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2016 (2) TMI 1236
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.... head is allowable expenditure or not after deletion of section 37(2) of the Act. It was clarified by the bank that this expenditure was incurred for supplying tea, coffee, etc. to the customer at the time of canvassing business. It was argued that expenditure has been incurred wholly and exclusively for the purposes of business and this expenditure was neither in the nature of capital expenditure nor in the nature of personal expenditure. It was also argued that effect of deletion of section 37(2) was to remove the restriction on the expenditure and not disallow expenditure incurred for promoting business which may be booked under the head entertainment expenditure. Considering the type of vouchers maintained and nature of expenditure, on estimate basis, the Assessing Officer has disallowed 5% of the expenditure of Rs..17,02,645/-, which comes to Rs..85,132/-. 3. On appeal, after considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 4. Aggrieved, the assessee is in appeal before the Tribunal. 5. We have heard both sides, perused the materials on record and gone through the orders of authorities below. While r....
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....he orders of authorities below. The Assessing Officer has made an addition of Rs..8,27,00,000/- in the value of contribution made to superannuation fund. The case of the assessee is that a provision was made in the books of the assessee and the Assessing Officer has erroneously treated as actual payment to superannuation fund. It was submitted before the ld. CIT(A) that the actual payment to the fund was made on 07.04.2006 and therefore, it was prayed for deleting the entire amount of contribution to pension fund from the computation of fringe benefit for the assessment year 2006-07. However, by considering the submissions of the assessee, the ld. CIT(A) has observed that if the bank wants to enjoy the benefits of proviso to section 43B of the Act for the purpose of income tax and book the expenditure made on 07.04.2006 for the assessment year 2006-07 itself, it should be offered for fringe benefits also and not accepted the contentions of the assessee that the expenditure items covered by section 43B of the Act cannot be treated on deemed basis and accordingly confirmed the addition made by the Assessing Officer. 11. Before us, it was argued that the residuary provisions of sec....
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....ure was involved either in terms of interest on the amount invested on securities or manpower and therefore, no disallowance was required to be made. It was also argued that same set of employees carried out banking activity and investment in Government securities/tax free securities, share and mutual funds formed part of indivisible business of banking. However, the Assessing Officer has disallowed an amount of Rs..3,42,654/- [being 2% of Rs..1,71,32,690/-] as expenditure incurred on earning tax free dividend income of Rs..1,71,32,690/-. 14. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 15. We have heard both sides, perused the materials on record and gone through the orders of authorities below. Before us, the ld. Counsel for the assessee has strongly contended that the assessee being a Bank, the securities held as stock-in-trade, section 14A has no application to securities/shares held as stock-in-trade as per the decision of the Hon'ble Karnataka High Court in the case of CCI Ltd. v. CIT 206 Taxman 563. Therefore, it has to be decided as to whether section 14A is applicable to banking sector where, the securities/ shares are held as s....
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....this context may be made to the section of the Decision under the heading 'Enactment of s.14A' with the hon'ble court proceeding to meet the various arguments advanced, summarizing its findings under the heading 'A summation of our conclusions on the interpretation of the provisions'. This position stands independently observed by the hon'ble Calcutta High Court in Dhanuka & Sons (supra). The factual situation obtaining in the instant case, where the share trading business yields both taxable income in the form of share trading profit and tax-exempt income by way of dividend income, is the same. The said decisions thus squarely cover the facts of the instant case as well. Therefore, to say that section 14A would not apply as shares are held as stock-in-trade would not hold." 16. In view of the above findings of the Mumbai Benches of the Tribunal, even though the assessee has held the securities as stock-in-trade, section 14A applies. Moreover, The Hon'ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. 328 ITR 81, after examining the genesis of the provision of section 14A of the Act, clarified that the basic principle of taxation being that only the net income, i.....
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....ground raised by the assessee is partly allowed for statistical purposes. 19. The next issue raised in the grounds of appeal of the assessee is with regard to confirmation of addition on account of interest on non-performing assets. The Assessing Officer has observed that in view of the RBI guidelines, the interest need to be offered for tax on accrual basis by the banks in respect of non-performing assets, which are more than 90 days old NPAs, but have not become 'sticky account' under Rule 6EA r.w.s. 43D i.e. these are not bad and doubtful debts under the Rule 6EA as these NPAs being less than 180 days old. Since section 43D taxes the interest income with regard to bad and doubtful debts, on receipt basis, no addition is called for interest on NPAs which are more than 180 days old on accrual basis, but interest on accrual basis have to be offered for tax with regard to NPAs (which are of the category of sticky advances) which are more than 90 days NPAs but are not bad and doubtful debts being less than 180 days old, under Rule 6EA r.w.s. 43D of the Act. 20. On appeal, the ld. CIT(A), after considering the submissions of the assessee, has observed and held as under: ....
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....3, by following the decision in the case of United Commercial Bank Ltd. v. CIT 237 ITR 889 (SC), wherein, the Hon'ble Supreme Court has held that "interest to a suspense account should not be taxed on accrual basis", deleted the addition in respect of interest on NPAs. Against the above order of the ld. CIT(A), though the Revenue has preferred appeals for the assessment years 2007-08 and 2008-09, the Revenue, while raising other grounds, has not raised the ground with regard to the deletion of addition in respect of interest on NPAs by the ld. CIT(A). Under the above facts and circumstances, we delete the addition made on account of interest on non-performing assets. Thus, the ground raised by the assessee is allowed. 22. The next issue raised in the appeal of the assessee is with regard to disallowance of deduction under section 36(1)(viii) of the Act. The assessee bank has originally claimed a deduction of Rs..9,17,03,880/- under section 36(1)(viii) of the Act and vide their letter dated 19.12.2011 revising the figure to Rs..9.99,93,927/- stating that an item of interest received under Industrial Development loan was omitted to be considered for the purpose. The revised claim ....
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.... long-term finance computed under the head 'Profits and gains of business or profession' or not. The long-term finance is defined under clause (h) of the Explanation to section 36(1)(viii) as per which, the long-term finance means any loan or advance where the terms under which moneys are loaned or advanced provided for repayment along with interest there on during the period of not less than five years. From the above, it is clear that profits derived from long-term finance only can be considered for the purpose of allowing deduction under section 36(1)(viii) of the Act and hence these receipts as interest on deposits, lease rentals, consultancy and other professional charges, legal fees, guarantee commission, appraisal fees, financial changes, interest on guarantee commission and miscellaneous income, etc., are not in the nature of income from long-term finance and hence these receipts cannot be included in total income for the purpose of computing deduction allowable to the assessee under section 36(1)(viii) of the Act. These receipts can be attributed to the income of business of providing long-term finance but it cannot be said that these are income derived from the business o....