Appeal partly allowed: broken-period interest allowed, HTM investment depreciation, ATM 60% upheld, s.36(1)(vii),(viii) and s.115JB clarified

ITAT Chennai partly allowed the appeal. Broken-period interest paid on purchase of securities was allowed where corresponding broken-period interest was treated as business income. Depreciation on investments shifted to HTM and a technical bad-debt write-off under s.36(1)(vii) were allowed. Depreciation on ATMs at 60% was upheld. Sec.115JB (MAT) adjustments were held inapplicable to banks. Foreign-branch income must be included in Indian return with foreign-tax credit only. Disallowance under s.14A r.w. Rule 8D limited to exempt income. Rule 6ABA computation for s.36(1)(viia) must use outstanding rural advances. MAT credit on amalgamation granted. Deduction under s.36(1)(viii) remanded for recomputation by AO.

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Issues Involved:
1. Broken period interest paid on purchase of securities.
2. Depreciation of investment on securities at the time of shifting from available for sale to held to maturity.
3. Deduction of bad debts written off (technical write-off).
4. Depreciation on ATM at 60% as against the eligible depreciation at 15%.
5. Adjustments in computing Minimum Alternate Tax (MAT) under Section 115JB.
6. Inclusion of income from foreign branches in total income and double taxation relief.
7. Disallowance under Section 14A read with Rule 8D.
8. Computation of deduction under Section 36(1)(viia) for advances made to rural branches.
9. Computation of deduction under Section 36(1)(viii).
10. MAT credit entitlement on the amalgamation of IndFund Management Ltd. with the assessee bank.

Detailed Analysis:

1. Broken Period Interest Paid on Purchase of Securities:
The Tribunal dismissed the Revenue's appeal, agreeing that the issue of broken period interest paid on the purchase of securities, held as investments, was covered by the decision in the assessee's own case for the assessment year 2011-12. The Tribunal had previously held that such interest should be allowed as revenue expenditure based on the precedent set by the Hon’ble Mumbai High Court and the Hon’ble Apex Court.

2. Depreciation of Investment on Securities at the Time of Shifting from Available for Sale to Held to Maturity:
The Tribunal dismissed the Revenue's appeal, holding that the issue was covered by the decision in the assessee's own case for the assessment year 2011-12. The Tribunal had previously ruled that depreciation on securities at the time of shifting from AFS to HTM should be allowed, following the precedent set by the Co-ordinate Bench and the Hon’ble Jurisdictional High Court.

3. Deduction of Bad Debts Written Off (Technical Write-Off):
The Tribunal dismissed the Revenue's appeal, agreeing that the issue was covered by the decision in the assessee's own case for the assessment year 2011-12. The Tribunal had previously allowed the deduction for bad debts written off, referencing the decision of the Hon’ble Supreme Court in Vijaya Bank v. CIT.

4. Depreciation on ATM at 60% as Against the Eligible Depreciation at 15%:
The Tribunal dismissed the Revenue's appeal, holding that the issue was covered by the decision in the assessee's own case for the assessment year 2011-12. The Tribunal had previously ruled that ATMs are substantially in the nature of computers and are eligible for 60% depreciation.

5. Adjustments in Computing Minimum Alternate Tax (MAT) Under Section 115JB:
The Tribunal dismissed the Revenue's appeal, agreeing that the provisions of Section 115JB are not applicable to the assessee bank, as it is not a company under the provisions of the Companies Act, 1956. The Tribunal followed the precedent set in the assessee's own case for the assessment years 2004-05 to 2006-07.

6. Inclusion of Income from Foreign Branches in Total Income and Double Taxation Relief:
The Tribunal dismissed the assessee's appeal, holding that the income from foreign branches should be included in the total income, and only double taxation relief as per the agreement is allowable. This decision was based on the precedent set in the assessee's own case for the assessment year 2011-12.

7. Disallowance Under Section 14A Read with Rule 8D:
The Tribunal partly allowed the assessee's appeal, directing the Assessing Officer to restrict the disallowance under Section 14A read with Rule 8D to the extent of the exempted income earned. This decision was influenced by the decisions of the Hon’ble Jurisdictional High Court and the Hon’ble Supreme Court.

8. Computation of Deduction Under Section 36(1)(viia) for Advances Made to Rural Branches:
The Tribunal dismissed the assessee's appeal, holding that the deduction under Section 36(1)(viia) should be based on the aggregate average advances made by the rural branches, not just the incremental advances. This decision followed the precedent set in the assessee's own case for the assessment year 2011-12.

9. Computation of Deduction Under Section 36(1)(viii):
The Tribunal restored the issue to the file of the Assessing Officer to re-compute the deduction under Section 36(1)(viii) by applying the correct principle of computing 20% of the profit derived from the eligible business. The Tribunal emphasized the need to reduce pro-rata expenditure in respect of earning the said interest from eligible business.

10. MAT Credit Entitlement on the Amalgamation of IndFund Management Ltd. with the Assessee Bank:
The Tribunal allowed the assessee's appeal, directing the Assessing Officer to grant the benefit of MAT credit in respect of the amalgamation of IndFund Management Ltd. with the assessee bank. This decision was based on the precedent set by the Co-ordinate Bench in the case of Suraj Agro Infrastructure Vs. DCIT.

Conclusion:
The appeals filed by the Revenue for the assessment years 2012-13, 2013-14, and 2014-15 were dismissed, while the appeals filed by the assessee for the same assessment years were partly allowed for statistical purposes. The Tribunal's decisions were largely influenced by precedents set in the assessee's own cases and other relevant judicial decisions.

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