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TMI Blog2017 (8) TMI 1577X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the said section. We, therefore, delete the disallowance of 16,50,000/- and allow this ground of appeal of the assessee. Disallowance of deduction under the head leave encashment u/s.43B(f) - assessee submitted that though provision made is disallowed u/s 43B(f) in the case of Exide Industries Ltd vs UOI [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] has held that liability towards leave encashment should be allowed as a deduction even if the same is not paid - HELD THAT:- As A.R. has contended that even though the decision of the Hon ble Calcutta High Court holding Clause (f) of Section 43D as ultra virus is stayed by the Hon ble Supreme Court while admitting the SLP filed by the Revenue, the same has not been reversed and, therefore, the Tribunal is bound to follow the same being a binding precedent. He, therefore, prayed that the matter should be restored back to the file of the Assessing Officer for adjudication afresh of the issue in the light of the decision of Hon ble Supreme Court in the case of Exide Industries ltd (supra). Disallowance being amounts written off/amortization of Government securities - HELD THAT:- In the instant case the undisputed facts are that duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and admit the appeal for hearing. 3. Ground No.1 is general in nature and hence, requires no separate adjudication by us. 4. Ground No.4 of the appeal is not pressed by ld A.R. of the assessee, hence, same is dismissed as not pressed. 5. In Ground No.2 of the appeal, the grievance of the assessee is that the CIT(A) erred in confirming the addition of ₹ 16,50,000/- under the head "provision for standard assets" as per RBI norms. 6. The brief facts of the case are that the Assessing Officer required the assessee to explain why provision for standard assets amounting to ₹ 16,50,000/- shall not be disallowed since provisions for expenditure claimed in the profit and loss account are not permissible expenditure under the Act. The assessee explained that the bank provided for an amount of ₹ 16,50,000/- towards provisions for standard assets in accordance with the guidelines issued by Reserve Bank of India for provisioning of loans and advances of a Bank. The assessing Officer was not satisfied with the explanation of the assessee and observed that such provision for standard assets is not permissible expenditure under the act and moreover expenditure on such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduction after April, 1989. He further relied on the decision of Hon'ble Supreme Court in the case of Southern Technologies vs JCIT, 320 ITR 577 (SC), wherein also, similar finding was given. Hence, it was his submission that the order of the CIT should be confirmed. 11. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the undisputed facts are that the assessee made a claim for deduction of ₹ 1,68,13,000/- for bad and doubtful debts which includes ₹ 16,50,000/- as provision made for standard assets in the profit and loss account. The Assessing Officer disallowed deduction of ₹ 16,50,000/- on the ground that it was not permissible expenditure and that it was capital expenditure. 11.1 On appeal, the CIT(A) confirmed the action of the Assessing Officer on the ground that it is a contingent liability. 12. We find that the assessee argued before the CIT(A) that the deduction claimed of ₹ 1,68,13,000/- which includes ₹ 16,50,000/- was in accordance with the provisions of section 36(1)(viia) of the Act. The contention of the assessee was that it being a Regional Rural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 32,13,587/- under the head leave encashment u/s.43B(f) of the Act. 15. The brief facts of the case are that the Assessing Officer asked the assessee to explain why provision towards leave encashment of ₹ 37,00,000/- should not be disallowed since provision for expenditure claimed in the profit and loss account are not permissible expenditure under the Act. The assessee submitted before the Assessing Officer that provision for leave encashment for ₹ 37,00,000/- was made in the accounts. However, the bank has paid an amount of ₹ 4,86,413/- against leave encashment made during earlier years and not allowed to them as deduction. The Assessing Officer observed that auditor in his report in Schedule-18 at item Sl.No.6(j) mentioned that leave encashment is accounted for on cash basis. Therefore, he did not accept the contention of the assessee regarding payment of ₹ 4,86,413/-. The Assessing Officer concluded that provision towards leave encashment of ₹ 37,00,000/- is not permissible under the Act. 16. Before the CIT(A), the assessee submitted that though provision made is disallowed u/s 43B(f) of the Act, the Hon'ble Calcutta High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original provision being s. 43B which was originally inserted to plug in evasion of statutory liability. It does not imply that the legislature was not entitled to bring such amendment. They were within their power to bring such amendment. However, they must disclose reasons which would be consistent with the provisions of the Constitution and the laws of the land and not for the sole object of nullifying the apex Court decision. Therefore, s. 43B(f) is struck down being arbitrary, unconscionable and de hors the apex Court decision in the case of Bharat Earth Movers (2000) 162 CTR (SC) 325." 19 The A.R. has contended that even though the decision of the Hon'ble Calcutta High Court holding Clause (f) of Section 43D as ultra virus is stayed by the Hon'ble Supreme Court while admitting the SLP filed by the Revenue, the same has not been reversed and, therefore, the Tribunal is bound to follow the same being a binding precedent. He, therefore, prayed that the matter should be restored back to the file of the Assessing Officer for adjudication afresh of the issue in the light of the decision of Hon'ble Supreme Court in the case of Exide Industries ltd (supra). 19.1 The DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the decision of Hon'ble Supreme Court in the case of Vijaya Bank (supra), he confirmed the disallowance of ₹ 1,39,42,283/- made by the Assessing Officer. 26. In Ground No.3 of the appeal, the grievance of the assessee is that the CIT(A) erred in confirming the disallowance made under provision for non-SLR securities as per Mark to market valuation of ₹ 2,50,125/-. 27. The brief facts of the case are that the Assessing Officer disallowed ₹ 2,50,125/- being provision for non-SLR securities as per Mark to market valuation. 28. The CIT(A) confirmed the action of the Assessing Officer. 29. With regard to Ground Nos.2 & 3 of the appeal, ld A.R. of the assessee relied on the decision of Hon'ble Karnataka High Court in the case of Karnataka Bank Ltd vs ACIT, (2013) 356 ITR 549 (Kar) and submitted that the Hon'ble High Court has held as under: "The assessee had maintained the accounts in terms of the Reserve Bank of India Regulation and it had shown the securities as investments. But consistently for more than two decades they had been shown as stock-in-trade and depreciation was claimed and allowed. The value of the stocks being closely connected with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the securities to the assessee. Similarly, the Assessing Officer also disallowed provision for non-SLR securities as per Mark to market valuation of ₹ 2,50,125/-. The contention of the assessee has been claiming this loss consistently for past so many year and was allowed deduction for the same. Instruction No.17/2008 dated 26.11.2008 issued by the CBDT wherein, at para vi, it has been clearly stated that in the case of HFT and AFS Securities of the Bank, the depreciation and appreciation to be aggregated script wise and only depreciation, if any, is required to be provided in the accounts. 34. In view of the above, we do not find any merit in the action of lower authorities for disallowing loss arose on the year end revaluation of securities. Our view is supported by decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd., passed in ITA N0.330 of 2012; United Commercial Bank Vs. CIT, 240 ITR 355(SC); Investment Ltd. Vs. CIT, 77 ITR 533 (SC); and CIT Vs. Bank of Baroda, 262 ITR 334 (Bom). Respectfully following the decision of Hon'ble Supreme Court and Hon'ble Bombay High Court and considering the classification of security so made and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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