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TMI Blog2025 (1) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X .....
The provisions of Section 115JB did not apply to electricity companies governed by distinct statutes before the amendment effective from 1-4-2013. We allow the appeals of the assessee for both assessment years, and the additions to the book profits under Section 115JB are hereby deleted. Assessee appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) ought to have appreciated that the Hon'ble Tribunal had set aside the issue to examine the applicability of provisions of section 115JB of the I T Act in view of the judgement of Kerala High Court in case of Kerala State Electricity Board vs. DCIT, reported at 196 Taxman 1 and the decision of Mumbai bench of ITAT in case of Maharashtra State Electricity Board, 77 TTJ 33. 1.2 The learned Commissioner of Income Tax (Appeals) has held that there has been a mistake apparent from record in the above two judgements whereby the High Courts held that there was no express exclusion of the companies engaged in the generation and distribution of power from the applicability of provisions of section 115JA of the I T Act. The learned Commissioner (Appeals) invited reference to the clause (iv) of the sub-section 2 of section 115JA of the Act which provides that the net profit as shown in the Profit & Loss Account has to be reduced by the amount of the profit derived from an industrial undertaking engaged in the business of generation or distribution of power. Thus even by virtue of above clause (iv) of sub-section (2) of section 115JA of the Act the appellant becomes eligible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vidyut Vitran Nigam Ltd. [2022] 140 taxmann.com 660, where the Hon'ble High Court by impugned order held that provisions of section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to an electricity generating company. The AR stated that the assessee is an electricity generating company governed by Electricity (Supply) Act, 1948. The AR, in support of the said claim, presented the audited financial statements of the assessee and explained that in the audit report of the assessee auditor has stated that - "3. As the Company is governed by the Electricity (Supply) Act, 1948, the provisions of the Act have prevailed wherever they have been inconsistent with the provisions of the Companies Act, 1956." 4.1. The AR also explained that in the disclosure related to significant accounting policies in Schedule - 17 of the financial statements, there is a reference to the governing provisions of Electricity (Supply) Act, 1948. The AR further explained that the provisions of section 61 and section 69 of The Electricity (Supply) Act, 1948 requires the assessee to follow prescribed format of financial statements as notified by the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory corporations engaged in power generation are not subject to MAT due to their distinct statutory obligations. The CIT(A) dismissed the reliance on these cases, stating that the facts of the present case were different because the assessee (referred as "GSECL"), was incorporated under the Companies Act, 1956, and not as a statutory corporation like the entities in the cited cases. The CIT(A) concluded that Section 115JB explicitly applied to companies preparing their financial statements under the Companies Act, 1956, including the assessee. Thus, the provisions of MAT were held applicable, rejecting the argument that the Electricity (Supply) Act exempted the assessee. 7.1. The CIT(A) reasoned that the judicial decisions cited by the assessee pertained to statutory bodies that were not companies in the traditional sense but were treated as companies only under deeming provisions of the Income Tax Act. The CIT(A) emphasized that GSECL is a company incorporated under the Companies Act and consistently filed its returns declaring income under MAT and therefore, the assessee's own filings and financial disclosures under the Companies Act undermined its argument for exemption. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in the power sector, under the MAT provisions, unless expressly exempted by the statute. CIT(A) pointed out that the specific exemptions for power companies under Section 115JA (which allowed deduction of profits derived from power generation from book profits) were not present in Section 115JB. Therefore, the general provisions of MAT under Section 115JB applied to GSECL. 7.4. The CIT(A) referenced Circular No. 762 issued by the Central Board of Direct Taxes (CBDT), which explained the purpose of Section 115JA. The Circular noted that the MAT was introduced to tax companies that paid significant dividends while showing minimal or zero taxable income under normal provisions. The Circular highlighted that companies engaged in specific businesses, such as power generation and infrastructure, were initially exempted to promote infrastructural development. However, CIT(A) argued that the Circular's applicability was limited to Section 115JA and did not extend to Section 115JB, which did not include similar exemptions. CIT(A) stated that while Circular No. 762 explained the legislative intent behind Section 115JA, it did not have binding authority over Section 115JB, which was a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal terms, bound by the Companies Act, and thus liable under MAT provisions. 7.8. The arguments advanced by the CIT(A) in the present matter merit a detailed appreciation for their adherence to statutory interpretation and judicial principles that govern the applicability of tax provisions. The CIT(A) meticulously analysed the legislative framework of Section 115JB but has not considered the specific exclusions embedded within the provision prior to the amendment effective from 1-4-2013. The CIT(A) acknowledged the intent behind Section 115JB to bring companies with significant book profits into the tax net but has not noted that electricity companies were governed by statutes such as the Electricity Supply Act, 1948, and the Electricity Act, 2003, which required different accounting standards. In light of the judgment of Ajmer Vidyut Vitran Nigam Ltd. by the High Court of Rajasthan, it is evident that the findings of the CIT(A), although thorough and based on existing legal principles, cannot be sustained. 7.9. At this stage, we are inclined to discuss the legislative intent and the principle of "Substance Over Form". The primary purpose of introducing provision relating to MAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance on the Kerala High Court and Mumbai ITAT decisions on the grounds that those entities were statutory corporations and not companies under the Companies Act. However, the High Court of Rajasthan, in Ajmer Vidyut Vitran Nigam Ltd., clarified that the MAT provisions under Section 115JB did not apply to electricity companies governed by specific statutes distinct from the Companies Act, regardless of their incorporation status. Thus, the CIT(A)'s rejection of these judicial precedents is not sustainable. 7.12. The CIT(A) referenced Section 115JA of the Act, highlighting exclusions under Clause (iv) for companies engaged in power generation, but argued that this exclusion was not extended to Section 115JB. However, we note that the legislative history and the interpretation provided by higher judicial authorities clearly establish that companies like GSECL (the assessee company) were not intended to be covered by MAT prior to the amendment in 2012. Consequently, the CIT(A)'s interpretation does not align with the legislative intent and judicial guidance. 7.13. In view of Hon'ble Supreme Court's decision affirming the High Court's ruling in Ajmer Vidyut Vitran Nigam Ltd., it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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