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2015 (8) TMI 173 - AT - Income TaxDisallowance of claim made u/s.10(23G) - failure to produce the necessary certificate required under the said section - assessee is a scheduled bank and carries on banking business - Held that - The limited request of the learned counsel for the assessee was that the necessary approvals from the CBDT is available and will be provided to the Assessing Officer. He prayed that the order of the Assessing Officer may be set aside and the assessee allowed opportunity of providing the necessary approvals for grant of exemption u/s.10(23G) of the Act. We are of the view that it would be just and appropriate to set aside the addition made by the Assessing Officer in this regard and allow opportunity to the assessee to produce the required certificate which will enable the assessee to claim exemption u/s.10(23G) of the Act. - Decided in favour of assessee for statistical purpose. Disallowance of expenditure claimed for software - revenue v/s capital expenditure - Held that - Respectfully following the decisions of the Hon ble High Court of Karnataka in the case of IBM India Ltd. (2013 (10) TMI 1225 - KARNATAKA HIGH COURT ) and the coordinate bench of this Tribunal in the assessee s own case for Assessment Year 2001-02 we hold that the expenditure incurred by the assessee for purchase of application software is revenue in nature - Decided in favour of assessee. Disallowance of expenditure incurred for employee stock option plan - Held that - We set aside the orders of authorities below and remit the issue back to the AO for considering it afresh in the light of directions given by of the Tribunal in A. Y. 2004-05 wherein held the claim of the assessee for deduction has to be allowed in principle. - Decided in favour of assessee for statistical purpose. Expenditure relating to rights issue disallowed u/s.35D - Held that - Evidently, the sum of ₹ 5,37,45,182/- from which the AO started his computation and made the disallowance did include income of ₹ 3,53,58,063/-, from business, which amount was arrived at after adding back the inadmissible operating expenditure, which inter alia included the rights issue expenditure of ₹ 1,38,98,183/-. In other words, when the AO made an addition of ₹ 1,65,83,020/-. The result was that what was already suo motu added back by the assessee was once again aggregated, as pointed out by the Ld. AR. This had resulted in a double disallowance. Hence, the disallowance of ₹ 1,38,19,183/- is deleted. However, in respect of the balance amount of ₹ 27,63,837/-, as admitted by the Ld. AR in the case of Andhra Bank (2013 (4) TMI 701 - ITAT HYDERABAD ), this Tribunal had held that amortisation of rights issue u/s.35D of the Act in the years prior to A. Y. 2009-10 was not allowable. Therefore, the disallowance to the extent of ₹ 27,63,837/- has been rightly made and is hereby confirmed. - Decided against assessee. Application of Sec.115JB - MAT applicability - whether the banking companies were not required to prepare their accounts in accordance with Parts II & III of the Companies Act, 1956? - Held that - On a perusal of the cited decision in the assessee s own case for Assessment Year 2002- 03, we find that the issue of whether or not the provisions of section 115JB of the Act are applicable to Banks has been considered and held in favour of the assessee to hold that provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - Decided in favour of assessee. Addition of claim of dimunition in value of investment - CIT(A) deleted addition - Held that - The facts of the assessee in the case on hand are similar to that of the cited case, i.e. Corporation Bank Ltd. (2012 (9) TMI 753 - ITAT, BANGALORE) followed by the learned CIT (Appeals) in the impugned order, we concur with the decision of the learned CIT (Appeals) in allowing the assessee s claim of diminution in the value of investments under the AFS/HFT categories - Decided in favour of assessee. Depreciation on conversion of securities - CIT(A) allowed claim - Held that - In view of the clear-cut guidelines of the RBI the claim of the assessee towards provision of depreciation on account of transfer of securities from AFS category to HTM category is allowed.- Decided in favour of assessee. Disallowance of insurance premium paid on housing loans of customers - CIT(A) deleted addition - Held that - We concur with the finding of the learned CIT (Appeals) in the impugned order that the expenditure incurred on insurance premium on housing loan are revenue in nature and is an allowable deduction. It is not the case of the Assessing Officer that these expenses are not for the purposes of the assessee s business or that they are capital in nature. These expenses are related to the housing products which are very much a part of the assessee s business activities and the payment of insurance premium on the housing products is also not capital in nature. Once the expenditure is accepted to be revenue in nature and incurred for the purposes of business, then it is allowable in the year in which it is incurred. Thus we concur with the finding of the learned CIT (Appeals) that the expenditure incurred as insurance premium in connection with their housing loan scheme is revenue in nature and is eligible for deduction - Decided in favour of assessee. Addition made for broken period interest - Addition deleted by the CIT (A) - Held that - Broken period interest does not constitute income in the year under consideration as it has not become due and payable / receivable as per the provisions of the Act. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of claim under Section 10(23G) of the Income-tax Act. 2. Disallowance of expenditure on software as capital in nature. 3. Disallowance of expenditure on Employee Stock Option Plan (ESOP). 4. Disallowance of rights issue expenditure and claim under Section 35D. 5. Applicability of Section 115JB of the Income-tax Act to banking companies. 6. Claim of depreciation on conversion of securities. 7. Allowance of insurance premium on housing loans. 8. Addition for broken period interest. Issue-wise Detailed Analysis: 1. Disallowance of Claim under Section 10(23G): The assessee challenged the disallowance of Rs. 1,53,72,053/- under Section 10(23G) due to the non-production of the necessary certificate. The Tribunal noted that in a previous year, it had allowed the assessee to provide the necessary approvals from the CBDT to claim the exemption. Hence, the issue was remitted back to the AO to allow the assessee to produce the required certificate for the current assessment year as well. 2. Disallowance of Expenditure on Software: The assessee contested the disallowance of Rs. 1,93,31,126/- claimed for software, which the AO treated as capital expenditure. The Tribunal found that the software expenses were for application software with a short shelf-life, thus revenue in nature. It referred to its earlier decision in the assessee's case for A.Y. 2007-08, where similar claims were allowed. Consequently, the Tribunal allowed the assessee's claim. 3. Disallowance of Expenditure on ESOP: The assessee's claim of Rs. 62,68,139/- for ESOP expenditure was disallowed by the AO and confirmed by the CIT(A). The Tribunal referred to its previous decision for A.Y. 2005-06, where it had remitted the issue back to the AO for correct quantification of the deduction. Following this precedent, the Tribunal remitted the issue back to the AO for fresh consideration. 4. Disallowance of Rights Issue Expenditure and Claim under Section 35D: The assessee admitted that the claim under Section 35D for rights issue expenditure was not allowable, as held by the Tribunal in another case. However, it was argued that Rs. 1,38,19,183/- was already added back by the assessee, leading to double disallowance. The Tribunal found merit in the assessee's argument and deleted the double disallowance. However, the disallowance of Rs. 27,63,837/- was upheld as per the Tribunal's earlier decision. 5. Applicability of Section 115JB: The Tribunal examined whether Section 115JB applied to banking companies. It referred to its earlier decision in the assessee's case for A.Y. 2007-08, where it was held that Section 115JB did not apply to banking companies. Following this precedent, the Tribunal allowed the assessee's claim, holding that the provisions of Section 115JB were not applicable. 6. Claim of Depreciation on Conversion of Securities: The AO disallowed the claim of depreciation of Rs. 5,17,67,388/- on securities converted from AFS to HTM, arguing that such depreciation was not allowable. The Tribunal found that the assessee had an opening balance provision and had accounted for the depreciation in its books. It referred to its earlier decision in the case of State Bank of Mysore, where it was held that such depreciation was allowable. Thus, the Tribunal upheld the CIT(A)'s decision allowing the claim. 7. Allowance of Insurance Premium on Housing Loans: The AO disallowed the insurance premium of Rs. 9,16,88,855/- paid on housing loans, treating it as non-revenue in character. The Tribunal referred to its earlier decision in the assessee's case for A.Y. 2007-08, where such expenditure was held to be revenue in nature and allowable in full in the year incurred. Following this, the Tribunal upheld the CIT(A)'s decision allowing the claim. 8. Addition for Broken Period Interest: The AO added Rs. 6,07,37,440/- for broken period interest. The Tribunal referred to its earlier decision in the assessee's case for A.Y. 2007-08, where it was held that broken period interest does not constitute income as it has not become due and payable. Following this, the Tribunal upheld the CIT(A)'s decision deleting the addition. Summary: The Tribunal partly allowed the assessee's appeal, remitting some issues back to the AO for fresh consideration, and dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on various claims. The Tribunal's decisions were largely based on precedents set in earlier years in the assessee's own cases and other similar cases.
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