2014 (2) TMI 1071 - AT - Income Tax

Reopening of assessment u/s 147 of the Act - Held that - The assessment was reopened within four years and there is specific findings that there was under assessment of income in the case of the assessee - This is nothing on record to suggest that the reopening was due to change of opinion thus, the order of the CIT(Appeals) on this issue is confirmed Decided against Assessee. Application of provisions of section 115JB of the Act - Levy of minimum alternate tax Held that - As decided in assessee s own case for the previous year, it has been held that the provisions of s. 115JB can only come into play when the assessee is required to prepare its P&L a/c in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act - The starting point of computation of MAT under s. 115JB is the result shown by such a P&L a/c. In the case of banking companies, however, the provisions of Sch. VI are not applicable in view of exemption set out under proviso to s. 211(2) of the Companies Act - The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act - The provisions of s. 115JB cannot thus be applied to the case of a banking company - the provisions of Sec.115JB could not be applied on the assessee Decided in favour of Assessee. Interest on securities whether the interest on securities are to be taxed on due basis or on accrual basis - Held that - The decision in Tamilnadu Mercantile Bank Limited 2007 (1) TMI 128 - MADRAS High Court followed - the interest on securities can be taxed only on due basis - When the principal amount involved in the instrument itself is redeemable only on due date, there is no reason to hold that the interest element would be generated on accrual basis - The interest also goes along with the principal amount in the case of securities Decided against Revenue.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Applicability of section 115JB and computation of minimum alternate tax.
3. Taxation of interest on securities on due basis or accrual basis.

Analysis:

Issue 1: Reopening of Assessment
The first issue involved in the judgment pertains to the reopening of assessment under section 147 of the Income Tax Act. The Tribunal considered cross-appeals by the assessee and the Revenue against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2002-03. The assessee challenged the reopening of assessment, arguing that the original assessment had under-assessed income chargeable to tax. The Tribunal upheld the reopening, stating that it was done within the specified time frame of four years and was not based on a change of opinion. The Tribunal confirmed the order of the CIT(Appeals) on this issue, dismissing the grounds raised by the assessee.

Issue 2: Applicability of Section 115JB
The second issue revolved around the applicability of section 115JB and the computation of minimum alternate tax. The assessee raised additional grounds challenging the application of section 115JB, citing judgments by the ITAT Mumbai and ITAT Chennai in similar cases. The Tribunal admitted the additional grounds as a pure question of law, following a precedent in the assessee's own case for earlier assessment years. The Tribunal allowed the ground of appeal raised by the assessee, holding that the provisions of section 115JB could not be applied to the assessee.

Issue 3: Taxation of Interest on Securities
The final issue addressed in the judgment concerned the taxation of interest on securities on a due basis or accrual basis. The Revenue raised a ground regarding the taxation of interest on securities, which had been considered in the assessee's own case for a previous assessment year. The Tribunal dismissed the ground raised by the Revenue, following the decision in the earlier case that interest on securities should be recognized only on a due basis. The Tribunal held that in the case of government securities, interest could be recognized only on the due date and not on an accrual basis, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, pronouncing the order on February 17, 2014, in Chennai.