TMI Blog2016 (3) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... as also been filed before us. The assessee being a bank is eligible for deduction under section 36(1)(vii) of the Act. Further, the provisions of section 41(4) are also applicable on such debts that are recovered during the year which have been reduced from the income in any of the earlier years. In view of all these, we are inclined to send this issue back to the file of the Assessing Officer to verify with the details filed by the assessee whether any claim of any such nature, which reduces the income of the assessee with regard to these recoveries, if made in any of the earlier years the disallowance has to be sustained however in case no such benefit has been taken by the assessee out of these amounts recoverable in any of the earlier years the disallowance should be deleted. This ground of the assessee is allowed for statistical purposes. Disallowance as prior period expenses - appellant had not claimed any expenses relating to prior years in the computation of income - HELD THAT:- As it has been held in earlier year by the I.T.A.T. that looking into the regular system of accounting being followed by the assessee, an expenditure either has to be allowed or not to be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer to delete the addition made by him. The ground of assessee is allowed. Disallowance of depreciation on ATM - @ 60% - HELD THAT:- There are a number of judgments of various High Courts where the ATM is held to be computer and depreciation is allowed @ 60%. The grounds raised by the Department are dismissed. - ITA No. 215/Chd/2015, ITA No. 362/Chd/2015, ITA No. 216/Chd/2015, ITA No. 363/Chd/2015, ITA No. 447/Chd/2014 - - - Dated:- 28-3-2016 - SHRI H.L. KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Appellant : Shri C. Naresh For the Respondent : Shri Sushil Kumar, DR ORDER PER RANO JAIN, A.M. : The above mentioned cross appeals filed by the assessee and the Revenue are directed against the separate orders of learned Commissioner of Income Tax (Appeals), Patiala all dated 6.1.2015 for assessment years 2008-09 and 2009-10 and the appeal of the assessee in ITA No.447/Chd/2014 is directed against the order of learned Commissioner of Income Tax, Patiala dated 18.3.2014 for assessment year 2009-10, passed under section 263 of the Income Tax Act, 1961 (in short the Act ). 2. We w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if no dividend or interest income had earned by the assessee bank from shares etc. Lastly, it was submitted that no expenditure on account of interest can be considered for disallowance in view of the fact that the assessee bank has owned funds amounting to ₹ 2708.63 which are much more than the investment. 6. The CIT (Appeals) sent the matter back to the Assessing Officer for remand proceedings. In the remand proceedings apart from the earlier submissions the assessee made vehement arguments with regard to the fact that assessee bank is trading in shares and bonds etc. and as such the shares and bonds are held as stock in trade of the assessee. Therefore it was contended that there is no expenditure incurred for earning exempted dividend income or interest income as the expenditure has been incurred for business purposes only. It was explained to the Assessing Officer that investment in shares and bonds is not made under any obligation under the Banking Regulation Act, 1949 as compared to SLR Securities, which are maintained under section 24 of the said Act. The bank is dealing in shares and bonds as a trader which is permitted under section 6 of the Banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance will only be Nil, as the disallowance under sub clause (ii) and (iii)is based on average investments the income from which does not or shall not form part of total income. Since all the securities are held by the bank as stock in trade only and this has also been accepted by the Assessing Officer, and not as investments held, there cannot be any disallowance made as per the said sub clause also. Reliance was placed on the decision of Bombay High Court in the case of India Advantage Securities (supra) and ITAT Kolkata bench in the case of DCIT versus Gulshan investment company limited, ITA No. 666/K OL/2012 dated 11/03/2013. 9. Alternatively, it was argued that since the interest free funds available with the assessee as share capital, reserves and surplus, current-account balances on which the bank does not pay any interest are far more than the investments in assets earning tax-free income, no disallowance under section 14A of the Act with respect to interest can be made. Reliance was placed on the judgement of CIT versus Reliance Utility and Power 313 ITR 340. Reliance was also placed on the judgement of the jurisdictional High Court in the case of Lakhani ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and incidental to assessee s business, income from such shares and securities cannot be treated as investment so as to attract provisions of section 14A of the Act. 12. We have also perused the circular issued by the CBDT No. 18/2015 dated 02/11/2015, whereby in some other context it has been stated that income arising from investments of a banking concern is attributable to the business of banking falling under the head profits and gains of business and profession. The content of this circular were shown to us to emphasise the fact that the shares and stocks held by the bank are its stock in trade and not investments. 13. In another order of the ITAT Ahemedabad bench in the case of Anjali Exim private limited versus ACIT, ITA No. 2386/AHD/11 dated 29.0.2014 it has been held as under: + + the issue is covered by a coordinate bench decision in the case of DCIT Vs Gulshan Investment Co Ltd [(2013) - 2013-TIQL206-ITAT-KOL inasmuch as even if the provisions of Section 14A are to be held applicable in this case-as was held therein, computation provisions under rule 8D2 (ii) and (iii) will fail because the dividend yielding shares are held as stock in trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which is incidental to its business of sale of shares etc the same cannot be exigible to disallowance under section 14A. Further we also observe that a very apt interpretation of the said proposition has been given by the Ahemedabad bench of the tribunal in the case of Anjali Exim private limited (Supra), which we have already referred herein above. In this order it has been very categorically analysed that if the shares are held that as stock in trade and not as investment then even the disallowance under section under rule 8D will be Nil as rule 8D (2)(i) will be confined to only direct expenses for earning the tax exempt income. In the present case also since there are no direct expenses incurred in earning the dividend the disallowance will come to nil. 16. In view of the above, ground raised by the assessee is allowed. 17. Ground No. 2 of the assessee s appeal to read as under. 2. The CIT (A) erred in confirming the addition made by the AO in respect of bad debts recovered amounting to ₹ 94.60 crore ignoring the fact that when bad debts were written off in any of the precious years, no claim of deduction was made or allowed u/s 36( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the CIT (Appeals) has rightly confirmed the disallowance. 22. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. From the perusal of the order of the ITAT in assessee s own case for the assessment year 2007-08, we see that the said issue has been decided by the ITAT at page 5 para 7 to 8, as under. 7. In Ground No.2, the appellant contended that learned Commissioner of Income Tax (Appeals) has erred in holding that bad debts recovered during the year which were neither claimed nor allowed as a deduction u/s 36(1)(vii) were liable to tax thereby sustaining the addition of ₹ 55,24,00,000/-. 8. In the course of present appellate proceedings before us, both ld.'AR' and ld.'DR' stated that the issue is squarely covered against the assessee, in assessee's own case, by the Tribunal s order. The detail of such bad debts has been provided in the Paper Book, from page 105 to 184. A perusal of the issues and facts, involved in the present case and the adjudication made by the Tribunal in assessee's own case, it reveals that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shape of a note attached with the return. 21. The Assessing Officer noticed from the report of the Auditor in Form No. 3CD at Sr.No. (18), there is mention that the amount recovered on account of advance written off at ₹ 4.52 Cr was credited to Profit Loss Account meaning thereby that the same are covered u/s 41(1) of the Act though the case of assessee is that these are not covered u/s 41(4) of the Act. The issue arising in the present case is in connection with the bad debts recovered. The A.O. requisitioned the assessee to file details of bad debts written off year wise and recovered during the year. The assessee has failed to furnish any information in this regard either before A.O. or CIT(A). No details have been filed by the learned AR for the assessee before us, despite a specific query raised in this regard. The learned AR has placed reliance on the ratio laid down by the Bangalore Bench of Tribunal in State Bank of Mysore Vs DCIT (2009) 33 SOT 7 (Bang) without bringing on record the factual aspects on record. In the absence of the same and in view of the report of Auditor and the assessee not discharging its onus, we are in conformity with order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Bank is eligible for deduction of provision for Bad doubtful debts u/s 36(1)(viia) of the Income Tax Act, however the actual bad debts written off are not claimed as expense while arriving at the assessable income and are met from the Provisions for Bad Doubtful debts u/s 36(1)(viia) outstanding in the books of accounts. As the bad debts written off have not been claimed as expense while arriving at the assessable income, therefore, the Bad Debts recovered amounting to ₹ 94,60,13,107/- credited to charges account A/c Misc. are not considered as income u/s 41(1) of the I.T.Act. 2. A certificate from the Management of bank certifying that bad debts recovered during the year have not been claimed nor allowed as a deduction u/s 36(1)(vii)of the Act is also attached with the return at page 474. In view of the facts stated above, the amount of ₹ 94,60,13,107/-on account of bad debts recovered during the year is not chargeable to tax. 24. Further, there is no denying the fact that the details of these amounts recovered were filed before the lower authorities. A copy of the same has also been filed before us. The assessee being a bank is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile of the Assessing Officer on remand and after considering the remand report and other material the CIT (Appeals) held that the Assessing Officer had not identified any particular instance of prior period expenses even during the remand proceedings. The Assessing Officer has only restricted prior period expenses to stationery and miscellaneous expenses in the earlier year. In this way the CIT (Appeals) too restricted the disallowance to ₹ 8, 03, 000/ 29. Aggrieved by this, the assessee has come up in appeal before us. Before us the Ld. counsel of the assessee submitted that the lower authorities were not correct in estimating the disallowance. It was submitted that even though every previous year cuts off on 31st March of every year, the actual carrying on of business which is a life process, cannot be cut off as exactly, specially in an organization like that of a bank where activities are carried out through various branches spread across the country. Therefore such expenses cannot be treated as disallowed as prior period expenses. Reliance was placed on the judgement of Bombay ITAT in the case of Polio Engineering India Ltd. Vs. JCIT 100 TTJ 373. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were purchased in earlier years. The AO, further, mentioned On perusal of the audit report of the Tax Auditors furnished by the assessee with the return of income, it is clear that the assessee was required to provide details to the auditor in respect of prior period expenses/income debited to Profit Loss Account but the assessee has failed to do so stating the reasons depicted in the audit report against column 9(b) as also in the reply filed during the course of assessment proceedings as stated supra. Accordingly, the ld. 'AR' was of the opinion that it is the failure of the assessee which led to frame present assessment. Both ld. 'AR' and ld. 'DR' were of the opinion that for the proper and judicious disposal of the issue in question, in these appeals, the case(s) may be restored to the file of the AO. 4. We have carefully perused the rival submissions,facts of the case and the relevant material on record. The grievance of the assessee is non-compliance with the directions given by the ITAT, in the above referred decision. The relevant para of the ITAT order while restoring the appeal to the AO is as under : 11. We have given ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the issue of prior period expenses afresh, in accordance with relevant provisions of the Act. The assessee is directed to render necessary cooperation in the matter of filing evidences and any other detail, as required by the AO for the purpose of framing assessment. The AO is also directed to comply with the necessary directions contained in the decision of the ITAT in assessee's own case, reproduced above, and provide proper and reasonable opportunity to the assessee. 6. In the result, appeal of the assessee in ITA No.451/Chd/2011 is allowed for statistical purposes only. 11(i) In view of the above discussions, the issue is restored to the file of the AO, as indicated above. 32. As it has been held in earlier year by the I.T.A.T. that looking into the regular system of accounting being followed by the assessee, an expenditure either has to be allowed or not to be allowed. In the present year also, both the Assessing Officer as well as the CIT (Appeals) has indulged in estimating the disallowance. Nowhere any of these authorities have been able to pinpoint which expenses are prior period in nature. A disallowance has not to be made just f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) on the ground that the disallowance made was confirmed by the Hon ble ITAT in the earlier years. It was submitted that the amount of unclaimed balances were never treated by the appellant as its income and continue to be shown as a liability. The bank is liable to pay the customers the amounts due to them as and when the claims are made by them. Further our attention was invited to a circular titled Depositors Education and Welfare Fund whereby as per the directions of the RBI these amounts are to be transferred to the government of India. Therefore it was submitted that the balance outstanding as on 31.0.2008 was fully transferred to the said fund and there is no balance outstanding as on date in respect of the said amount. In view of this it was submitted that since the notification came from government to transfer the unclaimed account after the order of the ITAT in earlier year, the facts become distinguishable. Therefore the addition made by the Assessing Officer may be deleted. 37. The Ld. DR relied on the order of the authorities below. 38. We have heard the learned representatives of both the parties, perused the findings of the authorities below a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of ₹ 8,91,00,0007- made on account of un reconciled inter-branch and inter-bank entries. 4. In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition on account of un-reconciled inter-branch and inter-bank entries by relying on the certificate from the assessee that there were no entries which were hit by the provision of section 22 of the Limitation Act, without allowing the AO opportunity to examine this contention of the assessee. 43. Briefly, the facts are that there were large number of unreconciled entries between the different branches of the bank and in inter-bank reconciliation account. Before the Assessing Officer, it was submitted that no addition on this account is called for as issue has been finally resolved in favour of the assessee as the Committee on Dispute has not given permission to the Department to pursue appeal before the I.T.A.T. Otherwise also, a certificate from the management to the effect that there are no entries hit by limitation per Article 22 of Schedule of Limitation Act was filed. 44. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T thereafter restored the matter to the Assessing Officer to be decided on same lines. Thus it is seen that Hb' ITAT has directed to consider only the entries which have remained outstanding for a period of more than three years. The appellant during the course of assessment proceeding has submitted the certificate from the Management that no entries are hit by the limitation Act. The A.O has not cited a single instance where the entry is hit by the limitation Act and the addition is merely made to keep the issue alive. Therefore, following the order of Hon'ble ITAT in the previous year, the addition made by the A.O. is deleted as the facts are exactly same. 47. On perusal of the same, we do not find any infirmity in the same, as the I.T.A.T. in earlier year has directed the Assessing Officer to take the entries outstanding for more than three years. In the relevant year, there is no entry outstanding for more than three years. This fact has not been controverted by any of the lower authorities. Even the learned D.R. before us could not conrovert the same. In view of the above, we confirm the order of the learned CIT (Appeals). The ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it is held that ATM is a computer and entitled to depreciation @ 60% for the purpose of income tax proceedings. There is no order of the Jurisdictional High Court cited by either the appellant or the Assessing Officer. It is an established law that when two views are possible then the view favourable to the assessee has to be taken namely in CIT vs. Polar Cement Put. Ltd. 226 ITR 625(SC). In this case, most of the latest judgments are in favour of the assessee including the order of Hon'ble Bombay High Court. The issue in the case of Diebold System Pvt. Ltd. pertains to commercial taxes and not Income Tax. Therefore, looking into entirety of facts of the case and respectfully following the decision of Hon'ble Bombay High Court I am of the opinion that ATM has to be treated as a computer and is entitled to depreciation @ 60%. In the result, this ground of appeal is allowed. 53. On perusal of the above, we do not find any infirmity in the same as there are a number of judgments of various High Courts where the ATM is held to be computer and depreciation is allowed @ 60%. The grounds raised by the Department are dismissed. 54. The appeal of the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that consistent with the stand of the Department that increase in the unclaimed balance in NOSTRO account will be taxes, since there is a reduction in such unclaimed balances during the year, the same should have been allowed. 61. Since we have deleted the addition made by the Assessing Officer on account of unclaimed balance in NOSTRO account, while adjudicating the issue in ITA No.215/Chd/2015, the issue in the present case, becomes infructuous. 62. The appeal of the assessee is partly allowed. ITA No.363/Chd/2015:(Revenue s Appeal) : 63. Ground Nos. 1 to 3 raised by the Revenue read as under : 1. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of ₹ 86,66,667/- made on account of prior period expenses. 2. In the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition on account of prior period expenses without appreciating that the AO had sought to verify the expenditure claimed on the basis of actual bills received/settlement or on crystallization of liability, in light of the comments of the tax auditors and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable for computers without appreciating the decision in the case of the Hon'ble Karnataka High Court decision in Diebold Systems Pvt. Ltd. Vs. Commissioner of Commercial Taxes reported as 144 STC 59 Kar., in which it has been held that ATMs cannot be treated as computers after detailed examination of the nature of ATMs. 8. In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing depreciation on ATMs at the rate applicable to computers without appreciating that if it is held that anything connected to computers in input or output is held to be a computer for the purpose of rate of depreciation then many equipment like mobile phones, robots, computer controlled machinery etc. which are connected to computers or have embedded computers would also qualify for depreciation at the rate applicable to computers. 68. It is relevant to observe here that the issues in these grounds are similar to the issues in ground Nos.5 to 6 raised by the Revenue in ITA No.362/Chd/2015 and the findings given in ITA No.362/Chd/2015 shall apply to this case also with equal force. The grounds raised by Department are dismissed. 69. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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