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Facts
The assessee, Gujarat State Electricity Corporation Ltd., filed its return for AY 2003-04. The assessment was reopened under Section 147, leading to additions. The CIT(A) deleted some additions but dismissed the assessee's claim for additional depreciation and the applicability of Section 115JB.
Held
The Tribunal held that the provisions of Section 115JB were not applicable to electricity companies governed by the Electricity (Supply) Act, 1948, prior to the 2012 amendment, based on judicial pronouncements. The issue of depreciation was set aside.
Key Issues
Whether Section 115JB is applicable to electricity companies governed by special statutes? Whether the additional depreciation claim should be considered in reassessment proceedings?
Sections Cited
143(3), 147, 148, 271(1)(c), 234B, 234C, 234D, 115JB, 69, 115JA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
ITA No: 1246/Ahd/2012 Assessment Year: 2003-04 Gujarat State Electricity Dy. Commissioner of Corporation Ltd., Income Tax, Sardar Patel Vidyut Vs Circle-1(1), Bhavan, Race Course Baroda Circle, Baroda PAN: AAACG6864F (Appellant) (Respondent) Assessee Represented: Shri M.K. Patel, Advocate Revenue Represented: Shri Rignesh Das, Sr.D.R. Date of hearing : 07-04-2025 Date of pronouncement : 19-06-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 23.03.2012 passed by the Commissioner of Income Tax (Appeals)-I, Baroda arising out of the reassessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2003-04.
A.Y. 2003-04 Page No 2 Gujarat State Electricity Corporation Ltd. vs. DCIT
Brief facts of the case is that the assessee is a Company engaged in Generation and Distribution of Electricity. For the Asst. Year 2003-04, assessee filed its Return of Income on 28-11-2003 declaring total income under the normal provisions of Income Act at Nil and u/s. 115JB at Rs. 30,83,44,248/-. The return was taken for scrutiny assessment and regular assessment order u/s. 143(3) was passed on 28-03-2006 determining the total income under the normal provisions at Nil and u/s. 115JB at Rs. 31,25,56,283/-. Thereafter the assessment was reopened by issuing a notice u/s. 148 of the Act dated 15-05-2007 which has resulted in making various additions of Rs. 81,30,03,000/- and net taxable income under the normal provisions of Act at Nil.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who deleted various additions made by the A.O., however the claim of difference in depreciation by way of additional ground raised by the assessee was dismissed by observing as follows:
“…..10. Appellant filed additional ground of appeal that the Id. AO erred in restricting claim of depreciation on fixed assets to Rs.1,24,37,88,0937- as against Rs. 1,31,10,13,350/- claimed in the revised return filed on 30.3.2005 without giving evidence thereon whatsoever. The additional ground of appeal was admitted on which no submissions were made by the appellant. As held by the Supreme Court in the case of CIT v Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC), in the reassessment proceedings, it is not open to an assessee to seek a review of a concluded item unconnected with escapement of income. Additional ground of appeal is dismissed.”
A.Y. 2003-04 Page No 3 Gujarat State Electricity Corporation Ltd. vs. DCIT
Aggrieved against the appellate order, assessee is in appeal before us raising the following Grounds of Appeal and Additional Grounds of Appeal: GROUNDS OF APPEAL: 1.0 The learned Commissioner of Income Tax (Appeal) erred in law and in facts has dismissed the additional ground relating to the claim of depreciation on Fixed Assets on the ground that an issue already concluded and not connected to the escapement of income cannot be admitted. The learned Commissioner of Income Tax (Appeal) failed to appreciate that the claim of depreciation was revised by the appellant well before the re-opening of the assessment and a Revised Return for the same was also filed on 30-03-2005. However, while completing the reassessment proceedings under section 147 of the I T Act, the claim was not considered and the depreciation claimed in the original return was only allowed. The additional ground was preferred merely because the same was left to be taken in the appeal filed against the present impugned assessment order. 2.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271(l)(c) of the I T Act. 3.0 The learned Commissioner of Income Tax (Appeals) erred in law and facts has dismissed the ground relating to the charging interest under section 234B, 234C and 234D of the Income Tax Act, 1961 on tax liability computed under section 115JB of the Income Tax Act, 1961. 4.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. ADDITIONAL GROUNDS OF APPEAL:
1. That, on facts, and in law, it be held that the provisions of section 115JB of the Act are not applicable to the appellant, as it is governed by the provisions of section 69 of the Electricity (Supply) Act, 1948.
2. That on facts and in law, it be held that the appellant is not liable to be taxed on “Book Profit” u/s. 115JB of the Act as per the law applicable for the year under consideration.
A.Y. 2003-04 Page No 4 Gujarat State Electricity Corporation Ltd. vs. DCIT
3. The appellant craves leave to add, alter, amend any ground of appeal
4. Heard rival submissions and perused the materials available on record including the Paper Book filed by the assessee. Regarding the claim of depreciation on fixed assets, the assessee has produced the Return of Income filed on 18-06-2007 in response to the 148 notice, wherein the claim of depreciation made in the return. Thus Ld. CIT(A) is not correct in denying the benefit to the assessee on account of reassessment, specifically when the assessee claimed in the Return of Income filed in response to the reassessment notice.
4.1. Similarly the Additional Grounds raised before us namely provisions of Section 115JB are not applicable to the assessee being an Electricity manufacturing company, as per the provisions of Section 69 of the Electricity (Supply) Act, 1948. This issue was considered by the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier Asst. Year 2002-03 and subsequent Asst. Year 2004-05 in & 2842/Ahd/2015 vide order dated 26-09-2024 wherein it was held as follows: “7.9. At this stage, we are inclined to discuss the legislative intent and the principle of "Substance Over Form". The primary purpose of introducing provision relating to MAT was to tax companies that, despite having significant book profits, paid minimal or no tax due to various deductions under the Act. However, the legislative framework before the 2012 amendment did not specifically include electricity companies because they prepared their accounts under specialized statutes and not under the Companies Act. This distinction was crucial in determining the applicability of MAT. The doctrine of substance over form typically emphasises that the economic reality of a transaction should take precedence over the legal form. However, in the context of Section 115JB, this principle does not override statutory exclusions. Various courts noted that the legislative intent was not to cover electricity companies under MAT prior to the amendment. They A.Y. 2003-04 Page No 5. Gujarat State Electricity Corporation Ltd. vs. DCIT emphasized that companies preparing accounts under other statutes were not meant to be brought under MAT unless explicitly stated by an amendment. 7.10. In case of A.Y. 2002-03, the CIT(A) confirmed the addition of prior period expenses to the book profits computed under Section 115JB, arguing that GSECL, as a company incorporated under the Companies Act, was bound by the MAT provisions. The CIT(A) emphasized the statutory differences between GSECL and other statutory corporations, such as the Maharashtra State Electricity Board and Kerala State Electricity Board, which were not companies under the Companies Act. However, in light of the Supreme Court's dismissal of the SLP in the case of Ajmer Vidyut Vitran Nigam Ltd., it is clear that the provisions of Section 115JB, as they stood before the amendment by the Finance Act, 2012, do not apply to companies like the assessee company, which are engaged in the generation of electricity and governed by the Electricity (Supply) Act, 1948. Therefore, the CIT(A)'s findings on this ground cannot be upheld. In case of A.Y. 2004-05, the CIT(A) upheld the addition of foreign exchange variations to the book profits under Section 115JB, stating that such liabilities had not crystallized within the relevant assessment year and were unascertained. However, considering the judicial pronouncements and the applicability of MAT provisions to electricity companies, this addition also lacks merit. Since Section 115JB did not apply to the assessee, the inclusion of foreign exchange variations for MAT calculation cannot be justified. 7.11. The CIT(A) dismissed the reliance on the Kerala High Court and Mumbai ITAT decisions on the grounds that those entities were statutory corporations and not companies under the Companies Act. However, the High Court of Rajasthan in Ajmer Vidyut Vitran Nigam Ltd., clarified that the MAT provisions under Section 115JB did not apply to electricity companies governed by specific statutes distinct from the Companies Act, regardless of their incorporation status. Thus, the CIT(A)'s rejection of these judicial precedents is not sustainable. 7.12. The CIT(A) referenced Section 115JA of the Act, highlighting exclusions under Clause (iv) for companies engaged in power generation, but argued that this exclusion was not extended to Section 115JB. However, we note that the legislative history and the interpretation provided by higher judicial authorities clearly establish that companies like GSECL (the assessee company) were not intended to be covered by MAT prior to the amendment in 2012. Consequently, the CIT(A)'s interpretation does not align with the legislative intent and judicial guidance. 7.13. In view of Hon'ble Supreme Court's decision affirming the High Court's ruling in Ajmer Vidyut Vitran Nigam Ltd., it is evident that the CIT(A)'s A.Y. 2003-04 Page No 6. Gujarat State Electricity Corporation Ltd. vs. DCIT reliance on the incorporation status under the Companies Act and interpretation of statutory provisions, although well-reasoned, cannot be sustained. The provisions of Section 115JB did not apply to electricity companies governed by distinct statutes before the amendment effective from 1-4-2013. Therefore, we allow the appeals of the assessee for both assessment years, and the additions to the book profits under Section 115JB are hereby deleted.”
Respectfully following the above decision of the Co-ordinate Bench of this Tribunal, both the issues namely claim of depreciation and applicability of Section 115JB are set aside to the file of Jurisdictional Assessing Officer to consider it on merits and pass consequential reassessment order by giving proper opportunity of hearing to the assessee.
In the result, the appeal filed by the Assessee is allowed for statistical purpose.