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2016 (5) TMI 754

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..... ty - Held that:- provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - ITA.1460/Kol/2013 - - - Dated:- 6-4-2016 - Hon ble Shri N.V.Vasudevan, JM Shri M.Balaganesh, AM For The Appellant : Shri B.K.Ghosh, FCA Shri Piyush Dey,FCA For The Respondent : Shri Rajat Subra Biswas, CIT(DR) ORDER Per Shri N.V.Vasudevan, JM This is an appeal by the Assessee against the order dated 18.3.2013 of CIT(A)- VI, Kolkata, relating to AY 2003-04. 2. In Grounds No. 1 to 5 the Assessee has challenged the action of the revenue authorities in disallowing a sum of ₹ 4,33,45,434/- and adding the said sum to the total income of the Assessee by invoking the provisions of Sec.14A of the Income Tax Act, 1961 (Act) read with Rule 8D of the Income Tax Rules, 1962 (Rules). The assessee is a public sector bank and is governed by the Banking Companies (A T) Act 1970, Banking Regulation Act, 1949 and various rules and regulations made by RBI from time to time. The original assessment in the case of the Assessee was completed u/s.143(3) of the Act on 30.3.2006. One of the addition to the total income made in such assessment was .....

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..... d only with effect from the Assessment Year 2008-09. Further, the Bombay High Court also observed in the above-referred case that the Assessing Officer would first be required to check the concerned assessee's offer of disallowance and only after recording his dissatisfaction, if any, the Assessing Officer could commute the amount to be disallowed in accordance with sub-section (2) of section 14A. The Assessee submitted that the above-referred subsection (2) of section 14A was inserted by the Finance Act, 2006, with effect from the Assessment Year 2007-08. It was pointed out that the present case of the Assessee s being one for the Assessment Year 2003-04, there cannot be any applicability of the above-referred sub-section (2) of section 14A of the Act read with Rule 8D of the Rules in the Assessee's case for the Assessment Year 2003-04. Hence, the Assessee submitted that the computation of alleged disallowable sum made by the Assessing Officer after applying Rule 8D, should be held to bad. Without prejudice to the above, the Assessee submitted that while computing the disallowable sum u/s 14A the Assessing Officer took into account all the investments from which the income .....

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..... n ITA No.243 of 2012 dated 4.1.2013 held that computation of 1% of exempt income as disallowance u/s.14A of the Act was proper. 7. We have considered the rival submissions. The Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. v. Dy. CIT [2010J 328 ITR 87(Bom) has held that Rule 8D could not be considered as retrospective and the said Rule could be applied only with effect from the Assessment Year 2008-09. Further, the Bombay High Court also observed in the above-referred case that the Assessing Officer would first be required to check the concerned assessee's offer of disallowance and only after recording his dissatisfaction, if any, the Assessing Officer could commute the amount to be disallowed in accordance with sub-section (2) of section 14A. The abovereferred subsection (2) of section 14A was inserted by the Finance Act, 2006, with effect from the Assessment Year 2007-08. The Assessee s case being for the Assessment Year 2003-04, there cannot be any applicability of the above-referred subsection (2) of section 14A or Rule 8D in the Assessee's case for the Assessment Year 2006-07. In the given circumstances, the quantum of disallowance had to be .....

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..... extent the same was not acceptable to the Assessee, the Assessee challenged the same before CIT(A). To the extent the Assessee was not successful before CIT(A), the Assessee preferred further appeal before the Hon ble ITAT in ITA No.2486/Kol/2007. The grounds raised by the Assessee before ITAT was as follows: 8. That the Ld.CIT(A) was unjustified in confirming the addition made by the ld. A.O. of the following ascertained liabilities in computing the book profit for MAT purposes. Amount (Rs.) (i) Provision for Bad Doubtful Debt 1,73,13,11,000 (ii) Provision for Standard asset 4,50,77,500 (iii) Provision for depreciation on investment 19,43,38,211 (iv) Provision for legal expenses 27,00,000 (v) Provision for Fraud Forgery 2,80,00,000 (vi) Provision for Wealth-tax 3,00,000 (vii) Provision for Stationery Was .....

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..... as considering the details as may be furnished before him. 11. In the proceedings before the AO pursuant to the order of the Tribunal, the AO again held that the liability towards legal expenses and other provisions, were not ascertained liability and therefore could not be reduced from the profit as per profit and loss account prepared in accordance with Companies Act, 1956 to ascertain book profit for the purpose of Sec.115JB of the Act. 12. Before CIT(A), the Assessee raised the following addition ground vide its letter dated 19.7.2011: Additional Ground of Appeal That, without prejudice to the Ground Nos.4 and 5 relating to computation of book profit under section 115JB of Income tax Act, 1961 for ascertaining liability in respect of minimum alternate tax, the Learned Assessing Officer has erred in applying the provision of section 115JB of Income tax Act, 1961 in disregard of the referred judicial pronouncements. 13. The following were the judicial pronouncements referred to in the grounds of appeal viz.: (1) Order dated 30.09.2010 in ITA No.3390/2009 passed by ITAT G Bench, Mumbai in the case of Krung Thai Bank wherein it was held that Th .....

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..... rung Thai Bank (supra) and on the above issue held as follows:- 5. Learned counsel for the assessee, however, contends that the provisions of MAT do not apply to the assessee, and , for this reason, very foundation of impugned reassessment proceedings is devoid of legally sustainable merits. His line of reasoning is this. The provisions of MAT can come into play only when the assessee prepares its profit and loss account in accordance with Schedule VI to the Companies Act .It is pointed out that , in terms of the provisions of Section 115JB(2),every assessee is required to prepare its profit and loss account in terms of the provisions of Part II and II I of Schedule VI to the Companies Act . Unless the profit and loss is so prepared, the provisions of Section 115 JB cannot come into play at all. However, the assessee is a banking company and under proviso to Section 211 (2) of the Act , the assessee is exempted from preparing its books of accounts in terms of requirements of Schedule VI to the Companies Act , and the assessee is to prepare its books of accounts in terms of the provisions of Banking Regulation Act . It is thus contended that the provisions of Section 115 JB do .....

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