TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 1584
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces of the case and in law, the Ld. CIT(A) erred in directing to delete the addition of Rs. 10,00,000/- made by disallowing the conveyance expenses incurred by employees on tour under Rules 6D without appreciating the fact that conveyance expenses on tour are part of tour expenses and are to be treated as per Rule 6D of IT Rules, 1962." 2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 16,72,890/- made u/s. 37(2) in respect of the entertainment expenses incurred on assessee's employees on the ground that the expenditure incurred on its employees was incurred at the place of their work and therefore not covered u/s. 37(2)" 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete the disallowance of Rs. 5,00,000/- made on account of club expenses." 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made of Rs. 1,15,75,022/- on account of unrealised forward profit on the ground that the forward transaction in foreign exchange have not been actually settled and therefore income ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the disallowance on account of losses in Securities transactions to the extent of Rs. 756.96 crores out the total disallowance of Rs. 1094.14 crores made by the Assessing Officer on the ground that the loss to the extent of Rs. 756.96 crores is allowable deduction u/s. 28 and 36(i)(vii) of the I.T. Act, 1961. 12. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2.1 The Revenue has raised the additional grounds of appeal: 12.1 On the facts and in the circumstances of the case and in law, apart from erring in deleting the disallowance of Rs. 40,21,73,018 referred to in Ground 10 the learned CIT(A) failed to appreciate that as per explanation to section 37(1) inserted by the Finance(No 2) Act 1998 with retrospective effect from 01/04/1962, any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction shall be made in resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal grounds, None of the lower authorities have disallowed the entire purchase value of so- called Ready Forward transactions and consequently this ground cannot be taken for the first time by the Assessing Officer in an appeal before this Hon'ble Tribunal, and cannot be adjudicated at this stage before the Hon'ble Tribunal. 6. The new ground proposing disallowance of purchase cost of all securities should not be admitted and therefore there is no question of or justification for a set aside of this issue for fresh determination by the Assessing Officer." 3 The relevant facts in brief are that the Assessee is a foreign corporate body being a bank incorporated by the Royal Charter under the laws of England and Wales and registered in India under the Companies Act, 1956. The Assessee was engaged in the business of banking financial services and allied activities in India and filed return of income for the Assessment Year 1993-94 on 29/12/1993 declaring loss of INR 1,645.85 Crores. Assessment was framed on the Assessee vide Assessment order dated 20/09/1996, passed under Section 143(3) of the Act at net loss of INR 448.74 Crores after making various additions and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are covered under Rule 6D of the Rules as said rule does not make any distinction on account of the nature of expenses incurred by the employees. The aforesaid contentions found favour with the CIT(A) who deleted the disallowance of INR 10,00,000/- made by the Assessing Officer. 4.3. Being aggrieved by the above relief granted by the CIT(A), the Revenue has preferred appeal on this issue before the Tribunal. 4.4. Having heard both the sides and on perusal of material on record, we note that the CIT(A) has deleted the addition by following, inter alia, the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. Gannon Dunkerly and Co. : [1993] 114 CTR 56 wherein it has been held that the local conveyance expenses and other actual expenses which are incurred by the employee while on tour for conducting the assessee's business cannot be considered as travelling expenses of the employee under Rule 6D of the Rules. Further, the disallowance was made on ad-hoc basis. Thus, we do not find any infirmity in the order passed by the CIT(A) deleting the ad-hoc disallowance of INR 10,00,000/- by invoking the provisions of Rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....food or beverages provided by an assessee to employees in office, factory or other place of their work. Vide Circular No. 644, dated 15/03/1993, the Central Board of Direct Taxes (CBDT), clarified that the provision of food or beverages in places other than the place of work in respect of specified employees shall not attract disallowance under Section 37(2) of the Act if such food or beverages are provided during working hours even in places other than the place of work, provided the expenditure is genuine and reasonable. In the present case, the genuineness/reasonableness of expenditure was never in doubt. Further, the Assessing Officer, in our view, despite referring to the aforesaid Circular No. 644 failed to appreciate that the true purport of the said circular and the benefit extended by it. Without examining whether the entertainment expenditure was incurred for provisions of food/beverages of specified employees, the Assessing Officer concluded that the expenditure qualified as 'Entertainment Expenditure' and proceeded to make the disallowance of the entire entertainment expenditure attributable to employees amounting to INR 16,72,890/-. We note that the Appellant had disal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n favour of the Assessee vide order, dated 29/05/2006, passed in case of Assessee [ITA No. 311/Mum/1996] for the Assessment Year 1991-92 by following the judgment of the Hon'ble Bombay High Court in case Otis Elevator Co. India Ltd.(supra) and the order, dated 03.04.1995, passed by the Tribunal rejecting the appeals preferred by the Revenue for the Assessment Years 1989-90 &1990-91 (ITA No. 9007&9008/Bom/1992). It would be pertinent to note that Reference Applications filed by the Income Tax Department against the order of the Tribunal for the Assessment Years 1989-90 & 1990-91 was dismissed, both, by the Tribunal under Section 256(1) of the Act and by the Hon'ble Bombay High Court under Section 256(2) of the Act. In view of the aforesaid, we do not find infirmity in the order passed by the CIT(A) on this issue. Therefore, Ground No. 3 raised by the Revenue is dismissed. 7 Ground No.4: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made of Rs. 1,15,75,022/- on account of unrealized forward profit on the ground that the forward transaction in foreign exchange have not been actually settled and therefore inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....redited by the appellant to profit and loss account are merely notional profits and cannot be subjected to tax in view of the decision of the Madras High Court (supra). In view of this issue has already been decided in favour of the appellant in earlier years by CIT(A), this ground of appeal is allowed in favour of the appellant and the addition of Rs.1,15,75,022/- is deleted. The alternate ground, that the A.O. erred in not granting deduction of Rs.1,22,75,320/- being the amount of forward profit unrealized as on 31.3.92 offered for tax by the Appellant in the year under appeal, but taxed in the assessment for Assessment Year 1992-93, does not survive since as per the appellant, the CIT(A) has already allowed this issue in its favour in appeal for that year." 7.3. Now the Revenue is in appeal before us against the order of CIT(A) deleting the addition of INR 1,15,75,022/-. 7.4. We have considered the rival submissions and perused the material available on record. We find that the CIT(A) granted relief to the Assessee by placing reliance upon the Judgment of the Hon'ble Madras High Court in the case of Indian Overseas Bank Vs. CIT: [1990] 183 ITR 200 (Madras....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the same principle even to a case of notional profit, we hold that the amounts of Rs.1,72,911 and Rs.15,57,022.40 represented notional profit only and not actual profit for the assessment years 1972-73 and 1973-74 and could not be subjected to tax. We may also in this connection usefully refer to Shoorji Vallabhdas & Co. ( supra)where the Supreme Court pointed out that the levy of income-tax is on income and though the Act had taken note of the twin points of time at which the liability to tax is attracted, viz., the accrual of income or its receipt, yet, the substance of the matter is income and if income does not result at all, there cannot be a tax, even though for purposes of book-keeping an entry is made about hypothetical income, which does not materialise and a mere book-keeping entry cannot be income, unless an income has actually resulted. The amounts in these references were only estimated anticipated income arrived at on the basis of the rates of exchange which prevailed, presumably on the last day of the accounting year, without an actual settlement of the forward contracts in foreign currencies having been brought about and in that sense, the amounts in question repr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors are all monetary items which have to be valued at the closing rate under AS-11. Under para 5, a transaction in a foreign currency has to be recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. This is known as recording of transaction on Initial Recognition. Para 7 of AS-11 deals with reporting of the effects of changes in exchange rates subsequent to initial recognition. Para 7(a) inter alia states that on each balance sheet date monetary items, enumerated above, denominated in a foreign currency should be reported using the closing rate. In case of revenue items falling under section 37(1), para 9 of AS-11 which deals with recognition of exchange differences, needs to be considered. Under that para, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise, except as stated in para 10 and para 11 which deals with exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets, which topic falls under section 43A of the 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions of Accounting Standard 11 would have to be recognized as profits of the relevant previous year. A perusal of notes to financial statements for the year ended 31/03/1993 shows that the Assessee has been following account policy in relation to transactions involving foreign exchange: "(b) Transaction involving foreign exchange (i) Monetary assets and liabilities in foreign currencies are translated at market rates of exchange notified by the Foreign Exchange Dealers Association of India at the close of the year (ii) Income and Expenditure items are translated at the exchange rates prevailing on the date of the transaction. (iii) Outstanding forward contracts are revalued at the forward exchange rates prevailing at the year end and it resulting profit or loss accounted for." 7.7. On perusal of the above, we find that even as per the accounting policy followed by the Assessee the gains/loss arising out of foreign exchange fluctuation is recognized as profit or loss accruing to the Assessee during the relevant previous year. Accordingly, we reverse the order passed by the CIT(A) and reinstate the addition on account of foreign exchange fl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....debts, the provisions which have been taxed in earlier years, the recoveries cannot again be taxed otherwise it would amount to double taxation. The appellant had filed complete details during the course of assessment and has filed the details before me as well. After perusal of details filed. I direct the A.O. to allow the claim of the appellant for Rs. 70,30,360/." (Emphasis Supplied) 8.3. Being aggrieved, the Revenue is in appeal before us against the above relief granted by the CIT(A). 8.4. Having heard the rival submission and on perusal of the material on record, we find that the factual findings returned by the CIT(A), to the effect that the deduction for the provisions for INR 70,30,360 was not allowed in the earlier years since the same was in excess of the limits specified under Section 36(1)(vii)(a) of the Act, has gone uncontroverted in the appellate proceedings before us. Therefore, we concur with the reasoning given by the CIT(A) on this issue. The amount of bad debts recovered during the year in respect of which provisions were created in earlier years but not allowed/claimed as deduction would not be taxable as income in the hands of the Assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n nature ne penalty paid to R.B.I. but represents the interest dint would have been received had there been no shortfall. It was also submitted that the amount has not been received nor is eligible to receive the same. After considering the submissions, the CITIA) allowed the claim of the assessee." 9.5. In view of the above, we confirm the order passed by the CIT(A) on this issue. Ground No. 6 raised by the Revenue is dismissed. 10 Ground No.7: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,17,32,848/- made on account of broken period interest paid on purchase of securities, which were lying in stock at the end of the previous year on the ground that in case of trading in security, total cost of purchase of security, which included broken period interest and debited to P & A A/c. is an allowable deduction." 10.1. The facts relevant for adjudication of the issue under consideration are that while purchasing a securities, the Appellant made a payment for broken-period interest (i.e. interest due from the coupon date or last interest date upto the date of purchase) which was debited to the Profit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in present appeal and accordingly, rejected." 10.3. Being aggrieved, the Revenue in now in appeal before us on this issue. 10.4. Having considered the rival submissions and on perusal of record, we are of the view that the issue stands decided in favour of the Assessee in Assessee's own case for the Assessment Year 1989-90 & 1990-91 [ITA No. 4243 & 4244/Mum/2000, dated 20/05/2004] wherein the Tribunal by following the decision of the Hon'ble Bombay High Court in the case of American Express International Banking Corporation Vs. Commissioner of Income Tax: 258 ITR 601 held as under: "10 The second issue is regarding the treatment of the broken period Interest. At the time of purchasing a security, banks usually make payments towards broken period interest. This is the Interest due from the broken date fill the date of purchase. The interest so paid by the banks usually known as broken period interest is debited in the Profit & Loss account of the banks and further claimed as deduction In computing the taxable Income. The claim has been disallowed by the AO on the ground that such broken period interest is in the nature of capital outlay. The cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in a fiduciary capacity. However, the Assessing Officer concluded that CCDS was in the nature of portfolio management scheme operated by the Assessee in violation of the guidelines issued by the Reserve Bank of India on portfolio management. The amounts received under the CCDS by the Assessee were nothing but short-term deposits on which the Assessee has paid interest in excess of the rates prescribed by the Reserve Bank of India. Therefore, the Assessing Officer calculated excess interest paid at INR 14,23,38,910/- and added the same to the income of the Assessee. 11.2. Before CIT(A) the Assessee contended the interest should not be added back as the Assessee had not claimed deduction for interest expenses. The CIT(A) following the order, dated 25.11.2002, passed in the case of the Assessee in appeal against the Assessment Order for the Assessment Year 1992-93, deleted the addition of 14,23,38,910/-. 11.3. Being aggrieved, the Revenue has filed appeal before us on this issue. 11.4. We have considered the rival submissions and perused the material on record. The factual finding retuned by the CIT(A) that the Assessee had not claimed deduction for interest/payme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the course of assessment proceedings, on perusal of special audit report under Section 142(2A) of the Act, the Assessing Officer noted that the Assessee has entered into transactions with brokers as counterparties. 12.2. The Assessing Officer noticed that the special auditors had worked out a loss of INR 74,86,000/- in the transactions in GIC Rise II Units undertaken by the Appellant with C. Mackertich and Stewart & Co. According to the Assessing Officer, the aforesaid transaction were hit by the provisions contained in Section 15 of the Securities Contract (Regulation) Act, 1956 (SCRA) as the same were undertaken by the broker with the Appellant as a counterparty without obtaining written consent of the Appellant. Therefore, the Assessee Officer concluded that the Appellant was not entitled to claim loss of INR 74,86,000/- from the aforesaid transactions were not legal. However, the Assessing Officer, did not make a separate addition of INR 74,86,000/- (mentioned as INR 75 lakhs in paragraph 13.2 of the assessment order), since the transactions were covered under the disallowance made in respect of the Corporate Cash Deployment Scheme (CCDS). 12.3. The Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that the CIT(A) was correct in holding that the provisions of Section 15 of SCRA were not applicable to the Assessee since the Assessee was not a member of stock exchange. 12.8. We have considered the rival submissions and perused the material on record. The issue that raises for consideration is the applicability of Section 15 of SCRA which reads as under: "Members may not act as principals in certain circumstances. 15. No member of a recognised stock exchange shall in respect of any securities enter into any contract as a principal with any person other than a member of a recognised stock exchange, unless he has secured the consent or authority of such person and discloses in the note, memorandum or agreement of sale or purchase that he is acting as a principal: Provided that where the member has secured the consent or authority of such person otherwise than in writing he shall secure written confirmation by such person or such consent or authority within three days from the date of the contract: Provided further that no such written consent or authority of such person shall be necessary for closing out any outstanding contract e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actions were used by the banks to divert their funds to stock brokers. These transactions were undertaken at rate which had no relation to the market rates and sole purpose of such transactions was to advance funds in an unauthorized manner to the stock brokers. Therefore, special audit under Section 142(2A) of the Act was directed on this issue. The special auditors examined all the transactions in order to segregate transactions which were in the nature of Ready-forward transactions as the Assessee Bank did not provide data bifurcating Readyforward transaction without rate transactions. The special auditors identified transactions of purchase and sale in the same security of the same face value with same counter-party to be ready-forward transaction where certain other ingredients such as exchange of BRS or SGL form representing a particular lot of securities was exchanged between counter-parties. The special auditors computed net profit of INR 54,06,54,475/- from the aforesaid Ready-forward transactions as under: Particulars Amount (INR) Profit in ready-forward transactions in approved securities with bank clients &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecial auditor the net result of Ready-forward transactions was a profit of INR 54,06,54,475/-. The CIT(A) also took note of the fact that no disallowance was made by the Assessing Officer in identical facts and circumstance for immediately preceding Assessment Year 1992-93. 13.5. Being aggrieved with above relief granted by the CIT(A), the revenue is now in appeal before us. 13.6. The Ld. Departmental Representative submitted that the losses of INR 40,21,73,018/-, being losses from illegal transactions undertaken in contravention of Securities Contract (Regulation) Act, 1956, could not have been set off against the profits from legal transactions. The special auditor incorrectly set off the losses from illegal Ready-forward transactions with the profits arising from legal Ready-forward transactions. During the course of assessment proceedings, the Assessee had filed revised working which shows that there was a net loss of INR 26.32 Crores and not a profit of 54.06 Crores. Further, the Ld. Departmental Representative placed reliance on the order passed by the Assessing Officer on this issue. 13.7. Per contra, the Ld. Sen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the light of representations received from both Indian and foreign banks, the Board has considered certain issues arising out of the transactions in securities in the context of assessments under the Income-tax Act, 1961. The following guidelines may be kept in view while finalising the bank's assessments. 1. The first issue is whether the loss incurred in the ready- forward transactions can be set off against the profits arising out of ready-forward transactions. In the light of the notification dated 27-6-69 (copy enclosed) issued under section 16 of the Securities Contracts (Regulation) Act, 1956 a view is possible that ready-forward transactions in any form were not legally permissible. Further, several banks had also violated the statutory directions of the Reserve Bank of India in this regard by undertaking transactions in non-approved securities, by dealing with non-bank clients, by transacting at artificial rates having no correlation with market values, by dealing in securities without actually holding the same, etc. It is noticed that, in view of the violations, the losses incurred in such transactions have been disallowed in the assessments of certain banks wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of profits and losses should be made; and only the net profit should be brought to tax. 13.3 As regards, computation furnished by the Assessee vide letter, dated 13/09/1996 containing re-worked position of profit and losses from Ready-forward transactions is concerned, we find merit in the submission advanced on behalf of the Assessee that the same was furnished as per the directions issued by the Assessing Officer and could not be considered as reflecting the correct overall/net profits/or losses arising from Ready-forward transactions. On perusal of Assessment Order we find that the direction issued by the Assessing Officer to file the aforesaid computation was given on the basis of apprehension harbored by the Assessing Officer. According to the Assessing Officer, there was a possibility of involvement of a broker where the broker name was mentioned as 'Direct' in the special audit report. There was no material on record to show the leg of the transactions shown to be 'direct' actually involved a broker. The Assessing Officer did not have any basis to change the parameters of identifying Ready-forward transactions adopted by the special auditor and the computation of net....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld require further investigation into the bifurcation of Ready-forward transactions into first leg and second leg transaction. Further, investigation would be required to identify first-leg transaction involving purchase of securities since according to Explanation 1 to Section 37 of the Act only expenses incurred can be disallowed. In our view, the facts necessary for adjudication of Ground No 12.2 to 12.5 are not on record and would require further inquiry/investigation. Accordingly, we decline to admit Ground No. 12.2 to 12.5 raised by the Revenue after expiry of more than 7 years the date of institution of appeal before the Tribunal. 13.8 In view of the above, the Cross - Objections filed by the Assessee become infructuous and therefore, the same are dismissed. 14 Ground No.11: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the disallowance on account of losses in Securities transactions to the extent of Rs. 756.96 crores out the total disallowance of Rs. 1094.14 crores made by the Assessing Officer on the ground that the loss to the extent of Rs. 756.96 crores is allowable d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of INR 1,094.14 Crores which consisted of the following: Particular INR (Crores) Losses in transactions with BOK/MCB, which are in liquidation 403.14 Settlement reached with the counterparties 156.97 Suits decided in favour of the Appellant and recoveries made subsequent to the accounting year 180.19 Cases pending before Special Court/Supreme Court, etc. 353.84 Total 1,094.14 14.5 Before the CIT(A), the Assessee filed various submissions including submissions dated 12/04/2000 and 03/05/2002. It was contended on behalf of the Assessee as under: (a) The Assessee bank was a victim of massive fraud perpetrated by a broker in collusion with the employees of the Assessee resulting in embezzlement of funds. The loss thus suffered by the Assessee was allowable as deduction under Section 28 of the Act. Reliance in this regard was placed on Circular No. 35-D (XLVII-20) [F.  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Bank and Others was dismissed. (f) The losses had crystallized during the relevant previous year as the same were written off in the books of accounts during the relevant previous year. (g) Alternatively, it was also contended by the Assessee that the securities in question were held by the Assessee as stock-intrade as the Assessee has written of the losses in the books of accounts during the relevant previous year, the Assessee was entitled to claim deduction for the amount written off as bad debts under Section 36(1)(vii) of the Act. Reliance in this regard was place on Circular No. 551 dated 23/01/1990 issued by CBDT [ 183 ITR 37] 14.6 The above submissions advanced by the Assessee found favour with the CIT(A) who allowed deduction for losses to the extent of INR 756.96 Crores being losses of INR 867.50 Crores written off by the Assessee reduced by the recoveries of INR 110.53 Crores. The balance claimed for deduction of losses amounting to INR 337.18 Crores (INR 1094.14 Crores - INR 756.96 Crores) was not allowed by the CIT(A) on the ground that the same were either not written off during the relevant previous year or co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansactions without holding the stocks. The funds received by these banks were siphoned off by certain brokers. In the event, these banks were not in a position to honor their contractual obligations for delivery of securities. Both the aforesaid banks were placed under liquidation, during the previous year relevant to Assessment Year 1993-94. Investigation of losses suffered by the banks was also conducted by the committee which estimated that the Assessee had exposure of INR 1,482.14 Crores. On the second test applied by the Assessing Officer that whether the transaction was genuine and was in the regular course of banking, the Learned Senior Counsel relied upon the judgment of the Hon'ble Supreme Court, dated 30/10/2001, passed in Civil Appeal No.4456 of 1996. Explaining the background, Learned Senior Counsel submitted that a suit was filed by the Appellant against Canara Bank and Others before the Special Court [being Suit 13 of 1994]. In that suit, the Defendants (i.e. Canara Bank and Others) sought to take a defense that the suit transactions were part of an internal arrangement between the Assessee (i.e. Standard Chartered Bank) and the broker, who was a notified party and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id on grounds of public policy it must be shown that the object and consideration of that contract was one which was illegal. The object and consideration of the suit contracts are purchase/sale of the securities and payment of price. Such securities contracts are normally entered into by banks. These may be for SLR purposes or in the normal course of business of the bank. It is the business of the bank to try and make profit. Thus, even if these were part of the 15% arrangement, provided there was such an arrangement, would not make them against public policy if it was a genuine security transaction. None of the circulars relied upon by Mr. Salve prohibit such transactions. In my opinion, none of the circulars have any bearing on the point under consideration. The suit transactions or transactions under the alleged 15% arrangement are not against the subject matter of these circulars. They are also not even against any policy laid down therein. I thus see no illegality. For this reason also no evidence can be permitted. 38. However, it must be immediately stated that if there was a fictitious transaction, it could possibly be construed as being against public policy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as there was lack of evidence. The other plea of repayment also failed. We see no infirmity with the decision of the Special Court on this account with regard to the contention that the transaction was opposed to public policy. The Special Court was right in observing that no such plea has been raised in the written statement and we agree with the Special Court that permitting such a plea to be raised would be contrary to the plea already taken in the written statement namely, of squaring up or of repayment. The order relating to the admissibility of the cheque wherein the Special Court had come to the conclusion that such a plea could not be raised was passed on 2/3-3-1995. The appellant herein chose not to file any application for amendment of the written statement before the Special Court. It proceeded with the case and in our opinion it is now too late to allow such an amendment in this Court. We are also not satisfied that there is any merit in the contention that the transaction in question would be void on the grounds of public policy. The allegation in this connection which the appellant wanted to prove was that there was an understanding between the respondent and Hiten Da....