Canara Bank Vs DCIT (ITAT Bangalore)
Income Tax Appellate Tribunal (ITAT) Bangalore has ruled in favor of Canara Bank, stating that the provisions of Section 115JB of the Income Tax Act, which pertain to the Minimum Alternate Tax (MAT), are not applicable to the bank for the assessment year in question. This decision came on the basis of the argument presented by the bank’s counsel that Canara Bank, being a nationalized bank established under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980, does not fall under the definition of a banking company as defined in the Companies Act, 1956. Consequently, it is not governed by the proviso to Section 211(2) of the Companies Act, which relates to the preparation of financial statements.
The counsel for Canara Bank supported this contention by citing a recent order from the Delhi High Court in the case of CIT v Punjab National Bank Ltd. The Delhi High Court had dismissed a similar question of law, effectively agreeing that MAT provisions, as they stood prior to the Finance Act, 2012 amendment, would not apply to banking companies. Further bolstering their argument, the counsel referred to a decision by the Delhi Tribunal in the case of Oriental Bank of Commerce v. ACIT, which had also held that pre-amendment Section 115JB was not applicable to banking companies. The Delhi Tribunal had referred to multiple judgments from various High Courts and its own benches that supported this view.
The core rationale behind these decisions, as highlighted by the Bombay High Court in CIT vs Union Bank of India, is that the machinery provision for computing book profit under Section 115JB(2) would be rendered unworkable for banking companies due to the specific regulatory framework they operate under, which differs from the accounting standards prescribed under the Companies Act. Drawing an analogy from the Supreme Court’s ruling in CIT vs B.C. Shrinivasa Setty, the Tribunal noted that the charging section and the computation provisions of the Income Tax Act form an integrated code, and if the computation provision cannot be applied, the charging section itself would not be applicable.
Despite the arguments presented by the Departmental Representative (DR) who relied on the order of the Commissioner of Income Tax (Appeals), the ITAT Bangalore sided with Canara Bank. The Tribunal specifically noted that the Delhi Tribunal’s decision in the Oriental Bank of Commerce case was upheld by the Delhi High Court. Furthermore, the High Court observed that the revenue had not raised this identical issue in the case of Punjab National Bank. Given these precedents, the Bangalore ITAT concluded that Ground No. 4 raised by Canara Bank deserved to be allowed, providing the bank with an exemption from the applicability of Section 115JB for the relevant assessment year.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
