TaxTMI 
TaxTMI 
2016 (12) TMI 1799
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.... debited in the Profit & Loss Account and not a notional loss. The disallowance is wrong and bad in law, the claim of the assessee bank should be allowed. 2. The appellant contends that the claim of the bank is in accordance with the RBI circular allowing the bank, once in a year, shifting of securities duly approved by the Board of the Bank. Resultant loss, if any, has to be provided by the bank as per the said RBI circular. Therefore, it is an actual loss and not a notional loss. The claim of Rs. 209.99 crores should be allowed. 3. The appellant contends that in the principle of valuations of investments held as stock in trade on the basis of cost or market value whichever is lower, has been accepted in the earlier years and the consequential loss has been allowed as business loss. Therefore, applying the same principle the fall in value of investments of Rs. 209.99 crores at the time of shifting the securities from AFS to HTM should be allowed. 4. The Appellant contends the appellant's case is directly covered by the decision of Hon'ble ITAT Bangalore 'Bf bench in the case of State Bank of Mysore vs. DCIT reported in [2009] 33 SOT 7 (Bang).....
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.... by giving relief to the assessee on excess depreciation claimed by the assessee on computer LAN/ WAN equipments without considering the fact that the revenue is already in appeal against the order of the High Court on the similar issue. Hence, the issue is sub-judice and has not attained its finality. 3. On the facts & in the circumstances of the case, the Ld. CIT(A) erred in the case by giving relief to the assessee on 100% depreciation claimed by the assessee on temporary fixtures by ignoring the fact that fixtures noted by the assessee have longer life than one year, hence does not come in the purview of temporary fixtures. 3.1 On the facts & in the circumstances of the case, the Ld. CIT(A) erred in the case by deleting the addition on account of disallowance of excess claim of depreciation on fixture & fittings on temporary structures by not considering the observation of the AO that the life of wooden partitions, cabins and wiring etc. for computers etc. are easily for a period of four to five years." Grounds raised in appeal for A.Y. 2009-10: "1. On the facts & in the circumstances of the case the Ld. CIT(A) has erred in reducing the disal....
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....ring the years under consideration the assessee claimed depreciation on account of fall in value of investments held as stock in trade. The assessee valued these investments on the principle of valuation of stock in trade at cost or market value whichever is less. The loss due to fall in valuation of investments held as stock in trade comprised of two portions - fall in value of investments as on 31.03.2008 and 31.03.2009 and the fall in value of investments based on the market value on the date of shifting of SLR securities from AFS(available for sale) category to HTM (held to maturity) category amounting to Rs. 209.99 crores and 119.55 crores respectively for A.Y. 2008-09 and 2009-10. The AO allowed the loss due to fall in valuation as on 31.03.2008 and 31.03.2009 as deduction, but disallowed the claim of loss of Rs. 209.99 crores and Rs. 119.55 crores respectively caused at the time of shifting of securities from AFS category to HTM category holding same as notional loss. The learned CIT(A) confirmed the disallowance after following the order of first appellate authority dated 31.12.2010 rendered in appeal of the assessee for A.Y. 2007-08 whereby the issue was decided against th....
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.... under:- "9. In the present case, we find that the facts and issues that are covered by the aforesaid judgment squarely apply to the facts and issues raised in the present Appeal. Not only are we in full agreement with the judgment of this Court in the case of Bank of Baroda (supra) but we are bound by the same. We therefore respectfully follow the ratio laid down in the said judgment. "10. We find that even the judgment of the Karnataka High Court in the case of Karnataka Bank Ltd. (supra), reliance on which was placed by Mr Mistry, squarely covers the issue raised in this Appeal. The facts in the case before the Karnataka High Court were that the Assessee was holding securities in different categories as mandated by the RBI Master Circular dated 1st September 2003. The Assessee treated such securities as stock-in-trade and claimed depreciation on the book value after valuing the securities at cost or market value whichever was lower. The Revenue refused to accept the Assessee's plea for the deduction and disallowed the same and added back to the total income the said amount. Aggrieved by the said order, the Assessee preferred an Appeal before the CIT (Appeal....
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....e Tax Officer as well as the assessee to point out true and proper income while submitting the income tax returns. Even if the assessee under some misrepresentation or mistake fails to make an entry in the books of account, although under law, a deduction must be allowed by the Income Tax Officer, the assessee will not lose any right on claiming or will be debarred from being allowed the deduction. Therefore, the approach of the authorities in this regard is contrary to the well settled legal position as declared by the apex court. In the instant case, the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment. But consistently for more than two decades it has been shown as stock-in-trade and depreciation is claimed and allowed. Therefore, notwithstanding that in the balance-sheet , it is shown as investment, for the purpose of Income Tax Act, it is shown as stock-in-trade. Therefore, the value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of the shares. If the market value is less th....
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....ions referred to the decisions of the Supreme Court in United Commercial Bank v. Commissioner of Income Tax [1999] 240 ITR 355 (SC) and Southern Technologies Ltd v. The Joint Commissioner of Income Tax [2010] 320 ITR 577 (SC). 4. However, Mr. Shivpuri, learned Senior standing counsel appearing for the Revenue, seeks to place reliance on another decision of High Court of Karnataka in Commissioner of. Income Tax v. ING VYSYA Bank Ltd. [2013] 356 ITR 532 (Kar.) where, in the facts of that case it was held that where the Assessee invested in securities for the purpose of complying with RBI instructions, such investments could not be termed as investment in the form of security ready for sale. The Court is not persuaded to concur with the view expressed in ING VYSYA Bank Ltd. (supra) which appears to have been decided in the peculiar facts of that case. The Court prefers to adopt the reasoning in the decision the Karnataka High Court in Karnataka Bank Ltd. (supra) and the Bombay High Court in HDFC Bank Ltd. (supra). The Court accordingly declines to frame a- question on this issue." Therefore, respectfully following the above decisions of coordinate Bench and of Hon'bl....
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.... the parties and have perused the material on record. The contention of the assessee has been that similar issue in the identical facts and circumstances of the case came up for adjudication before ITAT Delhi Bench in appeal of assessee and Revenue for A.Y. 2007-08, whereby the Tribunal after considering the facts and circumstances of the case restored the issue back to the Assessing Officer and the Assessing Officer while giving the appeal effect, has restricted the disallowance to the extent of 5% of the exempted income. It was, therefore, contended that the disallowance, if any, could at the most be restricted to 5%. This contention of the assessee is not found supported by any evidence on record. He has referred to page No. 24 of the paper book, in which the Assessing Officer has given appeal effect vide order dated 24.02.2016. However, we do not find anything in this order to support the contention of the assessee that the Assessing Officer has restricted the disallowance to the extent of 5% of the exempted income. Rather the Assessing Officer has shown the relief u/s. 14A as nil. Besides, the provisions of Rule 8D were inserted in the statute w.e.f. 24.03.2008 and as such was....
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....correctness of the claim of the assessee, having regard to the accounts of the assessee. 5.2.4 Hon'ble High Court of Delhi in Maxopp Investment Ltd. v. CIT [2011] 15 Taxmann.com 390 (Delhi) held that while rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same. 5.2.5 From the particulars furnished it is seen that as against the above investments of Rs. 759.04 crore the bank has its own share capital of Rs. 250.54 crore, Reserve and Surplus of Rs. 5525.36 crores and balances under current deposits of Rs. 7,762.39 crore on which the bank does not pay any interest. Therefore the available funds which are non interest bearing is Rs. 13,538.29 crore. Thus, it is seen that sufficient interest free funds are available to make the investment of Rs. 759.04 crores from which tax free exempt income is earned. The appellant also submitted that the investments as stated above are out of the said funds available to the assessee. 5.2.6 The AO held that the amount of direct expenditure in relation to exempt income is nil und....
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....es to disallowance of software expenses of Rs. 2.60 crores and Rs. 10.91 crores respectively for A.Y. 2008-09 and 2009-10. During the years under consideration, amounts of Rs. 2,83,89,975/- and Rs. 11,66,05,590/- respectively were claimed to have been expended on account of Software Expenses which were charged to revenue. Assessee stated that the expenditure pertained to license fee for use of various software applications, purchase of new software licenses of Oracle Data Base, Anti Virus Software, Support Charges for Software Items etc. AO observed that no breakup of expenses with reference to AMC etc. was provided except a list outlining total expenses incurred. The assessee also did not furnish any reason for not capitalizing the said expenses and charging them to revenue. The AO, therefore, following the decision in CIT v. Aravali Construction Co. Pvt. Ltd. 124 Taxman 146 (Raj) (2002) concluded that the expenditure incurred on acquisition of computer software was to be treated as capital in nature. Accordingly, the expenditure of Rs. 2,83,89,975/- was disallowed for A.Y. 2008-09 and in A.Y. 2009-10 after giving corresponding depreciation, the expenditure of Rs. 7,11,05,582/- wa....
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....provides that licenses are intangible assets. In the Issue in appeal, from the detail of software expenses furnished before the AO, it is seen that only the following expenses are incurred for AMC: Date Name of the Vendor Software Details Amount (in Rs.) 09-08-2008 Mithi Software Tech P.L. AMC Relay Server 41,800/- 14-08-2008 Network Solution P.L. AMC of Networking at PDC 3,25,000/- 01-10-2008 Logica P.L. AMC of QPH & QLM for RTGS 4,63,5007- 03-01-2009 HCL Infosystems Ltd. AMC IBM Websphare for rtgs application 2,62,045/- Network Solution P.L. AMC Information Security Infrastructure 1,62,500/- Logica Pvt Ltd. AMC of QPH & QLM software 1,54,500 Network Solutions P.L. AMC networking of 440 OBC & 104 Egtb 4,60,591/- 24-03-2009 Wipro Limited AMC of hw/sw cluster installed at PDC 27,79,357/- 26-03-2009 FSS Pvt. Ltd. AMC of BASE 24 Software PDC 16,73,010/- 26-03-2009 FSS Pvt. Ltd. AMC of BASE 34 Software DR Site 7,83,180/- 27.03.2009 Network Solutions Pvt. Ltd. AMC cluster cisco router & software switches at PDC 4,40,000/- ....
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....the details of AMC charges which has been allowed by the ld. CIT(A) as revenue expenditure, but in case of license fee for oracle database, antivirus software etc., the appellant could not establish that the same were for a particular period. The case laws relied upon by the appellant has rightly been distinguished by the ld. CIT(A). We, therefore, find that the ld. CIT(A) has passed a good order which needs no interference on this issue. Accordingly, grounds No. 7 in both the appeals of the assessee are dismissed. 9. Issue No.4 : This issue is involved in appeal of the Revenue for the A.Y. 2008-09. The brief facts of the issue are that the assessee claimed depreciation @ 60% on LAN, WAN as applicable to the block of computers. The AO restricted the depreciation to 15% relying on the judgment of ITAT in the case of Nestle India Ltd., whereby the UPS has been treated as part of plant and machinery and not as part of computer. According, the AO made addition of Rs. 1,54,12,500/- being excess depreciation disallowed. The ld. CIT(A) deleted the addition after relying on the decision of ITAT, Delhi Benches in the case of assessee itself (ITA No. 22 & 173/Del. /2011 for A.Y. 2006-07) ....
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.... 5,77,71,439/- made by the AO on account of excess claim of depreciation of LAN and WAN equipment. Therefore ground no three of the appeal is dismissed." In view of above decisions of coordinate bench in the cases of assessee, we decide this issue in favour of the assessee and against the revenue. Accordingly, ground No. 2 in Revenue's appeal for A.Y. 2008-09 is dismissed. 11. Issue No. 5 : This issue involved in both the appeals of the Revenue pertains to 100% depreciation on temporary wooden structure allowed by the ld. CIT(A). The brief facts of the case are that the assessee-bank claimed 100% depreciation on temporary erections including internal partition, cabin formation, flooring and concealed wiring etc. for the computers aggregating to Rs. 10,01,24,279/- and Rs. 9,60,81,761/- as supported by the Tax auditor's certificate inform 3CD along with depreciation chart which was placed before the authorities below. The AO disallowed the claim of assessee in part and observed that the above items were easily for five years and there the AO allowed 1/5th of the depreciation claimed thereby amortizing the same for five years and accordingly allowed 20% of the total claim of ....
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..... 83.00 crores made by AO on account of interest on overdue deposits. 14. Having heard both the parties on this issue, we find on record that the assessee bank had made a provision of Rs. 83.00 crores in respect of interest on overdue deposits at the rate of saving bank interest on time deposits. The assessee bank has followed the RBI Circular No. DBOD No.Leg.BC.34/09.07.005/2008-09 dated 22.08.2008. Instruction No. (xi) of the above RBI circular reads as under : "(xi). Interest on saving bank accounts should be credited on regular basis whether the account is operative or not. If a fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest." This issue has been discussed in detail by the ld. CIT(A) in his order. The assessee Bank is covered by the Banking Regulation Act, 1949 and it has to follow the directions of Reserve Bank of India which regulates all the banks operation in India. The books of accounts are to be maintained as per directions of the Reserve Bank of India and financial results of the banks are also prepared by the banks as per the prescribed norms fixed by RBI. The Reser....