TaxTMI 
TaxTMI 
2024 (11) TMI 152
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.... 2007-08. 3) These are the cross appeals by State Bank Of India (Assessee/Appellant) and The Additional Commissioner Of Income Tax - 2 (2), Mumbai (The AO) against appellate order passed by The Commissioner Of Income Tax (Appeals) - 5, Mumbai [ The ld. CIT (A) ] dated 30/3/2013 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) of The Income Tax Act, 1961 (The Act) dated 20/3/2018 was partly allowed and therefore both the parties are aggrieved and are in appeal before us. 4) ITA number 3868/M/2013 is filed by the assessee wherein following grounds of appeal are raised:- 1. The learned CIT (A) erred in upholding the action of the assessing officer in taxing the deferred payment guarantee commission on receipt basis, without appreciating that such commission relates to subsequent years. 2.1 The learned CIT (A) erred in confirming the action of the assessing officer in making the disallowance under section 14 A to the extent of Rs. 311,976,518/- as under: - 0.5% of average investments (including subsidiaries) Rs. 30,84,14,003 and 74/- Interest expenditure in foreign currency loans Rs. 3,562,144 2....
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....not directing the assessing officer to not to tax the income earned by foreign branches of the appellant, based in countries with whom India has entered into a tax treaty. 7.2 The learned CIT - A erred in holding that the ground of appeal is not maintainable is no claim was made in the original/revised return or during the course of assessment proceedings. 5) Identical grounds are raised in the appeal of the assessee in ITA number 4105/M/2014 for assessment year 2007 - 08. 6) The learned AO in ITA number 4952/M/2013 has raised following grounds of appeal:- 1. The order of CIT (A) is opposed to law and facts of the case. 2. on the facts and circumstances of the case and in law, the learned CIT (A) has erred in deleting the disallowance of Rs. 62.09 lakhs incurred by the assessee on reservation of seats in the schools for the children of the bank officers without appreciating that the amount was not incurred bullion are usually for the purposes of its business. 3. (a) on the facts and circumstances of the case and in law, the learned CIT A has erred in holding that no disallowance under section 14 A with rule 8D (2) (ii) is called for, thereb....
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....ee vide letter dated 12/3/2000 date has clarified that the foreign taxes paid is of Rs. 582,463,026/- however the Double Taxation Relief and withholding tax claimed by the assessee is only Rs. 522,365,018/- and therefore the relief was allowed to that extent only. The learned assessing officer has made several disallowances/additions/rejected the claims, therefore the assessee is aggrieved with the same, preferred an appeal before the learned CIT - A who disposed of the appeal of the assessee by appellate order dated 30/3/2013 allowing the appeal of the assessee partly. Therefore, both the parties are aggrieved and in appeal before us raising above stated grounds. 9) Facts are similar for assessment year 2007 - 08 also as agreed by the parties. 10) We first take up the appeal of the learned assessing officer. 11) Ground number 1 of the appeal is general in nature and therefore same is dismissed as no specific arguments were raised, but the issue of grievance was raised in subsequent grounds. 12) Identically ground number 1 in the appeal of the learned assessing officer for assessment year 2007 - 08 is also dismissed. 13) As per ground number 2 of the appeal, the lear....
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....n the judgment in case of Mahindra and Mahindra Ltd versus CIT [261 ITR 501] has held that the contribution made by the assessee to societies which runs the schools in which children of the employees of the company study, is an allowable expenditure because it was incurred predominantly for benefit of staff. He further held that this issue has been decided in favour of the assessee by his predecessor in earlier assessment years 1999 - 2000, 2000 - 01, 2002 - 03, 2003 - 04, 2004 - 05 and 2005 - 06 in favour of assessee. He further held that the coordinate bench has also decided the issue in favour of the assessee for assessment year 1992 - 1993 to 1995 - 1996. Therefore, following the principles of judicial consistency, the disallowance made by the learned assessing officer was deleted. 16) The learned AO is aggrieved by the same. The learned special counsel and the learned CIT departmental representative argued that it may be appreciated that bank has spent money for the admission of children of senior bank officers. Such money is directly paid by the assessee to the schools. Such amount is not incurred for business purposes. It is not clear whether such amount paid by the asses....
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....ture. He further stated that it is not the case of the learned assessing officer that whether such amount paid by the assessee on behalf of the parents of the children is reflecting as income of such parents or otherwise because of the reason that the amount is paid by the assessee to facilitate the availability of seat for the employees of the bank. He submits that it is not the liability/ burden of the parents which is shared by the assessee, but it is the expenditure incurred by the assessee to facilitate the education of the children of the staff and therefore such expenses are incurred wholly and exclusively for the purposes of the business of the assessee. 20) We have carefully considered the rival contention and perused the orders of the learned lower authorities. As we find that this issue is squarely covered in favour of the assessee by the decision of the honourable High Court in case of the assessee for assessment year 1996 - 1997 as per order dated 1 August 2016, which is not disputed by the revenue before us, therefore, we confirm the order of the learned CIT - A on this issue deleting the disallowance of Rs 62.09 Lakhs. Further argument raised by the learned depart....
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...., leasing, project finance, retail banking and international banking. The source of funds is the deposit of the bank which constitutes 76.95% of the total funds available in the balance sheet. The reserve and surpluses account for only 5.49% of the assets. These figures are reported in the bank's annual statement for financial year 2005 - 06. d) Since the funds are not separately earmarked for each division, it can only be concluded that a common pool of funds, which is mainly in the nature of borrowings, is available to the different divisions for carrying on the business activity. The investment in securities is carried on by the Treasury division, while Foreign Exchange advances were made by the international division. The various business activities of the assessee are clearly demarcated, however there is no separate demarcation of funds. e) Therefore, the principles laid down in the decision of the honourable Supreme Court in Rajasthan warehousing versus CIT [242 ITR 450 ] that when all venture carried on by the assessee do not constitute one individual business, the principle of apportionment of expenditure will apply. The same principle has been laid do....
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....onization with the provisions of the law. He also rejected the working of the learned assessing officer applying the cost of earning the interest income compared with the investment. He asked the assessee to work out the disallowance in relation to interest on exempt income from foreign currency loans. Assessee submitted a detailed working in respect of such disallowances. Assessee also submitted that it has the share capital of Rs. 526 crores, reserve and surplus of 27,117 crores and current account balances on which no interest is payable of Rs. 67,995 crores along with the profit of the current year of Rs. 40 406 crores. Against this the average investment is only Rs. 6168 crores. The learned CIT - A considered the above explanation and found that in earlier year for assessment year 2003 - 04 to 2005 - 06, this issue was decided and disallowance out of only expenses was made. Based on this he computed the disallowance of Rs. 311,976,518/-. Against this both the parties are in appeal before us. 27) The learned AO challenging the deletion of the disallowance of Rs. 3,502,060,685/- and assessee is challenging the sustenance of disallowance to the extent of Rs. 31.19 crores as pe....
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.... funds) were used by the assessee to earn exempt income. This principle is laid down by the Hon'ble Supreme Court in the case of M/s Maxop Investment Ltd Vs CIT [ 91 TAXMANN.COM 154 (SC)].For the sake of reference the relevant portion from the decision of Hon'ble Supreme Court is reproduced as under-. "26. ------- 9. In our opinion, the mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares. In the absence of any such materials placed by the assessee, in our opinion, the authorities below rightly held that proportionate amount should be disallowed having regard to th....
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....res. The funds utilized by the assessee being mixed funds and in view of the provisions of Rule 8D(2)(ii) of the Income Tax Rules the disallowance is confirmed at Rs. 10,49,851/-, we find no merit in the ad hoc disallowance made by the CIT (Appeals) at Rs. 5,00,000/-. Consequently, ground of appeal raised by the Revenue is partly allowed and ground raised by the assessee in cross-objection is allowed..." Taking note of the aforesaid finding of fact, the High Court has dismissed the appeal of the assessee observing as under: "In the present case, after examining the balance-sheet of the assessee, a finding of fact has been recorded that the funds utilized by the assessee being mixed funds, therefore, the interest paid by the assessee is also an interest on the investments made. Such being a finding of fact, we do not find that any substantial question of law arises for consideration of this Court." After going through the records and applying the principle of apportionment, which is held to be applicable in such cases, we do not find any merit in Civil Appeal No. 1423 of 2015, which is accordingly dismissed". iv. Further, it is submitted that when....
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....ts, even though the Ld. A.R contended that the said examination should be carried out as on the date of Balance sheet. We may explain our view with an example. Let us assume that the capital of the assessee is Rs. 1.00 lakh and the same was used to give rent advance and in purchasing office furniture. Let us further assume that the assessee borrows interest bearing loan of Rs. 10.00 lakh and uses the same for making investments. Hence, his Balance sheet as on the date of making investment would reflect as under:- LIABILITIES AMOUNT ASSETS AMOUNT Capital 1,00,000 Furniture 50,000 Loan funds 10,00,000 Office advance 50,000 Investments 10,00,000 Total 11,00,000 Total 11,00,000 If one examines the above Balance sheet, he can easily conclude that the investments have been made out of loan funds. Let us further elaborate this matter. Let us assume that the assessee has made a profit of Rs. 20.00 lakhs during the year under consideration. Then the Balance Sheet at the yearend would reflect as under: - LIABILITIES AMOUNT ASSETS AMOUNT Capital 21,00,00....
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....e are of the related category, tax implication would not arise against the appellants, from the said circular. 27. The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under section 14A of Income Tax Act for investments made in tax-free bonds/securities which yield tax-free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favoring the assessee's. 28. The above conclusion is reached because nexus has not been established between expenditure disallowed and earning of exempt income. The respondents as earlier noted, have failed to substantiate their argument that assessee was required to maintain separate accounts. Their reliance on Honda Siel (supra) to project such an obligation on the assessee, is already negated. The learned counsel for the revenue has failed to refer to any statutory provision which obligate the assessee to maintain separate accounts which might justify proportionate disall....
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....he income tax Act 1961 for investment made in tax-free bonds, securities which yielded tax-free dividend and interest to the assessee. The learned authorized representative heavily relied upon the decision of the honourable Supreme Court in case of Principal Commissioner Of Income Tax Versus Syntax Industries (2018) 93 taxmann.com 24, honourable Bombay High Court in case of CIT versus HDFC Bank Ltd (2016) 383 ITR 529, CIT versus HDFC bank (2014) 366 ITR 505, principal Commissioner of income tax versus Sapnco Ltd in ITA number 488/2016 dated 26th number 2018 and principal Commissioner of income tax versus JSW power trading Co Ltd in ITA number 1075/2014. It was the claim of the learned authorized representative that no disallowance is required under rule 8D (2) (ii) when the assessee has sufficient own fund is covered by the decision of the coordinate bench in assessee's own case for assessment year 2009 - 10 in ITA number 3645/M/2016 and ITA number 4564/M/2016 dated 6 June 2023. Therefore, it was submitted that no disallowance of interest could have been made which is rightly deleted by the learned CIT - A. 31) The learned authorized representative further submitted that the....
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....as restricted the disallowance to the extent of 1 % of the same to income for the assessment year 2005 - 06 as per order dated 22 March 2022 and for assessment year 2003 - 04 and 2004 - 05 as per order dated 30 September 2021 and further the order of the coordinate bench for assessment year 2001 - 02 and 2002 - 03 dated 12 July 2021 and for assessment year 1982 - 83 to 83 - 84. The learned authorized representative also placed reliance on the decision of the coordinate bench in case of American Express bank Ltd versus additional CIT (2013) 55 SOT 136 (MUM). 36) The learned authorized representative also submitted a cash flow chart for assessment year 2006 - 2007 and 2007 - 2008 wherein it is specifically shown that no new investments have been made during the assessment year 2006 - 07. Even otherwise it was stated that if only those categories of investments are to be considered where there is an increase as compared to assessment year 2005 - 06, that would still amount to iron and 5010 crores as the cash flow of the bank during the current year is Rs. 45,909 crore, it is evident that the bank had sufficient own funds to make investments during the year. He further stated that t....
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....e total interest income of foreign offices and total interest expenditure of such foreign offices and worked out the ratio of expenditure to the income in percentage terms which is 81.36%. Over and above, he assumed 5% administrative expense which comes to the cost of earning exempt income at the rate of 86.36% of such income. Accordingly, on the interest income of foreign interest of Rs. 86,53,01,178/- he determined the total disallowance of Rs. 747,243,395/-. Thus, according to him the total claim of tax-free income is Rs. 6,000,888,070/- the disallowance under section 14 A is Rs. 3,814,037,203/-. Thus, the learned assessing officer has disallowed 63.56 percentage of the exempt income under section 14 A of the act. Out of this 58.56 percentage is the interest expenditure disallowed and 5% is the administrative expenses disallowance. The learned CIT - A sustained the disallowance of 0.5% of the average investment resulting into sustenance of such disallowance of Rs. 311,976,518/-. 40) The issue here is bank has sufficient own interest free funds then the amount of investment from which tax-free income is earned during the year, therefore, no disallowance on account of interest ....
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.... 14A is not warranted, in absence of clear identity of funds. 10. The decision of the ITAT was reversed by the High Court by acceptance of the contentions advanced by the Revenue in their appeal and accordingly the Assessee Bank is before us to challenge the High Court's decision which was against the assessee. 11. Since, the scope of section 14A of the Act will require interpretation, the section with sub-clauses (2) and (3) along with the proviso is extracted hereinbelow:- "14A. Expenditure incurred in relation to income not includible in total income - (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in res....
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....ate amount of the interest paid on the borrowings/deposits, was considered to have been incurred to earn the tax-free income on bonds/shares and such proportionate amount was disallowed applying section 14A of the Act. 17. In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure. For accepting such a proposition, it would be helpful to refer to the decision of the Bombay High Court in Pr. CIT v. Bombay Dyeing & Mfg. Co. Ltd. [IT Appeal No. 1225 of 2015, dated 28-11-2017], where the answer was in favour of the assessee on the question, whether the Tribunal was justified in deleting the disallowance under section 80M of the Act on the presumption that when the funds available to the....
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.... bonds/shares using interest free funds, under section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax-free securities then in such cases, disallowance under section 14A cannot be made. 21. On behalf of Revenue Mr. Arijit Prasad, the learned Senior Advocate refers to SA Builders Ltd. v. CIT [2007] 158 Taxman 74/288 ITR 1 (SC), where this Court ruled on issue of disallowance in relation to funds lent to sister concern out of mixed funds. The issue in SA Builders is pending consideration before the larger bench of this Court in Addl.CIT v. Tulip Star Hotels Ltd. [SLP (C) No. 14729 of 2012, dated 7-2-2019]. The counsel therefore, argues that there is no finality on the issue of disallowance, when mixed funds are used. On this aspect, since the issue is pending before a larger Bench, comments from this Bench may not be appropriate. However, at the same time it is necessary to distinguish the facts of present appeals from those in SA Builder Ltd. Tulip Star Hotels Ltd.'s case (supra). In that case, loans were extended to sister concern ....
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.... by not permitting deduction of the expenditure incurred in relation to income, which does not form part of total income, is to ensure that the assessee does not get double benefit. Once a particular income itself is not to be included in the total income and is exempted from tax, there is no reasonable basis for giving benefit of deduction of the expenditure incurred in earning such an income........" The following was written explaining the scope of section 14- A(1): "41. In the first instance, it needs to be recognised that as per Section 14-A(1) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee "in relation to income which does not form part of the total income under this Act". Axiomatically, it is that expenditure alone which has been incurred in relation to the income which is includible in total income that has to be disallowed. If an expenditure incurred has no causal connection with the exempted income, then such an expenditure would obviously be treated as not related to the income that is exempted from tax, and such expenditure would be allowed as business expenditure. To put it differently, such expe....
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....epting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect.............." 24. Another important judgment dealing with section 14A disallowance which merits consideration is Godrej & Boyce Mfgr. Co. Ltd. v. Dy. CIT [2017] 1 SCC 421. Here the assessee had access to adequate interest free funds to make investments and the issue pertained to disallowance of expenditure incurred to earn dividend income, which was not forming part of total income of the Assessee. Justice Ranjan Gogoi writing the opinion on behalf of the Division Bench observed that for disallowance of expenditure incurred in earning an income, it is a condition precedent that such income should not be includible in total income of assessee. This Court accordingly concluded that for attracting provisions of Section 14A, the proof of fact regarding such expenditure being incurred for earning exempt income is necessary. The relevant portion of Justice Gogoi's judgment reads as follow: "36. ......... what cannot be denied is that the requirement for attracting the provisions of section 14-A (1) of the Act is proof of the fact that the expenditure sought to....
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....e failed to substantiate their argument that assessee was required to maintain separate accounts. Their reliance on Honda Siel (supra) to project such an obligation on the assessee, is already negated. The learned counsel for the revenue has failed to refer to any statutory provision which obligate the assessee to maintain separate accounts which might justify proportionate disallowance. 29. In the above context, the following saying of Adam Smith in his seminal work - The Wealth of Nations may aptly be quoted: "The tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid ought all to be clear and plain to the contributor and to every other person." Echoing what was said by the 18th century economist, it needs to be observed here that in taxation regime, there is no room for presumption and nothing can be taken to be implied. The tax an individual or a corporate is required to pay, is a matter of planning for a taxpayer and the Government should endeavour to keep it convenient and simple to achieve maximization of compliance. Just as the Government does not wish fo....
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....ted to the extent of 1% of the exempt income earned by the assessee is also apply to this case. Accordingly ground number 4 of the appeal of the AO and 1 of the appeal of the assessee are decided accordingly. 45) Ground number 4 (a) of the appeal is against the broken period interest expenditure where the facts are mentioned in paragraph number 9 of the assessment order. Broken period interest relating to government securities refers to the interest relatable the period from due date for payment of interest to the date of purchase or sale of such securities. When a security is purchased by a bank, the interest from the last due date of payment of interest till the date of purchase, is an interest which is considered as broken period interest. Therefore, the accounting treatment of such interest is given by the banks by debiting it to the profit and loss account. Similarly, when a security is sold, interest accrued from the last due date of payment of interest to the date securities are sold is broken period interest income recognized by the banks to the profit and loss account as income. Thus, when securities are purchased, any broken period Interest expenditure is debited to th....
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....s backed by the decision of the honourable Bombay High Court in case of American Express international banking Corporation (income tax reference number 173 of 1983/75 of 1986 and 346 of 1987 dated 25/9/2002) (2002) (125 taxman 488) and in the case of Union Bank of India (income tax reference number 149 of 1995 dated 9/10/2002) wherein it has been held by the honourable High Court that interest paid on broken period should be allowed as revenue expenditure. The learned assessing officer has categorically held that the decision of the honourable Bombay High Court has not been accepted by revenue and therefore the disallowance of Rs. 151,011,972/- was made. 49) The assessee aggrieved with the same, challenged it before the learned CIT - A as per ground number 8 which has been decided as per paragraph number seven of his order. He deleted the above addition. He held that in assessee's own case for assessment year 2003 - 04 the learned CIT - A following the decision of the honourable Bombay High Court in case of American Express international banking Corporation (supra) and honourable Supreme Court in case of Citibank NA has deleted the above addition. Further in assessee's o....
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....y). 52) The learned departmental representative further give an example that if a government security with face value of Rs 100/- and 12% interest per annum, wherein the date of interest is November and first May respectively, if in the month of January the assessee buy the Security for Rs 102/- out of which Rs. 2 is broken period interest and if it remains unsold and Rs 100/- is debited as purchase price of security which remains in the value of the closing stock and Rs. 2 is debited in profit and loss account as broken period interest expenditure. Since the interest is not offered for taxation on due basis, there is no realization of profit in connection with broken period interest expenditure of Rs. 2/-. This would clearly distort the picture of correct profit. In short, his contention is that the value of security in closing stock should be Rs 102/- and not Rs 100/-. 53) It was further contended that merely because the assessee has credited broken period interest in respect of some other securities, it would not justify debiting the broken period interest against book profit in anticipation of future profit of following years. 54) The learned departmental representativ....
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....the financial year requires to be disallowed and added to the income of the assessee. 57) The learned authorized representative stated that the issue stands decided in favour of the assessee by the coordinate bench in assessee's own case for last several assessment years and the appeal filed by the assessee against the order of the coordinate bench before the honourable Bombay High Court for assessment year 1996 - 1997 was dismissed as per order dated 1 August 2016. The assessee submitted the copies of such decisions of the coordinate bench and the decision of the honourable Bombay High Court. He submits that when honourable high court has decided these issues, all these permutation and combination argued by the ld. DR, may also have been considered, though not mentioned in the orders, but that does not give permission to lower court to question it now. In view of this, it was submitted that in view of the principles of consistency, the issue must be decided in favour of the assessee. 58) We have carefully considered the rival contention and perused the orders of the learned lower authorities. We find that identical issue arose in the case of the assessee bank itself wher....
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....eing broken period interest is not allowable as a revenue expenditure. 8. Aggrieved by the aforesaid order, assessee preferred further appeal before the Tribunal. 9. Tribunal framed the question for consideration as under: Whether broken period interest paid on purchase of securities is revenue expenditure since the securities constitute stock-in-trade? 10. After hearing rival submissions and on perusal of the decision of the Supreme Court in Vijaya Bank Ltd. (supra), Tribunal noted that the decision of the Supreme Court in Vijaya Bank Ltd. (supra) was explained by the Central Board of Direct Taxes (for short, 'CBDT' hereinafter). On the same lines, Kerala High Court in CIT v. Nedungadi Bank Ltd. [2003] 130 Taxman 93/264 ITR 545 distinguished the decision of the Supreme Court in Vijaya Bank Ltd. (supra), which held that if the securities were held by the banking company as stock-in-trade of the business, interest paid for the broken period would constitute an allowable deduction in the hands of the assessee. Tribunal held that admittedly assessee had purchased the securities to hold them as stock-in-trade. Therefore, the interest paid for....
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....06, dated 12-8- 2008] where the question which fell for consideration was whether the interest paid for broken period should not be considered as part of the purchase price but should be allowed as revenue expenditure in the year of purchase of securities? He submits that in the said decision, Supreme Court accepted the distinction pointed out by the Bombay High Court in American Express International Banking Corpn. (supra) and agreed with the view expressed that judgment in Vijaya Bank Ltd. (supra) would have no application. He therefore submits that appeal by the Revenue has no merit and should be dismissed. 14. Submissions made by learned counsel for the parties have received the due consideration of the Court. 15. Issue before the Court is whether broken period interest paid on purchase of securities is revenue expenditure since the securities constitute stock-in-trade? 16. To appreciate the above question, it would be appropriate to first examine the meaning of the expression "broken period interest". This has been explained by the Bombay High Court in American Express International Banking Corpn. (supra) in the following manner: "6. Before ....
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..... Therefore, it receives interest for the entire six months, though it bought the security on August 11, 1976. In the above example, since the security was sold/transferred on August 11, 1976 (i.e., after due date for payment of interest), interest had accrued to the transferor/seller from the last due date, i.e., May 12, 1976 up to August 11, 1976." 17. As explained by the Bombay High Court, every bank is required to maintain a Statutory Liquidity Ratio (SLR). For that purpose, every bank subscribes to government securities. One such security is known as Subsidiary General Ledger (SGL) which is maintained in the Public Debt Office in the Reserve Bank of India. Every bank is required as a part of its banking business to subscribe to this loan. Like any other security, such a loan/SGL is also transferable. Reserve Bank of India pays interest on due dates on such securities to the holders of the securities every six months. After subscribing to the said loans, banks are free to transfer such loans for consideration to other banks. Reserve Bank of India pays interest to the holder on the balances in a security if in its books the said security stands in the name of that holde....
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....t of the four substantial questions of law which were considered by the Kerala High Court, question No. 1 pertained to whether investments made by the assessee in the form of government securities acquired for the purpose of complying with the requirements of the provisions of the Banking Regulation Act i.e., to maintain SLR, could be treated as trading asset/stock-in-trade of the business of the assessee? The 4th question considered by the Kerala High Court was as to whether interest paid for the broken period in the purchase of securities is an allowable deduction? Referring to the Circular dated 24-4-1991 issued by the CBDT, Kerala High Court held that securities held by banks constitute their stock-in-trade or investment and consequently loss claimed by banks on the valuation of their securities should be allowed as a deduction in computing the taxable profits. Therefore, Kerala High Court confirmed the view taken by the Tribunal that securities held by the assessee bank were stock-in-trade of the business of the assessee bank and that the notional loss suffered on account of revaluation of the said securities at the close of the year was an allowable deduction in the computati....
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....t to broken period interest paid on securities which are on closing stock. Thus, we do not find any merit and hence we confirm the order of the ld. CIT (A) in allowing the broken period interest included in the cost of securities at the time of purchase correctly written off/ debited to profit and loss account as allowable interest. Accordingly Ground no 4 (a) is dismissed. 60) Ground number 5 (a) for assessment year 2007 - 08 about disallowance deleted of Rs. 600,785,375/- is also of the similar nature. Therefore, as we have already discussed the issue and decisions of the honourable High Court, while deciding ground number 4 (a) for assessment year 2006 - 07, we also dismiss ground number 5 (a) for assessment year 2007 - 08. 61) Ground number 4 (b) for AY 2006-07 is with respect to the interest on securities on due basis, whereas the claim of the learned AO is that when the assessee is following mercantile system of accounting the interest on securities to be accounted for on accrual basis while arriving at profit. 62) During the course of the proceedings the assessee submitted the details of interest accrued but not due as on 31st of March 2006 of Rs. 34,745,979,218/-. ....
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....d High Court is relying on the charging provision contained in section 5 and is based on the stand that Section 145 cannot override provisions of section 5 of the act. It was submitted that while interpreting charging provisions the tribunal has missed an important link that is the definition of total income in which charge of income tax has been created by virtue of provisions of section 4 and 5 and therefore the link of charging provision with provisions of section 145 has also been missed. It was further stated that when the assessee on accrual method of accounting has stated in its books of accounts that the above income has accrued to the assessee, now the assessee is precluded from saying that the income has not accrued for the purpose of taxation. It was further submitted that provisions of section 145 (1) are mandatory, and the proper method of accounting regularly followed by the assessee is binding for the computation of total income of the assessee. The learned departmental representative vehemently placed reliance on the decision of the honourable Supreme Court in case of Saharanpur cotton manufacturing Co Ltd 6 ITR 36. The learned departmental representative vehemently....
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....nch for assessment year 1996 - 1997 as per order dated 1 August 2016 has decided the issue in favour of the assessee and therefore now this issue is squarely covered in favour of the assessee and cannot be disturbed. 67) The learned DR submitted that the honourable High Court in assessee's own case has held following the decision of Director of income tax (International taxation) versus Credit Suisse first Boston (Cyprus) Ltd (2013) 351 ITR 323. Thus, it was stated that if the above logic is applied then the assessee also cannot be granted any deduction of interest expenditure which has accrued unless it is paid by the assessee. He submits that the principles of accrual cannot be different in the books of accounts and for income tax purposes and further it can also not be different for accrual of expenditure and accrual of income. 68) We have carefully considered the rival contention and perused the orders of the learned lower authorities. The point here is that as per the accounting policies of the bank, the revenue is recognized on accrual basis. Thus, when interest accrues but not due then it is recognized as income. However, in the income tax return assessee is showin....
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....f the honorable high court, on carefully consideration of the argument of the learned departmental representative, various examples given by the learned departmental representative, the accounting methodology applied by the assessee for revenue recognition of accrual, and also the method adopted by the assessee of offering income only which is accrued in the due instead of accrual as on the last day of the accounting year, but, respectfully following the decision of the honourable High Court, we find that the addition to the income cannot be made of interest accrued as on the last day of the accounting year but only the income which has accrued and due can be charged to tax, therefore, this ground of appeal no 4 (b) does not survive, hence, dismissed. 72) Identical ground is raised by the learned assessing officer for assessment year 2007 - 08 as per ground number 5 (b) and ground number 8 of his appeal. As we have already decided ground number 4 (b) for assessment year 2006 - 07, we also dismiss ground number 5 (b) of the appeal of the AO for assessment year 2007 - 08. 73) Ground number 5 (a) and (b) for AY 2006-07 are with respect to the loss on revaluation of investments a....
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.... 802. It was also contested that securities of the bank are in the nature of stock in trade and as held in the decision of the honourable Supreme Court in case of United Commercial Bank Versus Cit 240 ITR 355 that a bank is entitled for depreciation in valuation of closing stock. Several other judicial precedents were pressed into service. Thus, it was contested that the amortization of premium in respect of investments 'held in 'held to maturity' category is another method of valuation which is prescribed by the reserve bank of India and is consistently followed by the bank. Alternatively, assessee also contested that the excess of cost price over face value should be allowed as a deduction in the initial year in itself and further alternatively the entire premium should be allowed as revenue deduction in the year in which the securities are redeemed. 75) The learned assessing officer held that in respect of held to maturity securities the assessee follows different systems which are inconsistent with each other. When the purchase price is less than the face value at which security is sold, the difference is booked as profit only in the year of sale, but when the cost price is ....
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....er followed that in assessee's own case for assessment year 2002 - 03 and 2003 - 04, the learned CIT - A has allowed the claim of the assessee and accordingly he deleted the disallowance of Rs. 12,799,950,899/- being the amortized amount of total premium in investment held in held to maturity category of the investment. 77) The learned departmental representative aggrieved with the same and reiterated findings of the learned AO. It was further submitted that the learned CIT - A has allowed the appeal of the assessee without appreciating the fact that on similar issue appeal has been filed for the assessment year 95 - 96 before the honourable High Court in ITA number 625/2010. 78) The learned authorized representative referred to his note on amortization of premium paid in held to maturity category of investment placed at page number 287 - 291 of the paper books. It was further stated that the issue is decided in favour of the assessee by the several decision of the coordinate bench in assessee's own case and further the honourable jurisdictional High Court has decided the issue in favour of the assessee for assessment year 96 - 97 as per order dated 1 August 2016, for....
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....ial contribution made to any provident fund/superannuation fund. As per rule 87 of the IT Rules, the ordinary annual contribution by the employer to the fund in respect of any particular employee shall not exceed 27% of his salary for each year as reduced by the employer's contribution to any provident fund in respect of the same employee for that year. Secondly, as per rule 88 Of IT Rules the amount to be allowed as a deduction on account of initial contribution which an employer make in respect of past services of an employee admitted to the benefit of the fund shall not exceed 27% of employee's salary. Aggrieved, assessee preferred an appeal before the CIT (A). The CIT (A) placed reliance on the decision of Hon'ble Bombay High Court in the case of Glaxo Smith Kline Pharmaceuticals Ltd (ITA No. 2232 of 2011) and ruled in favor of the assessee. 82) The learned departmental representative vehemently submitted that It may be appreciate that in the case of Commissioner of Income Tax, Trivandrum v. State Bank of Travancore (50 taxmann.com 240), Hon. Kerala HC held that the when the expenditure incurred by the assessee for pension fund is not admissible u/ s 36 of the act, the s....
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....f any Financial Corporation Act as has been noted by the assessing officer. The assessee bank is also not incorporated as a corporation within the meaning of Companies Act. As per section 3 (1) of The State Bank of India Act, 1955,.- ''A Bank to be called the Stale Bank of India shall be constituted to carry on the business of banking and other business in accordance with the provisions of this Act and for the purpose of taking over the undertaking of the Imperial Bank". 3. As such, it is found that a assessee bank is neither an Indian company registered under the provisions of Companies Act, 1956 nor a Corporation established by Central or State or Provincial Act nor any institution or association or body declared by the Board or any other institution and not included in the definition of the eligible entities to claim deduction under section 36(1)(viii) of Income Tax Act. Therefore, considering the facts and circumstances of the case and in law the assessee is not eligible for the deduction under section 36(1)(viii) of the Income Tax Act 88) The learned authorized representative vehemently submitted that this issue stands covered in favour of the assessee by t....
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..... Accordingly ground number 7 of the appeal of the learned AO is allowed and ground number 3 of the appeal of the assessee is also allowed. 90) Accordingly, appeal filed by the learned AO for assessment year 2006 - 07 is dismissed and appeal for assessment year 2007 - 08 stands partly allowed. 91) Now we come to the appeal of the assessee in ITA number 3868/M/2013 for AY 2006-07 and ITA No 4105/MUM/2014 for AY 2007-08. 92) As per ground number 1 for AY 2006-07, the assessee has challenged the order of the learned CIT - A wherein the order of the learned AO was upheld about the taxing the deferred payment guarantee commission on receipt basis without appreciating that such commission relates to subsequent years. The fact shows that during the year the assessee has received commission on deferred payment guarantee in advance covering the entire period of guarantee. The commission was relatable to future years was not included in the current year's income but is credited to the deferred payment guarantee commission adjustment account. The assessee has received guarantee commission during the year of Rs. 148,241,129/- but has credited the same to the profit and loss accoun....
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.... officer has given effect of the order of the coordinate bench and has allowed the deduction for the deferred payment guarantee commission for the assessment year 1984 - 85 to 1989 - 90 and 1996 - 97. 95) The learned departmental representative supported the order of the learned assessing officer and further held that assessee cannot claim that such amount received by the assessee is in the nature and character of service fee which can be spread over for the period of bank guarantee and therefore considering the facts and circumstances of the case and the provision of the Act the assessing officer and the learned CIT - A is correct in taxing the guarantee fee income as and when the guarantee is issued by the bank. It was further stated that the learned assessing officer has placed reliance on the decision of Kerala Urban Development & Finance Corporation[266 ITR 245]. 96) We have carefully considered the rival contention and perused the orders of the learned lower authorities. The only issue in this ground of appeal is that when the bank issues guarantee, and receives the guarantee commission, whether guarantee commission should be accrued and chargeable to tax in the hands o....
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....39; Association of India the guarantee commission was refundable, if the guarantee is cancelled before the expiry of the full period. 100) Facts do not show that such deferred guarantee commission is refundable at all subsequently. Thus, facts in the case of assessee are distinguishable. If such guarantee commission is not received on the basis of time period for which guarantee is issued, but at the time of issue of guarantee, there is no logic and reason in saying that such guarantee commission will accrue as per period of time for which guarantee is issued. Further the facts of the decision of Honourable Kerala High court are more near and adjunct to the case of assessee. 101) We find that the learned Departmental Representative has correctly relied on the judgment rendered by the Hon'ble Kerala High Court in Kerala Urban Development Finance Corpn. Ltd. v. CIT [2004] 266 ITR 245 / 136 Taxman 24 in which case the administration and supervision charges were collected and retained by the assessee, a nodal agency for disbursement and loan realized by HUDCO to various urban local bodies. It has been held in this case that the income accrued to the assessee at the time of di....
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....allowance of depreciation on leased assets of Rs. 267,535,992/- is contested. 107) The fact shows that in computation of income Rs. 376,913,650/- has been claimed as a depreciation on lease assets pertaining to various leases transactions entered into by the assessee during the previous year as well as earlier years. Assessee has entered into several lease transactions as per standardized lease agreement called master lease agreement which the assessee has entered into with the lessees in respect of all these transactions. In all these cases the lessee approaches the assessee for the lease finance purchase assets required by the borrower. Assessee has claimed to have acquired new assets or equipment's at the instances of such lessees and have given them on lease in the capacity of absolute honour of such new assets and the lessees to possession of such assets directly from the manufacturers. The bank's sanction is the advance after examining the request of the applicant in the same manner as it does when the loan is sanctioned. In this case the invoices are raised in the name of the bank and ability gate to treat itself as the owner and claimed depreciation. The learned asse....
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.... as per ground number 7 which was decided as per paragraph number 6 of his appellate order wherein it was held that it is a mere case of advancement of loan by the assessee. Wherein it has been held that there is no genuine leasing. Accordingly, he confirmed the disallowance of depreciation. 109) The learned authorized representative submitted that this issue is decided against the assessee by the Tribunal in its own case by several orders of the coordinate benches however the jurisdictional Bombay High Court has admitted the said issue on appeal by the assessee for assessment year 96 - 97, 97 - 98 and 98 - 99. 110) The learned departmental representative submitted that as the issue is decided against the assessee by the coordinate benches for several assessment years, this ground on similar facts and circumstances deserves to be dismissed. 111) We have carefully considered the rival contention and perused the orders of the learned lower authorities. This issue is admitted by the learned authorized representative that it has been decided against the assessee by the coordinate benches in assessee's own case, therefore respectfully following those decisions and reasons p....
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....assessment is not affected, controlled, or limited in any way by the proviso to section 36 (1) (vii)" a similar view has been taken by honourable Kerala High Court in case of South Indian bank Ltd versus CIT (262 ITR 579) (Kerala). Accordingly, the debts actually written off, which does not arise out of rural advances, are not affected by the proviso to clause (vii) and that only those bad debts which arise out of rural advances are to be limited in accordance with the proviso. Four the assessment year 2006 - 07, we have not claimed for any deduction on account of bad debts written off. However, it should be allowed deduction in respect of write-off of non-rural branch advances amounting to Rs. 14,968,666,681/- based on the decisions mentioned above." 115) The claim of the assessee is that in case of an assessee to which clause (viia) applies the amount of deduction relating to any such debt and part thereof shall be limited to the amount by which such debt part thereof exceeds the credit balance in the provision for bad and doubtful debts accounts made under that clause. This is relevant for claim of bad debts allowance under the proviso to section 36(1)(vii) ....
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....urther invited our attention to the decision of the honourable Supreme Court in case of Catholic Syrian bank Ltd versus CIT (2012) 343 ITR 270, the decision of the honourable madras High Court in case of CIT versus city Union Bank Ltd (2007) 291 ITR 144 and of the honourable Karnataka High Court in case of Deputy Commissioner of income tax versus Karnataka bank Ltd (2012) 349 ITR 705. He further referred to the decision of the coordinate bench in case of Punjab and Sindh bank versus ACIT (2008) 23 SOT 103. 119) He fairly invited our attention also to the decision of the coordinate bench in assessee's own case passed on 12 July 2021 for assessment year 2001 - 02 and 2002 - 03 wherein identical issue has been inadvertently decided against the bank assessee against which the miscellaneous application was filed which has been decided on 24 June 2022 and the issue has been decided now in favour of the assessee. 120) The learned departmental representative vehemently supported the order of the learned assessing officer and the learned CIT - A. He submits that the assessee being a bank is eligible for deduction under section 36(1)(vii) and 36(1)(viia) of the income tax Act. Prov....
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....assessee. It was submitted that section 36(1)(viia) provides for any benchmark for computing the amount of bad debts actually written off in the books of accounts of the assessee. The opening balance of the provision for bad and doubtful debts in the books of accounts of the assessee is an initial benchmark or starting point to compute such deduction. The amount of bad debt is actually written off in the books of account of the assessee as irrecoverable shall exceed the opening balance for provision for bad and doubtful debts in the accounts of the assessee. Therefore, if such opening balance is nil, entire bad debt would be allowed as a deduction. However, if there is some positive amount of opening balance into (credit balance) in the provision for bad and doubtful debts account such opening balance would be reduced from the actual bad debts written off and such excess amount over the credit balance would be allowed as a deduction. The amount of such write off related to all advances during normal course of business including rural advances and non-rural advances. The assessee cannot buy for bad debts written off in the multiple categories for the purpose of provisions of section....
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....ount in the books of accounts of the assessee considering it irrecoverable. Therefore, may be verified and substantiated with documentary evidence as how such amount was computed as eligible deduction. In absence of such documentary evidence and method for accounting such amount, the deduction claimed by the assessee cannot be allowed. In view of the above, we restore these grounds of appeal back to the file of the learned assessing officer for the above verification only. Accordingly ground number 4 for assessment year 2006 - 07 and ground number 5 for assessment year 2007 - 08 are allowed as indicated above. 124) Ground number 5 for AY 2006-07 is with respect to the action of the learned CIT - A wherein reduction and appreciation and taxing appreciation in the value of securities held as 'available for sale' and 'held for trading 'category. Identical ground number 6 is raised for assessment year 2007 - 08. 125) The facts are mentioned at paragraph number 14 of the assessment order. It shows that valuation of securities held under assets for sale and held for trading categories have been made script wise and diminish in/depreciation in the value of that script has been recog....
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.... subsequent to filing of the return of income that such income is not to be included in the total income was rejected. 128) Assessee carried this matter before the learned CIT - A who dealt with this issue as per paragraph number 10 were held to decide in ground number 11 of the appeal. He also rejected the contention of the assessee holding that by recognizing the depreciation script wise and ignoring the script wise appreciation without netting eight of the resulted in over statement of depreciation to the extent of script wise appreciation ignored by the bank. He therefore agreed with learned AO that depreciation/appreciation in individual script sale be aggregated for each category of classification and thereafter only netted depreciation shall be allowed in the profit and loss account as per RBI guidelines on valuation of securities and recognition of income and loss. Accordingly, he upheld the order of the AO. 129) The learned authorized representative referred to letter dated 4 March 2008 wherein such claim was made by way of a letter. It was stated that this issue has already been decided in favour of the assessee by the coordinate benches for assessment year 2009 - 1....
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....sessing officer and therefore an additional ground was raised (number 13) before the learned CIT - A. He dealt with the same in paragraph number 11 dismissing the same for the reason that there was no claim in the original return/revised return or during the course of assessment proceedings before the learned assessing officer. Even otherwise the explanation (vii) to section 36 (1) inserted by the finance act 2013 is clarificatory in nature. It states that the proviso to clause (viia) and clause (vi) of subsection 2 related to all types of advances including advances made by rural branches. The proviso to clause (viia) of section 36 (1) therefore shall limit the application to both rural advances and nonrural advances. Therefore, there cannot be double deduction one on the provision basis and again on actual write-of basis separately and independently. He further relied upon the judicial precedent of Privy Council Maharajkumar Gopal Saran Narain Singh [3 ITR 237]. Accordingly, since the ground of appeal does not arise out of the issue in assessment proceedings, he held it to be not maintainable and dismissed. 133) The learned authorized representative submitted that this issue i....
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....e provisions of section 41 (4) of the act. 135) We have carefully considered the rival contention and perused the orders of the learned lower authorities. We have also carefully considered the several judicial precedents of the coordinate benches in assessee's own case on the similar issue wherein the issue has been set-aside to the file of the learned assessing officer to decide it in accordance with the law. The learned CIT - A in one of the cases also set-aside following the decision of the coordinate bench giving a direction to the learned assessing officer to follow the order of the coordinate bench the learned assessing officer in pursuance of that order of the learned CIT - A himself accepted that such addition cannot be made under section 41 (4) of the act. In view of these facts, this issue has been decided by the coordinate benches in assessee's own case, on remand before the assessing officer, the learned assessing officer himself has accepted the same, therefore, now this issue is squarely covered in favour of the assessee. 136) Provisions of section 41 (4) of the act provides that where the assessee is allowed any deduction in respect of bad debt or part of bad d....
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.... clause. This makes it clear that when the assessee identifies the actual bad debt, it should be first adjusted against the reserve created by virtue of section 36(1)(viia) and excess, if any, will be allowed to be written off in the P&L account as bad debts by invoking section 36(1)(vii) of the Act. In other words, if such bad debts exceed the reserve, the excess amount alone can be charged to P&L account as per section 36(1)(vii) of the Act, in such event section 41(4) comes to play, when the excess amount so charged to P&L account under section 36(1)(vii) of the Act is subsequently recovered from bad debts. In this given case, the assessee asserts that the actual amount of Rs. 39,38,25,324 is adjusted against the reserve created by virtue of section 36(1)(viia) of the Act and had not exceeded the reserve account. Therefore, the assessee claims no amount was charged to P&L account by invoking section 36(1)(vii) of the Act. Since the assessee has not claimed bad debts under section 36(1)(vii) of the Act, but purely adjusted the amount against the reserve created under section 36(1)(viia) of the Act, section 41(4) cannot be invoked. Considering the facts and the circumstances of th....
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....are allowed and the issue is restored back to the file of the learned assessing officer to consider the provisions of section 41 (4) of the act and to determine whether the assessee has claimed any deduction under section 36(1)(viia) of the act with respect to that debt, ld. AO may consider the issue in accordance with the law. 141) Ground number 7 is the issue which was not raised before the assessing officer but raised for the first time before the learned CIT - A. Identical ground is raised in ground number 8 of the appeal for assessment year 2007 - 08. 142) This ground states that: a) state bank of India has earned income from its foreign branches. The profits of such foreign branches should not be included in the income of the resident assessee, state bank of India, as such profits are earned by such foreign branches are not liable to tax in India in terms of the relevant tax treaties and relying on the following judicial precedents:- i. PAVLKulandagan Chettiar (3 ITD 426) (special bench)upheld by the honourable High Court and by the honourable Supreme Court in 267 ITR 654 wherein the review petition was also dismissed in 300 ITR 5 ii. CIT vers....
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....sue in the assessment proceedings and therefore it is not maintainable and hence dismissed. 144) The learned authorized representative categorically submitted that this issue has already been decided in case of the assessee for assessment year 2008 - 2009 by order dated 3 February 2020, for assessment year 2001 - 02 and 2002 - 03 as per order dated 12 July 2021. Further for assessment year 2005 - 06, 2003 - 04, 2000 - 2001, 1996 - 1997, 1997 - 98 and 1998 - 99 as well as 1999- 2000 has been remanded back to the assessing Officer for fresh examination and adjudication. It was further stated that the CIT - A in assessee's own case for the assessment year 1996 - 1997 in an appeal filed against the assessment order passed under section 143 (3) read with section 254 has decided the issue in favour of the assessee as per order dated 1/7/2016. The assessing officer as per his order dated 28 December 2016 giving effect to the order of the learned CIT - A, has already excluded the income earned by such foreign branches while computing the total income of the assessee. 145) However, he also pointed out that this issue has also been decided against the assessee in an order dated 6 June ....
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.... which India has entered into a Double Taxation Avoidance Agreement. d) Also, the assessing officer/CIT (A) could not examine the provisions of the respective tax treaty and compute the admissibility of tax credits separately for each jurisdiction in accordance with the scheme of related treaty. e) He further relied upon the decision of the coordinate bench in the case of Bank of India versus Assistant Commissioner of Income Tax (122 taxmann.com 247) wherein the tribunal remanded the matter back for verification of claim of the assessee. f) He further placed reliance on the decision of the tribunal in case of Tecnimont private limited [116 taxmann.com 996] wherein it was held that with effect from 1 April 2004 subsection 3 was inserted in section 90 and thereby effect of honourable Supreme Court judgement in the case of Kulunagan Chettiar was clearly overruled by the legislative development. It was specifically stated that mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of the assessee in India and that of such income shall be included in his total income chargeable to tax in India in accordan....
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....of payment of taxes and complying tax laws of either state in accordance with the provisions of such agreement. In absence of any documentary evidence of tax compliance in either country or state the assessee cannot claim exemption or exclusion of income in the state of residence i.e., India. l) Therefore, it was submitted that the claim of the assessee should be tested on the basis of the provisions of the Double Taxation Avoidance Agreement with the respective state that with the provisions of the income tax act for taxing such income on door accrued in foreign state with supporting evidence and whether any exemption is to be granted or credit of taxes. Unless the Double Taxation Avoidance Agreement which each of the country is verified, examined, such claim of the assessee cannot be allowed. m) He therefore submitted that it is most appropriate to restore it to the file of the learned assessing officer for the purpose of granting tax credit, in terms of related Double Taxation Avoidance Agreement, if any, and to the extent, admissible. 147) During the course of hearing the bench also asked the assessee to submit certain details such as details of branches fo....
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....thod of elimination of double taxation. 151) Assessee vehemently submitted that issue for this year is specifically covered in favour of the assessee by Decision of Honourable Supreme court and series of decision of Tribunal. 152) The learned departmental representative vehemently submitted that the a) decision of the honourable Bombay High Court does not apply to the current assessment year in these appeals i.e., assessment year 2006 - 07 and 2007 - 08 because that decision pertain to the assessment year 2003 - 04. After the assessment year 2003 - 04 there is an amendment in the law which has been discussed in the decision of the coordinate bench in case of Tecnimont private limited as well as in Essar oil Ltd on account of notification number 91/2008 dated 28/8/2008. b) He submitted that according to the version of the assessee there is no exemption clause for elimination of double taxation avoidance between the respective countries and therefore it is out of question that such income derived by the assessee from foreign branches should be excluded from the computation of total income of the assessee. c) He further stated that assessee is a reside....
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.... wherein agreement entered into by the central government with government of any country outside India for granting relief of tax, or as the case may be, avoidance of double taxation, provides that any income of a resident of India 'as may be taxed' in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the income tax act 1961 and relief shall be granted in accordance with the method for elimination of avoidance of double taxation provided in such agreement. Therefore, it was held that the above decision of the honourable Supreme Court was clearly overruled by the legislative development. On the issue of the date of applicability of such notification it was further held that looking at the decision of the coordinate bench in case of Essar oil Ltd wherein it has been held that this notification was retrospective in effect in as much as it applied with effect from 1 April 2004 i.e., the date on which subsection 3 was introduced in section 90. In the same decision relying on the decision of the honourable Supreme Court in case of fiber boards private limited versus CIT (2015) 62 taxmann.com 135, it was he....
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....ion. It was further stated that the issue is covered by the decision of the honourable Supreme Court in case of Vijaya bank versus CIT [(2010) (323 ITR 166)]. 162) The learned departmental representative vehemently objected to the additional ground. It was further the claim of the learned departmental representative that no double deduction shall be allowed. 163) We have carefully considered the rival contention and perused the orders of the learned lower authorities. This is an additional issue raised by the assessee before us. This issue was neither before the assessing officer nor before the learned CIT - A. We are also not aware whether the relevant facts are also available before the lower authorities are not. However as in earlier years in assessee's own case with a series of the orders of the coordinate bench this issue is restored back to the file of the assessing Ofc for fresh examination and adjudication, respectfully following the decision of the coordinate benches in assessee's own case we also remand this ground back to the file of the learned assessing officer with a direction to the assessee to substantiate the facts before the learned assessing officer....