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2022 (1) TMI 583 - AT - Income TaxDeduction of bad debts claimed u/s 36(1)(vii) - AO noticed that the above said amount was included in Provisions and Contingencies account debited to the Profit and Loss account - adjustment of bad debts against provision allowed u/s 36(1)(viia) - AO noticed that the above said amount was included in Provisions and Contingencies account debited to the Profit and Loss 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. Disallowance of payments made to VISA International u/s 40(a)(ia) - HELD THAT - We confirm the deletion of payments made to NPCI and Cash tree Network. We also set aside the order passed by Ld CIT(A) in respect of VISA charges and direct the AO to delete the disallowance of the same. MAT computation - Addition made to the book profit computed u/s 115JB on disallowance computed u/s 14A in respect of exempt income - HELD THAT - This issue is covered by the decision rendered by jurisdictional Hon ble High Court of Karnataka in the case of Shobha Developers Ltd vs. DCIT 2021 (1) TMI 378 - KARNATAKA HIGH COURT wherein it was held that the disallowance made u/s 14A is a notional disallowance and hence the same cannot be adopted for the purpose of clause (f) of Explanation 1 to sec.115JB of Act. Accordingly we restore this issue to the file of AO for computing disallowance for the purpose of clause (f) from the profit and loss account. Deduction of education cess and Secondary Higher education cess paid during the year as deduction - HELD THAT - The assessee has raised this claim by way of additional ground. The Ld A.R submitted that the claim of the assessee is allowable as per the decision rendered by Hon ble Rajasthan High Court in the case of Chambal Fertilisers and Chemicals Ltd. 2018 (10) TMI 589 - RAJASTHAN HIGH COURT - A.R also submitted that the Hon ble Bombay High Court has expressed the view in the case of Sesa Goa Ltd 2016 (2) TMI 308 - BOMBAY HIGH COURT that the education cess, secondary and higher education cess is allowable as deduction.Accordingly, following the above said decision, we restore this issue to the file of AO to examine the claim of the assessee in accordance with the decision rendered in the cases cited supra. Disallowance of claim made u/s 36(1)(viia) - HELD THAT - What has to be seen by the AO is as to whether PBDD is created (irrespective of whether it is in respect of rural or non-rural advances by debiting the Profit Loss a/c. To the extent PBDD is created, the assessee is entitled to deduction subject to upper limit of deduction laid down in Sec.36(1)(viia) of the Act - As relying on case of Corporation Bank 2015 (3) TMI 1360 - ITAT BANGALORE CIT(A) held that the assessee is entitled for deduction u/s 36(1)(viia) of the Act and accordingly directed the AO to allow deduction as per the decision of ITAT.
Issues Involved:
1. Disallowance of bad debts claimed under section 36(1)(vii) of the Income-tax Act, 1961. 2. Disallowance of payments made to VISA International under section 40(a)(ia) of the Act. 3. Additions made while computing book profit under section 115JB of the Act. 4. Plea for deduction of Education cess and Secondary & Higher education cess as allowable expenditure. 5. Disallowance under section 14A of the Act. 6. Disallowance under section 40(a)(ia) of the Act. 7. Disallowance made under section 36(1)(viia) of the Act. Detailed Analysis: 1. Disallowance of Bad Debts under Section 36(1)(vii): The assessee, a scheduled commercial bank, claimed ?192.02 crores as bad debt under section 36(1)(vii). The AO disallowed the claim, arguing that the amount was not debited to the Profit and Loss account and was a prudential write-off, not an actual write-off. The AO relied on the Supreme Court's decision in Southern Technologies vs. ACIT and the Kerala High Court's decision in CIT vs. Hotel Ambassador. The CIT(A) disagreed with the AO, holding that the assessee's case was covered by the Supreme Court's decision in Vijaya Bank vs. CIT. However, the CIT(A) examined the claim from another angle, stating that the AO did not examine the claim in terms of the proviso to section 36(1)(vii) read with 36(1)(viia). The CIT(A) held that the bad debts pertaining to non-rural advances should also be adjusted against the provision allowed under section 36(1)(viia). The Tribunal, following the decision of the Hyderabad bench of ITAT in State Bank of Hyderabad vs. DCIT, held that the CIT(A)'s view was not legally correct and directed the AO to delete the disallowance of ?192.02 crores. 2. Disallowance of Payments to VISA International under Section 40(a)(ia): The AO disallowed ?17.27 crores claimed as expenditure towards ATM charges, including ?15,01,663 paid to VISA International, under section 40(a)(ia) for non-deduction of tax at source. The CIT(A) deleted the disallowance for payments made to NPCI and Cash Tree Network, following the Supreme Court's decision in CIT vs. Kotak Securities Ltd and the ITAT's decision in the assessee's own case. However, the CIT(A) confirmed the disallowance of VISA charges. The Tribunal, following its earlier decision in the assessee's own case, set aside the CIT(A)'s order regarding VISA charges and directed the AO to delete the disallowance. 3. Additions to Book Profit under Section 115JB: The assessee did not contest the addition of ?39.48 crores made to the book profit under section 115JB before the CIT(A). The Tribunal noted that this issue was covered by the Karnataka High Court's decision in Shobha Developers Ltd vs. DCIT, which held that the disallowance under section 14A is a notional disallowance and cannot be adopted for clause (f) of Explanation 1 to section 115JB. The Tribunal restored the issue to the AO for recomputation. 4. Deduction of Education Cess and Secondary & Higher Education Cess: The assessee sought deduction of education cess and secondary & higher education cess as allowable expenditure. The Tribunal restored this issue to the AO to examine the claim in accordance with the decisions of the Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd and the Bombay High Court in Sesa Goa Ltd. 5. Disallowance under Section 14A: The AO disallowed ?49.98 crores under section 14A, which the CIT(A) deleted, holding that the AO had not recorded dissatisfaction on the assessee's claim. The Tribunal noted that the AO's dissatisfaction was discernible from the assessment order and restored the issue to the AO for fresh examination, following the Supreme Court's decision in Maxopp Investments Ltd vs. CIT. 6. Disallowance under Section 40(a)(ia): The Tribunal confirmed the CIT(A)'s deletion of disallowance for payments made to NPCI and Cash Tree Network, following its earlier decision in the assessee's own case. The Tribunal also set aside the CIT(A)'s order regarding VISA charges and directed the AO to delete the disallowance. 7. Disallowance under Section 36(1)(viia): The AO disallowed ?140.59 crores claimed under section 36(1)(viia), allowing only ?77.92 lakhs related to rural advances. The CIT(A) followed the ITAT's decision in Corporation Bank, which held that the assessee is entitled to deduction under section 36(1)(viia) irrespective of whether the provision is for rural or non-rural advances. The Tribunal upheld the CIT(A)'s decision. Conclusion: The Tribunal allowed the assessee's appeal on the disallowance of bad debts and VISA charges, restored the issue of book profit computation and deduction of education cess to the AO, and upheld the CIT(A)'s decisions on disallowance under sections 14A and 36(1)(viia). The revenue's appeal was partly allowed for statistical purposes.
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