2012 (6) TMI 500 - AT - Income Tax

Tribunal's Ruling: Tax Issues Decided - Depreciation, Disallowance, Deduction

Union Bank of India Versus Assistant Commissioner of Income-tax

Union Bank of India Versus Assistant Commissioner of Income-tax - TMI Issues Involved:1. Depreciation on leased assets.2. Disallowance under Section 14A of the Income Tax Act.3. Deduction under Section 36(1)(viii) of the Income Tax Act.4. Disallowance of expenditure for non-deduction of TDS at Sikkim.5. Applicability of the provisions of Section 115JB.6. Disallowance under Section 14A in computing book profits.7. Prior period expenses.8. Reversal of interest.9. Bad debts written off.10. Depreciation on investments.Detailed Analysis:1. Depreciation on Leased Assets:The Tribunal dismissed the assessee's appeal on this issue, citing previous decisions in the assessee's own case for earlier assessment years. It was consistently held that the transactions were essentially loan or finance transactions and not genuine lease transactions, thus disallowing the claim for 100% depreciation on leased assets.2. Disallowance under Section 14A:The Tribunal noted that the applicability of Section 14A was upheld by the Hon'ble Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT. The matter was remitted back to the Assessing Officer (AO) to determine the quantum of disallowance on a 'reasonable basis' after providing the assessee an opportunity to be heard.3. Deduction under Section 36(1)(viii):The Tribunal allowed the assessee's appeal, holding that the definition of 'financial corporation' under Section 36(1)(viii) is inclusive and not exhaustive. The assessee, being a government company engaged in providing long-term finance for specified purposes, was eligible for the deduction. The matter was remitted back to the AO to determine the deduction amount subject to the prescribed limits.4. Disallowance of Expenditure for Non-Deduction of TDS at Sikkim:The Tribunal deleted the disallowance, citing the Supreme Court decision in GE India Technology Centre (P) Ltd v CIT, which held that if the income is not taxable under the Indian Income Tax Act, the payer is not obligated to deduct tax. The Tribunal noted that the Income Tax Act's applicability to Sikkim was not clear, and the assessee had relied on communications from Sikkim authorities indicating non-applicability.5. Applicability of the Provisions of Section 115JB:The Tribunal reversed the CIT(A)'s decision, holding that the provisions of Section 115JB do not apply to the assessee, as it is not a company under the Companies Act but deemed to be a company under the Banking Companies Act. The Tribunal followed the Jurisdictional High Court's decision in Kurung Thai Bank (PCL).6. Disallowance under Section 14A in Computing Book Profits:This ground was dismissed as consequential, following the dismissal of the ground related to the applicability of Section 115JB.7. Prior Period Expenses:The Tribunal dismissed the Revenue's appeal, agreeing with the CIT(A) that the nature of the expenses (rent, municipal taxes, etc.) and the bank's nationalized status justified the claim that the liability arose in the relevant assessment year. The Tribunal followed the Jurisdictional Court's decision in Toyo Engg. India Ltd. v. Joint CIT.8. Reversal of Interest:The Tribunal allowed the assessee's appeal, citing previous decisions in the assessee's own case, which held that the non-recognition of income in respect of non-performing assets, following RBI guidelines, was justified. The addition of Rs. 6,12,80,937 was deleted.9. Bad Debts Written Off:The Tribunal dismissed the Revenue's appeal, holding that the provisions of Section 36(1)(viia) do not apply to bad debts written off for advances made by non-rural branches. The Tribunal followed its earlier decisions and directed the AO accordingly.10. Depreciation on Investments:The Tribunal dismissed the Revenue's appeal, following its earlier decisions in the assessee's own case, which held that securities held by banks as part of their circulating capital should be valued at cost or market value, whichever is lower. The Tribunal approved the change in the method of valuation of securities and directed the AO to verify and allow the loss.Conclusion:The Tribunal's consolidated order addressed multiple issues across various assessment years, providing detailed reasoning and following precedents in the assessee's own cases and relevant judicial decisions. The appeals were partly allowed for statistical purposes, and the Revenue's appeals were dismissed.