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09-07-2019, City Union Bank, Section 14A, 36(1) (vii), 48, Tribunal Chennai
These are cross appeals filed by the Revenue as well as Assessee directed against the order of the learned Commissioner of Income Tax (Appeals)—1, Tiruchirappalli (hereinafter called as ‘CIT(A)’) dated 14.02.2018 for the assessment years (AY) 2012-13 & 2014-15.
2. Since, the identical facts and issues are involved in these appeals, we proceed to dispose the same vide this common order.
3. For the sake of convenience and clarity the facts relevant in ITA No.1129/Chny/2018 for assessment year 2012-13 are stated herein.
4. The br ef facts of the case are as under:
The appellant namely M/s. City Union Bank Limited is engaged in the business of banking. The return of income for the AY 2012-13 was filed on 29.09.2012 disclosing total income of Rs.169,83,76,140/- and the same was revised on 08.09.2013 at total income of Rs.159,55,89,950/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Circle 1, Kumbakonam, (hereinafter called “AO”) vide order dated 30.03.2015 passed u/s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) at total income of Rs. 330,47,65,965/-. While doing so, the Assessing Officer made the following additions.
1 Disallowance u/s.14A ₹2,82,57,685
2 Bad debts written off ₹51,44,46,907
3 Interest on securities disallowed ₹25,21,72,886
4 Profit on sale of investments ₹7,25,09,632
5 Loss on shifting of securities ₹8,85,34,138
6 Deduction u/s.36(1) (viia) ₹64,64,78,669
7 Disallowance u/s.41(1) & 28(iv) ₹47,58,883 ₹47,05,085
8 Claim of deduction u/s.36(1) (viii) ₹1,70,94,716
9 Excess depreciation on ATMs ₹2,52,39,819
10 Interest on VIP deposits disallowed u/s 40(a) (ia) of the Act ₹5,49,77,592
5. Being aggrieved by the order of the Assessing Officer, an appeal was preferred before the ld. CIT(A) who vide impugned order deleted the addition of I2,82,57,685/- made u/s.14A of the Act placing reliance on the decision of Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank vs. JCIT in ITA No.2325 & 2326/Mds/2016, dated 29.03.2017, wherein it was held that investments made by the banking companies are part of business assets i.e. stock in trade of the banking company and therefore disallowance cannot be made for the provisions of Section 14A of the Act.
6. As regards to the disallowance of provisions for bad debts of written off of I51,44,46,907/- in respect of non rural branches. The ld. CIT(A) after considering the submissions made on behalf of the assessee bank and the cogent reading of both provisions of Sections 36(1) (vii) and 36(1) (viia) of the Act held that amounts can be allowed only to the extent to the actual provisions created out of the total claim of Rs.51,44,46,907/- u/s.36(1)(vii) and Rs.65,33,93,780/- u/s.36(1) (viia) of the Act. The claims are restricted to the actual provisions of Rs.66,00,00,000/- debited to profit and loss account and the balance addition of Rs.50,78,40,687/- was confirmed by the ld.CIT(A).
7. Regarding addition on account of accrual of interest on Government securities of I25,21,72,886/-. The ld. Commissioner of Income Tax (Appeals) following the decision of Jurisdictional High Court in assessee’s own case for assessment year 1994-95 reported in 2014(8)TMI 604- Madras High Court and decision of Karnataka High Court in the case of CIT vs. Karnataka Bank, (2014) 226 Taxman 197, held that interest on the Government Securities cannot be said to be accrued till the due date. Accordingly directed the Assessing Officer to delete the addition.
8. Regarding addition on account of profit on sale of investments of I7,25,09,632/-. The addition was made on excess cost of securities over the face value. The ld. CIT(A) held that it is an allowable expenditure following the decision of Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra).
9. Regarding issue on loss on shifting of securities of I8,85,34,138/- from AFS category to HTM category. The ld. CIT(A) confirmed the addition considering the fact that only notional loss were accounted and not the gain made.
10. Next issue is regarding addition made on account of stale drafts of I94,63 968/-. The ld. CIT(A) deleted the addition made on account of stale demand drafts and cheques following the decision of Co-ordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra).
11. Next issue regarding allowability of depreciation on ATM machine of the claim of I2,52,39,819/-, the learned CIT(A) following the decision of Chandigarh Bench of the Tribunal in ITA No.215/Chd/2015, dated 28.03.2016 held that ATM machine were held to be computers. Accordingly, higher depreciation was allowed.