2017 (5) TMI 1695 - AT - Income Tax

Tribunal Allows Some Deductions, Taxes Refund as Income

Prathamik Shikshak Sahakari Bank Ltd., Versus The Asst. Commissioner of Income Tax,

Prathamik Shikshak Sahakari Bank Ltd., Versus The Asst. Commissioner of Income Tax, - TMI Issues:1. Allowance of broken period interest2. Disallowance of ex-gratia payments to retired employees3. Treatment of refund of municipal tax receipt4. Disallowance of prior period expenses5. Levy of interest under sections 234A, 234B, and 234CIssue 1: Allowance of Broken Period InterestThe assessee claimed deduction of Rs. 16,97,027 as broken period interest, which the Assessing Officer disallowed. The AO held that such expenditure was a capital outlay and not allowable against income accruing in securities. The CIT(A) upheld this decision. However, the Tribunal allowed the claim based on precedents citing that broken period interest is deductible. The ground of appeal was allowed in favor of the assessee.Issue 2: Disallowance of Ex-gratia Payments to Retired EmployeesThe AO disallowed Rs. 26,05,728 claimed as ex-gratia payments to retired employees due to the absence of a formulated scheme by the assessee bank. The CIT(A) upheld this disallowance. The Tribunal referred to a similar case where such payments were allowed as profits in lieu of salary under section 37(1) of the Act. Following this reasoning, the Tribunal allowed the ground of appeal in favor of the assessee.Issue 3: Treatment of Refund of Municipal Tax ReceiptThe AO treated the refund of Rs. 3,40,185 of municipal tax receipt as revenue in nature, whereas the assessee treated it as a capital receipt. The CIT(A) upheld the AO's decision. The Tribunal ruled that once the refund was received in the current year, it should be added as income, dismissing the appeal on this issue.Issue 4: Disallowance of Prior Period ExpensesAn amount of Rs. 5,000 claimed as prior period expenses for advertisement expenditure was disallowed by the AO and upheld by the CIT(A). The Tribunal allowed this expense as a deduction since the bill was received during the current year, directing its allowance. The ground of appeal was thus allowed in favor of the assessee.Issue 5: Levy of Interest under Sections 234A, 234B, and 234CThe assessee contested the levy of interest under these sections. However, the Tribunal did not provide specific details on the decision regarding the levy of interest.In conclusion, the Tribunal partly allowed the appeal of the assessee, allowing the deductions for broken period interest, ex-gratia payments, and prior period expenses, while upholding the treatment of the refund of municipal tax receipt as income. The decision on the levy of interest under sections 234A, 234B, and 234C was not explicitly detailed in the provided summary.