9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (11) TMI 1089 - AT - Income TaxDisallowance of expenses being relatable to exempt income by invoking the provisions of section 14A r.w.s. 8D(ii) - as argued provisions of section 14A of the Act does not apply to the case of assessee as it is in the banking business and the exempt income is business income from banking as the assessee has kept these shares/investments as stock in trade - HELD THAT - After hearing rival contentions and considering the ratio of the aforesaid decision of Hon ble Supreme Court in the case of South Indian Bank Ltd. 2021 (9) TMI 566 - SUPREME COURT we hold that the provisions of section 14A of the Act would not attract to such income and such income is held by bank being shares and securities as stock-in-trade . In case, stock-in-trade are held as investments then the provisions of section 14A of the Act will apply. Since there is no finding in the order of AO or CIT(A) that the shares and securities held by assessee bank as stock-in-trade and not investment, we principally agreeing with the argument of assessee that this issue is covered but for verification purpose, we remit this issue back to the file of the AO. The AO is directed to first give a finding as regards to the fact that these shares and securities are held as stock-in-trade or as investment in assessee s bank balance sheet and in case, these are held as investment, the AO will recompute the disallowance by applying the provisions of section 14A r.w.rule 8D of the Rules as per law after considering the facts and circumstances of the case. Accordingly issue of assessee s appeal is allowed for statistical purposes. Disallowance of loss on treasury investments being mark-to-market loss - HELD THAT - As assessee stated that this has been accepted by the AO while framing assessment for the assessment year 2017- 18 and for the purpose of consistency also this should have been accepted by the AO once he accepted the income on the same concept or principle. We noted that this issue stands covered by the decision of Lakshmi Villas Bank Ltd. 2006 (2) TMI 99 - MADRAS HIGH COURT and it is the case of valuation of investment at cost or market value whichever was lower and the difference arising as a result of valuation has to be allowed to the assessee either as loss or income. Hence, we find that the assessee s claim is perfectly alright and hence, the order of AO and that of the CIT(A) is reversed and the claim of assessee is allowed. This issue of assessee s appeal is allowed. Disallowance of deduction claimed on account of interest on delayed payment of service tax - HELD THAT - As relying on decision of Vegetable Vitamin Foods Co.(P) Ltd. 1994 (3) TMI 60 - BOMBAY HIGH COURT wherein it is held that the deduction claimed u/s. 37(1) of the Act can be allowed being payment made by way of interest on delayed payment of sales tax being purely compensatory in nature and not penal in nature. Thus, we allow the claim of assessee and hence, this issue of assessee s appeal is allowed. Claim of amortization of premium on HTM securities - deduction for perquisite charged in the hands of employees on exercise of ESOPS - HELD THAT - As we are of the view that all the details and facts are available but none of the authorities below i.e., the AO or CIT(A) has not considered this claim. We admit these two claims and the finding of the AO and CIT(A) on these two issues are set aside and matter remanded back to the file of the AO for adjudicating the same on merits. The AO will adjudicate these two claims after examining the facts and legal position and accordingly, decide these two claims. These two issues are allowed for statistical purposes.
Issues Involved:
1. Applicability of Section 14A of the Income Tax Act to exempt income from shares and securities held as stock-in-trade by a bank. 2. Disallowance of mark-to-market loss on treasury investments. 3. Deduction of interest on delayed payment of service tax. 4. Amortization of premium on Held to Maturity (HTM) securities. 5. Deduction for perquisites charged in the hands of employees on exercise of Employee Stock Options (ESOPs). Issue-wise Detailed Analysis: 1. Applicability of Section 14A: The primary issue revolves around whether the provisions of Section 14A of the Income Tax Act apply to a bank's exempt income derived from shares and securities held as stock-in-trade. The appellant argued that since these shares and securities are held as stock-in-trade and not as investments, the income should be considered business income, exempt from Section 14A disallowance. This position aligns with the Supreme Court's decision in South Indian Bank Ltd., which clarified that Section 14A does not apply to income from shares and securities held as stock-in-trade by banks. The Tribunal agreed with this interpretation but remanded the matter back to the Assessing Officer (AO) for verification of whether the shares and securities were indeed held as stock-in-trade or as investments. 2. Disallowance of Mark-to-Market Loss: The appellant challenged the disallowance of a mark-to-market loss of Rs. 1,02,66,292/- on treasury investments, which the AO and CIT(A) treated as notional and contingent, thus not deductible. The appellant contended that the loss was real, based on the valuation of investments at cost or market value, whichever is lower, as per the Bombay High Court's decision in CIT vs. Bank of Baroda. The Tribunal found merit in the appellant's argument, referencing the consistent treatment of such losses in previous assessments and the Madras High Court's decision in Lakshmi Villas Bank Ltd., which supported the claim. Consequently, the Tribunal allowed the deduction for the mark-to-market loss. 3. Deduction of Interest on Delayed Payment of Service Tax: The appellant sought deduction of Rs. 15,07,018/- for interest on delayed payment of service tax, arguing it was compensatory, not penal. The AO and CIT(A) had disallowed the deduction, considering it penal. The Tribunal, however, sided with the appellant, citing the Bombay High Court's decision in CIT vs. Vegetable Vitamin Foods Co.(P) Ltd., which treated such interest as compensatory and deductible under Section 37(1) of the Act. Thus, the Tribunal allowed the deduction. 4. Amortization of Premium on HTM Securities: The appellant claimed a deduction for the amortization of premium on HTM securities amounting to Rs. 6,92,21,392/-, which was not claimed in the original or revised tax returns but raised during assessment proceedings. The CIT(A) rejected the claim, adhering to the Supreme Court's ruling in Goetze (India) Ltd., which restricts claims not made via a revised return. The Tribunal, however, admitted the claim for consideration, remanding it back to the AO to adjudicate on the merits, emphasizing the need for consistency and thorough examination. 5. Deduction for Perquisites on ESOPs: Similar to the HTM securities issue, the appellant's claim for deduction of Rs. 1,53,77,100/- for perquisites on ESOPs was denied due to its absence in the original and revised returns. The Tribunal acknowledged the appellant's detailed submissions and remanded the issue back to the AO for a fresh examination, emphasizing the necessity to adjudicate based on the merits and available evidence. Conclusion: The Tribunal's decision partially favored the appellant, allowing some claims while remanding others for further verification and adjudication by the AO. The judgment underscores the importance of consistent treatment of financial transactions and adherence to judicial precedents in tax assessments.
|
