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TMI Blog2016 (2) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the disallowance figure u/s 14A of the Act at 20,03,61,170/- under normal provisions of the Act and at 41,16,36,422/- under the provisions of section 115JB of the Act. There seems to be apparent mistake on adoption of figures by the Learned AO while computing the book profits u/s 115JB of the Act. However, we have already held that the assessee corporation is not liable to pay tax on the book profits u/s 115JB of the Act and accordingly, the issue of whether the disallowance u/s 14A of the Act could be added to the book profits u/s 115JB of the Act, becomes infructuous. Accordingly the ground raised by the assessee in this regard is allowed. Applicability of rule 8D - Held that:- As the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules without recording any satisfaction as mandated in Rule 8D(1) of the Rules is not appreciated and hence no disallowance u/s 14A of the Act by applying Rule 8D(2) of the Rules could be made in the facts of the instant case. In the instant case the assessee corporation had disallowed a sum of 11,08,315/- and no adverse inference has been brought on record and no satisfaction has been recorded with cogent reasons by the Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the aforesaid claim was not made in the return of income or revised return of income filed by the appellant. 3. For that on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) failed to appreciate that the judgment of the Kerala High Court in the case of Kerala State Electricity Board Vs DCIT was squarely applicable to the appellant in terms of which statutory corporations not registered under the Companies Act, 1956 were not liable to be assessed on 'book profits' under Section 115JB of the Income-tax Act, 1961. 4. For that on the facts and in the circumstances of the case and in law, the AO be directed to assess total income of the appellant for AY 2008-09 only with reference to computational provisions of the LT. Act, 1961, without invoking deeming provisions of Section 115JB of the Act. Ground nos. 1 to 5 of ITA No.451/Kol/2013 A.Y 2009-10 1. For that on the facts and in the circumstances of the case and in law, the CIT(Appeals) was grossly unjustified in rejecting the appellant's claim that the deeming provisions of Section 115JB are not applicable to the appellant and therefore total income was not assessable wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Corporation are maintained in accordance and conformity with the provisions of DVC Act, 1948. The annual financial statements are prepared in the form prescribed under the said Act. e. that assessee Corporation does not prepare its annual accounts in accordance or conformity with Schedule VI of the Companies Act, 1956 and accordingly the net profit of the Corporation is not arrived at the provisions of Part II & III of Schedule VI to Companies Act, 1956. f. that assessee Corporation does not distribute its profits by way of dividend either to participating Governments or any other person. In view of the above, the Learned AR argued that the provisions of section 115JB of the Act are not applicable to the assessee corporation. 3.2. In response to this, the Learned DR argued that the assessee filed its return by computing its income under normal provisions of the Act as well as under section 115JB of the Act and during assessment proceedings, it is only by way of a letter dated 20.12.2010, the asssessee sought to withdraw the applicability of section 115JB of the Act for the assessee and no revised return was filed for making this fresh claim. He placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisionally made by each of the three participating governments on the basis of the budget estimates shall be adjusted as soon as possible in accordance with the allocation made in the annual report. (4) Printed copies of the annual report shall be made available to each of the three participating governments by the 15th day of October each year. (5) The annual report shall be laid before the Central and the Provincial Legislatures concerned as soon as may be, after it is prepared. 3.3.1. We find that the provisions of section 46 of DVC Act, 1948 are as below:- Section 46 - "Other Annual Financial Statements" (1) The corporation shall also prepare such other annual financial statements in such form and by such dates as may be prescribed. (2) Printed copies of each such annual financial statements shall be made available to each of the three participating governments by such date as may be prescribed. 3.3.2. We find that the provisions of section 46 of DVC Act, 1948 are as below:- Section 47 - "Accounts and Audit" The accounts of the corporation shall be maintained and audited in such manner as may, in consultation with Auditor General of India, be prescribed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunicated to the Audit Officer. "AUDIT" 28. The accounts of the Corporation shall be audited by an officer appointed by the Comptroller and Auditor General of India, and under his direction and control. A statement of the results of audit for each month, shall be presented to the Corporation. 29. The Audit Officer shall be supplied with copies of all contracts and other orders involving revenue or expenditure of the Corporation duly authenticated by an Officer of the Corporation, who is competent to enter into the contract or to issue the order. 30. The Audit Officer shall have access to all papers, books, records, files and accounts at all reasonable times. 31. The Audit Officer shall certify to the correctness of the Annual Accounts prepared by the Corporation and append to the Certificate an audit report. The annual accounts so certified and the audit report shall, after countersignature by the Comptroller and Auditor General be submitted with three additional copies to the President. One copy shall be retained by the Central Government and one copy each shall be sent to the other two Participating Governments. The Audit Report shall be printed along with the Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Companies Act, 1956. We hold that assessee Corporation is not a company under the Companies Act, 1956. Only for income tax assessment purposes, the assessee corporation is given the status of a company. We hold that when the computation provision could not be applied in a particular case, it is indicative of the fact that the charging section also would not apply. We hold that the amendment in section 115JB came into effect only from 1.4.2013 vide Expln 3 inserted by Finance Act 2012. At the time of Finance Bill 2012 stage, amendment was proposed only in section 115JB(2) . Expln 3 was not proposed at that time. But when the Act was enacted, Expln 3 was inserted. Expln 3 states that assessee being a company to which section 211(2) of Companies Act applies. Admittedly, the accounts of assessee corporation are not prepared as per section 211(2) of Companies Act, 1956. We find that the Explanation 3 to section 115JB of the Act has been inserted by the Finance Act 2012 to clarify that only assesses being companies and to whom provisions of the Companies Act , 1956 are applicable come within the ambit of section 115JB of the Act. In other words, unless an assessee comes within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the provisions of their regulatory Acts shall be taken as a basis for computing the book profit under section 115JB. ii. It is noted that in certain cases, the amount standing in the revaluation reserve is taken directly to general reserve on disposal of a revalued asset. Thus, the gains attributable to revaluation of the asset is not subject to MAT liability. It is, therefore, proposed to amend section 115JB to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account. iii. It is also proposed to omit the reference of Part III of the Schedule VI of the Companies Act, 1956 from section 115JB in view of omission of Part III in the revised Schedule VI under the Companies Act 1956. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013- 14 and subsequent assessment years." 3.7. In view of the above, we hold that in view of the legislative change brought about by the introduction of Explanation 3 in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit. Where the total income as computed under the normal provisions of the Incometax Act, is more than 30 per cent of the book profit, tax shall be charged on the same. " 3.10. The Memorandum explaining the provisions in the Finance (No. 2) Bill, 1996 categorise the amendment under the caption "Rationalisation and Simplification". The relevant portion is reproduce hereunder:- 'RATIONALISATION AND SIMPLICATIONS Minimum Alternative tax on companies In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that inspite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. The new proposal provides for those companies to pay tax on 30% of the book profits, whose total income as computed under the Income-tax Act is less than 30% of the book profits as per the books of account prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. "Book profits" is defined and certain adjustments are provided in the proposed section. The proposed amendment will take effect from 1-4-1997, and will accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be placed before the annual general meeting conducted, in accordance with section 210 of the Companies Act, 1956. Though the Kerala State Electricity Board, a statutory corporation constituted by virtue of section 5 of the Electricity (Supply) Act, 1948 answers the description of an Indian company and therefore a company within the meaning of section 2(17) of the Income-tax Act, 1961 it is not a company for the purpose of the Companies Act, 1956. It is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. On the other hand, under section 69 of the Electricity (Supply) Act, 1948, the Board is obliged to keep proper accounts, including the profit and loss account, and prepare an annual statement of accounts, balance sheet etc. in such form as may be prescribed by the Central Government and notified in the Official Gazette. Such accounts of the Board are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorized by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report are required to be laid annually before the State L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame rates, and as per the same method as was adopted for calculating depreciation for the purpose of preparing the Profit & Loss Account laid before the company at its AGM under section 210 of the Companies Act. This section cannot be applied in relation to the assessee. In fact, the very concept of a "meaning "is alien to MSEB. A meeting can be between two or more persons. In case of MSEB there is no other person. Similarly, second proviso to sub-section (2) provides that where a company has adopted or adopts a financial year under the Companies Act, 1956, which is different from the previous year under the Act, the methods and the rates of depreciation shall correspond to the method and rates, which have been adopted for calculating the depreciation, for which financial year or part of such financial year falling within or relevant previous year. 16. Only those companies, which are engaged in the generation or supply of electricity, will come within the ambit of section 616 of the Companies Act. For that it is necessary that assessee must be a company. If assessee is not a company, then provision of section 616( c) cannot be applied. For example, Tata Electric Company is a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h words relating to such matter. 19. It is true that the word used in section 115JA of the Act is 'company'. The heading of this section is "Deemed income relating to certain companies. The provision begins with a non obstante clause. It applies to every assessee being a company. The panoply o the section is erected over the structure of Companies Act, 1956. The Minimum Alternate Tax (MAT) on companies was introduced by the Finance (No.2) Act, 1996 with effect from 1-4-1997. This was necessitated due to the rise in the number of zero tax companies. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. To curb this mischief MAT was introduced by inserting section 115JA. This is a deeming provision. It is a trite law that deeming provision should be narrowly watched, jealously regarded and never to be pressed beyond its true limits. It is applicable to a company. The assessee is not a company. It is not required to distribute any dividend. As such it does not come within the mischief of this section……" Hence we find lot of force in the argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this issue has been considered by this Tribunal in the series of decisions including the decision relied upon by the Ld. AR of the assessee. In the case of ICICI Lombard General Insurance (supra) the coordinate bench of this Tribunal has considered and decided an identical issue in para 6 as under:- As discussed above, the assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & II of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Hon'ble Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case." Following the decisions of the coordinate Benches of this Tribunal, we hold that when the insurance companies, banking companies and electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porated under the provisions of the Companies Act. In this regard, we place reliance on the following decision to support our view :- CIT vs M/s Pruthvi Brokers & Shareholders Pvt Ltd in ITA No. 3908 of 2010 dated 21.6.2012 for Asst Year 2004-05 (Bombay High Court) The questions raised before the Bombay High Court is as below:- (i) Whether, an assessee can amend a return filed by him for making additional claim for deduction other than filing a revised return ? (ii) Whether , on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal, in law, was right in holding that a claim of deduction not made in the original return and not supported by a revised return, is admissible ? (iii) Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in not appreciating the fact that the AO has no power to entertain a claim made by an assessee after filing a original return otherwise than by filing a revised return ? 3. The question that arises in this appeal is whether the CIT(Appeals) and / or the ITAT had the jurisdiction to consider a new / additional claim. Deduction subsequently raised before the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of change of circumstances or law". 14. The facts in Jute Corporation of India Ltd, various judgements referred to therein as well as in subsequent cases, which we will refer to establishes this beyond doubt. In many of the cases, the grounds were, in fact, available when the return was filed and / or the assessment order was made. In Jute Corporation of India Ltd, the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as "it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941". Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgement of the Supreme Court in Kedarnath Jute Manufacturing Company Limited vs CIT (1971) 82 ITR 363. This was, therefore, a case of error in perception / judgement. Despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case. 25. In the circumstances, it is not necessary to decide the other questions raised by Mr.Mistri. 26. The appeal, is therefore, dismissed. 3.15. Apart from the above decisions, we also find that the following cases also supports the contentions of the assessee on the impugned issue :- * UCO Bank vs DCIT reported in (2015) 64 taxmann.com 51 (Kolkata Tribunal) in ITA No.1768 / Kol / 2009 dated 27.11.2015 for Asst Year 2002-03 * A.P.S.E.B. vs JCIT reported in (2004) 91 ITD 259 (HYD ITAT) in ITA No. 1055 (HYD) of 20052 dated 5.4.2004 for Asst Year 1997-98 3.16. In view of the aforesaid provisions of the Act, our findings given thereon with respect to the facts and various judicial precedents relied upon hereinabove and further in view of the fact that no contrary decisions being brought to our knowledge on the same issue, we accordingly hold that - the assessee is a statutory corporation not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing appellant's explanations which clearly proved that the disallowance was arbitrary and not supported by the entries in the books of account. 7. For that on the facts and in the circumstances of the case and in law, the CIT (Appeals) failed to appreciate the reasons and explanations offered by the appellant against the disallowance of ₹ 18,45,63,204/- made under Section 14A of the Act and therefore the AO be directed to delete the disallowance and/or reduce the disallowance ix] s.14A; in assessing total income both as per computational provisions as also book profits, if any. 4.1. The brief facts of this issue are that the assessee derived exempt income during the asst year 2008-09 under appeal as below:- Interest on tax free bonds of RBI 120,37,87,527 Interest on PF investments u/s 10(25) 18,15,99,358 Dividend on shares of Power Trading Corpn Ltd & Bokaro Power Supply Co. Ltd 2,35,28,025 140,89,14,910 4.2. The total investments held by the assessee as at the end of the financial year ending 31st March are as follows:- 31.3.2008 Tax Free Bonds issued by RBI and guaranteed by West Bengal Government and Jharkhand Government 1294.83 Crores Shares in Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been made with a view to expand the existing business of pweor generation and distribution of the assessee. In order to take benefit of synergies enjoyed by Public Sector Undertaking, a joint venture was formed at the instance of the Central Government. The main objective for making investment was to expand the existing business activities. Similarly, the assessee corporation acquired shareholding in Power Trading Corporation Ltd which has been established by the Government of India and Public Sector Power Companies have contributed to its share capital. The Power Trading Corporation Ltd has provided window to power generating companies for carrying on trade in surplus power so that the power generating companies do not incur losses due to lack of demand in their command areas. Thus the investment in Power Trading Corporation Ltd was also made in the course of assessee's principal business. The investment in shares of Bokaro Power Supply Co Ltd and Power Trading Corporation Ltd have been made by the corporation out of its own funds and not borrowed funds. 4.6. The Learned AO directly invoked the provisions of Rule 8D (2)(ii) and Rule 8D(2)(iii) of the IT Rules and made disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There seems to be apparent mistake on adoption of figures by the Learned AO while computing the book profits u/s 115JB of the Act. However, we have already held that the assessee corporation is not liable to pay tax on the book profits u/s 115JB of the Act and accordingly, the issue of whether the disallowance u/s 14A of the Act could be added to the book profits u/s 115JB of the Act, becomes infructuous. Accordingly the ground raised by the assessee in this regard is allowed. Disallowance u/s 14A under normal provisions of the Act 4.8.1. We find that the assessee had disallowed a sum of ₹ 11,08,315/- u/s 14A of the Act (being 20% of employee cost of provident fund cell employees) with some rational basis in consonance with the consistent method followed by the assessee over the years. The Learned AR also stated that similar disallowance made by assessee has been accepted by the Learned AO in earlier and in subsequent years. We also find from the scrutiny assessment order for the Asst Year 2010-11, the disallowance u/s 14A of the Act made by the assessee was not disturbed by the Learned AO. We also find that the Learned AO had directly embarked on Rule 8D(2) without record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Kol / 2011 dated 30.3.2012 for the Asst Year 2008-09 , wherein the grounds raised and decision taken thereon are as below:- (1) That on the facts and circumstances of the case, ld. CIT(A) erred in law in deleting the disallowance of ₹ 9,86,306/- under Rule 8D(2)(ii) being a part of total disallowance u/s 14A since he opined in the instant case that there cannot be any interest expenditure left where interest income is more than interest expenditure. Held 4. As learned CIT(A) has rightly observed, once there is no net interest expenditure , as is the case before us - upon setting off interest credited to profit and loss account, no part of interest debited can be disallowed as attributable to earning tax free dividend. The CIT(A) was thus quite justified in deleting the interest disallowance. 4.8.4. On non recording of satisfaction in terms of Rule 8D(1) We find that the Learned AO had directly embarked on Rule 8D(2) without recording satisfaction in terms of Rule 8D(1) of the Rules with cogent reasons as to why the figure disallowed by the assessee u/s 14A of the Act is incorrect. We find that the Learned AO had straight away embarked upon computing disallowance un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 1622 / Kol / 2011 for the Asst Year 2008-09 and ground nos. 6 & 7 raised by the assessee in ITA No. 451 / Kol / 2013 for the Asst Year 2009-10 are allowed. 5. The last issue to be decided in the appeal for the Asst Year 2009-10 is as to whether interest u/s 234C of the Act could be levied in the facts and circumstances of the case. 5.1. The brief facts of this issue is that the assessee corporation paid the first installment of advance tax payable on or before 15.6.2008 by 16.6.2008 with a delay of one day. The reason for this delay was that 15.6.2008 was a sunday and accordingly the Learned AO charged interest u/s 234C for the said quarter. This action of the Learned AO was also upheld by the Learned CITA. Aggrieved the assessee is in appeal before us on the following grounds of ITA No.451/Kol/2013 for AY 2009-10:- Ground nos. 8 & 9 of ITA No.451/Kol/2013 A.Y 2009-10 8. For that on the facts and in the circumstances of the case the CIT(A) erred in upholding the levy of interest u/s. 234C of the Act for the alleged deferment of the first installment of advance tax due on 15.06.2008 even though the appellant had not committed any such default as the advance tax was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where any Act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office (in the present case the bank which is authorised to receive payment of advance tax from the assessee) is closed on that day or on the last day of the prescribed period, the Act or proceeding shall be considered as done or taken in due time after it is done or taken on the next day, afterwards, on which the Court or office (or the bank) is open. In view of this provision, it is hereby clarified that if the last day for payment of any instalments of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next immediately following working day, and in such cases, the mandatory interest leviable under sections 234B and 234C of the Income-tax Act, 1961 would not be charged. Circular: No. 676, dated 14-1-1994. Respectfully following the aforesaid circular and section 10 of General Clauses Act, we hold that the assessee had not committed any default in payment of first instalment of advance tax and hence we direct the Learned AO not to charge interest u/s 234C in the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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