TIMES BANK LTD ( SINCE MERGED WITH HDFC BANK LTD), MUMBAI V. ACIT CIR 2(3), MUMBAI

ITA 4355/MUM/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62313 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 08-05-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 23-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUSUM INGALE
• Assessee Lawyers: MRUDUL D INAMDAR
• Keywords: Business expenditure; Earning of tax free income; Reassessment proceedings
• Section: 10; 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 4355/MUM/2008 ASSESSMENT YEAR 1999-2000 M/S. TIMES BANK LIMITED, (SINCE MERGED WITH HDFC BANK LTD.,) KAMALA MILL COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. PAN: AAACT 2146B VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MRUDUL D. INAMDAR REVENUE BY : SMT. KUSUM INGALE, DR DATE OF HEARING : 08-05-2012 DATE OF PRONOUNCEMENT : 08-05-2012 ORDER PER RAJENDRA, A.M. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED IN THE APPEAL PREFERRED AGAINST HE ORDER DT. 24-03-2008 OF CIT(A) , MUMBAI: GROUND NO.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX (THE CIT( A)) ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI (THE A.O), IN TREATING INTERE ST AND OTHER OPERATING EXPENSES AGGREGATING TO ` 18,09,53,825/- AS HAVING BEEN INCURRED FOR EARNING INCOME EXEMPT U/S. 10(15) AND 10(33) OF THE INCOME TAX ACT, 1961 (THE ACT) ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 2 HE THEREBY ERRED IN DISALLOWING EXPENDITURE BY AN A MOUNT (I.E., ` 18,09,53,825) WHICH IS HIGHER THAN THE AMOUNT CLAI MED AS EXEMPT BY THE APPELLANT (I.E., ` 14,85,56,061). GROUND NO.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE A.O IN DISALLOWING A SUM OF ` 5,88,30,184/- BEING THE PROVISION FOR NON-PERFORMI NG ASSETS WHILE COMPUTING INCOME UNDER MAT THEREBY INV OKING CLAUSE ( C ) OF EXPLANATION TO SECTION 115JA(2). GROUND NO.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE A.O IN MAKING AN ADDITION OF THE ENTIRE AMOUNT OF EXEMPT INCOME OF ` 14,85,56,081/- AS BEING ALLEGED EXPENSES ATTRIBUTA BLE FOR EARNING TAX FREE INCOME WHILE COMPUTING BOOK PROFIT U/S. 115JA OF THE ACT. FURTHER, ADDITIONAL GROUNDS OF APPEAL WERE ALSO FIL ED ON 18-02-2011: ADDITIONAL GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX (THE CIT( A)) ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(3), MUMBAI (THE A.O) IN APPLYING THE PRO VISIONS OF SECTION 115JA TO THE APPELLANT. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THA T THE PROVISIONS OF SECTION 115JA IS APPLICABLE TO ONLY T HOSE COMPANIES THAT PREPARE THEIR ACCOUNTS IN ACCORDANCE WITH SCHE DULE VI OF THE COMPANIES ACT, 1956. THE APPELLANT IS A BANKING CO MPANY AND UNDER PROVISO TO SECTION 211(2) OF THE ACT, THE APP ELLANT IS EXEMPTED FROM PREPARING ITS BOOKS OF ACCOUNTS IN TE RMS OF REQUIREMENTS OF SCHEDULE VI TO THE COMPANIES ACT, A ND THE APPELLANT IS TO PREPARE ITS BOOKS OF ACCOUNTS IN TE RMS OF THE PROVISIONS OF BANKING REGULATION ACT. ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 3 THE APPELLANT THEREFORE PRAYS THAT, IT BE HELD THA T PROVISIONS OF SECTION 115JA ARE NOT APPLICABLE AND CONSEQUENTLY T HE ADJUSTMENTS MADE BY THE A.O. TO THE BOOK PROFIT BE DELETED. 2. FIRST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF INTEREST AND OTHER OPERATING EXPENSES TREATING THAT THE EXPENSES WERE INCURRED FOR EARNING INCOME EXEMPT U/S. 10 OF THE ACT. AO OBSERVED FROM THE COMPUTATION OF INCOME, THAT TH E ASSESSEE HAS CLAIMED DEDUCTION OF ` 12,27,49,118/- WHICH COMPRISES OF INTEREST ON BONDS, EQUITIES AND PREFERENCE SHARES A ND DIVIDEND INCOME OF ` 2,58,06,963/- BEING EXEMPT FROM TAX, THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON GROSS INCOME, THA T TREATMENT GIVEN BY THE ASSESSEE WAS ERRONEOUS IN SO FAR AS TH E DEDUCTION WAS AVAILABLE NOT IN RESPECT OF GROSS INTEREST INCO ME, BUT ON NET INCOME, THAT EXPENSES ATTRIBUTABLE TO EARNING GROSS INTEREST INCOME WERE REQUIRED TO BE NETTED OFF AND THE BALAN CE AMOUNT OF INCOME HAD TO BE ALLOWED AS INCOME NOT CHARGEABLE T O TAX. AO DIRECTED THE ASSESSEE TO FURNISH THE INTEREST AN D OTHER EXPENSES ALLOCABLE TO TAX FREE INCOME. HE ASKED TH E ASSESSEE AS TO WHY SUCH INTEREST AND EXPENSED WHICH WERE ATT RIBUTABLE TO EARN TAX FREE INCOME, SHOULD NOT BE REDUCED FROM TH E GROSS TAX FREE INCOME EARNED BY THEM AND ONLY NET INCOME BE ALLOWED AS DEDUCTION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO APPLIED PROVISIONS OF SEC. 14(A) AND HE FINALLY CONCLUDED A S UNDER: IT IS NOTICED THAT THE TAX FREE INCOME COMPONENT A ROSE OUT OF CERTAIN INVESTMENTS IN SHARES, SECURITIES AND BONDS . THE TOTAL INVESTMENT MADE AS ON 31-03-1999 WAS APPROX. ` 10,43,40,82,000/-. IT IS OBVIOUS THAT THE BUSINESS ACTIVITY OF MAKING SUCH INVESTMENTS WOULD HAVE INCURRED EXPENDI TURE ON SALARY, TELECOMMUNICATIONS AND OTHER ESTABLISHMENT EXPENDITURE. THEREFORE, A PART OF THE EXPENSES WOULD BE ALLOCATE D FOR THIS PURPOSE. THE TOTAL OPERATING EXPENSES ARE ` 56,48,13,000/- OUT OF WHICH 2% WORKS OUT TO ` 1,12,96,260/- WHICH IS BEING ALLOCATED TOWARDS EARNING OF THE TAX FREE INCOME AN D WOULD BE THEREFORE DISALLOWED AS BUSINESS EXPENDITURE. ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 4 THEREFORE, THE TOTAL EXPENSES OF INTEREST AND OPERA TING EXPENSES AMOUNT TO ` 18,09,53,825/- ( ` 16,96,57,565/- + ` 1,12,96,260/-) IS DISALLOWED. SINCE THE DISALLOWANCE AGAINST TAX FREE INTEREST AND DIVIDEND IS MORE THAN TAX FREE INCOME THE DEDUC TION UNDER SECTION 10(15)(IV)(H) FOR TAX FREE INTEREST AND U/S . 10(330 FOR DIVIDEND INCOME IS DENIED. 3. CIT(A) IN HIS APPELLATE ORDER DEALT THE ISSUE AS UNDER: THE FACT THAT THE APPELLANT HAS CLAIMED ` 14,85,56,061/- AS INCOME EXEMPT U/S. 10(15) AND 10(33) OF THE ACT IS NOT IN DISPUTE. IT IS ALSO A FACT THAT THIS INCOME COMPRISES OF ` 12,27,49,118/- ON ACCOUNT OF DIVIDEND. IT IS ALSO A FAT THAT THE APPELLANT HAS CLAIMED THE ENTIRE INCOME OF ` 14,85,56,061/- AS INCOME EXEMPT U/S. 10(15) AND 10 (33) OF THE INCOME TAX ACT. IN OTHER WORDS NO EXPENDITURE WHATSOEVER ATTRIBUTABLE OR RELATING TO EARNING OF THIS EXEMPT INCOME HAS BEEN CLAIMED HAVING INCURRED. ADMITTEDLY, THE EXEMPTION /DEDUCTION IS AVAILABLE NOT IN RESPECT OF GROSS EXEMPT INCOME BUT ON NET INCOME. AS PER THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, THE EXPENSES RELATING TO EARNING THIS GROSS INTEREST INCOME ARE REQUIRED TO BE NETTED OFF AND THE BALANCE AMOUNT OF THIS INCOME ONLY IS E XEMPTED AND NOT CHARGEABLE TO TAX. THE ASSESSING OFFICER ON FINDIN G THAT THE APPELLANT HAS CLAIMED THE ENTIRE AMOUNT OF ` 14,85,56,061/- AS EXEMPT AND ALSO NOTICING THT NO EXPENDITURE RELATING TO EARNING OF THIS INCOME HAS BEEN CLAIMED/DEDUCTED, REQUIRED THE APPELLANT TO FURNISH THE DETAILS OF INTEREST AND OTHER EXPENSES RELATING TO AND ALLOCAB LE TO THE TAX FREE INCOME AND ALSO REQUIRED TO EXPLAIN AS TO WHY SUCH EXPENSES WHICH ARE ATTRIBUTABLE TO EARN THIS EXEMPT INCOME SHOULD NOT BE REDUCED FROM THE GROSS EXEMPT INCOME AND ONLY NET INCOME BE ALLOWED AS EXEMPT. IN REPLY TO THESE QUERIES THE APPELLANT HAS GIVEN A VE RY GENERAL AND NON- SPECIFIC EXPLANATION CLAIMING THAT INVESTMENTS MADE WERE IN THE COURSE OF BUSINESS OF THE BANK, OUT OF ITS OWN FUNDS, WHEN OWN FUNDS AND BORROWINGS HAVE BEEN MIXED, IT CANNOT BE PRESUMED T HAT INVESTMENTS IN TAX FREE BONDS WERE OUT OF BORROWED FUNDS, BANK HAS EARNED SUBSTANTIAL CASH PROFITS AND ITS FREE RESERVES ALSO INCREASED AND DURING THE FINANCIAL YEAR, BANK CAME OUT WITH AMERICAN DEP OSITORS SHARES ISSUE PART OF WHICH WAS INVESTED ETC., NOT SATISFI ED WITH THIS EXPLANATION OFFERED BY THE APPELLANT, PARTICULARLY IN THE ABSENCE OF ANY EVIDENCE PROVING THESE CLAIMS, THE ASSESSING OFFICE R CONCLUDED THAT THE PROVISIONS OF SECTION 14A OF THE I.T.ACT, SQUARELY APPLIES TO THE APPELLANTS CASE. HE FURTHER HELD THAT: ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 5 ASSESSING OFFICER HAS ALSO MADE DISALLOWANCE OUT OF SALARY, TELECOMMUNICATION AND OTHER ESTABLISHMENT EXPENDITU RES BY TREATING 2% AS EXPENSES RELATABLE TO EARNING THE EXEMPT INCOME ON THE GROUND THAT THE TAX FREE INCOME AROSE OUT OF CERTAIN INVESTMENT S AND THE TOTAL INVESTMENT MADE AS ON 31-03-1999 WAS APPROXIMATELY 1,43,40,82,000/-. ON THIS ISSUE OF DISALLOWANCE, T HE APPELLANT HAS NOT MADE ANY SUBMISSIONS EXCEPT ITS DENIAL OF HAVING MA DE INVESTMENTS WITHOUT INCURRING ANY EXPENDITURE OF ABOVE NATURE. AS THE APPELLANT HAS FAILED TO SUBSTANTIATE ITS DENIAL WITH ANY CORR OBORATIVE EVIDENCES AND PRIMA FACIE, THE HUGE INVESTMENT MADE FOR EARNI NG EXEMPT INCOME, ESTABLISHMENT EXPENDITURES HAVING INCURRED CANNOT B E RULED OUT. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON THIS ACCOUNT ALSO IS UPHELD. 4. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMIT TED THAT NO PART OF INTEREST WAS DISALLOWABLE, THAT IN THE YEAR UNDER CONSIDERATION, RULE 8D WAS NOT APPLICABLE, THAT DISALLOWANCE MADE/ CONFIRMED BY THE AO/CIT(A) WERE NOT AS PER THE PROVISIONS OF LAW, TH AT BOTH THE AUTHORITIES DID NOT CONSIDER THE DATA RELEVANT FOR THE ISSUE. HE RELIED UPON THE CASES OF RELIANCE UTILITIES AND POWER LTD. , (313 ITR 340), HDFC BANK LTD.,, (ITA NO. 4529/M/2005) RELIANCE CAP ITAL LTD., (ITA NO. 3303/M/2003). HE SUBMITTED THAT MATTER MAY BE RESTORED BACK TO LOWER AUTHORITIES TO MAKE FURTHER VERIFICATION. DR ALSO AGREED THAT FOR MAKING REASONABLE DISALLOWANCE FILE MAY BE RE MITTED BACK. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT MATTER SHOULD BE RESTORED TO THE FILE OF THE C IT(A) FOR ADJUDICATING THE ISSUE OF DISALLOWANCE AFRESH. ASS ESSEE IS DIRECTED TO FURNISH THE DETAILS LIKE AVAILABILITY OF INTEREST F REE FUNDS, RESERVES, SELF- GENERATED FUND ETC., DURING THE HEARING PROCEEDINGS TO BE HELD BY THE CIT(A). 6. GROUND NOS. 2 AND 3 AS WELL AS ADDITIONAL GROUND S ARE ABOUT SEC. 115JA OF THE ACT. WE ARE OF THE OPINION THAT IF THE BASIC QUESTION OF APPLICABILITY/NON-APPLICABILITY OF SECTION 115JA SHOULD BE DECIDED FIRST. 7. WITH REFERENCE TO SEC. 115JA, AR SUBMITTED THAT PROVISIONS OF SEC. 115JA WERE NOT APPLICABLE TO THE APPELLANT, TH AT ASSESSEE WAS A BANKING COMPANY AND LIKE ELECTRICITY COMPANY WAS OU T OF PURVIEW OF THE SECTION 115JA, THAT ASSESSEE HAD TO PREPARE P&L A/C AS WELL AS BALANCE SHEET AS PER THE PROVISIONS OF III SCHEDULE OF BANKING REGULATION ACT, 1949. HE RELIED UPON CASES OF KRUN G THAI BANK PCL ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 6 (ITA NO. 3390/MUM/09) DECIDED BY THE G BENCH MUMB AI AND MAHARASHTRA STATE ELECTRICITY BOARD (82 ITD 422) 8. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT PROVISIONS OF SEC. 115JA WERE APPLICABLE TO ALL COMPANIES INCLUDI NG BANKING COMPANIES, EVEN IF THE ASSESSEE HAD TO PREPARE ACCO UNTS AS PER BANKING REGULATION ACT, IT HAD TO FURNISH THE ACCOU NTS TO THE AO, AS PER THE PROVISIONS OF IT ACT, THAT SEC. 115JA WAS A SELF-CONTAINED CODE AND THAT IF INCOME OF A COMPANY WAS TAXABLE UNDER M INIMUM ALTERNATIVE TAX (MAT) IT SHOULD COMPLY WITH THE PRO VISIONS OF SEC. 115JA. RELYING UPON THE ORDER OF MSEB, REFERRED EA RLIER, DR SUBMITTED THAT MSEB WAS NOT A COMPANY, HENCE, SEC. 115JA WAS NOT APPLICABLE TO IT, BUT ASSESSEE COMPANY CANNOT CLAIM IMMUNITY ON THIS GROUND. DR RELIED UPON THE MATTER OF DRESDNER AG B ANK (108 ITD 375). IN THE REJOINDER, AR SUBMITTED THAT IN THE CASE OF DRESDNER AG BANK APPLICABILITY OF SEC. 115JA IN A BANKING CO., WAS NOT EXAMINED, WHERE AS IN THE CASE OF KRUNG THAI BANK PCL., MAIN ISSUE DECIDED BY THE TRIBUNAL WAS APPLICABILITY OF THE SAID SECTION. 9. AFTER HEARING THE RIVAL SUBMISSIONS, WE ARE OF T HE OPINION THAT BACK GROUND OF INTRODUCTION OF SECTION 115JA IN THE ACT HAS TO BE UNDERSTOOD. THE PURPOSE BEHIND THE INTRODUCTION OF SECTION 115J A OF THE INCOME-TAX ACT, 1961, WAS TO TAX 'ZERO TAX COMP ANIES'. A NUMBER OF COMPANIES WITH HUGE PROFITS WERE AVOIDING PAYMEN T OF TAX BY ADJUSTING THEIR PROFITS AGAINST VARIOUS ALLOWANCES WHICH ARE PERMITTED UNDER THE INCOME-TAX ACT. TO CIRCUMVENT THIS STRATE GY, SECTION 115JA WAS INSERTED. THE SIMPLE METHOD ADOPTED BY SECTION 115JA IS TO FIND OUT WHETHER THE TOTAL INCOME OF A COMPANY AFTER ALL THE DEDUCTIONS AND ALLOWANCES WAS LESS THAN 30 PER CENT. OF ITS BO OK PROFIT. IN SUCH A SITUATION, THE TOTAL INCOME CHARGEABLE TO TAX IS DE EMED TO BE 30 PER CENT.OF SUCH BOOK PROFIT.SECONDLY,THE USE OF THE WO RDS IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT IN SECTION 115JA OF THE ACT,IS MADE FOR A LIMITED PURPOSE OF EMPOWERING THE AO TO RELY UPON THE AUTHENTIC STATEM ENT OF ACCOUNTS OF THE COMPANY. WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, HE HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT WHICH OBLIGATES THE COMPANY TO MAINTAIN ITS ACCOUNTS IN A MANNER PROVIDED BY THAT ACT AND THE ACCOUNTS TO BE SCRUTINISED AND CERTIFIED BY THE STA TUTORY AUDITORS AND APPROVED BY THE COMPANY IN THE GENERAL MEETING AND, THEREAFTER, TO BE FILED BEFORE THE REGISTRAR OF COMPANIES WHO HAS A S TATUTORY OBLIGATION TO EXAMINE AND BE SATISFIED THAT THE ACCOUNTS OF TH E COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUIREMENTS OF T HE COMPANIES ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 7 ACT.SO,IF THERE ARE SPECIAL PROVISIONS WITH REGARD TO A COMPANY,SECTION 115 JA WILL NOT BE APPLICABLE THUS,IT IS CLEAR THAT SEC. 115 WAS INCORPORATED IN THE ACT WITH A SPECIFIC PURPOSE AND SPECIAL TREATMENT HAS TO BE GI VEN TO THE ELECTRICITY COMPANIES OR COMPANIES GOVERNED BY SPEC IAL PROVISION OF OTHER ACTS.. 10. WE ARE OF THE OPINION THAT ACCOUNTS OF A BANKIN G COMPANY ARE GOVERNED BY BANKING REGULATION ACT,AND AS PER PROVI SIONS OF 211 OF COMPANIES ACT, BANKING COMPANIES HAVE TO PREPARE TH EIR ACCOUNTS IN ACCORDANCE WITH SEC. 211 OF COMPANIES ACT. IN OUR HUMBLE OPINION, PROVISIONS OF SEC.115JA ARE NOT APPLICABLE TO THE C ASE UNDER CONSIDERATION.IN THE CASE KRUNG OF KRUNG THAI BANK ISSUE, WITH REGARD TO 115JB,HAS BEEN ELABORATELY DISCUSSED IN THE FOLL OWING WORDS: LEARNED COUNSEL FOR HE ASSESSEE, HOWEVER, CONTENDS THAT THE PROVISIONS OF MAT DO NOT APPLY TO THE ASSESSEE, AND , FOR THIS REASON, VERY FOUNDATION OF IMPUGNED RE-ASSESSMENT P ROCEEDINGS IS DEVOID OF LEGALLY SUSTAINABLE MERITS. HIS LINE OF REASONING IS THIS. THE PROVISIONS OF MAT CAN COME INTO PLAY ONL Y WHEN THE ASSESSEE PREPARES ITS PROFITS AND LOSS ACCOUNT IN A CCORDANCE WITH SCHEDULE VI TO THE COMPANIES ACT. IT IS POINTED OU T THAT, IN TERMS OF THE PROVISIONS OF SECTION 115 JB (2), EVERY ASSE SSEE IS REQUIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT IN TERMS OF THE PROVISIONS OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT . UNLESS THE PROFIT AND LOSS IS SO PREPARED, THE PROVISIONS OF S ECTION 115JB CANNOT COME INTO PLAY AT ALL. HOWEVER, THE ASSESSE E IS A BANKING COMPANY AND UNDER PROVISO TO SECTION 211(2) OF THE ACT, THE ASSESSEE IS EXEMPTED FROM PREPARING ITS BOOKS OF AC COUNTS IN TERMS OF REQUIREMENTS OF SCHEDULE VI TO THE COMPANI ES ACT, AND THE ASSESSEE IS TO PREPARE ITS BOOKS OF ACCOUNTS IN TERMS OF THE PROVISIONS OF BANKING REGULATION ACT. IT IS THUS C ONTENDED THAT THE PROVISIONS OF SECTION 115JB DO NOT APPLY IN THE CASE OF BANKING COMPANIES 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 PROVIS IONS OF SECTION 115 JB DO NOT APPLY TO THE ASSESSEE COMPANY, THE RE ASONS RECORDED FOR RE-OPENING THE ASSESSMENT ARE CLEARLY WRONG AND INSUFFICIENT. WE ARE URGED TO QUASH THE REASSESSMEN T PROCEEDINGS ON THIS SHORT GROUND. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER 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 LEARN ED COUNSEL, ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 8 ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE, ARE C LEARLY CONTRARY TO THE LEGISLATIVE INTENT AND PLAIN WORDINGS OF THE STATUTE. THE PLEA OF THE ASSESSEE IS INDEED WELL TAKEN, AN D IT MEETS OUT 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 P ART II AND III OF SCHEDULE VI TO THE COMPANIES ACT. THE STARTING POI NT OF COMPUTATION OF MINIMUM ALTERNATE TAX UNDER SECTION 115 JB IS THE RESULT SHOWN BY SUCH A PROFIT AND LOSS ACCOUNT. IN THE CASE OF BANKING COMPANIES, HOWEVER, THE PROVISIONS OF SCHED ULE VI ARE NOT APPLICABLE IN VIEW OF EXEMPTION SET OUT UNDER P ROVISO TO SECTION 211(2) OF THE COMPANIES ACT. THE FINAL ACC OUNTS OF THE BANKING COMPANIES ARE REQUIRED TO BE PREPARED IN AC CORDANCE WITH THE PROVISIONS OF THE BANKING REGULATION ACT. THE PROVISIONS OF SECTION 115 JB CANNOT THUS BE APPLIED TO THE CAS E OF A BANKING COMPANY. IN VIEW OF THE ABOVE DISCUSSIONS, AND FOLLOWING T HE VIEW TAKEN BY A COORDINATE BENCH IN THE CASE OF MAHARASH TRA STATE ELECTRICITY BOARD VS. JCIT (82 ITD 422), WHICH HOLD S THAT PROVISIONS OF MAT CANNOT BE APPLIED TO ELECTRICITY COMPANIES FOR MUTUALLY SIMILAR REASON WE UPHOLD THE PLEA OF THE A SSESSEE. THE PROVISIONS OF SECTION 115 JB DO NOT APPLY TO THE AS SESSEE, AND, AS SUCH, THE ASSESSING OFFICER WAS IN ERROR IN CONC LUDING THAT INCOME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE A SSESSEE. THE VERY INITIATION OF REASSESSMENT PROCEEDINGS WAS BAD IN LAW, AND WE QUASH THE SAME. 11. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE CO -ORDINATING BENCH, WE DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. AS WE HAVE HELD THAT PROVISIONS OF SEC. 115JA ARE NOT APPLICAB LE IN THE CASE UNDER CONSIDERATION. 12. SO, IN OUR OPINION GROUND NOS. 2 AND 3 REMAIN A CADEMIC ONLY. IF SECTION ITSELF IS NOT APPLICABLE, QUESTION OF DI SALLOWING/ALLOWING SOME ITEM UNDER THE SAID SECTION DOES NOT ARISE. ASSESSEES APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MAY 2012. SD/- SD/- (B.R. MITTAL) (RAJENDRA) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATE: 08-05-2012 ITA NO. 4355/MUM/2008 M/S. TIMES BANK LIMITED, , 9 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR J BENCH, ITAT, MUMBAI 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI