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TMI Blog2015 (2) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... rite back excess provision of bonus needs to be allowed as a deduction from the taxable income as the provision was offered to tax in earlier years - Held that:- Before us, the ld. counsel for the assessee drew our attention to page 12 of the paperbook, which contains the statement showing the details of sums which fall for consideration u/s. 43B of the Act. The same is annexed as Annexure-I to this order. He also drew our attention to page 9 & 10 of the paper book which is the computation of income from business. The same is annexed as Annexure-II. Attention was also drawn to the fact that one of the items added to the profit & loss account was Schedule-C of the computation of income from business and that in Schedule-C the excess provision of bonus of ₹ 44,80,266 had been duly considered while arriving at the sum of ₹ 6,31,91,125 which was the amount debited to the profit and loss account. It was submitted that there was no claim made for deduction as assumed by the revenue authorities. - the order of the CIT(A) is set aside and the matter is remanded to the Assessing Officer for fresh consideration - Decided in favour of assessee for statistical purposes. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that this amount has become irrecoverable and were therefore claimed as deduction on account of bad debts u/s. 36(1)(vii) of the Act. The assessee pointed out that the remaining sum of ₹ 11,18,42,001 was actually the amount charged to profit loss account for the A.Ys. 2000-01 and 2001-02 as follows:- A.Y. 2000-01 Rs.3,70,00,315 A.Y. 2001-02 Rs.7,48,41,686 Rs.11,18,42,001 3. The assessee pointed out that a sum of ₹ 11,18,42,001 was not allowed during the respective assessment years for the reason it was not written off in the account. The assessee also pointed out that it had filed appeal against the aforesaid orders of assessment and the same were pending and that the claim for deduction of the aforesaid amount is being made in this year by way of abundant caution. The AO held that since these amounts were subject matter of another assessment year, the claim cannot be entertained in this assessment year. 4. On appeal, the CIT(A) upheld the order of the AO. 5. At the time of hearing, it was pointed out by the ld. cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- being amortisation of investments under held to maturity category and had claimed the same as an allowable deduction. The Assessee submitted that when the investments are purchased at a price higher than its redeemable value and are intended to be held upto its maturity, the difference between the purchase price and redeemable value of investments were being amortized over the life of the investments. At the same time, the coupon rates of interest earned from the investments are being offered to tax. The Assessee further submitted that when the coupon rate of interest is higher than the prevailing market rate of interest, the price of the security will be higher than the face value as the holder will be receiving a higher stream of income over the remaining maturity of the security. Since, the higher payment is to secure a benefit over a number of years, there is a continuing benefit to the assessee over the life of security and therefore, such amount should be spread over the period of the security. In support of its contention that the sum of ₹ 3,13,60,916/- being amortisation of investments under held to maturity category, should be allowed as a deduction, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not take away the benefit which the appellant was entitled to and he ought to have appreciated that the case law referred were distinguishable and accordingly he ought to have allowed the deduction as claimed in full. 04. The brief facts pertaining to this issue are that while framing the assessment u/s.143(3) of the IT Act, for the assessment year 2007-08, the Assessing Officer noticed that the assessee has claimed a sum of ₹ 26,40,237/- under amortization of premium on investments and the assessee had no explanation for the claim. Hence, he disallowed the same. While disallowing the same, the Assessing Officer followed the decision of the Madras High Court in the case of TN Power Finance and Infrastructure Development Corporation Ltd., v. JCIT (2006) 280 ITR 491. Aggrieved, the assessee moved the matter in appeal before the first appellate authority. 05. The learned Commissioner of Income-tax (Appeals) after considering the submissions made before him and following the decision of the Madras High Court cited supra, came to the conclusion that the Hon'ble Madras High Court has that merely because the RBI had directed the assessee to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) on this issue of amortization of premium on government securities. United Commercial Bank v. CIT (1999) 156 CTR (SC) 380 ; (1999) 240 ITR 355 (SC) and South Indian Bank Ltd., (ITA No.126/Coch/2004, dated.___ Sept, 2005 followed. (ii) The Khanapur Co-op Bank Ltd v. ITO - ITA No.141/PNJ/2011, dated.8.9.2011 : The Hon'ble Bench of Panaji Tribunal had recorded its findings that 6. Likewise, the premium amortized at ₹ 1,78,098/- is claimed to be in respect of securities held under the category 'held to maturity'. The Assessing Officer has taken them as long term investments. In other words, he has accepted the assessee's claim that the securities are 'held to maturity'. That being so and having regard to the CBDT Instruction No.17 of 2008 dated.26.11.2008 as reproduced herein above, the premium paid on such government securities is required to be amortized over the period remaining to maturity . (iii) In the case of Corporation Bank v. ACIT, M'lore in ITA.112/Bang/2008 (Bang), for the assessment year 2004-05, the earlier bench had also held a similar view. In the light of the above discussion and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount was already offered to tax in the assessment year 2001-02. 15. However, the AO while computing income from business added a sum of ₹ 44,80,266/- as excess claim made under section 43B of the Act. 16. Before CIT(A), the Assessee contended that the sum of ₹ 44,80,266 added as excess claim made u/s.43B of the Act needs to be reduced from the taxable income, since the same has been offered for tax for the financial year 2000-01 (A.Y. 2001-02). 17. The CIT(Appeals) did not agree with the submissions made by the assessee and he confirmed the order of the AO observing as follows:- 10.4. I have considered the above. The cited case laws were perused. The gist of the ratio of these case laws is that when the assessee follows mercantile system of accounting, the income is to be taxed when it accrues and not at the time of its receipt. Thus, it has been pleaded that the receipt of ₹ 44,80,266/- had already been taxed in a.Y.2001-02 and therefore, should not be taxed again in this year. I find gaps in this argument. What is being brought to tax here is excess claim of deduction u/s.43B of I.T. Act. No defect has been found out by the A.R. in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Companies Act, 1956 but being a bank governed by the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and deemed as a company under the latter Act could not be construed as a company for the purposes of charging MAT in the light of a decision of Mumbai Bench of the Tribunal in the case of Maharashtra State Electricity Board vs. JCIT reported in 82 lTD 422 and therefore should not have to be subjected to the MAT. 89. The assessing officer rejected the computation of book profits made by the appellant on the ground that it was done as per Schedule-VI of the Companies Act, but had not adopted the profit arrived at in the profit and loss account approved by shareholders in the Annual General Meeting, certified by the auditors, and filed before RBI. He rejected the assessee s contention that the bank was not a company as per Companies Act, 1956, but a statutory corporation governed by the provisions of Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. It had prepared the profit and loss account as per the latter Act, and not in accordance with the provisions of the Companies Act. However, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 990-91, held that, even though the assessee was functionally regulated by Banking Regulations Act, it was equally governed by the provisions of the Companies Act as it was basically a corporate entity. Therefore, the assessee company was bound by the provisions of law contained in section 115J. In these circumstances, the CIT(A) held that there is nothing in the provisions of section 115JB to exclude its applicability to banking companies. As regards the adoption of profit declared in the profit and loss account prepared under the Banking Companies (Acquisition and Transfer of Undertakings) Act, he relied on the decision of the Hon ble Supreme Court has, in case of Apollo Tyres Ltd. Vs. CIT [2002] 255 ITR 273, wherein it was held that the assessing officer had no power to rework the book profit if the profits were computed in accordance with Parts II and II of Schedule VI to Companies Act. Accordingly, he referred to his own order dated 15.01.2010 in ITA No. RB-lIl/UDP/CIT(A)MNG/2008-09 in the assessee s own case for assessment year 1990-91 holding that if the adjustments carried out in preparing the revised profit and loss account were in accordance with the provisions of Parts II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/Hyd/2010 and ITAT Mumbai in the case of ICICI Lombard General Insurance Co. Ltd. dated 10.10.2012 in ITA No.2398/Mum/2009. 97. The learned DR relied on the order of the CIT(A). 98. We have considered the rival submissions of the ld. counsel for the assessee. We find that this issue was considered by the Mumbai Bench of the Tribunal in the case of Krung Thai Bank (supra) and on the above issue held as follows:- 5. Learned counsel for the assessee, however, contends that the provisions of MAT do not apply to the assessee, and , for this reason, very foundation of impugned reassessment proceedings is devoid of legally sustainable merits. His line of reasoning is this. The provisions of MAT can come into play only when the assessee prepares its profit and loss account in accordance with Schedule VI to the Companies Act. It is pointed out that, in terms of the provisions of Section 115JB(2),every assessee is required to prepare its profit and loss account in terms of the provisions of Part II and II I of Schedule VI to the Companies Act . Unless the profit and loss is so prepared, the provisions of Section 115 JB cannot come into play ..... X X X X Extracts X X X X X X X X Extracts X X X X
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