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2016 (2) TMI 1236 - ITAT CHENNAIAddition made towards entertainment expenses - assessee has claimed deduction under this head is allowable expenditure or not after deletion of section 37(2) - HELD THAT:- Assessee has submitted that the expenditure was incurred through its 238 branches, Central Office and Division Offices for the whole year and requested to delete the disallowance made by the Assessing Officer. After considering the submissions of the assessee, CIT(A) has observed that the Assessing Officer has reasonably estimated the expenditure to the tune of 5% only as not utilized wholly and exclusively for the purposes of business and confirmed disallowance - no infirmity in the order of the authorities below, which calls for our interference. Addition made towards Fringe Benefit Tax - contribution made to superannuation Fund - HELD THAT:- The assessee company has made a provision for contribution to superannuation fund and the same was paid in the next Financial year. There is no dispute about the provision and the payment and there is no escapement of value and same was subject to fringe benefit tax. Similar issue was considered by the Co-ordinate Bench in the case of M/s. Bharat Overseas Bank [2013 (2) TMI 881 - ITAT CHENNAI] wherein held that provision of contribution to the approved superannuation fund was not subject to charging of FBT. Accordingly, we direct the Assessing Officer to delete the addition. - Decided in favour of assessee. Disallowance u/s 14 r.w.s. Rule 8D - HELD THAT:- In the present case, the assessee has not admitted any expenditure to earn the exempt income. Further, it was the submission of the assessee that the assessee bank has enormous own funds as well as interest free funds for purchasing tax exempt securities [shares and mutual funds]. Be as it may, but some expenditure in the form of travel, telephone, postage, stationery and manpower might have been involved in earning the exempt income. Moreover, we are of the opinion that the investments would have definitely involved certain administrative and establishment works have to be undertaken which entails definite costs. Hence, the contention of the assessee that no expenses have been incurred to earn the exempt income is not acceptable. In view of the notification of Rule 8D and applicable from the assessment year 2008-09, the AO should have worked out the expenses under Rule 8D(2)(iii) instead of disallowing 2% of exempt income. Accordingly, we set aside the orders of authorities below and direct the Assessing Officer to work out the disallowance under section 14A r.w. Rule 8D. Thus, the ground raised by the assessee is partly allowed for statistical purposes. Addition on account of interest on non-performing assets - AO observed that in view of the RBI guidelines, the interest need to be offered for tax on accrual basis by the banks in respect of non-performing assets, which are more than 90 days old NPAs, but have not become ‘sticky account’ under Rule 6EA r.w.s. 43D - HELD THAT:- On second round of litigation, the ld. CIT(A) by following the decision in the case of United Commercial Bank Ltd. v. CIT [1999 (5) TMI 3 - Supreme Court] as held that “interest to a suspense account should not be taxed on accrual basis”, deleted the addition in respect of interest on NPAs. Against the above order of the CIT(A), though the Revenue has preferred appeals for the assessment years 2007-08 and 2008-09, the Revenue, while raising other grounds, has not raised the ground with regard to the deletion of addition in respect of interest on NPAs by the ld. CIT(A). Under the above facts and circumstances, we delete the addition made on account of interest on non-performing assets. Thus, the ground raised by the assessee is allowed. Disallowance of deduction under section 36(1)(viii) - AO has not accepted the revised claim - HELD THAT:- Profits derived from long-term finance only can be considered for the purpose of allowing deduction under section 36(1)(viii) of the Act and hence these receipts as interest on deposits, lease rentals, consultancy and other professional charges, legal fees, guarantee commission, appraisal fees, financial changes, interest on guarantee commission and miscellaneous income, etc., are not in the nature of income from long-term finance and hence these receipts cannot be included in total income for the purpose of computing deduction allowable to the assessee under section 36(1)(viii) - These receipts can be attributed to the income of business of providing long-term finance but it cannot be said that these are income derived from the business of providing long-term finance because the business of providing long-term finances, can be carried out even without these activities such as consultancy, legal service, appraisal, etc., in leasing there is no finance and hence lease rental is not income from providing long-term finance. Other interests and financial charges are not shown to be out of providing long-term finance and hence not eligible for deduction under section 36(1)(viii). We set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to decide the issue afresh - Ground raised by the assessee is allowed for statistical purposes.
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