TaxTMI 
TaxTMI 
2017 (4) TMI 1424
X X X X Extracts X X X X
X X X X Extracts X X X X
....duction u/s.36(1)(viia) made by AO by considering the word "Place" as appearing in Rule 6EA to mean the "Panchayat" whereas the same should only be taken to mean the "Ward" in a rural areas. 2.1 At the outset, the ld.A.R submitted that this issue came for consideration in assessee's own case in I.T.A.No.2126/Mds/2013 for assessment year 2010-11 vide order dated 26th September,2014. 2.2. On the other hand, ld.D.R did not raise any objection to the submission of ld.A.R. 3. We have heard both the parties and perused the material on record. As rightly pointed out by the ld.A.R, this issue was decided against the assessee by the Co-ordinate Bench of Chennai Tribunal in assessee's own case for assessment year 2010-11 cited supra, wherein Tribunal held that:- "At the time of hearing, counsel for the assessee submits that this issue has been decided against the assessee by the co-ordinate Bench of this Tribunal for assessment year 2009-10 in ITA No.1949/Mds./2012 dated 18.06.2014. Copy of the order is placed on record. We find that the Tribunal while dismissing the assessee's ground in the above order held as under:- 8. The assessee's third ground raises the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has decided both these issues against the assessee by dismissing the grounds observing as under:- "4. The third ground of appeal of the assessee is regarding restriction of claim in respect of deduction under section 36(1)(viia) to the extent of provision made in the books. The A.R. for the assessee has conceded that this issue has already been decided against the assessee bank in the case of Bharat overseas Bank Ltd. in ITA No.1191/Mds/2012. This issue had also come up before the Tribunal in ITA No.818/Mds/2010 relevant to the assessment year 2007-08. The findings of the Tribunal are reproduced herein below:- "7. We have perused the orders and heard the rival submissions. The original claim, which was allowed by the Assessing Officer under Section 36(1)(viia) of the Act, was as follows:- 7.5% of Gross Total Income : Rs. 5,74,07,362 10% of Rural Advances (Rs. 27,26,50,990/-) : Rs. 2,72,65,099 Rs. 8,46,72,461 Thereafter, assessee had moved in appeal against some of the additions made by the Assessing Officer on other issues and pursuant to the relief granted in such appeal, the gross total i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not against any debts which had become doubtful. Standard assets are always considered recoverable, in the sense, bank has no doubt of recoverability. When the bank itself has treated such assets as good and recoverable, any provision made on such assets cannot be considered as a provision for bad and doubtful debts. The debt itself being good, a provision made on good debt cannot be considered as a provision for bad and doubtful debts. May be, the RBI has made a regulation for 10% provision for standard assets also a prudential norm. This can however be considered as a measure prescribed in abundant caution, to deal with a situation where banks are not to suffer shock of sudden delinquency that could happen in future. There is always a possibility that an asset, which is fully recoverable, may not be so at future date. Nevertheless, possibility of happening of such a contingency cannot be a sufficient reason to consider a provision made on standard assets also as a provision for bad and doubtful debts. Therefore, claim of the assessee that provision for standard assets also has to be considered for applying the condition set out under Section 36(1)(viia) is not in accordance with....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... raised by the assessee. 7. The assessee raised the additional ground relating to the first ground which reads as follows:- 1.3 Without prejudice to the contention that the provision for standard assets and country risk is to be considered as provision made for bad and doubtful debts, for the purpose of sec.36(1)(viia), the appellant submits that even if provisions for non-performing assets as per the guidelines of RBI is alone to be considered, the provisions held as at the year end should be the basis and not the provision made during the year. Reliance for this view is placed on the decision of Hon'ble ITAT Ahmedabad in the case of DCIT Vs. Sarvodaya Sahakari Bank Ltd. (2014) 48 Taxmann.com.82. The ld.A.R filed a petition for admission of additional ground. Since first time raised before the Tribunal, Revenue authorities have no occasion to consider the same, we remit the issue relating to the above additional ground to the file of AO for his consideration. This ground is allowed for statistical purposes. 8. The second ground is with regard to disallowance u/s.14A r.w.Rules 8D of the Income Tax Rules, 1962. 9. At the outset, the ld.A.R submitted that this is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k-intrade' or not. Proceeding on the same, we find that the caselaw quoted by the assessee (supra) squarely supports its plea. The Revenue has brought to our notice a recent Third Member decision incase of D.H. Securities P. Ltd vs DCIT [2014] 31 (Trib) 381. This decision follows the judgment of the hon'ble Bombay high court ( which is also the concerned jurisdictional high court) in case of Godrej & Boyce Manufacturing Co. Ltd vs ACIT, 328 ITR 81 and that of hon'ble Calcutta high court in Dhanuka& Sons vs CIT, 339 ITR 319. Notonly this, the hon'ble Third Member also refers to the case law CCI Ltd.(supra) and expresses a view that the aforesaid decisions of otherhon'ble high courts were not brought to the notice of the Karnatakahigh court. In these circumstances, the picture that emerges is thatvarious high courts have expressed divergent opinions on this legalissue. That being the case, we apply the decision of CIT vs Vegetable Products Ltd 88 ITR 192 and in the view favourable to the assessee is followed. So, in principle, we hold that the authorities below have wrongly invoked section 14A in case of investments held as 'stock-in trade'wherein the 'exempt' income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 2.4.2013 in para 14 of the order. Respectfully following the said order of this Tribunal, we dismiss the ground of assessee on this issue." 14.1 Respectfully following the above decision of Tribunal in assessee's own case for assessment year 2010-11, we reject this ground raised by the assessee. 15. The fourth ground in this appeal is with regard to disallowing the claim of depreciation on UPS at 80% overlooking the fact that UPS is an energy saving device entailing for higher depreciation. 16. At the time of hearing, the ld.A.R submitted that this issue came for consideration before this Tribunal in assessee's own case in I.T.A.No.2126/Mds/2013(supra) and the Tribunal decided the issue against the assessee. 17. We have heard both the parties and perused the material on record. As rightly pointed out by the ld.A.R, this issue was decided against the assessee by the Co-ordinate Bench of Chennai Tribunal in assessee's own case for assessment year 2010-11 cited supra, wherein Tribunal held that:- "69. The next issue in the grounds of appeal of the assessee is that Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ishment in India. On DTAA with southKorea, the Assessing Officer was of the view that the terms containedtherein did not give exclusive rate of tax to the concerned countryand it had only provided for credit method of relief in double taxation.Accordingly, he declined to accept the assessee's claim. 23. Coming to the DTAAs between India and Singapore, Thailandand Srilanka, the Assessing Officer observed that they also recognized'credit' method. He alleged the assessee not to have provided anydifference in rates of tax in the above stated tax jurisdictions.Simultaneously, the Assessing Officer held that on furnishing detailson assessee's part, the claim would be allowed in its favour. Thisresulted in disallowance/addition of Rs. 55,65,44,48/-. 24. In lower appellate order, the CIT(A) has quoted a notification No.S.O 2123(E) dated 28.8.2008 reported as 304 ITR(St.)63, clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by 'elimination' method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to section 90....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowance as per Rule 8D of Income Tax Rules, 1962. 24. After hearing both the parties, in our opinion, this ground does not require adjudication. Since the same issue is dealt in assessee's appeal in the earlier para No.11 of this order, we remit the issue to the file of AO for fresh consideration. 25. The third ground is with regard to loss on revaluation of investments. 25.1 We have heard the submissions of the Counsel and perused the material on record. In our opinion, this issue is squarely covered by the decision of the Co-ordinate Bench of Chennai Tribunal in assessee's own case in ITA No.2031/Mds./2013 for assessment year 2010-11 wherein held that:- "83. Counsel for the assessee submits that this issue has been decided by this Tribunal in favour of the assessee for the assessment year 2009-10 in ITA No.1949/Mds/2012 dated 18.6.2014 in pages 20 & 21 at para 43 to 46 of the order. He places reliance on the said order. Departmental Representative supports the order of Assessing Officer. 84. On going through the order of the co-ordinate Bench in ITA No.1949/Mds/2012 dated 18.6.2014 we find that the issue in appeal has been decided in favour of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laimed loss of Rs. 11,32,83,633/- on account of aforesaidrevaluation. Per Assessing Officer, this pertained to only speculativetransactions which would invoke the Board's instruction No.3 of 2010.He held that the loss arising out of speculative/notional transactionscould only be set off against the income of such activity as nosale/conclusion/settlement of contracts had taken place since theassets in question continued to be owned by the assessee.Accordingly, the Assessing authority made consequential addition inassessee's income. 49. Herein also, the CIT(A) has followed his predecessor's orderfor assessment year 2008-09 as well as decision of the ITAT Mumbai incase of Edelwiss Capital Ltd vs ITO, I.T.A.No. 5324/Mum/07 decidedon 10.11.2010, to hold that provision for loss on 'market to market'basis in respect of trading derivatives could not have been disallowed.So, the impugned disallowance stands deleted. 50. Coming to this ground, we find from the parties' writtensubmissions and paper books filed that the 'tribunal' has upheld theCIT(A)'s identical findings in assessment year 2008-09. On beinggranted opportunity, the Revenue has failed to point out anyd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 of caution, we observe that the assessee's claim of bad debts pertaining to those sums in preceding assessment years, if any, shall be deemed to have been dismissed. With these observations, the Revenue's ground is rejected." In view of the above Order of Tribunal, we dismiss the ground raised by the Revenue. Further, we make it clear that if it is allowed as bad debt in earlier years and recovered the same in the assessment year under consideration to be treated as income of assessee. 28. The Sixth ground is with regard to depreciation on UPS allowed at 60%. 28.1 Since we have confirmed the order of the CIT(A) in earlier para No.17 of this order, this ground raised by the Revenue is rejected. 29. The Seventh ground is with regard to allowability of provision for leave encashment. 29.1 We have heard both the parties and perused the material on record. The same issue came for consideration before this Tribunal in ITA No.2031/Mds./2013 for assessment year 2010-11(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dence of such payment is furnished by the assessee along with such return." 21. The Hon'ble Calcutta High Court in the case of Exide Industries (supra) has held that the original enactment of section 43B of the Income Tax Act was to curb unreasonable deduction on the basis of the mercantile system of accounting without discharging statutory liabilities on the one hand and claim appropriate benefit under the Act on the other introduced the provisions of section 43B(f). Under clause (f) of section 43B any sum payable by the employer to its employees as leave encashment shall be deductible only in computing the income referred to in section 28 of that previous year in which the sum is actually paid by the employer to its employees." The Hon'ble High Court further held that "while inserting the clause (f) no special reasons were disclosed. Without such reasons the enactment is inconsistent with the original provisions of that section. Although the disclosure of the reasons was not mandatory, but in the interest of justice, it was incumbent upon the legislature to disclose the reasons. The legislature must disclose reasons which would be consistent with the provisions of the Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be dis- charged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one ; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. Applying the above said settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. The appeal is allowed. The judgment under appeal is se....