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TMI Blog2015 (7) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... s 40(a)(ia) on reimbursement of clearing house charges paid to the Ahmedabad Dist. Cooperative Bank and corresponding service tax - CIT(A) deleted disallowance - Held that:- The assessee has reimbursed the impugned expenses towards MICR processing centre and its recipient institution i.e. the Ahmedabad District Co-op. Bank has already deducted TDS thereupon. The Revenue does not dispute this factual position. We observe in these facts that the impugned disallowance amounts to double deduction of TDS as per a coordinate Bench decision reported as the Karnavati Coop. Bank Ltd. vs. DCIT. [2011 (11) TMI 367 - ITAT AHMEDABAD]. The Revenue does not highlight any distinction on facts or law therein. We affirm the CIT (A)’s findings under challenge. - Decided against revenue. Disallowance of capital expenditure - Held that:- The assessee is a tenant in a rented premises. It incurred the impugned expenditure on the above stated items. The lower authorities treat the same as capital expenditure by holding that the expenditure in question has brought new assets into existence. We find no increase in the relevant space area nor construction of a new structure forthcoming from the case file. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy is penal in nature. Section 46 r.w.s. 47A(1)(b) of the Banking Regulation law does not stipulate any such criminal liability. We follow the aforestated case law in these facts and direct the assessing authority to allow the assessee’s claim of ₹ 5 lacs as revenue expenditure. - Decided in favour of assessee. - I.T.A. No.2423/Ahd/2010,C.O. No.269/Ahd./2010 - - - Dated:- 3-7-2015 - Shri Pramod Kumar and S.S. Godara , JJ. For the Petitioner : Shri Dinesh Singh, Sr. D.R. For the Respondent : Shri M.J. Shah, A.R. ORDER PER S.S. GODARA JUDICIAL MEMBER: This Revenue s appeal and assessee s cross objection for A.Y.2007-08, arise from order of CIT(A)-XVI, Ahmedabad dated 28.5.2010, passed in case No.CIT(A)/XVI/DCIT.Cir.11/270/2009- 10, in proceedings u/s.143(3) of the Income Tax Act,1961 in short hereafter the Act. 2. The Revenue s appeal raises five substantive grounds challenging the CIT(A) s order interalia deleting addition of ₹ 45 lacs as unexplained cash deposits u/s. 68, section 40(a)(ia) disallowance of ₹ 1,94,473/- + ₹ 56,556/- regarding expenses on reimbursement of clearing housing charges paid to the Ahmedabad District C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddress, photo identity etc. In these 250 bank accounts total amount of ₹ 45 lacs was transferred. According to the Assessing Officer since the bank has not followed the necessary instructions of the RBI while opening these 250 bank accounts, the amount of ₹ 45 lacs deposited in these bank accounts is not properly explained because the identity and creditworthiness of such 250 depositors was not established. The Assessing Officer observed that in each of these accounts ₹ 18,0007- in the name of 250 different depositors were credited in the books of the appellant bank therefore the onus is on the bank to prove the identity and creditworthiness of the depositors. Since the bank has failed to discharge the onus cast u/s. 68 of the I T Act by giving name , address and PAN of .the depositors and also by producing them, the amount of ₹ 45 lacs deposited in their accounts was treated as cash credit u/s. 68 of the Act. The AR brought to my notice the copy of the resolution passed in the meeting of the Board of Directors held on 27-1-2006 which is placed at page No 28 of the Paper book. As per this resolution No.3 the Board of Directors offered their comments as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness of these 250 depositors has not been proved by the appellant bank, the credit of ₹ 18,0007- each in these 250 bank accounts amounting to ₹ 45 lacs represent unexplained credit in the hands of the appellant bank. 5.2 Whereas, the case of the AR is that no fresh fund has been deposited in the fixed deposit account holder. The entry in their account of ₹ 18,0007- each is made by way of transfer entry from the account of Radhe Finance, therefore the question of treating the amount of ₹ 45 lacs u/s. 68 does not arise. Reliance was also placed on the decision of A P High Court at 246 ITR 283. 5.3 I have considered the submissions of the AR. On the perusal of the bank account No 1497 of Radhe Finance with the appellant bank, I have verified that the amount of ₹ 53,50,000 was transferred to the account of Radhe Finance from the account of Nilkanth Enterprise who received the refund of tender money from official liquidator. From this account of Radhe Finance, cheques of ₹ 18,000/- each were transferred to the accounts of 250 depositors (whose KYC Norms were not observed by the appellant bank and for which penalty of ₹ 5 lac was im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,94,473/- on reimbursement of clearing house charges paid to the Ahmedabad Dist. Cooperative Bank and corresponding service tax of ₹ 56,556/-. The assessee had included these sums under the head other expenses . It had paid the same for its cheque process/MICR charges. The Assessing Officer invoked Sec. 40(a)(ia) disallowance for non deduction of TDS. 8. The CIT (A) has accepted the assessee s corresponding ground as under:- 6. Next ground is regarding disallowance of clearing house charges of ₹ 1,94,473 + service tax paid thereon ₹ 56,5227- on behalf of Ahmedabad District Co.Op. Bank (ADC Bank) u/s. 40(a)(ia) of the I T Act. This issue has been discussed by the AO at para 6 of the asstt order. Briefly the facts are that the appellant bank is not a member of clearing house. The.cheques of the bank are cleared by the clearing house though Ahmedabad Dist Co Bank (ADC). The clearing house in Ahmedabad is managed by Bank of Baroda. For the services rendered by Bank of Baroda, the member banks are supposed to pay for services, to the Bank of Baroda. The payment is made by ADC Bank on behalf of the appellant bank (as the appellant is not member of clearing house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is not further subject to TDS. The Assessing Officer was not therefore justified in disallowing the amount of ₹ 1.94,473/- + 56,222 u/s. 40(a)(ia) of the Act. . 9. We have heard rival contentions and gone through the relevant findings. It has come on record that the assessee has reimbursed the impugned expenses towards MICR processing centre and its recipient institution i.e. the Ahmedabad District Co-op. Bank has already deducted TDS thereupon. The Revenue does not dispute this factual position. We observe in these facts that the impugned disallowance amounts to double deduction of TDS as per a coordinate Bench decision reported as (2012) 14 ITR (Trib.)175 (Ahd) the Karnavati Coop. Bank Ltd. vs. DCIT. The Revenue does not highlight any distinction on facts or law therein. We affirm the CIT (A) s findings under challenge. The Revenue s second substantive ground is rejected. 10. The Revenue s third ground challenges the lower appellate order restricting disallowance of capital expenditure from ₹ 5,80,000/- to ₹ 4,15,000/-. The assessee s second substantive ground in its cross objection seeks to delete this remaining part of the disallowance as well. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. As regards the payment of ₹ 5,30,0007- to Saurashtra Const Co. the Assessing Officer observed that the expenditure incurred by the assessee bank is not towards routine maintenance but construction of new-floor on the existing building. According to the Assessing Officer the expenses are meant for bringing ' into existence of the assets of enduring nature and hence, he disallowed the same as not being revenue expenditure. On the other hand, the case of the appellant is that the premises are rented premises and the repairs undertaken by the appellant has not resulted into any benefit to the appellant because at the time of surrender of the premises to the landlord, no asset would remain with the appellant but would be handed over to the owner of the building. It was therefore argued that since no enduring benefit has accrued to the appellant, in view of the judgement of Hon'ble Guj High Court in the case of Mehta Transport Co. 160 ITR Page 35. The expenses of ₹ 5,30,0007- is allowable to the appellant. The head notes of the decision is as under :- Held, that the shop premises consisted only of ground floor admeasuring 450 sq yds and the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As the rented premises is very old in Age, flooring tiles were also cracked / broken hence such tiles were removed and fresh tiles were fitted - approx cost .... 1900 sq ft @ ₹ 90/- = 1.71 lacs. iii. Also load bearing beams were damaged due to its old age and earthquake, the same was get repaired by removing broken parts. Approx cost.... 1200 sq ft @ ₹ 140/- = 1.68 lacs iv. Colour works in the said premises - approx cost ... 5,500 sq ft @ Rs. JO/- = .55 lacs. This also includes extension of safe deposit vault room due to shortage of vault room space by making bricks work and RCC work. Approx cost of 600 sq ft @ ₹ 120/- = 0.72 lacs. From these details, I find that the expenses incurred at Sr No. I (Rs. 1.10 lacs) and IV (Rs. 0.55 lacs) i.e. on account of removal of plaster of the wall and colour works of the premises represent the revenue expenditure. By virtue of Expl. to section 30, capital expenditure incurred on repairs by a tenant would not be allowed u/s. 30(a)(i) of the I T act. For the sake of convenience section 30 is reproduced as under:- 30. In respect of rent, rates, taxes, repairs and insurance for premises used for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has brought new assets into existence. We find no increase in the relevant space area nor construction of a new structure forthcoming from the case file. The Revenue fails to prove that the assessee has demolished any existing structure altogether and erected a new one. The assessee appears to have got removed/ partly demolished the same and spent the impugned sums in carrying out necessary repair and maintenance by way of fixing new beams, re-plastering of ceiling etc. We hold in these circumstances that once no new structure has come up nor is there any increase in capacity of the already existing structure, the impugned claim is to be treated as revenue expenditure only. We reject the Revenue s third ground and accept the assessee s corresponding plea in its cross objection. The balance amount is of ₹ 50,000/-. Page No.102A contains its relevant bill on cement, flooring and a truck of sand. The Revenue s objection in assessment order (supra) stands rectified. The assessee s claim of ₹ 5,80,000/- is allowed as revenue expenditure. 14. The Revenue s fourth ground assails correctness of the CIT(A) s action in deleting disallowance of petrol allowance of ₹ 30,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this allowance has been actually allowed to the bank in the past. The appellant also submitted that in past Shri Kanubhai has been reimbursed the amounts for telephone ₹ 12,000/- and conveyance expenses ₹ 1,12,000/- in F.Y. 2004-05. In F.Y. 2005-06 conveyance ₹ 12,000/- telephone expenses ₹ 12,000/-, in 2006-07 conveyance 30,000/- and telephone expenses 24,000/-. Copies of bills of BSNL were also enclosed. It was stated that such expenses are being allowed to the appellant from year to year. Since the expenses are in the form of reimbursement, the same were not shown as income by Shri Kanubhai Kothia. As regards the consultancy services it was stated that Shri Kanubhai has included the amount of ₹ 36,000/- in his return of income for A.Y. 2007-08. The Assessing Officer has not doubted the nature of services. Nor his case is that such payments are excessive or unreasonable to bring the same under the purview of section 40A(2). 8.1. I have considered the submissions of the appellant. Looking into the fact that the appellant has paid salary to the tune of ₹ 21,64,554/- and tat Shri Kanubhai has been reimbursed with the telephone allowance an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 8,88,300/- 2005-06 5,79,000/- 2006-07 5,03,380/- There is practice of First Crediting Interest Income of amount recovered from NPA Account and any excess recovery than accrued interest being created as principal recovery. Therefore, there is no any amount of accrued interest not treated as income during all financial years. 9.1 The Assessing Officer was not satisfied with this reply of the assessee and made addition of ₹ 5,03,380/- on the ground that the appellant has not furnished the copy of interest account showing booking of income of accrued interest on NPA accounts. The case of the AR is that the proforma for classification of assets and provision made against NPA Assets as on 31-3-2007 ( which is enclosed as page No 113 in the paper book), a copy of which is enclosed as Annexure-l to this order) was produced before the Assessing Officer during the assessment proceedings which clearly shows that out of the total loans and advances of ₹ 933.27 lacs, standard asset represent 857.61 lacs and the bifurcation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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