INDIAN OVERSEAS BANK,CHENNAI vs. ACIT LTU 1, CHENNAI

�नधा�रती क� ओर से /Assessee by : Shri C. Naresh, CA : Shri Clement Ramesh Kumar, Addl.CIT राज� की ओर से /Revenue by सुनवाई क� तार�ख/Date of hearing : 06.06.2019 घोषणा क� तार�ख /Date of Pronouncement : 26.07.2019 आदेश /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER:

Both the assessee and the Revenue filed the appeals for the assessment years 2008-09 and 2012-13. The assessee also filed

2 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 appeal for the assessment year 2009-10. We heard all the appeals together and disposing off the same by this common order.

2.1 The first issue is regarding reopening of assessment.

2.1.1 Shri C. Naresh, the Ld. Representative for the assessee submitted that the Assessing Officer reopened the assessment. In the P&L account the assessee had made a provision for bad and doubtful debts to the extent of Rs.192,02,99,716/-. In the assessment proceeding U/s.143(3) of the Act, the assessee was allowed deduction U/s.36(1)(viia) of the Income-Tax Act, 1961 (in short ‘the Act’) to the extent of Rs.125,43,91,016/- restricting the provision for non-performance asset debited to the P&L account. According to the Ld.AR, the Assessing Officer disallowed bad debts written off relating to rural debt amounting to Rs.37.28 crore and allowed non-rural bad debts to the extent of Rs.304.36 crore. According to the Ld.AR, the Assessing Officer reopened the assessment in order to completely deny bad debts written off relating to non-rural debts. According to 3 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 the Ld.AR, the bad debt written off relating to non-rural debts is not affected by proviso to Section 36(1)(vii) of the Act. Therefore the reopening is not justified.

2.1.2 On the contrary, Shri Clement Ramesh Kumar, the Ld. Departmental Representative submitted that the assessment of the assessee was re-opened on identical circumstance for the assessment year 2006-07. According to the Ld.DR the re-opening of the assessment was based upon the subsequent information available with the Assessing Officer. This Tribunal also confirmed the identical order of the CIT(A) for the assessment year 2006-07. Therefore there is no merit in the appeal of the assessee.

2.1.3 We have considered the rival submissions on either side and perused the material available on record. On the basis of the material found during the course of scrutiny proceedings for the subsequent years, the Assessing Officer found that taxable income escaped assessment. Therefore he reopened the assessment for the year under consideration. Since the assessment was reopened on the basis of tangible material found subsequent to the assessment, this 4 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment.

2.2. The next issue arises for consideration is deduction U/s.36(1)(viia) of the Act. Shri C. Naresh, the Ld. Representative for the assessee submitted that the very same issue was decided against the assessee in the assessee’s own case by this Tribunal for the assessment year 2011-12 in & 497/Mds/2015 by order dated 23.02.2016. We heard Shri Clement Ramesh Kumar, the Ld. Departmental Representative also. Since the issue was decided by this Tribunal for the assessment year 2011- 12 in ITA Nos.496 & 497/Mds/2015 by order dated 23.06.2016, for the same reasons this Tribunal do not find any reason to interfere with the order of the lower authorities and the same is confirmed.

2.3 The next issue arises for consideration is deduction U/s.36(1)(vii) of the Act.

2.3.1 Shri C. Naresh, the Ld. representative for the assessee submitted that the assessee claimed alternatively that the provision for bad debts in respect of non-rural branches should be allowed as 5 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 bad debts written off U/s.36(1)(vii) of the Act. This issue was decided in favour of the assessee by the Apex Court in the case of Vijaya Bank 323 ITR 166. The Apex Court in the case of Catholic Syrian Bank Ltd 343 ITR 270 also decided in favour of the assessee. We heard Shri Clement Ramesh Kumar, Ld. Departmental Representative also. We find merit in the alternate claim of the assessee. In view of the Judgments of the Apex Court in Vijaya Bank and Catholic Syrian Bank Ltd supra, this Tribunal is of the considered opinion that the bad debts in respect of non-rural branches has to be allowed as bad debts written off U/s.36(1)(vii) of the Act. In view of the above, we are unable to uphold the order of the lower authorities. Accordingly the orders of both the authorities below are set aside and the addition made U/s.36(1)(vii) of the Act is deleted.

3.1 The only issue arises for consideration is deduction U/s.36(1)(viia) of the Act based on advance outstanding and not on incremental advances.

6 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 3.1.2 Shri Clement Ramesh Kumar, the Ld. Departmental Representative submitted that for deduction U/s.36(1)(viia) of the Act, the Assessing Officer is expected to calculate the deduction based on incremental advance for each month and not on the outstanding advance on the last day of the relevant month. However the CIT(A) by following the order of this Tribunal in the assessee’s own case for the assessment year 2010-11 in dated 26.09.2014 allowed the claim of the assessee. We heard Shri C. Naresh, the Ld. Representative for the assessee also. Admittedly, the CIT(A) followed the order of this Tribunal in the assessee’s own case for the assessment year 2010-11. Rule 6ABA of the Income Tax Rules clearly shows that any advance that has been made and outstanding at the end of each month has to be taken for the purpose of deduction U/s.36(1)(viia) of the Act. The Rule does not say that only the incremental advance has to be considered. Moreover, this issue was also decided in favour of the assessee by this Tribunal in the assessee’s own case for the assessment year 2010-11. Therefore the CIT(A) has rightly followed the order of this Tribunal. Hence this Tribunal did not find any reason to interfere with the order of the CIT(A). Accordingly the same is confirmed.

7 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017

5.1 The first issue arises for consideration is reopening. We heard Shri C. Naresh, the Ld. Representative for the assessee and Shri Clement Ramesh Kumar, the Ld. Departmental Representative. The Assessing Officer reopened the assessment based upon the information in the subsequent assessment years. In other words, the assessment was reopened on the basis of the tangible material. Therefore this Tribunal do not find any reason to interfere with the order of the lower authorities.

5.2 The next issue arises for consideration is deduction U/s.36(1)(viia) of the Act. This issue was decided against the assessee for the assessment year 2011-12 in & 497/Mds/2015 by order dated 23.02.2016. It is not in dispute that the facts are identical. Therefore for the same reason stated by the 8 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 Tribunal for the assessment year 2011-12, the order of the CIT(A) is confirmed.

5.3 The next issue arises for consideration is provision for bad debts in respect of non-rural branches. This claim was taken as alternative claim. The assessee has also claimed deduction U/s.36(1)(vii) of the Act in respect of bad debts written off relating to non-rural branches on substantive basis instead of protective basis. It is not in dispute that the Apex Court in the case of Vijaya Bank 323 ITR 166 and in the case of Catholic Syrian Bank Ltd., 343 ITR 270 decided the issue in favour of the assessee. This Tribunal is of the considered opinion the Judgment of the Apex Court is binding on all authorities including this Tribunal. Therefore this Tribunal is unable to uphold the order of the lower authorities. Accordingly the orders of both the authorities below are set aside and the addition made U/s.36(1)(vii) of the Act is deleted.

5.4 The next issue arises for consideration is charging of floating provision to tax. According to Shri C. Naresh, the Ld. Representative for the assessee provision for bad and doubtful debts is not liable to tax since the provision was already set off against the bad debts

9 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 written off U/s.36(1)(viia) of the Act. Therefore according to the Ld.AR it amounts to double taxation. The CIT(A) directed the Assessing Officer to decide the issue instead of deciding himself.

5.4.1 On the contrary, Shri Clement Ramesh Kumar, Ld. Departmental Representative submitted that deduction U/s.36(1)(viia) of the Act shall alone be treated as income when floating provision was reversed. This provision was not allowed as deduction. Therefore it cannot be taken as income when the reversal is made. Since the required particulars are not available, the CIT(A) directed the Assessing Officer to verify whether floating provision was made exclusively U/s.36(1)(viia) of the Act and whether income by way of interest repayment received from Government as agricultural waiver was offered for taxation and thereafter decide the issue.

5.4.2 We have considered the rival submissions on either side and perused the material available on record. The CIT(A) directed the Assessing Officer to verify the details of waiver of agricultural interest repayment and the floating provision made exclusively and thereafter decide the issue. It is not in dispute that these facts need

10 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 to be verified under the scheme of Income Tax. The CIT(A) has no power to set aside the order of the Assessing Officer for verification. The CIT(A) has to decide the issue himself after considering the material available or he may call for Remand Report from the Assessing Officer and thereafter decide the issue by himself. In this case, the CIT(A) has directed the Assessing Officer to verify the facts and thereafter decide the issue. However the fact remains is that the details need to be verified. Therefore in exercise of the jurisdiction conferred on this Tribunal, the matter is remitted back to the file of the Assessing Officer. The Assessing Officer shall verify the fact whether the floating provision was made exclusively and whether the interest payment received from Government as agricultural waiver was offered for taxation and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.

5.5 The next issue arises for consideration is taxability of amount received under Agricultural Debt Relief and Debt Waiver Scheme.

5.5.1 Shri C. Naresh, the Ld. Representative for the assessee submitted that the amount received from Government under the 11 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 scheme towards Agricultural Debt Relief and Debt Waiver is not liable for taxation. This amount received by the assessee would go to reduce the amount due from the borrowers / farmers. Even otherwise according to the Ld.AR, it is allowable U/s.36(1)(vii) of the Act.

5.5.2 On the contrary, Shri Clement Ramesh Kumar, the Ld. Departmental Representative submitted that the assessee has received Rs.234.53 crores towards first installment on account of small and marginal farmers Debt Waiver and Debt Relief Scheme 2008. The assessee has not disclosed the same as income. However the assessee discloses the same as advance in Schedule 9 to the Balance Sheet. According to the Ld.DR the assessee was already allowed a portion as deduction U/s.36(1)((viia) of the Act. Therefore the amount received from the Government to the extent of Rs.234.53 crores, the portion of the amount which was already allowed U/s.36(1)(viia) of the Act was required to be brought for taxation. The CIT(A) directed the Assessing Officer to examine the details that may be furnished by the assessee and pass a speaking order either allowing or disallowing the claim of the assessee. Therefore the assessee may not have any grievance.

12 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 5.5.3 We have considered the rival submissions on either side and perused the material available on record. The assessee admittedly received Rs.234.53 crores towards first installment on account of Agricultural Debt Waiver and Debt Relief Scheme 2008. The CIT(A) found that it is possible that the interest income would not be offered to tax whereas the principal portion would be included in the proviso account. Therefore CIT(A) directed the assessee to furnish the relevant information before the Assessing Officer and directed the Assessing Officer to examine the matter. Under the scheme of Income-Tax Act, the CIT(A) has no power to set aside the assessment for reconsideration. However this Tribunal is of the considered opinion, it has to be verified whether the interest income was offered for taxation earlier. Accordingly in exercise of jurisdiction conferred on this Tribunal, the orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh in accordance with law after giving reasonable opportunity to the assessee.

13 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 6. In the result the appeal of the assessee for the assessment year 2009-10 is partly allowed for statistical purposes.

7.2 The next issue is with regard to disallowance made by the Assessing Officer based upon the population of village instead of ward. Shri C. Naresh, the Ld. Representative for the assessee very fairly submitted that this issue is decided against the assessee by this Tribunal in the assessee’s own case for the assessment year 2011-12 in by order dated 03.04.2017. In view

14 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 of the above, this Tribunal do not find any reason to interfere with the order of the lower authority for the reason stated in the order of the Tribunal dated 03.04.2017. For the very same reason, the order of the CIT(A) is confirmed.

7.3 The next issue arises for consideration is provision for bad and doubtful debts with regard to standard assets and provisions for country risk. Shri C. Naresh, the Ld. Representative for the assessee submitted that this issue was also decided against the assessee by this Tribunal in the assessee’s own case for the assessment year 2011-12 in by order dated 03.04.2017. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and the same is confirmed.

7.4 The next issue arises for consideration is bad debt in respect of rural branches and non-rural branches. This claim is made alternatively by the assessee. Shri C. Naresh, the Ld. Representative for the assessee submitted that the Apex Court in the case of Vijaya Bank 323 ITR 166 and Catholic Syrian Bank Ltd., 343 ITR 270 examined this issue elaborately and allowed the claim of the 15 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 assessee. This statement of facts was not disputed by the Ld.DR. Therefore respectfully following the Judgment of the Apex Court in the case of Vijaya Bank and Catholic Syrian Bank Ltd., supra the orders of both the authorities below are set aside and the appeal of the assessee is allowed.

7.5 The next issue arises for consideration is restriction of relief U/s.90 of the Act to the extent of tax paid in foreign country instead of tax charged on the foreign income which is included in total income. We heard Shri C. Naresh, the Ld. Representative for the assessee and Shri Clement Ramesh Kumar, the Ld. Departmental Representative. Admittedly this issue was decided against the assessee by this Tribunal for the assessment year 2011-12 in by order dated 03.04.2017. Moreover U/s.90 of the Act, only to the extent of tax paid in foreign country, the relief has to be granted. In this case, the Assessing Officer already granted relief to the extent of tax paid in the foreign country. In view of the above, this Tribunal did not find any reason to interfere with the order of the lower authorities and the same is confirmed.

16 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 7.6 The next issue arises for consideration is depreciation on goodwill. Shri C. Naresh, the Ld. Representative for the assessee submitted that the assessee took over the assets and liabilities of Shree Suvarna Sahakari Bank Ltd. According to the Ld.AR, there was excess liability over the asset. The Ld.AR very fairly submitted that this issue was decided against the assessee by this Tribunal in the assessee’s own case for the assessment year 2013-14 in & 947/Chny/2018 by order dated 28.02.2019. In view of the above, for the very same reasons stated for the assessment year 2013-14, the order of the CIT(A) is confirmed.

7.7 The next issue arises for consideration is contribution to staff welfare fund. Shri C. Naresh, the Ld. Representative for the assessee very fairly submitted that this issue was also decided against the assessee by this Tribunal in the assessee’s own case for the assessment year 2013-14 in & 947/Chny/2018 by order dated 28.02.2018. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed.

17 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 7.8 Now coming to recovery of bad debts written off in respect of rural branches, this issue also decided against the assessee by this Tribunal for the assessment year 2013-14. For the reasons stated by this Tribunal for the assessment year 2013-14, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed.

7.9 Now coming to depreciation on UPS, the assessee claimed before the Assessing Officer depreciation at the rate of 80% however the Assessing Officer allowed depreciation at the rate of 60%. The Ld.AR very fairly submitted that this issue was decided against the assessee by this Tribunal for the assessment year 2013-14 in & 947/Chny/2018 by order dated 28.02.2018. In view of the order of the Tribunal for the assessment year 2013-14 and the reason stated therein, the order of the CIT(A) is confirmed.

18 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 9.1 The first issue arises for consideration is deduction U/s.36(1)(viia) of the Act based on advances outstanding and not on incremental advances. This issue was considered by this Tribunal elaborately for the assessment year 2013-14 and decided in favour of the assessee. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and the same is confirmed.

9.2 The next issue arises for consideration is loss on revaluation of trade derivatives. Accordingly to the Ld. Representative for the assessee on account of revaluation of trade derivatives the assessee estimated loss for the assessment year 2011-12, this Tribunal examined this issue elaborately and found that the loss on account of revaluation has to be allowed. We heard Shri Clement Ramesh Kumar, the Ld. Departmental Representative also. According to the Ld.DR this issue was decided in favour of the assessee for the assessment year 2011-12 by this Tribunal in by order dated 03.04.2017. In view of the above this Tribunal did not find any reason to interfere with the order of the lower authority and the same is confirmed.

19 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 9.3 Now coming to disallowance U/s.14A of the Act, Shri C. Naresh, the Ld. Representative for the assessee submitted that this Tribunal for the assessment year 2013-14 decided the issue partly in favour of the assessee. Therefore the very same order may be followed. We heard Shri Clement Ramesh Kumar, the Ld. Departmental Representative also. Similarly with regard to disallowance of provision for leave enhancement, it was decided partly in favour of the assessee for the assessment year 2013-14. Since the required details with regard to leave enhancement and the details of investment in shares are not available in record, this Tribunal is of the considered opinion that this matter needs to be reconsidered by the Assessing Officer. Accordingly both the orders of the lower authorities are set aside and the issue with regard to disallowance U/s.14A of the Act and provision for leave enhancement are remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in the light of the material filed by the assessee and thereafter decide the issue after considering the order of the Tribunal for the assessment year 2013- 14 in & 947/Chny/2018 by order dated 28.02.2019.

20 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 9.4 Now coming to the issue of depreciation on UPS, this Tribunal for the assessment year 2013-14 found that the assessee is eligible for depreciation at the rate of 60% on the UPS. In this case, the Assessing Officer allowed only 15% of depreciation. Therefore the CIT(A) has rightly allowed depreciation at the rate of 60%. In view of the above, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly the same is confirmed.

9.5 The next issue arises for consideration is disallowance made U/s.40(a)(ia) of the Act on account of short deduction.

9.5.1 Shri C. Naresh, the Ld. Representative for the assessee submitted that the Kolkata High Court in the case of S.K. Tekriwal, GA 2069 of 2012 and Chennai Bench of the Tribunal in the case of Micro Marvel Projects Ltd, 2016-TIOL-249-ITAT-Madras found that in case of short deduction, there cannot be any disallowance.

9.5.2 We heard Shri Clement Ramesh Kumar, the Ld. Departmental Representative also. According to the Ld.DR, there are other decisions which are in favour of the Revenue. In view of the conflicting decisions one in support of the Revenue and another in 21 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 support of the assessee, the matter may be remitted back to the file of the Assessing Officer.

9.5.3 We have considered the rival submissions on either side and perused the material available on record. No doubt, the Kolkata High Court in the case of S.K. Tekriwal supra found that in case of short deduction there cannot be any disallowance U/s.40(a)(ia) of the Act. However as rightly submitted by the Ld.DR, there are other High Court Judgments which is in favour of the Revenue also. In case of any Judgment by Madras High Court that is binding on the Assessing Officer. Since the Ld.DR could not produce the details immediately, the issue is remitted back to the file of the Assessing Officer. Accordingly the orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue and bring on record all the available Judgments on the issue. If there is a Judgment by Madras High Court, the same has to be followed in preference to the other High Court Judgments.

9.6 The next issue arises for consideration is depreciation claimed by the assessee on the asset taken over from Bank of Tamilnadu.

22 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 This issue was admittedly examined by this Tribunal for the assessment year 2010-11 in dated 02.04.2013 and remitted back the matter to the file of the Assessing Officer. Similarly for the assessment year 2013-14 also, the very same issue was remitted back to the file of the Assessing Officer. For the sake of consistency for the year under consideration also the issue is remitted back to the file of the Assessing Officer.

9.7 The next issue arises for consideration is applicability of provision of Section 115JB of the Act. Both the representatives for the assessee and the Revenue very fairly submitted that this issue was decided in favour of the assessee in the assessee’s own case for the assessment year 2011-12 by this Tribunal in by order dated 03.04.2017. In view of the above this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed.

23 I .T.A. Nos. 1879 to 1881, 1894 & 1895/Chny/2017 11. To sum up, the appeals of the assessee in & 1881/Chny/2017 are partly allowed & 1880/Chny/2017 is partly allowed for statistical purposes. The appeal of the Revenue in ITA No.1894/Chny/2017 is dismissed and ITA 1895/Chny/2017 is partly allowed for statistical purposes.

Order pronounced in the court on 26th July, 2019 at Chennai.