TaxTMI 
TaxTMI 
2011 (4) TMI 706
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....fits u/s 115JB; 3. On the facts and in the circumstance of the case and in law, the ld. CIT(A) erred in confirming disallowance of loss amounting to Rs.3,78,40,017/- on unmatured foreign exchange contracts ignoring he fact that the appellant maintains accounts on mercantile system, where liability has already accrued though discharged at a future date having regard to the accepted principles of commercial practice, accountancy and the guidelines issued by RBI." 3. The grounds of appeal no.1 is regarding the addition on account of interest accrued on securities but not become due for payment. During the course of assessments proceedings, the AO observed that the assessee-bank is following the method of offering the income for taxation on receipt basis. In computation of income attached to the return of income, the assessee has reduced from the total income an amount of Rs.26,03,374,002.86 being interest income on investments, whereas in the balance sheet of the assessee as per schedule XVII-CI, the principle accounting policy in case of revenue recognition has been given interalia interest on government securities, debentures and other fixed income securities has b....
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.... laid down under the Act and that section 5 is subject to the provisions of the Act which would interalia include section 145, As per section 145, income chargeable under the head "profit and gains of business or professions' or "Income from other sources" shall be computed in accordance with either cash or mercantile system of accounting regularly followed by the assessee as well as the notified accounting standard. There is no scope for adopting a hybrid system of accounting in contravention of section 145, as has been done by the assessee in the instant case. He also relied upon the decisions of this Tribunal, Mumbai in the cases of ACIT V/s Asea Brown Boveri Ltd reported in 11 0TTJ (Mum) 502 and Jt CIT V. India Equipment leasing ltd reported in 111 ITD 37 (Chenai). The learned DR submitted that in the printed accounts of the assessee, the assessee has itself included this amount on accrual basis as per accounting standard employed by the assessee, whereas for the purposes of computing taxable income the assessee followed cash method in regard to such interest income. He further submitted that the concept of real income....
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....njab, 4 ITR 297, the Full Bench of the Patna High Court in Ranjit Prasad Singh v CIT, Bihar & Orissa (4 ITC 264) and the Karnataka High Court judgment in Addl CIT, Mysore v. The Vijay Bank Ltd., Mangalore (1976) Tax LR 524. It was also noticed by the Tribunal that the contention advanced on behalf of the revenue before Tribunal in that case was totally contradictory to the contention advanced by the revenue before the Karnataka High court in the case of Vijay Bank(supra) before the Tribunal. The department had placed reliance on the judgement of the Hon'ble Bombay High court in the case of American Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss account on day to day basis but contended that for purposes of income tax only the interest that accrued on the....
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....hah Sardarilal v CIT,Punjab, 4 ITR 297, the Full Bench of the Patna High Court in Ranjit Prasad Singh v CIT, Bihar & Orissa (4 ITC 264) and the Karnataka High Court judgment in Addl CIT, Mysore v. The Vijay Bank Ltd., Mangalore (1976) Tax LR 524. It was also noticed by the Tribunal that the contention advanced on behalf of the revenue before Tribunal in that case was totally contradictory to the contention advanced by the revenue before the Karnataka High court in the case of Vijay Bank(supra) before the Tribunal. The department had placed reliance on the judgement of the Hon'ble Bombay High court in the case of American Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss acco....
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....jab, 4 ITR 297, the Full Bench of the Patna High Court in Ranjit Prasad Singh v CIT, Bihar & Orissa (4 ITC 264) and the Karnataka High Court judgment in Addl CIT, Mysore v. The Vijay Bank Ltd., Mangalore (1976) Tax LR 524. It was also noticed by the Tribunal that the contention advanced on behalf of the revenue before Tribunal in that case was totally contradictory to the contention advanced by the revenue before the Karnataka High court in the case of Vijay Bank(supra) before the Tribunal. The department had placed reliance on the judgement of the Hon'ble Bombay High court in the case of American Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss account on day to day basis but contended that for purposes of income tax only the interest that accrued on the ....
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.... The ground no.2 is consequential to that of grounds of appeal no.1. As the AO has disallowed the expenditure u/s 14A in respect of the addition made under the interest income on securities on the basis of accrual. The AO has disallowed the interest and other expenses by applying the provisions of section 14A. The CIT(A) has confirmed the same by following the decision of Special Bench of the Tribunal in Daga Capital Management and therefore apply Rule 8D and direct the AO to work out the disallowance in accordance of Rule 8D. 16. We have considered the rival contentions and relevant record. In view of the decision taken in grounds of appeal no.1 in favour of the assessee, the disallowance to that extent is not sustainable. The disallowance on other income has to be computed as per the decision of Hon. Jurisdictional High Court in the case of Godrej & Boyce Mfg.Co.Ltd. Mumbai.Vs.Dy. Commissioner of Income Tax, reported in 234 CTR (Bom)-1, if any. Accordingly, we set aside this issue to the record of the AO. 17. Grounds of appeal no.2 is allowed for statistical purposes. 18. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order....
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....due for payment. During the course of assessments proceedings, the AO observed that the assessee-bank is following the method of offering the income for taxation on receipt basis. In computation of income attached to the return of income, the assessee has reduced from the total income an amount of Rs.26,03,374,002.86 being interest income on investments, whereas in the balance sheet of the assessee as per schedule XVII-CI, the principle accounting policy in case of revenue recognition has been given interalia interest on government securities, debentures and other fixed income securities has been recognized on accrual basis. The AO accordingly added the interest accrued as on 31.3.2004 but not received of Rs.44,16,08,111. 4. On appeal, the CIT(A) has confirmed the addition made by the AO. 5. Before us the learned AR of the assessee has submitted that the interest on securities is due on coupon date and hence taxable on those date. The learned AR submitted that the interest on securities does not accrue on day-to-day basis and the assessee does not have any right or claim of interest on such securities till it becomes due i.e. coupon date. The ld. AR submitted that if th....
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....tant case. He also relied upon the decisions of this Tribunal, Mumbai in the cases of ACIT V/s Asea Brown Boveri Ltd reported in 11 0TTJ (Mum) 502 and Jt CIT V. India Equipment leasing ltd reported in 111 ITD 37 (Chenai). The learned DR submitted that in the printed accounts of the assessee, the assessee has itself included this amount on accrual basis as per accounting standard employed by the assessee, whereas for the purposes of computing taxable income the assessee followed cash method in regard to such interest income. He further submitted that the concept of real income cannot be so used as to make accrued income non-income. He relied upon the decision of the Hon.Apex Court in the case of State Bank of Travencore V. CIT reported in 158 ITR 102 (SC) 8. The learned DR submitted that the RBI guidelines are only prudential in nature and do not override the provisions of the Act. In this regard, he placed reliance on the decision of the Hon. Supreme Court in the case of Southern Technologies ltd V/s JCIT -320 ITR 577 (SC). 9. We have considered the rival contentions and relevant record. The contentions of the learned DR are that when the assessee is r....
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....rican Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss account on day to day basis but contended that for purposes of income tax only the interest that accrued on the coupon dates can be assessed. The Tribunal noticed the judgement of the Supreme Court in the case of another bank, namely United Commercial Bank, 240 ITR 355.In this case, the Supreme Court has reversed the judgement of the Calcutta High Court, which held that the assessee cannot prepare the computation of its income for income tax purposes in a manner different from the method under which it keeps accounts. Applying this judgment of the Supreme Court, the Tribunal held that Union Bank of India cannot be prevented from urging in the return that the interest on govt. securities accrued only on....
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....rtment had placed reliance on the judgement of the Hon'ble Bombay High court in the case of American Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss account on day to day basis but contended that for purposes of income tax only the interest that accrued on the coupon dates can be assessed. The Tribunal noticed the judgement of the Supreme Court in the case of another bank, namely United Commercial Bank, 240 ITR 355.In this case, the Supreme Court has reversed the judgement of the Calcutta High Court, which held that the assessee cannot prepare the computation of its income for income tax purposes in a manner different from the method under which it keeps accounts. Applying this judgment of the Supreme Court, the Tribunal held that Union ....
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....ican Express International banking Corporation v CIT, 258 ITR 602 and Taparia Tools Ltd v. JCIT, 269 ITR 102. These two judgments have been considered by the Tribunal in paragraphs 14 to 17 of the order cited above and it was held that these judgements are not applicable to the facts of Union Bank's case. In paragraphs 20 and 21, the Tribunal has also considered the objection of the department that the assessee cannot credit the interest on government securities in the profit & loss account on day to day basis but contended that for purposes of income tax only the interest that accrued on the coupon dates can be assessed. The Tribunal noticed the judgement of the Supreme Court in the case of another bank, namely United Commercial Bank, 240 ITR 355.In this case, the Supreme Court has reversed the judgement of the Calcutta High Court, which held that the assessee cannot prepare the computation of its income for income tax purposes in a manner different from the method under which it keeps accounts. Applying this judgment of the Supreme Court, the Tribunal held that Union Bank of India cannot be prevented from urging in the return that the interest on govt. securities accrued only on ....