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TMI Blog2014 (7) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT(A) erred in deleting the disallowance of broken period interest of Rs. 12,09,39,097/- without considering the decision of Supreme Court in the case of Vijaya Bank Vs. CIT and in view of board's Circular No.665 dated 05/10.1993." 3. We heard both sides and perused the impugned orders of the Revenue authorities and other material available on record. We find that on this issue, the consistent view taken by the Tribunal in assessee's own cases, viz. in ITA Nos.95 to 97 & 218/Hyd/2013 dated 4.4.2013 for the assessment year 2006-07 and in ITA Nos.1592 & 1644/Hyd/2008 dated 30.4.2013 for the assessment year 2005-06, is in favour of the assessee and against the Revenue, and the impugned order of the CIT(A) on this issue is in consonance with the said orders of the Tribunal for the assessment years 2005-06 and 2006-07, besides the orders of the CIT(A) on this issue for the assessment years 2005-06 and 207-08. In this view of the matter, following the consistent view taken by the coordinate benches of the Tribunal in assessee's own cases for the earlier years noted above, we find no merit in the above ground of the Revenue on this issue. We accordingly uphold the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submitted that the decision of the Apex Court in the case of Kedarnath Jute Manufacturing Company Ltd. V/s. CIT (82 ITR 363) relied upon by the assessee is not applicable to the present case. It was argued that only such expenditure which is charged to Profit & Loss Account, which can be claimed as deduction and for this purpose, there is no difference between the accounts prepared as per Companies Act and Income Tax Act. The Learned Departmental Representative submitted that the Assessing Officer was right in holding that S.43B is only a safeguard provision restricting a debit to Profit & Loss Account on the basis of actual payment as otherwise an unscrupulous employer may cause harm to the interest of the employees by debiting an amount to Profit & Loss Account but not remitting it to the statutory authorities. Therefore, this provision is not overriding the basic fact that the expenditure has to be debited only to the Profit & Loss Account. In the present case, it was pointed out, part of the amount has been met from reserves, and the same not having been thus not debited to Profit & Loss Account is liable for disallowance under S.43B. He also submitted that it is incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce made by the Assessing Officer in terms of S.43B is not warranted. We accordingly uphold the order of the CIT(A) and reject the above ground of the Revenue on this issue. 11. The next effective ground of the Revenue in its appeal reads as follows- "The ld. CIT(A) erred in deleting the disallowance of Rs. 2,04,34,107/- without supportive evidence that the amount spent Andhra Rural Development Trust were incurred wholly land exclusively for the purpose of business." 12. Brief facts of the case relating to this issue are that the assessee claimed an amount of Rs. 2,04,34,107 spent on Andhra Bank Rural Development Trust, which is engaged in conducting several trainings for providing self employment to rural youth. After the training, the bank also provided finance to the rural youth. This amount, claimed by the assessee was disallowed by the Assessing Officer, for the following reasons- a) None of the activities/trainings conducted by the bank related to banking activity. b) It is far fetched to state that amount spent on such activities was 'wholly and exclusively' for the purpose of business of the assessee. c) As per the Corporate Social Responsibility Voluntary Loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucting training programmes for rural unemployed youth, and later on extending them credit facilities for starting their own enterprise. Hence, it is submitted that the expenditure in question has been laid out wholly land exclusively for the purpose of business, and as such is clearly allowable under S.37(1) of the Act. 17. We have considered the rival submissions and perused the orders of the Revenue authorities and other material available on record. Undisputedly, the expenditure in question relates to the training of unemployed rural youth by conducting training programmes, to whom it is submitted that credit facilities are extended for starting their own enterprises. The CIT(A) has noted the number of youth trained, and the number of persons to whom such credit facilities are extended during the year. The question for consideration before us is whether the expenditure incurred by the assessee in conducting such training programmes can be said to have been incurred wholly and exclusively for the purposes of banking business being conducted by the assessee, and even if it is not connected with the business of the assessee, can it be allowed by treating the same as having been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not considered in the first place the admissibility of such additional ground, but straight away proceeded to decide the same on its merits. Though the CIT(A) in all fairness, should have considered the admissibility of such additional ground and only after admitting the same, should have adjudicated thereupon on merits, it is only a procedural lapse on the part of the CIT(A). In any event, by deciding the additional ground, which undisputedly a legal ground, on its merits, the CIT(A) has impliedly admitted the said ground. The issue on merits, being allowability of bad debts written off to the tune of Rs. 109,12,63,726, having been covered by the decision of the Apex Court in the case of Catholic Syrian Bank (supra), the said additional ground of the assessee before him, has been allowed by the CIT(A). We do not find any infirmity in the order of the CIT(A) insofar as the merits of the issue in dispute are concerned. We accordingly uphold the order of the CIT(A) rejecting the ground of the Revenue on this issue. 20. In the result, Revenue's appeal for the assessment year 2008-09, being ITA No.167/Hyd/2014, is dismissed. Assessee's Appeal: ITA No.244/Hyd/2014: 21. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the provision for bad and doubtful debts of Rs. 98,66,58,913 for the following reasons - a) The provision for bad and doubtful debts should be limited to the extent of provision made in the books of account; b) The CBDT Instruction No.17/2008 point No.2 clause (3) clarifies that the provision for bad and doubtful debts should be restricted to the extent of provision made in the books of account. 27. On appeal before the CIT(A), learned Authorised Representative reiterated for allowing the entire provision claimed of Rs. 427,05,12,789 irrespective of the provision for bad debts reflected in the books of account. The CIT(A), after considering the provisions of S.36(1)(viia) of the Act, and also the CBDT's Instruction No.17/2008 dated 26.11.2008, upheld the disallowance made by the Assessing Officer. Hence, assessee is in second appeal on this issue. 28. We heard both sides and perused the impugned orders of the Revenue authorities and other material available on record. We find that on this issue, the decision of the Tribunal in assessee's own case for the assessment year 2007-08, viz. in ITA No.715/Hyd/2012 dated 4.10.2013, is against the assessee and in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA Nos.95 to 97 & 218/Hyd/2013 dated 4.4.2013, is in against the assessee, and the impugned order of the CIT(A) on this issue is in consonance with the said order of the Tribunal for the assessment years 2006-07. However, the recent decisions of the Uttarakhand High Court in the case of CIT V/s. Nainital Bank Ltd. (2014)8 Tax Corp(DT)56471; and of the Kerala High Court in the case of CIT V/s. Hindustan Latex Ltd. (2012) 22 Taxmann.com 332, relied upon by the learned counsel for the assessee before us, duly furnishing copies thereof in the paper-book, are in favour of the assessee. It has been held by the Uttarakhand High Court in the case of Nainital Bank Ltd. (Supra) as follows- "4.It is not in dispute that the payment of the premium in question is not an expenditure of the nature described in Sections 30 to 36. In order to show that the expenditure was not in the nature of capital expenditure or personal expenses of the assessee and had been spent wholly and exclusively for the purpose of business or profession, reference was drawn to Section 43B(f) of the Act. Inasmuch as, Section 43B contains non-obstante provision and there in Clause (f) payment by the assessee as employer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t grievance of the assessee in this appeal relates to disallowance made in terms of Rule 8D, in respect of expenditure attributable to earning of tax free income. 36. Brief facts of the case in relation to this issue are that the assessee earned an amount of Rs. 17,15,33,910 as tax free income in the form of dividends form companies and mutual funds. Since this amount is exempt under S.10 of the Income-tax Act, 1961, the assessee itself disallowed an amount of Rs. 33,41,474 being two months' salary of officers and staff working in Investment Department under S.14A of the Act. Not convinced with the quantum of disallowance made by the assessee under S.14A, the Assessing Officer re-computed the expenditure incurred in connection with such tax-free income, and made a disallowance of Rs. 2,27,55,994. The reasons given by the Assessing Officer for enhancing this disallowance made by the assessee, are as follows- (a) There is no rational basis for disallowing only two months' salary of persons working in Investment Division. (b) The total expenses of Investment Department for the relevant assessment year is Rs. 4,87,41,188. (c) It cannot be said that only Investment departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has not properly appreciated the facts of the case and has mechanically applied Rule 8D in this case. The shares were held as stock-in-trade and not as 'investments'. Hence, profit or loss has to be considered under the head 'business or profession' and the claim of expenses are to be considered under the head 'business' and provisions of S.14A and Rule 8D are not applicable. The Cochin Bench of the tribunal in the case of State Bank of Travancore (318 ITR 17) held that any expenditure incurred by the assessee bank for investing in the bonds even tax- free was expenditure incurred for carrying on its business so as to maintain the required statutory liquidity ratio and tax free interest is just an incidence to it. Therefore, since the assessee has not incurred any expenditure to earn the said dividend income, the expenditure cannot be disallowed and the assessee is entitled to the benefit of deduction of the entire expenditure. We are of the opinion that there are no direct expenses attributable to the dividend income earned by the assessee, and the decision of the Karnataka High Court in the case of CCI Ltd. V/s. JCIT (212.TIOL.251) al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive ground of the Revenue in this appeal relates to disallowance of Rs. 2,03,66,949, being the amount spent on Andhra Rural Development trust. Facts and circumstances in relation to this issue, for the year under appeal being identical to those considered by us in the context of the corresponding ground of the Revenue in its appeal ITA No.167/Hyd/2014, for the reasons discussed para 17 hereinabove, we find no infirmity in the impugned order of the CIT(A). The same is accordingly upheld and this ground of the Revenue on this issue is rejected. 46. Next effective ground of the Revenue in this appeal is against the action of the CIT(A) in entertaining the additional ground of appeal raised by the assessee and granting relief in relation to the assessee's claim with regard to bad debts written off to the tune of Rs. 79,94,86,249. Facts and circumstances in relation to this issue, for the year under appeal being identical to those considered by us in the context of the corresponding ground of the Revenue in its appeal ITA No.167/Hyd/2014, for the reasons discussed para 19 hereinabove, we find no infirmity in the impugned order of the CIT(A). The same is accordingly upheld and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in its appeal ITA No.244/Hyd/2014, for the reasons discussed paras 32 to 34 hereinabove, we find no infirmity in the impugned order of the CIT(A). The same is accordingly upheld and this grounds of the assessee on this issue are allowed. 52. The next effective grievance of the assessee in this appeal is against the action of the Assessing Officer in considering an amount of Rs. 12,49,22,229, being interest credited by the LIC in leave encashment scheme, as the income of the assessee. 53. We heard both sides and perused the orders of the Revenue authorities on this issue and other material available on record. Interest to the tune of Rs. 12,49,22,229 which accrued to the assessee, on the payments made by the assessee to the LIC by way of regular premium payments, was brought to tax by the Assessing Officer as the income of the assessee for the year under appeal. On appeal, the CIT(A), distinguishing the decision of the Kerala high Court in the case of Hindustan Latex Ltd.(22 Taxman.com.332), relied upon by the assessee before him, and following the decision of the Tribunal dated 4.4.2013 in assessee's own case for assessment year 2006-07 in ITA No.218/Hyd/2010, upheld the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India through Agriculture Debt Waiver and Relief Scheme, 2008. During the course of assessment proceedings, a claim was made before the Assessing Officer by the Authorised Representative that the above credit may be reversed because the entries are notional in nature. The Assessing Officer rejected the said request of the assessee, with the following observations- "......Such a claim is not acceptable because the books of the assessee are audited and the credit entries are not reversed in the books. Moreover, the revenue is recognized by the assessee, as can be seen from the notes to accounts. Once the assessee recognizes the income in its accounts, the same has to be offered to tax. There is no arithmetical or clerical error in the amounts which warrant revision or reversal. There is no sanction of law for such reversal also. Therefore, the claim of the assessee is rejected." 57. On appeal, the CIT(A) observed in the first place that the assessee is simply seeking reversal of the amount credited to Profit & Loss Account because the amount credited was not received. Further observing that the view taken by him in the context of provision made under S.36(2)(v), in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xability of an income. It is only such entries, which reflect the real income which can be brought to tax, in the relevant assessment year. In this view of the matter, respectfully following the decision of the Apex Court in the case of Bokaro Steel (supra), we set aside the impugned order of the CIT(A) on this issue and direct the assessing officer to grant appropriate relief to the assessee. Assessee's grounds on this issue are accordingly allowed. 59. The next effective grievance of the assessee in this appeal is with regard to donation of Rs. 5,00,000 made by the assessee to Rajasthan Government, and the direction of the CIT(A) to the Assessing Officer to allow the claim for deduction under S.80G, if copy of 80G approval is furnished by the assessee. 60. We heard both sides and perused the impugned orders of the Revenue authorities and other material available on record. The Assessing Officer has not considered the claim of the assessee's claim for deduction in respect of donation of Rs. 5,00,000 paid to Rajasthan Government, stating that approval under S.80G was not furnished. It is the case of the assessee that since the amount of donation in question has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o those considered by us in the context of the corresponding ground of the Revenue in its appeal ITA No.167/Hyd/2014, for the reasons discussed para 17 hereinabove, we find no infirmity in the impugned order of the CIT(A). The same is accordingly upheld and this ground of the Revenue on this issue is rejected. 65. In the result, Revenue's appeal for the Assessment year 2010-11, being ITA No.169/Hyd/2014, is dismissed. Assessee's Appeal : ITA No.246/Hyd/2014 66. First effective grievance of the assessee in this appeal relates to disallowance of Rs. 3,654,08,364 claimed by the assessee under S.35D of the Act, on account of expenditure incurred in connection with public issue for raising capital for expansion of assessee's business. Facts and circumstances in relation to this issue, for the year under appeal being identical to those considered by us in the context of the corresponding ground of the assessee in its appeal ITA No.244/Hyd/2014, for the reasons discussed para 24 hereinabove, we find no infirmity in the impugned order of the CIT(A). The same is accordingly upheld and the grounds of the assessee on this issue are rejected. 67. The next effective grievance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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