TaxTMI 
TaxTMI 
2020 (3) TMI 877
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....first we would take up Revenue‟s appeal in ITA No.81/PUN/2018 & ITA No.585/PUN/2018 for the assessment year 2013-14 & 2014-15 for adjudication. ITA No.81/PUN/2018 (By Revenue) ITA No.585/PUN/2018 (By Revenue) A.Ys.2013-14 & 2014-15 3. In ITA No.81/PUN/2018 and ITA No.585/PUN/2018, the Revenue has raised common grounds of appeal which reads as under: "1. The order of the Ld. CIT(A) is contrary to law and to the facts and circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeal) has erred on the facts and circumstances of the case in allowing loss of valuation of Held to Maturity (HTM) securities when HTM securities are capital in nature. 3. The appellant craves to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 4. At the very outset, the Ld. Counsel for the assessee submitted that grounds of appeal raised by the Revenue pertains to the allowability of depreciation on Held to Maturity (HTM) Investment. In this regard, the Ld. Counsel submitted that this issue is covered by the decision in assessee‟s own case in ITA Nos.634 & 635/PN....
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.... category. Both sides are unanimous in stating that the present issue was subject matter of appeal before the Tribunal in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The Co-ordinate Bench adjudicated the issue by observing as under: "20. In the background of the aforesaid legal position, a premise which can be drawn is that for the purposes of valuation of the closing stock it is permissible for the assessee to value it at the cost or market value, whichever is lower. In-fact, the Hon‟ble Supreme Court in the case of Chainrup Sampatram vs. CIT, (1953) 24 ITR 481 (SC) held that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower. In the present case, Revenue does not dispute that the method of the valuation adopted by the assessee, namely, valuing the stock either at cost price or market value whichever is lower, is a generally accepted method of valuation. No doubt, there are no statutory rules for the valuation of closing stock but the ordinarily accepted method of commercial accounting support the valuation of closing stock based on the lower of the cost or market value. Therefore, the ....
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....e activities; and, accordingly the recognition of investments in HTM category as "stock-in-trade‟ is not dependent on the frequency of their sale / purchase carried out by the assessee-bank 21. In view of the aforesaid discussion, we, therefore, conclude by holding that in the present case the method of valuation of the closing stock adopted by the assessee i.e. cost or market value, whichever is lower is fair and proper and the income-tax authorities have erred in not accepting the same. The orders of the authorities below on this aspect are hereby reversed. " 5.4 The ld. AR has further drawn our attention that the decision of Tribunal has been upheld by the Hon‟ble Bombay High Court in Income Tax appeal No. 920 of 2015 (supra). The copy of the Hon‟ble High Court order dated 27-02-2018 was furnished before us. A perusal of same shows that one of the question of law before the Hon‟ble High Court for consideration was : "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs. 359,24,58,508/- in allowing loss of valuation of Held to Maturity (HTM) securities....
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....ovision made has to be considered and not the provision relating to rural advances only be considered. 2.3 The learned CIT(A) failed to appreciate the fact that the Hon'ble Supreme Court in the case of Catholic Syrian Bank [2012] 343 ITR 270 (SC) did not lay down the law that the deduction should be allowed by only considering the provision for rural advances in the books. 2.4 Without prejudice to the above, the learned CIT(A) erred in holding that the deduction should be restricted to the provision made in the books of accounts and not to the extent of eligible amount. 2.5 Without prejudice to the above, the learned CIT(A) erred in not considering the provision made subsequently for the purpose of arriving at the deduction. 3. In the facts and circumstances of the case and in law, the action of the learned CIT(A) in upholding the disallowance of Rs. 1,58,75,823/- made by the learned Assessing Officer 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....
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....on 36(1)(viia) of the Income Tax Act, 1961 (hereinafter referred to as "the Act‟). 10. The Ld. Counsel for the assessee submitted that this is a case where the assessee created provision for bad and doubtful debts amounting to Rs. 585,72,52,022/-. However, the assessee claimed deduction u/s.36(1)(viia) of the Act amounting to Rs. 706,21,02,484/-. The Ld. Counsel further submitted that relying on the judgment of the Hon‟ble Supreme Court in the case of Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax (2012) reported in 343 ITR 270, the Assessing Officer rejected the claim of the assessee and allowed deduction only at Rs. 111,72,83,312/- i.e. provision relatable to the rural advances. Contesting the decisions of the Assessing Officer and the Ld. CIT(Appeals), the Ld. Counsel for the assessee submitted the similar claim 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. 10.1 The Ld. Counsel further has drawn our attention to Para 4 of the Tribunal‟s order in assessee‟s ow....
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....ovision 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." In view of the decision mentioned hereinabove, we direct the Ld. CIT(Appeals) to comply with our order in assessee‟s own case dated 27.06.2019 (supra.) and decide the matter accordingly. Thus, Ground No.2 raised in appeal by the assessee is partly allowed. 12. Ground No.3 pertains to the disallowance of Rs. 1,58,75,823/- u/s.14A r.w.r. 8D(2)(iii) of the Income Tax Rules, 1962. 13. The Ld. Counsel for the assessee submitted that this issue is covered in favour of the assessee by the decision of the Tribunal in assessee own case in ITA No.634 & 635/PN/2017 (supra.). In this regard, the Ld. Counsel for the assessee has drawn our attention at Para 5 of the said order. The Ld. Counsel further submitted that the Assessing Officer erred in invoking the provisions of Section 14A of the Act without recording any findings as to the nexus between the expenditure and exempt income. 14. We have heard both the sides and perused the relevant paragraphs of the order of the Tribunal in assess....
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....pleteness relevant extract of the judgment is reproduced herein-below : "26. What is of vital importance in the above judgment are the observations emphasised by us. Each of them expressly states that what is disallowed is expenditure incurred to "earn" exempt income. The words "in relation to" in section 14A must be construed accordingly. Thus, the words "in relation to" apply to earning exempt 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. T....
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....(ii) CIT Vs. Vijaya Bank, ITA No.343/2014 dated 15.09.2015-Kar HC (iii) Nitin M. Panchamiya Vs. Additional Commissioner (2012) 19 taxmann.com 2020(Mum.) 16.1 The Ld. Counsel for the assessee further submitted that this issue is covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in assessee‟s own case in ITA No.634 & 635/PN/2017 (supra.). In this regard, the Ld. Counsel for the assessee has drawn our attention at Para 8 of the said order. 17. We have heard both the sides and perused the relevant paragraphs of the order of the Tribunal in assessee‟s own case (supra.) wherein, the Tribunal has decided the issue in favour of the assessee by observing as follows: "8. The ground No. 6 of the appeal is : "6. In the facts and circumstances of the case and in law, the action of the learned CIT(A) in upholding the disallowance u/s 40(a)(ia) of the I.T. Act 1961, in respect of short deduction of tax being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 6.1 The learned CIT(A) erred in holding that the provisions of section 40(a)(ia) is applicable even in ca....
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....ction 211 of the companies Act, 1956 (1 of 1956) is applicable shall for the purpose of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act governing such company." 20. The Ld. Counsel for the assessee further submitted that vide bifurcation of sub section (2) of Section 115JB in Clause (b), the Banking Companies are not under the scope of the provisions of section 115JB (2)(b) of the Act. The case of the assessee is that it is not Banking Company. The Ld. Counsel for the assessee also submitted that this issue was not raised before the Assessing Authority. However, the Ld. Counsel submitted that this matter came up for adjudication before the Ld. CIT(Appeals) who rejected the arguments of the assessee merely following of provision of Explanation 3 of the said section. The Explanation 3 is actually a sunset clause ending on 31.03.2012 vide Finance Act, 2012. The Ld. CIT(Appeals) ignoring the submissions of the assessee applied the said Explanation to the case of the assessee without giving into the essential core fact whether the assessee is Banking Company or Corporation or otherwise. 20.1 Before us, th....