Tribunal rules in favor of assessee for 2006-07 and 2007-08 assessments

The Tribunal allowed the assessee's appeals for the assessment years 2006-07 and 2007-08. The revenue's appeals were partly allowed for the assessment year 2006-07 and dismissed for the assessment year 2007-08. The Tribunal's decision was pronounced on September 11, 2015.

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Issues Involved:
1. Applicability of Section 115JB of the IT Act, 1961 to the assessee.
2. Deduction under Section 36(1)(viia) of the IT Act, 1961.
3. Deduction of bad debts under Section 36(1)(vii) of the IT Act, 1961.
4. Depreciation on "Held to Maturity" (HTM) investments.
5. Deduction under Section 36(1)(viii) of the IT Act, 1961.
6. Disallowance under Section 14A of the IT Act, 1961.

Issue-wise Detailed Analysis:

1. Applicability of Section 115JB of the IT Act, 1961 to the Assessee:
The assessee, a nationalized bank, argued that since it prepares its accounts as per the Banking Regulation Act, 1949, and not as per Schedule VI Part II & III of the Companies Act, 1956, the provisions of Section 115JB are not applicable. The Tribunal referred to the case of M/s Indian Bank Vs Addl.CIT, where it was held that the provisions of Section 115JB do not apply to banking companies as they are exempt from preparing accounts under Schedule VI of the Companies Act. The Tribunal, respecting the decision of the Co-ordinate Bench, set aside the orders of the lower authorities and allowed the appeal of the assessee.

2. Deduction under Section 36(1)(viia) of the IT Act, 1961:
The CIT(A) directed the AO to allow the claim of deduction under Section 36(1)(viia) amounting to Rs. 143,12,69,349/-. The Tribunal referred to the Co-ordinate Bench's decision in the case of Canara Bank, which held that the claim for deduction under Section 36(1)(viia) cannot be greater than the amount debited to the profit and loss account as provision. The Tribunal allowed the revenue's appeal to this extent and rejected the alternate submission by the assessee regarding excess provision in subsequent years.

3. Deduction of Bad Debts under Section 36(1)(vii) of the IT Act, 1961:
The CIT(A) directed the AO to allow the deduction of Rs. 34,45,27,639/- under Section 36(1)(vii) for bad debts written off pertaining to non-rural branches without adjusting against provisions made under Section 36(1)(viia). The Tribunal referred to the Supreme Court's decision in Catholic Syrian Bank Ltd., which clarified that deductions under Section 36(1)(vii) and 36(1)(viia) are distinct and independent. The Tribunal dismissed the revenue's appeal on this issue.

4. Depreciation on "Held to Maturity" (HTM) Investments:
The CIT(A) allowed the claim of depreciation on HTM investments amounting to Rs. 349,47,34,269/-. The Tribunal referred to the Co-ordinate Bench's decision in ITA No.578(B)/2012, which upheld that depreciation on investments held under HTM or "Available for Sale" can be allowed as deduction. The Tribunal dismissed the revenue's appeal on this issue.

5. Deduction under Section 36(1)(viii) of the IT Act, 1961:
The CIT(A) allowed the deduction of Rs. 20 Cr under Section 36(1)(viii), considering the assessee as a specified entity. The Tribunal referred to the Mumbai Bench's decision in the case of Union Bank of India, which held that the assessee, being a Government company, is entitled to the deduction under Section 36(1)(viii). The Tribunal dismissed the revenue's appeal on this issue.

6. Disallowance under Section 14A of the IT Act, 1961:
The CIT(A) deleted the disallowance of Rs. 3,43,28,658/- under Section 14A. The Tribunal referred to the Co-ordinate Bench's decision in ITA No.578(B)/2012, which held that no disallowance can be made under Section 14A as the expenditure would have been incurred even without earning any tax-free income. The Tribunal dismissed the revenue's appeal on this issue.

Conclusion:
The appeals filed by the assessee for the assessment years 2006-07 and 2007-08 were allowed, and the appeals filed by the revenue were partly allowed for the assessment year 2006-07 and dismissed for the assessment year 2007-08. The Tribunal pronounced the order in the open court on the 11th of September, 2015.

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