TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 124
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....total income under normal provisions of the Act was higher than the tax payable u/s 115JB of the Act, the AO assessed total income under normal provisions of the Act. The assessee filed appeal challenging the assessment order before Ld CIT(A) and it was partly allowed. Aggrieved by the order passed by Ld CIT(A), both the parties have filed these appeals on the issues decided against each of them. 3. The grounds urged by the assessee give rise to the following issues:- (a) Disallowance of deduction of Provision for bad and doubtful debts claimed u/s 36(1)(viia) of the Act (b) Disallowance of bad debts claimed u/s 36(1)(vii) of the Act. (c) Applicability of provisions of sec. 115JB of the Act (d) Whether Provision for funded interest term loan is liable to be added to net profit u/s 115JB of the Act. 4. The grounds urged by the revenue give rise to the following issues:- (a) Disallowance u/s 14A of the Act (b) Disallowance u/s 40(a)(ia) of the Act (c) Whether the Provision for bad and doubtful debts is not liable to be added to net profit u/s 115JB of the Act. 5. We shall first take up the appeal filed by the assessee. The first issue relates to the disallowance of P....
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....the Profit and Loss account of subsequent year. Accordingly, he contended that the amount of deduction as claimed by the assessee should be allowed without restricting the same to the amount debited to Profit and Loss account. 5.3 We heard Ld D.R on this issue and perused the record. We notice that the co-ordinate benches, in the assessee's own case, has held that the deduction is admissible u/s 36(1)(viia) of the Act to the extent PBDD is debited to the Profit and Loss account subject to the upper limit prescribed in that section. Before us, the Ld A.R submitted that the assessee has made good the shortfall in the provision amount by debiting profit and loss account of subsequent year. However, the provisions of sec.36(1)(viia) does not provide that the shortfall amount can be created as provision in any of the subsequent years. The computation of total income is required to be made for every year and it is determined on the basis of books of account maintained by the assessee for that year. Hence, in our view, the provision made in subsequent year cannot be considered for the purpose of allowing deduction u/s 36(1)(viia) of the Act for the year under consideration. Accordingly, ....
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....en off as per sec. 36(1)(vii) of the Income tax Act? Accordingly, the AO held that the assessee cannot place reliance on the decision rendered by Hon'ble Supreme Court in the case of Vijaya Bank (supra). The AO further noticed that the amount of Rs. 1297.36 crores included bad debts relating to rural advances amounting to Rs. 38.89 crores. Accordingly, the AO held that the remaining amount of Rs. 1258.47 crores relating to non-rural advances have not been written off in the books by only provided as "Provision for NPA". Accordingly, the AO held that it does not result in write off within the meaning of sec.36(1)(vii) of the Act and accordingly disallowed the amount of Rs. 1,258.47 crores. 6.1 Before the Ld CIT(A), the assessee explained the manner of writing off bad debts in the books of account. The Ld CIT(A) summarised the same as under:- "6.4.3 The write off of bad debts at Head Office is carried out by debiting the Provision for bad & doubtful debts account (Code No.8602) and crediting the Prudential Write Off account (Code no.7767) at the HO level. The Prudential write off account is grouped under Loans & Advances with a credit balance which has the effect of netting off t....
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.... adjusted against the provision allowed u/s 36(1)(viia) of the Act and only the excess should be allowed as deduction. He expressed the view that the decision by Hon'ble Supreme Court in the case of Catholic Syrian Bank (2012)(343 ITR 270)(SC) was rendered under the assumption that the banks would maintain separate PBDD a/c in respect of rural branches and nonrural branches and therefore it is possible to distinguish PBDD as one in respect of rural branches and non-rural branches. The Ld CIT(A) expressed the view that the claim of the bank that the provisions of sec. 36(1)(viia) are distinct and independent of sec. 36(1)(vii) is based on the old circular no. 258 dated 14.6.1979 issued in connection with old law. Accordingly the Ld CIT(A) held that the provision allowed u/s 36(1)(viia) of the Act is for single account since introduction in 1985 for all types of advances including rural advances. Accordingly, the Ld CIT(A) held that the bad debts pertaining to non-rural advances should also be first adjusted against PBDD allowed u/s 36(1)(viia) of the Act. During the year under consideration, the opening credit balance in the PBDD account stood at Rs. 4365.90 crores. Since it is more....
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....alance amount of bad debts relating to rural advances was not claimed as deduction by assessee in terms with the proviso to section 36(1)(vii) as it has not exceeded the provision for bad and doubtful debts relating to rural advances created u/s 36(1)(viia). Both AO and ld. CIT(A) have misconstrued the statutory provisions while observing that proviso to section 36(1)(vii) would also apply in case of bad debts relating to non-rural advances. The Hon'ble Supreme Court in case of Catholic Syrian Bank Vs. CIT (supra) while analyzing provisions of section 36(1)(vii) and 36(1)(viia) have observed that section 36(1)(viia) applies only to rural advances. The observations made by Hon'ble Apex Court in this regard in paras 26 & 27 of the judgment is extracted hereunder for convenience. "26. The Special Bench of the Tribunal had rejected the contention of the Revenue that proviso to s. 36(1)(vii) applies to all banks and with reference to the circulars issued by the Board, held that a bank would be entitled to both deductions, one under cl. (vii) of s. 36(1) of the Act on the basis of actual write off and the other on the basis of cl. (viia) of s. 36(1) of the Act on the mere makin....
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....o the deduction on account of the provision for bad and doubtful debt(s) is distinct and independent of the provisions of Section 36(11(vii) relating to allowance of the bad debt(s). In other words, the scheduled commercial banks continue to get the full benefit of the write off of the irrecoverable debt(s) under Section 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debt(s) under section 36(1)(viia). A reading of the Circulars issued by CBDT indicates that normally a deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed even in respect of a mere provision without insisting on an actual write off However, this may result in double allowance in the sense that in respect of same rural advance the bank may get allowance on the basis of clause (viia) and also on the basis of actual write off under clause (vii). This situation is taken care of by the proviso to clause (vii) which limits the allowance on the basis of the actual write off to the ....
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....in case of Bank of India Vs. Addl. CIT (supra). Even otherwise also, careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount of Rs. 209.94 crore representing actual write off in the books of account of bad debts relating to nonrural/ urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A)." 6.5 Following the above said decision, we hold that the view expressed by Ld CIT(A) is not legally correct. Accordingly, we set aside the order passed by Ld CIT(A) with regard to his alternative decision, i.e., the view that the proviso to sec. 36(1)(vii) which requires adjustment of bad debts against provision allowed u/s 36(1)(viia) would apply to non-rural advances also. Accordingly, we direct the AO to delete the disallowance of Rs. 1258.47 crores. 7. The next issue contested by the assessee rel....
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.... its return of income under the status of "company". (f) The shares of assessee bank are listed in the Stock exchange and traded. (g) The assessee is a banking company under Banking Regulations Act, since the definition of the term "banking company" in BR Act is a functional definition. The assessee is following all the rules and regulations of the BR Act which are applicable to other private banks. The assessee bank is constitutionally defined as "corresponding new bank" in BR Act. However, the BR Act does not say that 'corresponding new bank' is not a Banking Company. (h) It is not the case of the assessee that being a 'corresponding new bank' and not registered under Companies Act, 1956, the assessee is not governed by BR Act. (i) It is highly unfortunate on the part of a reputed public sector bank to resort to such unwarranted, hyper technical, hair splitting of the definitions under various Acts only to avoid the payment of due taxes. (j) Assuming that the assessee is not a Banking Company, then the provisions of sec.115JB(2)(a) will be applicable to the assessee, as it is an Indian Company as per section 11 of the Banking Companies (Acquisition and Transfer of Under....
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....peal filed by the revenue. The first issue contested by the revenue is the relief granted by Ld CIT(A) in respect of addition made u/s 14A of the Act. The assessee had earned tax free income of Rs. 24.05 crores. The AO proposed to apply the provisions of Rule 8D of Income tax Rules. The assessee contended that no interest disallowance is called for as the interest free funds exceeds the value of tax free investments. It was also submitted that the ITAT has held in the assessee's own case in AY 2008-09 that no disallowance u/r 8D(2)(i) and 8D(2)(ii) is called for. The assessee further submitted that the tax free investment forms miniscule part of total investments. Accordingly, it was submitted that the assessee had to incur those expenditure, whether it receives tax free income or not. The assessee also agreed for a disallowance of a sum of Rs. 9,24,123/- u/s 14A of the Act before the AO during the course of assessment proceedings. However, the AO did not accept the contentions of the assessee. He held that the assessee has failed to establish the nexus between interest free funds and tax free investments. Accordingly, the AO held that the disallowance as per Rule 8D is called for.....
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....ate decision in accordance with law. 10. The next issue contested by the revenue is the relief granted by Ld CIT(A) in respect of disallowance made u/s 40(a)(ia) of the Act. The AO noticed that the assessee has paid a sum of Rs. 70,96,04,943/- as ATM usage charges to M/s National Payment Corporation of India (NPCI) without deduction of tax at source as required u/s 194C or 194J or 194H. He further noticed that the certificate was obtained from an Accountant under first proviso to sec. 201(1) for a sum of Rs. 3,01,18,976/-. Accordingly, the AO disallowed the balance amount of Rs. 67,94,85,967/- u/s 40(a)(ia) of the Act. 10.1 The Ld CIT(A) noticed that the Hon'ble Supreme Court has considered the nature of payment made to Stock exchange by the brokers as transaction charges for use of facility offered by the Stock exchange in the case of Kotak Securities Ltd (2016)(285 CTR 63). It was held that the services made available was the facility of standard faceless screen rendered and the authenticity of the transactions. It was noticed that these services were made available to all and not fall under the category of exclusive service. Accordingly, it was held that the TDS is not require....