TaxTMI 
TaxTMI 
2014 (6) TMI 954
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....ee's appeal for disposal. I.T.A.No.1949/Mds/2012 3. In this appeal, we find that there are total eight substantive grounds. Coupled with this, three alternate grounds to ground No.8 qua applicability of section 115JB have also been raised. 4. The assessee's first ground challenges action of the Assessing Officer and the CIT(A) in disallowing claim of depreciation amounting to Rs. 40,676/- on building which included cost of land The assessee had pleaded that this land formed an integral part of the building. The Assessing Officer disallowed it by holding that such a claim is inadmissible under the Act and Income-tax Rules. The CIT(A) has followed his predecessor's order dated 30.8.2011 pertaining to the preceding assessment year. From the tabulation, it appears that a coordinate bench of this 'tribunal' in I.T.A.No. 1815/Mds/2011 decided on 2.4.2013 for assessment year 2008-09 has already adjudicated this issue against the assessee. That being the case, we also uphold the CIT(A)'s order by rejecting the assessee's corresponding ground. 5. The assessee's second ground raises issue of bad debts (rural branches) written off amounting to Rs. 9,85,75,637/- u/s 3....
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..... 21 crores. In 'scrutiny', the Assessing Officer noticed the assessee to have made investments in equities and mutual funds. The assessee claimed not to have incurred any expenditure proving direct nexus with the aforesaid exempt income. It placed on record opening balance as on 31.3.2008 of Rs. 17435.51 crores as well as investment in bonds of Rs. 227.81 crores to oppose applicability of section 14A. The Assessing Officer quoted substantial investments in equities and mutual funds, sales and purchases thereof resulting in dividends of Rs. 21 crores to conclude that the assessee's plea of not having incurred any expenditure at all did not deserve acceptance. He placed reliance on CBDT clarification dated 4.2.2009 for applying rule 8D. Thereafter, the Assessing Officer drew support from the Special Bench decision of the 'tribunal' in case of Cheminvest Ltd vs ITO, 121 ITD 318 (Delhi) to hold that disallowance u/s 14A could be made even if there was no 'exempt' income. So, he computed disallowance/addition under rule 8D(2)(ii) of Rs. 6,86,08,046/- and rule 8D(2)(iii) of Rs. 8,02,74,555/- totaling to Rs. 14,88,82,601/-. 12. In lower appe....
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....s and the judicial precedents. Undisputedly, the assessee had earned exempt income of Rs. 21 crores from investments made in mutual funds and equities. Its stand adopted throughout has been to have held the investments as 'stock-in-trade'. There is no finding on this issue forthcoming either from the Assessing Officer or the CIT(A). We have also perused the 'guard' file pertaining to I.T.A.No. 1815/Mds/2011 decided on 2.4.2013(supra). It is evident therefrom that the very disallowance stands upheld by a co-ordinate bench. Its plea challenging applicability of section 14A in case of investment held as 'stock-in-trade' appears to have neither been raised nor adjudicated. So, we treat it as a fresh plea not covered by the earlier order. Thus, the new issue that arises for our consideration is as to whether a disallowance u/s 14A can be made even in a case when the investments giving rise to an 'exempt' income are held as 'stock-in-trade' or not. Proceeding on the same, we find that the case law quoted by the assessee (supra) squarely supports its plea. The Revenue has brought to our notice a recent Third Member decision in case of D.H. Securities P. Ltd vs DCIT [2014] 31 (Trib) ....
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....owed. The assessee gets part relief. 19. The assessee's sixth ground pleads that the CIT(A) has erred in confirming disallowance of expenditure by way of leave encashment quantified based on actual valuation amounting to Rs. 16 crores. In this regard, we notice from the assessment order that there is no such disallowance forthcoming either in the computation or main body thereof. In CIT(A)'s order, he quotes section 43B; his predecessor's order pertaining to preceding assessment year and affirms the disallowance. 20. Before us, the assessee submits that the very issue for previous assessment year stands decided in its favour by the 'tribunal'. However, in view of our observation hereinabove that no such disallowance emanates from the assessment order, we refrain from deciding the same in this assessment year and dismiss the relevant ground for this reason itself. 21. The seventh substantive ground challenges the CIT(A)'s order restricting relief @ 90% of the tax paid in foreign countries. 22. Factual backdrop qua this issue is that the assessee had raised a claim of double taxation relief in memo of income from its overseas branches in south Korea, Singapo....
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....enges applicability of MAT provision u/s 115JB. Relevant facts qua this ground are that the Assessing Officer had adopted assessee's profits derived at in its printed annual report for the purpose of computing income u/s 115JB after holding that the profit & loss account drawn as per the Banking Regulation Act fell within the provisions of the Companies Act, 1956. Accordingly, he went on to add the provision of bad and doubtful debts, standard assets, amortizations on investments, severance pay , 'other' assets and loss on evaluation of assets. 27. In assessee's appeal, the CIT(A) holds that section 115JB duly applies in a bank's case also after amendment made in the Act by way of the Finance Act, 2012. Per CIT(A), this amendment grants an option to offer income for tax purpose as per the profit & loss account in accordance with Schedule VI of the Companies Act or Banking Regulation Act, 1949 relevant to any assessment year prior to 2013- 14. So, he has directed the Assessing Officer to compute book profits stated in the profit & loss account as per the Companies Act (Schedule VI). 28. After giving our thoughtful consideration to the arguments of both parties and perusing the....
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....e Revenue's plea is accepted for statistical purposes. 34. The Revenue's second substantive ground assails the CIT(A)'s order holding that a provision made for standard assets and country risks should be allowed for computing deduction u/s 36(1)(viia). Per Revenue, the lower appellate authority has failed to appreciate that this provision had been made towards good and not for bad debts. 35. Brief narration of facts qua this issue is that during 'scrutiny', the Assessing Officer had dealt with a claim of bad debts of Rs. 654,41,43,300/- (as discussed in Ground No.3 of assessee's appeal) decided hereinabove). In Assessing Officer's view, this provision pertained to even standard assets and country risks. He quoted assessment orders in assessment years 2007-08 and 2008-09 and made disallowance of Rs. 48,41,43,501/-. 36. The CIT(A) has deleted the aforesaid disallowance after forming an opinion that the relevant statutory provision u/s 36(1)(viia) covers 'any provision' made for bad and doubtful debts including the one for standard advances and country risks provided the same shall not exceed @ 7½% of the total income or 10% of the aggregate advances in rur....
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.... of investments. 44. In 'scrutiny' the Assessing Officer found the assessee to have claimed deduction by way of loss on revaluation of investments of Rs. 69,13,38,139/-. Per Assessing Officer, the same was neither an allowable expenditure nor an ascertained liability. In assessment order, he placed reliance on his findings for assessment years 1996-97 and 1998-99 for making the impugned disallowance. 45. In lower appellate order, the CIT(A) has quoted his predecessor's orders for assessment years 2005-06 and 2008- 09(supra) as well as various decisions stated herein below: UCO Bank vs CIT 240 ITR 355 (SC) CIT vs City Union Bank Ltd 291 ITR 144 (Mad) Bharat Overseas Bank Ltd vs ACIT I.T.A.No. 239/Mds/2001 dated 7.1.2005 Indian Bank vs DCIT I.T.A.No.984/Mds/2003 dated 30.6.2011 Accordingly, the impugned disallowance stands deleted. 46. Coming to this issue as well, the parties express unanimity in referring to order of the 'tribunal' for assessment year 2008- 09(supra) to state that the very issue stands decided in the assessee's favour. Consequently, we agree with the CIT(A)'s findings and reject the relevant Revenue's ground. 47. The Revenue's sixth sub....
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....y. Accordingly, he disallowed the aforesaid amount. 53. In lower appellate order, the CIT(A) holds that the recovery made in respect of bad debts could be taxed only if the bad debts themselves are allowed as a deduction by quoting section 41(4) in support. He disagrees with the Assessing Officer after expressing an opinion that when the bad debts written off had not been allowed as a deduction, the same cannot be taxed again. Therefore, the Revenue has raised the instant ground. 54. We have heard both parties and gone through the orders of Assessing Officer and CIT(A). Even the Revenue does not dispute that the assessee had raised its claim of deduction of bad debts relating to the very sums in preceding assessment years. The Assessing Officer did not allow this relief. In relevant previous year, when it has recovered the aforesaid debts, the Revenue is again seeking to tax the same. There is no cogent evidence before us to dispute this factual position. Moreover, the CIT(A) has cited section 41(4) of the Act whilst granting relief. The Revenue has failed to point out any legal or factual error in the CIT(A)'s findings. Therefore, the same are affirmed. However, as a matter ....
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....given in rural branches and not the ones outstanding be considered for this purpose. 58. In assessee's appeal, the CIT(A) has followed order of the 'tribunal' in City Union Bank's case in deleting the disallowance as follows: "7.4 I have carefully considered the facts of the case and submissions of the ld. A.R. I have also gone through the decision relied on by the ld. DR. With regard to the restriction of advances of rural branches to the incremental advances sanctioned during the year, the Hon'ble ITAT, Chennai in the case of City Union Bank (supra) has held as under: "We have duly considered the rival contentions and the material on record. We have perused Rule 6ABA of the Income-tax Rules, 1962. As per the said rule, the aggregate average advances made by the rural branches have to be computed by taking the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year. Thus, it is clear that there is no provision to consider only the advances made during the year under consideration. It is the finding of the Assessing Officer that the assessee has furnished the working as per....