BANK OF BARODA, MUMBAI V. PR.CIT 2(1)(1), MUMBAI

ITA 3347/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3669 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 17-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K. MADHUSUDHANLD.
• Keywords: Revision of order; Depreciation; Bad and doubtful debts
• Section: 263; 11; 14A; 115JB; 13

Judgement Text

1 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.3346/MUM/2019 ( / ASSESSMENT YEAR:2015-16) & ./ I.T.A. NO.3347/MUM/2019 ( / ASSESSMENT YEAR:2016-17) BANK OF BARODA C-26, G-BLOCK, BARODA CORPORATE CENTRE BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400 051. / VS. P R.C IT - 2 3 RD FLOOR, ROOM NO. 344 AAYKAR BHAVAN MUMBAI-400 020. MN ./ ./ PAN/GIR NO. AAACB - 1534 - F ( NR / APPELLANT ) : ( TUNR / RESPONDENT ) NRV / APPELLANT BY : SHRI C. NARESH - LD. AR T UNRV / RESP ONDENT BY : SHRI K. MADHUSUDHAN - LD. CIT - DR / DATE OF HEARING : 01/10/2019 / DATE OF PRONOUNCEMENT : 13/11/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. BY WAY OF THESE APPEALS, THE ASSESSEE IS CONTEST ING THE VALIDITY OF REVISIONAL JURISDICTION U/S 263 AS EXERCISED BY LD. PRINCIPAL COMMISSIONER OF 2 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 INCOME TAX -2, MUMBAI (PR. CIT) VIDE SEPARATE ORDER S, BOTH DATED 26/03/2019 FOR ASSESSMENT YEARS [AY] 2015-16 & 2016 -17. BOTH THE APPEALS ARE BEING DISPOSED-OFF BY WAY OF THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. FIRST, WE TAKE UP APPEAL FOR AY 2015-16 WHEREIN THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: - 1. THE ID. CIT ERRED ON JURISDICTION BY INVOKING RE VISIONARY POWERS U/S 263 OF THE INCOME TAX ACT TO HOLD THAT PROVISIONS OF SECTION 115JB ARE AP PLICABLE TO APPELLANT EVEN THOUGH AO IN ORDER ITSELF HAD APPLIED SECTION 115JB AND THE SAID ISSUE WAS NOT IN THE SHOW CAUSE NOTICE SENT TO APPELLANT U/S 263. 1.1 THE ID. CIT ERRED IN INVOKING JURISDICTION U/S 263 AND DIRECTING AO TO ADD BACK AMOUNTS IN RESPECT OF BAD AND DOUBTFUL DEBTS AND INVESTMENTS W HICH WERE WRITTEN OFF AND STAFF WELFARE EXPENSES WHICH WERE EXAMINED BY AO AND ALLOWED IN A SSESSMENT. 2. WITHOUT PREJUDICE TO ABOVE, ID.CIT ERRED IN HOLD ING THAT THE PROVISIONS OF SECTION 115JB ARE APPLICABLE TO APPELLANT RELYING ON EXPLANATION 3 WI THOUT APPRECIATING THAT THE SAID EXPLANATION WILL APPLY ONLY TO THOSE ENTITIES ESTABLISHED UNDER COMPANIES ACT AND WILL NOT APPLY TO APPELLANT WHICH IS ESTABLISHED UNDER BANKING (COMPA NIES TRANSFER OF UNDERTAKINGS) ACT, 1970 AS HELD BY HON'BLE ITAT KOLKATA IN THE CASE OF UCO BANK. ; 3. WITHOUT PREJUDICE TO ABOVE, ID. CIT ERRED IN HOL DING THAT PROVISIONS AND CONTINGENCIES OF RS. 6516.67 CRORE IS TO BE ADDED IN COMPUTING BOOK PROF ITS WITHOUT APPRECIATING THAT OUT OF THE SAID AMOUNT, A SUM OF RS. 4760.89 CRORE REPRESENTING AMO UNT PROVIDED FOR BAD AND DOUBTFUL DEBTS AND INVESTMENTS ARE REDUCED FROM THE ADVANCES AND I NVESTMENTS IN BALANCE SHEET AND ACCORDINGLY, THEY REPRESENT AMOUNTS ACTUALLY WRITTE N OFF AND NOT MERE PROVISIONS. ACCORDINGLY, ID. CIT ERRED IN INVOKING THE PROVISIONS OF EXPLANA TION-1 TO DISALLOW THE ABOVE AMOUNTS. FURTHER THE SUM OF RS. 25 CRORE REPRESENTS PROVISIO N MADE FOR A CONTRACTUAL LIABILITY IN RESPECT OF STAFF WELFARE AND ACCORDINGLY, CIT SHOULD NOT HA VE DIRECTED THE SAID AMOUNT TO BE ADDED BACK IN COMPUTING BOOK PROFIT. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEIN G BANKING COMPANY WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3 ) AT RS.7229.71 CRORES UNDER NORMAL PROVISIONS AFTER CERTAIN ADDITIONS / D ISALLOWANCES VIDE ORDER DATED 30/03/2017. THE BOOK PROFITS U/S 115JB WERE COMPUTED AT RS.5584.71 CRORES AFTER ADDING BACK DISALLOWANCE U/ S 14A AND PROVISION 3 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 FOR TAXES AS AGAINST BOOK PROFITS OF RS.3398.43 CRO RES REFLECTED BY THE ASSESSEE IN ITS RETURN OF INCOME. 2.1 SUBSEQUENTLY, UPON PERUSAL OF CASE RECORDS, LD. PR.CIT INVOKED REVISIONAL JURISDICTION U/S 263 AND ISSUED SHOW-CAU SE NOTICE ON 05/03/2019. THE BASIS OF INVOKING THE JURISDICTION WAS THE FACT THAT CERTAIN PROVISIONS OF BAD DEBTS FOR RS.4545.83 CRORES AS DEBITED IN THE P & L ACCOUNT WERE NOT ADDED BACK WHILE COMPUTING BOOK PROFITS U/S 115JB. FURTHER, CERTAIN PROVISIONS SUCH AS PROVISIONS FOR DEPRECIATION ON I NVESTMENTS, STAFF WELFARE EXPENSES AND OTHER PROVISIONS WERE ADDED BACK WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS, HOWEVER, THE SAME W ERE NOT ADDED BACK WHILE COMPUTING BOOK PROFIT U/S 115JB. BY CONSIDERI NG THESE ADDITIONS, THE BOOK PROFITS WOULD WORK OUT TO BE RS.10443.61 CRORE S AND THEREFORE, TAX PAYABLE UNDER MAT WOULD BE MORE THAN TAX PAYABLE UN DER NORMAL PROVISIONS. THE SAID OMISSIONS ON THE PART OF LD. A O HAS MADE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 2.2 IN DEFENSE, THE ASSESSEE SUBMITTED THAT THE PRO VISIONS OF SECTION 115JB WERE NOT, AT ALL, APPLICABLE TO THE ASSESSEE SINCE THE ASSESSEE WAS NOT A COMPANY AS PER THE COMPANIES ACT AND THE DEEM ING PROVISIONS OF SEC. 115JB COULD NOT BE EXTENDED TO INCLUDE COMPANI ES WHICH WERE DEEMED TO BE COMPANIES FOR THE PURPOSES OF INCOME T AX ACT. THE ATTENTION WAS DRAWN TO THE FACT THAT AS PER EXPLANATION-3, AS INSERTED BY FINANCE ACT, 2012 W.E.F. 01/04/2013, THE PROVISIONS OF SECTION 1 15JB WERE MADE APPLICABLE TO ANY COMPANY TO WHICH THE PROVISIONS O F SECTION 211(2) OF COMPANIES ACT, 1956 WERE APPLICABLE. SINCE THE ASSE SSEE COULD NOT BE 4 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 WOUND UP UNDER THE PROVISIONS OF INDIAN COMPANIES A CT, IT WAS NOT A BANKING COMPANY AS PER THE PROVISIONS OF COMPANIES ACT, 1956 AND HENCE, THE PROVISIONS OF SEC. 211(2) WOULD NOT APPLY TO IT . 2.3 HOWEVER, THE SAID PLEA WAS REJECTED BY OBSERVIN G THAT THE PROVISIONS OF SECTION 115JB WOULD APPLY TO ALL COMPANIES AS DE FINED IN SEC 2(17) AND THE ASSESSEE WAS A COMPANY AS DEFINED IN SEC. 2(17) . FURTHER, IN TERMS OF AMENDMENT, THE COMPANIES COVERED UNDER PROVISO TO S UB-SECTION (2) OF SECTION 211 OF THE COMPANIES ACT, WERE BROUGHT UNDE R THE PURVIEW OF SECTION 115JB. THE ASSESSEES SUBMISSIONS WERE DULY CONSIDERED IN THE LIGHT OF NOTES TO CLAUSES TO FINANCE ACT, 2012, THE PROVISIONS OF SECTION 11 OF BANKING COMPANIES (ACQUISITION AND TRANSFER OF U NDERTAKINGS) ACT, 1970 AND OTHER PROVISIONS OF THE COMPANIES ACT. FINALLY, IT WAS CONCLUDED THAT THE PROVISO TO SEC 211(2) OF THE COMPANIES ACT APPL IES NOT ONLY TO THE COMPANIES INCORPORATED UNDER THE COMPANIES ACT BUT ALSO TO THE BANKING COMPANIES GOVERNED BY SPECIAL ACTS AND THE ASSESSEE WAS COVERED BY SECTION 211(2)(B) OF THE COMPANIES ACT, 1956. RELIA NCE WAS PLACED ON THE DECISION OF HONBLE HYDERABAD TRIBUNAL IN STATE BANK OF HYDERABAD V/S DCIT (ITA NO.1364/HYD/2013) TO SUPPORT THE SAID CONCLUSION. THE DECISION OF KOLKATA TRIBUNAL IN UCO BANK V/S DCIT (ITA NO. 1768/KOL/2009 AY 2002-03) AND THE ORDER OF FIRST APPELLATE AUTHORITY IN ASSES SEES OWN CASE FOR 2014-15 WAS FOUND TO BE MISPLACED SINCE THE ISS UE WAS NOT EXAMINED WITH RESPECT TO LAW, POST AMENDMENT OF SECTION 115J B. MOREOVER, MUMBAI TRIBUNAL IN THE CASE OF BANK OF INDIA, FOR AY 2013- 14, ON SIMILAR FACTS AND CIRCUMSTANCES, FOUND THE DECISION IN UCO BANK NOT A PPLICABLE SINCE IT 5 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 PERTAINED TO AY PRIOR TO THE AMENDMENT TO EXPLANATI ON 3 TO SEC 115JB. FINALLY, IT WAS CONCLUDED THAT THE PROVISIONS OF SE C 115JB WERE APPLICABLE TO THE ASSESSEE COMPANY. 2.4 PROCEEDING FURTHER, THE PLEA OF THE ASSESSEE TH AT LD.AO HAD PASSED THE ASSESSMENT ORDER AFTER EXAMINING ALL THE DETAIL S ON THE AFORESAID ISSUES, WAS REJECTED IN TERMS OF EXPLANATION-2 TO S ECTION 263 COUPLED WITH THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN MALABAR INDUSTRIAL CO. LTD. (2000 243 ITR 83). THEREFORE, INVOKING JURISDICTION U/S 263, THE ASSESSMENT ORDER WAS REVISED AND LD. AO WAS DIRECTE D TO COMPUTED BOOK PROFITS IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 115JB. AGGRIEVED, THE ASSESSEE IS UNDER APPEAL BEFORE US. 3. WE HAVE CAREFULLY HEARD AND CONSIDERED THE RIVAL SUBMISSIONS PUT FORTH BY RESPECTIVE REPRESENTATIVES AND DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. 4. UPON PERUSAL OF FACTUAL MATRIX, IT IS UNDISPUTED FACT THAT THE ASSESSEE, IN ITS RETURN OF INCOME, HAS COMPUTED INCOME UNDER NORMAL PROVISIONS AS WELL AS BOOK PROFITS U/S 115JB. THE LD. AO MADE CER TAIN ADJUSTMENTS / ADDITIONS WHILE COMPUTING INCOME AS AFORESAID. THE LD. PR.CIT, EXCISING REVISIONAL JURISDICTION, OBSERVED THAT CERTAIN OMIS SIONS TOOK PLACE ON THE PART OF LD. AO, WHILE COMPUTING BOOK PROFITS U/S 11 5JB. THE PRIME ARGUMENT OF LD. AR WOULD REVOLVE AROUND THE FACT TH AT THE PROVISIONS OF SECTION 115JB WOULD NOT APPLY TO THE CASE OF THE AS SESSEE, WITH WHICH WE ARE NOT CONCERNED. WE FIND THAT THE ISSUE BEFORE US IS TO TEST THE VALIDITY OF REVISIONAL JURISDICTION AS EXERCISED BY LD. PR.CIT U/S 263 AND NOTHING 6 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 BEYOND. IF THE ASSESSMENT ORDER WAS FOUND TO BE ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE SAM E WOULD CERTAINLY BECOME SUBJECT MATTER OF REVISION U/S 263 AS HELD BY HONB LE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. (2000 243 ITR 83). THE OMISSIONS ON THE PART OF LD. AO, TO CARRY OUT CERTAIN ADJUSTMENTS, AS POI NTED OUT BY LD. PR.CIT WOULD CERTAINLY MAKE THE ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE BOOK PROFITS U/S 115J B HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THAT SECTION. THE FAILURE TO DO SO WOULD RENDER THE ORDER UNDER CONSIDERATION AMENABLE TO RE VISIONAL JURISDICTION U/S 263 READ WITH EXPLANATION-2 THEREOF. THE LD. PR. CI T, IN OUR CONSIDERED OPINION, WAS CLOTHED WITH AMPLE SUPERVISORY POWERS TO DIRECT FOR REDOING THE ASSESSMENT PROVIDED TWIN CONDITIONS AS ENVISAGED BY SECTION 263 WERE FULFILLED. UPON PERUSAL OF FACTUAL MATRIX AS ENUMER ATED IN PRECEDING PARAGRAPHS, WE FIND THAT THE SAID CONDITIONS WERE D ULY FULFILLED AND THE ONLY RECOURSE AVAILABLE TO THE REVENUE WAS REVISION U/S 263. NOTHING ON RECORD WOULD SUGGEST THAT THE STATED ISSUES WERE EVER EXAM INED OR VERIFIED BY LD. AO DURING ASSESSMENT PROCEEDINGS AND A VIEW WAS TAK EN IN THE MATTER. THEREFORE, WE DECLINE TO INTERFERE IN THE DIRECTION S GIVEN BY LD. PR.CIT. 5. HOWEVER, IT IS MADE CLEAR THAT OUR ADJUDICATION AS ABOVE, SHALL HAVE NO BEARING ON THE ISSUE OF APPLICABILITY OF SECTION 115JB TO THE ASSESSEE, WHICH IS KEPT OPEN SINCE THE SAME DO NOT FORM SUBJE CT MATTER OF PRESENT APPEAL. 6. RESULTANTLY, THE APPEAL STANDS DISMISSED. 7 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 ITA NO. 3347/MUM/2019 : AY 2016-17 7. THE JURISDICTION U/S 263 IN AY 2016-17 HAS BEEN INVOKED IN VIEW OF THE FACT THAT THE ASSESSEE CLAIMED DEDUCTION U/S 36(1)( VIII) FOR RS.426.81 CRORES WHICH WAS ACCEPTED BY LD. AO DISREGARDING TH E FACT THAT THE ASSESSEE DID NOT CREATE SPECIAL RESERVE TO THAT EXT ENT AS PER THE REQUIREMENT OF SECTION 36(1)(VIII). FAILURE ON THE PART OF LD. AO TO CONSIDER THE SAME, IN THE OPINION OF LD. PR.CIT, HAS RENDERE D THE ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN DEFENSE, THE ASSESSEE SUBMITTED THAT THE RESERVE CREATED IN SUBSEQUENT YE ARS WOULD AMOUNT TO FULFILLMENT OF THE CONDITION OF SEC. 36(1)(VIII). H OWEVER, LD. PR.CIT, UPON PERUSAL OF STATUTORY PROVISIONS OF SEC. 36(1)(VIII) , OBSERVED THAT THE AMOUNT CLAIMED AS DEDUCTION SHOULD HAVE BEEN CARRIED TO SU CH RESERVE ACCOUNT DURING THE RELEVANT PREVIOUS YEAR. RELIANCE WAS PLA CED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN CIT V/S TAMIL NADU INDUSTRIAL INVESTMENT CORP. LTD. (240 ITR 573) FOR THE SAID CONCLUSION. THEREFORE, APPLYING THE PROVISIONS OF SEC. 263 READ WITH EXPLANATION-2, LD. AO WAS DIRECTED TO DISALLOW THE DEDUCTION U/S 36(1)(VIII) AND DETERMIN E THE TOTAL INCOME ACCORDINGLY. AGGRIEVED, THE ASSESSEE IS UNDER APPEA L BEFORE US CHALLENGING THE VALIDITY OF JURISDICTION U/S 263. 8. UPON DUE CONSIDERATION, WE FIND THAT IT WAS OBLI GATORY ON THE PART OF ASSESSEE TO FULFIL THE CONDITIONS AS ENVISAGED BY S EC. 36(1)(VIII) BEFORE CLAIMING DEDUCTION THEREIN. NON-FULFILLMENT OF THES E CONDITIONS WOULD CERTAINLY DISENTITLE THE ASSESSEE TO CLAIM THE SAID DEDUCTION. THE LD. PR.CIT HAS BROUGHT ON RECORD SUFFICIENT FACTUAL MATRIX TO DEMONSTRATE THAT THE 8 ITA NO.3346-47/MUM/2019 BANK OF BARODA ASSESSMENT YEARS-2015-16 & 2016-17 ASSESSEE DID NOT FULFIL THESE CONDITIONS. THEREFORE , WE ARE NOT IMPRESSED WITH THE ARGUMENTS OF LD.AR AND FIND NO INFIRMITY I N THE DIRECTIONS ISSUED BY LD. PR. CIT. ACCORDINGLY, THE APPEAL STANDS DISMISS ED. CONCLUSION 9. BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13/11/2019 SR.PS:-JAISY VARGHESE DE FE / COPY OF THE ORDER FORWARDED TO : 1. NR / THE APPELLANT 2. TUNR / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. A B T C , C , / DR, ITAT, MUMBAI 6. B DEF / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.