ITAT rules Section 115JB Inapplicable to SBI for AY 2006-07, Exempts Banks from MAT Provisions [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), provided relief to the State Bank of India (SBI) in an appeal concerning the applicability of Minimum Alternate Tax (MAT) provisions under Section 115JB of the Income Tax Act, 1961.

On March 31, 2018, a rectification order was passed by the Assessing Officer (AO) under Section 154 read with Section 251 of the Income Tax Act against the assessee State Bank of India. The AO recomputed SBI’s income by applying MAT provisions for the assessment year 2006–07. However, SBI contested this assessment, arguing that Section 115JB does not apply to banking institutions as they prepare financial statements under the Banking Regulation Act, 1949, and not under Schedule VI of the Companies Act.

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The Commissioner of Income Tax (Appeals) [CIT(A)] upheld SBI’s contention in its order, stating that before April 1, 2012, banking companies were exempt from MAT provisions. Dissatisfied with this decision, the Revenue Department appealed before the ITAT.

Before the Tribunal, SBI's legal counsel,reiterated that Section 115JB does not apply to banks, citing previous judgments in favor of banking institutions.

The tribunal noted that in the cases of SBI Commercial & International Bank Ltd. vs. ITO (2011) and Krung Thai Bank PCL vs. Joint Director of Income-tax (2009), ITAT had already held that MAT provisions could not be enforced on banking companies. These rulings emphasized that banking entities are governed by the Banking Regulation Act and are not required to prepare their profit and loss accounts as per the Companies Act.

The tribunal further held that MAT is applicable only to companies required to prepare financial statements under the Companies Act. As per the Banking Regulation Act, banks have distinct accounting standards, exempting them from MAT provisions before April 1, 2012.

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The ITAT bench, comprising Narendra Kumar Billaiya (Accountant Member) and Sunil Kumar Singh (Judicial Member), observed that the revenue could not produce any arguments to counter the arguments put forth by SBI nor could they rely on any cases. As a result,the ITAT dismissed the appeal filed by the Revenue and ruled in favor of SBI, confirming that MAT provisions were inapplicable for the assessment year 2006–07.

To Read the full text of the Order CLICK HERE

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