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2014 (7) TMI 1185 - AT - Income TaxDisallowance under section 14A - Held that:- We find that similar issue had come up for consideration before the Tribunal in assessee’s own case for the assessment year 2003–04 and 2004–05, wherein the Tribunal has set aside the issue of disallowance under section 14A, back to the file of the Assessing Officer after observing and holding that there is a drastic change in the disallowance calculated by the assessee bank under the head disallowance made for earning exempt income. We further find that vital factors like availability of share capital / reserve & profits, holding of securities as stock in trade or investment, to decide the issue of proportionate disallowance have not been considered by the AO/ FAA. In our opinion, in the interest of justice matter has to be restored back to the file of the A.O. for fresh adjudication Disallowance of bad debt written off in relation to non–rural branches - Held that:- We hold that the provisions of ss. 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. The bad debts written off in debts, other than those for which the provision is made under cl. (viia), will be covered under the main part of s. 36(1)(vii), while the proviso will operate in cases under cl. (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under cl. (viia). The proviso to s. 36(1)(vii) will relate to cases covered under s. 36(1) (viia) and has to be read with s. 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans while under s. 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year. This, obviously, would be subject to satisfaction of the requirements contemplated under s. 36(2). We hold that the assessee’s claim for bad debt is to be allowed in terms of observations made by the Hon'ble Supreme Court in Vijaya Bank vs. CIT & Anr. [2010 (4) TMI 46 - SUPREME COURT ] subject to satisfaction of requirements contemplated u/s 36(2) wherein held that under the accounting practice, the accounts of the rural branches have to tally with the accounts of the head office. Exclusion of income earned by the foreign branches - Held that:- The income of the branches of the assessee shall also taxable in India i.e., it would be included in the return of income filed by the assessee in India and whatever taxes have been paid by the Branches in the other contracting States i.e., the source country, credit of such taxes shall be given. - Decided against assessee Allowance of business expenditure - Held that:- The assessee has claimed actual expenditure incurred on staff welfare to maintain cordial relationship. These expenses cannot be said to be of personal in nature and consistently it has been allowed by the appellate authorities. Thus, following the rule of consistency and also the fact that these expenses are incurred in the normal course of business to maintain healthy relationship with the employees, the same is to be treated as allowable business expenditure under section 37(1) - Decided in favour of assessee
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