M/s. Syndicate Bank, Manipal V. Deputy Commissioner of Income Tax, Circle-1, Udupi

ITA 1885/BANG/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8287 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Bad and doubtful debts; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 40(a)(ia); 194C; 194J

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K, JM & Ms.Padmavathy S, JM ITA No.1885/Bang/2018 : Asst.Year 2014-2015 M/s.Canara Bank (erstwhile Syndicate Bank) FM Wing, Head Office, 112 JC Road Bangalore – 560 002. PAN : AACCS4699E. V. The Deputy Commissioner of Income-tax, Circle-1 Udupi. (Appellant) (Respondent) ITA No.237/PAN/2018 : Asst.Year 2014-2015 The Deputy Commissioner of Income-tax, Circle-1 Udupi. V. M/s.Canara Bank (erstwhile Syndicate Bank) FM Wing, Head Office, 112 JC Road Bangalore – 560 002. (Cross Objector) (Respondent) Revenue by : Pradeep Kumar, CIT-DR Assessee by : Sri. S.Ananthan, CA & Smt.Lalitha Rameshwaran, CA Date of Hearing : 21.02.2022 Date of Pronouncement : 23.02.2022 O R D E R Per George George K, JM These cross appeals are directed against CIT(A)’s order dated 26.03.2018. The relevant assessment year is 2014- 2015. 2. The brief facts of the case are as follows: The assessee is a Nationalised Bank. For the assessment year 2014-2015, the return of income was filed on 29.11.2014 claiming a loss of Rs.108,96,44,000. The assessment was completed u/s 143(3) of the I.T.Act vide order dated 28.12.2016. The Assessing Officer made several additions / ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 2 disallowances and determined the income under the regular provisions of the Act at Rs.2228,45,47,130. The details of the disallowances / additions made by the A.O. are as follows:- Sl. No. Particulars Amount in Rs. 1. Disallowance u/s 14A r.w. Rule 8D 64,59,79,000 2. Disallowance u/s 36(1)(viia) 936,90,65,332 3. Disallowance u/s 36(1)(va) 1008,00,06,232 4. Disallowance u/s 40(a)(ia) 87,91,40,567 5. Provision for wage revision 240,00,00,000 Total disallowance / addition 2337,41,91,131 3. The Assessing Officer also assessed tax payable u/s 115JB of the I.T.Act at Rs.757,13,40,716 after making several additions to the book profits. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the first appellate authority. The CIT(A) allowed the appeal of the assessee in respect of following issues:- Sl. No. Particulars Amount in Rs. 1. Disallowance u/s 14A r.w. Rule 8D 64,59,79,000 2. Disallowance u/s 40(a)(ia) 87,91,40,567 3. Provision for wage revision 240,00,00,000 5. The CIT(A), however, did not allow the grounds with regard to the assessee-bank on the following issues:- Sl. No. Particulars Amount in Rs. 1. Disallowance u/s 36(1)(viia) Party allowed 936,90,65,332 2. Disallowance u/s 36(1)(vii) 1008,00,06,232 6. The CIT(A) in relation to applicability of provisions of section 115JB of the Act, did not allow ground that section ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 3 115JB is not applicable to the assessee. The first appellate authority allowed the appeal of the assessee-bank in respect of additions made to the book profit on the following issues:- Sl. No. Particulars Amount in Rs. 1. Disallowance u/s 14A 64,59,79,000 2. Cenvat credit reversal 33,00,20,282 3. Provision for bad and doubtful debts (allowed subject to verification) 976,70,58,332 4. Bad debts written off (allowed subject to verification) 35,47,37,835 5. Depreciation on investments (allowed subject to verification) 212,58,68,059 6. Difference in books written off (allowed subject to verification) 1,23,383 7. Sundry assets written off (allowed subject to verification) 4,19,94,874 8. Provision for wage revision 240,00,00,000 9. Staff welfare expenses 20,00,00,000 10. Provision for leave encashment 97,32,00,000 11. Provision for reward points 18,26,130 7. Further, the CIT(A) upheld the additions made to the book profits in respect of the following:- Sl. No. Particulars Amount in Rs. 1. Provision for funded interest term loan (FITL) 238,07,60,397 2. Diminution in fair value of restructured accounts 40,82,96,342 3. Provision for fraud 3,91,56,786 4. Provision for premises 2,98,65,014 5. Provision for blocked differences 28,03,857 6. Loss on account of claim (suits against the bank) 1,98,044 8. Aggrieved by the order of the CIT(A), the Revenue and the assessee has filed these cross appeals before the Tribunal. We shall first adjudicate the assessee’s appeal. ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 4 ITA No.1885/Bang/2018 (assessee’s appeal) 9. In this appeal, the assessee has raised five grounds and one additional ground. We shall adjudicate the grounds as under:- Ground 1 10. The above ground is general in nature and no specific adjudication is called for. Hence, ground 1 is rejected. Deduction u/s 36(1)(viia) of the I.T.Act (Ground 2) 11. The assessee bank had created provision for bad & doubtful debts of Rs.936,90,65,332 in the books of accounts. It had claimed deduction of Rs.936,90,65,332 u/s 36(1)(viia) of the Act being the amount eligible as calculated under the section in its original return. During the assessment proceedings, the assessee-bank made a revised claim of Rs.1494,99,64,784 u/s 36(1)(viia) of the Act. The assessee calculated deduction based on Aggregate Average Rural Advances (AAA) computed as per Rule 6ABA of the Income-tax Rules, 1962. The Assessing Officer held that the deduction should be restricted to actual provision made in the books. However, the A.O. disallowed the entire deduction u/s 36(1)(viia) by holding that the sum is debited to the profit and loss account and for income tax computation, the same is added back as it is only a provision which is not an allowable deduction. 11.1 Aggrieved by the assessment order, the assessee- bank raised this issue before the first appellate authority. It ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 5 was contended before the first appellate authority that – (i) there is no requirement in section 36(1)(viia) of the Act that provision should be in relation to rural advances, (ii) decision of the Hon’ble Supreme Court in the case of Catholic Syrian Bank relied on by the Assessing Officer was not relevant to the present case, as the Hon’ble Apex Court did not go into the matter of deduction u/s 36(1)(viia) of the Act. It was further contended that deduction has to be calculated as provided in section 36(1)(viia) of the Act and need not be restricted to the amount of provision created in the books. The CIT(A) relying on various judicial pronouncements, allowed the claim of the assessee-bank u/s 36(1)(viia) of the Act, but restricted the claim to the extent of provision created in the books by holding that deduction u/s 36(1)(viia) is subject to provision made in the books and it is not a standard deduction. 11.2 Aggrieved by the order of the CIT(A), the assessee has raised this issue in ground 2 before the Tribunal. The learned AR fairly submitted that the issue in question is covered against the assessee by the order of the Tribunal in assessee’s own case for assessment year 2009-2010 and 2010-2011 in ITA No.681 & 955/Bang/2012 (order dated 13.06.2014). 11.3 The learned Departmental Representative was duly heard. ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 6 11.4 We have heard rival submissions and perused the material on record. It has been fairly admitted by the learned AR that the issue in question is covered against the assessee by the order of the Tribunal in assessee’s own case for assessment year 2009-2010 in ITA No.681/Bang/2012. It was also submitted that the order of the Tribunal was affirmed by the Hon’ble jurisdictional High Court and the assessee has filed SLP before the Hon’ble Apex Court and the same is pending adjudication. 11.5 In view of the submission of the learned AR, we reject ground 2 in assessee’s appeal. Deduction u/s 36(1)(vii) of the Act (Ground 3) 12. The assessee-bank had written off bad debts amounting to Rs 1,024.60 crore, out of which debts written off by rural branches was Rs 16.60 crore and the same was adjusted against the provision claimed u/s 36(1 )(viia) and balance Rs.1,008 crore was claimed as deduction u/s 36(1 )(vii). The Assessing Officer relying on the judgment of Hon'ble Supreme Court in the case of Southern Technologies v. CIT [2010] 352 ITR 577 (SC) disallowed the claim holding that the assessee- bank had not debited the amount of doubtful debt to P&L A/c instead they had debited the provision for NPA to P&L A/c. 12.1 Aggrieved, the assessee raised this issue before the first appellate authority. Before the first appellate authority, the assessee-bank relying on the decision of Hon'ble Supreme Court in the case of Vijaya Bank 323 ITR 166 contended that ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 7 individual debts need not be written off and reduction of bad debts in balance sheet amounts to writing off the debts in the books of accounts. Based on the submissions made by the assessee-bank, the CIT(A) was of the view that assessee’s case was fully covered by the judgment of Hon'ble Supreme Court in the case of Vijaya Bank 323 ITR 166. However, the CIT(A) vide his letter dated 06/03/2018 asked the assessee to explain why bad debts written off u/s 36(1)(vii) should not be first adjusted with the provision allowed u/s 36(1 )(viia) in respect of non-rural branches, keeping in view the Explanation 2 below Section 36(1)(vii), proviso Section 36(1)(vii) r.w.s 36(2)(v) r.w.s 36(1)(viia). The assessee-bank relying on the Hon'ble Supreme Court decision that Section 36(1)(viia) is applicable only to rural advances in the case of Catholic Syrian Bank, argued that since no deduction is allowed for non-rural debts u/s 36(1)(viia), the entire non- rural debts written off should be allowed as deduction u/s 36(1)(vii) without adjusting the same against the provision allowed u/s 36(1)(viia). It was contended that insertion of explanation 2 to Section 36(1)(vii) has not altered the proposition of law as it existed prior to introduction of explanation. Further it contended that since Section 36(1)(viia) applies only to rural debts, in the case of banks having rural branches, it is only rural debts which are to be adjusted against the provision allowed u/s 36(1)(viia) and non-rural debts can be claimed in full. Relying on decision of the Hon'ble Supreme Court in the case of Union of India v. Intercontinental Consultants & Technocrats (P.) Ltd [2018] 91 ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 8 taxmann.com 67 (SC) it also argued that the term 'such debt' contained in proviso to Section 36(1)(vii) refers to the amount of provision allowed u/s 36(1)(viia) and hence, non-rural debts for which no deduction is allowed u/s 36(1)(viia) need not be adjusted against the provision created under that section and they should be allowed in full u/s 36(1)(vii). Alternatively, it is contended that since up to 31/03/2013, deduction was allowed only for rural debts, it is only rural debts that are to be adjusted against the opening balance. Hence, the non-rural debts written off during the year 2013- 14 can be claimed as deduction in full. However, the CIT(A) observed that the reliance placed by the assessee on the judgment of Hon'ble Supreme Court in the case of Catholic Syrian Bank is misplaced. The CIT(A) opined that Hon'ble Supreme Court never held that deduction allowed u/s 36(1)(viia) for Banks having both rural and non-rural branches is in respect of rural advances only, irrespective of the provision made in books of accounts. Further the CIT(A) opined that aforesaid decision was delivered on the assumption that Banks would maintain two separate provision for bad and doubtful debts (PBDD) account in respect of rural branches and non-rural branches. He was of the view that insertion of explanation 2 to Section 36(1)(vii) was only c1arificatory in nature and provision allowed u/s 36(1)(viia) account referred in the proviso and Section 36(2)(v) was always only single account for all types of advances including rural advances since its introduction in 1985. As the assessee-bank was not maintaining two separate PBDD ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 9 accounts, the CIT(A)went ahead and segregated the provision allowed into rural and non-rural based on the ratio of provision made in books. According to him, the PBDD for rural advances made in the books is only 10.48% of the total PBDD. Based on his calculations, he disallowed the claim of the appellant bank stating that non-rural debt written off u/s 36(1)(vii) was less than the opening credit balance in the provision allowed account for non-rural advances. 12.1 Aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR submitted that an identical issue was decided in favour of the assessee-bank by the Tribunal in assessee’s own case for assessment year 2013-2014 (reported in 2022 (1) TMI 124 – ITAT Bangalore). 12.2 The learned DR strongly supported the orders of the Income Tax Authorities. 12.3 We have heard rival submissions and perused the material on record. We notice that the CIT(A) had expressed the view that provision allowed u/s 36(1)(viia) of the Act would apply to non-rural advances also. An identical issue has been examined by the Hyderabad Bench of the ITAT in the case of State Bank of Hyderabad v. DCIT in ITA No.450/Hyd/2015, ITA No.498 and 499/Hyd/2015 (order dated 14.08.2015) wherein the Tribunal had not accepted the above said view expressed by the CIT(A). The Bangalore Bench of the Tribunal in assessee’s own case for assessment year 2013-2014 by ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 10 following the Hyderabad Bench order of the Tribunal in the case of State Bank of Hyderabad (supra), had set aside the view expressed by the CIT(A) that proviso to section 36(1)(vii) which requires adjustment of bad debts against the provisions allowed u/s 36(1)(viia) would apply to non-rural advances also. The relevant finding of the Bangalore Bench of the Tribunal in assessee’s own case for assessment year 2013- 2014 reads as follows:- “6.4 We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has expressed the view that the provision allowed u/s 36(1)(viia) of the Act would cover bad debts pertaining to non-rural advances also. An identical issue has been examined by Hyderabad bench of ITAT in the case of State Bank of Hyderabad vs. DCIT (ITA No.450/Hyd/2015, ITA No.498 and 499/Hyd/2015 dated August 14, 2015), wherein the Tribunal has not accepted the above said view expressed by Ld CIT(A). The relevant observations made by the Tribunal are extracted below:- “19. We have considered the rival submissions and perused the materials on record as well as the orders of revenue authorities. As could be seen from the finding of AO as well as ld. CIT(A), only reason for which claim of deduction for Rs. 209,07,50,831 representing actual write off of bad debts relating to non-rural advances u/s 36(1)(vii) was denied is, assessee having already availed deduction u/s 36(1)(viia), it is not eligible to claim deduction u/s 36(1)(vii) as it will amount to double deduction. In our view, both AO as well as ld. CIT(A) have committed fundamental error by mixing up provisions of sections 36(1)(vii) and 36(1)(viia). While 36(1)(vii) speaks of actual write off of bad debts in the books of account, section 36(1)(viia) even allows provision made towards bad and doubtful debts in respect of rural advances to the extent of provision made in the books of account subject to the ceiling fixed under clause (viia) of section 36(1). Proviso to section 36(1)(vii) operates only in a case where deduction is also claimed under section 36(1)(viia). In other words, proviso to section 36(1)(vii) applies to write off of bad debts relating to rural advances to the extent it exceeds the provision made u/s 36(1)(viia). If we examine the facts of the present case in the context of aforesaid statutory provision, it will be evident that assessee, though, has written off in the books of account an amount of Rs. ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 11 210.74 crore, but, in the computation of total income, the actual deduction claimed u/s 36(1)(vii) is Rs. 209.08 crore representing bad debts written off relating to non-rural/urban advances. The balance amount of bad debts relating to rural advances was not claimed as deduction by assessee in terms with the proviso to section 36(1)(vii) as it has not exceeded the provision for bad and doubtful debts relating to rural advances created u/s 36(1)(viia). Both AO and ld. CIT(A) have misconstrued the statutory provisions while observing that proviso to section 36(1)(vii) would also apply in case of bad debts relating to non-rural advances. The Hon'ble Supreme Court in case of Catholic Syrian Bank Vs. CIT (supra) while analyzing provisions of section 36(1)(vii) and 36(1)(viia) have observed that section 36(1)(viia) applies only to rural advances. The observations made by Hon'ble Apex Court in this regard in paras 26 & 27 of the judgment is extracted hereunder for convenience. "26. The Special Bench of the Tribunal had rejected the contention of the Revenue that proviso to s. 36(1)(vii) applies to all banks and with reference to the circulars issued by the Board, held that a bank would be entitled to both deductions, one under cl. (vii) of s. 36(1) of the Act on the basis of actual write off and the other on the basis of cl. (viia) of s. 36(1) of the Act on the mere making of provision for bad debts. This, according to the Revenue, would lead to double deduction and the proviso to s. 36(1)(vii) was introduced with the intention to prevent this mischief. The contention of the Revenue, in our opinion, was rightly rejected by the Special Bench of the Tribunal and it correctly held that the Board itself had recognized the position that a bank would be entitled to both the deductions. Further, it concluded that the proviso had been introduced to protect the Revenue, but it would be meaningless to invoke the same where there was no threat of double deduction. 27. As per this proviso to cl. (vii), the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the amount of the provision which had already been allowed under cl. (viia). The proviso by and large protects the interests of the Revenue. In case of rural advances which are covered by cl. (viia), there would be no such double deduction. The proviso, in its terms, limits its application to the case of a bank to which cl. (viia) applies. Indisputably, cl. (viia)(a) applies only to rural advances." ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 12 Concurring with the aforesaid majority view, Hon'ble CJI, S.H. Kapadia, as the then he was, held as under: "2. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation or taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits. In order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in subsection (1) of Section 36 to provide for a deduction, in the computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debts relating to advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962. Thus, the provisions of clause (viia) of Section 36(1) relating to the deduction on account of the provision for bad and doubtful debt(s) is distinct and independent of the provisions of Section 36(11(vii) relating to allowance of the bad debt(s). In other words, the scheduled commercial banks continue to get the full benefit of the write off of the irrecoverable debt(s) under Section 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debt(s) under section 36(1)(viia). A reading of the Circulars issued by CBDT indicates that normally a deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed even in respect of a mere provision without insisting on an actual write off However, this may result in double allowance in the sense that in respect of same rural advance the bank may get allowance on the basis of clause (viia) and also on the basis of actual write off under clause (vii). This situation is taken care of by the proviso to clause (vii) which limits the allowance on the basis of the ITA No.1884/Bang/2018 & ITA No.236/PAN/2018 M/s. Canara Bank, Bangalore Page 11 of 20 actual write off to the excess, if any, of the write off over the ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 13 amount standing to the credit of the account created under clause (viia). However, the Revenue disputes the position that the proviso to clause (vii) refers only to rural advances. It says that there are no such words in the proviso which indicates that the proviso apply only to rural advances. We find no merit in the objection raised by the Revenue. Firstly, CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off would be limited to the excess of the amount written off over the amount of the provision allowed under clause (viia). Thus, the proviso to clause (vii) stood introduced in order to protect the Revenue. It would be meaningless to invoke the said 1 proviso where there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii)." Thus, considered in light of principle laid down as referred to above, when the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to nonrural/urban advances. As far as application of explanation to section 36(1)(vii) is concerned, we agree with the ld. AR that its operation will be prospective and will not apply to the impugned AY. For this proposition, we rely upon the decision of the ITAT Mumbai in case of Bank of India Vs. Addl. CIT (supra). Even otherwise also, careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 14 be eligible to avail deduction of an amount of Rs. 209.94 crore representing actual write off in the books of account of bad debts relating to nonrural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A).” 6.5 Following the above said decision, we hold that the view expressed by Ld CIT(A) is not legally correct. Accordingly, we set aside the order passed by Ld CIT(A) with regard to his alternative decision, i.e., the view that the proviso to sec. 36(1)(vii) which requires adjustment of bad debts against provision allowed u/s 36(1)(viia) would apply to non-rural advances also. Accordingly, we direct the AO to delete the disallowance of Rs.1258.47 crores.” 12.4 In view of the above co-ordinate Bench order of the Tribunal in assessee’s own case for assessment year 2013- 2014 (supra), we hold that the view expressed by the CIT(A) is not correct. Therefore, the alternative decision taken by the CIT(A) (i.e. the proviso to section 36(1)(vii) which requires adjustment of bad debts against provision allowed u/s 36(1)(viia) would apply to non-rural advances also) is hereby set aside. Hence, we direct the A.O. to delete the disallowance made by the CIT(A). It is ordered accordingly. 12.5 In the result, ground 3 is allowed. APPLICABILITY OF PROVISIONS OF SECTION 115JB OF THE ACT (GROUND 4) 13. The assessee-bank had not computed book profit and accordingly not calculated MAT. It was contended that it was under the belief that the assessee-company being a public sector bank is not a company under Companies Act, 1956 as well as Banking Regulations Act, 1949. Therefore, as such provisions of Section 115JB of the Act does not apply to the ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 15 assessee. However, the Assessing Officer held that provisions of Section 115JB of the Act are applicable to the bank. 13.1 Aggrieved, the assessee filed appeal to the first appellate authority. Before the first appellate authority it was contended that even amended section 115JB of the Act does not apply to the bank as it was of the view that – (i) it does not prepare profit and loss account as per the provisions of the Companies Act, 1956 and (ii) Section 211 of the Companies Act, 1956 does not apply to them as they do not fall under the definition of Banking Companies under Companies Act, 1956. 13.2 The CIT(A) dismissed the assessee’s contention by holding that there is no option given to the company u/s 115JB of the Act to exclude itself from the applicability of the provisions of Section 115JB of the Act on the ground that it does· not prepare profit and loss account as per the provisions of the Companies Act, 1956. Further, it was held by the CIT(A) that provisions of section 115JB(2)(a) of the Act will be applicable to the assessee-bank as it is an Indian Company as per Section 11 of Banking Companies (Acquisition & Transfer of Undertaking) Act, 1949. 13.3 Aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR submitted that in assessee’s own case for assessment year 2013-2014 an identical issue was considered and the matter was remitted back to the CIT(A). It was submitted by the ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 16 learned AR that since the facts being identical, a similar view may be taken by the Tribunal for this assessment year also. 13.4 The learned DR was duly heard. 13.5 We have heard rival submissions and perused the material on record. The Tribunal in assessee’s own case for assessment year 2013-2014 (supra) had restored the issue to the files of the CIT(A). The CIT(A) was directed to examine whether the assessee being a banking company would be liable for book profits u/s 115JB of the Act. The relevant finding of the Tribunal in assessee’s own case, reads as follows:- “7.4 We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has expressed the view that the assessee would fall under clause (a) of sec.115JB(2). However the case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a ‘banking company”, i.e., it is a “corresponding new bank”. 7.5 We notice that the provisions of sec.51 of the Act specifically states that only certain provisions of BR Act are applicable to “Corresponding new bank”. We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec.51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of “banking company”, provisions of sec.211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh.” ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 17 13.6 In view of the co-ordinate Bench order of the Tribunal in assessee’s own case for assessment year 2013- 2014, we restore this issue to the files of the CIT(A). The CIT(A) shall follow the directions contained in the Tribunal order for assessment year 2013-2014 and shall afford a reasonable opportunity of hearing to the assessee before a decision is taken on the issue. It is ordered accordingly. 13.7 In the result, ground 4 is allowed for statistical purposes. ADDITION TO THE BOOK PROFIT U/S 115JB OF THE ACT (GROUND 5) 14. The Assessing Officer had made various additions to the book profit u/s 115JB of the Act by holding that such provisions / write off would get covered under the provisions of section 115JB of the Act. Since the issue regarding the applicability of section 115JB of the Act is restored to the files of the CIT(A), the additions made u/s 115JB of the Act by the A.O. and sustained by the CIT(A) is also restored to the files of the CIT(A) for examining of the same afresh. It is ordered accordingly. Similar view has been taken in assessee’s own case for assessment year 2013-2014 (supra). 14.1 Hence, ground 5 raised by the assessee is allowed for statistical purposes. ADDITIONAL GROUND 1 15. This ground is alternative ground to ground 3. Since we have already allowed ground 3, the additional ground 1 is ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 18 rendered infructuous and the same is dismissed as such. REVENUE’S APPEAL (ITA NO.237/PAN/2018) 16. In Revenue’s appeal, 10 grounds are raised. Ground 1 is general in nature, hence, the same is dismissed. The other grounds shall be adjudicated as under:- DISALLOWANCE U/S 14A OF THE ACT (GROUND 2 AND 3) 17. The assessee-bank had earned exempt income of Rs.29,87,66,187. The assessee-bank while filing the return of income had disallowed an amount of Rs.9,86,321 as expenditure relating to earning of tax exempt income. The A.O. by invoking the provisions of section 14A r.w.Rule 8D, disallowed a sum of Rs.64,59,79,000. 17.1 Aggrieved, the assessee filed an appeal to the first appellate authority. The CIT(A) deleted the disallowance made u/s 14A of the Act. The CIT(A) held that the A.O. has failed to record dissatisfaction of correctness of claim by the assessee in making disallowance u/s 14A of the Act while filing the return of income. 17.2 Aggrieved by the order of the CIT(A), the Revenue has raised this issue before the Tribunal. The learned AR fairly submitted that on identical facts, the Tribunal in assessee’s own case for assessment year 2013-2014 reported in 2022 (I) TMI 124-ITAT Bangalore (order dated 27.12.2021) had restored the matter to the CIT(A). The learned AR submitted that for parity of reasoning, the issue raised by the ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 19 Revenue in grounds 2 and 3 also may be restored to the files of the CIT(A). 17.3 We have heard rival submissions and perused the material on record. A perusal of the assessment order, it is clear that the A.O. has recorded the satisfaction and has rejected the assessee’s disallowance u/s 14A of the Act while filing the return of income (the satisfaction can be inferred indirectly). The learned AR also fairly admitted that the matter can be restored to the files of the CIT(A) for de novo consideration. The Tribunal in assessee’s own case for assessment year 2013-2014 had restored the issue of disallowance u/s 14A of the Act to the files of the CIT(A). The relevant finding of the Tribunal in this regard reads as follows:- “9.2 We heard the parties and perused the record. It is not clear as to whether the assessee had voluntarily disallowed the sum of Rs.9,24,123/- while filing return of income, since it is stated in the reply dated 28.01.2015 given by the assessee to the AO, which is extracted in paragraph 1.4 of the assessment order, that the assessee is aggregable for a disallowance of Rs.9,24,123/- as mentioned in its submission dated 13.1.2015. In fact, the Ld CIT(A), at one point, records that the assessee contended that no expenditure was incurred to earn tax free income, but without prejudice to the above said contention, it agreed for a disallowance of Rs.9,24,123/- u/s 14A of the Act. 9.3 Thus, it appears that the assessee’s case is a case of making no disallowance u/s 14A of the Act. Be that as it may, we are of the view that from the discussion made by the assessing officer in the assessment order, it can be discerned that he was not satisfied with the claim of the assessee. Accordingly he has proceeded to compute the disallowance as per Rule 8D of I T Rules. Accordingly, we are of the view that it cannot be said that the assessing officer has not recorded dissatisfaction. In this view of the matter, we are unable to sustain the decision rendered by Ld CIT(A) on this issue. 9.4 Accordingly, we reverse the order passed by Ld CIT(A) on this ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 20 issue. Since he has not decided the issue on merits, we restore this issue to his file to decide the same in accordance with law. Before us, the Ld A.R placed his reliance on the decisions rendered by Hon’ble Supreme Court to contend that no disallowance u/s 14A is called for in the case of the assessee. The Ld CIT(A) should consider those decision and should take appropriate decision in accordance with law.” 17.4 By following the co-ordinate Bench order of the Tribunal in assessee’s own case, we restore the issue to the files of the CIT(A). The CIT(A) shall follow the directions of the Tribunal in assessee’s own case for assessment year 2013- 2014 (supra) and shall take a decision after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. 17.5 In the result, grounds 2 and 3 are allowed for statistical purposes. DISALLOWANCE U/S 40(a)(ia) OF THE ACT (GROUND 4 AND 5) 18. The brief facts in relation to the above ground are that the assessee-bank issues debit cards and credit cards to its customers. These cards are used by the customers in ATMs of several other banks for the purpose of withdrawal of money. All the ATM in the country are connected to National Payment Corporation of India (NPCI). Whenever the card is used in ATM of other banks, it charges fees for the same and the same is paid by the assessee. For the relevant assessment year, the assessee paid an amount of Rs.87,91,40,567 to NPCI as charges towards using of ATM of other banks. The A.O. while completing the assessment u/s 143(3) of the Act, ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 21 held these payments are subject to TDS u/s 194C of the Act and the assessee having not deducted tax at source, the sum claimed amounting to Rs.87,91,40,567 was disallowed u/s 40(a)(ia) of the I.T.Act. 18.1 Aggrieved, the assessee filed an appeal to the first appellate authority. The CIT(A) following the order of the Bangalore Bench of the Tribunal in the case of Corporation Bank Limited in ITA No.1264 and 1352/Bang/2013 for assessment year 2011-2012 deleted the disallowance made by the A.O. It was held by the CIT(A) that there is no TDS liability on the assessee when payments are made to NPCI, and hence, the disallowance made u/s 40(a)(ia) of the Act is uncalled for. 18.2 Aggrieved, the Revenue has filed this appeal before the Tribunal. The learned DR relied on the Assessing Officer’s order. 18.3 The learned AR, on the other hand, submitted that the issue in question is covered by the order of the Tribunal in assessee’s own case for assessment year 2013-2014 (supra). 18.4 We have heard rival submissions and perused the material on record. The Tribunal on identical facts in assessee’s own case for assessment year 2013-2014 had held that the assessee is not liable for TDS, and hence, the provisions of section 40(a)(ia) of the Act does not have application in respect of payments made to NPCI. The relevant finding of the Tribunal reads as follows:- ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 22 “10.1 The Ld CIT(A) noticed that the Hon’ble Supreme Court has considered the nature of payment made to Stock exchange by the brokers as transaction charges for use of facility offered by the Stock exchange in the case of Kotak Securities Ltd (2016)(285 CTR 63). It was held that the services made available was the facility of standard faceless screen rendered and the authenticity of the transactions. It was noticed that these services were made available to all and not fall under the category of exclusive service. Accordingly, it was held that the TDS is not required to be deducted treating as technical service u/s 194J of the Act. The Ld CIT(A) also noticed that the Bangalore bench of Tribunal has held in the case of Corporation Bank (ITA Nos.1264 & 1352 (Bang)/2013) that similar kind of payment made cannot be considered as Commission or Brokerage warranting deduction of tax at source u/s 194H of the Act. The Ld CIT(A) held that the above said decision shall apply to the facts of the present case also. He further held that the AO did not specify the section under which the TDS is liable to be deducted by the assessee. Accordingly he deleted the disallowance. 10.2 We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has rendered his decision following the ratio of decision rendered by Hon’ble Supreme Court in the case of Kotak Securities Ltd (supra) and also the decision rendered by coordinate bench in the case of Corporation Bank (supra). Hence we do not find any reason to interfere with his order passed on this issue.” 18.5 In view of the order of the Tribunal in assessee’s own case, we confirm the CIT(A)’s order and delete the disallowance made by the A.O. by invoking the provisions of section 40(a)(ia) of the Act. 18.6 Hence, ground 4 and 5 of the Revenue’s appeal is dismissed. DELETION OF PBDD FROM BOOK PROFITS (GROUNDS 6 AND 9) 19. In this ground, the Revenue challenges the relief granted by the CIT(A) while computing the book profit u/s 115JB of ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 23 the Act. Since the issue of applicability of section 115JB of the Act to the assessee is restored to the files of the CIT(A) while considering the appeal of the assessee, we restore this issue also to the files of the CIT(A). It is ordered accordingly. 19.1 In the result, grounds 6 and 9 are allowed for statistical purposes. ADDITION OF PROVISION FOR WAGE ARREARS TO THE BOOK PROFIT (GROUND 7) 20. The CIT(A) had deleted the provision for wage revision amounting to Rs.240 crore while calculating the book profit u/s 115JB of the Act. 20.1 The Revenue being aggrieved, has raised this issue before the Tribunal. Since the issue of applicability of section 115JB of the Act to the assessee is restored to the files of the CIT(A), we deem it appropriate to restore the issue on merits as regards the additions / deductions for computation of book profit u/s 115JB of the Act also to the files of the CIT(A). It is ordered accordingly. 20.2 In the result, ground 7 is allowed for statistical purposes. GROUNDS 8 AND 10 21. Grounds 8 and 10 are general grounds with regard to the relief granted by the CIT(A) in computing the book profit u/s 115JB of the Act. As mentioned in the earlier paragraphs, ITA No.1885/Bang/2018 & 237/PAN/2018 M/s.Canara Bank (Erstwhile Syndicate Bank) 24 since the applicability of section 115JB of the Act to the assessee has been restored to the files of the CIT(A), the general grounds 8 and 10 with regard to the merits / deletion of book profits made by the CIT(A) is also restored the files of the CIT(A). 22. In the result, the appeal filed by the assessee is partly allowed and the appeal filed by the Revenue is partly allowed for statistical purposes. Order pronounced on this 23 rd day of February, 2022. Sd/- (Padmavathy S) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 23 rd February, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), Mangaluru. 4. The Pr.CIT, Mangaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore