AI Drafter 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2013 (3) TMI 643
X X X X Extracts X X X X
X X X X Extracts X X X X
....epreciation on land and ground no.3 with respect to disallowance under section 14A are not pressed by the A.R. Therefore, both these grounds are dismissed as having not pressed. 4. Ground no.2 relates to bad debts written off in terms of provisions under section 36 of the Act. A similar issue has already been adjudicated by us in the assessee's own case in ITA No.265/Mds/2005 for the assessment year 1998-1999. The relevant extract of the said order is reproduced herein below:- "21. The representatives of both the sides have stated that the present issue has been adjudicated by the Hon'ble Supreme Court of India in the case of Catholic Syrian Bank Ltd. (supra). The Hon'ble Apex Court while dealing with this issue has concluded as under:- "To conclude, we hold that the provisions of sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. The bad debts written off in debts, other than those for which the provision is made under clause (viia), will be covered under the main part of section 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduction to the extent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). Accordingly, the above question is answered in the affirmative, i.e., in favour of the assessee(s). For the above reasons, I agree that the appeals filed by the assessees stand allowed and the appeals filed by the Revenue stand dismissed with no order as to costs." 22. In view of the above, we deem it appropriate to remand the issue back to the Assessing Officer to decide it afresh in accordance with the law laid down by the Hon'ble Supreme Court of India in the case of Catholic Syrian Bank Ltd. (supra)." 5. In view of the aforesaid findings, we remit this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of both the sides are in consonance that in the present case also similar situation has arisen where provisions of section 2(1B) have not been taken into consideration while deciding the issue by the Assessing Officer. We, therefore, remit this issue back to the Assessing Officer for deciding it afresh on the similar directions as given by the Tribunal vide order dated 2.6.2008. This ground of appeal of the Revenue is allowed for statistical purposes. 12. The second ground of appeal of the Revenue is with regard to deleting disallowance of loss on account of frauds written off by the CIT(A) . The DR has referred to the order of the Tribunal in ITA No.843/Mds/2001 relevant to the assessment year 1996-97 wherein a similar issue had been raised by the Revenue and the Tribunal had remitted the issue back to the file of the Assessing Officer for deciding the issue afresh as the CIT(A) has not adequately discussed the issue. The CIT(A) only followed the earlier order and the copies of the orders were not produced before the Tribunal for deciding the issue. 13. Similar is the situation in this case. We find that while deciding the issue relating to loss arising out of frauds writte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed CIT(Appeals) hyper technically held that the only job of the Assessing Officer was to see whether there is a DTAA between India and Thailand. We are unable to understand the above conclusion made by the learned CIT(Appeals) that the job of the Assessing Officer is just to see whether there is a DTAA between India and Thailand. If there is a DTAA, the Assessing Officer has to allow the relief claimed by the assessee. That being so, in our opinion, the Tribunal need not refer it to the Assessing Officer as well just to see and pass an order. The Tribunal clearly directed the Assessing Officer to enquire into the existence of a DTAA between India and Bangkok. "Enquiry" means to investigate and apply the same. In our opinion, the Assessing Officer has rightly investigated and applied the same and decided the issue. We therefore hold that the finding given by the learned CIT(Appeals) is not correct. Accordingly, we reverse the order passed by the learned CIT(Appeals) on this count and uphold the order of the Assessing Officer." The learned AR of the bank fairly conceded that the issue has been decided against the bank. Respectfully following the decision of the Tribunal in the afo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) . In the present case, the assessee has not been able to show that the liability has been crystallized or the contribution has been made towards approved fund as per the provisions of the Act. The claim of the assessee based upon the provision of section 43B has no merit. Before the provisions of section 43B can be applicable, deduction must otherwise be allowable under the Act. In view of the above discussion, we are constrained to hold that the contribution towards staff welfare fund is not allowable expenditure. Therefore, this ground of appeal of the assessee is dismissed." In view of the above findings, we set aside the order of the CIT(A) on this issue and allow this ground of appeal of the Revenue. 16. The next additional ground of appeal raised by the Revenue is with regard to provision towards wage arrears. This issue has been dealt in detail in an appeal of the Revenue in ITA No.1866/Mds/2006 for the assessment year 1999-2000 decided on 26.02.2013. The relevant extract of the order of the Tribunal is reproduced here under:- "42. We have heard the submissions made by both the sides and have gone through the orders of the authorities below and the judgements/o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ribunal in the aforementioned appeal, we dismiss this ground of appeal of the assessee. 19. The second ground of appeal of the assessee relates to bad debts written off. This issue has already been adjudicated by the Tribunal in the appeal of the assessee in ITA No.1146/Mds/2008, wherein the Tribunal has observed as under:- " 33. We have considered the submissions made by the representatives of both the sides. The Hon'ble Supreme Court of India in the case of TRF Ltd (supra) has held as under:- "After the amendment of section 36(1)(vii) of the Income Tax Act, 1961 with effect from 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough, if the bad debt is written off as irrecoverable in the accounts of the assessee." In view of the above, we hold that the case of the assessee is squarely covered by the judgement of the Hon'ble Apex Court. As in the present case, the assessee has claimed the bad debts written off in respect of rural advances. A perusal of the documents on record shows that the bad debts written off by the assessee relates to non-rural branches as well. The issue regardi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal unrealised gain arose. As regards the various decisions relied on by the appellant counsel it would be relevant to discuss the ratio of the various decisions. 151 ITR 446 This case relates to the appellant bank itself. In this case the appellant bank dealing in foreign currencies on behalf of customers, the loss or profit arising on the outstanding contracts was estimated, based on the exchange as on the closing date. The appellant bank made provision for this amount in its account for the accounting period on the ground that this amount had to be provided for before ascertaining the profit and accordingly claimed the deduction of the said amount from the profit. It has been held by the Honourable Madras High Court held "That it cannot be disputed that as against the profits earned in the accounting year, only the actual loss incurred can be deducted and not any probable or possible loss. As there was no settlement of the outstanding contracts in the accounting year in question, the amount claimed could only be considered to be a notional or anticipated loss and such notional or anticipated loss could not be allowed deduction. The Tribunal was, theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cited and analysed supra that the claim of the appellant was based on estimated liability or the estimated profit on exchange difference. Therefore the ratios of the above decisions will not apply in the present appeal since in the present appeal the actual amount due to the appellant from overseas branches had been received and as a result of such receipt the profit has not only accrued but also been realised by the appellant. As regards the decision of the Supreme Court in Brooke Bond India Ltd reported in 225 ITR 789 relied on by the appellant, I may mention here that the said decision is with reference to the expenditure incurred in connection with the increase of capital base by an assessee. In the present case the increase of capital base was not by the appellant bank nor has the appellant incurred any such expenditure. Therefore, the ratio of the said decision is not applicable to the facts of the present case 10. The Supreme Court in case of Sutlej Cotton Mill Ltd vs Commissioner of Income Tax (WB) has formulated the tests for determining the profitability on account of the appreciation or depreciation in the value of foreign currency. It has been held therein that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ange would be to determine i) what is the nature of transaction? ii) whether the transaction relates to the circulating capital or the investment? iii) whether a profit has resulted out of such transactions? 11. Applying the above tests to the facts of the present case there is no dispute that the appellant's Head Office transferred the amount to its foreign branches as circulating capital. The amount so transferred by any parameter cannot be said to be investment. Moreover there is no dispute in the present case that the profit has arisen as result of the transactions. In my view therefore the tests laid down by the Supreme Court in case of 116 ITR 1 and Bombay High Court in 218 ITR 371 are satisfied which lead to irresistible conclusion that the impugned amount which arose on account of foreign exchange fluctuation is in the nature of revenue receipt liable to be taxed. The addition of Rs. 131,59,65,267/- made by the Assessing Officer is therefore confirmed. The appellant fails on this ground. " 14. Before us, the assessee contended that it has remitted capital to its branches outside India. When the capital in subsequent years became excess the same was brough....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nk of Hyderabad Vs. DCIT in ITA No.578/Hyd/2010 relevant to the assessment year 2007-08 decided on 7.9.2012, wherein the Tribunal has held that the provisions of section 115JB will not be applicable to the assessee and set aside the assessment made under section 115JB on the assessee bank. The relevant extract of the order of the Tribunal is reproduced herein below:- "13. The provisions of Sec.115JB will be applicable to all companies. However, it is contended that Sec.115JB will be applicable only where the assessee is required to show profit & loss account in accordance with schedule VI of companies act. As the banks are required to prepare balance sheet and profit & loss account in accordance with the Banking Regulation Act, provision of 115JB cannot be applied to the banks. In the case of Maharashtra State Electricity Board vs. JCIT (82 ITD 422) it was held that provisions of book profit cannot be applied to Electricity Companies. Banking Companies and companies engaged in generation and supply of electricity do not have to prepare their accounts in accordance with parts II and III of Sch. VI of the Companies Act by the virtue of proviso to sec 211(2) of the Companies Act. W....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugha Kesari reported as 121 ITR 403 (Mad) 23. We have heard the submissions made by both the sides and have perused the orders of the authorities below. We have also examined the judgements/orders referred to by both the sides. The DR has placed reliance on the judgements which are prior to nationalization of banks. After the enactment of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 the status of banks have changed and the said judgements have lost their relevance in the post nationalization scenario. The facts of the judgement of the Hon'ble Madras High Court in the case of S.P.Shanmugha Kesari (supra) are entirely different from the case in hand. Therefore, the ratio of the said decision is also not applicable in the instant case. On the contrary, the order of the Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad (supra) deals with an identical issue. The Tribunal has held that provisions of section 115JB cannot be applied to the banking company. However, in view of amendment to the provisions of section 115JB by the Finance Act, 2012, the provisions of section 115JB are applicable to the banks as well from assessment year 2013-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he next additional ground raised by the Revenue is in respect of disallowance on loss on revaluation of investments. The learned AR submitted that similar issue has earlier been raised in appeal of the assessee in ITA No.694/Mds/2001 relevant to the assessment year 1996-97. The learned DR agrees with the statement of the AR . We find that the Tribunal has placed reliance on the judgement of the Hon'ble Madras High Court in the case of CIT Vs. Karur Vysya Bank Ltd. in TCA No.2139 of 2008 decided on 13.7.2008. The Tribunal held as under:- "37. We find that the Hon'ble Madras High Court in the above quoted case has held as under: "2. In so far as the first question of law raised by the revenue is "whether the Tribunal is right in holding that the diminution in the value of the securities held by the bank should be allowed as deduction disregarding the method prescribed in the Reserve Bank of India as per which 'permanent' investments had to be valued only at cost and only 'current 'investments were to be valued at market price at the close of the accounting year". The very same issue came up for consideration before this Court in the decision reported in 273 ITR 510 @ ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. The appeal of the Revenue is partly allowed in the above said terms. ITA No.98/Mds/2010 (A.Y. 2003-04): 32. This appeal has been preferred by the assessee impugning the order of the CIT(A), LTU, Chennai dated 30.11.2009 relevant to the assessment year 2003-04. 33. The ground of appeal raised by the assessee is as under:- "The CIT(A) has erred in confirming the order of Assessing Officer in disallowing the appellants claim in respect of provision made towards arrears of salary amounting to Rs. 12,00,00,000/-. The appeal is emanating from the order giving effect to the order passed under section 263 of the Act. The A.R. has fairly conceded that the provision made towards arrears of salary amounting to Rs. 12 crores may be allowed in the year of actual payment. In view of the statement made by the A.R., we remit the file back to the Assessing Officer with a direction to allow the payment of arrears of salary in the year of actual payment. This ground of appeal is allowed for statistical purpose. ITA No.248/Mds/2010 (A.Y.2003-04): 34. This appeal has been filed by the Revenue against the order of the CIT(A) LTU, Chennai dated 30.11.2009. 35. The first gr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n case, we do not find any merit in the order passed by the learned Commissioner of Income Tax u/s.263 of the Act with regard to the direction to assess the interest income on accrued basis. Further, with regard to the point for allowing deduction ujs.36(1)(viia) on account of provision for doubtful debts, we find no substance in the Commissioner of Income Tax's order in directing the Assessing Officer to allow deduction ujs.36(1)(viia) after setting off of brought forward business losses in as much as the set off of brought forward business losses are the matter of Chapter - VI consisting of sections 70 to 80 and not falling within the manner of computation of business income in accordance with the provisions contained in sections 30 to 43D. Be it stated here that income from profit and gain from business or profession are to be computed in accordance with the provision contained in section 30 to 43D and as such the computation of income from profit and gains of business have nothing to do with the amount of business losses brought forward from earlier years which is deductible u/s.70 to 80 of the Act and not within the sections 30 to 43D of the Act. In this connection referen....