KRUNG THAI BANK PCL, MUMBAI V. JDIT (IT) 3(1), MUMBAI

ITA 3390/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4562 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 22-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: GAJENDRA GOLCHHA
• Keywords: Reassessment proceedings
• Section: 143(3); 115JB

Judgement Text

ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, AM, AND SMT ASHA VIJAYRAG HAVAN JM ITA NO. 3390/MUM/09 ASSESSMENT YEAR 2004-05 KRUNG THAI BANK PCL .APPELLANT 62, MAKER CHAMBERS, MAKER CHAMBERS VI NARIMAN POINT, MUMBAI 400 021 VS. JOINT DIRECTOR OF INCOME TAX INTERNATIONAL TAXATI ON CIRCLE 3(1), MUMBAI . RESPONDENT APPELLANT BY : SHRI GAJENDRA GOLCHHA RESPONDENT BY : SHRI A K NAYAK O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL, THE ASSESSE, A FOREIGN BA NK OPERATING IN INDIA, HAS CHALLENGED CORRECTNESS OF COMMISSIONER (APPEALS )S ORDER DATED 23 RD JANUARY 2009, IN THE MATTER OF ASSESSMENT UNDER SEC TION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEA R 2004-05. ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 2 OF 6 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED CIT(A)S UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 ON THE FACTS OF THIS CASE. 3. TO ADJUDICATE ON THIS GRIEVANCE, A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS A FOREIGN BANK OPERATING I N INDIA THROUGH A BRANCH OFFICE. WHILE ITS ORIGINAL ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 19 TH SEPTEMBER 2006, WITHOUT MAKING ANY ADJUSTMENTS TO THE INCOME RETURNED BY THE ASSESSEE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 147 ON 29 TH MAY 2007. THE REASONS FOR SO REOPENING THE ASSESSMENT WERE AS FOL LOWS : ON PERUSAL OF THE COMPUTATION OF INCOME, THE ASSESS EE HAS SHOWN A PROFIT OF RS 78,32,594 AS PER PROFIT AND LOSS ACCOU NT. AFTER MAKING NECESSARY ADJUSTMENTS AS PER NORMAL PROVISIONS OF T HE ACT, THE ASSESSEE HAS SHOWN A TOTAL INCOME OF RS 94,74,105. AFTER SET OFF OF BROUGHT FORWARD LOSS OF AY 2003-04, THE ASSESSEE HA S DECLARED NIL INCOME. HOWEVER, THE ASSESSEE HAS NOT COMPUTED BOOK PROFIT WHEREBY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT . (EMPHASIS BY UNDERLINING SUPPLIED BY US) 4. THE VERY FOUNDATION OF IMPUGNED REOPENING THE AS SESSMENT IS THE ASSUMPTION THAT THE PROVISIONS OF MINIMUM ALTERNATE TAX UNDER SECTION 115 JB WOULD APPLY TO THE ASSESSEE. THAT I S THE ONLY ADDITION MADE BY THE ASSESSING OFFICER IN THE REASSESSMENT P ROCEEDINGS. 5. LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, CONTE NDS THAT THE PROVISIONS OF MAT DO NOT APPLY TO THE ASSESSEE, AND , FOR THIS REASON, ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 3 OF 6 VERY FOUNDATION OF IMPUGNED REASSESSMENT PROCEEDING S IS DEVOID OF LEGALLY SUSTAINABLE MERITS. HIS LINE OF REASONING I S THIS. THE PROVISIONS OF MAT CAN COME INTO PLAY ONLY WHEN THE ASSESSEE PR EPARES ITS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH SCHEDULE VI TO THE COMPANIES ACT. IT IS POINTED OUT THAT , IN TERMS OF THE PROVISIONS OF SECTION 115JB(2), EVERY ASSESSEE IS REQUIRED TO PREPARE ITS PROFIT AN D LOSS ACCOUNT IN TERMS OF THE PROVISIONS OF PART II AND III OF SCHED ULE VI TO THE COMPANIES ACT. UNLESS THE PROFIT AND LOSS IS SO PRE PARED, THE PROVISIONS OF SECTION 115 JB CANNOT COME INTO PLAY AT ALL. HOW EVER, THE ASSESSEE IS A BANKING COMPANY AND UNDER PROVISO TO SECTION 211 (2) OF THE ACT, THE ASSESSEE IS EXEMPTED FROM PREPARING ITS BOOKS O F ACCOUNTS IN TERMS OF REQUIREMENTS OF SCHEDULE VI TO THE COMPANIES ACT , AND THE ASSESSEE IS TO PREPARE ITS BOOKS OF ACCOUNTS IN TERMS OF TH E PROVISIONS OF BANKING REGULATION ACT. IT IS THUS CONTENDED THAT THE PROVISIONS OF SECTION 115 JB DONOT APPLY IN THE CASE OF BANKING C OMPANIES WHICH ARE NOT REQUIRED TO PREPARE THE PROFIT AND LOSS ACCOUNT AS PER THE REQUIREMENTS OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT. SINCE THE PROVISIONS OF SECTION 115 JB DONOT APPLY TO THE ASSESSEE COMPANY, THE REASONS RECORDED FOR REOPENING THE ASS ESSMENT ARE CLEARLY WRONG AND INSUFFICIENT. WE ARE URGED TO QUA SH THE REASSESSMENT PROCEEDINGS ON THIS SHORT GROUND. 6. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, VEHEMENTLY RELIES UPON THE ORDERS OF THE AUTHORITIE S BELOW AND SUBMITS THAT THERE IS NO SPECIFIC EXCLUSION CLAUSE FOR THE BANKING COMPANIES, AND IN THE ABSENCE OF SUCH A CLAUSE, IT IS NOT OPEN TO US TO INFER THE SAME. THE SUBMISSIONS OF THE LEARNED COUNSEL, ACCOR DING TO THE DEPARTMENTAL REPRESENTATIVE, ARE CLEARLY CONTRARY T O THE LEGISLATIVE INTENT AND PLAIN WORDINGS OF THE STATUTE. ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 4 OF 6 7. THE PLEA OF THE ASSESSEE IS INDEED WELL TAKEN, A ND IT MEETS OUR APPROVAL. THE PROVISIONS OF SECTION 115 JB CAN ONLY COME INTO PLAY WHEN THE ASSESSEE IS REQUIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III O F SCHEDULE VI TO THE COMPANIES ACT. THE STARTING POINT OF COMPUTATION O F MINIMUM ALTERNATE TAX UNDER SECTION 115 JB IS THE RESULT SH OWN BY SUCH A PROFIT AND LOSS ACCOUNT. IN THE CASE OF BANKING COMPANIES, HOWEVER, THE PROVISIONS OF SCHEDULE VI ARE NOT APPLICABLE IN VIE W OF EXEMPTION SET OUT UNDER PROVISO TO SECTION 211 (2) OF THE COMPANI ES ACT. THE FINAL ACCOUNTS OF THE BANKING COMPANIES ARE REQUIRED TO B E PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE BANKING REGUL ATION ACT. THE PROVISIONS OF SECTION 115 JB CANNOT THUS BE APPLIED TO THE CASE OF A BANKING COMPANY. 8. IN VIEW OF THE ABOVE DISCUSSIONS, AND FOLLOWING THE VIEW TAKEN BY A COORDINATE BENCH IN THE CASE OF MAHARSHTRA STATE ELECTRICITY BOARD VS JCIT (82 ITD 422), WHICH HOLDS THAT PROVISIONS OF M AT CANNOT BE APPLIED TO ELECTRICITY COMPANIES FOR MUTUALLY SIMIL AR REASON WE UPHOLD THE PLEA OF THE ASSESSEE. THE PROVISIONS OF SECTION 115 JB DO NOT APPLY TO THE ASSESSEE, AND , AS SUCH, THE ASSESSING OFFIC ER WAS IN ERROR IN CONCLUDING THAT INCOME HAD ESCAPE4D ASSESSMENT IN T HE HANDS OF THE ASSESSEE. THE VERY INITIATION OF REASSESSMENT PROC EEDINGS WAS BAD IN LAW, AND WE QUASH THE SAME. 9. GROUND NO. 1 IS THUS ALLOWED. 10. AS THE VERY INITIATION OF REASSESSMENT PROCEEDI NGS HAS BEEN QUASHED, WE SEE NO NEED TO ADDRESS OURSELVES TO OTH ER GRIEVANCES ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 5 OF 6 RAISED BY THE ASSESSE. THESE GRIEVANCES ARE ACADEMI C NOW. IN ANY CASE, THIS DECISION WILL ALSO GOVERN THE QUESTION WHETHER ON MERITS THE ADDITION ON ACCOUNT OF MAT UNDER SECTION 115JB COUL D HAVE BEEN MADE; THAT IS THE ONLY QUANTUM ADDITION MADE IN THE REASS ESSMENT PROCEEDINGS. WE MAY ALSO ADD THAT LEARNED REPRESENT ATIVES ALSO ADDRESSED US AT LENGTH OTHER FACETS OF VALIDITY OF REOPENING, BUT HAVING COME TO THE CONCLUSIONS AS ABOVE, WE DO NOT SEE ANY NEED TO DEAL WITH THOSE ARGUMENTS AT THIS STAGE. 11. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS I NDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON_30 TH DAY OF SEPTEMBER, 2010. SD/- SD/- (ASHA VIJAYRAGHAVAN] [PRAMOD KUMAR] JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF SEPTEMBER, 2010. COPIES TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT , MUMBAI 4. THE CIT(A) , MUMBAI 5. DR, G BENCH, ITAT, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI ITA NO. 3390/MUM/06 ASSESSMENT YEAR 2000-01 PAGE 6 OF 6