BANK OF BARODA,MUMBAI vs. PR.CIT 2(1)(1), MUMBAI

O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1. By way of these appeals, the assessee is contesting the validity of revisional jurisdiction u/s 263 as exercised by Ld. Principal Commissioner of -47/Mum/2019 Bank of Baroda Assessment Years-2015-16 & 2016-17 Income Tax -2, Mumbai (Pr. CIT) vide separate orders, both dated 26/03/2019 for Assessment Years [AY] 2015-16 & 2016-17. Both the appeals are being disposed-off by way of this common order for the sake of convenience & brevity. First, we take up appeal for AY 2015-16 wherein the grounds raised

by the assessee reads as under: -

2. Without prejudice to above, Id.CIT erred in holding that the provisions of section 115JB are applicable to appellant relying on Explanation 3 without appreciating that the said Explanation will apply only to those entities established under Companies Act and will not apply to appellant which is established under Banking (Companies Transfer Of Undertakings) Act, 1970 as held by Hon'ble ITAT Kolkata in the case of UCO Bank. ;

3. Without prejudice to above, Id. CIT erred in holding that provisions and contingencies of Rs. 6516.67 crore is to be added in computing book profits without appreciating that out of the said amount, a sum of Rs. 4760.89 crore representing amount provided for bad and doubtful debts and investments are reduced from the advances and investments in Balance sheet and accordingly, they represent amounts actually written off and not mere provisions. Accordingly, Id. CIT erred in invoking the provisions of Explanation-1 to disallow the above amounts. Further the sum of Rs. 25 crore represents provision made for a contractual liability in respect of staff welfare and accordingly, CIT should not have directed the said amount to be added back in computing book profit.

Facts on record would reveal that the assessee being banking company was assessed for year under consideration u/s 143(3) at Rs.7229.71 Crores under normal provisions after certain additions / disallowances vide order dated 30/03/2017. The Book Profits u/s 115JB were computed at Rs.5584.71 Crores after adding back disallowance u/s 14A and provision -47/Mum/2019 Bank of Baroda Assessment Years-2015-16 & 2016-17 for taxes as against book Profits of Rs.3398.43 Crores reflected by the assessee in its return of income. 2.1 Subsequently, upon perusal of case records, Ld. Pr.CIT invoked revisional jurisdiction u/s 263 and issued show-cause notice on 05/03/2019. The basis of invoking the jurisdiction was the fact that certain provisions of bad debts for Rs.4545.83 Crores as debited in the P & L account were not added back while computing Book Profits u/s 115JB. Further, certain provisions such as provisions for depreciation on investments, staff welfare expenses and other provisions were added back while computing the income under normal provisions, however, the same were not added back while computing Book Profit u/s 115JB. By considering these additions, the Book Profits would work out to be Rs.10443.61 Crores and therefore, tax payable under MAT would be more than tax payable under normal provisions. The said omissions on the part of Ld. AO has made the order erroneous and prejudicial to the interest of the revenue. 2.2 In defense, the assessee submitted that the provisions of Section 115JB were not, at all, applicable to the assessee since the assessee was not a company as per The Companies Act and the deeming provisions of Sec. 115JB could not be extended to include companies which were deemed to be companies for the purposes of Income Tax Act. The attention was drawn to the fact that as per Explanation-3, as inserted by Finance Act, 2012 w.e.f. 01/04/2013, the provisions of Section 115JB were made applicable to any company to which the provisions of Section 211(2) of Companies Act, 1956 were applicable. Since the assessee could not be -47/Mum/2019 Bank of Baroda Assessment Years-2015-16 & 2016-17 wound up under the provisions of Indian Companies Act, it was not a banking company as per the provisions of Companies Act, 1956 and hence, the provisions of Sec. 211(2) would not apply to it. 2.3 However, the said plea was rejected by observing that the provisions of Section 115JB would apply to all companies as defined in Sec 2(17) and the assessee was a company as defined in Sec. 2(17). Further, in terms of amendment, the companies covered under proviso to sub-section (2) of Section 211 of the Companies Act, were brought under the purview of Section 115JB. The assessee’s submissions were duly considered in the light of notes to clauses to Finance Act, 2012, the provisions of Section 11 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and other provisions of The Companies Act. Finally, it was concluded that the proviso to Sec 211(2) of the Companies Act applies not only to the companies incorporated under the Companies Act but also to the banking companies governed by special acts and the assessee was covered by Section 211(2)(b) of the Companies Act, 1956. Reliance was placed on the decision of Hon’ble Hyderabad Tribunal in State Bank of Hyderabad V/s DCIT (ITA No.1364/Hyd/2013) to support the said conclusion. The decision of Kolkata Tribunal in UCO Bank V/s DCIT (ITA No. 1768/Kol/2009 AY 2002-03) and the order of first appellate authority in assessee’s own case for 2014-15 was found to be misplaced since the issue was not examined with respect to law, post amendment of Section 115JB. Moreover, Mumbai Tribunal in the case of Bank of India, for AY 2013-14, on similar facts and circumstances, found the decision in UCO bank not applicable since it -47/Mum/2019 Bank of Baroda Assessment Years-2015-16 & 2016-17 pertained to AY prior to the amendment to Explanation 3 to Sec 115JB. Finally, it was concluded that the provisions of Sec 115JB were applicable to the assessee company. 2.4 Proceeding further, the plea of the assessee that Ld.AO had passed the assessment order after examining all the details on the aforesaid issues, was rejected in terms of Explanation-2 to Section 263 coupled with the judgment of Hon’ble Supreme Court rendered in Malabar Industrial Co. Ltd. (2000 243 ITR 83). Therefore, invoking jurisdiction u/s 263, the assessment order was revised and Ld. AO was directed to computed Book Profits in accordance with the provisions of Section 115JB. Aggrieved, the assessee is under appeal before us.