TaxTMI 
TaxTMI 
2015 (8) TMI 1269
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....guments, which are identical to the ground raised by claiming that the impugned issue is covered in favour of the assessee by the decision of the Tribunal (ITA No.1498/Mum/2011)(A.Y. 2001-02) order dated 09/04/2014, wherein, the disallowance was restricted to 1% of the exempt income. This factual matrix was not controverted by the ld. CIT-DR, Shri N.P. Singh. 2.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal for ready reference:- "4. Ground No. 3 is regarding disallowance u/s 14A. The assessee has earned dividend income of Rs. 17.83 crores which is exempt u/s 10(33). The assessee has also earned interest on tax free bond of Rs. 18.39 crores which is exempt u/s 10(15) as well as interest on infrastructure amounting to Rs. 26.35 crores which is exmpt u/s 10(23G). The assessee has not disallowed any expenditure for earning the exempt income. The AO has computed the expenses for earning the exempt income at the rate of 12% and accordingly disallowed a sum of Rs. 7.51 crore u/s 14A. 4.1 On appeal CIT(A) has direct....
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....intained by the assessee as stock in trade and the income arising from the sale and purchase of securities is taxable as business income of the assessee, therefore, the expenditure if any incurred on account of administrative expenses for maintaining these securities the whole of the said expenditure cannot be attributed to the dividend income when the income arising from the sale and purchase of the securities is taxable. Accordingly only a reasonable estimate has to be made for disallowance of expenditure u/s 14A in respect of earning of dividend income and tax free interest. The Coordinate Bench of this Tribunal in the case of DCIT Vs. HDFC Bank Ltd. (supra) in para 7.1 and 7.2 has considered an identical issue as under:- 7.1 In the case in hand, the CIT(A) considered the facts and pointed out that the assessee is maintaining the treasury department which looks after the day to day investment portfolio of the bank including tax free investments. Having regard to the said factual proposition, the administrative expenses relatable to the income not forming part of the total income can be attributable to the expenditure of special treasury department maintained by the asse....
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....ch. 21. The DR relied on the orders of the revenue authorities and the decision by the Special Bench in the case of Mukund Limited. 22. We have heard both the sides. The claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed, has been decided by the Special Bench, as conceded by the AR. Respectfully following the decision rendered by the Hon'ble Special Bench, we sustain the disallowance of Rs. 1,55,43,817, as made by the revenue authorities. The ground of appeal is dismissed." 3.3. We note that while coming to a particular conclusion, the Tribunal followed the decision of the Special Bench in the case of JCIT vs Mukund Ltd., 106 ITD 231 (Mumbai)(SB). This factual matrix was consented to be correct by the ld. counsel for the assessee, therefore, we decide this issue against the assessee and in favour of the Revenue. 4. Next ground pertains to disallowing deduction of Rs. 45,00,00,000/- claimed u/s 36(1)(vii) of the Act. At the outset, the ld. counsel for the assessee claimed that this issue is decided in favour of the assessee by the Hon'ble jurisdictional High Court in the case of State Bank of India (ITA N....
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....l corporation". It shall not be presumed that only Govt. company and Public company are entitled for above deduction. Any financial corporation which is engaged in the activities specified in the said section are entitled to claim deduction specified in the said section. The Ld. CIT(A) overlooked the fact that the said definition is inclusive and wrongly concluded that it is exhaustive in nature so as to limit the deduction to a public company or a Govt. company. The appellant is a public sector undertaking incorporated under a specific legislation carrying on the specified business. The deduction under the said section was wrongly denied merely because it is not a public company or a Govt. company by overlooking the provision that it is not only these two types of companies that are eligible for deduction. Further this position has been clarified by the amendment in the Finance Act 2007 wherein the section has been restructured in an exhaustive manner to categories various entities that would come within the definition of "financial corporation". Since the definition is only clarificatory in nature it is always presumed that the said entities were covered in the definition from....
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....nk" also. The Memorandum explaining the amendment to Sec. 36(1)(viii) w.e.f. 1.2.2008 has clearly stated as follows: "The provision has also been restructured to provide for different categories of entities (which now also includes cooperative banks) and their respective activities for eligibility of the deduction under the said clause. For claiming deduction under the said clause, (i) a financial corporation specified in Sec. 4A of the Companies Act or a financial corporation which is a public section company or a banking company or a co-operative bank (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank)............. The amendment also provides definitions of the expressions "banking company", "co-operative bank", "primary agricultural credit society". 10. Further the restructuring done to define the financial corporation is only clarificatory as we can see from the notes on clauses which read as follows: "The proposed amendment further seeks to define certain terms including 'specified entities and 'eligible business' for the purposes of deduction. 11. Since the defi....
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....d order dated 09/04/2014 for perusal and ready reference:- "6. Ground No. 5 is regarding applicability of provisions of section 115JB in case of Bank. 6.1 The Ld. AR of the assessee submitted that the provisions of section 115JB are not applicable to a banking company since the accounts of banks are prepared under schedule III of banking regulation Act and not in accordance with the schedule VI of the Company's Act. In support of his contention he has relied upon the following decisions: (i) Kurung Thai Bank PCL dated 30.09.2010 (ITA 3390/Mum/2009) (ii) Maharashtra State Electricity Board (82 ITD 422) (iii) Kerala State Electricity Board (329 ITR 91) (HC) (iv) Union Bank of India dated 30.06.2011 (ITA No. 4702/mum/2010) (v) ICICI Lombard General Insurance Vs. Department of Income Tax (ITA 4286/Mum/2009). 6.2 On the other hand, the Ld. DR has relied upon the orders of authorities below. 6.3 Having considered the rival submissions as well as relevant material on record, we note that this issue has been considered by this Tribunal in the series of decisions including the decision relied upon by the ....
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....ill 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. )CIT (82 lTD 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 21 1(2) of the Companies Act. We find that by the Finance Act 2012, with effect from 1.4.2013, even companies to which Proviso to sec 211(2) applies (the banking Companies and companies engaged in generating and distribution of electricity), should prepare their P&Land balance Sheet in accordance with the provisions of the Act Governing such companies. This would mean that prior to AY 2013-14, provisions of sec 115JB will not apply t....
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....115JB are not applicable on the facts of the present case." 10 Following the decisions of the coordinate Benches of this Tribunal, we hold that when the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee." Accordingly, this issue is decided in favour of the assessee and against the revenue". 6.4 Though , section 115 JB ha s been amended to b ring all the Companies in its ambit vide Finance Act 2012, w.e.f 1.4.2013, however, the said amendment is not applicable in the assessment year under consideration. 6.5 Following the decision of co-ordinate bench of this Tribunal we decide this issue in favour of the assessee." 7. We find that the Tribunal has already taken a view on this issue, therefore, the Assessing Officer is directed to follow the aforesaid order of the Tribunal. 8. Now, we shall take up the appeal of the Rev....
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....ibunal in the case of State Bank of Hyderabad Vs. DCIT in ITA No. 578 and 579/HYD/2010. 2.3 On the other hand, the Ld. DR has submitted that the restriction provided under the proviso to section 36(1)(vii) is applicable in respect of entire bad debts written off by the assessee irrespective of rural branch or non rural branch. In support of his contention he has referred Explanation 2 inserted by the Finance Act 2013 and submitted that it has been clarified by the Explanation that for the purpose of proviso to clause (vii) of sub-section 1, the account referred to shall be only one account in respect of provisions for bad and doubtful debt under clause (viia) and such account shall relate to all types of advances including advance made by the rural branches. Thus the Ld. Dr has submitted that the claim of bad debts written off u/s 36(1)(vii) is allowable only after reduction of the amount in the provisions for bad and doubtful debts in terms of clause (viia). He has relied upon the orders of authorities below. 2.4 In rebuttal the Ld. AR of the assessee has submitted that Explanation 2 is applicable only w.e.f 01.04.2014 and, therefore, it is not retrospective and ....
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.... and the making of provisions for bad debts in relation to such rural branches. The functioning of such banks is such that the rural branches were practically treated as a distinct business, though ultimately these advances would form part of the books of account of the head office. An interpretation which serves the legislative object and intent is to be preferred rather than one which subverts the same. The deduction u/s 36(1)(vii) cannot be negated by reading into it the limitations of s. 36(1)(viia) as it would frustrate the object of granting such deductions. The Revenue's argument that this would lead to double deduction is not correct in view of the Proviso to s. 36(1)(vii) which provides that in respect of rural advances, the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the amount of the provision which had already been allowed u/s 36(1) (viia) (Southern Technologies 320 ITR 577 (SC) & Vijaya Bank 323 ITR 166 (SC) referred) 10. In that case the Apex Court has held that the bank would be entitled to both the deductions, one under Clause (vii) on the basis of actual write off and another on th....
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....ite off and not actual write off as irrecoverable cannot be allowed. 31. Aggrieved, the assessee approached the CIT(A), who, relying on the decision of assessee's own case in assessment year 2000-01 by the CIT(A) and also by following the decision of Hon'ble Supreme Court in the case of Vijaya Bank v/s CIT, reported in 323 ITR 166, wherein the Hon'ble Apex Court held, "Though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful debt, yet that would not constitute actual write off. But where besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balancesheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for "impugned bad debt", the assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an actual write off by the assessee in his b....
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....of the assessee. Reliance was placed upon the decision in UCO Bank vs CIT 240 ITR 355 (SC), CIT vs Bank of Baroda 262 ITR 334 (Mumbai), Karnataka Bank Ltd. vs ACIT 356 ITR 549 (Karnataka) and the decision of the Tribunal in the case of assessee itself for A.Y. 1997-98 (ITA No.1680/Mum/2001) order dated 27/03/2008. This factual matrix was consented to be correct by the ld. DR, though, he defended the conclusion drawn in the assessment order. 9.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 27/03/2008 for ready reference:- "2.8. Ground no. 5 is on the issue of disallowance of Rs. 37,09,35,386/- being valuation loss in respect of permanent investments. This issue also is admittedly covered in favour of the assessee and against the Revenue by the decision of the Hon'ble jurisdictional High Court in the case of CIT vs Bank of Baroda reported in 262 ITR 334 (Bom.). Respectfully following the same, we allow the ground of the assessee." In view of the above, undisputed legal position, following the order of th....