SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(3)(1),MUMBAI, MUMBAI

ITA 2971/MUM/2023Status: DisposedITAT Mumbai10 October 2025AY 2017-1822 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

On the issue of disallowance under Section 36(1)(vii), the Tribunal noted that a Coordinate Bench in the assessee's own case for AY 2005-06 had decided in favour of the assessee, and the Department had not appealed further, thus reaching finality. The Tribunal, following this precedent and the assessee's submission that there was no credit balance in the provisions account, held that the proviso to Section 36(1)(vii) was not applicable. The Revenue's ground was dismissed. Regarding the disallowance of amortized rent, the Tribunal noted that the issue had been decided against the assessee in earlier years, but the assessee had filed an appeal before the Bombay High Court, which had admitted a substantial question of law. The assessee filed a declaration under Section 158A. The Tribunal, considering the pendency before the High Court and the Section 158A declaration, set aside the issue to the AO for reconsideration. On the issue of Section 14A disallowance, the Tribunal noted that the appeals for AYs 2014-15, 2015-16, 2017-18, and 2018-19 were identical to AY 2016-17, and its decision in AY 2016-17 would apply mutatis mutandis. The judgment does not explicitly detail the holding on Section 14A for AY 2016-17, but the operative part indicates partial allowance for the assessee. The Tribunal dismissed the Revenue's appeals and partly allowed the Assessee's appeals.

What were the facts?

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench heard multiple appeals filed by the Revenue and the assessee, Small Industries Development Bank of India (SIDBI), for Assessment Years (AY) 2014-15 to 2018-19. The appeals challenged orders passed by the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi. The Assessing Officer (AO) had made several disallowances, including for bad debts under Section 36(1)(vii), amortized rent, and under Section 14A. The CIT(A) provided relief on bad debts and restricted the Section 14A disallowance but confirmed the disallowance of amortized rent. The Tribunal decided to hear all appeals together, using AY 2016-17 as the lead case. SIDBI is a financial institution for MSMEs.

What were the issues?

The Tribunal had to decide on several common issues raised by both the Revenue and the Assessee. The Revenue contended that the CIT(A) erred in deleting the addition made by the AO under Section 36(1)(vii) without considering the credit balance in the provision for bad and doubtful debts under Section 36(1)(viia)(c) (Revenue's Issue (i)). The Revenue also argued that the CIT(A) erred in restricting the disallowance under Section 14A by relying on a judgment for an earlier AY, ignoring the applicability of Rule 8D for the current AYs (Revenue's Issue (ii)). Furthermore, the Revenue questioned the CIT(A)'s allowance of deduction under Section 36(1)(viii) without appreciating that it was calculated after deductions under other clauses of Section 36(1), including Section 36(1)(viia)(c) (Revenue's Issue (iii)). The Assessee, on the other hand, contended that the CIT(A) erred in confirming an ad-hoc disallowance under Section 14A over and above the amount already disallowed by the assessee (Assessee's Issue (i)). The Assessee also argued that the CIT(A) erred in confirming the AO's disallowance of the proportionate amortized amount of lease premium paid to MMRDA (Assessee's Issue (ii)).

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 36(1)(viia)(c),Section 14A,Section 36(1)(viii),Section 250,Section 158A,Section 143(3)

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Cases cited in this judgment(8)Show list

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Heard together (7 matters)

I.T.A. No. 2943/Mum/2023
I.T.A. No. 2894/Mum/2023
I.T.A. No. 2893/Mum/2023
I.T.A. No. 3160/Mum/2023
I.T.A. No. 3173/Mum/2023
I.T.A. No. 2971/Mum/2023
I.T.A. No. 2970/Mum/2023

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE JUSTICE (RETD.) C V BHADANG, PRESIDENT & MS PADMAVATHY S, AM I.T.A. No. 2894/Mum/2023 (Assessment Year: 2015-16) I.T.A. No. 3160/Mum/2023 (Assessment Year: 2017-18)

Dy. Commissioner of Income Tax, Circle-3(3)(1), Room No. 609, Aayakar Bhavan, M.K. Road, Mumbai- 400020.

Appellant)

Small Industries Development Bank of India, SME Development Centre, Vs. C-11, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051 PAN: AABCS3480N : Respondent) I.T.A. No. 2970/Mum/2023 (Assessment Year: 2018-19)

Small Industries Development Bank of India 2 ITA 2943-2894-2893-3160-3173/M/2023 & 2971-2970/M/2023 Small Industries Development Bank of India Dy. Commissioner of Income Tax, Circle-3(3)(1), Room No. 609, Aayakar Bhavan, M.K. Road, Mumbai- 400020.

Small Industries Development Bank of India, SME Development Centre, Vs. C-11, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051 PAN: AABCS3480N Appellant) : Respondent)

Re

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