Case: A.P.Power Coordination Commit Vs. M/S Lanco Kondapalli Power Ltd

in view of the then prevailing tax regime under which income from such power projects stood exempted, is noticed only to be rejected. The entire phraseology used in Article 3.8 of the PPA leaves no manner of doubt that parties were aware that tax regime keeps changing and therefore any advance income tax payable for the income from the project only had to be reimbursed by the Board. As a successor of the Board the appellant cannot avoid the liability to reimburse advance income tax paid by the M/s. LANCO, on the ground that MAT was a new variety of tax concept introduced subsequently in which minimum tax became payable on the basis of mere book profits of even power generating companies. The argument that such tax is not on income from the project and therefore, not covered by Article 3.8 of the PPA is also found to be without any substance.35. The objective of levying MAT, as declared by the Income Tax Department is to bring into the tax net "Zero Tax Companies" which in spite of having earned substantial book profits and having paid handsome dividends, do not pay any tax due to various tax concessions and incentives provided under the Income Tax Law. It is no bodys case that in fact M/s. LANCO had not generated income from the project during the relevant years. The taxable income, of course, became amenable to MAT on account of Section 115JB. The Legislative changes in respect of MAT show that it came into force initially with effect from 1.4.1988 by introduction of Section 115J in the Income Tax Act, 1961 but this provision was amended to exempt power generating companies with effect from 1.4.1989 and from 1.4.1991 MAT became inapplicable because of deletion of Section 115J which was reintroduced with effect from 1.4.1997 by insertion of Section 115JA. But it was not made applicable to power generating companies till 31.3.2001. However, Section 115JA was withdrawn and Section 115JB was inserted with effect from 1.4.2001 to make MAT applicable to all targeted corporate entities including power generating companies. The submission on behalf of the appellant that Section 115JB is a tax not on profit but of different character is based on misconception. No doubt this Section has a special provision for payment of tax by certain companies on the basis of its book profit which is deemed to be the total income of the assessee and is subjected to income tax at a specified rate. The provisions of Sections 115JA and 115JB have been also construed as a self-contained code in Ajanta Pharma Limited v. CIT, 2010 (9) SCC 455 and in several other judgments as stand alone sections. But that does not change the basic nature of the provision. It remains a provision under the Income Tax Act and what is levied is income tax on the assessment of income as per such a special provision.36. Article 1.4 of the PPA provides inter alia that reference to any Law shall be construed as a reference to such Law as from time to time amended or re-enacted. This general provision in our view is sufficient to take care of all the taxes on income under Article 3.8 of the PPA notwithstanding different rates of income tax or other changes which may be brought about in the Income Tax Act. This view commends itself to us because such change in Law relating to Income Tax does not require any additional claim to be raised by the power generating companies. There is no specific amount - or rate which is to be reimbursed by the Board. Rather, the entire advance income tax payable requires reimbursement on account of Article 3.8 of the PPA provided of course that the accounts are maintained in the manner required by the Agreement so that tax is only on the basis of income from the project. No such dispute has been raised in the present case.37. The claim of the appellant that liability of MAT is on account of change in Law and therefore required M/s. LANCO to adopt the procedure for making claims under Article 11.4 of the PPA does not appeal to us for the aforesaid reasons. The entire stipulation in Article 11.4 of the PPA is in respect of additional or reduced expenditures or costs which have not been catered for and arise later due to change in Law. The burden on account of income tax as per Article 3.9 of the PPA cannot be treated as additional or reduced burden because the entire actual advance income tax payable for the project is required to be reimbursed by the Board. It is immaterial whether the income tax payable is high or low in any particular year. When there is already a special provision in respect of entire payable taxes on income under Article 3.8 of the PPA, that should have precedence over the general provisions in Article 11.4 of the PPA.38. We have also considered other relevant provisions of the Income Tax such as definition of income, total income, tax and find that they do not help the case of the appellant in any manner. Section 2(43) defines Tax to mean income tax chargeable under the provisions of Income Tax Act and Total Income has been defined with reference to Section 5 which enlarges the scope of total income not only to income received or accrued but also deemed to be received or deemed to be accrued in India (for a resident). Simply because the exemption earlier granted to power generating companies has been withdrawn so as to subject them to income tax liability under a special provision, cannot lead to any inference as suggested on behalf of the appellant that it is not an income tax but some other tax which is levied under Section 115JB of the Income Tax Act. Hence we hold the claim for MAT covered by Article 3.8 of the PPA and payable as such when requisite conditions stand satisfied.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. Although, we were taken through various other Articles of PPA but it is not imperative to reproduce all such provisions. Article 3.1 provides for capacity charge which is required to be computed as per Article 3.2 and is meant to be paid by the Board. This is in respect of the Cumulative Available Energy provided by the Project in respect of any tariff year, upto (but not exceeding) an amount calculated on the basis of Prescribed Plant Load factor. Since the issue of capacity charge is not required to be addressed by us on merits, further details need not detain us. Clause 3.8 has been read over again and again because it is of immense significance in deciding the issue relating to MAT. Article 5 contains various sub-articles relating to billing and payment. They provide for monthly tariff bills which are payable by the Board or the licensee on the Due Date of Payment. The supplementary bills are covered by Article 5.5. They cover different items and are required to be supported by supporting data. Such bills are also payable on the Due Date of Payment, except the supplementary bill for taxes on income which is to be submitted at least 30 days prior to the time when the income tax is required to be paid by the generating company. Such bill is payable by the Board within 25 days of presentation or at least 5 days before the date on which the tax is required to be paid by the company, whichever is later.12. Article 5.7 relates to billing disputes and it refers to the provisions of Article 14 which governs Arbitration including Informal Dispute Resolution. Article 11 caters to the effects of Change in Law upon the rights and liabilities of the parties. This has assumed relevance in the present context on account of stand taken by the appellant that MAT does not fall under Article 3.8 governing claims for Taxes on Income but under Article 11.4 which provides an altogether different procedure for making claim for additional costs by the company on account of any Change in Law etc. In this context it may usefully be noted that Article 1 of PPA contains definitions for the purposes of the agreement. Article 1.2 adopts definition of several terms as defined in the Indian Electricity (Supply Act) 1948 and set out in Schedule B to the Agreement. Article 1.4 contains various general provisions such as - unless the context otherwise requires, the singular shall include plural etc. and vice versa and that " .......a reference to any Law shall be construed as a reference to such Law as from time to time amended or re-enacted.It has already been noted that the claim for reimbursement of MAT for the period 2001-2005 was rejected by the Commission on the ground of limitation and after impugned order by APTEL reversing such order, that claim stands remitted to the Commission for passing a consequential order. The claims for other periods have been allowed by the Commission. On account of our view indicated earlier upholding the order of APTEL on the issue of limitation, the claim of MAT for 2001-2005 cannot be treated as barred by limitation. Thus the claim of MAT for entire concerned period that is from 2001-2012 will be covered by our decision on Merits of Claim relating to MAT. The argument of Mr. Giri that MAT cannot be covered by the provisions in Article 3.8 of the PPA providing for claims for taxes on income because the appellant had not foreseen such eventuality in view of the then prevailing tax regime under which income from such power projects stood exempted, is noticed only to be rejected. The entire phraseology used in Article 3.8 of the PPA leaves no manner of doubt that parties were aware that tax regime keeps changing and therefore any advance income tax payable for the income from the project only had to be reimbursed by the Board. As a successor of the Board the appellant cannot avoid the liability to reimburse advance income tax paid by the M/s. LANCO, on the ground that MAT was a new variety of tax concept introduced subsequently in which minimum tax became payable on the basis of mere book profits of even power generating companies. The argument that such tax is not on income from the project and therefore, not covered by Article 3.8 of the PPA is also found to be without any substance.35. The objective of levying MAT, as declared by the Income Tax Department is to bring into the tax net "Zero Tax Companies" which in spite of having earned substantial book profits and having paid handsome dividends, do not pay any tax due to various tax concessions and incentives provided under the Income Tax Law. It is no bodys case that in fact M/s. LANCO had not generated income from the project during the relevant years. The taxable income, of course, became amenable to MAT on account of Section 115JB. The Legislative changes in respect of MAT show that it came into force initially with effect from 1.4.1988 by introduction of Section 115J in the Income Tax Act, 1961 but this provision was amended to exempt power generating companies with effect from 1.4.1989 and from 1.4.1991 MAT became inapplicable because of deletion of Section 115J which was reintroduced with effect from 1.4.1997 by insertion of Section 115JA. But it was not made applicable to power generating companies till 31.3.2001. However, Section 115JA was withdrawn and Section 115JB was inserted with effect from 1.4.2001 to make MAT applicable to all targeted corporate entities including power generating companies. The submission on behalf of the appellant that Section 115JB is a tax not on profit but of different character is based on misconception. No doubt this Section has a special provision for payment of tax by certain companies on the basis of its book profit which is deemed to be the total income of the assessee and is subjected to income tax at a specified rate. The provisions of Sections 115JA and 115JB have been also construed as a self-contained code in Ajanta Pharma Limited v. CIT, 2010 (9) SCC 455  and in several other judgments as stand alone sections. But that does not change the basic nature of the provision. It remains a provision under the Income Tax Act and what is levied is income tax on the assessment of income as per such a special provision.36. Article 1.4 of the PPA provides inter alia that reference to any Law shall be construed as a reference to such Law as from time to time amended or re-enacted. This general provision in our view is sufficient to take care of all the taxes on income under Article 3.8 of the PPA notwithstanding different rates of income tax or other changes which may be brought about in the Income Tax Act. This view commends itself to us because such change in Law relating to Income Tax does not require any additional claim to be raised by the power generating companies. There is no specific amount - or rate which is to be reimbursed by the Board. Rather, the entire advance income tax payable requires reimbursement on account of Article 3.8 of the PPA provided of course that the accounts are maintained in the manner required by the Agreement so that tax is only on the basis of income from the project. No such dispute has been raised in the present case.37. The claim of the appellant that liability of MAT is on account of change in Law and therefore required M/s. LANCO to adopt the procedure for making claims under Article 11.4 of the PPA does not appeal to us for the aforesaid reasons. The entire stipulation in Article 11.4 of the PPA is in respect of additional or reduced expenditures or costs which have not been catered for and arise later due to change in Law. The burden on account of income tax as per Article 3.9 of the PPA cannot be treated as additional or reduced burden because the entire actual advance income tax payable for the project is required to be reimbursed by the Board. It is immaterial whether the income tax payable is high or low in any particular year. When there is already a special provision in respect of entire payable taxes on income under Article 3.8 of the PPA, that should have precedence over the general provisions in Article 11.4 of the PPA.38. We have also considered other relevant provisions of the Income Tax such as definition of income, total income, tax and find that they do not help the case of the appellant in any manner. Section 2(43) defines Tax to mean income tax chargeable under the provisions of Income Tax Act and Total Income has been defined with reference to Section 5 which enlarges the scope of total income not only to income received or accrued but also deemed to be received or deemed to be accrued in India (for a resident). Simply because the exemption earlier granted to power generating companies has been withdrawn so as to subject them to income tax liability under a special provision, cannot lead to any inference as suggested on behalf of the appellant that it is not an income tax but some other tax which is levied under Section 115JB of the Income Tax Act. Hence we hold the claim for MAT covered by Article 3.8 of the PPA and payable as such when requisite conditions stand