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2019 (6) TMI 1456 - AT - Income TaxAllowing loss on valuation of securities Held to Maturity (HTM) - HELD THAT - We find that the Commissioner of Income Tax (Appeals) has decided this issue in favour of assessee by following the order of Tribunal in assessee s own case for assessment year 2005-06 2014 (10) TMI 210 - ITAT PUNE . The issue of allowability of loss on valuation of HTM securities is recurring in assessment years after assessment years. The Co-ordinate Bench in assessee s own case for assessment year 2010-11 2019 (3) TMI 1744 - ITAT PUNE has decided this issue in favour of the assessee by placing reliance on 2018 (3) TMI 316 - BOMBAY HIGH COURT Disallowance of deduction u/s. 36(1)(vii) - HELD THAT - AR has fairly admitted that the Tribunal in assessee s own case in assessment year 2010-11 has restricted deduction u/s. 36(1)(viia) to the extent of provision made. Thus, in view of the admitted position, this ground of appeal by the assessee qua the claim of deduction u/s. 36(1)(viia) is allowed to the extent of provision actually made for bad and doubtful debts in the books of account. Disallowance u/s 14A - HELD THAT - No disallowance u/s. 14A is warranted in respect of shares held by the assessee as stock in trade. See MAXOPP INVESTMENT LTD. 2018 (3) TMI 805 - SUPREME COURT Disallowance u/s. 36(1)(viii) - CIT (Appeals) in restricting the disallowance u/s. 36(1)(viii) to the extent of provision made by the assessee in the relevant assessment year - HELD THAT - A bare perusal of provisions of section 36(1)(viii) would show that the deduction is allowable to the extent of special provision created and maintained‟ subject to the other conditions mentioned in clause (viii) and proviso thereto. In our considered opinion the provision created in the subsequent assessment year cannot be considered for allowing deduction in the preceding assessment years. Hon ble High Court THE PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION CHANDIGARH 2009 (11) TMI 37 - PUNJAB AND HARYANA HIGH COURT in principle has allowed the benefit of deduction u/s. 36(1)(viii) on reserve created subsequent to the assessment year in question provided the assessment order for the relevant assessment year has not attained finality. Thus, respectfully following the decisions discussed above, we hold that the reserve created in subsequent assessment year i.e. ₹ 58.86 Crores qualifies for deduction u/s. 36(1)(viii) of the Act. The ground No. 4 of the appeal by the assessee is allowed, accordingly. Depreciation on UPS - @ 15% or 80% or 60% - HELD THAT - The assessee in appeal has claimed depreciation on UPS @ 80%. The Hon ble Delhi High Court in the case of Commissioner of Income Tax Vs. Orient Ceramics Industries Ltd. 2011 (1) TMI 26 - DELHI HIGH COURT has held that the depreicaiton on UPS has to be computed at 60%. Similar view has been taken by the Hon ble Bombay High Court in the case of Commissioner of Income Tax Vs. Saraswat Infotech Ltd. 2013 (1) TMI 861 - BOMBAY HIGH COURT . Thus, in view of the settled position, we restrict assessee s claim of depreciation on UPS to the extent of 60%. Similar view was taken by the Co-ordinate Bench in assessee s own case in assessment year 2010-11. Disallowance u/s 40(a)(ia) - short deduction of tax - HELD THAT - Disallowance u/s. 40(a)(ia) on account of short deduction of tax at source was made in assessment year 2010-11. The Tribunal following the decision rendered by the Hon ble Calcutta High Court in the case of Commissioner of Income Tax Vs. S K Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT deleted the disallowance made u/s. 40(a)(ia) on short deduction of tax. Following the parity of reasons the disallowance made in the assessment year under appeal is deleted as well Accrual of income - taxing interest income on accrual basis in respect of Non- Performing Assets which are less than 180 days - HELD THAT - Section 43D r.w. Rule 6EA is applicable only in respect of NPAs above 180 days and not NPAs classified based on 90 days norm of RBI, this issue has been settled in favour of the assessee by the decision of Hon ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Vasisth Chay Vyapar Ltd. 2018 (3) TMI 56 - SUPREME COURT and the decision of Hon ble Bombay High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. 2015 (1) TMI 1218 - BOMBAY HIGH COURT The assessee has created a provision in the P L account on account of interest on NPAs and has claimed the same during the period relevant to the assessment year under appeal - thus interest on sticky loans has to be allowed. Applicability of provisions of section 115JB on Banking Company - HELD THAT - Assessee, being a banking company, does not fall within the purview of section 115JB Whether the advertisement expenditure incurred by the assessee by way of donation to various organizations is allowable u/s. 37, when the Auditors of the assessee bank have held that the expenditure qualifies for deduction u/s. 80G ? - HELD THAT - The fact that the assessee has incurred expenditure to the tune of ₹ 34,78,240/- on advertisement has not been disputed by the department. The Revenue has disallowed the expenditure on the premises that the Auditors have observed in the audit report that the amount qualifies for deduction u/s. 80G and the assessee has not claimed deduction in the return of income. The assessee has claimed expenditure in respect of donations to various organizations as advertisement expenditure. Since, no doubt has been raised by the Revenue on expenditure incurred and further it is also not in dispute the expenditure was for publicity of the assessee Bank, under the given facts, we are of considered view that the same is allowable u/s. 37 - Decided in favour of assessee.
Issues Involved:
1. Loss on valuation of securities Held to Maturity (HTM). 2. Disallowance under Section 36(1)(vii) of the Income Tax Act, 1961. 3. Deduction under Section 36(1)(viia). 4. Disallowance under Section 14A. 5. Deduction under Section 36(1)(viii). 6. Depreciation on Uninterruptible Power Supply (UPS). 7. Disallowance under Section 40(a)(ia). 8. Taxation of interest income on Non-Performing Assets (NPAs). 9. Applicability of Section 115JB. 10. Disallowance of advertisement expenses. Detailed Analysis: 1. Loss on Valuation of Securities Held to Maturity (HTM): The Revenue's appeal against the Commissioner of Income Tax (Appeals) on the issue of loss on valuation of HTM securities was dismissed. The Tribunal followed its own precedent and the Bombay High Court's decision in the assessee's favor, allowing the valuation of closing stock at cost or market value, whichever is lower. 2. Disallowance under Section 36(1)(vii): The assessee's appeal regarding the disallowance of ?258,00,00,098 under Section 36(1)(vii) was allowed for statistical purposes. The Tribunal restored the issue to the Assessing Officer for re-adjudication, following its own decision in the assessee's case for the assessment year 2010-11. 3. Deduction under Section 36(1)(viia): The assessee's claim for deduction of ?486.59 crores under Section 36(1)(viia) was restricted to the provision made in the books of accounts, i.e., ?102.36 crores. The Tribunal followed its earlier decision, allowing the deduction only to the extent of the provision actually made for bad and doubtful debts. 4. Disallowance under Section 14A: The Tribunal deleted the disallowance under Section 14A, as the investments were held by the assessee as stock-in-trade. This decision was based on the precedent set by the Punjab and Haryana High Court and the Supreme Court, which held that no disallowance under Section 14A is warranted for shares held as stock-in-trade. 5. Deduction under Section 36(1)(viii): The Tribunal allowed the assessee's appeal, holding that the reserve created in the subsequent assessment year qualifies for deduction under Section 36(1)(viii). This decision was based on precedents from the Punjab and Haryana High Court and the Tribunal's own decisions. 6. Depreciation on Uninterruptible Power Supply (UPS): The Tribunal restricted the depreciation on UPS to 60%, following the decisions of the Delhi High Court and the Bombay High Court. The assessee's claim for 80% depreciation was partly allowed to the extent of 60%. 7. Disallowance under Section 40(a)(ia): The Tribunal deleted the disallowance under Section 40(a)(ia) for short deduction of tax, following its own decision in the assessee's case for the assessment year 2010-11 and the Calcutta High Court's decision in S K Tekriwal's case. 8. Taxation of Interest Income on Non-Performing Assets (NPAs): The Tribunal allowed the assessee's appeal, deleting the addition of notional interest on NPAs. This decision was based on the Supreme Court's decision in Vasisth Chay Vyapar Ltd. and the Bombay High Court's decision in Deogiri Nagari Sahakari Bank Ltd., which held that interest on sticky loans cannot be taxed on an accrual basis. 9. Applicability of Section 115JB: The Tribunal held that the provisions of Section 115JB do not apply to banking companies, following its own decision in the assessee's case for the assessment year 2010-11. The assessee, being a banking company, is outside the purview of Section 115JB. 10. Disallowance of Advertisement Expenses: The Tribunal allowed the assessee's appeal, holding that the advertisement expenses incurred by way of donations to various organizations are allowable under Section 37. The expenditure was for the publicity of the assessee bank and was not disputed by the Revenue. Conclusion: The appeals of the assessee were partly allowed, and the appeals by the Revenue were dismissed. The Tribunal's decisions were largely based on precedents and the consistent application of legal principles across multiple assessment years.
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