OMAN INTERNATIONAL BANK SAOG, MUMBAI V. ADIT(I,T) 4(2), MUMBAI

CO 213/MUM/2009

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9094 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 22-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 04-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR B
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Double taxation relief; Opportunity of being heard; Cost of acquisition; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 14A; 37(1); 154

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI .. , .. !'#, $% $ & BEFORE SHRI I.P. BANSAL, JM AND SHRI P.M. JAGTAP, A M ./ I.T.A. NO.3362 /MUM/2009 ( ( ) *) ( ) *) ( ) *) ( ) *) / / / / ASSESSMENT YEAR : 2005-06 OMAN INTERNATIONAL BANK S.A.O.G., 201 RAHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 400 021. ( ( ( ( / VS. THE ASSISTANT DIRECTOR INCOME TAX, (INTERNATIONAL TAXATION)- 4(2), SCINDIA HOUSE, N.M. MARG, MUMBAI 400 020. + $% ./ PAN : AAACO 0440 M ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) ./ I.T.A. NO.3146 /MUM/2009 ( ( ) *) ( ) *) ( ) *) ( ) *) / / / / ASSESSMENT YEAR : 2005-06 THE ASSISTANT DIRECTOR INCOME TAX, (INTERNATIONAL TAXATION)- 4(2), SCINDIA HOUSE, N.M. MARG, MUMBAI 400 020. ( ( ( ( / VS. OMAN INTERNATIONAL BANK S.A.O.G., 201 RAHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 400 021. + $% ./ PAN : AAACO 0440 M ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) -.&$ /C.O. NO. 213 /MUM/20 09 ARISING OUT OF ITA NO. 3146/ MUM/20 09 ( ( ) *) ( ) *) ( ) *) ( ) *) / / / / ASSESSMENT YEAR : 2005-06) OMAN INTERNATIONAL BANK S.A.O.G., 201 RAHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 400 021. ( ( ( ( / VS. THE ASSISTANT DIRECTOR INCOME TAX, (INTERNATIONAL TAXATION)- 4(2), SCINDIA HOUSE, N.M. MARG, MUMBAI 400 020. + $% ./ PAN : AAACO 0440 M CROSS OBJECTOR .. ( -.+, / RESPONDENT ) ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 2 ASSESSEE BY SHRI P.J. PARDIWALA RESPONDENT BY : SHRI NARENDER KUMAR ( B #% / // / DATE OF HEARING : 01-10-2013 CD* B #% / DATE OF PRONOUNCEMENT : 13-11-2013 [ $E / O R D E R PER BENCH : THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO 3362/MUM/2009 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO. 3146/MUM/2009 ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XXXIII, MUMBAI DATED 18-3-2009 AND THE SAME ARE BEING DISPOSED OF ALONG WITH THE C.O. FILED BY THE ASSESSEE BY THIS S INGLE CONSOLIDATED ORDER. 2. THE FIRST ISSUE RAISED IN GROUND NO. 1 OF THE AP PEAL OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 21,34,411/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF INTEREST RECEIVED FROM THE HEAD OFFICE. 3. THE ASSESSEE IN THE PRESENT CASE IS A BRANCH OF A FOREIGN BANK WHICH HAS ITS HEAD OFFICE ABROAD. DURING THE YEAR UNDER C ONSIDERATION, IT HAD RECEIVED INTEREST OF RS. 21,34,211/- FROM ITS HEAD OFFICE. ALTHOUGH, THE SAID INTEREST WAS CREDITED BY THE ASSESSEE TO THE P&L AC COUNT, THE SAME WAS REDUCED IN THE COMPUTATION OF TOTAL INCOME FILED AL ONG WITH THE RETURN OF INCOME CLAIMING THAT IT IS NOT INCOME CHARGEABLE TO TAX BEING RECEIVED FROM SELF. THE A.O. DID NOT ACCEPT THIS CLAIM OF THE ASS ESSEE AND FOLLOWING THE STAND TAKEN ON THE SIMILAR ISSUE IN THE EARLIER YEA RS, HE ADDED THE INTEREST RECEIVED BY THE ASSESSEE FROM ITS HEAD OFFICE TO IT S TOTAL INCOME. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A .O. ON THIS ISSUE FOLLOWING HIS APPELLATE ORDERS IN ASSESSEES OWN CASE FOR THE EARLIER YEARS ON THE SIMILAR ISSUE. ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 3 4. AT THE TIME OF HEARING BEFORE US, THE LD. REPRES ENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF ITAT IN THE CAS E OF SUMITOMO MITSUI BANKING CORPN. VS. DY. DIRECTOR OF INCOME TAX (IT) (2012) 136 ITD 66 (MUM)[SB] WHEREIN IT WAS HELD THAT THE INDIAN BRANC H (PE) OF A FOREIGN BANK (GE) BEING PART OF THE GE WAS NOT A SEPARATE AND DISTINCT TAXABLE ENTITY IN INDIA AS PER DOMESTIC LAW AND IT WAS GE ALONE WHICH WAS A TAXABLE ENTITY IN INDIA. IT WAS HELD THAT THE INTEREST RECEIVED BY TH E INDIAN BRANCH OF A FOREIGN BANK FROM ITS HEAD OFFICE, THEREFORE, DID NOT GIVE RISE TO ANY INCOME WHICH WAS TAXABLE IN INDIA SINCE ONE COULD NOT MAKE PROFI T OUT OF HIMSELF. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE ITA T IN THE CASE OF SUMITOMO MITSUI BANKING CORPN., WE DELETE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST RECEIVED BY THE INDIAN BRANCH OF THE ASSESSEE BANK FROM ITS HEAD OFFICE AN D ALLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. 5. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO TAX THE INTEREST OF RS. 86 ,23,836/- PAID BY THE INDIAN BRANCH OF A FOREIGN BANK TO ITS HEAD OFFICE AS PER THE RELEVANT PROVISIONS OF DTAA. 6. AT THE TIME OF HEARING BEFORE US, THE LD. REPRES ENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF IT AT IN THE CASE OF SUMITOMO MITSUI BANKING CORPN. (SUPRA) WHEREIN IT WAS HELD T HAT INTEREST PAID TO THE HEAD OFFICE OF THE ASSESSEE BANK BY ITS INDIAN BRAN CH CANNOT BE TAXED IN THE HANDS OF ASSESSEE BANK, A FOREIGN ENTERPRISE BEING PAYMENT TO SELF WHICH CANNOT GIVE RISE TO ANY INCOME THAT IS TAXABLE IN I NDIA AS PER THE DOMESTIC LAW. RESPECTFULLY FOLLOWING THE SAID DECISION OF T HE SPECIAL BENCH OF ITAT IN THE CASE OF SUMITOMO MITSUI BANKING CORPN. (SUPRA), WE DIRECT THAT THE ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 4 ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE O F RS. 86,23,836/- ON ACCOUNT OF INTEREST PAID BY THE INDIAN BRANCH OF TH E ASSESSEE BANK TO ITS HEAD OFFICE BE DELETED. GROUND NO. 2 OF THE ASSESSEES A PPEAL IS ACCORDINGLY ALLOWED. 7. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 58,948/- MADE BY THE A.O. ON ACCOUNT OF PROVISION MADE FOR EXPENSES WHICH SUBSEQUENTLY TURN ED OUT TO BE IN EXCESS. 8. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE HAS NOT RAISED ANY MATERIAL CONTENTION TO DISPUTE THE A DDITION MADE ON THIS ISSUE TO THE TOTAL INCOME OF THE ASSESSEE. HE, HOWEVER, H AS CONTENDED THAT THE AMOUNT OF EXCESS PROVISION HAS BEEN OFFERED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE IMMEDIATELY SUCCEEDING YEAR I.E A.Y. 2006-07 AND THE A.O. THEREFORE MAY BE DIRECTED TO GIVE APPROPRIATE RELIE F TO THE ASSESSEE ON THIS ISSUE IN A.Y. 2006-07 IN ORDER TO AVOID DOUBLE ADDI TION. IN OUR OPINION, SUCH DIRECTION CANNOT BE GIVEN FOR A.Y. 2006-07 AS THE A PPEAL FOR THE SAID YEAR IS NOT BEFORE US. IN ANY CASE, THE D.R.P. HAS ALREADY GIVEN A DIRECTION TO THE A.O. TO GIVE SUCH APPROPRIATE RELIEF IN A.Y. 2006-0 7 AFTER NECESSARY VERIFICATION AND THE ASSESSEE HAS FILED AN APPLICAT ION U/S 154 OF THE ACT BEFORE THE A.O. SEEKING IMPLEMENTATION OF THE SAID DIRECTION. GROUND NO. 3 OF THE ASSESSEES APPEAL IS THEREFORE DISMISSED. 9. IN GROUND NO. 1 OF ITS APPEAL, THE REVENUE HAS C HALLENGED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO FIND OUT WH ETHER THE ASSESSEE CONSIDERS THE INCOME AT THE TIME OF SALE OF SECURITIES AS BUS INESS INCOME OR CAPITAL GAINS AND ACCORDINGLY TREAT THE BROKEN PERIOD INTE REST AS CAPITAL EXPENDITURE FORMING PART OF COST OF ACQUISITION IF THE INCOME O N SALE IS TREATED AS CAPITAL GAINS OR TREAT THE SAME AS REVENUE EXPENDITURE ALLO WABLE AS DEDUCTION IF THE INCOME ON SALE IS TREATED AS BUSINESS INCOME. ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 5 10. AT THE TIME OF HEARING BEFORE US, THE LD. REPRE SENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE DIRECTION GIVEN BY THE L D. CIT(A) TO THE A.O. ON THE ISSUE OF THE TREATMENT TO BE GIVEN TO THE BROKEN PE RIOD INTEREST IS IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VS. CIT (2002) 258 ITR 601 AND IN THE CASE OF CIT VS. CITIBANK NA, (2003) 264 ITR 18. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED ON RECORD BEFORE US THE UN-REPORTED JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. CITI BANK NA (CIVIL APPEAL NO. 1524 OF 2006 DATED 12 TH AUGUST, 2008) WHEREIN THE VIEW TAKEN BY THE HONBLE HIGH COURT HAS BEEN UPHELD BY THE HONB LE APEX COURT. KEEPING IN VIEW THESE DECISIONS OF HONBLE JURISDICTIONAL H IGH COURT AND HONBLE APEX COURT, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT( A) GIVING APPROPRIATE DIRECTION TO THE A.O. TO DECIDE THE ISSUE RELATING TO THE TREATMENT TO BE GIVEN TO THE BROKEN PERIOD INTEREST AND DISMISS GROUND NO . 1 OF REVENUES APPEAL. 11. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE AMOUNT OF RS. 16,35,60,206/- MADE B Y THE A.O. BY WAY OF DISALLOWANCE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 12. THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUN T OF BAD DEBTS WRITTEN OFF WAS DISALLOWED BY THE A.O. TO THE EXTENT OF RS. 16,35,60,206/- ON THE GROUND THAT THERE WAS A POSSIBILITY OF RECOVERY THE RELEVANT DEBTS CLAIMED AS BAD IN FUTURE AND IT WAS IMMATURE TO WRITE OF THE S AME IN THE YEAR UNDER CONSIDERATION. ON APPEAL, THE LD. CIT(A) DELETED T HE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF BAD DEBTS WRITTEN OFF RELYING, I NTER ALIA, ON THE DECISION OF SPECIAL BENCH OF ITAT IN ASSESSEES OWN CASE REPORT ED IN 100 ITD 285 (MUM)[SB] WHEREIN IT WAS HELD THAT ONCE THE ASSESSE E HAS WRITTEN OFF THE DEBTS AS BAD IN ITS BOOKS OF ACCOUNT, THE REQUIREME NT OF SECTION 36(1)(VI) OF THE ACT IS SATISFIED AND THE CLAIM FOR DEDUCTION OF BAD DEBTS IS ALLOWABLE. ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 6 13. AT THE TIME OF HEARING BEFORE US, THE LD. REPR ESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE NOW STANDS SQUARE LY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS. CIT 323 ITR 397 (SC) WHEREIN IT HAS BEEN HELD THAT AS PER THE AMENDED PR OVISIONS OF SECTION 36(1)(VII), IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH TO CLAIM DEDUCTION UNDER THE SAID PROVISION IF THE RELEVANT DEBT IS WRITTEN OFF BY TH E ASSESSEE AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNT. RESPECTFULLY FOLLOWING THE SA ID DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA), WE U PHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF BAD DEBTS WRITTEN OFF AND DISMISS GROUND NO. 2 OF REVEN UES APPEAL. 14. IN GROUND NO. 3, THE REVENUE HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF TRANSACTION CHARGES OF RS. 5,19,297/- MADE ON NOSTRO ACCOUNT U/S 40(A)(I) OF THE ACT. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSER VED THAT A SIMILAR ISSUE WAS INVOLVED IN ASSESSEES OWN CASE FOR THE EARLIER YEA RS AND THE SAME HAS BEEN DECIDED BY THE TRIBUNAL CONSISTENTLY IN FAVOUR OF T HE ASSESSEE IN THE SAID YEARS INCLUDING THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2004-05 WHICH WAS DECIDED VIDE ORDER DATED 13 TH SEPTEMBER, 2013 PASSED IN ITA NO. 1609/MUM/2008. AS NOTED BY THE TRIBUNAL IN ITS ORDE RS, THE TRANSACTION CHARGES PAID ON NOSTRO ACCOUNT WERE IN THE NATURE O F BANK CHARGES FOR MAINTAINING THE ACCOUNTS WITH BANKS OUTSIDE INDIA. THESE CHARGES WERE RECOVERED DIRECTLY BY WAY OF DEBITS TO THE CONCERNE D ACCOUNTS OF THE ASSESSEE WITH THESE BANKS AND THE SAME REPRESENTED BUSINESS INCOME OF THOSE BANKS WHICH ACCRUED/ARISEN OUTSIDE INDIA. AS HELD BY THE TRIBUNAL, NO TAX THEREFORE WAS REQUIRED TO BE DEDUCTED AT SOURCE FROM THE TRAN SACTION CHARGES PAID ON NOSTRO ACCOUNT AND THE DISALLOWANCE MADE BY THE A.O . U/S 40(A)(I) OF THE ACT WAS NOT SUSTAINABLE. RESPECTFULLY FOLLOWING THE OR DERS OF THE TRIBUNAL ON THE ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 7 SIMILAR ISSUE INVOLVED IN EARLIER YEARS, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A. O. ON ACCOUNT OF TRANSACTION CHARGES U/S 40(A)(I) OF THE ACT AND DIS MISS GROUND NO. 3 OF REVENUES APPEAL. 16. IN GROUND NO. 4, THE REVENUE HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE A.O. ON AC COUNT OF TRAVELING EXPENSES OF RS. 9,09,333/- INCURRED ON HEAD OFFICE PERSONNEL TO INDIA AND CERTIFIED FEES PAID TO THE AUDITORS. 17. THE EXPENSES CLAIMED BY THE ASSESSEE ON TRAVEL ING OF EMPLOYEES OF ITS HEAD OFFICE TO MONITOR THE OPERATIONS OF INDIA BRAN CH AND SERVICE FEES PAID TO THE AUDITORS FOR ISSUANCE OF CERTIFICATE WERE DISAL LOWED BY THE A.O. ON THE GROUND THAT THE SAME WERE COVERED WITHIN THE PURVIE W OF SECTION 44-C OF THE ACT AND NO EXTRA/ADDITIONAL DEDUCTION WAS ALLOWABLE FOR THE SAID EXPENSES UNDER ANY OTHER PROVISIONS OF THE ACT. ON APPEAL, THE LD. CIT(A) DELETED THE SAID DISALLOWANCE MADE BY THE A.O. FOLLOWING HIS AP PELLATE ORDERS IN ASSESSEES OWN CASE FOR THE EARLIER YEARS. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT A SIMILAR ISSUE INVOLVED IN ASSESSEES OWN CASE HAS BEEN DECIDED BY THE TRIBUNA L CONSISTENTLY IN FAVOUR OF THE ASSESSEE IN THE EARLIER YEARS RELYING, INTER ALIA, ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX V. EMIRATES COMMERCIAL BANK LTD. (2003) 262 ITR 55 (BO M.) WHEREIN IT WAS HELD THAT THE TRAVELING EXPENSES INCURRED BY THE HEAD OF FICE ON TRAVELING OF ITS OWN STAFF AND DIRECTLY IN CONNECTION WITH INDIA BRANCH ARE ALLOWABLE U/S 37(1) OF THE ACT AND SECTION 44-C HAS NO APPLICATION TO SUCH EXPENSES. THE DECISION OF THE TRIBUNAL FOR A.Y. 1996-97 DECIDING A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE HAS ALSO BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 26-2-2013 PASSED IN INCOME TAX APPEAL ( LOD) NO. 1890 OF 2012. ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 8 RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCH OF THIS TRIBUNAL AS WELL AS THAT OF HONBLE JURISDICTIONAL HIGH COUR T, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESS EE ON THIS ISSUE AND DISMISS GROUND NO. 4 OF THE REVENUES APPEAL. 19. IN GROUND NO. 5, THE REVENUE HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO ALLOW THE REPEAT CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS. 2 1,75,000/- IN THE YEAR UNDER CONSIDERATION IN CASE ANY AUTHORITY REVERSES THE DECISION OF THE TRIBUNAL ALLOWING THE SAID CLAIM FOR A.Y. 1995-96. 20. DURING THE COURSE OF APPELLATE PROCEEDINGS BEF ORE THE LD. CIT(A), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT ITS CLAIM FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS. 21.75 LACS H AS BEEN ALLOWED BY THE TRIBUNAL IN A.Y. 1995-96 BEING ASSESSMENT YEAR IN W HICH THE SAID DEBTS WERE WRITTEN OFF. IT WAS CONTENDED THAT A DIRECTION MAY, HOWEVER, BE GIVEN TO THE A.O. TO ALLOW THE DEDUCTION ON ACCOUNT OF SUCH BAD DEBTS IN A.Y. 2005-06 IN CASE ANY AUTHORITY REVERSES THE DECISION OF THE TRI BUNAL FOR A.Y. 1995-96 AS THE ASSESSEE HAD NOT RECOVERED ANY AMOUNT AGAINST T HE SAID BAD DEBTS TILL A.Y. 2005-06. THIS CONTENTION OF THE ASSESSEE WAS A CCEPTED BY THE LD. CIT(A) AND ACCORDINGLY A DIRECTION WAS GIVEN BY HIM TO THE A.O. TO ALLOW THE REPEAT CLAIM OF THE ASSESSEE FOR BAD DEBTS WRITTEN OFF IN A.Y. 2005-06 IN CASE ANY AUTHORITY REVERSES THE DECISION OF THE TRIBUNAL FOR A.Y. 1995-96. 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE DIRE CTION GIVEN BY THE LD. CIT(A) ON THIS ISSUE IS NOT PROPER. WHEN THE ASSESSEE ADM ITTEDLY HAD WRITTEN OFF THE RELEVANT DEBTS AS BAD IN ITS BOOKS OF ACCOUNT IN A. Y. 1995-96 AND NOT IN A.Y. 2005-06, IT IS NOT ENTITLED TO DEDUCTION ON ACCOUNT OF THE SAID BAD DEBTS IN A.Y. 2005-06 AS HELD BY THE HONBLE SUPREME COURT I N THE CASE OF TRF LIMITED VS. CIT 323 ITR 397 (SC). WE, THEREFORE, S ET ASIDE THE DEDUCTION ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 9 GIVEN BY THE LD. CIT(A) ON THIS ISSUE AND ALLOW GRO UND NO. 5 OF REVENUES APPEAL. 22. DURING APPELLATE PROCEEDINGS BEFORE THE TRIBUN AL, THE REVENUE HAS MOVED AN APPLICATION SEEKING ADMISSION OF THE FOLLO WING ADDITIONAL GROUND:- WHETHER PROVISIONS OF SECTION 14A OF THE I.T. ACT W ILL BE APPLICABLE IN THE EVENT IT IS HELD THAT THE INTEREST RECEIVED BY THE ASSESSEE FROM ITS HEAD OFFICE IS NOT TAXABLE IN THE HANDS OF INDIAN B RANCH OFFICE. 23. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT A SIMILAR ADDITIONAL GROUND WAS RAISED BY THE REVENUE IN ASSESSEES OWN CASE FO R THE EARLIER YEARS I.E. ASSESSMENT YEARS 1998-99, 1999-2000, 2002-03 AND 20 03-04 AND AFTER CONSIDERING AND DISCUSSING THE ELABORATE ARGUMENTS RAISED BY BOTH THE SIDES ON THE ISSUE OF ADMISSION OF THE SAID ADDITIONAL GR OUND AS WELL AS ON THE MERIT OF THE ISSUE INVOLVED THEREIN, THE ADDITIONAL GROUND WAS ADMITTED BY THE TRIBUNAL VIDE ITS COMMON ORDER DATED 22-3-2013 PASS ED IN ITA NO. 581 & 582/MUM/2004, ITA NO. 2872/MUM/2006 & 1608/MUM/2008 AND THE ISSUE WAS ALSO DECIDED IN PRINCIPLE AGAINST THE ASS ESSEE HOLDING THAT THE PROVISIONS OF SECTION 14-A OF THE ACT WERE APPLICAB LE ON THE EXEMPT INTEREST INCOME EARNED FROM THE HEAD OFFICE/OVERSEAS BRANCHE S. FOR THE LIMITED PURPOSE OF DETERMINING THE QUANTUM OF DISALLOWANCE TO BE MADE U/S 14A, THE ISSUE WAS FINALLY SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFTER GIVING A REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DATED 22-3-2013, WE ADMIT THE ADDITIONAL GROUND FILED BY THE REVENUE AND DECIDING THE ISSUE RAISED THEREIN RELATING TO THE APPLICABIL ITY OF SECTION 14A OF THE ACT IN FAVOUR OF THE REVENUE IN PRINCIPLE, WE RESTORE T HE MATTER TO THE FILE OF THE A.O. FOR THE LIMITED PURPOSE OF DETERMINING THE QUA NTUM OF DISALLOWANCE TO BE MADE U/S 14A AFTER GIVING THE ASSESSEE AN OPPORTUNI TY OF BEING HEARD. ITA 3362/M/09 & 3146/M/09 & C.O. 213/M/09 10 24. THE ISSUE RAISED BY THE ASSESSEE IN ITS C.O. R ELATING TO ITS ALTERNATIVE CLAIM ON ACCOUNT OF BROKEN PERIOD INTEREST HAS BECO ME INFRUCTUOUS AS A RESULT OF THE DECISION RENDERED ON THE ISSUE OF BRO KEN PERIOD INTEREST WHILE DISPOSING OF THE APPEAL OF THE REVENUE. THE C.O. FI LED BY THE ASSESSEE IS ACCORDINGLY DISMISSED AS INFRUCTUOUS. 25. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL A S APPEAL OF THE REVENUE IS PARTLY ALLOWED WHEREAS THE C.O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2013. . $E B CD* %$ F(G 13-11-2013 D B ' SD/- SD/- (I.P. BANSAL) (P.M. JAGTAP ) JUDICIAL MEMBER $% / ACCOUNTANT MEMBER MUMBAI ; F( DATED 13-11-2013 .(../ RK , SR. PS $E B -#HI J$I*# $E B -#HI J$I*# $E B -#HI J$I*# $E B -#HI J$I*#/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. K () / THE CIT(A)XXXIII, MUMBAI. 4. K / DIT (INTL. TAXN.), MUMBAI 5. I N' -#( , , / DR, ITAT, MUMBAI L BENCH 6. 'O) P / GUARD FILE. $E( $E( $E( $E( / BY ORDER, .I# -# //TRUE COPY// Q Q Q Q/ // /R ! R ! R ! R ! ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI