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TMI Blog2024 (7) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... t that interest free funds were available with the assessee which exceeded their investments, the provisions of Section 14A could not be relied on by the revenue to disallow the claim for expenses made by the assessee. We are also informed that the assessing officer has since, taking note of the Supreme Court judgment, passed rectification orders rectifying the assessments in the instant cases, in line with the Supreme Court judgment. Disallowance u/s 36(1)(viii) - disallowance arose consequent to an amendment that was effected to the provisions of Sections 36(1)(viii) with effect from 01.04.2010 through the Finance (No.2) Act, 2009 - change in the definition of eligible business via. amendment - HELD THAT:- A view had been expressed that National Housing Bank was not entitled to the benefits of the unamended Section 36(1) (viii) of the Act, on the ground that it was not engaged directly in the long term financing for construction or purchase of houses in India for residential purpose. The amendment was therefore deemed necessary to extend the said benefit even to the National Housing Bank. It follows therefore that the amendment was intended to widen the scope of the deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OME TAX JUDGMENT Dr. A. K. Jayasankaran Nambiar , J. As all these I.T. Appeals involve common issues, they are taken up together for consideration, and disposed of by this common judgment. I.T.A.No.165 of 2019 pertains to the assessment year 2012- 13 whereas I.T.A. Nos.26 of 2020 and 28 of 2020 pertain to the assessment year 2015-16. 2. The brief facts necessary for disposal of these I.T.Appeals are as follows: The appellant before us is engaged in the business of banking and is an assessee under the Income Tax Act ('the Act' for short) on the files of the respondent. During the assessment year 2012-13, the appellant had received dividend income of Rs.1,77,26,110/- from its investments in shares and bonds. Though during the year the dividend income received on such shares and bonds was tax free, the shares and bonds in question were held by the appellant as trading assets. The trading and current assets were valued at cost or market price, whichever was lower at the end of the financial year, and consequent depreciation in the value of the same was taken into account in the financial accounts of the Company. The profit on the sales of shares/bonds was also returned and asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the deduction contemplated under Section 36(1)(viii) of the Act in the years prior to the amendment. On account of the amendment referred above, and the change in the definition of eligible business, the assessing authority found that eligible business in relation to a Banking Company included only the business of 'providing long term finance for developing of housing in India' and hence, the appellant would not get the benefit if it 'provided long term finance for construction or purchase of houses in India for residential purposes'. The reasoning of the Appellate Tribunal, while confirming the view of the assessing officer, was that after the amendment, and the deletion of the words 'construction or purchase of houses in India for residential purposes' from the definition of eligible business in relation to a Banking Company, the deduction envisaged for a Banking Company could not be availed in a situation where the bank was engaged in providing long term finance for construction or purchase of house for residential purposes, since that deduction was available only to Housing Finance Companies after the amendment. 6. In this connection, it is relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India for residential purpose. The amendment was therefore deemed necessary to extend the said benefit even to the National Housing Bank. It follows therefore that the amendment was intended to widen the scope of the deduction in relation to Financial Corporations specified in Section 4A of the Companies Act, Financial Corporations that were Public Sectors Companies, Banking Companies and Corporative Banks other than Primary Agricultural Credit Society or Primary Corporative Agricultural and Rural Development Banks and to confine the benefit available to a Housing Finance Company only in relation to the provision by it of long term finance for the construction or purchases of houses in India for residential purpose. 9. We therefore, cannot agree with the finding of the Appellate Tribunal that in as much as the providing of long term finance for construction or purchases of houses in India for residential purpose was an activity that qualified for deduction under Section 36(1)(viii) only for Housing Finance Companies, the same activity would not qualify for deduction in relation to a Banking Company. The phrase 'Development of Housing in India' is wider in its scope and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 in I.T.A.No.36 of 2011 in the case of Federal Bank for the assessment year 2006-07. By the said judgment, a Division Bench of this Court had remanded a similar issue for consideration by the Appellate Tribunal as to whether, under circumstances where the assessee bank had written off the amounts in the manner described in the case of Vijaya Bank v. Commissioner of Income Tax and another [(2010) 323 ITR 166(SC)], as verified after obtaining a report from the assessing officer on perusal of the balance sheet of the assessee for the assessment year in question. the deduction under Section 36(1)(vii) of the Act would be available to the assessee. 15. We are inclined to allow the said request of the learned Senior Counsel in respect of the said issue and remit the matter to the Appellate Tribunal for a consideration as to whether the claim for deduction made under Section 36(1)(viia) of the Act could be considered in terms of Section 36(1)(vii) of the Act. 16. In the backdrop of the aforesaid discussion, we must proceed now to consider the questions of law raised in these I.T. Appeals. They read as follows : I.T.A.No.165 of 2019 1. Whether on the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt entitled to deduction of the provision for doubtful debts made even under Section 36(1)(vii)? I.T.A. No.28 of 2020 1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in reversing the order of the first appellate authority and confirming disallowance under Section 14A of the Income Tax Act? 2. Whether on the facts and in the circumstances of the case and when the shares and bonds from which tax free income by way of dividend is received is held by the Appellant as trading assets any amount can be disallowed under Section 14A with respect to such dividend income? 3. Whether on the facts and circumstances of the case and in the event it is held that Section 14Ais applicable, the quantum of disallowance under Section 14A cannot exceed the dividend income earned by the Appellant? 17. In the light of the discussions in the previous paragraphs of this judgment, we answer the substantial questions of law raised in these appeals as follows: 1. I.T.A.No.165 of 2019: We answer all the questions in favour of the assessee and against the revenue. 2. I.T.A No.26 of 2020: We answer questions 1 and 2 in favour of the assessee and against the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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