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2016 (7) TMI 834 - AT - Income TaxDisallowance of diminution in value of investments - Held that:- In the earlier years, the Tribunal had allowed this claim by following the decision rendered by Hon’ble Bombay High Court in the case of CIT Vs. Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court ). We notice that the Ld CIT(A) has followed the above said binding decision of Hon’ble jurisdictional High Court as well as the orders passed by the ITAT. Hence we do not find any infirmity in the order passed by him on this issue. Deduction allowed in respect of bad debts written off - Held that:- In the case of Catholic Syrian Bank (2012 (2) TMI 262 - SUPREME COURT OF INDIA ), the Hon’ble Supreme Court had held that the restriction provided in the proviso to sec. 36(1)(vii) shall apply only to the provision created for rural advances. Accordingly, the Tribunal has restored this matter to the file of the AO with the direction to allow the claim in the light of decision rendered by Hon’ble Supreme Court. Consistent with the view taken in the assessee’s own cases in the earlier years by the co-ordinate benches, the order passed by Ld CIT(A), wherein he has directed the AO to examine this issue in the light of decision rendered by Hon’ble Supreme Court in the case of Catholic Syrian Bank (supra) is upheld. Disallowance u/s 14A - Held that:- Consistent with the view taken therein we direct the AO to restrict the disallowance to 1% of the exempt income in AY 2007-08, since the provisions of Rule 8D are not applicable to this year. In respect of AY 2008-09 the investments are held as stock in trade, interest free funds available with it are in far excess of the investments etc. The Ld D.R submitted that the claim of the assessee that it is holding all its investments as stock in trade is farfetched one, since the assessee is required to hold certain funds as pure investments. We notice that this aspect of the submissions require verification at the end of the AO. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh in the light of fresh explanations that may be furnished by the assessee by duly considering various case laws relied upon by the assessee. Disallowance of lease premium paid - Held that:- This issue has been decided against the assessee by the Tribunal in AY 2006-07 by following the decision rendered by Special Bench of Tribunal in the case of JCIT Vs. Mukund Ltd (2007 (2) TMI 358 - ITAT MUMBAI ) Provisions of sec. 115JB shall not be applicable for both the years under consideration. Disallowance of claim made u/s 36(1)(viii) - Held that:- We notice that this issue has been decided in favour of the assessee by the co-ordinate bench of Tribunal in AY 2006-07. The tax authorities had rejected the claim by holding that the provisions of sec. 36(1)(viii) shall be applicable only to “financial Corporations”. The Tribunal has held that the banks will also be covered by the inclusive definition given for the expression “financial Corporations” in sec. 36(1)(viii) of the Act. Consistent with the view taken therein, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim. Disallowance of expenditure relating to issue of capital - Held that:- There is difference between funds inflow and funds outgo. The funds raised by issuing capital shall increase the capital base. The funds so raised, if used for the purpose of business, would ultimately increase the volume of business as well as profitability. The ultimate aim of raising more funds is to increase the volume of business and profitability. Viewed from this angle, the volume and profitability is bound to increase, when funds are used either for creating the assets or as working capital. Hence, we are of the view that the expenses incurred in increasing the capital base is capital expenditure as held by Hon’ble Supreme Court in the case of Brooke Bond India Ltd (1997 (2) TMI 11 - SUPREME Court ), since it would incidentally help in the business of the company and may also help in the profit making.
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