TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 1182
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....ls available on record. The Assessing Officer observed that the assessee has claimed dividend income of Rs. 11,61,400/- received from investment of Rs. 4 crores in mutual fund and claimed exemption of the same. According to the Assessing Officer, the assessee has claimed no expenditure has been incurred to earn exempt income. According to him, since the dividend income was claimed by the assessee to be exempt, the expenditure incurred in relation to the earning of such exempt income cannot be allowed deduction to the assessee. He, by invoking the provisions of section 14A of the Act, computed the expenditure incurred for earning of exempt dividend income as per Rule 8D and made disallowance of Rs. 11,09,378/-. 4. On appeal, the Commissione....
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....sonable estimate of expenditure incurred in relation to the earning of exempt income has to be made by the Assessing Officer and disallowance of such expenditure has to be made while computing the income of the assessee. We find that the Hon'ble Madras High Court in the case of Simpson & Co. Ltd. v. Dy. CIT [Tax (Appeal) No. 2621 of 2006, dated 15-10-2012] held that the Tribunal was justified in upholding the estimated disallowance of 2% of gross dividend income as the expenditure, as being incidental to the earning of dividend income u/s. 14A of the Act as the assessee had not furnished the details of expenditure incidental to earning of dividend income, estimation was made of the expenditure attributable to dividend income at 2% of th....
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....the amount of Rs. 7,00,000/- has nothing to do with the claim of Rs. 9,76,311/- made as provision for doubtful debts as the allowance for provision for bad and doubtful debts to the co-operative bank u/s. 36(1)(viia) does not put any condition upon the assessee that debts should be written of in the books of account as provided in section 36(1)(viia). Therefore, he deleted the disallowance made by the Assessing Officer. 11. We have heard the Departmental Representative. The relevant provision of section 36(1)(viia) reads as under: '(viia) in respect of any provision for bad and doubtful debts made by - (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-....
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....36(1)(vii) - Bad-debts written-off (b) Section 36(1)(viia) - Provision for Bad and Doubtful Debts Provision of section 36(1)(vii) reads as under: (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year; Provision of section 36(1)(viia) reads as under: (viia) in respect of any provision for bad and doubtful debts made by - (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceedi....
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....ns of this section, be allowed a deduction of an amount not exceeding fifty per cent of profits derived from the business of operation of ships (computed under the head "Profits and gains of business or profession" and before making any deduction under this section), as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account, to be utilized in the manner laid down in sub-section (2):" Contradictory to this reserve, in the case of reserve u/s. 36(1)(viii), there is no requirement that the same should be created in the same previous year in which deduction is to be allowed. The relevant provision reads as under: "(viii) in respect of any special res....
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....ved that as the bank was creating exact amount of provision as per section 36(1)(viia) of the Income Tax Act, 1961, in the particular year under appeal, there was no sufficient provision. The Hon'ble High Court held as under: "In the present case, the assessee has not made any provision in the books of account for the assessment year under consideration, i.e., 1985-86, by making supplementary entries and by revising its balance-sheet. The provision has been made in the books of account of the subsequent year." Further, it was observed by the Hon'ble Punjab & Haryana High Court that additional provision was created only subsequently. Therefore, the judgment of the Hon'ble Punjab & Haryana High Court holds good for that particu....