TMI Blog2015 (11) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... mandate of law. Thus issue requires fresh examination - Decided in favour of assessee for statistical purposes. Deduction claimed u/s 36(1)(viii) - Held that:- When the assessee is able to identify the long term finance given to specified purposes, it should not be difficult to cull out the actual interest income earned from such advances. Since the assessee had proceeded to ascertain the interest income on average basis and since the details furnished by the assessee was not convincing to the tax authorities, they were constrained to make their own estimates according to their respective understanding. In our view, the approach of the assessee is not appreciable. In this era of computerisation, it should not be difficult at all for the assessee to cull out the actual interest income earned by it out of eligible business. Further, there should not be any dispute that it is the responsibility of the assessee to show that the deduction claimed by it u/s 36(1)(viii) was justified. However, with regard to the cost of funds and administrative expenses, the assessee is required to allocate the expenses towards eligible business on a reasonable basis, since they are incurred from commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction claimed u/s 36(1)(viii). 3. The revenue is in appeal in respect of following issues: (a) Bad debts written off; (b) Loss on revaluation of investment; c) Deduction claimed u/s 80LA; d) Deduction claimed u/s 36(1)(viii) of the Act; e) Deduction claimed u/s 36(1)(viia) of the 4. The assessee is a Public Sector Bank and the assessment for the year under consideration was completed by the AO by making various additions. In the appeal filed by the assessee before the ld. CIT(A), the First Appellate Authority granted partial relief to the assessee. Aggrieved by the order passed by the ld.CIT(A), both the parties are in appeal before us in respect of issues decided against each of them. 5. We shall first take up the appeal filed by the assessee. The first issue relates to disallowance made under section 14A of the Act. During the year under consideration, the assessee received income from tax free bonds to the tune of ₹ 47.17 crores and dividend income of ₹ 6.92 crores both aggregating to ₹ 54.09 crores. The assessee claimed the same as exempt u/s 10 of the Act. However, the assessee did not disallow any expenditure relating to the above sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r end and the said valuation methodology also fortifies the fact that the investments are held as trade stock only. 8. The Ld D.R, on the contrary, submitted that the provisions of Rule 8D shall be applicable from AY 2008-09 as held by the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd (328 ITR 81). He further submitted that the assessee has shown the value of securities as Investments only in the Balance Sheet and hence the assessee cannot take a different stand for the purposes of sec. 14A of the Act. He further submitted that the disallowance is required to be made under Rule 8D(2)(iii) towards administrative expenses, even if the assessee proves that it has got sufficient interest free funds. He further submitted that the claim of the assessee that it was having sufficient interest free funds and also the claim that the securities are held as stock in trade have not been examined by the AO/CIT(A). 9. We have heard rival contentions and perused the record. The assessment year under consideration being AY 2008-09, the provisions of Rule 8D are applicable as per the decision of Hon ble Bombay High Court rendered in the case of Godre Boyce Mfg. Co. Ltd ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Long term finance is defined to mean any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years. 13. The assessee worked out the deduction u/s 36(1)(viii) as under:- Average advances 41937.41 Yield on advances 10.12% Cost of funds 5.76% Interest income 4.36% 1828.47 Less Operation expenses 15% 274.27 Profit earned 1554.20 Deduction u/s 36(1)(viii) 20% 301 The AO did not accept the above said workings. He noticed that the average advances worked out by the assessee did not tally with the figures of term loans reported in the Balance Sheet, viz., ₹ 32,442/- crores. Further, since the term loans reported in the Balance sheet would include ineligible advances, the AO took the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvances. Since the assessee had proceeded to ascertain the interest income on average basis and since the details furnished by the assessee was not convincing to the tax authorities, they were constrained to make their own estimates according to their respective understanding. In our view, the approach of the assessee is not appreciable. In this era of computerisation, it should not be difficult at all for the assessee to cull out the actual interest income earned by it out of eligible business. Further, there should not be any dispute that it is the responsibility of the assessee to show that the deduction claimed by it u/s 36(1)(viii) was justified. However, with regard to the cost of funds and administrative expenses, the assessee is required to allocate the expenses towards eligible business on a reasonable basis, since they are incurred from common pool of funds and also for all activities of the assessee. Hence, in our view, the workings given by the assessee, AO and Ld CIT(A) on approximate basis cannot be approved. Accordingly, in our view, this issue also requires reconsideration at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the claim of loss on revaluation of investment. Identical issue was considered by the Tribunal in the assessee s own case in AY 2007-08 (supra) and it has been decided in favour of the assessee by following the decision rendered by the Hon ble Supreme Court in the case of UCO Bank Vs. CIT (240 ITR 355) and also the decision of Hon ble Bombay High Court rendered in the case of CIT Vs. Bank of Baroda (262 ITR 334). Accordingly, we do not find any reason to interfere with the decision of Ld CIT(A) on this issue, since he has also followed the decision of Hon ble Supreme Court rendered in the case of UCO Bank (supra) in deciding this issue in favour of the assessee. 19. The next issue relates to the deduction claimed u/s 80LA of the Act. The AO disallowed this claim for the reason that the assessee did not furnish the audit report prescribed u/s 80LA of the Act along with the return of income. The Ld CIT(A) noticed that the assessee has furnished the audit report before the AO before finalisation of the assessment order and accordingly, by following the decision rendered by the Hon ble Delhi High Court in the case of Cit Vs. Web Commerce India Pvt Ltd (2009/179 Taxmann 310). T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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