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2022 (1) TMI 124 - AT - Income TaxDisallowance of deduction of Provision for bad and doubtful debts claimed u/s 36(1)(viia) - HELD THAT - Provisions of sec.36(1)(viia) does not provide that the shortfall amount can be created as provision in any of the subsequent years. The computation of total income is required to be made for every year and it is determined on the basis of books of account maintained by the assessee for that year. Hence, in our view, the provision made in subsequent year cannot be considered for the purpose of allowing deduction u/s 36(1)(viia) of the Act for the year under consideration - we are of the view that the Ld CIT(A) was justified in directing the AO to allow deduction u/s 36(1)(viia) of the Act to the extent of provision created and debited in the Profit and Loss account. Accordingly, we confirm the order passed by Ld CIT(A) on this issue. Disallowance of bad debts claimed u/s 36(1)(vii) - AO noticed that the above said amount was included in Provisions and Contingencies account - HELD THAT - We hold that the view expressed by Ld CIT(A) is not legally correct. Accordingly, we set aside the order passed by Ld CIT(A) with regard to his alternative decision, i.e., the view that the proviso to sec. 36(1)(vii) which requires adjustment of bad debts against provision allowed u/s 36(1)(viia) would apply to non-rural advances also. Accordingly, we direct the AO to delete the disallowance Applicability of provisions of sec. 115JB - case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act - HELD THAT - We notice that the provisions of sec.51 of the Act specifically states that only certain provisions of BR Act are applicable to Corresponding new bank . We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec.51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one - CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of banking company , provisions of sec.211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh. Whether Provision for funded interest term loan is liable to be added to net profit u/s 115JB? - HELD THAT - 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. Disallowance u/s 14A - HELD THAT - We are of the view that from the discussion made by the assessing officer in the assessment order, it can be discerned that he was not satisfied with the claim of the assessee. Accordingly he has proceeded to compute the disallowance as per Rule 8D of I T Rules. Accordingly, we are of the view that it cannot be said that the assessing officer has not recorded dissatisfaction. In this view of the matter, we are unable to sustain the decision rendered by Ld CIT(A) on this issue. Accordingly, we reverse the order passed by Ld CIT(A) on this issue. Since he has not decided the issue on merits, we restore this issue to his file to decide the same in accordance with law. Before us, the Ld A.R placed his reliance on the decisions rendered by Hon ble Supreme Court to contend that no disallowance u/s 14A is called for in the case of the assessee. The Ld CIT(A) should consider those decision and should take appropriate decision in accordance with law. Disallowance u/s 40(a)(ia) - ATM usage charges to M/s National Payment Corporation of India (NPCI) without deduction of tax at source as required u/s 194C or 194J or 194H - HELD THAT - As held that the TDS is not required to be deducted treating as technical service u/s 194J of the Act - CIT(A) also noticed that the Bangalore bench of Tribunal has held in the case of Corporation Bank 2015 (3) TMI 1360 - ITAT BANGALORE that similar kind of payment made cannot be considered as Commission or Brokerage warranting deduction of tax at source u/s 194H of the Act. The Ld CIT(A) held that the above said decision shall apply to the facts of the present case also. He further held that the AO did not specify the section under which the TDS is liable to be deducted by the assessee. Accordingly he deleted the disallowance. We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has rendered his decision following the ratio of decision rendered by Hon ble Supreme Court in the case of Kotak Securities Ltd 2016 (3) TMI 1026 - SUPREME COURT and also the decision rendered by coordinate bench in the case of Corporation Bank 2015 (3) TMI 1360 - ITAT BANGALORE Hence we do not find any reason to interfere with his order passed on this issue. Whether the Provision for bad and doubtful debts is not liable to be added to net profit u/s 115JB? - Since the issue of applicability of sec.115JB to the assessee is restored to the file of Ld CIT(A) while considering the appeal of the assessee, we restore this issue also to the file of Ld CIT(A)
Issues Involved:
1. Disallowance of deduction of Provision for bad and doubtful debts claimed u/s 36(1)(viia) of the Act. 2. Disallowance of bad debts claimed u/s 36(1)(vii) of the Act. 3. Applicability of provisions of sec. 115JB of the Act. 4. Whether Provision for funded interest term loan is liable to be added to net profit u/s 115JB of the Act. 5. Disallowance u/s 14A of the Act. 6. Disallowance u/s 40(a)(ia) of the Act. 7. Whether the Provision for bad and doubtful debts is not liable to be added to net profit u/s 115JB of the Act. Detailed Analysis: 1. Disallowance of deduction of Provision for bad and doubtful debts claimed u/s 36(1)(viia) of the Act: The assessee, a public sector bank, claimed a deduction of ?1469.32 crores for Provision for Bad and Doubtful Debts (PBDD) under section 36(1)(viia) of the Act. The AO restricted the deduction to ?168.02 crores for rural debts. The CIT(A) referred to previous Tribunal decisions and held that the deduction should be allowed to the extent of the provision created and debited in the Profit and Loss account, irrespective of whether it pertains to rural or non-rural debts. The Tribunal confirmed this view, stating that the provision made in subsequent years cannot be considered for the current year's deduction. 2. Disallowance of bad debts claimed u/s 36(1)(vii) of the Act: The assessee claimed ?1297.36 crores as bad debts, which included ?1249.73 crores for NPAs. The AO disallowed ?1258.47 crores, stating that mere provision for NPAs does not constitute actual write-off as per section 36(1)(vii). The CIT(A) disagreed, noting that the bad debts were written off in the books by debiting the provision account and crediting the Prudential Write Off account. The Tribunal upheld the CIT(A)'s view, citing the Supreme Court's decision in Vijaya Bank and ITAT Hyderabad's decision in State Bank of Hyderabad, which clarified that the provision for bad debts under section 36(1)(viia) applies only to rural advances. 3. Applicability of provisions of sec. 115JB of the Act: The assessee contended that section 115JB does not apply to it as it is not a banking company under the Banking Regulation Act (BR Act) but a "corresponding new bank." The CIT(A) rejected this, stating that the assessee is an Indian company as per the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and hence, section 115JB applies. The Tribunal noted that the CIT(A) did not consider the effect of section 51 of the BR Act, which only applies certain provisions to corresponding new banks. The issue was remanded to the CIT(A) for fresh examination. 4. Whether Provision for funded interest term loan is liable to be added to net profit u/s 115JB of the Act: Since the applicability of section 115JB was remanded to the CIT(A), this issue was also remanded for fresh examination. 5. Disallowance u/s 14A of the Act: The AO disallowed ?59.56 crores under section 14A, applying Rule 8D, as the assessee earned tax-free income of ?24.05 crores. The CIT(A) deleted the disallowance, stating that the AO did not record dissatisfaction with the assessee's voluntary disallowance of ?9,24,123. The Tribunal reversed the CIT(A)'s decision, noting that the AO's dissatisfaction was implicit in his detailed discussion. The issue was remanded to the CIT(A) for a decision on merits. 6. Disallowance u/s 40(a)(ia) of the Act: The AO disallowed ?67.94 crores for ATM usage charges paid to NPCI without TDS. The CIT(A) deleted the disallowance, relying on the Supreme Court's decision in Kotak Securities Ltd and ITAT Bangalore's decision in Corporation Bank, which held that such payments do not require TDS under sections 194C, 194J, or 194H. The Tribunal upheld the CIT(A)'s decision. 7. Whether the Provision for bad and doubtful debts is not liable to be added to net profit u/s 115JB of the Act: Since the applicability of section 115JB was remanded to the CIT(A), this issue was also remanded for fresh examination. Conclusion: The appeals of both the assessee and the revenue were partly allowed for statistical purposes, with several issues remanded to the CIT(A) for fresh examination.
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