TMI Blog2016 (11) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... find that this depreciation had been granted by the revenue all along. Going by the principle of consistency, there is no need to disturb the said stand of the revenue. But since the entire building ( including the renovated portion) was sold during the year under appeal for ₹ 9.55 crores, we find that the assessee bank had rightly allocated the sale consideration towards 5% an 10% block on the basis of their values and computed short term capital gains u/ 50 of the Act for the 5% block and claimed depreciation u/s 32 of the Act for the 10% block. It is not in dispute that the 10% block continues to exist as on 31.3.2010. MAT applicability to assessee bank - applicability of provisions of section 115JB - Held that:- The provisions of section 115JB of the Act are not applicable to an assessee unless it is registered as a company under the Companies Act, 1956 and prepares its financial statements in accordance with the provisions of section 211 and Part II and Part III of Schedule VI of the Companies Act, 1956. We place reliance on the recent decision of the co-ordinate bench of this tribunal in the case of UCO Bank vs DCIT (2015 (12) TMI 300 - ITAT KOLKATA ) wherein held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the ld Dispute Resolution Panel (DRP) is justified in upholding the addition of ₹ 14,57,051/- on account of interest income in relation to advances classified as Non-Performing Advances (NPAs) in the facts and circumstances of the case. 2.1. The brief facts of this issue is that the assessee is a bank incorporated in Netherlands with limited liability with branches in India. In India, the assessee is registered as a scheduled bank in terms of Schedule II of the Reserve Bank of India Act, 1934. The main activities fo the assessee in India comprise of accepting deposits, giving loans, discounting /collection of bills, issue of letters of credit/ guarantees, executing forward transaction in foreign currencies for importers / exporters , money market lending / borrowings, investment in securities, etc in terms of the prevailing rules and regulations governing such transactions. The ld AO observed that assessee bank had not recognized the interest income in respect of advances, which were overdue for more than 3 months , in the profit and loss account in accordance with the RBI guidelines applicable to the banks. 2.2. The assessee replied that since the account has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT vs Sirpur Paper Mills reported in 237 ITR 41 (SC). 2.3. Without prejudice to the above, it was submitted that Rule 6EA is practically difficult to be implemented, since the categories of advances prescribed therein do not exist anymore as the classification of advances have changed and RBI now follows the international norm of classification (viz. standard, sub-standard, doubtful and loss assets). The ld AO relied on the judgement of the Hon ble Supreme Court in the case of Southern Technologies Ltd vs CIT reported in (2010) 320 ITR 577 (SC) . The assessee stated that the said decision is distinguishable from the facts of the assessee bank in as much as the same pertained to claim of deduction in respect of Provision for NPA in the hands of a Non-Banking Finance Company (NBFC) u/s 36(1)(vii)(a) of the Act which is available only to banks. Even the said decision did not contemplate recognition of interest income in respect of NPA accounts on accrual basis. The assessee also submitted that the said accounts remained overdue for more than 180 days as on 31.3.2010 (i.e the next financial year) and hence it had become NPA even as per Rule 6EA of the Rules i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities and placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT vs Vasisth Chay Vyapar Ltd reported in 330 ITR 440 (Del) on the impugned issue, among others. In response to this, the ld DR argued that the provisions of Rule 6EA states non-recognition of interest income only if the loan account if overdue for more than 3 months. He argued that the recognition of income as contemplated by RBI prudential norms are not binding on the provisions of the Income Tax Act and placed reliance on the decision of the Hon ble Supreme Court in the case of Southern Technologies Ltd vs CIT reported in 320 ITR 577 (SC) in support of his proposition. The assessee had not proved the factum of uncertainty in collection of the said advances and argued that it is also claiming provision for NPA which includes interest element also as a deduction. Hence on one hand, it is not offering the interest income and on the other hand, it is claiming deduction towards the interest component added to the party s loan account balance. In defence, the ld AR argued that the fact of uncertainty of collection of these dues from the parties were never in dispute and the same is raised for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 1,02,54,946/- on account of deemed short term capital gains in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the Bank had sold a residential building (from 5% block of asset) with opening written down value ('WDV') of ₹ 1,06,53,958/- for a total consideration of ₹ 9,55,00,000/-, pursuant to which, the block of asset ceased to exist as it was the only asset in the respective block. The Bank had carried out some renovations in the said building in the earlier period(s) and the cost of such renovations were taken to the 10% block of building (i.e. other than residential buildings). Such tax treatment was based on accounting classification. Total sale consideration of ₹ 9,55,00,000/- was appropriated by the Bank between 5% and 10% block of assets as ₹ 8,51,55,054/- and ₹ 1,03,44,946/- respectively. Since, the 5% block of asset ceased to exist, the resultant gains of ₹ 7,45,91,096/- was offered to tax as deemed STCG. However, as the 10% block of asset continues to exist, the aforesaid appropriated sale consideration of ₹ 1,03,44,946/- was reduced from the 10% block and resulted into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ₹ 9.55 crores which was lying in 5% block as well as in 10% block and hence the appropriation of the sale consideration thereon was rightly made by the assessee bank. In response to this, the ld DR took us to the definition of block of assets as per section 2(11) ; provisions relating to allowance of depreciation u/s 32(1) ; meaning of written down value in respect of block of assets as per section 43(6)(c ) and provisions for computation of capital gains in case of depreciable assets in terms of section 50 of the Act. He also took us to the relevant Income Tax Depreciation chart wherein only classification of buildings is mentioned at 5% rate . He argued that the 10% depreciation claimed by the assessee for the renovations in the earlier years is wrong as the assessee was eligible only for 5% as what was available with assessee was only residential building. Accordingly, he supported the orders of the lower authorities. 3.3. We have heard the rival submissions. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the assessee had 5% block as well as 10% block for buildings in its I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is only consequential in nature and does not require any adjudication. 6. The Ground No. 5 raised by the assessee is general in nature and does not require any adjudication. 7. In the result, the appeal of the assessee in ITA No. 477/Kol/2015 is allowed. ITA NO. 496/Kol/2015 Revenue Appeal 8. The first issue to be decided in this appeal of the revenue is as to whether the ld DRP is justified in deleting the disallowance on account of provision for gratuity amounting to ₹ 2,18,00,000/- in the facts and circumstances of the case. 8.1. The brief facts of this issue is that the ld AO observed that the assessee had debited a sum of ₹ 416,76,96,118/- towards Payment to and provision for employees which included ₹ 2,18,00,000/- towards gratuity. Such sum of gratuity was debited to the profit and loss account for the year under consideration in accordance with the actuarial valuation performed by an independent valuer. The ld AO proposed disallowance of the said provision u/s 43B of the Act stating that the same was not paid on or before the due date of filing the return of income. The assessee replied stating that excess gratuity pertaining to AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable as deduction. In response to this, the ld AR vehemently relied on the order of the ld DRP and argued that the provisions of section 43B of the Act only contemplates the payment of the gratuity amount which has been duly done in the instant case in the earlier year itself. 8.3. We have heard the rival submissions. We find that assessee had actually paid the amount of ₹ 2,18,00,000/- in the earlier year i.e in Asst Year 2009-10 itself along with other amounts. However, deduction for the same has not been claimed in that year i.e in Asst Year 2009-10 and the same has been claimed in the year under appeal i.e the year in which it had become due. We agree with the argument of the ld AR that the spirit of section 43B of the Act has been satisfied by the assessee in full. We also find that the reliance placed on the decision of the Hon ble Kerala High Court supra is well founded. In these circumstances, we do not find any infirmity in the order of the ld DRP and accordingly the ground no.1 raised by the revenue is dismissed. 9. The next ground to be de decided in this appeal is regarding adjustments to be made in the computation of book profits u/s 115JB of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d office and overseas branches. Accordingly it held that the Circular No. 7 of 2007 is not applicable to the facts of the assessee bank and also observed that the said TDS is duly appearing in Form No. 26AS of the assessee which was directed to be verified by the ld AO with reference to TDS certificate and allow credit accordingly. Aggrieved, the revenue is in appeal before us on the following grounds:- 3. Whether on facts and circumstances of the case, the Ld.DRP had jurisdiction to give direction to the Assessing Officer on the issue of giving TDS credit, despite the fact that the credit of TDS in no way increases or decreases the returned income or loss of the assessee and therefore, as per section 144((2) of the I.T.Act'61, the assessee was not eligible to file objection on this ground. 4. Whether on facts and circumstances of the case, the Ld.DRP erred in Law by holding that circular number 7 of 2007 is not applicable in the instant case. 5. Whether on facts and circumstances of the case, the Ld.DRP erred in Law by directing the A.O to give TDS credit amounting to ₹ 10,19,31,487/- deducted from payment of interest to its Headquarters other branches ..... X X X X Extracts X X X X X X X X Extracts X X X X
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