TaxTMI 
TaxTMI 
2024 (9) TMI 1968
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....in ITA No. 620/Chny/2020 and 38 days delay in appeal filed by the revenue in ITA No. 635/Chny/2020, the condonation of which has been sought by Ld. AR and the ld.DR respectively, on the ground that the delay occurred due to lockdown situation arising out of Covid-19 Pandemic and the period of delay falls in the exclusion period commencing from 15.03.2020 to 28.02.2022. Keeping in view the adverse situation arising out of Covid-19 pandemic, we condone the delay and admit both the appeals for adjudication. ITA. No. 620/Chny/2020 for AY 2017-18: 3. The grounds of appeal filed by the assessee for A.Y.2017-18 are reproduced as under: 1. The order of the learned CIT(A) is against law and facts of the case. 2. The learned CIT(A) erred in sustaining the addition made by the learned Assessing Officer of Rs. 2,92,42,379/- being depreciation on equity shares - restructured. 2.1. The learned CIT(A) failed to appreciate the fact that the Appellant followed Reserve Bank of India guidelines as mandated by ICDS and section 145 of the Income Tax Act, 1961. 2.2. The learned CIT(A) erred in relying on CBDT circular which is contrary to the provisions of secti....
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.... write off of Rs. 103,67,40,537/- cannot be allowed as deduction as the same was not debited to P&L A/c. 4.5. The learned CIT(A) failed to appreciate the fact that the prudential write off has to be considered as write off as decided by the Hon'ble Supreme Court in the case of Vijaya Bank vs. CIT [2010] 323 ITR 166 (SC). 4.6. Without prejudice to Ground No. 4.3, the learned CIT(A) erred in disallowing the bad debts written off in respect of debts identified as NPAs for the first time amounting to Rs. 156,66,01,315/- and the learned CIT(A) failed to appreciate the fact that these debts are not covered by the Proviso to section 36(1)(vii). 4.7. Without prejudice to the above, the learned CIT(A) failed to appreciate the fact that the closing balance in the provision account as on 31-03-2013 was for rural debts and non-rural write off cannot be adjusted against the same. 4.8. Without prejudice to the above, the learned CIT(A) erred in adjusting the bad debts write off against the current year provision. 5. Without prejudice to Ground No. 4, the learned CIT(A) erred in taxing the recovery from written off accounts of Rs. 8,93,95,305/-. ....
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..../2020, issued enhancement notice to the assessee on certain issues including disallowance of excess claim of depreciation on security receipts(SRs) and disallowance u/s.36(1)(vii) of the Act. The assessee challenged proposed enhancement of assessment on legal ground as well as various additions proposed by the ld. CIT(A). The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of various provisions of law disposed off appeal filed by the assessee by partly enhancing the total income and also deleted certain additions including addition towards stale drafts account, disallowance of exgratia, disallowance u/s.14A, income received in advance and disallowance under Section 36(1)(viia). However, sustained additions made towards disallowance of bad debts written off and depreciation on investments. The ld. CIT(A) had also enhanced the assessment and directed the AO to make additions towards disallowance of excess claim of depreciation on security receipts and disallowance of bad debts written off (prudential write - off). Aggrieved by the ld. CIT(A) order, the assessee as well as the revenue are in appeal before us. 8. The first issue that came up fo....
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....sify, recognize and measure securities in accordance with the extant RBI guidelines and any claim for deduction shall not be allowed. In other words, the claim for deduction shall be limited as per the RBI guidelines. The RBI guidelines state that, depreciation on equity shares obtained on restructuring cannot be adjusted against the appreciation on other equity shares. In the instant case, we find that the assessee Bank had a depreciation of Rs. 3,18,81,323/- on the equity shares - restructured and had an appreciation of Rs. 26,38,943/- on the preference shares - restructured. The Bank adjusted the appreciation with that of the depreciation and claimed the net depreciation of Rs. 2,92,42,379/-. This claim of the appellant Bank is as per RBI guidelines and therefore is allowable as per Part-B of ICDS VIII. 8.6 In view of the matter and considering the facts and circumstances of the case, we are of the considered opinion that the assessee is entitled for deduction towards the depreciation of the equity shares - restructured and thus, we delete the addition made by the AO and allow the ground taken by the assessee. 9. The next issue that came up for our consideration from groun....
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....ivable that in presence of such specific provisions a similar power is available to the first appellate authority u/s.251 of the Act. He also relied on various decisions including that of the Hon'ble Supreme Court. The ld. Counsel for the assessee further submitted that the issue of the power to enhance has been decided, on similar set of facts, in their own case by the co-ordinate Bench in ITA No.677/Chny/2019 for assessment year 2014-15 vide its order dated 9/4/2024. 9.3 The ld. DR, on the other hand relied on the order of the Ld. CIT(A). On the issue of the power of the CIT(A) to enhance, the ld. DR submitted that, the CIT(A) has been given powers to not only confirm, reduce, or annul the assessment, but even pass an order enhancing the income determined by the AO and the Courts have held that in terms of Section 251 of the Act, the CIT(A) has wide powers, which includes power of enhancement of assessment. The ld. DR further submitted that the powers conferred upon the CIT(A) was plenary in view of the explanation inserted by the Finance No (2) Act, 1977 and was different in its express wordings from the corresponding Section 31 of the Indian Income tax Act, 1922. He subm....
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.... with all the plenary powers which the sub-ordinate authority has in the matter. It was held by Hon'ble High Court that an item of income noticed by the officer, but not examined by him from the point of view of its taxability or non-taxability, cannot be said to have been considered by him. Consideration does not mean incidental or collateral examination of any matter by the officer in the process of assessment. There must be something in the assessment order to show that the officer has applied his mind to a particular subject matter or the particular sources of income with a view to its taxability or to its non-taxability and not to any incidental connection. As in the present case, the Hon'ble Madras High Court has considered that the sources was not new and which was already noticed by the AO, the Hon'ble High Court has upheld the order of the first appellate authority for making enhancement but the ratio laid down by the Hon'ble Madras High Court is very clear and categorical. 7.5 We have also gone through the case law of Hon'ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry, [1962] 44 ITR 891 (SC), wherein the Hon'ble Supreme Court has considered th....
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....d for nearly 37 years. In view of the provisions of section 34 and 33b which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commission to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, one would expect that the legislature would have amended section 31 and specified the other intention in express words. The Income-tax Act was amended several times in the last 37 years, but no amendment of section 31(3) was undertaken to nullify the rulings, to which we have referred. In view of this, we do not think that we should interpret section 31 differently from what has been accepted in India as its true import, particularly as that view is also reasonably possible. 7.6 Further, as cited by ld. Counsel for the assessee, the Hon'ble Delhi High Court in the case of Sardari Lal& Co, supra, wherein the Hon'ble Delhi High Court has considered the case laws cited by the ld. DR and finally held that no new source of income can be introduced by CIT(A) while deciding the appeal and enhancement of income. T....
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....n of the Division Bench needs a fresh look. We have considered this submission in the background of what had been stated by the Apex Court in Jute Corporation's case (supra) and Daluram's case (supra). In Jute Corporation's case (supra), the Apex Court while considering the question whether the Appellate Assistant Commissioner has the jurisdiction to allow the assessed to raise an additional ground in assailing the order of assessment before it, referred to Shapoorji's case (supra), and drew a distinction between the power to enhance tax on discovery of a new source of income and granting a deduction on the admitted facts supported by the decision of the Apex Court. Relying on certain observations made by the Apex Court in CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), the Apex Court held that powers of the first appellate authority are coterminous with those of the assessing officer and the first appellate authority is vested with all the wide powers, which the subordinate authority may have in the matter. In Daluram's case (supra), the decisions of Kanpur Coal's case (supra) and Jute Corporation's case (supra) were also considered and it was obse....
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....h a particular process but the amount which ought to have been computed if the true total income had been found. The court observed that there was no doubt that this view was also possible, but having regard to the provisions of sections 34 and 33B, which made provision for assessment of escaped income from new sources, the interpretation suggested on behalf of the revenue would be against the view which had held the field for nearly 37 years...." (p.692) [Emphasis, supplied]. Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the assessing officer, the jurisdiction to deal with the same in appropriate cases may be dealt with under section 147/148 of the Act and section 263 of the Act, if requisite conditions are fulfilled. It is inconceivable that in the presence of such specific provisions, a similar power is available to the first appellate authority. That being the position, the decision in Union Tyres' case (supra) of this court expresses the correct view and does not need reconsideration. This reference is accordingly disposed....
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....1907/Bang/2018, wherein the issue has been dealt in detail in light of provisions of section 36(1)(vii) of the Act and explanation provided thereunder and also provisions of section 36(1)(viia) r.w.s. 36(2)(v) of the Act. The Tribunal had also discussed the issue in light of explanation (2) inserted by Finance Act, 2013 w.e.f. 01.04.2014 in light of decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank vs CIT [2012] 343 ITR 270, and held that for the purpose of deduction towards write off of non-rural debts u/s.36(1)(vii) of the Act, there is no need to adjust credit in the account of provision for bad and doubtful debts created in terms of section 36(1)(viia) of the Act. The Ld. Counsel for the assessee, has argued the issue at length in light of the decision of Karnataka Bank Ltd vs DCIT (Supra) and held that, even after insertion of Explanation (2) to section 36(1)(vii) of the Act, the ratio laid down by the Hon'ble Supreme Court in the above case is not nullified, in so far as, deduction in respect of bad debts written off by non rural branches. He, further submitted that, clause (a) of section 36(1)(vii) of the Act is a beneficial provision provided to banks op....
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....r.w.s. 36(2)(v) of the Act, because the Explanation has been inserted to remove doubts in light of certain judicial precedents including the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank vs CIT (Supra), and thus, the arguments of the Ld. Counsel for the assessee that, even after insertion of Explanation (2), provision for bad and doubtful debts and write off of bad debts in respect of rural advances should be separately considered without any adjustment in respect of write off of non-rural debts. In this regard, he has filed a detailed submission which has been reproduced as under: "Bad debts written off claimed u/s. 36(1)(vii) The assessee has claimed deduction of bad debts written off to the extent of Rs. 264.88 crores as irrecoverable u/s.36(1)(vii) of the Income Tax Act in its Computation of Income in respect of AY 201718. However, the same was not claimed as expenditure in the audited financial accounts prepared and published by the assessee. While computing the income referred in section 28 of the Income Tax Act, bad debts written off is an allowable deduction u/s.36. In order to claim the said deduction, the assesse....
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....1. The assessee has debited provision for bad and doubtful debts ("PBDD") in the books of account. This is charged as expense in the profit and loss account. The profit and loss account from the annual accounts can be perused. The said provision for bad and doubtful debts is debited under the head "provisions and contingencies". The amount of PBDD debited to P & L a/c for the AY 2017-18 is Rs. 417.30 crores. The amount of PBDD made by the assessee is in respect of all the advances irrespective of whether the advances relate to rural or nonrural branches. This implies that the assessee has been creating PBDD for all advances irrespective of whether they are rural or nonrural branches. That is, the assessee has been maintaining only one account under the head PBDD as mentioned in explanation 2 to section 36(1)(vii) and the same is debited to the profit and loss account. The said PBDD, subject to the limits mentioned in section 36(1)(viia), has been allowed to the assessee. The amounts of PBDD debited to Profit & Loss a/c and the amount claimed u/s.36(1)(viia) is shown in table below: Amount debited into P&L account Amount claimed u/s.36(1)(viia) 417.30 2....
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.... have been written off in the books of account of the assessee. As the bad debts were not written off in the books, it is not eligible to claim deduction u/s.36(1)(vii). Further the bad debts written off were not debited to the PBDD thus not fulfilling the condition prescribed u/s 36(2)(v). 2.7 The assessee has been claiming that the debts written off are urban debts and can be claimed separately u/s 36(1)(vii) and not subject to provisions of section 36(1)(viia) which governs only bad debts of rural advances. Such a claim is not acceptable in view of the newly inserted explanation 2 to section 36(1)(vii) w.e.f. AY 2014-15. The explanation makes it very clear that the provision u/s.36(1)(viia) is for bad and doubtful advances related to both urban and rural advances. Further, the explanatory memorandum while introducing the explanation 2 makes it very clear that provision u/s.36(1)(viia) is for bad and doubtful debts is related to both urban and rural advances. The Memorandum to the Finance Act, 2013 is reproduced below: "It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (....
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....ection 36(1)(vii) allows deduction of bad debt write off as irrecoverable in the accounts of the assessee. Section 36(1)(viia) allows deduction of any provision for bad and doubtful debt made by assessee. Some of the judicial pronouncements gave findings that section 36(1)(viia) allows deduction of bad debt of rural branch NPA and section 36(1)(vii) of the Income Tax Act allows deduction of bad debts of non-rural NPA of the respective bank. To clear the doubts, as explained earlier, Explanation 2 was brought into the statute in Finance Act, 2013. The claim of the assessee is not legally valid in view of the newly inserted explanation and hence is not to be accepted. From the accounts, it is seen that it has created only one account for PBDD which covers all types of advances and has published the same in the annual accounts. The provision created is for both rural and urban advances. Now, to make an artificial distinction is not valid. Hence, as the assessee has failed to debit the bad debts written off in the accounts i.e either to PBDD nor charged it to profit and loss account, its claim has no merit. In this connection, the following cases are relied u....
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.... bank can claim deduction in respect of provision for bad and doubtful debts made in its books of account, which does not exceed the aggregate of amount not exceeding 7.5 per cent of the total income computed before making any deduction under section 36(1)(viia) and Chapter-VIA and an amount not exceeding 10 per cent of the aggregate average advances made by rural branches of such bank computed in terms with the prescribed rules. Thus, on reading of the aforesaid provision, it is very much clear that for claiming deduction under the said provision, assessee has to fulfil two conditions, firstly, it must have made a provision for bad and doubtful debts in its books of account and secondly the maximum deduction allowable is to the extent of 7.5 per cent of the total income and 10 per cent of the aggregate average advances made by rural branches of such bank. On a reading of the provisions of section 36(1)(viia), as it stands now, it is very much clear that there is no restriction imposed under the said provision to indicate that assessee cannot make a provision for nonrural/urban advances. That being the case, department's argument that deduction under section 36(1)(viia) has to ....
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....ion. This principle has been established in the case of Pragathi Grameena Bank Ltd vs CIT [2018] 91 taxmann.com 343 (Kar) which has been affirmed by the Hon'ble Supreme Court. Prudential write off / technical write off These are prudential norms prescribed as per RBI norms. When they create 100% provision of any that NPA, it will be classified as loss asset. The technical write off or prudential write off or head office write off takes place in head office. However, in books of respective branch account it remains as advance recoverable. It cannot be written off as irrecoverable. These write off are not all bad debt write off as irrecoverable as contemplated in section 36(1)(vii) of the Income Tax Act. The Hon'ble Supreme Court explained the differences between these two in Southern Technologies vs JCIT [2010] in 320 TR 577. This is also once again reiterated in the latest decision by the Apex Court in the case of PCIT vs Khyati Realtors (P.) Ltd [2022] 141 taxmann.com 461. In the case of PCIT v. Khyati Realtors (P.)Ltd (supra), the Hon'ble Supreme Court gave the analysis and conclusion from paragraph 11 to 13. At paragraph 13, the Ap....
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.... debt. * Finally, it is well settled that actual provision made by assessee on account of provision for bad and doubtful debt irrespective of the fact whether it is rural or non-rural, has to be seen while examining assessee's claim of deduction under section 36(1)(viia). If the bank does not have rural branch, it will not get deduction relating to 10 per cent of aggregate average advances made by rural branches. However, it will be eligible to claim deduction of 7.5 per cent of total income. Bifurcating the provision for bad and doubtful debt as one relating to rural advances and other advances (non-rural) does not arise for consideration. * Assessee is a scheduled bank falling under clause (a) of section 36(1)(viia) of the Income Tax Act. They are entitled for any provision for bad and doubtful debt made by them in the books of accounts, not exceeding the limits prescribed therein which has already been claimed. No other bad debt was actually written off as irrecoverable as per section 36(1)(vii) of the Income Tax Act in the annual accounts published. Hence, the claim of bad debt write off in the computation of income is not true and correct. Prayer....
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....ows: "We have also carefully considered the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank vs CIT (Supra) and subsequent Explanation (2) inserted by Finance Act, 2013 w.e.f. 01.04.2014, in light of the decision of Hon'ble ITAT Bangalore Bench in the case of Karnataka Bank vs DCIT (Supra) in ITA No. 1907/Bang/2018. The controversy with regard to claim for deduction towards provision for bad and doubtful debts in terms of section 36(1)(viia) of the Act and deduction towards actual write off of bad debts u/s. 36(1)(vii) r.w.s. 36(2)(v) of the Act, has to be understood in the context of rural advance and non-rural advance given by the banks. 10.4 The provisions of section 36(1)(vii) deals with deduction toward bad debts or part thereof which is written off as irrecoverable in the accounts of the assessee subject to the provision of sub-section (2) to section 36 of the Act. As per said provision in the case of assessee, to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtf....
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....vii) allows deduction as under:- "36(1)(vii) Subject to the provisions of subsection (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account under that clause. ........... Explanation 2 - For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;" The provisions of sec. 36(2)(v) are relevant here and it reads as under:- "(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply-- -- .......
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....aining two separate accounts, as observed by the Hon'ble Supreme Court. Hence there was an apprehension in the minds of revenue with regard to the effect of the decision rendered by Hon'ble Supreme Court. For instance, if a particular bank is maintaining only a single PBDD a/c for the provision created u/s. 36(1)(viia) of the Act and even if that bank is not having any rural branches, then it may try to avail the benefit of decision rendered by Hon'ble Supreme Court and may possibly contend that (i) the provision allowed u/s. 36(1)(viia) shall apply only to Rural branches. (ii) since it does not maintain two separate PBDD a/c for rural and non-rural advances, the bad debts relating nonrural branches need not be reduced from the PBDD a/c allowed u/s. 36(1)(viia) in terms of sec. 36(2)(v) and the proviso to sec. 36(1)(vii) of the Act. However, the Ld A.R submitted before us that the Explanation 2 has been inserted in sec. 36(1)(vii) by Finance Act, 2013 (after the decision of Catholic Syrian Bank) to debar certain assessees to avail the interpretation given by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra). 7.11 We have considere....
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....o "non-rural debts". Accordingly, we are of the view that the Explanation 2 has been inserted in order to bring the assesses covered by clauses (b) to (d) within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. Hence, in our view, advances given by rural and non-rural branches mentioned in Explanation 2 shall apply to the assesses covered by clause (b) to (d) of sec. 36(1) (viia) of the Act. 7.12 At this juncture, we may gainfully refer to the "MEMORANDUM EXPLAINING FINANCE BILL 2013", which brings out the intention of the Parliament in inserting Explanation-2 in sec. 36(1)(vii) of the Act. It is extracted below:- "Clarification for amount to be eligible for deduction as bad debts in case of banks:- Under the existing provisions of section 36(1)(viia) of the Income-tax Act, in computing the business income of certain banks and financial institutions, deduction is allowable in respect of any provision for bad and doubtful debts made by such entities subject to certain limits specified therein. The limit specified under section 36(1)(viia)(a) of the Act restrict the claim of deduction for provision for bad and doubtful debts for cer....
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....pes of advances, whether rural or other advances. It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rural advances and urban advances and if the actual write off of debt relates to urban advances, then, it should not be set off against provision for bad and doubtful debts made for rural advances. There is no such distinction made in clause (viia) of section 36(1). In order to clarify the scope and applicability of provision of clause (vii), (viia) of sub-section (1) and subsection (2), it is proposed to insert an Explanation in clause (vii) of section 36(1) stating that for the purposes of the proviso to section 36(1)(vii) and section 36(2)(v), only one account as referred to therein is made in respect of provision for bad and doubtful debts under section 36(1)(viia) and such account relates to all types of advances, including advances made by rural branches. Therefore, for an assessee to which clause (viia) of section 36(1) applies, the amount of deduction in respect of the bad debts actually written off under section 36(1)(vii) shall be limited to the amount by which such bad debts exceeds the c....
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....n banks do not have rural branches. The assesses covered by clause (b) to (d) may not be having rural branches. Hence, the memorandum explains as under with regard to the decision rendered by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra):- "However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances." Because of the interpretation so given by Hon'ble Supreme Court, as discussed earlier, there arose a necessity for the Parliament to clarify that the PBDD allowed u/s. 36(1)(viia) shall apply to all types of advances including advances made by rural branches. However, as stated earlier, the clause (a) to sec.36(1)(viia) has been held to be applicable to rural advances only and this interpretation has not been overridden by any amendment. 7.15 As noticed earlier, the assessees covered by clauses (b) to (d) may not be having rural branches, but they would be getting the benefit of deduction of PBDD u/s. 36(1)(viia) of the Act. Hence, in order ....
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....old that the bad debts written off relating to non-rural advances is not required to be adjusted against provision for bad and doubtful debts made u/s. 36(1)(viia) of the Act and quash the enhancement made by the CIT(A) allowing the ground of assessee's appeal by directing the AO to delete the addition. Since we have decided this issue on merits, the issue on technical ground is left open." 10.6 As the facts are same for this year also, respectfully following the above decision of the co-ordinate Bench in the Appellant Bank's own case, we hold that the bad debts written off (including technical write off) relating to non rural advances is not required to be adjusted against the provision for bad and doubtful debts made under clause 36(1)(viia)(a) of the Act and delete the disallowances made by the lower authorities. Further we find that the co-ordinate Bench in the case of Indian Bank (supra) held that technical write off is allowable u/s.36(1)(vii). As the facts of this case is same as that of Indian Bank case, we hold that the technical write off of non rural debts is an allowable deduction u/s.36(1)(vii). This ground of the assessee is allowed. 11. The next issue that came....
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....s. 1671, 1801,1802, 1803,1804,2034 & 2035/Mds/2014 dated 28/12/2016 wherein the ITAT treated the unclaimed balance as the Revenue receipts irrespective of the fact that the bank is a custodian and allowed the ground of revenue relying on the judgment of Hon'ble Kerala High Court in the case of Catholic Syrian Bank Ltd Vs Assistant Commissioner of Income tax, 349 ITR 0569. 6. The CIT(A) failed to appreciate the decision of Hon'ble High Court of Kerala in the case of South Indian Bank Ltd v CIT, Trichur reported in 279 CTR 179 (Kerala), where the Hon'ble High Court held that excess cash in branches of assessee-bank that was to be refunded only if any customer would claim, is to be added to income under section 41(1) of the Act. 7. The CIT(A) erred in allowing the deduction claimed by the assessee towards ex-gratia payment. 8. The CIT(A) failed to appreciate decision of the Hon'ble Madras High Court in the case of CIT vs Carborundum Universal Ltd (1977) 110 ITR 621 (Mad), wherein it was held that nature of payment was one as described in section 36(1)(iv) but said payment could not be deducted under section 36(1)(iv) because it was not a cont....
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....t of income received in advance. 15. The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal. 14. The first issue that came up for our consideration from Ground No. 2 to 4 of the Revenue appeal is deletion of disallowance of expenditure relatable to exempt income u/s. 14A of the Act. 14.1 The assessee has earned dividend income of Rs. 1,48,37,087/-, and the assessee had made suo moto disallowance of Rs. 1,55,622/-. The AO invoked the provisions of Rule 8D and disallowed Rs. 1,09,85,212/-. On appeal, the Ld. CIT(A) deleted the disallowance. 14.2 The ld. DR supporting the order of the AO submitted that the moment exempt income is earned, disallowance contemplated u/s.14A triggers and the AO shall compute such disallowance by invoking Rule 8D of IT Rules, 1962 and thus, there is no error in the reasons given by the AO towards disallowance u/s.14A and the order of the AO should be upheld. 14.3 The ld.AR for the assessee at the time of hearing submitted that this issue is covered in favour of the assessee by the decision of ITAT in assessee's own case for assessment year 2014-15 in ITA No....
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.... the CIT(A) and reject the ground taken by the Revenue." 14.5 Respectfully following the above decision, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. 15. The second issue that came up for our consideration from Ground Nos. 5 to 6 of Revenue appeal is deletion of addition made towards disallowance of stale drafts. 15.1 The facts with regard to the impugned dispute are that the assessee is in the business of banking, has issued demand drafts to various persons and further any unclaimed demand drafts was kept in stale draft account under the head 'outstanding liabilities'. During the course of assessment proceedings, the AO noticed that an amount of Rs. 30,27,690/- was shown under the head outstanding liabilities towards stale draft and treated the same as income of the assessee and added to total income. On appeal before the ld. CIT(A), the CIT(A) has deleted addition made by the AO by following the decision of ITAT in assessee's own case for earlier years. 15.2 The ld. DR submitted that the ld. CIT(A) has erred in deleting the disallowance made by the AO towards stale draft account without appreciating the fact that amo....
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....view has been taken by the Hon'ble Jurisdictional High Court of Madras in the case of City Union Bank Ltd., vs. CIT, supra. Therefore, consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made by the AO towards Stale Draft Account. Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue." 16.4 Respectfully following the above decision, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue." 15.5 Respectfully following the above decision, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. 16. The next issue that came up for our consideration from Ground Nos. 7 to 9 of Revenue appeal is deletion of disallowance of ex-gratia payment of Rs. 29,59,64,696/-. 16.1 The AO had disallowed ex-gratia payment made by the assessee to its staff by observing that the Revenue has filed appeals before the Hon'ble High Court against the orders of the ITAT and in order to keep the issue alive, the claim made by the assessee was disallowed. On app....
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.... the assessee is allowed." Following the co-ordinate bench decision, supra, we do not find merit in the Revenue's appeal, therefore, the corresponding grounds are dismissed." 7.2 In this view of matter and consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the reasons given by the ld.CIT(A) to delete additions made towards disallowance of ex-gratia payment and thus, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the Revenue." 17.2 Respectfully following the above decision, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue." 16.3 Respectfully following the above decision, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. 17. The next issue that came up for our consideration from Ground Nos. 10 to 12 of the Revenue appeal is towards the deduction u/s.36(1)(viia). 17.1 The Appellant Bank had claimed a deduction of Rs. 225,89,92,063/- u/s.36(1)(viia). The AO restricted this deduction to Rs. 107.28 Cr and disallowed Rs. 118,61,29,245/- on account of the following reas....
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....ncial year. Further, the Hon'ble Madras High Court in appellant's own case has considered an identical issue and by following the decision of Hon'ble Kolkata High Court in the case of PCIT vs Uttarbangakshetriya Gramin Bank [2018] 94 Taxman.com 90 Kolkata, held that aggregate average advances made by rural branches as outstanding at the end of the last day of each month should be considered, but not aggregate monthly advances taking loans and advances made only during the previous year relevant to the assessment year as computed by the Assessing Officer. But, the High Court has remitted the matter back to the file of the Assessing Officer for the purpose of re-computation after considering the fact that the Assessing Officer has not computed deduction based on the documents produced by the assessee. The relevant findings of the Hon'ble High Court are as under: "10.2 Similarly, the second issue relating to deduction of Rs. 8.53 crores u/s. 36(1)(viia) with regard to the provision for bad and doubtful debts, is covered by the decision in Principal Commissioner of Income Tax, Jalpaiguri v. UttarbangaKshetriyaGramin Bank [(2018) 94 taxmann. Com 90 (Calcutta), in favour of the ....
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....he advances made by the rural and non-rural branches of the bank and the quantum of deduction was not properly determined by the assessing officer based on the materials furnished by the respondent / assessee. In this context, the relevant paragraphs of the assessment order dated 31.03.2006 passed by the assessing officer are quoted below: "5.3 When the assessee was asked to clarify whether the advances which were considered to be bad and doubtful in earlier years and for which the provision was made so as to claim deduction under section 36(1)(viia) of the Act, have been recovered subsequently, it was stated that as the provision claimed was not with reference to any particular debt due to the assessee but on an overall basis, it is not possible to certify that the bad debts claimed as trading loss for deduction u/s. 36(1)(viia) was recovered or not. It was also stated that the assessee would not be able to give age-wise details of outstanding advances for the branches more so for the rural branches with reference to which the deduction was claimed, so as to determine whether any advance of earlier year for which provision was made is still outstanding. 5.4. In o....
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....ate orders, on merits and in accordance with law, within a period of three months from the date of receipt of a copy of this judgment. 12.4 In so far as deciding a particular branch is rural branch or not, the population of 2011 census should be considered because said data was officially available with the bank while deciding the branches as rural branches or urban branches and this issue is covered by the decision of ITAT, Chennai benches in the case of KarurVysya Bank in ITA Nos. 2762/Chny/2017 & 332/Chny/2018, dated 03.11.2011, where the issue has been discussed in detail. Therefore, we direct the Assessing Officer to consider the issue in light of the decision of the ITAT, Chennai Benches in the case of KarurVysya Bank vs CIT (Supra). 12.5 In this view of the matter and considering facts and circumstances of the case and also following the decision of Hon'ble High Court of Madras in appellant's own case for earlier years, we are of the considered view, that the Assessing Officer is erred in computing deduction u/s. 36(1)(viia) of the Act, by considering only incremental advances made by rural branches of appellant bank as against the aggregate average advance....