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2015 (5) TMI 478

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..... write off such income in concerned assessment year when it was found that it was not recoverable. Thus we direct the AO to allow deduction being unrealised interest offered for tax in the earlier year now reversed by the assessee. See assessee’s own cases [2013 (4) TMI 702 - ITAT HYDERABAD] & [2013 (4) TMI 701 - ITAT HYDERABAD] - Decided in favour of assessee. Disallowance of claim of payment to LIC for Group Leave Encashment Scheme for the employees of the assessee - Held that:- Respectfully following the recent decisions of the Uttarakhand High Court in the case of CIT V/s. Nainital Bank Ltd. (2014 (1) TMI 449 - UTTARAKHAND HIGH COURT); and CIT V/s. Hindustan Latex Ltd. (2012 (6) TMI 713 - KERALA HIGH COURT), in preference to the earlier decision of the Tribunal in assessee's own case for assessment year 2006-07 to concluded that the expenditure has been certified as an expenditure not for personal expenses of the assessee and that the same is wholly and exclusively for the purpose of the business or profession of the assessee – The expenditure is deductible u/s 37 - we accept the contentions of the assessee on this issue, and delete the addition made by the Assessing Of .....

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..... r of the AO also on this issue and the assessee’s ground of appeal is allowed. - ITA No. 42/Hyd/2015, ITA No.31/Hyd/2015 - - - Dated:- 24-4-2015 - Shri P.M. Jagtap And Smt. P. Madhavi JJ. For the Appellant : Shri S. Ananthan and Smt. Lalitha Rameswaran For the Respondent : Shri D. Sudhakar Rao, CIT ORDER Per Smt. P. Madhavi, J.M. There are cross appeals preferred by the assessee and the Revenue against the order of the CIT (A)-II Hyderabad, dated 21.10.2014 relating to A.Y 2011-12. 2. Brief facts of the case are that the assessee bank filed its return of income on 22.09.2011 declaring income of ₹ 746,69,40,774. During the assessment proceedings u/s 143(3) of the Act, the AO made certain disallowances and the consequential additions to the returned income of the assessee and brought it to tax. Assessee preferred an appeal before the CIT (A) who granted partial relief to the assessee. Against the relief granted by the CIT (A), Revenue is in appeal before us, while against the confirmation of certain additions by the CIT (A), assessee is in appeal before us. At the time of hearing the ld Counsel for the assessee has filed charts depicting the groun .....

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..... interest on NPA. The grievance of the Revenue is that the CIT (A) has ignored the decision of the Apex Court in the case of State Bank of Travancore vs. CIT (158 ITR 102) on a similar issue. It is seen that similar ground was raised by the Revenue in the assessee s own case for the A.Y 2008-09 in ITA No.244/Hyd/2014 and the Tribunal at Para 5 of its order held as as under: 5. 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 dated 30.4.2013 for the assessment year 2005-06 in ITA Nos. 1592 1644/Hyd/ 2008, 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 order of the Tribunal for the assessment year 2005-06. In this view of the matter, we find no merit in the above ground of the Revenue on this issue. We accordingly uphold the order of the CIT(A) on this issue and reject the above ground of the Revenue . 6. Respectfully following the decision of the Coordinate Bench, this ground of appeal of the Revenue is rejected. 7. Ground No.3 is a .....

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..... f 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 paperbook, 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 in lieu of any leave to the credit of its employees has been recognized as a revenue expenditure and .....

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..... the Coordinate Bench in assessee s own case, this ground of appeal of the Revenue is rejected. 9. Ground No.4 is against the order of the CIT (A) deleting the disallowance u/s 14A of the Act. According to the Revenue, the CIT (A) has ignored the fact that the expenditure by way of interest during the previous year is not directly attributable to any particular income or receipt. We find that this issue is also covered in favour of the assessee by the decision of the Coordinate Bench in ITA No.244/Hyd/2014 dated 18.07.2014, in assessee s own case for A.Y 2005-06 in which the Tribunal at Para 41 has held as under: 41. We heard both sides and perused the impugned orders of the Revenue authorities and other material available on record. We find that the assessee itself has disallowed an amount of ₹ 33,41,474, being two months' salary of officers and staff working in Investment Department under S.14A. We are of the opinion that 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 .....

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..... f assessee s claim on account of Andhra Bank Rural Development Trust, the grievance of the Revenue is that the CIT (A) has ignored the fact that the corporation social responsibility, if any, incurred by the assessee should be met out of profit after tax and not profit before tax and further ignoring that the same was not wholly and exclusively used for the purpose of assessee s business. We find that this issue had arisen in assessee s own case for A.Y 2008-09 and the Tribunal at Para 12 to 17 of its order has held as under: 12. Brief facts of the case relating to this issue are that the assessee claimed an amount of ₹ 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 farfetched to state that amount spent on such activities was 'wholly and exclusively' for the purpose of business of the ass .....

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..... nsel further submitted that the assessee has a corporate social responsibility, by conducting 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 ITA No.167/Hyd/2014 five others M/s. Andhr .....

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..... unds are therefore only grounds 2 3 which are as follows: 2. The CIT (A) erred in law in confirming the action of the AO in considering ₹ 1372,45,64,987 which represents provision for bad and doubtful debts claimed and allowed the appellant ove rthe last so many years as deduction u/s 36(1)(viia) of the Act as income. 2.1 The CIT (A) failed to appreciate the fact that there is no provision in the Income Tax Act under which such provision can be considered as income. 3. The CIT (A) erred in law in upholding the action of the AO in considering ₹ 19,59,29,028 of interest credited by the LIC in leave encashment scheme as income of the appellant. 3.1 The CIT (A) failed to appreciate the fact that when only the net amount of premium paid by the assessee to the LIC i.e. gross amount of premium payable less interest accrued to the assessee from the scheme is allwoed as deduction instead of the gross amount of premium payable, addition of the interest amount of ₹ 19,59,29,028 as income is indirectly leading to taxation of the same amount twice. 3.2 Without prejudice to the above and alternatively, amount of ₹ 19,59,29,028 treated as income be allow .....

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..... stated in the notice. The assessee also submitted the working for the same. AO however, was not convinced by the argument of the assessee and held that as per AS-29, a provision is an estimate of certain future liability/expense, arising from the business carried out during the year and allowable u/s 37 and such provisions are normally adjusted/set-off against the actual expenses of the very next year and unadjusted or unutilized provision in excess of the actual expenses under the same head has to be written back as income. He, therefore, held that the unutilized provision has to be written back and brought to tax. 18. On appeal, the CIT (A) confirmed the addition by holding that the claim made by the scheduled bank u/s 36(1)(viia) should be restricted to the extent of provisions made in the books of accounts. 19. Aggrieved, the assessee is in appeal before us. The ld Counsel for the assessee demonstrated before us that the CIT (A) has confirmed the disallowance on a totally erroneous appreciation of facts. He submitted that the disallowance made by the AO was of the unutilized portion of the provision, whereas the addition confirmed by the CIT (A) is on the ground that the .....

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