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TMI Blog2019 (5) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent in ITXA Nos. 1309/16, 1567/16, 1878/17, 1907/17 and 143/18. Mr. Sanjiv Shah for the Respondent in ITXA 182/15. ORAL JUDGMENT : 1. In these appeals common questions of law arise. Some of the appeals have been admitted. Some have been tagged on account of similarity of issues though they are at the admission stage. For convenience, we may record facts from Income Tax Appeal No.1196 of 2013. This appeal was admitted for consideration of following questions of law: "(i) Whether on the facts and in the circumstances of the case and in law, the ITAT is correct is reversing the order of Assessing Officer confirmed by the CIT(A), exercising the jurisdiction u/s.154 of the Income Tax Act, 1961, determining the Book Profits as per the amendment to Section 115JB? (ii) Whether on the facts and in the circumstances of the case and in law the ITAT is correct in holding that the provision of Section 115JB are not applicable to the assesseeBank?" 2. For all the appeals we would adopt the above quoted questions as substantial questions of law. 3. Respondent-Union Bank of India had filed return of income for the assessment year 200506. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under normal provisions and tax under section 115JB at Rs. 28.06 crores under section 115JB. Ultimately the taxes were determined under normal provisions without exercising the provisions of section 115JB. In that view, the entire exercises of modifying the orders is redundant as even after such adjustment, the tax determined under the normal provisions is more than the tax that are being determined by this order under section 154. 8. Be that as it may, just because a retrospective amendment has been carried out on the statue, the assessment cannot be modified without examining whether the provisions so made are to be disallowed or not. This requires detailed examination and in fact as for the submissions made before the authorities, the assessee had appeared before the Assessing Officer furnishing various details and how the amounts cannot be disallowed. Since this requires claborate examination on a long run process, we are of the opinion that the orders cannot be modified by invoking the provisions of section 154. Not only that the Coordinate Bench in assessee's own case in assessment year 200607 has held that the provisions of section 115JB are not applicable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to what is popularly referred to as MAT companies (Minimum Alternative Tax) was Section 115J. The Circular No.762 dated 18th February, 1998 issued by the Central Board of Direct Tax ("CBDT" for short) explains the object for introduction of such MAT provisions. The circular clarifies that new Section 115JA has been inserted by the Finance Act, so as to levy a minimum tax on companies, who are having book profits and paying dividends, but not paying any taxes. Relevant portion of Section 115JB as is stood at the relevant time reads as under: "Special provision for payment of tax by certain companies 115JB.(1)Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the incometax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, (2007) is less than (ten percent) of its book profit, (such) book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of incometax at the rate of (ten percent). (2) Every as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the context, the question would also be of the legislative intent to cover such companies within the swip of Section 115JB of the Act. These questions arise because of the language used in sub-section (2) of Section 115JB. These provisions we may peruse more minutely. As per sub-section (2) of Section 115JB, every assessee being a company would for the purposes of the said section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956. It is undisputed that the respondenta banking company is not required to prepare its accounts in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956. The accounts of the banking company are prepared as per the provisions contained in Banking Regulation Act, 1949. The counsel for the revenue may still argue that irrespective of such requirements, for the purposes of the said Act and special requirements of Section 115JB of the Act, a banking company is obliged to prepare its profit and loss account as per the provisions of the Companies Act, as mandated by sub-section (2) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso contained therein in case of a banking company, would convince us that machinery provision provided in Sub-section (2) of section 115JB of the Act, would be rendered wholly unworkable in such a situation. In a well known judgment the Supreme court in case of Commissioner of Income-Tax, Bangalore Vs. B.C. Shrinivasa Setty had observed that in the Income Tax Act, a charing section and the computing provisions together constitute an integrated code. In a case where the computation provision can not apply, it would be evident that such a case was not intended to fall within the charging section. It was a case of charging a partnership firm for transfer of a capital asset in the nature of goodwill. The Supreme Court was of the opinion that it would not be possible to envisage a cost of acquisition of goodwill. Since computation of capital gain cannot be done without ascertaining the cost of acquisition, it was held that no capital gain tax can be levied. 12. For the completeness of the discussion, we may note that section 211 of the Companies Act, 1956 pertains to form of contents of balancesheet and profit and loss account, sub-section (1) of Section 211 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, (2012), is less than (eighteen and one-half percent) of its book profit, (such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of (eighteen and one-half percent). (2) Every assessee, (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its (statement of profit and loss) for the relevant previous year in accordance with the provisions of (Schedule III) to the (Companies Act, 2013 (18 of 2013); or (b) being a company, to which the (second proviso to sub-section (1) of section 129) of the (Companies Act, 2013 (18 of 2013) is applicable, shall, for the purposes of this section, prepare its (statement of profit and loss) for the relevant previous year in accordance with the provisions of the Act governing such company:) Provided that while preparing the annual accounts including (statement of profit and loss), (i) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account. III. It is also proposed to omit the reference of Part III of Schedule VI of the Companies Act, 1956 from section 115JB in view of omission of Part III in the revised Schedule VI under the Companies Act, 1956. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 201314 and subsequent assessment years." 16. It can be seen that sub-section (2) of Section 115JB of the Act has now been bifurcated in two parts covered in the clauses (a) and (b). Clause (a) would cover all companies other than those referred to in clause (b). Such companies would prepare the statement of profit and loss in accordance to the provisions of schedule III of the Companies Act, 2013 (which has now replaced the old Companies Act, 1956). Clause (b) refers to a company to which second proviso to sub-section (1) of Section 129 of the Companies Act, 2013 is applicable. Such companies, for the purpose of Section 115JB, would prepare the statement of profit and loss in accordance with the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly applied prospectively. The memorandum explaining the provision of the Finance Bill, 2012 while explaining the amendments under Section 115JB of the Act notes that in case of certain companies such as insurance, banking and electricity companies, they are allowed to prepare the profit and loss account in accordance with the sections specified in their regulatory Acts. To align the Income Tax Act with the Companies Act, 1956 it was decided to amend Section 115JB to provide that the companies which are not required under Section 211 of the Companies Act, to prepare profit and loss account in accordance with Schedule VI of the Companies Act, profit and loss account prepared in accordance with the provisions of their regulatory Act shall be taken as basis for computing book profit under Section 115 JB of the Act. 19. Before closing, we may also take note of explanation (3) below sub-section (2) of section 115 JB of the Act which reads as under : "Explanation 3For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the proviso to sub-section (2) of section 211 of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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