New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (10) TMI 2009 - ITAT BANGALORE

2015 (10) TMI 2009 - ITAT BANGALORE - TMI - Applicability of provisions of section 115JB - banking business - Held that:- Allow the appeal of the assessee on the ground that the bank is not required to prepare its P&L accounts in accordance with the provisions of part-II & of schedule VI of Companies Act, 1956 and therefore, the provisions of MAT insec.115JB of the IT Act, is not applicable to the assessee. See M/s Indian Bank Vs Addl.CIT [2011 (8) TMI 1112 - ITAT CHENNAI] - Decided in favour of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

’s whims and fancy. Moreover the assessee is not making a claim for creation of PBDD in the books of accounts of PY relevant to AY 08-09. The excess reserve created in the subsequent year cannot be equated to the PBDD created in the books for the present AY. The decisions relied upon by the learned counsel for the assessee do not lay down a proposition that excess provision created in the subsequent year can supplement the inadequate created in an earlier year. The decisions relied upon by the l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me against the provisions made u/s 326(1)(viia) - Held that:- CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off would be limited .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year, while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ity”(HTM) investment - Held that:- As decided in case of UCO Bank [1999 (9) TMI 4 - SUPREME Court] Preparation of the balance-sheet in accordance with the statutory provision would not disentitle the assessee in submitting the Income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that the assessee was maintaining the balance-sheet in the st .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e assessee in the present case

Addition u/s 36(1)(viii) - whether the assesssee is not a specified entity prior to amendment in the IT Act,w.e.f.1/4/2008 and not doing an eligible business to be entitled for deduction u/s 326(1)(viii)? - Held that:- As decided in Union Bank of India case [2012 (6) TMI 500 - ITAT MUMBAI] even otherwise the assessee is a Govt. company since the Central Government holds more than 51% of the share capital of the bank and as defined inSec.617 of the Compan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

serve subject to the limit of prescribed percentage of profits derived from providing long term finance for the approved purposes mentioned in Sec.36(1)(viii). For the purpose of determining the deduction available to the assessee u/s 36(1)(vii) the issue is remitted back to the file of the AO subject to the above direction the appeal of the assessee on this issue is allowed - Decided against revenue.

Disallowance made u/s 14A - CIT(A) allowed the claim - Held that:- This issue is cov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Therefore, there is no expenditure incurred directly by the bank for earning any tax free income. Since the expenditure would have been incurred by the bank even without the earning of tax free income, no part of the expenditure can be related to earning the tax free income. In the light of the above undisputed fact and in view of the decision of the Hon’ble Karnataka High Court in the case of CCI Ltd. (2012 (4) TMI 282 - KARNATAKA HIGH COURT), we are of the view that no disallowance can be ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

revenue directed against the orders of the CIT(A)LTU, Bangalore, dated 13-01-2010 & 15-01-2010, for the assessment years : 2006-07 & 2007-08 respectively. ITA No.660(BNG)/2010 Assessment year 2006-07 (Assessee s appeal) 2. The assessee is a nationalized bank in which majority of the shares are held by the Central Government, while computing the taxable income the AO has also computed book profits determining the same at ₹ 185,03,00,106/-. 2.1 Aggrieved, the assessee filed appeal a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bank was not accordance with the provisions of part-II and III of Companies Act, 1956 but as per Banking Regulation Act. 4. The learned CIT(A) failed to appreciate the fact that non-submissions of Form No.29B was only a technical error. 5. The learned CIT(A)-II erred in confirming the addition made for computation of MAT u/s 115JB expenditure incurred for earning tax free income as the same is allowed in regular computation . 3. However, the assessee has now raised additional ground against the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Union Bank of India vs ACIT, LTU(ITAT) (Mumbai) c) ITA No.469/Mds/2010 dt.3.8.2011 in the case of Indian Bank vs Addl.CIT (ITAT) (Chenai) d) ITA Nos.4155 to 4161 of 2011 dt.27-3-2012 in the case of Union Bank of India (UTAT) (Mumbai) 5. In the case of M/s Indian Bank Vs Addl.CIT in ITA No.469(Mds/2010 for assessment year 2000-01, it has been held as follows; 7. We have heard the rival submissions and perused the orders of the lower authorities and the material available n record. In the insta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

18 has held as under; 7. The plea of the assessee is indeed well taken, and it meet our approval. The provisions of sec.115JB can only come into play when the assessee is required to prepare its P&L account in accordance with the provisions of Parts II & III of Schdule VI to the Companies Act. The starting point of computation of MAT under sec.115JB is the result shown by such a P&L account. In the case of banking companies, however, the provisions of Schedule VI are not applicable i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o prepare its P&L accounts in accordance with the provisions of part-II & of schedule VI of Companies Act, 1956 and therefore, the provisions of MAT insec.115JB of the IT Act, is not applicable to the assessee. 7. In the result, the appeal of the assessee is allowed. ITA No.596(BNG)/2010 : Assessment Year : 2006-07 Dept. appeal 8. We shall take up ground no.2 in ITA No.596(B)/2010. With respect to deduction u/s 36(1)(viia) of the IT Act, 1961. 2. The CIT(A) erred in directing the AO to a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the total claim of the Assessee for deduction of ₹ 200,03,24,219/- on the ground that the provision for bad and doubtful debts in respect of rural advances was created by debit to profit and loss account of only a sum of ₹ 7,45,51,455 whereas the claim for deduction actually made u/s.36(1)(viia) of the Act was a sum of ₹ 200,03,24,219/-. 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 5 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e profit and loss account on account of provision for bad and doubtful debts (PBDD), an Assessee is entitled to 10% of the AARA as deduction u/s.36(1)(viia) of the Act. The relevant observations of the Tribunal in the aforesaid decision was as follows: 20. The learned CIT has also acted under the misconception that deduction under cl. (viia) is related to the actual amount of provision made by the assessee for bad and doubtful debts. The true meaning of the clause, as indicated earlier, is that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in its accounts towards provision for bad and doubtful debts. 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 followe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rnate submissions made by the respondent bank that the assessee should be allowed deduction on account of Provision for Bad & Doubtful Debts (PBDD) u/s 36(1)(viia) of the IT Act, 1961 for the entire permissible limit because the provision is whatever is the shortfall between the eligible limit and the PBDD made in the books of accounts by the assessee was made excess provision in subsequent years and therefore, the entire amount should be made as deduction. It was further submitted in the al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is made good by providing excess provision in subsequent years the upper limit permissible u/s 36(1)(viia) of the Act should be allowed as deduction, referred to decision of the Hon ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Industrial Development Corporation 323 ITR 495 ( Pun.& Har.) and the Special Bench ITAT Chandigarh Bench in the case of Punjab State Industrial Development Corporation Ltd. 102 ITD 1 (Chd.)(SB). In the aforesaid decisions the assessee claimed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

afforded an opportunity to assessee to create further reserve. Reference was made to the decision of ITAT Delhi in the case of Power Finance Corporation Ltd. 2008-TIOL-475-ITAT-Del wherein in the context of deduction u/s.32A of the Act, the Tribunal held that the reserve created by holding a second Annual general meeting and where accounts were amended creating reserve required u/s.32A of the Act, the assessee should be allowed deduction u/s 36(1)(viia) of the Act. 11. The Co-ordinate Bench has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the books of accounts of PY relevant to AY 08-09. The excess reserve created in the subsequent year cannot be equated to the PBDD created in the books for the present AY. The decisions relied upon by the learned counsel for the assessee do not lay down a proposition that excess provision created in the subsequent year can supplement the inadequate created in an earlier year. The decisions relied upon by the learned counsel for the assessee lay down proposition that the assessee should be give .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The CIT(A) erred in directing the AO to allow deduction of ₹ 34,45,27,639/- u/s 36(1)(viia) of the IT Act in respect of bad debts written off pertaining to non-rural branches without adjusting the same against the provisions made u/s 326(1)(viia). The CIT(A) ought to have appreciated the fact that the decision of Hon ble Kerala High Court in the case of South Indian Bank Vs CIT (262 ITR 579) has been reversed by the full bench of the Hon ble High Court on 16-12-2009 . 12.1 We find that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962. Thus, the provisions of clause(viia) of section 36(1) relating to the deduction on account of the prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed even n respect of a mere provision without insisting on an actual write off. However, this may result in double allowance in the sense that in respect of same rural advance the bank may get allowance on the basis of clause(viia) and also on the basis of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vances. There is no merit in the objection raised by the revenue. Firstly, the CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pplies. Clause(viia) applies only to rural advances. This has been explained by the circulars issued by the 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 n 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 ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ision of the Coordinate Bench of this Tribunal in ITA No.578(B)/2012 which is as under; 33. We have considered the rival submissions. Similar issue as to whether depreciation on investments held under the category Held to Maturity or Available for Sale can be allowed as deduction came up for consideration in Assessee s own case in AY 10-11 in ITA No.1310/Bang/2012 and this Tribunal upheld similar order of CIT(A). The following were the relevant observations of the Tribunal:- 21. We have consider .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o.2886/2005 dated 06.06.2012. In the aforesaid decision, the Hon ble High Court of Karnataka took a view that the guidelines issued by the RBI will not be relevant while computing income under the Income-tax Act. The Hon ble Court further took the view that every investment held by a bank cannot be considered as stock-in-trade. The Hon ble High Court finally concluded that 30% of the investments can be clothed to the character of stock-in-trade and that the remaining amounts will be investments .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the CIT(A) was correct in deleting the addition made by the AO on account of profit on sale of investments of ₹ 200,77,13,662/- and deleting the action of the AO in disallowing loss claimed on treating investments as stock-in-trade by drawing the investment trading account of ₹ 775,96,55,047. The Tribunal held 16. We have heard both sides and find that the Supreme Court in the case of UCO Bank in 240 ITR 355 has held as under : In our view, as stated above, consistently for 30 years .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f accounting adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that the assessee was maintaining the balance-sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments) because the bank was required to prepare the balance-sheet in the prescribed form and it had no option to change it. For the purp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l by the Revenue is dismissed. 60. Apart from the above, the ld. counsel for the assessee also submitted that the decision rendered by the Hon ble High Court of Karnataka in the case of ING Vysya Bank (supra) is per incuriam the decision of the Hon ble Supreme Court in the case of UCO Bank v. CIT, 240 ITR 355 (SC). He brought to our notice that the Hon ble Supreme Court approved the practice of nationalized bank governed by Banking Regulation Act, following mercantile system of accounting both f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ision of the Hon ble High Court of Karnataka rendered on 11.03.2013 in the case of CIT v. Vijaya Bank, ITA No.687/2008. The Hon ble High Court of Karnataka in the aforesaid case followed its own decision rendered in the case of Karnataka Bank Ltd. v. CIT in ITA No.172/2009 rendered on 11.01.2013, wherein the Court took the view that depreciation claimed on investments held on maturity by a bank has to be treated as stock-in-trade in accordance with RBI guidelines and CBDT Circular. It was his su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the view that the issue raised by the revenue in its appeal is without merit. Consequently, the same is dismissed. The above decision squarely covers the issue in favour of the assessee. Respectfully following the same, we uphold the order of the CIT(A) and dismiss the relevant grounds of appeal of the Revenue. Respectfully following the Co-ordinate Bench decision in ITA No.578(B)/2012, we dismiss the ground no.4 raised by the revenue. 15. Ground no.5 of the revenue reads as follows; 5. The CIT( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ollows; Even otherwise the assessee is a Govt. company since the Central Government holds more than 51% of the share capital of the bank and as defined inSec.617 of the Companies Act, the assessee is a Government Company. Hence the deduction u/s 36(1)(viii) has to be allowed to the assessee as it is engaged in the business of providing long term finance for industrial, agriculture and infrastructure development in India and is a Government Company. The assessee is a financial Corporation within .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the appeal of the assessee on this issue is allowed . Respectfully following the Co-ordinate Bench (Supra), we dismiss the revenue s appeal on this issue. 17. The revenue has raised the following ground no.6 as follows; 6. The CIT(A) has erred in deleting the disallowance made u/s 14A ₹ 3,43,28,658/- considering it is an expenditure incurred to earn exempt income u/s 14A. In the case of State Bank of Mysore, the CIT(A) has upheld disallowance of 2% of the exempt income vide order dated 22- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version