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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYASHRI SANDEEP SINGH KARHAIL
The present batch of appeals has been filed by the assessee and Revenue challenging separate orders passed under section 250 of the Income- tax Act, 1961 (“the Act”) by the learned Commissioner of Income-tax (Appeals), Mumbai [“learned CIT(A)”], for the assessment years 2013-14 to 2016-17.
Since all these appeals pertain to the same assessee raising similar issues arising out of a similar factual matrix, these appeals were heard together for the sake of convenience and are decided by way of this consolidated order. With the consent of the parties, the appeals for the assessment year 2013-14 are considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals.
./2018 Assessee’s appeal – A.Y. 2013-14
In this appeal, the assessee has raised the following grounds: –
“1A On the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income-Tax - 2(1)(2) ["ACIT) has erred in disallowing Rs.7,77,69,000 /s. 14A of the Income-tax Act, 1961 ("the Act") read with Rule 80(2)ii) towards expenditure incurred in relation to income claimed exempt u/s. 10 without recording objective reasons for dissatisfaction with the claim of the Appellant Bank and the Hon'ble CIT(A) has erred in confirming the said disallowance. The learned ACIT be directed to delete the disallowance made u/s. 14A read with Rule 8D(2)(ii) of Rs.7,77,69,000 and reduce the total income accordingly.
1B Without prejudice to Ground no. 1A above, assuming without accepting that the contentions of the Appellant Bank are not acceptable, then the Appellant Bank prays that the disallowance us. 14A in respect of general and administrative expenses be restricted to 2% of exempt income earned during the year under appeal.
Central Bank of India (A.Y. 2013-14 to 2016-17) 4
2A On the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing provision for wage revision of Rs.100,00,00,000 and the Hon'ble CIT(A) has erred in confirming the said disallowance. The learned ACIT be directed to allow deduction of provision for wage revision of Rs.100,00,00,000 u/s. 37(1) of the Act and reduce the total income accordingly.
2B Without prejudice to Ground no. 2A above, assuming without accepting that the contention of the Appellant Bank is not acceptable, then the Appellant Bank prays that the the provision for wage revision be allowed in the assessment year in which the liability is crystallised and is capable of quantification.
3A. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in invoking the provisions of Sec. 115JB of the Act while determining tax liability. The learned ACIT be directed not to invoke the provisions of Sec. 115JB of the Act in the case of the Appellant Bank and determine the total income and income-tax thereon under normal provisions of the Act only.
3B Without prejudice to Ground no. 3A above, assuming without accepting that Your Honours are of the view that the provisions of Sec. 115JB are applicable to the Appellant Bank's case for the year under appeal, in such case on the facts and in the circumstances of the case and in law:
(i) The learned ACIT has erred in adding back the provision for wage revision of Rs.100,00,00,000 while computing Book Profit u/s. 115JB and the Hon'ble CIT(A) has erred in confirming the said addition without appreciating that the same is an ascertained liability. The Appellant Bank prays that the learned ACIT be directed to delete the addition of provision for wage revision of Rs.100,00,00,000 while computing Book Profit u/s. 115JB and reduce the Book Profit accordingly.
(ii) The learned ACIT has erred in disallowing the bad debts written off of Rs.728,10,48,511 while computing Book Profit u/s. 115JB of the Act and the Hon'ble CIT(A) has erred in confirming the said disallowance. The Appellant Bank prays that the learned ACIT be directed to allow bad debts written off of Rs.728,10,48,511 for computing true and correct Book Profit u/s. 115JB and reduce the Book Profit accordingly.
4. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in disallowing corresponding valuation loss arisen on shifting of securities in earlier Previous Years (which was not claimed in the year of shifting) in the year of sale or transfer in any manner of such securities. The learned ACIT be directed to decrease / increase the profits / (loss), respectively, on sale or transfer in any manner of securities which were shifted in earlier Previous Years by the amount of the corresponding loss on valuation of securities on shifting disallowed in the year of shifting and reduce the total income accordingly.
5. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in enhancing the value of securities shifted from AFS to HTM category and outstanding as on 31-Mar-2013 by Rs.85,03,64,972 and consequently, reversing valuation loss on such HTM securities by Central Bank of India (A.Y. 2013-14 to 2016-17) 5
Rs.85,03,64,972. The learned ACIT be directed to delete the enhancement of Rs.85,03,64,972 in value of securities shifted from AFS to HTM category and outstanding as on 31-Mar-2013 and consequently, delete the addition on account of reversal in valuation loss on such HTM securities. 6. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) be directed not to initiate penalty proceedings u/s. 271(1)(c) of the Act.”
Vide its letter dated 07/01/2020, the assessee filed the following revised and additional grounds of appeal: -
“Without prejudice to Ground no. 3A of the original grounds of appeal contending that the provisions of Section 115JB of the Income-tax Act, 1961 ("the Act") are not applicable to the Appellant Bank for AY 2013-14, the Appellant Bank most respectfully submits the following revised ground no. 3B containing additional ground of appeal in serial no. (ii) below:
3B Without prejudice to Ground no. 3A, assuming without accepting that Your Honours are of the view that the provisions of Section 115/B are applicable to the Appellant Bank's case for the year under appeal, in such case on the facts and in the circumstances of the case and in law:
(i) The learned ACIT has erred in adding back the provision for wage revision of Rs.100,00,00,000 while computing book profit u/s. 115JB and the Hon'ble CIT(A) has erred in confirming the said addition without appreciating that the same is an ascertained liability. The Appellant Bank prays that the learned ACIT be directed to delete the addition of provision for wage revision of Rs.100,00,00,000 while computing book profit u/s. 115JB and reduce the book profit accordingly.
(ii) Additional Ground:
The Appellant Bank prays that the provision for bad and doubtful debts of Rs.1930,20,40,959 debited to Profit and Loss account of the Bank during the FY 2012-13 and simultaneously reduced from the loans & advances appearing on the asset side of the Bank's balance sheet for the year does not constitute a 'provision for diminution in value of asset but amounts to a write-off and accordingly, should not be added back while computing book profit u/s. 115JB. The learned ACIT be directed to delete the addition of provision for bad and doubtful debts of Rs.1930,20,40,959 while computing book profit u/s. 115JB and reduce the book profit accordingly.
(iii) Ground no. 3B (ii) of original appeal renumbered to Ground no. 3B (iii)
WITHOUT PREJUDICE TO GROUND NO. 3B ii) above:
The learned ACIT has erred in disallowing the bad debts written offof Rs.728,10,48,511 while computing book profit u/s. 115JB of the Act and the Hon'ble CIT(A) has erred in confirming the said disallowance. The Appellant Bank prays that the learned ACIT be directed to allow bad debts written off of Rs.728,10,48,511 for computing true and correct book profit u/s. 115JB and reduce the book profit accordingly.”
Central Bank of India (A.Y. 2013-14 to 2016-17) 6
Ground No. 1A raised in assessee’s appeal pertains to the disallowance made under section 14A read with Rule 8D of the Income-tax Rules, 1962 (“the Rules”).
The brief facts of the case pertaining to this issue are that during the year under consideration, the assessee filed its return of income on 28/11/2013, declaring a total income of INR 1147,98,89,311. Subsequently, the assessee filed a revised return of income on 12/03/2015, declaring a total income of INR 1254,53,15,313. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has claimed an amount of INR 27.15 crore as exempt income under section 10 of the Act (INR 24.37 crore - dividend earned on shares/mutual funds and INR 2.78 crore - dividend from subsidiary). It was further observed that the assessee has incurred a sum of INR 16,123.08 crore as interest expense in the year under consideration. Even though the assessee’s primary business is banking, where lending and borrowing constitute the main activity, it was observed that sizable funds were invested, the income from which is exempt. Further, it was noted that the tax- free investments of the assessee are INR 1892.38 crore as on 31/03/2013.
Accordingly, the assessee was asked to explain why the expenses related to the exempt income should not be computed as per section 14A read with Rule 8D of the Rules. In response, the assessee submitted that it has sufficient own funds to make investments in tax-free securities. The assessee also submitted that it has sufficient current deposits to cover the investment in Central Bank of India (A.Y. 2013-14 to 2016-17) 7 tax-free securities, and no interest was paid on current deposits, so interest is not attributable to earning tax-free income. In this regard, the assessee placed reliance upon the decision of the Hon’ble jurisdictional High Court in Reliance Utilities and Power Ltd, reported in 313 ITR 340 (Bom.). The assessee further submitted that since securities are held as stock in trade in the case of a bank, no disallowance should be made under section 14A read with Rule 8D of the Rules.
The Assessing Officer (“AO”), vide order dated 26/03/2015 passed under section 143(3) of the Act, disagreed with the submissions of the assessee and computed the disallowance under section 14A read with Rule 8D as follows, by placing reliance upon the decision of the Special Bench of the Tribunal’s in the case of Daga Capital Management Private Limited and the decision of the Hon’ble jurisdictional High Court in Godrej and Boyce: –
(Rs. in Lakhs) (i) Amount of expenditure directly relating to income 0 which does not form part of Total Income (ii) A X B / C 10149.456 (iii) 0.5% of the average investment in tax free 777.690 instruments Total Disallowance u/s.14A(i) + (ii) + (iii) 10927.146
8. The learned CIT(A), vide impugned order, deleted the addition made under Rule 8D(2)(ii) of the Rules by placing reliance upon the decision of the Hon’ble jurisdictional High Court in CIT v/s HDFC Bank Ltd., reported in [2016] 67 taxmann.com 42 (Bombay HC). However, the disallowance made under Central Bank of India (A.Y. 2013-14 to 2016-17) 8 Rule 8D(2)(iii) of the Rules was upheld by the learned CIT(A). Being aggrieved, the assessee is in appeal before us.
Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal while deciding a similar issue in assessee’s own case in Central Bank of India for the assessment it 2019-20, vide order dated 25/08/2023, observed as follows: –
“8. We have considered the submissions of both sides and perused the material available on record. The dispute raised by the assessee is limited to disallowance of expenditure under section 14A read with Rule 8D in respect of income exempted under section 10 of the Act. As per the assessee, the securities are held by it in the ordinary course of its business and the profits and gains on sale/transfer of such securities are offered to tax while computing the income under the head “profits and gains from business or profession”, therefore such securities constitute stock in trade of assessee’s business. No dispute has been raised by the Revenue as regards the aforesaid submission. The assessee further submitted that since the exempt income earning securities are held by it as stock in trade, therefore, disallowance of expenditure under section 14A of the Act cannot be made.
9. We find that while deciding a similar issue in PCIT v/s Punjab National Bank, [2022] 449 ITR 468 (Del.), the Hon’ble Delhi High Court dismissed the appeal filed by the Revenue and upheld the findings of the Tribunal in deleting the disallowance made under section 14A read with Rule 8D, by observing as under:-
“15. The Appellant in the present appeal has also challenged the deletion of the disallowance under rule 8D(2)(ii) of Rs. 17,48,97,348/-. The said disallowance was deleted by the CIT (Appeals) vide order dated 28th June, 2017. The CIT (Appeals) noted that this issue was also covered by the order of the ITAT in the case of Respondent in Assessment Year 2009-10. It was noted that in the said Assessment Year the Tribunal had observed that no part of the borrowed funds were utilised by the Respondent for making investments yielding tax free income. It was also observed that the Assessing Officer had not brought on record any nexus between the borrowed funds and amounts invested by the Respondent. The Tribunal, therefore, held that the disallowance made by the Assessing officer under rule 8D(2)(ii) of the Rules was not permissible. The learned Counsel for the Appellant has not disputed the aforesaid facts and on this ground additionally, no challenge can be maintained to the deletion of the disallowance made under this Rule.
16. The learned counsel for the Appellant has contended that the decision of the Tribunal deleting the addition of Rs. 1,58,00,000/- made by the JAO under section 14A of the Act read with rule 8D(iii) is incorrect since the said amount was offered for disallowance suo moto by the Respondent.
17. In this regard, the Tribunal has observed that the facts of the Respondent in the present appeal are similar to the order passed by another Bench of the Tribunal in the case of Nice Bombay Transport (P.) Ltd. v. Asstt. CIT [2019] 103 taxmann.com
Central Bank of India (A.Y. 2013-14 to 2016-17) 9
338/175 ITD 684 (Delhi - Trib.) wherein issue relating to Section 14A of the Act read with Rule 8D of the Rules in respect of shares held in stock has been discussed and adjudicated in favour of the Assessee therein.
Learned counsel for Appellant has submitted that the facts of the assessee in the case of Nice Bombay Transport (P.) Ltd. (supra) are distinct from the case at hand, however, no submissions have been made with respect to the said 'distinguishing facts'. On the contrary, it is noted that the Supreme Court has held in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154/254 Taxman 325/402 ITR 640 that in cases where the main purpose for investing in shares was to hold the same as stock-in-trade, the expenditure incurred by the Respondent shall be permissible to be deducted from its gross income. The relevant paragraph of the judgment of the Supreme Court reads as under : "…40 It is to be kept in mind that in those cases where shares are held as "stock-in- trade", it becomes a business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee-company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee-company. In that case, whenever dividend is declared by the investee-company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove…."
19. The Supreme Court in this judgment upheld the decision of the High Court of Punjab and Haryana arising under section 14A of the Act with respect to an assessee bank. It further held that when the shares were held as stock-in-trade and not as investment particularly by banks, the main purpose was to trade in those shares and earn profits there from and therefore section 14A of the Act was not attracted and the expenditure could not be disallowed. The judgment of Maxopp Investment Ltd. (supra) has been duly noted by the Tribunal in its impugned order and in our opinion the Tribunal has correctly disallowed the disallowance under rule 8D(2)(iii) of the Rules.
20. In the present case as well, the Tribunal has considered that the Respondent was holding the shares as a stock-in-trade and has, therefore, disallowed the addition made by the JAO. Learned counsel for the Appellant has not disputed the fact that the shares are held as stock-in-trade by the Respondent.
21. In the aforesaid view of the matter, the questions of law proposed by the Appellant do not arise for consideration either in fact or in law in view of the judgments of the Supreme Court, which have conclusively decided the questions sought to be canvassed by the Appellant.
The appeal is accordingly dismissed.”
The Revenue could not show us any reason to deviate from the aforesaid decision. We also find that similar findings were rendered by the coordinate bench of the Tribunal in assessee’s own case in Central Bank of India v/s DCIT, ITA No. 3739/Mum./2018, vide order dated 29/01/2020. Therefore, respectfully following the decision of the Hon’ble Delhi High Court cited supra, we direct the AO to delete the disallowance made under section 14A read with Rule 8D. Since the relief is granted to the assessee on the aforesaid limited aspect, the other aspects raised by the assessee in ground no.1, are rendered academic and therefore are left open. Ground no. 1 raised in assessee’s appeal is decided accordingly.”
Central Bank of India (A.Y. 2013-14 to 2016-17) 10
10. Thus, respectfully following the aforesaid decision, the disallowance made under section 14A read with Rule 8D of the Rules is deleted. As a result, Ground no. 1A raised in assessee’s appeal is allowed.
In view of our findings rendered in respect of Ground no.1A, Ground no.1B raised in assessee’s appeal is rendered academic, and therefore, is kept open.
Grounds no.2A and 2B, raised in assessee’s appeal, pertain to the disallowance of provision for wage revision.
The brief facts of the case pertaining to this issue are that during the assessment proceedings, it was observed that the assessee had made a provision in respect of wage revision amounting to INR 100 crore. As the procedure involved with the wage revision is yet to reach its conclusion, and the quantification of liability was to be done at a later stage, the AO vide order passed under section 143(3) of the Act disallowed the provision for wage revision, treating it as a contingent liability. The learned CIT(A), vide impugned order, upheld the disallowance made by the AO on this issue. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. As per the assessee during the year under consideration, it made a provision of INR 100 crore in respect of wage revision based on the indicative increase in the wages payable by the Bank in pursuance of the terms that are likely to be settled by way of signing an agreement between Indian Banks Association, on behalf of the members
Central Bank of India (A.Y. 2013-14 to 2016-17) 11 banks, and the Union of Workmen/officers. Since the concerned Workman/officers had rendered the service and the assessee had also received income because of their efforts, which has been recognised in the books of accounts, the assessee claimed that such provision was required to be recognised in the year under consideration itself, as it follows the mercantile system of accounting.
During the hearing, the learned Authorised Representative (“learned AR”) referred to the note on provision for wage revision, forming part of paper book-III on page 1. From the perusal of the same, we find that as per the assessee, the earlier settlement dated 27/04/2010 was operational for a period of 5 years from 01/11/2007 to October 2012. As per the assessee, at the time of finalization of accounts for the financial year 2012-13, the negotiations between Indian Banks Association with the Unions were at a preliminary stage for wage revision and based on the past wage settlements, wage increase at the rate of 15% was worked out which came to INR 240 crore for the year, and accordingly, INR 20 crore was considered as liability
per month. Since the revised salary was due to the staff from 01/11/2012, provision for 5 months at INR 20 crore for each month was made by the assessee, amounting to INR 100 crore for the year ending 2013. As per the assessee, after prolonged discussion, the wage revision was settled by signing the agreement on 25/05/2015, a copy of which forms part of the paper book- IV from pages 45-103. During the hearing, the learned AR also placed reliance upon the decisions of the coordinate bench of the Tribunal in the case of other
Central Bank of India (A.Y. 2013-14 to 2016-17) 12 nationalised banks, wherein a similar provision for wage revision was allowed as a deduction by the coordinate benches of the Tribunal.
We find that the Memorandum of Settlement dated 25/05/2015 for wage revision entered into between the Indian Banks Association, on behalf of the member Banks, and the Union of Workmen/officers also agreed for wage revision at the rate of 15% of the salary slip component. Undisputedly, in the present case, the aforesaid Memorandum of Settlement was not examined by any of the lower authorities, and the same is fresh evidence.
Accordingly, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo consideration, as per law, after examining the Memorandum of Settlement entered into between the Indian Banks Association, on behalf of the member Banks, and the Union of Workmen/officers. As this issue is restored for consideration afresh, all the contentions of the assessee in this regard are open. Needless to mention, no order shall be passed without affording the reasonable and adequate opportunity of hearing to the assessee. As a result, Grounds no.2A and 2B, raised in the assessee’s appeal, are allowed for statistical purposes.
Ground no.3A, raised in assessee’s appeal, pertains to the applicability of provisions of section 115-JB of the Act in case of the assessee. We find that this issue is no longer res integra and has been decided in favour of the assessee by the Special Bench of the Tribunal in Union Bank of India vs. Deputy Commissioner of Income-tax, LTU(2), reported in [2024] 115 ITR(T)
481 (Mumbai - Trib.) (SB), wherein the assessee was also a party. The Central Bank of India (A.Y. 2013-14 to 2016-17) 13 relevant findings of the Special Bench, in the aforesaid decision, are reproduced as follows: –
“60. Accordingly, the question referred to Special Bench is decided in favour of the assessee banks that clause (b) to sub section (2) of section 115JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, are not applicable to the banks constituted as 'corresponding new bank' in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, the provision of Section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks. “
18. Therefore, respectfully following the aforesaid decision of the Special Bench of the Tribunal, Ground no.3A raised in assessee’s appeal is allowed.
The issues arising in revised Ground no.3B, raised in assessee’s appeal, are rendered academic in view of our aforesaid findings, and therefore, are kept open.
The issue arising in grounds no.4 and 5, raised in the assessee’s appeal, pertains to the disallowance/enhancement on account of the shifting of securities from the Available for Sale (“AFS”) category to the Held to Maturity (“HTM”) category.
The brief facts of the case pertaining to this issue are that in its appeal before the learned CIT(A), the assessee, inter-alia, raised an additional ground claiming the decrease/increase in profit/loss on sale or maturity or redemption or a transfer of securities which were shifted in earlier previous years from AFS to HTM category by the amount of the corresponding loss on valuation of securities disallowed in the year of shifting and reduce the total income accordingly. As per the assessee, during the earlier previous years, i.e., from 2004-05 to 2009-10, the provision for loss on valuation of securities
Central Bank of India (A.Y. 2013-14 to 2016-17) 14 while shifting from AFS to HTM category aggregating to INR 1144,54,88,301 was disallowed. As per the assessee, such shifted HTM securities stand in the books of accounts net of the corresponding provision for loss on valuation of securities arising on shifting from AFS to ATM category as per the RBI instructions. Accordingly, if such loss on valuation of securities while shifting from AFS to HTM category is not allowed in the year of shifting itself then for income tax purposes, this would lead to inadvertently higher profits or lower losses being offered/claimed to the extent of such loss on valuation on sale or maturity or redemption or transfer in any manner of such shifted HTM securities. Therefore, the assessee claimed that in order to compute the true and real income of the assessee, the corresponding loss on valuation of such securities provided by the Bank while shifting the same from AFS to HTM, which was disallowed in earlier years of shifting, need to increase or decrease the profit/loss during the year under consideration, arising on account of sale or transfer or maturity of such securities. In other words, the assessee submitted that certain HTM securities shifted in earlier previous years have been sold or matured or redeemed or transferred in the year under consideration, therefore, the corresponding loss on valuation of such securities provided by the Bank while shifting the same from AFS to HTM, which was disallowed in the year of shifting need to increase the corresponding profit/loss in the year under consideration. The learned CIT(A), vide impugned order, in absence of any working regarding the shifting of loss, dismissed the additional ground raised by the assessee.
Central Bank of India (A.Y. 2013-14 to 2016-17) 15
Further, it was noticed that the assessee has changed the book value of the shifted securities from the cost to the market value on the date of shifting.
As per the learned CIT(A), in case of securities belonging to HTM category, this method yielded a wrong computed value, as the book value is always lower than the cost and in fact the assessee was comparing the book value and the market value instead of comparing the cost and market value. The learned CIT(A) held that in cases where market value was lower than the book value, this method yielded a correct computed value, however, in the reverse scenario, the method followed by the assessee yielded a wrong computed value, which was lower than the correct value. Accordingly, the learned CIT(A) following the approach adopted in the assessment year 2012-13 enhanced the valuation of assessee’s investments in HTM securities by INR 85,03,64,972.
22. Being aggrieved by the aforesaid findings of the learned CIT(A), the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. We find that while deciding the issue of enhancement in valuation of assessee’s investments in HTM securities, the coordinate bench of the Tribunal in assessee’s own case in Central Bank of India v/s DCIT, in ITA No. 3739/Mum./2018, vide order dated 29/01/2020, observed as follows: –
6.2. Accordingly, the Id. CIT(A) made enhancement of Rs.3,43,236/- in the appellate order by holding that the valuation of investments was not made by the assessee in accordance with RBI guidelines. Against this action of Id. CIT(A), the assessee is in appeal before us vide ground No.3. We find that as per the RBI Circular dated 01/07/2011, shifting loss incurred at the time of Central Bank of India (A.Y. 2013-14 to 2016-17) 16 shifting of securities from AFS to HTM category should be debited to profit and loss account as a regular expenditure. We find that the Id. CIT(A) while allowing the additional ground of the assessee had categorically agreed that the assessee had incurred valuation loss / shifting loss to have been incurred pursuant to due compliance of RBI Circular dated 01/07/2011. While that be so, how the assessee could have violated the very same RBI Circular when it comes to enhancement of Rs.3,43,236/- by way of reversal of shifting loss. Hence, it could be safely concluded that the Id. CIT(A) had taken a contradictory stand in his order with regard to compliance with RBI Circular.
6.3. We find that in the instant case, the depreciation of investments at the time of shifting from AFS to HTM category had been debited by the assessee as an expenditure in consonance with RBI Circular dated 01/07/2011 referred to supra. The said shifting loss is squarely allowable as deduction. But the assessee had provided the revised workings of the said loss before the Id. CIT(A) which resulted in an enhancement of Rs 3,42,336/-. We find that the assessee had not provided any evidence before us to counter the said workings given before the Id. CIT(A) and hence we do not deem it fit to interfere in the said enhancement done by the Id. CIT(A) . However, the observations made by the Id. CIT(A) for justifying the addition is not warranted. Accordingly, the ground No.8 of the revenue is dismissed and ground no.3 of the assessee is dismissed subject to removal of remarks by the Id. CIT(A) as observed hereinabove.”
Subsequently, the assessee preferred a Miscellaneous Application against the aforesaid findings of the learned CIT(A). Vide order dated 07/12/2020 passed in Central Bank of India V/s DCIT, in MA No. 153/Mum./2020, for the assessment year 2012-13, the coordinate bench of the Tribunal allowed the Miscellaneous Application filed by the assessee and modified its order as follows: –
“5. We find that the Id. CIT(A) had issued enhancement notice vide letter dated 08/01/2018 to the assessee bank categorically calling for the workings of valuation on securities held in HTM category as on 31/03/2002 in the prescribed format. These papers are enclosed in pages 126 & 127 of the paper book filed before us at the time of original appeallate proceedings, We find that assessee had responded to the said enhancement notice which is enclosed in pages 128-131 of the paper book filed before us at the time of original appellate proceedings. In the said reply letter dated 10/01/2018 addressed by the assessee to the ld. CIT(A), in paragraph 2, it has been categorically mentioned by the assessee that, without prejudice to the original claim made by the assessee that shifting loss on conversion of securities is squarely allowable as deduction and valuation of securities held as 'stock in trade' as on 31/03/2012 has been rightly made by the assessee, the assessee, as directed by the Id. CIT(A), had furnished the workings for valuation of securities in the prescribed format given by the Id. CIT(A). The prima facie
Central Bank of India (A.Y. 2013-14 to 2016-17) 17 reading of the said letter dated 10/01/2018 addressed by the assessee to Id. CIT(A) is absolutely unambiguous in this regard. We find from the perusal of the said letter that assessee had merely complied with the directions of the Id. CIT(A) by furnishing the necessary details of valuation of securities as on 31/03/2012 in the prescribed format given by the ld. CIT(A) and the said details were furnished on without prejudice basis. While this is so, it would be wrong on the part of the Id. CIT(A) to conclude that assessee had filed revised valuation of losses on account of securities and observed that a sum of Rs.3,43,236/- requires to be reversed thereon. So based on this working, the Id. CIT(A) had resorted to enhancement of Rs.3,43,236/- on the valuation difference of securities by holding that the said valuation was not done in accordance with RBI guidelines.
5.1 Against this enhancement, the assessee was in appeal before us vide ground No.3. We find that this Tribunal in paragraph 6.2 and 6.3 of its order had categorically held that assessee had fully complied with RBI Circular dated 01/07/2011 with regard to valuation of securities at the time of shifting of securities from AFS to HTM category and this Tribunal had also held that the shifting loss incurred would be squarely allowable as deduction to the tune of Rs.159,74,79,854/-. Having done so, the enhancement made by the Id. CIT(A) to the tune of Rs.3,43,236/- should have been deleted by this Tribunal which was not done. We find that the aforesaid workings for valuation difference of Rs.3,43,236/- was furnished by the assessee on without prejudice basis but complied with the directions of the Id. CIT(A) by filling up the data in the prescribed format given by the Id. CIT(A). Hence, there is no need for the assessee to file any evidence before us to counter the said workings as admittedly the assessee has only complied with the directions of Id. CIT(A) by furnishing the requisite details on without prejudice basis. Hence, observation made by this Tribunal in para 6.3 of its order that assessee has not provided any evidence before us to counter the said workings given before the ld. CIT(A) is incorrect. This constitutes mistake apparent on record within the meaning of Section 254(2) of the Act.
5.2. We find that the aforesaid mistake has been rightly pointed out by the Id. AR before us and we accordingly, deem it fit to modify para 6.3 of our order as under:-
“6.3 ………………………. We find that in the instant case, the depreciation of investments at the time of shifting from AFS to HTM category had been debited by the assessee as an expenditure in consonance with RBI Circular dated 01/07/2011 referred to supra. The said shifting loss is squarely allowable as deduction."
5.3. Para No.6.3 of our order should be read in the aforesaid manner and stands modified as above. All other contents of our order remain unchanged.
5.4 Accordingly, the ground No.8 of the revenue appeal is dismissed and ground no.3 of the assessee is allowed.”
Therefore, in the absence of any allegation of change in facts and law, respectfully following the aforesaid directions of the coordinate bench of the Central Bank of India (A.Y. 2013-14 to 2016-17) 18 Tribunal rendered in assessee’s own case for the assessment year 2012-13, the enhancement in the value of assessee’s investments in HTM securities made by the learned CIT(A) is deleted.
From the perusal of the aforesaid findings, we further find that the coordinate bench held that the shifting loss is an allowable deduction. During the hearing, the learned AR, by referring to page 307 of the paper book-III, referred to the details of the securities which were sold during the year under consideration. However, as is evident from the record, these details were not examined by any of the lower authorities. Accordingly, concurring with the findings of the coordinate bench that shifting loss is an allowable deduction, we restore the issue of quantification of such loss to the file of the jurisdictional AO for necessary examination. Needless to mention, no order shall be passed without affording the reasonable and adequate opportunity of hearing to the assessee. As a result, Ground no. 4 is allowed for statistical purposes, while Ground no. 5 raised in assessee’s appeal is allowed.
Ground no.6 raised in assessee’s appeal pertains to the levy of penalty under section 271(1)(c) of the Act, which is premature in nature. Therefore, this ground is dismissed.
In the result, the appeal by the assessee for the assessment year 2013- 14 is partly allowed for statistical purposes.
./2018 Revenue’s appeal – A.Y. 2013-14
In this appeal, the Revenue has raised the following grounds: –
Central Bank of India (A.Y. 2013-14 to 2016-17) 19
“On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:
1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in accepting the plea of the assessee that two separate provisions for rural and non rural advances are permissible u/s 36(1)(viia), for the purpose of set off of bad debts incurred us 36(1)(vii) of the Income Tax Act, 1961."
2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the provisions of Rule 8D(2)(ii) cannot be applied, even if the assessee has mixed funds, ignoring the ratio of the Hon'ble Supreme Court in the case of Maxopp Investments."
3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in accepting the plea of the assessee that the interest income of Rs. 69,69,59,409/- has to be taxed on due basis instead of accrued basis as per mercantile system of accounting followed by the assessee."
4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the broken period interest is allowable on matching principles, without realizing that the same has not been incurred for realizing the interest on securities as enunciated by the Apex Court in Vijaya Bank Ltd. (57 Taxmann 152)(SC)."
5. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying on the ratio of the Apex Court in the case of Citi Bank (Civil Appeal No. 1549 of 2006) where the income from securities were treated as business income which was not the same as in the present case."
6. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made to Book Profit on account of sec. 14A read with Rule 8D of the Act."
7. "On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing the loss on account of valuation of securities while shifting from Available for Sale (AFS) to Hold to Maturity(HTM) without appreciating that shifting from one category to another cannot give rise to profit or loss as one cannot make profit or loss with oneself."
"For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO be restored.”
Ground no.1, raised in Revenue’s appeal, pertains to the deletion of the disallowance of bad debts relating to the non-rural advances.
The brief facts of the case pertaining to this issue are that during the year under consideration, the assessee wrote off bad debts pertaining to rural
Central Bank of India (A.Y. 2013-14 to 2016-17) 20 advances amounting to INR 51,43,82,368 and bad debts pertaining to non- rural advances amounting to INR 676,66,66,143. The bad debts pertaining to rural advances were not claimed as deduction by the assessee as the same did not exceed the opening credit balance in the provision for bad and doubtful debts account maintained under section 36(1)(viia) of the Act. However, the assessee claimed the entire bad debts written off pertaining to non-rural advances amounting to INR 676,66,66,143 as a deduction under section 36(1)(vii) of the Act in its return of income. In this regard, the assessee placed reliance upon the decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd v/s CIT, reported in [2012] 343 ITR 270 (SC). The AO, vide order passed under section 143(3) of the Act, disagreed with the submissions of the assessee and held that there are no bifurcations of provision for rural and non-rural doubtful debts conceived by the legislature separately and distinct from each other. The AO further held that the assessee has not made any provisions on the lines of rural and non-rural branches goes on to show that the provisions as per the books have to be compared with the provisions as
per section 36(1)(viia) of the Act as a single unit and not by bifurcating them into separate provisions for rural and non-rural branches. Accordingly, the AO disallowed the entire bad debts written off pertaining to non-rural advances amounting to INR 676,66,66,143 as the opening balance of provision of doubtful debts allowed under section 36(1)(viia) of the Act was at INR 1524,93,68,550.
The learned CIT(A), vide impugned order, following the decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd (supra) allowed the ground Central Bank of India (A.Y. 2013-14 to 2016-17) 21 raised by the assessee on this issue. Being aggrieved, the Revenue is in appeal before us.
Having considered the submissions of both sides and perused the material available on record, we find that this issue is no longer res integra and has been decided in favour of the assessee by the Hon’ble Supreme Court in Catholic Syrian Bank Ltd (supra). As the learned CIT(A) has rightly followed the aforesaid decision of the Hon’ble Supreme Court, we do not find any infirmity in the findings of the learned CIT(A) on this issue, and the same are upheld. As a result, Ground no.1 raised in Revenue’s appeal is dismissed.
Ground no.2, raised in Revenue’s appeal, pertains to the disallowance made under section 14A read with Rule 8D of the Rules. Since a similar issue has already been decided in assessee’s appeal and disallowance made under section 14A read with Rule 8D of the Rules has been directed to be deleted, accordingly, Ground no.2 raised in Revenue’s appeal is dismissed.
Ground no.3, raised in Revenue’s appeal, pertains to the deletion of the disallowance of interest accrued but not due.
The brief facts of the case pertaining to this issue are that in its books of account, the assessee accounted interest on securities on accrual basis. In the computation of income, the interest income of INR 1,313,32,41,173, which had accrued but was not due as on 31/03/2013 was deducted. Similarly, interest accrued but not due as on 31/03/2012 of INR 1,243,62,81,784 and became due during the year was offered to tax. Thus, the assessee made a net deduction of INR 69,69,59,409. During the assessment proceedings, the Central Bank of India (A.Y. 2013-14 to 2016-17) 22 assessee submitted that it is governed by the guidelines/instructions issued by the RBI and accordingly the interest income is accounted in accordance with the guidelines and instructions issued by the RBI from time to time. The assessee further submitted that the method of recognising the interest accrued but not due is adopted by the assessee consistently. It was further submitted that interest on securities does not accrue from day to day but only on fixed days (coupon dates) and the interest though accrued and becomes due on such fixed days can only be taxed under the provisions of the Act.
The AO, vide order passed under section 143(3) of the Act, disagreed with the submissions of the assessee and held that the assessee follow the mercantile system of accounting under which all interest which has accrued should be included as income. The AO noted that the assessee itself in its books of accounts treated all accrued interest as income. The AO held that the income accrues as and when the assessee acquires the right to receive such income. Thus, in the case of government securities, although interest becomes due for payment only at 6-monthly intervals, such interest certainly accrues from day to day. Similarly, when the assessee purchased certain securities, it paid not only the cost of securities, but also the interest which has accrued on a day-to-day basis from the last date of payment of interest to the date of purchase. Accordingly, the AO added the amount of INR 69,69,59,409, being the interest accrued but not offered to the total income of the assessee.
The learned CIT(A), vide impugned order, deleted the addition made by the AO following the decision of the coordinate bench of the Tribunal in Central Bank of India (A.Y. 2013-14 to 2016-17) 23 assessee’s own case for the assessment years 2008-09 and 2009-10. Being aggrieved, the Revenue is in appeal before us.
Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee’s own case in Central Bank of India V/s ACIT, in ITA 1525/Mum./2013 and others, for the assessment years 2008-09 and 2009- 10, vide order dated 03/10/2017, following the decision of the Hon’ble jurisdictional High Court in DIT v/s Credit Suisse First Boston (Cyprus) Ltd., [2012] 23 taxmann.com 424 (Bom.), deleted the similar disallowance in respect of interest accrued but not due. As the learned CIT(A), while deciding this issue in favour of the assessee, followed the aforesaid decision of the coordinate bench of the Tribunal, therefore, we do not find any infirmity in the findings of the learned CIT(A) and thus the same are upheld. Accordingly, Ground no.3 raised in Revenue’s appeal is dismissed.
Grounds no.4 and 5, raised in Revenue’s appeal, pertains to the disallowance of broken period interest on securities purchased by the assessee by treating the same to be capital in nature.
Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A), while deciding this issue in favour of the assessee, followed the decision of the Hon’ble jurisdictional High Court in CIT v/s HDFC Bank Ltd, in of 2012.
We find that the Hon’ble Supreme Court in Bank of Rajasthan Ltd. vs. Commissioner of Income-tax, reported in [2024] 469 ITR 280 (SC), held that Central Bank of India (A.Y. 2013-14 to 2016-17) 24 where assessee-bank purchased government securities and paid broken period interest, since said securities were treated as stock-in-trade, broken period interest could not be considered as capital expenditure and would have to be treated as revenue expenditure, which could be allowed as deduction.
Therefore, respectfully following the aforesaid decision of the Hon’ble Supreme Court, we do not find any infirmity in the findings of the learned CIT(A) on this issue, and accordingly, the same are upheld. As a result, Grounds no.4 and 5, raised in Revenue’s appeal, are dismissed.
Ground no.6, raised in Revenue’s appeal, pertains to the deletion of the addition made to the book profits on account of the disallowance made under section 14A read with Rule 8D of the Rules. In view of our findings rendered in Ground no.3A raised in assessee’s appeal, the issue raised in this ground is rendered infructuous. Therefore, Ground no.6 is dismissed.
Ground no.7, raised in Revenue’s appeal, pertains to the allowability of the deduction of the shifting loss.
Having considered the submissions of both sides and perused the material available on record, we find that the Hon’ble jurisdictional High Court in Commissioner of Income-tax-2, Mumbai vs. HDFC Bank Ltd., reported in [2014] 368 ITR 377 (Bombay), held that loss incurred on account of transfer of securities held under category AFS to HTM was to be allowed as business loss. As the learned CIT(A), while deciding this issue in favour of the assessee, followed the aforesaid decision of the Hon’ble High Court, therefore, we do not find any infirmity in the findings of the learned CIT(A), and therefore, the Central Bank of India (A.Y. 2013-14 to 2016-17) 25 same are upheld. Accordingly, Ground no.7 raised in Revenue’s appeal is dismissed.
In the result, the appeal by the Revenue for the assessment year 2013- 14 is dismissed.
./2018 Assessee’s appeal – A.Y. 2013-14 (Penalty)
In this appeal, the assessee has raised the following grounds: –
“1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income-tax (Appeals) - 3 ["CIT(A)"] has erred in levying penalty u/s. 271(1)(c) of the Income-tax Act, 1961 ["the Act"]. The Appellant Bank prays that the initiation of penalty proceedings. u/s. 271(1)(c) is without jurisdiction and bad in law and the resultant order passed u/s. 271(1)(c) be quashed accordingly.
2. Without prejudice to Ground no. 1 above, assuming without accepting that Your Honours is of the view that the order u/s. 271(1)(c) is valid, then on the facts and in the circumstances of the case and in law:
The Hon'ble CIT(A) has erred in imposing penalty u/s. 271(1)(c) for furnishing inaccurate particulars of income without appreciating that the Appellant Bank disclosed complete and accurate facts and details in respect of bona fide claims made in the return of income. The Appellant Bank prays that the Hon'ble CIT(A) be directed to delete the penalty of Rs. 27,59,00,915 u/s. 271(1)(c).”
The only issue raised in the present appeal is against the levy of penalty under section 271(1)(c) of the Act.
We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that as the assessee change the book value of the shifty securities from AFS category to HTM category from the cost to their market value on the date of shifting, the learned CIT(A) in the quantum appeal filed by the assessee made an enhancement in the value of assessee’s investments in HTM securities. In the Central Bank of India (A.Y. 2013-14 to 2016-17) 26 meanwhile, the penalty proceedings under section 271(1)(c) of the Act were initiated on this issue and vide order dated 16/07/2018 passed under section 271(1)(c) of the Act penalty of INR 27,59,00,915 was levied on the assessee on the basis that the assessee has furnished inaccurate particulars of its income. In further proceedings, the learned CIT(A), vide impugned order, the learned CIT(A) upheld the levy of penalty on the assessee under section 271(1)(c) of the Act.
As in the quantum appeal filed by the assessee for assessment year 2013-14, we have already deleted the enhancement made by the learned CIT(A) in the value of assessee’s investments in HTM securities following the directions of the coordinate bench of the Tribunal rendered in assessee’s own case for the assessment year 2012-13, therefore, we do not find any basis in upholding the penalty levied under section 271(1)(c) of the Act on this issue.
Accordingly, the same is quashed. As a result, grounds raised by the assessee in its appeal are allowed.
In the result, the appeal by the assessee, being is allowed.
./2017 Assessee’s appeal – A.Y. 2014-15 51. The first issue that arises for consideration, in the present appeal, pertains to the disallowance made under section 14A read with Rule 8D of the Rules. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, the disallowance
Central Bank of India (A.Y. 2013-14 to 2016-17) 27 made under section 14A read with Rule 8D of the Rules is deleted, and Ground no.1A, raised in the assessee’s appeal, is allowed. In view of our findings rendered in respect of Ground no.1A, Ground no.1B raised in assessee’s appeal is rendered academic, and therefore, is kept open.
The next issue arising in assessee’s appeal pertains to the applicability of provisions of section 115-JB of the Act to the assessee’s case. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, Ground no.2 raised in assessee’s appeal is allowed. The issues arising in Grounds no.2A and 2B, raised in the assessee’s appeal, are rendered academic in view of our aforesaid findings, and therefore, are kept open.
In the result, the appeal by the assessee for the assessment year 2014- 15 is allowed.
./2017 Revenue’s appeal – A.Y. 2014-15 54. The first issue that arises for consideration, in the present appeal, pertains to the deletion of the disallowance of broken period interest on securities purchased by the assessee by treating the same to be capital in nature. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Grounds no. 1 and 2, raised in Revenue’s appeal, are dismissed.
Central Bank of India (A.Y. 2013-14 to 2016-17) 28
The next issue that arises for consideration pertains to the deletion of the disallowance of provision for wage revision. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013- 14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Ground no.3, raised in Revenue’s appeal, is allowed for statistical purposes with similar directions.
The next issue that arises for consideration pertains to the allowability of the deduction of the shifting loss. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Ground no. 4, raised in Revenue’s appeal, is dismissed.
The last issue that arises for consideration pertains to the deletion of an adjustment to the book profit on account of a provision for wage revision. In view of our findings rendered in respect of the applicability of the provisions of section 115-JB of the Act to the assessee’s case, the issue raised in this ground is rendered infructuous. Therefore, Ground no.5 is dismissed.
In the result, the appeal by the Revenue for the assessment year 2014- 15 is partly allowed for statistical purposes.
./2022 Assessee’s appeal – A.Y. 2014-15 59. In this appeal, the assessee has raised the following grounds: –
“1. On the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax (Hereinafter referred to as "ACIT") has erred in passing rectification order u/s. 154 of the Income-tax Act, 1961 ("the Act") for legal and debatable issues for which two views are possible. The Hon'ble CIT(A) has erred in confirming the same. The Appellant Bank prays
Central Bank of India (A.Y. 2013-14 to 2016-17) 29 that the rectification order u/s. 154 dated 12-3-2020 is bad in law and the same be quashed.
2. Without prejudice to Ground No. 1 mentioned above, assuming without accepting that Your Honors is of the view that the rectification order passed u/s. 154 dated 12-3-2020 is valid, then on the facts and in the circumstances of the case and in law, the learned ACIT has erred in invoking the provisions of Section 115JB of the Act while determining tax liability. The Hon'ble CIT(A) has erred in confirming the same. The learned ACIT be directed not to invoke the provisions of Section 115JB of the Act in case of Appellant Bank for AY 2014-15 and determine the total income and tax liability thereon under normal provisions of the Act only.
2A Without prejudice to Ground No. 2 mentioned above, assuming without accepting that Your Honours is of the view that the provisions of Section 115JB are applicable to the Appellant Bank, then on the facts and in the circumstances of the case and in law, the Appellant Bank submits that the learned ACIT has erred in making addition of provision for depreciation on investments of Rs.106,18,10,375 to book profit u/s. 115JB and the Hon'ble CIT(A) has, without properly appreciating the correct facts of the case, erred in confirming the said addition. The learned ACIT be directed not to make addition of provision for depreciation on investments of Rs.106,18,10,375 to book profit u/s. 115JB and reduce the book profit u/s. 115JB accordingly.
2B Without prejudice to Ground No. 2 mentioned above, assuming without accepting that Your Honours is of the view that the provisions of Section 115JB are applicable to the Appellant Bank, then on the facts and in the circumstances of the case and in law, the Appellant Bank submits that the learned ACIT has erred making addition of provision for depreciation on transfer of securities of Rs.125,11,57,677 to book profit u/s. 115JB and the Hon'ble CIT(A) has, without properly appreciating the correct facts of the case, erred in confirming the said addition. The learned ACIT be directed not to make addition of provision for depreciation on transfer of securities of Rs.125,11,57,677 to book profit u/s. 115J8 and reduce the book profit u/s. 115JB accordingly.
3. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in charging interest u/s. 234C of the Act on assessed income and the Hon'ble CIT(A) has erred in confirming the interest charged u/s. 234C. The learned ACIT be directed to charge interest u/s. 234C, if any, on returned income as per provisions of Section 234C and reduce the income-tax demand accordingly.”
The brief facts of the case are that the AO issued notice under section 154 of the Act seeking recomputation of book profit under section 115-JB of the Act by disallowing provision for investment depreciation and provision for depreciation on transfer of securities. Disagreeing with the submissions of the Central Bank of India (A.Y. 2013-14 to 2016-17) 30 assessee, the AO vide order dated 12/03/2020 passed under section 154 of the Act recomputed the book profit under section 115-JB of the Act. As following the decision of the Special Bench of the Tribunal in Union Bank of India (supra), we have come to the conclusion that the provisions of section 115-JB of the Act are not applicable to the case of the assessee, therefore, the order passed under section 154 of the Act recomputing the book profit under section 115-JB of the Act is quashed. As a result, the grounds raised by the assessee are allowed.
In the result, the assessee’s appeal, being for the assessment year 2014-15 is allowed.
./2018 Assessee’s appeal – A.Y. 2015-16 62. The first issue that arises for consideration, in the present appeal, pertains to the disallowance made under section 14A read with Rule 8D of the Rules. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, the disallowance made under section 14A read with Rule 8D of the Rules is deleted, and Ground no.1A, raised in the assessee’s appeal, is allowed. In view of our findings rendered in respect of Ground no.1A, Ground no.1B raised in assessee’s appeal is rendered academic, and therefore, is kept open.
The next issue arising in assessee’s appeal pertains to the applicability of provisions of section 115-JB of the Act to the assessee’s case. Since a similar issue has already been decided in the assessee’s appeal for the Central Bank of India (A.Y. 2013-14 to 2016-17) 31 assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, Ground no.2A raised in assessee’s appeal is allowed. The issues arising in Ground no.2B, raised in the assessee’s appeal, are rendered academic in view of our aforesaid findings, and therefore, are kept open.
In the result, the appeal by the assessee for the assessment year 2015- 16 is allowed.
./2018 Revenue’s appeal – A.Y. 2015-16 65. The first issue that arises for consideration, in the present appeal, pertains to the deletion of the disallowance of broken period interest on securities purchased by the assessee by treating the same to be capital in nature. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Grounds no. 1 and 2, raised in Revenue’s appeal, are dismissed.
The next issue that arises for consideration pertains to the deletion of the disallowance of provision for wage revision. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013- 14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Ground no.3, raised in Revenue’s appeal, is allowed for statistical purposes with similar directions.
Central Bank of India (A.Y. 2013-14 to 2016-17) 32
The next issue that arises for consideration pertains to the allowability of the deduction of the shifting loss. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Ground no. 4, raised in Revenue’s appeal, is dismissed.
The next issue that arises for consideration pertains to the deletion of disallowance made under section 14A read with Rule 8D while computing the book profit. In view of our findings rendered in respect of the applicability of the provisions of section 115-JB of the Act to the assessee’s case, the issue raised in this ground is rendered infructuous. Therefore, Ground no.5 is dismissed.
The last issue that arises for consideration pertains to the deletion of the disallowance of interest accrued but not due. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013- 14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Ground no. 6, raised in Revenue’s appeal, is dismissed.
In the result, the appeal by the Revenue for the assessment year 2015- 16 is partly allowed for statistical purposes.
./2020 Assessee’s appeal – A.Y. 2016-17 71. The first issue that arises for consideration, in the present appeal, pertains to the disallowance made under section 14A read with Rule 8D of the Central Bank of India (A.Y. 2013-14 to 2016-17) 33 Rules. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, the disallowance made under section 14A read with Rule 8D of the Rules is deleted, and Ground no.1A, raised in the assessee’s appeal, is allowed. In view of our findings rendered in respect of Ground no.1A, Ground no.1B raised in assessee’s appeal is rendered academic, and therefore, is kept open.
The next issue arising in assessee’s appeal pertains to the applicability of provisions of section 115-JB of the Act to the assessee’s case. Since a similar issue has already been decided in the assessee’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. As a result, Ground no.2A raised in assessee’s appeal is allowed. The issues arising in Ground no.2B, raised in the assessee’s appeal, are rendered academic in view of our aforesaid findings, and therefore, are kept open.
Vide its application dated 01/04/2025, the assessee has raised the following additional ground of appeal pertaining to payment of wage revision.
In light of the decision of the Hon’ble Supreme Court in NTPC v/s CIT, reported in [1998] 229 ITR 383 (SC), this additional ground of appeal is admitted. As we have restored similar issue to the file of the jurisdictional AO for de novo adjudication in the assessee’s appeal for the assessment year 2013-14, accordingly, we are restoring this issue also to the file of the jurisdictional AO for consideration afresh in line with its findings rendered in previous assessment years after granting reasonable and adequate opportunity of Central Bank of India (A.Y. 2013-14 to 2016-17) 34 hearing to the assessee. As a result, the additional ground of appeal filed by the assessee is allowed for statistical purposes.
In the result, the appeal by the assessee for the assessment year 2016- 17 is allowed for statistical purposes.
./2020 Revenue’s appeal – A.Y. 2016-17 75. The first issue that arises for consideration, in the present appeal, pertains to the deletion of the disallowance of broken period interest on securities purchased by the assessee by treating the same to be capital in nature. Since a similar issue has already been decided in the Revenue’s appeal for the assessment year 2013-14, accordingly, our findings/conclusions as rendered therein shall apply mutatis mutandis. Accordingly, Grounds no. 1 and 2, raised in Revenue’s appeal, are dismissed.
The next issue that arises for consideration pertains to the deletion of the disallowance made while computing the book profit. In view of our findings rendered in respect of the applicability of the provisions of section 115-JB of the Act to the assessee’s case, the issue raised in this ground is rendered infructuous. Therefore, Grounds no. 3 and 4 are dismissed.
In the result, the appeal by the Revenue for the assessment year 2016- 17 is dismissed.
Our findings in the present batch of appeals are summed up as follows:-