2022 (12) TMI 242 - AT - Income Tax

Deduction u/s. 36(1)(viia) - disallowance pertaining to bad and doubtful debts - HELD THAT - We find no force in the Revenue's supportive arguments as there is no material in principle which has been rejected by the AO while dealing with the assessee's crystallization plea. That being the case, we allow the assessee's impugned claim in principle and direct the Assessing Officer to examine its supportive evidence of crystallization of the corresponding expenditure items in the relevant previous year by quoting CIT Vs. Indian Petrochemicals Corporation Ltd 2016 (9) TMI 110 - GUJARAT HIGH COURT and case law CIT vs. Adani Enterprises Ltd. 2016 (7) TMI 1250 - GUJARAT HIGH COURT also holds that such prior period expenditure items ought not to be disallowed where the taxpayer concerned is assessed at the same rate all along. The second substantive ground is accepted for statistical purposes in foregoing terms. Disallowance of interest paid on TDS on the ground that the same is 'penal' in nature - HELD THAT - We find no merit in its arguments in light of Lachmandas Mathuradas 1997 (12) TMI 16 - SUPREME COURT , Rungta Mines Ltd. 2018 (10) TMI 672 - ITAT KOLKATA and M/s. M.L. Reality 2021 (9) TMI 877 - ITAT MUMBAI holding such interest payment on delayed remittances of tax items as an allowable revenue expenditure u/s. 37 of the Act. The impugned disallowance accordingly stands deleted. Disallowing its claim of expenditure regarding education, secondary and higher education cess - HELD THAT - Learned counsel fails to dispute that the legislature has amended section 40(h) of the Act vide Finance Act 2022 w.e.f. 01.04.2005 that such education cess is not an allowable expenditure item. We take note thereof to hold that the impugned claim of preceding cess(es) items is not allowable in law. The same stands rejected. Invoking section 115JB MAT computation on a public sector banking company - HELD THAT - Both the parties are fair enough in not pinpointing any distinction on facts or law qua the instant issue of applicability of section 115JB in assessee's case. There is further hardly any dispute as we have restored the assessee's foregoing second substantive grievance of prior period expenditure back to the AO. Faced with the situation, we set aside the instant MAT issue as well back to the Assessing Officer for his afresh adjudication in light of CIT(A)'s findings in the preceding assessment year (s) 2013-14 and 2014-15, as the case may be, as per law. Claim of loss on valuation of Held to Maturity (HTM) securities - allowable revenue item - HELD THAT - Revenue is fair enough in not pinpointing any distinction on facts or law before us. We adopt judicial consistency to uphold the CIT(A)'s findings allowing the impugned loss on sale of Held to Maturity (HTM) securities to the assessee. Revenue's sole substantive grievance as well as main appeal stand rejected accordingly.

Issues Involved:
1. Disallowance under Section 36(1)(viia) of the Income Tax Act.
2. Disallowance of prior period expenses.
3. Disallowance of interest paid for delayed remittance of TDS.
4. Disallowance of education cess & secondary and higher education cess.
5. Applicability of Section 115JB (Minimum Alternate Tax) to the appellant bank.
6. Allowability of loss on valuation of Held to Maturity (HTM) securities.

Issue-wise Detailed Analysis:

1. Disallowance under Section 36(1)(viia):
The assessee challenged the CIT(A)'s decision to restrict the claim under Section 36(1)(viia) to Rs. 143,07,19,755/- against the claimed Rs. 1083,06,95,013/-. The CIT(A) held that the deduction should be restricted to the provision made in the books for rural advances. The tribunal noted that this issue is recurring and referred to its previous decision for AY 2010-11, which restored the matter to the assessing authority for reconsideration. The tribunal accepted the assessee's grievance for statistical purposes, directing the Assessing Officer to frame a consequential adjudication.

2. Disallowance of Prior Period Expenses:
The assessee contested the disallowance of prior period expenses amounting to Rs. 1,72,73,670/-, arguing that these expenses crystallized during the relevant previous year. The tribunal found no force in the Revenue's arguments and allowed the assessee's claim in principle. The tribunal directed the Assessing Officer to examine the supportive evidence of crystallization of the expenses in the relevant year, referencing CIT Vs. Indian Petrochemicals Corporation Ltd. and CIT vs. Adani Enterprises Ltd.

3. Disallowance of Interest Paid for Delayed Remittance of TDS:
The tribunal addressed the disallowance of Rs. 1,71,338/- paid as interest for delayed TDS remittance, which the Revenue considered penal in nature. The tribunal found no merit in the Revenue's arguments, referencing Lachmandas Mathuradas vs. CIT, DCIT vs. Rungta Mines Ltd., and M/s. M.L. Reality vs. ACIT, which held that such interest payments are allowable under Section 37 of the Act. The disallowance was deleted.

4. Disallowance of Education Cess & Secondary and Higher Education Cess:
The assessee's claim for education cess and secondary and higher education cess totaling Rs. 8,69,48,904/- was disallowed based on the amendment to Section 40(h) of the Act by the Finance Act 2022, effective from 01.04.2005. The tribunal noted that the claim is not allowable in law and rejected the same.

5. Applicability of Section 115JB (Minimum Alternate Tax):
The assessee contended that Section 115JB is not applicable to it as a public sector banking company. The tribunal referred to its previous decision for AYs 2013-14 and 2014-15, where the matter was remanded to the CIT(A) for a detailed examination of whether the assessee is a banking company or corporation. The tribunal restored the matter to the Assessing Officer for fresh adjudication in light of the CIT(A)'s findings in the preceding years.

6. Allowability of Loss on Valuation of HTM Securities:
The Revenue challenged the CIT(A)'s decision to allow the assessee's claim of loss on valuation of HTM securities amounting to Rs. 20,64,08,969/-. The tribunal noted that this issue had been settled in favor of the assessee in previous years by the tribunal and upheld by the Hon'ble Bombay High Court. The tribunal found no distinction in facts or law and upheld the CIT(A)'s findings, dismissing the Revenue's appeal.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's cross appeal was dismissed. The tribunal directed the Assessing Officer to re-adjudicate certain issues based on previous tribunal and CIT(A) findings, ensuring a consistent and thorough examination of the facts and applicable law.

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