TaxTMI 
TaxTMI 
2010 (11) TMI 127
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....ellant and disallowed certain claims of the appellant. 3. It may be mentioned herein that the dispute revolves mainly around certain amounts collected by the appellant, pursuant to the statutory obligations created under section 5 of the Kerala Electricity Duty Act, 1963. Under section 41 of the said Act, a duty is levied on the consumers of electricity specified in column (2) of the Schedule. Under section 52, the appellant is obliged to collect from the consumer the abovementioned duty and pay to the Government at the time and in the manner as prescribed by rule. Further details of the scheme of the said Act may not be necessary for the purpose of deciding this appeal. 4. It appears, for the assessment year 2002-03, the appellant collected an amount of Rs. 125,19,23,805 from the various consumers (of the electricity supplied by the appellant) the duty payable under section 4 of the Kerala Electricity Duty Act. But, the amount admittedly remained in the hands of the appellant by the date of assessment, though under section 4, the amount is required to be paid to the Government. It is the case of the appellant that under an agreement between the State ofKeralaand the appel....
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....d a common seal, with power to acquire and hold property both movable and immovable, capable of suing and being sued by the name specified in the notification issued under section 5 of the said Act. Section 80 of the Act, declares that the appellant shall be deemed to be a company within the meaning of the Income-tax Act, 1922 and further declares that the appellant is liable to pay income-tax and super-tax on its income, profits and gains. Section 80 reads as follows: "80. Provision relating to income-tax and super-tax.-(1) for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), the Board shall be deemed to be a company within the meaning of that Act and shall be liable to income-tax and super-tax accordingly on its income, profits and gains. (2) The State Government shall not be entitled to any refund of any such taxes paid by the Board." 8. The Income-tax Act, 1922 came to be repealed by section 297(1) of the Income-tax Act, 1961. Therefore, by virtue of operation under section 18 of the General Clauses Act, 1897, reference to the Income-tax Act, 1922 in section 80 of the Electricity (Supply) Act shall be understood to be reference to the Income....
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.... under clause (17) ; (ii) in the case of the State ofJammu and Kashmir, a company formed and registered under any law for the time being in force in that State ; (iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory : Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is inIndia." 12. It can be seen from the above definitions; more particularly in section 2(26) clause (ia) that the appellant answers descriptions of the expression of an Indian company and therefore a company within the meaning of sec-tion 2(17). Admittedly, the appellant was being assessed as a company under the provisions of the Income-tax Act, 1922. Therefore, irrespective of the fact whether it is an Indian company or not by virtue of the operations under clause (iii) of section 2(17), the appellant is a company for the pur-pose of the Income-tax Act, 1961. Even otherwise, as we have already noticed, since section 80 of the Electricity....
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....al income chargeable to tax. Such a fiction is applicable only to those assessees which-(a) are companies except the companies engaged in the business of either generation or distribution of electricity, (b) that such a fiction is made applicable to the companies only with reference to the previous year relevant to the assessment year commencing after 1st April, 1988 and ending with the 1st April, 1991, (c) the" total income" of the company as computed under the Act is less than thirty per cent. of its "book profit". The fiction being that the total income for the purpose of assessment shall be deemed to be 30 per cent. of the book profit. In other words, the section prescribes 30 per cent. of the book profits of those companies falling within the purview of the section shall be treated as the total income of the company for the purpose of income-tax, irrespective of the fact that according to the accounts of the company the "total income" is less than thirty per cent. of the book profit. The expression "book profit" itself is explained in the section as meaning, the net profit as shown in the profit and loss account for the relevant previous year prepared as per the prescription u....
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....ct of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of ten per cent. (2) Every assessee, being a company shall for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956) : Provided that while preparing the annual accounts including profit and loss account,- (i) the accounting policies ; (ii) the accounting standards followed for preparing such accounts including profit and loss account ; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of pre-paring such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) : ....
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....l lay before the company a balance-sheet as at the end of the relevant period and also a profit and loss account for the period. Parts II and III of Schedule VI to the Companies Act specify the method and manner of maintaining the profit and loss account. 22. However, the appellant though is by definition a company under the Income-tax Act and deemed to be a company for the purpose of the Income-tax Act, (by virtue of the declaration under section 80 of the Electricity (Supply) Act, it is not a company for the purpose of the Companies Act. Therefore, the appellant is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. As a matter of fact, a general meeting contemplated under section 166 of the Companies Act is not possible in the case of the appellant as there are no shareholders for the appellant-Board. On the other hand, under section 69 of the Electricity (Supply) Act, the appellant 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 Off....
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....ction 69 is only regarding the general duty of the appellant for the purpose of the Electricity (Supply) Act. Nothing in theory prevents Parliament from obligating the appellant to prepare another profit and loss account as prescribed under section 115JB(2) for the purpose of the Income-tax Act. The question is whether such an obligation is created under section 115JB(2) in so far as the appellant is concerned. In examining the said question, the legislative history and the mischief sought to be cured by the Legislature in making the special deeming provision, in our opinion, would be relevant. 25. Coming to the legislative history of section 115JB and its forerunners-sections 115J and 115JA-we have already noticed that they provided for the determination of the total income of the companies by a fictitious process. However, at the earliest point of time when such a fictitious process is invented, i.e., when section 115J was introduced, the section expressly excluded from its operation bodies like the appellant. Coming to section 115JA, though such express exclusion is absent, the Central Board of Direct Taxes issued a Circular No. 762 dated 18th February 1998 [1998] 230 IT....
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....l total income computed is less than 30 per cent. of the book profits, so long as the enterprises (other than FTZ units and EOUs) earning income from export profits do not have their component of export income higher than 70 per cent. of the book profits, the provisions of section 115JA will not be attracted. In other words, the MAT will apply only to such cases where export profits forming part of book profits of an assessee exceed 7 per cent. of the total profits. 46.6 Companies engaged in the business of generation and distribution of power and those enterprises engaged in developing, maintaining and operating infrastructure facilities under sub-section (4A) of section 80-IA are exempted from the levy of MAT, so that the incentive given to infrastructure development is not affected." 27. It can be seen from the above that the Legislature took note of the fact that a number of companies paying marginal tax and also zero-tax has grown. Such companies earned substantial book profits and paid hand-some dividends to the shareholders without paying any tax to the exchequer. Such a result was achieved by such companies by taking advantage of the then existing legal posi....
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....ome subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation pro-visions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision. That pertains to the fundamental integrality of the statutory scheme provided ....
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....y fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances, or (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him." 34. The scheme of the section, in so far as it is relevant for the present, is as follows: It recognizes that different kinds of a....
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....ring the previous year relevant for the assessment year 2002-03 the assessee has collected a sum of Rs. 126,45,69,500 towards electricity duty under section 4(1) and as such a sum of Rs. 1,25,19,23,805 was pay-able to the Government after retaining the collection charges. But the assessee has not paid the same to the Government within the due date. The assessee has not produced any order granting exemption from remitting the duty collected within the due date. In the circum-stances, electricity duty under section 4(1) not remitted within the time amounting to Rs. 125,19,23,805 is disallowed under section 43B of the Income-tax Act, 1961." 36. In substance, though it is not clearly indicated in the assessment order, the case of the Revenue is that section 43B(a) is attracted ; whereas the case of the appellant is that the said clause is applicable only in those cases where any sum is payable by the assessee qua tax, duties, cess or fee under any law for the time being in force. But, in the instant case, the amount in question is not an amount payable by the assessee qua tax but the amount collected by the assessee as the agent of the State of Kerala towards the tax payable by....
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....liability to pay and the corresponding authority of the State to collect the tax (flowing from a statute) is essentially in the realm of the rights of the sovereign. Whereas the obligation of the agent to account for and pay the amounts collected by him on behalf of the principal is purely fiduciary. The nature of the obligation, in our opinion, continues to be fiduciary even in a case wherein the relationship of the principal and agent is created by a statute. We are of the opinion that, when section 43B(a) speaks of the sum payable by way of tax, etc. ; the said provision is dealing with the amounts payable to the sovereign qua sovereign, but not the amounts payable to the sovereign qua principal. We are, therefore, of the that section 43B cannot be invoked in making the assessment of the liability of the appellant under the Income-tax Act with regard to the amounts collected by the appellant pursuant to the obligation cast on the appellant under section 5 of the Kerala Electricity Duty Act, 1963. 39. We must make it clear that the above conclusion of ours does not mean that the said amount is either exempted from the liability of income-tax or it should be treated as income for....