9911796707
TMI Blog2012 (4) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... of by the CIT (A)-2 Cochin vide orders dated 5.3.2007. The Revenue has raised ground Nos.2 to 11, ground 1 being general in nature. The grounds are considered as under:- 4. Ground Nos. 2 3 pertains to disallowance under section 14A. The Assessing Officer on noticing that the assessee had incremental tax free investment to the extent of ₹ 87.36 crores at the end of year out of which incremental tax free investments of ₹ 34 crores were added during the year and further a tax free income of ₹ 5091/- crores disallowed by his own working, interest on borrowed capital of ₹ 4.05 crores and managerial expenses of ₹ 5,09,580/- totaling to ₹ 410,95,100/-. The CIT (A) following his orders in earlier years after considering the history of the disallowance in assessee's own case deleted the amount. Thus the Revenue is aggrieved. 5. It is fairly admitted that the issue of similar nature was sent to the CIT (A) in the assessee's own case for assessment year 2002- 03 vide the order in ITA No.193/Coch/2007 dated 30.12.2011. The learned Counsel, however, relied on the fact that the average net worth of the bank was more than the average tax free in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing to the parties . Accordingly issue in these two grounds is restored to the file of the CIT (A) for fresh adjudication keeping in line facts of the case as well as law on the issue. The grounds are considered allowed. 6. Ground No.4: The Revenue is contesting the deletion of an amount of ₹ 5 lakhs paid by the assessee bank to RBI as penalty. It was the contention of the assessee that these are the charges paid for technical violation of the instructions, whereas the Assessing Officer was of the opinion that the amounts wad paid in contravention of law. The learned CIT (A) deleted the amount stating as under: 6. The next ground relate to disallowance of ₹ 5,00,000/- in respect of fee paid to RBI which the AO is of the opinion, relates to a penalty payment for violation of RBI norms. It has been clarified that this is not a penalty imposed by the RBI. This is a one time adhoc levy by the RBI for a technical violation. This issue is covered by the Kerala High Court decision in the case of The Catholic Syrian Bank Ltd., 265 ITR 177. I have considered the argument and find that the claim of the appellant is in order. The disallowance is delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und is rejected. 10. Ground No.6 pertains to the issue of depreciation on value of investment. The Assessing Officer has added back an amount of ₹ 320,08,000/- on the reason that the investments have been treated as capital asset and the capital gains was offered from assessment year 1999-2000 and since these are not business assets, depreciation cannot be allowed. It was the contention that claim of depreciation on investment by a Bank is as per the instructions of the RBI and irrespective of whether the income is treated as income from business or capital gains, deduction of the value of the assets has to be allowed as an expenditure as held by the Hon'ble Kerala High Court in the case of CIT vs. Nedungadi Bank Ltd 264 ITR 545 and assessee's own case by ITAT in assessment year 1998-99. Considering these arguments, the CIT (A) held that the decision in the case of Nedungadi Bank is fairly applicable and in the case of the Bank, the RBI guidelines had governed the issue and accordingly he allowed the claim. 11. It was fairly submitted that the issue is covered in favour of the assessee by the ITAT in 1994-95 and 1995-96 and in 2002-03 (copy placed on record) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be disallowed. In the second part, the Assessing Officer is of the opinion that any non reconciliation of an entry in the books for a long period does not make it an allowable revenue expenditure. Hence, he disallowed ₹ 24,82,836/-. It has been clarified that there is no case of any double deduction. The provisions made in the earlier years pertaining to contingencies and the entire provisions and contingencies have been added back. Only the relevant allowable expenditure has been claimed. So ₹ 37 lakhs has not been claimed twice. It has also been explained that the reconciliation arises out of mismatch of DDs and cheques etc., issued by one branch and encashable in another branch of the same Bank. Such entries are credited to an inter branch reconciliation account till it is actually matched and liquidated. However, in actual practice, a number of entries cannot be liquidated inspite of repeated reconciliation. Hence, in similar cases, the RBI issues directions that such un-reconciled entry should be squared off. The write off, therefore, has been done under specific directions of the RBI. 15. The CIT (A) after examining the facts as well as guidelines of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 129,29,000/- being the value of leased asset written off (net of provisions ofRs. 100,95,000/-). In computing the total income, the net debit was first added back and the gross amount written off ofRs. 230,24,749/- was claimed as deduction u/s 36(i)(vii) of the Act in addition to the deduction claimed for loans and advances written off. The amounts represents overdue lease rentals receivable from M/s. G.K Dolly Steels Ltd., M/s. Charas Constructions Ltd, and M/s Bellary Steels Alloys. The accounts of those concerns are classified as Doubtful Assets (DA) as on 31-3-2002 under the RBI guidelines on account of non-payment of installments of lease rental for a prescribed period. The entire amounts were written off during the previous year under the prudential norms prescribed by the RBI. Regarding the query about the admissibility of the claim, the assessee, by letter dated 10-1 12005 had stated that overdue lease rentals had been written off in the books of accounts in accordance with the RBI guidelines and that the same may be allowed as deduction u/s 36(1 )(vii). It is also stated that no benefit had been claimed on those assets under section 36(1)(viia) during the previous as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions resulting in disallowance of depreciation and bringing to tax only the interest element received by the assessee bank. There were disputes in respect of these transactions, which is likely to lead the Assessing Officer to a confusion. But the issue at present is altogether different. The assessee is not in a position to recover the entire finance or in same case, part of the finance advanced in respect of lease financing of certain assets. Hence, these have been written off. While carrying out the writing off, all the norms of accounting standards and the RBI guidelines have been applied. I am therefore, of the opinion that the write off leading to the claim of expenditure has arisen in the course of business and hence the Assessing Officer is directed to allow the claim . 19. It was submitted that the issue is legally covered by the Hon'ble Supreme Court in the case of TRF Ltd vs. CIT 323 ITR 397 and also submitted that the assessee's own case in assessment year 2002-03, the matter was restored to the file of the CIT (A). We have considered the issue. As far as Assessing Officer is concerned, there is a finding that the amount claimed pertains to the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Following the decision of the ITAT in the case of Sameera Majumdar, 201 TTJ 501 (Cal.) 2006, the CIT (A) allowed the claim. Before us it was submitted that these items are allowable for depreciation at 60% following the decision of the Special Bench of the ITAT in the case of DY CIT v Datacraft India Ltd (2010) 40 SOT 295. Since the decision relied upon by the CIT (A) stands approved by the Special Bench of the ITAT in the above referred case, we uphold the order of the CIT (A) in allowing the depreciation at 60% on computer peripherals as part of computer system. Revenue ground is accordingly dismissed. 22. Ground No.10 pertains to the interest on income-tax refund. The assessee had received ₹ 119,31,483/- as interest arising out of I.T. refunds, out of which an amount of ₹ 10,55,500/- was interest granted after making scrutiny assessment. It was admitted before the Assessing Officer that the Bank is following a policy of treating only assessment completed under section 143(3) as final and accordingly only the interest on refunds arising there from is treated as income. With reference to the balance amount of ₹ 108,75,983/-, the same were granted after comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer without giving any valid reason. 24. Before us, it was fairly admitted that consistent with the stand taken with reference to the reduction in value of the investment contested in Ground No.6, the securities are to be taken as stock in trade and therefore, the directions of the CIT (A) require modification. It was also informed that similar ground in assessment year 2002-03 raised by the assessee was not pressed and referred to the order therein. Having considered the rival arguments and examined the record, we are of the opinion that the Assessing Officer stand is to be upheld as the securities are held as stock in trade, gains on sales therein has to be assessed as business income. Since similar issue in assessment year 2002-03 was not pressed by the assessee in the appeal before the ITAT, consistent with that stand, we modify the order of the CIT (A) and restore the order of the Assessing Officer. The gains are to be assessed as business income. Ground is accordingly allowed. 25. In the result, appeal filed by the Revenue in ITA No. 476/Coch/2007 is partly allowed. ITA NO. 581/Coch/07: 26. This is a Revenue appeal for the assessment year 2004-05 against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in earlier years by the Assessing Officer. While doing so, he modified the amounts and arrived at a different amount. Consistent with the stand taken by the assessee in 2002-03 onwards, it has not objected to the stand taken by the Assessing Officer in shifting the head of income but only requested for correct assessment of the income for which the CIT (A) directed the Assessing Officer to verify after giving due opportunity to the assessee. We do not see any reason why the Revenue is objecting to the above direction for factual verification. Without going into the legal aspects of the ground raised, we in the interest of justice direct the Assessing Officer to give an opportunity to the assessee and examine the working of income and bring to tax the correct amount. With these directions, the ground is rejected. 31. Ground No.5 pertains to disallowance under section 36(1)(vii). The assessee claimed an amount of ₹ 635,31,701/- as a deduction under section 36(1)(vii). The Assessing Officer considered the claims made under section 36(1)(vii) from earlier years and modified the claim in assessment year 2003-04. Consistent with the stand taken therein, the Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.476/Coch/07. Consistent with the reasoning given there and directions, we reverse the order of the CIT (A) and uphold the action of the Assessing Officer following the decision in the case of Avada Trading Co. (P) Ltd, 6 SOT 1. The assessee however, is free to claim correct amount by furnishing necessary details to the Assessing Officer with reference to the quantum of the amount to be brought to tax. With these directions, the ground is considered allowed. 33. Ground No.7 pertains to the issue of addition under section 43B of provision for leave encashment of ₹ 331,69,000/-. It was submitted by the assessee in response to the letter dated 9.10.2006 that the provisions made in the accounts were added to the income in tax computation and only those amounts were claimed which have crystallised. Assessing Officer did not accept the above contention and disallowed an amount of ₹ 331,69,000/- under this head. The CIT (A), however, in his brief order vide Para 8, directed the Assessing Officer to allow the amount actually paid under section 43B before due date of filing the return after ascertaining the actual amount paid in this regard, so as to allow the amount u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the CIT (A) considered the same for levy of penalty on an amount of ₹ 17,18,21,980/- levied penalty of ₹ 6,13,40,500/- The items which are considered for penalty are as under: S.No Description Amount (Rs. ) 1 Lease Equalization 54,94,000 2 Other expenses 4,60,000 3 Diamond Jubilee Expenses 21,92,167 4 Depreciation on Investment 1,00,00,000 5 Tax free investment 23,00,000 6 Provisions for depreciation on investment 33,54,500 7 Bad Debts 14,80,21,313 37. The CIT (A) considered the amount vide Para 4 5 of his order and deleted the penalty stating as under: 4. In respect of the AY 02-03, penalty has been imposed in respect of the following additions made - Lease equalization ₹ 54,94,000/-, interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
