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TMI Blog2016 (5) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Appeal No. 300/CIT(A)-VI/07-08/Cir-6 dated 30-11-2009 for Asst Year 2005- 06 ; Appeal No. 625/CIT(A)-VI/08-09/Cir-6/Kol dated 29-12-2009 for Asst Year 2006-07 ; and Appeal No. 853/CIT(A)/VI/2009-10/Cir-6/Kol dated 19-11- 2010 for Asst Year 2007-08 ; Against the respective order of assessments framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. As identical issues are involved in these years except change in figures, they are taken up together and disposed off by this common order for the sake of convenience. 3. The ground no.1 raised by the assessee for the Asst Years 2003-04 and 2004-05 are general in nature and hence not adjudicated herein. 4. DISALLOWANCE OF BAD DEBTS WRITTEN OFF IN RESPECT OF NONRURAL ADVANCES CLAIMED U/S 36(1)(vii) OF THE ACT GROUNDS 2 3 ASST YEAR 2003-04 GROUNDS 2 , 3, 4, 5 6 ASST YEAR 2004-05 GROUND 1 of Assessee Appeal - ASST YEAR 2007-08 The brief facts of this issue is that the assessee claimed deduction towards bad debts written off u/s 36(1)(vii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A) Bad Debts Written Off (relating to rural branches) ₹ 1,31,21,100/- 3B) Bad Debts Written Off (other than rural advances) ₹ 239,44,04,842/- We find that the assessee had duly written off the debts in its books of accounts as mandated by RBI regulations through reversal from provision account. This amounts to actual write off in its books of accouns. We find that this issue is already covered in favour of the assessee in assessee s own case by the co-ordinate bench decision of this tribunal for the Asst Years 1998-99, 1999-2000, 2001-02 2002-03 and also covered by the decision of the Hon ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT reported in 343 ITR 270 (SC) . The Learned DR fairly conceded that the issue is covered by the decision of the Hon ble Apex Court but the figures stated by the Learned AR requires verification and confirmation by the Learned AO. Hence in these facts and circumstances, we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cannot be any question of considering claim for any deduction u/s 36(1)(viia) of the Act if there is no provision for bad and doubtful debts made by the assessee bank because the clause (viia) starts with the phrase In respect of any provision for bad and doubtful debts made by . No doubt that the deduction is to be restricted to 7.5% of total income and 10% of aggregate rural advances, but the result of the such workings cannot be allowed in excess of the provision charged to profit and loss account for the year. We find that the issue is squarely covered against the assessee by the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala vs CIT reported in (2005) 272 ITR 54 (P H) ( supra) wherein it was held as under:- A bare perusal of the above shows that the deduction allowable under the above provisions is in respect of the provision made Therefore, making of a provision for bad and doubtful debt equal to the amount mentioned in this section is a must for claiming such deduction The Tribunal has rightly pointed out that this issue stands further clarified from the proviso to clause (vii) of section 36(1) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the assessee in ITA No. 1329/Kol/2008 is dismissed as not pressed. 7. DISALLOWANCE OF PRIOR PERIOD EXPENSES ₹ 8,09,20,734/- Ground No. 5 for Asst Year 2003-04 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 5 raised by the assessee in ITA No. 1329/Kol/2008 is dismissed as not pressed. 8. DISALLOWANCE U/S 14A OF THE ACT Ground No.6 for ASST. YEAR 2003-04 Ground Nos. 7 8 FOR ASST. YEAR 2004-05 Ground No. 2 for ASST. YEAR 2005-06 Additional Grounds 1 to 3 for ASST. YEAR 2007-08 The brief facts of this issue is that the assessee had derived dividend income from shares held as stock in trade and interest income out of tax free bonds. The assessee claimed that it had not incurred any expenditure for the purpose of earning these exempt incomes and therefore objected to the disallowance u/s 14A of the Act. It was also further argued by the assessee that the shares were not held as investments for the purpose of earning dividend income (which is exempt) and instead the same were held as stock in trade, wherein the profit derived on sale of such shares would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1.4.1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. The Hon ble Jurisdictional High Court in the case of CIT vs M/s R.R.Sen Brothers P Ltd in GA No. 3019 of 2012 in ITAT NO. 243 of 2012 dated 4.1.2013 had held as under:- The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income tax. The tribunal has computed expenditure at 1% of such dividend income, which, according to them, is the thumb rule applied consistently. We find no reason to interfere. The appeal is dismissed. Respectfully following the decision of the Hon ble Calcutta High Court (supra), we direct the Learned AO to disallow 1% of exempt income under this issue and accordingly, the grounds raised by the assessee are set aside to the file of Learned AO to make addition as directed above. Accordingly, the grounds raised by the assessee in this regard are allowed for statistical purposes. 9. EXCLUSION OF PROFIT ON SALE OF INVESTMENT AND INCLUSION OF PROFIT / LOSS AS PER INVESTMENT TRADING ACCOUNT ₹ 344,84,22,513/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held that the assessee bank had no right to calculate profit and loss arising out of investment trading account as it had excluded the same from the preparation of its final accounts. He held that unless a bank itself accepted the position by incorporating such loss / profit in the final accounts, it would have no right to put across such hypothetical loss for the purpose of income tax assessment. On appeal, however, the Tribunal set aside the order of the Commissioner and accepted that of the IAC. On the revenue s appeal, the High Court, rejecting the Tribunal s order, affirmed the order of the Commissioner. Held :- What is taxable under the Act is the rea11y accrued or arisen income. On the basis of the method of accountancy regularly employed by the assessee, the real income is pointed out in {he income-tax return submitted by the assessee. This cannot be ignored by holding that in a balance sheet which is required 10 be statutorily maintained in a particular form, market value of the shares and securities is not mentioned or is mentioned ill brackets. For the purpose of income-lax whichever method is adopted by the assessee, a true picture 0f the profits and gains, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at cost or market value, whichever was lower. That practice was accepted by the department and there was no justifiable reason for not accepting the same. Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That could not be discarded by the departmental authorities, on the ground that the assessee was maintaining balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods jar valuing its stock-in-trade (investments) because the bank was required to prepare balance sheet in the prescribed form and it had no option to change it. For the purpose of income-tax as stated earlier, what is to be taxed is the real income which is to be deduced on the has is of the accounting system regularly maintained by the assessee and that was done by the assessee in the instant case. Therefore, the order of the High Court was to be set aside. Respectfully following the decision of the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Malaysia Whereas the annexed Agreement between the Government of the Republic of India and the Government of Malaysia for the avoidance of double taxation and the prevention of fiscal evasion with respect to Taxes on income has come into force on the 14th August, 2003, on the notification by both the Contracting States to each other, under Article 28 of the said Agreement, of the completion of the procedures required by their respective laws for bringing into force of the said Agreement. Now, therefore, in exercise of the powers conferred by section 90 of the Income-Tax Act, 1961 (43 of 1961) , the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India. Notification ; NO. GSR 667(E), dated 12-10-2004. ARTICLE 28 ENTRY INTO FORCE 1. The Contracting States shall notify each other in writing, through diplomatic channels, of the completion of the procedures required by the respective laws for the entry into force of this Agreement. 2. The Agreement shall enter into force thirty days after the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EAR 2007-08 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 3 raised by the assessee in ITA No. 2286/Kol/2010 is dismissed as not pressed. 12. ADDITION TOWARDS GAIN ON ACCOUNT OF SECURITIZATION ₹ 2,81,00,000/- GROUND NO. 4 OF ASST YEAR 2007-08 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 4 raised by the assessee in ITA No. 2286/Kol/2010 is dismissed as not pressed. 13. DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT U/S 43B OF THE ACT ₹ 30,75,22,434/- GROUND NO. 5 OF ASST YEAR 2007-08 The brief facts of this issue is that the assessee made provision for leave encashment in its books of accounts and claimed the same as deduction. The Learned AO invoked the provisions of section 43B(f) of the Act and disallowed the same on the ground that the same is not paid by the assessee. This action of the Learned AO was confirmed by the Learned CITA on first appeal. Aggrieved, the assessee is in appeal before us . 13.1. We have heard the rival submissions. We find that this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to its operations in Hongkong. The Learned AO disallowed the claim on the contention that the said relief is available only for taxes paid under normal provisions of the Act and not when taxes are paid u/s 115JB of the Act. This action was not endorsed by the Learned CITA who directed the Learned AO to grant relief for the same. Aggrieved , the revenue is in appeal before us. 14.1. We have heard the rival submissions. We find that the provisions of section 91 of the Act did not distinguish between normal provisions and provisions of section 115JB of the Act when it comes to claiming relief u/s 91 of the Act in respect of taxes paid for income earned in another country with which DTAA does not exist. We find that it is clearly specified in section 91 of the Act that if the income in respect of which the assessee has paid income tax in any country, with which no agreement u/s 90 exists, and such income is taxable in India, the assessee shall be entitled to relief u/s 91 from the Indian Income tax payable. We are in agreement with the argument of the Learned AR in this regard and also on the reliance placed on the co-ordinate bench decision of Mumbai Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITY OF PROVISIONS OF SECTION 115JB OF THE ACT TO ASSESSEE BANK ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2003-04 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2004-05 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2005-06 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2006-07 GROUND NO. 6 OF A EE APPEAL - ASST YEAR 2007-08 We find that this issue is covered by the co-ordinate bench decision of this tribunal in assessee s own case in ITA No. 1768/Kol/2009 dated 27.11.2015 for Asst Year 2002- 03, wherein it was held that the provisions of section 115JB of the Act are not applicable to the assessee bank and the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012. Accordingly, the additional grounds 1 to 4 raised by the assessee for Asst Years 2003-04 to 2006-07 and Ground No. 6 raised by the assessee for Asst Year 2007-08 are allowed. 16. DISALLOWANCE OF VARIOUS PROVISIONS WHILE COMPUTING BOOK PROFITS U/S 115JB OF THE ACT GROUND NO. 9 - ASST YEAR 2003-04 GROUND NOS 3 4 - ASST YEAR 2005-06 GROUND NO. 2 - ASST YEA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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