TMI Blog2019 (3) TMI 1744X X X X Extracts X X X X X X X X Extracts X X X X ..... ognition of investments in HTM category as stock-in-trade‟ is not dependent on the frequency of their sale / purchase carried out by the assessee-bank. We, therefore, conclude by holding that in the present case the method of valuation of the closing stock adopted by the assessee i.e. cost or market value, whichever is lower is fair and proper and the income-tax authorities have erred in not accepting the same. The orders of the authorities below on this aspect are hereby reversed. As decided in BANK OF MAHARASHTRA [ 2018 (3) TMI 316 - BOMBAY HIGH COURT] Tribunal was justified in deleting the addition in allowing loss of valuation of Held to Maturity (HTM) securities, when HTM securities are capital in nature Disallowance u/s. 14A - contention of the assessee is that the investments were held by the assessee as stock in trade, therefore, no disallowance u/s. 14A was required to be made in respect of exempt income earned on shares held as Stock in trade - HELD THAT:- The Hon‟ble Apex Court in the case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax [ 2018 (3) TMI 805 - SUPREME COURT] has approved the judgment rendered in the case of Pr. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has been deducted at source. Thus, in view of the law laid down in the case of Commissioner of Income Tax Vs. S K Tekriwal (supra) no disallowance u/s. 40(a)(ia) is warranted. Depreciation on UPS is restricted to 60% - See M/S. SARASWAT INFOTECH LTD. [ 2013 (1) TMI 861 - BOMBAY HIGH COURT] Disallowance of interest on NPAs - HELD THAT:- The issue is no more res integra. The assessee has created a provision in the P L account on account of interest on NPAs and has claimed the same during the period relevant to the assessment year under appeal. The issue is squarely covered in favour of the assessee by the decision rendered in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. [ 2015 (1) TMI 1218 - BOMBAY HIGH COURT] . The Hon‟ble High Court following the decision of Hon‟ble Apex Court in the case of UCO Bank Vs. Commissioner of Income Tax [ 1999 (5) TMI 3 - SUPREME COURT] held that interest on sticky loans has to be allowed. Thus, in view of the aforesaid decision the ground No. 11 raised in the appeal by the assessee is allowed. Applicability of MAT provisions u/s. 115 JB on assessee bank - HELD THAT:- The said provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted as 206 Taxman 182. The debts were written off at Branch level and at the level of head office. The Assessing Officer during assessment proceedings has erred in coming to the conclusion that the assessee has not actually written off irrecoverable. He further erred in observing that bad debts written off were debited to P L account. The ld. AR pointed that the assessee has created provision for bad and doubtful debts by debiting P L account. The ld. AR contended that similar issue was decided by the Tribunal in assessee‟s own case in ITA No. 1505/PN/2008 for assessment year 2005-06 and ITA Nos. 1135 to 1138/PN/2013 for assessment years 2006-07 to 2009-10. The Tribunal vide order dated 17-09-2014 restored this issue back to the file of Assessing Officer for verification. The ld. AR submitted that ground No. 1 of appeal may be allowed in the same terms. 3.2 Dr. Subhash Chandra representing the Department vehemently defended the impugned order. However, the ld. DR fairly admitted that the issue raised in ground No. 1 by the assessee was subject matter of appeal before the Tribunal for the assessment years 2005-06 to 2009-10. 3.3 Both sides heard. Orders of the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Co-ordinate Bench in assessee‟s own case and there has been no change in the facts, we deem it appropriate to restore the issue to Assessing Officer for re-adjudication with similar directions. The ground No. 1 of the appeal is allowed for statistical purpose in the same terms. 4. The ground No. 2 of the appeal is : 2. In the facts and circumstances of the case and in law, the learned CITA) has erred in restricting the claim made by the appellant u/s 36[1][viia] of the I.T. Act 1961 to ₹ 45,14,84,690/- as against the claim of ₹ 416,44,00,000/ - made by the appellant. 2.1 The learned CIT(A) erred in holding that the deduction should be restricted to the provision made in the books accounts for rural advances. 2.2 The learned CIT(A) failed to appreciate the fact the entire provision made has to be considered and not the provision relating to rural advances only be considered. 2.3 The learned CIT(A) failed to appreciate the fact that the Hon'ble Supreme Court did not lay down the law that the deduction should be allowed by only considering the provision for rural advances in the books. 2.4 Without prejudice to the above, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the deduction u/s 36(1)(viia) of the Act is admissible only to the extent of Provision for bad and doubtful debts actually made in the books of account. The CIT(A) has already allowed ₹ 83,00,00,000/- following the aforesaid proposition which is hereby affirmed, and the balance of assessee‟s claim is inadmissible as the corresponding Provision has not been made in the books of account. Thus, assessee‟s Ground of Appeal No.11 and Ground of Appeal Nos.2 to 6 of the Revenue are dismissed. 4.4 We find that in the earlier assessment years, the Commissioner of Income Tax (Appeals) had allowed the deduction u/s. 36(1)(viia) to the extent of provision made in the books of account for bad and doubtful debts u/s. 36(1)(viia) of the Act. Against which the Department was in appeal. The Tribunal dismissed the ground raised by the Department and upheld the findings of Commissioner of Income Tax (Appeals). Both the sides are unanimously in stating that the issue in present appeal is identical to the one already adjudicated by the Tribunal in earlier assessment years. Thus, the deduction u/s. 36(1)(viia) is allowed to the extent of provision made, in the same terms. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Appeal No. 920 of 2015. The Hon‟ble High Court vide order dated 27-02-2018 upheld the findings of Tribunal. 5.2 The ld. DR vehemently opposed the ground raised by assessee and prayed for confirming the findings of Assessing Officer on this issue. However, the ld. DR fairly admitted that the issue raised in ground No. 3 was subject matter of appeal before the Tribunal in earlier assessment years. 5.3 Both sides heard on the issue of disallowance of claim of loss in respect of securities held under HTM category. Both sides are unanimous in stating that the present issue was subject matter of appeal before the Tribunal in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The Co-ordinate Bench adjudicated the issue by observing as under : 20. In the background of the aforesaid legal position, a premise which can be drawn is that for the purposes of valuation of the closing stock it is permissible for the assessee to value it at the cost or market value, whichever is lower. In-fact, the Hon‟ble Supreme Court in the case of Chainrup Sampatram vs. CIT, (1953) 24 ITR 481 (SC) held that the assessee is entitled to value the closing stock eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has furnished a statement showing net profit on sale of HTM Securities as per the Balance Sheet for the various assessment years, viz. 2006-07 to 2009-10. On this basis, it is sought to be contended that the HTM category securities are also viewed as stock-in-trade‟ by the assesseebank. In our opinion, the plea of the learned CIT-DR is quite untenable primarily because the very nature of banking activities allowed as per the Banking Regulation Act, 1949 are in the sphere of business / trade activities; and, accordingly the recognition of investments in HTM category as stock-in-trade‟ is not dependent on the frequency of their sale / purchase carried out by the assessee-bank. 21. In view of the aforesaid discussion, we, therefore, conclude by holding that in the present case the method of valuation of the closing stock adopted by the assessee i.e. cost or market value, whichever is lower is fair and proper and the income-tax authorities have erred in not accepting the same. The orders of the authorities below on this aspect are hereby reversed. 5.4 The ld. AR has further drawn our attention that the decision of Tribunal has been upheld by the Hon‟bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its stock of securities / investments in assessment year 2005-06 assessee claimed deduction for a loss of ₹ 359,24,58,508/-. The effect of the change in method of valuation on the computation of income for the purposes of income tax is a matter of factual appreciation, which is liable to be verified by the Assessing Officer appropriately. For the aforesaid purpose, we therefore direct the Assessing Officer to consider the stand of the assessee stated aforesaid and thereafter re-work the income of the assessee accordingly. Needless to mention, the assessee shall provide necessary workings to the Assessing Officer, including the Investment Trading Account and / or such other workings which would enable the Assessing Officer to re-work the income of the assessee in accordance with our decision in the earlier paragraphs. The Assessing Officer shall allow the assessee an appropriate opportunity of being heard and thereafter re-work the computation of income as per law and keeping in mind the aforesaid directions. Thus, on Ground of Appeal No.1 assessee succeeds. The assessee is directed to furnish the workings of income to the Assessing Officer. The Assessing Officer shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order in confirming disallowance u/s. 14A made by the Assessing Officer. 8.3 Both sides heard. The first contention of the assessee is that the investments were held by the assessee as stock in trade, therefore, no disallowance u/s. 14A was required to be made in respect of exempt income earned on shares held as Stock in trade . The Hon‟ble Punjab and Haryana High Court in the case of Pr. Commissioner of Income Tax Vs. State Bank of Patiala (supra) has decided the issue of disallowance u/s. 14A in respect of expenditure in earning exempt income from shares held as stock in trade. The Hon‟ble High Court after placing reliance on the decision of Hon‟ble Apex Court in the case of Commissioner of Income Tax Vs. Walfort Share Stock Brokers (P) Ltd. reported as 326 ITR 1 held that that no disallowance u/s. 14A is to be made where the shares are held as stock in trade. For the sake of completeness relevant extract of the judgment is reproduced here-in-below : 26. What is of vital importance in the above judgment are the observations emphasised by us. Each of them expressly states that what is disallowed is expenditure incurred to earn exempt income. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, the disallowance of ₹ 153,00,00,000/- upheld by the learned CIT(A) on account of disallowance of provision for wage revision, being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 7.1 The learned CIT(A) failed appreciate the fact that it was an ascertained liability and as such, was allowable. 9.1 The ld. AR submitted that the assessee has created provision for wage arrears in meeting of Board of Directors. The minutes of the meeting were signed on 27-11-2009 wherein in principle the revision of wages was accepted. Thus, the liability for revised wage payments crystallized. However, actual quantification was delayed till the signing of memorandum of settlement on 27-04-2010. The Assessing Officer in the assessment proceedings held that the Provision for Wages is a contingent liability, whereas, it had crystallized in the period relevant to the assessment year under appeal. It is a well settled law that where the liability has crystallized it is no more a contingent liability. To support his contentions the ld. AR placed reliance on the following decisions : i. Bharat Earth Movers Vs. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 9.4 The Kolkata Bench of the Tribunal in the case of Allahabad Bank Vs. DCIT (supra) following the ratio laid down in the case of Bharat Earth Movers Vs. Commissioner of Income Tax (supra) allowed the claim of assessee on claim of deduction on account of provision for salary arrears. In the said case the facts were somewhat similar to the case in hand. The revision of salary in principle was agreed after negotiations between Bank Associations and Employees Union during the relevant assessment year. However, the actual quantification of payment of revised salary was made in the subsequent assessment year. The Tribunal following the ratio laid down by the Hon‟ble Apex Court allowed the claim of assessee holding that the liability could be ascertained with reasonable certainty. 9.5 We are of considered view that in the present case the authorities below have erred in coming to the conclusion that the liability has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereafter decide the issue de novo, after affording reasonable opportunity of hearing to the assessee, in accordance with law. Thus, the ground No. 8 is allowed for statistical purpose. 11. The ground No. 9 of the appeal is : 9. In the facts and circumstances of the case and in law, the action of the learned CIT(A) in upholding the disallowance u/s 40(a)(ia) of the I.T. Act 1961, in respect of short deduction of tax being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 9.1 The learned CIT(A) erred in holding that the provisions of section 40(a)(ia) is applicable even in cases of short deduction. 11.1 The disallowance u/s. 40(a)(ia) of the Act has been made for short deduction of tax at source. The Hon‟ble Calcutta High Court in the case of Commissioner of Income Tax Vs. S K Tekriwal reported as 361 ITR 432 has held that the provision of section 40(a)(ia) are not attracted where there is short deduction of tax. The provision of section 40(a)(ia) apply where no tax has been deducted at source. Thus, in view of the law laid down in the case of Commissioner of Income Tax Vs. S K Tekriwal (supra) no disallowance u/s. 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AR submitted that in respect of interest income on Non Performing Assets (NPAs) no addition was made by the Assessing Officer. The issue was raised for the first time by the First Appellate Authority. Therefore, it is a case of enhancement of income. The ld. AR submitted that this issue has been settled in favour of the assessee by the Hon‟ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. reported as 379 ITR 24. 13.2 Both sides heard. Orders of the authorities below perused. The issue raised in ground No. 11 of the appeal is with regard to disallowance of interest on NPAs. The issue is no more res integra. The assessee has created a provision in the P L account on account of interest on NPAs and has claimed the same during the period relevant to the assessment year under appeal. The issue is squarely covered in favour of the assessee by the decision rendered in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. (supra). The Hon‟ble High Court following the decision of Hon‟ble Apex Court in the case of UCO Bank Vs. Commissioner of Income Tax reported as 237 ITR 889 held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. The Bangalore Bench of the Tribunal in the case of Canara Bank (supra) held that section 115JB of the Act is not applicable to a banking company. In coming to such conclusion, the Bangalore Bench of the Tribunal relied upon the earlier decisions of the Tribunal in the cases of Union Bank of India vs. ACIT (ITA Nos.4702 4706/2010 dated 30.06.2011) and Indian Bank vs. Addl. CIT (ITA No.469/Mds/2010 dated 03.08.2011). Similar is the decision of the Hyderabad Bench of the Tribunal in the case of State Bank of Hyderabad (supra). In so far as the objection of the learned CIT-Departmental Representative, based on the amendment made to section 115JB of the Act by the Finance Act, 2012 is concerned, the same is misconceived because the said amendment is applicable from assessment year 2013-14 onwards. Therefore, the aforesaid amendment does not negate the ratio of the aforesaid precedents, which hold the field so far as the assessment year before us is concerned. Therefore, following the aforesaid precedents and in the absence of any contrary decision, we hereby hold that assessee, being a banking company, does not fall within the purview of section 115JB of the Act. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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