AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 754
X X X X Extracts X X X X
X X X X Extracts X X X X
....al income made in such assessment was the addition consequent to disallowance of a sum of Rs. 4,98.28,693/- to the total income of the Assessee u/s.14A of the Act. The order of the AO was confirmed by the CIT(A) vide order dated 22.10.2007. On further appeal by the Assessee the Hon'ble ITAT vide its order dated 30.9.2009 in ITA No.2486/Kol/2007 (vide para-17 of the order) set aside the order of the CIT(A) and directed the AO to decide the disallowance u/s.14A of the Act as per Rule 8D of the Rules as Rule 8D of the Rules which was inserted w.e.f. 24.3.2008 was held by a Special Bench of ITAT in the case of ITO Vs. Daga Capital Management Pvt.Ltd., 312 ITR 1 (AT) (ITAT)(Mum) to have retrospective operation. 3. Pursuant to the order of the ITAT the AO examined the issue in the light of the directions of the ITAT. The exempt income of the Assessee was dividend on shares & units amounting to Rs. 10.07,38,161, interest on tax free bonds of Rs. 8,31,98,692/- and interest u/s.10(23G) of the Act amounting to Rs. 8,47,24,000/-. It is not in dispute that there was no interest expenditure incurred in making investments which yielded tax free income. The only question was disallowance of ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the income that may be received, would be exempt from tax, irrespective of the fact as to whether any such income has actually been received or not. It was submitted that as per the language of section 14A, the expense which has been incurred in relation to income which does not form part of the total income for the year, is disallowable. Hence, there is no scope of considering any income which has not actually been earned during the year, for the purposes of section 14A. It was pointed out that the Assessing Officer considered even those investments from which no income was earned during the year. 5. The CIT(A) held that in view of the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce (supra), the decision of Special Bench in the case of Daga Capital Management (supra) was not applicable and therefore the disallowance had to be made in terms of Sec.14A of the Act and not in terms of Rule 8D of the rules. He was however of the view that the disallowance offered by the Assessee was on the lower side. He held that 0.5% of the average value of investments was sound method of disallowance to be made in the case of the Assessee and thus upheld the addition made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quantum of disallowance had to be decided in the light of the decisions rendered by the ITAT Kolkata Benches in the cases referred to by the CIT(A) in the impugned order. In those decisions, the ITAT, Kolkata Benches have consistently taken a view that 1% of the exempted income/dividend shall be considered as expenses/expenditure relating to the earning of exempted income u/s 14A in the assessment years where the rule 8D was not applicable. The same has also been upheld by the Hon'ble Calcutta High Court in the case of M/S.R.R.Sen & Brothers Pvt.Ltd. (supra). Following those rulings, we hold that 1% of the exempt income alone should be disallowed u/s.14A of the Act. Gr.No.1 to 5 are thus partly allowed to the extent indicated. 8. Grounds No.6 & 7 raised by the Assessee reads as follows: "6. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeal) - VI, Kol has erred in confirming the application of provision of section 115JB of the Income Tax Act to the case of the appellant bank in disregard of the ratios laid down by the Hon'ble Kerala High Court in the case of Kerala State Electricity Board vs. OCIT 329 ITR 91, Hon'ble ITAT, Mumbai in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the appeal, the learned submitted that- (a) claim of Rs. 27 lakhs for legal expenses was actual expenses and it was wrongly mentioned as provision. (b) Wealth Tax ofRs.3 lakhs was actual liability of the assessee and it was not a provision; and (c) Rs. 16,96,86,145 was the provision for pension on actuarial basis though shown as provision and as such, it was an ascertained liability of the assessee. The learned AR of the assessee submitted that the above amounts should not be added to the book profit while computing profit for the purposes of MAT u/s.115JB of the Act. However, in respect of the other amounts viz, provision for bad & doubtful debts, provision for standard asset, provision for depreciation on investment, provision for fraud & forgery, provision for stationery-wastage, and provision for tangible asset, learned AR of the assessee did not made any submission. The learned DR relied on the orders of the authorities below. He submitted that issue in respect of above three items could be restored to the Assessing Officer to ascertain the exact nature of liabilities of the assessee though shown as provision by the assessee in the balanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to Section 211 (2) of the Companies Act . The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act . The provisions of Section 115 JB cannot thus be applied to the case of a banking company. (2) Order dated 30.06.2011 in ITA Nos.4702 to 4706/2010 passed by the ITAT, Mumbai 'F' Bench in the case of Union Bank of India; and (3) Order dated 03.08.2011 in ITA No.469/2010 passed by the ITAT 'C' Bench, Chennai in the case of Indian Bank, 14. The CIT(Appeals) after making a reference to the legislative history of the provisions of Sec.115JB of the Act was of the view that in the light of the purpose for which provisions of Sec.115JB of the Act were introduced, it cannot be said that the provisions of Sec.115JB of the Act are not applicable to banking companies. 15. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee reiterated submissions as were made before the learned CIT(A). The learned cou....