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2017 (11) TMI 1589 - AT - Income TaxDisallowance u/s 14A - Held that - It is seen that the assessment year under consideration is 2011-12 and the provisions of rule 8D are applicable. It is common submission that similar treatment was given by the respective authorities below for the A.Ys. 2008-09 and 2009-10. The Tribunal has upheld the action of the CIT(A) for such years, meaning thereby that disallowance of interest got deleted and disallowance @ 0.5% of the average value of investment got sustained. In the absence of any change in the factual scenario and respectfully following the precedent, we uphold the impugned order. To put it simply, the respective grounds raised by both the sides stand dismissed. Allowing excess deduction claimed u/s 36(1)(vii) - Held that - The Hon'ble Supreme Court in Catholic Syrian Bank vs. CIT (2012 (2) TMI 262 - SUPREME COURT OF INDIA) has observed that the provisions of section 36(1)(viia) apply only to rural advances and the provisions of section 36(1)(vii) apply on other advances. It has been held that both these provisions are distinct and independent items of deduction and operate in their respective fields. It is relevant to note that Explanation 2 has been inserted by the Finance Act, 2013 w.e.f. 01.04.2014 diluting the position laid down in Catholic Syrian Bank (supra). Such an insertion has been made prospectively and hence cannot be applied retrospectively to the year under consideration. No contrary decision has been brought on record by the ld. DR in which such Explanation has been held to be retrospective. We, therefore, countenance the view taken by the ld. CIT(A), in principle, in allowing deduction u/s 36(1)(vii) in addition to the deduction u/s 36(1)(viia). Computation of deduction u/s 36(1)(viia)- Held that - Total provision made by the assessee stands at ₹ 934.38 crore. As section 36(1)(viia) grants deduction in respect of total provision for bad and doubtful debts and the same is not confined to provision for rural branches only, we hold that the quantum of deduction has to be seen in the light of the total amount of provision consisting of both rural and non-rural branches. Viewed in this light, the action taken by the ld. CIT(A) in reducing the amount of deduction to the extent of provision for bad and doubtful debts in respect of rural branches alone, becomes unsustainable. We, therefore, direct that deduction of ₹ 637,56,78,375/- be allowed u/s 36(1)(viia). Software expenses - revenue or capital in nature - Held that - Having heard both the sides and perused the relevant material on record, it is observed that similar issue was raised in the appeals for assessment years 2008-09 and 2009-10. The Tribunal has upheld the view taken by the CIT(A) for such earlier years wherein noticed that a sum of ₹ 1,65,47,264/- was in the nature of AMC expenses and, hence, allowable. The remaining amount was held to be capital in nature and the Assessing Officer was directed to allow depreciation. Amortized premium on HTM securities - Held that - It was fairly admitted that the amount was offered for taxation and no deduction was claimed either before the Assessing Officer or before the CIT(A). He submitted that the additional claim has been raised because of the favorable judgment of the Hon'ble Bombay High Court in CIT vs. HDFC Bank Ltd., (2014 (8) TMI 119 - BOMBAY HIGH COURT). Since this issue was not raised before the authorities below, we are of the considered opinion that the ends of justice would meet adequately if the Assessing Officer is directed to consider the assessee s claim in the light of the judicial precedents available on the issue
Issues involved:
1. Disallowance under section 14A of the Income-tax Act, 1961 2. Depreciation on temporary erections 3. Addition on account of interest on overdue deposits 4. Disallowance under section 36(1)(viia) 5. Excess deduction claimed under section 36(1)(vii) 6. Computation of deduction under section 36(1)(viia) 7. Treatment of software expenses as capital in nature 8. Additional ground for amortized premium on HTM securities Detailed Analysis: 1. Disallowance under section 14A of the Income-tax Act, 1961: The dispute arose regarding disallowance under section 14A due to exempt income earned by the assessee. The AO invoked Rule 8D for disallowance, which was partly sustained by the CIT(A). The Tribunal upheld the order, citing consistency with previous years' treatment and precedent, dismissing both parties' appeals. 2. Depreciation on temporary erections: The issue was regarding the percentage of depreciation allowed on temporary erections. The CIT(A) deleted the addition, but the Tribunal remitted the matter to the AO for fresh verification based on a similar case from a previous year, following precedent. 3. Addition on account of interest on overdue deposits: The dispute involved the deletion of an addition related to interest on overdue deposits. The Tribunal remitted the matter to the AO for verification, aligning with previous decisions for earlier years. 4. Disallowance under section 36(1)(viia): The issue was about reducing the disallowance made by the AO under section 36(1)(viia). The Tribunal upheld the order based on the precedent from the previous assessment year, supporting the assessee's position. 5. Excess deduction claimed under section 36(1)(vii): The dispute concerned excess deduction claimed under section 36(1)(vii). The Tribunal supported the CIT(A)'s decision to disallow the excess deduction, emphasizing the non-retrospective application of a clarificatory amendment. 6. Computation of deduction under section 36(1)(viia): The issue involved the computation of deduction under section 36(1)(viia). The Tribunal disagreed with the CIT(A)'s restriction on the deduction amount, directing that the full deduction be allowed based on the total provision for bad and doubtful debts. 7. Treatment of software expenses as capital in nature: The dispute was over the treatment of software expenses as capital in nature. The Tribunal upheld the CIT(A)'s decision, following precedent from earlier years, resulting in disallowance of the claimed amount. 8. Additional ground for amortized premium on HTM securities: An additional ground was raised for amortized premium on HTM securities. The Tribunal admitted the ground for disposal on merits, directing the AO to consider the claim based on judicial precedents, granting the assessee a fair opportunity for representation. In conclusion, the Tribunal partly allowed both appeals, addressing each issue based on legal provisions, precedents, and factual considerations.
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