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Banks are not liable to pay S. 115JB MAT on “book profits”
The assessee, a foreign bank operating in India through a branch office, filed a return offering Nil income as per the normal provisions of the Act. Though the assessee had a net profit of Rs. 78.32 lakhs in the P&L A/c it did not compute “book profits” u/s 115JB. The AO accepted the return u/s 143(3) though he subsequently made a reassessment u/s 147 in which he assessed the “book profits” u/s 115JB. The assessee challenged the reopening on the ground that s. 115JB did not apply to banking companies. HELD upholding the challenge:
(i) S. 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 Parts II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax u/s 115 JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to S. 211 (2) of the Companies Act. The final accounts of banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. Consequently, s. 115 JB cannot be applied to a banking company;
(ii) As s. 115 JB did not apply to the assessee, no income had escaped assessment and consequently the very initiation of reassessment proceedings u/s 147 was bad in law.
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