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2017 (4) TMI 566 - AT - Income TaxAddition u/s 14A - as per assessee shares/units held by it whether classified as “investment” or “stock-in-trade” in balance sheet, that has to be considered as stock-in-trade only for tax purpose, and Section 14A of the Act had no application - Held that:- CBDT itself has accepted the line of thinking that income from investment made by a banking concern is part of its business of banking to be considered under the head ‘Business and Profession’. Direct result of this view is that such investments would be only a part of stock-in-trade. In our opinion, how the assessee has treated the shares and mutual funds in its balance sheet prepared under Banking Regulation Act may not be relevant when the income therefrom is treated as a part of business profit and not under the head of ‘Income from other sources’. There is no case for the Revenue that assessee was holding these investments solely for the purpose of earning dividend. Once holding of investment was considered incidental to the business of banking to the assessee, in our opinion, Section 14A of the Act could not have been applied. Thus disallowance under Section 14A of the Act could not have been made in the assessee’s case for investments which were considered as part of stock-in-trade for tax purposes. - Decided in favour of assessee Method of calculation of Aggregate Average Rural Advances for the purpose of application of Section 36(1)(viia) not adjudicated by the Ld. CIT(Appeals) - Held that:- Irrespective of the fact whether computation made by the Assessing Officer is having an effect on the taxable income of the assessee, Ld. CIT(Appeals) ought to have decided the ground raised by the assessee on merits. We are, therefore, of the opinion that ground No.10 raised before the Ld. CIT(Appeals) needs to be adjudicated by him. We, therefore, set aside the order of the CIT(Appeals) and remit the issue back to the file of the Ld. CIT(Appeals) for consideration Disallowance of clam under Section 36(1)(viii) - Held that:- Assessee cannot be stopped from making an enhanced claim of deduction. It is not a case where the assessee had not made any claim under Section 36(1)(viii) of the Act in its original return. In other words, it is not a fresh claim altogether. It had only revised its claim based on fresh method of computation which was not earlier adopted by it. In our opinion, the lower authorities ought have verified whether the method of computation adopted by the assessee for the enhanced claim was acceptable under law. We are of the opinion that by virtue of judgment of Hon'ble Apex Court in the case of National Thermal Power Corporation Ltd. (1996 (12) TMI 7 - SUPREME Court ) assessee could make such a claim before Ld. CIT(Appeals). Considering the facts of the case we are, therefore, of the opinion that the matter requires a fresh consideration by the A.O. We set aside the orders of the lower authorities and remit the issue regarding deduction under Section 36(1)(viii) of the Act back to the file of the A.O. for consideration afresh Addition for stale draft account - Held that:- Just because a draft remained unclaimed by the beneficiaries, in our opinion, would not entitle the assessee to claim it as its money or property. Assessee was always obliged to pay the amount either to the beneficiary or the original drawer. Assessee held the money only as a trustee in fiduciary capacity. Once the money is held as trustee, the question of limitation will not arise at all. In any case, RBI itself has issued a Notification on 24.05.2014 mandating the banks to transfer such unclaimed amounts to “Depositor Education and Awareness Fund Scheme”. In our opinion, in such circumstances, Ld. CIT(Appeals) was justified in taking the view that the amount cannot be construed as income of the assessee. - Decided in favour of assessee Disallowance for ex-gratia payment made by the assessee - Held that:- Assessing Officer could not have put himself in the shoes of the businessman and decide whether employees concerned were eligible for such ex-gratia payment. When part of employees alone were eligible for bonus under Payment of Bonus Act, the assessee, in our opinion, was justified in taking a business decision as to how to treat those employees who were not covered by such enactment. Assessee cannot be faulted for making such payment so as to ensure smooth and better relationship with its employees. In any case, we find Hon'ble jurisdictional High Court in the case of Kumaran Mills Ltd.(1997 (12) TMI 31 - MADRAS High Court) had held that ex-gratia payments could not be disallowed if it was found to be commercial expedient. Therefore, in our opinion, Ld. CIT(Appeals) was justified in disallowing this issue.- Decided in favour of assessee Disallowance of entertainment expenses - Held that:- It is not disputed that the claim of entertainment expenditure was in relation to customers of the assessee-bank. There is no ground for the Revenue that entertainment expenditure was incurred by the employees of the assessee for their own benefit. In the nature of business of the assessee, we cannot say that the entertainment expenditure claimed by the assessee was not required to be incurred. In any case, there is no reason why an ad-hoc disallowance of 5% was made. If the Assessing Officer was of the opinion that any expenditure was not vouched, he could have made disallowance for such expenditure. In our opinion, the CIT(Appeals) was justified in deleting 5% disallowance made by the Assessing Officer. Addition made for interest accrued on NPAs - Held that:- Only for non-viable or sticky advances having irregularities falling within sub-clause (ii) alone the six months limitation apply. However, where accounts or information of accounts show usual signs of sickness, this condition regarding six months may not be applicable. In any case, once the rule does not follow the guidelines issued by RBI, in our opinion, it becomes necessary to read down such rule so that it is in consonance with the RBI regulations or prudential norms for recognizing income.Therefore, in our opinion, CIT(Appeals) was justified in deleting the addition made on interest on NPAs. - Decided in favour of assessee Claim of disbursement on actual payment basis - Held that:- The provision made by the assessee for such wage arrears in earlier year was disallowed. Against such disallowance, assessee has taken no grounds before this Tribunal in its appeal for assessment year 2010-11. Accordingly, the claim of the assessee that it had to be allowed on actual payment basis was, in our opinion, rightly allowed by the CIT(Appeals). However, whether the assessee had actually disbursed ₹ 17,66,43,818/- requires to be verified by the A.O. For this limited purpose, the matter is remitted back to the file of the Assessing Officer.
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