Section 115JB not applies to assessee governed by Special Acts & Rules

ITO Vs M/s. Atria Hydel Power Ltd. (ITAT Bengalore)

Conclusion: Provisions of section 115JB would not be applied to assessee-company where assessee was governed by different Acts and Rules, and was not required to prepare its profit & loss account and balance sheet as per Part II & III of Schedule VI to the Companies Act.

Held: Assessee was a company incorporated under the provisions of the Companies Act 1956. It was engaged in the business of generation and sale of power. Assessee filed the return of income. The assessment was completed under sections 115JB. Assessee-company denied its liability for the assessment of book profit under section 115JB on the ground that the accounts were required to be prepared in accordance with the Provisions of Electricity Act. CIT(A) allowed relief placing reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of Karnataka Power Corporation. It was held since there was no dispute that assessee was engaged in the generation of power and in an electricity company, it was governed by and bound to follow the relevant Electricity Act and Rules thereto in preparation of its financial statements. Where assessee was governed by different Acts and Rules, and was not required to prepare its profit & loss account and balance sheet as per Part II & III of Schedule VI to the Companies Act, the provisions of section 1 15JB could not be invoked against him.

FULL TEXT OF THE ITAT JUDGEMENT

These are appeals filed by the Revenue directed against three different orders of the learned Commissioner of Income Tax (Appeals)-I, Bangalore, all dated 31/10/2017 for the assessment years 2009-10, 2011-12 and 2012-13.

2. The Revenue raised the following grounds of appeal:

1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case.

2. The Ld. CIT (A) erred in holding that the provisions of section 115 JB of the Income Tax Act, 1961 are not applicable to the assessee company which is a company engaged in the business of generation of power without appreciating the fact that the pre-amended provisions of the section 115JB(2) of the Income Tax Act, 1961 applies to all the companies irrespective of the applicability of the provisions of the section 211(2) of the erstwhile Companies Act, 1956 to them as the amendment is only applicable from the Assessment Year 2013-14 onwards.

3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored.

4. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal.

3. Briefly, the facts of the case are as under:

The appellant is a company incorporated under the provisions of the Companies Act 1956. It is engaged in the business of generation and sale of power. The appellant filed the return of income. The assessment was completed under sections 115JB of the Income Tax Act. The assessee company denies its liability for the assessment of book profit under section 115JB on the ground that the accounts are required to be prepared in accordance with the Provisions of Electricity Act. The CIT(A) allowed relief placing reliance on the decision of the Co-ordinate Bench of the Tribunal in the case of Karnataka Power Corporation.

2. Being aggrieved, the Revenue is in the present appeal before us.

3. Having considered the rival submission, we are of the considered opinion that the issue in the present appeal is covered against the Revenue in the assessee’s own case for the assessment year 2010-11 by order dated 22.12.2017 wherein it was held as under:

“15. Having carefully examined the orders of authorities below in the light of rival submissions and documents placed on record, we find that there was an amendment to sub-section (2) of section 115JB by the Finance Act, 2012 w.e.f. 1.4.2013. Prior to this amendment, as per sub-section (2), every assessee being a company, shall for the purpose of this section (s. 115JB) prepare its profit & loss account for the relevant previous year in accordance with the provisions of Part II & III of Schedule VI to the Companies Act, 1956. Before this amendment it was not realized by the Legislature that there are certain companies who are not obliged to prepare its profit & loss account for the relevant previous year in accordance with the provisions of Part II & III of the Schedule VI to the Companies Act, 1956, as they were governed by different Acts/statute. It was not clear as to when these companies are not required to prepare their profit & loss account in accordance with the provisions of Part II & III of Schedule VI to the Companies Act, 1956, whether the provisions of section 115JB are applicable to these companies. Having realized this position, sub-section (2) was amended and according to the amendment, it was categorized in two clauses and for the sake
of reference, we extract the provisions of section 115 JB (1) & (2) hereunder:-

“115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on 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, 2012, is less than eighteen and one-half 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 eighteen and one-half per cent.

4. (2) Every assessee,–

5. (a) being a company, other than a company referred to in clause

6. (b), shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956 (1 of 1956); or

7. (b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company:”

16. By virtue of this amendment, the Legislature has brought those companies to which proviso to sub-section (2) of section 211 of the Companies Act applies within the network of provisions of section 1 15JB of the Act. As per the provisions of section 211(1), every balance sheet of a company shall be prepared in accordance with Part I & II of Schedule VI of the Companies Act, but as per proviso to sub-section (1), insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of company, are not required to prepare its profit & loss account in accordance with Part I of Schedule VI to the Companies Act. As per sub- section (3), the Central Government may, by notification in the Official Gazette, exempt any class of companies from compliance with any of the requirements in Schedule VI if, in its opinion, it is necessary to grant the exemption in the public interest. For the sake of reference, we extract the provisions of section 211 (1) to (3) hereunder:-

“Form and contents of balance sheet and profit and loss account.

211. (1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading “Notes” at the end of that Part:

Provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of company.

(2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto:

Provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of profit and loss account has been specified in or under the Act governing such class of company.

(3) The Central Government may, by notification in the Official Gazette, exempt any class of companies from compliance with any of the requirements in Schedule VI if, in its opinion, it is necessary to grant the exemption in the public interest.

Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.”

17. Undisputedly, the assessee is engaged in the generation of power, therefore as per proviso to section 211(1), the assessee was not required to prepare its balance sheet and profit & loss account in the form set out in Part-I & III of Schedule VI to the Companies Act, as the assessee was required to prepare its balance sheet and profit & loss account as per the Act notified by the Government. Now the question arises under such circumstances, whether the provisions of section 1 15JB would apply to the assessee’s case, where he was not required to prepare the balance sheet and profit & loss account as per Part I & III of Schedule VI to the Companies Act. This aspect was examined by this Tribunal in the case of Karnataka Power Corporation Ltd. v. ACIT, ITA No.711/Bang/2011 in which it was held that the assessee is engaged in the generation of power and in an electric company, it is governed by and bound to follow the relevant Electricity Act and Rules thereto in preparation of its financial statements. Therefore, the provisions of section 115 JB of the Act are not applicable to the assessee’s case. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:-

“1 1.1 Ground Nos.8 and 9 raised by the assessee is in respect of the very applicability of the provisions of section 1 15JB of the Act, to the assessee, since the assessee being an electric company, the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 are not applicable. In this regard, the learned Authorised Representative submitted that the newly inserted Explanation 3 to section 1 15JB(2) of the Act (Inserted by Finance Act, 2012 w.e.f. 1.4.2013) is very clear that the provisions of section 1 15JB of the Act is not applicable to companies engaged in the generation of power prior to 1.4.2013. This means that the assessee being in the business of generation of power prior to Assessment Year 2013-14, the provisions of section 11 5JB of the Act are not applicable to it and since the assessee being a company to which the proviso to section 211(2) of the Companies Act, 1956 applies, it will not be liable to tax under section 1 15JB of the Act. In this context, the learned Authorised Representative placed reliance on the parity of reasoning of the following Tribunal decisions :-

i) State Bank of Hyderabad V DCIT (ITA No.578 & 579/Hyd/2010 dt.7.9.2012); and

ii) Decision of the co-ordinate bench of ITAT, Bangalore in the case of Syndicate Bank V DCIT (ITA 668 and 669/Bang/2010 and 708 & 709/Bang/2010 dt.19.6.2013.)

11.2.1 We have heard both parties and perused and carefully considered the material on record. It is not in dispute that the assessee in the case on hand is an electric company engaged in the generation of power. The provisions of section 1 15JB(2) read as under :

” 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)”

The assessee, in the case on hand, however does not have to prepare its accounts in accordance with Parts II and III of Schedule VI of the Companies Act, 1956, by virtue of proviso to section 211(2) thereto. The proviso to section 211 (2) of the Companies Act, 1956 reads as under :

“Provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which the form of profit and loss account has been specified in or under the Act governing such class of company”

11.2.2. As contended by the learned Authorised Representative the newly inserted Explanation – 3 to section 1 15JB of the Act is clear that the assessee is given an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956, OR in accordance with the provisions of the Act governing such company, w.e.f. 1.4.2013. Since there is no dispute that the assessee is engaged in the generation of power and in an electricity company, it is governed by and bound to follow the relevant Electricity Act and Rules thereto in preparation of its financial statements. In this view of the matter and taking into consideration the judicial decisions cited and relied upon by the assessee, we are of the considered view that the provisions of section 11 5JB of the Act are not applicable to the assessee which is an electric company in the business of generation of power. In this view of the matter, the additional grounds of appeal raised by the assessee on the non-applicability of the provisions of section 1 15JB of the Act is allowed.”

18. This issue was again examined by the Delhi Bench of the Tribunal in the case of BSES Rajdhani Power Ltd. (supra) wherein the Tribunal has examined the issue in the light of various judicial pronouncements and has categorically held that the provisions of section 11 5JB were not at all applicable to the companies governed by special Acts, which includes power. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:-

“22.10 In view of the above, it is patently clear that the appellant prepares its annual accounts in accordance with the applicable laws, including provisions of the Delhi Electricity Reforms (Transfer Scheme), Rules, 2001 and is not required to and has not been strictly preparing its audited annual accounts as per Parts II and III of Schedule VI of the Companies Act, 1956.

22.11 In the aforesaid context, it may also be pertinent to note that prior to the amendment to sub-section (2) of section 115JB of the Income-tax Act, 1961 (‘the Act’), the deeming provisions of the said section were not applicable to companies to which proviso to sub- section (2) of section 211 of the Companies Act applied.

22.12 This is clearly evident from a bare reading of the provisions of section 1 15JB of the Act, as applicable to the relevant year under consideration.

22.13 The Learned AR submitted that on perusal of the aforesaid, it will kindly be noticed that the provisions of section 1 15JB of the Act applied during the relevant year only to companies required, under the law, to prepare its profit and loss account in accordance with Parts II and III of Schedule VI of the Companies Act and not otherwise.

22.14. It is of utmost importance to note that the Legislature re- introduced the MAT provisions vide Finance Bill, 1996: 220 ITR (St.) 107 and the Hon’ble Finance Minister while introducing this provision, inter-alia, stated as under:

“90. Corporate tax rates have been reduced and simplified over the past few years and the results have been very encouraging with a significant increase in corporate taxes as a percentage of GDP. However, there are two issues which need to be addressed. The first is the promise made in the past that the corporate surcharge will be temporary. The other is the phenomenon of zero tax companies which, according to many observers, reflects an excessive degree of laxity in the tax regime. I propose to respond to the two issues as follows:

(i) I am reducing the rate of surcharge on corporation tax from 15% to 7.5% and hope to take a similar step in my next budget. The reduced tax burden will benefit all companies big and small.

(ii) I propose to introduce a “Minimum Alternate Tax” (MAT) on companies. In a case where the total income of the company, as computed under the Income Tax Act after availing of all eligible deductions, is less than 30 per cent of the book profit, the total income of such a company shall be deemed to be 30 per cent of the book profit and shall be charged to tax accordingly. The effective rate works out to 12 per cent of book profit calculated under the Companies Act. Companies engaged in the power and infrastructure sector will, however, be exempted from the levy of MAT.”

22.15 On the basis of the aforesaid, it would be noted that Legislature intended to exclude from the purview of MAT provisions under section 11 5JA of the Act (which were para-materia to section 11 5JB of the Act) companies engaged, inter-alia, in the power sector which were governed by a Special statute, which also regulates the manner in which accounts for such companies were to be prepared.

22.16 The appellant, is governed by the provisions of the Electricity Act, 2003 and accordingly prepares its annual accounts in accordance with the applicable Electricity Act! DERC regulations, which are binding and mandatorily to be followed by the appellant.

22.17 It is was submitted that various Benches of the Tribunal have held that provisions of section 1 15JB of the Act shall not apply to companies referred in proviso to sub-sections (1) and (2) of Section 211 of the Companies Act, i.e., companies governed by Special Acts viz.,. Banking Regulation Act, 1949, Electricity Act, 2003, Insurance Regulatory Act, 1999 etc. Reference, in this regard, made to the following decisions:-

– Kerala State Electricity Board v. DCIT: ITA Nos. 1703!1710 and 1716 of 2009 (Ker) = 2010-TIOL-827-HC- KERALA -IT

– Maharashtra State Electricity Board v. JCIT: 82 ITD 422 (Mum.) = 2003-TIOL-87-ITAT-MUM

– Reliance Energy Ltd. vs. ACIT: ITA No. 218!Mum!2005 (Mum.)

– Krung Thai Bank PCL v. JDIT: 133 TTJ 435 (Mum.)

22.18 Accordingly, the provisions of section 1 15JB of the Act were, during the relevant year, not applicable to the appellant, contended the Learned AR.

22.19 The Learned AR submitted that the aforesaid contention of the appellant, is fortified by substantive amendments in section 1 15JB of the Act made by the Finance Act, 2012, with effect from April 1, 2013, which are discussed hereunder:

22.20 The scope of the deeming provisions of section 115JB of the Act was widened w.e.f. 01.04.2013, by including within the ambit of the said section, companies to which proviso to sub-section (2) of section 211 of Companies Act applied. The Learned AR referred sub- section (2) to section 115 JB of the Act as substituted by the Finance Act, 2012 w.e.f. 01.04.2013.

22.21 Thus, vide Finance Act, 2012 the scope of section 1 15JB of the Act was widened so as to include companies preparing profit and loss account in accordance with provisions of the relevant regulatory Act.

22.22 However, it may be noted that amendments by the Finance Act, 2012 imposing new tax burden on companies which was otherwise not provided under the Act, were, in no uncertain terms, made in provisions of section 1 15JB(2) with effect from April 1, 2013, meaning thereby that the deeming provisions are applicable to companies governed by special Acts only from assessment year 2013- 14 and onwards.

22.23 Memorandum explaining the provisions of the Finance Bill, 2012: 342 ITR (St.) 288, whereby sub-section (2) of section 11 5JB was substituted provides that the amendment is applicable w.e.f. 01.04.2013, that is for assessment years 20 13-14 onwards. Relevant extract of the Memorandum is reproduced as under:

“Minimum Alternate Tax (MAT)

I. Under the existing provisions of section 11 5JB of the Act, a company is liable to pay MAT of eighteen and one half per cent of its book profit in case tax on its total income computed under the provisions of the Act is less than the MAT liability. Book profit for this purpose is computed by making certain adjustments to the profit disclosed in the profit and loss account prepared by the company in accordance with the Schedule VI of the Companies Act, 1956. As per section 1 15JB, 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 1 15JB 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 1 15JB.

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 section 1 15JB to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account.

III. It is also proposed to omit the reference of Part III of the Schedule VI of the Companies Act, 1956 from section 1 15JB in view of omission of Part III in the revised Schedule VI under the Companies Act, 1956.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. [Clause 46]”

(emphasis supplied)

22.24 On perusal of the aforesaid, it will kindly be appreciated that the Legislature recognized that “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 these circumstances, since the provisions of section 11 5JB of the Act were not applicable to such special category of companies, the Legislature made substantive amendments therein so as to make the said section applicable to such special category companies, including electricity company, with prospective effect from assessment year 2013-14 only.

22.25 The Learned AR contended that it is patently clear from the aforesaid amendment that prior to the amendment applicable from assessment year 2013-14, provisions of section 1 15JB of the Act were not at all applicable to an electricity company, such as the appellant up to the assessment year 2012-13.

22.26 Further, Explanation 3 to section 11 5JB of the Act, which provides an option to discoms to prepare accounts as per Schedule VI of the Companies Act or the governing law/special Act in respect of assessment years prior to 2013-14, has also been inserted as part of the substantive amendments applicable from assessment year 2013-14 and onwards. The said Explanation, cannot be given such retrospective effect resulting in imposition of fresh levy for assessment years up to AY 2012-13, which was not in accordance with the language of section 11 5JB of the Act, as it then stood and the legislative intent. The amendments to section 11 5JB of the Act made by the Finance Act, 2012 are, it was submitted, substantive in nature resulting in fresh liability to tax and would therefore, apply only prospectively; the same cannot, unless specifically mandated by the statute, be applied from retrospective effect.

22.27 Reliance in this regard was placed on the decision of the Constitution Bench of the Hon’ble Supreme Court in the case of CIT vs. Vatika Township Private Limited: [TS-573-SC-2014-O]. To the same effect are the following decisions wherein it has been held that a provision imposing liability is governed by the normal presumption that is not retrospective:

– S.S.Gadgil vs. Lal and Co. (1964) 53 ITR 231 (SC) – K.M.Sharma vs. ITO [TS-5013-SC-2002-O] – Gem Granites vs. CIT [TS-5022-SC-2004-O]

– Sedco Forex International Drill Inc. vs. CIT (2005) [TS-14-SC- 2005-O].

22.28 The fundamental principle reiterated in the aforesaid decision is lexprospicit non respicit: i.e., laws look forward and not backward. No section can be interpreted retrospectively unless it is mentioned in the section itself.

22.29 Specific reliance in this regard was placed on the decision of the Delhi Bench of the Tribunal in the case of Bank of Tokyo Mitsubishi UFJ Ltd. vs. ADIT: ITA No.5 364 of 2010 wherein the Tribunal was adjudicating the issue regarding applicability of provisions of section 1 15JB to a foreign bank which was subject to tax in India on income earned by the branch in India (PE)and preparing its accounts as per requirements of Banking Regulation Act. The Tribunal while following the principles laid down by the Supreme Court in Vatika Township (supra) observed that the amendment to section 1 15JB of the Act by the Finance Act, 2012 was prospective since the same resulted in substantial change in computation provisions.

22.30 To the same effect are the following decisions, wherein amendment to sub-section (2) of section 11 5JB of the Act vide Finance Act 2012 has been held to be prospective:

– State Bank of Hyderabad v. DCIT: ITA No. 578/Hyd./2010 (Hyd.)

– ICICI Lombart General Insurance Co. Ltd. V. ACIT: 54 SOT 538 (Mum.)

22.31 Applying the aforesaid legal principles, the Finance Act, 2012, in no uncertain terms, clearly provides that the provision of section 115JB(2) and Explanation 3 to said sub-section shall come in force with effect from April 1, 2013 and will accordingly apply in relation to the assessment year 20 13-14 and onwards. Meaning thereby, the amendment is specifically made applicable prospectively and not retrospectively, contended the Learned AR.

22.32 Furthermore, section 1 15JB of the Act is a deeming provision which results in an assessee having to pay tax, otherwise not payable, on artificial income. The said section should, therefore, be construed and interpreted strictly, viz, in a manner that leaves the assessee with a lower burden of having to bear an artificial tax liability contended the Learned AR.

22.33 It is a well-known principle of interpretation of fiscal statutes that in the event of any doubt in regard to interpretation, particularly in cases of taxation by employing legal fiction, the benefit of doubt, if any, should be given to the assessee and the interpretation beneficial to the taxpayer should be accepted. Reference was made to the following cases:

– CIT v. Vegetable Products Ltd.: [TS-6-SC-1973-O] – CIT vs. J.K.Hosiery Factory : [TS-5013-SC-1986-O]

– ACIT v. Thanthi Trust: 247 ITR 785 [TS-5005-SC-2001-O]

– UOI v. Onkar Kanwar : [TS-5021-SC-2002-O]

– CIT v. A. J. Abraham Anthraper : [TS-5230-HC-2004(Kerala)-O]

– Vijay Omprakash Bansal v. CIT : [TS-6051-HC-2001 (Bombay)-O]

– CIT v. L.G Balakrishnan: [TS-5374-HC-2001 (Madras)-O]

– CIT v. Quantas Airlines Ltd.: [TS-5297-HC-2002(Delhi)-O]

– Southern Roadways Ltd. vs. CWT: [TS-5676-HC-2000(Madras)-O]

22.34 Having regard to the legal position discussed supra, the Learned AR submitted that the provisions of section 1 15JB of the Act were not at all applicable to companies governed by special Acts (which includes power companies) in respect of assessment years falling prior to April 1, 2013 and thereby the appellant was not liable to pay tax under the provisions of the said section for the assessment year under consideration. Even though the appellant, under a misconception of law, had declared income under the deeming provisions of section 1 15JB of the Act, still the assessing officer was under duty to correctly assess income of the appellant in accordance with the provisions of the Act.

23. The learned CIT(DR) on the other hand tried to justify the action of the Assessing Officer in framing the assessment under sec. 11 5JB of the Act. He submitted that the decisions relied upon by the Learned AR having distinguishable facts are not applicable in the case of the He pointed out that the assessee itself had declared income under the deeming provisions of sec. 115JB of the Act, thus, the assessee has no grievance in this regard and the issue raised in the additional ground may be decided in favour of the Revenue.

24. We find that in support of the issue that deeming provisions of sec. 1 15JB of the Act were not applicable in the case of the assessee during the assessment year under consideration, the Learned AR has cited provisions of different laws and has placed reliance on several decisions. We thus prefer to examine provisions of different laws on the issue first. It was claimed that books of account of the assessee are drawn in accordance with the statutory provisions as applied to an electricity company, i.e. the Repealed Electricity (Supply) Act, 1948 and the Delhi Electricity Reforms (Transfer Scheme) Rules, 2001 and provisions of the Companies Act, 1956 to the extent the same are not inconsistent with the Electricity Act/DERC Regulation. It was submitted in other words that in case of any variation/conflict in the aforesaid provisions, the assessee is bound to mandatorily follow/adopt the specific provisions of Electricity Act/DERC Regulation, which are specifically related to its area of operations, although the basic form for preparation and presentation of accounts would be prescribed by Schedule-VI to the Companies Act. It was submitted that overriding mandate of Electricity Act, 2003 in respect of electricity company vis-а-vis other Acts, is specifically provided in sec. 174 of the Electricity Act, 2003.

24.1 For a ready reference, the provisions laid down under sec. 174 of the Electricity Act, 2003 are reproduced hereunder:

S.174 “Save as otherwise provided in section 173, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.”

24.2 Perusal of the above provisions make it clear that these provisions shall override the provisions of all other Acts. The Learned AR has also referred the provisions laid down under sec. 616 of the Companies Act, 1956 to support his contention that even the Companies Act, 1956 and the Companies Act, 2013 (Section 1(4)) also provided/provides that the provisions of the said Act would apply in respect of an Electricity Company only in so far as the said provisions are not inconsistent with the Electricity Act. For a ready reference, the aforesaid provisions of the Companies Act, 1956 and the Companies Act, 2013 are being reproduced hereunder:

Section 616 of the Companies Act, 1956:

“616. Application of Act to insurance, banking, electricity supply and other companies governed by special Acts. The provisions of this Act shall apply–

(a) to insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 ; (4 of 1938.)

(b) to banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Companies Act, 1949 ; (10 of 1949.)

(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, (9 of 1910) or] the Electricity Supply Act, 1948 ; (54 of 1948.)

(d) to any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act;

(e) to such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification in the Official Gazette, specify in this behalf, subject to such exceptions, modifications or adaptations, as may be specified in the notification.] Application of Act to Government Companies”

Further, Section 1(4) of the Companies Act, 2013 reads as under:

“1. Short title, extent, commencement and application (1) This Act may be called the Companies Act, 2013.

…………………………..

(4) The provisions of this Act shall apply to-

(a) companies incorporated under this Act or under any previous company law;

(b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999;

(c) banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949;

(d) companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003;

(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and

(f) such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification….”

24.3 On perusal of the above provisions of the Companies Act, we find substance in the contention of the Learned AR that the provisions of the Act would apply in respect of an Electricity Company only in so far as the said provisions are not inconsistent with the Electricity Act.

24.4 The Learned AR has also referred the provisions laid down under sec. 181 of the Electricity Act with this submission that the said provisions provide power to the State Commission to make regulation. For a ready reference, relevant extracts of section 180 of the Electricity Act, 2003 is being reproduced hereunder:

“180. Powers of State Commissions to make regulations.

(1) The State Commissions may, by notification, make regulations consistent with this Act and the rules generally to carry out the provisions of this Act.

(2) In particular and without prejudice to the generality of the power contained in sub-section (1), such regulations may provide for all or any of the following matters, namely:

(a) period to be specified under the first proviso of section 14;

(b) the form and the manner of application under sub-section (1) of section 15;

………………..

…………………..

(zc) the terms and conditions for the determination of tariff under section 61;

……………………….

(zg) issue of tariff order with modifications or conditions under subsection(3) of section 64;

(zo) any other matter which is to be, or may be, specified.

(3) All regulations made by the State Commission under this Act shall be subject to the condition of previous publication.”

24.5 On perusal of the above provisions, we concur with the submission of the assessee that under the Electricity Act, 2003, the State Commission is empowered to make regulations. In view of the above discussed provisions of Electricity Act, 2003 and Companies Act, it is clear that the very basis of recognition of Revenue and expense is regulated by the DERC and not strictly as per the provisions of the Companies Act. It is also an established position of law that provisions of a specific Act would override the provisions of all other Acts, which is supported by the decisions relied upon by the assessee including the decision so Hon’ble Supreme Court in the case of TRO vs. Custodian – Special Court at – 934 (supra). Thus, it can be safely arrived at a conclusion that the assessee prepares its annual account in accordance with the applicable laws including provisions of the Delhi Electricity Reforms (Transfer Scheme), Rule 2001 and is not required to and has not been strictly preparing its audited annual account as per Parts II and III of Schedule-6 of the Companies Act, 1956.

24.6 Further contention of the Learned AR remained that prior to the amendment to sub-section (2) of sec. 11 5JB of the Income-tax Act, 1961, the deeming provisions of the said section were not applicable to Companies to which proviso to sub-section (2) of sec. 211 of the Companies Act were abolished. To examine this contention, we have gone through the provisions of sec. 1 15JB of the Income-tax Act, 1961, as applicable to the relevant year under consideration, reproduced hereunder:

“Special provision for payment of tax by certain companies.

1 15JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on 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, 2001, is less than seven and one-half 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 seven and one-half 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) ………………..”.

24.7 On the reading of above provisions laid down under sec. 1 15JB of the Act relevant for the year, we find that the provisions are applied during the relevant year only to the companies required under the law, to prepare its profit and loss account in accordance with Parts-II and III of Schedule-VI of the Companies Act and not otherwise.

24.8 The Learned AR in his submission has also reproduced hereinabove the speech of Hon’ble Finance Minister while reintroducing the MAT provisions vide Finance Bill, 1996 – 220 ITR (Statute) 107 with the submission that the Legislature intended to exclude it from the purview of MAT provisions under sec. 1 15JA of the Act (which were para materia to sec. 11 5JB of the Act) Companies engaged, inter alia, in the power sector which were governed by a Special Statute, which also regulates the manner in which accounts for such companies were to be prepared. Having gone through the said speech of the Hon’ble Finance Minister, we concur with the above submission of the assessee about the intention of the legislature.

24.9 In view of the above discussion, we agree with the submission of the Learned AR that the assessee is governed by the provisions of the Electricity Act, 2003 and accordingly supposed to prepare its annual accounts in accordance with the applicable Electricity Act/DERC Regulation, which are binding and mandatory to be followed by the assessee.

24.6 The cited decisions by the Learned AR in the cases of Kerala State Electricity Board, vs. DCIT (supra), Maharashtra State Electricity Board vs. JCIT (supra), Reliance Energy Ltd. vs. ACIT (supra) and Crung Thai Bank PCL vs. JDIT (supra) also support the contention of the assessee that provisions of sec. 1 15JB of the Act shall not apply to Companies referred in proviso to sub-sections (1) and (2) of sec. 211 of the Companies Act, i.e. companies covered by Special Acts viz. Banking Regulation Act, 1949, Electricity Act, 2003, Insurance Regulatory Act, 1999 etc. We accordingly hold that provisions of sec. 1 15JB of the Act were not applicable to the assessee during the year under consideration as the same is also fortified by substantive amendments in section 1 15JB of the Act by the Finance Act, 2012 w.e.f. 01.04.2013. Sub-section (2) to section 1 15JB of the Act as substituted by the Finance Act, 2012 w.e.f. 01.04.2013 reads as under:

“Special provision for payment of tax by certain companies

1 15JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on 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, 2012, is less than eighteen and one-half 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 eighteen and one-half per cent.

(2) Every assessee,-

(a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956 (1 of 1956); or

(b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company.”

24.7 Simultaneously, Explanation 3 to aforesaid sub-section (2) of section 11 5JB of the Act was inserted by Finance Act, 2012 w.e.f. 01.04.2013 which reads as under:

“Explanation 3.-For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, has, for an assessment year commencing on or before the 1st day of April, 2012, an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956 or in accordance with the provisions of the Act governing such company.”

24.8 We thus find that vide Finance Act, 2012, the scope of section 1 15JB of the Act was widen so as to include companies preparing profit and loss account in accordance with provisions of the relevant Regulatory Act. However, the amendments by the Finance Act, 2012 imposing new tax burden on companies which was otherwise not provided under the Act, were, in no uncertain terms, made in provisions of sec. 11 5JB (2) w.e.f. 01 .04.2013. In other words, the deeming provisions are applicable to companies governed by special Act only from assessment year 2013-14 and onwards. The memorandum explaining the provisions of the Finance Bill, 20 12-240 ITR (St.) 288 whereby sub-section (2) of sec. 1 15JB was substituted provides that the amendment is applicable w.e.f. 01.0.2013 i.e. for the assessment year 2013-14 onwards. The relevant extracts of the memorandum has been reproduced hereinabove in the submissions of the Learned AR. From the aforesaid amendments, it is clear that prior to amendment applicable from the assessment year 2013-14, provisions of sec. 1 15JB of the Act were not applicable to an electricity company such as the assessee up to the assessment year 20 12-13.

24.9 The Explanation-3 to section 11 5JB of the Act which provides an option to prepare its accounts as per Schedule-VI of the Companies Act or the governing law/special Act in respect of assessment year prior to 2013- 14, has also been inserted as per the substantive amendments applicable from assessment year 20 13-14 and onwards. The amendments to section 1 15JB of the Act made by Finance Act, 2012 are substantive in nature resulting in fresh liability to tax and would, therefore, apply only prospectively. The same cannot unless specifically mandated by the statute, be applied from retrospective effect. In this regard, we find support from the ratios laid down by the Hon’ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (supra), wherein the Hon’ble Supreme Court has been pleased to discuss elaborately the general principles concerning interpretation of amendments with retrospective effect. The relevant excerpts of the observations of the Hon’ble Supreme Court are being reproduced hereunder:

“General Principles concerning retrospectivity

………………..

31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lexprospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre (1870) LR 6 QB 1, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.

32. The obvious basis of the principle against retrospectivity is the principle of ‘fairness’, which must be the basis of every legal rule as was observed in the decision reported in L’OfficeCherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd (1994) 1 AC Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later.

………………………

Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors.

35. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as “declaratory statutes”. The circumstances under which a provision can be termed as “declaratory statutes” is explained by Justice G.P. Singh7 in the following manner:

“Declaratory statutes: The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court : “For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word ‘declared’ as well as the word ‘enacted’. But the use of the words ‘it is declared’ is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is ‘to explain’ an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language ‘shall be deemed always to have meant’ is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law.”

The above summing up is factually based on the judgments of this Court as well as English decisions.

A Constitution Bench of this Court in KeshavlalJethalal Shah v. MohanlalBhagwandas&Anr.(1968) 3 SCR 623, while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows:

“The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional juris-diction was before the amendment derived from s. 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act.”

36. It would also be pertinent to mention that assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. (See Controller of Estate Duty Gujarat-I v. M.A. Merchant 1989 Supp (1) SCC 499. We would also like to reproduce hereunder the following observations made by this Court in the case of Govinddas v. Income- tax Officer (1976) 1 SCC 906, while holding Section 171 (6) of the Income- Tax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Income Tax Act came into force:

“11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be constued as prospective only.”

37. In the case of C.I.T., Bombay v. Scindia Steam Navigation Co. Ltd. (1962) 1 SCR 788, this Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year………………….”

24.6 Similar view has been expressed by the Hon’ble Supreme Court in the other cited decisions in the cases of S.S. Gadgil vs. Lal & Co. (supra), Sedco Forex International Drill Inc. vs. CIT (supra) etc. Thus, it is clear and an established position of law that no section can be interpreted retrospectively unless is mentioned in the section itself.

24.7 The Delhi Bench of the ITAT in the case of Bank of Tokyo Mitsubishi UFJ Ltd. vs. ADIT (supra) while following the principles laid down by the Hon’ble Supreme Court in Vatika Township (supra) observed that the amendment to sec. 115JB of the Act by Finance Act, 2012 was prospective since the same resulted in substantial change in computation provisions. In that case, the ITAT was adjudicating the issue regarding applicability of provisions of sec. 1 15JB of the Act to a foreign bank which was subject to tax in India on income earned by the Branch in India (P.E) and preparing its accounts as per requirements of Banking Regulation Act. The relevant finding in that case are being reproduced hereunder:

“74 In our opinion this explanation cannot be held to be retrospective in operation because it has brought in a substantial change in the computation provision. Till the insertion of this amendment, various decisions clearly held that in case of Banking Companies, Electricity Companies and Insurance Companies, since they were governed by Special Acts and the profit and loss account was not prepared as per part II of schedule VI to the Companies Act, therefore, the computation provisions failed.Accordingly, in view of the decision of Supreme Court in the case of B.C. Srinivasa Setty (supra), the law till the insertion of this explanation was that the provisions of section 11 5JB were not applicable on account of impossibility of computation as the accounts were not prepared in accordance with part II, schedule VI to the Companies Act. Now by incorporating Explanation 3, the Companies governed by Special Acts which come within the ambit of company u/s 2(17) are covered by the provisions of section 1 15JB. Therefore, this amendment brings substantial change in the taxability of companies governed by the special acts and, therefore, cannot be held to be retrospective. In this regard we also find strength from the ratio laid down by the Supreme Court in its decision dated 16.9.2014 in the case of CIT v. Vatika Township (P.) Ltd. In Civil Appeals arising out of SLP(C) No. 1362 of 2009 and others. The five judges Bench of the Supreme Court strikes down division Bench ruling on retrospective applicability of proviso to section 113 of the Income Tax Act holding the proviso to operate prospectively. Laying down perusal principles governing retrospectivity, the Supreme Court has been pleased to rule that unless contrary intention appears, a legislation is presumed not to be intended to have retrospective operation, current law ought to govern current activities, law passed today cannot apply to past events.”

24.8 The Mumbai Bench of the ITAT in the case of Reliance Instruments Ltd. vs. ACIT &Ors. (supra) has also expressed similar view. Relevant para Nos. 38 and 39 are being reproduced hereunder:

“3 8. Having heard the rival submissions and after perusing the relevant material on record we find that the Tribunal in assessee’s own case in assessment year 200 1- 02 in para 29 has held as under:

“As discussed above, the assessee is following the accounting policies wider the Electricity Supply Act and prepared its accounts in view of those very policies. Following those very policies, the account’s in accordance with Part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II and II of Schedule VI of Companies Act then the provisions of sec. 11 5JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Hon’ble Supreme Court and the decision of the Tribunal for A.Y. 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the relevant case.”

39. Similar view has been taken by the Tribunal in assessment years 2002-03 and 2003-04 as has been discussed in para 14 of the said order and also in the order for A.Y. 2004-05. Respectfully following the precedents, we accept the assessee’s claim and hold that the provisions of sec. 11 5JB cannot be upheld.”

Again the Bangalore Bench of the ITAT in the case of Syndicate Bank vs. DCIT (supra) has decided the issue in favour of the assessee, a banking company. Relevant para Nos. 98 & 99 thereof are being reproduced hereunder:

“98. We have considered the rival submissions of the learned counsel for the assessee. We find that this issue was considered by the Mumbai Bench of the Tribunal in the case of Krung Thai Bank PCL (supra) and on the above issue held as follows:

“5. Learned counsel for the assessee, however, contends that the provisions of MAT do not apply to the assessee, and, for this reason, very foundation of impugned reassessment proceedings is devoid of legally sustainable merits. His line of reasoning is this. The provisions of MAT can come into play only when the assessee prepares its profit and loss account in accordance with Schedule VI to the Companies Act. It is pointed out that, in terms of the provisions of sec. 1 15JB(2), every assessee is required to prepare its profit and loss account in terms of the provisions of Part II and III of Schedule VI to the Companies Act. Unless the profit and loss is so prepared, the provisions of Sec. 1 15JB cannot come into play at all. However, the assessee is a banking company and under proviso to sec. 211(2) OF THE Act, the assessee is exempted from preparing its books of account in terms of requirements of Schedule VI to the Companies Act, and the assessee is to prepare its books of account in terms of the provisions of Banking Regulation Act. It is thus, contended that the provisions of sec. 1 15JB do not apply in the case of banking companies which are not required to prepare the profit and loss account as per the requirements of Part II and III of Schedule VI to the Companies Act. Since the provisions of sec. 1 15JB do not apply to the assessee company, the reasons recorded for reopening the assessment are clearly wrong and insufficient. We are urged to quash the reassessment proceedings on this short ground.

6. Learned Departmental Representative, on the other hand, vehemently relies upon the orders of the authorities below and submits that there is no specific exclusion clause for the banking companies, and in the absence of such a clause, it is not open to us to infer the The submission of the learned counsel, according to the departmental representative, are clearly contrary to the legislative intent and plain wording of the statute.

7. The plea of the assessee is indeed well taken, and it meets our approval. The provisions of sec. 115JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Part II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax under sec. 11 5JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to Sec. 211(2) of the Companies Act. The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The ITA provisions of Section 1 15JB cannot thus be applied to the case of banking company”.

The Hon’ble Kerala High Court in its recent decision in the case of Kerala State Electricity Board vs. DCIT (2010) – 329 ITR 91 (Ker.) after detailed deliberation and referring the CBDT understanding (Circular No. 762 dated 18.2.1998 – 230 ITR (Statute)-12) that companies engaged in the business of generation and distribution of electricity and enterprises engaged in developing, maintaining and operating infra-structure facility as a matter of policy, are not brought within the purview of the amendment (1 15JA) for the reason that such a policy would promote the infra-structural development of the country and that such an understanding of the CBDT is binding on the department, has also been pleased to arrive at a conclusion, relevant paragraphs thereof are being reproduced hereunder:

“11. Before we examine the first question a brief survey of the history of section 11 5JB is necessary. Chapter XII-B was inserted by the Finance Act of 1987 in the Income-tax Act. Section 1 15J was introduced for the first time by the said Chapter. The relevant portion of the said section reads as follows:

“Section 1 15J. Special provisions relating to certain companies.-(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), 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, 1988 but before the 1st day of April, 1991 (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 deemed to be an amount equal to thirty per cent of such book profit.

(1A) 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) Explanation.-For the purposes of this section, “book profit” means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by –

if any amount referred to in clauses (a ) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by,-“

It can be seen from clause (1) that the provision creates a legal fiction regarding the total 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 1-4-1988 and ending with the 1-4- 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 under sub-section (1A) and either increased or decreased by various amounts specified in the various subsequent sub-clauses appended to the Explanation, the details of which are not necessary for the purpose of this case. However, the operation of section 115 J came to an end with 1991- 92 assessment year onwards.

12. Subsequently, section 1 15JA came to be inserted in the Income-tax Act by Finance Act 2 of 1996, with effect from 1-4-1997. The scheme of section 1 15JA is almost similar to the scheme of section 11 5J. Two major points of difference are that the new section is applicable with reference to the previous year relevant to the assessment year commencing from 1-4-1997 and ending with 1-4- 2001. Secondly, the express exclusion of the Companies engaged in the business of either generation or distribution of electricity is absent under section 1 15JA. The third and most important change is that two provisos are added to sub-section (2) stipulating that :

“Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account 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):

Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation or depreciation shall correspond to the method and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year falling within the relevant previous year.”

The further details of section 1 15JA may not be necessary for the present purpose.

13. Then came to section 1 15JB, which was inserted in the Income-tax Act by Finance Act of 2000 with effect from 1-4-2001. The relevant portion as it stands today reads as follows:-

“1 15JB. Special provision for payment of tax by certain companies.- (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the incometax, payable on 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, 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 preparing 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):

Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,-

(i) the accounting policies;

(ii) the accounting standards adopted for preparing such accounts including profit and loss account;

(iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year failing within the relevant previous year”.

The scheme of the section 115 JB is similar to section 1 15J and section 1 15JA. The difference insofar as it is relevant for the present purpose between section 11 5JB and its fore-runners (Sections 1 15J and 115 JA) is as follows:

All the 3 sections (Ss.115J, 115JA and 115JB) create legal fictions regarding the ‘total income’ (a defined expression under section 2(45) \ of the Act) of the Companies. While the earlier two sections mandate the department to make the assessment on a fictitious amount of ‘total income’ where the actual amount of total income computed in accordance with the Income-tax Act is less than 30 per cent of the book profits of the Company, section 11 5JB mandates the department to resort to the fiction in those cases where the tax payable on the basis of the ‘total income’ computed in accordance with the Income- tax Act is less than a specified percentage (7- per cent for the years in issue) of the book profit. Further, sections 11 5JA and 1 15JB also stipulate a definite manner of preparing the annual accounts including the profit and loss accounts. More specifically, Section 11 5JB 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.

14. It may be mentioned here that under section 166 of the Companies Act every Company is mandated to hold a general meeting in each year. Section 210 mandates that every year the Board of Directors of the Company in the general meeting shall 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

15. However, the appellant though is by definition a Company under the Income-tax Act and deemed to be a Company for the purpose of 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 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 Official The prescription of the rules in this regard is required to be made in consultation with the Comptroller and Auditor-General of India and also the State Governments. Such accounts of the appellant are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorised by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report is required to be laid annually before the State Legislature and also to be published in the prescribed manner and copies of such publication shall be made available for sale at a reasonable price, obviously for the benefit of the general public who wish to scrutinise the accounts.

16. Thus, it can be seen that coming to the maintenance of the accounts, the appellant though is deemed to be a “Company” – both by virtue of operation of section 80 of the Income-tax Act for the purpose of Income-tax Act and by virtue of the definition of the expression “Company” under the Income-tax Act (which is already examined earlier) – the appellant is required to keep and maintain its accounts in a manner specified by the Central Government, but not in the manner specified in the Companies Act. Therefore, the question is whether the legal fiction contemplated under section 11 5JB can be pressed into service while making the assessment of Income-tax payable by the appellant.

17. It must be remembered that section 1 15JB creates a legal fiction regarding the total income of the assessees which are Companies. The book profit of the Company is deemed to be total income of the assessee in the circumstances specified in the said section, which are already noticed earlier. The expression “book profit” for the purpose of the said section is explained in the section itself to mean the net profit as increased or decreased by the various amounts shown in the various sub-clauses 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 is required to be prepared in the manner specified therein. Though in view of the requirement under section 69 of the Electricity Supply Act the appellant is required to maintain accounts in a different form than the one contemplated under section 1 15JB(2), the prescription under section 69 is only regarding the general duty of the appellant for the purpose of Electricity Supply Act. Nothing in theory prevents the Parliament from obligating the appellant to prepare another profit and loss account as prescribed under section 11 5JB(2) for the purpose of the Income-tax Act. The question is whether such an obligation is created under section 11 5JB(2) insofar as the appellant is 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.

18. Coming to the legislative history of section 115JB and its fore-runners – Sections 115J and 115JA – we have already noticed that they provided for the determination of the total income of the Companies by a fictitious 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 – [which is binding on the Department, see K.P. Varghese v. ITO [TS-11-SC-1981-O] and Ranadey Micronutrients v. Collector of Central Excise 1996 (87) ELT 19 (SC) excluding the bodies like the appellant from the operation of the said section. Though under the normal rules of interpretation of statutes the omission of a clause which existed in the statute at some point of time by a subsequent amendment would indicate that the legislature intended not to give the benefit of such clause any more to those who were getting the benefit of such exclusion clause, in our opinion, it is not an absolute rule. The other attendant circumstances, the context, the history and the mischief sought to be remedied by the amendment are all required to be examined before reaching at definite conclusion.

19. The Circular No. 762 not only is binding on the respondents, but also explains the purpose in introducing section 115 JA. The relevant portion reads as follows:-

“46.1 In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer.

46.2 The Finance Act has inserted a new section 1 15JA of the Incometax 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 Income-tax Act, is more than 30 per cent of the book profit, tax shall be charged on the same.

46.3 The effective minimum alternate tax, at the existing rates of taxation works out to 12 per cent of the book profits.

46.4 Income arising from free trade zone (FTZ), export oriented undertakings (EOUs), charitable activities, investment by a venture capital company and other exempted incomes (section 10) are excluded from the purview of the alternate tax.

46.5 Since the alternate tax is applicable only where the normal 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 1 15JA 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.”

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 handsome 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 position which permitted the adoption of dual accounting policies and practices, one for the purpose of computation of Income-tax and another for the purpose of determining the book profits for the purpose of payment of dividends.

Therefore, the amendment was made to plug the loophole in the law. However, the CBDT understood that Companies engaged in the business of generation and distribution of electricity and Enterprises engaged in developing, maintaining and operating infrastructure facilities, as a matter of policy, are not brought within the purview of the amendment (Section 11 5JA) for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT is binding on the department.

20. If that is the background in which section 11 5JA is introduced into the Income-tax Act, section 1 15JB, which is substantially similar to section 11 5JA, in our opinion, cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of section 1 15JA.”

24.8 Under the above facts and circumstances, we thus hold that even though the assessee, under a misconception of law, had declared income under the deeming provisions of sec. 1 15JB of the Act, still the Assessing Officer was under its duty bound to make correct assessment of income of the assessee in accordance with the provisions of the Act. As per above discussion and the ratios laid down in the cited decisions, we hold that the provisions of sec. 1 15JB of the Act were not at all applicable to companies governed by special Acts which also includes power companies, in respect of assessment years falling prior to 01.04.2013 and thereby the assessee was not liable to pay tax under the provisions of the said sections for the assessment years under consideration.

19. This aspect was also examined by the Hon’ble Kerala High Court in the case of Kerala State Electricity Board (supra) and has concluded that provisions of section 11 5JB cannot be invoked in the case of State Electricity Board as it was governed by different law. The relevant observations of this Hon’ble Court is also extracted hereunder for the sake of reference:-

“Section 1 15JB of the Income-tax Act, 1961 creates a legal fiction regarding the total income chargeable to tax. Such a fiction is applicable only to those assessees which are companies.The book profit of the company is deemed to be the total income of the 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 shown in the various sub-clauses 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 is required to be prepared in the manner specified therein. Section 11 5JB 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 company for the purpose of the Companies Act, 1956. It is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. On the other hand, under section 69 of the Electricity (Supply) Act, 1948, the Board 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 Official Gazette. Such accounts of the Board are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorised by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report are required to be laid annually before the State Legislature and also to be published in the prescribed manner.

At the earliest point of time when section 1 15J was introduced, the section expressly excluded from its operation bodies like the Electricity Board. Though such express exclusion is absent in section 1 15JA, the Central Board of Direct Taxes issued Circular No. 762 dated February 18, 1998 excluding bodies like the Electricity Board from the operation of the section. Circular No. 762 not only is binding on the Department, but also explains the purpose in introducing section 11 5JA which was to tax zero-tax companies. The CBDT understood that companies engaged in the business of generation and distribution of electricity and enterprises engaged in developing, maintaining and operating infrastructure facilities, as a matter of policy, are not brought within the purview of section 115 JA for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT is binding on the Department. Section 115JB, which is substantially similar to section 1 15JA cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of section 115JA.

Where 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.

The Electricity Board or bodies similar to it, which are totally owned by the Government, either State or Central, have no shareholders. Profit, if at all, made would be for the benefit of entire body politic of the State. Therefore the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, the fiction fixed under section 11 5JB cannot be pressed into service against the Electricity Board while making the assessment of the tax payable under the Income-tax Act.

Section 43B(a) deals with “any sum payable by the assessee by way of tax, duty, . . . under any law for the time being in force”. The words, “by way of tax” are indicative of the nature of liability. The 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 continues to be fiduciary even in a case wherein the relationship of principal and agent is created by a statute. Section 43B(a) deals with amounts payable to the sovereign qua sovereign, not amounts payable to the sovereign qua principal. Therefore section 43B cannot be invoked in the case of the Electricity Board with regard to electricity duty collected by it pursuant to the obligation under section 5 of the Kerala Electricity Duty Act, 1963. [The court made it clear that it had not decided whether the amount should be treated as income for the purpose of the Act.]”

20. We have also considered the order of the Tribunal in assessee’s own case for the AY 2005-06 and we find that the assessment order was passed on 23.12.2008, much before the amendment brought in sub-section (2) of section 11 5JB of the Act. Therefore, no inference can be drawn from this order while adjudicating the impugned issue.

21. Since it has been repeatedly held by the different Benches of the Tribunal and Hon’ble High Court of Kerala that where the assessee is governed by different Acts and Rules, and is not required to prepare its profit & loss account and balance sheet as per Part II & III of Schedule VI to the Companies Act, the provisions of section 1 15JB cannot be invoked against him. In the light of this legal position, we are of the view that the revenue authorities wrongly invoked the provisions of section 11 5JB of the Act, therefore the order of the CIT(Appeals) is not sustainable in the eyes of law. Accordingly, we set aside the order of CIT(Appeals) in this regard.

Respectfully following the above mentioned decision of the co- ordinate bench of Tribunal, we reject the ground of appeal raised by the revenue.

4. In the result, the appeals filed by the revenue are dismissed.

C.O. No. 76/Bang/2018:

The only issue in the C.O. is as to what is the tax payable under section 115JB of the Income Tax Act, 1961. This issue is also covered by the decision of this Co-ordinate Bench in the case of M/s.Atria Power Corporation Ltd. in ITA No.913/Bang/2007 dated 22/12/2008 for assessment year 2005-06. The relevant paras are extracted hereunder:

“6. We are afraid that the argument cannot be given effect to the following reasons. As to the difference in the language employed in the sections, we find that whereas u/ss. 115J and 115JA, the comparison is between the total income of the assessee computed under the normal provisions of the Act and 30% of the book profit, in section 115JB the comparison is between the tax payable on the total income computed under the normal provisions of the Act and 7.5% of the book profit. Since sections 115J and 115JA refer to the total income computed under the normal provisions of the Act, they employ the words “chargeable to tax”. However, it is seen that section 115JB makes a comparison between the figure of tax payable on the total income computed under the normal provisions of the Act and the tax of 7.5% of the book profit. Therefore, necessarily section 1 15JB has to use the expression “tax payable by the assessee on such total income”. In sections I15J and I15JA, the comparison is between the figure of total income computed under the normal provisions of the Act and 30% Of the book profit and, therefore, these sections have necessarily to use the expression “total income of such assessee chargeable to tax”. Nothing really turns on the language employed in these sections since the language employed is consistent with what is being compared. If the total income of the assessee computed in accordance with the normal provisions of the Act is to be compared with a percentage of the book profit then the expression which is necessarily to be used is “chargeable” whereas if the comparison to be made is between the tax on the total income computed under the normal provisions of the Act and the tax on the book profit, expressed as a percentage of the book profit, then the section has to necessarily refer to the “tax payable” by the assessee. From this it does not follow that there has to be some tax which is payable by the assessee under the normal computation of the total income. What is “chargeable” to tax under the Act is the total income of the assessee, on which the tax is “payable”. In the case of K. S. Venkataraman & Co., (P) Ltd., v. State of Madras (1966) 60 ITR 112, a constitution bench of the Supreme Court approvingly cited the following passage from Kanga and Palkiwala’s treatise on Income-tax Law : “Section 3 charges total income; section 4 defines its range, section 6 qualifies it; and sections 7 to 1 2B quantify it”. The sections referred to are the sections of the Indian Income-tax Act, 1922. The 8th edition of the treatise referred to above, at page 398 substituted the corresponding provisions of the Income-tax Act, 1961. Reference may also be made to the judgement of the Bombay High Court in CIT v. Smt. T. P. Sidhwa, (1982) 133 ITR 840 ® page 849. In a nutshell, it can be said that what is charged to tax is the total income of the assessee; the tax so charged is payable by the assessee.

7. It was clarified before us in the course of the arguments addressed on behalf of the assessee that what is referred to in section 115JB by the Words “tax payable by the assessee” is actually the assessed tax and that it is not being contended that section 115JB cannot be applied even to a case where the assessed tax is more than covered by prepaid taxes and nothing is payable as per the demand notice issued consequent to the assessment. It was submitted that what is being argued is only that where no tax can be charged at all for the reason that the total income of the assessee computed under the normal provisions of the Act is either nil or a loss, then there is no question of any tax being payable by the assessee on the total income and since there would be nothng with which the book profit tax can be compared, section 115.TB cannot be applied. It was submitted that it was a case of one ingredient of the charging section being incapable of ascertainment with the consequent result that the entire section becomes inapplicable. This argument is, perhaps, inspired by the judgement of the Supreme Court in the case of CIT v. B. C. Srinivasa Setty (1981) 128 ITR 294, though there was no express reference to the said decision. In this case it was held that the charging section and the computation provisions together constitute an integrated code and 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. These observations were made by the Supreme Court in relation to the assessment under the head “capital gains”. It was held that where the cost of an asset, which was deductible from the sale price for ascertaining the capital gains, was incapable of ascertainment any reason, it can be said that the sale of such an asset was not intended at all to be assessed to capital gains. In that case, the assessee sold goodwill which was no doubt considered as a capital asset but since it was self-generated, the precise cost of the goodwill was incapable of ascertainment. The sale value of the goodwill was, therefore, held to be held to be exempt from capital gains tax. It has to be borne in mind that the observations of the Supreme Court were made with reference to the nature of an asset, the cost of acquisition of which was incapable of being ascertained. The argument in the case before us similarly is that you cannot ascertain the tax payable by the assessee if the total income computed under the normal provisions of the Income-tax Act is Rs. Nil. The argument proceeds further to say that since the entire profits of Rs.11,97,79,339/- from the undertaking is exempt u/s.80IA, no tax is payable and, therefore, there is nothing with which one can compare the book profit tax. With respect, the argument seems to overlook that what is required by the section is only a factual ascertainment whether any tax payable by the assessee on the total income computed under the normal provisions of the Act and if there is, then it should be compared with the book profit tax, but it does not further require that there should be some tax actually payable on such total income. In a case where the total income is Rs. Nil or a negative figure, undoubtedly no tax is payable but we are not concerned with that at all, but what we are concerned is the comparison of the fact that no tax is payable by the assessee on the total income computed under the normal provisions of the Act with the book profit tax, if any. In a case where the total income computed under the normal provisions of the Act is either nil or a negative figure, the tax payable would be zero and since this would be less than the book profit tax, the assessee would be liable to pay book profit tax u/s.115JB. Our view is supported by the object for which section 115JB was introduced by the Finance Act, 2000 w.e.f.1.4.2001. Section .115JB is of the same genus as section 115J which for the first time, provided for a minimum tax payable by certain companies which was popularly known as the book profit tax. Section 115J was introduced by the Finance Act, 1987 w.e.f.1.4.1988. In Circular No.495, dt. 22.9.1987 (reported in 168 ITR (St) 110, the ambit and object of the section were elaborated by the CBDT. The relevant portions of the circular which throw light on -the object of introducing the section are reproduced below:

“New provisions to levy minimum tax on ‘book profit’ of certain companies.

36.1 It is an accepted canon of taxation of levy tax on the basis of ability to pay. However, as a result of various tax concessions and incentives certain companies making huge profits and also declaring substantial dividends, have been managing their affairs in such a way as to avoid payment of income- tax.

36.2 Accordingly, as a measure of equity, section 115J has been introduced by the Finance Act.”

It will be appreciated from the above that the section was introduced as an equitable measure in order to levy tax on companies which made huge profits and declared substantial dividends but did not pay income-tax because of the various tax concessions and incentives availed of by them. It was thought that such companies had the ability to pay taxes and they ought to contribute to the exchequer. The interpretation of section 115JB which is similar to section 115J and which we have adopted, is in consonance with the object of the section namely, that all companies which make handsome profits must- pay tax irrespective of the factthat -they would not have paid tax on their profits if their profits had been computed under the normal provisions of the Act in view of present case has made substantial book profit which according to its balance sheet comes to Rs.6,18,3 6,130!-. However, by virtue of the relief available uls.801A, it has claimed the entire business profits of Rs. 11,97,79,339/- to be exempt from tax with the result that its total income became nil and no tax waspayable. This is exactly the situation contemplated by the section for which provision has been made to the effect that the company should pay tax on its book profit and thus contribute to the exchequer. Therefore, there can be no escape from the position that the assessee company is caught within the mischief of section 115JB, notwithstanding that the tax payable by it on its total income computed under the normal provisions of the Act is Rs. Nil. It would be anomalous to hold that where tax of Re.!!- is payable on the total income computed under the normal provisions of the Act, then section 115JB would be attracted, but it would not be attracted when the tax payable on the total income is Rs.Nil either because the total income is nil or is a negative figure. It is well settled that the section has to be interpreted in such a manner as to avoid absurdity and also in
such a manner as to advance the cause and suppress the mischief.”

Respectfully following the above mentioned order of the co-ordinate bench of Tribunal, the cross objection No. 76/Bang/2018 is dismissed. C.O. Nos. 77 and 78/Bang/2018 are dismissed as not pressed.

In the result, ITA Nos.534 to 556/Bang/2018 and CO Nos.76 to 78 are dismissed .