ACIT (LTU)-1, MUMBAI V. UNION BANK OF INDIA, MUMBAI

ITA 882/MUM/2020

AI Insights

The case involves cross-appeals by the Union Bank of India and the revenue against the order of the CIT(A) pertaining to the assessment year 2015-16. The primary issues revolved around the disallowance of bad debts written off, the taxability of recoveries in respect of bad debts, the deduction claimed under section 36(1)(viia) of the Income Tax Act, and the applicability of section 115JB. The Tribunal examined the provisions of the Income Tax Act, relevant judicial precedents, and the specific circumstances of the bank's operations to arrive at its decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717248 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 03-02-2020
• Other Referred Cases: State Bank of Mysore vs. ACIT, The Karnataka Bank Ltd. vs. DCIT, Catholic Syrian Bank vs. PCIT, Maxopp Investment Pvt. Ltd. vs. CIT, UCO Bank vs. ACIT, Punjab National Bank vs. ACIT, IDBI Bank Ltd. vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA; DR
• Assessee Lawyers: C NARESH; AR
• Keywords: Set aside; Business income; Revised return; Bad and doubtful debts; Depreciation; TDS; Earning of tax free income; Rule 8D
• Section: 144; 263; 14A; 115JB

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 424/Mum/2020 Assessment Year: 2015-16 Union Bank of India Union Bank of India Bhavan 6th Floor, 239, Vidhan Bhavan Marg Nariman Point Mumbai - 400021 [PAN: AAACU0564G] Vs DCIT, LTU(2), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) I.T.A. No. 882/Mum/2020 Assessment Year: 2015-16 ACIT, LTU(2), Mumbai Vs Union Bank of India Union Bank of India Bhavan 6th Floor, 239, Vidhan Bhavan Marg Nariman Point Mumbai - 400021 [PAN: AAACU0564G] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri C Naresh, A/R Revenue by : Shri Vivek Perampurna, CIT D/R सुनवाई की तारीख/Date of Hearing : 05/08/2025 घोषणा की तारीख /Date of Pronouncement: 11/08/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 424/Mum/2020 & I.T.A. No. 882/Mum/2020 are cross- appeals by the assessee and the revenue preferred against very same order of the ld. CIT(A) – 2, Mumbai [hereinafter ‘the ld. CIT(A)’] dated 05/11/2019 pertaining to AY 2015-16. Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 2 2. The cross-appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. We first take up the assessee’s appeal in ITA No. 424/Mum/2020. The grounds of the appeal raised by the assessee read as under:- “Disallowance of bad debts written off 1.1 The CIT(A) erred in directing the AO to recompute deduction for bad debt written off by reconstructing provision for bad and doubtful account in a manner different from what was already decided by Id. CIT(A) for Asst year 2014-15. 1.2 Without prejudice to the above even as per CIT(A)'s own method of arriving balance in the provision account a credit entry of Rs 1362.02 crores against a debit entry of Rs 909.41 crores would result in a credit balance of Rs 452.61 crore and not a credit balance of 1362.0 crore as erroneously arrived by him. Taxability of recovery in respect of bad debts written off which was not allowed as deduction. 2.1 The CIT(A) failed to note that when bad debts written off were not allowed, the question of charging to tax the amount recovered therefrom does not arise. Reliance is also placed on the decision of Hon'ble ITAT Bangalore in case of State Bank of Mysore (33 SOT 7) in this regard. 2.2 Without prejudice to the above the contention of Ld CIT(A) that any recovery towards bad debt written off shall be charged to tax merely because a deduction against provision made for bad and doubtful debts is allowed u/s 36(1)(viia), is contrary to the provisions of the Act since the two terms are not interchangeable. Further charging to tax such sum amounts to disallowing same amount twice once by charging the recovery and the other by reducing allowable bad debt by such recovery. Deduction u/s 36(1) (viia) 3.1The Ld CIT(A) ought to have noted that provision made in books of accounts in line with RBI direction towards loans having arrears up to 90 days (though classified as standard assets) is eligible for deduction u/s 36(1)(viia) which is made by all banks in the matter of provisioning as per prudential norms prescribed by RBI. Applicability of provisions of section 115JB 4.1 The CIT(A) erred in holding that the provisions of section 115JB are applicable to appellant relying on Explanation 3 without appreciating that the said Explanation will apply only to those entities established under Companies Act and will not apply to appellant which is established under Banking (Companies Transfer Of Undertakings) Act, 1970 as held by Hon'ble ITAT Kolkata in the case of UCO Bank.” Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 3 4. Briefly stated the facts of the case are that the assessee filed its return of income on 27/11/2015 declaring total income of Rs. 33,49,62,49,038/- and book profits of Rs. 28,85,73,24,680/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the AO observed that an amount of Rs. 471,05,05,075/- has been claimed as bad debts written off with regard to the non-rural branches in the statement of computation of income and this amount is claimed in addition to the provision made u/s 36(1)(viia) of the Act of Rs. 17,21,27,00,501/-. The assessee has claimed that the amount of rural bad debts written off is not claimed as a deduction considering the fact that the provision available exceeds the amount written off. It was contended that the provision account u/s 36(1)(viia) of the Act has to be constructed for the first time for both rural and non- rural advances together with the insertion of Explanation 2 to Section 36(1)(vii) w.e.f 01/04/2014. 5. Drawing support from the provisions of Section 36(1)(vii) read with its proviso along with provision of Section 36(1)(viia) of the Act and CBDT Circular No. 464 dated 18/07/1986 along with clarificatory amendment made to Section 36(1)(vii) vide Finance Act, 2013 by adding Explanation 2 thereon, the AO was of the opinion that a plain reading of the aforementioned provisions leaves no doubt that the legislature did not intend to differentiate between rural and non-rural bad debts for the purpose of proviso to clause (vii). According to the AO deduction available under clause (vii) of Section 36(1) shall be the difference between the bad debts written off by assessee in his books and the Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 4 provision made for bad and doubtful debts u/s 36(1)(vii) of the Act. According to the AO, since opening credit balance in provision u/s 36(1)(viia) of the Act exceeds the actual amount of bad debts written off, assessee is not entitled for additional claim made for bad debts and accordingly disallowed Rs. 471,05,05,075/-. 5.1. The assessee agitated the matter before ld. CIT(A) and vehemently contended that the assessee had written off bad debts of Rs. 923.67 Crore after reducing the opening credit balance in the provision for bad and doubtful debts account u/s 36(1)(viia) of Rs. 452.61 Crores and claimed the balance amount of Rs. 471.06 Crores. It was strongly argued that the AO is not correct in stating that the opening credit balance in the provision account was in excess of bad debt written off without signifying the opening credit balance. 6. The contention of the assessee did not find favour with the ld. CIT(A) who concurred with the view taken by the AO by taking the opening balance as on 01/04/2013 as Nil and confirmed the disallowance. 7. Before us, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities. Per contra the ld. D/R strongly supported the findings of the AO. 8. The applicability of Explanation 2 to Section 36(1)(vii) r.w.s. 36(1)(viia) has been elaborately considered by the Co-ordinate Bench in the case of the The Karnataka Bank Ltd. vs. DCIT in ITA No. 1907/Bang/2018 vide order dated 26/05/2022. The relevant findings reads as under:- “7.7 We heard the Ld D.R and perused the record. Now the core question that arises is whether the bad debts relating to non-rural branches are also required to be first Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 5 debited to PBDD a/c and then the excess amount over and above the balance available in PBDD alone could be allowed as bad debts u/s 36(1)(vii) of the Act. 7.8 The provisions of sec. 36(1)(vii) allows deduction as under:- \"36(1)(vii) Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account under that clause. ........... Explanation 2 - For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (via) and such account shall relate to all types of advances, including advances made by rural branches;\" The provisions of sec.36(2)(v) are relevant here and it reads as under:- \"(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply---- ....... (v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the 'provision for bad and doubtful debts' account made under that clause.\" A combined reading of provisions of clause (vii) of sec.36(1), the proviso thereunder and clause (v) of sec.36(2) would show that (a) the bank should debit the actual bad debts written off by it to \"PBDD a/c\" (sec. 36(2)(v)) (b) the deduction u/s 36(2)(vii) shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the PBDD made under clause (viia) of sec.36(1). 7.9 The contention of the revenue is that the Explanation 2 has expanded the scope of the proviso to sec. 36(1)(vii) and hence the bad debts relating to non-rural branches are also required to be first debited to PBDD a/c and the excess amount alone can be allowed as deduction u/s 36(1)(vii) of the Act. According to revenue, the decision rendered by Hon'ble Supreme Court in the case of Catholic Syrian Bank (2012)( 343 ITR 270). In the above said case, the Hon'ble Supreme Court has expressed the view that the provisions of sec. 36(1)(vii) and 36(1)(viia) allow separate deduction and they are independent provisions. The Supreme Court further held that the clause (viia)(a) applies only to rural advances. So the bad debts relating to non-rural advances need not be deducted against the PBDD allowed under clause (a) of sec.36(1)(viia) of the Act. The Hon'ble Supreme Court, inter alia, also observed as under:- Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 6 \"31 It was neither in dispute earlier nor is it disputed before us, that the assessee-bank is maintaining two separate accounts, one being a provision for bad and doubtful debts other than provision for bad debts in rural branches and another provision account for bad debts in rural branches for which separate accounts are maintained....\" Referring to the above said observations, the revenue has taken the view that the Hon'ble Supreme Court has rendered its decision on the assumption that the banks would be maintaining two separate PBDD a/c, viz., one for rural branches and another one for non-rural branches. 7.10 It is possible that all banks may not be maintaining two separate accounts, as observed by the Hon'ble Supreme Court. Hence there was an apprehension in the minds of revenue with regard to the effect of the decision rendered by Hon'ble Supreme Court. For instance, if a particular bank is maintaining only a single PBDD a/c for the provision created u/s 36(1)(viia) of the Act and even if that bank is not having any rural branches, then it may try to avail the benefit of decision rendered by Hon'ble Supreme Court and may possibly contend that (i) the provision allowed u/s 36(1)(viia) shall apply only to rural branches. (ii) since it does not maintain two separate PBDD a/c for rural and non-rural advances, the bad debts relating non-rural branches need not be reduced from the PBDD a/c allowed u/s 36(1)(viia) in terms of sec. 36(2)(v) and the proviso to sec. 36(1)(vii) of the Act. However, the Ld A.R submitted before us that the Explanation 2 has been inserted in sec. 36(1)(vii) by Finance Act, 2013 (after the decision of Catholic Syrian Bank) to debar certain assessees to avail the interpretation given by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra). 7.11 We have considered the arguments advanced by Ld A.R on this point. According to Ld A.R, if we closely analyse the provisions of sec. 36(1)(viia) of the Act, the intention of the Parliament in inserting Explanation -2 shall become clear. Accordingly, we analysed the provisions of sec.36(1)(viia) and notice that the said section allows deduction of PBDD to various types of assessees, viz., (i) Clause (a) of sec. 36(1)(viia) shall be applicable to a Scheduled bank (not being a bank incorporated by or under the laws of a country outside India) or non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank. The quantum of The deduction is 7.50% of Total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding 10% of aggregate average advances made by the rural branches of such bank. (ii) Clause (b) of sec. 36(1)(viia) shall be applicable to a bank incorporated by or under the laws of a country outside India. The quantum of deduction is 5% of the total income (computed before making any deduction under this clause and Chapter VIA). Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 7 (iii) Clause (c) is applicable to a public financial institution or a State financial corporation or a State industrial investment corporation. The quantum of deduction is 5% of total income (computed before making any deduction under this clause and Chapter VIA). (iv) Clause (d) is applicable to Non-banking financial company from AY 2017-18. The Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra) has held that the PBDD allowed under clause (a) of Sec. 36(1)(viia) refers to 'rural advances' only. In fact the expression \"rural branches\" finds place in clause (a) only. It can be noticed that the reference to \"rural branches\" is not there in clause (b) to (d). Generally, the foreign banks may not have rural branches. However, such kind of banks, financial institutions, NBFC etc. are also eligible to claim deduction towards PBDD u/s 36(1)(viia) of the Act under clauses (b) to (d). In view of the decision rendered in the case of Catholic Syrian bank, it is possible that the assessees covered by clause (b) to (d) may contend that the bad debts written off by them need not be adjusted against PBDD allowed u/s 36(1)(viia) of the Act, since the bad debts relate to \"non-rural debts\". Accordingly, we are of the view that the Explanation 2 has been inserted in order to bring the assesses covered by clauses (b) to (d) within the ambit of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. Hence, in our The view, advances given by rural and non-rural branches mentioned in Explanation 2 shall apply to the assesses covered by clause (b) to (d) of sec. 36(1)(viia) of the Act. 7.12 At this juncture, we may gainfully refer to the \"MEMORANDUM EXPLAINING FINANCE BILL 2013\", which brings out the intention of the Parliament in inserting Explanation-2 in sec. 36(1)(vii) of the Act. It is extracted below:- \"Clarification for amount to be eligible for deduction as bad debts in case of banks:- Under the existing provisions of section 36(1)(viia) of the Income-tax Act, in computing the business income of certain banks and financial institutions, deduction is allowable in respect of any provision for bad and doubtful debts made by such entities subject to certain limits specified therein. The limit specified under section 36(1)(viia)(a) of the Act restrict the claim of deduction for provision for bad and doubtful debts for certain banks (not incorporated outside India) and certain cooperative banks to 7.5% of gross total income (before deduction under this clause) of such banks and 10% of the aggregate average advance made by the rural branches of such banks. This limit is 5% of gross total income (before deduction under this clause) under sections 36(1)(viia)(b) and 36(1)(viia)(c) for a bank incorporated outside India and certain financial institutions. Provisions of clause (vii) of section 36(1) of the Act provides for deduction for bad debt actually written off as irrecoverable in the books of account of the assessee. The proviso to this clause provides that for an assessee, to which section 36(1)(viia) of the Act applies, deduction under said clause (vii) shall Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 8 be limited to the amount by which the bad debt written off exceeds the credit balance in the provision for bad and doubtful debts account made under section 36(1) (viia) of the Act. The provisions of section 36(1)(vii) of the Act are subject to the provisions of section 36(2) of the Act. The clause (v) of section 36(2) of the Act provides that the assessee, to which section 36(1)(viia) of the Act applies, should debit the amount of bad debt written off to the provision for bad and doubtful debts account made under section 36(1) (viia) of the Act. Therefore, the banks or financial institutions are entitled to claim deduction for bad debt actually written off under section 36(1)(vii) of the Act only to the extent it is in excess of the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) of the Act. However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances. Section 36(1)(viia) of the Act contains three sub-clauses, i.e. sub-clause (a), sub- clause (b) and sub-clause (c) and only one of the sub-clauses i.e. sub- clause (a) refers to rural advances whereas other sub-clauses do not refer to the rural advances. In fact, foreign banks generally do not have rural branches. Therefore, the provision for bad and doubtful debts account made under clause (viia) of section 36(1) and referred to in proviso to clause (vii) of section 36(1) and section 36(2)(v) applies to all types of advances, whether rural or other advances. It has also been interpreted that there are separate accounts in respect of provision for bad and doubtful debt under clause (viia) for rural advances and urban advances and if the actual write off of debt relates to urban advances, then, it should not be set off against provision for bad and doubtful The debts made for rural advances. There is no such distinction made in clause (viia) of section 36(1). In order to clarify the scope and applicability of provision of clause (vii), (viia) of sub-section (1) and sub-section (2), it is proposed to insert an Explanation in clause (vii) of section 36(1) stating that for the purposes of the proviso to section 36(1)(vii) and section 36(2)(v), only one account as referred to therein is made in respect of provision for bad and doubtful debts under section 36(1)(viia) and such account relates to all types of advances, including advances made by rural branches. Therefore, for an assessee to which clause (viia) of section 36(1) applies, the amount of deduction in respect of the bad debts actually written off under section 36(1)(vii) shall be limited to the amount by which such bad debts exceeds the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) without any distinction between rural advances and other advances. This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. The CBDT has issued an Explanatory note to the Provisions of Finance Act, 2013 on 24.01.2014 in F No.142/24/2013 - TPC, wherein also the very same explanations have been given for introducing Explanation - 2 in Sec. 36(1)(vii) of the Act. The Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 9 above said Memorandum and the Explanatory Note issued by the Government/CBDT supports our view. 7.13 Our view is further fortified by certain observations made by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra). We may refer to paragraph 27 of the decision now:- \"27. As per this proviso to clause (vii), the deduction on account of the actual write off of bad debts would be limited to the excess of the amount written off over the amount of the provision which had already been allowed under clause (viia). The proviso by and large protects the interests of the Revenue. In case of rural advances which are covered by clause (viia), there would be no such double deduction. The proviso, in its terms, limits its application to the case of a bank to which clause (viia) applies. Indisputably, clause (viia)(a) applies only to rural advances.\" It is pertinent to note that the Hon'ble Supreme Court has categorically held that clause (a) of sec. 36(1)(viia) applies to rural advances only. If the Parliament wanted to undo the above said interpretation given by the Hon'ble Supreme Court, it should have brought amendment in clause (a) to sec. 36(1)(viia) to make its intention clear that the clause (a) shall apply to both rural and non-rural advances. Since there is no such amendment, the interpretation given by Hon'ble Supreme Court that \"clause (viia)(a) applies to rural advances only\" shall remain intact. Explanation 2 inserted in sec. 36(1)(vii), in our view, does not override the above said interpretation given by Hon'ble Supreme Court. 7.14 In the Memorandum explaining the purpose of introducing Explanation -2 in Sec. 36(1)(vii), it has been acknowledged that only the clause (a) refers to \"rural branches\". It has also been stated that the foreign banks do not have rural branches. The assesses covered by clause (b) to (d) may not be having rural branches. Hence, the memorandum explains as under with regard to the decision rendered by Hon'ble Supreme Court in the case of Catholic Syrian Bank (supra):- \"However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances.\" Because of the interpretation so given by Hon'ble Supreme Court, as discussed earlier, there arose a necessity for the Parliament to clarify that the PBDD allowed u/s 36(1)(viia) shall apply to all types of advances The Karnataka Bank Ltd. including advances made by rural branches. However, as stated earlier, the clause (a) to sec.36(1)(viia) has been held to be applicable to rural advances only and this interpretation has not been overridden by any amendment. 7.15 As noticed earlier, the assessees covered by clauses (b) to (d) may not be having rural branches, but they would be getting the benefit of deduction of PBDD u/s 36(1)(viia) of the Act. Hence, in order to bring those assessees within the ambit of Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 10 the proviso to sec. 36(1)(vii) and sec. 36(2)(v), it was imperative for the Parliament to clarify the legal position and accordingly Explanation-2 has been inserted in sec. 36(1)(vii) of the Act. Accordingly, on the analysis of the provisions discussed above, we are of the view that the above said Explanation-2 shall operate (a) in respect of clause (a) of sec. 36(1)(viia) of the Act only to rural advances and (b) in respect of clauses (b) to (d), for advances given by both rural and non- rural branches. 7.16 In the instant case, the assessee has claimed deduction towards PBDD under clause (a) to sec. 36(1)(viia) of the Act, meaning thereby, the clause (a) is applicable to rural advances only as per the decision given by Hon'ble Supreme Court in the case of Catholic Syrian Bank. Hence the bad debts relating to non-rural branches are not required to be adjusted against PBDD allowed under clause (a) of sec. 36(1)(viia) of the Act in terms of the proviso to sec. 36(1)(vii) and sec. 36(2)(v) of the Act. 7.17 In view of the foregoing discussions, we are unable to agree with the view expressed by Ld CIT(A) on this issue. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the bad debts relating to non- rural branches u/s 36(1)(vii) of the Act without adjusting the same against the PBDD a/c, since the said PBDD a/c relates to rural advances only.” 9. Finding parity of facts qua the relevant provisions, we direct the AO to allow the bad debts written off by the assessee. Accordingly, Ground No. 1 is allowed. 10. Ground No. 2 relates to the taxability of recovery in respect of bad debts written off which were not allowed as deduction. A similar issue was considered by the Co-ordinate Bench in assessee’s own case in ITA No. 2037/Mum/2024, vide order dated 11/06/2025. The relevant findings read as under:- “5.1 We find that an identical issue was decided by the coordinate bench in ITA No. 1440/Mum/2023 in AY 2016-17. The relevant findings read as under:- \"11. We heard the parties and perused the material on record. The Id. AR brought to our attention that a similar issue in assessee's own case for AY 2013-14 was considered by the Co-ordinate Bench where it has been held that \"11. Considered the rival submissions and material placed on record, we observe from the record that the issue raised by the assessee is covered in its favour by the order of the Coordinate Bench in assessee's own case, the same is reproduced by Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 11 the Ld. CIT(A) in his order at Page No. 17 of the order. Since the issue under consideration is already covered in favour of assessee, however, Ld. CIT(A) has elaborately discussed his point of view that why he is not in a position to follow the decision of the Coordinate Bench, even though it is not as per the legal conventions still we proceed to explain the issue in the following paragraphs. 12. In the factual matrix submitted before us, the Bank makes provision for bad and doubtful debts as per RBI norms. Out of the said provisions made, deduction is allowed under section 36(1) (vita) to the extent of eligible amount as prescribed (an amount not exceeding 8.5% of the total income and an amount not exceeding 10% of the aggregate average advances by the rural branches). This is the first stream of deduction specified u/s 36(1) (vita) of the Act. 13. Therefore, Let us understand this transaction with an example, if a provision of say 2.1000 is made in the books as per RBI norms, a deduction of say .500 is allowed based on formula (an amount not exceeding 8.5% of the total income and an amount not exceeding 10% of the aggregate average advances by the rural branches) under section 36(1)(viia). However, if no provision is made in the books, no deduction is allowed under section 36(1)(viia) as per section 36(2)(v) of the Act. 14. Accordingly, for the purpose of determining taxable income, the provision made of 2.1000 is added back and offered to tax, the deduction of ₹.500 is claimed u/s 36(1)(viia) in the tax computation. Therefore, the actual bad debts written off is charged to the provision account, which the assessee ultimately reverses in the tax computation and allowed only the statutory deduction u/s 36(1)(viia) of the Act, in the books it never crossed the amount allowed under section 36(1)(viia) of the Act. 15. If there is a reversal of provision which is credited to P&L account, the same will be offered to tax and no deduction is allowed under section 36(1)(viia) of the Act. Therefore, the provision made/reversed and deduction allowed under section 36(1)(viia) / amount offered to tax form a separate stream of deduction under the Income-tax Act. When a bad debt is written off, the same is written off by debit to provision account for the reason that the assessee's claim of actual bad debts written off never crossed the claim of deduction claimed under section 36(1)(viia) of the Act by the assessee. Whereas, the deduction under section 36(1) (vii) is allowed to the extent it exceeds the opening credit balance in the provision account maintained under section 36(1)(viia) of the Act. This is the 2nd stream of deduction. Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 12 16. No deduction of the bad debts written off is allowed under section 36(1)(vii) of the Act, if it is lower than the deduction allowed under section 36 (1)(viia). In this regard, if a recovery is effected out of the said write off which falls under the 2nd stream of deduction, the same cannot be taxed unless a deduction has been allowed under the 2nd stream in respect of the bad debts written off. 17. The provisions of section 41(4) of the Act which provides for taxing the recovery effected out of the bad debts written off, therefore, clearly stipulates that the said recovery will be taxed if a deduction has been allowed in respect of bad debts written off which falls under the second stream of deductions as stated above. Accordingly, the section provides that if a bad debt written off has been allowed as deduction under section 36(1)(vii) of the Act i.e., in second stream of deductions, the recovery effected out of such write off, which has been allowed, will be charged to tax. This is explained in the below chart and table: ***************** ***************** 18. From the above, in situation I, the deduction u/s 36(1)(viia) is allowed the extent of ₹.500 because there is a provision created as per RBI guidelines. In situation II, deduction of ₹.500 is allowed under 36(1)(viia) und also the actual bad debts is more than the first stream of deduction, the additional deduction is allowed of 2.100/- u/s 36(1)(vii) of the Act. In situation III, if the provision is not created in the books of account, then no deduction is allowed under section 36(1)(viia) of the Act and only option available to the assessee is to claim uls 36(1)(vii) of the Act. 19. Therefore, it is clear that where a deduction has not been allowed in respect of bad debts written off under the 2nd stream, the question of charging the recovery effected out of such bad debts written off to tax will not arise. In the third situation discussed in the chart, when the assessee does not make any provision as per RBI Guidelines, then it cannot claim any deductions under section 36(1)(viia) of the Act and it can only claim deduction under section 36(1)(vii) of the Act, if there is any recovery, it can be charged to tax under section 41(4) of the Act. Therefore, the proposed addition of recovery of bad debts by the Assessing Officer is not proper and observation of Ld.CIT(A) is also not correct, the revenue has to appreciate the actual claim of deductions made by the assessee under various provisions exclusively enacted for the purpose of banking companies has to be read along with the tax computation submitted by the assessee and not express their opinion without properly verifying the impact in the tax computation. It may look double deduction while reading the Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 13 provisions in isolation. Accordingly, the grounds raised by the assessee is allowed. 20. In the result, appeal filed by the assessee is allowed.\" 12. From the observations of the AO as extracted in earlier part of this order, it is clear that the AO has held the recovery to be taxable for the reason that the adjustment made to the provision is indirectly charged to P&L A/c. This scenario is considered in the above decision and therefore respectfully following the same, we hold that the recovery of bad-debts which has not been claimed as a deduction u/s 36(1)(vii) in earlier years is not taxable. Accordingly, the AO is directed to delete the addition made in this regard.\" 5.2 Respectfully following the findings of the coordinate bench, we direct the AO to delete the impugned addition. Ground No. 2 is allowed.” 11. Ground No. 2 with its sub-grounds are accordingly allowed. 12. Ground No. 3 relates to the deduction claimed u/s 36(1)(viia) of the Act. 13. During the course of scrutiny assessment proceedings, the AO found that the method adopted by the assessee taking the average advances as Rs. 32,928.41 Crores and the profit earned at Rs. 1032.96 Crores, was not acceptable for the computation of deduction claimed u/s 36(1)(viia) of the Act at Rs. 200 Crores. The AO computed yield on advances by considering interest earned on advances as a percentage of total advances at 9.38% and the net profits earned have been computed by reducing the same by cost of funds and computed the deduction @ 20% of net profits earned for eligible advances at Rs. 101.03 Crores. 13.1. The assessee questioned the methodology of the AO before the ld. CIT(A) but without any success. 14. Before us, the ld. Counsel for the assessee pointed out that an identical issue was decided by the Co-ordinate Bench in the case of State Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 14 Bank of India in ITA No. 3645/Mum/2016; AY 2009-10 vide order dated 06/06/2023. The ld. D/R placed strong reliance on the orders of the Authorities below. 15. We have carefully considered the orders of the authorities below. We find force in the contention of the ld. Counsel. We find that the Co- ordinate Bench in the case of State Bank of India (supra), has considered a similar grievance and following the earlier order of the Co-ordinate Bench in the case of State Bank of India for AY 2008-09, vide order dated 03/02/2020, held as under:- “29. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case in State Bank of India (supra) for the assessment year 2008-09, vide order dated 03/02/2020, while deciding similar issue observed as under:- \"71. We have noted the facts that the assessee has claimed that provision for standard assets should be taken into consideration for computing the deduction under section 36(1)(viia) of the Act. The assessee has also filed the details vide note 17 and Annexure 6 to the revised return of income on pages 8, 9 and 20 of Paper Book - 1 filed by assessee. As per the provisions of section 36(1)(viia) of the Act, a bank is eligible to avail deduction in respect of provision made for bad and doubtful debts, of an amount not exceeding 7.5% of total income and 10% of the aggregate average advances made by the rural branches of the bank. The provision is created by the assessee on the basis of RBI Guidelines. The assessee is required to create provision on non-performing assets on the basis of the classification of assets into the four prescribed categories i.e. loss assets, doubtful assets, substandard assets and standard assets [refer para 5.1.2 of the RBI Guidelines]. 72. The Revenue before us emphasized that the provision for standard assets is not same as provision for bad and doubtful debts and the same is contingent in nature, since it is created only out of abundant caution. We noted from the provisions that the assessee is required to make a provision on all its debts ranging from 0.25% to 100% depending upon the categorization of the loan in terms of the guidelines issued by RBI. The provision on debts made by the assessee is in line with the RBI guidelines and section 36(1)(viia) of the Act does not have a requirement that the provision for debts should be in respect of specified debts only. Section 36(1)(viia) of the Act provides for a deduction to the bank in respect of „any provision made for bad and doubtful debts‟ subject Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 15 to certain ceiling. It does not specify the methodology for calculation of provision for bad and doubtful debts. The banks are required to make provision for bad and doubtful debts in accordance with the RBI guidelines. All the loan assets are initially classified as „Standard‟. Later on depending upon the problems arising, if any, and symptoms of sickness shown including delays in the repayment of the principal and interest, deterioration of security, etc., they may be shifted to other categories. A provision made on any loan assets is a provision for „bad and doubtful debts‟ irrespective of the category in which the loan falls. This is to provide for the inherent risk of loan losses which the bank may suffer in subsequent years. 73. We noted from the provision of Section 36(1)(viia) of the Act that the same allows a deduction to banks in respect of any provision made „for‟ bad and doubtful debts. It does not restrict the allowance to provision made „on‟ bad and doubtful debts. Even in respect of assets that are classified as standard assets, a part of the debts are doubtful of recovery. The fact that a provision is made for standard assets by itself indicates that a part of the standard assets are doubtful of recovery. Accordingly, the entire provision made by the assessee, including in respect of standard assets, is for bad and doubtful debts as envisaged by section 36(1)(viia) of the Act. Thus, in light of above, the assessee is eligible to claim deduction under section 36(1)(viia) of the Act even in respect of the provision made for standard assets. This issue was considered by the ITAT in assessment year 2006-07 in ITA 3145/Mum/2009 dated 6.09.2016, in an appeal against the revision order of the CIT passed under section 263 of the Act, wherein it is held as under: \"So, however, we may also clarify that we are in principle in agreement that a provision for bad and doubtful debts cannot include that against standard assets i.e. which the bank (assessee) itself regards as good for receipt and, therefore with the decision by the tribunal in Bharat Overseas Bank Ltd. (supra) relied upon by the Revenue. A provision by definition a charge against profits, while that in respect of an asset, considered good, would be more in the nature of an appropriation of profit i.e. a reserve. This is precisely what the Tribunal in Bharat Overseas Bank Ltd. (supra) means when its states of the deduction being not in the nature of a standard allowance. No contrary judgement by the Tribunal or a higher court has even otherwise been brought to our notice. At the same time, the provision as per RBI guidelines - which are contended to have been followed / adopted, provide for the minimum provision, and the bank is free to make a higher provision, i.e., than that prescribed by the RBI norms. Provisioning, it may be noted, is a management function, made reflecting its risk assessment qua different assets. If therefore, the assessee-bank is able to satisfy the assessing authority that the provision as made is justified with reference to the debts considered by it as bad and doubtful, we see no reason as to why the same cannot be allowed. The matter is accordingly restored back to the file of the Assessing Officer for fresh determination Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 16 by issuing definite findings of fact. Even as the primary onus would be on the assessee, the Assessing Officer cannot substitute his own judgement with regard to the risk assessment qua a particular asset and, correspondingly, the provision in its respect. His purview would be to examine the reasonableness of the assessee‟s claim in light of the facts and circumstances qua each asset/s in respect of which provision is made. In arriving at our decision, we have taken a holistic view of the matter, placing due emphasis on the words „provision‟ preceding the words „for bad and doubtful debts‟ as well as the words „not exceeding‟ occurring in the section, and which stand highlighted for the purpose. We decide accordingly.\" 74. In view of the above discussion, arguments of both the sides, we are of the view that the assessee is eligible for claim of deduction u/s 36(1)(viia) of the Act on standard assets and this issue is covered by Tribunal’s decision in assessee‟s own case for AY 2006-07 in ITA no.3145/Mum/2004 vide order dated 06.09.2016. Hence, we allow this issue of assessee‟s appeal.\" 30. The learned DR could not show any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged Page | 30 State Bank of India ITA no.3645/Mum/2016 ITA no.4564/Mum./2016 in the relevant assessment year. Therefore, respectfully following the judicial precedents in assessee's own case cited supra, we uphold the plea of the assessee and allow the claim of deduction on provisions for standard assets under section 36(1)(viia) of the Act. Accordingly, ground no.7, raised in assessee's appeal is allowed.” 16. Respectfully following the decision of the Co-ordinate Bench, Ground No. 3 is allowed. 17. Ground No. 4 relates to the applicability of provisions of Section 115JB of the Act. This issue has been considered by the Co-ordinate Bench in assessee’s own case in ITA No. 2037/Mum/2024 (supra). The relevant findings read as under:- “13.1 An identical issue has been decided by the coordinate bench in ITA No. 1440/Mum/2023 for AY 2016-17. The relevant findings read as under: 13. We notice that the issue of applicability of provisions of section 115JB has been considered by the Special Bench in assessee's own case for AY 2015-16 (ITA No. 424/Mum/2020 dated 06.09.2024) where it has been held that \"39. We have heard both the parties and also perused the relevant material referred to before us and the various provisions of the relevant Acts cited which are relevant for adjudication of the issue before us. 40. The question which has been referred to the Special Bench is whether the requirement of sub-section (2) of 115JB is fulfilled in the present case of the assessees. Sub-section (1) of Section 115JB mandates charge of income based Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 17 on book profits subject to fulfilment of certain conditions and also provides the rate on which such tax shall be charged. The Section starts with non- obstante clause and therefore, it is a departure from normal charge of tax on the total income of the company. Sub-section (2) is the computation provision dealing with the manner in which such book profits are to be computed. Upto A.Y.2012-13, subsection (2) of Section 115JB applied only to such companies which were required to prepare its profit and loss account in accordance with part II & III of Schedule VI to the Companies Act 1956. The assessee bank is required to prepare its profit and loss account in accordance with Section 52 r.w.s. 29 of the Banking Regulation Act and not as per the Companies Act. Earlier in the case of the assessee it has been settled by the Hon'ble Jurisdictional High Court that provision of Section 115JB has no application to its case. Now after the amendment w.e.f. A.Y.2013-14, Sub-section (2) has been amended to bring into the ambit of Section 115JB, those companies to which second proviso to subsection (1) of Section 129 of the Companies Act is applicable, who are required to prepare its statement of profit and loss account in accordance with provisions of the Act governing such company. For the sake of ready reference the amended subsection (2) of Section 115JB is again reproduced hereunder:- (2) Every assessee,- (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of Schedule III to the Companies Act, 2013 (18 of 2013); or (b) heing a company, to which the second proviso to subsection (1) of section 129 of the Companies Act, 2013 (18 of 2013) is applicable, shall, for the purposes of this section, prepare its statement of profit and loss for the relevant previous year in accordance with the provisions of the Act governing such company: Provided that while preparing the annual accounts including statement of profit and loss, (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including statement of profit and loss; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including statement of profit and loss and laid before the company at its annual general meeting in accordance with the provisions of section 129 of the Companies Act, 2013 (18 of 2013): Provided further that where the company has adopted or adopts the financial year under the Companies Act, 2013 (18 of 2013), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including statement of profit and loss; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including statement of profit and loss for such Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 18 financial year or part of such financial year falling within the relevant previous year. 41. In so far as Clause (a), the same applies to a case of a company other than referred to in Clause (b). According to clause (a), for the purpose of Section 115JB the company has to prepare its profit and loss account for the relevant previous year in accordance with the Companies Act, 2013 and the First proviso to sub-section (2) requires that while preparing the accounts including the profit and loss account, the accounting policies, the accounting standards and the method and rates adopted for the purpose of preparing such accounts including the profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of Section 129 of the Companies Act, 2013. Since assessee bank has to prepare its accounts in accordance with the provisions contained in Section 51 r.w.s. 29 of the BR Act, therefore, Schedule III of the Companies Act is not applicable. Thus, Clause (a) of Section 115JB (2), the computation provision, will not apply and this matter has attained finality in the case of the assessee by the Hon'ble Jurisdictional High Court in the case of the assessee (cited supra). 42. Now for Clause (b), following conditions need to be satisfied for applying section 115JB in the case of a company:- i. it applies to a company to which the second proviso to subsection (1) of section 129 of the Companies Act, 2013 is applicable; ii. once this condition is fulfilled, it requires such assessee for the purpose of this section to prepare its profit and loss account in accordance with the provisions of the Act governing such company. 43. Since 115JB is applicable to the company to which second proviso to Section 129(1) applies, therefore, it would be relevant to quote Section 129 of the Companies Act which reads as under:- \"129. Financial statement-(1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III: Provided that the items contained in such financial statements shall be in accordance with the accounting standards. Provided further that nothing contained in this subsection shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company Provided also that the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose (a) in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999). Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 19 (h) in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949 (10 of 1949), (c) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity Act, 2003 (36 of 2003), (d) in the case of a company governed by any other law for the time being in force, any matters which are not required to be disclosed by that law.\" 44. The second proviso applies to any insurance company, hanking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company. In so far as the present case is concerned, one has to consider whether the assessee could be regarded as a 'banking company' for the purposes of section 129 of the Companies Act, 2013). 45. Now whether the assessee bank can be termed as a company within the meaning of the Companies Act, 2013, first of all, Section 115JB(2) is applicable to every assessee „being a company\". The company has been defined in Section 2(17) of the Income Tax Act which we have already reproduced in para 22 above. Thus, the company means any Indian company. Indian company has been defined in Section 2(26) (incorporated in para 23 of the order) which defines „Indian company\" means company formed and registered under the Companies Act. Thus, the company for the purpose of the Income Tax Act is a company which is formed and registered under the Companies Act. Section 2(9) of the Companies Act, 2013, a banking company has been defined to mean a banking company as defined in section 5(c) of the BR Act). Section 5(c) of the BR Act defines a „banking company\" as under: \"(c) \"banking company\" means any company which transacts the business of banking in India\" Therefore, for an entity to qualify as a banking company it should first of all, be a company' and secondly the said company should transact the business of banking in India. 46. The expression \"company\" has been defined in section 5(d) of the BR Act as under: \"(d) \"company\" means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;\" 47. Therefore, in so far as is relevant, the entity has to be a company as defined in section 3 of the Companies Act, 1956 (Now 2013) to be regarded as a banking company. Section 3(1)(i) of the Companies Act, defines a 'company' as under: Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 20 \"(i) \"company\" means a company formed and registered under this Act or an existing company as defined in clause (ii)\" 48. Therefore, it is sine-qua-non that for an entity to qualify as a company it must either be a company formed and registered under the Companies Act or it should be an existing company as defined in sub-clause (ii) thereof. Since the Assessee is not formed and registered under the Companies Act, 1956, albeit came into existence by a separate Act of Parliament, that is, .,Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970\", therefore, it does not fall in the first part of the said section. 49. Further, the expression \"existing company has been defined in Section 3(1)(ii) to mean as under: \"(ii) \"existing company\" means a company formed and registered under any of the previous companies laws specified below :- (a) any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866), and repealed by that Act; (b) the Indian Companies Act, 1866 (10 of 1866); (c) the Indian Companies Act, 1882 (6 of 1882); (d) the Indian Companies Act, 1913 (7 of 1913); (e) the Registration of Transferred Companies Ordinance, 1942 (54 of 1942); and (f) any law corresponding to any of the Acts or the Ordinance aforesaid and in force - (1) in the merged territories or in a Part B States (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); Or (2) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), insofar as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu & Kashmir) Act, 1968 (25 of 1968), insofar as other corporations are concerned; and (3) the Portuguese Commercial Code, insofar as it relates to sociedades anonimas\";\" 50. The assessee bank was neither formed or registered under the Companies Act, 1956; nor it is in existing company as per the above definition. Once it is not a company under the Companies Act, then the first condition referred to in clause (b) of Section 115JB(2) is not fulfilled, and consequently second proviso helow Section 129(1) of the Companies Act is also not applicable. 51. The main crux of the department is that since assessee bank has come into existence by the Acquisition Act\" and Section 11 thereof states that for the purpose of Income Tax Act, every corresponding new bank shall be deemed to be an Indian company\" and the company in which the public are ..substantially interested' and since in Section 2(17) of the Income Tax Act, the company\" has been defined as any Indian company therefore, the provisions of the Income Tax Act would apply because Section 2(26) of the Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 21 Act defines Indian company\" means the company formed and registered under the Companies Act and therefore, it is deemed to be a company under the Companies Act. 52. Section 11 of the Acquisition Act states that \"For the purposes of Income- tax Act, 1961 (43 of 1961), every corresponding new bank shall be deemed to be an Indian company and a company in which the public are substantially interested\". Therefore, the said deeming fiction is created only for the purposes of the Income-tax Act. Further, for the purposes of the said Act, it treats every corresponding new bank to be an Indian company and also a company in which the public are substantially interested. 53. First of all, deeming an entity to be an Indian Company or a company in which public are substantially interested for the purposes of the Income- tax Act would not ipso facto make such entity as a 'company' for the purposes of the Companies Act, 2013, unless the conditions specified in Section 3 thereof are fulfilled. There is no provision to deem a nationalised bank to be a company for the purposes of Section 3 of the Companies Act, 1956. 54. As explained in the foregoing paragraphs, Section 2(17) of the income Tax Act r.w.s. 2(26) which defines company\" to mean a company formed and registered under the Companies Act, 1956, does not meet the requirement of being a company in the case of assessee bank, because the Indian company has to be formed and registered under the Companies Act. Notwithstanding that Section 11 of the Acquisition Act deems assessee bank to be a company for the purpose of Income Tax Act, but that does not lead to an inference that merely regarded as a company for the purpose of the Income Tax Act it is also Company registered under the Companies Act. The fiction created by Section 11 of the Acquisition Act, does not imply that the assessee bank would also P a g e | 29 ITA Nos. 2037, 2119, 2038 & 2118/Mum/2024 A.Y. 2020-21 & 2021-22 Union Bank of India become a company for the purpose of the Companies Act for which Clause (b) of Sub- Section 2 of Section 115JB is applicable. 55. In the earlier part of the order, we have already noted that by the Acquisition Act, the banking business of the existing bank was transferred from Union Bank of India Ltd to The Union Bank of India. The earlier entity,i.e., Union Bank of India Ltd. was a company under the earlier Companies Act, however, that company as a whole was not taken over or acquired but only banking business was acquired by the Acquisition Act. That is the reason why Union Bank of India Ltd. still existed at the point of acquisition and continues till now and the shareholders of Union Bank of India Ltd. were paid compensation as a consideration for acquiring the banking business. It was by the Acquisition Act that these banks were nationalized and the banking business was acquired from the erstwhile banking companies. These new acquiring banks including Union Bank of India is neither registered under the Companies Act, 2013 nor under any other previous company law. Already the Hon'ble Supreme Court in the case of Rustom Cavasjee Cooper v. Union of India (supra) as noted above, the Hon'ble Supreme Court had held that only undertaking was acquired Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 22 for the banking companies acquisition and transfer of invoking ordinance which was promulgated on 19/06/1969, which culminated into the Act of Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Thus, assessee cannot be treated as a company under the Companies Act, because it was never registered under the Companies Act. Ergo, the deeming fiction by way of Section 11 of the Acquisition Act has to be read purely in the context for the purpose of Income Tax Act where the corresponding new bank have been deemed to be an Indian Company and a company in which public are substantially interested. This deeming section cannot be extended to a company registered under the Companies Act to which alone Section 115JB is applicable. 56. Thus, we hold that Section 11 of the Acquisition Act which deals a corresponding new bank treated as Indian company for the purpose of Income Tax, however, Clause (b) in Sub-Section 2 to Section 115JB does not permit treatment of such bank as a company for the purpose of the said clause, because it should be company to which second proviso to sub-section (1) to Section 129 of the Companies Act is applicable. The said proviso has no application to the corresponding new bank as it is not a banking company for the purpose of the said provision. The expression \"company\" used in section 115JB(2)(b) is to be inferred to be company under the Companies Act and not to an entity which is deemed by a fiction to be a company for the purpose of the Income Tax Act. 57. Before us, ld. Counsel has given various references under the Income Tax Act itself where the corresponding new bank and a banking company have been treated separate and independent from each other for which our reference was also drawn to Section 36(1)(viii) & 72A. Apart from that, it is noticed that, Section 1941(1) of the Act which provides that if any specified person is responsible for paying to a resident any income hy way of interest is obliged to deduct tax at source, however, Section 194A(3) provides that P a g e | 30 ITA Nos. 2037, 2119, 2038 & 2118/Mum/2024 A.Y. 2020-21 & 2021-22 Union Bank of India Section 194A(1) shall not apply if the payment has been made to certain entities. Clause (iii) of subsection (3) of section 1944, deals with such entities. The said clause reads as under:- iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or such other institution, association or body [or class of institutions, associations or bodies] which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 23 [Provided that no notification under this sub-clause shall be issued on or after the Ist day of April, 2020;] 58. The aforesaid clause (f) provides that if Central Government notifies any such entity then TDS is not to be deducted. It is very relevant to note that at the time of Acquisition Act was enacted, Central Government had issued a Notification No. SO 710 dated 16/02/1970 [1970] [Reported in 75 ITR (Stat) 106] which reads as under:- Income-tax Act, 1961: Notification under sec. 194A(3) (iii) (f) Notification No. S. O. 710, dated February 16, 1970. (1) In pursuance of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify with effect from the 19th July, 1969, the following banks for the purposes of the said sub-clause:- 1. Indian Overseas Bank, 151, Mount Road, Madras- 2. Indian Bank, Indian Chamber Building, Madras-1. 3. Allahabad Bank, 14, India Exchange Place, Calcutta-1. 4. Dena Bank, Devkaran Nanjee Building. 17. Horniman Circle, Fort, Bombay-1. P a g e | 31 ITA Nos. 2037, 2119, 2038 & 2118/Mum/2024 A.Y. 2020-21 & 2021-22 Union Bank of India 5. Canara Bank, 112, Jayachamarajendra Road, Bangalore-1. 6. Union Bank of India, 66/80, Apollo Street, Fort, Bombay-1. 7. United Commercial Bank, 10, Brabourne Road, Calcutta-1. 8. Bank of Baroda, 3. Walchand Hirachand Marg, Bombay-1. 9. Punjab National Bank, Parliament Street, New Delhi-1. 10. Bank of India, 70/80 Mahatma Gandhi Road, Bombay-1. 11. Central Bank of India, Mahatma Gandhi Road, Bombay-1. 12. United Bank of India, 4, Narendra Chandra Datta Srani (Clive Ghat Street), Calcutta-1. 13. Bank of Maharashtra, 1177 Peth, Poona-2. 14. Syndicate Bank, Manipal, Mysore State, Mysore 59. Thus, the aforesaid notification read with provision of Section 1944(3), makes it clear that even Government of India considers the above entities separate and distinct from banking companies. Once under the Income Tax Act, Legislature itself has made a distinction for the aforesaid banks including the assessee are not covered as banking company, then, this further buttresses the point that these banks are separate and distinct from other banking companies. 60. Accordingly, the question referred to Special Bench is decided in favour of the assessee banks that clause (b) to sub section (2) of section 115.JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, are not applicable to the banks constituted as 'corresponding new bank' in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, the provision of Section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks.\" 14. Respectfully following the above decision, we hold that the provisions of section 115JB are not applicable to assessee's case for the year under consideration also.\" Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 24 18. Respectfully following the abovementioned findings, we hold that provisions of section 115JB are not applicable. Accordingly, Ground No. 4 is allowed. 19. We now take up the revenue’s appeal in ITA No. 882/Mum/2020. The grounds of appeal raised by the revenue read as under:- 20. The first grievance relates to the deletion of the disallowance u/s 14A r.w.r 8D. 21. Similar issues was decided by the Co-ordinate Bench in assessee’s own case in ITA No. 2037/Mum/2024 (supra). The relevant findings read as under:- “4.1 We find that an identical issue was decided by the coordinate bench in ITA No. 1440/Mum/2023 for AY 2016-17. The relevant findings of the coordinate bench read as under: \"4. The Id. AR submitted that the Co-ordinate Bench in assessee's own case for AY 2014-15 (ITA No. 1807/Mum/2018 dated 27.11.2020) has considered a similar issue and held that \"6. We have heard the submissions made by rival sides and have examined the orders of authorities below. The assessee in appeal has raised solitary ground against the disallowance under section 14A r.w.r. 8D of the Act. The Revenue in ground No.1 of the appeal has impugned the finding of CIT(A) in restoring the issue of disallowance under section 144 r.w.r. 8D of the Act to Assessing Officer. Undisputedly, the assessee has earned tax free income from Bonds and dividend income on shares held as 'stock-in-trade'. The assessee has made suo-moto disallowance of Rs.9,20,164/- under section 144 for earning tax free income. The assessee in appeal has contended that no disallowance under section 144 of the Act is warranted as tax free income has been earned on shares/stock held as 'stock-n-trade'. In so far as contention of the assessee that shares/bonds on which tax free income has been earned are held as 'stock-in- trade', is not disputed by the Revenue. The Hon'ble Apex Court in the case of Maxopp Investment Pvt. Ltd. (supra) has observed that where shares are held as 'stock-in-trade', it becomes business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not is immaterial. It is quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 25 intention of the assessee is to trade in shares to earn profits. The Hon'ble Supreme Court approved the order of Hon'ble Punjab & Haryana High Court in the case of PCIT vs. State Bank of Patiala, 391 ITR 218 albiet for a different reason that provisions of section 144 would not get attracted where the shares are held in 'stock-in-trade' Following the judgment rendered in the case of Maxopp Investment P. Ltd. (supra), the Tribunal in the case of Asstt.CIT vs. UCO Bank (supra), Punjab National Bank vs. ACI (supra) and IDBI Bank Ltd. Vs. DCIT(supra) has held that disallowance under section 144 r.w.r. 8D of the Act in case of assessee engaged in Banking business and holding shares as 'stock-in-trade' is not warranted. 7. The CIT(A) has restored the issue of disallowance under section 144 r.w.r. 8D of the Act to Assessing Officer to decide the issue in line with the order of Tribunal in assessee's own case for assessment year 2010-11. We observe that the Co-ordinate Bench while adjudicating the issue of disallowance under section 144 r.w.r. 8D of the Act for assessment year 2010-11 in appeal by the assessee ITA No.1627/Mum/2014 has in turn followed the order of Tribunal in assessee's own case for assessment year 2008-09, wherein the issue was restored to Assessing Officer with a direction to examine the same afresh. The Tribunal while deciding the appeal of assessee for assessment year 2010-11 was not having the benefit of judgment rendered in the case of Maxopp Investment P. Ltd. (supra). The Tribunal passed the order on 08/01/2016 and the judgment in the case of Maxopp was delivered in February 2018. Even the judgment in the case of Pr.CIT vs. State Bank of Patiala (supra) and Pr.CIT vs. Punjab and Sind Bank (supra) are subsequent to the order of Tribunal. 8. Thus, in the light of the decisions discussed above, we hold that no disallowance under section 14A r.w.r. 8D of the Act is warranted where the assessee has earned exempt income on shares/stocks held as 'stock-in-trade'. Consequently, the sole ground raised in appeal by the assessee is allowed and corresponding ground No.1 raised in the appeal by the Revenue is dismissed. 9. In the result, appeal of the assessee is allowed.\" 5. We heard the parties and perused the material on record. The facts for the year under consideration is identical i.e. the exempt income earned by the assessee is out of the shares/stock held as stock-in-trade, therefore respectfully following the above decision of the Co-ordinate Bench in assessee's own case, we direct the AO to delete the disallowance made u/s 14A r.w.r. 8D.\" On finding of parity of facts, respectfully following the decision of the coordinate bench (supra), we direct the AO to delete the disallowance made u/s 14A r.w. rule 8D. Ground No. 1 with its sub-grounds allowed.” Printed from counselvise.com I.T.A. No. 424/Mum/2020 I.T.A. No. 882/Mum/2020 26 22. Respectfully following the same, Ground Nos. 1 to 3 are dismissed. 23. Ground Nos. 4 & 5 relate to the bad debts written off u/s 36(1)(vii) of the Act. This issue has been also considered by us in the appeal of the assessee (supra) vide Ground No. 1 of that appeal. For our detailed discussion therein, this ground is dismissed. 24. Ground Nos. 6 & 7 relate to the adjustment in book profit in respect of disallowance u/s 14A and addition of various provisions to income while computing book profit. 25. Since in the appeal by the assessee we have categorically held that provision of Section 115JB of the Act are not applicable, therefore, Ground No. 6 and 7 become infructuous. 26. In the result, appeal by the assessee is allowed and appeal of the revenue is dismissed. Order pronounced in the Court on 11th August, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 11/08/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "