Case Law Details
Bank Of India Vs ACIT (ITAT Mumbai)
We find that Section 11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, provides that ‘for the purposes of the Income Tax Act, 1961, every corresponding new bank shall be deemed to be Indian company and a company in which public is substantially interested’. This provision is not for any specific purposes in the Income Tax Act, 1961, such as assessment, but for (all) “the purposes of the Income Tax Act, 1961′. It is thus not possible to read the provision, as has probably been sought to be read, that while the nationalized banks are to be treated as Indian companies in which public is substantially interested, so far as assessment of their income is concerned, but they will not be treated as such for other purposes. We see no support of such an approach, as is implicit in the stand taken by the assessee bank. Once the provisions of Section 11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, provides that “for the purposes of the Income Tax Act, 1961, every corresponding new bank shall be deemed to be Indian company and a company in which public is substantially interested”, a new bank established under the said Act, as is the assessee before us, is required to be treated as an Indian company in which public is substantially interested, for all the purposes of the Act. No exclusions can be inferred. Once the assessee bank is required to be treated an Indian company for the purposes of the Income Tax Act, 1961, it cannot be open to us to hold that it will not be treated as a company for the purposes of Section 11 5JB of the Income Tax Act, 1961.
Section 11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, categorically provides that “for the purposes of the Income Tax Act, 1961, every corresponding new bank shall be deemed to be Indian company and a company in which public is substantially interested”. This provision does not exclude any area for the purpose of which, even for the purposes of the Income Tax Act, 1961, this provision cannot be pressed into service. The only plea available to the assessee thus is the section 115JB being a non-obstante clause, but then, as has been observed by Hon’ble Supreme Court in Vardarajulu’s case (supra), a non obstante clause does not mean that it is a standalone provision and it denies the applicability of the other provisions of the law, but it does only mean that any provisions which are inconsistent with the provisions of Section 115JB, will have to make way for the provisions of Section 115JB. The scheme of the section 115 JB is that de hors the manner in which taxable income of a company is required to be computed in accordance with the provisions of the Income Tax Act, 1961 and de hors the rate at which an income is taxed, or is already taxed, under the provisions of the Income Tax Act, 1961, where such a taxable income is less than the specified percentage of book profits of the assessee company- computed in accordance with the provisions of the regulatory mechanism in the related legislation, the assessee shall pay a certain percentage as income tax on the book profits computed in accordance with the manner prescribed. It is only to this extent that the provisions of the Income Tax Act, 1961, have to make way for implementation of the scheme of section 115JB. However, we see no conflict in this scheme of section 115JB and the assessee being treated as a company for any purpose of the Income Tax Act, 1961. This part of the tax law position cannot come in the way of implementing the scheme of Section 115 JB, and, cannot, therefore, be overridden.
It is also contended that the assessee bank is paying huge income tax and is declaring dividends too, and the intention of the legislature was to pay companies paying zero or minimal taxes and yet paying dividends, in view of background in which section 115 JB was brought and underlying intention of MAT provisions, it is clear that the legislature never intended to levy MAT on assesses like the nationalized banks. As to what is huge tax and what is minimal tax is a subjective and perception based understanding, and such notions cannot govern the applicability of MAT. In any event, the parameters governing the decision as to what is less than reasonable tax vis-à-vis book profits is embedded in the scheme of Section 115JB itself, and, as long as that criterion is fulfilled, the applicability of MAT cannot be repudiated by the assessee. The scheme of Section 115JB, so far as computation of book profits is concerned, looks like this. It applies on a company. Under section 11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, which provides that “for the purposes of the Income Tax Act, 1961, every corresponding new bank shall be deemed to be Indian company and a company in which public is substantially interested”. Section 115 JB does start with a non-obstante clause, but, as we have seen above in our detailed analysis and particularly in the light of Hon’ble Supreme Court’s judgment discussed above, a non-obstante clause is not a standalone provision which disregards everything else in the enactment but a non-obstante clause “is equivalent to saying that the provisions embraced in the non-obstante clause will not be an impediment for the operation of the enactment or the provision in which the non-obstante clause occurs”. There is nothing in the scheme of Section 115 JB which does require that the assessee should not be treated as a company, and, therefore, this proviso being a non-obstante clause does not come in the way of the assessee being treated as a company. The annual accounts of the assessee company are required to be drawn up as the Banking Regulation Act, 1949, and, therefore, the assessee is not required to prepare its annual accounts in terms of the requirements of the Companies Act, 1956. When the profit and loss account is drawn up as the per the related provisions of the Companies Act, the starting point for computation of taxable book profits is the profit as computed in accordance with these provisions. However, when profit and loss account is drawn up, in accordance with the requirements of, say, the Banking Regulation Act, 1949, the starting point of computation of book profits is the profit computed as computed in accordance with the provisions of the said legislation. In this light, and bearing in mind the fact that the provisions of preparing profit and loss account in accordance with the provisions of the Banking Regulation Act 1949 applies to the assessee before us, which is treated as a company for the purposes of the Income Tax Act, the provisions of Section 115JB clearly apply to the assessee as well.
FULL TEXT OF THE ITAT JUDGEMENT
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