TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 2167
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.... Rs. 1683,33,73,335. Subsequently, assessee filed a revised return of income on 18th March 2013, declaring total income of Rs. 1187,66,91,972. During the assessment proceedings, while verifying the computation of total income filed by the assessee, the Assessing Officer noticed that assessee has claimed deduction of Rs. 200 crore under section 36(1)(viii) of the Act in respect of special reserve created for income from eligible business of long term finance for industrial and agricultural development and for development of infrastructure facility for construction or purchase of residential house. After calling upon the assessee to furnish the details relating to the working of deduction claimed and the basis thereof and examining them the Assessing Officer found that as per the working submitted by the assessee the eligible income is Rs. 200 crore. Further, on examining the working of the assessee, he found that basis for arriving at the allocable operational expenses is incorrect, since, the assessee has made such allocation on the basis of proportionate expenses on the funds deployed for earning the eligible income. Whereas, while considering the total deployed fund, the assessee....
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....he above order of the Tribunal,we decide first Ground of appeal in favour of the assessee." 6. There being no material difference in facts brought to our notice, respectfully following the consistent view of the Tribunal in assessee's own case, we allow assessee's claim of deduction u/s 36(1)(viii), thereby, deleting the addition made. Ground raised is allowed. 7. In ground No. 2, assessee has challenged disallowance of Rs. 59,76,26,012 made u/s 14A of the Act r/w rule 8D of the rules. 8. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has earned exempt income amounting to Rs. 18,07,69,806 through interest and dividend, called upon the assessee to furnish necessary details and also to explain why disallowance should not be made under section 14A of the Act by applying the provisions of rule 8D. Though, the assessee objected to the proposed disallowance by stating that all the securities are held as stock-in-trade and were made out of own funds, however, the Assessing Officer rejecting the claim of the assessee proceeded to compute disallowance under section 14A of the Act by applying rule 8D which was quantified at Rs. 59,76,2....
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....he shares and securities are held as stock-in-trade and it constitutes a business activity, hence, no disallowance under section 14A of the Act should be made. Notably, in assessment year 2009-10, while considering similar dispute relating to disallowance under section 14A, the Tribunal in order dated 8th November 2017 (supra) has restored the issue to the Assessing Officer. It is also relevant to mention, in the meanwhile, the judgment of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. (supra) has been delivered. It is to be noted that in the said decision the Hon'ble Supreme Court has specifically dealt with the decision of the Hon'ble Punjab & Haryana High Court in case of State Bank of Patiala (supra) on identical issue. Undisputedly, the aforesaid decision of the Hon'ble Supreme Court having been delivered recently, the Departmental Authorities while deciding the issue did not have the benefit of it. In view of the aforesaid, we restore the issue to the file of the Assessing Officer for deciding afresh after considering the submissions made by the assessee and applying the ratio laid down by the Hon'ble Supreme Court in case of Maxopp Invest....
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.... under section 36(1)(viia) of the Act on account of advances made by the Rural Branches amounting to Rs. 1365.95 crore, however, it has claimed deduction under the said provision for an amount of Rs. 1376.51 crore which works out to 10% of the aggregate average advances made by the rural branches. Thus, it is evident that the deduction claimed by the assessee under section 36(1)(viia) of the Act is not as per the provisions made in the books of account. A reading of the aforesaid provision, makes it clear that the deduction allowable is in respect of the provision made for bad and doubtful debt not exceeding certain amount as provided under sub-clause (a) of the said provision. That being the case, assessee's claim that 10% of the aggregate average advances made by the Rural Branches and 7.5% of the total income has to be allowed as deduction irrespective of the provisions made in the books of account is not acceptable in view of the ratio laid down by the Hon'ble Punjab & Haryana High Court in State Bank of Patiala (supra). However, accepting the without prejudice submissions made by the learned Counsel for the assessee we hold that the deduction under section 36(1)(viia) of t....
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....t year 2003-04 has sustained the disallowance by concurring with the view expressed by the Departmental Authorities. Respectfully following the aforesaid decision of the Co-ordinate Bench in assessee's own case, we uphold the order of the learned Commissioner (Appeals) on this issue. Ground raised is dismissed. 27. In ground No. 5, the assessee has challenged the decision of the Departmental Authorities in including the profits of the foreign branches in the income of the assessee. 28. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that while computing the income the assessee has excluded the profits of the foreign branches amounting to Rs. 551,23,42,097 resorting to section 90 of the Act, called upon the assessee to explain why such income should not be included after considering the expenses against the income of the foreign branches. In reply, it was submitted by the assessee, the foreign branches from which the assessee has received such income are situated in countries with whom the Government of India has entered into double taxation avoidance agreements (DTAA). It was submitted, since the branches of the assessee in those countries const....
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....rly indicates its inclusion while arriving at the total income." 2. At the outset it is noticed that this issue has already been deliberated by the Tribunal in assessee's own case for AY 2003-04 in ITA No. 3534/Mum/2011 vide order dated 15-06-2012 and has allowed the claim of the assessee vide Para 34 and 35 as under: - "34. The next two grounds are interlinked, wherein the assessee has sought relief of Rs. 90,63,29,812/- in respect of profit in foreign branches. The AR submitted that complete and comprehensive submissions made before the CIT(A), who after considering the submissions, allowed the assessee's appeal. The AR, thus pointed out the relevant portion of the written submissions also placed before us. "The respondent had excluded the income from foreign branches based on Double Tax Avoidance Agreement entered into between the Govt. of India and the Govt. of the respective countries. The AO had granted relief only in respect of branches at Singapore and Japan and in respect of the other branches denied the benefit to the appellant. The CIT (A) allowed the claim of the respondent based on the decision of Hon'ble ITAT in appellant's own case. The respondent submits that th....
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....the other state. He also found that Article 7 stated that if enterprise of one State carries on business in another State through permanent establishment then the State where the business is carried out would levy tax on the profits attributable to the permanent establishment. On analysis of these provisions the learned CIT(A) found that Article 7 of the different DTAA.s are specific provision while Articles 23, 24 and 25 are general provisions. The coordinate Bench in the case of the assessee, in the earlier year's case held, "As a result he also found that the issue already decided by the Tribunal in assessee's own case for the earlier years have to be followed. We do not find any infirmity in the above finding of the CIT(A). Therefore consistent with the earlier finding of the Tribunal in assessee's own case for the earlier years case, we do not see any merit in the ground taken by the Revenue". The AR submitted that in the instant case also, the view should be taken in the assessee's favour." Even Hon'ble Bombay High Court also confirmed the decision of Tribunal in Income Tax Appeal No. 1630/Mum/2012 vide order dated 07-01-2015, wherein Hon'ble High Court has dismissed the Re....
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....d that in respect of security on which broken period interest is paid if remains unsold at the end of accounting year, neither the broken period interest paid appears on credit side in the valuation of security nor the corresponding broken period interest accrued up to 31st March is offered as income on accrual basis. Thus, the assessee is booking the expenditure in anticipation of future profit which, according to the Assessing Officer, is against the basic principle of accountancy. Thus, ultimately the Assessing Officer disallowed the deduction claimed by the assessee on account of broken period interest paid and added back to the income of the assessee. Though, the assessee challenged the disallowance before the first appellate authority, however, the learned Commissioner (Appeals) sustained the disallowance made by the Assessing Officer. 36. The learned Authorised Representative submitted that the issue in dispute now stands settled in favour of the assessee by the decision of the Hon'ble Supreme Court in Citi Bank N.A. v/s CIT, Civil Appeal No. 1549 of 2006 and also the decision of the Hon'ble Jurisdictional High Court in case of CIT v/s State Bank of India, ITA No. 2....
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....nt dated 1st August 2016, after following the decision of the said Court in case of American Express International Corporation (supra) has rejected Revenue's appeal against allowance of assessee's claim of deduction in respect of broken period interest paid. While doing so, the Hon'ble High Court has also upheld the decision of the Tribunal in holding that the broken period interest income has to be taxed on due basis instead of accrual basis. It is evident, the aforesaid decision of the Hon'ble Jurisdictional High Court was neither referred to nor examined by the Departmental Authorities while deciding the issue. In view of the aforesaid, we restore the issue to the Assessing Officer for deciding afresh keeping in view the decisions of the Hon'ble Jurisdictional High Court referred to above and only after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. 39. Ground No. 7 is not pressed, hence, dismissed. 40. In ground No. 8, the assessee has challenged the disallowance of Rs. 211,08,34,546, on account of loss arising out of payment made to Lehman Brothers Special Financing Inc. 41. Brief facts are, the assessee Bank is ....
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....with the view expressed by the Assessing Officer. 43. The learned Authorised Representative submitted that the assessee is dealer in forex and in course of such activity customers come to the assessee for entering into forward contract. He submitted that for hedging loss on forward contract, the assessee has entered into an agreement with LBSFI. He submitted, being aware of the fact that LBSFI has filed bankruptcy proceedings the assessee wanted to terminate the forward contract which led to arbitration proceedings and in pursuance to such arbitration proceedings an award was passed against the assessee and the assessee had to pay compensation to LBSFI. He submitted, the loss arising to the assessee on payment of compensation is in course of its regular business activity, hence, cannot be treated as speculation loss. Therefore, the provisions of section 73 of the Act are not applicable. The learned Counsel for the assessee submitted that as per section 43(5) of the Act, transaction relating to trading in derivative by banks are not treated as speculative transaction. He submitted, whenever there is gain from forward contract the assessee has offered it as business income and the A....
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....mmissioner (Appeals) with regard to the inclusion of profit relating to foreign branches. 49. While deciding ground No. 5 of assessee's appeal in ITA No. 4491/ Mum./2016, we have allowed assessee's claim that profit of foreign branches cannot be included at the hands of the assessee. In view of the aforesaid, this ground is dismissed. 50. In ground No. 3 and 4, Revenue has challenged the decision of the learned Commissioner (Appeals) with regard to applicability of the provisions of section 115JB of the Act to the assessee. 51. We have considered rival submissions and perused materials on record. As could be seen, learned Commissioner (Appeals) relying upon certain judicial precedents held that as per the provisions of section 115JB of the Act applicable to the relevant assessment year, it cannot be extended to Banking companies. 52. The learned Counsels appearing for the parties have fairly agreed that the issue is covered by various judicial precedents as referred to in Para-19.2 of the order of the learned Commissioner (Appeals). In view of the aforesaid, we dismiss this ground. 53. In ground No. 5, the Revenue has challenged the directions of the learned Commissioner (Appe....