TaxTMI 
TaxTMI 
2015 (11) TMI 861
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....ual loss and not a notional loss. The claim of Rs. 205.43 crores should be allowed. 3. The appellant contends that the principle of valuation of investments held as stock in trade on the basis of cost or market value whichever is lower, has been accepted in the earlier years and the consequential fall in value has been allowed as business loss. Therefore, applying the same principle the fall in value of investments of Rs. 205.43 crores at the time of shifting the securities from AFS to HTM should be allowed. 4. The Ld. CIT (A) has erred in law and on the facts and circumstances of the case in not accepting the plea of the assessee that there is no expenditure incurred by the assessee bank for earning tax-free income and hence no disallowance should be made u/s 14A of the Income Tax Act , 1961. 5. The appellant contends that no expenditure is incurred for earning tax free income because a) expenditure incurred is for banking business of the assessee, b) assessee has sufficient non-interest bearing own funds to invest c) the investments made by the bank are to meet RBI norms like CRR, SLR ratios etc. d) the investments in the bank are made to realize gains or losses and earning....
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....Corporation of India ltd. vs. CIT 187 ITR 688. Ld. AR further submitted that the facts relating to the additional ground are available at page no. 11 and 12 of the paper book wherein a query letter dated 18.9.2009 a query has been raised for the deduction u/s 36(1)(vii) and 36(1) (viia) vide point no. 1, 2 and 3 of that notice. Ld. AR further stated that vide letter dated 13.10.2009 assessee has submitted the details of deduction u/s 36(1) (viia) and 36(1) (vii) . In the letter it was submit ted that the claim of bad debt u/s 36(1) (vi i ) has been made by the assessee after considering the provisions for bad and doubtful debts u/s 36(1) (viia). Ld. AR of the assessee submitted that identical issue has been decided in case of assessee for AY 2006-07 in ITA no. 22/Del /2011 dated 15 March 2013 and ITAT has admitted additional ground, accepted the contention of the assessee and remitted matter back to AO with direct ion to make verification and grant deduction. Therefore, he contended that this ground may be admitted and adjudicated upon. 05. Ld. DR did not object to the raising of additional ground but submitted that as this ground requires verification of the facts same may be set....
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....assessee for AY 2006-07 in ITA no. 22/Del /2011 dated 15 March, 2013 wherein ITAT has admitted these additional grounds, accepted the content ion of the assessee and has remitted back to file of AO with direction to make verification and grant deduction. 08. We have carefully considered the rival submission. The breakup of the bad and doubtful debts shows that the banks has total bad debts of Rs. 4,49,05,86,446/- out of which bad debts claimed in computation of total income is Rs. 1,74,40,55,501/- leaving a balance of Rs. 2,74,65,30,945/- . Out of the above sum amount has been written of f comprising bad debts in respect of rural branches of Rs. 32,53,000/ - and balance amount of 2,74,32,77,945/- relates to claim of deduction on account of bad debt u/s 36(1) (vi i ) with respect to non- rural branches. The facts and workings relating to the same are at page no. 11 and 12 of the paper book wherein a query letter dated 18.9.2009 a query has been raised for the deduction u/s 36(1) (vii) and 36(1) (viia) vide point no. 1, 2 and 3 of that not ice and assessee replied on 13.10.2009 . In the letter it was submitted that the claim of bad debt u/s 36(1) (vi i ) has been made by the assesse....
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....transfer red SLR securities aggregating to 1664.32 crores from 'Available for sale' category to 'Held to Maturity' category during the year . Due to this, mark to market devaluation of Rs. 205.43 crores has been debited to the P & L Account . Further deduction of Rs. 205.10 crores was also claimed being fall in value of investments as on 31 March 2007, which is allowed as deduction. During the course of assessment proceedings, AO disallowed the deduction claimed of Rs. 205.43 crores for the reason that it is loss arising out of provisions in the books and therefore it is notionalloss and not real . Assessee carried the matter before CIT (A) who in turn concur ring with the views of assessing officer confirmed the disallowance. Therefore, assessee has raised this ground before us. 11. Before us ld. AR submitted that RBI circular provides for transfer of securities from 'available for sale' category to 'held to maturity' category once in a year. The Board of the Directors of the Bank authorizes such transfer and such loss is charged to profit and loss account of the bank. He submitted that loss arising therefrom is not a notionalloss but realloss arising on account of principles of ....
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....ted V Jt CIT 320 ITR 577, wherein Hon'ble High Court has held as under: - "9. In the present case, we find that the facts and issues that are covered by the aforesaid judgment squarely apply to the facts and issues raised in the present Appeal. Not only are we in full agreement with the judgment of this Court in the case of Bank of Baroda (supra) but we are bound by the same. We therefore respectfully follow the ratio laid down in the said judgment. 10. We find that even the judgment of the Karnataka High Court in the case of Karnataka Bank Ltd. (supra), reliance on which was placed by Mr Mistry, squarely covers the issue raised in this Appeal. The facts in the case before the Karnataka High Court were that the Assessee was holding securities in different categories as mandated by the RBI Master Circular dated 1st September 2003. The Assessee treated such securities as stock-in-trade and claimed depreciation on the book value after valuing the securities at cost or market value whichever was lower. The Revenue refused to accept the Assessee's plea for the deduction and disallowed the same and added back to the total income the said amount. Aggrieved by the said order, the ....
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....ecisive or conclusive. It is open to the Income Tax Officer as well as the assessee to point out true and proper income while submitting the income tax returns. Even if the assessee under some misrepresentation or mistake fails to make an entry in the books of account, although under law, a deduction must be allowed by the Income Tax Officer, the assessee will not lose any right on claiming or will be debarred from being allowed the deduction. Therefore, the approach of the authorities in this regard is contrary to the well settled legal position as declared by the apex court. In the instant case, the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment. But consistently for more than two decades it has been shown as stock-in-trade and depreciation is claimed and allowed. Therefore, notwithstanding that in the balance-sheet , it is shown as investment, for the purpose of Income Tax Act, it is shown as stock-in-trade. Therefore, the value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of th....
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..... AR of the appellant submit ted that CIT (A) has deleted the addition though on account of interest expenditure but has confirmed the disallowance to the expenditure of 5% of exempt income. He submitted that the assessee has not incur red any expenditure to earn that income. He further relied upon the decision of Hon'ble Mumbai High Court in case of CIT vs. HDFC Bank Ltd. Income Tax Appeal No. 330 of 2012 that no disallowance can be made in case of banking company on account of interest while applying Sect ion 14A. Regarding disallowance of ½ % of the exempt income, Ld. Counsel further submit ted that for AY 2006-07 the Hon'ble ITAT in assessee's own case in ITA no. 22/Del /2011 has considered this issue and in view of decision of Hon'ble Delhi High Court in case of Maxopp Investment Ltd. & Ors. Vs. CIT 247 CTR 162 set aside the issue back to the file of AO. 17. Ld. DR relied on the orders of lower authorities and submitted that the disallowance has rightly been made of interest expenditure as well as other expenditure by AO. 18. We have carefully considered rival submission and we have perused the orders placed before us. Undisputedly for AY 2007-08, Rule 8 D of In....
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....d. CIT(A) has erred in deleting the disallowance of Rs. 6,01,09,266/ - made by the A.O. on account of excess claim of depreciation on fixture and fiting on temporary structure. 5. That on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in directing the AO to allow deduction u/s 36(1) (viia) as per law. 6. The Hon'ble Apex Court in the case of the Electronics Corporation of India vs. UOI (full bench decision) [Civil Appeal No. 1883 of 2011 arising out of SLP (c) No. 2538 of 2009 dated 17.02.2011] , has recalled the law relating to approval of COD. Therefore, earlier COD decision to grounds at Sl . No. 2,3 and 5 above for not filing appeals on these points no longer exists." 21. The ground no. 1 is regarding restricting the disallowance u/s 14A of the IT Act to Rs. 1,19,80,033/- from Rs. 39,23,61,000/ - by CIT (A). Brief facts are already discussed in deciding ground no. 4 to 6 of the assessee' s appeal however, to state the facts succinctly that assessee has earned tax free income during the year as under :- (i) Interest on tax free bonds Rs. 18,29,60,056/ - (ii ) Dividend received from UTI etc. Rs. 16,48,80,807/ - (iii ) Dividend received ....
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....ry, the learned Senior Counsel appearing on behalf of the Assessee, that this issue is squarely covered by a judgment of this Court in the case of Commissioner of Income Tax v/s Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Bom) is well founded. The facts of that case were that the Assessee viz. M/s Reliance Utilities and Power Ltd. Had invested certain amounts in Reliance Gas Ltd. and Reliance Strategic Investments Ltd. It was the case of the Assessee that they themselves were in the business of generation of power and they had earned regular business income therefrom. The investments made by the Assessee in M/s Reliance Gas Ltd. And M/s Reliance Strategic Investments Ltd. were done out of their own funds and were in the regular course of business and therefore no part of the interest could be disallowed. It was also pointed out that the Assessee had borrowed Rs. 43.62 crores by way of issue of debentures and the said amount was utilised as capital expenditure and inter-corporate deposit. It was the Assessee's submission that no part of the interest bearing funds (viz. Issue of debentures) had gone into making investments in the said two companies. It was ....
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....year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal." (emphasis supplied) 5. We find that the facts of the present case are squarely covered by the judgment in the case of Reliance Utilities and Power Ltd. (supra). The finding of fact given by the ITAT in the present case is that the Assessee's own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current ....
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....od interest is allowable to the assesse. The issue raised before Honourable High court was (B) Whether the ITAT was correct in law in holding that the broken period interest is allowable as a deduction, inspite of the Hon'ble Supreme Court's decision in the case of CIT v. Vijay Bank (187 ITR 541) and the Rajasthan High Court's decision in the case of Bank of Rajasthan (316 ITR 391) ? Honourable high court answered this quest ion as under- "6. Even as far as question (B) is concerned, we find no infirmity in the orders passed by the CIT (Appeals) or the ITAT. In deciding this issue, CIT (Appeals) and the ITAT have merely followed the judgment of this Court in the case of American Express International Banking Corpn. v. CIT [2002] 258 ITR 601/125 Taxman 488. On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr Suresh Kumar is squarely answered by the judgment of this Court in the case of American Express International Banking Corpn. (supra). In view thereof, we do not find that even question (B) gives rise to any substantial question of law that needs to be answered by this Court." Therefore respectfully f....