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TMI Blog2016 (3) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we find that the provisions of section 35D of the Act have been amended by the Finance Act, 2008 with effect from 01.04.2009 wherein the words "Industrial unit" and "Industrial undertaking" were substituted with the words "Unit" and "undertaking". The memorandum explaining the provisions clearly states as under: "Section 35D provides for deduction of certain specified preliminary expenses. The deduction is allowed on an amount equal to one fifth of such expenditure for five successive previous years. The preliminary expenses relate either to the period before the commencement of the business or after. However, if preliminary expenses relate to a period after the commencement of the business, such expenses are only allowed if they are in relation to the extension of an industrial undertaking or the setting up of a new industrial unit. With a view to providing a level playing field to the services sector, it is necessary to extend to the service sector, the same benefit of amortization of specified post-commencement preliminary expenses as is available to the manufacturing sector for the extension of an undertaking or the setting up of a new unit. Therefore, it is proposed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered view that the decisions rendered in assessee's own case prior to assessment year 2004-05 will not have binding precedence in the assessment year 2009-10 or subsequent years. Accordingly, we hold that the income of the assessee at Singapore and Colombo would be included in the return of income of the assessee in India and whatever taxes paid by the branches in foreign countries, credit of such taxes shall only be given. Accordingly, the ground raised by the assessee is dismissed." In view of the above, we dismiss this ground of appeal raised by the assessee. 6. The next ground raised by the assessee is as under : "Without prejudice to the above contention, the CIT(Appeals) ought to have appreciated that your appellant's alternate contention that the loss on sale of loan assets to Asset Reconstruction Companies are allowable as business deduction under section 37, if not allowable as Bad Debt under Section 36(1)(vii) of the Act." 7. At the time of hearing, the ld. AR did not press the above ground and the same is dismissed as not pressed. 8. The next ground in this appeal of the assessee is as follows: "5.(a) The Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowability of 60% depreciation on UPS, we have considered similar issue and dismissed the ground raised by the Revenue in I.T.A. Nos. 2124 and 2125/Mds/2014 for the assessment year 2005-06 and 2007-08 at para 17 to 22 of this order. With regard to the allowability of 60% depreciation on ATM, we have considered the issue and allowed the ground raised by the assessee in its appeal in I.T.A. Nos.1396 & 1395/Mds/2014 for the assessment years 2005-06 and 2007-08 at para 8 to 13 of this order. Accordingly, the ground raised by the assessee is allowed." Respectfully following the decisions of the Tribunal in assessee's own case, we allow this ground of appeal raised by the assessee. 12. The next ground raised by the assessee is that the CIT(Appeals) ought to have noted that advances of the Rural Branch is the criteria for computation of eligible deduction u/s.36(1)(viia) and individual nature of advances cannot be the basis of computation. 13. The facts of the case are that the asesessee in its return of income claimed a deduction of Rs. 698,32,76,000/-. As per the assessee, the allowable deduction u/s.36(1)(viia) is Rs. 849,57,75,715/-, as under : On gross total income @ 7.5% - Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... average aggregate advances of the rural branches, is not in accordance with the provisions of the Act. The CIT(Appeals) relied on the decision of the Tribunal in the case of Lakshmi Vilas Bank in ITA No.551, 552 & 553/Mds/2009 dated 18.12.2009 and held that the allowable deduction u/s.36(1)(viia) of the Act is @ 10% of the 'total average aggregate advances, as contemplated by the Assessing Officer. Accordingly, the CIT(Appeals) directed the AO to allow deduction u/s.36(1)(viia) of the Act @ 10% of the 'total average aggregate advances made by the rural branches and not on the incremental average aggregate advances. 15. We have heard both the parties and perused the material on record. The contention of the ld. AR is that all the loans advanced by the rural branches are eligible for deduction u/s.36(1)(viia) of the Act, irrespective of the purpose for which the loans are advanced. On the other hand, the AO observed that only those loans which are advanced by the rural branches for the purpose of improving the rural economy, like agricultural loans, agro based industrial loans and other loans given to the villagers for their needs in the villages etc. are eligible for deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting the budget of 1978-79. We have also gone through the intention under which sec.36(1)(viia) was brought to statute book and there is no intention to support rural branches and being so, only advances made for improving the rural economy to be considered for eligible deduction u/s.36(1)(viia) of the Act. Accordingly, the finding of the AO is upheld and the ground of appeal of the assessee is dismissed. 17. The next ground in the appeal of the assessee is that the CIT(Appeals) failed to appreciate the fact that in respect of the claims raised against the bank, in the normal course, considering the various circumstances provision is being made by the bank and considering the business risk, such provisions are allowable deductions. 18. After hearing both the parties, we are of the opinion that this issue was considered in assessee's own case by the Tribunal in ITA No.1871/Mds/2012 & Others, wherein it was observed as under : "100. Before us, the ld. Counsel for the assessee has reiterated the submissions as made before the ld. CIT(A). However, the ld. Counsel for the assessee has not furnished any details about the nature of expenses. If any expense is required to be allowed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the income under MAT. We find that recently the Mumbai Bench of the Tribunal in the case of in the case of Krung Thai Bank PCL Vs. Joint Director of Income Tax [International Taxation] [2010] 45 DTR 218 has held has under: "7. The plea of the assessee is indeed well taken, and it meets our approval. The provisions of s. 115JB can only come into play when the assessee is required to prepare its P&L a/c in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act. The starting point of computation of MAT under s. 115JB is the result shown by such a P&L a/c. In the case of banking companies, however, the provisions of Sch. VI are not applicable in view of exemption set out under proviso to s. 211(2) of the Companies Act. The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The provisions of s. 115JB cannot thus be applied to the case of a banking company." 8. Further, it may be noted that the authority for advance ruling in the case of The Timken Company, In re [2010-TII-25-ARA-INTL and Praxair Pacific Ltd In re [2010-TII-25-ARA-INTL] has held that MAT provisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 60 has clearly held that when interest received by an assessee, from transferees for broken period is included under the head 'business income', amounts paid by the assessee to the transferors for broken periods could not have been disallowed. This viewwas reiterated in the case of Union Bank of India referred to supra. Hon'ble Apex Court had dismissed the special leave petition filed by the Department against such judgement of order of Mumbai High Court on 27.01.2004 (SLP(C) No.3710 of 2004). Therefore, even though it was earlier decided by this Tribunal in assessee's own case for Assessment Year 1996-97 in ITANo.1901/Mds/04 dated 25.10.07, that broken period interest could not be considered as revenue expenditure but had to be taken as capital outlay when paid for acquiring securities, in view of the later decisions of Hon'ble Mumbai High Court mentioned supra, such broken period interest has to be allowed. We would prefer to follow the decision of the Hon'ble Mumbai High Court, since Special leave petition filed by the Department against such decision in the case of Union Bank of India (supra) was dismissed by Hon'ble Apex Court. Thus, this issue is decided in favour of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the parties and perusing the record, we find that the issue under consideration is squarely covered by the decision of the coordinate bench of ITAT, Hyderabad in assessee's own case for AY 2006- 07wherein the coordinate bench held as follows: "50. We are of the opinion that the assessee Bank is holding various Government Securities in order to comply with the statutory liquidated ratio. The bank would have to hold requisite percentage of deposits in the form of cash, gold, government or approved securities. The government securities held for the purpose of comply with the SLR has been held to be stock in trade and therefore value of the same as on 31st March has to be made and there is any depreciation the same should be allowed as a revenue deduction. However, the RBI has issued Circular wherein they have classified the investment made to comply with SLR requirement as `Held to maturity' (HTM), `Available for sale' (AFS) and `Held for Trade' (HFT). Based on the RBI Circular lower authorities came to the conclusion that investment in Government Securities which are classified under the head HTM cannot be considered as stock in trade and therefore depreciation in value of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 has held as under: "11. We have perused the orders of lower authorities and heard the rival contentions. We find that the issue regarding allowance of bad debts written off on technical reasons stand decided in favour of assessee by this Tribunal in ITA No.1082/Mds/2003 for Assessment Year 1998-99. It was held by this Tribunal at para Nos. 43 & 44 of its order dated 30/06/11 as under:- "I.T.A. No. 1082/Mds/2003 42. First issue raised by the assessee is regarding disallowance of its claim for bad debt - technical write off. 43. A.O. had disallowed a part of the claim of bad debt on a reasoning that the write-off was purely technical, since assessee had not reduced the written off amounts from the individual debtors account, though the total amount of write-off was deducted from total of the advances. 44. We find this issue now stands settled in favour of the assessee by Hon'ble Apex Court, vide its decision in Vijaya Bank v. CIT (323 ITR 166). Crux of this decision as appearing from the head note runs as under:- "Business expenditure - Bad debt - Debt written off in the books - After insertion of Explanation to s. 36(1)(vii), assessee is required not only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance made on this issue. Thus, the ground raised by the assessee is allowed." Respectfully following the above order of the Tribunal, this ground raised by the Revenue is dismissed. 28. The next ground raised by the Revenue is that the CIT(Appeals) erred in allowing the claim of the assessee u/s.36(1)(viia) of the Act. 29. The ld. AR submitted that the issue was considered by the Tribunal in ITA No.2124/Mds/2010 & Others dated 30.11.2015 for the assessment year 2005-06 and decided the same in favour of the assessee by observing as under: 29. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The ld. CIT(A), after examining the detailed submissions of the assessee and also by following the decision of the Tribunal in the case of Lakshmi Vilas Bank Ltd. v. ACIT (supra), allowed the ground raised by the assessee by observing as under: "4.3.3 I have considered the assessee's submissions carefully. As perthe provisions of sec.36(1)(viia), the assessee, being a scheduled bank,is eligible for deduction of not exceeding 10% of the" aggregate average advances made by the rural branches of the banks computed in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused Rule 6ABA of the Income Tax Rules, 1962. As per the said rule, the aggregate average advances made by the rural branches have to be computed by taking the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year. Thus, it is clear that there is no provision to consider only the advances made during the year under consideration. It is the finding of the Assessing Officer that the assessee has furnished the working as per Rule 6ABA. It Is not in dispute that the working is as per Rule 6ABA but the Assessing Officer seems to have interpreted the provision not warranted by law. Therefore, we uphold the order of the Commissioner of Income Tax (Appeals) allowing the deduction to the assessee." 4.1.4 By following the principle of consistency, as the issue has already been decided by the Co-ordinate Bench of this Tribunal, we decide this issue on merits in favour of the assessee and against the Revenue. 4.3.4 In view of the above discussion and respectfully following the decision of the jurisdictional ITAT in the case of Lakshmi Vilas Bank in ITA No.551,552, 553/Mds/2009 dated 18-12-2009, I hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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