Section 115JB and banking companies: MAT did not apply where accounts were not prepared under the Companies Act framework.

Section 115JB applies only where the company's book profit is computed from accounts prepared in the manner required by section 115JB(2), linked to section 211(2) of the Companies Act, 1956. Banking companies, being permitted to prepare accounts under the Banking Regulation Act, 1949 and not under Part II and Schedule VI of the Companies Act, 1956, were treated as outside that framework for the relevant year. The later insertion of Explanation 3 by the Finance Act, 2012 clarified the position prospectively from 1 April 2013. On that statutory scheme, section 115JB did not apply to the assessee bank for assessment year 2002-03.

---

---

Issues: Whether section 115JB of the Income-tax Act, 1961 applies to a banking company whose profit and loss account is not prepared in accordance with Part II and Schedule VI to the Companies Act, 1956.

Analysis: Section 115JB fastens liability on a company by reference to book profit computed from a profit and loss account prepared in the manner prescribed by section 115JB(2). Banking companies are exempted by the proviso to section 211(2) of the Companies Act, 1956 from preparing accounts under Part II of Schedule VI and instead prepare accounts under the Banking Regulation Act, 1949. The legislative change introduced by Explanation 3 to section 115JB by the Finance Act, 2012 clarified that the provision applies to companies to which section 211(2) applies, and the Notes on Clauses stated that the amendment takes effect from 1 April 2013. On the statutory scheme and the cited precedents, banking companies not governed by section 211(2) of the Companies Act, 1956 were outside the ambit of section 115JB for the assessment year under consideration.

Conclusion: Section 115JB was held not applicable to the assessee bank for the assessment year 2002-03.

---