9911796707
TMI Blog2019 (9) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... ategory. No doubt the value in opening stock in the next year would correspondingly be adjusted. This issue is decided in favour of the assessee Deduction of bad debts written off (technical write off) - HELD THAT:- As in assessee s own case for assessment year 2011-12 [ 2016 (3) TMI 1361 - ITAT CHENNAI ] besides debiting the P L a/c and creating a provision for bad and doubtful debts, the assessee bank had simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and consequently, at the end of the year, the figure of loans and advances/debtors was shown as net of the provision - assessee is entitled to benefit of deduction under s. 36(1)(vii) - Contention that it is imperative for the assessee-bank to close the individual account of each debtor in its books and a mere reduction in the loans and advances account or debtors to the extent of the provision for bad and doubtful debt is not sufficient, is not sustainable Depreciation on ATM - 60% OR 15% - HELD THAT:- As in assessee s own case for assessment year 2011-12 [ 2016 (3) TMI 1361 - ITAT CHENNAI ] allowing depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the eligible business of development of infrastructure facilities by applying the formula business income multiplied by the interest from eligible business and divided by total interest income - HELD THAT:- A perusal of the provisions of section 36(1)(viii) of the Act shows that the words used therein are an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head Profits and gains of business or Profession subject to other conditions specified therein. The interest earned in respect of the said eligible business is specifically available. Once this is available, the total expenditure incurred by the assessee is also available, and obviously, the total income of assessee is also available. When these figures are very much available, then expenditure incurred on pro-rata basis for the purpose of earning the said interest income in respect of the eligible business can easily be quantified. The same is to be reduced from the said interest expenditure earned and that would give the profits derived from the eligible business, out of which 20% deduction would be the eligible deduction u/s.36(1)(viii) of the Act subject to the complianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed by both the Counsels that the issue raised in this ground was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee s own case for assessment year 2011-12 in ITA No.1992/Chny/2015 vide order dated 11.13.2016 wherein it has been held as follows:- 23. After hearing both the parties, we are of the opinion that similar issue came for consideration in assessee s own case for the asst. year 2007-08 in ITA No.880/Mds/2010 Others. Vide order dated 30.11.2015, the Tribunal held as follows : 48. We have heard the rival contentions and perused the materials on record. With regard to the claim of broken period interest paid on purchase of securities as revenue expenditure, we find that issue involved in this appeal is squarely covered by the decision of the Coordinate Bench of the Tribunal, in assessee s own case in I.T.A. Nos. 470 to 472/Mds/2010 for the assessment years 2004-05 to 2006-07 vide order dated 11.06.2012, wherein the Tribunal has observed as under: 8. We have perused the orders of the authorities below and heard the rival contentions. Issue is regarding treatment of amount paid by assessee to transferors of securities, towards interest accrued as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.2 consisting of grounds 2.1 to 2.4, it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in allowing the depreciation of investment on securities at the time of shifting from available for sale to held to maturity. It was fairly agreed by both the Counsels that the issue raised in this ground was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee s own case for assessment year 2011-12 in ITA No.1992/Chny/2015 vide order dated 11.13.2016 wherein it has been held as follows:- 24. The next ground in Revenue s appeal is that the CIT(Appeals) has erred in directing the Assessing Officer to allow an amount of ₹ 49,22,32,974/- being the depreciation on securities at the time of shifting from AFS to HTM. 25. Similar issue came for consideration before the Tribunal in assessee s own case in ITA No.887/Mds/2010 Others dated 30.11.2015, wherein it was observed as under: 120. Further, on an identical set of fact, similar ground was raised before the Bench of the Tribunal in the case of DCIT v. Andhra Bank Ltd. in I.T.A. No. 630/Hyd/2012 and vide its order dated 04.10.2013 for the assessment year 2007-08, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of UCO Bank Ltd Vs CIT reported in 240 ITR 355 has held that value of the securities at cost or market value whichever is less should be accepted for income tax even if the banks in their books do not value on that basis. Therefore, it is an accepted proportion that investment made by the bank to comply with the SLR requirement would constitute their stock in trade and depreciation in value of the same is an allowable deduction. 51. Respectfully following the decisions cited by the learned counsel for the assessee, we uphold the claim of the assessee and direct the AO to allow depreciation / fall in value of investment in Government Securities including those classified under HTM category. No doubt the value in opening stock in the next year would correspondingly be adjusted. This issue is decided in favour of the assessee. 6. Since the issue under consideration is identical to that of AY 2006-07 in assessee s own case, respectfully following the same we uphold the directions of Ld.CIT(A) with a direction to AO to follow the same in this year also as per the order of ITAT supra.. Accordingly, ground No. 2 raised by the revenue is dismissed. In view of the above decisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised 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 writeoff 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 to debit the P L a/c but simultaneously also- reduce loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that at the end of the year the amount of loans and advances/debtors is shown as net of provision for impugned bad debt In the instant case, besides debiting the P L a/c and creating a provision for bad and doubtful debts, the assessee bank had simultaneously obliterated the said provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue stands confirmed. Consequently Ground No.3 consisting of grounds 3.1 to 3.4 stands dismissed. 11. In respect of Ground No.4 consisting of grounds 4.1 to 4.3, it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in allowing the assessee s claim of depreciation on ATM at 60% as against the eligible depreciation at 15%. It was fairly agreed by both the Counsels that the issue raised in this ground was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee s own case for assessment year 2011-12 in ITA No.1877/Chny/2015 vide order dated 11.13.2016 wherein it has been held as follows:- 10. The next ground raised by the assessee in this appeal is that the CIT(Appeals) failed to appreciate the fact that Automated Teller Machines are substantially in the nature of computers and hence, are eligible for deduction at the rate of 60% and not at 15% as applicable to other normal plant and machinery. 11. 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 : 98. The sixth ground raised in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest-free income; (b) That the claims against the bank are not contingent liabilities and hence, are required to be deducted from the computation of book profits; (c) That bad debts which are required to be debited to the provision account only by the provisions of the Income Tax Act, 1961, is required to be debited as provisions were added back in earlier years. 20. This issue came for consideration before the Tribunal in assessee s own case for the asst. years 2004-05 to 2006-07 in ITA Nos.470 to 472/Mds/2010 dated 11.6.2012, wherein it was held as under : 20. We have perused the orders of lower authorities and heard the rival contentions. We find that the issue regarding applicability of Sec.115JB on a Bank governed by Bank Regulation Act had coming up before a Co-ordinate Bench of this Tribunal in assessee s own case for Assessment Year 2000-01. It was held by the Co-ordinate Bench of this Tribunal in its order dated 3rd April, 2011 as under:- 7. We have heard the rival submissions and perused the orders of the lower authorities and the material available on record. In the instant case, the only dispute raised by the assessee is that since it is a bank and is required to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied to the Banks. As such, other grounds herein above do not require adjudication and dismiss the same as infructuous. 14. The Co-ordinate Bench of this Tribunal has followed the decision of Co-ordinate Bench of this Tribunal in assessee s own case ITA Nos.470 to 472/Mds/2010 dated 11.6.2012 for assessment years in 2004-05 to 2006-07. Consequently, respectfully following the decision of Co-ordinate Bench of Chennai Tribunal in ITA No.1877/Chny/2015 referred to supra, the findings of ld.CIT(A) on this issue stands confirmed. Consequently Ground No.5 consisting of grounds 5.1. to 5.2 stands dismissed. 15. In the result, the appeal of Revenue in ITA No.650/Chny/2017 is dismissed. ITA No.738/Chny/2017 16. Now, we take up the Assessee s appeal in ITA No.738/Chny/2017. 17. In respect of Ground No.2 consisting of grounds (a) (b), it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in confirming the action of Assessing Officer holding that income from foreign branches are to be included in the total income and only double taxation relief as contemplated as per the agreement is allowable. It was fairly agreed by both the sides that the issue raised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in ITA No.1877/Chny/2015 vide order dated 11.13.2016 wherein it has been held as follows:- 9. We find 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 : 83. After hearing both sides, we have carefully perused the orders of authorities below. In view of the decision of the Hon ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. v. DCIT (supra) that Rule 8D is applicable from the assessment year 2008-09, when the Act has prescribed a method for quantifying the disallowance, the same cannot be overlooked. Since Rule 8D is not applicable prior to the assessment year 2007-08, the Tribunal has set aside the order passed by the ld. CIT(A) and directed the Assessing Officer to work out the disallowance @ 2%. However, since Rule 8D is applicable from the assessment year 2008-09 onwards, the disallowance should be made based on the prescribed method quantified by the Act. Since the Assessing Officer has made the disallowance under section 14A and computed under Rule 8D, we confirm the disallowance made by the Assessing Officer. Accordingly, the ground raised by the assessee is dismissed. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims. As per the Assessing Officer, the total average aggregate advances should not be considered because some of these amounts are the brought forward amount from the earlier years, where the assessee had already claimed 10% of the amounts as deductions u/s.36(1)(viia) of the Act. Therefore, according to the Assessing Officer, only the incremental average aggregate advances made during the year are eligible deduction u/s.36(1)(viia) of the Act. The total incremental average aggregate advances made during the year (as per the Annexure III enclosed along with the assessment order) are ₹ 3420,91,21,320/-. Therefore, the Assessing Officer calculated eligible deduction on account of the incremental average aggregate advances rural branches at ₹ 342,09,12,132/- (being 10% of ₹ 3420,91,21,320). Accordingly, the Assessing Officer worked out the eligible deduction u/s.36(1)(viia) of the Act at ₹ 597,67,74,583/- and disallowed the balance of ₹ 100,65,01,417/-, as under : Incremental average aggregate advances 3420,91,21,320 Deduction u/s.36(1)(viia) @ 10% 342,09,12,132 Add: 7.5% of the total income (of ₹ 3407,81,66,014) 255,58,62,451 Total available de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced by the rural branches, under the statutes. But when the statutes are allowing a special deduction with respect to the advances made by the rural branches, the background of the provisions and the intentions of the legislature, while enacting the statutes, have to be looked into. Perusal of the budget of the Finance Minister in 1978-79, while disposing the insertion of provisions of [36(1)(viia)] of the Act, clearly showed that the deduction was extended to the rural branches of the schedule banks to encourage them to move to the rural areas and extend rural credit. The relevant portion of the budget speech of the Finance Minister is as under : Budget Speech of the Finance Minister (While) presenting the budget of 1978-79: In recent years, commercial banks, particularly public sector banks, have been asked to reach out into the rural areas and the expand rural credit. In order to promote rural banking and to assist the scheduled commercial banks in making adequate provisions from their current income to provide for risks in rural advances, I propose to amend the Income-tax Act to grant a deduction in respect of provisions made for bad and doubtful debts by scheduled commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking out of the average rural advances. The AO has considered only incremental advances, whereas the assesseebank considered the outstanding advances for the purpose of calculating the average rural advances on each calendar month. The ld. CIT(A) directed the AO to follow the decision of this Tribunal in the case of City Union Bank, Lakshmi Union Bank etc. and set aside the issue for verification of the AO. This issue was discussed at length by the Co-ordinate Bench of Tribunal, Bangalore in the case of Canara Bank v. JCIT 60 ITR (Trib.) 1 (Ban.), wherein it was held vide relevant paras 18.2 18.3 relevant paragraphs is extracted below: 18.2 We heard rival submissions and perused the material on record. The Finance Act, 1979 inserted a new clause (viia) in subsection (1) of section 36 to provide for deduction in computation of taxable profits of schedule bank in respect of provision made for bad and doubtful debts relating to advances made by the rural branches computed in the manner prescribed under IT Rules,1962. For this purpose, 'rural branches' has been defined to mean 'branch of schedule bank situated at place with population not exceeding 10,000 according to last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d while construing a particular provision of Rules or statutes. Thus, the reasoning adopted by the AO as well as the CIT(A) does not stand the test of law. Furthermore, co-ordinate bench of Hyderabad Tribunal in the case of Nizamabad District Co- operative Central Bank Ltd. (supra) held as follows: 8. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. Before going into the issue, it is necessary to look into the relevant statutory provisions. Section 36(1)(vii) provides for deduction on account of bad debts actually written off in the books of account. However, proviso to 36(1)(vii) makes an exception by providing that in case of an assessee to which clause (viia) applies the claim of bad debt shall be limited to the amount by which such debt exceeds the credit balance in the provision for bad and doubtful debts made under clause (viia). Clause (viia) permits a cooperative bank to claim deduction of provision made for bad and doubtful debts as per the prescribed conditions. As has been correctly observed by ld. CIT(A), the only dispute between assessee and department is in respect of working out 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e co- ordinate bench in the cases cited supra. However, remit this issue back to the file of the AO to identify rural branches less than 10,000 population as per last census and the AAA of such rural branches alone should be considered for the purpose of this deduction. Thus, these grounds of appeal are allowed for statistical purposes. 14.1 The reasoning of this Tribunal was approved by the Hon'ble Calcutta High Court in the case of PCIT v. Uttarbanga Kshetriya Gramina Bank [2018] 408 ITR 393 (Cal), wherein the Hon ble Calcutta High Court upheld the interpretation of the provisions of Rule 6ABA of the Rules for the purse of s. 36(1)(viiia) of the Act that only aggregate average advance made by rural branches of a scheduled bank should be computed by aggregating separately the advances made by each rural branch as outstanding at the end of the last day of each months comprised in the previous year. The Hon ble High Court had categorically held that the method of taking the loans and advances made during the year only is not correct. 14.2 Therefore, in view of the above legal position, we direct the AO to consider only the outstanding rural advances not the incremental advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company under sec.115JAA. 27. As it is noticed that this issue is now squarely covered by the decision of Co-ordinate Bench of this Tribunal in the case of Suraj Agro Infrastructure Vs. DCIT referred to supra, the Assessing Officer is directed to grant the assessee the benefit of MAT credit in respect of amalgamation of IndFund Management Ltd., with the assessee s bank. Consequently, Ground No.6 stands allowed. 28. In respect of Ground No.7, it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in upholding the computation of deduction u/s.36(1)(viii) of the Act as made by the Assessing Officer. It was submitted that the assessee had been following the method of computing 20% book profit of the eligible business of development of infrastructure facilities by applying the formula business income multiplied by the interest from eligible business and divided by total interest income. It was a submission that as the assessee s business income included interest income from Government security also, the Assessing Officer had held that the computation was erroneous and consequently re-computed the deduction u/s.36(1)(viii) of the Act by excluding the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration as directed in ITA No.650/chny/2017(A.Y.2012-13) supra. 32. Since the Ground No.1 consisting of grounds 1.1 to 1.5 in respect of Broken period interest is identical to Ground No.1 of Revenue s appeal in ITA No.650/chny/2017, therefore, the decision reached by us in ITA No.650/chny/2017 pertaining to Ground No.1 shall equally apply to the Ground No.1 of Revenue s appeal in ITA No.648/chny/2017. Hence, the issue raised in Ground No.1 of this appeal stands dismissed. 33. In respect of Ground No.2 consisting of grounds 2.1 to 2.4, it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in allowing the depreciation of investment on securities at the time of shifting from available for sale to held to maturity. 34. On identical findings as in Ground No.2 of Revenue s appeal in ITA No.650/chny/2017, therefore, the decision reached by us in ITA No.650/chny/2017 applies to Ground No.2 of Revenue s appeal in ITA No.648/chny/2017. Hence, the issue raised in Ground No.2 of this appeal stands dismissed. 35. It is observed that this ground No.3 consisting of 3.1. to 3.4 in respect of bad debts technical write off is identical to ground No.3 of Revenue s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies have fairly stated that the issue involved in this ground is similar with the issue involved in Assessee s appeal in ITA No.738/chny/2017 for assessment year 2012-13. 44. Since the facts and circumstances for assessment year 2012-13 in assessee s appeal are same for the year under consideration, respectfully following our conclusion drawn in Ground No.2 in ITA No.738/chny/2017, the findings of ld.CIT(A) on this issue stands confirmed. Consequently Ground No.2 consisting of grounds 2(a) to 2(b) stands dismissed. 45. In respect of Ground No.3 consisting of grounds (a) (b), it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in confirming disallowance u/s.14A r.w.Rule 8D. It was fairly agreed by both the sides that the issue involved in this ground-3 is similar with the issue involved in Ground No.3 of Assessee s appeal in ITA No.738/chny/2017 for assessment year 2012-13. 46. Since the facts and circumstances for assessment year 2012-13 in assessee s appeal are same for the year under consideration, respectfully following our conclusion drawn in Ground No.3 in ITA No.738/chny/2017, the Assessing Officer is directed to restrict the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ground No.1 consisting of grounds 1.1 to 1.5 in respect of Broken period interest is identical to Ground No.1 of Revenue s appeal in ITA No.650/chny/2017 for assessment year 2012-13, both ld.A.R and ld.D.R reiterated similar arguments as submitted for assessment year 2012-13. 53. Since the facts and circumstances for assessment year 2012-13 in Revenue s appeal are same for the year under consideration, respectfully following our conclusion drawn in Ground No.1 in ITA No.650/chny/2017, the findings of ld.CIT(A) on this issue stands confirmed. Consequently Ground No.1 consisting of grounds 1.1. to 1.5 stands dismissed. 54. In respect of Ground No.2 consisting of grounds 2.1 to 2.4, it was fairly agreed by both the sides that the issue was against the action of ld.CIT(A) in allowing the depreciation of investment on securities at the time of shifting from available for sale to held to maturity. Both the parties have fairly agreed that the issue involved in this ground No.2 is similar with the issue involved in Ground No.2 of Revenue s appeal in ITA No.650/chny/2017 for assessment year 2012-13. 55. We have heard the rival contentions. Since the facts and circumstances for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tands dismissed. ITA No.2155/Chny/2017(Assessee s appeal)(A.Y 2014-15) 63. In respect of Ground No.2 consisting of 2(a) 2(b), the issue was against the action of ld.CIT(A) in upholding the computation of deduction u/s.36(1)(viii) of the Act as made by the Assessing Officer. 64. Both the Counsels agreed that there is a similar ground bearing Ground No.7 raised by the assessee in ITA No.738/Chny/2017 for assessment year 2012-13. We have already held in paragraph Nos. 28-29 of this order, that the issue raised in ground-7 is restored to the file of Assessing Officer to re-compute the deduction u/s.36(1)(viii) of the Act as per the directions given above. For the very same reasons mentioned in the said paragraph, the Ground No.2(a) 2(b) of assessee s appeal under consideration is partly allowed for statistical purposes. 65. In respect of Ground No.3, the issue was against the action of ld.CIT(A) in confirming the action of Assessing Officer holding that income from foreign branches are to be included in the total income and only double taxation relief as contemplated as per the agreement is allowable. 66. Both the Counsels agreed that there is a similar ground bearing Ground No.2 raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
