2016 (8) TMI 963 - HC - Income Tax

Appeal dismissed for lack of legal questions. Tribunal decisions upheld on expenses, income, and investments.

The appeal was dismissed as the court found that the issues raised did not present any substantial questions of law. The court upheld the decisions made ... Allowance of Broken Period Expenses - Held that:- It is an agreed position between parties that the decision of this Court in American Express International Banking Corporation vs. C.I.T. [2002 (9) TMI 96 - BOMBAY High Court ]covers the issue raised herein. Tribunal was right in law in allowing the Broken Period Expenses. Expenditure incurred for payment to Educational Institutions for reservation of seats to its officers - whether an allowable expenditure u/s. 37(1) - Held that:- We find that the issue raised herein is identical to the one which was subject matter of consideration by this Court in Mahindra and Mahindra Ltd vs. CIT [2003 (1) TMI 71 - BOMBAY High Court ] wherein payments were made to a schools where the children of its employees studied. This payment was allowed as being incurred predominantly for staff welfare and consequently expenditure incurred in running of the business. Therefore allowable as business expenditure Accrual of income - whether the Tribunal was right in law in accepting the plea of the assessee that the interest income on the securities has to be taxed on the due basis only, instead of accrual basis as per the mercantile system of accounting followed by the assessee? - Held that:- As agreed position between parties that the issue arising here in stand concluded against revenue and in favour of the respondent assessee by the decision of this Court in Director of Income Tax (International Taxation) vs. Credit Suisse First Boston (Cyprus) Ltd [2012 (8) TMI 17 - BOMBAY HIGH COURT ] Allowance of loss on revaluation of permanent category investments - Held that:- The issue raised herein stands concluded against revenue and in favour of the respondent assessee by the order of this Court in CIT vs. Union Bank of India [2016 (2) TMI 606 - BOMBAY HIGH COURT] Issues Involved:- (a) Treatment of Broken Period Expenses- (b) Allowability of Expenditure for Reservation of Seats- (c) Taxation of Interest Income on Securities- (d) Allowance of Loss on Revaluation of InvestmentsAnalysis:Issue (a) - Treatment of Broken Period Expenses:The appellant challenged the Tribunal's decision to allow Broken Period Expenses, arguing that it should be considered a Capital outlay towards acquiring investments due to the nature of the business being banking. However, the Court found that the decision in the case of American Express International Banking Corporation vs. C.I.T. covered the issue, and therefore, the question did not raise any substantial question of law. Hence, it was not entertained.Issue (b) - Allowability of Expenditure for Reservation of Seats:The Tribunal allowed the expenditure of Rs. 100.55 Lacs for reservation of seats to Educational Institutions as Staff Welfare Expenditure under Section 37(1) of the Income Tax Act. The Assessing Officer had disallowed it, considering it a donation. The Court referred to the precedent set in Mahindra and Mahindra Ltd vs. CIT, where similar payments for staff welfare were allowed as business expenditure. As the issue was already decided in favor of the respondent assessee, the question did not raise any substantial question of law and was not entertained.Issue (c) - Taxation of Interest Income on Securities:The Tribunal accepted the plea of the assessee that interest income on securities should be taxed on a due basis rather than an accrual basis. This decision was supported by the precedent set in Director of Income Tax vs. Credit Suisse First Boston, and hence, the question did not give rise to any substantial question of law and was not entertained.Issue (d) - Allowance of Loss on Revaluation of Investments:The Tribunal allowed a loss of Rs. 32,64,283/- on account of loss on revaluation of investments, which the revenue contended was a notional loss and inadmissible. However, the Court found that the issue was already decided in favor of the respondent assessee by the order in CIT vs. Union Bank of India. Consequently, the question did not raise any substantial question of law and was not entertained.In conclusion, the appeal was dismissed, and no costs were awarded.