TaxTMI 
TaxTMI 
2019 (6) TMI 1456
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.... sake of convenience the appeals of Revenue and the assessee for assessment year 2011-12 are first taken up for adjudication. ITA No. 579/PUN/2017 (A.Y. 2011-12) 2. The Revenue has assailed the findings of Assessing Officer on the single issue of allowing loss on valuation of securities Held to Maturity (HTM). 2.1 The ld. AR submitted that this issue has been let to rest by the Hon'ble Bombay High Court in assessee's own case in Income Tax Appeal No. 920 of 2015 decided on 27-02-2018. The ld. AR further submitted that the Tribunal in appeal by the assessee in ITA No. 1370/PUN/2014 for the assessment year 2010-11 decided on 11-03-2019 has also considered this issue and has decided in favour of assessee. 2.2 Mrs. Kesang Y. Sherpa representing the Department fairly admitted that the issue relating to loss on valuation of HTM securities has been considered by the Tribunal in assessee's own case in immediately preceding assessment years. 2.3 Both sides heard. Orders of the authorities below perused. The Revenue is in appeal against the findings of Commissioner of Income Tax (Appeals) on the issue of loss on valuation of HTM securities. We find that the Commissioner of Income T....
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.... Revenue to challenge the bona-fides of the change is that the change has been effected only for the purpose of assessment of taxable income and is not incorporated in the account books. The aforesaid plea of the Revenue, in our view, is quite misplaced because it is well understood that assessee is a banking company and is statutorily mandated to maintain its books of account in terms of the RBI guidelines. On the other hand, the assessment of taxable income has to be based on the principle of law and cannot be guided merely by the treatment meted out to a particular transaction in the account books. In-fact, this aspect of the controversy has 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 th....
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....ssee, we find merit in ground No. 3 of the appeal by assessee. Consequently, ground No. 3 raised in the appeal is allowed." Since, the issue raised in present appeal is identical to the one already adjudicated by the Tribunal and no contrary decision/material has been placed on record by the Revenue, the ground raised by the Revenue in its appeal on the issue of disallowance of loss on valuation of securities held under HTM category is dismissed. 2.4 In the result, the appeal of Revenue is dismissed. ITA No. 634/PUN/2017 (A.Y. 2011-12) 3. The grounds raised by the assessee in appeal against the findings of Commissioner of Income Tax (Appeals) are adjudicated in seriatim. 3.1 The first ground of appeal is : "1. In the facts and circumstances of the case and in law, the disallowance of Rs. 258,00,00,098/- u/s 36(1)(vii) of the Income Tax Act, 1961, being bad in law, arbitrary, perverse and legally unsustainable. The said claim may please be allowed to the appellant. 1.1 The learned CIT(A) erred in holding that the appellant bank had not written off the debts. 1.2 The learned CIT(A) erred in holding that the prudential write off is not a write off. 1.3 The ....
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....d a claim of deduction of Rs. 68,06,15,000/- u/s 36(1)(vii) of the Act on account of write off on debts by the non-rural branches of the assessee bank. The learned counsel for the assessee explained that the said claim was raised by way of an Additional Ground of Appeal before the CIT(A) vide letter dated 26.08.2008 but the same has not been inadvertently considered by the CIT(A). In this connection, a reference has been invited to a copy of the communication addressed to the CIT(A), which is placed in the Paper Book. Before us, it is sought to be canvassed that the said claim is covered by the judgement of the Hon‟ble High Court in the case of Catholic Syrian Bank Ltd. vs. CIT, (2012) 343 ITR 270 (SC) and in the case of assessee for assessment 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 ....
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..... The Co-ordinate Bench of Tribunal upheld the findings of Commissioner of Income Tax (Appeals) and has restricted the deduction u/s. 36(1)(viia) to the extent of provision made. 4.2 We have heard the submissions made by ld. AR. The ld. AR has fairly admitted that the Tribunal in assessee's own case in assessment year 2010-11 has restricted deduction u/s. 36(1)(viia) to the extent of provision made. Thus, in view of the admitted position, this ground of appeal by the assessee qua the claim of deduction u/s. 36(1)(viia) is allowed to the extent of provision actually made for bad and doubtful debts in the books of account. Accordingly, the ground No. 2 of the appeal is partly allowed in line with the findings for assessment year 2010-11. 5. The ground No. 3 of the appeal is : "3. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance u/s. 14A of the I.T. Act, 1961 r.w.r. 8D(2)(iii), being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 3.1 The learned CIT (A) failed to appreciate the fact that the learned Assessing Officer erred in invoking the provisions of Sec. 14A without....
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....he securities is its business income and is brought to tax as such. That income is not exempt from tax and, therefore, the expenditure incurred in relation thereto does not fall within the ambit of section 14A. Now, the dividend and interest are income. The question then is whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee's stock-in-trade. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, dividend and interest, but to earn profits from trading in i.e. purchasing and selling the same. It is axiomatic, therefore, that the entire expenditure including administrative costs was incurred for the purchase and sale of the stock-in-trade and, therefore, towards earning the business income from the trading activity of purchasing and selling the securities. Irrespective of whether the securities yielded any income arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to the same." 8.....
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....(viii). The assessee had furnished all the necessary documents to show that the Reserve was created in the period relevant to the assessment year under appeal but the same were ignored by the authorities below. The ld. AR further submitted that the assessee is eligible to claim deduction in respect of reserve created in the subsequent assessment year, as well. The ld. AR in support of his contentions placed reliance on following decisions : i. Punjab State Industrial Development Corporation, 323 ITR 495 (P&H); ii. Punjab State Industrial Development Corporation, 102 ITD 1 (CHD)(SB); iii. Nizamabad District Co-Operative Bank Ltd., 2014 (12) TMI 562 - ITAT, Hyderabad; iv. Vijaya Bank Vs. JCIT in ITA No. 915/Bang/2017 for assessment year 2012-13 decided on 05-01-2018. 6.2 On the other hand ld. DR vehemently defended the action of Commissioner of Income Tax (Appeals) in restricting the disallowance u/s. 36(1)(viii) to the extent of provision made by the assessee in the relevant assessment year. 6.3 We have heard the submissions made by rival sides and have examined the findings of authorities below on this issue. Before proceeding further it would be relevant to refer t....
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....ons, perused and carefully considered the material on record; including the judicial pronouncements cited. We find that this issue was considered and held in favour of the assessee and against revenue by a co-ordinate bench of this Tribunal in the case of Corporation Bank (supra); wherein at para 19, the Bench has held as under : "19. We have perused the orders and heard the rival contentions. Section 36(1) (viii) is reproduced hereunder; "(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head "Profits & gains of business or profession" (before making any deduction under its clause) carried to such reserve account" We find that Delhi Bench in the case of M/s PFCL (Supra) had considered the very same issue as to whether the special reserve was required to be created in the very same year of the claim of deduction of whether it could be created in a succeeding year. In its order dated 31- 07-2008 it was held as under at paras 18 to 24. 18. We have considered the rival contentions of both the parties, perused the records and carefull....
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.... year, has no force as it does not find support from the plain language of s. 36(1)(viii) of the Act. Perhaps, the words "......... (before making any deduction under this clause) carried to such reserve account" prompt such inference by the learned Departmental Representative for the Revenue but to our mind answer to such inference drawn by the learned Departmental Representative for the Revenue is that before making any deduction does not mean before making any claim but means at the time of considering such deduction claimed by the assessee. 21. Hon‟ble jurisdictional High Court of Delhi while interpreting similar wordings in the context of s. 32A of the Act in the case of CIT vs. Orient Express Co. (P) Ltd. (supra) while dealing with creation of reserve required under s. 32A of the Act at p. 896 held that section prescribes no point of time by which the reserve should be created and in this regard accepted that a reserve created after the closure of the accounts of the year qualifies by observing as under : "The second question which is raised only in ITC Nos. 44 and 45 of 1986 is whether the assessee is disentitled to the investment allowance scheme because no requ....
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....wed for statistical purposes." 8.4.2 Respectfully following the aforesaid decision of the co-ordinate bench in the case of Corporation Bank (supra), we hold that reserve created even in subsequent / succeeding years; however before the finalization of grant of deduction under Section 36(1)(viii) of the Act i.e. as per date of order of assessment is required to be considered while allowing the assessee's claim for deduction under Section 36(1)(viii) of the Act. The Assessing Officer is directed to examine and allow the assessee's claim accordingly. Consequently, this ground No.5 (5.1 to 5.3) is allowed for statistical purposes." 6.4 The ld. AR of the assessee further placed reliance on the decision of Hon'ble Punjab and Haryana High Court in the case of Commissioner of Income Tax Vs. Punjab State Industrial Development Corporation (supra). One of the question before the Hon'ble High Court for adjudication was : "3. Whether on facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the CIT(A) directing the AO to allow opportunity to the assessee for creating further reserve which falls short of admissible deduction under s. ....
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....same may please be deleted. 5.1 The learned CIT (A) failed to appreciate the fact that UPS being energy saving device being electrical equipment eligible for depreciation @ 80%. 5.2 Without prejudice to the above, UPS being part of computer peripherals is eligible for depreciation @ 60%." 7.1 The ld. AR submitted that the assessee had claimed depreciation on UPS @ 80%. The lower authorities have restricted the assessee's claim of depreciation to 15%. The Tribunal in assessment year 2010-11 has allowed depreciation on UPS @ 60%. 7.2 Both sides heard. The assessee in appeal has claimed depreciation on UPS @ 80%. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax Vs. Orient Ceramics & Industries Ltd. reported as 358 ITR 49 has held that the depreicaiton on UPS has to be computed at 60%. Similar view has been taken by the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Saraswat Infotech Ltd. reported as 2013 (1) TMI 861. Thus, in view of the settled position, we restrict assessee's claim of depreciation on UPS to the extent of 60%. Similar view was taken by the Co-ordinate Bench in assessee's own case in assessment year 2010-11. Thu....
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....g Assets (NPAs). Section 43D r.w. Rule 6EA is applicable only in respect of NPAs above 180 days and not NPAs classified based on 90 days norm of RBI, this issue has been settled in favour of the assessee by the decision of Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Vasisth Chay Vyapar Ltd. reported as 410 ITR 244 and the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. reported as 379 ITR 24. The ld. AR further contended that identical issue had come up before the Tribunal in assessee's own case in assessment year 2010-11. The Co-ordinate Bench of Tribunal following the aforesaid decision of Hon'ble Bombay High Court has deleted the addition. 9.2 We find that identical ground of appeal was raised before the Tribunal by the assessee in appeal for the assessment year 2010-11. The Tribunal decided the issue in favour of assessee by observing as under : "13.2 Both sides heard. Orders of the authorities below perused. The issue raised in ground No. 11 of the appeal is with regard to disallowance of interest on NPAs. The issue is no more res integra. The assessee has created a prov....
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....re outside the purview of section 115JB of the Act. The relevant extract of findings of the Tribunal are reproduced herein- below : "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 Coordinate 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 Indian Bank vs. Addl. CIT (ITA No.469/Mds/2010 dated 03.08.2011). Similar is the decision of th....