TMI Blog2016 (7) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... against assessee. Disallowance invoking the Rule 8D(2)(iii) of section 14A - HELD THAT:- In the instant case since the assessee is a dealer in share, therefore the rigorous provision u/s 14A r.w.s 8D of the IT Rule shall not be applied with respect to share held by way of stock-in-trade. In this connection, whether assessee is a dealer in share or not we are placing our reliance in the case of UNITED COMMERCIAL BANK [ 1999 (9) TMI 4 - SUPREME COURT] respectfully where it has been held that the assessee is dealer in shares. Thus holding the bank as dealer in shares/ securities and consequently no disallowance is warranted on the shares/securities held as stock in trade. Accordingly we reverse the orders of Authorities Below and allow the ground raised by assessee. Disallowance of provision of leave encashment u/s. 43B - HELD THAT:- Provision for leave encashment that this issue is pending before Hon ble Supreme Court in the case of Exide Industries Ltd. Vs. Union of India [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT] and fairly conceded that subsequently Hon'ble Supreme Court has stayed this judgment of Hon'ble jurisdictional High Court. Assessee fairly stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as the Act ) vide his orders dated 29.12.2011 for assessment year 2009-10. Shri D.S. Damle, Ld. Authorized Representative appeared on behalf of assessee and Shri Rajat Subhra Biswas, Ld. Departmental Representative appeared on behalf of Revenue. 2. Both the appeal are heard together and are being disposed of by way of this consolidate order for the sake of convenience. First we take up assessee s appeal in ITA No.585/Kol/2013 for AY 09-10. The grounds raised by the assessee per its appeal are as under:- 1. For that on the facts and in the circumstances of the case, the CIT(Appeals) was grossly unjustified in upholding the disallowance for provision for bad doubtful debts amounting to ₹ 320,17,00,000/- on the ground that the deduction under Section 36(1)(viia) needs to be restricted to actual provision made in the books. 2. For that on the facts and in the circumstances of the case, the CIT(Appeals) was grossly unjustified in law and on facts in upholding disallowance of ₹ 2,36,68,517/- by invoking Rule 8D(2)(iii) of the IT Rules without establishing any proximate cause between the expenditure incurred and earning of tax free income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For that on the fact and circumstances of the case and without prejudice to Ground No. 6, 7 8, the ld. CIT(Appeals) failed to appreciate that the provision for bad and doubtful debts provision for standard assets were reduced form the gross figure of debtors/loans advances and the net figure was reflected in the Balance Sheet and therefore in light of the decision of the Supreme Court in the case of Vijaya Bank, it amounted to actual write off and were not in the nature of provisions. 12. For that on the fact and circumstances of the case and without prejudice to Ground No. 6, 7 8, ld. CIT(Appeals) failed to consider that the provision for credit linked notes, provision for unstructured loans were in the nature of provision for losses created in the ordinary course of banking business and not provisions made towards diminution in value of assets. 13. For that on the facts and circumstances of the case, the AO be directed to re-compute the set off and carry forward of the unabsorbed business losses and depreciation brought forward from the earlier years. 14. For that on the facts and circumstances of the case, the interest levied u/s. 234B 234D serves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return by making up the shortfall in the provision in the balance sheet of subsequent year, the claim to the extent of enhancement is not allowable. Respectfully following the above cited case law, we find no reason to interfere in the order of lower authorities. Hence the ground raised by assessee is dismissed. 6. Next issue raised by assessee in Grounds No. 2, 3 4 is that Ld. CIT(A) erred in confirming the action of AO by upholding the disallowance of ₹2,36,68,517/- by invoking the Rule 8D(2)(iii) the Rule. 7. During the year, assessee has declared tax free income of ₹ 5,08,78,809/- but no expenditure pertaining to tax free income was disallowed in the computation of total income of assessee. Accordingly, AO sought clarification from the assessee for not making the disallowance u/s. 14A of the Act. In compliance thereto it was submitted that the assessee was dealing in shares and the income earned thereon is offered to tax. The dividend income which is exempted from tax is incidental to the main business of assessee. However, AO has disregarded the contention of assessee by holding that merely because the assessee is dealing in shares it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the rigorous provision u/s 14A r.w.s 8D of the IT Rule shall not be applied with respect to share held by way of stock-in-trade. In this connection, whether assessee is a dealer in share or not we are placing our reliance in the case of 240 ITR 355 respectfully where it has been held that the assessee is dealer in shares. The relevant extract of the case UNITED COMMERCIAL BANK vs. COMMISSIONER OF INCOME TAX (1999) 156 CTR 0380 : (1999) 240 ITR 0355 (1999) 106 TAXMAN 0601 whereby Hon ble SUPREME COURT OF INDIA held as under : It is an established rule of commercial practice and accountancy that closing stock can be valued at cost or market price whichever is lower. What is taxable under the Act is the really accrued or arisen income. On the basis of the method of accountancy regularly employed by the assessee, the real income is pointed out in the IT return submitted by the assessee. This cannot be ignored by holding that in a balance sheet which is required to be statutorily maintained in a particular form, market value of the shares and securities is not mentioned or is mentioned in brackets. Hence, for the purpose of income-tax whichever method is adopted by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That practice was accepted by the Department and there was no justifiable reason for not accepting the same. Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting IT return on the real taxable income in accordance with a method of accounting adopted by the assessee consistently and regularly. That cannot be discarded by the Departmental authorities on the ground that assessee was maintaining balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stocks-in-trade (investments) because the bank was required to prepare balance sheet in the prescribed form and it had no option to change it. For the purpose of income-tax as stated earlier, what is to be taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case. Where the assessee-bank had been valuing its stock-in-trade (investments) at cost in the balance sheet but it had been valuing the same investments at cost or market value, whiche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. Merely because the assessee is also having dividend income, the provisions of s 14A of the Act are not applicable to the expenses incurred by the assessee in the course of its business when there was no material brought to show that the assessee had incurred expenditure for earning dividend income which is exempted from taxation. Respectfully following the above cited case laws for holding the bank as dealer in shares/ securities and consequently no disallowance is warranted on the shares/securities held as stock in trade. Accordingly we reverse the orders of Authorities Below and allow the ground raised by assessee. AO is directed accordingly. 10. Next issue raised by assessee in ground No.5 is that Ld. CIT(A) erred in confirming the action of AO for disallowing the provision of leave encashment amounting to ₹ 27. 13 crores u/s. 43B of the Act. Ld. Counsel for the assessee argued for provision for leave encashment that this issue is pending before Hon ble Supreme Court in the case of Exide Industries Ltd. Vs. Union of India (2007) 292 ITR 470 (Cal) and fairly conceded that subsequently Hon'ble Supreme Court has stayed this judgment of Hon'ble jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the orders of Authorities Below and allow the ground raised by assessee. AO is directed accordingly. 13. Next issue raised by assessee in ground No.9 is that Ld. CIT(A) erred in confirming the action of AO by disallowance the expense disallowed as per Rule 8D(2)(iii) of the IT Rule for the purpose of Minimum Alternate Tax (MAT for short) u/s 115JB of the Act. 14. As we have already held that the provision of MAT does not apply to the assessee, therefore, the present issue does not require any adjudication. 15. Next issue raised by assessee in Grounds No.10 to 12 is that Ld. CIT(A) erred in making the addition to the book profit u/s. 115JB of the Act on account of provision credited for bad and doubtful debts etc. As we have already held that the provisions of MAT are not applicable to the assessee, therefore, this issue does not require any adjudication. 16. Next issue raised by assessee in Ground No.13 for giving the direction to AO for re-computation of the set off and carry forward of unabsorbed business loss and depreciation brought forward from the earlier years. In terms of above ground of assessee s appeal we direct the AO to recompute the set off and carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 63% of the shares, which were purchased, are sold and the income derived therefrom is offered to tax as business income. The remaining 37% of the shares are retained. It has remained unsold with the assessee. It is those unsold shares have yielded dividend, for which, the assessee has not incurred any expenditure at all. Though the dividend income is exempted from payment of tax, if any expenditure is incurred in earning the said income, the said expenditure also cannot be deducted. But in this case, when the assessee has not retained shares with the intention of earning dividend income and the dividend income is incidental to his business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income and that should be disallowed from deductions. In that view of the matter, the approach of the authorities is not in conformity with the statutory provisions contained under the Act. Therefore, the impugned orders are not sustainable and require to be set aside. Accordingly, the substantial question of law is answered in favour of the assessee and against the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the definition of permanent establishment. The Hon'ble High Court in the case of ABN AMRO Bank N.V. vs CIT has held that a branch is to be taken as a permanent establishment and if it is further read with relevant article the permanent establishment or the branch is to be treated as a separate unit. Therefore, keeping in view the provisions of Section 90 of the IT Act, 1961 and Article 7 of the Double Taxation Avoidance Agreement (DTAA) and respectfully following the decision of the Hon'ble jurisdictional High Curt, it is held that between India and Singapore, the profits of the Singapore Branch is only taxable in Singapore and is not taxable in India. It is held that the profit of ₹ 42,40,70,571/- is not taxable in India and is allowed as dd. These grounds are allowed. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 25. At the outset, it was observed that the issue is squarely covered in favour of assessee and against the Revenue by the decisions of Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers Shareholders Pvt. Ltd. 252 CTR 151 (Bom); Hon'ble Delhi High Court in the case of CIT vs. Jai Parabol ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
