9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (12) TMI 458 - AT - Income TaxReopening of assessment - Held that - CIT (A) had judiciously considered the issue and held the matter against the assessee because reopening was within a period of four years and various omissions and discrepancies was revealed from the assessment order based on which the Ld. Assessing Officer had initiated proceedings U/s. 147 of the Act. Therefore we hereby uphold the order of the Ld. CIT (A). - Decided against assessee. Disallowance of provision for wage arrears to staff - Held that - CIT (A) following the decision of the Tribunal in the case of Indian Overseas Bank(IOB) for the assessment year 2005-06 2013 (3) TMI 643 - ITAT CHENNAI held that the adhoc provision made shall be allowed as deduction in the year of payment and not in the year provision is made. Since the Ld. CIT (A) has followed the decision of the Tribunal, we do not find it necessary to interfere with his order. Accordingly, this issue is held against the assessee. Allowing depreciation on UPS at 60% instead of 80% claimed by the assessee - Held that - the appellant is entitled to depreciation @ 60% by treating the UPS under the category of computer. Since the Ld. CIT (A) has followed the decision of the Tribunal, we do not find it necessary to interfere with his order. Disallowance made U/s.14A read with Rule 8D - Held that - The whole purpose of enactment of Section.14A of the Act is to disallow certain expenses which are attributable to exempt income. The assessee bank due to various statutory requirements and commercial reasons is bound to make investments in securities and equity shares etc., which earn dividend that, are exempt from income. For making such investments obviously the financial wizards employed by the assessee company has to make tremendous exercise to determine as to what securities /equity shares etc., has to be purchased by the assessee to optimize the economical functioning of the assessee. This incurs cost. A portion of this cost has to be apportioned towards the factor of exempt income whether it is earned during the year or otherwise. For determining such apportionment of cost, Income Tax Rules are framed which we find in Rule-8D. However, Rule-8D has come into effect from 24.03.2008. Therefore for the relevant assessment year, Rule-8D is not applicable. In these circumstances, Chennai Bench of the Tribunal on many occasions has held 3% of earned exempt income can be estimated for making disallowance for the purpose of Section.14A of the Act Accordingly, we hereby direct the Ld. Assessing Officer to disallow 3% of earned exempt income for making disallowance U/s.14A of the Act. Applicability of Section-115JB - Held that - As the amendment to Section.115JB by the Finance Act, 2012 will be applicable only from the A.Y.2013-14, we uphold the claim of the assessee that provisions of section 115 JB will not be applicable to the assessee bank and set aside the assessment made U/s.115JB on the assessee company Treatment of Brokerage paid at the time of acquisition of investments in securities as revenue expenditure or capital expenditure- Held that - Before us, the nature of investments as to whether the investment made amounts to capital expenditure or revenue expenditure is not explained by both the parties. Moreover the decision cited by the Ld. CIT (A) and the assessee were not brought to the notice of Ld. Assessing Officer therefore in the interest of justice we remit back the matter to the file of Ld. Assessing Officer for denovo consideration and to pass appropriate order as per law and merit and after duly examining the decisions cited by the assessee as well as the Ld. CIT (A). Treatment to the loss on sale of investments - CIT(A) treated as Revenue expenditure by holding the investments to be stock in trade while as the investments related to HTM category and therefore, it amount to capital loss - Held that - While adjudicating ground No. 2B(vi) herein above we have made it clear that, before us the nature of investments as to whether the investments made amounts to capital expenditure or revenue expenditure is not explained by both the parties. Moreover the decision cited by the Ld. CIT (A) and the assessee were not brought to the notice of Ld. Assessing Officer. Hence we hereby remit back the matter to the file of Ld. A.O for fresh consideration to pass appropriate order as per law and merit and after duly examining the decisions cited by the assessee as well as the Ld. CIT (A).
Issues Involved:
1. Validity of reassessment proceedings under Section 147. 2. Disallowance of provision for wage arrears. 3. Depreciation rate on UPS. 4. Disallowance under Section 14A read with Rule 8D. 5. Applicability of Section 115JB for book profit computation. 6. Treatment of brokerage paid for acquiring investments. 7. Treatment of loss on sale of investments. 8. Depreciation rate on UPS (Revenue's appeal). Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The assessee argued that the grounds for reopening were previously examined under Section 263 and dropped. The Tribunal upheld the reassessment proceedings, noting that reopening was within four years and based on various omissions and discrepancies. The Tribunal relied on the detailed examination by the CIT(A) and upheld the order against the assessee. 2. Disallowance of Provision for Wage Arrears: The Assessing Officer disallowed the provision for wage arrears of Rs. 3,50,35,000, considering it a contingent liability. The CIT(A) followed the Tribunal's decision in the Indian Overseas Bank case, allowing the deduction in the year of payment, not when the provision was made. The Tribunal upheld the CIT(A)'s decision. 3. Depreciation Rate on UPS: The Assessing Officer restricted the depreciation on UPS to 15%, considering it an electrical installation. The CIT(A) allowed 60% depreciation, treating it as a computer accessory, following the Tribunal's decision in the Indian Overseas Bank case. The Tribunal upheld the CIT(A)'s decision against the assessee's claim of 80%. 4. Disallowance under Section 14A read with Rule 8D: The Assessing Officer added Rs. 24,27,875 under Section 14A read with Rule 8D. The CIT(A) confirmed this. The Tribunal noted that Rule 8D was not applicable for the relevant assessment year and directed the Assessing Officer to disallow 3% of the earned exempt income, following the Chennai Bench's decision in similar cases. 5. Applicability of Section 115JB for Book Profit Computation: The Assessing Officer applied Section 115JB to the assessee bank. The Tribunal, following decisions in IOB vs. ACIT and SBI vs. DCIT, held that Section 115JB does not apply to banking companies, as they prepare accounts as per the Banking Regulation Act, not the Companies Act. The Tribunal ruled in favor of the assessee. 6. Treatment of Brokerage Paid for Acquiring Investments: The Assessing Officer treated brokerage paid for acquiring investments as capital expenditure. The CIT(A) treated it as revenue expenditure, citing the Madras High Court's decision in Kauru Vyas Bank Ltd. The Tribunal remitted the matter back to the Assessing Officer for fresh consideration, noting the need for clarity on whether the investments were capital or revenue in nature. 7. Treatment of Loss on Sale of Investments: The CIT(A) treated the loss on sale of investments as revenue expenditure, while the Assessing Officer considered it a capital loss. The Tribunal remitted the matter back to the Assessing Officer for fresh consideration, similar to the brokerage issue, to determine the nature of the investments. 8. Depreciation Rate on UPS (Revenue's Appeal): The Tribunal upheld the CIT(A)'s decision to allow 60% depreciation on UPS, following the decision in the Indian Overseas Bank case, and disposed of the Revenue's appeal accordingly. Conclusion: The appeals for the assessment year 2005-06 were dismissed for the assessee and partly allowed for the Revenue. For the assessment year 2006-07, the assessee's appeal was partly allowed, and the Revenue's appeal was partly allowed for statistical purposes. The Tribunal's order was pronounced on 20.11.2015.
|
