TaxTMI 
TaxTMI 
2007 (8) TMI 748
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....nder Section 36(1)(viia) in respect of the provision for bad and doubtful debts which consisted of Rs. 23,77,20,200/- being 10% of the rural advances and Rs. 11,70,09,145/- being 5% of the gross total income relating to non-rural advances. The AO was of the opinion that the assessee was claiming double deduction, one Under Section 36(1)(vii) and the other as Under Section 36(1)(viia). The AO had serious reservation about the claim of the assessee bank in respect of the bad debts written off. The contention of the assessee bank was that there was only debit balance in the account of provision for bad and doubtful debts and hence, the entire claim is required to be allowed. In the opinion of the AO, the method followed by the assessee was not as per the provisions of the Income Tax Act. In the further opinion of the AO, if there is no; credit balance in the provision for bad and doubtful debts made as per Section 36(1)(viia) of the Act, the provision for bad and doubtful debts ceased to exist and debit balance or negative figure in the provision account is not possible. After analyzing the Annexure to the audited statement of accounts, the AO noted that in the case of the assessee ba....
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.... in favour of the assessee in assessee's own case for the asst. years 1994-95 and 1995-96 by the decision of this Tribunal in ITA Nos. 465 and 466(Coch)/1998. The ld. CA also relied on the following precedents: (i) Catholic Syrian Bank Ltd. 88 ITD 185(Coch) (SB) (ii) South Indian Bank Ltd. v. CIT 262 ITR 579 (Ker) 6. The ld. Departmental Representative was fair enough to submit that this issue is covered in favour of the assessee bank by the decision of this Tribunal for the asst. years 1994-95 and 1995-96 as well as by the decision of the Jurisdictional High Court in the case of South Indian Bank Ltd. (supra). 7. This issue had come for the consideration of this Tribunal in assessee's own case for the asst. year 1994-95 and 1995-96 and it is held as under: The same point was considered by this Tribunal in assessee's own case in ITA Nos. 621 and 622(Coch)/1996 dated 30-6-2003 and in ITA Nos. 650 & 651(Coch)/96. The Tribunal accepted the contention of the assessee bank and held that the entire bad debts written off by the assessee bank for the assessment year 1992-93 relating to non rural branches need to be allowed as a deduction. In the light of the above, we a....
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....owance were made from assessment year 2000-01 onwards and were upheld by the CIT(A) indicates that the assessee's arguments are without any basis. Further, the assessee was specifically informed about the proposal to estimate expenditure at the rate of 5% of the total tax free income as per the decision of the Bombay High Court in the case of CIT v. Scindia Investment Pvt. Ltd. 190 ITR 118 (Bom), in a case involving computation of deduction under Section S0M of I.T Act in respect of dividend income. The assessee was also informed that the disallowance Under Section 14A will be Rs. 44,33,575/-. However, the assessee in its reply dated 17.03.2005 remained silent about, this proposal to estimate the expenditure at 5% of the total tax free income. Therefore, as proposed, the AO disallowed a sum of Rs. 44,33,575/- Under Section 14A of the Act being the expenditure estimated to have been incurred for earning tax free income. 9. The matter was carried in appeal by the assessee and it found favour. The CIT(Appeals) deleted the said addition relying on the decision of Delhi Bench of ITAT in the case of Maruti Udyog Ltd. 92 ITD 119. Now, the revenue has challenged the order of the CIT(A....
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....ess or not; if they do, the entire expenditure will be a permissible deduction but if they do not, the principle of apportionment of the expenditure will apply because there will be no nexus between the expenditure attributable to the venture not forming an integral part of the business and the expenditure sought to be deducted as the business expenditure of the assessee. 11. As per the principles laid down by the Apex Court in the case of Rajasthan State Warehousing Corporation (supra), if the business carried on by the assessee constitutes one indivisible business, then the entire expenditure will be a permissible deduction and apportionment of the expenditure is not permissible. 12. After the judgment of the Apex in the case of Rajasthan State Warehousing Corporation (supra), Section 14A was brought on the statute book and as stated hereinabove as explained by the CBDT in its Circular, the principles for disallowance of the expenditure relating to the exempt or non-taxable income were already there, but the said position has been made clear by virtue of introduction of Section 14A. It means that the principles laid down by the Apex Court in the case of Rajasthan State Wareho....
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....e the order of the CIT(Appeals) on this issue and direct the A.O to delete the said addition. In our opinion, the same principles are applicable to the assessee's case. We, therefore, uphold the order of the CIT(Appeals) on this issue. 12. The next issue is regarding deletion of addition in respect of the broken period interest paid on the purchase of securities amounting to Rs. 27,52,58,302/-, It was noticed by the AO that the assessee has paid broken period interest of Rs. 27,52,58,302/- on purchase of securities during the current asst. year. The AO noted that 'the Hon'ble High Court of Kerala has decided this issue in favour of the assessee in the asst. years 1991-92 and 1992-93. However, since the Department is filing SLP against the said decision of the Hon'bie High Court subject to the approval of Committee on Disputes for the asst. year 1991-92, the AO brought to tax the broken period interest of Rs. 27,52,58,302/- as a protective measure. 13. The matter was carried in appeal before the CIT(Appeals) and the CIT(Appeals) following his earlier order in assessee's own case, deleted the addition. Now, the revenue is in appeal before us. 14. We have heard....
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....fit Scheme (hereinafter referred to as "medical scheme"). On the perusal of the tax audit report Under Section 44AB, the AO proposed to make disallowance in respect of the said contribution as the AO was of the opinion that provisions of Section 40A(9) of the Income Tax Act are applicable. The assessee contended that the said expenditure was incurred wholly and exclusively for the purpose of assessee's business and hence it was allowable expenditure Under Section 37 of the Act. The assessee further contended that the provisions of Section 40A(9) of the Act are not applicable as bonafide of the expenditure is not doubted. The AO rejected the contention of the assessee on both the grounds and made the addition of Rs. 50 lakhs while computing the income of the assessee bank. 17. The assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) was of the opinion that the decision of the ITAT Hyderabad Bench in the case of Rasi Cements Ltd. 42 ITD 233 is squarely applicable to the assessee's case and hence the contribution made by the assessee does not attract the mischief of Section 40A(9) of the Act and no disallowance was warranted. The CIT(Appeals) also a....
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....ees as workmen and other than workmen has nothing to do with the smooth working of the assessee bank because ultimately the officers are also the employees of the assessee. Moreover, this scheme is demanded by the present employees of the assessee bank which will be beneficial to them also after their retirement. The ld. CA referred to the different aspects of the scheme and he submitted that it is a bonafide scheme for which State Bank of India and other associate banks made their contribution. As far as the applicability of Section 40A(9) is concerned, he submitted that the provisions' of the said Section are not applicable to the facts of the assessee's case. The ld. CA relied on the decision of the Jurisdictional High Court in the case of CIT v. Travancore Cochin Chemicals Ltd. (supra) and submitted that the Jurisdictional High Court has discussed the purpose of introduction of Section 40A(9) by giving reference to the Finance Bill, 1984 that it is introduced to avoid the tax evasion in the guise of donation to trust and the flow back of the same amount to the employer again. He further submitted that provisions of Section 40A(9) are to be interpreted in the context for....
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....ted with the contribution from the bank as well as pensioners and for administration of the funds, a managing committee was formed. As per the scheme, each member to the scheme and his/her respective spouse are the beneficiaries. It is further provided that the spouse of the member will continue to receive the benefit even after the death of the member. Certain ailments and diseases were specified which would be covered under the scheme and the maximum limit of reimbursement was restricted to Rs. 30,000/-. As per the terms of bipartite agreement between the associate bank management and the union, the assessee paid Rs. 50 lakhs as its contribution towards the formulation of the fund under the scheme. 22. It is necessary to refer to the legislative history of Sub-section (9) of Section 40A of the Act. Sub-section (9) of Section 40A was inserted by the Finance Act, 1984 with effect from 1st April, 1980. The scope and effect of the new provision was explained by the Board in its Circular No. 387 dated 6-7-1984 as under: 16.1 Sums contributed by an employer to a recognised provident fund, an approved superannuation fund and an approved gratuity fund are deducted in computing his tax....
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....the assessee. The effect of the under-lined words will be that the deduction under this provision would be subject to the other provisions of the Act, as for instance, Section 40A(5), which would operate to the same extent as they would have operated had such expenditure been incurred by the assessee directly: Deduction under this provision will be allowed only if no deduction has been allowed to the assessee in an earlier year in respect of the sum contributed by him to such trust, fund, etc. 16.4 The Finance Act has also provided that, notwithstanding anything contained in any other law for the time being in force or in the instrument creating the trust or fund, the assessee may, at his option, claim that the unexpended amount shall be returned to the assessee and, where such a claim is so made, such unexpended amount shall be returned by the trustee to the assessee as early as possible. The assessee may also claim that any asset being land, building, machinery, plant or furniture acquired or constructed by the. fund, trust, company, association of persons, body of individuals, society or any other-institution out of the sums paid by the assessee be transferred to him and where....
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....in computing the income of the assessee. 25. In the case before us, formulation of the medical scheme for the retired employees was one of the demands by the Executive Officers' Association and bipartite settlement was reached between the management of the associate bank and the union at Simla, We find force in the argument of the ld. Counsel that the distinction made in the Industrial Disputes Act in respect of the employees as workmen and other than workmen has nothing to do with the smooth working of the assessee bank because ultimately the officers are also the employees of the assessee bank. The demand for the scheme by the present employees of the assessee bank is also beneficial to them after their retirement. It was a contractual obligation between the associate bank's management and the union and it was a bonafide formulation of the funds. In our opinion, whether it is an association or union of the executives or non-executives, both can hamper the smooth working of the assessee bank by resorting to strike or go-slow or other coercive measures if their demands are not settled and this aspect has to be taken into consideration for keeping a healthy relation with it....