TaxTMI 
TaxTMI 
2019 (2) TMI 1691
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....de disallowance under section 14A read with rule 8D, restricted relief under section 90 to the extent of tax paid in foreign country instead of tax charged on foreign income which was included in total income, disallowed depreciation on goodwill, disallowed contribution to staff welfare fund, made disallowance of bad debts recovery during the year brought to tax as offered in profit & loss account as claimed by the assessee in income-tax computation, restricted depreciation claimed on UPS from 80% to 60%, disallowed depreciation claimed on ATMs etc. Aggrieved, the assessee filed appeal before Ld. CIT(A), who partly allowed the appeal. Aggrieved against the order of the Ld. CIT(A), the assessee filed the appeal with the following grounds:- Deduction u/s 36(1)(viia) 1.1 The ld.CIT(A) erred in confirming order of AO that restricted deduction u/s 36(1)(viia) in respect of provision made in books for bad and doubtful by adopting methods contrary to what is prescribed in the Act. 1.2 That CIT(A) restricted deduction for bad and doubtful debts only towards rural advances whereas said section allows deduction in respect all bad and doubtful advances rural or othe....
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....he employer bank to contribute the same as per RBI direction. 6.2 Without prejudice to the above, the CIT (A) should have at least allowed the amount actually utilized from the fund as deduction since it is expended for the welfare activities of the employees of the appellant. Recovery in respect of bad & doubtful debts: 7.1 The CIT(A) ought to have directed the AO not to charge to tax the recovery in respect of bad debts written off relating to rural branches since the bad debts written off relating to rural branches were never allowed as deduction in any earlier year. 7.2 The CIT(A) ought to have appreciated that AO had consistently disallowed bad debts written off relating to rural debts which are available in the assessment records and therefore no fresh material was required to be produced before AO for allowing the claim. Depreciation on UPS 8.1 The CIT (A) erred in confirming the order of AO disallowing the claim for depreciation on UPS at 80%, overlooking the fact that UPS is an energy saving device entailing higher depreciation rate. Depreciation on ATM 9.1 The CIT (A) erred in confirming the order of AO disall....
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....* Provisions of sections 36(1) (vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and they operate in their respective fields. * A scheduled bank may have both urban and rural branches. It may give advances from both branches with separate provision accounts for each. In the normal course of its business, an assessee bank is to maintain different accounts for the rural debts and for non-rural/urban debts. Maintenance of such separate accounts would not only be a matter of mere convenience but would be the requirement of accounting standards. * The bad debts written off in debts, other than those for which the provision is made under clause (viia), will be covered under the main part of Section 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). * In case of rural advances which are covered by clause (viia), there would be no double deduction. The proviso, in its terms, limits its application to the c....
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.... allowed only when bad debts are really written off. The question of double deduction being allowed does not arise therein at all, because it is allowed only on actual write off. The Hon'ble Apex Court has also held that the proviso to section 36(1)(vii) apply only in respect of rural debts. In view of the above decision and in view of the option exercised by the assessee that it can claims deduction on doubtful debts as per option (b) i.e. 7.5% of Gross Total Income and 10% of aggregate average rural advances, the Assessing Officer has rightly worked out the allowable deduction, which is less than that of the provision made by the assessee as doubtful debts, allowed the deduction of bad debts for all assessment years and remaining balance was brought to tax. Accordingly, we reverse the order of the ld. CIT(A) and confirm the addition made by the Assessing Officer for all the above assessment years. This ground of appeal of the Revenue is allowed''. Considering the facts of the Co-ordinate decision where the provision has been restricted to the extent of rural branches only. We confirm the findings of the Commissioner of Income Tax on the issue of rural branches following ....
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....n of Rs.2.23 crores on its standard assets, If the provision for bad and doubtful debts alone was considered, then the total allowance under Section 36(1))(viia) was in excess of such provision. However, if the provision for standard assets was also considered as provision for bad and doubtful debts,then the total provision could go up toRs. 6,24,44,027I-. Then of course, assessee's claim as finally allowed was well within the limits specified under Section 3(1)viia of the Act. At this juncture, a look at Section 36(1)(viia) is necessary and this is reproduced hereunder, for brevity.' 36(1)(viia,) a scheduled bank [not being a bank in corporated by or under the laws of a country outside India or a non scheduled bank for a cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-ha/f per cent] of the total income ('computed before making any deduction under this clause and chapter VLV and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner." it is clear from....
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....h regard to the claim made by it under Section 36(1)(viia), insofar as it concerns the quantum of such claim. This obviously show that there was no application of mind by the Assessing Officer at the time of assessment. Assessing Officer had not come to any conclusion at all having not considered the claim in the light of the conditions set out in Section 36ft'viia of the Act. We cannot say that he had taken a view which was in accordance with law. It is not a case where the Assessing Officer had adopted one of the courses possible in law. Of course, a cryptic order of the Assessing Officer by itself may not show that there was no thought given: by him on a claim of the assessee. However, here there was io enquiry made during the course of assessment proceedings. Therefore, the order which was silent on the claIm made by the assessee, andallowing such claim, without any discussion,: will definitely render it erroneous and prejudicial to the interests of Revenue.As held by Hon'b!e Apex Court in the case of Malabar industrial Co. Ltd. v. lT (243 ITR 83, prejudicial to the interests of the Revenue" is a term of wide import and not confined to loss of tax. An order without application ....
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....9. We have heard both the parties arid perused the material on record. In our opinion, the same issue came for consideration before the coordinate Bench of Chennai Tribunal in assesse's own case for assessment year 2010-11 cited supra, wherein Tribunal held that:- '76. Counsel for the assessee submits that this issue has been decided against the assesee by the co-ordinate Bench for the assessment year 2009-10/n 174 No.1949/Mds/2012 dated 18.6.2014 at pages 11 to 13 in paras 21 to 25 of the order, 77. We have perused the said order of this Tribunal and find that the issue has been decided against the assessee ho/ding as under: 21. The seventh substantive ground challenges the ClTA's order restricting relief 90% of the tax paid in foreign countries 22. Factual backdrop qua this issue is that the assessee hadraised a claim of double taxation relief in memo of income from its overseas branches in south Korea, Singapore, Thailand, SrilankaandHong Kong amounting to Rs.357,573I- Rs.21,32,37,338/-Rs.7,84,71,232,,Rs.42,94,845/- and Rs.39,80,57,968/- respectively. Its thrust was upon various Double Taxation Avoidance Agreements DTAAs between India and the ....
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....next issue raised by the assessee is with regard to denial of depreciation on goodwill and the Ld. AR submitted that the Bank had during the year ended 31.01.2010 taken over assets &liabilities of Shree Suvama Sahakari Bank Ltd. The excess of Liabilities over Assets amounting to Rs.246,52,02,148/- has been treated as Goodwill, Depreciation on the said amount of Goodwill based on the WDV as on 01.04.2012 of Rs. 26,00,01,789/- has been claimed as deduction based on the decision of Supreme Court in the case of CIT vs Smift Securities Ltd (Civil Appeal No.5961 of 2012 (Arising out of SLP (c) No.35600 of 2009) dated 22.08.2012.The AO rejected this claim on the following reasons: "As held by the assessee, assessee has taken over the specific asset and liabilities of M/s.Shree Swatna Sahakari Bank Ltd as existing as on 19.05.2009 as per the approval of RBI. Accordingly it resulted in excess of liabilities over assets absorbed on account of absorption scheme of RB1. The liabilities are balance sheet entries and same will be considered as and when incurred or paid as per the provisions of IT Act. Considering such liabilities as good will is neither justifiable nor based on any prud....
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.... "12. Regarding Goodwill:-Since the business of Transferor Bank is undermoratorium from 14/09/2006, the Transferor Bank does not enjoy any goodwill in commercial terms. Accordingly, no monetary consideration isprovided for goodwill." and submitted that as per the agreement, it is clear the transferor bank does not enjoy any goodwill in commercial terms and hence, there is no goodwill. The Ld. DR further invited our attention to the following portion of the judgement of the Hon'ble Supreme Court in the case of Smifs Securities Ltd.(348 ITR 302) : "Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ["CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee-Company....
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....evant portion of the order of this Tribunal, supra, is extracted as under:- "12. The third ground is with regard to disallowance of contributionof staff welfare fund. 13. At the outset, the Ld. AR. submitted that this issue came forconsideration before this Tribunal in assessee's own case in ITA No.2126/Mds/2013(supra). 14. We have heard both the parties and perused the material on record. As rightly pointed out by the Ld. AR 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: "67. The next issue in the appeal of the assessee is that Commissioner of Income Tax (Appeals) erred in not allowing deduction in respect of contribution to staff welfare fund overlooking the mandatory requirement of payment as an employer. 68. At the time of hearing, counsel for the assessee submits that this issue has been decided against the assessee by the coordinate Bench for the assessment year 2008-09 in ITA No.1815/Mds/2011 dated 2.4.2013 in para 14 of the order. Respectfully following the said order of this Tribunal, we dismiss t....
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....en the Revenue does not dispute that the assessee had raised its claim of deduction of bad debts relating to the very sums in preceding assessment years. The Assessing Officer did not allow this relief in relevant previous year, when it has recovered the aforesaid debts, the Revenue is again seeking to tax the same. There is no cogent evidence before us to dispute this factual position Moreover, the CIT(A) hascited section 41(4) of the Act whilst granting relief.The Revenue has failed to point out any legal or factual error inCIT(A)'s findings Therefore, the same are affirmed. However, as a matter of caution, we observe that theassessee's claim of bad debts pertaining to those sums inpreceding 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." 9.2 Respectfully following the above order of this Tribunal, we allow these grounds of the as....
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....bunal by its order dated 14.03.2012 held that UPS is an integral part of the computer system and regulate the flow of power to avoid any kind of damage to the computer network due to fluctuation in power supply which could lead to loss of valuable data. The Tribunal relied upon the decision of Delhi High Court dated 20/1/2011 in the matter of CIT Vs. Orient Ceramics & Industries Ltd in which UPS was held to be the part of the computer system and depreciation at 60% was allowed. Similarly, so far as ATMs are concerned, the Tribunal on finding of fact concluded that ATM cannot function without the help of computer and would be a part of the computer used in the banking industry. Reliance was placed by the Tribunal upon the decision of the Delhi Bench of Tribunal in the matter of DCIT v. Global Trust Bank (ITA No.474/D/09) wherein it has been held that ATM was a computer equipment and depreciation @ 60% was allowed. So far as the use of software is concerned, the Tribunal records a fact that the evidence of the use of the software on 31/3/2008 was produced before the Tribunal. Thus, the Tribunal held that depreciation @ 30% on software was rightly claimed." Respectfully following t....
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....rder of this Tribunal is extracted as under:- "Next we take up Revenue's appeal in ITA.No.35/Mds/2014 The first issue in the appeal of the Revenue is that commissioner Tax (Appeals) erred in directing the Assessing Officer to the aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month while computing deduction under section 36(i)(viia) of the Act. 22. 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 inassessee's own case in 1TA No.2O3l/Mds./2013 for assessment year2010-11 wherein held that:- "80. At the time of hearing counsel for the assessee submits that the present issue has been decided in favour of the assessee by this Tribunal for the assessment year 2009-10/n J74 No. 1949/Mds/20.t2 dated 18.6.2014 at pages 24 to 26 in pares 55 to 59 of the order. He places reliance on the said order. Departmental Representative relies on the order of the Assessing Officer. 81. Similar issue has been raised by the Revenue in 17A No.2030/Mds/2013....
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....es below have wrongly invoked section 14A in case of investments held as stock-in-trade. While holding so the Tribunal observed as under:'15. We have considered the rival contentions, perused therelevant findings and the judicial precedents Undisputedly, the assesse had earned income of 21 crores from investments made in mutual funds and equities. Its stand adopted throughout has been to have held the investments as 'stock-intrade'. There is no finding on this issue forthcoming either from the Assessing Officer orthe CIT(A). We have also perused the 'guard' fife pertaining tol.T.A.No. 1815/Mds/2011 decided on 2.4.2013(supra). It is evident there from that the very disallowance stands upheld by a coordinate bench. Its plea challenging applicability of section 14A in case of investment held as 'stock-in- trade' appears to have neither been raisednor adjudicated. So, we treat it as a fresh plea not covered by theearlier order. Thus, the new issue that arises for our consideration isas to whether a disallowance u/s 14A can be made even in a case when the investments giving rise to an 'exempt' income are held as'stock-intrade' or not. Proceeding on the same, we find that the caselaw quo....
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....upra). Accordingly, this issue is remitted to the file of AO for fresh consideration. This ground is allowed for statistical purposes. In view of the above reasoning of this Tribunal, following it, were mit this issue back to the file of AO for fresh consideration. This ground is allowed for statistical purposes. 15. The next ground raised by the Revenue is against the disallowance of provision made for leave salary on actuarial valuation. With regard to the issue on leave salary, the AO held that it is only a provision and hence disallowed. Aggrieved, the assessee filed an appeal before the Ld. CIT(A) and the Ld. CIT(A) allowed the appeal based on this Tribunal's decision in assessee's case for assessment year 2010-11 in ITA No.2031/Mds/2013 dated 26.09.2014. Before us, the assessee submitted that the provision for leave salary cannot be disallowed u/s. 43B for the reason that leave provision is a contractual liability and therefore, it cannot be treated at par with tax, duty, cess or fee u/s. 43B. However, in the SLP (Civil) Nos. 22889/2008 dated 08.05.2009 in the case of CIT & ors. Vs M/s. Exide Industries Ltd & ANR, wherein, the Apex Court held that "pending hearing and f....