2011 (8) TMI 1112 - AT - Income Tax

Bank exempt from Minimum Alternate Tax under Income-tax Act, 1961

The Tribunal ruled in favor of the bank, holding that it is exempt from the provisions of section 115JB of the Income-tax Act, 1961. The bank, not ... Minimum Alternate Tax under section 115JB - Preparation of profit and loss account in accordance with Parts II and III of Schedule VI to the Companies Act - Applicability of accounts prepared under the Banking Regulation Act versus the Companies ActMinimum Alternate Tax under section 115JB - Preparation of profit and loss account in accordance with Parts II and III of Schedule VI to the Companies Act - Accounts prepared under the Banking Regulation Act - Whether the provisions of section 115JB are applicable to the bank which prepares its final accounts under the Banking Regulation Act and not in accordance with Parts II and III of Schedule VI to the Companies Act. - HELD THAT: - The Tribunal examined whether MAT computation under section 115JB can be invoked where the assessee-bank is not required to prepare its profit and loss account as per Parts II and III of Schedule VI to the Companies Act. The Tribunal observed that sub-section (2) of section 115JB makes the starting point of computation the result shown by a profit and loss account prepared in accordance with Parts II and III of Schedule VI. For banking companies, however, the proviso to section 211(2) of the Companies Act exempts them from applying Schedule VI and requires final accounts to be prepared under the Banking Regulation Act. Following the reasoning of the Tribunal in Krung Thai Bank PCL which held that section 115JB applies only where Schedule VI preparation is mandatory, and having regard to rulings of authorities for advance ruling to similar effect [The Timken Company, In re ; Praxair Pacific Ltd In re ], the Tribunal concluded that the statutory condition for invoking section 115JB is absent in the case of a bank whose accounts are governed by the Banking Regulation Act. Consequently the orders of the lower authorities applying MAT were set aside and the appeal was allowed on this ground. [Paras 7, 8, 9]The bank is not required to prepare its profit and loss account in accordance with Parts II and III of Schedule VI to the Companies Act and therefore section 115JB (MAT) does not apply to the assessee for the relevant assessment year; the orders of the lower authorities are set aside and the appeal is allowed in part.Final Conclusion: Appeal allowed in part: MAT under section 115JB held not applicable to the assessee-bank for assessment year 2000- 2001 because its final accounts are prepared under the Banking Regulation Act and not in accordance with Parts II and III of Schedule VI to the Companies Act. Issues:1. Applicability of section 115JB of the Income-tax Act, 1961 to a bank not classified as a company under the Companies Act, 1956.Analysis:The appeal was filed against an order of the Commissioner of Income Tax (Appeals)-III, Chennai for the assessment year 2000-2001. The main contention was regarding the applicability of section 115JB of the Income-tax Act, 1961 to the bank, which argued that it was not a company under the Companies Act, 1956. The Assessing Officer relied on provisions of the Companies Act and a decision of the Madras High Court to support the applicability of section 115JB to the bank.On appeal, the CIT(A) rejected the bank's claim, stating that every assessee being a company is required to prepare its profit and loss account in accordance with the provisions of the Companies Act, 1956. The CIT(A) differentiated the present case from a previous case involving an Electricity Board, emphasizing that the bank, in this instance, falls under different circumstances. The CIT(A) dismissed the bank's argument that section 115JB should not apply to it.During the proceedings, the bank reiterated its submissions, while the Departmental Representative supported the CIT(A)'s order. The Tribunal considered the bank's argument and referred to a Mumbai Tribunal decision and rulings by the authority for advance ruling in similar cases involving foreign companies without a physical presence in India. The Tribunal concluded that the bank, not required to prepare its accounts as per the Companies Act, is exempt from the provisions of section 115JB. Therefore, the Tribunal set aside the lower authorities' orders and partially allowed the bank's appeal, ruling that the bank is not subject to the provisions of Minimum Alternate Tax (MAT) under section 115JB.In conclusion, the Tribunal found in favor of the bank, holding that the bank, not required to prepare its profit and loss account in accordance with the Companies Act, is exempt from the provisions of section 115JB. The appeal was partially allowed in favor of the bank.