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TMI Blog2021 (10) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) Assessee Appeal 2. The ground No.1 raised by the assessee is with regard to addition made on account of deferred payment guarantee commission. 2.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "7. We have heard both the parties end 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 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. Consistent with the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as non- performing assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was followed in Western India Oil Distributing Co. Ltd. Vs. CIT 206 ITR 359 (Bom). It was held in this decision that the concept of real income should not be so read as to defeat the provisions of the Act. Extension of the concep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not redeemed. It was contended before the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as nonperforming assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was Travancore vs. CIT 158 ITR 102, 155 (SC) followed in Western India Oil Distributing Co. Ltd. Vs. CIT 206 ITR 359 (Bom). ITR 359 (Bom). It was held in this decision that the concept of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is dismissed. 4. The ground No.3 raised by the assessee is with regard to disallowance of payment made in respect of scientific research. 4.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "10. Ground no.4, relates to disallowance of Rs. 3,36,420 in respect of payments for scientific research. 11. The learned Sr. Counsel for the assessee submitted before us that this issue is covered by the decision of the Tribunal in assessee's own case for the assessment year 2000-01, 1997-98, 1998-99, 1999-2000 wherein this issue has been decided by the Tribunal against the assessee and in favour of the Revenue. However, he pointed out that during the year under consideration the payment for scientific research was made out of separate funds created out of taxed profits in each of the earlier years. The amount set apart for the funds has not been claimed as a deduction in the earlier years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that in order to maintain consistent stand, this Tribunal in earlier years in assessee's own case had disallowed 1% of exempt income u/s.14A of the Act as expenses attributable for earning the exempt income. The ld. DR fairly agreed that the said disallowance to be made. Accordingly, we direct the ld. AO to disallow only 1% of exempt income u/s.14A of the Act which would be in line with disallowance made in earlier years. Accordingly, the ground Nos. 4.1 to 4.4 raised by the assessee are partly allowed. 6. The ground Nos. 5.1 to 5.4 raised by the assessee are with regard to reduction in the claim of deduction made u/s.80M of the Act. 6.1. We have heard rival submissions and perused the materials available on record. The assessee has received dividend of Rs. 194,09,17,456/-. The assessee had distributed dividend of Rs. 447,35,40,463/-. The assessee had claimed deduction u/s.80M of the Act to the tune of Rs. 194,09,17,456/-. We find that the lower authorities had made the disallowance by applying the estimated percentage to the income as the expenses incurred to earn the dividend income. The law is now well settled that for the purpose of deduction u/s.80M of the Act, only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the assessee. Ground no.6, is dismissed. 7.2. Respectfully following the same, the ground Nos. 6.1 and 6.2 raised by the assessee are dismissed. 8. The ground Nos.7.1 & 7.2 raised by the assessee are with regard to disallowance of broken period interest. 8.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "4. Ground no.1, relates to disallowance of Rs. 274,04,19,099, in respect of broken period interest. 5. . Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. During the course of hearing, both the leaned Counsels for the parties agreed that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in view of the proviso to section 36(1)(vii) of the Act, the deduction under section 36(1)(vii) of the Act is limited to excess of the amount written off over the credit balance of provision for bad and doubtful debts under section 36(1)(viia) of the Act. The CIT(A) confirmed the disallowance following the order of the CIT(A) for the assessment year 2007-08, wherein the CIT(A) had held that Explanation 2 to section 36(1)(vii) of the Act inserted w.e.f 01.04.2014 which states that the proviso to section 36(1)(vii) of the Act and section 36(2)(v) of the Act relates to all types of advances i.e. rural and non-rural advances, is clarificatory in nature. Accordingly, the CIT(A) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en off over the credit balance in the provision for bad and doubtful debts accounts made under section 36(1)(viia) of the Act. Further, as per section 36(2)(v) of the Act, where a debt made by the assessee to which section36(1)(viia) of the Act applies, no deduction shall be allowed unless the assessee has debited the amount of such debt to the provision for bad and doubtful debts account made under section 36(1)(viia) of the Act. On a conjoint reading of the aforesaid provisions, it can be inferred that sections 36(1)(viia) and 36(2)(v) of the Act and the first proviso to section 36(1)(vii) of the Act, apply only to rural advances. 57. We noted that, as reliance placed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of legislation is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. In the present case, the legislature stipulated a fixed date i.e. 01.04.2014 while inserting Explanation 2 to section 36(1)(vii) of the Act. In view of the above, we are of the view that assessee is entitled to deduction under section 36(1)(vii) of the Act being the amount of bad debts written off (other than in respect of rural advances). This issue of assessee appeal is allowed." 9.2. Respectfully following the same, the ground No.8 raised by the assessee is allowed. 10. The ground No.9 raised by the assessee is with regard to claim of deduction for entire provision for bad and doubtful debts u/s.36(1)(viia) of the Act amounting to Rs. 2798,97,50,043/-. 10.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "32. Ground no.10, relates to the disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that both the parties mutually agreed before us that this issue has already been adjudicated by this Tribunal in assessee's own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "43. Additional ground no.3, raised by the assessee relates to treatment of income earned from foreign branches i.e., whether or not the income earned is liable to be taxed in India. 44. Considered the rival submissions and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assesses. Before us, both the parties agree 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 3'd 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 !aw by following similar guidelines as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 verify the assessee's claim in accordance with law. Thus, additional ground no.1, raised by the assessee is allowed for statistical purposes." 15.2. Respectfully following the same, the additional ground No.1 raised by the assessee is allowed for statistical purposes. 16. The additional ground No.2 raised by the assessee relates to recovery of bad debts written off which according to the assessee should not be liable to tax in terms of Section 41(4) of the Act. 16.1. We have heard rival submissions and perused the materials available on record. All the facts necessary for adjudication of the additional ground is already on record and hence the same are hereby admitted. We find that this issue already was the subject matter of adjudication by this Tribunal in assessee's own case for A.Yrs 2001-02 and 2002-03 vide order dated 12/07/2021 wherein this issue was restored to the file of the ld. AO by observing as under:- "42. Having heard both the parties, we find that identical issue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum./2016, order dated 3rd February 2020, for the A.Y. 2008-09, has decided this issue in favour of the assessee and against the Revenue. Consistent with the view taken by the Tribunal in assessee's own case as cited supra, we uphold the order of the learned CIT(A) on this issue and decline to interfere in the order as such. While concluding, we place on record that the appeal filed by the Revenue in assessee's own case before the Hon'ble Jurisdictional High Court for the assessment year 1996-97, the said appeal was also dismissed vide its order dated 1st August 2016. Thus, ground no.1, raised by the Revenue is dismissed." 20.2. Respectfully following the same, the ground No.2 raised by the Revenue is dismissed. 21. The ground No.3 raised by the Revenue is with regard to disallowance of expenses u/s.14A of the Act. This ground has already been adjudicated in detail while addressing the ground No.4 of assessee's appeal in A.Y.2003-04. The decision rendered thereon would apply with equal force for this ground also. 22. The ground No.4 raised by the revenue is challenging the restriction of deduction u/s.80M of the Act. We find that this ground also had already been ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:- "93. Having considered the submissions of the parties and having perused the material en record in the light of the decision relied upon by the learned Counsel for the assessee, both the learned Counsel appearing for the parties conceded before us 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 1991-92, 1995-96, 1996-97 and 1999-2000. 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. It is also placed on record that identical issue has also been decided by in assessee's own case being ITA no.4656/Mum./2011, for the assessment year 2001-02, vide Para-44 of this order, wherein, the issue has been decided in favour of the assessee and against the Revenue. Consequently, consistent with the view taken by the Tribunal as we!! the Hon'ble Jurisdictional High Court in assessee's own case as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for A.Y.2008-09 in ITA No.3644 & 4563/Mum/2016 vide order dated 03/02/2020 wherein it was observed as under:- 60."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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The Revenue before the Tribunal has emphasised on the applicability of Mumbai Tribunal's decision in the case of Deutsche Bank AG and that the valuation is as per RBI guidelines. It was contended by the assessee that it is a well settled principle of law that unrealised 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 si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee will get the benefit of a notional loss he has not incurred. Nevertheless, as mentioned earlier, the ordinary principles of commercial accounting permit valuation 'at cost or market price, whichever is the lower'. [para 27] The proper practice is to 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 Rs. 90 per kg (market price as on 1.4.1991 was Rs. 98 per kg) and the closing stock at Rs. 130 per kg. For assessment year 1993-94, the opening stock was valued at Rs. 130 per kg and there was no closing stock. The assessee returned a loss of Rs. 54,420 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not justified in taking a different view. 68. The assessee also relied on the judgement of the Bombay High Court in the case of Union Bank of India dated 08.02.2016 in ITA 1977 of 2013. The assessee in this case for the purpose of its books 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire stock of securities should be followed. This resulted in a situation of taxing appreciation of stock, which goes against the general and settled principle of non-taxation of notional income, as laid by the Supreme 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." 33.2. Respectfully following the same, the ground No.7 raised by the assessee is allowed. 34. The ground No.8 raised by the assessee for A.Y.2004-05 is similar to ground No.9 raised by the assessee for A.Y.2003-04. Hence, the decision rendered by us for ground No.9 for A.Y.2003-04 shall apply with equal force for A.Y.2004-05 also except with variance in figures. 35. The ground No.9 raised by the assessee for A.Y.2004-05 is similar to ground No.12 raised by the assessee for A.Y.2003-04. Hence, the decision rendered by us for ground No.12 for A.Y.2003-04 shall apply with equal force for A.Y.2004-05 also except with variance in fig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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