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2018 (9) TMI 1021
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....sessment year 2012-13 Ground Nos. 3(a) to 3(c) for assessment year 2013-14 The brief facts of this 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. 4 (a) to 4(e) raised by the assessee for Asst Year 2012-13 and Ground Nos. 3(a) to 3(c ) for Asst Year 2013-14 are dismissed. 3. ADDITION TOWARDS INTEREST INCOME ON NPA Ground Nos. 1(a) to 1(d) for assessment year 2012-13 Ground Nos. 1(a) to 1 (d) for assessment year 2013-14 The facts of assessment year 2012-13 are taken up for adjudication and the decision rendered thereon would apply with equal force for assessment year 2013-14 also except with variance in figure. The issue to be decided in the appeal of the assessee is as to ....
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....ch income / revenue is to be postponed to the extent of uncertainty involved, which is also in accordance with the theory of taxing only the real income, which is a settled law as per various judicial precedents. The assessee argued that the application of section 43D of the Act was specifically intended to clarify the income recognition by the banks to be in sync with the RBI guidelines and was never intended to be a static norm. Thus, 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 Sirp....
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....f 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. 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 ....
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....ur of the assessee by this tribunal in its own case supra, we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly, the ground nos. 2(a) to 2(d) raised by the assessee are allowed." Respectfully following the same, the grounds raised by the assessee in this regard for assessment years 2012-13 and 2013-14 are allowed. 4. DISALLOWANCE OF PAYMENT MADE TO EMPLOYEES IN RELATION TO UNFUNDED PENSION (AKIN TO SALARY) Ground Nos. 3(a) to 3(d) for assessment year 2012-13 Ground Nos. 2(a) to 2(d) for assessment year 2013-14 The brief facts of this issue are that the ld AO observed that the assessee during the year had claimed the payment made to its employees against the provision made for unfunded pension amounting to Rs. 5.38 crores. In this regard, the assessee filed the submissions stating as under:- * "The Bank has established a superannuation fund for the purpose of providing pension to its eligible employees. The fund has been approved by the Commissioner of Incometax under rule 2(1) of the part B of the Fourth Schedule. The bank has been regularly contributing to ....
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....nd Pvt. Ltd. 200 ITR 281 (Gui), * CIT v Punjab Financial Corporation Ltd., 295 ITR 510 (P&H); * Decom Marketing Pvt. Ltd vs CIT 251 ITR 398 (Guj); * CIT vs Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. 128 ITR 70 (Guj), and * Mylan Laboratories Ltd. vs ACIT (ITA No. 1616/Hyd/2010 dated 16 January, 2015). * Further, we understand that your goodself wishes to place reliance on the decision of the Calcutta High Court in the case of Brooke Bond India Limited vs. Joint Commissioner of Income-tax [2011] 337 ITR 482, while seeking to disallow the payment of Rs. 4.09 crore to employees towards unfunded pension. In this regard, we submit that the aforesaid decision is not applicable to the Bank's case for the following reasons: * In the case of the Bank the deduction for pension has been made in respect of amounts which have been actually paid to the employees of the Bank and which has been gone out irretrievably and on which the Bank has no control. However, in the case of Brooke Bond, the deduction for pension was claimed merely on basis of a provision created based on a Board Resolution which could have reversed at a later ....
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.... in the instant case had not provided the details in respect of the classes of employees eligible to avail it. When certain details were furnished by the assessee before the ld DRP, the matter was remanded to the ld AO. The ld AO in his remand report commented as under:- "The list does not indicate the class of employees, their place in the hierarchy, whether these were terminal benefits or short term benefits, etc. The submission is devoid of the Boards resolution, terms and conditions of payment of benefits and business expediency of such payments inter alia. It is therefore could not be perceived from the additional evidence filed, as to how it negates the proposal of the AO to disallow payment of unfunded pension to the employees. On the basis of the facts and circumstances of the case, the additional evidence filed does not hold merit to overturn the AO's proposal." 4.2. The ld DRP observed that this remand report was sent to assessee for its rebuttal and no submissions were made later on. Accordingly , the ld DRP upheld the action of the ld AO in disallowing the said expenditure in the sum of Rs. 5.38 crores. Accordingly, the same was sought to be disallo....
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....re to employees of the assessee bank which makes it eligible for deduction u/s 37 of the Act. The payments were made to employees pursuant to Employer - Employee Relationship. Even the TDS obligations associated with the said payments have been duly complied with by the assessee, which is not disputed by the revenue before us. Even the sample Form No. 16 were duly submitted by the assessee before the ld AO which are enclosed in page 246 of the paper book. It was specifically submitted before the ld AO that the payment made under this particular scheme covered all eligible employees ranking from clerical staff, assistant manager, manager, vice president etc. We find that the genuinity of the said payments are not disputed by the revenue before us. We find that the case law relied upon by the ld AO in his assessment order and by the ld DR i.e Brooke Bond India Ltd supra, refers to payments made to fund . In the instant case, there was no contribution made by the assessee bank to any of the funds. The payments were directly made to the employees of the bank and subjected to deduction of tax at source. The moment the payments are made to those employees, the assessee had lost complete ....
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....NVAT 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 totally dependent on future business prospects. 5.1. The assessee explained the rationale for write off of CENVAT credit as under:- * As on 31st March, 2011, the Consumer Business Division of the Bank had an unutilized CENVAT credit of Rs. 510.9 million available with its books. Pursuant to an internal review of the Bank's future business prospects in line with RBS Group Global Strategy, the Bank revisited the utilized CENVAT credit relating to Consumer Business Division. It was observed that the reduced business consumer Business Division would adversely impact the taxable fee income generated by the said division. This was reflected in reduced fee income trend for Consumer Business division observed year on year. * Consequently, the service tax liability to be discharged by the Consumer Business Division would also be impacted and would result in accumulation of un utilized CENVAT Credit balance. As such, the CENV AT credit amount was in excess of service tax liability for future years....
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....cribed 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 January, 1996 provides that accounting policies adopted by an assessee should be such that it represents a true and fair view of the state of affairs of the business in the financial statements prepared and presented on the basis of such accounting policies. As per the principles of prudence, the assessee is required to recognize all known liabilities and losses immediately in its financial statement. * Accordingly, in light of the Bank's future business prospects and having regard to the principle of prudence, the bank had written off CENVAT credit amounting to Rs. 460 million during the year under consideration." 5.4. The assessee further submitted that closure of business was not necessary to claim deduction of the CENVAT credit written off as under:- * "In the course of the earlier hearing, your goodself had contended that the judicial precedents relied upon by the Bank in the earlier submissions namely Mohan Spinning Mills vs. ACIT (2012) 27 taxmann.com 332) (Chd.) and the decision of....
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....ssee due to market conditions, economic conditions, Government Policies, etc. Further, putting a restrictive interpretation on the event triggering the write off for the purposes of allowing deduction under the Act (i.e. deduction of write off only in the year of actual closure of business) is not justified and would be against the Guidance note issued by the ICAI on Accounting Treatment for MODVAT/CENVAT, which permits assessee to carry out such a write off." 5.5. The assessee also placed reliance on the following decisions in support of its contentions:- * "CIT vs Samtel India Limited (ITA No. 130 of 2000) (Date of Order 26th September, 2013) (Delhi High Court) * Girdhar Fibers Pvt. Ltd. vs. ACIT (ITA No. 2027/Ahd/2009) (Ahmedabad Tribunal) * NCS Distilleries Pvt. Ltd. vs. ITO (ITA No. 699/Hyd/2012) (Hyderabad ITAT) 5.6. This claim was made by the assessee already in assessment year 2011-12 but the same was disallowed by the Ld. AO on the ground that such credit claim was surrendered by the assessee to the Service Tax Department vide written intimation dated 24.02.2012 only and hence it does not relate to assessment year 2011-12. Hence going by th....
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.... to the assessee and which was erroneously adjusted against the outstanding demands which never existed. In these circumstances, the assessee did not choose to offer the interest on income tax refund in its return of income for assessment year 2012-13. The ld. AO did not agree to this contention of the assessee and held that since the assessee is following mercantile system of accounting, the said interest on income tax refund in the sum of Rs. 9,35,01,366/- determined for assessment year 2010-11 u/s 244A of the Act ought to have been offered to tax by the assessee under the head income from other sources. Since the sum was not offered an addition was made to that effect in the assessment. Aggrieved the assessee is in appeal before us. 6.1 Similarly for assessment year 2013-14 , the assessee in the return of income offered interest on income tax refund received u/s 244A of the Act amounting to Rs. 27,34,90,629/-. The assessee in its written submissions dated 25.07.2016 contended that the said interest u/s 244A of the Act is not taxable in India in the light of protocol to India-Netherlands Double Taxation Avoidance Agreement (DTAA) on Article 10,11 and 12 which states that India....