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2016 (3) TMI 1364 - AT - Income TaxDisallowance u/s 14A - securities held as stock in trade - HELD THAT - However in view of the clear finding given by the Karnataka High Court in the case of CCI Ltd 2012 (4) TMI 282 - KARNATAKA HIGH COURT we found ourselves bound by the said judgement and hold that since the assessee bank is holding the securities as its stock in trade the disallowance under section 14A cannot be made. If the shares are held that as stock in trade and not as investment then even the disallowance under section under rule 8D will be Nil as rule 8D (2)(i) will be confined to only direct expenses for earning the tax exempt income. In the present case also since there are no direct expenses incurred in earning the dividend the disallowance will come to nil. - Decided in favour of assessee Addition of bad debts recovered - whether when bad debts were written off in any of the precious years, no claim of deduction was made or allowed u/s 36(1)(vii) - HELD THAT - There is no denying the fact that the details of these amounts recovered were filed before the lower authorities. A copy of the same has also been filed before us. The assessee being a bank is eligible for deduction under section 36(1)(vii) of the Act. Further, the provisions of section 41(4) are also applicable on such debts that are recovered during the year which have been reduced from the income in any of the earlier years. In view of all these, we are inclined to send this issue back to the file of the Assessing Officer to verify with the details filed by the assessee whether any claim of any such nature, which reduces the income of the assessee with regard to these recoveries, if made in any of the earlier years the disallowance has to be sustained however in case no such benefit has been taken by the assessee out of these amounts recoverable in any of the earlier years the disallowance should be deleted. This ground of the assessee is allowed for statistical purposes. Disallowance as prior period expenses - appellant had not claimed any expenses relating to prior years in the computation of income - HELD THAT - As it has been held in earlier year by the I.T.A.T. that looking into the regular system of accounting being followed by the assessee, an expenditure either has to be allowed or not to be allowed. In the present year also, both the Assessing Officer as well as the CIT (Appeals) has indulged in estimating the disallowance. Nowhere any of these authorities have been able to pinpoint which expenses are prior period in nature. A disallowance has not to be made just for the sake of making disallowance. We do not appreciate the way the issue has been handled by he lower authorities. The assessee has provided all details which were asked for by them. The order and dictate of I.T.A.T. were before them. Even then they did not bother to analyze the details filed by the assessee. In the earlier year, in the proceedings set aside by the I.T.A.T., the Assessing Officer restricted the disallowance only to stationery and miscellaneous expenses. This year also, same has been done on an estimated basis. This is not the right approach. Looking into the fact that the only dispute remaining is with regard to stationery and miscellaneous expenses, we are inclined to delete the disallowance made by the Assessing Officer and confirmed by the CIT (Appeals) in this regard. Income chargeable to tax being the increase in the credit balance outstanding in blocked accounts of customers (under NOSTRO balances) - Whether the said amount has not been written back in the profit and loss account as any remission of liability by the appellant bank? - HELD THAT - The undisputed facts of the case are that there are certain unclaimed balances lying in the account of the assessee on account of NOSTRO Blocked accounts. This is also undisputed that the same nature of amount was taxed as income in the earlier year by the Assessing Officer which got confirmed till the level of ITAT. However we are in agreement with the argument of the assessee that there is a circular of the RBI No.RBI/2013-14/527, DBOD No. DEAF Cell.BC.101/30.01.002/2013-14, dated 21.3.2014, whereby these kind of unclaimed balances are to be transferred to a government account under the Depositors Education and Awareness Fund . This circular was not available to the I.T.A.T. while adjudicating the similar issue in assessment year 2007-08. In view of the same we are very clear that since no balance outstanding as on date is there in assessee s account in respect of the said amount, the said amount cannot be considered as income in nature. No addition on this account can be made. In view of this we direct the Assessing Officer to delete the addition made by him. The ground of assessee is allowed. Disallowance of depreciation on ATM - @ 60% - HELD THAT - There are a number of judgments of various High Courts where the ATM is held to be computer and depreciation is allowed @ 60%. The grounds raised by the Department are dismissed.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Addition of bad debts recovered. 3. Disallowance of prior period expenses. 4. Addition of unclaimed balances in NOSTRO accounts. 5. Disallowance of excess depreciation on ATMs. 6. Deletion of unreconciled inter-branch and inter-bank entries. 7. Revisionary powers under Section 263 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee contested the disallowance of ?12.20 crore under Section 14A, which was enhanced to ?40.72 crore by the CIT(A). The assessee argued that investments constituted stock-in-trade, and thus, Section 14A should not apply. The CIT(A) upheld the disallowance, stating the provisions were mandatory. The Tribunal agreed with the assessee, noting that since the securities were held as stock-in-trade, the earning of income was incidental to its business, and thus, Section 14A could not be applied. The Tribunal relied on the Karnataka High Court judgment in CCI Ltd. and other similar cases. 2. Addition of Bad Debts Recovered: The assessee argued that the bad debts recovered, amounting to ?94.60 crore, were not claimed as deductions under Section 36(1)(vii) in earlier years and thus should not be taxed under Section 41. The CIT(A) upheld the addition based on past decisions. However, the Tribunal remanded the issue back to the Assessing Officer to verify the details provided by the assessee, directing that the disallowance should be sustained only if the bad debts were claimed as deductions in earlier years. 3. Disallowance of Prior Period Expenses: The assessee contested the disallowance of ?8.03 lakh as prior period expenses. The CIT(A) restricted the disallowance to ?8.03 lakh based on remand proceedings. The Tribunal noted that the lower authorities had not identified specific prior period expenses and criticized the estimation approach. The Tribunal deleted the disallowance, emphasizing that the assessee had provided all necessary details. 4. Addition of Unclaimed Balances in NOSTRO Accounts: The assessee argued that the unclaimed balances in NOSTRO accounts, amounting to ?5.19 lakh, were liabilities and not income. The CIT(A) upheld the addition based on past decisions. However, the Tribunal noted a new RBI circular requiring such balances to be transferred to a government account and directed the deletion of the addition, as no balance was outstanding. 5. Disallowance of Excess Depreciation on ATMs: The assessee claimed 60% depreciation on ATMs, treating them as computers, while the Assessing Officer allowed only 15%. The CIT(A) allowed the higher depreciation rate, citing various judgments. The Tribunal upheld this decision, noting that multiple High Courts had treated ATMs as computers eligible for 60% depreciation. 6. Deletion of Unreconciled Inter-Branch and Inter-Bank Entries: The Assessing Officer added ?8.91 crore for unreconciled inter-branch and inter-bank entries. The CIT(A) deleted the addition, noting that the assessee had provided a certificate stating no entries were hit by the Limitation Act. The Tribunal upheld the CIT(A)’s decision, finding no infirmity in the deletion. 7. Revisionary Powers under Section 263 of the Income Tax Act: The Commissioner invoked Section 263 to revise the Assessing Officer's order regarding disallowance under Section 14A for the assessment year 2009-10. Since the Tribunal had already deleted the addition under Section 14A, it quashed the Commissioner’s revisionary order. Conclusion: - The assessee's appeals were partly allowed, and the Revenue's appeals were dismissed. - The Tribunal emphasized that securities held as stock-in-trade are not subject to disallowance under Section 14A. - The Tribunal remanded the issue of bad debts recovered for verification. - Prior period expenses disallowance was deleted due to lack of specific identification. - Unclaimed balances in NOSTRO accounts were not considered income due to RBI guidelines. - ATMs were treated as computers for depreciation purposes. - Unreconciled inter-branch and inter-bank entries were deleted based on provided certificates. - The Commissioner’s revisionary order under Section 263 was quashed.
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