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2014 (9) TMI 347 - AT - Income TaxExpenses incurred on public issue of equity shares disallowed u/s 35D Held that - As decided in assessee s own case for the earlier assessment year, it has been decided that the Tribunal rightly observed from the assessment as well as the impugned order that there is no discussion on this aspect of the matter thus, the matter is liable to be remitted back to the AO for fresh adjudication Decided in favour of assessee. Confirmation of disallowance u/s 14A r.w. Rule 8D Indirect expenses - Held that - In CIT vs. Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - HIGH COURT BOMBAY - if there are funds available with the assessee, both interest free and overdraft/loans taken, then presumption would arise that investments would be out of the interest free fund generated or available with the assessee - CIT(A) from the balance sheet of the assessee observed that own funds of the assessee were sufficient for making investments yielding exempt income and under such circumstances no disallowance u/s 14A read with rule 8D (2) (ii) was called for - The disallowance under rule 8D(2)(iii) is in fact related to indirect expenditure incurred for earning of exempt income thus, there was no infirmity in the order of the CIT(A) and the disallowance under 8D(2)(iii) is upheld Decided against assessee. Computation of income u/s 115JB Held that - As decided in assessee s own case for the earlier assessment year, it has been held that provisions of Section 115JB were not applicable to the assessee-bank - The provisions of Sec. 115JB do not apply to the assessee and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee revenue could not bring any contrary fact or case law which may justify departure from the above finding of the Tribunal Decided in favour of assessee.
Issues Involved:
1. Deduction under Section 35D for public issue expenses. 2. Disallowance under Section 14A read with Rule 8D. 3. Application of Section 115JB (Minimum Alternate Tax) to the assessee. 4. Bad debts write-off. 5. Verification of unmatured forex contracts. 6. Disallowance under Section 14A for computing book profit under Section 115JB. 7. Deletion of addition regarding appreciation in investment value while computing total income under Section 115JB. 8. Rebate under Section 88E from tax payable under Section 14A. Issue-wise Detailed Analysis: 1. Deduction under Section 35D for Public Issue Expenses: The assessee contested the disallowance of Rs. 1,44,24,299/- claimed under Section 35D for expenses incurred on public issue equity shares. The Tribunal referred to its earlier decision for assessment years 1997-98 and 1998-99, where it had restored the issue to the Assessing Officer (AO) for fresh adjudication. Following this precedent, the Tribunal directed the AO to re-examine the claim, allowing the assessee a reasonable opportunity of being heard. Thus, this ground was partly allowed for statistical purposes. 2. Disallowance under Section 14A read with Rule 8D: The AO had disallowed Rs. 1,36,08,000/- under Section 14A read with Rule 8D for expenses related to earning tax-free income. The CIT(A) observed that the assessee had sufficient own funds for investments and deleted the disallowance under Rule 8D(2)(ii) but upheld the disallowance under Rule 8D(2)(iii) for administrative expenses. The Tribunal upheld the CIT(A)'s decision, citing the Bombay High Court's judgment in 'CIT vs. Reliance Utilities and Power Ltd.' that presumes investments are made from interest-free funds if available. The Tribunal found no merit in the assessee's contention that Section 14A applies only to direct expenditure. 3. Application of Section 115JB (Minimum Alternate Tax): The assessee argued that Section 115JB does not apply to banks. The Tribunal referred to its earlier decision for assessment year 2006-07, where it had ruled in favor of the assessee, stating that Section 115JB does not apply to banking companies. The Tribunal upheld this position, finding no contrary evidence from the Revenue. Consequently, the remaining grounds related to Section 115JB were rendered academic and not addressed. 4. Bad Debts Write-off: The Revenue's appeal contested the CIT(A)'s allowance of Rs. 264 crores as bad debts, arguing it was a provision, not an actual write-off. The Revenue did not press this ground during the hearing, leading to its dismissal. 5. Verification of Unmatured Forex Contracts: The Revenue's appeal included a ground on the verification of unmatured forex contracts. The representatives stated that the required rectification had been made under Section 154, rendering this ground infructuous. 6. Disallowance under Section 14A for Computing Book Profit under Section 115JB: The Tribunal's decision on the assessee's appeal regarding Section 14A disallowance was upheld, maintaining the CIT(A)'s restriction of disallowance to Rs. 1,36,08,000/- under Rule 8D(2)(iii). 7. Deletion of Addition Regarding Appreciation in Investment Value while Computing Total Income under Section 115JB: This issue was correlated to the ground on the application of Section 115JB. Since the Tribunal ruled that Section 115JB does not apply to the assessee, the related grounds in the Revenue's appeal were dismissed. 8. Rebate under Section 88E from Tax Payable under Section 14A: The Tribunal dismissed the Revenue's ground on the rebate under Section 88E, correlating it with the decision on Section 115JB's non-applicability to the assessee. Cross Objection: The assessee's cross-objection was linked to the Revenue's ground on bad debts write-off, which was dismissed as not pressed, rendering the cross-objection infructuous. Conclusion: The assessee's appeal was partly allowed, the Revenue's appeal was dismissed, and the cross-objection was also dismissed.
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