TaxTMI 
TaxTMI 
2013 (2) TMI 751
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing two grounds :- i) Disallowance of expenditure on Wills World Cup amounting to Rs. 48.05 lakhs; & ii) Applicability of provisions of section 115JA to bank. The counsel for the assessee has raised alternate ground without prejudice to his arguments being raised in ground no.ii) with regard to preparation of books of account as per Schedule VI of the Companies Act in accordance with the provisions of section 115JA. 3. With regard to ground no.1 relating to advertisement expenditure on Wills World Cup, the assessee had amortized the total expenditure of Rs. 1,58,05,001/- over the period of three years. The expenditure was incurred in the previous year relevant to the assessment year 1996-97. The assessee had amortized the said expenditure over the period of three years starting from assessment year 1996-97. Accordingly, the assessee had claimed expenditure to the tune of Rs. 48.05 lakhs in the assessment year 1997-98. The issue had already come up for adjudication before the Tribunal in ITA No.694/Mds/2011 for the assessment year 1996-97. The Tribunal vide order dated 31.1.2013 has allowed the entire advertisement expenditure to the tune of Rs. 1,58,05,001/- in the year....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annot be treated as a company, as it is not required to distribute dividend, therefore, it would not come within the mischief of section 115JA. Similar view has been taken by the Hon'ble Kerala High Court in the case of Kerala State Electricity Board Vs. DCIT., reported as 329 ITR 91 (Ker), wherein the Hon'ble High Court has held that since the board is not a company within the provisions of the Companies Act, provisions of section 115JB are not applicable to it. 5. The A.R. made an alternate plea, without prejudice to his submissions made on the point that the assessee is not a company under the provisions of the Companies Act and therefore, the provisions of section 115JA and 115JB are not applicable to it. The A.R. submitted that if at all the Tribunal holds that the provision of section 115JA are applicable to the assessee, then liberty be granted to the assessee to draw its books of account in accordance with Schedule VI of the Companies Act, 1956. 6. On the other hand, Shri Shaji P.Jacob appearing on behalf of the Revenue submitted that the assessee is a company under the provisions of the Companies Act, 1956. The DR submitted that the assessee was originally incorporat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions of the Companies Act, 1956. The DR further referred to the ruling given by the Authority for Advance Rulings in the case of Castleton Investment Ltd. IN RE reported as 75 DTR (AAR) 321 in support of his submissions. 8. On the alternate plea, the DR submitted that there is no such option for changing books of account to make them suitable under the provisions of the Companies Act, 1956. Moreover, method of computation under both the Acts, i.e. under the provisions of the Companies Act as well as under the provisions of Banking Regulation Act, is almost identical. Filing of documents with the Registrar of Companies in case of banking companies has been exempted in view of section 32 of the Banking Regulation Act, 1949, wherein it has been provided that copies of balance sheets and accounts are to be sent to the Registrar. Section 211 of the Companies Act provides that every balance sheet of a company shall give true and fair view of the state of affairs of the company at the end of financial year and the same should be prepared in accordance with Schedule VI. The Banking and/or Insurance companies have been exempted from preparing their balance sheet in accordance with the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before the Tribunal nor this issue was raised before the CIT(A). It is for the first time that the assessee has raised this issue before the Tribunal by mentioning it in the concise grounds of appeal. 12. When confronted with the situation, the AR has fairly conceded that this issue was not raised by the assessee bank before the CIT(A). However, the issue may not have been clearly spelt out in the detailed grounds of appeal originally filed before the Tribunal but in para 2.7 and 2.8 reference has been made to provisions of section 115JA for allowing the assessee to prepare its profit and loss account in accordance with Schedule VI of the Companies Act. 13. In view of the situation that the second ground of appeal which has been vehemently argued by both the parties does not emanate from the impugned order of the CIT(A), it would not be possible for the Tribunal to adjudicate the same. The issue was not raised by the assessee by following proper procedure by raising the same as additional ground of appeal before the Tribunal. This ground of appeal of the assessee is dismissed for the reasons aforementioned. 14. In the result, the appeal of the assessee is dismissed. ITA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted as 343 ITR 270(SC). 20. The DR submitted that the assessee's claim that provision for doubtful debts created under section 36(1)(viia) has debit balance which is an impossibility. However, the DR admitted that this issue has been adjudicated by the Hon'ble Supreme Court of India in Catholic Syrian Bank Ltd.(supra). 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 of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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). 23. The fifth issue raised by the assessee in the appeal is with respect to applicability of section 115JA to the assessee bank. This ground of appeal has cropped up in ITA No.264/Mds/2005. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... para 16 of this order. Since the issue in this appeal is identical, we dismiss this ground of appeal for the reasons recorded in para 16 of the order. 32. The second ground of appeal is with respect to bad debts written off in respect of rural advances. The AR appearing on behalf of the assessee submitted that the issue has been squarely covered in favour of the assessee by the judgement of the Hon'ble Supreme Court of India in the case of TRF Limited Vs. CIT reported as 323 ITR 397 (SC). On the other hand, the DR submitted that the judgement of the Hon'ble Supreme Court of the India in the case of TRF Ltd. (supra) is not applicable in the facts and circumstances of the present case. Therefore, this ground of appeal of the assessee should be dismissed. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it is neither capital in nature nor personal expenditure but has been wholly and exclusively incurred for the purpose of business of the assessee and arising out of business contingency on account of wage revision. The same has become payable in terms of the agreement entered into between the bank and its employees and therefore, the assessee bank is liable to pay the same. The AR further contended that it is a contractual obligation on the bank to make payment and therefore is allowable deduction. On the other hand, the DR representing the Department submitted that the assessee has made mere provision in its books of account and the liability is not shown to have crystallized during the year. Moreover, the manner in which the amount determined has not been explained before the lower authorities. The DR further contended that since the fund is not a recognized one, the assessee cannot claim the benefit of the same. Only contributions towards recognized Provident Fund or approved Superannuation Fund or approved Gratuity Fund for the purpose and to the extent provided under section 36(1)(iv) or (v) are allowable as deduction under section 40A(9). The D.R. has relied on the follow....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the aforesaid findings, the appeal of the assessee in ITA No.1146/Mds/2008 is partly allowed for statistical purposes. ITA No.1866/Mds/2006 (A.Y. 1999-2000): 40. The Revenue has preferred this appeal impugning the order of the CIT(A)-XII, Chennai dated 31.03.2006 relevant to the assessment year 1999-2000. 41. The first ground of appeal of the Revenue relates to allowability of provision for wage arrears. The DR appearing on behalf of the Revenue submitted that the claim of Rs. 25 crores made by the assessee is purely on ad-hoc basis. The claim of the assessee is that provision has been made on the basis of 7th Bipartite Settlement between the Indian Banks Association and the Staff & Officers Associations. The agreement was acted upon on 23.7.2000 i.e. much after the close of the accounting year 1998-99. The DR further submitted that the assessee is taking contradictory stand when the 6th Bipartite Settlement was made on 14.2.1995, the assessee had claimed it only in the assessment year 1995- 96. In the instant case, the assessee is claiming deduction on the basis of Memorandum of Understanding dated 11.3.1999. Whereas a perusal of clause 3 of the MOU shows that negotiatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be allowed in the year of creating of reserve. 42. We have heard the submissions made by both the sides and have gone through the orders of the authorities below and the judgements/orders referred to by the respective parties. The co-ordinate Bench of the Tribunal in ITA No.1690/Mds/2006 has decided the issue against the assessee by holding that liability has not been crystallized and it can be allowed consequent upon its crystallization within the framework of law. Be that as it may, it is an admitted fact that agreement was entered between the Indian Banks Association including the assessee and the Unions of staff/workers for revision of wages etc. It is also an admitted position that consequent to revision in wages the amount has been paid to the staff. A perusal of the order of CIT(A) shows that though in Notes on Account it is stated that the provision of Rs. 25.00 crores was made in an ad-hoc manner during the accounting period, it formed part of the liability incurred by the bank actually in the next accounting year and the bank has not claimed the amount for that year. The expenditure is an business expenditure allowable under section 37 of the Act. Now, the question....