TMI Blog2021 (8) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... able to a banking company. We are inclined to allow the grounds of appeal raised by the assessee even though the calculation submitted by the assessee is not proper. However, the provisions of section 115JB of the Act are not applicable to a scheduled bank. Consequently, we set aside the impugned order passed by the learned CIT(A) and allow the grounds of appeal raised by the assessee. - ITA No.7257/Mum./2019, ITA No.7258/Mum./2019, ITA No.7259/Mum./2019 - - - Dated:- 6-8-2021 - Shri S. Rifaur Rahman, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Assessee : Shri Satish Modi For the Revenue : Ms. Mamta Bansal ORDER PER S. RIFAUR RAHMAN, A.M. The captioned appeals have been filed by the assessee challenging three separate orders dated 25th September 2019, for A.Y. 2011 12, and orders of even date 27th September 2019, for A.Y. 2012 13 and 2013 14, respectively, passed by the learned CIT(A) 6, Mumbai. 2. Since all the captioned appeals pertain to the same assessee involving common issue, except variation in figures, which arose out of identical set of facts and circumstances, therefore, as a matter of convenience, these appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirming the order passed u/s 154 of the Act as it amounts to review of the assessment order. ₹ 8,61,57,497 (Aprox.) 3. Facts in brief: In the present case, the assessee filed its return of income on 29th September 2011, declaring total loss at ₹ nil. The Assessing Officer concluded assessment under section 143(3) of the Income Tax Act, 1961 (for short the Act ) after adjusting brought forward business loss of ₹ 52,88,74,650 and book profit at ₹ 43,08,18,446, which was set off against unabsorbed depreciation of ₹ 50,99,00,000, and determined a revised book profit of ₹ ( )7,90,81,554. The Assessing Officer noticed that the assessee had carried forward the same amount of unabsorbed depreciation of ₹ 50,99,00,000 in the year under consideration. The Assessing Officer, accordingly, issued notice dated 16th March 2018, under section 154 of the Act to the assessee proposing to rectify the mistake of carry forward of unabsorbed depreciation. In response, the assessee vide letter dated 22nd March 2018, submitted its reply stating that the bank had correctly claimed deduction of brought forward losses and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, oral contentions and written submissions of the appellant and material available on record. The Assessing Officer vide the impugned order has passed rectification and has re-computed the amount of carry forward of unabsorbed depreciation at ₹ 8,92,93,814/- and has rectified the order passed uls.143(3) dated 10.02.2014 since the mistake being apparent from record. However, the income computed remained Nil under the normal provisions as well as u/s.115JB of the Act. The appellant, in their submission, have contended that there was no mistake apparent from record as also the provisions of section 115JB of the Act is not applicable to them. The appellant has also contended that the order uls.154 cannot be passed after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. It is seen that the assessment order for A.Y.2011-12 was passed u/s.143(3) on 10.02.2014 and the order under challenge has been passed on 31.03.2018. The assessee contends that since the same was delivered to them on 07.05.2018, it appeared that the order was passed after the expiry of four years from the end of financial year in which the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act are not applicable in case of a Bank. For that proposition, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Union Bank of India, [2019] 263 Taxman 685 (Bom.). He further submitted that the learned CIT(A) distinguished the case relied upon by the assessee in Eli Lilly Co., India Pvt. Ltd. (supra) by observing that the case relied upon by the assessee which was assessed under section 143(1) of the Act, whereas in assessee s case the assessment was completed under section 143(3) of the Act, therefore, it is not applicable. However, he submitted that the issue is not about how the assessment was completed, but whether the issue involved under consideration is debatable or not. However, he submitted that with regard to the issue as debatable, the learned CIT(A) has not adjudicated the same. Further he invited our attention to Page 14 of the paper book to bring to our notice the computation of minimum alternate tax (MAT) for the assessment year 2011 12 and submitted that the assessee has followed the proper method of determining the tax as per MAT. He also brought to our notice Page 24 of the paper book and brought to our notice computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 08, 2010 11, 2011 12. Based on the calculation submitted before us, we notice that the assessee has adjusted the above declared profit against the business loss carried forward by the assessee. However, as per the Explanation 3 to section 115JB of the Act considering huge loss carried forward by the assessee and in few assessment years the assessee has earned net profit, the assessee is allowed to adjust the above said profits only to the extent of unabsorbed depreciation or business loss whichever is less. Keeping the Explanation in mind, in our considered view, the computation determined by the Assessing Officer is just and proper. However, we notice that the assessee is a scheduled bank and as per the decision of the Hon'ble Jurisdictional High Court in Union Bank of India (supra), the Hon ble Court held that the provisions of section 115JB of the Act as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company. For the sake of clarity, it is reproduced below: 8. In order to resolve the controversy, we may take note of the statutory provisions and the legislative history. As is well known, Section 115JB of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 210 of the Companies Act, 1956(1 of 1956): Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956(1 of 1956), which is different from the previous year under this Act,- (i) the account policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for financial year or part of such financial year falling within the relevant previous year. 9. In terms of sub-section (1) of Section 115JB of the Act thus notwithstanding anything contained in any of the provisions of the Act in case of an assessee being a company where the income tax payable on the total income as computed under the Act, is less than prescribed percentage of its book profit, such book profit shall be deemed to be the total income of the assessee. In so far as the language used under sub-section (1) of Section 115JB is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondent-bank in terms of Section 210 of the Companies Act, 1956 is also required to lay its accounts before the Annual General Meeting. However, such accounts would necessarily be prepared in accordance with the provisions of Banking Regulation Act, 1949 and never be those which even had it been possible to be prepared, in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. The applicability of this proviso therefore, in case of a banking company would immediately create complications. On one hand, in terms of Section 210 of the Companies Act, 1956, the bank would be under an obligation to lay before Annual General Meeting its annual accounts including the profit and loss account. These accounts would be prepared in terms provisions contained in Banking Regulation Act, 1949. Sub-section (2) requires preparation of the accounts in terms of the Companies Act. Proviso to sub-section (2) would require maintaining the same parameters in relation to the accounting policies, accounting standards and method and rate of depreciation as adopted for the purpose of preparing the accounts, which would ultimately be laid before the Annual General Meeting. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) of Section 211 of the Companies Act, 1956 and as a consequence from the purview of Section 115JB of the Act. 13. What we have held above is duly supported by the division bench judgment of Kerala High Court. It was a case in which the assessee before the court was Kerala State Electricity Board, a statutory corporation constituted under Section 5 of the Electricity (Supply) Act, 1948. The revenue sought to cover the said Electricity Board under the provisions of Section 115JB which the assessee opposed. The issue reached the Kerala High Court. The Court referred to and relied upon the decision of the Supreme Court in case of B.C. Shrinivasa Setty (supra). It was noticed that the Board was required to keep and maintain its account in the manner specified by the Central Government and not in the manner specified in the Companies Act. In that view of the matter it was held that section 115JB would not apply to the Electricity Board. Learned counsel for the assessee has also brought to our notice decisions of Delhi High Court holding that such MAT provisions would not apply to the insurance companies and to the banking companies. 14. There are certain significant legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the provisions of the Act is less than the MAT liability. Book profit for this purpose is computed by making certain adjustments to the profit disclosed in the profit and loss account prepared by the company in accordance with the Schedule VI of the Companies Act, 1956. As per section 115JB, every company is required to prepare its accounts as per Schedule VI of the Companies Act, 1956. However, as per the provisions of the Companies Act, 1956, certain companies, e.g. insurance, banking or electricity company, are allowed to prepare their profit and loss account in accordance with the provisions specified in their regulatory Acts. In order to align the provisions of Income-tax Act with the Companies Act, 1956, it is proposed to amend section 115JB to provide that the companies which are not required under section 211 of the Companies Act to prepare their profit and loss account in accordance with Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordance with the provisions of their regulatory Acts shall be taken as a basis for computing the book profit under section 115JB. II. It is noted that in certain cases, the amount standing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y insurance or banking companies or companies engaged in the generation or supply of electricity or to any other class of company in which form of financial statement has been specified in or under the Act governing such class of company. Combined reading of this proviso to sub-section (1) of Section 129 of the Act, 2013 and clause (b) of sub-section (2) of Section 115JB of the Act would show that in case of insurance or banking companies or companies engaged in generation or supply of electricity or class of companies for whom financial statement has been specified under the Act governing such company, the requirement of preparing the statement of accounts in terms of provisions of the Companies Act, is not made. Clause (b) of sub-section (2) provides that in case of such companies for the purpose of Section 115JB the preparation of statement of profit and loss account would be in accordance with the provisions of the Act governing such companies. This legislative change thus aliens class of companies who under the governing Acts were required to prepare profit and loss accounts not in accordance with the Companies Act, but in accordance with the provisions contained in such gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the provisions of the Act governing such company. To our mind, this is some what curious provision. In the original form, sub-section (2) of section 115JB of the Act did not offer any such option to a banking company, insurance company or electricity company to prepare its profit and loss account at its choice either in terms of its governing Act or as per terms of Section 115JB of the Act. Secondly, by virtue of this explanation if an anomaly which we have noticed is sought to be removed, we do not think that the legislature has achieved such purpose. In plain terms, this is not a case of retrospective legislative amendment. It is stated to be clarificatory amendment for removal of doubts. When the plain language of sub-section (2) of Section 115JB did not permit any ambiguity, we do not think the legislature by introducing a clarificatory or declaratory amendment cure a defect without resorting to retrospective amendment, which in the present case has admittedly not been done. 21. In the result, we hold that sub-section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company. We answer the question No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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