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TMI Blog2018 (6) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 declaring total income at Rs. 56,03,03,650/-. Case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has debited expenditure under the head Business Promotion Member's Gift, payment towards scholarship to children of members, and payment to nominee/legal heirs of members. He directed the assessee to defend its claim as to how these expenses be linked with the business of the assessee. In response to the query of the AO, the assessee has filed written statement vide letter dated 30.12.2013 and submitted as under: "We are in receipt of your above show cause notice dtd. 2O/12/2013 asking us to furnish our explanation as to why claim of following expenses be not disallowed being not incurred for banking business. (i) Business Promotion Member's Gift of Rs.94,86,753/- (ii) Payment towards scholarship to children of members Rs. 5,36,259/- (iii) Payment to nominee/legal heirs of members Rs. 24,70.000/- Total Rs.1,24,39,012/- For the claim of deduction made in computing total taxable income, explanation for the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing total income under the head business income, claim of expenditure is allowed on the basis of incurring of said expenditure for the business purpose and not on the basis of debiting the same or otherwise in profit and loss account. (c) For allowability of claim for payment in form of Scholarship to students of the members of the bank, donation and payment to legal heirs of members upon his death we clarify that detailed accounts and particulars have already been given in our earlier submission. Almost entire income in form of interest on advances consists of interest income from members to whom advances were made. It being main source of income, and your assessee being Commercial Co. Operative Bank, expenditure incurred to have cordial and long relationship with members such as Scholarship to their children etc. are in nature of business expenditure and as same are incurred for the business purpose only it may kindly be allowed as claimed for. * The expression " for the purpose of business " used in section 37(1) is wider in scope than the expression " for the purpose of earning profit In order that an expenditure may be allowed as deduction u/s.37(l), it need not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances relevant to that business enterprise. CIT V. Chandne W.Pvt.L td. 212 ITR 63 (Madras) Atlas Cycle Indus. Ltd. V. CIT 129ITR 60 (P A H)" 5. The ld.AO was not satisfied with the explanation of the assessee, and he made disallowance of Rs. 1,24,39,012/-. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 6. Identical expenditure has been incurred in the assessment year 2008-09, which was deleted by the ITAT vide its order dated 17.8.2016 passed in ITA No.2614/Ahd/2011. Dissatisfied with the order of the ITAT, Revenue went in appeal before the Hon'ble High Court in Tax Appeal No.596 of 2017. The Hon'ble High Court upheld the order of the ITAT. Similarly, ITAT has deleted the addition in the assessment year 2009-10 in ITA NO.2676/Ahd/2013. The ld.counsel for the assessee placed on record copies of all these orders and contended that the issue in dispute is squarely covered in favour of the assessee. On the other hand, the ld.DR is unable to controvert the contentions of the ld.counsel for the assessee. 7. We have duly considered rival contentions and gone through the record carefully. The assessee has debited expenditure under these heads in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be retained by the assessee upto maturity and it was acquired at a value higher than the face value. The question arose whether the premium paid by the assessee on acquiring such security could be permitted to be amortised and allowed in phased manner. The ld.AO disallowed the claim of the assessee where the ld.CIT(A) accepted the claim of the assessee on the strength of order of the ITAT in identical situations. 15. The ld.counsel for the assessee contended that the issue in dispute is squarely covered by the decision of the Hon'ble Gujarat High Court rendered in the case of Rajkot District Co-op. Bank Ltd., 43 taxmann.com 161 (Guj). The ld.DR was unable to controvert this contention of the assessee. 16. We find issue is dispute is squarely covered in favour of the assessee by the Hon'ble jurisdictional High Court. The finding recorded in the case of Rajkot District Co-op. Bank Ltd. (supra) reads as under: 5. The learned counsel Shri P.O. Desai for the appellant vehemently contended that the Tribunal committed serious error in overruling the decision of the CIT (Appeals), who had given detailed reasons. He submitted that the investment was in the nature of capital investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .CIT(A) has appreciated this controversy, and hence this ground of appeal is rejected. 18. In the next ground, grievance of the Revenue is that the ld.CIT(A) has erred in restricting the disallowance to Rs. 9,50,000/- as against Rs. 26,35,056/- under section 14A of the Income Tax Act. 19. Brief facts of the case are that the assessee has shown dividend income of Rs. 1,52,00,000/-. Interest earned on other trustees securities of Rs. 46,12,380/- were claimed as exempt from tax. The ld.AO has directed the assessee to show interest expenditure for earning its tax free income, and whether such expenditure has been disallowed under section 14A r.w. rule 8D of the Income Tax Rules,1962 or not. In response to the query of AO, the assessee filed detailed reply which has been taken into consideration by the AO. The ld.AO thereafter worked out the disallowance as per Rule 8D and made addition of Rs. 26,35,056/-. 20. On appeal, the ld.CIT(A) re-appreciated the contentions of the assessee and observed that at the most half percent of the average investment could be disallowed in order to cover administrative expenditure alleged to have been incurred by the assessee for earning such exempt in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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