TMI Blog2021 (7) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1996-97. However, both the leaned Counsels for the parties conceded that that identical issue raised in this ground by the assessee is now settled in favour of the assessee and against the Revenue by the decisions of the Tribunal rendered in assessee s own case in as 2000-01, 1984-85, 1996-97, and 1999-2000 - we set aside the impugned order passed by the learned CIT(A) by allowing the ground raised by the assessee - assessee also brought to our notice that the Assessing Officer has given effect to the order of the Tribunal and has allowed the deduction for deferred payment guarantee commission for the assessment year 1984-85 to 1989-90 and 1996-97. Consequently, the ground raised by the assessee is decided in favour of the assessee. Disallowance on account of depreciation on securities - HELD THAT:- We have heard both the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue has been decided by the Tribunal and has allowed the claim of depreciation on securities in the assessment year 2000-01, 1996-97, 1997-98, 1998-99, 1999-00. Consistent with the view taken therein, we set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI has taken note of it and we noticed that so many banks has established its own insurance business along with the banking business. Some of them has utilised their own brand name. But some of the banks have entered Joint Venture with the international big players in the insurance business. In this case, the assessee has selected Cardif S.A. The international players will look for readymade establishment to establish their business. The assessee is providing its huge network facility to establish this new line of business along with its regular banking business. The assessee received the onetime premium towards this additional facilities and advantage which it was willing to offer to the other partner. Therefore, in the changing business module in the banking sector, it can only be treated as charges for facilitation offer or advantage for establishing the insurance business in India. Therefore, it cannot be said that it is for non-compete but it is for the advantage offered for the Joint Venture business. Therefore, we are inclined to sustain the addition made by the AO. Thus, ground no.7, raised by the assessee is dismissed. Disallowance on account of road show, legal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions made on account of foreign offices - HELD THAT:- Tribunal in assessee s own case [ 2020 (3) TMI 1374 - ITAT MUMBAI ] wherein the Co-ordinate Bench Para-26 of its order has restored the issue to the file of the Assessing Officer directing him to decide the issue afresh after following the directions given in the order dated 31st January 2018 passed in assessee s own case for the assessment year 1999- 2000. Consistent with the view taken therein, we set aside the order of the first appellate authority and restore the issue to the file of the Assessing Officer for deciding the issue afresh. Levy of interest under section 234D - HELD THAT:- This issue covered against the assessee and in favour of the Revenue by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Indian Oil Corporation Ltd. [ 2012 (9) TMI 517 - BOMBAY HIGH COURT ] wherein the Hon ble Court has decided identical issue in favour of the Revenue and against the assessee. Deduction for write-off of the bad debts under section 36(1)(vii) - HELD THAT:- Tribunal rendered in assessee s own case as well as the decision of the Hon'ble Supreme Court in Vijaya Bank [ 2010 (4) TMI 46 - SU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines, across the banks. Therefore, the financial assets and liabilities are valued only based on the above master circular. The status of valuation will keep changing year on year. Therefore, there will be up and down on the book result of the banks, which will iron out over the period. It is not expected to revalue the opening and closing stock every year, which will give absurd results. This aspect was already considered by the RBI and the judiciary in the past. It was explained clearly in the decision of the Hon ble Karnataka High Court in CIT v/s Corporation Bank Ltd. [ 1988 (8) TMI 90 - KARNATAKA HIGH COURT ] The bank s financial results are completely different from the regular business results since they are bound by the guidelines of the RBI and the new method of valuation adopted by the banks, henceforth applied on a permanent basis in the later years. Therefore, the contention of the tax authorities are not proper and not as per judicial precedence. Accordingly, the ground raised by the assessee is allowed. Disallowance of payment made to Federal Reserve Bank of New York and State of New York Banking Department due to the payment being penal in nature - HELD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign branches i.e., whether or not the income earned is liable to be taxed in India - HELD THAT:- Tribunal in assessee s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01 and 2008-09, wherein the Tribunal following the order 3rd January 2014, passed in assessee s own case for the assessment year 1996-97 [ 2014 (1) TMI 1887 - ITAT MUMBAI ] restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. Disallowance on account of staff welfare expenses, disallowance of deduction on account of loss in respect of amortization of securities held in HTM category and taxing of interest on securities - HELD THAT:- As identical issue has also been decided by in assessee s own case for the assessment year 2001-02, vide Para-44 of this order, wherein, the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and against the Revenue by the decisions of the Tribunal rendered in assessee s own case in assessment years 2008-09, 1996-97, 1995-96 and 1991-92. The relevant findings (vide Para-119/Page-110 111) of the Tribunal in State Bank of India v/s DCIT, ITA no. 3644 4563/Mum./2016, order dated 3rd February 2020, for the A.Y. 2008-09. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) by allowing the ground raised by the assessee. We also observe that the appeal filed by the Revenue before the Hon'ble Jurisdictional High Court for the assessment year 1996-97, was also dismissed vide its order dated 1st August 2016. Thus, ground no.1, is allowed. 6. Ground no.2, raised by the assessee relates to deferred payment guarantee commission of ₹ 64,82,28,164. 7. We have heard both the parties and perused the material on record including the case laws relied upon by the parties. The leaned Sr. Counsel for the assessee submitted that the Assessing Officer has given effect to the order passed by the Tribunal and has allowed the deduction for the deferred payment guarantee commission of the assessment year 1984-85 to 1989-90 and 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the submissions of the learned Sr. Counsel for the assessee. 13. Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue in respect of disallowance on account payments for scientific research is decided against the assessee and in favour of the Revenue by the decisions of the Tribunal rendered in assessee s own case in assessment year 2000-01, 1997-98, 1998-99 and 1999-2000. Consistent with the view taken therein, we uphold the order of the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.4, is dismissed. 14. Ground no.5, relates to disallowance of ₹ 337,18,21,921, for earning exempt income under section 10(15)(iv)(c), 10(15)(iv)(f), 10(15)(iv)(h), 10(23G) and 10(33) by applying provisions of section 14A of the Act. 15. The learned Counsel for the assessee submitted that the loan granted/investments made out of own funds and non-interest bearing funds cannot attribute to disallowance in relation to interest expenditure and no disallowance can be made under rule 8D(2)(ii), as the assessee has own/non-interest b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of the Assessing Officer and similarly in the year 1997-98, 1998-99 and 1999-2000. However, he submitted that the Assessing Officer has not granted any relied by giving effect to the order of the Tribunal for the assessment year 1997-98 and 1998-99 and the above orders were not speaking order. Accordingly, he prayed that similar to the finding given by the Tribunal in preceding assessment years, the issue may be decided in this year also and the Assessing Officer may be directed to give a clear decision in this regard. 18. The learned Departmental Representative relied upon the order of the authorities below. 19. Considered the rival submissions and perused the material on record. We notice that the provisions of rule 8D was introduced only from the assessment year 2008-09 and strictly the rules are not applicable in the current assessment year. However, following the findings of the Co-ordinate Bench decisions rendered in assessee s own case which has directed the Assessing Officer to estimate the disallowance under section 14A of the Act at one percent of the exempt income. Keeping in view the consistency maintained by the Tribunal in assessee s own case, we are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into a joint venture with the assessee and the payment made by the Cardif S.A. was a onetime payment. He brought to our notice the provisions of clause-2.2 of the joint venture agreement placed at Page-112 of the Paper book which specifies that either party will carry on life BUSINESS IN India except through SBI Life Insurance Co. Ltd. Therefore, such payment was to be insured that the business of SBI Life Insurance can be protected from competition. For the above proposition, he relied upon the following case laws:- (i) Best Co., 60 ITR 11 (SC); (ii) Kettlewell Bullen Co. Ltd., 53 ITR 261; (iii) Gi/landers Arbuthnot Co. Ltd., 53 ITR 283; (iv) Guftic Chem Pvt. Ltd., 198 Taxman 79 (SC); (v) Rohitasava Chand, 306 ITR 242, etc. 24. Further, he submitted that the provision of section 28(va) of the Act are not applicable to assessment year 2001-02. The said provisions are applicable w.e.f. 1st April 2003. Therefore, the above Provision is not applicable for this assessment year. In support of this Proposition, he relied upon the following decisions:- (i) Vikram S. Agrawal, 14 SOT 515 (Mum.); (ii) Ashit M. Patel, 96 7711 439 (Mum.); and (iii) Kaushal N. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business with the collaboration of Cardif S.A. to form a new venture. The assessee will facilitate to establish the insurance business along with its regular business of banking. The existing and prospective customers are targeted and encouraged to take insurance policy. The concept itself bancasurrance . It means Insurance company in this case is Joint Venture, ties up with the assessee branches, the branches targets existing and prospective customers not only for banking facilities but also for insurance. These activities are carried out simultaneously with the banking facilities. The Joint Venture gets added advantage to expand their business with the existing facilities of vast network of the assessee. The Joint Venture i.e., Cardif S.A. paid the premium not only for selecting it for Joint Venture partner but for getting ready made platform for establishing the business and huge advantage to the Joint Venture partners and Joint Venture to establish its business. The payment is more towards the facilitation than the brand value. In fact, there is no doubt that the assessee carries the huge brand value since it is in the interest of Joint Venture not to compete with each other. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue are similar to the assessment year 1999-2000. Consistent with the view taken therein as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) and allow the ground raised by the assessee. Ground no.8, is allowed. 30. Ground no. 9, relates to write-off of bad debts under section 36(1)(vii) of the Act in respect of non-rural advances. 31. After hearing both the parties and on perusal of the record in the light of the decisions relied upon by the learned Sr. Counsel for the assessee, we find that the issue for our consideration is identical to the issue decided by the Co-ordinate Bench of this Tribunal rendered in assessee s own case wherein the Tribunal has decided the issue against the assessee and in favour of the Revenue in assessment year 2008-09. Consistent with the view taken therein as aforesaid, we uphold the order passed by the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.9, is dismissed. 32. Ground no.10, relates to the disallowance of ₹ 1474,31,07,529, on account of doubtful debts under section 36(1)(viia) of the Act. 33. Considered the submissions and perused the material on record in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Revenue by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Indian Oil Corporation Ltd., [2012] 25 taxmann.com 284 (Bom.), wherein the Hon ble Court has decided identical issue in favour of the Revenue and against the assessee. Since the issue is squarely covered against the assessee, consistent with the view taken by the Hon'ble Jurisdictional High Court as aforesaid, we do not have any hesitation to uphold the order of the learned CIT(A) on this issue by dismissing the ground raised by the assessee. Thus, the assessee fails on ground no.12. 38. The assessee has also raised additional grounds for our adjudication and these additional grounds are being disposed off accordingly. 39. Additional ground no.1, raised by the assessee relates to deduction for write-off of the bad debts under section 36(1)(vii) of the Act as per the judgment of the Hon'ble Supreme Court in Vijaya Bank Ltd. v/s CIT, [2010] 323 ITR 166 (SC). 40. Having considered the rival submissions and having perused the material on record in the light of the decisions of the Tribunal rendered in assessee s own case as well as the decision of the Hon'ble Supreme Court in V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree that identical issue has been consistently decided by the Tribunal in assessee s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01 and 2008-09, wherein the Tribunal following the order 3rd January 2014, passed in assessee s own case for the assessment year 1996-97 in M.A. No. 371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.3, raised by the assessee is allowed for statistical purpose. 45. In the result, assessee s appeal being ITA no.4409/Mum./2011, for A.Y. 2001-02 is partly allowed for statistical purposes. ITA No. 4656/Mum./2011 Revenue s Appeal-A.Y. 2001-02 46. Ground no.1, raised by the Revenue relates to deletion of addition on account of payment made to var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 51. Ground no.1, raised by the assessee relates to deferred payment guarantee commission of ₹ 43,78,18,454. 52. We have heard both the parties and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the related facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.2, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-6 above, we have decided the issue in favour of the assessee and against the Revenue. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) on this issue and allow the ground no.1, raised by the assessee. 53. Ground no.2, relates to disallowance of depreciation on matured investments of ₹ 15,28,05,239. 54. Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue in respect of disallowance on account of depreciation on matu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank Ltd., 174 ITR 616 (Kar.). 59. The Assessing Officer, however, did not accept the explanation of the assessee for the following reasons:- (i) The bank has been valuing the scrips in the HTF category at market place. (ii) The Appellant's reliance on the decision in the case of Chainrup Sampatram v/s CIT 24 ITP 481 (SC), wherein it is stated unrealized profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following yearn account in a business that is contirnhing are not brought to charge as a matter of practice is misplaced. The Appellant has itself taken into account the appreciation in stock value in the earlier years. As a consequence of this, the opening stock of the HfT category of the current year i.e, FY 2001-02 will reflect a higher value and is not comparable with the opening stock. (iii) Opening stock cannot be valued in a manner different from the valuation of the closing stock; both have to be valued on the same principle. (iv) The RBI Circular was necessitated by a change in market conditions and thus the prudential norms requiring creation of the IFT was being reviewe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was added back to the total income of assessee. The assessee being aggrieved, filed appeal before the appellate authority. 61. The learned CIT(A) upholding the order of the Assessing Officer dismissed the ground raised by the assessee by observing as follows:- 8.3 I have considered the submissions of the Appellant and the assessment order. As I see, the main issue here is twofold. i) Whether or not the change violates the principles of accounting consistency? ii) What as the scope and import of the RBI guidelines? The answers to the questions make we agree with the Assessing Officer Coming to the first question, I find that the change leads to a major accounting inconsistency in that during the same accounting year, the opening stock and the Closing stock are being valued differently on different principles. This is highly anomalous In this respect, the Assessing Officer's reliance on the decision in the case K. G. Khosla Co. Pvt. Ltd. v/s CIT. 99 ITP 574 (Delhi) is very apt and appropriate. It is to be noted that this anomaly being there, the Appellant's accounts will also not be able to give the true and fair view of the statements of affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na fide or otherwise is also immaterial when the change violates some basic accounting principles. 8.3.3 In line with the foregoing, I find the action of the Assessing Officer justified. It is confirmed and the ground of appeal is dismissed. 62. Considered the rival submissions and perused the material on record. We notice that the RBI has modified the method of valuation of investments held for trading. Based on the above guidelines, the assessee has changed the method of valuation from market value to book value or market value whichever is lower. As per the DBOD circular, it was advised to the assesse to ensure that the unrealized gains if any on valuation of investment portfolio are not taken to the income or to investment fluctuation reserve (IFR) account. Based on the above guidelines of the RBI, the assessee revalued its investment Portfolio on 31st March 2002. Based on the above, the value of the closing stock was appreciated, which according to the assessee it is unrealized appreciation. Even the RBI DBOT Circular direct the assessee not to account for if there is any appreciation in valuation as income or creation of IFR. The tax authorities rejected the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar, therefore, on this issue also, we are inclined to direct the Assessing Officer to estimate the expenditure under section 14A of the Act at the rate of one percent of the exempt income. Accordingly, this ground no.5, is allowed in terms indicated above. 65. Ground no.6, relates to depreciation of ₹ 164,55,89,293, on account of leased assets. 66. Both the parties have been heard and material perused in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.6, raised by the assessee in its appeal being ITA no.4409/Mum./2011, for the assessment year 2001-02, vide Para-17 above, we have decided the issue against the assessee and in favour of the Revenue. Consistent with the view taken therein, We uphold the order of the learned CIT(A) by dismissing the ground no. 6, raised by the assessee. 67. Ground no.7, relates to disallowance of broken period expenses of ₹ 151,03,18,584. 68. We have heard both the parties and perused the material on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Reserve Bank, New York and the State New York Banking Dept., an amount of ₹ 36,60,00,000. These amounts were payments for violation of certain requirements. In this context, the Assessing Officer held that a penalty imposed for breach of law during the course of trade cannot be treated as a commercial loss. According to the Assessing Officer, this view was in line with the decisions of various Courts that infraction of law is not a normal incident of business and, therefore, no expenses which are claimed by way of penalty for beach of law can be an amount wholly and exclusively made for the purpose of business. Reliance was placed on the decision in the case of Swadeshi Cotton Mills, 233 ITR 199 (SC). The assessee was aggrieved by the order of the Assessing Officer, hence, filed appeal before the first appellate authority. 74. Before the learned CIT(A), the assessee submitted that in terms of order of assessment of civil money penalty and monetary payment issued by the Board of Governors of the Federal Reserve System, USA, the New York Office of the Appellant bank has paid Federal Reserve Bank, New York and the State New York Banking Dept., it was argued that the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty for breach of law can be an amount wholly and exclusively for the Purpose of business. The above view of the Assessing Officer was upheld by the learned CIT(A). After considering the submissions of both the parties, in our considered view, penalty can be based on the action committed by the parties when the law allows the parties to compound the lapse and mistake committed. What needs to be seen is, whether the penalty imposed is towards punishment for breach or infraction of law or statutory scheme or something akin to penalty. In case, the same law gives option to the assessee to compound the offence or in the nature of compensation. These penalty expenses can be treated based on the severity of the offence. The offence falls under the category of infringement then these kind of penalty is not allowable under section 37 of the Act. The law of allowability of penalty is fully settled by the Hon ble Supreme Court in CIT v/s Ahmedabad Cotton Manufacturing Co. Ltd., 205 ITR 163 (SC), wherein it is held that as per Explanation to section 37, the expenditure incurred for any purpose which is an offence or which is prohibited by law is to be treated to have not been incurred for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed off accordingly. 81. Additional ground no.1, raised by the assessee relates to deduction for write-off of the bad debts under section 36(1)(vii) of the Act as per the judgment of the Hon'ble Supreme Court in Vijaya Bank Ltd. v/s CIT, [2010] 323 ITR 166 (SC). 82. Having considered the rival submissions and having perused the material on record in the light of the decisions of the Tribunal rendered in assessee's own case as well as the decision of the Hon'ble Supreme Court in Vijaya Bank v/s CIT [2010] 323 ITR 166 (SC) relied upon by the learned Counsel for the assessee, both the parties agree before us that identical issue has been decided by the Tribunal in assessee s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01, 2008-09, wherein the Tribunal has restored the issue to the file of the Assessing Officer adjudication afresh. Consistent with the view taken by the Tribunal in assessee s own case, we set aside the impugned order passed by the learned CIT(A) and restore the issue to the file of the Assessing Officer for deciding the issue afresh after verifying the assessee s claim in accordance with law. Thus, additional ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.3, raised by the assessee is allowed for statistical Purpose. 87. In the result, assessee s appeal is partly allowed for statistical purposes. ITA No.4655/Mum./2011 Revenue s Appeal-A.Y. 2002-03 88. Ground no.1, relates to disallowance of ₹ 86,32,689, on account of staff welfare expenses. 89. Before us, during the course of hearing, the learned Counsel appearing for the parties agreed that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee s own case for the assessment year 1992- 93, 1995-96 1996-97, 1999-2000, 2000-01 and 2008-09. The Hon'ble Jurisdictional High Court had also dismissed the Revenue s which was filed by the Revenue challenging the order passed by the Tribunal in assessee's own case for the assessment year 1996-97. Consistent with the view taken by the Tribunal as well the Hon'ble Jurisdictional High Court in assessee s own case as cited supra, we uphold the order oof the learned CIT(A) dismissing the ground n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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