×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
12-04-2019, Standard Chartered Bank, Section 115JA, 90(2), Tribunal Mumbai
These cross appeals arise out of the order dated 27th September 2004, passed by the learned Commissioner (Appeals)–XXXI, Mumbai, pertaining to the assessment year 1997–98.
2. Shri P.J. Pardiwala, learned Sr. Counsel, appearing for the assessee, at the outset, submitted that the issues raised in grounds no.1 and 2, have become infructuous as the assessee has been granted consequential relief n assessment year 1999–2000 and 2005– 06 respectively. In view of the aforesaid submissions of the learned Sr. Counsel for the assessee, grounds no.1 and 2 are dismissed as infructuous.
3. In ground no.3, the assessee has challenged the computation of income under section 115JA of the Income-tax Act, 1961 (for short "the Act").
4. Brief facts are, the assessee is a foreign company incorporated by the Royal Charter under the laws of England and Wales. It carries on business of banking, financial service and allied activities. The assessee company opened branches in India to carry on such activities with the permission of Reserve Bank of India (RBI) under the Banking Regulations Act, 1949. For the impugned assessment year, the assessee filed its return of income on 28th November 1997, declaring total income of ` 2,54,830. In the course of assessment proceeding when the Assessing Officer proposed to compute assessee’s tax liabilities under section 115JA of the Act, it was contended by the assessee that as per Article–7 of India–U K. Double Taxation Avoidance Agreement (DTAA) only business profit directly attributable to the Indian branches can be taxed in India. Thus, it was submitted, the assessee has no liability under the provisions of section115JA of the Act. It was submitted, the provisions of the Act would apply to the assessee only to the extent they are beneficial to it as provided under section 90(2) of the Act. In this context, the assessee also relied upon CBDT Circular no.333, dated 12th April 1982. Thus, in sum and substance, it was submitted by the assessee that when the India–U.K. Tax Treaty specifically provides mode of computation of profit, it will override the provisions of section 115JA of the Act. The Assessing Officer after considering the submissions of the assessee observed that under the Article–7 of the Tax Treaty no specific method of computation for calculation of tax has been provided. He observed, the said Article only provides for taxability of business profit directly attributable to Bank’s branches in India. Whereas, what section 115JA of the Act seeks to tax is nothing but the profits derived by the assessee shown in the Profit & Loss Account in respect of Indian
branches. Thus, ultimately, he held that the assessee is liable to pay tax under section 115JA of the Act and computed the tax accordingly under the said provision. The assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority.
5. Learned Commissioner (Appeals) after considering the submissions of the assessee did not find merit in them. Relying upon a decision of the Authority for Advance Ruling reported in 234 ITR 335, he held that the provisions of section 115JA of the Act would apply to a non–resident company. Accordingly, he upheld the decision of the Assessing Officer insofar as applicability of section 115JA of the Act is concerned.
6. Learned Sr. Counsel for the assessee drawing our attention to the provisions contained under section 115JA of the Act submitted, as per sub–section (2) of section 115JA of the Act, the companies whose Profit & Loss Account is prepared in accordance with the provisions of Part–I & II of Schedule–VI to the Companies Act, 1956, are amenable to the provisions of section 115JA of the Act. He submitted, assessee has to prepare its accounts as per Banking Regulations Act and not as per the Companies Act. He submitted, clause (e) to Explanation to section 115JA of the Act further makes it clear that the provision of section 115JA of the Act is applicable only to domestic companies as it speaks of increasing the income by the amount of dividend paid or proposed. Learned Sr. Counsel for the assessee submitted, section 115JB of the Act, which is pari–material to section 115JA of the Act, an amendment was made by Finance Act, 2012, effective from 1st April 2013, making it mandatory for all companies including banking companies to prepare their Profit & Loss Account as per Schedule–VI of the Companies Act, 1956. He submitted, the said amendment would be applicable form assessment year 2012–13 onwards. Learned Sr. Counsel for the assessee submitted, no such corresponding amendment like section 115JB(2)(b) of the Act was made to the provisions of section 115JA of the Act. Thus, he submitted, the provisions of section 115JA of the Act cannot be applied to the assessee. In support of his contention, learned Sr. Counsel relied upon the following decisions:–
i) ICICI Lombard General Insurance Co. Ltd. v/s ACIT, 54 SOT 538 (Mum.);
ii) UCO Bank v/s DCIT, 156 ITD 146 (Kol.);
iii) State Bank of Hyderabad v/s DCIT, 58 SOT 278 (Hyd.);
iv) DCIT v/s Royal Bank of Scotland, 76 taxmann.com 91; and