DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1), HYDERABAD vs. UNION BANK OF INDIA, HYDERABAD

ITA 316/HYD/2019Status: DisposedITAT Hyderabad21 April 2025AY 2015-1643 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that for investments that are in the nature of stock-in-trade, there is no infirmity in the method of valuation adopted by the assessee, and the AO is directed to accept it. However, for investments not in the nature of stock-in-trade, they are to be valued at cost, and no depreciation will be available. This means the ground related to depreciation on investments is partly allowed for statistical purposes. The Tribunal also noted that the issue regarding depreciation on investments was covered in favour of the assessee by its own case for AY 2012-13, which followed the decision for AY 2006-07. In that decision, the Tribunal held that government securities held to comply with SLR requirements are stock-in-trade, and depreciation in their value is an allowable deduction, including those classified under HTM. The Tribunal upheld the CIT(A)'s findings on this aspect, directing the AO to follow the earlier order. The Tribunal's decision on the provision for NPA is not explicitly detailed in the provided excerpt, but the overall result indicates a partial allowance.

What were the facts?

The assessee, Union Bank of India, filed its return of income for Assessment Year 2015-16. The Assessing Officer (AO) completed the assessment by making several additions, including provision for bad and doubtful debts, disallowance of deduction under Section 36(1)(vii), disallowance under Section 14A, disallowance of provisions for wage arrears, and disallowance of depreciation on investments. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal. Both the assessee and the revenue have filed cross-appeals before the Income Tax Appellate Tribunal (ITAT). The ITAT is hearing appeals arising from the order dated 07.12.2018 passed by the Ld. CIT(A). The total income assessed by the AO was Rs.3764,77,47,070/-.

What were the issues?

1. Whether the provision created for Non-Performing Assets (NPA) by the assessee bank constitutes a provision for bad and doubtful debts eligible for deduction under Section 36(1)(viia) of the Income Tax Act, 1961 (the Act)? The assessee argued that the provision for NPA is substantively a provision for bad and doubtful debts, and the nomenclature used should not prevent the deduction. The revenue contended that the AO and CIT(A) disallowed the claim without considering the substance. 2. Whether the ITAT's prior decision in the assessee's own case for AY 2012-13, which allowed deduction for diminution in value of investments, including those classified as 'Held to Maturity' (HTM), is applicable to the current assessment year? The assessee argued that the issue is covered by the Tribunal's decision in its own case for AY 2006-07 and 2012-13, where it was held that investments held to comply with SLR requirements constitute stock-in-trade and depreciation is allowable. The revenue argued that the CIT(A) erred in deleting the addition as the diminution in value was not provided for in the books and that HTM securities should not be treated as stock-in-trade.

Which sections of the Income-tax Act were involved?

Section 36(1)(viia),Section 36(1)(vii),Section 14A,Section 143(3)

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Income Tax Appellate Tribunal, Hyderabad B’ Bench, Hyderabad

Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA

For Appellant: Shri S. Ananthan, C.A. &, Smt. Lalitha Rameshwaran, C.A, Ms. M Narmada, CIT-DR
For Respondent: Ms. M Narmada, CIT-DR
Hearing: 10.02.2025

Heard together (2 matters)

ITA No.193/Hyd/2019
ITA No.316/Hyd/2019

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

PER MADHUSUDAN SAWDIA, A.M. : These cross appeals are filed by Union Bank of India (“the assessee”) and the revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-1, Hyderabad (“Ld. CIT(A)”), dated 07.12.2018 for the A.Y. 2015-16. Since the issues are inter-connected, they are heard together and are bei

The order continues below.

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