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2021 (10) TMI 862 - AT - Income TaxDisallowance u/s. 14A of the Act r.w. Rule 8D - contention of the ld. AR is that the assessee has investment in mutual funds and tax free bonds of out of its own funds out of share capital, free reserve and it exceeds the average value of investments during the AY 2013-14. No direct expenditure to earn exempt income, therefore section 14A r.w. Rule 8D - HELD THAT - As these facts have not been examined by the CIT(Appeals) while deleting the addition holding that there is no exempt income, which is not correct. Accordingly, we set aside his order and restore this issue back to the Assessing Officer for examination and fresh decision in accordance with law after providing opportunity of hearing to the assessee. Disallowance of depreciation claimed on investments - assessee submitted that depreciation on investments in Govt. securities characterized as Securities Available For Sale (AFS) and Held for Trade (HFT) and that the depreciation on these investments has been made as per RBI guidelines - HELD THAT - The issue is squarely covered in favour of the assessee by the judgment of case of Karnataka Bank Ltd. 2013 (7) TMI 656 - KARNATAKA HIGH COURT wherein depreciation on investment in securities held for trading and available for sale was allowed. Being so, the CIT(Appeals) followed this judgment of the High Court. We do not find any infirmity in his order and confirm the same. This ground of the revenue is dismissed. Amortization of premium debited to profit and loss account and the amount claimed in the return of income - HELD THAT - We find that this issue is covered by the order of this Tribunal in the case of Corporation Bank 2008 (12) TMI 745 - ITAT BANGALORE in favour of the assessee. Being so, the CIT(Appeals) followed the same order of the Tribunal and hence we do not find any infirmity in the impugned order and the same is confirmed. Payment towards education fund to Karnataka State Co-operative Union, payment of annual subscription to Karnataka State Co-operative urban Federation and payment of benevolent fund to the bank's staff - HELD THAT - There were no additions on this issue by the AO. However, the CIT(Appeals) has unilaterally considered these grounds and given relief. He fell into error in considering and adjudicating these grounds. Accordingly, the findings of the CIT(Appeals) in respect of these issues are vacated and the grounds raised by the revenue are allowed.
Issues:
1. Disallowance u/s. 14A of the Act r.w. Rule 8D 2. Disallowance of depreciation claimed on investments 3. Amortization of premium debited to profit and loss account 4. Assessee's claim of payment towards education fund, annual subscription, and benevolent fund Issue 1: Disallowance u/s. 14A of the Act r.w. Rule 8D: The appeal concerned disallowance u/s. 14A of the Act r.w. Rule 8D. The CIT(Appeals) had deleted the disallowance stating no exempt income was received by the assessee. However, the ITAT found that the assessee earned exempt income, thus the CIT(Appeals) decision was against the facts. The ITAT set aside the order and directed the AO to re-examine the issue after providing an opportunity to the assessee. Issue 2: Disallowance of Depreciation Claimed on Investments: The appeal also involved disallowance of depreciation claimed on investments. The assessee argued that the depreciation was made as per RBI guidelines and submitted that the AO did not follow the judgment of the Hon'ble High Court of Karnataka. The ITAT upheld the CIT(Appeals) decision, citing the judgment of the Hon'ble High Court of Karnataka, and dismissed the revenue's ground. Issue 3: Amortization of Premium Debited to Profit and Loss Account: Regarding amortization of premium debited to profit and loss account, the ITAT confirmed the CIT(Appeals) decision based on the Tribunal's order in favor of the assessee. The ITAT found no infirmity in the CIT(Appeals) order and upheld the same. Issue 4: Assessee's Claim of Payment Towards Education Fund, Annual Subscription, and Benevolent Fund: The final issue was the assessee's claim of payment towards various funds. The CIT(Appeals) had given relief on these grounds, which the ITAT found to be in error. The ITAT vacated the CIT(Appeals) findings and allowed the revenue's grounds on this issue. In conclusion, the ITAT partly allowed the appeal of the revenue, addressing various issues related to disallowances, depreciation, amortization, and claims towards different funds.
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