TaxTMI 
TaxTMI 
2023 (12) TMI 1446
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....391/B/2-23 therefore becomes infructuous at this stage. However, he sought liberty to revive the appeal if circumstances do warrant in future. 2.1. The Ld. DR did not object to prayer of assessee. 3. We have perused submissions from both the sides in the light of records placed before us. The Ld. AR has filed the submission which is reproduced below in ITA 391/B/2023:- 3.1. Based on the above submission by the assessee, it is not necessary to analyse the issues raised by the assessee in ITA No.391 as the appeal has become infructuous. However, liberty is granted to assessee to take necessary steps to revive he appeal in the circumstances do warrant in future. Accordingly appeal filed by the assessee in ITA 391 stands dismissed as infructuous. 4. The Ld. AR submitted that ITA 392 & 663 in case of Canara Bank filed by the assessee and revenue, the issues are largely covered by assessee's own case. He has filed a chart wherein the issues raised by the assessee has been summarized. For the sake of convenience, the same is reproduced as under:- Gr.No. ISSUES Contested in 3 & 7 Disallowance u/s. 14A Assessee appeal 4 & 9-10 Applicability of section ....
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...." employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that : 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. ......................................................1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court tha....
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....list of judgement of the Hon'ble jurisdictional High Court which is placed on record. 5.2 On the other hand, the Ld. DR relied on the order of lower authorities and further submitted that the CIT(A) after relying on various judgments observed that " In view of the above, I am not inclined to concur with this plea of the appellant that it had held the securities as stock-in-trade, not with the intention to dividend income. The various judicial precedents relied upon by the appellant, on the above issue, are of no avail as the facts of the instant case are distinguished, as elaborated in preceding paragraphs". The Ld. DR further submitted that the department has not accepted the judgment of the jurisdictional High Court and has filed appeal before the Hon'ble Supreme Court and SLP for the AY 2009-10 to 2011-12 is accepted. Therefore, he requested that the issue should be decided in favour of revenue. 6. Considering rival submissions, we note that this issue has been settled by the Hon'ble jurisdictional High Court in assessee's own case for AY 2011-12 & 2012-13 in ITA No.258/2020 dated 8.2.2021 observing as under:- " 4. Even though four substantial question....
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....d, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other incomes which is includable in the total income for the purposes of chargeability to the Lax. It i4 equally well settled that expenditure is a pay out. In order to attract applicability of section 14,4 of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [See: WALFORT SHARE AND STOCK BROKERS (P) LTD SUPRA as well as M.4XOP INVESTMENTS LTD SUPRA]. In the instant case, the assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. In view of aforesaid enunciation of law by the Supreme Court, the first substantial question of law framed by this court is answered in favour of the assessee and against the revenue. 10. Learned counsel for parties, have fairly admitted that in case this court frames a substantial question of law that whether provisions of Section 115JA apply to the Banking Companies are not the remaining substantial questions of lay,/ would b....
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....ecision of Ld.CIT(A). 10. We have perused the submissions advanced by both sides in light of records placed before us. We note that the issue of disallowance u/s. 14A has been considered in assessee's own case which has been upheld by Hon'ble Karnataka High Court (supra). It is also noted that the decision of Hon'ble Karnataka High Court has been followed by coordinate bench AY 2016-17 & 2017-18 has considered this issue in ITA 501& 390/Bang/2023 in order dated 25.10.2023 reproduced herein above. Respectfully following above view, we allow Ground No.3 of assessee in terms of the decision hereinabove. 11. Ground No.4 raised by assessee is on applicability of provisions of section 115JB of the Act. The Ld.AR submitted that, the assessee does not fall within definition of banking company as defined under Companies Act, 1956 and therefore it is not covered by proviso to section 211(2) of the Companies Act. The Ld. AR thus submitted that provisions of s. 115JB are not applicable to assessee. In support of this submission, he placed reliance on decision of Hon'ble Delhi High Court in the case of CIT v Punjab National Bank Ltd. (successor of erstwhile Oriental Bank of Comme....
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....94 = 2002-TIOL-587-SC-IT-LB, had observed that in the Income Tax Act, a charging section and the computing provisions together constitute an integrated code. In a case where the computation provision cannot apply, it would be evident that such a case was not intended to fall within the charging section. It was a case of charging a partnership firm for transfer of a capital asset in the nature of goodwill. The Supreme Court was of the opinion that it would not be possible to envisage a cost of acquisition of goodwill. Since computation of capital gain cannot be done without ascertaining the cost of acquisition, it was held that no capital gain tax can be levied. " 53. Concluded at page 12 para 21 as under: "27. In the result, we hold that sub-section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company. We answer the question No. 2 in favour of the assessee and against the revenue. In view of this, question of correctness of the order of rectification passed by the Assessing Officer becomes unimportant. Question No. 1 is therefore not answered. All the appeals are dismissed." 54. For the AY 2....
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.... Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. " 56. Thus, the understanding of the above amendment to section 115JB is where a company which are not required u/s 211 (129) of the Companies Act to prepare their P&L account in accordance with Schedule - VI of the Companies Act, 1956 profit & loss account prepared in accordance with the provisions of their Regulatory Acts shall be taken as a basis for computing the book profit u/s 115JB. 57. The assessee's contentions for non-applicability o....
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....n Oriental Bank(supra) has been upheld by Hon'ble Delhi High Court wherein Hon'ble High Court has categorically observed that the revenue in case of Punjab National Bank did not raise this issue which are identical to facts of the present assessee before us. In view of the same, Ground No.4 raised by the assessee deserves to be allowed. 14. Ground No.5 is in respect of additions to book profits u/s. 115JB. As we have already non-applicability of 115JB in case of assessee in ground No.4, this ground becomes infructuous. 15. Ground No.6 is in respect of deduction disallowed by the Ld.CIT(A) the claim of assessee u/s.36(1)(viia). The Ld.AR submitted that assessee had made provisions for bad and doubtful debts and claimed the same u/s. 36(1)(viia) of the act. He submitted that the Ld.AO disallowed the amount on two counts being: (i) the Ld. AO held that only advances made during the year has to be considered for calculating aggregate average rural advances; (ii) the Ld. AO treated some of the branches as non-rural and did not allow deduction with respect to such branches. 16. The Ld. AR submitted that the Ld. CIT(A) followed decision of Hon'ble Karna....
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....for this very purpose. The opening balance of brought forward provisions was Rs. 7264,47,17,510 which was more than adequate to cover the entire claim of bad debts written off. AO relied on first proviso to section 36(1)(vii) which states that claim of bad debts written off shall be admissible, only to the extent the same exceeds the credit balance in provisions for bad and doubtful debts. As per Explanation 2 to section 36(1)(vii), there shall be only one account of provision for bad and doubtful debts, against which all claims of bad debts actually written off during the year shall be first set off, without any distinction between rural advances and other advances. The AO also relied on the judgements of Southern Technologies Vs. CIT reported in 352 ITR 577(SC), M/s Vijaya Bank vs CIT reported in 320 ITR 166 (SC) & CIT vs Hotel Ambassdor [2002] reported in 253 ITR 430 (Ker). Thus, only the excess amount of bad debts written off, remaining after such set off, is admissible for deduction u/s. 36(1)(vii). 7.2 On appeal, the assessee submitted before the CIT(Appeals) that it had written off total amount of Rs. 1296,56,16,023 during the year. The entire sum of Rs. 130,81,22,9....
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.... as deduction, is also covered in favour of the appellant Bank in the following cases,- i. Catholic Syrian Bank Vs CIT (2012) (343 ITR 270) (SC) ii. Vatika Township Pvt Ltd (2014)(367 ITR 466)(SC) iii. State Bank of Hyderabad (2015) ((8) TMI 836) (Trib.- Hyderabad) iv. IDBI Bank Ltd (2017) ((9) TMI 1289) (Trib.-Mumbai) v. Oriental Bank of Commerce (2017)((11 TMI 1589)(Trib.- Delhi) 7.5 The assessee further submitted that any subsequent recovery made in the loan accounts, which have been written off, either at the Head Office level or at the branch level, are credited to the Profit and Loss account and shown as other income. The amounts subsequently recovered are duly offered to tax under section 41(1) of the Act, in the year of recovery. It was pointed out that any recovery made in a loan account which is still live, i.e. not written off, is credited to that loan account only, and not to the Profit and Loss account.. However, recovery made in an account which has been written off, is credited to the profit and loss account. Thus, it was argued that the very fact that the recovery is credited to the Profit and Loss account, shows....
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.... emerges is that the bad debts actually written off as irrecoverable in case of such assessee [to which clause (viia) applies] should be first charged to the provisions made for bad and doubtful debts, and the excess amount, if any, shall be charged to the profits for the year and such excess amount only shall be allowed deduction clause (vii). The Hon'ble Supreme Court in Catholic Syrian Bank (supra) held that deduction u/s. 36(1)(vii) is available to banks in respect of bad debts written off, other than rural advances, subject to s. 36(2)(v) and independent of s. 36(1)(viia). In other words, proviso to s. 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural branches. 8.3 The CIT(A) observed that in order to clarify the purport of said proviso, Explanation 2 was inserted to section 36(1)(vii) by Finance Act, 2013 w.e.f. 1.4.2014 which clarified that for the purposes of proviso to s. 36(1)(vii) and s. 36(2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts and such account shall relate to all advances, including advances made by rural branches. Further, the scope and effect of thi....
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....he statute is aggregate average advances "made" by the rural branches. To quote an example, he submitted that for A.Y. is 2013-14 (F.Y. 2012-13) if the bad debt as on 31-3-2012 is considered to be as Rs. 1 Crore by virtue of making provisions subsequently, the assessee will be entitled for double benefit because provisions in respect of 10% of the bad debt of provisions of Rs. 1 Crore towards bad debt was already made as on 31-3-2012. Therefore, if the same amount is carried forward for the next F.Y., the assessee will be entitled for the double benefit because it would be making a provision for Rs. 1 Crore in addition to the 10% to the bad debt made in the relevant F.Y. 7. Shri Suryanarayana, adverting to the Para 7 of the impugned order, submitted that in identical circumstances, in assessee's own case, the assessee had made provision in similar manner as made in A.Y. 2013-14. A co-ordinate bench of the Tribunal had accepted the provision made by the assessee benefit in CanaraBank v. Jt. CIT [2018] 99 taxmann.com 357/[2017] 60 ITR (Trib.) 1 (Bengaluru - Trib.). He further submitted that the said order has been followed by the Tribunal in Vijaya Bank v. Jt. CIT [IT Ap....
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.... 11. In view of the above, these appeals with regard to question No. 4 must fail and it is also answered in favour of the assessee and against the Revenue." Based on the above observation we remand this issue to the Ld.AO for necessary verification and consideration of the issue in accordance with law. Accordingly Ground no.6 raised by the assessee stands partly allowed for statistical purposes. 20. Ground No.7 becomes infructuous by virtue of view taken by us in ground No.3 in preceding paragraphs. 21. Ground No.8 is raised by the assessee in respect of the disallowance made of the RBI Penalty paid by the assessee. 21.1 It is submitted that the assessee had made payment of Rs. 1,00,000/- as penalty to RBI for non compliance of RBI guidelines which are submitted to be general in nature. The Ld.AO disallowed the same treating it to be in the nature of penal in nature. On an appeal before the Ld.CIT(A) the disallowance was upheld. Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before us now. At the outset it is submitted that a similar disallowance was made in case of Union Bank of India vs. DCIT reported in (2022) (3) TMI 1131 by coordina....
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....assessee for statistical purposes." Considering submissions of both sides, we remand this matter to file of AO to look into the details/nature of payments made by assessee to RBI in order to verify whether these are routine payments for procedural non-compliances or were punitive in nature. The Ld. AO is then directed to consider this issue in accordance with law. Based on the above observation we remand this issue to the Ld.AO for necessary verification and consideration of the issue in accordance with law. Accordingly Ground no.8 raised by the assessee stands partly allowed for statistical purposes. 22. Ground Nos.9 & 10 raised by assessee is also in respect of section 115JB of the Act. As we have already decided the issue in favour of assessee in ground No.4, the same becomes infructuous. Revenue's appeal - ITA 663/Bang/2023 23. Ground No.1-2 raised by the revenue is in respect of the Ld.CIT(A) allowing the claim of assessee u/s. 36(1)(viia). We have already remanded this issue in Ground no.6 while dealing with assessee's appeal hereinabove. Accordingly ground raised by revenue stands partly allowed for statistical purposes. 24. Ground Nos. 3-4 is agai....
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..... DCIT (supra) wherein the following observations have been made. "11. The assessee is a public sector bank governed by the provisions of the Banking Regulation Act, 1949. Factually the contribution has been made by the assessee to Corporation Bank Economic Development Foundation which has its objects to set up training centre for educating and training people with a view to creating awareness, developing local leadership among the community, development through self help, utilization of local resources and talents. The Trust came into existence by virtue of a deed of declaration of trust dated 26.1.1992 with the object of taking up developmental activities particularly for the upliftment of the economically weaker sections of the society. The trust also played catalyst role in the process of social economic development. The Government of India, Ministry of Rural Development has instructed public sector banks to be lead institutions in managing and running such institutes. It is in this context that the assessee has contributed a sum of Rs. 3,82,69,960/-. The Revenue authorities took the view that this was in the nature of donation which can be claimed as a deduction only ....
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.... revenue challenging the deletion of Rs. 30,39,820/- being the expenditure incurred at club towards entrance fee and subscription and Rs. 24,979/- being expenditure incurred for club services and facilities. The Ld.DR submitted that the expenditure cannot be allowed as there is no requirement for the assessee to spend it for the purposes of business. The Ld.DR supported the view taken by the Ld.AO. 26.1 The Ld.AR submitted that the Ld.CIT(A) considered the claim of assessee by observing as under: "29. Ground 30 of the appeal is related to disallowing a sum of Rs. 30,64,799/- being the club expenses. The appellant has made following submissions dated 15.12.2022: "30.2 Our Submissions: 30.2.1 The Appellant bank has incurred these expenses for business purposes only. The learned Assessing Officer has not brought anything on record to prove that they are not for business purposes. The disallowance made by the learned Assessing Officer is based on surmises and conjunctures. Therefore. it is submitted that the groundof the appellant be allowed. Reliance in this regard is placed on the following decisions: * OTIS Elevator Co. (India) Ltd vs CIT [1992....