DCIT - 2(2)(1), MUMBAI vs. STATE BANK OF HYDERABAD, MUMBAI

Date of Hearing 03/10/2019 Date of Pronouncement 15/10/2019 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):

These cross appeals filed by the assessee, as well as the revenue are directed against separate, but identical orders of the Commissioner of Income Tax (Appeals)–5, Mumbai, all dated 31/01/2018 and they pertains to AY 2014-15 and 2015-16. Since, the facts are identical and issues are common, for the sake of convenience, these appeals filed by the assessee, as well as the revenue were heard together and are disposed-off by this consolidated order.

3 State Bank of India (Successor to State Bank of Hyderabad)

ITA.No’s 2608 & 2772/Mum/2018 for AY’s 2015-16:-

Further, the Ld. AO in order giving effect to Ld.CIT(A) order dated 31/01/2018 allowed relief to the assessee in respect of disallowances of deduction claimed u/s 36(1) (viia) and 36(1)(viii) of the I.T.Act, 1961. Therefore, there is nothing to challenge before the ITAT by the assessee, as well as the revenue and hence, peeal filed by the assessee and reveune may be dismissed. We find that the Ld. CIT(A) has set aside the issue of additions made towards disallowance of deduction claimed u/s 36(1) (viia) and 36(1)(viii) of the I.T.Act, 1961and said findings have been challenged by the assessee, as well as the revenue. We, further noted that the Ld. AO had allowed relief to the assessee in order giving effect to Ld.CIT(A) order, in order dated 29/03/2019. Therefore, we are of the considered view that the appeals filed by the assessee, as well as the revenue for AY 2015-16 becomes infructuous and hence, both

4 State Bank of India (Successor to State Bank of Hyderabad) appeals filed by the assessee, as well as the revenue are dismissed as non maintainable.

ITA.NO.2647 and 2771/Mum/2018 for AY’s 2014-15:

5 State Bank of India (Successor to State Bank of Hyderabad)

1961 before completion of assessment proceedings relevant assessment year shall needs to be considered, instead of reserves created during the relevant financial year. If, reserve created by the assessee during subsequent financial years and also, amount transferred to general reserves have been considered, then amount transferred to special reserve account u/s 36(1)(viii) of the I.T.Act, 1961 is more than the amount of deduction claimed u/s 36(1)(vii) for the AY 2014-15 and hence, no disallowance could be made. In this regard, he relied upon the decision of ITAT, Bangalore Bench in the case of Vijaya Bank vs JCIT (LTU) in vide order dated, 05/01/2018.

6 State Bank of India (Successor to State Bank of Hyderabad) as, disallowance of deduction claimed u/s 36(1)(viia), there is no dispute, because the Ld.AO in order giving effect to the order of CIT(A), dated 08/11/2019 allowed relief to the assessee. Therefore, nothing is survived to challenge before the AO, in respect of said addition and hence, ground taken by the assessee, as well the revenue in this regard are rejected. Insofar as, disallowance of deduction claimed u/s 36(1)(viii) of the I.T.Act, 1961, amounting to Rs. 311 crores, the Ld. AO has allowed an amount of Rs. 116 crores, on the basis of amount transferred to special reserve account for the year under consideration and balance addition has been sustained. The assessee has argued for deletion of balance amount sustained by the AO, in the light of decision of ITAT, Bangalore bench, in the case of Vijaya Bank (Supra) and argued that even, reserve created in subsequent/succeeding years, however before finalization grant of deduction u/s 36(1)(viii) of the I.T.Act, 1961, i.e, as per date of order of assessment is required to be considered, while allowing the claim for deduction u/s 36(1)(viii) of the I.T.Act, 1961. We find that provision of section 36(1)(viii) is very clear as per which deduction is allowed only, if assessee creats and transfers amount to specil reasrve account. Unless, the assessee transferred amount to special reserve accounted created and maintained subject to certain conditions during the relevant financial year itself,

7 State Bank of India (Successor to State Bank of Hyderabad) deduction for the same cannot be allowed u/s 36(1)(viii) of the I.T.Act, 1961. Although, the co-ordinate bench of ITAT, Bangalore has held that reserve created in subsequent /succeeding years however, before the finalization of deduction u/s 36(1)(viii) of the I.T.Act, 1961 needs to be considered while allowing claim for deduction, but on consideration of provisions of section 36(1)(viii) of the Act, we are of the considered view that the findings recorded by the Tribunal is contrary to the law as set out in provisions of section 36(1)(viii) of the I.T.Act, 1961 and hence, the case laws relied upon by the assessee is not considered. Therefore, we are of the considered view that there is no error in the findings recorded by the Ld. AO, while allowing relief to the assessee to the extent of Rs. 116 crores, which is equivalent to amount transferred to special reserve account created and maintained by the assessee u/s 36(1)(viii) of the I.T.Act, 1961. Accordingly, we reject ground taken by the assessee, as well as the revenue.

8 State Bank of India (Successor to State Bank of Hyderabad)

Order pronounced in the open court on this 15 /10/2019