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2018 (8) TMI 1882 - AT - Income TaxAddition u/s. 40(a)(ia) on account of non-deduction of TDS - whether the taxes have been deposited before the due date of filing of income tax return or that the payees have furnished Form 15G/15H to the assessee - HELD THAT - Grounds of appeal raised by the revenue itself is erroneous for the simple reason that the Ld. CIT(A) has only directed to AO to verify and find whether the taxes have been deposited before the due date of filing of income tax return or that the payees have furnished Form 15G/15H to the assessee. In case if the assessee has been able to satisfy the AO that the tax has been deposited before the due date of filing of income tax return or that the payee has filed From 15G/15H to the assessee then only such amount shall be deleted from the addition/disallowance made by the AO. The Ld. DR fairly conceded that the CIT(A) had only directed the AO to examine the relevant supporting evidence - we set aside the order of the Ld. CIT(A) and restore the issue back to the file of AO to decide the allowability of the claim of the assessee after examining the relevant supporting evidence - Ground of appeal of revenue is allowed for statistical purposes Addition u/s. 14A read with Rule 8D - HELD THAT - As decided in HDFC BANK LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX-2 (3) MUMBAI OTHERS 2016 (3) TMI 755 - BOMBAY HIGH COURT since the Bank s own funds were substantially more than the cost of investments yielding tax free income no part of the interest paid was liable for disallowance. Also see RASOI LIMITED 2017 (2) TMI 863 - CALCUTTA HIGH COURT . Merit in the assessee s alternate contention that no disallowance out of interest paid was warranted because after netting off interest paid against interest received the assessee had made net interest gain of Rs. 3902.10 crores. The Hon ble Gujarat High Court in its recent judgment in the case of Pr. CIT Vs Nirma Credit Capital Pvt Ltd 2017 (9) TMI 485 - GUJARAT HIGH COURT has held that the expression used in Rule 8D(2)(ii) is interest expenditure and not interest paid and accordingly the expenditure in this context must mean interest paid minus taxable interest earned. Applying the ratio laid down in this judgment to the facts of the present case we find no infirmity in the order of the Ld. CIT(Appeals) deleting the interest disallowance made under Rule 8D(2)(ii). Disallowance under Rule 8D(2)(iii) - qua the assessees engaged in the banking business the Hon ble Supreme Court upheld the judgment of the Hon ble Punjab Haryana High Court in the case of Pr. CIT Vs State Bank of Patiala 2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT as per which no disallowance u/s 14A is permissible in terms of Rule 8D in case of assessee engaged in banking business. Respectfully following above qua the assessees engaged in the banking business the Hon ble Supreme Court upheld the judgment of the Hon ble Punjab Haryana High Court in the case of Pr. CIT Vs State Bank of Patiala 2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT as per which no disallowance u/s 14A is permissible in terms of Rule 8D in case of assessees engaged in banking business. Respectfully following above we direct the Ld. AO to delete the disallowance made under rule 8D(2)(iii). CIT(A) in directing the AO to re-compute and allow the benefit of unabsorbed losses and depreciation brought forward from earlier years - DR appearing on behalf of the Revenue fairly stated that the directions given by the Ld. CIT(A) were only consequential in nature and in accordance with the provisions of law. We also do not find any infirmity in the order of the Ld. CIT(A) in this regard. Accordingly Ground No. 3 is dismissed. Section 115JB are not applicable to the assessee Bank
Issues Involved:
1. Delay in filing Cross Objection by the assessee. 2. Deletion of disallowance under Section 40(a)(ia) of the Income-tax Act, 1961. 3. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules. 4. Re-computation and allowance of unabsorbed losses and depreciation. 5. Applicability of Section 115JB to the assessee bank. 6. Additions/disallowances while assessing book profit under Section 115JB. Detailed Analysis: 1. Delay in Filing Cross Objection by the Assessee: The Cross Objection filed by the assessee was delayed by 555 days. The delay was attributed to the advice given by the assessee's Authorized Representative (AR) that filing an intimation under Rule 27 of the ITAT Rules would suffice. However, as a precaution, the assessee filed the Cross Objection on the same grounds. The Tribunal deemed it fit to condone the delay and admitted the Cross Objection, considering the reasons provided. 2. Deletion of Disallowance under Section 40(a)(ia): The department appealed against the deletion of the disallowance of Rs. 66,80,772 under Section 40(a)(ia) without giving the Assessing Officer (AO) an opportunity to be heard as per Rule 46A. The assessee argued that the TDS on the amount was deposited before the due date of filing the return of income. The Ld. CIT(A) had restored the issue to the AO for verification. The Tribunal noted that the Ld. CIT(A) had not deleted the disallowance but directed the AO to verify the supporting evidence. The Tribunal set aside the order of the Ld. CIT(A) and restored the issue to the AO for fresh consideration after examining the relevant evidence. 3. Disallowance under Section 14A read with Rule 8D: The assessee, a Public Sector Bank, derived exempt income from shares and securities. The AO computed the disallowance under Section 14A at Rs. 39,14,48,612. The Ld. CIT(A) deleted the disallowance of Rs. 36,24,11,122 under Rule 8D(2)(ii) but upheld the disallowance of Rs. 2,90,37,490 under Rule 8D(2)(iii). The Tribunal found that the issue was covered in favor of the assessee by the judgment of the Hon’ble Bombay High Court in CIT Vs HDFC Bank Ltd and the Gujarat High Court in Pr. CIT Vs Nirma Credit & Capital Pvt Ltd. The Tribunal upheld the deletion of the interest disallowance as the assessee’s own funds were more than the investments yielding tax-free income. Regarding the disallowance under Rule 8D(2)(iii), the Tribunal followed the judgment of the Hon’ble Supreme Court in the case of State Bank of Patiala, which held that no disallowance under Section 14A is permissible for assessees engaged in banking business. The Tribunal directed the AO to delete the disallowance of Rs. 2,90,37,490. 4. Re-computation and Allowance of Unabsorbed Losses and Depreciation: The Ld. CIT(A) directed the AO to re-compute and allow the benefit of unabsorbed losses and depreciation brought forward from earlier years. The Tribunal found no infirmity in the order of the Ld. CIT(A) as the directions were consequential and in accordance with the provisions of law. 5. Applicability of Section 115JB to the Assessee Bank: The Ld. CIT(A) followed the decision of the Tribunal in the assessee’s own case for AY 2002-03, which held that the provisions of Section 115JB are not applicable to the assessee bank as it is not a company within the meaning of the Companies Act, 1956. The Tribunal upheld the decision of the Ld. CIT(A). 6. Additions/Disallowances while Assessing Book Profit under Section 115JB: Since the Tribunal held that the provisions of Section 115JB do not apply to the assessee, the issue of additions/disallowances while assessing book profit under Section 115JB was rendered academic and did not require adjudication. Conclusion: The appeal of the Revenue was dismissed, and the Cross Objection of the assessee was allowed.
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