DEPUTY COMMISSIONER OF INCOMETAX , CHENNAI vs. M/S. INDIAN OVERSEAS BANK, CHENNAI

Aggrieved by the order of the ld.CIT(A), the Revenue has preferred the present appeal with respect to the issue u/s.36(1)(via) and with respect to excess depreciation.

The brief facts of the case emanating from the records are that the assessee, M/s.Indian Overseas Bank, is a nationalised bank engaged in the business of banking. For the year under consideration, the assessee filed its return of income on 29.10.2022 admitting a total loss of Rs.6,55,78,73,736/-. Thereafter, the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued on the following issues: (i) Refund Claim, (ii) Claim of any other amount allowable as deduction under Schedule BP, (iii) Excess contribution to provident fund, (iv) Superannuation fund or gratuity fund,

Thereafter multiple notices were issued on various dates and the assessee filed its replies thereto vide submissions dated 16.06.2023, 21.08.2023, 22.08.2023, 23.02.2024, 28.02.2024, 09.03.2024 and 13.03.2024 furnishing details, information and explanations on the reasons for selected for case. The assessee also had a personal hearing via video conferencing on 13.03.2024. Subsequently, the Assessing Officer made total disallowance of Rs.25,16,25,87,561/-. With respect to the issues before us, the disallowances are as follows.

Before the ld.CIT(A), the assessee reinforced their earlier submissions from the assessment proceedings. The assessee also contested before the ld.CIT(A) that the Assessing Officer has included the said additions/disallowances under the head of Income from Other Sources instead of business income in the computation sheet. It was also contended that the Assessing Officer has computed income u/s.115JB of the Act in the computation with no mention of the same in the assessment order. The interest levied u/s.234B of Rs.48,16,53,432/- and 234C of Rs.75,64,309/-, credit for tax deducted at source, incorrect tax computation and the consequent demand raised were also contested by the assessee to be incorrect.

The assessee made detailed submissions in the appellate proceedings for each additions/disallowance made by the Assessing Officer and the other contentions raised by them.

For the disallowances u/s.36(1)(via) of the Act, the assessee submitted that the Assessing Officer has incorrectly estimated the population only based on the sub-district wise population as against the district-wise population prescribed by the Act and that these branches are classified by the Reserve Bank of India as rural branches. In support of the same, the assessee relied on :-5-: ITA No: 2544/Chny/2025 the decision of Hon'ble High Court of Madras in CIT II v City Union Bank in TCA No. 961/2010 decided on 07.03.2022 and also submitted this issue was decided in favour of the assessee in AYs 2019-20 and 2021-21 by the first appellate authorities. For the disallowance of excess depreciation, the assessee stated that this Tribunal as well as the first appellate authority in the AYs 2014-15 and 2021-22, respectively, allowed depreciation of ATMs and UPS at the rate of 40%.

Thereafter, the ld.CIT(A) passed the order u/s.250 dated 11.07.2025, wherein all the disallowances made by the AO were allowed by the ld.CIT(A).

Before us, the ld.DR argued that the order of the ld.CIT(A) is contrary to the law and facts and prayed that the assessment order be upheld on the issue u/s.36(1)(viia) and on the issue of depreciation at the rate of 40% on ATMs and UPS.

Per contra, the ld.AR of the assessee submitted that the issues raised by the Revenue were already decided in favor of the assessee in the previous AYs by this Tribunal and therefore the ld.CIT(A) was right in his order. For the issue on claim of depreciation on ATMs and UPS at the rate of 40%, the assessee placed reliance on the judgments rendered by this Tribunal for Assessment Year 2014-15 in & 948/Chny/2018 dated 22.01.2020 and also for Assessment Years 2020-21 & 2021-22 in & 300/Chny/2024 and 354 & 377/Chny/2024 dated 30.05.2025, wherein it was held that the assessee is entitled to a higher depreciation at the rate of 40% on ATMs and UPS. With respect to the issue on claim of deduction u/s.36(1)(viia), the same judgments referred herein were quoted, wherein, by following the order of the Hon’ble Jurisdictional High Court in City Union Bank decision (cited supra), this Tribunal had remitted the issue to the Assessing Officer for quantification of the deduction allowable. Accordingly, the ld.AR of the assessee prayed that the appeal of the Revenue be dismissed.

We have heard the rival submissions, gone through the orders of the authorities below and the documents placed before us.

With regard to the issue on claim of depreciation at the rate of 40% on ATMs and UPS, we note that the issue is squarely covered in favour of the assessee. We find that this Tribunal, in assessee’s own case (cited supra), had decided the issue against the Revenue. Respectfully following the same, we dismiss the ground raised by the Revenue on the issue of claim of depreciation at the rate of 40% on ATMs and UPS.

With regard to the next ground raised by the Revenue on deduction claimed u/s.36(1)(viia) of the Act based on advances outstanding and not on incremental advances, we note that this issue is squarely covered in favour of the assessee. On going through the order of this Tribunal in assessee’s own case (supra) and by respectfully following the Hon’ble Jurisdictional High Court in the case of City Union Bank (supra), we remit this issue to Assessing Officer for quantification of the deduction allowable. Accordingly, the Assessing Officer is directed to proceed with the quantification of the deduction as per the judgment of the Hon’ble Madras High Court delivered in the case of City Union Bank(supra) and shall complete the said exercise, after providing due opportunity to the assessee. Accordingly, this ground of the Revenue is allowed for statistical purposes.

In the result, the appeal filed by the Revenue is partly allowed for statistical purposes. Order pronounced in the court on 09th March, 2026 at Chennai.