Indian Bank, Chennai V. DCIT, Corporate Circle, Chennai

ITA 2155/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4554 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S BHARATHCITD R
• Assessee Lawyers: SANJEEV ADITYAC A
• Keywords: Business income; Depreciation; Business expenditure; Double taxation relief; Permanent establishment; Advance ruling; Bad and doubtful debts; Revenue expenditure; Rule 8D; Set aside
• Section: 14A; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NOS. 738, 739 & 2155/CHNY/2017 / ASSESSMENT YEARS : 2012-13, 2013-14 & 2014-15 INDIAN BANK , CORPORATE OFFICE, ACCOUNTS DEPARTMENT, 254-260,AVVAI SHANMUGAM SALAI, ROYAPETTAH, CHENNAI 600 014. VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI 600 034. [PAN AAACI 1607 G ] ( / APPELLANT) ( /RESPONDENT) ./ I.T.A.NOS.650, 648 & 2149/CHNY/2017 / ASSESSMENT YEARS : 2012-13, 2013-14 & 2014-15 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI 600 034. VS. INDIAN BANK , CORPORATE OFFICE, ACCOUNTS DEPARTMENT, 254-260,AVVAI SHANMUGAM SALAI ROYAPETTAH, CHENNAI 600 014 [PAN AAACI 1607 G ] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : MR.SANJEEV ADITYA,C.A REVENUE BY : MR.S.BHARATH,C.I.T,D.R ! / DATE OF HEARING : 26 - 08 - 201 9 ! / DATE OF PRONOUNCEMENT : 28 - 08 - 201 9 ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 2 -: / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE FILED THESE AP PEALS. THE CROSS APPEALS OF ASSESSEE AND THE REVENUE IN ITA NO.738/C HNY/2017 AND ITA NO.650/CHNY/2017 RESPECTIVELY FOR ASSESSMENT YE AR 2012-13 ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI IN ITA NO.76/CIT(A)-6/2015-16 DATED 17.01.2 017 FOR ASSESSMENT YEAR 2012-13. THE CROSS APPEALS OF ASSE SSEE AND THE REVENUE IN ITA NO.739/CHNY/2017 AND ITA NO.648/CHNY /2017 RESPECTIVELY FOR ASSESSMENT YEAR 2013-14 ARE AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI IN ITA NO.311/CIT(A)-6/2015-16 DATED 19.01.2017 FOR ASSESS MENT YEAR 2013- 14. THE CROSS APPEALS OF ASSESSEE AND THE REVENUE IN ITA NO.738/CHNY/2017 AND ITA NO.650/CHNY/2017 RESPECTIV ELY FOR ASSESSMENT YEAR 2014-15 ARE AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI IN ITA NO.491/CI T(A)-6/2016-17 DATED 30.06.2017 FOR ASSESSMENT YEAR 2014-15. 2. AS THE ISSUES IN ALL THESE APPEALS OF THE ASSES SEE AND THE REVENUE ARE INTER-CONNECTED AND IDENTICAL, ALL THES E APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 3 -: 3. SHRI SANJEEV ADITYA REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI S.BHARATH REPRESENTED ON BEHALF OF THE REVENUE. 4. AT THE OUTSET, LD.AR SUBMITTED THAT REVENUES APPEAL IN ITA NO.650/CHNY/17 ASSESSEES APPEAL IN ITA NO.738/CHNY /2017 FOR ASSESSMENT YEAR 2012-13 CONTAINED ALL THE ISSUES, W HICH WERE COMMON IN RESPECT OF ALL OTHER CROSS APPEALS PERTAI NING TO ASSESSMENT YEARS 2013-14 & 2014-15. CONSEQUENTLY, THE CROSS AP PEALS IN ITA NO.738/CHNY/2017 AND ITA NO.650/CHNY/2017 ARE TAKEN UP FOR DISPOSAL FIRST. 5. IN THE REVENUES APPEAL IN ITA NO.650/CHNY/2017 , IT WAS FAIRLY AGREED BY BOTH THE SIDES, THE ISSUE IN GROUND NO.1 CONSISTING OF GROUNDS 1.1 TO 1.5 WAS AGAINST THE ACTION OF LD.CIT (A) IN ALLOWING THE ASSESSEES CLAIM OF BROKEN PERIOD INTEREST PAID ON PURCHASE OF SECURITIES, WHICH WERE HELD AS INVESTMENTS. IT WAS FAIRLY AGREED BY BOTH THE COUNSELS THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 I N ITA NO.1992/CHNY/2015 VIDE ORDER DATED 11.13.2016 WHERE IN IT HAS BEEN HELD AS FOLLOWS:- 23. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME FOR CONSIDERATION IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2007-08 IN ITA NO.880/MDS/2010 & OTHERS . VIDE ORDER DATED 30.11.2015, THE TRIBUNAL HELD AS FOLLOWS : ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 4 -: 48. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS ON RECORD. WITH REGARD TO THE CLAIM OF BROKEN PERIO D INTEREST PAID ON PURCHASE OF SECURITIES AS REVENUE EXPENDITURE, WE F IND THAT ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, IN ASSESSEES OWN CASE IN I.T.A. NOS. 470 TO 472/MDS/2010 FOR THE ASSESSMENT YEARS 2 004-05 TO 2006-07 VIDE ORDER DATED 11.06.2012, WHEREIN THE TR IBUNAL HAS OBSERVED AS UNDER: 8. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE RIVAL CONTENTIONS. ISSUE IS REGARDING TRE ATMENT OF AMOUNT PAID BY ASSESSEE TO TRANSFERORS OF SECURITIE S, TOWARDS INTEREST ACCRUED AS ON THE DATE OF TRANSFER. HONBL E MUMBAI HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNAT IONAL BANKING CORPORATION VS. C.I.T. IN 258 ITR 60 HAS CL EARLY HELD THAT WHEN INTEREST RECEIVED BY AN ASSESSEE, FROM TR ANSFEREES FOR BROKEN PERIOD IS INCLUDED UNDER THE HEAD BUSIN ESS INCOME, AMOUNTS PAID BY THE ASSESSEE TO THE TRANSF ERORS FOR BROKEN PERIODS COULD NOT HAVE BEEN DISALLOWED. THIS VIEWWAS REITERATED IN THE CASE OF UNION BANK OF INDIA REFER RED TO SUPRA. HONBLE APEX COURT HAD DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST SUCH JUDGEMENT OF O RDER OF MUMBAI HIGH COURT ON 27.01.2004 (SLP(C) NO.3710 OF 2004). THEREFORE, EVEN THOUGH IT WAS EARLIER DECIDED BY TH IS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 1996-97 IN ITANO.1901/MDS/04 DATED 25.10.07, THAT BROKEN PERIO D INTEREST COULD NOT BE CONSIDERED AS REVENUE EXPENDI TURE BUT HAD TO BE TAKEN AS CAPITAL OUTLAY WHEN PAID FOR ACQ UIRING SECURITIES, IN VIEW OF THE LATER DECISIONS OF HONB LE MUMBAI HIGH COURT MENTIONED SUPRA, SUCH BROKEN PERIOD INTE REST HAS TO BE ALLOWED. WE WOULD PREFER TO FOLLOW THE DECISI ON OF THE HONBLE MUMBAI HIGH COURT, SINCE SPECIAL LEAVE PETI TION FILED BY THE DEPARTMENT AGAINST SUCH DECISION IN THE CASE OF UNION BANK OF INDIA (SUPRA) WAS DISMISSED BY HONBLE APEX COURT. THUS, THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 49. FURTHER, WE ALSO FIND THAT THE HONBLE JURISDIC TIONAL HIGH COURT IN ASSESSEES OWN CASE IN T.C.(A) NO. 417 OF 2008 VIDE ORDER DATED 11.02.2014 DECIDED THE ABOVE ISSUE IN F AVOUR OF THE ASSESSEE. RESPECTFULLY, FOLLOWING THE ABOVE DECISIO N OF THE COORDINATE BENCH OF THE TRIBUNAL AS WELL AS THE DEC ISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING O FFICER TO DELETE THE DISALLOWANCE MADE. ACCORDINGLY, THE GROUND RAIS ED BY THE ASSESSEE IS ALLOWED. IN VIEW OF THIS, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 6. AS IT IS NOTICED THAT THE ISSUE RAISED IN ASSESSEE S APPEAL IS IDENTICAL, AND THE CO-ORDINATE BENCH OF THIS TRIBUN AL IN ASSESSEES OWN ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 5 -: CASE CITED ABOVE HAS ALREADY ADJUDICATED ON THIS IS SUE, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF CHEN NAI TRIBUNAL IN ASSESSEES OWN CASE REFERRED TO SUPRA, THE FINDING S OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND N O.1 CONSISTING OF GROUNDS 1.1. TO 1.5 STANDS DISMISSED. 7. IN RESPECT OF GROUND NO.2 CONSISTING OF GROUND S 2.1 TO 2.4, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN ALLOWING THE DEPRECIATION OF INVESTMENT ON SECURITIES AT THE TIME OF SHIFTING FROM AVAILABLE F OR SALE TO HELD TO MATURITY. IT WAS FAIRLY AGREED BY BOTH THE COUNSE LS THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE D ECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO.1992/CHNY/2015 V IDE ORDER DATED 11.13.2016 WHEREIN IT HAS BEEN HELD AS FOLLOW S:- 24. THE NEXT GROUND IN REVENUES APPEAL IS THAT THE CIT(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING O FFICER TO ALLOW AN AMOUNT OF RS.49,22,32,974/- BEING THE DEPR ECIATION ON SECURITIES AT THE TIME OF SHIFTING FROM AFS TO H TM. 25. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.887/MDS/2 010 & OTHERS DATED 30.11.20 15, WHEREIN IT WAS OBSERVED AS UNDER: 120. FURTHER, ON AN IDENTICAL SET OF FACT, SIMILAR GROUND WAS RAISED BEFORE THE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. ANDHRA BANK LTD. IN I.T.A. NO. 630/HYD/2 012 AND VIDE ITS ORDER DATED 04.10.2013 FOR THE ASSESSM ENT ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 6 -: YEAR 2007-08, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 2. GROUND NOS. 2 & 3 ARE PERTAINING TO DEPRECIATIO N ON HTM INVESTMENTS OF RS. 293,31,88,038/-. THE AO DISALLOWED THE SAID DEPRECIATION CLAIM OF THE ASSES SEE ON THE GROUND THAT THE CLAIM WAS NOT ROUTED THROUGH P& L ACCOUNT BUT A CLAIM WAS MADE IN RESPECT OF DEPRECIA TION ON HTM CATEGORY THROUGH A NOTE AND THEREFORE IS NOT ALLOWABLE EXPENDITURE AS PER THE PROVISIONS OF IT A CT FOLLOWING CBDT CIRCULARS, CASE LAWS RELIED UPON BY THE ASSESSEE, RELEVANT ACCOUNTING STANDARDS, RBI GUIDEL INES AND ACCOUNTING PRINCIPLES. 3. ON APPEAL, THE CIT(A) FOLLOWING HIS PREDECESSOR S DECISION IN AY 2005-06, SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ASCERTAIN THE FACTS AND ALLOW DEPRECIATION ACCORDINGLY. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CANVASSED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2006-07 IN ITA NO. 97/HYD/2010 VIDE ORDER DA TED 04/04/2013. THE LEARNED DR NEITHER CONTROVERTED THE SUBMISSION OF THE LEARNED COUNSEL NOR BROUGHT ANY CONTRARY DECISION ON RECORD AGAINST THE SAID ORDER. 5. AFTER HEARING THE PARTIES AND PERUSING THE RECOR D, WE FIND THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN ASSESSEES OWN CASE FOR AY 2006- 07WHEREIN THE COORDINATE BENCH HELD AS FOLLOWS: 50. WE ARE OF THE OPINION THAT THE ASSESSEE BANK I S HOLDING VARIOUS GOVERNMENT SECURITIES IN ORDER TO COMPLY WITH THE STATUTORY LIQUIDATED RATIO. THE BAN K WOULD HAVE TO HOLD REQUISITE PERCENTAGE OF DEPOSITS IN THE FORM OF CASH, GOLD, GOVERNMENT OR APPROVED SECURITIES. THE GOVERNMENT SECURITIES HELD FOR THE PURPOSE OF COMPLY WITH THE SLR HAS BEEN HELD TO BE STOCK IN TRADE AND THEREFORE VALUE OF THE SAME AS O N 31ST MARCH HAS TO BE MADE AND THERE IS ANY DEPRECIATION THE SAME SHOULD BE ALLOWED AS A REVENU E DEDUCTION. HOWEVER, THE RBI HAS ISSUED CIRCULAR WHEREIN THEY HAVE CLASSIFIED THE INVESTMENT MADE TO COMPLY WITH SLR REQUIREMENT AS `HELD TO MATURITY (HTM), `AVAILABLE FOR SALE (AFS) AND `HELD FOR TRA DE (HFT). BASED ON THE RBI CIRCULAR LOWER AUTHORITIES CAME TO THE CONCLUSION THAT INVESTMENT IN GOVERNMENT SECURITIES WHICH ARE CLASSIFIED UNDER TH E HEAD HTM CANNOT BE CONSIDERED AS STOCK IN TRADE AND ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 7 -: THEREFORE DEPRECIATION IN VALUE OF SUCH SECURITIES CANNOT BE ALLOWED AS A DEDUCTION. THE APEX COURT IN THE CASE OF UCO BANK LTD VS CIT REPORTED IN 240 ITR 355 HAS HELD THAT VALUE OF THE SECURITIES AT COST O R MARKET VALUE WHICHEVER IS LESS SHOULD BE ACCEPTED F OR INCOME TAX EVEN IF THE BANKS IN THEIR BOOKS DO NOT VALUE ON THAT BASIS. THEREFORE, IT IS AN ACCEPTED PROPORTION THAT INVESTMENT MADE BY THE BANK TO COMPLY WITH THE SLR REQUIREMENT WOULD CONSTITUTE THEIR STOCK IN TRADE AND DEPRECIATION IN VALUE OF T HE SAME IS AN ALLOWABLE DEDUCTION. 51. RESPECTFULLY FOLLOWING THE DECISIONS CITED BY T HE LEARNED COUNSEL FOR THE ASSESSEE, WE UPHOLD THE CLA IM OF THE ASSESSEE AND DIRECT THE AO TO ALLOW DEPRECIATION / FALL IN VALUE OF INVESTMENT IN GOVERNMENT SECURITIES INCLUDING THOSE CLASSIFIED UN DER HTM CATEGORY. NO DOUBT THE VALUE IN OPENING STOCK I N THE NEXT YEAR WOULD CORRESPONDINGLY BE ADJUSTED. TH IS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 6. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THAT OF AY 2006-07 IN ASSESSEES OWN CASE, RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE DIRECTIONS OF LD.C IT(A) WITH A DIRECTION TO AO TO FOLLOW THE SAME IN THIS Y EAR ALSO AS PER THE ORDER OF ITAT SUPRA.. ACCORDINGLY, GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE DECISIONS OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AN D THE GROUND RAISED BY THE REVENUE IS DISMISSED. ACCORDINGLY, THIS GROUND RAISED BY THE REVENUE IS D ISMISSED. 8. AS IT IS NOTICED THAT THE ISSUE RAISED IN ASSES SEES APPEAL IS IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF C O-ORDINATE BENCH OF CHENNAI TRIBUNAL REFERRED TO SUPRA, THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.2 C ONSISTING OF GROUNDS 2.1. TO 2.4 STANDS DISMISSED. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 8 -: 9. IN RESPECT OF GROUND NO.3 CONSISTING OF GROUND S 3.1 TO 3.4, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN ALLOWING THE ASSESSEES CLAI M TOWARDS DEDUCTION OF BAD DEBTS WRITTEN OFF (TECHNICAL WRITE OFF). IT WAS FAIRLY AGREED BY BOTH THE COUNSELS THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 I N ITA NO.1992/CHNY/2015 VIDE ORDER DATED 11.13.2016 WHERE IN IT HAS BEEN HELD AS FOLLOWS:- 26. THE NEXT GROUND TAKEN BY THE REVENUE IN ITS APPEAL IS THAT THE CIT(APPEALS) IS ERRED IN ALLOWING THE ASSESSEE S CLAIM TOWARDS DEDUCTION OF BAD DEBTS WRITTEN OFF. 27. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASS ESSEES OWN CASE IN ITA NO.880/MDS/2010. VIDE ITS ORDER DATED 30.11 .2015, THE TRIBUNAL OBSERVED AS UNDER : 44. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE TRIBUNAL, WHILE DECIDING THE GROUP CASES OF THE ASSESSEE IN I.T.A. NOS. 470 TO 472/MDS/2010 FOR THE ASSESSMENT YEARS 2004-05 TO 2006-07 VIDE ORDER DATE D 11.06.2012, HAS FOLLOWED ITS OWN DECISION IN I.T.A. NO. 1082/MDS/2003 DATED 30.06.2011, WHEREIN, THE ISSUE STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF VIJAYA BAN K V. CIT 323 ITR 166 AND THE TRIBUNAL IN ITS ORDER DATED 11.06.2012 HAS HELD AS UNDER: 11. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIE S AND HEARD THE RIVAL CONTENTIONS. WE FIND THAT THE ISSUE REGARDING ALLOWANCE OF BAD DEBTS WRITTEN OFF ON TECHNICAL REA SONS STAND DECIDED IN FAVOUR OF ASSESSEE BY THIS TRIBUNA L IN ITA NO.1082/MDS/2003 FOR ASSESSMENT YEAR 1998-99. IT WA S HELD BY THIS TRIBUNAL AT PARA NOS. 43 & 44 OF ITS O RDER DATED 30/06/11 AS UNDER:- ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 9 -: I.T.A. NO. 1082/MDS/2003 42. FIRST ISSUE RAISED BY THE ASSESSEE IS REGARDING DISALLOWANCE OF ITS CLAIM FOR BAD DEBT TECHNICAL WRITE OFF. 43. A.O. HAD DISALLOWED A PART OF THE CLAIM OF BAD DEBT ON A REASONING THAT THE WRITE-OFF WAS PURELY TECHNICAL, SINCE ASSESSEE HAD NOT REDUCED THE WRITTEN OFF AMOUNTS FR OM THE INDIVIDUAL DEBTORS ACCOUNT, THOUGH THE TOTAL AMOUNT OF WRITE- OFF WAS DEDUCTED FROM TOTAL OF THE ADVANCES. 44. WE FIND THIS ISSUE NOW STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY HON'BLE APEX COURT, VIDE ITS DECISION I N VIJAYA BANK V. CIT (323 ITR 166). CRUX OF THIS DECISION AS APPEARING FROM THE HEAD NOTE RUNS AS UNDER:- BUSINESS EXPENDITURE BAD DEBT DEBT WRITTEN OFF IN THE BOOKS AFTER INSERTION OF EXPLANATION TO S. 36(1)( VII), ASSESSEE IS REQUIRED NOT ONLY TO DEBIT THE P&L A/C BUT SIMULTANEOUSLY ALSO- REDUCE LOANS AND ADVANCES OR T HE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET T O THE EXTENT OF THE CORRESPONDING AMOUNT SO THAT AT THE END OF T HE YEAR THE AMOUNT OF LOANS AND ADVANCES/DEBTORS IS SHOWN AS NE T OF PROVISION FOR IMPUGNED BAD DEBT IN THE INSTANT CA SE, BESIDES DEBITING THE P&L A/C AND CREATING A PROVISION FOR B AD AND DOUBTFUL DEBTS, THE ASSESSEE BANK HAD SIMULTANEOUSL Y OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DE BTORS ON THE ASSETS SIDE OF THE BALANCE SHEET AND CONSEQU ENTLY, AT THE END OF THE YEAR, THE FIGURE OF LOANS AND ADVANC ES/DEBTORS WAS SHOWN AS NET OF THE PROVISION THEREFORE, ASSE SSEE IS ENTITLED TO BENEFIT OF DEDUCTION UNDER S. 36(1)(VII ) CONTENTION THAT IT IS IMPERATIVE FOR THE ASSESSEE-BANK TO CLOS E THE INDIVIDUAL ACCOUNT OF EACH DEBTOR IN ITS BOOKS AND A MERE REDUCTION IN THE LOANS AND ADVANCES ACCOUNT OR DE BTORS TO THE EXTENT OF THE PROVISION FOR BAD AND DOUBTFUL DE BT IS NOT SUFFICIENT, IS NOT SUSTAINABLE APPREHENSION THAT IF THE ASSESSEE FAILS TO CLOSE EACH AND EVERY INDIVIDUAL A CCOUNT OF ITS DEBTORS, IT MAY RESULT IN CLAIMING DEDUCTION TW ICE OVER IS NOT CORRECT IT IS ALWAYS OPEN TO THE AO TO CALL FOR D ETAILS OF INDIVIDUAL DEBTORS ACCOUNT IF HE HAS REASONABLE GR OUNDS TO BELIEVE THAT THE ASSESSEE HAS CLAIMED DEDUCTION TWI CE OVER CONTENTION THAT WHERE A BORROWERS ACCOUNT IS WRITT EN OFF BY DEBITING P&L A/C AND CREDITING LOANS AND ADVANCES O R DEBTORS ACCOUNT, IT WOULD RESULT IN ESCAPEMENT OF INCOME FR OM ASSESSMENT IF THE BORROWER REPAYS THE LOAN IN THE S UBSEQUENT YEARS AS THE ASSESSEE WOULD CREDIT THE REPAID AMOUN T TO LOANS AND ADVANCES ACCOUNT AND NOT TO THE P&L A/C H AS NO MERIT IN SUCH CIRCUMSTANCES THE AMOUNTS ARE DULY OFFERED FOR TAX AND THE AO IS SUFFICIENTLY EMPOWERED TO TAX SUCH ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 10 -: SUBSEQUENT REPAYMENTS UNDER S. 41(4). HENCE THIS I SSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL, WE ARE INCLINED TO ALLOW THE CLAIM O F ASSESSEE. THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 45. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E COORDINATE BENCH OF THE TRIBUNAL, WHEREIN THE DECIS ION OF THE HONBLE SUPREME COURT IS FOLLOWED, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSI NG OFFICER TO DELETE THE DISALLOWANCE MADE ON THIS ISSUE. THUS , THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 10. THE TRIBUNAL HAS FOLLOWED THE DECISION OF CO-O RDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.880/ MDS/2010. VIDE ITS ORDER DATED 30.11.2015 . CONSEQUENTLY , RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF CHENNAI TRIBUNAL R EFERRED TO SUPRA, THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONF IRMED. CONSEQUENTLY GROUND NO.3 CONSISTING OF GROUNDS 3.1 TO 3.4 STANDS DISMISSED. 11. IN RESPECT OF GROUND NO.4 CONSISTING OF GROUN DS 4.1 TO 4.3, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN ALLOWING THE ASSESSEES CLAI M OF DEPRECIATION ON ATM AT 60% AS AGAINST THE ELIGIBLE DEPRECIATION AT 15%. IT WAS FAIRLY AGREED BY BOTH THE COUNSELS THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 11 -: TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2011-12 IN ITA NO.1877/CHNY/2015 VIDE ORDER DATED 11.13.2016 W HEREIN IT HAS BEEN HELD AS FOLLOWS:- 10. THE NEXT GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(APPEALS) FAILED TO APPRECIATE THE F ACT THAT AUTOMATED TELLER MACHINES ARE SUBSTANTIALLY IN THE NATURE OF COMPUTERS AND HENCE, ARE ELIGIBLE FOR DEDUCTION AT THE RATE OF 60% AND NOT AT 15% AS APPLICABLE TO OTHER NORMAL PL ANT AND MACHINERY. 11. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT THIS ISSUE WAS CONSIDERED IN ASSESSEES OWN CA SE BY THE TRIBUNAL IN ITA NO.1871/MDS/2012 & OTHERS, WHEREIN IT WAS OBSERVED AS UNDER : 98. THE SIXTH GROUND RAISED IN THE APPEAL IS WITH REGARD THE DEPRECIATION ON ATM AND UPS. WITH REGARD TO ALLOWABILITY OF 60% DEPRECIATION ON UPS, WE HAVE CONSIDERED SIMILAR ISSUE AND DISMISSED THE GROUND RAISED BY THE REVENUE IN I.T.A. NOS. 2124 AND 2125/MDS/2014 FOR THE ASSESSMENT YEAR 2005-06 AND 2007-08 AT PARA 17 TO 22 OF THIS ORDER. WITH REGARD TO THE ALLOWABILITY OF 60% DEPRECIATION ON ATM, WE HAV E CONSIDERED THE ISSUE AND ALLOWED THE GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IN I.T.A. NOS.1396 & 1395/MDS/2014 FOR THE ASSESSMENT YEARS 2005-06 AND 2007-08 AT PARA 8 TO 13 OF THIS ORDER. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNA L IN ASSESSEES OWN CASE, WE ALLOW THIS GROUND OF APPEAL RAISED BY THE ASSESSEE. 12. THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS FOLLOWED THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 12 -: NO.880/MDS/2010, VIDE ITS ORDER DATED 30.11.2015 . CONSEQUENTLY , RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN ITA NO.1877/CHNY.2015 REFERRED TO SUPRA , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUE NTLY GROUND NO.4 CONSISTING OF GROUNDS 4.1. TO 4.3 STANDS DISMISSED. 13. IN RESPECT OF GROUND NO.5 CONSISTING OF GROUN DS 5.1 TO 5.2, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN HOLDING THAT ADJUSTMENTS AS DONE IN COMPUTING MINIMUM ALTERNATE TAX (MAT) U/S.115JB OF THE ACT WA S NOT PERMISSIBLE. IT WAS FAIRLY AGREED BY BOTH THE COUN SELS THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE D ECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO.1877/CHNY/2015 V IDE ORDER DATED 11.13.2016 WHEREIN IT HAS BEEN HELD AS FOLLOW S:- 19. THE NEXT GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IS THAT THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE PROVISIO NS OF SEC.115JB OF THE I.T. ACT ARE NOT APPLICABLE TO THE ASSESSEE BAN K AS IT IS NOT A COMPANY UNDER THE PROVISIONS OF COMPANIES ACT, 1956 . WITHOUT PREJUDICE TO THE ABOVE CONTENTION THAT THE PROVISIO NS OF SECTION 115JB ARE NOT APPLICABLE, HAVING HELD THAT THE PROV ISIONS ARE APPLICABLE, THE COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE HELD ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 13 -: (A) THAT NO AMOUNT COULD BE ADDED BACK TO BOOK PROF ITS TOWARDS EXPENSES EXIGIBLE UNDER SECTION 14A AS NO INVESTMEN TS ARE HELD EXCLUSIVELY FOR EARNING INTEREST-FREE INCOME; (B) THAT THE CLAIMS AGAINST THE BANK ARE NOT CONTIN GENT LIABILITIES AND HENCE, ARE REQUIRED TO BE DEDUCTED FROM THE COM PUTATION OF BOOK PROFITS; (C) THAT BAD DEBTS WHICH ARE REQUIRED TO BE DEBITED TO THE PROVISION ACCOUNT ONLY BY THE PROVISIONS OF THE INC OME TAX ACT, 1961, IS REQUIRED TO BE DEBITED AS PROVISIONS WERE ADDED BACK IN EARLIER YEARS. 20. THIS ISSUE CAME FOR CONSIDERATION BEFORE THE TR IBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEARS 2004-05 TO 2006-07 IN ITA NOS.470 TO 472/MDS/2010 DATED 11.6.2012, WHEREIN IT WAS HELD AS UNDER : 20. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIE S AND HEARD THE RIVAL CONTENTIONS. WE FIND THAT THE ISSUE REGARDING APPLI CABILITY OF SEC.115JB ON A BANK GOVERNED BY BANK REGULATION ACT HAD COMING UP BEFORE A CO-ORDINATE BENCH OF THIS TRIBUNAL IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01. IT WAS HELD BY TH E CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER DATED 3 RD APRIL, 2011 AS UNDER:- 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ONLY DISPUTE RAISED BY THE ASSESS EE IS THAT SINCE IT IS A BANK AND IS REQUIRED TO PREPARE ITS ACCOUNTS ACCO RDING TO BANKING REGULATION ACT, 1949 AND NOT ACCORDING TO SCHEDULE VI PART II AND III OF THE COMPANIES ACT, 1956, THE PROVISIONS OF S ECTION 115JB ARE NOT APPLICABLE TO IT WHILE COMPUTING THE INCOME UND ER MAT. WE FIND THAT RECENTLY THE MUMBAI BENCH OF THE TRIBUNAL IN T HE CASE OF IN THE CASE OF KRUNG THAI BANK PCL VS. JOINT DIRECTOR OF I NCOME TAX [INTERNATIONAL TAXATION] [2010] 45 DTR 218 HAS HELD HAS UNDER: 7. THE PLEA OF THE ASSESSEE IS INDEED WELL TAKEN, AND IT MEETS OUR APPROVAL. THE PROVISIONS OF S. 115JB CAN ONLY COME INTO PLAY WHEN THE ASSESSEE IS REQUIRED TO PREPARE ITS P&L A/C IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCH. VI TO TH E COMPANIES ACT. THE STARTING POINT OF COMPUTATION OF MAT UNDER S. 1 15JB IS THE RESULT SHOWN BY SUCH A P&L A/C. IN THE CASE OF BANK ING COMPANIES, HOWEVER, THE PROVISIONS OF SCH. VI ARE NOT APPLICAB LE IN VIEW OF EXEMPTION SET OUT UNDER PROVISO TO S. 211(2) OF THE COMPANIES ACT. THE FINAL ACCOUNTS OF THE BANKING COMPANIES ARE REQ UIRED TO BE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THE B ANKING REGULATION ACT. THE PROVISIONS OF S. 115JB CANNOT T HUS BE APPLIED TO THE CASE OF A BANKING COMPANY. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 14 -: 8. FURTHER, IT MAY BE NOTED THAT THE AUTHORITY FOR ADVANCE RULING IN THE CASE OF THE TIMKEN COMPANY, IN RE [2010-TII-25- ARA-INTL AND PRAXAIR PACIFIC LTD IN RE [2010-TII-25-ARA-INTL] HA S HELD THAT MAT PROVISIONS ARE APPLICABLE TO A FOREIGN COMPANY THAT DOES NOT HAVE A PHYSICAL PRESENCE IN INDIA, AS SUCH, COMPANI ES ARE NOT REQUIRED TO PREPARE ITS ACCOUNTS AS PER COMPANIES A CT. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE CITED DECISIONS OF THE TRIBUNAL, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND A LLOW THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE BANK IS NOT REQ UIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT AND THEREFORE, THE PROVISIONS OF MAT IN SECTION 115JB IS NOT APPLI CABLE TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH, WE HOLD THAT THE PROVISIONS OF SEC.115JB COULD NOT BE APPLIED ON THE ASSESSEE. IN THE RESULT, THIS ISSUE STANDS DECIDED IN FAVOUR OF ASSESSEE. 21. SIMILAR VIEW HAS BEEN TAKEN BY THIS TRIBUNAL FO R THE ASST. YEAR 2007-08 IN ITA NO.880/MDS/2010 DATED 30.11.201 5. BEING SO, WE ARE OF THE OPINION THAT THE PROVISIONS OF SEC.11 5JB OF THE ACT CANNOT BE APPLIED TO THE BANKS. AS SUCH, OTHER GRO UNDS HEREIN ABOVE DO NOT REQUIRE ADJUDICATION AND DISMISS THE S AME AS INFRUCTUOUS. 14. THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS FOLLOWED THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE ITA NOS.470 TO 472/MDS/2010 DATED 11.6.2012 FOR ASSESSM ENT YEARS IN 2004-05 TO 2006-07. CONSEQUENTLY , RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN ITA NO.1877/CHNY/2015 REFERRED TO SUPRA, THE FINDINGS OF LD.CIT(A) ON THI S ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.5 CONSISTING OF GROUNDS 5.1. TO 5.2 STANDS DISMISSED. 15. IN THE RESULT, THE APPEAL OF REVENUE IN ITA NO .650/CHNY/2017 IS DISMISSED. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 15 -: ITA NO.738/CHNY/2017 16. NOW, WE TAKE UP THE ASSESSEES APPEAL IN ITA NO.738/CHNY/2017. 17. IN RESPECT OF GROUND NO.2 CONSISTING OF GROUNDS (A) & (B), IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFF ICER HOLDING THAT INCOME FROM FOREIGN BRANCHES ARE TO BE INCLUDED IN THE TOTAL INCOME AND ONLY DOUBLE TAXATION RELIEF AS CONTEMPLATED AS PER THE AGREEMENT IS ALLOWABLE. IT WAS FAIRLY AGREED BY BOTH THE SID ES THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE D ECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE IN ITA NO.1877/CHNY/2015 VIDE ORDER DATED 11.13.2016 WHERE IN IT HAS BEEN HELD AS FOLLOWS:- 4. THE NEXT GROUND RAISED BY THE ASSESSEE IS A S UNDER: 3.(A) THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING AUTHORITY HOLDING THAT INCOME FROM FOREIGN BRANCHES ARE TO BE INCLUDED IN THE TOTAL INCOME AND ONLY DOUBLE TAXATI ON RELIEF S CONTEMPLATED AS PER THE AGREEMENT IS ALLOW ABLE. (B) THE COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT T O HAVE APPRECIATED THAT IN VIEW OF THE PROVISIONS REG ARDING BUSINESS PROFITS CONTAINED IN THE DOUBLE TAXATION AVOIDANCE AGREEMENTS, BUSINESS PROFITS EARNED THROU GH PERMANENT ESTABLISHMENT SITUATED IN FOREIGN COUNTRY IS NOT TO BE INCLUDED IN THE TOTAL INCOME AT ALL. 5. WE FIND THAT THIS ISSUE WAS CONSIDERED IN A SSESSEES OWN CASE BY THE TRIBUNAL IN ITA NO.1871/MDS/2012 & OTHERS, C ITED SUPRA, WHEREIN THE TRIBUNAL FOLLOWED THE DECISION OF MUMBA I BENCHES IN THE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 16 -: CASE OF BANK OF BARODA VS. ACIT IN ITA NO. 2927/MUM /2011 DATED 25.7.2014 AND OBSERVED AS UNDER : 94. IN VIEW OF THE ABOVE DECISION OF THE MUMBAI BEN CHES OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT THE DECISIONS RENDERED IN ASSESSEES OWN CASE PRIOR TO ASSESSMENT YEAR 2004-05 WILL NOT HAVE BINDING PRECE DENCE IN THE ASSESSMENT YEAR 2009-10 OR SUBSEQUENT YEARS. ACCORDINGLY, WE HOLD THAT THE INCOME OF THE ASSESSE E AT SINGAPORE AND COLOMBO WOULD BE INCLUDED IN THE RETU RN OF INCOME OF THE ASSESSEE IN INDIA AND WHATEVER TAXES PAID BY THE BRANCHES IN FOREIGN COUNTRIES, CREDIT OF SUCH T AXES SHALL ONLY BE GIVEN. ACCORDINGLY, THE GROUND RAISED BY TH E ASSESSEE IS DISMISSED . IN VIEW OF THE ABOVE, WE DISMISS THIS GROUND OF APP EAL RAISED BY THE ASSESSEE. 18. AS IT IS NOTICED THAT THE ISSUE HAS BEEN HELD AGAINST THE ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO.1877/CHNY/2015 REFERRED TO SUPRA, THE FINDINGS O F THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY, GROUND N O.2 CONSISTING OF GROUNDS (A) & (B) STANDS DISMISSED. 19. IN RESPECT OF GROUND NO.3 CONSISTING OF GROUND S (A) & (B), IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN CONFIRMING DISALLOWANCE U/S. 14A R.W.RULE 8D. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE HAS BEEN HELD AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1877/CHNY/2015 VIDE ORDER DATED 11.13.2016 WHERE IN IT HAS BEEN HELD AS FOLLOWS:- ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 17 -: 9. WE FIND THAT THIS ISSUE WAS CONSIDERED IN A SSESSEES OWN CASE BY THE TRIBUNAL IN ITA NO.1871/MDS/2012 & OTHERS, WHEREIN IT WAS OBSERVED AS UNDER : 83. AFTER HEARING BOTH SIDES, WE HAVE CAREFULLY PE RUSED THE ORDERS OF AUTHORITIES BELOW. IN VIEW OF THE DECISIO N OF THE HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. V. DCIT (SUPRA) THAT RULE 8D IS APPLICABLE FROM THE AS SESSMENT YEAR 2008-09, WHEN THE ACT HAS PRESCRIBED A METHOD FOR Q UANTIFYING THE DISALLOWANCE, THE SAME CANNOT BE OVERLOOKED. SI NCE RULE 8D IS NOT APPLICABLE PRIOR TO THE ASSESSMENT YEAR 2007 -08, THE TRIBUNAL HAS SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND DIRECTED THE ASSESSING OFFICER TO WORK OUT THE DISA LLOWANCE @ 2%. HOWEVER, SINCE RULE 8D IS APPLICABLE FROM THE A SSESSMENT YEAR 2008-09 ONWARDS, THE DISALLOWANCE SHOULD BE MA DE BASED ON THE PRESCRIBED METHOD QUANTIFIED BY THE ACT. SIN CE THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE UNDER S ECTION 14A AND COMPUTED UNDER RULE 8D, WE CONFIRM THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND R AISED BY THE ASSESSEE IS DISMISSED. IN VIEW OF THE ABOVE, WE DISMISS THIS GROUND OF APP EAL RAISED BY THE ASSESSEE. 20. IT WAS A FURTHER SUBMISSION THAT IN VIEW OF TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CH ETTINAD LOGISTICS REPORTED IN (2017) 80 TAXMANN.COM 221 (MAD), THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVES TMENT (P) LTD VS.C.I.T REPORTED IN 59 TAXMANN.COM 295(DELHI) AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C.I.T VS. CHET TINAD LOGISTICS REPORTED IN (2017) 95 TAXMANN.COM 250(SC), THE DISA LLOWANCE U/S.14A R.W.RULE 8D MAY BE RESTRICTED TO THE AMOUNT OF EXEM PTED INCOME EARNED. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 18 -: 21. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS IT IS NOTICED THAT THIS ISS UE IS NOW SQUARELY COVERED BY THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHETTINAD LOGISTICS (SUPRA) AND HONBLE DE LHI HIGH COURT IN THE CASE OF JOINT INVESTMENT (P) LTD VS.C.I.T (SUPR A), RESPECTFULLY FOLLOWING THE SAME, THE ASSESSING OFFICER IS DIRECT ED TO RESTRICT THE DISALLOWANCE U/S.14A READ WITH RULE 8D TO THE EXTEN T OF THE EXEMPTED INCOME EARNED. CONSEQUENTLY, THE GROUND NO.3 CONSIS TING OF GROUNDS (A) & (B) IS PARTLY ALLOWED. 22. IN RESPECT OF GROUND NO.4, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN HOLDING THAT FOR THE PURPOSE OF SECTION 36(1)(VIIA) OF THE ACT, THE ADVANCES MADE TO RURAL BRANCHES IS TO BE TAKEN AS CRITERIA FOR COMPU TATION OF ELIGIBLE DEDUCTION AND NOT AN INDIVIDUAL NATURE OF ADVANCES. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1877/CHN Y/2015 VIDE ORDER DATED 11.13.2016 WHEREIN IT HAS BEEN HELD AS FOLLOWS:- 13. THE FACTS OF THE CASE ARE THAT THE ASESESSEE IN ITS RETURN OF INCOME CLAIMED A DEDUCTION OF RS.698,32,76,000/-. AS PER THE ASSESSEE, THE ALLOWABLE DEDUCTION U/S.36(1)(VIIA) I S RS.849,57,75,715/-, AS UNDER : ON GROSS TOTAL INCOME @ 7.5% - RS.184,72,24,910 ON RURAL ADVANCES @ 10% - RS.664,85,50,805 (RURAL ADVANCES RS.6648,55,08,050) TOTAL - RS.849,57,75,715 ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 19 -: HOWEVER, THE ASSESSEE IN ITS RETURN OF INCOME FILED , RESTRICTED THE DEDUCTION U/S.36(1)(VIIA) TO THE EXTENT OF PROV ISIONS ACTUALLY MADE OF RS.698,32,76,000/-. 13.1 THE ASSESSING OFFICER IN HIS ORDER HAS NOT ACC EPTED THE ASSESSEES CLAIMS. AS PER THE ASSESSING OFFICER, T HE TOTAL AVERAGE AGGREGATE ADVANCES SHOULD NOT BE CONSIDERED BECAUSE SOME OF THESE AMOUNTS ARE THE BROUGHT FORWA RD AMOUNT FROM THE EARLIER YEARS, WHERE THE ASSESSEE H AD ALREADY CLAIMED 10% OF THE AMOUNTS AS DEDUCTIONS U/S.36(1)(VIIA) OF THE ACT. THEREFORE, ACCORDING T O THE ASSESSING OFFICER, ONLY THE INCREMENTAL AVERAGE AGG REGATE ADVANCES MADE DURING THE YEAR ARE ELIGIBLE DEDUCTIO N U/S.36(1)(VIIA) OF THE ACT. THE TOTAL INCREMENTAL A VERAGE AGGREGATE ADVANCES MADE DURING THE YEAR (AS PER THE ANNEXURE III ENCLOSED ALONG WITH THE ASSESSMENT ORD ER) ARE RS.3420,91,21,320/-. THEREFORE, THE ASSESSING OFFIC ER CALCULATED ELIGIBLE DEDUCTION ON ACCOUNT OF THE INC REMENTAL AVERAGE AGGREGATE ADVANCES RURAL BRANCHES AT RS.342,09,12,132/- (BEING 10% OF RS.3420,91,21,320) . ACCORDINGLY, THE ASSESSING OFFICER WORKED OUT THE E LIGIBLE DEDUCTION U/S.36(1)(VIIA) OF THE ACT AT RS.597,67,7 4,583/- AND DISALLOWED THE BALANCE OF RS.100,65,01,417/-, AS UN DER : INCREMENTAL AVERAGE AGGREGATE ADVANCES 3420,91,21,320 DEDUCTION U/S.36(1)(VIIA) @ 10% 342,09,12,132 ADD: 7.5% OF THE TOTAL INCOME 255,58,62,451 (OF ` 3407,81,66,014) TOTAL AVAILABLE DEDUCTION U/S.36(L)(VIIA) 597,67,74,583 . LESS: DEDUCTION CLAIMED IN THE RETURN 698,32,76,000 EXCESS DEDUCTION CLAIMED, NOW DISALLOWED 1 00,65,01,417 ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 20 -: AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). 14. THE CIT(APPEALS) OBSERVED THAT AS PER THE PR OVISIONS OF SEC.36(1)(VIIA), THE ASSESSEE BEING A SCHEDULE BANK , IS ELIGIBLE FOR DEDUCTION OF NOT EXCEEDING 10% OF THE AGGREGATE AV ERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE BANKS CO MPUTED IN THE PRESCRIBED MANNER. FURTHER, THE CIT (APPEALS) OBS ERVED THAT THE STATUTES CLEARLY CONTAIN THAT THE DEDUCTION IS AVAI LABLE ON THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES, AND NOT ON THE INCREMENTAL ADVANCES ONLY. THEREFORE, ACCOR DING TO THE CIT(APPEALS), THAT ASSESSEE IS ENTITLED FOR DEDUCTI ON ONLY ON THE INCREMENTAL AVERAGE AGGREGATE ADVANCES OF THE RURAL BRANCHES, IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE CIT(APPEALS) RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF LAKSHMI VILAS BANK IN ITA NO.551, 552 & 553/MDS/2009 DATED 18.12. 2009 AND HELD THAT THE ALLOWABLE DEDUCTION U/S.36(1)(VIIA) O F THE ACT IS @ 10% OF THE TOTAL AVERAGE AGGREGATE ADVANCES, AS CO NTEMPLATED BY THE ASSESSING OFFICER. ACCORDINGLY, THE CIT(APPEAL S) DIRECTED THE AO TO ALLOW DEDUCTION U/S.36(1)(VIIA) OF THE ACT @ 10% OF THE TOTAL AVERAGE AGGREGATE ADVANCES MADE BY THE RURAL BRANCH ES AND NOT ON THE INCREMENTAL AVERAGE AGGREGATE ADVANCES. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CONTENTION OF THE LD. AR IS THAT ALL T HE LOANS ADVANCED BY THE RURAL BRANCHES ARE ELIGIBLE FOR DEDUCTION U/ S.36(1)(VIIA) OF THE ACT, IRRESPECTIVE OF THE PURPOSE FOR WHICH THE LOANS ARE ADVANCED. ON THE OTHER HAND, THE AO OBSERVED THAT ONLY THOSE LOANS WHICH ARE ADVANCED BY THE RURAL BRANCHES FOR THE PURPOSE OF IMPROVING THE RURAL ECONOMY, LIKE AGRICULTURAL LOAN S, AGRO BASED INDUSTRIAL LOANS AND OTHER LOANS GIVEN TO THE VILLA GERS FOR THEIR NEEDS IN THE VILLAGES ETC. ARE ELIGIBLE FOR DEDUCTION U/S .36(1)(VIIA) OF THE ACT. THE CIT(APPEALS) DISCUSSED THIS ISSUE IN PAR A 4.12.6 OF HIS ORDER, WHICH IS AS BELOW : 4.12.6 THE PROVISIONS OF SECTION 36(1)((VIIA) OF THE ACT STIPULATE THAT A DEDUCTION NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANC HES OF THE BANKS IS TO BE ALLOWED WHILE COMPUTING INCO ME. IT ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 21 -: MAY BE TRUE THAT THERE WAS NO APPARENT DISCRIMINATI ON IN THE NATURE OF LOANS ADVANCED BY THE RURAL BRANCHES, UNDER THE STATUTES. BUT WHEN THE STATUTES ARE ALLOWING A SPECIAL DEDUCTION WITH RESPECT TO THE ADVANCES MADE BY THE RURAL BRANCHES, THE BACKGROUND OF THE PROVISIONS AND THE INTENTIONS OF THE LEGISLATURE, WHILE ENACTING THE S TATUTES, HAVE TO BE LOOKED INTO. PERUSAL OF THE BUDGET OF T HE FINANCE MINISTER IN 1978-79, WHILE DISPOSING THE IN SERTION OF PROVISIONS OF [36(1)(VIIA)] OF THE ACT, CLEARLY SHOWED THAT THE DEDUCTION WAS EXTENDED TO THE RURAL BRANCHES OF THE SCHEDULE BANKS TO ENCOURAGE THEM TO MOVE TO THE RUR AL AREAS AND EXTEND RURAL CREDIT. THE RELEVANT PORTIO N OF THE BUDGET SPEECH OF THE FINANCE MINISTER IS AS UNDER : BUDGET SPEECH OF THE FINANCE MINISTER (WHILE) PRESE NTING THE BUDGET OF 1978-79: IN RECENT YEARS, COMMERCIAL BANKS, PARTICULARLY PUB LIC SECTOR BANKS, HAVE BEEN ASKED TO REACH OUT INTO THE RURAL AREAS AND THE EXPAND RURAL CREDIT. IN ORDER TO PROMOTE RURAL BANKING AND TO ASSIST THE SCHEDULED COMMERCIAL BANKS IN MAKING ADEQUATE PROVISIONS FROM THEIR CURRENT INCOME TO PROVIDE FOR RISKS IN RURAL ADVANC ES, I PROPOSE TO AMEND THE INCOME-TAX ACT TO GRANT A DEDU CTION IN RESPECT OF PROVISIONS MADE FOR BAD AND DOUBTFUL DEBTS BY SCHEDULED COMMERCIAL BANKS RELATING TO ADVANCES MAD E BY THEIR RURAL BRANCHES. SUCH A DEDUCTION WILL, HOWEV ER, BE LIMITED TO 1.5 PER CENT OF THE AGGREGATE AVERAGE AD VANCES MADE BY THE RURAL BRANCHES. THIS MEASURE WILL RESU LT IN A REVENUE LOSS OF ` 12 CRORES DURING 1979-80 BUT IT WILL BE IN A GOOD CAUSE. . .. 16. WE HAVE CAREFULLY GONE THROUGH THE ABOVE FINDIN GS OF THE CIT(APPEALS). IN OUR OPINION, THE FINDING OF THE C IT(APPEALS) IS BASED ON THE BUDGET SPEECH OF THE FINANCE MINISTER BY PRESENTING THE BUDGET OF 1978-79. WE HAVE ALSO GONE THROUGH T HE INTENTION UNDER WHICH SEC.36(1)(VIIA) WAS BROUGHT TO STATUTE BOOK AND THERE IS NO INTENTION TO SUPPORT RURAL BRANCHES AND BEING SO, ONLY ADVANCES MADE FOR IMPROVING THE RURAL ECONOMY TO BE CONSIDERED FOR ELIGIBLE DEDUCTION U/S.36(1)(VIIA) OF THE ACT. ACCORDINGLY, THE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 22 -: FINDING OF THE AO IS UPHELD AND THE GROUND OF APPEA L OF THE ASSESSEE IS DISMISSED. 23. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. RESPECTFU LLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN A SSESSEES OWN CASE IN ITA NO.1877/CHNY/2015 REFERRED TO SUPRA, D ISALLOWANCE CONFIRMED BY THE LD.CIT(A) ON THIS ISSUE STANDS CON FIRMED. CONSEQUENTLY, GROUND NO.4 OF ASSESSEE STANDS DISMIS SED. 24. IN RESPECT OF GROUND NO.5, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.C IT(A) IN HOLDING THE COMPUTATION OF AVERAGE ADVANCES MADE BY THE ASSESSI NG OFFICER BY RESTRICTING THE ADVANCES FOR THE CURRENT YEAR ALONE . THIS ISSUE WAS IN RESPECT OF COMPUTATION BY INTERPRETATION OF PROVISI ONS OF RULE 6ABA FOR THE PURPOSE OF SECTION 36(1)(VIIA) IN SO FAR AS COM PUTING THE DEDUCTION ONLY THE OUTSTANDING RURAL ADVANCES OUGHT TO BE CON SIDERED AND NOT THE INCREMENTAL ADVANCES MADE BY RURAL BRANCHES. FO R THIS PROPOSITION, LD.AR DREW OUR ATTENTION TO THE DECISION OF CO-ORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF KARUR VYSYA BANK IN ITA NO. 1497/CHNY/2013 DATED 28.02.2019 WHERE IT HAS BEEN HELD AS UNDER:- 14. GROUNDS OF APPEAL NO.3 & 4 CHALLENGES THE DIREC TION OF LD. CIT(A) TO DELETE THE ADDITION MADE U/S. 36(1)(VIIA) OF THE AC T. THE AO ALLOWED DEDUCTION OF RS. 8,63,72,774/- AS AGAINST THE CLAIM OF RS. 24,34,18,374/-. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 23 -: THE DIFFERENCE IN THE AMOUNT CLAIMED BY THE ASSESSE E-BANK AND ALLOWED BY THE AO HAD ARISEN ON ACCOUNT OF METHODOLOGY ADOPTED UNDER RULE 6AB OF THE ACT RULES FOR THE PURPOSE OF WORKING OUT OF THE AVERAGE RURAL ADVANCES. THE AO HAS CONSIDERED ONLY INCREMENTAL ADVANCES, WH EREAS THE ASSESSEE- BANK CONSIDERED THE OUTSTANDING ADVANCES FOR THE PU RPOSE OF CALCULATING THE AVERAGE RURAL ADVANCES ON EACH CALENDAR MONTH. THE LD. CIT(A) DIRECTED THE AO TO FOLLOW THE DECISION OF THIS TRIBUNAL IN THE C ASE OF CITY UNION BANK, LAKSHMI UNION BANK ETC. AND SET ASIDE THE ISSUE FOR VERIFICATION OF THE AO. THIS ISSUE WAS DISCUSSED AT LENGTH BY THE CO-ORDINA TE BENCH OF TRIBUNAL, BANGALORE IN THE CASE OF CANARA BANK V. JCIT 60 ITR (TRIB.) 1 (BAN.), WHEREIN IT WAS HELD VIDE RELEVANT PARAS 18.2 & 18.3 RELEVANT PARAGRAPHS IS EXTRACTED BELOW: 18.2 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE FINANCE ACT, 1979 INSERTED A NEW CLAUSE (VIIA) IN SUB- SECTION (1) OF SECTION 36 TO PROVIDE FOR DEDUCTION IN COMPUTATION OF TAXABLE PROFITS OF SCHEDULE BANK IN RESPECT OF PROV ISION MADE FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCES MADE BY THE RURAL BRANCHES COMPUTED IN THE MANNER PRESCRIBED UNDER IT RULES,1962. FOR THIS PURPOSE, 'RURAL BRANCHES' HAS BEEN DEFINED TO MEAN 'BRANCH OF SCHEDULE BANK SITUATED AT PLACE WIT H POPULATION NOT EXCEEDING 10,000 ACCORDING TO LAST CENSUS'. RUL E 6BA OF THE INCOME-TAX RULES PROVIDES THE PROCEDURE FOR COMPUTI NG AAA FOR THE PURPOSE F PROVISIONS OF SECTION 36(1)(VIIA) WHI CH READS AS UNDER: '6ABA. COMPUTATION OF AGGREGATE AVERAGE ADVANCES FO R THE PURPOSES OF CLAUSE (VIIA) OF SUB-SECTION (1) OF SECTION 36 FOR THE PURPOSES OF CLAUSE (VIIA) OF SUB-SECTION (1 ) OF SECTION 36, THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURA L BRANCHES OF A SCHEDULED BANK SHALL BE COMPUTED IN T HE FOLLOWING MANNER, NAMELY : (A) THE AMOUNTS OF ADVANCES MADE BY EACH RURAL BRAN CH AS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONT H COMPRISED IN THE PREVIOUS YEAR SHALL BE AGGREGATED SEPARATELY ; (B) THE SUM SO ARRIVED AT IN THE CASE OF EACH SUCH BRANCH SHALL BE DIVIDED BY THE NUMBER OF MONTHS FOR WHICH THE OU TSTANDING ADVANCES HAVE BEEN TAKEN INTO ACCOUNT FOR THE PURPO SES OF CLAUSE (A) ; (C) THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESP ECT OF EACH OF THE RURAL BRANCHES SHALL BE THE AGGREGATE AVERAG E ADVANCES MADE BY THE RURAL BRANCHES OF THE SCHEDULED BANK. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 24 -: EXPLANATION : IN THIS RULE, RURAL BRANCH AND SCHEDU LED BANK SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE EXP LANATION TO CLAUSE (VIIA) OF SUB-SECTION (1) OF SECTION 36.' FROM A BARE READING OF THE ABOVE RULE IT IS CRYSTAL CLEAR THAT THE SAID RULES PRESCRIBE THREE STEPS FOR COMPUTING AAA IN THE FOLLOWING MANNER: STEP ONE - IN RESPECT OF EACH RURAL BRANCH, NOTE DO WN THE AMOUNTS OF ADVANCES OUTSTANDING AT THE END OF THE L AST DAY OF EACH MONTH COMPRISED IN THE PREVIOUS YEAR AND AGGRE GATE THE AMOUNTS SO NOTED. STEP TWO- DIVIDE THE AGGREGATE AMOUNT ARRIVED AT IN STEP ONE BY THE NUMBER OF MONTHS FOR WHICH THE OUTSTANDING A MOUNTS HAVE BEEN TAKEN INTO ACCOUNT FOR THE PURPOSE OF STE P ONE. STEP THREE- AGGREGATE THE AMOUNTS ARRIVED AT UNDER STEP TWO IN RESPECT OF ALL THE RURAL BRANCHES. THUS, IT IS CLEAR THAT THE SAID RULES DO NO T PROVIDE FOR ONLY FRESH ADVANCES MADE BY EACH RURAL BRANCH DURING EAC H MONTH ALONE IS TO BE CONSIDERED. IT ONLY PRESCRIBES THAT THE AMOUNT OF ADVANCES MADE BY RURAL BRANCH AND IS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONTH SHALL BE AGGREGATED. HAV ING REGARD TO THE PLAIN PROVISIONS OF THE IT RULES, IT CANNOT BE CONSTRUED THAT ONLY FRESH LOANS MADE BY RURAL BRANCHES OUTSTANDING AT THE END OF EACH MONTH SHOULD BE CONSIDERED FOR THE PURPOSE OF CALCULATING AAA. IT IS TRITE LAW THAT THE CONDITION NOT IMPOSED BY THE STATUTE CANNOT BE IMPORTED WHILE CONSTRUING A PARTICULAR PR OVISION OF RULES OR STATUTES. THUS, THE REASONING ADOPTED BY THE AO AS WELL AS THE CIT(A) DOES NOT STAND THE TEST OF LAW. FURTHERMORE, CO-ORDINATE BENCH OF HYDERABAD TRIBUNAL IN THE CASE OF NIZAMABA D DISTRICT CO- OPERATIVE CENTRAL BANK LTD. (SUPRA) HELD AS FOL LOWS: '8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. BEFORE GOING INTO THE ISSUE, I T IS NECESSARY TO LOOK INTO THE RELEVANT STATUTORY PROVISIONS. SEC TION 36(1)(VII) PROVIDES FOR DEDUCTION ON ACCOUNT OF BAD DEBTS ACTU ALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. HOWEVER, PROVISO TO 36 (1)(VII) MAKES AN EXCEPTION BY PROVIDING THAT IN CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES THE CLAIM OF BAD DEB T SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT EXCEEDS TH E CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE UNDER CLAUSE (VIIA). CLAUSE (VIIA) PERMITS A COOPER ATIVE BANK TO CLAIM DEDUCTION OF PROVISION MADE FOR BAD AND DOUBT FUL DEBTS AS PER THE PRESCRIBED CONDITIONS. AS HAS BEEN CORRE CTLY OBSERVED BY LD. CIT(A), THE ONLY DISPUTE BETWEEN AS SESSEE AND DEPARTMENT IS IN RESPECT OF WORKING OUT 10% OF AGGREGATE AVERAGE RURAL ADVANCES. WHILE ASSESSEE HAS MADE SUC H WORKING BY CONSIDERING THE ENTIRE OUTSTANDING ADVAN CES AT THE END OF EACH MONTH, AO HAS WORKED OUT BY CONSIDERING THE AGGREGATE AVERAGE RURAL ADVANCES OF EACH MONTH AND NOT ON THE ENTIRE OUTSTANDING ADVANCES. HOWEVER, A PERUSAL OF THE PROVISION CONTAINED U/S 36(1)(VIIA) AND RULE 6ABA, WOULD MAKE IT CLEAR THAT THE 10% OF AGGREGATE AVERAGE ADVANCES HAS TO BE WORKED OUT ON THE ENTIRE OUTSTANDING ADVANCES AND N OT THE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 25 -: ADVANCES OF THAT MONTH ALONE. THAT BEING THE CASE, WE AGREE WITH THE VIEW HELD BY LD. CIT(A). 9. NOW COMING TO THE QUANTUM OF DEDUCTION CLAIMED U /S 36(1)(VII) AND 36(1) (VIIA), LAW IS WELL SETTLED TH AT AN ASSESSEE CAN CLAIM DEDUCTION UNDER BOTH THE CLAUSES SUBJECT TO THE CONDITION IMPOSED UNDER THE PROVISO TO 36(1)(VII). AS CAN BE SEEN FROM THE WORKING SUBMITTED BY LD. AR, THE PROV ISION CREATED DURING THE YEAR U/S 36(1)(VIIA) READ WITH R ULE 6ABA, AMOUNTS TO RS. 16,35,55,829.00 WHEREAS ASSESSEE HAS CLAIMED DEDUCTION OF RS. 5,16,46,976, WHICH IS WELL WITHIN THE PROVISION PERMISSIBLE UNDER SECTION 36(1)(VIIA). TH EREFORE, THERE CANNOT BE ANY DOUBT WITH REGARD TO THE ALLOWA BILITY OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 36(1)(VIIA). ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF LD. CIT(A) IN DELETING ADDITION OF RS. 3,88,25,673. HOW EVER, AS FAR AS DEDUCTION OF RS. 18,79,704 IS CONCERNED, THE SAM E CANNOT BE ALLOWED U/S 36(1)(VII) CONSIDERING THE FACT SUCH AMOUNT HAS NOT EXCEEDED THE PROVISION FOR BAD AND DOUBTFUL DEB TS U/S 36(1)(VIIA). AT THE SAME TIME, ALTERNATIVE CLAIM OF THE ASSESSEE THAT IT IS TO BE ALLOWED U/S 37(1), IN OUR VIEW, IS ACCEPTABLE. ON A PERUSAL OF THE ASSESSMENT ORDER AND THE FACTS AND MATERIALS AVAILABLE ON RECORD, IT IS QUITE EVIDENT THAT THE A MOUNT WAS WAIVED AT THE DIRECTION OF THE STATE GOVT. DEPARTME NT HAS NOT CONTROVERTED THIS FACT. THEREFORE, IN OUR VIEW, THE WAIVER OF INTEREST AT THE INSTANCE OF THE STATE GOVERNMENT, H AS TO BE ALLOWED AS BUSINESS EXPENDITURE U/S 37(1). ACCORDIN GLY, WE UPHOLD THE ORDER OF LD. CIT(A) IN DELETING ADDITION OF RS. 18,79,704 THOUGH, FOR A DIFFERENT REASON. THE GROUN DS RAISED BY THE DEPARTMENT ARE DISMISSED.' 18.3 IN THE LIGHT OF THE ABOVE, WE HOLD THAT THE ME THODOLOGY ADOPTED BY THE AO FOR THE PURPOSE OF COMPUTING AAA IS AGAINST THE PLAIN PROVISIONS OF RULES AND ALSO AGAINST THE RATIO OF THE DECISION OF THE CO- ORDINATE BENCH IN THE CASES CIT ED SUPRA. HOWEVER, REMIT THIS ISSUE BACK TO THE FILE OF THE A O TO IDENTIFY RURAL BRANCHES LESS THAN 10,000 POPULATION AS PER LAST CE NSUS AND THE AAA OF SUCH RURAL BRANCHES ALONE SHOULD BE CONSIDER ED FOR THE PURPOSE OF THIS DEDUCTION. THUS, THESE GROUNDS OF A PPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 14.1 THE REASONING OF THIS TRIBUNAL WAS APPROVED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PCIT V. UTTARBAN GA KSHETRIYA GRAMINA BANK [2018] 408 ITR 393 (CAL), WHEREIN THE HONBLE CALCUTTA HIGH COURT UPHELD THE INTERPRETATION OF THE PROVISIONS OF RULE 6ABA OF THE RULES FOR THE PURSE OF S. 36(1)(VIIIA) OF THE ACT THAT ONLY A GGREGATE AVERAGE ADVANCE MADE BY RURAL BRANCHES OF A SCHEDULED BANK SHOULD BE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 26 -: COMPUTED BY AGGREGATING SEPARATELY THE ADVANCES MAD E BY EACH RURAL BRANCH AS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONTHS COMPRISED IN THE PREVIOUS YEAR. THE HONBLE HIGH CO URT HAD CATEGORICALLY HELD THAT THE METHOD OF TAKING THE LOANS AND ADVANC ES MADE DURING THE YEAR ONLY IS NOT CORRECT. 14.2 THEREFORE, IN VIEW OF THE ABOVE LEGAL POSITION , WE DIRECT THE AO TO CONSIDER ONLY THE OUTSTANDING RURAL ADVANCES NOT THE INCREMENTAL ADVANCES MADE BY THE RURAL BRANCHES FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S. 36(1)(VIIA) OF THE ACT. THE DIRECTI ON OF THE LD. CIT(A) ARE IN CONSONANCE WITH THE LAW ENUNCIATED THE ABOVE. TH EREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE. 14.3 IN THE RESULT, GROUNDS OF APPEAL NO.3 & 4 FI LED BY THE REVENUE ARE DISMISSED. 25. AS IT IS NOTICED THAT THIS ISSUE IS NOW SQUARE LY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KARUR VYSYA BANK REFERRED TO SUPRA, THE ASSESSING OFFICER IS DIRECTED TO RE- COMPUTE THE DEDUCTION U/S.36(1)(VIIA) OF THE ACT FO R CONSIDERING ONLY THE OUTSTANDING RURAL ADVANCES AND NOT INCREMENTAL ADVANCES MADE BY THE RURAL BRANCHES. THE GROUND NO.5 OF ASSESSEE IS PARTLY ALLOWED. 26. IN RESPECT OF GROUND NO.6, IT WAS FAIRLY AGREE D BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN NOT GRANTING THE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 27 -: ASSESSEE THE BENEFIT OF MAT CREDIT ENTITLEMENT ON T HE AMALGAMATION OF INDFUND MANAGEMENT LTD., WITH THE ASSESSEES BANK. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE RAISED IN THIS GROUND WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF SURAJ AGRO INFRASTRUCTURE V S. DCIT ITA NO.1554/CHNY/2011 VIDE ORDER DATED 06.06.2012 WHERE IN IT HAS BEEN HELD AS FOLLOWS:- 2. IT IS THE CASE OF THE ASSESSEE THAT THE COMMISS IONER OF INCOME-TAX(APPEALS) HAS ERRED IN CONCLUDING THAT TH E ASSESSEE COMPANY IS NOT ENTITLED FOR CREDIT U/S.115JAA IN RE SPECT OF THE TAXES PAID BY THE AMALGAMATING COMPANIES. IT IS TH E CASE OF THE ASSESSEE THAT THE ASSETS AND LIABILITIES ON THE DAT E OF AMALGAMATION OF THE AMALGAMATING COMPANY WOULD BECO ME ASSETS AND LIABILITIES OF THE AMALGAMATED COMPANY A ND, THEREFORE, THE AMALGAMATED COMPANY IS ENTITLED FOR THE CREDIT U/S.115JAA IN RESPECT OF THE TAXES PAID BY THE AMAL GAMATING COMPANY. IT IS AGAIN THE CONTENTION OF THE ASSESSE E THAT THERE IS NO PROHIBITION OR RESTRICTION IN SEC.115JAA WITH REGARD TO CARRY FORWARD AND SET OFF OF MAT CREDIT BELONGING TO THE AMALGAMATING COMPANY BY THE AMALGAMATED COMPANY, THOUGH THERE IS SPECIFIC PROHIBITION IN CASE OF UNLISTED PUBLIC COMPANIES OR PRIVATE COMPANIES CONVERTED INTO LIMITED LIABILITY PARTNERS HIPS. 3. THE GROUNDS RAISED BY THE ASSESSEE ARE SELF SPEA KING. WE DO AGREE WITH THOSE GROUNDS. THE AMALGAMATED COMPANY IS ENTITLED FOR THE CREDIT AVAILABLE TO THE AMALGAMATI NG COMPANY UNDER SEC.115JAA. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 28 -: 27. AS IT IS NOTICED THAT THIS ISSUE IS NOW SQUARE LY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SURAJ AGRO INFRASTRUCTURE VS. DCIT REFERRED TO SUPRA, THE ASSESSING OFFICER IS DIRECTED TO GRANT THE ASSESSEE THE BENEFIT OF MA T CREDIT IN RESPECT OF AMALGAMATION OF INDFUND MANAGEMENT LTD., WITH THE A SSESSEES BANK. CONSEQUENTLY, GROUND NO.6 STANDS ALLOWED. 28. IN RESPECT OF GROUND NO.7, IT WAS FAIRLY AGREE D BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN UPHOLDING THE COMPUTATION OF DEDUCTION U/S.36(1)(VIII) OF THE AC T AS MADE BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSES SEE HAD BEEN FOLLOWING THE METHOD OF COMPUTING 20% BOOK PROFIT O F THE ELIGIBLE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIE S BY APPLYING THE FORMULA BUSINESS INCOME MULTIPLIED BY THE INTEREST FROM ELIGIBLE BUSINESS AND DIVIDED BY TOTAL INTEREST INCOME. IT W AS A SUBMISSION THAT AS THE ASSESSEES BUSINESS INCOME INCLUDED INTEREST INCOME FROM GOVERNMENT SECURITY ALSO, THE ASSESSING OFFICER HAD HELD THAT THE COMPUTATION WAS ERRONEOUS AND CONSEQUENTLY RE-COMP UTED THE DEDUCTION U/S.36(1)(VIII) OF THE ACT BY EXCLUDING T HE INTEREST ON THE GOVERNMENT SECURITIES. ON A SPECIFIC QUERY FROM THE BENCH, AS TO WHEN THE INTEREST INCOME FROM ELIGIBLE BUSINESS WAS SPEC IFICALLY AVAILABLE AND QUANTIFIED WHY THE FORMULA WAS APPLIED AS PERCENTAG E OF THE BUSINESS ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 29 -: INCOME, AND NOT APPLIED THE RATE OF 20% ON THE SAID PROFITS, BEING THE INTEREST FROM THE ELIGIBLE BUSINESS, AFTER REDUCING THE PRO RATA EXPENDITURE IN RESPECT OF EARNING OF THE SAID INTER EST FROM ELIGIBLE BUSINESS? IT WAS SUBMITTED BY THE LD.AR THAT THE M ETHOD HAD BEEN FOLLOWED RIGHT FROM THE BEGINNING. IT WAS HOWEVER A GREED BY BOTH THE SIDES, THE ISSUE MAY BE RESTORED TO THE FILE OF ASS ESSING OFFICER FOR APPLYING CORRECT PRINCIPLE OF COMPUTING THE 20% OF THE PROFIT DERIVED FROM THE ELIGIBLE BUSINESS. 29. A PERUSAL OF THE PROVISIONS OF SECTION 36(1)(V III) OF THE ACT SHOWS THAT THE WORDS USED THEREIN ARE AN AMOUNT NOT EXCE EDING TWENTY PER CENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SUBJECT TO OTHER CONDITIONS SPECIFIED THEREIN. THE INTEREST EARNED I N RESPECT OF THE SAID ELIGIBLE BUSINESS IS SPECIFICALLY AVAILABLE. ONCE THIS IS AVAILABLE, THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE IS ALSO AVAILABLE, AND OBVIOUSLY, THE TOTAL INCOME OF ASSESSEE IS ALSO AVA ILABLE. WHEN THESE FIGURES ARE VERY MUCH AVAILABLE, THEN EXPENDITURE I NCURRED ON PRO-RATA BASIS FOR THE PURPOSE OF EARNING THE SAID INTEREST INCOME IN RESPECT OF THE ELIGIBLE BUSINESS CAN EASILY BE QUANTIFIED. TH E SAME IS TO BE REDUCED FROM THE SAID INTEREST EXPENDITURE EARNED A ND THAT WOULD GIVE THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS, OUT OF WHICH 20% DEDUCTION WOULD BE THE ELIGIBLE DEDUCTION U/S.36(1) (VIII) OF THE ACT ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 30 -: SUBJECT TO THE COMPLIANCE OF THE OTHER CONDITIONS M ENTIONED THEREIN BEING THE CREATION OF SPECIAL RESERVE AND CARRYING OF THE SAME TO THE RESERVE ACCOUNT. IN THIS CIRCUMSTANCE, THE ISSUE RA ISED IN GROUND-7 IS RESTORED TO THE FILE OF ASSESSING OFFICER TO RE-COM PUTE THE DEDUCTION U/S.36(1)(VIII) OF THE ACT AS PER THE DIRECTIONS GI VEN ABOVE. CONSEQUENTLY, GROUND NO.7 OF ASSESSEES APPEAL IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 30. THE APPEAL OF ASSESSEE IN ITA NO.738/CHNY/2017 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.648/CHNY/2017(REVENUES APPEAL)(A.Y 2013-14) 31. THE FINDINGS OF ASSESSMENT YEAR 2012-13 APPLIES TO THE IDENTICAL ISSUE RAISED IN THE ASSESSMENT YEAR UNDE R CONSIDERATION AS DIRECTED IN ITA NO.650/CHNY/2017(A.Y.2012-13) SUPRA. 32. SINCE THE GROUND NO.1 CONSISTING OF GROUNDS 1. 1 TO 1.5 IN RESPECT OF BROKEN PERIOD INTEREST IS IDENTICAL TO G ROUND NO.1 OF REVENUES APPEAL IN ITA NO.650/CHNY/2017, THEREFORE, THE DECISION REACHED BY US IN ITA NO.650/CHNY/2017 PERTAINING TO GROUND NO.1 SHALL EQUALLY APPLY TO THE GROUND NO.1 OF REVENUES APPEAL IN ITA NO.648/CHNY/2017. HENCE, THE ISSUE RAISED IN GROUND NO.1 OF THIS APPEAL STANDS DISMISSED. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 31 -: 33. IN RESPECT OF GROUND NO.2 CONSISTING OF GROUND S 2.1 TO 2.4, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN ALLOWING THE DEPRECIATION OF INVESTMENT ON SECURITIES AT THE TIME OF SHIFTING FROM AVAILABLE F OR SALE TO HELD TO MATURITY. 34. ON IDENTICAL FINDINGS AS IN GROUND NO.2 OF REV ENUES APPEAL IN ITA NO.650/CHNY/2017, THEREFORE, THE DECISION REACHED BY US IN ITA NO.650/CHNY/2017 APPLIES TO GROUND NO.2 OF REVENUES APPEAL IN ITA NO.648/CHNY/2017. HENCE, THE ISSUE RAISED IN GROUN D NO.2 OF THIS APPEAL STANDS DISMISSED. 35. IT IS OBSERVED THAT THIS GROUND NO.3 CONSISTING OF 3.1. TO 3.4 IN RESPECT OF BAD DEBTS TECHNICAL WRITE OFF IS IDENTIC AL TO GROUND NO.3 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 IN ITA NO.650/CHNY/2017. BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENTS AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 36. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CON SIDERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.3 IN ITA ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 32 -: NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.3 CONSISTING OF GROUNDS 3.1 TO 3.4 STANDS DISMISSED. 37. IT IS OBSERVED THAT THIS GROUND NO.4 CONSISTING OF 4.1. TO 4.3 IN RESPECT OF DEPRECIATION ON ATMS IS IDENTICAL TO GRO UND NO.4 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 IN ITA NO.650/CHNY/2017. BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENTS AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 38. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CON SIDERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.4 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.4 CONSISTING OF GROUNDS 4.1 TO 4.3 STANDS DISMISSED. 39. IT IS OBSERVED THAT THIS GROUND NO.5 CONSISTIN G OF 5.1. TO 5.2 IN RESPECT OF APPLICABILITY OF PROVISIONS 115JB OF THE ACT IS IDENTICAL TO GROUND NO.5 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 IN ITA ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 33 -: NO.650/CHNY/2017. BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENTS AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 40. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CON SIDERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.5 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.5 CONSISTING OF GROUNDS 5.1 TO 5.2 STANDS DISMISSED. 41. IN THE RESULT, THE APPEAL OF REVENUE IN ITA NO.648/CHNY/2017 STANDS DISMISSED. ITA NO.739/CHNY/2017(ASSESSEES APPEAL)(A.Y 2013-14 ) 42. NOW, WE PROCEED TO DEAL WITH THE ASSESSEES APP EAL IN ITA NO.739/CHNY/2017. 43. IN RESPECT OF GROUND NO.2 CONSISTING OF GROUN DS (A) & (B), THE ISSUE RAISED IN THIS GROUND WAS AGAINST THE ACT ION OF LD.CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER HOLDING THAT INCOME FROM FOREIGN BRANCHES ARE TO BE INCLUDED IN THE TOTAL IN COME AND ONLY DOUBLE TAXATION RELIEF AS CONTEMPLATED AS PER THE A GREEMENT IS ALLOWABLE. BOTH THE PARTIES HAVE FAIRLY STATED THAT THE ISSUE INVOLVED IN ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 34 -: THIS GROUND IS SIMILAR WITH THE ISSUE INVOLVED IN A SSESSEES APPEAL IN ITA NO.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13. 44. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN ASSESSEES APPEAL ARE SAME FOR THE YEAR UNDER CO NSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSION DRAWN IN GROU ND NO.2 IN ITA NO.738/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.2 CONSISTING OF GROUNDS 2(A) TO 2(B) STANDS DISMISSED. 45. IN RESPECT OF GROUND NO.3 CONSISTING OF GROUND S (A) & (B), IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN CONFIRMING DISALLOWANCE U/S. 14A R.W.RULE 8D. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISS UE INVOLVED IN THIS GROUND-3 IS SIMILAR WITH THE ISSUE INVOLVED IN GROU ND NO.3 OF ASSESSEES APPEAL IN ITA NO.738/CHNY/2017 FOR ASSES SMENT YEAR 2012-13. 46. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSMEN T YEAR 2012-13 IN ASSESSEES APPEAL ARE SAME FOR THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSIO N DRAWN IN GROUND NO.3 IN ITA NO.738/CHNY/2017 , THE ASSESSING OFFICER IS DIRECTED TO ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 35 -: RESTRICT THE DISALLOWANCE U/S.14A R.W.RULE 8D TO TH E EXTENT OF THE EXEMPTED INCOME EARNED. CONSEQUENTLY, THE GROUND NO .3 CONSISTING OF GROUNDS (A) & (B) IS PARTLY ALLOWED. 47. IN RESPECT OF GROUND NO.4, IT WAS FAIRLY AGREE D BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN HOLDING THE COMPUTATION OF AVERAGE ADVANCES MADE BY THE ASSESSI NG OFFICER BY RESTRICTING THE ADVANCES FOR THE CURRENT YEAR ALONE . THIS ISSUE WAS IN RESPECT OF COMPUTATION BY INTERPRETATION OF PROVISI ONS OF RULE 6ABA FOR THE PURPOSE OF SECTION 36(1)(VIIA) IN SO FAR AS COM PUTING THE DEDUCTION ONLY THE OUTSTANDING RURAL ADVANCES OUGHT TO BE CON SIDERED AND NOT THE INCREMENTAL ADVANCES MADE BY RURAL BRANCHES. B OTH THE PARTIES HAVE FAIRLY STATED THAT THE ISSUE INVOLVED IN THIS GROUND NO.4 IS SIMILAR WITH THE ISSUE INVOLVED IN GROUND NO.5 OF ASSESSEE S APPEAL IN ITA NO.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13. 48. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN ASSESSEES APPEAL ARE SAME FOR THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSIO N DRAWN IN GROUND NO.5 IN ITA NO.738/CHNY/2017 , THE ASSESSING OFFICER IS DIRECTED TO RE- COMPUTE THE DEDUCTION U/S.36(1)(VIIA) OF THE ACT FO R CONSIDERING ONLY ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 36 -: THE OUTSTANDING RURAL ADVANCES AND NOT INCREMENTAL ADVANCES MADE BY THE RURAL BRANCHES. THE GROUND NO.4 OF ASSESSEE IS PARTLY ALLOWED. 49. BOTH THE PARTIES HAVE FAIRLY STATED THAT THE I SSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN UPHOLDING THE COMPUTATION O F DEDUCTION U/S.36(1)(VIII) OF THE ACT AS MADE BY THE ASSESSING OFFICER. BOTH THE PARTIES HAVE FAIRLY AGREED THAT THE ISSUE INVOLVED IN THIS GROUND NO.5 IS SIMILAR WITH THE ISSUE INVOLVED IN GROUND NO.7 O F ASSESSEES APPEAL IN ITA NO.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13 . 50. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSM ENT YEAR 2012-13 IN ASSESSEES APPEAL ARE SAME FOR THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSIO N DRAWN IN GROUND NO.5 IN ITA NO.738/CHNY/2017 , THE ISSUE RAISED IN GROUND-5 OF THIS APPEAL IS RESTORED TO THE FILE OF ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION U/S.36(1)(VIII) OF THE ACT AS PER THE DIR ECTIONS GIVEN IN PARA- 29 OF THIS ORDER. CONSEQUENTLY, GROUND NO.5 OF ASSE SSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 51. THE APPEAL OF ASSESSEE IN ITA NO.739/CHNY/2017 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 37 -: ITA NO.2149/CHNY/2017(REVENUES APPEAL)(A.Y 2014-15 ) 52. SINCE THE GROUND NO.1 CONSISTING OF GROUNDS 1.1 TO 1.5 IN RESPECT OF BROKEN PERIOD INTEREST IS IDENTICAL TO G ROUND NO.1 OF REVENUES APPEAL IN ITA NO.650/CHNY/2017 FOR ASSESSMENT YEAR 2012-13, BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENT S AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 53. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR U NDER CONSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSIO N DRAWN IN GROUND NO.1 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.1 CONSIST ING OF GROUNDS 1.1. TO 1.5 STANDS DISMISSED. 54. IN RESPECT OF GROUND NO.2 CONSISTING OF GROUN DS 2.1 TO 2.4, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN ALLOWING THE DEPRECIATION OF INVESTMENT ON SECURITIES AT THE TIME OF SHIFTING FROM AVAILABLE F OR SALE TO HELD TO MATURITY. BOTH THE PARTIES HAVE FAIRLY AGREED THAT THE ISSUE INVOLVED ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 38 -: IN THIS GROUND NO.2 IS SIMILAR WITH THE ISSUE INVOL VED IN GROUND NO.2 OF REVENUES APPEAL IN ITA NO.650/CHNY/2017 FOR ASSESS MENT YEAR 2012-13. 55. WE HAVE HEARD THE RIVAL CONTENTIONS. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSMENT YEAR 2012-13 IN REVENU ES APPEAL ARE SAME FOR THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING OUR CONCLUSION DRAWN IN GROUND NO.2 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRME D. CONSEQUENTLY GROUND NO.2 CONSISTING OF GROUNDS 2.1. TO 2.4 STAND S DISMISSED. 56. IT IS OBSERVED THAT THIS GROUND NO.3 CONSISTIN G OF 3.1. TO 3.4 IN RESPECT OF BAD DEBTS TECHNICAL WRITE OFF IS IDENTIC AL TO GROUND NO.3 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 IN ITA NO.650/CHNY/2017. BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENTS AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 57. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CON SIDERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.3 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 39 -: CONFIRMED. CONSEQUENTLY GROUND NO.3 CONSISTING OF GROUNDS 3.1 TO 3.4 STANDS DISMISSED. 58. SINCE THE GROUND NO.4 CONSISTING OF GROUNDS 4.1 TO 4.4 IN RESPECT OF CLAIMING OF DEPRECIATION ON ATM AT 60% A S AGAINST THE ELIGIBLE DEPRECIATION AT 15% IS IDENTICAL TO GROUN D NO.4 OF REVENUES APPEAL IN ITA NO.650/CHNY/2017 FOR ASSESSMENT YEAR 2012-13, BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENT S AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. 59. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CONSID ERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.4 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.4 CONSISTING OF GROUNDS 4.1 TO 4.4 STANDS DISMISSED. 60. IT IS OBSERVED THAT THIS GROUND NO.5 CONSISTIN G OF 5.1. TO 5.2 IN RESPECT OF APPLICABILITY OF PROVISIONS 115JB OF THE ACT IS IDENTICAL TO GROUND NO.5 OF REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 IN ITA NO.650/CHNY/2017. BOTH LD.A.R AND LD.D.R REITERATED SIMILAR ARGUMENTS AS SUBMITTED FOR ASSESSMENT YEAR 2012-13. ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 40 -: 61. SINCE THE FACTS AND CIRCUMSTANCES FOR ASSESSME NT YEAR 2012-13 IN REVENUES APPEAL ARE SAME FOR THE YEAR UNDER CON SIDERATION, RESPECTFULLY FOLLOWING THE DECISION REACHED BY US I N GROUND NO.5 IN ITA NO.650/CHNY/2017 , THE FINDINGS OF LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. CONSEQUENTLY GROUND NO.5 CONSISTING OF GROUNDS 5.1 TO 5.2 STANDS DISMISSED. 62. IN THE RESULT, THE APPEAL OF REVENUE IN ITA NO. 2149/CHNY/2017 STANDS DISMISSED. ITA NO.2155/CHNY/2017(ASSESSEES APPEAL)(A.Y 2014-1 5) 63. IN RESPECT OF GROUND NO.2 CONSISTING OF 2(A) & 2(B), THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN UPHOLD ING THE COMPUTATION OF DEDUCTION U/S.36(1)(VIII) OF THE ACT AS MADE BY THE ASSESSING OFFICER. 64. BOTH THE COUNSELS AGREED THAT THERE IS A SIMIL AR GROUND BEARING GROUND NO.7 RAISED BY THE ASSESSEE IN ITA N O.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13. WE HAVE ALREADY HELD I N PARAGRAPH NOS. 28-29 OF THIS ORDER, THAT THE ISSUE RAISED IN GROUN D-7 IS RESTORED TO THE FILE OF ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTI ON U/S.36(1)(VIII) OF THE ACT AS PER THE DIRECTIONS GIVEN ABOVE. FOR THE VERY SAME REASONS MENTIONED IN THE SAID PARAGRAPH, THE GROUND NO.2(A) & 2(B) OF ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 41 -: ASSESSEES APPEAL UNDER CONSIDERATION IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 65. IN RESPECT OF GROUND NO.3, THE ISSUE WAS AGAIN ST THE ACTION OF LD.CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER HOLDING THAT INCOME FROM FOREIGN BRANCHES ARE TO BE INCLUDED IN THE TOTAL INCOME AND ONLY DOUBLE TAXATION RELIEF AS CONTEMPLATED AS PER THE AGREEMENT IS ALLOWABLE. 66. BOTH THE COUNSELS AGREED THAT THERE IS A SIMIL AR GROUND BEARING GROUND NO.2 RAISED BY THE ASSESSEE IN ITA N O.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13. WE HAVE ALREADY HELD I N PARAGRAPH NOS. 17 TO 18 OF THIS ORDER, THAT THE ISSUE HAS BEEN HEL D AGAINST THE ASSESSEE. FOR THE VERY SAME REASONS MENTIONED IN T HE SAID PARAGRAPHS, THE GROUND NO.3 OF ASSESSEES APPEAL UN DER CONSIDERATION IS DISMISSED. 67. IN RESPECT OF GROUND NO.4, CONSISTING OF GROUN DS 4(A) & 4(B), THE ISSUE WAS AGAINST THE ACTION OF LD.CIT(A) IN CONFIRMING DISALLOWANCE U/S.14A R.W.RULE 8D. 68. BOTH THE COUNSELS AGREED THAT THERE IS A SIMIL AR GROUND BEARING GROUND NO.3 RAISED BY THE ASSESSEE IN ITA N O.738/CHNY/2017 FOR ASSESSMENT YEAR 2012-13. WE HAVE ALREADY HELD I N PARAGRAPH ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 42 -: NOS.19 TO 21 OF THIS ORDER, THAT RESPECTFULLY FOLLO WING THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CH ETTINAD LOGISTICS (SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENT (P) LTD VS.C.I.T (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S.14A R.W.RULE 8D TO THE EXTENT OF THE EXEMPTED INCOME EARNED. FOR THE VERY SAME REASONS MENTIONED IN THE SAID PARAGRAPHS, THE GROUND NO.4 OF ASSESSEES APPEAL UN DER CONSIDERATION IS PARTLY ALLOWED. 69. IN RESPECT OF GROUND NO.5, THE ISSUE WAS IN RE SPECT OF COMPUTATION BY INTERPRETATION OF PROVISIONS OF RULE 6ABA FOR THE PURPOSE OF SECTION 36(1)(VIIA) IN SO FAR AS COMPUTI NG THE DEDUCTION ONLY THE OUTSTANDING RURAL ADVANCES OUGHT TO BE CON SIDERED AND NOT THE INCREMENTAL ADVANCES MADE BY RURAL BRANCHES. 70. BOTH THE COUNSELS AGREED THAT THERE IS A SIM ILAR GROUND BEARING GROUND NO.5 RAISED BY THE ASSESSEE IN ITA NO.738/CH NY/2017 FOR ASSESSMENT YEAR 2012-13. WE HAVE ALREADY HELD IN PA RAGRAPH NOS.24 TO 25 OF THIS ORDER THAT RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KARUR VYSYA BANK REFERRED TO SUPRA, THE ASSESSING OFFICER IS DIRECTE D TO RE-COMPUTE THE DEDUCTION U/S.36(1)(VIIA) OF THE ACT FOR CONSIDERIN G ONLY THE ITA NOS.738,739,2155/CHNY/2017 ITA NOS.650,648,2149/CHNY/2017 :- 43 -: OUTSTANDING RURAL ADVANCES AND NOT INCREMENTAL ADVA NCES MADE BY THE RURAL BRANCHES. FOR THE VERY SAME REASONS MENTIONED IN THE SAID PARAGRAPHS, THE GROUND NO.5 OF ASSESSEES APPEAL UN DER CONSIDERATION IS PARTLY ALLOWED. 71. TO SUM UP, ALL THE APPEALS FILED BY THE REVENU E FOR THE ASSESSMENT YEARS 2012-13, 2013-14 & 2014-15 ARE DISMISSED AND ALL THE APPEALS FILED BY THE REVENUE FOR THE ASSESSMENT Y EARS 2012-13, 2013- 14 & 2014-15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 28 TH AUGUST, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER / CHENNAI % / DATED: 28 TH AUGUST, 2019. K S SUNDARAM '() *) / COPY TO: 1 . , / APPELLANT 4. - / CIT 2. '., / RESPONDENT 5. ) '1 / DR 3. - () / CIT(A) 6. / GF