TaxTMI 
TaxTMI 
2019 (6) TMI 1456
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....isposed of vide this common order. For the 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 sec....
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....of Chainrup Sampatram (supra). In-fact, the only basis for the 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 q....
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....t the issue has now been settled by the Hon‟ble High Court in favour of the assessee, 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. ....
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....the findings of Co-ordinate Bench on the issue are reproduced here-in-under : "28. By way of Ground of Appeal No.3, assessee has raised 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. (su....
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....u/s. 36(1)(viia) though the provision was made under the aforesaid section to the extent of Rs. 102.36 crores. The similar claimed was made by the assessee in assessment year 2010-11. 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 ....
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....pt income. The importance of the observation is this. We have held that the securities in question constituted the assessee's stock-in-trade and the income that arises on account of the purchase and sale of the 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....
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....ect to verification by Assessing Officer i.e. amount of reserve created in the period relevant to impugned assessment year. The ld. AR submitted that the authorities below have erred in observing that no details were furnished qua claim of deduction u/s. 36(1)(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 disall....
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....(supra). The Tribunal in the said case has in turn placed reliance on the decision rendered in the case of Corporation Bank in ITA No. 1352/Bang/2013 for assessment year 2011-12 decided on 11-03-2015. The Tribunal after considering the aforesaid decision concluded as under : "8.4.1 We have heard the rival contentions, 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 sam....
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....x) of, this Act in respect of the total income of the previous year of every person. 20. A plain reading of s. 36(1)(viii) does not indicate any time-limit for creation of special reserve for claiming deduction under s. 36(1)(viii) of the Act, hence, the contention of learned Departmental Representative for the Revenue that this provision does not permit the deduction in case the special reserve is created in subsequent 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 creat....
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....36(1)(viii) of the Act. Whether assessee had indeed made a further creation of special reserve in the succeeding year and also whether such reserves were created before finalization of the grant of deduction u/s 36(1)(viii) had not been verified by any of the authorities below. We therefore, set aside the orders of the authorities below and remand the issue to the file of the AO for fresh consideration in accordance with law. Ground no.4 of the assessee is allowed 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....
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....above, we hold that the reserve created in subsequent assessment year i.e. Rs. 58.86 Crores qualifies for deduction u/s. 36(1)(viii) of the Act. The ground No. 4 of the appeal by the assessee is allowed, accordingly. 7. The ground No. 5 of the appeal is : "5. 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 allow depreciation at the rate of 15% on UPS being bad in law, arbitrary, perverse and legally unsustainable, the 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 ca....
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.... 7.1 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. 7.2 The learned CIT(A) failed in not considering the entire provisions of Rule 6EA of Income Tax Rules, 1962. 7.3 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." 9.1 The ld. AR submitted that the Assessing Officer added notional interest on Non Performing 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 20....
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....s. Since, the assessee is not a company, the provisions of Companies Act, 1956 does not apply. In the assessment year 2010-11 the Commissioner of Income Tax (Appeals) had invoked the provisions of section 115JB. The matter travelled to the Tribunal. The Tribunal decided the issue in favour of assessee. 10.2 Both sides heard. Orders of authorities below perused. We find that the issue i.e. whether the provisions of section 115JB apply on Banking Company has already been considered by the Co-ordinate Bench in assessee's own case in assessment year 2010-11. The Tribunal held that the Banking Companies are 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 dec....
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.... raised in assessment year 2012-13. 13. The only new issue raised in appeal by the assessee for assessment year 2012-13 is ground No. 7. The same is reproduced here-in-below : "7. The learned CIT(A) erred in upholding the disallowance of Rs. 34,78,240/- being the Advertisement expenses incurred. 7.1 The learned CIT(A) erred in holding that the Appellant bank did not substantiate the claim for deduction u/s. 37 or u/s. 80G of the Income Tax Act, 1961." 13.1 The ld. AR submitted that the assessee has incurred expenditure on advertisement Rs. 34,78,240/- by way of donation to various organizations. The expenditure was mainly incurred with an intention to gain mileage from advertisement by contributing to various organizations. The Auditors have verified that such expenditure qualifies for deduction u/s. 80G of the Act. Though, the assessee has not claimed the benefit of deduction u/s. 80G, however, the expenditure was claimed under the provisions of section 37 of the Act. 13.2 On the other hand the ld. DR vehemently defended the findings of Commissioner of Income Tax (Appeals) in disallowing alleged expenditure on advertisement. The ld. DR submitted that the....