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TMI Blog2017 (11) TMI 1812X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the issue already decided by the Tribunal in assessee s own case for the earlier years have to be followed. We do not find any infirmity in the above finding of the CIT(A). Therefore consistent with the earlier finding of the Tribunal in assessee s own case for the earlier years case, we do not see any merit in the ground taken by the Revenue Benefit u/s.36(1) (viii) applied only to Financial Corporations/Public Sector Co. Banking Co./Co-operative Bank/ Housing Finance Co.etc. - whether AO had adopted right method of allocation of expenses in arriving at the profits from eligible business - HELD THAT:- In AY 2007-08 [ 2016 (7) TMI 834 - ITAT MUMBAI ] the assessee is contesting the disallowance of claim made u/s 36(1)(viii) of the Act. We notice that this issue has been decided in favour of the assessee by the co-ordinate bench of Tribunal in AY 2006-07. The tax authorities had rejected the claim by holding that the provisions of sec. 36(1)(viii) shall be applicable only to financial Corporations . The Tribunal has held that the banks will also be covered by the inclusive definition given for the expression financial Corporations in sec. 36(1)(viii) of the Act. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA contains two different Articles.Business income is governed by Article 7 and Article 6 deals with house property income. Secondly, any notification or circular cannot alter the nature of income that has been specifically included in DTAA.s. Even amendment in a section of the Act would not affect the provisions of tax treaties,unless same are not rectified by both the signatories of the treaty.So,we hold that house property income had to taxed as per Article 6 of the DTAA and as per that Article income from Kenyan house property could not be taxed in India. Reversing the order of the FAA. Disallowance of loss on sale of assets to Asset Reconstruction Company of India Ltd.(ARCIL) - HELD THAT:- We find the assessee had sold NPA.s to ARCIL,that as per the RBI instructions it did not claim the loss in the profit and loss account, that the claim was made before the Department authorities that it had suffered a loss on sale of NPA.s,that the AO and the FAA held that the assessee had not suffered real loss i.e. it was notional loss only.There is no doubt about selling of assets to ARCIL,that ARRIL is not a fake or bogus entity,that the sale has not been doubted by the AO/FAA,that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entered into by the assessee during the year. 3.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA)and made elaborate submissions.It also relied upon certain case laws.Referring to the orders of the FAA.s for the earlier AY.s i.e. AY.s 2008-09 and 2004- 05,he decided the issue in favour of the assessee.He held that the provision was being made for the services rendered by the employees in the past,that the income on account of those services/efforts of the employees had already been accounted for,that in view of the settlement with Indian bank Association and various unions the wages were to be paid,that the negotiations were not concluded,that the liability had crystallized in the year under consideration. 3.2.Before us,the Departmental Representative (DR)stated that matter could be decided on merits.The AR relied upon the case of Bank of Baroda (ITA/4619/Mum/2012, dated 4/11/ 2015;AY 2008-09). We find that the assessee had made provisions for the services rendered by the employees.There is no doubt that the assessee had to make payment once the negotiations were over.Thus,it was not an unascertained liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue has been decided in favour of the assessee by Supreme Court of India in CIT Vs PV.AL.Kulandagan Chettiar, reported in 267 ITR 654 which upheld the decision of ITAT Chennai in the case of PV.AL.Kulandagan Chettiar Vs ITO (3 ITD 426). The ITAT had held that So the argument that the agreement must be so interpreted as to retain the taxation powers with the Government of India in order to prevent fiscal evasion has only to be rejected. The agreement is mainly for avoidance of double taxation. That means the income shall not be taxed at the same time in both the countries in India and Malaysia. So, if we interpret the agreement to mean that the Indian Government and the Malaysian Government both still retain even after the execution of the agreement the power to tax at the same time the same income it will only frustrate the object with which the agreement is executed . The ITAT had therefore concluded, As regards business profits paragraph I of Article 7 provides that the profits of an enterprise of a contracting state shall be taxable only in that contracting state. We will take it that the assessee being a resident of India, the enterprise is an Indian enterprise. So th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenues contention by observing in Para 4 as under: - 4. With the assistance of Mr. Suresh Kumar and Sanjiv Shah, we have perused the memo of Appeal. The Assessing Officer was satisfied that the benefit of the Double Taxation Avoidance Agreement is admissible provided the proof is produced in relation to payment of taxes by the Assessee abroad. In other words, if the Assessee has permanent establishment abroad, then, the Assessee would have to produce evidence regarding payment of taxes pertaining to the income of these establishments abroad. On production of such evidence, the Assessee would be entitled to the benefit. That evidence was always available and as noted by the Commissioner of Income Tax (Appeals) and the Tribunal. In the circumstances, the authorities did nothing but follow their earlier orders based on identical facts and circumstances. The finding of fact, therefore, cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. The Appeal does not raise any substantial question of law. It is devoid of merits and is accordingly dismissed. No costs. As the issue is squarely covered in favour of assessee in assessee s own c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banks will also be covered by the inclusive definition given for the expression financial Corporations in sec. 36(1)(viii) of the Act. Consistent with the view taken therein, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim. Respectfully following the above order of the Tribunal,we decide first Ground of appeal in favour of the assessee. 7.Next ground of appeal is with regard to disallowance made u/s.14 A of the Act.We find that the issue of 14A disallowance was dealt by the Tribunal,while deciding the appeal for AY.s.2007-08 and 2008-09(supra).We are reproducing paragraphs no.8-11 of the order of the Tribunal,dated 13/07/2016 and same reads as under :- 8. Now we shall take up the appeals filed by the assessee. The first common issue urged by the assessee in both the years relate to the disallowance made u/s 14A of the Act. In both the years under consideration, the AO worked out the disallowance u/s 14A of the Act in accordance with Rule 8D of the Act. The Ld CIT(A) took note of the binding decision rendered by Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd (328 ITR 81), wherein it was held that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducing the relevant portion of the order(ITA.s/5977 6016/Mum/ 2011, dt.26- 07-2017)and it reads as under: 2.Briefly stated facts are that the assessee claimed deduction of bad debts amounting to ₹ 508,90,28,469/- out of which the AO during the course of original assessment proceedings u/s 143(3) of the Act restricted the claim at ₹ 132,93,97,624/- and disallowed the balance bad debts of ₹ 375,96,30,845/-. The case was reopened u/s. 147 of the Act and claim for bad debts was disallowed further to the extent of ₹ 132,93,97,624/- and therefore, finally reassessment framed u/s. 143(3)/147 of the Act dated 31-12-2007. The entire claim of bad debts of ₹ 508,90,28,469/- was disallowed. Aggrieved, assessee preferred the appeal before CIT(A), who considering the order which is already decided u/s. 147/143(3) of the Act dated 11-12-2011 confirmed the action of the AO vide Para 5 of his appellate order as under: - XXXXX 3.At the outset, the learned Counsel for the assessee stated that exactly the identical issue has been allowed by Tribunal in assessee s own case for the AY 2001-02 in ITA No. 1498/Mum/2011 vide order dated 09-04-2014. The Tribunal foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the head office. An interpretation which serves the legislative object and intent is to be preferred rather than one which subverts the same. The deduction u/s 36(1)(vii) cannot be negated by reading into it the limitations of s. 36(1)(viia) as it would frustrate the object of granting such deductions. The Revenue's argument that this would lead to double deduction is not correct in view of the Proviso to s. 36(1)(vii) which provides that in respect of rural advances, the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the amount of the provision which had already been allowed u/s 36(1) (viia) (Southern Technologies 320 ITR 577 (SC) Vijaya Bank 323 ITR 166 (SC) referred). 10. In that case the Apex Court has held that the bank would be entitled to both the deductions, one under Clause (vii) on the basis of actual write off and another on the basis of clause (viia) in respect of mere provision. Further to prevent to double deduction, proviso to clause (vii) was inserted which says that in respect of bad debts arising out of rural advances the deduction on account of actual write off would be limited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 9.Ground of appeal No.4(GOA-4)pertains to deduction of amount written off under Agricul - tural Debt Relief and Waiver Scheme(ADRWS).During the assessment proceedings, the AO found that the assessee had claimed deduction of ₹ 9.45 crores under the head ADRWS,it was claimed that the Govt.of India had formulated the scheme in terms of which loan given to agriculturists were either waived or reimbursed by the Govt.,that in accordance with the scheme the bank waived or partly waived the loans, that in some cases claims were rejected by Govt. of India, that in such cases bank was not in a position to recover the amount from the borrowers,that the assessee wrote off such amounts.However,the AO disallowed the claim made by the assessee on the ground that the amount,not paid by the Govt.,had to be recovered by the assessee from the farmers.Accordingly, he made a disallowance of ₹ 9,45,22,875/-. 9.1.Aggrieved by the order of the AO the assessee preferred an appeal before the FAA and made submissions. After considering the available material,he held that the Govt. of India had rejected the claim on account of various reasons,that the C AG had reported several irregul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue. Following the orders for the earlier years,we allow ground no.5. 11.Next ground of appeal deals with exclusion of income of foreign branches.It was brought to our notice that,while deciding the appeal for AY.2004-05,the Tribunal had decided the issue in favour of the assessee(supra).We have reproduced the relevant portion of the order while deciding the appeal filed by the AO at paragraph no.5 our order.Respectfully following the same,we decide ground no.6 in favour of the assessee. 12.Ground number seven is with regard to exclusion of income from house property at Kenya. During the assessment proceedings, the AO found that the assessee had credited and amount of ₹ 91.89 lakhs as rent received during the year under appeal. He considered the same for computing the income from house property in the original return, income at ₹ 61.64 lakhs however in the revised return declared a lower income of 9.09 lakhs from the house property. He directed the assessee to reconcile the differences and to justify the lower income offered in the revised return after considering the submission of the assessee, the AO held that the total rent received by it during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s when provision for the same had been allowed in the earlier years.He held that there was no actual loss arising on sale of assets to ARCIL. Finally, he disallowed the amount claimed by the assessee. 13.1.During the appellate proceedings, before the FAA, the assessee argued that loss had arisen on account of sale of advances to ARCIL enterprise less than the Book value, that same was not debited to P L account as per the guidelines of the RBI, that the resultant loss had to be adjusted against the provisions held, that the loss had occurred in the course of carrying on banking business. After considering the available material,he held that the assessee had not debited the said claim of loss in its profit and loss account,that no material evidences were furnished to establish that the claim made by the assessee was genuine. Finally,upholding the order of the AO, he dismissed the ground, raised by the assessee. 13.2.Before us,the AR contended that the assessee had sold its assets,that it had incurred loss, that selling of assets was part of the normal business activity to ARCIL.The DR supported the order of the FAA and stated the claim was made in the computation of income, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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