AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 173
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....rt). The latter grounds are consequential, needing no specific adjudication. 4. Vide its ground 2, assessee is assailing the disallowance of claim of Rs. 1,53,72,053/-, made u/s.10(23G) of the Act, due to the reason that it was unable to produce the necessary certificate required under the said section. Ld. Counsel for assessee, submitted that this Tribunal in its own case for A. Y. 2005- 06 had considered this issue at para 5 of its order dt 06.02.2015. According to him, for the impugned assessment year also, the assessee's limited request was for remitting the issue back to the file of AO since the assessee was now having the necessary approvals from the CBDT. 5. Per contra, Ld. DR supported the orders of authorities below. 6. We have heard the rival submissions and considered the materials on record. We find that the issue regarding exemption claimed u/s.10(23) of the Act, had come up before this Tribunal in assessee's own appeal for A. Y. 2005-06 (ITA.288/Bang/2013, dt.06.02.2015) and this Tribunal had held as under at paras 6 to 8 of its order : 6. The assessee is a scheduled bank and carries on banking business. The assessee claimed to have earned an amoun....
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....ntra Ld. DR supported the orders of authorities below. 9. We have perused the materials on record and considered the rival submissions. There is no dispute that the claim of expenditure was on application software. In assessee's appeal for A. Y. 2007-08 (ITA.898/Bang/2013, dt 06.02.2015), this Tribunal in respect to the claim of software expenditure as revenue, had held as under : "5.4.1 We have heard the rival contentions and perused and carefully considered the material on record. On perusal of the judicial decisions cited by the assessee (supra), we find that there are a catena of decisions wherein it has been held that the expenditure incurred on application software are revenue in nature. It is seen that the coordinate bench of this Tribunal in the assessee's own case for Assessment Year 2001-02 in ITA Nos.733 & 748/Bang/2011 dt.28.8.2014, has held these expenses to be revenue in nature. The relevant portion thereof, is extracted here under :- "7.3 On consideration of the material on record, we find that similar issue had arisen in the case of IBM India Ltd., and the jurisdictional High Court, vide judgment dated 10-4-2013 at para.9 has held as under: "9. T....
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....n the tool itself. Though certain application is an enduring benefit, it does not result into acquisition of any capital asset. It merely enhances the productivity or efficiency and therefore, it has to be treated as revenue expenditure. In that view of the matter, the finding recorded by the Tribunal is in accordance with law and do not call for any interference. Accordingly, the second substantial question of law is answered in favour of the assessee and against the Revenue." Respectfully following the decision of the jurisdictional High Court on similar set of facts, we hold that the expenditure incurred by the assessee for computerization of its branches is revenue in nature. These grounds are accordingly allowed." 5.4.2 Respectfully following the decisions of the Hon'ble High Court of Karnataka in the case of IBM India Ltd. (supra) and the coordinate bench of this Tribunal in the assessee's own case for Assessment Year 2001-02 as extracted above (supra), we hold that the expenditure incurred by the assessee for purchase of application software is revenue in nature. Ground No.1 raised by the assessee is accordingly allowed." Following the above, we allow ground 3 ....
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....nsation cost of Rs. 97,73,232 is an unascertained expense and contingent in nature." 68. During the previous year relevant to AY 2004-05, the assessee debited an amount of Rs. 9,773,232/- towards employee compensation expense under the Employee Stock Option Scheme (ESOP). These expenses were debited to the profit and loss account in accordance with the SEBI guidelines. The learned AO has disallowed the claim for deduction while computing income of the aforesaid expense on the ground that they are contingent in nature and hence not allowable as revenue expenditure. 69. Before CIT(A), the Assessee submitted that the treatment adopted by the Assessee is in accordance with the SEBI guidelines and that the expenditure is not a contingent liability and allowable revenue expenditure. Further the Assessee placed reliance on the decision of the Madras Tribunal in the case of SSI Ltd. V DCIT (85 ITJ 1049) wherein it was held that such expenditure was allowable as revenue in nature. The CIT(A) however upheld the order of the AO. Aggrieved by the order of the CIT (A), assessee has raised ground no.10 before the Tribunal. 70. The issue raised by the assessee in ground no.10 has since b....
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....e and disallowance of claim of Rs. 27,63,837/-, u/s.35D of the Act. 15. Ld. AR fairly admitted that the claim u/s.35D of the Act on rights issue expenditure was held to be not allowable by this Tribunal in the case of Andhra Bank v. DCIT (ITA.1644/Hyd/2008, dt 30.04.2013). However, according to him, the sum of Rs. 1,38,19,893/- was suo motu added back by the assessee in its computation of income and therefore, further addition made of such amount resulted in double disallowance. According to him, the disallowance u/s.35D of the Act, at best could be made with regard to the sum of Rs. 27,63,837/- only. 16. Per contra Ld. DR supported the orders of authorities below. 17. We have perused the materials on record and considered the rival submissions. Assessee had during the relevant previous year claimed Rs. 1,38,19,183/- as expenditure incurred for rights issue. Assessee had also claimed a sum of Rs. 27,63,837/-, as amortisation of expenditure incurred for rights issue in an earlier year which was capitalised in such earlier year. In other words, for the impugned assessment year, assessee had claimed expenditure incurred for rights issue during the relevant previous year as we....
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.... that banking companies were not required to prepare their accounts in accordance with Parts II & III of the Companies Act, 1956. 19. Ld. AR submitted that this issue had come up before this Tribunal in assessee's own case for A. Y. 2007-08. According to him, it was held that the said section was not applicable for banking companies. 20. Per contra Ld. DR supported the orders of authorities below. 21. We have perused the materials on record and considered the rival submissions. Whether Section 115JB of the Act can be applied to the assessee, which is a banking company was an issue before this Tribunal in assessee's own case for A. Y. 2007-08, in ITA.898/Bang/2013, dt.06.02.2015. This Tribunal had held as under at para 7.5.1 and 7.5.2 of its order : 7.5.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2002-03 (supra). On a perusal of the cited decision in ITA No.443/Bang/2013 dt.14.8.2013 in the assessee's own case for Assessment Year 2002- 03, we find that the issue of whether or not th....
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....of Parts II and III of Schedule VI to the Companies Act. Therefore, the MAT computed in accordance with the redrawn profit and loss account was in order. 90. Before the CIT(Appeals), the assessee stated that the assessing officer had erred in adopting the net profit as per the profit and loss account prepared on the basis of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for computing the book profit under section 115JB. He ought to have called for and adopted the profit and loss account as required under section 115JB(2) and prepared as per Schedule-VI of the Companies Act. The assessee also questioned the various other adjustments made by the assessing officer in computing the book profit. On 16.02.2010, the assessee filed an additional ground of appeal, questioning the applicability of section 115JB, while the other adjustments made by the assessing officer in computing the book profit under that section were challenged in the original grounds. 91. On the applicability of section 115JB, the assessee placed reliance on the decision of the Mumbai Bench of the Hon'ble ITAT in the case of Maharashtra State Electricity Board Vs. JCIT [2002] 82 I....
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....computation of book profit under section 115J, and not the profit as per the profit and loss account prepared in accordance with the Banking Regulation Act. Following the same reasoning, the CIT(A) directed that computation of MAT may be done on the basis of the profit and loss account redrawn by the assessee in accordance with the Companies Act. The assessee was directed to furnish the profit and loss account redrawn in accordance with Schedule VI of Companies Act. 94. Aggrieved by the order of the CIT(A), the assessee has raised ground No.3 before the Tribunal. 95. At the time of hearing, it was submitted by the ld. DR that the issue can be remanded for fresh consideration as was done by the Tribunal in A.Y. 2005-06 in ITA No.504/Bang/2009, order dated 13.01.2012. The ld. counsel for the assessee, however, submitted that the Tribunal in its earlier order though noted direct judgments on the point viz., (1) Order dated 30.09.2010 in ITA No.3390/2009 passed by ITAT 'G' Bench, Mumbai in the case of Krung Thai Bank; (2) Order dated 30.06.2011 in ITA Nos.4702 to 4706/2010 passed by the ITAT, Mumbai 'F' Bench in the case of Union Bank of India; and (3) Or....
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....d the assessee is to prepare its books of accounts in terms of the provisions of Banking Regulation Act. It is thus contended that the provisions of Section 115 JB do not apply in the case of banking companies which are not required to prepare the profit and loss account as per the requirements of Part II and III of Schedule VI to the Companies Act. Since the provisions of Section 115 JB do not apply to the assessee company, the reasons recorded for reopening the assessment are clearly wrong and insufficient. We are urged to quash the reassessment proceedings on this short ground. 6. Learned Departmental Representative, on the other hand, vehemently relies upon the orders of the authorities below and submits that there is no specific exclusion clause for the banking companies, and in the absence of such a clause, it is not open to us to infer the same. The submissions of the learned counsel, according to the departmental representative, are clearly contrary to the legislative intent and plain wordings of the statute. 7. The plea of the assessee is indeed well taken, and it meets our approval. The provisions of Section 115 JB can only come into play when the assessee is requir....
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....Per contra Ld. AR supported the orders of authorities below. 25. We have perused the materials on record and considered the rival submissions. Investment portfolio of banks including the SLR and non-SLR securities as per RBI's circular has to be classified under three categories, namely, Held to Maturity (HTM); Available for Sale (AFS); and Held for Trading (HFT). All securities classified as AFS and HFT were shown as stockin- trade by the assessee and there was a claim of depreciation of Rs. 10,56,61,946/- on determination thereof. AO was of the opinion that depreciation could be allowed on securities aggregated scriptwise and once appreciation was set off, the net amount that could be claimed by the assessee was only 5,76,59,169/-. He made disallowance of Rs. 4,80,02,777/-. Assessee's appeal before the CIT (A) on this issue was successful. CIT (A) relied n the decision of the coordinate bench in the case of Corporation Bank in ITA. Nos.794 & 795/Bang/2011, dt. 18.06.2012 for allowing the claim of the assessee. 26. We find that this issue stands covered in favour of the assessee by virtue of the decision off this Tribunal in assessee's own case of A. y. 2007-08 i....
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....sale of stock-in-trade. 16.3.3 As mentioned by the learned CIT (Appeals) in the impugned order, we find that the issue before us for consideration is squarely covered by the decision of the co-ordinate bench of this Tribunal in the case of Corporation Bank (supra) which was rendered after analyzing the decision of the Hon'ble Apex Court in the case of UCO Bank Ltd., in 240 ITR 355 (SC). The relevant portion of the above cited decision of the co-ordinate bench at paras 11 and 12 thereof are extracted here under :- "11. After considering the submissions of both the parties and the material available on the record, it is noticed that a similar issue having identical facts has been decided in favour of the assessee vide the aforesaid referred to order dated 31.05.2011 in ITA No.710/Bang/2010 for the A.Y. 2007-08 in assessee's own case and the relevant findings has been given in paras 5 to 7, which read as under:- "05. At the time of hearing, though this is Revenue's appeal, the learned Chartered Accountant appearing for the assessee, placed on record a Xerox copy of the order of the Tribunal in ITA 112/Bang/2008 for the assessment year 2004-05 and drew our attentio....
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...." 12. So respectfully following the aforesaid referred to order dated 31.05.2011 in ITA No.710/Bang/2010 for the A.Y. 2007-08 in assessee's own case, the issue stands covered in favour of the assessee, we therefore do not see any merit in these appeals of the department." As we find that the facts of the assessee in the case on hand are similar to that of the cited case, i.e. Corporation Bank Ltd. (supra) followed by the learned CIT (Appeals) in the impugned order, we concur with the decision of the learned CIT (Appeals) in allowing the assessee's claim of diminution in the value of investments under the AFS/HFT categories amounting to Rs. 6,05,64,289. Consequently, Revenue's grounds at S.Nos.11 to 13 are dismissed." Following the above, we are of the opinion that the CIT (A) was justified in allowing the claim of the assessee. Grounds 2 to 4 stands dismissed. 27. Vide its grounds 5 to 7, Revenue is aggrieved that the CIT (A) allowed the assessee's claim of depreciation on conversion of securities. 28. Ld. DR submitted that assessee could claim capital loss or gain on sale of securities which was classified as HTM. However, according to him, the impac....
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....previous year, assessee had deducted the excess provisions of Rs. 5,17,67,000/-, or in other words, the provision made by the assessee during the relevant previous year was after deducting the excess provision. Therefore, the view taken by the AO that the depreciation loss was not considered in the books appears to be incorrect. In the case of State Bank of Mysore v. DCIT (ITA.647 & 706/Bang/2008, dt 29.05.2009) (33 SOT 7), this Tribunal had considered the issue at paras 7.2 to 7.5 of the order and held as under : 7.1 On the other hand, the learned Departmental Representative had vehemently argued that the CIT(A) had decided the issue in a judicious manner which requires no interference at this stage. 7.2 We have considered the rival submissions. We have also perused the RBI master circular and other case laws on which the senior counsel has placed strong reliance. The Hon'ble Tribunal, Bangalore Bench 'B' in ITA No. 253/Bang/2007, dt. 24th Jan., 2008 in the case of Asstt. CIT (LTU) vs. Vijaya Bank had an occasion to deal with a similar issue. After considering the rival submissions, analyzing the RBI guidelines and also extensively quoting various judicial pronou....
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....7, dt. 27th July, 2003; (2) ING Vysya Bank Ltd. vs. Dy. CIT (2006) 6 SOT 606 (Bang). 17. Considering the above discussion, it is held that the assessee is entitled to value all the investment at cost prices or market value whichever is lower by treating such investment as stock-in-trade...." 7.3 The Hon'ble Tribunal in ITA No. 112/Bang/2008, dt. 3rd Dec., 2008 in the case of Corporation Bank vs. Asstt. CIT, 2009-TIOL-75-ITAT BANG by following the decision of the Hon'ble Tribunal in the case of Asstt. CIT (LTU) vs. Vijaya Bank (supra), has held that- "16. Considering the facts and circumstances of the case before us and respectfully following the decision of the Hon'ble Supreme Court in the case of United Commercial Bank vs. CIT referred supra, it is held that the assessee bank is entitled to value all the investment at cost prices or market value whichever is lower by treating such stock-in-trade........." 7.4 In RBI's master circular, under the caption 2 classification, it has been mentioned thus- "(i) The entire investment portfolio of the banks (including SLR securities and non-SLR securities) should be classified under three categories vi....
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....r with this claim of the assessee and restricted the deduction to the extent of amortization as made by the assessee in its books of account. 17.2.2 According to the assessee, this expenditure is directly related to the business of the assessee and is liable to be allowed as deduction. It was submitted that the provisions of sections 30 to 36 of the Act covers specific expenses and section 37 of the Act is a residuary section which permits deduction of expenses incurred wholly and exclusively for the purposes of business, provided they are not capital in nature, not personal in nature and not prohibited in law. It is contended that deduction was allowable, irrespective of whether the expenses were deferred over a period of time in the books of account. In support of this contention, the assessee relied on various judicial pronouncements put forth before the learned CIT (Appeals). 17.2.3 On a careful consideration of the facts of the matter, we concur with the finding of the learned CIT (Appeals) in the impugned order that the expenditure incurred on insurance premium on housing loan are revenue in nature and is an allowable deduction. It is not the case of the Assessing Offic....
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....pon dates, which are 30th of June and 30th of December of every year, in the case of the assessee. The assessee accounts for the income from the last coupon date, 30th December till 31st March as "broken period interest income" on accrual basis. It is the contention of the assessee, that even though it follows the Mercantile Basis of Accounting, an amount cannot be charged to tax under it constitutes income and as the broken period income does not constitute income, it is therefore not chargeable to tax. 12.3.2 We find that this issue has been considered and decided in favour of the assessee in several cases cited by both the Hon'ble Karnataka High Court and the co-ordinate bench of this Tribunal, including the decision in the case of State Bank of Mysore in ITA No. 1401/Bang/2003 dt.17.4.2009 relied on by the learned CIT (Appeals) in the impugned order. In the appellate proceedings before us, the learned Authorised Representative of the assessee placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT V Karnataka Bank Ltd. in ITA No.433 of 2005 dt.12.9.2012. The relevant portion of the said judgment at paras 16 & 17 thereof is extracted her....