TaxTMI 
TaxTMI 
2017 (10) TMI 583
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....A on the basis that this represents expenses attributable o earning income on account of dividend and interest aggregating Rs. 19,33,00,661/- which does not from part o the total income." 4. The only issue raised by the assessee is against the upholding the order of AO in disallowing Rs. 50,41,51,500/- under sectio14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962 as expenses attributable to the earning of the exempt income. 5. The facts in brief are that the assessee , a Schedule Bank, filed return of income on 29.9.20008 declaring a total income of Rs. 819,38,47,782/-/- which was revised on 2.12.2008 declaring the same income. Thereafter the case was selected for scrutiny and the assessment was framed vide order dated 30.3.2010 passed under section 143(3) by making various additions assessing the total income of the assessee at Rs. 12,46,54,02,894/- as has been mentioned in para 7 of the assessment order. 6. The AO during the course of assessment proceedings, noticed that the assessee claimed an amount of Rs. 19,33,00,661/- as exempt income. The AO observed that the assessee has incurred a sum of Rs. 5772.47 crores as interest pay out and it ....
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....hat the provisions of section 14A r.w.rule 8D are effective from assessment year 2008-09 and therefore prayed that order of ld. CIT(A) should be confirmed on this issue. 9. We have carefully considered the submissions of rival parties and perused the orders of lower authorities. The undisputed facts of the case are the assessee's own interest free funds comprising its own funds and other interest free funds availed with the assessee were far more than the investment made in securities which yielded tax free exempt income. Moreover, the perusal of the AO's order reveals that the AO has not recorded any satisfaction with regard to the claim of the assessee of exempt income without attributing any the expenses relating thereto with reference to the books of accounts which is a pre-condition for invoking the provisions of the section 14A r.w.r 8D as has been decided by the Hon'ble Apex Court in the case of „Godrej & Boyce Manufacturing Co. Ltd. V/s DCIT (2017) 81 taxmann.com 111(SC), wherein it has been held that the AO has to record the satisfaction that the assessee has incurred any expenditure in relation of the earning of earning income after examining the records and book....
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....mpt income. This ground of appeal is partly allowed. ITA No.1561/Mum/2013 Grounds of appeal taken by the revenue are as under : "On the facts and in the circumstances of the case and in law, the learned C!T(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:. 1. The order of the C!T(A) is opposed to law and facts of the case. 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that as per the provision to section 36(1)(vii), bad debts is allowed to be written off to the extent of the amounts in excess over the credit balance in provision account". 3. "On the facts and in the circumstances of the case and in law, the Ld. C!T(A) has failed to appreciate that the assessee is following Mercantile System of accounting and, therefore, interest accrued should have been offered for taxation" 10. In this appeal only two grounds have been raised by the revenue. In the grounds of appeal no.1, the issue is regarding the deletion of addition of Rs. 289,19,80,059 by CIT(A) as made by the AO u/s 36(1)(vii) of the Act towards bad debts written off. ....
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....enches , the order of First Appellate Authority should be upheld by dismissing the appeal of the revenue on this issue. 12. The ld. DR strongly objected to the contentions of the assessee by relying on the order of AO and requested that order the ld.CIT(A) be set aside and that of AO be upheld.. 13. We have heard the rival contentions and perused the material placed before us including the orders relied upon by the parties and impugned orders. We find from the record the co-ordinate Bench of the Tribunal that an identical issue has been decided in assessee's case in the earlier years by following the decision of the Hon'ble Supreme Court in (2012) 343 ITR 270 (SC). For the sake of convenience, we reproduce the operative part of the judgement as under: "41. To conclude, we hold that the provisions of Sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. The bad debts written off in debts, other than those for which the provision is made under clause (viia), will be covered under the main part of Section 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduc....
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....computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debt(s) relating to advances made by their rural branches. The deduction is limited to a specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962.Thus, the provisions of clause (viia) of Section 36(1) relating to the deduction on account of the provision for bad and doubtful debt(s) is distinct and independent of the provisions of Section 36(1)(vii) relating to allowance of the bad debt(s). In other words, the scheduled commercial banks would continue to get the full benefit of the write off of the irrecoverable debt(s) under Section 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debt(s) under Section 36(1)(viia). A reading of the Circulars issued by CBDT indicates that normally a deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed eve....
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....t the appeals filed by the assessees stand allowed and the appeals filed by the Revenue stand dismissed with no order as to costs." We, respectfully following the decision of the co-ordinate bench of the Tribunal uphold the order of the ld.CIT(A) and dismiss the ground taken by the revenue. 14. The issue raised in grounds of appeal no.3 is against the decision of the ld.CIT(A) that the interest accrued at the year end on the securitiesqua broken period is not taxable as against the addition made by the AO on the ground that the interest accrued up to the year end has to be taxed according to the mercantile system of accounting whether or not it is fall due. 15. The facts of the case are that the assessee held the securities on which the interest was accrued on fixed days normally twice in an year on which the interest due dates were different from the year end and therefore, the interest after due date till the year end was accounted on the accrual system of accounting but not offered to tax. The AO was of the view that the interest has to be taxed on the basis of accrual irrespective of date of payment as the same accrues on day to day basis and therefore rejected the con....
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....t yield any income during the broken period of any year." We are in respectful agreement with this interpretation of the judgment of the Supreme Court. It logically follows from the fact that the Supreme Court upheld the judgment of the High Court in Vijaya Bank Ltd. ( supra). 19. The right to receive interest on the Government securities vested in the respondent only on the due date mentioned in the securities. Consequently, interest accrued on the securities only on the due dates and cannot be said to have accrued to the respondent on any date other than the date stipulated therein. The contention that interest accrues for broken periods between two consecutive dates stipulated in the agreement/instrument for payment of interest is without any basis in law. If the respondent held the security upto 31st March, 2001 and sold the same thereafter, but before the date on which interest was payable as stipulated in the security, interest cannot be said to have accrued to the respondent. It is not disputed that in respect of the securities held by the respondent on 31st March, 2001, the due date for payment of interest thereon had not arrived on 31st ....