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TMI Blog2024 (11) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the bad debts relating to non-rural branches u/s 36(1)(vii) of the Act without adjusting the same against the PBDD a/c, since the said PBDD a/c relates to rural advances only. Addition u/s.14A being expenditure in relation to exempt income to the book profit u/s. 115JB - AO has calculated the disallowance u/s. 14A and this issue was raised before the CIT(A) and the CIT(A) has also decided the issue in favour of the assessee. Against the deletion by the CIT(A), the revenue has raised this issue before us in ground no.2 to 9 of revenue s appeal. After considering the submissions we have dismissed the appeal of the revenue on this issue observing that there should not be disallowance u/s. 14A and decided this issue in favour of assessee, therefore no question arises for adjudication u/s. 115JB. Addition being provision for wage arrears and towards Ex-gratia and Bonus while computing book profits computed u/s. 115JB - AO noted that while computing taxable income these provisions has been added back by the assessee, however, while computing the book profit, these provisions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELD THAT:- Tribunal in assessee s own case for AY 2013-14 [ 2022 (1) TMI 583 - ITAT BANGALORE] uphold the order of ld CIT(A) in deleting the disallowance of payments made to NFS and Cash Tree. We also set aside the order passed by ld CIT(A) inspect of payment to Visa International towards visa fee, as the same is not liable to tax deduction at source as per the decision rendered by Hon ble Supreme Court in the case of Kotak Securities Management [ 2016 (3) TMI 1026 - SUPREME COURT] Accordingly we direct the AO to delete the said disallowance also. - Shri Laxmi Prasad Sahu, Accountant Member And Shri Soundararajan K., Judicial Member For the Assessee : Shri Ananthan S. Smt. Lalitha Rameswaran, CAs For the Revenue : Shri D.K. Mishra, CIT(DR)(ITAT), Bengaluru. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER These cross appeals are filed by the assessee and revenue against the order dated 18.03.2019 of the CIT(Appeals), Mangaluru for the assessment year 2015-16. 2. The assessee has raised the following revised grounds:- 1. The order of the learned CIT(A) is bad in law and against the facts of the case. 2. The learned CIT(A) erred in disallowing the claim of Rs. 218,08,80,715/- of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d - [2016] 383 ITR 1 (SC) 5. The learned Assessing Officer erred in adding an amount of Rs. 14,94,21,888/- being the expenditure incurred in relation to exempted income to the Book Profit computed u/s 115JB. 5.1 The learned Assessing Officer failed to appreciate the fact that no disallowance can be made u/s 14A. 5.2 Without prejudice to the above. the learned Assessing Officer failed to appreciate the fact that the disallowance u/s. 14A worked out by invoking Rule 8D cannot be applied for making an addition while computing the Book Profit u/s 115JB. 6. The learned Assessing Officer erred in adding an amount of Rs. 25,85,00,000/- being the provision for Wage Arrears while computing the Book Profit computed u/s 115JB. 6.1. The learned Assessing Officer erred in holding that the provision for wage arrears is an unascertained liability. 7. The learned Assessing Officer erred in adding an amount of Rs. 20,00,00,000/- being the provision for Ex-gratia Bonus while computing the Book Profit computed u/s 115JB. 7.1. The learned Assessing Officer erred in holding that the provision for Ex-gratia Bonus is an unascertained liability. 8. The learned Assessing Officer erred in charging interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been accepted by the department and SLP has been admitted by the Hon'ble Supreme Court as seen from CA No.005716/2015 and the same is pending (SLP against ITA No.675 and 657 of 2008 of HC of Karnataka). 10. Disallowance u/s 36(1)(viia) - Provision for bad and doubtful debts The CIT(A) erred in allowing the claim of provision for bad and doubtful debts relating to rural advances. 11. The CIT(A) failed to appreciate the fact that the computation of Average Aggregate advances is erroneously worked and not in accordance with rule 6ABA of Income tax rules, 1961. 12. The CIT(A) failed to appreciate the fact that the details of rural branches was examined and it was held that the assessee has not classified rural branches correctly as per population and also that the definition of a revenue village was incorrectly stated. 13. The CIT(A) has erred in not appreciating the ratio of the decision of Hon'ble High Court of Kerala in the case of Lord Krishna Bank which considered the urban agglomeration and defined revenue village for the purposes of a rural branch. 14. The CIT (A) failed to appreciate the fact that the advances made during the year are only eligible for deduction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch consisted of bad debts relating to rural branches Rs. 1.12 crores and the non-rural branches Rs. 145.16 crores. The AO noticed that the bad debts written off was not debited to Profit and Loss account. The AO also noticed that the new provision created during the year was Rs. 210.54 crores, out of which the assessee had claimed a sum of Rs. 112.19 crores as deduction u/s 36(1)(viia) of the Act. Accordingly, the AO took the view that the assessee is claiming deduction both u/s 36(1)(vii) and 36(1)(viia) of the Act. The assessee submitted that the bad debts claimed by it included prudential write off of Rs. 134.86 crores. The AO expressed the view that the Prudential write off is not eligible for deduction u/s 36(1)(vii) of the Act, since it is not actual write off. He then relied upon the decision rendered by Hon ble Supreme Court in the case of Southern Technologies vs. ACIT (352 ITR 577)(SC), wherein it was held that the mere making of provision for NPA cannot be considered as write off u/s 36(1)(vii) of the Act. He also relied upon the decision rendered by Hon ble Kerala High Court in the case of CIT vs. Hotel Ambassador (2002)(253 ITR 430)(Ker), wherein it was held that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the year end. In other words, the amount of loans and advances at the year end in the Balance sheet is shown as net of bad debts written off. We also notice that the revenue has not filed appeal challenging the above said decision of Ld CIT(A) and hence this view of Ld CIT(A) on this issue has attained finality. 7.3 The Ld CIT(A), however, proceeded to examine this aspect from another angle, i.e., he took the view that the AO has not examined the claim of write off non-rural bad debts of Rs. 145.16 crores in terms of the proviso to sec. 36(1)(vii) read with 36(1)(viia) of the Act. Before Ld CIT(A), the assessee submitted that the provision for bad and doubtful debts (PBDD) allowed u/s 36(1)(viia) of the Act is related to rural debts only and hence, in terms of the proviso to sec. 36(1)(vii), only rural debts written off as bad should be adjusted against the PBDD allowed u/s 36(1)(viia) of the Act. However, the Ld CIT(A) expressed the view that the PBDD allowed u/s 36(1)(viia) of Act is applicable to both Rural and non-Rural debts. Accordingly, he held that the entire amount of bad debts written off (both rural and nonrural) should be first adjusted against the PBDD a/c allowed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to non-rural advances u/s 36(1)(vii) was denied is, assessee having already availed deduction u/s 36(1)(viia), it is not eligible to claim deduction u/s 36(1)(vii) as it will amount to double deduction. In our view, both AO as well as ld. CIT(A) have committed fundamental error by mixing up provisions of sections 36(1)(vii) and 36(1)(viia). While 36(1)(vii) speaks of actual write off of bad debts in the books of account, section 36(1)(viia) even allows provision made towards bad and doubtful debts in respect of rural advances to the extent of provision made in the books of account subject to the ceiling fixed under clause (viia) of section 36(1). Proviso to section 36(1)(vii) operates only in a case where deduction is also claimed under section 36(1)(viia). In other words, proviso to section 36(1)(vii) applies to write off of bad debts relating to rural advances to the extent it exceeds the provision made u/s 36(1)(viia). If we examine the facts of the present case in the context of aforesaid statutory provision, it will be evident that assessee, though, has written off in the books of account an amount of Rs. 210.74 crore, but, in the computation of total income, the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cl. (viia) applies. Indisputably, cl. (viia)(a) applies only to rural advances. Concurring with the aforesaid majority view, Hon'ble CJI, S.H. Kapadia, as the then he was, held as under: 2. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation or taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits. In order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in subsection (1) of Section 36 to provide for a deduction, in the computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debts relating to advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). Thus, considered in light of principle laid down as referred to above, when the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to non-rural/urban advances. As far as application of explanation to section 36(1)(vii) is concerned, we agree with the ld. AR that its operation will be pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act 2013. 7.6 The Ld A.R, however, contended that Explanation-2 has not changed the legal position for claiming deduction of bad debts written off u/s 36(1)(vii) and also claiming PBBD u/s 36(1)(viia) for banks having rural branches. According to Ld A.R, the assessee has claimed deduction towards PBDD under clause (a) of sec. 36(1)(viia) and it relates to the rural advances only. Hence the proviso to sec. 36(1)(vii) shall have bearing only on PBDD relating to rural advances only. Thus, according to Ld A.R, the bad debts written off relating to nonrural advances should be allowed independently u/s 36(1)(vii) of the Act without first adjusting the same against PBDD allowed under clause (a) of sec. 36(1)(viia) of the Act. 7.7 We heard the Ld D.R and perused the record. Now the core question that arises is whether the bad debts relating to non-rural branches are also required to be first debited to PBDD a/c and then the excess amount over and above the balance available in PBDD alone could be allowed as bad debts u/s 36(1)(vii) of the Act. 7.8 The provisions of sec. 36(1)(vii) allows deduction as under:- 36(1)(vii) Subject to the provisions of sub-section (2), the amount of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (viia)(a) applies only to rural advances. So the bad debts relating to non-rural advances need not be deducted against the PBDD allowed under clause (a) of sec.36(1)(viia) of the Act. The Hon ble Supreme Court, inter alia, also observed as under:- 31 It was neither in dispute earlier nor is it disputed before us, that the assessee-bank is maintaining two separate accounts, one being a provision for bad and doubtful debts other than provision for bad debts in rural branches and another provision account for bad debts in rural branches for which separate accounts are maintained . Referring to the above said observations, the revenue has taken the view that the Hon ble Supreme Court has rendered its decision on the assumption that the banks would be maintaining two separate PBDD a/c, viz., one for rural branches and another one for non-rural branches. 7.10 It is possible that all banks may not be maintaining two separate accounts, as observed by the Hon ble Supreme Court. Hence there was an apprehension in the minds of revenue with regard to the effect of the decision rendered by Hon ble Supreme Court. For instance, if a particular bank is maintaining only a single PBDD a/c for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in the case of Catholic Syrian Bank (supra) has held that the PBDD allowed under clause (a) of Sec. 36(1)(viia) refers to rural advances only. In fact the expression rural branches finds place in clause (a) only. It can be noticed that the reference to rural branches is not there in clause (b) to (d). Generally, the foreign banks may not have rural branches. However, such kind of banks, financial institutions, NBFC etc. are also eligible to claim deduction towards PBDD u/s 36(1)(viia) of the Act under clauses (b) to (d). In view of the decision rendered in the case of Catholic Syrian bank, it is possible that the assessee s covered by clause (b) to (d) may contend that the bad debts written off by them need not be adjusted against PBDD allowed u/s 36(1)(viia) of the Act, since the bad debts relate to non-rural debts . Accordingly, we are of the view that the Explanation 2 has been inserted in order to bring the assesses covered by clauses (b) to (d) within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. Hence, in our view, advances given by rural and non-rural branches mentioned in Explanation 2 shall apply to the assesses covered by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances. Section 36(1)(viia) of the Act contains three sub-clauses, i.e. sub-clause (a), sub-clause (b) and sub-clause (c) and only one of the sub-clauses i.e. sub-clause (a) refers to rural advances whereas other sub-clauses do not refer to the rural advances. In fact, foreign banks generally do not have rural branches. Therefore, the provision for bad and doubtful debts account made under clause (viia) of section 36(1) and referred to in proviso to clause (vii) of section 36(1) and section 36(2)(v) applies to all types of advances, whether rural or other advances. It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rural advances and urban advances and if the actual write off of debt relates to urban advances, then, it should not be set off against provision for bad and doubtful debts made for rural advances. There is no such distinction mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation given by the Hon ble Supreme Court, it should have brought amendment in clause (a) to sec. 36(1)(viia) to make its intention clear that the clause (a) shall apply to both rural and non-rural advances. Since there is no such amendment, the interpretation given by Hon ble Supreme Court that clause (viia)(a) applies to rural advances only shall remain intact. Explanation 2 inserted in sec. 36(1)(vii), in our view, does not override the above said interpretation given by Hon ble Supreme Court. 7.14 In the Memorandum explaining the purpose of introducing Explanation -2 in Sec. 36(1)(vii), it has been acknowledged that only the clause (a) refers to rural branches . It has also been stated that the foreign banks do not have rural branches. The assesses covered by clause (b) to (d) may not be having rural branches. Hence, the memorandum explains as under with regard to the decision rendered by Hon ble Supreme Court in the case of Catholic Syrian Bank (supra):- However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 7. Ground No. 04 - Disallowance u/s 40(a)(ia) is taken up with ground Nos. 15 16 in the revenue s appeal in the following para. 8. Ground No.5 is regarding addition of Rs. 14,94,21,888 u/s. 14A being expenditure in relation to exempt income to the book profit u/s. 115JB. During the course of hearing the ld. AR of the assessee relied on the judgment of Sobha Developers Ltd. reported in [2021] 434 ITR 266 (Karn) and submitted that para no. 6 7 is relevant part of the judgment is squarely applicable to the present case on hand which reads as under:- 6. We have considered the submissions made on both sides and have perused the record. Before proceeding further, it is apposite to take note of relevant extract of section 115JB of the Act, which reads as under: 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n taken by this court in Gokaldas Images (P.) Ltd. (supra) was also taken by High Court of Bombay in CIT v. Bengal Finance Investments (P.) Ltd. [IT Appeal. No. 337 of 2013, dated 10-2-2015]. It is pertinent to note that in Rolta India Ltd., the Supreme Court was dealing with the issue of changeability of interest under sections 234B and 234C of the Act on failure to pay advance tax in respect of tax payable under section 115JA/115JB of the Act and therefore, the aforesaid decision has no impact on the issue involved in this appeal. Similarly, in Maxopp Investment Ltd. (supra) the Supreme Court has dealt with section 14A of the Act and has not dealt with section 115JB of the Act. Therefore, the aforesaid decision also does not apply to the fact situation of the case. In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered in favour of the assessee and against the revenue. In the result, the order passed by the tribunal dated 9-1-2015 insofar as it pertains to the findings recorded against the assessee is hereby quashed. 9. The ld. DR relied on the order of the AO and submitted that the AO has correctly added the disallowance made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient material. Grounds No. 6 7 are allowed for statistical purposes. 12. Ground No. 8 regarding interest u/s. 234B 234D is consequential in nature. 13. The appeal of the assessee is partly allowed for statistical purposes. ITA No.161/Bang/2019 (Revenue s appeal) 14. Ground No.1 17 are general in nature. 15. Ground Nos. 2 to 9 : Disallowance u/s. 14A : During the course of assessment proceedings the AO noted that the assessee has received certain exempt income but there is no disallowance made by the assessee under section 14A of the Act. During the impugned AY, the assessee had made investment and earned exempt income as under:- A. Investments Tax free bonds Rs. 5 crore Shares Rs.150.44 crores Total investments Rs.155.44 crores B. Exempt income earned Dividend income Rs. 87,05,348 RIDF interest Rs. 30,98,618 Total Rs.118,03,966 16. The AO noted that without utilising the resources and the existing establishment of the applicant it would have been possible to earn the exempt income. The investment made will always have a notional interest and other costs attached to it. The investments made by the assessee are from common pool of funds, therefore the proportional expenditure should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments during the year by Rs. 59.36 crores and the increase in the internal fund is by Rs. 336.86 crores. Therefore there is no external fund used for investments towards earning of exempt income and there is no separate administrative expenditure incurred for earning exempt income. This issued has been decided by the coordinate Bench of Tribunal in assessee s own case for the AY 2016-17 2017-18 in ITA No.876 877/Bang/2023 in which it has been held as under:- 20. 11. After considering the rival submissions and perusing the material on record, we note that this issue was considered by this Tribunal in the case of Canara Bank (erstwhile Syndicate Bank) in ITA No. 501 390/Bang/2023for assessment years 2016-17 2017-18 dated 25.10.2023 and it was held as under:- 6. Considering rival submissions, we note that this issue has been settled by the Hon ble jurisdictional High Court in assessee s own case for AY 2011-12 2012-13 in ITA No.258/2020 dated 8.2.2021 observing as under:- 4. Even though four substantial questions of law are raised in the appeal Memorandum cited supra, among them, substantial question of law Nos.2 4 are covered by the judgment and are answered by the co-ordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled that expenditure is a pay out. In order to attract applicability of section 14,4 of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [See: WALFORT SHARE AND STOCK BROKERS (P) LTD SUPRA as well as M.4XOP INVESTMENTS LTD SUPRA]. In the instant case, the assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. In view of aforesaid enunciation of law by the Supreme Court, the first substantial question of law framed by this court is answered in favour of the assessee and against the revenue. 10. Learned counsel for parties, have fairly admitted that in case this court frames a substantial question of law that whether provisions of Section 115JA apply to the Banking Companies are not the remaining substantial questions of lay,/ would be reduced otiose. This court has already framed a substantial question of law in this regard today. This court by an order passed on 16.01.2020 passed in ITA No.13/2014 has already held that the provisions of Section 115JB do not apply to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und No. 10 to 14 : Briefly stated the facts of the case are that the assessee bank has claimed a sum of Rs. 211.22 crores as deduction u/s. 36(1)(viia) in the computation of income filed. The assessee was asked to justify the claim and the assessee furnished reply as under:- Assessee s written submission of details Deduction u/s 36(1)(viia) Basis of claiming Rs. 211,22,28,835 as deduction u/s 36(1)(viia) of the IT Act The claim u/s 36(1)(viia) has been made on the following basis: (i) 10% of Aggregate Average Rural Advances Rs.127,09,83,333 (ii) 7.50% of the total income Rs. 84,12,45,502 Provision made u/s 36(1)(viia) (against above balance provision Available supra) Rs.211,22,28,835 (iii) Provision for bad and doubtful debts made in the Books Rs. 223,07,13,584 The claim is restricted to minimum of the provision made in the Books and percentage of average advances and total income prescribed under the Section. The method of calculation of aggregate average advances for the purposes of Section 36(1)(viia) is exactly as specified in Rule GABA of the Income Tax Rules. The details of working is furnished 23. From the above submissions, it was noted that assessee has not furnished detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded 10,000. b) Further, in several cases it was noticed that the branch is not a rural branch and rather it was situated in urban agglomeration which cannot be considered as a Rural branch. c) Apart from this, while the computing the AAA the assessee bank has taken into account the running balance of the advances made in the previous year as the opening balance of the subsequent year and computed the outstanding balance at the end of last day of each month comprised in the previous year. d) While computing the AAA the assessee bank should have considered the fresh amount of advances made by each rural branch as outstanding at the end of each month comprised in the previous year rather the running balance. In this process, substantial amount of deduction has been claimed over and above the eligible amount. 25. Accordingly the assessee was asked to furnish the working made in respect of AAA made by various branches. Further the AO noted that the rural branches should be defined as per judgment of Hon ble jurisdictional High Court in the case of Lord Krishna Bank and advances made by rural branches are to be considered but not the cumulative balances. The assessee is eligible to get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance Rs.76,21,69,555/-. 26. Aggrieved from the above order, the assessee filed appeal before the CIT(A) and the ld. CIT(A) relying on following judgments allowed appeal of the assessee:- Canara Bank v. JCIT, LTU [2017] 60 ITR (Trib) 1 (ITAT Bang) Vijaya Bank v. JCIT, LTU in ITA No.1252/B/2010 order dt. 5.1.2018 Nizamabad Dist. Co-op. Central Bank Ltd. v. ITO, 2014 (12) TMI 562 ITAT, Hyd. DCIT v. Madurai Dist. Central Co-op. Bank Ltd. [2014] 51 taxmann.com 194 (Chennai Trib) DCIT v. City Union Bank Ltd. in ITA No.1485/Mds/07 dt. 30.10.2009. 27. The ld. DR relied on the order of AO and submitted that the assessee has wrongly interpreted the provisions of the Act and submitted that the order of the AO should be upheld. 28. The ld. AR submitted that the issue is squarely covered in favour of the assessee by the order of the jurisdictional High Court and in assessee s own case and further submitted that the ld. CIT(A) has rightly allowed the appeal of the asse. He also relied on the coordinate Bench decision in the assessee s case in ITA Nos. 963 964/Bang/2023 dated 19.2.2024 for AYs 2016-17 2017-18 where it is held as under:- 40. Considering the rival submissions, the assessee has com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision has been approved by the Calcutta High Court in Uttarbanga Kshetriya Gramin Bank case. 8. We have carefully considered the rival contentions and perused the records. 9. In Para 7.2 of the impugned order, the Tribunal has recorded thus, 7.2 Before us, the learned Authorised Representative for the assessee reiterated the submission that the language of Rule 6ABA is very clear and does not mandate that only incremental advances has to be considered and nothing can be read into it as has been done by the authorities below. It was submitted that this issue has been considered and decided in favour of the assessee by the co-ordinate bench of this Tribunal in the case of Canara Bank v. JCIT (2017) 60 ITR (Trib) 1 [ITAT (Bang)] 10. It is further held that the said decision has been followed in Vijaya Bank case. The manner in which the computation has been made has been given in the case of Vijaya Bank Case. Order passed by the Tribunal in Canara Bank's case followed in Vijaya Bank case has attained finality and the Revenue has not challenged the said order. Further, the High Court of Calcutta, while considering an identical situation as recorded thus, Mr. Khaitan, learned sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consideration, then it is the Census figures of 2001, which has to be taken into consideration. If the final population published on December 2003 is taken into consideration, then it would be the final population figure of 1991 Census that has to be taken into consideration. The question is which is the final population total which has to be taken into consideration because as it is clear from the letter written by the Registry of Home Affairs, the provisional population total cannot be relied upon. [Para 7] In respect of any provision for bad and doubtful debts made by the scheduled bank, an amount not exceeding 7 1/2 percentage of the total income computed before making any deduction under this clause and chapter VIA and an amount not exceeding 10 per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner are allowed as deduction. It is clear from the said provision that the distinction has been made between the branches situated in the rural areas and the branches situated outside the rural areas. In respect of rural area, branches have to cater to the requirements of the poor and underprivileged section of the society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 'final' conspicuously missing in the said words. The word 'published' has to be understood as final population as contended by the assessee. If other words are added, it would amount to re-writing which is impermissible in law. Keeping in mind the object, before the bank is entitled to the said benefit, all that is to be seen is whether in that village where the rural branch is situated, population is less than 10,000 or exceeding 10,000. Census is conducted once in ten years. After conclusion of the Census, provisional figure will be published and then final publication is made. If from the date of provisional population totals being published, it has crossed the 10,000 limit as prescribed under the law, then it does not satisfy the requirements of the rural branch and, consequently, would not be entitled to the benefit granted to the rural branches. The publication of the final population total is only a formality. If provisional population total shows more than 10,000 and in the final population total figure shown is less than 10,000, then it will make difference. But in both the provisional population total and the final population total if figure is mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to current account after netting the amount to be received by the bank for usage of the bank ATM by the customers of other bank. Thus the net amount is credited to the bank account rather than the bank making any payment. The amount so debited to the bank s account is in turn paid to various banks by NPCI only. The assessee also referred to the Notification SO 3069(E) [NO.56/2012 (F. NO. 275/53/2012- IT(B)], DATED 31-12-2012 and NOTIFICATION NO. SO 2143(E) (NO.47/2016 (F.NO.275/53/2012-IT(B), DATED 17-6-2016] . From the written synopsis it was observed that the deductee has reported receipts in their returns of income and furnished a certificate in the prescribed form. However the assessee was unable to provide the legal basis / detailed reasons as to why the amounts were paid without TDS in the absence of any express provision of law or a certificate u/s. 197 obtained and furnished by the deductee for non-deduction of tax. He further noted that even if the deductee has offered the receipts, the deductor is liable for consequences of non-deduction of tax and the Notification relied by the assessee is applicable from its publication i.e. 17.6.2016 and payment made prior to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. Karnataka Bank Ltd. reported in 2021 (7) TMI 1411 Karnataka High Court and the issue has been answered in favour of the assessee as per the question of law no. 4. 33. The ld. DR relied on the order of the AO in respect of payment made to NPCI and in respect of payment made to VISA Worldwide the order of the lower authorities. 34. Considering the rival submissions we noted that the issue has been decided by the coordinate Bench of Tribunal in assessee s own case for AY 2013-14 as relied by the ld. AR of the assessee noted supra. For the sake of convenience we are reproducing the same as under:- The next issue urged by the assessee relates to disallowance of payments made to VISA International u/s 40(a)(ia) of the Act, which was confirmed by Ld CIT(A). The revenue is also in appeal in respect ITA No.1906/Bang/2018 ITA No.229/PAN/2018 M/s. The Karnataka Bank Ltd., Mangalore Page 11 of 22 of relief granted by the first appellate authority in respect of remaining amount of disallowance made u/s 40(a)(ia) of the Act. 6.1 The AO noticed that the assessee has claimed a sum of Rs. 17.27 crores as expenditure towards expenses on ATM charges. The breakup details is given i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide its order dated 06.02.2020 has decided the issue as under:- 13. The next issue relates to disallowance made u/s 40(a)(ia) of the Act. The AO noticed that the assessee has claimed a sum of Rs. 75.46 crores as other expenses details of which are given below:- i) ISC for provision of ATMs (Rs.18,14,31,425/-) ii) Payment to NFS Network towards ATM usage charges (Rs.15,04,34,326/- iii) Payment to Cash Tree Network towards ATM usage charges (Rs.99,87,801/-) iv) VISA fees paid to VISA International (Rs.96,87,529/-) 14. The AO asked the assessee to furnish details of tax deducted at source from the above said payments. The AO noticed that the assessee has not deducted tax at source from the following payments:- i) Payment to NFS Network towards ATM usage charges (Rs.15,04,34,326/-) ii) Payment to Cash Tree Network towards ATM usage charges (Rs.99,87,801/-) iii) VISA fees paid to VISA International (Rs.96,87,529/-) Accordingly, he disallowed all the three expenses aggregating toRs.17.01 crore by invoking provisions of sec. 40(a)(ia) of the Act. The ld CIT(A) noticed that the Bengaluru Bench of Tribunal has held in the case of Corporation Bank in ITA No.1264 and 1352/Bang/2013 for asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n; (ii) cash management service charges (iii) depository charges on maintenance of demat accounts (iv) charges for warehousing services for commodities (v) underwriting service charges (vi) clearing charges (MICR charges) (vii) credit card or debit card commission for transaction ben-: the merchant establishment and the acquirer bank. 2. This notification shall come into force from the 1st day of January, 2013. Furthermore, the Hon'ble Supreme Coup in the case of Kotak Securities Management 383 ITR 1 held that consultancy managerial services involving services rendered by human efforts where services are made available to all customers and there is nothing special, exclusive or customer service charges, it does not partake of the character of managerial or technical services. In the light of this decision we hold that the assessee-bank is not liable for tax deduction at source on these payments. We direct the Assessing Officer to delete addition on account of technical service. 18. Following the above said decision, we uphold the order of ld CIT(A) in deleting the disallowance of payments made to NFS and Cash Tree. We also set aside the order passed by ld CIT(A) inspect of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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