BANK OF BARODA ,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), MUMBAI

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.

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.

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.

From the above, it is seen that the Ld. PCIT exercised revisionary juri iction 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 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 Bank of Baroda

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.

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.

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.

The appeal of appellant bank is allowed.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.