TMI Blog2024 (3) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure of any kind referred to u/s. 135 of the Companies Act, 2013 i.e., corporate social responsibilities expenses, w.e.f. assessment year 2015-16. Although, the assessee has relied upon the decision of Gujarat Narmada Valley Fertilizer and Chemicals Ltd [ 2019 (8) TMI 1288 - GUJARAT HIGH COURT ] but in our considered view, said judgments were rendered before insertion of Explanation (2) to section 37 of the Act and thus, the ratio laid down by the Karnataka High Court and also Hon ble Gujarat High Court is not applicable to the facts of the present case. Thus we are of the considered view that the assessee is not entitled for deduction towards CSR expenses and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee. Disallowance of ESOS expenses and enhancement of disallowance of ESOS expenses - Addition on the ground that in case of ESOP, the whole idea of treating differential value of shares as expenses is based on the misconception and thus, the question of allowing deduction towards difference between market price and exercise price does not arise - HELD THAT:- When there is no ambiguity in computation of expenditure de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the purpose of Income tax Act and claimed that it has investments under one category and followed cost or market price whichever is lower, which is different from valuation of securities for the purpose of books which is as per RBI guidelines. Thus AO is erred in making additions towards disallowance of depreciation on investments and thus, we direct the Assessing Officer to delete additions made towards disallowance of depreciation on investments. Disallowance of interest u/s. 40(a)(ia) - non-deduction of tax at source u/s. 194A - appellant has failed to comply with provisions of section 197A(1A), 197A(1B) 197A(1C) - as claimed by the Ld. Counsel for the assessee, interest payment to trust and institutions are exempt u/s. 11 12, then it is for the declarants to obtain necessary certificates u/s. 197 of the Act, from the Assessing Officer and produce before the appellant s bank for compliance - HELD THAT:- Since, income of trust and associations is exempt u/s. 11 12 of the Act, unless otherwise said exemption was either withdrawn or not granted by the authorities, in our considered view, this aspect needs to be verified by the Assessing Officer in light of averments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit balance in the provision for bad and doubtful debts account in respect of rural advance. Additions u/s. 36(1)(vii) r.w.s. 36(2)(v) - We have dealt with the issue of deduction towards provision for bad and doubtful debts u/s. 36(1)(viia) of the Act and deduction for write off of actual bad debt u/s. 36(1)(vii) of the Act in previous paragraph and held that while allowing deduction for actual write off of non-rural debts, same need not be adjusted against credit balance in provision for bad and doubtful debts account. Therefore, we direct the Assessing Officer to verify the facts with regard to amount claimed by the assessee and in case, the AO found that what was claimed as deduction is pertains to write off of non-rural debts, then the same should be allowed as deduction without adjusting against credit balance in provision for bad and doubtful debts account created u/s. 36(1)(viia) of the Act. Deduction u/s. 36(1)(vii) of the Act towards write off of non-rural debts - This ground also pertains to deduction towards actual write off of non-rural debts as claimed by the assessee. If the claim of the assessee is correct, then the same needs to be considered for the purpose of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal advances made by rural branches of appellant bank as against the aggregate average advances made by rural branches of appellant bank as outstanding at the end of the financial year and thus, we direct the Assessing Officer to consider aggregate average advances outstanding at the end of the relevant financial year for the purpose of computing deduction u/s. 36(1)(viia) of the Act. Further, to compute correct amount of deduction, the matter has been set aside to the file of the Assessing Officer with a direction to reconsider the issue in light of our discussions given herein above and also the details that may be filed by the assessee. Addition u/s. 14A r.w.r. 8D - contention of the appellant that the appellant had not incurred any expenditure to earn exempt income - HELD THAT:- No reason was assigned by the AO for rejecting the explanation of the assessee. In the circumstances, ratio of the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT ] is squarely applicable. We direct the Assessing Officer to delete the addition made u/s. 14A of the Act. Additions made towards Excess cash, Stale drafts and Branch suspense accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Shri V. Durga Rao, Hon ble Judicial Member And Shri Manjunatha. G, Hon ble Accountant Member For the Assessee : Shri. S. Anandhan, CA Smt. R. Lalitha, CA For the Department : Shri. Nilay Baran Som, CIT ORDER PER MANJUNATHA. G, ACCOUNTANT MEMBER: This bunch of six cross appeals filed by the assessee and, as well as the revenue are directed against separate, but identical orders of the learned Commissioner of Income Tax (Appeals)-1, Trichy, all dated 18.02.2019, 06.03.2019 and 12.03.2020 and pertains to assessment years 2015-16, 2016- 17 2017-18. Since facts are identical and issues are common, for the sake of convenience these appeals were heard together and are being disposed off, by his consolidated order. ITA No: 1120/Chny/2019 for assessment year 2015-16: 2. The assessee has raised the following grounds of appeal: 1. The order of the Commissioner of Income Tax (Appeals) is bad in law contrary to the facts circumstances that are prevalent in the case of the Appellant. 2. The learned Commissioner (Appeals) erred in confirming the disallowance of non-rural bad debts write off of Rs. 21,58,73,485/-. 2.1. The learned Commissioner (Appeals) failed to appreciate the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner (Appeals) failed to consider the fact of that the institutions whose income is wholly exempt from tax under section 10 or 11 12 and Individuals whose taxable income is below the threshold limit, are not required to pay tax, are outside the provisions of section 201. 7.2. The Learned Commissioner (Appeals) failed in not considering that the interest paid has been reflected in the Form 26AS of the Depositors. 7.3. The Learned Commissioner (Appeals) failed in not considering the first proviso to section 201 of the Income Tax Act, 1961. 7.4. The Learned Commissioner (Appeals) erred in sustaining the disallowance without appreciating the fact that the AO has passed the order without giving sufficient time as requested by the Appellant for submission of evidence. 8. The Learned Commissioner (Appeals) erred in confirming the QIP expenses of Rs. 1,75,43,308/- by holding that the same is not covered u/s. 35D. 8.1. The Learned Commissioner (Appeals) erred in holding that there was no extension of existing undertaking. 8.2. The Learned Commissioner (Appeals) failed to appreciate the fact that the proceeds of QIP is for augmentation of business by opening more branches of the Bank an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts return of income for the assessment year 2015-16 on 31.01.2018. The assessment has been completed u/s. 143(3) r.w.s. 147 of the Act and determined total income of Rs. 575,49,22,469/- by making the following additions: 1 Excess provision made in respect of rural advances u/s. 36(2)(v) claimed as deduction on account of Non rural bad debts written off u/s. 36(1) (vii) 21,58,73,485 2 Disallowance of u/s. 14A 2,05,86,520 3 Corporate Social Responsibility expenses 3,53,83,891 4 Expenses on shares alloted to employees on ESOS 7,61,57,839 5 Net profit on investment 29,66,29,150 6 Disallowance u/s. 40(a)(ia) 16,59,07,839 7 1/5th of shares issues expenses under QIP mode u/s. 35D 1,75,43,306 8 Excess depreciation on ATM 7,55,27,480 9 Accrued interest on NPA 62,94,991 10 Accrued interest on government securities 12,92,76,203 11 Amount assessed/s.41(1) and 28(iv) 2,31,45,410 12 Disallowances of Sec. 36(1) (vii) 10,61,97,071 13 Disallowances of Sec. 36(1) (vi) (a) 100,11,07,15 14 Disallowance of excess claim of provision for bad and doubtful debts 43,62,86,255 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with the provisions of section 135 of the Companies Act, 2013 and which have no connection with the business of the assessee is only disallowable as per the Explanation (2) to section 37 of the Act. The CSR expenses incurred by the assessee by voluntarily in the business is not covered by the Explanation and hence, allowable. In this regard, he relied upon the decision of Hon ble Karnataka High Court in the case of CIT vs Info Technologies Ltd reported in [2014] 260 ITR 714 and also decision of Gujarat High Court in the case of Gujarat Narmada Valley Fertilizer and Chemicals Ltd reported in [2020] 422 ITR 164 (Guj). 5.2 The ld. DR, on the other hand supporting the order of the Assessing Officer and the ld. CIT(A) submitted that, Explanation (2) to section 37 of the Act, inserted by the Finance Act, 2014 w.e.f. 01.04.2015 clarified that, any expenditure incurred by the assessee on the activities relating to corporate social responsibilities referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. 5.3 We have heard both the parties, perused materials available on record and go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses of Rs. 7,61,57,839/-, mainly on account of lapsed options which have not been exercised by the employees. The Assessing Officer has discussed the issue at length in light of decision of ITAT Special Bench in the case of Biocon Ltd vs DCIT [2013] 25 ITR (Trib) 602 (Bang), and held that differential between the market price and exercise price is allowable as deduction u/s. 37(1) of the Act, but said deduction should be allowed equally over the vesting period. Therefore, worked out proportionate disallowance based on allotment price, market price and claim of expenses by the assessee and accordingly, disallowed sum of Rs. 7,61,57,839/- . On appeal, the ld. CIT(A) enhanced the assessment and disallowed total expenditure claimed by the assessee amounting to Rs. 33,84,00,839/-, on the ground that in case of ESOP, the whole idea of treating differential value of shares as expenses is based on the misconception and thus, the question of allowing deduction towards difference between market price and exercise price does not arise. Aggrieved by the ld. CIT(A) order, the assessee is in appeal before us. 6.1 The Ld. Counsel for the assessee, submitted that this issue is squarely cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple is explained by Special Bench of ITAT in the case of Biocon vs DCIT (supra). Although, the Assessing Officer in principle accepted ESOS expenses is deductible u/s. 37(1) of the Act and also followed the decision of Biocon Ltd vs DCIT (Supra), in computing disallowance, but arrived at difference amount of deduction. In our considered view, when there is no ambiguity in computation of expenditure deductible towards ESOS expenses and also said deduction has been computed in light of SEBI guidelines, the Assessing Officer is erred in re-computing allowable expenses by adopting his own formula is incorrect. Since, the appellant has deducted difference between market price and the price at which the option is exercised by the employees is deductible expenditure u/s. 37(1) of the Act, in our considered view the Assessing Officer is completely erred in re-computing the deduction without assigning proper reasons. Further, this principle is supported by the decision of Hon ble Madras High Court in the case of CIT vs PVP Ventures Ltd [2013] 001 ITR OL 307 (Mad), where it has been clearly held that the difference between the market price and the price at which the option is exercised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the order of the Assessing Officer and ld. CIT(A) submitted that, the bank has classified securities into three categories, HTM securities which are carried at acquisition cost unless the cost is more than the face value. Securities Available For Sale (AFS) are valued at quarterly or at more frequent intervals. Similarly, securities Held for Trading (HFT) will be valued at monthly or at more frequent intervals. The Assessing Officer, has followed RBI guidelines and instruction no. 17/2008 dated 26th Nov, 2008 and worked out disallowances. Therefore, the argument of the assessee that the issue is settled by the decision of Hon ble High Court in appellant s own case is incorrect. 7.3 We have heard the rival parties, perused material available on record and gone through orders of the authorities below. The assessee has classified all its securities as stock in trade for the purpose of Income Tax Act, which provides a separate investment trading account and offers the net result of the trading account to tax. The stock in trade was valued at lower of cost or market value. However, for the purpose of books of accounts, the bank classifies securities as per RBI norms and also valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in light of provisions of section 197A(1A), 197A(1B) 197A(1C) of the Act, in light of Form 15G 15H submitted by the depositors and held that, wherever the appellant has furnished no deduction certification in respect of trust/societies, the Assessing Officer has accepted the claim of the assessee and excluded interest amount of Rs. 14,51,95,445/-. Further, wherever the interest payment excludes maximum amount not chargeable to tax for the relevant assessment year, the Assessing Officer has not accepted Form 15G 15H furnished by the appellant bank and disallowed 30% of interest u/s. 40(a)(ia) of the Act and made additions of Rs. 16,59,07,839/-. 8.1 The Ld. Counsel for the assessee, Shri. S. Anandhan, CA, submitted that, wherever the appellant filed Form 15G 15H in respect of trust/associates/societies, whose income is exempt u/s. 11 12 of the Act, then the appellant bank is not required to deduct TDS and this principle is supported by the decision of Hon ble Punjab Haryana High Court in the case of CIT vs Canara Bank [2016] 387 ITR 229. He, further submitted that in case of individual and HUF, the appellant has already filed Form 15G 15H and proved that the declarants income is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to prove its claim. Similarly, in respect of remaining interest disallowance of Rs. 3,72,35,522/-, it is the claim of the appellant s bank that in most of the cases, the deductees have already filed return of income and paid income tax on interest payment made by the bank. This fact also needs to be verified by the Assessing Officer, with necessary evidences that may be filed by the appellant. Therefore, we are of the considered view that this issue needs to go back to the file of the Assessing Officer for further verification and thus, we set aside the order of the ld. CIT(A) on this issue and restore the issue back to the file of the Assessing Officer with a direction to reexamine the claim of the assessee, in light of any evidences that may be placed by the assessee before the Assessing Officer to prove their case. 9. The next issue that came up for our consideration from ground no. 8 of assessee appeal is disallowance of QIP expenses of Rs. 1,75,43,308/- . The Assessing Officer has disallowed 1/5th of the share issue expenses under QIP mode amounting to Rs. 1,75,43,308/-, on the ground that QIP expenses is not eligible for deduction u/s. 35D of the Act, as no extension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing business like setting up new branches, ATMs etc. In case, the appellant is able to prove its argument that the QIP proceeds has been utilized for extension of existing business, then expenditure incurred for QIP is allowable as deduction. The Assessing Officer is directed to verify the claim and decide the issue in accordance with law. 10. The next issue that came up for our consideration from ground no. 2, 3, 9 10 of assessee s appeal is deduction u/s. 36(1)(vii) and 36(1)(viia) of the Act, in respect of provision for bad debts and bad debts actually written off in the books of accounts of the assessee. The Assessing Officer has discussed the issue in Para 1 of Page 2 to 4 and Para 12 of Pages 28 to 43 of assessment order. The facts with regard to the impugned disputed are that, the assessee is a scheduled bank and has claimed deduction u/s. 36(1)(viia) of the Act, in respect of provision for bad and doubtful debts. The assessee had also claimed deduction u/s. 36(1)(vii) of the Act, towards actual write off of bad debts in light of decision of Hon ble Supreme Court in the case of Vijaya Bank vs CIT [2010] 323 ITR 166 SC. The assessee has claimed deduction u/s. 36(1)(vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 36(1)(vii) of the Act and explanation provided thereunder and also provisions of section 36(1)(viia) r.w.s. 36(2)(v) of the Act. The Tribunal had also discussed the issue in light of explanation (2) inserted by Finance Act, 2013 w.e.f. 01.04.2014 in light of decision of Hon ble Supreme Court in the case of Catholic Syrian Bank vs CIT [2012] 343 ITR 270, and held that for the purpose of deduction towards write off of non-rural debts u/s. 36(1)(vii) of the Act, there is no need to adjust credit in the account of provision for bad and doubtful debts created in terms of section 36(1)(viia) of the Act. The Ld. Counsel for the assessee, has argued the issue at length in light of the decision of Karnataka Bank Ltd vs DCIT (Supra) and held that, even after insertion of Explanation (2) to section 36(1)(vii) of the Act, the ratio laid down by the Hon ble Supreme Court in the above case is not nullified, in so far as, deduction towards provision for bad and doubtful debts u/s. 36(1)(viia) and 36(1)(vii) of the Act, in respect of rural advance given by branches. He, further submitted that, clause (a) of section 36(1)(vii) of the Act is a beneficial provision provided to banks operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for bad and doubtful debts and write off of bad debts in respect of rural advances should be separately considered without any adjustment in respect of write off of non-rural debts. In this regard, he has filed a detailed submission which has been reproduced as under: Written submission on bad debt write off claimed u/s. 36(1)(vii) The assessee has claimed deduction of bad debt write off (Non- rural) as irrecoverable u/s. 36(1)(vii) of the IT Act in the computation of income as under: AY Amont (Rs. In Cr) 2015-16 173.71* 2016-17 137.58 2017-18 228.49 * In the revised computation, claim was Rs. 66.19 Cr and Rs. 152.12Cr; Total being Rs. 218.32 Cr. This deduction was claimed only in the statements of Computation of Income for respective Assessment Years and not in the audited financial accounts prepared and published for those financial years. Legal Provisions: While computing the income referred in section 28 of the IT Act, actual bad debt written off is an allowable deduction and dealt with in Section 36. Section 36 of the IT Act deals with other deductions subject to certain conditions. In order to claim those deductions, the assessee has to prepare their accounts in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debt write off as irrecoverable u/s. 36(1)(vii) of the IT Act as deduction while computing the total income. The arguments are advanced in the form of question and answers for ease of understanding. 1. What happened in the case of assessee? Ans: Assessee is a scheduled bank incorporated in India. Hence, they can claim deduction in respect of any provision for bad and doubtful debts by debiting the same in the P L account as per clause (a) of section 36(1)(viia) of the IT Act. It will be allowed as a deduction subject to certain limits prescribed under the act. The assessee has availed the benefit provided under 36(1)(viia) of the IT Act. The assessee has further availed deduction of bad debts written off u/s. 36(1)(vii) without debiting the same into the provision created u/s. 36(1)(viia). 2. Whether the provision for bad and doubtful debt was debited into the P L a/c was allowed as a deduction? Ans: Yes. It has debited the Provision for bad and doubtful debts under the head provisions and contingencies in the profit and loss account. The Provision for bad and doubtful debts has been added back in computation of Income and claimed deduction u/s. 36(1)(viia). As per clause (a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee Limit Clause (a) Scheduled bank incorporated in India, non-scheduled bank, co-operative bank other than primary agri. Credit society Not exceeding 7.5% of total income AND 10% of aggregate average advances made by rural branches of that bank Clause (b) Bank incorporated under the laws of outside country Foreign banks Not exceeding 5% of total income Clause (c) public finance institution or State Finance Corporation or State Industrial Investment Corporation Not exceeding 5% of total income Clause (d) a non-banking financial company Not exceeding 5% of total income 8. Under which category assessee bank claimed this deduction of provision for bad and doubtful debts? Ans: Being a scheduled bank, incorporated in India, they claimed deduction as per clause(a) of section 36(1)(viia). 9. Can they claim deduction of any bad debt or part thereof, which is written off as irrecoverable as per section 36(1)(vii)? Ans: Yes. They can claim bad debt write off as irrecoverable, subject to provision of sub section (2) of section 36 of the IT Act. Provided, in case of any assessee being a scheduled bank, where they already claimed deduction of 'provision for bad and doubtful debt under clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pared and published by the bank. 14. What is the significance of Explanation-1 to section 36(1)(vii)? Ans: It was introduced in Finance Act 2001 w.r.e.f 1.4.1989 to plug the tax payers from claiming both provisions for bad debts as well as bad debt write off as an allowable deduction simultaneously of the same bad debt. Explanation 1. For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee. 15. What is the significance of Explanation-2 of section 36(1)(vii)? Ans: The provision of section 36(1)(vii) allows deduction of bad debt write off as irrecoverable in the accounts of the assessee. Section 36(1)(viia) allows deduction of any provision for bad and doubtful debt made by various class of assessee from (a) to (d) discussed above. Some of the judicial pronouncements gave findings that section 36(1)(viia) allows deduction of bad debts in respect of NPAs of rural branches and section 36(1)(vii) of the IT Act allows deduction of bad debts of non- rural NPA of the respective bank. However, it is not correct. To clear the doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This principle has been established in the case of Pragathi Grameena Bank Ltd vs CIT 91 taxmann.com 343(KAR)(2018) which has been affirmed by Supreme Court. 18. Where such reversal of provision for NPA can be found? Ans: It can be found in the annual report itself under the head movement of provision for NPA. The opening balance of provision, current year provision for NPA, write back of excess provision, write off of provision and closing balance etc are duly disclosed. It is as under: Movement of provision for NPA (Rs. In Cr) - as per Annual report AY Opening balance Provision made during the year Write off/write back of excess provision Closing balance 2014-15 76.41 148.50 129.14 95.77 2015-16 95.77 165.00 157.74 103.33 2016-17 103.33 205.00 121.36 186.67 2017-18 186.67 251.50 167.86 251.66 The relevant pages of the annual report are placed at P.No. 8,13,18. 19. What about prudential write off or technical write off? Ans: These are prudential norms prescribed as per RBI norms. The technical write off or prudential write off or head office write off is the amount of NPAs written off at head office level but these debts remain outstanding at the branch level. Hence in books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the appellant who claimed deduction u/s. 36(1)(vii) of the IT Act, by reducing substantial amount of bad debt write off in the computation of income after closure of audit. It is for them to prove that they have followed section 36(1) (vii) read with sub section (2) of section 36 and also section 36(1)(viia) rightly. Every assessee claiming deduction of bad debt write off as irrecoverable in the accounts have to scrupulously follow section 36(1)(vii), 36(1)(viia)and section 36(2). Legislature in its wisdom has rightly placed every provision, explanations at right place and it has to be scrupulously followed while claiming deductions. 5. Appellant relied upon the decision of Hon'ble ITAT in the case of Karnataka Bank Ltd v. DCIT in ITA No.1907/Bang/2018 dated 26.05.2022. With due respect, it is submitted that this decision has not laid down the law correctly. While reading the decision, the counsel of the appellant conveniently omitted some of the findings advanced by the DR that is recorded at para 7.1. The DR had argued that mere provision for NPA cannot be considered as write off u/s. 36(1)(vii) as held by Supreme Court in the case of Southern Technologies vs ACIT (352 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se satisfies the ingredients of Section 36(1)(vii) as well as section 36(2) of the Act. D. Summary and Prayer: The decision of Apex Court in the case of Southern Technologies vs JCIT (352 ITR 577) and PCIT v. Khyati Realtors (P.) Ltd [2022] reported in 141 taxmann.com 461, dated 25th August, 2022 laid down the law with clear cut analysis. Para-17 of Khyati realtors is sum and substance of bad debt write off contemplated in section 36(1)(vii) of the IT Act. The decision of SC in the case of Khyati Realtors is placed at P.No.32-43 of the paper book. Assessee is a scheduled bank falling under clause-(a) of section 36(1)(viia) of the IT Act. They are entitled for any provision for bad and doubtful debt made by them in the books of accounts, not exceeding the limits prescribed therein. It was already claimed. No other bad debt was actually written off as irrecoverable as per section 36(1)(vii) of the IT Act in the annual accounts published. Hence the claim of bad debt write off in computation of income is not true and correct. It is prayed that the grounds raised by the appellant bank may be dismissed. 10.3 We have heard both the parties, perused material available on record and gone th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a clue from the decision of Hon ble Supreme Court in the case of Catholic Syrian Bank vs CIT (Supra), the ITAT Bangalore Bench in the case of Karnataka Bank Ltd vs DCIT (supra), has dealt the issue at length in light of provisions of section 36(1)(vii) r.w.s. 36(2)(v) of the Act and also provisions of section 36(1)(viia) of the Act, and held that write off of non-rural bad debts should be considered only against provision for bad and doubtful debts in respect of non-rural advances as per section 36(1)(viia) of the Act. In other words, the credit balance in provision for bad and doubtful debts in respect of rural advance only needs to be adjusted against write off of rural bad debts in terms of section 36(1)(viia) of the Act, without considering write off of non-rural debts. The relevant findings of the Tribunal are as under: 7.7 We heard the Ld D.R and perused the record. Now the core question that arises is whether the bad debts relating to non-rural branches are also required to be first debited to PBDD a/c and then the excess amount over and above the balance available in PBDD alone could be allowed as bad debts u/s. 36(1)(vii) of the Act. 7.8 The provisions of sec. 36(1)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iia) allow separate deduction and they are independent provisions. The Supreme Court further held that the clause (viia)(a) applies only to rural advances. So the bad debts relating to non-rural advances need not be deducted against the PBDD allowed under clause (a) of sec.36(1)(viia) of the Act. The Hon ble Supreme Court, inter alia, also observed as under:- 31 It was neither in dispute earlier nor is it disputed before us, that the assessee-bank is maintaining two separate accounts, one being a provision for bad and doubtful debts other than provision for bad debts in rural branches and another provision account for bad debts in rural branches for which separate accounts are maintained . Referring to the above said observations, the revenue has taken the view that the Hon ble Supreme Court has rendered its decision on the assumption that the banks would be maintaining two separate PBDD a/c, viz., one for rural branches and another one for non-rural branches. 7.10 It is possible that all banks may not be maintaining two separate accounts, as observed by the Hon ble Supreme Court. Hence there was an apprehension in the minds of revenue with regard to the effect of the decision rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause and Chapter VIA). (iv) Clause (d) is applicable to Non-banking financial company from AY 2017-18. The Hon ble Supreme Court in the case of Catholic Syrian Bank (supra) has held that the PBDD allowed under clause (a) of Sec. 36(1)(viia) refers to rural advances only. In fact the expression rural branches finds place in clause (a) only. It can be noticed that the reference to rural branches is not there in clause (b) to (d). Generally, the foreign banks may not have rural branches. However, such kind of banks, financial institutions, NBFC etc. are also eligible to claim deduction towards PBDD u/s. 36(1)(viia) of the Act under clauses (b) to (d). In view of the decision rendered in the case of Catholic Syrian bank, it is possible that the assessees covered by clause (b) to (d) may contend that the bad debts written off by them need not be adjusted against PBDD allowed u/s. 36(1)(viia) of the Act, since the bad debts relate to non-rural debts . Accordingly, we are of the view that the Explanation 2 has been inserted in order to bring the assesses covered by clauses (b) to (d) within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. Hence, in our view, advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the credit balance in the provision for bad and doubtful debts account made undersection 36(1)(viia) of the Act. However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances. Section36(1)(viia) of the Act contains three sub-clauses, i.e. sub-clause (a), subclause (b) and sub-clause (c) and only one of the subclauses i.e. sub-clause (a) refers to rural advances whereas other sub-clauses do not refer to the rural advances. In fact, foreign banks generally do not have rural branches. Therefore, the provision for bad and doubtful debts account made under clause (viia) of section 36(1) and referred to in proviso to clause (vii) of section 36(1) and section 36(2)(v) applies to all types of advances, whether rural or other advances. It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rural advances and urban advances and if the actual write off of debt relates to urban advances, then, it should not be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of sec. 36(1)(viia) applies to rural advances only. If the Parliament wanted to undo the above said interpretation given by the Hon ble Supreme Court, it should have brought amendment in clause (a) to sec. 36(1)(viia) to make its intention clear that the clause (a) shall apply to both rural and non-rural advances. Since there is no such amendment, the interpretation given by Hon ble Supreme Court that clause (viia)(a)applies to rural advances only shall remain intact. Explanation 2 inserted in sec. 36(1)(vii), in our view, does not override the above said interpretation given by Hon ble Supreme Court. 7.14 In the Memorandum explaining the purpose of introducing Explanation -2 in Sec. 36(1)(vii), it has been acknowledged that only the clause (a) refers to rural branches . It has also been stated that the foreign banks do not have rural branches. The assesses covered by clause (b) to (d) may not be having rural branches. Hence, the memorandum explains as under with regard to the decision rendered by Hon ble Supreme Court in the case of Catholic Syrian Bank (supra):- However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supra), which has been further strengthened by the decision of Hon ble Delhi High Court in the case of Oriental Bank of Commerce vs PCIT (supra), we are of the considered view that, the bad debts written off relating to non-rural advances is not required to be adjusted against provision for bad and doubtful debts allowed u/s. 36(1)(viia) of the Act and thus, we direct the Assessing Officer to re-compute deduction in respect of write off of non:- rural debts without any adjustment to credit balance in the provision for bad and doubtful debts account in respect of rural advance. 10.6 In so far as additions of Rs. 21,58,73,485/- u/s. 36(1)(vii) r.w.s. 36(2)(v) of the Act, we find that the Assessing Officer has made additions on the ground that excess provisions made in respect of rural advances has been claimed as non-rural bad debts written off u/s. 36(1)(vii) of the Act. On the other hand, it was the argument of the Ld. Counsel for the assessee that, write off of non-rural bad debt u/s. 36(1)(vii) of the Act is exclusive for provision for bad and doubtful debts u/s. 36(1)(viia) of the Act. He further submitted that, to ascertain facts the Assessing Officer may verify with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rural debt or non-rural debt. Therefore, we are of the considered view that, this issue needs to go back to the file of the Assessing Officer for fresh verification. Thus, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to reconsider the issue in light of evidences that may be filed by the assessee and decide the issue in accordance with law in terms of our observation given herein above. 11. The next issue that came up for our consideration from ground no 9 of assessee appeal is addition made by the Assessing Officer towards deduction @20% in respect of income earned from providing long term finance to eligible business u/s. 36(1)(viii) of the Act. The assessee has claimed a deduction of Rs. 32 crores u/s. 36(1)(viii) of the Act, towards profit derived from eligible business. The assessee being a banking company provided long term finance for industrial, agricultural and development of infrastructural facilities in India (called eligible business) and claimed deduction @ 20% on profit from the eligible business. The bank has adopted a method in which cash profit was arrived and proportionate amount was claimed as deduction u/s. 36(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Assessing Officer for verification in light of decision of ITAT, Chennai Benches in the case of Indian Bank vs CIT 2019 (9) TMI 231 ITAT. 11.2 The ld. DR, on the other hand supporting the order of the ld. CIT(A) submitted that the law is very clear in so far as computation of deduction u/s. 36(1)(viii) of the Act and as per said provisions, eligible profit from the business should be computed in terms of provisions of section 30 to 43A of the Act and before any deduction u/s. 36(1)(viii) of the Act. The assessee has adopted a unique method and segregated its business into three divisions and apportioned various expenses, even though various activities carried out by the assessee is one business of banking. Therefore, the Assessing Officer has rightly recomputed deduction u/s. 36(1)(viii) of the Act and their order should be upheld. 11.3 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Provisions of section 36(1)(viii) deals with, any special reserve created and maintained by a specific entity, an amount not exceeding 20% of the profit derived from eligible business computed under the head profit and gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of the Act. In our considered view, when the assessee has not maintained separate books of accounts for eligible business, the method followed by the Assessing Officer to work out profit from eligible business may be one of accepted method for computation of profit and gains from eligible business, because the Assessing Officer has computed percentage of advances given to eligible business out of total advances given by the assessee and also worked out profit from eligible business out of total profit of the assessee for the relevant period. The fact remains that the Ld. Counsel for the assessee claims that the method followed by the assessee has been upheld by the Jurisdictional High Court of Madras in the case of Indian Bank vs DCIT 2019 (9) TMI 231. We find that the Jurisdictional High Court of Madras has considered deduction claimed u/s. 36(1)(viii) of the Act in light of facts of that case and set aside the issue on the ground that both the sides agreed to go back to the Assessing Officer for applying correct principle of computing 20% of the profit derived from eligible business. The Hon ble High Court further observed that in the above case details with regard to the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature. The Assessing Officer has given an example in Page 37 of their order and argued that, if you follow method adopted by the assessee, the assessee may claim deduction under the main provisions of section 36(1)(viia) of the Act on the aggregate outstanding rural advances which remains same throughout the period. Therefore, rejected method followed by the assessee and considered only incremental average rural advance given for the relevant assessment year and then applied 10% for computing eligible deduction. The assessee has computed deduction of Rs. 143,41,26,515/- originally, in the return of income but, subsequently, the claim was reduced to Rs. 95,45,45,298/-. As against this, the Assessing Officer has computed eligible deduction u/s. 36(1)(viia) of the Act at Rs. 43,30,19,357/- and after considering deduction claimed by the assessee at Rs. 143,41,26,515/- disallowed excess claim of Rs. 100,11,07,158/- u/s. 36(1)(viia) of the Act. 12.1 The Ld. Counsel for the assessee, submitted that the assessee has classified rural branches based on the population of 2011 census and if you consider population as per 2011 census, the branches classified by the assessee as rural branc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the assessment year as computed by the Assessing Officer. But, the High Court has remitted the matter back to the file of the Assessing Officer for the purpose of re-computation after considering the fact that the Assessing Officer has not computed deduction based on the documents produced by the assessee. The relevant findings of the Hon ble High Court are as under: 10.2 Similarly, the second issue relating to deduction of Rs. 8.53 crores u/s. 36(1)(viia) with regard to the provision for bad and doubtful debts, is covered by the decision in Principal Commissioner of Income Tax, Jalpaiguri v. Uttarbanga Kshetriya Gramin Bank [(2018) 94 taxmann. Com 90 (Calcutta), in favour of the assessee and the relevant passage of the same is usefully extracted below: 6. Mr. Nizamuddin, learned advocate appeared on behalf of the Revenue and submitted the amended direction made by the Tribunal on the ITO has resulted in the assessee getting double deduction which is not permissible on computation made under Rule 6ABA. He submitted a double deduction in the manner thus obtained by the assessee has not been expressly provided. He relied on a judgment of the Supreme Court in the case of Es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, have been recovered subsequently, it was stated that as the provision claimed was not with reference to any particular debt due to the assessee but on an overall basis, it is not possible to certify that the bad debts claimed as trading loss for deduction u/s. 36(1)(viia) was recovered or not. It was also stated that the assessee would not be able to give age-wise details of outstanding advances for the branches more so for the rural branches with reference to which the deduction was claimed, so as to determine whether any advance of earlier year for which provision was made is still outstanding. 5.4. In other words, the assessee is not in a position to give details of the advances with reference to which the deduction of Rs. 14.99 crores was allowed as per Annexure 2 as deduction under section 36(1)(viia) towards unknown and anticipated trading loss by virtue of mere provision made on ad-hoc basis for bad and doubtful debts and to confirm that these advances were still outstanding as at the end of the previous year relevant to this accounting year. 6.3.1. Therefore due to assessee's inability to relate the provision to any particular advance of a branch, it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to consider the issue in light of the decision of the ITAT, Chennai Benches in the case of Karur Vysya Bank vs CIT (Supra). 12.5 In this view of the matter and considering facts and circumstances of the case and also following the decision of Hon ble High Court of Madras in appellant s own case for earlier years, we are of the considered view, that the Assessing Officer is erred in computing deduction u/s. 36(1)(viia) of the Act, by considering only incremental advances made by rural branches of appellant bank as against the aggregate average advances made by rural branches of appellant bank as outstanding at the end of the financial year and thus, we direct the Assessing Officer to consider aggregate average advances outstanding at the end of the relevant financial year for the purpose of computing deduction u/s. 36(1)(viia) of the Act. Further, to compute correct amount of deduction, the matter has been set aside to the file of the Assessing Officer with a direction to reconsider the issue in light of our discussions given herein above and also the details that may be filed by the assessee. 13. The next issue that came up for our consideration from ground no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Maxopp Investment Ltd vs CIT [2018] 91 Taxman.com 154. 16.1 The ld. DR, Shri. Nilay Baran Som, CIT, submitted that the ld. CIT(A) erred in deleting additions made by the Assessing Officer u/s. 14A of the Act, without appreciating fact that the appellant has made adhoc disallowances u/s. 14A, without considering Rule 8D of I.T. Rules, 1962, even though the Hon ble Supreme Court in Maxopp Investment Ltd vs CIT (Supra) has clearly held in Para 39 of their order that, moment the assessee claims exemption u/s. 10(34) of the Act, towards dividend income received from shareholder as stock in trade, the theory of apportionment of expenditure between taxable and non-taxable income comes into play and thus, depending upon facts of each case, expenditure incurred in acquiring those shares which yielded exempt income will have to be apportioned. 16.2 The ld. AR, on the other hand submitted that this issue has been squarely covered in favour of the assessee by the decision of ITAT Chennai Benches in assessee s own case for assessment years 2012-13 2015-16 [2019] 74 ITR (Trib) 644, where the Tribunal by following the decision of Coordinate bench of ITAT, Chennai bench in the case of Karur V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant that the appellant had not incurred any expenditure to earn exempt income. The Assessing Officer had not given any findings as to how the claim of the assessee- bank that no expenditure was incurred to earn the exempt income was incorrect. In the absence of this finding resort to the provisions of rule 8D of the Income Tax Rules cannot be made as held by the Hon ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, (2018) 402 ITR 640. Therefore this ground of appeal filed by the assessee is allowed. Accordingly, this ground of appeal stands allowed in favour of the assessee . Similar view was taken up by the Hon ble Delhi High Court in the case of CIT vs. Taikisha Engineering India Ltd, 370 ITR 338 and PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd, 105 taxmann.com 274. The Hon ble Delhi High Court had firmly held that mere rejection of the explanation of the assessee per se cannot be accepted. This decision of Delhi High Court in the case of Moonstar Securities Trading and Finance Co. (P) Ltd, was affirmed by the Hon'ble Supreme Court in the case of dismissal of SLP in PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd, 105 taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nai Benches in the case of Karur Vysya Bank Ltd vs CIT in ITA NO. 2349/Chny/2016, order dated 29.03.2017. 18.1 The ld. DR, submitted that the ld. CIT(A) erred in appreciating fact that unclaimed money, Stale drafts and cheques reflected in the balance sheet for more than three years becomes income of the assessee by applying the principle of limitation and thus, the Assessing Officer has rightly made additions towards Excess cash, Stale drafts and Branch suspense account as income of the assessee u/s. 41(1) 28(iv) of the Act and their order should be upheld. 18.2 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that this issue is squarely covered in favour of the assessee by the decision of Hon ble High Court of Madras in appellant s own case reported in [2020] 118 Taxman.com 96 (Mad), where the Hon ble High Court of Madras by following the decision of Hon ble High Court of Karnataka in the case of CIT vs Raddi Sahakara Bank Niyamitha [2017] 88 Taxmann.com 560, held that Excess cash, Stale drafts and Branch suspense account cannot be treated as income of the assessee, because as per RBI guidelines/notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract by its constituents. As it appears from the facts of the case, the amounts were depleted by adjustments made from time to time. The Commissioner of Income-tax (Appeals) found that the assessee wrote back the amounts to its profit and loss account because the various trading parties did not claim these amounts for a long time. The amounts represented credit balances in the name of the trading parties and was taken to its profit and loss account. The Commissioner of Income-tax (Appeals) held that these amounts were not revenue receipts but were of capital nature. The provisions of section 41(1) were not attracted in the facts of this case because the assessee's liability to pay back the amounts to its customers had not ceased. The Tribunal agreed with this view.' (under lining is by us) 19. The Tribunal adverting to the above ruling has rightly deleted the sum of Rs. 58,38,581 added by the assessing authority by holding it as unsustainable in law. 5. Having perused the record, we are in respectful agreement with the aforesaid decision of the Division Bench of this court and we do not find any reason to take a different view of the matter and in view of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entation of business by opening more branches of the Bank and hence the QIP expenses are allowable u/s. 35D. 5. The Learned Commissioner (Appeals) erred in confirming the disallowance of Rs. 48,03,464/- u/s. 36(1) (viii) of the Income Tax Act, 1961. 5.1. The Learned Commissioner (Appeals) failed to consider that the issue involved is classification of advances and not computation of income for deduction under this section. 5.2. The similar addition made earlier years was allowed the Learned Commissioner (Appeals) for the AY 2012-13 AY 2014-15. 6 The learned Commissioner (Appeals) erred in confirming disallowance of the non-rural bad debts write off of Rs. 137,58,65,624/- 6.1. The learned Commissioner (Appeals) failed to appreciate the fact that the amount claimed was write off effected by the bank. 6.2. The Learned Commissioner (Appeals) erred in allowing the amount by considering the. amount debited to Profit Loss account. 6.3. The Learned Commissioner (Appeals) erred in the method adopted to arrive at the allowable amount of deduction under Sec 36(1)(vii). 6.4. The Learned Commissioner (Appeals) erred in relying on the Explanation 2 to Sec 36(1)(vii) which is not applicable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from ground no. 3 of assessee appeal is disallowance of CSR expenses amounting to Rs. 10,45,09,355/-. An identical issue has been considered by us in appellant s own case for assessment year 2015-16 in ITA No. 1120/Chny/2019. The facts are similar for this year also. The reasons given by us in preceding paragraph no. 5 to 5.4, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we are inclined to uphold the findings of the ld. CIT(A) and sustain additions made by the Assessing Officer towards disallowance of CSR expenses. Accordingly, the ground of the assessee is dismissed. 23. The next issue that came up for our consideration from ground no. 4 of assessee appeal is disallowance of QIP expenses of Rs. 1,75,43,308/-. An identical issue has been considered by us in appellant s own case for assessment year 2015-16 in ITA No. 1120/Chny/2019. The facts are identical for the year under consideration. The reasons given by us in preceding paragraph no. 9 to 9.1, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we direct the Assessing Officer to delete additions made towards disallowance of QIP expenses. 24. The next i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not want to press this ground. Thus, ground no. 10 of assessee appeal is dismissed as not pressed. 27. In the result, appeal filed by the assessee for assessment year 2016-17 is partly allowed for statistical purposes. ITA NO. 1419/CHNY/2019 AY 2016-17: 28. The revenue has raised the following grounds of appeal: 1. The order of the learned CIT(A) is bad in law and against the facts and circumstance of the case. 2. The Ld. CIT(A) failed to appreciate that the assessee had itself made adhoc disallowance u/s. 14A of the Act in the return of income and the AO rightly worked out the correct disallowance by applying Rule 8D of Income Tax Rule. 3. The Ld. CIT(A) erred to notice that the AO had rightly restricted the deductions u/s. 36(1)(vii) 36(1)(viia) of the Act to the credit balance of the provision for bad and doubtful debts made for rural branches as against the credit balance of provision for bad and doubtful debts made for all branches. 4. The Ld. CIT(A) erred to notice that the Assessing Officer has rightly invoked the provisions of sec 41(1) and 28(iv) of the Act with regard to unclaimed money, stale drafts and cheques reflected in the balance sheet for more than three year b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudication. 33. The assessee has raised the following grounds of appeal: 1. The order of the learned Commissioner of Income Tax (Appeals) is against law and facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in law in disallowing a sum of Rs. 278,34,98,114/- u/s. 36(1)(vii) of the Act. 2.1 The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 113,31,51,493/- being bad debts written off in relation to accounts classified as NPA for the first time. 2.1.1. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance despite holding that the claim of the appellant can be considered as write off. 2.1.2. The learned Commissioner of Income Tax (Appeals) erred in holding that write off amount has to be adjusted against the provision allowed u/s. 36(1)(viia) in view of Explanation 2 to Section 36(1)(vii) and only excess over and above the provision is to be allowed as deduction u/s. 36(1)(vii). 2.1.3. The learned Commissioner of Income Tax (Appeals) erred in relying on the Explanation 2 to Section 36(1)(vii) which is not applicable to the facts of this case. 2.1.4. The learned Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ia) of the Act being 30% of the interest paid to individuals. 4.1 The learned Commissioner of Income Tax (Appeals) failed to appreciate that Individuals whose taxable income is below the threshold limit, are not required to pay tax, are outside the provisions of Section 201 of the Act. 4.2 The learned Commissioner of Income Tax (Appeals) erred in not considering the first proviso to Section 201 of the Act. 4.3 The learned Commissioner of Income Tax (Appeals) erred in sustaining the disallowance without appreciating the fact that the learned Assessing Officer had passed the order without giving sufficient time as requested by the appellant for submission of evidence. 4.4 Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) failed to appreciate that once Form 15G / Form 15H is obtained, no disallowance u/s. 40(a)(ia) can be made. 5. The learned Commissioner of Income Tax (Appeals) erred in law in disallowing ESOS expenses of Rs. 13,83,71, 181/-. 5.1 The learned Commissioner of Income Tax (Appeals) failed to appreciate that disallowance was made on the lapsed options for which the bank has not made any claim. 5.2 The learned Commissioner of Income Tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) failed to appreciate that share issue expenditure incurred for QIP issue is covered under Section 35D of the Act. 9. In the facts and circumstances of the case and in law, the appellant be allowed a claim towards education cess secondary higher education cess amounting to Rs. 5,52,48,210/- paid by it during the previous year 2016-17 in the computation of total income. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed. 34. The first issue that came up for our consideration from ground nos. 2 to 2.2 of assessee appeal is deduction u/s. 36(1)(vii) of the Act, towards write off of non-rural bad debts and disallowance of provision for bad and doubtful debts u/s. 36(1)(viia) of the Act. An identical issue has been considered by us in appellant s own case for assessment year 2015-16 in ITA No. 1120/Chny/2019. The facts are identical for the year under consideration. Therefore, for similar reasons, we direct the Assessing Officer to allow deductions towards write off of non-rural debts u/s. 36(1)(vii) of the Act, without any adjustment to credit balance in provision for bad and doubtful debts account created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re identical for the year under consideration. The reasons given by us in preceding paragraph no. 6 to 6.4, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we direct the Assessing Officer to delete additions made towards disallowances of ESOS expenses and delete enhancement made by the ld. CIT(A). 38. The next issue that came up for our consideration from ground no. 6 of assessee appeal is disallowance of CSR expenses of Rs. 8,65,92,170/-. An identical issue has been considered by us in appellant s own case for assessment year 2015-16 in ITA No. 1120/Chny/2019. The facts are similar for this year also. The reasons given by us in preceding paragraph no. 5 to 5.3, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we are inclined to uphold the findings of the ld. CIT(A) and sustained additions made by the Assessing Officer towards disallowance of CSR expenses. Accordingly, the ground of the assessee is dismissed. 39. The next issue that came up for our consideration from ground no. 7 of assessee appeal is depreciation on investments. An identical issue has been considered by us in appellant s own case for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that Hon'ble Supreme Court in the case of Maxopp Investment Ltd 402 ITR 640 (SC) agreed with applicability of section 14A of the Act based on theory of apportionment of expenditure between taxable and non-taxable income as held in the case of Walfort Share Stock Brokers (P) Ltd, when shares are held as stock in trade. 4. The CIT(A) failed to appreciate the decision of ITAT, Chennai in the case of M/s City Union Bank Limited Vs ACIT dated 09/7/2019 rendered in ITA Nos. 1129 1130/CHNY/2018 and 1315 1316/CHNY/2018, wherein the ITAT 'C' Bench rejected the contention of the assessee that provisions of section 14A of the Act cannot be invoked, when the securities are held as stock-in-trade following the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd vs Commissioner of Income tax [2018] 402 ITR 640 (SC). 5. The CIT(A) erred in deleting the addition made u/s. 40(a)(ia) of the Act on account of non-deduction of TDS on payment of interest to Trust and Institutions. 6. The CIT(A) failed to note that sub-section (1B) of section 197A restricts filing of declaration in Form 15G whose income exceed the maximum amount which is not chargeable to income tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red these funds to the Depositor Education and Awareness Fund . 14. The CIT(A) failed to appreciate the decision of ITAT, Chennai in the case of City Union bank vs JCIT reported in ITA Nos. 1671, 1801,1802, 1803,1804,2034 2035/Mds/2014 dated 28/12/2016 wherein the ITAT treated the unclaimed balance as the Revenue receipts irrespective of the fact that the bank is a custodian and allowed the ground of revenue relying on the judgment of Hon'ble Kerala High Court in the case of Catholic Syrian Bank Ltd Vs Assistant Commissioner of Income tax, 349 ITR 0569. 15. The CIT(A) failed to appreciate the decision of Hon'ble High Court of Kerala in the case of South Indian Bank Ltd v CIT, Trichur reported in 279 CTR 179 (Kerala), where the Hon'ble High Court held that excess cash in branches of assessee-bank that was to be refunded only if any customer would claim, is to be added to income under section 41(1) of the Act. 16. The CIT(A) erred in allowing the claim of the assessee towards provision of bad and doubtful debts u/s. 36(1)(viia) of the Act. 17. The CIT(A) failed to appreciate that the concept of considering the incremental Average rural advance was upheld by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2017-18 in ITA No. 672/Chny/2020, where the issue has been set aside to the file of the Assessing Officer with a direction to reexamine the issue in light of our discussions given hereinabove for the assessment year 2015- 16. Therefore, the grounds of appeal filed by the revenue has also been set aside to the file of the Assessing Officer with a direction to the Assessing Officer to reexamine the issue in light of our discussions given hereinabove for the assessment year 2015-16 and decide the issue for the impugned assessment year in accordance with law. 47. The next issue that came up for our consideration from ground nos. 7 to 9 of revenue appeal is deletion of depreciation @ 60% on ATMs. The assessee has claimed 60% depreciation on ATMs, on the ground that ATMs is akin to computer and computer software. The Assessing Officer, has disallowed excess depreciation on the ground that ATMs comes under normal depreciation of 15% as applicable to plant and machinery. On appeal, the ld. CIT(A) deleted additions made by the Assessing Officer by following the decision of Hon ble Supreme Court in the case of CIT vs State Bank of Patiala [2016] 70 Taxmann.com 36 (SC). 47.1 The ld. DR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by the ld. CIT(A) to delete additions made towards excess depreciation claimed on ATMs and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. 48. The next issue that came up for our consideration from ground nos. 10 to 12 of revenue appeal is deletion of additions made towards interest on non-performing assets. The Assessing Officer has made additions towards interest accrued, but not due of NPA on the ground that NPA should be classified as per Rule 6EA of I.T. Rules, 1962, which says account can be treated as non-performing asset only, if the interest is overdue for more than 6 months. 48.1 The ld. DR, submitted that, the assessee has claimed NPA as per RBI guidelines, which is contrary to Income-tax Rules and thus, the Assessing Officer has rightly made additions towards interest on NPA and their order should be upheld. 48.2 The Ld. Counsel for the assessee, supporting the order of the ld. CIT(A) submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai Benches in appellant s own case for assessment year 2012-13 2014-15 reported in [2019] 74 ITR 644, where the Tribunal by foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the revenue. 49. The next issue that came up for our consideration from ground no 16 to 18 of revenue appeal is deduction u/s. 36(1)(vii) and 36(1)(viia) of the Act, towards actual write off of bad debts pertains to non-rural debts and deduction towards provision for bad and doubtful debts in terms of section 36(1)(vii) of the Act, for rural debts. An identical issue has been considered by us in appellant s own case for assessment year 2015-16 in ITA No. 1418/Chny/2019. The reasons given by us in preceding paragraph no. 17, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we direct the Assessing Officer to decide the issues in accordance with out directions given on this issue in assessee s appeal for the assessment year 2015-16 and recomputed disallowance for this assessment year. 50. In the result, appeal filed by the revenue for assessment year 2017-18 is partly allowed for statistical purposes. 51. As a result, appeals filed by the assessee in ITA NOs: 1120, 1121/Chny/2019 for assessment years 2015-16 2016- 17, ITA No: 672/Chny/2020 for assessment year 2017-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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