Tribunal upholds CIT(A)'s decisions for assessee, dismisses revenue's appeals, and allows assessee's appeal on Rule 8D(2)(iii).

The Tribunal upheld the CIT(A)'s decisions in favor of the assessee on all grounds, citing previous rulings and Supreme Court decisions. The revenue's appeals were dismissed, and the assessee's appeal on Rule 8D(2)(iii) was allowed.

---

---

Issues Involved:
1. Loss of revaluation of investment on the HTM category.
2. Depreciation/loss on investments and MTM on derivatives.
3. Contribution to PNB Employees Pension Fund Trust.
4. Deduction under Section 36(1)(viii).
5. Depreciation on goodwill.
6. Disallowance under Rule 8D(2).
7. Addition on account of Leave Encashment.

Issue-wise Detailed Analysis:

1. Loss of Revaluation of Investment on the HTM Category:
The first ground of the revenue’s appeal pertains to the “loss of revaluation of investment on the HTM category.” The assessee had claimed losses on account of amortization of premium paid at the time of purchase of securities held under the HTM category, amounting to Rs. 212,47,18,151/-. The AO disallowed this claim, reasoning that the securities were sold before maturity, thus not complying with RBI guidelines, and the losses were notional. The CIT(A) had previously ruled in favor of the assessee for similar issues in earlier assessment years, and the Tribunal had also adjudicated against the revenue in previous years. The Tribunal found no infirmity in the CIT(A)'s order and deleted the addition made by the AO, following the principle laid down by the Hon’ble Apex Court in the case of UCO Bank 240 ITR 355.

2. Depreciation/Loss on Investments and MTM on Derivatives:
The second ground of the revenue’s appeal involves the disallowance of Rs. 1,06,50,34,039/- for depreciation/loss on investment and Rs. 5,74,10,270/- for MTM on derivatives. The AO disallowed these claims, stating that the investments were not shown as stock-in-trade and their profits on sale were not enhanced by the value of depreciation in subsequent years. The CIT(A) had consistently ruled in favor of the assessee in earlier years, and the Tribunal upheld these decisions, noting that the issue was fully covered by earlier orders and the binding decision of the Hon’ble Apex Court in UCO Bank 240 ITR 355.

3. Contribution to PNB Employees Pension Fund Trust:
The third ground of the revenue’s appeal concerns the disallowance of Rs. 215,56,00,000/- contributed to the PNB Employees Pension Fund Trust. The AO disallowed this, arguing it was not a contribution to a recognized fund. The CIT(A) had allowed similar contributions in earlier years, referencing the Delhi ITAT’s decision in DCIT vs. Ranbaxy Laboratories Ltd. The Tribunal found no difference in the facts of the case and upheld the CIT(A)’s decision, dismissing the revenue’s appeal.

4. Deduction under Section 36(1)(viii):
The fourth ground pertains to the disallowance of Rs. 98,90,00,000/- claimed under Section 36(1)(viii). The AO disallowed this, stating the assessee had not provided exact profits derived from eligible business. The CIT(A) had allowed similar claims in earlier years, directing the AO to verify the correct computation of eligible deduction. The Tribunal upheld the CIT(A)’s decision, noting the matter had attained finality.

5. Depreciation on Goodwill:
The fifth ground deals with the disallowance of Rs. 2,58,34,887/- for depreciation on goodwill from the merger of Nedungadi Bank. The AO had consistently allowed this depreciation in subsequent years. The Tribunal directed the AO to examine the computation part of depreciation from the year of merger and allow the claim.

6. Disallowance under Rule 8D(2):
The sixth ground involves disallowance under Rule 8D(2) for expenses related to exempt income. The AO disallowed Rs. 2,86,69,45,381/-, which the CIT(A) partly deleted. The Tribunal referenced the Supreme Court’s decision in Maxopp Investment Ltd. vs. CIT, noting that for banks, shares held as stock-in-trade do not fall under Rule 8D(iii). The Tribunal dismissed the revenue’s appeal on Rule 8D(2)(ii) and allowed the assessee’s appeal on Rule 8D(2)(iii).

7. Addition on Account of Leave Encashment:
The seventh ground pertains to the addition of Rs. 31.35 crore for leave encashment. The AO did not allow this claim, following the specific provision of Section 43B(f). The Tribunal confirmed the disallowance, referencing the Supreme Court’s order upholding the constitutional validity of Section 43B(f).

Conclusion:
The Tribunal consistently upheld the CIT(A)’s decisions favoring the assessee, referencing binding precedents and Supreme Court decisions, and dismissed the revenue’s appeals on all grounds while allowing the assessee’s appeal on Rule 8D(2)(iii).

---