9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 625 - AT - Income TaxAdjustment of Bad Debts & diminution in value of investments from computation of book profits u/s 115JA - Held that - We find that Section 115JA of the Act is a special provision introduced to the Income Tax Act by the Finance (No.2) Act, 1996 w.e.f. 01/04/1997 and as per subsection (1) of the said provision, in the case of a company whose total income computed under the Act is less than 30% of its book profits, then the total income chargeable to tax in the relevant previous year shall be deemed to be an amount equal to 30% of such book profit. Sub-section (2) of the said provision provides that the company referred to in subsection (1) of Section 115JA must prepare a profit & Loss Account in accordance with the provisions of Parts II and Part III of the Schedule VI of the Companies Act, 1956. The ITAT Mumbai benches in the case of Krung Thai Bank PCL Vs. JCIT 2010 (9) TMI 18 - ITAT, MUMBAI have held that the provisions contained in Section 115JB, which in other words is also known as Minimum Alternative Tax MAT provisions, are not applicable to banking companies since they are not required to prepare a Profit & Loss Account in accordance with the provisions of Parts II and Part III of the Schedule VI of the Companies Act, 1956. We hold that since the provisions of Section 115JA are not applicable to the assessee. No additional interest has been computed u/s 234D in reassessment proceedings and the same did not arise out of reassessment proceedings. Sale of shares - treated as capital gain and not as business income chargeable to tax u/s. 28 - Held that - We find that the assessee is consistently following such classification and treatment of income from investment since past many years. The revenue has nowhere disputed that permanent investment were carried at cost price. Further, upon perusal of the order of Ld. CIT(A) for AY 2002-03, we find that the same issue arose in that year also and Ld. CIT(A) upheld the stand of the assessee and concluded that the income from investment was rightly offered under the head capital gains. It is noteworthy that the revenue, in its appeal for AY 2002-03, accepted the stand of Ld. CIT(A) and did not prefer any further appeal qua this issue. Therefore, following the rule of consistency, we see no reason to disturb the findings of Ld. CIT(A) in this year and therefore, inclined to dismiss revenue s appeal on this ground. Resultantly, the revenue s appeal stands dismissed. Interest u/s 234D on the premises that the quantum assessment order u/s 143(3) read with section 147 did not contain any specific directions for the same. However, it is settled legal position that charging of interest is mandatory and consequential in nature and therefore, no specific direction to charge the same is required in the quantum assessment order. So far as the quantum is concerned, we find that the assessee has been charged interest u/s 234D pursuant to original quantum assessment order passed u/s 143(3). We have already dismissed revenue s appeal for this year and therefore, practically, the assessee is not saddled with any further additions in reassessment proceedings. Hence, this ground raised by the assessee also becomes infructuous and hence, dismissed in limine
Issues Involved:
1. Applicability of Section 115JA to a banking company. 2. Imposition of interest under Section 234D. 3. Classification of income from sale of investments as capital gains or business income. Issue-wise Detailed Analysis: 1. Applicability of Section 115JA to a Banking Company: The primary issue was whether the provisions of Section 115JA of the Income Tax Act, 1961, which mandates companies to prepare a Profit & Loss account in accordance with Parts II and III of Schedule VI of the Companies Act, 1956, apply to a banking company. The assessee argued that as a scheduled bank, it was not required to prepare its Profit & Loss account under these provisions, thus Section 115JA was inapplicable. This argument was supported by several judicial pronouncements, including the ITAT Mumbai's decision in Krung Thai Bank PCL Vs. JCIT and the assessee's own case for AY 2000-01. The Tribunal upheld this view, stating that the provisions of Section 115JA are not applicable to the assessee, a banking company. Consequently, the revenue’s appeal was dismissed, and the assessee’s cross objections were partly allowed on legal grounds. 2. Imposition of Interest Under Section 234D: The second issue revolved around the imposition of interest under Section 234D for AY 2002-03. The CIT(A) had held that interest under Section 234D could not be charged for AY 2002-03, relying on the decision in ITO Vs. Ekta Promoters Private Limited. However, the Tribunal noted that the original quantum assessment order was passed after the introduction of Section 234D, making the section applicable to the assessee. The Tribunal referred to the Bombay High Court's decision in CIT Vs. Indian Oil Corporation Ltd., which clarified that amendments to the Act apply to pending proceedings. Therefore, the Tribunal reversed the CIT(A)'s decision and allowed the revenue’s appeal, concluding that interest under Section 234D was correctly charged. 3. Classification of Income from Sale of Investments: The third issue concerned whether the income from the sale of shares by the assessee bank should be treated as capital gains or business income for AY 2003-04. The revenue contended that all investments by banks should be treated as current assets, and profits from their sale should be classified as business income. However, the assessee argued that it had consistently classified its investments into current and permanent categories, treating the latter as capital assets. The CIT(A) agreed with the assessee, noting that the department had accepted this classification in earlier years. The Tribunal upheld the CIT(A)’s decision, emphasizing the consistency in the assessee's practice and the department's acceptance in previous years. Consequently, the revenue’s appeal was dismissed. Conclusion: - The Tribunal dismissed the revenue’s appeals regarding the applicability of Section 115JA and the classification of income from the sale of investments. - The Tribunal allowed the revenue’s appeal concerning the imposition of interest under Section 234D. - The cross objections by the assessee were dismissed as infructuous. Final Order: - ITA No. 8581/M/2010, ITA No. 910/M/2011 & CO No. 43/M/2013 were dismissed. - CO No. 153/M/2012 was partly allowed. - ITA No. 8582/M/2010 was allowed. Order pronounced in the open court on 04th October, 2017.
|
