2020 (11) TMI 486 - HC - Income Tax

MAT computations u/s 115JB on banking companies - HELD THAT - First substantial question of law has already been answered against the revenue in M/S. ING VYSYA BANK LIMITED 2020 (1) TMI 1116 - KARNATAKA HIGH COURT . The aforesaid statement made by learned counsel for the assessee could not be disputed by learned counsel for the revenue. First substantial question of law framed by this Court is answered against the revenue. Deduction u/s 36(1)(vii) - bad debts - 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 - Second substantial question of law has also been answered against the revenue in M/S. VIJAYA BANK 2014 (10) TMI 1015 - KARNATAKA HIGH COURT -The aforesaid fact also could not be disputed by learned counsel for the revenue. Second substantial question of law is also answered against the revenue and in favour of the assessee. Depreciation on Held to Maturity category investments - Whether the same is notional in nature and against the RBI guidelines for valuation of securities? - HELD THAT - Substantial question of law is also been answered against the revenue in the case of KARNATAKA BANK LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 2(1) 2013 (7) TMI 656 - KARNATAKA HIGH COURT . The aforesaid aspect could not be disputed by learned counsel for the revenue. - Decided in favour of assessee. Deduction u/s 36(1)(viii) - Whether assessee is eligible for deduction u/s 36(1)(viii) even though the assessee is not an eligible entity under the provisions of the Act prior to amendment w.e.f. 01.04.2008? - HELD THAT - The benefit of deduction under Section 36(1)(viii) of the Act was available to a Financial Corporation, which included the Public Company and Government Company. The explanation appended to clause (viii) further specifies that expression Public Company shall have the meaning assigned to it under Section 3 of the Companies Act, 1956 and the expression Government Company shall have the meaning assigned to it under Section 617 of the Companies Act, 1956. Admittedly, Vijaya Bank is not a Private Company. Therefore, the same fulfills the requirement of Section 3 of the Companies Act, 1956 and is a Public Company. It is also pertinent to note that 51% of the shares of Vijaya Bank are held by the Government of India and therefore, the same is a Government Company within the meaning of Section 617 of the Companies Act, 1956. Therefore, the assessee is squarely covered within the meaning of expression Financial Corporation and is entitled to benefit of deduction under Section 36(1)(viii) of the Act. For the aforementioned reasons, the fourth substantial question of law is answered against the revenue and in favour of the assessee. Disallowance made under section 14A - HELD THAT - The aforesaid question is also answered against the revenue by a Bench of this Court in M/S. SYNDICATE BANK 2020 (1) TMI 1141 - KARNATAKA HIGH COURT . The aforesaid fact could not be disputed by learned counsel for the revenue. - Decided in favour of assessee.

Summary

Issues:
1. Minimum Alternate Tax liability of Banking companies under Section 115JB of the Income Tax Act.
2. Eligibility of a bank for deduction under Section 36(1)(vii) for bad debts write off.
3. Claiming depreciation on 'Held to Maturity' category investments against RBI guidelines.
4. Eligibility of a bank for deduction under Section 36(1)(viii) of the Act.
5. Disallowance made under Section 14A of the Act.

Analysis:

1. The appeal addressed the issue of whether Banking companies are liable for Minimum Alternate Tax under Section 115JB of the Income Tax Act. The Tribunal held that Banking companies are not liable for MAT, contrary to the revenue's claim. This decision was supported by previous judgments and was in favor of the assessee.

2. The eligibility of a bank for deduction under Section 36(1)(vii) for bad debts write off was also contested. The Tribunal allowed the deduction, stating that the provision for bad debts could be claimed as a deduction even if bad debts write off was not debited in the profit and loss account. This decision was in favor of the assessee based on previous rulings.

3. The issue of claiming depreciation on 'Held to Maturity' category investments, despite being notional and against RBI guidelines, was examined. The Tribunal ruled in favor of the assessee, allowing depreciation on such investments. This decision aligned with previous judgments and was against the revenue's contentions.

4. The eligibility of the assessee for deduction under Section 36(1)(viii) of the Act was a crucial aspect. The revenue argued that prior to the 2008 amendment, Banking companies were not entitled to this deduction. However, the court found that the assessee, a Public and Government Company fulfilling the requirements of the Companies Act, fell under the category of 'Financial Corporation' and was eligible for the deduction. This decision was based on the interpretation of relevant provisions and previous rulings.

5. Lastly, the disallowance made under Section 14A of the Act was challenged. The Tribunal had deleted the disallowance, which was upheld in this appeal as well. The court found in favor of the assessee, based on previous judgments and the specific circumstances of the case.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decisions on all issues raised. The judgments were based on thorough analysis of legal provisions, precedents, and factual circumstances, resulting in rulings favoring the assessee in each instance.