Prior to the Finance Act 2012 Amendment, Section 115JB (MAT) Did Not Apply to Foreign Banking Companies

By | June 18, 2026
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Prior to the Finance Act 2012 Amendment, Section 115JB (MAT) Did Not Apply to Foreign Banking Companies

Issue

Whether the Minimum Alternate Tax (MAT) provisions under Section 115JB of the Income-tax Act, 1961 are applicable to a foreign banking company (Royal Bank of Scotland) for the Assessment Year 2011-12, given that specific statutory amendments bringing banking companies under MAT were enacted later via the Finance Act, 2012.

Facts

  • The assessee, Royal Bank of Scotland, is a foreign banking corporation operating branches in India and is not a nationalised/domestic banking company.

  • For the Assessment Year 2011-12, the tax authorities attempted to apply the provisions of Section 115JB to compute the bank’s book profits and levy Minimum Alternate Tax.

  • The assessee contended that the framework of Section 115JB, as it stood during AY 2011-12, was structurally incapable of applying to banking companies that prepared their financial statements under the Banking Regulation Act, 1949, rather than the Companies Act.

  • The Finance Act, 2012, subsequently amended Section 115JB to explicitly bring banking, insurance, and electricity companies under the MAT net, but made this amendment effective only from Assessment Year 2013-14 onwards.

Decision

  • Decided in favor of the assessee. The provisions of Section 115JB were held to be completely inapplicable to the assessee for AY 2011-12.

  • The High Court/Tribunal confirmed that since the regulatory amendment extending the scope of Section 115JB to non-national banking companies came into effect only from AY 2013-14 via the Finance Act, 2012, the revenue could not retrospectively enforce MAT on a banking institution for an earlier assessment year.

Key Takeaways

  • Statutory Limitation of MAT: Prior to the 2012 amendment, Section 115JB applied strictly to companies whose financial accounts were governed by the formatting rules of the Companies Act. Because banking companies prepare their balance sheets under special banking laws, they fell outside the operational mechanism of MAT.

  • Prospective Nature of Amendments: When the legislature introduces a statutory amendment to expand the tax net to a new sector (e.g., banking or insurance under MAT), such provisions are prospective unless explicitly stated otherwise. They cannot be applied to open or pending assessments for prior years.

HIGH COURT OF CALCUTTA
Commissioner of Income-tax (IT and TP)
v.
Royal Bank of Scotland N.V.*
Rajarshi Bharadwaj and CHAITALI CHATTERJEE (DAS), JJ.
IT AppealNo.67 of 2019
MAY  18, 2026
Amit Sharma, Adv. for the Appellant. Akhilesh Gupta and Asit Kr. De, Advs. for the Respondent.
ORDER
1. Learned counsel appearing for the appellant raises the question of law framed on 17th June, 2019 by their Lordships Hon’ble Justice P. Mukerji and Hon’ble Justice Md. Nizamuddin. The substantial question of law framed in the above appeal is as under:
2. “Whether a nationalised banking company would be subject to the requirements of section 115JB of the Income Tax Act, 1961?”
3. At the outset, the learned counsel appearing for the respondent/assessee submits that Section 115JB is not applicable in the assessment year in question, namely assessment year 2011-12, as this provision was introduced by the Finance Act, 2012 and became applicable from the assessment year 2013-14. The Royal Bank of Scotland is not a nationalised bank, and for the relevant assessment year, tax on normal income calculated under section 143(3) exceeded the tax calculated under section 115JB; accordingly, the tax payable was computed at the normal rate.
4. Learned counsel for the appellant supports the respondent/assessee’s position, contending that Section 115JB of the Income Tax Act was applicable from the assessment year 2013-14.
5. We have heard the counsel for the parties. Since the assessee, Royal Bank of Scotland, is not a national banking company and the provisions of section 115JB came into effect from the assessment year 2013-14 by virtue of the Finance Act, 2012, the respondent/assessee company computed its normal income under section 143(3), and the assessment was made by the Assessing Officer under that same provision. There is no applicability of section 115JB in the relevant assessment year. Consequently, the question framed on 17th June, 2019 is answered in the negative and in favour of the assessee. The appeal is accordingly dismissed.