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TMI Blog2015 (4) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... al income was determined at Rs. 142,04,20,490 on account of the following additions: 1. Disallowance of broken period interest Rs. 5,59,70,000 2. Disallowance of amortization provided on Govt. securities Rs. 6,63,76,000 3 Disallowance of provision for gratuity Rs. 5,61,93,000 4 Interest on NPA Rs. 1,36,22,000 5 Disallowance claim towards staff frauds Rs. 28,68,000 6 Disallowance of provision for audit fees Rs. 1,60,659 3. Aggrieved the assessee preferred appeal before the CIT (A). BROKEN PERIOD INTEREST 4. With respect to broken period interest, while computing the total income of the assessee, the Assessing Officer made the disallowance of claim of deduction towards interest paid in acquisition of securities on the ground that investment in Held to Maturity (HTM) securities amounted to capital expenses. It was observed by the Assessing Officer that, though this issue is covered by the decisions of CIT(A) for the A.Ys. 2007-08 & 2008- 09, further appeal, was made by the Department. The Assessing Officer also relied on the master circular by RBI, and circular No.665 issued by CBDT and the decision of Supreme Court in the case of Vijaya Bank Ltd. Vs. CIT (187 ITR 541) to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id premium is amortized. Accordingly, the claim was disallowed and brought to tax. 8. Before the CIT (A), the assessee objected for such addition and submitted that, when there is no specific provision under Income Tax Act, 1961, the tax liability of certain sum has to be decided in accordance with accounting practices and as per AS 26, read with I.T.Act, 1961, the premium paid on government securities is an intangible asset, whose life can be ascertained and the same should be written off, over the useful life of the asset. It was also submitted that this issue has been covered by the decision of CIT(A), Vijayawada and CIT(A)-VI, Hyderabad for earlier years, which were upheld by ITAT, Hyderabad, vide its order dated 13.03.2014 in ITA No. 610/Hyd/2013. 9. The asseessee has preferred appeal before us. We find that the issue is covered by the Coordinate Bench decision in ITA No.610/Hyd/2013 dated 13.03.2014. Respectfully following the same, we dismiss the ground of the Revenue. PROVISION FOR GRATUITY 10. While computing the total income of the assessee, the AO disallowed the claim of the assessee for an amount of Rs. 5,61,93,000/- being the amount contributed to the gratuity fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout fulfilling the conditions laid down therein, no assessee was entitled to deduction under 36(1)(v). This has undergone a change after the insertion of section 43B for and from the assessment year 1984-85. The provision of section 43B(b) are relevant and apposite in the context of the provisions of section 36(1)(v). Section 43B has overriding effect over the provisions of section 40A(7). Under the provisions of section 43B, a deduction in respect of any sum payable by the assessee as an employer by way of contribution inter alia to a gratuity fund is to be allowed in computing the business income of that previous year in which such sum has been actually paid by him." 15. Section 43B permits a deduction in respect of any payment by way of' contribution to a provident fund or superannuation fund or any other fund for the welfare of employees in the year in which the liability is actually discharged. We may, however, add that clause (va) has been inserted in sub-section (1) of section 36 by the Finance Act, 1987. The effect of the amendment is that no deduction will be allowed in the assessment of the employer unless such contribution is paid to the fund on or before the due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed as provision for staff frauds, on the ground that provision for frauds cannot be equated with provision for bad and doubtful debts, and frauds were not let off or written off normally and the embezzled money usually recovered. It was also observed by the Assessing Officer that only certain provisions as prescribed by I. T. Act are allowed, and provision for staff frauds, not included in such allowable provisions and brought the amount of Rs. 28,68,000 to tax. 20. The assessee objected for such disallowance and it was contended that loss through embezzlement by employees is an expenditure, and is expressly allowable u/s 37 of the I.T.Act. It was also submitted that the said issue was subject matter of appeal and orders of CIT(A) and ITAT, supported the view of the assessee ,and relied on the order of ITAT 'A' Bench, Hyderabad in ITA No.610/Hyd/2013 dated 13.03.2014./ 21. Respectfully following the decisions of the ITAT on the issue in assessee's own case, CIT (A) was of the opinion that the provisions for staff frauds is an allowable expenditure and accordingly the addition of Rs. 28,68,000 was ordered to be deleted. 22. Respectfully following the decision of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the taxable income, which has to be computed as per the provisions of the I.T. Act. Though the decision of the Hon'ble Supreme Court is dated 11.01.2010 the same has not been considered by the Tribunal and hence, the finding of the Tribunal in assessee's own case for A.Ys 2007-08 and 2008-09 cannot be followed. In view of the same, this ground of appeal of the Revenue is allowed". 26. Respectfully following the decision of the ITAT Hyderabad, in assessee's own case, the CIT (A) had no hesitation in holding that unrealized interest on NPAs constitute income to the assessee on the principle that the RBI directives were only in the context of presentation of NPAs in Balance Sheet and presentation of Balance Sheets have nothing to do with taxable income, which has to be computed as per the provisions of the Income Tax Act. Accordingly, the CIT (A) held that the addition of Rs. 1,36,22,000 is held to be sustainable. 27. On appeal, the ld Counsel for the Assessee submitted a chart showing the issues involved and details of covered judgements/Circulars as follows: * Judgment of the Hon'ble Supreme Court in the case of United Commercial Bank of India vs. CIT (240 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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