Union Bank of India Vs DCIT (ITAT Mumbai)
Conclusion: Section 115JB (2)(b) inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, were 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, it did not apply to Union Bank of India due to non-company status under the Companies Act despite the deeming provision in the Acquisition Act for Income Tax Purposes. Consequently, the tax on book profits (MAT) were not applicable to such banks.
Held: Assessee-bank had calculated tax for the relevant assessment year based on both book profits under Section 115JB at Rs.604,86,39,540 and normal provisions at Rs.1153,29,54,493. AO requested assessee to provide a detailed computation of book profits under Section 115JB and questioned why the “provisions and contingency” amount that had been debited to the profit and loss account should not be added back when calculating the book profit for Minimum Alternate Tax ( MAT ) under Section 115JB. Assessee argued that Section 115JB did not apply to them, as they were governed by the Banking Companies ( Acquisition and Transfer of Undertakings ) Act, rather than the Companies Act. Although, assessee had calculated the Minimum Alternate Tax ( MAT ) on book profit for computation, they maintained that the provisions of Section 115JB should not apply to their case. AO rejected the assessee’s plea of non-applicability of 1155JB stating that the amendment to section 115JB now includes banking companies as part of its ambit and that the bank’s financial accounts must comply with section 115JB. Aggrieved by the decision, assessee appealed before CIT(A) against the AO’s order. However, CIT (Appeals) relied on various rulings and held that Union Bank of India fell within the purview of section 115JB due to its classification as a “company” for tax purposes under the Income Tax Act. Consequently, assessee’s appeal was dismissed. On appeal by assessee. It was held that the deeming provision in Section 11 of the Acquisition Act applie only to the Income Tax Act and does not extend to the Companies Act. Therefore, the Union Bank of India could not be treated as a “company” under the Companies Act, which was a requirement for the application of Clause (b) of Section 115JB(2). The special bench highlighted that various sections of the IT Act treat nationalized banks differently such as Section 194A(3) dealing with TDS on interest makes a distinction between nationalized banks and banking companies. Therefore, it was concluded that Section 115JB(2)(b) did not apply to the Union Bank of India, as the bank was not a company under the Companies Act, despite the deeming provision in the Acquisition Act for Income Tax purposes. Clause (b) to sub section (2) of section 115JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, were 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 could not be applied and consequently, the tax on book profits (MAT) were not applicable to such banks.
