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TMI Blog2015 (12) TMI 1747X X X X Extracts X X X X X X X X Extracts X X X X ..... n the absence of any details having been furnished as to the date when the said items were put to in use, which in turn were purchased on 30.03.2007, we uphold the order of CIT(A) in denying the deduction on account of depreciation on the said items of computer expenses. Further, two of the items have been purchased in the succeeding year i.e. on 28.04.2007 and 30.06.2007. No depreciation on the said items is allowable in the hands of the assessee during the instant assessment year. Coming to the balance items purchased by the assessee which were held to be capital expenditure by the Assessing Officer and the addition was made to that extent in the hands of assessee, the assessee has revised its claim in respect of the same that the depreciation on such capital expenditure should be allowed in the hands of assessee. We find merit in the plea of the assessee in view of the evidence furnished on record in respect of the said assets being purchased in the months of November, 2006 and February, 2007 and once the asset has held to be capital in nature, depreciation on the same as per law, is allowable. We find merit in the plea of the assessee and accordingly, direct the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on account of interest expenditure to which the provisions of section 194A of the Act are applicable, the onus was upon the assessee to deduct TDS and in absence of the same, the said expenditure is liable to the disallowed in the hands of assessee, in view of the provisions of section 40(a)(ia) of the Act. We uphold the order of CIT(A) in this regard. Second proviso to section 40(a)(ia) inserted by the Finance Act, 2012 - Held that:- We deem it fit to restore the matter back to the file of Assessing Officer, who shall consider the plea of the assessee based on the provisions of the Act inserted by the Finance Act, 2012 w.e.f. 01.04.2013 and in line with earlier order of the Tribunal dated 06.01.2014 Depreciation on expenditure incurred on computers and software purchased in earlier years - Held that:- We find merit in the plea of the assessee, in view of the order passed in assessment year 2007-08, wherein, certain expenditure incurred by the assessee was capitalized. The Assessing Officer is directed to allow the depreciation on the items capitalized in assessment year 2007-08 on which directions have been given to allow the depreciation. - ITA Nos.1108 & 1109/PN/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evoid of merits and being legally unsustainable the same may please be vacated. It may please be held that the all the securities held by the appellant bank under all categories, are Stock in Trade and loss arising on sale of the same is a loss arising out of the banking business carried on by the appellant and the deduction of the said amount as a business loss may please be allowed to the appellant. 4. The disallowance made by the learned Assessing Officer in respect of Commission paid by the appellant to Pigmy deposit agents amounting to ₹ 17,09,767.00 u/s 40[a] [ia] of the I.T. Act 1961 being patently illegal, bad in law and void ab initio the same may please be deleted and the deduction of the same may please be allowed by holding that there is no estoppel in taxation and further the appellant cannot be denied any lawful deduction on the ground of his inadvertent failure to raise the necessary ground of appeal before the first appellate authority. 5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds necessary at the time of hearing of the appeal. 4. The assessee has also raised additional grounds of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the orders of authorities below and order of Tribunal in The Cosmos Co-op. Bank Ltd. Vs. DCIT in ITA Nos.460 461/PN/2012, relating to assessment year 2007-08 2008-09, order dated 23.01.2014. 8. We have heard the rival contentions and perused the record. The assessee for the year under consideration was a cooperative bank registered under the Hyderabad Co-operative Societies Act. The assessee had furnished the return of income declaring total income of ₹ 2,21,42,030/-. On verification of Profit Loss Account, the Assessing Officer noted that the assessee had made provision for Standard Assets totaling ₹ 17,82,000/-, which was added back in the computation of income and subsequently was reduced from the total income. The Assessing Officer held that the same was not an allowable expenditure on account of bad and doubtful debts as available under section 36(1)(viia) of the Act. The CIT(A) upheld the order of Assessing Officer. 9. We find that similar issue of allowability of provision made on account of Standard Assets being eligible under section 36(1)(viia) of the Act, arose before the Pune Bench of Tribunal in The Cosmos Co-op. Bank Ltd. Vs. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to explain the nature of expenditure with documentary evidence. The Assessing Officer noted that sum of ₹ 48,44,760/- pertains to expenditure on software and computer purchases and installation charges thereof, which were capital in nature, hence, the said expenditure was not allowable. On further verification, the Assessing Officer also noted that the expenditure does not pertains to assessment year 2007-08, but pertains to assessment year 2008-09. A show cause notice was issued to the assessee in this regard. In reply, the assessee explained that the expenditure was incurred for computer machinery during the year 2006-07 and the same may be allowed. The Assessing Officer rejecting the explanation of the assessee, disallowed expenditure of ₹ 48,44,760/- being capital in nature as well as expenditure not pertaining to the present assessment year. 13. The CIT(A) noted the plea of the assessee vide letter dated 19.08.2010, under which the assessee had accepted that the said expenditure was capital expenditure and not revenue expenditure and a request was made to allow depreciation on the said capital expenditure. However, in subsequent submissions dated 07.12.2010, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of CIT(A). 17. We have heard the rival contentions and perused the record. The issue arising before us is in relation to the claim of depreciation on assets purchased by the assessee in the form of certain computers, their accessories and software. The assessee has furnished the break-up of expenditure totaling ₹ 48,44,760/- at page 42 of the Paper Book. The learned Authorized Representative for the assessee has fairly conceded that for item Nos.1 to 4 and 11, there is no evidence of the said items being put to use during the instant assessment year and the addition to that extent merits to be upheld in the hands of assessee being capital in nature. The details of the expenses are as under:- Sr. No. Date Invoice No. Name of the party Amount (Rs.) 1 30.06.2007 2007-2008/06/017 Magic e-money Limited 28,70,000 2 28.04.2007 37 Cute Computers 1,48,000 3 30.03.2007 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee being a cooperative bank was governed by the Banking Regulation Act, 1949, for which the Reserve Bank of India had issued guidelines which were termed as prudential norms. Reference was made to the guidelines issued by the RBI, under which the Cooperative banks were required to classify their entire investment portfolio under three categories i.e. (1) Held To Maturity (HTM), (2) Available For Sale (AFS) and (3) Held For Trade (HFT) . The categorization of investments was to be decided at the time of acquisition. Further, the investments could be shifted to / from Held To Maturity category with the approval of the Board of Directors once in a year at the beginning of accounting year and further shifting could not be allowed during the remaining part of accounting year. Further, the banks could shift the investments from AFS category to HFT category with the approval of the Board of Directors. Further, the investments held as HFT category could not be shifted to AFS category. However, only under exceptional circumstances, the same could be shifted with the approval of the Board of Directors. The Assessing Officer noted that the assessee had shifted the category of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd s Resolution dated 14.12.2006. Thereafter, the said securities were sold and loss of ₹ 235.66 lakhs was booked as business loss. The case of the authorities below was that the securities held in the category of HTM were in the nature of capital assets and the loss incurred on the sale of the same was capital loss. The contention of the assessee that it had converted the said category from HTM to AFS was also not accepted by the authorities below since as per the RBI guidelines, in case any shifting in the category of securities is to be carried out, then the same is to be carried out at the beginning of the year, whereas, in the case of the assessee, the said shifting was as per the Board s Resolution dated 14.12.2006 i.e. towards the end of accounting period. The case of the assessee before us is that irrespective of the category under which the securities are being held, the same are in the nature of stock-in-trade and once the same are sold in the open market, the loss arising thereof, is business loss. We are in conformity with the above said plea of the assessee, in view of the ratio laid down by the Hon ble Kerala High Court in CIT Vs. Nedungadi Bank Ltd. (2003) 264 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of appeal raised by the assessee is not an additional ground of appeal raised before us. The assessee has raised an additional ground of appeal on a different issue. In view thereof, where the addition has been accepted by not filing any ground of appeal before the CIT(A), the assessee is barred from raising any ground of appeal by way of regular grounds of appeal against the order of CIT(A). In case, the assessee was aggrieved, he could have raised an additional ground of appeal. However, in the absence of the same, we dismiss the ground of appeal No.4 raised by the assessee. 31. Now, coming to the additional ground of appeal i.e. the claim of deduction under section 36(1)(viia) of the Act. 32. The learned Authorized Representative for the assessee pointed out that in respect of the provision for bad and doubtful debts to be allowed under section 36(1)(viia) of the Act @ 10% or 7 % of advances, as the case may be, no issue was admittedly raised before the Assessing Officer or the CIT(A). However, the deduction was claimed as per the formula, which is higher than the provision. The assessee had made provision to the extent of ₹ 17,85,60,000/-, which has been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failed to appreciate that the provision of ₹ 4,18,000.00 made by the appellant on Standard Assets is a provision for bad and doubtful debts which qualifies, for deduction u/s 36 [1][viia] of the I.T. Act 1961. In the circumstances the learned CIT(A) ought to have allowed the deduction of the said provision u/s 36[1][viia] of the I.T. Act 1961. The said deduction may please be allowed to the appellant. 4. The learned CIT(A) has erred in sustaining the disallowance made by the learned Assessing Officer in respect of Commission paid by the appellant to Pigmy deposit agents amounting to ₹ 16,89,806.00 u/s 40[a][ia] of the I.T. Act 1961. The said disallowance being patently illegal, bad in law and void ab initio the same may please be deleted. 5. The learned CIT(A) has erred in sustaining the disallowance made by the learned Assessing Officer in respect of Legal Charges paid by the appellant amounting to ₹ 2,68,598.00 u/s 40[a][ia] of the I.T. Act 1961. The said disallowance being patently illegal, bad in law and void ab initio the same may please be deleted. 6. The disallowance made by the learned Assessing Officer in respect of Professional Fees paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts return of income on 11.09.2009 for the year under consideration declaring total income at ₹ 14,57,840/-. In the scrutiny assessment, the Assessing Officer noticed that the assessee had not credited interest receivable or accrued on non-performing assets (hereinafter referred to as NPA) to its profit and loss account for financial year 2008- 09. The Assessing Officer after rejecting the various contentions of the assessee has held that the RBI guidelines are not intended to regulate the income tax law and the assessee was liable to be assessed on accrual basis u/s.5 of I.T. Act for the reasons (i) benefits extended to schedule bank, public financial institutions, public companies for the purpose of section 43D were not extended to a co-operative bank and (ii) the assessee was following mercantile system of accounting and not cash system. Ultimately the Assessing Officer taxed on accrued interest of ₹ 25,20,022/- advance claimed to be NPA account. The matter was carried before the first appellate authority wherein, following the Osmanabad Janta Sahakari Bank Ltd. in ITA No.795/PN/2011, the CIT(A) has decided the issue in favour of the assessee and the same has been opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of authorities below and dismiss the ground of appeal No.3 raised by the assessee. 46. The issue in ground of appeal No.4 raised by the assessee is in respect of commission paid to Pigmy deposit agents amounting to ₹ 16,89,806/-, in ground of appeal No.5 is in respect of legal charges of ₹ 2,68,598/- and in ground of appeal No.6 is in respect of professional fees of ₹ 22,000/-. 47. The disallowance was made by the Assessing Officer, in view of the provisions of section 40(a)(ia) of the Act for non-deduction of tax at source out of above said expenditure incurred by the assessee. 48. The learned Authorized Representative for the assessee fairly admitted that the TDS was required to be deducted. However, where the payee has paid taxes, then no disallowance is to be made in the hands of assessee, in view of the ratio laid down by the Pune Bench of Tribunal in ITO Vs. M/s. Gaurimal Mahajan Sons in ITA No.1852/PN/2012, relating to assessment year 2008 -09, order dated 06.01.2014, consequent to the amendment in the Act. 49. The learned Departmental Representative for the Revenue relied on the orders of authorities below. 50. We have heard the rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal and the correctness or otherwise of the contentions raised was not examined by the lower authorities. Therefore, the Tribunal restored the matter back to the file of the Assessing Officer for examination afresh, following the decision of the Cochin Bench of the Tribunal in the case of Antony D. Mundackal (supra) in a similar circum stance. The Ld. Representative submitted that the matter be restored back to the file of the Assessing Officer in the light of the order of the Tribunal dated 06,01.2014 (supra). The aforesaid plea of the respondentassessee has not been seriously opposed by the Ld. Departmental Representative appearing for the Revenue. 5. Following the aforesaid precedent, we therefore deem it fit and proper to restore the matter back to the file of the Assessing Officer who shall consider the plea of the assessee based on the second proviso to section 40(a)(ia) of the Act inserted by the Finance Act w.e.f. 01.04.2013 in the light of the directions of the Tribunal contained in its order dated 06.01.2014 (supra). Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard before passing an order afresh on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd merit in the plea of the assessee, in view of the order passed in assessment year 2007-08, wherein, certain expenditure incurred by the assessee was capitalized. The Assessing Officer is directed to allow the depreciation on the items capitalized in assessment year 2007-08 on which directions have been given to allow the depreciation. The additional ground of appeal No.2 is thus, allowed. The grounds of appeal raised by the assessee are thus, partly allowed. 56. The assessee in ITA No.2330/PN/2012 has raised the following grounds of appeal:- 1. In the facts and circumstances of the case and m law the learned CIT(A) has erred in rejecting the claim of deduction of ₹ 28,65,71,088.00 made by the appellant bank u/s 36[1][viia] of the I.T. Act 1961 on the ground that since the said amount of provision was not debited by the appellant bank to its Profit and Loss Account for the year under consideration, the said deduction was not allowable to the appellant assessee. The said finding being arbitrary, perverse, patently illegal and being bad in law, the same may please be vacated and the deduction as claimed by the appellant be allowed. 2. It m ay please be held that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the issue is covered against the assessee by way of decision of Pune Bench of Tribunal and following the same parity of reasoning as while deciding the additional ground of appeal No.1 in assessment year 2007-08, we dismiss the grounds of appeal No.1 and 2 raised by the assessee. 59. Now, coming to the alternate plea raised by way of ground of appeal No.3, which is the deduction on account of provision on Standard Assets debited to the Profit Loss Account. The said issue is also identical to the issue raised vide ground of appeal No.1 in assessment year 2007-08 and following the same parity of reasoning, we dismiss the ground of appeal No.3 raised by the assessee. 60. The balance issue raised vide ground of appeal No.4 is in relation to the disallowance made under section 40(a)(ia) of the Act. We have also dealt with the same issue by way of grounds of appeal No.4 to 6 in assessment year 2008-09 and following the same, we remit the issue back to the file of Assessing Officer to verify the claim of the assessee and adjudicate the issue in accordance with law. 61. The ground of appeal No.5 is not pressed, hence, the same is dismissed as not pressed. The grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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