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2014 (7) TMI 904 - AT - Income TaxPayment of pension and gratuity funds u/s 43B Expenses not debited to P&L A/c eligibility for deduction u/s 37 Held that - CIT(A) was of the view that the purpose of S.43B is to ensure that the employer does not retain the amount with himself, after making certain statutory deductions in connection with the welfare of the employees - It is to plug such delayed/non-payment of deducted amount, S.43B was introduced - since the assessee has made the payment before the due date for the filing of the return, assessee is entitled for deduction, and disallowance in terms of S.43B was not warranted - CIT(A) noted that the amount is allowable as a business expenditure under S.37 of the Act Relying upon Joint Commissioner of Income-tax (Assts.), Spl. Range 3, Hyderabad Versus Lamtuff Plastics Ltd. 2006 (1) TMI 535 - ITAT HYDERABAD - irrespective of the method of accounting followed by the assessee, and the fact that the assessee has not debited the payments made towards gratuity and pension fund to Profit & Loss Account, disallowance made by the AO in terms of S.43B is not warranted Decided against Revenue. Amount spent on Andhra Rural Development Trust Expenses for the purpose of business or not Held that - The expenditure claimed by the assessee treated as expenditure having been incurred by the assessee in discharge of its corporate social responsibilities, which also facilitated the business of the assessee, and hence allowable as deduction under S.37(1) of the Act Following the decision in THE COMMISSIONER OF INCOME TAX, BANGALOR & OTH. Versus M/s INFOSYS TECHNOLOGIES LTD 2013 (7) TMI 451 - KARNATAKA HIGH COURT - thus, the amount spent by the assessee-bank, was not only in discharge of corporate social responsibility to train the rural youth, but also to indirectly to promote its own business, since the rural youth trained were its prospective clients, as the bank also intended to extended credit facilities to such unemployed youth for starting their own enterprise there was no infirmity in the order of the CIT(A) Decided against Revenue. Expenses on public issue u/s 35D Held that - CIT rejected the claim of the assessee, observing that the assessee is not an industrial undertaking and as such it is not entitled to claim deduction in respect of such expenditure Following the decision in Andhra Bank Ltd. Versus Dy. Commissioner of Income- tax, Circle - 1(1), Hyderabad 2013 (10) TMI 415 - ITAT HYDERABAD - order of the CIT(A) is upheld Decided against Assessee. Provision for bad debts u/s 36(1)(viia) Held that - CIT(A), after considering the provisions of S.36(1)(viia) of the Act, and also the CBDT s Instruction No.17/2008 dated 26.11.2008, upheld the disallowance made by the AO - Following the decision in Andhra Bank Ltd. Versus Dy. Commissioner of Income- tax, Circle - 1(1), Hyderabad 2013 (10) TMI 415 - ITAT HYDERABAD Decided against Assessee. Premium paid to LIC towards leave encashment policy Held that - The payment of the premium is not an expenditure of the nature described in Sections 30 to 36 - Section 43B contains non-obstante provision and there in Clause (f) payment by the assessee as employer in lieu of any leave to the credit of its employees has been recognized as a revenue expenditure The expenditure has been certified as an expenditure not for personal expenses of the assessee and that the same is wholly and exclusively for the purpose of the business or profession of the assessee - relying upon CIT V/s. Nainital Bank Ltd. 2014 (1) TMI 449 - UTTARAKHAND HIGH COURT Decided in favour of Assessee. Expenses on earning to tax free income under Rule 8D Held that - The assessee itself has disallowed an amount being two months salary of offers and staff working in Investment Department under S.14A AO has not properly appreciated the facts of the case and has mechanically applied Rule 8D - profit or loss has to be considered under the head business or profession and the claim of expenses are to be considered under the head business and provisions of S.14A and Rule 8D are not applicable - the disallowance offered by the assessee itself in terms of S.14A, working out to almost 2%, is quite reasonable and in consonance with the view taken by the Tribunal for the preceding year Decided in favour of Assessee. Interest on Agricultural loan Held that - CIT(A) is not justified in equating the amount receivable from Government of India through Agriculture Debt Waiver and Relief Scheme, 2008 and credited to Profit & Loss Account with the provision for bad and doubtful debts, which is governed by the provisions of S.36(2)(v) the amount merely on the basis of credit made to the Profit & Loss Account, cannot be brought to tax in the year under appeal Relying upon CIT V/s Bokaro Steel Ltd. 1998 (12) TMI 4 - SUPREME Court - mere entries in the Profit and Loss Account and the books of account cannot clinch the issue with regard to taxability of an income - It is only such entries, which reflect the real income which can be brought to tax, in the relevant assessment year Decided in favour of Assessee.
Issues Involved:
1. Disallowance of broken period interest. 2. Disallowance of unrealized interest on NPAs. 3. Disallowance of payments towards pension and gratuity funds under Section 43B. 4. Disallowance of expenses incurred on Andhra Rural Development Trust. 5. Admissibility of additional grounds of appeal regarding bad debts written off. 6. Deduction under Section 35D for public issue expenses. 7. Deduction under Section 36(1)(viia) for provision for bad and doubtful debts. 8. Deduction for premium paid to LIC for leave encashment policy. 9. Disallowance under Section 14A read with Rule 8D for expenses related to tax-free income. 10. Taxability of interest credited by LIC in leave encashment scheme. 11. Taxability of income credited to Profit & Loss Account under Agricultural Debt Waiver & Relief Scheme, 2008. 12. Deduction under Section 80G for donations to the Rajasthan Government. Detailed Analysis: 1. Disallowance of Broken Period Interest: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of broken period interest, relying on consistent views taken in previous years in favor of the assessee. The Tribunal found no merit in the Revenue's grounds and rejected them. 2. Disallowance of Unrealized Interest on NPAs: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of unrealized interest on NPAs, citing previous decisions in the assessee's favor. The Tribunal found no merit in the Revenue's grounds and rejected them. 3. Disallowance of Payments towards Pension and Gratuity Funds under Section 43B: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of payments towards pension and gratuity funds made before the due date for filing the return. The Tribunal noted that the purpose of Section 43B is to ensure timely payment and not to restrict deductions only to amounts debited to the Profit & Loss Account. 4. Disallowance of Expenses Incurred on Andhra Rural Development Trust: The Tribunal upheld the CIT(A)'s decision to delete the disallowance of expenses incurred on Andhra Rural Development Trust. The Tribunal noted that the expenses were incurred for training rural youth and providing them credit facilities, which indirectly promoted the assessee's business. 5. Admissibility of Additional Grounds of Appeal Regarding Bad Debts Written Off: The Tribunal found no procedural lapse in the CIT(A) admitting and deciding the additional ground regarding bad debts written off. The Tribunal upheld the CIT(A)'s decision, citing the Apex Court's decision in favor of the assessee. 6. Deduction under Section 35D for Public Issue Expenses: The Tribunal upheld the CIT(A)'s decision to disallow the deduction under Section 35D for public issue expenses, citing previous Tribunal decisions against the assessee. 7. Deduction under Section 36(1)(viia) for Provision for Bad and Doubtful Debts: The Tribunal upheld the CIT(A)'s decision to restrict the deduction under Section 36(1)(viia) to the extent of the provision made in the books of account, following previous Tribunal decisions against the assessee. 8. Deduction for Premium Paid to LIC for Leave Encashment Policy: The Tribunal, relying on recent High Court decisions, allowed the deduction for the premium paid to LIC for leave encashment policy, reversing the CIT(A)'s decision. 9. Disallowance under Section 14A Read with Rule 8D for Expenses Related to Tax-Free Income: The Tribunal found the disallowance made by the Assessing Officer under Section 14A read with Rule 8D to be unjustified, as the shares were held as stock-in-trade. The Tribunal accepted the assessee's self-disallowance as reasonable. 10. Taxability of Interest Credited by LIC in Leave Encashment Scheme: The Tribunal upheld the CIT(A)'s decision to treat the interest credited by LIC in the leave encashment scheme as the income of the assessee, citing the Tribunal's previous decision in the assessee's case. 11. Taxability of Income Credited to Profit & Loss Account under Agricultural Debt Waiver & Relief Scheme, 2008: The Tribunal set aside the CIT(A)'s decision and directed the Assessing Officer to grant relief, holding that the credited amount was not real income but notional and thus not taxable. 12. Deduction under Section 80G for Donations to the Rajasthan Government: The Tribunal directed the Assessing Officer to allow the deduction under Section 80G for the donation made to the Rajasthan Government, as it did not require an approval certificate. Conclusion: The appeals of the Revenue for all three years were dismissed, while the appeals of the assessee were partly allowed. The Tribunal's decisions were based on consistent views, previous decisions, and relevant High Court judgments, ensuring a thorough and detailed analysis of each issue.
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