AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1744
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(A) erred in holding that the prudential write off is not a write off. 1.3 The learned CIT(A) erred in holding that for the purpose of write off, the amount of doubtful debts has to be debited to Profit & Loss Account and not to provision account. 1.4 The learned CIT(A) failed to appreciate the fact that the learned Assessing Officer made the addition on Surmises & conjunctures. 1.5 Without prejudice to the above, the learned CITA) erred in not appreciating the fact that the write off need not be effected only by way of debit to Profit & Loss account. 3.1 Shri Ananthan appearing on behalf of the assessee submitted that the assessee is a Nationalized Bank. The assessee bank had written off Bad Debts in respect of non-rural advances and claimed deduction of Rs. 206,26,67,664/- u/s. 36(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The claim was made by the assessee in line with the decision of Hon‟ble Supreme Court of India in the case of Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax reported as 206 Taxman 182. The debts were written off at Branch level and at the level of head office. The Assessing Officer during assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment years 2002-03, 2003-04 and 2004-05 the Tribunal vide its order dated 30.05.2014 (supra) admitted such an Additional Ground but remitted the same back to the file of the Assessing Officer for adjudication in the light of the Hon‟ble Supreme Court in the case of Catholic Syrian Bank Ltd. (supra). The aforesaid factual matrix has not been disputed by the learned CIT-DR appearing for the Revenue. As a result, following the precedent in the assessee‟s own case, we deem it fit and proper to direct the Assessing Officer to consider the said claim of the assessee in the light of the judgement of the Hon‟ble Supreme Court in the case of Catholic Syrian Bank Ltd. (supra). Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity to put-forth its claim and only thereafter he shall proceed to adjudicate the claim of the assessee as per law. Thus, on this Ground assessee succeeds for statistical purposes." 3.4 Since, the issue in present appeal is identical to the one already considered by the Co-ordinate Bench in assessee‟s own case and there has been no change in the facts, we deem it appropriate to restore the issue to Assessing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lone. The assessee is claiming deduction to the extent of entire provision made. We find that this issue was considered by the Co-ordinate Bench in assessee‟s own case for the assessment years 2005-06 to 2009-10 in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The Tribunal decided the issue as under : "49. In this regard, the plea of the assessee is that deduction u/s 36(1)(viia) of the Act is allowable to the extent it was computable in terms of section 36(1)(viia) of the Act and cannot be restricted to the amount of Provision for bad and doubtful debts actually made in the account books. Accordingly, assessee has raised the claim to the extent of Rs. 172,49,54,970/-, which was restricted by the CIT(A) to Rs. 83,00,00,000/- representing the amount of Provision for bad and doubtful debts actually made in the account books. This aspect of the controversy has already been adjudicated by us in assessee‟s appeal for assessment year 2005-06, wherein it has been held that the deduction u/s 36(1)(viia) of the Act is admissible only to the extent of Provision for bad and doubtful debts actually made in the books of account. The CIT(A) has already allowed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffer trading results as per the provisions of the income tax. In assessment proceedings, the Assessing Officer disallowed the claim of assessee and held the securities classified under HTM category as capital assets. The Assessing Officer further held that the valuation of HFT and AFS securities are to be considered as per the CBDT instruction No. 17/2008 dated 26-11-2008 and as such net depreciation has to be allowed. Thus, the Assessing Officer disallowed net deprecation of Rs. 3,80,88,268/- and further held that profit on sale of investments as per books Rs. 204,27,88,848/- should be brought to tax. The ld. AR pointed that identical disallowance on securities was made in the earlier assessment years. The matter travelled up to Tribunal in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The Tribunal decided the issue in favour of the assessee. Thereafter, the Department challenged the same before the Hon‟ble Bombay High Court in Income Tax Appeal No. 920 of 2015. The Hon‟ble High Court vide order dated 27-02-2018 upheld the findings of Tribunal. 5.2 The ld. DR vehemently opposed the ground raised by assessee and prayed for confirming the findings ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also been answered by the Hon‟ble Karnataka High Court in the case of Corporation Bank Ltd. (supra) by relying on the judgement of the Hon‟ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT, (1971) 82 ITR 363 (SC). Therefore, we do not find any merits in the above objection of the Revenue. Moreover, the plea of the learned CIT-DR that nature of HTM securities is distinct from AFS and HFT securities and thus HTM securities are not stock-in-trade, is quite wrong. It cannot be denied that the securities held by the bank are stock-in-trade. Another plea of the learned CIT-DR was to the effect that the investments in the HTM category are not tradeable and the assessee may not be selling the HTM Securities prior to their maturity. Therefore, as per the learned CIT-DR, such securities could not be considered as "stock-in-trade‟. The aforesaid plea of the Revenue has been assailed by the learned Counsel for the assessee-bank. He has furnished a statement showing net profit on sale of HTM Securities as per the Balance Sheet for the various assessment years, viz. 2006-07 to 2009-10. On this basis, it is sought to be contended that the HTM category securit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the same is dismissed as such. 7. The ground No. 5 of the appeal is : 5. Without prejudice to the claim as per Ground No. 3 & 4, the learned CIT(A) erred in holding that the profit on sale of investments of Rs. 204,27,88,848/- credited to the Profit & Loss Account cannot be excluded from the Total Income. 7.1 The relief sought by the assessee in ground No. 5 is consequential to the claim of assessee in ground No. 3 of the appeal. Since, the claim of assessee in ground No. 3 has been allowed, the consequential relief has to be allowed to the assessee. In appeal by the assessee ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra) similar prayer was made by the assessee. The Co-ordinate Bench held as under : "24. In-principle, we have already upheld the stand of the assessee to value the stock of its investments / securities at lower of cost or market value. By application of such method of valuation of its stock of securities / investments in assessment year 2005-06 assessee claimed deduction for a loss of Rs. 359,24,58,508/-. The effect of the change in method of valuation on the computation of income for the purposes of income tax is a matter of factual ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of Income Tax, New Delhi, 2018 (3) TMI 805 (SC); ii. The Pr. Commissioner of Income Tax Vs. State Bank of Patiala, 391 ITR 218 (P & H). The second alternate submission of ld. AR is that while making disallowance u/s. 14A of the Act the authorities below have not followed the law laid down in the case of Commissioner of Income Tax Vs. HDFC Bank Ltd. reported as 49 taxmann.com 335 (Bombay). The ld. AR contended that the assessee had huge non interest bearing funds, therefore, disallowance under Rule 8D(2)(ii) was not warranted. The ld. AR further pointed that disallowance u/s. 14A r.w. Rule 8D was made in the earlier assessment years as well. The Tribunal in principle held that no disallowance u/s. 14A is to be made in respect of interest expenditure. However, for the purpose of verification the issue was remitted back to the file of Assessing Officer. 8.2 Te ld. DR vehemently defended the impugned order in confirming disallowance u/s. 14A made by the Assessing Officer. 8.3 Both sides heard. The first contention of the assessee is that the investments were held by the assessee as stock in trade, therefore, no disallowance u/s. 14A was required to be made in respect of exe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nditure was incurred in relation to the same." 8.4 The Hon‟ble Apex Court in the case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax (supra) has approved the judgment rendered in the case of Pr. Commissioner of Income Tax Vs. State Bank of Patiala (supra). Therefore, in view of the law settled by the Hon‟ble Apex Court, no disallowance u/s. 14A is warranted in respect of shares held by the assessee as stock in trade. 8.5 Since, the disallowance u/s. 14A has been set at naught on the ground of assessee holding the investment as "stock in trade‟, the alternate contention of assessee with regard to disallowance made under Rule 8D(2)(ii) in respect of interest expenditure has become academic. Thus, in view of our above findings ground No. 6 raised in the appeal by the assessee is allowed. 9. The ground No. 7 of the appeal is : 7. In the facts and circumstances of the case and in law, the disallowance of Rs. 153,00,00,000/- upheld by the learned CIT(A) on account of disallowance of provision for wage revision, being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 7.1 The learned CIT(A) failed appreciate th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3;ble Supreme Court of India in the case of Bharat Earth Movers Vs. Commissioner of Income Tax (supra) held that where the business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and is discharged at a future date. For the sake of ready reference and completeness the relevant extract of the judgment rendered by the Hon‟ble Apex Court in the aforesaid case is reproduced hereunder : "4. The law is settled; if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain." 9.4 The Kolkata Bench of the Tribunal in the case of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... file of Assessing Officer. However, till date the Assessing Officer has not given effect to the directions of Commissioner of Income Tax (Appeals). 10.2 The ld. DR submitted that the assessee has failed to provide necessary details before the Assessing Officer. The issue may be restored to the Assessing Officer for fresh examination. 10.3 Both sides heard. The issue in ground No. 8 is with respect to assessee‟s eligibility for claiming deduction u/s. 36(1)(viii). The deduction has been denied to the assessee for the reason that the assessee has failed to furnish relevant documents to claim such deduction. On the contrary the contention of the assessee is that all the relevant documents were furnished before the Assessing Officer. Without further going into the merits, the Assessing Officer is directed to examine the documents furnished by the assessee and thereafter decide the issue de novo, after affording reasonable opportunity of hearing to the assessee, in accordance with law. Thus, the ground No. 8 is allowed for statistical purpose. 11. The ground No. 9 of the appeal is : 9. In the facts and circumstances of the case and in law, the action of the learned CIT(A) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....artly allowed. 13. The ground No. 11 of the appeal is : 11. In the facts and circumstances of the case and in law, the action of the learned CIT(A) in directing the learned Assessing Officer to tax the accrued interest income on Non Performing Assets which are less than 180 days being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 11.1 The learned CIT(A) failed to appreciate the fact that once an account is classified as NPA as per Reserve Bank of India norms, then, no interest income can be recognized on accrual basis. 11.2 The learned CIT(A) failed in not considering the entire provisions of Rule 6EA of Income Tax Rules, 1962. 11.3 Without prejudice to the above, the learned CIT(A) failed to appreciate the fact that interest on sticky loans cannot be taxed on accrual basis. 13.1 The ld. AR submitted that in respect of interest income on Non Performing Assets (NPAs) no addition was made by the Assessing Officer. The issue was raised for the first time by the First Appellate Authority. Therefore, it is a case of enhancement of income. The ld. AR submitted that this issue has been settled in favour of the assessee by the Hon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vour of the assessee and deleted the addition. 14.2 The ld. DR defended the action of Commissioner of Income Tax (Appeals) in invoking the provisions of section 115JB and prayed for dismissing the ground No. 12 of the appeal. 14.3 Both sides heard. The assessee has assailed the action of Commissioner of Income Tax (Appeals) in invoking MAT provisions u/s. 115 JB of the Act. The said provisions are invoked only in respect of companies. The assessee is a Bank and is not governed by Companies Act, 1956. Hence, the said provisions would not apply in the case of a Bank. The Co-ordinate Bench of Tribunal in assessee‟s own case for the earlier assessment years has decided this issue by holding as under : "35. We have carefully considered the rival submissions. Ostensibly, there is no dispute that assessee is a banking company. The Bangalore Bench of the Tribunal in the case of Canara Bank (supra) held that section 115JB of the Act is not applicable to a banking company. In coming to such conclusion, the Bangalore Bench of the Tribunal relied upon the earlier decisions of the Tribunal in the cases of Union Bank of India vs. ACIT (ITA Nos.4702 & 4706/2010 dated 30.06.2011) and ....