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2015 (11) TMI 1519 - ITAT CHENNAI

2015 (11) TMI 1519 - ITAT CHENNAI - TMI - Reopening of assessment - Held that:- The assessee, in its return of income, has claimed depreciation on ATMs and UPS @ 60% by classifying them under the computers block as against allowable depreciation of 15%. This was not examined at the time of the scrutiny assessment under section 143(3) of the Act dated 31.12.2007. Thus, there is an underassessment of taxable incomes, within the meaning of section 147 of the Act. As no details were called for by th .....

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s depreciation claimed on ATMs and UPS - Held that:- Respectfully following the decision of the Delhi Benches of the Tribunal in the case of DCIT v. Global Trust Bank Limited (2011 (4) TMI 1380 - ITAT DELHI), we set aside the order passed by the ld. CIT(A) on this issue and direct the Assessing Officer to allow depreciation @ 60% to ATMs.

UPS attached to the computers are part of computer systems and eligible for depreciation @ 60%

Claim of deduction under section 36(1)(vi .....

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assessment years immediately succeeding the assessment year in which the depreciation allowance was computed is not in dispute [1994-95 to 1998-99]. However, the finding of the ld. CIT(A) that for the current year 2007-08, the brought forward unabsorbed depreciation losses is eligible is found to be incorrect since the reckoning of eight years period end by 2006-07 and therefore, for the assessment 2007-08, which is current assessment year, the assessee is not eligible for claiming the deprecia .....

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nd gains of business and, accordingly, chargeable to income tax as the income of the previous year in which it is recovered. In the circumstances, we are of the view that the Assessing Officer is sufficiently empowered to tax such subsequent repayments under Section 41(4) of 1961 Act and, consequently, there is no merit in the contention that, if the assessee succeeds, then it would result in escapement of income from assessment.See Vijaya Bank v. CIT [2010 (4) TMI 46 - SUPREME COURT ] - Decided .....

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f Godrej and Boyce Mfg. Co. Ltd. v. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT ) states that application of provisions of 14A are 'Constitutionally valid' and provisions of section 14A are still applicable for earlier assessment years and the Assessing Officer is duty bound to determine expenditure by adopting a reasonable basis or method. Accordingly, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to disallow only 2% of gross dividend received towards exp .....

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e Act to include service sector. Since the amendment extending the benefit to service sector and made effective only from the assessment year 2009-10 and, the banks are coming under service sector, the benefit can be extended from the assessment year 2009-10 only to the extent of setting up of a new unit for five successive years. Accordingly, we set aside the order passed by the ld. CIT(A) and remit the matter back to the Assessing Officer to examine whether the assessee has set up a new unit o .....

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ound raised by the assessee is liable to be dismissed.

MAT applicability - Provisions of section 115JB of the Act could not be applied on the assessee

Taxability of interest on securities on due basis - Held that:- As per the terms of securities issued by the Government, the proceeds at maturity along with interest shall be paid to the persons who are holding the securities on the date of redemption. The holder of the security cannot encash the security prematurely before t .....

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n be made only on the due date. When the principal amount involved, in the instrument itself is redeemable only on due date, there is no reason to hold that the interest element would be generated on accrual basis. The interest, also goes along with the principal amount in the case of securities. The fall out of the above position is that in the case of a Government security, the interest could be recognized only on due date and not on accrual basis. This fundamental character of a Government in .....

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ract, is allowable, as deduction

Provision made for wage arrears to staff - Held that:- It cannot be said that since the Bipartite agreement was signed only on 27.04.2010, the wage revision will be effected from the date of signing of the agreement. The ld. CIT(A) has observed that the assessee has made a provision in books based on reasonable estimate in accordance with mercantile system of accounting followed by it. The actual payment of this sum has been made during June, 2010 on s .....

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97/Mds/2014, 887/Mds/2010, 2025/Mds/2011, 2198/Mds/2012, 2124, 2125 and 2126/Mds/2014, Asst. Year 2005-2006 to 2010-2011 - Dated:- 30-11-2015 - Chandra Poojari, Accountant Member and Duvvuru R.L. Reddy, Judicial Member S. Swaminathan, C.A. for the Appellant M.N. Maurya, CIT-DR for the Respondent ORDER Duvvuru R.L. Reddy, Judicial Member:- 1. These six cross appeals are directed against the separate orders of the ld. Commissioner of Income Tax (Appeals), Chennai for the assessment years 2005-06, .....

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he assessment years 2005-06 and 2007-08. 3. We consider the facts as relating to the assessment year 2005-06 for adjudication. Brief facts of the case are that the assessee is a Nationalized Bank and Central Public Sector Undertaking. The assessee is engaged in the business of banking. The assessee filed its return of income for the assessment year 2005-06 on 25.10.2015, declaring an income of NIL [after setting off the brought forward losses]. The return was processed under section 143(1) of th .....

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f brought forward losses by disallowance the excess depreciation claimed on ATMs and UPS and expenses under section 36(i)(viia) of the Act. 4. The assessee carried the matter in appeal before the ld. CIT(A) and challenged the reassessment order passed by the Assessing Officer. After considering the submissions of the assessee and materials on record, the ld. CIT(A) partly allowed the appeal of the assessee. 5. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for .....

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by assigning reasons and there is no question of change of opinion. Further, with regard to depreciation on ATMs, he relied on the decision in the case of HDFC Bank Ltd. v. ACIT, Mumbai. 7. We have heard both sides, perused the materials on record and gone through the orders of authorities below. With regard to validity of reopening of assessment, the Assessing Officer was of the opinion that certain income had escaped assessment and accordingly initiated reassessment proceedings under section 1 .....

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o reopen the assessment under section 147 of the Act. Where there is an assessable income for any of the assessment years and the same was not brought to tax, it constitutes a reason for reopening the return under section 147 of the Act. As per these provisions, the escapement of income constitutes (i) understatement of income or claim of excessive loss, deduction, allowance or relief in the return [where the return of income has not been subjected to scrutiny assessment under section 143(3)] or .....

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ned at the time of the scrutiny assessment under section 143(3) of the Act dated 31.12.2007. Thus, there is an underassessment of taxable incomes, within the meaning of section 147 of the Act and accordingly, the ld. CIT(A) confirmed the reassessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Act by relying various judicial pronouncements. We find that, in this case, the issue of reopening was done where the income chargeable to tax are under-assessed, and as pe .....

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ima facie, reassessment proceedings u/s. 147 was initiated in this case for the following reasons:- "The assessee being public sector bank held ATMs and had claimed depreciation 60% applicable to software/computer under the category of computes. Since ATMs are mechanical machines working at the command of software. In modern technology, all and other plant and machinery are operated through command of software only but are eligible for depreciation @ 15% only. On similar lines, ATMs are eli .....

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eedings and reopened the assessment, then it may be held that there is change of opinion. In the present case, no details were called for by the Assessing Officer or filed by the assessee on this issue, no finding either positive or negative was arrived at during the course of the original assessment proceedings, there is no question of change of opinion as contended by the assessee. Therefore, the reopening of assessment is not amounting to any change of opinion. Thus, we find no infirmity in t .....

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Ms treating them as computers. The Assessing Officer has held that these cannot be treated as computer and accordingly restricted the claim of depreciation to 15% as against 60% claimed by the assessee and disallowed the excess depreciation claimed. 9. On appeal before the ld. CIT(A), the assessee has submitted that the ATMs cannot be considered as ordinary machinery or equipment since it performs a variety of functions and has to be considered as a computer system for disbursement of cash at lo .....

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lso be used for account balance verification, payment of various challans/bills, etc. and argued that the ATMs are nothing but the extensions of the computer systems and hence eligible for deduction @ 60%. After considering the submissions of the assessee and the materials on record, the ld. CIT(A) has not accepted the view of the assessee and confirmed the order of the Assessing Officer for both the assessment years under appeal. 10. On being aggrieved, the assessee is in appeal before the Trib .....

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owability of 60% depreciation on the ATMs, the Assessing Officer has observed that the ATMs is different type of machine, different from those of computers and allowed depreciation @ 15% only as applicable to plant and machinery. The ld. CIT(A) has confirmed the order passed by the Assessing Officer. Before us, the ld. DR has placed reliance on the decision in the case of Venture Infotech Global (P) Ltd. v. DCIT (2008) 25 SOT 184 (Mum), wherein the Mumbai Benches of the Tribunal has held that hi .....

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nly concerned with the ground regarding assessee's claim of depreciation on LAN, WAN, ATM etc. at 60% as against 25% allowed by the AO. The other grounds of appeal raised by the Revenue in this appeal are not maintainable for want of COD approval, and they have also not been restored back for fresh disposal while recalling the Tribunal's earlier order dated 17.6.2009. 6. In the course of hearing of this appeal, the learned counsel for the assessee relied upon several decisions including .....

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mputer system and are entitled to depreciation at the higher rate of 60%. In the present case, we are concerned about the depreciation on LAN, WAN, ATM equipments. During the year under consideration, the assessee has purchased certain equipments in the form of LAN, WAN, ATM etc. apart from computer and other related items. It is not in dispute that LAN, WAN, ATM equipments cannot be used without the computer. In the case of DCIT vs. Datacraft India Ltd. - (2010) 6 Taxmann.com 85 (Mum.-ITAT)(SB) .....

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an integral part of the computer, they are classified as a computer. 7. Automated Teller Machine or Automatic Teller Machine (ATM) is the computerized telecommunication device that allows bank's customers to access the bank at places other than the normal bank without having to take the trouble to go to the bank in person and collect the cash as is done under the conventional method of withdrawing money from the bank. The ATM machines are computerized machines which not only allow the custo .....

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nd all the other computers are connected through local area network equipment and the single processor can be accessed by the other computers and the data stored is used by the other computers. 9. The WAN equipment is called Wide Area Network, meaning, two or more LAN would form a WAN i.e. to cover large geographical area. The computer network is done by use of Wide Area Network equipment. Thus, this is also an integral part of computer hardware. 10. In this connection, a reference is also invit .....

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N and ATM would undoubtedly form a part of computer. 11. In the light of the view we have taken above, we direct the AO to allow depreciation at the rate of 60% on LAN, WAN and ATM equipments. We order accordingly. 13. Respectfully following the decision of the Delhi Benches of the Tribunal in the case of DCIT v. Global Trust Bank Limited (supra), we set aside the order passed by the ld. CIT(A) on this issue and direct the Assessing Officer to allow depreciation @ 60% to ATMs. Thus, the ground r .....

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raised in both the appeals of the Revenue relates to allowance of depreciation for UPS @ 60%. 17. The assessee has claimed depreciation for UPS @ 60% treating them as computers. The Assessing Officer has held that the UPS cannot be treated as computers and accordingly restricted the claim of depreciation to 15% as against 60% claimed by the assessee and disallowed excess depreciation claimed. 18. The assessee carried the matter in appeal before the ld. CIT(A). The assessee has submitted before .....

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9. Aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR has submitted that the ld. CIT(A) was not justified in directing the Assessing Officer to allow depreciation on UPS @ 60%. The ld. DR has relied on the decision of the Delhi Benches of ITAT in the case of Nestle India Ltd. v. DCIT 111 TTJ 498. 20. We have heard both sides, perused the materials on record and gone through the orders of authorities below. With regard to allowability of 60% depreciation on the UPS, the Assess .....

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th regard to allowability of depreciation @ 60% on UPS, while considering similar issue raised in the case of Indian Overseas Bank (supra), by following the decision of the Hon'ble Delhi High Court in the case of Oriental Ceramics and Industries Ltd. 56 DTR (Del) 397, the Tribunal has observed as under:- "28. We do not agree with the submissions of the AR that the UPS is an energy saving device, therefore, depreciation @ 80% should be granted. However, we are in consonance with the deci .....

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r of the Revenue and rejected the plea of the assessee for claiming depreciation @ 60% on UPS. However, The Delhi Benches of the Tribunal in the case of Neptune Information Solutions Ltd. in I.T.A. No. 962/Del/2006 vide order dated 21.04.2011 has decided the issue in favour of the assessee by following the decision of the Hon'ble Delhi High Court in the case of CIT v. BSES Rajdhani Powers Ltd. vide order dated 31.08.2010 in ITA No. 1266/2010 and also by following the decision of the ITAT Del .....

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at the ld. CIT(Appeals) has rightly directed the Assessing Officer to allow depreciation on UPS @ 60% and we find no infirmity in the order passed by the ld. CIT(Appeals) on this issue. Accordingly, ground raised in both the appeals of the Revenue for the assessment year 2005-06 and 2007-08 is dismissed. 23. The third common ground raised in the appeals of the Revenue for both the assessment years is with regard to the claim of deduction under section 36(1)(viia) of the Act. 24. The assessee, in .....

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not be considered because some of these amounts are the brought forward amount from the earlier years, where the assessee had already claimed 10% of the amounts as deduction under section 36(1)(viia) of the Act. He further observed that only the incremental average aggregate advances made during the year are eligible for deduction under section 36(1)(viia) of the Act and accordingly he disallowed the balance amount claimed by the assessee. 25. The assessee carried the matter in appeals before th .....

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For the this purpose, the assessee also relied on the decision of the Chennai ITAT in the case of Lakshmi Vilas Bank Ltd. vs. ACIT in ITA Nos. 551, 552 and 553/Mds/2009 dated 18.12.2009. The relevant portion of assessee's submissions are as under- RESTRICTION OF DEDUCTION U/S 36(1)(viia) ₹ 130,20,57,500/- Your appellant had claimed deduction in respect of the provisions made for non performing assets i.e., provisions for bad and doubtful debts. As per the provisions of Section 36(1)(vi .....

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The rule requires computation of average outstanding advances at the end of each month and the Assessing Authority has proceeded to consider that the opening balance of every month should be excluded for arriving at average rural advances outstanding. The rule has not warranted computation of average advances granted during the year or average advances as reduced by the opening balance. The interpretation thus taken by the Assessing Authority is that the appellant would be entitled to deduction .....

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mi Vilas Bank in ITA No. 551, 552, 553/Mds/2009 dated 18-12-2009, held that the average rural advances as considered under Rule 6ABA is the average of the closing balances only. A copy of the order of the Hon'ble Income Tax Appellate Tribunal, Chennai Bench is annexed." 26. The assessee has also filed similar submissions before the ld. CIT(A) for the assessment year 2007-08. 27. After considering the submissions of the assessee and by following the decision of the Tribunal in the case o .....

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er hand, the ld. Counsel for the assessee strongly relied on the decision of the ld. CIT(A), wherein the ld. CIT(A), by following the decision of the Tribunal, decided the issue in favour of the assessee. 29. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The ld. CIT(A), after examining the detailed submissions of the assessee and also by following the decision of the Tribunal in the case of Lakshmi Vilas Bank Ltd. v. ACIT (supra), all .....

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nches, and not on the incremental advances only. Therefore, the Assessing Officer's interpretation, that the assessee is entitled for deduction only on the incremental average aggregate advances of the rural branches, is not in accordance with the provisions of the Act. For this purpose, reliance is also placed on the decision of the jurisdictional ITAT in the case of Lakshmi Vilas Bank in ITA No. 551, 552, 553/Mds/2009 dated 18-12-2009. The relevant portion of the decision of the decision, .....

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Co-ordinate Bench of this Tribunal in the case of DCIT vs. City Union Bank Lid, vide order dated 30.10.2009 in I.T.A. No. 1485/Mds/2007. 4.1.2 On the other hand, the Learned Departmental Representative has submitted that as per the section 5 of the Income Tax Act, the income is computed for the previous year and, therefore, all deductions are to be allowed in respect to the previous year only. Each assessment year is a separate Unit. He has thus submitted that if the opening balance is included .....

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relevant records. At the outset, we find that the Co-ordinate Bench of this Tribunal in case of City Union Bank Ltd. supra considered and adjudicated this issue in para 8 as under:- "We have duly consider the rival contentions and the material on record. We have perused Rule 6ABA of the Income Tax Rules, 1962. As per the said rule, the aggregate average advances made by the rural branches have to be computed by taking the amounts of advances made by each rural branch as outstanding at the e .....

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ppeals) allowing the deduction to the assessee." 4.1.4 By following the principle of consistency, as the issue has already been decided by the Co-ordinate Bench of this Tribunal, we decide this issue on merits in favour of the assessee and against the Revenue. 4.3.4 In view of the above discussion and respectfully following the decision of the jurisdictional ITAT in the case of Lakshmi Vilas Bank in ITA No. 551, 552, 553/Mds/2009 dated 18-12-2009, I hold that the allowable deduction u/s. 36 .....

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nue for both the assessment years are dismissed. 31. The next ground raised in the appeal of the Revenue for the assessment year 2007-08 is with regard to the claim of brought forward unabsorbed depreciation losses of 73,40,85,563/- to be set off against the income of current assessment year i.e., 2007-08. The assessee has claimed the brought forward unabsorbed depreciation losses from the assessment years 1994-95 to 1998-99, amounting to 73,40,85,563/-. However, the Assessing Officer in his ord .....

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ears are to be restricted to a period of eight years only. Accordingly, the Assessing Officer disallowed the brought forward unabsorbed depreciation losses from the assessment years 1994-95 to 1998-99 amounting to 73,40,85,563/-. 32. On appeal, the ld. CIT(A), after considering the submissions of the assessee, allowed the ground raised by the assessee. 33. On being aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR supported the order passed by the Assessing Officer. On the othe .....

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f section 32(2) have been amended by the Finance Act, 2001 (w.e.f. 01.04.2002). After considering the submissions of the assessee, the ld. CIT(A) has observed as under:- "4.4.2 I have considered the assessee's submissions carefully. As per the provisions of sec. 32(2) of the Act, the unabsorbed depreciation of any assessment year will be carried forward to the following year where it has to be treated on par with the current depreciation of the said year and carried forward to the subse .....

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ever, the provisions of sec. 32(2) was amended by the Finance Act, 1996 w.e.f. 01.04.1997, as per which the unabsorbed depreciation can be carried forward for a period of eight years only. This amended position continued upto A.Y. 2001-02, i.e. till the provisions of sec. 32(2) were reversed by the Finance Act, 2001 w.e.f. 01.04.2002. In other words, the restrictions imposed on the carry forward position of unabsorbed depreciation was applicable between A.Y.1997-98 and 2001-02 only. 4.4.4 At the .....

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t off. This was the position from A.Y. 1997-98 to 2001-02. 4.4.5 From 01.04.2002, the provisions have been reversed by lifting the restrictions imposed on the carry forward position of unabsorbed depreciation, as a result of which all the unabsorbed depreciations available as on 01.04.2002 and eligible for set off during the year 2002-03, will become the current year's depreciation losses and accordingly, can be carried forward to any number of years. In simple words, since the provisions im .....

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ciation losses of ₹ 73,40,85,563/- from A.Ys. 1994-95 to 1998-99, are eligible for set off in the current A.Y. 2007-08, and after set off, if any of these losses still remains unabsorbed, the same can be carried forward to the subsequent years. The Assessing Officer is directed to allow the assessee's claim of brought forward unabsorbed depreciation losses of ₹ 73,40,85,563/- from A.Ys. 1994-95 to 1998-99 and their set off against the income of current A.Y. 2007-08. The assessee& .....

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iation allowance disputed before us against the profit and gains of subsequent year without any limit of period whatsoever. For the same preposition, the ld. Counsel for the assessee has relied on the judgements of the Hon'ble Madras High Court in the case of CIT v. Pioneer Asia Packing (P) Ltd. 310 ITR 198 and also in the case of CIT v. S and S Power Switchgear Ltd. 318 ITR 187. However, the Hyderabad Benches of the Tribunal, in the above case, has observed that the above judgement cannot b .....

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Gujarat High Court in the case of General Motors India (P) Ltd. (supra). In view of the amended provisions as well as the decision of the Hon'ble Jurisdictional High Court, the unabsorbed depreciation losses carried forward to eight assessment years immediately succeeding the assessment year in which the depreciation allowance was computed is not in dispute [1994-95 to 1998-99]. However, the finding of the ld. CIT(A) that for the current year 2007-08, the brought forward unabsorbed depreciat .....

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allowed. I.T.A. Nos. 880/Mds/2010: [A.Y. 2007-08] 38. Brief facts of the case are that the assessee filed its return of income on 30.10.2007 admitting total income at NIL under the normal provisions of the act and at 866,51,40,625/- under the provisions of section 115JB of the Act. After due process, the assessment was completed under section 143(3) of the Act determining total income at 790,48,75,820/- and book profits under section 115JB of the Act at 1357,97,12,285/- and made various disallo .....

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Accordingly, the ground is dismissed as not pressed. 41. The second issue raised in the appeal of the assessee is with regard to disallowance of bad debts written off [technical Write-off] under section 36(1)(vii) amounting to 136,31,00,000/-. The Assessing Officer made disallowance on the ground that these debts were not actually written off at branch level. The Assessing Officer was of the opinion that the very fact that these debts continued to appear in the books of the branches make it clea .....

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he Tribunal and submitted that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee's own case in I.T.A. No. 1082/Mds/2003 vide order dated 30.06.2011. 44. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The Tribunal, while deciding the group cases of the assessee in I.T.A. Nos. 470 to 472/Mds/2010 for the assessment years 2004-05 to 2006-07 vide order dated 11.06.2012, has followed its .....

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this Tribunal in ITA No. 1082/Mds/2003 for Assessment Year 1998-99. It was held by this Tribunal at para Nos. 43 and 44 of its order dated 30/06/11 as under:- "I.T.A. No. 1082/Mds/2003 42. First issue raised by the assessee is regarding disallowance of its claim for bad debt - technical write off. 43. A.O. had disallowed a part of the claim of bad debt on a reasoning that the write-off was purely technical, since assessee had not reduced the written off amounts from the individual debtors .....

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also reduce loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that at the end of the year the amount of loans and advances/debtors is shown as net of provision for impugned bad debt In the instant case, besides debiting the PandL a/c and creating a provision for bad and doubtful debts, the assessee bank had simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and adva .....

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ot sufficient, is not sustainable Apprehension that if the assessee fails to close each and every individual account of its debtors, it may result in claiming deduction twice over is not correct It is always open to the AO to call for details of individual debtor's account if he has reasonable grounds to believe that the assessee has claimed deduction twice over Contention that where a borrower's account is written off by debiting PandL a/c and crediting loans and advances or debtors acc .....

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Bench of this Tribunal, we are inclined to allow the claim of assessee. This issue is decided in favour of assessee." 45. Respectfully following the above decision of the Coordinate Bench of the Tribunal, wherein the decision of the Hon'ble Supreme Court is followed, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to delete the disallowance made on this issue. Thus, the ground raised by the assessee is allowed. 46. The third issue raised in the a .....

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rther submitted that the entire interest paid is allowable as revenue expenditure since it is incurred for purchase of stock-in-trade. After examining the issue, the Assessing Officer has worked out the computation of the broken period interest in the assessment order and reproduced hereunder:- Broken period interest on securities held as closing stock is of 4,21,43,054/-. As against this, the interest disallowed on securities held as closing stock amounting to 7,15,28,701/- in assessment for 06 .....

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ear 1986-87, partly allowed the ground raised by the assessee, wherein, the Tribunal has remitted the issue back to the Assessing Officer to determine the allowability based on the classification made. 48. We have heard the rival contentions and perused the materials on record. With regard to the claim of broken period interest paid on purchase of securities as revenue expenditure, we find that issue involved in this appeal is squarely covered by the decision of the Coordinate Bench of the Tribu .....

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g Corporation vs. C.I.T. in 258 ITR 60 has clearly held that when interest received by an assessee, from transferees for broken period is included under the head 'business income', amounts paid by the assessee to the transferors for broken periods could not have been disallowed. This view was reiterated in the case of Union Bank of India referred to supra. Hon'ble Apex Court had dismissed the special leave petition filed by the Department against such judgement of order of Mumbai Hig .....

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o follow the decision of the Hon'ble Mumbai High Court, since Special leave petition filed by the Department against such decision in the case of Union Bank of India (supra) was dismissed by Hon'ble Apex Court. Thus, this issue is decided in favour of assessee." 49. Further, we also find that the Hon'ble Jurisdictional High Court in assessee's own case in T.C.(A) No. 417 of 2008 vide order dated 11.02.2014 decided the above issue in favour of the assessee. Respectfully, foll .....

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ovision for market risk. It is contingent in nature to cover any further risk that could arise in future. Since contingent liabilities are not allowable, the claim of provisions made for market risk by the assessee was disallowed by the Assessing Officer. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 51. We have heard both sides, perused the materials on record and gone through the orders of authorities below. In the assessment order, the Assessing Officer h .....

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Though, it is a fact that the assessee has made the provision in accordance with the RBI guidelines, but the Hon'ble Supreme Court in the case of Southern Technologies Ltd. (187 Taxman 346), has held that the RBI directions and the Income Tax Act operate in different fields. Therefore, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. Hence, we find no infirmity in the order passed by the ld. CIT(A), we uphold the order the order of the ld. CIT(A) and thus, the ground .....

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e of investment is an allowable deduction, which was recognized in terms of RBI Prudential Guidelines. Since the provision made in this case is over and above the actual reduction in value, the Assessing Officer has not accepted the contentions of the assessee and made the disallowance. 53. On appeal, the ld. CIT(A), after considering the submissions of the assessee, confirmed the disallowance made by the Assessing Officer. 54. After hearing both sides, we find that the ld. CIT(A), after conside .....

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he case of section 36(1)(viia), where the provision made by the appellant for bad and doubtful debts is allowed as deduction, the provision made for non performing investments cannot be allowed as deduction. With regard to the reliance placed by the appellant in the case of Nainital Bank (supra), I have already held that the said decision is not applicable in paras 4.1 and 8.1 of the order. For the reasons given therein, the above decision would not help the cause of the appellant. Therefore, th .....

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5 per cent of the total income only in respect of the provision for bad and doubtful debts which are predominately revenue in nature or trade related and not for provision for non-performing assets which are of predominately capital nature. The assessee was not entitled to deduction, in view of the Explanation to section 36(1)(vii) which says that the provision for bad and doubtful debts made in the accounts of the assessee is not an allowable deduction." 55. In view of the above decision .....

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incurred in earning exempt income, the same can be added back under section 14A of the Act. The assessee has also submitted that the disallowance under section 14A has been made by the bank as decided by the Tribunal in the earlier assessment years @ 2% of the exempt income and the same disallowance percentage shall be followed. After considering the submissions of the assessee, the Assessing Officer has observed that Rule 8D prescribes to arrive at the figure of expenditure attributable to the .....

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CIT(A), after considering the submissions of the assessee and by following the decision of the Special Bench of ITAT, Mumbai in the case of Daga Capital Management (P) Ltd. (26 SOT 303), wherein the Tribunal has decided the issue against the assessee, dismissed the ground raised by the assessee. 58. We have heard both sides and perused the materials on record. The disallowance under section 14A of the Act has been decided by the Tribunal in the earlier assessment years @ 2% of the exempt income .....

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ely but only from the assessment year 2008-09. In view of the above decision of the Hon'ble Mumbai High Court, the Coordinate Bench of the Tribunal in assessee's own case in I.T.A. Nos. 470 to 472/Mds/2010 for the assessment years 2004-05 to 2006-07 vide order dated 11.06.2012 has observed that Rule 8D shall be applicable only from the assessment year 2008-09. However, we find that though Rule 8D is applicable from the assessment year 2008-09, the Hon'ble Mumbai High Court in the cas .....

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such dividend income. Thus, the ground raised by the assessee is partly allowed for statistical purposes. 59. The seventh ground raised in the appeal of the assessee relates to disallowance of bad debts written off of 51,95,64,198/- against the provisions made by the assessee. The Assessing Officer, by following earlier assessment orders on this issue, has held that the write off is deemed to have been adjusted against the provisions under section 36(1)(viia), which was already allowed and adde .....

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ooks of the bank as per provisions under section 36(1)(viia), no disallowance can be made. However, the ld. CIT(A), by following the earlier order passed in the assessment year 2006-07, directed the Assessing Officer to verify the claim for the assessment year under consideration and allow the same after ensuring that no double deduction is allowed. 61. Before us, the ld. Counsel for the assessee has relied on the decision in the case of Catholic Syrian Bank Ltd. v. CIT 343 ITR 270 (SC). On the .....

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appeal before the Tribunal and the Tribunal, while deciding the appeals for the assessment years 2004-05 to 2006-07, by following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT (supra), has observed as under:- "14. We find that disallowance was made by Assessing Officer for a reason that bad debts were written off against a provision. As per the Assessing Officer, assessee was allowed its claim of provisions for bad debts under Section 36(1)(vi .....

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heir respective fields. Bad debts written off, other than those for which a provision was made under clause-(viia) would be covered under the main part of section 36(1)(vii), while the proviso would operate to cases falling in clause-(viia), so as to limit the deduction to the extent of difference between the debt or part thereof written off in the previous year, and credit balance in the provision for bad and doubtful debts account made under clause (viia). Apex Court further held that proviso .....

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that the issue regarding write-off of bad debts raised by assessee in its ground No. 4 for Assessment Years 2004-05 and 2006-07 and as ground No. 3 for Assessment Year 2005-06 requires reconsideration by the Assessing Officer, in the light of judgment of the Apex Court in Catholic Syrian Bank Ltd.'s case (supra). Accordingly, these grounds are allowed for statistical purposes and remitted back to the file of Assessing Officer for consideration afresh. 63. Respectfully following the above de .....

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ground raised in the appeal of the assessee relates to disallowance of deduction under section 35D of the Act amounting to 4,50,03,133/-. The assessee has claimed a sum of 4,50,03,133/- as one fifth of the share issued expense incurred towards the initial public offer of 22,50,15,663/-. Before the Assessing Officer, the assessee has submitted that during the year under consideration, the bank had come out with initial public offer to raise capital of 429.77 crores of which issued to Central Gov .....

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the Assessing Officer has observed that the claim of amortization is allowable only to an industrial undertaking where the claim is in respect of expenditure made after commencement of business. Since the assessee bank is not an industrial undertaking, the Assessing Officer has held that the assessee is not eligible for claiming amortization and accordingly disallowed the claim of the assessee. 65. On appeal, after considering the submissions of the assessee, the ld. CIT(A) has confirmed the dis .....

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that the assessee had already commenced his business and the deduction with regard to extension of the industrial undertaking is not applicable to the assessee since it is not an industrial undertaking. Before the ld. CIT(A), the assessee has submitted that the banks are classified only under service sector and in view of the amendment in the Finance Act, 2008, the benefit of deduction under section 35D should be extended to the assessee. However, the ld. CIT(A) has observed that the amendment m .....

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unascertained liability, contingent liabilities and diminution in value of assets should be added and the assessee was asked to furnish details. After considering the detailed submissions, the Assessing Officer has observed that the provision made for claims made against the bank as unascertained liabilities cannot be accepted as the same is not made on scientific method of workings and made the disallowance. 69. On appeal, the ld. CIT(A), by following earlier order passed in the assessment yea .....

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he assessment year 2006-07, has held that the provisions of section 115JB will not apply to assessee's case is not correct. For the very same assessment year, the assessee has preferred an appeal before the Tribunal and the Tribunal in the consolidated order passed for the assessment year 2004-05 to 2006-07 has observed as under:- "20. We have perused the orders of lower authorities and heard the rival contentions. We find that the issue regarding applicability of Sec. 115JB on a Bank g .....

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nts according to Banking Regulation Act, 1949 and not according to Schedule VI Part II and III of the Companies Act, 1956, the provisions of section 115JB are not applicable to it while computing the income under MAT. We find that recently the Mumbai Bench of the Tribunal in the case of in the case of Krung Thai Bank PCL vs. Joint Director of Income Tax [International Taxation] [2010] 45 DTR 218 has held has under:- "7. The plea of the assessee is indeed well taken, and it meets our approva .....

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es are required to be prepared in accordance with the provisions of the Banking Regulation Act. The provisions of s. 115JB cannot thus be applied to the case of a banking company." 8. Further, it may be noted that the authority for advance ruling in the case of The Timken Company, In re and Praxair Pacific Ltd. In re has held that MAT provisions are applicable to a foreign company that does not have a physical presence in India, as such, companies are not required to prepare its accounts as .....

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-ordinate bench, we hold that the provisions of Sec. 115JB could not be applied on the assessee. In the result, this issue stands decided in favour of assessee." 72. The ld. DR could not controvert the above findings of the Tribunal. Respectfully following the above decision of the Coordinate Bench of the Tribunal, we set aside the order passed by the ld. CIT(A) on this issue and hold that the provisions of section 115JB of the Act could not be applied on the assessee. Thus, the ground rais .....

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nst the bank in respect of section 115JB of the Act. 74. Both the above disallowances [at para 73] are consequential to applicability of book profit under section 115JB of the Act. We have held at para 72 of this order that the provisions of section 115JB of the Act could not be applied on the assessee. For more clarity, in the case of Shriram Capital Limited v. ACIT in I.T.A. Nos. 512 and 513/Mds/2015 dated 26.06.2015 for the assessment year 2010-11 and 2011-12, the Coordinate Bench of the Trib .....

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normal course. There is no provision in the Act to add these kind of disallowance while computing book profit u/s. 115JB and it cannot change the book profit on this count. Therefore even if there is an addition in view of provision u/s. 14A r.w. Rule 8D, that cannot be added back to compute the book profit u/s. 115JB. This ground is allowed." 75. In view of the above, both the grounds raised by the assessee are allowed. 76. With regard to grounds No. 12.1 and 12.2 in the assessment year 2 .....

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ed by the assessee is partly allowed for statistical purposes. I.T.A. No. 1923/Mds/2011 [A.Y. 2008-09] 78. The first ground raised in the appeal of the assessee is general in nature and requires no adjudication. 79. The second ground raised in the appeal is with regard to depreciation on value of assets taken over from Bank of Thanjavur [BOT] by adopting written down value [WDV] of assets taken over from BOT ignoring the value adopted in the taken over scheme approved by the Reserve Bank of Indi .....

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cision of the Hon'ble Jurisdictional High Court, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to delete the disallowance made. Accordingly, for the assessment year 2008-09 also we direct the Assessing Officer to delete the above disallowance. 81. The fourth ground relates to non performing investments. We have considered similar issue for the assessment year 2007-08 hereinabove from para 52 to 55 and decided the issue against the assessee. For the a .....

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e submissions of the assessee, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer by observing that the claim of the assessee that 2 per cent of exempt income can be taken as expenditure incurred to earn tax free income cannot be accepted. When the Act has prescribed a method for quantifying the disallowance where the Assessing officer has not satisfied with the disallowance made by the assessee, the same cannot be overlooked. In the assessee's case, the securities are h .....

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rder passed by the ld. CIT(A) and directed the Assessing Officer to work out the disallowance @ 2%. However, since Rule 8D is applicable from the assessment year 2008-09 onwards, the disallowance should be made based on the prescribed method quantified by the Act. Since the Assessing Officer has made the disallowance under section 14A and computed under Rule 8D, we confirm the disallowance made by the Assessing Officer. Accordingly, the ground raised by the assessee is dismissed. 84. The sixth g .....

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the Assessing Officer, the assessee has contended that the provisions of section 36(1)(vii) and 36(1)(viia) are independent and unless credit balances in respect of accounts written off as bad debts is maintained in the books of the bank as provision under section 36(1)(viia), no disallowance can be made. 84(i). On appeal, the ld. CIT(A), after considering the submissions of the assessee, has held that the provisions of section 36(1)(vii) and 36(1)(viia) were independent and that the deduction .....

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onsideration of the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank v. CIT 343 ITR 270, Accordingly, the ground raised by the assessee is allowed for statistical purposes. 85. The seventh and eighth ground raised in the appeal of the assessee is with regard to disallowance of claim of amortization of share issue expenses of ₹ 4,50,03,133/- under section 35D of the Act. Similar issue was raised in the assessment 2007-08 and we have decided the issue against the .....

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of assets taken over from Bank of Thanjavur [BOT] by adopting written down value [WDV] of assets taken over from BOT ignoring the value adopted in the taken over scheme approved by the Reserve Bank of India [RBI]. At the time of hearing, the ld. Counsel for the assessee has not pressed this ground and endorsed in the grounds of appeal of the assessee as "not pressed". Accordingly, the ground is dismissed as not pressed. 89. The third ground relates inclusion of income of foreign branc .....

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amount representing the net profit of 6,38,44,662/- after making provision for bad and doubtful debts and taxation in respect of branches in Singapore and Colombo has been excluded from the global income in view of the agreement entered into with those countries for avoidance of double taxation. Consequently, double income tax relief has not been worked out, which otherwise is allowable. It was also submitted that the Hon'ble Madras High Court in the case of CIT v. SRM Brothers 208 ITR 400 u .....

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e amounts were not originally allowed as bad debt under the Act, the same is not income taxable under section 41(1) and hence the amount is excluded from the computation of income. The Assessing Officer has not accepted the submissions made by the assessee and made the disallowance. 91. On appeal, after considering the submissions of the assessee, the ld. CIT(A) remitted the matter back to the Assessing Officer to allow relief of tax based on the tax paid in the foreign countries. 92. On being a .....

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that the income of the foreign branches of the assessee should be included in the return of income and credit of such taxes shall be given. 93. We have considered the rival submissions and gone through the orders of authorities below. On similar issue, against the appeal filed by the Revenue, the Coordinate Bench of the Tribunal in assessee's own case for the assessment year 2003-04 has considered and observed that income of the foreign branches in Singapore and Colombo had to be excluded a .....

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branches are tax resident of those countries as per DTAA. Accordingly, the assessee has claimed that income tax paid/payable on the income of such branches in the respective countries should be excluded from the return of income filed in India. This claim was made in view of the Article-7 of the respective DTAAs, wherein the income from such foreign branches is not taxable again along with the income of the assessee in India. The Assessing Officer has allowed the credit/relief for the taxes paid .....

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A. Whereas, the assessee's submission before the learned Commissioner (Appeals) was that the income of the branches is taxable only in those countries and such an income has to be excluded from the income filed in India i.e., it is not taxable in India. Reliance has been placed on the decision of the Hon'ble Supreme Court in P.V.A.L. Kulandagan Chettiar (supra). 23. The learned Commissioner (Appeals) agreed with the contention of the assessee and directed the Assessing Officer to allow e .....

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o that P.E. which is situated in the source State. This means that once the tax has been paid in the other contracting State, then the same cannot be taxed in the resident State. The notification dated 29th August 2008, as issued by the Government of India, will not apply in case of business profit of the P.E. He submitted that the decision of the Hon'ble Supreme Court P.V.A.L. Kulandagan Chettiar (supra) squarely covers the case wherein the Hon'ble Supreme Court held that once the tax h .....

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rt judgment. 25. The learned Departmental Representative, on the other hand, submitted that this issue is squarely covered by the decision of the Tribunal in Essar Oil Ltd. v/s ACIT, ITA No. 2428/Mum./2007, etc., order dated 28th August 2013, wherein the Tribunal has not only taken into consideration the decision of the Hon'ble Supreme Court in P.V.A.L. Kulandagan Chettiar (supra) but also various other decisions of Supreme Court and High Courts, including the amendment brought in the statut .....

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ssessee on the income which has been earned by the P.E in the source country which are liable for tax in such country. 26. We have heard the rival contentions and perused the decisions relied upon by both the parties. The issue of interpretation of phrase "may be taxed in other contracting States", as used in different Articles including Article-7 in the DTAA has been discussed in detail by the Tribunal in Essar Oil Ltd. (supra) after taking into consideration various decisions of the .....

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once the tax is payable or paid in the country of source, then country of residence is denied of the right to levy tax on such income or the said income cannot be included in return of income filed in India, would no longer apply after the insertion of provision of sub-section (3) of section 90 w.e.f. 1st April, 2004, i.e. assessment Year 2004-05. The said provision as conferred upon the Central Government a power to issue notification, assigning meaning to the terms used in the DTAA, which has .....

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in his total income chargeable to tax in India in accordance with the provisions of the Income Tax Act, 1961 and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. This meaning assigned to the term "may be taxed" has changed its complexion; ii) The notification dated 28th August 2008, reflects a particular intent and objective of the Government of India, as understood during the course of negotiations leadin .....

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nd therefore, the interpretation as understood and intended by the negotiating parties should be adopted. Here one of the parties i.e., Government of India has clearly specified the intent and the object of this phrase. If phrase is used in a statute, then 'any interpretation given by the High Court or the Supreme Court is binding on all the subordinate Courts and has to be reckoned as law of the land. However, the meaning assigned by Government of India for a phrase or term used in the agre .....

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f the aforesaid findings/conclusion, we hold that the income of the branches of the assessee shall also taxable in India i.e., it would be included in the return of income filed by the assessee in India and whatever taxes have been paid by the Branches in the other contracting States i.e., the source country, credit of such taxes shall be given. Accordingly, the ground No. 3, as raised by the assessee in the assessment year 2005-06 and 2006-07, is treated as dismissed, whereas, ground No. 1, as .....

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of income of the assessee in India and whatever taxes paid by the branches in foreign countries, credit of such taxes shall only be given. Accordingly, the ground raised by the assessee is dismissed. 95. The fourth ground raised in the appeal is with regard to disallowance of 21,20,56,397/- under section 14A. Similar ground was raised in the assessment 2008-09 and we have decided the issue against the assessee in para 82 to 83 of this order. Accordingly, for the assessment year 2009-10 also, we .....

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Assessing Officer. 97. After hearing both sides, we find that the provisions of section 35D of the Act have been amended by the Finance Act, 2008 with effect from 01.04.2009 wherein the words "Industrial unit" and "Industrial undertaking-were substituted with the words "Unit" and "undertaking". The memorandum explaining the provisions clearly states as under:- "Section 35D provides for deduction of certain specified preliminary expenses. The deduction is a .....

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ctor, it is necessary to extend to the service sector, the same benefit of amortization of specified post-commencement preliminary expenses as is available to the manufacturing sector for the extension of an undertaking or the setting up of a new unit. Therefore, it is proposed to amend section 35D accordingly. The amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to assessment year 2009-10 and subsequent assessment years (Clause 6)." From the .....

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om the assessment year 2009-10 and, the banks are coming under service sector, the benefit can be extended from the assessment year 2009-10 only to the extent of setting up of a new unit for five successive years. Accordingly, we set aside the order passed by the ld. CIT(A) and remit the matter back to the Assessing Officer to examine whether the assessee has set up a new unit or not and if so, he is directed to allow the benefit from 2009-10 onwards. Accordingly, the ground raised by the assess .....

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the assessee in its appeal in I.T.A. Nos. 1396 and 1395/Mds/2014 for the assessment years 2005-06 and 2007-08 at para 8 to 13 of this order. Accordingly, the ground raised by the assessee is allowed. 99. The seventh ground raised in the appeal relates to disallowance of provision made for claims against the bank amounting to 16,00,00,000/-. The Assessing Officer has disallowed the sum on the ground that the assessee has not furnished any details about the nature of the claims against which the p .....

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r considering the submissions of the assessee, the ld. CIT(A) confirmed the order passed by the Assessing Officer. 100. Before us, the ld. Counsel for the assessee has reiterated the submissions as made before the ld. CIT(A). However, the ld. Counsel for the assessee has not furnished any details about the nature of expenses. If any expense is required to be allowed, it is for the assessee to prove the nature of the expenditure and its relation to its business. In the present case, the assessee .....

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d by the assessee. 102. The ninth ground raised in the appeal of the assessee relates to disallowance under section 14A in computing the book profits under section 115JB, the tenth ground raised in the appeal relates to disallowance of provision made for wage arrears in computing the book profits and eleventh ground relates to disallowance of claims made against the bank while computing book profit under 115JB of the Act. Similar grounds were raised in the assessment 2007-08 and we have decided .....

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f income of foreign branches at Singapore and Colombo amounting to 82,89,70,657/-. Similar ground has been raised in the assessment year 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the issue against the assessee from para 89 to 94 of this order. Accordingly, for the assessment year 2010-11 also, we dismiss the ground raised by the assessee. 106. The third ground (a and b) raised in the appeal of the assessee relates to disallowance of expenses under section 14A r.w.r. 8D of 23,09,49, .....

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ses at para 96 and 97 of this order. Accordingly, for the assessment year 2010-11 also, the ground is allowed for statistical purposes. 108. The fifth ground raised in the appeal of the assessee relates to depreciation on ATM and UPS of 5,24,54,359/-. With regard to allowability of 60% depreciation on UPS, we have considered similar issue and dismissed the ground raised by the Revenue in I.T.A. Nos. 2124 and 2125/Mds/2014 for the assessment year 2005-06 and 2007-08 at para 17 to 22 of this order .....

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22,31,40,333/-. Similar ground was raised in the assessment 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the ground against the assessee at para 99 and 100 of this order. Accordingly, for the assessment year 2010-11 also, the ground raised by the assessee is dismissed. 110. The seventh ground raised in the appeal relates to applicability of book profits under section 115JB of the Act. Similar ground was raised in the assessment 2007-08 and we have decided the issue in favour of the as .....

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of the assessee from para 73 to 75 of this order. Accordingly, for the assessment year 2010-11 also, we allow both the grounds raised by the assessee. 112. The tenth ground raised in the appeal of the assessee relates to disallowance of deduction claimed under section 36(1)(viia) of the Act of 197,51,47,290/-. Similar ground was raised in the assessment 2007-08 and we have considered the issue and decided the issue from para 59 to 63 of this order. Accordingly, for the assessment year 2010-11 a .....

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amounting to 37,43,13,769/- with the income chargeable to tax in India. Similar ground has been raised in the assessment year 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the issue against the assessee from para 89 to 94 of this order. Accordingly, for the assessment year 2007-08, the ground raised by the Revenue is allowed. 116. The third ground raised in the appeal of the Revenue relates to the disallowance of depreciation on securities provided by the assessee at the time of shifti .....

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". It was also submitted that in respect of "Held to Maturity" category, as per the Reserve Bank of India guidelines, the securities are to be valued at cost. In respect of other two categories it has to be valued at cost or market price whichever is lower. When an asset is transferred from "Held to Maturity" category to "Available for Sale" category, such transfer shall be valued at cost or market price, whichever is lower. Therefore, the AR of the assessee ha .....

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nal and the ld. DR has submitted that the securities are treated as permanent and hence does not qualify for depreciation. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A). He also relied on the decision in the case of DCIT v. Andhra Bank Ltd. in I.T.A. No. 630/Hyd/2012 and vide its order dated 04.10.2013 and also in the case of ACIT v. The South India Bank Ltd. in I.T.A. No. 208/Coch/2014 vide its order dated 24.12.2014, wherein the ld. A .....

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are treated as permanent, the same cannot qualify for depreciation. The ld. CIT(A), by following the decision of the Bangalore Bench of the Tribunal in the case of State Bank of Mysore v. DCIT [2009] 33 SOT 7, allowed the ground raised by the assessee. In the above decision, the Tribunal has observed as under:- "7.2 We have considered the rival submissions. We have also perused the RBI Master Circular and other case laws on which the Sr. Counsel has placed strong reliance. The Hon'ble I .....

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ory 'held for maturity' as stock-in-trade. If there is appreciation in the market value as compared to the market value at the opening of the year and such appreciation is also accounted for. It is not claiming depreciation only for the years, when the value has gone down. If that had been the case, the assessee would not have accounted for any appreciation in 3rd, 4th and 5th year. The method by which the assessee bank is valuing securities is in accordance with the accounting principle .....

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ncome-tax Act. Income is to be assessed as per the provision of the Income-tax Act. The Madras High Court in the case of Tamilnadu Power and Infrastructure Development Corporation Ltd. v. CIT 280 ITR 491, held that provision for non-performing the assets debited to PandL account is not allowable, as directive of Reserve Bank of India may not override statutory provision. Once the Revenue is accepting that profit arising on the maturity of investment is business income, then it cannot take the st .....

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No. 50/BANG/97 dated 27th July, 2003. (2) ING Vysya Bank Ltd. v. Dy CIT [2006] 6 SOT 606 (Bang.) 17. Considering the above discussion, it is held that the assessee is entitled to value all the investment at cost prices or market value whichever is lower by treating such investment as stock-in-trade...." 7.3 The Hon'ble Tribunal in IT Appeal No. 112/Bang/2008, dated 3-12-2008 in the, case of Corporation Bank v. Asstt. CIT, by following the decision of the Hon'ble Tribunal in the cas .....

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ation, it has been mentioned thus:- "(i) The entire investment portfolio of the banks (including SLR securities and non-SLR securities) should be classified under three categories viz., 'Held to maturity', 'Available for Sale' and 'Held for Trading'. However, in the balance sheet, the investments will continue to be disclosed as per the existing six classifications viz.; (a) Government securities, (b) other approved securities, (c) shares, (d) debentures and bonds, ( .....

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will be allowed during the remaining part of that accounting year. " 7.5 In view of the clear cut guidelines of the RBI and respectfully following the findings of the Hon'ble Tribunal referred supra, the claim of the assessee towards provision of depreciation of ₹ 127,21,17,913 on account of transfer of securities from AFS Category to HTM Category is allowed. It is ordered accordingly." 120. Further, on an identical set of fact, similar ground was raised before the Hyderabad .....

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ory through a note and therefore is not allowable expenditure as per the provisions of IT Act following CBDT Circulars, Case laws relied upon by the assessee, relevant accounting standards, RBI guidelines and Accounting Principles. 3. On appeal, the CIT(A) following his predecessor's decision in AY 2005-06, set aside the issue to the file of the AO with a direction to ascertain the facts and allow depreciation accordingly. 4. Before us, the learned counsel for the assessee has canvassed that .....

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own case for AY 2006-07 wherein the coordinate bench held as follows:- "50. We are of the opinion that the assessee Bank is holding various Government Securities in order to comply with the statutory liquidated ratio. The bank would have to hold requisite percentage of deposits in the form of cash, gold, government or approved securities. The government securities held for the purpose of comply with the SLR has been held to be stock in trade and therefore value of the same as on 31st March .....

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in trade and therefore depreciation in value of such securities cannot be allowed as a deduction. The Apex Court in the case of UCO Bank Ltd. vs CIT reported in 240 ITR 355 has held that value of the securities at cost or market value whichever is less should be accepted for income tax even if the banks in their books do not value on that basis. Therefore, it is an accepted proportion that investment made by the bank to comply with the SLR requirement would constitute their stock in trade and de .....

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tion is identical to that of AY 2006-07 in assessee's own case, respectfully following the same we uphold the directions of Ld. CIT(A) with a direction to AO to follow the same in this year also as per the order of ITAT supra. Accordingly, ground No. 2 raised by the revenue is dismissed." In view of the above decisions of the Tribunal, we uphold the order of the ld. CIT(A) on this issue and the ground raised by the Revenue is dismissed. 121. The fourth ground raised in the appeal of the .....

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sis to tax and the Hon'ble Madras High Court has upheld this system in the cases of Tamilnadu Mercantile Bank 137 and City Union Bank 2912 ITR 144. The assessee has also relied on the decision of UCO Bank v. CIT 240 ITR 355. However, the Assessing Officer has not accepted the submissions of the assessee and made addition of 60,88,50,392/-. 122. On appeal, the ld. CIT(A), after considering the submissions of the assessee and, in view of the judicial pronouncement of the Hon'ble Supreme Co .....

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e order passed by the ld. CIT(A). 124. After hearing both sides, we find that on this issue, the Hon'ble Supreme Court has dismissed the SLP filed by the Department against the decision of the Hon'ble Jurisdictional High Court in the case of Federal Bank 310 ITR 9 [Statute] and also in the case of Tamilnadu Mercantile Bank Ltd. in CC 3043/2008 dated 07.03.2008. The ld. CIT(A), by following the above decision, decided similar issue for the assessment year 2006-07 and allowed the ground ra .....

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ty Union Bank Limited 291 ITR 144 against which the Revenue preferred appeal before the Tribunal and the Tribunal in I.T.A. No. 239/Mds/2011 vide order dated 12.10.2011 decided the issue against the Revenue, wherein, the Tribunal has held as under:- "5. The second issue raised, by the Revenue is that the Commissioner of Income-tax (Appeals) has erred in holding that the interest on securities has to be taxed on due basis. The Revenue has taxed it on accrual basis. The Commissioner of Income .....

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of redemption. The holder of the security cannot encash the security prematurely before the date of redemption like bank deposits. A fixed bank deposit can be redeemed even before the maturity date and the depositor may get a portion of the interest accrued on the deposit till the date of surrender. In such cases, the interest is generated on accrual basis. But in the case of a Government security, it is not possible to encash it prior to the due date. A holder of the security may be able to se .....

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d only on due date and not on accrual basis. This fundamental character of a Government instrument itself is sufficient to justify the method of interest income recognition by the assessee-bank. We find that the order of the Commissioner of Income-tax (Appeals) is just and proper in law. The appeal filed by the Revenue fails." 125. Respectfully following the above judicial pronouncements, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the Re .....

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considered and decided against the Revenue from para 23 to 30 of this order. Accordingly, the ground raised by the Revenue for the assessment year 2007-08 is also dismissed. 127. In the result, the appeal of the Revenue for the assessment year 2007-08 is partly allowed. I.T.A. No. 2025/Mds/2011 [A.Y. 2008-09] 128. The first ground raised in the appeal of Revenue is general in nature and requires no adjudication. 129. The second ground raised in the appeal of the Revenue is with regard to allowab .....

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to inclusion of income of foreign branches at Singapore and Colombo amounting to 38,33,66,265/- with the income chargeable to tax in India. Similar ground was raised by the assessee in the assessment year 2009-10 in I.T.A. No. 1871/Mds/2012 and we have decided the issue against the assessee from para 89 to 94 of this order. Accordingly, for the assessment year 2008-09, the ground raised by the Revenue is allowed. 131. The fourth ground raised in the appeal of the Revenue relates to disallowance .....

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he assessee in the assessment year 2007-08 in I.T.A. No. 880/Mds/2010 and we have decided the issue in favour of the assessee from para 68 to 72 of this order. Accordingly, for the assessment year 2008-09, the ground raised by the Revenue is dismissed. 133. In the result, the appeal of the Revenue for the assessment year 2008-09 is partly allowed. I.T.A. No. 2198/Mds/2012 [A.Y. 2009-10] 134. The first ground raised in the appeal of Revenue is general in nature and requires no adjudication. 135. .....

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is dismissed. 136. The third ground raised in the appeal of the Revenue is with regard to broken period interest amounting to 51,74,61,891/- on the purchase of securities. Similar ground was raised by the assessee in the assessment year 2007-08 in I.T.A. No. 880/Mds/2010 and we have decided the issue in favour of the assessee from para 46 to 49 of this order. Accordingly, for the assessment year 2009-10, the ground raised by the Revenue is dismissed. 137. The fourth ground raised in the appeal o .....

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t on securities on due basis. Similar ground has been raised by the Revenue in the assessment 2007-08 in I.T.A. No. 887/Mds/2010 and we have decided the issue against the Revenue from para 121 to 125 of this order. Accordingly, for the assessment year 2009-10 also, the ground raised by the Revenue is dismissed. 139. The sixth ground raised in the appeal of the Revenue relates to the provision made for wage arrears to staff of 173,00,00,000/-. The Assessing Officer disallowed the claim on the gro .....

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sidering various higher Courts decisions, the ld. CIT(A) directed the Assessing Officer to allow the claim of the assessee. 141. On being aggrieved, the Revenue is in appeal before us and the ld. DR has supported the order passed by the Assessing Officer. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A). 142. We have considered the rival submissions. Before the Assessing Officer, the assessee, vide its letter dated 15.12.2011, has submitte .....

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r dated 29.12.2011, it was submitted before the Assessing Officer that the Bipartite agreement was on wages expired on 31.10.2007 paving the way for fresh negotiations for 9th Bipartite agreement by which revised wages are to be from 01.11.2007. As payment of revised wages was certain from 01.11.2007, the bank started providing for wages as it is a certain liability to be paid. The Assessing Officer has observed that the bipartite wage pact was signed by Indian Bank associations on behalf of mem .....

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as signed only on 27.04.2010, the wage revision will be effected from the date of signing of the agreement. The ld. CIT(A) has observed that the assessee has made a provision in books based on reasonable estimate in accordance with mercantile system of accounting followed by it. The actual payment of this sum has been made during June, 2010 on signing the agreement. Though the agreement was signed on a later date, there definitely existed a liability on the part of the assessee to provide for it .....

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not controvert the above findings of the Tribunal. Since the ld. CIT(A) has followed the order of the Tribunal and decided the issue in favour of the assessee, we find no infirmity in the order passed by the ld. CIT(A). We further hold that the actual liability is allowed in the year of actual discharge of the said liability and accordingly, the ground raised by the Revenue is dismissed. 143. With regard to the grounds raised in 6.6, 6.7 and 6.8 relate to applicability of book profits to the ba .....

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o. 2126/Mds/2014 [A.Y. 2010-11] 145. The first ground raised in the appeal of Revenue is general in nature and requires no adjudication. 146. The second ground raised in the appeal of the Revenue is with regard to allowability of write off of bad debts at Head Office against provisions [technical write-off] of bad debts of 377,05,00,000/- under section 36(1)(vii) of the Act. Since bad debts are allowable expenditure, the issue raised in the appeal of the assessee for the assessment year 2007-08 .....

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from para 46 to 49 of this order. Accordingly, for the assessment year 2010-11, the ground raised by the Revenue is dismissed. 148. The fourth ground raised in the appeal of the Revenue relates to disallowance of depreciation of 49,22,32,974/- on account of shifting of securities from AFS to HTM. Similar ground has been raised by the Revenue in the assessment 2007-08 in I.T.A. No. 887/Mds/2010 and we have decided the issue against the Revenue from para 116 to 120 of this order. Accordingly, for .....

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d in the appeal of the Revenue relates to disallowance of deduction claimed under section 36(1)(viia) of the Act at 197,51,47,290/-. We have considered similar issue and dismissed the ground raised by the Revenue in I.T.A. Nos. 2124 and 2125/Mds/2014 for the assessment year 2005-06 and 2007-08 from para 23 to 30 of this order. Accordingly, for the assessment year 2010-11 also, the ground raised by the Revenue is dismissed. 151. The seventh ground raised in the appeal of the Revenue relates to di .....

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ontracts to reduce the incidence of unforeseen losses thereby protecting the interests of business and therefore, the derivative contracts will amount to a business transaction and not a speculative transaction for the purpose of section 43(5) of the Act. After considering the submissions of the assessee and examining the issue at length, the ld. CIT(A) has held that the derivative contracts though involved foreign exchange cannot be viewed as speculative transactions and directed the Assessing .....

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issue before us is whether the losses from the derivative contracts amounts a speculative transaction or not? The Assessing Officer has observed that the derivative transactions are speculative transactions under section 43(5) of the Act and the resulting losses are speculative losses. On appeal, the ld. CIT(A), by reproducing relevant provisions of section 43(5) of the Act, has observed that for the purpose of sections 28 to 41 (i.e., under the head income from business or profession) means th .....

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classified as speculative losses. Any other transaction which is not falling into the above definition under section 43(5) cannot be treated as a speculative transaction. In view of the above, the ld. CIT(A) has held that the derivative contracts though involved foreign exchange cannot be viewed as speculative transactions and directed the Assessing Officer to consider the losses from the derivative contracts as regular business losses and allow their set off against other business profits of th .....

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ans the shares of the companies. Hence the foreign currency will not fall into the category of 'shares and stocks'. "Commodity" means the ones which are eligible to be traded in the recognized commodity exchanges. The currency, whether "foreign currency" or "Indian currency", is not allowed to be traded in the commodity exchanges. Therefore, the foreign currency cannot be treated as a "commodity". The Delhi Bench of ITAT in the case of Munjal Showa .....

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ss profits and not speculative profits. Further, the specific issue of "loss on evaluation of un-matured forward foreign exchange contract" was considered by the Hon'ble Special Bench of ITAT, Mumbai in the case of DCIT v. Bank of Bahrain and Kuwait, 41 SOT 290 wherein it was held as below:- "58. In view of the above discussion, we allow the assessee's appeal for the following reasons:- (i) A binding obligation accrued against the assessee the minute it entered into forwar .....

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reasonable certainty. The considerations for accounting the income are entirely on different footing. (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 than one accounting period. (vi) The forward foreign exchange contracts have all the trappings of stock-in-trade. (vii) In view of the decision of Hon'ble Supreme Court in the case of Woodward Governor India (I) P. Ltd. the assessee's c .....

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orward contract." 155(i) The facts of the assessee's case are similar to that of the Bank of Bahrain and Kuwait (supra). We find that the "ratio laid down by the Special Bench Mumbai ITAT is squarely applicable to the case of the assessee. In the assessment order, the loss on account of revaluation of forward foreign exchange contracts has wrongly been treated as speculative in nature. The tests laid down in the case of Bank of Bahrain and Kuwait (supra) are duly satisfied and ther .....

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