2015 (2) TMI 892 - AT - Income Tax

Write off of Non-Convertible Debentures - Held that - Actual write off in the NCD account had taken place in this year. The claim of the assessee as made in the A.Y. 2000-01 and 2001-02 would be on the basis that there is a diminution in the value of stock in trade, whereas the claim of the assessee in this assessment year would be on the basis that it is a bad debt and allowable as a deduction u/s. 36(1)(vii) of the Act. We are of the view that the claim of the assessee has to be allowed in either of the assessment years, as the loss in question is incidental to the business and had to be allowed as a diminution in value of stock in trade. We therefore hold that in the event of the claim of the assessee being rejected in A.Ys. 2000-01 & 2001-02, the claim should be allowed in the A.Y. 2002-03 - Decided in favour of assessee. Amortization of premium paid on Held to Maturity ( HTM ) category of investment - Held that - The assessee is entitled to claim this deduction - Decided in favour of assessee. Disallowance under section 43B - whether write back excess provision of bonus needs to be allowed as a deduction from the taxable income as the provision was offered to tax in earlier years - Held that - Before us, the ld. counsel for the assessee drew our attention to page 12 of the paperbook, which contains the statement showing the details of sums which fall for consideration u/s. 43B of the Act. The same is annexed as Annexure-I to this order. He also drew our attention to page 9 & 10 of the paper book which is the computation of income from business. The same is annexed as Annexure-II. Attention was also drawn to the fact that one of the items added to the profit & loss account was Schedule-C of the computation of income from business and that in Schedule-C the excess provision of bonus of ₹ 44,80,266 had been duly considered while arriving at the sum of ₹ 6,31,91,125 which was the amount debited to the profit and loss account. It was submitted that there was no claim made for deduction as assumed by the revenue authorities. - the order of the CIT(A) is set aside and the matter is remanded to the Assessing Officer for fresh consideration - Decided in favour of assessee for statistical purposes. Section 115JB not applicable - whether provisions of MAT do not apply to the assessee? - Held that - Provisions of section 115JB of the Act are not applicable to the assessee which is a banking company - Decided in favour of assessee.

Summary

Issues Involved:
1. Write off of Non-Convertible Debentures (NCDs).
2. Amortization of premium paid on Held to Maturity (HTM) category of investment.
3. Disallowance under section 43B.
4. Applicability of Section 115JB to a banking company.

Issue-wise Detailed Analysis:

1. Write off of Non-Convertible Debentures (NCDs):
The assessee, engaged in banking, claimed a deduction of Rs. 11,18,42,001 for the write-off of NCDs in the A.Y. 2002-03. The AO disallowed this claim, stating that the amounts were subject to another assessment year. The CIT(A) upheld the AO's decision. The Tribunal noted that the actual write-off in the NCD account occurred in this year and held that the claim should be allowed either in the A.Y. 2000-01 or 2001-02 based on diminution in value or as a bad debt in A.Y. 2002-03. The Tribunal directed that if the claim is rejected in A.Ys. 2000-01 & 2001-02, it should be allowed in A.Y. 2002-03.

2. Amortization of premium paid on Held to Maturity (HTM) category of investment:
The assessee claimed Rs. 3,13,60,916 towards amortization of investments under the HTM category. The AO disallowed this based on the order for A.Y. 2001-02, and the CIT(A) upheld this disallowance. The Tribunal referred to previous decisions, including the case of M/s. Sir M. Visweswaraya Cooperative Bank Ltd., which allowed such claims. The Tribunal concluded that the claim should be allowed and directed the AO to allow the deduction.

3. Disallowance under section 43B:
The assessee had made a provision for bonus and later wrote back an excess provision of Rs. 44,80,266, which was initially offered to tax in A.Y. 2001-02. The AO added this amount as an excess claim under section 43B, and the CIT(A) upheld this decision. The Tribunal noted the necessity to examine the details and submissions provided by the assessee. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for fresh consideration.

4. Applicability of Section 115JB to a banking company:
The issue was whether Section 115JB applies to a banking company. The Tribunal referred to the decision in Syndicate Bank v. DCIT, which held that Section 115JB does not apply to banking companies as they are not required to prepare their profit and loss account per Schedule VI of the Companies Act. The Tribunal followed this precedent and concluded that Section 115JB is not applicable to the assessee, a banking company. Consequently, grounds related to the computation of book profits under Section 115JB were not adjudicated.

Conclusion:
The appeal by the assessee was partly allowed, with directions for fresh consideration on the disallowance under section 43B and confirmation that Section 115JB does not apply to the banking company. The Tribunal allowed the claims related to the write-off of NCDs and amortization of premium on HTM investments.