Banking company MAT provisions under section 115JB require fresh consideration for corresponding new bank status determination

ITAT Bangalore remitted the case to CIT(A) for fresh consideration regarding MAT provisions applicability on corresponding new bank versus banking company. The tribunal found CIT(A) erred by not considering section 51 of BR Act which limits applicable provisions to corresponding new banks. The court clarified that section 36(1)(viia) deduction calculation must include both outstanding and fresh advances per Karnataka HC precedent in Canara Bank case. All related additions under section 115JB were also restored to CIT(A) for re-examination following the MAT applicability determination.

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Issues Involved:
1. Re-opening of the assessment under Section 147.
2. Disallowance of deduction under Section 36(1)(viia).
3. Applicability of provisions of Section 115JB (MAT) to the appellant bank.
4. Principles of natural justice.

Summary:

1. Re-opening of the assessment under Section 147:
The appellant challenged the re-opening of the assessment under Section 147 on multiple grounds, including it being a mere change of opinion, based on existing material, and without proper approval. The Tribunal did not provide a detailed analysis on this issue as the appellant's representative requested to keep the legal issue open.

2. Disallowance of deduction under Section 36(1)(viia):
The Tribunal noted that the issue of allowance under Section 36(1)(viia) has been settled by the Karnataka High Court in the case of CIT, LTU v. Canara Bank, where it was held that while calculating average aggregate advances of rural branches, both advance outstanding and fresh advances are to be considered. Consequently, the Tribunal allowed the ground in favor of the appellant, holding that the disallowance calculated by the AO was incorrect.

3. Applicability of provisions of Section 115JB (MAT) to the appellant bank:
The Tribunal examined whether the provisions of Section 115JB are applicable to the appellant bank, which is constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, and not registered under the Companies Act. The Tribunal referred to its earlier decision in the appellant's own case for AY 2013-14, where the issue was remitted back to the CIT(A) for fresh consideration. The Tribunal followed the same approach and remitted the issue back to the CIT(A) for fresh consideration, noting that the CIT(A) should examine the effect of provisions of Section 51 of the Banking Regulation Act on the appellant.

4. Principles of natural justice:
The appellant argued that the CIT(A) passed the impugned order without affording an opportunity of hearing through VC, which was specifically requested by the appellant. The Tribunal did not provide a separate ruling on this issue but remitted the main issues back to the CIT(A) for fresh consideration, implicitly addressing the need for a fair hearing.

Conclusion:
The Tribunal partly allowed the appeals for statistical purposes, remitting the issues regarding the applicability of Section 115JB and the additions to book profit under Section 115JB back to the CIT(A) for fresh consideration. The disallowance under Section 36(1)(viia) was decided in favor of the appellant, following the jurisdictional High Court's ruling.

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