TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 1570
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....at provisions of Section 115JB are applicable to the bank. 5. Without prejudice to the above ground, the learned Commissioner of Income Tax (Appeals) erred in sustaining the addition of provision for restructured accounts to arrive at the book-profit which is beyond the scope of the section. Tax effect Rs.9,89,45,717/- Total Tax effect Rs.428,85,25,735/- 1.1. The revenue raised following grounds: Grounds of appeal: i. The Ld. CIT(A) has erred in law by deleting addition and thereby allowing deduction u/s 36(1)(vii). ii. The Ld. CIT(A) has not appreciated the fact that the Explanation 2 of 36(1)(vii) clarifies that for the purpose of 36(1)(viia) r.w.s 36(2)(v), there shall be only 'one' provision account with respect to bad and doubtful debts and such accounts relates to all types of advances including advances made by Rural Branches. iii. Whether deduction under section 36(1)(viia) of the Income Tax Act. 1961 r.w.r 6ABA of the Income Tax Rules, 1962 is to be allowed on the total outstanding advances including opening balances upon which the assessee bank has already claimed such deduction in earlier years or the same has to be allowed in respect of increm....
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....ommissioner of Income Tax (Appeals) vide his letter dated 19/02/2019 asked the assessee to explain why non-rural bad debts of Rs. 975.07 Crores written off u/s 36(1)(vii) should not be first adjusted with the provision allowed u/s 36(1)(viia) in view the proviso to Section 36(1)(vii) r.w.s. 36(2)(v) r.w.s. 36(1)(viia) 3.1 The assessee bank relying on the Hon'ble Supreme Court decision that Section 36(1)(viia) is applicable only to rural advances in the case of Catholic Syrian Bank, contended that since no deduction is allowed for non-rural debts u/s 36(1)(viia), the entire non-rural debts written off should be allowed as deduction u/s 36(1)(vii) without adjusting the same against the provision allowed u/s 36(1)(viia). It contended that insertion of explanation 2 to Section 36(1)(vii) has not altered the proposition of law as it existed prior to introduction of explanation. Further it contended that since Section 36(1)(viia) applies only to rural debts, in the case of banks having rural branches, it is only rural debts which are to be adjusted against the provision allowed u/s 36(1)(viia) and non-rural debts can be claimed in full. 3.2 Relying on decision of the Hon'ble Su....
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..../2023 for the AYs 2016-17 & 201718 dated 25.10.2023, wherein the Tribunal held as under: "11. We have heard the rival submissions and perused the material on record. We notice that the from the decisions of the coordinate Bench quoted by the assessee in ITA No. 1885/Bang/2018 for AY 2014-15 (supra) in its own case, the issue has been decided in favour of the assessee as under:- "12.3 We have heard rival submissions and perused the material on record. We notice that the CIT(A) had expressed the view that provision allowed u/s 36(1)(viia) of the Act would apply to non-rural advances also. An identical issue has been examined by the Hyderabad Bench of the ITAT in the case of State Bank of Hyderabad v. DCIT in ITA No.450/Hyd/2015, ITA No.498 and 499/Hyd/2015 (order dated 14.08.2015) wherein the Tribunal had not accepted the above said view expressed by the CIT(A). The Bangalore Bench of the Tribunal in assessee's own case for assessment year 2013-2014 by following the Hyderabad Bench order of the Tribunal in the case of State Bank of Hyderabad (supra), had set aside the view expressed by the CIT(A) that proviso to section 36(1)(vii) which requires adjustment of bad debts against t....
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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 non-rural 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 o....
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....on 36(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 actua....
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....of the 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 non-rural 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 nonrural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to nonrural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A)." 6.5 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.1258.47 crores." 12.4 In view of the above ....
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....ed a sum of Rs.1387,81,80,315/- out of total claim of Rs.1695,59,52,309/-. The assessee bank contended before the learned Commissioner (Appeals) that there is no requirement in Section 36(1)(viia) that the provision should be in relation to rural advances. Further, it was contended that the reliance placed by the learned Assessing Officer on the decision (Supreme Court in the case of Catholic Syrian Bank Ltd (supra) is misplaced as the Hon'ble Supreme Court did not go into the manner of deduction u/s 36(1)(viia). To support its contentions, the assessee bank placed reliance on the decision of Hon'ble Bangalore Bench of the Tribunal in the case of ING Vysya Bank [(2014) 149 ITD 611] & Vijaya Bank [ITA No. 578/Bang/2012 dated 27/02/2015]. Without prejudice to the above, it was submitted that bank had created a provision of Rs. 1445,42,49,751/- and claimed deduction of Rs.1695,59,52,309/- based on the decision of Bangalore Bench of the Tribunal in the assessee's own case reported in 78 ITD 103. Accepting the contentions of the assessee bank that provision need not related to rural advances for the purpose of calculating deduction u/s 36(1)(viia), the learned Commissioner o....
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....ommissiong. of Income Tax (Appeals) dismissed the assessee bank's appeal by concurring with the cogent reasons and justifications given by the AO. 9. After hearing both the parties, we are of the opinion that similar issue came for consideration in the case of Canara Bank in ITA Nos.391 & 392/Bang/2023 for the assessment year 2019-20. The Tribunal vide order dated 22.12.2023 held as under: "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 Commerce) in ITA 594/2023 by order dated 20/10/2023, wherein the question of law considered by the court is proposed in question (e) has been dismissed. The said order of Hon'ble Delhi High Court in the case of CIT v Punjab ....
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....he 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 2013-14 and onwards, vide ground no. ground no. 3 of ITA no. 1582/Del/2Q17 (AY 13-14), ITA no. 1583/Del/2017 (AY 1415) 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 ....
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....he 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 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 a....
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....ssee. 10. Last ground No.5 of the assessee's appeal is with regard to addition of book profit u/s 115JB of the Act. 10.1 Facts of the case are that The learned Assessing Officer had made various additions to book profit u/s 115JB by holding that provisions / write offs would get covered under various clauses to Explanation 1 of Section 115JB. Relying on various decisions, the assessee bank contended before the learned Commissioner of Income Tax (Appeals) that provisions / write offs are actual write offs and not provisions and hence, they cannot be added to book profit. Accepting the contentions of the assessee bank, the learned Commissioner of Income Tax (Appeals) allowed the appeal with respect to additions made to book profit u/s 115JB except for provision for restructured accounts. 11. After hearing both the parties, in view of the deciding issue on applicability of provisions of section 115JB of the Act in earlier ground in favour of the assessee, this ground is dismissed as infructuous. 12. In the result, appeal of the assessee in ITA No.1219/Bang/2019 is partly allowed. ITA No.186/Pan/2019 (Revenue's appeal) (AY 2015-16): 13. First ground for our consideration is with....
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....of Canara Bank Vs. DCIT in ITA Nos.390 & 501/Bang/2023 for the assessment years 2016-17 & 2017-18, the Tribunal vide order dated 25.10.2023 held as under: "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 questions of law are raised in the appeal Memorandum cited supra, among them, substantial question of law Nos.2 & 4 are covered by the judgment and are answered by the coordinate 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....
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....ourt, 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 be reduced otiose. This court has already framed a substantial question of law 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 11514 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 Y....
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....io of the decision of Hon'ble High Court of Kerala in the case of Lord Krishna Bank which considered the urban agglomeration and defined revenue village for the purposes of a rural branch. The CIT(A) failed to appreciate the fact that the advances made during the year are only eligible for deduction and not the advances outstanding, as it amounts to repetitive and duplicate claims during every subsequent year. 16. We have heard the rival submissions and perused the materials available on record. With regard to disallowance u/s 36(1)(vii)(a) of the Act on computation under Rule 6ABA, this issue came for consideration before this Tribunal in ITA Nos.390 & 501/Bang/2023 for the assessment years 2016-17 & 2017-18 dated 25.10.2023 wherein held as under: "17. After considering the rival submissions, we find that this issue was considered by this Tribunal in the latest judgement in assessee's own case for AYs 2014-15 & 2015-16 in ITA Nos.388 & 389/Bang/2023 by order dated 26.09.2023 and it was held as under:- "9. After considering rival contentions, we note that the issue of allowance u/s. 36(1)(viia) has been settled by the Hon'ble jurisdictional High Court of Karnataka in the case....
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.... which the computation has been made has been given in the 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 ....
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.... inter connectivity between banks switchers thereby enabling customers to utilize any ATM of a connected bank. This service provided by the NPCI comes under definition and explanation provided Under Section 194J and accordingly liable for TDS. The CIT(A) erred in not appreciating the fact that Section 40(a)(ia) encompasses all those payments liable for TDS Under Chapter XVII-B and failure to adhere to the TDS provisions would attract disallowance u/ s. 40(a)(ia). So when the A.O has given a finding that the payments are to be subjected to TDS, such payments would get covered U/ s. 40(A)(ia). The CIT(A). erred in deleting the disallowance made u/ s 40(a)(ia) on the payments made to NPCL, when the decision of the CIT(A) on this point has not been accepted by the department and an appeal has been filed by the department before the Hon High Court of Karnataka in the case of M/S Corporation Bank for the AY 2011-12 & 2012-13, which is pending as on date. 18. After hearing both the parties, we are of the opinion that this issue came for consideration before this Tribunal in case of Canara Bank (erstwhile Syndicate Bank) in ITA No.1884/Bang/2018 & ITA No.236/Panaji/2018 dated 27.12.2021 w....
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.... case are that the learned CIT(A) erred in allowing claim in respect of Provision for wage arrears while computing income under regular provision which is against the decision rendered in the case of CIT V/ s Indian Overseas Bank in 151 ITR 466 (Mad). The Learned CIT(A) ought to have accepted that the decision of the Hon ITAT in the assessee's own case for the AY 2009-10 in ITA No 709 & 998/ B/ 2012 was not accepted by the department and an appeal was filed by the department before the Hon High Court of Karnataka and the appeal is pending as on date. 20. After hearing both the parties, we are of the opinion that similar issue came for consideration in the case of Bank of Baroda in ITA Nos.2480 & 3081/Mum/2015 the Tribunal vide order dated 17.2.2017 held as under: 5. Up on careful consideration we find that this tribunal in assessee's own case in ITA number 4619 and 4873/M/2012 for assessment year 2008- 09 has adjudicated identical issue as under; "Ground Nos.3.1 & 3.2 relate to the disallowance of provision towards liability arising on account of wage revision payable to employees. According to the assessee the provision made for excess payment of wages payable to the....
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.... the issue in favour of the assessee. This ground of revenue is rejected. 21. Next ground No.6 is with regard to Adjustments to book profits and Computation of Income u/ s 115 JB of the Act. 21.1 Facts of the case are that the CIT(A) erred in directing other adjustments to MAT which is not in accordance the provisions of section 115JB of the Act. The learned CIT(A) erred in allowing the same to be adjusted for MAT purposes which is not in accordance with provisions and intent of law. 21.2 With regard to disallowance of Amount debited under provisions & contingencies for NPA of Rs. 1618,51,84,413/- the CIT(A) erred in directing adjustment of provision for NPA for the purposes of working out Book profits as the very nature of Provision does not change with the reduction from the asset. The CIT(A) failed to consider the fact that the Provision for NPA is part of "Provisions and contingencies" which is added back in the computation of regular income and the assessee has voluntarily added back the same in the computation of income under a regular provisions as well as for the purpose of working book profits. The Learned CIT(A) erred in deleting the addition made u/ s 14 A under the p....
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.... 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 Commerce) in ITA 594/2023 by order dated 20/10/2023, wherein the question of law considered by the court is proposed in question (e) has been dismissed. The said order of Hon'ble Delhi High Court in the case of CIT v Punjab National Bank Ltd. (successor of erstwhile Oriental Bank of Commerce) (supra) is placed at page 35-37 of the PB. The Ld.AR further relied on decision of Hon'ble Delhi Tribunal in the case of Oriental Bank of Commerce v. ACIT reported in [2022] TIOL 331 ITAT-DEL. The Ld.AR submitted that, the provisions of section 115JB, as it stood prior to its amendment by virtue of Finance Act, 2012, would no....
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....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 2013-14 and onwards, vide ground no. ground no. 3 of ITA no. 1582/Del/2Q17 (AY 13-14), ITA no. 1583/Del/2017 (AY 1415) 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 sub-section (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 th....
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.... 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 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 f....