2019 (12) TMI 1031 - AT - Income Tax

Disallowance u/s 40(a)(ia) - HELD THAT - Hon ble Kerala High Court in the case of CIT vs.- PVS Memorial Hospital Limited 2015 (8) TMI 277 - KERLA HIGH COURT in support of the Revenue s case on this issue, it is observed that the decision of the Hon ble Calcutta High Court in the case of S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT relied upon by the ld. CIT(Appeals) in his impugned order to give relief to the assessee on this issue squarely covers this issue in favour of the assessee. We, therefore, respectfully follow the said decision of the Hon ble Jurisdictional High Court and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made under section 40(a)(ia). Ground No. 1 of the Revenue s appeal is accordingly dismissed. Addition u/s 14A read with Rule 8D - HELD THAT - As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2012-13, we respectfully follow the decision of the Tribunal for A.Y. 2012-13 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 14A read with Rule 8D Applicability of MAT section 115JB to the assessee being a Banking Company - HELD THAT - A similar issue as involved in the year under consideration thus was decided by the Tribunal in favour of the assessee for A.Y. 2002-03 after taking into consideration not only the provisions of section 115JB but also the relevant provisions of the Companies Act, 1956. The Tribunal also considered the Circulars issued by the Board from time to time in this regard and took note of the decision of the Hon ble Supreme Court in the case of Surana Steels Pvt. Limited 1999 (4) TMI 5 - SUPREME COURT wherein the legislative intent of section 115J was considered. As rightly contended by the ld. Counsel for the assessee, a similar issue thus has been decided by the Tribunal in favour of the assessee for A.Y. 2002-03 by passing a well discussed and well reasoned order and we do not find any justifiable reason to reconsider the said decision as sought by the ld. D.R. Also see UNION BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX 2012 (6) TMI 500 - ITAT MUMBAI Since there is not a single decision of the Jurisdictional High Court or even of any other Hon ble High Court cited by the ld. D.R, which is in favour of the Revenue on this issue, we respectfully follow the judicial pronouncements referred to and discussed above, which are in favour of the assessee and uphold the impugned order of the ld. CIT(Appeals) holding that the provision of section 115JB was not applicable in the case of the assessee being a Banking company for the year under consideration, i.e. A.Y. 2010-11

Summary

Issues Involved:
1. Deletion of disallowance under section 40(a)(ia) of the Income Tax Act, 1961.
2. Deletion of disallowance under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.
3. Applicability of provisions of section 115JB of the Income Tax Act, 1961 to the assessee-company.

Detailed Analysis:

1. Deletion of Disallowance under Section 40(a)(ia):
The Revenue contested the deletion by the Commissioner of Income Tax (Appeals) [CIT(A)] of a disallowance amounting to ?1,17,97,270/- made by the Assessing Officer (AO) under section 40(a)(ia). The assessee, a banking company, had filed its return declaring total income as 'NIL' and had suo motu made the disallowance under section 40(a)(ia). During assessment, the assessee claimed the disallowance was due to a short deduction of tax, not non-deduction. The AO, citing the Supreme Court decision in Goetze India Limited, did not entertain this claim as it was not made in the return. However, the CIT(A) entertained the claim and deleted the disallowance, relying on the Calcutta High Court decision in DCIT vs. S.K. Tekriwal, which held that short-fall in TDS does not warrant disallowance under section 40(a)(ia). The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue’s appeal on this ground.

2. Deletion of Disallowance under Section 14A read with Rule 8D:
The Revenue also challenged the deletion by the CIT(A) of a disallowance of ?36,60,39,331/- made by the AO under section 14A read with Rule 8D. The AO had disallowed the expenses related to exempt income earned by the assessee, applying Rule 8D. The CIT(A) deleted this disallowance, relying on a Tribunal decision in DCIT vs. Gulshan Investment Co. Limited. The Tribunal noted that a similar issue in the assessee’s case for A.Y. 2012-13 was decided in favor of the assessee, citing the Bombay High Court’s decision in CIT vs. HDFC Bank Ltd, which held that no disallowance is warranted if the bank’s own funds exceed the cost of investments yielding tax-free income. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue’s appeal on this ground as well.

3. Applicability of Provisions of Section 115JB:
The Revenue challenged the CIT(A)'s decision that the provisions of section 115JB are not applicable to the assessee, a banking company. The AO had computed the assessee’s book profit under section 115JB and levied tax accordingly. The CIT(A) accepted the assessee’s contention, supported by a Tribunal decision in the assessee’s own case for A.Y. 2002-03, that section 115JB does not apply to banking companies governed by the Banking Regulation Act. The Tribunal, after considering the Revenue’s written submissions and the assessee’s reliance on the Tribunal’s earlier decision and the Bombay High Court’s decision in Union Bank of India, upheld the CIT(A)'s order. The Tribunal noted that section 115JB’s machinery provisions are unworkable for banking companies, and the legislative intent and amendments support this interpretation. The Tribunal dismissed the Revenue’s appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue’s appeal on all grounds, upholding the CIT(A)’s deletions of disallowances under sections 40(a)(ia) and 14A read with Rule 8D, and confirming that section 115JB does not apply to the assessee, a banking company. The Tribunal’s decision was based on precedents, legislative intent, and the unworkability of section 115JB’s provisions for banking companies.