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TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 1005
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....d on 04th September, 2014. The assessee bank is engaged in the business of banking and financial activities. Further facts of the case are discussed while adjudicating the appeals filed by the assessee and the Revenue as below: ITA No.3267/Mum/2019 -Assesse's Appeal Ground 2: Provision for Standard Asset qua deduction under section 36(1)(viia) 3. During the course of assessment, the Assessing Officer noted that assessee bank has claimed deduction for provisions under section 36(1)(viia) of the Act in respect of bad and doubtful debts, though is available in respect of 7.5% of the total income and 10% of the rural branches. The assessee bank has created provisions in respect of following categories of assets i) Standard Assets; ii) Doubtful Assets; and iii) Losses 4. The Assessing Officer stated that though the deduction under section 36(1)(viia) is available only in respect of provisions for bad and doubtful debts; however, the assessee bank had claimed deduction in respect of provisions for even the standard assets. The Assessing Officer was of the view that no provision is required for standard assets as the standard assets are not included ....
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....ee. As per the provisions of section 36(1)(viia) of the Act, a bank is eligible to avail deduction in respect of provision made for bad and doubtful debts, of an amount not exceeding 7.5% of total income and 10% of the aggregate average advances made by the rural branches of the bank. The provision is created by the assessee on the basis of RBI Guidelines. The assessee is required to create provision on non-performing assets on the basis of the classification of assets into the four prescribed categories i.e. loss assets, doubtful assets, substandard assets and standard assets [refer para 5.1.2 of the RBI Guidelines]. 72. The Revenue before us emphasized that the provision for standard assets is not same as provision for bad and doubtful debts and the same is contingent in nature, since it is created only out of abundant caution. We noted from the provisions that the assessee is required to make a provision on all its debts ranging from 0.25% to 100% depending upon the categorization of the loan in terms of the guidelines issued by RBI. The provision on debts made by the assessee is in line with the RBI guidelines and section 36(1)(viia) of the Act does not have a requirem....
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....on a charge against profits, while that in respect of an asset, considered good, would be more in the nature of an appropriation of profit i.e. a reserve. This is precisely what the Tribunal in Bharat Overseas Bank Ltd. (supra) means when its states of the deduction being not in the nature of a standard allowance. No contrary judgement by the Tribunal or a higher court has even otherwise been brought to our notice. At the same time, the provision as per RBI guidelines - which are contended to have been followed / adopted, provide for the minimum provision, and the bank is free to make a higher provision, i.e., than that prescribed by the RBI norms. Provisioning, it may be noted, is a management function, made reflecting its risk assessment qua different assets. If therefore, the assessee-bank is able to satisfy the assessing authority that the provision as made is justified with reference to the debts considered by it as bad and doubtful, we see no reason as to why the same cannot be allowed. The matter is accordingly restored back to the file of the A.O. for fresh determination by issuing definite findings of fact. Even as the primary onus would be on the assessee, the A.O. cannot....
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....he submission of the assessee. He was of the view that assessee was a banking company and credit card business was different from banking business. The Assessing Officer further stated that credit card business was a payment service and not a business of banking or money lending as defined in the Banking Regulations Act, 1949. After referring to the order passed by the PCIT-2, Mumbai under section 263 in the case of ICICI Bank, the Assessing Officer has disallowed the bad debt claimed pertaining to credit card business of the assessee bank. 11. Aggrieved, assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) has dismissed the appeal of the assessee. 12. During the course of appellate proceedings before us, the Ld.Counsel submitted that identical issue on similar facts has been adjudicated by the ITAT, Mumbai Benches in the case of ICICI Bank Ltd vide order in ITA No.1112/Mum/2022 for A.Y. 2011-12 vide order dated 14th December, 2022. 13. On the other hand, the Ld.DR supported the orders of lower authorities. 14. With the assistance of Ld.representatives of the parties, we have gone through the order of the co-ordinate bench in the case of ICICI Bank Limited cited su....
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....nterest on cash basis are specified in Rule 6EA of the I.T. Rules, 1962. As per rule 6EA, interest is not to be offered for taxation with respect to advances which have become NPA for a period of 180 days or more. However, as per the guidelines of RBI, interest is not to be recognized on NPAs if they have become non performing for a period of 90 days or more. Therefore, Assessing Officer was of the view that provisions of Rule 6EA read with section 43D are very clear that irregularity of the nature referred in Rule 6EA should be noticed for a period of six months or more. The Assessing Officer also observed that as per guidelines of RBI, non performing assets are recognized for a default of 3 months or more, however, as per the I.T. Rules, the period of 3 months has not been recognized anywhere. Therefore, the Assessing Officer has not accepted the interest derecognized by the assessee and made an addition of Rs.5,15,36,039/- by estimating the interest income from 91 to 180 days. 17. Aggrieved, assessee filed appeal before the Ld.CIT(A). Ld.CIT(A) has dismissed the appeal of the assessee. 18. During the course of appellate proceedings before us, the Ld.Counsel, at the outset,....
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....g sticky was never disputed. The next issue is whether the prudential norms of RBI for income recognition would override the provisions of the IT Act. This issue has been addressed by the Hon'ble Supreme Court in the case of Southern Technologies Ltd supra in the context of allowability of deduction towards 'Provision for NPA. We find that the same decision clearly stated that the interest income on NPA accounts should not be recognized on accrual basis which is in line with RBI prudential norms for income recognition. This fine distinction has been duly considered in the decision of the Hon'ble Delhi High Court in the case of CIT vs Vasisth Chay Vyapar Ltd supra. When the account becoming NPA is not disputed by the revenue, the recognition of income is to be done only on receipt basis which is in consonance with the real income theory. In these circumstances and respectfully following the decisions of Hon'ble Delhi High Court in 330 ITR 440 and various other decisions refered to supra, we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly, the grounds raised by the ....
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....6 months. The RBI has revised the guideline from time to time and made changes in the period of overdue of advances for categorization of NPA. During the year under consideration the RBI has reduced the period to 90 days for categorization of interest on sticky loan as NPA, however, similar changes was not made to Rule 6EA. After considering the provisions of Sec. 43D and judicial findings as supra we consider that norms for categorization of bad and doubtful debts had to be prescribed considering the guidelines issued by the RBI. Therefore, the ld. CIT(A) is not justified in substituting the limit for recognizing of interest on account of NPA to 180 days from 90 days in view of the clear provisions of Sec. 43D(a) that in the case of public financial institutions or schedule bank or a state financial corporation or a State Industrial Investment Corporation, the income by way of interest in relation to such categories of bad and doubtful debt as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts. Therefore, both the ground of appeals of the assessee are allowed." 21. Respectfully following the decision of co-ordinate bench as referred ab....
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....28. During the course of appellate proceedings before us, the Ld.Counsel submitted that identical issue on similar facts in the case of the assessee itself has been adjudicated by the ITAT, Mumbai Bench in ITA No.781 & 782/Mum/018 for the A.Ys 2013-14 & 2014-15 vide order dated 27/08/2019. 29. On the other hand, the Ld.DR supported the orders of lower authorities. 30. We have perused the order of the co-ordinate bench as referred above in assessee's own case. The relevant operating part of the decision is reproduced as under:- 9. We have considered the rival submissions and perused material placed before us. The Hon'ble Supreme Court in the case of Maxopp Investment Ltd (supra) held that where the shares are held as stock-in- trade, the expenditure incurred for earning business profits will have to 1 apportioned and allowed as a deduction. Only that expenditure A /,which is "in relation to "earning dividends can be disallowed u/s 14A & 8D. Further, the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg Co Ltd (supra) has upheld the finding of the ITAT that the expenditure incurred in relation to exempt income can be disallowed only if the assessing o....
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....worked out an expense of Rs.1,23,71,727/- as inadmissible as per the provisions of section 14A of the Act. On query, the assessee explained that it had made investments from own funds and no interest disallowance is required under section 14A r.w.r. 8D(2)(ii). However, the Assessing Officer has not agreed with the submission of the assessee and computed the disallowance under section 14A r.w.r. 8D(2)(ii) on the ground that assessee has not proved that day to day investment was made out of own funds. Aggrieved, the assessee has filed appeal before the Ld.CIT(A). The Ld.CIT(A) has allowed the appeal of the assessee holding that in the case of the assessee reserves and surplus were at Rs.12275.09 crores and Rs.14141.09 crores at the beginning and at the end of the year, whereas the investments capable of yielding exempt income was made of Rs.1195.04 crores only. 36. During the course of appellate proceedings before us, the Ld.Counsel for the assessee submitted that similar issue on identical facts has been adjudicated by he ITAT in assessee's own case in ITAs No.781 & 782/Mum/2018 vide order dated 27/08/2019. 37. It is evident from the above fact that assessee had share capital ....
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....r authorities and the various case laws relied by the Ld AR for the assessee. During the assessment the AO required the details of the broken period interest expenses. The assessee furnished such interest on broken period expenses of Rs. 88,41,69,624/-. The AO disallowed the same holding that the securities are held till the maturity which constitute the investment of the bank and cannot be considered as stock in trade. Before Id CIT(A) the assessee contended that all the investments were made in accordance with RBI guidelines. The closing balance has been shown in the balance sheet. The interest income on Government securities and the profit / loss has been offered in the return of income for the current year. Similar treatment is consistently offered by the assessee in earliert years. The assessee also relied on the CBDT Circular No.18/2015 dated 02.11.2015. The Ld CIT(A) accepted the contention of the assessee granted relied to the assessee by relying on the CBDT circular and on the decision of Hon'ble Supreme Court in CIT Vs Citi Bank NA in Civil Appeal No.1549 of 2006) and Bombay High Court in American Express International Banking Corporation vs CIT (125 Taxman 488 Bom). ....