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2015 (5) TMI 478 - ITAT HYDERABAD

2015 (5) TMI 478 - ITAT HYDERABAD - TMI - Disallowance of broken period interest - CIT(A) deleted the disallowance - Held that:- Issue had arisen in the assessee’s own case for the A.Y 2008-09 and the Tribunal has followed its decision in the assessee’s own cases [2013 (4) TMI 702 - ITAT HYDERABAD] & [2013 (4) TMI 701 - ITAT HYDERABAD] wherein as relying on American Express International Ltd Vs CIT reported in [2002 (9) TMI 96 - BOMBAY High Court] and Karur Vysya Bank Ltd [2009 (7) TMI 1210 - MA .....

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interest on NPA - Held that:- Income which was earlier recognised is not to be allowed in the subsequent year in case it is permissible for the assessee to 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 f .....

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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 Officer in this behalf. - Decided in favour of assessee.

Disallowance u/s 14A - CIT(A) allowed the claim - Held that:- As assess .....

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u/s 14A - Decided against revenue.

Disallowance of claim on account of Andhra Bank Rural Development Trust - CIT(A) deleted the disallowance - Held that:- the amount spent by the assessee-bank, was not only in discharge of corporate social responsibility to train the rural youth, but also to indirectly to promote its own business, since the rural youth trained were its prospective clients, as the bank also intended to extended credit facilities to such unemployed youth for starting th .....

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ade the disallowances is different from the ground on which the CIT (A) has confirmed the addition. Thus, it is seen that there is no appreciation of facts by the CIT (A). Therefore, the order of the CIT (A) is set aside. Coming to the order of the AO, we find that the assessee has made a provision u/s 36(1)(viia) in accordance with the provisions of the Act and if the assessee is not able to set off the provisions during the relevant A.Y, it is entitled to carry it forward subject to the maximu .....

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nthan 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 .....

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lso the grounds raised by the assessee in its appeal and as to how these grounds are covered in favour of or against the assessee. Taking the said charts into consideration and after hearing both the parties, we decide the issues as under: ITA No.31/Hyd/2015 3. In the Revenue appeal, the first ground of appeal raised by the Revenue is against the deletion of the disallowance of broken period interest paid by the assessee on purchase of long term securities and claimed as expenditure by the asses .....

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eld for complying with SLR (Statutory Liquidity Ratio) are to be held as stock-in-trade and the broken period interest included in the purchase price of such govt. securities is revenue in nature and is allowable. The ld DR relied upon the order of the AO while the ld AR supported the order of the CIT (A) and also placed reliance upon the orders of the Tribunal in earlier A.Ys as well as the decision of the Hon'ble Supreme Court in the case of CIT vs. Citi Bank reported in 2008 (8 TMI 766). .....

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he Revenue has not been able to bring any decision contrary to the above mentioned decisions in assessee s own case for the A.Y 2008-09, we do not find any reason to interfere with the order of the CIT (A). Accordingly, this ground of the Revenue is rejected. 5. The second issue is against the CIT (A) allowing the deduction of unrealized 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 (15 .....

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d/ 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 .....

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held as under: 29. The next effective grievance of the assessee in this appeal relates to disallowance of premium of ₹ 148,36,49,516 paid to Life Insurance Corporation of India towards leave encashment policy taken by the assessee for its employees. 30. Facts of the case in brief relating to this issue are that the assessee claimed deduction in the computation of income of ₹ 124.82 crores towards payment made to LIC group leave encashment scheme. During the course of assessment, the .....

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by the assessee, rather the payment was made to LIC Group Leave Encashment Scheme and therefore, such payment is not allowable under S.43B(f) of the Act. b) The payment made is not debited to Profit & Loss Account, but was made out of General Reserves c) The LIC Group Leave encashment Scheme is not recognized/approved as per S.36(1)(vi)/(v) of the Act, and therefore, it is in violation of provisions of S.40A(9) of the Act. 31. On appeal, the CIT(A) sustained the disallowance made by the Ass .....

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or 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 fo .....

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ssessee as employer in lieu of any leave to the credit of its employees has been recognized as a revenue expenditure and 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 business or profession of the assessee. A cover obtained to discharge such recognized obligation will not come under Section 37 of the Act is not accepted. 33. In the case of Hindustan Latex Ltd. (supra), which in fact was in the context .....

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as a deduction. The assessee had insured itself against the liabilities that may arise on account of the claims ITA No.167/Hyd/2014 & five others M/s. Andhra Bank, Hyderabad made by the employees towards leave encashment. The assessee being covered by a valid insurance policy and premium being regularly paid, incurs no liability towards leave encashment. The liability being covered by a valid insurance policy, is solely that of the insurer. Therefore, it was held that even if 43B (f) stands, .....

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the recent decisions of the Uttarakhand High Court in the case of CIT V/s. Nainital Bank Ltd. (supra); and of the Kerala High Court in the case of CIT V/s. Hindustan Latex Ltd. (supra), in preference to the earlier decision of the Tribunal in assessee's own case for assessment year 2006-07, we accept the contentions of the assessee on this issue, and delete the addition made by the Assessing Officer in this behalf. Assessee's grounds on this issue are allowed . 8. Respectfully following .....

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nch 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 properl .....

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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 ex .....

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l in assessee's own case for the assessment year 2007- 08, vide its order dated 4.10.2013 in ITA No.630/Hyd/2012, has held disallowance 2% of the tax-free income earned by the assessee as reasonable. Taking into account, the total tax-free income of ₹ 17,15,33,910 earned by the assessee, we find that the disallowance of ₹ 33,41,474 offered by the assessee itself in terms of S.14A, working out to almost 2%, is quite reasonable and in consonance with the view taken by the Tribunal .....

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ue is rejected. 11. As regards Ground No.5 against the order of the CIT (A) deleting the disallowance of 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 fi .....

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s 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 assessee. c) As per the Corporate Social Responsibility Voluntary Loans 2009 published by the Ministry of Corporate Affairs, though not binding, companies should allocate specific amount from the budget for CSR .....

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t the Trust was formed with the noble objective of providing employment to the rural youth by way of providing training and also the required credit to help them to be self- employed. For these reasons and also for the reasons discussed in Para 13.4 of the impugned order, extracted hereunder, the CIT(A) deleted the addition made by the Assessing Officer in this behalf. "13.4 The appellant also submitted the statistics as the number of candidates trained in each district and the number of ca .....

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nnot be said that the expenses are not incurred 'wholly and exclusively" for the purpose of business. Therefore, this ground of appeal is allowed. " 14. Aggrieved by the relief granted by the CIT(A), Revenue is in appeal before us on this issue. 15. Learned Departmental Representative strongly supporting the order of the Assessing Officer submitted that the CIT(A) is not justified in deleting the disallowance made by the Assessing Officer. 16. The learned counsel for the assessee, .....

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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 y .....

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be allowed by treating the same as having been incurred by the assessee in the discharge of its social responsibility. In the case of Infosys Technologies Ltd. (supra), Hon'ble Karnataka High Court considered the expenditure claimed by the assessee on installation of traffic signals at Bannerghata Circle, Bangalore, as expenditure having been incurred by the assessee in discharge of its corporate social responsibilities, which also facilitated the business of the assessee, and hence allowabl .....

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e of a corporate social responsibility and hence allowable as deduction under S.37 of the Act. In the facts of the present case, the amount spent by the assessee-bank, was not only in discharge of corporate social responsibility to train the rural youth, but also to indirectly to promote its own business, since the rural youth trained were its prospective clients, as the bank also intended to extended credit facilities to such unemployed youth for starting their own enterprises. In this view of .....

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ue s ground of appeal is rejected. 13. In the result, appeal of the Revenue is dismissed. ITA No. 42/Hyd/2015 14. In the assessee s appeal, assessee has raised as many as four grounds of appeal, but grounds No.1 and 4 are general in nature, hence needs no adjudication. The effective grounds 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 .....

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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 allowed as deduction as the sam .....

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alternate ground before the authorities below, but has raised it for the first time before this Tribunal. Since it is an alternate and legal ground, we deem it fit and proper to remand this issue to the file of the AO with a direction to adjudicate the same de novo in accordance with the law. 16. In the result, ground No.3.1 raised by the assessee is rejected and Ground No.3.2 is treated as allowed for statistical purposes. 17. As regards Ground No.2, brief facts are that during the scrutiny pr .....

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69,987 should not be written back and brought to tax as an excess provision made. Assessee, vide letter dated 21.1.2014, submitted that the deduction u/s 36(1)(viia) is allowable in respect of any provision for bad and doubtful debts, of the amounts not exceeding 7.5% of the total income and 10% of the aggregate average of advances made by rural branch advances at the end of every year and on the total income of that year and that even though, the assessee bank is eligible for deduction of ͅ .....

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ee 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 appe .....

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