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2012 (9) TMI 790 - ITAT, MUMBAIDisallowance u/s 14A – Assessee is a Bank – AO disallow 0.5% of average of investment yielding tax free income - Assessee contended that the same cannot exceed the proportionate expenditure incurred by the treasury department and amount relating to tax free income proportionately arrived at based on exempt income to total income amounts to ₹ 15,76,875 – Held that:- As the disallowance is to be made on a reasonable basis. Assessee have not shown any working on the disallowance, and how they arrived at figure of ₹ 15,76,875 and why 0.5% of average of investment yielding tax free income was excessive. Issue remand back to AO. Disallowance of Prior Period expense – The expenditure stated as relating to prior period consisted of rent, electricity charges, payment to R & T agents, repairs etc – Held that:- Following the decision in case of Union Bank of India (2012 (6) TMI 500 - ITAT MUMBAI), even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction. Issue decided in favour of assessee Disallowance of Lease premium expenses – Assessee claim lease premium as revenue expenditure – Following the decision in case of Mukund Limited(2007 (2) TMI 358 - ITAT MUMBAI), the claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed. Issue decide in favour of revenue Disallowance of claim of Bad debts – AO hold that the bad debt is allowable only if it is irrecoverable and is actually written off in the books of accounts – Held that:- Following the decision in case of Vijaya Bank(2010 (4) TMI 46 - SUPREME COURT) debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for “impugned bad debt”, the assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an actual write off by the assessee in his books. Disallowance cannot be made on an apprehension that if the assessee failed to close each and every individual account of its debtor, it may result in the assessee claiming deduction twice over”, allowed the appeal of the assessee, allowing the claim of bad debts. Issue decides in favour of assessee Income from foreign branches – Assessee excluded the income from foreign branches as per provision of DTAA – AO denied the benefit of foreign except branches at Singapore and Japan – Held that:- In all the foreign countries the operation is carried out through its branches which is a PE situated outside India. Hence the income attributable to these branches cannot be taxed in India. Therefore, consistent with the earlier finding of the Tribunal in assessee’s own case for the earlier years case, we do not see any merit in the ground taken by the Revenue. Therefore issue decides in favour of assessee
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