TMI Blog2020 (5) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... nd acceptance with the Tribunal is that place referred to in the above definition clause is the ward of a panchayat or municipality, the AO took the view that place contained in the definition clause should mean a revenue village. No doubt, place as such is not defined in the definition clauses and so much so, we have to find out the scope and meaning of place referred to in the section. Standing counsel for the Department produced before us last published Census Report of 2001. Even though the previous Census Report may be the relevant one, we feel the scope of place as referred to in the Census Report produced could be adopted for the purpose of this case - we are inclined to reject the above ground of appeal raised by the assessee. Allowability of claims made during the course of assessment - HELD THAT:- Tribunal relied on the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [ 2006 (3) TMI 75 - SUPREME COURT] and remanded the issue to the file of CIT(A) for fresh consideration. In view of the above decision of the Tribunal cited supra, we are inclined to remit all the above grounds to the CIT(A) to consider afresh and decide the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development or development of infrastructure facility in India and development of housing in India. 4. In first appeal, the CIT(A), confirmed the same, by observing as under:- 6.3 Facts being identical, following my own order, I hold that the appellant is entitled to deduction in accordance with the section 36(1)(viii) for the income generated from advancing to (A) industrial or agricultural development (B) Development of infrastructure facility in India only. No deductions shall be allowed to the appellant for amount claimed in respect of advances / loans given for individual houses. Further, the disallowance will be computed with respect to amount claimed by the appellant in its revised return of income. This ground is, therefore, partly allowed. Against the same, both the assessee and Revenue is in appeal before us. 5. After hearing both the sides and perusing the material on record, we are of the opinion that the same issue came for consideration before this Tribunal in assessee s own case for assessment year 2012-2013 in ITA No.215/Coch/2018, wherein the Tribunal vide its order dated 20th March, 2019, observed as under:- 5. The next common ground in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including a public company Being a Banking Company, it is clear that the assessee is a Specified entity within Clause (iii) of Explanation (a) to Section 36(1)(viii). 9.1 Next point to be considered is whether the assessee will be entitled to deduction u/s. 36(1)(viii) for income generated by giving loans to their customers for purchase/construction of individual houses. For this we will have to consider Explanation (b) to Section 36(1)(viii). (b) eligible business means (i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for (A) industrial or agricultural development (B) Development of Infrastructure facility in India; or (C ) Development of Housing in India (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and 9.2 Here it is quite apparent that a Housing Finance Company will be entitled to the deduction u/s 36(1)(viii) from income generated out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act. 17.3 A view has been expressed that NHB is not entitled to the benefits of section 36(1)(viii) on the ground that it is not engaged in the long-term financing for construction or purchase of houses in India for residential purpose. Hence the Act has been amended to provide that corporations engaged in providing long-term finance (including refinancing) for development of housing in India will be eligible for the benefit under section 36(1)(viii). 17.4 Applicability - These amendments will be effective from the 1st April, 2010 and will accordingly apply in respect of assessment year 2010-11 and subsequent assessment years. 9.5 It is true that the Amendment provided the deduction to National Housing Bank. But the amendment also substituted the previous words with words 'Development of Housing' which has to be interpreted in its plain dictionary meaning in absence of any definition given. We cannot read into law anything that is not specifically provided therein. 9.6 The assessee referred to the order of the Tribunal in the case of Ernakulam District Co-Op Bank Ltd. vs. Joint Director of Income tax (TS-7866-IT AT-2017 (Cochin). It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agri. Purposes. Mithra SHG / NHG loans 12,59,494 Carry bag mfg. Units (Industrial purposes) Term loans 64,17,383 For establishment of new industries and allied activities societies and expansion of existing industries. Housing Loans 42,85,34,630 Housing Project loans 2,32,48,158 Small Scale Industrial Projects etc. Other Long Term 4,54,60,679 For purchase of property loan housing (construction of flats / purchase of property for construction of house /flat) Total 50,98,18,515 8.6. From the above discussions, it is clear that the said loans falls under the eligible business of providing long term finance for industrial or agricultural development, development of infrastructure facility in India and development of housing in India and hence is eligible for deduction u/s.36(1)(viii). Accordingly, deduction of ₹ 1, 56,78,943 is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of infrastructure facility in India. Therefore, this ground was partially allowed. However, the CIT(A) found that the assessee had adopted a new methodology for claiming deduction u/s 36(1)(viii) of IT Act which is more objective and had resulted in reduction of assessee s claim. Thus, while allowing deduction u/s 36(1)(viii) of IT Act, the CIT(A) directed the assessing officer to allow such deduction as per the new computation. 10.3 In view of the above order of the Tribunal in the case of Ernakulam District Co-op. Bank Ltd. vs. Joint Director Income-tax (supra), we do not find any infirmity in the order of the CIT(A) in granting relief to the assessee u/s. 36(1)(viii) of the Act with regard to providing long term finance for industrial or agricultural development or development of infrastructure facility in India and the same is confirmed. Thus, this ground of appeals of both the assessee as well as the Revenue are dismissed. 6. In view of the above order of the Tribunal, we are inclined to dismiss the ground raised by the Revenue as well as the assessee. Accordingly, this ground of appeal is rejected. 7. Ground No.2 raised by the assessee is against not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted for the purpose of this case. What is written in the Census Report 2001 is as follows : The basic unit for rural areas is the revenue village with definite surveyed boundaries. The rural area is, however, taken as the residual portion excluding the urban area and for that no strict definition is followed. 10. In view of the aforesaid judgment of the Hon ble jurisdictional High Court (supra), we are inclined to reject the above ground of appeal raised by the assessee. 11. The other grounds of appeal raised by the assessee for our consideration read as under:- 3 Allowability of claims made during the course of assessment. The Ld. CIT(A) erred in holding that claims made during the course of assessment cannot be allowed even by CIT(A) without appreciating that in a number of judicial decisions that appellate authorities should decide on claims made other than by way of revised return. Accordingly, CIT(A) ought to have decided and allowed the following claims. 4. Deduction u/s 36(1)(vii) The CIT(A) erred in not allowing deduction in respect of bad debts written off amounting to ₹ 97,32,19,596.00 u/s 36(1)(vii) claimed during the assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1 to section 37(1) is not applicable to such payments. 12. These grounds were raised for the first time before the CIT(A). The assessee has not made any claim in its original return or in the revised return filed by it. According to the assessee, the Assessing Officer ought to have taken cognizance of such claims which were entitled to. However, the CIT(A) observed that these claims were made by the assessee during the course assessment proceedings by way of letter dated 19.12.2017 and there was no claim made in the original return or revised return and these claims were made by way of above letter, before the A.O., as such the Assessing Officer has not allowed such claim of deductions made by the assessee by way of letter during the course of assessment proceedings, and hence, he rejected the grounds. 13. After hearing both sides and perusing the material on record, in our opinion, the observation of the CIT(A) is not proper as held by the Bangalore Bench of Tribunal in the case of Rakesh Singh v. ACIT in ITA No.1027/Bang/2011 dated 24th August, 2012 relevant to assessment year 2007-2008, wherein the Tribunal observed that the assessee is entitled to raise not merely add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, being a bank, the funds generated from all activities is kept common and there is no segregation of interest bearing and interest free funds. It is held that what section 14A contemplates is real expenditure and not assumed or deemed expenditure. The fact that the assessee has not recognized any expenditure towards earning this income does not mean that there is no expenditure at all in connection with the investment in such shares. There is an element of expenditure in connection with administration and a portion of interest paid also gets merged into the activity of earning dividend. Had the money not been invested in such shares, it would have been available for normal business and to that extent there would not have been a need to borrow to that extent from public and other banks. While deciding this matter reliance is placed on the decisions of the following Courts / ITAT :- (i) K.Somasundaram Bros. Vs. CIT (2381TR 139)(Mad.) (ii)) CIT vs. H.R.Sugar Factory Pvt. Ltd. (187/TR 363)(Alah.) (iii) Consolidated Coffee Vs. State of Kamataka (248 ITR 432)(SC) (iv) ITA T decision in CIT Vs. S. G. Investments (89 ITO 44/Kol.) (v) ITAT decision in CfT Vs. Qanish K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rationale adopted by the Assessing Officer to estimate the expenditure for the purpose of disallowance under Section 14A is not tenable, we feel the matter should be restored to the Assessing Officer for making disallowance under section 14A by reasonably estimating as nearly as possible the expenditure incurred for earning the tax free income. This should be done after giving opportunity to '.he asses see-banks to suggest their own formula with reference to accounts for the purpose of arriving at the actual amount or near actual amount The disallowance on estimated basis has to be done as above until Rule 80 was framed and thereafter it is for the Assessing Officer to make disallowance by following sub-section (2) of Section 14A and Rule 80 of the Income Tax rules. 6. So far as the disallowance of administrative expenditure is concerned, we feel considering the fact that there is no precise formula for proportionate disallowance, no disallowance is called for, for proportionate administrative cost attributable to earning of tax free income until Rule 80 came into force. We, therefore, dispose of the appeals by setting aside the orders of the Tribunal and that of the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from business and profession . When the shares were held as stock-intrade , certain dividend was also earned, though incidentally, which was also income which by virtue of section 10(34) of the Act, was not to be included in the total income and was exempt from tax. This triggered the applicability of section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. (ii) That the Assessing Officer, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in rule 8D of the Rules and holding that section 14A of the Act would be applicable. The Commissioner (Appeals) disallowed the entire deduction of expenditure. That view of the Commissioner (Appeals) was clearly untenable and rightly set aside by the Tribunal. Therefore, on the facts, the Punjab and Haryana High Court had rightly affirmed the view of the Tribunal, though the theory of dominant intention applied by the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the High Court. It is to be kept in mind that in those cases where shares are held as stock-in-trade , it becomes a business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee-company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee-company. In that case, whenever dividend is declared by the investee-company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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