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2023 (4) TMI 1169
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.... 565,92,40,708/- u/s 36(1)(viia). 4. The learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the disallowance of Rs. 58,30,00,000/- u/s 36(1)(viii). 5. The learned Commissioner of Income Tax (Appeals) erred in holding that Rs. 1,38,11,847/- paid to NPCI is in the nature of technical and managerial service covered u/s 194J of the Income Tax Act. 6. The learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of Rs 5,16,000/- paid to RBI. 7. The learned Commissioner of Income Tax (Appeals) erred in holding that provisions of Section 115JB are applicable to the bank. 8. Without prejudice to the above ground, the learned Commissioner of Income Tax (Appeals) erred in adding various items to arrive at the book-profit which are beyond the scope of the section." 3. In ITA No. 528/Bang/2019 Revenue has raised the following grounds of appeal: - "1. The Order of the Ld. C1T(A), LTD, Bengaluru dated 31.12.2018 is opposed to the law and facts of the case. 2. The Ld. CIT(A) held in law in confirming the method of calculation adopted by the assessee in computing the eligible quantum of provision for bad debts u/s 36(l)(viia) rel....
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....er reasons that may be adduced at the time of hearing, it is humbly pleaded that the Order of CIT(A) be set aside and that of the Assessing Officer be restored and thus render justice." 4. The brief facts of the case are that the assessee, a leading bank in Karnataka has filed its return of income on 28.09.2015 for AY 2015-16 declaring total income at 'Nil'. The assessee filed revised income by declaring total income at Nil by making additional claim of Rs.200/- crores under Section 36(1)(vii) of the Income Tax Act, 1961 (the Act). The case was selected for scrutiny under CASS and notice under Section 143(2) of the Act dated 13.04.2016 was issued and served upon the assessee. Notices under Section 142(1) were also issued on various dates along with questionnaires calling for various details to verify the claims made by the assessee in the return of income. After hearing the assessee, assessment was completed by determining total income at Rs.1750,77,68,383/-. 5. Aggrieved by the above order, the assessee filed appeal before the CIT(A). The CIT(A) granted partial relief to the assessee vide order dated 31.12.2018. 6. Aggrieved by the above order of the CIT(A) both assessee and Re....
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....eparation and finalisation of accounts. The assessee has also claimed deduction as per the provisions of Income Tax Act. The assessee also relied on various judgments and in assessee's own case of the jurisdictional High Court also. The AO also followed the CBDT Circular No.12/2016 dated 30.5.2016. The AO after considering the entire submissions as well as case law and provisions of the Act did not accept the claim of the assessee towards bad debts written off claimed in the computation of income of Rs.727.33 crores with the following observations:- "1. The alleged claim of bad debts written off is nothing but prudential write off by the bank as per RBI circular and disclosure norms. 2. There is no actual write off of bad debts as irrecoverable as the same is provision for NPA created as per RBI guidelines and the adjustments are taking place only in balance sheet and it was claimed in different version i.e. write off of non rural provisions / prudential write off /head office write off etc. 3. Prudential write off is not allowable u/s 36(1)(vii) as per the findings of Hon'ble Apex court in the case of Southern Technologies Ltd. 4. The alleged bad debt written off of Rs....
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....lar issue has been decided by the coordinate bench of the Tribunal in assessee's own case for AY 2014-15 (supra) and held as under: - "11. The assessee had claimed Rs.282,18,79,407/- as bad debts written off in the computation. The AO rejected the claim of the assessee to the extent of Rs.279,60,53,018/- on the ground that - i) Accounting entries merely represented disclosure as per RBI guidelines. ii) Bad debts written off was not debited to P&L account iii) As the bad debt had not exceeded the credit balance of provision created in earlier years u/s 36(1)(viia), no deduction can be allowed as per the provisions of the Act. 12. The assessee made a detailed submissions before the CIT(A) in the appeal filed against the order of the AO contending that since sec. 36(1)(viia) applies to rural advances, it is only the rural debts which has to be adjusted against the provision allowed. The assessee further submitted that insertion of Explanation 2 to sec. 37(1)(vii) has not been changed the legal position in this case. 13. The CIT(A) dismissed the claim of the assessee and upheld the order of the AO on the basis that (i) Provisions for bad and doubtful debts made u/s 36(1)(vi....
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....ing the same to the 'Bad Debts Written Off Account' under the GL Code 163301 which is part of the profit and loss account and recoveries made in written off accounts are credited to the profit and loss account and offered to tax. According to the learned Authorised Representative, it is only in respect of accounts written off that the assessee bank can credit the recoveries to the profit and loss account and in the case of live accounts any recovery is credited to the debtors account. Therefore, the very fact that the recoveries are credited to the profit and loss account shows that the corresponding debts have been written off. It was submitted that the detailed accounting entries passed by the assessee bank with regard to the write off has been extracted at pages 31 and 32 of the order of assessment. The learned Authorised Representative drew the attention of the Bench to page 32 of the paper book in which the reconciliation of Gross Advances as per Branch Books and net advances as per Balance Sheet as on 31.3.2010 of the Bank has been carried out (placed at page 135 of the Annual Report for the year under consideration). It is submitted that the net advances as shown in ....
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....bts Written Off Account' (GL Code 163301) which is part of the profit and loss account and has reduced the write off from Gross Advances in the Balance Sheet. The authorities below disallowed the write off on the ground that the individual accounts are not squared off at the branch level. We find that this issue of write off has been settled by the Hon'ble Apex Court in the assessee's own case reported in 2010 (323 ITR 160) (SC), wherein at paras 8 & 9 thereof it was held as under : "8. Coming to the second question, we may reiterate that it is not in dispute that s. 36(1)(vii) of 1961 Act applies both to banking and nonbanking businesses. The manner in which the write off is to be carried out has been explained hereinabove. It is important to note that the assessee-bank has not only been debiting the P&L a/c to the extent of the impugned bad debt, it is simultaneously reducing the amount of loans and advances or the debtors at the year-end, as stated hereinabove. In other words, the amount of loans and advances or the debtors at the year-end in the balance sheet is shown as net of the provisions for impugned debt. However, what is being insisted upon by the AO is tha....
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....On the other hand, if bad debt is written off by closing the borrower's account individually, then the repaid amount in subsequent years will be credited to the P&L a/c on which the assessee-bank has to pay tax. Although, prima facie, this argument of the Department appears to be valid, on a deeper consideration, it is not so for three reasons. Firstly, the head office accounts clearly indicate, in the present case, that, on repayment in subsequent years, the amounts are duly offered for tax. Secondly, one has to keep in mind that, under the accounting practice, the accounts of the rural branches have to tally with the accounts of the head office. If the repaid amount in subsequent years is not credited to the P&L a/c of the head office, which is ultimately what matters, then, there would be a mismatch between the rural branch accounts and the head office accounts. Lastly, in any event, s. 41(4) of 1961 Act, inter alia, lays down that, where a deduction has been allowed in respect of a bad debt or a part thereof under s. 36(1)(vii) of 1961 Act, then, if the amount subsequently recovered on any such debt is greater than the difference between the debt and the amount so allowed, ....
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....of Rs.112.19 crores as deduction u/s 36(1)(viia) of the Act. Accordingly, the AO took the view that the assessee is claiming deduction both u/s 36(1)(vii) and 36(1)(viia) of the Act. The assessee submitted that the bad debts claimed by it included prudential write off of Rs.134.86 crores. The AO expressed the view that the Prudential write off is not eligible for deduction u/s 36(1)(vii) of the Act, since it is not actual write off. He then relied upon the decision rendered by Hon'ble Supreme Court in the case of Southern Technologies vs. ACIT (352 ITR 577)(SC), wherein it was held that the mere making of provision for NPA cannot be considered as write off u/s 36(1)(vii) of the Act. He also relied upon the decision rendered by Hon'ble Kerala High Court in the case of CIT vs. Hotel Ambassador (2002)(253 ITR 430)(Ker), wherein it was held that the deduction u/s 36(1)(vii) of the Act only if the assessee debits the same into the accounts as irrecoverable. Accordingly, the AO took the view that the amount of bad debts claimed by the assessee was mere provision and not actual write off. Before the AO, the assessee had placed reliance on the decision rendered by Hon'ble Supreme Court in ....
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....d CIT(A), however, proceeded to examine this aspect from another angle, i.e., he took the view that the AO has not examined the claim of write off 'non-rural bad debts" of Rs.145.16 crores in terms of the proviso to sec. 36(1)(vii) read with 36(1)(viia) of the Act. Before Ld CIT(A), the assessee submitted that the "provision for bad and doubtful debts" (PBDD) allowed u/s 36(1)(viia) of the Act is related to rural debts only and hence, in terms of the proviso to sec. 36(1)(vii), only rural debts written off as bad should be adjusted against the PBDD allowed u/s 36(1)(viia) of the Act. However, the Ld CIT(A) expressed the view that the PBDD allowed u/s 36(1)(viia) of Act is applicable to both Rural and non-Rural debts. Accordingly, he held that the entire amount of bad debts written off (both rural and nonrural) should be first adjusted against the PBDD a/c 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 rendered 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 ....
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....ons 36(1)(vii) and 36(1)(viia). While 36(1)(vii) speaks of actual write off of bad debts in the books of account, section 36(1)(viia) even allows provision made towards bad and doubtful debts in respect of rural advances to the extent of provision made in the books of account subject to the ceiling fixed under clause (viia) of section 36(1). Proviso to section 36(1)(vii) operates only in a case where deduction is also claimed under section 36(1)(viia). In other words, proviso to section 36(1)(vii) applies to write off of bad debts relating to rural advances to the extent it exceeds the provision made u/s 36(1)(viia). If we examine the facts of the present case in the context of aforesaid statutory provision, it will be evident that assessee, though, has written off in the books of account an amount of Rs. 210.74 crore, but, in the computation of total income, the actual deduction claimed u/s 36(1)(vii) is Rs. 209.08 crore representing bad debts written off relating to non-rural/urban advances. The balance 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 ba....
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....e computation or taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits. In order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in subsection (1) of Section 36 to provide for a deduction, in the computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debts relating to advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962. Thus, the provisions of clause (viia) of Section 36(1) relating to 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 ....
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....is has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii)." Thus, considered in light of principle laid down as referred to above, when the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to non-rural/urban advances. As far as application of explanation to section 36(1)(vii) is concerned, we agree with the ld. AR that its operation will be prospective and will not apply to the impugned AY. For this proposition, we rely upon the decision of the ITAT Mumbai 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 sect....
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....ed deduction towards PBDD under clause (a) of sec. 36(1)(viia) and it relates to the rural advances only. Hence the proviso to sec. 36(1)(vii) shall have bearing only on PBDD relating to rural advances only. Thus, according to Ld A.R, the bad debts written off relating to nonrural advances should be allowed independently u/s 36(1)(vii) of the Act without first adjusting the same against PBDD allowed under clause (a) of sec. 36(1)(viia) of the Act. 7.7 We heard the Ld D.R and perused the record. Now the core question that arises is whether the bad debts relating to non-rural branches are also required to be first debited to PBDD a/c and then the excess amount over and above the balance available in PBDD alone could be allowed as bad debts u/s 36(1)(vii) of the Act. 7.8 The provisions of sec. 36(1)(vii) allows deduction as under:- "36(1)(vii) Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limit....
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.... observed as under:- "31 It was neither in dispute earlier nor is it disputed before us, that the assessee-bank is maintaining two separate accounts, one being a provision for bad and doubtful debts other than provision for bad debts in rural branches and another provision account for bad debts in rural branches for which separate accounts are maintained...." Referring to the above said observations, the revenue has taken the view that the Hon'ble Supreme Court has rendered its decision on the assumption that the banks would be maintaining two separate PBDD a/c, viz., one for rural branches and another one for non-rural branches. 7.10 It is possible that all banks may not be maintaining two separate accounts, as observed by the Hon'ble Supreme Court. Hence there was an apprehension in the minds of revenue with regard to the effect of the decision rendered by Hon'ble Supreme Court. For instance, if a particular bank is maintaining only a single PBDD a/c for the provision created u/s 36(1)(viia) of the Act and even if that bank is not having any rural branches, then it may try to avail the benefit of decision rendered by Hon'ble Supreme Court and may possibly contend that (i)....
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....inds place in clause (a) only. It can be noticed that the reference to "rural branches" is not there in clause (b) to (d). Generally, the foreign banks may not have rural branches. However, such kind of banks, financial institutions, NBFC etc. are also eligible to claim deduction towards PBDD u/s 36(1)(viia) of the Act under clauses (b) to (d). In view of the decision rendered in the case of Catholic Syrian bank, it is possible that the assessees covered by clause (b) to (d) may contend that the bad debts written off by them need not be adjusted against PBDD allowed u/s 36(1)(viia) of the Act, since the bad debts relate to "non-rural debts". Accordingly, we are of the view that the Explanation 2 has been inserted in order to bring the assesses covered by clauses (b) to (d) within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. Hence, in our view, advances given by rural and non-rural branches mentioned in Explanation 2 shall apply to the assesses covered by clause (b) to (d) of sec. 36(1)(viia) of the Act. 7.12 At this juncture, we may gainfully refer to the "MEMORANDUM EXPLAINING FINANCE BILL 2013", which brings out the intention of the Parliament in in....
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....es only to provision made for bad and doubtful debts relating to rural advances. Section 36(1)(viia) of the Act contains three sub-clauses, i.e. sub-clause (a), sub-clause (b) and sub-clause (c) and only one of the sub-clauses i.e. sub-clause (a) refers to rural advances whereas other sub-clauses do not refer to the rural advances. In fact, foreign banks generally do not have rural branches. Therefore, the provision for bad and doubtful debts account made under clause (viia) of section 36(1) and referred to in proviso to clause (vii) of section 36(1) and section 36(2)(v) applies to all types of advances, whether rural or other advances. It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rural advances and urban advances and if the actual write off of debt relates to urban advances, then, it should not be set off against provision for bad and doubtful debts made for rural advances. There is no such distinction made in clause (viia) of section 36(1). In order to clarify the scope and applicability of provision of clause (vii), (viia) of sub-section (1) and sub-section (2), it is proposed to insert an....
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....ly to both rural and nonrural advances. Since there is no such amendment, the interpretation given by Hon'ble Supreme Court that "clause (viia)(a) applies to rural advances only" shall remain intact. Explanation 2 inserted in sec. 36(1)(vii), in our view, does not override the above said interpretation given by Hon'ble Supreme Court. 7.14 In the Memorandum explaining the purpose of introducing Explanation -2 in Sec. 36(1)(vii), it has been acknowledged that only the clause (a) refers to "rural branches". It has also been stated that the foreign banks do not have rural branches. The assesses covered by clause (b) to (d) may not be having rural branches. Hence, the memorandum explains as under with regard to the decision rendered by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra):- "However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances." Because of the interpretation so given by Hon'ble Supreme Court, as discussed earlier, there arose a necessity for the Pa....
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...., therefore, respectfully following the above decisions, we direct the AO to delete the addition made u/s. 36(1)(vii). Accordingly ground Nos. 2.1 to 2.4 are allowed. Ground No.2.5 was not pressed and hence it is dismissed as not pressed. GROUND No. 3 ( 3.1 to 3.2) 18. The appellant bank claimed Rs.58.30 crores as deduction u/s. 36(1)(viii). In this regard assessee was asked to substantiate and furnish the working of the deduction claimed. The assessee furnished the details of the working of the deduction claimed u/s. 36(1)(viii) as under:- Calculation of Claim for deduction u/s 36(1)(viii) for the year ended 31.03.2015 Interest earned from advances made to industrial, agricultural and infrastructure 3242,94,10,480 Less: Interest expenses (Average Advances in the eligible activities* cost of fund) 2246,36,50,954 Net Interest Income 1045,58,86,092 Less: Operating expenses (Total Operating Expenses* Average advances in the eligible business/Total deposits, advances and investment) 754,07,18,267 Net Profit 291,51,67,825 20% of the above 58,30,33,565 Amount Transferred to Special Reserve 0 2015 2014 Average Advances in the eligible b....
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....garding aggregate of the amount carried to such reserve account from time to time not exceeding twice the amount of the paid up share capital and general reserve. Accordingly, he noted that assessee has not transferred any amount into the special reserve account for claiming deduction u/s. 36(1)(viii). The AO also having gone through the case law relied by the ld. AR, but did not accept the same and made addition to the total income of the assessee. 21. On appeal before the CIT(A), the assessee reiterated the submissions made before the AO and relied on the judgment of coordinate Bench of ITAT Hyderabad in the case of Nizamabad District Central Co-op. Bank Ltd. v ITO. The ld. CIT(A) examined the issue in detail in the light of provisions of section 36(1)(viii) of the Act and noted that nothing has been brought on record to show that the amount transferred into statutory reserve and capital reserve have been created and maintained for the purpose in terms of section 36(1)(viii). He also noted that as per the AO, the assessee has created and maintained reserve as per section 36(1)(viii) and it has been allowed in earlier years. He further observed that the assessee has not clarified....
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....omputed above. The lower authorities have not accepted the arguments of the assessee. We note that during the course of hearing, the ld. AR submitted that similar issue has been decided by the coordinate Bench of Tribunal in assessee's own case for AY 2014-15, for the sake of convenience, we reproduce the relevant part on this issue:- 21. We heard both the parties and perused the materials on record. We will first look into the provisions of sec.36(1)(viii) which reads as follows "(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head 'Profits & gains of business or profession" (before making any deduction under its clause) carried to such reserve account" 22. Section 36(1)(viii) envisages a transfer to a special reserve in order to claim deduction under the said section. The issues to be considered here are (i) Whether the amount transferred to any reserve can be considered for deduction u/s.36(1)(viii) since "special reserve" is not defined in the Act (ii) Whether the amount transferred in the subsequent year also need to be c....
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....cements cited. We find that this issue was considered and held in favour of the assessee and against revenue by a co-ordinate bench of this Tribunal in the case of Corporation Bank (supra); wherein at para 19, the Bench has held as under "19. We have perused the orders and heard the rival contentions. Section 36(1) (viii) is reproduced hereunder,' "(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head 'Profits & gains of business or profession" (before making any deduction under its clause) carried to such reserve account" We find that Delhi Bench in the case of M/s PFCL (Supra) had considered the very same issue as to whether the special reserve was required to be created in the very same year of the claim of deduction of whether it could be created in a succeeding year. In its order dated 31- 07- 2008 it was held as under at paras 18 to 24. 18. We have considered the rival contentions of both the parties, perused the records and carefully gone through the orders of the tax authorities below. 19. We would first like to rep....
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...., the words ...(before making any deduction under this clause) carried to such reserve account" prompt such inference by the learned Departmental Representative for the Revenue but to our mind answer to such inference drawn by the learned Departmental Representative for the Revenue is that before making any deduction does not mean before making any claim but means at the time of considering such deduction claimed by the assessee. 21. Hon'ble jurisdictional High Court of Delhi while interpreting similar wordings in the context of s. 32A of the Act in the case of CIT vs. Orient Express Co. (P) Ltd. (supra) while dealing with creation of reserve required under s. 32A of the Act at p. 896 held that section prescribes no point of time by which the reserve should be created and in this regard accepted that a reserve created after the closure of the accounts of the year qualifies by observing as under: "The second question which is raised only in ITC Nos. 44 and 45 of 1986 is whether the assessee is disentitled to the investment allowance scheme because no requisite reserve has been created by the assessee company before the close of books of the relevant previous year. On this, t....
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....t reserve created even in subsequent / succeeding years; however before the finalization of grant of deduction under Section 36(1)(viii) of the Act i.e. as per date of order of assessment is required to be considered while allowing the assessees claim for deduction under Section 36(1)(viii) of the Act. The Assessing Officer is directed to examine and allow the assessee's claim accordingly. Consequently, this ground No.5 (5.1 to 5.3) is allowed for statistical purposes." 25. We therefore follow the binding decision of the coordinate bench in the case of Vijaya Bank (Supra), and hold that reserve credit in the subsequent or succeeding years before the initiation of grant of deduction u/s 36(1)(viii) of the Act is required to be considered while allowing the assessee's claim for the deduction under the said section. We, therefore direct the AO to examine and allow the assessee's claim accordingly. This ground is allowed for statistical purposes." 25. Since the assessee has not answered the objections raised by the lower authorities regarding compliance of section 36(1)(viii) and in view of the case law relied by the ld. AR in assessee's own case, we remit the issue to the AO in....
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.... 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. 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.1834/Bang/2018 dated 11/03/2022 in assessee's own case for the assessment year 2014-15. 30. The ld.DR relied on the order of lower authorities. 31. We have heard the rival submissions and perused the materials on record. We notice that the coordinate bench of this Tribunal in assessee's own case (Supra) allowed this ground of appeal by the assessee by observing as under:- 30. 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) allowed this ground of appeal by the assessee and held that - 6.1 We heard the parties and perused the record. The Ld A.R placed his reliance on the decision rendered by the co-ordinate bench on an identical issue in the case of C....
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....e 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 all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange. "Technical services" like "Managerial and Consultancy service" would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided f....
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....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 Stock Exchange by its members are for 'technical services' rendered is not an appropriate view. Such charges, really, are in the nature of payments made for facilities provided by the Stock Exchange. No TDS on such payments would, therefore, be deductible under Section 194J of the Act." 12.4.2 Respectfully following the aforesaid decision of the Hon'ble Apex Court in the case of Kotak Securities Ltd. (supra), we hold that the services rendered by NPCI are not technical services and as such, are not covered by....
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....visions of Banking Regulation Act, hence, any payment in violation of the RBI directions is not allowable as deduction u/s. 37(1) read with Explanation. He also relied on the judgment of Hon'ble Karnataka High Court in the case of Syndicate Bank 261 ITR 528 in which penalty has been confirmed for violation of section 24(4)(a) and 24(4)(b) of the Banking Regulation Act and the penalty paid by the assessee bank for violation of above section was not allowed. 35. The ld. AR reiterated the submissions made before the CIT(A) to which we have noted and he also relied on the judgment of the coordinate Bench in the case of Union Bank of India v. DCIT in ITA No.1109/Bang/2019 for the AY 2015-16, order dated 15.3.2022. 36. On the other hand, the ld. Dr relied on the order of lower authorities and further submitted that assessee has violated RBI directions for maintaining currency chest and the Hon'ble Supreme Court in the case of Bank of India Finance Ltd. v. Custodian supra relied by the lower authorities in which it has been clearly held that violation of any direction of RBI is covered u/s. 37, hence the amount paid by the assessee is not allowable. The ld DR also submitted that case la....
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....d on following decisions:- (i) CIT v. Mysore Breweries Ltd. [2009] 227 CTR 569 (ii) CIT v. Yashaswi Leasing & Finance Ltd. 204 Taxman 602 (iii) CIT v. Steriplate (P) Ltd. (2011) 338 ITR 547. 40. The AO accordingly computed book profits of the assessee for an amount of Rs.93,89,26,067. The CIT(A) confirmed the order of the AO. Aggrieved, the assessee is in appeal before the Tribunal. 41. The Ld. AR reiterated the submissions made before the lower authorities. He submitted that similar issue has been decided by the coordinate bench in assessee's own case for AY 2014-15 in ITA No.1834/Bang/2018 order dated 11.3.2022. 42. The ld. DR relied on the orders of lower authorities and submitted that by virtue of amendment by the Finance Act, 2012 MAT is applicable to the specified entity also. He also submitted that Hon'ble Supreme Court had accepted the SLP filed by the revenue on the similar issue. Therefore he submitted that the issue should be decided in favour of the assessee. 43. We have heard the rival submissions and considered the entire material on record. We notice that similar issue was considered by the coordinate bench in assessee's own case for AY 2014-15 and held as ....
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....ssee 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 Alternative Tax (MAT provisions u/s 115JB) shall apply to a banking company. (d) Assessee is a "company" as per the deeming provisions of sec.11 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, which reads as under:- "11. Corresponding new bank deemed....
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....a "corresponding new bank". 7.4 We notice that the provisions of sec.51 of the Act specifically state 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 etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh." 7.2 Since the facts relating to the issue and contention of the assessee is identical in nature, followin....
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..... The AO after considering the submissions made by the assessee and applying the prescribed rule 6ABA for computation of deduction computed deduction under this section at Rs. NIL and disallowed the entire claim of deduction made by the assessee. Aggrieved from the above disallowance the assessee filed appeal before the CIT (A). 49. The CIT(A) after considering the submissions of the assessee and following the previous assessment year's order of the co-ordinate bench of the Tribunal in assessee's own case, allowed the appeal of the assessee. Aggrieved by the order of the order of the CIT(A) on this issue, revenue has filed the appeal before the Tribunal. 50. Before us, the ld. DR relied on the order of the AO and submitted that the assessee has computed wrongly considering the opening balance of the previous years, the figures should be considered of only those advances which were made in the particular month but not on the entire monthly outstanding advances. The word used "made by" in the section is very clear that only advances made during the month have to be considered and not the running advances. It is an incentive for promoting the rural branches. 51. The ld. AR for the ....
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....e outstanding advances have been taken into account for the purposes of clause (a) ; (c) the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank. Explanation : In this rule, rural branch and scheduled bank shall have the meanings assigned to them in the Explanation to clause (viia) of sub-section (1) of section 36." From a bare reading of the above rule it is crystal clear that the said rules prescribe three steps for computing AAA in the following manner: Step One - In respect of each rural branch, note down the amounts of advances outstanding at the end of the last day of each month comprised in the previous year and aggregate the amounts so noted. Step Two- Divide the aggregate amount arrived at in Step One by the number of months for which the outstanding amounts have been taken into account for the purpose of Step One. Step Three- Aggregate the amounts arrived at under Step Two in respect of all the rural branches. Thus, it is clear that the said Rules do not provide for only fresh advances made by each rural branch during each month alone is to be consid....
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....t to the condition imposed under the proviso to 36(1)(vii). As can be seen from the working submitted by ld. AR, the provision created during the year u/s 36(1)(viia) read with rule 6ABA, amounts to Rs. 16,35,55,829.00 whereas assessee has claimed deduction of Rs.5,16,46,976, which is well within the provision permissible under section 36(1)(viia). Therefore, there cannot be any doubt with regard to the allowability of deduction claimed by the assessee u/s 36(1)(viia). Accordingly, we do not find any infirmity in the order of ld, CIT(A) in deleting addition of Rs. 3,88.25,673, However, as far as deduction of Rs.18,79,704 is concerned, the same cannot be allowed u/s 36(1)(vii) considering the fact such amount has not exceeded the provision for bad and doubtful debts u/s 36(1)(viia). At the same time, alternative claim of the assessee that it is to be allowed u/s 37(1), in our view, is acceptable. On a perusal of the assessment order and the facts and materials available on record, it is quite evident that the amount was waived at the direction of the State Govt. Department has not controverted this fact. Therefore, in our view, the waiver of interest at the instance of the State Gov....
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....Held For Trading (HFT). As per RBI guidelines, the securities held under the category of AFS and HFT are subject to market valuation and the closing stock of securities held under these categories have to be valued on 31st March and depreciation on account of such valuation shall be provided. Accordingly the assessee has debited a sum of Rs.42.9 crores under the head provisions & contingencies. Further the AO noted that the category of HTM securities shall not be subjected to market valuation and depreciation is not to be allowed as per RBI guidelines and as per CBDT Instruction No.17/2008 dated 26.11.2008. During the impugned AY, the assessee has computed depreciation in the computation of income of Rs.1564.15 crores on its investments. In this regard, the assessee was asked to produce the evidence for such huge differences. The AO further noted that there is difference in valuation for purpose of Income Tax Act as well as for the books of accounts maintained. In reply the assessee submitted that the issue has been decided in favour of the assessee by various judicial pronouncements and the Hon'ble jurisdictional High Court has also decided this issue in favour of assessee. The as....
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....1.3.2022 wherein it was held as follows: - "43. We heard the rival submissions and perused the material on record. We notice that the coordinate bench of the Tribunal in assessee's own case (supra) has allowed the appeal in favour of the assessee. The Tribunal in this case has held that - 10. The next issue contested by the revenue relates to the disallowance of depreciation on HTM Securities, which has been deleted by Ld CIT(A). The AO took the view that the RBI has allowed banks to claim depreciation on securities which are "Held for Trade" and "Available for sale" only. Accordingly he held that the depreciation is not available on securities "Held to Maturity". Accordingly, he disallowed the claim of Rs.174.42 crores relating to depreciation on HTM securities. 10.1 The Ld CIT(A) noticed that the ITAT, Bangalore has decided an identical issue in AY 2003-04 in favour of the assessee. The Hon'ble Karnataka High Court upheld this decision in ITA No.687/2008 vide order dated 11.03.2013. Similarly in AY 2008-09 also, the Tribunal in ITA Nos. 578 & 653 of 2012 has decided the issue in favour of the assessee. Similarly in AY 2010-11 to 2012-13 has again decided in favour of the as....
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....n ITA No.687/2008 which was then followed by the co-ordinate bench of this Tribunal in the assessee's case in the immediately preceding assessment year 2009-10 in order in ITA No.318/Bang/2014 dt.22.7.2016 and for A.Y. 2008-09 in ITA No.578/Bang/2012 dt.27.2.2015. 11.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. We find that this issue has been considered and held in favour of assessee and against Revenue both by the decisions of the Hon'ble Karnataka High Court and those of the co-ordinate bench of this Tribunal in the assessee's own case. We find that a co-ordinate bench, while dismissing Revenue's ground on this issue in the assessee's own case for Assessment Year 2008-09 in its order in ITA No.578 & 653/Bang/2012 at paras 33 & 34 thereof has held as under:- "33. We have considered the rival submissions. Similar issue as to whether depreciation on investments held under the category "Held to Maturity" or "Available for Sale" can be allowed as deduction came up for consideration in Assessee's own case in AY 10-11 in ITA No.1310/Bang/2012 and this Tribunal u....
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....fiable reason for not accepting the same. Preparation of the balance-sheet in accordance with the statutory provision would not disentitle the assessee in submitting the Income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that the assessee was maintaining the balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments) because the bank was required to prepare the balance sheet in the prescribed form and it had no option to change it. For the purpose of income tax as stated earlier, what is to be taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case." The Bangalore Bench of ITAT in Corporation Bank (supra) has also followed the above decision of the Hon'ble Supreme Court as also the ITAT, Mumbai and ITAT, Chennai. Following the above decisions, we are deciding this ....
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....s of appeal of the Revenue." 34. The above decision squarely covers the issue in favour of the Assessee. Respectfully following the same, we uphold the order of the CIT(A) and dismiss the relevant ground of appeal No.4 of the Revenue." 11.4.2 We find that the decision of the learned CIT (Appeals) in the impugned order is in line with the aforesaid decision of the Hon'ble Karnataka High Court and the co-ordinate bench of this Tribunal in the assessee's own case (supra). In this view of the matter, we do not find any reason to interfere with the finding of the learned CIT (Appeals) on this issue and consequently finding no merit in grounds at S.Nos.1 & 2 (supra) raised by revenue, dismiss the same." 10.3 We notice that the Ld CIT(A) has followed the decision rendered by the co-ordinate bench in the assessee's own case and has deleted the disallowance of depreciation claimed on HTM securities. Accordingly, we do not find any reason to interfere with his decision rendered on this issue. 44. Considering the decision of the coordinate bench of the Tribunal and noting the fact that the CIT(A) has followed the decision of the coordinate bench in assessee's own case, we do n....