TaxTMI 
TaxTMI 
2021 (11) TMI 568
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....olidated order. 2. The Revenue has raised the following grounds of appeal in ITA No. 2762/Chny/2017:- 1. The order of the learned CIT (A) is against law and in facts and circumstances of the case. 2. The learned CIT (A) has erred in deleting the disallowance of Stale Draft Account to the tune of Rs. 4,45,07,818/- quoting the "The Depositor Education and Awareness Fund Scheme, 2014" of the RBI guideline. 3. The learned CIT(A) has erred in deleting the disallowance of ex-gratia payment following the decision of the CIT Vs. Maina Ore Transport Pvt. Ltd. 324 ITR 100 (Born) and Kumaran Mills Pvt. Ltd. Vs. CIT (2000) 241 ITR 564 (Mad) which are distinguishable and not applicable to this case. 4. The learned CIT (A) has erred in deleting the disallowance of bad debts u/s 36(1)(vii) of the Act, following the decision of the Catholic Syrian Bank Ltd Vs CIT(2012) 343 ITR 270 (SC), which is not applicable to this case. 5. The learned CIT (A) has erred in deleting the disallowance of provision for bad and doubtful debts u/s36(1)(viia) of the Act, quoting the census 2001. However, 2011 census is officially released and available as on 30/03/2011. ....
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....ethod. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed. The assessee has raised the following additional grounds vide letter dated 24.08.2021:- 1. Aggrieved by the appellate order passed by the Commissioner of Income Tax (Appeals), Trichy, the appellant had filed the above numbered appeal before the Hon'ble Income Tax Appellate Tribunal. 2. It is humbly stated that, while filing the appeal, the appellant had not raised any ground relating to non-disallowance of Education Cess (EC) and Secondary & Higher Education Cess (SHE). It is humbly submitted that the Appellant had not raised the ground at the time of filing the appeal since it was under bonafide belief that EC & SHE were not allowable deduction. 3. It is humbly submitted that the Appellant has been advised by their A/Rs to file additional ground for claiming the deduction of EC and SHE based on the decisions of certain High Courts which held that EC and SHE are allowable deduction. 4. The Appellant humbly submits that this being the legal ground the same may be raised before the Hon'ble ITAT. ....
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....sons stated in his order dated 14.09.2017 partly allowed the appeal filed by the assessee, where he has deleted additions made by the AO towards disallowance of stale drafts, disallowance of ex-gratia payment to staff, disallowance of deduction claimed u/s.36(1)(vii) of the Act, disallowance of deduction claimed u/s.36(1)(viia) of the Act and addition towards interest on non-performing assets. Aggrieved by the CIT(A) order, the Revenue is in appeal before us. 6. The first issue that came up for our consideration from Ground No.2 of Revenue appeal is deletion of addition made towards disallowance of stale drafts. The facts with regard to the impugned dispute are that the assessee is in the business of banking, has issued demand drafts to various persons and further any unclaimed demand drafts was kept in stale draft account under the head 'outstanding liabilities'. During the course of assessment proceedings, the AO noticed that an amount of Rs. 18,42,40,053/- was shown under the head outstanding liabilities towards stale draft. He further noted that opening balance in said account was at Rs. 13,97,32,235/- and therefore, the differential amount of Rs. 4,45,07,818/- has been trea....
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....has been taken by the Hon'ble Jurisdictional High Court of Madras in the case of City Union Bank Ltd., vs. CIT, supra. Therefore, consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made by the AO towards Stale Draft Account. Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. 7. The next issue that came up for our consideration from Ground No.3 of Revenue appeal is disallowance of ex-gratia payment of Rs. 21,87,41,562/-. The AO had disallowed ex-gratia payment made by the assessee to its staff who are not covered under payment of bonus Act, on the ground that the assessee has circumvented the provisions of Bonus Act and has given bonus to employees who are not eligible for payment of bonus and thus, whatever cannot be done directly has been done indirectly by changing the nomenclature of the nature of payment. Therefore, he opined that ex-gratia payment made by the assessee to its staff cannot be allowed in guise of business expediency. The AO has also taken support from the provisions of Section 36(1)(v) of the Act and ....
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....ue that came up for our consideration from Ground No.4 of Revenue appeal is deletion of deduction u/s.36(1)(vii) of the Act for Rs. 36,10,29,903/-. The AO has disallowed bad debts claim of the assessee bank on the ground that the assessee did not give details like full address of the borrower and PAN number. The ld.CIT(A) has deleted additions made by the AO by following the decision of Hon'ble Supreme Court in the case of TRF Ltd., vs CIT, [2010] 323 ITR 397 on the ground that after amendment of section w.e.f. 01.04.1989, it would be sufficient if the debt is written off as irrecoverable in the books of accounts of the assessee. Therefore, he deleted addition made by the AO, however sustained an amount of Rs. 73,92,699/- by holding that same should be adjusted against the provisions created in the books of accounts u/s.36(1)(viia) of the Act. 8.1 The ld.DR submitted that the ld.CIT(A) has erred in deleting disallowance of bad debts u/s.36(1)(vii) of the Act, by following the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd., vs. CIT, [2012] 343 ITR 270, which is not applicable to this case. 8.2 The ld.AR for the assessee on the other hand supporting ....
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.... Dhanalakshmi Bank Ltd., one of the appellants before us, had also raised the same issue before the Tribunal in ITA Nos. 602- 605/Coch/1994 and 190/Coch/1995, in relation to earlier assessment years. A view had been expressed that there was no distinction made by the legislature in the proviso to s. 36(1)(vii) between rural and nonrural advances and, therefore, its application cannot be limited to rural advances. Under cl. (viia) also, a bank was held to be entitled to deduction in respect of the provisions made for rural and non-rural advances, subject to limitations contained therein. Thus, the contention of the assessee in that case, for deduction of bad debts from urban branches under s. 36(1)(vii), was rejected. The earlier view taken by the Tribunal in the case of Federal Bank in ITA Nos. 505, 854/Coch/1993, 376/Coch/1995 and 284/Coch/1995 held that the proviso to cl. (vii) only bars the deduction of bad debts arising out of rural advances, the actual right to set off bad debts in respect of non-rural and urban advances cannot be controlled or restricted by application of the proviso and the same would be allowed without making adjustment vis-a-vis the provision for bad and d....
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....we are of the considered view that there is no error in the reasons given by the ld.CIT (A) to delete additions made towards disallowance of deduction claimed u/s.36(1)(vii) of the Act and thus, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the Revenue. 9. The next issue that came up for our consideration from Ground No.5 of Revenue appeal is disallowance of deduction claimed towards provision for bad debts u/s.36(1)(viia) of the Act. The ld.AR for the assessee and ld.DR present for the Revenue made a statement at bar that Ground No.5 of Revenue appeal become infructuous in view of order passed u/s.154 of the Act dated 01.11.2017, because a similar issue has been raised by the parties in the appeal filed against order passed u/s.154 of the Act. Thus, Ground No.5 of Revenue appeal is dismissed as infructuous. 10. The next issue that came up for our consideration from Ground No.6 of Revenue appeal is deletion of addition made towards interest on non-performing assets. The AO has made addition of Rs. 2,50,67,500/- towards interest on non-performing assets (NPAs) by holding that interest on loans needs to be offered to tax on accrual basis in ....
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....ant portion is extracted as under : "29. The next ground of appeal challenges the addition on account of interest accrued in NPAs accounts of Rs. 14,00,000/-. The AO had brought to tax the interest on the NPAs accounts by holding that interest had accrued in terms of the agreement entered by the appellant with borrowers. This issue is now covered in favour of the assessee-bank by decision of Hon'ble Supreme Court in the case of CIT v. Vasisth Chay Vyapar Ltd. [2019] 410 ITR 244 (SC), wherein the Hon'ble Supreme Court had confirmed the decision of Hon'ble Delhi High Court, that the interest income cannot be said to have been accrued to the assessee on the NPA accounts. Accordingly, we direct the AO to delete the addition of Rs. 14,00,000/- made on interest on NP accounts. Accordingly, this ground of appeal stands allowed. 29.1 In the result, the appeal filed by the assessee-bank is partly allowed." Following the co-ordinate bench decision, supra, we do not find merit in the Revenue's appeal, therefore, the corresponding grounds are dismissed." 10.4 In this view of matter and consistent with view taken by the Co-ordinate Bench, we are of the ....
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....sment year 2012- 13, where under identical set of facts, the Tribunal by following certain judicial precedents including the decision of Hon'ble Punjab & Haryana High Court in the case of Pr.CIT vs. State Bank of Patiala, [2017] (2) TMI 125, held that no disallowance u/s.14A is permissible in terms of Rule 8D, where the assessee is engaged in banking business. A similar view is taken by the Hon'ble Supreme Court in the case of South Indian Bank Ltd vs. CIT in Civil Appeal No.9606 of 2011, and held that shares and securities held by a bank are stock-in-trade and income received on such shares and securities must be considered to be business income. That is why, Section 14A of the Act would not be attracted to such income. 12.4 In this view of matter and consistent with view taken by the Co-ordinate Bench and also by respectfully following the decision of Hon'ble Supreme Court in the case of South Indian Bank Ltd., vs. CIT, supra, we direct the AO to delete addition made towards disallowance u/s.14A r.w.rule 8D of the IT Rules, 1962. 13. The next issue that came up for our consideration from Ground No.3 of assessee appeal is disallowance of bad debts claimed u/s.36(1)(vii) of t....
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....ough the AO claims that census data for 2011 was made available, but as per the assessee information the provisional and final census data of 2011 was released on 30.04.2013, for which the assessee has filed a reply received from Office of the Registrar General of India, Ministry of Home Affairs dated 04.10.2019, as per which the village level population data of 2011 census was not released on 31.03.2011 including provisional data. He further submitted that the assessee goes by classification of branches as per RBI guidelines, as per which those 3 branches have been classified as rural branches by the RBI. Therefore, when the assessee has made provision in the books of accounts as on 31.03.2011, the data available with the assessee was that of 2001 census as per which places where those 3 branches are situated, population of which is less than 10,000, hence the assessee has treated those 3 branches as rural branches for the purpose of making provision. He further submitted that although, the ld. CIT(A) has relied upon the decision of Hon'ble Karnataka High Court in the case of State Bank of Mysore vs. ACIT, [2015] 231 Taxmann 319, but said judgment is not applicable to facts of the....
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....on 31.03.2013, but fact remains that when the assessee has finalized its accounts and audit was completed in 24.05.2013, the final population data for 2011 census was very much available, as per the official clarification issued by Registrar General of India and thus, the assessee ought to have taken cognizance of the fact, while classifying those branches as rural branches for the purpose of provision created u/s.36(1)(viia) of the Act. Since, the assessee has failed to classify those branches as rural branches, the ld.CIT(A) has rightly considered the facts and held that those 3 branches are coming under urban limits and provision made by the assessee is not in accordance with provisions of section 36(1)(viia) of the Act. 14.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The fact with regard to eligibility of assessee for claiming the benefit of provisions of section 36(1)(viia) of the Act is not in dispute. In fact, the AO as well as the ld.CIT(A) have accepted the fact that the assessee is entitled for provision for bad and doubtful debts in respect of rural branches u/s.36(1)(viia) of the Act. The on....
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.... according to its own wish or whims because banks are covered by RBI guidelines and further, they have to strictly follow guidelines issued by RBI for all purposes including accounting of provisions, etc. In this case, as per the evidences filed by the assessee, the RBI has classified those 3 branches as rural branches, when the assessee has made provision for bad debts u/s.36(1)(viia) of the Act. Therefore, in our considered view, provision made by the assessee u/s.36(1)(viia) of the Act is in accordance guidelines of RBI and further in accordance with law. 14.6 Be that as it may. As per the provisions of section 36(1)(viia) of the Act, "rural branch" means a branch of a scheduled bank situated in a place which has a population of not more than ten thousand, according to the last preceding census of which the relevant figures have been published before the first day of the previous year". In this case, for the impugned assessment year the first day of relevant previous year is 01.04.2012. Therefore, the assessee while making provisions u/s.36(1)(viia) of the Act, should consider population figure of that place as on first day of relevant previous year. If you go by said analogy....
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....politan Area and Hyderabad Metropolitan Development Authority but those, places are served by local Municipality, which is having jurisdiction over said area. In this case, those 3 branches which fall within the limits of Village Panchayat and as per 2001 census, population of those Village Panchayat is less than 10,000 and thus, we are of the considered view that those 3 branches are definitely rural branches for the purpose of provision of section 36(1)(viia) of the Act. 14.8 Insofar as, case law relied upon by the ld.CIT(A) in the case of Hon'ble High Court of Karnataka decision of State Bank of Mysore vs. ACIT, supra, we find that as per facts on record in that case, the Hon'ble High Court of Karnataka has recorded categorical finding that provisional population data was published before the end of relevant financial year even though, the final data was made available to subsequent date. The Hon'ble Karnataka High Court further recorded a categorical finding that there is no difference between provisional and final census data and thus, opined that in order to determine status of a bank as a 'rural branch' for allowing claim of deduction u/s.36(1)(viia), even provisional fig....
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....nce u/s.36(1)(viii) of the Act for Rs. 23,28,45,881/-. The appellant bank has claimed a deduction of Rs. 47,68,45,881/- u/s.36(1)(viii) of the Act and the same was allowed by the AO. The ld.CIT(A) in the same manner in which he dealt the issue in assessment year 2012-13, disallowed claim of the appellant bank by substituting his own method and disallowed a sum of Rs. 23,28,45,881/-. 15.1 The ld.AR for the assessee submitted that the order passed by the ld.CIT(A) is pari-materia and same as his order passed for assessment year 2012-13. Further, the ITAT vide its order dated 10.01.2020 in assessee's own case in ITA No.54/CHNY/2018 for assessment year 2012-13, partly allowed the ground of the assessee by remitting the issue back to the AO to examine the issue afresh in accordance with law. Therefore, this year also the issue may be set aside to the file of the AO with a direction to follow the directions given by the Tribunal for earlier assessment years 15.2 The ld.DR on the other hand strongly supporting order of the CIT(A) submitted that although the CIT(A) has given various reasons for disallowing partial amount claimed by the assessee u/s.36(1)(viii) of the Act, but because th....
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....that the assessee has failed to prove the fact, of all relevant materials available before the AO to admit additional ground and hence, additional grounds filed by the assessee may be rejected. 16.3 We have heard both the parties and considered petition filed by the assessee for admission of additional grounds, taking a ground on taxability of Education Cess and Secondary & Higher Education Cess. We find that additional grounds filed by the assessee is purely a legal issue, which can be raised for the first time at any time of the proceedings including appellate proceedings before the Tribunal, in view of the clear ratio of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT, supra. Therefore, additional ground filed by the assessee is admitted to decide the issue on merits. 17. As regards ground of appeal raised by the assessee regarding taxability of Education Cess and Secondary & Higher Education Cess, we find that a similar issue has been considered by the Hon'ble Bombay High Court in the case of Sesa Goa Ltd., vs. JCIT, 2020 (3) TMI 347, where the Hon'ble Bombay High Court held that Education Cess and Secondary & Higher Education Cess is....
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....ataka High Court in the case of State Bank of Mysore vs. CIT, [2015] 231 Taxman 319, held that 15 branches of the bank as per list annexed to appellate order are not rural branches and thus, provisions made in respect of advances of those branches are not eligible for deduction u/s.36(1)(viia) of the Act. Therefore, he has reworked eligible deduction u/s.36(1)(viia) of the Act and made addition of Rs. 4,15,55,556/-. Being aggrieved by the CIT(A) order, the assessee is in appeal before us. 19.2 The ld.AR for the assessee submitted that the ld.CIT(A) has erred in considering rectification application filed by the AO to rectify the purported mistake apparent on record in the order of the CIT(A) without appreciating the fact that mistakes apparent on record claimed by the AO is a debatable issue and said issue could be decided only by looking into extraneous records and long drawn process of investigation. He further submitted that this issue was not considered either in the original assessment proceeding nor during the appellate proceeding and thus, it cannot be considered u/s.154 of the Act. He, further referring to certain judicial precedents including the decision of Hon'ble Sup....