The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) ruled in favor of Canara Bank that Banking Companies are exempted from Minimum Alternate Tax ( MAT ) under Section 115JB of the Income Tax Act, 1961
Canara Bank (formerly Syndicate Bank), the assessee filed its income tax return for 2013-14, showing a loss. After scrutiny, the Assessing Officer (AO) made adjustments and assessed the bank’s total income based on Section 115JB ( Minimum Alternate Tax or MAT ) provisions, calculating book profits of approximately Rs. 3797 crores.
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The assessee argued that MAT provisions under Section 115JB do not apply to banks stating that Banks are governed by the Banking Regulation Act, 1949, not the Companies Act. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] who partially allowed it, leading to further appeals.
The assessee before the Bangalore Bench of ITAT argued that Banks defined under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, are considered “Indian companies” for limited purposes under the Income Tax Act. so, this deeming provision does not extend to MAT under Section 115JB of the Income Tax Act, as they are not companies under the Companies Act.
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The assessee’s counsel cited various rulings, including those from the Delhi High Court and the ITAT Special Bench, which held that MAT does not apply to public sector banks.
On the contrary, the revenue counsel contended that the banks were classified as a company under the Income Tax Act and liable to MAT under Section 115JB of the Income Tax Act, 1961. They also argued that the bank’s financials are prepared similarly to companies, and hence, MAT provisions should apply.
The two-member bench comprising Waseem Ahmed (Accountant Member) and Keshav Dubey (Judicial Member) examined earlier judicial precedents, which held that Section 115JB does not apply to banking companies. Specifically, the tribunal referred to earlier ITAT decisions and High Court rulings, which consistently concluded that MAT provisions under Section 115JB do not apply to banks.
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The tribunal also considered the Special Bench ruling from Mumbai, which reinforced the concept that banking companies are governed by their respective statutes, not by the Companies Act, and should be exempt from MAT.
Therefore, the tribunal held that the bank is not liable for MAT under Section 115JB for the assessment years 2013-14 & 2014-15. The appeal of the assessee was allowed.
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