TMI Blog2011 (6) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned expenditure comprising interest and management expenses, aggregating to ₹ 4,33,113/-, attributable to the investment by the assessee in tax-free bonds (at ₹ 0.65 crores), against which the assessee had earned interest income of ₹ 15.28 lakhs, claimed (and allowed) exempt under section 10(33) of the Act. Similarly, another sum of ₹ 78,87,262/- stood also disallowed qua the amount invested in shares (at ₹ 15.48 crores), yielding tax-free income by way of dividend (at ₹ 0.53 crores). The proportionate interest expenditure was worked out by the Assessing Officer (AO) by considering the said investments as being financed proportionately from the common pool of funds available with the assessee, as reflected in the balance-sheet (Rs.10827.42 crores). Similarly, the proportionate management expenses were worked out on the basis of the proportionate yield. Reliance was placed on the decisions in the case of K. Somasundaram Bros. vs. CIT, 238 ITR 939 (Mad.); CIT vs. H.R.Sugar Factory (P) Ltd., 187 ITR 363 (All.); CIT vs. V.I. Baby Co., 254 ITR 248 (Ker.), among others, besides by the tribunal, as in the case of CIT (Dy.) vs. S.G. Investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise, i.e., irrespective of the turnover therein. Even as held by the tribunal in the assessee s own case for the preceding years (supra), it is the investment in the impugned asset that would be relevant. 4.3 We consider the assessee s case to be governed by the decision by the hon ble high court in the case of CIT v. Dhanalakshmi Bank Ltd. (supra) as well as by the tribunal in its own case for the earlier years. We, accordingly, restore the matter back to the file of the AO with like directions. The assessee s ground is allowed for statistical purposes. 5. The next issue raised, per Ground No. 3, is in respect of deduction claimed u/s. 37(1) at ₹ 123.10 lakhs on write off of investments categorised as non performing assets (NPA) by the assessee-bank. The AO disallowed the same on the basis that the impugned claim did not satisfy the relevant provisions of the Act, i.e., 36(1)(vii) r/w s. 36(2) of the Act. Further, the assessee had not substantiated its case of the market value of the relevant scrip being Nil; it ostensibly adopting the valuation method of cost or market price (or net realisable value), which ever is less. The guidelines by the RBI, with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the value of the relevant investments with some materials as well as the write off in terms of the relevant guidelines by the RBI, to the satisfaction of the AO; it having admittedly not done so in the first instance (refer paras 5, 6 above). The relevant ground is considered as allowed for statistical purposes. We decide accordingly. 8. The fourth ground of the assessee s appeal is the disallowance of a deduction in the sum of ₹ 2973883/- claimed as loss on revaluation of investment in unquoted shares, being in Ispat India Ltd., Rama Phosphates Ltd. and Sagar Tourist Resorts Pvt. Ltd. The same was explained by the assessee as in accordance with the prudential norms for valuation of investments prescribed by RBI. The same did not find favour with the AO for the reason that, firstly, no documentary evidence to substantiate its claim with regard to the valuation of the relevant scrips had been brought on record. The assessee had not valued the same at the break-up value, i.e., on the basis and balance-sheet of the company, as is required under the said prudential norms by the RBI. The claim for write off could be made where the amount had been actually written off and, fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT vs. Nedungadi Bank Ltd. (supra), and restored back the matter back to the file of the assessing authority for factual determination. As such, the AO s objection with regard to the non-availability of the market quotation; the shares being unquoted, as also qua non write off of the relevant investment in books; the same being liable for a valuation, as stock-in-trade, on each valuation date, would not hold. So, however, the fact that the balance-sheets were un-communicable or the companies were defunct, which only would enable the valuation at nil as against break-up value; the assessee claiming loss for the entire book value, would need to be established by it; the asssesse itself claiming the value of the said investments as at the following valuation date (31/3/2007) at ₹ 7.17 lacs, apparently disproving its claim of the balance-sheets being not communicable or the companies being defunct. We, accordingly, find no infirmity in the impugned order; the AO shall in the restored proceedings decide the matter factually, issuing specific findings in the matter. We decide accordingly, confirming the impugned order on this ground. 11. The next and fifth ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue. We decide accordingly. 13. Vide its sixth ground, the assessee contests the disallowance of deduction of ₹ 650.42 lakhs claimed by the assessee as payment of pension. The same was found by the AO to be in addition to the payment of ₹ 12.73 crores by the assessee to the approved pension fund. It was explained by the assessee, on enquiry, that the pension fund is complying with all the relevant provisions of the Act and the Rules framed there-under. However, as the purchase of annuities in favour of the retiring employees is 'expensive , the assessee participates in the pension fund only partially. That is, a part of the pension is paid directly, debiting the same to the salary account, and is being claimed u/s. 37(1) of the Act, as against u/s. 36(1)(iv) in respect of contribution to the pension fund. In appeal, the ld. CIT(A) remitted the matter back to the file of the AO to consider the issue afresh, as in the assessee s own case for the preceding years (A.Y. 2003-04 and 2004-05), following the decision by the tribunal in the assessee s own case (in I.T.A. Nos. 359 360/Coch/2006 dated 27.9.2007). 14. We have heard the parties, and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue had arisen in the assessee s case for the immediately preceding year A.Y. 2005-06 (in I.T.A. No. 935/Coch/2008 dated 31.5.2011). The tribunal, with reference to its earlier decision in the case of Catholic Syrian Bank vs. CIT (Asst.) [in I.T.A. No. 10/Coch/2009 dated 11.2.2011], upheld the Revenue s stand. The same, in its view, could only be considered as a contingent liability, and the principles as enumerated in the case of Shree Digvijay Cement Mills Ltd. vs. UOI (2002) 259 ITR 705 (SC) and CIT vs. T.V.S. Iyengar Sons Ltd. (1996) 222 ITR 344 (SC), were found applicable in the undisputed facts and circumstances of the case. We, therefore, in line with the decisions by the tribunal, including in the assessee s own case for the earlier year, uphold the addition. We decide accordingly. 17. The last and eighth ground contests the levy of interest u/s. 234B(3) of the Act. This is on the premise that no liability under section 234B(1) arose, i.e., on the processing of the return u/s. 143(1), which resulted in a refund to the assessee. A liability u/s. 234B (3) provides for an increase in the liability u/s. 234B(1), i.e., on a regular assessment. The issue, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being admittedly of no consequence in relation to the current year, we do not consider it necessary for the purpose of adjudicating the issue arising for our consideration, i.e., the deductibility of the assessee s claim u/s. 36(1)(vii) in respect of the debts claimed as bad and irrecoverable relating to non-rural branches for the current year. Even as conceded to by the assessee, the deduction u/s.36(1)(vii) qua debts of both rural and non-rural branches, claimed as bad and written off as irrecoverable, would have to considered as being subject to the condition of proviso thereto as well as s. 36(2)(v). The Full Bench decision by the jurisdictional high court has admittedly resolved the controversy in favour of the Revenue, and none obtains. We decide accordingly. 21. Ground No. 2(ii) and Ground No. 4 of the Revenue s appeal relates to the assessee s claim, at ₹ 7989.56 lakhs, in respect of depreciation on HTM (Hold to Maturity) category of investments. The basis for the Revenue s objection was that the investments in these securities are in the nature of investments, i.e., represent capital assets, in contradistinction to current assets. In fact, the relevant guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), both with regard to the admissibility of the claim as well as on merits. We find its observations and findings in the said case (contained at para 23, 24 of its order) as applicable in the facts and circumstances of the present case as well, and are reproduced as under: '24. We have heard the parties, and perused the material on record. We shall consider both the objections by the Revenue to the assessee s claim. The first is the non-claim per the return of income or per the revised return u/s. 139(5). Without doubt, the same does not represent a technical formality, so that a claim could be pressed by the assessee with abandon at any time. The apex court in the case of Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) has clarified that while a non-consideration by the AO could not normally be objected to by the assessee where not pressed as required by law, there could be several reasons for a non-claim earlier by the assessee. The first appellate authority, who is invested with all the powers of the assessing authority, would therefore be required to be satisfied that the assessee was acting bona fide, and that the ground being now raised could not be so ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me stood deleted in appeal by the ld. CIT(A), finding the said decision by the apex court as distinguishable; there being no write back of the said deposits, and neither any cessation of liability having been established by the Revenue, for it to press s. 41(1) of the Act. 26. We have heard the parties, and perused the material on record. The said issue also arose in the assessee s own case for A.Y. 2005-06 (in I.T.A. No. 1003/Coch/2008 dated 31.5.2011). The tribunal dismissed the Revenue s ground following its decision in the case of CIT (Asstt.) v. Catholic Syrian Bank Ltd. (in ITA 66/Coch/2009 dtd. 11/2/2011), also reproducing therefrom at para 33 of its said order. We find no change in the facts and circumstances of the case and, accordingly, no reason to depart from the consistent and considered stand by the tribunal. We, therefore, uphold the deletion of the disallowance by the ld. CIT(A), deciding accordingly. 27. Ground Nos. 2(v) and 7 relate to an addition for ₹ 23,221/-, being the surplus amount realised on sale of jewellery pawned with it by the assessee. While the same stood added by the AO by applying the general principles as laid down in the case of Shree ..... X X X X Extracts X X X X X X X X Extracts X X X X
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