BOB FINANCIAL SOLUTION LTD.,MUMBAI vs. DCIT ,CIRCLE 2 (1)(1), MUMBAI

1 • BOB Financial Solutions Limited Assessment Year: 2014-15 आयकर अपीलीय अिधकरण “बी” "ायपीठ मुंबई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI माननीय "ी महावीर िसंह, उपा"" एवं माननीय "ी मनोज कुमार अ"वाल ,लेखा सद" के सम"। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकरअपील सं./ I.T.A. No.1207/Mum/2019 (िनधा"रण वष" / Assessment Year: 2014-15 ) BOB Financial Solutions Ltd. DCIT–Circle-2(1)(1) 2nd Floor, Baroda House बनाम/ 561, 5th Floor S.V. Road, Jogeshwari (W) Aaykar Bhavan, MK Marg Vs. Mumbai-400 062 Mumbai-400 020 "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACB-1989-L (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Kishor C. Dalal-Ld.AR Revenue by : Shri Rahul Raman –Ld. CIT-DR सुनवाई की तारीख/ : 24/02/2021 Date of Hearing घोषणा की तारीख / : 15/03/2021 Date of Pronouncement आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2014-15 contest the order of Ld. Commissioner of Income-Tax (Appeals)-4, Mumbai [CIT(A)], Appeal No.CIT(A)-4/IT-236/ACIT-2(1)(1)/2016-17 dated 06/12/2018 on following grounds of appeal : - 1) On the facts and circumstances of the case and in law learned Assessing Officer erred in disallowing TDS paid on License Fees on VISA Cards as per agreement with VISA Card of Rs.49,36,262/- and Commissioner of Income Tax (Appeals)-4, Mumbai erred in confirming the same.

2 • BOB Financial Solutions Limited Assessment Year: 2014-15 2) On the facts and circumstances of the case in law the learned Assessing Officer erred in making addition of Rs.19,30,95,394/- being provision for Card receivable written back while computing book profit under Section 115JB and Commissioner of Income Tax (Appeals)-4, Mumbai erred in confirming the same.”

3 • BOB Financial Solutions Limited Assessment Year: 2014-15 r.w.s. 195A since the payment was over and above service charges payable to two non-resident entities. The attention was drawn to favorable orders of Tribunal for AYs 2003-04 to 2005-06, 2007-08 to 2008-09, 2010-11 and 2011-12. However, Ld. AO opined that the payment was not the liability of the assessee and secondly, the copies of respective agreements were not furnished by the assessee. Further, TDS being part of advance income tax would not be an allowable deduction to the assessee since the expenditure could not be said to have been incurred wholly and exclusively for business purposes. In the aforesaid background, the deduction so claimed was denied to the assessee. 5.2 Upon further appeal, Ld. CIT(A), relying upon appellate order for 2015-16 denied deduction of TDS paid for VISA Card payments but allowed deduction of TDS paid for Master card payments. Aggrieved, the assessee is in further appeal before us. 5.3 We find that assessee assailed the appellate order for AY 2015-16 before this Tribunal vide ITA No.6724/Mum/2018 order dated 05/02/2020 wherein the matter was adjudicated as under:- 5. After careful consideration of factual matrix as enumerated hereinabove, we find the dispute to be in narrow compass. We find that primary reason to confirm the disallowance on VISA card is the fact that the terms of Master Card and VISA cards have been found to be at variance. As noted by Ld, CIT(A), Article-11 of agreement with VISA cards mandated assessee to provide proof of payment of taxes and nothing more and there were no specific stipulations that the payment of the same would constitute assessee's liability. However, the fact that whether the said expenditure was reimbursable by VISA or not, was not brought on record. The answer to the same would be vital to clinch the issue in proper perspective. Obviously, if the expenditure was non reimbursable in nature and it was borne by the assessee himself, the same would certainly become assessee’s liability and hence an allowable expenditure as held in earlier years. On the contrary, if the expenditure was reimbursable in nature, it would materially alter the assessee's claim of deduction. The submissions made by Ld. AR also do not throw much light

4 • BOB Financial Solutions Limited Assessment Year: 2014-15 on this fact and the observation made by Ld. CIT(A) has remained unaddressed. Therefore, with a view to bring on record clear facts and to dispel the concerns raised by Ld. DR, we restore the matter back to the file of Ld. CIT(A) with a direction to ascertain the correct facts. The assessee is directed to provide the requisite details / information. Needless to add that, if the expenditure was non- reimbursable in nature, the same would be an allowable deduction otherwise not.

Facts as well as the issue being identical, this issue stand restored back to the file of Ld. CIT(A) with similar directions. The ground stands allowed for statistical purposes. 6. Write-back of provision for Card NPA 6.1 While computing Book Profits u/s. 115JB, the assessee reduced ‘provision of card receivables written-back’ amounting to Rs.19.30 Crores. However, the provision for card receivable, in earlier years, was not added back to compute Book Profits for AYs 2007-08 to 2010-11. Therefore, Ld.AO opined that reduction in Book Profits would not be available to the assessee in this year. 6.2 The assessee submitted that write-back represents provisions of NPA made in earlier years following RBI guidelines. The company made provision for NPA during financial years 2006-07 to 2009-10. The same was voluntarily disallowed against the net profit under normal tax provisions in earlier assessment years and therefore, the same has been reduced while computing income under normal provisions as well as while computing Book Profits u/s 115JB. The assessee also submitted that during AYs 2007-08 to 2010-11, the assessee was incurring business losses and therefore, as per advice of tax auditor, the book profits in return of income were shown as ‘Nil’ without making any 5 • BOB Financial Solutions Limited Assessment Year: 2014-15 adjustment as provided in Sec. 115JB as it had no impact on assessee’s tax liability. 6.3 However, Ld. AO rejected the plea on the ground that assessee’s book profit were not increased for AY 2010-11, and therefore, provisions written-back as reduced by the assessee, was added back to the Book Profits u/s 115JB. Upon further appeal, Ld. CIT(A) chose to confirm the stand of Ld. AO by relying upon appellate order for AY 2012-13. 6.4 We find that the assessee assailed this issue for AY 2012-13 before this Tribunal in cross-appeals ITA No.4485 & 4297/Mum/2017 order dared 07/05/2019 wherein the matter was adjudicated as under: -

5.1 We have carefully considered the rival submissions and perused relevant material on record and deliberated on judicial pronouncements as cited before us. The basic facts are not under dispute. So far as the nature of provisions of card receivables is concerned, we find that Hon’ble Apex Court has succinctly carved out the fine distinction between debts payable by the assessee vis-à-vis debts receivable by the assessee in the cited case of CIT Vs. HCL Commet Systems & Services Ltd. [305 ITR 409] in the following manner: - As stated above, the said Explanation has provided six items, i.e., Item Nos.(a) to (f) which if debited to the profit and loss account can be added back to the net profit for computing the book profit. In this case, we are concerned with Item No. (c) which refers to the provision for bad and doubtful debt. The provision for bad and doubtful debt can be added back to the net profit only if Item (c) stands attracted. Item (c) deals with amount(s) set aside as provision made for meeting liabilities, other than ascertained liabilities. The assessee's case would, therefore, fall within the ambit of Item (c) only if the amount is set aside as provision; the provision is made for meeting a liability; and the provision should be for other than ascertained liability, i.e., it should be for an unascertained liability. In other words, all the ingredients should be satisfied to attract Item (c) of the Explanation to Section 115JA. In our view, Item (c) is not attracted. There are two types of "debt". A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case "debt" under consideration is "debt receivable" by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, in our view Item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the AO was not justified in adding back the provision for doubtful debts of Rs.92,15,187/- under clause (c) of the Explanation to Section 115JA of the 1961 Act. With a view to overcome the same, clause (i) was added to Explanation-1 to Section 115JB with retrospective effect from AY 2001-02 vide Finance (No.2) Act, 2009 which provided that the Book Profits should be increase by the amount set aside as provision for diminution in the value of any 6 • BOB Financial Solutions Limited Assessment Year: 2014-15 asset. It is undisputed fact that the assessee had filed return of income for AY 2007-08 much before the date of the said amendment and therefore, the said amendment could not be given effect to by filing revised return of income u/s 139(5) which already expired on 31/03/2009. 5.2 Proceedings further, it is also an undisputed fact that the write-back of Rs.363.37 Lacs has been made out of provisions of Rs.3449.82 Lacs made in AY 2007-08. Nothing on record controvert the aforesaid fact. We find that in AY 2007-08, the assessee had book losses of Rs.4601.10 Lacs and even after adding back the said provisions as envisaged by the amendment, the resultant figure would have still been a negative figure and the assessee would not have any liability to pay tax u/s 115JB. Therefore, we find substantial force in these arguments raised by Ld. AR before us. 5.3 Lastly, it is also evident from assessment order dated 27/01/2014 of immediately preceding AY 2011-12 that similar treatment given by the assessee to write-back of Rs.1899.12 Lacs in that year has been accepted by the revenue since no computation of Book Profit has been made in the assessment order. Therefore, following the principle of consistency, the assessee’s claim was to be accepted, there being no change in factual matrix. 5.4 Bearing in mind the aforesaid factual matrix, we are of the considered opinion that the assessee was entitled for deduction of write-back while computing Book Profits u/s 115JB for the impugned AY. We order so. Ground No. 1 stand allowed.”

We find the factual matrix to be similar in this year. The learned CIT(A) has confirmed the order of Ld. AO by following appellate order for AY 2012-13 which stood reversed by this Tribunal. Therefore, respectfully following earlier view of the Tribunal in AY 2012-13, we hold that the assessee was entitled for deduction of write-back while computing Book Profits u/s 115JB. The Ld. AO is directed to re-compute Book Profits u/s 115JB. The ground thus raised stand allowed. 7. The appeal stand partly allowed in terms of our above order. Order pronounced on 15th March, 2021. (Mahavir Singh) (Manoj Kumar Aggarwal) उपा"" / Vice President लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated : 15/03/2021 Sr.PS, Jaisy Varghese आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant 1. ""थ"/ The Respondent 2. आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड"फाईल / Guard File 6. 7 • BOB Financial Solutions Limited Assessment Year: 2014-15

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.