TMI Blog2015 (8) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the assessee by the decision of the Hon’ble Supreme Court in the case of UCO Bank (1999 (9) TMI 4 - SUPREME Court ) and also by the decision of the co-ordinate Bench of the Tribunal in the assessee’s own case. In view of the same, we remand this issue to the file of the AO for re-consideration - Decided in favour of assessee for statistical purposes. Disallowance of the expenditure on Vysyamulya Project (computerization of branches) on the ground that the same is capital expenditure - Held that:- Similar issue had arisen in the case of IBM India Ltd. [2013 (10) TMI 1225 - KARNATAKA HIGH COURT] wherein held that when the software is fitted to a computer system to work, it enhances the efficiency of the operation. It is an aid in manufacturing process rather than the tool itself. Though certain application is an enduring benefit, it does not result into acquisition of any capital asset. It merely enhances the productivity or efficiency and therefore, it has to be treated as revenue expenditure.- Decided in favour of assessee. Disallowance of the claim of ₹ 1 lakh u/s 36(1)(viia) - Held that:- The actual provision made in the books by the Assessee on account of PB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred to as 'the Act'], the Assessing Officer (AO) observed that the assessee had claimed an amount of ₹ 28,73,88,373/- to be income exempt u/s 10 of the Act. He observed that the assessee has not made any disallowance u/s 14A stating that there is no cost incurred for earning such income. The AO held that the contention of the assessee is not correct, as the CBDT in the circular No.780 dated 4-10-1999 has clarified that it is the net income after taking into account all expenses incurred to earn the dividend, interest and long term capital gains, that is exempt u/s 10(23C) of the Act. He observed that the assessee has made these investments out of borrowed funds i.e. public deposits only and that the assessee s own funds are only 14% of the total funds available for the year. He, therefore, estimated that all the investments have not been made out of own funds and since there will be administrative expenses for realizing the income on investment, he held that 15% has to be treated as expenses incurred for earning of the exempt income. He, accordingly, worked out the expenses at ₹ 28,73,88,373/- and made disallowance of ₹ 1,43,69,418/- u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y written off from the investment portfolio and the assessee, vide letter dated 4-3-2002, stated that depreciation provision of ₹ 7.48 crores is covered by RBI prudential norms and that it has been written off. Further, vide letter dated 6-3-2002 the assessee stated that the bank holds non-convertible debentures worth ₹ 245.01 crores as on 31-3-2001 out of which the non-convertible debentures worth ₹ 22.71 crores became the non-performing assets. The AO observed that non-performing assets in NCD worth ₹ 22.7 crores shown in the balance-sheet under investment for the assessment year 2000-01 are still a part of the investments at the end of year ending on March 2001 also. Thus, he came to the conclusion that there was no actual write off and hence the same cannot be allowed u/s 36(1)(vii) of the Act and the assessee had only made provision for non-performing assets in non-convertible debentures as per RBI guidelines. 6.2 Aggrieved, the assessee preferred an appeal before the CIT(A) who, after considering the decision of the Tribunal in the assessee s own case for the assessment year 2000-01, has held that the issue is still open for decision and hence the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record, we find that similar issue had arisen in the case of IBM India Ltd., and the jurisdictional High Court, vide judgment dated 10-4-2013 at para.9 has held as under: 9. The second substantial question of law relates to application of the amount utilized for projects of Software in a sum of ₹ 33,14,298/-. The Tribunal on consideration of the material on record and the rival contentions held, when the expenditure is made not only once and for all but also with a view to bringing into existence an asset or an advantage for the enduring benefit, the same can be properly classified as capital expenditure. At the same time, even though the expenses are once and for all and may give an advantage for enduring benefit but is not with a view to bringing into existence any asset, the same cannot be always classified as capital expenditure. The test to be applied is, is it a part of company's working expenses or is it expenditure laid out as a part of process of profit earning. Is it on the capital layout or is it an expenditure necessary for acquisition of property or of rights of a permanent character, possession of which is condition on carrying on trade at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 2003-04 and 2004-05 (ITA Nos.53 54/Bang/2013 dt.25-10-2013) had considered this issue and at para.37 thereof has held as under: 37. Though under Stage-II and Stage-III of the provisions of Sec.36(1)(viia) of the Act, PBDD has to be created by debiting the profit and loss account of the sum claimed as deduction, the condition that the provision should be in respect of rural advances is not necessary. At stage-II of the provisions of Sec.36(1)(viia) of the Act, this condition was done away with and it was only necessary to create PBDD in the books of accounts and debit to profit and loss account. The quantification of the maximum deduction permissible u/s.36(1)(viia) of the Act had to be done. Firstly it has to be ascertained as to what is 10% of the aggregate average advances made by rural branches, if the Bank has rural branches, otherwise that part of the deduction u/s.36(1)(viia) of the Act will not be available to the bank. The second part of the deduction u/s.36(1)(viia) has to be ascertained viz., 7.5% seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VI-A). The above are the permissible upper limits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, in the case of Sir M.Visveswaraya Co-op. Bank Ltd. (cited supra) has considered this issue at length and after considering various decisions of the Tribunal in the cases of Catholic Syrian Bank Ltd. vs. ACIT (2010) 38 SOT 553)(Cochin) and The Khanapur Co-op. Bank Ltd. vs. ITO (ITA No.141/PNJ/2011 dated 8-9-2011 has held that the assessee therein is entitled to claim deduction of the amortization of the premium on Government securities. Since facts of the case before us are also similar, we are inclined to follow the decisions of the co-ordinate Benches of the Tribunal and we direct the AO to allow the deduction. These grounds are accordingly allowed. 10. Grounds No.19 to 22 are against the confirmation of addition of the write off of non-convertible debentures, depreciation on investment, depreciation on leased assets and provision for NPA while arriving at the book profits /s 115JB of the Act. In addition to the above, the assessee has also raised an additional ground that the provisions of sec.115JB are not applicable to the assessee, being a bank. In support of the additional ground of appeal, the learned counsel for the assessee has placed reliance upon decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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