2013 (3) TMI 643 - AT - Income Tax

Applicability of Section 115JB on banks - The assessee, a banking company has a branch office in Bangkok. It was contended that Sec.115JB applies only where the assessee is required to maintain accounts as per schedule VI of Companies act. As the banks prepare accounts in accordance with the Banking Regulation Act, 115JB cannot be applied to the banks. - HELD THAT - Post Nationalisation, after the enactment of the Banking Companies (Acquisition Transfer of Undertakings) Act, 1970 the status of banks has changed. In view of amendment in the section 115JB by the Finance Act, 2012, the provisions of section 115JB are applicable to the banks as well from assessment year 2013-14. Export Credit Insurance for Banks - The DR submitted that no evidence was furnished before the AO for claiming the export credit by the assessee. On the other hand, the learned AR said that there is no provision to pay interest by ECGC. The AO has made additions based on mere presumption. - HELD THAT - Under clause (vii) of the salient features of the Export Credit Insurance for banks, - interest payable by the exporter on the packing credit advances will not be eligible for cover . So there is no provision to pay interest by ECGC. - CIT(A) rightly deleted the additions. Levy of interest on excess refund u/s 234D .- Regular assessment order u/s 143(3) was passed on 30.03.2006. The D.R. submitted that interest u/s 234D has been introduced with effect from 1.6.2003 without specific reference to any assessment year. The CIT(A) ought to have seen that interest u/s 234D is leviable on or after 2.6.2003 irrespective of the assessment year. - HELD THAT - Section 234D is applicable on the date on which regular assessment order has been passed and not the year of assessment that falls for consideration. In the present case, regular assessment order was passed on 30.03.2006, the provisions of section 234D came into operation prior to the completion of regular assessment, therefore, will apply to assessee as well.

Issues Involved:

1. Disallowance of depreciation on land.
2. Disallowance under section 14A.
3. Bad debts written off under section 36.
4. Applicability of provisions of section 115JB.
5. Depreciation on assets taken over from the Bank of Tamil Nadu.
6. Loss on account of frauds written off.
7. Double taxation relief in respect of foreign branches.
8. Contribution towards staff welfare fund.
9. Provision towards wage arrears.
10. Interest received from Export Credit Guarantee Corporation (ECGC).
11. Levy of interest under section 234D.
12. Disallowance of loss on revaluation of investments.

Detailed Analysis:

1. Disallowance of Depreciation on Land:
The assessee did not press this ground, leading to its dismissal. The Tribunal dismissed the ground as it had already been adjudicated against the assessee in earlier appeals.

2. Disallowance under Section 14A:
The assessee did not press this ground, leading to its dismissal.

3. Bad Debts Written Off under Section 36:
The Tribunal referred to the Supreme Court judgment in the case of Catholic Syrian Bank Ltd., which clarified that sections 36(1)(vii) and 36(1)(viia) are distinct and independent. The matter was remanded back to the Assessing Officer to decide afresh in accordance with the Supreme Court's decision.

4. Applicability of Provisions of Section 115JB:
The Tribunal noted that the issue was not raised following the proper procedure and dismissed the ground. However, in another instance, it was held that the provisions of section 115JB are not applicable to banking companies, following the decision of the Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad.

5. Depreciation on Assets Taken Over from the Bank of Tamil Nadu:
The Tribunal noted that the provisions of section 2(1B) were not considered by the Assessing Officer and remanded the issue back for fresh consideration.

6. Loss on Account of Frauds Written Off:
The Tribunal found that the CIT(A) had not adequately discussed the issue and remanded it back for a detailed order citing reasons for allowing or dismissing the issue.

7. Double Taxation Relief in Respect of Foreign Branches:
The Tribunal found that the issue was covered by the decision in the case of Bharat Overseas Bank Ltd., where it was held that the Assessing Officer should investigate and apply the provisions of the DTAA. The Tribunal set aside the CIT(A)'s order and allowed the Revenue's ground.

8. Contribution Towards Staff Welfare Fund:
The Tribunal held that the contribution towards an unrecognized welfare fund is not allowable as a deduction, following its earlier decision in ITA No.1146/Mds/2008.

9. Provision Towards Wage Arrears:
The Tribunal noted that the liability had not crystallized and should be allowed in the year of actual payment. The issue was remanded back to the Assessing Officer for fresh consideration.

10. Interest Received from Export Credit Guarantee Corporation (ECGC):
The Tribunal upheld the CIT(A)'s finding that there is no provision for ECGC to pay interest and dismissed the Revenue's ground.

11. Levy of Interest under Section 234D:
The Tribunal reversed the CIT(A)'s order, holding that interest under section 234D is applicable from 1.6.2003, following the decision of the Hon'ble Madras High Court in the case of Infrastructure Development Finance Co. Ltd.

12. Disallowance of Loss on Revaluation of Investments:
The Tribunal dismissed the Revenue's ground, following the decision of the Hon'ble Madras High Court in the case of CIT Vs. Karur Vysya Bank Ltd., which held that the loss on revaluation of investments is an allowable deduction.

Conclusion:
The appeals were partly allowed for statistical purposes, with several issues remanded back to the Assessing Officer for fresh consideration in accordance with the law and relevant judicial precedents. The Tribunal's decisions were consistent with previous rulings and higher court judgments, ensuring a thorough and detailed analysis of each issue.

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