2011 (4) TMI 1358 - AT - Income Tax

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of claim of Rs. 32.5 lakhs as business expenditure u/s 37 of the Income Tax Act.
3. Whether the non-recoverable deposits with KCC Bank qualify as business expenditure u/s 37.

Summary:

1. Delay in Filing the Appeal:

The assessee Bank filed the appeal with a delay of three days, attributing the delay to the indisposition of its Manager. The delay was supported by a Medical Certificate. After due examination, the delay was condoned, and the appeal was accepted for consideration.

2. Disallowance of Claim of Rs. 32.5 Lakhs as Business Expenditure u/s 37:

The assessee claimed Rs. 32.5 lakhs as business expenditure u/s 37, citing non-recoverable deposits and interest with KCC Bank, which had become sick. The AO disallowed the claim on the grounds that the assessee had not made any provision in its books of account for such a claim, as required u/s 37. The CIT (A) upheld the AO's decision, stating that the deposits were not written off in the books, and the entire deposit amount had not been claimed as irrecoverable.

3. Non-Recoverable Deposits with KCC Bank:

The assessee argued that the deposits with KCC Bank were made as per RBI guidelines and had become irrecoverable due to the bank's sickness. The CIT (A) noted that no conclusive proof was provided to support the claim that KCC Bank had become sick. Furthermore, the CIT (A) observed that the liability of KCC Bank had not ceased, and the assessee had the legal right to recover the deposits. The CIT (A) also pointed out that the assessee had not taken any legal recourse to recover the deposits, and the claim of Rs. 32.5 lakhs as business expenditure was not justified.

The Tribunal examined the rival submissions and found that the assessee had not provided any clinching evidence to justify the claim of irrecoverable deposits. The Tribunal agreed with the CIT (A) that the deposits had not become irrecoverable, as the assessee had renewed the deposits after maturity. The Tribunal also noted that the assessee had not shown the claimed amount as business expenditure in its balance sheet, but only in its computation of income.

Based on the facts and circumstances, the Tribunal concluded that the assessee's claim of Rs. 32.5 lakhs as business expenditure u/s 37 was not allowable. The authorities below were justified in their stand, and the assessee's appeal was dismissed.

Conclusion: The assessee's appeal was dismissed, and the claim of Rs. 32.5 lakhs as business expenditure u/s 37 was disallowed.

Pronounced in the open court on this 8th day of April, 2011.