TMI Blog2023 (11) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... ion taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of banking company , provisions of sec. 211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh - Thus we remit this issue also to the file of CIT(A) for fresh consideration and decision as per law in the same terms. Deduction u/s. 36(1)(viia) - advances made and not advances outstanding as on 31 st March, 2014 and deduction u/s. 36(1)(viia) is only on the incremental advances - HELD THAT:- We note that the issue of allowance u/s. 36(1)(viia) has been settled in the case of CIT, LTU v. Canara Bank [ 2023 (1) TMI 291 - KARNATAKA HIGH COURT] calculating average aggregate advances of rural branches under section 36(1)(viia), both advance outstanding as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned CIT(A) failed to appreciate the fact that the order of the learned Assessing Officer is based on surmises conjunctures. 3. The learned CIT(A) erred in upholding the disallowance of Rs. 732,27,14,733/- out of the amount claimed as deduction u/s. 36(1)(viia). 3.1. The learned CIT(A) failed to appreciate the fact that the addition made u/s 36(1)(viia) is hit by the third proviso to section 147 of the Income Tax Act, 1961. 3.2. The learned CIT(A) erred in considering only the incremental advance for the purpose of arriving at the deduction u/s 36(1)(viia). 3.3. The learned CIT(A) failed to appreciate the fact that for the purpose of arriving at the Aggregate Average Advances as per Rule 6ABA, the outstanding balance at the end of each month needs to be considered and not the incremental advances. 3.4. The learned CIT(A) failed to follow the binding decisions of the jurisdictional High Court and Tribunal. 3.5. The learned CIT(A) failed to appreciate the fact that the deduction u/s 36(1)(viia) has to be allowed on the basis of the calculation as provided in the section and not with reference to the amount of provision made in the books of account. 3.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued other statutory notices. The objections of the assessee were disposed by order dated 22.11.2019. The breakup of depreciation on land for FY 2013-14 provided by the assessee is as under:- Particulars Opening WDV Add 180 days Add 180 days Sale Consideration Depreciation Closing WDV Residential 5,62,91,929 - - - 28,14,596 5,34,77,332 Commercial 1,40,62,786 - - - 1,33,34,195 12,00,07,752 Total 7,03,54, - - - 1,61,48,791 17,34,85,084 4. During the reassessment proceedings, the AO observed that the assessee has claimed a sum of Rs. 936,90,65,332 as deduction u/s. 36(1)(viia) of the Act in the computation of income filed with the return. The AO observed that as per section 36(1)(viia), assessee is eligible to get deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 115JB dealing with Minimum Alternate Tax (MAT) are not applicable to them. The learned Assessing Officer held that the MAT provisions are applicable to the Bank and computed the Book Profit by applying the provisions of section 115JB. He made various additions to the Book Profit. On an appeal by the Bank, the learned CIT(A) held that the provisions of section 115JB are applicable to the Bank. Further, he also held that the various additions made by the learned Assessing Officer to the Book Profit are as per the provisions of section 115JB and upheld the same. The Appellant Bank has filed an appeal against the order of the learned CIT(A) challenging his decision on the applicability of MAT provisions and also adjustment made to the Book Profit. 2. Our Submissions: 2.1. Issue the decisions prior to 01-04-2013: Section 115JB(2) of the Income Tax Act, 1961 before its amendment by the Finance Act 2012 w.e.f. 01-04-2013 read as follows: (2) Every assessee, being a company, 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 Parts II and III of Schedule VI t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including 37[statement of profit and loss] for such financial year or part of such financial year falling within the relevant previous year. Explanation. 1 .. 2.4. From the above amended section, it can be seen that the provisions of sub clause 2(a) are not applicable to the Bank as decided by various appellate authorities and the High Court. 2.5. Sub clause 2(b) is applicable to a Company to which the second proviso to sub section (1) of section 129 of the Companies Act, 2013 is applicable. It is the submission of the Bank that the second proviso to section 129(1) of the Companies Act 2013 is not applicable to the Bank. 2.6. The second proviso to Section 129(1) of the Companies Act, 2013 reads as follows: Provided further that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 1882 (6 of 1882) ; (d) the Indian Companies Act, 1913 (7 of 1913) ; (e) the Registration of Transferred Companies Ordinance, 1942 (54 of 1942) ; and (f) any law corresponding to any of the Acts or the Ordinance aforesaid and in force- (1) in the merged territories or in a Part B States (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913) ; or (2) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), insofar as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu Kashmir) Act, 1968 (25 of 1968), insofaras other corporations are concerned ; and (g) the Portuguese Commercial Code, insofar as it relates to sociedades anonimas 2.14. Based on the above, it can be seen that only a Company registered under the Companies Act 1956 or any other previous Companies Act can be called a Company. 2.15. The Bank is not registered either under the Companies Act 1956 or under any other previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020] 422 ITR116 (Kar) 6 - 11 50 - 52 4 Punjab National Bank (successor of Oriental Bank of Commerce) ITA No. 740 /Del / 2020 - order dated 31-03-2023 for Asst Year 2016-17 10 217 -227 5 Indian Overseas Bank 2020 (3) TMI 897 - ITAT CHENNAI 29 - 30 181 -182 6 Damodar Valley Corporation 2017 (8) TMI 1363 - ITAT KOLKATA 4 - 6 104 -106 7 Rajasthan Financial Corporation 2023 (1) TMI 623 - ITAT JAIPUR 12 199 -201 2.20. In the case of Greater Bombay Co-Op. Bank Ltd vs United Yarn Tex. Pvt Ltd. Ors 2007 (4) TMI 679 SUPREME COURT, the Apex Court was considering a question whether the Recovery of Debts due to banks and Financial Institutions Act, 1993 (the RDB Act) is applicable to certain Co-operative Banks established in Maharashtra Andhra Pradesh. After analysing various provisions of the BR Act, RDB Act, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.23 of 1965. As noticed above, Co-operative bank was separately defined by the newly inserted clause (cci) and primary co- operative bank was similarly separately defined by clause (ccv). The meaning of 'banking company' must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. If the intention of the Parliament was to define the 'co-operative bank' as 'banking company, it would have been the easiest way for the Parliament to say that 'banking company' shall mean 'banking company' as defined in Section 5(c) and shall include 'co- operative bank' and 'primary co-operative bank' as inserted in clauses (cci) and (ccv) in Section 5 of Act 23 of 1965. Page 11 The provisions of the RDB Act, which are relevant, are referred to in the following paragraphs. Section 2(d) defines banks to mean (i) a banking company; (ii) a corresponding new bank; (iii) State Bank of India; (iv) a subsidiary bank; or (v) a Regional Rural Bank. In terms of clause (e) banking company shall have the meaning assigned to it in clause (c) of Section 5 of the BR Act. Page 12 Mr. S. Ganesh, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary co-operative bank was similarly separately defined by clause (ccv). The Parliament was simply assigning a meaning to words; it was not incorporating or even referring to the substantive provisions of the BR Act. The meaning of 'banking company' must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. It would have been the easiest thing for Parliament to say that 'banking company' shall mean 'banking company' as defined in Section 5 (c) and shall include 'co- operative bank' as defined in Section 5 (cci) and 'primary co-operative bank' as defined in Section 5 (ccv). However, the Parliament did not do so. There was thus a conscious exclusion and deliberate commission of co-operative banks from the purview of the RDB Act. The reason for excluding co-operative banks seems to be that co- operative banks have comprehensive, self- contained and less expensive remedies available to them under the State Co-operative Societies Acts of the States concerned, while other banks and financial institutions did not have such speedy remedies and they had to file suits in civil courts.(* emphasis applied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not include co-operative bank since the term co-operative bank is separately defined u/s 5(cci) of the BR Act. This clause 5(cci) is inserted vide section 56 of the BR Act contained in Part V of the said Act which deals with Co-Operative Banks. The Hon ble Supreme Court held that since the co-operative banks are defined separately under the BR Act, they cannot be included in the definition of the banking company contained in the said Act. 2.23. The above decision of the Hon ble Supreme Court squarely applies to the facts of this case also. In this case also, the Appellant Bank is separately defined u/s 5(da) of the BR Act as corresponding new bank and therefore, it cannot be included within the term banking company as per the said Act. 2.24. Without prejudice to the above, even assuming, but not admitting, that the Appellant Bank has to be treated as a company covered u/s 115JB(2)(b), then, also, the provisions are not applicable since the computation of Book Profit fails. As per first proviso to section 115JB(2), the Assessee has to follow the same accounting policy, accounting standards and method and rates adopted for calculating depreciation as have been adopted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 order dated 11-12-2020. 3.1. The learned CIT(A) has relied on the decision of the Hon ble Mumbai Tribunal in the case of Bank of India (supra). The decision of the Hon ble Tribunal in the case of Bank of India, with due respect, is per incuriam for the following submissions: The decision has mainly relied on the deeming fiction contained in section 11 of the Acquisition Act. It has been clearly established that the deeming fiction deems the Bank as a company for the purpose of Income Tax Act and not more than that. Therefore, unless the Bank is a banking company as per the provisions of the BR Act, then, it is not covered by the second proviso to section 129(1) of the Companies Act 2013 and as such, it is not covered by section 115JB(2)(b). With due respect, this fact has been overlooked by the Hon ble Tribunal. In para 29 of the said decision, the Hon ble Tribunal has extracted the observations of the Hon ble Bombay High Court in the case of Union Bank of India (supra). In the said decision, the Hon ble High Court has noted the second proviso to section 129(1) of the Companies Act 2013. It also noted that the second proviso refers to insurance or banking companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax purposes, was on a much lower amounts. We are unable to see any reasons as to why in this scheme of taxation of book profits, an assessee like the assessee before us, i.e. a bank distributing dividends on the basis of books profits but paying tax on a substantially lower amount of taxable profits, should be excluded. It is a corporate entity treated as such for the purposes of Income Tax Act 1961 by the virtue of specific legal provisions to that effect, it pays dividends, its taxable profits are substantially lower than book profits, and, therefore, in our humble understanding, there is no good reason not to treat it as a company- at least no good reasons are shown to us. All that has been said is that there is a drafting error in the legislation, by not specifically including the nationalized banks- as for the purpose of some other deduction provisions, but then what this argument overlooks is that definition provision is not the same thing as charging provision or even computation provision, and that the statutory definitions- on account of specific provision to that effect in the definition itself, have to yield to the contextual meanings. In any case, the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1921) 1 KB 64 at 71, Rowlatt J. laid down: In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 33. This Court has, in a plethora of judgments, referred to the aforesaid principles. Suffice it to quote from one of such judgments of this Court in Commissioner of Sales Tax Commissioner, Uttar Pradesh v. Modi Sugar Mills, 1961 (2) SCR 189 at 198:- In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency. (*) 34. We are, therefore, of the view that this appeal must be allowed and the judgment of the High Court of Kerala is, accordingly set aside and that of the learned Single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yokogawa India Ltd [2012] 17 taxmann.com 15 (Kar.) 13. Kirloskar Systems Ltd [2013] 40 taxmann.com 124(Karnataka) 14. Syndicate Bank [2015] 54 taxmann.com 292 (Karnataka) 15. Vodafone Essar Gujarat Ltd 2017 (8) TMI 451 - Gujarat High Court 16. Torrent Private Limited 2019 (6) TMI 709 - GUJARATHIGH COURT 17. Gokaldas Images [2020] 429 ITR 526 (Kar) 18. Canara Bank (erstwhile Syndicate Bank) 2022 (1) TMI 124 - ITAT BENGALURU 19. Vireet Investment (P.) Ltd [2017] 165 ITD 27 (Delhi - Trib.) (SB) 8. The ld. DR relied on the orders of lower authorities. She submitted that the disallowance calculated u/s. 36(1)(viia) is within the framework of the Income-tax Act and the language is very clear. The CIT(Appeals) has rightly decided the issue. Further in respect of applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 915 845 (Bang.) of 2017, dated 5-1- 2018] and the said method of making provision has been approved by the Calcutta High Court in Uttarbanga Kshetriya Gramin Bank case. 8. We have carefully considered the rival contentions and perused the records. 9. In Para 7.2 of the impugned order, the Tribunal has recorded thus, 7.2 Before us, the learned Authorised Representative for the assessee reiterated the submission that the language of Rule 6ABA is very clear and does not mandate that only incremental advances has to be considered and nothing can be read into it as has been done by the authorities below. It was submitted that this issue has been considered and decided in favour of the assessee by the co-ordinate bench of this Tribunal in the case of Canara Bank v. JCIT (2017) 60 ITR (Trib) 1 [ITAT (Bang)] 10. It is further held that the said decision has been followed in Vijaya Bank case. The manner in which the computation has been made has been given in the case of Vijaya Bank Case. Order passed by the Tribunal in Canara Bank's case followed in Vijaya Bank case has attained finality and the Revenue has not challenged the said order. Further, the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1956 as well as Banking Regulations Act, 1949. Therefore, as such provisions of Section 115JB of the Act does not apply to the assessee. However, the Assessing Officer held that provisions of Section 115JB of the Act are applicable to the bank. 13.1 Aggrieved, the assessee filed appeal to the first appellate authority. Before the first appellate authority it was contended that even amended section 115JB of the Act does not apply to the bank as it was of the view that (i) it does not prepare profit and loss account as per the provisions of the Companies Act, 1956 and (ii) Section 211 of the Companies Act, 1956 does not apply to them as they do not fall under the definition of Banking Companies under Companies Act, 1956. 13.2 The CIT(A) dismissed the assessee s contention by holding that there is no option given to the company u/s 115JB of the Act to exclude itself from the applicability of the provisions of Section 115JB of the Act on the ground that it does not prepare profit and loss account as per the provisions of the Companies Act, 1956. Further, it was held by the CIT(A) that provisions of section 115JB(2)(a) of the Act will be applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh. 13.6 In view of the co-ordinate Bench order of the Tribunal in assessee s own case for assessment year 2013-2014, we restore this issue to the files of the CIT(A). The CIT(A) shall follow the directions contained in the Tribunal order for assessment year 2013-2014 and shall afford a reasonable opportunity of hearing to the assessee before a decision is taken on the issue. It is ordered accordingly. 12. Respectfully following the above decision and submissions made by both the parties, we remit this issue also to the file of CIT(A) for fresh consideration and decision as per law in the same terms. This ground is allowed for statistical purposes. 13. Ground No.4.3 - Addition to book profit u/s. 115JB : This issue raised by the assessee has also been by the coordinate Bench of the Tribunal to the CIT(A) for fresh consideration as per para No.14 of the order which reads as under:- 14. The Assessing Officer had made v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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