Canara Bank (Erstwhile Syndicate Bank) Vs DCIT (ITAT Bangalore)
Income Tax Appellate Tribunal (ITAT), Bangalore, has ruled in favor of Canara Bank (formerly Syndicate Bank), stating that the provisions of Section 115JB of the Income Tax Act, which pertain to the Minimum Alternate Tax (MAT), are not applicable for computing the bank’s book profit. This decision, delivered on August 8, 2024, follows a similar order by the Tribunal in Canara Bank’s own case for the assessment years 2019-20.
The core contention revolved around whether Canara Bank, being a nationalized bank under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, falls within the definition of a “banking company” under the Companies Act, 1956. The bank argued that it does not meet this definition and is therefore not subject to the proviso to Section 211(2) of the Companies Act, which relates to the preparation of financial statements. Consequently, Canara Bank asserted that the provisions of Section 115JB, as it stood prior to its amendment in 2012, should not apply to it.
The Tribunal’s decision drew support from several judicial precedents. Notably, the Delhi High Court in the case of CIT v Punjab National Bank Ltd. (successor of erstwhile Oriental Bank of Commerce) dismissed a similar question of law. Furthermore, the Delhi Tribunal in Oriental Bank of Commerce v. ACIT had also held that the MAT provisions under Section 115JB would not apply to a banking company before the 2012 amendment. The Bangalore ITAT specifically highlighted the Delhi Tribunal’s observation that this issue was no longer res judicata due to consistent rulings by various tribunals and High Courts.
The Tribunal also referred to the Bombay High Court’s decision in CIT vs Union Bank of India, which reasoned that applying the machinery provisions of Section 115JB(2) to banking companies would be unworkable given the specific regulatory framework governing their financial reporting. The Supreme Court’s ruling in Commissioner of Income-Tax, Bangalore vs B.C. Shrinivasa Setty, emphasizing the integrated nature of charging and computation provisions in the Income Tax Act, was also cited to support the view that if the computation provision cannot be applied, the charging section is also not intended to cover such cases.
While the Income Tax Department’s representative relied on a decision by the Commissioner of Income Tax (Appeals), the Tribunal found merit in the assessee’s arguments and the supporting judicial pronouncements. It also noted that there was no jurisdictional High Court decision or any other High Court decision against Canara Bank on this issue. Citing the Supreme Court’s view in CIT vs Vegetable Products Ltd. that when two views are possible, the one favoring the assessee should be considered, especially in the case of a nationalized bank, the Tribunal ultimately ruled in favor of Canara Bank. Consequently, the revenue’s appeal on this ground was dismissed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
