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TMI Blog2022 (8) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under separation scheme - HELD THAT:- The audit report cannot be taken as a sacrosanct document to be relied upon for the business purposes like banking operations/loans and for statutory obligations like taxation. All the financials scams and tax evasion cases had their genesis in the window dressing of the balance sheets and the other related financial statements. When an item of the financial statements which is to be examined and verified by the tax authorities for allowing any deduction, it is incumbent upon the assessee to provide the basic backup details based on which the auditors have certified that such expenses is true to their knowledge. In the absence of any supporting evidences, the claim of the assessee cannot be allowed by the tax authorities. In case, the bank takes a position that owing to the scattering of retired employees all over India and inability to provide such details for their own benefit points to the efficient functioning of the bank itself. When the bank itself cannot be organized their own affairs, it will be very difficult to gain the public trust to part and park their hard earned amounts with the bank. Since, no details have been submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k incorporated in Australia and engaged in banking business. It has opened up various offices all over the country in India that constitute PE of the non-resident bank. During the year, the Standard Chartered Grindlays Bank was merged with Standard Chartered Bank, UK w.e.f. 1st of September, 2002. During the assessment year, the assessee has shown business profit of Rs.58,32,59,075/-, short term capital gain of Rs.13,26,247/- and long term capital gains of Rs.232,21,57,920/-. Allowability of business expenditure incurred outside India which pertains only to the Indian Business: 4. The Assessing Officer disallowed the expenses which were incurred only for the Indian business outside India on the grounds that these are general head office administrative expenses which fall under section 44C of the Income Tax act, 1961 and hence are subject to the ceiling under section 44C. (page 4 of AO.). However, the fact of the matter is that the amount of Rs.5.14 Cr. or the costs directly attributable to the operations pertaining to India for the period 01.04.2002 to 31.08.2002. The expenses incurred by the assessee is on account of purchased Grindlays Bank from ANZ on 01.08.2000. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspite of granting sufficient opportunities, the AR did not furnish the evidence in respect of person who retired during the year and given compensation under early separation scheme. In absence of evidence the sum claimed in not allowable. Therefore, the amount of Rs. 59,32,163/- 1/5th of Rs. 2,96,60,815/- claimed deduction u/s 35DDA is hereby disallowed. 8. The ld. AR argued that in schedule- F of Financial Statements, the ERS expenses are fully disclosed. Further the actual expenses incurred has been duly verified by the auditors. The claim of the assessee for the said deduction has been made in accordance with section 35DDA of Rs. 59,32,163/- being 1/5th is allowable Rs. 2,96,60,815/-. It was argued that the Books of Accounts have been accepted as reliable by the Assessing Officer. There is no allegation of any incorrect claim or false statement. These claims have been examined and certified by external auditors who verify each and every document at the time of audit. Hence these expenses having been authenticated by auditors, and the Books of accounts having been accepted, there is no factual basis for disallowing the legitimate claim of expenses. It was further argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). The assessee stated that there was nothing left in provision account under section 36(1)(viia) as no provision was made during this year. Neither was any provision made in AY 2002-03 as a Loss return was filed, so assessee could not claim 5% of adjusted income by way of provision under section 36(1)(viia). 12. The provisions of Section 36(1)(vii) are as under: Section 36(1) (vii): subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year: Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause. Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of April, 2005, the provisions of the first proviso shall have effect as if for the words five per cent , the words ten per cent had been substituted : Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head Profits and gains of business or profession. Explanation.-For the purposes of this sub-clause, relevant assessment years means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005; 13. The key provisions are as under: The bad debts has to be written off as irrecoverable. **In the case of the assessee (i.e. bank) the amounts shall be limited to the amount by which such date are part thereof exceeds of credit balance in the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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