TMI Blog2020 (2) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on account of provision for other employee benefit - AO disallowed these provisions on the basis that this provision represents accumulated liability of earlier years which cannot match with current year s revenue and the same is contingent in nature AND since there are specific provisions dealing with contributions to employee welfare funds, the same cannot be allowed under section 37(1) of the Act and the provisions of section 43B of the Act are applicable - HELD THAT:- provision for leave can be discharged in two manners i.e. one by availing the leave and other by way of encashment. In so far as availment of leave is concerned, the salary paid to the employee is known as leave with pay and it does not amounts to salary paid in lieu of leave and, hence, the provisions of section 43B(f) of the Act to that extent do not apply. Leave fare concession/Leave travel concession is in respect of actual payment made to the employees for the travel cost incurred by them on availment of the leave entitled to employees. The same is not towards any leave encashment, and hence it cannot be considered as a sum payable in lieu of any leave to which alone section 43B(f) of the Act applies - p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not yielded any exempt income during the year are to be excluded for the purpose of computing average value of investment. Even otherwise, now the law is settled that the investment which are giving exempt income during the year are to be considered for the purpose of disallowance u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules, i.e. the administrative expenses for the purpose of computing average value of investment. We direct the AO accordingly. Depreciation on leased assets - HELD THAT:- Assessee enters into lease agreements with various parties whereby assets were granted on lease to them. During the year under consideration, it has not entered into any new lease transactions. The assessee has claimed income-tax depreciation on the leased assets under section 32 of the Act since these assets are owned by the assessee. In the earlier years, certain lease agreements were considered as finance transaction and hence, depreciation was disallowed on these assets in the earlier years. In the year under consideration, the AO has disallowed the depreciation in respect of leased assets, where depreciation was disallowed in earlier years. The CIT(A) upheld the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y advances that had been classified as NPAs by the Bank in terms of RBI guidelines - HELD THAT:- This issue is squarely covered by the decision of Hon ble Bombay High Court in the case of American Express Bank Ltd [ 2012 (11) TMI 499 - ITAT MUMBAI] wherein it is held that there is no credit entry in the books of the account in respect of the interest on such NPAs, no addition can be made - where the AO has not contested that the policy adopted by the assessee is not in accordance with RBI guidelines, the incidence of taxation of interest on bad and doubtful debts will be either when the same is credited to the profit and loss account for the year or in the year in which it is actually received. Mere crediting of the interest to a reserve cannot be said to be an incidence by which the said interest could be charged to tax. Hence, we delete the addition of interest income and allow this issue of assessee s appeal. Addition of interest on non-performing Investments(NPIs) - HELD THAT:- In view of the above decision of Hon ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd. [ 2010 (11) TMI 88 - DELHI HIGH COURT] , which was affirmed by Hon ble Supreme Court [ 2018 (3) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court judgement in the case of Vijaya Bank (Supra). Further, we noted that this issue has been remanded back to the AO for fresh examination and adjudication by the Tribunal in the assessee s own case - we are of the view that this issue needs to be set aside to the file of the AO and AO will decide the issue after examining the facts afresh. Addition of interest on securities on accrual basis as the assessee is following mercantile system of accounting - AO has taxed such interest which has neither accrued nor become due as on 31st March 2018 - HELD THAT:- The right to receive interest on securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be taxed in the accounting year itself. Hence, we decide this issue in favour of assessee. Interest for Broken period [BPI] - AO had disallowed BPI claim deduction on the ground that this goes against the theory of real income as well as matching concept which are fundamental to the accounting - HELD THAT:- BPI refers to interest on Government and other approved securities relatable to the period from last due date (upto which interest was paid) till the date of purchase or sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue s appeal is dismissed. Depreciation provided for investments classified under the HTM category to be allowed. Discount on issue of Employee Stock Option - HELD THAT:- Discount on Employee Stock Purchase Scheme is an allowable deduction under section 37(1) in view of the Special Bench decision of the Bangalore Tribunal in the case of Biocon Ltd. v/s. DCIT [ 2013 (8) TMI 629 - ITAT BANGALORE] . As this issue is squarely covered in favour of assessee and against Revenue, we find no infirmity in the order of CIT(A). This issue of Revenue s appeal is dismissed. - ITA No. 3644/Mum/2016, ITA No. 4563/Mum/2016 - - - Dated:- 3-2-2020 - SRI MAHAVIR SINGH, VP AND SRI G MANJUNATHA, AM For the Appellant : Shri P.J. Pardiwalla Shri Nitesh Joshi, AR, Shri Ninad Patade For the Respondent : Shri Anadi Varma, CIT-DR Ms. Alankrutha Attaluri, AO ORDER PER MAHAVIR SINGH, VP: These cross appeals are arising out of the order of the Commissioner of Income Tax (Appeals)-5, Mumbai in Appeal No. IT-11/10-11 dated 08.03.2016. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle 23(1) Mumbai (in short ACIT/ITO/ AO) for AY 2008-09 vide date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned representative appearing for the Bank does not dispute the factual matrix asserted by the learned DR. Considering the aforesaid, it is deemed fit that the appeals listed before G Bench in the case of Sate Bank of India in ITA Nos. 3680, 3882/Mum/2017 and 3644, 3645, 4563 4564/Mum/2016 are transferred to come up for hearing before A Bench on 25th March, 2019. Above was announced in the court. Sd/- Sd/- (MS) (GSP) JM VP In terms of the above, these appeals were heard after the consent of the parties. 4. The first issue in this appeal of the assessee is as regards to the order of the CIT(A) confirming the disallowance made by AO in respect to assessee s claim of deduction on account of provisions for pension amounting to ₹ 3724/- crores. For this the assessee raised the following ground No. 1: - 1. Provision for pension of ₹3724,00,00,000/-. The learned CIT(A) erred in u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13084.80 3544.18 Reconciliation of present value of the obligation and fair value of the plan assets Present value of Funded obligation at 31st March, 2008 16810.00 3544.18 Deficit (Surplus) 13084.80 3544.18 Unrecognized Past Service Cost Nil Nil New Liability/(Asset) 3725.20 Nil Amount Recognised in the Balance Sheet Nil Liabilities 3725.20 Nil Assets Nil Nil Net Liability/(Asset) recognized in Balance Sheet 3725.20 Nil Net Cost recognized in the Profit and Loss Account Current Service Cost 423.14 126.15 Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing within the ambit of any specific provision. c. Further the expenditure should be relatable to the previous year. d. In the mercantile system the liability shall be an accrued liability and not a provisional liability to be allowed. Provisions of section 36 (1) (iv) and 36 1(v) allow provisional liabilities but they are subject to certain including applicability of section 438 of the I.T. Act. However, similar provisional liabilities cannot be allowed u/s 37(1) of the I.T. Act. In any case, the liability should be relatable to the revenue realized during the year. 7. In view of the above, the AO noted that the provision for pension relates to accumulated impact of services of employees till 31.03.2007 as a result of change in accounting policy adopted by the assessee bank. According to the AO, these so called expenses claimed by the assessee represents accumulated liability of earlier years which cannot be matched with the current year s revenue and the assessee itself has taken to Reserves account and not to the Profit Loss Account. According to him, the same indicates that the management and the Auditor itself considered that these liabilities relate to earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Senior Counsel for the assessee, Shri P.J. Pardiwalla, stated the facts first. He stated that during the financial year 2007-08 the bank adopted AS-15 Employees Benefit (Revised 2005) issued by the ICAI and in accordance with the provisions of AS-15 the bank has claimed/provided and made provision of ₹ 3724/- crores towards pension benefit. The learned counsel for the assessee filed copy of AS 15 and particularly drew our attention to clause 4 of Employees benefit and argued that even the pension is included in this clause where specifically AS-15 applies to pension also, i.e. employees benefit including retirement benefits. He then took us through the assessment order and narrated that the AO has made disallowance only on the above noted 4 items. He particularly stated the following: - (i) The liability is not for the relevant year rather it relates to earlier year. (ii) If at all it is allowable it falls under Section 40A (4/5) and 40A(7)/(9) of the Act. (iii) Even this provision can be allowed subject to condition of payment as prescribed under Section 43B of the Act. 10. In view of the above, he stated that the entire premise of the AO is without any basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 36(1)(v) of the Act. He stated that the crucial issue to be examined is whether in the present case the provisions made by the assessee bank for pension is a liability in the present or payable in future or is it a contingent liability. He stated that in the present case the provisions are in respect of actual liability which is ascertained at the time it is debited in the books of account of the assessee bank and is not contingent upon happening of any future event. He referred to the decision of the Hon'ble Supreme Court in the case of Bharat Earth Movers Vs. CIT (2000) 245 ITR 428 (SC) held as under: - The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. The appeal is allowed. The judgement under appeal is set aside. The question referred by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on fund. The Hon'ble Delhi High Court also held that where the liability on account of pension accrued from year to year, which were payable on retirement of eligible employees and the same cannot be disallowed under Section 43B of the Act. 14. On the other hand, Ld. CIT DR Shri Anadi Verma argued that the AO during the course of scrutiny proceedings under section 143(3) of the Act disallowed the deduction claimed by the assessee on account of provision for pension. The CIT(A) upheld the decision of the AO. The assessee bank has claimed that the provision for pension made by it in its books of account is an accrued liability that should be allowed under section 37(1) of the Act. The assessee bank has also claimed that such provision for pension is independent of, and is not hit by the provisions of Section 36(1)(iv) and Section 40A(7) and 40A(9) of the Act. However, the bank regularly contribute towards superannuation fund, gratuity fund, P.F. etc. for meeting the requirement of post-employment benefits which comprises of defined benefit plan and other long term employee benefits. The contribution made by the assessee towards superannuation funds are allowed u/s.36(1)(iv) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and is hit by 40A(7) of the Act. Without prejudice to the above, the provision for pension made by the assessee is hit by Section 40A(9) of the Act. 15. We have heard rival contentions on this issue and gone through facts and circumstances of the case. We have also perused the material placed before us including assessment order, order of CIT(A) and case laws. We noted that the assessee provides post-employment benefits such as pension, gratuity, etc. to its employees, under a Defined Benefit Plan . In terms of the said Plan, the assessee operates a Provident Scheme, Gratuity scheme and Pension Scheme. The Pension scheme comprises of two parts, (i) where the assessee makes a contribution to an approved Pension Fund, and (ii) where the assessee provides for pension payable to vested employees on retirement, on death while employed or on termination of employment, etc. The issue in the present appeal is only with regard to (ii) above i.e. provision for pension payable to employees. Based on the employment policy, the assessee provides pension benefits to its employees under a defined benefit plan. The provision is in respect of the agreed benefits payable to its employees on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith reasonable certainty. Hence, the provision made is for a present actual liability, payable in future, and not a contingent liability. It is clearly an ascertained liability and has been recognised in the books of account on a scientific basis, based on actuarial valuation. The Supreme Court in the case of Metal Box Co. of India (supra) and Bharat Earth Movers (supra) and several other cases, have held that if a business liability has definitely arisen in the accounting year, a deduction should be allowed if the liability could be reasonably estimated though actually discharged at a later date. Also, the Delhi High Court in the case of Delhi Flour Mills Vs. CIT [1974] 95 ITR 151 (Delhi), while allowing the provision for gratuity, observed as under: The gratuity payable to an employee represented a part of the emoluments payable to him for rendering service during each year. The right to receive gratuity accrued to the employee as soon as he completed one year of service and, as a corollary, the liability to pay the gratuity to the employee arose to the assessee at the end of each year. The amount of the liability was also ascertainable and there was no question in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting standard. 19. The fact that in year of change of accounting method there may be a distortion was accepted by the Bombay High Court in CIT vs. West Coast Paper Mills Ltd. [1992] 193 ITR 349 (Bombay). The Court was concerned with a case where the assessee changed its method of accounting for claiming deduction of bonus payments to employees from cash to mercantile. Consequently, in the year of change it claimed such deduction in respect of the cash payment for the past year accounts as well as for the provision made for the current year s liability. The High Court held that whenever there is a change in the method of accounting, something of this kind is bound to happen. In the present case also, liability has arisen on account of change in the policy that was thrust on the assessee as a consequence of the revised accounting standard that was mandated to adopt by the Reserve Bank of India. Therefore, no disallowance could be made on this ground. 20. The assessee is under an obligation to pay pension to their employees as per the agreed terms. With the rise in salary levels and reduction in interest rates and the fact that pension payments will have to made, based on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a case where the assessee had introduced a pension scheme for its managerial employees which was over and above the benefits available under the superannuation scheme of the company. The Delhi High Court held that the pension scheme of the assessee does not envisage any regular contribution to any fund or trust or any other entity and, therefore, allowed the deduction on the basis that liability in this regard accrues year on year. Further, reliance is placed on the decision of Mumbai Bench of the Tribunal in the case of Hindustan Unilever Ltd. vs. ACIT [2013] 22 ITR(T) 737 (Mumbai), wherein the issue of allowability of pension payable to employees over and above the amount payable under the LIC scheme was restored to the file of the AO since additional evidence was filed by the assessee. However, in a subsequent decision by an order dated 30.10.2014 in ITA No. 4449/Mum/1999, the Tribunal has allowed the deduction after noting that the deduction was allowed by the AO while giving effect to the earlier year s order wherein the matter was restored back. 23. The issue is also squarely covered by the decision of the Hon ble Bench of the Mumbai Tribunal in the case of erstwhile St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance in this regard is placed on the decision of the Supreme Court in the case of CIT vs. Kalyanji Mavji Co. [1980] 122 ITR 49 (SC), wherein it was held that if expenditure incurred by the assessee was not covered by the specific provision under section 10(2)(v) of the Act, then, benefit should be given to the assessee under the residuary clause i.e. section 10(2)(xv) of the Act. Moreover, Instruction No. 17/2008 dated 26.11.2008, relied upon by the CIT DR is also not applicable to the facts of the case. As regards, para ix of the aforesaid instruction, it is applicable to deduction towards contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees. Whereas the provision for pension of ₹ 3,724 crore is not towards contribution to any fund, but it is payable to the employees directly. Also, Sr. no. xi of the aforesaid instruction states that contingent liability cannot constitute deductible expenditure. As elaborated above, provision towards pension of ₹ 3,724 crore is not a contingent liability. It is an ascertained liability and has been provided for in the books of account on a scientific basis, as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AS 15 (Revised 2005), the Bank has based on actuarial valuation provided ₹ 3,724 crore towards pension benefits and ₹ 532.70 crore towards other employee benefits by debiting the revenue reserves. The said amounts have been claimed as deduction by the Bank under section 37(1) in the year under consideration. The AO disallowed the provisions of pension and other employees benefits of ₹ 3,724 crore and ₹ 532.70 crore respectively on the ground that liability relates to earlier years and therefore not allowable and hence the provisions are applicable under section 43B, only it is allowed if it is paid and further according to AO it is in the nature of contingent liabilities. 6.2 .. With regard to Other employees benefits which are as under: Sr. No. Long Term Employee s Benefits Amount (In crore) 1. Privilege Leave (Encashment) including leave encashment at the time of retirement 88.00 2. Leave Travel and Home Travel Concession (Encashment/ Availament) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs. In crore) 1. Leave Travel and Home Travel Concession (Encashment/Availment) 232.64 2. Silver Jubilee Award 9.66 3. Resettlement Allowance 35.89 4. Sick Leave 208.00 5. Retirement Award 15.84 6. Casual Leave 30.67 TOTAL 532.70 28. The assessee claimed a deduction for the above in the computation of total income and the details can be seen from sr. no III.13 of the computation of total income on page 2 of the Paper Book I filed by the assessee. The AO disallowed these provisions on the basis that this provision represents accumulated liability of earlier years which cannot match with current year s revenue and the same is contingent in nature. Further, the AO stated that since there are specific provisions dealing with contributions to employee welfare funds, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to item mentioned at Sr. No. 1, a separate ground of appeal viz. ground of appeal No. 3 has been raised in the captioned appeal, whereas ground of appeal No. 2.2 has been raised with respect to items mentioned at Sr. Nos. 2, 3 6 aggregating ₹ 41.50 crore. 32. Provision for Leave Travel and Home Travel Concession represents provision towards actual payments to be made by the assessee to its employees for the travel costs incurred by them such as rail fare, air fare, etc. on availment of the leave the employees are entitled to. It is not towards any encashment of leave at the credit of the employee so as to fall within the scope of section 43B(f) of the Act. Further, provision for casual leave and sick leave represents provision for the loss of services of the employees for the period of such leave which the employees of the assessee are entitled to, but not availed during the year. The above category of leave can only be availed by them and cannot be encashed. Therefore, these provisions are also not in lieu of any leave, but in respect of services of the employees utilised in respect of the leave not availed by the employees and which leave will be availed in future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue is dismissed. 35. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing provision for privilege leave encashment. For this assessee raised the following Ground No.3: - 3. Provision for privilege leave encashment of ₹ 88,00,00,000 The learned CIT(A) ought to have allowed the deduction of ₹ 88,00,00,000 in respect of provision for privilege leave encashment. 36. We have heard rival contentions and gone through facts and circumstances of the case. We have also perused the material placed before us including assessment order, order of CIT(A) and case laws. We noted the contention of the assessee that the employees of the assessee are entitled to privilege leave encashment in terms of which they can either avail the privilege leave or encash it. Hence, it was claimed that it is entitled to deduction for provision made towards privilege leave encashment based on the following decisions: Exide Industries Ltd vs. UOI [2007] 292 ITR 470 (Calcutta) Bharat Earth Movers v/s. CIT [2000] 245 ITR 428 (SC) 37. The learned Counsel argued that the Calcutta High Court in the case of Exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own funds and investments made in tax free income. 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to restrict the disallowance under section 14A rw.r. 8D(2)(iii) by the excluding the long term investment in subsidiary/ group concerns relying on the decision of ITAT in the case of Garware Wall Ropes Ltd. (65 SOT 86), without appreciating the fact that the decision of ITAT has not been accepted by the department and appeal has been admitted by the Hon ble High Court. Since both the grounds of Assessee and Department are dealing with the same issue of disallowance under section 14A of the Act relating to the disallowance of expenses relatable to exempt income, and submissions in respect of both the appeals are dealt with together. 39. The facts are that the assessee earned dividend income from equity shares in respect of which the benefit under section 10(34) of the Act was claimed and interest on tax free bonds amounting to ₹ 325 crore which was claimed exempt in terms of section 10(15) of the Act. In the original computation of total income, the assessee suo-moto made a disallowance of ₹ 201 crore in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2066/Mum/2017 dt. 3.01.2019] [Mumbai Tribunal] 42. It was contended that no disallowance under section 14A of the Act is called for based on the judicial precedents on the subject. Even the suo-moto disallowance made by the assessee in its revised return of income ought to be deleted. With respect to the CIT(A) s direction that the disallowance u/s 14A of the Act should not go below the amount suo-moto disallowed by the assessee. It was argued that there is no provision in the Act justifying this direction of the CIT(A). Merely because a disallowance is made in the return based on a particular understanding of the law does not preclude an assessee from contesting to the contrary in the course of further proceedings and, if such contention is accepted, then, full relief ought to be given and the allowance of the same cannot be fettered in any manner. This is based on the principle that there is no estoppel against the statute and acquiescence cannot take away from a party the relief that he is entitled to, where the tax is levied or collected without authority of law. Reliance in this regard is placed on the decisions of CIT vs. Milton Laminates Ltd. (2013) 37 taxmann.com 249 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 23.12.2016 for AY 2008-09 (see pages 613 to 623 of the Paper Book - I) Reliance is also placed on the CBDT Circular No. 18/2015 dated 2.11.2015, wherein it is discussed that investments made by a banking concern are part of the business of banking and therefore, the income arising from such investments is attributable to business of banking falling under the head 'Profits and gains of business and profession . 45. It was also argued that no disallowance can be made in relation to interest expenses as the assessee s own/non-interest bearing funds far exceed the investments. Reliance in this regard is placed on the following decisions: CIT vs. Reliance Industries Limited [Civil Appeal No. 37 of 2019] [ Supreme Court] CIT vs. HDFC Bank Ltd. (2016) 383 ITR 529 (Bom.) CIT vs. HDFC Bank (2014) 366 ITR 505 (Bom.) The following decisions laying down the same principle have been referred to in the tabulation filed before the Tribunal on 25.03.2019: PCIT vs. Spanco Ltd. [ITA No. 488/2016 dt. 26.11.2018] [Bombay High Court] PCIT vs. JSW Power Trading Co. Ltd. [ITA No. 1075/2015 dt. 14.02.2018] [Bombay High Court] CIT vs. Tin Box Co. [2003] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 8D(2)(ii) of the Rules in regard to interest, is covered by the decision of Hon ble Bombay High Court in the case of HDFC Ltd. (supra), wherein it is clearly held that no disallowance can be made in the relation to interest expenses as assessee s own non-interest bearing funds far exceed the investment as details are noted above and hence, this issue of the Revenue s appeal is dismissed. 49. As regards to the issue of disallowance u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules, the administrative expenses the investment made in subsidiaries / strategic investment while computing disallowance is decided against the assessee in view of the decision of Supreme Court in the case of Maxopp Investment Ltd. (supra). However, it is to clarify that those strategic investment which have not yielded any exempt income during the year are to be excluded for the purpose of computing average value of investment. Even otherwise, now the law is settled that the investment which are giving exempt income during the year are to be considered for the purpose of disallowance u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules, i.e. the administrative expenses for the purpose of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any documentary evidence of the Registered Valuer to show the market value of the underlying assets at the time of expiry of the lease/renewal of the lease. No such documentary evidence of the Registered Valuer to show the market value of the alleged leased assets on the date of expiry of the lease/ renewal of the lease could be produced by the appellant during the appellate proceedings. It is thus clear that the lessor had no intention to recover and repossess the assets after the end of the lease period. The assets were never re possessed. The lease was certainly not an operating lease. As held in the case of Asea BrownBover Ltd V/s Industrial Finance Corporation of India (2006) 154 Taxman 512 (Supreme Court) and confirmed in Indus Ind Bank 135 lTD 165 (Special Bench) - in the appellant's case, the assets were user specific/risk and rewards incident to ownership were passed on to the lessee. The lessee bore the risk of obsolescence. The lessor was interested only in his rentals not in the asset The lease was non-cancellable. The lessor entered into the transaction only as a financier, lie did not bear the cost of repairs/ maintenance or operations. The lessor is typically a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed assets is confirmed. This ground of appeal is therefore dismissed. 52. Before us also the assessee contended that during the course of its business, assessee enters into lease agreements with various parties whereby assets were granted on lease to them. During the year under consideration, it has not entered into any new lease transactions. The assessee has claimed income-tax depreciation on the leased assets under section 32 of the Act since these assets are owned by the assessee. In the earlier years, certain lease agreements were considered as finance transaction and hence, depreciation was disallowed on these assets in the earlier years. In the year under consideration, the AO has disallowed the depreciation in respect of leased assets, where depreciation was disallowed in earlier years. The CIT(A) upheld the disallowance made by the AO following the earlier years. It was fairly agreed that this issue is decided against the assessee in its own case by the ITAT in following Orders: Order dated 26.07.2013 for assessment Year 1996-97 [ITA 5470/Mum/2002] [see pages 450 to 496 of the Paper Book - II] Order dated 29.04.2016 for assessment years 1997-98 and 1998-99 [ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) held that the assessee cannot be allowed double deduction i.e. one on provision basis and then again on actual write-off basis. The CIT(A) observed as under: - 14.3 I have considered the appellant's submissions. This is a recurring issue and this issue was considered by CIT(A) in appellant's own case for A.Y. 2007-08 which are reproduced as under: 3.11.1 This is also a recurring issue and has been decided by the CFI(A) in AY 2002-03 to 2006-07 against the assessee. The decision dated 30.03.2013 of CIT(A) for AY 2006-07 in appeal no IT-241/09-10 is placed on record. As discussed therein, the Finance Act, 2013 has inserted explanation-2 to Sec 36(1) which reads as under the removal of doubts it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub section of clause (v) of sub-section 2 the account referred to therein shall be only one account in r/o provision of bad and doubtful debts under clause (viiia) and such account shall relate to all types of advances including advances made by rural branches . This explanation, though inserted w.e.f. 01.04.2014, is clarificatory in nature. It states that proviso to clause (vii) and clause(v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by assessee, this issue is decided in favour of the assessee by the Supreme Court judgment in the case of The Catholic Syrian Bank Ltd. vs. CIT [2012] 343 ITR 270 (SC). The Supreme Court was concerned with a case where the assessee had claimed a deduction under section 36(1)(vii) of the Act pertaining to urban advances. The deduction was not allowed to the assessee on the basis that deduction under section 36(1)(vii) of the Act can be allowed only to the extent it is in excess of the provisions created and allowed as a deduction under clause (viia). The Supreme Court held that if the bad debts actually written off in the accounts of the assessee-bank represents only debts arising out of urban advances, allowance thereof is not affected, controlled or limited in any way by the proviso to section 36(1)(vii) of the Act. The relevant extract of the judgement of the Supreme Court is reproduced below: 41. To conclude, we hold that the provisions of Sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. The bad debts written off in debts, other than those for which the provision is made under clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by assessee on account of reducing depreciation/ taxing appreciation in the value of securities held as Available For Sale(AFS) and Held For Trading(HFT) category. For this assessee has raised the following ground No. 7: - 7. Depreciation on securities The learned CIT(A) erred in upholding the action of the Assessing Officer in reducing deprecation/ taxing appreciation in the value of securities held as Available for Sale (AFS) ad Held for Trading (HFT) category. 61. Brief facts are that as per assessee from FY year 2004-05 the Bank has been valuing investments in 'Available for Sale' (AFS) and 'Held For Trading' (HFT) in books after netting off classification-wise depreciation and appreciation, computed scrip-wise and providing for net deprecation in each classification while ignoring net appreciation, as required by RBI guidelines. However, for tax purposes, investments in AFS and HFT categories are being valued scrip wise and depreciation, if any, was provided scrip wise while ignoring appreciation. Valuation of investments in AFS and HFT categories has consistently been done scrip-wise for tax purposes in earlier years. Therefore, for tax purposes v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains on stock are not to be brought to the tax net. Reliance in this regard is placed on the decision of the Supreme Court in the case of Chainrup Sampatram vs. CIT [1953] 24 ITR 481 (SC), wherein it is held that profit cannot arise out of the valuation of the closing stock . The relevant extract of the judgement of the Supreme Court is reproduced below: While we agree with the conclusion that no part of the profits of the firm in the accounting year can be said to have accrued or arisen at Bikaner, the reasoning by which the learned Judges arrived at that conclusion seems to us, with all respect, to proceed on a misconception. It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o value the closing stock at cost. That will eliminate entries relating to the same stock from both sides of the account. To this rule custom recognises only one exemption and that is to value the stock at market value if that is lower. But on no principle can one justify the valuation of the closing stock at a market value higher than cost as that will result in the taxation of notional profits the assessee has not realised. [para 28] 65. In Sanjeev Wollen Mills vs. CIT [2005] 279 ITR 434 (SC), the Supreme Court was concerned with a case where the assessee had valued its finished goods at market value. For assessment year 1992-93, the opening stock was valued at ₹ 90 per kg (market price as on 1.4.1991 was ₹ 98 per kg) and the closing stock at ₹ 130 per kg. For assessment year 199394, the opening stock was valued at ₹ 130 per kg and there was no closing stock. The assessee returned a loss of ₹ 54,420 for the second year. The AO held that the profits were artificially inflated in assessment year 1992-93 to claim higher deduction under section 80HHC of the Act. The Supreme Court held that the profit earned by valuing finished goods is notional imagi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks was netting off the depreciation in its securities against appreciation in other securities while for tax purpose, the assessee has been claiming gross depreciation that is without netting of the appreciation in other securities held as a part of investment. The Bombay High Court has dismissed the appeal of the Revenue and has decided the issue in favour of the assessee. It is argued that the facts of the present case are exactly same as in the aforesaid case of Union Bank of India. This issue stands covered by the judgement of the jurisdictional High Court. The facts of the assessee s case and the facts in the decision of the Bombay High Court in the case of Harinagar Sugar Mills Ltd. vs. CIT [1994] 207 ITR 901 (Bombay), relied by the AO are different. In the aforesaid decision, the assessee had changed the method of valuing stock in the year under consideration, whereas in the assessee s case, there is no change in the method of valuation. Also, in that case, sugar was valued differently by bifurcating the stock into 'levy sugar' and 'free sugar'. The Court s conclusion is based on the fact that there was no justification for bifurcation of sugar between free a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of Sanjeev Wollen Mills vs. CIT [2005] 279 ITR 434 (SC) and others discussed supra. Hence, we are of the view that this disallowance of depreciation/ reducing of depreciation on appreciation in the value of securities held as available for sale and held for trading category are allowable. We direct the AO accordingly. 69. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing deduction claimed by assessee under section 36(1)(viia) of the Act being the amount of standard assets. For this assessee raised the following ground No. 8: - 8. Deprecation under section 36(1)(viia) of ₹ 566,96,68,537 8.1 The learned CIT(A) erred in holding that the provision for standard assets amounting to ₹ 566,96,68,537 is to be excluded for determining the deduction under section 36(1)(viia). 8.2 The learned CIT(A) erred in not appreciating that even in respect of assets that are classified as standard assets, a part of the debts are doubtful of recovery and accordingly qualifies for deduction under section 36(1)(viia). 70. Brief facts are that the assessee is claiming deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of abundant caution. We noted from the provisions that the assessee is required to make a provision on all its debts ranging from 0.25% to 100% depending upon the categorization of the loan in terms of the guidelines issued by RBI. The provision on debts made by the assessee is in line with the RBI guidelines and section 36(1)(viia) of the Act does not have a requirement that the provision for debts should be in respect of specified debts only. Section 36(1)(viia) of the Act provides for a deduction to the bank in respect of any provision made for bad and doubtful debts subject to certain ceiling. It does not specify the methodology for calculation of provision for bad and doubtful debts. The banks are required to make provision for bad and doubtful debts in accordance with the RBI guidelines. All the loan assets are initially classified as Standard . Later on depending upon the problems arising, if any, and symptoms of sickness shown including delays in the repayment of the principal and interest, deterioration of security, etc., they may be shifted to other categories. A provision made on any loan assets is a provision for bad and doubtful debts irrespective of the category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity that the provision as made is justified with reference to the debts considered by it as bad and doubtful, we see no reason as to why the same cannot be allowed. The matter is accordingly restored back to the file of the A.O. for fresh determination by issuing definite findings of fact. Even as the primary onus would be on the assessee, the A.O. cannot substitute his own judgement with regard to the risk assessment qua a particular asset and, correspondingly, the provision in its respect. His purview would be to examine the reasonableness of the assessee s claim in light of the facts and circumstances qua each asset/s in respect of which provision is made. In arriving at our decision, we have taken a holistic view of the matter, placing due emphasis on the words provision preceding the words for bad and doubtful debts as well as the words not exceeding occurring in the section, and which stand highlighted for the purpose. We decide accordingly. 74. In view of the above discussion, arguments of both the sides, we are of the view that the assessee is eligible for claim of deduction u/s 36(1)(viia) of the Act on standard assets and this issue is covered by Tribunal s deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f RBI guidelines, on accrual basis. The same is offered to tax in the year in which the same is received and credited to the profit and loss account in terms of the RBI guidelines. Presently, the period to recognise an advance as a NPA as per RBI guidelines is where interest and/ or instalment of principal remained overdue for 90 days whereas as per Rule 6EA, the same is 180 days. The AO has brought to tax the notional interest on sticky advances having irregularities for the period between 90 days to 180 days on accrual basis, relying on section 43D of the Act and rule 6EA of the Rules. The CIT(A) has upheld the disallowance made by the Assessing Officer following the directions of the DRP for the assessment year 2012-13. 79. The Revenue before the Tribunal has emphasized on the applicability of the criteria prescribed as per rule 6EA and that the interest on NPAs cannot fall under the exception provided in clause (e) of rule 6EA. But, the assessee argued that the action of the lower authorities cannot be sustained due to the following three reasons viz., a. section 43D of the Act would not apply in cases where interest is neither received nor credited to the profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the interest on such NPAs and, accordingly, the addition made cannot be sustained. Hence according to assessee the issue stood covered by the first proposition in terms of the Bombay High Court in assessee s favour and hence, no further submissions were made on other two propositions. 82. We noted that this issue is squarely covered by the decision of Hon ble Bombay High Court in the case of American Express Bank Ltd (supra), wherein it is held that there is no credit entry in the books of the account in respect of the interest on such NPAs, no addition can be made. Further, even the Mumbai Tribunal in the case of American Express Bank Ltd. (supra) has considered this issue and held that where the AO has not contested that the policy adopted by the assessee is not in accordance with RBI guidelines, the incidence of taxation of interest on bad and doubtful debts will be either when the same is credited to the profit and loss account for the year or in the year in which it is actually received. Mere crediting of the interest to a reserve cannot be said to be an incidence by which the said interest could be charged to tax. Hence, we delete the addition of interest incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical in the present case before us and hence, respectfully following the same, we delete the addition of interest income from non-performing Investments made by the AO. This issue of assessee s appeal is allowed. 87. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in not allowing claim of the Bank in respect of non-taxability of recovery of Bad Debts written off in earlier years. For this assessee raised the following Ground No.11: - 11. Recovery of bad-debts written off in earlier years 11.1 The learned CIT(A) erred in not allowing the claim of the Bank in respect on non-taxability of recovery of bad debts written off in earlier years. 11.2 The learned CIT(A) erred in not directing the Assessing Officer to not to tax the recovery of bad debts written off in terms of section 41(4), as the appellant had not claimed a deduction under section 35(1)(vii). 11.3 The learned CIT(A) erred in not directing the Assessing Officer to verify and allow the claim of the appellant. 88. Brief facts are that during the year under consideration the assessee has recovered bad debts written off in earlier years, in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances. Each of the sub-sections deals with different and distinct topics and one cannot read recoupment under one sub-section into another. We have considered the decision relied on in this regard of Supreme Court in the case of Nectar Beverages (P.) Ltd. vs. DCIT [2009] 314 ITR 314 (SC) wherein the Supreme Court has dealt with the specific section 41(2) of the Act for taxing balancing charge versus taxing the same under section 41(1) of the Act and has concluded that section 41(1) of the Act shall not be applicable. 91. As the aspects of bad and doubtful debts is dealt with specifically under section 41(4) of the Act, as laid down by the Supreme court in Nectar Beverages (supra), section 41(1) of the Act is not applicable in case of the assessee. Further, the primary condition to be satisfied for taxing an amount as deemed income under section 41(1) of the Act is that a deduction/allowance should have been claimed by the assessee in respect of a loss, expenditure or trading liability. A deduction under section 36(1)(viia) of the Act is not for a loss, expenditure or trading liability, but for a provision for bad and doubtful debts. We noted that the learned CIT Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich India has a tax treaty. The CIT(A) held as under:- 23.2.4 I have considered the appellant's submissions. Here the additional ground filed by the appellant is considered in view of decision of Mumbai High Court in the case of Pruthvi Brokers vs. CIT 349 ITR 336. In the above case, it is clearly held that if the facts are verified by the AO, this legal claim may be considered in the appellant's case. Regarding this issue the appellant had not submitted any facts and quantified the amount which falls under this category and what is the amount received by the appellant and this amount was neither verified by the AO during the assessment proceedings nor the facts are not placed before me, claim of the appellant cannot be allowed. Similar issue was decided against the Bank by the CIT(A) for AY 2007-08. 95. Now before us assessee claimed that income earned by the branches of the assessee located outside India is not to be taxed in India in light of the tax treaties between India and the countries where the branches are located, as the income has been subject to tax in foreign countries. The details of the income earned by foreign branches were submitted to the AO vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal meaning of term is any expression or phrase which has a fixed or known meaning in art, science, or profession. Accordingly, it is submitted that sale, transfer, gift, etc. could be regarded as terms; however may be taxed cannot be regarded as a term. Hence, the said notification, is not applicable The Notification does not define any term ; it only gives a result / clarification. Section 90(3) empowers the Central Government to define any term which is not inconsistent with the provisions of the Incometax Act, 1961 or the tax treaty. As the Supreme Court has already interpreted the meaning of the phrase may be taxed in the case of CIT v/s. PAVL Kulandagan Chettiar [267 ITR 654], the notification cannot give a meaning to may be taxed which is inconsistent with the views of the Supreme Court. The Notification cannot survive as it directly contradicts the judgment of the Supreme Court. 98. Without prejudice to the above argument made was that even if it held that the above notification is applicable, the same can be said to be applicable prospectively (i.e. from assessment 2009-10 onwards) and, hence, is not applicable for the year under consideration. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for standard assets of ₹ 566.97 crore), in accordance with the decision of the Supreme Court in the case of Vijaya Bank (Supra). The assessee claimed that if the aforesaid claim is allowed, the deduction under section 36(1)(viia) of the Act as allowed by the AO may be withdrawn. In relation to the Departmental representative s stand on nonadmission of additional grounds by relying on the decision of the Bombay High Court in the case of Ultratech Cement Ltd. Vs. ACIT [2018] 408 ITR 500 (Bombay), the Ld. Counsel of assessee argued that whether or not to allow an additional ground to be raised before the appellate authority is to be decided by the appellate authority in exercise of its discretion considering the facts and circumstances of the case before it. 103. We noted that in the assessment years 1996-97 to 199899, the assessee had raised a similar additional ground of appeal. The said ground of appeal was admitted by the Tribunal in those years and the matter was restored to the Assessing Officer. The Revenue has not filed an appeal challenging the admission of the additional ground raised by the assessee in the AYs 1996-97 to 1998-99. Hence, according to us the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of deduction under section 36(1)(vii) as per Supreme Court s ruling in the case Vijaya Bank. 106. Hence, we are of the view that this issue needs to be set aside to the file of the AO and AO will decide the issue after examining the facts afresh. Hence, this issue of assessee s appeal is allowed for statistical purposes and matter remanded back to the file of the AO. 107. The next issue in this appeal of revenue is as regards to the order of CIT(A) deleting the addition made by AO on account of interest on securities on accrual basis as the assessee is following mercantile system of accounting. For this revenue has raised the following Ground No. 2:- 2. On the facts and circumstances of the case, in law, the Ld. CIT(A) has erred in allowing the assessee s plea that the interest income on securities has to be taxed on the due basis only without appreciating that as per the mercantile system of accounting followed by the assessee, interest on securities has to be taxed on accrual basis. 108. Brief facts relating to this issue are that the AO made addition in respect of interest of securities on accrual basis instead of due basis of ₹ 3,804,07,30,799/-. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that interest on securities is payable six-monthly on the coupon date i.e. on 30th June and 31st December. While closing the books as on 31st March, there is interest on securities of 3 months i.e. from 1st January to 31st March is accounted for. However, the assessee is not eligible to receive such interest on 31st March, as the payment of interest accrues and becomes due only on the coupon date i.e. 30th June. It is the practice of the assessee to account for the interest on securities for the period upto 31st March while arriving at the book profit on the basis that interest accrues from day to day for accounting purposes. However, in the return of income filed for tax purposes, the interest on securities is taxed on accrued and due basis since the right to receive interest on securities arises on the due date only which falls after the accounting year. 110. The AO has taxed such interest which has neither accrued nor become due as on 31st March 2018 of ₹ 3804,07,30,799/-. The CIT(A) deleted the disallowance following Tribunal s order in assessee s own case for AYs 1991-92 to 1996-97 and the CIT(A) order for AY 2007-08. The Revenue before the Tribunal emphasized o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case, the courts have held that no real income has accrued to the assessee. Reliance in this regard is placed on the decision of the Supreme Court in the case of CIT vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC), wherein the benefit of an entitlement to make duty free imports could not be taken until the goods are imported and made available for clearance, also there was no liability on part of the other party to pass on the benefit to the assessee and, hence, it was held that only hypothetical income had accrued to the assessee. The Court has equated the right to receive with a corresponding liability to pay which does not exist in the present case as the obligation of the issuer to pay arises only on the coupon date. The learned CIT DR also relied on the decision of the Bombay High Court in the case of Taparia Tools Ltd. Vs. JCIT [2003] 260 ITR 102 (Bombay). It is to be clarified that the matching concept theory referred by the CIT DR in the decision of the Bombay High Court in the case of Taparia Tools Ltd. (supra) has been reversed by the Supreme Court in the case of Taparia Tools Ltd. Vs. JCIT [2015] 372 ITR 605 (SC). 114. We noted that this ground of appeal is cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the appellant and which are as under: . 5.4 In view of the above decision of CIT(A) and ITAT, claim of the appellant is allowed. Disallowance in relation to BPI is against the law and question of making any addition in relation to BPI either protective or substantive does not arise. This ground of appeal is allowed. 117. We noted that BPI refers to interest on Government and other approved securities relatable to the period from last due date (upto which interest was paid) till the date of purchase or sale. Thus, when the assessee purchases a security, it pays a price which is calculated having regard to two components, viz., the market price of security plus BPI to the seller. In this case, the assessee treats the BPI paid as expenditure. Similarly, when the assessee sells a security, such interest is treated as income of the assessee. 118. The Revenue before us emphasized on the fact that interest income is offered to tax on due basis and, hence, the corresponding expenses cannot be allowed, on the basis of the matching concept. 119. We noted that this ground of appeal is covered in favour of the assessee by the order of the Tribunal in its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of quantification of these expenses. 123. Assessee argued that the department in its appeal has only contested that the said expenses are contingent in nature. It is not the case of the AO that the said provision is not on a reasonable basis. Therefore, the contentions raised by the Department Representative on the basis of quantification are not justified and cannot be accepted. These costs are part of employee cost and, hence, should be allowed as deduction as normal business expenditure. These costs are incurred based on the employee guidelines and have been quantified on a scientific basis as per actuarial valuation. As submitted in Assessee s appeal ground 2.1 to 2.3, the said provision is an ascertained liability, determined based on reasonable certainty and hence, clearly allowable. Reliance in this regard is placed on the decision of the Supreme Court in the case of Bharat Earth Movers Vs. CIT [2000] 245 ITR 428 (SC), wherein it is held that the liability is not a contingent one if the liability has been incurred during the accounting year and an estimate with reasonable certainty can be made, even if the liability is to be discharged at a future date. We accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees, previous Pay Commission's reports of public sector employees, union demands and other relevant factors. The Tribunal also held that with the expiry of one wage settlement or agreement, invariably, there is a time lag when deduction cannot be termed as contingent vision or rates of revision would be ..the quantification, however, had not happened. In view of these facts, this Court holds that there is no infirmity with the reasoning of the Tribunal about the deduction claimed on account of wage revision being permissible. In the above case Delhi High Court held that though it is not fully quantified, liability cannot be considered as contingent and provision for wage revision was based on past experience, interim Pay Commission of Government employees, previous Pay Commissions reports of public sector employees, union demands and other relevant factors. The Tribunal also held that with the expiry of one wage settlement or agreement, invariably, there is a time lag when another fresh wage revision agreement is negotiated and entered. Though it is not fully quantified, this amount is real in nature and claim of the organization has to be allowed. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a deduction under section 37(1) of the Act. Reliance in this regard is placed on the following: CIT vs. Mahindra Ugine Steel Co. Ltd. [2000] 245 ITR 428 (SC) (Bom.) [see para 2 on page 2] CIT vs. United Motors (India) Ltd. [1990] 181 ITR 347 (Bombay) (Bom.) [last para page 3-4] 128. In fact on exact similar issue of deductibility of wage revision relating to the same Agreement, pending finalisation of wage settlement, is also decided in favour of the assessee by the Tribunal in the case of other Bank s. In the case of Bank of India vs. DCIT [ITA No. 3082/Mum/2015] [Mum. Trib] the assessee had claimed a deduction for provision created toward wage revision arrived at based on indicative increase for assessment year 2009-10. The Mumbai Bench of the Tribunal allowed the claim on the basis that the provision was for services rendered by the employees and there was no doubt that the assessee has to make payment once the negotiations were over. We may mention that Bank of India is also a part of the same Bipartite settlement as in the present case of the assessee. 129. Similarly, in the case of Bank of Baroda [ITA/4619/Mum/2012] [Mum. Trib] the Mumbai Tribunal held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal is squarely covered in favour of the assessee in its own case for assessment years 1992-93 to 1994-95 by the order of Tribunal dated 19.05.2008, which was followed by the Tribunal in subsequent assessment years: - Order dated 17.09.2009 for assessment year 1995-96 - Order dated 26.07.2013 for assessment year 1996-97 - Order dated 31.01.2018 for assessment year 1999-00 133. Further, the Bombay High Court on an appeal filed by the Revenue for the AY 1996-97, upheld the decision of Tribunal, vide its order dated 01.08.2016. The facts of the case in the year under consideration are same as the facts on the earlier years. In view of the above, this ground of appeal is covered in favour of the assessee vide the aforementioned orders of the Tribunal and Bombay High Court. The payment for reservation of seats was done by the assessee for its employees under the assessee s Staff Welfare Scheme and hence, should be allowed as normal business expenditure. This issue is also covered by the decision in the case of Mahindra and Mahindra Ltd. vs. CIT [2003] 261 ITR 501 (Bombay), wherein it was held that payment made to schools where children of its employees studied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is dismissed. 138. The next issue in this appeal of revenue is as regards to the order of CIT(A) deleting the addition made by AO on account of disallowing the discount on issue of Employee Stock Option. For this revenue has raised the following Ground No. 10:- 10. On the facts and circumstances of the case, the CIT(A) has erred in allowing the discount on issue of Employee Stock Purchase Scheme in accordance with the principle laid down by the Bangalore Special Bench in the case of Biocon Ltd. (IIA No. 368 to 371 1206/Ban/2010), when the decision has not been accepted and further appeal has been filed before the Karnataka High Court on this issue. 139. Brief facts are that the Central Board of the assessee has adopted the Employees Share Purchase Scheme (the Scheme), duly approved by the Central Government, and accordingly has approved the offer of 86,17,500 equity shares of ₹ 10 each at a premium of ₹ 1580 as part of its rights issue to the employees of the Bank including the Chairman and Managing Directors. The Scheme is in accordance with the provisions of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sine qua non for becoming eligible to avail the benefit under the scheme. Once the service is rendered for one year, it becomes obligatory on the part of the company to honour its commitment of allowing the vesting of 25 per cent of the option. It is at the end of the first year that the company incurs liability of fulfilling its promise of allowing proportionate discount, which liability would actually be discharged at the end of the fourth year when the options are exercised by the employees. 20.4 In view of the above two decisions, here the claim of the appellant for provision of Employee Stock Purchase Scheme is allowed. 140. We noted that the assessee during the year created a provision for Employee Stock Purchase Scheme amounting to ₹ 11 crore in accordance with SEBI Guidelines. The AO disallowed the claim of the assessee on the basis that the same is contingent in nature. The CIT(A) deleted the disallowance made by the AO. The Revenue before the Tribunal emphasised that the same is contingent in nature and that the deduction was claimed by way of a note by the assessee and not by filing a revised return. The facts were submitted before the AO vide letter dated 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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