TaxTMI 
TaxTMI 
2025 (11) TMI 2057
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....s against the law and facts of the case. 2. The learned CIT(A) erred in confirming that certain branches as non-rural branches and disallowing a sum of Rs. 19,96,89,544/- claimed by the appellant bank u/s.36(1)(viia). 2.1. The learned CIT(A) erred in holding that some of the branches are not rural branches as per the definition of Section 36(1)(viia). 2.2. The learned CIT(A) failed to appreciate the fact that term "rural branch" is to be determined based only on the population and not on any other basis. 2.3. The learned CIT(A) failed to appreciate that branches have been classified as rural branches as per Reserve Bank of India classification, based on the population data, and on that basis, licenses have been granted. 2.4. The learned CIT(A) failed to appreciate that the provisions of the Income Tax Act and the Rules, thereunder, do not stipulate an alternate method to determine the status of rural branches. 2.5. The learned CIT(A) erred in not directing the Assessing Officer to revise the eligible deduction u/s.36(1)(viia) after considering the additions made to the returned income by the Ld. Assessing Officer. 2.6. ....
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....preciation on investments 91,05,14,883 2 Disallowance of Provision for Bad and Doubtful Debts u/s.36(1)(viia) 19,96,89,544 3 Disallowance of Excess claim of Bad debts u/s 36(1)(vii) 42,75,76,143 4 Disallowance on account of stale drafts account 41,46,170 5 Disallowance of ex-gratia payment 33,06,75,325 TOTAL 1,87,26,02,065 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), NFAC, Delhi. 5. The Ld.CIT(A), vide the impugned order dated 31.03.2025 partly allowed the appeal of the assessee. He allowed the grounds of the assessee as tabulated below: Sl. No Particulars Amount (Rs.) 1 Disallowance of depreciation on investments 91,05,14,883 2 Disallowance on account of stale drafts account 41,46,170 3 Disallowance of ex-gratia payment 33,06,75,325 TOTAL 1,24,53,36,378 6. The Ld. CIT(A) however, did not allow the grounds of the assessee on the following issues: Sl. No Particulars Amount (Rs.) 1 Disallowance of Provision for Bad and Doubtful Debts u/s.36(1)(viia)) 19,96,89,544 TOTAL 19,96,8....
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....lopment Authority. As per the Revenue authorities' findings, those 3 branches are urban branches because said branches fall within Chennai Metropolitan Area and Hyderabad Metropolitan Development Authority. Therefore, the AO as well as CIT(A) opined that even though local panchayat population where the branches are situated is less than 10,000, but because those 3 branches are part of urban conglomerate or territorial distance of Chennai Metropolitan Area and Hyderabad Metropolitan Development Authority, those 3 branches cannot be considered as rural branches for the purpose of provisions of section 36(1)(viia) of the Act. The ld.CIT(A) had discussed the issue at length in light of provision of section 36(1)(viia) of the Act and decision of Hon'ble Kerala High Court in the case of CIT vs. Lord Krishna Bank, [2011] 339 ITR 606 and observed that "place" as mentioned in section 36(1)(viia) of the Act, with reference to "place" as defined in census report of 2001 means, "the basic unit for rural areas is the revenue village with definite surveyed boundaries. The rural area is, however, taken as the residual portion excluding the urban area and for that no strict definition is followed.....
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.... has followed 2001 census for the purpose of classification of those 3 branches as rural branches. The assessee has adduced reasons for classifying those branches, as per 2001 census. According to the assessee, population data of 2011 was not available when the assessee has finalized its accounts and provision was created u/s.36(1)(viia) of the Act. For this purpose, the assessee has furnished necessary evidences including reply received from Registrar General of India, Ministry of Home Affairs, in response to RTI application, as per which provisional and final population data of 2011 census was published in official Gazette on 30.04.2013. In this case, financial year relevant to assessment year 2013-14 ends on 31.03.2013. As per evidence available on record, the 2011 census data was not made available to the assessee as on 31.03.2013. Therefore, we are of the considered view that once official census figure was not published in official gazette of Government of India, then the assessee has to consider official census data available in public domain when the provision was created in the books of accounts of the assessee. In this case, no doubt of whatsoever with regard to populatio....
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....lete the disallowance of Rs. 42,75,76,143/- being the bad debts written off by the non rural branches of the assessee. 9.2 The Ld.ARs submitted that it is purely a legal ground and the details are available on records. They also submitted that this issue is covered on merits in favour of the assessee in their own case by the co-ordinate Bench of the Tribunal. 9.3 The ld.DR submitted that the grounds of appeal raised for the first time and hence need to be dismissed. 9.4 We heard both the parties perused the material available on record. We find that this issue is raised for the first time before us. We also find that this ground is purely a legal ground and the details are available on records. Since it is a legal ground, following the settled principles in this regard, we allow this ground to be raised. However, as the issue has not been examined by the Ld.CIT(A), we remit the issue back to the files of ld.CIT(A) to decide the issue on merits after affording a reasonable opportunity to the assessee. 9.5 This ground of appeal is allowed for statistical purposes. 10. The next issue that came up for our consideration from Ground - of the assessee's appeal is relating t....
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....addition made towards Ex-gratia payments. the Ld. CIT(A) has erred in deleting the addition made towards Ex-gratia payments made by the assessee to its employees who were not covered under Payment of Bonus Act. (7) For these and such other grounds that may be adduced at the time of hearing and it is prayed that the order of the Ld.CIT(A) may be reversed and that of the Assessing Officer be restored. 13. The first issue that came up for our consideration from ground No. 2 of Revenue Appeal is against the deletion of depreciation on Investments - Rs. 91,05,14,883/-: 13.1 The assessee has claimed deduction of depreciation on investments based on Reserve Bank of India (RBI) guidelines. The Assessing Officer disallowed the same on the ground that the assessee did not net off the appreciation with the depreciation as per RBI guidelines and CBDT Instruction No.17/2008 dated 26/11/2008. The Ld.CIT(A) in para 5.2 of the impugned order noticed that the assessee had claimed net depreciation of Rs. 91,05,14,883/- after adjustment of appreciation and depreciation for the year under consideration and further found that the working of the valuation of the securities by the assessee....
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.... VI on the effect of changes in foreign exchange rates relating to forward exchange contracts shall not apply." 8.5 We note that the Banks shall classify, 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 - restruc....
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....supporting the order of the ld.CIT(A), submitted that the issue is squarely covered in favour of the assessee by the decision of Tribunal in assessee's own case for assessment year 2017-18 in ITA No.635/Chny/2020 vide order dated 20.09.2024, where under identical circumstances the Tribunal had upheld the order of the Ld.CIT(A), which deleted the addition made by the AO by holding that amount kept under stale draft account is not income of the assessee. He further submitted that the Hon'ble High Court of Madras has considered an identical issue in case of City Union Bank Ltd., vs. CIT reported in [2020] 118 taxmann.com 96 2020-TIOL-807-HC-MAD-IT, wherein it has been clearly held that amount kept under stale draft account cannot be treated as income of the assessee. 15.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with case laws relied on. We find that the issue has been decided in assessee's own case by the Tribunal order (supra) by holding as under: "15.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We fi....
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.... 16. The last issue that came up for our consideration from ground No. 6 of Revenue Appeal is against the deletion of disallowance of exgratia payment - Rs. 33,06,75,325/-: 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 Tribunal and in order to keep the issue alive, the claim made by the assessee was disallowed. On appeal, the Ld.CIT(A) following the earlier orders of the Tribunal, allowed the appeal of the assessee. 16.2 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. An identical issue had been considered by this Tribunal in assessee's own case for A.Y.2017-18 in ITA No.635/Chny/2020 (supra), wherein the Tribunal after considering relevant facts held that exgratia payment to staff is deductible u/s.37(1) of the Act. The relevant findings of the Tribunal are as under: "16.2 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. An identical issue had been considered by the Tribunal in as....