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TMI Blog2013 (3) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... rter on the packing credit advances will not be eligible for cover . So there is no provision to pay interest by ECGC. - CIT(A) rightly deleted the additions. Levy of interest on excess refund u/s 234D .- Regular assessment order u/s 143(3) was passed on 30.03.2006. The D.R. submitted that interest u/s 234D has been introduced with effect from 1.6.2003 without specific reference to any assessment year. The CIT(A) ought to have seen that interest u/s 234D is leviable on or after 2.6.2003 irrespective of the assessment year. - HELD THAT: - Section 234D is applicable on the date on which regular assessment order has been passed and not the year of assessment that falls for consideration. In the present case, regular assessment order was passed on 30.03.2006, the provisions of section 234D came into operation prior to the completion of regular assessment, therefore, will apply to assessee as well. - 98/Mds/2010, 1495/Mds/2008, 2306/Mds/2008, 248/Mds/2010, 1566/Mds/2008 & 393/Mds/2009 - - - Dated:- 5-3-2013 - N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER Appellant by : Mr. C.Naresh, CA Respondent by : Mr. Shaji P.Jacob, Addl. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year. This, obviously, would be subject to satisfaction of the requirements contemplated under section 36(2). Consequently, while answering the question in favour of the assessee, we allow the appeals of the assesses and dismiss the appeals preferred by the Revenue. Further, we direct that all matters be remanded to the Assessing Officer for computation in accordance with law, in the light of the law enunciated in this judgment. S. H. Kapadia C. J. I.: I have gone through the judgment of my esteemed brother, Swatanter Kumar J. and I agree with the conclusions contained therein. However, I would like to give my own reasons. However, the Revenue disputes the position that the proviso to clause (vii) refers only to rural advances. It says that there are no such words in the proviso which indicates that the proviso apply only to rural advances. We find no merit in the objection raised by the Revenue. Firstly, CBDT itself has recognized the position that a bank would be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order of the CIT(A), it would not be apt for the Tribunal to adjudicate the same. The issue was neither raised by the assessee by following proper procedure for taking additional ground in the appeal before the Tribunal. In the absence of the same, this ground of appeal of the assessee is dismissed. 7. The other two issues relating to profit and loss account as per Schedule VI and disallowance of provision for bad debts, wage arrears etc. are consequential to ground no.4. Since ground no.4 has been dismissed, consequential issue arising therefrom are also dismissed. 8. In the result, the appeal of the assessee is partly allowed for statistical purposes. ITA No. 1566/Mds/2008 (A.Y. 2004-05): 9. The appeal has been preferred by the Revenue impugning the order of the CIT(A) LTU Chennai dated 24.04.2008. 10. The first ground of appeal is with respect to depreciation on assets taken over by the assessee from the Bank of Tamil Nadu. The CIT(A) has allowed depreciation on fixed assets taken from Bank of Tamil Nadu Ltd. after its merger with assessee. The DR pointed out that similar issue had come up before the Tribunal in the case of the assessee in ITA No.843/Mds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing a speaking and detailed order citing reasons for allowing or dismissing the issue. This ground of appeal of the Revenue is allowed for statistical purposes. 14. The third ground of appeal of the Revenue is with respect to the direction given by CIT(A) to the Assessing Officer to allow the claim of double taxation relief in respect of foreign branches. The D.R. submitted that the issue is squarely covered in favour of the Revenue by the order of the Tribunal in ITA No.213/Mds/2010 passed in the case of DCIT Vs. Bharat Overseas Bank Ltd. dated 30.10.2012. The DR placed on record a copy of the said order along with written submissions. We find that the issue decided by the Tribunal in Bharat Overseas Bank Ltd. (supra) is similar to the one in hand. The Tribunal in the case of Bharat Overseas Bank Ltd. has held as under:- 10. We have heard both the sides, perused the records and gone through the orders of the authorities below. In this case the assessee is a banking company and also having a branch office at Bangkok. The Assessing Officer in the original assessment order gave tax credit to the assessee on the tax paid at Bangkok at ₹ 1,08,25,780/-. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can raise additional ground if the ground is emanating from the order of the CIT(A) and the issue has been raised before the CIT(A) and inadvertently has not been taken in the original ground of appeal filed before the Tribunal. We, find that the additional ground raised by the Revenue emanates from the impugned order of the CIT(A), we, therefore, take on record the additional grounds of appeal of the Revenue assailing the order of the CIT(A). The first additional ground of appeal raised by the Revenue, is with respect to deletion of disallowance of contribution towards staff welfare fund. The D.R. Submitted that the fund is not recognized one and any contribution made by the employer towards unrecognized welfare fund is not allowable as a deduction. Similar issue has been decided by the Tribunal in ITA No.1146/Mds/2008 relevant to the assessment year 2002-03 in the appeal of the assessee. The findings of the Tribunal in ITA No.1146/Mds/2008 are reproduced herein below:- 37. We have heard the submissions made by both the parties and have perused the orders of the authorities below. As per the contentions of the AR, the liability has arisen out of the agreement between the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of wages etc. It is also an admitted position that consequent to revision in wages the amount has been paid to the staff. A perusal of the order of CIT(A) shows that though in Notes on Account it is stated that the provision of ₹ 25.00 crores was made in an ad-hoc manner during the accounting period, it formed part of the liability incurred by the bank actually in the next accounting year and the bank has not claimed the amount for that year. The expenditure is an business expenditure allowable under section 37 of the Act. Now, the question is when such expenditure should be allowed: Whether it should be allowed in the assessment year relevant to the financial year in which Memorandum of Understanding was signed or in the year of actual payment? The learned AR has stated that the expenditure may be allowed in the year of actual payment. In view of the above discussion and the statement made by the learned AR, we hold that the amount claimed by the assessee towards wage revision be allowed in the year of actual discharge of the said liability. This ground of appeal of the Revenue is thus partly allowed. Since, the issue in hand is identical to the one already adjudicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. For the reasons recorded above, we remit this ground back to the file of the Assessing Officer to decide the issue fresh by taking into consideration the aforementioned judgements of the Hon ble Supreme Court of India. This ground of appeal of the assessee is allowed for statistical purpose. 20. The third ground of appeal of the assessee relates to disallowance under section 14A . The AR makes a statement at the Bar that he is not pressing this ground. Therefore, this ground of appeal of the assessee is dismissed as having not pressed. 21. The fourth ground of appeal of the assessee is with respect to taxability of exchange gain arising on account of return of capital on account of repatriation. Similar issue has come up earlier in ITA Nos.2412 323/Mds/2003 for the assessment years 1994-95 and 1995-96 in the appeal of the assessee and the same was decided by the Tribunal vide order dated 31st January, 2013. The findings of the Tribunal on the issue are reproduced herein below:- 13. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. The CIT(A) has held as under: 8. I have carefully cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken note of the twin points of time at which the liability to tax is attracted, viz: the accrual of income or its receipt, yet, the substance of the matter is income and if income does not result at all, there cannot be a tax, even though, for purposes of book-keeping, an entry is made about an hypothetical income which does not materialise and a mere book-keeping entry cannot be income unless income has actually resulted. The question whether there is a loss or profit on foreign exchange transactions can be ascertained only after the settlement of the forward contracts and not before and so long as that stage has not been reached, the loss can only be notional and not actual or real and a notional loss cannot be claimed as a deduction. Whether a loss or profit, the principle applicable would be the same and the estimated profit, till the settlement of the forward foreign exchange contracts, could be regarded only as notional and not actual or real and such notional profits cannot be assessed. 250 ITR 146 This case also relates to the decision of the High Court in the appellant's own case. It has been held that (ii) That the provision made in the accounts towards the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital nature. It is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper principles of accountancy, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee. Following the said decision the Bombay High Court in case of Commissioner of Income Tax vs Bank of India reported in 218 ITR 371 has held as under: Where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by him, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by him on revenue account or as a trading asset or as part of circulating capital in the business. It would, however, be profit or loss of capital nature, if the foreign currency is held as a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrued to the assessee. In the case of Sutlez Cotton Mills Ltd vs CIT, 116 ITR 1, the Hon'ble Supreme Court has held as under: Where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held him, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. 15. No material could be brought before us to show that the foreign currency which was brought back by the assessee was held as capital asset or fixed asset of the assessee and not its trading asset. Thus, we do not find any good reason to interfere with the orders of the lower authorities. They are confirmed and the ground of appeal of the assessee is dismissed. Representatives of both the sides are in consonance that the issue is covered by the order of the Tribunal. Respectfully following the aforesaid decision of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to which proviso to sec 211(2) of the Companies Act 1956 applies, will not be liable to be taxed under sec 115JB. 14. The Mumbai Tribunal in the case of Krung Thai Bank Vs. JCIT (133 TTJ 435), to which one of us is a party has held that provision of Sec.115JB cannot be applied to the banking company. 15. In view of the above, as the amendment to sec 115JB by the Finance Act 2012 will be applicable only from the AY 2013-2014, we uphold the claim of the assessee that provision of Sec.115JB will not be applicable to the Assessee Bank and set aside the assessment made u/s 115JB on the Assessee company. Similar view has been taken by the Mumbai Bench of the Tribunal in the case of ICICI Lombard General Insurance Co. Ltd. in ITA No.2398/Mum/2009, wherein the Tribunal relying on the order of the Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad (supra) has concluded that the provisions of section 115JB are not applicable in the case of the assessee. On the other hand, the DR has vehemently argued that the assessee is a company and therefore, the provisions of section 115JB are applicable on the assessee. In order to support his contentions, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been decided in para 13 of this order. For the reasons recorded in para 13 of the order, we reverse the findings of the CIT(A) on this issue and allow this ground of appeal of the Revenue. 26. The Revenue has raised additional grounds of appeal. For the reasons recorded in para 14 of this order in the appeal of the Revenue i.e. ITA No.1566/Mds/2008 for the assessment year 2004-05 we allow the prayer of the learned DR and take on record additional grounds raised by the Revenue for adjudication. 27. The first additional ground of appeal of the Revenue is with respect to applicability of provisions of section 115JB in the case of the banks. Similar issue has been raised by the assessee in ITA No.2306/Mds/2008 for the assessment year 2005-06, wherein we have concluded this issue in favour of the assessee vide para 22 and 23 of the order hereinabove. For the reasons recorded in para 22 and 23, we dismiss this ground of appeal of the Revenue. 28. The second ground raised by the Revenue is with respect to disallowance of contribution of staff welfare fund. This issue was earlier raised by the Revenue and in ITA No.1566/Mds/2007 for the assessment year 2004-05. We have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price. 3. A method of accounting adopted by the taxpayer consistently and regularly, cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation. 4. The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognized limits. 5. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. 3. Following the principles laid down by the Hon'ble Supreme Court, this Court has clearly held that the assessee is entitled to change the method of valuation of Government securities to market value from cost and claim depreciation on the difference in the diminution value. The Tribunal also rightly pointed out the above ruling and held that the securities are trading assets of the bank and the loss arising on its sale is an allowable deduction. The loss on sale of securities is a revenue loss considering that the securities are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s.36(1)(viia) of the Income Tax Act, 1961. Though the word used in this provision is total income and the definition of total income u/s.2(45) of the Income Tax Act, 1961 which includes all income of the assessee as referred in Section 5 and computed as per the manner laid down in this Act. Since the definition of Section 2 begins with the term unless context otherwise requires which means that the definition provided u/s.2 of the Income Tax Act, 1961 are not exclusive. Moreover, as per Section 2(45) of the Income Tax Act, 1961 income of the assessee is to be computed as per the manner prescribed in this Act. The purpose of total income u/s.36(1)(viia) of the Income Tax Act, 1961 is for computing the deduction for computation of business income as per the provisions of section 28 to 43D of the Income Tax Act, 1961. Therefore, the term total income referred in Clause (viia) of Subsection 1 of Section 36 of the Income Tax Act, 1961 is used for the purpose of statutory deduction available for business income. In the case of West Bengal Industrial Development Corporation Ltd. Vs. JCIT.(supra) the Kolkata Benches of this Tribunal has held as under:- 2. We have heard both the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee before deducting the deduction under this Clause and deductions under Chapter 6A of the Income Tax Act, 1961. Therefore, the brought forward losses would not be deducted while computing the total income for the purpose of Section 36(1)(viia). Since the deduction is available only for computing the business income under the clause, therefore the total income also refers the income of the assessee from profit and gain from a business and shall not include the income other than the business income. We find that issue in hand is identical to the one already decided by the Tribunal in ITA No.1147/Mds/2008 in assessee s own case. Respectfully following the same, we dismiss this ground of the appeal of the Revenue. 36. The second ground of appeal raised by the Revenue is in respect of interest received from Export Credit Guarantee Corporation (ECGC). The DR submitted that no evidence was furnished before the Assessing Officer for claiming the export credit by the assessee. On the other hand, the learned AR strongly supporting the order of CIT(A) on the issue stated that CIT(A) has passed a reasoned order after examining ECGC scheme. There is no provision to pay interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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