TaxTMI 
TaxTMI 
2022 (3) TMI 1187
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....earned CIT(A) erred in upholding the action of the Assessing Officer in taxing the deferred payment guarantee commission of Rs. 58,44,167 on receipt basis, without appreciating that such commission relates to subsequent years. 2 The learned CIT(A) erred in confirming the disallowance of Rs. 122,38,98,858 in respect of depreciation on matured securities which had fallen due for redemption during year ended 31 March 2005 but redemption proceeds were not received. 3.1 The learned CIT(A) erred in confirming the action of the Assessing Officer in making the disallowance under section 14A to the extent of Rs. 46,35,85,591 as under: 0.5% of average investments (including subsidiaries) - Rs. 42,23,51,770 Interest expenditure on foreign currency loans - Rs. 4,12,33,821 3.2 The learned CIT(A) erred in holding that the appellants's contention that there should be no disallowance is clearly out of synchronization with the provisions of section 14 A. 3.3 The learned CIT(A) erred in holding that the disallowance under section 14A based on the exempt income is incorrect and on that basis rejecting the claim of the appellant that 1% of the ....
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....ngs. 9 Each one of the above grounds of appeal is without prejudice to the other. 10 The appellant reserves the right to amend, alter or add to the grounds of appeal." Additional grounds by assessee: "Computation of total income in accordance with the provisions of the Income-tax Act, 1961: 1. Re: Deduction in respect of 'Education Cess on income tax' and 'secondary and higher education cess on income tax* (collectively referred to as 'education cess on income tax') payable for the year under consideration, while computing the total income of the Appellant: 1:1 The Assessing Officer has erred in not allowing a deduction for the 'education cess on income-tax' payable for the year under consideration. 1:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, 'education cess on income-tax' for the year under consideration, ought to be allowed as a deduction while assessing its income for the year under consideration. 1:3 The Appellant submits that the Assessing Officer be directed to re-compute its total income and tax th....
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....cumstances of the case and in law, the Ld. CIT(A) has erred in allowing the assessee's appeal without appreciating the fact that on similar issue appeal has been filed for the AY 1995-96 before the Hon'ble Bombay High Court vide ITXAL No. 625/2010." 7. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored." 3. Briefly stated facts necessary for adjudication of the controversy at hand are : the assessee is a public sector bank having income from banking operations, treasury operations and other retail services. On the basis of search and seizure operations conducted at the premises of one of the branches at Tiruchengode in Tamil Nadu on 02.07.2005 some documents pertaining to deposits were seized and proceedings under section 153A of the Income Tax Act (for short 'the Act') were initiated and in reply thereto assessee opted vide letter dated 17.05.2007 to treat the return of income already filed as response to the notice issued under section 153A of the Act. Declining the contentions raised by the assessee bank, the Assessing Officer (AO) made addition of Rs. 58,44,167/-, Rs. ....
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.... & 1999-2000, the operative part of which is as under: "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, 1984-85, 1996-97, and 1999-2000. Consistent with the view taken therein, we set aside the impugned order passed by the learn....
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....ee has challenged the disallowance of depreciation on matured investments in sum of Rs. 15,13,81,119/-. At the very outset, the Ld. Representative of the assessee has argued that this issue has been covered against the assessee in the assessee's own case bearing ITA. No. 4736/M/2010 & 4598/M/2010 dated 31.01.2018 for the A.Y. 1999-2000. The relevant finding has been given in para no. 8 to 10 which is hereby reproduced as under.:- "8. We have considered the contention of the parties and have gone through the orders of authorities below. We have noted that similar ground of appeal has been dismissed by the Tribunal in assessee‟s own case, with the following order: 38. Additional Ground No. 2 is regarding depreciation on matured securities. The assessee has claimed a sum of Rs. 2,23,86,418/- towards depreciation of investments. The AO disallowed the claim of the assessee and the CIT(A) has confirmed the action of the AO. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The CIT(A) has decided the issue in para 9 as under: "9. The ninth effective ground of appeal is against the disallowance of Rs. 2,23,86,418/- being the provision....
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....risdiction High Court. No contrary decisions has been brought before us accordingly we do not find any error or illegality in the impugned order of CIT(A) qua this issue. The same is upheld. 9. Again in appeal for AY 1997-98 & 1998-99, the Tribunal by following the decision of AY 1996- 97 dismissed the identical ground of appeal by passing the following order: 11.Next additional ground pertains to disallowance of depreciation on matured investments Rs. 18,35,53,508/-.The AR fairly conceded that the issue is covered against the assessee by the decision of the Tribunal in its own case for assessment year 1996-97 (para 38 & 39) in ITA No.5470/M/2002 which reads as under :- "38. Additional Ground No. 4 is regarding depreciation on matured securities. The assessee has claimed a sum of Rs. 2,23,86,418/- towards depreciation of investments. The AO disallowed the claim of the assessee and the CIT(A) has confirmed the action of the AO. We have heard the Ld. AR as well as Ld. DR and ITA No. 4736 & 4598/M/2010- State Bank of India 10 considered the relevant material on record. The CIT(A) has decided the issue in para 9 as under: "9.The ninth effective ground of appeal is aga....
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....e allowed against the amount receivable on redemption of securities which had matured and become due for payment before the close of the accounting year. This ground therefore fails." "39.The findings of the CIT(A) is based the on the various decisions of the Hon'ble Supreme Court as well Jurisdiction High Court. No contrary decisions has been brought before us accordingly we do not find any error or illegality in the impugned order of CIT(A) qua this issue. The same is upheld." Respectfully following the above additional ground No.4 is decided against the assessee. 10. Thus, respectfully following the decision of Tribunal in assessee's own case for AY 1996- 97, 1997-98 & 1998-99 in ITAs No. 5470/Mum/2002 and ITA No. 3823- 3824/Mum/2002, this ground of appeal is dismissed." 8. On appraisal of the above mentioned finding, we find that this issue has already decided against the assessee by Hon'ble ITAT in the assessee's own case for the A.Y. 1996-97, 1997-98 & 1998-99 bearing ITA.No.5470/M/2002, 3823 & 3824/M/2002. Nothing came into noticed that the finding has been changed or varied at this stage. Therefore, by reliance upon the decision of the Hon....
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....case by returning the following findings: "5.4. We find that computation mechanism provided 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." 18. Following the settled principle of law laid down by the Hon'ble Apex Court and co-ordinate Bench of the Tribunal in the identical facts and circumstances of the case, we are of the considered view that in the instant case disallowance to the extent of 1% of the exempt income under section 14A is to be made. So we accordingly direct the AO to disallow 1% of the exempt income und....
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....of non rural advances to the tune of Rs. 10,50,55,44,005/- which the Ld. CIT(A) has upheld. 23. The Ld. A.R. for the assessee challenging the impugned disallowance brought to the notice of the Bench that this issue has also been decided in favour of the assessee in the order passed for A.Y. 2003-04 and 2004-05 (supra), which fact has not been controverted by the Ld. D.R. for the Revenue. 24. We have perused the order passed by the co-ordinate Bench of the Tribunal in assessee's own case, wherein identical issue has been decided in favour of the assessee by returning the following findings: "9.1. We have heard rival submissions and perused the materials available on record. We find that both the parties mutually agreed that this issue has already been adjudicated by this Tribunal in assessee's own case for A.Y.2008-09 in ITA No.3644 and 4563/Mum/2016 dated 03/02/2020 for A.Y.2008-09 wherein it was held as under:- "54. 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 under section 36(1)(vii) of the Act being the amount of Bad Debts written off (other than in ....
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....clause (vii) of this sub section of clause (v) of sub-section 2 the account referred to therein shall be only one account in r/o provision of bad and doubtful debts under clause (viiia) and such account shall relate to all types of advances including advances made by rural branches". This explanation, though inserted w.e.f. 01.04.2014, is "clarificatory" in nature. It states that proviso to clause (vii) and clause(v) of sub-section2 shall relate to all types of advances including advances made by rural branches. The proviso to clause (vii) of Sec.36(1) therefore shall limit the application to both rural advances and non-rural advances. Therefore, there cannot be double deduction i.e. one on provision basis and then again on actual writeoff basis separately and independently. The disallowance is accordingly confirmed. This ground of appeal is dismissed." 14.4 In view of the above decision of CIT(A), claim of the appellant is disallowed. This ground of appeal is disallowed." 56. We noted that for the year under consideration the assessee has not claimed any deduction for bad debts written-off. However, it should be allowed deduction in respect of write-offs of non-r....
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....limited in any way by the proviso to section 36(1)(vii) of the Act. The relevant extract of the judgement of the Supreme Court is reproduced below: "41. To conclude, we hold that the provisions of Sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. The bad debts written off in debts, other than those for which the provision is made under clause (viia), will be covered under the main part of Section 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans while under Section 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts ....
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.... an addition of Rs. 17,40,43,00,607/- by reducing depreciation/taxing appreciation in the value of securities held as available for sale (AFS) having been held for trading category (HFT), which has been upheld by the Ld. CIT(A). 27. The Ld. A.R. for the assessee, at the very outset, brought to the notice of the Bench that this issue has also been decided in favour of the assessee by the co-ordinate Bench of the Tribunal for another A.Y. also i.e. for A.Y. 2004-05 vide order dated 30.09.2012 in ITA No.3780/M/2012, for A.Y. 2008-09 vide order dated 03.02.2020 in ITA No.3644/M/2016 and has also placed reliance on decision rendered by the Hon'ble High Court of Madras in case of CIT vs. Chari & Ram (1949) 17 ITR 1 (Madras) and on the decision rendered by the Hon'ble Apex Court in case of United Commercial Bank vs. CIT (1999) 240 ITR 355 (SC). This factual position has not been controverted by the Ld. D.R. for the Revenue. 28. We have perused the order passed by the co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 2008-09 qua identical issue which has been decided in favour of the assessee by following assessee's own case for A.Y. 2008-09 by returning the following....
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....allowed. This ground of appeal is disallowed. 62. Before us it was argued that from the financial year 2004-05, the assessee has been valuing investments in 'Available for Sale' (AFS) and 'Held for Trading' (HFT) in books after netting off classification-wise depreciation and appreciation, computed scrip-wise and providing for net deprecation in each classification while ignoring net appreciation, as required by RBI guidelines. However, for tax purposes, investments in AFS and HFT categories are being consistently valued scrip wise and depreciation, if any, was provided scrip wise while ignoring appreciation. Valuation of investments in AFS and HFT categories has consistently been done scrip-wise for tax purposes in earlier years. The same has also been accepted by the AO upto assessment year 2004-05 i.e. prior to the change in the treatment given in 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. ....
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...., such principles have been superseded or modified by legislative enactments unrealised profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following year's account in a business that is continuing are not brought into the charge as a matter of practice, though, as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised. .... Again, it is a misconception to think that any profit "arises out of the valuation of the closing stock" and the sites of its arising or accrual is where the valuation is made. As already stated, valuation of unsold stock at the close of an accounting period is a necessary part of the process of determining the trading results of that period, and can in no sense be regarded as the "source" of such profits." 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....
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....hazardous to assume that the entire stock could be sold at the prevailing market rate and necessarily bring in a profit. The High Court also held that there is no provision of law or principle according to which the assessee could be compelled to adopt either the average cost for all the items or the market rate for all the items. Further, the Supreme Court in the case of United Commercial Bank vs. CIT [1999] 240 ITR 355 (SC) has held that there is no such question of following two different methods for valuing its stock-in-trade (investments) because bank was required to prepare balance sheet in the prescribed form and it had no option to change it and for the purpose of income-tax, what is taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee. In view of the above, it was claimed that the 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 fo....
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....The CIT DR placed reliance on the decision of the Mumbai Tribunal in the case of JCIT vs. Dena Bank [2012] 20 taxmann.com 278 (Mumbai). In the aforementioned case, the security was purchased in year 1 at Rs. 100 and the market price at the end of the year was Rs. 90. Accordingly, the stock was valued at market price of Rs. 90 being lower than the cost. In year 2, the market price went upto Rs. 95. Accordingly, the stock was valued at market price of Rs. 95 being lower than the cost. However, suppose in year 3, the market value rises to Rs. 120, in such a situation, the stock would be valued at cost i.e Rs. 100, being lower than the market price. The Mumbai Tribunal held that excess of appreciation over the cost price would not be considered for valuing the closing stock. In the present case, we are not concerned with a scenario where in the later year the depreciation 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 a....
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....g heard to the assessee by returning the following findings: "16.1. We have heard rival submissions and perused the materials available on record. All the facts necessary for adjudication of the additional ground is already on record and hence the same are hereby admitted. We find that this issue already was the subject matter of adjudication by this Tribunal in assessee‟s own case for A.Yrs 2001-02 and 2002-03 vide order dated 12/07/2021 wherein this issue was restored to the file of the ld. AO by observing as under:- "42. Having heard both the parties, we find 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, 1999-2000, 2000-01 and 2008-09, wherein the Tribunal following the order 3rd January 2014, passed in assessee's own case for the assessment year 1996-97 in M.A. no.371/Mum./2014 restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by Giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Co....
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....hat identical issue has been consistently decided by the Tribunal In assessee's own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01 and 2008-09, wherein the Tribunal following the order 3'd January 2014, passed in assessee's own case for the assessment year 1996-97 in M.A. no.371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with !aw by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.3, raised by the assessee is allowed for statistical purpose." 13.2. Respectfully following the same, the ground No.12 raised by the assessee is restored to the file of the ld. AO with similar directions contained hereinabove and accordingly allowed for statistical purposes." 36. We have perused the order passed by the co-ordinate Bench of the ....
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.... the omission of expression "cess" and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) of the IT Act, 1961. The effect of such omission is that the provision in Section 40(a)(ii) does not include, "cess" and consequently, "cess" whenever paid in relation to business, is allowable as deductable expenditure." 41. Following the decision rendered by the Hon'ble Bombay High Court, we are of the considered view that education cess on income tax paid by the assessee is an allowable deduction, hence AO is directed to allow the same. So additional grounds No.1, 1.1, 1.2 & 1.3 are decided in favour of the assessee. Ground No.1 of Revenue's appeal (ITA No.4951/M/2013) A.Y. 2005-06 42. Ground No.1 is general, hence need no findings. Ground No.2 of Revenue's appeal (ITA No.4951/M/2013) A.Y. 2005-06 43. Assessee bank has paid an amount of Rs. 71,76,146/- to various schools towards reservation of seats for the children of the bank officers by including the same in staff welfare expenses. Declining the contentions raised by the assessee the AO treated the aforesaid payment as donation being not acceptable as expenditure incurred w....
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.... having been consistently decided in favour of the assessee by the co-ordinate Bench of the Tribunal right from A.Y. 1992-93 to A.Y. 2008-09, no distinct facts have been brought on record, moreover appeal filed by the Revenue against the order passed by the Tribunal allowing this issue in favour of the assessee for A.Y. 1996-97 has also been dismissed. So finding no illegality or perversity in the impugned findings returned by the Ld. CIT(A), ground No.2 raised by the Revenue is dismissed. Ground No.4 of Revenue's appeal (ITA No.4951/M/2013) A.Y. 2005-06 48. Assessee has debited an amount of Rs. 11,08,09,98,612/- as broken period interest paid on purchase of securities by treating the same as revenue expenditure. Declining the contentions raised by the assessee, the AO disallowed the claim of the assessee under the head "Broken period interest" to the tune of Rs. 1,08,35,95,093/- and consequently made addition thereof. 49. However, the Ld. CIT(A) decided this issue in favour of the assessee by returning following findings: "8.2 The ld CIT(A) in A.Y. 2003-04 held as under: In this context, I find that this is a recurrent issue featuring in the Appellant....
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....rnational Banking Corporation vs. CIT reported in 258 ITR 601 (Bom) by considering the decision rendered by the Hon'ble Supreme Court in case of Vijaya Bank Ltd. vs. Addl. CIT reported in 187 ITR 541 SC. No distinguishing facts have been brought on record by the Ld. D.R., hence we find no scope to interfere into the findings returned by the Ld. CIT(A). Hence, ground No.4 is also determined against the Revenue. Ground No.5 of Revenue's appeal (ITA No.4951/M/2013) A.Y. 2005-06 51. Revenue has come up before the Tribunal by challenging the allowance of taxing of interest on securities on due basis on the ground that the assessee bank has been following mercantile system of accounting and as such interest on securities is to be accounted for on accrual basis while arriving at the book profit. The Ld. CIT(A) decided this issue by returning the following findings: "8.7 Interest on securities is to be charged on due basis on specified date in the security. This view has been upheld in various case laws : (i) Mumbai Tribunal in the case of Union Bank of India (ITA No. 8817/B/92), wherein it was held that: a. If income has not been found to have accrued to t....
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....TA No.4656/M/2011 which is on identical issues, the operative part of which is as under: "48. Ground no.2, raised by the Revenue is, the learned CIT(A) erred in allowing the taxing of interest on securities on due basis. 49. During the course of hearing, on a perusal of the record available before -us, we find 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, 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 by dismissing the ground raised by the Revenue. The learned Counsel for the assessee also submitted before us that 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 sa....