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2017 (11) TMI 982 - AT - Income TaxDisallowance u/s. 14A - nexus between the expenditure incurred and tax free income - Held that:- Considering the tax exempt investment of ₹ 759.04 crores and tax exempt income of ₹ 46.56 crores, some administrative and managerial expenses are definitely incurred which are attributable to tax exempt investment income. Therefore, as per Rule 8D(2)(iii), 0.5% of average value of investment calls for disallowance u/s 14A keeping in view the administrative and managerial expenses attributable to tax free investment income. The AO has disallowed ₹ 3,63,00,0007- under Rule 8D(2)(iii) being 1/2% of average value of tax exempt investment which is, therefore, justified. In view of the above factual and legal position, the disallowance made by the AO u/s 14A is reduced from ₹ 49.15 crores to ₹ 3.63 crores. Accordingly the grounds of appeal are partly allowed. Disallowance as revenue expenditure being software expenses - Held that:- As AR had submitted the details of AMC charges which has been allowed by the ld. CIT(A) as revenue expenditure, but in case of license fee for oracle database, antivirus software etc., the appellant could not establish that the same were for a particular period. The case laws relied upon by the appellant has rightly been distinguished by the ld. CIT(A). We, therefore, find that the ld. CIT(A) has passed a good order which needs no interference on this issue. Accordingly, grounds No. 7 in both the appeals of the assessee are dismissed. Addition on account of excess depreciation claimed on temporary wooden structure - Held that:- This issue is covered by the decision of Tribunal for A.Y. 2008-09 & 2009-10 whereby the issue has been restored to the file of AO observing that assessee has shown these items as furniture and fixtures and we do not find that Appendix I as per Income tax rules 1962 prescribed under the head furniture and fixtures any class of items, which is eligible for 100 % depreciation. As per annexure D of the tax audit report, assessee himself has classified it is temporary wooden structure. Definitely, it is apparent that it is not building which CIT (A) has considered. Therefore, from the facts it is not clear that whether it is building or furniture and fittings. Secondly, we agree with the views of the CIT (A) that AO has erred in allowing depreciation at the correct rates has amortized these expenditure over 5 years. Therefore, in absence of these facts, this ground of appeal is restored back to the file of AO for fresh verification. Addition on account of interest on overdue deposits - Held that:- The claim of assessee, in our opinion, is not acceptable until it is ascertained that the actual payment of the provision has been made to the customers or not. We, therefore, restore this issue to the file of AO for the limited purpose to verify whether actual payment of the provision has been made to the customers or not and to decide the same accordingly as per law. Addition made on account of excess deduction u/s. 36(1)(viia) - Held that:- From the computation of income it is clear that the appellant has claimed the deduction u/s 36(1)(viia) as per the provision which is sum of the amount not exceeding 7.5% of the total income before making any deduction under this clause and chapter VI-A i.e. 7.5 % of ₹ 22,16,97,03,324/- (Rs. 166,27,27,749/-) and 10% of average aggregate advances pertaining to rural branches i.e. (10% of ₹ 3,043,77,68,253/-) ₹ 304,37,76,800/- as per auditor certificate qualifying the deduction under rule 6BA read with sec 36(1)(viia). The claim made by the appellant u/s 36(1)(viia) is to the extent it does not exceed 7 ½ % of the total income and an amount not exceeding 10% of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. In view of the above, the arbitrary disallowance made by the AO cannot be sustained. Therefore, the same is deleted and appeal is allowed in this ground
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