TaxTMI 
TaxTMI 
2011 (3) TMI 268
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....e, a Bank incorporated in the relevant assessment year, carried on banking activities in India through its branches. ITA No. 5098/M/2004 (AY : 1999-2000):- 3. The assessee filed its return of income declaring income of Rs.117,670,060/-. The assessment was completed at a total income of Rs.151,323,570/- after making the following additions/disallowances:- "(i) Broken Period Interest Rs. 30,870,084/- (ii) Software expenses Rs. 444,059/- (iii) Interest cost and operating expenses to earn income on tax free bonds Rs. 2.450,380/-" The ld. CIT(A) partly allowed the assessee's appeal. 4. Being aggrieved, the department is in appeal before us and has taken the following grounds o....
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.... Hon'ble Bombay High Court in the case of American Express International Banking Corporation (258 ITR 601) = (2003-TII-85-HC-MUM-INTL), allowed the assessee's claim, inter alia, observing that since the interest income of the assessee Bank had been taxed by the Department on accrual basis, the interest relatable to the said income is only to be allowed. 6. We have considered the submissions of both the parties. The fact that interest income of the assessee bank has been taxed by the department on accrual basis is not disputed. The Hon'ble Bombay High Court held as under:- "Held.......................once the Department sought to assess to ax the interest received by the assessee from the transferees for the broken period....
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....laim. 7.1 The ld. D.R. submitted that the matter needs to be restored back to the file of AO in view of the decision of the Special Bench decision of the Tribunal in the case of Amway India Enerprises (111 ITD 112) (Del.). 7.2 The ld. counsel for the assessee submitted that in asstt. year 1997-98 the department has not preferred any appeal against the CIT(A)'s order. 8. Having heard both the parties, we find that this issue has been considered threadbare by the Special Bench of the Tribunal in the case of Amway India Enterprises (supra) and has laid down various tests for deciding the issue regarding software expenses. We, therefore, restore this issue to the file of AO for deciding the same in the light of the....
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....am inclined to agree with the appellant's contention that in the business of banking the funds received as deposits from public at large are to be mainly utilized for the purpose of making advances and the bank cannot afford to have mismatch of short term borrowed funds being used for long term investments. However, keeping in view the appellant's submission that it has interest free funds in the form of reserves relatable to profits and share capital, therefore, business prudence demands that the investment in tax free securities ought to come out of interest free funds which are in the form of reserves and share capital, I hold that no disallowance should be made to the extent of capital, profit reserve and surplus available with the bank....