TaxTMI 
TaxTMI 
2024 (2) TMI 1590
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.... in law, the Hon'ble CIT(A) erred in directing the AO to verify the accounts of the Appellant to verify if the Appellant had interest free funds, which direction is beyond the powers conferred on CIT(A) under section 251 of the Act, even after Hon'ble CIT(A) has deleted the disallowance of interest. WITHOUT PREJUDICE TO GROUNDS 1: GROUND NO. III: RULE 8D IS NOT AUTOMATIC: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in holding that there is no substance in the claim of the Appellant that the AO has not passed a speaking order in recording his satisfaction. 2. He erred in upholding the action of the AO of computing the disallowance as per Rule 8D of the Rules when the AO has not recorded his satisfaction for rejecting the suo-moto disallowance computed by the Appellant. 3. The Appellant prays that the AO be directed to delete the disallowance u/ s. 14A r.w.r. 8D. WITHOUT PREJUDICE TO GROUNDS I & III: GROUND NO. IV: NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE WHEN SECURITIES ARE HELD AS STOCK-IN- TRADE: 1. On the facts and circumstances of th....
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....URRED IN CONNECTION WITH THE QUALIFIED INSTITUTIONAL PLACEMENT ('QIP'): 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance of deduction of Rs. 3,44,94,634/ - claimed us 35D in respect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not tantamount to public subscription and such capital expenses are not eligible for deduction u/ s. 35D of the Act. 2. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in holding that the facts in the year under consideration are same and thereby relying on the order of his predecessor for confirming the disallowance u/s. 35D without considering the facts in the captioned year. 3. The Appellant prays that the AO be directed to allow Rs. 3,44,94,634/- as a deduction u/ s. 35D of the Act. WITHOUT PREJUDICE TO GROUND NOS. VII AND VIII: GROUND NO. VII: DISALLOWANCE OF QIP EXPENSES BY INVOKING SECTION 40(a) (i)/ (ia) OF THE ACT: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in observing that the expenses in....
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.... income on bank guarantee. GROUND NO XIII: NOT ADMITTING CLAIM FOR DEDUCTION OF DISCOUNT ON ISSUE OF SHARES UNDER EMPLOYEE STOCK OPTION SCHEMES (ESOPs) MADE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not admitting and allowing the claim of the Appellant by stating that the Appellant is making such claims only as an additional claim and not in the ROI without considering that the claim for ESOPs is a legal claim and that there are no restrictions provided in law for putting forth a legal claim at any stage of appellate proceedings. The Appellant prays that the claim for discount on ESOP be admitted and allowed in accordance with the Act. WITHOUT PREJUDICE TO GROUND NO. XIII: GROUND NO. XIV: DISALLOWANCE OF DEDUCTION OF DISCOUNT ON ISSUE OF SHARES UNDER THE EMPLOYEE STOCK OPTION PLAN ('ESOP'): 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not allowing the claim for deduction in respect of discount on issue of shares under the ESOP made during the course of the assessment proceedings, amounting to ....
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....us debt instruments. 3. He further erred in equating the IPDIs with the preference share capital of a Company. 4. The Appellant prays that the AO be directed to treat the IPDIs as debt instruments and allow the interest paid thereon u/ s. 36(1)(iii) of the Act. WITHOUT PREJUDICE TO GROUND NO XVII GROUND NO XVIII: INTEREST DEDUCTIBLE U/S 37(1)/28 OF THE ACT: 1. On the facts and the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of disallowing the interest amounting to Rs. 77,53,20,737/ - paid on the IPDIs issued by the Appellant u/s 37(1)/28 of the Act. 2. The Appellant prays that the AO be directed to allow the interest of Rs. 77,53,20,737/-on IPDIs u/s. 37/28 of the Act in computing business income of the Appellant. GROUND NO XIX: LEVY OF INTEREST U/S 234A OF THE ACT: 1. On the facts and the circumstances of the case and in law, the CIT(A) erred in directing the AO to verify the levy of interest u/ s 234A of the Act when the details that the return was filed within the statutory time limit specified u/s 139 of the Act were on record. 2. The Appellant....
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....f HTM securities and hence not an allowable deduction?' 6. 'Whether on the facts and in the circumstances of the case and in law, Ld. CIT (A) was right in directing to delete the addition made on account of deferred payment guarantee commission without appreciating the fact that the right to received the commission and actual receipt of the same occur during the relevant accounting period as also no corresponding charges or expense will arise in the later years?' 2.1 Before us, the assessee filed following additional ground as under: 1. On the facts and circumstances of the case and in law, AO erred in considering the investments made by the Assessee in Pass-Through certificates ('PTCs') issued by securitization trust for the purposes of computing disallowance u/s 14A of the Income-Tax Act, 1961('the Act'). 2. The Assessee submits and prays that since Income-Tax is paid on the income distributed by the trust to the PTC holders as per provisions of section 1151A of the Act, provisions of section 14A cannot apply to PTCs. 3. We have heard rival submission of the parties on the issue of the admissibility of the additional ground. The additional ground ....
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....uring plan. 6.3 The second kind of instrument is 'interest free bonds' which amounted to Rs.180,56,03,200/- as 31/3/2015 and on which interest earned of Rs.23,39,96,110/- during the year under consideration has been claimed as exempt u/s 10(15) of the Act. A list of such instruments has been reproduced by the Assessing Officer on page 3 of the assessment order. The assessee claimed that those instruments/investments were only incidental to the banking business of assessee, therefore, no expenses were incurred in relation to earning of such tax-free income. 6.4 Third kind of instrument is Pass Through Certificates (PTC) on which the assessee bank earned income of Rs.237,66,81,445/-, which has been distributed by the 'securitization trusts' and claimed that tax was paid by the respective securitization trust, thus the income distributed by said trust is exempted income in the hands of the assessee u/s 10(35A) of the Act, being received as investor of securitization trust. A pass through certificate (PTC) is a certificate that is given to an investor against certain mortgaged- backed securities that lie with the issuer. The certificate can be compared to securiti....
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....0% 440,783 Rent - India Bulls Finance Centre 1,940,486,074 89,023,968 0.10% 93,376 Electricity 329,440,644 12,053,394 0.10% 12,643 Telephone 36,696,467 1,639,717 0.10% 1,720 Other Operation expenses 5,964,872,642 51,272,326 0.10% 53,779 17,498,673,623 Total 602,299 Other Operating cost Cost has been allocated based on no. of employees in treasury department to the total number of employees of the Bank Deals made in Financial Year 2014-15 Nos. Deals in tax free instruments (including PCs where tax is paid by Secu trust) in FY 2014-15 199 Total No of Treasury Deals in FY 2014-15 189,726 % of tax free deals including PTC deals where tax is paid by Secu trust) to Total Deals 0.10% ● The Treasury Department ('TD') of Yes Bank is the Department which is exclustely engaged in the buying and selling of securities. The TD is engaged in buying and selling of Government Securities, Treasury Bills, Corporate /PSU Bonds, Equity, Mutual Funds and other investments. Hence, Yes Bank has considered the expenses of the TD for the purpose of computation of ....
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....40,644 684,852 Actuals Telephone 36,696,467 93,166 Actuals Other Operating Expenses 5,964,864,436 3,110,901 No of employees 29,681,323 Employee database IFI CF CF / IFI Emplyoes 15 6 Total no of Employees 10,354 10,354 Cost allocation % of the employees 0.14% 0.06% 518,483 2,592,417 Total 3,110,901 Accordingly, Yes Bank calculated total sum of Rs. 29,681,323/ - for the assessment year under consideration and disallowed the same under section 14A of the Act.' 6.6 Thus, the assessee itself identified direct cost of Rs. 29,446/-and indirect cost of Rs. 2,96,81,323/-towards earning of exempted income and disallowed the same for the purpose of section 14A of the Act, while computing its income for the purpose of filing return of income. 6.7 The Assessing Officer, however expressed his dissatisfaction on the claim of the assessee of suo-motu disallowance of expenses computed under section 14A of the Act and invoked Rule 8D of Income-tax Rules, 1962 (in short the 'Rules').The disallowance computed by the Assessing ....
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.... for computation of disallowance under section 14A read with rule 8D, the only investment which have yielded exempted income during the year under consideration should be considered. But, as far as the disallowance under Rule 8D(2)(ii) of the Rules is concerned, the Ld. CIT(A) directed the Assessing Officer to verify the claim of the assessee of availability of sufficient 'interest-free funds' to cover the investment made, following the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs Reliance Utilities and Power Ltd 313 ITR 340 and CIT vs HDFC bank Ltd 366 ITR 505 (bom). 6.10 Regarding disallowance in terms of Rule 8D(2)(iii) of Rules, the Ld. CIT(A) followed the finding of third member of the Tribunal bench in the case of DH securities Private Limited reported in 41 taxmann.com 352 and upheld the disallowance of Rs. 22,57,50, 010/-being 0.5% of the average value of the investments. The relevant finding of the Ld. CIT(A) is reproduced as under: 'As discussed above, the Hon'ble ITAT in appellant's own case for AY 2008-09, which have been followed by my Ld. Predecessors in appellant's own case for AY 2014-15, while consideri....
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....levant material on record. We find that Ld. CIT(A) has rejected arguments made by the assessee on this issue observing as under: '6.4.2 The appellant's first contention is that the application of Rule 8D is not automatic and the same cannot be invoked until and unless the Ld. AO records the cogent reasons for disregarding the claim of the appellant. It is an admitted fact that while framing the assessment the Ld. AO has taken into account the suo moto disallowance made by the appellant in relation to earning exempt income and had requested the appellant to furnish the details regarding the expenses attributable to earning exempt income. From the assessment order, it is observed that the Ld. AO has discussed the facts of the assessment ord reit i othe judicial precedence, as detailed therein. The Hon'ble Gujarat High Court in the case of Devarsons Industries P Ltd, reported in 84 taxmann.com 244 has held that mere fact that the Assessing Officer did not arrive at satisfaction in a particular manner while making disallowance would not per se destroy mandate of sec 14A of the Act. For the sake of convenience, the finding of the Hon'ble Gujarat High Court in the ab....
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....e conclusion that the claim of the assessee in this regard is not correct. It is not necessary for him to decide the extent or the quantum of the incorrect claim. He must, however, correctly conclude that the claim of the assessee is incorrect. It is necessary for the Assessing Officer to rightly come to the conclusion that the claim of the assessee is incorrect. The language of Section 14(2) is 'is not satisfied with the correctness of the claim' and not 'reasonably doubts it' or 'has reasons to doubt the correctness of the claim'. 34. Mrs. Suri's reliance upon the word 'determine' in sub section (2) of Section 14A as regards the second part of her submission is misplaced. The term 'determination' in Section 14(2) applies to the computation of the expenditure incurred in relation to exempt income by resorting to the method as may be prescribed. The method is prescribed by Rule 8D. Under section 14A(2) where the Assessing Officer is not satisfied with the correctness of the claim in respect of the expenditure in relation to exempt income or the assessee's claim that no expenditure has been incurred in relation to such income, 'he shall' determine the am....
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....icer is entitled to resort to Rule 8D. 39. We are, however, unable to agree with Mr. Klar that the assessee is estopped from challenging the Assessing Officer's application of Rule 8D, as the assessee had itself furnished its working under Rule 8D. The assessee furnished a calculation only to show that the Assessing Officer's calculation is in any event incorrect. That is not an admission by the assessee that Rule 8D was validly invoked. It was only an alternative case assuming that Rule 8D was validly invoked or ought to be invoked. 40. The Assessing Officer on not being satisfied with the correctness of the claim by the assessee in respect of the expenditure incurred to earn exempt income ought to have applied Rule 8D which he did not. Instead he made an estimate on the basis that he considered to be reasonable. This he was not entitled to do. Where an Assessing Officer is not satisfied with the correctness of the claim of the assessee, in this regard, he is bound by the provisions of sub section (2) of Section 14A to follow the prescribed method which at the relevant time was Rule 8D.' In view of the above discussions, there is no substance in ....
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....interest free funds available with the Assessee The Assessee Bank submits that when own funds and interest free funds are more than tax free investments, no disallowance of interest u/s 14A r.w.r. 8D(i) be made. The said proposition is supported with the position of own funds and tax-free investments as on March 31, 2015, tabulated below for reference: Details of Owned funds and other non-interest- bearing funds Amount (Rs. in lacs) as on March 31, 2015 Amount (Rs. in lacs) as on March 31, 2014 Share Capital (a) (Pg. 8 of FPB) 41,773 36,063 Reserves and Surplus (b) (Pg. 8 of FPB) 11,26,224 6,76,110 Current Account Deposits - From Banks (c) (Pg. 9 of FPB) 37,561 23,469 - From Others (d) (Pg. 9 of FPB) 8,12,383 6,78,246 Total Current Account Deposits (e=c+d) (Pg. 9 of FPB) 8,49,944 7,01,715 Total non-interest bearing funds (a+b+e) 20,17,941 14,13,888 Tax free investments (Pg. 18 of AO order) 3,50,453 5,52,546 For this proposition, reliance is placed on various judicial precedents listed in the index of Legal Paper Book ('LPB') running from pg. no. 1- 67 under propositi....
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....eiterated the theory of presumption regarding availability of interest free funds being utilized for the purpose of investment in fact, in assessee's own case in assessment year 2011- 12 in ITA No.6173/Mum/2016 dated 08-07-2020 and for assessment year 2012-13 in ITA No.5672/Mum/2017 dated 16-07- 2021 the Tribunal has expressed identical view that if on the date of balance-sheet the assessee had sufficient interest free funds available with it, the presumption would be, the investments were made out of such interest free funds. The aforesaid decisions of the Hon'ble superior Courts as well as the co-ordinate benches are binding precedents qua the issue arising for consideration before us. That being the case, adhering to the norms of judicial discipline and decorum, we are bound to follow them. 33. In view of the aforesaid, having found that the assessee had sufficient interest free funds available to take care of the investment made, we hold that no disallowance of interest expenditure under rule 8D(2)(ii) can be made. Accordingly, we delete the disallowance made under rule 8D(2)(ii).' (Underlined for emphasis) The above two decisions of the Hon&#....
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....n if an academic exercise is done to find out the position in the middle of the year to find out the investment balance, there is zero probability of the position being different at any time during the middle of the year.' 10.1 On the contrary, the learned DR submitted that availability of the interest free funds should be considered on the date of the investment as held by the Hon'ble Supreme Court in the case of Maxopp investment ltd(supra). The relevant submission of learned DR is reproduced as under: '7.5 Further, it is submitted that while computing the disallowance under section 14 A of the Act, the date of investment on which the investment is made which is earned exempted income is important and not the balance sheet date. This principle has been affirmed by the Hon'ble Apex Court in the case of M/s Maxopp Investment as mentioned supra. For the sake of reference the same is reproduced as under- '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 availabl....
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....es is reproduced as under - '8. We have heard learned counsel for both the parties. In our opinion the very basis on which the revenue had sought to contend or argue their case that the shareholder funds to the tune of over Rs. 172 crores was utilised for the purpose of fixed assets in terms of the balance sheet as on 31st March, 1999, is fallacious. Firstly, we are not concerned with the balance sheet as of 31-3-1999. What would be relevant would be balance sheet as on 31-3-2000. Apart from that, the learned counsel has been unable to point out to us from the balance sheet that the balance sheet as on 31-3-1999 showed that the shareholders funds were utilized for the purpose of fixed assets. To our mind the profit and loss account and the balance sheet would not show whether shareholders funds have been utilised for investments. The argument has to be rejected on this count also. 9. Apart from that we have noted earlier that both in the order of the CIT (Appeals) as also the Appellate Tribunal, a clear finding is recorded that the assessee had interest-free funds of its own which had been generated in the course of the year commencing from 1-4- 1999. Apart from t....
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....n those funds rather than availability of the funds in the year under consideration. However, no such details could be made available during the course of the hearing. In the circumstances, the proposition by the Ld. Counsel of the assessee cannot be adjudicated. Accordingly, we restore this issue of disallowance u/s 14A of the Act to the file of the Ld. CIT(A) for deciding afresh after taking into consideration submissions of the assessee. The ground Nos. 1 to 3 of the appeal of assessee and ground No. 1 of the appeal of the Revenue, are accordingly allowed for statistical purposes'. Therefore, considering the facts and circumstances of the case, judicial precedence on this issue, the addition made by Assessing Officer may be sustained.' 10.2 In the rejoinder, the learned counsel for the assessee has submitted that observation of the Tribunal (supra) referred by the ld DR, is merely orbiter dicta and not the ratio of the said decision. The relevant submission of the ld counsel is reproduced as under: 2. As regards Para 7.5 to 7.9 of the Department's reply: In para 7.5 to 7.9, the Ld. DR has made submissions on the Assessee' s proposition that ....
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....t emanating at all from the orders of the lower authorities because in those years, the question whether the figures as on 'Balance Sheet date' or 'investment date' should be taken, was not before the Hon'ble Tribunal at all. These observations are mere obiter dicta and not the ratio of the said decision and therefore cannot be followed in the year under consideration especially when the issue is settled by the Hon'ble Supreme Court in South Indian Bank (supra) as elaborately explained in our Limited Written Submissions.' 10.3 We have heard rival submission of the parties on the issue in dispute. We agree with the contention of the learned counsel for the assessee that Ld. CIT(A) is not authorised for restoring the matter back to the Assessing Officer as per the provisions of the Act. We note that in identical circumstances the Tribunal in ITA No. 3249/2018 and 3501/2018 for AY 2014-15, where the Ld. CIT(A) directed the Assessing Officer for verification of the availability of the interest free funds, has set-aside the finding of ld CIT(A) and restored the matter back to the file of the Ld. CIT(A) for deciding afresh . Therefore, respectfully following th....
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.....R that as the assessee is a bank, therefore, investments that are held as stock-in-trade cannot be subjected to disallowance u/ s 14A of the Act. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Maxopp Investments Ltd. Vs. CIT (2018) 402 ITR 640 (SC). In its said order, it was observed by the Hon'ble Apex Court that in case of a bank the investments that are held as stock-in-trade cannot be a subject matter of disallowance u/s 14A of the Act. As pointed out by the Id. A.R, and rightly so, the Tribunal in the assessee's own in ITA No. 6173/Mum/2016, dated 08.07.2020 after relying on the judgment of the Hon'ble Supreme Court in the case of Maxopp Investments Limited (supra), had observed that as the assessee was a bank, therefore, investments held as stock in- trade were not to be considered for the purpose of working of disallowance us 14A of the Act, irrespective of the fact that any exempt income was derived from such investments or not. For the sake clarity the observations of the Tribunal are culled out as under: '3.7 To sum up, we direct the ld. A. O as under: a. Since, assessee being a bank, investments held....
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....6. What is of vital importance in the above judgment are the observations emphasised by us. Each of them expressly states that what is disallowed is expenditure incurred to 'earn' exempt income. The words 'in relation to' in section 14A must be construed accordingly. Thus, the words 'in relation to' apply to earning exempt income. The importance of the observation is this. We have held that the securities in question constituted the assessee's stockin- trade and the income that arises on account of the purchase and sale of the securities is its business income and is brought to tax as such. That income is not exempt from tax and, therefore, the expenditure incurred in relation thereto does not fall within the ambit of section 14A. Now, the dividend and interest are income. The question then is whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee's stockin-trade. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, di....
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.... 144 of the Act. We find that the issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai Benches in the assessee's own case for AY 2013-14, where the Tribunal by following the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd. v. CIT (supra) held that shares d securities held by the bank or guarantor and income received for such shares & securities must be considered as business income, and consequently, provisions of Sec. 144 of the Act, would not be attracted to such income. In view of the above, it is most humbly submitted that, the view of the Learned Commissioner of Income-tax (Appeal) [(*the Ld. CIT(A)'] is contrary to the above well-settled law. All the above Tribunal Benches have decided the issue after duly considering the decision of the Hon'ble Supreme Court in Maxopp Investment Ltd (402 ITR 640), South Indian Bank Ltd. (438 ITR 1), Nawanshahar Central Co-op Bank Ltd (289 ITR 6) and Hon'ble Punjab and Haryana High Court in case of State Bank of Patiala (391 ITR 218), and other relevant case laws. The Appellant Assessee, therefore, submits that disallowance u/s 14A of the Act be delet....
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....his hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share & Stock Brokers (P.) Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom. "The next phrase is, 'in relation to income which does not form part of total income under the Act'. It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A . ** The theory of apportionment of expenditure between taxable and non- taxable has, in principle, been now widened under section 14A.' 35. The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business eleets of both taxible and nonse, the principle of apportionment of the expenditure relating to the non-taxable income did no app....
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....nd profession'. The Board also went to the extent of saying that this would not be limited only to co-operative societies/Banks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/ commercial banks, to which Banking Regulation Act, 1949 applies. 38. From this, Punjab and Haryana High Court pointed out that this circular carves out a distinction between 'stock-in-trade' and 'investment' and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the test of dominant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to on what basis those cases are to be decided where the shares of other companies are purchased by the assessees as 'stock-in-trade' and not as 'investment'. We proceed to discuss this aspect hereinafter. 39. In those cases,....
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....henever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove' 7.4 It may be appreciated that in the case of M/ s Maxopp Investment as mentioned supra, the Hon ble Apex Court has made it very clear in an ambiguous terms that the actual expenditure incurred by the assessee which is debited to the profit and loss account and related to the exempted income earned, qualifies for disallowance under section 14-A. Also, it is inferred by the Hon'ble Supreme Court that even if the expenditure actually incu....
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.... apply to Stock- in-trade, and that too after considering the decision of Hon'ble Supreme Court in case of Maxopp Investments Ltd. v. CIT (402 ITR 640). Kindly refer submissions on Proposition no. 3 on pg. no. 5 of the Limited Written submissions made by the Assessee. In addition to the said submissions, reliance is also placed on the following judicial precedents: > Central Bank of India Vs AO (NFAC) (ITA No. 235/Mum./2023 dated 25/08/2023) (Mumbai Tribunal) > PCIT v. Punjab National Bank [2022] 140 taxmann.com 131 (Delhi High Court) Therefore, if for any reason, Hon'ble Tribunal decides to take a contrary view despite the Tribunal having taken favorable view in Assessee* s own case, the issue will have to be referred to the Special Bench. ' 11.4 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Hon'ble Supreme Court in the case of Maxopp Investment Ltd(supra) has specifically decided the applicability of the provisions of section 14A in case of securities held as stock in trade. The Hon'ble Supreme Court rejected the dominant purpose theory and held that expenses inc....
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....he same time, we do not agree with the test of dominant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to on what basis those cases are to be decided where the shares of other companies are purchased by the assessees as 'stock-in-trade' and not as 'investment'. We proceed to discuss this aspect hereinafter. 39) In those cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walf....
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....ing to the assessee, the Coordinate bench of Tribunal in the case of HDFC Bank Ltd Vs ACIT (ITA No. 6173/Mum/2016) and Punjab National Bank Vs ACIT ( ITA No. 1519/Del/2016) has concluded that investment that are held as a stock-in-trade cannot be subjected to disallowance under section 14A of the Act in view of the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd(supra). The ld Counsel contended that conclusion of the Tribunal (supra) is that disallowance in respect of the stock-in-trade is not applicable in case of the banks. The learned counsel before us therefore submitted that in case the Bench is not agreed with his proposal, than matter might be referred to the Special Bench. However, we do not agree with the above proposition of the learned counsel for the assessee as the theory of the dominant purpose for which the securities were held has been rejected by the Hon'ble Supreme Court the case of Maxopp investment Ltd (supra) in unambiguous terms and clearly laid down that in case of securities held as stock- in-trade, theory of apportionment of expenses has to be applied and according to which the expenses for incurring non-taxable income fro....
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.... of exempt dividend income on the same would trigger the applicability of Sec. 14A of the Act. Accordingly, the Hon ble Apex Court had „ set asidel the dominant purpose test which was relied upon by the High Court. For the sake of clarity, the observations of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. (supra) are reproduced as under : "39. In those cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as income under the head „profits and gains from business and professionl. What happens is that, in the process, when the shares are held as „stock-in-tradel, certain dividend is also earned, though incidentally, which is also an income. However by virtue of Section 10(34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, ....
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....e not required to follow the same as precedent. Accordingly, the prayer of the learned counsel for the assessee to refer the matter to the special bench is rejected. 11.7 In view of the above, the assessee has to provide details of taxable and non-taxable income earned from the securities held as stock-in-trade and thereafter apportion the expenses incurred in relation to such securities in the ratio of taxable and non-taxable income earned from those securities and thereafter to consider the proportion of the expenses related to non-taxable or exempted income for disallowance under section 14A of the Act. Therefore, we feel it appropriate to restore this issue back to the file of the Assessing Officer for necessary verification and deciding afresh. The ground No. IV of the appeal of the assessee is accordingly allowed for statistical purposes. 12. In ground No. V, the assessee has raised the issue that only securities yielding dividend income should be considered for computing disallowance under section 14A of the Act. 12.1 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. It is undisputed that securities wh....
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....collected from various investors by the trustee by way of issuance of a security known as Pass-Through certificate (PTC). These investors are themselves the beneficiaries of the trust in as much as all income received by the trust is for the benefit of these investors in the ratio in which they have made investments in the PTCs. The Appellant Assessee, in the course of its normal banking business, acquires PCs from such securitization trust. A PTC is essentially a securitized debt instrument whereby the investor in PTC gets an undivided interest in the underlying receivable acquired by the trust from a bank/ financial instrument. During the captioned year, the Appellant Assessee has received certain income by way of distribution of its share of income by the securitization trust. Under the scheme of the Act, the income of the securitization trust is taxed in the hands of the trustee u/s 115TA of the Act and is not taxed in the hands of the beneficiary. The Ld. AO has considered PTC as an investment yielding exempt income and thereby included the same in computing disallowance u/s 14A r.w.r 8D of the Act. It is the Appellant Assessee's submiss....
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.... position, a shareholder cannot claim tax payable on dividend as his tax triggering the provisions of section 14A of the Act. ● Assessee's case being that of Trust, the above argument does not apply. A Trustee is a mere Representative Assessee of a Trust as per the provisions of section, 160(iv) of the Act. A Trustee pays tax as a Representative Assessee of the beneficiary. However, a Company is not a representative Assessee of a shareholder. Therefore, the argument that where dividend which is exempt in the hands of the shareholder has already suffered DDT was not accepted and applicability of section 14A was rightly upheld. However, the said argument cannot be applied in case of the Assessee where trustee pays tax as a Representative Assessee. ● It is true that section 10(35A) of the Act apparently provides an exemption on income distributed by the trust and therefore, at first blush, the income distributed by the securitization trust to a beneficiary, is an exempt income. However, as mentioned above, a trustee is a mere representative assessee of the beneficiary and therefore any tax paid by the trustee is a tax paid on behalf of the beneficiary....
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....rwise. There is also no distinction with respect of the incidence of taxes by the payer to the payee. Onley one condition is prescribed by the Income tax Act viz., the expenditure incurred by the assessee shall be related to or attributable to the 'income not forming part of total income. Also, it is admitted that the impugned income claimed by the assessee from passthrough certificates is 'income not forming part of total income' under section 10(35 A) and such factual matrix is not disputed. Therefore, it is not material whether such income is earned by the assessee during the course of normal banking business or from the investments. Further, it is an admitted fact that the securitization trust is a distinct entity, it has it own, PAN and it is also legally bound to file its return of income. Therefore, the Appellant assessee is not related to the income of the trust directly and it the trust has distributed the income accrued to assessee on its investment. It is admitted fact that the trust has distributed income to the assessee on investment made by the assessee in the respective trust. Therefore, the income received by the assessee is ex....
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....evious year, the tax paid thereon and such other relevant details, as may be prescribed. (4) No deduction under any other provisions of this Act shall be allowed to the securitisation trust in respect of the income which has been charged to tax under sub-section (1). (5) Nothing contained in this section shall apply in respect of any income distributed by a securitization to its investors on or after the 1st day of June, 2016.' "115TCA. Tax on income from securitisation trusts .- (1) Notwithstanding anything contained in this Act, any income accruing or arising to, or received by, a person, being an investor of a securitisation trust, out of investments made in the securitisation trust, shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to, or received by, such person, had the investments by the securitisation trust been made directly by him. (2) The income paid or credited by the securitisation trust shall be deemed to be of the same nature and in the same proportion in the hands of the person referred to in sub-section (1), as if it had been received by, or had accrued or arisen to, the securitisat....
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....ncome from such PTCs has been taxed in the hands of the securitisation trust and therefore PTCs are tax exempted investment. Since the income has already suffered tax same in the hand of securitisation trust, same cannot be termed as exempted income for the purpose of section 14A of the Act. Secondly, he has distinguished the status of a trust with that of a company and submitted that in the case of the company, the company and the shareholder are different entities, therefore the shareholder cannot claim that the dividend has suffered tax, whereas in the case of the trust, the trustee pays tax, as representative assessee of the beneficiary i.e. assessee. Thirdly, he submits that section 10(35A) is only clarificatary in nature and it is settled law that same income can never be taxed twice. 14.7 The above contentions of the learned counsel are not acceptable for the reason that in case of normal trust, it is the settler of the trust, who contribute the trust property for the benefit of beneficiary and trustee(s) are manager of the trust. In the securitisation trust, the investors are making investment in the securitisation trust, and in turn they are receiving the returns in pro....
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....that shares issued to QIB shall be regarded as public issue, however the Assessing Officer rejected the contention of the assessee for deduction under section 35D and disallowed expenses holding the same being in the nature of capital expenditure. The Ld. CIT(A) also following his predecessor in assessment year 2014-15, upheld the finding of the Assessing Officer. We find that identical issue has been decided by the Tribunal in assessment year 2014-15 in ITA No. 3239 and 3501/mum/2018, observing as under: "14. We have heard the rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the issue in dispute is squarely covered by the order of the Tribunal for AY 2011-12 to 2013-14 in ITA No. 3498 to 3500/Mum/2018 and the Miscellaneous Application filed against that order has also been rejected by the Tribunal and therefore, the Tribunal (supra) has duly considered the order of the Tribunal for assessment year 2010- 11, therefore, this order is a binding precedent. The relevant finding of the Tribunal (supra) in MA No. 442 to 444 of 2022 are reproduced as under: "09. However, claim of the assessee is that the de....
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....ture 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., both under sections 35D and 37. I agree with the argument of the appellant that the language used in section 35D is so plain and unambiguous that the only condition laid down in that section is that the issue should be offered for public subscription and the mode of placement is immaterial. Thus, the only issue for consideration is whether QIB can be called 'public' or not. After a careful and comprehensive consideration of the relevant provisions of the Company Law, Securities Contract (Regulation) Rules, SEBI Guidelines/Instructions, I am of the considered opinion that QIBs constitute 'public' and accordingly, the subscription made by the amount to public subscription. In this view of the matter and also considering the facts with regard to the utility of funds raised through QIB issue, I hold that the issue expe....
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....ssue 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 which is eligible to be charged to profit and loss account. Accordingly as per the provisions of section 35D of the Income-tax Act, one fifth of the QIB issue expenditure i.e., Rs. 207 lakhs was written off. Qualified Institutional Buyers (QIBs) are a class of investors as a part of the large investor community and the companies sought for QIB issues because the funds can be raised within a short span. This is an extremely important investment for larger investors and since the buyers are only a class of investors, the issue of shares to QIB have been considered as public issue. The expenses in connection with public issue of shares or debentures of the company are allowable. Reliance is placed on CIT v. Shree Synthetics Ltd. [1986] 162 ITR 819 (MP). Hence on the merits of the issue, the QIB expenditure can be treated as revenue ....
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....e is the issue of IIP in accordance with Chapter VIIIA of the SEBI- ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding requirement in Rule 19(2) and 19A of SCRR. Reg. 91B defines IPP as a further public offer made only to QIBs. These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. Itthus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public shareholding. That 'a section of public qualifies as public' has been clarified in Nitta Gelatine India Limited (supra) and Andhra Chamber of Commerce (supra). 7. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Limited (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....
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.... of the expense u/s 35D of the Act is restored to the file of the Assessing Officer to be decided in accordance with direction of the Tribunal in 3498 to 3500/Mum/2018 for AYs 2011- 12 to 13-14. The ground Nos. 4, 5 and 6 of the appeal of the assessee are accordingly allowed for statistical purposes" 15.2 Thus, respectfully following the finding of the Tribunal the issue in dispute is restored to the file of the Assessing Officer to be decided as per the direction of the Tribunal in assessment year 2014-15 as reproduced above. The ground Nos. VII and VIII of the appeal of the assessee are accordingly allowed for statistical purposes. 16. In ground No. VIIIA (sick), the assessee is aggrieved with the observation of the Ld. CIT(A) with reference to disallowance under section 35D of the Act that those expenses in connection with QIP might not be allowable in view of section 40(a)(i)/(ia) of the Act. 16.1 Before us the learned counsel for the assessee submitted that the Ld. CIT(A) has not decided this issue in dispute and therefore same might be sent back to the Assessing Officer for deciding a fresh. However, we find that the Assessing Officer made no disallowance of QIP expe....
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.... of Revenue is related to the ground No. IX and X of the appeal of assessee. Since we have already restored the ground No. IX and X of the appeal of the assessee to the file of Assessing Officer, the ground No. 2 of the appeal of the revenue being connected, same is also restored to the file of the Assessing Officer for deciding afresh. The ground No. 2 of the Revenue is accordingly allowed for statistical purposes. 19. The ground XI of the appeal of the assessee relate to assessing interest income on HTM investment as income from other sources. 19.1 We have heard rival submission of the parties on the issue in dispute. The contention of the assessee is that the HTM investment have been held by the assessee as a stock-in-trade and therefore interest earned thereon is part of the business income, whereas the Assessing Officer has held the HTM securities as capital investment and therefore the interest earned thereon has been assessed by him under the head 'income from other sources'. We find that Ld. CIT(A) has followed finding of his predecessor in assessment year 2014-15, wherein he observed that the Assessing Officer himself treated the interest income under the hea....
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....to which the guaranty commission relates and should be taxed proportionately. However, observed that the assessee did not provided any valid reason for change in method of the accounting of guaranty commission from 'anniversary' basis to 'actual on No. of days' and therefore, the Ld. CIT(A) directed the Assessing Officer to verify the records and amount of guaranty commission according to the earlier method of recognising guaranty commission on anniversary date, which according to the assessee was of Rs.28,31,72,647 / -. 20.2 We have heard rival submission of the parties and perused the relevant material on record. The issue in dispute in the case is whether the guaranty commission received by the assessee for guaranty agreement spreading over for more than the year under consideration, accrue to the assessee or not and whether the corresponding expenses have also been the spread by the assessee for the period of guaranty or not. We find that assessee is following mercantile system of method and therefore any income which is accrued or deemed to accrue is liable for assessing in the year under consideration in the hands of the assessee. In the case the Ld. CIT(A)....
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.... the Tribunal in assessment year 2011-12 to 2013-14. The relevant finding of the Tribunal in assessment year 2014-15 is reproduced as under: "20. We have heard rival submission of parties on the issue in dispute and perused the relevant material on record. We find that under similar facts, the Tribunal in assessee's own case for AY 2011-12 to 2013-14 has admitted the additional ground and restored the matter back to the file of the Assessing Officer for examination of the claim in accordance with law. The relevant finding of the Tribunal (supra) is reproduced as under: "056. Ground number 6 has also another subsidiary ground, alternatively raised for claim of deduction of discount on issue of shares Under ESOP scheme. As we have held that, the learned CIT - A should have admitted additional ground of the assessee, we do not find it appropriate here to allow the claim of the assessee for the simple reason that deduction is required to be verified with respect to its quantum by the lower authorities. Accordingly, we setaside the alternative ground of allowability of discount on issue of shares Under the employee stock option plan of 0 1,432,422,420/- back to ....
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....to delete the impugned addition of Rs. 1,62,47.886/-, being interest income assessed as per provisions of section 43D r.w. Rule 6EA. The appellant has made detailed submissions, as above and the same have been considered carefully. The appellant has submitted that the Ld. AO has erred in taxing said interest income on NPA which have been recognized as per RBI guidelines. From perusal of record it is observed that similar issue had come up for consideration in the case of State Bank of India for AY 2014-15, wherein my Ld. Predecessor, vide his order dated 28.02.2018 in Appeal No. CIT(A) -5/ ACIT-2(2) (1)/IT-113/ 16-17 has held as under. "15.3 Decision: I have considered the appellant's submissions. Similar issue was decided against the Bank by the DRP for AY 2012-13. The key observations of the DRP are reproduced as under: '6.12.3 We have carefully considered this issue. It is noted that section 43D was introduced by Finance Act 1991 with a view to improve the viability of the banks, public financial institutions; and as per that section the interest on sticky loans has to be charged only in the year in which interest is actually received or c....
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....hern Technologies Lid reported in 187 Taxman 346. Similar law has been laid down by the Hon'ble Karnataka High Court in the case of Karnataka Bank Ltd, reported in 59 taxmann.com 93, wherein the Hon'ble Court has held as under. "13. When the legislature has expressly used the words 'income by way of interest' in Section 43D of the Act, if we had to include in that Section the unrealized rentals from equipment leasing activity, it would amount to the Court rewriting the Section, which is impermissible in law. In fact, the authorities have not carefully read the aforesaid statutory provision. It is a case of misreading the provision. A liability under the Income Tax Act cannot - be foisted on the basis of analogy. Unless the statute provides, no tax to be levied. Similarly, when the stafute expressly provides how the income received is to be taxed and in which year, strictly in accordance with the statutory provision, the tax has to be levied. The language employed in the aforesaid Section is simple. There is no ambiguity. We have to follow the words used in that Section. There is no scope for interpretation at all. Hence, the impugned order passed by the Appellate A....
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....erest on the NPA by debiting profit and loss account. In the case of DCIT Vs. Karur Vysya Bank ITA No. 2433 & 2467 of ITAT Chennai dated 29.03.2017 held that it becomes necessary to read down such rules so that it is in consonance with the RBI regulation or prudential norms for recognizing income. In Royal Bank of Scotland Vs. DCIT vide ITA No. 477/Kal/ 2015 ITAT Kolkata held as under: "2.6 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute before the lower authorities that the loan accounts had become sticky and doubtful of recovery. The only contention of the revenue is that section 43D of the Act read with Rule 6BA of the Rules permits accounting of interest income on receipt basis only if the loan account had become overdue for more than six months, whereas in the instant case, it is more than three months but less than six months as on 31.3.2010. The loan account becoming overdue and becoming sticky was never disputed. The next issue is whether....
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....-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank or] the State financial corporation or the State industrial investment corporation or '[a deposit taking non-banking financial company or a systemically important non- deposit taking non-banking financial company or] the public company to its profit and loss account for that year or as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier.' It is categorically provided in the provisions of section 43D that income by way of interest in relation to bad and doubtful debts to be prescribed in accordance with guidelines issued by the RBI. The section 43D was introduced by the Finance Act, 1991 as per the section the category of bad and doubtful debts to be prescribed in the Income Tax Rules having regard to the guidelines issued by the RBI in relation to such debts. In 1992 the Rules 6E was framed and as per RBI guidelines the norms for categorization of advances as NPA were those advances which remained over due for more than 6 months. The RBI has revised the guideline from ti....
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....for provision of bad and doubtful debt which is subjected to limit of 7.5% of total income before claiming deduction under chapter VIA of the Act. It is stated by the assessee that 7.5% of the total income before claiming deduction under chapter VIA of the Act works out to Rs.221,14,18,694/-, but the assessee's book provision was lower than 7.5% of the total income and therefore the assessee restricted its claim under section 36(1)(viia) to the extent of Rs.129,79,83,437/- and the claim for 10% of rural advances amounting to Rs.24,91,43,645/ -- was made separately. According to the AO, however the deduction under section 36(1)(viia) cannot exceed the total provision for bad and doubtful made by the assessee. On further appeal, the Ld. CIT(A) following the decision of the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala Vs CIT (supra), upheld the finding of the Assessing Officer. The relevant finding of Ld. CIT(A) is reproduced as under: "16.4.1 l have considered the submissions made by the appellant and have perused the material available on record. The appellant has requested to allow the claim of Rs. 24,91,43,645/- made u/s 36(1)(viia) i....
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....admitted fact that the appellant has made provision for bad and doubtful debt u/s 36(1)(viia) at Rs. 129,79,83,437/ -. The appellant has also admitted that 7.5% of total income before claiming any deduction under chapter VIA works out to Rs. 221,14,18,694/- and since the appellant's book's provision was lower than 7.5% of total income, the appellant has restricted its claim u/s 36(1)(viia) of the Act to Rs. 129,79,83,437/ -. Having claimed the deduction u/s 36(1) (via) by restricting 7.5% of total income to the provisions made in the books, surprisingly in its computation of income the appellant has made separate claim u/s 36(1)(viia) of the Act in respect of Rural Advances. The appellant's contention that it is eligible to claim of deduction u/s 36(1) (viia) separately for Rural Advances, without any provision for bad and doubtful debt made in books in respect of same is contrary to provisions of sec 36(1)(viia) of the Act. As discussed above, the first step to claim deduction u/s 36(1)(viia) is to create provisions for bad and doubtful advances in books and then the same has to be restricted to prescribed percentage of total income and rural advances made. The appella....
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....ointed out that in all those cases, reserves/provisions had been made in the books of account of the same assessment year and not of the subsequent assessment year. 8. In the present case, the assessee has not made any provision in the books of account for the assessment year under consideration, i.e., 1985- 86, by making supplementary entries and by revising its balance-sheet. The provision has been made in the books of account of the subsequent year. 9. We are, therefore, satisfied that the Tribunal was right in holding that since the assessee had made a provision of Rs. 1, 19,36,000 for bad and doubtful debts, its claim for deduction under section 36(1)(viia) of the Act had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this court.' Similar law has been laid down by the Hon'ble ITAT, Bangalore in the case of Karnataka Vikas Grameen Bank wherein the Hon'ble Tribunal, vide its order dated 25.04.2018 in ITA Nos. 673 & 674/Bang/2014 and 684/Bang/2014 has held as under. ....
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....f the quantum provided by the assessee in its accounts towards provision for bad and doubtful debts" 10. However the Bangalore Bench of ITAT in the case of Syndicate Bank (supra) 150 ITD 103 (Bang.) noticed that the ITAT Bangalore Bench in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra) and held that the decision rendered by the Hon'ble High Court has to be followed. The above decision though of a non jurisdiction High Court was followed as the said decision of the Hon'ble High Court was rendered after the decision in the case of Syndicate Bank 78 ITD 103 (Bang.). The Tribunal held that Judicial discipline demands that the Tribunal should follow the later decision which has considered both the decisions on the issue. The Tribunal following the said decision held deduction on account of Provision for Bad and Doubtful Debts u/ s.36(1) (viia) of the Act has to be allowed only to the extent....
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....f Canara Bank ITA No. 58/Bang/ 2004 dated 9.6.2006, after considering the decision rendered in the case of Syndicate Bank 78 ITD 103(Bang.) preferred to follow the decision of Hon'ble Punjab & Haryana High Court in the case of State Bank of Patiala (supra) though of a non jurisdictional High Court than the decision of co-ordinate Bench in the case of Syndicate Bank 78 ITD 103 (Bang.). In our view therefore the decision of the Hon'ble Karnataka High Court in the case of Patil Vijayakumar (supra), does not support the plea of the assessee. We, therefore hold that the relief allowed by the CIT(A) in the matter of allowing deduction for provision for bad and doubtful debts was not in accordance with law. The addition made by the AO is, therefore, restored. The ground Nos. 2 and 4 raised by the Revenue are allowed." In view of above discussions and respectfully following the above referred decisions of the Hon'ble Punjab & Haryana High Court and that of Hon'ble ITAT, Bangalore, I am of the considered opinion that the contentions of the appellant in this respect are devoid of merits and hence herewith rejected. The impugned disallowance of Rs. 24,91,43,645/- bein....
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.... perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore. those of a perpetuity.' Similarly the Black Dictionary defines the Perpetual Bond as 'a bond with no maturity date and investor receives coupon but the principle is never paid. Conceptually, with the perpetual bonds, the agreed-upon period of time over which interest will be paid, i.e. in perpetuity and in this respect the perpetual bonds function similarly to dividend-paying stocks or certain preferred securities. Just as owners of such stock receive dividend payment for the entire time the stock is held, perpetual bond owners receive interest payments, for as long as they hold onto the bond. 17.4.2 The RBI Master Circular related to Prudential Norms on Capital Adequacy dated 01.07.2015 in DBR.No.BP.BC.3/21.01.002/2015-16, while defining the Components of Capital Funds, stipulates that the capital funds would include the components Tier I capital and Tier ll capital. It further provides that Elements of Tier I capital include (i) Paid-up capital (ordinary shares), statutory reserves, and other disclosed free reserves, if any; (ii) Pe....
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....ther claimed that interest paid to bondholders unlike dividend income is not exempt as per the provisions of the Act and the bondholders would have accordingly offered the same to the income in their respective returns and therefore disallowance of said interest would result in double taxation of the same income. The Ld. A.O. however rejected the contention of the assessee and held that the perpetual bonds are the bonds with no maturity date. The investor don't get the right to redeem the bonds at any point of the time and only the issuing bank can buy back the bonds from the investor, therefore even if subsequently borrower buyback these bonds, it will not alter the nature and character of these bonds. The Ld. A.O. summarized that perpetual bonds are quasi equity and they have equity-features like perpetual nature, high loss absorption capacity and discretionary payout with existence of full coupon discretion. The Ld. A.O. relied on the decision of Hon'ble Punjab and Haryana High Court in the case of Pepsu Road transport Corporation versus CIT reported in 130 ITR 18 (P& H) wherein it is held that an element of refund or repayment is a must in case of concept of borrowing a....
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...."consistency"rule enunciated in Radhasaami Satsang (supra). The Supreme Court observed, in that case that: ' ... where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter-and if there was not change it was in support of the assesses-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken.' This Court notices that there cannot be a wide application of the rule of consistency. In Radhasomi Satsang's case (supra) itself, the Supreme Court acknowledged that there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. This is consistent with the view of the Supreme Court that 't....
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....ch had no provision of repayment. Further in the event of the liquidation of Pepsu Road transport Corporation after meeting the liabilities if any, the assets were to be divided among Central Government and the State Government and such other parties, if any as may have subscribed to the capital in proportion to the contribution made by each of them to the total capital. However in the instant case there was no statutory obligation on the investors to subscribe to IPDs and further the claim of the investor of the IPD bonds is superior to that of equity investor and subordinate to other creditors. Further, it was submitted that interest paid on IPD cannot be equated with the dividend as dividend is not mandatory to be paid each year and it has to be paid if there is profit during the any financial year and on approval of the proposal of the Board of Directors by the shareholders in the annual general meeting. Whereas in the case of the IPD, it is mandatory to pay interest irrespective of the availability of the profit and no approval of the Board of Directors or shareholders was required. In view of the above discussion, we concur with the contention of the assessee that ratio in th....
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....claimed by the assessee in its return of income. The assessee has also supplied to the Assessing Officer detailed offer document issued for unsecured perpetual debentures of Rs. 1500 crores during the course of assessment proceedings. In the offer document the terms and conditions of issuing perpetual debentures, basis of allotment, creation of debenture redemption reserves along with object of the issue were clearly mentioned. As per the copy of object of the issue placed at page 67 of the paper book, it is mentioned that utilization of funds to be raised through this private placement will be for general business purpose and at page no. 62 issue size was mentioned of 15000 debentures of face value of Rs. 10 lac each aggregating to Rs.1500 crores. It is demonstrated from the detailed submission and copies of documents placed in the paper book that assessing officer has made detailed inquiry/verification during the course of assessment proceedings that assessee has borrowed funds for business use by issue of debentures. The borrowed fund were payable on call option exercising by company after the 10th year or any at the end of every year thereafter. It was also explained that the l....
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....tion 234A and 234D of the Act. 28.1 We find that Ld. CIT(A) directed the Assessing Officer to verify the claim of the assessee as in the assessment order no details of computation of interest under section 234A or section 234D was provided. In the grounds raised the assessee has submitted with regard to interest under section 234A of the Act that return of income was filed within the statutory Limit as specified under section 139 of the Act. Regarding interest levied under section 234D of the Act, it has been submitted that the assessee had not received any refund for captioned Year before the date of the Regular Assessment. In our opinion, computation of the interest under section 234A and 234D is a matter of verification from the record and in absence of details of computation, the Ld. CIT(A) is justified in directing the Assessing Officer for verification in accordance with law. We therefore, feel it appropriate to direct the Assessing Officer that if he had not complied with the direction of the Ld. CIT(A) than he may verify the claim of the assessee in accordance with law and compute the interest accordingly. The ground Nos. XIX and XX of the appeal are accordingly allowed ....
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....Act provides that income by way of interest on securities shall be chargeable to income- tax under the head 'Income from Other Sources', if the income is not chargeable to income-tax under the head 'Profits and Gains of Business and Profession'. 3. The matter has been examined' in light of the judicial decisions on this issue. In the case of CIT v. Nawanshahar Central Cooperative Bank Ltd. 2007] 160 Taxman 48(SC), the Apex Court held that the investments made by a banking concern are part of the business of banking. Therefore, the income arising from such investments is attributable to the business of banking falling under the head 'Profits and Gains of Business and Profession'. 3.2 Even though the abovementioned decision was in the context of co- operative societies/Banks claiming 80P (2)(a) (i)of the Act, the principle is deduction under section 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....
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.... the issue under consideration remain same as that in AY 2014-15 and hence respectfully following the said decision of my Ld. Predecessor in appellant's own case for AY 2014-15 the impugned disallowance of Rs 68,06,37,940/- is DELETED. Accordingly, the Ground No. IV raised in appeal is ALLOWED.' 29.2 Before us the learned counsel for the assessee referred to the decision of the coordinate bench of the Tribunal in the case of the assessee in assessment year 2011-12 to 2013-14 in ITA No.3498 to 3500 & 3296 to 3238/ Mum/2018 and submitted that issue in dispute is covered in favour of the assessee. The relevant finding of the Tribunal is reproduced as under: "099. Ground number 5 and 6 with relation to the broken period interest allowable as a deduction. The learned authorised representative stated that the honourable Bombay High Court in CIT versus HDFC bank Ltd has decided the issue while deciding ground number (b) before them. The learned departmental representative supported the order of the AO. 100. We find that this issue squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in CIT versus HDFC bank Ltd 366 ITR 505 ....