TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 480
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.... circumstances of the case and in law, Hon'ble CIT(A) erred in rejecting the plea of the Appellant that Rule 8D is not automatic even when the AO had not recorded any satisfaction before applying Rule 8D of the Income-tax Rules, 1962. 2. The Appellant prays that the order of the CIT (A) disregarding the settled legal position be treated as illegal. WITHOUT PREJUDICE TO GROUND I: GROUND NO. I: DISALLOWANCE of EXPENSES UNDER SECTION 14A OF THE ACT: 3. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in rejecting the plea of the Appellant that when the securities are held as stockin-trade, no disallowance can be made u/s. 14A of the Act. 4. The Appellant, therefore, prays that the suo-moto disallowance of Rs. 9,27,255/- be deleted. GROUND NO. III: ORDER MADE ON THE BASIS OF SURMISES AND ASSUMPTIONS IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in disallowing the claim for deduction u/s. 35D of the Act on the assumption that the shares may have been allotted only to selected QIPs. 2. The Appellant prays that an order made on surmises and presumptions is bad-in-law and void-a....
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....under ESOP be allowed." 04. ITA No. 3236/Mum/2018 is filed by the learned Deputy Commissioner of Income tax 2 (2) (2), Mumbai [ The Ld AO ] against the same order [ AY 2011-12] of the learned CIT (A) raising following grounds of appeal:- "1. Whether on the facts and in the circumstances of the case and in law, learned CIT Appeal was right in directing to delete the disallowances made U/s 14A of the IT Act without appreciating that the disallowance u/s 14A has to be mandatorily calculated as per rule 8D of IT Rules and no discretion is available with the A.O for estimated disallowances? 2. Whether on the facts and in the circumstances of the case and in law, learned CIT Appeal was right in directing to delete the disallowances of brokerage paid on acquisition of investments without appreciating that such expenditure is in the nature of capital expenditure and forms a part of cost of asset?" 05. Assessee is a company engaged in the business of banking. It filed its original return of income on 30th September, 2011, and subsequently, filed revised return on 30th March, 2013, declaring income of Rs.1176,82,76,464/-. Return of the assessee was picked up for scrutiny and assessment....
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....ck Option Plan (ESOP). [4] Not adjudicating and allowing on ESOP deduction claim based on the additional evidence field by the appellant 011. The first ground of appeal of the learned Assessing Officer and ground nos. 1 and 2 of the appeal of the assessee are with respect to the disallowance under Section 14A of the Act. 012. Assessee has claimed dividend income of Rs.50,76,400/- as exempt under Section 10(34) of the Act. Assessee disallowed a sum of Rs. 9,27,255/- under Section 14A of the Act. Learned Assessing Officer asked assessee to furnish details regarding the disallowance. Assessee submitted that i. It has made investment in equity shares of various companies and holding is those shares in compliance with statutory requirement as part of stock in trade. ii. It has not incurred any expenses in relation to earning of such dividend income. iii. However, it has offered identified expenditure of Rs.9,26,255/-,as disallowable expenses u/s 14A of the Act. It identified direct and indirect expenditure for the same. It stated that assessee has disallowed 100% of treasury cost of custodian charges amounting to Rs.3,25,930/- as direct expenditure. It further submitted the de....
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....th respect to the interest disallowance, he agreed with the argument of the assessee that in view of more interest free funds available than the amount invested in tax-free income earning securities, o disallowance u/r 8D (2) (i) and (ii) can be made. Therefore, he deleted the disallowance of Rs.3,65,18,979/-. Thus, both the parties aggrieved with the above order 015. The learned Authorized Representative submitted that the learned Assessing Officer has failed to record any satisfaction about the correctness of the disallowance offered by the assessee. He submitted that this is mandatory requirement before the learned Assessing Officer proceeds to invoke Rule 8D for making disallowance. He referred to section 14 A (2) of the Act. For this proposition, he relied on the decision of Hon'ble Supreme Court in case of Maxopp Investment Ltd. Vs. CIT [2018] 91 taxmann.com 154 (SC) and also the decision of the Hon'ble Bombay High Court in Principal Commissioner of Income Tax-2 Vs. Bombay Stock Exchange Ltd. [2020] 113 taxmann.com 303 (Bombay) dated 15-10-2019. He also relied on several judicial precedents of co-ordinate Benches. Thus, it was stated that as learned Assessing Officer....
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.... and that why it is not correct. That means learned Assessing Officer has to give reasons with regard to the accounts of the assessee about incorrectness of the claim of the assessee. The Supreme Court also held that while recording such satisfaction, the nature of loans and the nature of investment need to be examined by the learned Assessing Officer. Further, Hon'ble Bombay High Court following the aforesaid judgment of the Hon'ble Supreme Court in Bombay Stock Exchange Ltd. (supra) in Paragraph no. 9 has also categorically held that the learned Assessing Officer must first record a conclusion that having regard to the account of the assessee he has not satisfied with the disallowance offered by the assessee. In paragraph no. 11, it further held that no satisfaction with the disallowance offered has to be arrived at, based on the accounts submitted by the assessee. In the present case, we find that the learned Assessing Officer has failed to carry out the necessary exercise before applying the provisions of Rule 8D of the Rules. There is no reference to examination of accounts of the assessee. There is no finding that disallowance offered by assessee is inadequate as envi....
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....as per books of account and as per Banking Regulation Act. Therefore, he held that when a particular security has been treated as stock-in-trade and profit or loss has been offered as business income, all the expenses incidental to the earning of such income has to be allowed as deduction as revenue expenditure. The learned Assessing Officer is aggrieved with the same. 022. Learned Departmental Representative vehemently supported the order of the learned Assessing Officer. 023. Learned Authorised Representative supported the order of the learned Commissioner of Income Tax (Appeals). He further supported the order of the learned CIT(A) relying on the decisions of CIT vs. Nawan shahar co-operative Bank of India 289 ITR 6, CIT vs. DLF Universal Ltd 317 ITR 197 of Hon'ble Delhi High Court and also relied upon circular no. 18/15 dated 2nd November, 2015. 024. We have carefully considered the rival contentions and perused the orders of the lower authorities. On appreciation of facts, we find that assessee offers profit and loss on sale of securities as business income and not as capital gain. This fact has also been accepted by the LD AO. Therefore the securities purchased and sol....
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.... expenditure as deduction u/s 35D of The Act. This is the first year of such claim with respect to this issue of shares. Assessee submitted that said expenses are in connection with the issue of "public subscription" of shares of the assessee. 027. Learned Assessing Officer examined the claim and held that since the issue of shares to Qualified Institutional Buyers, does not tantamount to "issue of shares to public" and therefore, expenditure incurred is not covered under Section 35D of the Act. Hence, he disallowed the same. 028. Assessee aggrieved with the same and preferred the appeal before the learned CIT (A). Assessee submitted that the provisions of Section 35D of the Act are complied with. It further stated that Qualified Institutional Buyers are "public" and therefore, the assessee deserves to be allowed the above deduction. For this proposition, assessee relied on the SEBI Regulation. Assessee also referred to Securities Contract Regulation Rules, wherein the word "Public" was defined. The learned CIT (A) referred to SEBI (issue of capital and disclosure requirement) 2019, Rules, and the Companies Act. He therefore held that the offer made under the QIP scheme could not....
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....ional Buyers is " public" or not. The coordinate Bench following the decision of ITAT in Deccan Chronicle Holdings Ltd. (supra) hold that QIB is " Public" so deduction under Section 35D of the Act is allowable. It held as under:- "6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The appellant is a banking company. It filed its revised return of income for the AY 2010-11 on March 30, 2012 declaring total income at Rs. 7,90,10,18,157/-. As mentioned earlier, the question involved in this appeal is whether QIB can be regarded as "public" and whether the offer made to them can be regarded as "offer made to public" for the purpose of section 35D of the Act. In Deccan Chronicle Holdings Limited (supra), the Tribunal has held as under : "6. With respect to ground No. 4 for the assessment year 200809, we find that the Assessing Officer has not disallowed for the assessment years 2006-07 and 2007-08. However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers for the assessment year 2008-09 which has been allowed by the Commissioner of Income-tax (A....
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.... of its case are distinguishable from those in the case of Brooke Bond, for the detailed reasons submitted by it, and therefore its claim cannot be denied by relying on that decision. It was further claimed that though the entire expenditure was allowable in one year under section 37, the same was treated as deferred revenue expenditure and claimed over five years, starting from the assessment year 2007-08. The concept of deferred revenue expenditure is now legally recognised by various judicial authorities and in fact, this was upheld even in the case of the appellant by my predecessor, while deciding the appeal for assessment year 2006-07. In view of the above facts, I hold that the expenditure of Rs. 2,07,00,112 claimed for assessment year 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in order, the disallowance on this account is deleted." 7. We find that during the year 2007-08, the company incurred debenture expenses of Rs. 2.07 crores and QIB issue expenditure of Rs. 8.28 crores, both totalling to Rs. 10.35 crores. The expenditure referred to above of Rs. 10.35 crores was adjusted against the share....
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....ting agreement takes us to Securities Contracts (Regulation) Rules, 1957 (in short "SCRR"). Also Rule 19(2)(b) and Rule 19A of the SCRR provide that companies are required to maintain minimum public shareholding of 25% in case of first time listing and in case of continuous listing agreement respectively. In this context, we may refer to section 2(d) of SCRR defining the term "public". It (public) is defined to mean any person other than the promoter, promoter group, subsidiaries and associates of the company. Thus any person other than these four qualify to be considered as public. As can be seen from the list of QIBs to whom shares are issued, the shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as "public". As specified in clause 40A(ii) of the listing agreement, public shareholding can be increased by any of the modes specified therein to comply with Rule 19(2) and 19A of SCRR. One such note is the issue of IIP in accordance with Chapter VIIIA of the SEBI-ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding r....
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....ound that he is entitled to deduction of Rs. 143,24,22,420/- being the discount on issue of shares under the ESOP computed as difference between the fair market value of shares on the date on which the ESOP were exercised by the eligible employees and issue price of shares. 039. The fact shows that assessee introduced the ESOP in accordance with the provisions of Securities Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Assessee submitted that the issue is squarely covered in favour of the assessee by the Special Bench decision of Biocon Ltd. VS. DCIT [2013] 35 taxman. com 335 (Bangalore - Trib.) (SB) 040. With respect to the fact that whether the adequate information was available on record for pressing the additional ground, the learned Authorized Representative referred to the annual report of the assessee for the year ended 31st March, 2011. He referred to note number 18.7.7, where ESOP disclosures were made. He submitted that there is a complete scheme wise expenditure disclosed by the assessee. He further referred to the note appended to the summary of the status of the Stock Option Plan, which states, "the bank....
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....ore, it has not been correctly admitted. The learned Departmental Representative further submitted in addition to that assessee has failed to raise this ground before the learned Assessing Officer and it is an admitted fact that for four assessment years i.e. AYs 2011-12 to 2014-15, assessee never claimed this deduction in the original return of income or even in the revised return. It was also not claimed before the learned Assessing Officer during scrutiny assessment proceedings and all these claims have been raised first time in December 2017 as fresh claims before the learned CIT (A) as additional grounds. It was stated that inexplicable pattern of making the fresh claim stated to be due to inadvertent error is devoid of any merit. Assessee further stated that no specific reason supported by evidence has been mentioned as to why the alleged inadvertence occurred. Merely stating that the ground could not be raised earlier is a bald statement, which is unacceptable. Therefore, in the guise of additional ground in fact assessee is making fresh claim, which was not made earlier. The learned Departmental Representative placed reliance on the decision of Hon'ble Bombay High Court....
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....cer there would not have been any need of filing such a Paper Book. 044. The learned Departmental Representative on merit submitted that piece of expenditure is contingent, notional and capital in nature. For this proposition, he relied on the order of the co-ordinate Bench in cases of Medha Servo Drivers Ltd. Vs. DCIT dated 01.02.2011 in ITA No. 1189 & 1190/Hyd/2009, DCIT vs. Blow Plast Ltd in ITA No. 512/Mum/2009 dated 26th Nov, 2010, Mahindra & Mahindra Vs. DCIT in ITA No. 8597/Mum/2010 and M/s VIP Industries Ltd vs. DCIT in ITA no. 7242/Mum/2018. He also relied on the decision of Hon'ble Supreme Court in case of EMCO KCP Ltd. Vs. CIT 159 CTR 137, that the shares issued against assets contributed by shareholders cannot be considered as Revenue expenditure. He further submitted that ESOP expenses has not attained finality and pending before the Hon'ble Supreme Court in 2021] 131 taxmann.com 188 (SC)/[2021] 283 Taxman 290 (SC). In view of this, he submitted that CIT (A) has correctly not admitted the additional ground and even otherwise, on merits, the deduction is not allowable. 045. In rejoinder, the learned Authorized Representative submitted that assessment of income....
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....ted it to be a capital expenditure even at the time of the filing of the return, the assessee did not claim the same therefore, filing of the return, the assessment proceedings, the appellant proceedings to the extent of filing of appeal which with due application of mind and therefore, as the omission to raise additional ground was a conscious decision considering all the facts and therefore, same is not admissible. The learned CIT (A) relied on the decision of Hon'ble Bombay High Court in case of Ultratech Cement Ltd. (supra). 048. The learned CIT (A) also invoked the provisions of Section 46A of the Act and stated that the case of the assessee do not fall into parameters from (a) to (d) laid down in that Rule. Hence, he rejected the same. Therefore, he held that omission of raising the above ground in the original appeal was willful and hence, it does not pass the test of provision of Section 250(5) of the Act. 049. Section 250 deals with the procedure in appeals before the learned CIT (A). Provisions of Sub Section 5 gives power to the learned CIT (A) to go into any ground of appeal which is not mentioned in the original grounds of appeal, if he is satisfied that omission....
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....in its favour rendered by the courts and tribunals. Later on based on that any claim is made by raising additional ground of appeal, It cannot be said to be not a bona fide action of assessee. Assessee cannot be prevented to do so. No malafide can be attributed on part of the assessee in raising these additional grounds. Hence, according to us, it passes the test of section 250(5) of the Act. Therefore, we hold that raising the additional ground by the assessee is not willful and unreasonable failure. The ld CIT (A) ought to have admitted the same. 051. The second issue that arises is that fresh claims can be raised before the learned CIT (A) or not. Undisputedly, the claims are required to be made in the return of income under Section 139 of the Act or by filing revised return. Certain times it may happen that claims are not raised in return of income , but are raised/made before appellate authorities. Such an event may arise on account of multiple reasons, such as, availability of judicial precedents in favour of such claim, purely legal claims, etc. Those reasons cannot be exhaustively visualized. However, the issue that may arise whether, the assessee can raise fresh claim dur....
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....idences, which are required to be examined for the claim of the assessee, are not recorded then the additional ground could be raised and admitted if assessee satisfies the appellate authority that such claim could not be made for good and sufficient reasons. Therefore, there could be two situations first, where the facts are on record and second, whether the facts are not on record. 053. If the facts are not on record, even then the additional ground can be raised if assessee proves that such ground could not be raised before the lower authorities for good and sufficient reasons. Such is the mandate of Hon'ble Jurisdictional High Court in 408 ITR 500. Now, therefore, we must say that whether the relevant material is on record or not, the claim of the assessee is with respect to deduction of ESOP expenditure. In this proposition, assessee has submitted the balance sheet of the assessee. As per Para no. 18.7.5, the assessee has stated that it has five employees stock option scheme, where provision for grant of options to eligible employees are made and it is approved by the remuneration committee, the board of Directors and shareholders. According to those plans, vesting took p....
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....eneficiary upon exercise. 18. Notes forming part of the Accounts for the year ended March 31, 20110 (Continued) 18.7 Disclosures as required by Accounting Standards (Continued) 18.7.7 ESOP disclosures (Continued) YBL ESOP (PESOP 1), a sub scheme of YBL ESOP, YBL PESOP II and YBL PESOP II 2010, sub schemes of YBL JESOP V/ PESOP II are Performance Stock Option Plans and are also administered by the Board Remuneration Committee of the Bank. Under YBL ESOP (PESOP I) vesting takes place at the end of each year from the grant date for 25% of the options granted and are settled with equity shares being allotted to the beneficiary upon exercise. Under YBL PESOP II, 30% of the granted options vest at the end of first year, 30% vest at the end of second year and balance 40% vest at the end of third year. Further grants under PESOP II had been discontinued with effect from January 20, 2010. Under YBL PESOP II2010, 30% of the granted options vest at the end of the third year, 30% vest at the end of the fourth year and balance vest at the end of the fifth year. A summary of the status of the Bank's stock option plans is set out below: Particulars JSOP_I JESOP-II JESOP-....
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.... 270.61 In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by the auditors." 055. In present case before us, we find assessee has disclosed the preliminary facts with respect to the employee"s stock option scheme in its annual accounts. The details with respect to each of the scheme, options granted during the year, exercised during the year and options lapsed during the year along with the closing balance of each of the scheme are shown. It also shows how in the books of accounts the treatments of stock options granted are made. Various assumptions in arriving in the fair valuation of the options showing risk free interest rate, expected life, volatility and expected dividend are also disclosed. The details also show the market price of the shares of the company at the time of grant of options. Therefore, it cannot be said that the primary facts of deduction for ESOP is not available on record. No doubt, the final computation of allowable deduction is required to be produced and verified by the assessee. However, absence of such allowable deduction at the time of assessment stage cannot deprive the....
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.... of the case and in law, the honourable CIT (A) erred in effectively setting aside the ground of appeal numbers III, IX and XI to the file of the AO, which is beyond the powers conferred u/s 251 of the act 2. the appellant prays that it be held that the order of the CIT (A) is void ab initio and/or otherwise bad in law GROUND No II:- disregarding the direction on the tribunal with respect to disallowance u/s 14 A of the act 1) on the facts and circumstances of the case and in law, the honourable CIT (A) erred in going beyond the order of the honourable ITAT in the appellant"s own case for earlier year in directing the AO to reexamine the entire claim made by the appellant GROUNd No III :- disallowance of interest and expenses u/s 14 A of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the proportionate interest expenditure u/s 14 A of the act 2. he further erred in rejecting the plea of the appellant that when the securities are held as stock in trade, no disallowance can be made u/s 14 A of the act 3. the appellant, therefore, prays that the disallowance u/s 14A of the act, including the SUO Moto disallowa....
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....se and in law, the honourable CIT (A) erred in not following his own order in appellant"s case for assessment year 2011 - 12 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in partly confirming the action of the AO of disallowing the brokerage paid on HTM securities though all the securities are held by the appellant as stock in trade 3. the appellant prays that the disallowance of brokerage paid on HTM securities be deleted GROUND NO X : setting aside to the AO the ground of Section 36 (1) (viia) of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify whether the appellant had rural branches within the meaning of Section 36 (1) (viia) when all the relevant details were submitted before him as additional evidences during the appellate proceedings and on which the AO had given his remand report 2. the appellant prays that the claim of deduction u/s 36 (1) (viia) of the act be allowed without sending it back to the AO for verification GROUND No XI:- non-allowability of deduction claimed u/s 36 (1) (viia) of the act 1. on the facts and circumstances of the case ....
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....ing to Rs. 107,39,69,980/- 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not giving any finding on the additional evidences filed by the appellant 3. the appellant prays that the claim for deduction in respect of discount on issue of shares Under ESOP be allowed 060. Despite the appeal filed by the assessee in 2018 raising lengthy, argumentative, descriptive grounds of appeal, till 2022 assessee did not care to revise those grounds of appeal. However, in the interest of justice we proceed with the appeal. 061. In ITA number 3237/M/2018 the learned assessing officer has raised following grounds of appeal:- 1. whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance made u/s 14 A of the IT act without appreciating the fact that the disallowance u/s 14 A has to be mandatorily calculated as per rule 8D of IT rules and no discretion is available with the AO for estimated disallowances. 2. Whether on the facts and in the circumstances of the case and in law the learned CIT (A) was right in allowing depreciation on HTM securities without appreciating the....
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....35D for allotment to QIP of Rs 2, 82,80,291/- iii. provision on investment amounting to Rs. 160,152,000/- iv. brokerage paid on acquisition of investment Rs. 386,405 v. provision for bad and doubtful debts of 11,56,77,762 vi. broken period interest charged to tax of Rs. 866,301,425 vii. amortisation of premium paid on held to maturity securities amounting to Rs. 308,135,800 063. Assessee preferred an appeal before the learned CIT - A who passed an order on 31/1/2018 allowing certain deductions and confirming certain disallowances. The learned CIT - A also did not admit certain additional evidences as well as the additional ground raised by the assessee on the issue of deduction under employee stock option plan. Therefore, both the parties are aggrieved with that order and have preferred this appeal. 064. We first come to the appeal of the assessee. 065. As per ground number 1 assessee has challenged the setting aside the ground to the file of the learned AO on certain issues. No specific arguments were produced before us and therefore ground number 1 is dismissed 066. ground number two is with respect to the disallowance u/s 14 A of the act wherein the assessee is agg....
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....isallowance can be made to the extent of interest free funds available with the assessee, disallowance u/s 14 A of the act cannot be made when securities are held as stock in trade of the business, only those investments are required to be taken into consideration which gives exempt dividend income and only net interest expenditure after setting off of interest income should be considered for the purpose of interest disallowance u/s 14 A of the act. The assessee submitted dozens of judicial precedents with respect to each of these issues. 068. The learned departmental representative vehemently supported the order of the learned assessing officer. 069. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the assessee has though Under exempt income u/s 10 (35) as well as u/s 10 (34) of the act and offered disallowance of Rs. 233,399/-. Assessee also submitted the working of the above disallowances. However, the learned assessing officer without recording any satisfaction u/s 14 A (2) of the act proceeded to compute the disallowance under rules 8D of the act. This issue is identical to the issue involved in the appeal of the....
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....round raised in appeal of the assessee for assessment year 2011 - 12. Therefore, the argument of the assessee was also similar. 072. The learned departmental representative vehemently supported the orders of the lower authorities and stated that the provisions of Section 35D of the income tax act grants deduction of expenditure only if it is issued in connection with a public issue. 073. We have carefully considered the rival contention and perused the orders of the lower authorities. The identical issue arose in the case of the assessee on the same set of facts and circumstances. We find that the provisions of Section 35D (2) (c) of the act grants deduction of expenditure incurred in relation to expenditure on public subscription of shares. The facts are not coming out that whether the allotment of shares to QIP is made in public subscription or in private placement. In earlier year i.e. assessment year 2011 - 12, we have set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to show whether it was an issue of shares of public subscription of private placement. The learned assessing officer may examine the claim as soon as su....
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....he assessee and therefore revaluation laws with respect to all the three would be allowable to the assessee as per regular system of accounting followed by the assessee. This claim was allowed by the learned CIT appeal. However, he directed the AO to verify actual book entries before allowing deduction about the system of accounting followed by the assessee and the method of valuation adopted. 076. Assessee is aggrieved with this direction and is in appeal before us. We have carefully considered the rival contentions and find that this issue has been decided in favour of the assessee by the learned CIT - A but has given a direction to the AO to verify the accounting entries and the method of valuation adopted by the assessee. This issue has also been considered by the coordinate benches in assessee"s own case for assessment year 2006 - 07 and 2007 - 08 wherein loss in Revelation of securities classified as held for trading in available for sale is held to be a revenue expenditure and allowable as deduction. We do not find any reason to sustain the order of the learned CIT - A for the purpose of verification to the file of the learned AO wherein identical deduction is allowed to th....
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....n the appeal filed by the revenue for assessment year 2011 - 12, which is decided by this same order. We do not find any reason to deviate from the same accordingly, ground number 9 of the appeal is allowed. 081. Ground number 10 of the appeal is against the order of the learned CIT - A aside the order of the learned AO with respect to deduction claimed u/s 36 (1) (viia) of the act and further ground number 11 is with respect to the claim of the above deduction of Rs. 115,677,762. As per ground, number 12 assessee has raised an alternative plea that bad debts in assessment year 2013 - 14 the correspondingly allowed on higher side by reducing the opening balance of the provisions for bad and doubtful debts for assessment year 2013 - 14. The facts related to the above issue shows that that assessee company has claimed a deduction under this Section of Rs. 115,677,762 and made a provision for non-performing assets. The 7.5% of the income of the assessee company comes to Rs 117,55,45,107/-. Assessee has claimed deduction lower of these two amounts at Rs. 115,677,762/-. The assessee was questioned that how the deduction is available to the assessee in view of the decision of the honour....
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....lly considered the rival contention and perused the orders of the lower authorities. The only reason why the deduction is disallowed to the assessee is that assessee does not have any rural branches. we find that deduction u/s 36 (1) (viia) of the act is not restricted to the banks only having the rural branches. This has been dealt with in 42 taxmann.com 303 as under :- "34. It can be seen from the history of Sec.36(1)(viia) of the Act that at stage-I the deduction was allowed in respect of any provision for bad and doubtful debts made by a scheduled bank in relation to the advances made by its rural branches. At this stage the PBDD had to be linked to the advances made by Bank's rural branches. At stage-II of Sec.36(1)(viia), the deduction while computing the taxable profits was allowed of an amount not exceeding ten per cent of the total income (computed before making any deduction under the proposed new provision) or two per cent of the aggregate average advances made by rural branches of such banks, whichever is higher. At this stage also the PBDD had to be created and debited to the profit and loss account but it was not required to be done in relation to advances made ....
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....tful debts. Even under the new provisions creating a PBDD in the books of accounts is necessary. 37. Though under Stage-II and Stage-III of the provisions of Sec.36(1)(viia) of the Act, PBDD has to be created by debiting the profit and loss account of the sum claimed as deduction, the condition that the provision should be in respect of rural advances is not necessary. At stage-II of the provisions of Sec.36(1)(viia) of the Act, this condition was done away with and it was only necessary to create PBDD in the books of accounts and debit to profit and loss account. The quantification of the maximum deduction permissible u/s.36(1)(viia) of the Act had to be done. Firstly it has to be ascertained as to what is 10% of the aggregate average advances made by rural branches, if the Bank has rural branches, otherwise that part of the deduction u/s.36(1)(viia) of the Act will not be available to the bank. The second part of the deduction u/s.36(1)(viia) has to be ascertained viz., 7.5% seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VI-A). The above are the permissible upper limits of deductions u/s.36(1)(viia) of the Act....
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....ment year 2012 - 13 is partly allowed. 092. Now we come to the appeal of the assessing officer. The first ground of appeal is with respect to disallowance u/s 14 A of the act. Ground number 2 and 3 of the appeal of the assessee is also on the same issue. We have already held that the learned assessing officer has not recorded satisfaction u/s 14 A (2) of the act prior to proceeding for computing disallowance Under rule 8D and therefore we have allowed those grounds while deciding the appeal of the assessee in favour of the assessee. In view of this ground number, 1 of the appeal of learned AO does not survive. Hence, we dismiss the same. 093. Ground number 2 and 3 is with respect to the allowance of revaluation loss arising on HTM securities by the learned CIT - A. We find that this issue is linked with ground number 7 of the appeal of the assessee. Ground number 7 is with respect to the amortization of premium paid for acquisition of held to maturity securities. 094. The learned authorised representative stated that that this issue is now squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in case of CIT versus HDFC bank Ltd 366 ITR 50....
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....0100. We find that this issue squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in CIT versus HDFC bank Ltd 366 ITR 505 wherein while deciding issue number (b) i.e. B) Whether the ITAT was correct in law in holding that the broken period interest is allowable as a deduction, inspite of the Hon'ble Supreme Court's decision in the case of CIT v. Vijay Bank (187 ITR 541) and the Rajasthan High Court's decision in the case of Bank of Rajasthan (316 ITR 391) ? Honourable High Court held as Under:- "6. Even as far as question (B) is concerned, we find no infirmity in the orders passed by the CIT (Appeals) or the ITAT. In deciding this issue, CIT (Appeals) and the ITAT have merely followed the judgment of this Court in the case of American Express International Banking Corpn. v. CIT [2002] 258 ITR 601/125 Taxman 488. On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr Suresh Kumar is squarely answered by the judgment of this Court in the case of American Express International Banking Corpn. (supra). In view thereof, we do not find that even question (B) gives rise to....
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....e, both the parties are in appeal before us. 0108. Appeal of the learned assessing officer in ITA number 3238/M/2018 raised [9] grounds of appeal as Under:- 1) whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance made u/s 14 A of the IT act without appreciating the fact that the disallowance u/s 14 A has to be mandatorily calculated as per rule 8D of IT rules and no discretion is available with the AO for estimated disallowances 2) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance of brokerage paid on acquisition of investments without appreciating the fact that such expenditure is in the nature of capital expenditure and forms a part of cost of assets. 3) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to allow deduction u/s 36 (1) (viia) after verification without appreciating the fact that the assessee has no branches and hence not entitled for the same to deduction claimed. 4) Whether on the facts and in the circumstances of the ca....
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....w, the learned CIT (A) was right in directing to delete premium amortised without appreciating the fact that held to maturity category of securities are held as investment i.e. a capital asset and hence amortisation of premium paid on such securities will form part of cost of acquisition of held to maturity securities and hence not an allowable deduction. 0109. Assessee, in its appeal in ITA number 3500/M/2018 has raised the following grounds of appeal:- Ground NO I : setting aside the ground to the file of the AO 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in effectively setting aside the ground of appeal numbers III, IX and XI to the file of the AO, which is beyond the powers conferred u/s 251 of the act 2. the appellant prays that it be held that the order of the CIT (A) is void ab initio and/or otherwise bad in law GROUND No II: - disregarding the direction on the tribunal with respect to disallowance u/s 14 A of the act 1) on the facts and circumstances of the case and in law, the honourable CIT (A) erred in going beyond the order of the honourable ITAT in the appellant"s own case for earlier year in directing the AO to ree....
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....l the details were available on record and no further verification was required GROUND No VIII :-disallowance of brokerage paid on acquisition of HTM investments 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not following his own order in appellant"s case for assessment year 2011 - 12 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in partly confirming the action of the AO of disallowing the brokerage paid on HTM securities though all the securities are held by the appellant as stock in trade 3. the appellant prays that the disallowance of brokerage paid on HTM securities be deleted GROUND NO IX : setting aside to the AO the ground of Section 36 (1) (viia) of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify whether the appellant had rural branches within the meaning of Section 36 (1) (viia) when all the relevant details were submitted before him as additional evidences during the appellate proceedings and on which the AO had given his remand report 2. the appellant prays that the claim of deduction u/s 36 (1) (v....
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....in assessment year 2014 - 15 on higher side by reducing the opening balance of provisions for bad and doubtful debts for assessment year 2014 - 15 Ground number XIV deduction of additional claim u/s 36 (1) (vii) of the act amounting to Rs 2 43,53,135/- 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to reverify the additional claim of the appellant u/s 36 (1) (vii) of the act amounting to Rs. 24,353,135/- 2. the appellant prays that the additional claim for deduction u/s 36 (1) (vii) of the act amounting to Rs 2,43,53,135/- be allowed GROUND No XV non-admission of additional ground of appeal 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in rejecting the additional ground raised by the appellant, in respect of discount on issue of shares Under the employee stock option plan (ESOP) without appreciating the fact that the appellant authorities can admit and adjudicate the additional film raised by the assessee during the course of appellate proceedings 2. the appellant prays that the claim for deduction in respect of discount on issue of shares Under the ESOP be allowed GRO....
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....nd number 15 and ground number 16 are related to the admission of the additional ground with respect to the deduction of employee stock option plan discount as well as allowing the claim on the merit. This issue is identical to the issue in appeal of the assessee for assessment year 2011 - 12. We dispose of this ground with similar directions. 0117. In the result, appeal filed by the assessee is partly allowed. 0118. Now we come to the appeal of the learned assessing officer. The ground number one is with respect to the disallowance u/s 14 A of the act which is related to the ground number 2 - 4 of the appeal of the assessee. Those grounds of appeal in the appeal of the assessee are allowed and therefore ground number 1 of the appeal of the AO becomes infructuous and dismissed. 0119. Ground number 2 is with respect to the disallowance of brokerage paid on acquisition of investment. This issue is identical to the issue in the appeals for earlier years wherein we have allowed the claim of the assessee. Therefore, we do not find any reason to deviate from the same hence ground number 2 of the appeal of the AO is dismissed. 0120. Ground number 3 - 6 are on the issue of deduction u/....