Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2013 (4) TMI AT This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2013 (4) TMI 701 - AT - Income Tax


Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Deduction of broken period interest.
3. Deduction of outstanding credits in blocked accounts.
4. Deduction under Section 35D of the Income Tax Act.
5. Deduction of provision on standard assets under Section 36(1)(viia).
6. Deduction of unrealized interest on Non-Performing Assets (NPAs).
7. Addition of amounts realized from investments written off in previous years.
8. Depreciation on investments classified under HTM category.
9. Deduction under Section 36(1)(vii) for debts written off by non-rural branches.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act:
The Assessing Officer (AO) disallowed Rs. 19,51,21,158/- under Section 14A, comprising Rs. 17,33,40,193/- from interest expenditure and Rs. 2,17,80,965/- from other operating expenditure. The CIT(A) followed the decision in the assessee's own case for previous years and deleted the disallowance of interest expenditure while restricting the disallowance on operating expenditure to two months' salary of the funds department. The tribunal upheld the CIT(A)'s order and directed the AO to disallow 2% expenditure relating to earning exempted income under Section 14A.

2. Deduction of broken period interest:
The AO disallowed Rs. 147,43,57,963/- as broken period interest, treating it as capital expenditure. The CIT(A) directed the AO to delete the addition, relying on various case laws and the ITAT's decision. The tribunal upheld the CIT(A)'s order, noting that the issue was covered by the decision in the assessee's own case for AY 1996-97.

3. Deduction of outstanding credits in blocked accounts:
The AO disallowed Rs. 10.58 crores transferred to the capital reserve account, treating it as income. The CIT(A) directed the AO to delete the disallowance, following the Supreme Court's decision in CIT Vs. Sugauli Sugar Works Pvt. Ltd. The tribunal upheld the CIT(A)'s order, confirming that the liability did not cease to exist unilaterally.

4. Deduction under Section 35D of the Income Tax Act:
The AO disallowed Rs. 1,14,45,507/- claimed under Section 35D, stating that the assessee did not have the status of an industrial undertaking. The CIT(A) confirmed the AO's action, following the ITAT Mumbai's decision in Bank of Baroda Vs. JCIT. The tribunal upheld the CIT(A)'s order, noting that the issue was decided against the assessee in earlier years.

5. Deduction of provision on standard assets under Section 36(1)(viia):
The AO disallowed Rs. 13,28,54,000/- for provision on standard assets, stating it was not of the same species as specified under Section 36(1)(viia). The CIT(A) confirmed the AO's action. The tribunal upheld the CIT(A)'s order, following the decision in the assessee's own case for earlier years, stating that provision for standard assets cannot be equated with provision for bad and doubtful debts.

6. Deduction of unrealized interest on Non-Performing Assets (NPAs):
The AO disallowed Rs. 3,63,00,000/- as unrealized interest on NPAs. The CIT(A) confirmed the AO's action. The tribunal set aside the CIT(A)'s order and directed the AO to allow the deduction, following the decision in the assessee's own case for AY 2006-07 and the Delhi High Court's decision in CIT Vs. Industrial Finance Corpn. of India Ltd.

7. Addition of amounts realized from investments written off in previous years:
The CIT(A) did not entertain the ground raised by the assessee for Rs. 2,29,85,000/- realized from investments written off in earlier years, stating that the assessee's appeal was pending before the Tribunal. The tribunal remitted the issue to the AO for verification, following the CIT's order under Section 264 for AY 2004-05.

8. Depreciation on investments classified under HTM category:
The AO disallowed Rs. 211,82,17,733/- claimed as depreciation on HTM category investments, stating they cannot be treated as stock in trade. The CIT(A) allowed the depreciation in principle, subject to verification by the AO. The tribunal upheld the CIT(A)'s order, following the decision in the assessee's own case for AY 2006-07 and other judicial pronouncements.

9. Deduction under Section 36(1)(vii) for debts written off by non-rural branches:
The AO disallowed Rs. 57,50,32,244/- claimed as deduction for debts written off by non-rural branches, stating the assessee failed to substantiate its claim. The CIT(A) directed the AO to verify the details furnished by the assessee and allow the claim accordingly. The tribunal remitted the issue to the AO for verification, following the Supreme Court's decision in Catholic Syrian Bank Ltd. Vs. CIT.

Conclusion:
The revenue's appeal (ITA No. 1592/Hyd/08) and the assessee's appeal (ITA No. 1644/Hyd/08) were partly allowed. The tribunal upheld the CIT(A)'s orders on several issues while remitting some issues back to the AO for verification and fresh consideration.

 

 

 

 

Quick Updates:Latest Updates