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TMI Blog2015 (7) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 5,80,000/- to Rs. 4,15,000/-, deleting addition of Rs. 90,000/- i.e. petrol allowance of Rs. 24,000/-, telephone allowance of Rs. 30,000/- and consulting charges of Rs. 36,000/- and the last one being addition of Rs. 5,03,380/- on account of interest accrued on NPA, as made by the Assessing Officer in a regular assessment framed on 29-12-2009. The assessee's pleadings in its cross objection raise two substantive grounds assailing the lower appellate order confirming disallowance of RBI penalty for violation of KYC norms of Rs. 5 lacs claimed as business expenditure and restricting the other one of the alleged capital expenditure of Rs. 5,80,000/- to Rs. 4,15,000/-. The latter ground is related to the Revenue's identical plea stated hereinabove. 3. Both parties reiterate their respective pleadings in the course of hearing. They also support the CIT (A)'s order to the extent it is in their favour. We have heard both the sides and gone through the case file. 4. The Revenue's first ground seeks to restore unexplained cash deposits / credits addition of Rs. 45 lacs u/s. 68 of the Act. The assessee had opened 250 FDR accounts of Rs. 18,000/- each in F.Y. 2005-06 relevant to A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) The cheque of Nilkanth Enterprise has been transferred in the account of Radhe Finance in good faith, the other formalities were to be done as per verbal instructions of both the parties. Our bank has practice to allow withdrawal against clearing only in respect of first class customers and even in such cases the extent of limits and the need thereof were subjected through scrutiny. In this case a cheque of an amount of Rs. 53.50 lacs issued by Hon'ble Gujarat High Court presented in HVC on 11- 11-2006, eventhough the amount was credited in .the beneficiary account after due realization. After clear proceeds of the cheque, allowed transfer of this amount on the same day of credit into the account of M/s. Radhe Finance. iii) On 6-11-2005 the amount has been transferred to 250 different members by making 250 FDRs from the account of Radhe Finance. iv) The members were in need of money after depositing, * and therefore the money has been withdrawn on 19-11-2005. v) The party is old and regular. Their operations and conduct of the account is satisfactory. vi) The bank has acted in good faith. The Board has viewed this matter very seriously and have instructed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 68 even though all the 250 parties may not be genuine. Because what is to be seen in this case is whether the amount credited in the account of such 250 depositors is. explained or not. There is no denial that the fund of Rs. 18,0007- each are transferred from the account "of Radhe Finance out of the fund of Rs. 53,50,000/- received from Nilkanth Enterprise. The proper course of action should have been to examine the nature of transaction in the hands of Nilkanth Enterprise and M/s. Radhe Finance and to see as to what treatment has been given by them in their books of accounts in respect of the amount transferred to such 250 depositors. In any case the amount of Rs. 45 lacs deposited in the accounts of 250 depositors is properly explained as transfer entry from the account of Radhe Finance. Therefore the addition made u/s. 68 in the hands of the appellant bank cannot be sustained. The AO is directed to delete the addition of Rs. 45 lacs. 6. Heard both sides. Records perused. It is evident that the assessee; a financial institution registered under the Gujarat Cooperative Societies Act has explained source of the impugned deposits of Rs. 45 lacs. Rather source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g house expenses and Rs. 56,5227- service tax thereon. According to the Assessing Officer the amount of Rs. 1,94,4737- & Rs. 56,5527- are liable for further TDS and since the appellant bank has not made any payment of TDS, he disallowed these two amounts of Rs. 1,94,4737- and Rs. 56,5227- u/s. 40(a)(ia). On the other hand the case of the appellant is that the clearing house expenses has been incurred by ADC Bank on behalf of the appellant. While making payment to the Bank of Baroda (managing the clearing house in Ahmedabad) the ADC Bank deducts tax at source and pays the net amount to the Bank of Baroda. Since ADC Bank has already deducted TDS on the processing charges of the clearing house and the appellant bank is reimbursing the amount to the ADC Bank in respect of the expenses relating to appellant bank, there is no need of further deducting tax at source on the same amount. It was therefore requested that the Assessing Officer was not justified in disallowing the claim of R. 1,94,473/- Rs. 56,522/- u/s. 40(a)(ia) of the Act. . 6.1. I have considered the submissions of the AR. The AR was asked to state as to whether ADC Bank is claiming the same amount which is paid by the AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material of first floor at the site of old building, Rs. 1,25,000/- relating to mason work, plaster, RCC beam column and ceiling labour of the old building. There is no dispute that the assessee is a tenant in the above stated building taken on rent. It submitted that the aforesaid expense was not to be set off against the other sums paid to the landlord. The rent agreement and other details were filed in support. 11. The case file reveals that all the above stated assertions could not impress upon the Assessing Officer. He observed that the impugned expenditure was meant for bringing into the existence assets of enduring nature which could not be treated as revenue expenditure. He held that the impugned charges were not for supply of material, but paid for a turnkey contract for execution of the job of construction of a new storey with labour and material. He concluded that there were certain factual inconsistencies as well in the assessee's payments withdrawn. All this resulted in the impugned disallowance of Rs. 5,80,000/-. 12. The assessee's corresponding ground stands partly accepted in the lower appellate proceedings as follows:- 7. Next ground is regarding disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loft, the assessee did not bring into existing an asset of a permanent nature because, on the surrender of the lease, the option of the lessor of the premises in which the improvements were made was either to pay compensations and take over the improvement or to permit the lessee to remove the improvement. Therefore, the expenditure incurred in constructing the loft in the rented premises was allowable as revenue expenditure." 7.1 In respect of the bill of Rs. 50,000/-, it was stated that the bill dated 25-2-2007 from Murlidhar Construction of Rs. 50,000/- for the repairs was enclosed in the paper book at page No71. In short the submission of the AR is that as per the rent agreement clause No 6, "there is a legal obligation to vacate the premises in the same condition when it was taken. Over and above, under any circumstances, if in. the said premises any colour or repairing or any correction, renovation as per the needs of the tenant is to be carried out by the tenant at his own cost. Thus as per this agreement, the repair expenses is required to be incurred by the tenant and therefore the expenditure is in the nature of revenue only." 7.2 I have considered the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r premises used for the purpose of the business or profession, the following deductions shall be allowed - (a) Where the premises are occupied by the assessee- (i) As a tenant, the rent paid for such premises, and further if he has undertaken to bear the cost of repairs to the premises, the amount paid .on account of such repairs, (ii) Otherwise than as a tenant, the amount paid by him on account of current repairs to the premises. (b) Any sums paid on account of land revenue, local rates or municipal taxes, (c) The amount of any premium paid in respect of insurance against risk of damage or destruction of the premises. (Explanation - For the removal of doubts, it is hereby declared that the amount paid on account of the cost of repairs referred to in sub clause(i) and the amount paid on account of current repairs referred to in sub clause (ii) of clause (a), shall not include any expenditure in the nature of capital expenditure." In other words, if a tenant incurs a capital expenditure in the repairs of business premises, then w.e.f. A Y 2004-05 onwards such repairs would not be .allowable expenditure in view of the introduction of Explanation to this section by Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy service charges of Rs. 36,000/-; totaling to Rs. 90,000/- paid to Shri Kanubhai B. Kothia husband of the assessee's chairperson Smt. Lilaben. The Assessing Officer involved section 40A (2) (b) and made the impugned disallowance. 15. The CIT (A) has reversed the Assessing Officer's action as given below:- "8. Next ground is regarding disallowance of telephone and petrol expenses of Rs. 54,000/- and consultancy expenses of Rs. 36,000/- u/s. 40A(2)(b) of the Act. This issue is discussed by the Assessing Officer at para-8 of the assessment order. The Assessing |Officer held that Shri Kanubhai Kothia, husband of chairperson of the bank Mrs. Lilaben Kothia has been paid consultancy services of Rs. 36,000/-, telephone allowance of Rs. 24,000/- and petrol allowance of Rs. 30,000/-.Shri Kanubhai in his return of income for A.Y. 2007-08 has not included petrol allowance of Rs. 30,000/- are telephone allowance of Rs. 24,000/- as his income. The Assessing Officer observed that Shri Kanubhai has educational qualification as B.Sc. He is associated with Co-op. Bank since last 25 years either as consultant or director of other co-operative bank. He has experience in managing loan disbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such expenses have been allowed by the Assessing Officer, I do not find any infirmity in the claim of such expenses. Since the telephone and petrol allowances are reimbursement of expenses, they were not shown as income by Shri Kanubai. I therefore, direct the Assessing Officer to allow the expenses of Rs. 90,000/- under the above mentioned three heads of consultancy charges, petrol and telephone allowances." 16. We have given our thoughtful consideration to rival contentions advanced by both the parties. The Revenue has not been able to controvert the CIT (A)'s crucial finding that the very expenditure is being accepted in preceding assessment years as paid to the same recipient. Nor does it point out any exception in facts and circumstances involved there. We adopt consistency in these facts and uphold the CIT (A)'s action. The Revenue's corresponding ground is declined. 17. The Revenue's fifth and last ground seeks to restore addition Rs. 5,03,380/- on account of interest accrued on NPA. It is to be seen that the CIT (A)'s findings elaborately discuss assessee's explanation and Assessing Officer's observations as under:- 9. Last ground is regarding addition of interest acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made by the Assessing Officer is without any basis. 9.2 I have considered the submissions. For the sake of convenience the proforma appearing at page No 113 of the paper book in respect of classification of asset and provision made against non performing asset as on 31-3-2007 is enclosed as Annexure-1 to this order. From this proforma I find that the interest income of Rs. 5.04 lacs has been included in the interest account. Therefore the assumption of the Assessing Officer that the interest income of Rs. 5.04 lac is not shown by the appellant is not correct-. In fact this amount is already shown by the appellant as income in the P & L A/c. The Assessing Officer is therefore directed to delete the addition of Rs. 5,03,380/- on this account." 18. Heard both sides. Records perused. The CIT (A) has given a finding of fact that the assessee has already included the very interest income of Rs. 5,04,000/- in its interest income and P & L account. Annexure "A" to this effect also forms part of the lower appellate order. The Revenue has not been able to dispute contents thereof. We affirm the CIT (A)'s findings in these circumstances and reject the Revenue's ground. The Revenue' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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