BANNARI AMMAN SUGARS LIMITED,COIMBATORE vs. ACIT CENTRAL CIRCLE 3(2), CHENNAI

The assessee, inter-alia, is engaged in distribution of electric power through bagasse-based cogeneration units. The power is captively consumed by the assessee. For doing so, the assessee was required to pay an amount of Rs.175.65 Lacs towards self-generation tax to Tamil Nadu State Electricity Board (TNEB). The same was in the nature of self- generation tax on electricity consumed from captive power generating plant. The same remain unpaid and accordingly, Ld. AO proceeded to disallow the same u/s 43B. The assessee contended that the same being in the nature of energy charges would not be covered u/s 43B which would apply only for payment which are in the nature of tax, duty, cess or fees. However, Ld. AO observed that self-generation tax was collected by TNEB as per the provisions of Tamil Nadu Tax on consumption or sale of Electricity Act, 2005. As per Article 265 of the Constitution of India, no tax could be levied except by the authority of law. Thus, each tax levied or collected was to be backed up by accompanying law, passed either by the Parliament or the State Legislature. Each state regulates power generation and distribution within the state and the same is backed by state laws, Therefore, the charge being in the nature of tax would be disallowable u/s 43B. Accordingly, the impugned amount was disallowed u/s 43B. The Ld. CIT(A), taking similar view as in first appeal for AY 2016-17, confirmed the action of Ld. AO against which the assessee is in further appeal before us.