TaxTMI 
TaxTMI 
2024 (8) TMI 1651
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....e Assessing Officer wherein he stated that the excess provision unutilized is not required by the assessee and hence, written back Rs. 844,33,34,197/ - considering it as income. 2.1. The Commissioner of income tax (Appeals) failed to appreciate the fact that there is no provision in the Income Tax Act under which such provision can be considered as income. 2.2. The Commissioner of Income tax (Appeals) erred in not following the decision of the Hon'ble Tribunal in the Appellant bank's own case for the Assessment year 2011-12. 2.3. The Commissioner of Income tax (Appeals) erred in confirming the disallowance by the learned Assessing Officer relying on facts which are not applicable to the issue under appeal. 3. The Commissioner of Income tax (Appeals) erred in law in confirming the action of the Assessing Officer in disallowing Rs.265,71,57,198/- out of deduction of Rs.847,40,27,692/ claimed by the Appellant under Section 36(1)(viia) of the Act stating it to be excess claim towards provision for bad and doubtful debts. 3.1 The Commissioner of Income tax (Appeals) ought to have seen that under Section 36(1)(viia) of the Act, amount ....
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..... gross amount of premium payable less interest accrued to the assessee from the scheme is allowed as deduction instead of the gross amount of premium payable, addition of the interest amount of Rs.21,97,59,646/- as income is indirectly leading to taxation of the same amount twice. 6.2. Without prejudice to the above and alternatively, the amount of Rs.21,97,59,646/ treated as income be allowed as deduction as the same is contributed back to the fund. 7. The Commissioner of Income tax (Appeals) erred in law in upholding the action of Assessing Officer in disallowing Rs. 2,14,14,040/ - u/s 14A of the Act. 7.1. The Commissioner of Income tax (Appeals) failed to appreciate the fact that no disallowance can be made u/s 14A since the investments are stock in trade. 7.2. Without prejudice to the above, the Commissioner of Income tax (Appeals) failed to appreciate the fact that the Assessing Officer erred in invoking Rule 8D in the absence of any finding that Rs. 14,85,960/- disallowed by the assessee itself is not correct and the assessee has incurred expenditure of more than this amount. 7.3. The Commissioner of Income tax (Appeals) failed to....
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....ceedings, the Assessing Officer noticed that the opening balance of the provision for rural bad and doubtful debts u/s 36(1)(viia) was at Rs. 690,97,31,364/- and the amount of rural bad debts written off for the A.Y 2012-13 was Rs. 3,06,93,495/ -. The Assessing Officer further noted that the deduction u/s 36(1)(viia) of the Act was allowable in respect of any provision for bad and doubtful debts for the amounts not exceeding 7 1/2 % of the total income and 10% of the aggregate average advances made by the Rural Branches of the Bank. As per the above section, deduction was available every year depending upon the aggregate average advances made by the Branches at the end of every year and on the total income of that year. The Assessing Officer further noted that the assessee is making excess provision u/s 36(1)(viia) every year, however, claiming deduction towards bad debts at very low amount and continuing unutilized provisions for unlimited period. Therefore, by following AS-29, which deals with provision and liabilities, has made addition towards excess provision in opening balance of provision for bad and doubtful debts u/s 36(1)(viia) for Rs. 844,33,34,197/-. 7. On appeal, th....
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....be debited to such provision account to the extent of balance available and excess, if any, should be debited to the P&L Account. In case of excess provision available as per books, section 36(1)(viia) did not have any time limit for utilization of such provision. If no bad debt arises on account of rural advances, provision created u/s 36(1)(viia) is to be carried forward from year to year and whenever bad debt on account of rural advances arises, such bad debts are to be set off against the balance in provision made for rural advances/loan, but cannot be claimed/allowed as deduction by debiting to P&L account. In the present case, provision made as per section 36(1)(viia) is more, whereas write off of actual bad debt in respect of rural advance is less. Thus, there is excess provision u/s 36(1)(viia) and the same needs to be carried forward to the subsequent A.Ys. Therefore, in our considered view, the Assessing Officer and the learned CIT (A) erred in making addition towards the amount lying in provision for bad and doubtful account u/s 36(1)(viia) of the Act for Rs. 844,33,34,197/ -. 11. We, further note that this issue is squarely covered in favour of the assessee by the de....
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....made by the Assessing Officer by following the decision of the ITAT Hyderabad Benches in appellant's own case for A.Y 2007-08 in ITA No. 167/Hyd/2014 dated 29.5.2014. 15. The learned Counsel for the assessee submitted that this issue is covered against the assessee by the decision of the ITAT, Hyderabad Benches in appellant's own case for the A.Y 2007-08. However, he further submitted that the alternative ground taken by the assessee regarding allowing deduction as per provision accrued and debited to P&L Account of Rs.785,63,70,495/- should be allowed. Therefore, he submitted that to verify the facts, the matter should be set aside to the file of the Assessing Officer. 16. The learned DR, on the other hand, supporting the order of the learned CIT (A) submitted that the issue is squarely covered in favour of the Revenue by the decision of the ITAT Hyderabad Benches in appellant's own case for the A.Y 2007-08. The learned CIT (A) by following the order of the ITAT, has upheld the addition made by the Assessing Officer and thus, the order of the learned CIT (A) should be sustained. 17. We have heard both the parties, perused the material available on record and g....
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....t of ATs 2001-02 to 2004-05 in assessee's own case. 29. On appeal, before the CIT(A) the assessee contended that the AO ought to have seen the déduction u/s 36(1)(viia) allowable on account of bad and doubtful debts to the extent of seven & one half percent of the total income and an amount not exceeding 10% of the aggregate average advances made by rural branches of a bank in computing its total income, irrespective of the provision made in its books of account and therefore the deduction for bad and doubtful debts of Rs. 334,43, 19,444/- should have been allowed instead of Rs. 97,48,84,948/- while completing the assessment. The assessee relied on Hon'ble Bangalore Bench of ITAT in the case of Syndicate Bank Vs. DCIT, 78 ITD 103 which has been applied in the case of Vijaya Bank by the same bench of ITAT and similar view taken by the Hon'ble Karnataka High Court in the case of DCIT Vs. Karnataka Bank Ltd., 175 Taxman 325. 30. After considering the submissions of the assessee, the CIT(A) discussed and examined the issue with CBDT Instruction No. 17/2008, case laws relied upon by the assessee and with the provisions of section 36(1)(viia). Thereaf....
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.... the case of State Bank of Patiala Vs. CIT 272 ITR 54 where it has been held that it is necessary to make a provision for bad and doubtful debts in the account books in the same previous year in which such provision is claimed as deduction u/s 36(1)(viia). Therefore, it is held that deduction is available only to the extent of the provision made in the books and accordingly the deduction for provisions of bad and doubtful debts as computed u/s 36(1)(viia) is restricted to the amount provided by the appellant in its books and the AO is justified in allowing the provision made of Rs. 97,48,84,948/- u/s 36(1)(vila) of IT Act and disallowing the claim of Rs. 334,43,19,444/ -. 6.10 However, if the returned income is taken at Rs. 288,27,68,633/- as directed in para 5.5 then the AC will have to add back the amount of Rs. 230,94, 34,496 (Rs. 334,43, 19,444 - Rs. 97,48,84,946) in the computation." 35. Since the CIT(A) followed the decision of the Hon'ble High Court of P&H in case of State Bank of Patiala (supra), we do not find any reason to differ from the order of the CIT(A). Moreover, the coordinate bench of ITAT, Bangalore in case of Syndicate Bank (supra) has anal....
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....aim deduction by way of PBDD which according to the AO would not be the intention of the legislature. The AO thus refused to allow the claim of the Assessee for deduction of 10% of AARA. 49. The CIT(A) deleted the addition made by the AO by following the decision of the decision of the ITAT in Assessee's own case reported in 78 ITD 103 wherein it was held that irrespective of the debit to the profit and loss account on account of provision for bad and doubtful debts (PBDD), an Assessee is entitled to 10% of the AARA as deduction u/s.36(1)(viia) of the Act. The relevant observations of the Tribunal in the aforesaid decision was as follows: "20. The learned CIT has also acted under the misconception that deduction under cl. (viia) is related to the actual amount of provision made by the assessee for bad and doubtful debts. The true meaning of the clause, as indicated earlier, is that once a provision for bad and doubtful debts is made by a scheduled bank having rural branches, the assessee is entitled to a deduction which is quantified not with respect to the amount provided for in the accounts, but with respect to a certain percentage of the total income and al....
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..... The Assessing Officer observed that as per note on accounts under Schedule 18 at point 10.1 on page 81 of the Annual Report, it was stated that the amount claimed as per the balance sheet is Rs. 581.68 crores whereas the appellant claims that it has made a provision for Rs. 785.63 crores. The facts are not clear and needs further verification from the Assessing Officer. Therefore, we set aside the alternative ground taken by the assessee in Ground No.3.2 of grounds of appeal to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee and decide the issue in accordance with law. 20. The next issue that came up for our consideration from Ground No.4 of assessee's appeal is addition towards amounts received under agricultural debt relief scheme for Rs. 21,21,73,183/-. 21. During the financial year 2007-08, the Govt. of India has formulated a scheme called agricultural rural debt relief scheme 2008, where govt. has agreed to pass on relief to the farmers. In terms of the above scheme, appellant claims amount received from Govt. of India towards debt relief passed on to the farmers for Rs. 151,80,40,961/-. Out of the same, the appellan....
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.... waiver relief scheme 2008. Under the said scheme, the appellant has received sum of Rs. 21,21,73,183/- from Govt. of India as compensation for waiver of loans given to farmers. In the normal understanding of any person, any amount received from the State or Central Govt. in the form of a grant to compensate any person should be in the nature income. Generally, debt waiver scheme is given by the State or Central Govt. considering the necessity of providing such scheme depending upon the Bankers inability to recovery loan from farmers and such schemes are provided considering the nature of loans, the outstanding period of loans in the books of account of any Bank. In other words, generally debt waiver scheme is provided in a situation where the Banks are unable to recover loans after a long period and the Banks have written of the said debts in their books of account. In the present case, the appellant bank has not provided the scheme document to verify the terms & conditions of the scheme. The appellant claims that it has not claimed deduction towards loans & advances given to farmers as bad debts in earlier years which represent the amount received from Govt. of India towards loan....
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....r claimed nor allowed as deduction. Therefore, he submitted that the matter may be set aside to the file of the Assessing Officer for verification and decide the issue in accordance with law. 28. The learned DR fairly agreed that this issue may be set aside to the file of the Assessing Officer for further verification and to decide the issue in accordance with law. 29. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. The appellant claims that it has recovered Rs. 2,06,73,094/- from bad debt account in respect of the period from 2001-02 to 2004-05, but the same was not claimed nor allowed as deduction in above A.Ys. If the claim of the assessee is correct that the deduction is not allowed u/s 36(1)(vii), then recovery from bad debts written off cannot be taxed u/s 41(4) of the I.T. Act, 1961. The facts need to be verified to ascertain the claim of the assessee that it has not claimed deduction towards bad debts when the provision was made for the A.Y 2000-01 to 2004-05. Therefore, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to verify the claim of the a....
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....e scheme, then interest accrued on said fund partakes the nature of contribution towards leave encashment scheme and same needs to be allowed as deduction. The learned Counsel for the assessee further submitted that without prejudice to the above, alternatively interest credited by the LIC should be treated as contribution back to the fund towards leave entitlement of the employees of the appellant Bank. 33. The learned DR, on the other hand, supporting the order of the learned CIT (A) submitted that the interest received by the appellant towards group leave encashment scheme should be offered to tax as income of the appellant. The contribution, if any, to the scheme should be paid on actuarial valuation. Therefore, the argument of the assessee that interest credited by LIC partake the nature of contribution is incorrect. Therefore, he submitted that the addition made by the Assessing Officer and sustained by the learned CIT (A) should be upheld. 34. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. Payment towards leave encashment is deductible on actual payment basis in terms of 43B(f) of the Act, ....
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....e towards interest credited by the LIC. In case, actuarial valuation of contribution to said fund is fully debited by the assessee into P&L Account i.e. Rs.39,30,20,910/-, then interest income of Rs.21,97,59,646/- should be taxed separately. Facts need to be verified in light of the claim of the assessee. Therefore, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to verify the claim of the assessee and decide the issue in accordance with our findings given herein above. 37. The next issue that came up for our consideration from Ground No.7 of assessee's appeal is addition towards disallowance u/s 14A r.w. rule 8D of I.T. Rules, 1962. During the financial year relevant to A.Y 2012-13, the appellant has earned dividend income of Rs. 8,56,70,661/- and claimed exempt u/s 10(34) of the I.T. Act, 1961. The assessee has made Suo motto disallowance of expenditure relatable to exempt income of Rs. 14,85,960/- u/s 14A of the I.T. Act, 1961. The Assessing Officer did not accept the disallowance of expenditure computed by the assessee and according to the Assessing Officer, the disallowance contemplated u/s 14A of the I.T. Act, 1961 should be....
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....ssing Officer and the learned CIT (A) to uphold the addition towards disallowance of expenditure u/s 14A of the Act, r.w.r 8D of IT Rules, 1962, in light of argument of the learned Counsel for the assessee along with certain judicial precedents, including the decision of the Hon'ble Supreme Court in the case of Maxopp Investments Ltd vs. CIT (Supra). The Hon'ble Supreme Court has discussed this issue at length in the case of Maxopp Investments Ltd vs. CIT (Supra) in Paras 36 to 41 and more particularly in Para No.39, where it is clearly discussed the issue of applicability of provisions of section 14A r.w.r 8D in case of dividend income earned by any assessee on investment held as stock-in-trade. The Hon'ble Supreme Court after considering relevant facts held that in those cases where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as income under the head profits and gain from business and profession. What happens is that in the process when the shares are held as stock-in-trade, certain dividend income is also earned, though inc....
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....not be limited only to co-operative societies/ Banks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/ commercial banks, to which Banking Regulation Act, 1949 applies. 38) From this, Punjab and Haryana High Court pointed out that this circular carves out a distinction between 'stock- in-trade' and 'investment' and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the test of dominant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to on what basis those cases are to be decided where the shares of other companies are purchased by the assessees as 'stock-in-trade' and not as 'investment'. We proceed to discuss this aspect hereinafter. 39) In those cases, where shares are held as stock-in- trade, the main purpose is to trade in tho....
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.... earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. 41) Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. ....
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....essee and considered by us. 44. The next issue that came up for our consideration from Ground No.8 of assessee's appeal is deduction towards bad debts written off in respect of non-rural branches u/s 36(1)(vii) of the Act for Rs. 166,35,33,701/ -. The Assessing Officer noticed from the computation of income that the assessee has claimed bad debts written off in respect of non-rural debts written off at Rs. 166,35,33,701/ -. It was submitted that those amount was claimed in view of the Hon'ble Supreme Court decision in the case of Catholic Syrian Bank Ltd vs CIT (2012) 343 ITR 270 (SC). The Assessing Officer did not accept the explanation of the assessee and according to the Assessing Officer, in the same judgment it was held that the claim of bad debts made u/s 36(1)(vii) should be limited to claim made u/s 36(1)(viia) and the overall claim of the assessee shall be subject to provisions of section 36(2)(v) of the Act. Since the assessee has already availed benefit u/s 36(1)(viia) for both creation of provision and actual written off of debts, further deduction for a write off non-rural bad debts cannot be accepted and thus, disallowed Rs. 166,35,33,701/- towards deductio....
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....on of the assessee that even after insertion of Explanation 2 to proviso to sub clause (vii) of section 36(1), the ratio laid down by the Hon'ble Supreme Court holds good, because the Hon'ble Apex Court has clearly explained the law in respect of deduction towards provision for bad & doubtful debts u/s 36(1)(viia) of the Act and deduction towards bad debts written off u/s 36(1)(viia) and as per the ratio laid down by the Hon'ble Supreme Court, the scheduled commercial banks would continue to get full benefit of write off of irrecoverable debts u/s 36(1)(vii) in addition to the benefit of deduction for provision for bad & doubtful debts u/s 36(1)(viia). We find that the Hon'ble Supreme Court in Para 45 of their order has explained the position of law in respect of deduction towards provision for bad & doubtful debts and actual write off of bad debts u/s 36(1)(viia) and 36(1)(vii). The Hon'ble Supreme Court very categorially held that the scheduled commercial bank would continue to get the full benefit of write off of bad debts u/s 36(1)(vii) in addition to the benefit of deduction for the provision for bad & doubtful debts u/s 36(1)(viia). The Hon'ble Supreme....
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....ebt(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 actual write off to the excess, if any, of the write off over the amount standing to the credit of the account created under clause (viia). However, the Revenue disputes the position that the proviso to clause (vii) refers only to rural advances. It says that there are no such words in the proviso which indicates that the proviso apply only to rural advances. We find no merit in the objection raised by the Revenue. Firstly, CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was ins....
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....cquisition of these securities form integral part of the cost of the securities and cannot be separated from the face value of securities and allowed as revenue expenditure under the I. T. Act. (iii) The Learned CIT{Appeals) erred in deleting the addition made by the Assessing Officer on account of disallowance of reversal of unrealized interest of Rs. 62,44,22,051/- on NPAs. (iv) The Learned CIT(Appeals) ought to have appreciated that the assessee bank had neither set off said unrealized interest against provision for bad and doubtful debts account nor written off as irrecoverable in the books of account and therefore such reversal of interest is not an admissible deduction under the IT Act. (v) The Learned CIT(A) erred in deleting the addition of Rs. 6,60,52,609/- made by the Assessing Officer on account of disallowance of unpaid expenses on encashment of leave. (vi) The Learned CIT(A) ought to have appreciated that under section 43B() of the I T Act actual payments of leave encashment made to the employees during the year are only admissible deduction and not the entire contribution paid to LIC for maintenance of leave encashment scheme. ....
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....61 is incorrect. 54. The learned Counsel for the assessee on the other hand submitted that this issue is squarely covered in favour of the assessee by the decision of the ITAT Hyderabad Benches in appellant's own case for the A.Y 2011-12, reported in (2015) 5 TMI 478 ITAT Hyderabad, where the Tribunal has considered an identical issue and deleted the addition made by the Assessing Officer. 55. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. We find that the learned CIT (A) deleted the addition made by the Assessing Officer towards broken period interest paid on HTM securities by following the decision of the ITAT Hyderabad Benches in appellant's own case for earlier A.Ys. We further noted that the Coordinate Bench of the ITAT has considered an identical issue in appellant's own case for the A.Y 2011-12 and after considering relevant facts deleted the addition made by the Assessing Officer. The relevant findings of the Tribunal are as under: "3. In the Revenue appeal, the first ground of appeal raised by the Revenue is against the deletion of the disallowance of broken period intere....
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....st of Rs. 62,44,22,051/- on Non- Performing Assets (NPAs). The Assessing Officer noticed that the assessee claimed deduction for Rs. 62,44,22,051/- on account of reversal of unrealized interest on NPAs. The assessee submitted that this amount has been credited to borrowers account as unrealized interest in A.Y 2012-13 and debit the same to the interest account. The assessee further submitted that as per RBI guidelines, once any loan account is termed as NPA, then unrealized interest, if any, debited to the said loan account should be reversed. Therefore, the appellant has debited interest to NPA account in earlier period and because said loan account was treated as NPA for the impugned A.Y., the unrealized interest has been reversed and debited to the P&L Account. The Assessing Officer however, was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, as per the I.T. Act, 1961, the assessee can claim deduction towards bad debts written off and provision for bad debts on loans/advances. But, it cannot claim deduction towards reversal of income on its own as per its accounting policy. Therefore, by following the decision of the ITAT in t....
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.... NPA account as per RBI guidelines for Rs. 62,44,22,051/- on the ground that the interest income has been credited on those loan account in earlier financial year and further, when the account become NPA as per RBI guidelines for the impugned A.Y, unrealized interest has been reversed. Since the appellant has not received any interest income, the same has been reversed and debited to P&L Account. We find that, as per RBI guidelines for asset classification and income recognition, loan account has to be categorized as standard asset, sub-standard asset and doubtful asset depending upon the period for which no recovery from sad loan account is made. But deduction towards provision for bad & doubtful debts or actual written off on bad debts should be allowed as per provisions of the I.T. Act, 1961. In fact, the appellant also claims deduction towards provision of bad & doubtful debts and actual write off of bad debts in terms of section 36(1)(vii) and 36(1)(viia) of the I.T. Act, 1961. There is no dispute on these facts. 63. Coming to the issue on hand, the assessee claims that it has recognized interest income on loan account on accrual basis in earlier A.Ys and credited to income....
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....tly the same has to be accepted and interest income on NPA need not be recognized. With regard to the income already recognized in the earlier year the Bench observed, in para-29 of the order, that the department has already accepted the claim made as per the reversal entries. Since the issue is confined to non-recognition of income and not with regard to the reversal of entries, the Bench had no occasion to consider this issue with regard to the claim of deduction of the amount referable to the reversal of the entries. In the case of Bank of Madura (supra), the Hon'ble Madras High Court was Concerned with the peculiar case of a bank declaring higher income by charging excess interest from one of its Customers and on realization of the same, the excess interest which was charged and collected was claimed as liability in the year of realizing the mistake and credited to the account of the customer. The Court held that the claim of deduction in the year of realization of mistake is in order. It may be noted here that it was a case of excess collection of interest and there was a duty cast upon the bank to refund the excess interest whereas in the instant case interest on NPAs was....
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.... it as NPA and interest for the period of three months if already credited in the books as income, such entry should be reversed in the later part of the accounting year and for the balance period of 9 months of the previous year 1998-99 the assessee need not recognize the income of Rs.9 lakhs. If the assessee has other income to the tune of Rs. 20 lakhs, can the assessee claim that only Rs. 17 lakhs has to be treated as income, on the ground that interest to the tune of Rs.3 lakhs payable by another party was wrongly declared as income in the earlier year and thus it needs to be set off in the year under consideration? Non recognition of income permissible in applying the real income principle and the income which is already accounted for in the first part of the year but reversed in the later part of the year also need not be declared as income, by applying the same principle, because in the computation of income of a particular year, the income of that year to be taken into consideration. However, once the income of that year is properly recorded the assessee cannot reduce the income from the subsequent years computation on the ground that in the earlier year income was shown on....
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....a difficulty. Further reference has been placed on the decision of the Supreme Court in UCO Bank v. Commissioner of Income Tax (1999)4 SCC 599 to contend that it is always open to the Central Board of Direct Taxes (CBDT) to issue instructions under Section 119 of the Act to remove any difficulty in which event such instructions would be binding on the department. 10. We are afraid we cannot accept such contention urged by learned counsel for the appellant. In the present appeal, it is not CBDT which has issued circulars or guidelines under Section 119 of the Act. On the other hand, circular has been issued by the RBI which is binding on all the banking companies in general. However, when it comes to assessment under the Act, the revenue authorities are bound by the provisions of the Act. Therefore, the claim of the assessee that interest paid on NPAs should be excluded from computation of income was rightly negatived by the assessing officer, which has been affirmed by the two lower appellate authorities. 11. As pointed out by the Supreme Court in M/ s. Motor Industries Company (supra), it is always open for the assessee or appellant to file a revised return and c....
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....venue. 67. The next issue that came up for our consideration from Ground Nos. 7 & 8 of Revenue's appeal is deletion of addition of Rs. 558,56,58,451/- made by the Assessing Officer towards diminution in value of investment. 68. The appellant has claimed deduction towards diminution in value of investment of Rs. 558,56,58,451/-on the ground that the investment of appellant bank are stock-in-trade and further, any diminution in value of the said stock in trade should be treated as loss or depreciation. The Assessing Officer disallowed diminution in value of investments on the ground that as per CBDT Circular No. 17/2018 dated 26.11.2008, the actual deduction made in the books by the assessee shall only be allowed in respect of any provision and thus, allowed deduction towards actual diminution in value on investment in the books to the extent of Rs. 26,86,34,000/- and balance amount of Rs.558,56,58,451/- is disallowed and added back to the total income. 69. On appeal, the learned CIT (A) by following the decision of the ITAT Hyderabad Benches in appellant's own case for A.Y 2007-08 deleted the addition made by the Assessing Officer. 70. The learned DR submitted th....
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....refore depreciation in value of such securities cannot be allowed as a deduction. The Apex Court in the case of UCO Bank Ltd Vs CIT reported in 240 ITR 355 has held that value of the securities at cost or market value whichever is less should be accepted for income tax even if the banks in their books do not value on that basis. Therefore, it is an accepted proportion that investment made by the bank to comply with the SLR requirement would constitute their stock in trade and depreciation in value of the same is an allowable deduction. 51. Respectfully following the decisions cited by the learned counsel for the assessee, we uphold the claim of the assessee and direct the AO to allow depreciation/ fall in value of investment in Government Securities including those classified under HTM category. No doubt the value in opening stock in the next year would correspondingly be adjusted. This issue is decided in favour of the assessee." 6. Since the issue under consideration is identical to that of AY 2006-07 in assessee's own case, respectfully following the same we uphold the directions of Ld. CIT(A) with a direction to AO to follow the same in this year also as p....
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....ts simply deleted the addition made by the Assessing Officer and their orders should be set aside. 77. The learned Counsel for the assessee, on the other hand, supporting the order of the learned CIT (A) submitted that this issue is covered in favour of the assessee by the decision of the ITAT Bangalore Benches in the case of Vijaya Bank vs. JCIT reported in 2015(7) TMI 86. Further, there is no dispute with regard to the fact that the appellant is engaged in the business of providing long term finance to eligible business sector. Therefore, the ld. CIT(A) has rightly deleted the addition made by the Assessing Officer and their order should be upheld. 78. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. Provisions of section 36(1)(viii) deals with deduction towards any special reserve created and maintained by specified entity, an amount not exceeding 20% of the profit derived from eligible business computed under the head profits and gains of business or profession and carried to such reserve account. The 'specified entity' and 'eligible business' has been defined in Explanation to Secti....