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2014 (6) TMI 954 - AT - Income TaxDisallowance u/s 14A - Held that - We apply the decision of CIT vs Vegetable Products Ltd 1973 (1) TMI 1 - SUPREME Court and in the view favourable to the assessee is followed. So, in principle, we hold that the authorities below have wrongly invoked section 14A in case of investments held as stock-in-trade wherein the exempt income by way of dividends is only incidental. It is also made clear that since there is no verification of the factual position of investments held as stock-in-trade , we accept the assessee s contentions in principle only and remit the issue back to the Assessing Officer to determine the true factual position. The assessee s alternative plea carries only an academic significance. The relevant ground is accepted for statistical purposes. UPS attached to the computers are part of computer systems and eligible for depreciation @ 60% and directed the Assessing Officer to allow depreciation on UPS @ 60% Restricting relief @ 90% of the tax paid in foreign countries - Held that - CIT(A) has quoted a notification No.S.O 2123(E) dated 28.8.2008 clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by elimination method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to section 90 making the notification retrospectively applicable. In this manner, the CIT(A) has directed the Assessing Officer to allow relief to the assessee as per the aforesaid notification. Section 115JB could not have been invoked in a bank s case.
Issues Involved:
1. Disallowance of depreciation on building including cost of land. 2. Bad debts (rural branches) written off. 3. Bad debts relating to rural branches under section 36(1)(viia). 4. Disallowance under section 14A read with Rule 8D. 5. Depreciation on UPS claimed at 80%. 6. Disallowance of expenditure by way of leave encashment. 7. Restriction of relief on tax paid in foreign countries. 8. Applicability of MAT provision under section 115JB. 9. Disallowance of depreciation on fixed assets taken over from another bank. 10. Provision for standard assets and country risks. 11. Disallowance under Rule 8D(2)(ii) read with section 14A. 12. Contribution to an unrecognized staff welfare fund. 13. Loss on revaluation of investments. 14. Loss on revaluation of derivative contracts. 15. Bad debts recovered. 16. Computation of book profits under section 115JB. 17. Computation of average advances for deduction under section 36(1)(viia). Issue-wise Detailed Analysis: 1. Disallowance of Depreciation on Building Including Cost of Land: The assessee's claim of depreciation on building, including the cost of land, amounting to Rs. 40,676/- was disallowed by the Assessing Officer and upheld by the CIT(A). The tribunal upheld the CIT(A)'s order, referencing a previous decision against the assessee for the preceding assessment year. 2. Bad Debts (Rural Branches) Written Off: The assessee's claim of bad debts written off, amounting to Rs. 9,85,75,637/-, was disallowed by the Assessing Officer and upheld by the CIT(A). The tribunal remitted the issue back to the Assessing Officer for a fresh decision, consistent with the preceding assessment year's order. 3. Bad Debts Relating to Rural Branches under Section 36(1)(viia): The assessee's claim of deduction for bad debts was restricted by the Assessing Officer and upheld by the CIT(A) based on population criteria. The tribunal upheld the CIT(A)'s order, referencing the decision of the Kerala High Court in CIT vs. Lord Krishna Bank Ltd. 4. Disallowance under Section 14A Read with Rule 8D: The assessee's disallowance of Rs. 14,88,82,601/- under section 14A read with Rule 8D was partly upheld and partly disallowed by the CIT(A). The tribunal held that section 14A was wrongly invoked for investments held as stock-in-trade and remitted the issue back to the Assessing Officer for verification. 5. Depreciation on UPS Claimed at 80%: The assessee's claim of depreciation on UPS at 80% was restricted to 15% by the Assessing Officer and upheld by the CIT(A). The tribunal allowed depreciation at 60%, consistent with the preceding assessment year's order. 6. Disallowance of Expenditure by Way of Leave Encashment: The tribunal noted that there was no disallowance of leave encashment expenditure in the assessment order and dismissed the relevant ground for this reason. 7. Restriction of Relief on Tax Paid in Foreign Countries: The assessee's claim of double taxation relief was restricted by the Assessing Officer and upheld by the CIT(A) based on a notification and Finance Act, 2012. The tribunal upheld the CIT(A)'s order, consistent with the preceding assessment year's decision. 8. Applicability of MAT Provision under Section 115JB: The tribunal held that section 115JB could not be invoked in a bank's case, consistent with the preceding assessment year's decision, and dismissed the alternate contentions as academic. 9. Disallowance of Depreciation on Fixed Assets Taken Over from Another Bank: The tribunal remitted the issue back to the Assessing Officer for a fresh decision, consistent with the preceding assessment year's order. 10. Provision for Standard Assets and Country Risks: The tribunal upheld the CIT(A)'s order allowing the provision for standard assets and country risks under section 36(1)(viia), consistent with the preceding assessment year's decision. 11. Disallowance under Rule 8D(2)(ii) Read with Section 14A: The tribunal treated this as a consequential issue and rejected the Revenue's ground, consistent with the decision on section 14A in the assessee's appeal. 12. Contribution to an Unrecognized Staff Welfare Fund: The tribunal upheld the CIT(A)'s order deleting the disallowance of Rs. 15 crores towards contribution to an unrecognized staff welfare fund, consistent with the preceding assessment year's decision. 13. Loss on Revaluation of Investments: The tribunal upheld the CIT(A)'s order deleting the disallowance of Rs. 69,13,38,139/- on revaluation of investments, consistent with the preceding assessment year's decision. 14. Loss on Revaluation of Derivative Contracts: The tribunal upheld the CIT(A)'s order deleting the disallowance of Rs. 11,32,83,633/- on revaluation of derivative contracts, consistent with the preceding assessment year's decision. 15. Bad Debts Recovered: The tribunal upheld the CIT(A)'s order deleting the disallowance of Rs. 71,34,751/- on bad debts recovered, citing section 41(4) and the lack of any legal or factual error in the CIT(A)'s findings. 16. Computation of Book Profits under Section 115JB: The tribunal held that section 115JB was not applicable in the assessee's case, rendering the Revenue's grounds academic and rejecting them. 17. Computation of Average Advances for Deduction under Section 36(1)(viia): The tribunal upheld the CIT(A)'s order directing the Assessing Officer to consider the aggregate average advances outstanding at the end of each month, consistent with the decision in City Union Bank's case. Conclusion: The assessee's appeal was partly allowed, and the Revenue's appeal was partly allowed for statistical purposes.
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