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2013 (4) TMI 752 - AT - Income TaxDisallowing the claim for deduction under section 35D for expenditure on public issue of equity shares - Held that - Matter is restored back to the file of the AO for fresh adjudication after affording a reasonable opportunity of hearing to the assessee. Ground no.1 is allowed in part in favour of the assessee. Prior period expense - Held that - Assessee had made submissions about pending rent payment and accrued interest on FDRs. As per the settled principles of taxation-jurisprudence, prior period expenses can be allowed in certain circumstances though they may not pertain to a particular AY for which return of income is filed.Crystalisation of expenses during a particular period is the deciding factor in such cases.We find that in the matter under consideration prior period expenses related to arrears of rent paid by the bank in respect of leased property and interest expenditure due to renewal of Fixed Deposits held by the FDR holders. The nature of expenditure is as such that some delay is bound to happen and crystalisation of such expenditure after 31st March of the AY.under consideration is natural Applicability of section 115 JB - Held that - 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.Therefore as held by the Jurisdictional ITAT in the case of Maharashtra State Electricity Board 2001 (8) TMI 310 - ITAT MUMBAI the provisions of Sec. 11 5JB cannot be made applicable to the appellant. Addition u/s 36(1) - Held that - FAA had rightly directed the AO to calculate the bad debts and provisions in a particular manner,that section 36(1) of the Act allowed writing off of bad debts as well as provisions in certain circumstances. Applicability of section 88E while computing the income of the assessee as per the provisions of section 115JB - Held that - Analysis of section 88E of the Act proves that where the total income of any assessee includes any income chargeable under the head Profits and gains of business/profession arising from taxable securities transaction,the assessee is entitled to a deduction from the amount of income tax on such transaction of an amount paid as STT. We agree with the view of the FAA that provisions of section 115JB deem the book profits to be income of the assessee and income tax on such book profits is payable at the rate provided in section115JB. Therefore,we are of the opinion that the amount tax paid as STT is income tax only and the reference to income tax in Section 88E includes the tax payable u/s. 115JB.In our opinion appellant-bank is entitled to the rebate of STT paid even if tax has to be calculated under MAT provisions
Issues Involved:
1. Deduction under Section 35D for expenditure on public issue of equity shares. 2. Disallowance under Section 14A related to exempt income. 3. Prior period expenses. 4. Applicability of Section 115JB (MAT) to a banking company. 5. Deduction under Section 36(1) for bad debts and provisions. 6. Rebate under Section 88E for Securities Transaction Tax (STT). Issue-wise Detailed Analysis: 1. Deduction under Section 35D for expenditure on public issue of equity shares: The assessee-bank claimed deductions under Section 35D for public issue expenses. The AO disallowed the claim, referencing Supreme Court judgments (Brooke Bond and Punjab State Industrial Development Corporation). The Tribunal restored the matter to the AO for fresh adjudication, following similar decisions in past years. The Tribunal directed the AO to decide the question afresh, allowing a reasonable opportunity for the assessee to be heard. The appeals for AYs 1997-98, 1998-99, 2003-04, and 2006-07 were partly allowed in favor of the assessee. 2. Disallowance under Section 14A related to exempt income: The assessee-bank's claim for exempt income was partially disallowed by the AO, who attributed interest and administrative expenses to the exempt income. The Tribunal, referencing the High Court decision in Godrej & Boyce Mfg. Ltd., restored the matter to the AO for fresh adjudication on a reasonable basis. The Tribunal directed the AO to consider the assessee's contention of having sufficient interest-free funds. The appeals for AYs 2003-04 and 2006-07 were partly allowed in favor of the assessee. 3. Prior period expenses: The AO disallowed prior period expenses, stating they did not pertain to the current AY and the assessee followed the mercantile system of accounting. The Tribunal found that the expenses related to arrears of rent and interest on FDRs, which crystallized during the year. Referencing past ITAT decisions, the Tribunal allowed the prior period expenses, deciding the issue in favor of the assessee for AY 2006-07. 4. Applicability of Section 115JB (MAT) to a banking company: The AO applied MAT provisions to the assessee-bank, which was contested. The Tribunal, referencing ITAT decisions in Union Bank of India and Indian Bank, held that Section 115JB does not apply to the assessee-bank, as it is not a company under the Companies Act but deemed so under the Banking Companies Act. The Tribunal decided the issue in favor of the assessee for AY 2006-07. 5. Deduction under Section 36(1) for bad debts and provisions: The AO allowed deductions for actual bad debts written off but adjusted provisions for rural debts. The Tribunal, referencing the Supreme Court decision in Catholic Syrian Bank Ltd., upheld the FAA's order, allowing both the write-off of bad debts and provisions for rural advances. The Tribunal directed the AO to verify the facts and take a decision accordingly. The issue was decided against the AO for AY 2006-07. 6. Rebate under Section 88E for Securities Transaction Tax (STT): The AO rejected the assessee's claim for rebate of STT against tax liability under Section 115JB. The Tribunal upheld the FAA's decision, stating that STT paid is considered income tax, and the rebate is allowable even under MAT provisions. The issue was decided against the AO for AY 2006-07. Conclusion: The appeals filed by the assessee-bank for AYs 1997-98, 1998-99, 2003-04, and 2006-07 were partly allowed, while the appeal filed by the AO for AY 2006-07 was dismissed. The Tribunal directed fresh adjudication on several issues, ensuring a reasonable opportunity for the assessee to be heard.
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