9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (5) TMI 795 - HC - Income TaxApplicability of Section 43B - electricity duty collected by the assessee-company as licensee, on behalf of the State Government - Held that - The electricity duty, not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, Section 43B is not attracted to the licensee/assessee in respect of electricity duty collected by it for being passed on the State Government. On this point we are in respectful disagreement with the decision of Commissioner of Income Tax-vs.-Ahmedabad Electricity Co. Ltd. (2003 (1) TMI 43 - GUJARAT High Court) and we are in agreement with the decision Kerala State Electricity Board-vs.-Deputy Commissioner of Income Tax (2010 (11) TMI 127 - Kerala High Court). We are of the opinion that Section 43B of the Income Tax Act is attracted to a case where payment is to be made to the State Government in the capacity of the State as a sovereign and not to a case where payment is to be made to the State Government in its capacity as a principal by an agent. In the instant case, the relationship between the State and the licensee is of a principal and agent/fiduciary and not that of a sovereign and a subject. It is not a business receipt of the licensee which the licensee collects on its own behalf in connection with its business of generating and supplying electricity. The licensee does not collect the electricity duty for its own consumption or utilization. If the licensee collects the duty but does not pay the same to the Government, the statute provides mechanism for the Government to recover the same from the licensee. Even in a case where the licensee is unable to recover the duty but recovers the energy charges, the statutes still provides a procedure for the Government to recover the duty either from the consumer or from the licensee. This view of ours finds support from the decision of Commissioner of Income Tax-vs.-Devatha Chandraiah (1983 (4) TMI 6 - ANDHRA PRADESH High Court). Though the said case deals with sales tax, the principle laid down in that case supports our view. The mischief that Section 43B of the Income Tax Act intended to present, is taken care of by the provisions of the Bengal Electricity Duty Act itself. Thus We clarify that the provision of Section 43B of the Income Tax Act does not apply to the electricity duty collected by the licensee/assessee as per provisions of the Bengal Electricity Duty Act, 1935. - Decided in favour of assesse.
Issues Involved:
1. Applicability of Section 43B of the Income Tax Act to electricity duty collected by the licensee from consumers. 2. Nature of electricity duty collected by the licensee and whether it constitutes a trading receipt. 3. Primary liability for payment of electricity duty under the Bengal Electricity Duty Act, 1935. Detailed Analysis: 1. Applicability of Section 43B of the Income Tax Act: The primary issue is whether Section 43B of the Income Tax Act applies to the electricity duty collected by the assessee-company (licensee) from consumers. The assessee argued that Section 43B does not apply since the electricity duty collected is not a tax, duty, cess, or fee payable by the assessee but is collected on behalf of the State Government. The Tribunal, however, held that the electricity duty collected constitutes a trading receipt and is subject to Section 43B, which allows deductions only on actual payment. The Tribunal relied on the Gujarat High Court decision in CIT vs. Ahmedabad Electricity Co. Ltd. The High Court of Calcutta disagreed, aligning with the Kerala High Court's decision in Kerala State Electricity Board vs. Deputy Commissioner of Income Tax, which held that Section 43B applies to sums payable to the sovereign as a sovereign, not as a principal by an agent. 2. Nature of Electricity Duty Collected: The Tribunal considered the electricity duty collected as a trading receipt, similar to sales tax, and thus chargeable to tax. The High Court of Calcutta, however, found that the electricity duty collected by the licensee from consumers is not a trading receipt. The licensee acts as a collecting agent for the State Government, and the duty does not constitute income for the licensee. The Court emphasized that the duty collected is not for the licensee's consumption or utilization but is to be passed on to the State Government. 3. Primary Liability for Payment of Electricity Duty: The High Court analyzed Sections 3, 5, and 8 of the Bengal Electricity Duty Act, 1935. It concluded that the primary liability to pay electricity duty lies with the consumers, not the licensee. The licensee's role is to collect the duty from consumers and remit it to the State Government. The proviso to Section 5(1) exempts the licensee from paying duty if it cannot recover its dues from consumers, indicating that the primary liability is on the consumers. The Court noted that the first charge created by Section 5(1) on the amount recoverable by the licensee for the energy supplied is to ensure the licensee makes every effort to recover the duty from consumers. Conclusion: The High Court of Calcutta set aside the Tribunal's orders, clarifying that Section 43B of the Income Tax Act does not apply to the electricity duty collected by the licensee under the Bengal Electricity Duty Act, 1935. The Court emphasized that the duty collected by the licensee is not a trading receipt and does not constitute income for the licensee. The primary liability for the duty lies with the consumers, and the licensee acts merely as a collecting agent for the State Government. The appeals were accordingly disposed of, and the orders under appeal were set aside.
|
