ACIT LTU 2, CHENNAI vs. INDIAN OVERSEAS BANK, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

Assessee’s appeal in ITA No. 777/2018:

“ITA No.496 & 497/2015: 8. We heard the rival submissions and perused the material on record and judicial decisions, circulars, provisions and also bank regulations. The assessee has raised various grounds in respect of one substantive issue that the Commissioner of Income Tax order is bad in law and also deduction u/s.36(1)(vii) and 36(1)(viia) shall be in respect of both bad and doubtful debts irrespective of rural or urban debts. The legislative intention of decision of Catholic Syrian Bank was to protect the rural farmers and also benefit given without actual write off in the actual Books of Accounts though the principle was considered in the earlier years and the :-3-: & 777/Chny/2018

Department has accepted and passed the order. On the decision of the allowability of Sec.36(1)(viia) we relied on the Co-ordinate decision of Lakshmi Vilas Bank in to 1209/Mds/2014 dated 29.01.2016, where it has been held in detail at para 90 to 93 in page no. 60 to 63 90. After examining the various Circulars issued by the Board in relation to section 36(1)(viia) and 36(1)(vii) and also the Statement of Objects and Reasons to the Finance Act 1986, the Hon'ble Supreme Court came to the conclusion that the legislative intention behind the introduction of section 36(1)(viia) was to encourage rural advances and to aid creation of the provision for bad debts in relation to such rural branches. Some of the salient findings of the Hon'ble Supreme Court are as follows: • A mere provision for bad and doubtful debts is not an allowable deduction in the computation of taxable profits. However, in the case of rural advances, in line with the policy to promote rural banking, a provision may be allowable u/s Sec.36(1)(viia), without insisting on an actual write- off. • Provisions of sections 36(1) (vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and they operate in their respective fields. • A scheduled bank may have both urban and rural branches. It may give advances from both branches with separate provision accounts for each. In the normal course of its business, an assessee bank is to maintain different accounts for the rural debts and for non-rural/urban debts. Maintenance of such separate accounts would not only be a matter of mere convenience but would be the requirement of accounting standards. • The bad debts written off in debts, other than those for which the provision is made under clause (viia), will be covered under the main part of Section 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). • In case of rural advances which are covered by clause (viia), there would be no double deduction. The proviso, in its terms, limits its application to the case of a bank to which clause (viia) applies. Indisputably, clause (viia) applies only to rural advances.

• If the amount of bad debt actually written off in the accounts of the bank represents only debt arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). • A statue is not normally construed to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. • Proviso to sec 36(1)(vii) would not permit benefit of double deduction, operating with reference to 'rural' loans, while under Section 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year.

:-4-: & 777/Chny/2018 of interpretation and construction of the relevant sections. Thus, the judgement is a comprehensive one which has considered the ratios laid down by various courts, the implications of Board's circulars and accounting standards.

Considering the facts of the Co-ordinate decision where the provision has been restricted to the extent of rural branches only. We confirm the findings of the Commissioner of Income Tax on the issue of rural branches following the Catholic Syrian Bank decision and uphold the order of the Commissioner of Income Tax. Accordingly, the appeal of the assessee in is dismissed.

“60. We have perused the above order of the co-ordinate Bench of thisTribunal in dated 2.4.2013 and find that the :-5-: & 777/Chny/2018

Tribunal has decided both these issues against the assessee by dismissing the grounds observing as under.’-

“4. The third ground of appeal of the assessee is regarding restriction of claim in respect Of deduction under section 36(1)(viia) to the extent of provision made in the books. The Aft. for the assessee has conceded that this issue has already been decided against the assessee bank in the case of Bharat overseas Bank Ltd. in ITA No. 1191/Mds/2012. This issue had also come up before the Tribunal in relevant to the assessment year 2007-08. The findings of the Tribunal are reproduced herein below:

“7. We have perused the orders and heard the rival submissions. The original claim, which was allowed by the Assessing Officer under Section 36(1)(viia) of the Act, was as follows:

Thereafter, assessee had moved in appeal against some of the additions made by the Assessing Officer on other issues and pursuant to the relief granted in such appeal, the gross total income which earlier stood at I76,54,31,493/- came down to I 35,38,65,546/-. As a result of the reduction in gross total income, deduction under Section 36(1)(viia) was also scaled down from Rs, 74,07,362/- to Rs.2,65,39,916/-. This sum when aggregated with 10% of rural advances coming to , 72,65,099/-, resulted in the sum of 5,38,05,015/- being eventually allowed as deduction under Section 36(1(viia), of the Act In the books of the assessee, actual provision for bad and doubtful debts was only ‘ 4,01,44,027/-. Assessee had also made a provision of I2.23 crores on its standard assets, If the provision for bad and doubtful debts alone was considered, then the total allowance under Section 36(1))(viia) was in excess of such provision. However, if the provision for standard assets was also considered as provision for bad and doubtful debts,then the total provision could go up toI 6,24,44,027I-. Then of course, assessee’s claim as finally allowed was well within the limits specified under Section 3(1)viia of the Act. At this juncture, a look at Section 36(1)(viia) is necessary and this is reproduced hereunder, for brevity.’

36(1)(viia,) a scheduled bank [not being a bank incorporatedby or under the laws of a country outside India or a nonscheduled bank for a co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-ha/f per cent] of the total income (‘computed before making any deduction under this clause and chapter VLV and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner.” it is clear from the above that it is not a standard allowance which is given, but, the allowance is subject to the actual provision made by the assessee, which in no case shalt exceed 7.5% of the gross total income. Therefore, the argument of the assessee that whatever the provision it had actually made in its books, a provision of 7.5% of the gross total income had to be allowed, is not in accordance with law. Now

:-6-: & 777/Chny/2018 considering the second aspect, whether provision for standard assets could be considered as provision for bad and doubtful debts, admittedly a provision on standard assets is not against any debts which had become doubtful. Standard assets are alwaysconsidered recoverable, in the sense, bank has no doubt of recoverability. When the bank itself has treated such assets as good and recoverable, any provision made on such assets cannot be considered as a provision for bad and doubtful debts. The debt itself being good, a provision made on good debt cannot be considered as a provision for bad and doubtful debts, May be, the RB! has made a for 10% provision for standard assets also a norm. This can however be considered as ameasure prescribed in abundant caution, to deal with a situation where banks are not to suffer shock of sudden delinquency that could happen in future, There is always a possibility that an asset, which is fully recoverable may not be so at future date. Nevertheless, possibility of happening of such a contingency cannot be a sufficient reason to consider a provision made on standard assets also as a provision forbad and doubtful debts, Therefore, claim of the assessee that provision for standard assets also has to be considered for applying the condition sat out under Section 36(1)(viia) is not in accordance with law. If the provision for standard assets is not considered as provision for bad and doubtful debts, the actual provision for bad and doubtful debts made by the assessee in its booksI4,01,44,027/- fall much below the sum of I5,38,05,015/- allowed by the Assessing Officer. in any case, a look into the original assessment order clearly show that but for the deduction allowed to the assessee as claimed by it in its return, there was no discussion as to how Section 36(1)(viia) was applied and whether the limits were corrected worked out Admittedly, no question was asked to the assessee during the course of assessment proceedings also with regard to the claim made by it under Section 36(1)(viia), insofar as it concerns the quantum of such claim. This obviously show that there was no application of mind by the Assessing Officer at the time of assessment. Assessing Officer had not come to any conclusion at all having not considered the claim in the light of the conditions set out in Section 36ft’viia of the Act. We cannot say that he had taken a view which was in accordance with law. It is not a case where the Assessing Officer had adopted one of the courses possible in law. Of course, a cryptic order of the Assessing Officer by itself may not show that there was no thought given: by him on a claim of the assessee. However, here there was io enquiry made during the course of assessment proceedings. Therefore, the order which was silent on the claIm made by the assessee, andallowing such claim, without any discussion,: will definitely render it erroneous and prejudicial to the interests of Revenue.As held by Hon’b!e Apex Court in the case of Malabar industrial Co. Ltd. v. lT (243 ITR 83, prejudicial to the interests of the Revenue” is a term of wide import and not confined to loss of tax. An order without application of mind is definitely prejudicial to the interests of the revenue. We are in agreement with Id. CIT that the order of Assessing Officer was insofar as it was prejudicial to the interests of Revenue.No interference is required.

:-7-: & 777/Chny/2018

4. 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.

“ 6.1 On hearing rival contentions, we find that this issue was decided against the assessee in its own case for the assessment year 2011-12 in vide order dated 03.04.2017. The relevant portion of the said order is extracted here under:- 18. The last ground: in this appeal is with. regard to restricting the relief u/s.90 to the extent of tax paid in the foreign country.

:-8-: & 777/Chny/2018

21. The seventh substantive ground challenges the ClTA’sorder restricting relief 90% of the tax paid in foreign countries 22. Factual backdrop qua this issue is that the assesseehadraised a claim of double taxation relief in memo of income from its overseas branches in south Korea, Singapore, Thailand, SrilankaandHong Kong amounting to I357,573I- I21,32,37,338/-I7,84,71,232, ,I42,94,845/- and I39,80,57,968/- respectively. Its thrust was upon various Double Taxation Avoidance Agreements DTAAs between India and the said countries except Hong Kong. The Assessing Officerhad restricted this relief @ 16.5% Le the prevailing tax rate in Hongkong. Thereafter, he distinguished case law PVAL .Kulandaganchettiarvs CIT, 267 ITR 654 by observing that contrary to the facts ofthis case, ShriChéttiar was fiscally domiciled in Malaysia and did nothave any permanent establishment in India. On DTM with southKorea, the Assessing Officer was of the view that the terms contained therein did not give exclusive rate of tax to the concerned country and it had only provided for credit methodof relief in double taxation.Accordingly, he declined to accept the assesse’s claim. 23. Coming to the DTMs between India and Singapore, ThailaridandSrilanka, the Assessing Officer observed that they also recognized ‘credit’ method. He alleged the assessee not to have provided anydifference in rates of tax in the above stated tax jurisdictions.Simultaneously, the Assessing Officer held that on furnishing detailsonassessee’s part; the claim would be allowed in its favour. Thisresulted in disallowance/addition of 55, 65,44,48/-. 24.in lower appellate order, the CIT(A) has quoted a notification No. SO 2123(E) dated 28.8.2008 reported as 304 ITR(St )63, clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by ‘elimination’ method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to 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. 25. 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 :-9-: & 777/Chny/2018 the Ld. CIT(A) and hence reject the corresponding grounds of the assessee.

“ 7. The next issue raised by the assessee is with regard to denial of depreciation on goodwill and the Ld. AR submitted that the Bank had during the year ended 31.01.2010 taken over assets &liabilities of Shree SuvamaSahakari Bank Ltd. The excess of Liabilities over Assets amounting to I246,52,02,148/- has been treated as Goodwill, Depreciation on the said amount of Goodwill based on the WDV as on 01.04.2012 of Rs. 26,00,01,789/- has been claimed as deduction basedon the decision of Supreme Court in the case of CIT vsSmift Securities Ltd (Civil Appeal No.5961 of 2012 (Arising out of SLP (c) No.35600 of 2009) dated 22.08.2012.The AO rejected this claim on the following reasons: “As held by the assessee, assessee has taken over the specific asset and liabilities of M/s.ShreeSwatnaSahakari Bank Ltd as existing as on 19.05.2009 as per the approval of RBI. Accordingly it resulted in excess of liabilities over assets absorbed on account of absorption scheme of RB1. The liabilities are balance sheet entries and same will be considered as and when incurred or paid as per the provisions of IT Act. Considering such liabilities as good will is neither justifiable nor based on any prudent accounting norms/methods of due diligence. Assessee’s contention is devoid of merits and support of law. • As per the definition of the goodwill as made in the provisions of IT Act the same is read as under:- From the above it is clear that the assessee merely equated excess liabilities as attributable to goodwill on account of absorption scheme In fact it is opposite to the goodwill as defined in the IT Act as above and same do not qualify asset leave alone intangible asset as it is a liability. Hence assessee’s contention to that liability. Hence assessee’s contention to treat liability as an intangible asset if far stretched and contrary to the provisions of IT Act in latter and spirit. Assessee was requested to reconcile the good will as reflected in the books of the absorbed concern i.e. M/s1Shree SwarnaSahakariBank Ltd as appearing in their block of assets prior to its absorption Hence assessees notional working of goodwill based on excess liabilities is not allowable as intangible asset qualified under good will. • Any absorption scheme surplus of asset over liabilities has to be taken to reserves account of balance sheet. Subsequent to absorption as held byHon’ble ITAT in the case of Spencer and Company Ltd of ITAT vide ITR No.440 of 2011. On similar analogy the surplus of liabilities over assets has to be taken to the balance sheet and same has no bearing on Profit and Loss

:-10-: & 777/Chny/2018 account of assessee as it tantamount to skewed representation of profits on the year of absorption so as to avoid genuine taxes due to exchequer.” 7.1 TheLd. AR invited our attention to the copy of Memorandum of Understanding for the proposed transferor dated 17.02.2009 and to the Schedule to the MoU and submitted that as per the MoU, liabilities to be taken over as on 31.12.2008 was valued at I1,078.13 crores and the assets to be taken over as on 31.12.2008 was valued at I870.58 crores and the resultant deficit of I207.55 crores was notionally treated as purchase consideration and argued that on this amount the assessee claimed depreciation. In support of his contention, he relied on the judgement of the Hon’ble Supreme Court in the case of Smifs Securities Ltd.(348 ITR 302) dated 22.08.2012. 7.2 Per contra, the Ld. DR invited our attention to para 12 of the Memorandum of Understanding, which is extracted as under : “12. Regarding Goodwill:-Since the business of Transferor Bank is undermoratorium from 14/09/2006, the Transferor Bank does not enjoy any goodwill in commercial terms. Accordingly, no monetary consideration isprovided for goodwill.” and submitted that as per the agreement, it is clear the transferor bank does not enjoy any goodwill in commercial terms and hence, there is no goodwill. The Ld. DR further invited our attention to the following portion of the judgement of the Hon’ble Supreme Court in the case of Smifs Securities Ltd.(348 ITR 302) : “Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) [“CIT(A)’, for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee- Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal [‘ITAT, for short]. We see no reason to interfere with the factual finding” and submitted that the decision of the Supreme Court is distinguishable on facts of the assessee’s case. In the reported case, the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee-Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal. However, in the assessee’s case, there is a deficit or loss of I207.55 crores in the purchase consideration . Further, as per transfer agreement extracted , supra, itself it is clear that the transferor bank does not enjoy any goodwill in commercial terms and hence, there is no goodwill. When there is no goodwill and the assessee has also not paid any amount for goodwill it is not entitled to claim any goodwill, consequently no depreciation can be allowed. 7.3 We heard rival submissions and gone through relevant material. It is clear from the above that the assessee did not have any goodwill in commercial terms as it has acquired more liabilities than the assets. The Ld.DR’s submission that when there is no goodwill as per the terms of the agreement as well as in reality. When the assessee has not paid any amount

:-11-: & 777/Chny/2018 for the goodwill, it cannot claim existence of any goodwill. When there is no existence of goodwill, it is not entitled for any depreciation. Therefore, the assessee’s corresponding grounds fail.”

8. We heard the rival submissions. In view of the above findings of the Tribunal in the assessee’s own case in the earlier assessment years, respectfully following it , we reject the corresponding grounds of the assessee.

9. On the issue of Disallowance of contribution to staff welfare fund, the AR relied on the order of this tribunal in the assessee’s own case in dated 28.02.2019 for assessment year 2013-14 , the relevant portion is extracted as under:

“ 8. The next ground raised by the assessee is with Regard to disallowance of contribution to staff welfare fund . The Ld. AR submitted that this issue was decided against the assessee by this Tribunal in its own case for the assessment year 2011-12 in ITA No.77/Mds/2014. 8.1 On hearing both sides, we find that this Tribunal vide order dated 03.04.2017 in for the assessment year 2011-12 has decided this issue against the assessee. The relevant portion of the order of this Tribunal, supra, is extracted as under:- “12. The third ground is with regard to disallowance of contributionof staff welfare fund.

13. At the outset, the Ld. AR. submitted that this issue came forconsideration before this Tribunal in assessee’s own case in ITA No.2126/Mds/2013(supra).

14. We have heard both the parties and perused the material on record. As rightly pointed out by the Ld. AR this issue was decided against the assessee by the Co-ordinate Bench of Chennai Tribunal in assessee’s own case for assessment year 2010-11 cited supra, wherein Tribunal held that: “67. The next issue in the appeal of the assessee is that Commissioner of Income Tax (Appeals) erred in not allowing deduction in respect of contribution to staff welfare fund overlooking the mandatory requirement of payment as an employer.

:-12-: & 777/Chny/2018

10. 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 reject the corresponding grounds of the assessee.

11. On the issue of Recovery in respect of bad debts written off relating to rural branches viz ground nos 5.1 & 5.2, the AR relied on the order of this tribunal in the assessee’s own case in dated 28.02.2019 for assessment year 2013-14 , the relevant portion is extracted as under:

“9. The next ground raised by the assessee is with regard to recovery of bad debts written off relating to rural branches . The Ld. AR submitted that this issue was decided in favour of the assessee by this Tribunal in order dated 03.4.2017. 9.1 Heard the rival submissions and perused the order of this Tribunal in ITA No.35/Mds/2017 dated 03.04.2017. The relevant portion of the order of this Tribunal, supra is extracted here under:-

27. The Fifth ground is with regard to addition towards bad debts recovered. 27.1 After hearing both the parties, the same issue came for consideration before this Tribunal in ITA No.1949/Mds./2012 vide

:-13-: & 777/Chny/2018 order dated 18.06.2014 in assesse’s own case wherein the Tribunal held that: “52. Relevant facts qua this ground are that in Rs memo of income, the assessee is stated to have claimed deduction towards bad debts recovered. It explained before the Assessing Officer that this amount pertained to rural advances written off but not allowed in various preceding assessment years. It stressed the fact that when bad debts itself had been disallowed as deduction, recovery thereof could not have been taxed in the Impugned assessment year. The Assessing Officer held that theassessee had ordinarily claimed the above bad debts written off as expenditure. Further, he observed that it had a/so fifed appeals before the ‘tribunal’ and the issue was yet to attain finality. Accordingly, he disallowed the aforesaid amount.

:-14-: & 777/Chny/2018

In view of the above Order of Tribunal, we dismiss the ground raised by the Revenue. Further, we make it clear that if it is allowed as bad debt in earlier years and recovered the same in the assessment year under consideration to be treated as income of assessee.” 9.2 Respectfully following the above order of this Tribunal, we allow these grounds of the assessee subject to the above lines.”

“10. The next ground raised by the assessee iswithregard to depreciation on UPS allowed at 60% instead of 80% claimed by the assessee. The Ld. AR submitted that this issue was decided against the assesseeby this Tribunal in ITA No,77/Mds/2014 dated 3.4.2017 for the assessment year 2011-12.

15. The fourth ground in this appeal is with regard to disallowing the claim of depreciation on UPS at 80% overlooking the fact that UPS isan energy saving device entailing for higher depreciation.

16. At the time of hearing, the Id.A.R submitted that this issue came for consideration before this Tribunal in assessee’s own case in I.T.A.No.2l26/Mds/2013(supra) and the Tribunal decided the issue against the assessee.

:-15-: & 777/Chny/2018

“69. The next issue in the grounds of appeal of the assesseeis that Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer disallowing the claim of depreciation on UPS at 80% overlooking the fact that UPS is an energy saving device entailing for higher depreciation.

70. Counsel for the assessee submits that this issue has been decided against the assessee by the co-ordinate Bench for the assessment year 2009-10 in dated 18.6.2014 at pages 10 & 11 in para 16 to 18 of the order. Respectfully following the said decision, we dismiss the grounds raised by the assessee on this issue.”

Respectfully following the above decision of Tribunal in assessee’s own case for assessment year 2010-11, we reject this ground raised by the assessee.”

In view of the above reasoning of this Tribunal, we reject this issue raised by the assessee .”

“11. The next ground raised by the assessee iswith regard to the depreciation on ATM. The Ld. AR submitted that this issue was decided in favour of the assessee by the Hon’ble Bombay High Court in the case of CIT Vs.SaraswatInfotech Ltd. in ITA(L) No.1243 of 2012. On hearing both sides, we find that the Hon’ble Bombay High Court in the above cited case has held as under:- 5) In second appeal, the Tribunal by its order dated 14.03.2012 held that UPS is an integral part of the computer system and regulate the flow of power to avoid any kind of damage to the computer network due to fluctuation in power supply which could lead to loss of valuable data. The Tribunal relied upon the decision of Delhi High Court dated

:-16-: & 777/Chny/2018

20/1/2011 in the matter of CIT Vs. Orient Ceramics & Industries Ltd in which UPS was held to be the part of the computer system and depreciation at 60% was allowed. Similarly, so far as ATMs are concerned, the Tribunal on finding of fact concluded that ATM cannot function without the help of computer and would be a part of the computer used in the banking industry. Reliance was placed by the Tribunal upon the decision of the Delhi Bench of Tribunal in the matter of DCIT v. Global Trust Bank (ITA No.474/D/09) wherein it has been held that ATM was a computer equipment and depreciation @ 60% was allowed. So far as the use of software is concerned, the Tribunal records a fact that the evidence of the use of the software on 31/3/2008 was produced before the Tribunal. Thus, the Tribunal held that depreciation @ 30% on software was rightly claimed.” Respectfully following the judgement of the Hon’ble High Court in the case of Saraswat Infotech Ltd., supra, we allow this ground of the assessee . In the result, the assessee’s appeal is partly allowed.”

17. On the issue of deduction u/s. 36(1)(viia) based on advances outstanding and not on incremental advances, the ld DR presented the case on the lines of grounds of appeal . Per contra, the ld AR relied on the orders of the Calcutta High Court in the case of Uttarbanga Kshetriya Gramin Bank in and the assessee’s own case in ITA No. 947/CHny/2018 dated 28.02.2019 , the relevant portion is extracted as under:

:-17-: & 777/Chny/2018

“13. With regard to the claim that the deduction u/s36(1)(viia) needs to be calculated based on the incremental advances for each month and not on the outstanding advance as on the last day of the relevant month, the Ld. DR submitted on the lines of grounds of appeal

. Per contra, the Ld.AR submitted that this issue was decided by this Tribunal in favouroftheassessee in vide order dated 03.04.2017. The relevant portion of the said order of this Tribunal is extracted as under:- “ Next we take up Revenue’s appeal in ITA.No.35/Mds/2014 The first issue in the appeal of the Revenue is that commissioner Tax (Appeals) erred in directing the Assessing Officer to the aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month while computing deduction under section 36(i)(viia) of the Act.

22. We have heard the submissions of the Counsel and perused thematerial on record. In our opinion, this issue is squarely covered bythe decision of the Co-ordinate Bench of Chennai Tribunal inassessee’s own case in 1TA No.2O3l/Mds./2013 for assessment year2010-11 wherein held that:- “80. At the time of hearing counsel for the assessee submits that the present issue has been decided in favour of the assessee by this Tribunal for the assessment year 2009-10/n J74 No. 1949/Mds/20.t2 dated 18.6.2014 at pages 24 to 26 in pares 55 to 59 of the order. He places reliance on the said order. Departmental Representative relies on the order of the Assessing Officer.

81. Similar issue has been raised by the Revenue in 17A No.2030/Mds/2013 for the assessment year 2007-08 and we have dealt with this issue in para 51 & 52 of this order. For the reasons mentioned therein and the decision holds good for the assessment year 2010-11, we reject the grounds raised by the Revenue on this issue.” 22.1 In view of the above Order of Tribunal in the appeal of Revenue, we dismiss the ground raised by the Revenue

Respectfully following the above decisions, the grounds of the Revenue are dismissed.”

:-18-: & 777/Chny/2018 respectfully following it, we reject the corresponding grounds of the Revenue .

19. On the issue of Allowability of loss on revaluation of trading derivatives, the ld DR presented the case on the lines of grounds of appeal. Per contra, the ld AR relied on the order of this tribunal in the assessee’s own case in dated 03.04.2017, the relevant portion is extracted as under:

“87. We find that the co-ordinate Bench of this Tribunal while upholding the order of the Commissioner of Income Tax (Appeals) in allowing the claim of loss on revaluation of derivative contracts observed as under:- “47. The Revenue’s sixth substantive ground is that the CIT(A)has wrongly deleted disallowance of `11,32,83,633/- on revaluation of derivative contracts.

:-19-: & 777/Chny/2018

“14. The next ground raised by the Revenue is against the disallowance under section 14A. The Ld. DR submitted on the lines of grounds of appeal. However, the Ld AR submitted that this issue was decided in favour of the assessee by the Hon’ble Supreme Court in the case of Maxopp Investment Ltd (402 ITR 640) and this Tribunal in vide order dated 03/04/2017 decided partly in the assessee’sfavour in its own case. The relevant portion of the order of this Tribunal dated 03.04.2017 is extracted as under:-

8. The second ground is with regard to disallowance u/s.14Ar.w.Rules 8D of the Income Tax Rules, 1962.

9. At the outset, the Id.A.R submitted that this issue came forconsideration before this Tribunal in assessee’s own case in IT.A.No.2126/Mds/20 13(supra) wherein the Tribunal held that:p63. Counsel for the assessee submits that assessee bank is holding securities as stock-in-trade, when once securities are held as stock-in- trade, no disallowance under section 14A is warranted. The counsel submits that co-ordinate Bench of this Tribunal decided similar issue for the assessment year 2009-10 in ITA No.1949/Mds/2012 dated 18.6.2014. Referring to the said order, counsel submits that In principle, the Tribunal decided the issue in favour of the assessee holding that provisions of section 14A have no application when the securities are held as stock-in-trade. However, the Tribunal remitted the matter to the file of the Assessing Officer to ascertain whether securities are held as stock-in- trade.

64. Departmental Representative places reliance on the orders of lower authorities in invoking provisions of section 14A read with Rule 8D for the purpose of disallowing expenditure attributable for earning dividend income.

65. We have perused the order of co-ordinate Bench of this Tribunal for the assessment year 2009-10, wherein the Tribunal held that authorities below have wrongly invoked section 14A in case of investments held as stock-in-trade. While holding so the Tribunal observed as under:‘15. We have considered the rival contentions, perused therelevant findings and the judicial precedents Undisputedly, the assesse had earned income of 21 crores from investments made in mutual

:-20-: & 777/Chny/2018 funds and equities. Its stand adopted throughout has been to have held the investments as ‘stock-in- trade’. There is no finding on this issue forthcoming either from the Assessing Officer orthe CIT(A). We have also perused the ‘guard’ fife pertaining tol.T.A.No. 1815/Mds/2011 decided on 2.4.2013(supra). It is evident there from that the very disallowance stands upheld by a co-ordinate bench. Its plea challenging applicability of section 14A in case of investment held as ‘stock-in- trade’ appears to have neither been raisednor adjudicated. So, we treat it as a fresh plea not covered by theearlier order. Thus, the new issue that arises for our consideration isas to whether a disallowance u/s 14A can be made even in a case when the investments giving rise to an ‘exempt’ income are held as’stock-intrade’ or not. Proceeding on the same, we find that the caselaw quoted by the assessee (supra) squarely supports its plea. The Revenue has brought to our notice a recent Third Member decision incase of D.H. Securities P. Ltd vs DCIT (2014] 31 (Trib) 381. This decision follows the judgment of the hon’ble Bombay high court (which is also the concerned jurisdictional high court) in case of Godrej & Boyce Manufacturing Co. Ltd vs A CIT, 328 ITR 81 and that of hon’ble Calcutta high court in Dhanuka& Sons vs CIT, 339 ITR 319. Notonly this, the hon’ble Third Member also refers to the case law CC! Ltd.(supra) and expresses a view that the aforesaid decisions of otherhon’ble high courts were not brought to the notice of the Karnatakahigh court. In these circumstances, the picture that emerges is thatvarious high courts have expressed divergent opinions on this legalissue. That being the case, we apply the decision of CIT vs Vegetable Products Ltd 88 ITR 192 and in the view favourable to the assessee is followed. So, in principle, we hold that the authorities below have wrongly invoked section 14A in case of investments held as ‘stock-in trade’wherein the ‘exempt’ income by way of dividends is only incidental. It is also made clear that since there is no verification of the factual position of investments held as ‘stock-in-trade’, we accept the assessee’s contentions in principle only and remit the issue back to the Assessing Officer to determine the true factualposition. The assessee’s alternative plea carries only an academicsignificance. The relevant ground is accepted for statistical‘ purposes.”

bythe assessee.”

10. On the other hand, the ld.D.R relied on the orders of the lower authorities in invoking the provisions of the section 14A r.w.Rule 8D He further submitted for assessment year 2008-09, the same issue was decided against the assessee.

11. We have heard both the parties and perused the material on record. We have gone through the order of the assessment order. There Is no finding in the assessment order regarding treatment of exempted income yielding assets as stock-in-trade. Hence, in our opinion, if it is treated as stock-in-trade by the assessee, then the claim of assessee is to be allowed in terms of Order of Tribunal in ITA No.2126/Mds./2013 (supra). Accordingly, this issue is remitted to the file of AO for fresh consideration. This ground is allowed for statistical purposes. In view of the above reasoning of this Tribunal, following it , weremitthisissue back to the file of AO for fresh consideration. This ground is allowed for statistical purposes.”

:-21-: & 777/Chny/2018 respectfully following it, we remit this issue back to the file of the AO for fresh consideration . This ground is treated as allowed for statistical purposes.

“15. The next ground raised by the Revenue is against the disallowance of provision made for leave salary on actuarial valuation. With regard to the issue on leave salary, the AO held that it is only a provision and hence disallowed. Aggrieved, the assessee filed an appeal before the Ld. CIT(A) and the Ld. CIT(A) allowed the appeal based on this Tribunal’s decision in assessee’s case for assessment year 2010-11 in dated 26.09.2014. Before us, the assessee submitted that the provision for leave salary cannot be disallowed u/s. 43B for the reason that leave provision is a contractual liability and therefore, it cannot be treated at par with tax, duty, cess or fee u/s. 43B. However, in the SLP (Civil) Nos. 22889/2008 dated 08.05.2009 in the case of CIT &ors. Vs M/s. Exide Industries Ltd & ANR, wherein, the Apex Court held that “ pending hearing and final disposal of the Civil Appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal , pay tax as if section 43B(f) is on the statute Book but at the same it would be entitled to make a claim in its returns.” In view of the above, subject to the conditions imposed by the Apex Court, supra, the addition made is sustained.”

:-22-: & 777/Chny/2018

“16. The next issue raised by the Revenue is with regard to depreciation on UPS at 60% instead of 15%. Similar issue was raised by the assessee in its appeal No.776/Chny/2018 herein above. For the same reasoning, we uphold the order of the Ld. CIT(A) and reject the ground raised by the Revenue.”

Further, the Ld. AR relied on the orders of this tribunal in the assessee’s own case in dated 28.02.2019, for assessment year 2013-14, the relevant portion is extracted as under:

“17. The next issue raised by the Revenue is with regard to depreciation on assets taken over by Bank of Tamilnadu. We heard the rival submissions. Since the LdCIT(A) has directed the AO to follow the directions of this tribunal decision in the assessee’s own case in dated 02.04.2014 wherein, the ITAT had remitted

:-23-: & 777/Chny/2018 the matter back to the AO to verify the scheme of take over and to determine whether the provisions of section 2(1B) were applicable, we do not find any error in the order of the Ld.CIT(A).”

:-24-: & 777/Chny/2018

Order pronounced on 22nd January, 2020 at Chennai.