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2022 (7) TMI 374 - AT - Income TaxDeduction u/s 36(1)(vii) - writing off of bad debts in the books of accounts of the assessee - CIT(A) recorded a finding that the writing off of the loans is an actual writing off and not a provision and the same is bona fide and based on its commercial expediency of the assessee - HELD THAT:- As in the light of the addition of the Hon’ble Apex Court in the case of Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT] we are of the considered opinion that in this matter the assessee not only debited the amount of doubtful debt to the P&L Account but in fact registered the value of assets in the Balance Sheet, and therefore we find that it’s not the case of mere creating provision but actual writing off of the bad debts, and accordingly the assessee is entitled to the deduction under section 36(1)(vii) of the Act. On this premise we uphold the findings of the Ld. CIT(A) and dismiss ground No. 1 of the appeal. Disallowance u/s. 14A r.w.r. 8D - HELD THAT:- In view of the decision of Acb India Ltd. [2015 (4) TMI 224 - DELHI HIGH COURT] for the purpose of computing the disallowance u/s. 14A of the Act only such investments which yielded exempt income during the year should be taken into consideration, but not the entire investment. Going by that principle, we find that during the year, the investment in Karnataka Bank Ltd. alone yielded dividend income. Assessee’s contention that such an initial investment to the tune of Rs.35.35 crores was made in the assessment year 2007-08 and for that year, the assessee had free cash reserves to the tune of Rs.81.70 croes, was considered by the coordinate Bench of this Tribunal [2020 (9) TMI 141 - ITAT DELHI] accepted the contention of the assessee as far as the investment in shares of Karnataka Bank Ltd. was concerned. It is, therefore, clear that no disallowance could be made towards interest expense u/r. 8D(2)(ii) of the rules. We accordingly uphold the finding of the ld. CIT(A) on this aspect and dismiss ground No. 2 of this appeal. Disallowance of business promotion expenses - Nature of expenditure - Revenue or capital expenditure - HELD THAT:- In so far as incurring of expenses is concerned, there is no doubt. There is no reason either for the authorities or for this tribunal to discard the policy manual for support services fee and recovery of expenses from the subsidiaries, in accordance with which the allocation of expenses were made. It is also not in dispute that the expenses were incurred for the purpose of business. In CIT vs. Salora International Limited [2008 (8) TMI 138 - DELHI HIGH COURT] held that the expenses incurred on advertisement and business promotion are to be treated as revenue expenditure. In the instant case, it is also pertinent to note that as a result of advertising and business promotion activities undertaken by REL on behalf of the assessee, loans granted by assessee have significantly increased from 1711,35,45,136/- in assessment year 2009-10 to Rs.4085,59,04,068/- in assessment year 2010-11, resulting to corresponding increase of interest income earned thereon from Rs.282,80,50,151/- in A.Y. 2009-10 to Rs.407,16,62,922/- in A.Y. 2010-11. Therefore, the business promotion expenses reimbursed by assessee to REL were for the purpose of business and hence, such expenditure has to be treated as revenue in nature. Consequently, this ground of Revenue’s appeal is dismissed.
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