Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2008 (10) TMI AT This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2008 (10) TMI 252 - AT - Income Tax

Issues Involved:
1. Allowability of expenses incurred outside India for raising deposits from Non-resident Indians (NRIs).
2. Depreciation on let out properties.
3. Disallowance of provision for bad and doubtful debts.
4. Disallowance of traveling expenses under Rule 6D.
5. Re-computation of allowance of provision for bad and doubtful debts under Section 36(1)(viia).
6. Re-computation of allowable head office expenses under Section 44C.
7. Admission of additional evidence regarding exemption under Section 10(15)(iv)(f).
8. Disallowance of club expenses.
9. Disallowance of interest payable to the head office.
10. Addition of commission earned by foreign branches on credit card business overseas.

Issue-wise Detailed Analysis:

1. Allowability of Expenses Incurred Outside India for Raising Deposits from NRIs:
The assessee, a non-resident banking company, claimed expenses for mobilizing deposits from NRIs to be placed with its Indian branches. The AO disallowed the claim, stating the expenses were not reflected in Indian books and were head office expenses under Section 44C. The CIT(A) allowed the expenses under Section 37, supported by an auditor's certificate. The Tribunal remanded the matter back to the AO to verify if the deposits raised abroad were brought into India and used for Indian business.

2. Depreciation on Let Out Properties:
The AO disallowed depreciation on buildings given on rent, estimating the WDV at Rs. 35 lacs. The CIT(A) reduced the disallowance to Rs. 10 lacs, considering the properties' age. The Tribunal agreed with the CIT(A) that depreciation is not allowable if the income is computed under "Income from house property." However, to end the dispute, the Tribunal directed the AO to treat rental income as business income and allow depreciation accordingly.

3. Disallowance of Provision for Bad and Doubtful Debts:
The AO restricted the deduction under Section 36(1)(viia) to Rs. 3,22,61,719, disallowing Rs. 4,88,61,772, as the net provision for bad and doubtful debts was only Rs. 3,22,61,719. The CIT(A) upheld the AO's view, stating that recoveries from provisions made in earlier years should be included in the total income. The Tribunal agreed with the CIT(A) that only the net provision could be considered for allowability under Section 36(1)(viia).

4. Disallowance of Traveling Expenses Under Rule 6D:
The AO disallowed Rs. 13,71,749 for training-related hotel accommodation, considering it under Rule 6D. The CIT(A) upheld the disallowance. The Tribunal, however, held that such expenses were for training, not travel, and thus Rule 6D was not applicable. The disallowance was deleted.

5. Re-computation of Allowance of Provision for Bad and Doubtful Debts Under Section 36(1)(viia):
The Tribunal directed the AO to allow deduction under Section 36(1)(viia) within the prescribed limit based on the finally computed income.

6. Re-computation of Allowable Head Office Expenses Under Section 44C:
The Tribunal directed the AO to allow deduction within the limits of Section 44C based on the adjusted total income as finally determined.

7. Admission of Additional Evidence Regarding Exemption Under Section 10(15)(iv)(f):
The AO disallowed part of the exemption claimed under Section 10(15)(iv)(f) due to discrepancies in the approval certificate. The CIT(A) admitted additional evidence and granted the exemption. The Tribunal upheld the CIT(A)'s decision, noting the additional evidence was admitted following due process.

8. Disallowance of Club Expenses:
The AO disallowed club expenses, but the CIT(A) deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, following its earlier ruling that such expenses are allowable under Section 37(1).

9. Disallowance of Interest Payable to the Head Office:
The AO disallowed interest paid to the head office, treating it as an inter-branch transfer. The CIT(A) allowed the deduction under Section 37(1) and the Indo-UK DTAA. The Tribunal, referencing a Special Bench decision, held that interest paid to the head office is not an allowable deduction, and upheld the disallowance.

10. Addition of Commission Earned by Foreign Branches on Credit Card Business Overseas:
The AO estimated Rs. 10 crores as income from international credit card transactions in India. The CIT(A) deleted the addition, stating the income could not be attributed to the Indian PE. The Tribunal agreed, noting the debt and credit arose outside India, and upheld the deletion.

Conclusion:
Both the appeals were partly allowed, with specific directions and remands for re-examination of certain issues. The Tribunal provided detailed reasoning for each decision, ensuring compliance with relevant legal provisions and precedents.

 

 

 

 

Quick Updates:Latest Updates