2010 (9) TMI 18 - AT - Income Tax

Section 115JB (MAT) inapplicable to banking companies due to exemption under proviso to Section 211(2) of Companies Act

ITAT, MUMBAI held that Section 115JB (MAT) is inapplicable to a banking company because MAT's computation starts from a profit & loss account prepared ... Re-opening of an assessment - Non application of provisions of MAT (minimum alternate tax) by the assessee - assessee contended that provisions of MAT are not applicable to it and therefore assessment cannot be reopened - Banking company - Held that:- The provisions of Section 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Part II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax under section 115 JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to Section 211 (2) of the Companies Act. The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The provisions of Section 115 JB cannot thus be applied to the case of a banking company. Issues: Whether the provisions of Minimum Alternate Tax under Section 115JB of the Income-tax Act, 1961 apply to a banking company which prepares accounts under the Banking Regulation Act and is exempt from preparing profit and loss account in terms of Part II and III of Schedule VI to the Companies Act; and whether reassessment proceedings under Section 147 premised on applicability of MAT are valid.Analysis: The Tribunal examined the statutory scheme where Section 115JB starts from the result shown by a profit and loss account prepared in terms of Part II and III of Schedule VI to the Companies Act. Banking companies are exempted by the proviso to Section 211(2) of the Companies Act from preparing accounts under Schedule VI and instead prepare final accounts under the Banking Regulation Act. Because the MAT computation under Section 115JB presupposes accounts prepared as per Schedule VI, those provisions cannot be invoked where Schedule VI does not apply. The Assessing Officer's reopening under Section 147 was founded solely on an assumption that MAT applied and no other basis was shown for escaped assessment; therefore the reasons were legally unsustainable.Conclusion: Section 115JB does not apply to the assessee bank whose accounts are prepared under the Banking Regulation Act and exempted from Schedule VI; the reassessment initiated under Section 147 on the sole ground of MAT applicability is quashed.