DCIT, Circle - 6 Kolkata, Kolkata V. UCO Bank, Kolkata

ITA 197/KOL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4901 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 09-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLICKARJUNA
• Assessee Lawyers: D S DAMLE; AKKAL DUDHWALA
• Keywords: Business income; Depreciation; Double taxation relief; Earning of tax free income; Retrospective amendment; Question of law; Bad and doubtful debts
• Section: 145; 263; 90; 43B; 143(3); 14A; 115JB

Judgement Text

ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 197/KOL/2011 A.Y 2007-08 DCIT, CIRCLE-6, KOLKATA VS. U C O BANK PAN: AAACU 35 61B (APPELLANT) (RESPONDENT) ITA NOS. 1329 & 1102/KOL/2008 A.YS 2003-04 & 2004-05 UCO BANK VS. ACIT, RANGE-6, KOLKATA (APPELLANT/ASSESSEE) (DEPARTMENT/RESPONDENT) ITA NOS. 07, 415 & 2286/KOL/2010 A.YS 2005-06, 06-07 & 07-08 UCO BANK VS. DCIT, RANGE-6, KOLKATA (APPELLANT/ASSESSEE) (DEPARTMENT/RESPONDENT) FOR THE APPELLANT/DEPARTMENT: SHRI G.MALLIKARJANA, CIT, LD.DR FOR THE RESPONDENT/ASSESSEE: S/SHRI D.S DA MLE, FCA AKKAL DUDHWALA, ACA DATE OF HEARING: 09-02-2016 DATE OF PRONOUNCEMENT: 21 -03-20 16 ORDER SHRI M.BALAGANESH, AM : THESE APPEALS ARISE OUT OF THE ORDER OF TH E LEARNED CIT(A), VI, KOLKATA IN APPEAL NO. 60/CIT(A)-VI/06-07/C-6 DATED 27-05-2008 FOR ASST YEAR 2003-04 ; APPEAL NO.121/CIT(A)-VI/06-07/C-6 DATED 13-05-2008 FOR ASST YEAR 2004-05 ; ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 2 APPEAL NO. 300/CIT(A)-VI/07-08/CIR-6 DATED 30-11-2 009 FOR ASST YEAR 2005- 06 ; APPEAL NO. 625/CIT(A)-VI/08-09/CIR-6/KOL DATED 29-12-2009 FOR ASST YEAR 2006-07 ; AND APPEAL NO. 853/CIT(A)/VI/2009-10 /CIR-6/KOL DATED 19-11- 2010 FOR ASST YEAR 2007-08 ; AGAINST THE RESPECTIVE ORDER OF ASSESSMENTS FRAMED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS THE ACT). 2. AS IDENTICAL ISSUES ARE INVOLVED IN THESE YEA RS EXCEPT CHANGE IN FIGURES, THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE FOR THE ASST YEARS 2003-04 AND 2004-05 ARE GENERAL IN NATURE AND HENCE NOT ADJUDICATED HER EIN. 4. DISALLOWANCE OF BAD DEBTS WRITTEN OFF IN RESPECT OF NON- RURAL ADVANCES CLAIMED U/S 36(1)(VII) OF THE ACT GROUNDS 2 & 3 ASST YEAR 2003-04 GROUNDS 2 , 3, 4, 5 & 6 ASST YEAR 2004-05 GROUND 1 OF ASSESSEE APPEAL - ASST YEAR 2007-08 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE CLAIMED DEDUCTION TOWARDS BAD DEBTS WRITTEN OFF U/S 36(1)(VII) OF THE ACT. THE LEARNED AO HELD THAT THE ASSESSEE BEING A BANK IS ENTITLED FOR DEDUCTION TOWARDS PROVISION FO R BAD AND DOUBTFUL ADVANCES IN TERMS OF SECTION 36(1)(VIIA) OF THE ACT AND GRANTIN G DEDUCTION U/S 36(1)(VII) OF THE ACT WOULD BE OVERLAPPING AND WOULD RESULT IN DOUBLE DED UCTION. THIS ACTION OF THE LEARNED AO WAS UPHELD BY THE LEARNED CITA. AGGRIE VED, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE VARIOUS ASSESSMENT YEARS ON VARIO US GROUNDS AS LISTED HEREINABOVE. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 3 4.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEA RNED AR PRODUCED A STATEMENT SHOWING CLAIM OF DEDUCTION U/S 36(1)(VII) AND 36(1) (VIIA) FOR EACH OF THE ASSESSMENT YEARS AS BELOW:- ASST YEAR 2003-04 1) PROVISION CREATED IN THE BOOKS OF ACCOUNTS RS . 224,72,26,320/- 2) DEDUCTION ALLOWED U/S 36(1)(VIIA) BY LEARNED CI T(A) RS. 115,59,63,471/- 3) BAD DEBTS WRITTEN OFF (APART FROM PROVISION CRE ATED FOR THE YEAR) 3A) BAD DEBTS WRITTEN OFF (RELATING TO RURAL BRANCH ES) RS. 21,25,38,302/- 3B) BAD DEBTS WRITTEN OFF (OTHER THAN RURAL ADVANCE S) RS. 132,66,41,596/- ASST YEAR 2004-05 1) PROVISION CREATED IN THE BOOKS OF ACCOUNTS RS . 335,04,07,864/- 2) DEDUCTION ALLOWED U/S 36(1)(VIIA) BY LEARNED CI T(A) RS. 192,27,57,403/- 3) BAD DEBTS WRITTEN OFF (APART FROM PROVISION CRE ATED FOR THE YEAR) 3A) BAD DEBTS WRITTEN OFF (RELATING TO RURAL BRANCH ES) RS. 46,26,28,000/- 3B) BAD DEBTS WRITTEN OFF (OTHER THAN RURAL ADVANCE S) RS. 231,86,13,287/- ASST YEAR 2007-08 1) PROVISION CREATED IN THE BOOKS OF ACCOUNTS RS . 290,23,67,319/- 2) DEDUCTION ALLOWED U/S 36(1)(VIIA) BY LEARNED CI T(A) RS. 290,23,67,319/- 3) BAD DEBTS WRITTEN OFF (APART FROM PROVISION CRE ATED FOR THE YEAR) 3A) BAD DEBTS WRITTEN OFF (RELATING TO RURAL BRANCH ES) RS. 1,31,21,100/- ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 4 3B) BAD DEBTS WRITTEN OFF (OTHER THAN RURAL ADVANCE S) RS. 239,44,04,842/- WE FIND THAT THE ASSESSEE HAD DULY WRITTEN OFF THE DEBTS IN ITS BOOKS OF ACCOUNTS AS MANDATED BY RBI REGULATIONS THROUGH REVERSAL FROM P ROVISION ACCOUNT. THIS AMOUNTS TO ACTUAL WRITE OFF IN ITS BOOKS OF ACCOUNS. WE F IND THAT THIS ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL FOR THE ASST YEARS 1998-99, 1999-2000 , 2001-02 & 2002-03 AND ALSO COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIA N BANK LTD VS CIT REPORTED IN 343 ITR 270 (SC) . THE LEARNED DR FAIRLY CONCEDED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE APEX COURT BUT THE FIGURES STATED BY THE LEARNED AR REQUIRES VERIFICATION AND CONFIRM ATION BY THE LEARNED AO. HENCE IN THESE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT AN D APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIRPLAY, TO SET ASIDE THIS ISSUE TO TH E FILE OF THE LEARNED AO, TO VERIFY THE FIGURES GIVEN BY THE ASSESSEE WITH REGARD TO THE CL AIM OF DEDUCTION U/S 36(1)(VII) OF THE ACT. ACCORDINGLY THE GROUND NOS. 2 & 3 IN ITA NO. 1329/KOL/2008 FOR ASST YEAR 2003-04 ; GROUND NOS. 2 TO 6 IN ITA NO. 1102/KOL/20 08 FOR ASST YEAR 2004-05 AND GROUND NO. 1 IN ITA NO. 2286/KOL/2010 FOR ASST YEAR 2007-08 ARE ALLOWED FOR STATISTICAL PURPOSES. 5. DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL D EBTS CLAIMED U/S 36(1)(VIIA) OF THE ACT IN EXCESS OF PRO VISIONS CREATED IN THE BOOKS GROUND 1 ASST YEAR 2005-06 GROUND 1 - ASST YEAR 2006-07 GROUND 2 OF ASSESSEE APPEAL ASST YEAR 2007-08 THIS ISSUE PERTAINS TO CLAIM OF DEDUCTION TOWARDS P ROVISION FOR BAD AND DOUBTFUL DEBTS AS PER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT IN EXCESS OF PROVISION CREATED IN ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 5 THE BOOKS. IT WAS ARGUED BY THE ASSESSEE THAT THE INTENTION OF THE LEGISLATURE WHILE INSERTING PROVISION U/S 36(1)(VIIA) OF THE ACT AND ITS SCOPE HAS TO BE UNDERSTOOD. IT WAS ARGUED THAT FROM THE PROVISIONS OF SECTION 36(1 )(VIIA) OF THE ACT, IT IS EVIDENT THAT FOR A SCHEDULED BANK IN ORDER TO CLAIM DEDUCTION, T HE ESSENTIAL PRE-REQUISITE IS THE PROVISION FOR BAD AND DOUBTFUL DEBTS MUST BE CREATE D IN RESPECT OF ADVANCES GIVEN IN ITS BOOKS OF ACCOUNTS. THUS, ON CREATION OF SUCH P ROVISION, THE ASSESSEE IS AUTOMATICALLY ENTITLED TO SUCH DEDUCTION I.E AGGREG ATE OF 7.5 % OF TOTAL INCOME AND 10% OF AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. ACCORDING TO LEARNED AR, THUS, IF A PROVISION FOR BAD AND DOUBTF UL DEBTS IS MADE BY A SCHEDULED BANK HAVING RURAL BRANCHES, THE ASSESSEE IS ENTITLE D TO A DEDUCTION WHICH SHOULD NOT BE RESTRICTED TO THE PROVISION FOR BAD AND DOUBTFUL DE BTS MADE IN THE ACCOUNTS BUT IS TO BE ALLOWED AT THE RATE OF 7.5% OF TOTAL ICNOEM AND 10% OF AGGREGATE RURAL ADVANCES MADE BY THE ASSESSEE. IT WAS ARGUED FURTHER THAT SUCH PROVISION HAS BEEN INSERTED SO AS TO PROMOTE RURAL BANKING. IT WAS ARGUED THAT THE LEGI SLATURE HAS PROVIDED THAT EXTENT OF DEDUCTION WHICH IT DEEMS FIT IRRESPECTIVE OF WHETHE R THE CORRESPONDING PROVISION HAS BEEN MADE IN THE BOOKS OR NOT. IN RESPONSE TO THIS , THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. A GGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE VARIOUS ASSESSMENT YEARS ON VARIO US GROUNDS AS LISTED HEREINABOVE. 5.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HOLD THAT THERE CANNOT BE ANY QUESTION OF CONSIDERING CLAIM FOR ANY DEDUCTION U/S 36(1)(VI IA) OF THE ACT IF THERE IS NO PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE AS SESSEE BANK BECAUSE THE CLAUSE (VIIA) STARTS WITH THE PHRASE IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL D EBTS MADE BY . NO DOUBT THAT THE DEDUCTION IS TO BE RESTRICTED TO 7.5% OF TOTAL INCOME AND 10% OF AGGREGATE RURAL ADVANCES, BUT THE RESULT OF THE SUCH WORKINGS CANNOT BE ALLOWED IN EXCESS OF THE PROVISION CHARGED TO PROFI T AND LOSS ACCOUNT FOR THE YEAR. WE FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 6 HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F STATE BANK OF PATIALA VS CIT REPORTED IN (2005) 272 ITR 54 (P&H) ( SUPRA) WHEREIN IT WAS HELD AS UNDER:- A BARE PERUSAL OF THE ABOVE SHOWS THAT THE DEDU CTION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PROVISION MAD E THEREFORE, MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBT EQUAL TO THE AM OUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION THE TRIBUNAL HAS RIGHTLY POINTED OUT THAT THIS ISSUE STANDS FURTHER CLARIFIED FROM THE PROVIS O TO CLAUSE (VII) OF SECTION 36(1) OF THE ACT, WHICH READS AS UNDER: 'PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DE BT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFU L DEBTS ACCOUNT MADE UNDER THAT CLAUSE' THIS ALSO CLEARLY SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE ACCOUNT BOOKS IS NECESS ARY FOR CLAIMING DEDUCTION UNDER SECTION 36(1) (VIIA) OF THE ACT THE TRIBUNAL HAS DISTINGUISHED VARIOUS AUTHORITIES RELIED UPON BY THE ASSESSEE WHEREIN DED UCTIONS HAD BEEN ALLOWED UNDER VARIOUS PROVISIONS WHICH ALSO REQUIRED CREATI ON OF RESERVE AFTER THE ASSESSEE HAD CREATED SUCH RESERVE IN THE ACCOUNT BO OKS BEFORE THE COMPLETION OF THE ASSESSMENT IT HAS BEEN CORRECTLY POINTED OUT TH AT IN ALL THOSE CASES, RESERVES/PROVISIONS HAD BEEN MADE IN THE BOOKS OF A CCOUNT OF THE SAME ASSESSMENT YEAR AND NOT OF THE SUBSEQUENT ASSESSMEN T YEAR IN THE PRESENT CASE, THE ASSESSEE HAS NOT MADE ANY PROVISION IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION, IE, 1985-86, BY MAKING SUPPLEMENTARY ENTRIES AND BY REVISING ITS BALANCE-S HEET THE PROVISION HAS BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR WE ARE, THEREFORE, SATISFIED THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT SINCE THE ASSESSEE HAD MADE A PROVISION OF RS 1,19, 36,000 FOR BAD AND DOUBTFUL DEBTS, ITS CLAIM FOR DEDUCTION UNDER SECTION 36(1) (VIIA) OF THE ACT HAD TO BE RESTRICTED TO THAT AMOUNT ONLY SINCE THE LANGUAGE O F THE STATUTE IS CLEAR AND IS NOT CAPABLE OF ANY OTHER INTERPRETATION, WE ARE SATISFI ED THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR CONSIDERATION BY T HIS COURT THE APPEAL IS, ACCORDINGLY, DISMISSED NO COSTS. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 7 RESPECTFULLY FOLLOWING THE DECISION CITED SUPRA, TH E GROUND NO.1 IN ITA NO. 07/KOL/2010 FOR ASST YEAR 2005-06 ; GROUND NO.1 IN ITA NO. 415/KOL/2010 FOR ASST YEAR 2006-07 AND GROUND NO. 2 IN ITA NO. 2286/KOL/2 010 FOR ASST YEAR 2007-08 ARE DISMISSED. 6. DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED UNDER SECOND PROVISO TO SECTION 36(1)(VIIA) OF THE ACT RS. 84,34,52,800/- GROUND NO. 4 FOR ASST YEAR 2003-04 DURING THE COURSE OF HEARING, THE LEARNED AR STATED THAT THE ASSESSEE IS NOT WILLING TO PRESS THIS GROUND. HENCE THE GROUND NO. 4 RAISED B Y THE ASSESSEE IN ITA NO. 1329/KOL/2008 IS DISMISSED AS NOT PRESSED. 7. DISALLOWANCE OF PRIOR PERIOD EXPENSES RS. 8,09 ,20,734/- GROUND NO. 5 FOR ASST YEAR 2003-04 DURING THE COURSE OF HEARING, THE LEARNED AR STATED THAT THE ASSESSEE IS NOT WILLING TO PRESS THIS GROUND. HENCE THE GROUND NO. 5 RAISED B Y THE ASSESSEE IN ITA NO. 1329/KOL/2008 IS DISMISSED AS NOT PRESSED. 8. DISALLOWANCE U/S 14A OF THE ACT GROUND NO.6 FOR ASST. YEAR 2003-04 GROUND NOS. 7 & 8 FOR ASST. YEAR 2004-05 GROUND NO. 2 FOR ASST. YEAR 2005-06 ADDITIONAL GROUNDS 1 TO 3 FOR ASST. YEAR 2007 -08 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE HAD DERIVED DIVIDEND INCOME FROM SHARES HELD AS STOCK IN TRADE AND INTEREST INCOME O UT OF TAX FREE BONDS. THE ASSESSEE CLAIMED THAT IT HAD NOT INCURRED ANY EXPENDITURE FO R THE PURPOSE OF EARNING THESE EXEMPT INCOMES AND THEREFORE OBJECTED TO THE DISALL OWANCE U/S 14A OF THE ACT. IT WAS ALSO FURTHER ARGUED BY THE ASSESSEE THAT THE SHARES WERE NOT HELD AS INVESTMENTS FOR THE ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 8 PURPOSE OF EARNING DIVIDEND INCOME (WHICH IS EXEMPT ) AND INSTEAD THE SAME WERE HELD AS STOCK IN TRADE, WHEREIN THE PROFIT DERIVED ON SA LE OF SUCH SHARES WOULD ONLY RESULT IN TAXABLE INCOME AND NOT EXEMPT INCOME. THE LEARNED AO HOWEVER MADE DISALLOWANCE U/S 14A OF THE ACT WHICH WAS ALSO CONF IRMED BY THE LEARNED CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE VARIOUS ASSESSMENT YEARS ON VARIOUS GROUNDS AS LISTED HEREINABOVE. 8.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEA RNED AR ARGUED THAT THE HONBLE APEX COURT IN ASSESSEES OWN CASE REPORTED IN (1999 ) 240 ITR 355 (SC) HAD HELD THAT THE ASSESSEE HAS BEEN HOLDING THE SHARES HELD AS ST OCK IN TRADE AND HAS BEEN VALUING THE SAME AT COST OR MARKET VALUE WHICH IS LOWER FOR SEV ERAL DECADES. BASED ON THIS FINDING BY THE HONBLE APEX COURT, HE ARGUED THAT T HE SHARES WERE NOT HELD BY THE ASSESSEE WITH AN INTENTION TO EARN DIVIDEND INCOME AND INSTEAD THE SAME WERE HELD ONLY AS STOCK IN TRADE IN ORDER TO MAKE BUSINESS PR OFITS OUT OF THE SAME. ACCORDINGLY, HE ARGUED THAT THE PRIMARY INTENTION BEHIND INTRODU CTION OF SECTION 14A OF THE ACT WOULD NOT GET SATISFIED AND HENCE DISALLOWANCE CONT EMPLATED THEREON WOULD NOT BE APPLICABLE TO THE ASSESSEE HEREIN. IN RESPONSE TO THIS, THE LEARNED DR ARGUED THAT THE DISALLOWANCE U/S 14A OF THE ACT WOULD BE APPLICABLE TO THE ASSESSEE AS THE SAID SECTION DOES NOT BIFURCATE BETWEEN AN ASSESSEE HOLDING THE SHARES AS INVESTMENTS OR AS STOCK IN TRADE. WE ARE IN COMPLETE ARGUMENT WITH THE LEAR NED DR IN THIS REGARD. WE FIND THAT THE DIVIDEND INCOME WHETHER EARNED FROM SHARES HELD AS INVESTMENTS OR AS STOCK IN TRADE, STILL RETAINS THE CHARACTER OF EXEMPT INCOME AND ACCORDINGLY THE PROVISIONS OF SECTION 14A WOULD HAVE TO BE INVOKED THEREON. HEN CE THE FINDING GIVEN BY THE HONBLE SUPREME COURT IN ASSESSEES OWN CASE WITH REGARD TO THE STATUS OF THE ASSESSEE DOES NOT SUPPORT/ ADVANCE THE CASE OF THE ASSESSEE IN THE CONTEXT OF MAKING DISALLOWANCE U/S 14A OF THE ACT. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 9 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD REPORTED I N 328 ITR 81 (BOM) , WE HOLD THAT THE PROVISIONS OF RULE 8D OF THE IT RULES , 1962 CANNOT BE MADE APPLICABLE FOR ASST YEARS PRIOR TO ASST YEAR 2008-09. HOWEVE R, IS NOT IN DISPUTE THAT THE ASSESSEE HAD DERIVED TAXABLE INCOME AS WELL AS TAX FREE INCOME AND INCURRED EXPENDITURE FOR DERIVING BOTH THE INCOMES AND HENCE DISALLOWANCE IS DEFINITELY WARRANTED IN TERMS OF SECTION 14A WHICH IS BROUGHT IN THE STATUTE BOOK WITH RETROSPECTIVE EFFECT FROM 1.4.1962. THE DISALLOWA NCE HAD TO BE MADE ONLY ON AN ESTIMATED BASIS WITH REGARD TO THE EXPENDITURE INCU RRED FOR THE PURPOSE OF EARNING TAX FREE INCOME. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS M/S R.R.SEN & BROTHERS P LTD IN GA NO. 3019 OF 2012 IN ITAT NO. 243 OF 2012 DATED 4.1.2013 HAD HELD AS UNDER:- THE ASSESSEE DID NOT SHOW ANY EXPENDITURE INCURRE D BY HIM FOR THE PURPOSE OF EARNING THE MONEY WHICH IS EXEMPTED UNDE R INCOME TAX. THE TRIBUNAL HAS COMPUTED EXPENDITURE AT 1% OF SUCH DIV IDEND INCOME, WHICH, ACCORDING TO THEM, IS THE THUMB RULE APPLIED CONSIS TENTLY. WE FIND NO REASON TO INTERFERE. THE APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT (SUPRA), WE DIRECT THE LEARNED AO TO DISALLOW 1% OF EXEMPT INCO ME UNDER THIS ISSUE AND ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE TO THE FILE OF LEARNED AO TO MAKE ADDITION AS DIRECTED ABOVE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED FOR STATISTICAL PURPOSES . 9. EXCLUSION OF PROFIT ON SALE OF INVESTMENT AND I NCLUSION OF PROFIT / LOSS AS PER INVESTMENT TRADING ACCOUNT RS. 344,84,22,513/- GROUNDS 7 & 8 IN ASST YEAR 2003-04 ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 10 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE CLAIMED EXCLUSION OF PROFIT ON SALE OF INVESTMENTS AMOUNTING TO RS. 344,84,22,513/- AS WEL L AS DEDUCTION FOR LOSS ON SALE OF INVESTMENT AMOUNTING TO RS. 115,28,84,687/-. THE ASSESSEE SUBMITTED THAT IT HAS BEEN TREATING ALL THE INVESTMENTS AS STOCK IN TRADE FOR INCOME TAX PURPOSES AND THE RESULTANT PROFIT / LOSS FROM BUYING AND SELLING OF THESE SECU RITIES HAS BEEN OFFERED TO TAX AS BUSINESS INCOME. IT WAS ALSO ARGUED THAT THE INVE STMENTS AT THE END OF THE YEAR ARE VALUED AT THE LOWER OF COST OR MARKET PRICE CONSIST ENTLY OVER SEVERAL DECADES AND THIS METHOD OF VALUATION AND THE STATUS OF THE ASSESSEE HOLDING INVESTMENTS AS STOCK IN TRADE HAD BEEN APPROVED BY THE HONBLE APEX COURT IN ASSESSEES OWN CASE REPORTED IN 240 ITR 355 (SC) AND ANY PROFIT / LOSS ARISING OUT OF THE SAID VALU ATION AT THE END OF THE YEAR HAS BEEN CONSIDERED IN THE BOOK S OF ACCOUNTS. IT WAS ARGUED THAT HOWEVER, FOR THE PURPOSE OF INCOME TAX VALUATION OF INVESTMENTS, AN INVESTMENT TRADING ACCOUNT IS PREPARED IN WHICH ALL THE SECURI TIES ARE TREATED AS STOCK IN TRADE AND RESULTANT FIGURE OF THE TRADING ACCOUNT HAS BEEN OF FERED TO TAX. THE PROFIT / LOSS ON SALE OF INVESTMENTS AS PER BOOKS AND THE DEPRECIATION ON INVESTMENTS AS PER BOOKS ARE ADDED BACK IN THE COMPUTATION STATEMENT FOR THE PUR POSE OF INCOME TAX. IT WAS ARGUED FURTHER THAT THE STAND OF THE ASSESSEE HAS BEEN ACC EPTED BY THE REVENUE FROM ASST YEAR 2004-05 ONWARDS AND NO ADDITION HAS BEEN MADE ON TH IS ACCOUNT BY THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPP ORTED THE ORDERS OF THE LOWER AUTHORITIES. 9.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE LEARNED AO HAD ACCEPTED TO THE STAND OF THE ASSESSEE FROM ASST YEAR 2004-05 ONWARDS AND HAD NOT MADE ANY ADDITION WITH REGARD TO THE IMPUGNED ISSUE. WE FI ND THAT THE PRESENT ISSUE HAS BEEN CONSIDERED BY THE HONBLE APEX COURT IN ASSESSEES OWN CASE REPORTED IN 240 ITR 355 (SC). THE FACTS BEFORE THE HONBLE APEX COURT WERE THAT THE ASSESEE BANK FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, CLAIMED A NOTIONAL LOSS OF RS. 7.45 CRORES ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 11 ON ACCOUNT OF CLOSING STOCK OF SECURITIES AT MARKET VALUE. SINCE THE REVENUE HAD ACCEPTED THE SAME METHOD FOR OVER LAST 30 YEARS, TH E IAC ACCEPTED THE SAME BUT THE COMMISSIONER PROCEEDED FOR REVISION U/S 263 OF THE ACT. HE HELD THAT THE ASSESSEE BANK HAD NO RIGHT TO CALCULATE PROFIT AND LOSS ARIS ING OUT OF INVESTMENT TRADING ACCOUNT AS IT HAD EXCLUDED THE SAME FROM THE PREPARATION OF ITS FINAL ACCOUNTS. HE HELD THAT UNLESS A BANK ITSELF ACCEPTED THE POSITION BY INCOR PORATING SUCH LOSS / PROFIT IN THE FINAL ACCOUNTS, IT WOULD HAVE NO RIGHT TO PUT ACROSS SUCH HYPOTHETICAL LOSS FOR THE PURPOSE OF INCOME TAX ASSESSMENT. ON APPEAL, HOWEVER, THE TRI BUNAL SET ASIDE THE ORDER OF THE COMMISSIONER AND ACCEPTED THAT OF THE IAC. ON THE REVENUES APPEAL, THE HIGH COURT, REJECTING THE TRIBUNALS ORDER, AFFIRMED THE ORDER OF THE COMMISSIONER. HELD :- WHAT IS TAXABLE UNDER THE ACT IS THE REA11Y ACCR UED OR ARISEN INCOME. ON THE BASIS OF THE METHOD OF ACCOUNTANCY R EGULARLY EMPLOYED BY THE ASSESSEE, THE REAL INCOME IS POINTED OUT IN {H E INCOME-TAX RETURN SUBMITTED BY THE ASSESSEE. THIS CANNOT BE IGNORED B Y HOLDING THAT IN A BALANCE SHEET WHICH IS REQUIRED 10 BE STATUTORILY M AINTAINED IN A PARTICULAR FORM, MARKET VALUE OF THE SHARES AND SECURITIES IS NOT MENTIONED OR IS MENTIONED ILL BRACKETS. FOR THE PURPOSE OF INCOME-LAX WHICHEVER METHOD IS A DOPTED BY THE ASSESSEE, A TRUE PICTURE 0F THE PROFITS AND GAINS, THAT IS TO SAY, THE REAL INCOME IS TO BE DISCLOSED. FOR DETERMINING THE REAL INCOME, THE ENTRIES IN A BALANCE SHEET REQUIRED TO BE MAINTAINED IN THE STAT UTORY FORM MAY NOT BE DECISIVE OR CONCLUSIVE. IN SUCH CASES, IT IS OPEN T O THE ITO AS WELL AS THE ASSESSEE TO POINT OUT THE TRUE AND PROPER INCOME W HILE SUBMITTING THE INCOME-TAX RETURN. FOR REASONS, THE CENTRAL GOVERNMENT, IN EXERCISE OF THE POWERS CONFERRED BY SECTION 53 OF THE BANKING REGULATION A CT, AND ON THE RECOMMENDATION OF THE RBI, PERMITTED THE ASSESSEE N OT TO DISCLOSE THE MARKET VALUE OF ITS INVESTMENT IN THE BALANCE SHEET REQUIR ED TO BE MAINTAINED AS PER THE STATUTORY FORM. BUT AS THE ASSESSEE WAS MAINTAI NING ITS ACCOUNTS ON MERCANTILE SYSTEM, IT WAS ENTITLED TO SHOW ITS REAL INCOME BY TAKING INTO ACCOUNT THE MARKET VALUE OF SUCH INVESTMENTS IN ARR IVING AT THE REAL TAXABLE INCOME. ON THAT BASIS, THEREFORE, THE ASSESSING OFF ICER HAD TAXED THE ASSESSEE. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 12 FROM THE VARIOUS DECISIONS OF THE SUPREME COURT, IT CAN BE HELD THAT (1) FOR VALUING THE CLOSING STOCK, IT IS OPEN TO T HE ASSESSEE TO VALUE IT AT COST OR MARKET VALUE, WHICHEVER IS LOWER; (2) IN THE BAL ANCE SHEET, IF THE SECURITIES AND SHARES ARE VALUED AT COST BUT FROM THAT NO FIRM CONCLUSION CAN HE DRAWN, A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE OF HIS TRADE HIS OWN METHOD OF KEEPING ACCOUNTS AND, JAR THAT PURPOSE, TO VALUE ST OCK-IN-TRADE EITHER AT COST OR MARKET PRICE; (3) A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY T HE DEPARTMENTAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING ACCOUNTS OR OF VALUATION; (4) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICABLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT. IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN THE R ECOGNISED LIMITS; (5) WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATIO N; (6) UNDER SECTION 145 OF THE ACT, IN A CASE WHERE ACCOUNTS ARE CORRECT AND COMPL ETE HUT THE METHOD EMPLOYED IS SUCH THAT IN THE OPINION OF THE ITO THE INCOME CANNOT BE PROPERLY DEDUCED THEREFROM, THE COMPUTATION SHALL B E MADE IN SUCH MANLIER AND ON SUCH BASIS AS THE ITO MAY DETERMINE. THE ASSESSEE-BANK WAS VALUING THE STOCK-IN-TRADE AT COST FOR THE PURPOSE OF STATUTORY BALANCE SHEET AND FOR THE INCO ME-TAX RETURN, VALUATION WAS AT COST OR MARKET VALUE, WHICHEVER WAS LOWER. T HAT PRACTICE WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS NO JUSTIFI ABLE REASON FOR NOT ACCEPTING THE SAME. PREPARATION OF THE BALANCE SHEE T IN ACCORDANCE WITH THE STATUTORY PROVISION WOULD NOT DISENTITLE THE ASSESS EE IN SUBMITTING THE INCOME-TAX RETURN ON THE REAL TAXABLE INCOME IN ACC ORDANCE WITH THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE CONSISTENTLY AND REGULARLY. THAT COULD NOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES, O N THE GROUND THAT THE ASSESSEE WAS MAINTAINING BALANCE SHEET IN THE STATU TORY FORM ON THE BASIS OF THE COST OF THE INVESTMENTS. IN SUCH CASES, THERE IS NO QUESTION OF FOLLOWING TWO DIFFERENT METHODS JAR VALUING ITS STOCK-IN-TRAD E (INVESTMENTS) BECAUSE THE BANK WAS REQUIRED TO PREPARE BALANCE SHEET IN THE P RESCRIBED FORM AND IT HAD NO OPTION TO CHANGE IT. FOR THE PURPOSE OF INCO ME-TAX AS STATED EARLIER, WHAT IS TO BE TAXED IS THE REAL INCOME WHICH IS TO BE DEDUCED ON THE HAS IS OF THE ACCOUNTING SYSTEM REGULARLY MAINTAINED BY THE ASSESSEE AND THAT WAS DONE BY THE ASSESSEE IN THE INSTANT CASE. THEREFORE , THE ORDER OF THE HIGH COURT WAS TO BE SET ASIDE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN ASSESSEES OWN CASE (SUPRA) , WE ALLOW THE GROUNDS 7 & 8 FOR ASST YEAR 2003-04 RAISED BY THE ASSESSEE. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 13 10. TAXABILITY OF DIVIDEND RECEIVED FROM BANK OF B ARHAD, MALAYSIA IN TERMS OF DTAA BETWEEN INDIA AND MALAYSI A GROUND NO. 9 OF ASST YEAR 2004-05 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE DERIVED DIVIDEND INCOME OF RS. 16,17,000/- FROM BANK OF BARHAD , MALAYSIA AND CLAI MED EXEMPTION FOR THE SAME. THE LEARNED AO DISALLOWED THE SAME ON THE GROUND THAT T HE SAID DIVIDEND IS RECEIVED FROM FOREIGN COMPANY AND EXEMPTION U/S 10 (34) READ WITH SECTION 1150 OF THE ACT IS APPLICABLE ONLY FOR DIVIDEND RECEIVED FROM DOMESTIC COMPANIES. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE ARGUED THAT IT IS ENJOYING BENEFIT OF DOUBLE TAXATION RELIEF AS PER DTAA ENTERED INTO BETWEEN INDIA AND M ALAYSIA AND ALSO PLEADED THAT THE SAID EXEMPTION HAS BEEN GRANTED TO THE ASSESSEE BY THE REVENUE IN THE EARLIER YEARS AND THERE IS NO REASON TO SHIFT THE STAND DURING THE AS SESSMENT YEAR UNDER APPEAL. NOT CONVINCED WITH THE ARGUMENTS OF THE ASSESSEE, THE L EARNED CITA UPHELD THE ADDITION MADE BY THE LEARNED AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 10.1. THE LEARNED AR ARGUED THAT AS PER THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BETWEEN INDIA AND MALAYSIA, THE RIGHT TO TAX THE DIVIDEND INCOME FOR COMPANY REGISTERED IN MALAYSIA WAS VESTED IN THE HA NDS OF MALAYSIA AND ACCORDINGLY THE SAME IS NOT TAXABLE IN INDIA. HE FAIRLY STATED THAT AS PER THE NEW TREATY BETWEEN INDIA AND MALAYSIA, DIVIDEND IS TAXABLE IN BOTH THE STATES AND ALSO SUBJECT TO CLAIM OF TAX CREDIT IN TERMS OF SECTION 91 OF THE ACT. H E FURTHER ARGUED THAT THE NEW TREATY BETWEEN INDIA AND MALAYSIA WAS NOTIFIED VIDE NOTIFI CATION NO. GSR 667(E) DATED 12.10.2004 AND ACCORDINGLY THE SAME IS NOT APPLICAB LE FOR ASST YEAR 2004-05. IN RESPONSE TO THIS, THE LEARNED DR ARGUED THAT THE TA XABILITY OF FOREIGN DIVIDEND INCOME IS TO BE CONSTRUED AS RETROSPECTIVE IN OPERATION A S THE NEW TREATY HAD COME INTO FORCE ON 14.8.2003 AND HENCE IS APPLICABLE FOR ASST YEAR 2004-05. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 14 10.2. WE HAVE HEARD THE RIVAL SUBMISSIONS . WE HA VE GONE THROUGH THE NEW TREATY BETWEEN INDIA AND MALAYSIA AND THE RELEVANT ARTICLE OF COMING INTO FORCE OF THIS NEW TREATY IS DEALT IN ARTICLE 28. FOR THE SAKE OF CO NVENIENCE, THE PREAMBLE TO THE TREATY AND ARTICLE 28 ARE REPRODUCED HEREUNDER:- AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREV ENTION OF FISCAL EVASION WITH MALAYSIA WHEREAS THE ANNEXED AGREEMENT BETWEEN THE GOVERNMEN T OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF MALAYSIA FOR THE AVO IDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME HAS COME INTO FORCE ON THE 14 TH AUGUST, 2003, ON THE NOTIFICATION BY BOTH THE CONTRACTING STATES TO EACH OTHER, UNDER AR TICLE 28 OF THE SAID AGREEMENT, OF THE COMPLETION OF THE PROCEDURES REQU IRED BY THEIR RESPECTIVE LAWS FOR BRINGING INTO FORCE OF THE SAID AGREEMENT. NOW, THEREFORE, IN EXERCISE OF THE POWERS CONFERRED BY SECTION 90 OF THE INCOME-TAX ACT, 1961 (43 OF 1961) , THE CENTRAL GOV ERNMENT HEREBY DIRECTS THAT ALL THE PROVISIONS OF THE SAID AGREEME NT SHALL BE GIVEN EFFECT TO IN THE UNION OF INDIA. NOTIFICATION ; NO. GSR 667(E), DATED 12-10-2004. ARTICLE 28 ENTRY INTO FORCE 1. THE CONTRACTING STATES SHALL NOTIFY EACH OTHER I N WRITING, THROUGH DIPLOMATIC CHANNELS, OF THE COMPLETION OF THE PROCE DURES REQUIRED BY THE RESPECTIVE LAWS FOR THE ENTRY INTO FORCE OF THIS AG REEMENT. 2. THE AGREEMENT SHALL ENTER INTO FORCE THIRTY DAYS AFTER THE RECEIPT OF THE LATTER OF THE NOTIFICATIONS REFERRED TO IN PARAGRAP H 1 OF THIS ARTICLE. 3. THE PROVISIONS OF THIS AGREEMENT SHALL HAVE EFFE CT: (A) IN MALAYSIA : (I) IN RESPECT OF MALAYSIAN TAX, OTHER THAN PETROLE UM INCOME TAX, TO TAX CHARGEABLE FOR ANY YEAR OF ASSESSMENT BEGINNING ON OR AFTER THE FIRST DAY OF ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 15 JANUARY IN THE CALENDAR YEAR FOLLOWING THE YEAR IN WHICH TIS AGREEMENT ENTERS INTO FORCE; (II) IN RESPECT OF PETROLEUM INCOME TAX, TO TAX CHA RGEABLE FOR ANY YEAR OF ASSESSMENT BEGINNING ON OR AFTER THE FIRST DAY OF J ANUARY OF THE SECOND CALENDAR YEAR FOLLOWING THE YEAR IN WHICH THIS AGRE EMENT ENTERS INTO FORCE; AND (B) IN INDIA: IN RESPECT OF INCOME IN ANY FISCAL YEAR BEGINNING O N OR AFTER THE FIRST DAY OF APRIL NEXT FOLLOWING THE CALENDAR YEAR IN WHICH THE AGREEMENT ENTERS INTO FORCE. 4. THE AGREEMENT BETWEEN THE GOVERNMENT OF MALAYSIA AND THE GOVERNMENT OF INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND P REVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT N EW DELHI , INDIA ON THE 25 TH DAY OF OCTOBER, 1976 SHALL CEASE TO HAVE EFFECT WH EN THE PROVISIONS OF THIS AGREEMENT BECOME EFFECTIVE IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 3 . FROM THE ABOVE, IT COULD BE SAFELY BE CONCLUDED THA T THE NEW TREATY IS EFFECTIVE ONLY FROM 1.4.2004 AND HENCE NOT APPLICABLE FOR ASST YEA R 2004-05. ACCORDINGLY, FOR ASST YEAR 2004-05, THE TAXABILITY OF FOREIGN DIVIDEND IN COME WOULD BE GOVERNED ONLY BY THE OLD TREATY ENTERED INTO ON 25.10.1976. WE FI ND THAT THE HONBLE APEX COURT HAD AN OCCASION TO ADDRESS THE TAXABILITY OF FOREIGN DI VIDEND INCOME IN THE CASE OF DCIT VS TORQOUISE INVESTMENT & FINANCE LTD & ORS REPORTE D IN (2008) 300 ITR 1 (SC) , WHEREIN IT WAS HELD THAT DIVIDEND INCOME DERIVED BY THE ASSESSEE FROM A COMPANY IN MALAYSIA IS NOT LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE IN INDIA BY VIRTUE OF PROVISIONS OF DTAA BETWEEN INDIA AND MALAYSIA. R ESPECTFULLY FOLLOWING THE SAID JUDICIAL PRECEDENT AND IN VIEW OF THE FACT THAT THE NEW TREATY IS NOT APPLICABLE FOR ASST YEAR 2004-05, WE HOLD THAT THE DIVIDEND RECEIVED FR OM FOREIGN COMPANY IN MALAYSIA BY THE ASSESSEE IS NOT LIABLE TO BE TAXED IN INDIA. ACCORDINGLY, THE GROUND NO. 9 RAISED BY THE ASSESSEE FOR ASST YEAR 2004-05 IS ALLOWED. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 16 11. DISALLOWANCE OF LOSS ON AMORTISATION OF INVESTM ENT RS. 107,78,30,185/- GROUND NO. 3 OF ASST YEAR 2007-08 DURING THE COURSE OF HEARING, THE LEARNED AR STATED THAT THE ASSESSEE IS NOT WILLING TO PRESS THIS GROUND. HENCE THE GROUND NO. 3 RAISED B Y THE ASSESSEE IN ITA NO. 2286/KOL/2010 IS DISMISSED AS NOT PRESSED. 12. ADDITION TOWARDS GAIN ON ACCOUNT OF SECURITIZAT ION RS. 2,81,00,000/- GROUND NO. 4 OF ASST YEAR 2007-08 DURING THE COURSE OF HEARING, THE LEARNED AR STATED THAT THE ASSESSEE IS NOT WILLING TO PRESS THIS GROUND. HENCE THE GROUND NO. 4 RAISED B Y THE ASSESSEE IN ITA NO. 2286/KOL/2010 IS DISMISSED AS NOT PRESSED. 13. DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT U/S 43B OF THE ACT RS. 30,75,22,434/- GROUND NO. 5 OF ASST YEAR 2007-08 THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE MADE PROVISION FOR LEAVE ENCASHMENT IN ITS BOOKS OF ACCOUNTS AND CLAIMED THE SAME AS DEDUC TION. THE LEARNED AO INVOKED THE PROVISIONS OF SECTION 43B(F) OF THE ACT AND DIS ALLOWED THE SAME ON THE GROUND THAT THE SAME IS NOT PAID BY THE ASSESSEE. THIS ACTION OF THE LEARNED AO WAS CONFIRMED BY THE LEARNED CITA ON FIRST APPEAL. AGGRIEVED, THE AS SESSEE IS IN APPEAL BEFORE US . 13.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD VS UNION OF INDIA REPORTED IN 292 ITR 470 (CAL). WE FIND THAT THE REVENUE HAD ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 17 PREFERRED SPECIAL LEAVE PETITION BEFORE THE SUPREME COURT AGAINST THE JUDGEMENT OF CALCUTTA HIGH COURT. THE APEX COURT IN SPECIAL LEA VE TO APPEAL (CIVIL) CC 12060 / 2008 DATED 8.9.2008 HAD HELD AS UNDER:- THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING O RDER. ISSUE NOTICE. IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNE D JUDGEMENT, UNTIL FURTHER ORDERS. LATER THE HONBLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (CIVIL) NO(S). CC 22889 / 2008 DATED 8.5.2009 HAD HELD AS UNDER:- THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING O RDER DELAY CONDONED. LEAVE GRANTED. PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APP EAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHI CH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTERE ST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RE COVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL , PAY TAX AS IF SECTION 43B(F) IS ON T HE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN I TS RETURNS. HENCE FROM THE AFORESAID SUPREME COURT JUDGEMENT, I T COULD BE INFERRED THAT THE HONBLE SUPREME COURT HAD NOT STAYED THE JUDGEMENT OF THE CALCUTTA HIGH COURT DURING LEAVE PROCEEDINGS. HENCE, WE DEEM IT FIT A ND APPROPRIATE , IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THIS ISSUE TO T HE FILE OF THE LEARNED AO TO PASS ORDERS BASED ON THE OUTCOME OF THE MAIN APPEAL ON MERITS B Y THE HONBLE SUPREME COURT AS STATED SUPRA. ACCORDINGLY, THE GROUND NO. 5 RAISE D BY THE ASSESSEE IN ITA NO. 2286/KOL/2010 FOR ASST YEAR 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 18 14. GRANTING RELIEF U/S 91 OF THE ACT IN RESPECT O F MAT PAYABLE U/S 115JB OF THE ACT RS. 2,55,47,497/- GROUND NO. 3 OF REVENUES APPEAL FOR ASST YEAR 2007 -08 THE BRIEF FACTS OF THIS ISSUE IS THAT ASSESSEE CLAI MED RELIEF U/S 91 OF THE ACT FOR RS. 2,55,47,497/- WHILE COMPUTING TAX LIABILITY ON ACCO UNT OF TAXES PAID OUTSIDE INDIA IN RELATION TO ITS OPERATIONS IN HONGKONG. THE LEARNE D AO DISALLOWED THE CLAIM ON THE CONTENTION THAT THE SAID RELIEF IS AVAILABLE ONLY F OR TAXES PAID UNDER NORMAL PROVISIONS OF THE ACT AND NOT WHEN TAXES ARE PAID U/S 115JB OF THE ACT. THIS ACTION WAS NOT ENDORSED BY THE LEARNED CITA WHO DIRECTED THE LEARN ED AO TO GRANT RELIEF FOR THE SAME. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US. 14.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE PROVISIONS OF SECTION 91 OF THE ACT DID NOT DISTINGUISH BETWEEN NORMAL PROVISIO NS AND PROVISIONS OF SECTION 115JB OF THE ACT WHEN IT COMES TO CLAIMING RELIEF U/S 91 OF THE ACT IN RESPECT OF TAXES PAID FOR INCOME EARNED IN ANOTHER COUNTRY WITH WHICH DTAA DO ES NOT EXIST. WE FIND THAT IT IS CLEARLY SPECIFIED IN SECTION 91 OF THE ACT THAT IF THE INCOME IN RESPECT OF WHICH THE ASSESSEE HAS PAID INCOME TAX IN ANY COUNTRY, WITH W HICH NO AGREEMENT U/S 90 EXISTS, AND SUCH INCOME IS TAXABLE IN INDIA, THE ASSESSEE SHALL BE ENTITLED TO RELIEF U/S 91 FROM THE INDIAN INCOME TAX PAYABLE. WE ARE IN AGREEMENT WIT H THE ARGUMENT OF THE LEARNED AR IN THIS REGARD AND ALSO ON THE RELIANCE PLACED ON T HE CO-ORDINATE BENCH DECISION OF MUMBAI TRIBUNAL IN THE CASE OF HINDUSTAN CONSTRUCTI ON CO LTD VS CIT REPORTED IN 25 SOT 359 (MUM ITAT) IN FAVOUR OF THE ASSESSEE, WHEREIN IT WAS HELD :- 6.4 IN THE LIGHT OF THE ABOVE DISCUSSION, WE CONS IDER THE FACTS OF THE CASE UNDER CONSIDERATION. THERE IS NO DISPUTE THAT THE A SSESSEE IS ENTITLED TO RELIEF UNDER SECTION 91 OF THE ACT. THE SCHEME OF T HE ACT IS THAT SECTION 115JB IS APPLICABLE WHEREIN THE CASE OF AN ASSESSEE , BEING A COMPANY, THE INCOME-TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR IS LESS THAN 7.5 PER C ENT OF ITS BOOK PROFIT, 7.5 PER CENT BOOK PROFIT SHALL BE DEEMED TO BE THE TOTA L INCOME OF THE ASSESSEE. ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 19 THIS CAN BE EXPLAINED BY AN ILLUSTRATION. SUPPOSE A N ASSESSEE HAVING INCOME IN INDIA IS 'X ' AND INCOME OUTSIDE INDIA IS 'Y'. IN NORMAL CALCULATIONS OF INCOME FROM SECTIONS 2!! TO 430, TH E INCOME I.E., 'X' + 'Y' IS LESS THAN THE INCOME 'Z': AS PER CALCULATION UNDER SECTION 115JB THEN INCOME 'Z' IS TO BE TAKEN. IN THE CASE UNDER CONSID ERATION 'X' + 'Y' IS LESS THAN 7.5 PER CENT SO INCOME ACCORDING TO SECTION 11 51B IS TAKEN WHICH IS MORE THAN INCOME 'X ' + 'Y'. ON CONSIDERATION OF AB OVE GUIDELINES LAID DOWN BY THE APEX COURT IN THE ABOVE DECISIONS AND THE RA TIO LAID DOWN BY THE CALCUTTA HIGH COURT IN THE CASE OF JEEWANLAL (1929) LTD. (SUPRA), WE FIND THAT INCOME IN BHUTAN HAS BEEN CONSIDERED WHILE INV OKING SECTION 11518, ONCE BHUTAN INCOME HAS BEEN CONSIDERED FOR THE PURP OSE OF THIS ACT, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 91. WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO DE DUCTION UNDER SECTION 91 OF THE ACT EVEN ON MERIT. THE ORDERS OF THE ASSESS ING OFFICER ARE NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE R EVENUE, THEREFORE, THE CIT IS NOT CORRECT IN INVOKING SECTION 263. THE ORDER O F THE CIT IS, THUS, QUASHED. WE ALSO FIND THAT THIS ISSUE HAS BEEN ACCEPTED BY T HE LEARNED AO IN THE ASSESSMENT ORDER FRAMED U/S 143(3) OF THE ACT FOR THE ASST YEA R 2009-10 WHICH IS PART OF THE RECORDS PRODUCED BEFORE US. RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENT RELIE D UPON HEREINABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IN ITA NO. 197/KOL/2011 FOR ASST YEAR 2007-08 IS DISMISSED. 15. APPLICABILITY OF PROVISIONS OF SECTION 115JB OF THE ACT TO ASSESSEE BANK ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2003-04 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2004-05 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2005-06 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2006-07 GROUND NO. 6 OF AEE APPEAL - ASST YEAR 2007-08 ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 20 WE FIND THAT THIS ISSUE IS COVERED BY THE CO-ORDINA TE BENCH DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1768/KOL/2009 DATED 27.11.2015 FOR ASST YEAR 2002- 03, WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECT ION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE BANK AND THE AMENDMENT BROUGHT IN SECTION 115JB OF THE ACT READ WITH EXPLANATION 3 THEREON BY THE FINANCE ACT 2012 IS APPLICABLE ONLY WITH EFFECT FROM ASST YEAR 2013-14 ONWARDS IN LINE WITH THE NOTES TO CLAUSES OF FINANCE ACT 2012. ACCORDINGLY, THE ADDITIONAL GROUNDS 1 T O 4 RAISED BY THE ASSESSEE FOR ASST YEARS 2003-04 TO 2006-07 AND GROUND NO. 6 RAISED BY THE ASSESSEE FOR ASST YEAR 2007-08 ARE ALLOWED. 16. DISALLOWANCE OF VARIOUS PROVISIONS WHILE COMPUT ING BOOK PROFITS U/S 115JB OF THE ACT GROUND NO. 9 - ASST YEAR 2003-04 GROUND NOS 3 & 4 - ASST YEAR 2005-06 GROUND NO. 2 - ASST YEAR 2006-07 GROUND NOS 7 & 8 OF ASSESSEES APPEAL - ASST YEAR 2 007-08 GROUND NOS. 1 & 2 OF REVNUES APPEAL - ASST YEAR 2 007-08 IN VIEW OF OUR DECISION IN PARA NO. 15 ABOVE THAT T HE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE BANK , H ENCE THE AFORESAID GROUNDS RAISED BY THE ASSESSEE AND REVENUE BECOME INFRUCTUOUS AND ACA DEMIC IN NATURE. HENCE THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE A LLOWED AND GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 17. DISALLOWANCE U/S 14A OF THE ACT UNDER SECTION 115JB OF THE ACT GROUND NO. 9 OF AEE APPEAL - ASST YEAR 2007-08 ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 21 IN VIEW OF OUR DECISION IN PARA NO. 15 ABOVE THAT T HE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE BANK , H ENCE THE GROUND NO. 9 RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND ACADEMIC IN NATURE . HENCE THE GROUND NO. 9 RAISED BY THE ASSESSEE FOR ASST YEAR 2007-08 IS ALLOWED. 18. TO SUM UP, APPEAL NO. A.Y APPEAL BY RESULT ITA NO.1329/K/08 2003-04 ASSESSEES APPEAL PARTLY A LLOWED FOR STATISTICAL PURPOSES ITANO.1102/K/2008 2004-05 -DO- PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 07/K/2010 2005-06 -DO- PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO.415/K/2010 2006-07 -DO- PARTLY ALLOWED ITA NO. 2286/K/2010 2007-08 -DO- PARTLY ALLOWED FOR STATISTICAL PURPOSES ITANO.197/K/2011 2007-08 REVENUES APPEAL DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 21 -03-20 16. SD/- SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) ( M.BALAGANESH, ACCOUNTANT MEMBER) DATE : 21 -03-2016 ITA NO. 1329/KOL/2008 ITA NO. 1102/KOL/2008 ITA NO. 07/KOL/2010 ITA NO. 415/KOL/2010 ITA NO. 2286/KOL/2010 ITA NO. 197/KOL/2011 UCO BANK-AM 22 1. THE APPELLANT/DEPARTMENT: THE DCIT/ACIT, CIR-6 P-7 CHOWRINGHEE SQUARE, KOL - 69. 2 THE RESPONDENT/ASSESSEE- UCO BANK 10 B.T.M SAR ANI, KOL-700001. . 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS COPY OF THE ORDER FORWARDED TO: