2023 (11) TMI 1022 - AT - Income Tax

Applicability of MAT Provisions on assessee bank - corresponding new bank - case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a banking company , i.e., it is a corresponding new bank - HELD THAT - On going through the above decision of coordinate Bench in 2022 (3) TMI 134 - ITAT BANGALORE , the issue has been decided as stating provisions of sec. 51 of the Act specifically states that only certain provisions of BR Act are applicable to Corresponding new bank . We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec. 51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of banking company , provisions of sec. 211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh - Thus we remit this issue also to the file of CIT(A) for fresh consideration and decision as per law in the same terms. Deduction u/s. 36(1)(viia) - advances made and not advances outstanding as on 31 st March, 2014 and deduction u/s. 36(1)(viia) is only on the incremental advances - HELD THAT - We note that the issue of allowance u/s. 36(1)(viia) has been settled in the case of CIT, LTU v. Canara Bank 2023 (1) TMI 291 - KARNATAKA HIGH COURT calculating average aggregate advances of rural branches under section 36(1)(viia), both advance outstanding as well as fresh advances are to be considered. Addition to book profit u/s. 115JB on provisions / write off - Since the issue regarding the applicability of section 115JB of the Act is restored to the files of the CIT(A), the additions made u/s 115JB of the Act by the A.O. and sustained by the CIT(A) is also restored to the files of the CIT(A) for examining of the same afresh.

Summary

Issues Involved:
1. Re-opening of the assessment under Section 147.
2. Disallowance of deduction under Section 36(1)(viia).
3. Applicability of provisions of Section 115JB (MAT) to the appellant bank.
4. Principles of natural justice.

Summary:

1. Re-opening of the assessment under Section 147:
The appellant challenged the re-opening of the assessment under Section 147 on multiple grounds, including it being a mere change of opinion, based on existing material, and without proper approval. The Tribunal did not provide a detailed analysis on this issue as the appellant's representative requested to keep the legal issue open.

2. Disallowance of deduction under Section 36(1)(viia):
The Tribunal noted that the issue of allowance under Section 36(1)(viia) has been settled by the Karnataka High Court in the case of CIT, LTU v. Canara Bank, where it was held that while calculating average aggregate advances of rural branches, both advance outstanding and fresh advances are to be considered. Consequently, the Tribunal allowed the ground in favor of the appellant, holding that the disallowance calculated by the AO was incorrect.

3. Applicability of provisions of Section 115JB (MAT) to the appellant bank:
The Tribunal examined whether the provisions of Section 115JB are applicable to the appellant bank, which is constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and not registered under the Companies Act. The Tribunal referred to its earlier decision in the appellant's own case for AY 2013-14, where the issue was remitted back to the CIT(A) for fresh consideration. The Tribunal followed the same approach and remitted the issue back to the CIT(A) for fresh consideration, noting that the CIT(A) should examine the effect of provisions of Section 51 of the Banking Regulation Act on the appellant.

4. Principles of natural justice:
The appellant argued that the CIT(A) passed the impugned order without affording an opportunity of hearing through VC, which was specifically requested by the appellant. The Tribunal did not provide a separate ruling on this issue but remitted the main issues back to the CIT(A) for fresh consideration, implicitly addressing the need for a fair hearing.

Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, remitting the issues regarding the applicability of Section 115JB and the additions to book profit under Section 115JB back to the CIT(A) for fresh consideration. The disallowance under Section 36(1)(viia) was decided in favor of the appellant, following the jurisdictional High Court's ruling.