TMI Blog2012 (6) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... JB do not apply to the assessee, and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee Prior period expenses - expenditure disallowed as in the nature of rent, municipal taxes etc, where usually the amounts are paid after detailed negotiations and receipt of demand of the arrears amount from the parties. - held that:- even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction Taxability of reversal of unrealized interest - assessee had been following similar method of accounting and the same had been accepted by the department in the earlier years. Therefore, the non-recognition of income for the year under consideration in respect of non-performing assets cannot be accepted. assessee's appeal allowed Allowability of non-rural bad debts written off - credit balance in the provision for bad and doubtful debts allowed u/s. 36(1)(viiia) exceeds the bad debts written off - The provision of section 36(1)(viia) does not apply to bad debts written off to adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at para 17 of the order has held as under:- We have heard the parties to the dispute and have carefully gone through the record. We are of the opinion that there are sufficient findings in the orders of the CIT(A) to show that the assessee has entered into are only loan or finance transactions and so documented as to give the colour of the lease transaction to claim 100% depreciation on the assets so leased out. Identical issue has been examined by the Tribunal in the case of HDFC Bank (supra), and the Tribunal has rejected similar contentions made by the assessee. Following the same reasoning, we affirm the findings of the departmental authorities for the two years in respect of the so-called lease transactions. In other words, the disallowance of depreciation on the so-called leased assets are correctly disallowed by the revenue authorities. The order of the CIT(A) does not call for any interference, it is accordingly upheld. Respectfully following the decision of the Tribunal in assessee's own case, the grounds raised by the appellant are dismissed. In view of the decision of ITAT in assessee's own case for the A. Y. 1999-2000 and as the facts for the current year are iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercent of the profits derived from such business is providing long term finance (computed under the head 'Profits and Gains of Business or Profession' before making any deduction under this clause) carried to such reserve account." As per explanation (a) to section 36(1)(viii) "financial corporation" is defined to "include a public company and a Government Company" From the above it is clear that under the existing provisions of the Act, the deduction is allowable to a "financial corporation" which is engaged in specific activities viz., providing long term finance for industrial or agricultural development or development of infrastructure facility etc.,. The term "financial corporation" was defined in an inclusive manner so as to include a Government Company and a Public Company. By very nature of this definition being an inclusive definition and not an exhaustive definition, an entity incorporated under a statute carrying on the business of financing would come under the definition of "financial corporation". It shall not be presumed that only Govt. company and Public company are entitled for above deduction. Any financial corporation which is engaged in the activities specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed to be an Indian company and a company in which public are substantially interested." The appellant is engaged in the business of providing long term finance for industrial or agricultural development or development of infrastructure in India and hence is eligible to claim the said deduction. The appellant had also created the necessary reserve in accordance with the said section and hence the deduction as claimed ought to have been allowed. 9. We find that as per Explanation (a) to sec. 36(1)(viii) 'financial corporation' is defined to "include a public company and a Government company. We are of the opinion that any entity incorporated under a statute carrying on the business of financing would come under the definition of financial corporation. The definition is not an exhaustive definition and the term financial corporation has been defined in an inclusive manner so as to include a Govt, company and a public company. Hence financial corporation should include 'Bank' also. The Memorandum explaining the amendment to sec. 36(1)(viii) w.e.f. 1.2.2008 has clearly stated as follows: "The provision has also been restructured to provide for different categories of entities ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had not deducted tax at source in respect of the payments and hence as per the provisions of sec. 40(a) the said amount is not allowable as deduction. The CIT(A) relying on the decision in the case of Anjan Banerjee v. UOI [1994] 207 ITR 130/77 Taxman 17 (Cal.) confirmed the said disallowance. 15. The ld. Counsel for the assessee submitted that the provisions regarding the applicability of I.T. Act to Sikkim was not clear and hence the assessee had not deducted tax at source. The Secretary (Finance Govt. of Sikkim vide letter 3054 dt. 9.2.1996 specifically stated about the non-applicability of the Income Tax Act to Sikkim which was also confirmed by Under Secretary Govt. of Sikkim vide letter ref. 827/Fin. dt. 1.2.2007. In view of the above the assessee had not deducted tax at source in respect of interest paid. Hence no amount of expenditure should have been disallowed for non-deduction of tax at source in the State of Sikkim. 16. With regard to the reliance placed by the CIT (A) on the decision of Calcutta High Court, the ld. Counsel submitted that even though the Court held that the Income Tax Act is extended to State of Sikkim with effect from 1.4.1989, the Act has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The very initiation of reassessment proceedings was bad in law, and we quash the same. 22. The decision of the ld. CIT(A) is reversed and we hold that provisions of Sec. 115JB cannot be made applicable to the assessee. This ground of the assessee is dismissed. 23. Ground No. 6 (in ITA No. 4706/M/10- A.Y. 2006-07) relates to disallowance u/s. 14A in computing book profits. 24. Ground No. 5 has been dismissed therefore disallowance u/s. 14A in computing book profits is consequential therefore dismissed as consequential. ITA Nos.4720 to 4724/Mum/2010 25. Ground No. 1 raised by the Revenue (in ITA No.(s) 4702 to 4706/M/10 for A.Yrs. 2002-03 to 2006-07) is with respect to prior period expenses. 26. The expenditure disallowed as in the nature of rent, municipal taxes etc, where usually the amounts are paid after detailed negotiations and receipt of demand of the arrears amount from the parties. The ld. CIT(A) taking into consideration the nature of expenditure had come to a conclusion that since the bank is a nationalized bank subjected to audit, the claim that the liability to pay the expenses arose in the relevant assessment year would not be a matter of doubt particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Tribunal in assessee's own case vide ITA No.2590/M/01. We find the Tribunal at para 21 22 of the order has held as under:- "21. The last dispute in the appeal for A.Y. 1997-98 relates to taxability of reversal of unrealized interest amounting to Rs. 5,61,73,805/-. According to the guidelines issued by the Reserve Bank of India an option is given to the Bank either to make a provision for such unrealized interest on the Non-Performing Assets (NPA) by debiting the Profit and Loss Account or reverse the said interest by debiting the income in the Profit Loss Account and in both cases the borrowers account is credited. The banks had no option but follow the above guidelines of the Reserve Bank of India. The aforesaid method of accounting was regularly employed by the assessee in the earlier years and the same had been accepted by the department. 22. We have heard both the sides and have gone through the details filed in this regard. We have also considered section 43D of the I.T. Act and find that the claim of the assessee is fully supported by the decision of the Tribunal in the case of TCI Finance Ltd. v. ACIT (91 ITD 573). In that case the assessee company was carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance in the provision for bad and doubtful debts allowed u/s. 36(1)(viiia) exceeds the bad debts written off by the above amount and hence as per the proviso to section 36(1)(vii) restricts the deduction in respect of bad debts written off only if it exceeds the credit balance in the provision for bad and doubtful debts account maintained u/s.36(1)(viiia) and is applicable only in respect of bad debts written off relating to advances made at rural branches and does not apply to bad debts written off relating to advances made by non-rural branches. Hence, the learned CIT(A) counsel for the assessee contended that the bad debts written off relating to advances made by rural branches should be allowed in full without any limitation or restriction. In support of his contentions, the learned counsel for the assessee relied on the following decisions: (i) Central Bank of India v DCIT (ITA No. 3062/Bom/ 93) for A.Y. 1989-90 order dated 15.02.2005) (ii) South Indian Bank Ltd. v. CIT (262 ITR 570- Ker.) (iii) Dhanalakshmi Bank Ltd. v. CIT (131 Taxman 744 - Ker.) (iv) Karur Vysya Bank Ltd. v. DCIT (ITAT Chennai Bench in ITA No. 1410/Mds./93 vide order dated 31.03.2002 (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Revenue relates to depreciation on investments. 34. This issue is covered in assessee's own case for the assessment year 1982-83 in ITA No. 3075/M/86 also in ITA No. 1679/M/01 for A.Y. 1997-98 in the case of Bank of India vide order dt. 27.3.2008 wherein it has been held as follows: 35. In assessee's own case in ITA No. 3075/M/86 it has been held as follows: "We have carefully considered the rival submissions and have also gone through the orders passed by the learned authorities below. The assessee is a nationalized bank. The banks are required to keep a certain percentage of their liquidity in easily realizable securities in accordance with the provision of Banking Regulations Act and in order to comply with the directions issued by the Reserve Bank of India from time to time. Such securities as far as the banks are concerned are part of their circulating capital. The mere fact that it has not been shown as stock-in-trade in the balance sheet cannot alter the true nature of these securities held by the bank as stock-in-trade. The two principles are applicable with regard to the valuation of stock and that the assessee is entitled to value the closing stock either ..... X X X X Extracts X X X X X X X X Extracts X X X X
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