TaxTMI 
TaxTMI 
2021 (10) TMI 608
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....ld. AO). ITA No.3779/Mum/2012 (A.Y.2003-04) Assessee Appeal 2. The ground No.1 raised by the assessee is with regard to addition made on account of deferred payment guarantee commission. 2.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "7. We have heard both the parties end perused the material on record including the case laws relied upon by the parties, The leaned Sr. Counsel for the assessee submitted that the Assessing Officer has given effect to the order passed by the Tribunal and has allowed the deduction for the deferred payment guarantee commission of the assessment year 1984- 85 to 1989-90 and 1996-97. However, both the leaned Counsels for the parties conceded that that identical issue raised in this ground by the assessee is now settled in favour of the assessee and against the Revenue by the decisions of the Tribunal rendered in assessee's own case in as 2000-01,....
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....for redemption during the year but were not redeemed. It was contended before the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as non- performing assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was followed in Western India Oil Distributing Co. Ltd. Vs. CIT 206 ITR 359 (Bom). It was held in this decision that the concept of real income should not....
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....n in the value of securities which had matured and become due for redemption during the year but were not redeemed. It was contended before the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as nonperforming assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was Travancore vs. CIT 158 ITR 102, 155 (SC) followed in Western India Oil Distributing Co. Lt....
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....ue in favour of the revenue against the assessee. 3.2. Respectfully following the same, the ground No.2 raised by the assessee is dismissed. 4. The ground No.3 raised by the assessee is with regard to disallowance of payment made in respect of scientific research. 4.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "10. Ground no.4, relates to disallowance of Rs. 3,36,420 in respect of payments for scientific research. 11. The learned Sr. Counsel for the assessee submitted before us that this issue is covered by the decision of the Tribunal in assessee's own case for the assessment year 2000-01, 1997-98, 1998-99, 1999-2000 wherein this issue has been decided by the Tribunal against the assessee and in favour of the Revenue. However, he pointed out that during the year under consideration the payment for scientific research was made out of separate funds created out of ....
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....ded in Rule 8D which was introduced from 24/03/2008 could be made applicable only from A.Y.2008-09 and hence, the same cannot be applied for earlier years prior to A.Y.2008-09. The ld. AR fairly submitted that in order to maintain consistent stand, this Tribunal in earlier years in assessee's own case had disallowed 1% of exempt income u/s.14A of the Act as expenses attributable for earning the exempt income. The ld. DR fairly agreed that the said disallowance to be made. Accordingly, we direct the ld. AO to disallow only 1% of exempt income u/s.14A of the Act which would be in line with disallowance made in earlier years. Accordingly, the ground Nos. 4.1 to 4.4 raised by the assessee are partly allowed. 6. The ground Nos. 5.1 to 5.4 raised by the assessee are with regard to reduction in the claim of deduction made u/s.80M of the Act. 6.1. We have heard rival submissions and perused the materials available on record. The assessee has received dividend of Rs. 194,09,17,456/-. The assessee had distributed dividend of Rs. 447,35,40,463/-. The assessee had claimed deduction u/s.80M of the Act to the tune of Rs. 194,09,17,456/-. We find that the lower authorities had made the disa....
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....igh Court and pending for hearing and yet no orders have been passed on merit. Keeping this in view and consistent with view taken by the Co-ordinate Bench of this Tribunal in assessee's own case, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the assessee. Ground no.6, is dismissed. 7.2. Respectfully following the same, the ground Nos. 6.1 and 6.2 raised by the assessee are dismissed. 8. The ground Nos.7.1 & 7.2 raised by the assessee are with regard to disallowance of broken period interest. 8.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "4. Ground no.1, relates to disallowance of Rs. 274,04,19,099, in respect of broken period interest. 5. . Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. During the course of hearing, both the ....
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....on 36(1)(vii) of the Act amounting to Rs. 1026,23,30,375/-by way of note 18 to the revised return of income. The AO did not allow the claim of the assessee on the basis that deduction under section 36(1)(viia) of the Act is available towards rural and non-rural advances and in view of the proviso to section 36(1)(vii) of the Act, the deduction under section 36(1)(vii) of the Act is limited to excess of the amount written off over the credit balance of provision for bad and doubtful debts under section 36(1)(viia) of the Act. The CIT(A) confirmed the disallowance following the order of the CIT(A) for the assessment year 2007-08, wherein the CIT(A) had held that Explanation 2 to section 36(1)(vii) of the Act inserted w.e.f 01.04.2014 which states that the proviso to section 36(1)(vii) of the Act and section 36(2)(v) of the Act relates to all types of advances i.e. rural and non-rural advances, is clarificatory in nature. Accordingly, the CIT(A) held that the assessee cannot be allowed double deduction i.e. one on provision basis and then again on actual write-off basis. The CIT(A) observed as under: - "14.3 I have considered the appellant's submissions. This is a recurri....
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....e is eligible to claim deduction of an amount lower of the provision made for bad and doubtful debts or the amount calculated as per the prescribed methodology. As per the proviso to section 36(1)(vii) of the Act, deduction under section 36(1)(vii) of the Act is limited to excess of the amount written off over the credit balance in the provision for bad and doubtful debts accounts made under section 36(1)(viia) of the Act. Further, as per section 36(2)(v) of the Act, where a debt made by the assessee to which section36(1)(viia) of the Act applies, no deduction shall be allowed unless the assessee has debited the amount of such debt to the provision for bad and doubtful debts account made under section 36(1)(viia) of the Act. On a conjoint reading of the aforesaid provisions, it can be inferred that sections 36(1)(viia) and 36(2)(v) of the Act and the first proviso to section 36(1)(vii) of the Act, apply only to rural advances. 57. We noted that, as reliance placed by assessee, this issue is decided in favour of the assessee by the Supreme Court judgment in the case of The Catholic Syrian Bank Ltd. vs. CIT [2012] 343 ITR 270 (SC).The Supreme Court was concerned with a case ....
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....section 36(1)(vii) of the Act and section 36(2)(v) of the Act relates to all types of advances i.e. rural and non- rural advances, is Clarificatory in nature. In this regard, reliance is placed on the decision of the Supreme Court in case CIT vs. Vatika Township (P.) Ltd. [2014] 367 ITR 466 (SC), wherein it was held that one established rule for interpretation of legislation is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. In the present case, the legislature stipulated a fixed date i.e. 01.04.2014 while inserting Explanation 2 to section 36(1)(vii) of the Act. In view of the above, we are of the view that assessee is entitled to deduction under section 36(1)(vii) of the Act being the amount of bad debts written off (other than in respect of rural advances). This issue of assessee appeal is allowed." 9.2. Respectfully following the same, the ground No.8 raised by the assessee is allowed. 10. The ground No.9 raised by the assessee is with regard to claim of deduction for entire provision for bad and doubtful debts u/s.36(1)(viia) of the Act amounting to Rs. 2798,97,50,043/-. 10.1. We have heard riva....
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.... Indian Oil Corporation reported in 25 taxmann.com 284. Respectfully following the same, the ground No.11 raised by the assessee is dismissed. 13. The ground No.12 raised by the assessee is challenging the action of the lower authorities in taxing the income earned from foreign branches in India. 13.1. We have heard rival submissions and perused the materials available on record. We find that both the parties mutually agreed before us that this issue has already been adjudicated by this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "43. Additional ground no.3, raised by the assessee relates to treatment of income earned from foreign branches i.e., whether or not the income earned is liable to be taxed in India. 44. Considered the rival submissions and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assesses. Before us, both the parties agree that identical issue has been consistently decided by the Tribunal In assessee's own case for the assessment year 1996-97, 1997-98, 1998-99, ....
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....aya Bank v/s CIT [2010] 323 ITR 166 (SC) relied upon by the learned Counsel for the assessee, both the parties agree before us that identical issue has been decided by the Tribunal in assessee's own : case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01, 2008-09, wherein the Tribunal has restored the issue to the file of the Assessing Officer adjudication afresh. Consistent with the view taken by the Tribunal in assessee's own case, we set aside the impugned order passed by the learned CIT(A) and restore the issue to the file of the Assessing Officer for deciding the issue afresh after verify the assessee's claim in accordance with law. Thus, additional ground no.1, raised by the assessee is allowed for statistical purposes." 15.2. Respectfully following the same, the additional ground No.1 raised by the assessee is allowed for statistical purposes. 16. The additional ground No.2 raised by the assessee relates to recovery of bad debts written off which according to the assessee should not be liable to tax in terms of Section 41(4) of the Act. 16.1. We have heard rival submissions and perused the materials available on record. All the facts....
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....t operative portion of the said order is reproduced hereunder:- "47. During the course of hearing, both the parties agree before us that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee's own case for the assessment year 1992-93, 1995-96 1996-97, 1999-2000, 2000-01 and 2008-09. The Tribunal in assessee's own case in 'State Bank of India v/s DCIT, ITA no.3644 & 4563/Mum./2016, order dated 3rd February 2020, for the A.Y. 2008-09, has decided this issue in favour of the assessee and against the Revenue. Consistent with the view taken by the Tribunal in assessee's own case as cited supra, we uphold the order of the learned CIT(A) on this issue and decline to interfere in the order as such. While concluding, we place on record that the appeal filed by the Revenue in assessee's own case before the Hon'ble Jurisdictional High Court for the assessment year 1996-97, the said appeal was also dismissed vide its order dated 1st August 2016. Thus, ground no.1, raised by the Revenue is dismissed." 20.2. Respectfully following the same, the ground No.2 raised by the Revenue is dismissed.....
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....rt in assessee's own case as cited supra, we uphold the order of the learned CIT(A) dismissing the ground no.2, raised by the Revenue." 24.2. Respectfully following the same, the ground Nos. 6a & 6b raised by the Revenue are dismissed. 25. The ground No.7 raised by the Revenue is with regard to taxability of interest on securities. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "93. Having considered the submissions of the parties and having perused the material en record in the light of the decision relied upon by the learned Counsel for the assessee, both the learned Counsel appearing for the parties conceded before us that identical issue has been consistently decided In favour of the assessee and against the Revenue by the Tribunal in assessee's own case for the assessment year 1991-92, 1995-96, 1996-97 and 1999-2000. The Hon'ble Jurisdictional High Court had also dismissed the Revenue's which was filed by the Revenue challenging the order pa....
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....decision rendered by us for ground No.8 for A.Y.2003-04 shall apply with equal force for A.Y.2004-05 also except with variance in figures. 33. The ground No.7 raised by the assessee is with regard to depreciation of securities held under "Available For Sale" (AFS) category and "Held For Trading"(HFT) category totaling to Rs. 397,56,90,028/-. 33.1. We have heard rival submissions and perused the materials available on record. We find that this issue has already been adjudicated by this Tribunal in assessee's own case for A.Y.2008-09 in ITA No.3644 & 4563/Mum/2016 vide order dated 03/02/2020 wherein it was observed as under:- 60."The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing deduction claimed by assessee on account of reducing depreciation/ taxing appreciation in the value of securities held as Available For Sale(AFS) and Held For Trading(HFT) category. For this assessee has raised the following ground No. 7: - "7. Depreciation on securities The learned CIT(A) erred in upholding the action of the Assessing Officer in reducing deprecation/ taxing appreciation in the value of se....
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.... books of account. Therefore, for tax purposes valuation is done on the basis of lower of cost or market value computed scrip-wise and providing for depreciation in each of the scrip, while ignoring any appreciation. The assessee has claimed a deduction on this account vide note 24 to the revised return of income. 63. We noted that revenue rejected the claim of the assessee following the decision of the Mumbai Tribunal in the case of Deutsche Bank AG. The CIT(A) upheld the disallowance made by the AO following the earlier years order of CIT(A) for assessment year 2007-08. The Revenue before the Tribunal has emphasised on the applicability of Mumbai Tribunal's decision in the case of Deutsche Bank AG and that the valuation is as per RBI guidelines. It was contended by the assessee that it is a well settled principle of law that unrealised gains on stock are not to be brought to the tax net. Reliance in this regard is placed on the decision of the Supreme Court in the case of Chainrup Sampatram vs. CIT [1953] 24 ITR 481 (SC), wherein it is held that profit cannot "arise out of the valuation of the closing stock". The relevant extract of the judgement of the Supreme Court is ....
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....s." 64. The Supreme Court in the case of A.L.A. Firm vs. CIT (1991) (189 ITR 285) (SC) has observed that closing stock cannot be valued at a market value higher than the cost as that will result in taxation of the notional profits which the assessee has not realised. The relevant extract of the judgement of the Supreme Court is reproduced below: "The valuation of the closing stock at market value invariably will create a problem. For if the market value is higher than cost, the accounts will reflect notional profits not actually realised. On the other hand, if the market value is less, the assessee will get the benefit of a notional loss he has not incurred. Nevertheless, as mentioned earlier, the ordinary principles of commercial accounting permit valuation 'at cost or market price, whichever is the lower'. [para 27] The proper practice is to value the closing stock at cost. That will eliminate entries relating to the same stock from both sides of the account. To this rule custom recognises only one exemption and that is to value the stock at market value if that is lower. But on no principle can one justify the valuation of the closing stock at ....
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....assessee be allowed a deduction in respect of depreciation on each securities, scrip wise, while ignoring the appreciation. 67. Further, the assessee claimed that it has consistently been following the method of valuation of lower of cost or market price in respect of securities. Accordingly, the method of valuation followed by the assessee is required to be accepted. Reliance in this regard is placed on the following decisions: • CIT vs. Bank of Baroda [2003] 262 ITR 334 (Bombay) • CIT vs. Corpn. Bank Ltd. [1988] 174 ITR 616 (Karnataka) Further, the issue was not disputed upto financial year 2003-04 and hence, the AO is not justified in taking a different view. 68. The assessee also relied on the judgement of the Bombay High Court in the case of Union Bank of India dated 08.02.2016 in ITA 1977 of 2013. The assessee in this case for the purpose of its books was netting off the depreciation in its securities against appreciation in other securities while for tax purpose, the assessee has been claiming gross depreciation that is without netting of the appreciation in other securities held as a part of investment. The Bombay High Co....
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....provided in earlier years is reduced. Further, the decision of the Mumbai Tribunal in the case of Deutsche Bank A.G vs. DCIT [2003] 86 ITD 431 (Mumbai), relied by the AO is in connection with valuation of foreign exchange forward contracts. In this case the assessee did not account for in the financial statement the anticipated/contingent profits from the contracts to the extent not settled as on the last day of the accounting year whereas any loss on such contracts was provided for by a charge in the profit and loss account on the best estimates. The Department brought to tax the profit on such forward exchange contracts and stated that one method for valuation of the entire stock of securities should be followed. This resulted in a situation of taxing appreciation of stock, which goes against the general and settled principle of non-taxation of notional income, as laid by the Supreme Court in the case of Sanjeev Wollen Mills vs. CIT [2005] 279 ITR 434 (SC) and others discussed supra. Hence, we are of the view that this disallowance of depreciation/ reducing of depreciation on appreciation in the value of securities held as available for sale and held for trading category are allo....