1998 (8) TMI 148 - AT - Income Tax

1993 (9) TMI 52 - HC

Issues Involved:
1. Allowability of deduction under Section 32AB of the IT Act, 1961.
2. Disallowance of club fees.
3. Credit for tax payment under Section 140A.
4. Revisionary powers of the CIT under Section 263.

Issue-wise Detailed Analysis:

1. Allowability of Deduction under Section 32AB of the IT Act, 1961:
The assessee, a public sector bank, claimed deductions under Section 32AB for the assessment years 1988-89, 1989-90, and 1990-91. The amounts claimed were Rs. 1,61,24,000, Rs. 2,47,60,000, and Rs. 3,78,36,034 respectively. The Assessing Officer (AO) rejected the claims on the grounds that the bank was not engaged in manufacturing or processing activities, which he believed were prerequisites for the deduction. The CIT(A) upheld the AO's decision. On appeal, the Tribunal reviewed the provisions of Section 32AB(2), which defines "eligible business or profession" and noted that banking is not excluded from the claim. The Tribunal referred to Circular No. 461 issued by the CBDT, which clarified that the deduction is admissible to all assessees engaged in "eligible business or profession." The Tribunal concluded that the banking business is eligible for the deduction under Section 32AB and allowed the claims for all three assessment years.

2. Disallowance of Club Fees:
The assessee claimed deductions for club fees amounting to Rs. 9,868, Rs. 11,990, and Rs. 8,701 for the assessment years 1988-89, 1989-90, and 1990-91 respectively. The AO disallowed these claims, treating them as non-business expenditure, and the CIT(A) upheld the disallowance. The Tribunal, however, noted that the issue was covered in favor of the assessee by the decision of the Gujarat High Court in the case of Gujarat State Export Corporation Ltd. vs. CIT. Respectfully following the jurisdictional High Court's decision, the Tribunal allowed the claims for club fees for all the assessment years under consideration.

3. Credit for Tax Payment under Section 140A:
For the assessment year 1988-89, the assessee filed a revised return and paid an additional tax of Rs. 2,10,000 under Section 140A. The AO, while finalizing the assessment under Section 143(3), did not give credit for this payment. The CIT(A) upheld the AO's decision. The Tribunal reviewed Section 140A(2), which states that any amount paid under Section 140A(1) should be credited towards the regular assessment. The Tribunal concluded that the AO should have given credit for the Rs. 2,10,000 paid by the assessee and directed the AO to modify the assessment accordingly.

4. Revisionary Powers of the CIT under Section 263:
The CIT, using his revisionary powers under Section 263, directed the AO to withdraw deductions of Rs. 85,96,000 and Rs. 1,65,00,000 allowed under Section 32AB for the assessment years 1987-88 and 1988-89 respectively. Since the Tribunal had already decided the issue of allowability of deduction under Section 32AB in favor of the assessee, it allowed the appeals against the CIT's orders as they were rendered academic.

Conclusion:
The Tribunal allowed all the appeals of the assessee, granting the deductions under Section 32AB, allowing the club fees as business expenditure, directing the AO to give credit for the tax payment under Section 140A, and setting aside the CIT's revisionary orders under Section 263.

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