Case: The Commissioner of Income Tax Vs. Union Bank of India and Another

Bank of India had filed return of income for the assessment year 2005-06. The Assessing Officer passed order of assessment under Section 143(3) of the Income Tax Act, 1961 (the Act for short) on2007 computing the assesseesoff) under the normal provisions and Rs.431.15 crores as book profit under Section115JB of the Act. Thethereafter passed an order dated 25thof rectification to give effectto a retrospective amendment in Section 115JBof the Act. Hebook profit at Rs.374.21 crorescarried the matter in appeal. In such appeal, the assesseeopposed the assessment order on merits, including theorder passed by the Assessing Officer exercisingrectification powers. CIT (Appeals)granted partial relief by his order dated 27th March, 2012In such appeal, the assesseethat the Assessing Officerexercised rectification powers. The assessee raised an additionalthe provisions of Section 115JB of the Actapplicable. The Tribunal allowed such appealby the impugned judgment datedwas of the opinionthat the Assessing Officerwrongly exercised powers of rectification. The Tribunal further noted that thefor the assessment yearthe provisions of Section 115JB of theapplicable to the assessee¬bank.held as under :¬There is no doubtin these years under which totalof section 115JB were not invoked. The issues which are considered in normal assessmentfor adjudication,whereas the Assessing Officer under the guise of section 154 disallowed certain amounts revising the book profits. However, even afterRs.328.07 cores, whereas the tax under section 115JBwas determined at Rs.72.02 crores for assessment years 2004¬05tax under section 115JBat Rs.28.06 crores under section 115JB. Ultimately the taxeswithout exercising the provisions of section 115JB. In that view, the entire exercises of modifying the orders is redundant as even after such adjustment, the tax determined under the8. Be that as it may, just because a retrospective amendment has been carried out on the statue, the assessmentcannot be modified without examining whetherhad appeared before theon a long run process, we are of the opinionby invoking the provisions ofNot only that the Coordinate Bench in assesseesthe provisions of section 115JBare not applicable to the assessee Bank. In view of this, we hold that the order under section 154 passed by the Assessing Officer is notthe same was set aside.grounds in the above 2 years are allowed.

Reasoning: certain complications arise in this line of argument. The first proviso to sub¬section (2) of Section 115JBprovides that while preparing annual accounts including profit and loss account the accounting policiesaccounting standards adopted for preparingshall be the sameas have been adopted for the purpose of preparingthe company at its Annual General Meeting in accordance with provisions of Section 210 of the Companies Act, 1956.There is no dispute that the respondent-bank in terms of Section 210of the Companies Act, 1956is also required to lay its accounts before the Annual General Meeting.such accounts would necessarily be preparedin accordance with the provisions ofBanking Regulation Act, 1949 andnever be those whicheven had it been possible to be prepared, in accordance with Parts II and III of Schedule VIof the Companies Act,in case of a bankingin terms of Section 210of the Companies Act,the bank would be under an obligation to lay before Annual General Meeting its annual accounts includingthe profit and loss account.provisions contained in Banking Regulation Act, 1949.preparation of the accounts in terms of the Companies Act. Proviso to sub¬section (2) would require maintaining the sameparameters in relation to theof depreciation as adoptedfor the purpose of preparingthe Annual General Meeting.Banking company in terms of sub¬section (2) ofprovisions of Parts II and III of Schedule VIof the Companies Actor fulfill the requirements of the proviso to sub¬section (2)provisions of sub-section (2) of Section 115JBregard to the first provisoin case of a bankingcompany, would convince us thatmachinery provision provided in subsection (2) of section 115JBof the Act, wouldbe rendered wholly unworkablein such a situation17. This proviso thus refers any insuranceor banking companies or companies engaged in the generation or supplyto any other classfinancial statement has been specified in or under the Act governing such class ofcompany. Combined reading ofthis proviso to sub¬section (1)and clause (b) of subsection(2) of Section 115JB of the Act wouldshow that in case of insuranceor banking companies or companies engaged ingeneration or supply of electricity orclass of companies for whomfinancial statement has been specifiedunder the Act governing suchthe statement of accounts interms of provisions ofthe Companies Act, is not made. Clause (b)of sub¬section (2) providesthat in case of such companiesfor the purpose of Section 115JBthe preparation of statement ofprofit and loss account would bein accordance with the provisions ofthe Act governing suchclass of companies whowere required to prepareprofit and loss accounts not in accordance with theCompanies Act, but in accordance with the provisions contained in such governing Act. The earlier dichotomyif we accept the revenues contention, having the obligation of preparingaccounts as per theCompanies Act has been removed18. These amendments in section 115JB are neither declaratory nor classificatory but make substantive and significant legislative changesthe provision of the Finance Bill, 2012 while explaining the115JB of the Act notes that in case of certain companies such as insurance, banking and electricitythey are allowed to prepare theprofit and loss account in accordance with thespecified in their regulatory Acts.with the Companies Act, 1956to amend Section 115JB to provide that the companies which are not required under Section 211profit and loss account in accordance withprofit and loss accountin accordance with the provisions ofshall be taken asbasis for computing book profit under Section 115 JB of the Actfor the purpose ofthe said section in case ofan assessee¬company to which second provisoto section 129 (1)is applicable, would havefor the assessment yearstatement of profit and lossaccordance with the provisions ofto the Companies Act,with the provisions ofthe Act governing suchmind, this is some what curious provision. In the original form, sub-section (2) of section 115JB of the Act did notprepare its profit and lossat its choice either in terms of its governing Act oras per terms ofSection 115JB of the Act. Secondly, by virtue ofif an anomaly which we have noticed is