TMI Blog2013 (2) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... /2006 - - - Dated:- 26-2-2013 - N. S. Saini (Accountant Member) And Vikas Awasthy (Judicial Member) For the Petitioner : C. Naresh For the Respondent : Shaji P. Jacob ORDER The assessee has filed the aforementioned six appeals i.e. ITA Nos. 264 265/Mds/2005, 2632 to 2634/Mds/2005 and 1146/Mds/2008 for the respective assessment years and the Revenue has preferred one appeal i.e. ITA No.1866/Mds/2006 for the assessment year 1999-2000 against the orders of the CIT(A), Chennai. Since the issues involved in these appeals are common, they are taken up together for adjudication. ITA No. 264/Mds/2005(A.Y.1997-98): 2. This appeal has been filed by the assessee impugning the order of the CIT(A)-XI, Chennai dated 6.12.2004 relevant to the assessment year 1997-98. In the concise grounds of appeal, the assessee has raised only the following two grounds :- i) Disallowance of expenditure on Wills World Cup amounting to ₹ 48.05 lakhs; ii) Applicability of provisions of section 115JA to bank. The counsel for the assessee has raised alternate ground without prejudice to his arguments being raised in ground no.ii) with regard to preparation of books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirement of section 115JA(2) and as such the provisions of section 115JA are not applicable to the assessee. In order to support his contentions, the A.R. for the assessee relied on the orders of the various Benches of the Tribunal in ITA No.469/Mds/2010 in the case titled Indian Bank Vs. ACIT., decided on 3rd August, 2011 and in ITA No.4702 to 4706/Mum/2010 in the case titled Union Bank of India Vs. ACIT decided on 3rd August, 2011 and ITA No.305/Bang/2011 in the case of Canara Bank Vs. CIT decided on 18th July, 2012. The A.R. submitted that nationalized banks are deemed to be companies under the provisions of Banking Companies (Acquisition Transfer of Undertakings) Act, 1970. The AR further submitted that the Mumbai Bench of the Tribunal in the case of Maharashtra State Electricity Board Vs. JCIT., reported as 82 ITD 422(Mum) has held that State Electricity Board cannot be treated as a company, as it is not required to distribute dividend, therefore, it would not come within the mischief of section 115JA. Similar view has been taken by the Hon ble Kerala High Court in the case of Kerala State Electricity Board Vs. DCIT., reported as 329 ITR 91 (Ker), wherein the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave as hereinafter expressly provided, in derogation of the Companies Act, 1956 and any other law for the time being in force. The DR further referred to the judgement of the Hon ble Supreme Court in the case of The Indian Overseas Bank Ltd. Vs. CIT., 1970 AIR 1530, wherein the Hon ble Apex Court vide its order dated 23.4.1970 has held that the appellant is a public limited company carrying on banking business. The DR also referred to the judgement of the Hon ble Madras High Court in the case of CWT Vs. S.P.Shanmugha Kesari reported as 121 ITR 403(Mad), wherein the Hon ble High Court has held that the assessee is a banking company under the Banking Regulation Act, 1949. The DR further pointed out that the assessee has come up with a public issue and had convened Annual General Meeting declaring dividends in accordance with the provisions of the Companies Act, 1956. The DR further referred to the ruling given by the Authority for Advance Rulings in the case of Castleton Investment Ltd. IN RE reported as 75 DTR (AAR) 321 in support of his submissions. 8. On the alternate plea, the DR submitted that there is no such option for changing books of account to make them suitable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to nationalization of banks. Therefore, the same are not applicable on the assessee bank now. 10. As regards adoption of accounts in the Annual General Meeting, the AR submitted that accounts are adopted by the Board of Directors of the bank and not in the Annual General Meeting as is in the case of companies registered under the provisions of the Companies Act, 1956. The AR further contended that section 115JA(2) makes it mandatory to make balance sheet and profit and loss account as per Schedule VI, therefore, the assessee had made balance sheet and profit and loss account as referred to in Annexure-2 to comply with the provisions of section 115JA(2). 11. At this stage, the DR pointed out that ground no.2 raised by the assessee in the concise grounds of appeal was not taken by the assessee in its original grounds of appeal before the Tribunal nor this issue was raised before the CIT(A). It is for the first time that the assessee has raised this issue before the Tribunal by mentioning it in the concise grounds of appeal. 12. When confronted with the situation, the AR has fairly conceded that this issue was not raised by the assessee bank before the CIT(A). However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in ITA No.264/Mds/2005 for the assessment year 1997-98. For the reasons recorded by us in para 3 hereinabove on the similar issue, we dismiss this ground of appeal as having become infructuous. 19. The fourth issue raised by the assessee is with regard to bad debts written off. The AR submitted that the CIT(A) has erred in allowing bad debts at ₹ 1,76,90,03,339/- as against ₹ 2,01,58,51,000/-. The AR submitted that the CIT(A) has erred in not taking into consideration that there was no balance in the provisions for bad and doubtful debts account under section 36(1)(viia). Therefore, entire bad debts written off should be allowed instead of restricting it. The AR further submitted that the issue is now squarely covered by the judgement of the Hon ble Supreme Court of India in the case of Catholic Syrian Bank Ltd. Vs. CIT reported as 343 ITR 270(SC). 20. The DR submitted that the assessee s claim that provision for doubtful debts created under section 36(1)(viia) has debit balance which is an impossibility. However, the DR admitted that this issue has been adjudicated by the Hon ble Supreme Court of India in Catholic Syrian Bank Ltd.(supra). 21. The rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to the excess of the amount written off over the amount of the provision allowed under clause (viia). Thus, the proviso to clause (vii) stood introduced in order to protect the Revenue. It would be meaningless to invoke the said proviso where there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by 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 in the accounts of the bank represents only debt(s) arising out of urban advances, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fourth ground of appeal in these appeals is with regard to applicability of provisions of section 115JA. This issue has already been adjudicated in ITA No.264/Mds/2005 for the assessment year 1997-98 in para 13 of this order. Since the issue in these three appeals is identical, we dismiss this ground of appeal for the reasons recorded in para 13 of the order. 29. In the result, all these three appeals of the assessee are dismissed. ITA No.1146/Mds/2008 (A.Y.:2002-03): 30. The present appeal has been filed by the assessee against the order of the CIT(A)-XII, Chennai dated 27.2.2008 relevant to the assessment year 2002-03. 31. The first ground raised by the assessee is with respect to depreciation on land. This issue has already been adjudicated earlier in ITA No.265/Mds/2005 for the assessment year 1998-99 in para 16 of this order. Since the issue in this appeal is identical, we dismiss this ground of appeal for the reasons recorded in para 16 of the order. 32. The second ground of appeal is with respect to bad debts written off in respect of rural advances. The AR appearing on behalf of the assessee submitted that the issue has been squarely covered in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has made disallowance @ 10% on estimation. The CIT(A) has confirmed the same. In our considered opinion, to meet the ends of justice, it would be appropriate that the disallowance be made @ 2% as has been done in the earlier assessment years. Therefore, this ground of appeal of the assessee is partly allowed. 36. The fourth ground of appeal relates to contribution towards staff welfare fund. The A.R. submitted that the bank had created a provision of ₹ 2.40 crores towards staff welfare fund in the profit and loss account for the financial year ended on 31.3.2002 and had claimed the same as deduction from its profit. The Assessing Officer has made disallowance on the ground that fund towards which the provision is made is not a recognized fund. The A.R. submitted that the payment is allowable under section 37 as it is neither capital in nature nor personal expenditure but has been wholly and exclusively incurred for the purpose of business of the assessee and arising out of business contingency on account of wage revision. The same has become payable in terms of the agreement entered into between the bank and its employees and therefore, the assessee bank is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee based upon the provision of section 43B has no merit. Before the provisions of section 43B can be applicable, deduction must otherwise be allowable under the Act. In view of the above discussion, we are constrained to hold that the contribution towards staff welfare fund is not allowable expenditure. Therefore, this ground of appeal of the assessee is dismissed. 38. The fifth ground of appeal relates to applicability of provisions of section 115JB. This ground of appeal has cropped up in ITA No.264/Mds/2005 for the assessment year 1997-98. In the present assessment year 2002-03 again this ground of appeal is not emanating from the impugned order of the CIT(A). Therefore this ground of appeal of the assessee is dismissed for the reasons recorded in para 13 of this order. 39. In view of the aforesaid findings, the appeal of the assessee in ITA No.1146/Mds/2008 is partly allowed for statistical purposes. ITA No.1866/Mds/2006 (A.Y. 1999-2000): 40. The Revenue has preferred this appeal impugning the order of the CIT(A)-XII, Chennai dated 31.03.2006 relevant to the assessment year 1999-2000. 41. The first ground of appeal of the Revenue relates to allowability of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the basis of the memorandum of understanding. Therefore, in our opinion the liability did not crystallize in the year under consideration. It can be allowed only consequent upon its crystallization within the framework of law. Subject to this remark, we uphold the impugned order on this count. On the other hand, the AR submitted that similar issue has already been decided by the co-ordinate Bench of the Tribunal in favour of the assessee in the case of Neyveli Lignite Corporation reported as 93 TTJ 685 (Chennai) wherein it has been held that provision for revision of salary made in the year of entering into agreement irrespective of the actual payment should be allowed. The Tribunal further held that if the accrued liability can be reasonably estimated, it should be allowed in the year of creating of reserve. 42. We have heard the submissions made by both the sides and have gone through the orders of the authorities below and the judgements/orders referred to by the respective parties. The co-ordinate Bench of the Tribunal in ITA No.1690/Mds/2006 has decided the issue against the assessee by holding that liability has not been crystallized and it can be allowed conse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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