TaxTMI 
TaxTMI 
2022 (3) TMI 669
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Joint Commissioner of Income tax, LTU, Bangalore. In the assessment made under section 143(3), the Assessing Officer, the respondent herein, made several additions and disallowances and determined the income under regular provisions at Rs. 1261,89,70,977/- and raised a demand of Rs. 169,44,47,405/-. In the assessment, the learned Assessing Officer made the following additions to the total income under the regular computation: 4. The Assessing Officer has also assessed tax payable under Section 115JB at Rs. 226,12,56,555/-. However, since the tax payable on the total income computed as above by Assessing Officer was more than 18.5% of the book profits u/s 115JB, Assessing Officer assessed the tax payable as Rs. 169,44,47,405/-. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), LTU, Bangalore. 6. The Learned Commissioner of Income Tax (Appeals) partially allowed the appeal of the assessee as under: 7. The Learned Commissioner of Income Tax (Appeals) didn't allow the ground of the assessee that Section115JB is not applicable to the them and also the ground relating to levy of interest u/s 234D. 8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion. 16. We have heard the rival submissions and perused the materials on record. We noticed that the coordinate bench of this Tribunal in assessee's own case (Supra) has held that "9.3 We heard the parties and perused the record. We notice that the co-ordinate bench has considered an identical issue in the assessee's own case for AY 2010-11 in ITA No.1284/Bang/2016 dated 05-01-2018 and it has been decided in favour of the assessee with the following observations:- "5. Ground No.2 - Bad Debts written off u/s.36(1)(vii) 5.1 In this ground (supra), the assessee challenges the disallowance of bad debts written off by it u/s.36(1)(vii) of the Act. In the order of assessment, the Assessing Officer disallowed the assessee's claim as he was of the view that it was only a prudential write off since the individual accounts were not squared off. The Assessing Officer also observed that the write off was not debited to the assessee's profit and loss account. On appeal, the learned CIT (Appeals) rejected the assessee's contentions that the said bad debts are written off by debit in the profit and loss account under the head 'Bad Debts Written Off A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Hon'ble Apex Court in the assessee's own case i.e. Vijaya Bank Vs. CIT (2010) 323 ITR 166 (SC). 5.2.2 The learned Authorised Representative contended that the reliance placed by the authorities below on the decision of the Hon'ble Apex Court in the case of Southern Technologies Limited (supra) is not applicable as the facts in this cited case are totally different. It is submitted that the cited decision has been noted by the Hon'ble Apex Court in the assessee's own case (supra) and after noticing the said decision, the Hon'ble Court held that the provision debited to profit and loss account and reduced from advances would amount to write off. 5.3 Per contra, the ld. CIT, DR placed reliance on the findings rendered by the authorities below on this issue. It was contended that since the assessee's bank had not closed the individual debtors accounts at the Branch Level, there cannot be any write off. 5.4 In rejoinder, the learned Authorised Representative for the assessee bank submitted that there is no requirement to close the individual debtors account at the branch books, as has been held by the Hon'ble Apex Court in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding of the AO that the assessee had unauthorisedly claimed the benefit of deduction under s. 36(1)(vii), twice over. The order of the AO is based on an apprehension that, if the assessee fails to close each and every individual account of its debtor, it may result in assessee claiming deduction twice over. In this case, we are concerned with the interpretation of s. 36(1)(vii) of 1961 Act. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the AO to call for details of individual debtor's account if the AO has reasonable grounds to believe that assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years. There is also a flipside to the argument of the Department. Assessee has instituted recovery suits in Courts against its debtors. If individual accounts are to be closed, then the debtor/defendant in each of those suits would rely upon the bank statement and contend that no amount is due and payable in which event the suit would be dismissed. 9. Before concluding, we may refer to an argument advanced on behalf of the Department. According to the Department, it is necessary to squ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claim and be allowed write off of the bad debts u/s.36(1)(vii) of the Act and we therefore reverse and delete the disallowance made by the Assessing Officer in this regard. Consequently, Ground No.2 of the assessee's appeal is allowed." 9.4 We notice that the Ld CIT(A) has followed the decision rendered by the coordinate bench in assessee's own case and deleted the disallowance of bad debts u/s 36(1)(vii) of the Act. Accordingly we do not find any reason to interfere with his order passed on this issue" 17. Respectfully following the decision rendered by the coordinate bench in assessee's own case, we allow the appeal in favour of the assessee. Accordingly, this ground of the assessee is allowed and the disallowance made u/s.36(1)(vii) is deleted. Disallowance u/s 36(1)(viii) (Ground 4) 18. The assessee had claimed deduction of Rs. 179,56,01,185/- u/s 36(1)(viii) of the Act. The AO disallowed the claim on the ground that the assessee has not transferred the amount to special reserve as required by sec. 36(1)(viii). Before the CIT(A), the assessee contended that the bank had transferred to statutory reserve and capital reserve amounting to Rs. 117,61,72,383/- d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he issue of Whether the amount transferred to any reserve can be considered for deduction u/s.36(1)(vii) since "special reserve" is not defined in the Act we notice that a similar question is considered by the Hyderabad Bench of the ITAT in the case of Nizambad District Cooperative Central Bank Ltd., Vs. ITO where the Tribunal has held that "53. It is the contention of the assessee before us that as per the provisions of section 36(1)(viii) assessee is eligible for deduction for an amount of 79,39,000 whereas deduction to the extent of 14,21,432 has been allowed to assessee, hence, assessee remains eligible to claim deduction u/s 36(1)(viii) to the extent of 65,17,568. On a perusal of section 36(1)(viii) of the Act. it is clear that deduction not exceeding twently percent of the profits derived from eligible business can be allowed in respect of any special reserve created. The expression 'special reserve' has not been defined u/s 36(1)(viii). The only restriction imposed as per proviso to section 36(1)(viii) is aggregate of amount carried to such reserve account should not exceed twice the amount of paid up share capital and general reserve. Therefore, it cannot b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sec. 36(1) Other deductions 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in s. 28. Sec. 36(1)(viii) in respect of any special reserve created (and maintained) by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India or by a public company formed and registered in India with the main object of carrying on the business of providing longterm finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long-term finance computed under the head "Profits and gains of business or profession" (before making any deduction under this clause) carried to such reserve account: Sec. 28(1) Profits and gains of business or profession 28. The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",- (I) the profits and gains of any business or profession which was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....On this, the finding is that the requisite reserve' has been created by holding a second annual general meeting of the members of the company and that the accounts had been duly amended so as to provide for the reserve before the assessment was completed. In view of the fact that the section prescribes no point of time by which the reserve should be created and in view of the various decisions also referred to by the Tribunal, we think, no question of law arises in regard to this aspect. We, therefore, decline to refer this question." The observation made by the Hon'ble Delhi High Court in this regard is thus clearly applicable to the instant case under consideration also. 22. We further find that the Special Bench of Tribunal (Chandigarh) in the case of Punjab State Industrial DeveIopmnf rporaioriE. upr is dearly eTia in case of claim under s. 36(1)(viii) of the Act further reserve could be created after closure of the account and AO should offer an opportunity to the assessee to do the same for claiming the deduction under s. 36(1 )(viii) of the Act. 23. Similar view as taken by the apex Court in the case of Karimjee (F) Ltd. (supra) wherein whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of India (NPCI). The ld.AO disallowed the entire amount u/s 40(a)(ia) on the ground that the assessee has not deducted TDS on the said amount. 27. Aggrieved by the order of the AO, the assessee has contended before the CIT(A) that NPCI was formed with the objective to primary function as a hub in facilitating all electronic retail payment systems through the National financial switching network and all the transactions are carried out without any human intervention. The assessee also submitted that the assessee had sued NPCI to facilitate transaction involving ATMs of other banks by the customers of the assessee to carry out electronic transactions. The CIT(A) rejected the claim of the assessee and observed that the TDS recovery mechanism displayed in NPCI's website and that all banks who were receiving the services before the NPCI were deducting TDS. 28. Aggrieved by the order of the CIT(A), the assessee has now raised this issue before the Tribunal. 29. The ld.AR submitted that an identical issue has been decided in favour of the assessee by the coordinate bench of the Tribunal in ITA No.1838/Bang/2018 dated 28/12/2021 in assessee's own case for the assessment year 2013-....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such is covered by the proviso to Sec. 40(a)(ia) and therefore no disallowance could be made. 12.3 Per contra, the learned Departmental Representative for Revenue placed reliance on the orders of the Assessing Officer on this issue. 12.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. We find that the issue before us is covered in favour of the assessee by the decision of the Hon'ble Apex Court in the case of Kotak Securities Ltd. (supra); wherein at paras 8 to 10 thereof the Hon'ble Apex Court has held as under :- " 8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant upgradation of the services made available and surveillance of the essential parameters connected with the trade including those of a particular/single transaction that would lead credence to its authenticity is provided for by the Stock Exchange. All such services, fully automated, are available to al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services" as appearing in Explanation 2 to Section 9(1)(vii) of the Act. 10. For the aforesaid reasons, we hold that the view taken by the Bombay High Court that the transaction charges paid to the Bombay Stoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h of the Tribunal in assessee's own has held as under "7. The next issue contested by the assessee relates to the applicability of sec.115JB of the Act. In the return of income, the assessee did not compute book profit, as according to the assessee the provisions of sec.115JB will not be applicable to it. The AO did not accept the said contentions and held that the provisions of sec.115JB shall apply to the assessee. Accordingly, he computed book profit u/s 115JB of the Act also. The Ld CIT(A) also confirmed the same. 7.1 An identical issue was considered by this bench of Tribunal in the case of Canara Bank (ITA No.236/PAN/2018 & ITA 1884/Bang/2018 dated 27-12-2021) and the matter was restored to the file of Ld CIT(A) with the following observations:- 7.1 Before Ld CIT(A) also, the assessee contended that the provisions of sec.115JB will not be applicable to it. It was submitted that the assessee falls under the category of "corresponding new bank" under BR Act. Accordingly it was contended before Ld CIT(A) by the assessee as under:- (a) banking company is defined under BR Act as a "company" which transacts business of banking. (b) "Comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Companies Act, 1956, the assessee is not governedby BR Act. (i) It is highly unfortunate on the part of a reputed public sector bank toresort 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 Undertaking) Act 1980. (k) Various decisions relied upon by the assessee relate to the period prior to the amendment made by Finance Act 2012. 7.2 Before us, the Ld A.R reiterated that the provisions of sec.115JB will not apply to the assessee, since it is not formed under Companies Act. He placed his reliance on the decision rendered by Kolkatta bench of Tribunal in the case of Damodar Valley Corporation (2017(8) TMI 1363). On the contrary, the Ld D.R supported the order passed by Ld CIT(A). 7.3 We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has expressed the view that the assessee would fall under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ground no1 is general in nature which does not require separate adjudication and hence dismissed. Ground no 4 is with respect to applicability of the provisions of 115JB to the assessee. Since the CIT(A) has upheld the order of the AO interms of applicability of 115JB to the assessee, this ground becomes in fructuous and dismissed accordingly. We will proceed to adjudicate only Ground no 2 and 3 in the ensuing paragraphs Depreciation on HTM securities (Ground 2) 39. During the relevant assessment year the assessee has claimed Rs. 1521.21,40,390/- as deduction being the depreciation on the securities classified as Held To Maturity (HTM). The Assessing Officer disallowed this claim on the ground that the depreciation cannot be claimed on HTM securities for which he relied on the decision of the Hon'ble Karnataka High Court decision in the case of ING Vysya Bank Ltd. Further, he also observed that the assessee did not debit the depreciation to the Profit & Loss Account and as such, no deduction can be allowed without debiting the same to the Profit & Loss Account. 40. The assessee filed an appeal before the CIT(A) and also made a written submission on the issue. The CIT(A) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer disallowed the assessee's claim following the decision of the Hon'ble Karnataka High Court in the case of ING Vysya Bank Vs. CIT (2012) 208Taxman 511. On appeal, the learned CIT (Appeals) allowed the assessee's claim by following the decision of the Hon'ble Karnataka High Court in the assessee's own case in ITA No.687/2008 dt.11.3.2013 and also the decisionof the co-ordinate bench of this Tribunal in the assessee's own case for A.Y.2008-09 in ITA No.578 & 653/Bang/2012 for A.Y. 2008-09. 11.2 The ld. CIT DR placed strong reliance on the order of the Assessing Officer which was based on the decision of the Hon'ble Karnataka High Court in the case of ING Vysya Bank (supra) which decided the issue in favour of the revenue. 11.3 Before us, the learned Authorised Representative for the assessee submitted that it was only after considering its own decision in the case of ING Vysya Bank (supra) that the Hon'ble Karnataka High Court decided the issue in favour of the assessee in the case of Karnataka Bank Vs. ACIT reported in (2013) 356 ITR 549 (Kar). Following the decision of the Hon'ble Apex Court in the case of UCO Ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ataka took a view that the guidelines issued by the RBI will not be relevant while computing income under the Income-tax Act. The Hon'ble Court further took the view that every investment held by a bank cannot be considered as stock in trade. The Hon'ble High Court finally concluded that 30% of the investments can be clothed to the character of stock-in-trade and that the remaining amounts will be investments and therefore diminution in their value cannot be allowed as a deduction. 59. The ld. counsel for the assessee, however, submitted that in the assessee's own case for the A.Y. 2005-06, this Tribunal has confirmed the order of the CIT(A), deleting identical addition made by the AO. Our attention was also drawn to the order of the Tribunal in assessee's own case in ITA No.492/Bang/2009 for the A.Y. 2005-06, order dated 13.01.2012, wherein the Tribunal had to deal with identical issue as to whether the CIT(A) was correct in deleting the addition made by the AO on account of profit on sale of investments of Rs. 200,77,13,662/- and deleting the action of the AO in disallowing loss claimed on treating investments as stock-in-trade by drawing the investment t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aluing stock-in-trade (investments) at cost in balance sheet in accordance with the Banking Regulation Act and valuing the same at cost or market value, whichever was lower for income-tax purposes. The Hon'ble Court took the view that all investments held by a bank are to be regarded as stock-in-trade. 61. The ld. counsel for the assessee further drew our attention to a very recent decision of the Hon'ble High Court of Karnataka rendered on 11.03.2013 in the case of CIT v. Vijaya Bank, ITA No.687/2008. The Hon'ble High Court of Karnataka in the aforesaid case followed its own decision rendered in the case of Karnataka Bank Ltd. v. CIT in ITA No.172/2009 rendered on 11.01.2013, wherein the Court took the view that depreciation claimed on investments 'held on maturity' by a bank has to be treated as stockin- trade in accordance with RBI guidelines and CBDT Circular. It was his submission that the later decision of the Hon'ble Karnataka High Court has to be followed. 62. We have given a careful consideration to the rival submissions and are of the view that the contentions put forth on behalf of the assessee deserve to be accepted. The Tribuna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able for earning exempt income and thus the disallowance is made only to the proportionate administrative cost. This contention of the assessee is not accepted by the AO who proceeded to make a disallowance u/.14A. In the appeal preferred before the CIT(A) by the assessee the CIT(A) followed the decision rendered by the coordinate bench of the Tribunal in assessee's own case for the assessement years 2010-11 and 2011-12 and allowed the appeal in favour of the assessee. 46. The revenue is in appeal before us against the order of the CIT(A). 47. We heard the parties on this issue and perused the record. We notice that the co-ordinate benches have decided this issue prior to rendering of decision by Hon'ble Supreme Court in the case of Maxopp Investment Ltd (2018 (3) TMI 805)(SC). However, before us, the Ld A.R relied upon certain other decisions in order to contend that no disallowance u/s 14A is called for. In view of the subsequent development of law on this issue, in our considered view, this issue requires fresh examination at the end of AO by duly considering the various decisions on the subject. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and res....