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Facts
The appeals were filed by the assessee and the Revenue against the orders of the CIT(A) concerning AY 2020-21 and 2021-22. The core issues involve deductions related to provisions for bad and doubtful debts, depreciation on goodwill, provision for leave encashment, and foreign tax relief.
Held
The Tribunal decided various grounds. Some grounds raised by the assessee were dismissed as withdrawn. The issue of depreciation on goodwill and provision for leave encashment were decided against the assessee, following earlier precedents. The ground regarding irrecoverable advances was restored to the AO for re-adjudication. The issues concerning foreign tax relief were decided against the assessee. Revenue's appeals on prior period expenses, depreciation on ATMs, and section 14A were dismissed based on earlier rulings. The issue of recovery of bad debts was decided in favor of the assessee. The non-applicability of Section 115JB was also decided in favor of the assessee.
Key Issues
The primary issues concern the allowability of deductions for provisions for bad debts, leave encashment, depreciation on goodwill, foreign tax credits, and prior period expenses, along with the applicability of Section 115JB and Section 14A.
Sections Cited
36(1)(vii), 36(1)(viia), 43B, 90, 14A, 37(1), 115JB
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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA
per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to 14 & 914/19, 202,203/23 others section 90 making the notification retrospectively applicable. In this manner, the CIT(A) has directed the Assessing Officer to allow relief to the assessee as per the aforesaid notification.
We have heard both parties and gone through the relevant findings in the orders of Assessing Officer as well as the ClT(A). The parties are unanimous before us that this vary issue stands decided in the Revenue’s favour by the ‘tribunal’‘supra) in preceding assessment year. So, we also follow suitand reject the assessee’s relevant grounds.” 78 Respectfully following the said decision, we dismiss the ground raised
by the assessee on this issue.” 6.2 In view of the above findings of this Tribunal, we find no reason to interfere with the order of the Ld. CIT(A) on this issue and reject the grounds raised by the assessee.”
6. We heard the rival submissions. In view of the above findings of the Tribunal in assessee’s own case in the earlier assessment years, respectfully following it , we find no reason to interfere with the order of the Ld. CIT(A) and hence reject the corresponding grounds of the assessee’’. In view of the above findings of the Tribunal in assessee’s own case in the earlier assessment years, respectfully following the co-ordinate bench order referred supra we also reject and decide this ground against the assessee. Accordingly, this ground of assessee is dismissed.”
Respectfully following the decision of the co-ordinate Bench of this Tribunal in dated 31.01.2025, we also uphold the order of the CIT(A) on the issue of double taxation relief amounting to Rs.98.41 crores and reject the grounds raised by the assessee. Thus, the ground raised by the assessee is dismissed.
Additional Grounds: Additional grounds with regard to computation of income u/s.115JB, Non applicability of provisions of the section 115JB and various additions under MAT are not raised in the appeal by assessee separately, however raised during the course of hearing by way of chart. On the additional grounds, the ld. Counsel for the assessee pleaded that these issues are covered by the order of the Tribunal in earlier assessment year 2018-19 in dated 31.01.2025, & 777/Chny/2018 for AY 2014-15 in assessee’s own cases and by the Special Bench decision of this Tribunal in the case of Union Bank of India in ITA No.424/Mum/2024. We have perused the orders of the lower authorities and find that nothing is emanating from the impugned order. Hence, we refrain ourselves to decide these additional grounds as there are no discussion/facts in the order of AO or CIT(A) in these issues.
In the result, appeal filed by the assessee for AY 2020-21 is partly allowed for statistical purposes. (AY 2021-22) (Assessee’s appeal): 19. The assessee in the above appeal has raised three grounds namely (i)deduction u/s.36(1)(viia), (ii) Disallowance u/s.43B in respect of provision for leave encashment; & (iii) Tax relief u/s.90.
At the outset, the learned counsel for the assessee submitted that the first ground of appeal i.e, deduction u/s.36(1)(viia) is not pressed and prayed that the said ground may be dismissed as withdrawn. The Ld.DR has no objection for the same. In view of the above submission, we dismiss the ground no.1 raised by the assessee as withdrawn.
21. In regard to second ground raised by the assessee i.e, disallowance u/s.43B of the Act in respect of provision for leave encashment. We find that an identical issue raised by the assessee for the assessment year 2020-21 in has been decided by us hereinabove in para 9 &
10. The findings rendered by us on this issue for the assessment year 2020-21 in would apply mutatis mutandis to the AY 2021-22 as well to the appeal in ITA No.300/Chny/2024. Thus, the ground raised by the assessee is dismissed.
22. The third ground raised by the assessee for AY 2021-22 is in regard to restricting relief u/s 90 to the extent of foreign tax paid instead of tax charged on foreign income which is included in taxable Income.
23. We find that an identical issue raised by the assessee for the assessment year 2020-21 in has been decided by us hereinabove in para 15 to 17. The findings rendered by us on this issue for the assessment year 2020-21 in ITA No.299/Chny/2024 would apply mutatis mutandis to the AY 2021-22 as well to the appeal in ITA No.300/Chny/2024. Thus, the ground raised by the assessee is dismissed.
24. In the result, appeal filed by the assessee for AY 2021-22 is dismissed. (AY 2020-21) (Revenue’s appeal):
25. The grounds raised by the Revenue read as under:-
1. The order of the learned Commissioner of Income Tax (Appeals) in dated 12/12/2023 for the Assessment year 2020-21 is erroneous in law, facts and circumstances of the case.
2. The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs.3,96,50,286/- on account of the claim of expenditure of prior period debited to P&L account which was reported in the Tax Audit report in Form 3CD and the assessee could not demonstrate that the said prior period liability had crystalized during the relevant year.
The learned Commissioner of Income Tax (Appeals) erred in allowing depreciation @ 60% on ATM machines which fall under the category of "Plant & Machinery" and accordingly are entitled for depreciation only @ 15%.
The learned CIT(A) has erred in allowing the depreciation @ 60% on ATM machines by treating them as part of computer, without appreciating that the AO had rightly allowed depreciation @ 15% by treating it as part of any General Plant and Machinery equipment operated through Command or Software. 5. The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 11.89 crores on account of section 14A r.w Rule 8D, 1962 by relying upon the decision of the Hon'ble ITAT in its own case for the AY: 2015-16 in & 777/Chny/2018 dated 22/01/2022 wherein it has been held that the provisions of the section 14A cannot be invoked for investments held as Stock in trade which is contrary to the decision of Hon'ble Supreme Court in the case of Maxopp Investments Ltd (91 taxmann.com 154 )wherein it has been held that there is no distinction to be made whether the stocks are held as investment or are held as Stock in trade.
6. The learned CIT(A) has deleted the disallowance made u/s 37(1) of Rs.2.64 crores without appreciating that the said expenditure was of the nature of Penalty considering that it was made for non-adherence of internal directions of RBI for which explanation to Sec.37(1) is clearly applicable.”
The first ground raised
by the Revenue is in regard to addition made on account of claim of expenditure of prior period debited to profit & loss account amounting to Rs.3,96,50,286/- which was reported in Form 3CD. The learned AR for the assessee fairly admitted that similar issue raised by the Revenue in AY 2019-20 in assessee’s own case has been decided against the Revenue in & 525/Chny/2023 vide order dated 31.01.2025.
27. We find that while dealing with the issue of prior period expenses, the CIT(A) has followed the decision of the Mumbai Benches of this Tribunal in the case of Bank of India in & 3354/Mum/2011 for AY 2003-04 and extracted the order in page 33 of the impugned order. On identical issue, by following the decision of Mumbai Bench decision in the case of Bank of India (supra) the co-ordinate Bench of this Tribunal in dated 31.01.2025 held as under:- “We have gone through the orders of the lower authorities and we appreciate the submissions of the appellant that the liability to pay the said sums or the invoices for the said sums were received only in the current year and hence these cannot be treated as prior period expenses. The assessee has branches spread across the country, and settlement of claim and payment thereof is a continuous process and no expenditure can be treated as prior period expenses overlooking this fact. Hence, in the light of the order of the Tribunal referred supra we refrain from interfering in the order of the ld.CIT(A). Hence, the appeal of the revenue is dismissed.”
Since there is no change in the facts for the year under consideration, we respectfully following the decision of the Tribunal in the assessee’s own case cited supra, we see no infirmity in the order of the CIT(A) to uphold the same and reject the ground raised
by the Revenue. Thus, the ground raised by the Revenue is dismissed.
29. The next ground raised by the Revenue in its appeal for AY 2020-21 is in regard to claim of depreciation @ 40% on ATM machines. The AO restricted the claim of depreciation on ATM to 15%. On appeal, the CIT(A) by taking into consideration of the Tribunal in assessee’s own case for AY 2014-15 in & 948/Chny/2018 dated 22.01.2020 held that no disallowance is called for. We find the Tribunal in assessee’s own case for AY 2018- 19 in ITA No.524/Chny/2023 dated 31.01.2025 has decided the issue against the Revenue. Respectfully following the same, we reject the ground raised by the Revenue on the claim of depreciation on ATM. The ground raised by the Revenue is dismissed.
30. The next ground raised by the Revenue for AY 2020-21 is against deletion of addition amounting to Rs.11.89 crores u/s.14A r.w. Rule 8D. We find that the co-ordinate Bench of this Tribunal in vide its order dated 31.01.2025 remitted the issue back to the file of the AO for fresh consideration. We also direct the AO to follow the same direction of the Tribunal in vide its order dated 31.01.2025. We do so accordingly.
31. The next ground raised by the Revenue for AY 2020-21 is in regard to deletion of disallowance u/s.37(1) of the Act amounting to Rs.2,63,70,000/-. The assessee has paid said amount to RBI for not following internal guidelines laid down as reported in Tax Audit report which is not in nature of penalty.
32. We have gone through the impugned order of the CIT(A), wherein by following ratio laid down by the decision of the Mumbai Benches of the Tribunal in the case of IDBI Bank Ltd. in & 3849/Mum/2019, on identical facts, deleted the addition made on account of penalty u/s.37(1) of the Act. Therefore, we see no infirmity in the order of the CIT(A) and thus reject the ground raised by the Revenue. In result, revenue appeal is dismissed.
(AY 2021-22) (Revenue’s appeal): 1. The order of the learned Commissioner of Income Tax (Appeals) in dated 12/12/2023 for the Assessment year 2021-22 is erroneous in law, facts and circumstances of the case.
The Ld. Commissioner of Income tax(Appeals) erred in directing the Assessing officer to consider the aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month while computing deduction u/s 36(1)(viia) of the Act.
3. The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs.2,65,33,671/- made on account of the claim of expenditure of prior period debited to P&L account without appreciating that the audit report in Form 3CD clearly showed that these expenses pertain to previous year and not for the year under consideration and that the assessee was unable to demonstrate that the said expenditure has crystalized during the relevant year. 4.The learned Commissioner of Income Tax (Appeals) erred in not appreciating that the Assessing Officer had correctly disallowed the excess claim of the assessee of depreciation on ATM, which are classified as "other plant and machinery" and therefore are eligible for depreciation @ 15% only.
The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 1.36 crores on account of section 14A r. w Rule 8D, 1962 by relying upon the decision of the Hon'ble ITAT in its own case for the AY: 2015-16 in & 777/chny/2018 dated 22/01/2022 wherein it has been held that the provisions of the section 14A cannot be invoked for investments held as Stock in trade which is contrary to the decision of Hon'ble Supreme Court in the case of Maxopp Investments Ltd(9i taxmann.com154)wherein it has been held that there is no distinction to be made whether the stocks are held as investment or are held as Stock in trade.
The learned Commissioner of Income Tax (Appeals) erred in deleting the addition made by the AO of Rs.1.59 crores related to recovery of bad debts written off which were not allowed as deduction at the time of written off, by relying upon the decision of the Hon'ble ITAT in assessee's own case for the AY 2014-15 wherein the AO was directed to verify if the bad debts written off in respect of recovery were allowed in earlier years and as such no blanket relief was allowed but the same has been given by the Learned CIT(A) for the relevant year.
The learned Commissioner of Income Tax (Appeals) erred in holding that the provisions u/s 115JB for computation of book profits are not applicable in respect of Banks which are governed by Banking Regulatory Act, 1949.”
Deduction u/s 36(1)(viia) based on advance outstanding and not on incremental advances: Before us, the ld. Counsel for the assessee submitted that this issue has been allowed in favour of assessee by the co-ordinate bench order of the Tribunal in assessee’s own case in & 777 /Chny/2018 for AY 2014-15.
We have gone through the co-ordinate bench order of the Tribunal in assessee’s own case referred supra and respectfully following the Hon’ble jurisdictional High Court in the case of City Union Bank judgment [TCA 961 of 2010] Para 10.2-12, we also remit this issue to AO for quantification of the deduction allowable. The AO is directed to proceed with the quantification of the deduction as per the judgment of the Hon’ble jurisdictional High Court delivered in the case of City Union Bank referred supra and shall complete the said exercise, after providing due opportunity to the respondent. Accordingly, this ground of revenue is allowed for statistical purposes.
Prior period expenses: We find that an identical issue raised by the assessee for the assessment year 2020-21 in has been decided by us hereinabove in para 26 to 28. The findings rendered by us on this issue for the assessment year 2020-21 in would apply mutatis mutandis to the AY 2021-22 as well to the appeal in . Thus, the ground raised
by the revenue is dismissed.
36. Depreciation on ATM at 40%: We find that an identical issue raised by the assessee for the assessment year 2020-21 in has been decided by us hereinabove in para
29. The findings rendered by us on this issue for the assessment year 2020-21 in ITA No.354/Chny/2024 would apply mutatis mutandis to the AY 2021-22 as well to the appeal in . Thus, the ground raised by the revenue is dismissed.
37. Disallowance u/s 14A: We find that an identical issue raised by the assessee for the assessment year 2020-21 in has been decided by us hereinabove in para
30. The findings rendered by us on this issue for the assessment year 2020-21 in would apply mutatis mutandis to the AY 2021-22 as well to the appeal in . Thus, AO is directed to follow the same.
38. Recovery in respect of bad debts written off relating to rural branches: The AO held that the appellant has not filed evidences to prove that this sum was already taxed in the earlier years. The appellant submitted that orders for the earlier years are available with the revenue wherein the bad debts written off of the rural branches have never been allowed by the revenue hence no need to file evidences. As stated by the ld. Counsel for the assessee that this issue has been allowed in favour of assessee by the co-ordinate bench of the Tribunal in assessee’s own case in & 777 /Chny/2018 for AY 2014-15 and for AY 2018- 19.
In view of the above orders of the Tribunal in assessee’s own case in the earlier assessment years, respectfully following the co- ordinate bench order referred supra we also allow and decide this ground in favour of assessee and against the revenue. Accordingly, this ground of revenue is dismissed.
Non-applicability of provisions of section 115JB: This ground has been allowed in favour of assessee by the co- ordinate bench of the Tribunal in assessee’s own case in & 777 /Chny/2018 for AY 2014-15 which held as under: ‘’29. On the issue of applicability of provisions of section 115JB, the Ld. AR relied on the order of the Calcutta ITAT in the case of UCI Bank (2015) 64 Taxmann.com 51 and Damodar Valley Corporation in ITA No. 438/Kol/2017, which is relied on by the Ld. CIT(A) in allowing the appeal in its favour.
We heard the rival submissions. Since, the Ld. CIT(A) has followed and applied the decision of Calcutta ITAT in the case of UCI Bank (2015) 64 Taxmann.com 51 and Damodar Valley Corporation in we do not find any reason to interfere with the order of the Ld. CIT(A) and hence, the corresponding grounds of the Revenue on this ground as well as the other grounds raised
by the Revenue with regard to the various additions made in computing book profits are dismissed’’. It is also pointed out that this issue has been decided by the Special Bench of Tribunal Mumbai in the case of Union Bank of India [ITA 424/Mum/2020]. Hence, respectfully following the co-ordinate bench order referred supra we also decide this ground in favour of assessee and against the revenue. Accordingly, this ground of Revenue is dismissed.
41. In the result, appeal filed by the revenue for AY 2021-22 is partly allowed for statistical purpose.
Order pronounced in the open court on 30th May, 2025