2012 (6) TMI 500 - ITAT MUMBAI

Applicability of section 36(1)(viii) to banks - financial corporation - public company and a Government Company - held that:- . The assessee is a financial corporation "within the meaning of Sec. 36(1)(viii) since it is Govt. company. However the deduction available under this section will be restricted to the amount transferred to Special reserve subject to the limit of prescribed percentage of profits derived from providing long term finance for the approved purposes mentioned in sec 36(1)(viii).

Disallowance of expenditure for non-deduction of TDS at Sikkim - Held that:- if the income is not taxable under the Indian Income tax Act, the payer is not under any obligation to deduct tax and the payment cannot be disallowed for non-deduction of Tax. disallowance on account of non-deduction/ payment of TDS deleted

Applicability of the provisions of sec. 115JB - appellant is not a company under Companies Act but is only deemed to be a company as per the provisions of sec. 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 - provisions of sec. 115JB do not apply to the assessee, and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee

Prior period expenses - expenditure disallowed as in the nature of rent, municipal taxes etc, where usually the amounts are paid after detailed negotiations and receipt of demand of the arrears amount from the parties. - held that:- even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction

Taxability of reversal of unrealized interest - assessee had been following similar method of accounting and the same had been accepted by the department in the earlier years. Therefore, the non-recognition of income for the year under consideration in respect of non-performing assets cannot be accepted. assessee's appeal allowed

Allowability of non-rural bad debts written off - credit balance in the provision for bad and doubtful debts allowed u/s. 36(1)(viiia) exceeds the bad debts written off - The provision of section 36(1)(viia) does not apply to bad debts written off to advances made by non-rural branches. Bad debts written off by advances made by non-rural branches should be allowed in full without any restrictions or limitations. provisions of sec. 36(1)(viia) does not apply to bad debts written off to advances made by non rural branches

Change in method of valuation of such securities held as stock-in-trade, by no stretch of imagination, can be said to be not bona fide. - In fact, ignoring the loss would result in distortion of the real income of the assessee during the year under appeal. The representative of the assessee also confirmed that the changed method of valuation of securities has consistently been followed in all subsequent years. We, therefore, approve the change in the method of valuation of securities held as stock-in-trade. appeal filed by the assessee is partly allowed for statistical purpose and the appeal filed by the Revenue is dismissed.