TaxTMI 
TaxTMI 
2018 (9) TMI 415
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....s issue are that the assessee is a non-resident foreign company and therefore the prescribed rate of tax applicable to it as per the relevant Finance Act would be 40% along with surcharge and education cess as applicable. The assessee pleaded that it is liable to tax only at the rate of 30% along with surcharge and education cess as applicable. We find that this issue is decided against the assesee by the order of this tribunal in assessee's own case for the Asst Years 2005-06 to 2008-09 vide order dated 13.4.2016 . Accordingly, the Ground Nos. 1 (a) to 1(d) raised by the assessee are dismissed. 3. ADDITION TOWARDS INTEREST INCOME ON NPA Ground Nos. 2(a) to 2(d) of Assessee Appeal The issue to be decided in the appeal of the assessee is as to whether the ld DRP was justified in upholding the addition of Rs. 39,78,079/- on account of interest income in relation to advances classified as Non-Performing Advances (NPA) in the facts and circumstances of the case. 3.1. The brief facts of this issue are 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 Sche....
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....s, purposive interpretation should be followed keeping in mind the legislative object. The assessee also referred to Para (xii) of CBDT's Instruction No. 17/2008 dated 26.11.2008 which directed the assessing authorities to bear in mind that the bank has to follow system of accounting and prepare accounts as mandated inter alia by RBI guidelines. Withou prejudice to the above, Rule 6EA of the Rules, which deviates from current RBI guidelines, is in conflict with the parent provisions of section 43D of the Act and it is well settled that the Rules, being a subordinate legislation cannot override the express mandate of the parent statutory provision. Reliance in this regard was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs Sirpur Paper Mills reported in 237 ITR 41 (SC). 3.3. Without prejudice to the above, it was submitted that Rule 6EA is practically difficult to be implemented, 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....
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.... 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. He placed reliance on the decision of Hon'ble Delhi High Court in the case of Housing and Urban Development Corporation Limited vs Additional CIT in ITA No.s 440, 442, 444 to 446 / 2016 dated 3.7.2017 wherein the decision of Vasisth Chay Vyapar Ltd ( 330 ITR 440 -Del HC) was also considered and decision held in favour of the revenue. He further stated that against the tribunal order passed for the earlier year, the Hon'ble Calcutta High Court had admitted the appeal of the revenue and hence the matter had not attained finality. 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. Hence there is no question of recognizing any interest income on accrual basis in respect of such sticky loans. 3.6 We have heard the rival submissions and perused the materia....
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.... such payments. The assessee , among others, replied that tax was not deducted at source on payments made to M/s Leaseplan India Limited . It was pleaded however that the payee , being a corporate assessee, is assessable to tax and had offered the rental income received from assessee bank to income tax and paid taxes thereon. It also submitted that the second proviso to section 40(a)(ia) of the Act introduced by the Finance Act 2012 should be held to be retrospective in operation and accordingly no disallowance u/s 40(a)(ia) of the Act is to be made in the hands of the assessee payer. The ld AO in his final assessment order pursuant to the directions of ld DRP, sough to verify M/s Leaseplan India Limited as to whether they had offered the subject mentioned lease income to tax in their income tax returns, for which purpose, he issued notice u/s 133(6) of the Act , which returned unserved. Accordingly, the ld AO proceeded to disallow the lease rent u/s 40(a)(ia) of the Act. Aggrieved, the assessee is in appeal before us. 4.1. We have heard the rival submissions. We find that the assessee had furnished the certificate from a chartered accountant in the prescribed form as mandated i....
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....e same has been claimed as deduction by the Bank under Section 37(1) of the Act. * In the course of the assessment proceedings, your good self has asked the Bank as to why the said amount should be allowed as deduction in view of the provisions of section 36(1) of the Act. In this regard, we submit as under: * In this regard the assessee mentioned the provisions of section 37(1) of the Act, whereby any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". In this regard, the asseessee relied on the following decisions: * CIT v. High Land Produce Co. Ltd. [1986] 158ITR 419 (SC) * Liberty Cinema V. Commissioner of Income-tax [1964] 52 ITR 153, 161 / (Cal.), * Decom Marketing (P.) Ltd. v. CIT (164 CTR 230). * RDB Industries Ltd vs DCIT 120 ITJ 107 (Kol). * CIT v. Punjab FinanciaL Corpomtion Ltd.. [2007] 295 ITR 5....
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....ar mischief should be construed in a manner that they do not create jeopardy beyond the mischief which is sought to be remedied. As per the intent, the above restriction should apply to contribution to superannuation trust/funds which are not approved by CIT. As mentioned above, in the Banks' case, the deduction for unfunded pension has been made in respect of amounts which have been actually paid to the employees of the Bank (and not as contribution to a fund/trust) and on which the Bank has not control. In rendering the decision in the case of Brooke Bonde, the Hon'ble Kolkata High Court has not taken into consideration the decision of the Supreme Court in the case of High Land Produce and the decision of the jurisdictional High Court in the case of Liberty Cinema. In light of the above, we submit that the decision in the case of Brooke Bonde is not applicable to the Bank case and the Bank has righty claimed the deduction of the unfunded pension under section 37 of the Act. Given the above, the Bank submits that the payment of Rs. 4.09 crores towards unfunded pension should be allowed in full." 5.1. The ld AO in the draft assessment order placed ....
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....ension', it is effectively paid to employees of the assessee bank and no contribution was made whatsoever to any fund with respect to the said pension payments. It is more of a exgratia or extra payment of salary made to the employees of the bank based on some criterion, which has been duly subjected to deduction of tax at source and the same has been duly included in their respective Form No. 16. This fact is not in dispute before us. In other words, the payments made by the assessee bank to the various employees had been treated effectively as salary and other allowances including perquisites and the employees in turn had paid taxes for the same by offering it to tax in their returns, wherever applicable. Hence it is effectively a payment made as a welfare measure for the benefit of the employees of the assessee bank, which is squarely allowable as deduction u/s 37 of the Act. It is well settled that nomenclature or the form of a transaction should have to be ignored for the purpose of allowability of the same as deduction for income tax purposes and substance of the transaction is to be looked into. The real substance is that payment has been made as a welfare measure to employe....
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....respect of fees earned by it from the various services provided in the course of its banking activities. Such service tax liability can be discharged either by payment in cash to the Government authorities or through utilization of CENVAT credit available with the Bank. The bank incurs various expenses in the routine course of its business, which are essential for undertaking its banking activities. The vendors invoice the bank for such expenses along with the service tax applicable thereon. The expenses component (excluding service tax) is debited by the bank to its profit and loss account and the service tax component is recognized as CENVAT credit in the balance sheet in accordance with the service tax laws. In other words, the bank follows 'Exclusive Approach' for treatment of service tax. A set off principle is prescribed under the CENVAT credit rules, wherein such CENVAT credit can be set off only against payment of output service tax liabilities. No mechanism of refund has been prescribed in case of CENVAT credit balances is in excess of the output tax liabilities. As the quantum of output tax liabilities is purely driven by business considerations, event of set-off is total....
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....sessee also submitted that the said write off was in accordance with the Guidance Note on Accounting Treatment for MODVAT / CENVAT issued by the Institute of Chartered Accountants of India (ICAI) wherein it was reflected as under:- "REVIEW OF BALANCES IN MODVANT/CENVAT CREDIT REVEIABLE ACCOUNTS 30. Balances in MODVAT/CENVAT Credit Receivable Accounts, pertaining to both inputs and capital goods, should be revived at the end of the year and if it is found that the balances of the MODVAT/CENVAT credit are not likely to be used in the normal course of business within a reasonable time, then, notwithstanding the right to carry forward such excess credit in the Excise Rules, the non-useable excess credit should be adjusted in the accounts." 6.3. The assessee submitted that the said write off was in accordance with the Accounting Standard prescribed and notified by Central Board of Direct Taxes as under:- * As per the provisions of Section 145 of the Act, Accounting Standards prescribed by the CBDT are to be followed in computing the business income of an assessee. Accounting Standard-1 prescribed by the CBDT vide notification No. SO 69 (E) dated 25th Januar....
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....urther, the best person to judge the business expediency is the businessman himself. The Hon'ble Courts have also consistently held that the necessity or otherwise of the commercial expediency is to be decided from the point of view of the businessman and not by the subjective standard of reasonableness of the revenue. * The assessee has relied on the following case laws: * S.A Builders Limited vs. CIT(2007) 288 ITR 1 (SC) * CIT vs. Panipat Woollen & General Mills Co. Ltd.[1976] 103 ITR 66(SC) * CIT vs. Chandulal Keshavlal & Co(1960) 38 ITR 601 Thus, it is submitted that the write off of excess CENVAT credit need not always be on account of closure of the business but the write off could also trigger inter alia on account of expected reduction in the output service tax liability (against which the input service tax credit would have been adjusted) which may be on account of various reasons inter alia including reduction or downsizing in the business of the assessee due to market conditions, economic conditions, Government Policies, etc. Further, putting a restrictive interpretation on the event triggering the write off for the purposes o....
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....d going by the future prospects of the business wherein the said credit would not be utilized in full, the assessee chose to write off the same in part during the year under consideration based on some rationale and proper workings, which in our considered opinion, is in order and cannot be questioned by the revenue. Accordingly, we direct the ld AO to grant deduction for the same in the sum of Rs. 46 crores . Accordingly, the Ground Nos. 5(a) and 5(d) raised by the assessee are allowed. In view of this decision, the alternative claim of the assessee made in Grounds 5(b) and 5(c ) need not be looked into and accordingly the same are dismissed. 7. Short Credit of Advance Tax of Rs. 92 Crores Ground Nos. 6(a) and 6(b) of Assessee Appeal This is a matter of verification of tax paid challans. Hence we direct the ld AO to kindly grant credit for the advance tax paid of Rs. 92 crores after verification of the same. Accordingly, the Grounds 6(a) and 6(b) raised by the assessee are allowed for statistical purposes. 8. The Ground No. 7 raised by the assessee is with regard to initiation of penalty u/s 271(1)(c ) of the Act which would be prematured to be adjudicated at this stag....
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.... of the assessee in the draft assessment order. 10.1. The assessee filed objections regarding this aspect before the ld DRP. The ld DRP disposed off the same in favour of the assessee by observing as under:- "10.2. DRP's Direction: It has been contended by the assessee that- Without prejudice to the above, the Bank would also like to submit were brought forward loss is proposed to be set off against total income for the purpose of computing the amount eligible of deduction under section 36(1)(viia)(b) of the Act, the bank's claim for bad debts under Section 36(1)(viia) of the Act in the subsequent year would consequently increase. Thus, the aforesaid adjustment is merely a timing difference, as the aforesaid adjustment, if made by your goodself would result in a consequential adjustment to the income of the Bank in the next assessment year i.e. A.Y. 2012-13. Given that the aforesaid adjustment, merely results in a timing difference, the Assessee humbly submits that the impugned litigation is not warranted. The facts have been considered by the panel. The adjustment has to be as per Law and for the relevant period. The provisioning for bad debt....
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....essee is to be computed as per the manner prescribed in this Act. The purpose of total income u/s.36(1)(viia) of the Income Tax Act, 1961 is for computing the deduction for computation of business income as per the provisions of section 28 to 43D of the Income Tax Act, 1961. Therefore, the term total income referred in Clause (viia) of Sub- section 1 of Section 36 of the Income Tax Act, 1961 is used for the purpose of statutory deduction available for business income. In the case of West Bengal Industrial Development Corporation Ltd. Vs. JCIT.(supra) the Kolkata Benches of this Tribunal has held as under:- "2. We have heard both the parties and have gone through the orders of the authorities below. We find that the issue involved in this appeal had come for consideration before this Tribunal 'E' Bench in I.T.A. No.1207/1994 wherein this Tribunal vide its order dated 18.08.1996 had held that the accounting of interest on non-performing assets is to be accounted. for on receipt basis. The similar issue had also come before this Tribunal in the assessee's appeal for the assessment year 1995 - 1996 wherein this Tribunal having followed its earlier order allowed the....
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....ssue in hand is identical to the one already decided by the Tribunal in ITA No.1147/Mds/2008 in assessee's own case. Respectfully following the same, we dismiss this ground of the appeal of the Revenue." Respectfully following the aforesaid judicial precedent, we hold that the final order of the ld AO granting relief to the assessee does not call for any interference. Accordingly, the Ground No. (ii) raised by the revenue is dismissed. 11. APPLICABILITY OF PROVISIONS OF SECTION 115JB OF THE ACT Ground No. (iii) of Revenue Appeal We find that this issue is already settled in favour of the assessee in its own case for the Asst Year 2010-11 in ITA Nos. 477/Kol/2015 dated 14.10.2016 wherein it was held as under:- "4. The next issue is with regard to the applicability of provisions of Section 115JB of the Act for the assessee bank. We find that this issue has been dealt in detail by several decisions of this Tribunal and other tribunals wherein it had been categorically held that the provisions of section 115JB of the Act are not applicable to an assessee unless it is registered as a company under the Companies Act, 1956 and prepares its financial stated in acco....