TaxTMI 
TaxTMI 
2019 (9) TMI 1225
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....llant namely M/s. City Union Bank Limited is engaged in the business of banking. The return of income for the AY 2012-13 was filed on 29.09.2012 disclosing total income of Rs. 169,83,76,140/- and the same was revised on 08.09.2013 at total income of Rs. 159,55,89,950/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Circle 1, Kumbakonam, (hereinafter called "AO") vide order dated 30.03.2015 passed u/s. 143(3) of the Income Tax Act, 1961 (in short 'the Act') at total income of Rs. 330,47,65,965/-. While doing so, the Assessing Officer made the following additions. 1 Disallowance u/s.14A Rs. 2,82,57,685 2 Bad debts written off Rs. 51,44,46,907 3 Interest on securities disallowed Rs. 25,21,72,886 4 Profit on sale of investments Rs. 7,25,09,632 5 Loss on shifting of securities Rs. 8,85,34,138 6 Deduction u/s.36(1) (viia) Rs. 64,64,78,669 7 Disallowance u/s.41(1) & 28(iv) Rs. 47,58,883 Rs. 47,05,085 8 Claim of deduction u/s.36(1) (viii) Rs. 1,70,94,716 9 Excess depreciation on ATMs Rs. 2,52,39,819 10 Interest on VIP deposits disal....
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....only notional loss were accounted and not the gain made. 10. Next issue is regarding addition made on account of stale drafts of Rs. 94,63,968/-. The ld. CIT(A) deleted the addition made on account of stale demand drafts and cheques following the decision of Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra). 11. Next issue regarding allowability of depreciation on ATM machine of the claim of Rs. 2,52,39,819/-, the learned CIT(A) following the decision of Chandigarh Bench of the Tribunal in ITA No.215/Chd/2015, dated 28.03.2016 held that ATM machine were held to be computers. Accordingly, higher depreciation was allowed. 12. Next issue relates to disallowance on interest on recurring deposits account due to alleged non deduction of tax at source. The ld. CIT(A) deleted the addition on account of interest are recurring deposits considering the fact that it is only from the assessment year 2016-2017 that there is an obligation to deduct tax at source on such deposits u/s.194A of the Act by virtue of amendment by Finance Act, 2015. 13. Thus, the appeal of the assessee came to the partly allowed by the ld. CIT(A). 14. Being aggrieved by that part o....
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....d CIT(A) had allowed the deduction as claimed by the Appellant bank since he had decided the issue of deduction u/s 36(1)(vii) & 36(1)(viia) together in his order and allowed the amount actually debited to the Profit & Loss Account. Since the Appellant Bank had debited the provision for bad & doubtful debts to the Profit & Loss Account, it was under the opinion that its claim of deduction u/s 36(1)(viia) has been allowed by the learned CIT(A). However, the ARs who represent the Appellant Bank are of the opinion that it is advisable for the Appellant Bank to raise a specific ground with regard to deduction u/s 36(1) (vii a) since the learned CIT(A) has not dealt with the ground on merits. In view of the same, the additional ground, which is purely a legal ground which is raised. 4. The appellant now seeks to raise the under mentioned additional grounds of appeal. The appellant humbly prays that these Additional Grounds of Appeal may please be admitted and adjudicated upon while adjudicating the Appeal in ITA No. 1129/CHNY/2018. ADDITIONAL GROUNDS OF APPEAL 1. The learned CIT(A) erred in not deciding the issue of deduction u/s 36(1)(viia) by a spea....
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....unt reducing the same from debtor account constitutes write off. The assessee wrote off of accounts i.e. debiting the provisions for bad and doubtful debts and reducing the same from advances in the Balance Sheet. It is an admitted fact that in the year subsequent recovery, the same credited to Profit and Loss account and offered to tax. We find merit in the submissions of the assessee bank that the learned CIT(A) grossly fell in error in combining the provisions of Section 36(1) (vii) and 36 (1) (viia) of the Act ignoring the principle emanated by the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd (supra). We find that the ld. CIT(A) considered only the provisions of bad and doubtful debts debited to profit and loss account and ignored the write off of bad debts debited to provisions for bad and doubtful debts and reduced from advance from the Balance Sheet which also constitute write off as observed by us (supra). Therefore we remand this issue back to the file of the Assessing Officer for limited purpose of verifying the amount of write off debited to provisions of bad and doubtful debts and reduced from advance account in the balance sheet and allow the same a....
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....not relevant for classifying the investments whether stock-in-trade or not. In the present case, undisputedly, assessee-bank has changed its method of accounting by classifying the investments from investments to stock-in-trade. In such a situation, provisions of sec. 45(2) of the Act are attracted. The said provisions of the Act read as under: "45(2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset." But here the question is, in the earlier years though investments are shown as investments in the books of account, for income-tax purposes, the same was shown as stock-in-trade. Therefore, assessee-bank chang....
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.... From the reading of the above circular, it is clear that investments held by the banking concern are treated as a part of business of the banking company and therefore, the income arising from such investments is treated as part of business income falling under the head 'profits and gains of business'. Though the circular was issued in the provisions of sec. 80P of the Act, the said principle was equally made applicable to other banks and commercial banks to which Banking Regulation Act, 1949 applies. Therefore, by virtue of the above said circular, investments made by the bankingcompany should be treated as a business asset of the banking company or stock-in-trade. It is well settled in law that CBDT circulars are binding upon the officers who are entrusted with the responsibility of executing the provisions of the Act. 9.6 The jurisdictional High Court, in the case of Karnataka Bank (supra), after referring to the judgment of the Apex Court in the case of Southern Technology Ltd. v. Jt. CIT [2010] 320 ITR 577/187 Taxman 346 and UCO Bank v. CIT [1999] 237 ITR 889/104 Taxman 547 (SC) held that the directions of the RBI are only disclosed norms and they have ....
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....raised the following grounds of appeal. 1. The Ld. CIT(A) failed to appreciate that the assessee had itself made adhoc disallowance u/s 14A of the Act in the return of income and the AO rightly worked out the correct disallowance by applying Rule 8D of Income Tax Rule. 2. The Ld. CIT(A) erred to notice that when the assessee following mercantile system of accounting, any interest accrued on investments should be admitted as income. 3. The Ld. CIT(A) erred to notice that the AO had rightly restricted the deductions u/s 36(1)(vii) & 36(1)(viia) of the Act to the credit balance of the provision for bad and doubtful debts made for rural branches as against the credit balance of provision for bad and doubtful debts made for all branches. 4. The Ld. CIT(A) erred to notice that the AO has rightly disallowed the excess cost of securities over the face value amortized, while working out the profit / loss on trading of securities. 5. The Ld. CIT(A) erred to notice that the Assessing Officer has rightly invoked the provisions of sec 41(1) and 28(iv) of the Act with regard to unclaimed money, stale drafts and cheques reflected in the balance sheet f....
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....icer had not assigned any reason whatsoever as to how the claim of the assessee is incorrect. In the similar facts, the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, 402 ITR 640 held that in the absence of the finding of the Assessing Officer resort to provisions of Section 14A of the Act r.w.r 8D of the Rules cannot be made. This decision was followed by the Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra) cited by holding as under:- ''Ground No. 8 challenges the addition of Rs. 3,88,882/- invoking the provision of Section 14A of the Act. It is the contention of the appellant that the appellant had not incurred any expenditure to earn exempt income. The Assessing Officer had not given any findings as to how the claim of the assessee- bank that no expenditure was incurred to earn the exempt income was incorrect. In the absence of this finding resort to the provisions of rule 8D of the Income Tax Rules cannot be made as held by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, (2018) 402 ITR 640. Therefore this ground of appeal filed by the assessee is allowed. Accordingly, this ground of appeal stands al....
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....assessment years, a Division Bench of this Court in Commissioner of Income Tax v. City Union Bank Ltd., [2007] 291 ITR 144 (Mad.) has answered both the substantial questions of law raised in this appeal in favour of the assessee and against the Revenue. The relevant portion of the said order reads as under: 4.1. With regard to the first substantial question of law raised in T.C.(A) No.22 of 2004 and the first substantial question of law raised in T.C.(A) No.466 of 2004, the Division Bench of this Court by judgment dated 23.1.2007 made in T.C.(A) Nos.15 and 24 of 2003 (Commissioner of Income Tax, Madurai v. Tamilnadu Mercantile Bank Ltd., Tuticorin), after referring to the decisions in Commissioner of Income-tax v. Canara Bank [1992] 195 ITR 66, CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144, H.M.Kashiparekh and Co. Ltd. v. CIT [1960] 39 ITR 706, Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521, Morvi Industries Ltd. v. CIT, [1971] 82 ITR 835, State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC), Godhra Electricity Co. Ltd., v. Commissioner of Income-tax, [1997] 225 ITR 746 held that the assessee is taxable for interest on securities only on specified dates w....
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.... be allowed in the Profit & Loss Account unless authorized by the Act. 12.1 Further, the Ld. AO is of the opinion that the assessee included the amortization amount in the book value of HTM Securities to arrive at cost of purchase. Therefore, the assessee bank cannot claim the cost paid and face to value receivable at the time of HTM Securities as expenditure and disallowed Rs. 5,18,96,960/-. The Ld. CIT(A) considered the findings of the Assessing Officer and grounds raised before him and followed the judicial decision in the assessee's own caseand the submissions on the amortization expenses that it represents only depreciation loss written off in the books of accounts and is allowable expenditure and relied on the decision of Hon'ble Supreme Court in the case of UCO Bank 240 ITR 355 (SC), where it was held that depreciation in investments should be allowed as revenue expenditure. Since, the securities are stock in trade and valued at cost or market value whichever is less the claim has to be allowed. The Ld. CIT(A) placed reliance on Jurisdictional High Court decision in assessee's own case in 291 ITR 144 (Mds), where it was held that the depreciation on inv....
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....Ground No.5 challenges the decision of ld. CIT(A) in deleting the addition on account of stale drafts and cheques. The Assessing Officer made an addition on account of stale drafts and cheques of Rs. 47,58,883/- and Rs. 47,05,085/- on the ground that these amounts are not payable. This issue was decided in favour of the assessee by the Co-ordinate Bench of the Tribunal in the case of The Karur Vysya Bank Ltd vs. Addl. CIT, wherein it was held at paras 18 to 18.2 as follows. ''18. Ground No.8 challenges the direction of ld. CIT(A) to deal with the additions unclaimed balance of Rs. 1,12,00,000/-. 18.1 The brief facts relating to this issue as under: The customers of the assessee-bank taking demand draft/pay order in favour of various parties but this demand drafts/payee orders are not encashed within a period of six months and they are accounted under the stale draft head. It is stated that the payee of the demand draft can encash any time/pay orders bank even after lapse of ten years subject to validation by the issued bankers and some of the SBI saving banks and current bank customers, which are not operated the bank accounts are kept under inop....
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.... 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.4741D/09) wherein t has been held that ATM was a computer equipment and depreciation (c) 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. 6) We note that the Tribunal has arrived at a finding of fact on all the three questions. The revenue has not been able to show that the above finding of fact is perverse. Thus, we do not see any reason to entertain question (i), (ii) and (iii) above''. Respectfully following the above decision, we dismiss the ground No.6 filed by the Revenue. 35. Ground No.7, challenges the decision of the ld. CIT(A) that int....
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....al: 1. Aggrieved by the appellate order passed by the Commissioner of Income Tax (Appeals), Trichy, the appellant had filed the above numbered appeal before the Hon'ble Income Tax Appellate Tribunal. 2. It is humbly stated that, while filing the appeal, the appellant did not raise specific grounds of appeal against the following issue: 2.1. Disallowance of deduction u/s 36(1)(viia) of Rs. 131,16,10,731 /-. 3. With respect to the item mentioned in para 2.1 above, it is humbly submitted that the learned Assessing Officer had disallowed in part, the claim of the Appellant bank u/s 36(1)(viia) and Appellant Bank had challenged the same before the learned CIT(A) by taking a specific ground. The appellant bank was of the opinion that the learned CIT(A) had allowed the deduction as claimed by the Appellant bank since he had decided the issue of deduction u/s 36(1)(vii) & 36(1)(viia) together in his order and allowed the amount actually debited to the Profit & Loss Account. Since the Appellant Bank had debited the provision for bad & doubtful debts to the Profit & Loss Account, it was under the opinion that its claim of deduction u/s 36(1)(viia) has ....
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....orrect disallowance by applying Rule 8D of Income Tax Rule. 2. The Ld. CIT(A) erred to notice that when the assessee following mercantile system of accounting, any interest accrued on investments should be admitted as income. 3. The Ld. CIT(A) erred to notice that the AO had rightly restricted the deductions u/s 36(1)(vii) & 36(1)(viia) of the Act to the credit balance of the provision for bad and doubtful debts made for rural branches as against the credit balance of provision for bad and doubtful debts made for all branches. 4. The Ld. CIT(A) erred to notice that the Assessing Officer has rightly invoked the provisions of sec 41(1) and 28(iv) of the Act with regard to unclaimed money, stale drafts and cheques reflected in the balance sheet for more than three year by applying the principle of limitation and the notification of RBI was issued on 24/05/2014 only, mandating the banks to transfer such unclaimed amount to "Depositor Education and Awareness Fund Scheme" and this instruction is prospective only. 5. The Ld. CIT(A) failed to notice that the higher depreciation at 60% for ATMs could not be given on par with the computers, since the funct....