TMI Blog2022 (3) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... view that provision allowed u/s 36(1)(viia) of the Act would apply to non-rural advances also. An identical issue has been examined by the Hyderabad Bench of the ITAT in the case of State Bank of Hyderabad [ 2015 (8) TMI 836 - ITAT HYDERABAD] wherein the Tribunal had not accepted the above said view expressed by the CIT(A). The Bangalore Bench of the Tribunal in assessee s own case for assessment year 2013-2014 [ 2022 (1) TMI 124 - ITAT BANGALORE] by following the Hyderabad Bench order of the Tribunal in the case of State Bank of Hyderabad (supra), had set aside the view expressed by the CIT(A) that proviso to section 36(1)(vii) which requires adjustment of bad debts against the provisions allowed u/s 36(1)(viia) would apply to non-rural advances also.nce, we direct the A.O. to delete the disallowance made by the CIT(A). It is ordered accordingly. Applicability of provisions of Section 115JB to assessee bank - HELD THAT:- The Tribunal in assessee s own case for assessment year 2013-2014 [ 2022 (1) TMI 124 - ITAT BANGALORE] had restored the issue to the files of the CIT(A). The CIT(A) was directed to examine whether the assessee being a banking company would be liable for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 14A r.w. Rule 8D 64,59,79,000 2. Disallowance u/s 36(1)(viia) 936,90,65,332 3. Disallowance u/s 36(1)(va) 1008,00,06,232 4. Disallowance u/s 40(a)(ia) 87,91,40,567 5. Provision for wage revision 240,00,00,000 Total disallowance / addition 2337,41,91,131 3. The Assessing Officer also assessed tax payable u/s 115JB of the I.T.Act at ₹ 757,13,40,716 after making several additions to the book profits. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the first appellate authority. The CIT(A) allowed the appeal of the assessee in respect of following issues:- Sl. No. Particulars Amount in Rs. 1. Disallowance u/s 14A r.w. Rule 8D 64,59,79,000 2. Disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the book profits in respect of the following:- Sl. No. Particulars Amount in Rs. 1. Provision for funded interest term loan (FITL) 238,07,60,397 2. Diminution in fair value of restructured accounts 40,82,96,342 3. Provision for fraud 3,91,56,786 4. Provision for premises 2,98,65,014 5. Provision for blocked differences 28,03,857 6. Loss on account of claim (suits against the bank) 1,98,044 8. Aggrieved by the order of the CIT(A), the Revenue and the assessee has filed these cross appeals before the Tribunal. We shall first adjudicate the assessee s appeal. ITA No.1885/Bang/2018 (assessee s appeal) 9. In this appeal, the assessee has raised five grounds and one additional ground. We shall adjudicate the grounds as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn case for assessment year 2009-2010 and 2010-2011 in ITA No.681 955/Bang/2012 (order dated 13.06.2014). 11.3 The learned Departmental Representative was duly heard. 11.4 We have heard rival submissions and perused the material on record. It has been fairly admitted by the learned AR that the issue in question is covered against the assessee by the order of the Tribunal in assessee s own case for assessment year 2009-2010 in ITA No.681/Bang/2012. It was also submitted that the order of the Tribunal was affirmed by the Hon ble jurisdictional High Court and the assessee has filed SLP before the Hon ble Apex Court and the same is pending adjudication. 11.5 In view of the submission of the learned AR, we reject ground 2 in assessee s appeal. Deduction u/s 36(1)(vii) of the Act (Ground 3) 12. The assessee-bank had written off bad debts amounting to ₹ 1,024.60 crore, out of which debts written off by rural branches was ₹ 16.60 crore and the same was adjusted against the provision claimed u/s 36(1 )(viia) and balance ₹ 1,008 crore was claimed as deduction u/s 36(1 )(vii). The Assessing Officer relying on the judgment of Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 36(1)(viia) need not be adjusted against the provision created under that section and they should be allowed in full u/s 36(1)(vii). Alternatively, it is contended that since up to 31/03/2013, deduction was allowed only for rural debts, it is only rural debts that are to be adjusted against the opening balance. Hence, the non-rural debts written off during the year 2013- 14 can be claimed as deduction in full. However, the CIT(A) observed that the reliance placed by the assessee on the judgment of Hon'ble Supreme Court in the case of Catholic Syrian Bank is misplaced. The CIT(A) opined that Hon'ble Supreme Court never held that deduction allowed u/s 36(1)(viia) for Banks having both rural and non-rural branches is in respect of rural advances only, irrespective of the provision made in books of accounts. Further the CIT(A) opined that aforesaid decision was delivered on the assumption that Banks would maintain two separate provision for bad and doubtful debts (PBDD) account in respect of rural branches and non-rural branches. He was of the view that insertion of explanation 2 to Section 36(1)(vii) was only c1arificatory in nature and provision allowed u/s 36(1)(viia) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abad bench of ITAT in the case of State Bank of Hyderabad vs. DCIT (ITA No.450/Hyd/2015, ITA No.498 and 499/Hyd/2015 dated August 14, 2015), wherein the Tribunal has not accepted the above said view expressed by Ld CIT(A). The relevant observations made by the Tribunal are extracted below:- 19. We have considered the rival submissions and perused the materials on record as well as the orders of revenue authorities. As could be seen from the finding of AO as well as ld. CIT(A), only reason for which claim of deduction for ₹ 209,07,50,831 representing actual write off of bad debts relating to non-rural advances u/s 36(1)(vii) was denied is, assessee having already availed deduction u/s 36(1)(viia), it is not eligible to claim deduction u/s 36(1)(vii) as it will amount to double deduction. In our view, both AO as well as ld. CIT(A) have committed fundamental error by mixing up provisions of sections 36(1)(vii) and 36(1)(viia). While 36(1)(vii) speaks of actual write off of bad debts in the books of account, section 36(1)(viia) even allows provision made towards bad and doubtful debts in respect of rural advances to the extent of provision made in the books of account subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been introduced to protect the Revenue, but it would be meaningless to invoke the same where there was no threat of double deduction. 27. As per this proviso to cl. (vii), the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the amount of the provision which had already been allowed under cl. (viia). The proviso by and large protects the interests of the Revenue. In case of rural advances which are covered by cl. (viia), there would be no such double deduction. The proviso, in its terms, limits its application to the case of a bank to which cl. (viia) applies. Indisputably, cl. (viia)(a) applies only to rural advances. Concurring with the aforesaid majority view, Hon'ble CJI, S.H. Kapadia, as the then he was, held as under: 2. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation or taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the objection raised by the Revenue. Firstly, CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off would be limited to the excess of the amount written off over the amount of the provision allowed under clause (viia). Thus, the proviso to clause (vii) stood introduced in order to protect the Revenue. It would be meaningless to invoke the said 1 proviso where there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-rural advances also) is hereby set aside. Hence, we direct the A.O. to delete the disallowance made by the CIT(A). It is ordered accordingly. 12.5 In the result, ground 3 is allowed. APPLICABILITY OF PROVISIONS OF SECTION 115JB OF THE ACT (GROUND 4) 13. The assessee-bank had not computed book profit and accordingly not calculated MAT. It was contended that it was under the belief that the assessee-company being a public sector bank is not a company under Companies Act, 1956 as well as Banking Regulations Act, 1949. Therefore, as such provisions of Section 115JB of the Act does not apply to the assessee. However, the Assessing Officer held that provisions of Section 115JB of the Act are applicable to the bank. 13.1 Aggrieved, the assessee filed appeal to the first appellate authority. Before the first appellate authority it was contended that even amended section 115JB of the Act does not apply to the bank as it was of the view that (i) it does not prepare profit and loss account as per the provisions of the Companies Act, 1956 and (ii) Section 211 of the Companies Act, 1956 does not apply to them as they do not fall under the definition of Banking Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of banking company , provisions of sec.211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh. 13.6 In view of the co-ordinate Bench order of the Tribunal in assessee s own case for assessment year 2013- 2014, we restore this issue to the files of the CIT(A). The CIT(A) shall follow the directions contained in the Tribunal order for assessment year 2013-2014 and shall afford a reasonable opportunity of hearing to the assessee before a decision is taken on the issue. It is ordered accordingly. 13.7 In the result, ground 4 is allowed for statistical purposes. ADDITION TO THE BOOK PROFIT U/S 115JB OF THE ACT (GROUND 5) 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, it is clear that the A.O. has recorded the satisfaction and has rejected the assessee s disallowance u/s 14A of the Act while filing the return of income (the satisfaction can be inferred indirectly). The learned AR also fairly admitted that the matter can be restored to the files of the CIT(A) for de novo consideration. The Tribunal in assessee s own case for assessment year 2013-2014 had restored the issue of disallowance u/s 14A of the Act to the files of the CIT(A). The relevant finding of the Tribunal in this regard reads as follows:- 9.2 We heard the parties and perused the record. It is not clear as to whether the assessee had voluntarily disallowed the sum of ₹ 9,24,123/- while filing return of income, since it is stated in the reply dated 28.01.2015 given by the assessee to the AO, which is extracted in paragraph 1.4 of the assessment order, that the assessee is aggregable for a disallowance of ₹ 9,24,123/- as mentioned in its submission dated 13.1.2015. In fact, the Ld CIT(A), at one point, records that the assessee contended that no expenditure was incurred to earn tax free income, but without prejudice to the above said contention, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and the assessee having not deducted tax at source, the sum claimed amounting to ₹ 87,91,40,567 was disallowed u/s 40(a)(ia) of the I.T.Act. 18.1 Aggrieved, the assessee filed an appeal to the first appellate authority. The CIT(A) following the order of the Bangalore Bench of the Tribunal in the case of Corporation Bank Limited in ITA No.1264 and 1352/Bang/2013 for assessment year 2011-2012 deleted the disallowance made by the A.O. It was held by the CIT(A) that there is no TDS liability on the assessee when payments are made to NPCI, and hence, the disallowance made u/s 40(a)(ia) of the Act is uncalled for. 18.2 Aggrieved, the Revenue has filed this appeal before the Tribunal. The learned DR relied on the Assessing Officer s order. 18.3 The learned AR, on the other hand, submitted that the issue in question is covered by the order of the Tribunal in assessee s own case for assessment year 2013-2014 (supra). 18.4 We have heard rival submissions and perused the material on record. The Tribunal on identical facts in assessee s own case for assessment year 2013-2014 had held that the assessee is not liable for TDS, and hence, the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the files of the CIT(A). It is ordered accordingly. 19.1 In the result, grounds 6 and 9 are allowed for statistical purposes. ADDITION OF PROVISION FOR WAGE ARREARS TO THE BOOK PROFIT (GROUND 7) 20. The CIT(A) had deleted the provision for wage revision amounting to ₹ 240 crore while calculating the book profit u/s 115JB of the Act. 20.1 The Revenue being aggrieved, has raised this issue before the Tribunal. Since the issue of applicability of section 115JB of the Act to the assessee is restored to the files of the CIT(A), we deem it appropriate to restore the issue on merits as regards the additions / deductions for computation of book profit u/s 115JB of the Act also to the files of the CIT(A). It is ordered accordingly. 20.2 In the result, ground 7 is allowed for statistical purposes. GROUNDS 8 AND 10 21. Grounds 8 and 10 are general grounds with regard to the relief granted by the CIT(A) in computing the book profit u/s 115JB of the Act. As mentioned in the earlier paragraphs, since the applicability of section 115JB of the Act to the assessee has been restored to the files of the CIT(A), the general grounds 8 and 10 with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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