AI Drafter 
TaxTMI 
TaxTMI 
2018 (11) TMI 1949
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....e Income Tax Act, 1961 (for short "the Act") r/w rule 8D of the Income Tax Rules, 1962. 4. Brief facts are, the assessee a public sector banking company is engaged in the business of banking and related financial activities. All activities of the assessee are governed by the guidelines issued by the Reserve Bank of India (RBI). For the assessment year under dispute, the assessee filed its return of income on 28th September 2012, declaring loss of Rs. 877,65,34,549. Subsequently, the assessee filed its revised return of income on 14th March 2014, revising the loss to Rs. 975,93,74,149. During the assessment proceedings, the Assessing Officer on verifying the return of income filed by the assessee noticed that in the relevant previous year, the assessee has earned exempt income by way of interest and dividend amounting to Rs 33,68,49,017. He also noticed that the assessee has incurred interest expenditure of Rs.20167.23 crore on borrowed fund as against interest received of Rs. 28480.67 crore on funds given as loan. Therefore, he called upon the assessee to explain why disallowance of expenditure attributable to earning of exempt income should not be made under section 14A of the ....
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....he Assessing Officer. 10. We have considered rival submissions and perused materials on record. As could be seen from the facts on record, in the preceding assessment year the assessee contested the disallowance made under section 14A of the Act r/w rule 8D on the plea that the investment in shares, etc., having been held as stock-in-trade no disallowance can be made under section 14A of the Act. However, while deciding the aforesaid claim of the assessee in assessment year 2011-12, vide order passed in ITA no.4491/Mum./2016 dated 25th May 2018, the Tribunal has restored the issue to the Assessing Officer for fresh adjudication with the following observations:- "14. We have considered rival submissions and perused materials on record. The basic contention of the assessee is, since the assessee being a Bank the 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 ....
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.... hold lands held by the assessee. After examining the nature of expenditure the Assessing Officer concluded that it is in the nature of a capital expenditure. Accordingly, he disallowed the same. 14. The learned Commissioner (Appeals) also upheld the disallowance made by the Assessing Officer. 15. The learned Authorised Representative fairly conceded before us that the aforesaid issue has been decided against the assessee by the Tribunal in its own case for assessment year 2004-05 and 2011-12. 16. The learned Departmental Representative agreed with the aforesaid submissions of the learned Counsel for the assessee. 17. We have considered rival submissions and perused materials on record. As could be seen, the claim of amortization of lease premium on lease hold land is a recurring dispute between the assessee and the Department from the preceding assessment year. While deciding the disputed issue in assessee's own case for assessment year 2004-05 in ITA no.5977/Mum./2011, dated 26th July 2007, the Tribunal upheld the disallowance made by the Assessing Officer. The same view was reiterated by the Tribunal while deciding assessee's appeal in ITA no. 4491/Mum./2016, dated 2....
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.... also been upheld by the Hon'ble Jurisdictional High Court while deciding Revenue's appeal in Income Tax Appeal no.1630/2012, dated 7th January 2015. He submitted, similar view was also expressed by the High Court while deciding the issue in assessee's own case for assessment year 2000-01. Thus, he submitted, the income of foreign branches cannot be included at the hands of the assessee. 22. The learned Departmental Representative vehemently opposing the contention of the assessee submitted that while deciding the issue in assessee's favour in the preceding assessment years the Tribunal has not taken note of the provisions of sub-section (3) of section 90 of the Act inserted w.e.f. 1st April 2004, as well as notification no.91/ 2008, dated 28th August 2008. He submitted, taking note of the provisions of section 90(3) of the Act and the notification issued in pursuance thereto, the Tribunal in case of Essar Oil Ltd. v/s ACIT, [2013] 94 DTR 153, has held that income of foreign branches has to be included in the income of the assessee for bringing into tax in India, however, necessary relief with regard to payment of tax is to be given to avoid double taxation. He submitted, fo....
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....er taking note of the provisions contained under section 90(3) of the Act and Central Govt. notification dated 28th August 2008, referred to above, has held that after assessment year 2004-05 income of the foreign branches would be includible in the income of the assessee for chargeability to tax in India. It is relevant to observe, though, in the case of Essar Oil Ltd. (supra), the Tribunal and the Hon'ble Jurisdictional High Court had decided the issue in favour of the assessee in preceding assessment year, however, while deciding the appeal for subsequent assessment year, the Tribunal taking note of the change in legal position arising due to section 90(3) r/w the Central Government Notification no.91/2008, dated 28th August 2008, held that income of foreign branches shall be included in the total income chargeable in India under the Act from assessment year 2004-05 onwards. Following the aforesaid decision, the Co-ordinate Bench in Bank of Baroda v/s ACIT, in ITA no.2927/Mum./2011, dated 25th July 2014, expressed similar view. It is relevant to observe, neither the effect / impact of section 90(3) r/w Central Government notification no.S.O. 2123(E) dated 28th August 2008, n....
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....ment and other approved securities purchased during financial year 2011-12. 26. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction of Rs. 128,64,00,000, on account of broken period interest paid on purchase of securities called upon the assessee to justify the claim. By way of an elaborate written submission dated 14th March 2014, though the assessee justified the deduction claimed, however, the Assessing Officer disallowed assessee's claim on the reasoning that once the accrued interest is brought to tax, the broken period interest cannot be allowed. In this context, he referred to the decision of the Hon'ble Jurisdictional High Court in American Express Bank. Though, the assessee challenged the disallowance before the learned Commissioner (Appeals), however, he also upheld the disallowance made by the Assessing Officer by following his own order in assessee's case for assessment year 2010-11. 27. The learned Authorised Representative submitted, the issue has been decided partly in favour of the assessee in assessment year 2011-12 in ITA no.4357/Mum./2016, dated 25th March 2018. Further, the learned ....
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....e reasoning that the assessee is not showing the broken period interest income on accrual basis. As could be seen, the Hon'ble Jurisdictional High Court in case of State Bank of India, vide judgment 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." 30. Respectfully following the aforesaid decision of the Co-ordinate ....