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TMI Blog2020 (3) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee - HELD THAT:- A O while finalising the assessment did not agree with the method of computation adopted by the assessee for claiming the deduction u/s. 36(1)(viia) and he adopted a different method of computation. On appeal, the Ld. CIT(A) held that by adopting the different method, the AO arrived at the same figure of ₹ 90.08 crores as an allowable amount. Therefore, he held that the asseesee s appeal is purely academic having no tax impact. He also held that the computation of average aggregate advances made by the assessee bank s Rural Branches have not been properly computed in as much as some of the branches claimed as Rural Branch do not clearly fall within the definition of Rural Branch given in Explanation (ia) to section 36(1)(viia) - it was found that even after the advances made to such non Rural Branches are excluded from the average advances made by the Rural Branches claimed by the assessee, the claim of the assessee at ₹ 19,08,77,607/- would still be admissible. CIT(A) has not decided the issue on merits. Aggrieved against that decision, the assessee is on appeal before us. In the facts and circumstances, since the matter ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue : Shri S. Bharath, CIT ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: The Cross Appeals filed by the Assessee and Revenue are directed against the common order passed by the Commissioner of Income Tax (Appeals)-1, in ITA No. 59/CIT(A)-1/TRY/2015-16 dated 31.10.2017 for the assessment year 2012-13. Therefore, we heard both the appeals together and dispose them by this common order. 2. The Karur Vysya Bank Ltd., the assessee, is a banking company in private sector carrying on the business of banking. For the assessment year 2012-13, it filed its return of income on 29.09.2012 admitting the total income of ₹ 461.22 crores. Thereafter, the assessee filed two revised returns viz., on 07.02.2013 with a total income of ₹ 490.07 crores and on 26.03.2014 admitting re-revised total income of ₹ 481.23 crores. The Assessing Officer completed the assessment u/s. 143(3) on 31.03.2015 making various additions/ disallowances. Aggrieved against that order, the assessee filed an appeal before the CIT(A). The Ld. CIT(A) partly allowed the appeal. Aggrieved against certain issues on which dismissal and enhancement were made and on certain issues wherein the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, which is yielding both taxable and non-taxable income, the CIT(A) required the assessee to file the details of expenses incurred by the treasury department. The assessee furnished such sum at ₹ 2.75 crores. The Ld. CIT(A) found that the proportion of investment in equity shares and preferential shares at 103.22 crores in comparison to total investment of ₹ 10,506.03 crores, which works out to 0.99 crores as on the last date of the accounting year. Therefore, the Ld. CIT(A) held that the assessee s claim that no direct expenditure was incurred to earn, exempt income cannot be accepted, on assessee s own admission that it has incurred ₹ 2.75 crores on the treasury department which was entrusted with the responsibility of managing the entire investment portfolio. Therefore, the Ld. CIT(A) gave an enhancement notice to the assessee after considering its plea, held that since the proportion of investments giving raise to exempt income to the total investment was to the tune of 0.99%, the disallowable portion under rule 8D(2)(i) worked out at ₹ 2,72,366/- and hence he directed the AO to disallowance this sum. Relying on the Supreme Court decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Profession . 3.2 Even though the abovementioned decision was in the context of co-operative societies/Banks claiming deduction under section 80P(2)(a)(i) of the Act, the principle is equally applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies. 4. In the light of the Supreme Court s decision in the matter, the issue is well settled. Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this ground before Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned. (emphasis supplied) CBDT itself has accepted the line of thinking that income from investment made by a banking concern is part of its business of banking to be considered under the head Business and Profession . Direct result of this view is that such investments would be only a part of stock-in-trade. In our opinion, how the assessee has treated the shares and mutual funds in its balance sheet prepared under Banking Regulation Act may not be relevant when the income therefrom is treated as a part of business profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, dividend and interest, but to earn profits from trading in i.e. purchasing and selling the same. It is axiomatic, therefore, that the entire expenditure including administrative costs was incurred for the purchase and sale of the stock-intrade and, therefore, towards earning the business income from the trading activity of purchasing and selling the securities. Irrespective of whether the securities yielded any income arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to the same. We are, therefore, of the opinion that disallowance under Section 14A of the Act could not have been made in the assessee s case for investments which were considered as part of stock-in-trade for tax purposes. Such disallowance therefore stands deleted. Subsequent to this decision in the assessee s case, the Kolkata Bench of the ITAT in the case of UCO Bank in ITA No 1615/Kol/2016 CO 51/Kol/2018 dated 21.08.2018 for ay 2012-13 and the Delhi Bench of the ITAT in the case of Punjab National Bank vs CIT, Rnage-14, New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores made by the assessee. On appeal, the CIT(A) found that the assessee bank made its first claim u/s. 36(1)(vii) in the assessment year 2009-10 and adopted different methods for computation of its eligibility u/s. 36(1)(vii) for assessment years 2010-11 2011-12. During this assessment years, it changed its earlier method (Old method) and adopted a different method (new method). Therefore, the Ld. CIT(A) required the assessee to file a copy of computation statement adopting the old method, he found that as per the new method, the assessee claimed deduction at ₹ 35.93 crores. However, under the old method it worked out to just ₹ 25.82 crores. Therefore, the Ld. CIT(A) held that, prime facie, the assessee had inflated its claim by adopting different method of computation for this claim in comparison to the method adopted in the earlier years viz., ay 2010-11 2011-12 and the new method does not correctly reflect the profits from the eligible business. Therefore, the Ld. CIT(A) issued notice for enhancement. The assessee filed the revised computation claiming deduction u/s. 36(1)(vii) at ₹ 34,41,12,325/- only as against ₹ 35,93,12,994/- claimed origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this order for assessment year 2010-11 2011-12. In this regard, he relied on this tribunal decision in its own case (2019) 72 ITR (Trib) 26 (Chennai) and Uttarbanga Kshetriya Gramin Bank (2018) 408 ITR 393 (Cal). 9.1 On the above issue, the Revenue has also filed cross appeal pleading that the Ld. CIT(A) ought to have considered the provisional figures of census data available on first day of relevant financial year, while allowing deduction claimed by the assessee u/s. 36(1)(viia) of the Act, following the decision of the Hon ble High Court of Karnataka in the case of State Bank of Mysore vs ACIT (ITA No 6-7 of 2009 dated 09.01.2015. 10. In this regard, the Ld. AR invited our attention to the copy of the letter issued by Deputy Director CPIO in RTI-09/01/2018- 19/CD(Cen) dated 24.05.2018 to the Chief Manager, wherein the following observations were made : a. As regards point no.1 of your application, it is submitted that the village level population data was not released on 31.03.2011 in respect of Census 2011. b. In respect of point nos. 2 3 of your application, it is informed that the date of release of first and final population data of Census 2011 is 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in its own case (2019) 72 ITR (Trib) 26, Chennai. 13. Per contra, the Ld. DR submitted that the assessee bank created a provision for leave encashment on retirement at ₹ 6,81,00,000/-. Since, provision is not admissible u/s. 43B(f), the assessee itself disallowed this sum in its computation of taxable income enclosed along with the return. However, it claimed ₹ 3,03,67,103/- as deductible amount on actual payment basis. The AO allowed this sum. However, before the AO, a fresh claim was made for the deduction of ₹ 3,77,32,897/-, the difference between provision for leave encashment on retirement i.e., ₹ 6,81,00,000/- and the actual payment made towards leave encashment on retirement. The AO did not consider. Aggrieved, the assessee filed appeal before the CIT(A). The Ld. CIT(A) apart from relying on the Supreme Court order of Staying the operation of the order of Calcutta High Court decision in the case of M/s. Exide Industries Ltd. SLP (Civil) C.C. No. 12060 of 2008 dated 08.09.2008 held that the assessee s original claim was correct in as much as it had on its own disallowed the provision for leave encashment on retirement to the extent of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than three years ought to be taxed as an income. On the other hand, the ld. Authorised Representative of assessee submitted that the issue is covered in favour of the assessee company by Karnataka High Court in the case of Karnataka Vikas Gramena Bank 2015 (12) TMI 1420 (supra), wherein the Hon'ble Karnataka High Court held that the decision of Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar (supra) cannot be applied to the present claim. In the light of the above decision, we do not find any merit in the grounds of appeal No.8 filed by the Revenue. 18.3 In the result, the appeal filed by the Revenue in ITA No.1497/Chny/2018 is dismissed. Following the co-ordinate bench decision, supra, we do not find merit in the Revenue s appeal, therefore, the corresponding grounds are dismissed . 16. The Ld. DR submitted that the Ld. CIT(A) erred in deleting the disallowance of ex-gratia payment following the decision of the CIT vs Maina Ore Transport Pvt. Ltd., 324 ITR 100 (Bom) and Kumaran Mills Ltd vs CIT (2000) 241 ITR 564 (Mad) which are distinguishable and not applicable to this case. Per contra, the Ld. AR supported the order of the Ld. CIT(A) and relied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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