ACIT, ANAND CIRCLE, ANAND, ANAND V. NATIONAL DAIRY DEVELOPMENT BOARD, ANAND

ITA 733/AHD/2023

AI Insights

The case involves a series of appeals by the Revenue against the National Dairy Development Board (NDDB) concerning the applicability of Section 115JB (MAT) and subsequent rectification orders under Sections 154 and 143(3) of the Income Tax Act, 1961 for various assessment years. The core legal issue was whether the NDDB, being a statutory corporation, falls under the definition of 'company' as per the Income Tax Act, which would make it liable for MAT. The Tribunal examined the statutory framework of the NDDB, the specific provisions of the Income Tax Act, and relevant judicial precedents, ultimately concluding that the NDDB is not subject to MAT under Section 115JB.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312282 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Other Referred Cases: Kerala State Electricity Board -Vs- DCIT, Union Bank of India -Vs- DCIT, Deputy Commissioner of Income Tax Vs. Kerala State Electricity Board, DCIT v Rajasthan Financial Corporation
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Change of opinion; Revised return; Rectification of order; Earning of tax free income; CHAPTER IV
• Section: 143(3); 154; 69; 234B; 27; 28; 14A; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member The ACIT, Anand Circle, Anand Vs National Dairy Development Board Post Box No. 40 Opp. Jagnath Mahadev Temple, Borsad Cross Road, Anand 388001, Gujarat PAN: AABCN2029C The ACIT, Anand Circle, Anand Vs National Dairy Development Board Post Box No. 40 Opp. Jagnath Mahadev Temple, Borsad Cross Road, Anand 388001, Gujarat PAN: AABCN2029C National Dairy Development Board Post Box No. 40 Opp. Jagnath Mahadev Temple, Borsad Cross Road, Anand 388001, Gujarat PAN: AABCN2029C Vs The ACIT, Anand Circle, Anand ITA Nos: 733, 734 & 755/Ahd/2023 Asst Years: 2010-11 & 2011-12 ITA Nos: 756 & 757/Ahd/2023 & C.O. Nos: 2 & 3/Ahd/2024 Assessment Year: 2012-13 I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 2 The ACIT, Anand Circle, Anand Vs National Dairy Development Board Post Box No. 40 Opp. Jagnath Mahadev Temple, Borsad Cross Road, Anand 388001, Gujarat PAN: AABCN2029C National Dairy Development Board Post Box No. 40 Opp. Jagnath MahadevTemple, Borsad Cross Road, Anand 388001, Gujarat PAN: AABCN2029C (Appellant) Vs The ACIT, Anand Circle, Anand (Respondent) Revenue Represented: Shri V Nandakumar, CIT-DR & Shri Kavan Limbasiya, Sr.D.R. Assessee Represented: Shri Milin Mehta, A.R. & Ms. Amrin Pathan, A.R. Date of hearing : 19-03-2025 Date of pronouncement : 02-05-2025 आदेश/ORDER PER BENCH:- These appeals are filed by the Revenue as against the appellate orders arising against rectification and assessment orders passed under Section 154 and 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) for Assessment Years 2010–11 to 2013–14. Since the common issue of applicability of the provisions of Section ITA Nos: 1052 & 1059/Ahd/2023 Assessment Year: 2013-14 I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 3 115JB (MAT) to the assessee as Statutory Corporation and whether rectification order u/s 154 was legally permissible are involved in all these appeals. For the sake convenience the same are disposed of by this common order. 2. The assessee, the National Dairy Development Board (hereinafter referred as NDDB), is a statutory body established under the National Dairy Development Board Act, 1987, with the object of promoting, financing, supporting dairy and related rural industries. For the Asst. Year 2010-11 assessee e-filed its return of income on 01.10.2010 declaring loss of Rs.39,92,593/. The AO passed regular assessment order u/s.143(3) of the Act on 30.10.2012 determining total income at Rs.44,29,53,080/-. The assessee filed an appeal before Ld.CIT(A), Baroda which was partly allowed on 24.03.2014. An order giving effect [herein after referred as OGE] to the appellate order was passed by the A.O. on 09.12.2014. Further appeal was preferred against the said OGE order, which was decided by Ld. CIT(A) on 16.12.2016. Second giving effect order dated 27-03-2017 passed by the AO and then the A.O. passed the suo-motto rectification order u/s.154 of the Act dated 11.08.2017 determining the total income at Rs.4,49,59,741/- with charging MAT liability on Book profit at Rs.46,27,94,914/-, on the ground of mistake apparent from record. [which is the subject matter of appeal in ITA No.733/Ahd/2023 for A.Y. 2010-11]. 2.1. The assessee also filed a rectification petition u/s 154 of the Act on 11.09.2017 against the said OGE order, to allow the exempt income of Rs.15.66 crores for the disallowance u/s. 14A of the Act. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 4 The AO passed rectification order u/s.154 on 08.03.2019 and allowed the exempt income but added the disallowance of Rs.2,30,15,007/- u/s.14A in the computation of book profit u/s.115JB of the Act. [which is the subject matter of appeal in ITA No.734/Ahd/2023 for A.Y. 2010-11]. 3 On further appeal against the first rectification order, Ld CIT[A] allowed the assessee appeal by observing as follows: “Decision of Ground No. 2 & 3 Hon’ble Gujarat High Court opined that in case MAT provisions kick in because of relief in respect of additions made, then it would be open for the AO while giving effect to the order to apply provisions of MAT. AO did not apply MAT provisions while giving effect CIT(A)’s order. It was done subsequently by invoking section 154. The AO in his order u/s 154 has mentioned that MAT is applicable because appellant is a company. This is clearly not enough. No attempt was made to rebut the contention of the appellant. Applicability of MAT is clearly a debatable issue and is not amenable to rectification u/s 154. I agree with the appellant on this count. Moreover the reason ascribed for invoking 115JB is also not enough. These grounds are therefore decided in favour of the appellant 4. GROUND No. 4: Without prejudice to above, while computing book profit as per Section 115JB, as per clause (i) and (ii) of Explanation 1 to that section the AO ought to have reduced exempt interest, dividend income and reversal o AO ought to have reduced exempt interest, dividend income and reversal of provision of non-performing assets, provision of inventory and wealth tax provision it is submitted to be held now. Decision of Ground No.4: in view of decision on Ground No 2 & 3 this ground does not require adjudication.” 3.1. As against the above appellate order the Revenue is in appeal before us raising the following Grounds of Appeal in ITA No.733/Ahd/ 2023: I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 5 1.\" On the facts and in the circumstances of the case and in law the learned CIT(A) erred by not adjudicating the issue of disallowance made u/s 14A of the Income Tax Act, 1961, added to the Book Profit u/s 115JB of the Act, by holding that the issue stands deleted by Order of CIT(A) read with CIT(A) No. Vadodara- 4/10242/2019-20 without appreciating the fact that disallowance made u/s 14A of the Income Tax Act, 1961 on account of administrative expenses incurred of Rs.2,29,89,221/- in earning exempt income is was required to be added to the book profit as per clause(f) to Explanation 1 of Section 115JB of the Income Tax Act, 1961. 4. As against the second rectification order, Ld CIT[A] allowed the assessee appeal by observing as follows: “2. GROUND No.2:- The AO erred in increasing the profit by disallowance u/s 14A of the Act Rs.2,30,15,007/- without appreciating that provisions of section 14A apply only to the computation of income under chapter IV of the Act and not to the computation of book profit under Chapter XII-B since provisions of chapter XII-B of the Act are special provisions and complete code in itself. It is submitted it be so held now. Decision of Ground No.2: This ground is not being decided in view of decision in Appeal No 10242 of AY 2010-1 1, as it has become academic.” 4.1. As against the second appellate order the Revenue is in appeal before us raising the following Grounds of Appeal in ITA No.734/ Ahd/ 2023: 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding (a) that assessee itself has admitted that it is a company under the Income tax Act, 1961 as per the definition of company in Section 2(17) read with definition of Indian Company in Section 2(26)(ia) of the Income Tax Act 1961 in the ground raised in respect of applicability of provisions of Section 115JB of the Act for A.Y. 2014-15, and that, therein it is held by the Ld. CIT(A) that provisions of Section 115JB of the Act would apply to the assessed. (b) that the AO has exercised the provisions of Section 154 of the Act in true perspective and has correctly computed book profit u/s 115JB of the Income Tax Act, 1961 at Rs. 46,27,94,414/therefore, erred in holding that I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 6 the applicability of MAT is a debatable issue and is not amenable to rectification u/s 154 of the Income Tax Act, and also ignoring the fact that assessee files its Return of Income in the status of Company.” 5. Heard rival submissions and perused materials available on record including the National Dairy Development Board Act, 1987, Paper Books and case laws filed by the assessee. It is undisputed fact that the assessee NDDB, is a Statutory Body established under the National Dairy Development Board Act, 1987 by the Central Government with the object of promoting, financing, supporting dairy and related rural industries. As per clause [17][i] of section 2 of the IT Act, a Company is defined as “any body corporate incorporated by or under the laws of a country outside India”. As per clause 26 of Section 2 of the IT Act, defines an “Indian Company” as “a company formed and registered under the Companies Act, 1956 and as per clause [ia] also includes a Corporation established by or under a Central, State or Provincial Act”. Thus NDDB is a Body Corporate established under the Central Act is deemed as an “Indian Company” for the purpose of the Income Tax Act. 5.1. Further NDDB Act, 1987 itself is a self contained code and the Provisions of sections 27 and 28 of the NDDB Act which reads as follows: “27 (1) The balance sheet and accounts of the National Dairy Development Board shall be prepared in such form and in such manner as may be prescribed. (2) The Board shall cause the books and accounts of the National Dairy Development Board to be closed and balanced as on the 31st day of March each year or such other date as the Board may, with the con-currence of the Central Government, decide. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 7 28. (1) The accounts of the National Dairy Development Board shall be audited by auditors duly qualified to act as auditors of companies under the Companies Act, and the appointment of auditors and remuneration payable to them shall be subject in the approval of the Central Government. (2) Every auditor in the performance of his duties shall have at all reasonable times access to books, accounts and other documents of the National Dairy Development Board. (3) The auditors shall submit their report to the Board which shall forward a copy of their report to the Central Government.” 5.2. Further the Ministry of Finance, Department of Company Affairs vide Gazette Notification No.187 dated 23-02-2004 held that “National Dairy Development Board” to be public financial institution which reads as follows: MINISTRY OF FINANCE (Department of Company Affairs) NOTIFICATION New Delhi, the 23rd February, 2004 S.O. 219(E)- In exercise of the powers conferred by Sub-section (2) of Section 4A of the Companies Act, 1956 (1 of 1956) the Central Government hereby specifies the following institutions to be public financial institutions and for that purpose makes the following further amendment in the Notification of the Government of India, published in the Gazette of India dated the 13th May, 1978 in Part II, Section 3(ii) vide in the Ministry of Law, Justice and Company Affairs (Department of Company Affairs) number S.O. 1329 dated 8th May, 1978 namely- In the said notification, after serial number 40, the following serial numbers and the entries relating thereto shall be inserted namely-d “41. National Dairy Development Board 42. The Pradeshiya Industrial and Investment Corporation of U.P. Limited 43 Rajasthan State Industrial Development and Investment Corporation Limited. 44. State Industrial Development Corporation of Maharashtra Limited 45. West Bengal Industrial Development Corporation Limited. 46. Tamil Nadu Industrial Development Corporation Limited. [F No. 3/1/2003-CI.V] JITESH KHOSLA A.lt. Secy. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 8 5.3. Thus the assessee NDBB is not a company as per the provisions of the Companies Act, therefore the provisions of section 115 JB of the IT Act is not applicable. Further the term ‘company’ as referred to in section 115JB of the Act is applicable only Companies registered under the Company’s Act, whose accounts are drawn as per the provisions of Company’s Act are liable to pay tax on book profit. As per section 115 JB of the Act, the company is required to prepare its Profit and Loss account as per the provisions of Part II and III of Schedule VI of the Company’s Act and required to place before the Annual General Meeting. Whereas the assessee NDPP is required to prepare its accounts as per section 27 and 28 of the NDDB Act, there is no share holders in NDDB, therefore there is no question dividend payable and the conditions stipulated u/s.115 JB[ii] are not satisfied and the computation mechanism could not be applied, since the charging sections itself fails. 5.4. In similar circumstances Hon’ble Kerala High Court in the case of Kerala State Electricity Board -Vs- DCIT reported in 196 Taxman 1 [Ker] held as follows: “Whether section 115JB was applicable to assessee Sections 1151, 115JA and 115JB create legal fictions regarding the total income of the companies. While the earlier two sections mandate the department to make the assessment on a fictitious amount of 'total income' where the actual amount of total income computed in accordance with the Act is less than 30 per cent of the book profits of the company, section 115JB mandates the department to resort to the fiction in those cases where the tax payable on the basis of the total income computed in accordance with the Act is less than a specified percentage (7 per cent for the years in issue) of the book profit. Further, sections 115JA and 115JB I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 9 also stipulate a definite manner of preparing the annual accounts including the profit and loss accounts. More specifically, section 1151B stipulates that the accounting policies, accounting standards, etc., shall be uniform, both for the purpose of income-tax as well as for the information statutorily required to be placed before the annual general meeting conducted, in accordance with section 210 of the Companies Act, 1956. [Para 13] However, the assessee though was by definition a company under the Income-tax Act and deemed to be a company for the purpose of the Income-tax Act by virtue of the declaration under section 80 of the Electricity Supply Act, it was not a company for the purpose of the Companies Act. Therefore, it was not obliged either to convene an annual general meeting or place its profit and loss account in such general meeting. As a matter of fact, a general meeting contemplated under section 166 of the Companies Act, 1956 was not possible in the case of the assessee, as there were shareholders for the assessee-board. On the other hand, under section 69 of the Electricity Supply Art, the assessee was obliged to keep proper accounts, including the profit and loss account, and to prepare an annual statement of accounts, balance sheet, etc., in such form as had been prescribed by the Central Government and notified in the Official Gazette. (Para 15) Thus, it could be seen that coming to the maintenance of the accounts, the assessee, though was deemed to be a company both by virtue of operation of section 80 of the Electricity Supply Act for the purpose of Incomes tax Act and by virtue of the definition of the expression company under the Income-tax Act, yet it was required to keep and maintain its accounts in a manner specified by the Central Government, but not in the manner specified in the Companies Act. Therefore, the question was whether the legal fiction contemplated under section 115JB could be pressed into service while making the assessment of income-tax payable by the assessee. (Para 15) Section 115JB creates a legal fiction regarding the total income of the assessees which are companies. However, at the earliest point of time when such a fictitious process was invented, i.e., when section 115J was introduced, the section expressly excluded from its operation bodies like the assessee. Coming to section 115JA, though such express exclusion is absent, the CBDT issued Circular No. 762, dated 18-2-1998-[which is binding on the department as per decisions in K.P. Varghese v. ITO (1981) 131 ITR 597/7 Taxman 13(SC) und Ranadey Micronutrients v. Collector of I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 10 Central Excise 1996 (87) ELT 19 (SC)] excluding the bodies like the assessee from the operation of the said section. Though under the normal rules of interpretation of statutes, the omission of a clause which existed in the statute of some point of time by a subsequent amendment would indicate that the Legislature intended not to give the benefit of such a clause any more to those who were getting the benefit of such exclusionary clause, yet it is not an absolute rule. The other attendant circumstances, the context, the history and the mischief sought to be remedied by the amendment are all required to be examined before reaching a definite conclusion. [Para 18] The Circular No. 762 not only is binding on the department, but also explains the purpose of introducing section 115JA. On a reading of the said circular, it is clear that the Legislature took note of the fact that a number of companies paying marginal tax and also zero-tax had grown. Such companies earned substantial book profits and paid handsome dividends to the shareholders without paying any tax to the exchequer. Such a result was achieved by such companies by taking advantage of the then existing legal position which permitted the adoption of dual accounting policies and practices, one for the purpose of computation of income-tax and another for the purpose of determining the book profits for the purpose of payment of dividends. Therefore, the amendment was made to plug the loophole in the law. However, the CBDT understood that companies engaged in the business of generation and distribution of electricity and the enterprises engaged in developing, maintaining and operating infrastructure facilities, as a matter of policy, were not brought within the purview of the amendment (Section 115JA) for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT was binding on the department. [Para 19] If that is the background in which section 115JA has been introduced into the Income-tax Act, section 115JВ, which is substantially similar to section 115JA, cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of section 115JA [Para 20] Another reason was that the assessee or bodies similar to the assessee, which were totally owned by the Government-either State or Central had no shareholders, Profit, if at all, made by the assessee would be for the benefit of entire body politic of the State. In the final analysis, all taxation is meant for the welfare of the people in a Constitutional Republic. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 11 Therefore, the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, the fiction fixed under section 115JB cannot be pressed into service against the assessee while making the assessment of the tax payable under the Income-tax Act. [Para 22]” 5.5. Revenue’s further appeal before Hon’ble Supreme Court (2022) 141 taxmann.com 341 (SC) was also dismissed by holding that section 115JB would not be applicable to Electricity Board, a Statutory Corporation constituted by notification of State of Kerala, pursuant to the powers vested in it and by virtue of section 5 of Electricity Supply Act 1948. 6. Thus the question of invoking rectification u/s.154 of the Act, to bring to tax u/s.115JB on the assessee is against the provisions of law and exfacei illegal. Further such debatable issues cannot be done under rectification order, therefore, the first Rectification order and appellate order are liable to be quashed. In the result the Revenue’s appeal against the first rectification order passed for the Asst. Year 2010-11 in ITA No.733/Ahd/2023 is hereby dismissed. 7. Since the second rectification order is arising from the first rectification order, which is already quashed by this Tribunal in Paragraphs 5 & 6 above, the second rectification order has no legs to stand in the eye of law, consequently Revenue’s appeal against the second rectification order and appellate order passed for the Asst. Year 2010-11 in ITA No.734/Ahd/2023 are hereby dismissed. ITA No. 755/Ahd/2023 for A.Y. 2011-12 I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 12 8. The assessee e-filed its Return of Income for Asst. Year 2011-12 on 26.09.2011 declaring total Income of Rs.9,69,66,285/- and revised return was filed on 27.08.2012 declaring total income of Rs.2,36,19,752/-. The AO passed regular assessment order u/s 143(3) of the Act on 18.03.2014 determining total income as Rs.1,66,66,44,232/-. The assessee filed appeal against the said order before Ld. CIT(A) which was decided on 14.06.2016. The AO passed giving effect order on 20.10.2016, determining the total income at Rs.1,66,66,44,232/- without calculating MAT liability on Book profit of Rs.1,16,01,87,138/-. That was considered as mistake apparent from record, therefore the AO passed the rectification order u/s 154 of the Act on 23.03.2018 determining the total income at Rs.22,90,72,703/- by computing MAT liability on Book profit at Rs.1,16,01,87,138/- 8.1. On appeal before CIT[A] following Supreme Court judgement in the case of Kerala State Electricity Board Ld. CIT(A) deleted the addition made u/s.115JB of the Act. Aggrieved against the appellate order, the Revenue is in appeal with the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding: (a) that assessee itself has admitted that it is a company under the Income tax Act, 1961 as per the definition of company in Section 2(17) read with definition of Indian Company' in Section 2(26)(ia) of the Income Tax Act 1961 in the ground raised in respect of applicability of provisions of Section 115JB of the Act for A.Y. 2014-15, and that, therein it is held by the Ld.CIT(A) that provisions of Section 115JB of the Act would apply to the assessee. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 13 (b) that the AO has exercised the provisions of Section 154 of the Act in true perspective and has correctly computed book profit u/s 115JB of the Income Tax Act, 1961 at Rs.116,01,87,138/-therefore, erred in holding that the applicability of MAT is a debatable issue and is not amenable to rectification u/s 154 of the Income Tax Act, and also ignoring the fact that assessee files its Return of Income in the status of Company. (c) that in view of decision on ground No.3 & 4, the ground regarding not reducing reversal of provision of non-performing assets Rs.1,45,80,10,247/- while computing book profit as per Section 115JB, as per clause (i) of Explanation 1, becomes academic, without deciding the issue on merit? (d) that in view of decision on ground No.3 & 4, the ground regarding increasing the book profit u/s 115JB of the Act by disallowance u/s 14A of the Act Rs.2,39,18,818/- becomes academic without deciding the issue on merit ? 9. The core issue is whether the omission to apply MAT under section 115JB or the alleged errors in computing book profit constitutes a mistake apparent from record, as contemplated under section 154 of the Act. The Ld AO originally accepted the returns without invoking MAT. Any subsequent action to impose MAT or recalculate it by changing the position amounts to change of opinion, which cannot be cloaked as rectification u/s 154 of the Act. Further, when CIT(A) did not direct to levy of MAT, the AO had no jurisdiction to travel beyond the scope of directions while giving effect to the appellate order. 9.1. That apart the assessee is a Statutory Board, not a company registered under the Companies Act, and its accounts are not prepared in accordance with Schedule VI, which is a pre-condition under section 115JB of the Act. This position has been subject to judicial scrutiny in several cases and cannot be said to be free from I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 14 debate. Therefore, any attempt to apply MAT through a rectification order involves a long-drawn reasoning process and not a patent mistake and permissible as held by the Apex Court in T.S. Balaram v. Volkart Bros. (1971) 82 ITR 50 (SC). 10. In light of the above, the issue of applicability of Section 115JB to NDDB is clearly debatable and not a mistake apparent from record. The rectification order passed is beyond the scope of section 154 of the Act and therefore liable to be quashed as without jurisdiction. In the result the Revenue’s appeal against the rectification order passed for the Asst. Year 2011-12 in ITA No.755/Ahd/2023 is liable to be dismissed. ITA No. 756 & 757/Ahd/2023 for A.Y. 2012-13 11. The assessee e-filed its return of income for AY 2012-13 on 27.09.2012 declaring total loss of Rs.(84,09,26,490/-). The AO passed order u/s. 143(3) of the Act on 30.03.2015 reducing the total loss to Rs.(36,11,90,670/-) without calculating MAT liability on Book profit. That mistake was apparent from record, therefore the AO passed the rectification order u/s 154 of the Act on 03.11.2017, raising tax demand of Rs.10,10,34,710/-. Subsequently, the assessee submitted application for rectification on 01.12.2017. The AO was passed rectification order u/s 154 of the Act on 31.01.2018. 12. On appeal before CIT[A] following Supreme Court judgement in the case of Kerala State Electricity Board Ld. CIT(A) deleted the addition made u/s.115JB of the Act and the other additions made were consequently academic in nature not adjudicated upon. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 15 13. Aggrieved against the appellate order, the Ground of Appeal raised by the Revenue in ITA No.756/Ahd/2023 are as follows: 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that in view of decision in Appeal No.10319 filed on 30-11-2017, the ground regarding not reducing reversal of provision of non-performing assets and Inventory of Rs.89,56,26,283/-while computing book profit as per Section 115JB, as per clause (i) of Explanation 1, becomes academic, without deciding the issue on merit ? 13.1. Aggrieved against the appellate order, The Ground of Appeal raised by the Revenue in ITA No.757/Ahd/2023 are as follows: 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding (a) that assessee itself has admitted that it is a company under the Income tax Act, 1961 as per the definition of company in Section 2(17) read with definition of Indian Company' in Section 2(26)(ia) of the Income Tax Act 1961 in the ground raised in respect of applicability of provisions of Section 115JB of the Act for A.Y. 2014-15, and that, therein it is held by the Ld. CIT(A) that provisions of Section 115JB of the Act would apply to the assessee. (b) that the AO has exercised the provisions of Section 154 of the Act in true perspective and has correctly computed book profit u/s 115JB of the Income Tax Act, 1961 at Rs.34,98,90,865/-therefore, erred in holding that the applicability of MAT is a debatable issue and is not amenable to rectification u/s 154 of the Income Tax Act, and also ignoring the fact that assessee files its Return of Income in the status of Company. (c) that in view of decision on ground No.3 & 4, the ground regarding not reducing reversal of provision of non-performing assets and inventory of Rs.89,56,26,283/- & reversal of excess provision of inventory of Rs.316/- while computing book profit as per Section 115JB, as per clause (i) of Explanation 1, becomes academic, without deciding the issue on merit? (d) that in view of decision on ground No.3 & 4, the ground regarding increasing the book profit u/s 115JB of the Act by disallowance u/s 14A of I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 16 the Act Rs.2,97,33,479/- becomes academic without deciding the issue on merit ? 13.2. The Ground of Appeal raised by Assessee in C.O. No.2/Ahd/2024 are as follows: The Ld. Assessing Officer ('Appellant') being aggrieved by the order dated 4 August 2023 passed by the National Faceless Appeal Centre ('NFAC') preferred an appeal before Ahmedabad Bench of Hon'ble ITAT vide ITA No. 756 of 2023. Against the same, respondent wishes to cross object on the following ground: 1. The NFAC has erred on facts and in law in upholding the calculation of interest u/s 2348 of the Act amounting to Rs. 1,07,29,545 till the date of rectification order under consideration instead of the date of regular assessment. 2. The NFAC has erred on facts and in law in upholding the calculation of interest u/s 234D of the Act amounting to Rs 32,24,401/-without appreciating the fact that respondent is not liable to pay interest as per provisions of the said section. The Cross objector prays for leave to add, alter and/or amend all or any of the grounds before final hearing of the Cross objection. 13.3. The Ground of Appeal raised by Assessee in C.O. No.3/Ahd/2024 are as follows: The Ld. Assessing Officer ('Appellant') being aggrieved by the order dated 4 August 2023 passed by the National Faceless Appeal Centre ('NFAC') preferred an appeal before Ahmedabad Bench of Hon'ble ITAT vide ITA No. 757 of 2023. Against the same, respondent wishes to cross object on the following ground: 1. The NFAC has erred on facts and in law in upholding the calculation of interest u/s. 234B of the Act amounting to Rs.1,07,29,545/- till the date of rectification order under consideration instead of the date of regular assessment. 2. The NFAC has erred on facts and in law in upholding the calculation of interest u/s. 234D of the Act amounting to Rs 32,24,401/-without I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 17 appreciating the fact that respondent is not liable to pay interest as per provisions of the said section. The Cross objector prays for leave to add, alter and/or amend all or any of the grounds before final hearing of the Cross objection. 14. The Ld CIT[A] considered his earlier order and dismissed the appeal without deciding the issue on merit since the issue becomes academic. Therefore for the detailed reasons recorded by this Tribunal in Paragraphs 5, 6, 9 & 10 above, the present rectification orders dated 03-11-2017 and 31-01-2018 has no jurisdiction in the eye of law and are hereby quashed. Consequently, both the Revenue appeals for the Asst. Year 2012-13 in ITA Nos.757 & 756/Ahd/2023 are liable to be dismissed. Since the Rectification orders are itself quashed consequently C.O.No. 2 & 3/Ahd/2024 are also dismissed. ITA No.1052/Ahd/2023 for A.Y. 2013-14 [Assessee Appeal] 15. The assessee e-filed its return of income for AY 2013-14 on 26.11.2013 declaring total loss of Rs.(28,90,24,794/-). The AO passed order u/s.143(3) of the Act on 19.01.2016 reducing the total loss to Rs.(14,24,39,000/-) without calculating MAT liability on Book Profit. That mistake was apparent from record, therefore the AO passed the rectification order u/s 154 of the Act on 03.11.2017 determining the total Book profit for the purpose of MAT at Rs.27,10,93,612/- 16. On appeal, Ld CIT[A] held that the amendment made in Sec 115JB by Finance Act 2012 effective from 01.04.2013 which is I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 18 applicable to the assessee company for the Asst. year 2013-14 by observing as follows: ‘… The question to be decided is whether section 115JB is applicable to statutory corporations enacted by an act of the legislature or 115JB applies exclusively to those incorporated under the Companies Act. The matter was discussed in great detail by the Kerala High Court vide judgment dated 12.11.2010 in I T A No. 1710 of 2009 in the case of Kerala State Electricity Board. Hon’ble Supreme court has confirmed the view taken by Hon’ble Kerala High Court and the case was dismissed vide judgment dated 16/08/20222. The appellant in its submission dated 25.04.2023 has relied heavily on the above mentioned decision of Hon’ble Kerala High Court . The matter pertained to AY 2002-03 to 2009-10. However the judgment of Kerala High Court in the case of ‘Deputy Commissioner of Income Tax Vs. Kerala State Electricity Board’ and confirmed by the Hon’ble Supreme court is no longer applicable in view of amendment made in Sec 115JB by Finance Act 2012 effective from 01/04/2013. In view of the fact that appellant’s reliance on Judgment of Kerala High Court in the case of DCIT v Kerala State Electricity Board confirmed by the Hon’ble apex court is no longer teneable, a letter was issued on 28/06/2023 asking NDDB to explain its position . The appellant vide letter dated 05/07/2023 submitted that Hon’ble Jaipur Bench of ITAT in the case of DCIT v Rajasthan Financial Corporation for AY 2019-20, which is post amendment in section 115JB by Finance Act 2012, has categorically dealt with the amendment and clearly held that even after the amendment to apply the provision of section 115JB the assessee is required to be a company under the Companies Act. The question before Hon’ble ITAT Jaipur was “Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the assessee is not liable to MAT even after amendment in the Act and section 115JB(2) has been amended by Finance Act, 2012 w.e.f 1-4- 2013 though, after amendment of section 115JB(2), by Finance Act, 2012 w.e.f. 1-4-2013, not only the companies registered under the Companies Act are subject to the MAT provisions, but companies in whose case second proviso to section 129(1) of the Companies Act, 2013 are applicable (if such companies prepare profit and loss account as per the provisions of the Act governing such companies) are also subject to the provisions of MAT.” I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 19 … … ITAT Jaipur relies heavily on a decision of jurisdictional High Court in the case of the appellant i.e. Rajasthan Financial corporation, where the High Court had not considered the provision of Section 2(17), 2(18) or 2(26) (ia) of the IT Act and decided against application of 115JB. The AR of the appellant had argued before the Hon’ble ITAT Jaipur that 2nd proviso to section 129(1) of the Companies Act, 2013 applies to Companies such as Electricity Companies, Banking Companies and Insurance Companies which are registered under the Companies Act but prepare their statement of Profit & Loss as per provision of the governing Act. It is pertinent to mention that Electricity, Banking and Insurance are specifically mentioned in 2nd proviso to Section 129(1) of the Companies Act and it also includes “any other class of Company”. Use of the expression “any other class of company” frees it from the purview of Companies Act 2013. National Dairy Development Board admittedly is a company under the IT Act 1961 and falls squarely within “any other class of company” as mentioned in second proviso of Sec 129 (1) of Companies Act, 2013. “Any other class of Company” is not discussed in the ITAT order and how it precludes Companies identified under the Income- Tax Act. Reducing it to just Banking, Electricity and Insurance as argued by AR of Rajasthan Finance Corporation is against the letter of 2 nd proviso to Section 129(1) of the Companies Act. Grounds of appeal did not include what constitutes “any other class of Company”. Use of expression “any other class of Company” was not the subject matter before Hon’ble ITAT Jaipur. One class of Company are the ones incorporated under Companies Act. The expression “any other class of Company” includes the word ‘other’. What Constitutes this ‘other’ has not been discussed as it was not the ground before ITAT. Therefore, this judgement of ITAT Jaipur is applicable to the facts of Rajasthan Financial Corporation. Therefore the provisions of section 115JB will apply to the appellant. These grounds are decided against the appellant.” 17. Aggrieved against the appellate order, the Grounds of Appeal raised by the Assessee in ITA No.1052/Ahd/2023 are as follows: The appellant being dissatisfied with the order passed by the National Faceless Appeal Centre ('NFAC) Income Tax Department, prefers an appeal against the same on the following amongst other grounds, which are without prejudice to each other. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 20 1. The order passed by the NFAC is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 2 The NFAC has erred on facts and in law by upholding the order passed u/s 154 of the Act applying provisions of Section 115JB of the Income Tax Act, 1961 (the Act') to the appellant considering the applicability of section 115JB of the Act as mistake apparent on records. It is submitted it be so held now. 3. The NFAC has erred on facts and in law in holding that the provisions of Section 115JB of the Act are applicable to the appellant on the ground that appellant is \"other Company as per Section 129 of the Companies Act since it is Company under Income tax. It is submitted it be so held now. 3.1. The NFAC erred in not following the decision of the Jaipur Tribunal in case of Rajasthan Financial Corporation which held even after amendment to Section 115JB of the Act, it is not applicable to entities like the appellant which are not incorporated under the Companies Act and are deemed as Company under provisions of Section 2(17) or 2(26) of the Income Tax Act. It is submitted it be so held now. 4 The NFAC has erred on fact and in law in directing the AO to verify if reserve or provision from which withdrawal has been made was added back to book profit or not without appreciating the fact that proviso to clause (1) of Explanation 1 to Section 115JB of the Act is not applicable to its case as the section was not applicable to it in the earlier years. It is submitted it be so held now. 5. The NFAC has erred in holding that interest u/s 234B is chargeable on assessed tax as increased in order u/s 154 while adjudicating appellant's ground that the interest u/s 234B needs to be computed upto the date of order u/s 143(3) and not upto the order u/s 154 as done by AO. It is submitted it be so held now. 18. The question of applicability section 115JB to Statutory Corporations pursuant to the amendment made in Sec 115JB by Finance Act 2012 effective from 01.04.2013 is no more res-integra as the same considered by the Special Bench of Mumbai Tribunal in the case of Union Bank of India -Vs- DCIT reported in [2024] 166 I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 21 taxmann.com 207 vide recent decision dated 06-09-2024 held as follows: “Section 115JB, read with section 2(26), of the Income-tax Act, 1961- Minimum alternate tax. Payment of Tax (Banks) Assessment years 2013-14 to 2015-16 Assessee-bank claimed that section 115JB would not be applicable in its case Assessing Officer denied said claim on ground that amended provision of section 115JB brought by Finance Act, 2012 with effect from 1-4-2013 by insertion of clause (b) to section 115JB(2) had brought within its ambit companies governed by Companies Act and also governed by other regulating act including Banking Regulation Act, 1949 It was noted that assessee came into existence as 'corresponding new bank as per section 3(1) of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 Also new acquiring banks like assessee-bank was neither registered under Companies Act, 2013 nor under any other previous company law - Whether expression 'company' used in section 115JB(2)(b) was to be inferred to be company under Companies Act Held, yes - Whether thus, deeming fiction by way of section 11 of Acquisition Act had to be read purely in context for purpose of Income Tax Act where corresponding new bank had been deemed to be an Indian Company and a company in which public were substantially interested and this deeming section could not be extended to a company registered under Companies Act to which alone section 115JB is applicable -Held, yes Whether thus, clause (b) to sub section (2) of section 115JB inserted by Finance Act, 2012 with effect from 1-4-2013, i.e, from assessment year 2013-14 onwards, would not be applicable to banks constituted as 'corresponding new bank' in terms of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and not registered under Companies Act, 2013 or any other previous company law Held, yes Whether thus assessee-bank would not fall under provisions of section 115JB and tax on book profits (MAT) would not be applicable - Held, yes [Paras 55, 56 and 60] [In favour of assessee]” ……………………… I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 22 60. Accordingly, the question referred to Special Bench is decided in favour of the assessee banks that clause (b) to sub section (2) of section 115JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, are not applicable to the banks constituted as \"corresponding new bank in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, the provision of Section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks. 18.1. Special Bench thus held that section 115JB of the Act is not applicable to banks formed under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, not registered under the Companies Act. Hence, MAT is not leviable on such banks even on post amendment by Finance Act 2012 effective from 01.04.2013 by insertion of clause (b) to section 115JB(2) of the Act. Summery of the Special Bench decision are as follows: A. Section 115JB applies only to companies registered under the Companies Act:  The expression \"company\" under Section 115JB must be interpreted in the context of the Companies Act, not merely by reference to the Income Tax Act.  Although Section 11 of the Acquisition Act deems a “corresponding new bank” to be an “Indian company” for income-tax purposes, this does not extend to deeming it as a company under the Companies Act. B. Union Bank of India is not a company under the Companies Act:  It was created under a special statute (the 1970 Act) and not incorporated under the Companies Act.  Thus, it is not covered by Section 129(1) second proviso of the Companies Act, 2013 – a prerequisite for Section 115JB(2)(b) to apply. I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 23 C. Non-Applicability of Schedule III or Section 129 of the Companies Act:  The bank’s financials are prepared under the Banking Regulation Act, not the Companies Act, which is essential under 115JB(2)(a)/(b). D. Deeming fiction under Section 11 is limited:  It is only for income-tax purposes (i.e., for tax rate application), not to widen the scope of MAT.  The Special Bench noted that deeming provisions should be strictly construed. E. Computation mechanism fails:  Without the profit and loss account being prepared per the Companies Act or as mandated under Section 129(1), the computation mechanism of Section 115JB fails, following the principle laid down in CIT v. B.C. Srinivasa Setty. 18.2. Similarly Delhi High Court in the case of Oriental Insurance Co. Ltd -Vs- ACIT reported in [2017] 84 taxmann.com 312 held that from the reading of section 44 read with the First Schedule of the Act, that insurance companies are required to prepare accounts as per the IA and the regulations of the IRDA and not as Parts II and III of Schedule VI of the Companies Act. Insurance companies prepares its accounts as per the IRDA Regulations which governs the preparation of the auditor’s report, therefore the provisions of Section 115JB of the Act does not apply to insurance companies. 19. Thus we hold that MAT is not leviable even under the post amendment by Finance Act 2012 effective from 01.04.2013 by insertion of clause (b) to section 115JB(2) of the Act to a Statutory Corporation created under the Central Act. Therefore, the additions I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 24 made thereunder by way of passing rectification order is hereby quashed. In the result the appeal filed assessee for the Asst. Year 2013-14 in ITA No.1052/Ahd/2023 is allowed. ITA No.1059/Ahd/2023 for A.Y. 2013-14 [Revenue Appeal] 20. The Ground of Appeal raised by the Revenue are as follows: Whether on the facts and in the circumstances of the case, the learned CITIA) has erred in late and on facts in holding that disallowance made u/s. 14A is not to be added to computation made u/s. 115JB of the Income Tax A 1961 despite the fact that said amount was disallowed us of and was required to be added to the book profit as per clause (f) to Explanation 1 of section 115.JB (2) of the Income Tax Act, 1961? 21. For the detailed reasons recorded by this Tribunal in Paragraphs 18 & 19 hereinabove, the impugned rectification order is quashed, consequently, the Revenue appeal for the Asst. Year 2013-14 in ITA Nos.1059/Ahd/2023 is hereby dismissed. 22. In the combined result, the appeals filed by the Revenue in ITA No.733, 734, 755 to 757 and 1059/Ahd/2023 are Dismissed. 23. Appeal filed by the assessee in ITA No.1052/Ahd/2023 is Allowed and C.O. Nos.2 & 3/Ahd/2024 are dismissed. Order pronounced in the open court on 02-05-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 02/05/2025 I.T.A Nos. 733, 734/Ahd/2023 and Ors. A.Ys. 2010-11 and Ors. Page No ACIT Vs. National Dairy Development Baord 25 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "