IN THE ITAT MUMBAI BENCH ‘B’
Bank of India
Versus
Deputy Commissioner of Income-tax
IT Appeal No. 2781 (Mum.) of 2011
[Assessment year 2003-04]
JUNE 15, 2012
ORDER
Vivek Varma, Judicial Member – The cross appeal have been filed by the assessee bank and the department against the order of CIT(A) 4, Mumbai, dated 17/02/2011.
As the impugned order is the same, for the sake of convenience, we are, passing a consolidated order, covering both the appeals.
ITA No. 2781/Mum/2011 (Appeal by the assessee) :
2. The assessee has filed the following grounds of appeal:
01. On the facts and circumstances of the case and in law, the learned CIT (A) had erred in determining the disallowance u/s 14A at 0.5% of average investments yielding tax free income without appreciating the fact that the appellant had not incurred any expenditure to earn the said income. The CIT (A) should have followed the decision of ITAT Delhi in the case of Minda Investments Ltd. v. Dy. CIT [2011] 48 SOT 169 (Delhi) (URO)/15 taxmann.com 376 (Delhi) wherein it was held that no disallowance can be made on estimated basis.
Without prejudice to the above contention, the CIT (A) ought to have followed the decision of Jurisdictional ITAT Mumbai in the case of Godrej Agrovat Ltd. v. Asstt. CIT [IT Appeal No. 1629 (Mum.) of 2009, dated 17-9-2010] wherein it had been held that the disallowance will be 2% of exempt income.
02. On the facts and circumstances of the case CIT(A) erred in disallowing a sum of Rs. 2,93,434/- as prior period expenses on the ground that evidence that these have accrued or crystallized during the year was not submitted. The CIT(A) ought to have appreciated that in the case of appellant which has branches throughout India and abroad, incurring of expenditure is a continuous process and therefore no amount can be treated as prior period expenses based on decision of Jurisdictional ITAT in the case of Toyo Engg. India Ltd v. Jt. CIT [2006] 5 SOT 616 (Mum.) & Saurashtra Cement & Chemical Industries Ltd v. CIT [1995] 213 ITR 623 (Guj.).
03. On the facts and circumstances of the case and in law, the learned CIT (A) erred in disallowing the lease premium expenses of Rs. 1,55,43,817/- on the ground that it is a capital expenditure. The CIT(A) should have noted that the said sum being amortization of premium paid on leasehold properties cannot be termed as capital expenditure. The CIT(A) ought to have allowed the entire premium of Rs. 124,43,05,430/- as held in the case of CIT v. Ucal Fuel Systems Ltd. [2008] 296 ITR 702 (Mad.) and against which decision the Supreme Court had dismissed the SLP filed by the department (195 Taxman 52 stat).Without prejudice to the above contention, the CIT(A) ought to have allowed at least the proportionate amount of Rs. 1,55,43,817/- claimed by the appellant.
3. The facts relating to the first ground of appeal is that the AO, taking the basis of addition made in respect of infrastructure lending interest @ 12%, disallowed a sum of Rs. 12,48,06,374 of Rs. 112,33,86,448, being the aggregate figure computed, on account of disallowance to be made under section 14A. The calculations taken by the AO was the result of the following :
