TaxTMI 
TaxTMI 
2015 (11) TMI 1519
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....r under section 143(3) r.w.s. 147 of the Act for the assessment years 2005-06 and 2007-08. 3. We consider the facts as relating to the assessment year 2005-06 for adjudication. Brief facts of the case are that the assessee is a Nationalized Bank and Central Public Sector Undertaking. The assessee is engaged in the business of banking. The assessee filed its return of income for the assessment year 2005-06 on 25.10.2015, declaring an income of NIL [after setting off the brought forward losses]. The return was processed under section 143(1) of the Act and the case was selected for scrutiny. An assessment under section 143(3) of the Act were made on 31.12.2007 by assessing the income at 1,82,96,50,331/-. Subsequently, the Assessing Officer reopened the assessment under section 147 of the Act by issuing notice under section 148 of the Act on 28.03.2012. While completing the reassessment under section 143(3) r.w.s. 147 of the Act on 31.03.2013, the Assessing Officer assessed the losses at 261,34,67,929/-, before setting off equal amounts of brought forward losses by disallowance the excess depreciation claimed on ATMs and UPS and expenses under section 36(i)(viia) of the Act. 4. T....
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....come, or assessing the income at too low a rate, or granting excessive relief, or granting/computation of excessive loss or depreciation allowance or any other allowance, if the return was already subjected to scrutiny assessment under section 143(3). In the present case, the assessee, in its return of income, has claimed depreciation on ATMs and UPS @ 60% by classifying them under the computers block as against allowable depreciation of 15%. This was not examined at the time of the scrutiny assessment under section 143(3) of the Act dated 31.12.2007. Thus, there is an underassessment of taxable incomes, within the meaning of section 147 of the Act and accordingly, the ld. CIT(A) confirmed the reassessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Act by relying various judicial pronouncements. We find that, in this case, the issue of reopening was done where the income chargeable to tax are under-assessed, and as per Explanation 2(c) to section 148, it shall be deemed to have been income chargeable to tax has been escaped assessment. Therefore, in our opinion, the Assessing Officer, while passing the original assessment order under section 143(3)....
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....stricted the claim of depreciation to 15% as against 60% claimed by the assessee and disallowed the excess depreciation claimed. 9. On appeal before the ld. CIT(A), the assessee has submitted that the ATMs cannot be considered as ordinary machinery or equipment since it performs a variety of functions and has to be considered as a computer system for disbursement of cash at locations convenient to customers. The assessee has further submitted before the ld. CIT(A) that the ATMs have all the computer software and linked to the main computer servers (systems). The ATMs process the customers' requests, analyse the availability of credit balance in their accounts, deliver the cash and send the same information to the main computer system, so that the credit balance in the customers' accounts is debited by the said amount. It was also submitted that the ATMs can also be used for account balance verification, payment of various challans/bills, etc. and argued that the ATMs are nothing but the extensions of the computer systems and hence eligible for deduction @ 60%. After considering the submissions of the assessee and the materials on record, the ld. CIT(A) has not accepted t....
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....0 has held that computer accessories and peripherals such as printers, scanners and server etc. formed an internal part of the computer system and, in fact, the computer accessories and peripherals cannot be used without the computer. The Hon'ble High Court thus held that they are the part of the computer system and are entitled to depreciation at the higher rate of 60%. In the present case, we are concerned about the depreciation on LAN, WAN, ATM equipments. During the year under consideration, the assessee has purchased certain equipments in the form of LAN, WAN, ATM etc. apart from computer and other related items. It is not in dispute that LAN, WAN, ATM equipments cannot be used without the computer. In the case of DCIT vs. Datacraft India Ltd. - (2010) 6 Taxmann.com 85 (Mum.-ITAT)(SB), the ITAT Special Bench of Mumbai has observed that router is a hardware device that routes data from a Local Area Network (LAN) to another network connection. In that case, the Special Bench has taken a view that routers and switches in the circumstances of that case are to be included in the block of computer entitled to rate of depreciation at 60%. Since the LAN, WAN, ATM etc. cannot funct....
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.... the Tribunal in the case of DCIT v. Global Trust Bank Limited (supra), we set aside the order passed by the ld. CIT(A) on this issue and direct the Assessing Officer to allow depreciation @ 60% to ATMs. Thus, the ground raised by the assessee is allowed and subject to recomputation of WDV for each assessment year accordingly. 14. In the result, the appeals filed by the assessee in I.T.A. No. 1396/Mds/2014 for the assessment year 2005-06 and I.T.A. No. 1395/Mds/2014 for the assessment year 2007-08 are partly allowed. 15. In the Revenue appeals in I.T.A. No. 2124 and 2125/Mds/2014 for the assessment years 2005-06 and 2007-08, the first ground is general in nature and requires no adjudication. 16. The second ground raised in both the appeals of the Revenue relates to allowance of depreciation for UPS @ 60%. 17. The assessee has claimed depreciation for UPS @ 60% treating them as computers. The Assessing Officer has held that the UPS cannot be treated as computers and accordingly restricted the claim of depreciation to 15% as against 60% claimed by the assessee and disallowed excess depreciation claimed. 18. The assessee carried the matter in appeal before the ld. CIT(A....
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....relied on the decision in the case of Nestle India Ltd. V. DCIT (supra), wherein the Delhi Benches of the Tribunal has decided the issue in favour of the Revenue and rejected the plea of the assessee for claiming depreciation @ 60% on UPS. However, The Delhi Benches of the Tribunal in the case of Neptune Information Solutions Ltd. in I.T.A. No. 962/Del/2006 vide order dated 21.04.2011 has decided the issue in favour of the assessee by following the decision of the Hon'ble Delhi High Court in the case of CIT v. BSES Rajdhani Powers Ltd. vide order dated 31.08.2010 in ITA No. 1266/2010 and also by following the decision of the ITAT Delhi in the case of Expeditors International (India) (P) Ltd. v. CIT (2008) 118 TTJ 652 and directed the Assessing Officer to allow depreciation @ 60% to UPS. Therefore, we find no force in the arguments of the ld. DR. 22. Further, the Tribunal, in the case of Indian Overseas Bank v. DCIT in I.T.A. No. 1949/Mds/2012 dated 18.06.2014, has also allowed depreciation on UPS at the rate of 60%. Accordingly, in view of the above decisions of the Coordinate Benches of Tribunal, we are of the firm view that the ld. CIT(Appeals) has rightly directed the Ass....
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....sions for bad and doubtful debts. As per the provisions of Section 36(1)(viia), a banking company would be entitled to deduction computed in the manner provided therein namely:- (1) an amount not exceeding 7lh% of the total income before making any deductions under Chapter VI-A and this section; and (2) an amount not exceeding 10% of the aggregate rural advances made by the rural branches. The methodology of computation of average rural advances has been prescribed in Rule 6ABA of the Income Tax Rules, 1962. Your appellant had computed the deduction in the said manner. The rule requires computation of average outstanding advances at the end of each month and the Assessing Authority has proceeded to consider that the opening balance of every month should be excluded for arriving at average rural advances outstanding. The rule has not warranted computation of average advances granted during the year or average advances as reduced by the opening balance. The interpretation thus taken by the Assessing Authority is that the appellant would be entitled to deduction only in respect of the incremental advances outstanding and accordingly, hp has restricted the de....
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....he rural branches, and not on the incremental advances only. Therefore, the Assessing Officer's interpretation, that the assessee is entitled for deduction only on the incremental average aggregate advances of the rural branches, is not in accordance with the provisions of the Act. For this purpose, reliance is also placed on the decision of the jurisdictional ITAT in the case of Lakshmi Vilas Bank in ITA No. 551, 552, 553/Mds/2009 dated 18-12-2009. The relevant portion of the decision of the decision, is reproduced as under: 4.1 Issue No. 1 - Regarding computation of aggregate average advances, made by the rural branches: 4.1.1 We have heard the learned A.R. as well as learned Departmental Representative and considered the relevant records. The learned counsel for the assessee has submitted that the provisions of section 36(1)(viia) refers to the computation in the prescribed mariner. He has then referred Rule 6ABA of Income Tax Rules, 1962 and submitted that this issue was considered by the Co-ordinate Bench of this Tribunal in the case of DCIT vs. City Union Bank Lid, vide order dated 30.10.2009 in I.T.A. No. 1485/Mds/2007. 4.1.2 On the other hand,....
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....e 'total average aggregate advances' made by the rural branches and not on the incremental average aggregate advances, as contemplated by the Assessing Officer. The assessee's appeals in this regard are allowed." 30. We find that the ld. CIT(Appeals) has rightly followed the decision of the Tribunal in the case of Lakshmi Vilas Bank (supra) and we find no infirmity in the order passed by the ld. CIT(Appeals). Thus, the ground raised by the Revenue for both the assessment years are dismissed. 31. The next ground raised in the appeal of the Revenue for the assessment year 2007-08 is with regard to the claim of brought forward unabsorbed depreciation losses of 73,40,85,563/- to be set off against the income of current assessment year i.e., 2007-08. The assessee has claimed the brought forward unabsorbed depreciation losses from the assessment years 1994-95 to 1998-99, amounting to 73,40,85,563/-. However, the Assessing Officer in his order disallowed the same in view of the amended provisions of section 32(2) w.e.f. 01.04.1997. Consequent to the amended provisions of section 32(2) w.e.f. 01.04.1997, the unabsorbed depreciation losses can be carried forward to eight a....
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....sorbed depreciation can be carried forward for a period of eight years only. This amended position continued upto A.Y. 2001-02, i.e. till the provisions of sec. 32(2) were reversed by the Finance Act, 2001 w.e.f. 01.04.2002. In other words, the restrictions imposed on the carry forward position of unabsorbed depreciation was applicable between A.Y.1997-98 and 2001-02 only. 4.4.4 At the beginning of the A.Y. 1997-98, all the unabsorbed losses brought forward from the earlier years, irrespective of the year in which they were originally computed, were at par with the current year's depreciation losses (of A.Y.1997-98), and a result of which all these losses can be carried forward for a period of 8 years to be reckoned from 1997-98. That is, these unabsorbed depreciation losses available as on 01.04.1997 can be carried forward upto the A.Y. 2005-06 and can be utilized for set off. This was the position from A.Y. 1997-98 to 2001-02. 4.4.5 From 01.04.2002, the provisions have been reversed by lifting the restrictions imposed on the carry forward position of unabsorbed depreciation, as a result of which all the unabsorbed depreciations available as on 01.04.2002 and....
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....nce, the ld. Counsel for the assessee has strongly placed reliance on the decisions of the Hon'ble Jurisdictional High Court in the case of CIT v. Pioneer Asia Packing (P) Ltd. 310 ITR 198 and also in the case of CIT v. S and S Power Switchgear Ltd. 318 ITR 187 including the decision of the Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd. (supra). In view of the amended provisions as well as the decision of the Hon'ble Jurisdictional High Court, the unabsorbed depreciation losses carried forward to eight assessment years immediately succeeding the assessment year in which the depreciation allowance was computed is not in dispute [1994-95 to 1998-99]. However, the finding of the ld. CIT(A) that for the current year 2007-08, the brought forward unabsorbed depreciation losses is eligible is found to be incorrect since the reckoning of eight years period end by 2006-07 and therefore, for the assessment 2007-08, which is current assessment year, the assessee is not eligible for claiming the depreciation loss. Accordingly, the ground raised by the Revenue is allowed. 37. In the result, the appeal filed by the Revenue in I.T.A. No. 2124/Mds/2014 for t....
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....hrough the orders of authorities below. The Tribunal, while deciding the group cases of the assessee in I.T.A. Nos. 470 to 472/Mds/2010 for the assessment years 2004-05 to 2006-07 vide order dated 11.06.2012, has followed its own decision in I.T.A. No. 1082/Mds/2003 dated 30.06.2011, wherein, the issue stands settled in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Vijaya Bank v. CIT 323 ITR 166 and the Tribunal in its order dated 11.06.2012 has held as under:- "11. We have perused the orders of lower authorities and heard the rival contentions. We find that the issue regarding allowance of bad debts written off on technical reasons stand decided in favour of assessee by this Tribunal in ITA No. 1082/Mds/2003 for Assessment Year 1998-99. It was held by this Tribunal at para Nos. 43 and 44 of its order dated 30/06/11 as under:- "I.T.A. No. 1082/Mds/2003 42. First issue raised by the assessee is regarding disallowance of its claim for bad debt - technical write off. 43. A.O. had disallowed a part of the claim of bad debt on a reasoning that the write-off was purely technical, since assessee had not reduced t....
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....quent repayments under s. 41(4)." Hence this issue stands decided in favour of the assessee." Respectfully following the decision of Co-ordinate Bench of this Tribunal, we are inclined to allow the claim of assessee. This issue is decided in favour of assessee." 45. Respectfully following the above decision of the Coordinate Bench of the Tribunal, wherein the decision of the Hon'ble Supreme Court is followed, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to delete the disallowance made on this issue. Thus, the ground raised by the assessee is allowed. 46. The third issue raised in the appeal of the assessee relates to disallowance of (-) 2,93,85,647/- [wrongly mentioned as 4,21,43,054/- in CIT(A)'s order] towards broken period interest paid on purchase of securities. The assessee has submitted before the Assessing Officer that the above amount represents interest paid on purchase of investments which is its stock-in-trade. It was also submitted that the said interest has been paid from the last due date of payment of interest for the security to the date of purchase and further submitted that the entire interest paid ....
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....eave petition filed by the Department against such judgement of order of Mumbai High Court on 27.01.2004 (SLP(C) No. 3710 of 2004). Therefore, even though it was earlier decided by this Tribunal in assessee's own case for Assessment Year 1996-97 in ITA No. 1901/Mds/04 dated 25.10.07, that broken period interest could not be considered as revenue expenditure but had to be taken as capital outlay when paid for acquiring securities, in view of the later decisions of Hon'ble Mumbai High Court mentioned supra, such broken period interest has to be allowed. We would prefer to follow the decision of the Hon'ble Mumbai High Court, since Special leave petition filed by the Department against such decision in the case of Union Bank of India (supra) was dismissed by Hon'ble Apex Court. Thus, this issue is decided in favour of assessee." 49. Further, we also find that the Hon'ble Jurisdictional High Court in assessee's own case in T.C.(A) No. 417 of 2008 vide order dated 11.02.2014 decided the above issue in favour of the assessee. Respectfully, following the above decision of the Coordinate Bench of the Tribunal as well as the decision of the Hon'ble Jurisdictio....
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....tment is an allowable deduction, which was recognized in terms of RBI Prudential Guidelines. Since the provision made in this case is over and above the actual reduction in value, the Assessing Officer has not accepted the contentions of the assessee and made the disallowance. 53. On appeal, the ld. CIT(A), after considering the submissions of the assessee, confirmed the disallowance made by the Assessing Officer. 54. After hearing both sides, we find that the ld. CIT(A), after considering the details submissions, has observed as under:- "9.1 I have considered the facts of the case and the submissions made by the learned AR. I am unable to agree with the contentions of the learned AR. The amount represents only a provision made for a probable future loss on an estimated basis. It is not an actual loss incurred during the year. The appellant has only made a provision in accordance with RBI guidelines. In the absence of specific provisions under the Income Tax Act, as in the case of section 36(1)(viia), where the provision made by the appellant for bad and doubtful debts is allowed as deduction, the provision made for non performing investments cannot be allowed as ded....
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....bove prescriptions since the assessee's investments and payment of interest, the component of managerial remuneration and other staff expenses are interlinked and it would be difficult to allocate individually, the Assessing Officer worked out the expenditure of 14,27,99,714/- in view of the provisions of Rule 8D and disallowed the expenditure under section 14A of the Act. 57. On appeal, the ld. CIT(A), after considering the submissions of the assessee and by following the decision of the Special Bench of ITAT, Mumbai in the case of Daga Capital Management (P) Ltd. (26 SOT 303), wherein the Tribunal has decided the issue against the assessee, dismissed the ground raised by the assessee. 58. We have heard both sides and perused the materials on record. The disallowance under section 14A of the Act has been decided by the Tribunal in the earlier assessment years @ 2% of the exempt income and therefore, the assessee has pleaded that the same disallowance percentage shall be followed. However, the ld. CIT(A) by following the Special Bench of ITAT, Mumbai in the case of Daga Capital Management (P) Ltd. (supra) confirmed the disallowance made by the Assessing Officer. Before us....
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.... directed the Assessing Officer to verify the claim for the assessment year under consideration and allow the same after ensuring that no double deduction is allowed. 61. Before us, the ld. Counsel for the assessee has relied on the decision in the case of Catholic Syrian Bank Ltd. v. CIT 343 ITR 270 (SC). On the other hand, the ld. DR supported the orders of authorities below. 62. We have considered the rival submissions. Against the disallowance made by the Assessing Officer, the ld. CIT(A) by following the order passed for the assessment year 2006-07, directed the Assessing Officer to verify the claim for the assessment year under consideration and allow the same after ensuring that no double deduction is allowed. With regard to the above issue, for the assessment year 2006-07, the assessee has filed appeal before the Tribunal and the Tribunal, while deciding the appeals for the assessment years 2004-05 to 2006-07, by following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT (supra), has observed as under:- "14. We find that disallowance was made by Assessing Officer for a reason that bad debts were written off against....
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....n'ble Supreme Court in the case of Catholic Syrian Bank v. CIT (supra) and also there cannot be double claim by the assessee. Accordingly, the ground raised by the assessee is allowed for statistical purposes. 64. The eighth ground raised in the appeal of the assessee relates to disallowance of deduction under section 35D of the Act amounting to 4,50,03,133/-. The assessee has claimed a sum of 4,50,03,133/- as one fifth of the share issued expense incurred towards the initial public offer of 22,50,15,663/-. Before the Assessing Officer, the assessee has submitted that during the year under consideration, the bank had come out with initial public offer to raise capital of 429.77 crores of which issued to Central Government is 342.82 crores and to public 85.95 crores. The bank has also credited 696.19 crores to the capital reserve account being the share premium in the IPO process. This capital was raised mainly towards increasing the capital base in order to achieve the capital adequacy ratio as prescribed by the RBI. The assessee's counsel has submitted before the Assessing Officer that this capital was used to start new branches in rural areas. In view of the provisions....
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....scientific method of workings and made the disallowance. 69. On appeal, the ld. CIT(A), by following earlier order passed in the assessment year 2006-07, has held that the provisions of section 115JB would not apply to assessee's case and dismissed the ground raised by the assessee. 70. Before us, the ld. Counsel for the assessee has submitted that the issue involved is squarely covered by the decision of the Tribunal in assessee's own case for the assessment year 2006-07. On the other hand, the ld. DR supported the orders of authorities below. 71. We have heard rival contentions. The ld. CIT(A), by following his own order in the assessment year 2006-07, has held that the provisions of section 115JB will not apply to assessee's case is not correct. For the very same assessment year, the assessee has preferred an appeal before the Tribunal and the Tribunal in the consolidated order passed for the assessment year 2004-05 to 2006-07 has observed as under:- "20. We have perused the orders of lower authorities and heard the rival contentions. We find that the issue regarding applicability of Sec. 115JB on a Bank governed by Bank Regulation Act had coming up....
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....to the assessee." Respectfully following the decision of the Co-ordinate bench, we hold that the provisions of Sec. 115JB could not be applied on the assessee. In the result, this issue stands decided in favour of assessee." 72. The ld. DR could not controvert the above findings of the Tribunal. Respectfully following the above decision of the Coordinate Bench of the Tribunal, we set aside the order passed by the ld. CIT(A) on this issue and hold that the provisions of section 115JB of the Act could not be applied on the assessee. Thus, the ground raised by the assessee is allowed. 73. The tenth ground raised in the appeal of the assessee relates to confirmation of disallowance made under Rule 8D r.w.s. 14A in the computation of book profit under section 115JB even when no expenditure has been actually incurred by the assessee and further in the absence of section 14A(2) and (3) in explanation to section 115JB, Rule 8D cannot be made applicable. The eleventh ground raised in the appeal of the assessee relates to provision made for claims against the bank in respect of section 115JB of the Act. 74. Both the above disallowances [at para 73] are consequential to appl....
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..... At the time of hearing, the ld. Counsel for the assessee has not pressed this ground and endorsed in the grounds of appeal of the assessee as "not pressed". Accordingly, the ground is dismissed as not pressed. 80. The third ground relates to broken period interest paid on purchase of securities. We have considered similar issue for the assessment year 2007-08 hereinabove from para 46 to 49 and, by following the decision of the Coordinate Bench of the Tribunal as well as the decision of the Hon'ble Jurisdictional High Court, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to delete the disallowance made. Accordingly, for the assessment year 2008-09 also we direct the Assessing Officer to delete the above disallowance. 81. The fourth ground relates to non performing investments. We have considered similar issue for the assessment year 2007-08 hereinabove from para 52 to 55 and decided the issue against the assessee. For the assessment year 2008-09 also, the assessee has not actually incurred any loss and the provision was made only for a probable future loss on an estimated basis. Accordingly, the ground raised by the assessee is di....
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....(viia) are independent and unless credit balances in respect of accounts written off as bad debts is maintained in the books of the bank as provision under section 36(1)(viia), no disallowance can be made. 84(i). On appeal, the ld. CIT(A), after considering the submissions of the assessee, has held that the provisions of section 36(1)(vii) and 36(1)(viia) were independent and that the deduction allowable under section 36(1)(vii) should not result in double deduction. Accordingly, the ld. CIT(A) directed the Assessing Officer to verify the claim and allow the same after ensuring that no double deduction is allowed. We have also considered similar issue for the assessment year 2007-08 in I.T.A. No. 880/Mds/2010 at para 59 to 63 and directed the Assessing Officer to verify whether the requirements of section 36(2) of the Act is satisfied or not and decide the issue afresh by taking into consideration of the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank v. CIT 343 ITR 270, Accordingly, the ground raised by the assessee is allowed for statistical purposes. 85. The seventh and eighth ground raised in the appeal of the assessee is with regard to disal....
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.... taxable, necessary depreciation in respect of foreign assets to be allowed as per the Income Tax Rules. The assessee has further submitted that during the year ended 31.03.2009, a total sum of 3,27,77,083/- has been recovered and the same has been credited in Indian Profit and Loss account as income. As the amounts were not originally allowed as bad debt under the Act, the same is not income taxable under section 41(1) and hence the amount is excluded from the computation of income. The Assessing Officer has not accepted the submissions made by the assessee and made the disallowance. 91. On appeal, after considering the submissions of the assessee, the ld. CIT(A) remitted the matter back to the Assessing Officer to allow relief of tax based on the tax paid in the foreign countries. 92. On being aggrieved, the assessee is in appeal before the Tribunal and submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case for the assessment year 2003-04 in I.T.A. No. 252/Mds/2007 vide order dated 11.06.2012. On the other hand, the ld. DR supported the order passed by the authorities below. By relying on the decision of the Mumbai Benches of....
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.... decision of the Hon'ble Supreme Court in P.V.A.L. Kulandagan Chettiar (supra). 23. The learned Commissioner (Appeals) agreed with the contention of the assessee and directed the Assessing Officer to allow exclusion of the income of foreign branch with whom the India has DTAA in the year 2007-08. However, in the assessment year 2005-06 and 2006-07, there is no such finding as stated above in the foregoing paragraphs. 24. The learned Counsel submitted that under Article-7, business income is to be computed, which envisages that the profit of the enterprise situated in the other contracting State i.e., the source country, then it is to be taxed there, whatever is attributable directly or indirectly to that P.E. which is situated in the source State. This means that once the tax has been paid in the other contracting State, then the same cannot be taxed in the resident State. The notification dated 29th August 2008, as issued by the Government of India, will not apply in case of business profit of the P.E. He submitted that the decision of the Hon'ble Supreme Court P.V.A.L. Kulandagan Chettiar (supra) squarely covers the case wherein the Hon'ble Supreme C....
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.... specifically in the case of Turquoise Investment, on the interpretation of the expression "may be taxed", that once the tax is payable or paid in the country of source, then country of residence is denied of the right to levy tax on such income or the said income cannot be included in return of income filed in India, would no longer apply after the insertion of provision of sub-section (3) of section 90 w.e.f. 1st April, 2004, i.e. assessment Year 2004-05. The said provision as conferred upon the Central Government a power to issue notification, assigning meaning to the terms used in the DTAA, which has neither been defined under the Act nor in the agreement provided that such a meaning should not be inconsistent with the provisions of the Act or agreement. In pursuance of such a statutory empowerment, Central Govt. has issued a notification on 28th August, 2008, clearly specifying that where the DTAA entered into by the Central Govt. with the Govt. of any other country provides that any income of a resident of India "may be taxed" in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income Tax ....
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....as raised by the Department in ITA No. 6018/Mum./2011, for the assessment year 2007-08, is treated as allowed." 94. In view of the above decision of the Mumbai Benches of the Tribunal, we are of the considered view that the decisions rendered in assessee's own case prior to assessment year 2004-05 will not have binding precedence in the assessment year 2009-10 or subsequent years. Accordingly, we hold that the income of the assessee at Singapore and Colombo would be included in the return of income of the assessee in India and whatever taxes paid by the branches in foreign countries, credit of such taxes shall only be given. Accordingly, the ground raised by the assessee is dismissed. 95. The fourth ground raised in the appeal is with regard to disallowance of 21,20,56,397/- under section 14A. Similar ground was raised in the assessment 2008-09 and we have decided the issue against the assessee in para 82 to 83 of this order. Accordingly, for the assessment year 2009-10 also, we dismiss the ground raised by the assessee. 96. The fifth ground raised in the appeal relates to disallowance of 4,50,03,133/- under section 35D of the Act. The Assessing Officer has disallowed ....
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....t year 2009-10 only to the extent of setting up of a new unit for five successive years. Accordingly, we set aside the order passed by the ld. CIT(A) and remit the matter back to the Assessing Officer to examine whether the assessee has set up a new unit or not and if so, he is directed to allow the benefit from 2009-10 onwards. Accordingly, the ground raised by the assessee is allowed for statistical purposes. 98. The sixth ground raised in the appeal is with regard the depreciation on ATM and UPS. With regard to allowability of 60% depreciation on UPS, we have considered similar issue and dismissed the ground raised by the Revenue in I.T.A. Nos. 2124 and 2125/Mds/2014 for the assessment year 2005-06 and 2007-08 at para 17 to 22 of this order. With regard to the allowability of 60% depreciation on ATM, we have consider the issue and allowed the ground raised by the assessee in its appeal in I.T.A. Nos. 1396 and 1395/Mds/2014 for the assessment years 2005-06 and 2007-08 at para 8 to 13 of this order. Accordingly, the ground raised by the assessee is allowed. 99. The seventh ground raised in the appeal relates to disallowance of provision made for claims against the bank amoun....
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....e assessee for the assessment year 2009-10 is partly allowed for statistical purposes. I.T.A. No. 1397/Mds/2014: [A.Y. 2010-11] 104. The ground No. 1 is general in nature and requires no adjudication. 105. The second ground (a and b) raised in the appeal of the assessee relates to inclusion of income of foreign branches at Singapore and Colombo amounting to 82,89,70,657/-. Similar ground has been raised in the assessment year 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the issue against the assessee from para 89 to 94 of this order. Accordingly, for the assessment year 2010-11 also, we dismiss the ground raised by the assessee. 106. The third ground (a and b) raised in the appeal of the assessee relates to disallowance of expenses under section 14A r.w.r. 8D of 23,09,49,928/-. Similar ground was raised in the assessment 2008-09 and we have decided the issue against the assessee from para 82 to 83 of this order. Accordingly, for the assessment year 2010-11 also, we dismiss the ground raised by the assessee. 107. The fourth ground raised in the appeal of the assessee relates to disallowance of 4,50,03,133/- under section 35D of the Act. Similar ground was r....
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....iia) of the Act of 197,51,47,290/-. Similar ground was raised in the assessment 2007-08 and we have considered the issue and decided the issue from para 59 to 63 of this order. Accordingly, for the assessment year 2010-11 also, the ground raised by the assessee is allowed for statistical purposes. 113. In the result, the appeal of the assessee for the assessment year 2010-11 is partly allowed for statistical purposes. I.T.A. No. 887/Mds/2010 [A.Y. 2007-08] (Revenue Appeal) 114. The first ground raised in the appeal of the Revenue is general in nature and requires no adjudication. 115. The second ground raised in the appeal of the Revenue pertains to inclusion of income of foreign branches at Singapore and Colombo amounting to 37,43,13,769/- with the income chargeable to tax in India. Similar ground has been raised in the assessment year 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the issue against the assessee from para 89 to 94 of this order. Accordingly, for the assessment year 2007-08, the ground raised by the Revenue is allowed. 116. The third ground raised in the appeal of the Revenue relates to the disallowance of depreciation on securities provided....
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....orms. However, the case of the Revenue is that once the securities are treated as permanent, the same cannot qualify for depreciation. The ld. CIT(A), by following the decision of the Bangalore Bench of the Tribunal in the case of State Bank of Mysore v. DCIT [2009] 33 SOT 7, allowed the ground raised by the assessee. In the above decision, the Tribunal has observed as under:- "7.2 We have considered the rival submissions. We have also perused the RBI Master Circular and other case laws on which the Sr. Counsel has placed strong reliance. The Hon'ble ITAT, Bangalore Bench 'B' in ITA No. 253/Bang/2007 dated 24-1-2008 in the case of Asstt. CIT (LTU) v. 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 pronouncements on which both the parties have placed their reliance, the Hon'ble Tribunal has observed thus:- "15. From the above, it is clear that the assessee is treating the securities held under the category 'held for maturity' as stock-in-trade. If there is appreciation in the market value as compared to the market val....
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....unal in the case of Asstt. CIT v. 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 v. 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 viz., 'Held to maturity', 'Available for Sale' and 'Held for Trading'. However, in the balance sheet, the investments will continue to be disclosed as per the existing six classifications viz.; (a) Government securities, (b) other approved securities, (c) shares, (d) debentures and bonds, (e) subsidiaries/joint ventures, and (t) other (CP Mutual Fund Units, etc.). (ii) Banks should decide the category of the investment at the time of acquisition and t....
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....-07 wherein the coordinate bench held as follows:- "50. We are of the opinion that the assessee Bank is holding various Government Securities in order to comply with the statutory liquidated ratio. The bank would have to hold requisite percentage of deposits in the form of cash, gold, government or approved securities. The government securities held for the purpose of comply with the SLR has been held to be stock in trade and therefore value of the same as on 31st March has to be made and there is any depreciation the same should be allowed as a revenue deduction. However, the RBI has issued Circular wherein they have classified the investment made to comply with SLR requirement as 'Held to maturity' (HTM), 'Available for sale' (AFS) and 'Held for Trade' (HFT). Based on the RBI Circular lower authorities came to the conclusion that investment in Government Securities which are classified under the head HTM cannot be considered as stock in trade and therefore depreciation in value of such securities cannot be allowed as a deduction. The Apex Court in the case of UCO Bank Ltd. vs CIT reported in 240 ITR 355 has held that value of the securities at cos....
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....in the case of Federal Bank 310 ITR 9 [Statute] and in the case of Tamilnadu Mercantile Bank Ltd. in CC 3043/2008 dated 07.03.2008, allowed the ground raised by the assessee. 123. On being aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR strongly supported the order passed by the Assessing Officer. On the other hand, the ld. Counsel for the assessee strongly relied on the order passed by the ld. CIT(A). 124. After hearing both sides, we find that on this issue, the Hon'ble Supreme Court has dismissed the SLP filed by the Department against the decision of the Hon'ble Jurisdictional High Court in the case of Federal Bank 310 ITR 9 [Statute] and also in the case of Tamilnadu Mercantile Bank Ltd. in CC 3043/2008 dated 07.03.2008. The ld. CIT(A), by following the above decision, decided similar issue for the assessment year 2006-07 and allowed the ground raised by the assessee, against which, the Department has not preferred any appeal before the Tribunal. Similarly, by following his own decision in the assessment year 2006-07 also, the ld. CIT(A) allowed the ground raised by the assessee. Moreover, the ld. CIT(A), while deciding the appeal in assess....
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....ee-bank. We find that the order of the Commissioner of Income-tax (Appeals) is just and proper in law. The appeal filed by the Revenue fails." 125. Respectfully following the above judicial pronouncements, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the Revenue is dismissed. 126. The fifth ground raised in the appeal of the Revenue is with regard to allowability of write off of bad debts by debit to provision account amounting to 51,95,64,198/- and technical write off amount to 136,31,00,000/-. Since bad debts are allowable expenditure, the issue raised in the appeals of the Revenue for the assessment years 2005-06 and 2007-08 in I.T.A. Nos. 2124 and 2125/Mds/2014 [cross appeals against 143(3) r.w.s. 147 assessment] before the Tribunal have been considered and decided against the Revenue from para 23 to 30 of this order. Accordingly, the ground raised by the Revenue for the assessment year 2007-08 is also dismissed. 127. In the result, the appeal of the Revenue for the assessment year 2007-08 is partly allowed. I.T.A. No. 2025/Mds/2011 [A.Y. 2008-09] 128. The first ground raised in the appeal of Revenue is general ....
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....are allowable expenditure, the issue raised in the appeal of the assessee for the assessment year 2007-08 and has been considered and decided in favour of the assessee from para 41 to 45 of this order. Accordingly, the ground raised by the Revenue is dismissed. 136. The third ground raised in the appeal of the Revenue is with regard to broken period interest amounting to 51,74,61,891/- on the purchase of securities. Similar ground was raised by the assessee in the assessment year 2007-08 in I.T.A. No. 880/Mds/2010 and we have decided the issue in favour of the assessee from para 46 to 49 of this order. Accordingly, for the assessment year 2009-10, the ground raised by the Revenue is dismissed. 137. The fourth ground raised in the appeal of the Revenue relates to disallowance of depreciation of 202,64,09,682/- on account of shifting of securities from AFS to HTM. Similar ground has been raised by the Revenue in the assessment 2007-08 in I.T.A. No. 887/Mds/2010 and we have decided the issue against the Revenue from para 116 to 120 of this order. Accordingly, for the assessment year 2009-10 also, the ground raised by the Revenue is dismissed. 138. The fifth ground raised in t....
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....or wages as it is a certain liability to be paid. The Assessing Officer has observed that the bipartite wage pact was signed by Indian Bank associations on behalf of member banks and bank unions only on 27.04.2010 i.e. after 31st March, 2009, the end of the relevant financial year and therefore it is clear that the liability of wage arrears did not arise in the financial year 2008-09 relevant to the assessment year 2009-10. The Bipartite agreement should have been signed and revised wages are to be paid from 01.11.2007. After completion of negotiations, the Bipartite agreement was signed only on 27.04.2010. It cannot be said that since the Bipartite agreement was signed only on 27.04.2010, the wage revision will be effected from the date of signing of the agreement. The ld. CIT(A) has observed that the assessee has made a provision in books based on reasonable estimate in accordance with mercantile system of accounting followed by it. The actual payment of this sum has been made during June, 2010 on signing the agreement. Though the agreement was signed on a later date, there definitely existed a liability on the part of the assessee to provide for it in its books. Therefore, by fo....
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....7-08 in I.T.A. No. 880/Mds/2010 and we have decided the issue in favour of the assessee from para 46 to 49 of this order. Accordingly, for the assessment year 2010-11, the ground raised by the Revenue is dismissed. 148. The fourth ground raised in the appeal of the Revenue relates to disallowance of depreciation of 49,22,32,974/- on account of shifting of securities from AFS to HTM. Similar ground has been raised by the Revenue in the assessment 2007-08 in I.T.A. No. 887/Mds/2010 and we have decided the issue against the Revenue from para 116 to 120 of this order. Accordingly, for the assessment year 2010-11 also, the ground raised by the Revenue is dismissed. 149. The fifth ground raised in the appeal of the Revenue relates to depreciation for UPS @ 60%. We have considered similar issue and dismissed the ground raised by the Revenue in I.T.A. Nos. 2124 and 2125/Mds/2014 for the assessment year 2005-06 and 2007-08 from para 17 to 22 of this order. Accordingly, for the assessment year 2010-11 also, the ground raised by the Revenue is dismissed. 150. The sixth ground raised in the appeal of the Revenue relates to disallowance of deduction claimed under section 36(1)(viia) of....
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....means the contracts of purchases or sales of any (i) shares and stocks, and (ii) commodities periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. Therefore, he observed that any other transactions, other than those mentioned above are not the speculative transactions for the purpose of income tax and in other words, only the losses resulting from the transactions in shares and stocks and commodities, that too without actual delivery, are to be classified as speculative losses. Any other transaction which is not falling into the above definition under section 43(5) cannot be treated as a speculative transaction. In view of the above, the ld. CIT(A) has held that the derivative contracts though involved foreign exchange cannot be viewed as speculative transactions and directed the Assessing Officer to consider the losses from the derivative contracts as regular business losses and allow their set off against other business profits of the assessee. For arriving the above conclusion, the ld. CIT(A) has relied various judicial pronouncements including the decision of the Hon'ble Calcutta High Court in the case of CIT v. Soo....
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.... (v) As per AS-11 when the transaction is not settled in the same accounting period as that in which it occurred the exchange difference arises over more than one accounting period. (vi) The forward foreign exchange contracts have all the trappings of stock-in-trade. (vii) In view of the decision of Hon'ble Supreme Court in the case of Woodward Governor India (I) P. Ltd. the assessee's claim is allowable. (viii) In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit: 59. We, accordingly, hold that where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period, i.e., before the date of maturity of the forward contract." 155(i) The facts of the assessee's case are similar to that of the Bank of Bahrain and Kuwait (supra). We find that the "ratio laid down by the Special Bench Mumbai ITAT is squarely applicable to the case of the assessee. In the assessment....