TaxTMI 
TaxTMI 
2017 (1) TMI 1404
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....e the CIT(A), who granted partial relief to the assessee. Against the additions confirmed by the CIT(A), the assessee is in appeal before us, while the revenue is in appeal against the relief given by the CIT(A) in ITA No.752/Hyd/2015. 3. The grounds raised by the assessee for the A.Y 201112 are reproduced below: "1. The order of the learned Commissioner of Income Tax (appeals)-3, Hyd. dt. 20-03-2015 in ITA No. 0622/DC1, Wrgl./CIT(A)-3/14-15 to the extent in confirms the various additions/disallowances made in the assessment is contrary to law and facts. Disallowance of gratuity payment of Rs. 3,68,54,000 2. The appellant contends that the Ld. CIT(A) erred in confirming the disallowance of the sum of Rs. 3,68,54,000/- which represents the gratuity paid to the gratuity fund during the financial year ending 31-03-2011 relevant to the assessment year 2011-12. In the facts and circumstances of the case, the amount being the payment made before the end of the financial year is allowable as deduction under the I.T Act. Disallowance of provision for standard assets of Rs. 3,02,37,921 3. The appellant contends that the disallowance of provisi....
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....11-12". 5. Ground No.1 is general in nature and therefore, needs no specific adjudication. 6. As regards Ground No.2 against the disallowance of gratuity payment of Rs. 3,68,54,000/-, the brief facts are that the Assessing Officer has observed that the assessee has debited to the Profit and Loss account, an amount of Rs. 3,68,54,000/- towards gratuity contribution fund under head "operating expenses". During the assessment proceedings u/s 143(3) of the Act, the assessee submitted that "the gratuity provision is made on the basis of actuarial valuation and same is paid to State Bank of India Life Insurance, vide receipt No. PR/2010-2011/111033, dated 30-03-2011". Ongoing through the assessee's submissions, the A.O found that the assessee made payments to a gratuity contribution fund, which was not the approved gratuity fund. Observing that, u/s 40A(7) of the Act, the payment to an unapproved gratuity fund was not allowable, he disallowed the same. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O following her own order in the assessee's own case for the assessment year 2007-08. Aggrieved, the assessee is in further appeal before....
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....levant portion of the Tribunal's order is reproduced hereunder for ready reference. 14. We have heard both the parties. The conflict between section 40A(7) and section 43B has been considered by the Hon'ble Calcutta High Court in the case of Sree Kamakhya Tea Co. (P) Ltd. (supra) and the relevant portion of the Judgment is reproduced below (extracted from head not at page 718 to 199 ITR): Under section 36(1)(va), deduction is allowed in respect of any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund, as defined in section 2(5) of the Act, created by the employer for the exclusive benefit of his employees under an irrevocable trust. After the insertion of section 40A(7), for claiming deduction for gratuity payment, the assessee was required to fulfill the conditions laid down in section 40A(7) and without fulfilling the conditions laid down therein, no assessee was entitled to deduction under 36(l)(v). This has undergone a change after the insertion of section 438 for and from the assessment year 1984-85. The provision of section 438(b) are relevant and apposite in the context of the provisions of section 36(1....
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....ion received by the employer would be 'income' in his hands and that would be allowed as permissible deduction under clause (va) of subsection (1) of section 36 in computing the business income under section 28 provided the assessee credits the same to the relevant fund. Under Section 438, the sum referred to in clause (b) of section 438 is treated differently, as it relates to the sum payable by the assessee as an employer which includes the employer's contribution as well as employees' contribution,. If such contributions which are payable to any provident fund or superannuation fund or any fund are paid within the due date, the employer will be able to avail of the benefit of deduction under section 438". 18. Hence we dismiss the ground of the Revenue." 5.1. Hence, we find that in the earlier year, disallowance was deleted by following the decision in the case of Sree Kamakhya Tea Co. (P) Ltd. (supra). Now, coming to the facts of the case for the relevant assessment year, the ground on which A.O. has disallowed the claim of the assessee is that the payment is not routed through the approved gratuity fund as is evident from the recitals in the sh....
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.... a deduction of Rs. 92,06,978/- as contribution/provision towards the approved gratuity fund. As per the breakup of the said amount, an amount of Rs. 5, 84, 754/- was paid as annual premium to the Life Insurance Corporation ("LIC" for short); a sum of Rs. 50,00,000/- was paid to the LIC as initial contribution in the group Life Assurance Scheme framed by the LIC for the benefit of the employees of the assessee and the remaining amount of Rs. 36,22,224/- was shown as provision for initial contribution. It is common ground that assessee company's gratuity fund, viz., the Textool Company Ltd. Employees Group Gratuity Fund was approved by the Commissioner of Income Tax, Coimbatore, w. e.f 25th February, 1983. While completing assessment, the Assessing Officer allowed a deduction of Rs. '36,22,224/under Section 40A(7) of the Act. However, deduction for the balance amount was disallowed on the ground that payment towards the gratuity fund was made by the assessee directly to the LIC and not to an approved gratuity fund and, therefore, it was not allowable under Section 36(1)(v) of the Act. Being aggrieved, the assessee preferred appeal to the Commissioner of Income Tax (....
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....igh Court has observed as follows: "In our opinion, the Commissioner of Income Tax (Appeals) as well as the Tribunal have correctly held that merely because the payments were made directly to the LIC, the company could not be denied the benefit under Section 36(1)(V) and the amount had to be credited in favour of the assessee. Both the Commissioner (appeals) as well as the Tribunal have correctly read the law and have correctly relied upon the aforementioned Supreme Court judgment. In our opinion, since the finding of fact is that all the payments made were only towards the Group Gratuity Fund, there would be no question of finding otherwise. " Learned counsel appearing on behalf of the Revenue has submitted before us that the provisions of Section 36(l)(v) of the Act have to be construed strictly and for claiming deduction, conditions laid down in Section 36(l)(v) of the Act must be fulfilled. It is urged that since during the relevant previous year the contribution by the assessee towards the gratuity fund was not in an approved gratuity fund the High Court was not justified in affirming the view taken by the Commissioner as also by the Tribunal while answering ....
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....rief facts are that in the profit and loss account, the assessee debited sum of Rs. 3,02,37,921/- towards "provision for standard assets" under the head "provisions and contingencies". The A.O observed that the "standard assets" are different in character from "non performing assets", as a standard asset is a performing asset and is neither bad and doubtful for recovery. He observed that it is prescribed by the RBI that the 'provision for standard assets' need not be netted out from gross advances but should be shown separately as contingent provisions against standard assets and therefore the heading itself indicated that this provision is contingent in nature as against the provision for 'non performing assets' which is to guard against the loss which is looming large on the bank or for the loss which has already taken place. In view of the same, the A.O disallowed the provision and added it to the returned income of the assessee. AO further observed that in the assessee's own case for the A.Y. 2007-08, the Tribunal has upheld the disallowance. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O. following the decision of the Income T....
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.... of value (upward revision) or reduction in value should be charged or credited to the profit and loss account statements, and on the disposal of the investment, profit or loss is to be quantified on the sale proceeds minus carrying amount viz, amount brought forward and profit and loss account statement is to be charged or credited accordingly. It is submitted that the assessee bank has acted in accordance with the Accounting Standard 13 and even if the same is not notified, it is to be followed for computing the income u/s 145 of the Act. In support of his contentions, he placed reliance upon the following decisions. a) Challapalli Sugars Vs CIT (SC) 98 ITR @ 167 to 174 b) Prakash Leasing Ltd.Vs.Dy.CIT (kar.) 208 Taxman 464 c) CIT Vs. UP State Industrial. Dev. Corpn. (SC) 225 ITR 703 d) CIT Vs Elgi Finance Ltd. (Mad) 293 ITR 357 @ 360-361 e) CIT Vs Virutal Soft Systems Ltd (Del) 341 ITR 593 @ P 602 f) CIT Vs Canfin Homes Ltd (Kar) 347 ITR 382 g) CIT Vs. Pact Securities & Services Ltd. (T & AP) 374 ITR 681 @ 688, 692-693 14. The Ld. DR, on the other hand, supported the orders of the authorities below and submitted t....
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....up to ITAT and vide orders dated 29.04.2013 in ITA.No.502 and 967/2011 the ITAT directed the A.O. to examine the claim of deduction made by the assessee under section 36(1)(viia) and decide the same in accordance with law, after considering all the material and evidence that may be produced by the assessee. 10. During the proceedings before the A.O. under section 143(3) read with section 254 of the Act, the assessee referred to the decisions of the Hon'ble Supreme Court in the cases of Catholic Syrian Bank reported in 343 ITR 270(SC) and Southern Technologies reported in 320 ITR 571(SC) and submitted that a plain reading of section 36(1)(viia) showed that the assessee was entitled to two deductions, firstly basing on provision made by the appellant, not exceeding 10% of the average rural advances, and secondly, a sum not exceeding 7.5% of the total income computed before making any deduction under section 36(1)(viia) and sections 80C to 80U. Assessee further submitted that he has debited 5% of the average rural advances amounting to Rs. 85.57 crores in the books and that with regard to claim of 7.5% of the total income, the law did not provide for provision of such amo....
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....e following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (viia) in respect of any provision for bad and doubtful debts made by (a) a scheduled bank ", an amount not exceeding seven and one-half per cent of the total income ,,, and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. " 5.4. In the normal course, provisions are not a deductible expense. Sec.36(I)(viia) is a special provision that permits such a deduction for bad and doubtful debts for specified categories of assessees. However, the sub-section states that deduction shall be allowed 'in respect of any provision for bad and doubtful debts made by' the assessee. This phrase applies to both segments of the deduction allowed under the sub-section: of ten percent of the average aggregate rural advances as well as seven and on behalf percent of the total income. In other words, the deduction of seven and one-half percent of the total income is not an absolute allowance independent of the entries, if any, in the books of acc....
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....3 lakhs created by the appellant relating to rural branches. 5.11. It is also seen from the revised computation of income filed by the appellant that while the appellant had added back the sum of Rs. 85, 57, 00, 000, it had not added back the balance provision of Rs. 433. 73 lakhs. The AR has sought to argue that the sum of Rs. 433. 73 lakhs was allowable as a deduction in any case. I do not agree with this plea. The amounts debited to the P & L account were mere provisions and did not represent an actual write-off of the debts in question. Therefore, the appellant was not entitled to a claim u/s 36(1)(vii) for this sum. Secondly, the deduction u/s 36(1)(viia) has been claimed and allowed on the basis of the very same provision and the appellant cannot claim deduction for the same amount u/s 36(1) (viia) without first adding it back. Indeed, the appellant had itself added back the provision of Rs. 85, 57, 00, 000 and there is no reason why the same treatment should not be accorded to the sum of Rs. 433.73 lakhs. 5.12. In view of the above, the Assessing Officer is directed to add the provision of Rs. 89, 90, 073 lakhs before proceeding to allow the deduction u/s.3....
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....t, calculated at the rate of 7.5% of the total income. The AO has observed that the deduction was claimed based on statutory provision, without there being any claim in books of account. It was further opined by the AO that any provision created should have a purpose and in the case of assessee provision was created without any necessity as such the provision was unwarranted and the said claim towards bad and doubtful debts under 7.5% category is disallowed to be added back to the returned income and brought to tax.. The assessee's objection for such disallowance/addition was on the ground that the provisions of Sec. 36(1)(viia) permits banking company to claim a deduction not exceeding 7 .5% of total income computed, towards bad and doubtful debts. The assessee relied on the decision of ITAT, Hyderabad, in the case of SBH Vs. DCIT (ITA No.1232/Hyd./2006) to support the claim of deduction @ 7.5%of the total income. The assessee also relied on the decision of Karnataka High Court, in the case of DCIT, SR Vs.Karnataka Bank Ltd., to support the argument that deductions u/s. 36(1)(vii) are allowable independently and irrespective of provisions for bad and doubtful debts, without cl....
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.... Department is in appeal before us and raised the following grounds : 1..... 2..... 3.......... 4. Whether the Ld CIT (A) is correct in allowing law in deduction claimed u/s 36(1)(viia) of IT ActRs.4,44,52,560". 20. ......................................... 21........................................ 22. With respect to the issue of claim of deduction u/s36(1)(viia) for an amount of Rs. 4,44,52,560, this issue is also covered by the order of the ITAT Hyderabad Bench in the case of SBH Hyderabad in ITA No.584/Hyd/2013 and also Catholic Syrian Bank Ltd vs. CIT (2012) 248 CTR (S.C). Respectfully following the order of the Coordinate Benches, we dismiss Ground No.4 of Revenue's appeal. 23. In the result, appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 25th March, 2015. 14.2. However, in assessee's own case for the A.Y. 2009-2010 in ITA.No.610/Hyd/2013 dated 12.08.2015 the Tribunal at para-6 of its order has held as under : "6. On a reference to the provisions of section 36(1)(viia) of the Act, it is very much clear that for claiming deduction under the said p....
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....of the case, we are of the view that it would be fair and proper and in the interests of justice to restore the issue relating to the assessee's claim for deduction under S.36(1)(viia)to the file of the Assessing Officer for deciding the same afresh, in accordance with the provision of S.36(1)(viia) after giving proper and sufficient opportunity of hearing to the assessee and after verifying all the relevant facts and figures. We order accordingly. This appeal of the Revenue is accordingly treated as allowed for statistical purposes." Keeping in view of the aforesaid order of the coordinate bench, we are inclined to remit the matter back to the file of AO for deciding afresh after verifying the fact whether assessee has created any provision for bad and doubtful debts in its books of account in terms with section 36(1)(viia). In case it is found that assessee has made a provision for bad and doubtful debts in its books of account, then, deduction u/s 36(1)(viia) can be allowed to assessee. In case it is found that assessee has not made any provision for bad and doubtful debts in its books of account, then, assessee would not be eligible for any deduction u/s 36(1)(viia....
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....ble High Court of P&H in the case of State Bank of Patiala Vs. CIT 272 ITR 54 where it has been held that it is necessary to make a provision for bad and doubtful debts in the account books in the same previous year in which such provision is claimed as deduction u/s 36(1)(viia). Therefore, it is held that deduction is available only to the extent of the provision made in the books and accordingly the deduction for provisions of bad and doubtful debts as computed u/s 36(1)(viia) is restricted to the amount provided by the appellant in its books and the AO is justified in allowing the provision made of Rs. 97,48,84,948/- u/s 36(1)(viia) of IT Act and disallowing the claim of Rs. 334,43,19,444/-. 6.10 However, if the returned income is taken at Rs. 288,27,68,633/- as directed in para 5.5 thenthe AO will have to add back the amount of Rs. 236,94,34,496 (Rs. 334,43,19,444 - Rs. 97,48,84,948) in the computation." 35. Since the CIT(A) followed the decision of the Hon'ble High Court of P&H in case of State Bank of Patiala (supra), we do not find any reason to differ from the order of the CIT(A). Moreover, the coordinate bench of ITAT, Bangalore in case of Syndicate B....
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.... will be entitled to claim deduction by way of PBDD which according to the AO would not be the intention of the legislature. The AO thus refused to allow the claim of the Assessee for deduction of 10% of AARA. 49. The CIT(A) deleted the addition made by the AO by following the decision of the decision of the ITAT in Assessee's own case reported in 78 ITD 103 wherein it was held that irrespective of the debit to the profit and loss account on account of provision for bad and doubtful debts (PBDD), an Assessee is entitled to 10% of the AARA as deduction u/s.36(1)(viia) of the Act. The relevant observations of the Tribunal in the aforesaid decision was as follows: "20. The learned CIT has also acted under the misconception that deduction under cl. (viia) is related to the actual amount of provision made by the assessee for bad and doubtful debts. The true meaning of the clause, as indicated earlier, is that once a provision for bad and doubtful debts is made by a scheduled bank having rural branches, the assessee is entitled to a deduction which is quantified not with respect to the amount provided for in the accounts, but with respect to a certain percentage of ....
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....consequential effect to this order. 18. As regards the additional ground of appeal raised by the assessee, we find that it relates to the disallowance of salary arrears amounting to Rs. 127360121/-. It is submitted by the learned Counsel for assessee that while completing the assessment for the earlier A.Y. 2010-11, the A.O by his order u/s 143(3) of the Act dated 04-03-2013, allowed the salary arrears as deduction and completed the assessment but subsequently the CIT, u/s 263 of the Act, set aside the assessment on the ground the assessment order passed u/s 143(3) of the Act dated 04-03-2013 is erroneous and prejudicial to the interest of the revenue with a direction to redo the same de novo by examining all details in accordance with law. It is submitted that the AO, while passing the consequential order, has disallowed the claim towards provision for salary arrears aggregating to Rs. 12,73,60,121/- which is for the period 1.10.2007 to 31.03.2009 on the ground that it is only a provision made and that the assessee has not adduced any evidence of actual disbursement made to towards employees before filing of the return of income. Before the CIT(A), the assessee submitted that d....
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....O for reconsideration in accordance with law and the judicial pronouncements on the issue. AO is therefore to directed to decide the same afresh after giving the assessee a fair opportunity of hearing. The additional ground of appeal is accordingly treated as allowed for statistical purposes. 20. In the result, assessee's appeal is partly allowed. ITA No.752/Hyd/2015 (A.Y 2011-12) Revenue's Appeal: 21. This is Revenue's appeal for the assessment year 2011-12, the Revenue has raised the following grounds of appeal. "1. The CIT (Appeals) has erred on both in law and on facts. 2. The learned CIT(Appeals) ought not to have allowed the assessee's claims of broken period interest as expenditure while overlooking the decision of the Hon'ble Supreme Court of India in the case of Vijaya Bank Ltd. (187 ITR 541). 3. The learned CIT (Appeals) erred in deleting the disallowance of provision for staff frauds of Rs. 6,68, 153/- since such provision is not allowable as business expenditure. 4. The learned CIT (Appeals) erred on deleting the disallowance of amortization provided on Govt. Securities at Rs. 3,74,28,085/- on the facts and circumstan....
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....er rejected the same and held that the interest element included in the purchase consideration was not allowable as expenditure by following the decision was not allowable as expenditure by following the decision of Hon'ble Supreme Court in the case of Vijaya Bank Vs. CIT (187 ITR 541). The assessing officer further referring to the Circular No. 665 dated 05-10-1993 of the CBDT held that the government securities since are coming within the category of 'held to maturity (HMT), securities constituted investment and not stock in trade. Hence, it is a capital expenditure and therefore not allowable. The assessee challenged the disallowance in appeal before the CIT(A). 4. In course of hearing before the CIT(A) the assessee relying upon various judicial precedents, submitted that HMT category of securities are not investment but stock in trade of the assessee and as such no disallowance of the broken period interest can be made. The CIT(A) after considering the submissions of the assessee and relying upon the decision of Hon'ble Kerala High Court in the case of CIT Vs Nedungadi Bank Ltd. (264 ITR 545) held that government securities acquired by the assessee in purchase....
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....is ground is covered in favour of the assessee by the decision of the Tribunal (cited supra) for the A.Y 2007-08 in ITA No.1121/Hyd/2011 dated 29.04.2013. For the sake of ready reference, the relevant Paras are reproduced hereunder:- "8. Ground No.4 relates to deletion of addition of Rs. 46,45,087/being provision for staff frauds. During the assessment proceedings, the AO noted that the assessee had made a provision of Rs. 44,44,087/towards staff fraud. In response to the query made by the A 0, the assessee submitted that all the advances which have become bad on account of fraud by the staff are treated as loss and accordingly provision has been made. The A 0 however rejected the contentions of the assessee by observing that the provision for staff frauds could not be equated with the provision of bad and doubtful debts. He was further of the view that frauds by staff are normally not easily let off and the amounts are recovered, but appropriate action is initiated for recovery of such loss from payments due to them. The A 0 was of the opinion that since the assessee was not able to show that the amount so recovered was duly accounted for, the claim cannot be allowed. He ....
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....find that it is similar to Ground No.2 of assessee's appeal for the A.Y 2012-13. Therefore, we shall deal with this ground along with the assessee's ground of appeal No.2 in the assessee's appeal for the A.Y 2012-13. ITA No. 1293/Hyd/2015(A.Y 2012-13) Assessee Appeal: 26. This is assessee's appeal for the A.Y 2012-13, the assessee has raised the following grounds of appeal: "1) The order passed by the Hon'ble Commissioner of Income Tax (Appeal)-III, Hyderabad (hereafter called the Appellate Authority for the Asst. Year 2012-13 is contrary to law, unjust and unsustainable in so far as the dismissal of grounds relating to (a) Uninsured Interest on NPA (b) Provision for standard assets (c) Provision for Mutual Funds (d) Provision for bad and doubtful debts (claim of deduction of 7.5% of total income U/s 36(1)(viia) 2. Unrealised Interest on Non-performing Assets - Rs. 23,89,00,000/- (i) The Appellate Authority ought to have considered that the appellant applies the interest on advances in regular intervals (Monthly/Quarterly/Half yearly) till such advances are classified as Non-performing Assets as per the Pruden....
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....me Tax Act,1961. ii. The Appellate Authority ought to have considered the rationale behind the issue of circular by the Reserve Bank of India in directing the banks to make a general Provision on Standard Assets also @0.25% I 0.40% I 1 % due to the various risks involved in the rural sector which might lead to all Standard assets becoming loss assets overnight. iii. The Appellate Authority ought to have considered the purpose of introducing Sec.36(l )(viia) in the Income Tax Act, 1961. Which allows a deduction for Provision up to 10% on rural advances made by individual rural branches and also direct deduction of7.5% of the total income computed before making any deduction u/s 36(l)((viia) and Sec.80C to 80D (as substituted vide Finance Act, 2002 effective from 1-4-2003). iv. The Appellate Authority failed to consider that, even otherwise, there is a lot of distinction between Commercial Bank advances and Rural Bank advances and this is the point of distinction between the present case and the Andhra Bank case. The Appellate Authority ought not to have applied the same principle as rural banks are only exposed to rural segment, which are also subjected to....
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....vii) in respect of urban advances would be available to the bank, subject to provisions of Sec.36(2), without adjusting the provision made U/s.36(1)(viia). The Appellate Authority also failed to consider that the total debts written off during the Financial year 201011 does not exceed the credit balance in the provision for bad and doubtful debts and accordingly, the proviso to Sec.36(1)(vii) is not applicable to the present case. The Appellate Authority ought to have also relied upon the Judgment of the Apex Court in the case of Southern Technologies 320 ITR 577 (SC) Vijaya Bank 323 ITR 166(SC) wherein it was held that the bank would be entitled to both the deductions, one under Cl. (vii) on the basis of actual write off and another on the basis of Cl. (viia) in respect of mere provisions. The Appellate Authority erred materially in not considering the Scheme of deduction allowable U/s.36(1)(viia) which reads as follows: According to Sec. 36(1)(viia), the scheme of deduction allowable under 36(1)(viia) the bank is entitled for :: deductions (i) basing on the provision made not exceeding 10% of the aye rage rural advances. and (ii) An amount not ....
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....ibunal for the A.Ys 200708 and 2008-09 and the Revenue is in appeal before us, while for the A.Y 2012-13, the CIT (A) confirmed the addition by following the Income Tax Appellate Tribunal's order for the A.Y 2009-10 against which the assessee is in appeal before us. Since the issue involved is the same, we deem it fit and proper to dispose of the said ground in both the appeals as under. 33. It is submitted by the learned Counsel for the assessee that while completing the assessment for the A.Y 2011-12, the AO added a sum of Rs. 18,37,02,000 as un-realised interest on NPA, as according to the AO, since the assessee bank is following mercantile system of accounting, it is required to account for, all the interest accrued to it irrespective of the date of receipt. Further, according to the AO, even in respect of sticky loans i.e. NPAs, accrued interest is taxable and consequential notional interest of Rs. 13,87,02,000 was added as accrued interest on NPA. It is submitted that the assessee filed first appeal before the CIT (A) contending that in respect of sticky loans, there is no accrual of interest at all, as the receipt of principal amount itself is in jeopardy. The CIT (A), fo....
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....also relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. Vasisth Chay Vyapar Ltd (Delhi) reported in 330 ITR 440 wherein the Hon'ble Delhi High Court has explained the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd and has held that the interest on NPAs cannot be brought to tax but the Tribunal has not considered the same. Therefore, according to the learned Counsel for the assessee, the Income Tax Appellate Tribunal has to consider the facts of the case for the A.Y before us independently and has to come to a different conclusion as in the assessee's own case for the A.Y 2008-09. In support of its contention that the Income Tax Appellate Tribunal can take a different view from the earlier years on proper appreciation of facts, the learned Counsel for the assessee has placed reliance upon the following decisions: a) New Jehangir Vakil Mills Co. vs. CIT 49 ITR 137 @142(S.C) b) ITO v. Muralidhar Bhagwandas 52 ITR 335 @ 342(S.C) c) Radhasoamy Satsang v. CIT 193 ITR 321 @ 329 (S.C) d) CIT v. Brijlal Lohia and Mahabir Prasad 84 ITR 273 @ 277(S.C) e) CIT vs. Kalpetta Estat....
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....09-10 and the other side. It is therefore, to be seen whether this Tribunal can take a different view than the view taken by it in the A.Y 2009-10 particularly when one of us (J.M) is a signatory to such an order. The Income Tax Appellate Tribunal for the A.Y 2009-10 while considering the issue has held as under: "12. As regards Ground No.5 relating to addition made by the AO towards accrued interest on non-performing assets, we find that the Tribunal has considered this issue in assessee's case at Paras 13 to 17 of its order and has held it in favour of the assessee. However, we find that the Tribunal has not considered the decision of the Hon'ble Supreme Court in the case of Southern Technologies reported in 320 ITR 577 wherein it has been held that the RBI directives were only in the context of presentation of NPAs in the balance sheet and the balance sheet of NBFC has nothing to do with the taxable income, which has to be computed as per the provisions of the I.T. Act. Though the decision of the Hon'ble Supreme Court is dated 11.01.2010, the same has not been considered by the Tribunal and, hence, the finding of the Tribunal in assessee's own case for the A.Ys ....
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....dering the AS-22 has observed that it would be logical to consider that the assessee should have remitted its margin, privilege fee etc., after deducting expenses which also included income tax and furthermore, when no mechanism has been provided for computing the privilege fee, special privilege fee etc., and admittedly the assessee having not collected privilege fee, special privilege fee etc., separately in the bills, the quantification of such fee is also not possible and in these circumstances, it cannot be claimed as expenditure. The Tribunal held that the payment of surplus/margin/privilege is only partly of the profit of the assessee corporation to the State and therefore, it cannot be anything else but application of income and therefore, not allowable as an expenditure. Thus, it can be seen that the issue as to whether there is any diversion of income by overriding title to the State is clearly against the assessee by the above order of the Tribunal and the Coordinate Bench of this Tribunal is bound to follow the same for the sake of uniformity unless the facts germane to the issue have not been considered by the earlier Bench or new facts have emerged this year requiring....
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....ot genuine gifts. The Hon'ble High Court did not interfere with the findings of the Tribunal on the ground that it was a finding of fact. The matter travelled up to the Hon'ble Supreme Court also and the Apex Court refused to interfere with the finding of the Tribunal observing that the question whether the gifts were real was the matter within the jurisdiction of the Tribunal as the final fact finding authority. The question whether those very gifts were genuine or not came up again before the authorities while dealing with the assessment of the assessee for the A.Ys 1947-48 to 1951-52. In these years, the assessee adduced considerable additional evidence. On the basis of that evidence, the Tribunal after taking into consideration the decision rendered by the Tribunal in the previous proceedings, came to conclusion that the gifts, in question, are genuine. The matter travelled up to the Hon'ble Supreme Court and after considering the evidence taken into consideration by the Tribunal for a different conclusion than in the earlier A.Ys, the Hon'ble Supreme Court held that the circumstances taken into consideration by the Tribunal have material bearing on the points o....
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....arwal, argued that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not the RBI Act which was the accounting method that the assessee was supposed to follow. We have already held that even under the Income-tax Act, interest income had not accrued. Moreover, this submission of Mr. Sabharwal is based entirely on the judgment of the Supreme Court in the case of Southern Technologies Ltd.'s (supra). No doubt, in first blush, reading of the judgment gives an indication that the Court has held that RBI Act does not override the provisions of the Income-tax Act. However, when we examine the issue involved therein minutely and deeply in the context in which that had arisen and certain observations of the Apex Court contained in that very judgment, we find that the proposition advanced by Mr. Sabharwal may not be entirely correct. In the case before the Supreme Court, the assessee a NBFC debited Rs. 81,68,516 as provision against NPA in the profit and loss account, which was claimed as deduction in terms of section 36(1)(vii) of the Act. The Assessing Officer did not allow the deduction claimed as aforesaid on the ground that t....
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....o uncertainty in collection of the income. It is for the Assessing Officer to accept the claim of the assessee under the IT Act or not to accept it in which case there will be add back even under real income theory as explained herein below. 38. The point to be noted is that the Income-tax Act is a tax on "real income", i.e., the profits arrived at on commercial principles subject to the provisions of the Income-tax Act. Therefore, if by Explanation to section 36(1)(vii) a provision for doubtful debt is kept out of the ambit of the bad debt which is written off then, one has to take into account the said Explanation in computation of total income under the Income-tax Act failing which one cannot ascertain the real profits. This is where the concept of "add back" comes in. In our view, a provision for NPA debited to Profit and Loss Account under the 1998 Directions is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the IT Act. 39. One of the contentions raised on behalf of NBFC before us was that in this case there is no scope for "add back" of the Provision against NPA to the taxable income of....
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....settled that the Accounting Policies followed by a company can be changed unless the Assessing Officer comes to the conclusion that such change would result in understatement of profits. However, here is the case where the Assessing Officer has to follow the RBI Directions 1998 in view of section 45Q of the RBI Act. Hence, as far as Income Recognition is concerned, section 145 of the Income-tax Act has no role to play in the present dispute." (Emphasis supplied) 19. We have also noticed the other line of cases wherein the Supreme Court itself has held that when there is a provision in other enactment which contains a non obstante clause, that would override the provisions of Income-tax Act. Custodian appointed under the Special Court Act, 1992's case (supra) is one such case apart from other cases of different High Courts. When the judgment of the Supreme Court in Southern Technologies Ltd.'s case (supra) is read in manner we have read, it becomes easy to reconcile the ratio of Southern Technologies Ltd. (supra) with Custodian appointed under the Special Court Act, 1992 (supra). 20. Thus viewed from any angle, the decision of the Tribunal appears to be correct in ....