2018 (6) TMI 1770 - AT - Income Tax

Computation of income for the purposes of allowing deduction u/s.36(1)(viia) - HELD THAT - As decided in CANARA BANK VERSUS JOINT CIT, LTU, BANGALORE. 2016 (4) TMI 429 - ITAT BANGALORE the amount of deduction is to be calculated with reference to income computed under the head 'profits and gains of business or profession'. The provisions governing the brought forward and set-off business loss are not part of the provisions governing the computation of profits under the head 'profits and gains of business' - the method of calculation adopted by the AO is in accordance with the provisions of the Act and the reasoning adopted by the CIT(A) is also in consonance with the clear provisions of the Act. Hence, we confirm the addition made by the AO. The grounds of appeal raised by the assessee on this issue are dismissed. Additions made while computing the book profit which are not covered by the Explanation 1 to section 115JB(2) - HELD THAT - Admittedly, as per the decision of the CIT (A) the provisions of Section 115JB are not applicable to the assessee bank as the issue was decided in favour of the assessee by a decision of the coordinate bench in the assessee s own case. As , the decision of the CIT (A) was based on the decision rendered in the assessee s own case by the Tribunal in earlier years, therefore the assessee had preferred the appeal before us. If the decision is rendered by the superior court in the earlier appeal for AY 2007-08 2015 (4) TMI 727 - ITAT BANGALORE , thereby reversing the decision of the Tribunal for AY 2007-08, in that eventuality in the opinion of the bench, this issue will be required to be decided by the CIT (A), as no decision was rendered by the CIT (A) or by the Tribunal. In our view, it is for the assessee to move an appropriate application for seeking a direction from the Tribunal for adjudication of these issues namely, ground nos.8 to 15, in case the decision is reversed by the superior court in earlier appeal and sought appropriate direction for adjudication of these grounds on merit by the CIT(A) . At this stage, we do not find any error in the decision recorded by the CIT (A). Therefore this ground of the assessee is decided in terms of the above said observation, against the assessee.

Summary

Issues Involved:
1. Disallowance under Section 36(1)(viia) of the Income Tax Act, 1961.
2. Adjustment of brought forward losses for computing total income under Section 36(1)(viia).
3. Non-adjudication of grounds relating to additions made while computing book profit under Section 115JB(2).

Issue-wise Detailed Analysis:

1. Disallowance under Section 36(1)(viia):
The primary issue pertains to the disallowance of ?92,14,87,404 under Section 36(1)(viia). The Assessing Officer (AO) disallowed the excess claim of ?811,52,49,133, citing that the deduction should be restricted to the provision made in the books of accounts. The CIT (A) upheld this view, referencing the Hon'ble Punjab & Haryana High Court and Bangalore ITAT's decision in Canara Bank, which stated that the deduction under Section 36(1)(viia) must correspond to the actual provision made in the books. The Tribunal, following its previous decision in the assessee's own case, dismissed this ground, confirming that the deduction cannot exceed the provision debited in the books.

2. Adjustment of brought forward losses for computing total income under Section 36(1)(viia):
The second issue involves the method of computing total income for the purpose of allowing deduction under Section 36(1)(viia). The AO adjusted the brought forward losses to arrive at the total income before computing the deduction. The CIT (A) and the Tribunal upheld this method, referencing the Supreme Court's decisions in Distributors (Baroda) (P.) Ltd. v. Union of India and H.H. Sir Rama Verma v. CIT, which necessitate computing total income in accordance with the Act's provisions before allowing specific deductions. The Tribunal confirmed that the method adopted by the AO, which includes setting off brought forward losses, is correct.

3. Non-adjudication of grounds relating to additions made while computing book profit under Section 115JB(2):
For the assessment year 2012-13, the CIT (A) did not adjudicate grounds related to various additions made while computing book profit under Section 115JB(2), as it held that Section 115JB does not apply to banking companies. The CIT (A) relied on the Tribunal's decision in the assessee's case for AY 2007-08 and other relevant cases, which stated that the provisions of Schedule VI to the Companies Act do not apply to banking companies, thus exempting them from Section 115JB. The Tribunal upheld this view, noting that the CIT (A)'s decision was based on binding precedents and that the assessee could seek further adjudication if a superior court reverses these decisions.

Conclusion:
The Tribunal dismissed both appeals, upholding the disallowance under Section 36(1)(viia) and the method of computing total income by adjusting brought forward losses. It also supported the CIT (A)'s decision that Section 115JB does not apply to banking companies, thereby not adjudicating the related grounds. The Tribunal's decisions were consistent with established legal precedents and previous rulings in the assessee's own cases.