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TMI Blog2015 (5) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... o month s salary of officers and staff working in Investment Department under S.14A, and the said disallowance made by the assessee itself works out to almost 2% of the tax-free income received CIT(A) correctly following his decision in assessee’s own case for AY 2004-05, directed the Assessing Officer to follow the conclusions drawn in the said years wherein the CIT(A) had deleted disallowance made out of interest expenditure u/s 14A - Decided against revenue. Disallowance of claim on account of Andhra Bank Rural Development Trust - CIT(A) deleted the disallowance - Held that:- 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 enterprises. In this view of the matter, following the decision of in the case of CIT V/s, Infosys Ltd. (2013 (7) TMI 451 - KARNATAKA HIGH COURT) & consistent view taken by coordinate benches of this Tribunal, in similar circumstances, we find no infirmity in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.31/Hyd/2015 3. In the Revenue appeal, the first ground of appeal raised by the Revenue is against the deletion of the disallowance of broken period interest paid by the assessee on purchase of long term securities and claimed as expenditure by the assessee. The AO made the disallowance holding that the securities are purchased by the assessee as capital outlay and therefore interest element in the purchase is also capital in nature. On appeal, the CIT (A) had given relief by following the decision of the ITAT in assessee's own case for A.Ys 2005-06 to 2010-11, wherein the decision of Bombay High Court in the case of American Express International Ltd vs. CIT (285 ITR 601 (Bom.), was followed, wherein it was held that the securities which are held for complying with SLR (Statutory Liquidity Ratio) are to be held as stock-in-trade and the broken period interest included in the purchase price of such govt. securities is revenue in nature and is allowable. The ld DR relied upon the order of the AO while the ld AR supported the order of the CIT (A) and also placed reliance upon the orders of the Tribunal in earlier A.Ys as well as the decision of the Hon'ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s seen that this issue is also covered by the decision of the Tribunal in the assessee's own case for A.Y 2008-09 and the Tribunal at Para Nos.29 to 34 has held as under: "29. The next effective grievance of the assessee in this appeal relates to disallowance of premium of ₹ 148,36,49,516 paid to Life Insurance Corporation of India towards leave encashment policy taken by the assessee for its employees. 30. Facts of the case in brief relating to this issue are that the assessee claimed deduction in the computation of income of ₹ 124.82 crores towards payment made to LIC group leave encashment scheme. During the course of assessment, the claim was revised to ₹ 148.36 crores, as the claim for deduction of ₹ 10.576 crores for Assessment year 2006-07 and ₹ 12.97 crores for assessment year 2007-08 were not allowed by the Assessing Officer in those respective assessment years . The entire amount of ₹ 148.36 crores was said to have been paid during the relevant previous year. The Assessing Officer did not allow the deduction claimed by the assessee for the following reasons a) The payment was not made directly by the assessee, rather the payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stan Latex Ltd. (supra), which in fact was in the context of order of the Commissioner passed under S.263 of the Act, dealing with eligibility of deduction in respect of premia paid towards insurance cover, the Kerala High Court has held that what is intended by clause (f) of S.43B was to deny deduction for liabilities not actually incurred and to exclude provisions made against future liabilities from being granted as deduction. In the case of insurance premia paid, it was observed, the same was not a provision for future liability which was claimed as a deduction. The assessee had insured itself against the liabilities that may arise on account of the claims ITA No.167/Hyd/2014 & five others M/s. Andhra Bank, Hyderabad made by the employees towards leave encashment. The assessee being covered by a valid insurance policy and premium being regularly paid, incurs no liability towards leave encashment. The liability being covered by a valid insurance policy, is solely that of the insurer. Therefore, it was held that even if 43B (f) stands, in the case of the assessee, where the liability is borne by the insurer, there can be no situation wherein assessee could make a valid claim for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the bonds even tax- free was expenditure incurred for carrying on its business so as to maintain the required statutory liquidity ratio and tax free interest is just an incidence to it. Therefore, since the assessee has not incurred any expenditure to earn the said dividend income, the expenditure cannot be disallowed and the assessee is entitled to the benefit of deduction of the entire expenditure. We are of the opinion that there are no direct expenses attributable to the dividend income earned by the assessee, and the decision of the Karnataka High Court in the case of CCI Ltd. V/s. JCIT (212.TIOL.251) also supports this view. However, assessee itself has disallowed an amount of ₹ 33,41,474, being two month's salary of officers and staff working in Investment Department under S.14A, and the said disallowance made by the assessee itself works out to almost 2% of the tax-free income received. The coordinate bench of the Tribunal in assessee's own case for the assessment year 2007- 08, vide its order dated 4.10.2013 in ITA No.630/Hyd/2012, has held disallowance 2% of the tax-free income earned by the assessee as reasonable. Taking into account, the total tax-fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Corporate Social Responsibility are to be met out of profits and as such, cannot be deducted before arriving at taxable profits, the Assessing Officer disallowed the claim of the assessee and made an addition of ₹ 2,04,34,107. 13. On appeal, the CIT(A) considering the objectives of the trust and details of the programmes conducted by the Trust observed that the Trust was formed with the noble objective of providing employment to the rural youth by way of providing training and also the required credit to help them to be self- employed. For these reasons and also for the reasons discussed in Para 13.4 of the impugned order, extracted hereunder, the CIT(A) deleted the addition made by the Assessing Officer in this behalf. "13.4 The appellant also submitted the statistics as the number of candidates trained in each district and the number of candidates to whom credit was provided by the bank. During the financial year, the total numbers of candidates trained were 7,671 and number of candidates to whom credit facilities were given 2,744. In the process of providing credit facilities to unemployed to youth in rural areas, the bank is extending its activities. The project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by the assessee on installation of traffic signals at Bannerghata Circle, Bangalore, 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. Similarly, coordinate bench of the Tribunal in cross appeals of NMDC Ltd., Hyderabad for the assessment year 2008-09, vide order dated 28.2.2014 in ITA No.714 & 885/Hyd/2012, to which both of us are signatories, following the still earlier order of the Tribunal in that very case, held donation of ₹ 5 crores made by the assessee therein to a Medical College, though not related to the business of the assessee, as having been incurred in furtherance of a corporate social responsibility and hence allowable as deduction under S.37 of the Act. In the facts of the present case, 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 unemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by the decision of the Coordinate Bench dated 18.7.2014 in ITA No.244/Hyd/2014. On perusal of the material on record, we find that the assessee had not raised this alternate ground before the authorities below, but has raised it for the first time before this Tribunal. Since it is an alternate and legal ground, we deem it fit and proper to remand this issue to the file of the AO with a direction to adjudicate the same de novo in accordance with the law. 16. In the result, ground No.3.1 raised by the assessee is rejected and Ground No.3.2 is treated as allowed for statistical purposes. 17. As regards Ground No.2, brief facts are that during the scrutiny proceedings, the AO directed the assessee to furnish the details of provisions on account of rural debts and the bad debts written off for the preceding year. Assessee submitted the required details and the AO observed that the opening balance of the provision u/s 36(1)(viia) was ₹ 1373,47,97,236/- while the amount of rural and bad debts written off during A.Y 2011-12 is ₹ 102,32,249. AO therefore, asked the assessee to show cause as to why the difference amounting to ₹ 1037,245,69,987 should not be writ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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