TaxTMI 
TaxTMI 
2016 (2) TMI 458
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....ration established under Damodar Valley Corporation Act, 1948 for the Asst Years 2008- 09 and 2009-10. The assessee has raised the following grounds in this regard:- Ground nos. 1 to 4 of ITA No.1622/Kol/2011 A.Y 2008-09 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 with reference to 'book profit'. 2. For that on the facts and in the circumstances of the case and in law, the CIT(Appeals) was grossly unjustified in not entertaining the statutory claim of the appellant that the provisions of Section 115JB had no application primarily on the ground 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 stat....
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....g provisions of Section 115JB of the Act. 3.1. The brief facts of this issue is that the Learned AO invoked the provisions of section 115JB of the Act. Before the lower authorities, it was stated :- a. that assessee is a statutory corporation established under the Act of Parliament namely Damodar Valley Corporation (DVC) Act, 1948 meant to provide for the establishment and regulation of the Corporation for the development of the Damodar Valley in the Provinces of Bihar and West Bengal. b. that assessee Corporation consists of 3 participating governments viz Union Government and the Provincial Governments of Bihar (now Jharkhand) and West Bengal. c. that assessee Corporation does not have equity capital and consequently does not have any shareholders. d. that the accounts 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 provisi....
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....the end of each financial year giving a true and faithful account of its activities during the financial year with particular reference to irrigation ; water supply ; electrical energy ; flood control ; navigation ; forestation ; soil erosion; use of land ; resettlement of displaced population ; sanitation and public health measures and economic and social welfare of the people. (2) The Annual Report shall also give a true and faithful account of the income and expenditure during the previous financial year , the net amount attributable to each of the three main objects and the distribution of the capital cost between the three participating governments and show the progressive total from the inception of the corporation and upto date financial results. (3) The payments provisionally 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 a....
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....I to these rules, showing the financial results of irrigation, electricity and flood control schemes with such subsidiary accounts as may be necessary, shall be placed before the Corporation, and, after the accounts have been duly passed, communicated to the Participating Governments and the Audit Officer. 26. Initial Accounts for stores including materials on the site of works, and tools and plant (including special tools and plant) shall be maintained in accordance with such instructions as may, from time to time, be issued by the Corporation. 27. A physical verification of stores and tools and plant shall be made by an officer who is not the custodian thereof. The results of the verification together with the orders of the Corporation for shortages and excesses shall be communicated 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 ....
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....e hold that Section 115JB of Income Tax Act overrides all other provisions of Income Tax Act as it starts with a non obstante clause. Hence it is an independent code by itself. In this section, the term 'company' referred to should be construed as company as defined under Companies Act, 1956 only. The Section 115JB of the Act clearly states that the accounts are to be prepared in accordance with Part II of Schedule VI of Companies Act, 1956. We find lot of force in the arguments of the Learned AR that the computation provision states that 'Net profit as per per Profit and Loss Account prepared as per Part II of Sch VI of Companies Act, 1956.' We hold that Sec 211 of Companies Act, 1956 is not applicable to assessee herein, whereas it is very much applicable to companies defined 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 ....
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....accordance with the Schedule VI of the Companies Act, 1956. As per section 115JB, every company is required to prepare its accounts as per Schedule VI of the Companies Act, 1956. However, as per the provisions of the Companies Act, 1956, certain companies e.g. insurance, banking or electricity company are allowed to prepare their profit and loss account in accordance with the provisions specified in their regulatory Acts. In order to align the provisions of Income-tax Act with the Companies Act, 1956, it is proposed to amend section 115JB to provide that the companies which are not required under section 211 of the Companies Act to prepare their profit and loss account in accordance with the Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordance 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....
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....ternate minimum tax on companies- 46.1 In recent times, the number of zero-tax companies and companies marginal tax has grown. Studies have shown that in spite of the fact that companies have entered substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. 46.2 The Finance (No.2) Act, 1996, has inserted a new section 115JA of the Income-tax Act, so as to levy a minimum tax on companies who are having book profits and paying dividends but are not paying any taxes. The scheme envisages the payment of a minimum tax by deeming 30 per cent of the book profits computed under the Companies Act, as taxable income, in a case where the total income as computed under the provisions of the Income-tax Act, is less than 30 per cent of the 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....
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....egarding the total income of assesses which are companies. The book profit of the company is deemed to be the total income of assessee in the circumstances specified in the section. The expression "book profit"for the purpose of the section is explained to mean the net profit as increased or decreased by the various amounts whon in the various sub-clause of the section. The " net profit" itself must be the net profit as shown in the profit and loss account of the company. Sub-section (2) mandates that the profit and loss account of the company. Sub-section (2) mandates that the profit and loss account of the 115JB stipulates that the accounting policies, accounting standards, etc. shall be uniform both for the purpose of income-tax as well as for the information statutorily required 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 comp....
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....omes irrelevant. Therefore, the fiction fixed under section 115JB cannot be pressed into service against the Electricity Board while making the assessment of the tax payable under the Income-tax Act." B. Maharashtra State Electricity Board vs JCIT reported in (2002) 82 ITD 422 (Mumbai Tribunal), wherein it was held that : "15. We find that sub-section (2) of section 115JA requires the company to prepare its Profit & Loss Account in accordance with the provisions of Parts II & III of Schedule VI to the Companies Act, 1956. The assessee was required to prepare its account in conformity with the provision of section 69 of the Electricity (Supply) Act. Besides proviso to section 115JA(2) provides that while preparing the annual accounts, depreciation has to be provided on the same 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 ....
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....s the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. Word in section is skin of the living though. It may vary in colour and content according to the context. It is a settled rule of interpretation canonized in the dictum: EX PRAECEDENTIBUS ET CONSEQENTIBUS OPTIMA FIT INTERPRETATIO" ( the best interpretation is made from the context). Whether the same meaning, as has been given in the interpretation clause, should be given to the word wherever it occurs, will depend upon the context. Therefore, it becomes necessary not only to look at the words but also to look at the context, the collocation and the objects of such 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 introduc....
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....VI of the Companies Act . Thus, when the Insurance Companies, Banking companies and electricity generation and distribution companies are treated in the same class as per the provisions of section 211 of the Companies Act in preparing the final accounts, then those companies cannot be treated differently for the purpose of section 115JB and accordingly, the provisions of section 115JB are not applicable in the case of the assessee. D. Bank of India vs Addl CIT reported in 2014 (5) TMI 929 :n ITA No. 1498/Mum/2011 dated 9.4.2014- ITAT Mumbai, wherein it was held that : 6. Ground No. 5 is regarding applicability of provisions of section 115JB in case of Bank. 6.3 Having considered the rival submissions as well as relevant material on record, we note that 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 accou....
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....case of Goetze (India) Ltd vs CIT in 284 ITR 323 (SC). But we find that the same decision specifically states that the claim could be made before the appellate authorities. In this regard, we would like to state that the revenue should not be unjustly enriched and only the due taxes should be collected. We find that the provisions of section 115JB of the Act is a code by itself. It imposes tax not on "income" but on "book profits". Section 115JB of the Act creates a statutory fiction under which "book profit" of a company assessee is regarded as 'total income'. The deeming fiction of the IT Act can only be applied to a 'company' proper. Section 115JB which is a deeming provision of the IT Act cannot be applied to any other bodies which are not companies incorporated 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 deduct....
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....ot merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz. "if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made...." Clearly relate to cases where the ground was available when the return was filed and the assessment order was made but "could not have been raised" at that stage. The words are "could not have been rasied" and not "were not in existence". Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz. where "the ground became available on 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 asses....
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.... and the assessee further stated that it had rasied these additional grounds on learning about the legal position subsequently. The Tribunal declined to entertain these additional grounds. But the Supreme Court held that we fail to see why the tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 24. A Division Bench of Delhi High Court dealt with a similar submission in CIT vs Jai Parabolic Springs Limited (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgement held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return 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....
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.... 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 Rs. 41, 16,36,422/- made under Section 14A of the Act and therefore the AO be directed to delete the disallowance and/or reduce the disallowance in assessing total income both as per computational provisions as also in computing book profits, if any. Ground nos. 6 & 7 of ITA No.451/Kol/2013 A.Y 2009-10 6. For that on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the disallowance made by the AO under Section 14A of Income-tax Act, 1961 read with Rule 8D of the I.T. Rules, 1962 by summarily rejecting 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 Rs. 18,45,63,204/- made under Section 14A of the Act and therefore the AO be directed to delete th....
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....counts department and total salary paid to employees working in that cell worked out to Rs. 55,41,573/-. The Learned AR argued that the personnel in the said provident fund cell are entrusted with collection of PF contributions from employees, its accounting, complying with various statutory rules, settlement of provident fund claims, collection of income and accounting of income & investment etc. The Learned AR argued that the employee cost of the said provident fund cell does not pertain only to earning of interest income. Accordingly the assessee disallowed 20% of such salaries amounting to Rs. 11,08,315/- as attributable to the interest income earning activity which does not form part of total income. 4.5. The Learned AR argued that the assessee is the co-promoter of Bokaro Power Supply Co. Ltd jointly promoted with Steel Authority of India Ltd (SAIL), another PSU. The investment 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....
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....assessee had made earned taxable interest income of Rs. 248.78 crores and paid interest on its borrowings amounting to Rs. 211.01 crores and earned a net interest income of Rs. 37.77 crores. He argued that the assessee had sufficient own funds to make the investments and no part of borrowed funds were utilized for the same. Hence in any case, the provisions of Rule 8D(2)(ii) of the IT Rules cannot be applied in the facts of the instant case. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.8. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the Learned AO had adopted the disallowance figure u/s 14A of the Act at Rs. 20,03,61,170/- under normal provisions of the Act and at Rs. 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 ....
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....e point of view of businessman and not from the view point of the revenue. It is well settled that businessman knows his interest best. We place reliance on the decision of Hon'ble Bombay High Court in the case of CIT vs Reliance Utilities & Power Ltd ( 313 ITR 340 ) (Bom) in support of our view that if the own funds are available with the assesee and if the same are more than the investments made by the assessee, then it has to be presumed that the investments were made out of own funds and not out of borrowed funds. Hence the provisions of Rule 8D(2)(ii) cannot be invoked in these circumstances. 4.8.3. On non-application of Rule 8D(2)(ii) as the assessee had earned net taxable interest income Reliance placed on the coordinate bench decision of this tribunal in the case of DCIT vs M/s Trade Apartment Ltd in ITA No. 1277 / 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 Rs. 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 c....
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....tion 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 Rs. 11,08,315/- and no adverse inference has been brought on record and no satisfaction has been recorded with cogent reasons by the Learned AO as to why the said figure computed by the assessee is incorrect. Without satisfying the requirement contemplated in Rule 8D(1) , the Learned AO had directly proceeded to apply Rule 8D(2) in the instant case. Hence the disallowance u/s 14A of the Act cannot be made in the instant case of the assessee corporation for the Asst Years 2008-09 and 2009-10. Accordingly the ground nos. 5 & 6 raised by the assessee in 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 i....