2022 (3) TMI 669 - AT - Income Tax

Disallowance of bad debts claimed u/s 36(1)(vii) - HELD THAT - We allow the appeal in favour of the assessee. Accordingly, this ground of the assessee is allowed and the disallowance made u/s.36(1)(vii) is deleted. Disallowance u/s 36(1)(viii) - AO disallowed the claim on the ground that the assessee has not transferred the amount to special reserve as required by sec. 36(1)(viii) - HELD THAT - We therefore follow the binding decision of the coordinate bench in the case of Vijaya Bank 2018 (1) TMI 1575 - ITAT BANGALORE and hold that reserve credit in the subsequent or succeeding years before the initiation of grant of deduction u/s 36(1)(viii) of the Act is required to be considered while allowing the assessee s claim for the deduction under the said section. We, therefore direct the AO to examine and allow the assessee s claim accordingly. This ground is allowed for statistical purposes. Disallowance u/s 40(a)(ia) - assessee has paid towards NFS ATM charges and towards ATM switch charges to National Payment Corporation of India (NPCI) - AO disallowed the entire amount u/s 40(a)(ia) on the ground that the assessee has not deducted TDS on the said amount - HELD THAT - As in assessee s own case, we allow this ground in favour of the assessee. Accordingly, this ground of the assessee is allowed. MAT applicability u/s 115JB - HELD THAT - Since the issue regarding applicability or otherwise of sec.115JB is restored to the file of Ld CIT(A), the next issue urged by the assessee relating to the addition made by the AO while computing book profit u/s 115JB is also restored to the file of Ld CIT(A) for examining it afresh. Deduction being the depreciation on the securities classified as Held To Maturity (HTM) - AO disallowed this claim on the ground that the depreciation cannot be claimed on HTM securities - HELD THAT - We do not find any reason to interfere with the decision of the CIT(A). Accordingly the decision of CIT(A) with respect to depreciation on HTM securities is upheld and the appeal of the revenue on this issue is dismissed. Disallowance u/s.14A - HELD THAT - We notice that the co-ordinate benches have decided this issue prior to rendering of decision by Hon ble Supreme Court in the case of Maxopp Investment Ltd. 2018 (3) TMI 805 - SUPREME COURT However, before us, the Ld A.R relied upon certain other decisions in order to contend that no disallowance u/s 14A is called for. In view of the subsequent development of law on this issue, in our considered view, this issue requires fresh examination at the end of AO by duly considering the various decisions on the subject. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh.

Summary

Issues Involved:
1. Disallowance of bad debts claimed under Section 36(1)(vii)
2. Disallowance under Section 36(1)(viii)
3. Disallowance under Section 40(a)(ia)
4. Applicability of provisions of Section 115JB
5. Additions made to book profit under Section 115JB
6. Depreciation on HTM securities
7. Disallowance under Section 14A

Detailed Analysis:

1. Disallowance of bad debts claimed under Section 36(1)(vii):
The assessee claimed ?282,18,79,407/- as bad debts written off, which the AO partially disallowed, citing that the bad debts were not debited to the P&L account and did not exceed the credit balance of the provision created under Section 36(1)(viia). The CIT(A) upheld the AO's decision. The Tribunal, referencing its previous decision in the assessee's own case, ruled in favor of the assessee, allowing the bad debt deduction under Section 36(1)(vii).

2. Disallowance under Section 36(1)(viii):
The assessee claimed a deduction of ?179,56,01,185/- under Section 36(1)(viii), which the AO disallowed on the grounds that the amount was not transferred to a special reserve. The CIT(A) upheld the AO's decision. The Tribunal, referencing the Hyderabad Tribunal's decision in the case of Nizambad District Cooperative Central Bank Ltd. and its own decision in the case of Vijaya Bank, ruled that the reserve created in subsequent years before the finalization of the grant of deduction should be considered, directing the AO to allow the claim accordingly.

3. Disallowance under Section 40(a)(ia):
The AO disallowed ?29,15,52,274/- paid towards NFS ATM charges and ATM switch charges to NPCI, as no TDS was deducted. The CIT(A) upheld this disallowance. The Tribunal, referencing its previous decision in the assessee's own case and the Supreme Court's decision in the case of Kotak Securities Ltd., ruled that the payments made to NPCI are not technical services and do not require TDS deduction, thus allowing the assessee's appeal.

4. Applicability of provisions of Section 115JB:
The AO computed book profit under Section 115JB, which the CIT(A) upheld. The Tribunal, referencing its decision in the assessee's own case, restored the issue to the CIT(A) for fresh examination, considering the provisions of Section 51 of the Banking Regulation Act and the definition of "banking company."

5. Additions made to book profit under Section 115JB:
Since the applicability of Section 115JB was restored to the CIT(A), the Tribunal also restored the issue of additions made to book profit to the CIT(A) for fresh examination.

6. Depreciation on HTM securities:
The AO disallowed the depreciation on HTM securities, which the CIT(A) allowed, referencing the Karnataka High Court's decision in the assessee's own case. The Tribunal upheld the CIT(A)'s decision, referencing its previous decision in the assessee's own case, affirming that depreciation on HTM securities is allowable.

7. Disallowance under Section 14A:
The AO disallowed an amount under Section 14A, which the CIT(A) reduced based on the coordinate bench's decision in the assessee's own case. The Tribunal, considering the Supreme Court's decision in the case of Maxopp Investment Ltd., restored the issue to the AO for fresh examination.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, and the appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal directed fresh examinations on several issues, ensuring adherence to judicial precedents and proper application of the law.