S. 115JB of the Income-tax Act, 1961 — Liability to pay income tax based on book profit — Whether banking company liable to pay tax u/s.115JB — Held, No.

ITAT ‘G’ Bench, Mumbai

ITA No. 3390/Mum./2009

A.Y. : 2004-05. Decided on :
30-9-2010

Counsel for assessee/revenue
:

Gajendra Golchha/A. K. Nayak

Per Pramod Kumar :

The assessee was a foreign
bank operating in India through a branch office. During the year under appeal,
it had shown a profit of Rs.78,32,594 as per profit and loss account. After
making necessary adjustments as per normal provisions of the Act, including the
setting off of brought forward loss of A.Y. 2003-04, the assessee had returned
nil income. The original assessment u/s.143(3) was completed on 19th September
2006, without making any adjustments to the income returned by the assessee.
According to the AO, the income of the assessee had escaped assessment as it had
not computed book profit u/s.115JB. Accordingly, the notice u/s.147 was issued.
The assessee objected to the reassessment proceedings on the ground that the
provisions of S. 115JB were not applicable to the assessee. However, the CIT(A)
upheld the action of the AO.

Before the Tribunal the
Revenue contended that there was no specific exclusion clause for the banking
companies, and in the absence thereof, it was not open to infer the same. It
further added that the submission of the assessee was clearly contrary to the
legislative intent and plain wordings of the statute.

The Tribunal agreed with the
contention of the assessee that the provisions of S. 115JB were not applicable
to the case of the assessee. According to it, the provisions of S. 115JB can
only come into play when the assessee was required to prepare its profit and
loss account in accordance with the provisions of Part II and III of Schedule VI
to the Companies Act. In the case of the assessee being a banking company,
however, the provisions of Schedule VI are not applicable in view of the
exemption given under proviso to S. 211(2) of the Companies Act. The final
accounts of the banking companies are required to be prepared in accordance with
the provisions of the Banking Regulation Act. Further, relying on the Mumbai
Tribunal decision in the case of Maharashtra State Electricity Board v. JCIT,
(82 ITD 422), it held that the provisions of S. 115JB do not apply to the
assessee, and, therefore, the Assessing Officer was in error in concluding that
income had escaped assessment in the hands of the assessee.