Kerala State Electricity Board Vs DCIT (Kerala High Court)
Summary: Kerala High Court allowed four appeals filed by Kerala State Electricity Board concerning AYs 2002-03 to 2005-06 and decided two principal issues—applicability of Section 115JB and disallowance under Section 43B of the Income Tax Act, 1961. KSEB, a statutory corporation constituted under Section 5 of the Electricity Supply Act, 1948, was treated as a company for income-tax purposes, but it was not a company governed by the Companies Act, 1956 and was therefore not required to prepare accounts or hold an annual general meeting in the manner contemplated by that Act.
The Court examined the legislative history of Sections 115J, 115JA and 115JB and noted that the original Section 115J expressly excluded companies engaged in generation or distribution of electricity. Although that express exclusion did not appear in Section 115JA, CBDT Circular No. 762 dated 18.02.1998 explained that power-generation and distribution companies were exempted from MAT so that incentives for infrastructure development were not affected.
The Court observed that Section 115JB required the profit and loss account to be prepared in accordance with Parts II and III of Schedule VI to the Companies Act, whereas KSEB was statutorily required to maintain its accounts under Section 69 of the Electricity Supply Act in the form prescribed by the Central Government, with audit by the Comptroller and Auditor-General or its authorised person. Referring to the principle that charging and computation provisions constitute an integrated code, the Court concluded that the legal fiction under Section 115JB could not be pressed into service against KSEB.
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