TaxTMI 
TaxTMI 
2023 (3) TMI 1425
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....he 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 (Mum ). 5. The Ld. CIT(A) as well as AO has erred in law and on fa....
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....gh 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 sufficient non-interest bearing funds like share capital, reserves, current account balances for making any investment in tax free secu....
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....come 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 0324 (Del Trib.), had taken the similar view and deleted the disallowance u/s 14A of the Income Tax Act. 9. Therefore, this ground of the assessee is hereby allowed, the Revenue's ....
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....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 the depreciation rate is spelt out in the Schedule to the Income-tax act in our opinion is not conclusive as to the nature of the expenditure and whether it resulted an enduring advantage to a particular assessee. It is nobody's case that assessee is dealing ....
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....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 claim has been raised because of the favourable judgment of the Hon'ble Bombay High Court in CIT vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom). Since this issue was not raised before the authorities below, we are of the considered opinion that the ends of justice would meet adequately if the Assessing Officer is directed to....
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....cular. 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 whether the amortization of investment under HTM category done as per RBI guidelines was allowable expenditure u/s 37(1) of the Act. 24. At page 20 of the paper book is the question of law as under: "In addition, in ITA No. 18/2014, an additional substantial question of law arises, viz., whether the Tribunal committed an error of law in allowing the claim o....
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....ssessee 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 reproduced in her order at page no.66 the relevant page of the Annual accounts wherein the assessee has shown under the code 2404 separately "provision for bad and doubtful debts further provision (write off)" of Rs.315 cr. The provisions u/s 36(1)((viia) are separate which has also been noted by the Id. CIT(A) in her order pages 66-67. However, the ld. CIT(A) has concluded that it is not a "bad debt written off but it is still a "provi....
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.... 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 side of the balance sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the balance sheet was shown as net of the provision "for impugned bad debt". In the judgment of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala (supra), a mere debit to the P&L a/c was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only....
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....ation 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) In ITA No. 305/Bang/2011 dtd. 18.06.2012 * Krung Thai Bank PCI vs. Joint Director of Income Tax (ITAT) (Mumbai) in ITA No.3390/Mum/09 dtd. 30.09.2010 reported in (2010) 45 DTR 218 * Union Bank of India vs. ACIT, LTU (ITAT) (Mumbai) in ITA Nos.4702 to 4706/Mum/2010 dtd. 30.06.2011 * Indian Bank vs. Addl. CIT (ITAT) (Chennai) in ITA No.469/Mds/2010 dtd. 03.08.2011 * Union Bank of India (ITAT Mumbai) in ITA Nos.4155 to4161 of 2011 dtd. 27.03.2012 * Oriental Insurance Co. Ltd. vs. DCIT I ITA No.447/2015 dtd ....
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...."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 [eighteen and one-half per cent]]. (2) [Every assessee,- (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part II of Schedule VI to the Companies Act, 1956 (1 of 1956); or (b) being a company, to which the proviso to sub-section (2) of section 211 of the Companies Act, 1956 (1 of 1956) is applicable, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of the Act gover....
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.... 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 computing provision together would constitute an integrated code. In case charging section does not apply then the computation section fails. CIT vs. B C Shrinivas Setty 128 ITR 294." 58. However, the plea of the assessee with respect to nonapplicability of section 115JB to the Banking Companies was rejected by the ITAT Mumbai "B" Bench in ITA No.1767/Mum/2019 for the A.Y. 2015-16 in the case of Bank of India vs. ACIT Mumbai vide order dated 11th December, 2020. 59. There is no jurisdictional High Court decision or for that matter any other High Court decision against the assessee. In view of the fact that two use are possible, the view that favour the assessee may kindly be considered, more so in the case of a Nationalized Ba....
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....ofit 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) thereof)] or [***] section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or (iia) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); or (iib) the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or] (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or....
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....allenges 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 under of the items from (a) to (j) of the Explanation to section 115JB of the Act and cannot be added in the book profit of the Assessee. 11.1 We find that this issue too, in the identical facts and circumstances, has been decided by the coordinate Bench of Tribunal in the decision referred to above by holding as under : "Bad and Doubtful Debts: 65. The assessee is a banking company and is governed by the RBI regulations. The above provisions for bad and doubtful debts are made by the assessee bank as per the RBI Regulations which are called prudential norms and are in the nature of statutory provisions. The same are not in the nature of provisions which are set aside by the assessee for meeting any contingent liability/ or provision set aside for any diminution in the value of assets. The same are in relation to actual debts and debited in the Profit & Loss account. 66. The assessee submit....
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....de 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 fatality of the said argument, it is contended now that item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, if case of the assessee falls under item (c). In meeting the aforesaid case, the assessee brought on record the judgment of the Apex Court in the case of Vijaya Bank vs. CIT [2010] 323 ITR 166 /190 Taxman 257 where the Apex Court had an occasion to consider this Explanation . It accepted the argument on behalf of the revenue to the effect that the Explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other. A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the Explanation stood inserted. Prior to the Finance Act, 2001 many assessees used to take the benefit of deduction under section ....
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....t 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 balance sheet, because if that be so, in terms of Vodafone Essar (supra) judgment of Hon'ble Gujarat High Court particularly as there is nothing contrary thereto by Hon'ble jurisdictional High Court, that amount will have to be reduced from the book profits. It cannot indeed by open to us to disregard the law laid down by Hon'ble non jurisdictional High Court, on the ground that coordinate branches of the Tribunal have taken a particular view- as has been done by the CIT(A), and that it is not the view of Hon'ble jurisdictional High Court, as is laid down by Hon'ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf [(1978) 113 ITR 589 (Bom.)]. In the hierarchical judicial system that we have, wisdom of the Court below has to yield ITA No. 740/Del/2020 30 to higher wisdom of the Court above and, therefore, one a authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of....
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....e 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. 7 too stands allowed. 12. Ground No.8 challenges the upholding of addition of Rs.81,44,33,541/- being loss on amortization of permanent investment alleging the same to be notional loss. 12.1 We observe that this issue also stands decided in favour of the Assessee in the identical set of facts & circumstances by the Hon'ble coordinate Bench of Tribunal in the aforesaid decision, in the cases of Assessee for the preceding assessment years. For the sake of convenience, the findings reached by the Tribunal are being reproduced herein below: "HTM Investment: 73. The assessee submitted that loss on amortization of investment is on account of the investments purchased at the prevailing market price which is higher than its face value. The difference between the purchase price and face value of investments is amortized in equal installments over the life of the investments. This is as per the RBI guidelines master circular No RBI/2013- 14/109 DBOD No BP.BC. 8/21.04.141/20....