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TMI Blog2013 (12) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... A) following his predecessor's decision in AY 2005-06, set aside the issue to the file of the AO with a direction to ascertain the facts and allow depreciation accordingly. 4. Before us, the learned counsel for the assessee has canvassed that the issue is squarely covered by the decision of the coordinate bench in assessee's own case for AY 2006-07 in ITA No. 97/Hyd/2010 vide order dated 04/04/2013. The learned DR neither controverted the submission of the learned counsel nor brought any contrary decision on record against the said order. 5. After hearing the parties and perusing the record, we find that the issue under consideration is squarely covered by the decision of the coordinate bench of ITAT, Hyderabad in assessee's own case for AY 2006-07 wherein the coordinate bench held as follows: "50. We are of the opinion that the assessee Bank is holding various Government Securities in order to comply with the statutory liquidated ratio. The bank would have to hold requisite percentage of deposits in the form of cash, gold, government or approved securities. The government securities held for the purpose of comply with the SLR has been held to be stock in trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said disallowance. 8. Aggrieved, the revenue is in appeal before us. 9. The learned counsel for the assessee submitted that the issue is squarely covered by the decision of the coordinate bench of ITAT in assessee's own case for AY 2006-07 (supra). The learned DR has not objected to the facts available on record. 10. After considering the submissions of the parties and perusing the record, we find that the issue in dispute is covered by the decision of the coordinate bench in assessee's own case for AY 2006-07 wherein the coordinate bench held as follows: "55. Earlier in the order while considering the allowability of depreciation or reduction in valuation of the government securities held to comply with the SLR ratio, we have held that the entire such investment in order to comply with SLR would constitute stock in trade and classification of these assets by the RBI is not binding on the Income tax authorities. Such classification would not alter the characteristic of the investments to comply with SLR requirement as stock in trade. 56. As held by the Supreme Court in the case of Southern technologies Ltd v JCIT (320 ITR 577), directions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance u/s 14A. Since Rule 8D will be applicable in the AY 2008-09 and is not with retrospective effect as held by the Hon'ble Bombay High Court in the case of CIT Vs. Godrej Boyce Mfg. Co. Ltd. Vs. DCIT [2010] 328 ITR 81, the CIT(A) held that the application of Rule 8D for calculation of disallowance u/s 14A done by the AO was not proper. CIT(A) therefore directed the AO to recalculate the disallowance u/s 14A by observing as under: "It is an admitted fact that there would be certain portion of administrative costs/operating expenditure attributable to income exempt and other activities relating to earning of such exempt income. In the AYs 2000-01 to 2005-06, the AO made the disallowance using the formula tax free income/gross income X interest paid on loans, which has been confirmed by my predecessor. Therefore, for this year also following the decision of my predecessor, the AO is directed to recalculate the disallowance u/s 14A by applying the same formula to the facts of the case." 15. Against the said order of CIT(A), the assessee is in appeal before us contending that the CIT(A) erred in law in stating that CIT(A) in assessment years 2000-01 to 2005-06 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructural Engineers Pvt. Ltd., in ITA No. 605 of 2012 dated 15th January, 2013 has upheld the disallowance of reasonable amount based on the facts of the case. We follow the said decision of the Delhi High Court and reduce the disallowance to 2% expenditure as relating to earning of the exempted income u/s 14A, which has been already decided in the Assessee's appeal in ITA 97/H/10 supra. In view of this decision the appeal by the revenue for a higher disallowance u/s 14A is partly allowed." 19. Respectfully following the same, we direct the AO to restrict the disallowance to 2% of the income claimed exempt as relating to earning such income. Accordingly, the assessee ground is treated as partly allowed, where as Revenue ground is dismissed.. 20. In the result, appeal of the Revenue being 630/Hyd/12 is dismissed. ITA NO. 715/H/12 - appeal by the assessee 21. Ground No. 1 is general in nature. Ground No 5 is already dealt with in Revenue appeal. Ground No. 2 is pertaining to the disallowance u/s 35D of the Act. 22. The assessee in its return of income for AY 2007-08 claimed deduction of one-fifth of the expenses in connection with the public issue u/s 35 of the IT Act. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) in confirming the action of the AO in rejecting the assessee's claim of deduction u/s 35D. Ground No. 2 raised by the assessee is dismissed. 27. Ground No. 3 is pertaining to the disallowance u/s 36(1)(viia) of the Act. 28. During the year under consideration, the AO noted that assessee made a provision for bad and doubtful debts Rs. 97,48,84,948/- and also made a provision of Rs. 49,90,24,000/- towards standard assets. It was noticed that while claiming the deduction u/s 36(1)(viia) of the Act, the assessee had claimed a sum total of provision for bad and doubtful debts and provision for standard assets i.e. Rs. 147,39,08,948/-. The assessee revised the return on 25/03/2009 claiming a total income of Rs. 470,31,79,129/-, which is the same figure as in the original return. However, in the computation statement, it claimed higher deduction u/s 36(1)(viia) of the Act i.e. a deduction of Rs. 334,43,19,444/- which is the maximum deduction allowable under the head provision for doubtful debts as per the computation provided in the Act. Even though assessee claimed a higher deduction u/s 36(1)(viia) in the computation sheet enclosed with the return, its reflection is not see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel for the assessee relied upon the following cases in support of assessee's case: 1. Syndicate Bank Vs. DCIT [2001] 78 ITD 103 (Bang.) 2. ACIT Vs. Vijaya Bank in ITA Nos. 150 & 151/Bang/2004 order dt. 9th June, 2006. However, the learned counsel fairly admitted that the ITAT "A" Bench in the case of Syndicate Bank for AY 2006-07 and 2007-08 in ITA Nos. 668 & 669 and 708 & 709/Bang/2010, order dated 19/06/2013, did not allow the issue consequent to the decision of the Hon'ble P&H High Court in the case of State Bank of Patiala, 272 ITR 54. 33. The learned DR, on the other hand, relied on the orders of the Revenue authorities. 34. We have considered the rival submissions and perused the record. In fact this is the first year in which the issue has arisen as the provision made by the assessee in its books of account is less than the amount allowable u/s 36(1)(viia) of the IT Act. The learned CIT(A) after considering the provisions of law as well as the actual provision made by the assessee for bad and doubtful debts, ultimately concluded vide paras 6.9 and 6.10 in his order as under: "6.9 If the intention of the legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.295,55,54,682 whereas the claim for deduction actually made u/s.36(1)(viia) of the Act was a sum of Rs.503,49,00,000/-. The AO was of the view that as laid down by the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala Vs. CIT 272 ITR 53 (P & H), claim for deduction u/s.36(1)(viia) of the Act cannot be greater than the amount debited to the profit and loss account as provision. The AO therefore proposed to disallow a sum of Rs.207,93,45,318 (Difference between Rs.503,49,00,000 and Rs.295,55,54,682). b) Apart from the above the AO also disallowed the sum of Rs.295,55,54,682 out of Rs.503,49,00,000 claimed as deduction u/s.36(1)(viia) of the Act. The reasons given for disallowing claim for deduction of Rs.295,55,54,682/- u/s.36(1)(viia) of the Act by the AO was that there was already credit balance in the PBDD as on 1.04.2005 Balance B/F was Rs. 912,57,47,169. According to the AO 10% of AARA can be created as provision each year provided there is no brought forward balance as on the first day of the previous year in the PBDD account.10% of the AARA as admitted by the Assessee as per revised census of 2001 was 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, in Ground No.3 of the original grounds of appeal, the Revenue has challenged the order of CIT(A) in so far as it relates to the deletion of a sum of Rs.207,83,45,338 which is the difference between Rs.503,49,00,000 and Rs.295,55,54,682. The learned DR relied on the decision of the ITAT Bangalore Bench in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006. In the aforesaid decision this Bench considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra)and held that the decision rendered by the Hon'ble High Court has to be followed. The above decision is the decision brought to our notice on the issue rendered after the decision in Assessee's own case. Judicial discipline demands that we follow the later decision which has considered both the decisions on the issue. We therefore respectfully following the decision of the Tribunal in the case of Canara Bank(supra), allow Gr.No.3 raised by the Revenue and hold that disallowance to the extent of Rs.207,83,45,338/- be restored. Thus Gr.No.3 raised by the revenue is allowed." 36. Respectfully fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not objected to the facts available on record. 45. After hearing the parties and perusing the record, we find that similar issue came up before the coordinate bench in assessee's own case for AY 2006-07 (supra) wherein the coordinate bench held as follows: "61. The Delhi High Court held that income which was earlier recognised is not to be allowed in the subsequent year in case it is permissible for the assessee to write off such income in concerned assessment year when it was found that it was not recoverable. In this connection they have also referred to the decision of the Apex Court in the case of Vijaya bank reported in 323 ITR 166 and TRF Ltd reported in 323 ITR 397. The Delhi High Court upheld the claim of the assessee for deduction of interest reversed. 62. Respectfully following the above we direct the AO to allow deduction of Rs.2.36 crores being unrealised interest offered for tax in the earlier year now reversed by the assessee." 46. As the issue in the year under consideration is similar to that of AY 2006-07, respectfully following the decision of the coordinate bench in that year, we set aside the order of the CIT(A) and allow the unrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deduction. However, amount claimed for Rs.105691015/- , the same was disallowed in view of the amendment to Section 43B by the introduction of Sub Section (f) which provides for allowing deduction on leave encashment only on the actual payment. There is nothing on record to show that the assessee has parted with the amount for making payment for the leave encashment. This was merely a provisions made by the assessee. No doubt, the Calcutta High Court in the case of Exide Industries Ltd Vs Union of India (292 ITR 470) held that they have struck down the Section 43B in a writ petition filed. But that decision which is applicable to parties to the writ petition and the same will not be applicable to the assessee in the appellate proceedings. The ITAT which is creature of the Income tax Act is bound by the provisions of the Act and therefore in view of the specific provisions of sub-clause (f) to Section 43B the claim of the assessee for deduction of Rs.1056911015/- towards provisions for leave encashment cannot be allowed." 54. Respectfully following the said decision, we uphold the order of the CIT(A) in confirming the action of the AO in making the disallowance of provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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