TaxTMI 
TaxTMI 
2022 (3) TMI 1131
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....se The assessee is a nationalized bank in which majority of shares are held by Central Government. It filed its Return of Income for the A.Y 2015-16 on 28-11-2015 which was subsequently revised on 04-03- 2017. The assessee had declared a loss of Rs. 883.67 Cr in revised return under normal provisions. 4. The assessment was completed u/s 143(3) was completed on 12- 12-2017 by The Deputy Commissioner of Income tax, Circle - 2(1) (AO), Mangalore. In the assessment made under section 143(3), the learned AO made several additions and disallowances and determined the income under regular provisions at Rs. 3208,32,31,415/-. In the assessment, the learned Assessing Officer made the following additions to the total income under the regular computation: Sr. No. Particulars Amount (Rs.) 1. Disallowance u/s 14A r.w.r 8D 51,87,08,431 2. Disallowance u/s 36(1)(viia) 548,05,37,200 3. Disallowance u/s 36(1)(vii) 1619,82,46,411 4. Expenses on capital goods 4,67,22,283 5. Penalty levied by RBI 13,63,463 6. Provision for wage arrears 198,00,00,000 7. Prior period expenses 3,41,81,547 8. Expenditure on Clubs 2,63,21....
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.... the provision allowed u/s 36(1)(viia) and reduced the same from the deduction claimed u/s 36(1)(vii). The details of deduction claimed u/s 36(1)(vii) are as under:- Sr. No. Particulars Amount (Rs.) 1 Debts written off, which became bad debts (NPA) for the first time during the Financial Year 2014-15 (non rural) 659,99,26,000 2. Incremental written off of debts, which became bad debts (NPA) for the first time during the Financial Year 2013-14 (non rural) 182,55,38,675 3. Prudential write off of debts (non rural) 770,56,53,655 4. Debts written off at the Branch level 8,48,64,770 Total 1621,59,83,100 Less: Amount of rural debts written off adjusted against provision u/s 36(1)(vii) 1,77,36,689 Amount claimed as deduction u/s 36(1)(vii) 1619,82,46,411 13.1. The AO disallowed the claim of the assessee on the ground that the assessee bank has not debited the amount to the P&L account and the non-rural debts written off were not adjusted with provisions allowed a/c. u/s.36(1)(viia) in view of the first provisio to section 36(1)(vii) r.e.s. 36(2)(v) 13.2. Aggrieved by the order of the AO, the....
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....duction. 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 non-rural 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 than the bad debts pertaining to non-rural branches of Rs. 1258.47 crores, the Ld CIT(A) held that the bad d....
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.... 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 making of provision for bad debts. This, according to the Revenue, would lead to double dedu....
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....ebt(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 excess, if any, of the write off over the amount standing to the c....
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....ise 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)." 5.2 We have heard both the parties and perused the materials on record. Following the decision rendered by the co-ordinate bench of this Tribunal in the case of M/s Canara Bank cited supra, we set aside the order passed by the ld.CIT(A) and direct the AO to delete the disallowance of Rs. 707.83 crores. 13.6. 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....
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.... mention here that Appendix 1 to Income-tax Rules, the computer has been treated as plant and machinery. Therefore, the decision relied upon by the revenue in Diebold Systems (P.) Ltd. supra has no application to the fact situation of the case. The Tribunal by placing reliance on the decision of Bombay High Court in Dy. CIT Vs. Datacraft India Ltd. [2010]40 SOT 295 (SB) has so long as functions of the computers are performed with other functions and other functions are dependant on the functions of the computer, ATMs are to be treated as computers and are entitled to higher rate of depreciation. It has further been held that computer is integral part of ATM machine and on the basis of information processed by the computer in ATM machine only, the mechanical function of the dispensation of cash or deposit of cash is done. Therefore, it was held that ATMs are computers and are entitled to higher rate of depreciation. The aforesaid finding of fact has been recorded on correct analysis of the material available on record and by placing reliance on decision of the Bombay High Court." 14.6. We also notice that the decision of NCR Corporation Pvt. Ltd., (Supra) is followed in the case ....
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.... (i) It is undisputed fact that CENVAT credit availed by the assessee is relating to capital goods. (ii) The assessee had filed CENVAT credit based on provisions CENVAT credit Rule 2004 and as per Rule 63B of said rules 50% CENVAT credit availed on input & input services has to be paid back by a bank. (iii) Therefore, the assessee paid Rs. 1,28,10783/- being 50% of a CENVAT credit. (iv) As per Explanation 9 to sec. 43 of the Act any CENVAT credit availed as per the relevant rules cannot be added to the capital cost (v) Hence 50% CENVAT credit paid is debited to P&L account and claimed as expenditure. 15.5. The ld.DR relied on the written submission. 15.6. We have heard the rival submissions and perused the materials on record. As submitted by the AR it is undisputed fact that CENVAT credit availed by the assessee is relating to capital goods. Therefore the issue to be decided here is whether the 50% of the CENVAT Credit paid is to be debited to the Profit & Loss account or should be added to the cost of the capital good. We will look into the provision of Explanation 9 to sec.43 of the Act in this regard which reads as follows:- Section ....
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....redit as per the Rule 63B of CENVAT credit Rules 2004 (Rs. 20 in our example above). Hence the amount so paid and not eligible for credit should be added to the cost of the asset. Hence, we uphold the order of the CIT(A) in restricting the disallowance to the amount debited to the P&L account as said amount needs to be capitalized and not claimed as an expenditure as per the provisions of Explanation 9 to sec.43 of the Act. 15.9. In the result, the assessee's appeal on this ground is dismissed. Penalty paid to RBI (Ground No. 6) 16. The assessee has paid a sum of Rs. 13,63,463/- as penalty to Reserve Bank of India for non compliance of RBI guidelines which are general guidelines. The AO disallowed the claim on the ground that it is penal in nature. The assessee preferred an appeal before the CIT(A) who upheld the order of the AO on the ground that the assessee has not filed any details with regard to the penalty to prove that the I is not for infraction of law. 16.1. Aggrieved by the order of the CIT(A) the assessee is in appeal before us. 16.2. Before us, the ld.AR submitted that the penalty paid to RBI is in the nature of fine for non-compliance of the RBI Guidelines ....
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....The assessee had claimed a sum of Rs. 3,41,81,547/- as service charges paid to Bajaji Finance Ltd., pertaining to earlier years. The AO disallowed the claim on the ground that no income relating to such transaction was offered to tax during the current asst. year. The assessee availed an appeal before the CIT(A) on the ground that the expenditure was crystallized during the financial year relevant to asst. year 2015-16 and hence eligible for deduction. The CIT(A) confirmed the disallowance on the basis that the assessee is not having any evidence in support of its claim that the expenditure got crystallized during the relevant previous year. 17.1. Aggrieved by the order of the CIT (A) the assessee is not in appeal before the Tribunal. 17.2. The ld.AR reiterated the submissions made before the CIT(A) whereas the ld.DR supported the claim of the lower authorities. 17.3. We have heard the rival submissions and perused the materials on record. The very basis for allowing the expenditure is the crystallization of the expenditure and in the interest of justice this issue needs to be decided based on evidences and facts. The assessee has not produced and additional evidence befor....
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...." which transacts business of banking. (b) "Company" is defined as a company as defined in section 3 of the Companies Act and includes a foreign company within the meaning of sec. 591 of that Act. (c) Since the assessee falls under the category of Act of "corresponding new bank", it was contended that it cannot fall under the definition of "banking Company". (d) Clause (b) of sec.115JB(2) is applicable to a banking company, but the assessee is not a banking company as per the definition given in BR Act. Accordingly, it was contended that the assessee is not liable u/s 115JB of the Act. 7.2 The Ld CIT(A), however, did not accept the above said contentions. The view expressed by Ld CIT(A) has been summarised below:- (a) Sec. 115JB(1) is the charging section and it overrides all other provisions of the Act. It provides that the provisions of this section are applicable in case of "every company". It does not carve out any exception. (b) Sec. 2(17) defines the word "company". According to this section company "means" any Indian Company. (c) Explanatory Note to Finance Act, 2012 has explained that Minimum Alternativ....
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.... has expressed the view that the assessee would fall under clause (a) of sec.115JB(2). However the case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a 'banking company", i.e., it is a "corresponding new bank". 7.5 We notice that the provisions of sec.51 of the Act specifically states that only certain provisions of BR Act are applicable to "Corresponding new bank". We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec.51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of "banking company", provisions of sec.211(2) of the Companies Act e....
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....DCIT (2017) (81 Taxmann 111) (SC). Accordingly, he observed that it is mandatory for the AO to record dissatisfaction over the claim of the assessee before invoking the provisions of Rule 8D. Accordingly, the Ld CIT(A) deleted the disallowance holding that the AO has not recorded dissatisfaction. 20.2. The Ld AR submitted that the issue is covered by the decision of the coordinate bench of the Tribunal is assessee's own case (supra) where the Tribunal upheld the order of the CIT(A). The Ld DR relied on the written submissions 20.3. We heard the parties on this issue and perused the record. We notice that the coordinate bench of the Tribunal in assessee's own case (supra) has held as under 8.3 We heard the parties on this issue and perused the record. A perusal of the observations made by the AO on this issue in the assessment order would show that the AO was not satisfied with the claim of the assessee, even though he has not expressly mentioned so. In our view, his dissatisfaction is discernible from the assessment order. However, the AO has not made any specific observation over the disallowance of Rs. 2.74 crores made by the assessee out of administrative expenses....
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....hes from rural branches list on the ground that population of many of the rural branches already exceeded 10,000 and they are situated in urban agglomeration by relying of the assessment order for AY 2014-15 (ii) AO merely quoted the Lord Krishna Bank decision of Kerala High Court but not followed it up to the logical end to bring out the relvant data as to why a particular branch is not a rural branch (iii) The list of such branches given as part of the assessment order does not have the population figures and also the specific reason why they are not rural branches (iv) The AO has not pointed out any mistakes in the classification of rural branches made by the RBI (vi) The AO calculated the AAA by considering only incremental advances made during the year instead of outstanding balances The CIT (A) also observed that this issue is covered by the various Tribual decisions including the decision of the coordinate bench of the Tribunal and deleted the addition made by the AO. 21.4. We heard the parties and perused the record. We notice that the Ld CIT(A) has rendered his decision on this issue following the decision rendered by co-ordinate benc....
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....as only quantification. The estimate of the appellant bank was based on the previous settlements and also considering expectd DA increase, increase in number of employees and other factors. Accordingly the Bank had made provision for wage revision of Rs. 198crore during the FY 2014-15. Respectfully following the Hon'ble jurisdictional ITAT decision on the issue : direct the AO to allow the deduction of Rs. 198 crores towards wage arrears both under regular computation and 115JB. The additional ground on the issue is allowed" 23.2. The CIT(A) has followed the decision of the coordinate bench of the Tribunal and has also considered the merits in assessee's submission to decide the issue in favour of the assessee. Hence we do not see a reason to interfere with the decision of CIT(A). This ground of the revenue is dismissed for statistical purposes. Adjustment to Book Profits (Ground No 20 to 22) 24. The next ground of the revenue is with regard to specific addition made to book profit as per sec. 115JB of the Act, i.e. Disallowance u/s. 14 and amount debited under provisions & contingencies for NPA. The AO made these additions stating that these are liable to be added to net ....
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.... allowed and the hold that the depreciation on ATM is to be allowed at the higher rate of 60% The applicability of provisions of sec. 115JB (Ground No.4) 30. This ground relating to issue of applicability of provisions of sec. 115JB is adjudicated by us in ITA No.1109/Bang/2019 for the assessment year 2015-16 for the reasons stated herein above in paragraphs 18.1 to 18.5. Considering the fact that this ground also pertains to the same issue we set aside order of the CIT(A) and restore the same to his file for deciding the case afresh in accordance with law Specific addition to book profit (Ground No. 5) 31. The assessee bank in its computation of book profit u/s 115JB, had added provision for funded interest loan (FITL) to book profit and provision for interest sacrifice. On becoming aware of the error, the assessee bank claimed before the CIT(A) that provision for FITL and provision for interest sacrifice being debits in profit and loss account is not covered under any of the items mentioned in Section 115JB and, therefore, the same needs to be reduced from book profit. Disregarding the contentions of the assessee, the CIT(A) dismissed the appeal by holding that such p....