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2020 (12) TMI 109 - AT - Income TaxAddition u/s. 115JB - assessee is a company carrying on the business of generation and selling of power had filed Nil return of income under normal provisions of the Income Tax Act - assessee claimed that the provisions of section 115JB of the Act were not applicable to the assessee as there was no tax payable on the income as per the regular computation of income under the Act, which is a sine qua non for application of the provisions of the Act u/s. 115JB - HELD THAT - As decided in own case 2018 (11) TMI 438 - ITAT BANGALORE the situation contemplated by the section for which provision has been made to the effect that the company should pay tax on its book profit and thus contribute to the exchequer. Therefore, there can be no escape from the position that the assessee company is caught within the mischief of section 115JB, notwithstanding that the tax payable by it on its total income computed under the normal provisions of the Act is Rs. Nil. It would be anomalous to hold that where tax of Re. - is payable on the total income computed under the normal provisions of the Act, then section 115JB would be attracted, but it would not be attracted when the tax payable on the total income is Rs.Nil either because the total income is nil or is a negative figure. It is well settled that the section has to be interpreted in such a manner as to avoid absurdity and also in such a manner as to advance the cause and suppress the mischief Admittedly, the provisions of s. 115JB have been amended w.e.f. 1st April, 2013, the Memorandum Explaining the Provisions of Finance Bill, 2012 while explaining the amendments to s. 115JB, notes that in cases of certain companies such as insurance, banking and electricity companies, they are allowed to prepare the P L a/c in accordance with the sections specified in their regulatory Acts. Thus, to align the provisions of the IT Act, 1961 with the Companies Act, 1956, it was decided to amend s. 115JB w.e.f. 1st April, 2013 to provide that companies which are not required under s. 211 of the Companies Act, 1956 to prepare P L a/c in accordance with Sch. VI of the Companies Act, 1956. P L a/c prepared in accordance with the provisions of their Regulatory Act shall be taken as basis for computing book profit under s. 115JB. For the foregoing reasons, it is held that the provisions of s. 115JB(2) do not apply to the banking companies. - Decided in favour of the assessee.
Issues:
- Appeal against deletion of addition under section 115JB - Applicability of section 115JB to the assessee engaged in generating electricity Analysis: Issue 1: Appeal against deletion of addition under section 115JB The appellant, a company involved in power generation and sales, filed a Nil return of income under normal provisions of the Income Tax Act, claiming that section 115JB was not applicable as there was no tax payable under regular computation. However, the Assessing Officer (A.O.) applied section 115JB and assessed the income as book profit. The CIT(A) deleted the addition, citing a previous Tribunal decision in favor of the assessee. The appellant raised grounds of appeal against the CIT(A)'s order, contending it was prejudicial to the revenue's interest. The Tribunal upheld the CIT(A)'s decision, emphasizing that the issue had been previously decided in favor of the assessee in other cases as well. The Tribunal noted that the issue was extensively covered by a judgment of the Hon'ble Karnataka High Court and the Tribunal, both ruling in favor of the assessee. Issue 2: Applicability of section 115JB to the assessee engaged in generating electricity The appellant contended that section 115JB was not applicable to them as they were engaged in generating electricity. The CIT(A) and the Tribunal both ruled in favor of the assessee, referencing previous decisions in the assessee's own case. The appellant relied on a judgment of the Hon'ble Karnataka High Court and the Tribunal to support their position. The Tribunal, after considering the arguments of both parties and reviewing relevant judgments, decided the issue against the revenue and in favor of the assessee. The Tribunal highlighted that the provisions of section 115JB did not apply to banking companies, insurance companies, or those engaged in electricity generation or supply, as per the Companies Act, 1956. The Tribunal dismissed the revenue's appeal, aligning with previous decisions and legal interpretations. In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition under section 115JB and ruling in favor of the assessee regarding the applicability of section 115JB to a company engaged in generating electricity. The Tribunal's decision was based on previous judgments and legal provisions that supported the assessee's position in both issues raised in the appeal.
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