TaxTMI 
TaxTMI 
TaxTMI 
2001 (8) TMI 310
X X X X Extracts X X X X
X X X X Extracts X X X X
....eipts such as sale of tender forms, interest on loan to staff, profit on sale of excess stores, commission for collection of duty etc.? (iii) Whether on the facts and in the circumstances of the case the modus for the computation of book profit was correctly applied inasmuch as deduction was not made in respect of prior period adjustments and provision for bad and doubtful debts?" 3. We have heard the rival submissions in the light of material placed before us and precedents relied upon Maharashtra State Electricity Board (hereinafter called MSEB) is a statutory corporation. It was set up under section 5 of the Electricity (Supply) Act, 1948 vide Notification of the State Government dated 20th June, 1960. Section 5 reads as under:-- "5. Constitution and Composition of State Electricity Boards.--(1) The State Government shall, as soon as may be after the issue of the notification under sub-section (4) of section 1, constitute by notification in the Official Gazette, a State Electricity Board under such name as shall be specified in the notification. (2) The Board shall consist of not less than three and not more than seven members appointed by the State Government. (3) [***....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id System'. In the circumstances of this country such a system need not necessarily involve inter-connection throughout the length and the breadth of a province; regional co-ordination inclusive of some measures of inter-connection may be all that is needed. An essential pre-requisite is, however, the acquisition of necessary legislative power not only to facilitate the establishment of this system in newly licensed areas but also to control the operation of existing licensees so as to secure fully coordinated development." 6. The question posed before us is: "whether assessee could be construed to be a company for the purpose of section 115JA"? Section 115JA reads as under: "115JA(1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deeme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 616. Application of Act to insurance, banking, electricity supply and other companies governed by Special Acts--The provisions of this Act shall apply (a) ................... (b) ................... (c) to companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Indian Electricity Act, 1910 or the Electricity (Supply) Act, 1948 (LIV of 1948); 10. We have considered the text and the context of the various sections listed above in the light of the Heyden's Rule. Lord Coke in Heyden's case [1584] 3 Rep. 7b has said:-- "To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider (i) what was the law before the Act was passed; (ii) what was the mischief or defect for which the law had not provided; (iii) what remedy the Parliament has appointed; and (iv) the reason of the remedy." 11. Section 115J was introduced by the Finance Act, 1987 in the shape of MINIMUM CORPORATE TAX ON BOOK PROFITS of the ZERO TAX COMPANIES. This was on the pattern of ALTERNATE MINIMUM TAX (AMT) introduced in USA i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 accordingly, apply in relation to assessment year 1997-98 and subsequent years." 13. The Apex Court in the case of Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 777,783 considered the Legislative intent for the introduction of section 115J. It was found that the section was introduced to take care of the phenomenon of prosperous zero-tax companies which had continued inspite of the enactment of section 80VVA. These were companies which were paying no income-tax though they had profits and were declaring dividends. A minimum corporate tax was sought to be ensured on prosperous companies. 14. The two rules of most general application in construing a statute are that--first that it shall, if possible be so interpreted UT RES MAGIS VALEAT QUAM PEREAT (that the thing may rather have effect than be destroyed) and secondly, that such a meaning shall be given to it as may carry out and effectua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. It is company within the meaning of section 3 of the Companies Act. It is engaged in the business of generation or supply of electricity. As such it will come within the sweep of this provision. MSEB cannot be construed to be a company within the meaning of section 3 of the Companies Act, therefore, though it is engaged in the generation/distribution of electricity, it cannot be deemed as a company within the meaning of section 616(c). 17. Explanation to section 115JA defines the term "Book Profit" to mean the net profit as shown in the Profit & Loss Account for the relevant previous year prepared under sub-section (2) [i.e. in accordance with Parts II & III of Schedule VI] as increased by................ We have noted that assessee did not prepare its account under Parts II & III of Schedule VI. Assessee was under no legal obligation to do so. As such the definition of "Book Profit" cannot be applied in the case of the assessee. 18. According to section 2(17) read with section 2(26) of the Act, MSEB could be deemed to be a company for the purpose of Income-tax Act. The term company as defined in the said section is, NOMENGENERALISSIMUM (term of the most general meaning) and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f you manipulate them, you can prove any thing. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. Minutest differences on facts have swayed the judicial decisions one way or the other. In deciding such cases, one should avoid temptation as said by Cordozo, by matching the colour of one case against the colour of another. Learned Departmental Representative failed to produce any direct decision on the point. We have decided this issue after taking into consideration all the facts and circumstances of the case. In our opinion a corporation cannot be construed to be a company for the purpose of charging the Minimum Alternate Tax. The case of the assessee falls beyond the ken of section 115JA. We decide this issue in favour of the assessee and against the revenue. 20. The next issue, in view of this finding, has become academic. Even then for the sake of completeness we will adjudicate that issue also. Whether the provision of clause (iv) of Explanation to section 115JA(2) can be applied in the case of assessee was the question posed before us. CIT(A) vide Para 46....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted that the 'book profits' as defined in Explanation to section 115JA mean "the net profit shown in the Profit & Loss Account". Accordingly the Assessing Officer ought to have adopted the figure of Rs.346.58 crores as shown in the revenue account and not the figure of Rs. 456.27 crores. Such net profit means the bottom line in Profit & Loss Account. As per the Electricity (Supply) (Annual Accounts) Rules, 1985, all prior period revenue or costs are required to be accounted for prospectively and not retrospectively restating the past years figures was stated to be permitted. The practice adopted by MSEB of adopting the prior period expenses into the revenue account was in accordance with well-established accounting principles. It was submitted that the accounts of the assessee were audited by the Comptroller and Auditor General. These were found to be in order. 24. In regard to the bad and doubtful debts, it was stated that Assessing Officer was wrong in treating the provision as one made for meeting a liability and adding it under clause (c) of the Explanation to section 115JA of the Act. It was submitted that in making a provision for bad and doubtful debts the assessee....