TMI Blog2014 (6) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No.S.O 2123(E) dated 28.8.2008 clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by ‘elimination’ method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to section 90 making the notification retrospectively applicable. In this manner, the CIT(A) has directed the Assessing Officer to allow relief to the assessee as per the aforesaid notification. Section 115JB could not have been invoked in a bank’s case. - I.T.A.No.1949/Mds/2012, I.T.A.No.2110/Mds/2012 - - - Dated:- 18-6-2014 - DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] For the Appellant : Shri Hari Rao, JCIT For the Respondent : Shri C. Naresh, CA O R D E R PER S.S.GODARA, JUDICIAL MEMBER These cross appeals filed by the assessee and the Revenue for assessment year 2009-10, are directed against order of the Commissioner of Income-tax (Appeals) Large Taxpayer Unit, Chennai dated 09.08.2012 passed in Appeal No.112/11-12/LTU(A), in proceedings under section 143(3) of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2013(supra), the 'tribunal' has restored this issue back to the Assessing Officer for decision afresh. Thus, we adopt consistency and remit the relevant grounds back to the Assessing Officer for decision as per law in view of his findings in the preceding assessment year. This ground is accepted for statistical purposes. 8. The assessee s third ground raises the issue bad debts relating to rural branches u/s 36(1)(viia). It pleads that the CIT(A) has wrongly restricted its claim of aforesaid deduction by treating a branch as rural based on population of the panchayat instead of concerned ward . 9. It is to be seen that the assessee had claimed deduction of bad and doubtful advances of ₹ 654,41,43,300/-. The Assessing Officer restricted this claim to ₹ 25,58,86,646/-; inter alia, on the ground that the assessee s 48 branches were not rural as per section 36(1)(viia) explanation read with rule 6ABA in view of the census figures given in the Ministry of Home Affairs Website. The CIT(A) has also expressed agreement with the Assessing Officer s findings in view of case law CIT vs Lord Krishna Bank Ltd, 339 ITR 606 (Kerala). 10. In the course of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer s computation. He has turned down the assessee s arguments that the Assessing Officer had considered the entire investments under shares portfolio and bonds instead of only the investments giving rise to the impugned exempt income by concluding that this income amount reads Rs. 21 crores and the case law of Cheminvest (supra) applied in this case. It is evident that the assessee s plea assailing applicability of section 14A disallowance in case of investments held as stock-in-trade has gone un-adjudicated. In this manner, it has got part relief in lower appellate order. 13. Before us, the assessee raises two folded arguments i.e it had held the investments as stock-in-trade which renders disallowance u/s unsustainable. An alternate contention has also been raised that even if rule 8D is applied, the investments giving rise to exempt income in forming part of total is nil in case of stock-in-trade. Further it is submitted that for assessment year 2008-09 as well, this issue had arisen and decided in the Revenue s favour without considering the decision of CCI Ltd vs JCIT, 250 CTR 291 (Kar) and that of Chennai 'tribunal' in MSA Securities Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A in case of investments held as stock-intrade wherein the exempt income by way of dividends is only incidental. It is also made clear that since there is no verification of the factual position of investments held as stock-in-trade , we accept the assessee s contentions in principle only and remit the issue back to the Assessing Officer to determine the true factual position. The assessee s alternative plea carries only an academic significance. The relevant ground is accepted for statistical purposes. 16. The assessee s fifth ground raises issue of depreciation on UPS claimed @ 80%. The Assessing Officer treated it as general plant and machinery and restricted it to 15% of the total value of Rs. 12,49,63,955/- resulting in consequential addition of Rs. 5,89,08,262/-. In doing so, he drew support from the ITAT Delhi and Jodhpur benches decisions to hold that a UPS is neither part of a computer nor an energy saving device but only an equipment to ensure uninterrupted power supply. 17. In lower appellate order, the CIT(A) has agreed with the Assessing Officer s findings treating the UPS in question as part of general plant and machinery only. 18. We have heard bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept the assessee s claim. 23. Coming to the DTAAs between India and Singapore, Thailand and Srilanka, the Assessing Officer observed that they also recognized credit method. He alleged the assessee not to have provided any difference in rates of tax in the above stated tax jurisdictions. Simultaneously, the Assessing Officer held that on furnishing details on assessee s part, the claim would be allowed in its favour. This resulted in disallowance/addition of Rs. 55,65,44,468/-. 24. In lower appellate order, the CIT(A) has quoted a notification No.S.O 2123(E) dated 28.8.2008 reported as 304 ITR(St.) 63, clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by elimination method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to section 90 making the notification retrospectively applicable. In this manner, the CIT(A) has directed the Assessing Officer to allow relief to the assessee as per the aforesaid notification. 25. We have heard both parties and gone through the relevant findings in the orders of Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und. We propose to decide them in succeeding paras. 30. The Revenue s first substantive ground challenges the CIT(A) s order deleting disallowance of Rs. 64,282/- as depreciation on fixed assets taken over from the Bank of Tamilnadu Ltd. Per Revenue, the CIT(A) has ignored section 43(1) explanation 7 and 43(6) explanation 2 whilst granting the relief to the assessee. 31. Brief factual backdrop qua this issue is that the Assessing Officer had noticed the assessee to have taken over certain assets from Bank of Tamilnadu Ltd at a value other than their written down value in the bank s books on the date of acquisition. The assessee had adopted the assets written down value for claiming depreciation. It pleaded that in assessment year 1993-94 as well, the CIT(A) had allowed the very relief. The Assessing Officer disagreed with this claim, quoted aforesaid statutory provisions and made disallowance of Rs. 64,282/- by stating that this issue was pending at appellate stage. 32. In lower appellate order, the CIT(A) has followed his order for assessment year 2008-09 in assessee s case for accepting the assessee s claim of depreciation. 33. Before us, both parties have expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue s ground. 39. The Revenue s fourth substantive ground challenges the CIT(A) s order deleting disallowance of Rs. 15 crores qua provisions made towards contribution to an unrecognized staff welfare fund. 40. In scrutiny , the Assessing Officer came across assessee s contribution of Rs. 15 crores to staff welfare fund under provisions and contingencies. The assessee had quoted section 37 of the Act and termed this provision as neither a capital nor personal expenditure but incurred wholly and exclusively for the purpose of the business. It also pleaded that the CIT(A) had agreed with its contentions in assessment year 2008-09. However, the Assessing Officer disallowed this sum by observing that assessee s contributions had not been made towards a recognized fund. 41. In lower appellate order, the CIT(A) has held that the aforesaid provision had been made for employees benefits in light of his findings in assessment year 2008-09(supra) for deleting the impugned disallowance. 42. Qua this ground as well, it is to be seen that the written submissions filed by the parties aver that the 'tribunal' in assessment year 2008-09 has agreed with similar findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided on 10.11.2010, to hold that provision for loss on market to market basis in respect of trading derivatives could not have been disallowed. So, the impugned disallowance stands deleted. 50. Coming to this ground, we find from the parties written submissions and paper books filed that the 'tribunal' has upheld the CIT(A) s identical findings in assessment year 2008-09. On being granted opportunity, the Revenue has failed to point out any distinction on facts. Therefore, we uphold the CIT(A) s order deleting the aforesaid disallowance and reject the Revenue s ground. 51. The Revenue s seventh substantive ground challenges the CIT(A) s order deleting the disallowance of Rs. 71,34,751/- qua bad debts recovered. 52. Relevant facts qua this ground are that in its memo of income, the assessee is stated to have claimed deduction towards bad debts recovered. It explained before the Assessing Officer that this amount pertained to rural advances written off but not allowed in various preceding assessment years. It stressed the fact that when bad debts itself had been disallowed as deduction, recovery thereof could not have been taxed in the impugned assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r allowing deduction u/s 36(1)(viia). The relevant pleadings read as follows: The CIT(A) erred in directing the AO to consider the aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month, in computing the deduction u/s 36(1) (viia). The CIT(A) ought to have appreciated that as per clause (a) of Rule 6ABA, the sum to be reckoned for deduction u/s 36(1 )(viia) has to be computed on advances made by the rural branch during the previous month the same should be outstanding as at the end of the month. The assessee in its claim for the current year, had considered the closing balances of advances made as on 31.3.2008. This amounts to double deduction of the same amount since closing balance as on 31.3.2008 was already considered for deduction u/s 36(1 )(viia) for the earlier previous year. The CIT(A) ought to have appreciated this fact and upheld the disallowance of excess deduction u/s 36(1 )(viia). The CIT(A) erred in following the decision in the case of City Union Bank, (ITA No.1485/Mds/2007 dt 30.10.2009) wherein the facts are distinguishable and hence inapplicable to the facts of the present case. 57. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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