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TMI Blog2024 (11) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... the said proceedings before the Ld. CIT(A) but the Ld. CIT(A) had not accepted the case of the assessee and dismissed the appeals. 3. For the sake of convenience, the dispute involved in the other two i.e. A.Y. 2016-17 and 2017-18 are enumerated as follows: 2016-17 Sl. No. Particulars Amount (in Rs. ) 1 Disallowance of bad debts claimed u/s 36(1)(vii) 1225,48,50,405 2 Disallowance of CSR expenditure 2,73,39,000 3 Disallowance of Penalty levied by RBI 5,96,810 4 Disallowance of expenditure u/s 14A 52,87.69,672 5 Restriction of claim u/s 36(1)(viia) to Rs 178.03 crores against the claim of Rs 634.27 456,23,09,625 6 Rejection of claim made u/s 36(1)(viii) 77,86,61,944 7 Disallowance of Depreciation on Investment 325,61.24.113 8 Disallowance of sundry assets written off 1,31.98,076 Total 2142,18,49,645 2017-18 Sl. No. Particulars Amount (in Rs. ) 1 Disallowance of bad debts claimed u/s 36(1)(vii) 1295,07,50,151 2 Disallowance of CSR expenditure 4,97,00,000 3 Disallowance of Penalty levied by RBI 19,13,625 4 Disallowance of expenditure u/s 14A 3,31,88,493 5 Restriction of claim u/s 36(1)(viia) to Rs 246.50 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax (Appeals) failed to appreciate the fact that the provisions of Section 115JB of the Act are not applicable to the appellant. 2.2. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision of the High Courts & Tribunals. 3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in adding various items to arrive at the book-profit which are beyond the scope of the section. 3.1. The learned Commissioner of Income Tax (Appeals) failed to appreciate the fact that the various items added to the book-profit are not covered by the Explanation to Section 115JB. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed." AY 2016-17 "1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in law in disallowing the CSR expenditure incurred by the Bank amounting to Rs. 2,73,39,000/- by holding that the expenditure on CSR activities is not an allowable expenditure u/s 37 post amendment made to Section 37 which is appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the various items added to the book-profit are not covered by the Explanation to Section 115JB. For all these and other grounds, which may be urged at the time of hearing, the appellant prays that its appeal be allowed." AY 2017-18 "1. The order of the learned Commissioner of Income Tax (Appeals) is bad in law and against the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) erred in law in disallowing the CSR expenditure incurred by the Bank amounting to Rs. 4,97,00.000/- by holding that the expenditure on CSR activities is not an allowable expenditure u/s 37 post amendment made to Section 37 which is applicable from AY 2015-16. 2.1. The learned Commissioner of Income Tax (Appeals) failed to appreciate the fact that the provisions of Section 135 of the Companies Act, 2013 are not applicable to the Appellant Bank. 2.2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that where expenditure has been incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, such expenditure would meet the grounds of commercial expediency and accordingly, such expenditure would be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns and consequently, the other disallowances by treating the assessee as a company and added the same to the book profits is also not correct and filed a paper book of case laws in support of his argument. The Ld.AR also brought to our notice that the other issues disputed in the assessment years 2016-17 and 2017-18 are also covered by the orders of the Tribunal as well as the Hon'ble Gujarat High Court and prayed to allow the appeals. The Ld.DR relied on the order of the lower authorities and prayed to dismiss the appeals. 8. We have heard the arguments of both the sides and perused the materials available on record. 9. Firstly, we will take up the issue of applicability of section 115JB to the assessee bank since it involves in all the 3 assessment years. 10. The first dispute relates to the applicability of section 115JB of the Act. Insofar as the assessee bank is concerned, it is not in dispute that it is a public sector bank came into existence during the year 1969 by way of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and in the said Act, the assessee bank was termed as corresponding new bank. 11. We have perused the Special Bench order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO as well as the Ld.CIT (A) had confirmed the following additions made to the book profit u/s. 115JB of the Act by holding that such provisions / written off would get covered under clause (i) to Explanation 1 of section 115JB of the Act. Sl. No. Particulars Amount (in Rs) 1. Bad debts written off 2,58,26,390 2. Sundry assets written off 20,74,636 3. Provision for NPA 367,77,05,141 4. Provision for restructured accounts 13,04,66,000 5. Diminution in value of investment on shifting 77,07,91,951 Total 460,68,64,118 15. The additions made to the book profits are based on the premise that the assessee is a company liable to be assessed u/s 115JB of the Act. In the earlier paragraphs, we have discussed about the applicability of section 115JB to the assessee and we hold that the said provision would not be applicable to the assessee since the assessee is a public sector bank and not a company registered under the provisions of the Companies Act, 1956 and governed under the provisions of the Banking Regulations Act, 1949. The above said disallowances were made based on the notion that the assessee is a company liable to be computed the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of business". There is no dispute that the expenses in question are not incurred under the aforesaid statutory obligation. For this reason also. as also for the basic reason that the Explanation 2 to Section 37(1) comes into play with effect from 1st April 2015. we hold that the disabling provision of Explanation 2 to Section 37(1) does not apply on the facts of this case." 18. Further, the Coordinate Bench of this Tribunal also considered the issue in ITA No. 3300/Bang/2018 dated 01.12.2021 in the case of Hanumantha Rao vs. ACIT in which the Coordinate Bench has followed the earlier order of the Coordinate Bench and extracted the findings given in the earlier order and allowed the ground raised by the assessee, which is as follows "19. Thus, it is evident that the disallowance is restricted to the expenses incurred by the assessee under a statutory obligation u/s. 135 of the Companies Act, 2013 and there is thus now a line of demarcation between the expenses incurred by the assessee on discharging corporate social responsibility under such a statutory obligation and under a voluntary assumption of responsibility. As for the former, the disallowance under Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as allowable expenditure for AY 2016-17 and 2017-18. 20. The other dispute raised by the assessee is the penalty imposed by the Reserve Bank of India for the deficiencies in exchange of notes and coins/remittances sent to RBI for operations of currency chest etc. which is a civil liability under the RBI Act and therefore allowable expenditure u/s. 37 of the Act and therefore the assessee claimed the same as an allowable expenditure u/s. 37 of the Act. 21. We have also perused the order of the Mumbai Bench on this issue in ITA No. 3394 & 3849/Mum/2019 dated 09.02.2021 wherein the Mumbai Bench had considered the issue in detail and relied on the judgment of the Hon'ble Bombay High Court in ITA No. 4117 of 2010 in the case of CIT vs. Stock & Bond Trading Company and gave the following finding and allowed the case on the assessee. "12. We have heard the rival submissions and perused the relevant materials on record. In M/s Stock & Bond Trading Company (supra) one of the questions was whether the Tribunal was justified in deleting the additions made by the AO under provisions to section 37(1) being penalty imposed by the National Stock Exchange on the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities, e.g., BSE, NSE, CDSL, NSDL and SEBI, etc. In the regular course of the business of the assessee-company, certain procedural non-compliance are not unusual, for which the assessee is required to pay some fines or penalties. These routine fines or penalties are 'compensatory' in nature; they are not punitive. These fines are generally levied to ensure procedural compliances by the concerned persons. Only those payments, which have been made by the assessee for any purpose which is an 'offence' or which is 'prohibited by law', shall alone would be hit by the Explanation to section 37. Thus impugned amount of penalty was allowable as deduction." 12.1 In the instant case, as recorded by the AO the assessee has claimed expenses on account of penalty of Rs. 15,00,000/- imposed by the RBI u/s 47A of the Banking Regulation Act, 1949 and Rs. 94,200/- for noncompliance of guidelines on customer service, guidelines in respect of exchange of coins and small de-nomination notes and mutilated notes. The ratio laid down in the decisions mentioned at para 12 is squarely applicable to the instant case instead of the decision in ANZ Grindlays Bank (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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