TaxTMI 
TaxTMI 
2025 (2) TMI 1575
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....rd together, they are being adjudicated issue wise vide this composite order for the sake of brevity. BROKEN PERIOD INTEREST (Common ground in AYs 2013-14/2018-19 and 2021-22) i) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of claim of deduction of Broken Interest Period without appreciating the fact that the Broken Period Interest forms a part of capital layout and cannot be claimed as Revenue expenditure?" 2. This is a recurring issue in the case of the assessee which is a bank. The ld.AO has relied on the case of Vijaya Bank vs ACIT 187 ITR 541(SC) for the proposition that such interest is capital outlay and hence cannot be allowed as deduction. The ld.AR vide a written submission dated 18.02.2025 has pleaded that such kind of interest arises on account of purchase of securities held as stock in trade where such security is purchased in between the due dates of interest. Buying and selling of securities is a part of banking business as per Banking Regulations Act. It is submitted that the hon'ble Supreme Court in Civil appeal no.1549 of 20026 in the case of Citi Bank and Bank of Rajasth....
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.... view taken in this case." 3.1 Respectfully following the above decision on identical facts and consistent with the precedent, we do not find any reason to take a contrary view of the matter and accordingly, the decision on the ld.CIT( A) in favour of the assessee is upheld dismissing the ground in all the above AYs 2013-14/2018-19 and 2021-22. 4. Amortization of premium (Common ground in AYs 2013 -14,2018-19 and 2021-22) ii) "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the Disallowances of amortization of premium in respect of securities in HTM category?" 5. According to the assessee, as per the directions of RBI had amortised the premium paid on purchase of securities over the remaining period to maturity. The AO had disallowed the sum of Rs. 181.80 crore on the ground that Income Tax Income cannot be computed based on RBI guidelines by placing reliance on the decision of Hon'ble Supreme Court in case of M/s. Southern Technologies Ltd. According to him as per the provisions of section 145, the said loss cannot be claimed. The ld.CITA) has allowed appeal of the assessee by placing reliance ....
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....-19 and 2021-22) iii) " Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the Disallowance of interest expenses incurred in respect of Innovative Perpetual Debt Instrument without appreciating the fact that interest paid on them does not fall under the purview of section 36(1)(iii) as the issuing of Innovative Perpetual Debt Instrument lacks the concept of borrowing?" 9. The assessee claimed that above named bonds are in the nature of borrowing which is evident from the fact that it has only been shown as borrowing in Schedule 4 of the Annual Report. Further, the interest paid on the said bonds is debited to P&L A/c under the head interest expended. The IPDI issued by banks are in the nature of borrowing only. They are reckoned as Tier 1 capital only for the limited purpose of ascertaining the capital adequacy norms as per RBI guidelines. Though they are stated to be perpetual, banks still have an option of issuing a call option after a period of 10 years. The banks pay only interest on these bonds and at prefixed rates which may either be fixed or floating. Even when there is a loss, interest on these bonds c....
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....the case, assessment order passed by the AO, written submission uploaded as well the oral contentions of the appellant and also the contention that the issue has already been covered in favour of the appellant by the decisions of Hon'ble Income-tax Appellate Tribunal (ITAT) for earlier years wherein ITAT has upheld the order of the CIT(A) wherein disallowance of interest expense incurred in respect of Innovative Perpetual Debt Instruments (IPDI) made by the AO was deleted. We also find that the issue in hand is being consistently decided in favour of the assessee by the ITAT, Mumbai in AYs 2016-17 and 2017-18 allowed appeal of the assessee on identical facts and circumstances. The ld.CIT,DR vide has relied on the assessment order. 11. Respectfully following the above decision on identical facts and consistent with the precedent, we do not find any reason to take a contrary view of the matter and accordingly, the decision on the ld.CIT( A) in favour of the assessee is upheld dismissing the ground in all the above AYs 2013-14/2018-19 and 2021-22. Claim of Capital Loss 12. (Ground in AY 2021-22) iv) Whether, on the facts and in the circumstances of the case and in la....
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....nsideration the trend of the negotiations and the settlements reached in the earlier wage negotiations and based on the average increase granted in earlier agreements it had quantified the likely increase and accordingly, made a provision in its books since the basis of accounting followed was accrual system. The AO required the appellant to furnish the details of included any amount disallowable u/s. 43B. The assessee before submitted before him that the provision was made on an estimated basis taking into consideration the ongoing negotiations between employees' union and Indian Banks' Association. Since the same was provided on estimated basis the amounts covered u/s. 43B was also calculated on estimated basis. The amount on such estimated basis was given at Rs. 7 crore. The AO disallowed the said sum based on provisions of section 43B. 15.1 It is submitted that the above sum which was computed on an estimated basis will not be the actual amount payable to the respective funds since the same will be actuarially determined when the wage agreement gets concluded. Hence, invoking the provisions of section 43B to disallow the above sum is not correct. The said issue is de....
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....o-moto disallowances the assessee has only included expenses which according to it can be categorized as expenses directly relatable to earning exempt income. Further, the assessee has not maintained any separate books of accounts for income relating to exempt income and expenditure incurred therein ......... " 19.1 It is submitted that the AO failed to note that assessee made disallowance of the estimated amount by considering the expenses incurred by the department which was handling the business of investing in securities. The AO erred in concluding that it is the direct expenditure incurred without appreciating that no direct expenses were incurred by appellant in earning of tax-free income. Further, the other reason is that no separate books of accounts are maintained. The AO failed to appreciate that the Act nowhere requires separate books of accounts to be maintained and the same has been elaborately discussed and appellants claim allowed by Hon'ble Supreme Court in case of South Indian Bank (438 ITR 1). Therefore, it is respectfully submitted that the very basis of recording of satisfaction was not correct and hence as held by Hon'ble Supreme Court in case of God....
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....never contended that provisions of section 14A would not apply to dividend income on which tax is paid u/s. 115O. The submission is that in the absence of any expenditure having been incurred to earn tax free income, the question of making any disallowance u/s. 14A will not arise. The assessee submits that the NFAC had disallowed the above sum u/s. 14A by misinterpreting the decision in case of Maxopp Investments Ltd and holding that in appellants case where securities are held as stock in trade, disallowance u/s. 14A is still warranted. However, in the latest decision, the Hon'ble Supreme Court in case of South Indian Bank (438 ITR 1), had also discussed the above decision in case of Maxopp Investments Ltd. and held that no disallowance u/s. 14A is warranted in cases where the securities are held as stock in trade. Reliance is placed on binding decision of Hon'ble ITAT Mumbai in appellants own case for AY 2015-16 in ITA 3394 and 3849/Mum/2019 where it was held that no disallowance is warranted in respect of interest free income earned on stock in trade. 19.4 It is further contented that the interest free funds available amounts to Rs. 56186.72 crore as against which the....
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....ion of disallowance made u/s. 14A r.w.r. 8D in determining the book profit computed u/s. 115JB. In this regard, the assessee submitted that the AO failed to note that the provisions of Rule 8D cannot be invoked while computing the disallowance u/s. 14A since there is no specific provision in section 115JB for invoking the same. Hence, the disallowance made by NFAC is not correct. Reliance for the same is placed on the decision of Hon'ble Jurisdictional Bombay High Court in case of Bengal Finance and Investments Pvt. Ltd (TTA 337 of 2013). This issue was decided in favour of the appellant by Hon'ble ITAT in appellant's own case in ITA 3394 and 3849/Mum/2019 and for AY 2017-18 ITA 2937/MUM/2022 & 2919/MUM/2022 dated May 11, 2023. 21.1 The ld.CIT(A) observed that Hon'ble ITAT, Mumbai "C" Bench in the order cited (supra) for A.Y. 2016-17 has given the finding in favour of the appellant that different treatment for same head of expenses cannot be given while computing total income under normal provision and book profit u/s. 115JB. Alternatively, also as per the decision of Hon'ble Jurisdictional Bombay High Court in the case of The Commissioner of Income Tax-8 v/s. M/s. B....
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....ome in respect of accounts classified as non-performing assets. In all these cases, there was uncertainty of recovery of interest and accordingly the assessee had not recognised interest in respect of these accounts. It has been held in various decisions that even in the absence of specific provision like 43D and Rule 6EA interest not recognised based on RBI guidelines cannot be taxed. Reference may be had to the decision of SC in the case of CIT v Vashist Chay Vyapar Limited 301 CTR 263 and the Bombay High Court in the case of Deogiri Nagari Sahakari Bank Limited 379 ITR 24. This issue is covered in its favour by the Jurisdictional ITAT Mumbai in case of State Bank of India (ITA 3644 and 4563/Mum/2016), Mumbai ITAT in the case of ICICI Bank Ltd (ITA 3215/Mum/2019), State Bank of Bikaner and Jaipur (ITA 3033/Mum/2019) and ITAT Kolkata in case of Royal Bank of Scotland (ITA Nos. 36 & 1885/Kol/2017). The ld.CIT,DR vide has relied on the assessment order. 25. The ld.CIT(A) deleted the addition made by relying on the decisions supra. We have carefully gone through the grounds of appeal, facts of the case, assessment order passed by the AO, written submission uploaded as well the ora....
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....urce but was not deducted, it is argued that the assessee had only made the provisions in the accounts but had not credited the same in the accounts of concerned parties and, therefore, the provisions of Section 40(a)(ia) of the Act would not be applicable. Once bills for the expenses were received tax was deducted on the same. Therefore, no disallowance of the sum of Rs. 95.75 crore being provision made for expenses is warranted. Without prejudice to the above contention, even if any disallowance needs to be made u/s. 40(a)(ia) for non-deduction of TDS, only a sum of Rs. 28.72 crore (i.e., 30% of Rs. 95.75 crore) can be disallowed and not the entire expense of Rs. 95.75 crore. 27.1 It is further submitted that his issue was decided in favour of the assessee in its own case by Hon'ble IT AT for AY 2015-16 in ITA 3394 and 3849/Mum/2019 and for AY 2017-18 (ITA 2937/MUM/2022 & 2919/MUM/2022) dated May 11,2023. The ld.CIT,DR vide has relied on the assessment order. 28. The ld.CIT(A) deleted the addition made by relying on the decisions supra. We have carefully gone through the grounds of appeal, facts of the case, assessment order passed by the AO, written submission uploaded....
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....on the binding decision of Bombay High Court in case of Otis Elevator (195 ITR 682),Hindalco Industries Ltd 165 Taxmann.com 606(Mumbai- ITAT).The ld.CIT,DR vide has relied on the assessment order and also on Balrajsingh Jagjit Singh 153 Taxmann.com 642( Mumbai-ITAT) which is distinguishable as related to individual club membership and not of corporate membership. 31. The ld.CIT(A) considered the contentions of the assessee that the expenses incurred at clubs being cost for club services and facilities are for the Directors of the Bank and related to the advancement of business of the bank. The AO's finding in the assessment order is general in nature and not brought any facts or evidence on record as to how it is personal in nature. Therefore, an amount of Rs. 12,74,672/- disallowed by the AO on account of club expenses was deleted. 32. We do not find any infirmity in the conclusion drawn by the ld.CIT(A).In facts, we take note of a recent decision of hon'ble Jurisdictional High Court on the same issue in the case of High Court in the case of Swiss Re Services India Pvt. Ltd Vs DCIT (Bombay High Court) Appeal Number: Writ Petition No. 1323 of 2012 Date of Judgement/Order : 13....