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Assistant Commissioner of Income Tax, Company Circle-I (2) , Chennai Versus M/s Bharat Overseas Bank Ltd. (Since Taken Over By Indian Overseas Bank, Chennai) And Vica-Versa

2015 (12) TMI 458 - ITAT CHENNAI

Reopening of assessment - Held that:- CIT (A) had judiciously considered the issue and held the matter against the assessee because reopening was within a period of four years and various omissions and discrepancies was revealed from the assessment order based on which the Ld. Assessing Officer had initiated proceedings U/s. 147 of the Act. Therefore we hereby uphold the order of the Ld. CIT (A). - Decided against assessee.

Disallowance of provision for wage arrears to staff - Held th .....

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PS at 60% instead of 80% claimed by the assessee - Held that:- the appellant is entitled to depreciation @ 60% by treating the UPS under the category of computer. Since the Ld. CIT (A) has followed the decision of the Tribunal, we do not find it necessary to interfere with his order.

Disallowance made U/s.14A read with Rule 8D - Held that:- The whole purpose of enactment of Section.14A of the Act is to disallow certain expenses which are attributable to exempt income. The assessee ban .....

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be apportioned towards the factor of exempt income whether it is earned during the year or otherwise. For determining such apportionment of cost, Income Tax Rules are framed which we find in Rule-8D. However, Rule-8D has come into effect from 24.03.2008. Therefore for the relevant assessment year, Rule-8D is not applicable. In these circumstances, Chennai Bench of the Tribunal on many occasions has held 3% of earned exempt income can be estimated for making disallowance for the purpose of Secti .....

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Treatment of Brokerage paid at the time of acquisition of investments in securities as revenue expenditure or capital expenditure- Held that:- Before us, the nature of investments as to whether the investment made amounts to capital expenditure or revenue expenditure is not explained by both the parties. Moreover the decision cited by the Ld. CIT (A) and the assessee were not brought to the notice of Ld. Assessing Officer therefore in the interest of justice we remit back the matter t .....

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e have made it clear that, before us the nature of investments as to whether the investments made amounts to capital expenditure or revenue expenditure is not explained by both the parties. Moreover the decision cited by the Ld. CIT (A) and the assessee were not brought to the notice of Ld. Assessing Officer. Hence we hereby remit back the matter to the file of Ld. A.O for fresh consideration to pass appropriate order as per law and merit and after duly examining the decisions cited by the asses .....

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both order dated 21.07.2014 passed under Sec.143(3) read with section 147 & Sec. 250 of the Act for the assessment years 2005-06 & 2006-07 respectively. 2. The concised grounds raised in all these appeals are listed here-in-below for adjudication. 2.A Assessee's Appeal : Common ground in both the assessee's appeals for the A.Ys 2005-06 & 2006-07) (i) Ld. CIT(A) erred in confirming reassessment proceedings u/s.147 of the Act, which was upheld by the CIT(Appeals) since the iss .....

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nergy saving device. (iv) Ld. CIT(A) erred in confirming the disallowance made U/s.14A read with Rule 8D of Income Tax Rules disregarding the order of the Chennai Bench of the Tribunal in ITA No.1949/Mds./2012 for the assessment year 2009-10 wherein it was held that disallowance U/s.14A was not warranted if securities from which tax free income is earned are held as stock-in-trade. 2.B Revenue's Appeal : Common ground in both the revenue's appeals for the A.Ys 2005-06 & 2006-07) (v) .....

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oss on sale of investments as Revenue expenditure by holding the investments to be stock in trade while as the investments related to HTM category and therefore, it amounts to capital loss. For A.Y 2006-07 (viii) Ld. CIT(A) erred in allowing 60% depreciation on UPS treating it as computer accessories as against 15% granted by the Ld. Assessing Officer. 3. The brief facts of the case are that the assessee is engaged in the business of banking, filed its return of income on 31.10.2005 for the A.Y .....

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Aggrieved by the orders of the Ld. Assessing Officer, the assessee went on appeals before the Ld. CIT (A) and now both the assessee and the Revenue are in appeal before us against the order of the Ld. CIT (A). ASSESSEE'S APPEAL. 4. Ground No. (i) - Validity of reassessment proceedings u/s.147(for the A.Ys 2005-06 & 2006-07):- Ld. A.R. argued before us stating that the grounds on which reopening proceedings were initiated were originally examined by the CIT U/s.263 of the Act and after co .....

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147 of the Act. On the other hand the Ld. D.R relied on the order of Ld. CIT(A) who had upheld the validity of reopening discussing the issue in detail. After hearing both sides and perusing the materials on record, we find that the Ld. CIT (A) had judiciously considered the issue and held the matter against the assessee because reopening was within a period of four years and various omissions and discrepancies was revealed from the assessment order based on which the Ld. Assessing Officer had i .....

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in the P&L A/c. The Ld. Assessing Officer disallowed the same since the amount debited in the P&L A/c was an adhoc provision. On appeal, the Ld. CIT (A) following the decision of the Tribunal in the case of Indian Overseas Bank(IOB) for the assessment year 2005-06 in ITA No.393/Mds./2009 dated 05.03.2013 held that the adhoc provision made shall be allowed as deduction in the year of payment and not in the year provision is made. Since the Ld. CIT (A) has followed the decision of the Tri .....

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egory of Plant & Machinery and therefore, restricted the depreciation @ 15% and thereby disallowed excess depreciation of ₹ 31,73,549/-. On appeal, the Ld. CIT (A) following the decision of the Tribunal in the case of IOB for the assessment year 2008-09 in ITA No. 1815/Mds./2011 dated 02.04.2013 held that the appellant is entitled to depreciation @ 60% by treating the UPS under the category of computer. Since the Ld. CIT (A) has followed the decision of the Tribunal, we do not find it .....

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ome of the assessee. On appeal, the Ld. CIT (A) confirmed the order of the Ld. Assessing Officer. 7.2 Before us, Ld. A.R. submitted that the Chennai bench of the Tribunal in the case of IOB in ITA No.1949/Mds./2010 dated 18.6.2014 held that the provisions of section 14A cannot be invoked where securities are held in stock in trade. It was further submitted that, since the appellant holds all its securities as stock in trade, the decision of the Tribunal will hold good in the case of the assessee .....

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cial authorities. However in the present case, it is not evident as to whether the securities are held in stock in trade or held as investments. The whole purpose of enactment of Section.14A of the Act is to disallow certain expenses which are attributable to exempt income. The assessee bank due to various statutory requirements and commercial reasons is bound to make investments in securities and equity shares etc., which earn dividend that, are exempt from income. For making such investments o .....

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Rule-8D has come into effect from 24.03.2008. Therefore for the relevant assessment year, Rule-8D is not applicable. In these circumstances, Chennai Bench of the Tribunal on many occasions has held 3% of earned exempt income can be estimated for making disallowance for the purpose of Section.14A of the Act viz., in the case M/s.HTC Global Services (India) P. Ltd., Chennai Vs. ACIT in ITA No.58/Mds./2014 for the assessment year 2008-09 vide order dated 02.06.2015. Accordingly, we hereby direct t .....

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he Act is not applicable to the case of the assessee bank because the assessee bank has to statutorily maintain the books of accounts and draw its statement of accounts like P&L A/c, notes to Balance Sheet etc., as per the RBI guidelines and not as per the Companies Act. 8.2 At the outset, the Ld. A.R. brought to our notice the decision of the Chennai Bench of the Tribunal in the case IOB Vs. ACIT in ITA No.98/Mds./2010 dated 5th March 2013 wherein it was held that the provisions of section .....

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p; loss account in accordance with schedule VI of companies Act. As the banks are required to prepare balance sheet and P&L A/c in accordance with the Banking Regulation Act, provision of 115JB cannot be applied to the banks. In the case of Maharashtra State Electricity Board Vs. JCIT (82 ITD 422) it was held that provisions of book profit cannot be applied to Electricity Companies. Banking Companies and Companies engaged in generation and supply of electricity do not have to prepare their a .....

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2013-14, provisions 115JB will not apply to companies to which proviso to Section.211(2) of the companies Act, 1956 applies. The assessee being a company to which proviso to Section.211 (2) of the Companies Act, 1956 applies, will not be liable to be taxed U/s.115JB. 14. The Mumbai Tribunal in the case of Krung Thai Bank Vs. JCIT (133 TTJ 435) to which one of us is a party has held that provisions of section 115JB cannot be applied to the banking company. 15. In view of the above, as the amendm .....

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of ICICI Lombard General Insurance Co., Ltd. in ITA No.2398/Mum/2009 wherein the Tribunal relying on the order of the Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad(supra) has concluded that the provisions of section 115JB are not applicable in the case of the assessee." 8.3 Therefore, following the above decisions, we hereby hold that in the case of the assessee bank provisions of section 115JB of the Act will not be applicable. It is ordered accordingly. 9.1 Ground .....

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for acquiring these investments has to be added to the cost of the investments. On appeal, the Ld. CIT (A) held the issue in favour of the assessee by holding that the investments constitute stock in trade following the decision of the jurisdictional Madras High Court in the case of Kauru Vyas Bank Ltd Tax case No.2139 of 2008. Before us, the Ld. A.R. also relied in the decision of the Supreme Court in the case of UCO Bank reported in 240 ITR 355 which was in favour of the assessee. On the other .....

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atter to the file of Ld. Assessing Officer for denovo consideration and to pass appropriate order as per law and merit and after duly examining the decisions cited by the assessee as well as the Ld. CIT (A). 10. Ground No.(vii) - Ld. CIT(A) erred in treating the loss on sale of investments as Revenue expenditure by holding the investments to be stock in trade while as the investments related to HTM category and therefore, it amount to capital loss. For the A.Y. 2005-06. While adjudicating ground .....

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