TaxTMI 
TaxTMI 
2024 (11) TMI 759
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.....2. The learned CIT(A) failed to appreciate the fact that the issue has been decided in favour of the appellant by the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT [2012] 343 ITR 270 (SC). 2.3. The learned CIT(A) erred in not following the decision of Hon'ble Supreme Court decision in the case of Union of India vs Intercontinental Consultants & Technocrats (P.) Ltd [2018] 91 taxmann.com 67 (SC) in interpreting the words 'such debt' contained in proviso to Section 36(1)(vii). 2.4. The learned CIT(A) erred in concluding that Sections 36(1)(vii) and 36(1)(viia) of the Income Tax Act are not independent items of deduction post Finance Act, 1985. 2.5. The learned CIT(A) failed to appreciate the fact that introduction of Explanation 2 to Section 36(1)(vii) by Finance Act, 2013 has not changed the proposition of law as it existed before introduction of such explanation. 2.5.1. The learned CIT(A) failed to appreciate the fact that Explanation 2 was introduced to prevent double deduction in the case of same debt for which deduction was allowed u/s 36(1)(viia). 2.6 The learned CIT(A) erred in interpreting the purpose of the said explanation. ....
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....ue has raised the following grounds:- "1. The order of the Learned CIT(A) is opposed to law and facts of the case. 2. Disallowance u/s 14A: The CIT(A) has erroneously allowed relief on the ground that the AO failed to record non-satisfaction with regard to the correctness of the claim of the assessee, as envisaged under the provisions of section 14A has not been recorded by the AO before proceeding to make any disallowance. 3. The CIT(A) failed to notice from records that a show cause notice for determining and disallowing expenditure in accordance with section 14A rwr 8D was given to the assessee and this fact has also been explicitly mentioned in the assessment order. 4. The CIT (A) failed to take cognizance of such a proposal given by the Assessing Officer with regard to his dis-satisfaction about the correctness of the claim made by the assessee. 5. The CIT(A) erred in not considering that this would suffice the requirement of law as per provisions of section 14A, as the same has been communicated to the assessee before completion of assessments, even though there is no express-provision to give a finding regarding the satisfaction of the Assessing Officer. 6. The....
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....ade u/s 40(a)(ia) on the payments amounting to Rs. 29,95,61,815/- made to NPCL, when the decision of the CIT(A) on this point has not been accepted by the department and an appeal was filed by the department before the Hon High Court of Karnataka in the case of M/s Corporation Bank for the AY 2011-12 86 2012-13 and the said appeal is pending as on date. 16. The CIT(A) erred in not considering the fact that the service provided by the NPCI comes under the explanation provided under Sec 194 J arid accordingly liable for TDS and the failure to adhere to the TDS provisions would attract disallowance u/s 40(a)(ia). 17. For these and any other grounds that may be urged at the time of hearing it is prayed that the order of the CIT(A) may be cancelled and that of the Assessing Officer restored." ITA No.1107/Bang/2024 (Assessee's appeal) 4. Disallowance of deduction claimed U/s 36(1)(vii):- Briefly stated the facts of the assessee bank claimed a sum of Rs. 218.09 Crore as Bad Debts Written off (BDW) in the computation of income in Annexure X out of which Rs. 53.47 cr. was found to be prudentially written off. The majority of bad debts written off related to urban debts mounting to Rs.....
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....e 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 the case of Vijaya Bank vs. CIT (2010)(320 ITR 166 (SC)) to reiterate that it is entitled for deduction u/s 36(1)(vii) of the Act. The AO expressed the view that the issue considered by Hon'ble Supreme Court in the case of Vijaya Bank (supra) related to category of "Loss Assets", which is required to be provided @ 100% of the outstanding amount. He further expressed the view that the Hon'ble Supreme Court did not consider the question viz., Whether the provision for non-performing assets created by the assessee bank by debiting P & L a/c and crediting the provision account would comply with the requirement of actual write off of 'bad debts" as mentioned in sec. 36(1)(vii) of the Income tax Act? Accordingly, the AO held that the assessee cannot place reliance on the decision rendered by Hon'ble Supreme Court in the case of Vijaya Bank (supra). Accordingly the AO held that the amount of Rs. 145.16 crores was mere prudential write off and hence not allowable as deduction. He also held that it i....
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....ed by Hon'ble Supreme Court in the case of Catholic Syrian Bank (2012)(343 ITR 270)(SC) was rendered under the assumption that the banks would maintain separate PBDD a/c in respect of rural branches and non-rural branches and therefore it is possible to distinguish PBDD as one in respect of rural branches and non-rural branches. The Ld CIT(A) expressed the view that the claim of the bank that the provisions of sec. 36(1)(viia) are distinct and independent of sec. 36(1)(vii) is based on the old circular no. 258 dated 14.6.1979 issued in connection with old law. Accordingly the Ld CIT(A) held that the PBDD allowed u/s 36(1)(viia) of the Act is for single account since its introduction in 1985 and it is for all types of advances including rural advances. He also observed that the above said view has been clarified by Finance Act, 2013 by inserting Explanation 2 to sec 36(1)(vii) of the Act. Accordingly, the Ld CIT(A) held that the bad debts pertaining to non-rural advances should also be first adjusted against PBDD created u/s 36(1)(viia) of the Act. Accordingly, the Ld CIT(A) directed the assessee to furnish workings of PBDD a/c. As per the working so furnished, the opening credit ....
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.... 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 bad and doubtful debts relating to rural advances created u/s 36(1)(viia). Both AO and ld. CIT(A) have misconstrued the statutory provisions while observing that proviso to section 36(1)(vii) would also apply in case of bad debts relating to nonrural advances. The Hon'ble Supreme Court in case of Catholic Syrian Bank Vs. CIT (supra) while analyzing provisions of section 36(1)(vii) and 36(1)(viia) have observed that section 36(1)(viia) applies only to rural advances. The observations made by Hon'ble Apex Court in this regard in paras 26 & 27 of the judgment is extracted hereunder for convenience. "26. The Special Bench of the Tribunal had rejected the contention of the Revenue that proviso to s. 36(1)(vii) applies to all banks and with reference to the circulars issued by the Board, held that a bank would be entitled to both deductions, one under cl. (vii) of s. 36(1) of the Act on the basis of actual write off and the other on the basis of cl. (viia) of s. 36(1) of the Act on....
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....(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 other words, the scheduled commercial banks continue to get the full benefit of the write off of the irrecoverable debt(s) under Section 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debt(s) under section 36(1)(viia). A reading of the Circulars issued by CBDT indicates that normally a deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed even in respect of a mere provision without insisting on an actual write off However, this may result in double allowance in the sense that in respect of same rural advance the bank may get allowance on the basis of clause (viia) and also on the basis of actual write off under clause (vii). This situation is taken care of by the proviso to clause (vii) which limits the allowance on the basis of the actual wri....
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....e 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 section 36(1)(vii) would apply in respect of bad debt written off relating to nonrural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount of Rs. 209.94 crore representing actual write off in the books of account of bad debts relating to non-rural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A)." 5.4 Following the above said decision, we hold that the view expressed by Ld CIT(A) is not legally correct. Accordingly, we set aside the order passed by Ld CIT(A) with regard to his alternative decision, i.e., the view that the proviso to sec. 36(1)(vii) which requires adjustment of bad debts against provision allowed u/s 36(1)(viia) would apply to non-rural advances also. Accordingly, we direct the AO to delete the disallowance of Rs. 192.02 crores. 7.5 The Ld A.R submitted that the....
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....s 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 limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account under that clause. ........... Explanation 2 - For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (via) and such account shall relate to all types of advances, including advances made by rural branches;" The provisions of sec.36(2)(v) are relevant here and it reads as under:- "(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply---- ....... (v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that p....
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.... 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) the provision allowed u/s 36(1)(viia) shall apply only to rural branches. (ii) since it does not maintain two separate PBDD a/c for rural and non-rural advances, the bad debts relating non-rural branches need not be reduced from the PBDD a/c allowed u/s 36(1)(viia) in terms of sec. 36(2)(v) and the proviso to sec. 36(1)(vii) of the Act. However, the Ld A.R submitted before us that the Explanation 2 has been inserted in sec. 36(1)(vii) by Finance Act, 2013 (after the decision of Catholic Syrian Bank) to debar certain assessee's to avail the interpretation given by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra). 7.11 We have considered the arguments advanced by Ld A.R on this point. According to Ld A.R, if we closely analyse the provisions of sec. 36(1)(viia) of the Act, the intention of the Parliament in inserting Explanation -2 shall become clear. Accordingly, we analysed the provisions of sec.36(1)(viia) and notice that the said section allows deduction of PB....
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.... 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 inserting Explanation-2 in sec. 36(1)(vii) of the Act. It is extracted below:- "Clarification for amount to be eligible for deduction as bad debts in case of banks:- Under the existing provisions of section 36(1)(viia) of the Income-tax Act, in computing the business income of certain banks and financial institutions, deduction is allowable in respect of any provision for bad and doubtful debts made by such entities subject to certain limits specified therein. The limit specified under section 36(1)(viia)(a) of the Act restrict the claim of deduction for provision for bad and doubtful debts for certain banks (not incorporated outside India) and certain cooperative banks to 7.5% of gross total income (before deduction under this clause) of such banks and 10% of the aggregate average advance made by the rural branches of such banks. This limit is 5% of gross total income (before deduction under this clause) under sections 36(1)(viia)(b) and 36(1)(viia)(c) for a bank incorporated out....
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....istinction 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 Explanation in clause (vii) of section 36(1) stating that for the purposes of the proviso to section 36(1)(vii) and section 36(2)(v), only one account as referred to therein is made in respect of provision for bad and doubtful debts under section 36(1)(viia) and such account relates to all types of advances, including advances made by rural branches. Therefore, for an assessee to which clause (viia) of section 36(1) applies, the amount of deduction in respect of the bad debts actually written off under section 36(1)(vii) shall be limited to the amount by which such bad debts exceeds the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) without any distinction between rural advances and other advances. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. The CBDT has issued an Explanatory note to the Provisions of Finance Act, 201....
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....s 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 Parliament to clarify that the PBDD allowed u/s 36(1)(viia) shall apply to all types of advances including advances made by rural branches. However, as stated earlier, the clause (a) to sec.36(1)(viia) has been held to be applicable to rural advances only and this interpretation has not been overridden by any amendment. 7.15 As noticed earlier, the assessee's covered by clauses (b) to (d) may not be having rural branches, but they would be getting the benefit of deduction of PBDD u/s 36(1)(viia) of the Act. Hence, in order to bring those assessee's within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v), it was imperative for the Parliament to clarify the legal position and accordingly Explanation-2 has been inserted in sec. 36(1)(vii) of the Act. Accordingly, on the analysis of the provisions discussed above, we are of the view that the above said Explanation-2 shall operate (a) in respect of clause (a) of sec. 36(1)(viia) of the Act only to rural advances and (b)....
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.... 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 income tax at the rate of eighteen and one-half per cent. (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or (i) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss, 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 statement of profit and loss), if any such amount is credited to the statement of profit and loss: (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. 7. Thus from perusal of the relevant extract of section 115JB, it....
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....rder of the AO and submitted that the AO has correctly added the disallowance made u/s. 14A for computing income u/s. 115JB. 10. Considering the rival submissions we noted that the AO has calculated the disallowance u/s. 14A of Rs. 14,94,21,888 and this issue was raised before the CIT(A) and the CIT(A) has also decided the issue in favour of the assessee. Against the deletion by the CIT(A), the revenue has raised this issue before us in ground no.2 to 9 of revenue's appeal. After considering the submissions we have dismissed the appeal of the revenue on this issue observing that there should not be disallowance u/s. 14A and decided this issue in favour of assessee, therefore no question arises for adjudication u/s. 115JB. Hence this ground becomes infructuous. 11. Ground No.6 & 7 relates to addition of Rs. 25,85,00,000 being provision for wage arrears and Rs. 20 crores towards Ex-gratia and Bonus while computing book profits computed u/s. 115JB. During the course of assessment proceedings, the AO noted that while computing taxable income these provisions has been added back by the assessee, however, while computing the book profit, these provisions have not been added back and th....
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....ched to it. The investments made by the assessee are from common pool of funds, therefore the proportional expenditure should have been disallowed by the assessee since the assessee has interest bearing and interest free funds available. The assessee submitted that during the relevant AY the investment have come down by Rs. 59,36,09,174 and the assessee has own fund of Rs. 3389.06 crores and increased from previous AY by Rs. 336.86 crores. Therefore there is no any capital (internal and external) outlay. From the submissions made by the assessee, it was observed that there is no incremental investment during the year, there are interest free surplus funds, tax free income is only incidental income received from investments made out of cost free funds and the income earning activity does not require human agency and no expenditure involved. From the further reply submitted by the assessee, the AO further noted that certain administrative expenditure cannot be denied and there is direct and indirect expenditure involved towards earning of such exempt income. He relied on certain judgments and calculated the disallowance u/s. 14A r.w. Rule 8D of Rs. 14,94,21,888. 17. On appeal, the l....
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....eal Memorandum cited supra, among them, substantial question of law Nos.2 & 4 are covered by the judgment and are answered by the co-ordinate bench of this court vide judgment dated 31..01.2020 in ITA No.481/2014. Paras 8 to 10 of the said judgment dated 31.01.2020 passed in the aforesaid case, reads as under: "8. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of Section 14A of the Act: Section 14A (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the tot....
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....in this regard today. This court by an order passed on 16.01.2020 passed in ITA No.13/2014 has already held that the provisions of Section 115JB do not apply to the banking companies. Therefore, the substantial questions of law Nos_3, 4 and 5 and substantial question of law framed in ITA 99/2010 are rendered academic and need not be answered. So far as substantial; question of law No.2 in ITA No.97/2010 is concerned, the same is squarely covered by the decision of the Supreme Court in 'CIT VS. ESSAR TELEHOLOINGS LTD.',(2018) 401 ITR 445, wherein it has been held that provisions of Section 114A read with rule 8D of the Income Tax Rules are prospective in nature and can not be applied to any assessment year prior to Assessment Year 2008-09. Accordingly, the aforesaid substantial question of law is answered against the revenue and in favour of the assessee." 5. In this regard, a memo is also filed by the learned counsel for the appellant, which reads as under: "MEMO ON BEHALF OF THE APPELLANT The appellant respectfully submits that in view of the substantial questions of law 2 and 4 having been covered in favour of the assessee in the earlier orders in assessee's own....
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....s of Section 36(1)(viia) is exactly as specified in Rule GABA of the Income Tax Rules. The details of working is furnished 23. From the above submissions, it was noted that assessee has not furnished details as asked regarding rural branches and average aggregate advances as prescribed under the Rules. Accordingly a further query was raised to assessee. The assessee furnished reply las under:- Deduction claimed u/s 36(1)(viia): Identification of rural branches: AR submitted that the rural branches as per list furnished earlier, were classified as rural branches by RBI notification/at the time of commencement of branch. However, as and when they are notified to be non rural the same is modified for the purpose of working out rural advances as per rule 6ABA. Assessee requested to justify the claim that they are still rural branches as on date and furnish details of population in each of the rural branches as claimed, with complete address. The branches which are part of urban agglomeration are not be considered as rural, in view of the decision of Hon'ble High Court of Kerala in the case of Lord Krishna Bank, which was discussed during hearing. Assessee asked to justify/re....
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.... should be defined as per judgment of Hon'ble jurisdictional High Court in the case of Lord Krishna Bank and advances made by rural branches are to be considered but not the cumulative balances. The assessee is eligible to get deduction u/s. 36(i)(viia) to the extent of 7.5% of total income before allowing this deduction and 10% of the AAA. The quantum of advances should be only the advances made but not the advances outstanding at the end of the year. The assessee contended that there is no such interpretation with regard to advances made. Ther AOA relied on various judgments. During the course of hearing the assessee was informed that deduction is only 10% of AAA and not the cumulative balance outstanding. The AO noted that the terminal balances / outstanding balances on this deduction is being claimed, year after year will lead to a situation wherein the advances on which deduction is allowed during earlier years will also get deduction in the subsequent year which may not be the intention and purport of the law. The words "advances made" signify that the advances made during the year and hence the cumulative balance which includes advances granted during earlier years cannot be....
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....CIT(A) has rightly allowed the appeal of the asse. He also relied on the coordinate Bench decision in the assessee's case in ITA Nos. 963 & 964/Bang/2023 dated 19.2.2024 for AYs 2016-17 & 2017-18 where it is held as under:- "40. Considering the rival submissions, the assessee has computed deduction u/s 36(1)(viia) of Rs. 191.95 crores being a scheduled bank to the extent of 7.5% of the total income and 10% of the AAA of rural branches. The AO noted that the assessee has claimed excessive deduction on two counts. Firstly the assessee has not updated its information about categorization of rural branches which has either converted to semi urban branches or where the population has exceeded 10,000. Secondly the assessee has claimed 10% of the entire advances of rural branches including the opening balances. The AO discussing the provision and relying on the decision of Hon'ble High Court of Kerala in the case of Lord Krishna Bank on the basis of information furnished by the assessee restricted the deduction to the tune of Rs. 103.72 crores. This issue has been decided by the Hon'ble Jurisdiction high Court in the case of CIT, LTU v. Canara Bank [2023] 147 taxmann.com 171 (Karnataka)....
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....e case of Vijaya Bank Case. Order passed by the Tribunal in Canara Bank's case followed in Vijaya Bank case has attained finality and the Revenue has not challenged the said order. Further, the High Court of Calcutta, while considering an identical situation as recorded thus, "Mr. Khaitan, learned senior Advocate appeared on behalf of the assessee and submitted that the computation to be made as prescribed by rule 6ABA is for the purpose of fixing the limit of the deduction available under section 36(1)(viia). Clauses (a) and (b) in rule 6ABA cannot be given the restricted interpretation. The amounts of advances as outstanding at the last day of each month would be a fluctuating figure depending on the outstanding as increased or reduced respectively by advances made and repayments received. The assessee might provided for bad and doubtful debts but the deduction would only be allowed at the percentage of aggregate average advance, computation of which is prescribed by rule 6ABA. We find from the amended direction made by the Tribunal that such direction is in terms of rule 6ABA. The ITO has made the computation of aggregate monthly advances taking loans and advances made dur....
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....er are allowed as deduction. It is clear from the said provision that the distinction has been made between the branches situated in the rural areas and the branches situated outside the rural areas. In respect of rural area, branches have to cater to the requirements of the poor and underprivileged section of the society. The chances of recovery by the national bank being weaker by 10 per cent to the aggregate average, advances made in those rural branches is given deduction towards bad and doubtful debts. The Legislature has defined what is 'rural branch', as it is clear from the explanation. They have fixed the population of not more than 10,000 as determining the rural branch and that population of 10,000 should be according to the last preceding census of which the relevant figures have been published before the first day of previous year. Therefore, this benefit of 10 per cent of the aggregate average advances made by the rural branches of the bank is extended to the small population, living in the villages which is less than 10,000. If the population of such village is more than 10,000, then the said benefit of 10 per cent deduction is not available. Hence, one sho....
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.... branches. The publication of the final population total is only a formality. If provisional population total shows more than 10,000 and in the final population total figure shown is less than 10,000, then it will make difference. But in both the provisional population total and the final population total if figure is mentioned above 10,000, it makes no difference in the instant case. It is not the case of the assessee that though the provisional figure mentioned is above 10,000 in the final population total it has gone below 10,000 and, therefore, provisional population total cannot be acted. In that view of the matter, the Tribunal was justified in upholding the order passed by the assessing authority where they have acted on the Census figures of 2001 as reflected in the provisional population totals and denied the benefit to the assessee. [Para 8]". 43. Respectfully following the above judgment, we hold that for claiming deduction u/s. 36(1)(viia) in respect of rural branches, the latest/provisional census available should be considered. Accordingly this issue is remitted back to the AO. The assessee is directed to provide the latest/provisional census which was available for....
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....cate u/s. 197 obtained and furnished by the deductee for non-deduction of tax. He further noted that even if the deductee has offered the receipts, the deductor is liable for consequences of non-deduction of tax and the Notification relied by the assessee is applicable from its publication i.e. 17.6.2016 and payment made prior to such date are not eligible for any TDS exemption. He aloo noted that NPCI which is fully owned subsidiary of RBI has issued several Notifications in the form of Circulars/letters to the member banks to deduct taxes uniformly and intimate the details for their record. It was noted that the exemption from TDS to the NPCI is applicable from 17.62016 and the assessee is liable for deduction of TDS before that date since the transaction was done in the ordinary course of business. NPCI also collects charges from ATM card issuing bank whose customer has done transaction in other bank AT"M and share it with other bank. NPCI also retains a part of such receipt as its share of profit. All this show that the assessee is utilising service of NPCI, accordingly it is liable for TDS. It was also noticed that the TDS AO has also passed orders in this regard for non-deduc....
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....29/PAN/2018 M/s. The Karnataka Bank Ltd., Mangalore Page 11 of 22 of relief granted by the first appellate authority in respect of remaining amount of disallowance made u/s 40(a)(ia) of the Act. 6.1 The AO noticed that the assessee has claimed a sum of Rs. 17.27 crores as expenditure towards expenses on ATM charges. The breakup details is given in the order of ld CIT(A) as under:- NPCI (NFS) (includes SWITCH FEE) - 16,17,01,971 Cash Tree network - 95,74,697 VISA Charges - 15,01,663 17,27,78,331 The assessee submitted that these payments have been made to various agencies like NPCI, Cash tree networks and VISA international in connection with settling dues amongst the banks in respect of transactions entered by the customers of the assessee bank through ATM of other banks and vice versa. Accordingly, it was submitted that these payments are not liable for deduction of tax at source. However, the AO took the view that the assessee is liable to deduct tax at source u/s 194J of the Act. The assessee replied that the ATM machines are taken on hire by the assessee and hence there is no transfer of usage or right to use any industrial, commercial or scientific ....
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....ii) Payment to Cash Tree Network towards ATM usage charges (Rs.99,87,801/-) iii) VISA fees paid to VISA International (Rs.96,87,529/-) Accordingly, he disallowed all the three expenses aggregating toRs.17.01 crore by invoking provisions of sec. 40(a)(ia) of the Act. The ld CIT(A) noticed that the Bengaluru Bench of Tribunal has held in the case of Corporation Bank in ITA No.1264 and 1352/Bang/2013 for asst. year 2011-12 that the payments made to National Financial Switch and Cash Tree could not be considered as commission or brokerage falling within the purview of sec. 194H of the Act. Accordingly the Tribunal had deleted identical disallowances made in the hands of Corporation Bank. Accordingly he directed the AO to delete the disallowance of payments made to NFS and Cash Tree. 15. In respect of payment of Rs. 96.87 lakhs made to Visa International, the ld CIT(A) restored the issue to the file of the AO with the direction to verify the details of Tax deduction and allow deduction to the extent of TDS deducted. 16. The assessee has filed cross-objections in respect of addition of Rs. 96.87 lakhs made to Visa International, which has been confirmed by ld CIT(A) by way of s....