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2023 (3) TMI 1425 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D(2)(iii) - HELD THAT - As decided in assessee own case 2022 (4) TMI 147 - ITAT DELHI where shares were held as stock-in-trade and therefore it becomes business activity of assessee - as shares and securities held by a bank are stock in trade and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income. Disallowance of 100% depreciation claimed by the Assessee on temporary erections - HELD THAT - As in Assessee s own case for A.Y.2015-16 2022 (4) TMI 147 - ITAT DELHI additions are temporary wooden structures internal partitions cabin formation flooring and ceiling wiring etc. for computer false ceiling glass windows interiors etc. as noted by the AO. These are not in the nature of construction of any structures or renovation or extension or improvement to the building. Assessee appeal allowed. Nature of expenses - software expenses - revenue or capital expenditure - HELD THAT - This issue is covered in favour of the assessee in its own case by the Hon ble Delhi High Court for Assessment Years 2008- 09 to 2011-12 2018 (4) TMI 1534 - DELHI HIGH COURT it is nobody s case that assessee is dealing with computer softwares or is in the business of any related services. Rather it uses specific customized software which is specific to its banking activities. But for the use of such software the nature of expenditure otherwise incurred for streamlining its functions i.e. towards fee payable to the consultants for systems and employment of special professionals to carry on the tasks that the software in fact performs would have fallen undoubtedly in the revenue stream. Taking these into account and the further circumstance that the software itself would have run its course or life span as it were given that the earlier assessment year in question is 2008-09 we are of the opinion that the question of law framed is to be answered in favour of the assessee. Disallowance of Assessee s claim of amortization of premium on HTM securities - Assessee claimed that amortization of this premium is allowable as relying on case of CIT vs. HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT HELD THAT - As decided in assessee own case 2022 (4) TMI 147 - ITAT DELHI as held where the assessee maintains the accounts in terms of the Reserve Bank of India Regulations the assessee is entitled to deductions and it cannot be denied by the authorities under the pretext that it was showing as investment in the balance-sheet. Accordingly the common questions of law are answered in favour of the assessee. Addition as bad debt u/s. 36(1)(vii) - assessee argued complete details of all the loan accounts were furnished and the condition of write off was claimed to be duly satisfied by the Assessee - HELD THAT - Issue stands decided by the Coordinate Bench of Tribunal in favour of the Assessee in its case for A.Y. 2015-16 2022 (4) TMI 147 - ITAT DELHI as decided in the case of Vithaldas H. Dhanjibhai Bardanwala 1980 (8) TMI 40 - GUJARAT HIGH COURT a mere debit to the P L a/c was sufficient to constitute actual write off whereas after the Explanation the assessee(s) is now required not only to debit the P L a/c but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that at the end of the year the amount of loans and advances/ debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the High Court in its impugned judgment. In the circumstances we hold on the first question that the assessee was entitled to the benefit of deduction under s. 36(1)(vii) of 1961 Act as there was an actual write off by the assessee in its books. Applicability of MAT provision - MAT provision u/s 115JB will not apply to a Banking Company. Addition under MAT in respect of provision for bad and doubtful debt - HELD THAT - As assessee being a banking company; even there are specific provisions in the Income Tax Act 1961 u/s 36(1)(viia) which allows deduction to the banks in respect of provisions made for bad and doubtful debts. The Income Tax Act has considered this peculiarity in the case of banking industry and has allowed deduction on the basis of provision whereas under normal circumstances any provision made in the books is not allowed as deduction. The fact that the provisions of Section 115JB are now allowing the profit loss account to be prepared in accordance with the regulatory act under which the bank operates all provisions as mandated by RBI and duly recorded in the books should be allowed. Also when in the Income Tax Act itself the deduction is allowed to the assessee it cannot be held that the computation under book profit provisions contemplated addition of such claim under the garb of provision for diminution in the value of assets. Addition being loss on amortization of permanent investment alleging the same to be notional loss - HELD THAT - The amortized value of the investment is reflected in the accounts. This is also clearly mentioned in note to the annual report. The loss on amortization is neither a provision nor a reserve and does not fall under any of the items from (a) to (j) of the above explanation to section 115JB. AO has wrongly considered the same as falling within the preview of Clause (i) to the Explanation 1 to Sec. 115JB(2) whereas the same is not a provision for diminution in the value of assets. It is the actual loss on amortization of investments and the same is allowed under the Income Tax Act 1961 under normal provisions also as held in the case of CIT vs. HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT as detailed explained while dealing with the grounds on allowing the amortization of HTM investment as allowable business deduction u/s 37(1) of the Income Tax Act.
Issues Involved:
1. Disallowance under Section 14A. 2. Disallowance of 100% depreciation on temporary erections. 3. Treatment of software expenses as capital expenditure. 4. Disallowance of amortization of premium on HTM securities. 5. Disallowance of bad debt claims under Section 36(1)(vii). 6. Applicability of MAT provisions under Section 115JB. 7. Addition under MAT for provision for bad and doubtful debts. 8. Addition of loss on amortization of permanent investment under MAT. Summary: 1. Disallowance under Section 14A: The Tribunal observed that the issue of disallowance under Section 14A read with Rule 8D(2)(iii) to the extent of Rs. 5.99 crores is covered by previous decisions in favor of the Assessee. The Assessee, being a nationalized bank, holds investments as stock-in-trade, and the expenses incurred are for carrying on banking business. Hence, no expenses can be disallowed under Section 14A. 2. Disallowance of 100% Depreciation on Temporary Erections: The Tribunal found that the issue of 100% depreciation on temporary erections amounting to Rs. 30,76,16,842/- is covered in favor of the Assessee by previous orders. The temporary wooden structures, partitions, and cabins are purely temporary and not disputed by the AO. 3. Treatment of Software Expenses as Capital Expenditure: The Tribunal noted that the issue of treating software expenses of Rs. 17,78,06,658/- as capital in nature instead of revenue expenditure has been decided in favor of the Assessee by the Hon'ble Delhi High Court. The software expenses do not result in any asset or enduring benefit and should be allowed as revenue expenditure. 4. Disallowance of Amortization of Premium on HTM Securities: The Tribunal observed that the issue of disallowance of amortization of premium on HTM securities amounting to Rs. 81,44,33,541/- is covered in favor of the Assessee. The amortization is mandated by RBI for maintaining SLR and is allowable as per the decision of the Hon'ble Mumbai High Court in CIT vs. HDFC Bank Ltd. 5. Disallowance of Bad Debt Claims under Section 36(1)(vii): The Tribunal found that the disallowance of Rs. 2153,02,00,000/- claimed as bad debt by the Assessee is covered in favor of the Assessee. The Assessee provided complete details of loan accounts, and the condition of write-off was duly satisfied. 6. Applicability of MAT Provisions under Section 115JB: The Tribunal held that the provisions of Section 115JB (MAT) are not applicable to the Assessee, a nationalized bank under the Banking Companies Act, 1980. This issue has been decided in favor of the Assessee by various High Courts and the Hon'ble Supreme Court. 7. Addition under MAT for Provision for Bad and Doubtful Debts: The Tribunal observed that the provision for bad and doubtful debts is an actual reduction in the value of advances and not a provision. Hence, it does not fall under any items of the Explanation to Section 115JB and cannot be added in the book profit computation. 8. Addition of Loss on Amortization of Permanent Investment under MAT: The Tribunal found that the loss on amortization of permanent investment is as per RBI guidelines and is not a notional loss. This issue is covered in favor of the Assessee and cannot be added in the book profit computation under MAT. Conclusion: The Tribunal allowed the appeal filed by the Assessee, finding no reason to deviate from the conclusions reached by the Hon'ble Coordinate Bench of the Tribunal in the Assessee's own cases for preceding assessment years.
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