DDIT (I.T)-4(2), MUMBAI V. M/S. OMAN INTERNATIONAL BANK S.A.O.G., MUMBAI

ITA 1609/MUM/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5042 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 05-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 04-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERJA PRADHAN
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Permanent establishment; Non-deduction of tax; Bad and doubtful debts; Revenue expenditure
• Section: 14A; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 1609/MUM /2008 ASSESSMENT YEAR : 2004-05 DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-4(2) 133, SCINDIA HOUSE, BALLARD PIER MUMBAI-400 038. VS. M/S. OMAN INTERNATIONAL BANK SAOG 201, RAHEJA CENTRE, FREE PRESS JOURNAL MARG NARIMAN POINT MUMBAI-400 021. PAN NO.AAACO 0440 M (APPELLANT) (RESP ONDENT) ITA NO. 1786/MUM/2008 ASSESSMENT YEAR : 2004-05 M/S. OMAN INTERNATIONAL BANK SAOG 201, RAHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT MUMBAI-400 021. PAN NO.AAACO 0440 M VS. ASTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(2) 1 ST FLOOR, SCINDIA HOUSE, N.M. MARG MUMBAI-400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.J. PARDIWALA REVENUE BY : MS. NEERJA PRADHAN DATE OF HEARING : 05/09/2013 DATE OF PRO NOUNCEMENT : 13 / 0 9 /2013 O R D E R PER B. R. MITTAL, JM: THESE CROSS APPEALS ARE FILED BY THE DEPARTMENT AND THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 31 ST DECEMBER, 2007 FOR THE ASSESSMENT YEAR 2004-05. ITA NO.6809 & 1786/M/08 A.Y.04-05 2 1.1 FIRSTLY WE TAKE UP APPEAL FILED BY THE DEPARTME NT BEING ITA NO.1609/M/2008: 1.2 THE DEPARTMENT HAS TAKEN UP THE FOLLOWING GROUN DS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW T HE INTEREST PAID TO HEAD OFFICE OF RS.51,35,800/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW A SSESSEES CLAIM FOR DEDUCTION U/S. 37 OF THE ACT OF RS.17,59,457/- REPR ESENTING TRAVELLING EXPENSES OF HEAD OFFICE PERSONNEL TO IND IA AND CERTIFICATE FEE PAID TO AUDITORS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F TRANSACTION CHARGES OF RS.16,56,533/- MADE ON NOSTRO ACCOUNT U/ S. 409A)(I) OF THE I.T. ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO ALLOW THE CLAI M FOR BAD DEBTS OF RS.21,75,000/-. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A), MUMBAI ON THE ABOVE GROUND(S) BE SET ASIDE AND THE ORDER O F AO BE RESTORED. 1.3 VIDE LETTER DATED 26.02.2013 THE DEPARTMENT HAS FILED ADDITIONAL GROUND OF APPEAL ON THE GROUND THAT THE TAXABILITY OF INTEREST INCOME RECEIVED FROM HEAD OFFICE COULD NOT HAVE BEEN TAKEN UP EARLIER, AS LOWER AUTHORITIES HAVE HELD THAT THE AMOUNT OF INCOME REC EIVED FROM HEAD OFFICE IS TAXABLE AND THE DECISION OF SUMITOMO MITS UI BANKING CORPN. VS. DY.DIT(IT), MUMBAI (136 ITD 66)(MUM)(SB) WAS RENDE RED BY THE SPECIAL BENCH ONLY ON 30 TH MARCH, 2012. IN VIEW OF THE ABOVE THE ADDITIONAL GROUND MAY BE ADMITTED FOR CONSIDERATION. THE ADDIT IONAL GROUND READS AS UNDER :- ITA NO.6809 & 1786/M/08 A.Y.04-05 3 WHETHER PROVISIONS OF SECTION 14A OF THE I.T. ACT WILL BE APPLICABLE IN THE EVENT IT IS HELD THAT THE INTEREST RECEIVED BY THE ASSESSEE FROM ITS HEAD OFFICE IS NOT TAXABLE IN THE HANDS OF INDI AN BRANCH OFFICE? 1.4 WE CONSIDER IT PRUDENT TO ALSO STATE THE GROUND S OF APPEAL TAKEN BY THE ASSESSEE IN ITA NO.1786/MUM/08 WHICH ARE AS UNDER :- 1. THE CIT(A)-33, MUMBAI ERRED IN UPHOLDING THE AC TION OF THE ASTT. DIT(IT)-3(2), MUMBAI IN CONSIDERING INTEREST RS.64,60,038/- RECEIVED FROM HEAD OFFICE AS FORMING PART OF TAXABL E INCOME. 2. THE CIT(A)ERRED IN UPHOLDING THE ACTION OF AO IN BRINGING TO TAX YEAR END PROVISION OF RS.4,11,385/- MADE FOR EX PENSES WHICH SUBSEQUENTLY TURNED OUT TO BE IN EXCESS. 3. WITHOUT PREJUDICE TO THE CONTENTION THAT BROKEN PERIOD INTEREST PAID ON PURCHASE OF SECURITIES SHOULD BE ALLOWED AS A DEDUCTION IN THE YEAR OF PURCHASE OF SECURITIES, IN THE EVENT OF ANY AUTHORITY REVERSING THE DECISION OF THE CIT(A)/TRIBUNAL IN TH E EARLIER YEAR I.E. ASSESSMENT YEAR 2002-03 THAT THE BROKEN PERIOD INT EREST PAID TO THE SELLERS AT THE TIME OF PURCHASE OF SECURITIES I S ALLOWABLE AS REVENUE EXPENDITURE IN THAT YEAR, THEN AO BE DIRECT ED TO ALLOW DEDUCTION FOR THE BROKEN PERIOD INTEREST DISALLOWED IN ASSESSMENT YEAR 2002-03 IN RESPECT OF SECURITIES SOLD DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. 4. IN THE EVENT OF ANY AUTHORITY REVERSING THE DECI SION OF THE ITAT FOR THE ASSESSMENT YEAR 1995-96 THAT THE CLAIM OF B AD DEBTS WRITTEN OFF OF RS.21.75 LACS, IN RESPECT OF BIOGENICS (I) L TD. IS ALLOWED AS A DEDUCTION IN THE ASSESSMENT YEAR 1995-96 (BEING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH DE BTS WERE WRITTEN OFF), THEN THE AO BE DIRECTED TO ALLOW DEDUCTION FO R THE SAME IN THE ASSESSMENT YEAR 2004-05 AS THE APPELLANTS HAVE NOT RECOVERED ANY AMOUNT TILL DATE. 5. THE CIT(A) OUGHT TO HAVE DIRECTED AO TO GRANT IN TEREST UPTO THE DATE OF RECEIPT OF REFUND ORDER. 1.5 THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A N ON-RESIDENT COMPANY AND CARRIED ON BUSINESS OF BANKING INCLUDING FOREIG N EXCHANGE TRANSACTIONS. THE ASSESSEE BANK IS INCORPORATED UND ER THE RELEVANT OMANI LEGISLATION. FOR THE ASSESSMENT YEAR UNDER CO NSIDERATION THE ITA NO.6809 & 1786/M/08 A.Y.04-05 4 ASSESSEE FILED RETURN OF INCOME ON 31 ST OCTOBER, 2004 DECLARING TOTAL LOSS OF RS.1,97,55,060/-. AO MADE THE ASSESSMENT AT A LO SS OF RS.1,0016,239/- VIDE ORDER DATED 13/11/2006 U/S. 14 3(3) OF THE ACT BY MAKING CERTAIN ADDITIONS/DISALLOWANCES. THE ASSESSE E FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) BY TH E IMPUGNED ORDER ALLOWED APPEAL OF THE ASSESSEE IN PART. HENCE, THES E APPEALS BY THE DEPARTMENT AS WELL AS BY ASSESSEE. 1.6 GROUND NO.1 TAKEN BY THE DEPARTMENT IS CONNECTE D WITH GROUND NO.1 TAKEN BY ASSESSEE. 1.7 THE ASSESSEE BANK IN THE COMPUTATION OF INCOME FILED ALONG WITH RETURN OF INCOME, HAS REDUCED A SUM OF RS.64,60,038 /- AS INTEREST RECEIVED FROM HEAD OFFICE NOT TAXABLE SINCE RECEIVE D FROM SELF. THE AO STATED THAT SIMILAR ISSUE WAS INVOLVED IN PREVIOUS YEARS. THAT THE ASSESSEE IS A BRANCH OF FOREIGN BANK AND HAS ITS HE AD OFFICE ABROAD. THAT FOREIGN COMPANY IS TAXED IN INDIA ON INCOME AR ISING OR ACCRUING THROUGH ANY BUSINESS CONNECTION OR SOURCE OR ASSET IN INDIA. THAT A NON- RESIDENT COMPANY IS TAXABLE ON INCOME ACCRUED OR DE EMED TO ACCRUE IN INDIA AS PER PROVISIONS OF SECTION.5 OF THE INCOME TAX ACT, 1961 (THE ACT). THE INCOME FOR TAX IN INDIA WOULD THUS BE LIMITED T O INCOME OF THE BRANCH, WHICH HAS PERMANENT ESTABLISHMENT OF THE AS SESSEE COMPANY IN INDIA. THAT THE BRANCH IS CONSIDERED AS AN INDEPEND ENT COMPANY IN ORDER TO ESTIMATE THE INCOME THAT HAS BEEN EARNED B Y IT DURING THE YEAR. THAT THE ASSESSEE BANK DURING THE YEAR HAS PLACED F UNDS WITH THE HEAD OFFICE ON PURE BUSINESS CONSIDERATION AND HAS CORRE CTLY SHOWN THE INTEREST RECEIVED AS INCOME IN ITS P & L ACCOUNT OF THE BRANCH. IT IS A BUSINESS DECISION TO PLACE FUNDS WITH THE HEAD OFFI CE AS THAT WAS PERHAPS THE BEST OPTION AT THAT POINT OF TIME. IN V IEW OF THE ABOVE, AO STATED THAT THE PROFIT EARNED BY THE ASSESSEE IN AC TIVITIES OF BORROWING FUNDS FROM INDIA AND LENDING IT ABROAD, THE BORROWI NG TAKES PLACE IN ITA NO.6809 & 1786/M/08 A.Y.04-05 5 INDIA, THEREFORE PROFIT ATTRIBUTABLE TO THE BORROWI NG ACTIVITY SHALL BE TAXABLE IN INDIA. AO HELD THAT THE CLAIM OF THE ASS ESSEE THAT INTEREST RECEIVED FROM HEAD OFFICE SHOULD BE ALLOWED AS DEDU CTION IN THE COMPUTATION OF INCOME IS NOT ACCEPTABLE AND SAME IS HENCE DISALLOWED. BEING AGGRIEVED ASSESSEE FILED APPEAL. 1.8 BEFORE THE FIRST APPELLATE AUTHORITY THE LD. CI T(A) HAS STATED THAT IDENTICAL ISSUE HAD BEEN DECIDED BY HIS PREDECESSOR FOR ASSESSMENT YEARS 1996-97 TO 2002-03 IN ASSESSEES OWN CASE. HE FURTH ER STATED THAT ITAT MUMBAI BENCH HAS ALSO DECIDED THE SAID ISSUE AGAINS T THE ASSESSEE AND ACCORDINGLY HELD THAT AO IS JUSTIFIED IN BRINGING T O TAX AN AMOUNT OF RS.64,60,038/-. LD. CIT(A) HAS FURTHER HELD THAT IT WAS SUBMITTED THAT IN THE EVENT INTEREST RECEIVED FROM HEAD OFFICE IS TAX ABLE IN INDIA INTEREST OF RS.51,35,818/- PAID TO HEAD OFFICE SHOULD NOT BE AD DED WHILE COMPUTING TOTAL INCOME. THEREFORE, THE LD. CIT(A) HELD THAT A O IS DIRECTED TO ALLOW INTEREST PAID TO HEAD OFFICE OF RS.51,35,800/-. HEN CE BOTH PARTIES ARE IN APPEAL BEFORE TRIBUNAL . 1.9 AT THE TIME OF HEARING THE LD. REPRESENTATIVE O F BOTH PARTIES SUBMITTED THAT THE ABOVE ISSUE IS NOW COVERED BY TH E DECISION OF THE HONBLE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE O F SUMITOMO MITSUI BANKING CORPN. VS. DY. DIT(IT), MUMBAI (136 ITD 66 ) (SUPRA), WHEREBY THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT INTERES T INCOME RECEIVED FROM HEAD OFFICE IS NOT CHARGEABLE TO TAX BEING INCOME TO SELF AND THEREFORE, THE PRINCIPLE OF MUTUALITY AS PROVIDED UNDER THE IN COME TAX ACT WOULD BE APPLICABLE IN RESPECT OF SUCH INCOME. THE RELEVANT PART OF THE DECISION OF THE SPECIAL BENCH IS REPRODUCED AS UNDER : KEEPING IN VIEW ALL THE FACTS OF THE CASE AND THE LEGAL POSITION EMANATING FROM THE INTERPRETATION OF THE RELEVANT P ROVISIONS OF THE DOMESTIC LAW AS WELL AS THAT OF THE TREATY AS DISCU SSED ABOVE, WE ARE OF THE VIEW THAT ALTHOUGH INTEREST PAID TO THE HEAD OFFICE OF THE ASSESSEE-BANK BY ITS INDIAN BRANCH WHICH CONSTITUTE S ITS PERMANENT ITA NO.6809 & 1786/M/08 A.Y.04-05 6 ESTABLISHMENT IN INDIA IS NOT DEDUCTIBLE AS EXPENDI TURE UNDER THE DOMESTIC LAW BEING PAYMENT TO SELF, THE SAME IS DED UCTIBLE WHILE DETERMINING THE PROFIT ATTRIBUTABLE TO THE PERMANEN T ESTABLISHMENT WHICH IS TAXABLE IN INDIA AS PER THE PROVISIONS OF ARTICLE 7(2) AND (3) OF THE INDO-JAPANESE TREATY READ WITH PARAGRAPH 8 O F THE PROTOCOL WHICH ARE MORE BENEFICIAL TO THE ASSESSEE. THE SAID INTEREST, HOWEVER, CANNOT BE TAXED IN INDIA IN THE HANDS OF T HE ASSESSEE- BANK, A FOREIGN ENTERPRISE BEING PAYMENT TO SELF WH ICH CANNOT GIVE RISE TO INCOME THAT IS TAXABLE IN INDIA AS PER THE DOMESTIC LAW. EVEN OTHERWISE, THERE IS NO EXPRESS PROVISION CONTAINED IN THE RELEVANT TAX TREATY WHICH IS CONTRARY TO THE DOMESTIC LAW IN IND IA ON THIS ISSUE. THIS POSITION APPLICABLE IN THE CASE OF INTEREST PA ID BY INDIAN BRANCH OF A FOREIGN BANK TO ITS HEAD OFFICE EQUALLY HOLDS GOOD FOR THE PAYMENT OF INTEREST MADE BY THE INDIAN BRANCH OF A FOREIGN BANK TO ITS BRANCH OFFICES ABROAD AS THE SAME STANDS ON THE SAME FOOTING AS THE PAYMENT OF INTEREST MADE TO THE HEAD OFFICE. AT THE TIME OF HEARING BEFORE US, THE LEARNED REPRESENTATIVES OF B OTH SIDES HAVE ALSO NOT MADE ANY SEPARATE SUBMISSIONS ON THIS ASPE CT OF THE MATTER SPECIFICALLY. HAVING HELD THAT THE INTEREST PAID BY THE INDIAN BRANCH OF THE ASSESSEE BANK TO ITS HEAD OFFICE AND OTHER BRANCHES OUTSIDE INDIA IS NOT CHARGE ABLE TO TAX IN INDIA, I T FOLLOWS THAT THE PROVISIONS OF SECTION 195 WOULD NOT BE ATTRACTED AN D THERE BEING NO FAILURE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYME NT OF INTEREST MADE BY THE PERMANENT ESTABLISHMENT, THE QUESTION O F DISALLOWANCE OF THE SAID INTEREST BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) DOES NOT ARISE. ACCORDINGLY WE ANSWER QUESTION NO.1 REFE RRED TO THIS SPECIAL BENCH IN THE NEGATIVE, I.E ., IN FAVOUR OF THE ASSESSEE AND QUESTION 2 IN AFFIRMATIVE, I.E., AGAIN IN FAVOUR OF THE ASSESSEE. 1.10 THE TRIBUNAL IN ASSESSEES OWN CASE BY FOLLOWI NG THE SAID DECISION OF THE SPECIAL BENCH HAS DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE THAT THE INTEREST INCOME RECEIVED FROM HEAD OFFICE IS NO T CHARGEABLE TO TAX BEING IT IS AN INCOME TO SELF. CONSEQUENTLY THE INT EREST PAID BY THE ASSESSEE BRANCH PE IN INDIA TO HEAD OFFICE IS ALSO NOT TO BE ALLOWED AS DEDUCTION. IN VIEW OF GROUND NO.1 OF THE APPEAL TA KEN BY THE DEPARTMENT AS WELL AS BY THE ASSESSEE ARE ALLOWED B Y REVERSING THE ORDER OF CIT(A). ITA NO.6809 & 1786/M/08 A.Y.04-05 7 2. IN RESPECT OF GROUND NO.2 TAKEN BY THE DEPARTMEN T WE OBSERVE THAT THE SAID EXPENSES COMPRISING OF RS.17,59,457/- FOR TRAVELLING EXPENSES INCURRED BY HEAD OFFICE ON ITS EMPLOYEES AND EXECUT IVES TO MONITOR THE OPERATIONS OF INDIA BRANCH AND RS.45,420/- IS SERVI CE FEE PAID TO AUDITORS FOR ISSUANCE OF CERTIFICATE OF EXPENSES AN D ASSESSING OFFICER DISALLOWED THE SAID CLAIM THAT THESE EXPENSES ARE W ITHIN THE PURVIEW OF SECTION 44C OF THE ACT AND NOT ADDITIONAL DEDUCTION OR ALLOWANCE AS PERMITTED UNDER PROVISIONS OF THE ACT. BEING AGGRIE VED THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) BY FOLLOWI NG THE ORDER OF HIS PREDECESSORS IN RESPECT OF ASSESSMENT YEAR 2001-02 AND 2002-03 AND ALSO CONSIDERING THE DECISION OF HON'BLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. EMIRATES COMMERCIAL BANK LTD. (262 ITR 55) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECTED AO TO ALLOW DEDUCTION OF RS.17,59,457/- U/S. 37 OF THE ACT. 2.1 AT THE TIME OF HEARING THE LD. AUTHORIZED REPRE SENTATIVE SUBMITTED THAT THE SAME VERY ISSUE HAS ALSO BEEN CONSIDERED B Y THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1996-97 AND THE TRIBUNAL HAD HELD VIDE ITS ORDER DATED 29.06.2012 IN ITA NO.1981 /MUM/2001 THAT THE TRAVELLING EXPENSES INCURRED BY THE HEAD OFFICE ON TRAVELLING OF ITS OWN STAFF AND DIRECTLY IN CONNECTION WITH INDIA BRANCHE S IS ALLOWABLE U/S. 37(1) OF THE ACT AND SECTION 44C IS NOT APPLICABLE TO IT. WE OBSERVE ON PERUSAL OF THE SAID ORDER OF ITAT DATED 29 TH JUNE, 2012 THAT THE TRIBUNAL WHILE DECIDING THE SAID ISSUE CONSIDERED THE DECISI ON OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF EMIRATES COMMERCIAL BANK LTD. (SUPRA), AND ALSO THE DECISION OF ITAT DATED 28 TH FEBRUARY, 2007 IN THE CASE OF AMERICAN BANK LIMITED. VS. DCIT IN ITA NO.2770 AND 2439/MUM/1996 . THE LD. DR AT THE TIME OF HEARING COULD NOT CONT ROVERT THE FACT THAT THE ABOVE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION(SUPRA), SAVE AND EXCEPT RELYING ON THE ORDER OF AO. WE, RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRI BUNAL IN ASSESSEES OWN ITA NO.6809 & 1786/M/08 A.Y.04-05 8 CASE (SUPRA), CONFIRM THE ORDER OF THE LD. CIT(A) A ND REJECT GROUND NO.3 TAKEN BY THE DEPARTMENT. 2.3 IN RESPECT OF GROUND NO.3 OF THE APPEAL THE REL EVANT FACTS ARE THAT AO DISALLOWED TRANSACTION CHARGES OF RS.16,56,533/- PAID ON NOSTRO ACCOUNT. THE TRANSACTION CHARGES ON NOSTRO ACCOUNT ARE BANK CHARGES FOR MAINTAINING THE ACCOUNTS WITH THE BANKS OUTSIDE INDIA AND FOR ADMINISTRATIVE CHARGES. THESE CHARGES ARE RECOVERED DIRECTLY BY WAY OF DEBTORS ACCOUNT OF THE ASSESSEE WITH THESE BANKS. T HESE CHARGES REPRESENTED THE BUSINESS INCOME OF THOSE BANKS WHIC H ACCRUE /ARISE OUTSIDE INDIA. THE ASSESSEE CONTENDED THAT NO TAX I S REQUIRED TO BE DEDUCTED AT SOURCE ON THE ABOVE AMOUNT PAID. BUT AS SESSING OFFICER DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND D ISALLOWED THE CLAIM OF THE ASSESSEE U/S. 40(A)(I). HOWEVER, IN THE FIRST A PPEAL THE LD. CIT(A) DELETED THE SAID DISALLOWANCE BY FOLLOWING HIS ORDE R IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2001-02 AND 2002-03. HENCE, THIS APPEAL BY THE DEPARTMENT. 2.4 AT THE TIME OF HEARING THE LD. DR RELIED ON THE ORDER OF AO WHEREAS THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT SI MILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE F OR ASSESSMENT YEAR 2002-03, 2003-04 IN ITA NOS.2762/MUM/2006 AND 1785/ MUM/2008 VIDE COMMON ORDER DATED 22 ND MARCH, 2013 ALONG WITH OTHER APPEALS OF THE ASSESSEE AND THE TRIBUNAL VIDE PARA-28 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE COPY OF THE SA ID ORDER WAS PLACED BEFORE US TO SUBSTANTIATE THE ABOVE SUBMISSION. ON CONSIDERATION OF THE ORDERS OF AUTHORITIES BELOW AND EARLIER ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 AND 2003-04 DA TED 22/03/2013 WE OBSERVED THAT THE TRIBUNAL DECIDED THE CASE IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT AND RESPECTFULLY FOLLOWI NG THE SAME WE REJECT THE GROUND NO.3 OF THE APPEAL TAKEN UP BY THE DEPAR TMENT. ITA NO.6809 & 1786/M/08 A.Y.04-05 9 3. IN RESPECT OF GROUND NO.4 TAKEN BY THE DEPARTMEN T THE LD.AR CONCEDED THAT CLAIM OF BAD DEBT OF THE ABOVE AMOUN T HAS BEEN ALLOWED IN EARLIER ASSESSMENT YEAR 1995-96 AND CONSEQUENTLY THE ORDER OF THE LD. CIT(A) IS TO BE REVERSED AND CONFIRM THE ACTION OF ASSESSING OFFICER. IN VIEW OF THE ABOVE, GROUND NO.4 TAKEN BY THE DEPARTM ENT IS ALLOWED BY CONFIRMING THE ACTION OF ASSESSING OFFICER. 3.1 IN RESPECT OF ADDITIONAL GROUND TAKEN BY THE DE PARTMENT THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT IN VIEW O THE SPECIAL BENCH DECISION IN THE CASE OF SUMITOMO MITSUI BANKING CORPN. (SUPRA), THAT THE INTEREST INCOME RECEIVED FROM HEAD OFFICE DOES NOT GIVE RISE TO INCOME AND ACCORDINGLY THE TRIBUNAL IN ASSESSEES OWN CASE HAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME CANNOT BE ALLOWED. THE LD.AR CONCEDED THAT THE ISSUE HAS B EEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATE D 22/03/2013 AND ACCORDINGLY THE ABOVE ADDITIONAL GROUD TAKEN BY THE DEPARTMENT IS TO BE ALLOWED IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE AND THAT THE PROVISIONS OF SECTION.14A ARE APPLICABLE ON THE EXEMPT INTEREST INCOME EARNED FROM HEAD OFFICE/OVERSEAS BRANCHES. H ENCE, ADDITIONAL GROUND TAKEN BY DEPARTMENT IS ALLOWED. 4. NOW WE TAKE GROUND OF APPEAL TAKEN BY THE ASSESS EE IN ITA NO.1786/MUM/2008 . 4.1 GROUND NO.2 OF THE APPEAL TAKEN BY THE ASSESSEE IS IN REGARD TO EXCESS PROVISION OF RS.4,11,385/- FOR WHICH THE LD. CIT(A) HAS UPHELD THE ACTION OF AO IN DISALLOWING THE SAID AMOUNT WITH DI RECTION THAT A REVERSAL THEREOF IN SUBSEQUENT YEAR SHOULD NOT BE BROUGHT TO TAX. AT THE TIME OF HEARING THE LD. AR SUBMITTED THAT THE ABOVE GROUND IS NOT PRESSED FOR AS THE SAID AMOUNT HAS BEEN TAXED IN THIS ASSESSMENT Y EAR AND IS NOT TAXED ITA NO.6809 & 1786/M/08 A.Y.04-05 10 IN NEXT YEAR WHEN IT WAS OFFERED TO TAX BY THE ASSE SSEE. IN VIEW OF ABOVE GROUND NO.2 TAKEN BY THE ASSESSEE IS REJECTED. 4.2 IN RESPECT OF GROUND NO.3 AND 4 OF THE APPEAL T HE LD. AR SUBMITTED THAT THE ABOVE GROUNDS ARE NOT PRESSED FOR AS ASSES SEE HAS BEEN ALLOWED THE DEDUCTION OF THE BROKEN PERIOD INTEREST ON PURC HASE OF SECURITIES IN THE ASSESSMENT YEAR 2002-03 AND ALSO WAS ALLOWED DE DUCTION OF BAD DEBTS OF RS.21.75 LACS IN RESPECT OF BIOGENIC (I) L TD. IN ASSESSMENT YEAR 1995-96 BY THE TRIBUNAL AND THE DEPARTMENT ALSO ACC EPTED THE ORDER OF THE TRIBUNAL IN RESPECT OF BOTH THE ABOVE CLAIM, TH E SAID GROUNDS ARE NOT PRESSED FOR. IN VIEW OF THE ABOVE SUBMISSION OF THE LD. AR, GROUND NO.3 AND 4 TAKEN BY THE ASSESSEE ARE REJECTED AS NO CLAI M OF THE ASSESSEE SURVIVES FOR BOTH THE GROUNDS IN THE ASSESSMENT YEA R UNDER CONSIDERATION. 5. IN THE RESULT THE APPEALS OF THE DEPARTMENT AS W ELL AS THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2013. SD/- SD/- (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER (B. R. MITTAL ) JUDICIAL MEMBER MUMBAI, DATED: 13/09/2013. JV. ITA NO.6809 & 1786/M/08 A.Y.04-05 11 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.