2020 (12) TMI 402 - HC - Income Tax

MAT application u/s 115JB on Banking companies - assessee bank is eligible for deduction under section 36(1)(vii) of the Act when the assessee has not debited any bad debts write off in the profit and loss account and only the provision for bad debts (prudential write off) has been claimed as deduction in the computation of income as bad debt write off? - HELD THAT - In view of the aforesaid submission and for the reasons assigned in the judgment 2020 (11) TMI 486 - KARNATAKA HIGH COURT the substantial questions of law involved in this appeal are answered against the revenue and in favour of the assessee.

Summary

Issues:
1. Liability of banking companies for Minimum Alternate Tax (MAT) under section 115JB of the Income Tax Act, 1961.
2. Eligibility of the assessee bank for deduction under section 36(1)(vii) of the Act regarding bad debts write off.

Analysis:
1. The appeal before the Karnataka High Court involved the question of whether banking companies are liable for Minimum Alternate Tax (MAT) under section 115JB of the Income Tax Act. The Court admitted the appeal to consider this substantial question of law. However, during the hearing, the assessee pointed out that a previous judgment dated 06.11.2020 in ITA No.140/2016 had already answered this question against the revenue. The revenue did not contest this submission. Consequently, the Court held that the substantial question of law on the liability of banking companies for MAT had been answered against the revenue in the previous judgment. Therefore, the appeal on this issue failed, and the Court dismissed it.

2. The second issue in the appeal was related to the eligibility of the assessee bank for deduction under section 36(1)(vii) of the Act concerning bad debts write off. The Court considered whether the assessee, who had not debited any bad debts write off in the profit and loss account but had claimed a provision for bad debts as a deduction, was eligible for the deduction. The Court referred to the judgment dated 06.11.2020 in ITA No.140/2016, where similar issues were addressed. Based on the reasons assigned in the previous judgment, the Court held that the substantial question of law on the eligibility of the assessee bank for the deduction under section 36(1)(vii) was answered against the revenue and in favor of the assessee. Consequently, the appeal on this issue also failed, and the Court dismissed it.

In conclusion, the Karnataka High Court, comprising Hon'ble Mr. Justice Alok Aradhe and Hon'ble Mr. Justice H.T. Narendra Prasad, dismissed the appeal filed by the revenue. The Court held that banking companies are not liable for Minimum Alternate Tax under section 115JB of the Income Tax Act and that the assessee bank is eligible for deduction under section 36(1)(vii) regarding bad debts write off, based on the judgments delivered in a previous case.