TMI Blog2012 (10) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... case of JCIT Vs Mukund Limited [2007 (2) TMI 358 - ITAT MUMBAI], as conceded by the AR. Respectfully following the decision rendered by the Hon’ble Special Bench, we sustain the disallowance of ₹ 1,55,20,622/-, as made by the revenue authorities - against assessee. Short allowance u/s 36 - Held that:- CIT(A) erred in not deciding on the issue of short allowance under section 36(1)(viia), based on total income computed by the AO. We, therefore, set aside the order of CIT(A) on this issue and direct the AO to decide the issue afresh - in favour of assessee by way of remand. Disallowance of bad debts claimed - CIT(A) allowed claim - Held that:- As decided in M/s. Vijaya Bank Versus Commissioner of Income Tax & Anr. [2010 (4) TMI 46 - SUPREME COURT] though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful debt, yet that would not constitute actual write off. But where besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses based on decision of Jurisdictional ITAT in the case of Toyo Engg. India Ltd Vs JCIT (100 TTJ 373) and Saurashtra Cement and Chemical Industries Ltd Vs CIT (213 ITR 623 Guj). 03. On the facts and circumstances of the case and in law, the learned CIT (A) erred in disallowing the lease premium expenses of ₹ 1,55,20,622/- on the ground that it is a capital expenditure. The CIT(A) should have noted that the said sum being amortization of premium paid on leasehold properties cannot be termed as capital expenditure. The CIT(A) ought to have allowed the entire premium of ₹ 124,43,02,761/- as held in the case of CIT Vs Ucal Fuel Systems Ltd (296 ITR 702 Mad) and against which decision the Supreme Court had dismissed the SLP filed by the department (195 Taxman 52 stat). Without prejudice to the above contention, the CIT(A) ought to have allowed at least the proportionate amount of ₹ 1,55,20,622/- claimed by the appellant. 04. On the facts and circumstances of the case and in law, the learned CIT (A) erred in not deciding on the issue of exclusion of income from foreign branches based on the Double Taxation Avoidance Agreement entered into with the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, if at all any disallowance is warranted the same cannot exceed 2% of the tax free income. Reliance was placed for this view on the decision of Jurisdictional ITAT Mumbai in the case of Godrej Agrovet Ltd vs. ACIT (2010 TIOL 616 ITAT, Mum) and ITAT Chennai in the case of Bharat Overseas Bank Limited in ITA No. 2622/Mds/2005 for the Assessment Year 2002-03 dated 15.09.2006. 5. The CIT(A), on consideration of the assessee s submissions held that the disallowance made by the AO at 12% of 84.05 crores, is very high, and after referring to the latest decision of Hon ble Bombay High Court in the case of Godrej Boyce, held that reasonable disallowance may be made and he, therefore, directed the AO to compute the disallowance at .5% of the average of investment yielding tax free income. 6. The assessee, still not satisfied, is now before the ITAT on this issue. 7. Before us the AR representing the assessee bank submitted that even on this disallowance, identical ground was raised in the preceding year in the assessee s own case in I.T.A. No. 2781/Mum/2011, wherein the coordinate Bench at Mumbai had set aside the issue to the file of the AO for computing a reasonable disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Toyo Engineering India Limited Vs JCIT 100 TTJ 373 wherein it was held as under: Even though a previous year is directly cut off on 31st March of every year, the actual carrying on of business which is a live process, cannot be cut off as exactly, especially in an organization like that of the assessee where activities are carried out through various site offices. Therefore, it is quite natural that there would be an amount of overflow of in formation after the close of the accounting year. Therefore, to certain extent, the claim of the assessee that the details of such expenditure were received only after the close of the accounting year, could be accepted. It is a continuous process to incur expenditure and to account for in the books of account. Therefore, 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. Reliance is also placed on the decision in the case of Union Bank of India in ITA no. 4720 to 4724/Mum/2010 for the assessment years 2002-03 to 2006-07 dated 30/06/2011 where under similar circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, to certain extent, the claim of the assessee that the details of such expenditure were received only after the close of the accounting r could be accepted. It is a continuous process to incur expenditure and to account for in the books of account. Therefore, 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. Respectfully following the above, we dismiss the ground raised by the Revenue. Since the issue now is settled on identical grounds by the coordinate Bench, respectfully following the decision in the case of Union Bank of India, as also our own order, where we have deleted the impugned addition, we delete the addition made by the revenue authorities on this issue, in the instant year. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition of ₹ 19,76,140/-. 18. The next ground is against the disallowance of ₹ 1,55,20,622/- wherein the AO has treated the expenses to be capital in nature. 19. The AR conceded that the expenses, treated to be of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The AO observed that only prudential write off and not actual write off as irrecoverable cannot be allowed. 31. Aggrieved, the assessee approached the CIT(A), who, relying on the decision of assessee s own case in assessment year 2000-01 by the CIT(A) and also by following the decision of Hon'ble Supreme Court in the case of Vijaya Bank v/s CIT, reported in 323 ITR 166, wherein the Hon'ble Apex Court held, Though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful debt, yet that would not constitute actual write off. But where besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for impugned bad debt , the assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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