2013 (8) TMI 1116 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of Claim of Depreciation Allowance.
2. Disallowance of claim for payment made to Members.
3. Disallowance of contribution to Urban Bank Credit Equalisation Fund.
4. Payment of Education Fund.
5. Levy of Surcharge and Interest u/s 234B.

Summary:

1. Disallowance of Claim of Depreciation Allowance:
The assessee claimed depreciation of Rs. 55 lacs on diminution in the value of securities held as Available for Sale (AFS). The AO disallowed this, considering it a contingent liability u/s 37 of the Act. The CIT(A) directed the AO to verify the cost and market price of the securities and allow depreciation as per CBDT Instruction No.17/2008. The Tribunal upheld this direction, allowing the appeal for statistical purposes.

2. Disallowance of claim for payment made to Members:
The AO disallowed Rs. 3,33,088/- spent on members' welfare, considering it not wholly and exclusively for business purposes u/s 37. The CIT(A) upheld this, noting the expenditure was not from the current year's income. The Tribunal reversed this decision, citing Gujarat High Court rulings that such expenditures are for business purposes, and allowed the appeal.

3. Disallowance of contribution to Urban Bank Credit Equalisation Fund:
The AO disallowed Rs. 5,20,609/- contributed to the Urban Bank Credit Equalisation Fund, as it was not debited to the profit & loss account. The CIT(A) upheld this. The Tribunal reversed the decision, noting the contribution was mandated by section 115G of the Gujarat Co-operative Societies Act, and allowed the appeal.

4. Payment of Education Fund:
The AO added Rs. 3,00,000/- for the education fund to the income, as it was not debited to the profit & loss account. The CIT(A) upheld this. The Tribunal reversed the decision, referencing similar cases decided by the Gujarat High Court in favor of the assessee, and allowed the appeal.

5. Levy of Surcharge and Interest u/s 234B:
The Tribunal directed the AO to decide on the levy of surcharge and interest u/s 234B in accordance with the law, as it is consequential.

Conclusion:
The appeal of the assessee is partly allowed for statistical purposes.