9911796707
TMI Blog2012 (9) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, otherwise normally eligible for deduction. Issue decided in favour of assessee Disallowance of Lease premium expenses – Assessee claim lease premium as revenue expenditure – Following the decision in case of Mukund Limited(2007 (2) TMI 358 - ITAT MUMBAI), the claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed. Issue decide in favour of revenue Disallowance of claim of Bad debts – AO hold that the bad debt is allowable only if it is irrecoverable and is actually written off in the books of accounts – Held that:- Following the decision in case of Vijaya Bank(2010 (4) TMI 46 - SUPREME COURT) debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for “impugned bad debt”, the assessee will be entitled to the benefit of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case CIT(A) erred in disallowing a sum of Rs. 2,93,434/- as prior period expenses on the ground that evidence that these have accrued or crystallized during the year was not submitted. The CIT(A) ought to have appreciated that in the case of appellant which has branches throughout India and abroad, incurring of expenditure is a continuous process and therefore no amount can be treated as prior period expenses based on decision of Jurisdictional ITAT in the case of Toyo Engg. India Ltd Vs JCIT (100 TTJ 373) and Saurashtra Cement and Chemical Industries Ltd Vs CIT (213 ITR 623 Guj). 03. On the facts and circumstances of the case and in law, the learned CIT (A) erred in disallowing the lease premium expenses of Rs. 1,55,43,817/- on the ground that it is a capital expenditure. The CIT(A) should have noted that the said sum being amortization of premium paid on leasehold properties cannot be termed as capital expenditure. The CIT(A) ought to have allowed the entire premium of Rs. 124,43,05,430/- as held in the case of CIT Vs Ucal Fuel Systems Ltd (296 ITR 702 Mad) and against which decision the Supreme Court had dismissed the SLP filed by the department ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Bank Limited in ITA No. 2622/Mds/2005 for the Assessment Year 2002-03 dated 15.09.2006. 5. The CIT(A), on consideration of the assessee s submissions held that the disallowance made by the AO at 12% of 112.33 crores, is very high, and after referring to the latest decision of Hon ble Bombay High Court in the case of Godrej Boyce, held that reasonable disallowance may be made and he, therefore, directed the AO to compute the disallowance at .5% of the average of investment yielding tax free income. 6. The assessee, still not satisfied, is now before the ITAT on this issue. 7. Before us the AR representing the assessee bank submitted that even this disallowance is against the various decisions of various coordinate Benches of the ITAT as well as decisions rendered by the various Hon ble High Courts. The AR pointed out that in the case of Reliance Capital Ltd. Vs DCIT, ITA No. 3303/Mum/2003, the coordinate Bench at Mumbai deleted the entire disallowance made by the revenue authorities. The AR further referred to the case of DCIT Vs Jindal Photo Limited ITA No. 814/Del/2011. The AO also referred to the case of HDFC bank Ltd. Vs JCIT ITA No. 4529/Mum/2005 and CO No. 75/Mum/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, reiterated the submissions made before the CIT(A) and pleaded, that despite the fact that no disallowance under section 14A is called for, as the assessee bank was having interest free investments at Rs. 502.61 crores and own funds of Rs. 13,819.70 crores and keeping in view the latest decision of Godrej Boyce, reported in 328 ITR 81, he however, prayed that disallowance of .5% of tax free income, which according to the AR came to Rs. 15,76,875, would be reasonable. 9. The DR strongly supported the orders of the revenue authorities and submitted that the CIT(A) has already made a substantial reduction in the disallowance. The DR submitted that although the CIT(A) s order is not acceptable, but atleast the direction given by the CIT(A) should be held to be reasonable, so far as the disallowance is concerned. 10. We have heard the arguments from both the sides and have also perused the material and case laws, placed on record and cited before us. The cases cited by the AR give indication that the disallowance is to be made on a reasonable basis, but we have not found any working on the disallowance, and how the AR has arrived at figure of Rs. 15,76,875 and how and why .5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess, cannot be cut off as exactly, especially in an organization like that of the assessee where activities are carried out through various site offices. Therefore, it is quite natural that there would be an amount of overflow of in formation after the close of the accounting year. Therefore, to certain extent, the claim of the assessee that the details of such expenditure were received only after the close of the accounting year, could be accepted. It is a continuous process to incur expenditure and to account for in the books of account. Therefore, even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction. Reliance is also placed on the decision in the case of Union Bank of India in ITA no. 4720 to 4724/Mum/2010 for the assessment years 2002-03 to 2006- 07 dated 30/06/2011 where under similar circumstances the claim of the appellant was allowed. Copy of the above decision is enclosed in annexure 6. Reliance is also placed on the decision of Saurastra Cement and Chemical Industries Vs CIT 213 ITR 523 Guj). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue. Since the issue now is settled on identical grounds by the coordinate Bench, respectfully following the decision in the case of Union Bank of India, we delete the addition made by the revenue authorities on this issue. Addition of Rs. 2,93,434 is deleted. 19. The next ground is against the disallowance of Rs. 1,55,43,817, wherein the AO has treated the expenses to be capital in nature. 20. The AR conceded that the expenses, treated to be of capital in nature, has been decided by the Special Bench in the case of JCIT Vs Mukund Limited, reported in 106 ITD 231 (Mum SB). The AR submitted that a view may be taken by the Bench. 21. The DR relied on the orders of the revenue authorities and the decision by the Special Bench in the case of Mukund Limited. 22. We have heard both the sides. The claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed, has been decided by the Special Bench, as conceded by the AR. Respectfully following the decision rendered by the Hon ble Special Bench, we sustain the disallowance of Rs. 1,55,43,817, as made by the revenue authorities. The ground of appeal is dismissed. 23. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount in the books. According to the AO, the bad debt is allowable only if it is irrecoverable and is actually written off in the accounts of the assessee. the AO observed that only prudential write off and not actual write off as irrecoverable cannot be allowed. 31. Aggrieved, the assessee approached the CIT(A), who, relying on the decision of assessee s own case in assessment year 2000-01 by the CIT(A) and also by following the decision of Hon'ble Supreme Court in the case of Vijaya Bank v/s CIT, reported in 323 ITR 166, wherein the Hon'ble Apex Court held, Though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful debt, yet that would not constitute actual write off. But where besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same income it will only frustrate the object with which the agreement is executed . The ITAT had therefore concluded, As regards business profits paragraph I of Article 7 provides that the profits of an enterprise of a contracting state shall be taxable only in that contracting state. We will take it that the assessee being a resident of India, the enterprise is an Indian enterprise. So the Profits are taxable in India. But this power of India to tax, as further provided in the Article, exists only when the enterprise does not carry on business in Malaysia through a permanent establishment situated in Malaysia. This is an undisputed fact. So the right of the Indian Government to levy tax in respect of business profits of these types of Indian Enterprise as provided in opening paragraph of Article 7 is taken away because a permanent establishment is situated in Malaysia. In the appellant s case also in all the foreign countries the operation is carried out through its branches which is a permanent establishment situated outside India. Hence the income attributable to these branches cannot be taxed in India. This issue has also been decided in favour of the appellant by ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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