TMI Blog2009 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment year - HELD THAT:- This issue was considered by the Tribunal in its orders for the earlier assessment years 2000-01 and 2001-02 and remitted the issue back to the Assessing Officer for his reconsideration. As the fine details and particulars of these expenses are not readily available before us, we are also inclined to follow the earlier decision of the Tribunal on this point and accordingly remit the issue back to the Assessing Officer for fresh consideration, in accordance with law. While the Assessing Officer is re-examining the above issue, he is directed to follow the principles laid down in the case of Toyo Engg. India Ltd. v. Joint CIT [ 2005 (9) TMI 237 - ITAT BOMBAY-J] , as held that the details of expenses have been received by the assessee at head office only after the close of the accounting year, though technically treated as prior period expenses, are allowable for the assessment year in which they were normally eligible for deduction. Assessing Officer has to see that whether those expenses claimed by the assessee, even though technically related to the earlier assessment years, are allowable for the reason that the particulars and quantum of expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41(1) of the Act. In the above scenario the full circle of the transaction is clear. The diminution in the value of the investment as it stood at the end of the relevant previous year is a business loss, which is eligible for deduction in computing the taxable income of the assessee-bank. Accordingly we direct the Assessing Officer to give deduction for the said amount of Rs. 3 lakhs. This issue is decided in favour of the assessee. Deduction of bad debts written off in respect of rural branches - case of the assessee that the CIT(Appeals) having agreed with the contention of the assessee that there was only a debit balance in the provision for bad and doubtful debts account u/s 36(1)(viia) ought to have allowed the entire bad debts written off as deduction instead of restricting it to write off in respect of non rural branches. HELD THAT:- The provision made u/s 36(1)(viia) in respect of bad and doubtful debts relating to rural branches is a credit balance and therefore the write off of bad debts pertaining to the rural branches should be set off against that provision available in the accounts. The write off can be allowed only in respect of bad debts pertaining to non-ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n I.T.A. Nos. 760 and 280/Coch/2004. After considering the facts surrounding the issue and the rival arguments of the parties and in the light of the earlier order of the Tribunal for the assessment year 1996-97, the Tribunal found that the Commissioner of Income-tax (Appeals) has rightly confirmed the disallowance made by the Assessing Officer in respect of the expenses incurred in the rights issue and the public issue expenses. Therefore, we find that the matter stands concluded by the successive orders of the Tribunal of earlier assessment years. Accordingly, we confirm the order of the Commissioner of Income-tax (Appeals) on this point and dismiss the ground raised by the assessee bank. The next ground raised by the assessee is that the Commissioner of Income-tax (Appeals) has erred in confirming the order of the Assessing Officer in disallowing the prior period expenses amounting to Rs. 5,62,405. It is the case of the assessee that the Commissioner of Income-tax (Appeals) should have noted that as the liability to pay these sums arose only during the current previous year, the same should have been allowed as a deduction for the impugned assessment year. While stating be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be accepted. It is a continuous process to incur expenditure and to account for the expenditure in the books of account. Therefore, even though they are treated technically as prior period expenses, they relates to a continuous flow of expenditure. The Tribunal held, therefore, there is no justification in disallowing the expenditure otherwise normally eligible for deduction. The Assessing Officer has to see that whether those expenses claimed by the assessee, even though technically related to the earlier assessment years, are allowable for the reason that the particulars and quantum of expenditures were assigned only during the previous year relevant to the assessment year under appeal. The third ground raised by the assessee is that the Commissioner of Income-tax (Appeals) has erred in confirming the order of the Assessing Officer in disallowing the provision made towards loss of stock-in-trade amounting to Rs. 3 lakhs. The assessee-bank had contributed a sum of Rs. 3 lakhs towards capital of Unit Trust of India (UTI) at the time of formation of the latter. In terms of the UTI (Transfer of Undertaking and Repeal) Act, 2002, the initial capital contributed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as doubtful at the close of the previous year relevant to the impugned assessment year under appeal. When the recovery of the initial capital was doubtful, the assessee-bank could not assign any value to the said investment of Rs. 3 lakhs. Instead of completely ignoring the value of that investment while valuing its stock in trade, the assessee-bank stated the cost value of the asset in the balance-sheet and thereafter deducted the same amount by way of diminution in the value of that investment. This particular accounting treatment was given by the assessee-bank to satisfy the requirement of the Banking Regulation Act. But it has not followed the basic principles of stock valuation. The basic principle of stock valuation is that the asset has to be valued at cost or realisable value whichever is less. In the present case there is nothing to be realised as on that date and therefore the value was nil. The assessee has correctly adopted the nil value. Whether this loss arising on valuation of stock-in-trade is deductible or not, the answer is in favour of the assessee-bank as held by the Supreme Court in the case of United Commercial Bank [1999] 240 ITR 355. Further it was stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 relating to rural branches. This issue is decided in favour of the assessee. The assessee is partly successful in its appeal filed before us. Regarding the appeal filed by the Revenue, (I.T.A. No. 790/Coch/2007), the only ground permitted by the COD to agitate before the Tribunal is the ground that the Commissioner of Income-tax (Appeals) has erred in deleting the disallowance of Rs. 56,42,639 made by the Assessing Officer under section 14A of the Income-tax Act. Permission was not granted to prosecute the remaining grounds raised in the appeal filed by the Revenue. It has been explained before us that tax-free interest derived to the assessee-bank from bonds and such instruments subscribed for maintaining the Statutory Liquidity Ratio (SLR) as prescribed by the Reserve Bank of India (RBI). The assessee-bank is statutorily bound to maintain the SLR norms as directed by the RBI from time to time. The tax-free bonds and instruments subscribed by the assessee-bank also qualified pari passu with cash and bullion for the purpose of acknowledging towards SLR. Therefore, it is to be seen that the assessee has subscribed to the tax-free bonds not for the purpose of earning tax-free ..... X X X X Extracts X X X X X X X X Extracts X X X X
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