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2016 (4) TMI 572 - AT - Income TaxDisallowance of draft payable more than 3 years - Held that:- Respectfully following the above decision of the Hon'ble Kerala High Court in the case of Catholic Syrian Bank ltd. v. Addl. CIT (2013 (4) TMI 140 - Kerala High Court), we are of the opinion that the amount of stale drafts found in the hands of the assessee cannot be treated as liability or provision for liability and it cannot be carried on for indefinite period and it has to be treated as income of the assessee. However, we make it clear that whenever the assessee has to make payment against the stale drafts at any time in future, the same has to be claimed as expenditure. Addition made towards payment of donation - Held that:- The assessee bank has debited to the profit and loss account an amount of ₹ 5,51,690/- towards donation. The assessee bank has produced receipt to the extent of ₹ 3,00,000/- only. The Assessing Officer has observed that deduction on account of donation is allowed at 50% i.e., ₹ 1,50,000/- only. He also observed that since the deduction is required to be considered under Chapter VIA separately, the entire amount of ₹ 5,51,690/- is required to be added back and ₹ 1,50,000/- to be allowed as deduction. Since the assessee bank itself has added ₹ 3,00,000/- only in the computation memo, the Assessing Officer has added back the balance amount of ₹ 2,51,690/-. On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer. Before us, the ld. Counsel for the assessee has submitted that the amount was actually paid for advertisement charges in the Souvenirs and treated it as donation and contended that the advertisement charges in souvenirs are deductible in view of the CBDT circular. If it is so, what prevented the assessee bank to claim the same under 'advertisement charges' rather than claiming it as 'donation'. The ld. Counsel for the assessee has not able to give any convincing reply to the specific query raised by the Bench. In view of the above, we find no infirmity in the order passed by the authorities below and accordingly, the ground raised by the assessee is dismissed. Disallowance u/s 36 - working out of allowable deduction - treatment to amount advanced by the rural branches of the bank - Held that:- Intention behind the introduction of section 36(1)(viia) was to encourage rural advances and to aid creation of the provision for bad debts in relation to such rural branches. In the case of provision made towards non-rural debts, no deduction can be allowed as there is no specific provision in the Income Tax Act to allow the same. This indicates that the provision made towards urban debt should be added back and allowed only when bad debts are really written off. The question of double deduction being allowed does not arise therein at all, because it is allowed only on actual write off. The Hon'ble Apex Court has also held that the proviso to section 36(1)(vii) apply only in respect of rural debts. in view of the option exercised by the assessee that it can claims deduction on doubtful debts as per option (b) i.e. 7.5% of Gross Total Income and 10% of aggregate average rural advances, the Assessing Officer has rightly worked out the allowable deduction, which is less than that of the provision made by the assessee as doubtful debts, allowed the deduction of bad debts for all assessment years and remaining balance was brought to tax. Accordingly, we reverse the order of the ld. CIT(A) and confirm the addition made by the Assessing Officer for all the above assessment years Addition made towards payment made to SEBI - Held that:- Registration with SEBI is mandatory for the purpose of dealing in securities and stocks. The payment made to SEBI is in the nature of fee for the purpose of enabling the assessee to carry out its business. The payment of rernewal fee is only for the purpose of continuing the business as a merchant banker. Registering with SEBI is only to identify the person who is dealing in securities. Therefore, in our opinion, the subscription to SEBI will not give any enduring benefit to the assessee. In our opinion, the fee paid by the assessee is only a fee paid to a regulatory authority, therefore, it is a revenue expenditure. By the payment of fee to SEBI, the assessee is not getting any capital asset. Therefore, in our opinion, the subscription made to SEBI has to be allowed as revenue expenditure.
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