Connect us       New User?     Subscribe Now
Confirm your Email ID for Updates
Banks not liable to pay minimum alternate tax
Thu, 14 Oct 2010 19:59:24 GMT
The Economic Times

Banks not liable to pay minimum alternate tax

A leading tax tribunal has said that banks are not liable to pay minimumalternate tax (MAT) since they are governed by the Banking Regulation Act andprepare their accounts differently. The Income Tax Appellate Tribunal (ITAT),Mumbai, which passed an order in the case of Krung Thai Bank, said that MATprovisions come into play only when the accounts are prepared under theCompanies Act under the Income-Tax Act.

Gajendra Golchha, a charteredaccountant, who appeared for the foreign bank told ET, “Going by thisorder, MAT will not be applicable to insurance, banking and electrical companies.” According to the ITAT order on September 30, the provisions of MAT isapplicable only when profit and loss accounts are prepared under the provisionsof the Companies Act, under schedule VI.

However, the Schedule VI ofCompanies Act are not applicable to banks as they are exempt under proviso toSection 211 (2) of the Companies Act. The final accounts of banks are to beprepared under the provisions of Banking Regulations Act. Therefore Section 115J B of Income-Tax Act governing provisions of MAT is not applicable tobanks.

In this case the bankwas a foreign entity operating through a branch in India. It had shown a profitof over `78 lakh but after adjustments the bank has shown a profit of over `94lakh. After setting off carry forward loses, the bank returned nil income. It isthe declaration of nil profit that compelled the I-T department to apply theprovisions of MAT. The department had argued before ITAT that there is nospecific exclusion for banking companies from the requirement to prepare profitand loss accounts as under Chapter VI of the Companies Act.

ITAT however, held that thedepartment’s stand is against the intent of the legislature. ITAT alsocited an earlier judgement on similar grounds given out by a co-ordinate benchin the case of Maharashtra State Electricity Board. ITAT held that theprovisions of MAT do not apply in this case and the assessing officer made anerror in concluding that income had escaped the tax net.
Online Poll
Connect Us       New User?     Subscribe Now