TMI Blog2019 (11) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... such, ground 2 of the assessee succeeds in part Disallowance of Broken period expenses - HELD THAT:- The closing balance has been shown in the balance sheet. The interest income on Government securities and the profit/ loss has been offered in the return of income for the current year. Similar treatment is consistently offered by the assessee in earlier years. The assessee also relied on the CBDT Circular No. 18/2015 dated 02.11.2015. The ld CIT(A) accepted the contention of the assessee granted relief to the assessee by relying on the CBDT circular and on the decision of Hon ble Supreme Court in CIT Vs Citi Bank NA [ 2008 (8) TMI 766 - SUPREME COURT] and in American Express International Banking Corporation Vs CIT [ 2002 (9) TMI 96 - BOMBAY HIGH COURT] . We have noted that this issue is also covered in favour of the assessee, hence, we affirms the order of the ld CIT(A) and accordingly dismissed the ground of appeal raised by the revenue. Allowability of ESOP expenses - HELD THAT:- CIT(A) allowed relief to the assessee by following the order of his predecessor in assessee s own case for AY 2009-10 as relying on M/S. BIOCON LIMITED AND OTHERS VERSUS THE DY. COMMISSIONER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and appeal has been admitted by the Hon'ble High Court. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the broken period interest is allowable on the matching principles, without realizing that the same has not been incurred for realizing the interest on securities as enunciated by the Apex court in Vijaya Bank Ltd. (57 Taxman 152) (SC). 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to allow expenditure incurred on ESOP, after verification in accordance with the principle laid down by Hon'ble Special Bench in the case of Biocon Ltd. (368/Bang/2010) without appreciating that the same is not an ascertained liability, contingent in nature, quantum cannot be worked out precisely and is capital in nature and hence not allowable. 5. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to allow bad debts u/s 36(1)(vii) independent of the claim and balance available in the provision of bad debts u/s 36(1 )(viia). 2. The assessee, a banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallowance carried out by the assessee from the disallowance worked out by him and made a net disallowance of ₹ 27,80,06,782/-. On appeal, the Ld.CIT(A) deleted the disallowance under Rule 8D2(ii) with the following observations:- 6.4 I have carefully considered the facts of the case, discussion of the AO in the impugned order as well as oral contentions and written submissions of the appellant. The appellant is a banking company and carries on the banking business as provided in the Banking Regulation Act, 1949. The appellant has various subsidiaries companies, which are in the business of life insurance, stock broking, asset management, NBFC etc. Besides investment in subsidiary company, it has also made certain investments in shares of other companies, investment in venture capital funds etc. During the year under appeal, the AO has disallowed expenditure U/S.14A by invoking Rule 8D2(ii) 8D(2)(iii) and has made the disallowance of Rs, 28, 02,45,2087- (₹ 26,01, 60,8537- and ₹ 2, 00,84,3557-). The appellant, on ;;he other hand, has disallowed Rs. Nil under rule 8D(2)(ii) and ₹ 22, 38,4267- under rule 8D(2)(iii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee by the decision of the Tribunal in assessees own case in ITA Nos 1657, 1629/Mum/2012; 3491, 3592, 3593, 6394, 6217/M/2013 for AYs 2008- 09 to 2011-12. Further, relying upon the following judgements, has submitted that when own funds are more than the amount of investments made for earning tax free dividends, no disallowance u/s 14A is warranted. He also submitted that when the investments are made in view of having strategic interest, no disallowance could be made. The following are the decisions, the Ld.Counsel relied upon:- 1. HDFC Bank Ltd vs DCIT (2016) 383 ITR 529 (Bom) 2. CIT vs HDFC Bank Ltd (2016) 383 ITR 529 (Bom) 3. CIT vs Reliance Utilities Power Ltd (2009) 313 ITR 340 (Bom) 4. CIT vs Bombay Oil Industries Ltd 23014) 42 Taxmann.com 440 (Bom) 5. CIT vs Reliance Industries Ltd CA No. 10 of 2010 (SLP(c) no.37/2010 6. PCIT vs Sintex Industries Ltd (2018) 255 Taxman 171 (SC) 7. PCIT vs Sintex Industries Ltd (2017) 82 taxmann.com 171 (Guj) 8. DCIT vs Bennet Coleman Co Ltd ITA No.1951/M/2016 9. DCIT vs Ageis Logistic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td 95 Taxmannn.com294 (Mum) 9. Integrated Coal Mining Ltd vs DCIT 67 Taxmnn.com 260 10. DCIT vs Rare Enterprises ITA No.5207,5208/M/2016 8. The Ld.AR further submitted that when investments are not for the purpose of yielding income, that part of investment is to be excluded from the working of disallowance u/r 8D(2)(iii). For this proposition, the Ld.AR relied upon the following precedents:- 1. Vireet Investment (P) Ltd 82 Taxmann.com 415 (Del)(SB) 2. Kotak Securities Ltd ITA No.666, 7055/M/16 3. Ageis Logistic Ltd ITA No.1945/M/2016 4. Reliance Capital Ltd ITA No.4008/M/2016 5. Stock Traders Pvt Ltd ITA No.2108/M/2006, 4403 687/M/2011 6. Reliance Capital Ltd ITA No.6396 6397/M/2017 7. Syntex Corporation P Ltd ITA No.2994/M/2012 8. Garden Court Distilleries P. Ltd ITA No.5562/Mum/2016 9. Bombay Oxygen Corporation Ltd 86 Taxmann.com 88(Mum) 10. Sajjan India Ltd 89 Taxmann.com 21 (Mum) 11. Integrated Coal Mining Ltd 67 Taxmann.com 260 (Mum) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld.AR for the assessee, on the other hand, has relied upon the following judicial precedents and submitted that the Ld.CIT(A) was right in deleting the addition: 1. CIT vs Citi Bank N.A. Civil Appeal No.1549 of 2006 2. American Express International Banking Corp vs CIT 258 UTR 601(Bom) 3. CIT vs Deustche Bank 266 ITR 106-107 (SC) 4. CIT vs HDFC Bank Ltd 49 Taxmann.com 335, 366 ITR 505 (Bom) 5. Indian Bank vs DCIT 44 Taxmann.com 339 (Mad) 6. DCIT vs Dena Bank ITA No.1407/M/16 1408/M/16 7. DCB Bank Ltd vs. ACIT ITA No.820/M/14 615/M/14 8. ACIT vs Dena Bank ITA No.5259/M/14 9. DCIT vs Bank of Baroda ITA No.5605 5604/M/16 10. CBDT circular 28 of 2015 CBDT circular 18 of 2015 11. ACIT vs The W.B. State Co-op Bank Ltd ITA No.324 325/Kol/2018 12. DCIT vs Bank of Baroda ITA No.4355,4504,5082, 5020,4505,4356,5602/M/2018 13. DCIT vs Bank of Baroda ITA No.1222, 1221, 1120,1121/M/2018 14. ADIT vs HSBC ITA No.2519,2520, 2679, 2680,4424,4424 /M /2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business receipts of the issuing company. The company does not suffer any pecuniary detriment. To claim a charge against income, it should inflict a detriment to the financial position. ESOP is a voluntary scheme launched by the employers to issue shares to employees. The intention is to only give a stake to the employees in the organization; (iii) This discount is not incurred towards satisfaction of any trade liability as the employees have not given up anything to procure such ESOP;(iv) Share premiums obtained on issue of shares are items of capital receipt. When such premium is forgone, it cannot be claimed as an expenditure wholly and exclusively laid out or expended for the purpose of the trade; (v) There is not any specific provision for such deduction from sections 30 to 36 of the Income-tax Act. So, the residuary section 37 only comes to play and the primary condition for allowance under this section is the existence of business. As elaborated in the above points, there is neither any real expenditure at the stage of grant or otherwise, nor the expenditure if at all any, can be qualified as Revenue in nature. The CBDT circular No.9/2007 dated 20-12-2007 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand the Ld.AR of the assessee placed his reliance on the following precedents and submitted that the Ld.CIT(A) was justified in allowing the ground of the assessee by placing authority on Bangalore Special Bench decision of the Tribunal in the case of Biocon Ltd (supra):- 1. Kotak Mahindra Bank Ltd. 89 taxmann.com 223 (ITA No. 698/M/16). 2. DCIT v. Kotak Mahindra Bank Ltd. ITA No. 2817/M/16 38/M/18. 3. Biocon Ltd. v. DCIT 144 ITD 21 (Bang) (SB). 4. DCIT v. Avendus Capital P. Ltd. ITA No. 5679/M/2015. 5. CIT v. PVP Ventures Ltd. v. 211 Taxman 554 (Mad). 6. S.S.I. Ltd. v. DCIT 2005-TIOL-30-ITAT-MAD. 7. Goldman Sachs India Securities P. Ltd. v. ACIT ITA No. 1428/Mum/2017. 8. DCIT v. Magma Fincorp Ltd. ITA No. 946/Kol/2017 17. We have considered the submissions of both the partied and perused the record. We have noted the AO disallowed the ESOP as we have recorded in para 15 above. However, the ld CIT(A) allowed relief to the assessee by following the order of his predecessor in assessee s own case for AY 2009-10 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17/M/2013 2. DCIT vs Kotak Mahindra Bank Ltd ITA No.2817/M/16 38/M/18 3. Catholic Syrian Bank Ltd vs CIT 343 ITR 270(SC) 4. CIT vs. Karnataka Bank Ltd 349 ITR 705 (SC), 25 taxmann.com 235 5. DCIT vs Union Bank of India ITA No.4678/Mum/2013 6. DCIT vs UCO Bank ITA No.197/Kol/2011 7. Central Bank of India vs DCIT ITA No.7428, 7485/M/2016 8. DCIT vs. Union Bank of India ITA No.2142, 1627/M/2014 22. We have considered the rival submissions of the parties and perused the record. The AO made disallowance as we have noted in para 20 above. The ld CIT(A) granted relief to the assessee by following the order of his predecessor in appeal for AY 2010-11date 04.02.2013, for AY 2011-12 dated 20.08.2013 and AY 2012-13 dated 19.01.2016. We have further noted that coordinate bench of the Tribunal while deciding the appeal for AY 2010-11, 2011-12 and 2012-13 in Kotak Mahindra Bank Vs DCIT in ITA(s) No. 1657, 1929/M/12, 3491, 3592, 3593, 6394, 6217/M/2013 in DCIT Vs Kotak Mahindra Bank Ltd ITA No.2817/M/16 38/M/18 confirmed the action of ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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