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TMI Blog2015 (10) TMI 2009X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has raised ground nos.1 to 5 as under; "1. The order of the learned CIT(A) is against the law and facts of the case. 2. The learned CIT(A) erred in not accepting the revised recasted profit & loss accounts as submitted by the Bank. 3. The learned CIT(A) erred in treating that computation of AO was good even when it was accepted that the Financial Statement prepared by the bank was not accordance with the provisions of part-II and III of Companies Act, 1956 but as per Banking Regulation Act. 4. The learned CIT(A) failed to appreciate the fact that non-submissions of Form No.29B was only a technical error. 5. The learned CIT(A)-II erred in confirming the addition made for computation of MAT u/s 115JB expenditure incurred for earning tax free income as the same is allowed in regular computation". 3. However, the assessee has now raised additional ground against the order passed u/s 250 of the IT Act, 1961 which reads as under; " Without prejudice to the other grounds, the learned CIT(A) failed to appreciate the fact that the provisions of section 115JB of the IT Act, 1961 are not applicable to the appellant". 4. The learned counsel for the assessee drew our attention to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the result, the appeal of the assessee is allowed. ITA No.596(BNG)/2010 : Assessment Year : 2006-07 Dept. appeal 8. We shall take up ground no.2 in ITA No.596(B)/2010. With respect to deduction u/s 36(1)(viia) of the IT Act, 1961. "2. The CIT(A) erred in directing the AO to allow the claim of deduction u/s36(1)(viia) amounting to Rs. 143,12,69,349/- in excess of the provisions made in the accounts without appreciating that the provisions of section 36(1)(viia) provides for limiting the deduction tot eh amount of provisions made in the accounts. We find from the AY: 2008-09 in ITA No.578(Bang)/2012 dated 27-02-2015 the Co-ordinate Bench of this Tribunal has discussed the similar issue as under; "4. The AO disallowed claim for deduction of Rs. 192,57,72,764/- out of the total claim of the Assessee for deduction of Rs. 200,03,24,219/- on the ground that the provision for bad and doubtful debts in respect of rural advances was created by debit to profit and loss account of only a sum of Rs. 7,45,51,455 whereas the claim for deduction actually made u/s.36(1)(viia) of the Act was a sum of Rs. 200,03,24,219/-. The AO was of the view that as laid down by the Hon'ble Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Bank (supra), hold that claim for deduction u/s.36(1)(viia) of the Act cannot be greater than the amount debited to the profit and loss account as provision. 9. To the alternate submissions made by the respondent bank that the assessee should be allowed deduction on account of Provision for Bad & Doubtful Debts (PBDD) u/s 36(1)(viia) of the IT Act, 1961 for the entire permissible limit because the provision is whatever is the shortfall between the eligible limit and the PBDD made in the books of accounts by the assessee was made excess provision in subsequent years and therefore, the entire amount should be made as deduction. It was further submitted in the alternate claim the provision made in subsequent years was much more than the eligible limits u/s 36(1)(viia) of the Act and such excess will take care of the shortfall of PBDD in the books of accounts. The learned counsel for the assessee filed a chart before us which is annexed in the annexure herein. (Annexure-I) 10. The learned counsel for the assessee in support of the proposition that if there is shortfall in the PBDD made in the books of accounts to the eligible limits and if the shortfall is made good by provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the assessee lay down proposition that the assessee should be given liberty to create a reserve in the books of accounts of the relevant AY. For the reasons given above, we reject the second alternate submission made by the learned counsel for the assessee. Thus the assessee will be entitled to deduction u/s.36(1)(viia) of the Act of Rs. 100,55,67,213/-Ground No.2 of the Revenue is allowed to this extent". Respectfully following the decision of the Co-ordinate Bench of this Tribunal the revenue appeal is partly allowed. 12. Ground no.3 reads as follows; "3. The CIT(A) erred in directing the AO to allow deduction of Rs. 34,45,27,639/- u/s 36(1)(viia) of the IT Act in respect of bad debts written off pertaining to non-rural branches without adjusting the same against the provisions made u/s 326(1)(viia). The CIT(A) ought to have appreciated the fact that the decision of Hon'ble Kerala High Court in the case of South Indian Bank Vs CIT (262 ITR 579) has been reversed by the full bench of the Hon'ble High Court on 16-12-2009". 12.1 We find that the issue is covered by the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd., 18 Taxmann.com 282 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no merit in the objection raised by the revenue. Firstly, the CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off would be limited to the excess of the amount written off over the amount of the provision allowed under clause (viia). Thus, the proviso to clause (vii) stood introduced in order to protect the revenue. It would be meaningless to invoke the said proviso where there is no threat of double deduction in case of rural advances, which are covered by the provisions of clause (viia) there would be no such double deduction. The proviso limits its application to the case of a bank to which clause(viia) applies. Clause(viia) applies only to rural advances. This has been explained by the circulars issued by the CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 59. The ld. counsel for the assessee, however, submitted that in the assessee's own case for the A.Y. 2005-06, this Tribunal has confirmed the order of the CIT(A), deleting identical addition made by the AO. Our attention was also drawn to the order of the Tribunal in assessee's own case in ITA No.492/Bang/2009 for the A.Y. 2005-06, order dated 13.01.2012, wherein the Tribunal had to deal with identical issue as to whether the CIT(A) was correct in deleting the addition made by the AO on account of profit on sale of investments of Rs. 200,77,13,662/- and deleting the action of the AO in disallowing loss claimed on treating investments as stock-in-trade by drawing the investment trading account of Rs. 775,96,55,047. The Tribunal held "16. We have heard both sides and find that the Supreme Court in the case of UCO Bank in 240 ITR 355 has held as under : "In our view, as stated above, consistently for 30 years, the assessee was valuing the stock-intrade at cost for the purpose of statutory balancesheet, and for the income-tax return, valuation was at cost or market value, whichever was lower. That practice was accepted by the Department and there was no justifiable reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnataka in the aforesaid case followed its own decision rendered in the case of Karnataka Bank Ltd. v. CIT in ITA No.172/2009 rendered on 11.01.2013, wherein the Court took the view that depreciation claimed on investments 'held on maturity' by a bank has to be treated as stock-in-trade in accordance with RBI guidelines and CBDT Circular. It was his submission that the later decision of the Hon'ble Karnataka High Court has to be followed. 62. We have given a careful consideration to the rival submissions and are of the view that the contentions put forth on behalf of the assessee deserve to be accepted. The Tribunal in assessee's own case on an identical issue for the A.Y. 2005-06 has upheld the claim of the assessee. The later decision of the Hon'ble High Court of Karnataka is also in favour of the assessee. In such circumstances, we are of the view that the issue raised by the revenue in its appeal is without merit. Consequently, the same is dismissed." The above decision squarely covers the issue in favour of the assessee. Respectfully following the same, we uphold the order of the CIT(A) and dismiss the relevant grounds of appeal of the Revenue." Respectfully following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under; " We have given a very careful consideration to the rival submissions. In the present case, the claim of the assessee before the AO that tax free income for the bank is mainly from investments held by the bank. The investment activities of the bank are carried out by the Treasury Department at Head Office. Even without earning any free income, these expenditure would have been incurred by the bank since the bank has to hold SLR securities to carry on the business and the expenditure is of fixed in nature. Therefore, there is no expenditure incurred directly by the bank for earning any tax free income. Since the expenditure would have been incurred by the bank even without the earning of tax free income, no part of the expenditure can be related to earning the tax free income. In the light of the above undisputed fact and in view of the decision of the Hon'ble Karnataka High Court in the case of CCI Ltd. (supra), we are of the view that no disallowance can be made u/s.14A of the Act. The addition made in this regard is directed to be deleted. The relevant grounds of appeal of the assessee are allowed". Following the Co-ordinate Bench decision in ITA No.578(B)/2012(Supra) w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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