2013 (3) TMI 694 - AT - Income Tax

Issues Involved:
1. Disallowance of interest paid at the time of purchase of securities.
2. Depreciation on investments.
3. Deduction u/s 36(1)(viia) for bad debts.
4. Proportionate expenses on tax-free bonds.
5. Deduction u/s 80M.
6. Interest paid to SIDBI and NABARD.
7. Other expenses.
8. Depreciation on leased vehicles.
9. Applicability of MAT provisions to banking companies.
10. Entertainment and pooja expenses.
11. Surplus on sale of jewelry.
12. Interest on non-performing assets (NPAs).

Summary:

1. Disallowance of Interest Paid at the Time of Purchase of Securities:
The assessee contended that the interest paid at the time of purchase of securities should be deductible. The Tribunal noted that similar issues had been decided in favor of the assessee in earlier assessment years by the Tribunal and the High Court. The Tribunal restored the matter to the Assessing Officer for factual verification and fresh adjudication.

2. Depreciation on Investments:
The Tribunal found that the issue of depreciation on investments had been decided in favor of the assessee by the Jurisdictional High Court in earlier years. The Tribunal restored the matter to the Assessing Officer for verification of facts and fresh adjudication.

3. Deduction u/s 36(1)(viia) for Bad Debts:
The Tribunal noted that the CIT(A) had allowed the deduction based on the Supreme Court's decision in the case of Catholic Syrian Bank Ltd. v. CIT. The Tribunal restored the matter to the Assessing Officer for fresh computation in light of the Supreme Court's judgment.

4. Proportionate Expenses on Tax-Free Bonds:
The CIT(A) restricted the disallowance to 2% of the tax-free income, which was upheld by the Tribunal in line with the Jurisdictional High Court's decision in the case of M/s. Simpson and Co. Ltd. vs. DCIT.

5. Deduction u/s 80M:
The Tribunal did not specifically address this issue separately, implying it was covered under other related issues.

6. Interest Paid to SIDBI and NABARD:
The Tribunal allowed the deduction for interest payable to SIDBI and NABARD in the year of actual payment, as agreed by both parties.

7. Other Expenses:
The Tribunal found that the disallowance of 10% of other expenses by the Assessing Officer and CIT(A) was without specific material evidence. Therefore, the Tribunal accepted the assessee's contention and allowed the expenses.

8. Depreciation on Leased Vehicles:
The Tribunal upheld the CIT(A)'s decision to allow depreciation on leased vehicles, following the Jurisdictional High Court's decision in the case of CIT vs. Madan & Co.

9. Applicability of MAT Provisions to Banking Companies:
The Tribunal noted that the issue of MAT provision does not arise for the assessment year 2004-05. For subsequent years, the Tribunal found that the Assessing Officer had not applied MAT provisions, thus rejecting the assessee's argument.

10. Entertainment and Pooja Expenses:
The Tribunal allowed the deduction for entertainment and pooja expenses, citing the Jurisdictional High Court's decision in CIT vs. Aruna Sugars Ltd., which held such expenses as business expenses or welfare expenses of the staff.

11. Surplus on Sale of Jewelry:
The Tribunal deleted the addition of surplus on sale of jewelry, following its earlier decision in the assessee's own case, which held that the surplus amount did not form part of the income of the assessee-bank.

12. Interest on Non-Performing Assets (NPAs):
The Tribunal restored the issue of interest on NPAs to the Assessing Officer for fresh adjudication, as the CIT(A) had confirmed the disallowance without adequate details.

Conclusion:
The Tribunal partly accepted the assessee's appeals and restored several issues to the Assessing Officer for fresh adjudication. The Revenue's appeals were accepted for statistical purposes, with directions for re-examination of certain issues by the Assessing Officer.

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