2021 (10) TMI 609 - AT - Income Tax

Disallowance on account of contribution made by the assessee bank to LIC on account of gratuity fund - HELD THAT - We are of the considered view that when application for granting approval for the gratuity trust with the Life Insurance Corporation of India has been filed well within time i.e. 02-01-2009, it is to be allowed from the date of application itself and not prospectively as Ld. Pr. CIT has done in this case. Following the order passed by Coordinate Bench of Tribunal, we remit this issue back to the AO to decide afresh after getting decision from the Pr. Commissioner of Income Tax on the application of the assessee. Application of the assessee is reportedly pending with Pr. CIT who shall decide the same expeditiously in accordance with law from the date of application and thereafter AO shall decide the issue afresh accordingly. Disallowance on account of dividend received by the assessee bank from UP Cooperative Federation u/s. 80P(4) of the Act - HELD THAT - Undisputedly, assessee bank has received dividend income for the years under consideration from the investment made with UP Cooperative Federation. It is also not in dispute that assessee bank is a cooperative bank registered with Reserve Bank of India. When we peruse the provisions contained u/s. 80P(4), 80P(2)(d) of the Act, this deduction is not available to the cooperative bank.

Summary

Issues:
- Disallowance of additions made by Assessing Officer
- Disallowance of dividend income received by the bank
- Disallowance of interest on alleged NPA assets
- Disallowance of provision for FBT and disallowance for earning exempt dividend income

Analysis:

The Appellant, a cooperative bank, challenged various additions made by the Assessing Officer in different assessment years. The Assessing Officer added amounts on account of provisions for gratuity, dividend income received from UP Cooperative Federation, interest on alleged NPA assets, provision for FBT, and disallowance for earning exempt dividend income. The Appellant contended that the orders were against the law and facts of the case.

In the assessment years under consideration, the Assessing Officer disallowed contributions made by the bank to LIC for gratuity fund, stating lack of approval from the Pr. Commissioner of Income Tax. The Tribunal, following a similar case, remitted the issue back to the AO for fresh consideration upon approval from the Pr. Commissioner. This decision was in favor of the assessee for statistical purposes.

Regarding the disallowance of dividend income received by the bank, the Tribunal upheld the decision of the Ld. CIT(A) as per the provisions of the Income Tax Act, ruling against the assessee.

The disallowance of interest on alleged NPA assets was also challenged by the Appellant. The Tribunal remitted this issue back to the AO for fresh consideration as the Appellant failed to provide evidence that the loans were categorized as NPA as per RBI guidelines. This ground was decided in favor of the assessee for statistical purposes.

The disallowance of provision for FBT and for earning exempt dividend income was also addressed. The Tribunal remitted the issue back to the Ld. CIT(A) for proper consideration and directed the AO to decide in accordance with previous orders. The appeals by the assessee were partly allowed for statistical purposes.

In conclusion, the Tribunal provided detailed analysis and decisions on each issue raised by the Appellant, remitting some back to the authorities for fresh consideration and upholding others as per the provisions of the Income Tax Act. The judgment was pronounced on 30th September 2021.