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

ITA 1767/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1526 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 26-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Residential status; Double taxation relief; Retrospective amendment; Permanent establishment; Advance ruling; Bad and doubtful debts; Revenue expenditure; Capital expenditure; TDS; Set aside; Liquidation
• Section: 90; 2; 143(3); 14A; 115JB; 201; 191; 208; 192; 64; 113; 35AB; 43; 48; 13; 22; 20

Judgement Text

ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 1 OF 37 INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH, MUMBAI [CORAM: PRAMOD KUMAR, VICE PRESIDENT AND, AMARJIT SINGH, JUDICIAL MEMBER] ITA NO . : 1767 /MUM/2019 ASSESSMENT YEAR: 2015 - 16 BANK OF INDIA .. APPELLANT T AXATION DEPARTMENT , 8 TH FLOOR, STA R HOUSE , C 5 G BLOCK, BKC, BANDRA EAST , MUMBAI 400 051 [PAN: AAACB0472C] V S. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), MUMBAI .RESPONDENT ITA NO .: 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 ASSISTANT COMMISSIONER OF INCOME TAX CIRCL E 2(1)(1), MUMBAI .. APPELLANT V S. BANK OF INDIA .RESPONDENT T AXATION DEPARTMENT , 8 TH FLOOR, STAR HOUSE , C 5 G BLOCK, BKC, BANDRA EAST , MUMBAI 400 051 [PAN: AAACB0472C] APPEARANCES: C NARESH , FOR THE ASSESSEE RAHUL RAMAN , FOR T H E REVENUE DATE OF CONCLUDING THE HEARING: OCTOBER 27, 20 20 DATE OF PRO NOUNCING THE ORDER: DECEMBER 11 , 2020 O R D E R PER P RAMOD KUMAR, VP : 1. TH IS SET OF CROSS APPEALS , CONSISTING OF AN APPEAL FILED BY THE ASSESSEE A S A LSO ANOTHER APP E AL F ILED BY TH E ASSESSING OFFICER, CALL INTO QUESTION CORRECTNESS OF THE ORDER DATED 25 TH APRIL 2019, IN THE M AT TER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS THE ACT ] , FOR THE ASSESSMENT YE A R 2015 - 16. 2. TH ESE APPEALS RAISE TWO INTERESTING ISSUES , WITH WIDER RAMIFICATIONS, FOR OUR ADJUDICATION - FIRST, WHETHER OR NOT THE INCOME OF THE ASSESSEE BANK FROM ITS FOREIGN BRANCHES, AMOU NTING TO RS 1,408 .32 CRORES , IS REQUIRED TO BE EXCLU DED FROM ITS INCOME TAXABLE I N INDIA; AND, SECOND, WHETHER OR NOT THE ASSESSEE BANK IS LIABLE TO SUBJECTED TO MIN IMUM ALTER NATE TAX UNDER SECTION 115 JB, AND, IF SO, WHETHER THE INCOME OF THE FOR EIGN BRANCHES , AMOUNTING ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 2 OF 37 TO RS 1,408.32 CROR ES , AND, PROVISION FOR B AD D OU BTF UL DEBTS AMOU NTING TO RS 5,3 59. 64 CRORES IN REQUIRED TO BE EXCLUDED F ROM THE COMPUTATION OF BOOK PROFITS COMPUT ED UNDER SECTION 11JB OF THE ACT. LET US TAKE UP THESE TWO ISSUES FIRST, AND THEN WE WILL PROCEED TO TAKE UP THE REMAINING ISSUES RAISED IN THE APPEAL. 3. SO FAR AS THE FIRST ISSUE IS CONCERNED, I.E. EXCLUSION OF PROFITS OF F OREIGN BRANCHES FROM TAXABLE INCOME IN INDIA, THIS IS CERTAINLY AN ISSUE OF WIDER RAMI FICATION TOUCHING THE ASSESSMENT OF E VERY INDIAN EN TERPRISE WHICH HAS BRANC H OFFICES ABROAD INASMUCH A S WHATEVE R WE DECID E IN THIS CASE OF A PUBLIC SECTOR UNDERTAKING WILL HAVE EQUAL APPLICATION IN OTHER C ASES OF INDIAN COMPANIES HAVING BRANCH OFFICES ABROAD IN THE COUNTRIES WITH WHICH INDIA HAS ENTERED INTO THE DOUBLE TAXATION AVOIDANCE AGREEMENTS. THE R ELATED GROUNDS OF APPEAL ARE AS FOLLOWS: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING EXCLUSION OF PROFITS OF BRANCHES OF THE APPELLANT BANK SITUATED I N COUNTRIES WITH WHOM INDIA HAS ENTERED IN TO A DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) NAMELY UNITED KINGDOM, FRANCE, BELGIUM, KENYA , JAPAN, UNITED STATES OF AMERICA, SINGAPORE, CHINA AND SOUTH AFRICA (HEREIN AFTER REFERRED TO AS 'FOREIGN BRANCHES OF TH E APPELLANT BANK') AGGREGATING TO RS.1408, 32,77,584 AND THE HON'BLE CIT(A) HAS ERRED IN U P HOLDING THE DECISION OF THE LEARNED ACIT. THE LEARNED ACIT BE DIRECTED TO ALLOW DEDUCTION FOR EXCLUSION OF PROFITS OF FOREIGN BRANCHES OF THE APPELLANT BANK AGGREGA TI NG TO RS.1408,32,77,584 AND REDUCE THE TOT AL INCOME ACCORDINGLY. 3A. WITHOUT PREJUDICE T O GROUND NO. 3 ABOVE, ASSUMING WITHOUT ACCEPTIN G THAT THE EXCLUSION OF PROFIT OF THE AFORESAID FOREIGN BRANCHES AGGREGATING TO RS. 1408,32,77,584 IS NOT ALLOWED AND TH EREFORE, TAXED IN INDIA , THEN THE APPELLA NT BANK PRAYS THAT THE CREDIT FOR TAXES PAID BY THE SAID BRANCHES IN THEIR RESPECTIVE COUNTRIE S BE ALLOWED AS A DEDUCTION WHILE DETERMINING TAX LIABILITY IN INDIA IN ACCORDANCE WITH SEC.90 OF THE ACT. 4 . THE AS SE SSE E BANK HAS BRANCHES ABROAD , IN BELGIUM, CHINA, FRANCE, JAPAN , KE N YA , SINGAPORE, SOUTH A FRICA, UNITED KINGDOM , AND UNITED STATES OF AMER IC A . DURING THE RELEVANT FINANCIAL PERIOD, THE ASSESSEE EARN ED INCOME AGGREGATING TO RS 1 408,32,77,5 84 (I. E RS 1408. 32 CROR ES) FROM THESE FOREIGN B R A NCH ES. WHIL E FILING ITS INCOME TAX RET URN, HOWEVER, THE A S SESSEE DID NOT INCLUDE THIS INCOME OF RS 1,408.32 CRORES IN ITS TAXABLE INCOME. THE PLEA OF THE ASSESSEE WAS THAT SINCE INDIA H A S DOUBLE TAXAT ION AVOIDANCE AGREEMEN TS W ITH ALL T HESE COUNTRIES, THE RIGHT TO TA X THE PROFITS OF THESE FOREIGN BRANCHES EXCLUSI V ELY VESTS WITH THE RESPE CTIVE TAX JURISDIC TION S AND THESE PROFITS CANNOT BE TA XED IN IN DIA. THIS PLEA WAS NEGAT E D BY THE ASSESSING OFFI CER ON THE GROUND THAT , UNDER T HE SCHEME OF THE LAW AS IT PREV AILS - PARTIC ULARLY IN THE LIGH T OF THE PROVISIONS OF SECT I O N 90(3) READ WITH NOT IFICATION NO SO 2123 (E) DATED 28 TH AUGUST 2008 , ENTIRE GLO BAL INCOME OF AN INDIAN RESIDENT ASSESSEE IS TO BE TAXED IN INDIA AND THA T WHERE A DT AA PROV IDES THAT ANY INCOME OF A RESIDENT OF INDIA MAY BE TA XED IN THE OTHER COUNTRY, SU C H INCOME SHALL BE INCLUDED IN HIS TOTAL I NCOME CHARGEABLE TO TAX IN INDIA, IN ACCORDANCE WITH THE PROV ISIONS OF THE INCOME T AX ACT, 1961, AND RELIEF SHALL BE GRANTE D IN ACCORD ANCE WITH THE METH O D O F EL IMINATIO N OR A VOIDANCE OF DOUBLE TAXAT ION PROVIDED IN SUCH AGREEMENT . AGGRIEV ED, ASSESSEE CARRIED THE MATTER IN APPEAL ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 3 OF 37 BEFORE THE C IT( A) BUT WITHOUT ANY SU CCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER A PPEAL BE FORE US. 5. LEA RNED COUNSEL S CONT ENTION, AS ARTICULATED IN THE WRITTEN NOTE FILED BEFORE US , IS THAT THE ISSUE IN APPEAL IS COVERED, IN FAVOUR OF THE ASSESSEE, BY DEC ISIONS OF THE COORDINATE BE NCHES IN TWO IMMEDIATELY PRECEDING ASSESSMENT YEAR S, NAMELY 2013 - 14 AND 2014 - 15, WHEREIN THE MATTER HAS BEEN REMITTED BACK T O THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF CERT AIN DIRECTIONS. IT IS THUS CONTENDED THAT WHEN PROFITS OF A BRANCH ABROAD HAS BEEN SUB JECTED TO TAX ABR OAD, UNDER AR TICLE 7 OF THE APPLICA BLE DOUBLE TAXATION AVOIDANCE A GREEMENT, T HE SAME INCOME CA NNOT AGAIN BE TAXED IN I NDIA. ON THE FIRST PRINCIPLE , T HE MERITS OF TH IS ARGUMENT, MERIT IF THERE IS ANY, C OULD ONLY BE ITS SIMPLICITY , OR NAIVETY - TO BE MORE APT , IN ITS APPRO ACH . IT PROCEEDS ON THE FALLACY THAT THERE IS ONLY ONE METHOD O F REL IEVING DOUB LE T AXATION OF AN INCOME , DUE T O INHERENT CONFLICT OF THE SOURCE TAXATION VS RESIDENCE TAXATION RULE, AND THAT METH O D IS EXEMPTION METH OD , AND THAT IS THE MET HOD OF REL IEV ING DOUBLE TAXATION OF INCOME IN THE I NDIAN TA X TREATIES AS WELL. NOT HING CAN BE FARTHER FROM THE TRUTH. NOT ONLY TH AT CREDIT METH OD IS A N EQUALLY, EVEN IF NOT MORE, EFFEC TIVE A METHOD OF RELIEV ING D OUBLE TAXATION OF INCOME IN A CROSS BORDER SITUATION, THAT IS THE MET HOD WHICH IS USED IN AN OVERWHELMING MAJORITY OF THE INDI AN TAX TREATIES - INCLUDING, OF COU RSE, ALL THE TAX TRE ATIES THAT WE ARE CONCERNED ABOUT IN THIS CASE. WHAT ESSENTIALLY FOLLOWS IS THAT THE S O FAR INCOME OF THE BRANCHE S, WHICH ARE SUBJECTED TO TAX AB ROAD UNDER THE RESPECTIVE TAX TREATIES, IS TO BE INCLUDED IN THE TAXABLE INCOME OF THE ASSESSEE, AND SO FAR AS TAXES PAID ABROAD ARE CONCERNED, CREDIT FOR THE TAXES SO PAID ABROAD IS TO BE GIVEN TO THE ASSESSEE, IN COMPUTATION OF ITS INDIAN INCOME TAX LIABILITY, IN ACCORDANCE WITH THE PROVISIONS OF THE RELATED T AX TREAT Y. HAVING SO SET OUT THE CORRECT P OSITION F ROM AN ACADEMIC PO INT OF VI EW , WE MAY HASTEN TO ADD THAT THERE IS INDEED A JUDICIAL PRECEDENT FROM HON BLE SUPREME COURT, IN TH E CASE OF CIT VS PVAL KULANDA GAN CHETTIAR [(2004) 267 ITR 654 (SC )], WHICH TOU CHES A DIFFERENT CHORD , BUT THE N, IN THE LIGHT OF SUBSEQUENT LEGAL AMENDMENTS, THE IMPACT OF THIS JUDICIAL PRECEDENT STANDS NULLIFIED. WHAT IS THUS CORRECT ON THE FIRST PRINCIPLES AND AS PER THE TEXT BOOKS, IS ALSO THE BINDING LEG AL POSIT ION. 6 . WHEN WE PUT OUR ABOVE UNDERSTANDING T O THE LEARNED COUNSEL IN THE BEGINNING OF HEARING O N THIS ISSUE , LEARNED COUNSEL DID FA IRLY A DMIT THA T, EVEN ON THE SAME FACTS OF THE C ASE T HIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCHES, THIS ISSUE I S NO W COVERED A GAINST THE ASSE SSEE, BY A RATHER REC E NT COORDINATE BE NCH DECISION IN THE CASE OF TECHNIMONT PV T LTD VS ACIT [ (2020) 116 TAX MANN.COM 996 (MUM)] . LEA R N ED COUNSE L FRANKLY SUBMITS THAT THE REASONING ADOPTED BY TH OSE COORDINATE BE NCHES, IN THE LI GHT OF THIS RECENT DECISION, DOES NOT HOLD GOOD, AND HE HAS NOTHING TO SAY ON THE SAME ON THE SAME - EXCEPT FOR ONE NEW REASON WHICH WE WILL TAKE UP A L ITTLE LATE R. IN THE CAS E OF TECHNIMONT PVT LTD (SUPRA) , THE COORDIN ATE BENCH, SPEAKING THROUGH ONE OF US (I.E. THE VICE PRESIDENT), HAS, INTER ALI A , OB SERVED , AN D WE ARE IN CONSIDERED AGREEMENT WITH THESE OBSER VATIONS, AS FOLLOWS: 4. TO ADJUDICATE ON THE ISSUE ON ME RITS, ONLY A FEW UNDISPUTED MATERIAL FACTS NEED TO BE TAKE N NOTE OF. THE A SSESSEE BEFORE US IS AN INDIAN COMPANY WITH BRANCH OFFICES IN UAE AND QATAR. THE ASSESSEE HAS EARNED PROFITS AGGREGATING TO RS. 11,91,18,391 IN THESE BRANCHES, WHICH, FOR THE PURPOSE S OF THE PROVISIONS OF THE RESPECTIVE TAX TREATIES, CONSTI T UTE PERMANENT E STABLISHMENTS. THE C LAIM OF THE ASSESSEE, AS NOTED BY THE DRP AT PAGE 10, IS THAT 'THE FOR EIGN BRANCHES CREATE PERMANENT ESTABLISHMENTS (PES) IN THE FOREIGN COUNTRIES, THE INCOME FRO M THE SAME IS LIABLE TO TAX IN THESE FOREIGN COUNTRIES, I. E . SOURCE STAT ES , AND, HENCE, THE IN COME FROM ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 4 OF 37 AFORESAID FOREIGN BRANCHES SHOULD BE EXEMPT IN INDIA AS PER ARTICLE 7 OF THE TAX TREATIES'. THE ASSESSEE HAS FURTHER CONTENDED THAT 'ACCORDING TO MANY J UDICIAL PRECEDENTS CITED BELOW, IT HAS BEEN HELD THAT UNDE R A TAX TREATY , IT HAS BEEN PROVIDED THAT TAX 'MAYBE' CHARGED IN A PARTICULAR STATE IN RESPECT OF SPECIFIE D INCOME, IT IS IMPLIED THAT TAX WILL NOT BE CHARGED BY THE OTHER STATE IN RESPECT OF SUCH I NCOME'. AS NOTED IN THE DRP'S ORDER, FURTHER AT PAGE 11, T H E CONTENTIONS O F THE ASSESSEE HAVE BEEN THAT 'IT HAS BEEN HELD THAT ONCE AN INCOME IS HELD TO BE TAXABLE IN A PARTICULAR JURISDICTION UNDER A TAX TREATY, UNLESS THERE IS A SPECIFIC MENTION THAT IT CAN BE TAXED IN THE OTHER JURISDICTION AS WELL, THE LATTER IS DENUDED OF T HE POWERS TO TAX SUC H INCOME' AND THAT 'ACCORDINGLY, INCOME EARNED BY THE FOREIGN BRANCHES IN UAE AND QATAR WHERE THE ASSESSEE WAS FORMING PE SHOULD NOT BE LIABLE TO TAX IN INDIA BAS ED ON RELEVANT TAX TREATIES'. THE ASSESSEE HAS ALSO RELIED UPON A LARGE NU MBER OF JUDICIAL PRE CEDENTS, INCLUDING THE JUDICIAL PRECEDENTS IN THE CASES OF PAVL KULAND AYAN CHETTIAR V. ITO [1983] 3 ITD 426 (MAD.) (SB), WHICH HAS BEEN UPHELD RIGHT UPTO HON'BLE SUPREME COURT P.V.A.L. KULANDAYAN CHETTIAR (SUPRA) AND A R E VIEW PETITION H AS ALSO BEEN DISMISS ED BY HON'BLE SUPREME COURT CIT V. P.V.A.L. KULANDAYAN CHETTIAR [2008] 300 ITR 5, CIT V. BANK OF INDIA [64 TAXMANN.COM 335 (BOM)], CIT V. VRSRM FIRM [1994] 208 IT R 400 (MAD.), CIT V. R M MUTHIAH [1993] 67 TAXMAN 222/202 I TR 508 (KARNA TA KA), DY. CIT V. PATN I COMPUTER SYSTEMS LTD. [2008] 114 ITD 159 (PUNE), APOLLO HOSPITALS EN TERPRISES LTD. V. DY. CIT [2012] 23 TAXMANN.COM 168/53 SOT 103 (CHENNAI)], DY. CIT V. TURQUO ISE INVESTMENTS & FINANCE LTD. [2008] 168 TAXMAN 107/300 I T R 1 (SC), MS. P OOJA BHATT V. DY. CI T [2008] 26 SOT 574 (MUM.), DY. CIT V. MIDEAST INDIA LTD. [2009] 28 SO T 395 (DEL.), CIT V. PATNI COMPUTER SYSTEMS LTD. [2013] 33 TAXMANN.COM 3/215 TAXMAN 108 HON' BLE BOMBAY HIGH COURT AND APOLLO ENTERPRISES LTD. V. (SUPR A ) 5. LEARNED C OUNSEL FOR THE ASSES SEE HAS MORE ARMOURY IN STORE. HE BEGINS BY INVITING OUR ATTENTION TO A COORDINATE BENCH DECISION IN THE CASE OF BANK OF INDIA V. DY. CIT, AND VICE VERSA [IT APPE AL NOS 5977 AND 6016 (MUM.) OF 2011, ORDER DATED 26 - 7 - 2017 ] WHEREIN IT H AS BEEN HELD THAT THE INCOME OF THE FOREIGN BRANCHES, COVERED BY TAX TREATIES WITH RESPECTIV E JURISDICTIONS, IS TO BE EXCLUDED FROM TOTAL INCOME OF THE ASSESSEE AND IS TO BE HELD AS NO T TAXABLE IN INDIA. IT IS SUBMITTED THAT THIS DECISION IS A BINDING JUDI CI AL PRECEDENT AND IT IS NOT OPEN TO US TO DEVIATE FROM THE STAND SO TAKEN BY THE COORDINATE BENCH. WHEN LEARNED COUNSEL'S ATTENTION WAS INVITED TO THE PROVISIONS OF SECTION 90(3) READ WITH NOTIFICATION NO. 91/2008 DATED 28TH AUGUST 2008, AND IMPACT OF THI S LEGAL POSITION ON TH E CLAIM OF THE ASSESSEE, HE SUBMITS THAT SECTION 90 WAS RE - ENACTED WIT H EFFECT FROM 1ST OCTOBER 2009, AND THE NOTIFICATIONS ISSUED PRIOR TO RE - ENACTED SECTION 90 WILL NOT HOLD GOOD IN LAW. IN SUPPORT OF THIS PROPOSITION, OUR ATTENTION I S INVITED TO A COORD INATE BENCH DECISION IN THE CASE OF ESSAR OIL LTD. V. ADDL.CIT [2014] 42 TAXMANN.COM 21 WHEREIN IT IS SAID TO HAVE BEEN HELD, IN PARAGRAPH NO. 76, THAT NOTIFICATI ONS ISSUED UNDER EARLIER SECTION 90 SHALL HOLD GOOD TILL 1 S T OCTOBER 200 9. AS A COROLLARY TO T HIS OBSERVATION, ACCORDING TO THE LEARNED COUNSEL, THE NOTIFICATIONS I SSUED UNDER EARLIER SECTION 90 WILL NOT HOLD GOOD AFTER 1ST OCTOBER 2009. HE SUBMITS THAT IN THIS VIEW OF THE MATTER, NOTHING REALLY TURNS ON THE NOTI F ICATION NO 91 /2 008 UNDER SECTION 90 (3). HE SUBMITS THAT THE IMPACT OF NOTIFICATION HAVING BEEN NULLIFIED BY RE - ENACTMENT OF SECTION 90, THE LAW LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF CIT V. PVAL KULANDAGAN CHETTIAR [2004] 137 TAXMAN 460/267 ITR 654 (SC) WILL H OLD THE FIELD, AND, THEREFORE, INCOME TAXABLE IN THE SOURCE JURISDICTION UNDER THE TREATY PROVISIONS CANNOT BE INCLUDED IN TOTAL INCOME OF THE ASSESSEE. HE HASTENS TO ADD, AND RATHER CURIOUSLY SO, THAT HE WOULD ONCE AGAIN URGE US NOT TO DEC I DE THE MATTER O N MERITS AND SIMPLY REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER. LEARNED DEPARTM ENTAL REPRESENTATIVE, ON THE OTHER HAND, VEHEMENTLY RELIES UPON THE STAND OF THE AUTHORITIES BELOW, AND LEAVES THE MATTER TO US. 6. FOR THE SAKE OF C O MPLETENESS, W E MAY ALSO PLACE ON RE CORD THAT THE FACT THAT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2012 - 13, THE DISPUTE RESOLUTION PANEL HAS GIVEN RELIEF OF ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 5 OF 37 RS. 10,81,17,104 ON THIS ISSUE, A ND LIKEWISE FOR THE ASSESSMENT YEAR 2013 - 14, THE DISPUTE R E SOLUTION PANE L HAS GIVEN RELIEF OF RS. 28,47,44,212 ON THE SAME ISSUE. THAT IS WHAT PROBABLY EXPLAINS THE ASSESSEE'S EAGERNESS TO GO BACK TO THE ASSESSMENT STAGE, AND CLAIM IT AS A COVERED ISSUE BE FORE THEM. THE REASONING ADOPTED BY THE DISPUTE RESOLUTION PANEL, FOR EX AM PLE FOR THE ASSESSME NT YEAR 2013 - 14 (AT PAGE 294 OF THE PAPER BOOK, AND INTERNAL PAGE 15 O F THE RESPECTIVE ORDER), IS AS FOLLOWS: 9.1 WE HAVE GONE THROUGH THE CORE OBJECTION RAISED WITH RESPECT TO INCLUSION OF FOREIGN BRANCHES INCOME IN TH E HANDS OF THE A SSESSEE. IT IS A FAC T THAT THE ASSESSEE HAS TWO FOREIGN BRANCHES SITUATED IN UAE AND BAHRA IN. IT IS ALSO A FACT THAT THERE EXISTS A DTAA BETWEEN INDIA AND UAE. REFERENCE IS MADE TO T HE DECISION OF HON'BLE SUPREME COURT IN PAVL KULANDAGAN CH E TTIAR'S CASE (2 67 ITR 654) WHEREIN HON'BLE COURT HAS UPHELD THE FINDING OF THE HIGH COURT WHICH TOOK THE VIEW THAT WHERE THERE EXISTS A PROVISION TO THE CONTRARY IN THE AGREEMENT, THERE IS NO SCOPE FOR APPLYING THE LAW OF ANY ONE OF THE RESPECTIVE CONTRAC T ING STARES TO T AX PAID ON THE LIABI LITY TO TAX HAS TO WORK DOUBT (SIC - OUT) IN THE MANNER AND TO THE EXTE NT PERMITTED AND ALLOWED UNDER THE TERMS OF THE AGREEMENT. THE AO IS DIRECTED TO VERIFY THE TOTAL INCOME OF THE UAE BRANCH AND REDUCE THE SAME FROM AS S ESSEE'S TOTAL I NCOME. THE GROUND OF OBJECTION IS, ACCORDINGLY, ACCEPTED. 9.2 SIMILAR VIEWS HAVE BEEN TAK EN IN THE ASSESSEE'S CASE BY THE DRP DURING THE ASSESSMENT YEAR 2012 - 13. 7. UNDOUBTEDLY, AS A RESULT OF HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE O F PAVL KULAND AG AN CHETTTIAR'S CASE (SUPRA), THE LEGAL POSITION WAS THAT ONCE AN INCOME IS HELD TO BE TAXA BLE IN A TAX JURISDICTION UNDER A DOUBLE TAXATION AVOIDANCE AGREEMENT, AND UNLESS THERE IS A SPECIFIC MENTION THAT IT CAN ALSO BE TAXED IN THE OTHER T A X JURISDICTIO N, THE OTHER TAX JURIS DICTION WAS DENUDED OF ITS POWERS TO TAX THE SAME. TO THAT EXTENT, THE WORLDWIDE BASIS OF TAXATION IN THE SCHEME OF THE INDIAN INCOME - TAX ACT WAS NO LONGER APPLIC ABLE IN A SITUATION PROVISIONS OF A DOUBLE TAXATION AVOIDA N CE AGREEMENT EN TERED INTO UNDER SEC TION 90 APPLY. THAT WAS THE SCHEME OF LAW, AS EVIDENT FROM THE FOLLOWI NG OBSERVATIONS, AS SETTLED BY HON'BLE SUPREME COURT: 13. WE NEED NOT TO ENTER INTO AN EXER CISE IN SEMANTICS AS TO WHETHER THE EXPRESSION 'MAY BE' WI L L MEAN ALLOCA TI ON OF POWER TO TAX O R IS ONLY ONE OF THE OPTIONS AND IT ONLY GRANTS POWER TO TAX IN THAT S TATE AND UNLESS TAX IS IMPOSED AND PAID NO RELIEF CAN BE SOUGHT. READING THE TREATY IN QUEST ION AS A WHOLE WHEN IT IS INTENDED THAT EVEN THOUGH IT IS P OSSIBLE FOR A R ESIDENT IN INDIA TO BE TAXED IN TERMS OF SECTIONS 4 AND 5, IF HE IS DEEMED TO BE A RESIDEN T OF A CONTRACTING STATE WHERE HIS PERSONAL AND ECONOMIC RELATIONS ARE CLOSER, THEN HIS RESI DENCE IN INDIA WILL BECOME IRRELEVANT. THE TREATY WILL HAV E TO BE INTERP RE TED AS SUCH AND PREV AILS OVER SECTIONS 4 AND 5 OF THE ACT. THEREFORE, WE ARE OF THE VIEW T HAT THE HIGH COURT IS JUSTIFIED IN REACHING ITS CONCLUSION, THOUGH FOR DIFFERENT REASONS FRO M THOSE STATED BY THE HIGH COURT. 8. WE ARE, AT THIS STAG E , NOT CONCERN ED ABOUT HOW THE ABOVE LEGAL POSITION WAS AT SOME VARIANCE WITH THE FIRST PRINCIPLES AND WHA T IMPACT THE AFORESAID DECISION HAD ON THE WORKABILITY OF THE DOUBLE TAXATION RELIEF MECHANI SM. IT WOULD APPEAR THAT THE VERY SCHEME OF TAX CREDIT, AS ENVISAGED IN TH E INTERNATIONAL TAX TREATIES, WAS PERHAPS RENDERED REDUNDANT. THERE WAS NO QUESTION OF TAX CREDITS BEING GRANTED IN INDIA IN VIEW OF THE FACT THAT ANY INCOME TAXED BY SOURCE JURISDIC TION ABROAD WAS HELD TO BE EXEMPTED FROM TAXATION IN INDIA , AND IF THESE T AX CREDITS WERE TO B E GRANTED IT WOULD HAVE RESULTED IN PLAIN AND SIMPLE REFUND OF THE TAX ES PAID ABROAD SINCE THE INCOMES RELATING THERETO WERE HELD TO BE NOT AT ALL TAXABLE IN ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 6 OF 37 INDI A. A DOUBLE DIP OF LOSSES ABROAD, HOWSOEVER INAPPROPRIATE O N THE FIRST P RI NCIPLES, WAS ACTUALL Y POSSIBLE, AND WAS APPROVED BY THE COORDINATE BENCHES OF THIS TRIBUNA L, AS IN THE CASE OF PATNI COMPUTERS (SUPRA), WHEREIN SPEAKING THROUGH ONE OF US (I.E. THE V ICE PRESIDENT), THE LEGAL POSITION WAS RESPECTFULLY FOLLOW E D NEVERTHELES S AND IT WAS ALSO OBSE RVED THUS: THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN BINDING ON US UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. THE PREVAILING LEGAL POSITION, THEREFO RE, IS THAT ONCE AN INCOME IS HELD TO BE TAXABLE IN A TAX J URISDICTION U ND ER A DOUBLE TAXATION AVOIDANCE A GREEMENT, AND UNLESS THERE IS A SPECIFIC MENTION THAT IT C AN ALSO BE TAXED IN THE OTHER TAX JURISDICTION, THE OTHER TAX JURISDICTION IS DENUDED OF ITS POWERS TO TAX THE SAME. TO THAT EXTENT, THE WORLDWIDE BAS I S OF TAXATION I N THE SCHEME OF THE INDIAN INCOM E - TAX ACT IS NO LONGER APPLICABLE IN A SITUATION PROVISION S OF A DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO UNDER SECTION 90 APPLY. THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN BINDING ON US UNDER A RTICLE 141 OF T HE CONSTITUTION OF I NDIA. THE PR EVAILING LEGAL POSITION, THEREFORE, IS THAT ONCE AN INCOME IS HELD TO BE TAXABLE IN A TAX JURISDICTION UNDER A DOUBLE TAXATION AVOIDANCE AGREEMENT, AN D UNLESS THERE IS A SPECIFIC MENTION THAT IT CAN ALSO BE T A XED IN THE OT HE R TAX JURISDICTION, THE OTHER TA X JURISDICTION IS DENUDED OF ITS POWERS TO TAX THE SAME. T O THAT EXTENT, THE WORLDWIDE BASIS OF TAXATION IN THE SCHEME OF THE INDIAN INCOME - TAX ACT IS NO LONGER APPLICABLE IN A SITUATION PROVISIONS OF A DOUBL E TAXATION AVO ID ANCE AGREEMENT ENTER ED INTO UNDE R SECTION 90 APPLY. 9. THE DEVELOPMENT OF LAW, HOWEVER, D ID NOT STOP AT THAT. 10. IT MAY BE RECALLED THAT, WITH EFFECT FROM 1ST APRIL 2004, A NEW SU B - SECTION 3 WAS INSERTED IN SECTION 90, AND THIS NEW SUB - S E CTION PROVIDE D THAT '(A)NY TERM USE D BUT NOT DE FINED IN THIS ACT OR IN THE AGREEMENT REFERRED TO IN SUB - S ECTION (1) SHALL, UNLESS THE CONTEXT OTHERWISE REQUIRES, AND IS NOT INCONSISTENT WITH THE PR OVISIONS OF THIS ACT OR THE AGREEMENT, HAVE THE SAME MEANI N G AS ASSIGNED T O IT IN THE NOTIFICA TION ISSUED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF'. IN EXERCISE OF THE POWERS SO VESTED IN THE CENTRAL GOVERNMENT, VIDE NOTIFICATION NO . 91 OF 2008 DATED 28TH AUGUST 2008, IT WAS NOTIFIED AS FO L LOWS: IN EXE RC ISE OF THE POWERS CO NFERRED BY S UB - SECTION (3) OF SECTION 90 OF THE INCOME - TAX ACT, 1961 ( 43 OF 1961), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THAT WHERE AN AGREEMENT ENTERED INTO BY THE CENTRAL GOVERNMENT WITH THE GOVERNMENT OF ANY COUNTRY O UTSIDE INDIA FO R GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, PROVIDES TH AT ANY INCOME OF A RESIDENT OF INDIA 'MAY BE TAXED' IN THE OTHER COUNTRY, SUCH INCOME SHALL BE INCLUDED IN HIS TOTAL INCOME CHARGEABLE TO TAX IN INDIA IN ACCORDANCE W ITH THE PROVISIONS O F THE INCOME - TAX ACT, 1961 (43 OF 1961), AND RELIEF SHALL BE GRANTED I N ACCORDANCE WITH THE METHOD FOR ELIMINATION OR AVOIDANCE OF DOUBLE TAXATION PROVIDED IN SUC H AGREEMENT. 11. THE EFFECT OF HON'BLE SUPREME COURT'S JU D GMENT IN KULA ND AGAN CHETTIAR'S CASE (SUPRA) THU S WAS CLEARLY OVERRULED BY THE LEGISLATIVE DEVELOPMENTS. I T WAS SPECIFICALLY LEGISLATED THAT THE MERE FACT OF TAXABILITY IN THE TREATY PARTNER JURISDI CTION WILL NOT TAKE IT OUT OF THE AMBIT OF TAXABLE INCOME O F AN ASSESSEE I N INDIA AND THAT 'SU CH INCOME SH ALL BE INCLUDED IN HIS TOTAL INCOME CHARGEABLE TO TAX IN I NDIA IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME - TAX ACT, 1961 (43 OF 1961), AND RELIEF SHALL BE GRANTED IN ACCORDANCE WITH THE METHOD FOR ELIMINA T ION OR AVOIDA NC E OF DOUBLE TAXATION PROVIDED IN SUCH AGREEMENT'. A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF ESSAR OIL LTD (SUPRA) ALSO PROCEEDED TO HOLD THAT THIS NOTIFICATION WAS ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 7 OF 37 RETROSPE CTIVE IN EFFECT INASMUCH AS IT APPLIED WITH EFFECT FROM 1S T APRIL 2004 I .E . THE DATE ON WHICH SUB - SECTION 3 WAS INTRODUCED IN SECTION 90. 12. WHEN WE INVITED LEARN ED COUNSEL'S ATTENTION TO THESE LEGAL DEVELOPMENTS, HE SUBMITTED THAT AS SECTION 90 HAS NOW BEEN REDRAFTED AND A NEW SECTION 90 IS IN PLACE, WITH EFFE C T FROM 1ST OC TO BER 2009, THE NOTIFI CATION ISSUE D UNDER OLD SECTION 90(3) CEASES TO BE RELEVANT. THE LEGAL POSITION IS, AS HE CONTENDED, THAT AS ON NOW THERE IS NO NOTIFICATION IS IN FORCE UNDER THE PRESENT SECTION 90, AND, THEREFORE, HON'BLE SUPREME COURT ' S JUDGMENT IN T HE CASE OF KULANDAGA N CHETTIAR ( SUPRA) STILL HOLDS GOOD IN LAW. IN SUPPORT OF THIS PROPOSI TION, LEARNED COUNSEL FOR THE ASSESSEE RELIES UPON AN OBSERVATION BY THE COORDINATE BENCH, I N THE CASE OF ESSAR OIL LTD. (SUPRA) TO THE EFFECT THAT 'W E ARE, THEREFO RE , OF THE CONSIDERED VIEW THAT TH E SUBSTITUTION OF SECTION 90, WHICH HAS COME INTO EFFECT F ROM 1ST APRIL 2004, AND NOTIFICATION ISSUED THEREIN SHALL CONTINUE TO HOLD AT LEAST UPTO 1ST OCTOBER 2009'. BY IMPLICATION, THEREFORE, ACCORDING TO TH E LEARNED COUN SE L, THE NOTIFICATION ISSUED UNDER OLD SECTION 90(3) WILL NOT HOLD GOOD IN LAW AFTER 1ST OCT OBER 2009, UNLESS SUCH NOTIFICATION IS REISSUED ON OR AFTER 1ST OCTOBER 2009. 13. THE ARGUM ENT OF THE LEARNED COUNSEL IS ONLY FIT TO BE NOTED AND REJ E CTED. IT IS O NL Y ELEMENTARY THAT ME RELY BECAUSE A SECTION IS AMENDED OR EVEN SUBSTITUTED, WHETHER BY REPE AL OF THE LEGISLATION ITSELF OR BY AMENDMENT IN THE LEGISLATION, THE NOTIFICATIONS, CIRCULAR S AND INSTRUCTIONS ISSUED THEREIN DO NOT CEASE TO HOLD GOO D . SECTION 297 (2 )(K) OF THE INCOME - T AX ACT, 1961 , SPECIFICALLY PROVIDES THAT NOTWITHSTANDING THE REPEAL OF INCOME - TAX ACT, 1922, 'ANY AGREEMENT ENTERED INTO, APPOINTMENT MADE, APPROVAL GIVEN, RECOGN ITION GRANTED, DIRECTION, INSTRUCTION, NOTIFICATION, ORDER OR RULE ISSUE D UNDER ANY PROVISION OF THE REPEA LED ACT SHALL, SO FAR AS IT IS NOT INCONSISTENT WITH THE C ORRESPONDING PROVISION OF THIS ACT, BE DEEMED TO HAVE BEEN ENTERED INTO, MADE, GRANTED, GIVE N OR ISSUED UNDER THE CORRESPONDING PROVISION AFORESAID AN D SHALL CONTIN UE IN FORCE ACCORDINGL Y'. ON A SIM ILAR NOTE, UNDER SECTION 24 OF THE GENERAL CLAUSES ACT, 'W HERE ANY CENTRAL ACT OR REGULATION, IS, AFTER THE COMMENCEMENT OF THIS ACT, REPEALED AND RE - ENACTED WITH OR WITHOUT MODIFICATION, THEN, UNLESS IT IS O T HERWISE EXPRE SS LY PROVIDED ANY APPO INTMENT NOTI FICATION, ORDER, SCHEME, RULE, FORM OR BYE - LAW, MADE OR IS SUED UNDER THE REPEALED ACT OR REGULATION, SHALL, SO FAR AS IT IS NOT INCONSISTENT WITH THE PROVISIONS RE - ENACTED, CONTINUE IN FORCE, AND BE DEEMED TO HAVE BEEN MAD E OR ISSUED UNDER THE PROVISIONS S O RE - ENACTED.' THE SCHEME OF LAW IS THUS UNAMBIGUOUS. IT S ONLY WHEN AN NOTIFICATION ISSUED UNDER THE OLD STATUTORY PROVISION, WHETHER REPEALED OR MO DIFIED, IS INCONSISTENT WITH THE CORRESPONDING NEW STATUTO R Y PROVISIONS, T HAT SUCH AN NOTIFICA TION CEASES TO HOLD GOOD IN LAW. IN A RATHER RECENT JUDGMENT IN THE CA SE OF FIBRE BOARDS (P.) LTD. V. CIT [2015] 62 TAXMANN.COM 135/[2017] 376 ITR 596 (SC), HON'B LE SUPREME COURT HAS REITERATED THIS PRINCIPLE, AND, INTER ALIA, OBSERVE D AS FOLLOWS: 34. IN CIT V. VENKA TESWARA HATCHERIES (P.) LTD. [1999] 237 ITR 174/103 TAXMAN 503 (SC), THIS COURT WAS FACED WITH AN OMISSION AND RE - ENACTMENT OF TWO SECTIONS OF THE INC OME - TAX ACT. THIS COURT FOUND THAT SECTION 24 OF THE GENER A L CLAUSES ACT W OULD APPLY TO SUCH O MISSION AND RE - ENACTMENT. THE COURT HAS STATED AS FOLLOWS: 'AS NOTICE D EARLIER, THE OMISSION OF SECTION 2(27) AND RE - ENACTMENT OF SECTION 80 - JJ WAS DONE SIMULTAN EOUSLY. IT IS A VERY WELL - RECOGNIZED RULE OF INTERPRETATIO N OF STATUTES TH AT WHERE A PROVISION OF AN ACT I S OMITTED BY AN ACT AND THE SAID ACT SIMULTANEOUSLY RE - ENA CTS A NEW PROVISION WHICH SUBSTANTIALLY COVERS THE FIELD OCCUPIED BY THE REPEALED PROVISION WITH CERTAIN MODIFICATION, IN THAT EVENT SUCH RE - ENACTMENT IS REGARDED H AV ING FORCE CONTINUOUS LY AND THE M ODIFICATION OR CHANGES ARE TREATED AS AMENDMENT COMING INT O FORCE WITH EFFECT FROM THE DATE OF ENFORCEMENT OF THE RE - ENACTED ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 8 OF 37 PROVISION. VIEWED IN THIS BACKGROUND, THE EFFECT OF THE RE - ENACTED PROVISION OF SEC T ION 80 - JJ WAS T HAT PROFIT FROM THE BUSINESS OF LIVESTOCK AND POULTRY WHICH ENJOYED TOTAL EXEMPTION UNDER SECTION 10(27) OF THE ACT FROM ASSESSMENT YEARS 1964 - 65 TO 1975 - 76 BECAME PARTIALLY EXEMPT B Y WAY OF DEDUCTION ON FULFILMENT OF CERTAIN CONDITIONS.' ( A T PARA 12) 3 5. FOR ALL THE AFORESA ID REASONS, WE ARE THEREFORE OF THE VIEW THAT ON OMISSION OF SECTION 2 80ZA AND ITS RE - ENACTMENT WITH MODIFICATION IN SECTION 54G, SECTION 24 OF THE GENERAL CLAUSE S ACT WOULD APPLY, AND THE NOTIFICATION OF 1967, DECLARING THANE TO BE A N URBAN AREA, WOULD BE CONTINUED U NDER AND FOR THE PURPOSES OF SECTION 54A. 14. WHEN SUCH A RE THE VIEWS OF HON'BLE SUPREME COURT IN RESPECT OF VALIDITY OF NOTIFICATIONS IN RESPECT OF AMENDMENT IN LAW BY RE - ENACTMENT OF THE STATUTORY PROVISIO N S UNDER THE I NC OME - TAX ACT, IN WHIC H THESE PROV ISIONS ARE OF SIMILAR NATURE THOUGH BY WAY OF DIFFERENT PR OVISIONS, IT IS FUTILE TO ARGUE THAT WHEN RE - ENACTMENT OF LAW HAS EXACTLY THE SAME PROVISION S, SO FAR AS THE RELATED NOTIFICATION IS CONCERNED, THE ME R E FACT OF RE - EN ACTMENT OF LAW WILL BE FATAL TO THE NOTIFICATION. AS REGARDS LEARNED COUNSEL'S RELIANCE ON OBSERVATIONS MADE BY A COORDINATE BENCH, IN THE CASE OF ESSAR OIL (SUPRA), TO THE EFFECT 'W E ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE SUBSTITU T ION OF SECTIO N 90, WHICH HAS COME I NTO EFFECT F ROM 1ST APRIL 2004, AND NOTIFICATION ISSUED THEREIN SHALL CONTINUE TO HOLD AT LEAST UPTO 1ST OCTOBER 2009', THE IMPORT OF WORDS 'AT LEAST' IS BEING MI SSED OUT. THE ISSUE FOR CONSIDERATION BY THE COORDINATE BE N CH WAS PRE 1S T OCTOBER 2009 SITUATI ON, AND THE COORDINATE BENCH WAS OF THE VIEW THAT 'AT LEAST' FOR THIS PERIOD, THE VALIDITY OF NOTIFICATION CANNOT BE CALLED INTO QUESTION. AS HELD BY HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT V. SUDHIR JAYANTI L AL MULJI [199 6] 84 TAXMAN 205/[1995 ] 214 ITR 15 4 (BOM.), A JUDICIAL PRECEDENT IS ONLY 'AN AUTHORITY FOR W HAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW FROM SOME OBSERVATIONS WHICH FIND PL ACE THEREIN'. THE ISSUE REGARDING VALIDITY OF NOTIFICATION AFTER 1ST APR IL 2009 WAS NOT BEFORE THE COORDIN ATE BENCH, AND THESE OBSERVATIONS THUS HAVE NO RELEVANCE O N THE PROPOSITION BEING CANVASSED BEFORE US. THE LAW LAID DOWN BY HON'BLE SUPREME COURT, AS ANALYSED ABOVE, IS AGAINST THE PLEA ADVANCED BY THE LEARNE D COUNSEL. IN AN Y CASE, THE ARGUMENT OF THE LEAR NED COUNSEL, HOWSOEVER ABSURD, DESTROYS HIS OWN CASE. IF A LL THE NOTIFICATIONS UNDER THE OLD SECTION 90 ARE TO BE HELD TO BE NOT GOOD IN LAW UNDER THE PRESENT SECTION 90, THE ASSESSEE CANNOT CLAIM THE BENEFIT S OF THE RELAT ED TAX TREATIES EITHER SINCE THESE TREATIES WERE ALSO NOTIFIED PRIOR TO 1ST APRIL 2009. 15. LET US NOW TURN TO JUDICIAL PRECEDENTS CITED BY THE LEARNED COUNSEL. 16. NONE OF THESE JUD ICIAL PRECEDENTS TAKE INTO ACCOUNT THE DEVELOPMENTS WITH R E SPECT TO THE PR OVISIONS OF SECTION 90(3) AND TH E NOTIFICATION ISSUED THEREUNDER. THE ONLY EXCEPTION IS A COORDINATE BENCH DECISION IN THE CASE OF BANK OF INDIA (SUPRA) WHEREIN THE ISSUE OF NOTIFICA TION WAS SPECIFICALLY RAISED BUT THEN THE COORDINATE BENCH , FOLLOWING HO N' BLE JURISDICTIONAL H IGH COURT'S JUDGMENT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 20 03 - 04 AND WITHOUT REALIZING THAT THE AMENDMENT IN LAW WAS EFFECTIVE 1ST APRIL 2004 I.E. ASSE SSMENT YEAR 2004 - 05, DECIDED THE ISSUE IN FAVOUR OF THE AS S ESSEE. THE IM PA CT OF AMENDMENT WITH EFFECT FROM 1ST APRIL 2004 NOT HAVING BEEN NOTED OR HAVING BEEN BROUG HT TO THE NOTICE OF THE COORDINATE BENCH, THIS DECISION IS CLEARLY PER INCURI A M AND, AS SUCH , NOT A BINDING JUDICIAL PRECEDENT. AS A MATTER OF FACT, W H EN SUBSEQUENT A SSESSMENT YEARS OF T HIS VERY ASS ESSEE CAME UP FOR CONSIDERATION OF ANOTHER BENCH, THE SAID PRECEDENT WAS NOT FOLLOWED AND, VIDE ORDER DATED 30TH NOVEMBER 2018, IT WAS OBSERVED THAT ' THE DECISION OF THE HON'BLE HIGH COURT IN ASSESSEE'S OWN C A SE PERTAINED TO THE ASSESSMENT YEAR S 2001 - 01 AN D 2003 - 04 AND THE HON'BLE HIGH COURT NEVER HAD ANY OCCASIO N TO EXAMINE THE TAXABILITY OF INCOME OF FOREIGN BRANCHES IN INDIA KEEPING IN VIEW PROVISION S OF SECTION 90(3) READ WITH THE GOVERNMENT NOTIFICATION D A TED ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 9 OF 37 28TH AUGU ST 2008' AND THAT ' WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LEARNED AUTHORISED REPRESE NTATIVE THAT THE ISSUE IS COVERED EARLIER DECISIONS OF THE TRIBUNAL'. THE ASSESSEE, THEREFOR E, DOES NOT DERIVE ANY BENEFIT FROM THIS LEGAL PRECEDENT R E LIED UPON. AL L OTHER JUDICIAL PRECE DENTS HOLD G OOD IN RESPECT OF THE PRE - AMENDMENT LAW, BUT THEN THE LEGA L POSITION, AS ANALYSED ABOVE, HAS CHANGED, AND, UNDER THE CHANGED LEGAL POSITION, THESE JUD ICIAL PRECEDENTS DO NOT HOLD GOOD. AS REGARDS THE DRP DECI S IONS FOR THE IM MEDIATELY TWO PRECED ING ASSESSME NT YEARS, WE HAVE NOTED THAT THE POST AMENDMENT LEGAL POSI TION WAS NOT EVEN BROUGHT TO THE NOTICE OF THE DISPUTE RESOLUTION PANEL. THERE IS NOT EVEN A WHISPER OF A SUGGESTION THAT THE AMENDMENT IN LAW IN SECT I ON 90(3) AND TH E POST AMENDMENT NOT IFICATION WA S BROUGHT TO THE NOTICE OF THE DRP. LEARNED COUNSEL'S ARGU MENTS BEFORE THE DRP SIMPLY PROCEEDED ON THE BASIS THAT THERE WAS NO CHANGE IN STATUTORY PRO VISIONS AFTER THE KULANGADAN CHETTIAR'S JUDGMENT. THAT IS S IMPLY UNACCEP TA BLE. WHILE WE RESTRA IN FROM MAKI NG ANY OBSERVATIONS ON THE CONDUCT OF THE REPRESENTATIVES OF THE ASSESSEE, WE FIND IT DIFFICULT TO BELIEVE THAT A BIG - 4 ACCOUNTING FIRM, AS THE ASSESS EE'S REPRESENTATIVE BEFORE THE DRP, AS INDEED BEFORE US, I S , WOULD REALL Y BE OBLIVIOUS OF THE CORRECT LEGA L POSITION AND IT WAS ANYTHING LESS THAN A CALCULATED IGNO RANCE, BEFORE THE DRP, ON THE BASIC LEGAL POSITION. ADVISING THE CORRECT LEGAL POSITION AND THEN MAKING WHATEVER AGGRESSIVE CLAIM ONE MAKES IS ONE THI N G, BUT NOT EX PL AINING THE CORRECT L EGAL POSITIO N AND THEN HOPING TO SUCCEED WITH THE CLAIM, BY KEEPING TH E ADJUDICATOR IN DARK ABOUT THE STATUTORY DEVELOPMENTS, IS QUITE ANOTHER. THE PATH CHOSEN BY THE ASSESSEE COULD HAVE FALLEN IN THE FIRST CATEGORY IF S U BMISSIONS WER E MADE BEFORE THE DRP ABOUT THE AM ENDMENT IN LAW BY WAY OF SECTION 90(3) AND NOTIFICATION TH EREUNDER, AND YET THE EXEMPTION CLAIM WAS TO BE JUSTIFIED DUE TO NO FRESH NOTIFICATION BEING ISSUED AFTER THE SUBSTITUTION OF SECTION 90(3) WITH EFFEC T FROM 1ST OCT OB ER 2009. THAT IS NOT THE CASE. I N ANY CASE, THE DRP DECISIONS CANNOT FETTER OUR ADJUDICATI ON. 17. WE HAVE ALSO NOTED THAT, AS PER DETAILS FURNISHED BEFORE US AT PAGES 327 TO 376 OF THE PAPER - BOOK, THE ASSESSING OFFICER HAS ACCEPTED THE CLA I M OF THE ASSE SS EE, IN THE ASSESSMEN T YEAR 2016 - 17, FOR EXCLUSION OF RS. 56,39,11,560 FROM ITS TAXABLE INC OME ON THE GROUND THAT IT PERTAINS TO THE PROFITS OF ITS BRANCHES IN ITALY, UAE, QATAR AND S AUDI ARAB AND INDIA HAS DTAAS WITH THESE COUNTRIES. THIS D E CISION BY THE A SSESSING OFFICER, WH ATEVER ITS M ERITS, CERT AINLY DOES NOT CONSTITUTE ANY ESTOPPEL AGAINST THE STATUTE, AND, IN ANY CASE, THERE IS NO RES JUDICATA IN THE INCOME TAX PROCEEDINGS. JUST BECAUSE THE ASSESSING OFFICER HIMSELF HAS ALLOWED A RELIEF TO THE ASSESS EE , WHICH, IN OUR HUMB LE UNDERSTAN DING OF LAW - WHATEVER IS ITS WORTH, IS PATENTLY INADMISSIB LE IN LAW, WE ARE NOT OBLIGED TO GIVE THE ASSESSEE THE SAME RELIEF. IF AT ALL THE STAND OF T HE ASSESSING OFFICER INDICATES OR EXPLAINS ANYTHING, IT EX P LAINS THE ANX IE TY OF THE ASSESSEE T O GO BACK TO THE ASSESSMENT STAGE ON THIS ISSUE. WE ARE, HOWEVER, NOT INCLINED TO FOLLOW THE PLAN SO LAID OUT. 18. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, ; WE REJECT THE CLAIM OF THE ASSE SS EE ON MERITS. NO MAT TER HOW TEMPTING IS IT TO GET A QUICK DISPOSAL BY REMITTING THE MATTER TO THE ASSESSMENT STAGE, AS THE MATTER WAS NOT ADJUDICATED ON MERITS AT THAT STAGE, WHEN, IN OUR CONSIDERED VIEW, QUITE CLEARLY IT IS A PATENTLY INADMI S SIBLE CLAIM , WE HAVE TO HOLD SO A ND THUS DECLINE TO REMIT IT TO THE ASSESSMENT STAGE. 7 . LEARNED COU NSEL HAS SHOW N , IN ACCEPTING THE FACT THAT EVEN THOUGH THE ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY EARLIER DECISIONS OF THE COORDINATE BE NCHES, T HESE COO RDINATE BE NCH DECISIONS CEASE TO BE BINDING JUDICIAL PRECEDENTS INASMUCH AS REASONING ADOPTED THEREIN DOES NOT HOLD GOO D ANY LONGER IN THE LIGHT OF THE DECISION IN THE CASE OF TECHNIMONT (SU PRA) , ADMIRABLE GRACE . IT IS NOT CLEAR TO US WHETHER THIS APPR OACH IS TO PRE EMPT A DETAI LED DI SCUSSION ON MERITS OF THE MA TTER , OR WHETHER TH IS APPROACH IS INDEED BONAFIDE STAND OF THE ASSESSEE . THAT D OES NOT, HOWE VER, MATTER MUCH AT THIS STAGE, AS ALL THE F ACETS OF THIS MATTER ARE CO VERED AB OVE NE VERTHELESS . THE BASIS ON WHICH THE RELIEF WAS GRANT ED IN THE EARLIER YEARS HAS ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 10 OF 37 BEEN EXA MINED AND THAT BASIS BEING EX FACIE INCORRECT AND EVEN RENDERED BY INADVERTENCE IS GLARING IN THE ANA LYSIS THAT HAS BEEN EXTENSIVELY REPRODUCED A BOVE. LEARNED COUNSEL FOR THE ASSESSEE , HOWEV ER, DOES NOT GIV E UP ; HE HAS A N EVEN MORE INNOVATIVE PLEA NOW . HE SUBMITS THAT ABOVE DECISION IS P ER INCURIAM FOR SOME OTH E R REASON , WHICH HAS NOT BEEN DI S CUSSED I N ANY JUDICIAL PRECEDENT SO FAR, INASMUCH AS IT O VERLOOKS THE FACT THAT THE NOTIFICATION D AT ED 28 TH AUGUST 2008 WAS NOT IS SUED IN THE CONTEXT OF THE BUSINESS INCOME, AND, SHOULD ACC ORDING LY N OT BE APPLICABLE SO FAR AS BUSINESS INCOME EARNED ABROAD, AS IN T HIS C ASE, IS CONCERNED . WE SEE NO SUB STAN C E IN THIS PLEA EITHER . THE NOTIFICATION DEALS WITH CONNOTATION S O F THE EXPRESSIO N MAY BE TAXED , APPEARING IN THE TAX TREATIES ENTERED INTO BY I NDIA, AND THERE IS ABS O LUTELY NO BASIS WH ATS OEVER TO SUPPORT THE PROP OSITION THAT TH E EFFECT OF TH E NOTIFICATION HAS TO BE RESTRICTED IN ITS APPLICAT ION TO NON - B USINESS IN COME ONLY. NO SUCH D I FFERENTIATION IN TREATMENT OF BUSINES S AND NON - BUSINESS INCO ME I S ENVISAGED IN THE S AID NOTIFICATI ON, NO R TO DO WE SEE ANY JUS TIFICATI ON FOR INFERRING THE SAME. LEARNED C OUNSEL DOES NOT HAVE ANY MATERIAL WHATSOEVER IN SUPPORT OF THE PROPOSITION CANVASSED BY HIM, NOR DOES THIS PROPOSITION MAKE ANY SENSE ON THE FIRS T PRI NCIPLES - INASMUCH AS O NCE THE NOTIFIC ATION IS IS SUED WITHOUT ANY SUCH SPEC IFIC RESTRI CTION FOR APPLICATION TO BUSINESS INCOME, WE CANNOT INFER A RESTRICTION IN I TS APPL ICATION . WE, THEREFORE, REJECT THE PLEA OF THE ASSESSEE , AND THUS DECLINE TO INTERFERE I N THE MATTER. WE UPHOLD THE ACTION OF THE ASSESSING OFF ICER IN INCLU DING THE PROFITS OF THE ASSESSEE S OVERSEAS BRANCHES , AMOUNTING TO RS1,408.32 CRORES , IN ITS TAXABLE INCOME IN INDIA. 8 . SO FAR AS THE TAX CREDIT FOR THE TAXES PAID ABROAD IS CONC ERNED, THE ASS ESSEE HAS NOT GIVEN SPECIFIC DETAILS OF THE TAXES SO PAID ABROAD IN RESPECT OF W HICH TAX CREDIT IS SOUGHT . ON A PERUSAL OF THE MATERIAL BEFORE US, WE FIND THAT THE ASSESSEE HAS CLAIM ED A DEDUCTION OF RS 46,96, 14,03 4 IN CONNECTION WITH THE TAX ES PAI D ABROAD WHICH HAS BEEN GRANTED BY THE ASSESSING OFFICER , THOUGH UNDER SECTION 91 . IT IS NOT CLEAR WHETHER TH IS T AX CREDIT IS IN RES PECT OF THE INCOME OF TH E OVE R SEAS BRAN C HES IN QUESTION OF T HE ASSES SEE , OR IN RESPEC T OF SOME OTHER INCOME. WE, THEREF ORE, DIRE CT T HAT I N CASE THE ASSESSEE FUR NISHES THE REQUISITE DETAILS OF THE TAXES PAID ABROAD IN RESPECT OF THE PROFI TS OF THESE BRANCHES , NO TAX CREDIT HAS BEEN CLAI MED IN RE S PECT OF THE SAME S O FAR , AND IN CAS E THE CLAI M SO MADE IS ADMISSIBL E IN TERMS OF THE PROVISI ONS OF THE RELATED DOUBLE TAXAT ION AVOIDANCE AGREEMENT, THE ASSE SSING OFFI CER WILL ALLOW THE TAX C REDIT, TO THE EXTENT ADMISSIBLE, FOR THE TAXES SO PAID A BROAD ON I NCOMES OF THE BRAN CH ES ABROAD EARNED IN TAX J URISDI CTIONS W ITH WHICH IN DIA HAS ENTER ED INTO DOUBLE TAXAT ION A VOIDANCE AGRE EMENT. WHILE GRANTING THE TAX CREDIT , THE ASSESSING OFFICER WILL EXAMINE THE PROVISI ONS OF THE RESPE C TIVE TAX TREATY, A ND CO MPUTE THE ADMISSIBLE TAX CREDI T SEPARATELY FOR EACH JURISDICTION IN ACCORDANCE WITH THE SCHEME OF RELATED TREATY. WITH THESE DIRECT IONS , THE MATTER STANDS RESTO RED, FOR THE LIMITED P URPOSES OF GRA NTING TAX CREDIT , IN TERMS OF THE RELATED DO U BLE TAXATION AV OID ANCE AGREEMENTS, IF, AND TO THE EXTENT, ADMISSIBLE. 9 . THE ACTION OF THE A UTH ORITIES BELOW IS THUS UPHELD IN PRINC IPLE , BUT ITS CLARIFI ED THAT THE TAX CREDITS FOR THE TAX ES PAID ABROAD, IN TREATY PART NER COUN TR IES, WILL BE ADMISSIBLE IN TERMS OF THE PR OVISIONS OF THE RESPECTIVE TRE ATY . 10. GROUND N O. 3 RA ISED IN THE APPEAL FILED BY THE ASS E SSEE , IS THUS DISMISSED AND GROUND NO. 3 A THEREIN IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 1 1 . THE SECOND IMPORTANT ISSUE IN THIS APPEAL IS WITH RESPECT TO LEVY OF MIN IMUM ALTERNATE TAX UNDER S E CTION 115 JB , I.E. WHETHER OR NOT THE ASSESSEE BANK IS LIABLE TO SUBJECTED TO MINIMUM ALTERNATE TAX UNDER SECTION 115 JB, AND, IF SO, WHETHER THE INCOME OF ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 11 OF 37 THE FOREI GN BRANCHES, AMOUNTING TO RS 1,1 45.14 CRORES, AND, PROVISION F OR BAD DOUBTFUL DEBTS AMOUNT ING TO RS 5,359.64 CRORES IN REQUIRED TO BE EXCLUDED FROM THE COMPUTATION OF BOOK PROFITS COMPUTED UNDER SECTION 11JB OF THE ACT. THE R ELAT ED GROUNDS OF APPEAL ARE AS FOLLOWS: 5. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED A CI T HAS ER RED IN INVOKE THE PROVISIONS OF SEC 115JB OF THE ACT WHILE D ETERMINING THE TAX LIABILITY. THE LEARNED ACIT BE DIRECTED NOT TO THE PROVISIONS OF SEC 115JB OF THE ACT IN THE CASE OF TH E APP ELLANT BANK AND DETERM INE THE T OTAL INCOME AND INCOME TAX T HE REON UND ER NORMAL PROVISIONS OF THE ACT ONLY. 5A. WITHOUT PREJUDICE TO GROUND NO. 5 ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES AND IN LAW, ASSUMING WITHOUT ACCEPTING THAT YO UR H O NOURS A RE OF THE OPIN ION THAT THE PROVISIONS OF SEC 11 5J B AR E APPLIC ABLE TO THE APPELLANT BANKS'S CASE, THEN ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING EXCLUSION OF PROFIT S O F BRANCHES IN C OUNTR IES WITH WHOM INDIA HA S ENTERED INTO DTAA NAMELY UK, FRANCE , BELGIUM, KENYA, JAPAN, USA, SINGAPORE, CHINA, SOUTH AFRICA AMOUNTING TO RS. 1145,14,40,634 U/S 90 OF THE ACT. THE LEARNED ACIT BE DIRECTED TO EXCLUDE THE PROFITS OF AFORESA ID FOREIGN BRANCHE S AMO UNTING TO RS. 1145,14, 40,634 WH ILE COMPUTING BOOK REDUCE TH E BOOK PRO FIT ACCORDINGLY. 5B. WITHOUT PREJUDICE TO GROUND NO. 5B ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES AND IN LAW ASSUMING WITHOUT ACCEPTING THAT THE EX CLU SION OF PROFITS OF T HE AFORESAID FOREIGN B RANCHES A GGREGATING TO RS.1145,14,40, 63 4 IS NOT ALLOWED WHILE COMPUTING BOOK PROFIT U/S 115JB AND THEREFORE, TA XED IN INDIA, THEN THE APPELLANT BANK PRAYS THAT THE CREDIT FOR TAXES PAID BY THE SAID BRANCHES IN T HEI R RESPECTIVE CO UNTRI ES BE ALLOWED AS A DED UCTION IN ACCORDANCE WITH SEC. 90 OF TH E ACT WH ILE DETERMINING TAX LIABILITY IN INDIA. 5C. WITHOUT PREJUDICE TO GROUND NO. 5 ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW ASSUMING WITHOUT ACC EPTING THAT YOU R HON OR'S IS OF THE OPINION THAT THE PROVISIONS OF SEC 115 J B ARE A PPLICABL E TO THE APPELLANT BANKS'S CASE, THEN ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ACIT HAS ERRED IN ADDING BACK THE PROVISION FOR BAD AND DOUBTFUL DEBTS OF R S.5359,64,38,015 WHILE COMPUTIN G BOOK PR FITS U/S 115JB OF TH E ACT WI THOUT APPRECIATING THAT THE SAME DOES NOT CONSTITUTE A PROVISION FOR DIMINUTION IN THE VALUE OF ASSET. THE LEARNED ACIT BE DIRECTED TO DELETE THE ADDITION OF PROVIS ION FOR BAD AND DO UBTFU L DEBTS OF RS.5359,64, 38,015 AND REDUCE BOOK PROFIT ACCORDI NG LY. 1 2 . THE FIRST POINT, SO FAR AS THIS SET OF G RIE VA NCES IS CONCERNED, IS LIKE THIS. THE STAND OF THE ASSESSEE, AS CULLED OUT FROM HIS ARGUMENTS AND THE MATERIAL ON RECOR D, IS THAT TH E PR OVISI ONS OF SECTION 115JB D ONOT APPLY TO T HE ASSESSEE BANK AT AL L. HIS SUB MISSION IS THAT THE ASSESSEE BANK IS NOT A COMPANY INCORPORATED UNDER THE COMPANIES A CT, 19 56 , NOR RECOG N I ZED UNDER SECTION 3 OF THE COMPANIES ACT , WHICH IS SINE QUA NON FOR APPLI CA BILITY OF EXPLANATION 3 TO SECTION 1 1 5JB , INASMUCH AS THE ASSES SEE BANK CAME INTO EXIST ENCE UND ER THE BANKING C OMPANIES (ACQUISITI ON AND TRANSFER OF UNDERTAKING ACT, 1970. HE SUBMITS THAT SINCE SECTION 115JB STARTS WITH A NON OB STANTE CLAUSE, I.E. NOTWI THST AN DING ANYTHING CONTAIN ED IN ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 12 OF 37 A NY OTHE R PRO VISIONS OF THIS AC T , IT SHOULD BE TREATED AS A COMPLETE CODE IN ITSELF, NO OTHER PROVISIONS OF LAW IN T HE CONTEXT OF THE INCOME TAX ACT, 1 961 SHOULD BE HELD TO BE APPLICABLE HERE, AND THE EXPRESSION COMPAN Y SHOULD BE CON STRUED A S T O A COMPANY I NCORPORATED UNDER THE COMPA NIES ACT, 1956 . HE VIRTUALLY ARGUES FOR ITS BEING SEEN A S A STANDA LONE PROVISION AND BE SEEN AS A COMPLETE CODE IN ITSE LF. A LOT OF E MPH ASIS IS REPEATEDLY PLACED ON SECTION 115 JB BE ING A THE NON OBSTANTE PROVISION , W HICH DOES NOT ALLOW ANYTHING IN THE I NCOME TAX ACT 1961 B EING IMPORTED INTO THE SAID PROV IS ION , AND DIFFERENT TE RMI NOLOG IES BEING EMPL OYED IN SECTION 36 AND E LSEWHE RE, FOR T HE NATIO NAL I ZED B ANKS. LEARNED COUNSEL SUBMIT S THAT IT I S A DRAFTING ERROR IN SECTI ON 115JB, EVEN IF THE INTENTION WAS T O INCLUDE BANKS IN THE AM B IT OF THIS SECTION, THAT T HE REFERENCES TO NATION ALI ZED BANKS AND THE BANKING C OMPANIES (ACQUISITI ON AND TRANS FER OF U NDERTAKING ACT, 1970 IS MISSING. IT IS SUB MITTED THAT IN VIEW OF THES E SUBM ISSIONS, T HE PROV ISIONS OF SECTION 11 5 JB BE HELD TO BE NOT APPLICABLE ON THE FACTS OF TH IS CASE. THAT IS THE ON LY POINT, REGARDING INADMISSIBILITY OF SECTION 115JB, ON THE N A TIONAL IZED BANKS . HE SUBMITS THAT THE AUTHORITIES BELO W HAVE RATHER SUMMARILY REJ ECTED THES E ARGUMENTS. IT IS ALSO POI NTED OUT THAT IN THE I MMEDIATELY TWO PRE CEDING ASSES SM ENT YEA RS, THE COORDI NAT E BE NCHES HAVE NOTED SOME JUDICIAL PREC EDENTS IN F AVOUR O F THE A S SESSEE, ON THIS ISSUES, AND REMITTED THIS ISSUE BACK TO THE FILE OF THE ASS ESSING OFF ICER FOR ADJUDICATION DE NO VO . HE , HOWEVER, SUBMITS THAT THE APPEAL EFFECT IS N OT YET GIVEN, AND P RAYS TH AT THE MATTER BEING A PURELY LEGAL ISSUE, THE SAME MAY BE ADJUDICA TED BY US ON MERITS. LEARNED DEPARTMENTAL R EPRES ENTATI VE, ON THE OTHER HAND , RELIES U PON THE ORDERS OF THE AUTHO R ITIES BELOW , SUBMITS THAT THE SCHEME OF SECTION 115J B DOE S NOT CALL FOR EX CLUS ION OF NATIONALIZED BANKS FROM THE LEVY OF SECTION 115JB, JUSTIFIES SECTION 115JB BEING INVOKED ON THE FACTS OF T HIS CASE , AND Y ET LEAVES TH E MAT TE R T O US. 1 3. WE HAVE HE ARD TH E R IVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEG AL POSI TION. 1 4. WE FIND THAT SECTION 11 OF THE BANKING C OM PANIES ( ACQUISITION AND TRANSFER OF UNDE RT AKI NGS) ACT, 1970 , PR OVI DES TH AT FOR THE PURPOSES OF THE INCOME TAX AC T, 1961, EV ERY CORR ESPONDING NEW BANK SHALL BE DEEMED TO BE INDIAN C OMPANY AND A COMPANY IN WHICH PUBLIC IS SUBSTAN TIALLY INTERE STED . THIS PROVISION IS NOT FOR ANY SPECIFIC PUR POSES I N T HE INCOME TAX ACT, 1 9 61, SU CH AS ASSESSMENT , BUT FOR ( ALL ) THE P U RPOSES OF THE INCOME TAX A C T, 196 1 . IT IS THUS NOT POSSIBLE T O READ THE PROVISION , AS HAS PROBABLY BEEN SOUGHT TO BE READ, THAT WHILE THE NATIONALIZED B ANKS ARE TO BE TREATED AS I NDIAN C OMP ANIES IN WHICH PUB LIC IS SU B STANTIALLY INTERESTED , SO FAR AS ASSESSMENT OF THEI R INCOME IS CONC ERNED, BUT THEY WILL NOT BE TREATED AS SUCH FOR OT HER PURP OSES. WE SEE NO SUPPORT OF SUCH AN APPROACH , AS IS IMPLICIT IN THE STAND TAKEN BY THE ASSESSE E BAN K. ON CE THE PROVISIONS OF SECTI O N 11 OF THE BANKING C OM PANIES (ACQUISITION AND TRANS FER OF U NDERTAKI NGS) ACT, 1970 , PROVIDES THAT FOR THE PURPOSES OF THE INCOME TAX AC T, 1961, EVERY CORRESPONDING NEW BANK SHALL BE DEEMED TO BE INDIAN C OMPANY AND A CO MPANY I N W HICH PUBLIC IS SUB STA N TIALL Y INTERE STED , A NEW BANK ESTABLISHED UNDER THE SAI D ACT , A S IS THE ASSESSEE BEFORE US, IS REQUIRED TO BE TREATED AS A N INDIAN COMPANY IN WHICH PUBLIC IS SUBSTANTIALLY INTERESTED , FOR ALL TH E PURPOSES OF THE ACT. NO E XCLUS IO NS CAN BE INFERRED. ON CE THE A SSESSEE BANK IS REQ UIRED TO BE TREATED AN INDIAN COMPANY FOR THE P URPOSES OF THE INCOME TAX ACT, 1961, IT CANNOT BE OPEN T O US TO HOLD THAT IT WILL NOT BE TREATED AS A COMPANY FOR THE PURPOSES OF SECTION 11 5JB OF THE I NCOME TAX A CT, 1961. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 13 OF 37 1 5 . A LOT OF EMP HASIS IS THEN PLACED ON THE FACT THAT THE PRO VISIONS OF SECTION 115 JB START WITH A NON OBSTANTE CLAUSE, AND, T HEREFORE, TH IS SECTION IS TO BE TREATED AS A COMPLETE CODE BY ITSELF - WITH OUT IMPORTING ANY INP UTS FR OM TH E INCOME TAX ACT, 196 1 , OR , FOR THAT PU RPOSE , ANY OTHER LEGISLATION NOT S PE CIFICALLY REFERRE D TO THEREIN. SECTION 115JB (1) , AS WE HAVE NOTED A BOVE, P ROVIDES T HAT N OTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE , BEIN G A COMPANY, THE INCO ME - TAX, PAYABLE ON THE TOTA L INCOME AS COMPUTED UN DE R THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 201 2 , IS LESS THAN EIGHTEEN AND ONE - HALF PER CENT OF ITS BOOK P ROFIT, SUCH BOOK PROF IT SHALL BE DEEMED TO B E TH E TOTAL INCOME OF THE A SS ESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCO ME SHALL BE THE AMOUNT OF INCOME - TAX AT THE RATE OF EIGHTEEN AND ONE - HALF PER CENT . IT IS IN THIS LIGHT THAT WE HAVE TO SE E THE IMPACT OF N ON - O B STANTE CLAUSE IN TH IS PRO V I SION. 1 6 . ELABORAT ING U PON THE NATURE OF A NON - OBSTANTE CLAUSE, A FULL B ENCH OF H ON BLE UT TARAKHAND HIGH COU R T, IN THE CASE OF D IT VS SCHLUMBERGER ASIA SERVICES LTD [(2019) 414 I TR 1 (UTT ARAKHAND FB ) ] , IN A N EXTENDED AND PR OF OUND DISC USSION, HAS OB SER VED AS FOLLOWS: A ' NON OBSTANTE CLAUSE' IS A LEGISLATIVE DEVICE WHICH IS USUALLY E MPLOYED T O GIVE OVERRIDING EFFECT TO CERTAIN PROVISIONS OVER SOME CONTRARY PROVISIONS THAT MAY BE FOUND IN THE SAME E NACTMEN T, THAT IS TO SA Y, T O AVOID THE OPERATION A ND EFF ECT OF ALL CONTRARY PRO VISIONS. (LAXMI DEVI V. STATE OF BIHAR [2015] 10 SCC 241; UN ION OF IN DIA V. G.M. KOKIL [1984] SUPP SCC 196. IT IS EQUIVALENT TO SAYING THAT, INSPITE OF THE PROVISIONS MENTIONED IN THE N ON - OBSTANTE CLAU SE, THE PROVISI ON FOLLOWING IT WI LL HAVE FULL OPERATI ON, OR THE PROVISIONS EMBRACED IN THE NON - OBSTANTE CLAUSE WILL NOT BE AN IMPEDIMENT FOR THE OPERATION OF THE ENACTMENT OR THE PROVISION IN WHICH THE NON - OBSTANTE CLAUSE OCCURS. ST ATE OF B IHAR V. (BIHAR R AJYA M.S.E.S.K. K. MAHASANGH [ 200 5] 9 SCC 129 ; SOUTH IN DIA CORPN. (P.) LTD. V. SECRETARY, BOARD OF REVENUE AIR 1964 SC 207. USE OF SUCH AN EXPRESSION IS ANOTHER WAY OF SAYING THAT THE PROVISION, IN WHICH THE NON - OBSTANTE CLAUSE OCC URS, WOU LD WHOLLY PREVAI L OV ER THE OTHE R PROVISIONS OF TH E ACT. NON - OBSTANTE CLA USES ARE TO BE REGARDED AS CLAUSES WHICH REMOVE ALL OBSTRUCT IONS WHIC H MIGHT ARISE OUT OF ANY OF THE OTHER PROVISIONS OF THE ACT IN THE WAY OF THE OPERATION OF THE PRINCIPAL EN ACTING P ROVISION TO WHIC H TH E NON - OBSTA NTE CLAUSE I S A TTA CHED. (BIHAR RAJYA M .S. E.S.K.K. MAHASANGH (SUPRA); IRIDIUM INDIA TELECOM LTD. V. M OTOROLA I NC. [2005] 2 SCC 145. WHILE INTERPRETING A PROVISION CONTAINING A NON - OBSTANTE CLAUSE, IT SHOULD FIRST BE A SCERTAIN ED WHAT THE ENAC TING PART OF TH E SECTION PR OVI DES , ON A FAIR CONSTRUC TIO N OF THE WORDS USED ACCORDING TO THEIR NATURAL AND ORDINARY MEANING, AND THE NON - OBSTANTE CLAUSE IS TO BE UNDERSTOOD AS OPERATING TO SET ASIDE AS NO LONGER VALID ANYTHING CONTA INED IN ANY OTHER PROVIS ION WHICH IS IN CONSISTENT W ITH TH E SECTION CONTAINING TH E NON - OBSTANTE CLAUSE . (ASWINI KUMAR GHOSH V. ARABINDA BOSE [1953] SC R 1; A.V. FERNANDEZ V. STATE OF KERALA [1957] SCR 837). [EMPH ASIS, BY UNDERLING, SUPPLIED BY US NOW ] 1 7 . CLEARLY, THEREFORE, WHAT IS T O BE SEEN IS TO WHAT T HE PRO VISION CONTAINING NO N OB STA NT E CLAUSE PROVIDES , AND , TO THAT EXT ENT , THE PROVISION CONTAININ G NON - OBSTANTE CLA USE SETS ASIDE , AS NO LONGER VALID, ANY OTHER PROVISION WHICH IS INCONS ISTENT WITH SUCH A PROVIS ION . AS ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 14 OF 37 CHATURV EDI & P I TH ISARIA S INCOME T AX L A W [ 2020 EDITION; PAGE 626 ] PUTS IT, CITING A UTHORITIES FOR THIS PROPOSITION, A NON - O BSTA NTE CL AUSE IS EQUIVALENT TO SAYING THAT IN SP ITE OF T HE PROVISIONS OF THE ACT, OR ANY OTHE R ACT MENTIONED IN THE NON - O BSTANTE CLAUSE, OR A NY CONTRACT OR DOCUMEN T EM BRA CED IN THE NON - OBSTA NTE CLA USE, IT WILL HAVE ITS FULL OPERATION , AND THAT THE PROVI SIONS EMBR ACED IN NON - OBSTANTE C LAU SE WOULD NOT BE AN IMPEDI MENT FOR OPERATION OF THE ENA CTMENT . 1 8 . IN THE C ASE OF A G V ARDARAJUL U VS ST ATE OF TAMILNADU [(1 998) 14 6 C TR 117 (SC)], HON BLE S UPR E ME COURT HAS, INTER ALI A, O BSERVED AS FOLLOWS: IN MADHAV R AO SCINDIA VS. UNION OF INDIA [1971 (1) SCC 85 139] HIDAYATULLAH. CJ OBSERVED THAT THE NON - OBSTANTE CLAUSE IS NO DO UBT A VE RY POTENT CLAUSE INTE NDED TO EXCLUDE EVERY C ON SID ERATION ARISING FROM OTHE R PR OVISIONS OF THE SAME STATUTE OR OTHER STATUTE BUT 'FOR THAT REASO N ALONE WE MUST DETERMINE THE SCOPE' OF THAT PROVISION STRICTLY , WHEN THE SECTION CONTAINING THE SAID CLA USE DOES NOT REFER TO ANY PAR TICULAR PROVISIONS WHIC H IT INTENDS TO OVERRIDE BUT R EFER S TO THE PROVISIONS OF THE STATUTE GENERALLY, IT IS NOT PERMISSIB LE TO HOLD THAT IT EXCLUDES THE WHOLE ACT AND STANDS ALL ALONE BY ITSELF . 'A SEARCH HAS, THEREFORE, TO BE MADE WI TH A VIEW TO DETE RMIN ING WHICH PROVISION ANS WE RS THE DESCRIPTION AND WHICH DOE S NOT'. 1 9 . VIEWED THUS IT IS INCORRECT TO SAY THAT J UST BE CA US E THE PROVISIONS OF SECTION 115JB(1) START WITH THE WORDS N OTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VIS ION OF THIS ACT , SECT ION 115JB SHOULD BE S E EN AS A PROVISION WHICH, AS OB SERVED BY HON BLE SUPRE ME COURT ABOVE, IT EXCLUDES THE WHO LE ACT AND STANDS ALL ALONE BY ITSELF . AS IS THE MANDATE OF HON BLE SUPREME C OURT S ABOVE O BSERVATIONS, A SEARCH H AS, THE REFORE, TO BE MAD E WIT H A VIEW TO DETERMININ G WHI CH PROVISION ANSWERS THE DESCRIPTION (FOR BEING OVERRIDDEN ) AND WHICH DOE S NOT'. 20 . COULD I T BE, THEREFORE , SAID THAT EVEN THOUGH THE ASSESSEE BEFORE US IS A COMPANY FOR THE PURPOSE OF ASSESSME NT OF INCO ME IN THE INCOME T AX ACT, 1961, IT IS NOT RE QUIRED TO BE TREATED A S A CO MPANY FOR THE PURPOSES OF SECTION 115JB OF THE ACT? A S WE DO SO, L ET US TA KE A QUICK LOOK AT THE REL EVANT LE GA L PROVISION IN THIS CO NTEXT . THE RELEVANT EXTRA C TS FROM THE PRO VIS IONS OF SECTION 115 JB, FOR REA DY REFERENCE AND AS THE Y STOOD AT THE RELEVANT PO INT OF TIME, ARE A S FOLLOWS : 1 15 JB. (1) NOTWITHSTANDI NG ANYTHING CONTAINED IN ANY O THER PRO VISION OF THIS ACT, WHE RE IN TH E CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME - T AX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PRE VIOUS YEAR RELEVANT TO THE ASSES SM ENT YEAR COMMENCING O N OR AFTER THE 1ST DAY OF APRI L, 201 2 , IS LESS THAN EIGHTEEN AND ONE - HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT S HALL BE DEEMED TO BE THE TOTAL INCOME OF TH E ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INC OME S HA LL BE THE AMOUNT OF I NCOME - TAX AT THE RATE OF EIGHT EEN AND ONE - HALF PER CENT . (2) EVERY A SSESSEE, (A) BEING A COMPANY, OTHER THAN A COMPA NY REFERRED TO IN CLAUSE (B), SHALL, FOR TH E PURPOSES OF THIS SECTION, PREPARE I TS PROFIT AND LOSS ACCOUNT FOR T HE RELEVANT ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 15 OF 37 PREVIOUS YE AR IN ACCORDANCE WIT H THE PROV ISIONS OF PART II OF SCHEDULE V I TO THE COMPANIES ACT, 1956 (1 OF 1956); OR (B) BEING A COMPANY, TO WHICH THE PROVISO TO SUB - SECTIO N (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS A PPLIC AB LE, SHALL, FOR THE PU RPOSES OF THIS SE CTION, PREPAR E ITS PROFIT AND LOSS ACCOUNT F OR THE R ELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT GOVERNING SUCH COMPANY: PRO VIDED .. EXPLANATION 3. FOR THE REMOVAL OF DOUBTS, IT I S HER EB Y CLARIFIED THAT FOR THE PURPOSES OF THIS SECTION, THE ASSESSEE, BEING A COMPANY T O WHICH THE PROVISO TO SUB - SECTI ON (2) OF SECTION 211 OF THE COM PANIES ACT, 1956 (1 OF 1956) IS APPLICA BLE, HAS, FOR AN ASSESSMENT YEAR COMM ENCING ON OR BEFORE THE 1ST DAY OF APRIL, 2012, AN OPTI ON TO PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PR EVIOUS Y EAR EITHER IN ACCORDAN CE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMP ANIES ACT, 1956 OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVER NI NG SUCH COMPANY. 2 1 . T HE ANSWER HAS TO EMPHATICALLY IN NEGATIVE, AS, SECTION 11 OF THE BANKING C OMPANIES (ACQUISITION AND TR ANSFER OF UNDERTAKINGS ) ACT, 19 70 , CAT EGORI CALLY PROVIDES THAT F OR THE PURPOSES OF THE IN COME TAX AC T, 1961, EVERY CORRESPONDING NEW BANK SHALL BE DEEMED TO BE IND IAN C OMPANY AND A COMPANY IN WHICH PUBLIC IS SUBSTAN TIALLY INTERE STED . THIS PROVISION DOES NOT EXCLUDE ANY AREA FOR THE P U RPOSE O F WHI CH, EVEN FOR THE PURPO SE S OF THE IN COME TAX A C T , 196 1, THIS PROV ISION CANNOT BE PRESSED INTO SERVICE. THE ONLY PLEA AVAIL ABLE TO THE ASSESSEE THUS IS THE SECTION 115JB BEING A NON - OBSTANTE CLAUSE, BUT THE N, AS H AS BEEN OBSER VED BY HON B L E SUPR EME COUR T IN VARDARAJUL U S CASE (SU PR A), A NON OBSTANTE CLAU SE DO ES NOT MEAN T HAT IT I S A STA NDALONE PROVISIO N AND IT DEN IES THE APPLI CA BILITY OF THE OTHER PROVISIONS OF THE LAW, BUT IT DOES ONLY MEAN THAT ANY PRO VISIONS WHICH A RE IN CO N SISTENT WITH THE PROVISIONS OF SE CTION 115JB , W ILL HAVE T O MAKE WAY FOR THE PROV ISION S OF SECTION 115JB . THE SCHE ME OF THE SECTI ON 11 5 JB IS TH AT DE HORS THE MANNER IN W HICH TAXABLE INCOME OF A COMPAN Y IS REQUIRED TO BE COMPUTED IN ACCORD ANCE WI TH THE P R OVISIONS OF THE INCOME T A X A C T, 19 61 AND DE H ORS T HE RAT E AT WH ICH AN INCOME IS T AXED , OR IS A LREA DY T AXED , UNDER THE PROVISIONS OF THE I NCOME T A X ACT, 196 1, WHERE SUCH A TAXABLE INCOME IS LESS THAN THE SPECI F IED PERCENTAG E OF BOOK PROFITS OF THE ASSESSEE COMPA NY - COMPU T ED IN ACCORD AN CE WI TH THE PROVISIONS OF T HE REGU LATOR Y MECHANISM I N THE RELATED LEGISLATION, THE ASSESSEE SHALL PAY A CERTAIN PERC ENTAGE AS INCOME TA X O N THE BOOK PROFITS COM PUTED IN ACCORD A NCE WITH THE MANNER PRES CRIBED. IT IS ONLY TO THIS E XTENT THAT THE PROVIS IONS OF THE INCOME TAX A CT, 1961, HA VE TO MAKE WAY FOR IMPL EMENT ATION OF THE SCHEME OF SECTION 115JB. HOWEVER, W E SEE N O CO NFLICT IN THIS SCHEME OF SE CTION 115JB AND THE ASSESSEE BEING TREATED AS A COMPA NY FOR ANY PURPOS E OF THE INCOME TAX A C T, 1961. THIS PA RT OF THE TAX L AW POSITION CANNO T COME IN THE WAY OF IMPL E MENT ING THE SCHEME OF SECTION 115 JB, AND, CANNOT , THEREF ORE, B E OVERRIDD EN . 2 2. THE NEXT POINT RAISED BY THE LEARNED COUNSEL I S THAT THE EXPRESSION BANKING COMPAN Y IS WELL DEFINED IN THE PROVISIONS OF THE BANKING REGULATION ACT, 1949 READ WITH THE RELATED P ROVISIONS OF THE COMPA NIES A CT, 1956, AND , UNL E SS THE CONDITIONS SO SET OUT IN TH OSE DE FINITIONS ARE SATIS FIED, SECTION 115 JB CANNOT C OME INTO PLAY . IT IS CONTENDED THAT T HE TERM ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 16 OF 37 'BANKING COMPANY' H AS BEEN DEFINED IN SECTIO N 5(C ) OF BANKING REGULATIO N ACT, 1949, AS ANY COMP ANY WH ICH TRANSACTS THE BUSINESS OF BANKING IN INDI A , AND THE TER M 'COMPANY ' HAS BEEN DEFINED IN SECTION 5(D) OF BANKING REGULATION ACT, 1949 TO MEAN ANY COMPANY AS DEFINED IN SECT ION 3 OF COMPANIES ACT, 1 956 AND INCLUDES A FOREIGN C OMPANY WITHIN THE MEANI NG OF SECTION 591 OF THAT ACT. IT IS FURTHER CONTENDED THAT TH E T ERM 'COMPA NY' HAS BEEN DEFINED IN SECTION 3 OF COMPANIES ACT, 1956 AS A COMPANY FORMED AND REGISTERED UNDER THIS ACT (I.E. THE COM PANIES A CT , 1956 AND I NCLUDES (A ) ANY ACT OR ACTS RELATI NG TO COMPANIES IN FORCE BEFORE THE INDIAN COMPANIES ACT, 1866 (1 0 OF 1866) AND REPEALED BY THAT ACT; (B) THE INDIAN COMPANIES ACT, 1866 (10 OF 1866); (C) THE INDIAN COMPANIES ACT, 1882 (6 OF 1882); (D) TH E INDIAN COMPANIES ACT, 191 3 (7 OF 1913); (E) THE R EGISTR ATION OF TRANSFERRED COMPANIES ORDINANCE, 1942 (54 OF 1942) ; AND (F) ANY LAW CORRESPONDING TO ANY OF THE ACT OR THE ORDINANCE AFORE SAID AND IN FORCE IN THE MERGED TERRITORIES OR IN A PART B STATE, OR ANY PART THEREOF, BEFORE T H E EXTENSION THERETO OF THE IN DIAN COMPANIES ACT, 1913 (7 OF 1913)'. IT IS CONTENDE D THAT A N ATIONALIZED BANK DOES NOT FIT INTO THE ABOVE DESCRIPTION AS IT COMES INTO EXIST ENC E BY THE VIRTUE OF BANKING CO MPANIES (ACQUISITIO N AND TRANSFER OF UNDERTAKI NGS) ACT, 1970, AND IS NOT S PE CIFICALLY C OVERED IN THE DEFINIT ION OF A BANKING COMPANY . IN SUPPOR T OF THIS PROPOSI TION AND FOR TH IS L IMI TED PURP OSE , O UR ATTENTION IS INVITED TO A DEC ISION OF A COORDINATE BE NC H IN THE CASE OF UC O BANK VS DC IT [(2015 ) 64 TAXMANN.COM 51 (K O L)] , AND OF ANOTHER COORDINATE BENCH IN THE CASE OF INDIAN OVERSEAS BAN K VS DCIT AND VI C E VERSA (ITA NO S 777 AND 948/CHNY/2018; OR DER DATED 22 ND JANU ARY 2020) 23 . TH E COORDINATE BE NCH DECISIO N IN THE CASE OF UCO BANK (SUP RA) RELATES T O THE ASSESSMENT YEAR 2002 - 03 WHEN THE EXPLANATION 3 TO SECTION 115 JB WAS NOT EVEN IN EX I STENCE. T HE DISCUSSIONS WIT H RESPECT TO EXPLANATION 3 TO SECTION 115 JB ARE IN THE NAT URE OF NO MORE THAN OBITER, AN D THE BE NCH ITSELF HAS O BSERVED THAT T HE AMENDMEN T BROUGHT IN SECTION 115 JB OF THE ACT READ WITH EXPLANATION 3 THEREON BY THE FINANCE A C T , 2012, IS APPLICABLE ONLY WITH EFFECT FRO M ASSESSMENT YEAR 2013 - 14 ONWA RDS IN LINE WITH THE NOT ES TO CLAUSES OF FINA NCE A C T, 2012 . CLEARLY , THEREFORE, THIS DECISION DOES NOT HOLD GOOD FOR THE ASSESSMENT YEA R BEF ORE US. BE THAT AS IT MA Y, T HIS PLEA , ON TH E FIRST PR INCIPLES , PROCEEDS ON THE FALLACY THAT THE STATUTORY DEFINITIONS ARE ALWAYS IN ABSOLUTE TERMS, WITHOUT O FFE R ING ANY FLEXIBILITY FO R T HE CONTEXT IN WH ICH THE DEFINITIONS ARE REQ UI RED TO BE INTERPRETED, A ND THAT THE WORDS OF THE DEFINITION MUST BE HO NOU RED, IN LE TTER - EVEN IF NOT IN SP IRIT , IN ALL THE SITUATIONS IN W H ICH THE DEFINED TERMS ARE REQUIRED TO BE USED. NOT HIN G CAN BE FARTHE R F RO M THE CORRECT LEGAL PO SITION , W HICH IS THAT A LL THE STATUTORY DEFIN ITIONS GENERALLY COME WITH A RIDER TO THE EF FECT THAT UNLESS CONTEXT REQUIRES OTHERWISE , THE DEFIN ED MEANINGS ARE TO BE A D OPTED . UNLIKE A CHARGING PROV ISION UN DER T HE TAX LAWS , WHICH FA IL S WH EN CONDITIONS PREC EDENT FOR CHARG ING THE INCOME TO TAX F AIL, EV ERY D EFINITION HAS THE SAVING CLAUSE E NABLIN G IMPROVIS ING THE DEFINITION TO MEET THE CONTEXTUAL REQUIREMENTS. WHETHER THIS IS SECTION 5 OF THE BANKING REGULATION ACT 194 9 WHICH HAS THE OP EN ING WORDS AS IN THIS ACT, U NL ESS THERE IS ANYTHING REPUGNANT IN SU BJECT OR CONTEXT BEFORE SETTING OUT THE DEF INITIONS, OR SECTION 2 OF THE C OMPANIES AC T, 1956 WHICH BEGI N S WITH THE WORDS IN THIS ACT, UNLESS CONTEXT OTHERWISE REQU IRE S AND THEN SET S O UT THE DEFINITION, IT IS ABSOLUTELY CLEAR THAT THESE DEFINITIO NS WILL HAVE TO MAKE WAY FOR THE REQUIRE MENTS OF TH E CONTEXT IN WHICH THE DEFINITIONS ARE REQUIRED TO BE INTERPRETED. ELABORATING UPON THIS ASPECT, A COOR DINATE BE NCH O F THI S T RIBUNAL, IN THE CA SE OF MAHAR ASHTRA STATE ELECTRICITY BOARD VS. JCIT [(2002) 82 ITD 422 (MUM)] , HAS OBSER VED THAT, THE DEFINITION AS GIVEN I N SECTION 2 OF THE ACT BEGINS WITH THE QUALIFYING WORDS, UN LESS THE CONTEXT OTHERWISE REQU I RES . TEXT AND CONTE XT ARE THE BASIS O F I NT ERPRETATION. IF THE TE XT IS THE TEXTURE, CONTEXT IS WHAT GIVES THE COLOUR. NEITHER CAN BE IGNORED. BOTH ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 17 OF 37 ARE IMP ORTANT. TH AT INTERPRETATION IS BEST WHICH MA KES THE TEXTUAL INTERPRETATION MATC H THE CONTEXTUAL. A STATUTE IS BEST IN TERPR ETE D WHEN WE KNOW WHY I T WAS ENACTED. WORD IN A SECTION IS SKIN OF THE LIVING THOUGHT. IT MAY VARY IN COLOUR AND CONTENT ACCORDING TO THE CONTEX T . THE COORD INATE BE NCH THEN CON CLUDED, NOTING THAT THE ASSESSEE DOE S NOT DISTRIBUTE DIV IDENDS, THAT THE A SSESS EE IS NOT A COMPAN Y. IN THE IR INIMITABLE LANG U AGE, THE BENCH O BSERVED THAT IT IS A TRITE LAW THAT DEEMING PROVISION SHOULD BE NARROWL Y WATCHED, JEALOUSLY REGARDED AND NEVER TO BE PRESSED BEYOND ITS TRUE LIMITS. I T IS APPLICABLE TO A COMPANY. THE ASSE SSEE IS NOT A COMPANY. IT IS NOT R EQUIRED TO DISTR IBUTE ANY DIVIDEND. AS SUCH IT DOES NOT COME WITHIN THE MISCHIEF OF THIS SECTION. WE HAVE CONSIDERE D THE VARIOUS PRECEDENTS RELIED UPON. LEGAL PRECEDENTS ARE LIKE STATI STICS. IF YOU MANIPULATE THEM, YOU CAN PROV E A NY THING. EACH C ASE D EPEND S ON ITS OWN FACT S, AND A CLOSE SIMILARITY BETWEEN ONE CASE AN D ANOTHER IS NOT ENOUGH, BECAUSE EVEN A SING LE SIGNIFI CANT DETAIL MAY ALTER THE ENTIRE ASPECT. MINUTEST DIFFERENCES ON FACT S HAVE SWAYED THE JUDICIAL DECISIONS O NE WA Y O R THE OTHER. IN DE CI DING SUCH CASES, ONE S HOULD AVOID TEMPTATION AS SAID BY CORDOZO, BY MATCHING THE COLOUR OF ONE CASE AGAINST THE COLOUR OF ANOTHER . (EMPHASIS , BY UNDERLI NING, SUPPLIED B Y US ) . WHEN THE BENCH WAS OF THE VIEW THAT DECLARATION OF D IVIDE ND WAS THE KEY FAC TOR , THE BENCH D ID NOT E THA T THE ASSESSEE WAS NOT REQUIRED TO DISTRIBUTE ANY DIVIDEND, AND , AS SUCH, THE ASSESSEE DI D NOT COME WITHIN MISCHIEF OF THAT SECTION. INCI D ENTALLY, IT IS NOT EV EN IN D IS PUTE, AND CA NNOT BE - AS A SIMPLE GOO GL E SEA RCH WOULD SHOW, TH AT TH E ASSESSEE BEFORE US W AS ALL ALONG PAYING DIV IDENDS. COMING BACK TO THE PROPOSI TION BEING DISCUSSED , IT IS CLEA R THAT THE DEFINITIONS ASSIGNED UNDER THE BANKING REGULATION ACT AND THE COMPAN IES A CT ARE NOT ABSOLUTE AND INFLEXIBL E, AN D T HEY YIELD TO TH E C ON TEXTUAL REQUIREMENTS. N O THING, THEREFORE , TURNS ON THESE DEFINITION S. WHAT IS TO BE ESSENTIALLY EXAMI NED IS WH A T WAS THE REQUIREMENT OF THE CON TEXT. THE CON TEXTUAL REQUIREMENT OF SECTION 115 JB , FOR TAXATION OF BOOK PROFITS, WAS WIT H RES PECT TO THE COM PAN IE S WHICH WERE ABLE TO D ISTRIBUTE DI VIDENDS ON THE BASIS OF BOOK PRO F IT S EVEN THOUGH THE TAXABILITY OF THEIR PROF ITS, FOR T HE INCOME TAX PURPOSES, WAS O N A MUCH LOWER AMOUNTS . WE ARE UNABLE TO SEE ANY REASONS AS TO WHY IN THIS SCH EME O F T AXATION OF BOOK PR OF ITS , AN ASSESSEE LIKE THE ASSESSEE BEFORE US, I.E. A BANK DISTRIBUT ING DIVIDE NDS ON THE BASIS OF BOOKS PROFITS BUT PA YING TAX ON A SUB ST AN TIALLY LOWER AMOUNT OF TAXA BLE PROFITS, S HOULD BE EX CLU DED. IT IS A CO RPORATE ENTITY TREAT ED AS SU CH FOR THE PURP OSE S OF INCOME TAX ACT 1961 BY THE VIRTUE OF SPECIFIC LEGAL PROVISIONS T O THAT EFFECT , IT PAYS DI VIDENDS, ITS TAXABL E PROFITS ARE SUBSTANTIALLY LOWER THAN BOOK PR OFITS, AND , T HERE FORE, IN OUR HUM BLE UNDERSTANDING, THERE IS NO GOOD RE ASON NOT TO TREAT IT AS A CO MPANY - AT LEAST NO GOO D R EASONS ARE SHOWN TO US. ALL THAT HAS BEEN SAID IS THAT THERE IS A DRAFTING ERROR IN TH E LEGISLAT ION, B Y NOT SPE CIFICALLY INCL UDING THE NATIONALIZED BANKS - AS FOR THE PURPOSE OF SOME OTHER DE DUCTION PROVI SIONS , B U T T HEN WHAT TH IS AR GUMENT OV ERL OOKS IS TH AT DEFINITION PROVISION IS NOT THE SAME THING AS CHAR GING PROVISION OR EVEN COMPUTATION P ROVISION , AND THAT THE STATUTORY DEFINITIONS - ON ACCOUNT OF SPECIFIC PROV ISION TO THAT EFFEC T IN THE DEFINITION ITSEL F, HA VE TO YI ELD TO THE CO NTEXTU AL MEANINGS. WHILE ON THIS ASPECT OF THE MATTER, WE MAY ALSO ADD THAT HONBLE AUTHORITY OF ADVANCE RULING, IN ASSESSEES OWN CASE - REPO RTED AS BANK OF INDIA IN RE. [(2007) 295 ITR 529 ( AAR)], HAD OBSER VED , ALTHOUGH IN A DIFFERENT CONTEXT BUT EQUALLY RELEVANT IN THE PRESENT CONTEXT, AS FOLLO WS : WHEN A S TATUTE DEFINES A PARTICULAR TERM OR EXPRESSION, IT IS THAT DEFINITION WHICH HAS TO BE TAKEN FOR CONSTRUING THE MEANING OF THAT TERM OR E XPRESSION, WHEREVER IT OCCURS IN THE STATUTE. NORMALLY, IT WOULD NOT BE PERMISSIBLE TO CONSTRUE IT IN ANY OTHER MANNER. IN OTHER WORDS, ONCE AN EXPRESSION IS DEFINED IN THE ACT, THAT EXPRESSION WHEREVER IT OCCURS IN THE ACT, RULES OR NOTIFICATIONS, ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 18 OF 37 MADE TH EREUNDER, SHOULD BE UNDERSTOOD IN THE SAME SENSE, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT. AT THE S AME TIME, IT IS ALSO A SETTLED POSITION OF LAW THAT EVEN WHERE AN ACT CONTAINS A DEFINITION SECTION, IT DOES NOT NECESSARILY APPLY IN AL L THE CONTEXTS IN WHICH A DEFINED WORD MAY BE USED. IF A DEFINED EXPRESSION IS USED IN A CONTEXT IN WH ICH THE DEFINITION WOULD NOT FIT, THE CONTEXT MUST BE ALLOWED, TO PREVAIL OVER THE DEFINITION CLAUSE, AND THE WORD MUST BE GIVEN ITS CONTEXTUAL MEANING. I T IS FOR THIS REASON THAT THE DEFINITION OR INTERPRETATION SECTION GENERALLY CONTAINS AN EXPRESSION SI MILAR TO THE ONE U SED AT THE BEGINNING OF SECTION 2 OF THE ACT. THE SUPREME COURT IN THE CASE OF CIT V. INDIRA BALKRISHNA [1960] 39 ITR 546 HELD '. . .T HE MEANING TO BE ASSIGNED TO THE WORDS MUST TAKE COLOUR FROM THE CONTEXT IN WHICH THEY OCCUR. . . .' (P . 551) THE APEX COURT AGAIN IN THE CASE OF DY. CHIEF CONTROLLER OF I. & E. V. K.T. KOSALRAM 1999 (110) ELT 366 HAS HELD AS FOLLOWS '. . .WHAT PARTICUL AR MEANING SHOULD BE ATTACHED TO WORDS AND PHRASES IN A GIVEN INSTRUMENT IS USUALLY TO BE GATHERED FROM T HE CONTEXT, THE NATURE OF THE SUBJECT MATTER, THE PURPOSE OF THE INTENTION OF THE AUTHOR AND THE EFFECT OF GIVING TO THEM ONE OR THE OTHER PERMISSIBLE MEANING ON THE OBJECT TO BE ACHIEVED.' (P. 373) 24 . OF CO URSE, THAT IS APART FROM THE FACT , AS WE WILL SEE A LITTLE LAT ER, THAT IF S OME OT HER PROV ISIONS OF THE SAME ENACTMENT ARE LOOKED AT, THESE DEFINITION S WILL , IN THE LIGHT OF THE SPE CIFIC P ROVISIONS A PPLICABL E TO THE ASSESSEE AND T HE REQUIREMENTS OF ACC OUNTS BEING PR EPARED IN THE FORM AT PRESCRIBED UNDER THAT ENACTME NT, RELEGAT E INT O INSIGNIFICAN CE. 25. AS REGARDS THE DECISION OF THE COORDINATE BENCH IN THE CASE OF INDIAN OVERSEAS BANK (SUPRA), IT DO ES PERTAIN TO A POS T - AMENDMENT YEA R, I.E. 2014 - 15, B UT IT MECHANICALLY RELIES UPO N THE DECISION IN THE CASE OF UCO BANK (SUPRA) WITHOUT EVEN TAKING NOTE OF T HE FACT THAT THE SAID DECISION PERTAINED TO THE PRE - AMENDMENT ASSESS MENT YEA R , I.E. 2003 - 04. AS FO R THE OBITERS OF THE COORDINATE BE NCH , THESE OB ITERS ANYWAY HAVE TO MAKE WAY FOR THE OBITERS OF HON BLE JURISDICTIONAL HIGH COURT, AS WE SEE A LITTLE LATER, WHICH TO UCH A DIFFERENT CHORD THESE OBITERS IN THE CO ORDINATE BE NCH DECISION, WHICH DO NO T BIND US A NYWAY - AS IS THE SETTLED LEGA L P OSITIO N , PRO CEE D ON THE ASSUMPTI ON THAT TH E PROV ISIONS OF THE BANKING REGULATION ACT, 1949 DO NOT COVER THE NATIONALIZED BANKS , AND THAT THE ASSESSEE CANNOT BE C ONSIDERED T O BE A COMPANY FOR THE P URP OSES OF SECTION 115JB . . AS FOR THE LATTER PROPOSITION , WE HAVE ALREADY DIS CUSSED THE MATT ER AT LENG TH TO MAKE OUR POINT, A S FOR THE FORMER PROPOSITION, IN OUR CONSIDERED VIEW, W HAT REALLY MATTERS IS WHETHER THE PRO VISIONS OF THE BANKING REGULATION ACT G OVE RN THE FORMAT OF ANNUAL ACCOUNTS OF THE A SSESSEE , AND, TO THA T EXTENT, TH E REQUIREMENTS O F SCHEDULE VI MAKE WAY FOR THE SE SPECIFIC REQUIREMENTS OF OTHER ENAC TMENTS. THAT IS THE CONTEXT IN WHICH THE EXPLANA TION 3 TO SECTION 11 5 JB COMES INTO PLAY. LET US , IN T HIS LIGHT , SEE PROVI SIONS OF THE BANK ING REGULATION ACT. S ECTION 51 OF THE BANKING RE GULATION A CT, 19 49, SPECIFICALLY PROVIDES THAT WITHOUT PREJUDICE TO .. ANY OTHER ENACTMENT, THE PROVISIONS OF SECTIONS 10, 13 TO 15, 17, 19 TO 21A, 23 TO 28, 29 EXC LUDING SUB - SE CTION (3,) SUB - SECTION (1B), (1C) AND (2) OF SECT IONS 30 , 31, 34, 35, 35A, 3 5AA, 35AB AND EXCLUDING CLAUSE(D) OF SUB - SECTION (1) , 45Y TO 45ZF, 46 TO 48 , 50, 52 AND 53 SHALL ALSO APPLY; SO FAR ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 19 OF 37 AS MAY BE, TO AND IN REL ATION T O ANY CORRESPOND ING NEW BANK . THE EXP RE SSION CORRESPON D ING NEW BANK IS DEFI N ED , UNDER SECTION 5(DA) AS CORRESP ONDI NG NEW BANK CONSTITUTED UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1970 ; OR UNDE R SECTION 3 OF THE BANKING COMPANIES (AC QUISITION A ND TRANSFER OF UN DERTAKINGS) ACT, 1980 AND SECTION 29 (1) PROVID ES THAT RE QUIR ES THAT THAT A BALANCE - SHEET AND PROFIT AND LOSS ACCOUNT AS ON THE LAST WORKING DAY OF T HAT YEAR OR THE PERIOD, AS THE CASE MAY BE IN THE F ORMS SET OU T IN THE THIR D SCHEDULE OR AS NEAR THERET O AS CIRCUMSTAN CES PE RMIT . EFFECTIVELY, THERE F ORE, SO FA R PR EPA RATION OF ANNUAL ACCOU NTS IS CONCERNED , A NATIONALIZED BANK IS COVERED BY THE SCOPE OF REQUIREMENTS OF THIRD SCHEDULE TO B ANKING REGULATION ACT, AND, FOR THAT REA SON, THE RE QUIREMENT OF SIXT H SCHEDULE TO THE C O M PANIES A C T , 1956 DOES NOT C OME IN TO P LAY. LET US , IN T HIS LI GHT , TAKE A LOOK AT THE PROVI SIONS OF EXPLANATION 3 TO SECTION 115JB AND SECT ION 211(2) OF THE COMPANIES A C T , 1956 - AS REPRODUCED BELO W: EXPLANAT ION 3. FOR THE REMOVAL OF DO UBTS, IT IS HEREBY CL ARIFIED THAT FOR THE PURPOS ES OF THIS SEC TION, THE ASSESSEE, BEING A COMPANY TO WHICH THE PROVISO TO SUB - SECT ION (2 ) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 19 56) IS APPLICABLE, HAS, FOR AN ASSESSMEN T YEAR COMM ENCING ON OR BEFO RE THE 1ST DAY OF APR IL, 2012, AN OPTION TO PREP ARE ITS PR OFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR EITHER IN ACCORDANC E W ITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT, 19 56 OR IN ACCO RDANCE WITH THE PROVISIONS O F THE ACT GOVERNING S UCH COMPANY. [EMP HASIS, BY UNDERLININ G, S UPPLIED BY US] 2 6 . P ROVISO TO S ECT ION 211 (2) OF THE CO MPANIES A C T, 1 956, R EFERRED TO IN THE AFORESAID PROVISION, IS ALSO REP RODUCED BELOW FOR READ Y REF ERENCE: PROV IDED THAT N OTHING CONTAINED IN THIS SUB - SECTI ON S HALL APPLY TO ANY INSURANCE OR BANKIN G CO MPANY OR ANY COMPANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECT RICI TY, OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OF PROFIT AND LOSS ACCOUNT HAS BEEN SPECIFI ED IN OR UN DER THE ACT GOVER NING SUCH CLASS O F CO MPANY [EMP HASIS, BY UNDERL INING, SUP PLIE D BY US] 2 7 . QUITE CLEARLY, T HEREFORE, TH E ANNUAL ACCOUNTS OF A NATIONALIZED BANK, LIKE THE ASSESSEE BEFORE US, ARE REQUIRED TO BE PREPARED IN ACCO RDANC E WITH THE RE QUIREMENTS OF THE BANK ING RE GULATION ACT, 1949, A ND , FOR THAT REASON , IT HAS AN OPTION T O PREPARE ITS PROF IT AND LOSS ACCOUNT IN ACCORD ANCE WITH ACT GOVE RNING THE ASSESSEE C OMPANY. IN ANY CASE, IN THE LIGHT OF THE AB OVE LEGAL POSITION - PARTICU LARLY PROVISI ONS OF SECT IO N 51 READ WITH SECTION 5( DA) OF THE BANKING REGULATION ACT, 194 9. IT IS NOT EVEN IN DISPUTE THAT THE PROVIS IONS OF THE BANK ING REGU LATION ACT, 1949 TO THE ASSESSEE COMPANY, AS INDEED EVE RY NATIONALIZED BANK . YET, IF AN YONE HAS AN Y DOUBT S ABO U T EVEN THIS ELEME NTARY LEG AL POSITION, EVEN A CAS UAL LOOK AT PUBLISHED ANNUA L ACCOUNTS OF ANY NATIONALIZED BANK, WHICH CAN BE FREELY ACCESSED ON THE RESPECTIVE BANK S WEBSITES, OR EVEN BASIC EXPERIENCE IN THE ACCOUNT ANCY PRO FESSION , WOULD SET SUCH DOU BTS A S REST. 2 8 . IT IS AL S O CONTENDED THAT THE ASSE SSEE BANK IS PAYING HUGE IN COME TAX A N D IS DECLAR ING DI VIDENDS TOO, AND THE INTENTION OF THE LEGISLATURE WAS TO PAY COMPANIES P A YING ZERO OR ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 20 OF 37 MINIMAL TAXES AND YET PAYI NG DIVIDENDS, IN VIEW OF BA CKGROUND IN WHICH SECTIO N 1 15 JB WAS BROUGHT AND UNDERLYING IN TENTION OF MAT PROVISIONS, IT IS CLEA R THAT THE LE G ISLATURE NEVER INTENDED TO LEVY MAT ON ASSESSES LIKE THE NATIONALIZED BANKS. AS TO WHAT IS HUGE TAX AND WHAT IS MINI MAL TAX IS A SUBJECTIVE AND PERCE PTION BASED UNDERS TANDING, AND SUCH NOTIONS CANNOT GOVER N THE APPLICABILITY OF M AT. IN ANY EV ENT, THE PARAMETERS GOVERN ING THE DECISION AS TO WHAT IS LESS THAN RE ASONABLE TAX VIS - - VIS BOO K PROFITS IS EM BEDDED IN THE SCHEME OF SECTION 115JB IT SELF, A ND, AS LONG AS THAT CRIT ERION IS FULFILLED, THE APPLICABILITY OF MAT CANNOT BE REPUDIATED BY THE AS SESSEE. THE SCHEME OF SECTION 115JB, SO FAR AS COMPUTATION OF BOOK PROFITS IS CONCERNED , LOOKS LIKE T HIS. IT APPLIES ON A COMPANY. UNDER SECTION 11 OF THE BA NKING C OM PANIES (ACQUISI TION AND TRANSFER OF UNDE RT AKI NGS) ACT , 1970 , WHICH PR OVI DES THA T FOR THE PURPOSES OF THE INCOME TAX AC T, 1961, EVERY CORRESPONDING NEW BANK SHALL BE DEEMED TO BE INDIAN C OMPANY AND A COMPANY IN WHICH PU BLIC IS SUBSTAN TIALLY INTER E STED . SECTION 115 JB D OES START WITH A NON - OBSTANTE CLAUSE , BUT, AS WE HAVE SEEN ABOVE IN OUR DET AILED A NALYSIS AND PARTICULARLY IN THE LIGHT OF HON BLE SU PREME COURT S JUDGMENT DISCUSSED A BOVE, A NON - O BSTANTE CLAUSE IS NOT A STANDALONE PROVISION WHICH DI SREGARDS EVERYTHING EL SE IN THE ENACTM ENT BUT A NON - O BSTANT E CLAUSE IS EQUIVALENT TO SAYING THA T .. THE PROVISIONS EMBRACED IN THE NON - OBSTANTE CLAUSE WILL NOT BE AN IMPEDIMENT FOR THE OPERATION OF THE ENACTMENT OR THE PROVIS ION IN WHICH THE NON - OBSTAN TE CLAUSE OCCURS . THER E IS N O THING I N THE SCHEME OF SECTION 11 5 JB WHICH DOES REQUIRE T HAT THE AS SESSEE S HOULD NOT BE TREATED AS A COMPANY , AND, THEREFORE, TH IS PROVISO BEING A NON - OBSTANTE CLAUSE DOES NOT COM E IN THE WAY OF TH E ASSESSEE BEING TREATED AS A COMPANY. THE ANNUAL A CCOUNTS OF THE ASSESSEE COMPANY ARE RE QUIRED TO BE D RAWN UP AS TH E BANKING REGU LATION ACT , 1949, AND, THEREFORE, THE ASSESSEE IS NOT RE QUIRED TO P REPARE I T S ANN UAL ACCOUNTS IN TERMS OF THE REQUIREMENTS OF THE COMPANIES ACT , 1956 . WH EN THE PROFIT AND LOSS A CCOUNT IS D RAWN UP AS THE PER THE RELA TED PROVISIONS OF T HE COM PA NIES ACT , THE START ING P OINT FOR C OMPUTATION OF TAXABLE BOOK PROFITS IS THE PR OF IT AS COMP UTED IN ACCORDANCE WITH THE SE P ROVISIONS. HOWEVER, WHEN PR OFIT AND LOSS ACCOU NT IS DRAWN UP, IN ACCOR DAN CE WITH THE REQUI REMENTS OF , SA Y , T HE BAN KING REGULATION ACT, 194 9, T HE STARTING POINT OF COMP UTATION OF BOOK PROFITS IS THE PROFIT C OMPUTED AS C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE SAID LEG ISLATION. IN THIS LIGHT, AN D BEARING IN MIND THE FA CT THAT THE P ROV ISIONS OF PREPARING PR OFIT AND LOSS A CC OUN T IN AC CORDANCE W ITH THE PROVISIONS OF THE BANKING REGULATION ACT 1949 APPLIES TO THE ASS ESSEE BEFORE US, WHICH IS TREATED AS A COMPANY FOR THE PU RPOSES OF THE INCOME TAX AC T, THE PROVISIONS OF SEC TION 115JB CLE ARL Y APPLY TO THE ASSESS EE AS WELL. 2 9 . WHILE DEALING WITH T HIS ISSUE, WE MAY ADD THAT OUR OWN HO N BLE JURISDICTIONAL HIGH COURT, IN ASSESSEE S OWN CASE - THOUGH REPORTED AS CIT V S UNION BANK OF INDIA, AND O THERS [(2019 ) 105 TAXMANN.253 (BO M)], HAS , INTER ALIA, OBSERVED AS FOLL OWS: 14. THERE ARE CERTAIN SIGNIFICANT LEGISLATIVE CHANGES MADE BY FINANCE ACT, 2012, WHICH MUST BE NOTED BEFORE CONCLUDING THIS ISSUE. IN THE PRESENT FORM, POST AMENDMENT BY FINANCE ACT, 2012, RELEVANT PORTION OF SE CTION 115JB OF THE ACT READS AS UNDER 'SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN CO MPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YE AR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, (2012) , IS LESS THAN (EIGHTEEN AND ONE - HALF PERCENT) OF ITS BOOK PROFIT, (SUCH BOOK PROFIT SHALL BE DEEMED TO ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 21 OF 37 BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY T HE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME - TAX AT THE RATE OF (EIGHTEEN AND ONE - HALF PERCENT). (2) EVERY ASSESSEE, - (A) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE (B), SHALL, FOR THE PURPOSES OF THIS SECTION, PREPAR E ITS (STATEMENT OF PROFIT AND LOSS) F OR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PRO VISIONS OF (SCHEDULE III) TO THE (COMPANIES ACT, 2013 (18 OF 2013); OR (B) BEING A COMPANY, TO WHICH THE (SECOND PROVISO TO SUB - SECTION (1) OF SECTION 129) OF THE (COMPANIES ACT, 2013 (18 OF 2013) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION, P REPARE ITS (STATEMENT OF PROFIT AND LOSS) FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY:) PROVIDED THAT WHIL E PREPARING THE ANNUAL ACCOUNTS INCLUD ING (STATEMENT OF PROFIT AND LOSS), - (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING (STATEMENT OF PROFIT AND LOSS); (III) THE METHOD AND RATES ADOPTED FO R CALCULATING THE DEPRECIATION, SHA LL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURPOSE OF PRE PARING SUCH ACCOUNTS INCLUDING (STATEMENT OF PROFIT AND LOSS) AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF (SE CTION 129) OF THE (COMPANIES ACT, 2013 (18 OF 2013)):' 15. THE MEMORANDUM EXPLAINING THE PROVISIO NS MADE IN THE FINANCE BILL, 2012, IN RELATION TO MINIMUM ALTERNATIVE TAX STATED AS UNDER : 'MINIMUM ALTERNATE TAX (MAT) I. UNDER THE EXISTING PROVISIONS OF SECTION 115JB OF THE ACT, A COMPANY I S LIABLE TO PAY MAT OF EIGHTEEN AND ON HALF PERCENT OF ITS BO OK PROFIT IN CASE TAX ON ITS TOTAL INCOME COMPUTED UNDER THE PROVISIONS OF THE ACT IS LESS THAN THE MAT LIABILITY. BOOK PROFIT FOR THIS PURPOSE IS COMPUTED B Y MAKING CERTAIN ADJUSTMENTS TO THE PR OFIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED BY THE COMPANY IN ACCORDANCE WITH THE SCHEDULE VI OF THE COMPANIES ACT, 1956. AS PER SECTION 115JB, EVERY COMPANY IS REQUIRED TO PREPARE ITS ACCOUNTS AS PER SCHEDU LE VI OF THE COMPANIES ACT, 1956. HOWE VER, AS PER THE PROVISIONS OF THE COMPANIES ACT, 1956, CERTAI N COMPANIES, E.G. INSURANCE, BANKING OR ELECTRICITY COMPANY, ARE ALLOWED TO PREPARE THEIR PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS SPECIFIED IN THEIR REGULATORY ACTS. IN ORDER TO ALIGN THE PROVISIONS OF INCOME - TAX ACT WITH THE COMPANIES AC T, 1956, IT IS PROPOSED TO AMEND SECTION 115JB TO PROVIDE THAT THE COMPANIES WHICH ARE NOT REQUIRED UNDER SECTION 211 OF THE COMPANIES ACT TO PREPARE THEIR P ROFIT AND LOSS ACCOUNT IN ACCORDANCE W ITH SCHEDULE VI OF THE COMPANIES ACT, 1956, PROFIT AND LOSS A CCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THEIR REGULATORY ACTS SHALL BE TAKEN AS A BASIS FOR COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. II. IT IS NOTED THAT IN CERTAIN CASES, THE AMOUNT STANDING IN THE REVALUATION RESERVE IS TAKEN DIRECTLY TO GENERAL RESERVE ON DISPOSAL OF A REVALUED ASSET. THUS, THE GAINS ATTRIBUTABLE TO REVALUATION OF THE ASSET IS NOT SUBJECT TO MAT LIABILITY. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 22 OF 37 IT IS, THEREF ORE, PROPOSED TO AMEND SECTION 115JB T O PROVIDE THAT THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB SHALL BE INCREASED BY THE AMOUNT STANDING IN THE REVALUATION RESERVE RELATING TO THE REVALUED ASSET WHICH HAS BEEN RETIRED OR DISPOSED, IF THE SAME IS NOT CREDITED TO THE PROFIT AND LOSS ACCOU NT. III. IT IS ALSO PROPOSED TO OMIT THE REFERENCE OF PART III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 FROM SECTION 115JB IN VIEW OF OMISSION OF PART III IN THE REVISED SCHEDULE VI UNDER THE COMPANIES ACT, 1956. TH ESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE AS SESSMENT YEAR 2013 - 14 AND SUBSEQUENT ASSESSMENT YEARS.' 16. IT CAN BE SEEN THAT SUB - SECTION (2) OF SECTION 115JB OF THE ACT HAS NOW BEEN BIFURCATED IN T WO PARTS COVERED IN THE CLAUSES (A) AN D (B). CLAUSE (A) WOULD COVER ALL COMPANIES OTHER THAN THOSE REFER RED TO IN CLAUSE (B). SUCH COMPANIES WOULD PREPARE THE STATEMENT OF PROFIT AND LOSS IN ACCORDANCE TO THE PROVISIONS OF SCHEDULE III OF THE COMPANIES ACT , 2013 (WHICH HAS NOW REPLACED THE OLD COMPANIES ACT, 1956). CLAUSE (B) REFERS TO A COMPANY TO WHICH SEC OND PROVISO TO SUB - SECTION (1) OF SECTION 129 OF THE COMPANIES ACT, 2013 IS APPLICABLE. SUCH COMPANIES, FOR THE PURPOSE OF SECTION 115JB, WOULD PREPARE THE STATEMENT OF PROFIT AND LOSS IN AC CORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING THE COMPANY. SEC TION 129 OF THE COMPANIES ACT, 2013 PERTAINS TO FINANCIAL STATEMENT. UNDER SUB - SECTION (1) OF SECTION 129 IT IS PROVIDED THAT THE FINANCIAL STATEMENT SH ALL GIVE A TRUE AND FAIR VIEW OF THE S TATE OF AFFAIRS OF THE COMPANY, COMPLY WITH THE ACCOUNTING STANDAR D NOTIFIED UNDER SECTION 113 AND SHALL BE IN THE FORM AS MAY BE PROVIDED FOR DIFFERENT CLASSES OF COMPANIES. SECOND PROVISO TO SUB - SECTION (1) OF SECTIO N 129 READS AS UNDER: 'PROVIDED FURT HER THAT NOTHING CONTAINED IN THIS SUB - SECTION SHALL APPLY TO ANY I NSURANCE OR BANKING COMPANY OR ANY COMPANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY, OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OF FIN ANCIAL STATEMENT HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY: 17. THIS PROVISO THUS REFERS ANY INSURANCE OR BANKING COMPANIES OR COMPANIES ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF COMPANY IN WH ICH FORM OF FINANCIAL STATEMENT HAS BE EN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY. CO MBINED READING OF THIS PROVISO TO SUB - SECTION (1) OF SECTION 129 OF THE ACT, 2013 AND CLAUSE (B) OF SUB - SECTION (2) OF SECTION 115JB OF THE ACT WOULD SHOW THAT IN CASE OF INSURANCE OR BANK ING COMPANIES OR COMPANIES ENGAGED IN GENERATION OR SUPPLY OF ELECTR ICITY OR CLASS OF COMPANIES FOR WHOM FINANCIAL STATEMENT HAS BEEN SPECIFIED UNDER THE ACT GOVERNING SUCH COMPANY, THE REQUIREMENT OF PREPARING THE STA TEMENT OF ACCOUNTS IN TERMS OF PROVISI ONS OF THE COMPANIES ACT, IS NOT MADE. CLAUSE (B) OF SUB - SECTION (2) PROVIDES THAT IN CASE OF SUCH COMPANIES FOR THE PURPOSE OF SECTION 115JB THE PREPARATION OF STATEMENT OF PROFIT AND LOSS ACCOUNT WOULD BE IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT GOVE RNING SUCH COMPANIES. THIS LEGISLATIVE CHANGE THUS ALIENS CLASS OF C OMPANIES WHO UNDER THE GOVERNING ACTS WERE REQUIRED TO PREPARE PROFIT AND LOSS ACCOUNTS NOT IN ACCORDANCE WITH THE COMPANIES ACT, BUT IN ACCORDANCE WI TH THE PROVISIONS CONTAINED IN SUCH GO VERNING ACT. THE EARLIER DICHOTOMY OF SUCH COMPANIES ALSO, IF WE ACC EPT THE REVENUE'S CONTENTION, HAVING THE OBLIGATION OF PREPARING ACCOUNTS AS PER THE PROVISIONS OF THE COMPANIES ACT HAS BEEN REMOVED. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 23 OF 37 18. THESE AMEN DMENTS IN SECTION 115JB ARE NEITHER DE CLARATORY NOR CLASSIFICATORY BUT MAKE SUBSTANTIVE AND SIGNIFICANT LEG ISLATIVE CHANGES WHICH ARE ADMITTEDLY APPLIED PROSPECTIVELY. THE MEMORANDUM EXPLAINING THE PROVISION OF THE FINANCE BILL, 2012 WHILE EXPLAINING THE A MENDMENTS UNDER SECTION 115JB OF THE A CT NOTES THAT IN CASE OF CERTAIN COMPANIES SUCH AS INSURANCE, BANKING AND ELECTRICITY COMPANIES, THEY ARE ALLOWED TO PREPARE THE PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE SECTIONS SPECIFIED IN THEIR REGULATORY ACT S. TO ALIGN THE INCOME TAX ACT WITH TH E COMPANIES ACT, 1956 IT WAS DECIDED TO AMEND SECTION 115JB TO PROVID E THAT THE COMPANIES WHICH ARE NOT REQUIRED UNDER SECTION 211 OF THE COMPANIES ACT, TO PREPARE PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT, PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF THEIR REGULATO RY ACT SHALL BE TAKEN AS BASIS FOR COMPUTING BOOK PROFIT UNDER SECTION 115 JB OF THE ACT. 30 . INTERESTINGL Y, IT WAS NOT EVE N PLEA OF THE ASSESSEE, AND RIGHTLY SO, THAT SECTION 11 5 JB WI LL HAVE NO APPLICATION ON THE ASSESSEE BECAUSE THE ASSESSEE COULD NOT BE TREATED AS A COMPANY FOR THE P URPOSES OF SECTION 115 JB . T HIS MATTER WAS ARGUED BEFORE TH EIR L ORDSHIPS ON 16 TH APRIL 2019, AND , AS ON THAT POINT OF T IME, THE SCHOOL OF THOUGHT THAT A BANKING COMPANY COULD NOT BE TREAT E D AS A COMPANY, FOR THE PURPOSES OF SECTION 115 JB , WAS IN PUBLIC DOMAIN ON ACCOUNT OF A DECISION OF THE COOR DINAT E BENCH UPHOLDING THAT P R OPOSIT ION - OBVIOUSLY OVER LOOKING THE STATUTO R Y PROVISIONS DISCUSS ED IN PARA GRA PHS 23 , 24 AND 25 EARLIER IN THIS ORDE R, REND ERING THAT LINE OF REASONING PE R INCURIAM IN OUR H UMBLE UNDERSTANDING . THIS LINE O F REASONING D OES NOT EVEN F IND PLACE IN THE ARG UMENTS, AS RECORDED BY THEIR LORDSHIPS, BEFORE THE HON BLE HIGH COURT. QUITE TO THE CON TRARY, THE OB SERVATIONS B Y HON B LE HIGH COURT SHOW THAT POS T 2012 AME NDMEN T , SECTION 115J B WILL APPLY TO TH E BAN KING COMP ANIES, INCLUDING, OF COURSE, NATIONALIZED BANKS WHICH ARE, BY THE VIRT UE OF SECTION 51 O F BANK ING REG ULATION ACT 1949, COVERED BY THE ACC OUNTING REQUIREMENTS TH EREIN . 3 1 . THE PLEA OF THE AS SESSE E , WITH RESPECT TO NON - APPLICABILITY OF SECTION 115JB TO THE B ANKING COMPAN IES LIKE THE ASSESSEE BEFORE US, IS, THEREFORE, RE JECTED. 3 2 . LET US NOW M OVE TO THE ALTERNATE PLEAS , SO FAR AS LE VY OF MAT U NDER SECTION 115JB I S CONC ERNED, AS RA I SED BY TH E LEARNED COUNSEL. 3 3 . LEARNED C OUNSEL CO NTENDS THAT PROFIT S O F THE BRANC HES , IN COUNTRIES WITH WHOM INDIA HAS ENTERED INTO DTAA - NAMELY UK, FRANCE, BELGIUM , K ENYA, JAPAN, USA, SINGAPORE, CHINA AND SOUTH AFR ICA , AMOUNTING TO RS. 1145,14,40,634 S HOULD BE E X CLU DED. HIS CONTENTIONS THAT SO FAR AS TH ESE PROFITS ARE CONCER NED, AS TH ESE PROFITS HAVE ALREA DY BEEN SU BJECTED TO TAX IN THE RE SPECTIVE CO UNTRIES, THE SA M E C ANNOT BE TAKEN INTO ACCOUNT FOR THE TAXATI ON OF I NCOME, INCLUDING THE MINIMU M ALTERNAT E TAX , I N INDIA . WITHO UT PREJUDICE TO THIS LINE OF A R GUM ENT, IT IS FURTHER SUBMITTED THAT THE CREDIT FOR TAXES PAID BY THE SAID BRANCHES IN T HEI R RESPECTIVE COUNTRIES BE ALLOWED AS A DEDUCTION IN ACCORDANCE WITH SEC. 9 0 OF THE ACT WHILE DETERMINING TAX LIA BILITY IN INDIA. 3 4 . THIS PLEA IS ONLY TO BE NOTED AND REJ ECTED. WE HAVE ALREADY DI SCUSSED, AT LENGTH, A S TO HOW TAX ATION OF PR OFITS OF F OR EIGN BRANCHES , OUTSIDE INDI A A ND UNDER THE TAX TRE ATIES ENTERED INT O B Y INDIA, DOES NOT IMP LY TH AT THE SAID INCOME C ANNOT BE T AXED IN INDIA. IRRE SPECTIVE OF WHETHER OR NOT THE SAME INCOME IS TAXED ABR OAD , THE ENTIRE GLOBAL INCOME, INCLUDING SUCH IN COME, IS TO BE TAXED IN INDIA I N TH E H AND S OF A RESIDENT , THOUGH THE CREDIT FOR TAXES PA ID ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 24 OF 37 ABROAD , AS AD MISSIBLE UNDER THE T REATY OR, IN THE ALTERNATIVE, UNDER THE DOMESTIC LAW, WILL BE A VAILABL E TO THE ASSES SEE NEVERTHELESS . WE ARE UNABLE T O SEE ANY RATIONALE IN EXCLUSION OF PRO F ITS IN RES PEC T OF BRANCHES ABROAD , WHICH HA VE ALREA DY BEEN TAXED ABROAD UN DER T HE APPLICABLE TAX TR EATIES, FR OM COMPUTATION OF BOOKS PRO FITS FOR THE PURPOSE OF LEVY OF MINIMUM ALTERNA TE TAX . A S FOR THE TAX CREDITS , W E HA VE AL READY GIVEN D IRECTIONS WI TH RESPECT TO G RAN T OF THE FOREIGN TA X CREDIT, AS MAY BE ADMISSIB LE. WHEN LEARNED CO U NSEL SUBMITS THAT T HE PROVISI ONS OF SECTION 90 WILL O VERRIDE TH E PRO VISIONS OF SECTION 115J B, AND , FOR THIS REASON, THE INCOMES TAX ED ABROAD UNDER THE TAX TRE A TIES SHOULD BE EXCLU DED FRO M T AX ATION OF BOOK PRO FITS UNDER SECTION 115 JB, HE O VERLOOKS THE FUN DAMENTAL POSITION TH AT S UCH A TREATY PROTECTION WILL COME NORMALLY INT O PLAY FOR TAXATION OF NON - RES IDEN T IN INDIA , I.E. SOURCE COUNTRY T AXATION, AND NO T FOR TA XATION OF RESIDENT IN WHOSE HA NDS GLO BAL INCOME IS TO BE TA XED ANYWAY . ALL THAT ONE GETS IN THE RESIDENCE JURISDICTI ON , BY THE VIRTUE OF TAX TREATIES, IS TAX CREDITS FOR THE TAX ES PAI D ABROAD, AND WE HAVE ALREADY GIVEN SUITABLE D IRECTIONS FOR THE SAME. 3 5 . TH AT LEAVES US, SO FAR AS C OMPUTATION OF BOOK PROFITS UNDER SECTION 115 JB IS CON CERNED, WITH THE PLEA OF THE ASSE SSEE THAT THE ASSESSI NG OFFICER HAS ERRED IN ADDING BACK THE PROVISION FOR BAD AND D OUBTFUL DEBTS OF RS.5359,64,38,015 WHILE COMPUTING BOOK PROFITS U/S 115JB OF THE AC T WITHOUT APPRECIATING THAT THE SAME DOES NOT CONSTITUTE A PROVISION FOR DIMINUTION IN TH E VALUE OF ASS ET . 36 . SO FAR AS THIS ISSUE IS CONCERNED, WE HA VE NOT ED THAT THE LE ARNED CIT(A) HAS, IN THE IMPUGNED ORDER, UPHELD THE ACTI ON OF THE ASSESSING OFFICER B Y OBSERVING AS FOLLOWS: 14.8 GROUND NO. 9E - VIDE THIS GROUND, AP PELLANT HAD CLAIMED T HAT PROVIS ION FOR BAD AND DOUBT FUL DEBTS AMOUNTING TO RS. 5359,64,38,015/ - SHOULD BE ALLOWED. IN SUPPORTS OF ITS CLAIM, APPELLANT PLACED REL IANCE ON JUDGEMENT OF HON'B LE HIGH COURT OF GUJARAT IN THE CASE OF CIT V/S VODAPHONE ESSAR GUJA RAT LTD. AFTER CONSID ERING THE ARGUMENT OF BOTH SIDE S, THE HON'BLE HIGH COURT HAS HELD AS UNDER: ' THE SI TUATION THAT ARISES IS THAT PRIOR TO THE INTRODUCTION OF CLAUSE (I) TO THE EXPLANAT IO N TO SECTION 115JB, AS HELD BY THE SUPREME COURT IN CASE OF HCL CO MNET SYSTEMS & SERVIC ES LTD (SU PRA), THE THEN EXIST ING CAUSE (C) DID NOT COVER A CASE WHERE THE ASSESSEE MADE A PROVISION FOR BAD OR DOUBTFUL DEBT. WITH INSERTIO N OF CLAUSE (I) TO THE EXPL AN ATION WITH RETROSPECTIVE EFFECT, ANY AMOUNT OR AMOUNTS SET ASIDE F OR PROVISION FOR DIMI NUTION IN THE VALUE OF THE ASS ET MADE BY THE ASSESSEE, WOULD BE ADDED BACK FOR COMPU TATION OF BOOK PROFIT UNDER SECTION 115JB. HOWEVER, IF T HIS WAS NOT A MERE PROVISIO N MADE BY THE ASSESSEE BY MERELY DEBITING THE PROFIT AND LOSS ACCOUN T AND CREDITING THE P ROVISION F OR BAD AND DOUBTFUL DEBT, BUT BY SIMULTANEOUSLY OBLITERATING SUCH PROVISIO N FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM THE LOANS AND ADVANCE S ON THE ASSET SIDE OF THE BALANCE SHEET AND CONSEQUENTLY, AT THE EN D OF THE YEAR SHOWING THE LOANS AND ADVANCES ON THE ASSET SIDE OF THE BALANCE SHEET AS NET OF THE PROVISI ON FOR BAD DEBT, IT WOULD AMOUNT TO A WRITE OFF AND SUCH ACTUAL WRITE OFF WOULD NOT B E HIT BY CLAUSE (I) OF THE EXPLANATION TO SECTION 115JB. THE JUDG EMENT IN CASE OF DEEP AK NITRITE LTD (SUPRA) FELL IN THE FORMER CATEGORY WHEREAS FROM THE BRIEF DISCUSSION AVAILABLE IN THE ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 25 OF 37 JUDGEMENT IT APPEARS THAT CASE OF INDI AN PETROCHEMICALS CORPN LTD . (SUPRA), FEEL IN THE LATER CATEGORY.' 14.9 FROM THE PERUSAL OF TH E FINDINGS GIVEN BY T HE HON'BLE GUJARAT HIGH COURT, IT IS EVIDENT THAT INSERTION OF CLAUSE (I) TO THE EXP LANATION WITH RETROSPECTIVE EFFECT, ANY AMOUNT OR AMOUNT S SET ASIDE FOR PROVISION F OR DIMINUTION IN THE VALUE OF THE ASSET MADE BY THE ASSESSEE, WOULD BE ADDED BACK FOR COM PUTATION O F BOOK PROFIT UNDER SECTION 115JB. THE HON'BLE COURT FURTHER CLARIFIED THA T IF THIS WAS NOT A MERE PROVISION MADE BY THE ASSESSEE BY MERELY DEBITING THE PROF IT AND LOSS ACCOUNT AND CREDITING THE PROVISION FOR BAD AND DOUBTFUL DEBT, BUT BY SIMULTA NEOUSLY OB LITERATING SUCH PROV ISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM THE LOANS AND ADVANCES ON THE ASSET SIDE OF THE BALANCE SHEET AND CONSE QU ENTLY, AT THE END OF THE YEAR SHOWING THE LOANS AND ADVANCES ON TH E ASSET SIDE OF THE B ALANCE SHE ET AS NET OF THE PRO VISION FOR BAD DEBT, IT WOULD AMOUNT TO A WRITE OFF AN D SUCH ACTUAL WRITE OFF WOULD NOT BE HIT BY CLAUSE (I) O F THE EXPLANATION TO SECTIO N 115J B. 14.10 IN APPELLANT'S CASE, IT WAS NOT DEMONSTRATED THAT THE APPELLANT HAD FUL FILLED THE ADDITION BY REDUCING THE ASSET SIDE OF BALANCE SHEET, THEREFORE, THE CASE LAWS CITED BY THE APPELLANT WILL NOT BE APPLICABLE. APP ELLANT HAD ALSO RELIED UPON T HE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF VIJAYA BANK 323 ITR 166 . AFTER CONSID ERING THE JUDGEMENT OF HON'BLE APEX COURT IN VIJAYA BANK, THE HON'BLE ITAT, MUMBAI B ENCH 'E' IN THE CASE OF SHAKTI INSULATED WIRES (P) LTD V /S (TO WD 9(3) 2014 (45TAXM AN N.COM 31) MUMBAI, THE HON'BLE ITAT IN PARA 5.1 OF THE ORDER HELD A S UNDER: '5.1 WE HEA RD LD D.R ON THIS ISSUE WHO CONTENDED THAT THE PROVISION FOR BAD AND DOUBTFUL IS NEC ESSARILY TO BE ADDED IN VIEW OF THE STATUTORY PROVISION CONTAINED IN SEC. 115JB OF TH E ACT ON CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE UNABLE TO AGRE E WITH THE CONTENTION S OF LD A. R. THE DECISION IN THE CASE OF VIJAYA BANK (SUPRA) HAS BEEN RENDERED IN TH E CONTEXT OF SEC 36(1)(III) OF THE ACT, WHICH IS REQUIRE D TO BE CONSIDERED WHILE CO MP UTING TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. IN THE INST ANT CASE, WE ARE CONC ERNED WITH THE PROVISIONS OF SEC. 115JB, WHEREIN THE BOOK PROFIT IS REQUIRED TO BE C OMPUTED FROM THE AUDITED ACCOUNTS PREPARED UNDER THE PRO VISIONS OF THE COMPANIES AC T. UNDER THE ACCOUNTING PRINCIPLES, ON THE BASIS OF WHICH THE ACCOUN TS ARE PREPARED UNDER THE COMPA NIES ACT, THE TERMS 'BAD DEBTS' AND THE 'PROVISION FOR BAD AND DOUBTFUL DE BTS HAVE DISTINCT MEANING AND HAS GOT DIFFERENT ACCOUNT ING TREATMENT. HENCE, IN OU R VIEW, THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE O F VIJAYA BANK (SUPRA) UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT CANNOT BE APPLIED TO THE PROVISIONS O F SEC. 115JB OF THE ACT. WE NOTICE THAT THE CO - ORDINATE BENCH IN THE CASE OF TAINW AL A CHEMICALS & PLASTICS INDIA LTD., DID NOT CONSIDER THE APPLICABIL ITY OF THE COMPANIES ACT TO THE BOOK PROFIT COMPUTED UNDER SEC. 115JB ACT. IN VIEW OF THE FOREGOING, IN O UR VIEW, THE LD CIT WAS JUSTIFIED IN UPHOLDING THE ADDIT ION OF 'PROVISION FOR BAD A ND DOUBTFUL DEBTS' TO THE BOOK PROFIT. ACCORDINGLY, WE UPHOLD HIS OR DER ON THIS ISSUE.' ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 26 OF 37 RECENTLY, THE HON'BLE ITAT HYDERABAD 'B' BENCH IN THE CASE OF M/S SOUTHERN POWER DIS TRIBUTION COMPANY OF ANDHRA PRADESH LTD V/S DCIT CIR 2(1 ), TIRUPATI IN ITA NO. 1 46 0/HYD/2013 HAS HELD AS UNDER: HAVING REGARD TO THE RIVAL CONTENT IONS AND THE MATERIEL ON RECORD , WE FIND THAT THE ASSESSEE HAS MADE A PROVISION OF RS.22.81 CRORES FOR BA D AND DOUBTFUL DEBTS DURING THE RELEVANT PREVIOUS YEAR. THE AO ADDED IT BACK TO THE B OOK PROFIT HOLDING THAT IT IS NOT AN ASCERTAINED LIABILITY. THE CI T(A) HAS CONFIRMED TH E ADDITION BY OBSERVING THAT SUBSEQUENT TO THE AMENDMENT TO EXPLANATION 1 (I) TO SEC TION 115JB, ANY PROVISION LEADING TO DIMINUTION IN THE V ALUE OF ANY ASSET, HAS TO B E ADDED TO THE BOOK PROFIT. THE FACT IS THAT THE ASSESSEE HAS DEBITE D THE PROVISION FOR B AD AND DOU BTFUL DEBTS TO THE P&L A/C AND THEREFORE, IT HAS TO BE ADDED BACK TO THE B OOK PROFIT WHILE MAKING THE COMPUTATION OF TAX PAYABLE U /S 115JB OF THE ACT. WHAT T HE ASSESSEE IS NOW SEEKING IS TO REDUCE THE BOOK PROFIT BY THE ACTUA L BAD DEBTS WRITTEN O FF AS IT H AS DEBITED THE SAID MOUNT TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS A/C AND NOT THE PROFIT AND LOSS ACCOUNT. WHETHER SUCH AN ADJ USTMENT IS PERMISSIBLE IS T O BE SEEN. THE LEGISLATURE HAS PROVIDED THAT FOR COMPUTING THE INCOM E U/S 115JB OF THE AC T, THE 'BO OK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT A/CC FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB - SECTI ON (2) AND AS INCREASED BY TH E ITEMS IN CLAUSES (A) TO (K) UNDER EXPLANATION (1) TO SECTION 115 JB AND THEREAFTER RED UCED BY TH E ITEMS UNDER CLAUSES (I) TO (VIII) THERE UNDER. THE BAD DEBTS WRITTEN OFF IS NOT AN ITEM UNDER THE EXPLANATION (1) TO SECTION 115 JB OF THE ACT. THE ASSESSEE 'S CONTENTIONS THAT THE BAD DEBTS WRITTEN OFF IS MORE THAN THE PROVI SION MADE DURING THE RELEVANT Y EAR AND THEREFORE, NOTHING SHOULD BE ADDED ALSO CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT THE ASSESSEE HAS PREPARED ITS P&L A/ C IN ACCORDANCE WITH THE PR OV ISIONS OF THE COMPANIES ACT AND THE NET PROFIT AS PER SUCH P&L A/C IS TO BE ADOPTED AND THEREAFTE R THE ADJUSTMENTS UNDER THE EXPLANATION (1) ARE TO BE MADE. THE HONBLE SU PREME COURT IN THE CASE OF APOLLO TYRES (CITED SUPRA) HA S CLEARLY HELD THAT THE AO HA S NO JURISDICTION TO TINKER WITH THE NET PROFIT ARRIVED AT UNDER T HE PROVISIONS OF - THE COMPANIES ACT. THERE IS ALSO NO DOUBT THAT THE PROVISION MADE FOR BAD AND DOUBTFUL D EBTS HAS TO BE ADDED BACK TO THE NET PROFIT. THE BAD DEB TS WRITTEN OFF OUGHT TO HAV E BEEN DEBITED TO THE P&L A/C AS PER THE PROVISIONS OF THE COMPANIES A/C AND THEREAFTER T HE NET PRO FIT IS TO BE ARRIVED AT TO WHICH THE ADJUSTMENTS UNDER THE EXPLANATION (1) ARE TO BE MADE. WHERE THE AO HAS NO JURISDICTION TO TIN KER WITH THE ACCOUNTS OF TH E ASSESSEE, LIKEWISE THE AO HAS NO AUTHORITY TO MAKE AN ADJUSTMENT N OT PROVIDED UNDER THE EXPLANATI ON THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISSUE AS THE ASSESSEE AS CLEARLY DEBITED THE PRO VISION OF RS.22.81 CRORES T O THE P&L A/C. THE ASSESSEE'S GROUND OF APPEAL NO. 4 IS ACCORDINGLY REJECTED.' ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 27 OF 37 RESPECTFU LLY FO L LOW ING JUDGEMENT OF HON'B LE ITAT IN THE CASE OF SHAKTI INSULATED WIRES (P) LT D (SUPRA) AND M/S SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LTD (SUPRA) , THE GROUND RAISED BY THE APPELLANT IS, DISMISSED. 37 . IN THE COU R SE OF ARGUMENTS BEFO RE U S, LEA RNED COUNSEL FOR THE ASSESSEE HAS SIMPLY PLACED HIS RELIANC E ON THE JUDGM ENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS VODAFONE E SSAR GUJARAT LIMI T ED [(2017) 85 TAXMANN.COM 32 (GUJ)] BUT HAS NOT EVEN DEALT WITH THE SPECIFIC ISSUES , AS DISCUSSED ABO VE, BY THE LEARNED CIT(A). BE THAT AS IT MAY, ONE THING THAT IS CLEAR IS THAT THE ASSESSING OFFICER HAS NOT, A T ANY STAGE , EVE N VERIFIED WHETHER THE ASSE SSE E HAS REDUC ED THE CORRESPONDING AMOUNT , OF THE PROVISION OF RS 535 9,64,38,015 , FROM TH E LOANS AN D ADVANCES ON THE ASSET SIDE OF THE BALANCE SHEET , B ECAUSE, IF THAT BE SO, IN TER MS OF VODAFONE ESSAR (SU P RA) JUDGMENT OF HON BLE GUJARAT H I GH COURT - PARTICU LAR LY AS THERE IS NOTHING CONTRARY THERE TO BY HON BLE JURISDICTIONAL HIGH COU RT, THAT AMO UNT WILL H AVE TO BE REDUCED FROM THE BOOK P ROFITS. IT CANNOT I N DEED BY O PEN TO US TO DISRE GARD THE LAW LAID DOWN BY HON BLE NON J URI SDICTIO NAL HIGH COURT, ON THE GROU ND THAT COORDINATE BENCHES OF THE TRIBUNAL HAVE TAKEN A PARTICULAR V I EW - AS HAS BEEN DONE BY THE CI T(A) , AND THAT IT IS NO T THE VIEW OF HON BLE JURISDICTIONAL H IGH CO URT , AS IS LA ID DOWN BY HONBLE BOMBAY HIGH COURT IN THE MATTE R OF CIT V. GODAVARI DEVI S ARA F [ (1978) 113 ITR 589 (BOM.) ] . IN THE HIERARCHI CAL JUDICIAL SYSTEM THAT WE HAVE, WISDO M OF THE C OURT BELOW HAS TO YIELD TO HIGHER WISDOM OF THE COURT ABOVE AND, THEREFORE, ONE A AUTHORITY HIGHER THAN THIS TRIBUNAL HAS EXPRESSE D AN OPINION ON THAT ISSUE, WE ARE NO LONGER AT LIBERTY TO RELY UPON E ARLIER DECISIONS OF THIS T RIBUNAL . THE DECISI ONS OF THE COORDINATE BE NCH, ON THAT ISSUE, CE ASE TO BE RELE VANT, NOR IS IT OPEN TO US TO TAKE A C ALL ON MERITS, AND THUS S IT DE FACTO IN JUDGMENT OVER WHAT A HIGHER JUDI CIAL AUT HORITY HAS DECI DED. WHATEVER BE THE MERIT S OF THE STAND OF THE RE VENUE ON THIS ISSUE, IT IS NOT FOR US TO T AKE CALL ON MER ITS. THAT E XERCISE ON MERITS , IN THE LIGHT OF THE NON - JURISDICTIONAL HIGH CO UR T JUDGMENT, CAN ONL Y BE DONE BY HON BLE COURTS A BOVE. IN THE LIGH T OF THESE DISCUSSIO NS, AND HA VING CLARIF IED THE LE G AL POSITION AS SUCH, WE REMIT THE MATTER TO THE FILE OF THE LEARNED CIT(A) FOR LIMITED EXAMINATION OF FAC TS SO FAR AS RE DUCTION OF T HE CORRESPONDING AMOUNT , OF THE PROVISION OF RS 5359, 64,38,015 , FROM THE LOANS AND ADVANC ES ON THE ASSET SIDE OF THE BALANCE SHEET , IS CON CERNED. IN T HE EVENT IT IS FOUND THAT THE C ORRESPONDENCE AMOUNT IS INDEED REDUC ED FORM THE LOANS AND ADVA NCES REFLECTE D IN THE ASSETS OF THE BALA NCE SHEET , THE LEARNED CIT (A) WILL DIRE CT CIT (A) T HE AO FOR E XCLUDING THE SAME IN THE COMPUTATIO N OF BOOK PROFITS. ORDERED, ACCORDINGLY. 3 8 . SO FAR AS THE ISSUE REGARDING ALLEGED IN APPLICABILITY OF SECTION 115JB ON THE ASSESSEE IS CONCERNED, WE REJECT THE PLEA OF THE ASSESSEE IN PRI NCI PLE. HOWEVER , SO FAR AS THE COMPUTATION OF BOOK PROFIT S FOR LEVY OF M AT IS CONCERNED , WE HAVE UPHELD ONE OF THE GRIEVANCES O F THE ASSESSEE AND REMITTED THE MATTER TO THE FILE OF THE CIT(A) FOR FACTUAL VERIFICATION. 3 9 . GROUND NO. 5 , RAISED IN THE AP PEAL FILED BY THE ASSESSEE, IS THUS PARTLY ALLOWE D FOR STATI STI CAL PURPOSES IN THE TERMS INDICATED ABOVE. 40. LET US NOW TAKE UP THE OTHER ISSUES RAISED IN THE C ROSS APPEALS. WE W ILL F IST TAKE U P THE REMAINING ISSUES IN APPEAL FILED BY THE ASSESSEE. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 28 OF 37 41 . IN THE FIRST SET OF GROUND S OF APPEAL, THE ASSESSEE - APPELLANT HA S RAISED THE FOLLOWING GRIE VA NCE: 1. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSIST A NT COMMISSIONER OF INCOME TAX - 2(1)(1) (HEREIN AFTER REFERRED TO AS 'A CIT) HAS ERRED IN DISALLOWING RS.158,75,16,480 U/S. 14A R.W.R 8D OF THE IN COME TAX ACT, 1961 ( HEREIN AFTER REFERRED TO AS 'THE ACT') TOWARDS EXPENDITURE INCURRED IN RELATION TO INCOME CLAIMED EXEMPT U/S. 10(34) AND 10(15) OF THE ACT AND THE HON'BLE COMMIS SIONER OF INCOME TAX (APPEALS) - 4 (HEREIN AFTER REFERRED TO AS 'CIT(A)') H AS ERRED IN CONFIR MI NG THE SAID DISALLOWANCE U/S. 14A R.W.R 8D. THE LEARNED ACIT BE DIRECTED NOT TO DISALLOW A NY EXPENDITURE IN RELATION TO THE INCOME CLAIMED EXEMPT U/S. 10(34) AND 10(15) OF THE ACT AND DELETE THE ADDITION OF RS. 158,75,16,480 MADE TO TH E TOTAL INCOME AND R EDUCE THE TOTAL INCOME ACCORDINGLY. 1A. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, ON THE F ACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, ASSUMING WITHOUT ACCE PTING THAT YOUR HONOURS IS OF THE OPINION THAT DISALLOWANCE U/S. 14A IS WARR ANTED IN THE CASE O F THE APPELLANT BANK, THEN THE LEARNED ACIT BE DIRECTED TO RESTRICT THE DISALLOWANCE U/S. 14A IN RESPECT OF EXPENSES INCURRED BY THE TREASURY DIVISION OF THE BAN K TO THE EXTENT OF THE AMOUNT ALREADY DISALLOWED BY THE APPELLANT BANK IN IT S RETURN OF INCOM E, I.E., RS. 21,32,383 AND REDUCE THE TOTAL INCOME ACCORDINGLY. 4 2 . LEARNED REPRESENTATIVE S FAIRLY AGREE THAT IDENTICAL ISSUE CAME UP FOR CO NSIDERATION BEFORE A COORDINATE BENCH OF T HE TRIBUNAL, IN ASSESSEE S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSM EN T YEAR, AND THE MATTER WAS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR A DJUDICATION DE NOVO IN THE L IGHT OF CERTAIN NEW JUDICIAL PREC EDENTS. WE ARE , HOWEV ER, URGED TO DECIDE THE MATTER ON MERITS, E VEN TH OUGH LEARNED COUNSEL FAIR LY POINTS OUT THAT T HE MATTER FOR THE IMMEDIATELY PRECED ING ASSESSMENT YEAR, WHICH WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, IS YET TO BE FINALIZED. LE ARNED DEPARTMENTAL RE PRESENTATIVE URGES US TO , ON THE SAME LINES AS IN THE PRECEDING ASSESSMENT YEAR, REMIT THE MAT TE R TO THE FILE OF THE ASSESS ING OFF ICER SO THAT A UN IF ORM CALL MAY BE TAKEN FOR BOTH THE A S SESSMENT YEARS. 43 . WE SEE NO RE ASONS TO TAKE AN Y OTHER VIEW OF THE MATTER THAN THE VIEW TAKEN BY THE COORDINATE BENCH , PARTICULARLY AS THERE IS NO CA TEGORICAL FI N DI NG S BY ANY O F THE AUTHORITIES BELO W WITH RESPECT TO THE FACTUAL ASPECTS REGARDING THE REL A TED SHARES BEING HELD AS STOCK IN TRADE - AS HAS B EEN CLAIM OF THE ASS ESSEE BEFORE US. CONSISTENT WITH THE STAND TAKEN BY THE COORDINATE BENCH, WE, THEREFORE, REMIT TH E MATTER TO THE FILE OF THE ASSESSING OFFIC ER FOR FRESH ADJUDICATION , IN THE LIGHT OF THE CORRECT F ACTS OF THE CASE , AS ALSO THE LAW LAID D OWN BY THE BINDING J UDICIAL PRECEDENTS . THE O BSERVATIONS MADE BY THE COORDINATE BE NCH, FOR THE ASSESSMENT YEA R 201 4 - 1 5, WILL APPLY MU TATIS MUTANDIS FOR TH E PRESENT ASSESS MENT YEAR AS WELL. 44 . GROUND NOS. 1 AND 1A ARE T HUS ALLOWED FOR THE STATI STICAL PURPO SES , IN THE TERMS I NDICATED ABOVE. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 29 OF 37 45 . IN THE SECOND SET OF GROUND OF APPEAL, THE ASSESSEE - A P PELLANT HAS RA ISED TH E FOLLOWING GRIEVANCES : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T H E LEARNED ACIT HAS ERRED IN DISALLOWING AMORTIZATION OF LEASE PREMI UM PAID IN RESPECT OF VARIOUS LEASE HOLD PROPERTI ES AGGREGATING TO RS.4,08,67,975 BY TREATING THE S AME AS CAPITAL EXPENDITURE AND THE HON'BLE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANC E MADE BY THE LEARNED ACIT. THE LEARNED ACIT BE DIRECTED TO ALLOW AM ORTIZATION OF LEASE PREMIUM PAID IN RESPECT OF VA RIOUS LEASE HOLD PROPERTIES AGGREGATING TO RS.4, 08 ,67,975 AS REVENUE EXPENDITURE AND REDUCE THE TOTAL INCOME ACCORDINGLY. 2A. WITHOUT PRE J UDICE TO GROUND NO. 2 ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, ASSUMING WITHOUT ACCEPTING THAT YOUR HONOURS IS OF THE OPINION THAT AMORT IZ ATION OF LEASE PREMIUM PAID IN RESPECT OF VARIOUS LEASE HOLD PROPERTIES AGGREGATING TO RS . 4,08,67,975 IS IN THE NATURE OF CAPITAL EXPENDITURE, THEN THE LEARN ED ACIT BE DIRECTED TO ALLOW DEPRECIATION U/S. 32 OF THE ACT ON THE SAME AND REDUCE THE TOTAL INC OM E ACCORDINGLY. 46 . LEARNED COUNSEL F OR THE ASSESSEE FAIRLY SUBMITS THAT , AS ON NOW, THE I SSUE IS COVERED , AGAINST THE ASSESSEE, B Y DECISIONS OF THE COORDIN ATE BENCHES, AND HE DOES NO T, THEREFORE, PRESS THE ISSUE ANY FURTHER. OBVIOUSLY , HOWEVER, HE RETAI NS H IS RIGHT TO CARRY THE MATTER F URTHER I N APPEAL, IF SO ADV ISED. LEARNE D DEPARTMENTAL REP R ESENTATIVE DOES NO T OPPOSE THE SUBMISSIO NS OF THE LEARN ED COUNSEL. 47 . IN VIEW OF THE AB OVE , AND SUBJECT TO THE RIDER THAT TH IS MATTER NOT BEING PRESSED BEFORE US S HO ULD NOT BE CONSTRUED AS PREJU DICIAL TO THE INTERESTS OF THE ASSESSEE FOR CARRYING THE MAT T ER IN FURTHER APPEAL BEFORE HON BLE C OUR TS ABOVE, THE SE GROUNDS O F APPEAL ARE DISMISSED AS NOT PRESSED. 48 . GROUND NOS. 2 AND 2 A ARE DISMI SSED . 49. GROUND N OS. 3 , INCLU DING ITS SUB GROUNDS, HA VE ALREADY BEEN DISPOSED OF EARLIER IN THIS ORDER, GROUND NO. 4 DOES NOT FIND IN THE MEM ORANDUM OF A PPEAL AT ALL, AND GROUND NO S. 5 , IN CLUDING ITS SUB GROUNDS, HAVE ALSO BEE N DISPOSED OF EARLIER IN THIS YEAR. 50. WE NOW TAKE UP THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE. 5 1 . THE ASSESSEE H AS ALSO MOVED A P E TITION D ATED 3 RD OCTOBER 2020 FOR ADMISS IO N OF AN ADDITIONAL GROUND OF APPEAL . HA VING P ERUSED THE PE TITIO N, A S ALSO MATERIAL ON RECORD, AND HAVING HEARD THE R IVAL CONTENTIONS ON THE SAME, AND HAVING NOTICED THAT IT IS A PURELY LEGAL GROUN D WHICH COULD NOT BE TAKEN UP BON AFIDE EARLIER, WE ADMIT THIS ADDITIONA L GROUN D . IT IS RE PRODUCED B ELOW FOR READY REFERENCE: THE AMOUNT OF EDUCATION C ESS AND HIGHE R AND SECONDARY ED UCATION CES S, NO T BEING IN THE NATURE OF TAX IS NOT C OVERED BY THE PROVISI ONS OF SECTION 40(A)(II ) ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 30 OF 37 AND, ACCORDINGL Y, OUGHT TO BE ALLOWED AS DEDUCTION IN COMPUTATIO N OF INCO ME FROM BUSINESS AND PRO FESSION, AS HELD BY HON BLE JURISDICTIONAL H I GH C OUR T IN THE CASE OF SE SA GO A LIMITED (423 ITR 426) AND O TH ER DEC ISIONS. 5 2 . LEARNED REPRESENT ATI VES FAIRLY AGREE THAT THE ISSUE IS COVERED, I N FAVOUR OF THE ASSES SEE, BY HO N BLE JUR ISDICTIONAL H IGH COURT S JUDGMENT IN THE CASE OF SE SA GOA LTD VS JOINT COMMISSION ER OF I N COME T AX [(2020) 423 ITRR 426 (BOM) ] BUT A S THE REL ATED FACTS HAVE NO T BEEN EXAMINED AT ANY STAGE, THE MATTER CAN BE RE MITTED TO THE FILE OF THE AS SESSING OF FICER FOR EXA MIN ATION DE NOVO IN ACCOR D ANCE WITH THE LAW , INCLUDING THE ABOVE CITED JUDIC IAL PRECEDENT. WE ACCEP T THIS SUGGESTION, AND , THER EFORE , REMIT THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR FRESH ADJUDICATION AS ABOVE. ORDERED ACCO RDINGL Y, A ND THE AD DITIONAL GROUND OF APPEAL IS THUS ALLOWED, FOR STATISTICAL PURPOSES, IN THESE T E RMS. 5 3 . IN TH E RES ULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE T ER MS INDICATED ABOVE. 5 4 . WE NOW TAKE UP THE AP PEAL FILED BY THE ASSESS ING OFF ICER. 5 5 . IN THE F IRST GROUND OF APPEAL, WHICH IS RAI SED BY WAY OF A QUESTION FOR OUR CONSIDER ATIO N, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCES : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS CORRECT IN UPHO LDING THAT THE BRO KEN PERIOD INTEREST PAID IS TAXABLE ON DUE BASIS INSTEAD OF ACCRUAL BASIS RELYIN G ON THE DECISI O N OF THE BOMBAY HIGH COURT IN THE CA SE OF STATE BANK OF INDIA W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FOLLOWS ACCRUAL BASIS OF ACCOUNT ING DURING THE YEA R. 5 6 . LEARNE D REPRESENTATIVES FAIRLY AGREE THAT TH IS ISSUE IS COVERED BY SEVERAL DECISIONS OF THE COORDINATE BE NCHES IN ASSESSEE S OWN CASE, AND THAT IS A FA CT NOTED BY THE L EA RNED CIT(A) IN THE IMPUGNED ORDER ITSELF AS WELL. THERE IS NO G OOD RE ASON, NOR HAS ANY REASON BEEN POINTED TO US, TO TAKE A DIFFERENT VIEW OF THE MATTER. R E SPECTFULLY FOLLOW ING THE ESTE EMED VIEWS OF THE COORDI NATE BE NCH, AND PARTICULARL Y AS NO CONTRARY VIEW BY A HIGHER JUDICIAL FO RUM , WE APPROVE THE CONCLUSIONS A RRIVED AT BY THE LE ARNED CIT(A) AND DECLI NE TO INTERFERE IN THE MATTER. 5 7 . GROUND N O. 1 IS THUS DISMISSED. 5 8 . IN THE G ROUND NO . 2, THE ASSESSING O FFICER HAS RAISED THE FOLLO WING GRIEVANCE: ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) HAS ERRED IN ALLOWING THE PROVISION FOR WAGE REVISION OF RS. 540,06,00,000/ - WITHOUT APPRECIATING T HE FACT THAT THE PROVISION WAS MADE FOR A CONTINGENT LIABILITY. ' 5 9 . LEARNE D REPRESENTATIVES FAIRLY AGREE TH AT TH IS ISSUE IS COVERED BY SEVER AL DECISIO NS OF THE COORDINATE BE NCHES IN ASSESSEE S OWN CASE, AND THAT IS A FACT NOTED BY THE L EA RNED CIT(A) IN T HE IMPUGNED ORDER ITSELF AS WELL. TH ERE IS NO G OOD REASON, NOR HAS ANY REASON BEEN POINTED TO US, TO TAKE A DIFFERENT VIEW OF THE MATTER. R E SP ECTFULLY F OLLOWING THE ESTE EMED VIEWS OF THE COORDINATE BE NCH, AND PARTICULARLY AS NO CONTRARY VIEW BY A HIGHER J UDICIAL ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 31 OF 37 FORUM, WE APPROVE THE CONCLU SIONS ARRIVED AT BY THE LE A RNED CIT(A) AND DECLI NE TO INTERFERE IN THE MATTER. 60 . GROUND N O. 2 IS THUS D ISMISSED. 61 . IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD . CIT(A) HAS E RRE D IN ALLOW I NG THE AMORTIZATION OF PREMIUM OF INVESTMENTS WITHOUT APPRECIATING THE FACT TH AT RBI CIR CULAR DTD 12.07.2005 CLEARLY MENTIONS THAT THE PRESCRIBED ACCOUNTING TREATMENT DOES NOT TAKE INTO ACCOUN T THE APPLICABILITY OF I.T. LAW AND DECISION OF HO N'B LE SUPREME COURT IN THE CASE OF M/S. SOUTHERN TECHNOLOGIES LTD. VS. JCIT IN CIVIL APPEAL NO. 1337/ 2003 MAKES IT VERY CLEAR THAT RBI GUIDELINES THEMSELVES WILL NOT DECIDE TAXABILITY OF THE INCOME.' 6 2 . LEARNE D REPRESENTATIVES FAIRLY AGREE THAT TH IS ISSUE IS COVERED BY SEVERAL DECISIONS OF THE COORDINATE BE NCHES IN ASSESSEE S OWN CASE, AND THA T IS A FAC T NOTED BY THE L EA RNED CIT(A) IN THE IMPUGNED ORDER ITSELF AS WELL. R E SPECTFULLY FOLLOWING THE ESTE EMED VIEWS OF THE COORDINATE BE NCH, AND P ARTICULARLY AS HON BLE JURI SDICTIONAL HIGH COURT, IN THE CASE OF C IT VS HDFC BANK LT D [(2016) 366 ITR 505 0 (BOM) ] H AS TAKEN THE S AME VIEW , WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LE ARNED CIT(A) AND DECLI NE TO INTER FERE IN THE MATTER. 6 3 . GROUND N O. 3 IS THUS DISMISSED. 6 4 . I N G ROUND NO. 4, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT(A) HAS ERR ED IN UPHOLDING THAT THE PERPETUAL BONDS CA NNOT BE COMPARED TO THE EQUITY/ SHAR E CAPITAL OF THE BANKS WITH OUT CONSIDERING AS PER SETTLED LEGAL POSITION IN 130 ITR 18 (P&H) OF HON'BLE PU NJAB & HAR YANA HIGH COURT IN THE CASE OF PEPSU ROAD TRANSPORT CORP VS C IT THAT AN ELEMENT OF REFUND OR REPAYMENT I S A MUST IN THE CONCEPT OF BORROWING . 6 5 . SO FAR AS THE DEDUCT IBILITY OF INTEREST ON PERPETUAL BONDS IS CONCERNED, WE HAVE NOTED THAT THE ASS ESSING OFF ICER HAS DISALLOWED THE SAID DEDUCT ION, WHICH AMOUNTED FOR RS 197 .62 CRORES, IN COMPUTATION OF TAXABLE I NCOME, AND HE JUSTIFIED THE SAID ACT ION BY OBSER VING, INTER ALI A , AS FOLLOWS: THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS AS KED TO SHO W CAUSE WHY PERPETUAL BONDS SHOULD NOT BE TREATED AS EQUITY IN NATURE AND CONSEQUENTLY THE INTEREST PAID ON SUCH BONDS SHOULD BE ALLOWED UND ER 36(1)(III) OF THE IT ACT . THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF THE INTEREST COST DEBITED TO THE P&L A /C ON ACCOUNT OF SUCH PERPETUAL BONDS. 12.1 THE ASSESSE E VIDE LETTER DATED 24.03.2018 INTER - ALIA SUBMITTED AS UNDER: - 'THE BANK HAS ISSUED PERPETUAL DEBT INST RUMENTS OVER THE YEARS. THE OUTSTANDING BALANCE OF PERPETUAL DEBT AS ON 31ST MA RCH 2016 W AS AT RS.2212.34 ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 32 OF 37 CRORES. THESE INSTRUMENTS IS CLASSIFIED AS BORR OWING IN BANK'S BALANCE SHEET. THE INTER EST PAID ON THE ABOVE INSTRUMENTS IS PROVIDED IN THE BOOKS AS I NTEREST EXPENSES THE ABOVE ACCOUNTING TREATMENT OF THE INTEREST AND PRESENTATI ON IN BALA NCE SHEET IS IN TUNE WITH THE RBI GUIDELINES AND ACCOUNTING STAND ARD 16 ISSUED BY ICAI ON BORROWING COST . AS SUCH, THE SAME IS ALLOWABLE EXP ENSES.' 12.2 ASSESSEE SUBM ISSION HAS BEEN CONSIDERED. ADMITTEDLY, THE ASSESSEE HAS STATED THAT THE SAID P AYMENT HAP PENS OUT OF DISTRIBUTABLE PROFITS OF PREVIOUS YEAR OR CURRENT YEAR AND THE NATURE OF PAYMENTS IS DIFFERE NT FROM THE INTEREST THAT IS BORROWE D FOR THE PURPOSE OF BUSINE SS WHICH IS ALLOWED U/S 36(1)(III). THEREFORE, THE ASSESSEE STAND IS NOT ACCEPT ABLE. AS P ER DETAILS FURNISHED BY THE ASSESSEE BANK IN ITS REPLY, THE ASSESS EE BANK HAS ISSUED INNOVATIVE PERPETUA L DEBT INSTRUMENTS (IPDI) WHICH QUAL IFY AS TIER I CAPITAL OF BA NK AND BOOK VALUE OF SUCH BONDS, WAS AT RS.2212.34 CRORES ON THE BALANCE SHEET DATE. THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF INTEREST PAID OF RS 1 97 CRORES ON THESE BONDS U/S 36(1)(III ). THE BANK HAS DISCRETION TO EXERCI SE THE CALL OPTION FOR THE SAID BONDS AS PER APPLICABLE GUIDELINES. IT HAS FURTHER BEEN CLAIMED THAT THE I NTEREST PA ID TO THE BONDHOLDERS UNLIKE DIVIDEND INCOME IS NOT EXEMPT AS PER PROVISIONS OF THE ACT AND THE BONDHOLD ERS WOULD HAVE ACCORDINGLY OFFERED T HE SAME TO INCOME IN THEIR RESPECTIVE RETURNS, DISALLOWANCE OF THE SAID INTEREST WOULD RESULT IN DOUBLE TA XATION OF THE SAME INCOME. 12.3 PERPETUAL BONDS OR DEBT INSTRUMENTS ARE IN N ATURE OF DEBT INSTRUMENTS OR BONDS WI TH NO MATURITY DATE. THE RBI GUIDELI NES HAVE ALLOWED TREATING T HE PERPETUAL BOND AS TIER I CAPITAL SUBJECT TO CERTAIN CONDITIONS. THE INVESTOR S DO NOT G ET THE FIGHT TO REDEEM THE BONDS AT ANY GIVEN POINT OF TIME. ONLY T HE ISSUING COMPANY CAN BUY BACK THE B ONDS FROM THE INVESTORS. THEREFORE, EVEN IF SUBSEQUENTLY BORROW ER BUYS BACK THESE BONDS, IT WILL NOT ALTER THE NATURE AND CHARACTER OF THESE B ONDS BECAU SE IT IS THE BORROWER AND NOT THE LENDER WHO HAS EVERY RIGHT IN SUC H BONDS TO REDEEM IT. ONCE THE BOND I S SOLD, THE RIGHTS OF FUTURE INTERES T PASSES TO THE NEW BOND HO LDER. TO SUM UP THE PERPETUAL BONDS ARE QUASI EQUITY AND THEY HAVE FOLLOWING EQ UITY LIKE FEATURES: - PERPETUAL IN NATURE HIGH LOSS ABSORPTION CAPACITY. P ROVISIONS FOR WRITE DOWN OF PRINCIPAL OR CONVERSION TO EQUITY ON TRIGGE R DISCRETIONARY PAY - OUT WITH EXISTENCE OF FULL C OUPON DISCRETION. 12.4 NORMALLY, THE AMOUNT IS NOT SHO WN IN THE BALANCE SHEE T AS DEBT OR BORROWING. IT IS SHOWN BELOW SHARE CAPITAL AN D INTEREST PAYABLE IS NOT CHARGED TO PROFIT AND LOSS ACCOUNT. THE ASSE SSEE COMPANY IN ITS REPLY H AS ALSO ADMITTED THAT THE INTEREST IS PAID OUT OF DISTRIBUTABLE PROFITS OF PREV IOUS YEAR OR CURRENT Y EAR. AS PER THE SECTION 36(1)(III), DEDUCTION IS ALLOWED I N RESPECT OF THE AMOUNT OF INTEREST IN RESPECT OF CAPITAL BORROWED FOR THE BUSINESS AND PROFESSIO N. BEFORE ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 33 OF 37 ALLOWING INTEREST U/S 36(1)(III), THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE AS TO WHETH ER THE ISSUE OF PERPETUAL BOND QUALIFIES AS 'BORROWING' FO R THE PURPOSES OF THE SAID SECTION. 12.5 IN THIS REGARD, REFERENCE M AY BE MADE TO THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PEPSU ROAD TRANSPORT CORPN V CIT, REPORTED IN 130 ITR 18 (P&H), THAT AN ELEMENT OF REFUND OR REPAYMENT IS A MUST IN THE CONCEPT OF BORROWIN G. IF THERE IS NO OBLIGATION TO REFUND THE CAPITAL PROVIDED , INTEREST ON SUCH CAPITAL IS NOT DEDUCTIBLE UNDER SECTION 36(1)(III). THEREFOR E, IN CASE OF PERPETUA L BONDS, WHERE THE LENDER DOES NOT HAVE AUTHORITY TO CLAIM REFUND OF THE AMOUNT GIVEN, THE SAID AMOUNT CANNOT BE HELD AS 'BORROW ING AND HENCE THE INTEREST ON SUCH BONDS WAS NOT ADMISSIBLE AS DEDUCTION U/S 36(1)(III) HENCE THE SAID AMO UNT OF RS.197,62,83,80 0/ - DOES NOT QUALIFY FOR CLAIM UNDER SECTION 36(1)(III) AND ACCORDINGLY DISALLOWED. THEREFORE RS .197,62,83,800/ - CLAIMED AS DEDU CTION IS ADDED BACK TO THE TOTAL INCOME . 6 6 . IN APPEAL, HOWEVER, THE LEARNED CIT(A) REVERSED THE ACTION OF THE ASSESSING OFFIC ER AND ALLOWED THE SAID DED UCTION. WH ILE DOING SO, LEARNED CIT(A) O BSERVED AS FOLLOWS: 13.2 BEFORE THE A.O, THE BANK HAS CLAIM ED THAT IT HAS DISCRETION T O EXERCISE THE CALL OPTION FOR SUCH BONDS AS PER APPLICABLE GUIDELINES. THE APP ELLANT ALSO CLAIMED TH AT THE INTEREST PAID TO THE BOND HOLDERS UNLIKE DIV IDEND INCOME WAS NOT EXEMPT AS PER PROVISION OF THE ACT AND THE BONDHOLDERS A CCORDINGLY HAD OFFERED THE INTEREST RECEIPTS AS THEIR INCOME. THE APPELLANT CLAIMED THAT AS PER RBI GUIDEL INES, THE PERPETUAL BO ND WERE TREATED AS TIER I CAPITAL SUBJECT TO CERTAI N CONDITIONS. THE INVESTORS DO NOT GET THE RIGHT TO REDEEM THE BONDS AT ANY G IVEN POINT OF TIME. ONLY TH E ISSUING COMPANY CAN BUY BACK THE BONDS FROM THE INVESTORS. THEREFORE, EVEN IF SUBSEQUENTLY BORROWER BUYS BACK THESE BONDS, IT WILL NOT ALTER THE NATUR E AND CHARACTER OF THESE BONDS BECAUSE IT IS THE BORROWER AND NOT THE LENDER WHO HAS EVERY RIGHT IN SUCH BONDS TO REDEEM IT. A.O FURTHER MENTIONED THAT THE AMOUNT WAS NOT SHOWN IN THE BALANCE SHEET AS DEBT OR BORROWING. IT WAS SHOWN AS SHARE CAPITAL AND IN TEREST PAYABLE WAS NOT CHARGED TO PROFIT AND LOSS ACCOUNT. ACCORDING TO THE A .O, THE ASSESSEE ALSO ADMIT TED THAT THE INTEREST WAS PAID OUT OF DISTRIBUTABLE PROFITS OF PREVIOUS YEAR OR CURRENT YEAR. AS PER SECTION 36(1)(III), DEDUCTION WAS ALLOWED IN RESPEC T OF THE AMOUNT OF INTEREST IN RESPECT OF CAPITAL BORROWED FOR THE BUSINESS A ND PROFESSION. 13.3 DURING THE COURSE OF APPELLATE PROCEEDINGS, A WRITTEN SUBMISSION WAS FILED WHICH FIND S PLACE IN PARA 5 OF T HIS ORDER. THE APPELLANT HAS SUBMITTED THAT LD. A.O WAS NOT CORRECT IN GIVING THE OBSERVATION THAT THE AMOUNT WAS NOT REFLECTED AS BORROWINGS IN ITS BOOKS OF ACCOUNTS. ACCORDING TO THE APPELLANT, THE SAME WAS SHOWN AS BORROWING IN SCH EDULE IV OF THE ANNUAL REPORT. IN SUPPORT OF ITS CLAIM, A COPY OF THE ANN UAL REPORT WAS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDI NGS. THE APPELLANT FURTHER CLARIFIED THAT THE INTEREST PAID ON SUCH BONDS WAS DEBITED TO P & L A/C UNDER T HE HEAD 'INTEREST EXPE NDITURE'. IT WAS FURTHER CLARIFIED THAT A.O WAS NOT CORRECT IN STATING THAT THE LENDER HAD NO ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 34 OF 37 AUTHORITY TO CLAIM THE REFUNDS. AC CORDING TO THE APPELLANT, T HESE BONDS WERE LISTED IN STOCK EXCHANGE AND THE LENDER HAD CHOICE TO EXIT AT A NY POINT OF TIME BY SE LLING THEM THROUGH STOCK MARKET. THE APPELLANT EMPH ASIZED THAT IN CASE OF SHARE CAPITAL, THE ASSESSEE COMPANY HAD AN OPTION TO D ECLARE OR NOT TO DECLARE DI VIDENDS DEPENDING UPON THE FINANCIAL REQUIREMENT OF THE COMPANY, WHEREAS, A FIX ED INTEREST LIABILITY HAS TO BE PAID BY THE APPELLANT ON SUCH BONDS ANNUA LLY WITHOUT ANY FAILURE. THE APPELLANT FURTHER CONTENDED THAT ON SHARE CAPITA L, DIVIDEND IS PAID OUT OF THE RESERVES WHICH IS PURELY DISCRETIONARY WHETHER TO PAY DIVIDEND IN A PARTICU LAR YEAR OR NOT. ON TH E OTHER HAND, ACCORDING TO THE APPELLANT, ON THESE BONDS FIXED INTEREST HAS TO BE PAID WHETHER THERE IS ANY PROFIT OR NOT. IT WA S ALSO ARGUED THAT ON SHARE CAPITAL, DIVIDEND IS PAID OUT OF RESERVE AND SURPLUS WHICH IS EXEMPTED FROM TA X FOR THE RECIPIENT, B ECAUSE TAX HAS BEEN ALREADY PAID BY THE COMPANY ON SUCH RESERVES AND SURPLUS, WHEREAS INTEREST ON SUCH BONDS IS TAXABLE IN THE H ANDS OF THE RECIPIENT. IN V IEW OF THESE FACTS, IT IS CLEAR THAT LIABILITY OF BANK IN RESPECT TO PERPETUAL BONDS IS TOTALLY DIFFE RENT FROM CAPITAL OF THE BANK, THEREFORE, THE PERPE TUAL BONDS CANNOT BE COMPARED TO THE EQUITY / SHARE CAPITAL OF THE BANKS, HEN CE APPEAL OF THE ASSESSEE O N THIS GROUND IS, ALLOWED. 6 7 . THE ASSESS ING OFFICER IS AGGRIEVED AND IS IN A PPEAL BEFORE US. 6 8 . WE HA VE HEARD THE RIVAL CONTENTIONS, PER USED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6 9 . WE F IND THAT THE SHORT GRIEVANCE OF THE ASSESSING OFFICER IS THAT IT IS INC O RRECT THAT THE PERPETU AL BONDS CANNOT BE COMPARED TO EQUI TY SHARE CAP ITAL OF THE ASSESSEE - PARTICULARLY IN THE LIGHT OF HON BLE PUNJAB & HARYANA H I GH COURT DECISION IN THE CASE OF PEPSU ROAD TRANSPORT CORP LTD VS CIT [(1981)130 ITR 18 (P&H)] WHEREI N IT IS INTER ALIA HELD THAT T HERE IS AN ELE MENT OF REFUND O R REPAYMENT INHERENT IN BORRO WING , AND IN THE LIGHT OF THE FA CT THAT TH ERE IS O ELEMENT OF REFUND OR REPAYMENT INHERENT IN T H E PRESENT ARRANGEMENTS. THE RELATED O BSERVATIONS OF HON BLE HIG H COU RT ARE AS FOLLO WS: THUS, THE SO LE QUESTION FOR DETERMINATION IS : ' WHETHER THE CAPITAL PROVIDED UNDER SECTION 23 OF THE ACT, BY THE CENTRAL GOVT. AS WELL AS T HE STATE GOVT. IS THE CAPIT AL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION?' THE MAIN ARGUMENT OF THE LEARNED COUNSEL IS THAT SINCE THE INTEREST IS PAYABLE THEREO N, AS PROVIDED UNDER SECTION 28 OF THE ACT, THE ASSESSEE IS ENTITLED TO CLAIM THIS DEDUCTION UNDER SECTION 36( 1)(III) OF THE INCOME - TAX ACT. THE WORD 'BORROW' HAS NOT BEEN DENNED IN THE ST ATUTE AND, THEREFORE, ITS DICTIONARY MEANING HAS TO BE LOOKED UP. T HE MEANING OF THE WORD 'BORROW' AS GIVEN IN THE SHORTER OXFORD DICTIONARY (3RD EDN. ), IS 'TO TAKE (A THING) ON SECURITY GIVEN FOR ITS SAFE RETURN. TO TAKE A THING ON CREDIT ON THE UNDERSTAN DING OF RETURNING IT O R AN EQUIVALENT'. REFERENCE IN THIS RESPECT M AY ALSO BE MADE TO CEPT V. BHARTIA ELECTRIC STEEL CO. LT D. [1954] 25 ITR 192 (CAL). IN THIS ALSO, THE QUESTION WAS WHETHER IT WAS 'MONEY HAD AND RECEIVED'; OR 'BORROWED MONEY'. IT WAS HELD THAT THERE HAS TO BE A POSITIVE ACT OF LENDING COUPLED WITH ACCEPTA NCE ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 35 OF 37 BY THE OTHER SIDE OF THE MONEY, AS A LOAN. THUS, IT IS CLEAR THAT AN ELEMENT OF REFUND OR REPAYMENT IS INH ERENT IN THE CONCEPT OF BORROWING. THERE IS NO PROVISION IN THE ACT WHICH CONTE MPLATES THE REPAYMENT OF THE CAPITAL SO PROVIDED UNDER SECTION 23 O F THE ACT. APART FROM THAT, SECTION 23 OF THE ACT PROVI DES THAT THE CENTRAL GOVT. AND THE STATE GOVT. MAY PRO VIDE ANY CAPITAL. IN OTHER WORDS, IT IS NOT BY VIRTUE OF ANY AGREEMENT, ETC., B ETWEEN THE PARTIES, BU T BECAUSE OF THE STATUTORY PROVISION THAT THE GOVERNMENTS ARE OBLIGED TO PROVIDE THE CAPITAL. IT IS U NDER SECTION 26 OF THE ACT THAT THE CORPORATION MAY BO RROW MONEY IN THE OPEN MARKET FOR THE PURPOSE OF RAISING ITS WORKING CAPITAL. T HUS, THE DISTINCTION H AS BEEN MADE IN THE ACT ITSELF BETWEEN THE 'C APITAL PROVIDED' UNDER SECTION 23 AND THE 'CAPITAL BORRO WED' UNDER SECTION 26. IT I S FURTHER CLEAR FROM THE PR OVISIONS OF SECTION 39(2), WHICH READS: 'IN THE EVENT OF A CORPORATION BEING P LACED IN LIQUIDATION, THE ASSETS OF THE CORPORATION, AFTER MEETING THE LIABILITIES, IF ANY, SHALL BE DIVIDED AMONG THE CENT RAL AND THE STATE GOVERNMEN TS AND SUCH OTHER PARTIES, IF ANY, AS MAY HAVE SUBSCRIBED TO THE CAPITAL IN PROPORTION TO THE CONTRIBUTION MADE BY EACH OF THEM TO THE TOTAL CAPITAL OF THE CORPORATION.' TH ERE IS NO OBLIGATION TO REFUND THE CAPITAL PROVIDED BY T HE GOVERNMENTS. IN THIS VIE W OF THE MATTER, THE ' CAPIT AL PROVIDED ' UNDER SECTION 23 OF THE ACT BY THE TWO GOVERNMENTS, CANNOT BE SAID TO BE ' CAPITAL BORROW ED ' AS CONTEMPLATED UNDER SECTION 36(1)(I II) OF THE INCOME - TAX ACT. 70 . WE HAVE NOTED THE STAND OF T HE ASSESSEE THAT THE P ERPET UAL BONDS ISSUED BY THE ASS ESSEE ARE IN NATURE OF BORROWINGS ONLY AS I NTEREST ON THESE BONDS ARE PAID AT P RE FIXED RATE , T HE INT EREST SO PAID IS CLASSIFIED ONLY UNDER SCHEDULE - 15 - INTEREST EXPENDED IN THE FINANCIAL STATEMENTS. FURTHER, INTEREST PAID ON T HESE BONDS ARE ALSO SUBJECT ED TO TDS , AND THAT EVEN THOUGH THE BONDS ARE STATED TO BE PERPETUAL, THE BANK HAS AN OPTION OF ISSUI NG CALL OPTION AFTER A PERIOD OF 10 YEARS. NONE OF THESE S UBMISSIONS, HOWEVER, ADDRESS THE COR E ISSUE REGARDING THE BONDS HAV IN G AN ELEMENT OF REF UND OR R EPAYMENT. HOW THE INTEREST IS SHO WN IN THE BOKS OF ACCOUNTS, AND WHE THER OR NOT THE TAX IS DE DUCTED A T SOURCE WILL NOT GOVERN THE ISSUE OF DEDUCTIBILITY OF THESE AMO UNTS, OR ADDRESSES THE ISSUE RAISE IN THE JUDICIAL PRECEDENT IN QU ESTION. THE JUDICIAL PREC EDENT RELIE D UP ON BY THE REVENUE AUTHORITIES CANNOT SIMPLY BR BRUSHED ASIDE; TH E ISSUE NEED S TO BE AD DRESSED. IN NONE OF THE ORDERS OF THE AUTHORITIES BELOW THE TERMS ON WHICH THE PERPETUAL BONDS HAVE BEEN ISSUED ARE DISCUSSED IN ADEQUAT E DETAIL, AND T HERE IS NO MATERIAL BEFORE US T O COME TO A CATEGO RICAL FINDING ONE WA Y OR THE OTHER . IN THESE CIRCUMSTANC ES, IN OUR CONSI DERED VIEW, THE RIGHT COURSE OF ACTION W ILL BE TO REMIT THE MATTER TO THE FIL E OF THE COMMISSIONER (APPEALS) FOR ADJUDICATION DE NOVO AFTER TAKING ON RECORD ALL THE RELATED MATERIAL FACTS O N RECORD SO FAR AS THE TERMS ON WHICH THE PERPETUAL BONDS ARE CON CERNED AND THE ELEMENT OF REFUND OR REPA YM ENT ARE CONCERNED. AS WE HAVE NOT TAKEN A CALL ON MERITS ON THIS ISSUE, WE MAKE IT CL EAR THAT ALL T HE ASPECTS REMAIN OPEN AND THE ASSESSEE IS AT LIBERTY TO TAKE ANY SUCH PLEA AS HE DEEMS FIT ON THIS I SSUE. THE MATTER THUS RESTORED TO THE FILE OF THE LEARNE D COMMISSIONER (APPEALS) AS SUCH. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 36 OF 37 71 . GROUND NO. 4 IS TH US ALLOWED FOR STATI STICAL PU RPOSES. 7 2 . IN GROUND NO. 5, THE ASS ESSING OFFICER HAS RAISED THE FOLLOWING GRIE VANCE: ON TH E FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING RELIEF THE ASSESSEE RELYING ON THE DECISI ON OF HON'BLE SPEC IAL BENCH OF ITAT DELHI IN THE CASE OF VIREET INVESTMENT (P) LTD., WITHOUT APPRECIATING THE FACTS THAT TH E I SSUE HAS NOT REACHED TO ITS FINALITY AS THE HON'BLE DELHI HIGH COURT IN ITS DECISION IN THE CASE OF GOETZ INDIA LTD., REPORTED IN 361 ITR 505 HELD T HAT WHILE COMPUTING BOOK PR OFIT DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE. HOWEVER, IN ITS LATER JUDGME NT THE HON'BLE DELHI HI GH COURT IN THE CASE OF BHUSHAN STEEL LTD. (ITA NO. 593 & 594/2015) HAS TAKEN A CONTRARY VIEW'. 7 3 . EVEN GOING BY THE GROUND S O RAISED BY THE AS SESSING O FFICER, THE RE IS A CLE AVAGE OF OPINION ON THE ISSUE BY HON BLE NON - JURISDICTIO NAL H I GH COURT , AND THE SPECIAL BENCH DECISION IN THE CASE OF ACIT VS VIREET IN VESTMENTS PVT LTD [(2017) 82 TAXMANN.COM 415 (DEL)] IS IN FAVOUR OF THE ASSESSEE. WHEN DECISION S O F ON JURISDICTIONAL HIGH COURT ARE IN CONFLI CT, WE ARE BOUND TO FOLLOW, TILL T HE TIME HON B LE JURISDI CTIONAL HIGH COURT TAKES A CALL ON THE ISSUE ONE WAY OR THE OTHER, THE DECISION IN FAVOUR OF THE ASSESSEE. THE REASON FOR OUR FOLLOWING THIS PATH IS AS FOLLOWS. IT WILL BE WHOLLY INA PPROPRIATE TO CHOOSE VIEWS OF ONE OF THE HIGH COURT S BASED ON OUR PERCEPTIONS ABOUT REASONABLENESS OF THE RESPECTIVE VIEWPOINTS AS SUCH AN EX ERCISE WILL DE FACTO AMOUNT TO SITTING IN J UDGMENT OVER THE VIEWS OF THE HIGH COURTS SOMETHING DIAMETRICALLY OPPOSE D TO THE VERY BASIC PRINCIP LES OF HIERARCHICAL JUDI CIAL SYSTEM. WE HAVE TO, WITH OUR HIGHEST RESPECT OF BOTH THE HONBLE HIGH CO URTS, ADOPT A N OBJECTIVE CRITERION FOR DECIDING AS TO WH ICH OF THE HONBLE HIGH COURT SHOULD BE FOLLOWED BY US. WE FIND GUIDANCE FROM THE JUDGMENT OF HONB LE SUPREME COURT IN THE MATTER OF CIT V. VEGETABLE PRODUCTS LTD. [( 1972 ) 88 ITR 192 (SC) ] HONBLE SUP REME COURT HAS LAID DOWN A PRINCIPLE THAT 'IF TWO REASON ABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS P RINCIPLE HAS BEEN CONSISTENTLY FOLLOWED BY THE VARIOUS AUTHORITIES AS ALSO BY THE HONBLE SUPREME COURT ITSELF. IT IS IN THIS BACKDROP THAT, WHILE TAKING COGNIZANCE OF THE FACT THAT THERE IS INDEED ONE DECISION OF HON BLE NON - JURISDICTIONAL H I GH COURT , AG AINST THE VIEW TAKEN BY THE SPECIAL BENCH OF THIS TRIBUNAL, WE ARE NEVERTHELESS FOLLOWING ANOTHER DECISION OF THE NON - JURISDICTIONAL HIGH COURT, WHICH IS IN FAVOUR OF THE ASSESSEE ON THE SAME POINT AND WHICH HAS TAKEN THE SAME VIEW AS IS THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENTS (SUP RA ). GIVEN THIS FA CTUAL BACKDROP, I T IS NOW FOR TH E HON BLE JURISDICTIONAL H I GH C OURT TO TAKE A CALL, IN AN APPROPRIATE CASE , ON MERITS ON THIS ISSUE. 72. IN ANY EVENT, THE ISSUE IS DIRECTL Y COVERED BY THE SPECIAL BENC H DECISION AND THERE I S NO WAY, CONTRARY THERETO, BY HON BLE JURISDICTIONAL HIGH COURT , AND THE L EARNED CIT(A), IN THE IMPUGNED ORDER, HAS SIMPLY FOLL OWED THE SAID SPECIAL BENCH DECISION. WE SEE NO INFIRMITY IN THIS APPROACH ON THE GIVE N FACTS . IN THE LIGHT OF THESE DISCUS SIONS , WE APPROVE THE CONCLUSION S ARRIVED AT BY THE LEARN ED CIT( A) AND DECLINE TO INTERFERE IN THE MATTER. 7 4 . GROUND NO. 5 IS THUS DISMISSED. ITA NOS: 1767 AND 2048/MUM/2019 ASSESSMENT YEAR: 2015 - 16 PAGE 37 OF 37 7 5 . GROUND NO. 6 IS GENE RAL IN NATURE AND DOES NO T CALL FOR ANY ADJUDICA TION. 7 6 . IN THE RESULT, THE APPEAL OF THE ASSESSING OFFICER IS PART LY ALLOW ED IN THE TERMS INDICATED A BOVE . 77. TO S UM UP, BOTH THE APPEALS ARE PARTLY ALLOWED IN THE TERMS I N DICATED. P RO NOUNCED IN THE OPEN COURT T OD A Y ON THE 11 TH DAY OF DECEMBER , 202 0. SD/ - SD/ - A MARJ IT SINGH PRAMOD KUMAR ( JUDICIAL MEMBER ) (VIC E PRESIDENT) MUMBAI, DATED THE 11 TH DAY OF DECEMBER , 20 20 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT ( 3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE C OPY ASSISTANT REGISTRAR INC OME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI