9911796707
TMI Blog2023 (6) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The learned Commissioner of Income tax of Appeal Trichy failed to see that the appellant did not incur any expenditure in earning the tax free income. The estimated disallowance @ 2% of the tax free income is not correct as per the decision of many appellate authorities. (ii) The learned Commissioner of Income tax of Appeal Trichy failed to see that the Assessing Officer had not proved any expenditure directly related to the tax free income in the case of the appellant. II (i) The learned Commissioner of Income tax of Appeal Trichy failed to see that the lease agreement of two lessee, viz, M/s Rajender Steels Ltd and M/s Aruna Textiles & Exports Ltd., are genuine. Depreciation claimed by the appellant regarding the two items were remitted back to the assessing offer by the Commissioner of Income tax of Appeal for A Y 96-97. The transactions were genuine. (ii) In the case of M/s Rajender Steels Ltd, Kanpurdue to mismanagement of business affairs by the lessee the projects failed after two years from the date of loan. (iii) The other banks were also advanced money to the lessee under different Scheme. (iv) Purchase receipts are available. Insurance done and Bank Officials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Fund. The appellant has got a self-managed Provident Fund. So the IBA on behalf of the members filed an application to grant exemption from Rule 89 (i.e.,) the individual Banks can maintain the fund & pay pension to employees without investing in LIC as per Rule 89. The CBDT gave exemption to Rule 89 in 1996 to the Nationalized Banks only. So Private Sector Banks through its Association once again requested CBDT to give exemption to Rule 89 to Private Sector Banks also. This petition by Private Sector Banks Association was not rejected immediately by the CBDT. CBDT only on 13th August 2003 refused exemption from Rule 89 to the Private Sector Banks and it was communicated by the Bank's Association through its letter datef5 03-09-2003. So the appellant Bank purchased annuity from LIC from October 2003. During this pendency period, i.e. from 1998 the Private Sector Banks paid pension directly to the pensioners. In other words, the appellant bank as soon as the petition rejected, acted according to Law and purchased Annuity from LIC. So, LIC Annuity cannot be purchased for past liability (i.e.) from 1993 to 1998. Past liability is to be paid by Bank directly. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l). (v) Impact of wage revision was provided during the year under consideration. This will reveal correct profit/loss of the concern. (vi) The case law cited by Assessing officer is irrelevant. The CIT (Appeals) thus erred in disallowing the claim for provision for wage revision. 3. The brief facts of the case are that the assessee is a banking company filed return of income u/s.139(1) of the Income Tax Act, 1961 (in short "the Act"). The assessment has been completed u/s.143(3) of the Act, where the AO has made proportionate disallowance towards expenditure incurred for exempt income. The assessee carried the matter in appeal before the First Appellate Authority and the Ld.CIT(A) for the reasons stated in their appellate order, directed the AO to estimate 2% of exempt income towards disallowance of expenditure relatable to exempt income. The assessee carried the matter in further appeal before the Tribunal and the Tribunal for the reasons stated in their order dated 17.01.2013, upheld the findings of the Ld.CIT(A) in directing the AO to estimate 2% on exempt income towards expenditure relatable to earning exempt income. The assessee preferred an appeal before the Hon'ble M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litary issue that came up for our consideration from all these appeals filed by the assessee relates to disallowance of expenditure relatable to exempt income u/s.14A of the Act. We find that the issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai Benches in the assessee's own case for AY 2013-14, where the Tribunal by following the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd. v. CIT (supra) held that shares & securities held by the bank or guarantor and income received for such shares & securities must be considered as business income, and consequently, provisions of Sec. 14A of the Act, would not be attracted to such income. The relevant findings of the Tribunal are as under: 12. The first issue that came up for our consideration from Ground No.2 of disallowance of expenditure relatable to exempt income u/s.14A of the Act The earned dividend income of Rs. 2,21,85,558/-, however no disallowance as required Act had been made by the assessee. Therefore, the AO has disallowed 2% of such income as expenses relatable to exempt income u/s.14A read with Rule 8D of the Rules, 1962 (hereinafter the 'IT Rules'). On ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , supra, we direct the AO to delete addition made towards disallowance u/s.14A r.w.rule 8D of the IT Rules, 1962. 7. Further, the Hon'ble Karnataka High Court in the case of the CIT, LTU, the Addl./Jt.CIT, LTU, Bengaluru v. M/s.Canara Bank, reported in 2023 (1) TMI 243 (Karnataka High Court), had considered an identical issue and by following the decision the Hon'ble Supreme Court in the case of South Indian Bank Ltd. v. CIT (supra) held that provisions of Sec. 14A of the Act, are not applicable in case of banking companies, where dividend income has to be considered as business income. The Hon'ble Delhi High Court, in the case of PCIT v. Punjab National Bank had also considered an identical issue and by considering the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT reported in [2018] 402 ITR 640 (SC) held that provisions of Sec. 14A of the Act, will not apply on profits from shares where held as stock in trade and not as investments. The sum and substance of ratio laid down by the Hon'ble Supreme Court and the Hon'ble High Courts are that in case of banking companies were shares & securities are held as stock in trade, dividend income is consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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