9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (11) TMI 568 - AT - Income TaxDisallowance of stale drafts - money received while issuing demand drafts / pay order to various customers - HELD THAT - The assessee is in the banking business, has received money while issuing demand drafts / pay order to various customers. The said money was held by the bank on behalf of the drawee till he/she made claim. Assessee bank had no right over the amount which is standing unclaimed - assessee banks had to remit the amount outstanding for more than 10 years to Depositors Education Awareness Fund Scheme maintained by Reserve Bank of India. As and when the drawee makes a claim, the assessee shall issue demand draft / pay order in case the amount lying with the assessee and further, if the amount is transferred to RBI account after 10 years, then the Reserve Bank settles the claim of the drawee. Therefore, under these facts and circumstances amount lying in stale draft account cannot be treated as income of the assessee. ITAT after considering relevant facts has rightly held that amount lying in stale draft account under the head outstanding liabilities cannot be treated as income of the assessee. A similar view has been taken in the case of City Union Bank Ltd. 2020 (3) TMI 475 - MADRAS HIGH COURT . We are of the considered view that there is no error in the reasons given by the CIT(A) to delete addition made by the AO towards Stale Draft Account. Hence, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. Disallowance of ex-gratia payment - AO had disallowed ex-gratia payment made by the assessee to its staff who are not covered under payment of bonus Act, on the ground that the assessee has circumvented the provisions of Bonus Act and has given bonus to employees who are not eligible for payment of bonus and thus, whatever cannot be done directly has been done indirectly by changing the nomenclature of the nature of payment - HELD THAT - An identical issue had been considered by the Tribunal in assessee s own case for assessment year 2012-13 2020 (3) TMI 713 - ITAT CHENNAI where the Tribunal after considering relevant facts held that exgratia payment to staff is deductible u/s.37(1) - there is no error in the reasons given by the ld.CIT(A) to delete additions made towards disallowance of ex-gratia payment and thus, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the Revenue. Deduction u/s.36(1)(vii) - AO has disallowed bad debts claim of the assessee bank on the ground that the assessee did not give details like full address of the borrower and PAN number - HELD THAT - We find that an identical issue has been considered by the Tribunal in assessee s own case for assessment year 2007-08 2019 (3) TMI 1002 - ITAT CHENNAI and by following the decision of Catholic Syrian Bank Ltd., 2012 (2) TMI 262 - SUPREME COURT held that the assessee was entitled to deduction under clause (vii) of Section 36(1) irrespective of the difference between the credit balance in the provision account made under clause (viia) and the bad debts written off in the books of accounts in respect of bad debts relating to urban or non-rural advances - no error in the reasons given by the ld.CIT (A) to delete additions made towards disallowance of deduction claimed u/s.36(1)(vii) - Decided against revenue. Addition made towards interest on non-performing assets - AO has made addition towards interest on non-performing assets (NPAs) by holding that interest on loans needs to be offered to tax on accrual basis in respect of NPAs, which are more than 90 days old but less than 180 days - HELD THAT - We find that an identical issue has been considered by the Tribunal in assessee s own case for assessment year 2012-13 2020 (3) TMI 713 - ITAT CHENNAI where under identical set of facts and by following the decision in the case of Vasisth Chary Vyapar Ltd. 2018 (3) TMI 56 - SUPREME COURT held that interest income cannot be said to have been accrued to the assessee on NPAs account - there is no error in the reasons given by the ld.CIT(A) to delete additions made towards interest on NPAs - Decided against revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT - Tribunal by following certain judicial precedents including the decision in the case of Pr.CIT vs. State Bank of Patiala, 2017 (2) TMI 125 - PUNJAB AND HARYANA HIGH COURT held that no disallowance u/s.14A is permissible in terms of Rule 8D, where the assessee is engaged in banking business. In the case of South Indian Bank Ltd 2021 (9) TMI 566 - SUPREME COURT , and held that shares and securities held by a bank are stock-in-trade and income received on such shares and securities must be considered to be business income. That is why, Section 14A of the Act would not be attracted to such income - Thus we direct the AO to delete addition made towards disallowance u/s.14A r.w.rule 8D - Decided in favour of assessee. Disallowance of deduction claimed u/s.36(1)(viia) of the Act, in respect of rural advances of appellant bank - HELD THAT - We are of the considered view that for limited purpose of ascertaining correct facts with regard to date when provisional and final census data of 2011 is published, the matter is set aside to the file of the AO and we direct the AO to examine when village/panchyat level provisional census data of 2011 was released for public. In case, as claimed by the assessee, provisional and final census data is made available to public on 30-04-2013, then the AO is directed to accept classification made by the assessee for above three branches as per 2001 census for the purpose of section 36(1)(viia) of the Act. In case, provisional census data is officially published on 31-03-2011 or even before 1-4-2012, as claimed by the AO, then the case of the assessee is covered by Hon ble Karnataka High Court in case of State Bank of Mysore 2015 (1) TMI 1328 - KARNATAKA HIGH COURT And thus, the AO is directed classify those three branches as per 2011 census for the purpose of provision for bad debt u/s 36(1)(viia) of the Act. Computation of deduction u/s.36(1)(viii) - manner in which such deduction should be computed - HELD THAT - A similar issue had been considered by the Tribunal right from assessment years 2010-11 to 2012-13, where the Tribunal has set aside the issue to the file of the AO and directed him to reconsider the issue in accordance with provisions of section 36(1)(viii) - We further noted that the AO had passed an order dated 04.11.2019 to give effect to the orders of the Tribunal. AO has examined computation submitted by the assessee and allowed deduction as per the computation of the assessee. AO had already accepted computation methodology adopted by the assessee-bank for assessment years 2010-11 2011-12, based on directions of ITAT, we are of the considered view that this year also the issue needs to go back to the file of the AO to consider the issue in light of directions of the Tribunal for earlier years. Hence, we set aside the issue to the file of the AO and direct him to follow the directions given by the Tribunal for earlier assessment years. Deductibility of Education Cess and Secondary Higher Education Cess - HELD THAT - We find that a similar issue has been considered by the Hon ble Bombay High Court in the case of Sesa Goa Ltd., vs. JCIT, 2020 (3) TMI 347 - BOMBAY HIGH COURT , where the Hon ble Bombay High Court held that Education Cess and Secondary Higher Education Cess is deductible u/s.37 - Therefore we are of the considered view that Education Cess and Secondary Higher Education Cess is deductible u/s.37(1) - But, facts remains that the assessee has taken this issue for the first time by filing additional ground and fact with regard to said claim was not before the AO at the time of assessment proceedings. Rectification u/s 154 - whether application of 2001 census or 2011 census for classification of a particular branch as rural branch for the purpose of making provision u/s.36(1)(viia) of the Act ? - HELD THAT - We of the considered view that issue of application of census data of 2001 or 2011 is highly a debatable issue which cannot be considered as glaring mistake apparent from record, which can be rectified u/s.154 of the Act. Therefore, we set aside order passed by the ld.CIT(A) u/s.154 of the Act and allow appeal filed by the assessee.
Issues Involved:
1. Deletion of disallowance of Stale Draft Account. 2. Disallowance of ex-gratia payment. 3. Deletion of disallowance of bad debts u/s 36(1)(vii). 4. Disallowance of provision for bad and doubtful debts u/s 36(1)(viia). 5. Deletion of disallowance of interest accrued on NPAs. 6. Disallowance of expenditure relatable to exempt income u/s 14A. 7. Deduction claimed u/s 36(1)(viii). 8. Deductibility of Education Cess and Secondary & Higher Education Cess. 9. Legality of rectification order passed u/s 154. Detailed Analysis: 1. Deletion of Disallowance of Stale Draft Account: The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO towards the stale draft account. The Tribunal noted that the amount in the stale draft account is not the income of the assessee as it is held on behalf of the drawee until claimed. The Tribunal relied on its previous decision and the Hon'ble High Court of Madras in the case of City Union Bank Ltd., which held that such amounts cannot be treated as income of the assessee. 2. Disallowance of Ex-gratia Payment: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of ex-gratia payment made to staff. It was noted that the issue was covered in favor of the assessee by the Tribunal's previous decision and that ex-gratia payments are deductible under Section 37(1) of the Act. 3. Deletion of Disallowance of Bad Debts u/s 36(1)(vii): The Tribunal upheld the CIT(A)'s decision to delete the disallowance of bad debts claimed under Section 36(1)(vii). The Tribunal referred to its previous decision and the Supreme Court's ruling in the case of Catholic Syrian Bank Ltd., which held that the assessee is entitled to deduction under Section 36(1)(vii) irrespective of the difference between the credit balance in the provision account and the bad debts written off. 4. Disallowance of Provision for Bad and Doubtful Debts u/s 36(1)(viia): The Tribunal noted that the issue became infructuous due to the order passed u/s 154. The Tribunal directed the AO to examine the correct facts regarding the publication date of the 2011 census data to determine the classification of branches as rural or urban for the purpose of Section 36(1)(viia). 5. Deletion of Disallowance of Interest Accrued on NPAs: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of interest accrued on NPAs. The Tribunal referred to its previous decision and the Supreme Court's ruling in the case of Vasisth Chary Vyapar Ltd., which held that interest income on NPAs does not accrue to the assessee. 6. Disallowance of Expenditure Relatable to Exempt Income u/s 14A: The Tribunal directed the AO to delete the disallowance made under Section 14A read with Rule 8D, noting that the issue was covered in favor of the assessee by the Tribunal's previous decision and the Supreme Court's ruling in the case of South Indian Bank Ltd., which held that Section 14A does not apply to banking companies. 7. Deduction Claimed u/s 36(1)(viii): The Tribunal set aside the issue to the AO to reconsider the deduction claimed under Section 36(1)(viii) in accordance with the Tribunal's directions for earlier years. The Tribunal noted that the AO had already accepted the computation methodology adopted by the assessee for previous years. 8. Deductibility of Education Cess and Secondary & Higher Education Cess: The Tribunal admitted the additional ground raised by the assessee and directed the AO to reconsider the issue in light of the Bombay High Court's decision in the case of Sesa Goa Ltd., which held that Education Cess and Secondary & Higher Education Cess are deductible under Section 37(1). 9. Legality of Rectification Order Passed u/s 154: The Tribunal set aside the rectification order passed by the CIT(A) under Section 154, noting that the issue of applying census data of 2001 or 2011 is highly debatable and cannot be considered a glaring mistake apparent from the record. The Tribunal referred to the Supreme Court's decision in the case of T.S. Balaram vs. Volkart Brothers, which held that rectification under Section 154 can only be made for glaring mistakes apparent from the record. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeals for statistical purposes. The Tribunal directed the AO to reconsider certain issues in light of the Tribunal's and higher courts' rulings. The Tribunal upheld the CIT(A)'s decisions on various disallowances and deductions, providing detailed reasons and referring to relevant case laws.
|
