TaxTMI 
TaxTMI 
2020 (1) TMI 213
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....alidity of the reopening under section 147 of the assessment completed under section 143(3). (2) Reopening under section 147 based on the retrospective amendment. (3) Applicability of provisions of section 115JB of the Act. (4) Addition to the books profit loss on revaluation of securities and provision made for bad debt and doubtful debts which is reduced from the respective asset. 2. At the outset of hearing the learned authorised representative (AR) for the assessee submits that the grounds of the appeal raised by the assessee are covered in favour of the assessee and against the revenue. On the validity of the reopening the ld AR for the assessee submits that notice was issued on the ground that the amount of Rs. 603.65 Crore debited to the profit and loss account as "provisions and contingences" are unascertained liabilities not allowable as per Explanation 1(c) to Section 115JB (2). The learned AR of the assessee submits that the reasons for reopening itself is not correct, the above amounts represents provision made for bad and doubtful debts, loss on revaluation of investments and other assets etc.,. The said amount was provided in respect of a....
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.... India (supra) held that provisions of section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company governed by provisions of Banking Regulation Act, 1949. Further, this bench of Tribunal in assessee's own case for AY 2004-05 in ITA No. 2193/Mum/2013 took the same view. Therefore, following the principle of consistency this ground of appeal is allowed in favour of assessee. 6. The other/ second addition as assailed in Ground No.4 relates to book profits loss on revaluation of securities and provision made for bad and doubtful debts which are reduced from the respective assets. We have noted that this ground of appeal is also covered by the decision of Hon'ble Gujarat High Court in CIT Vs Vodafone Essar (Gujarat) Ltd (supra) wherein it is held that prior to the introduction of clause (i) to the Explanation to section 115JB, as held by the Supreme Court in case of HCL Comnet Systems & Services Ltd. (305 ITR 409 SC), the then existing clause (c) did not cover a case where the assessee made a provision for bad or doubtful debt. With insertion of clause (i) to the Explanation with retrospective effect, any amount or amo....
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....ment. 1.3 The learned CIT(A) was grossly in error in going by the understanding that all the funds of the banks are interest-bearing, coming from the deposits or sale of Bonds. The observation totally ignored by the submission made by the assessee that an amount of Rs. 14567.58 Crore was existing with the assessee is interest free funds representing the share capital and reserves which are appearing in the published balance sheet. (2) Expenses for increase in paid up capital: 2.1 The ld CIT(A) erred in law and on facts in confirming the disallowances of Rs. 3,12,85,258/- made by AO and also rejecting the claim of amortization in total disregard to the amendment to section 35D brought by the Finance Act, 2008 extending the provision of section 35D of the Act, 1961 to the service sector and also ignoring the fact that sectors like bank also implies increased business activity in the form of increase in advance and to deposits, apart from the physical extension of Branch network etc. (3) Provision for diminution in value of investment-direction for relief subject to verification: 3.1 Having accepted that provision for diminution in value of....
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....accepted that whenever sale of such securities take place, the appellant is reflecting the same as business income/loss. (6) Addition to book profit of the amount disallowed under section 14A: 6.1 The learned CIT(A) erred in law and facts in confirming the addition of Rs. 102,44,25,790/-, being the amount of disallowance under section 14A towards the book profit computed for the purpose of section 115 JB ignoring the legal position that the addition prescribed under explanation to section 115JB(2) is of actual amount debited to P&L account, whereas the disallowance under Rule 8D is a notional amount to be disallowed irrespective of actual expenses incurred in earning exempt income. 6.2 While confirming the addition, the learned CIT(A) ignored the decision of Special Bench of ITAT Delhi in case of ACIT versus Vireet investment Private Limited ITA No. 502/Delhi/2012 and CO No. 68/Delhi/2014 wherein Hon'ble Tribunal follow the decision of Delhi High Court in CIT Vs Bhusan Steel Limited (IT No. 593 and 494 of 2015) holding that computation under MAT provisions is to be made without resorting to the computation as contemplated under section 14A read with Rule ....
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....jarat High Court has been dismissed by Hon'ble Supreme Court. 13. On the other head the learned DR for the revenue after going through digital furnished in the chart and decision relied by learned AR of the assessee, submits that he relied upon the order of lower authorities. 14. We have considered the rival submission of the parties and I want through the orders of lower authorities. During the assessment the assessing officer noted that the assessee claimed exempt income of Rs. 94,50,57,908/- under section 10 of the Act. The assessee apportioned 1% of dividend income towards administrative expenses incurred for earning this exempt income. The working provided by assessee was not accepted by assessing officer. The assessing officer asked to furnish the details of dividend income earned and expenses incurred as per Rule 8D. The assessee furnished its reply dated 9th of December 2013. The assessee in its reply stated that the own funds of the assessee are in far excess for making investment for earning exempt income, no borrowing are attributed to exempt income, section 14A and Rule 8D are not applicable in case of assessee. The submission of assessee was not accepted by asses....
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....squarely covered in assessee's favour by the judgment of the Hon'ble Bombay High Court in the case of CIT Vs HDFC Bank Ltd (383 ITR 529). In that case also the issue before the Hon'ble Bombay High Court was whether any part of the interest paid by the Bank could be disallowed u/s 14A read with Rule 8D(2)(ii). On appeal this Tribunal and thereafter the Hon'ble Bombay High Court held that since the Bank's own funds were substantially more than the cost of investments yielding tax free income, no part of the interest paid was liable for disallowance. The view of the Hon'ble Bombay High Court was followed with approval by the jurisdictional Calcutta High Court in the case of CIT Vs Rasoi Ltd (ITA No. 109 of 2016). 12. We also find merit in the assessee's alternate contention that no disallowance out of interest paid was warranted because after netting off interest paid against interest received, the assessee had made net interest gain of Rs. 3902.10 crores. The Hon'ble Gujarat High Court in its recent judgment in the case of Pr. CIT Vs Nirma Credit & Capital Pvt Ltd (supra) has held that the expression used in Rule 8D(2)(ii) is "interest expendi....
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....ssessee. The Hon'ble Punjab & Haryana High Court therefore held that in assessing the income of the assessee engaged in banking business, no disallowance u/s 14A was warranted because in such cases the expenditure was incurred in relation to its banking business and not in relation to earning any tax free income. The Revenue's appeal against the judgment of Hon'ble Punjab & Haryana High Court was dismissed by the Hon'ble Supreme Court. We therefore find that qua the assessee is engaged in the banking business, the Hon'ble Supreme Court upheld the judgment of the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT Vs State Bank of Patiala (supra) as per which no disallowance u/s 14A is permissible in terms of Rule 8D in case of assessees engaged in banking business. Respectfully following the judgment of the Supreme Court in case of State Bank of Patiala (supra), we direct the Ld. AO to delete the disallowance of Rs. 2,90,37,490/- made under Rule 8D(2)(iii). 17. In view of the aforesaid discussion we are of the view that no disallowance under 14A is permissible in terms of Rule 8D in case of assessee is engaged in banking business. Therefore, respec....
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.... Corporate action fees 1,103/- Total 3,12,85,258/- 22. In without prejudice and alternative submission, the assessee claimed that if expenditure incurred is proposed to be disallowed, then the proportionate deduction under section 35D may be allowed. The submission of assessee was not accepted by assessing officer. The assessing officer held that claim of amortization is not acceptable as there is no extension of undertaking or setting up a new unit which is necessary condition for amortization of such expenses. An alternative and without prejudice claim of assessing under section 35D, the assessing officer concluded that there must be extension of undertaking or setting up of a new unit. The assessee has not furnished supported documentary evidence to show that increase in paid a share capital were for extension of undertaking or setting up of new units. Before learned CIT(A) the assessee furnished the details of setting up of new units with factual data. The assessee also stated that they have added 107 new branches, 169 ATMs and 9 Retail Asset Centers. The learned CIT(A) confirmed the action of assessing officer holding that to avail the benefit of amort....
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....evances in verification of fact at the end of assessing officer. 26. We have considered the submission of both the parties and have perused the record. In the return of income the assessee claimed deduction of Rs. 190,39,69,109/- towards diminution in value of business assets. The assessing officer issued show cause notice to the assessee to explain the allowability of diminution in value of business assets. The assessee filed its reply dated 6th February 2014. In the reply the assessee stated that for the purpose of income tax, consistently the bank has been treating investment in equity and preference shares as 'capital assets' and other investments as 'business assets'. The account from sale of equity and preferential shares has been offered to tax under the head 'capital gains'. Similarly, income from sales of other investments has been offered to tax under the head 'profit and gains of business and profession'. This has been accepted in the assessment of the bank. In the return of income the assessee claimed deduction in respect of diminution in value of business assets of Rs. 190,39,69,106/-. The assessee also furnished the details of breakups. The assessee claimed that di....
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....n securities as its business income, this methodology is followed from year to year in all banks as per RBI guidelines. The learned CIT(A) also accepted this provision for diminution in value securities as on last day of financial year represents the difference between the purchase price of the stock of securities on the date of purchase and market value of these securities on the last day of financial year, which would have been reflected at lower value if normal system of accounting of the stock at market price in the profit and loss account for the guidelines issued by Reserve Bank of India under Banking Regulation Act. The learned CIT(A) after accepting legal position concluded that basic information provided by assessee required thorough examination of fact and directed the assessing officer to examine the assessee's claim on merit. 27. The Hon'ble Bombay High Court in CIT Vs Bank of Baroda (supra) while relying on the decision of Supreme Court in case of UCO Bank v. CIT [1999] 240 ITR 355/106 Taxman 601, held that where the market value of shares and securities had fallen below the cost before the date of valuation and where on the date of valuation, the market value is le....
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....ome academic. 33. Ground No. 7 relates to initiation of penalty. This ground of appeal is premature and therefore, resultantly dismissed. 34. In the result appeal of the assessee is allowed. ITA No. 3425/Mum/2018 by assessee for AY 2012-13. 35. We have noted that the assessee has raised identical grounds of appeal, as raised in appeal for AY 2011 -12, the facts of the year under consideration is also similar, therefore considering the principle of consistency all the grounds of appeal raised by assessee for the year under consideration are also allowed with similar direction. ITA No. 3426/Mum/2018 by assessee for AY 2013-14 36. We have noted that the ground No. 1 and 2 of the appeal for this year is identical to the ground No.1 & 2 as raised in appeal for AY 2011-12 and 2012-13, which we have allowed, therefore following the principle of consistency on same set of fact these grounds of appeal are allowed with similar directions. 37. Ground No. 3 relates to addition to book profit of tax on non-monetary perquisites. The learned AR of the assessee submits that the assessing officer and the learned CIT-A consider the amount of tax paid on behalf of employees on no....
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....s as per section 10 (10 CC) of the act and hence the same cannot be construed as akin to TDS/ fringe benefits tax and accordingly added back to the MAT income of assessee. The learned CIT(A) confirmed the action of assessing officer holding that the provision of section 40(a)(v) clearly provides that the taxes paid by the employer on perquisite to the employees is not deductible from the income of an employer. The alternative action under section 10(10 CC) was also upheld. 40. The learned AR of the assessee vehemently relied upon the decision of coordinate bench of tribunal in Rashtriya Chemical and Fertilizers Ltd. (supra) wherein on similar ground of appeal the coordinate bench held the taxes borne by the assessee on non-monetary perquisites provided to employees forms part of Employee Benefit cost and akin to Fringe Benefit Tax since they are certainly not 'below the line' items since the same are expressively disallowed under section 40(a)(v), the same do not constitute Income Tax for the assessee in terms of Explanation-2. Therefore, without there being any corresponding amendment in the definition of Income Tax as provided in Explanation-2 to Section 115JB, Fringe ....
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....llowance under clause (iii) of Rule 8D(2) to the extent of exempt income. While discussing the corresponding grounds of appeal in cross appeal of the assessee we have noted that no disallowance u/s 14A was warranted in case of assessee being engaged in banking business. We have further noted the Hon'ble Supreme Court in Maxopp Investment P Ltd (supra) upheld the judgment of the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT Vs State Bank of Patiala (supra), wherein it was held that no disallowance u/s 14A is permissible in terms of Rule 8D in case of assessee is engaged in banking business. Similar view was taken by the coordinate bench of the Kolkata Tribunal in UCO Bank (supra). Therefore in view of aforesaid legal discussion, we do not find any merit in the ground of appeal raised by revenue. 47. In the result the appeal of the revenue is dismissed. ITA No. 4042/Mum/2018 by revenue for AY 2012-13. 48. The revenue has raised identical ground of appeal as raised in appeal for assessment year 2011-12, which we are dismissed. No various in the facts for the year under consideration are brought to our notice. Therefore, following the principle of consiste....