TaxTMI 
TaxTMI 
2024 (11) TMI 1452
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....u/s. 115JB of the Act. The assessee challenged the said proceedings before the Ld. CIT(A) but the Ld. CIT(A) had not accepted the case of the assessee and dismissed the appeals. 3. For the sake of convenience, the dispute involved in the other two i.e. A.Y. 2016-17 and 2017-18 are enumerated as follows: 2016-17 Sl. No. Particulars Amount (in Rs. ) 1 Disallowance of bad debts claimed u/s 36(1)(vii) 1225,48,50,405 2 Disallowance of CSR expenditure 2,73,39,000 3 Disallowance of Penalty levied by RBI 5,96,810 4 Disallowance of expenditure u/s 14A 52,87.69,672 5 Restriction of claim u/s 36(1)(viia) to Rs 178.03 crores against the claim of Rs 634.27 456,23,09,625 6 Rejection of claim made u/s 36(1)(viii) 77,86,61,944 7 Disallowance of Depreciation on Investment 325,61.24.113 8 Disallowance of sundry assets written off 1,31.98,076 Total 2142,18,49,645 2017-18 Sl. No. Particulars Amount (in Rs. ) 1 Disallowance of bad debts claimed u/s 36(1)(vii) 1295,07,50,151 2 Disallowance of CSR expenditure 4,97,00,000 3 Disallowance of Penal....
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....h the following grounds: AY 2014-15: "1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in holding that provisions of Section 115JB are applicable to the bank. 2.1. The learned Commissioner of Income Tax (Appeals) failed to appreciate the fact that the provisions of Section 115JB of the Act are not applicable to the appellant. 2.2. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision of the High Courts & Tribunals. 3. Without prejudice to the above, 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. 3.1. The learned Commissioner of Income Tax (Appeals) failed to appreciate the fact that the various items added to the book-profit are not covered by the Explanation to Section 115JB. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed." AY 2016-17 "1. The order of the l....
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....are not applicable to the appellant. 5.2. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision of the High Courts & Tribunals. 6. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not adjudicating various items added to arrive at the bookprofit which are beyond the scope of the section. 6.1. The learned Commissioner of Income Tax (Appeals) failed to appreciate the fact that the various items added to the book-profit are not covered by the Explanation to Section 115JB. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed." AY 2017-18 "1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in law in disallowing the CSR expenditure incurred by the Bank amounting to Rs. 4,97,00.000/- by holding that the expenditure on CSR activities is not an allowable expenditure u/s 37 post amendment made to Section 37 which is applicable from AY 2015-16. 2.1. Th....
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....ls) failed to appreciate the fact that the various items added to the book-profit are not covered by the Explanation to Section 115JB. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed." 7. At the time of hearing, the Ld.AR submitted that the Hon'ble Special Bench of the Mumbai Tribunal had decided the issue of the applicability of Section 115JB of the Act in so for as the Nationalised Banks are concerned and held that the banks are not companies and therefore Section 115JB would not apply to the banking concerns and consequently, the other disallowances by treating the assessee as a company and added the same to the book profits is also not correct and filed a paper book of case laws in support of his argument. The Ld.AR also brought to our notice that the other issues disputed in the assessment years 2016-17 and 2017-18 are also covered by the orders of the Tribunal as well as the Hon'ble Gujarat High Court and prayed to allow the appeals. The Ld.DR relied on the order of the lower authorities and prayed to dismiss the appeals. 8. We have heard the arguments of both the sides and perused th....
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...., the tax on book profits (MAT) are not applicable to such banks." 13. In view of the categorical finding given by the Hon'ble Special Bench, we came to the conclusion that the assessee is not a company and therefore the section 115JB would not be applicable to all the assessment years in dispute. Therefore, we set aside the orders of the AO as well as the Ld.CIT (A) insofar as the applicability of section 115JB of the Act is concerned and decide the issue in favour of the assessee. 14. The other dispute involved in the assessment year 2014-15 is with regard to additions made to book profits u/s. 115JB of the Act. The AO as well as the Ld.CIT (A) had confirmed the following additions made to the book profit u/s. 115JB of the Act by holding that such provisions / written off would get covered under clause (i) to Explanation 1 of section 115JB of the Act. Sl. No. Particulars Amount (in Rs) 1. Bad debts written off 2,58,26,390 2. Sundry assets written off 20,74,636 3. Provision for NPA 367,77,05,141 4. Provision for restructured accounts 13,04,66,000 5. Diminution in value of investment on shifting 77,07,91,951  ....
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....findings. "This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation u/s 135 of Companies Act 2013. and there is thus now a line of demarcation between the expenses incurred by the assessee on discharging corporate social responsibility under such a statutory obligation and under a voluntary assumption of responsibility. As for the former, the disallowance under Explanation 2 to Section 37(1) comes into play. but, as for latter. there is no such disabling provision as long as the expenses, even in discharge of corporate social responsibility on voluntary basis, can be said to be "wholly and exclusively for the purposes of business". There is no dispute that the expenses in question are not incurred under the aforesaid statutory obligation. For this reason also. as also for the basic reason that the Explanation 2 to Section 37(1) comes into play with effect from 1st April 2015. we hold that the disabling provision of Explanation 2 to Section 37(1) does not apply on the facts of this case." 18. Further, the Coordinate Bench of this Tribunal also considered the issue in ITA No. 3300/Bang/2018 dated 01.12.2021 in the case of ....
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....of the said guidelines and if an obligation springs from complying with the said guidelines, it has to be regarded as expenditure incurred on grounds of commercial expediency and allowed as a deduction. Therefore the expenditure in question, on the facts of the present case, satisfies the requirements of Sec. 37(1) of the Act. In view of the facts and circumstances of the given case, we are of the view that the deduction claimed by the assessee should be allowed in full. We hold and direct accordingly and allow ground No. 3 raised by the assessee." In view of the above said judgment and the orders, we are also accepting the case of the assessee and allow the CSR claim made by the assessee as allowable expenditure for AY 2016-17 and 2017-18. 20. The other dispute raised by the assessee is the penalty imposed by the Reserve Bank of India for the deficiencies in exchange of notes and coins/remittances sent to RBI for operations of currency chest etc. which is a civil liability under the RBI Act and therefore allowable expenditure u/s. 37 of the Act and therefore the assessee claimed the same as an allowable expenditure u/s. 37 of the Act. 21. We have also perused the ord....
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.....w.s. 47A(1)(b) of the Banking Regulation law does not stipulate any such criminal liability. We follow the aforestated case law in these facts and direct the assessing authority to allow the assessee's claim of Rs. 5 lacs as revenue expenditure." In Mangal Keshav Securities Ltd. (supra), the assessee was engaged in the business of share/stock broking. It paid a sum of fine/penalty to stock exchange for non-maintenance of KYC forms etc. Said penalty was disallowed by the AO by invoking Explanation 1 to section 37. The Tribunal held that : "The assessee-company is engaged into stock broking activities and also in financial services which involves substantial compliance requirements with various regulatory authorities, e.g., BSE, NSE, CDSL, NSDL and SEBI, etc. In the regular course of the business of the assessee-company, certain procedural non-compliance are not unusual, for which the assessee is required to pay some fines or penalties. These routine fines or penalties are 'compensatory' in nature; they are not punitive. These fines are generally levied to ensure procedural compliances by the concerned persons. Only those payments, which h....