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2015 (12) TMI 300 - AT - Income TaxMAT applicability - Whether the provisions of Sec. 115JB of the Income Tax Act, 1961 could be made applicable to a bank when their profit and loss account is not prepared in accordance with Part II & Schedule VI to Companies Act, 1956? - Held that - The provisions of section 115JB of the act are not applicable in the case of the assessee and the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012 - Decided in favour of assessee.
Issues Involved:
1. Applicability of Section 115JB of the Income Tax Act, 1961 to a banking company when their profit and loss account is not prepared in accordance with Part II & Schedule VI to the Companies Act, 1956. Detailed Analysis: Issue 1: Applicability of Section 115JB to a Banking Company Arguments by the Assessee: - The assessee is a nationalized bank, not a company under the Companies Act, 1956, but given the status of a company for income tax purposes. - Section 115JB of the Income Tax Act overrides other provisions and should apply only to companies as defined under the Companies Act, 1956. - The profit and loss account must be prepared in accordance with Part II of Schedule VI of the Companies Act, 1956, which is not applicable to the assessee. - The assessee prepares its accounts as per the Banking Regulation Act, which mandates different accounting norms compared to the Companies Act, 1956. - The amendment in Section 115JB, effective from 1.4.2013, is prospective and not retrospective. - The expression "for the removal of doubts" in Explanation 3 to Section 115JB should not be construed as clarificatory and thereby giving retrospective effect, supported by the Supreme Court decision in Vatika Township case. Arguments by the Revenue: - The assessee, being a nationalized bank, is deemed to be an Indian company under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. - Section 115JB(2) refers to the Companies Act for the limited purpose of computation of book profits, making it applicable to banking companies. - Explanation 3 to Section 115JB, applicable from 1.4.2012, should be construed as retrospective. Tribunal's Findings: - Section 115JB(2) mandates that the profit and loss account be prepared in accordance with the Companies Act, 1956, which is not applicable to the assessee as it follows the Banking Regulation Act. - Explanation 3 to Section 115JB clarifies that only entities registered under the Companies Act, 1956, are covered, excluding the assessee. - Legislative intent behind MAT provisions was to tax companies declaring dividends while paying no or lesser tax, which does not apply to banking companies. - The Tribunal relied on various judicial precedents, including decisions in the cases of Kurung Thai Bank, Kerala State Electricity Board, and Maharashtra State Electricity Board, which held that Section 115JB does not apply to entities not required to prepare accounts under the Companies Act, 1956. Conclusion: - The provisions of Section 115JB are not applicable to the assessee, a banking company, for the assessment year 2002-03. - The amendment to Section 115JB by the Finance Act 2012, effective from 1.4.2013, is prospective and does not apply retrospectively. Result: - The appeal of the assessee on the issue of applicability of Section 115JB is allowed, complying with the directions of the Honorable High Court of Calcutta. Order Pronouncement: - The order was pronounced in open court on 27/11/2015.
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