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TMI Blog2024 (11) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallow. The PCIT in para 5 of his order has directed the AO as under (relevant):- "Therefore, the Assessing Officer is directed to verify the claim of the assessee and disallow the MAT credit, if found credit not available." ii) To verify the claim of deduction u/s. 36(1)(viia) of the Act and directed the AO to verify the classification of branches based on population and re-compute the deduction u/s. 36(1)(viia) of the Act, the PCIT has directed the AO as under (relevant):- "In view of the above, except for Pongalur branch having aggregate average advance of Rs. 1,25,13,362/-, there is no error in the classification of the branches based on population and hence no revision order can be passed in respect of the 10 branches. In view of the above submission of the assessee, the Assessing Officer is directed to verify the claim of the assessee and re-compute the deduction u/s. 36(1)(viia) accordingly" iii) The AO is directed to verify whether the assessee bank is treating all the investments as stock-in-trade for the purpose of disallowance u/s. 14A of the Act, read with Rule 8D(2) of the Income Tax Rules, 1962 (hereinafter the 'Rules'). The PCIT directed the AO in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause of additions were made in the order u/s. 143(3) of the Act under regular computation, the tax payable under normal computation was higher and there was no tax demand under MAT. The appeal for assessment year 2015-16 was allowed by Tribunal and consequent to Tribunal's order, the computation has to be reworked and accordingly, the MAT becomes applicable, the same will be available for set off in the subsequent assessment years and Tribunal has already decided this issue. The ld.counsel stated that for this purpose and for verification of MAT credit, the revision proceedings cannot be initiated rather this can be rectified while giving effect to the appellate order of ITAT or an order can be passed u/s. 154 of the Act. The ld.counsel stated that the Tribunal has already passed an order allowing the appeal of assessee bank for assessment year 2015-16 and other years on most of the issues and if the appeal effect is given to the order of ITAT, then the MAT credit available on the same can be verified. 4. As regards to the claim of deduction u/s. 36(1)(vii) of the Act, the ld.counsel stated the facts that the assessee's bank claimed deduction of Rs. 227,08,23,702/- u/s. 36(1)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has considered this issue and categorically held whatever the investments held by banking company are to be treated as stock-in-trade and no disallowance u/s. 14A of the Act can be made while dealing with the case of banks. 6. Apart from the merits of the case, the ld.counsel for the assessee also raised the issue of jurisdiction that there is no error in the assessment order or there is no prejudice caused to the Revenue pointed out by PCIT while passing revision order u/s. 263 of the Act. 7. On the other hand, the ld.CIT-DR relied on the revision order passed by the PCIT. 8. We have heard rival contentions and gone through facts and circumstances of the case. First issue on merits is as regards to the order of PCIT directing the AO to verify the claim of assessee to MAT credit and if found credit not available, disallow the same. The facts of the case are that the assessee bank had availed MAT credit for the assessment year relating to assessment year 2015-16 as per the provisions of section 115JAA of the Act. We noted from the facts that for the relevant assessment year 2018-19, it had adjusted MAT credit of Rs. 35,56,55,351/- against the tax liability payable as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of provisions for bad and doubtful debts. The assessee before AO during the original assessment proceedings filed various details and thereafter, the AO completed assessment after disallowing a part of claim of deduction by excluding 11 rural branches from the calculation and passed assessment order u/s. 143(3) of the Act and AO disallowed a sum of Rs. 199,68,95,443/-. The ld.counsel before us has now argued that the revision proceedings commenced by PCIT u/s. 263 of the Act by alleging that another 11 branches are to be excluded from the classification as rural branches, we noted from the facts that the assessee has filed complete details of 11 branches which are situated in various cities and also submitted addresses of branches in Annexure-2, which is made part of the revision order at pages 10-12. From the above, 11 branches located at various places, it is noticed that 10 branches are covered by 2011 census wherein population is less than 10,000 except one branch of Pongalur which can be excluded from rural branches since the population is more than 10,000 as per 2011 census. The claim of deduction in respect of Pongalur banch having aggregate average advance of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnai Benches in the assessee's own case for AY 2013-14, where the Tribunal by following the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd. v. CIT (supra) held that shares & securities held by the bank or guarantor and income received for such shares & securities must be considered as business income, and consequently, provisions of Sec.14A of the Act, would not be attracted to such income. The relevant findings of the Tribunal are as under: 12. The first issue that came up for our consideration from Ground No.2 of disallowance of expenditure relatable to exempt income u/s. 14A of the Act The earned dividend income of Rs. 2,21,85,558/-, however no disallowance as required Act had been made by the assessee. Therefore, the AO has disallowed 2% of such income as expenses relatable to exempt income u/s. 14A read with Rule 8D of the Rules, 1962 (hereinafter the 'IT Rules'). On appeal, the ld.CIT(A) has restricted 1.15% of exempt income which is proportionate expenditure of the Treasury CIT (A) has also disallowed an amount of Rs. 65,68,526/- being 0.5% of the tax exempt by invoking Rule 8D(2)(iii) of the IT Rules. 12.1 The Id.AR for the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Karnataka High Court), had considered an identical issue and by following the decision the Hon'ble Supreme Court in the case of South Indian Bank Ltd. v. CIT (supra) held that provisions of Sec.14A of the Act, are not applicable in case of banking companies, where dividend income has to be considered as business income. The Hon'ble Delhi High Court, in the case of PCIT v. Punjab National Bank had also considered an identical issue and by considering the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT reported in [2018] 402 ITR 640 (SC) held that provisions of Sec.14A of the Act, will not apply on profits from shares where held as stock in trade and not as investments. The sum and substance of ratio laid down by the Hon'ble Supreme Court and the Hon'ble High Courts are that in case of banking companies were shares & securities are held as stock in trade, dividend income is considered as business income, and consequently, provisions of Sec.14A of the Act, cannot be applied. In term of the above, we find no error in the order of AO which is causing prejudice to the Revenue rather the AO has rightly not disallowed any expenses relatable to exempt i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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