2023 (4) TMI 1169 - AT - Income Tax

Disallowance of bad debts written off u/s 36(1)(vii) - HELD THAT - After going through entire material placed before us, we notice that similar issue has been decided by the coordinate bench of the Tribunal in assessee s own case for AY 2014-15 2022 (3) TMI 669 - ITAT BANGALORE as held that assessee bank is eligible to claim and be allowed write off of the bad debts u/s.36(1)(vii) of the Act and we therefore reverse and delete the disallowance made by the Assessing Officer in this regard. Decided in favour of assessee. Deduction u/s. 36(1)(viii) for reserve credit - AO observed that the assessee has not transferred any amount to the special reserve as mentioned in section 36(1)(viii) - HELD THAT - As decided in assessee own case 2022 (3) TMI 669 - ITAT BANGALORE reserve created even in subsequent / succeeding years; however before the finalization of grant of deduction under Section 36(1)(viii) of the Act i.e. as per date of order of assessment is required to be considered while allowing the assessees claim for deduction under Section 36(1)(viii) of the Act. As in the case of Vijaya Bank 2022 (3) TMI 669 - 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. TDS u/s 194J - Disallowance of expenditure u/s 40(a)(ia) - expenditure for ATM switch charges to National Payment Corporation of India (NPCI) and debited under the head other expenses - assessee stated that no TDS was made on the NFS ATM charges and that ATM Switching facility provided by NPCI does not involve any human intervention and is a seamless transaction as the same is based on settlement reports - HELD THAT - As decided in assessee own case 2022 (3) TMI 669 - ITAT BANGALORE following the said decision of Canara Bank 2018 (9) TMI 2109 - ITAT BANGALORE payments made to NPCI towards NFS ATM charges cannot be considered as technical services within the meaning of sec.194J of the Act. Hence there is no liability to deduct tax at source from those payments. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. Decided in favour of assessee. Penalty for violation of any direction of RBI - allowable deduction u/s. 37 or not? - HELD THAT - We note that assessee has paid Rs.5.16 lakhs as penalty for deficiencies in exchange of notes and coins/ remittances sent to RBI/operations of currency chest etc. AR could not controvert the case law relied by the ld. CIT(A). However, the violations of Banking Regulation Act and RBI directions is not clear from the order of authorities below as well as from the submissions made by the ld. AR of the assessee - we think it fit to remit the issue to the AO for determination of the nature of violation of Banking Regulation Act / RBI directions and decide the issue as per law. The assessee is directed to provide necessary details. Accordingly this issue is allowed for statistical purposes. MAT applicability u/s 115JB - assessee submitted that it was a public sector bank and not a company under proviso to section 211(2) of the Companies Act, thus not covered under section 115JB(2)(b) and hence book profit was not computed - HELD THAT - As decided in assessee s own case for AY 2014-15 2022 (3) TMI 669 - ITAT BANGALORE 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. Considering the submission of the ld. DR that SLP has been accepted by the Supreme Court on this issue, but the status of the same could not be furnished by the ld. DR. In view of this, respectfully following the decision rendered by the coordinate bench in assessee s own case, we restore this issue of applicability of the provisions of section 115JB to the CIT(A) with similar direction. Computation of the deduction u/s. 36(1)(viia) - HELD THAT - As decided by the co-ordinate bench of this Tribunal in the case of VIJAYA BANK 2018 (1) TMI 1575 - ITAT BANGALORE assessee is not disputing the classification of rural branches made by the Assessing Officer and accepts the AAA Aggregate Rural Advances as arrived at by the Assessing Officer of the order of assessment and in this context pleaded that the matter need not be remanded back to the Assessing Officer. In view of the aforesaid submissions of the learned Authorised Representative of the assessee, we hold that the assessee is entitled to deduction by considering the AAA as worked out by Assessing Officer and direct the Assessing Officer to rework the deduction under Section 36(1)(viia) - Decided against revenue. Depreciation on various categories of securities as per classification of the RBI in its computation of income - HELD THAT - Similar issue has been decided by the coordinate Bench in 2022 (3) TMI 669 - ITAT BANGALORE wherein 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 under Section 14A - assessee made suo-moto addition - HELD THAT - As decided by the coordinate Bench of the Tribunal in assessee s own case for the AY 2014-15 2022 (3) TMI 669 - ITAT BANGALORE 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 - we set aside the order of the CIT(A) and restore the issue to the AO for examining it afresh in the light of above cited details. Accordingly the grounds raised by the revenue is allowed for statistical purposes.

Issues Involved:
1. Disallowance of bad debts under Section 36(1)(vii).
2. Deduction under Section 36(1)(viia) for rural advances.
3. Deduction under Section 36(1)(viii) for special reserve.
4. Disallowance under Section 40(a)(ia) for ATM switch charges.
5. Disallowance of penalty paid to RBI under Section 37(1).
6. Applicability of Section 115JB (MAT) to the bank.
7. Depreciation on HTM securities.
8. Disallowance under Section 14A for exempt income.

Summary of Judgment:

1. Disallowance of Bad Debts under Section 36(1)(vii):
The Tribunal allowed the assessee's appeal, following precedents in its own case and other similar cases, holding that the assessee is entitled to claim bad debts written off under Section 36(1)(vii) without adjusting against the provision for bad and doubtful debts under Section 36(1)(viia).

2. Deduction under Section 36(1)(viia) for Rural Advances:
The Tribunal upheld the CIT(A)'s decision allowing the assessee's method of computing the eligible quantum of provision for bad debts under Section 36(1)(viia), rejecting the AO's interpretation that only incremental advances should be considered.

3. Deduction under Section 36(1)(viii) for Special Reserve:
The Tribunal remitted the issue back to the AO for verification, directing that reserve created even in subsequent years before the finalization of the grant of deduction under Section 36(1)(viii) should be considered while allowing the assessee's claim.

4. Disallowance under Section 40(a)(ia) for ATM Switch Charges:
The Tribunal allowed the assessee's appeal, holding that payments made to NPCI for ATM switch charges do not constitute technical services under Section 194J and hence, no TDS was required to be deducted.

5. Disallowance of Penalty Paid to RBI under Section 37(1):
The Tribunal remitted the issue back to the AO to determine the nature of the violation of Banking Regulation Act/RBI directions and decide the issue as per law, noting that the violations were not clear from the records.

6. Applicability of Section 115JB (MAT) to the Bank:
The Tribunal restored the issue to the CIT(A) for fresh examination, following its own decision in the assessee's case for the previous year, considering the provisions of the Banking Regulation Act and the Companies Act.

7. Depreciation on HTM Securities:
The Tribunal upheld the CIT(A)'s decision allowing the depreciation on HTM securities, following the precedent in the assessee's own case and other similar cases, where investments were treated as stock-in-trade.

8. Disallowance under Section 14A for Exempt Income:
The Tribunal set aside the CIT(A)'s order and restored the issue to the AO for fresh examination in light of the Supreme Court's decision in Maxopp Investment Ltd., directing the AO to consider various decisions on the subject.

Conclusion:
The appeals filed by both the assessee and the revenue were partly allowed for statistical purposes, with several issues remitted back to the AO for further examination and verification.

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