TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 665
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.... Non-Performing Advances (NPAs) in the facts and circumstances of the case. 2.1. The brief facts of this issue is that the assessee is a bank incorporated in Netherlands with limited liability with branches in India. In India, the assessee is registered as a scheduled bank in terms of Schedule II of the Reserve Bank of India Act, 1934. The main activities fo the assessee in India comprise of accepting deposits, giving loans, discounting /collection of bills, issue of letters of credit/ guarantees, executing forward transaction in foreign currencies for importers / exporters , money market lending / borrowings, investment in securities, etc in terms of the prevailing rules and regulations governing such transactions. The ld AO observed that assessee bank had not recognized the interest income in respect of advances, which were overdue for more than 3 months , in the profit and loss account in accordance with the RBI guidelines applicable to the banks. 2.2. The assessee replied that since the account has been classified as NPA as per RBI prudential norms for income recognition, the interest income on such advances had to be recognized only on receipt basis. Since there was no recei....
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....emented, since the categories of advances prescribed therein do not exist anymore as the classification of advances have changed and RBI now follows the international norm of classification (viz. standard, sub-standard, doubtful and loss assets). The ld AO relied on the judgement of the Hon'ble Supreme Court in the case of Southern Technologies Ltd vs CIT reported in (2010) 320 ITR 577 (SC) . The assessee stated that the said decision is distinguishable from the facts of the assessee bank in as much as the same pertained to claim of deduction in respect of 'Provision for NPA' in the hands of a Non-Banking Finance Company (NBFC) u/s 36(1)(vii)(a) of the Act which is available only to banks. Even the said decision did not contemplate recognition of interest income in respect of NPA accounts on accrual basis. The assessee also submitted that the said accounts remained overdue for more than 180 days as on 31.3.2010 (i.e the next financial year) and hence it had become NPA even as per Rule 6EA of the Rules in the subsequent financial year and hence the said adjustment is only a timing difference and there is no loss to the revenue. The assessee also submitted that Rule 6EA was in confor....
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....R argued that the provisions of Rule 6EA states non-recognition of interest income only if the loan account if overdue for more than 3 months. He argued that the recognition of income as contemplated by RBI prudential norms are not binding on the provisions of the Income Tax Act and placed reliance on the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd vs CIT reported in 320 ITR 577 (SC) in support of his proposition. The assessee had not proved the factum of uncertainty in collection of the said advances and argued that it is also claiming provision for NPA which includes interest element also as a deduction. Hence on one hand, it is not offering the interest income and on the other hand, it is claiming deduction towards the interest component added to the party's loan account balance. In defence, the ld AR argued that the fact of uncertainty of collection of these dues from the parties were never in dispute and the same is raised for the first time only by the ld DR. He also stated that ultimately these two loan accounts were written off in the subsequent year which has been allowed deduction by the ld AO including the principal portion. Hence there....
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.... with opening written down value ('WDV') of Rs. 1,06,53,958/- for a total consideration of Rs. 9,55,00,000/-, pursuant to which, the block of asset ceased to exist as it was the only asset in the respective block. The Bank had carried out some renovations in the said building in the earlier period(s) and the cost of such renovations were taken to the 10% block of building (i.e. other than residential buildings). Such tax treatment was based on accounting classification. Total sale consideration of Rs. 9,55,00,000/- was appropriated by the Bank between 5% and 10% block of assets as Rs. 8,51,55,054/- and Rs. 1,03,44,946/- respectively. Since, the 5% block of asset ceased to exist, the resultant gains of Rs. 7,45,91,096/- was offered to tax as deemed STCG. However, as the 10% block of asset continues to exist, the aforesaid appropriated sale consideration of Rs. 1,03,44,946/- was reduced from the 10% block and resulted into reduced tax depreciation claim thereon under section 32 of the Act. It was submitted that the bank had carried out some renovations in the said building in the earlier periods and the cost of such renovations were taken to the 10% block of building (i.e ot....
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....ovisions relating to allowance of depreciation u/s 32(1) ; meaning of 'written down value' in respect of block of assets as per section 43(6)(c ) and provisions for computation of capital gains in case of depreciable assets in terms of section 50 of the Act. He also took us to the relevant Income Tax Depreciation chart wherein only classification of buildings is mentioned at 5% rate . He argued that the 10% depreciation claimed by the assessee for the renovations in the earlier years is wrong as the assessee was eligible only for 5% as what was available with assessee was only residential building. Accordingly, he supported the orders of the lower authorities. 3.3. We have heard the rival submissions. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the assessee had 5% block as well as 10% block for buildings in its Income Tax Depreciation schedule. It is not in dispute before us that the renovations work carried out by the assessee in the subject mentioned building (which was sold in the year under appeal and dispute before us) was added in the 10% block by the assessee in the earlier years and....
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.... Appeal 8. The first issue to be decided in this appeal of the revenue is as to whether the ld DRP is justified in deleting the disallowance on account of provision for gratuity amounting to Rs. 2,18,00,000/- in the facts and circumstances of the case. 8.1. The brief facts of this issue is that the ld AO observed that the assessee had debited a sum of Rs. 416,76,96,118/- towards 'Payment to and provision for employees' which included Rs. 2,18,00,000/- towards gratuity. Such sum of gratuity was debited to the profit and loss account for the year under consideration in accordance with the actuarial valuation performed by an independent valuer. The ld AO proposed disallowance of the said provision u/s 43B of the Act stating that the same was not paid on or before the due date of filing the return of income. The assessee replied stating that excess gratuity pertaining to AY 2009-10 amounting to Rs. 3.48 crore (viz. Rs. 2.23 crores on account of excess payment and Rs. 1.25 crores on account of net credit arising pursuant to actuarial valuation) was not claimed as deduction/offered to tax in AY 2009-10. Out of the above excess gratuity, Bank claimed deduction of Rs. 2,18,00,000/- in AY....
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....ssessee had actually paid the amount of Rs. 2,18,00,000/- in the earlier year i.e in Asst Year 2009-10 itself along with other amounts. However, deduction for the same has not been claimed in that year i.e in Asst Year 2009-10 and the same has been claimed in the year under appeal i.e the year in which it had become due. We agree with the argument of the ld AR that the spirit of section 43B of the Act has been satisfied by the assessee in full. We also find that the reliance placed on the decision of the Hon'ble Kerala High Court supra is well founded. In these circumstances, we do not find any infirmity in the order of the ld DRP and accordingly the ground no.1 raised by the revenue is dismissed. 9. The next ground to be de decided in this appeal is regarding adjustments to be made in the computation of book profits u/s 115JB of the Act in respect of excess provision written back. We have already held that the provisions of section 115JB of the Act are not applicable to the assessee bank for the year under appeal, the adjudication of the issue becomes academic and accordingly the ground no. 2 raised by the revenue is dismissed. 10. The last issue to be decided in this appeal of ....
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.... is in appeal before us on the following grounds:- "3. Whether on facts and circumstances of the case, the Ld.DRP had jurisdiction to give direction to the Assessing Officer on the issue of giving TDS credit, despite the fact that the credit of TDS in no way increases or decreases the returned income or loss of the assessee and therefore, as per section 144((2) of the I.T.Act'61, the assessee was not eligible to file objection on this ground. 4. Whether on facts and circumstances of the case, the Ld.DRP erred in Law by holding that circular number 7 of 2007 is not applicable in the instant case. 5. Whether on facts and circumstances of the case, the Ld.DRP erred in Law by directing the A.O to give TDS credit amounting to Rs. 10,19,31,487/- deducted from payment of interest to its Headquarters & other branches even though the corresponding income was not shown by the assessee in its Income Tax return as required u/s.199 of the I.T.Act'61. 6. Whether on facts and circumstances of the case, the assessee should have claimed refund from the jurisdictional TDS Officer and therefore the Ld.DRP erred in Law by directing the A.O to give credit to tax amounting to Rs. 10,1....