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2024 (11) TMI 759 - AT - Income TaxDisallowance of deduction claimed u/s 36(1)(vii) - HELD THAT - The co-ordinate bench of the Tribunal has decided this issue in favour of the assessee 2024 (2) TMI 1036 - ITAT BANGALORE in which decision of the assessee in its case for the AY 2014-15 2022 (5) TMI 1537 - ITAT BENGALURU order dated 26.05.2022 relied as held that the assessee has claimed deduction towards PBDD under clause (a) to sec. 36(1)(viia) of the Act, meaning thereby, the clause (a) is applicable to rural advances only as per the decision given by Hon ble Supreme Court in the case of Catholic Syrian Bank 2012 (2) TMI 262 - SUPREME COURT Hence the bad debts relating to non-rural branches are not required to be adjusted against PBDD allowed under clause (a) of sec. 36(1)(viia) of the Act in terms of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. We are unable to agree with the view expressed by Ld CIT(A) on this issue. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the bad debts relating to non-rural branches u/s 36(1)(vii) of the Act without adjusting the same against the PBDD a/c, since the said PBDD a/c relates to rural advances only. Addition u/s.14A being expenditure in relation to exempt income to the book profit u/s. 115JB - AO has calculated the disallowance u/s. 14A and this issue was raised before the CIT(A) and the CIT(A) has also decided the issue in favour of the assessee. Against the deletion by the CIT(A), the revenue has raised this issue before us in ground no.2 to 9 of revenue s appeal. After considering the submissions we have dismissed the appeal of the revenue on this issue observing that there should not be disallowance u/s. 14A and decided this issue in favour of assessee, therefore no question arises for adjudication u/s. 115JB. Addition being provision for wage arrears and towards Ex-gratia and Bonus while computing book profits computed u/s. 115JB - AO noted that while computing taxable income these provisions has been added back by the assessee, however, while computing the book profit, these provisions have not been added back and the assessee s view is that the provisions made were not unascertained liability - AO further noted that while computing the income of the subsequent year the actual arrears of salary has been claimed as expenses, therefore the amount remained contingent liability. This would not alter the nature of provision and accordingly required to be added back to the book profits. AO noted from the submissions that the provisions have been computed on approximate basis on the basis of previous wage revision and the quantification pending discussion with unions. Accordingly it cannot be said that it is ascertained liability. The claim of future liability is to be held as unascertained liability and not being capable of quantification with certainty. Accordingly these amounts were added back to the book profit. This issue was raised before the CIT(A), however, the CIT(A) has observed that the income under normal provisions as per the return itself is higher than the book profit calculated u/s. 115JB. During the course of hearing, both the parties agreed that the CIT(A) should have decided the issue in detail, therefore we are remitting this issue back to the file of the CIT(A) for fresh decision. Disallowance u/s. 14A r.w.s. 8D - HELD THAT - We note that this issue was considered by this Tribunal in the case of Canara Bank (erstwhile Syndicate Bank) 2023 (11) TMI 1146 - ITAT BANGALORE as held the assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. Deduction u/s. 36(1)(viia) in the computation of income filed - As per assessee s case 2024 (2) TMI 1036 - ITAT BANGALORE for AYs 2016-17 2017-18 we hold that for claiming deduction u/s. 36(1)(viia) in respect of rural branches, the latest/provisional census available should be considered. Accordingly this issue is remitted back to the AO. The assessee is directed to provide the latest/provisional census which was available for the respective assessment year. This ground is allowed for statistical purposes. Payments to National Payments Corporation of India managed by Reserve Bank of India and the company is registered u/s. 25 of the Companies Act being switch charges and ATM charges and ATM usage charges paid to Visa Worldwide - HELD THAT - Tribunal in assessee s own case for AY 2013-14 2022 (1) TMI 583 - ITAT BANGALORE uphold the order of ld CIT(A) in deleting the disallowance of payments made to NFS and Cash Tree. We also set aside the order passed by ld CIT(A) inspect of payment to Visa International towards visa fee, as the same is not liable to tax deduction at source as per the decision rendered by Hon ble Supreme Court in the case of Kotak Securities Management 2016 (3) TMI 1026 - SUPREME COURT Accordingly we direct the AO to delete the said disallowance also.
Issues Involved:
1. Disallowance of deduction claimed under Section 36(1)(vii) for bad debts. 2. Disallowance under Section 40(a)(ia) regarding payments made without TDS. 3. Addition of expenditure related to exempt income to book profit under Section 115JB. 4. Addition of provisions for Wage Arrears and Ex-gratia & Bonus to book profit under Section 115JB. 5. Charging of interest under Sections 234B and 234D. 6. Disallowance under Section 14A related to exempt income. 7. Disallowance under Section 36(1)(viia) for provision for bad and doubtful debts. Detailed Analysis: 1. Disallowance under Section 36(1)(vii): The assessee claimed a deduction for bad debts written off, which was disallowed by the AO on the grounds that it was a prudential write-off and not an actual one. The CIT(A) upheld this decision, interpreting that provisions of Section 36(1)(vii) and 36(1)(viia) are not independent. However, the Tribunal followed previous decisions, including the Supreme Court ruling in the Catholic Syrian Bank case, and concluded that bad debts related to non-rural advances should not be adjusted against the provision for bad and doubtful debts under Section 36(1)(viia). Therefore, the Tribunal directed the AO to allow the deduction for non-rural bad debts without adjustment against the provision account. 2. Disallowance under Section 40(a)(ia): The AO disallowed payments made to NPCI and VISA Worldwide due to non-deduction of TDS. The CIT(A) deleted the disallowance for NPCI payments, relying on previous Tribunal decisions, but upheld it for VISA Worldwide. The Tribunal, referencing its earlier rulings and the Supreme Court decision in Kotak Securities, directed the deletion of disallowance for both NPCI and VISA Worldwide payments, as these do not attract TDS under Section 194J. 3. Addition under Section 115JB for Exempt Income: The AO added disallowance under Section 14A to the book profit under Section 115JB, which was contested by the assessee. The Tribunal, relying on the Karnataka High Court decision in Sobha Developers, held that Section 14A disallowance is notional and cannot be added back to book profit under Section 115JB. Therefore, this addition was deleted. 4. Provision for Wage Arrears and Ex-gratia & Bonus under Section 115JB: The AO added provisions for wage arrears and ex-gratia & bonus to book profit, treating them as unascertained liabilities. The CIT(A) did not decide on the merits, leading the Tribunal to remit the issue back to the CIT(A) for a detailed examination, directing the assessee to substantiate its claim with evidence. 5. Interest under Sections 234B and 234D: The interest charged under these sections was deemed consequential, and no separate adjudication was required as the primary issues were resolved. 6. Disallowance under Section 14A: The AO made a disallowance under Section 14A for expenses related to exempt income, which was overturned by the CIT(A) based on the lack of satisfaction recorded by the AO. The Tribunal upheld the CIT(A)'s decision, citing the jurisdictional High Court's ruling in the assessee's favor, confirming that no disallowance under Section 14A was warranted. 7. Disallowance under Section 36(1)(viia): The AO disallowed a portion of the provision for bad and doubtful debts, arguing that the assessee misclassified rural branches and incorrectly calculated average aggregate advances. The CIT(A) allowed the deduction, supported by various Tribunal decisions. The Tribunal remitted the issue back to the AO for reconsideration based on the latest census data to correctly classify rural branches and calculate eligible advances. Conclusion: The Tribunal's judgment largely favored the assessee, allowing deductions for bad debts and provisions, while also addressing procedural issues related to TDS and book profit computations. The Tribunal provided clarity on the interpretation of relevant sections and directed the lower authorities to adhere to established legal precedents and factual accuracy.
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