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2022 (5) TMI 1537 - AT - Income TaxDisallowance of depreciation claimed on Investments held to Maturity (HTM) - HELD THAT:- We notice that the Ld CIT(A) has followed the subsequent decision rendered by the jurisdictional Hon’ble Karnataka High Court in the assessee’s own case [2013 (7) TMI 656 - KARNATAKA HIGH COURT] and also the decision rendered by Tribunal in the case of Corporation Bank [2015 (3) TMI 1360 - ITAT BANGALORE] in deciding this issue in favour of the assessee. Since the assessee has claimed depreciation only for income tax purposes, both the assessee and the assessing officer shall ensure that the profit/loss arising on sale of these investments should be ascertained by considering the value of investments as per income tax records and not as per books of account. Disallowance made u/s 14A - AO noticed that the assessee did not make any disallowance u/s 14A of the Act even though it has earned tax free income during the year under consideration - CIT(A) took the view that the AO has not recorded dissatisfaction over the claim of the assessee with regard to the disallowance to be made u/s 14A - HELD THAT:- Hon’ble Supreme Court in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] has expressed the view that the provisions of sec.14A would not be attracted when the income received on shares and securities held as stock in trade is assessed as business income. As held in AY 2012-13 we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining this issue afresh. In the set aside proceedings, the AO should also consider the effect of the decision rendered by Hon’ble Supreme Court in the case of South Indian Bank [2021 (9) TMI 566 - SUPREME COURT]. The assessee is free to make all contentions on this issue before the AO. Disallowance made u/s 36(1)(viia) - deduction towards Provision for bad and doubtful debts (PBDD) - 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? - HELD THAT:- In the instant case, the assessee has claimed deduction towards PBDD under clause (a) to sec. 36(1)(viia) of the Act, meaning thereby, the clause (a) is applicable to rural advances only as per the decision given by Hon’ble Supreme Court in the case of Catholic Syrian Bank[2012 (2) TMI 262 - SUPREME COURT] - Hence the bad debts relating to non-rural branches are not required to be adjusted against PBDD allowed under clause (a) of sec. 36(1)(viia) of the Act in terms of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. We are unable to agree with the view expressed by Ld CIT(A) on 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.
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