BANK OF INDIA, MUMBAI V. ADDL CIT 2(1), MUMBAI

ITA 1498/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78714 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 02-04-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 21-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JKTLP DH LS SHRI S J SINGH
• Assessee Lawyers: FUKKZFJRH DH LS SHRI C NARESH
• Keywords: Capital asset; Business income; Depreciation; Earning of tax free income; Bad and doubtful debts; Capital receipt; Revised return
• Section: 14A; 115JB

Judgement Text

BANK OF INDIA, 1 VK;DJ VIHYH; VF/KDJ.K TH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI JH JH JH JH FOT; IKY JKO] U;KF;D LNL; ,OA JH UJSUNZ DQEKJ FC YYS;K] YS[KK LNL; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH UJSUNZ DQEKJ FCYYS ;K] YS[KK LNL; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH UJSUNZ DQEKJ FCYYS ;K] YS[KK LNL; DS LE{K FOT; IKY JKO] U;KF;D LNL; ,OA JH UJSUNZ DQEKJ FCYYS ;K] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER VK;DJ VIYH LA[;K /ITA NO.1498/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2001-02 BANK OF INDIA, 8 TH FLOOR, STAR HOUSE, TAXATION DEPARTMENT BANDRA-KURLA COMPLEX, BANDRA (EAST) MUMBAI- 400 051. VS. ADDITIONAL COMMISSIONER OF INCOME TAX-2,(1), AAYAKAR BHAVAN, MUMBAI -400 020. PAN: - AAA CB0472C APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI C. NARESH REVENUE BY/ JKTLP DH VKSJ LS SHRI S.J. SINGH ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20.12.2010 OF CIT(A) FOR A.Y. 2001-02. THE ASSESSEE HAS RAISE THE FOLLOWING GROUNDS:- 01 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED TO AS ACIT) HAS ERRED IN DISALLOWING THE BAD DEBTS WRITTEN OFF OF RS.320,31,17,547 AND T HE HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS CI T (A)L HAS ERRED IN RESTRICTING THE CLAIM OF BAD DEBTS TO RS.217,43,96,387. THE LEARNED ACIT BE DIRECTED TO ALLOW THE ENTIRE BAD DEBTS CLAIM OF RS.320,31,17,547 AND REDU CE THE TOTAL INCOME ACCORDINGLY. DATE OF HEARING 02.04.2014 DATE OF PRONOUNCEMENT 09.04.2014 BANK OF INDIA, 2 0. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING FEES PAID TO MASTER CARD INTER NATIONAL OF RS.LL1 LAKHS AND THE HONOURABLE CIT (A) HAS ERRED IN UPHOLDING THE DECIS ION OF THE ACIT AND DISALLOWING THE CLAIM OF RS.L11LAKHS. THE LEARNED ACIT BE DIRECTED TO ALLOW DEDUCTION OF RS.LL1LAKHS AND REDUCE THE TOTAL INCOME ACCORDINGLY. 3 .ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING EXPENSES OF RS.7,51,78,000 U/S. 14A BEING EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AND HONOURABLE CIT(A) HAS ERRED IN DISALLOWING EXPENDITURE U/S. 14A BY ESTIMATING THE SAME ON AD HOC BASIS OF 0.5% OF AVERAGE INVESTMENTS. THE LEARNED ACIT BE DIRECTED NOT T O DISALLOW ANY EXPENSES U/S 14A OF THE ACT AND REDUCE THE TOTAL INCOME ACCORDINGLY. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS SUBMITTED THAT DISALLOWANCE OF EXPENDITU RE OF 0.5% OF AVERAGE INVESTMENTS IS SUBSTANTIALLY ON HIGHER SIDE AND THE SAME BE REDUCE D SUBSTANTIALLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED ACIT HAS ERRED IN CHARGING TO TAX RS.2,98,746 BEING LIQUIDAT ED DAMAGES RECEIVED FROM VENDORS ON ACCOUNT OF DELAY IN DELIVERY OF EQUIPMENT TREATI NG THE SAME AS REVENUE RECEIPTS AND THE HONOURABLE CIT (A) HAS ERRED IN UPHOLDING T HE DECISION OF THE ACIT AND CHARGING THE SAME TO TAX AS REVENUE RECEIPT. THE LE ARNED ACIT BE DIRECTED NOT TO CHARGE LIQUIDATED DAMAGES OF RS.2,98,746 TO TAX AND REDUCE THE TOTAL INCOME ACCORDINGLY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONOURABLE CIT (A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 115JB RELATING TO MINIMUM ALTERNATE TAX (MAT) ARE APPLICABLE TO THE APPELLANT -BANK. THE LEARNED ACIT BE DIRECTED NOT TO APPLY THE PROVISIONS OF SECTION 115 JB RELATING TO MINIMUM ALTERNATE TAX (MAT) TO THE APPELLANT BANK 2. GROUND NO. 1 IS REGARDING CLAIM OF BAD DEBTS WRITT EN OFF. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED BAD DEBT IN THE REVISED RETU RN AT RS. 217,43,16,387/- U/S 36(1)(VII). THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 36(1)(VII). ACCORDING TO AO BAD DEBT IS ALLOWEAB LE IF IT IS IRRECOVERABLE AND IS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 2.1 ON APPEAL, CIT(A) HELD THAT THE ASSESSEE IS ELIGIBL E FOR CLAIM OF BAD DEBTS, HOWEVER, THE CLAIM OF BAD DEBT U/S 36(1)(VII) I S TO BE RESTRICTED TO OVER BANK OF INDIA, 3 AND ABOVE THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS AS PER SECTION 36(1)(VIIA). ACCORDINGLY THE CIT(A) DIRECTED THE AO AL LOW THE BAD DEBTS OF RS. 217,43,16,387/- BY REDUCING A SUM OF RS. 102,87,21,1 60/- ON ACCOUNT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA). 2.2 THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE REST RICTION AS PER THE PROVISO OF SECTION 36(1)(VII) IS NOT APPLICABLE IN RESP ECT OF THE BAD DEBTS WRITTEN OFF OTHER THAN THE RURAL BRANCH. HE HAS THUS S UBMITTED THAT THE RESTRICTION UNDER PROVISO HAS TO BE APPLIED ONLY WITH R ESPECT TO BAD DEBTS PERTAINING TO RURAL BRANCH AND NOT TO THE URBAN BRAN CH. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT (343 ITR 270) . HE HAS ALSO RELIED UPON THE DECISION DATED 07/09/2012 OF HYDERABAD BENCH O F THIS TRIBUNAL IN THE CASE OF STATE BANK OF HYDERABAD VS. DCIT IN ITA NO. 578 AND 579/HYD/2010. 2.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE RESTRICTION PROVIDED UNDER THE PROVISO TO SECTION 36(1)(VII) IS AP PLICABLE IN RESPECT OF ENTIRE BAD DEBTS WRITTEN OFF BY THE ASSESSEE IRRESPECTIV E OF RURAL BRANCH OR NON RURAL BRANCH. IN SUPPORT OF HIS CONTENTION HE HAS RE FERRED EXPLANATION 2 INSERTED BY THE FINANCE ACT 2013 AND SUBMITTED THAT IT HAS BEEN CLARIFIED BY THE EXPLANATION THAT FOR THE PURPOSE OF PROVISO TO CLA USE (VII) OF SUB-SECTION 1, THE ACCOUNT REFERRED TO SHALL BE ONLY ONE ACCOUNT IN RESPECT OF PROVISIONS FOR BAD AND DOUBTFUL DEBT UNDER CLAUSE (VIIA) AND SUCH ACCOUNT SHALL RELATE TO ALL TYPES OF ADVANCES INCLUDING ADVANCE MADE BY THE RUR AL BRANCHES. THUS THE LD. DR HAS SUBMITTED THAT THE CLAIM OF BAD DEBTS WRITTE N OFF U/S 36(1)(VII) IS ALLOWABLE ONLY AFTER REDUCTION OF THE AMOUNT IN THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS IN TERMS OF CLAUSE (VIIA). HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. BANK OF INDIA, 4 2.4 IN REBUTTAL THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT EXPLANATION 2 IS APPLICABLE ONLY W.E.F 01.04.2014 AND, THEREFORE, IT IS NOT RETROSPECTIVE AND WOULD NOT APPLY IN THE ASSESSMENT YEAR UNDER CONSIDERATIO N. EVEN OTHERWISE, IF THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS UNDER CLAU SE (VIIA) IS TAKEN AS ONE ACCOUNT RELATING TO ALL TYPES OF ADVANCES THEN THERE WOU LD BE NO RESTRICTION IN THE CASE OF THE ASSESSEE. HE HAS REFERRED THE DETAILS OF PRO VISIONS FOR BAD AND DOUBTFUL DEBTS MAINTAINED U/S 36(1)(VIIA) AND SUBMITTE D THAT EXPLANATION 2 WOULD NOT ADVERSELY AFFECT THE CASE OF THE ASSESSEE. 2.5 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL PER USAL OF THE RECORD WE FIND THAT ON PRINCIPLE THE CIT(A) HAS ALLO WED THE CLAIM OF THE ASSESSEE IN RESPECT OF BAD DEBTS WRITTEN OFF, HOWEVER, THE QUANTUM OF THE CLAIM HAS BEEN RESTRICTED IN TERMS OF THE PROVISO TO SECTI ON 36(1)(VII). IT IS TO BE NOTED THAT THE PROVISO TO SECTION 36(1)(VII) HAS BEE N INSERTED TO AVOID THE DOUBLE CLAIM IN RESPECT OF THE SAME AMOUNT AND THE AMOU NT OF BAD DEBTS WHICH EXCEEDS THE CREDIT BALANCE IN THE PROVISIONS FOR BAD AND DOUBTFUL DEBT ACCOUNT MADE UNDER CLAUSE (VIIA) SHALL BE ALLOWABLE U/S 3 6(1)(VII). THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BA NK LTD. V. CIT (SUPRA) HAS HELD THAT THE DEDUCTION U/S 36(1)(VII) CANNOT B E NEGATED BY READING INTO THE LIMITATION OF SECTION 36(1)(VIIA) AS IT WOULD FRU STRATE THE OBJECT OF GRANTING SUCH DEDUCTIONS. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY TH E HYDERABAD BENCHES OF THIS TRIBUNAL IN THE CASE OF STATE BAND OF HY DERABAD VS. DCIT (SUPRA) IN PARA 9 TO 11 AS UNDER:- 9. THE APEX COURT IN THE CASE OF TRF LTD. (SUPRA) HAS HELD THAT ANY DEBT WRITTEN OFF AS IRRECOVERABLE SHOULD BE ALLOWED AS DEDUCTION. IN TH E CASE OF VIJAYA BANK LTD. (SUPRA), THE APEX COURT HAS HELD THAT IF THE PROVISION FOR BAD D EBTS DEBITED TO THE P&L IS NETTED AGAINST THE CURRENT ASSETS THE PROVISIONS IS AN ALLOWABLE D EDUCTION EVEN IF INDIVIDUAL ACCOUNTS OF THE DEBTORS ARE NOT WTITTEN OFF. IN THE CASE OF CAT HOLIC SYRIAN BANK LTD. (SUPRA), WHICH WAS NOT AVAILABLE WITH THE LOWER AUTHORITIES AT THE TIM E OF DECIDING THE ISSUE, THE APEX COURT HAS HELD AS UNDER UNDER: BANK OF INDIA, 5 (I) THE CLEAR LEGISLATIVE INTENT OF S. 36(1)(VII) & 36( 1)(VIIA) TOGETHER WITH THE CIRCULARS ISSUED BY THE CBDT DEMONSTRATE THAT THE DEDUCTION ON ACCOUNT OF P ROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) IS DISTINCT AND INDEPENDENT OF S. 36(1)(VII) RELATING TO ALLOWANCE OF BAD DEBTS. THE LEGISLATIVE INTENT WAS TO ENCOURAGE RURAL ADVANCES AND THE MAKING O F PROVISIONS FOR BAD DEBTS IN RELATION TO SUCH RURA L BRANCHES. THE FUNCTIONING OF SUCH BANKS IS SUCH THAT THE RURAL BRANCHES WERE PRACTICALLY TREATED AS A DISTINCT BUSINESS, THOUGH ULTIMATELY THESE ADVANCES WOULD FORM PART OF THE BOOKS OF ACCOUNT OF THE HE AD OFFICE. AN INTERPRETATION WHICH SERVES THE LEGISLATIVE OBJECT AND INTENT IS TO BE P REFERRED RATHER THAN ONE WHICH SUBVERTS THE SAME. THE DEDUCTION U/S 36(1)(VII) CAN NOT BE NEGATED BY READING INTO IT THE LIMITATIONS OF S. 36(1)(VIIA) AS IT WOULD FR USTRAT E THE OBJECT OF GRANTING SUCH DEDUCTIONS. THE REVENUE'S ARGUMENT THAT THIS WOULD LEAD TO DOUBLE DEDUCTION IS NOT CORRECT IN VIEW OF THE PROVISO TO S. 36(1)(VII) WHICH PROVIDES THAT IN RESPECT OF RURAL ADVANCES, THE DEDUCTION ON ACCOUNT OF THE ACT UAL WRITE OFF OF BAD DEBTS WOULD BE LIMITED TO EXCESS OF THE AMOUNT WRITTEN OF F OVER THE AMOUNT OF THE PROVISION WHICH HAD ALREADY BEEN ALLOWED U/S 36(1) (VIIA) ( SOUTHERN TECHNOLOGIES 320 ITR 577 (SC) & VIJAYA BANK 323 ITR 166 (SC) REF ERRED) 10. IN THAT CASE THE APEX COURT HAS HELD THAT THE BANK WOULD BE ENTITLED TO BOTH THE DEDUCTIONS, ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF MERE PROVISION. FURT HER TO PREVENT TO DOUBLE DEDUCTION, PROVISO TO CLAUSE (VII) WAS INSERTED WHICH SAYS THA T IN RESPECT OF BAD DEBTS ARISING OUT OF RURAL ADVANCES THE DEDUCTION ON ACCOUNT OF ACTUAL W RITE OFF WOULD BE LIMITED TO THE EXCESS OF THE AMOUNT WRITTEN OFF OVER THE AMOUNT OF THE PR OVISION ALLOWED UNDER CLAUSE (VIIA). IT FOLLOWS THAT DEDUCTION U/S 36(1)(VIIA) IS TO BE ALL OWED ONLY ON THE AMOUNT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS SUBJECT TO THE MAXI MUM ON THE BASIS OF RURAL ADVANCES/ INCOME PRESCRIBED UNDER THAT SECTION. THE ALLOWANCE U/S 36(1)(VIIA) CANNOT BE IN EXCESS OF PROVISION FOR BAD DEBTS ACTUALLY MADE IN THE ACCOUN TS. 11. IN VIEW OF THE VERY CLEAR PRINCIPLES LAID DOWN BY THE APEX COURT IN THE ABOVE JUDGMENTS, WE DEEM IT FIT TO SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE IN THE LIGHT OF THE DECISIONS OF THE APEX COURT IN THE CASES OF (A) TRF LTD. (SUPRA) (B) VIJAYA BANK LTD. (SUPRA) AND (C) CATHOLIC SYRIA N BANKLTD. (SUPRA). 2.6 IT IS CLEAR THAT THE HYDERABAD BENCHES IN THE CASE OF STATE BANK OF HYDERABAD VS. DCIT (SUPRA) HAD DECIDED THIS ISSUE BY FO LLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT (SUPRA). 2.7 AS REGARDS THE INTRODUCTION OF EXPLANATION 2 VIDE FINANCE ACT 2013, IT HAS BEEN MADE CLEAR IN THE FINANCE ACT ITSELF THAT THE SA ID EXPLANATION WILL BE EFFECTIVE W.E.F 01.04.2014 AND, THEREFORE, IN OUR VI EW THE SAME IS NOT BANK OF INDIA, 6 APPLICABLE FOR THE YEAR UNDER CONSIDERATION. FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT AS WELL AS THE DECISION OF HYDERABAD BENCHES OF THIS TRIBUNAL IN THE CAS E OF STATE BANK OF HYDERABAD VS. DCIT (SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO ALLOW THE CLAIM IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT. 3. GROUND NO. 2 IS REGARDING FEE PAID TO MASTER CAR D INTERNATIONAL DISALLOWED U/S 40(A)(IA). 3.1 WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CON SIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS ISSU E HAS BEEN CONSIDERED AND DECIDED AGAINST THE ASSESSEE BY THE DECISION OF THIS TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2000-01 VIDE ORDER DATED 5.5.2012 I N PARA 23 AND 24 AS UNDER:- 23. WE HAVE HEARD LD REPRESENTATIVES OF PARTIES AND CO NSIDERED THE ORDERS OF AUTHORITIES BELOW. ON PERUSAL OF ORDER OF LD CIT(A), IT IS OBSE RVED THAT ASSESSEE CLAIMED DEDUCTION IN REVISED RETURN OF INCOME FOR PAYMENT OF FEE TO MAST ER CARD/VISA INTERNATIONAL AMOUNTING TO RS.45,25,000 AND RS.50,93,000 FOR ASSESSMENT YEA RS 1996- 97 AND 1997-98, RESPECTIVELY WHICH WERE DISALLOWED BY INVOKING PROVISIONS OF SEC TION 40(A)(I) OF THE ACT STATING THAT NO TAX WAS DEDUCTED AT SOURCE WHILE MAKING THE PAYMENT S OUTSIDE INDIA. ON BEHALF OF ASSESSEE, IT WAS CONTENDED THAT VISA INTERNATIONAL HAS PAID FULL TAX ON 15.7.1999, HENCE, THE ASSESSEE BANK IS ENTITLED TO CLAIM DEDUCTION, W HICH WAS DISALLOWED EARLIER, IN THE YEAR OF PAYMENT OF TAXES. IT WAS CONTENDED THAT DEDUCTIO N OF RS.96,18,000 BE ALLOWED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ASSESSEE PLACE D RELIANCE ON THE CBDT INSTRUCTION NO.F.NO.275/201/95-IT DT.29.1.1997, WHICH CLARIFIED THAT NO PAYMENT FOR TDS SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE O FFICER IN CHARGE OF TDS THAT TAXES HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. ASSESSEE ALSO S TATED THAT AO HAS NOT DISCUSSED THE SAID ISSUE IN THE ASSESSMENT ORDER. LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE IN PARA 35. HAS STATED THAT ASSESSEE BANK HAS PAID TO MASTER CARD INTERNATIONAL WITHOUT DEDUCTING TAX. HENCE, AO IS JUSTIFIED IN DISALLOWIN G THE PAYMENTS. HOWEVER, LD CIT(A) HAS DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE REGARDING TAXES PAID IN THIS YEAR UNDER CONSIDERATION IN RESPECT OF EARLIER YEARS AND ALLOW THEM AS PER LAW. LD A.R. DURING THE COURSE OF HEARING SUBMITTED THAT REQUISITE DETAILS ARE PLACED AT PAGES 70-75 OF PB. THEREFORE, THERE IS NO QUESTION TO VERIFY AND DEDUC TION SHOULD BE ALLOWED IN ASSESSMENT YEAR ITSELF. HOWEVER, LD D.R. SUBMITTED THAT THERE IS NO DISCUSSION ON THE ABOVE ISSUE IN THE BANK OF INDIA, 7 ASSESSMENT ORDER BUT LD CIT(A) HAS GIVEN THE DIRECT ION TO THE AO TO ALLOW THE CLAIM AS PER LAW ON VERIFICATION AND THERE SHOULD BE NO GRIEVANC E TO THE ASSESSEE ON IT. 24. WE FIND SUBSTANCE IN THE SUBMISSION OF LD D.R. THA T LD CIT(A) HAS GIVEN DIRECTION TO THE AO TO ALLOW CLAIM OF THE ASSESSEE PER LAW AFTER VER IFICATION AND, THEREFORE, NO INTERFERENCE IS CALLED FOR. BEFORE WE PART WITH THIS GROUND, WE OBSERVE THAT IN THE STATEMENT OF FACTS AND ALSO AT PAGE 75 OF PB, ASSESSEE HAS STATED THE TOTA L AMOUNT OF RS.96,18,000 BUT IN THE ORDER OF LD CIT(A) IN PARA 33 AND ALSO IN THE GROUN D OF APPEAL TAKEN, THE AMOUNT MENTIONED IS RS.98,18,000. WE DIRECT THAT ASSESSEE WILL STATE THE CORRECT AMOUNT TO THE AO AT THE TIME WHEN AO GIVE EFFECT TO THIS ORDER. GROU ND NO.6 OF APPEAL IS REJECTED SUBJECT TO ABOVE DIRECTION. 3.2 FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL TH IS ISSUE IS DECIDED AGAINST THE ASSESSEE. 4. GROUND NO. 3 IS REGARDING DISALLOWANCE U/S 14A. THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 17.83 CRORES WHICH IS EXE MPT U/S 10(33). THE ASSESSEE HAS ALSO EARNED INTEREST ON TAX FREE BOND OF RS. 1 8.39 CRORES WHICH IS EXEMPT U/S 10(15) AS WELL AS INTEREST ON INFRASTRUCTU RE AMOUNTING TO RS. 26.35 CRORES WHICH IS EXMPT U/S 10(23G). THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME. THE A O HAS COMPUTED THE EXPENSES FOR EARNING THE EXEMPT INCOME AT THE RATE OF 12% AND ACCORDINGLY DISALLOWED A SUM OF RS. 7.51 CRORE U/S 14A. 4.1 ON APPEAL CIT(A) HAS DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE AT 0.5% OF AVERAGE INVESTMENT EARNING TAX FREE INCOME BY APPLYING THE DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. (3 28 ITR 81). 4.2 BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITTED TH AT ALL THE SECURITIES FROM WHICH TAX FREE INCOME HAS BEEN EARNED CONST ITUTE STOCK IN TRADE AND, THEREFORE, EARNING OF INCOME THERE FROM I S ONLY INCIDENTAL TO WHICH PROVISIONS OF SECTION 14A CANNOT BE APPLIED. HE HAS RELIE D UPON THE DECSION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD. V S. COMMISSIONER OF BANK OF INDIA, 8 INCOME TAX (206 TAXMAN 563) AS WELL AS THE DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. INDIA ADVANTAGE SECURITIES LTD. IN ITA NO. 6711/MUM/2011. THE LD. AR HAS SUBMITTED THAT THOUGH THE CIT(A) HAS ACCE PTED THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE INVESTMENT IN TAX FREE SECURITIES HAS COME OUT OF OWN FUND, HOWEVER, THE AO WAS DIRECTED TO DISALLOW 0.5% OF AVERAGE INVESTMENT YIELDING TAX FREE INCOME WHICH IS PROVIDED U NDER RULE 8D. SINCE RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERAT ION, THEREFORE, THE FORMULA ADOPTED BY THE CIT(A) IS NOT JUSTIFIED. ALTE RNATIVELY THE LD. AR HAS SUBMITTED THAT THE DISALLOWANCE FOR EARNING THE DIVIDE NT INCOME MAY BE RESTRICTED TO 1% OF THE TAX FREE INCOME. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE O F ACIT VS.HDFC BANK LTD. DATED 29.6.2011 IN ITA NO. 4529/MUM/2005. 4.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE THIRD MEMBER DECISION IN THE CASE OF D.H . SECURITIES (P.) LTD. VS. DCIT (146 ITD 1) AND, THEREFORE, THE PROVISIONS OF SECTION 14A ARE APPLICABLE EVEN THE SECURITIES ARE HELD BY THE ASSESSEE AS ST OCK IN TRADE. 4.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEV ANT MATERIAL ON RECORD. WE NOTE THAT THE CIT(A) HAS ACCEPTED THE FACT TH AT THE ASSESSEE HAS PURCHASED THE SECURITIES IN QUESTION BY USING ITS OWN FUND AND, THEREFORE, THERE IS NO INTEREST EXPENDITURE IN RESPECT OF THESE SECUR ITIES. HOWEVER FOR DISALLOWANCE OF ADMINISTRATIVE EXPENSES U/S 14A, CIT(A) H AS DIRECTED THE AO TO COMPUTE THE DISALLOWANCE AT .5% OF THE AVERAGE INV ESTMENT EARNING TAX FREE INCOME. IT IS PERTINENT TO NOTE THAT .5% OF THE AVERAGE INVESTMENT IS CLEARLY GIVEN UNDER RULE 8D WHICH IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. FURTHER THE SECURITIES ARE MAINTAINED BY THE ASSESSEE AS STOCK IN TRADE AND THE INCOME ARISING FROM THE SALE AND PURCH ASE OF SECURITIES IS TAXABLE AS BUSINESS INCOME OF THE ASSESSEE, THEREFORE, TH E EXPENDITURE IF ANY BANK OF INDIA, 9 INCURRED ON ACCOUNT OF ADMINISTRATIVE EXPENSES FOR MAINT AINING THESE SECURITIES THE WHOLE OF THE SAID EXPENDITURE CANNOT BE A TTRIBUTED TO THE DIVIDEND INCOME WHEN THE INCOME ARISING FROM THE SALE AND PURCHASE OF THE SECURITIES IS TAXABLE. ACCORDINGLY ONLY A REASONABLE ESTIMA TE HAS TO BE MADE FOR DISALLOWANCE OF EXPENDITURE U/S 14A IN RESPECT OF EA RNING OF DIVIDEND INCOME AND TAX FREE INTEREST. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. HDFC BANK LTD. (SUPRA) IN PARA 7.1 AN D 7.2 HAS CONSIDERED AN IDENTICAL ISSUE AS UNDER:- 7.1 IN THE CASE IN HAND, THE CIT(A) CONSIDERED THE FACTS AND POINTED OUT THAT THE ASSESSEE IS MAINTAINING THE TREASURY DEPARTMENT WHICH LOOKS AFTER THE DAY TO DAY INVESTMENT PORTFOLIO OF THE BANK INCLUDING T AX FREE INVESTMENTS. HAVING REGARD TO THE SAID FACTUAL PROPOSITION, THE ADMINIS TRATIVE EXPENSES RELATABLE TO THE INCOME NOT FORMING PART OF THE TOTAL INCOME CAN BE ATTRIBUTABLE TO THE EXPENDITURE OF SPECIAL TREASURY DEPARTMENT MAINTAIN ED BY THE ASSESSEE; BUT IT SEEMS THE ASSESSEE HAS NOT FILED THE EXACT DETAIL O F THE OPERATING EXPENSES AND THEREFORE, NO OPTION WAS LEFT BUT TO ESTIMATE T HEDISALLOWANCE. 7.2 EVEN OTHERWISE, THE OVERALL ADMINISTRATION OF T HE BANK LOOKS AFTER ALL THE DEPARTMENT INCLUDING THE TREASURY DEPARTMENT; THERE FORE, IN THE ABSENCE OF THE EXACT EXPENDITURE INCURRED IN RELATION TO THE A CTIVITY RELATING TO TAX FREE INVESTMENT AND EARNING THE INCOME NOT FORMING PART OF THE TOTAL INCOME, IN OUR CONSIDERED OPINION, THE CIT(A) IS JUSTIFIED IN RESTRICTING THE SAID DISALLOWANCE TO 1%. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A) ON THIS ISSUE OF DISALLO WANCE OF ADMINISTRATIVE EXPENDITURE U/S 14A. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE AS WELL AS THE ASSESSEE IN THE RESPECTIVE APPEAL AND CROSS OBJ ECTION ARE LIABLE TO BE DISMISSED. 4.5 ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT 1% OF THE EXEMPT INCOME WILL BE A REASONABLE DISALLOWANCE ON ACCOUNT OF AD MINSITRATIVE EXPENSES U/S 14A. 5. GROUND NO. 4 IS REGARDING DISALLOWANCE OF LIQUIDATE D DAMAGES. THE ASSESSEE RECEIVED A SUM OF RS. 2,98,746/- BEING LIQUIDATED DAMAGES ON ACCOUNT OF DELAY IN DELIVERY OF EQUIPMENTS AND CALIMED AS CAPITAL RECIEPT. THE AO TREATED THE LIQUIDATED DAMAGES AS REVENUE RECEIPT A ND ASSESSED TO TAX. BANK OF INDIA, 10 5.1 ON APPEAL, CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 5.2 BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITTED TH AT THE DAMAGES WERE DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREM ENT OF THE CAPITAL ASSET AND, THEREFORE, WAS NOT IN THE ORIDINARY COURSE OF BU SINESS. HE HAS FURTHER SUBMITTED THAT THE AMOUNT RECEIVED IS ONLY A CAPITAL RE CEIPT NOT CHARGEBLE TO TAX. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT. VS. SAURASHTRA CEM ENT LIMITED ( 325 ITR 422). 5.3 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT IT IS NOT CLEAR FROM THE RECOR D WHETHER THE DAMAGES ARE RECEIVED TOWARDS THE PROCUREMENT OF THE CAPITAL ASSE T. 5.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RE LEVANT MATERIAL ON RECORD. THE ASSESSEE CLAIMED RECEIPT OF LIQUIDATED DAMA GES ON ACCOUNT OF DELAY IN SUPPLY OF EQUIPMENTS. THIS FACT OF RECEIPT O F DAMAGES ON ACCOUNT OF DELAY IN SUPPLY OF EQUIPMENTS HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. IN THE CASE OF CIT. VS. SAURASHTRA CEMENT LIMITED (SUPR A), THE ASSESSEE RECEIVED LIQUIDATED DAMAGES DUE TO DELAY IN SUPPLY OF MACHINERY WITHIN THE STIPULATED TIME. THE DEPARTMENT SOUGHT TO ASSESS THE AMOU NT TO TAX. THE DISPUTE WAS CARRIED TO THE HONBLE SUPREME COURT BY THE DEPARTMENT. THE HONBLE SUPREME COURT HAS HELD IN PARA 13 AS UNDER:- 13. WE HAVE CONSIDERED THE MATTER IN THE LIGHT OF THE AFORE-NOTED BROAD PRINCIPLE. IT IS CLEAR FROM CLAUSE NO. 6 OF THE AGREEMENT DATED 1 -9-1967, EXTRACTED ABOVE, THAT THE LIQUIDATED DAMAGES WERE TO BE CALCULATED AT 0.5 PER CENT OF THE PRICE OF THE RESPECTIVE MACHINERY AND EQUIPMENT TO WHICH THE ITEMS WERE DEL IVERED LATE, FOR EACH MONTH OF DELAY IN DELIVERY COMPLETION, WITHOUT PROOF OF THE ACTUAL DAMAGES THE ASSESSEE WOULD HAVE SUFFERED ON ACCOUNT OF THE DELAY. THE DELAY IN SUPPLY COULD BE OF THE WHOLE PLANT OR A PART THEREOF BUT THE DETERMINATION OF DAMAGES WAS NOT BASED UPON THE BANK OF INDIA, 11 CALCULATION MADE IN RESPECT OF LOSS OF PROFIT ON AC COUNT OF SUPPLY OF A PARTICULAR PART OF THE PLANT. IT IS EVIDENT THAT THE DAMAGES TO THE AS SESSEE WAS DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF A CAPITAL ASSET, I.E ., THE CEMENT PLANT, WHICH WOULD OBVIOUSLY LEAD TO DELAY IN COMING INTO EXISTENCE OF THE PROFIT-MAKING APPARATUS, RATHER THAN A RECEIPT IN THE COURSE OF PROFIT-EARNING PROC ESS. COMPENSATION PAID FOR THE DELAY IN PROCUREMENT OF CAPITAL ASSET AMOUNTED TO STERILI ZATION OF THE CAPITAL ASSET OF THE ASSESSEE AS SUPPLIER HAD FAILED TO SUPPLY THE PLANT WITHIN TIME AS STIPULATED IN THE AGREEMENT AND CLAUSE NO. 6 THEREOF CAME INTO PLAY. THE AFORE-STATED AMOUNT RECEIVED BY THE ASSESSEE TOWARDS COMPENSATION FOR STERILIZAT ION OF THE PROFIT-EARNING SOURCE, NOT IN THE ORDINARY COURSE OF THEIR BUSINESS, IN OU R OPINION, WAS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. WE ARE, THEREFORE, IN AGREEM ENT WITH THE OPINION RECORDED BY THE HIGH COURT ON QUESTION NOS. (I) AND (II) EXTRAC TED IN PARA 1 (SUPRA) AND HOLD THAT THE AMOUNT OF RS. 8,50,000 RECEIVED BY THE ASSESSEE FROM THE SUPPLIERS OF THE PLANT WAS IN THE NATURE OF A CAPITAL RECEIPT. 5.5 THE HONBLE SUPREME COURT HAS HELD THAT THE AFORE SAID AMOUNT RECEIVED BY THE ASSESSEE TOWARDS COMPENSATION FOR STERILIZATION OF T HE PROFIT-EARNING SOURCE AND NOT IN THE ORDINARY COURSE OF ITS BUSINESS. ACCO RDINGLY, IT WAS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IN THE CASE I N HAND, THOUGH THE LIQUIDATED DAMAGE WAS RECEIVED ON ACCOUNT OF DELAY IN D ELIVERY OF EQUIPMENT BUT IT WAS NOT THE CASE OF PURCHASE OF NEW PLANT SO AS T O STERILIZATION OF PROFIT EARNING SOURCE DUE TO DELAY. SINCE THE DAMAGE WAS RECEIV ED ON ACCOUNT OF DELAY IN SUPPLY OF EQUIPMENTS, THEREFORE, IT IS NOT RE VENUE RECEIPT. HOWEVER THE SAME SHOULD BE REDUCED FROM THE COSTS OF THE ASSET FOR THE PURPOSE OF DEPRECIATION. ACCORDINGLY WE SET ASIDE THE ORDERS OF AUTH ORITIES BELOW ON THIS ISSUE AND DIRECT THE AO TO REDUCE THE SAID AMOUNT OF LI QUIDATED DAMAGES FROM THE COST OF ASSET FOR THE PURPOSE OF DEPRECIATION. 6. GROUND NO. 5 IS REGARDING APPLICABILITY OF PROVI SIONS OF SECTION 115JB IN CASE OF BANK. 6.1 THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE PROVI SIONS OF SECTION 115JB ARE NOT APPLICABLE TO A BANKING COMPANY SINCE TH E ACCOUNTS OF BANKS BANK OF INDIA, 12 ARE PREPARED UNDER SCHEDULE III OF BANKING REGULATION ACT AND NOT IN ACCORDANCE WITH THE SCHEDULE VI OF THE COMPANYS ACT. IN SU PPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS: (I) KURUNG THAI BANK PCL DATED 30.09.2010 (ITA 33 90/MUM/2009) (II) MAHARASHTRA STATE ELECTRICITY BOARD (82 ITD 422) (III) KERALA STATE ELECTRICITY BOARD (329 ITR 91) ( HC) (IV) UNION BANK OF INDIA DATED 30.06.2011 (ITA NO. 4702/MUM/2010) (V) ICICI LOMBARD GENERAL INSURANCE VS. DEPARTMENT OF INCOME TAX (ITA 4286/MUM/2009). 6.2 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 6.3 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELE VANT MATERIAL ON RECORD, WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED BY THI S TRIBUNAL IN THE SERIES OF DECISIONS INCLUDING THE DECISION RELIED UPON BY T HE LD. AR OF THE ASSESSEE. IN THE CASE OF ICICI LOMBARD GENERAL INSURANCE (SU PRA) THE COORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERED AND DECI DED AN IDENTICAL ISSUE IN PARA 6 AS UNDER:- 6. W E HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS T HE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDEN TICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY US IN ASSESSEES OWN CASE FOR THE AY 2003-04 IN ITA NO. 2398/MUM/2009 AS UNDER: 9 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POIN T THAT THE ASSESSEE, BEING AN INSURANCE COMPANY IS NOT REQUIRE D TO PREPARE ITS ACCOUNTS AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT 1956. SUB. SECTION (2) OF SEC 211 ARE REQUIRED EVER Y P&L ACCOUNTS OF THE COMPANIES SHALL BE PREPARED AS PER THE REQUI REMENT OF PART II OF SCHEDULE VI. HOWEVER, THE PROVISO TO SUB. SEC (2) OF SEC. 211 OF BANK OF INDIA, 13 THE COMPANIES ACT CREATES AN EXEMPTION OF APPLICABI LITY OF SUB. SEC. (2) INTER-ALIA IN RESPECT OF INSURANCE COMPANIES OR BANKING COMPANIES OR ANY OTHER COMPANIES ENGAGED IN GENERAT ION AND SUPPLY OF ELECTRICITY FOR WHICH A FORM OF PROFIT AN D LOSS ACCOUNT HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH C LASS OF COMPANY. EVEN IF AN INSURANCE COMPANY DOES NOT DISCLOSE ANY MATTER IN THE BALANCE SHEET AND P&L ACCOUNT BECAUSE THE SAME IS N OT REQUIRED TO BE DISCLOSED BY THE INSURANCE ACT SHALL NOT BE TREA TED UN-DISCLOSER OF A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE COMPANY AS THE SAID CONDITION HAS BEEN RELAXED BY SUB.SEC 5 OF SEC 211 OF THE COMPANIES ACT . 9.1 IT IS TO BE NOTED THAT IN ORDER TO ALIGN THE PR OVISIONS OF THE I T ACT WITH THE COMPANIES ACT , AN AMENDMENT HAS BEEN BROUGHT INTO THE STATUTE BY THE FINANCE ACT 2012 WHEREBY SEC 115 JB HAS BEEN AMENDED W.E.F 2013 AND THEREFORE, PRIOR TO 1.4.2013 , THE PROVISIONS OF SEC. 115JB CANNOT BE APPLIED IN CASE OF INSURANC E, BANKING, ELECTRICITY, GENERATION AND DISTRIBUTION COMPANIES AND OTHER CLASS OF COMPANIES, WHICH ARE NOT REQUIRED TO PREPARE THEIR ACCOUNTS AND PARTICULARLY BALANCE SHEET AND P&L ACCOUNT AS PER P ART II & III OF SCHEDULE VI OF THE COMPANIES ACT. 9.2 THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF STATE BANK OF HYDERABAD (SUPRA) HAS CONSIDERED AND DECIDED A SI MILAR ISSUE; THOUGH IN THE CASE OF BANK IN PARAS 13 & 14 AS UNDE R: 13. THE PROVISIONS OF SEC.1153B WILL BE APPLICABLE TO ALL COMPANIES. HOWEVER, IT IS CONTENDED THAT SEC.115JB W ILL BE APPLICABLE ONLY WHERE THE ASSESSEE IS REQUIRED TO S HOW PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH SCHEDULE VI OF COMP ANIES ACT. AS THE BANKS ARE REQUIRED TO PREPARE BALANCE SHEET AND PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH THE BANKING REGUL ATION ACT, PROVISION OF 115JB CANNOT BE APPLIED TO THE BANKS. IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD VS. )CIT (82 LTD 422) IT WAS HELD THAT PROVISIONS OF BOOK PROFIT CANNOT BE A PPLIED TO ELECTRICITY COMPANIES. BANKING COMPANIES AND COMPAN IES ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY DO NOT HAVE TO PREPARE THEIR ACCOUNTS IN ACCORDANCE WITH PARTS II AND III OF SCH. VI OF THE COMPANIES ACT BY THE VIRTUE OF PROVI SO TO SEC 21 1(2) OF THE COMPANIES ACT. WE FIND THAT BY THE FINA NCE ACT 2012, WITH EFFECT FROM 1.4.2013, EVEN COMPANIES TO WHICH PROVISO TO SEC 211(2) APPLIES (THE BANKING COMPANIE S AND COMPANIES ENGAGED IN GENERATING AND DISTRIBUTION OF ELECTRICITY), SHOULD PREPARE THEIR P&LAND BALANCE S HEET IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANIES. THIS WOULD MEAN THAT PRIOR TO AY 2013- BANK OF INDIA, 14 14,PROVISIONS OF SEC 115)B WILL NOT APPLY TO COMPAN IES TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT, 1 956 APPLIES. TH ASSESSEE BEING A COMPANY TO WHICH PROVI SO TO SEC 211(2) OF THE COMPANIES ACT 1956 APPLIES, WILL NOT BE LIABLE TO BE TAXED UNDER SEC 115JB. 14. THE MUMBAI TRIBUNAL IN THE CASE OF KRUNG THAI BANK VS. JCIT (133 TTJ 435), TO WHICH ONE OF US IS A PARTY H AS HELD THAT PROVISIONS OF SEC 115JB CANNOT BE APPLIED TO THE BA NKING COMPANY. 9.3 SIMILARLY, IN THE CASE OF RELIANCE ENERGY (SUPR A), THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD IN PARAS 28 & 29 AS UNDER: 28 AS DISCUSSED ABOVE WHEN IT IS NOT POSSIBLE TO P REPARE THE ACCOUNTS UNDER THE COMPANIES ACT FOR THE PURPOSE OF COMPUTATION U/S 115JB, THEREFORE, THE ASSESSEE CANN OT BE FORCED TO PREPARE THE ACCOUNTS WHEN IT IS NOT POSSI BLE. THEREFORE, WE ARE IN AGREEMENT WITH THE CONTENTIONS OF THE ASSESSEE IN AS MUCH AS THE ACCOUNTING POLICIES FOLL OWED IN THE ELECTRICITY ACCOUNTS IF FOLLOWED FOR THE PREPARATIO N OF COMPANIES ACT ACCOUNT WILL NOT DISCLOSE TRUE AND FA IR VIEW AND WILL NOT BE IN ACCORDANCE WITH PART II AND III OF S CHEDULE V OF THE COMPANIES ACT. THE RATIO OF THE DECISIONS OF TH E HONBLE SUPREME COURT AND THE RATIO OF THE DECISION OF THE TRIBUNAL DISCUSSED ABOVE ARE IN SUPPORT OF THE CONTENTIONS O F THE ASSESSEE. WE FURTHER FOUND THAT THE ISSUE OF APPLIC ABILITY OF SEC. 115J CAME BEFORE THE TRIBUNAL FOR AY 88-89. TA KING INTO CONSIDERATION THE PREPARATION OF ACCOUNTS UNDER THE ELECTRICITY ACT AND OTHER CONTENTIONS THE ASSESSEE INCLUDING TH E DECISIONS OF THE SUPREME COURT IN THE CASE OF B.C.SRINIVASA S ETTY (SUPRA), THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SEC. 115J ARE NOT ATTRACTED ON THE FACTS OF THE PRESENT CASE . 29 AS DISCUSSED ABOVE, THE ASSESSEE IS FOLLOWING TH E ACCOUNTING POLICIES UNDER THE ELECTRICITY SUPPLY AC T AND PREPARED ITS ACCOUNTS IN VIEW OF THOSE VERY POLICIE S. FOLLOWING THOSE VERY POLICIES, THE ACCOUNTS IN ACCORDANCE WIT H PART II & III OF SCHEDULE VI OF THE COMPANIES ACT ARE NOT APP LICABLE AT ALL. ONCE THERE IS NO POSSIBILITY FOR PREPARING THE ACCOUNTS IN ACCORDANCE WITH THE PART II & II OF SCHEDULE VI OF COMPANIES ACT THEN THE PROVISIONS OF SEC. 115JB CANNOT BE FOR CED. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES AND RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE HO NBLE SUPREME COURT AND THE DECISION OF THE TRIBUNAL FOR AY 88-89, BANK OF INDIA, 15 WE HOLD THAT PROVISIONS OF SEC. 115JB ARE NOT APPLI CABLE ON THE FACTS OF THE PRESENT CASE. 10 FOLLOWING THE DECISIONS OF THE COORDINATE BENCHE S OF THIS TRIBUNAL, WE HOLD THAT WHEN THE INSURANCE COMPANIES, BANKING COMPANIES AND ELECTRICITY GENERATION AND DISTRIBUTIONS COMPANIES ARE TREATED IN THE SAME CLASS AS PER THE PROVISIONS OF SEC. 211 OF THE COMPANIES ACT IN PREPARING THEIR FINAL ACCOUNTS, THEN THESE COMPANIE S CANNOT BE TREATED DIFFERENTLY FOR THE PURPOSE OF SEC. 115JB A ND ACCORDINGLY, THE PROVISIONSOF SEC. 115JB ARE NOT APPLICABLE IN THE C ASE OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6.4 THOUGH, SECTION 115JB HAS BEEN AMENDED TO BRING ALL THE COMPANIES IN ITS AMBIT VIDE FINANCE ACT 2012, W.E.F 1 .4.2013, HOWEVER, THE SAID AMENDMENT IS NOT APPLICABLE IN THE ASSESSMENT YEAR UN DER CONSIDERATION. 6.5 FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 09 -04-2014 SD/- SD/- ( N.K. BILLAIYA ) ( VIJAY PAL RAO ) ( ACCOUNTANT MEMBER / YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 09 -04-2014 SKS SR. P.S, BANK OF INDIA, 16 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI