TaxTMI 
TaxTMI 
2024 (8) TMI 1619
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....o new material available before the AO for re-opening the assessment without appreciating that the Hon'ble Apex Court has held in ALA Firm (19911 55 Taxman 497 (SC) and Hon'ble Gujarat High Court in Praful Chunilal Patel (1999) 23 ITR 832 (Guj.) have upheld the legal proposition that where mistake in assessment is caused by either an erroneous construction of transaction or due to its non- consideration, or caused by a mistake of law applicable even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based, would not amount to being on account of change of opinion and ought to be treated as valid?" 2 "Whether on the fact and the circumstances of the case and law, the Hon'ble ITAT was correct in allowing deduction of bad debts u/s. 36(1)(vii) of the Act when in facts assessee is claiming deduction u/s. 36(1)(viia) of the Act and first provision to section 36(1)(vii) restricts the deduction of the same. 3. "Whether on the fact and the circumstances of the case and law, the Hon'ble ITAT was correct in allowing provision on standard assets of Rs. 41.36 cr. when in fact standard assets are nei....
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....ect assessment could have been based, would not amount to being on account of change of opinion and ought to be treated as valid?" 2. "Whether on facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the deduction u/s. 80G on account of CSR expenses treating it as allowable in view of the decision of Hon'ble Jurisdictional ITAT in the case of Synergia Life Sciences Pvt. Ltd. us. CIT, for A.Y. 2020-21 dated 20.06.2023, without appreciating Explanatory Notes to Finance No. 2 Act, 2014, wherein it is highlighted: - a) CSR expenditure, being an application of income, is not incurred wholly &exclusively for the purposes of carrying on business. b) Hence on account of C.S.R. expenditure, no deduction is allowable u/s. 37 ofthe Act. c) If such expenditure as allowed as Tax Deduction u/s. 80G this could result in subsidizing 1/3nt of such expenses by the Govt., by way of tax expenditure," 3. "The appellant craves the leave to add, amend, alter and/ or delete any of the grounds of appeal as above." 4. The revenue has raised the following grounds in ITA No. 3676/Mum/2023 for AY 2016-17: - 1. "On the facts ....
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.... On the facts and in the circumstances of the case and in law, the Ld. CITIA) erred in deleting the disallowance of bad debts written off on account of credit card business made by the AO without appreciating the fact that the credit card business is a payment service and not a business of banking or money lending as defined in the Banking Regulation Act 1949. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has not appreciated that the bad debt claim of credit card business fails on both restrictions imposed in 36(2) (1) i.e. the credit card bad debts were never taken into account for computing income, and this does not represent money lent in the ordinary course of business banking. 10. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of bad debts written off on account of credit card business made by the on AO without appreciating the fact and position of law that the bad debts allowable on advances made as per provisions of section 36(2) (v) have to be done in compliance with section 36(2) (viia) and no such deduction can be allowed if the provisioning has been made ....
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.... credit card business made by the on AO without appreciating the fact that the credit card business is a payment service and not a business of banking or money lending as defined in the Banking Regulation Act 1949." 5 "On the facts and in the circumstances of the case and in law, the Ld.CIT (A) the Id. CIT (A) has not appreciated that the bad debt claim of credit card business fails on both restrictions imposed in 36(2)(i) i.e., The credit card bad debts were never taken into account for computing income and this does not represent money lent in the ordinary course of business of banking." 6 "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of bad debts written off on account of credit card business made by the on AO without appreciating the fact and position of law that the bad debts allowable on advances made as per provisions of section 36(2)(v) have to be done in compliance with section 36(2)(viia) and no such deduction can be allowed if the provisioning has been made for business other than banking business." 7. "Whether on the facts and circumstances of the case and in law the Ld. CIT(A) ....
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....thout establishing that such expenditure was incurred for earning exempt income by the Appellant. 2. He further erred in computing disallowance under section 14A by applying provisions of Rule 8D of the Income Tax Rules, 1962. 3. He further erred in not restricting the disallowance under section 14A to the amount of Rs. 1, 82, 35,840/-, Suo Moto disallowed by the appellant in the return of income. 4. He further erred in disregarding the accounts of the Cross Objector and ignoring the detailed submissions made regarding the correctness of the Cross Objector's claim. 5. He further erred confirming invocation Rule 8D by AO without recording satisfaction by AO regarding incorrectness of the Cross-objector's claim, as Rule 8D is not automatic and recording of objective satisfaction and finding incurrence of expenditure is necessary. 6. He failed to appreciate and ought to have held that: a. having regard to the accounts, the Cross Objector has not incurred any expenditure which was directly attributable towards earning of tax-free dividend income and such disallowance cannot be made on the basis of presumptions and by applying rules ....
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....o the accounts of the Appellant. 3. He further erred in confirming the action of AO with respect to invocation of Rule 8D, without recording his satisfaction as regards the correctness of the Appellant's claim. 4. He further erred in holding that the explanation inserted to section 14A by Finance Act 2022 is retrospective in nature. 5. He failed to appreciate and ought to have held that: a. having regard to the accounts, the Appellant has not incurred any expenditure which was directly attributable towards earning of tax-free dividend income and such disallowance cannot be made on the basis of presumptions and by applying rules mechanically. b. application of formula of 1% of annual average of the monthly averages of the opening and closing balances of value of such investments is totally inequitable and this disallowance has no relation to either the exempt income or to the expenditure claimed by the Appellant. c. There was no basis for making such an disallowance in accordance with Rule 8D(ii) to Section 14A without establishing that such expenditure was indeed incurred for earning exempt dividend income; d. The R....
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.... in holding that the provision of Rs. 85.95 crores (restricted to 56.69 crores) on standard assets made by the Appellant in line with the RBI Guidelines is not Provision for "Bad & Doubtful for the purpose of deduction u/s. 36(1)(viia) and therefore cannot be included for allowing deduction under section 36(1)(viia) of the Income- tax Act, 1961. 3. He further erred in holding that the provision for standard assets amounting to Rs. 85.95 crores (restricted to 56.69 crores) is to be excluded for determining the deduction under section 36(1)(viia). 4. He erred in not appreciating that even in respect of assets that are classified as standard assets, a part of the debts are doubtful of recovery and accordingly qualifies for deduction under section 36(1)(viia). 5. He failed to appreciate and ought to have held that: a. the provision made on standard assets amounting to Rs. 85.95 crores(restricted to 56.69 crores) is provision for bad and doubtful debts and the deduction u/s 36(1)(viia) has been correctly claimed in return of income. b. the expression provision for "bad and doubtful debts" in the substantive part of section 36(1)(viia) encompa....
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....grounds of appeal in ITA No. 570/Mum/2023 for AY 2018-19: - GROUND NO.1 - Disallowance of Administrative Expenses of Rs. 26, 61, 70,026/- under section 14A r.w.r 8D (2)(ii) 1. The Commissioner of Income Tax (A)-National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the CIT(A)") erred in confirming the disallowance made by the AO amounting to Rs. 26,61,70,026/- under section 14A by invoking the provisions of Rule 8D(2)(ii). 2. He further erred in confirming the action of AO regarding Invocation of the provisions of Rule 8D(2)(ii) for disallowance u/s. 14A without recording his satisfaction regarding incorrectness of the Appellant's disallowance of Rs. 2,16,33,239/- having regard to the accounts of the Appellant. 3. He further erred in confirming the action of AO with respect to invocation of Rule 8D, without recording his satisfaction as regards the correctness of the Appellant's claim. 4. He further erred in holding that the explanation Inserted to section 14A by Finance Act 2022 is retrospective in nature. 5. He failed to appreciate and ought to have held that: a. having regard to the account....
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....t in Return of Income 10. Without Prejudice to the above, AO be directed to restrict the disallowance u/s 14A r.w. Rule 8D(2)(ii) only w.r.t. those investments which have yielded exempt income during the year and exclude those investments which have not yielded exempt income during the year. GROUND NO. 2 Short Deduction u/s. 36(1)(viia) of Rs. 112.65 crores in respect of Provision for Standard Asset. 1. The CIT (A) erred in not considering provision on Standard Asset amounting to Rs. 112.65 crores as Provision for "Bad & Doubtful Debts" u/s. 36(1)(viia) and thereby denied deduction of Rs. 112.65 crores u/s. 36(1)(viia). 2. The CIT (A) erred in holding that the provision of Rs. 112.65 Crores on standard assets made by the Appellant in line with the RBI Guidelines is not Provision for "Bad & Doubtful Debts" for the purpose of deduction u/s 36(1)(viia) and therefore cannot be included for allowing deduction under section 36(1)(viia) of the Income-tax Act, 1961. 3. He further erred in holding that the provision for standard assets amounting to Rs. 112.65 crores is to be excluded for determining the deduction under section 36(1)(viia). ....
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.... are classified as standard assets, a part of the debts are doubtful of recovery. 6. The Appellant, therefore, prays that Provision amounting to Rs. 112.65 crores made for Standard Asset as per RBI guidelines be held as "provision for bad and doubtful debts" as envisage u/s. 36(1)(viia) and AO be directed to further grant deduction of Rs. 112.65 crores deduction U/s. 36(1)(viia). GROUND NO.3 non-allowance of deduction on account of withdrawal of Interest of Rs. 12, 95, 87,075 u/s. 244A which was offered for tax in earlier year. 1. The CIT(A) erred in confirming the AO's action towards deduction on account of withdrawal of Interest of Rs. 12,95,87,075/- u/s. 244A which was offered for tax in earlier year. 2. He failed to appreciate and ought to have held that: a. The Appellant has offered the interest u/s. 244A of the Act for A.Y. 2012-13 in the year of receipt i.e. A.Y. 2017-18. b. The said interest u/s. 244A of the Act for A.Y. 2012-13 was withdrawn in the A.Y. 201819 by the Income Tax department as reassessment proceedings resulted into demand. c. Since the interest u/s. 244A was already offered in the earlier yea....
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..... 2. The CIT(A) erred in not considering that the employees contribution made to PF before the due date of filing of return but after the due date of the relevant Act are eligible for deduction, under the provisions of section 2(24) (x) read with section 36(1)(va) of the Act. 3. The CIT (A) erred in not considering the fact that amendment to the provisions of Sec. 36(1)(va) of the Act, by the Finance Act, 2021 is applicable from assessment year 2020-21 onwards and thus, payments made to employees' contribution to PF beyond due date specified under the respective Act, but within due date for filing of return of income u/s. 139(1) of the Act, is an allowable deduction u/s.36(1)(va) of the Act. 4. He failed to appreciate and ought to have held that: a. the Appellant made the contribution towards PF before the due date of filing the Income tax return and hence allowable u/s. 43B b. the employee's contribution made to PF before filing of return is eligible for deduction Under section 43B of the Act. c. Since the Appellant had deposited employees' contribution to PF before due date of filing of Return of Income as prescribed u....
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....tion to Labour Welfare Fund (LWF) Rs. 31, 812/- U/s. 36(1)(va) 1. The CIT (A) erred in confirming the addition/disallowance made by the CPC at Rs. 31, 812/- on account of alleged delayed payment of employee's contribution to LWF, under section 36(1)(va) of the Income tax Act, 1961 ("the Act") while processing the Intimation u/s. 143(1) without appreciating the fact the payment made before the due date of filing of return of income. 2. The CIT(A) erred in not considering that the employees contribution made to LWF before the due date of filing of return but after the due date of the relevant Act are eligible for deduction, under the provisions of section 2(24) (x) read with section 36(1)(va) of the Act. 3. The CIT (A) erred in not considering the fact that amendment to the provisions of Sec. 36(1)(va) of the Act, by the Finance Act, 2021 is applicable from A.Y. 2020-21 onwards and thus, payments made to employees' contribution to LWF beyond due date specified under the respective Act, but within due date for filing of return of income u/s. 139(1) of the Act, is an allowable deduction u/s. 36(1)(va) of the Act. 4. He failed to appreciate an....
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....the AO, order of the Ld. CIT (A) and submissions of both the sides along with grounds raised before us by the Revenue. 12. First of all, we are dealing with ground no. 1 where the revenue has challenged the decision of the Ld. CIT (A). The Ld. CIT (A) in his decision vide para 5.2 quashed the proceedings initiated u/s. 148 of the Act, hence re-assessment order passed u/s. 147 of the Act declared to be invalid. If our findings on this ground goes against the revenue, rest of the grounds will become infructuous and not required any adjudication from our side. 13. For sake of clarity on the issue under consideration, we are reproducing herein below the reasons for reopening as supplied to the assessee by the AO as under:- "The assessee M/s. Kotak Mahindra Bank Ltd. is engaged in the business of banking and financial activities. The assessee filed e-return on 29/11/2012 declaring total income of Rs. 13 03, 14, 60,270/- for A.Y. 2012-13. The assessee filed a revised return of income on 17/02/2014 declaring total income of Rs. 12,64,28,49,892/-. The assessee further revised return on 26/03/2014 declaring total income at Rs. 12 64, 11, 72,041/-. The scrutiny assessment u/s.....
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....the provisions for standard assets were considered by the assessee as provisions for doubtful debts. There is nothing on record to indicate that the order has deliberated on this issue, making it very clear that the AO had not formed any opinion that provisions for standard assets could be considered as provisions for doubtful debts. It may be mentioned that the record very clearly reflects that the AO has not show caused the assessee on the issue. In view of these facts, it is clear that the AO has not dealt with the issue of provisions for standard assets being considered as provisions for doubtful debts and has not arrived at definitive fact finding. The assessee on one hand has declared these assets as standard assets as per RBI guideline and on the other hand at same time claimed deduction u/s. 36(1)(viia) of the Act by creating provision on these assets too clubbing these assets with bad and doubtful debts. Hon'ble Apex Court in the case of Southern Technologies vs. JCIT (Appeal No.1337/2003) made it dear that RBI guidelines themselves will not decide taxability of the income under income tax provisions. In the case of Bharat Overseas Bank Ltd Vs CIT reported in 139 ITO 1....
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....en that the figure of Rs. 197,54,90,668/- was Including the provision on standard asset. Thus, it was clearly disclosed that NPA provision is including provision on standard assets. Iv. In fact, during the course of assessment proceedings, the AO called for details of NPA provision. The same was submitted vide letter ref no KMBL/PL/11160/2017 dated 15.11.2017 (copy of which is enclosed herewith in Page Nos. 6 to 12 of the Paper Book No. I). The said letter clearly disclosed at the end of the letter that that NPA provision of Rs. 197,54,90,668/- is including provision on standard assets. v. The Annual accounts of the Appellant for the year ended 31st March 2012 is enclosed in Page No. 13 to 45 of the Paper Book No. 1. vi. After considering the above submissions, the AO has worked out the deduction u/s. 36(1)(viia) of the Act amounting to Rs. 197 crores. In fact in the assessment order the following table has reproduced by the AO: 5.13 The Assessee has written off bad debts of Rs. 106, 48, 70,590/- in the profit and loss account. The balance amount in Provision for Bad & Doubtful debts Account is as under Particulars Amount Rs Amount Rs ....
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....hed to an assessment order. It is only on the Assessing Officer strictly satisfying the provisions of section 147 that it acquires jurisdiction to re-open an assessment. Section 147 clothes the Assessing Officer with jurisdiction to re-open an assessment on satisfaction of the following: (a) The Assessing Officer must have reason to believe that (b) Income chargeable to tax has escaped the assessment, and (c) In cases where the assessment sought to be reopened is beyond the period of four years from the end of the relevant assessment year, then an additional condition is to be satisfied, viz.: there must be failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. [Para 6] ■ Admittedly in this case, the impugned notice has been issued within a period of four years from the end of the relevant assessment year, i.e. assessment year 2002-03. In such cases, the Assessing Officer would be clothed with jurisdiction to issue a notice for re-opening of an assessment if he has reason to believe that income chargeable to tax has escaped the assessment. The requirement of failure to make true and full....
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....ioner that the petition be allowed only on the above basis cannot be accepted. [Para 11] ■ Similarly, the contention of revenue that merely because petitioner had not contested the fact of escapement of income in its objections to the reasons recorded, it must conclusively follow that the impugned notice is valid in law and this court should not interfere is not acceptable. The petitioner had in its objections questioned the jurisdiction of the Assessing Officer to issue the impugned notice on the ground that there was no reason to believe on the part of the Assessing Officer this on the basis of the impugned notice is a change of opinion. This is evident from the fact that the opinion on the issue of allocation of expenses for claiming deduction under section 80-IA/IB was formed during the regular assessment proceedings. As observed above, the jurisdiction to issue a notice is acquired on satisfaction of twin conditions, i.e., reason to believe and escapement of income tax in case of assessment being sought be opened within a period of less than four years from the end of assessment year. Besides, the issue of escapement of income chargeable to tax is also an issue ....
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....ct that the Assessing Officer had during the regular assessment proceedings for assessment year 2002-03 sought information in respect of the allocation of expenses and the explanation offered by the petitioner was found to be satisfactory. This is evident from query and the petitioner's response to the same, explaining the manner of distribution of common expenses for delaying the process of claiming deduction under section 80-IA/IB. All this would indicate that Assessing Officer had formed an opinion while passing the assessment order. [Para 14] ■ Therefore, as there is a change of opinion in issuing the impugned notice having regard to the opinion formed while passing the assessment order under section 143(3), the Assessing Officer would cease to have any reason to believe. Moreover, the power to re-assess under section 147/148 is not a power to review an order of assessment passed under section 143(3). [Para 15] ■ It is further submitted by the revenue that so far as letter issued by the Assessing Officer is concerned, same was of general nature and particulars furnished by the petitioner in response to the same are voluminous and, therefore, no....
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....to the reasons recorded while issuing the impugned notice. [Para 20] ■ It was lastly contended by revenue that the impugned notice is only for reassessment for assessment year 2002-03. At this stage, the revenue is not required to establish the case to the hilt, but only required to make out a prima facie case in support of its stand. There can be no dispute to the above proposition. It is submitted that during the course of re-assessment proceedings, the petitioner would have opportunities to satisfy the authorities that there has been no escapement of income and the allocation of the common expenses between the three manufacturing units for the purposes of claiming deduction under section 80IA/IB is in accordance with law. ■ However, issue being examined is whether the Assessing Officer has jurisdiction to issue the re-opening notice. Once an assessment order is being passed, it has some sanctity. If the assessment order is to be disturbed, then the Assessing Officer must strictly satisfy the condition precedent as provided under section 147/148 before he can issue a notice, seeking to re-open an assessment. In this case, as pointed out above, there ....
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....is sought to be reopened are identical to the objection of the audit authority dated 29-12-2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This it-self indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted. [Para 6] Further the Supreme Court in the case of CIT v. Kelvinator India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) has observed that the Assessing Officer has only power to reassess on fulfilment of certain preconditions, namely, he must have reason to believe that income has escaped assessment and that there must be tangible material to come to the conclusion that there is an escapement of income from assessment. Such reason to believe should not be on account of mere change of opinion. Therefore, where facts have been viewed during the original proceeding and an assessment order has been passed then in such cases, reopening of an assessment on the same facts without anything more would be a review and not p....
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....ax effect would be the same. Consequently, there could be no reasonable basis to have a belief that there is any escapement of Income. [Para 8] In the circumstances, the impugned notice issued under section 148 as well as the impugned order rejecting the objections to initiation of reopening the assessment were liable to be quashed. [Para 10]" [1991] 55 Taxman 497 (SC) A.L.A. Firm v. Commissioner of Income-tax This judicial pronouncement rendered by Hon'ble Apex Court was with reference to old law on section 147 of the Act. The assessment year under consideration cannot be governed by this decision of Hon'ble Apex Court, hence reliance of the revenue is not found tenable in the present scenario. 17. Now we are reproducing the findings of the Ld. CIT (A) which are under challenge by the revenue as under:- "I have perused the assessment order, grounds of appeal, and submission filed by the appellant. I find from the submission of the appellant that the case was reopened by the AO on the round that though the appellant had filed average rural advances with respect to the deduction u/s 36(1)(viia), the appellant had not given any explanation and details for c....
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....s. ICICI Securities Primary Dealership Ltd ( 24 taxmann.com 310). The appellant has also submitted that reopening is nothing but change of opinion. I have perused the facts of the case and submission filed by the appellant and arguments made during VC. I find from the reasons recorded by the AO which are reproduced by the appellant in its submission that the appellant has not made true and full disclosure regarding risk assessment of a particular standard asset how it is arrived at and corresponding provision created neither in Audit Report nor at the time of scrutiny assessment. The tax Auditor has also not given qualifying remarks on standard asset in Tax Audit Report. The AO further observed that the original order u/s 143(3) also not dealt with the issue of how the provisions for standard assets were considered by the assesse as provisions for doubtful debts. There is nothing on record to indicate that the order has deliberated on this issue, making it very clear that the AO had not formed any opinion that provisions for standard assets could be considered as provisions for doubtful debts. In view of the above factual observation of the AO, I of the considered view tha....
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....agreement with the order of Ld. CIT (A). Hence ground no. 1 raised by the revenue is dismissed without any further decision on merits of the case as the reassessment proceedings itself is bad in law. 22. In the result, appeal of the revenue is dismissed. ITA No. 3676/Mum/2023 (A.Y.2016-17) C.O. No. 38/Mum/2024(A.Y.2016-17) 23. Ground no. 1 raised by the revenue has already been discussed elaborately on various occasions by the Coordinate Benches in favour of the assessee. Through this ground the revenue has challenged the decision of Ld. CIT (A) wherein he deleted the disallowance made by the AO under Rule 8D(2)(ii) r.w.s. 14A of the Act. The relevant findings of the Tribunal on similar issue we will discuss later in this order for reference. During the year under consideration, assessee has investments capable of yielding exempt income at Rs. 1195.04 crores whereas the own funds as on 01.04.2015 was Rs. 14,141.09 crores and Rs. 23,959.06 crores as on 31.03.2015. The assessee company has earned exempted income to the tune of Rs. 48.04 crores. 24. The coordinate Benches in the assessee's own cases viz Kotak Mahindra Bank Ltd v. ACIT (ITA No. 3267-3268-3269/Mum/2019), ....
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.... satisfied with the correctness of the suo moto disallowance of the assessee, invocation of rule 8D is mandatory. The AO has elaborately discussed the reasons as to why he is not satisfied with the correctness of disallowance made by the assessee with which I fully agree. The same has been briefly discussed in para 6.2 above. Hence, the contention of the appellant that the AO has mechanically invoked rule 8D is not correct and the same is rejected, Having held as above, let us now proceed to discuss the quantum of disallowance required u/s. 14A 6.5 As stated earlier, the appellant has disallowed Rs. 22, 38,4267- u/s. 14A r.w.r. 8D. For this purpose, the appellant had excluded the investment made in subsidiary companies, which according to the appellant are strategic in nature. As far as disallowance under clause (ii) of Rule 8D(2) is concerned, it is the submission of the appellant that it has its own funds to the extent of Rs. 9, 446.95 Crores as against the investment generating /capable of generating exempt income at Rs. 453.53 Crores. In the appellant's own case for A.Y. 2008-09 to 2011-12 in ITA No.1657/Mum/2012, the ITAT has given relief to the appellant in respect of dis....
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....M/2017 15.Essel Mining & Industries Ltd vs. DCIT ITA No.856/Kol/2017 16.Essel Mining & Industries Ltd vs. DCIT ITA No.1694/M/2017 17.Integrated Coal Mining Ltd vs. DCIT ITA No.786/Kol/2013 18.DCIT vs. Garware Polyester Ltd ITA No.5757/M/2017 7. We have considered the rival submissions and perused the material placed before us. We find that the issue is squarely covered in favour of the assessee by the decision of the Tribunal cited supra in assessee's own case for AYs 2008-09 to 2011-12. The Tribunal, by following the decisions of the Tribunal in the cases of Premier Finance & Leasing Co. Ltd (ITA No.1655/Mum/2013 for AY 2008-09 & others dated 25- 05-2016 and Aditya Birla Nuvo Ltd (ITA No.8427/ & 8483/Mum/2010 (order dated 17.09.2014) decided the issue in favour of the assessee. The facts and circumstances of the issue under consideration are stated to be identical except for figures. Therefore, consistent with the decision already arrived at by the Tribunal; we uphold the order of the CIT (A). Ground 1 of the revenue fails. 25. In view of the above decisions rendered by Coordinate Benches in assessee's own case (relying upon the various judicial pronouncements of various Hon'bl....
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....i) The assessee submitted that, assessee's own funds are sufficient and therefore, no is warranted. With regard to disallowance made by the AO under Rule 8D (2)(ii), the CIT (A) has given a detailed finding and gave relief to the assessee stating that when the assessee is having sufficient own funds no disallowance shall be warranted. With regard to 8D(2)(iii) the CIT(A) by relying on assessee's own case in ITA No. 374/Mum/2012 for AY 2008-09 held that for the purpose of disallowance under Rule 8D(2)(iii) the disallowance should be restricted to only those investments yielding exempt income. Against the decision of the CIT (A), the assessee is before the Tribunal contending that the plea of the assessee before the CIT (A) was to restrict the disallowance to the suo-moto disallowance offered by the assessee and the said relief has not been considered by the CIT (A). 4. The ld. AR with regard to the plea that disallowance should be restricted to the suo-moto disallowance, submitted that the assessee has investments which are in the nature of stock in trade and also are strategic investments made in subsidiaries. The ld. AR drew our attention to the financial statements of the....
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....er employees (deputed on the Board of the subsidiary companies of the HDFCBL) pertaining to the date of the Board meeting, secretarial cost for conducting the Board meeting, rental charges in case where meeting is conducted outside the HDFCBL's owned premises, travel cost of all the directors which has been incurred for the purpose of this Board meeting and other expenses which are incurred for the purpose of the Board meeting. Step 3: The total cost of conducting the Board meeting has been identified for every meeting which the Bank has conducted. After identifying the total cost, the Bank counts the total agenda discussed in the Board meeting. The total agenda pertaining to the subsidiary companies is also identified. The ratio of the agenda pertaining to the subsidiary companies in proportion to the total agendas is applied to the total cost incurred for the particular Board meeting. This amount is attributed as disallowance for the purpose of section 14A of the Act. For instance, if the total cost incurred for conducting the Board meeting is Rs. 10 lakhs and out of the total 20 agendas in the Board meeting, 5 agendas pertains to subsidiary associate and joint venture compan....
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....ssessee is not correct thereby failed to record any satisfaction. The ld. AR in this regard relied on the decision of the Co-ordinate Bench in the case of Aditya Birla Finance Ltd. Vs. ACIT (83 taxmann.com 85) where the Tribunal has accepted similar accountant report and held that the disallowance should be restricted to the suo-moto disallowance. The relevant findings of the co-ordinate bench are as extracted below: "3.28 In the light of the foregoing discussion, we find that neither the Ld. Assessing Officer nor the Ld. Commissioner of Income Tax (Appeal) pointed out any defect in the accounts of the assessee, therefore, the ratio laid down in the case of Britania Industries Ltd. v. Dy CIT [IT Appeal No.390 (Kol.) of 2013, dated 2-3- 2016], Rapiakos Brett & Co. Ltd. v. Addl. CIT(A) [IT Appeal No. 7490 (Mum.) of 2013, dated 10-112016] supports the case of the assessee. The ratio laid down in Fedex Finance (P) Ltd. v. Dy. CIT [IT Appeal Nos. 1067 & 1073 (Mum.) of 2013] and White Water Mass Media v. ACIT [IT Appeal No. 2963(Mum.) of 2013] supports the case of the assessee. It is also noted that during assessment proceedings, the report of the accountant, specifying the basis for cal....
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....g at the disallowance under section 14A. From the perusal of the financial statements, it is also noticed there no movement in the investment made in the subsidiaries and therefore, there is merit in the contention of the ld. AR that only the cost pertaining to the Board meeting where strategic decisions are taken with regard to investments in subsidiaries and the proportionate costs of those employees in the company who involving the decisions have been considered for the purpose of disallowance under section 14A and that the said method is appropriate. 9. on the contention that the AO has not recorded any satisfaction, it is relevant to take note of the following observations of the AO before he proceeded to compute the disallowance under section 14A. "3.3 Excluding stock-in-trade from the total investment, the strategic investment for the assessee as on 31.03 2015 was Rs. 2853,16,62,252/- and as on 31.03.2016 was Rs. 2853,56,41,425/ Hence, the average value of investment is Rs. 2853,36,51,839/- These investments cannot be managed without inherent expenses since no investments can be made without market analysis and expertise The assessee could not have got the market expertise a....
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....ot correct. In view of these discussions and considering the judicial pronouncements, we are of the view that the AO is not correct in invoking the provisions of section 14A without recording any satisfaction as to why the suo-moto disallowance computed by the assessee is not correct. Accordingly, we delete the disallowance made by the AO and direct the AO to restrict the disallowance to the suo-moto disallowance made by the assessee. It is ordered accordingly." 28. As the issue raised by the revenue in ground no. 2 with reference to disallowance u/s 14A r.w.r. 8D(2)(iii) and the grounds of the assessee 1 to 9 raised in CO are squarely covered in the decision of the Coordinate Bench discussed (supra), we have thoroughly gone through the orders of authorities below and the decision of Coordinate Bench reproduced (supra), we do not find any strength in the ground of revenue and respectfully following the detail finding of the Coordinate Bench, we dismiss the ground NO. 2 raised by the revenue and allowed ground nos. 1 to 9 raised by the assessee in its C.O. 29. Ground no. 3 raised by the revenue pertains to the disallowance made by the AO amounting to Rs. 415,74,56,787/- under ....
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....it is not expenditure. For this proposition, the AO relied upon the decision of Ranbaxy Laboratories Ltd vs. ACIT [124 TTJ 771 (2009) (Delhi Tribunal). Further, in giving its judgment, the Delhi Tribunal held that the issue of shares at below market price does not result into incurring any expenditure; rather it results into short receipt of share premium which the assessee was otherwise entitled to. The receipt of share premium is not taxable and hence any short receipt of such premium will only be a notional loss and not actual loss for which no liability is incurred and such notional losses are not allowable under the provisions of the Income Tax Act, 1961. Further, reference was made to section 37 of the IT Act which requires that there should be an expenditure incurred by the assessee; however, a benefit or income foregone cannot be considered as expenditure. The Tribunal was of the view that the assessee has not incurred any expenditure but merely received lesser amount of share premium. The assessing officer further stated that above judgment has been heavily relied on in the recent judgment pronounced by Mumbai Tribunal in the case of M/s. VIP Industries Ltd (2010 TIOL 654)....
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....ed 28.02.2018, thus, we do not find any reason for interfering with the order of ld CIT(A), which we affirms. In the result this ground of appeal is dismissed." 30. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 3 raised by the revenue is dismissed. 31. Ground no. 4 raised by the revenue pertains to addition of interest income under section 43D r.w.r. 6EA amounting to Rs. 10.48 crores. This issue is recurring in nature and has been decided in favour of assessee as well as other banks also. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee's own case as under:- "GROUND 4 : INTEREST ON NPA UNDER SECTION 43D READ WITH RULE 6EA 16. during the course of assessment, Assessing Officer observed that in the case of banks, provision of section 43D of the Act to allow them to offer interest in respec....
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....A.O was of the view that as per Rule 6E, interest is not to be offered for taxation with respect to advances which become Non Performing Assets for a period of 180 days or more. With the assistance of ld. representative we have perused the decision of ITAT, Mumbai in the case of Union Bank of India VS. ACIT, 16 taxman.com 304 wherein on identical issue and similar facts held that bank had no option but follow the RBI guidelines to make a provision for unrealized interest on the NPA by debiting profit and loss account. In the case of DCIT Vs. Karur Vysya Bank ITA No. 2433 & 2467 of ITAT Chennai dated 29.03.2017 held that it becomes necessary to read down such rules so that it is in consonance with the RBI regulation or prudential norms for recognizing income. In Royal Bank of Scotland vs. DCIT vide ITA No. 477/Kol/2015 ITAT Kolkata held as under: "2.6 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute before the lower authorities that the loan accoun....
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....ssued by the Reserve Bank of India in relation to such debts, (b) in the case of a public company, the income by way of interest" in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or "[a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or] the State financial corporation or the State industrial investment corporation or "[a deposit taking non-banking financial company or a systemically important nondeposit taking non-banking financial company or] the public company to its profit and loss account for that year or as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. "It is categorically provided in the provisions of section 43D that income by way of interest in relation to bad and doubtful debts to be prescribed in accordance with guidelines issued by the RBI. The secti....
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....roducing the decision of Coordinate Bench in assessee's own case as under:- "GROUND 3 : ALLOWING OF BROKEN PERIOD INTEREST 39. During the course of assessment, the assessee was asked to explain why the broken period interest on HTM (held to maturity) should not be treated as capital expenditure. The assessee made a detailed submission which has been reproduced by the Assessing Officer in para 10.2 of the assessment order wherein the assessee had also relied on the decision of the Bombay High Court in the case of American Express vs CIT 258 ITR 601 (Bom). The assessee has also relied on the various other decisions of the Tribunal. However, the Assessing Officer has not agreed with the submission of the assessee and held that the broken period interest is not allowable on investment as the same constitutes capital expenditure. The assessee filed appeal before the Ld.CIT (A). The Ld.CIT (A) allowed the claim of the assessee. 40. During the course of appellate proceedings before us, the Ld. Counsel submitted that identical issue on similar facts in the case of the assessee has been adjudicated by ITAT, Mumbai in ITAs No.781 & 782/Mum/2018. 41. On the....
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....at facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee's own case as under:- "Ground 2: Provision for Standard Asset qua deduction under section 36(1)(viia) 3. During the course of assessment, the Assessing Officer noted that assessee bank has claimed deduction for provisions under section 36(1)(viia) of the Act in respect of bad and doubtful debts, though is available in respect of 7.5% of the total income and 10% of the rural branches. The assessee bank has created provisions in respect of following categories of assets- i) Standard Assets; ii) Doubtful Assets; and iii) Losses 4. The Assessing Officer stated that though the deduction under section 36(1)(viia) is available only in respect of provisions for bad and doubtful debts; however, the assessee bank had claimed deduction in respect of provisions for even the standard assets. The Assessing Officer was of the view that no provision is required for standard assets as the standard assets are not included in the categories of standard and doubtful assets. The provision ....
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....tion 36(1)(viia) of the Act, a bank is eligible to avail deduction in respect of provision made for bad and doubtful debts, of an amount not exceeding 7.5% of total income and 10% of the aggregate average advances made by the rural branches of the bank. The provision is created by the assessee on the basis of RBI Guidelines. The assessee is required to create provision on non-performing assets on the basis of the classification of assets into the four prescribed categories i.e. loss assets, doubtful assets, substandard assets and standard assets [refer para 5.1.2 of the RBI Guidelines]. 72. the Revenue before us emphasized that the provision for standard assets is not same as provision for bad and doubtful debts and the same is contingent in nature, since it is created only out of abundant caution. We noted from the provisions that the assessee is required to make a provision on all its debts ranging from 0.25% to 100% depending upon the categorization of the loan in terms of the guidelines issued by RBI. The provision on debts made by the assessee is in line with the RBI guidelines and section 36(1)(viia) of the Act does not have a requirement that the provision for debts....
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....le that in respect of an asset, considered good, would be more in the nature of an appropriation of profit i.e. a reserve. This is precisely what the Tribunal in Bharat Overseas Bank Ltd. (supra) means when its states of the deduction being not in the nature of a standard allowance. No contrary judgement by the Tribunal or a higher court has even otherwise been brought to our notice. At the same time, the provision as per RBI guidelines - which are contended to have been followed / adopted, provide for the minimum provision, and the bank is free to make a higher provision, i.e., than that prescribed by the RBI norms. Provisioning, it may be noted, is a management function, made reflecting its risk assessment qua different assets. If therefore, the assessee bank is able to satisfy the assessing authority that the provision as made is justified with reference to the debts considered by it as bad and doubtful, we see no reason as to why the same cannot be allowed. The matter is accordingly restored back to the file of the A.O. for fresh determination by issuing definite findings of fact. Even as the primary onus would be on the assessee, the A.O. cannot substitute his own judgement wi....
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.... debt under section 36(1)(vii) of the Act. On query, the assessee explained that the credit card business is undertaken within the purview of banking licence issued by the Reserve Bank of India and that even debt fall under section 6(2) of Banking Regulations Act and this being part of their banking business or alternatively, even if treated as money lending business, the write off is allowable under section 36(1)(vii) of the Act. The assessee further submitted that section 36(1)(vii) read with section 36(2) provided that any bad debt or part thereof would be allowed as deduction if the same represent money lent in the ordinary course of business of banking or money lending which is carried on by the assessee. However, the Assessing Officer has not agreed with the submission of the assessee. He was of the view that assessee was a banking company and credit card business was different from banking business. The Assessing Officer further stated that credit card business was a payment service and not a business of banking or money lending as defined in the Banking Regulations Act, 1949. After referring to the order passed by the PCIT-2, Mumbai under section 263 in the case of ICICI Ba....
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....dinate bench as referred above, we direct the Assessing Officer to allow the claim of deduction under section 36(1)(vii) read with section 36(2) in respect of bad debts claimed on credit cards. 38. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 8 to 10 raised by the revenue is dismissed. 39. Ground no. 11 raised by the revenue pertains to disallowance of interest u/s. 36(1)(ii) in respect of perpetual bond. This issue is recurring in nature and has been decided in favour of assessee as well as other banks also in ITA No. 3215/Mum/2019 in the case of ICICI vs. ACIT. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench as under:- "10. Heard both the sides and perused the material on record. The A.O has disallowed the claim of interest made u/s 36(1)(iii) by treating the perpetual bond as equity in nature. In suppor....
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....man.com 247 (Mum ITAT) are also distinguishable from the case of the assessee. In that case the revenue had not discussed about the terms on which perpetual bond were issued. Therefore, the issue was remained back to the ld. CIT (A) for fresh adjudication. We have also perused the decision of Kerala Road Transport Corporation vs. ITO 34 TTJ 101 Cochin, ITAT, wherein held that payment of interest was not made to the corporation but it was the payment made to the third parties. In the light of the above facts and circumstances merely that RBI recognizes to treat the said debt instruments as additional Tier/Capital would not change the nature of Innovative Perpetual Debt Instruments which were of the nature of long term borrowings and the interest paid was debited to the profit and loss account. These debt instruments were also redeemed on different dates as discussed supra in this order, therefore, we don't find any reason to interfere in the decision of ld. CIT(A), accordingly, this ground of appeal of the revenue is dismissed." 40. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the....
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....gs (supra), applicable mutatis mutandis here also. In the result, ground nos. 1 raised by the assessee is allowed. 49. Ground no. 2 raised by the assessee has already been discussed and dismissed as ground no. 6 & 7 vide ITA No. 3676/Mum/2023 for A.Y. 2016-17, as the facts of this year and law applicable is similar. Our findings (supra), applicable mutatis mutandis here also. In the result, ground nos. 2 raised by the assessee is allowed. 50. In the result the appeal filed by the assessee in ITA No. 569/Mum/2023 is allowed. ITA No. 3677/Mum/2023 (A.Y.2018-19) ITA No. 570/Mum/2023 (A.Y.2018-19) 51. Ground no. 1, 2 & 3 raised by the revenue has already been discussed and dismissed as ground no. 3, 4 & 5 respectively vide ITA No. 3676/Mum/2023 for A.Y. 2016-17, as the facts of this year and law applicable is similar. Our findings (supra), applicable mutatis mutandis here also. In the result, ground no. 1, 2 & 3 raised by the revenue are dismissed. 52. Ground no. 1 raised by the revenue has already been discussed and dismissed as ground no. 3 vide ITA No. 3676/Mum/2023 for A.Y. 2016-17, as the facts of this year and law applicable is similar. Our findings (supra), app....