2021 (12) TMI 1313 - AT - Income Tax

Tribunal decisions on tax appeals: Assessee's appeal allowed, revenue partly allowed. Deductions under Act reviewed.

JCIT (Large Tax Payers Unit) Bangalore Versus M/s. Bank of Baroda (Erstwhile M/s. Vijaya Bank) and vice-versa

The appeal filed by the assessee was allowed for statistical purposes, while the appeal filed by the revenue was partly allowed for statistical purposes. ... TDS u/s 194J - NFS – ATM Charges paid - disallowance made u/s 40(a)(ia) for non-deduction of tax at source on payments fall under the category of technical services - HELD THAT:- Following the above said decision of co-ordinate bench rendered in the case of Canara Bank [2022 (1) TMI 124 - ITAT BANGALORE], we hold that the payments made to NPCI towards NFS ATM charges cannot be considered as “technical services” within the meaning of sec.194J of the Act. Hence there is no liability to deduct tax at source from those payments. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Applicability of sec.115JB on banking company - case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a ‘banking company”, i.e., it is a “corresponding new bank” - HELD THAT:- As decided in M/S. CANARA BANK (ERSTWHILE SYNDICATE BANK) VERSUS DEPUTY COMMISSIONER OF INCOME-TAX CIRLE-1 UDUPI AND (VICE-VERSA) [2022 (1) TMI 124 - ITAT BANGALORE] provisions of sec.51 of the Act specifically states that only certain provisions of BR Act are applicable to “Corresponding new bank”. We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec.51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of “banking company”, provisions of sec.211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh. Disallowance of bad debts claimed u/s 36(1)(vii) - HELD THAT:- We notice that the Ld CIT(A) has followed the decision rendered by the co-ordinate bench in the assessee’s own case [2018 (1) TMI 1575 - ITAT BANGALORE] and deleted the disallowance of bad debts claimed by the assessee u/s 36(1)(vii) of the Act. Accordingly, we do not find any reason to interfere with his order passed on this issue. Disallowance of depreciation on HTM Securities - AO took the view that the RBI has allowed banks to claim depreciation on securities which are “Held for Trade” and “Available for sale” only thus he held that the depreciation is not available on securities “Held to Maturity - CIT-A deleted the addition - HELD THAT:- As decided in own case [2018 (1) TMI 1575 - ITAT BANGALORE] depreciation claimed on investments 'held on maturity' by a bank has to be treated as stock-in- trade in accordance with RBI guidelines and CBDT Circular. Disallowance made u/s 14A - HELD THAT:- We notice that the co-ordinate benches have decided this issue prior to rendering of decision by Hon’ble Supreme Court in the case of Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] However, before us, the Ld A.R relied upon certain other decisions in order to contend that no disallowance u/s 14A is called for. In view of the subsequent development of law on this issue, in our considered view, this issue requires fresh examination at the end of AO by duly considering the various decisions on the subject. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh. Issues Involved:1. Disallowance of deduction of Provision for bad and doubtful debts claimed u/s 36(1)(viia) of the Act2. Disallowance of expenditure u/s 40(a)(ia) of the Act3. Applicability of provisions of sec. 115JB of the Act4. Additions made to net profit to compute book profit u/s 115JB of the Act5. Disallowance of bad debts written off u/s 36(1)(vii) of the Act6. Disallowance of depreciation on HTM securities7. Disallowance u/s 14A of the ActDetailed Analysis:1. Disallowance of Deduction of Provision for Bad and Doubtful Debts Claimed u/s 36(1)(viia) of the Act:The assessee did not press the grounds relating to disallowance of PBDD u/s 36(1)(viia) of the Act during the hearing. Consequently, these grounds were dismissed as not pressed.2. Disallowance of Expenditure u/s 40(a)(ia) of the Act:The AO disallowed payments made by the assessee towards NFS ATM charges, ATM switch charges, and NFS ATM charges paid A/c, totaling Rs. 25,73,39,358, for non-deduction of tax at source u/s 194J of the Act. The CIT(A) confirmed this disallowance. However, the tribunal referenced the decision in Canara Bank vs. Addl/JCIT, where it was held that payments made to NPCI are not technical services under sec.194J and thus not liable for TDS. Following this precedent, the tribunal directed the AO to delete the disallowance.3. Applicability of Provisions of sec. 115JB of the Act:The AO applied sec. 115JB to compute book profit, which was confirmed by the CIT(A). The tribunal noted that similar issues were considered in Canara Bank's case, where it was remanded to the CIT(A) for fresh examination. The tribunal restored this issue to the CIT(A) for reconsideration, noting the need to evaluate the effect of sec. 51 of the BR Act and the definition of 'banking company.'4. Additions Made to Net Profit to Compute Book Profit u/s 115JB of the Act:Since the applicability of sec. 115JB was restored to the CIT(A), the tribunal also restored the issue of additions made to net profit for computing book profit u/s 115JB to the CIT(A) for fresh examination.5. Disallowance of Bad Debts Written Off u/s 36(1)(vii) of the Act:The AO disallowed the bad debts claim of Rs. 497.69 crores, arguing it was a prudential write-off and not an actual write-off as required by sec. 36(1)(vii). The CIT(A) deleted the disallowance, following the tribunal's decision in the assessee's own case for AY 2010-11 to 2012-13. The tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in Vijaya Bank vs. CIT, which supported the assessee's method of write-off.6. Disallowance of Depreciation on HTM Securities:The AO disallowed Rs. 174.42 crores claimed as depreciation on HTM securities, stating that RBI guidelines allow depreciation only on 'Held for Trade' and 'Available for Sale' securities. The CIT(A) deleted the disallowance, citing the tribunal's decisions in the assessee's favor for AY 2003-04, 2008-09, and 2010-11 to 2012-13, which were upheld by the Karnataka High Court. The tribunal affirmed the CIT(A)'s decision, following the precedent set in the assessee's own case.7. Disallowance u/s 14A of the Act:The AO made a further disallowance of Rs. 3,34,76,500/- u/s 14A, computed under Rule 8D. The CIT(A) deleted the disallowance, following the tribunal's decisions in the assessee's favor for AY 2008-09, 2010-11, and 2011-12. The tribunal noted that these decisions were prior to the Supreme Court's ruling in Maxopp Investment Ltd. and remanded the issue to the AO for fresh examination, considering subsequent legal developments.Conclusion:The appeal filed by the assessee is allowed for statistical purposes, and the appeal filed by the revenue is partly allowed for statistical purposes.