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2022 (1) TMI 1220 - AT - Income TaxDisallowance of bad debts u/s 36(1)(vii) - assessee had debited the rural bad debts against the Provision for Bad and Doubtful Debts (PBDD) allowed u/s 36(1)(viia) - HELD THAT - When the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to non-rural/ urban advances. As far as application of explanation to section 36(1)(vii) is concerned, we agree with the AR that its operation will be prospective and will not apply to the impugned AY. As careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount representing actual write off in the books of account of bad debts relating to non-rural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A). Applicability of sec.115JB - HELD THAT - Following the decision rendered by the co-ordinate bench of this Tribunal in the case of M/s Canara Bank 2022 (1) TMI 124 - ITAT BANGALORE we set aside the order passed by the Ld. CIT(A) on this issue and restore the same to his file for deciding it afresh in accordance with law. Addition made to book profit as per sec. 115JB - whether amount debited to Profit and Loss account under the head Provision for funded interest term loan and Provision for others are liable to be added to net profit u/s 115JB - Since the issue regarding applicability or otherwise of sec.115JB is restored to the file of Ld CIT(A), this issue is also restored to the file of Ld CIT(A) for examining it afresh. Addition u/s 14A r.w.r. 8D - HELD THAT - As held in the case of Vireet Investment 2017 (6) TMI 1124 - ITAT DELHI that only those investments, which has yielded dividend income should be considered for computing average value of investments. Before us, the Ld A.R also relied on certain decisions in order to contend that the provisions of sec.14A itself are not applicable to banks. Thus, we notice that various contentions are involved in this issue and hence we are of the view that this issue requires fresh examination at the end of AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh. TDS u/s 194H - disallowance made u/s 40a(ia) - HELD THAT - This Tribunal in the assessee bank s own case 2015 (3) TMI 1360 - ITAT BANGALORE , wherein the disallowance was deleted by this Tribunal by holding that the payment made by the assessee company could not be considered as commission/brokerage liable for deduction of tax at source u/s 194H. CIT(A) has decided an identical issue in assessment year 2012-13 in the assessee bank s own case itself in favour of the assessee bank and it was also upheld by this Tribunal. Accordingly, the Ld CIT(A) deleted the above said disallowance. Disallowance of claim made u/s 36(1)(viia) - HELD THAT - We notice that the Ld CIT(A) has rendered his decision on this issue following the decision rendered by co-ordinate bench of ITAT on an identical issue. Accordingly, we do not find any reason to interfere with the decision rendered by Ld CIT(A) on this issue.
Issues Involved:
1. Disallowance under Section 36(1)(vii) of the Income-tax Act. 2. Applicability of provisions of Section 115JB of the Income-tax Act. 3. Specific additions to book profit as per Section 115JB of the Income-tax Act. 4. Disallowance under Section 14A of the Income-tax Act. 5. Disallowance under Section 40a(ia) of the Income-tax Act. 6. Disallowance under Section 36(1)(viia) of the Income-tax Act. Detailed Analysis: 1. Disallowance under Section 36(1)(vii) of the Income-tax Act: The assessee, a public sector bank, contested the disallowance of ?707.83 crores for non-rural bad debts claimed under Section 36(1)(vii). The Assessing Officer (AO) disallowed the claim on the grounds that the bad debts were not written off through the Profit & Loss (P&L) account. The CIT(A) directed the AO to adjust non-rural bad debts against the Provision for Bad and Doubtful Debts (PBDD) allowed under Section 36(1)(viia). However, the Tribunal referenced the case of M/s Canara Bank, ruling that the CIT(A)'s view was incorrect and directed the AO to delete the disallowance of ?707.83 crores. 2. Applicability of provisions of Section 115JB of the Income-tax Act: The assessee argued that Section 115JB, which pertains to Minimum Alternate Tax (MAT), should not apply to it as it was not formed under the Companies Act. The AO and CIT(A) disagreed, asserting that the assessee, as a "corresponding new bank" under the Banking Regulation (BR) Act, is considered an Indian company and thus subject to Section 115JB. The Tribunal, following the precedent set in the case of M/s Canara Bank, remanded the issue back to the CIT(A) for fresh examination, particularly considering the provisions of Section 51 of the BR Act. 3. Specific additions to book profit as per Section 115JB of the Income-tax Act: The issue of whether amounts debited to the P&L account under "Provision for funded interest term loan" and "Provision for others" should be added to net profit under Section 115JB was also remanded to the CIT(A) for fresh examination, contingent on the applicability of Section 115JB. 4. Disallowance under Section 14A of the Income-tax Act: The AO disallowed ?108.81 crores under Section 14A, applying Rule 8D, despite the assessee's voluntary disallowance of ?2.74 crores. The CIT(A) deleted the disallowance, citing the AO's failure to record dissatisfaction with the assessee's claim, as required by the Supreme Court's decision in Godrej & Boyce Manufacturing Company Ltd. The Tribunal found that the AO's dissatisfaction was implicit but noted that the AO did not specifically address the disallowance of administrative expenses. The Tribunal remanded the issue for fresh examination by the AO. 5. Disallowance under Section 40a(ia) of the Income-tax Act: The AO disallowed ?1.81 crores paid as ATM charges to other banks, treating it as commission/brokerage subject to TDS under Section 194H. The CIT(A) deleted the disallowance, referencing the Tribunal's earlier decision in the assessee's favor for previous years. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere. 6. Disallowance under Section 36(1)(viia) of the Income-tax Act: The AO restricted the deduction under Section 36(1)(viia) to ?94.24 crores for rural debts, disallowing the balance ?608.39 crores. The CIT(A) allowed the full deduction, following the Tribunal's precedent that the PBDD should be allowed irrespective of whether it pertains to rural or non-rural advances, subject to the upper limit of the section. The Tribunal upheld the CIT(A)'s decision. Conclusion: Both the appeals filed by the assessee and the Revenue were partly allowed for statistical purposes, with several issues remanded for fresh examination. The Tribunal's decision emphasized the need for a detailed and accurate application of legal provisions, ensuring compliance with judicial precedents.
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