TMI Blog2020 (11) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. CIT(A) has restored the issue of disallowance under section 14A r.w.r. 8D of the Act to Assessing Officer to decide the issue in line with the order of Tribunal in assessee s own case for assessment year 2010-11. We observe that the Co-ordinate Bench while adjudicating the issue of disallowance under section 14A r.w.r. 8D of the Act for assessment year 2010-11 in appeal by the assessee [ 2016 (1) TMI 1427 - ITAT MUMBAI ] has in turn followed the order of Tribunal in assessee s own case for assessment year 2008-09, wherein the issue was restored to Assessing Officer with a direction to examine the same afresh. The Tribunal while deciding the appeal of assessee for assessment year 2010-11 was not having the benefit of judgment rendered in the case of Maxopp Investment P. Ltd. (supra). The Tribunal passed the order on 08/01/2016 and the judgment in the case of Maxopp was delivered in February 2018. Even the judgment in the case of Pr.CIT vs. State Bank of Patiala[ 2018 (3) TMI 805 - SUPREME COURT] and Pr.CIT vs. Punjab and Sind Bank[ 2019 (11) TMI 342 - DELHI HIGH COURT] are subsequent to the order of Tribunal. Thus, in the light of the decisions discussed above, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA NO. 1804/MUM/2018, 1805/MUM/2018, 1806/MUM/2018, 1807/MUM/2018, 2227/MUM/2018, 2229/MUM/2018, 2230/MUM/2018, 2228/MUM/2018 - - - Dated:- 27-11-2020 - SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For the Assessee : Shri C. Naresh For the Revenue : Shri Sushil Kumar Poddar ORDER PER BENCH: These four sets of cross appeals by the assessee and Revenue for assessment years 2011-12 to 2014-15. Since the issue raised by the assessee and the Revenue in their respective appeals for the impugned assessment years are identical, these appeals are taken up together for adjudication and are disposed of by this common order. However, for the sake of convenience the cross appeals are decided assessment year wise starting with the appeals for assessment year 2011-12. ITA NO.1804/MUM/2018 AND 2227/MUM/2018 A.Y. 2011-12 2. The assessee in ITA No.1804/Mum/2018 and the Revenue in ITA No.2227/Mum/2018 have assailed the order of Commissioner of Income Tax (Appeals)-2, Mumbai (in short the CIT(A) ) dated 26/12/2017 for the assessment year 2011-12. The assessee in appeal has raised single ground, the same reads as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck to the file of the AO by relying on the decision of Hon'ble Ahmadabad Bench of ITAT dated 30.05.2014 in ITA No. 779/Ahd./2011 ignoring the later decision of the Hon'ble Co-ordinate Bench in assessee's own case for A. Y. 2005-06 in ITA No. 6920/Mum/2013 dated 31.07.2015 wherein the Hon'ble ITAT had decided the issue against the assessee? 7. On the facts and in the circumstances of the case and in law, the ld. CTT(A) erred in holding that the provisions of section 115JB is not applicable to the assessee company, without appreciating the facts of the case. 8. The appellant prays that the order of the Id. CIT(A) on the above ground be set aside and that of the Assessing Officer restored. 9. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. Disallowance u/s.14A r.w.r 8D 4. Shri C. Naresh, appearing on behalf of the assessee submitted that the assessee is a Nationalised Bank. During the period relevant to assessment year under appeal, the assessee earned exempt income from tax free bonds Rs.25,31,56,330/- and dividend Rs.12,14,86,269/- aggregating to Rs.37,46,42,599/-. The assessee made suo-motu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not in accordance with the provisions of section 14A r.w.r.8D of the Act, recomputed the disallowance. The ld. Departmental Representative pointed that the Department in ground No.1 of the appeal has assailed the findings of CIT(A) in restoring the issue of disallowance under section 14A r.w.r. 8D of the Act back to Assessing Officer. The ld.Departmental Representative prayed for sustaining the findings of Assessing Officer. 6. We have heard the submissions made by rival sides and have examined the orders of authorities below. The assessee in appeal has raised solitary ground against the disallowance under section 14A r.w.r. 8D of the Act . The Revenue in ground No.1 of the appeal has impugned the finding of CIT(A) in restoring the issue of disallowance under section 14A r.w.r. 8D of the Act to Assessing Officer. Undisputedly, the assessee has earned tax free income from Bonds and dividend income on shares held as stock-in-trade . The assessee has made suo-moto disallowance of Rs.9,20,164/- under section 14A for earning tax free income. The assessee in appeal has contended that no disallowance under section 14A of the Act is warranted as tax free income has been earned on sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of the decisions discussed above, we hold that no disallowance under section 14A r.w.r. 8D of the Act is warranted where the assessee has earned exempt income on shares/stocks held as stock-in-trade . Consequently, the sole ground raised in appeal by the assessee is allowed and corresponding ground No.1 raised in the appeal by the Revenue is dismissed. 9. In the result, appeal of the assessee is allowed. Bad Debt Written off: 10. The ground No.2 in the appeal of Revenue is against CIT(A) s finding in allowing assessee s claim of deduction of bad debts written off. The assessee has claimed bad debts written off with regard to non-rural branches. The Assessing Officer after examining assessee s claim concluded that as per provisions of section 36(1)(viia), the deduction is available only to the extent of 10% of aggregate average advances made by rural branches and an amount not exceeding 7.5% of the gross total income. The ld. Departmental Representative pointed that the Assessing Officer in assessment order has referred to Board Circular No.464 dated 18/07/1986, wherein it has been clearly explained that the provision under section 36(1)(viia) is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 705). We also notice that the new Explanation 2, which covers both rural and non-rural advances, has been inserted under sec. 36(1)(vii) of the Act by the Finance Act, 2013 w.e.f. 1.4.2014 only and hence it cannot have retrospective effect, since it affects substantive rights of the assessees. Accordingly, we are of the view that there is no reason to interfere with the decision of Ld CIT(A) on this issue . 13.Hence, we are of the opinion that the similar ratio are applicable for this order and the same is squarely covered by the finding of ITA 4842/M/13 further keeping in view the principle of consistency, this issue is decided in favour of assessee and against the revenue. 13. The ld. Departmental Representative has not been able to controvert the findings of Tribunal in assessee s own case for immediately preceding assessment year. No contrary judgment/order or any material distinguishing the facts was placed before the Bench. The CIT(A) by following the decision of Co-ordinate Bench in assessee s own case on same set of facts has allowed the claim of assessee. We find no reason to interfere with the order of CIT(A). The ground No.2 of the appeal is dismissed being w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of recovery of amount written off of rural branches. In scrutiny assessment the Assessing Officer added the aforesaid amount to the total income of the assessee. The CIT(A) following the decision in the case of State Bank of Mysore reported as 33 SOT 7, remitted the issue back to the Assessing Officer with certain directions. The ld. Departmental Representative submitted that CIT(A) has erred in not considering the fact that bad debts written off in respect of rural branches subsequently recovered by the assessee are included in the provisions of doubtful debt claimed under section 36(1)(viia) of the Act. 18. Per contra the ld.Authorized Representative of the assessee submitted that CIT(A) has decided this issue in accordance with the order of Tribunal and has restored this issue to the Assessing Officer with specific directions. 19. Both sides heard, orders of authorities below examined. We find that the CIT(A) after examining the findings of Assessing Officer and the submissions of the assessee held that the issue is covered by the decision of Tribunal in the case of State Bank of Mysore (supra). The CIT(A) restored the issue to the Assessing Officer with direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pointed that the Hon ble Bombay High Court in the case of CIT vs. Union Bank of India in Income Tax Appeal No.1196 of 2013 decided on 16/04/2019, has upheld the findings of the Tribunal for assessment year 2005-06 wherein it was held that the provisions of section 115JB are not applicable to the assessee- Bank. 23. Both sides heard. We find that applicability of provision of section 115JB of the Act on banking company was considered by the Tribunal in assessee s own case in appeal for assessment year 2005-06. The Tribunal held that MAT provisions are not applicable on banking company. The Revenue carried the issue before the Hon'ble Bombay High Court. One of the question of law for consideration before the Hon ble High Court was:- (ii) Whether on the facts and in the circumstances of the case and in law the ITAT is correct in holding that the provision of Section 115JB are not applicable to the assessee Bank? The Hon ble High Court answered the question in affirmative , upholding the order of Tribunal on this issue. The relevant extract of the judgment reads as under:- 16. It can be seen that sub-section (2) of Section 115JB of the Act has now been bifurcated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liens class of companies who under the governing Acts were required to prepare profit and loss accounts not in accordance with the Companies Act, but in accordance with the provisions contained in such governing Act. The earlier dichotomy of such companies also, if we accept the revenue's contention, having the obligation of preparing accounts as per the provisions of the Companies Act has been removed. 18. These amendments in section 115JB are neither declaratory nor classificatory but make substantive and significant legislative changes which are admittedly applied prospectively. The memorandum explaining the provision of the Finance Bill, 2012 while explaining the amendments under Section 115 JB of the Act notes that in case of certain companies such as insurance, banking and electricity companies, they are allowed to prepare the profit and loss account in accordance with the sections specified in their regulatory Acts. To align the Income Tax Act with the Companies Act, 1956 it was decided to amend Section 115JB to provide that the companies which, are not required under Section 211 of the Companies Act, to prepare profit and loss account in accordance with Schedule VI o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. In the result, we hold that sub-section 115JB as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company. We answer the question No.2 in favour of the assessee and against the revenue. In view of this, question of correctness of the order of rectification passed by the Assessing Officer becomes unimportant. Question No.1 is therefore not answered. All the appeals are dismissed. Thus, in the light of above judgment of Hon ble High Court rendered in assessee s own case the ground No.7 of the appeal by the Revenue is dismissed. 24. The Ground No.8 and 9 of the appeal are general in nature and hence, require no adjudication. 25. In the result, appeal of the Revenue is dismissed. 26. To sum up, the appeal of assessee is allowed and the appeal by Revenue is dismissed. ITA NO.1805/MUM/2018 -(ASSESSEE s APPEAL)- A.Y. 2012-13 ITA NO.2229/MUM/2018 -(REVENUE S APPEAL)- A.Y. 2012-13 27. The assessee and the Revenue are in appeal against the order of CIT(A)-2, Mumbai dated 26/12/2017 for the assessment year 2012-13. The assessee in appeal has raised solitary ground assailing the disallowance under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2012-13. 31. The ld. Authorized Representative for the assessee submitted at the Bar that the solitary ground raised by the assessee in its appear is against disallowance under section 14A of the Act i.e. identical to the one raised in assessment year 2011-12 and 2012-13. The Revenue in its appeal has raised 7 grounds that are similar to the grounds raised in assessment year 2011-12 and 2012-13. 32. The ld. Authorized Representative for the assessee submitted that in respect of applicability of provisions of section 115JB of the Act, there was an amendment to sub-section(2) to section 115JB of the Act by the Finance Act, 2012 w.e.f. 01/04/2013. The stand of Revenue is that by way of amendment the banking companies were brought into the fold of MAT provisions. The ld. Authorized Representative for the assessee has filed a detailed written note on applicability of amendment to provisions of section 115JB of the Act to Nationalised Banks. The same is reproduced as under:- 1. Amendment to section 115JB Section 115JB was amended w.e.f AY 2013-14 to include any banking company, insurance company or electricity company for the purposes of the said section. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nking Companies (Acquisition and Transfer of Undertakings) Act, 1970 as a corresponding new bankand hence is not a company under Companies Act. Accordingly, it is submitted that amendment does not apply to appellant. 3.2 Further as clarified by Hon ble ITAT Kolkatta in case of UCO Bank, the amendment only fortifies the stand that provisions of section 115JB are not applicable to appellant. As clearly held in the said decision, the purpose of amendment was to charge to tax u/s 115JB banking companies which are established under Companies Act such as ICICI Bank Ltd., Kotak Mahindra Bank Ltd., etc., and not assesses like appellant who are not companies under Companies Act. 3.3 This is also clear from the memorandum explaining provisions of Finance Act 2002 wherethe amendment was introduced. The memorandum states as under: As per section 115JB, every company is required to prepare its accounts as per Schedule VI of the Companies Act, 1956. However, as per the provisions of the Companies Act, 1956, certain companies, e.g. insurance, banking or electricity company, are allowed to prepare their profit and loss account in accordance with the provisions specified in their regulato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the said section would not arise. In other words if banking company include nationalized banks, the need for defining the term to include nationalized banks would not arise. (d) Section 194N also refers to a banking company including any bank or banking institution referred to in section 51 of Banking Regulation Act. (e) Section 72A and 72AA which provide for carry forward and set off of accumulated losses and unabsorbed depreciation in case of amalgamation also clearly make a distinction between a banking company and other banks like that of appellant. The said section provides for such set off where there is a amalgamation between banking company which are a separate entity with specified banks or banking institutions which are defined to include nationalized banks. Therefore, this section also carves out a distinction between the two types of banks. Further, the recent amendment in section 72AA by Finance Act 2020also fortifies the above distinction. The section has been amended to provide for set off of losses where amalgamation has taken place between nationalized banks which are not companies. The section already provided for set off of unabsorbed depreciation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 1956. The provisions of said section 129/210 of Companies Act, are not applicable to nationalized banks. The Accounts are prepared as per section 10 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and AGM is held as per section 10A of the said Act. Hence, as required in section 115JB, following of same accounting policy, accounting standard and method and rate of depreciation as adopted for preparing accounts which would be laid before AGM under section 129/210 of Companies Act would also fail in case of appellant.Accordingly, the machinery provisions post amendment wouldalso fail which would result in non-applicability of provisions of charging section. Hence, in the absence of any specific amendment in section 115JB to include nationalized banks it is submitted that the provisions of said section cannot be made applicable to appellant. 3.6 This issue is also covered in favour of appellant by decision of Hon ble ITAT Kolkatta in case of Damodhar Valley Corporation for AY 2013-14 in ITA 438/Kol/2017. 33. The ld. Departmental Representative submitted that the ground raised by the assessee in its appeal and the grounds raised by the Revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Bombay High Court in the case of CIT vs. Union Bank of India (supra) while adjudicating the appeal of Revenue for assessment year 2005-06 has also considered the amendment to section 115JB sub-section (2) by the Finance Act, 2012. The Hon ble High Court after considering the amended provisions concluded that there would be absolutely no change in the position as regards applicability of provisions of section 115JB on banking companies post amendment. The relevant extract of the judgment rendered by the Hon ble High Court has already been reproduced in para -23 above. The Revenue has not placed before the Bench any decision contrary to the one referred above. Thus, in the light of the judgment by Honb ble Jurisdictional High Court in assessee s own case we hold that the provisions of section 115JB of the Act does not get attracted in the case, of Nationalised Banks, assessee being the one. The ground No.5 raised by the Revenue is dismissed accordingly. 38. Ground No.6 and 7 of the appeal by the Revenue are general in nature, hence, require no adjudication. 39. In the result, appeal of assessee is allowed and the appeal by Revenue is dismissed. ITA NO.1807/MUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of this sub-section and clause (v) of subsection (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches; 4. From the above amendment which is applicable from AY 2014-15, it is clear that the credit balance in provision for bad and doubtful debts account u/s 36(1)(viia) has to be seen for both rural and non-rural advances. 5. The appellant did not claim any bad debts written off relating to rural advances till assessment year 2013-14. The bad debts written off of only nonrural branches was claimed based on decision of Hon ble Supreme Court in case of Catholic Syrian Bank (343 ITR 270). Hence the construction of provision account u/s 36(1)(viia) in earlier years did not arise. Since this is the first year of claim in respect of rural and non-rural advances, the opening balance will only be nil and accordingly, in the first year entire bad debts written off has to be allowed as deduction u/s 36(1)(vii). 6. In view of above, it is respectfully submitted that the matter need not be remitted back to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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