9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 213 - AT - Income TaxMAT - Applicability of provisions of section 115JB - Addition to the books profit loss on revaluation of securities and provision made for bad debt and doubtful debts which is reduced from the respective asset - HELD THAT - The Hon ble Bombay High Court in CIT Vs Union Bank of India 2019 (5) TMI 355 - BOMBAY HIGH COURT held that provisions of section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company governed by provisions of Banking Regulation Act, 1949. Further, this bench of Tribunal in assessee s own case for AY 2004-05 2016 (6) TMI 1381 - ITAT MUMBAI took the same view. Therefore, following the principle of consistency this ground of appeal is allowed in favour of assessee. Book profits loss on revaluation of securities and provision made for bad and doubtful debts which are reduced from the respective assets - HELD THAT - This ground of appeal is also covered by the decision of Hon ble Gujarat High Court in CIT Vs Vodafone Essar (Gujarat) Ltd 2017 (8) TMI 451 - GUJARAT HIGH COURT wherein it is held that prior to the introduction of clause (i) to the Explanation to section 115JB, as held by the Supreme Court in case of HCL Comnet Systems Services Ltd. 2008 (9) TMI 18 - SUPREME COURT , the then existing clause (c) did not cover a case where the assessee made a provision for bad or doubtful debt. With insertion of clause (i) to the Explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit under section 115JB. However, if this was not a mere provision made by the assessee by merely debiting the Profit and Loss Account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the asset side of the balance sheet and consequently, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the Explanation to section 115JB. Considering the decision of Gujarat High Court in Vodafone Essar 2017 (8) TMI 451 - GUJARAT HIGH COURT which is based on the decision of the Hon ble Supreme Court in HCL Comet system and services limited 2008 (9) TMI 18 - SUPREME COURT this ground of appeal is also allowed in fewer of assessee. Disallowance under section 14A - HELD THAT - No disallowance under 14A is permissible in terms of Rule 8D in case of assessee is engaged in banking business. Therefore, respectfully following the judgment of the Supreme Court in case of Maxopp investment Ltd 2018 (3) TMI 805 - SUPREME COURT we direct the Ld. AO to delete the disallowance of Rule 8D(2)(iii). Similarly, no disallowance under rule 8D((2)(ii) is permissible as the reserve and surplus of assessee which is a banking company, is more than the investment made for earning exempt income. Therefore, the assessing officer is also directed to delete the disallowance of Rule 8D(ii). Expenses incurred for increase in capital allowable under section 35D - HELD THAT - We have noted that the lower authorities have not disputed the addition of new ATMs, new branches and Retail Asset Centre. The lower authorities denied the expenditure on the ground that no documentary evidences furnished. Considering the fact that all details of new assets which consist of ATMs, no branches and retail asset Centre are part of Annual Report. The annual report is prepared by statutory auditors. Hence, we are of the view that the assessee has added new unit, however for limited purpose, we deem it appropriate to restore this issue to the file of assessing officer to verify the facts and allow necessary relief to the assessee in accordance with law. Needless to say that before passing the order the assessing officer shall grant opportunity to the assessee to further substantiate its claim and to allow filing further details along with documentary evidence to prove its claim. Addition to book profit of tax on non-monetary perquisites - HELD THAT - Assessee vehemently relied upon the decision of coordinate bench of tribunal in Rashtriya Chemical and Fertilizers Ltd. 2018 (3) TMI 1564 - ITAT MUMBAI wherein on similar ground of appeal the coordinate bench held the taxes borne by the assessee on non-monetary perquisites provided to employees forms part of Employee Benefit cost and akin to Fringe Benefit Tax since they are certainly not 'below the line' items since the same are expressively disallowed under section 40(a)(v), the same do not constitute Income Tax for the assessee in terms of Explanation-2. Therefore, without there being any corresponding amendment in the definition of Income Tax as provided in Explanation-2 to Section 115JB, Fringe Benefit Tax was not required to be added back while arriving at Book Profits u/s. 115JB. In our view the ratio of the decision is squarely applicable on the facts of the present case. Disallowance under section 40(a)(i) - assessee has made provision for expenses on which no tax was deducted - HELD THAT - CIT(A) after appreciating the submissions of the assessee concluded that the expenses were relatable to the previous year and therefore, to be provided under mercantile system of accounting on due basis, which is the requirement of this system of accounting to take in to account of expenses which has become due but could not be paid by reasons of non receipt of bills. It was further concluded that the TDS provisions are applicable to the payees who are clearly identifiable by the assessee. The TDS made has to be linked with PAN of the payee s. Further the payer has to issue a certificate to that effect. The payee s were not identifiable at that time. No contrary material that the assessee made such liability not on adhoc basis but a realistic evaluation based on the pending past liability. It was further concluded that outstanding expenses were reversed in the subsequent year upon receipt of bill and deducted tax when the liability was crystallized on receipt of bill. There is no loss of revenue in such cases. On the basis of the above conclusion the ld CIT(A) directed to delete the disallowances. No contrary facts or material or law is brought to our notice to take other view. In the result this ground of appeal is dismissed.
Issues Involved:
1. Validity of the reopening under section 147 of the assessment completed under section 143(3). 2. Reopening under section 147 based on the retrospective amendment. 3. Applicability of provisions of section 115JB of the Act. 4. Addition to the books profit loss on revaluation of securities and provision made for bad debt and doubtful debts. 5. Disallowance of expenditure under section 14A. 6. Expenses for increase in paid-up capital. 7. Provision for diminution in value of investment. 8. Application of MAT provisions to Banks. 9. Addition to book profit for provision of diminution in the value of investment. 10. Addition to book profit of the amount disallowed under section 14A. 11. Initiation of penalty proceedings under section 271. Detailed Analysis: 1. Validity of the reopening under section 147 of the assessment completed under section 143(3): The assessee argued that the reopening was based on incorrect grounds as the amount in question represented provisions for bad and doubtful debts, not unascertained liabilities. The Tribunal noted that since no addition was made in the reassessment order based on the reasons given in the notice under section 148, the reopening was without jurisdiction and invalid. 2. Reopening under section 147 based on the retrospective amendment: The Tribunal found that reopening based on an issue already settled by the Supreme Court (HCL Comnet System and Services Limited) was without jurisdiction. It was held that reopening based on retrospective amendments was not valid when the issue had already been settled. 3. Applicability of provisions of section 115JB of the Act: The Tribunal referred to the Bombay High Court's decision in Union Bank of India and the Tribunal's own decision in the assessee's case for AY 2004-05, concluding that section 115JB did not apply to banking companies governed by the Banking Regulation Act, 1949. Thus, this ground was decided in favor of the assessee. 4. Addition to the books profit loss on revaluation of securities and provision made for bad debt and doubtful debts: The Tribunal relied on the Gujarat High Court's decision in Vodafone Essar (Gujarat) Ltd and the Supreme Court's decision in HCL Comnet Systems & Services Ltd, holding that provisions for bad or doubtful debts, if written off from the respective assets, should not be added back for computation of book profit under section 115JB. This ground was allowed in favor of the assessee. 5. Disallowance of expenditure under section 14A: The Tribunal referred to the Supreme Court's decision in Maxopp Investment P Ltd Vs CIT and the Kolkata Tribunal's decision in UCO Bank, holding that no disallowance under section 14A was warranted for banking companies as their investments were part of the business of banking. This ground was allowed. 6. Expenses for increase in paid-up capital: The Tribunal noted that the assessee had added new branches, ATMs, and Retail Asset Centers, which constituted an extension of the undertaking. The issue was remanded to the Assessing Officer for verification and to allow the claim under section 35D if substantiated. 7. Provision for diminution in value of investment: The Tribunal referred to the Supreme Court's decision in UCO Bank and the Bombay High Court's decision in Bank of Baroda, holding that the provision for diminution in the value of securities should be allowed as it reflects the true financial state of affairs. This ground was allowed. 8. Application of MAT provisions to Banks: Following the Bombay High Court's decision in Union Bank of India and the Tribunal's own decision in the assessee's case for AY 2004-05, the Tribunal held that MAT provisions did not apply to banking companies. This ground was allowed. 9. Addition to book profit for provision of diminution in the value of investment: Considering the decision in Vodafone Essar (Gujarat) Ltd and HCL Comnet Systems & Services Ltd, the Tribunal held that such provisions should not be added back to book profit if they represent actual write-offs. This ground was allowed. 10. Addition to book profit of the amount disallowed under section 14A: The Tribunal held that disallowance under section 14A should not be added to book profit under section 115JB, as it represents notional amounts rather than actual expenses debited to the P&L account. This ground was allowed. 11. Initiation of penalty proceedings under section 271: The Tribunal found that penalty proceedings were premature and dismissed this ground. Conclusion: The appeals of the assessee were largely allowed, with specific directions for verification in some cases. The Tribunal consistently followed principles established by higher courts and its own previous decisions, ensuring uniformity and adherence to legal precedents.
|
