2022 (9) TMI 306 - HC - Income Tax

Applicability of Section 43B - electricity duty collected by the assessee as per the provisions of Punjab Electricity (Duty) Act, 1958 - revenue claims that since the assessee in the present case was following mercantile system of the accounting, thus provision of Section 43B will be applicable to the amounts covered under electricity duty - whether the amount towards electricity duty is payable by the assessee or it is merely a collection agency discharging its duty under a statutory arrangement? - HELD THAT - Liability to pay electricity duty lies on the consumer. Further, the electricity duty is to be paid to the State Government. Section 4 casts duty on the licensee to collect the electricity duty from the consumers and to pay the same to the State Government. Licensee is only a collecting agency. It will be further apposite to notice here that exercising powers under Section 13 of the 1958 Act, rules have been framed. The rules called as Punjab Electricity (Duty) Rules, 1958 prescribes for collection and payment of duty. Thus, the amount collected by the licensee as electricity duty leviable under 1958 Act is required to be deposited in the Government treasury by the licensee. Section 43B is a non-obstente clause. As inserted by Finance Act, 1983 with an intent to curb the malpractice at the hands of certain tax payers, who claimed statutory liability as a deduction without discharging the same and pleaded mercantile system of accounting as defence. The argument raised by counsel for the appellant(s) that Section 43B will be attracted merely for the reason that the appellant(s) is following mercantile system of accounting deserves to be rejected. The revenue is required to show that the duty, tax, cess or fee (in the present case electricity duty) is payable by the assessee. The reliance placed on judgment passed by Gujarat High Court in Ahmedabad Electricity Co. Ltd.'s case 2003 (1) TMI 43 - GUJARAT HIGH COURT is misplaced. Rather Section 4 of the 1958 Act read with provisions contained in 1958 Rules makes it abundantly clear that assessee is merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay the same to the State Government - we find that the question w.r.t. the applicability of Section 43B on the electricity duty, needs to be answered against the revenue and in favour of the assessee.

Summary

Issues:
Applicability of Section 43B of the Income-tax Act, 1961 to electricity duty collected under the Punjab Electricity (Duty) Act, 1958.

Analysis:
The judgment revolves around the interpretation of Section 43B of the Income-tax Act, 1961 concerning the electricity duty collected by the assessee under the Punjab Electricity (Duty) Act, 1958. The appellant, a licensee distributing power in Haryana, filed a return for the assessment year 2008-09, which was revised by the Commissioner Income Tax under Section 263 of the 1961 Act. The issue arose when the appellate authority deleted the disallowance made by the Assessing Officer regarding electricity duty under Section 43B of the 1961 Act. The Tribunal upheld the appellate authority's decision. The revenue argued that Section 43B should apply as the appellant followed the mercantile system of accounting, citing a Gujarat High Court judgment. However, the court analyzed the provisions of the Punjab Electricity (Duty) Act, 1958, and concluded that the liability to pay electricity duty lies with the consumer, not the assessee. The court highlighted that the licensee is merely a collection agency under the statutory arrangement, as per Section 4 of the 1958 Act. Referring to a Calcutta High Court judgment, the court emphasized that Section 43B is not attracted to the licensee for electricity duty collected to be passed on to the State Government. Consequently, the court ruled in favor of the assessee, dismissing the appeals.

In conclusion, the judgment clarifies that Section 43B of the Income-tax Act, 1961 does not apply to the electricity duty collected by the assessee under the Punjab Electricity (Duty) Act, 1958. The court emphasized that the liability to pay the electricity duty rests with the consumer, and the licensee acts as a collection agency to pass on the duty to the State Government. The court's decision was based on a detailed analysis of the statutory provisions and previous judgments, ultimately ruling against the revenue and in favor of the assessee.