2011 (5) TMI 988 - AT - Income Tax

Issues Involved:
1. Disallowance under section 14A of the Income-tax Act, 1961.
2. Provision for bad and doubtful debts in rural branches under section 36(1)(viia).
3. Write-off of bad debts under section 36(1)(vii).
4. Disallowance of amortized expenses on premium paid on permanent category investments.
5. Disallowance of employer's contribution to the employee's pension fund under section 43B(b).
6. Disallowance of loss on write-off of current investments.
7. Disallowance of share issue expenses.
8. Disallowance of pension paid directly to retired employees.
9. Addition of excess cash found.
10. Non-grant of allowance for provision of leave encashment.
11. Levy of interest under section 234B.
12. Disallowance of bad and doubtful debts written off as irrecoverable.
13. Disallowance of depreciation on HTM investments.
14. Addition of unclaimed deposits.
15. Addition of surplus from the sale of pawned jewelry.

Detailed Analysis:

1. Disallowance under section 14A:
The jurisdictional high court confirmed the retrospective application of section 14A, including Rule 8D, stating that where separate accounts are not maintained, the AO must adopt a rational basis. The matter was remitted back to the AO to comply with the jurisdictional high court's decision.

2. Provision for bad and doubtful debts in rural branches:
The jurisdictional high court held that the basic unit for rural branches is a "revenue village" with a population of not more than 10,000. The matter was remitted back to the AO to work out the disallowance in accordance with the high court's guidelines.

3. Write-off of bad debts under section 36(1)(vii):
The jurisdictional high court's Full Bench decision clarified the provisions of section 36(1)(vii) read with section 36(2). The matter was restored to the AO to allow the assessee an opportunity to press its claim with reference to the Full Bench decision.

4. Disallowance of amortized expenses on premium paid on permanent category investments:
The tribunal restored the matter back to the AO to decide de novo, considering all relevant aspects and issuing clear findings of fact and law.

5. Disallowance of employer's contribution to the employee's pension fund under section 43B(b):
The matter was restored to the first appellate authority to adjudicate afresh, issuing clear and definite findings after allowing an opportunity of hearing to both parties.

6. Disallowance of loss on write-off of current investments:
The tribunal restored the matter back to the file of the CIT(A) to decide afresh, issuing definite findings of fact after hearing both parties.

7. Disallowance of share issue expenses:
The assessee's claim was dismissed as the capital raised was towards maintaining its capital base, and the decision by the apex court in the case of CIT v. Brooke Bond Ltd. was applicable.

8. Disallowance of pension paid directly to retired employees:
The tribunal restored the matter back to the AO to determine the issue both factually and legally, following the tribunal's decision for earlier years.

9. Addition of excess cash found:
The tribunal dismissed the assessee's ground, holding that the excess cash represented a trade receipt and the principles of ownership as explained by the apex court were applicable.

10. Non-grant of allowance for provision of leave encashment:
The tribunal restored the matter back to the first appellate authority to adjudicate afresh, issuing clear findings after allowing an opportunity of hearing to both parties.

11. Levy of interest under section 234B:
The tribunal upheld the levy of interest as mandatory and compensatory, following the jurisdictional high court's decision in the assessee's own case.

12. Disallowance of bad and doubtful debts written off as irrecoverable:
The tribunal remitted the matter back to the AO to apply the jurisdictional high court's decision in the assessee's own case.

13. Disallowance of depreciation on HTM investments:
The tribunal dismissed the Revenue's ground, following the consistent view of the tribunal and the jurisdictional high court's decision in the case of CIT v. Nedungadi Bank Ltd.

14. Addition of unclaimed deposits:
The tribunal dismissed the Revenue's ground, following the tribunal's decision in the case of Catholic Syrian Bank Ltd., holding that the unclaimed deposits continued to represent the bank's liability.

15. Addition of surplus from the sale of pawned jewelry:
The tribunal held that the surplus represented a trade surplus, applying the principles enunciated in the cases of CIT v. T.V. Sundaram Iyengar & Sons (P.) Ltd. and Shree Digvijay Cement Mills Ltd. vs. Union of India.

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