TaxTMI 
TaxTMI 
2015 (12) TMI 300
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....Act, 1956? 3. This issue was already decided by this tribunal in ITA No. 1768/Kol/2009 vide order dated 19.3.2013 in favour of the assessee. The revenue had challenged this issue before the Hon'ble Calcutta High Court and the Hon'ble Calcutta High Court vide order in ITAT No. 147 of 2013, G.A. No. 2590 of 2013 dated 13.1.2014 had restored the matter to this tribunal only on the issue of the applicability of Minimum Alternate Tax u/s 115JB of the Act to banking companies with the following directions :- " The Learned Tribunal in its judgment and order dated 19th March, 2013 allowed the appeal of the assessee saying that "we accordingly hold that the provisions of section 115JB are not applicable in the case of assessee." The Learned Tribunal, however, relied upon the judgment of a coordinate bench in the case of State Bank of Hyderabad vs DCIT wherein the view taken by the tribunal was that provisions of section 115JB were applicable and that the amendment was prospective in nature. The Tribunal could not have taken a different view after relying upon the judgment in the case of State Bank of Hyderabad vs DCIT. If the Tribunal wanted to take such a view, the rea....
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.... towards Provision made for doubtful debts allowed in respect of banks which is not available for companies registered under the Companies Act, 1956 . Hence it has to be understood that the banking company as defined in Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 is structurally different from a company defined under Companies Act , 1956. i. Under Banking Regulation Act, the bad debts has to be routed only through the provision account unlike in Companies Act, 1956. Hence it will not appear in profit and loss account. Even provision is made for standard assets under Banking Regulation Act by following Prudential Norms prescribed by Reserve Bank of India. Hence there is material difference in the manner in which accounting entries are passed for the purpose of preparation of accounts under Banking Regulation Act and Companies Act, 1956 and corresponding income determination under the Income Tax Act thereon. j. Amendment in section 115JB came into effect only from 1.4.2013 vide Expln 3 inserted by Finance Act 2012. At the time of Finance Bill 2012 stage, amendment was proposed only in section 115JB(2) . Expln 3 was not proposed at that tim....
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....to Companies Act only for the limited purpose of computation of book profits. Hence it need not be a company under the Companies Act for the purpose of charging provision. Accordingly, Banking Companies also would automatically fall under the provisions of section 115JB of the Act. He placed reliance on the decision of Authority for Advance Ruling in the case of Niko Resources Ltd vs CIT reported in (1998) 234 ITR 828, wherein it was held that the provisions of section 115JA of the Act has application both to foreign and domestic companies. 6.2. He also argued that even banks are to be assessed as a company under the Income Tax Act as per section 11 stated supra. He argued that section 10(38) of the Act, through its proviso, brings into play, section 115JB. He argued that Section 115JB is the overriding provision. It overrides all other provisions in the Act. It is the overriding charging provision. It provides for payment of income tax by an assessee, which is a company. That company normally, is a company of whatsoever hue, or in the alternative, a company as defined in the Income Tax Act. There is no warrant for borrowing the definition of a company from section 3 of the Comp....
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....ding profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year." 7.2 Section 211(1), 211(2), 211(3), 211(3A), 211(3B) and 211(3C) of Companies Act 1956: 211. FORM AND CONTENTS OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT (1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading "Notes" at the end of that Part: Provide....
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....nting Standards until the accounting standards are prescribed by the Central Government under this subsection.]" 7.3 Explanation 3 to Section 115JB of the Income Tax Act, 1961 "For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the proviso to subsection (2) of section 211 of the Companies Act, 1956 (1 of 1956)16a is applicable, has, for an assessment year commencing on or before the 1st day of April, 2012, an option to prepare its profit and loss account for the relevant previous year either in accordance with the provisions of Part II and Part III of Schedule VI17 to the Companies Act, 1956 or in accordance with the provisions of the Act governing such company.] 7.3.1. The Explanation 3 to section 115JB of the Act has been inserted by the Finance Act 2012 to clarify that only assesses being companies and to whom provisions of the Companies Act , 1956 are applicable came within the ambit of section 115JB of the Act. In other words, unless an assessee comes within the ambit of section 211 of the Companies Act, 1956, it was not covered by the Explanation 3 to section 115JB and as a necessary c....
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.... 7.3.6. As demonstrated in earlier paragraphs, the assessee was established under the Banking Companies (Acquisition and Transfer of Undertakings ) Act, 1970. The assessee is neither a 'company' registered under Companies Act, 1956 nor is it an existing company registered under the Acts specified in clause (ii) of section 3(1) of the Companies Act, 1956. In the circumstances, even though the assessee is assessed in the status of a 'company' for tax purposes, it is not a 'company' within the meaning assigned to that expression by section 3 of the Companies Act, 1956. We find that the newly inserted Explanation 3 to section 115JB of the Act amplifies the intention of the legislature and categorically clarifies that the assesses to which section 115JB is applicable are only those who are 'companies' to which proviso to subsection (2) of section 211 of the Companies Act, 1956 is applicable and not to assesses which are assessed in the status of 'company' for tax purposes. To illustrate this point, it may be stated that HDFC Bank Ltd, Kotak Mahindra Bank Ltd etc are 'banking companies' as defined in section 5(c ) & (d) of Banking Regulation Act, 1949. These banking companies are incorpo....
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.... reserve on disposal of a revalued asset. Thus, the gains attributable to revaluation of the asset is not subject to MAT liability. It is, therefore, proposed to amend section 115JB to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account. iii. It is also proposed to omit the reference of Part III of the Schedule VI of the Companies Act, 1956 from section 115JB in view of omission of Part III in the revised Schedule VI under the Companies Act 1956. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." 7.5. In view of the above, we hold that in view of the legislative change brought about by the introduction of Explanation 3 in section 115JB of the Act by the Finance Act, 2012 , the assessee's contention infact stands more fortified. The Explanation 3 to section 115JB makes it evidently clear that section 115JB is applicable only to entities registe....
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....randum explaining the provisions in the Finance (No. 2) Bill, 1996 categorise the amendment under the caption "Rationalisation and Simplification". The relevant portion is reproduce hereunder:- 'RATIONALISATION AND SIMPLICATIONS Minimum Alternative tax on companies In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that inspite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. The new proposal provides for those companies to pay tax on 30% of the book profits, whose total income as computed under the Income-tax Act is less than 30% of the book profits as per the books of account prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. "Book profits" is defined and certain adjustments are provided in the proposed section. The proposed amendment will take effect from 1-4-1997, and will accordingly, apply in relation to assessment year 1997-98 and subsequent years." 7.6.3. The Hon'ble Apex Court in the case of Surana Steels P ltd vs DCIT reported in (1999) 237 ITR....
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.... extent, lives in the language even if it expands with the spirit of the statute. 7.6.6. Admittedly, the assessee bank is declaring dividends to shareholders and also paying huge income tax under IT Act. Applying the background on which the aforesaid amendment is brought in statute and the underlying intention of MAT provisions, it can safely be concluded that it was never the intention of the legislature to impose MAT on banking companies. 7.7. We find that the decision relied upon by the Learned AR in the case of Niko Resources Ltd vs CIT reported in (1998) 234 ITR 828 (AAR) is not applicable to the facts of the assessee's case as the AAR only dealt with the applicability of section 115JA of the Act on foreign companies. The term 'company' has been defined in section 5(d) of Banking Regulation Act, 1949 to mean any company as defined in section 3 of Companies Act, 1956 and includes a foreign company within the meaning of section 591 of that Act. Hence there is logic in including the foreign companies under the ambit of MAT provisions. However, the same is not applicable for assessee which is a bank. 7.8. We find that the impugned issue of applicability of section 115JB of t....
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.... it is not a company for the purpose of the Companies Act, 1956. It is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. On the other hand, under section 69 of the Electricity (Supply) Act, 1948, the Board is obliged to keep proper accounts, including the profit and loss account, and prepare an annual statement of accounts, balance sheet etc. in such form as may be prescribed by the Central Government and notified in the Official Gazette. Such accounts of the Board are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorized by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report are required to be laid annually before the State Legislature and also to be published in the prescribed manner. At the earliest point of time when section 115J was introduced, the section expressly excluded from its operation bodies like the Electricity Board. Though such express exclusion is absent in section 115JA, the Central Board of Direct Taxes issued Circular No.762 dated February 18, 1998 excluding bodies like the Electrici....
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....more persons. In case of MSEB there is no other person. Similarly, second proviso to sub-section (2) provides that where a company has adopted or adopts a financial year under the Companies Act, 1956, which is different from the previous year under the Act, the methods and the rates of depreciation shall correspond to the method and rates, which have been adopted for calculating the depreciation, for which financial year or part of such financial year falling within or relevant previous year. 16. Only those companies, which are engaged in the generation or supply of electricity, will come within the ambit of section 616 of the Companies Act. For that it is necessary that assessee must be a company. If assessee is not a company, then provision of section 616( c) cannot be applied. For example, Tata Electric Company is a company registered under the Companies Act. It is company within the meaning of section 3 of the Companies Act. It is engaged in the business of generation or supply of electricity. As such it will come within the sweep of this provision. MSEB cannot be construed to be a company within the meaning of section 3 of the Companies Act, therefore, though it is en....
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....ies Act, 1956. The Minimum Alternate Tax (MAT) on companies was introduced by the Finance (No.2) Act, 1996 with effect from 1-4-1997. This was necessitated due to the rise in the number of zero tax companies. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. To curb this mischief MAT was introduced by inserting section 115JA. This is a deeming provision. It is a trite law that deeming provision should be narrowly watched, jealously regarded and never to be pressed beyond its true limits. It is applicable to a company. The assessee is not a company. It is not required to distribute any dividend. As such it does not come within the mischief of this section......" Hence we find lot of force in the arguments of the Learned AR that the text has to be understood in the context in which provision has been enacted which is also endorsed by the Mumbai Tribunal in 82 ITD 422. D. Union Bank of India vs ACIT in ITA Nos. 4702 to 4706 / Mum / 2010 for Asst Years 2002-03 to 2006-07 , wherein they placed reliance on the decision of Kurung Thai Bank PCL (supra)....
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.... under sec 115JB. 14. The Mumbai Tribunal in the case of Krung Thai Bank v. Jt. CIT [2012] 49 SOT 70/[2011] 16 taxmann.com 239, to which one of us is a party has held that provision of Sec.115JB cannot be applied to the banking company. 15. In view of the above, as the amendment to sec 115JB by the Finance Act 2012 will be applicable only from the AY 2013-2014, we uphold the claim of the assessee that provision of Sec.115JB will not be applicable to the Assessee Bank and set aside the assessment made u/s 115JB on the Assessee company. G. ICICI Lombard General Insurance Co Ltd vs ACIT reported in 2012 -TIOL- 690-ITAT-Mum in ITA No. 2398/Mum/2009 dated 10.10.2012 for Asst Year 2003- 04, wherein it was held that : The proviso to section 211(2) of the Companies Act creates an exemption of applicability of subsection (2) inter alia in respect of insurance companies or banking companies or any other companies engaged in generation and supply of electricity for which a form of profit and loss account has been specified in or under the Act governing such class of company. Even if an insurance company does not disclose any matter in the balance sheet and ....
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....be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Hon'ble Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case." Following the decisions of the coordinate Benches of this Tribunal, we hold that when the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee." Accordingly, this issue is decided in favour of the assessee and against the revenue". Though, section 115JB has been amended to bring all the Companies in its ambit vide Finance Act 2012, w.e.f 1.4.2013, however, the said amendment is not applicable in the assessment year under consideration. Following the decision of co-ordinate bench of this Tribunal we decide this issue in favour of the assessee....