DCIT CIR 3(1), MUMBAI V. ICICI BANK LTD, MUMBAI

ITA 4159/MUM/2014

AI Insights

The case involves cross appeals by ICICI Bank Ltd. and the Deputy Commissioner of Income Tax (DCIT) concerning various disallowances and adjustments made during the assessment year 2008-09. The primary issues revolved around transfer pricing adjustments, disallowance of mark-to-market losses on forex derivatives, and disallowances related to bad debts and business losses. The Tribunal examined the methods of accounting and the legal provisions applicable to each issue, referencing several precedents and judicial decisions to arrive at its conclusions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312353 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE THESE ARE PASSTHROUGH COSTS; THEREFORE NO MARK UP IS; AJAY CHANDRA
• Assessee Lawyers: ARATIVISSANJI
• Keywords: Set aside; Opportunity of being heard; Revised return; Transfer pricing; International transaction; Business expenditure; Question of law; Bad and doubtful debts; Depreciation; Capital expenditure; TDS; Earning of tax free income; Transactions in derivatives; Rule 8D
• Section: 143(3); 142(1); 154; 271(1)(c); 90; 234B; 145; 14A; 115JB; 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “H”, MUMBAI BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No.4249/Mum/2014 Assessment Year: 2008-09 ICICI Bank Limited ICICI Bank Towers, North East Wing, 1st Floor, Bandra Kurla Complex, Bandra (East), Mumbai – 400034. PAN: AAACI 1195 H vs. DCIT, Circle-3(1), Aayakar Bhawan, Mumbai (Appellant) (Respondent) ITA No.4159/Mum/2014 Assessment Year: 2008-09 DCIT, Circle-3(1), Aayakar Bhawan, Mumbai vs. ICICI Bank Limited ICICI Bank Towers, North East Wing, 1st Floor, Bandra Kurla Complex, Bandra (East), Mumbai – 400034. PAN: AAACI 1195 H (Appellant) (Respondent) Present for: Assessee by : Arati Vissanji Revenue by : Shri Ajay Chandra, CIT/DR Date of Hearing : 18.03.2025 Date of Pronouncement : 30.04.2025 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: The present cross appeal arises out of order dated 25.03.2014 passed by ld. CIT(A) – 15, Mumbai for A.Y. 2008-09 on following grounds of appeal: ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 2 ITA No. 4249/Mum/2014 “Being aggrieved by the order bearing No. CIT(A)-15/Arr 137/13-14 dated March 25, 2014 issued by the Commissioner of Income-tax (Appeals) 15, Mumbai (hereinafter called the CIT(A)) issued under section 250 of the Income-tax Act, 1961 (hereinafter called the Act) and communicated to the Appellant on April 18, 2014, the Appellant appeals against and on the following amongst other grounds which are without prejudice to each other. 1. Re: Adjustment as per Transfer Pricing Order under section 92CA(3) ₹1,56,32,834 [Para 3, pages 2 to 47 of the CIT(A) order) On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the adjustment of 1,56,32,834 made to the arm's length price in respect of back office support services and business support services by the Transfer Pricing Officer vide his order dated October 28, 2011 passed under section 92CA(3) of the Act. 2. Re: Disallowance of Mark to market (MTM) losses on forex derivatives₹1302,00,00,000 [Para 4, pages 47 to 59 of the CIT(A) order] 2.1 On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of the amount of ₹1302,00,00,000 being MTM losses on interest rate, forex and credit derivative transactions on the ground that the same were notional losses and hence cannot be considered as deductible expenditure under the Act. 2.2 Without prejudice, the Assessing Officer ought not to tax the MTM gains amounting to ₹2504,00,00,000. 3. Re: Expenses apportioned against income exempted under section 10(15), 10(34) and 10(35)-Disallowance u/s. 14A: ₹629,05,90,585 [Para 5, Pages 59 to 67 of the CIT(A) order] 3.1 On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the apportionment of expenses amounting to 629,05,90,585 to the income exempt under section 10(15), 10(34) and 10(35) of the Act on the basis of on the basis of Rule 8D laid down by the CBDT vide notification no.45/2008 dated March 24, 2008. 3.2 The CIT(A) erred in not accepting the working submitted by the Appellant showing that the investments in shares and tax free securities have been made from the cost free funds of the Appellant based upon a periodic review of incremental funds and investments made by the Appellant. 3.3 The CIT(A) erred in not considering the Appellant's without prejudice claim that no expenses are incurred in earning dividend in respect of investments made in subsidiaries or group companies as the primary object of making investment is holding controlling stake in the group and not for earning any exempt income out of the said investment. 3.4 The CIT(A) erred in not accepting the alternative working of the Appellant which has been accepted and allowed by his predecessor's in A.Y. 1998-99 to 2006-07 without giving any reasons for the same. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 3 4. Re: Disallowance of Bad debts 7676,70,81,747 (gross) written off- [Para 7, Pages 72 to 79 of the CIT(A) order] 4.1 On the facts and circumstances of the case and law, the CIT(A) erred in upholding the Assessing Officers view and confirming the disallowance of the entire bad debts of ₹676,70,81,747 claimed by the Appellant on the ground that the Appellant had in the absence of entire details failed to establish that the debts had become bad. 4.2 The CIT(A) erred in not following the orders of CIT(A) 7, Mumbai for A.Y. 2003-04 to 2006-07 which after placing reliance upon the decisions of the Supreme Court in the case of TRF Limited v. CIT (SC) 230 CTR 14 and Vijaya Bank v. CIT & Anrs. 323 ITR 166 have allowed the Appellant's claim for bad debts on the ground that after the amendment of section 36(1)(vii) w.e.f. April 1, 1989 if the debt has been written as irrecoverable in the accounts of the assessee, it will suffice for claiming it as bad debt in the year of write off. 5. Re: Disallowance of Business Loss and other expenses-290,47,92,249 [Para 8, Pages 79 to 83 of the CIT(A) order] 5.1 On the facts and circumstances of the case and law, the CIT(A) erred in disallowing the business loss write off on account of loss on re- possessed assets, discrepant notes not accepted by the Reserve Bank of India, losses due to fraud etc. on retail loans amounting to 290,47,92,249 claimed by the Appellant on the ground that the Appellant's claim had not been accepted in the preceding assessment year 2006-07 and the Appellant had failed to prove the genuineness of the claim in the aforesaid assessment year. 5.2 The CIT(A) erred in not following the order of CIT(A) 7, Mumbai for A.Y. 2006-07 which after considering the facts of the case and submissions of the Appellant has held that these are expenses incurred in the normal course of banking business and accordingly allowed the Appellant's claim for business loss. 6. Re: Disallowance of Provision for expenses - 748,93,81,195 [Para 12, Pages 92 to 94 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of the amount of 48,93,81,195 in respect of provision for expenses created in March 2008 on which no tax was deducted at source on the ground that the same was contingent and unascertained in nature and hence not allowable as a deduction. 7. Re: Disallowance of contribution to Pension and gratuity paid on account of Sangli Bank Limited - 157,75,68,522 [Para 13, Pages 95 to 96 of the CIT(A) order) On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the view of the Assessing Officer and not allowing the claim for deduction of contribution to Pension and gratuity paid by the Appellant on account of its merged entity Sangli Bank Limited on the ground that the said claim was made vide revised computation filed during the course of assessment proceedings and not made vide a revised return. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 4 8. Re: Claim of Issue and discount expenses - 58,86,271 [Para 14, Pages 96 to 97 of the CIT(A) order] 8.1 The CIT(A) erred in dismissing the without prejudice claim of the Appellant of expenses on issue and discount of Rupee and Foreign currency Bonds for the current year amounting to 58,86,271 on the ground that since the Assessing Officer had not dealt with the same in the assessment order they do not arise from the findings of the Assessing Officer and hence do not require to be adjudicated upon. 8.2 The CIT(A) erred in not following the orders of CIT(A) 7, Mumbai in the Appellant's own case for A.Y. 2002-03 to 2006-07 which have allowed expenses as spread over the tenure of the bonds following the decision of the Supreme Court in the case of Madras Industrial Investment Corporation (225 ITR 802). 9. Re: Short grant of relief under section 90-₹65,41,167 [Para 15, Page 97 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in not granting additional relief under section 90 amounting to 65,41,167 as claimed by the Appellant on the ground that since the Assessing Officer had not dealt with the same in the assessment order it does not arise from the findings of the Assessing Officer and hence do not require to be adjudicated upon. 10. Re:Charging of interest under section 234B and 234D of the Act [Para 17, page 98 of the CIT(A) order] The CIT(A) erred on facts and in circumstances of the case and in law in not deleting the interest levied under section 2348 and 234D of the Act and treating the same as consequential in nature. 11. Re: Provisions of section 115JB not applicable [Para 18, page 98 of the CIT(A) order] 11.1 On the facts and circumstances of the case and in law, the CIT(A) erred in dismissing the ground regarding the applicability of provisions of section 115JB of the Act in case of the Appellant on the ground that since the Assessing Officer had not dealt with the same in the assessment order it does not arise from the findings of the Assessing Officer and hence does not require to be adjudicated upon. 11.2 The CIT(A) failed to appreciate that the Assessing Officer had worked out the book profit and tax thereon under section 115JB in the assessment order and hence the said ground does arise from the findings of the Assessing Officer. GENERAL 12. The Appellant craves leave and reserves its right to vary, amend, alter and/or add to the grounds of appeal and to produce such oral and documentary evidence and file such compilation of documents as may be necessary at the time of hearing of the appeal. ITA No. 4159/Mum/2014 “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation on leased assets without appreciating the fact that the said transaction being a financial lease ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 5 transaction, the assessee did not satisfy the legal requirement of ownership of the assets for the purpose of sec 32(1) of the I.T. Act, 1961 and therefore, not entitled for claim of depreciation on the leased assets. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation on leased assets without appreciating the fact that the leased assets in question were not in possession of the assessee and also not utilized by the assessee for its business purpose. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of payments made to Clubs without appreciating the fact that the expenses claimed are enduring in nature and cannot be treated as revenue expenses. 4. The appellant prays that the order of CIT (A) on the above ground be set aside and that of Assessing Officer be restored. 5. The appellant craves leave to amend or alter any ground or add a new ground which may necessary\" Brief facts of the case are that as under: 2. The assessee is engaged in the business of banking operation related activities. During the year under consideration, the assessee filed its original return of income on 30.09.2008 declaring total income of Rs. 5078,90,10,395/-. Subsequently, the return was revised on 30.03.2010 declaring total income of Rs.5056,57,98,084/-. The return was duly processed u/s 143(1) of the Act and was selected for scrutiny. Subsequently, notice u/s 143(2) and 142(1) along with questionnaire was issued to the assessee, in response to which representative of assessee appeared before the ld. AO and filed requisite details as called for. 2.1. The Ld. AO noted that the assessee had international transactions with its associated enterprise’s. Accordingly, reference was made to the Ld.TPO to compute the ALP of the transaction. 2.2. Upon receipt of the reference u/s 92CA(1) of the Act, the Ld.TPO called upon the assessee to furnish details in respect of international transactions undertaken by the assessee in Form ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 6 3CEB. Upon furnishing the relevant details, the Ld.TPO observed that, following were the international transactions undertaken by the assessee: Transactions Methodolo gy Amount (Rs in Cr.) Receipts Rent and common area usage charges CUP 0.08 Back office support services TNMM 8.71 Custody charges CUP 0.02 Front end fees CUP 0.02 Processing fees on subordinated bonds CUP 7.92 Risk participation fees CUP 4.05 Guarantee fees CUP 0.002 Income on derivative transactions PSM 35.09 Interest income CUP 92.86 Recovery of expenses CUP 27.03 Mark-to-market gain CUP 507.84 Swap forward contract CUP 0.06 Total - receipts 683.69 Payments Remittance fees CUP 4.67 Charges paid for mortgage loan CUP 0.6 Representative and marketing services for private banking CUP 7.03 Representative and marketing services - web trade CUP 0,25 Representative and marketing services - others TNMM 2.79 Risk participation fees CUP 13.94 Interest expense CUP 5.50 Reimbursement of expenses CUP 0.62 Swap forward contract CUP 258.8 Reversal of distribution fees CUP 0.28 Total payments 367.02 Total receipts and payments i.e. total value of all International transactions 1050.71 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 7 2.3. The Ld.TPO observed that, the assessee provided back office support services, in lieu of which, it received Rs.8,70,81,878/- included mark up of 10% from its AE in Britain UK & Canada. The assessee bench marked the transaction by treating it as ITES service provider. The assessee had selected TNMM as most appropriate method and PLI to OP/TC to computed its merger at 10%. 2.4. The assessee selected following 8 comparables with an average margin of 9.53%. Sr. No. Comparable Net cost plus margin (%) 1 BNR Udyog Limited 13.91 2 Cosmic Global Limited 14.48 3 Datamatics Technologies Limited 18.90 4 Informed Technologies India Limited -6.25 5 Nittany Outsourcing Service Private Ltd. -0.77 6 Sparsh BPO Services Limited 3.90 7 Transworks Information Services Limited 16.27 8 MCS Limited 15.79 Average 9.53 As assessee computed its margin at 10%, against the margin of the comparables at 9.53%, it treated the transaction to be as arm’s length. 2.4. The ld.TPO was dissatisfied with the comparables selected by assessee. The Ld.TPO applied certain filters and shortlisted set of 22 comparables with average margin of 27.53% as under: Sl. No. Company Name Revised OP to TC% 1 Accentia Technologies Ltd. (Seg.) 41.76% 2 Acropetal Technologies (Seg.) 35.30% 3 Aditya Birla Minacs Worldwide Ltd. 2.20% 4 Asit C Mehta Financial Services Ltd. (Seg.) 9.42% 5 Caliber Point Business Solutions Ltd. 10.97% 6 Coral Hubs Ltd. (Formerly Vishal 50.68% ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 8 Information Technologies Ltd.) 7 Cosmic Global Ltd. 23.30% 8 Crossdomain Solutions Ltd. 26.96% 9 Datamatics Financial Services Ltd. (Seg.) 34.87% 10 E4e Healthcare Solutions Ltd. 16.72% 11 Eclers Services Ltd. 65.88% 12 Genesys International Corporation Ltd. 47.40% 13. HCL Commet Systems & Services Ltd, (Seg.) 32.90% 14 Infosys BPO Ltd. 20.01% 15 Iservices India Pvt. Ltd. 9.58% 16 Jindal Intellicom Pvt. Ltd. 8.66% 17 Maple eSolutions Ltd. 20.43% 18 Mold Tek Technologies Ltd. 96.66% 19 R Systems International (Seg.) 4.30% 20 Spanco Ltd. (Seg.) 11.04% 21 Triton Corp. Ltd. 23.81% 22 Wipro Ltd. (Seg.) 30.05% Arithmetic Mean 27.53% 2.5. The Ld.TPO thus computed proposed adjustment at Rs.138,77,685/- being the difference. The Ld.TPO also denied the benefit of 5% even though assesse’s case fell within the safe harbor rules. 2.6. The Ld.TPO further noted that, the assessee provided certain business support services to its AE, details of which are as under: Sl. No. Nature of expense Amount 1 SAP maintenance expenses 22,00,268 2 Other legal expenses 26,56,448 3 Internal audit expenses 93,78,316 4 IT expenses 4,77,028 Total 1,47,12,060 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 9 2.7. The Ld.TPO noted that, the assessee had not charged any mark up to the services provided to its AE under this segment. Accordingly, based on the transfer pricing order passed for the previous assessment year, the Ld.TPO benchmarked the transaction by taking the margin at 11.93% and thus computed the adjustment of Rs. 17,15,159/-. 3. On receipt of the order of Ld.TPO, the Ld.AO passed draft assessment order on 18/01/2012, wherein along with transfer pricing proposed adjustment, following the disallowances were also proposed by the Ld.AO: Sl. No. Particulars Amount 1 Disallowance of deduction u/s 36(1)(vii) 32,51,44,22,114/- 2 Marked to market loss on interest rate derivative transaction 13,02,00,000/- 3 Disallowance u/s 14A r.w.r. 8D – interest portion read with exemption u/s 10(50), 10(34) and 10(35) 4,57,85,00,000/- 4 Disallowance of depreciation of leased assets 21,42,83,938/- 5 Disallowance of business loss and other expenses 12,25,33,260/- 6 Disallowance of club expenses 25,43,423/- 7 Disallowance of expenses on issue of discount of rupee and foreign currency bonds 6,54,231/- 8 Disallowance of eSOP expenses 79,28,46,381/- 3.1. On receipt of the draft assessment order, the assessee intimated the Ld.AO regarding its intention to file appeal before the Ld.CIT(A). The Ld.AO thus passed the final assessment order on 18/01/2012 under section 143(3) r.w. 144C of the Act. On receipt of the final assessment order, the assessee filed appeal before the Ld.CIT(A). ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 10 3.2. The Ld.CIT(A) after considering the submissions of the assessee confirmed the disallowance made under section 92CA of the act, as proposed by Ld.TPO and a few made under domestic law. The disallowance made under in respect of depreciation of leased assets and club membership fees, were deleted based on the observation of his predecessor on identical issue in similar facts and circumstances. Aggrieved by the order of the Ld.CIT(A), the assessee as well as the revenue are in appeal before this Tribunal. 4. At the outset, the Ld.AR submitted that, most of the issues raised by the assessee as well as the revenue, stands cover by the order of Co-ordinate Bench of the Tribunal in assessee’s own case for A.Y. 2007-08 in ITA No. 4248/M/2014 & 4159/M/2014 vide order dated 09.11.2023. Assessee’s Appeal: 5. The Ld.AR submitted that Ground no. 1 raised by the assessee is on the transfer pricing addition of Rs.1,38,77,685/-. She submitted that the assessee is seeking exclusion of following comparables based on functional dissimilarity: Sl No. Particulars Net cost plus margin (%) as per TP order 1 Accentio Technologies Ltd. 41.76 2 Coral Hubs Limited (formerly Vishal Information Technologies Ltd. 50.68 3 Cross Domain Solution Pvt. Ltd. 26.96 4 Eclerx Services Ltd. 65.88 5 HCL Comnet systems & Services Ltd. 32.9 6 Infosys BPO Ltd. 20.01 7 Mold-Tek Technologies Ltd. 96.66 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 11 8 R systems International Ltd. 4.3 9 Spanco Ltd. 11.04 10 Wipro Ltd. 30.05 5.1. It is submitted that if these comparables are excluded, assessee is acceptable with the margins that would be computed based on the remaining comparables. Before we undertaken the comparability analyze its sine qua non to understand the functions performed by the assessee, assets owned and risks assumed under the ITES segment. A. The assessee has placed the transfer pricing study report at page 649 of paper book. The services rendered by the assessee ITES segment are as follows: Function ICICI Bank AE Treasury support: • Processing of treasury-related transactions • Validation of deals, confirmation and settlement of deals • Settlement-related activities • Reconciliation of treasury accounts, bonds, inventory, etc. • Development of operational policies • Preparation of reports • Cash and fund management support \u0001 Back office account processing and related activities • Processing of applications for various products and services • Account opening in the books • Communicating with clients to solve discrepancies in forms • Reconciliation of accounts • Processing of money transfer transactions • Preparation of I-kits and I-packs for new accounts • Account maintenance services \u0001 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 12 • Handling queries Technology support services • Management of website • Customer information process in relation to logins, passwords, account numbers, etc. • . Secured framework of risk management \u0001 Asset ICICI Bank Appropriately qualified and trained personnel for performance of the services \u0001 Appropriately qualified and trained personnel for performance of the services \u0001 Risks borne Risk Service level quality risk - risk of delivering a quality product / service \u0001 Regulatory risk (ensuring that the AE has regulatory approvals for dealing in the respective products)_____________________ \u0001 Credit risk - risk of non-payment of dues by customers to whom credit has been extended \u0001 Client deliverable quality risk - risk of delivering a quality product to the ultimate customer \u0001 Working capital risk - risk of financing working capital requirements \u0001 Foreign exchange risk - risk of fluctuations in earnings due to fluctuations in currency conversion rates \u0001 Market risk - risk of uncertainty in business volumes \u0001 Software technology risk - risk of technology obsolescence \u0001 \u0001 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 13 Hardware and communications risk - risk due to obsolescence of hardware infrastructure and slow communication links \u0001 \u0001 Human capital risk - risk of appropriately trained human skill sets \u0001 \u0001 6. Based on the above, we analyze the comparability of assessee with the comparables sought to be excluded as under: Accentia Technologies Ltd., Coral Hubs Limited (formerly Vishal Information Technologies Ltd.), Eclerx Services Ltd., HCL Comnet Systems & Services Ltd., Infosys BPO Ltd., Mold Tek Technologies Ltd., R Systems International Ltd., Spanco Ltd. Wipro Ltd. 6.1. The Ld.AR submitted that, these comparables have been excluded by co-ordinate bench of this Tribunal in assessee’s own case for A.Y. 2007-08 in ITA No. 4248/M/2014 vide order dated 19.11.2023. The Ld.AR submitted that, this Tribunal found these comparables to be functional not similar to the assessee in paragraph 47, by observing as under: “Accentia Technologies Ltd. The Ld. AR submitted that the company is functionally different and is providing medical transcription, coding and software development. In this regard, we noticed that in the statement of accounts of the company, the income from operations (schedule-O page 716 of the PB) mainly consists of medical transcription, coding software development. We also noticed that income from medical transcription is more than 50% of the revenue, therefore, we see merit in the submission of Id. AR that the company is not functionally comparable with the assessee which is engaged in providing back office support services to its AE, therefore, we hold that Accentia Technologies Ltd. be excluded from the list of comparables. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 14 Vishal Information Technologies Ltd. The exclusion of this company is sought for the reason that the company has out sourced its activities and the business model is different. We in this regard notice that the exclusion of the company has been considered by the Delhi Bench of the Tribunal, in the case of American Express (India) (P.) Ltd., vs DCIT [2017] 83 taxmann.com 345 (Delhi - Trib.), where it is held that – The annual accounts of this company have been perused where the data entry charges and vendor payments have been specified at approximately 64.68 per cent of the total cost. This itself shows that this company is getting things done through outside vendor and is not carrying on work by employing its own human resources where as in case of the assessee, it carries on its business through its own employees for whom during the year it has incurred cost of almost 59 per cent of the total cost. The order of the co-ordinate bench in assessee's own case for the assessment year 2006-07 has also been perused wherein the co- ordinate bench has directed for exclusion of this comparable holding that the outsourcing model has its impact on the overall profitability of the company and therefore the business model of the comparable company is different than the assessee and hence it is required to be excluded. In view of this there is no reason to deviate from the order of the co-ordinate bench in assessee's own case for earlier years. Further, the Delhi High Court had also an occasion to consider the exclusion of Vishal information technologies Ltd. in Rampgreen Solutions (P.) Ltd. v. CIT [2015] 377 ITR 533/234 Taxman 573/60 taxmann.com 355 (Delhi) wherein, the High Court has held that this comparable could not be considered, as a comparable because of its business model was completely different. In view of the decision of the Delhi High Court as well as the decision of the co-ordinate bench in assessee's own case, the Assessing Officer/TPO was to be directed to exclude Vishal information technologies Ltd. from comparability analysis. The ratio laid down by the Tribunal in the above case is that the outsourcing model has its impact on the overall profitability of the company and therefore the business model of the comparable company is different than the assessee and hence it is required to be excluded. In assessee's case, the back office support services are rendered by the assessee through its own staff and therefore the business model of the assessee is different from that of the company. According we hold that ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 15 Vishal information technologies Ltd. be excluded from the list of comparables. Eclerx Services Ltd. The contention of the Id. AR with regard to exclusion of the company is that it is functionally different and is providing data analysis, data process solutions. The Id. AR is also seeking exclusion on the basis that the company is having unusual margin during the year under consideration as compared to earlier years. In this regard, we noticed that as per the financial statements of the company (page 847 of PB), we noticed that for the year ended 31.03.2007 the income of the company has almost doubled. Further, we noticed that as per the annual report wherein the functional profile of the company is stated to be that of KPO. Accordingly, we are of the view that the company cannot be compared with assessee which is rendering captive back office services to its AE. It is also relevant to notice here that in various decisions of the Co-ordinate Bench of the Tribunal, the inclusion of the said company has been rejected on the ground that the company is providing KPO services and therefore there is merit in the argument that the company which is rendering KPO services cannot be compared with the assessee. Accordingly, we direct the TPO to exclude Eclerx Services Ltd. from the list of comparables. Genesys International Corporation Ltd. The exclusion of this company is contended for the reason that the company is functionally different wherein the company is providing geographical information services comprising photogrammetry remote sensing data conversion and related computer based services. In this regard our attention was drawn to the annual report of the company where the business profile of the company is stated (page 1088 of PB schedule-M). Therefore, in our considered view there is merit in the contention of the assessee that the company is not functionally comparable to the assessee which is a back office service provider to its AE in various banking related activities. Accordingly, we hold that Genesys International Corporation Ltd. is not functionally comparable with the assessee and therefore to be excluded from the list of comparables. HCL Comnet Systems and Services Ltd. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 16 The exclusion of this company is contended on the ground that the company has prepared the financial statements for the year ended 30.06 whereas the assessee is financial year ended is 31.03. It is also contended that the company is having large scale operations as compared to the assessee and therefore, the same is to be excluded. In this regard, we noticed that from the perusal of the P&L A/c of the company. The company is having revenue of Rs. 314 crores which is significantly higher than the turnover of the assessee from back office support services. Further, it is noted that the Jurisdictional High Court in the case of CIT Vs. Pentair Water India Pvt. Ltd. (ITA No.18/2015) had rejected the inclusion of the company for the reason that the company is having large turnover. On perusal of the annual accounts of the company (page 887 of PB) we noticed that in ITES Segment, the company is rendering services to data centre management, individual computer managed securities services and tool and process consultant services which in our considered view is functionally not similar to the services rendered by the company which is extracted in the earlier part of this order. For these reasons, we hold that HCL Comnet Systems Services Ltd. is not comparable with the assessee and accordingly should be excluded from the list of comparables. ICRA Techno Analytic Ltd. From the perusal of the annual report of the company (page 886 of PB) we noticed that the company is deriving revenue from professional services which consists of revenue earned from service performed for software development, sub-licensing fees, web development and hosting, etc. Also it is noticed from the financial statements that the revenue generated mainly from software development and other allied services. It is also noticed that the decision of the Co-ordinate Bench in the case of DCIT Vs. Morgan Stanley Advantage Services Pvt. Ltd. (ITA No. 4406 and 4479/Mum/2012), the company is excluded for the reason that it is functionally different. In assessee's case, the assessee is engaged in the business of rendering back office services to its AE which is different from the nature of services rendered by the company. Accordingly, on the basis of functional comparability we hold that ICRA Techno Analytic Ltd. be excluded. Infosys BPO Ltd. The exclusion of the company is contended for the reason that the company is deriving very high turnover from its operations and therefore, ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 17 the same cannot be compared with the assessee company. In this regard, we noticed that the turnover of the company is Rs. 649.56 crores which is significantly higher when compared to the turnover of the assessee derived from rendering back officer support services. In our considered view when the operations of the company is much larger than that of the assessee, the assets employed and the risk undertaken would also be different and therefore, there cannot be any comparison between the company having a significantly higher turnover and the company with the lower turnover. We notice from the filters applied by the TPO that the filter for lower turnover of Rs.1 crore has been applied whereas there is no filter on upper turnover. It is settled position that while the turnover filter upper limit of the turnover filter should also be applied in order to excluded companies having very high turnover. We noticed in this regard that Hon'ble Bombay High Court in the case of Pentair Water India P. Ltd. (supra) has excluded the company on the basis of high turnover and also that on same basis the company is excluded in various decisions of the Jurisdictional High Court and also in the decisions of the Co-ordinate Bench. In view of this discussion, we are of the view that the company is not comparable with the assessee and therefore, we direct the TPO to exclude Infosys PBP Ltd. from the list of comparables. Mold Tek Technologies Ltd. Contention of the assessee seeking exclusion of this company is that the company is not functionally comparable. In this regard, we noticed that in the annual report, it is mentioned that the company's business segments are plastic and IT (KPO)) divisions. In the KPO division, the company is rendering services providing structural engineering and healthcare billing services. Further, from the P&L. A/c of the company (page 970 of PB), the revenue from KPO services is Rs. 11.40 crores which is 13% of total revenue of Rs. 88.11 crores whereby the company fails the TPO filter No.3 on exclusion of companies having ITES revenue of less than 75%. It is also noticed that the company is rejected from inclusion in the case of DCIT Vs. Morgan Stanley Advantage Services Pvt. Ltd. (supra) based on functionality, therefore, in our considered view the company which is into plastic and IT (KPO) Services is not functionally comparable with that of the assessee and accordingly we hold that Mold-Tek Technologies Ltd. should be excluded from the list of comparables. R Systems International Ltd. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 18 The Id. AR argued that the company is engaged mainly in sale of software products and rendering software development services. The Id. AR further argued that the income from ITES in the case of the company is only 14.75% and accordingly fails to filter applied by the TPO stating ITES revenue is less than 75% of total revenue. In this regard, we perused the financials of the company wherein we noticed that out of the total revenue of Rs. 117.54 crores is derived from sale of software products and rendering software development services. Therefore, we see merit in the submission of ld. AR that functions of the company cannot be compared with that of the assessee which is engaged in providing back office support services to its AE. Therefore, in our considered view based on functionality the company is not comparable with the assessee and accordingly we hold that R Systems International Ltd. be excluded from the list of comparables. Spanco Ltd. The exclusion of the company is sought on the ground of functionality dissimilar and that the ITES revenue is only 8.2% of the total revenue of the company. On perusal of the annual accounts of the company, we noticed that the main revenue of the company is derived from sale of Network Integration and other traded goods and also from sale of developed software and service income from network integration and others (page 1027 of PB). On further perusal, we noticed that the income derived from BPO operations is Rs. 35 crores out of the total turnover of Rs. 426 crores which is around 8.2%. From the perusal of the filters applied by the TPO which is extracted in the earlier part of this order one of the filters applied is to exclude companies whose ITES revenue is less than 75% of the total revenue. Accordingly, the company whose income from ITES is 8.2% fails the filter applied by the TPO and should be excluded accordingly. It is also noted that even on functionality the company is not comparable to that of the assessee since the major business of the company seems to be network integration of traded goods. In view comparables of the above, we hold that the company be excluded from the comparables. Wipro Ltd. From the perusal of the financial statement of the company we notice that the revenue generated by the company from ITES services is 939.78 cores (page 1079 of paper book) which is much higher than the revenue derived by the assessee from rendering back officer support services ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 19 rendered to AE. It is a well settled position that that size and scale of the operations are critical for comparability and that the company having higher turnover much more than that of the assessee would makes it inapposite comparable. Accordingly, we are of the considered view that Wipro Ltd be excluded from the comparables. 48. The TPO is directed to re-compute the ALP of the international transactions pertaining to adjustment towards back officer support services in accordance with the directions as given above with respect to exclusions / inclusions.” 6.2. The Ld.DR could neither bring out any distinguishing factual feature in respect of functions performed by the assessee for the year under consideration with assessment year 2007-08, nor could place any details contrary to the observations of the co-ordinate bench for AY. 2007-08 in respect of the above comparables. 6.3. We therefore do not find any reason to deviate from the same. Respectfully following the view taken by the coordinate bench for AY 2007-18, we direct the Ld.AO/TPO to exclude Accentia Technologies Ltd., Coral Hubs Limited (formerly Vishal Information Technologies Ltd.), Eclerx Services Ltd., HCL Comnet Systems & Services Ltd., Infosys BPO Ltd., Mold Tek Technologies Ltd., R Systems International Ltd., Spanco Ltd. Wipro Ltd. from the final list. 6.4. Accropetal Technologies Ltd: The Ld.AR submitted that, this comparable is functionally not similar with that of assessee as it is engaged in the development of engineering designs. It is submitted that this company is engaged in development of software and has incurred huge on sight development expenses during the year under consideration. She ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 20 submitted that the Ld.TPO considered the engineering design services segment to compare with the ITES segment of the assessee, which is a basic back up of support service rendered by assessee to its AE. It is submitted that, revenue generated under ITES by this comparable is more than 75% of the total operating revenue. She drew our attention to page 118 of the paper book where in segmental details of the comparables are provided. The Ld.AR also placed reliance on the decision of Co-ordinate Bench of this Tribunal in case of Goldman Sachs (I Securities (P) Ltd. vs ACIT reported in (2016) 72 taxmann.com 337 for exclusion of this comparable for identical reasons. 6.5. Cross Domain Solutions Pvt.Ltd. The Ld.AR submitted that this company is functionally not similar with the assessee as it is engaged in development of software products. She further emphasized that, there is not segmental details available in its audited balance sheet. The Ld.AR placed reliance on the decision of Hon’ble Bombay High Court in the case of PCIT vs BNY Mellon International Operations (India) Pvt. Ltd. reported in (2018) 93 taxmannc.com 363, wherein this company was upheld for exclusion by placing reliance on the decision of coordinate bench of Hon’ble High Court in case of DCIT vs Bills Processing Services India Pvt. Ltd. in ITA No. 2152/M/2014 vide dated 10.10.2014. Hon’ble High Court noted that this company is a high end KPO and this cannot be compared with captive service provider. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 21 6.6. On the contrary, the Ld.DR relied on the order passed by the authorities below. It is submitted by the Ld.DR that, the method adopted being TNMM requires broader comparability. He thus supported that as these comparables are rendering ITES Service and the revenue is identifiable from the segmental detail from the annual report. We have perused the submission advanced by both the sides in the light of records placed before us. 6.7. It is noted that this Accropetal Technologies Ltd is high end knowledge processing service provider as against the assessee who a captive service provider rendering services to its AE with minimal risk. Further, it is noted that, the revenue generated under the ITES segment of this company is more than 75% of the total revenue that fails the filter adopted by the Ld.TPO. It is also a fact that co-ordinate bench of this Tribunal for A.Y. 2008-09 excluded this company for being high end KPO Service provider. 6.8. In case of Cross domain solution Pvt.Ltd, it is noted that these comparables has been considered to be KPO service provider and also has developed brand of its own circumstances it cannot be compared with the assessee that is captive service provider only to the AE. 6.9. For all the above reasons, we do not find any merits in the arguments in the Ld.DR. Merely because TNMM is adopted, cannot be the reason to consider a company which is not functionally similar with that of assesse. It is necessary for the comparable to ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 22 be similar qualitatively in functions in order to determine the comparability. In the present facts of the case, admittedly the assessee is a low risk captive service provider only rendering services to its AEs whereas this company is a high and KPO and entrepreneur in itself. 6.10. We, therefore, direct the TPO to exclude Accropetal Technologies Ltd and Cross domain solution Pvt.Ltd form the final list. 7. The assessee has also alleged that the Ld.TPO bench marked the reimbursement of expenses with the mark up based on the transfer pricing order passed by the predecessor for preceding assessment year. It is submitted that, the assessee incurred certain expenses on behalf of its AE that was recovered on cost. The break up of the expenses incurred by the assessee are as under: Particulars Amount (Rs.) SAP Maintenance Expenses 23,08,41,072 Other Legal Expenses 26,56,448 Internal Audit Expenses 93,78,316 IT Expenses 4,77,028 7.1. The Ld.TPO imputed the transaction with 11.93% mark up. The Ld.AR submitted that similar adjustment was made by the Ld.TPO during assessment year 2007-08. It was submitted that ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 23 the authorities failed to verify allocation keys consistently applied by the assessee, based on which the cost was allocated. It is submitted that identical adjustment was considered by the co- ordinate bench of this Tribunal for AY.2007-08 (supra). 7.2. On the contrary, the Ld.DR submitted that assessee adopted TNMM as the most appropriate method and there cannot be directed co-relation between the revenue earned and the employee cost under such circumstances. It is submitted that assessee is rendering services like treasury support, back of his account processing and related activities, technology support services etc. that requires being bench marked with the mark up. He thus supported the order passed by the authorities below. 7.3. In the rejoinder, Ld.AR submitted that, functions performed by the assessee are purely BPO and is only processing the data without any critical analysis. She submitted that, assessee is only undertaking documentation and clerical work on behalf of its AE for third parties and there is no value addition to such services for which any mark up could be charged. We have perused the submission of both the sides and in the light of the records placed before us. 7.4. It is noted that the Ld.TPO made the adjustment during the year under consideration based on the adjustment proposed for AY:2007-08. It is noted that coordinate bench of this Tribunal considered identical issue for assessment year 2007-08 by observing as under: ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 24 “49. With regard to the benchmarking of business support services, the assessee furnished the below break up of a sum of R.1,51,79,844/- which is included in the amount received towards business support services. The assessee submitted that the nature of amount received is a 'pass through cost\" and hence no mark up was charged on the same. SI. No. Nature of expense Amount - Rs. A SAP maintenance expenses 17,85,423 B Legal expenses 55,14,827 C Internal audit expenses 73,44,177 D IT expenses 5,35,417 Total 1,51,79,844 50. The assessee further submitted before the TPO that these cost/costs are necessary for the purpose of exercising control over AE and, therefore, the same is recovered on a cost to cost basis from the AE. The TPO, however, did not accept the submissions of the assessee and held that these are in the nature of business support services for which the assessee is required to charge a margin since benefit is derived by the AE. The TPO did a benchmarking by selecting the following comparables to arrive at the arithmetic mean margin:- Name of the company Operating profits on operating costs (%) Financial Year 2006-07) Capital Trust -6.71 Crisil Limited 21.41 Cyber Media events Limited 10.64 Educational Consultants (India) Limited 10.64 ICRA Management Consulting Services Ltd 15.23 ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 25 IDC (India) Limited 15.33 NTPC Electric Supply Co.Ltd. 16.78 Arithmetic mean 11.59 51. Accordingly, the TPO made a TP adjustment as per below working:- Amount-Rs. A Operating cost 1,51,79,844 B Mark up @11.59% 17,59,344 C ALP (A+B) 1,69,39,188 D Price actually charged 1,51,79,844 E Adjustment (C-D) 17,59,344 52. The Id. AR reiterated the submissions made before the TPO. The Id AR submitted that these cost are incurred towards common services rendered by the third parties which are used by the AEs and the cost paid to third parties is allocated using allocation keys to all AEs using such services. Since the assessee does not do any value addition to the services and merely makes the payment and recover the same from AEs. For assessee these are pass-through costs and therefore no mark up is added to these costs 53. The Id DR relied on the order of TPO/CIT(A). 54. With regard to the pass through cost for which the TPO has added a margin of 11.59, we notice that from the nature of expenses that these costs are incurred on behalf of the AE and the same is allocated to the AF, using allocation key. Therefore, we are of the considered view that since the costs are pass-through costs and no value addition is made by the company by paying the cost on behalf of the AE and claiming the reimbursement there is no requirement of a mark up. Accordingly, we delete the adjustment made in this regard.” ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 26 It is an admitted fact that, expenses has been incurred by the assessee on behalf of its AE and the same is allocated using allocation key consistently followed by the assessee. In so far as the services rendered by the assessee are concerned, they are simplicitor business process outsourcing services without any involvement of skill, knowledge. Further these are pass through costs and hence no mark up is required to be charged. 7.5. Respectfully following the view taken by the co-ordinate bench in assessee’s own case for A.Y. 2007-08, we direct the Ld.AO/TPO to delete the adjustment made in this regard. Accordingly Ground no.1 raised by the assessee stands allowed. 8. Ground no. 2 raised by the assessee is in respect of disallowance of mark to market loss on forex derivatives. The Ld.AR submitted that, identical issue has been considered by co- ordinate bench of this Tribunal for A.Y. 2007-08. She also placed reliance on the decision of Hon’ble Supreme Court in case of PCIT vs Suzlon Energy Ltd. reported in (2020) 121 taxmann.com 137. 8.1. On the contrary, the Ld.DR relied on the orders passed by authorities below. We have perused the submission advanced by both the sides in the light of records placed before us. 8.2. The assessee claimed the forex derivatives losses during the year under consideration, the details of which are as under: ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 27 Particulars In Croress Currency derivatives 2,504 Interest rate derivatives 164 Forex derivatives 551 Credit derivatives 587 Net MTM Gain / Loss 1202 8.3. The Ld.AO called for various details that was provided by the assessee in support of its contention. After considering the submission of the assessee, the Ld.TPO was of the opinion that, merely because marked to market loss has to be provided for, in the books of account as per accounting standard, the same cannot constitute tangible expenditure for the purpose of Income Tax Act. 8.4. The assessee also alternatively submitted that, the marked to market loss may be treated as notional, in such case, corresponding marked to market gain may not be treated as taxable. 8.4. The Ld.AO held that the mark to market losses claimed by the assessee are in the nature of liability that is not crystallized and, therefore, cannot be claimed as a deduction as business loss. The Assessing Officer in this regard relied on the CBDT Instrn. Dated 23/03/2010. 8.5. On further appeal before the Ld.CIT(A), the disallowance was upheld the order of the Assessing Officer stating that the MTM loss is notional and that the assesee's claim that particular method of accounting continuously followed for a long period does not entail the assessee to presume that the method followed is correct. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 28 9. The Ld.AR submitted that the assessee enters into derivatives transactions in the course of its banking and treasury business in accordance with the guidelines issued by the RBI. The Bank act as counterparty for the corporate to enable them to hedge the risk. Assessee participate in the financial derivatives market part of their treasury activities. They deals in derivatives for their own balance sheet management and also for market making purposes, whereby the assessee offer their own derivative products to their customers, enabling them to hedge the risk. The assessee also manages its foreign exchange and interest rate risk to hedge its own borrowings. 9.1. It was submitted that the assessee accounts for the MTM gains/losses for such derivative contracts in accordance with the relevant Accounting Standard and the guidelines issued by RBI as the case may be. The ordinary principles of accounting are recognized under section 145 of the Act and unless there is a specific provision under the Income Tax law which lays down the taxability of a transaction in a particular manner, the accounting principles govern taxability of income. Under the basic principle governing the mercantile or accrual method of accounting, a gain or loss is accounted not when actually received or incurred, but when the legal liability/right arises. In forex derivative transactions, the MTM losses represent the unrealised losses that would arise if the transaction were to be squared off in accordance with valuation methodology. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 29 Dealing in derivatives is a part of normal banking business and as such, the gains and losses are offered to tax/claimed as deduction in accordance with the accrual method of accounting regularly employed by the banks. As per the consistent method of accounting followed by the Banks, the gains/losses on derivatives is offered to tax/claimed as deduction. Accounts and the accounting method followed by an assessee continuously for a given period of time needs to be presumed to be correct. Positive MTM on derivates are consistently accounted for and considered as part of income and similarly the 'loss' suffered by the assessee on account of the MTM on derivatives is allowable is an item of expenditure u/s.37(1). As the loss represent negative profits, there cannot be different treatment for the positive MTM and negative MTM as the nature of the income being the same and will not affect the taxability or deductibility of the same 9.2. The Ld. AR relied on the decision of Hon’ble Supreme Court in the case of Woodward Governor wherein it is held that notional loss suffered on foreign exchange difference is in the nature of business loss and allowable as a deduction as the loss would have crystallized if the contract was closed on the Balance Sheet date. The Ld.AR also relied on the decision of Hon’ble Special Bench of the of the Mumbai Tribunal in case of Bank of Bahrain and Kuwait, reported in 132 TTJ 505 relying on the Supreme Court decision, has recently decided in August 2010 that MTM losses on forward contracts are allowable, as a binding obligation is created against the assessee as soon as a forward contract is entered into ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 30 and if an assessee follows the same consistent method for accounting for both profits and losses, the loss should be allowed. Based on the above facts and legal position we submit that the MTM loss on Forex derivative is allowable as revenue loss u/s u/s.37(1). 9.3. On the contrary, the Ld.DR submitted that the MTM loss is not the real loss incurred by the assessee, but arise out of the re- instatement of the derivatives which is notional in nature. The Ld. DR also submitted that the lower authorities have correctly disallowed the said loss. The Ld. DR made a without prejudice submission that if the loss is to be allowed as a deduction, then the gain which was deleted by the order under section 154 should be brought back to tax. We have perused the submissions advanced by both sides in light of records placed before us. 9.4. It is submitted that the assessee has consistently recognised gains/losses arising out of forward contracts, and has been offering gains if any to tax arising from such contracts in accordance with accounting standard 11. It was submitted that, assessee retains outstanding forward contract loss/gains recognised as expenses/income respectively in the profit and loss account at the year end. Further, there is no dispute that, such contracts have been entered into by assessee in order to protect its interest against fluctuation in foreign currency in respect of consideration for export proceeds which are revenue in nature. Thus, in our view consequent effect of this accounting treatment is ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 31 to recognized as exchange fluctuation gain or loss in the profit and loss account as on the valuation date. Hon'ble Supreme Court in case of CIT vs Woodward Governor India (P) Ltd., reported in (2009) 312 ITR 254. Hon’ble Supreme Court established a precedent regarding the tax treatment of foreign exchange losses on both revenue and capital account transactions. Hon’ble Court held that, transaction in which a legal liability is incurred before it is actually disbursed, would be regarded as revenue in nature. In the present facts of the case, assessee incurred foreign exchange loss for year under consideration towards dealing in forex derivatives, it is directly attributable to business of assessee, which is an allowable expenditure. 9.5. The co-ordinate bench of this Tribunal in assessee’s own case on identical issue for A.Y. 2007-08(supra) relied of the decision of Hon'ble Supreme Court in case of CIT vs Woodward Governor India (P) Ltd., (supra) and decision of Hon’ble Mumbai Special Bench in case of Bank of Bahrin and Kuwait (supra)observed and held as under: “7. We heard the parties and perused the material on record. We notice that the Special Bench of the Tribunal in the case of DCIT vs Bank of Bahrain & Kuwait (supra) has considered the issue of allowability of loss arising out of MTM re-investment of foreign exchange contracts and held that- \"58. In view of the above discussion, we allow the assessee's appeal for the following reasons:- i) A binding obligation accrued against the assessee the minute it entered into forward foreign exchange contracts. ii) A consistent method of accounting followed by assessee cannot be disregarded only on the ground that a better method could be adopted. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 32 iii) The assessee has consistently followed the same method of accounting in regard to recognition of profit or loss both, in respect of forward foreign exchange contract as per the rate prevailing on March 31. iv) A liability is said to have crystalised when a pending obligation on the balance sheet date is determinable with reasonable certainty. The considerations for accounting the income are entirely on different footing. v) As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. vi) The forward foreign exchange contracts have all the trappings of stock in-trade. vii) In view of the decision of Hon'ble Supreme Court in the case of Woodward Governor India (1) P.Ltd., the assessee's claim is allowable. viii) In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit. 59. We, accordingly, hold that where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract.\" 8. Accordingly, we hold that the loss claimed by the assessee is to be allowed as a deduction. During the course of hearing, the Ld.AR fairly conceded that the gain on MTM which has been held to be treated as income of the assessee in the order passed under section 154 can be reversed in case the MTM loss is held to be allowed as a deduction. Accordingly, we direct the Assessing Officer to reconsider the order passed under section 154 reversing the MTM gain and bring the same to tax accordingly.” Respectfully following the above, we direct the Ld.AO to allow the deduction in respect of marked to market losses earned by the assessee. Accordingly Ground No.2 raised by the assessee stands allowed. 10. Ground no.3 raised by the assessee is in respect of the disallowance computed u/s 14A relating to the exemption claimed by the assessee u/s 10(15), 10(34) & 10(35). ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 33 10.1. During the assessment proceedings assessee was called upon assessee to explain as to why, disallowance should not be made under section 14A in respect of the expenses pertaining to earning of exempt incomes u/s 10(15), 10(34) & 10(35). The assessee submitted that investment made by it is out of cost free funds and there is no interest in local as incurred bullion exclusively for the purpose of earning dividend. It was submitted that the assessee has cost free fund of ₹ 71, 511.49 crores as on 31/03/2008 and investment in shares, mutual funds, commercial papers et cetera stands at ₹ 27, 841.65 crores. It wasn’t submitted that no expenses other than administrative expense at 1% of the gross dividend/interest income have been incurred for earning the said exempt income. 10.2. The assessee submitted that, only direct expenditure in relation to earning exempt income can be disallowed under section 14A and all other expenditure cannot be considered as it is allowable under section 37, being wholly and exclusively incurred for the purposes of business of the assessee. Assessee had relied on the decision of Hon’ble Supreme Court in case of Rajasthan State warehousing Corporation vs. CIT reported it to 242 ITR 450, wherein it was held at an assessee carrying on one indivisible business in various ventures that has yielded both taxable and exempt income, the entire expenditure is permissible to deduction without any apportionment. 10.3. The Ld.AO after considering the submissions of the assessee computed 14A disallowance by observing as under: ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 34 “The assessee had itself disallowed a sum of 11,94,09,415 @ 1% of the total dividend on account of administrative expenses attributable to the dividend income as per the notes to the original return.. The assessee had allocated the administrative expenses only on estimate basis, without any reasoning. Since the assessee itself has arrived at the figure of administrative expenses at 47 crore therefore, disallowance u/s 14A out of administrative expense is adopted at Rs 47 crore and addition to the tune of Rs (47,00,000,00-11,94,09,415) = Rs 35,05,90,585/-is made keeping into view the sum disallowed by the assessee. 8.14 The total disallowance u/s 14A amounting to Rs 594 crore plus Rs 35,05,90,585/-=629,05,90,585/- is added to the total income. Penalty proceedings u/s.271(1)(c) will be initiated separately for furnishing inaccurate particulars of income thereby concealing the income.” 10.4. On an appeal before the Ld. CIT(A), the disallowance made by the Ld.AO was upheld. 11. The Ld.AR submitted that, assessee made suo moto disallowance of 11.94 crores and no further disallowance could be made in respect of the interest expenditure as assessee has its own sufficient funds in form of reserve and surplus share capital amounting to Rs. 46820.20 crores. It is submitted that, assessee has sufficient current account deposit. 11.1. She placed reliance on the decision of Hon’ble Supreme Court in the case of Maxopp Investments Ltd. vs CIT reported in (2018) 402 ITR 640, in order to support her contention that the investment made by the assessee and held as stock in trade should be excluded for the purposes of Rule 8D(2)(iii). The Ld.AR has furnished computation of Rule 8D which is applicable for the year under consideration and is placed at page 903 and 904 of the paper book. The Ld.AR by placing reliance on various decisions on ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 35 identical issue, fairly submitted that, at the most the disallowance could be Rs.13.39 as per the computation at page 904. 11.2. The Ld.DR submitted that the same may be remanded for necessary verifications to the Ld.AO. We have perused the submission advanced by both the sides in the light of records placed before us. 11.3. It is noted that assessee suo moto disallowed of Rs.11.94 crores, however for the year under consideration 14A disallowance has to be computed as per Rule 8D. The assessee has furnished a computation as under: Particulars Amount March, 2008 Opening Investment Shares (equity and preference)s 524.42 Subsidiaries and/or joint ventures 1073.23 Venture funds 670.21 Total – a 2267.87 Closing investment Shares (equity and preference) 979.49 Subsidiaries and/or joint ventures 1846.33 Venture funds 263.07 Total – b 3088.88 Average Investment (a+b)/2 2678.37 Section 14A disallowances c) Administrative expenses (0.5%) 13.39 Total 13.39 The Ld.AO is directed to verify the same and to consider the disallowance in accordance with law. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 36 Accordingly, Ground no.3 raised by the assessee stands partly allowed for statistical purposes. 12. Ground no.4 raised by the assessee is in respect of disallowance bad debt written off. 12.1. The Ld.AO observed that, assessee claimed bad debts of Rs.6,76,70,81,747/-. It was noted that after adjusting credit balance of Rs.296,65,17,179/- in the provision of bad and doubtful debts, the deduction claimed by the assessee under section 36(1)(vii) of the Act was Rs.380,05,11,568/-. The Ld.AO called for various details in respect of the claim. After considering the submission of the assessee, the Ld.AO observed and held as under: “The circumstances and the facts of the case is similar to earlier year. The assessee as may be seen could not satisfy the provisions of section 36(2) in earlier years also. Further, in this year assessee in fact did not give any details of the cases pertaining to bad debt written off and rather simply contended that bad debt is allowable as the same are written off in the Books. As discussed in para 10.5, certain details are necessary to see whether the all criteria as envisaged in the Act are fulfilled or not before allowing the claim of bad debt. The assessee has not submitted any details whatsoever. It is not known as what was the original debt, what were principal and interest component of the debt, whether the securities were adjusted against the debt, what part of debt had already been debited to P & L account as bad debt, what is the status of such debits in assessments and appellate levels, whether write off has been made in the ledgers or not, how the income was shown in the previous year etc. No such information is coming forth from the assessee. In view of the discussion in para 10.5 and in view of the fact that in support of its claim the assessee could not substantiate the claim as per provisions of section 36(1)(vii) r.w.s 36(2) by way of giving complete details, it is held that the assessee has failed to justify the conditions requisite for allowance of a debt, as bad debt u/s 36(1) (vii) of the I.T. Act. Further the issue on same facts is sub judice in the previous years. In the result, the ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 37 claim of bad debt of 26,76,70,81,747/-is disallowed, and is added to total income. Penalty proceedings u/s 271(1)(c) are separately initiated for furnishing inaccurate particulars of income and concealment of income. 12.2. On an appeal before the Ld. CIT(A), the disallowance made by the Ld.AO was upheld. 13. The Ld.AR submitted that the bad debts claimed by the assessee comprises of bad debts written off on retail and corporate loans as under: Sl. No. Particulars Amount 1 Bad debts – Corporate loans 101,70,31,219 2 Bad debts – Retail loans 92,34,53,699 Total 194,04,84,918 13.1. The Ld.AR submitted that, the amount was merely written off and there was no need for the loan to become bad as per the provisions of section 36(1)(vii). She placed reliance on the observation of the co-ordinate bench of this Tribunal in assessee’s own case for A.Y. 2003-04 in ITA no.8420&8435/Mum/ 2010 vide order dated 21/07/2023, wherein identical issue was considered on similar findings of the authorities below. She also placed reliance on the decision of Hon’ble Supreme Court in the case of TRF Ltd. vs CIT reported in 230 CTR 14 and Vijaya Bank vs CIT & Anrs. reported in 323 ITR 166. 13.2. The Ld.AR submitted that for A.Y. 2004-05 and 2005-06, this Tribunal remanded the issue back to the Ld.AO to consider the claim of assessee in the light of the decision of Hon’ble Supreme Court in the case of Vijaya Bank (supra). In support she relied on the decision of Co-ordinate Bench of this Tribunal for AY. 2007- ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 38 08(supra), wherein identical direction was issued to the Ld.AO while remanding. 13.3. The Ld.DR on the contrary relied on orders passed by authorities below. We have perused the submission advanced by both the sides in the light of records placed before us. 13.4. It was submitted by the Ld.AR that, during the year under consideration the assets of the defaulting company were assigned Asset Reconstruction Company India Limited (ARCIL) who failed to sell the assets. Referring to the amendment to section 36(1)(vii) w.e.f. 01.04.1989, the Ld.AR submitted that, there is no requirement on the part of the assessee to prove that the debt has turned bad. Reliance was also placed on the CBDT Circular No. 12/2016 dated 30.05.2016. The Ld.AO rejected the bad debts written off u/s 36(1)(vii) of the Act on identical facts and circumstances for A.Y. 2003-04. Co-ordinate bench of this Tribunal for AY 2003-04 observed and held as under: “15. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also perused the decisions on which both sides have placed reliance in support of their respective arguments. 16. At the outset it is observed that the assessee has written off bad debts to the tune of Rs.1503,06,07,093/- u/s, 36(1) (vii) of the Act. The Assessing Officer while analyzing the debts written off by the assessee has rejected the claim of assessee to the extent of Rs.769,75,10,766/-. The remaining claim of the assessee has been accepted by the Assessing Officer. While examining the claim of bad debts written off, the Assessing Officer has segmented the debtors into large debtors, bad debt written off more than Rs.1.00 crore, bad debts in respect of which allegedly vague ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 39 explanation has been offered by the assessee, bad debts in respect of erstwhile AFL and fees written off. It is an undisputed fact that the assessee has written off bad debts in the books of account. The provisions of section 36(1)(vii) were amended w.e.f. 1 ^ (xt) April 1989. The Hon'ble Apex Court in the case of TRF Ltd. (supra) after analyzing the provisions of section 36(1)(vii) of the Act prior to amendment and post amendment held that after 1 ^ prime prime April, 1989 it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if bad debts are written off as irrecoverable in accounts of the assessee. In line with the aforesaid decision CBDT issued Circular No. 12/2016 clarifying the legislative intent behind the amendment and the law settled by Hon'ble Apex Court in the case of TRF Ltd. (supra) with regard to admissibility of claim of deduction of bad debts u/s. 36(1)(vii) of the Act. For the sake of completeness the relevant extract of the said Circular is reproduced herein below: 2. Direct Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(1)(vii) and 36(1)(vii) and 36(2) of the Income Tax Act 1961. (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the r ^ (at) April, 1989. 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010, has stated that the position of law is well settled. \"After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1) (v|l) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee\" 4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(l)(vii) of the Act. if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 40 Accordingly, no appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue withdrawn/not pressed upon.\" before various Court/Tribunals may be withdrawn/not pressed upon. 17. The main plank of arguments by the Id. Departmental Representative is that the assessee has failed to establish that debts that have been written off had in fact become bad. In support of this contention the Id. Departmental Representative has placed reliance on various case laws. The requirement to establish that the debts have become bad was done away vide armendment effective from 1\" April, 1989. Under the old provisions of section 36(1)(vii) of the Act as were applicable prior to 1\" April, 1989, it was mandatory to establish before writing off that the debts have become bad. After amendment (effective from 1\" April, 1989) the requirement of section 36(1)(vii) as explained by Hon'ble Apex Court in the case of TRF Ltd. (supra) is, it is sufficient if the bad debt is written off as irrecoverable in accounts of the assessee. The Act does not require the assessee to establish that the debts have in fact become bad before writing off. The CBDT vide Circular dated 30/05/2016 (supra) in an unambiguous manner explained the mandate of section and the law as explained by Hon'ble Apex Court in the case of TRF Ltd. (supra). Though the findings of CIT(A) in the impugned order on the issue are primarily based on the order of CIT(A) for assessment years 2001-02, 2002-03 and 2004-05 without any discussion, but we find no error in the conclusion in deleting the addition. Hence, ground No.1 raised in appeal by the Revenue is dismissed. 13.5. It is noted that the appeal filed for AY. 2003-04 by the Revenue and this Tribunal has upheld the view of Ld.CIT(A) in deleting the addition based on the factual observation by the 1st of authority. However in the present facts of the case it is noted that the Ld.AO/ CIT(A) did not verify the issue based on the ratio laid down by Hon’ble Supreme Court in case of TRF Ltd. vs CIT and Vijaya Bank Ltd (supra). We accordingly direct the Ld.AO to verify the claim of assessee in the light of the ratios by Hon’ble Supreme Court in the above referred decisions in accordance with law. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 41 Accordingly, this ground raised by the assessee stands partly allowed for statistical purposes. 14. Ground No.5 raised by the assessee is in respect of disallowance of business loss and other expenses. 14.1. During the assessment proceedings are Ld.AO noted that assessee claimed loss of Rs.290,47,92,249/- which included loss on repossessed assets, the details of which are as under: Sr. No. Particulars Amount (Rs.) 1. Loss on sale of re-possessed assets – automobiles 47,09,64,599 2. Loss on sale of re-possessed assets-consumer durables 26,70,630 3. Loss on sale of re-possessed assets two wheeler 29,13,54,083 4. Loss on sale of re-possessed assets-construction equipment 90,65,790 5. Loss on sale of re-possessed assets-commercial vehicles 74,86,29,880 6. Loss on sale of re-possessed assets-car overdraft 10,43,00,355 7. Loss on sale of re-possessed assets-farm equipments 51,10,05,485 Total 213,80,20,823 14.2. The assessee submitted that it gives loan for purchase of vehicles, 2 wheeler as well as consumer vehicle, farm equipments etc mainly to individuals. The said loan is given against hypotheses of the asset. It was submitted that the loan is generally given for period of 3 to 5 years and EMI’s are accordingly fixed over the tenure of the loan. It is submit that, EMI’s when become overdue from its customers, the assessee starts efforts to collect the overdue amount which involves steps like awareness calling, collection calling, demand notice, field collection, possession and disposal of hypothecated assets. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 42 14.3. The assessee submitted that, in the event it is unable to recover its dues in spite of follow-ups, assessee finally resorts to the last step that is possession and disposal of the vehicle. The assessee submitted that the outstanding loan amount as on the deed of repossession along with outstanding EMI is represent the total amount due from the borrower. On sale of the asset the EMI overdue are 1st adjusted against the sale proceeds and the balance of the sale proceeds is then appropriated towards the principal portion. The assessee submitted that if there is any balance principal portion outstanding is then written off as a business laws on the sale of repossessed assets. 14.3. The submissions by the receiver considered by the Ld.AO, however was not accepted based on the disallowance that was made in the immediately preceding assessment year for a white 2006-07 and 2007-08. 14.4. On an appeal to the Ld.CIT(A) the disallowance made by the Ld.AO was upheld. 15. before this Tribunal, the Ld.AR submitted that repossessed assets due to default in repayment of EMI’s by the individual customers were sold out, of which money realised was adjusted against the unpaid loan amount and the net amount was claimed as business loss. The Ld.AR drew our attention to pages 905 wherein the breakup of the laws on the repossessed assets have been placed. She also relied on the letter dated 11/10/2011 and 29/10/2011 placed at page 114 and 377 of the paper book containing all the details of the statement prepared party vice in ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 43 respect of the loss on sale of repossessed assets by the defaulting customers. She also placed reliance on the decision of coordinate by of this Tribunal in assssee’s own case assessment year 2007-08 (supra) wherein identical issue has been considered on similar facts. 15.1. On the contrary the Ld.AR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in the light of the records placed before us 15.2. The breakup of the repossessed assets placed in the pre- paper book at page 905 is as under: Statistical breakup of loss on repossessed assets Range Count Amount (Rs.) Percentage of amount Above 20 lakhs 3 1,02,61,288 0.48 Above 10 lakh below 20 Lakhs 1 16,19,479 0.08 Above 5 lakh below 10 lakhs 205 12,67,20,013 5.93 Above 1 lakh below 5 lakhs 6,571 1,22,57,47,130 57.33 Less than 1 Lakh 30,900 66,93,89,883 31.33 Others 10,42,83,030 4.88 TOTAL 2,13,80,20,822 100.00 15.3 It is noted that coordinate bench of this Tribunal in the preceding assessment year 2007-08 (supra) remanded identical issue on similar facts back to the Ld.AO to examine afresh by observing as under: “24. We notice that in the details furnished by the assessee before the Assessing Officer, the assessee has furnished the loan account number, party name, and the amount. However in our considered view it is important to examine the amount of loan given, amount realized from the ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 44 borrower, un-recovered amount, the amount realized on sale, how the net loss is computed etc., and these need to be factually verified. From the details submitted, it is not clear as to how the loss finally claimed is computed i.e. the loss is arising out of the difference between the unrecovered portion of the loan after setting off the amount realized from sale of the re-possessed assets. We, therefore, remit the issue back to the Assessing Officer for fresh examination and direct the assessee to furnish the complete details of loans given, the nature of assets re-possessed, sale value of the re-possessed assets and how loss is computed. It is ordered accordingly” 15.4. Respectfully following the above view, we direct the Ld.AO to carry out fresh examination of the based on the documents furnished by the assessee in respect of the loan given to the individual customers and the nature of the assets repossessed and the sale value of the repossessed assets. Assessee is directed to furnish all relevant details in respect of the same. Ld.AO is directed to consider the claim in accordance with law. Needless to say that proper opportunity of being hurt must be granted to assessee. Accordingly ground number 5 raised by the assessee stands archaeological statistical processes. 16. Ground No.6 raised by the assessee is in respect of disallowance of provision of expenses. The Ld.AO noted that assessee made provision on which no tax was deducted. Assessee was thus called upon to explain as to why it made provision for expenses like telephone, conveyance, professional fee et cetera which is made in the month of March and reversed in the following year on 1st of April. The Ld.AO noted ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 45 that in the immediately preceding year, assessee deducted tax on the provisions made as reported in the tax audit. 16.1. The assessee submitted that to the extent of ₹48,93,81,195/- the recipient was not identifiable and therefore an ad hoc provision was made which was reversed on the 1st April of the next financial year. It was submitted that the assessee deducted TDS upon payment to the recipients. The Ld.AO after considering the submissions of the assessee disallowed the provisions as under sustained liability. 16.2. On an appeal to the Ld.CIT(A), the disallowance made by the Ld.AR was upheld. 16.3. Before this Tribunal the Ld.AR submitted that the breakup of year and provision for expenses are pleased at page 906. She submitted that the provision is claimed as per mercantile system of accounting. It was submitted that in any event TDS is not applicable on the year and provision. She placed reliance on the decision of Hon’ble Karnataka High Court in case of Subex Ltd. vs DCIT in ITA No. 787 of 2017 vide order dated 22/12/2022. 16.4. On the contrary the Ld.AR relied on orders passed by authorities below. We have perused submissions advanced by both sides in the light of records placed before us. 17. It is an admitted fact that in the kind of business carried out by the assessee most of the times the bills are not received by 31st ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 46 March of the financial year relevant to the assessment year under consideration. In such cases the year and provision are made on an estimate basis and subsequently are reversed in the books of account on the 1st day of the next year upon receipt of their invoices. It is also not disputed that in the subsequent financial year the payments made by the assessee has been subjected to TDS. Further various courts and Hon’ble Supreme Court in case of Eli Lilly &Co vs CIT reported in (2009) 312 ITR 225 and the decision of GE India Technologies reported in (2010) 327 ITR 456held that, if the income component itself is not embedded in the amount provided, then there cannot be any liability to deduct tax at source even though TDS is a vicarious liability. It is noted that Hon’ble Karnataka High Court in case of Subex Ltd. vs DCIT (supra) has observed and held as under: “8. We have carefully considered the rival contentions and perused the records. 9. It is not in dispute that the provisions made at the end of the accounting year were reversed in the beginning of the next year and no payees were identified nor the exact amount payable... 10. In Karnataka Power Transmission Corporation Ltd. Vs. Deputy Commissioner of Income Tax (Supra), relied upon by the assessee, this Court has held that if no income is attributable to the payee there is no liability to deduct tax at source in the hands of the tax deductor. After quoting a passage from Kedarnath Jute Mfg. Co. Ltd. 15, this Court has held that the existence or absence of entries in the books of accounts is not decisive or conclusive factor in deciding the right of the assessee claiming deduction. 11. In Volvo India Pvt. Ltd. Vs. ITO16, this Court has observed that: \"It is ex-facie apparent that the contention of the assessee Inasmuch as non-identification of the payees in the provisions and ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 47 the disallowance of deduction experiditure under Section 40(a)(ia) of the Act has not been rightly appreciated by the Tribunal... If the deduction is not claimed for the expenditures made in the provision even in the return submitted and the same is offered to tax in the subsequent year after reversing the entries pursuant to the receipt of the bills/invoices by the payees; the matter has to be analysed having regard to, whether income has accrued to the payees to deduct tax at source.\" 12. We may record that it was argued by Shri. Chaithnaya that assessee had deducted tax.at source in subsequent year in accordance with the provisions of Chapter XVII-B and remitted within the due date and the same was not refuted. 13. So far as the authority in Palam Gas Service Vs. CIT (Supra), it is relevant to note that the payees were identified in that case as recorded in para 5 of that judgment. In contradistinction, in the case on hand the payees were not identified. Therefore, the said authority does not lend any support in the contentions urged on behalf of the Revenue. 14 In view of the law laid down in Karnataka Power Transmission Corporation Ltd. & Volvo India Pvt. Ltd. (supra), we are of the considered opinion that the ITAT's order reversing DRP's Order and issuing further direction to AO is perverse. Hence, the following: ORDER (a) Appeal is allowed. (b) The first question of law is answered in favour of assessee and against the Revenue. (c) In view of first question being answered in favour of the assessee, the second question does not arise for consideration.” Respectfully following the above view we are of the opinion that year end provision was made on estimate basis by the assessee cannot be denied in such facts as observed herein above. Accordingly ground 6 raised by the assessee stands allowed. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 48 18. Ground No.7 is in respect of the disallowance of contribution to pension and that it is paid on account of Sanghli Bank Ltd. 18.1. The Ld.AR observed that, assessee made a claim for deduction on certain accounts including discharge of liability towards pension/graduate refund in respect of Sanghli Bank. It is noted that neither any details were provided in respect of the claim nor revised return was filed in respect of the same. The Ld.AO thus disallowed the claim. 18.2. On an appeal before the Ld. CIT(A) the claim was rejected placing reliance on the decision of Hon’ble Supreme Court in case of Goetz India Ltd., reported in (2006) 284 ITR 323 18.3. Before this Tribunal the Ld.AR submitted that, assessee had filed bank statements showing payment made which is pleased at page 414 of the paper book. She also relied on the decision of Hon’ble Bombay High Court in case of the Prithvi Brokers and shareholders reported in (2012) 349 ITR 336 in support of the claim. The Ld.AR submitted that, the issue may be remanded to the Ld.AO wherein the claim filed by the assessee can be analysed based on the documents furnished. She also plays a reliance on specific observation by Hon’ble Supreme Court in case of Goetz India Ltd (supra). 18.4. On the contrary the Ld.DR relied on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of the records placed before us. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 49 19. Admittedly the claim was raised by the assessee during the assessment proceedings and no revised return was. The authorities below under such circumstances do not have the power to examine a claim is does not form part of the return of income. However Hon’ble Supreme Court in case of Goetz India Ltd (supra) observed as under: “3. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal. 4. The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961.” 19.1. Based on the above observations, we remand this issue back to the Ld.AO to verify the claim of the assessee in the light of the evidence is furnished in accordance law. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly ground number 7 raised by the assessee stands allowed for statistical purposes. 20. Ground No.8 raised by the assessee is in respect of the disallowance of discount expenses claimed by the assessee on bonds. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 50 20.1. It is submitted that there is no finding on this issue by the Ld.AO. The Ld. CIT(A) on an appeal dismissed the claim of the assessee by stating that the issue does not arise out of the assessment order. 20.2. Before this Tribunal the Ld.AR submitted that, assessee had claimed identical expenditure during assessment to 2002-03 and this Tribunal in assessee’s own case in ITA number 836/UM/2008 vide order dated 07/07/2017 remanded the issue to the Ld.AO with a direction to allow proportionate expenditure on the issue to be spread over the period of the bonds. She submitted that similar issue again arose for assessment in 2007-08 wherein following the observations of this Tribunal for assessment year 2002-03 the issue was remanded with similar direction. 20.3. The Ld.DR supported the observations of the authorities below. We have perused submissions advanced by both sides in the light of the records placed before us. 20.4. It is submitted that the claim of deduction was 1st made in the assessment year 2002-03 and coordinate bench of this Tribunal for assessment in 2002-03(supra) directed the Ld.AO to allow proportionate expenditure on the issue of discount of bonus to be spread over the period of bond. The Ld.AR has also submitted that for assessment in 2014-15 the assessing officer himself allowed the claim of assessee on proportionate basis. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 51 We notice that for assessment of 2007-08 identical issue has been considered following the decision of coordinate bench of this Tribunal for assessment in 2002-03(supra) by observing as under: “27. We heard the parties and perused he materials on record. We notice that the co-ordinate bench in assessee's own case for A.Y. 2002-03 had considered the similar issue and has issued a direction to spread the expenditure over the tenure of the bond. The relevant finding of the Tribunal in this regard is extracted below:- \"22. We have heard the rival contentions of the parties and perused the material available on record. As far as the nature of expenditure it of bonds / debenture and issue expenses are concerned, dispute that such expenditure is revenue in nature. In fact, in case o Madras Industrial Corp. (supra), the Hon'ble Supreme Court expenditure incurred on issue and discount of bond/debenture are revenue in nature as the liability incurred by the assessee is wholly and exclusively for the purpose of business, However, at the same time, the Hon'ble Supreme Court held that since by incurring such expenditure the assessee secures a benefit for a mumber of years and there is continuing benefit to the business of the assessee over the entire period turbont debenture, the liability should be spread over the period of wonderlebent bond Though, the Assessing Officer has referred to the aforesaid decision Hon'ble Supreme Court and accepts the legal position, however den of the tond bleven the expenditure relating to the impugned assessment year oroheallowed that the assessee has not furnished the books of account for verifying the correctness of the claim. It needs to be mentioned, the learned Commissioner (Appeals) while accepting assessee's alternative claim has leaned Commissioner (Appeals able to the impugned assessment year has to be allowed and the auditor expenditure has to be spread, over the period of bond/debenture. We find the aforesaid reasoning of the learned Commissioner (Appeals) to be in tune with the ratio laid down by the Hon'ble Supreme Court in Madras Industrial Investment Corp. (supra). As discussed earlier, in the aforesaid decision, the Hon'bie Supreme Court, though held that the expenditure incurred on bonds/debenture is revenue in nature, the expenditure has to be spread ever the period of bond/ In fact, the learned Authorised Representative has before us that in the subsequent assessment years, the Officer has allowed such ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 52 expenditure on pro-rata basis, r, as it appears from the record, the assessee itself was earlier following an accounting method under which the expenditure on issuance of discount and bond/debenture was spread over the tenure of the bond /debenture. In view of the aforesaid, we direct the Assessing Officer to allow the proportionate expenditure on the issue and discount of bonds / debenture as relatable to the impugned assessment year and the balance expenditure should be spread over to the tenure of bond/debenture. This ground is partly allowed.\" 28. Therefore, we see merit in the contention claim of the assessee that proportionate expenditure pertaining to the year under consideration should be allowed as a deduction. Accordingly, we direct the Assessing Officer to consider the claim of the assessee and allow the deduction in accordance with the directions given by the Tribunal.” Respectfully following the above view we direct the Ld.AR to allow the claim of the assessee on proportionate basis. Accordingly ground number 8 raised by the assessee stands allowed. 21. Ground No.9 raised by the assessee is on short grant of relief under section 90 Admittedly assessee made additional claim during assessment proceedings against which the TDS certificate was been submitted. The Ld.AO is directed to verify the same and consider the claim of assessee in accordance with law. Accordingly ground number 9 raised by the assessee stands allowed for statistical purposes. 22. Ground number 10 is in respect of interest charged under section 234 B 234D of the act. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 53 As these are consequential nature does not require separate adjudication. 23. Ground number 11 is in respect of applicability of provision of section 115 JB of the act. 23.1. It is submitted that the Ld.CIT(A) dismissed the ground of assessee by observing that the issue does not arise out of the assessment order. 23.2. The Ld.AR submitted that the issue is covered in assessee’s own case assessment years 2004-05 and 2005-06 and subsequently the assessing officer himself has accepted the submissions of the assessee in the subsequent assessment years being suspended 2010-11 and 2011-12. She also placed reliance on the decision of Hon’ble Bombay High Court in case of CIT vs Union Bank of India reported in (2019) 177 DTR 305 and the decision of Hon’ble Karnataka High Court in case of CIT vs ING Vysys Bank Ltd., reported in (2020) 114 taxmann.com 506. 23.4. The Ld.DR on the country relied on orders passed by authorities below. We have perused submissions advanced by both sides in the light of the records placed before this. This issue is no longer res integra as it has been held by Hon’ble Bombay High Court and Hon’ble Supreme Court that provisions of 115 JB of the act is not applicable to banking institutions. Respectfully following the view, we do not find any merit in the ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 54 applicability of section 115 JB of the act to the facts of the present assessee. Accordingly ground number 11 raised by the assessee is stands allowed. Departmental appeal: 24. Ground number 1 raised by the revenue is against the claim of depreciation on leased assets allowed by the Ld. CIT(A). 24.1. During the year under consideration assessee has claimed depreciation of Rs.30,63,55,733/- on leased assets. The Ld.AO disallowed the claim of the assessee by holding that ownership of the assets is not established by the assessee and therefore these transactions are of financial transaction. 24.2. The Ld.CIT(A) followed its predecessors order in assessee’s own case of the preceding assessment years and allowed the claim of depreciation on leased assets. Against the order of the Ld. CIT(A) the revenue is an appeal before this Tribunal. 24.3. At the outset both sides admit to the fact that identical issue has been considered by coordinate bench of this Tribunal in assessee’s own case from assessment year 2003-04 till assessment year 2007-08. It is also an admitted fact that no new lease transaction has been entered into by the assessee during the year under consideration. The learning DR has not been able to bring ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 55 out any new fact which are distinguishable with the present year under consideration in order to take a contrary view. We note that identical issue has been considered by coordinate of this Tribunal in assessee’s own case for assessment year 2007-08 (supra) by observing as under: “57. We have heard the parties and perused the material on record. We noticed that the Co-ordinate Bench in assessee's own case for AY 2004- 05 and 2005-06 (ITA No. 5276/Mum/2013 and ITA No. 6217/Mum/2008 dated 03.11.2017) has considered the similar issue and has held that \"17. We have heard rival contentions and perused the material available on record. Learned Counsels appearing for both the parties have agreed before us that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case for preceding assessment year as submitted in the paper book. As could be seen from the material on record, in the impugned assessment year, there is no new lease transaction. The assessee has claimed depreciation on its own fixed assets and depreciation claimed on leased assets were continuing from past lease transactions. Notably, in assessment year 1997-98, the Tribunal while deciding the issue in ITA no.5424/Mum./2001, dated 13th July 2016, had allowed assessee's claim of depreciation. The same view was reiterated by the Tribunal while deciding the cross appeals for assessment year 2000-01 in ITA no.4657/Mum./2004 and ITA no.4826/Mum./2004 dated 31st January 2017. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on this issue. Ground no.3 is dismissed.\" 58. Considering the fact that no new lease transactions are entered into by the assessee during the year and that the Co-ordinate Bench has been consistently hold the issue in favour of the assessee, where for the year under consideration see no reason to interfere with the decision of the Ld. CIT(A). This ground of the Revenue is dismissed.” ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 56 24.4. Respectfully following the above view and also taking into consideration the fact that no new lease transaction has been entered into by the assesse, we do not find any infirmity in the view taken by the Ld. CIT(A). Accordingly ground number 1 raised by the revenue stands dismissed. 25. Ground number 2 raised by the revenue is against the club membership fees being allowed as expenditure under section 37 of the act by the Ld. CIT(A). 25.1. During assessment proceedings are Ld.AO noted that assessee claimed ₹49,81,062/- towards club membership. Assessee was called upon to explain as to why the said expenditure should not be treated as capital expenditure. In response assessee submitted that membership fees peter the club is allowable as business expenditure since it is incurred to promote the business interest of the assessee. Assessee also relied on the decision of Hon’ble Bombay High Court in case of Otis elevators company India Ltd reported in 195 ITR 682. The Ld.AR however dismissed the claim of the assessee by treating the expenditure to be capital in nature. 25.2. On an appeal before the Ld. CIT(A) the claim of the assessee was allowed by following the order of the preceding assessment years on similar facts and circumstances. Aggrieved by the order of the Ld. CIT(A) revenue is in appeal before this Tribunal. ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 57 25.3. The Ld.DR relied on orders passed by the Ld.AO. 25.4. The Ld.AR on the contrary relied on coordinate of this Tribunal in assessee’s own case for assessment year 2007-08 (supra) as well as observations of the Ld. CIT(A) for the year under consideration. We have submissions advanced by both sides in the light of the records placed before us. 26. In assessee’s own case for assessment in 2007-08 (supra), this Tribunal followed the ratio of Hon’ble Bombay Court in case of Otis elevators company India Ltd (supra). We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld. Accordingly ground number 2 raised by the revenue stands dismissed. In the result, appeal filed by the assessee is stands partly allowed and appeal filed by the revenue stands dismissed. Order pronounced in the open court on 30/04/2025 Sd/- Sd/- (OMKARESHWAR CHIDARA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 30/04/2025 Biswajit, Sr. P.S./Dragon/Poonam ITA No.4249 & 4159/Mum/2014 ICICI Bank Ltd. 58 Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT, 4. The DR //True Copy// [ By Order Assistant Registrar ITAT, Mumbai Benches, Mumbai "