2018 (8) TMI 1916 - AT - Income Tax

Disallowance u/s 14A - estimated basis at 0.5% of average investments yielding tax free income - HELD THAT - Direct the AO to restrict the disallowance on exempt income at 1%. We direct accordingly. Disallowance of payment made to liquidator of BCCI - HELD THAT - As the facts and circumstances during the year under consideration are same respectfully following the order of the Tribunal we do not find any justification for disallowing payment to liquidator of BCCI. The AO is directed to delete the same. Disallowance of loss on account of write off on redemption of D-2 Plus funds - HELD THAT - carefully gone through the orders of the Authorities below as well as the order of the Hon ble Karnataka High Court in the case of Canara Bank 2014 (1) TMI 1586 - KARNATAKA HIGH COURT . We find that as per the finding recorded by the CIT(A) the issue has been decided in A.Y. 1999-2000 as well as in A.Y. 2004-05 in favour of the assessee. However the Department has not come in appeal before the Tribunal. Moreover the issue is covered by the decision in the case of Canara Bank (supra). Accordingly we do not find any reason to interfere with the order of CIT(A) for allowing the write off on redemption of D-2 Plus funds. Disallowance of loss on account of amount written off on account of Bank of India Mutual Rising Monthly Income (1990) Scheme - HELD THAT - We uphold the order of the CIT(A) for deleting the disallowance of loss on account of amount written off. Exclusion of income of foreign branches - HELD THAT - Respectfully following decision of the Tribunal in assessee s own case as stated above we do not find any reason to interfere with the order of the CIT(A) for excluding the income of foreign branches from assessee s income. Disallowance of provision for wage arrears - HELD THAT - No reason to interfere in the order of the CIT(A) for deleting the disallowance made for provision for wage arrears. Disallowance of interest accrued but not due on securities - HELD THAT - This issue is also decided by the Hon ble High Court in the case of DIT vs. Credit Suisse First Boston (Cyprus) Ltd. 2012 (8) TMI 17 - BOMBAY HIGH COURT . No reason to interfere in the order of the CIT(A) for deleting the disallowance of interest accrued but not due on securities. Disallowance of bad debts written off - HELD THAT - It has been decided in favour of the assessee by the ITAT in A.Y. 2007-08 after having detailed observation in paras 3 to 5. Respectfully following the same we do not find any reason to interfere in the order of the CIT(A) for deleting the disallowance on bad debts written off. Addition made on account of diminution in the value of investments - HELD THAT - We have carefully gone through the orders of the Authorities below and find that the issue is covered by the decision of the ITAT in assessee s own case for A.Y. 2008-09 and also by the Hon ble Bombay High Court in the case of HDFC Bank . 2014 (8) TMI 119 - BOMBAY HIGH COURT . Respectfully following the same we do not find any reason to interfere in the order of the CIT(A) for deleting the addition made on account of diminution of value of investment. Disallowance of depreciation on leased assets - HELD THAT - Respectfully following the order of the Tribunal in assessee s own case we do not find any reason to interfere in the order of the CIT(A) for deleting the disallowance of depreciation on leased assets.

Summary

Issues Involved:

1. Disallowance under Section 14A of the Income Tax Act.
2. Disallowance of payment made to liquidator of BCCI.
3. Disallowance of lease premium paid.
4. Disallowance of provision made towards leave encashment.
5. Application of Section 115JB of the Income Tax Act.
6. Disallowance of loss on account of write-off on redemption of D-2 Plus funds.
7. Disallowance of loss on account of amount written off on account of Bank of India Mutual Rising Monthly Income (1990) Scheme.
8. Exclusion of income of foreign branches.
9. Disallowance of provision for wage arrears.
10. Disallowance of interest accrued but not due on securities.
11. Disallowance of bad debts written off.
12. Addition made on account of diminution in the value of investments.
13. Disallowance of depreciation on leased assets.

Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act:
The Tribunal addressed the disallowance under Section 14A related to expenditure on exempt income. The assessee contended that no expenditure was incurred to earn the said income. The Tribunal referred to its earlier decisions and directed the AO to restrict the disallowance to 1% of the exempt income, aligning with previous judgments in the assessee's own case. The Revenue's appeal on this ground was dismissed.

2. Disallowance of payment made to liquidator of BCCI:
The Tribunal discussed the disallowance of payments made to liquidators of BCCI. The assessee argued that the compensation paid was a legitimate business expense, necessary to continue banking operations in the UK. The Tribunal, referencing earlier decisions and Supreme Court rulings, allowed the compensation as a business expenditure, emphasizing commercial expediency.

3. Disallowance of lease premium paid:
The Tribunal upheld the disallowance of lease premium paid, consistent with its previous decisions in the assessee's own case for earlier assessment years. The Tribunal found no infirmity in the CIT(A)'s order.

4. Disallowance of provision made towards leave encashment:
The Tribunal confirmed the disallowance of provision for leave encashment, referencing its earlier decisions in the assessee's own case. The Tribunal found no reason to interfere with the lower authorities' orders.

5. Application of Section 115JB of the Income Tax Act:
The Tribunal noted that the issue regarding the application of Section 115JB was not pressed by the assessee's counsel and thus dismissed it in limine.

6. Disallowance of loss on account of write-off on redemption of D-2 Plus funds:
The Tribunal upheld the CIT(A)'s decision to allow the write-off on redemption of D-2 Plus funds, referencing the consistent treatment of similar issues in previous assessment years and the Karnataka High Court's decision in the Canara Bank case.

7. Disallowance of loss on account of amount written off on account of Bank of India Mutual Rising Monthly Income (1990) Scheme:
The Tribunal upheld the CIT(A)'s decision to allow the loss written off, citing commercial expediency and the consistent treatment of similar issues in previous assessment years.

8. Exclusion of income of foreign branches:
The Tribunal upheld the CIT(A)'s decision to exclude the income of foreign branches from the assessee's income, referencing its own decisions in the assessee's case and the Bombay High Court's ruling.

9. Disallowance of provision for wage arrears:
The Tribunal confirmed the CIT(A)'s decision to allow the provision for wage arrears, referencing its own decisions in the assessee's case and the consistent treatment of similar issues in previous assessment years.

10. Disallowance of interest accrued but not due on securities:
The Tribunal upheld the CIT(A)'s decision to delete the disallowance of interest accrued but not due on securities, referencing the Bombay High Court's decisions and other relevant case laws.

11. Disallowance of bad debts written off:
The Tribunal confirmed the CIT(A)'s decision to delete the disallowance of bad debts written off, referencing its own decisions in the assessee's case and the consistent treatment of similar issues in previous assessment years.

12. Addition made on account of diminution in the value of investments:
The Tribunal upheld the CIT(A)'s decision to delete the addition made on account of diminution in the value of investments, referencing the Supreme Court and Bombay High Court's rulings and its own decisions in the assessee's case.

13. Disallowance of depreciation on leased assets:
The Tribunal upheld the CIT(A)'s decision to delete the disallowance of depreciation on leased assets, referencing its own decisions in the assessee's case and the consistent treatment of similar issues in previous assessment years.

Conclusion:
The Tribunal allowed the assessee's appeal in part and dismissed the Revenue's appeal, providing detailed reasoning and referencing relevant case laws and previous decisions in the assessee's own case.