TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1792
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.... consolidated order, for the sake of convenience. 2. First we will deal with the appeal filed by the revenue being ITA No.2519/Mum/2004, in respect of AY 1999-2000. 3. The assessee herein is engaged in the business of Banking and financing activities. It filed return of income declaring total income of Rs. 1,53,45,60,780/- on 31/12/1999. The AO made assessment u/s 143(3) of the Income Tax Act, 1961 and after making certain additions and disallowances computed total income of the assessee at Rs. 1,90,83,89,060/- vide order dated 04/02/2002, against which an appeal was filed which was disposed of vide order dated 15/01/2004, against which the present appeal before us. 4. The first issue urged by the revenue is in respect of broken period interest of Rs. 35,06,51,480/-. 5. The facts of the issue are that the assessee claimed disallowance of broken period interest on securities for Rs. 35,06,51,480/-. Consequently claimed as deduction of Rs. 13,25,23,374/- as broken period interest on securities sold during the year. The assessee claimed that the interest paid at the time purchase of securities be treated as revenue expenditure. The AO by following his earlier decisions and the pre....
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....082/Mum/97(AYs-1991-92) order dated 29.11.2006 para 5 to 10 of the order; c) The Hongkong and Shanghai Banking Corporation Ltd V/s JCIT in ITA Nos.709,2604,2605,4709/Mum/99 (AYs-1992-93 to 1994-95 & 1996-97 and 1997-98 order dated 15.2.2007 para 24 to 37 of the order; d) M/s Mercantile Bank Limited V/s Inspecting ACIT in Income Tax Reference No.153 of 1996 and RA No.865 and 866 of Bombay / 1992 order (AYs 1980-81 and 1991-92) dated 9.10.2002; e) Supreme Court in the case of British Bank of Middle East (through their successors HSBC) for the assessment year 1990-91; f) Bombay High Court in the case of British Bank of Middle East (through their successors HSBC) for the assessment year 1990-91; g) American Express International Banking Corporation V/s CIT(258 ITR 601 (Bom); h) CIT V/s City Bank N A -Civil Appeal No.1549 of 2006 order dated 12.08.2008 and i) CIT V/s Deutche Bank A G in Special Leave Petition No. 345 of 2004 order dated 27.1.2004 10. We heard both the sides and perused the record placed before us. We find that the issue raised by the Revenue in this ground stands covered by the orders and decisions of various courts including orders of the Tribuna....
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.... also placed reliance on the following decisions: a) Emirtes Commercial bank Ltd (now known as Abu Dhabi Commercial Bank Ltd (262 ITR 55); b) M/s American Express Bank Limited in Income Tax Reference No.3 of 2002 R A No.568/Mum/1998 order dated 17.7.2003; c) Shinhan Bank V/s DCIT(IT) (2012) 54 SOT 140(Mum) = (2012) 23 taxmann.com 449(Mum); d) DCIT (IT) V/s Chohang Bank 126 ITD 448 (Mum); e) ABN Amro Bank N V V/s JCIT in ITA No.692/Cal/2000(AY-1996-97) dated 30.3.2001; f) Kedarnath Jute Mfg Co. Ltd.V/s CIT- 82 ITR 363 g) The British Bank of Middle East V/s JCIT in ITA No.751/Mum/1998 (AY-1993-94) order dated 28.6.2005 para 71 and 72. 17. We have heard the parties on this issue and perused the materials placed before us including the case law relied upon by the parties. We find that the issue raised by the revenue in this appeal stands covered in favour of the assessee by the above said decisions. Therefore, following the principal of consistency, we dismiss Ground No.2 of revenue's appeal. 18. The next ground of appeal pertains to deletion of disallowance of Rs. 33,86,167 incurred on guest house and holiday home in view of the section 37(4) of the Act .w.e.f.1....
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....n identical issue had come up before the Mumbai Bench of the Tribunal in Tribunal in JCIT V/s The British Bank of Middle East in ITA No.2501/Mum/1999(AY- 1992-93) order dated 28.6.2005, para 15 and 16 and in ITA No.751/Mum/98 (AY- 1994-95) para 68 and 69 of the order he also placed reliance on the following case laws: a) CIT V/s Bharat Petroleum Corporation Ltd (Bom HC) 252 ITR 43; b) CIT V/s Hind Lamps Limited (Allahabad High Court) 130 Taxman 586; d) Associated Cement Co.Ltd repoted in 49 TTJ 623 (Bom-ITAT); e) Chloride Industries Ltd (79 ITD 1)(Cal ITAT). He submitted that the issue raised by the revenue now stands covered in favor of the assessee. Therefore, the issue raised by the revenue be dismissed. 28. After considering the rival submissions and on perusal of the record, we are of the considered opinion that this issue has already been decided in favour of the assessee by various judicial forum as mentioned above. Therefore, respectfully following the previous case law, we dismiss the Ground No.4 taken by the revenue. 29. The next issue raised by the revenue in this appeal pertains to deletion of disallowance of Rs. 1,46,32,997/- in respect of entertainment expe....
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.... order passed the ld. CIT(A) be confirmed. 34. After considering the rival submissions and on perusal of the record, we are of the considered opinion that this issue has already been decided in favour of the assessee by various judicial forum as mentioned above. Therefore, respectfully following the previous case law, we dismiss the Ground No.5 taken by the revenue. 35. The last issue pertains to exemption of interest of Rs. 21,82,78,180/- earned on tax free bonds. 36. The facts regarding the issue are that the assessee earned interest to the tune of Rs. 21,82,78,180/- on the investment made in tax free bonds and claimed that it is exempt income. The AO called for the explanation from the assessee as to why the interest earned on tax free should not be disallowed. The Assessee detailed explanation before the AO, but the AO did not accept the explanation tendered by the assessee and after calculating proportionate interest disallowed an interest of Rs. 4,36,55,636/- and added to the total income of the assessee. Aggrieved by this the assessee preferred an appeal before the ld.CIT(A), who after discussing every of the matter allowed the claim of the assessee vide para 11.1 to 11.3....
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....ld also be considered as its own fund is not acceptable as in the business of banking the funds received as deposits from public at large are to be mainly utilised for the purpose of making advances and the bank cannot afford to have mismatch of short term borrowed funds being used for long term investment. Besides this, certain percentage of deposits whether it is interest free or interest bearing is also supposed to be kept in SLR as per the guidelines of RBI. The appellant is also supposed to pay interest on term deposits to its customers. Therefore, amounts lying in the current deposits and term deposits should not be categorized as own funds. In principle, I am also agreeable with the findings of the AO that the disallowance is called for u/s.14A of the I.T. Act. 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....
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....oliday home in view of the section 37(4) of the Act .w.e.f.1.4.1998. 47. Since we have decided an identical ground against the revenue for the assessment year 1999-2000 vide para 18 and 19 of this order above, we taken the same view here also and dismiss Ground no.3 of revenue's appeal. 48. The ground No.4 taken by the revenue pertains to deletion of disallowance of Rs. 22,10,218/- incurred on library subsidy, contributions to staff cultural committee and recreation club. 49. We have already discussed similar ground of revenue's appeal and vide paragraphs 21 to 28 of this order for the assessment year 1999- 2000, we have dismissed ground taken by revenue thereon. Therefore, following the above view, here also we dismiss Ground No.4 taken by Revenue. 50. The next issue raised by the revenue in this appeal pertains to deletion of disallowance of Rs. 1,98,32,482/- in respect of entertainment expenses. 51. This ground being identical and no change in facts to that of Ground No.5 for the assessment year 1999-2000, we take similar view as taken therein vide para No.30 to 35 of this order. Accordingly, we dismiss Ground No.5 taken by Revenue. 52. The last ground of this appeal perta....
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.... by the assessee is regarding confirming the disallowance made by the AO on account of NRI deposit Mobilization of Rs. 3,38,53,896/-. 60. At the time of hearing, the ld.AR submitted that an identical issue had been came up before this Tribunal in assessee's own case in ITA Nos.9587/Mum/92 and 9588/Mum/92 (AYs-1989-90 and 1990-91) order dated 22.2.2006 and vide para 8 of the order, the Tribunal has decided this issue in favour of the assessee. In addition to this submissions, the ld.AR also relie don the following decisions : a) JCIT V/s The British Bank of Middle East in ITA No.4908/Mum/2000(AY- 1997-98) order dated 28.6.2005; b) Emirtes Commercial bank Ltd (now known as Abu Dhabi Commercial Bank Ltd (262 ITR 55); c) M/s American Express Bank Limited in Income Tax Reference No.3 of 2002 R A No.568/Mum/1998 order dated 17.7.2003; d) Kedarnath Jute Mfg Co. Ltd.V/s CIT- 82 ITR 363(SC) 61. The ld. DR strongly relied upon the order of the Authorities below. 62. After considering the rival contentions of the parties, on perusal of the records as well as orders of the Tribunal in assessee's own case including the cases relied upon, we find that that the facts of the case relied....
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....f Rs. 2 crores on the ground that cost of the vacated floor has already been included in the WDV on which depreciation has been claimed by the assessee every year. The ld. CIT(A) relying on the decision of the Hon'ble Kerala High Court in the case of CIT V/s Sea Lord Hotel Pvt Ltd reported in 245 ITR 601 confirmed the action of the AO holding that the expenses incurred for vacating the premises is permanent in nature and treating the same as capital expenditure, the AO is justified in rejecting the claim of the assessee. Aggrieved by the decision of ld.CIT(A), the assessee is in appeal before us. 67. The ld. AR submitted before us the facts as narrated before the lower authorities and also contended that the premises in question was very much in need of the assessee-bank and because of it assessee was facing acute shortage of place. Since the tenant was very old and it has incurred huge amount on renovation, it was not possible to it to get similar premises in the same vicinity in bare minimum cost it was the responsibility of the assessee-bank to get accommodation in the same area. Therefore, the assessee has no other alternative but to pay such huge amount to vacate the premises....
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....lled for the explanation from the assessee as to why this amount should not be added to the total income of the assessee. In reply, the assessee contended the assessee act as mediatory to holds securities, collect dividends, obtains deliveries, ensures transfer in the name of the clients and delivers the securities when the same are sold by the clients. During the course of such business proceedings. One client namely Capital Emerging Markets Growth Fund (EMGF) has purchased certain shares of Zee Telefilms in October, 1994. These shares were duly registered in the name of EMGF in December, 1994. Subsequently, a company viz Jas-One Diamonds Pvt Ltd filed a suit in Bombay High Court claiming that these share were in the name of Jas-One Diamonds Pvt Ltd and sent for registration in 1994, subsequently stolen and reintroduced into the market. EMGF was made a defendant. Meaning thereby, EMGF were holding custody of stolen shares. In December, 1998 the assessee sent these shares to Zee Tele Ltd. Since Jas-One Diamonds Pvt Ltd filed a case before the Hon'ble Bombay High Court and stay was on transfer of shares, dematerialization could not be effected. The bank referred the case to broker w....
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.... loss. In support of his contention, he placed reliance on the decision of Apex Court in the case of CIT V/s Nainital Bank Ltd (1966) 62 ITR 638(SC). 76. The ld.Counsel/ AR submitted that in the case of Nainital Bank Ltd, the large number of currency notes and jewellery were stolen and the payment of these assets were made by the bank to the constituent and the Hon'ble Supreme Court allowed the claim of the assessee being loss incurred by the assessee as business expenditure. He, therefore, submitted that the facts of the present case and the case cited supra are same and hence the payment made by the assessee to Zee Telefilms be allowed as business loss. 77. The ld. DR reiterated the facts of the case as made before the ld. CIT(A) and relied on the orders of authorities below. 78. After hearing both the parties and on perusal of records as well as the decision relied upon by the assessee in the case of Nainithal Bank Ltd, we find this issue stands covered in favour of the assessee. Respectfully following the decision relied upon by the ld. Counsel, we set aside the order of ld.CIT(A) and direct the AO to delete the addition made by the AO. 79. The Ground No.5 is therefore allo....
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.... DCIT (Bang ITAT) -(2013) 38 taxmann.com 25); c) Bharat Earth Movers V/s CIT -245 ITR 428 (SC); d) Calcutta Co. Ltd. vs. CIT (1959) 37 ITR 1 (SC); e) Rotork India Pvt. Ltd. Vs. CIT reported in 314 ITR 63 (SC); f) Taparia Tools Ltd v Joint CIT [2003] 260 ITR 102 (Bom),; g) Vinitee Corporation (P) Ltd. (2005) 146 Taxman 313 (Delhi); and h) CIT v. Beema Manufacturers P. Ltd. (2003) 130 Taxman 400 (Mad) 87. We find that the ld.CIT(A) has considered this issue with detailed discussions, we also find that an identical issue had come up before the various forums/ Judicial authorities, and therein the Courts have decided this issue in favour of the assessee. Hence, this issue stands covered in favour of the assessee. Therefore, we do not find any infirmity in the order of ld.CIT(A). Accordingly, we confirmed his findings. Ground No.2 taken by the revenue is dismissed. 88. The Ground No.3 of appeal pertains to deletion of disallowance of Rs. 77,17,146/- incurred on guest house and holiday home in view of the section 37(4) of the Act .w.e.f.1.4.1998. 89. Since we have decided an identical ground against the revenue for the assessment year 1999-2000 vide para 18 and 19 of this ....
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....ntended that the ld. CIT(A) has considered the issue and decided in favour of the assessee. He submitted that the findings of the ld.CIT(A) are in consonance of the law and, he therefore prayed that the findings of the ld.CIT(A) be upheld. He also contended that an identical issue had come up before the various Courts and they have decided the issue in favour of assessee. Accordingly, he placed reliance on the following case law: a) BNP Paribas SA (Bombay HC) (2013) (32 Taxman.com 276); b) CIT V/s Bank of Tokyo Ltd (71 Taxman 85) ; c) Bank of Baharain and Kuwait (Mumbai ITAT SB) (2010) 41 SOT 290). 100. After hearing both the parties on the issue and on perusal of the records including the case relied upon by the parties, we find that the ld. CIT(A) has passed well reasoned order and directed the AO to delete the addition. For the sake of convenience, we also reproduce the relevant findings of the Hon'ble Calcutta High Court( viz CIT Vs. Bank of Tokyo Ltd.) as under : "The Revenue contends that the right to receive the commission being a one-time right, its accrual shall coincide with the commencement of the service rendered by way of guaranteeing the debt repayment; it is....
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....hus there is a business connection and there income is clearly taxable as per the provisions of section 9 of the Act. The AO by placing reliance on the decision in the case of Raymonds Ltd V/s DCIT(80 TTJ 120) and by invoking the provisions of section 195 held that the assessee failed to deduct tax at source and hence he disallowed the expenditure u/s 40(a)(i) of the Act. Aggrieved by this finding of the assessing officer, the assessee filed appeal before the ld. CIT(A). 103. Before the ld.CIT(A), the assessee made detailed submissions and the ld.CIT(A) incorporated the same in the order vide para 31.1. to 32 of CIT(A)'s order. The ld. CIT(A) after considering the facts of the case and rival contentions and also considered the findings of the order of Tribunal in the case of Maharashtra State Electricity Board V/s DCIT( 2004 270 ITR 36 Mum), observed and held , which is as under : "In a case where no portion of payment is eligible to tax, the question of application of Section 195(2) does not arise, because, as the section itself categorically provides that it comes to play "where the person responsible for paying any sum chargeable under this Act (other than salary) to a non-re....
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....of NRI deposit Mobilization of Rs. 4,56,28,770/-. 109. This is an identical issue raised by the revenue in ITA No.2679/Mum/2005, which vide para 59 to 62 of this order has been dismissed. Accordingly, following the same, we confirm the order of ld.CIT(A) on this issue. Ground No.1 taken by the assessee is allowed. 110. The second issue raised by the revenue is in respect of directing the AO to delete salaries paid to expatriate employees amounting to Rs. 11,39,00,527/-under section 44C of the Act. 111. While dealing with the appeal of revenue in ITA No.2519/Mum/2004, we have dismissed the ground taken by the revenue on the same issue vide para 11 to 17 of this order and confirmed the order of ld.CIT(A). Respectfully following the same, we direct the AO to allow the claim of assessee. Ground No.2 taken by the assessee is allowed. 112. The third issue pertains to disallowance of fees of Rs. 2,83,77,518/- paid to Master card and Visa towards services rendered by them. 113. An identical issue had come up before the Tribunal in assessee's own case in Hongkong and Shanghai Banking Corporation Ltd V/s JCIT in ITA Nos.709,2604,2605,4709/Mum/99 (AYs-1992-93 to 1994-95 & 1996-97 and 199....
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....owed as business loss. In support of this contention, the ld.AR placed reliance on the following decisions: a) CIT vs. Woodward Governor India P. Ltd. 312 ITR 254(SC); and b) Bank of Bahrain (132 TTJ 505) Mum (SB). 119. The ld. DR reiterated the same contentions and relied on the orders of authorities below. 120. We have considered the rival submissions and perused the record. We find that the issue raised by the assessee stands covered by the decision of Hon'ble Supreme Court in the case of Woodward Governor India P. Ltd (supra) wherein the Hon'ble Supreme Court held that "that the loss suffered by assessee on account of fluctuations of foreign exchange as on the date of Balance Sheet is an item of expenditure under section 37(1), allowed the mark to market loss in the case of equity index/stock future as an allowable loss." We find that the issue in hand and the facts of the cases relied upon are same, therefore, respectfully following the decision of the Hon'ble Apex Court in the case of Woodward Governor India Pvt.Ltd (supra), we set aside the order of ld.CIT(A) and direct the AO to delete the addition. Ground No.5 taken by the assessee is allowed. 121. Now we shall t....