TaxTMI 
TaxTMI 
2025 (8) TMI 618
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....raised the following grounds of appeal: - ITA No. 660/Bang/2015 "1. Addition on account of recoveries made out of bad debts written off but not offered as income Rs. 13,01,85,558/- a) The learned Commissioner of Income-tax (Appeals) ["CIT(A)"] erred in upholding the addition of the recoveries from bad debts written off in earlier years amounting to Rs. 13,01,85,558 under section 41(1) of the Income-tax Act, 1961 ('the Act'). b) The learned CIT(A) ought to have appreciated that the Appellant bank has not claimed bad debts written off to which recovery pertains as an allowable expenditure in its return of income in the past years. c) The learned CIT(A) ought to have appreciated that in order to tax the recovery of the bad debts under section 41(1) of the Act, the condition ought to be satisfied is that the said bad debts should have been claimed as deduction (in the year in which they were written off) from the taxable income of the bank. d) The learned CIT(A) erred in holding that the bad debts written off (to which the present recoveries pertain) have been enjoyed by the Appellant as an allowance or deduction in the past....
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....ting under deduction under section 36(1)(viia) of the Act. c) The learned CIT(A) ought to have appreciated that the Aggregate Average Advances were computed by the Appellant as per the Rule 6ABA of the Income Tax Rules, 1962 ('IT Rules') and accordingly no excess deduction was claimed under section 36(1)(viia) of the Act. d) The learned CIT(A) erred in confirming the interpretation of Rule 6ABA of the IT Rules, as made by the learned AO that only the incremental advances made by each rural branch of the Appellant and outstanding at the end of each month, should be considered in order to compute the Aggregate Average Advances. e) The learned CIT(A) ought to have appreciated that there is no provision to consider only the advances made during the year for the purpose of section 36(1)(viia) and that the interpretation of the provisions made by the AO not warranted by law. f) The learned CIT(A) ought to have observed that the bad debts or doubtful debts could arise to Appellant, both from the fresh advances made during the current year and advances made in the past years. Hence, restricting the deduction under section 36(1)(viia) by computing....
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....d/PowerPoint/ Microsoft Excel etc., since it already has the basic operating system. e) The learned CIT (A) ought to have observed that since the ATM machine performs the functions of a computer along with other functions (such as dispending of cash at the time of withdrawal, deposit of cash etc..) and such other functions are wholly dependent upon the functions of the computer and hence the ATM would qualify to be computer. f) The learned CIT (A) ought to have observed that if the traditional standalone ATMs could be considered as computers under the Act, even the present networked ATMs would also qualify as computers as the only difference between them is that the standalone ATM contains the customers' account details in its entirety, while present networked ATMs get connected to the bank's server through internet connection from remote locations in order to complete the processing of the transaction. g) The learned CIT(A) erred in not relying upon the principles laid down by the judicial precedents including the jurisdictional Tribunal's ruling wherein it has been held that ATM machines are 'computers and are entitled to depreciation at....
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....o fixed assets are genuine and accordingly allowed depreciation on the balance additions for which invoices could not be furnished by the Appellant. 1) Notwithstanding and without prejudice to the above, the learned CIT(A) ought to have accepted the quantum of evidences furnished hitherto in support of additions to fixed assets, as representative sample for the entire additions made during the year under the block "computers and computer software" and allowed the depreciation thereon. 4. Disallowance of certain liabilities by treating as contingent liabilities - Rs. 6,20,70,000 A. Provision for Leave Fare Concession ("LFC")/ Home Travel Concession ("HTC")- Rs. 3,62,00,000 a) The learned CIT(A) has erred in disallowing the provision for LFC/HTC amounting to Rs. 3,62,00,000. b) The learned CIT(A) ought to have observed that the provision of LFC/HTC was reliably ascertained/estimated based on actuarial valuation and in accordance with the Accounting Standard 15- "Accounting for Retirement Benefits in the financial statements" issued by Institute of Chartered Accountants of India, the compliance of which is mandatory for the Appellant. ....
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....ver jubilee awards. - Rs. 35,00,000 a) The learned CIT(A) has erred in disallowing provision for silver jubilee awards amounting to Rs. 35,00,000 6) The learned CIT(A) ought to have observed that the provision for silver jubilee awards expenses was reliably ascertained/estimated based on actuarial valuation and in accordance with the Accounting Standard 15-"Accounting for Retirement Benefits in the financial statements" issued by Institute of Chartered Accountants of India, the compliance of which is mandatory for the Appellant Bank. c) The learned CIT(A) ought to have observed the fact that the liability would be discharged at a future date would not change the nature of liability in to that of contingent or unascertained so long as such liability can be quantified or estimated with reasonable certainty. d) The learned CIT(A) ought to have appreciated that the actuarial valuation process after considering the various inputs would certainly enables the Appellant Bank to estimate its liability in respect of silver jubilee awards expenses with a greater level of accuracy and certainty, and thus the said provision would partake the nature of ascerta....
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....nder section 36(1)(viii) to be dependent on maintenance of separate books of account is not in accordance with law. h) The learned CIT(A) ought to have observed that the deduction under section 36(1)(viii) of the Act needs to be recomputed consequent to the increase in Total Income due to the additions made in course of the assessment under section 143(3) of the Act and upheld during the subsequent appellate proceedings. 6. Disallowance of provision for loss in present value terms under debts relief scheme Rs. 5,55,00,000/- a) The learned CIT(A) erred in confirming the disallowance of provision made for loss in present value terms in respect of the debts (under the debt relief scheme) under section 36(1)(viia) of the Act. b) The learned CIT(A) ought to have appreciated that the above mentioned provision for bad and doubtful debts (under debt relief scheme) has been made by the Bank in accordance with the norms provided by the Reserve Bank of India (RBI), compliance with which is mandatory for the Appellant. c) The learned CIT(A) erred in stating (by reproducing a para from the assessment order) that the Appellant has contended before the....
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....the tax audit report of the Appellant, wherein certain defaults in deduction/remittance of taxes were reported and the same have been correctly disallowed by the Appellant, in its return of income. d) Notwithstanding the above, the learned CIT(A) ought to have restricted the amount of disallowance to the extent expenses payable at the end of the Financial Year under section 40(a)(ia) of the Act in line with the principles laid down by the following judicial precedents (including that of jurisdictional Tribunal): Merilyn Shipping and Transports v. Addi CIT [2012] 16 ITR (Trib) 1 ITAT, Viskhapatnam (Spl Bench): * CIT vs. M/s Vector Shipping Services (P) Ltd ITA No. 122 of 2013 dated 9.7.2013 (All HC) (SLP dismissed by SC on 2nd July,2014); * Capital Pharma v. ITO (ITAT Bang) (ITA No. 34/2013); * DCIT v. Ananda Marakala (ITAT Bang) (ITA No. 1584/2012); * Arcadia Share and Stock Brokers ITA 1871/Mum/2013; * S.S. Networks vs. ITO (ITAT Hyd) (ITA No.478/2013), 8. Addition on account of unexplained expenditure under section 69C- Rs. 6,98,56,399 a) The learned CIT(A) ought to have observed that the aforementio....
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....um/2016 A.Y. 2008-09, date of order 03/02/2020. The relevant part of the said order is reproduced as below: - "90. We noted from the above arguments of both the sides and case law cited by the parties, that the issue is squarely covered by a decision of the Bangalore Bench of the Tribunal in the case of State Bank of Mysore Vs. DCIT [2009] 33 SOT 7 (Bangalore), now merged with assessee. We noted that the Tribunal in the case of State Bank of Mysore (supra) narrated the facts and the facts in the present case are exactly the same as in the case of State Bank of Mysore. In the case of State Bank of Mysore (supra), the assessee had claimed deduction under section 36(1)(viia) of the Act and not under section 36(1)(vii) of the Act. Accordingly, the Bangalore Tribunal has held that section 41(4) of the Act cannot be invoked. Sections 41(1), 41(2), 41(3) and 41(4) of the Act operate in different spheres. Each of the sub-sections to section 41 of the Act deals with different and distinct circumstances. Each of the sub-sections deals with different and distinct topics and one cannot read recoupment under one sub-section into another. We have considered the decision relied on in thi....
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....s own case cited supra, we hold that the provisions of section 41(1) or 41(4) is applicable only when recoveries of bad debts in relation to debts, for which deduction under section 36(1)(vii) is allowed. However, the issue is restored to the file of the Ld.AO to verify if the recovery of the amount, in the present case is in respect of write off of claim allowed as a deduction under section 36(1)(viia) or section 36(1)(vii) of the Act, in earlier years. Accordingly, ground No.1 raised by the assessee is allowed for statistical purpose. Ground 2: Disallowance due to re-computation of deduction u/s 36(1)(viia) of the Act. - Rs. 13,01,85,558/- Ground 2(a) to 2(h): Deduction U/s 36(1)(vii) on the balance outstanding in respect of rural advance. 7. The issue is inter-connected with Ground 1; so the issue is covered in favour of the assessee in consolidated order dated 10/11/2022 passed by the Special Bench of ITAT, Mumbai Bench-G in case of State Bank of India, Patiala for A.Ys 2013-14 to 2015-16, ITA No. 510, 538 & 1259/Chandi/2017 wherein it has been held that deduction under section 36(1)(viia) read with rule 6ABA has to be allowed on total outstanding advance at the end....
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....meone is allowed to have the last word and that last word, once spoken, is loyally accepted" (See observations of Lord Hailsham and Lord Diplock in Broome vs. Cassell). The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical Judicial system." 14. As regards the submission of the learned Departmental Representative that no substantial question of law was admitted by the Hon'ble Calcutta High Court, we are of the considered view that non-admission of a substantial question of law under section 260A of the Act by the Hon'ble High Court not render the decision of Hon'ble Court to be non-binding and the doctrine of merger would still be applicable. In any case, we find that the Hon'ble Madras High Court in the aforesaid decision concurred with the legal proposition laid down by the Hon'ble Calcutta High Court after admitting the question of law as proposed by the Revenue in its appeal on this issue. Thus, we find no merits in this plea raised by the learned Departmental Representative. 15. Therefore, respectfully following the aforesaid decisions passed by Hon'ble Calcutta....
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....ertinent to note that provisions of the Karnataka Sales Tax Act, 1957 and provisions of Income-tax Act, 1961 are not pari materia provisions. The classification of goods has been provided only for the purposes of sales tax whereas, the provisions of the income tax levy tax on income. It is pertinent to mention here that Appendix 1 to Income-tax Rules, the computer has been treated as plant and machinery. Therefore, the decision relied upon by the revenue in Diebold Systems (P) Ltd. supra has no application to the fact situation of the case. The tribunal by placing reliance on the decision of Bombay High Court in Dy, CIT v. Datacraft India Ltd. [2010] 40 SOT 295 (SB) has held that so long as functions of the computers are performed with other functions and other functions are dependent on the functions of the computer, ATMs are to be treated as computers and are entitled to higher rate of depreciation. It has further been held that computer is integral part of ATM machine and on the basis of information processed by the computer in ATM machine only, the mechanical function of the dispensation of cash or deposit of cash is done. Therefore, it was held that ATMs are computers and are ....
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....re directly covered by the decisions of the Hon'ble Karnataka High Court in CIT v. NCR Corporation Pvt. Ltd. (supra) and the Hon'ble Jurisdictional High Court in Saraswat Infotech Ltd. (supra). Accordingly, following the said binding precedents, we hold that the assessee is entitled to claim depreciation at the higher rate as claimed in its return of income. 16. The Ld. DR also submitted that the disallowance of depreciation on account of non-furnishing of invoices or bills for the purchase of fixed assets was already considered by the ITAT, Bengaluru Bench in the assessee's own case in ITA No. 1063/Bang/2014 dated 27.05.2016. Considering the same, we direct the assessee to produce the relevant bills and invoices before the Ld. AO for verification, limited to the classification of assets. However, in respect of the rate of depreciation, we have already held that the claim of the assessee is allowable. The matter is remanded to the file of the Ld. AO for the limited purpose of verification, and the assessee shall be afforded a reasonable opportunity of being heard in the set-aside proceedings. 17. In the result, Ground No. 3 of the assessee's appeal is allowed in the terms ind....
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....he employees. Hence, we are of the view that the provision for leave can be discharged in two manners i.e. one by availing the leave and other by way of encashment. In so far as availment of leave is concerned, the salary paid to the employee is known as leave with pay and it does not amounts to salary paid in lieu of leave and, hence, the provisions of section 43B(f) of the Act to that extent do not apply. Leave fare concession/Leave travel concession is in respect of actual payment made to the employees for the travel cost incurred by them on availment of the leave entitled to employees. The same is not towards any leave encashment, and hence it cannot be considered as a sum payable in lieu of any leave to which alone section 43B(f) of the Act applies. As stated above, the provision in respect of unavailed casual leave and sick leave is not encashable and, hence, is not covered by section 43B(f) of the Act. Reliance in this regard is placed by the assessee on the decision of the Bangalore Bench of the Tribunal in the case of Robert Bosch Engineering & Business Solutions Ltd. v/s. DCIT [ITA No. 336/Bang/2014 dated 21.04.2017. Further, the provision made is for an ascertained liabi....
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....2. The Revenue before the Tribunal emphasised that these expenses are contingent in nature and questioned the basis of quantification of these expenses. 123. Assessee argued that the department in its appeal has only contested that the said expenses are contingent in nature. It is not the case of the AO that the said provision is not on a reasonable basis. Therefore, the contentions raised by the Department Representative on the basis of quantification are not justified and cannot be accepted. These costs are part of employee cost and, hence, should be allowed as deduction as normal business expenditure. These costs are incurred based on the employee guidelines and have been quantified on a scientific basis as per actuarial valuation. As submitted in Assessee's appeal ground 2.1 to 2.3, the said provision is an ascertained liability, determined based on reasonable certainty and hence, clearly allowable. Reliance in this regard is placed on the decision of the Supreme Court in the case of Bharat Earth Movers Vs. CIT [2000] 245 ITR 428 (SC), wherein it is held that the liability is not a contingent one if the liability has been incurred during the accounting year and an esti....
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....y the assessee to compute the eligible profits is contrary to the provisions of the Act, it is submitted that the Act or Rules made thereunder does not prescribe any method of computing the eligible profits. Hence, a reasonable method can be adopted by the assessee while determining the deduction u/s 36(1) (vii) of the Act. 21. Further, it is also pointed out that this is not the first year of claim for deduction u/s. 36(1)(vii) as the assessee has been claiming the said deduction since AY 2008-09, the assessee has claimed deduction u/s. 36(1)(viii) since AY 2008-09 by consistently using the same method by using the turnover / gross income as the same allocation key. The revenue authorities in past years as well have examined the said method / ratio and have accepted the claim of the Bank and accordingly, it is also submitted that the assessee has been consistently following this method, which has been accepted by the revenue and ought not to be disturbed. Reliance in this regard is placed on the following decisions: * Decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in [1992] 193 ITR 321. * Decision of the Hon'ble....
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....d the material on record. The assessee has made a provision of Rs. 5,55,00,000/- in respect of loss in present value terms arising from receivables under the Agriculture Debt Relief Scheme announced by the Government of India. The said amount relates to the debts recoverable from farmers under the Debt Relief component of the scheme, where banks are entitled to recover 75% of the eligible debt, with a 25% waiver extended to the farmers. It is the case of the assessee that this provision represents a permanent diminution in the value of receivables due to the time value of money and delayed recovery and has been made in accordance with RBI's prudential guidelines prescribed under Circular RPCD No. PLFS.BC.72/05.04.02/2007-08 dated 23.05.2008. The assessee has further submitted that this provision has been made only for those debts which are already classified as NPAs, and hence the provision in substance is for bad and doubtful debts. The Ld. AO has disallowed the claim on the ground that the provision for loss in present value does not qualify as a provision for bad and doubtful debts under section 36(1)(viia) of the Act. However, it is not disputed that the underlying loans are NP....
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.... Ld. AO ought to have placed reliance on Clause 27 of Form No. 3CD of the Tax Audit Report wherein the details of non-compliance with respect to non-deduction/non-payment of tax at source has been duly disclosed by the respective branch auditors of the assessee. It is submitted that in accordance with the Tax Audit Report, the assessee has voluntarily disallowed Rs. 2,36,72,707/-in its computation of total income. The Ld. AR further stated that the assessee submitted the sample copies before the Ld. AO for verification. Considering the huge volume of documents of assessee, State Bank of India the assessee placed in sample basis for perusal of the Ld. AO. 28. The Ld. DR argued and relied on the order of the revenue authorities. But he had not made any strong objection against the submission of the Ld. AR. 29. We have carefully considered the rival submissions and perused the material available on record. The assessee, a branch of the State Bank of India, claimed various expenses including Advertisement Expenses, Audit Fees, and Legal Charges under section 37(1) of the Act, aggregating to Rs. 16,43,60,000/-. The Ld. AO disallowed an amount of Rs. 8,10,18,335/- on the ground tha....
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....luded another sub-schedule called as 'Other Expenses' of Rs. 58,23,15,962/- representing various miscellaneous expenses. However, the break-up of the amount of the said 'Other expenses inadvertently shown Rs. 65,21,72,361/- instead the correct amount of Rs. 58,23,15,962/- and the differential amount of Rs. 6,96,56,399/-was added back expenditure u/s. 69C of the Act. It was submitted before the CIT(A) that an old copy of the sub-schedule Other Expenses was inadvertently furnished during the course of the assessment proceedings and the correct Other expenses were submitted refer Page No.333 - 334 of the paper book. The CIT(A) vide his Order dated 27/02/2015 accepted the claim of the assessee and allowed this issue subject to a direction to the Ld. AO to examine the nature of the expenses contained in the said list and to accept only those which are related to the assessee's business. 31. The Ld. DR argued and stands in favour of the order of the revenue authority. 32. We have considered the rival submissions and examined the material on record. The assessee debited a sum of Rs. 1,29,81,18,821/- under the head 'Operating Expenses' in Schedule 16 of the Profit & Loss Account,....
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.... as the judgement of the Supreme Court, the Indian Bank's Association [IBA] had vide its letter dated 22 January 2014 directed all the Banks to create a provision for payment of gratuity benefits for individuals who worked as Janatha Deposit Collectors. As per the letter dated 22 January 2014 issued by the IBA, it was clarified that such payments shall not be covered under the Payment of Gratuity Act, 1972, which is relevant for payment of gratuity under an employer-employee relationship only. According to the assessee, since the provision is for an ascertained liability and has been created by the assessee under the mandate of the Supreme Court, the same is eligible for deduction u/s. 37(1) of the Act. He placed reliance on the following decisions: * Bharat Earth Movers v/s. CIT reported in [2000] 245 ITR 428 (Supreme Court); * CIT v/s. Sony India Pvt. Ltd. reported in [2007] 160 taxman 397 (Delhi High Court); * CIT v/s. Kerala State Financial Enterprises Ltd. reported in [2009] 219 CTR 147 (Kerala High Court); * Lawkim Ltd. v/s. JCIT reported in [2004] 1 SOT 907 (Mumbai-Tribunal); * Persepolis Construction Co. Pvt. Ltd/v/s. ACIT re....
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....ly relied on the observation of the Ld. CIT(A) related addition U/s 14A of the Act. The relevant paragraph is reproduced as below:- "15.3. I have considered the objections as above. The suo motto disallowance of 2% of exempt income has been upheld in the case of the assessee for AY 2003-04 and 2004-05 by the Hon'ble ITAT, Bangalore in ITA nos. 1242 & 1243 (BNG)/2011 in order dt. 28.02.2013. The AO has mentioned in his order that all the decisions relied upon by the appellant in its own case pertained to years prior to AY 2008-09 when Rule 8D was brought into the statute. The AO's observation is erroneous since the undersigned has respectfully followed the ITAT decision even for AY 2008-09. In the present matter, I find that specific weaknesses in the appellant's accounts relating to exempt income have not been pointed out nor any nexus established between the amount sought to be disallowed and the exempt income. I am in agreement with the appellant that even after introduction of sub-section (2) and (3) to Section 14A, the provisions of Section 14A(1) must be complied with i.e., nexus theory must be satisfied, in order for the AO to disallow any expense under t....