TaxTMI 
TaxTMI 
2025 (1) TMI 1673
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....1949) and Regulations from RBI. The appellant filed its return of income for the A.Y 2013-14 on 30.09.2013, declaring total income of Rs. 1165,72,64,250/-, which was later revised to Rs. 1091,89,94,150/- by filing the revised return on 03.02.2015. The case has been taken up for scrutiny and the assessment has been completed u/s 143(3) of the Income tax Act, 1961 ("the Act"), on 29.03.2016 by determining total income at Rs. 2885,27,50,391/-. 3. The assessee carried the matter in appeal before the Ld. CIT (A) and challenged the additions/ disallowances made by the Assessing Officer. The Ld. CIT(A) for the reasons stated in their appellate order dated 27.11.2017, partly allowed the appeal filed by the assessee. 4. Aggrieved by the order of Ld. CIT (A), the assessee, as well as the Revenue, is in appeal before the Tribunal. ITA No. 350/Hyd/2018, A.Y.2013-14 (Revenue's Appeal) 5. The Revenue has raised the following grounds of appeal in ITA No. 350/Hyd/2018: (i) The order of the Ld.CIT(A) is erroneous on facts as well as in law. (ii) The Ld. CIT(A) erred in deleting the addition of Rs. 318,94,43,853/- made by the Assessing Officer on account of disallowance....
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....on of claim for deduction u/s 36(1)(viii) for the year ending 31.03.2013 as per revised return of income. The assessee recomputed the deduction u/s 36(1)(viii) of the Act, by taking into account operating profit of the assessee as per statement of total income which was at Rs. 20,21,75,76,065/- and then reduced operating expenses of Rs. 2,49,39,19,492/-, write off of advances in the eligible business of Rs. 70,06,59,381/-, provision u/s 36(1)(via) in the eligible business of Rs. 1,07,57,77,929/- and has, finally arrived at net profit of Rs. 15,94,72,19,263/- and then computed 20% net profit of Rs. 3,18,94,43,853/-. The Ld. CIT (A) after considering revised computation filed by the assessee, has deleted the addition made by the Assessing Officer towards reserve created for eligible profit u/s 36(1)(viii) of the Act. 8. The Ld. DR submitted that the Ld. CIT (A) is erred in deleting the addition made by the Assessing Officer on account of disallowance of excess claim of deduction u/s 36(1)(viii) of the Act, without appreciating the fact that the eligible profits computed by the appellant from providing long term finance to eligible sectors should not include other income. The Ld.CI....
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....laimed deduction of Rs. 318.94 crores, whereas the Assessing Officer has disallowed the same. We, find that an identical issue has been considered by the Tribunal in assessee's own case for the A.Y.2012-13, where the Tribunal after considering the provisions of section 36(1)(viii) of the Act and the computation of eligible profit of the assessee has set aside the issue to the file of the Assessing Officer for further verification of facts and allow deduction towards profit from eligible business u/s 36(1)(viii) of the Act. The relevant findings of the Tribunal are as under: "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 Section 36(1)(viii) of the Act. There is no dispute with regard to the fact that the appellant ....
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.... the learned CIT (A) in light of net profit as per P&L Account and allow deduction as per law." 11. In view of this matter and considering the facts of the case, we are of the considered view that the issue of computation of deduction u/s 36(1)(viii) needs to be set aside to the file of the Assessing Officer for the simple reason that the Assessing Officer has disallowed the claim on the ground that the assessee has not furnished any details with regard to income derived from eligible business and corresponding expenses and also computation of eligible profit. Further, the Ld.CIT(A) by considering revised computation filed by the assessee during the appellate proceedings has deleted the additions made by the Assessing Officer. Since we have considered an identical issue and given our findings on the issue of deduction u/s 36(1)(viii) and how to compute such deduction, in our considered view, the matter needs to go back to the file of the Assessing Officer for fresh consideration of the issue and decide the issue in light of our findings given on the issue for the A.Y.2012-13. Thus, we set aside the order of the Ld.CIT(A) on this issue and restore the issue back to the file of th....
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....owing the decision of the ITAT Hyderabad in appellant's own case for A.Y 2011-12 deleted the addition made by the Assessing Officer. 14. Aggrieved by the order of the Ld. CIT (A), the Revenue is in appeal before the Tribunal. 15. The Ld. DR submitted that the Ld. CIT (A) erred in deleting the addition made towards reversal of unrealized interest without appreciating fact that the assessee bank had neither set off said unrealized interest against the provision of bad and doubtful debts, nor written off as irrecoverable in the books of account and therefore, such reversal of interest is not an admissible deduction under the I.T. Act, 1961. 16. The Ld. Counsel for the assessee 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 2012- 13. He further submitted that the Hon'ble Delhi High Court has also considered similar issue in the case of CIT vs. IFCI (2011) 201 Taxman 75. Therefore, he submitted that the order of the Ld. CIT (A) should be upheld. He further submitted that, no doubt this issue is against the assessee by the decision of the Hon'ble Telangana High Cour....
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.... already stated, deduction towards provision of bad and doubtful debts and actual write off of debt should be allowed in terms of section 36(1)(vii) and 36(1)(viia) of the Act. In fact, the assessee also claims deduction as per said provision. Therefore, the assessee having claimed deduction as per provisions of the Act, once again claiming deduction for reversal of interest in terms of their accounting policies, is contrary to the law, because there is no clarity in respect of facts whether the assessee has made provision for bad debts in respect of those account in their books of account or not. Therefore, in our considered view, there is no merit in the argument of the assessee that reversal of unrealized interest is deductible. Although, the appellant claims that this issue is covered in favour of the appellant by the decision of the ITAT Hyderabad Benches in earlier A.Ys, but on going through the orders passed by the Tribunal, there is no discussion on the issue at all. On the other hand, the Ld. DR filed a copy of the order passed by the Hon'ble Telangana High Court in the case of State Bank of Hyderabad vs. Jt. CIT reported in 2023 (2) TMI 810, where the High Court held ....
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....s purchased and discounted becomes NPA as at the close of any year, interest accrued and credited to income account in the corresponding previous year, should be reversed or provided for if the same is not realized. This will apply to Government guaranteed accounts also. 3.22. In respect of NPAs, fees, commission and similar income that have accrued should cease to accrue in the Current period and should be reversed or provided for with respect of past periods, if uncollected." As per the Circular, if the interest is shown as accrued in the earlier year but in the subsequent years the advance becomes NPA the interest accrued and credited into income account should be reversed or provided for in the corresponding previous year. The mode of claiming deduction under the IT Act was absolutely not mentioned in the instruction. Income Tax Act is a self-contained code and in order to claim a deduction, it is for the assessee to show that the Act provides for such a deduction. It could be seen from the note given by the assessee, during the relevant period, 180 days yardstick was prescribed for identifying an asset as standard or NPA. For example, if an advance i....
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....come is to treat the same as bad debt by following the RBI norms. Our view is supported by the decision of Apex Court in the case of State Bank of Travancore (158 ITR 102) as well as the decision of ITAT, Delhi Bench in the case of Poysha Oxygen (P) Ltd., (91 ITD 616). Admittedly, the assessee ha not written off the impugned sum as bad-debt u/s 36(1)(V) of the Act and in fact the case of the assessee is that there is no question of write off u/s 36(1)(vi) of the Act. Such being the case, we are of the view that the claim of the assessee is contrary to law and accordingly we reject the contention of the assessee. 8. From the above, we find that Tribunal had considered the circular of RBI dated 04.07.2002 and held that once an income of a previous year is recorded, assessee cannot reduce the Income of subsequent years on the ground that in the earlier year income was shown on actual basis wrongly. Tribunal held that such a claim of the assessee is not permissible under the provisions of the Act. Further, Tribunal held that assessee had also not written off the NPAs as bad debts under Section 36(1)(vi) of the Act. Therefore, there was no question of writing off such ....
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....f the Hon'ble Telangana High Court in the case of State Bank of Hyderabad vs. Jt. CIT (Supra), we are of the considered view that the reversal of unrealized interest on NPA accounts and debited to P&L Account cannot be allowed as deduction. Thus, we reverse the findings of the Ld. CIT (A) and upheld the addition made by the Assessing Officer. 20. Ground No. (i) and (v) are general in nature which do not require any adjudication. 21. In the result, appeal filed by the Revenue for the A.Y.2013-14 is partly allowed. I.T.A. 364/Hyd/2018, A.Y.2013-14 (Assessee's Appeal) 22. The assessee has raised the following grounds of appeal in ITA No. 364/Hyd/2018: 1. The Order of the Commissioner of Income Tax (Appeals)-1, Hyderabad dated 27-1-2017 is erroneous and contrary to law and facts of the case. 2. The Commissioner of Income Tax (Appeals) erred in law in confirming the addition of the Assessing Officer in disallowing Rs. 1014,06,21,916/- claimed by the appellant bank u/s 36(1)(via) of the Act. 2.1. The order of the Commissioner of Income Tax (Appeals) is based on surmises and conjunctures. 2.2. The Commissioner of Income Tax (Appeals) err....
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....e Tax (Appeals) is based on surmises and conjunctures. 5. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 50,00,00,000/- of provision towards liability arising on account of revision of wages payable to employees. 5.1. The Commissioner of Income Tax (Appeals) erred in holding that the same was not an ascertained liability. 5.2. The Commissioner of Income Tax (Appeals) failed to appreciate that provision had been made based on a reasonable estimate of the imminent liability consequent on the bipartite settlement talks that were being held between the Indian Bank's Association (IBA) and various Employee Unions. 5.3. The Commissioner of Income Tax (Appeals) failed to appreciate that once liability for an expenditure which is contractual in nature is binding on appellant the same is allowable as deduction though the same could be quantified based on reasonable estimate only. 6. The Commissioner of Income Tax (Appeals) erred in law in upholding the action of Assessing Officer in disallowing Rs. 329,62,82,921/- being the claim made by the Appellant bank u/s 36(1)(vii) in respect of the bad debts written off....
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....ision for NPA as per RBI guidelines. Further provision for NPA as per RBI guidelines cannot be treated as provision for bad and doubtful debts in the context of section 36(1)(viia) of the Act. Therefore the Assessing Officer, by considering the provisions of section 36(1)(viia) and also explanation of the assessee, disallowed the total claim of deduction u/s 36(1)(viia) for Rs. 1017,46,21,168/-. 24. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee submitted that it has created provision for bad and doubtful debts in accordance with provisions of section 36(1)(viia) however, because of nomenclature used in the books of accounts, the Assessing Officer misunderstood the deduction claimed u/s 36(1)(viia) and disallowed the entire deduction, even though the deduction claimed by the assessee is in accordance with law. The assessee further contended that this issue is already covered in favour of the assessee by the decision of Hyderabad Tribunal in assessee's own case in earlier assessment year, where the issue has been discussed and allowed deduction as per law. 25. The Ld.CIT(A) after considering relev....
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..../s 36(1)(viia) of the Act on the basis of provision created as per RBI guidelines on NPAs. Further, provision in the books of accounts as per RBI guidelines is different from provision for bad and doubtful debts u/s 36(1)(viia) of the Act. The assessee is entitled for deduction towards bad and doubtful debts in terms of section 36(1)(viia) of the Act and on this issue there is no dispute. However, if the assessee claims deduction towards provision for NPA, then the same cannot be considered as provision for bad and doubtful debts as per section 36(1)(viia) of the Act. Since the assessee could not file relevant evidences to prove its claim on how the provision created for NPA as per RBI guidelines is allowable as deduction u/s 36(1)(viia), the AO and the Ld.CIT(A) has rightly disallowed the claim of the assessee. Therefore, the order of the Ld.CIT(A) should be upheld. 28. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. As per provisions of section 36(1)(viia) of the Act, provision for bad and doubtful debt is made for the amounts not exceeding 7½ % of the total income and 10% of the aggregate av....
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....re under identical set of facts, the Tribunal held as under: "10. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. As per provisions of section 36(1)(viia) of the Act, provision for bad and doubtful debt is made for the amounts not exceeding 7 ½ % of the total income and 10% of the aggregate average advances made by the rural branches of a Bank in computing total income. Deduction u/s 36(1)(viia) is not governed by provisions made in the books of account of the assessee, but purely on the basis of statutory provision as contained u/s 36(1)(viia) of the I.T. Act, 1961. The assessee is making provision for bad and doubtful debts accounts as per prudential norms and guidelines issued by the RBI. However, while computing total income, deduction has been claimed as per section 36(1)(viia) of the Act. Therefore, in the process, there is unutilized provision for bad and doubtful accounts in the books of account of the assessee. However, if any advance/loan given by rural branches become bad, such advances are to be debited to such provision account to the extent of balance available and excess, i....
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....irect the Assessing Officer to delete the addition made towards opening balance of provision of bad and doubtful debt u/s 36(1)(viia) of the I.T. Act, 1961. 30. We further note that although the assessee claimed that provision created on NPAs is as per the method provided for computing deduction u/s 36(1)(viia) of the Act, but in our considered view, on verification of details filed by the assessee we find that the assessee has claimed provision on standard assets. Further, if we go by RBI Circular, RBI guidelines provide for provision on standard assets at certain percentage. As per the provisions of section 36(1)(viia), any provision created on standard asset is not allowable as deduction. Further, the only provision created for bad and doubtful debt in the books of accounts of the assessee and computed in the manner provided u/d 36(1)(viia) is alone eligible for deduction. This issue of deduction u/s 36(1)(viia) has been discussed by us in assessee's own case for the A.Y.2012-13 and we held that how to compute provision for bad and doubtful debts u/s 36(1)(viia) in respect of rural debts and non-rural debts. Since the issue has already been discussed by us in assessee's own c....
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..... The Ld. Counsel for the assessee submitted that the investments by any bank in shares and securities are in the nature of stock-in-trade and further investment in securities is part of business activities of the assessee and thus, there cannot be any disallowance towards expenditure u/s 14A r.w.r 8D of IT Rules, 1962. The Ld. Counsel for the assessee further submitted that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Maxopp Investments Ltd vs. CIT reported in (2018) 402 ITR 640 (S.C). He, therefore, submitted that the addition made by the AO should be deleted. 34. The Ld. DR, on the other hand, supporting order of the Ld. CIT (A) submitted that this issue is covered in favour of the Department by the decision of the ITAT, in appellant's own case for the earlier A.Ys, where the Tribunal upheld computation of disallowances made by the Assessing Officer @ 2% exempt income. Therefore, the order of the Ld. CIT (A) should be upheld. 35. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. The assessee has earned dividend income of R....
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....nd income is also earned, though incidentally which is also income. However, by virtue of section 10(34) of the I.T. Act, 1961, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Shares and Stock vs. CIT(Supra). Therefore, to that extent depending upon facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. The sum and substance of the findings of the Hon'ble Supreme Court is that, once there is a dividend income from shares held as stock-in-trade which is claimed as exempt by virtue of section 10(34) of the I.T. Act, 1961, then the expenditure incurred relatable to said income should be apportioned. For better understanding, the relevant finding of the Hon'ble Supreme Court is reproduced hereunder: "36) There is yet another aspect which still needs to be looked into. What happens when the shares are held as 'stock-in-trade' and not as 'investment', particularly, by the banks? On this specific aspect, CBDT has is....
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.... are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40) We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carrie....
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....e for purchasing the shares/making the investment in shares is to be examined by the AO." 43. In the present case, the assessee contended that although the Hon'ble Supreme Court upheld the theory of apportionment of expenditure towards taxable and nontaxable income, but said findings is in the context of facts of the case of Maxopp Investments Ltd vs. CIT (Supra), whereas in Para 40 of the said judgment, it has upheld the decision of the Hon'ble Punjab & Haryana High Court in the case of State Bank Patiala vs. CIT(supra), where the ratio was that provisions of section 14A r.w.r 8D is not applicable when shares are held as stock-in-trade by a Bank. Although, the Hon'ble Supreme Court has upheld the decision of the Hon'ble Punjab & Haryana High Court and applicability of section 14A r.w.r 8D and the Assessing Officer has applied the provisions of section 14A and restricted the disallowance to the amount which was claimed as exempt, however, the learned CIT (A) disallowed the entire deduction of expenditure. That view of the learned CIT (A) was clearly untenable as rightly set aside by the ITAT. Therefore, on fact, Punjab & Haryana High Court has arrived at a ....
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....allowed u/s 36(1)(vii), the recovery cannot be taxed u/s 41(4) of the I.T. Act, 1961. The Assessing Officer however, was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, the appellant could not file relevant evidence to prove that it has not claimed deduction towards write of bad and doubtful debts to the extent of Rs. 2,97,54,308/- which represent the amount recovered out of bad debts written off during the impugned assessment year. 39. The Ld. Counsel for the assessee submitted that the appellant has placed all evidence including the relevant statement of total income from A.Y 2000-01 to 2004-05 and argued that the recovery from debts written off from the above period to the extent of 2,97,54,308/-, was neither 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. 40. The Ld. 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. 41. We have heard both the parties, perused the materi....
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....ssessee has not quantified the exact amount of arrears payable to employees. In the absence of any scientific method for arrears payable to employees, mere adhoc provision in the books of accounts cannot be held to be allowable deduction. The Ld.CIT(A) after considering the relevant facts has rightly sustained the additions made by the AO and their order should be upheld. 44. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee is a banking company and is bound by bi-partite agreement with the employees and the officers for payment of wages in terms of agreement between workmen and All India Banking Officers Association from time to time. It is also not in dispute that wages of employees are revised from time to time as per bi-partite agreement with the participating banks and employee's associations and the last of such wage settlement was entered into on 31.10.2012. According to the assessee, from 01.11.2012 a new wage settlement was entered into between the parties for which negotiations have commenced during the A.Y. 2013-14 and were in progress. The ....
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....ideration from Ground No. 6 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. 329,62,82,921/-. 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. 329,62,82,921/-. It was submitted that 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. 329,62,82,921/- towards deduction claimed in respect of bad debts written off for non-rural debts. 47. On appeal, t....
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.... insertion of Explanation (2) to provisions of sub-section (vii) of section 36(1), the account referred to therein shall be one account for all the advances including advances made by the rural branches of an assessee bank. It is the contention 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). 51. We find that an identical issue has been considered by the Tribunal in assessee's own case for the A.Y.2012-13 in ITA No. 1018/Hyd/2017, where the Tribunal by following the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT (supra) held as under: ....
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....ing of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra) is as under: "45. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation of taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits. In order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in sub-section (1) of Section 36 to provide for a deduction, in the computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debt(s) relating to advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962. Thus, the provisio....
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....nces, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). 46. Accordingly, the above question is answered in the affirmative, i.e., in favour of the assessee(s). For the above reasons, I agree that the appeals filed by the assessees stand allowed and the appeals filed by the Revenue stand dismissed with no order as to costs." 49. In this view of the matter and by respectfully following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra), we direct the Assessing Officer to delete the addition made to....
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....r depreciation. The Assessing Officer disallowed the loss claimed for Rs. 179,73,20,381/- in respect of AFS securities by holding that the assessee has claimed only diminution in value of securities, whereas, the net appreciation, if any has been ignored. Further, the Assessing Officer has also disallowed depreciation claimed on securities held under HTM securities by holding that the HTM securities do not constitute stock-in-trade and these securities are to be valued at cost and not at cost or market price, whichever is lower. 57. On appeal, the Ld. CIT (A) by following the decision of the ITAT Hyderabad Benches in appellant's own case for A.Y 2006-07 deleted the addition made by the Assessing Officer. 58. The Ld. DR submitted that the Ld. CIT (A) is erred in deleting the addition made by the Assessing Officer towards diminution in value of investment without appreciating the fact that the said diminution in the value of investment was not provided for in the books of account of the assessee bank. 59. The Ld. Counsel for the assessee, on the other hand, supporting the order of the Ld. CIT (A) submitted that this issue is squarely covered in favour of the assessee by the ....
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....rade and depreciation in value of the same is an allowable deduction. 51. Respectfully following the decisions cited by the Ld. 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 per the order of ITAT supra.. Accordingly, ground No. 2 raised by the revenue is dismissed." 61. In this view of the matter and by respectfully following the decision of the ITAT Hyderabad Benches in appellant's own case for the A.Y 2012-13, we are inclined to uphold the findings of the Ld. CIT (A) and reject the grounds taken by the Revenue. 62. In the result, an appeal filed by the Revenue for the A.Y.2014-15 is partly allowed for statistical purpose. ITA No. 365/....
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....at came up for consideration from Ground No. 5 of assessee's appeal is disallowance of sum of Rs. 2,50,00,000/- u/s 37(1) of the Act towards penalty paid u/s 46(4) of the Banking Regulation Act, 1949 for deviation in implementation of KYC-AML guidelines. The assessee bank has not added back penalty in the computation of income by following the decision of Hon'ble Supreme Court in the case of CIT Vs. Dhanalaxmi Bank Ltd. (373 ITR 526). The Assessing Officer, however, was not convinced with the explanation furnished by the assessee. According to the Assessing Officer, penalty paid to RBI u/s 46(4) of the Banking Regulation Act, 1949 for deviation in implementation of KYC-AML guidelines is penal in nature for violation of any law, which is an offence, or which is prohibited by law and therefore, cannot be allowed as deduction. The Assessing Officer had also distinguished the case law relied upon by the assessee in the case of CIT Vs. Dhanalaxmi Bank Ltd and held that the facts of the said case were entirely different, where the RBI has imposed penal interest on the bank for not maintaining cash reserve ratio, whereas, in the present case, penalty has been levied for contravention ....
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....I u/s 46(4) of Banking Regulation Act, 1949 is penal in nature or compensatory in nature. As per section 37(1) of the Act, any expenditure incurred by an assessee for any purpose, which is offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance should be made in respect of such expenditure. Section 46(4) of the Banking Regulation Act, 1949 deals with penalties for complying with certain directives of the RBI and as per said provisions, if any other provision of this Act is contravened or if any such default is made in complying with any requirements of this Act, by any person, such person shall be punishable with fine which may extend to one crore rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to one lakh rupees for every day, during which the contravention or default continues. On plain reading of section 46(4) of Banking Regulation Act, it is very clear that the RBI imposed penalty for not adhering to guidelines or no....