TMI Blog2020 (3) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal by the assessee qua the claim of deduction u/s. 36(1)(viia) is allowed to the extent of provision actually made for bad and doubtful debts in the books of account. Accordingly, the ground No. 2 of the appeal is partly allowed in favour of assessee. Disallowance u/s.14A r.w.r. 8D(2)(iii) - HELD THAT:- No disallowance u/s. 14A is warranted in respect of shares held by the assessee as stock in trade. Disallowance made u/s. 40(a)(ia) on short deduction of tax - HELD THAT:- Hon‟ble Calcutta High Court in the case of Commissioner of Income Tax Vs. S K Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] deleted the disallowance made u/s. 40(a)(ia) on short deduction of tax. Following the parity of reasons the disallowance made in the assessment year under appeal is deleted. Applicability of the provision u/s.115JB(2)(b) - HELD THAT:- As perusing the orders of the Assessing Officer and Ld. CIT(Appeals) and also the amended Clause(b) read with proviso to Section 211(2) of the Companies Act, 1956, we find there is a requirement of verification of facts whether the assessee is a Banking Company or Corporation or otherwise. The orders of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HTM securities are capital in nature. 3. The appellant craves to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon ble Tribunal. 4. At the very outset, the Ld. Counsel for the assessee submitted that grounds of appeal raised by the Revenue pertains to the allowability of depreciation on Held to Maturity (HTM) Investment. In this regard, the Ld. Counsel submitted that this issue is covered by the decision in assessee‟s own case in ITA Nos.634 635/PN/2017 order dated 27.06.2019 and it was adjudicated by the Tribunal against the Revenue. The Ld. Counsel for the assessee has drawn our attention to Para 2, Page No.105-108 of the paper book. 5. We have heard both the sides and perused the relevant paragraphs of the order of the Tribunal in assessee‟s own case (supra.) wherein, the Tribunal on the issue has held as follows: 2. The Revenue has assailed the findings of Assessing Officer on the single issue of allowing loss on valuation of securities Held to Maturity (HTM). 2.1 The ld. AR submitted that this issue has been let to rest by the Hon ble Bombay High Court in assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at cost price or market value, whichever is lower. In the present case, Revenue does not dispute that the method of the valuation adopted by the assessee, namely, valuing the stock either at cost price or market value whichever is lower, is a generally accepted method of valuation. No doubt, there are no statutory rules for the valuation of closing stock but the ordinarily accepted method of commercial accounting support the valuation of closing stock based on the lower of the cost or market value. Therefore, the departure from the erstwhile method of valuation of closing stock by the assessee is quite appropriate, and in fact is line with a method approved by the Hon‟ble Supreme Court in the case of Chainrup Sampatram (supra). In-fact, the only basis for the Revenue to challenge the bona-fides of the change is that the change has been effected only for the purpose of assessment of taxable income and is not incorporated in the account books. The aforesaid plea of the Revenue, in our view, is quite misplaced because it is well understood that assessee is a banking company and is statutorily mandated to maintain its books of account in terms of the RBI guidelines. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8223;ble Bombay High Court in Income Tax appeal No. 920 of 2015 (supra). The copy of the Hon‟ble High Court order dated 27-02-2018 was furnished before us. A perusal of same shows that one of the question of law before the Hon‟ble High Court for consideration was : (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of ₹ 359,24,58,508/- in allowing loss of valuation of Held to Maturity (HTM) securities, when HTM securities are capital in nature? The aforesaid question was decided by the Hon‟ble High Court in favour of the assessee upholding the order of Tribunal. Thus, in view of the fact that the issue has now been settled by the Hon‟ble High Court in favour of the assessee, we find merit in ground No. 3 of the appeal by assessee. Consequently, ground No. 3 raised in the appeal is allowed. Since, the issue raised in present appeal is identical to the one already adjudicated by the Tribunal and no contrary decision/material has been placed on record by the Revenue, the ground raised by the Revenue in its appeal on the issue of disallowance of loss on valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of arriving at the deduction. 3. In the facts and circumstances of the case and in law, the action of the learned CIT(A) in upholding the disallowance of ₹ 1,58,75,823/- made by the learned Assessing Officer u/s 14A of the I.T. Act 1961 r.w.r 8D(2)(iii), being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 3.1 The learned CIT(A) failed to appreciate the fact that the learned Assessing Officer erred in invoking the provisions of Sec 14A without recording any finding as to the nexus between the expenditure and exempt income. 3.2 The learned CIT(A) failed to appreciate the fact that the Appellant bank would have incurred the operating expenses even without investing in tax free investments. 3.3. Without prejudice to the above, the learned CIT(A) failed to appreciate the fact that the investments of the appellant bank being stock in trade, no disallowance can be made u/s 14A. 4. 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, pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer and the Ld. CIT(Appeals), the Ld. Counsel for the assessee submitted the similar claim was made by the assessee in assessment year 2010-11. The Co-ordinate Bench of Tribunal upheld the findings of Commissioner of Income Tax (Appeals) and has restricted the deduction u/s. 36(1)(viia) to the extent of provision made. 10.1 The Ld. Counsel further has drawn our attention to Para 4 of the Tribunal‟s order in assessee‟s own case in ITA No.634 635/PN/2017 (supra.) wherein the assessee was given relief and the claim of the assessee was allowed subject to the provision actually made for bad and doubtful debts in the books of account. In this regard, the Ld. Counsel for the assessee has drawn our attention at Para 4 of the said order. 11. We have heard both the sides and perused the relevant paragraphs of the order of the Tribunal in assessee‟s own case (supra.) wherein, the Tribunal on the issue has held as follows: 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 ₹ 102, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /PN/2017 (supra.). In this regard, the Ld. Counsel for the assessee has drawn our attention at Para 5 of the said order. The Ld. Counsel further submitted that the Assessing Officer erred in invoking the provisions of Section 14A of the Act without recording any findings as to the nexus between the expenditure and exempt income. 14. We have heard both the sides and perused the relevant paragraphs of the order of the Tribunal in assessee‟s own case (supra.) wherein, the Tribunal has decided the issue in favour of the assessee by observing as follows: 5. The ground No. 3 of the appeal is : 3. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance u/s. 14A of the I.T. Act, 1961 r.w.r. 8D(2)(iii), being bad in law, arbitrary, perverse and legally unsustainable the same may please be deleted. 3.1 The learned CIT (A) failed to appreciate the fact that the learned Assessing Officer erred in invoking the provisions of Sec. 14A without recording any finding as to the nexus between the expenditure and exempt income. 3.2 The learned CIT(A) failed to appreciate the fact that the investment of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o does not fall within the ambit of section 14A. Now, the dividend and interest are income. The question then is whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee's stock-in-trade. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, dividend and interest, but to earn profits from trading in i.e. purchasing and selling the same. It is axiomatic, therefore, that the entire expenditure including administrative costs was incurred for the purchase and sale of the stock-intrade and, therefore, towards earning the business income from the trading activity of purchasing and selling the securities. Irrespective of whether the securities yielded any income arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to the same. 8.4 The Hon‟ble Apex Court in the case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax (supra) has approved the judgment rendered in the case of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances 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. 6.1 The learned CIT(A) erred in holding that the provisions of section 40(a)(ia) is applicable even in cases of short deduction. 8.1 The ld. AR submitted that the Assessing Officer has made disallowance u/s. 40(a)(ia) for short deduction of tax. The ld. AR pointed that the C0-ordindate Bench of Tribunal in assessment year 2010-11 in assessee s own case has deleted the disallowance u/s. 40(a)(ia) in respect of short deduction of tax at source. 8.2 We have heard the submissions made by the ld. AR. We find that disallowance u/s. 40(a)(ia) on account of short deduction of tax at source was made in assessment year 2010-11. The Tribunal following the decision rendered by the Hon ble Calcutta High Court in the case of Commissioner of Income Tax Vs. S K Tekriwal reported as 361 ITR 432 deleted the disallowance made u/s. 40(a)(ia) on short deduction of tax. Following the parity of reasons the disallowance made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid section. The Explanation 3 is actually a sunset clause ending on 31.03.2012 vide Finance Act, 2012. The Ld. CIT(Appeals) ignoring the submissions of the assessee applied the said Explanation to the case of the assessee without giving into the essential core fact whether the assessee is Banking Company or Corporation or otherwise. 20.1 Before us, the Ld. Counsel for the assessee also submitted that they are not Banking Company. He referred to the events of nationalization of Banks that took place in the year 1970 and relevant Acts i.e. Banking Companies (acquisition and transfer of undertakings) Act 1970. 21. It is the case of the Revenue on this proviso that the assessee falls under the Banking Company and therefore, proviso to section 115JB of the Act still applicable to the Banking Company like the assessee. 22. In rebuttal, the Ld. Counsel for the assessee submitted that the assessee is neither the Company leave alone Banking Company and it is a Corporation created by the Special law of Parliament and therefore, the provisions of section 115JB cannot be applicable to the present case of the assessee. In this regard, the Ld. Counsel for the assessee has placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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