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Facts
The appellant bank challenged the order of the CIT(A) which dismissed its appeal against an order giving effect to a PCIT's order under Section 263. The PCIT had directed the AO to re-assess the appellant for A.Y. 2015-16, including provisions of Section 115JB.
Held
The Tribunal held that based on a Special Bench decision in the case of Union Bank of India, the provisions of Section 115JB are not applicable to banks constituted as 'corresponding new banks' under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Therefore, MAT is not applicable to such banks.
Key Issues
Whether Section 115JB (Minimum Alternate Tax) is applicable to public sector banks constituted as 'corresponding new banks' under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
Sections Cited
263, 115JB, 14A, 143(3), 194A, 36(1)(viii)
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Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
The following grounds of appeal were raised by the appellant bank against the order of Ld. CIT(A) for the A.Y. 2015-16:-
1. On the facts and in the circumstances of the case and in law, the Id.CIT (A) erred in dismissing the appeal filed by appellant against the order giving effect to order of Id. PCIT u/s 263 in limine as not maintainable.
2. On the facts and in the circumstances of the case and in law, the CIT (A) failed to take into consideration the order of Hon'ble ITAT against the order u/s 263 wherein the issue of applicability of the provisions of section 115JB to appellant was kept open for adjudication.
3. On the facts and in the circumstances of the case, the Id. CIT(A) ought to have followed the binding decision of Hon'ble Special Bench ITAT in case of Union Bank of India (166 taxmann.com 207) and held that the provisions of section 115JB do not apply to appellant.
4. Without prejudice to the above On the facts and in the circumstances of the case, the Id. CIT(A) ought to have decided on the addition made of provisions obliterated by reducing the assets and disallowance u/s 14A in computing the book profits.
2 Bank of Baroda Your appellant craves leave to add, to amend and/ or vary the grounds of appeal before or at the time of hearing.
2. From the above, it is seen that the Ld. PCIT exercised revisionary jurisdiction under section 263 of the I.T. Act with respect to the issue of applicability of provisions of section 115JB to appellant bank and held that the same are applicable subsequent to amendment made by legislature from A.Y. 2013-14. The Ld. PCIT placed reliance on the decision of Hon'ble ITAT Hyderabad in the case of State Bank of Hyderabad Vs. DCIT Circle 3(2) (ITA No. 1364/Hyd/2013 where it was held that the provisions of Minimum Alternative Tax under section 115JB are applicable the Public Sector Bank post amendment from A.Y. 2013-14. The Ld. PCIT has invoked Explanation 2 to section 263 amended by Finance Act 2015 w.e.f. 1.6.2015 stating that the Ld. AO passed the assessment order without conducting enquiries or verification which should have been done. Since the Ld. AO did not examine the provisions of section 36(1)(viii) of the Act and correctness of the deduction claimed by the appellant, the Ld. PCIT placed reliance on the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company (243 ITR 83)(SC) and finally concluded that Ld. AO should revise the assessment and compute book profit in accordance with provisions of Section 115JB of the Act.
In pursuance of the direction of Ld. PCIT, the Ld. AO passed the order applying the provisions of section 115JB to the appellant company and passed an order accordingly. Aggrieved by the order of Ld. AO, an appeal was filed by appellant bank before Ld. CIT(A), who held that the present appeal filed by the Bank is not maintainable because the 263 order of Ld. PCIT was not challenged. Then, the appellant bank filed this appeal of the order of Ld. CIT(A) with the grounds of appeal mentioned above before ITAT.
During the proceedings before the ITAT, the Ld. AR of the appellant filed a paper book consisting the Orders u/s. 143(3) passed by Ld. AO, copy of AO’s order giving effect to Ld. CIT(A) order, copy of 263 order passed by 3 Bank of Baroda Ld. PCIT and a copy of Hon'ble ITAT order in appellant’s own case for this A.Y. 2015-16 in dated 31.11.2019. From the copy of order of ITAT, it is observed that the ITAT upheld the order of Ld. PCIT passed under section 263 of the Act since no enquiry was conducted by Ld. AO. During the proceedings before ITAT, Ld. AR of the appellant bank relied on the order of ITAT, Mumbai Special Bench in the case of Union Bank of India Vs. DCIT LTU(2)(2014) 166 Taxmann.com 207(Mum)(SB) dated 6.9.2024 where the Special Bench has held that section 115JB are not applicable to appellant bank and hence pleaded that the addition made by Ld. AO be deleted.
Ld. DR relied on the orders of Ld. PCIT under section 263 of the Act, ITAT order in appellant bank’s own case for this relevant assessment year and ITAT Hyderabad Bench’s order of State Bank of Hyderabad (supra).
Perused the orders of both parties and written submissions filed. The Bench observed that this issue of applicability of section 115JB to appellant bank was held in favour of the appellant bank by the Special Bench order of Union Bank of India (supra) where it was held as follows :- Banks constituted as 'corresponding new banks' in terms of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and not registered under Companies Act, 2013 or any other previous company law, would not fall under provisions of section 1t5JB and, therefore, tax on book profits (MAT) would not be applicable to such banks.
6.1 Paragraph 40 to 44 of this Special Bench has held that even after the amendment to sub-section (2) of section 115JB with effect from A.Y. 2013-14 also, the Minimum Alternative Tax provisions are not applicable to these Public Sector Banks. At para 50 of the order, it was held as follows : 50. The assessee bank was neither formed or registered under the Companies Act, 1956; nor it is in existing company as per the above definition. Once it is not a company under the Companies Act, then the first condition referred to in clause (b) of Section 115JB(2) is not fulfilled, and consequently second proviso below Section 129(1) of the Companies Act is also not applicable.
4 Bank of Baroda 6.2. Again at para 58 of the order of Special Bench gives a list of banks to which the decision which was held in favour of appellant bank, is applicable is reproduced below :- 58. The aforesaid clause (f) provides that if Central Government notifies any such entity then TDS is not to be deducted. It is very relevant to note that at the time of Acquisition Act was enacted, Central Government had issued a Notification No. SO 710 dated 16/02/1970 [1970] [Reported in 75 ITR (Stat) 106] which reads as under:-
Income-tax Act, 1961: Notification under sec. 194A(3)(iii)(f) Notification No. S. O. 710, dated February 16, 1970. (1)
In pursuance of sub-clause (3) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify with effect from the 19th July, 1969, the following banks for the purposes of the said sub-clause:-
1. 1. Indian Overseas Bank, 151, Mount Road, Madras- 2. Indian Bank, Indian Chamber Building, Madras-1.
3. Allahabad Bank, 14, India Exchange Place, Calcutta- 1. 1. 4. Dena Bank, Devkaran Nanjee Building, 17, Horniman Circle, Fort, Bombay-1. 5. Canara Bank, 112, Jayachamarajendra Road, Bangalore-1. 6. Union Bank of India, 66/80, Apollo Street, Fort, Bombay-1. 7. United Commercial Bank, 10, Brabourne Road, Calcutta-1. 8. Bank of Baroda, 3, Walchand Hirachand Marg, Bombay-1. 9. Punjab National Bank, Parliament Street, New Delhi-1. 10. Bank of India, 70/80 Mahatma Gandhi Road, Bombay-1. 11. Central Bank of India, Mahatma Gandhi Road, Bombay-1.
12. United Bank of India, 4, Narendra Chandra Datta Srani (Clive Ghat Street), Calcutta-1.
13. Bank of Maharashtra, 1177 Peth, Poona-2.
14. Syndicate Bank, Manipal, Mysore State, Mysore 6.3 The concluding para 60 of this Special Bench is reproduced to adjudicate the issue in favour of the appellant bank in our impugned case :- 60. Accordingly, the question referred to Special Bench is decided in favour of the assessee banks that clause (6) to sub section (2) of section 115 JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4- 2013, that is, from assessment year 2013-14 onwards, are not applicable to the banks constituted as 'corresponding new bank' in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, the provision of Section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks.
5 Bank of Baroda 10. Respectfully following the decision of Special Bench (supra), the issue relating to applicability of section 115JB is held in favour of the appellant bank and the addition made by Ld. AO is hereby deleted.
The appeal of appellant bank is allowed.
Order pronounced in the open Court on 16/10/2025.