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 ... Minimum Alternate Tax - Reopening of assessment under section 147 - Preparation of profit and loss account in accordance with Schedule VI - Exemption under proviso to Section 211(2) of the Companies Act - Application of section 115JB to banking companiesMinimum Alternate Tax - Preparation of profit and loss account in accordance with Schedule VI - Exemption under proviso to Section 211(2) of the Companies Act - Application of section 115JB to banking companies - Applicability of section 115JB (MAT) to the assessee, a banking company, and correctness of reopening assessment under section 147 based on alleged escape of income by reason of MAT not being computed - HELD THAT: - The Court held that the computation under section 115JB commences from the result shown by the profit and loss account prepared in accordance with Part II and III of Schedule VI to the Companies Act. Banking companies are exempted from preparing final accounts under Schedule VI by the proviso to Section 211(2) and prepare accounts as required by the Banking Regulation Act. Consequently, section 115JB cannot be applied to banking companies which do not prepare profit and loss accounts as per Schedule VI. The reassessment was initiated solely on the assumption that MAT under section 115JB was applicable; since that foundational premise was legally erroneous, the reassessment under section 147 was invalid. The Tribunal followed the view taken by a coordinate bench in Maharashtra State Electricity Board v. JCIT (82 ITD 422) on analogous grounds and quashed the reassessment initiated for the stated reason. [Paras 7, 8]Provisions of section 115JB do not apply to the assessee (a banking company) and the reopening of assessment under section 147 on that basis is quashed.Final Conclusion: The appeal is allowed: reassessment proceedings initiated under section 147 on the basis that MAT under section 115JB applied to the banking branch were quashed because section 115JB is inapplicable where profit and loss accounts are not prepared in terms of Schedule VI owing to the proviso to Section 211(2); other grounds were not adjudicated as academic. 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.