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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 ..... and decided against the assessee.So, we dismiss both the grounds. ITA/3082/Mum/2015: 3.First effective ground of appeal (ground 2),raised by the AO is about deleting the addition of provision for wage revision.During the assessment proceedings,the AO had claimed a sum of Rs. 186.85 crores,being the amount of wage arrears,arrived at based on the indicative increase in the ways payable by the bank.The AO disallowed the provision on the ground that it was only an estimated increase and no agreement for the increase 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also placed before us. "The respondent had excluded the income from foreign branches based on Double Tax Avoidance Agreement entered into between the Govt. of India and the Govt. of the respective countries. The AO had granted relief only in respect of branches at Singapore and Japan and in respect of the other branches denied the benefit to the appellant. The CIT (A) allowed the claim of the respondent based on the decision of Hon'ble ITAT in appellant's own case. The respondent submits that 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 Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmity 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". The AR submitted that in the instant case also, the view should be taken in the assessee's favour." Even Hon'ble Bombay High Court also confirmed the decision of Tribunal in Income Tax Appeal No. 1630/Mum/2012 vide order dated 07-01-2015, wherein Hon'ble High Court has dismissed the 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 Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall now take up individual issue urged in the years under consideration. In AY 2007-08, 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed by the assessee by duly considering various case laws relied upon by the assessee." Considering the above,we remit the issue to the file of the AO.He is directed to follow the directions of the Tribunal for earlier years.Accordingly,second ground is partly allowed. 8.Restriction of deduction u/s.36(1)(viia)is the subject matter of third ground of appeal.The AR and DR agreed that the issue stands decided in favour of the assessee by the Tribunal.We are reproducing 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 Rs. 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 Rs. 132,93,97,624/- and disallowed the balance bad debts of Rs. 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 Rs. 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 Rs. 508,90,28,469/- was disallowed. Aggrieved, assessee preferred the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or bad and doubtful debts u/s 36(1)(viia) is distinct and independent of s. 36(1)(vii) relating to allowance of bad debts. The legislative intent was to encourage rural advances and the making of provisions for bad debts in relation to such rural branches. The functioning of such banks is such that the rural branches were practically treated as a distinct business, though ultimately these advances would form part of the books of account 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). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Further, this issue has also been decided in favour of assessee in case of Bank of Baroda in ITA No. 9195/Mum/2010 for AY 2003-04 vide order dated 12-06-2013. Respectfully, following the Tribunal decision in assessee's own case and consistently following the precedence, we allow the claim of the assessee. This issue of assessee's appeal is allowed." Considering the above,third ground appeal is allowed in favour of the assessee. 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 Rs. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium paid. The Ld A.R fairly admitted that this issue has been decided against the assessee by the Tribunal in AY 2006-07. We notice that the Tribunal has decided this issue against the assessee by following the decision rendered by Special Bench of Tribunal in the case of JCIT Vs. Mukund Ltd (106 ITD 231). Consistent with the view taken in the earlier years, we uphold the order passed by Ld CIT(A) on 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 Rs. 91.89 lakhs as rent received during the year under appeal. He considered the same for computing the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details on account of loss claimed.As per the AO,the assessee had only submitted that the deduction had been claimed on account of sale of NPAs to ARCIL,that it did not provide any other justification in support of the claim. He held that provisions of section 36(1)(viia)dealt with non-performing assets, that there was no justification for allowing the loss on sale of NPA.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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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