2021 (12) TMI 1475 - HC - Income Tax

Applicability of Section 115JB on electricity company - assessee is engaged in the generation of power and has been established under the provisions of Damodar Valley Corporation Act, 1948 - scope of amendment brought in Section 115JB of the Act by Finance Act, 2012 effective from 01.04.2013 - HELD THAT - All taxation is meant for the welfare of the people in a constitutional republic and, therefore, the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant and, therefore, the Court held that the fiction fixed under Section 115JB cannot be pressed into service against the appellant therein while making the assessment of the tax payable under the Income Tax Act. On this issue, it would be beneficial to refer to the decision of ING Vysya Bank Ltd. 2020 (1) TMI 1116 - KARNATAKA HIGH COURT wherein held that provision of Section 115JB cannot be made applicable to insurance companies, banking companies or companies engaged in generation or supply of electricity. Effect of the amendment brought about to Section 115JB by Finance Act, 2012 with effect from 1st April, 2013 and sought to impress upon us the effect of such amendment to sustain their contention - This very issue was considered in the case of CIT, LTU vs. Union Bank of India 2019 (5) TMI 355 - BOMBAY HIGH COURT as held that the amendments to Section 115JB are neither declaratory nor classificatory but are substantive and significant legislative changes and can be applied only prospectively. Further, the High Court of Kerala in Principal Commissioner of Income Tax vs. State Bank of India 2019 (10) TMI 638 - KERALA HIGH COURT had considered the identical issue in respect of a banking company and following the decision of Union Bank of India supra had dismissed the appeal filed by the revenue. Appeal decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of Section 115JB of the Income Tax Act, 1961.
2. Interpretation of Explanation-3 to Section 115JB as amended by the Finance Act, 2012.
3. Applicability of the amendment to Section 115JB for the Assessment Year 2010-11.

Detailed Analysis:

1. Applicability of Section 115JB of the Income Tax Act, 1961:
The core issue was whether the provisions of Section 115JB, which pertains to the Minimum Alternate Tax (MAT), are applicable to the assessee, a statutory corporation engaged in power generation. The assessee argued that Section 115JB did not apply to them, as they are not a company under the Companies Act but a statutory corporation under the Damodar Valley Corporation Act, 1948. The Tribunal had directed the Assessing Officer not to apply Section 115JB, a decision which the revenue challenged.

The High Court referenced the Kerala High Court decision in Kerala State Electricity Board vs. Deputy Commissioner of Income Tax, which held that Section 115JB does not apply to statutory corporations like the Kerala State Electricity Board, which are not companies under the Companies Act. The Court noted that the assessee, similar to the Kerala State Electricity Board, is not required to prepare its accounts as per the Companies Act but under its governing statute, thus Section 115JB would not apply.

2. Interpretation of Explanation-3 to Section 115JB as amended by the Finance Act, 2012:
The revenue contended that the Explanation-3 to Section 115JB, introduced by the Finance Act, 2012, should be interpreted to include the assessee within its ambit. The Court examined the legislative history and the intent behind the amendment, noting that the amendment was meant to align the Income Tax Act with the Companies Act and was not declaratory or classificatory but substantive.

The Court cited the Bombay High Court's decision in CIT, LTU vs. Union Bank of India, which held that the amendments to Section 115JB are substantive and apply prospectively. The amendments were intended to provide that companies not required to prepare profit and loss accounts as per the Companies Act but under their regulatory Acts should compute book profits accordingly.

3. Applicability of the amendment to Section 115JB for the Assessment Year 2010-11:
The revenue argued that the amendment to Section 115JB by the Finance Act, 2012, should be applied retrospectively to the assessment year 2010-11. The Court disagreed, referencing multiple judicial precedents which held that the amendments were prospective. The High Court of Bombay in CIT, LTU vs. Union Bank of India and the High Court of Kerala in Principal Commissioner of Income Tax vs. State Bank of India both concluded that the amendments to Section 115JB were prospective and could not be applied to earlier assessment years.

Conclusion:
The High Court dismissed the revenue's appeal, holding that the provisions of Section 115JB do not apply to the assessee, a statutory corporation engaged in power generation, for the assessment year 2010-11. The Court affirmed that the amendments introduced by the Finance Act, 2012, to Section 115JB are substantive and apply prospectively, not retrospectively. Consequently, the connected application for stay was also dismissed.