TMI Blog2017 (10) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... ore an issue that the above co-ordinate bench had upheld the same in preceding assessment year. We therefore adopt consistency to affirm this latter disallowance of administrative expenditure. This first substantive ground is taken as partly accepted. Adding speculative gains amortized as per RBI guidelines as well as in disallowing such related gain as taxed in preceding assessment years - Held that:- We draw support from above co-ordinate bench findings to delete addition of speculative gains of ₹ 2,64,27,796/- amortized as per RBI guidelines. The assessee at this stage submits that it no more wishes to press for its latter grievance qua addition of ₹ 3,21,05,491/- as an instance of double addition since assessed in earlier assessment years because of the fact that it has not been taxed till date. We appreciate this fair stand to confirm the above latter addition of ₹ 3.21crores. This second substantive ground is therefore partly accepted. Claiming employees’ stock option scheme “ESOP” as per SEBI guidelines, 1999 as revenue expenditure - Held that:- It is not in dispute that assessee’s relevant details pertaining to the impugned ESOP scheme already form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoke Section 14A r.w. Rule 8D inter alia by pleading that there has to be an express satisfaction u/s.14A(2) qua its accounts establishing a direct nexus with the exempt income in question, its interest free funds were much more than tax free investments and that the relevant facts involved in deriving the impugned exempt income did not warrant any such disallowance. The Assessing Officer however rejected all these contentions in his assessment order. He observed first of all that the assessee has not discharged its initial onus of proving the above direct nexus between tax free investments vis- vis the non interest bearing funds. He then invoked proportionate interest and administrative disallowance under Rule 8D (2) (ii iii) to the tune of ₹ 37,11,56,870/- and ₹ 3,33,94,517/-; respectively totaling to ₹ 40,45,51,387/- as reduced by the above suo motu disallowance of ₹ 1,00,21,247/-; coming to ₹ 39,45,30,140/- under challenge being made in assessment order dated 21.12.2011. 3. The CIT(A) affirms Assessing Officer s action by placing reliance upon his corresponding findings in preceding assessment year 2008-09 as under: 4.4 Identical issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing/investments. Coming to the method of computation of disallowance under section 14 A, assessing officer disallowed expenses relatable to exempt income as per rule 3D which is mandatory from assessment year 2008-09. For interest, proportionate expense is disallowable whereas for other expenses 5% of average investment value is disallowable. Considering the fact that appellant claimed huge administrative and other expenses, the disallowance of administrative expenses made by the assessing officer @.5% of investment resulting in exempt income is as per the formula given in rule 3D which is mandatory for making disallowance. In view of this the addition @ 5% of investment resulting in exempt income made by the assessing officer is confirmed. Since rule 8D is mandatory from this year, disallowance of administrative and other expenses relating to exempt income are to be computed as per this. The basis of disallowance in earlier years cannot be applied this year since rule 8D is mandatory and has to be applied for this year onwards. Accordingly the orders of appeal in earlier years are not relevant for this year. As regards interest, appellant had borrowed funds on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceed its tax free investments amounting to ₹ 651crores. It then confirms latter limb of administrative disallowance amounting to ₹ 63.84lacs. We take cue therefrom to notice that assessee s tax free investments in the impugned assessment year read a figure of ₹ 684crores as against interest free funds in the nature of share capital and reserves amounting to ₹ 10,214crores. We therefore find no reason to concur with the above proportionate interest disallowance of ₹ 37,11,56,870/-. We now proceed to deal with administrative expenditure disallowance of ₹ 3,33,94,517/-. It is no more an issue that the above co-ordinate bench had upheld the same in preceding assessment year. We therefore adopt consistency to affirm this latter disallowance of administrative expenditure. This first substantive ground is taken as partly accepted. 5. The assessee s second substantive ground pleads that both the lower authorities have erred in law as well as on facts in adding speculative gains of ₹ 2,64,27,796/- amortized as per RBI guidelines as well as in disallowing such related gain of ₹ 3,21,04,491/- as taxed in preceding assessment years. Both par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 547.16 Sale consideration received for the securities assets 550.09 Net gain/ loss over net book value 2.93 7.3 The assessee was asked to explain where the above amount of ₹ 2.93 crores has been offered as income in its annual accounts. In this regard, the assessee contended as under: GAIN ON SECURITIZATION OF ASSET OF ₹ 2.93 CRORES AS PER PARA 5.1.15 OF THE AUDITED ACCOUNTS During the hearing held on 10.11.2009, you have requested us to provide explanation that where the net gain of ₹ 2.93 on securitization transactions, as per para 5.1.15 (Page No. 60 of the annual report), has been accounted in the Profit and Loss. In this regard we submit as follows: For the year under consideration, the Bank has recognized income of ₹ 2,00,28,097 under the head Other Income, (Schedule 14, sub-clause, VII, miscellaneous income) and ₹ 93,13,051 was shown under the head other liabilities and provisions (Schedule 5, sub clause VII, others including provisions). The method of accounting followed in this regard is as per the RBI guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Electricity Co. Ltd. 225 ITR 746. Various High Courts have given due recognition to RBI guidelines which determined the taxation of banks/NBFC. The Hon ble Uttaranchal High Court in the case of Nainital Bank Ltd. 309 ITR 335, Hon ble Allahabad High Court in the case of Kailash Auto Finance Ltd. 320 ITR 394 and also Hon ble High Court of Delhi in the case of Elgi Finance Ltd. 293 ITR 357. 28. In our considered opinion, the amortization merely represents a timing difference and since the bank is consistently making profits and paying tax at the highest rate without claiming any tax holiday benefit, it can be safely concluded that the method followed is revenue neutral. We draw support from the decision of the Hon ble High Court of Bombay in the case of Nagri Mills Co. Ltd. 33 ITR 681. 29. Considering the facts in totality in the light of the judicial decisions referred to hereinabove, we do not find any merit in the findings of the ld. CIT(A). We accordingly set aside the findings of the ld. CIT(A) and direct the A.O to delete the addition of ₹ 93.13 lacs. Ground no. 3 is accordingly allowed. 20. As no distinguishing decision has been brought to our notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its additional ground at this belated stage. We find no merit in the instant technical plea. Hon ble jurisdictional high court s decision in CIT vs. Mitesh Impex 270 CTR 66 (Gujarat) recognizes this tribunal s jurisdiction to entertain such an additional ground for the first time as under. 38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of ₹ 45,49,315/- made by the Assessing Officer qua annual technical fees paid to Infosys as deleted in lower appellate proceedings. There is no dispute that the assessee incurred the impugned expenditure in preceding assessment year between July 2007 to March 2008. It however claimed that the above expenditure stood crystallized only in relevant previous year as it received corresponding bills in said period only. The Assessing Officer termed the same as violation of matching concept and lack of evidence indicating crystallization of impugned expenditure in relevant previous year to invoke the disallowance in question. The CIT(A) in turn follows his findings in assessment year 2007-08 on identical issue in assessee s favour. 11. We have given our thoughtful consideration to rival submissions. The Revenue fails to rebut the fact that the assessee has already succeeded on this prior period expenditure disallowance issue in preceding assessment years. We further find that hon ble jurisdictional high court decision in Tax Appeal No. 566/2016 PCIT vs. Adani Enterprises holds that such a disallowance is not to be invoked in case an assessee is assessed at the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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