Appeals partly allowed, issues remanded for re-examination. Disallowance under section 14A upheld.

The appeals for AY 2006-07 and AY 2007-08 were partly allowed, with certain issues remanded to the Assessing Officer for re-examination. The appeal for AY 2007-08 was dismissed, and the tribunal upheld the CIT(A)'s decision on the disallowance under section 14A and the contribution to the retired employees' medical benefit scheme.

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Issues Involved:
1. Validity of re-opening of the assessment.
2. Disallowance of depreciation on fixed assets.
3. Assessment of inter-branch credit balance transferred to the reserve account.
4. Assessment of appreciation in valuation of securities held as "Stock in trade".
5. Disallowance made u/s 36(1)(viia) of the Act.
6. Disallowance made u/s 14A of the Act.
7. Disallowance of contribution to retired employees medical benefit scheme.

Detailed Analysis:

1. Validity of Re-opening of the Assessment:
The assessee argued that the re-opening of the assessment was based on a change of opinion, citing the Supreme Court decision in CIT vs. Kelvinator India Limited. The Assessing Officer (AO) had recorded reasons for re-opening, including an excessive claim of depreciation. The tribunal upheld the re-opening, noting the absence of material evidence from the assessee to substantiate that the AO had previously examined these issues and formed an opinion.

2. Disallowance of Depreciation on Fixed Assets:
The AO disallowed Rs. 1.23 crores in depreciation, relying on the statutory auditor's report, which differed from the assessee's claim. The tribunal found that the AO had not examined the explanations provided by the assessee regarding discrepancies in depreciation rates for certain assets. The tribunal set aside the order and directed the AO to re-examine the issue considering the assessee's explanations.

3. Assessment of Inter-branch Credit Balance Transferred to the Reserve Account:
The AO assessed Rs. 23.87 crores transferred to the reserve account as income, contrary to the assessee's claim of mutuality. The CIT(A) and the tribunal referred to a prior decision in the assessee's own case, directing the AO to verify if the corresponding debit entries were claimed as expenditure. If not, the credit entries could not be treated as income. The tribunal upheld this approach.

4. Assessment of Appreciation in Valuation of Securities Held as "Stock in Trade":
The AO disallowed 50% of the claimed loss due to the assessee's failure to provide details of appreciated securities. The tribunal noted the assessee's consistent method of valuing stock at cost or market value, whichever is less, and found that the AO had not properly understood this method. The tribunal directed the AO to re-examine the issue, requiring the assessee to furnish relevant details and clarify valuation methods.

5. Disallowance Made u/s 36(1)(viia) of the Act:
The AO disallowed the claim, alleging duplication of bad debts. The assessee contended it debited bad debts to the "Provision for bad and doubtful debts account" and claimed only the net debit balance. The tribunal noted the contradiction between the AO's observations and the assessee's submissions, directing the AO to re-examine the issue and verify compliance with the proviso to section 36(1)(vii).

6. Disallowance Made u/s 14A of the Act:
The CIT(A) upheld the disallowance under section 14A, following the Kerala High Court decision in Catholic Syrian Bank. The tribunal agreed and upheld the CIT(A)'s order.

7. Disallowance of Contribution to Retired Employees Medical Benefit Scheme:
The CIT(A) deleted the disallowance, following a prior tribunal decision in the assessee's own case. The tribunal found no evidence of the High Court reversing this decision and upheld the CIT(A)'s order.

Conclusion:
The appeals for AY 2006-07 and AY 2007-08 were partly allowed, with several issues remanded to the AO for re-examination. The appeal for AY 2007-08 was dismissed, and the tribunal upheld the CIT(A)'s decision on the disallowance u/s 14A and the contribution to the retired employees' medical benefit scheme.

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