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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 ..... error in the assessment order or no prejudice is caused to the Revenue, the MAT credit can be verified by the AO and that can be done while giving appeal effect order of AO for the assessment year 2015-16 and consequent rectification can be done by the AO for assessment year 2018-19 also. Hence to that extent, we agree with the directions of PCIT but this cannot be a subject matter of revision u/s. 263 of the Act. Accordingly, this issue of assessee s appeal is allowed subject to above observation. PCIT directing the AO to verify the claim of deduction u/s. 36(1)(viia) of the Act on the loan advance by 11 branches, which are not classified as rural branches for the purpose of claiming deduction u/s. 36(1)(viia) - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Principal Commissioner of Income Tax, in Order No.ITBA/REV/F/REV5/2023-24/1063497446 (1) dated 27.03.2024. The assessment was framed by the Assessing Officer, National Faceless Assessment Centre, Delhi for the assessment year 2018-19 u/s. 143(3) r.w.s.144B of the Income Tax Act, 1961 (hereinafter the Act ) vide order dated 31.05.2021. 2. The only issue in this appeal of assessee is as regards to the revision order passed by PCIT, Madurai by invoking the provisions of section 263 of the Act and partially set aside the assessment order on the following issues:- i) To verify the MAT credit and even found not available, the AO is directed to 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 havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the PCIT on the issue of MAT credit adjustment, excess claim of deduction u/s. 36(1)(viia) of the Act and disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act r.w.rule 8D of the Rules on 02.02.2024 and subsequently, another show-cause notice was issued on 07.03.2024. 3.1 The assessee before PCIT explained as regards to MAT credit set off that the assessee for assessment year 2015-16 has paid the tax under MAT and it was carried forward and set off against tax payable for assessment year 2018-19 apart from other preceding years. It was explained that for assessment year 2015-16 because 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 cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The ld.counsel for the assessee stated that the PCIT during the proceedings u/s. 263 of the Act, treated the investments made by bank as stock-in-trade, hence no such disallowance can be made by invoking the provisions of section 14A of the Act for the reason that this issue was decided by Hon ble Supreme Court in the case of South Indian Bank Ltd., vs. CIT reported in (2021) 438 ITR 1. Even this issue is covered by the Tribunal s decision in assessee s own case in earlier assessment years in ITA Nos.902, 903, 905, 907/CHNY/2010 930, 931/CHNY/2011 vide order dated 09.06.2023. The ld.counsel stated that the Hon ble Supreme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2018-19 also. Hence to that extent, we agree with the directions of PCIT but this cannot be a subject matter of revision u/s. 263 of the Act. Accordingly, this issue of assessee s appeal is allowed subject to above observation. 8.1 The second issue on merits is as regards to revision order of PCIT directing the AO to verify the claim of deduction u/s. 36(1)(viia) of the Act on the loan advance by 11 branches, which are not classified as rural branches for the purpose of claiming deduction u/s. 36(1)(viia) of the Act. We noted that the assessee bank claimed deduction of Rs. 227,08,23,702/- u/s. 36(1)(viia) of the Act 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 classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -trade. We noted that this issue is covered by Tribunal decision in assessee s own case in ITA Nos.902, 903, 905, 907/CHNY/2010 930, 931/CHNY/2011 wherein the Tribunal has considered this issue in paras 6 7 as under:- 6. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The solitary issue that came up for our consideration from all these appeals filed by the assessee relates to disallowance of expenditure relatable to exempt income u/s. 14A of the Act. We find that the issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and securities must be considered to be business income. That is why, Section 14A of the Act would not be attracted to such income. 12.4 In this view of matter and consistent with view taken by the Coordinate Bench and also by respectfully following the decision of Hon'ble Supreme Court in the case of South Indian Bank Ltd., vs. CIT, supra, we direct the AO to delete addition made towards disallowance u/s. 14A r.w.rule 8D of the IT Rules, 1962. 7. Further, the Hon ble Karnataka High Court in the case of the CIT, LTU, the Addl./Jt.CIT, LTU, Bengaluru v. M/s.Canara Bank, reported in 2023 (1) TMI 243 (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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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