TaxTMI 
TaxTMI 
2023 (3) TMI 1425
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....g and bad in law and deserves to be deleted. 2. The Ld. CIT(A) has erred in confirming the disallowance of 100% depreciation on temporary erections of Rs. 30,76,16,842/-. The claim of the appellant is in accordance with I.T. rules part A under Building item No.4. These are wooden partitions, cabins etc. which are purely temporary erections and not disputed by AO. Consequently 100% claim of depreciation should be allowed. 3. The CIT(A) has erred in treating sum of Rs. 17,78,06,658/- being software expenses alleging them to be capital in nature instead of treating the entire amount as revenue expenditure. The appellant contends that the software expenses has not resulted in bringing into existence any asset nor any benefit of enduring nature and should be allowed as revenue expenditure. 4. The Ld. CIT(A) as well as AO has erred in law and on facts in disallowing the ' claim of amortization of premium on HTM securities amounting to Rs. 81,44,33,541/- to maintain SLR from time to time a mandate by RBI for doing banking business. The claim is allowable in view of the decision of the Hon'ble Mumbai High Court in the case of CIT v. HDFC Bank Ltd. 366 ITR 505....
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....stances, and therefore, the issues involved in the instant appeal may be decided accordingly. 4. The ld. DR though supported the impugned order passed by the ld. Commissioner, but did not refute the claim of the Assessee, hence we are inclined to decide this appeal in the light of the decision rendered by the Hon'ble Coordinate Bench of Tribunal in the cases of Assessee itself for the preceding years. For the sake of brevity, we will decide this Appeal ground-wise. 5. Ground No. 1 challenges the affirmation of the disallowance made by the Assessing Officer u/s. 14A of the Act read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 (in short "the Rules") to the extent of Rs.5.99 crores. We observe that this issue is squarely covered by the order of Hon'ble coordinate Bench of Tribunal referred to above, whereby this issue has been decided in favour of the Assessee in the identical facts and circumstances of the case. Relevant part of the Tribunal order is reproduced herein below for ready reference: "Disallowance u/s 14A: 2. This issue is related to disallowance of Rs.5.46 crores u/s 14A applying Rule 8D(2)(iii). 3. According to the assessee bank has....
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....d then explained that all shares and securities held by a bank which are not bought to maintain Statutory Liquidity Ratio (SLR) are its stock-in- trade and not investments and income arising out of those is attributable, to business of banking. This Circular came to be issued in the aftermath of CIT Vs. Nawanshahar Central Cooperative Bank Ltd. [(2007) 15 SCC 611] / [(2007) 160 TAXMAN 48 (SC) ] wherein this Court had held that investments made by a banking concern is part of their banking business. Hence the income earned through such investments would fall under the head Profits & Gains of business. The Punjab and Haryana High Court, in the case of Pr. CIT, vs. State Bank of Patiala, 2017 (393) ITR 476 (P&H) while adverting to the CBDT Circular, concluded correctly that shares and securities held by a bank are stock in trade, and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income." 8. The Co-ordinate Bench Delhi Tribunal in the case of Punjab & Sind Bank & Anr. vs. Assistant Commissioner of Income Tax & Anr. In ITA No.781/Del/2018, 1208/Del/2018 Jul 12, 2021(2021) 62 CCH....
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....provement to the building. 32. Therefore, this issue stands covered by earlier orders as explained above and Assessee's appeal vide ground No. 2 of ITA No. 1199/Del/2018 for the A.Y. 15-16 is allowed." 7. Ground No. 3 pertains to the treatment of software expenses of Rs.17,78,06,658/- as "capital in nature" instead of revenue expenditure. 7.1 We observe that this issue too has been decided by the coordinate Bench in the order referred to above in favour of the Assessee, by observing as under: "Software Expenses: 10. This issue is pertaining to addition of Rs. 16,15,97,772/- being software expenses alleging it to be capital in nature as against the claim of the Assessee that the same should be allowed as revenue expenditure. 11. This issue is covered in favour of the assessee in its own case by the Hon'ble Delhi High Court for Assessment Years 2008- 09 to 2011-12 in ITA No.129/2018, 451/2017, 56/2018 and 414/2017 enclosed at page 61 to 66 in the paper-book vide order dated 17.04.2018, the operating part of the Hon'ble Delhi High Court Order at page no. 5, para 7 upto page no. 6 is reproduced as under: "7. The mere circumstance that ....
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.... was a claim made as an additional ground before the ld. CIT(A). The ld. CIT(A) at page 22, para 10 of his order has dismissed the assessee's ground by not admitting the claim relying on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. vs. CIT 284 ITR 373 (SC). 21. This issue is also covered in favour of the assessee by the order of the Co-ordinate Bench of ITAT in the assessee's own case for the A.Y. 2011-12 in ITA No.6443/Del/2014 and ITA No.5969/Del/2014. The relevant part of the order is reproduced as under: "15. The assessee has raised an additional ground reading as under: "1. The appellant by this additional ground is claiming relief of Rs.30,73,30,286 being the amortized premium on HTM securities which may kindly be allowed" 16. This being a legal ground taken up before the Tribunal for the first time is hereby admitted for disposal on merits. The Id. AR contended that mortised premium on HTM securities be allowed as deduction. It was fairly admitted that the amount was offered for taxation and no deduction was claimed either before the Assessing Officer or before the CIT(A). He submitted that the additional clai....
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....o be amortized for the remaining period of maturity of the security. The learned authorized representative fairly conceded that details of such premium splitting over the remaining period of the maturity was not readily available and hence, the matter be remitted to the file of the Assessing Officer for deciding it as per the above part of the Circular. No serious objection was taken by the learned Departmental representative. In view of these facts we set aside the impugned order and restore the matter to the file of the Assessing Officer for deciding this point in accordance with the above noted method." Therefore, respectfully following the order of the Tribunal we decide the issue in favour of the assessee and against the Revenue and confirm the order of the Commissioner of Incometax (Appeals) on this issue." 23. The above judgment of the Hon'ble Bombay High Court has been followed by the Hon'ble Karnataka High Court in the case of CIT vs. ING Vysya Bank Limited (2020) 422 ITR 116. The Hon'ble Karnataka High Court decided on two issues- one was whether the provision of section 115JB of the Income Tax Act would apply to a banking company and the second was whet....
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.... satisfied by the Assessee. 9.1 We observe that this issue also stands decided by the Coordinate Bench of Tribunal in favour of the Assessee in its case for A.Y. 2015-16 in the identical set of fact. Relevant part of the Tribunal order is reproduced herein below for ready reference: "40. This issue relates to disallowance of Rs.315 crores u/s 36(1)(vii) claimed as bad debts written-off by the assessee in its books of accounts. 41. The AO disallowed the claim of Rs. 315 Crores u/s 36(1)(vii) stating that: "8.3 I have perused the details and reply submitted by the assessee and the same is not acceptable as per the provisions of the Income Tax Act. Accordingly the claim of the assessee is disallowed." 42. However, the assessee has claimed deduction u/s 36(1)(vii) for a sum of Rs.315.00 crores in respect of bad debts written off identified separately in the profit & loss account other than those provisions which were claimed u/s 36(1)(viia). The AO has mentioned in his order that the assessee has provided complete details of the bad debts claimed u/s 36(1)(vii) of Rs.315.00 crores at page 16-17 of his order. 43. The ld. CIT(A) has reprodu....
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....assessee nor there are any such findings by the AO or by the ld. CIT(A). 45. The assessee submitted that all these bad debts are relating to advances which are reduced from the loans & advances and no deduction against such provisions has been claimed by the assessee in any of the assessment year u/s 36(1)(viia) of the Income Tax Act. 46. Further, the ld. CIT(A) in para 9.3.11 for the A.Y. 2015-16 accepted factual position that the sum of Rs.315.00 crores reduced from the loans & advances and thus the principle of the Hon'ble Supreme Court in the case of Vijaya Bank vs. CIT 323 ITR 166 for write off u/s 36(1)(vii) duly satisfied. The relevant extract of Hon'ble Supreme Court in the case of Vijaya Bank vs. CIT reported in (2010) 323 ITR 166 (SC) is reproduced as under: "To this extent, we agree with the contentions of Shri Bhattacharya. However, as stated by the Tribunal, in the present case, besides debiting the P&L a/c and creating a provision for bad and doubtful debt, the assessee-bank had correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the asset sid....
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....er of Undertaking Act, 1980) the provisions of section 115JB are not at all applicable to the appellant bank. The AO in his order has directly embarked about computation of book profit under 115JB. 49. The ld. CIT(A) in his order at page 22 to 32 has discussed and not allowed the ground of the assessee with respect to nonapplicability of the provision of section 115JB on the ground that the assessee bank has itself made book profit computation not only for the year under consideration but also in the earlier years. 50. This issue with regard to the applicability of 115JB to a banking company is a legal issue and the claim will depend on the provisions of the Act. Merely because assessee has made book profit computation in the return, the legal position would prevail and cannot be denied the relief if legally 115JB would not apply. 51. This issue is no longer res-judicata following judgments of the tribunals and the High Courts wherein it is categorically held that MAT provision u/s 115JB will not apply to a Banking Company: • Canara Bank vs. JCIT, LTU in ITA No. 530/Bng/2010 & other dtd. 30.03.2016 • M/s. Canara Bank vs. CIT(LTU)....
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....wered. All the appeals are dismissed." 54. For the AY 2013-14 and onwards, vide ground no. ground no. 3 of ITA no. 1582/Del/2017 (AY 13-14), ITA no. 1583/Del/2017 (AY 14-15) and ground no. 6 of ITA no. 1199/Del/2018 (AY 15-16), the assessee has contended that provisions of section 115JB (MAT) will not apply as the assessee is a Nationalized Bank under the Banking Company (Acquisition and Transfer of Undertaking) Act, 1980. 55. The provisions of section 115JB as amended by the Finance Act, 2012 w.e.f. 1.4.2013, inserting clause (a) and clause (b) in subsection (2) to section 15JB are as under: "115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, [2012], is less than [eighteen and one-half per cent] of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of incometax at the rate of [eighte....
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....ee's contentions for non-applicability of 115JB provisions are: "i) It is a case of Nationalized Bank, under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980. ii) Assessee is not a company incorporated under the Companies Act, 1956, nor recognized under section 3 of the Companies Act. iii) The second proviso to sub-section (1) of section 129 (earlier provision 211) of the Companies Act, 2013 is not applicable to the assessee. iv) Under section 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980 provides that "for the purposes of the Income-tax Act, 1961, every corresponding new bank shall be deemed to be Indian company and a company in which public is substantially interested". v) It is settled principle of law where deeming fiction is created by the legislature it has to be confined to the purpose for which it is created. CIT, Panji vs. Dempo Company Limited reported in (2016) 74 TAXMAN.com 15 (SC). Therefore, the Income-tax Act must recognize such banking company for the purpose section 115JB in order to make the provisions applicable. vi) When the charging section and the c....
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.... reserve relating to revalued asset on the retirement or disposal of such asset, if any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by,-]]] (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account: Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or] (ii) the amount of income to which any of the provisions of [section 10 (other than the provisions contained in clause (38) ....
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.... "Therefore, we are of the opinion, the Assessing officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J." 64. Owing to the provisions of the Act that amended, we hereby allow the appeal on this ground." 10. Respectfully following the decision of Hon'ble Coordinate Bench, on the issue in hand, Ground no. 6 also stands allowed. 11. Ground No. 7 challenges the sustenance of addition under MAT in respect of provision for bad and doubtful debt, by the ld. Commissioner, ignoring the fact that it was actual reduction in the value of advances reflected as such in the balance sheet and not a provision and hence, the same is not falling ....
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....s an actual write off by the assessee in his books." 68. Further, Hon'ble Karnataka High Court in the case of CIT vs. Yokogawa India Ltd. reported in [2012] 204 Taxman 305 has taken similar view and has held as under: "In the instant case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, item (c) of the Explanation is not attracted to the facts of the case. Item (c) in section 115JA and 115JB (1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision is made which is in the nature of diminution in the value of any asset would not fall within item (c) of Explanation (1). It is in that context the appellate Commissioner as well as the Tribunal has granted relief to the assessee. Realizing the fat....
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....om the loans and advances or the debtors from the assets side of the balance sheet the Explanation to section 115JA or 115JB is not at all attracted. In that context even if amendment which Is made retrospective the benefit given by the Tribunal and the appellate Commissioner to the assessee is in no way affected. In that view of the matter, there is not merit in this appeal." 69. The same view was taken by Co-ordinate Bench of ITAT Mumbai in the case of Bank of India Vs. ACIT in ITA No. 1767/Mum/2019 and 2048/Mum/2019 dated 11.12.2020. The relevant portion of the order is as under: "37. In the course of arguments before us learned counsel for the assessee has simply placed his reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT Vs Vodafone Essar Gujarat Limited [(2017) 85 taxmann.com. 32 (Guj)] but has not even dealt with the specific issues, as discussed above by he learned CIT(A). Be that as it may, one thing that is clear is that the Assessing Officer has not, at any stage, even verified whether he assessee has reduced the corresponding amount, of the provision of Rs.5359,64,38,015, from the loans and advances on the asset side of the bal....
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....ng a banking company; even there are specific provisions in the Income Tax Act, 1961 u/s 36(1)(viia) which allows deduction to the banks in respect of provisions made for bad and doubtful debts. The Income Tax Act has considered this peculiarity in the case of banking industry and has allowed deduction on the basis of provision whereas under normal circumstances, any provision made in the books is not allowed as deduction. The fact that the provisions of Section 115JB are now allowing the profit & loss account to be prepared in accordance with the regulatory act under which the bank operates, all provisions as mandated by RBI and duly recorded in the books should be allowed. Also when in the Income Tax Act itself the deduction is allowed to the assessee, it cannot be held that the computation under book profit provisions contemplated addition of such claim under the garb of provision for diminution in the value of assets. 72. Therefore also the addition made by the AO on this ground is directed to be deleted as it is not an adjustment contemplated u/s 115JB of the Act." 11.2 In view of the aforesaid decision of ITAT in Assessee's own cases qua issue in hand, Ground no. ....