TaxTMI 
TaxTMI 
2025 (9) TMI 565
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....und No. 2 & 3 Ground No. 2 & 3 Sale of immovable properties acquired through loan be treated as Business Income / loss Ground No. 4 Ground No. 4 Claim of standard assets under section 36(1)(viia) Ground No. 5 Ground No. 5 Additional Ground of Appeal- Allowability of additional ESOP costs Ground No. 6 Ground No. 6 Revenue's Appeal Issue AY 2018-19 AY 2019-20 Disallowance of ESOP Expenses Ground No.1 Ground No.1 Disallowances under section 14A r.w.8D(ii) Ground No.2 Ground No.2 Disallowance u/s.35D towards QIP subscription expenses Ground No.3 Ground No.3 Bad Debts pertaining to credit card business Ground No.4 Ground No.4 Allowability of interest on Perpetual Bond Ground No.5 & 6 Ground No.5 & 6 Amortization of premium on HTM securities Ground No.7 Ground No.7 Broken Period Interest Ground No. 8 & 9 Ground No. 8 & 9 ITA No. 1841/Mum/2023- AY 2018-19- Assessee's Appeal 2. The assessee was incorporated in 1994 under the Companies Act, 1956 and is licence by Reserve Bank of India to operate as the Commercial Bank under the Banking Regulations Act, 1949. The assessee is....
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....n.com 332 (Mumbai - Trib.) (SB)). Accordingly respectfully following the decision of the Special Bench, we dismiss the ground raised by the assessee in this regard. Claim under section 36(1)(viia) for Rural Advances - Ground No. 2 & 3 5. BFIL was a listed micro finance NBFC whose primary lending was in rural area. BFIL amalgamated with the assessee from the appointed date 01.01.2018 vide the scheme of amalgamation as approved by NCLT vide order dated 10.06.2019 with effective date 04.07.2019. The assessee submitted before the CIT(A) that while claiming the deduction under section 36(1)(viia) the assessee missed to include the rural advances given by BFIL from the appointed date till effective date. The assessee further submitted that as per the scheme of amalgamation as approved by NCLT, BFIL was carrying on the business in the fiduciary capacity on behalf of the assessee during the above referred period. The assessee accordingly claimed that the assessee is entitled to include the rural advances given by BFIL during the above period for the purpose of claiming deduction under section 36(1)(viia). The CIT(A) did not allow the claim of the assessee for the reason that BFIL was....
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....DR on the other hand vehemently argued that the provisions of section 36(1)(viia) are very clear that the deduction is allowable only to Banks and not to NBFCs. The ld. DR further argued that BFIL continued its business till the effective date as an NBFC and therefore the lending activity carried on by BFIL cannot be considered as that of the Bank. Accordingly, the ld. AR argued that the rural advances extended by BFIL is not eligible for deduction under section 36(1)(viia). 8. We heard the parties and perused the material on record. Under the provisions of section 36(1)(viia) deduction shall allowed at the minimum of 8.5% of the total income plus 10% of the rural advances as compared to the actual provisions made in the books of accounts. The claim of the assessee before the CIT(A) was that the 10% of rural advances should include the rural advances given by the BFIL from the appointed date to 31.03.2018. The revenue's contention is that BFIL is an NBFC and not a Bank and hence the advances extended by BFIL cannot be considered for the purpose of deduction under section 36(1)(viia). In this regard it is relevant to consider the facts pertaining to the issue and the relevant....
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....e of amalgamation/transfer. The proceedings before the Court may take some time, indeed, they are bound to take some time because several steps provided by sections 391 to 394A and the relevant Rules have to be followed and complied with. During the period, the proceedings are pending before the Court, both the amalgamating units, i.e. the transferor company and transferee company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(6) does expressly provide that with effect from the transfer date, the transferor company (subsidiary company) shall be deemed to have carried on the business for and on behalf of the transferee company (holding company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issue....
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....ing the return of income has shown the loss from the sale of property under the head "Capital Gains". Before the CIT(A) the assessee made a claim that the loss arising from the sale of the immovable property are to be treated as Business Loss. The assessee in support of its claim submitted that the assets are acquired by the assessee against the settlement of outstanding loan by the borrowers in the normal course of business activity. The assessee further submitted that the properties so acquired are never utilized for the purpose of business and no depreciation was claimed. The assessee also submitted that these assets are not part of the fixed assets schedule and therefore the loss arising from the sale of these assets is to be treated as Business Loss. The CIT(A) did not allow the claim of the assessee stating that the assessee has acquired the assets in its own name and after lapse of considerable time period the assets were sold. The CIT(A) further held that in such circumstances the profit or loss arising out of such transactions cannot be treated as Business Income. 11. The ld. AR submitted that the assessee as part of its regular business activity lends money to borrower....
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....e that the properties acquired from the borrowers are not utilised for the purpose of business. We notice that the Hon'ble Bombay High Court in the case of L.M. Devere has considered a similar where it has been held that "6. On behalf of the revenue, it was submitted that the immovable properties were acquired in satisfaction of debt owed to the Bank. So it constituted stock-m-made of the money lending business carried on by the Bank. Any amount realised in excess of the amount due must be treated as income arising from the money lending business. The revenue submitted that these properties represent the converted form of stock-in- trade in the banking business of the assessee, viz, the money, therefore, profits made from the resale of these properties must be treated as the profits of the money lending business. The revenue further submitted that even though the amalgamation took place as per section 44A or the assessee was under compulsion to dispose of all the non- banking assets under section 9, income earned by the assessee must be treated as profits made from the resale of the stock-in-trade and most be treated as the profits of the money lending business. The re....
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....the facts pertaining to the acquisition of the property has not been factually examined by the lower authorities. Hence we are remitting this issue back to the AO for the limited purpose of examining the nature of acquisition i.e. it is in satisfaction of the debt and allow the claim of the assessee as business loss accordingly. Claim of deduction under section 36(1)(viia) against the provision made on standard assets - Ground No.5 15. The assessee being a banking company is eligible for deduction under section 36(1)(viia) towards provision made for bad and doubtful debts. As per the provisions of the said section the deduction is computed as per the prescribed methodology and is compared with the provision made in the books of account and the lower of the amounts is allowed as deduction. While comparing the provision for bad and doubtful debts made in the books of account, the assessee submitted before the CIT(A) that the provision made for standard assets should also be considered. The CIT(A) dismissed the ground stating that the appellant has got relief on most of the issues and that the ground raised by the assessee is premature that cannot be adjudicated till the finalit....
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....vision for bad and doubtful debts. The banks are required to make provision for bad and doubtful debts in accordance with the RBI guidelines. All the loan assets are initially classified as 'Standard'. Later on depending upon the problems arising, if any, and symptoms of sickness shown including delays in the repayment of the principal and interest, deterioration of security, etc., they may be shifted to other categories. A provision made on any loan assets is a provision for 'bad and doubtful debts' irrespective of the category in which the loan falls. This is to provide for the inherent risk of loan losses which the bank may suffer in subsequent years. 73. We noted from the provision of Section 36(1)(viia) of the Act that the same allows a deduction to banks in respect of any provision made 'for' bad and doubtful debts. It does not restrict the allowance to provision made 'on' bad and doubtful debts. Even in respect of assets that are classified as standard assets, a part of the debts are doubtful of recovery. The fact that a provision is made for standard assets by itself indicates that a part of the standard assets are doubtful of recovery. Accordingly, the entire prov....
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....ision is made. In arriving at our decision, we have taken a holistic view of the matter, placing due emphasis on the words 'provision' preceding the words 'for bad and doubtful debts' as well as the words 'not exceeding' occurring in the section, and which stand highlighted for the purpose. We decide accordingly." 74. In view of the above discussion, arguments of both the sides, we are of the view that the assessee is eligible for claim of deduction u/s 36(1)(viia) of the Act on standard assets and this issue is covered by Tribunal's decision in assessee's own case for AY 2006-07 in ITA No.3145/Mum/2004 vide order dated 06.09.2016. Hence, we allow this issue of assessee's appeal." 9. In view of the decision of the co-ordinate bench as referred above, the issue in appeal in the case of the assessee is squarely covered by the said decision. Therefore, following the decision of the co-ordinate bench, we direct the Assessing Officer to allow the claim of deduction of the assessee under section 36(1)(viia) in respect of standard assets. This ground of appeal of the assessee is allowed." 17. Considering that the facts in assessee's case are identical, respectfull....
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.... the company, can ho finally determined at the time of the exercise of option or when the options remain unvested or lapse at the end of the exercise period. It is at this later stage that the provisional amount of discount on ESOP, initially quantified on the basis of market price at the tune of grant of options, needs to be suitably adjusted with the actual amount of discount. 11.1.3 As regards the adjustment of discount, when the options remain unvested or lapse at the end of the exercise period, it is but natural that there is no employee cost to that extent and hence there can be no deduction of discount qua such part of unvested or lapsing options. But, as the amount was claimed as deduction by the company during the period starting with the date of grant till the happening of this event, such discount needs to be reversed and taken as income. It is so because logically when the options have not eventually vested in the employees, to that extent, the company has incurred no employee cost. And if there is no cost to the company, the tentative amount of deduction earlier claimed on the basis of the market price at the time of grant of option ceases to be admissible and....
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....n which now stands is that the discount on ESOP' is taxable as perquisite u/s 17(2)(vi) for the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to these Clause (c) of Explanation to section 17(2)(vi) provides that the value of any specified security or sweat equity shares shall be the fair market value of the specified security or swear equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security of shares. Two things surface from the above provision. First, that the perquisite arises on the 'allotment' of shares and second, the value of such perquisite is to be computed by considering the fair market value of the shares on the date on which the option is exercised by the assessee as reduced by the amount actually paid. The position that such amount was of was not taxable during some of the years in the hands of the employees is not relevant in considering the occasion and the amount of benefit accruing to ....
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....ket price at the time of the grant of options which is considered for working out the amount of discount during the vesting period. But, since actual amount of employees cost can be precisely determined only at the time of the exercise of option by the employees, the provisional amount of discount availed as deduction during the vesting period needs to be adjusted in the light of the actual discount on the basis of the market price of the shares at the time of exercise of options. It can be done by making suitable northwards or southwards adjustment at the time of exercise of option. This can be explained with the following example with the assumption of vesting period of four years and the benefit vesting at 25% each at the end of 1st to 4th years- At the time of granting option At the time of exercise of option Situation I Situation II Situation III Market Value per share 110 110 130 90 Option price 10 10 10 10 Employees Compensation or Discount 100, 100 120 80 11.1.7 From the above table it can be noticed that the market price of the shares at the t....
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....tention is correct, it would mean that the first two stages have been rightly given effect to. But the appellant assessee does not appear to have made any downward adjustment to the amount of discount at the time of exercise of option by the employees with the difference in the market price of the shares at the time of grant of option and price at the time of exercise of option. The argument seems to be that the SEBI Guidelines do not provide for such downward adjustment. It has been argued by the Ld AR that where the provisions of the Act specifically provide for treatment of a particular source of income in a particular manner, then the germane provision should be followed. II. however, there is no specific provision dealing with an issue in the Act, then the accounting he relied on the judged by the case of Challapalli Sugars Ltd. (supra) wherein the Hon'ble Supreme Court has held that the interest payable on capital borrowed by the assessee for purchase of plant and machinery before the commencement of business should be capitalized on the basis of accepted accountancy rule. Similarly in the case of UP State Industrial Development Corpn. (supra), the Hon'ble Apex Court held....
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....e overall principles to govern the deductibility or taxability of unspecified items. For example, the definition of 'income' u's 2(24) has been given by the Act in an inclusive manner. There have been enshrined clauses (1) to (xvi) dealing with the items specifically listed. However, the provision has been couched in such a way so as to include general items of receipts having character of income, even though not specifically mentioned Similar is the position regarding deductions. Under the head Profits and gains of business or profession', there are sections granting deductions in respect of specific expenses or allowances. Similarly, there is section 37(1), which grants deduction for expenses not specifically set out in other sections, if the conditions stipulated in the section, are fulfilled. All other items of expenses, which fulfil the requisite conditions, gain deductibility under section 37(1). To put it in simple words, this section is a specific provision for granting deduction in respect of the unspecified or the general categories of expenses Discount on ESOP is a general expense and hence covered by the specific provision of section 37. The contention o....
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....the higher judiciary, then there is an underlying presumption that such accounting principle is in conformity with and not in conflict with the taxation principle The essence of the manor is that taxation principles are to be followed. If an accounting principle is in conformity with the mandate of taxing principle and reference is made to such accounting principle while deciding the issue, it does not meant that the accounting principle has been followed. It simply means that the taxation principle has been followed and the accounting principle, which is in line with such taxation principle, has been simply taken note of. If however, an accounting principle runs counter to the taxation principle, then there is no prize for guessing that it is only the taxation principle which shall prevail. 11.2.8 The plea now raised before us by the id. AR, relying on the case of Challapalli Sugars Ltd. (supra), was also taken up before the Hon'ble Supreme Court in the case of Tuticorin Alkalis Chemicals & Fertilizers Ltd (supra). Dealing with the same, the Hon'ble Supreme Court held that "The question in Challapalli Sugars Ltd.'s case (supra) was about computation of depreci....
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....s High Court in the case of PVP Ventures Ltd. (supra) has upheld the view taken by the Chennai Bench in the case of SSI Lad (supra). The granting of the binding force to the SEBI Guidelines by the Hon'ble Madras High Court should be viewed in the context of the issue before it, which was about the deductibility of discount during one of the vesting years. In the earlier part of this order, we have held that the deductibility of discount during the vesting period, as prescribed under the SEBI Guidelines, matches with the treatment under the mercantile system of accounting. To that extent, we also hold that the SEBI guidelines are applicable in the matter of deduction of discount. Neither there was any issue before the Hon'ble Madras High Court nor it dealt with a situation in which the market price of the shares at the time of exercise of option is more or less than the market price at the time of grant of option. It is a situation which has also not been dealt with by the Guidelines Accordingly, the afore noted taxation principle of granting deduction for the additional discount and reversing deduction for the short amount of discount at the time of exercise of option, need....
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.... by the ITAT co-ordinate bench in favour of the assessee which has been followed by the Ld. CIT(A) while allowing the relief to the assessee in the current year. The operative part of Ld. CIT(A)'s order is reproduced as below: "7.4.3 I have considered the above submissions of the appellant as well as the facts of the case. The Hon'ble Mumbai Tribunal in the appellant's own case for A.Y.2009- 10 had held as under: "9. Disallowance of expenditure on ESOP is the subject matter of Ground No.4 for the year under appeal. During the assessment proceedings the AO held that the assesses had not incurred the expenditure for issuing ESOPs, that it was an unascertainable item of expenditure, that it depended upon the option to be exercised by the employees at a future date. In the appellate proceedings the FAA upheld the order of the AO. 9.1 Before us, the AR argued that share under ESOP were issued to the employee at below market price to retain them in co., that it was a form of compensation for services rendered, that SEBI had directed the listed companies to account for the compensation cost as expenditure, that ESOP amortization cost was charged to the P....
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....xempt income by way of dividend of Rs 9.34 crores and did not disallow any expenditure u/s 14A of the Act as expenses incurred for the purpose of earning such exempt income. The ld. AO applied the computation mechanism provided in Rule 8D(2) of the Income Tax Rules and worked out the disallowance u/s 14A of the Act as under:- Under Rule 8D(2)(ii) - Rs 9.63 crores Under Rule 8D(2)(iii) - Rs 0.72 crores Rs 10.35 crores 4.2. The ld. CIT(A) by placing reliance on the order passed by his predecessor for the A.Y. 2013-14 dated 06/11/2017 and by placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd reported in 366 ITR 505 (Bom) and Reliance Utilities & Power Ltd reported in 313 ITR 340 (Bom) deleted the disallowance of interest made under Rule 8D(2)(ii) of the Rules. The ld. CIT(A) however upheld the disallowance made under Rule 8D(2)(iii) of the Rules. With regard to yet another submission made by the assessee that the disallowance u/s 14A of the Act per se could not be made in the instant case as the investments were admittedly held as stock in trade, the ld. CIT(A) by placing reliance on the decision o....
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....rofits and Gains of Business and Profession". 3.2 Even though the abovementioned decision was in the context of cooperative societies/Banks claiming deduction under section 80P(2)(a)(i) of the Act, the principle is equally applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies. 4. In the light of the Supreme Court's decision in the matter, the issue is well settled. Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this ground before Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned.' (emphasis supplied) 36. There is yet another aspect which still needs to be looked into. What happens when the shares are held as 'stock-in-trade' and not as 'investment', particularly, by the banks? On this specific aspect, CBDT has issued circular No. 18/2015 dated November 02, 2015. 37. This Circular has already been reproduced in Para 19 above. This Circular takes note of the judgment of this Court in Nawanshankar case wherein it is held tha....
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....e 8D(2) of the Rules. Accordingly, the Ground No. 3 raised by the revenue is dismissed." 26. Respectfully following the above decision of the Co-ordinate Bench we see no infirmity in the order of the CIT(A). Disallowance of expenses claimed under section 35D - Ground No. 3 27. During the year under consideration the assessee has incurred expenses to the tune of Rs. 51,07,94,290/- on issuance of equity shares through Qualified Institutional Placement (QIP). The assessee claimed 1/5th of the said amount i.e. Rs. 10,21,58,858/- during the year under consideration under section 35D(2)(c)(iv) which allow amortization of preliminary expenses incurred in connection with the issue for "Public Subscription" of shares. The AO disallowed the said claim on the ground that QIP is not a public subscription and therefore the expenses fall outside the scope of section 35D(2)(c)(iv). The CIT(A) deleted the disallowance made by the AO by placing reliance on the decision of the Co-ordinate Bench in assessee's own case on an identical issue for AY 2011-12 and 2012-13. The revenue is in appeal before the Tribunal against the order of the CIT(A). 28. The ld. DR submitted that the deducti....
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....scription" under section 35D(2)(c)(iv). The ld. AR further submitted that the assessee being a listed company is require to make a disclosure of its surrounding pattern and as per Regulation 31 of SEBI Regulations there are only three categories of shareholders i.e. promoter/promoter group, public and non- promoter/non-public and that as per the said Regulations QIB are classified under category public. The ld. AR placed reliance on the decision of the Hyderabad Bench of the Tribunal in the case of DCIT vs. Deccan Chronicle Holdings Ltd. [2015] 60 taxmann.com 240 (Hyd. Trib.) where it has been held that 6. With respect to ground No. 4 for the assessment year 2008-09, we find that the Assessing Officer has not disallowed for the assessment years 2006-07 and 2007-08. However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers for the assessment year 2008-09 which has been allowed by the Commissioner of Income-tax (Appeals) holding as under : "5. I have gone through the factual and legal contentions of the appellant in support of its argument that the deduction was claimed under section 35D read with section 37 i.e., b....
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....hat though the entire expenditure was allowable in one year under section 37, the same was treated as deferred revenue expenditure and claimed over five years, starting from the assessment year 2007-08. The concept of deferred revenue expenditure is now legally recognised by various judicial authorities and in fact, this was upheld even in the case of the appellant by my predecessor, while deciding the appeal for assessment year 2006-07. In view of the above facts, I hold that the expenditure of Rs. 2,07,00,112 claimed for assessment year 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in order, the disallowance on this account is deleted." 7. We find that during the year 2007-08, the company incurred debenture expenses of Rs. 2.07 crores and QIB issue expenditure of Rs. 8.28 crores, both totalling to Rs. 10.35 crores. The expenditure referred to above of Rs. 10.35 crores was adjusted against the share premium account as per the provision of the Companies Act. However, the expenditure being deferred revenue expenditure falls within the ambit of section 35D read with section 37 of the Income-tax Act ....
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....otice that the Co-ordinate Bench has dismissed the ground of the revenue by placing reliance on the decision in the case of the Deccan Chronicle Holding Ltd. (supra). We further notice that the coordinate bench in the case of Yes Bank Ltd. vs DCIT ([2020] 117 taxmann.com 974 (Mumbai - Trib) has considered a similar issue where it has been held that - 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The appellant is a banking company. It filed its revised return of income for the AY 2010-11 on March 30, 2012 declaring total income at Rs. 7,90,10,18,157/-. As mentioned earlier, the question involved in this appeal is whether QIB can be regarded as "public" and whether the offer made to them can be regarded as "offer made to public" for the purpose of section 35D of the Act. In Deccan Chronicle Holdings Ltd. (supra), the Tribunal has held as under : ******* 6.1 A perusal of the above order of the Tribunal clearly indicates that the present issue is directly covered in favour of the appellant. 6.2 Further, we find that the appellant being a l....
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....Andhra Chamber of Commerce (supra). 7. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Ltd. (supra) and in view of the discussion hereinabove at para 6.2, hold that the appellant is eligible for deduction u/s 35D of the Act. Thus we set aside the order of the Ld. CIT(A) and allow the 1st, 2nd and 3rd ground filed by the assessee. 32. The ratio laid down by the coordinate bench in the above case is that QIBs are to be treated a public and hence any expenditure incurred towards issue of shares under QIP would qualify for deduction under section 35D. Therefore respectfully following the above judicial precedence and the decision of the coordinate bench in assessee's own case we hold that there is no infirmity in the findings of the Tribunal. Disallowance of Bad-debts pertaining to credit card expenses - Ground No.4 33. The AO during the course of assessment disallowed the bad debts claimed as deduction pertaining to credit card business. The CIT(A) allowed the claim by placing reliance on the decision of the Co-ordinate Bench in assessee's own case for AY 2015 and2015-16 (supra). 34. We heard the....
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.... of accounts, the assessee would certainly be entitled for deduction u/s.36(i)(vii) of the Act. It need not be routed through provision for bad and doubtful debts account. Moreover, we find that RBI has issued a master circular dated 01/07/2013 which provides for credit card / debit card and rupee denominated co-branded prepaid card portions of the banks. The said circular clearly establishes the fact that credit card business is part and parcel of banking business. This fact that was placed on record by the assessee before the lower authorities had been ignored by them. Further as part of the banking license granted by the RBI, the assessee is entitled to carry on the banking business either departmentally or through a company set up for this purpose. We find that credit card could be issued by the assessee bank only to its customers. Hence, the observation made by the ld. PCIT in the case of ICICI Bank for the A.Y.2013-14 that a person need not be a customer of the bank to obtain credit card is fundamentally incorrect. Credit card business according to the RBI master circular is a permissible banking business activity provided under Banking Regulation Act and hence, it could be s....
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....No. 3864/Mum/2019 dated 22.08.2022). 37. We heard the parties and perused the material on record. We notice that the Co-ordinate Bench in the case of ICICI Bank Ltd. has considered the issue of allowability of interest on IPDI under section 36(1)(iii) and held that: 7. During the course of assessment the A.O also noticed that assessee has claimed interest expenditure u/s 36(1)(iii) of the Act in respect of perpetual bonds issued by the assessee bank. The details of such Perpetual Debt Instruments (IPDI) are as under: Sr. No. Series Allotment Date Book Value (Rs.) Date of repayment Amount of repayment (Rs.) 1. DAG06RRB August 9, 2006 233,00,00,000 August 9, 2016 233,00,00,000 2. DJA07RB1 January 15, 2007 18,00,00,000 April 30, 2017 18,00,00,000 3 DJA08RB1 October 1, 2008 500,00,00,000 April 30, 2018 500,00,00,000 4. DSP06RRB September 13, 2006 550,00,00,000 September 13, 2016 500,00,00,000 1301,00,00,000 1301,00,00,000 On query the assessee explained that these bonds have been issued to various insurance companies, mutual fund p....
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.... capital of the bank. The AO had further mentioned that the assessee had claimed deduction on account of interest paid on such bonds for an amount of Rs 2,47,65,45.011/- u/s 36(1)(m) of the Act. Before The AO, the bank has claimed that it has discretion to exercise the call option for such bonds as per applicable guidelines. The Appellant also claimed that the interest paid to the bond holders unlike dividend income was not exempt as per provision of the Act and the bondholders accordingly had offered the interest receipts as their income. The Appellant claimed that as per RBI Guidelines, the Perpetual Bond were treated as Tier I capital subject to certain conditions The investors do not get the right to redeem the bonds at any given point of time Only the issuing company can buy back the bonds from the investors Therefore, even if subsequently borrower buys back these bonds, it will not alter the nature and character of these bonds because it is the borrower and not the lender who has every right in such bonds to redeem it Further, in the appellant's case, monies borrowed by issuance of IPDIs have been disclosed in Schedule 4 of the balance sheet as "Borrowings" and the intere....
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....is order under section 263 of the Act. In that case, the capital of the Petitioner Corporation was provided by the Union of India and the Punjab Government as per provisions of section 23 of the Road Transport Corporation Act, 1950 The Petitioner had paid interest on the capital, provided by the Government. On the question of whether the interest paid by the Petitioner can be regarded as deductible under section 36(1)(ii) of the IT Act, on facts, the High Court held that (a) the capital was not borrowed by the Petitioner, but was only provided by the Government, (b) there was no obligation on the Petitioner to repay the capital provided by the Government as per provisions of the Road Transport Corporation Act, 1950, and (c) hence, the interest paid on the capital, though termed as interest, would not be allowable as deduction under section 36(1)(ii) of the IT Act. The facts of aforesaid case are distinguishable as the assessee has borrowed money and it cannot be treated as provided by lenders. Further even though the terms of the IPDIs are perpetual in nature, as per the terms of the issue, all IPDIs are redeemed either at the first available opportunity or within a short while the....
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....wherein assessee has shown innovative perpetual debt instrument under the head borrowings. The ld. Counsel has also referred page no. 91 of the case law paper book wherein copy of the order of Hon'ble Punjab & Haryana High Court in the case of Pepsu Road Transport Corporation referred by the ld. D.R. in his argument was placed. By referring this case the ld. Counsel contended that fact of the case of the assessee are distinguishable from the facts of the case of Pepsu Road Transport Corporation. She stated that in the case of Pepsu Road Transport Corporation, it was the statutory requirement that the corporation shall pay interest on the capital borrowed from the central & state Government at such rates as may be fixed by the Government. In that case the capital of the corporation was to be provided by the Central & State Government whereas in the case of the assessee there was no such statutory requirement and assessee has issued debt instruments without any compulsory requirement of contribution. The ld. Counsel has also referred decision of ITAT, Cochin in the case of Kerala Road Transport Corporation Vs. ITO 34 TTJ 101. 10. Heard both the sides and perused the material....
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....it had borrowed the money from the lenders. Similarly the fact of the case of Bank of India Vs. ACIT vide 122 taxman.com 247 (Mum ITAT) are also distinguishable from the case of the assessee. In that case the revenue had not discussed about the terms on which perpetual bond were issued. Therefore, the issue was remained back to the ld. CIT(A) for fresh adjudication. We have also perused the decision of Kerala Road Transport Corporation Vs. ITO 34 TTJ 101 Cochin, ITAT, wherein held that payment of interest was not made to the corporation but it was the payment made to the third parties. In the light of the above facts and circumstances merely that RBI recognizes to treat the said debt instruments as additional Tier/Capital would not change the nature of Innovative Perpetual Debt Instruments which were of the nature of long term borrowings and the interest paid was debited to the profit and loss account. These debt instruments were also redeemed on different dates as discussed supra in this order, therefore, we don't find any reason to interfere in the decision of ld. CIT(A), accordingly, this ground of appeal of the revenue is dismissed." 38. The facts in assessee's case bein....
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....ment under the head HTM were long-term investment, that same would not marked to market, that diminution in value was not allowable as per provisions of s.37 of the Act. 6.2 Before us, the AR and DR agreed that the issue now stands settled by the decision of the Tribunal delivered in the case of Bank of Rajasthan(2011-TIOL-35-ITAT,Mum). A reference was made to the CBDT Instruction No.17 dated 26/11/2008. It was also agreed that the FAA had followed the decision of the Tribunal, while deciding the appeal for assessment year 2008-09 and the AO had agitated the issue before the Tribunal. 6.3 We have heard the rival submissions and perused the material before us. We find that in the case of Bank of Rajasthan (supra), the issue has been decided in favour of the assessee. While adjudicating the appeal for the AY.2008-09 the FAA had followed that order and allowed the appeal filed by the assessee. It is also found that similar issue had arisen in the case of HDFC Bank Ltd. (ITA/6939/Mum/201) and the Tribunal had decided the issue in favour of the assessee. Following the orders of the Bank of Rajasthan and HDFC Bank (supra) Ground-4 for AY.05-06,Ground-3 for AY.08-09 and ....