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2019 (9) TMI 1225 - AT - Income TaxDisallowance u/s.36(1) (vii) and 36(1) (viia) - bad doubtful debt or mere Provisions were made - HELD THAT - Now the law is settled to the extent that provisions u/s.36(1) (vii) and 36(1) (viia) of the Act are separate and independent to each other - CIT(A) has rightly observed that, creation of provisions for bad and doubtful debts by debiting profit and loss account reducing the same from debtor account constitutes write off. It is an admitted fact that in the year subsequent recovery, the same credited to Profit and Loss account and offered to tax. We find merit in the submissions of the assessee bank that the CIT(A) grossly fell in error in combining the provisions of Section 36(1) (vii) and 36 (1) (viia) of the Act ignoring the principle emanated by the Hon ble Supreme Court in the case of Catholic Syrian Bank Ltd 2012 (2) TMI 262 - SUPREME COURT Matter remanded back to the file of the Assessing Officer for limited purpose of verifying the amount of write off debited to provisions of bad and doubtful debts and reduced from advance account in the Accordingly, this ground of appeal raised by the assessee is partly allowed for statistical purpose. Disallowance of loss on account of shifting of securities - as during the previous year relevant to assessment year, the assessee bank had shifted certain securities from AFS to HTM in order to comply with the RBI guidelines in preparation of accounts - AO disallowed the claim on the ground that RBI guidelines are not binding while computing taxable income and the ld. CIT(A) confirmed the findings - HELD THAT - Assessee bank has shifted the investment from one category to another is of no relevance, in as much as, fall in value of investment is held to be allowable as deduction. Thus, ground of appeal filed by the assessee is allowed. See CANARA BANK VERSUS JOINT COMMISSIONER OF INCOME-TAX, LTU AND VICE VERSA 2017 (11) TMI 1425 - ITAT BANGALORE Disallowance u/s.14A - HELD THAT - AO had not assigned any reason whatsoever as to how the claim of the assessee is incorrect. In the similar facts, the Hon ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, 2018 (3) TMI 805 - SUPREME COURT held that in the absence of the finding of the Assessing Officer resort to provisions of Section 14A of the Act r.w.r 8D of the Rules cannot be made Interest accrued on Government securities - HELD THAT - This issue is covered in favour of the assessee in assessee s own case by the Jurisdictional High Court in 2014 (8) TMI 604 - MADRAS HIGH COURT held that the assessee is taxable for interest on securities only on specified dates when it becomes due for payment, in view of third proviso to Section 145(1) of the Act, which was in force during the relevant assessment years. Allowance of depreciation u/s.36(1) (vii) and 36(1) (viia) of the Act to the extent of the provision created by debiting the profit and loss and reducing the sundry creditors account. The decision of the ld. CIT(A) is based on the law laid down by the Hon ble Supreme Court in the case of Vijaya Bank 2010 (4) TMI 46 - SUPREME COURT and Catholic Syrian Bank Ltd 2012 (2) TMI 262 - SUPREME COURT and therefore we do not find any merits in the grounds of appeal filed by the Revenue Premium paid on purchase of securities as cost of acquisition in the year of investments itself though amortized in the books of accounts. This issue is decided against the Revenue and in favour of the assessee in assessee s own case following the decision of Hon ble Jurisdictional High Court in assessee s own case reported 2007 (2) TMI 187 - MADRAS HIGH COURT No addition can be made on account of stale drafts and cheques - amount cannot be brought to tax as a cessation of trading liability u/s. 41(1) of the Act, where the appellant had not written off the liability Depreciation at 60% on ATM treating it as computers - See M/S. SARASWAT INFOTECH LTD. 2013 (1) TMI 861 - BOMBAY HIGH COURT TDS u/s 194A - TDS liability on interest in respect of recurring deposit - HELD THAT - CIT(A) held that interest in respect of recurring deposit cannot be disallowed for non deduction of TDS thereon. The ld. CIT (A) had referred to the relevant provisions of Section 194A of the Act and amendment made by Finance Act, 2015. The decision of the ld. CIT(A) is based on proper appreciation of the legal position. Addition u/s 36(1) (viii) - AO had disallowed a sum on the ground that the assessee had not made advance to eligible activities - HELD THAT - CIT(A) taking note of the fact that the Assessing Officer had made disallowance based on the names of the borrowers without looking into purpose of the loan, deleted the addition. The ld. CIT(A) order is based on proper appreciation of the legal positions and evidence. We do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, ground No.8 filed by the Revenue is dismissed. Taxability of interest on NPA - AO brought to tax interest on NPA following the decision of Southern Technology Ltd. 2010 (1) TMI 5 - SUPREME COURT - HELD THAT - This issue was dealt by the Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank . 2017 (4) TMI 566 - ITAT CHENNAI wherein after referring to the decision of Hon ble Supreme Court in the case of CIT vs. Vasisth Chay Vyapar Ltd 2018 (3) TMI 56 - SUPREME COURT - We further note that the decision of Hon ble Supreme Court in the case of Vasisth Chay Vyapar Ltd (supra) is subsequent to the decision in the case of Southern Technology Ltd (supra). Therefore the decision of Hon ble Supreme Court in the case of Vasisth Chay Vyapar Ltd (supra) shall prevail over the decision of Southern Technology Ltd. Therefore, we direct the Assessing Officer not to assess interest on NPA.
Issues Involved:
1. Disallowance under Section 14A. 2. Bad debts written off. 3. Interest on securities disallowed. 4. Profit on sale of investments. 5. Loss on shifting of securities. 6. Deduction under Section 36(1)(viia). 7. Disallowance under Sections 41(1) and 28(iv). 8. Claim of deduction under Section 36(1)(viii). 9. Excess depreciation on ATMs. 10. Interest on VIP deposits disallowed under Section 40(a)(ia). Detailed Analysis: 1. Disallowance under Section 14A: The Assessing Officer (AO) made a disallowance of ?2,82,57,685 under Section 14A read with Rule 8D. The CIT(A) deleted this addition, relying on the Tribunal's decision in Karur Vysya Bank vs. JCIT, which held that investments by banking companies are business assets and thus, disallowance under Section 14A is not applicable. The Tribunal upheld this view, noting that the AO did not provide reasons to reject the assessee's claim that no expenditure was incurred to earn exempt income. 2. Bad Debts Written Off: The AO disallowed ?51,44,46,907 claimed as bad debts written off for non-rural branches. The CIT(A) restricted the allowance to the actual provision created of ?66,00,00,000, debited to the profit and loss account. The Tribunal remanded the issue back to the AO to verify the amount of write-off debited to provisions for bad and doubtful debts and reduced from the advance account in the balance sheet. 3. Interest on Securities Disallowed: The AO added ?25,21,72,886 as interest accrued on government securities. The CIT(A) deleted this addition, following the Jurisdictional High Court's decision in the assessee's own case, which held that interest on government securities accrues only on the due date. The Tribunal upheld this view. 4. Profit on Sale of Investments: The AO added ?7,25,09,632 as profit on the sale of investments. The CIT(A) allowed this as an expenditure, following the Tribunal's decision in Karur Vysya Bank. The Tribunal upheld this decision. 5. Loss on Shifting of Securities: The AO disallowed ?8,85,34,138 claimed as a loss on shifting securities from AFS to HTM categories. The CIT(A) confirmed the disallowance, considering it a notional loss. The Tribunal allowed the assessee's claim, citing that investments held by banking companies are treated as stock-in-trade and thus, the fall in value should be allowed as a deduction. 6. Deduction under Section 36(1)(viia): The AO disallowed ?64,64,78,669 claimed under Section 36(1)(viia). The CIT(A) did not specifically address this issue. The Tribunal remanded the issue back to the AO to verify the provision created and allow the deduction accordingly. 7. Disallowance under Sections 41(1) and 28(iv): The AO added ?47,58,883 and ?47,05,085 as unclaimed money, stale drafts, and cheques. The CIT(A) deleted this addition, following the Tribunal's decision in Karur Vysya Bank. The Tribunal upheld this view, noting that such amounts cannot be taxed as cessation of trading liability under Section 41(1). 8. Claim of Deduction under Section 36(1)(viii): The AO disallowed ?1,70,94,716, claiming that advances were made to ineligible activities. The CIT(A) deleted the disallowance, noting that the AO did not verify the purpose of the loans. The Tribunal upheld this decision. 9. Excess Depreciation on ATMs: The AO disallowed excess depreciation claimed on ATMs. The CIT(A) allowed higher depreciation, treating ATMs as computers, based on the Tribunal's decision in the Chandigarh Bench. The Tribunal upheld this view. 10. Interest on VIP Deposits Disallowed under Section 40(a)(ia): The AO disallowed ?5,49,77,592 as interest on VIP deposits due to non-deduction of TDS. The CIT(A) deleted this addition, noting that the obligation to deduct TDS on such deposits arose only from the assessment year 2016-17. The Tribunal upheld this decision. Summary of Results: - Appeals of the assessee for assessment years 2012-13 and 2014-15 are partly allowed for statistical purposes. - Appeals of the Revenue for assessment years 2012-13 and 2014-15 are dismissed.
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