /201 9 O R D E R PER CHANDRA POOJARI, AM: TH ESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDER S OF THE CIT(A) , TRIVANDRUM AND PERTAIN TO THE ASSESSMENT YEAR S 2005 - 06 AND 2006 - 07. ITA NO. 52/COCH/2019 : AY 2005 - 06 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO.52/COCH/2019: 1 . THE LD. COMMISSIONER OF INCOME - TAX (APPEALS), THIRUVANANTHAPURAM ERRED IN CONCLUDING THAT 'THE REOPENING MADE UNDER SECTION 147 OF THE ACT BY ISSUE OF NOTICE U/S 148 OF THE ACT ON 30.03.2010 IS INVALI D AND AS THE LEGAL GROUND RAISED BY THE APPELLANT IS ALLOWED, THE GROUNDS RAISED ON MERITS BECOME INFRUCTUOUS AND THEREFORE, NOT DISCUSSED'. I.T.A. NOS.52&53/COCH/2019 2 2. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE NOTICED THAT THE REASSESSMENT PROCEEDINGS U/S 147 WAS INITIATED AS PER EXPLANATION 2C(III) & (IV) GIVEN UNDER PROVISOS TO SECTION 147 WHEREBY EXCESSIVE RELIEF ALLOWED AND EXCESSIVE LOSS OR ANY OTHER ALLOWANCE ADMITTED ARE DEEMED TO BE A CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, I.E. THE REO PENING WAS DONE ON THE INCOME WHICH HAS BEEN MADE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT AND EXCESSIVE LOSS OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 3. THE LD. COMMISSIONER OF INCOME - TAX(APPEALS) HELD THE REOPENING MADE U/S 147 OF THE A CT BY ISSUE OF NOTICE U/S 148 OF THE ACT ON 30.03.2010 JS INVALID ON THE GROUND THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF ASSESSMENT ARE SUBJECT MATTERS OF APPEAL BEFORE THE CIT(A). LD. CIT(A) OUGHT TO HAVE NOTICED THAT THE APPEAL WAS FILED ON THE ISSUE INVOLVED AND NOT ON THE QUANTUM OF ADDITION AND HENCE PROVISO TO 148 DOES NOT APPLY. 4. THE LD. COMMISSIONER OF INCOME - TAX(APPEALS) OUGHT TO HAVE NOTICED THAT THE ISSUES REGARDING ADMISSIBILITY OF ALLOWANCE/DEDUCTION HAS NOT REACHED FINALITY AS THE SAME IS PENDING BEFORE THE APEX COURT. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF APPEALS, TRIVANDRUM ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR AY 2005 - 06 ON 31.10.2005 DECLARING TOTAL INCOME OF RS . NIL. THE ASSESSMENT UNDER SECTION 143(3) OF THE I.T. ACT WAS COMPLETED ON 24.12.2007 B Y ASSESSING TOTAL INC OME AT RS. 3,81,97,748 / - UNDER NORMAL PROVISIONS AND RS. 204,41,69,768 / - UNDER SECTION 115JB OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 30.03.2010. THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED ON 31.12.2010 BY ASSESSING TOTAL INCOME AT RS. 3,81,97,748 / - AND RS. 204,41,69,768 / - UNDER SECTION 115JB OF THE ACT. THE REASONS FOR REOPENING THE ASSESSMENT WERE COMMUNICATED TO THE ASSESSEE VIDE LETTER DATED 27.09.201 . WHILE COMPUTING THE TOTAL INCOME, THE ASSESSING OFFICER RECKONED RS.155 , 00 , 21 ,1 13/ - TOWARDS ELECTRICITY DUTY COLLECTED BY THE ASSESSEE AND PAYABLE I.T.A. NOS.52&53/COCH/2019 3 TO GOVT. WHICH REMAINED UNPAID AND ADDED BACK TO THE RETURNED INCOME AND THE ACTUAL AMOUNT WAS RS.155 , 00 , 21 , 113/ - . THUS, THE LO SS WAS ASSESSED TO THE EFFECT OF RS.51 , 04 , 72 , 328/ - . THUS, W HILE COMPUTING THE TOTAL INCOME, THE ASSESSING OFFICER OMITTED TO ADD BACK RS.15 , 83 , 00 , 000/ - BEING SHORT PROVISION OF INTEREST ON GOVT. LOANS AND RS.123 , 36 , 00 , 000/ - BEING PENAL INTEREST ON STATE GOVT. LOANS AND BELATED INTEREST PAYMENT OF ELECTRICITY DUTY. IN THE ORDER GIVING EFFECT TO CIT(A)S ORDER TOTALING MISTAKE APPEARED WHICH RESULTED IN SHORT TO THE TUNE OF RS.14 , 00 , 00 , 000 / - WITH A POTENTIAL TAX EFFECT OF RS.5 , 12 , 29 , 500/ - THUS, THE ASSESS ING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. 4 . BEFORE THE CIT(A), THE LD. AR SUBMITTED THAT T HE REOPENING WAS INVALID IN VIEW OF SECOND PROVISO TO SECTION 147 OF THE ACT. IT WAS SUBMITT E D THAT THE ISSUES DEALT WITH HAVE BEEN THE SUBJECT MATTER OF THE REGULAR ASSESSMENT' PROCEEDINGS U/ S . 143(3) ORIGINALLY COMPLETED VIDE ORDER 24.12 - 2007. IT WAS SUBMITTED THAT THE PREVIOUS CIT(A) HAD GIVEN DI RECTIONS TO THE ASS ESSING OFFICER FOR ALLOWING CLAIMS A FTER VERIFICATION OF THE FACTS/ DOCUMENTS VIDE ORDER DATED 26 .02.2008 . IT WAS SUBMITTED THAT THE ASSESSMENT TO ELECTRICITY DUTY AND OTHER STATUTORY LEVIES AGGREGATING TO RS.215,25,23,965 / - WAS AGAINST THE ORDER OF JURI SDICTIONAL HIGH REPORTED 'IN (2010) 329 1TR 91 ALLOWING THE ISSUE IN FAVOUR OF THE ASSESSEE. H ENCE , THE REASSESSMENT ORDER DT.31.12.2010 MAY BE QUASHED / SET ASIDE AS ILLEGAL. 4.1 THE CIT(A) OBSERVED THAT F ROM THE REASONS STATED FOR REOPENING OF THE ASSESSMENT, IT WA S EVIDENT THAT THERE WERE ARITHMETICAL ERRORS IN THE COMPUTATION OF I.T.A. NOS.52&53/COCH/2019 4 INCOME IN THE ORIGINAL ASSESSMENT ORDER AND THE ASSESSMENT WAS REOPENED FOR PURELY FOR CORRECTING THOSE ARITHMETICAL MISTAKES. HOWEVER, WHILE DISPOSING THE APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDER, THE CIT(A) HA D DISCUSSED ALL THESE ISSUES AND DECIDED IN THE APPEAL ORDER PASSED ON 26.02.2008. THE APPEAL EFFECT GIVING ORDER WAS PASSED BY THE ASSESSING OFFICER ON 31.03.2008 . THUS, ACCORDING TO THE CIT(A), THE REOPENING W AS MADE ON ISSUES WHICH WERE UNDER APPEAL BEFORE CIT(A). THE CIT(A) REFERRED TO T HE RELEVANT PROVISIONS OF SECTION 147 OF THE ACT ARE AS UNDER: 'INCOME ESCAPING ASSESSMENT. 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR , HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTL Y IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS TH E RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1 ) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO AN Y ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR: PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MAT TERS WHICH ARE THE SUBJECT MATTERS OF ANY I.T.A. NOS.52&53/COCH/2019 5 APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT.' [EMPHASIS SUPPLIED] 4.2 THEREFORE, ACCORDING TO THE CIT(A), AS PER THE SECOND PROVISO TO THE SECTION 147 OF THE ACT, THE AS SESSMENT CANNOT BE REOPENED ON ISSUES WHICH ARE UNDER APPEAL. THE CIT(A) OBSERVED THAT C LEARLY, THE REASONS REC O RDED BY THE ASSESSING OFFICER FOR REOPENING OF ASSESSMENT ARE SUBJECT MATTERS OF APPEAL BEFORE THE CIT(A). IN VIEW OF THE SAME, IT WA S HELD TH AT THE REOPENING MADE UNDER SECTION 147 OF THE ACT BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT ON 30.03.2010 WAS INVALID. ACCORDINGLY, THE CIT(A) DELETED THE ADDITIONS MADE UNDER THIS ORDER AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THE VALIDITY OF REOPENING OF THE ASSESSMENT. 5 . AGAINST T HIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ISSUE REGARDING REASONS RECORDED FOR TH E RE - OPENING OF THE ASSESSMENT BY THE ASSESSING OFFICER WAS ALREADY A SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONSIDERED THE ISSUE ON THE ABOVE REASONS FOR RE - OPENING OF THE ASSESSMENT AND GAVE RELIEF. FURTHER, THE SAME ADDITIONS WERE T HE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 785/COCH/2008 DATED 23 RD FEBRUARY, 2010 WHEREIN THE APPEAL OF THE DEPARTMENT WAS PARTLY ALLOWED IN THE CASE OF ORIGINAL ASSESSMENT WHICH WAS COMPLETED U/S. 143(3) OF THE ACT . I.T.A. NOS.52&53/COCH/2019 6 6.1 FURTHER, THE CIT(A) VIDE ORDER DATED 26.02.2008 HAD MADE OBSERVATIONS ON THE FOLLOWING ISSUES AS UNDER: 6.2 ON THE FIRST ISSUE REGARDING ADDITION OF ELECTRICITY DUTY PAYABLE AND SUPPLY SURCHARGE PAYABLE, THE CIT(A) CONCURRING WITH THE CONTE NTION OF THE ASSESSEE OBSERVED THAT THE ELECTRICITY DUTY PAYABLE U/S. 4(1) OF THE KERALA STATE ELECTRICITY DUTY ACT, 1963 AMOUNTING TO RS.15,50,02,113. ELECTRICITY DUTY U/S. 3(1) OF THE ABOVE ACT AMOUNTING TO RS. 54,98,40,000 AND SUPPLY SURCHARGE PAYABLE U NDER THE ABOVE ACT AMOUNTING TO RS.5,26,62,852/ - LEVIED AND UNPAID ARE NOT TO BE TREATED AS THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR ON THE GROUND THAT THE SAME ARE TRADING RECEIPTS COVERED BY SECTION 43B OF THE ACT. THE ELECTRICITY DUTY U/S. 4( 1) OF THE ACT AND SUPPLY SURCHARGE PAYABLE UNDER KERALA STATE ELECTRICITY DUTY ACT, 1963 ARE NOT ITEMS OF TRADING RECEIPTS BEING AMOUNTS COLLECTED BY THE BOARD ONLY AS AN INTERMEDIARY AGENT AND THERE IS NO LIABILITY ON THE PART OF THE BOARD TO MAKE PAYMENT OF THESE SUMS TO THE GOVT. IF IT IS NOT COLLECTED FROM THE CONSUMERS AND ON THESE GROUNDS IT WAS HELD BY ITAT, AHMEDABAD BENCH IN THE CASE OF AHMEDABAD ELECTRICITY CO. (P) LTD. VS. ITO THAT SUCH DUTIES/SUPPLY DISCHARGE COLLECTED BY ELECTRICITY COMPANIES A RE NOT IN THE SAME NATURE OF SALES OR OTHER TAXES, WHICH ARE LEVIED UNDER OTHER STATUTES SINCE IN THOSE CASES THERE IS A STATUTORY DUTY TO MAKE PAYMENT OF SAID TAX OR DUTY EVEN IF THERE IS NO COLLECTION FROM THE CUSTOMER. THE APPEAL OF THE ASSESSEE WAS AL LOWED BY THE ITAT, COCHIN BENCH IN ITA NO. 121/COCH/1989 DATED 08/03/1994 FOLLOWING THE DECISION OF THE ITAT, AHMEDABAD BENCH CITED SUPRA. THE ISSUE WAS DULY CONSIDERED AND ALLOWED BY THE I.T.A. NOS.52&53/COCH/2019 7 CIT(A) IN THE APPEALS FOR THE PRECEDING ASSESSMENT YEARS 2002 - 03 T O 2004 - 05 VIDE ORDER 20.11.2006 AND FOR AY 2004 - 05 VIDE ORDER DATED 22/03/2007, RELYING ON THE ORDERS OF THE CIT(A) FOR THE PRECEDING ASSESSMENT YEAR 2002 - 03 VIDE ORDER DATED 31/10/2005 AND THE ADDITIONS WERE DELETED. FOLLOWING THE ORDERS PASSED BY THE CIT(A) IN THE EARLIER ASSESSMENT YEARS, ADDITIONS MADE ON ACCOUNT OF ELECTRICITY DUTY PAYABLE AND SUPPLY SURCHARGE PAYABLE WERE DELETED. 6.3 ON THE SECOND ISSUE RELATING TO THE ADDITION PRIOR PERIOD EXPENSES, THE CIT(A) OBSERVED THAT EXPENDITURE WAS IDE NTIFIED BY C&AG AS RELATABLE TO THE ASSESSMENT YEAR 2005 - 06 AND THIS WAS DULY DEBITED UNDER PRIOR PERIOD EXPENSES IN THE ACCOUNTS OF THE BOARD FOR THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2006 - 07. ACCORDING TO THE CIT(A), SINCE THE ASSESSEE BEING WH OLLY OWNED BY PUBLIC SECTOR UNDERTAKING IS GOVERNED BY THE DIRECTIONS OF C&AG, THE CLAIM OF THE ASSESSEE WAS IN ORDER. THEREFORE, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION FOR THE EXPENDITURE OF RS.15,83,00,000/ - FOR THE RELEVANT ASSESS MENT YEAR AFTER DUE VERIFICATION OF THE SUPPORTING EVIDENCES OF THE EXPENDITURE BY AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND ASSESSING OFFICER WAS DIRECTED TO PASS A SPEAKING ORDER ON THE ISSUE. 6.4 ON THE THIRD ISSUE REGARDING DISALLOWANCE OF DEDUCTION OF PENAL INTEREST ON STATE GOVERNMENT LOANS AND ON BELATED PAYMENT OF ELECTRICITY DUTY U/S. 3(1) OF KERALA ELECTRICITY DUTY ACT, 1963, THE CIT(A) OBSERVED THAT CLAIM IS LIABLE TO SUCCEED CONSIDERING THAT C&AG HAD ENTERED INTO A FI NDING THAT THIS EXPENDITURE RELATES TO THE I.T.A. NOS.52&53/COCH/2019 8 CURRENT YEAR IN QUESTION AND THEREFORE, DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION OF THE SUM OF RS.1,23,36,00,000/ - AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AFTER DUE VER IFICATION OF THE SUPPORTING DOCUMENTARY EVIDENCES BY GIVING AN OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE AND ALSO ACCEPTING THE SUBMISSION THAT THE INTEREST PAID IS ONLY OF A COMPENSATORY NATURE AND THE ASSESSING OFFICER WAS ASKED TO PASS A SPEAKING O RDER ON THE ISSUE. 6.5 WHEN THESE ISSUES WERE SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) IN THE CASE OF ORIGINAL ASSESSMENT, IN OUR OPINION, THE ASSESSING OFFICER CANNOT RE - VISIT THE SAME BY RE - OPENING THE ASSESSMENT U/S. 147 OF THE ACT AND ALSO IN VIEW OF SECOND PROVISO TO SECTION 147 WHICH READS AS FOLLOWS : PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CH ARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT.' [EMPHASIS SUPPLIED] 6.6 FURTHER, THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE REPORTED IN (2010) 329 ITR 91 H AS DELETED THE ADDITION MADE U/S. 43B WITH REGARD TO SUPPLY SURCHARGE, INSPECTION FEE AND ELECTRICITY DUTY AND LIABILITY U/S. 115JB OF THE ACT IN FAVOUR OF THE ASSESSEE. BEING SO, IN OUR OPINION, RE - OPENING OF THE ASSESSMENT IS BAD IN LAW AND HENCE, THE ASSESSMENT ORDER PASSED U/S. 147 OF THE ACT VIDE ORDER DATED IS 31.12.2010 IS QUASHED. THE APPEAL OF THE REVENUE IN ITA NO.52/COCH/2019 IS DISMISSED. I.T.A. NOS.52&53/COCH/2019 9 ITA NO. 53/COCH/2019 : AY 2006 - 07 7. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 53/COCH/2019: 1 . THE LD. COMMISSIONER OF INCOME - TAX (APPEALS), THIRUVANANTHAPURAM ERRE D IN DELETING THE DISALLOWANCE U/S 43B TOWARDS SUPPLY SURCHARGE, INSPECTION FEE AND ELECTRICITY DUTY. . 2. T HE PRESENT APPEAL INVOLVES SUBSTANTIAL QUESTION OF LAW: (I) THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) FAILED TO NOTE THAT THE HON'BLE KERALA HIGH COURT'S DECISION IN ASSESSEE'S OWN CASE FOR THE EARLIER YEARS (A YS 2002 - 03 TO 2005 - 06) REPORTED IN 329 1TR 91 AND RELIED ON BY HIM ON THE ISSUE OF DISALLOWANCE U/S 43B, HAS NOT BECOME CONCLUSIVE AS THE SLP FILED BY THE DEPARTMENT AGAINST THIS ORDER IS PENDING FOR DECISION BEFORE THE HON'BLE APEX COURT. (II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE NOTICED THAT THE ELECTRICITY DUTY PAYABLE TO GOVT . OF KERALA WERE RECEIPTS BY THE ASSESSEE WHICH WERE KEPT OUTSIDE THE P & L ACCOU NT TO TAKE A STAND THAT THESE ARE NOT EXPENSES TO BE DISALLOWED U/S 43B AND OUGHT TO HAVE UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER. (III) THE ELECTRICITY CHARGES ARE IN THE NATURE OF PAYMENTS RECEIVABLE BY THE GOVT . OF KERALA AND M/S . KSEB IS A PERSON WHO IS MANAGING THE BUSINESS OF COLLECTION OF THESE CHARGES (AS THIS ACTIVITY IS VESTED WITH THIS BOARD AND GOVERNED BY THE ELECTRICITY DUTY ACT, 1963 READ WITH ELECTRICITY SUPPLY ACT,1948) AND HENCE CLEARLY IT IS AN INCOME FROM BUSINESS U/S 28(II )(D). HENCE THE DUTY COLLECTED BY THE ASSESSEE CONSTITUTES TRADING RECEIPTS RECEIVED DURING THE ORDINARY COURSE OF ITS BUSINESS AND CONSEQUENTLY WHEN THE PAYMENT IS MADE TO THE GOVT., THE DEDUCTION UNDER THE INCOME TAX ACT IS ALLOWED AS BUSINESS EXPENDITUR E. THUS IF ANY SUM IS NOT PAID/WITHIN THE DUE DATE FIXED BY THE STATUTE UNDER ELECTRICITY DUTY ACT, IT IS TO BE DISALLOWED U/S. 43B OF THE INCOME TAX ACT. (IV) THE LD . CIT(A) OUGHT TO HAVE BROUGHT HIS ATTENTION TO THE DECISION OF HON'BLE HIGH COURT OF G UJARAT ON IDENTICAL ISSUE AS REPORTED IN CIT V S . AHMEDABAD ELECTRICITY COMPANY (262 ITR 97) WHEREIN THE HONBLE HIGH COURT HAS HELD, AFTER AN ANALYSIS OF THE PROVISIONS OF BOMBAY ELECTRICITY DUTY ACT, 1958, WHOSE PROVISIONS ARE ANALOGOUS TO THE PROVISIONS OF THE KERALA STATE ELECTRICITY DUTY ACT, 1963, THAT 'THE LIABILITY OF THE ELECTRICITY COMPANY TO PAY THE DUTY COLLECTED TO THE GOVERNMENT HAD BEEN SPELT OUT IN CLEAR TERMS IN THE RELEVANT STATUTE AND IT CANNOT BE HELD AS NOT LIABLE TO PAY THE DULY COLLEC TED TO THE STATE GOVERNMENT ON THE GROUND THAT THE RELATIONSHIP IS ONLY ONE OF PRINCIPAL QUA AGENT AND HENCE PROVISIONS OF SECTION 43B IS APPLICABLE'. I.T.A. NOS.52&53/COCH/2019 10 3. THE LD. COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN CONCLUDING THAT THE APPELLANT IS NOT LIABLE F OR MAT U/S 1 15JB: (I) THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) FAILED TO NOTE THAT THE HON'BLE KERALA HIGH COURT'S DECISION IN ASSESSEE'S OWN CASE FOR THE EARLIER YEARS (A YS 2002 - 03 TO 2005 - 06) REPORTED IN 329 ITR 91 AND RELIED ON BY HIM ON THE I SSUE OF LIABILITY U/S . 115JB HAS NOT BECOME CONCLUSIVE AS THE SLP FILED BY THE DEPARTMENT AGAINST THIS ORDER IS PENDING FOR DECISION BEFORE THE HON'BLE APEX COURT. (II) THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS ) OUGHT TO HAVE NOTICED THAT THE DECISI ON OF HON'BLE HC OF KERALA ON THE APPLICABILITY OF SEC. 115JB TO THE ASSESSEE WAS WRONGLY BASED ON CBDT CIRCULAR NO. 762 DATED 18.02.1998 WHICH PERTAINS ONLY TO SEC. 115J & 115JA AND NOT SEC. 115JB . SECTION 115JB OF THE INCOME - TAX ACT HAS CO M E INTO EFFECT FROM 01.04.2001 ONWARDS. 8. REGARDING GROUND NO. 2, T HE FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER DISALLOWED THE SUPPLY SURCHARGE, INSPECTION FEE, ELECTRICITY DUTY UNDER SECTION 43B OF THE ACT AS THE SAID AMOUNTS WERE NOT PAID DURING THE RELEVAN T PREVIOUS YEAR. 9. ON APPEAL, THE CIT(A) OBSERVED THAT TH E ISSUE OF APPLICABILITY OF PROVISIONS OF SECTION 43B OF THE ACT TO THE ASSESSEE WAS CONSIDERED BY THE HIGH COURT OF KERALA ( 329 ITR 91) AND HELD IN FAVOUR OF THE ASSESSEE FOR AY S 2002 - 03 TO 20 05 - 06 . FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED SUPRA , THE CIT(A) DELETED THE A DDITION MADE UNDER SECTION 43B OF THE ACT . 10. AFTER HEARING BOTH THE PARTIES, WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED BY THE JURISDICTIONAL HIGH CO URT IN ASSESSEES OWN CASE (329 ITR 91) WHEREIN IT WAS HELD AS UNDER: ON A PLAIN READING OF S. 43B THE ONLY CLAUSE IF AT ALL IS RELEVANT IN THE CONTEXT OF THE FACTS OF THE APPELLANT'S CASE IS CL. (A) WHICH DEALS WITH 'ANY SUM PAYABLE BY THE ASSESSEE BY W AY OF TAX, DUTY, ...........UNDER ANY LAW FOR THE TIME BEING I.T.A. NOS.52&53/COCH/2019 11 IN FORCE'. THE WORDS, 'BY WAY OF TAX' ARE RELEVANT AS THEY 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 B E FIDUCIARY EVEN IN A CASE WHEREIN THE RELATIONSHIP OF THE PRINCIPAL AND AGENT IS CREATED BY A STATUTE. WHEN S. 43B(A) SPEAKS OF THE SUM PAYABLE BY WAY OF TAX ETC., THE SAID PROVISION IS DEALING WITH THE AMOUNTS PAYABLE TO THE SOVEREIGN QUA SOVEREIGN, BUT NOT THE AMOUNTS PAYABLE TO THE SOVEREIGN QUA PRINCIPAL. THEREFORE S. 43B CANNOT BE INVOKED IN MAKING THE ASSESSMENT OF THE LIABILITY OF THE APPELLANT UNDER THE IT ACT WITH REGARD TO THE AMOUNTS COLLECTED BY THE APPELLANT PURSUANT TO THE OBLIGATION CAST ON THE APPELLANT UNDER S. 5 OF THE ELECTRICITY DUTY ACT, 1963. IT IS CLARIFIED THAT THE ABOVE CONCLUSION DOES NOT MEAN THAT THE SAID AMOUNT IS EITHER EXEMPTED FROM THE LIABILITY OF INCOME - TAX OR IT SHOULD BE TREATED AS INCOME FOR THE PURPOSE OF THE ACT. THOS E QUESTIONS WILL HAVE TO BE INDEPENDENTLY EXAMINED, HAVING REGARD TO THE OTHER PROVISIONS OF THE IT ACT, PRIMARILY BY THE ASSESSING AUTHORITY. IN VIEW OF THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEA L OF THE REVENUE. 11. REGARDING GROUND NO. 3, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD NOT COMPUTED THE INCOME CHARGEABLE UNDER SECTION 115JB OF THE ACT IN THE RETURN OF INCOME FILED. THE ASSESSING OFFICER HA D COMPUTED MAT IN COME UNDER 115JB OF THE ACT AT RS. 331,75,83,578 / - . 12. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HA D ALSO OBSERVED THAT THE ISSUE OF MAT TAX LIABILITY WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE HIGH COURT OF KERALA VIDE ORDER DATED 12.11.2010 FOR AY 2002 - 03 TO 2005 - 06. FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT, THE CIT(A) HELD I.T.A. NOS.52&53/COCH/2019 12 THAT THE ASSESSEE WAS S NOT LIABLE FOR M AT TAX UNDER SECTION 115JB OF THE ACT AND ALLOWED THIS GROUND OF THE ASSESSEE. 1 3 . AFTER HEARING BOTH THE P ARTIES, WE FIND THAT A SIMILAR ISSUE WAS CONSIDERED BY THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE (329 ITR 91) WHEREIN IT WAS HELD AS UNDER: ALL THE 3 SECTIONS (SS. 115 B , 11 5 JA AND 115JB) CREATE LEGAL FICTIONS REGARDING THE 'TOTAL INCOME' [A D EFINED EXPRESSION UNDER S. 2(45)] OF THE COMPANIES. WHILE THE EARLIER TWO SECTIONS MANDATE THE DEPARTMENT TO MAKE THE ASSESSMENT ON A FICTITIOUS AMOUNT OF TOTAL INCOME' WHERE THE ACTUAL AMOUNT OF TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE IT ACT IS LESS THAN 30 PER CENT OF THE BOOK PROFITS OF THE COMPANY, S. 11 5 JB MANDATES THE DEPARTMENT TO RESORT TO THE FICTION IN THOSE CASES WHERE THE TAX PAYABLE ON THE BASIS OF THE 'TOTAL INCOME' COMPUTED IN ACCORDANCE WITH THE IT ACT IS LESS THAN A SPECIFIED PERCENTA GE (7 PER CENT FOR THE YEARS IN ISSUE) OF THE BOOK PROFIT. FURTHER, SS . 115JA AND 115J8 ALSO STIPULATE A DEFINITE MANNER OF PREPARING THE ANNUAL ACCOUNTS INCLUDING THE P&L A/CS. MORE SPECIFICALLY, S. 115JB STIPULATES THAT THE ACCOUNTING POLICIES, ACCOUNTIN G 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 S. 210 OF THE COMPANIES ACT, 1956. IT MAY BE MENTIONED HER E THAT UNDER S. 166 OF THE COMPANIES ACT EVERY COMPANY IS MANDATED TO HOLD A GENERAL MEETING IN EACH YEAR. SEC. 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 P&L A/C FOR THE PERIOD. PARTS II AND HI OF SCH. VI TO THE COMPANIES ACT SPECIFY THE METHOD AND MANNER OF MAINTAINING THE P&L A/C. HOWEVER, THE APPELLANT THOUGH IS BY DEFINITION A COMPANY UNDER THE IT ACT AND DEEMED TO BE A COMPANY FOR THE PURPOSE OF IT ACT (BY VIRTUE OF THE DECLARATION UNDER S. 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 CONVENE AN ANNUAL GENERAL MEETING OR PL ACE ITS P&L A/C IN SUCH GENERAL MEETING. AS A MATTER OF FACT, A GENERAL MEETING CONTEMPLATED UNDER S. 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 S. 69 OF THE ELECTRICITY SUPPLY ACT, THE APPELLANT IS OBLIGED TO KEEP PROPER ACCOUNTS, INCLUDING THE P&L A/C, AND PREPARE AN ANNUAL STATEMENT OF ACCOUNTS, BALANCE SHEET, ETC. IN SUCH FORM AS MAY BE PRESCRIBED BY THE CENTRAL GOVERNMENT. THUS, THE APPELLANT THOUG H IS DEEMED TO BE A 'COMPANY' BOTH BY VIRTUE OF OPERATION - OF S. 80 OF THE ELECTRICITY SUPPLY ACT FOR THE PURPOSE OF I.T.A. NOS.52&53/COCH/2019 13 IT ACT AND BY VIRTUE OF THE DEFINITION OF THE EXPRESSION 'COMPANY' UNDER THE IT ACT THE APPELLANT IS REQUIRED TO KEEP AND MAINTAIN ITS ACCO UNTS IN A MANNER SPECIFIED BY THE CENTRAL GOVERNMENT, AND NOT IN THE MANNER SPECIFIED IN THE COMPANIES ACT. WHEN S. 115 B WAS INTRODUCED, THE SECTION EXPRESSLY EXCLUDED FROM ITS OPERATION BODIES LIKE THE APPELLANT. COMING TO S. 115JA, THOUGH SUCH EXPRESS EXCLUSION IS ABSENT, THE CBDT ISSUED A CIRCULAR NO. 762, DT. 18TH FEB., 1998 EXCLUDING THE BODIES LIKE THE APPELLANT FROM THE OPERATION OF THE SAID SECTION. THOUGH UNDER THE NORMAL RULES OF INTERPRETATION OF STATUTES THE OMISSION OF A CLAUSE WHICH EXISTED IN THE STATUTE AT SOME POINT OF TIME BY A SUBSEQUENT AMENDMENT WOULD INDICATE THAT THE LEGISLATURE INTENDED NOT TO GIVE THE BENEFIT OF SUCH CLAUSE ANY MORE TO THOSE WHO WERE GETTING THE BENEFIT OF SUCH EXCLUSION CLAUSE, IT IS NOT AN ABSOLUTE RULE. THE OTH ER ATTENDANT CIRCUMSTANCES, THE CONTEXT, THE HISTORY AND THE MISCHIEF SOUGHT TO BE REMEDIED BY THE AMENDMENT ARE ALL REQUIRED TO BE EXAMINED BEFORE REACHING AT DEFINITE CONCLUSION. AS PER CIRCULAR NO. 762, DT. 18TH FEB., 1998, THE CBDT UNDERSTOOD THAT COMP ANIES ENGAGED IN THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY AND ENTERPRISES ENGAGED IN DEVELOPING, MAINTAINING AND OPERATING INFRASTRUCTURE FACILITIES, AS A MATTER OF POLICY, ARE NOT BROUGHT WITHIN THE PURVIEW OF THE AMENDMENT (S. 115 J A) FO R THE REASON THAT SUCH A POLICY WOULD PROMOTE THE INFRASTRUCTURAL DEVELOPMENT OF THE COUNTRY. SUCH AN UNDERSTANDING OF THE CBDT IS BINDING ON THE DEPARTMENT. IF THAT IS THE BACKGROUND IN WHICH S . 115JA IS INTRODUCED INTO THE IT ACT, S. 115JB, WHICH IS SUBS TANTIALLY SIMILAR TO S, 115JA, CANNOT HAVE A DIFFERENT PURPOSE AND NEED NOT BE INTERPRETED IN A MANNER DIFFERENT FROM THE UNDERSTANDING OF THE CBDT OF S . 115JA. ANOTHER REASON IS THAT THE APPELLANT OR BODIES SIMILAR TO THE APPELLANT, WHICH ARE TOTALLY OWN ED BY THE GOVERNMENT EITHER STATE OR CENTRAL HAVE NO SHAREHOLDERS. PROFIT, IF AT ALL, MADE BY THE APPELLANT WOULD BE FOR THE BENEFIT OF ENTIRE BODY POLITIC OF THE STATE OF KERALA. IN THE FINAL ANALYSIS, ALL TAXATION IS MEANT FOR THE WELFARE OF THE PEOPLE I N A CONSTITUTIONAL REPUBLIC. THEREFORE THE ENQUIRY AS TO THE MISCHIEF SOUGHT TO BE REMEDIED BY THE AMENDMENT BECOMES IRRELEVANT. THEREFORE, THE FICTION FIXED UNDER S. 11 5 JB CANNOT BE PRESSED INTO SERVICE AGAINST THE APPELLANT WHILE MAKING THE ASSESSMENT OF THE TAX PAYABLE UNDER THE IT ACT. ASSESSEE, A STATUTORY CORPORATION CONSTITUTED UNDER S. 5 OF THE ELECTRICITY SUPPLY ACT, 1948, IS NOT A COMPANY FOR THE PURPOSE OF COMPANIES ACT AND IS NOT REQUIRED TO KEEP AND MAINTAIN ITS ACCOUNTS IN THE MANNER SPECIFIE D IN THE SAID ACT AND, THEREFORE, THE FICTION LAID DOWN IN S. 115JB IS NOT APPLICABLE WHILE MAKING THE ASSESSMENT OF THE ASSESSEE. I.T.A. NOS.52&53/COCH/2019 14 IN VIEW OF THE ABOVE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL OF THE REV ENUE. THUS, THE APPEAL OF THE REVENUE IN ITA NO. 53/COCH/2019 IS DISMISSED. 14. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH AUGUST, 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 8 TH AUGUST, 2019 GJ COPY TO: 1 . KERALA STATE ELECTRICITY BOARD, VAIDYUTHI BHAVAN, PATTOM, TRIVANDRUM. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), TRIVANDRUM. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) , TRIVANDRUM. 4 . THE PR. COMMISSIONER OF INCOME - TAX, TRIVANDRUM. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NOS.52&53/COCH/2019 15