The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the Industrial Investment Bank of India Limited (IIBI) is liable to pay minimum tax on book profits even when undergoing voluntary liquidation.
The bench of Rajpal Yadav (Vice-President) and Sanjay Awasthi (Accountant Member) has observed that any assessee covered under the provisions of Section 115JB of the Income Tax Act will necessarily have to compute book profit for the purposes of Minimum Alternate Tax (MAT), until and unless such assessee is exempted specifically within the said provision itself. Clearly, the appellant-bank’s case does not fall within any of the exceptions contained in the said section and thus, the applicability of Section 115JB is clearly applicable to the IIBI bank.
Background
The appellant/assessee-bank is a wholly owned company of the Govt. of India, with its entire share capital being held by the President of India and her seven nominees. Considering poor financial performance, in accordance with the directions of the Ministry of Finance, Govt. of India, at an Extraordinary General Meeting (EGM) of the shareholders on 05.09.2012, it was decided in accordance with Section 484 of the Companies Act, 1956 to go in for voluntary winding up. Consequent upon the adoption of this special resolution for winding up, it became a case of Members’ voluntary winding up after which the company has not been carrying on any business activity other than realising its assets and discharging its statutory liabilities.
The assessee-bank has filed the return declaring total income. The income was set off against brought forward losses, by reducing the taxable income to “NIL”. Through a cryptic assessment order the Assessing Officer the total income was again assessed at “NIL”.
The Pr. Commissioner of Income Tax (Pr. CIT) initiated proceedings under section 263 of the Income Tax Act, 1961 mainly on the ground that the assessee had not computed income under the provisions of Minimum Alternate Tax (MAT) and had not computed book profit on the basis of claim that provisions of MAT were not applicable on him.
A show cause notice under section 263 was issued regarding the action of the appellant in not computing tax as per the provisions of MAT.
The Pr. CIT proceeded to hold that the provisions of Section under section 115JB would squarely apply to the assessee even when he is undergoing voluntary liquidation. The AO did not conduct any enquiry whatsoever on this issue and effectively assessed the case on the returned income.
Conclusion
The tribunal while dismissing the appeal of the bank held that whatever is the system of accounts being followed by the assessee, it is very much possible to determine profits and losses or to put it in the language of the Companies Act, 2013 and Section 115JB, preparing a “statement of profit and loss” which would lead to computation of MAT. This fact would be an additional factor against the appellant when he claims that because of the provisions of Companies Act, 2013/1956, he is unable to work out “book profits” for determining MAT liability.
Case title: Industrial Investment Bank of India Limited v/s PCIT, Kolkata
Citation: I.T.A. No.: 406/KOL/2023
Counsel for the Petitioner: Sanjay Bhattacharaya, FCA
Counsel for the Respondent: Subhendu Datta, CIT DR.