2020 (6) TMI 7 - AT - Income Tax

Tribunal Rulings: Bank Tax Exemptions, ATM Expense Classification, Rental Income Valuation; TDS Issue Remanded.

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. Key rulings included the non-applicability of Section 115JB ... MAT Applicability of section 115JB in the case of the assessee being a bank - HELD THAT:- As decided in own case [2016 (1) TMI 135 - ITAT KOLKATA] provisions of section 115JB of the Act are not applicable in the case of the assessee bank and further held that the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012 . - Decided in favour of assessee. Prior period expenses disallowance - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of A.Y. 2010-11 and 2012-13 [2018 (11) TMI 1784 - ITAT KOLKATA] we respectfully follow the order of the Tribunal for the said years and uphold the impugned order of the Ld. CIT(A) deleting the disallowance made by the AO on account of prior period expenses. Disallowance made on account of cost of debit card (ATM card) & ATM machine charges - HELD THAT:- As decided in own case [2018 (11) TMI 1784 - ITAT KOLKATA] we find that the issuance of ATM Cum Debit Cards to the customers of the assessee bank is part of the business activity of the assessee and there is no enduring benefit to the assessee out of incurring this expenditure. CIT(A) had observed that in the past the department had been accepting this expenditure as a revenue expenditure and we find no change in facts and circumstances of the case for the year under appeal with regard to the impugned issue warranting the department to take CL different stand. This fact has not been controverted by the revenue before us. Though the principle of res judicata does not apply to income tax proceedings in our opinion the principle of consistency cannot be given to go bye. Disallowance u/s 14A read with Rule 8D(2)(ii) of the Rules as applicable to the assessee bank - HELD THAT:- As decided in own case [2016 (1) TMI 135 - ITAT KOLKATA] we uphold the impugned order of the Ld. CIT(A) deleting the disallowance made by the AO u/s 14A read with Rule 8D and dismiss ground no. 4 of the revenue’s appeal. Disallowance u/s 40(a)(ia) for non-deposit of TDS - HELD THAT:- As decided in own case [2020 (2) TMI 948 - ITAT KOLKATA] since the assessee has deducted and deposited tax on contractual payments under consideration before the due date of filing of return of income, disallowance u/s 40(a)(ia) is not warranted, therefore, we delete the disallowance -This issue is accordingly restored to the file of the AO for the limited purpose of verifying the claim of the assessee of having paid the relevant TDS amount before the date of filing of return of income u/s 139(1) of the Act for the year under consideration and to decide the same accordingly. Disallowance of share issue expenses - allowing the deduction being 1/5th of the total share issue expenses u/s 35D - HELD THAT:- Respectfully following the decision of Mumbai Bench of this Tribunal in the case of Indusind Bank Ltd. [2019 (2) TMI 1713 - ITAT MUMBAI] we direct the AO to allow the claim of the assessee for share issue expenses u/s 35D of the Act being 15th of the total expenses. Ground No. 2 of the assessee’s cross-objection is accordingly allowed. Disallowance of assessee’s claim for deduction u/s 36(1)(viii) - HELD THAT:- As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Allahabad Bank [2019 (6) TMI 993 - ITAT KOLKATA] we respectfully follow the order of the Coordinate Bench of this Tribunal passed in the case of Allahabad Bank and direct the A.O to allow the deduction u/s 36(1)(viii) of the Act as claimed by the assessee. Municipal Valuation for determination of rental income from the relevant properties - HELD THAT:- No infirmity in the impugned order of the ld. CIT(A) directing the A.O to adopt municipal valuation to determine the rental income of the assessee from the concerned properties. Order is being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI] Issues Involved:1. Applicability of Section 115JB to banks.2. Allowability of prior period expenses.3. Classification of ATM card expenses as revenue or capital expenditure.4. Disallowance under Section 14A read with Rule 8D.5. Disallowance under Section 40(a)(ia) for non-deposit of TDS.6. Deduction under Section 35D for share issue expenses.7. Deduction under Section 36(1)(viii) for operating expenses.8. Adoption of Municipal Valuation for determining rental income.Issue-wise Detailed Analysis:1. Applicability of Section 115JB to Banks:The Tribunal held that the provisions of Section 115JB of the Income Tax Act, 1961, are not applicable to banks. This decision was based on the Tribunal's earlier rulings in the assessee's own case for A.Y. 2009-10 and 2010-11, where it was concluded that the amendment brought by the Finance Act 2012 to Section 115JB, effective from A.Y. 2013-14, does not apply to banks. The Tribunal cited multiple precedents, including UCO Bank vs. DCIT and State Bank of Hyderabad vs. DCIT, to support this view.2. Allowability of Prior Period Expenses:The Tribunal upheld the CIT(A)'s decision to allow prior period expenses, agreeing that the liability for these expenses crystallized during the relevant financial year. This decision followed the principle of consistency, as similar expenses had been allowed in previous years, specifically A.Y. 2010-11 and 2012-13.3. Classification of ATM Card Expenses:The Tribunal ruled that expenses related to ATM cards should be treated as revenue expenses. This decision was consistent with the Tribunal's earlier rulings in the assessee's own case for A.Y. 2010-11 and 2012-13, where it was held that such expenses do not provide an enduring benefit to the bank and are part of its regular business activities.4. Disallowance under Section 14A read with Rule 8D:The Tribunal upheld the CIT(A)'s decision to delete the disallowance made under Section 14A read with Rule 8D(2)(ii) but maintained the disallowance under Rule 8D(2)(iii). It was concluded that the bank had sufficient own funds to cover the investments yielding tax-free income, thus no part of borrowed funds was used for these investments.5. Disallowance under Section 40(a)(ia) for Non-Deposit of TDS:The Tribunal remanded the issue back to the AO for verification of the assessee's claim that the TDS was paid before the filing of the return of income under Section 139(1). The Tribunal referenced the Calcutta High Court's decision in CIT vs. Virgin Creations, which supports the allowance of such expenses if TDS is paid before the due date of filing the return.6. Deduction under Section 35D for Share Issue Expenses:The Tribunal directed the AO to allow the deduction of share issue expenses to the extent of 1/5th of the total expenses under Section 35D. This decision was based on the Tribunal's ruling in Indusind Bank Ltd. vs. Addl. CIT, where similar claims were allowed.7. Deduction under Section 36(1)(viii) for Operating Expenses:The Tribunal ruled in favor of the assessee, holding that the method used by the assessee to apportion operating expenses was reasonable and consistent with previous years. The decision relied on the Tribunal's ruling in Allahabad Bank vs. DCIT, where it was held that operating expenses should be apportioned considering both performing and non-performing assets.8. Adoption of Municipal Valuation for Determining Rental Income:The Tribunal upheld the CIT(A)'s decision to adopt the municipal valuation for determining rental income from the properties owned by the assessee. This decision followed the Tribunal's earlier ruling in the assessee's own case for A.Y. 2009-10.Conclusion:The appeal by the Revenue was dismissed, and the cross-objection by the assessee was partly allowed. The Tribunal's decisions were largely based on principles of consistency and adherence to previous rulings in similar cases.