TMI Blog2013 (5) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... added back the expense in its computation. Since the amount has already been added back, the revenue authorities erred in making a further disallowance, which has resulted in the double disallowance - set aside the order of the CIT(A) - This ground is allowed. Regarding disallowance for membership :- The amount paid towards corporate membership is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise - - set aside the order of the CIT(A) on this issue and direct the AO to delete the disallowanc - Appeal was allowed. Regarding disallowance of depreciation claimed premises acquired by the assessee - Held that:- It is not disputed that the property was repossessed from tenant after paying it off, and it is for the betterment of title of a capital asset, therefore, the expense has to be held to be of capital in nature we, set aside the order of the CIT(A) on this issue and direct the AO to allow depreciation as per law after verification of the dates of payment for repossession - the tenanted property cannot be held to be used by the assessee for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstitution of the original grounds of appeal. Assessment year 1996-97: ITA no. 3006/Mum/2001 : Assessee's appeal ITA no. 3620/Mum/2001 : Department's appeal 5. Ground no. 1 raised in assessee's appeal and both the grounds, i.e. grounds no. 1 2 raised in the department's appeal involve common issue relating to assessee's claim for depreciation on various assets given on lease. 6. The brief facts of the case are that, the assessee is a private bank, which came into existence on 31.05.1995 by taking over the business of Development Cooperative Bank Ltd. The assessment was framed by the AO at Rs. 30,37,61,270/-, which was challenged by the assessee. At the time of hearing before the CIT(A), on various dates, not only representatives of the assessee were present, but the AO and the AO who had framed the assessment were also present. 7. One of the business functions of the assessee bank is that, it leases assets to its clients under two segments, (i) the assessee purchases assets from its clients and leases it back to them for actual usage i.e., sale and lease back (SLB) and (ii) assets are purchased by the bank from suppliers and then give those assets to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of sale and lease back of assets without any alteration in the situation of assets and its working the denial of depreciation claimed has to be considered, keeping in view the principle laid down by the Supreme Court in the case of McDowell Co. Ltd.". The basic reply of the assessee was : a) technically it is sale and lease back but actually it is regular lease of new equipment, acquired within the financial year, wherein the lessee has already bought the equipment before the lease arrangement. In which case, the equipment is sold by the lessee to lessor and takes its back on lease; b) Circular dated 09.02.2001 is bereft of the fact that all lease arrangements are not colorable devises. The decision of McDowell Co. Ltd. is on colorable devices and will not be applicable on genuine transactions; c) that there are several judgments of UK US Courts where sale and lease back transactions, based on facts have been regarded as genuine commercial transactions and domestically also, the transactions have been approved as genuine in the following cases : Unimed Technologies Ltd. vs DCIT, reported in 73 ITD 150 (Ahm), K Co. vs DCIT reported in 56 ITD 448 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (the department is appeal in ITA No. 3620/Mum/2001) c) transactions at serial no. xv xvi, depreciation could not be allowed on the ground that the assets put on lease by the assessee bank had not been put to use by the lessees, depreciation as disallowed was sustained. 19. Against these observations by the CIT(A) in (a) and (c), as above, the assessee is in appeal. 20. The AR pointed out that the issue of sale and lease back had been an issue of dispute and the Special Bench of the ITAT in the case of IndusInd Bank, ITA no. 6566/Mum/2002 that only in the case of genuine cases, the depreciation could be allowable. This decision, by the Special Bench has now been reversed in the case of Cosmo Films Ltd. ITA no. 1404 of 2008, wherein Hon'ble Delhi High Court had allowed the claim. The AR also pointed out that Hon'ble Madras High Court in the case of CIT vs High Energy Batteries (India) Ltd., reported in 348 ITR 578, held that sale and lease back were not sham transactions. The AR also relied on the decision of CIT vs Zuari Finance Ltd., reported in 271 ITR 538 and West Coast Paper Mills Limited reported in 100 TTJ 833. 21. The AR pleaded that transactions entered into by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR submitted that the ratio laid down by the Tribunal in the cases relied upon by the revenue authorities and the DR, i.e. IndusInd and MidEast, has now been impliedly overruled by Hon'ble Delhi High Court in the case of Cosmo Films Ltd. (supra) and the same therefore cannot be relied upon in view of the decision of Hon'ble Delhi High Court. 27. With regard to CIT(A) not allowing the AO to have access to the Court Receiver's report, the AR pointed out that during the course of hearing, the CIT(A) had not only discussed the issues with the AO but the present AO and the AO who had passed the orders were made to be present in the course of hearing. The AR, therefore, submitted that this cannot be the case of violation of natural justice. 28. We have heard the arguments of both the sides and we are of the view that cross appeals on the issue of allowance of depreciation in the current year have to be decided simultaneously. In so far as disallowance of depreciation on the assets involved in SLB transactions, the issue stands settled in favour of the assessee. From the synopsis filed by the AR, it is seen that the assessee provided the AO with all the information as was asked for, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the owner of the vehicles which are leased out by it to its customers". The Hon'ble Supreme Court of India, concluded, extracted from para 28, "From a perusal of the lease agreement and other related factors, as discussed above, we are satisfied of the assessee's ownership of the trucks in question" (para 28, page 28). 32. Coming to the issue of finance lease, wherein the CIT(A) sustained the disallowance because the usage of the equipment lease out could not be substantiated. On going through the decision of the jurisdictional High court of Bombay, we find that the issue now is at rest, in so far as the lessor is concerned, because, while dealing the case of the lessor, i.e. the assessee in the instant case, the asset has left its corridors for being utilized, and in return, rent had been received by the assessee. The Hon'ble Bombay High Court in the case of Kotak Securities Ltd. has held that what is to be seen is that the asset has been given on lease and the lease rent has been received, then in that case, so far as lessor is concerned, the asset has been "used". 3) In AY 1996-97, the question of additional evidence ground does not arise as the AO was present during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of transaction and asset having being put to use. We, therefore, allow ground no. 1 the assessee's appeal and dismiss both the grounds of the department's appeal. 35. Ground no. 2, raised in the grounds of appeal of the assessee is not pressed at the time of hearing before us. The same is therefore, dismissed. 36. Ground no. 3 is on account of disallowance of Rs. 7,03,390/-incurred by the assessee for ATM link up. The revenue authorities held the expense to be of capital in nature but did not result in the creation of new asset. 37. From the impugned order, we find that the asaessee made the payment of Rs 9,20,000/- to Indian Bank Association for participating in Shared Payment Network Systems (SPNS). This facility provides connectivity facility of ATM of one bank to another bank and Rs. 2,83,390/- was paid on computer software, aggregating to Rs. 67,03,390/-. It was argued by the assessee that the entire expenditure was in the revenue stream, but the auditors in TAR had classified them to be as capital expenditure. The CIT(A), while dealing with the issue did not give any finding as to whether the expense was capital or revenue but, he in any case, sustained the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same. 48. The ground no. 4 is, therefore, allowed. 49. Ground no. 5 is not pressed, hence it is dismissed. 50. Ground no. 6 pertains to disallowance of Rs. 12,00,000/- paid to CCI for membership. 51. The revenue authorities have held the expense to be of capital in nature and have disallowed the same. 52. Before us, the AR submitted that the expense is only with regard to subscription on corporate membership, pertaining to the company and does not pertain to an individual and it does not involve any element of entertainment and, therefore, the expenditure incurred for the purpose of enhancing the business, and therefore cannot be taken to be capital or otherwise disallowable. 53. The AR placed reliance on the orders of the revenue authorities. 54. We have heard the rival contentions and we are in agreement with the submissions of the AR, placed before the CIT(A) and reiterated before us, which are extracted as, "The corporate membership itself meant it was for the benefit of the assessee and not for any particular employee as it had a right to nominate and substitute an employee at any point of time, In these circumstances, it could be concluded that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest u/s 234A, therefore the return of income admittedly filed in time but was signed by the General Manager and Chief Manager and not by the Managing Director. The revenue authorities, thus held the return to be invalid and levied interest u/s 234A. 66. The AR submitted that the dispute is not whether the return was not filed late but was not verified by the Managing Director or Director as per section 140(c) read with 139(1). 67. The AR pleaded that the defect as noted by the revenue authorities was never called upon to be rectified. The defect, as such, was not of the nature to being fatal to the return. The AR pleaded that not once, the assessee was called upon to rectify the defect which could have been removed, in any case, it is nobody's case that the return was delayed. The AR, therefore, placed reliance on, "In the case of Bharat Nidhi Ltd. vs Commissioner of Income Tax (306 ITR 230) - Delhi High Court, the assessee filed original return of income which was signed by its secretary, but, on being pointed out by the AO removed defect and filed fresh return duly signed by its Managing Director. The AO while completing assessment, held that original return was inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred,........", the Hon'ble Court further observes, "There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk". Taking note of the cited cases, as above, we are of the opinion, that the revenue authorities erred in charging interest under section 234A, where without a spec of doubt, the return was filed well within time. 69. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to cancel the interest, as in our opinion the defect as noted was not fatal to the return and the defect as pointed out could have been removed. 70. In the result, The appeal no. 3006/Mum/2001 filed by the assessee is partly allowed. The appeal filed by the department in ITA no. 3620/Mum/2001 is dismissed. ITA no. 4892/Mum/2003 - Assessee's appeal: 71. While disposing off the appeal, the CIT(A), vide order dated 12.03.2001, set aside certain issues to the file of the AO for reconsideration. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e result, appeal filed by the assessee in ITA no. 4892/Mum/2001 is allowed. ITA no. 5840/Mum/2003 : Assessee's appeal for AY 1997-98: ITA no. 6010/Mum/2003 : Revenue's appeal for AY 1997-98: 77. These Cross appeals filed for AY 1997-98 are directed against the order of Ld. CIT(A)-Central IV, Mumbai dated 26.06.2003. 78. The common issue involved in Ground no. 4 of the assessee's appeal and all the six grounds of the revenue's appeal relates to the assessee's claim for depreciation on the various assets given on lease. 79. A similar issue involved in Cross appeals filed for AY 1996-97 has already been decided by us in the foregoing portion of this order. Since all the material facts relevant thereto as well as arguments raised by the Ld. Representatives of both the sides are similar, we follow our decision rendered in AY 1996-97 and allow ground no. 4 of the assessee's appeal and dismiss ground no. 1 to 6 of the revenue's appeal. 80. Ground no. 1 raised in the appeal of the assessee involving issue relating to disallowance of law charges aggregating to Rs. 28,14,050/-, which has not been pressed by the Ld. Counsel for the assessee at the time of hearing before us. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank in defending cases in respect of certain shareholder disputes. GROUND NO. 4 The learned CIT(A) erred in confirming disallowance of depreciation of Rs.3, 15,900/- claimed as depreciation on premises on the ground that no new asset was acquired. The depreciation was claimed on the amount paid as part of expenses incurred towards acquisition of premises. GROUND NO. 5 The learned CIT(A) erred in not allowing deduction of provision made for bad doubtful debts aggregating to Rs. 1,10,37,350.50/- claimed under the provision of section 36(1)(vii-a) of the Income Tax Act. GROUND NO.6 The learned CIT(A) erred in directing the assessing officer to disallow Rs. 3,55,09.806 (85.63% of exempt income) out of total expenditure under the provisions of Section 14A of the Income Tax Act." 87. In its grounds of appeal, the revenue has raised following grounds: "On the facts and circumstances of the case and in law, 1. The Ld. CIT(A) has erred in allowing the assessee's claim of depreciation of Rs. 17,19,180/- in respect of assets leased to M/s. Stellar Modular System and Unified Cables ignoring the facts that the real nature of transactions are purely o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground is therefore dismissed. 95. The issue involved in ground no. 6 of the assessee's appeal is with regards to disallowance of Rs. 3,55,09,806/- (85.63% of exempt income) out of total expenditure under the provisions of section 14A of the Income Tax Act. 96. We find that the disallowance was made by the CIT(A) on the basis of a letter written to him by the AO at the time of prosecution of the appeal before him. We find that issue was neither an issue at the time of assessment proceedings, nor was an issue impugned by the assessee in appeal before the CIT(A). On the basis of the letter, the CIT(A), sought the assessee's response with regard to enhancement on the issue. The sssessee, pleaded that the impugned issue was never an issue at the time of assessment and was never the issue in appeal. It was also pleaded that the appellate authority did not the power to enhance the scope of its jurisdiction, on an issue which was not an issue before the authority. The CIT(A) negated the arguments of the assessee and proceeded to enhance the income of the assessee by making a disallowance under section 14A, as contemplated by the newly inserted provision. The CIT(A), therefore made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal, is, therefore, partly allowed. 102. In the result: appeal of the assessee stands partly allowed appeal of the revenue stands dismissed. ITA 51/Mum/2005 : Assessee's appeal for AY 1999-2000: ITA 9611/Mum/2004 : Revenue's appeal for AY 1999-2000: 103. These Cross appeals filed for AY 1999-00 are directed against the order of Ld. CIT(A)-Central IV, Mumbai dated 08.11.2004. The assessee has raised the following grounds: "GROUND NO.1: The learned Commissioner of Income Tax(Appeals), (hereinafter referred to as CIT(A)) erred in confirming the disallowance of depreciation of Rs.5,89,37,184/- on the leased assets. GROUND NO.2 The learned CIT(A) erred in confirming disallowance of Rs.3,25,39,610/-out of the total depreciation of Rs.8,47,53,033/- claimed on the year end stock of government securities and other approved securities. GROUND NO.3 The learned CIT (A) erred in confirming the addition of Rs.3,15,900/-claimed as depreciation on premises on the ground that no new asset was acquired. The depreciation was claimed on the amount paid as part of expenses incurred towards acquisition of premises. GROUND NO.4 The learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground is therefore, dismissed. An issue involved in Ground no. 3 of the assessee's appeal pertains to disallowance of depreciation claimed at Rs. 3,15,900/- on premises acquired by the assessee. 108. A similar issue has already been decided by us in ground no. 8 of the assessee's appeal for AY 1996-97 in foregoing portion of this order. Since all the material facts relevant thereto as well as arguments raised by the Ld. Representatives of both the sides are similar, we follow our decision rendered in AY 1996-97 and allow this ground for statistical purposes. 109. An issue in Ground no. 4 is with regards to deduction u/s 36(1)(viia), which is not pressed, the ground is therefore, dismissed. 110. Ground no. 5: The issue pertains to the disallowance of Rs. 8,41,96,260/- under section 14A of the Income Tax Act. 111. As per the introduction of the new provision under section 14A, the AO made a disallowance of Rs. 8,41,96,260/-, on an aggregate income of Rs. 9,77,18,388/-, claimed to be exempt. This was sustained by the CIT(A). 112. The assessee is now before the ITAT. 113. Before us the AR submitted that the disallowance may be called for, in case the assessee uses intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1: The learned Commissioner of Income Tax(Appeals), (hereinafter referred to as CIT(A)) erred in confirming the disallowance of depreciation of Rs.4,42,02,889/- on leased assets made by the Deputy Commissioner of Income Tax, Central Circle- 22. GROUND NO.2 The learned CIT(A) erred in confirming disallowance of Rs.52,62,078/- out of the total depreciation of Rs.4,2 1,96,588/-, being depreciation claimed on the year end stock of government and other approved securities. GROUND NO. 3 The learned CIT(A) erred in confirming disallowance of depreciation of Rs.2,84,310/- claimed as depreciation on premises on the ground that no new asset was acquired. The depreciation was claimed on the amount paid as part of expenses incurred towards acquisition of premises. GROUND NO.4 The learned CIT (A) erred in confirming disallowance of Rs.14,81,57,360/- (78.98 % of exempt income) out of total expenditure under the provisions of Section 14A of the Income Tax Act and in enhancing appellant's total income to that extent." 123. In its grounds of appeal, the revenue has raised following ground: "On the facts and circumstances of the case and in Law the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by us in ITA No. 51/Mum/2005, in the preceding year. Since the issue is the same, we do not intend to deviate from our own decision and we restore the issue to the file of the AO with similar directions, as given by us in assessment year 1998-99. 131. The ground of appeal, is, therefore, allowed for statistical purposes. 132. In the result, appeal of the assessee for AY 2000-01 is partly allowed. 133. In the result: appeal of the assessee is partly allowed appeal of the revenue stands dismissed ITA No. 3303/Mum/2005 : Assessee's appeal for AY 2000 01: 134. This appeal of the assessee arise out of order u/s 263 of CIT, Mumbai, dated 22nd March, 2005. The assessee has raised the following ground of appeal, in its appeal: "In the only ground of appeal the learned Commissioner of Income Tax erred in coming to the conclusion that the proviso to clause (vii) of section 36(1) of the Income Tax Act was attracted in the instant case and further erred in directing the Assessing Officer to revise the assessment order for disallowing the claim of bad-debts of Rs. 62,82,437/-." 135. The facts are that, in the year under consideration, the assessee created a provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end stock of government and other approved securities. GROUND NO.3 The learned CIT(A) erred in confirming disallowance of depreciation of Rs.2,55,880/- claimed as depreciation on premises on the ground that no new asset was acquired. The depreciation was claimed on the amount paid as a part of expenses incurred for acquisition of premises. GROUND NO.4 The learned CIT (A) erred in confirming disallowance of Rs. 17,66,12,371/- (84.25 % of exempt income) out of total expenditure under the provisions of Section 14A of the Income Tax Act and in enhancing appellant's total income to that extent." 144. In its grounds of appeal, the revenue has raised following ground: "On the facts and circumstances of the case and in Law the Ld. CIT(A) has erred in allowing the assessee's claim of Depreciation of Rs.1,22,32,881/- in respect of assets leased to parties mentioned herein below: Amt. in Rs. 1 Uniflex Cables 617,600 2 Stellar Modular Systems Ltd. 107,679 3 Neelachal Auto Ltd. 332,712 4 Shell Hotel I 383,858 5 Shell Hotel II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 30th March, 2005. The sole ground raised by the assessee reads as under: "In the only ground of appeal the learned Commissioner of Income Tax erred in coming to the conclusion that the proviso to clause (vii) of section 36(1) of the Income Tax Act was attracted in the instant case and further erred in directing the Assessing Officer to revise the assessment order for disallowing the claim of bad-debts of Rs. 2,37,09,343/-." 154. In the current assessment year, the AO passed the order, as per the direction of the CIT in consequential proceedings. We were seized with identical issue in the preceding year, in ITA No. 3303/Mum/2005, wherein we held that the proceedings under section 263 of the Income Tax Act, were bad in law in so far as the application of legal principles were concerned. Since the issue is the same, i.e. claim of the bad debts from the provisions, as directed to be made from the closing balances. We do not intend to deviate from our own decision and we cancel the revision proceedings initiated by the CIT and restore the order of the AO 155. In the result, appeal filed by the assessee is allowed. ITA 4104/Mum/2005 : Assessee's appeal for AY 2002-03: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A similar issue has already been decided by us in ground no. 1 of the assessee's appeal for AY 1996-97 in foregoing portion of this order. Since all the material facts relevant thereto as well as arguments raised by the Ld. Representatives of both the sides are similar, we follow our decision rendered in AY 1996-97 and allow ground no. 1 of the assessee's appeal. 160. The Issue in Ground no. 2 of the assessee's appeal is not pressed, the ground is therefore, dismissed. 161. Issue involved in Ground no. 3 of the assessee's appeal pertains to disallowance of depreciation claimed at Rs. 2,30,291/- on premises acquired by the assessee. 162. A similar issue has already been decided by us in ground no. 8 of the assessee's appeal for AY 1996-97 in foregoing portion of this order. Since all the material facts relevant thereto as well as arguments raised by the Ld. Representatives of both the sides are similar, we follow our decision rendered in AY 1996-97 and allow this ground for statistical purposes. 163. Ground no. 4: Identical issue has been decided by us in ITA No. 51/Mum/2005. Since the issue is the same, we do not intend to deviate from our own decision and we restore the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has raised the following grounds: "GROUND NO. 1: The order of learned Deputy Commissioner of Income Tax (hereinafter, referred to as DCIT) must be annulled and quashed, since it is capricious in nature and has been made, ignoring the established and undisputed facts, with an intention to punish the appellant. GROUND NO. 2 The learned Commissioner of Income Tax (Appeals) (hereinafter, referred to as CIT (A) erred in confirming disallowance of depreciation of Rs. 1,43,24,789/- on leased assets made by the DCIT. GROUND NO. 3 The learned CIT(A) erred in confirming disallowance of Rs.22,84,83,313/-, being depreciation claimed on the year end stock of government and other approved securities. GROUND NO.4 The learned CIT (A) erred in confirming disallowance of depreciation of Rs. 2,07,262/- claimed as depreciation on premises on the ground that no new asset was acquired. The depreciation was claimed on the amount paid as a part of expenses incurred for acquisition of premises. GROUND NO.5 The learned CIT(A) erred in confirming disallowance of Rs. 3,97,64,250/-, as proportionate interest expenditure attributable towards earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue has been decided by us in ITA No. 51/Mum/2005. Since the issue is the same, we do not intend to deviate from our own decision and we restore the issue to the file of the AO with similar directions, as given by us in assessment year 1998-99. 186. The ground of appeal, is, therefore, allowed for statistical purposes. Assessment year 2003-04: Department's appeal: 187. Ground no. 1 is with regards to bad debt written off of Rs. 108.33 crores. 188. The assessee in its accounts had claimed bad debts, which the AO disallowed. On appeal to the CIT(A), the assessee, reiterated its arguments and claimed that the write off of bad debts was rightly done by the assessee. 189. The CIT(A), taking into consideration the relevant facts that the assessee had written off the bad debts, allowed the claim. The department is in appeal before the ITAT. 190. The DR supported the order of the AO and the AR supported the arguments of the CIT(A). 191. On hearing both the parties, and going through the evidence brought on record and taking into account the relevant provision of law, we are of the opinion that the assessee is only required to take into account the amounts which according t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of appeal, the revenue has raised following ground: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of the assessee of bad debts amounting to Rs. 27.64 Crores merely on the basis of RBI directive and in contrary to the provisions of section 36(2)(iv) of the I.T. Act, as applicable to banking company. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's claim of depreciation of Rs. 1,07,84,267/- in respect of assets leased to various parties ignoring the fact that the real nature of transaction with the parties are purely one of finance rather than lease. 3. The appellant craves to leave to add, to amend and/or alter any of the grounds of appeal, if need be. 4. The appellant therefore prays that on the ground stated above, the order of the CIT(A)-IV, Mumbai may be set aside and that of the Assessing Officer restored," 199. The common issue involved in Ground no. 1 of the assessee's appeal as well as the sole ground no. 2 of the revenue's appeal relates to the assessee's claim for depreciation on the various assets given on lease. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides are similar, we follow our decision rendered in AY 1996-97 and dismiss ground no.2 of the revenue's appeal. 211. Grounds no.3 4 are general in nature, hence, no adjudication is called for, therefore, both these grounds are accordingly dismissed. 212. In the result: appeal of the assessee stands partly allowed and appeal of the revenue stands dismissed. ITA 7171/Mum/2011 : Assessee's appeal for AY 2008-09: ITA 7001/Mum/2011 : Revenue's appeal for AY 2008-09: 213. These Cross appeals filed for AY 2008-09 are directed against the order of Ld. CIT(A)-Central IV, Mumbai dated 29.07.2011. The assessee has raised the following grounds: "GROUND NO.1: The order of the learned DCIT which has been upheld by the Hon. CIT(Appeals) must be annulled and quashed, since it is capricious in nature and has been made, ignoring the established and undisputed facts, with an intention to punish the appellants. GROUND NO.2: The learned DCIT has made additions to the total income of the appellant, and which has been upheld by the Hon. CIT (Appeals) in his Appellate order without a proper consideration of the underlying facts and in the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the issue before the CIT(A), before whom the assessee reiterated its submissions made before the AO and placed reliance on the ITAT Special Bench decision in the case of DCIT vs Bank of Bahrain Kuwait, reported in 132 TTJ 505 (Mum-SB) = (2010-TII-224-ITAT-MUM-SB-INTL), as extracted by the CIT(A) are, "......(v) As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more then one accounting period. (vi) The forward foreign exchange contracts have all the trappings of stock in trade. (vii) In view of the decision of the Hon'ble Supreme Court in the case of Woodword Governor India (P) ltd. (supra), the assesses claim is allowable. (viii) In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit. We, accordingly, hold that where a forward contract is entered into by the assessee to sell the foreign currency as an agreed price at a future date falling beyond the last date of the accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period, i.e. before the date of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied with the correctness of the claim of the assessee in respect of such, expenditure .......". This only means that the AO cannot simply brush aside the claim made by the assessee, but, first the AO must give cogent reasons for his not being satisfied with the correctness of the claim of the assessee in respect of such expenditure. 236. In our considered opinion, the road leading to application of Rule 8D of the Income Tax Rules, goes through section 14A(2) of the Income Tax Act, 1961. This is so because, unless the AO gives a reasoned finding that the expenditure shown or even not shown in its/his books are incorrect, he cannot proceed to compute the disallowance, as prescribed. 237. In the present set of circumstances, we find that there is no reasoned finding against the disallowance computed and shown by the assessee and the AO has computed the disallowance by applying Rule 8D mechanically, without meeting the claim of the assessee in support of its computation. 238. In these circumstances, we set aside the order of the CIT(A) on this issue and direct the AO to compute the disallowance, by giving a reasoned finding for not accepting the disallowance made by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross interest chargeable to tax." 245. Since the issue of interest itself has been deleted, no question of levy of interest tax survives, as the assessee was held to be the owner. Accordingly, we dismiss ground a b of the revenue's appeal. 246. Ground no.2 Interest tax should not be levied on the interest collected by the appellant i.e. there should not be grossing up. The issue stands covered by the decision of Madras High Court in case of Bank of Madura, reported in 215 ITR 928 (Mad). In fact in AY 2000-01, the AO relying on the RBI circular has himself not levied interest tax on the interest collected by the assessee from its customer in light of RBI circular referred therein. 247. On these facts, we reject the ground taken by the department on the issue impugned before us. 248. In the result, revenue's appeal is dismissed. Interest tax Appeal no.08/Mum/2005 : Revenue's appeal for AY 1998-99: 249. This appeal of the revenue arises out of order of the CIT(A) Central IV, Mumbai, dated 09.11.2004. In its appeal, the revenue have raised following grounds: "1. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue's appeal stands dismissed. Interest tax Appeal no.10/Mum/2005 : Revenue's appeal for AY 2000-01: 255. This appeal of the revenue arises out of order of the CIT(A) Central IV, Mumbai, dated 23.11.2004. In its appeal, the revenue have raised following grounds: "1. On the facts and circumstances of the case and in law the Ld. CIT(A) failed to appreciate that the entire leasing income shown by the assessee are nothing but income arising out of financial transactions and hence should be treated as interest income and thereby erred in deleting the amount of Rs.1,07,77,637/- attributable to such transactions from the chargeable interest. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) failed to appreciate that the lease transactions entered into by the assessee are nothing but financial transactions in view of the RBI's circular no. FSC.BC. 18/24/-01-20001/93-94 dated 19.2.1994 and hereby erred in deleting the amount of Rs. 1,07,77,637/- arising out of such transactions treated as chargeable interest by the AO." 256. Grounds 1 2 are dismissed as interest not chargeable as assessee held to be owner. 257. In the result, revenue's appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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