DCIT, CHENNAI V. Indian Overseas Bank, CHENNAI

ITA 2031/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68740 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DURGESH SUMROTT
• Keywords: Reopening of assessment; Depreciation; Double taxation relief; Earning of tax free income; Period of limitation; Permanent establishment; Tangible material; Bad and doubtful debts; Difference of opinion; Time period of passing order; Change of opinion
• Section: 43B; 143(3); 244A; 14A; 115JB; 147; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER SL. NO. ITA NOS. ASSESS MENT YEAR APPELLANT RESPONDENT 1 3 2124/MDS/2013 2125/MDS/2013 & 2126/MDS/2013 2006-07 2007-08 & 2010-11 INDIAN OVERSEAS BANK, ACCOUNTS DEPARTMENT, 763, ANNA SALAI, CHENNAI-600 002. PAN:AAACI1223J THE DEPUTY COMMISSIONER OF INCOME TAX (LTU) 1775, J.N.INNER RING ROAD, ANNA NAGAR WEST, CHENNAI-600 101. 4 6 1951/MDS/2013 2030/MDS/2013 & 2031/MDS/2013 2006-07 2007-08 & 2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX (LTU) 1775, J.N.INNER RING RD, ANNA NAGAR WEST, CHENNAI-600 101. INDIAN OVERSEAS BANK, ACCOUNTS DEPARTMENT, 763, ANNA SALAI, CHENNAI-600 002. PAN:AAACI1223J REVENUE BY : MR. DURGESH SUMROTT, CIT ASSESSEE BY : MR. C.NARESH, C.A / DATE OF HEARING : 19 TH AUGUST, 2014 /DATE OF PRONOUNCEMENT : 26 TH SEPTEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: ALL THESE APPEALS ARE FILED BY THE ASSESSEE AS WEL L AS REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS) LTU, CHENNAI DATED 20.09.2013 FOR V ARIOUS ASSESSMENT YEARS. AS THE ISSUES ARE COMMON, THEY WE RE CLUBBED & HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ITA NO.2124/MDS/2013:- 2. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) LTU, CHENN AI DATED 20.9.2013 FOR THE ASSESSMENT YEAR 2006-07 ARI SING OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. 3. THE FIRST GROUND IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN HOLDING THAT REOPENING OF ASSESSMENT ALREA DY COMPLETED UNDER SECTION 143(3) OF THE ACT IS VALID. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN HOLDING THAT REOPENING OF AS SESSMENT ALREADY COMPLETED UNDER SECTION 143(3) OF THE ACT I S VALID EVEN WHEN NO TANGIBLE MATERIAL WAS AVAILABLE WITH T HE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. COUNSE L SUBMITS THAT THE DETAILS IN RESPECT OF THE ISSUES O N WHICH REOPENING WAS DONE WERE ALREADY AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMEN T UNDER SECTION 143(3) OF THE ACT, THEREFORE REOPENING WAS BASED ONLY 3 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ON CHANGE OF OPINION AND THE ASSESSMENT NEEDS TO BE STRUCK DOWN AS INVALID ON THIS GROUND. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF LOWER AUTHORITIES IN REOPENING THE ASSESSM ENT. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ISSUE OF REOPENING HAS BEEN CONSIDERED ELABORAT ELY BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND HELD T HAT REOPENING IN THIS CASE WAS MADE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THE REOPENI NG WAS MADE SUBSEQUENT INFORMATION AVAILABLE WITH THE ASSE SSING OFFICER AND THEREFORE REOPENING IS VALID. WHILE HOL DING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED AS UN DER:- 4 . 1 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSION OF THE ID . AR . THE REOPENING IN THIS CASE WAS MADE WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR . AS SEEN FROM THE RECORDS , THE FOUR ISSUES ON WHICH THE ASSESSMENT IS REOPENED DO NOT S EEM TO HAVE COME FOR DISCUSSION DURING THE COURSE OF OR IGINAL ASSESSMENT WHICH WAS PASSED ON 30 . 12 . 2008. THE REOPENING HAS BEEN DONE BASED ON THE SUBSEQUENT INFORMATION AVAILABLE WITH THE AO. THE ARGUMENT OF THE APPELLANT THAT IT HAS SUBMITTED ALL THE FACTS RELAT ING TO THESE ISSUES DURING THE TIME OF ORIGINAL ASSESSMENT AND NO NEW TANGIBLE MATERIAL WAS AVAILABLE WITH THE AO FOR INI TIATING THE REOPENING PROCEEDINGS WILL NO MORE HOLD GOOD IN THE LIGHT OF 4 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 FOLLOWING DECISIONS : (I) SUPREME COURT IN THE CASE OF KALYANJI MAVJI & C OMPANY V. CIT (102 ITR 287) (SC) (1976) WHEREIN IT IS STATED THAT THERE IS NO CHANGE OF OPINION IF THE ASSESSMENT IS REOPENED ON NEW FACTS WHICH CAME TO NOT I CE SUBSEQUENTLY , EVE N THOUGH THEY ARE ALREADY ON RECORD . (I I ) GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL AND VASANTH CHUNILAL PATEL V . ACIT ( 236 ITR 832) (1999) HELD THAT WHERE THE AO HAD OVER L OOKED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY C HANGE OF OPINION, WHEN THE INCOME WHICH WAS CHARGEABLE TO TA X IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE L AW BUT WAS NOT DUE TO AN ERROR COMMITTED AT THE FIRST ASSE SSMENT , THE REOPENING WAS HELD VALID. (III) ITAT, CHENNAI IN THE CASE OF CHENNAI PETROLEU M CORPN. LTD A . Y . 2006-07 (ITA NO . 66/11-12/LTU(A) DATED 08.01 . 2013 RELYING ON THE HIGH COURT OF DELHI IN THE CASE OF CONSOLIDATED PHOTO AND FINVEST LTD V . ACIT (281 ITR 394) (2006) AND HIGH COURT OF MUMBAI IN THE CASE OF DR . AMIR'S PATHOLOGICAL LABORATORY V. JCIT (252 ITR 673) HELD THAT MERE PRODUCTION OF BOOKS OF ACCOUNT , BALANCE- SHEET AND PROFIT AND LOSS ACCOUNT WILL NOT NECESSAR ILY AMOUNT TO DISCLOSURE NECESSARY FOR EXPLANATION 1 OF SEC 147. ( IV) HIGH COURT OF DELH I IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD V . DCIT (197 TAXMAN 415) (2011) I T IS HELD THAT MERELY BECAUSE THE MATERIAL LIES EMBEDDED IN THE MATERIAL EVIDENCE WHICH THE AO COULD HAVE UNCOVERED BUT DID NOT UNCOVER, IS NOT A GOOD REASON FOR STRIKING DOWN REOPENING. (V) HIGH COURT OF MUMBAI IN THE CASE OF EXPORT CRED IT GUARANTEE CORPORATION OF INDIA UD V. ADDL. CIT (30 TAXMAN . CAM 211) (2013), IT WAS HELD THAT THERE IS NO FAILU RE ON THE PART OF ASSESSEE TO DISCLOSE MATERIAL FACTS BUT THE RE IS COMPLETE FAILURE ON THE PART OF THE AO TO APPLY HIS MIND DURING ORIGINAL ASSESSMENT TO POINTS ON WHICH ASSES SMENT IS REOPENED, REOPENING WAS TREATED AS VALID . 4 . 2.1 IN VIEW OF THE ABOVE JUDGMENTS, I AM OF THE CON SIDERED OPINION THAT THERE IS NO INFIRMITY IN REOPENING TH E ASSESSMENT . THE 5 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 GROUND RAISED BY THE APPELLANT , THEREFORE , GETS DEFEATED . NOW , LET US MOVE ON TO THE MERITS OF THE CASE . 6. ON GOING THROUGH THE IMPUGNED ORDER, WE DO NOT F IND ANY VALID REASON TO INTERFERE WITH THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THA T REOPENING IS VALID. THE GROUNDS RAISED BY THE ASSES SEE ON THIS ISSUE ARE REJECTED. 7. COMING TO THE MERITS, THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 2. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS AS TO JURISDICTION, IT IS SUBM I TTED THAT EVEN ON MERITS, THE CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U/S 36(1)(VIIA) SHOULD BE RESTRICTED TO THE PROVISION MADE IN BOOKS AS AGAINST THE ENTIRE ELIGIBLE AMOUNT . 2 . 1 FURTHER IN COMPUTING THE DEDUCTION U/S 36(1)(VIIA) , THE CIT(A) ERRED IN CONFIRMING THE ORDER OF AO IN NOT CONSIDERING PROVISION MADE IN BOOKS OF ACCOUNTS FOR DEBTS HAVING ARREARS, IF ANY, UPTO 90 DAYS CLASSIFIED UNDER RBI NORMS AS STANDARD ASSETS . 2.2 IN COMPUTING THE DEDUCTION U/S 36(1 )(VIIA) , THE CIT(A) HAS ALSO ERRED IN CONFIRMING THE ORDER OF AO IN NOT CONSIDERING PROVISION FOR DEBTS BASED ON COUNTRY RISK AS PER RBI GUIDELINES . 6 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 8. COUNSEL FOR THE ASSESSEE SUBMITS THAT BOTH THESE ISSUES HAVE BEEN DECIDED AGAINST THE ASSESSEE BY TH E CO- ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.1815/MDS/ 2011 DATED 2.4.2013 FOR THE ASSESSMENT YEAR 2008-09. CO PY OF THE ORDER IS PLACED ON RECORD. 9. WE HAVE PERUSED THE ABOVE ORDER OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL AND FIND THAT THE TRIBUNAL H AS DECIDED BOTH THESE ISSUES AGAINST THE ASSESSEE BY DISMISSIN G THE GROUNDS OBSERVING AS UNDER:- 4. THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS R EGARDING RESTRICTION OF CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS. THE A .R. FOR THE ASSESSEE HAS CONCEDED THAT THIS ISSUE HAS ALREADY B EEN DECIDED AGAINST THE ASSESSEE BANK IN THE CASE OF BHARAT OVE RSEAS BANK LTD. IN ITA NO.1191/MDS/2012. THIS ISSUE HAD ALSO COME UP BEFORE THE TRIBUNAL IN ITA NO.818/MDS/2010 RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE FINDINGS OF THE TRIBUN AL ARE REPRODUCED HEREIN BELOW:- 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS:- 7.5% OF GROSS TOTAL INCOME : ` 5,74,07,362 10% OF RURAL ADVANCES ( ` 27,26,50,990/-) : ` 2,72,65,099 ` 8,46,72,461 THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON O THER ISSUES AND PURSUANT TO THE RELIEF GRANTED IN SUCH A PPEAL, 7 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 THE GROSS TOTAL INCOME WHICH EARLIER STOOD AT ` 76,54,31,493/- CAME DOWN TO ` 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GROSS TOTAL INCOME, DEDU CTION UNDER SECTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM ` 5,74,07,362/- TO ` 2,65,39,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING TO ` 2,72,65,099/-, RESULTED IN THE SUM OF ` 5,38,05,015/- BEING EVENTUALLY ALLOWED AS DEDUCTION UNDER SECTION 36(1) (VIIA) OF THE ACT. IN THE BOOKS OF THE ASSESSEE, ACTUAL P ROVISION FOR BAD AND DOUBTFUL DEBTS WAS ONLY ` 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION OF ` 2.23 CRORES ON ITS STANDARD ASSETS. IF THE PROVISION FOR BAD AND DOUBTFUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANC E UNDER SECTION 36(1)(VIIA) WAS IN EXCESS OF SUCH PRO VISION. HOWEVER, IF THE PROVISION FOR STANDARD ASSETS WAS A LSO CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THEN THE TOTAL PROVISION COULD GO UP TO ` 6,24,44,027/-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WEL L WITHIN THE LIMITS SPECIFIED UNDER SECTION 36(1)(VIIA) OF T HE ACT. AT THIS JUNCTURE, A LOOK AT SECTION 36(1)(VIIA) IS NEC ESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BREVITY:- 36(1)(VIIA) A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA] OR A NON-SCHEDULED BANK [OR A CO-OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING A NY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGAT E AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUB JECT TO THE ACTUAL PROVISION MADE BY THE ASSESSEE, WHICH IN NO CASE SHALL EXCEED 7.5% OF THE GROSS TOTAL INCOME. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT WHATEV ER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED , IS NOT IN ACCORDANCE WITH LAW. NOW CONSIDERING THE SECOND ASPECT, WHETHER PROVISION FOR STANDARD ASSETS COULD BE CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AG AINST 8 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ANY DEBTS WHICH HAD BECOME DOUBTFUL. STANDARD ASSE TS ARE ALWAYS CONSIDERED RECOVERABLE, IN THE SENSE, BA NK HAS NO DOUBT OF RECOVERABILITY. WHEN THE BANK ITSE LF HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PROVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS. THE DEBT ITS ELF BEING GOOD, A PROVISION MADE ON GOOD DEBT CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBT S. MAY BE, THE RBI HAS MADE A REGULATION FOR 10% PROVI SION FOR STANDARD ASSETS ALSO A PRUDENTIAL NORM. THIS C AN HOWEVER BE CONSIDERED AS A MEASURE PRESCRIBED IN ABUNDANT CAUTION, TO DEAL WITH A SITUATION WHERE BA NKS ARE NOT TO SUFFER SHOCK OF SUDDEN DELINQUENCY THAT COULD HAPPEN IN FUTURE. THERE IS ALWAYS A POSSIBILITY TH AT AN ASSET, WHICH IS FULLY RECOVERABLE, MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPENING OF SU CH A CONTINGENCY CANNOT BE A SUFFICIENT REASON TO CONSID ER A PROVISION MADE ON STANDARD ASSETS ALSO AS A PROVI SION FOR BAD AND DOUBTFUL DEBTS. THEREFORE, CLAIM OF TH E ASSESSEE THAT PROVISION FOR STANDARD ASSETS ALSO HA S TO BE CONSIDERED FOR APPLYING THE CONDITION SET OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION FOR STANDARD ASSETS IS NOT CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PR OVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE IN ITS BOOKS ` 4,01,44,027/- FALL MUCH BELOW THE SUM OF ` 5,38,05,015/- ALLOWED BY THE ASSESSING OFFICER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLE ARLY SHOW THAT BUT FOR THE DEDUCTION ALLOWED TO THE ASSE SSEE AS CLAIMED BY IT IN ITS RETURN, THERE WAS NO DISCUS SION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIED AND WHETHER THE LIMITS WERE CORRECTED WORKED OUT. ADMITTEDLY, NO Q UESTION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO WITH REGARD TO THE CLAI M MADE BY IT UNDER SECTION 36(1)(VIIA), INSOFAR AS IT CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSES SING OFFICER HAD NOT COME TO ANY CONCLUSION AT ALL HAVIN G NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36(1)(VIIA) OF THE ACT. WE CANNOT SAY T HAT HE HAD TAKEN A VIEW WHICH WAS IN ACCORDANCE WITH LAW. IT IS 9 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 NOT A CASE WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COURSE, A CRYPT IC ORDER OF THE ASSESSING OFFICER BY ITSELF MAY NOT SHOW THA T THERE WAS NO THOUGHT GIVEN BY HIM ON A CLAIM OF THE ASSES SEE. HOWEVER, HERE THERE WAS NO ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE O RDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, AND ALLOWING SUCH CLAIM, WITHOUT ANY DISCUSSION, WILL D EFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. AS HELD BY HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (243 ITR 83), PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS A TERM OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN OR DER WITHOUT APPLICATION OF MIND IS DEFINITELY PREJUDICI AL TO THE INTERESTS OF THE REVENUE. WE ARE IN AGREEMENT WITH LD. CIT THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEO US INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF R EVENUE. NO INTERFERENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. IN VIEW OF THE AFORESAID FINDINGS, THIS GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 10. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RE JECT THE GROUNDS RAISED BY THE ASSESSEE. IN THE RESULT, APPE AL OF THE ASSESSEE IS DISMISSED. ITA NO.1951/MDS/2013: (REVENUE APPEAL) 11. THIS IS A CROSS APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) L TU, CHENNAI DATED 20.9.2013 FOR THE ASSESSMENT YEAR 20 06-07. 10 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 12. THE FIRST ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE TOWARDS PROVISION FOR BA D AND DOUBTFUL DEBTS AND DEPRECIATION ON INVESTMENTS. TH E ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE ADDITION OF ` 17,23,03,552/- ON THE GROUND THAT THERE IS A DIFFERENCE IN THE PROVISION FOR BAD & DOUBTFUL DEBT S AND DEPRECIATION ON INVESTMENTS DEBITED TO THE PROFIT A ND LOSS ACCOUNT AND THE AMOUNTS ADJUSTED IN THE MEMO OF INC OME, IGNORING THE SUBMISSIONS OF THE ASSESSEE THAT THE S AID DIFFERENCE OF ` 17.23 CRORES REPRESENTS WRITE BACK OF PROVISIONS DURING THE YEAR WHICH WERE ALREADY OFFER ED TO TAX IN EARLIER YEARS WHEN THESE PROVISIONS WERE MADE AN D THEREFORE ONLY THE NET AMOUNT OF PROVISIONS DEBITED IN THE CURRENT YEARS PROFIT AND LOSS ACCOUNT HAS TO BE AD DED BACK WHICH HAS BEEN CORRECTLY ADDED BACK IN THE MEMO OF INCOME. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE. 11 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 13. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSEE HAS FILED DETAILS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) RECONCILING THE DIFFERENCE IN AMOUNTS MENTIONED IN THE PROFIT AND LOSS ACCOUNT AND THE M EMO OF INCOME. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH ESE DETAILS WERE FURNISHED ONLY BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS) AND THEY WERE NOT FURNISHED BE FORE THE ASSESSING OFFICER. 14. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT WHA TEVER MATERIALS PRODUCED BEFORE THE ASSESSING OFFICER WER E FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND NO FRESH DETAILS WHICH WERE NOT FILED BEFORE THE ASSES SING OFFICER WERE PLACED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). COUNSEL FOR THE ASSESSEE PLACING RELIAN CE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) S UBMITS THAT COMMISSIONER HAS RIGHTLY DELETED THE ADDITION ON VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE SIN CE THE ADDITION AMOUNTED TO DOUBLE TAXATION. COUNSEL PLACE S RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 12 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 15. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THIS A DDITION ON VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE I.E. COPY OF COMPUTATION OF INCOME, BREAK-UP OF PROVISIONS OF CONTINGENCIES DEBITED TO PROFIT AND LOSS ACCOUNT ET C. ACCEPTING THE CONTENTION OF THE ASSESSEE THAT IT HA S CORRECTLY ADDED BACK THE PROVISION WHILE COMPUTING ITS INCOME . THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE ACCEPTIN G THE SUBMISSIONS OF THE ASSESSEE AND DELETING THE DISALL OWANCE OBSERVED AS UNDER:- 6 . 1 THE ID.AR HAS STRONGLY CONTESTED THE DISALLOWANCE MADE BY THE AO . THE APPELLANT HAD FILED A COPY OF THE COMPUTATION OF INCOME ALONG WITH THE FU LL BREAK UP OF THE AMOUNT OF PROVISIONS AND CONTINGENC IES DEBITED TO P&L A/C . THE COPY OF THE RELEVANT PAGE OF THE P&L A/C WAS ALSO FILED . THE ID.AR SUBMITTED THAT THE TOTAL AMOUNT DEBITED TO P&L A/C ON ACCOUNT OF PROVISIONS AND CONTINGENCIES AMOUNTED TO RS . 735 , 47 , 46 , 6681- WHICH WAS ADDED BACK IN FULL IN THE COMPUTATION OF INCOME. IT WAS SUBMITTED THAT IN RESPECT OF PROVISI ON FOR BAD AND DOUBTFUL DEBTS A SUM OF RS. 161,61 , 47,068/- WAS PROVIDED OUT OF WHICH A SUM OF RS . 2 , 50,00 , 0001- WAS REVERSED AS EXCESS PROVISION. THEREFORE THE NET PRO VISION DEBITED IN THE P&L A/C WAS ONLY RS . 159 , 11 , 47,068/- WHICH WAS ADDED BACK IN THE COMPUTATION. SIMILARLY , IN RESPECT OF PROVISION FOR DEPRECIATION ON INVESTMENT S , THE APPELLANT HAD MADE A PROV I SION OF RS . 140 , 1 1 , 48 , 9011- OUT OF WHICH A SUM OF RS. 14 , 73,03,543/- WAS REVERSED AS EXCESS PROVISION . THEREFORE THE NET PROVISION DEBITED IN THE P&L A/C WAS ONLY RS . 125,38 , 45,358/- WHICH WAS 13 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ADDED BACK IN THE COMPUTATION. A DETAILED BREAKUP SHOWING THE PROVISION MADE AND REVERSAL OF THE PROV ISION AND THE AMOUNT DEBITED TO P&L A/C WAS ALSO FURNISHE D. 6 . 2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ID.AR . I HAVE ALSO PERUSED THE DETAILS AND THE WORKING GIVEN BY THE AR . I FIND THAT THE CONTENTION OF THE LEARNED AR THAT THE AMOUNT DE BITED TO P&L ACCOUNT HAS BEEN ADDED BACK IN COMPUTING THE TOTAL INCOME IS CORRECT . FROM THE DETAILS FILED, THE APPELLANT HAS MADE TOTAL PROVISIONS AGGREGATING TO RS.735 , 47 , 46 , 668 WHICH HAS BEEN ADDED BACK FU L LY IN THE COMPUTATION OF TOTAL INCOME . AS SUBM I TTED BY THE AR THE NET PROVISION FOR BAD AND DOUBTFUL DEBTS DEBITED TO THE P&L ACCOUNT AFTER TAKING INTO CONSIDERATION REVERSA L OF EXCESS PROVISION WAS RS . 159 , 11 , 47,068 WHICH HAS BEEN ADDED BACK IN THE COMPUTATION . SIMILARLY THE NET AMOUNT OF PROVISION FOR DEPRECIATION OF INVESTMENTS WAS ON LY RS.125,38 , 45,358 WHICH HAS ALSO BEEN ADDED BACK IN THE COMPUTATION OF TOTA L INCOME . ACCORDING L Y THE AO IS DIRECTED TO DELETE THE ADDITION MADE OF RS.17 , 23 , 03 , 543 MADE . THIS GROUND IS ALLOWED . 16. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE DO NOT FIND ANY INFIRMITY IN THE CONCLUSION ARRIVED AT BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE. THE REVENUE HAS ALSO NOT PLACED ANY DOCUMENT ON RECORD TO REBUT THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 14 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 17. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT UNRECONCILED ENTRIES IN INTER BRANCH TRANSACTIONS CREDITED TO PROFIT AND LOSS ACCOUNT TO THE TUNE OF ` 11,52,75,635/- IS NOT TAXABLE. 18. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE ASSESSMENT ORDER SUBMITS THAT ASSESSING OFFICER MAD E ADDITION OF ` 11.52 CRORES REPRESENTING CREDIT BALANCES IN THE ACCOUNT ARISING DUE TO NON-RECONCILIATION BETWEEN T HE VARIOUS BRANCHES OF THE ASSESSEE BANK WHICH IS AN ERROR IN ACCOUNTING OF INTER-BRANCH TRANSACTIONS. DEPARTMENT AL REPRESENTATIVE SUBMITS THAT ASSESSEE COULD NOT RECO NCILE THESE CREDIT BALANCES AND THEY WERE RIGHTLY BROUGHT TO TAX BY THE ASSESSING OFFICER. THE DEPARTMENTAL REPRESENTA TIVE PLACING RELIANCE ON THE JUDGEMENT OF HONBLE SUPREM E COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. (222 ITR 344) SUBMITS THAT THESE UNCLAIMED BALANCES WERE RIGHTLY TAXED BY THE ASSESSING OFFICER. DEPARTMENTA L REPRESENTATIVE ALSO PLACES RELIANCE ON THE DECISION OF THE 15 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. AR IES ADVERTISING P.LTD. (255 ITR 510) IN SUPPORT OF HIS CONTENTIONS. 19. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE SAID AMOUNT OF ` 11.52 CRORES REPRESENTS UNRECONCILED CREDIT BALA NCES IN THEIR INTER-BRANCH ACCOUNTS. COUNSEL SUBMITS THAT WHENEVER A PARTICULAR BRANCH REQUIRES AN AMOUNT, ONE OF THE BRANCHES TRANSFERS FUNDS TO THE PARTICULAR BRANCH AND IN T HE PROCESS IN SOME BRANCHES, SINCE THE ACCOUNTS WERE NOT SQUA RED UP THE UNRECONCILED CREDIT BALANCES APPEAR. THE COUN SEL SUBMITS THAT IN THE TRANSACTION BETWEEN INTER BRAN CH OF ASSESSEE BANK NO ONE CAN MAKE PROFIT WITH HIMSELF. COUNSEL STRONGLY PLACES RELIANCE ON THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS) IN CONSIDERING UNRECONCILED AMOUNTS AS NOT TAXABLE. COUNSEL FOR TH E ASSESSEE PLACES RELIANCE ON THE DECISION OF THE DEL HI BENCH OF THIS TRIBUNAL IN THE CASE OF PUNJAB NATIONAL BAN K VS. ADDL. CIT( 2012 -TIOL 80 ITAT- DEL) DATED 25.10.2011 IN S UPPORT OF HIS CONTENTIONS. COUNSEL SUBMITS THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY THE SAID DECISION WHERE IDENTIC AL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 16 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 20. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND DECISIONS RELIED ON. THE ASSESSING OFFICER MAD E ADDITION OF ` 11.52 CRORES REPRESENTING UNRECONCILED ENTRIES IN INTER BRANCH TRANSACTIONS WHICH WERE CREDITED T O PROFIT AND LOSS ACCOUNT REJECTING THE SUBMISSIONS OF THE ASSES SEE THAT THESE TRANSACTIONS ARE NOT INCOME OF THE ASSESSEE A ND THEREFORE HAVE TO BE REDUCED WHILE COMPUTING THE I NCOME. THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CA SE OF PUNJAB NATIONAL BANK VS. ADDL. CIT (SUPRA) DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER. ON A PERUSAL OF THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL, WE FIND THAT T HE SAID DECISION SQUARELY APPLIES TO THE ISSUE ON HAND. THE DELHI BENCH OF THIS TRIBUNAL CONSIDERED A SIMILAR SITUATI ON WHERE THE ASSESSEE REDUCED UNRECONCILED BALANCES WHILE COMPUTING THE INCOME WHICH WAS BROUGHT TO TAX BY TH E ASSESSING OFFICER AND THE TRIBUNAL HELD THAT QUESTI ON OF BRINGING SUCH SUMS TO TAX UNDER SECTION 41(1) OF THE ACT ARE NOT PERMISSIBLE. WHILE ARRIVING AT SUCH CONCLUSION THE TRIBUNAL CONSIDERED THE JUDGEMENT OF HONBLE SUPREM E COURT 17 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 IN THE CASE OF T.V.SUNDARAM IYENGAR & SONS LTD. (SU PRA) AND HELD AS UNDER:- 33. THE FACTS OF THE CASE OF THE ASSESSEE ARE EXACTLY SIMILAR TO THE FACTS BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF BETTS HARTLEY HU ETT AND CO. LTD. (SUPRA). IN THAT CASE , I T WAS HELD THAT THE TRANSACTION BETWEEN THE HEAD OFFICE OF THE ASSESSEE AND ITS BRANCH IN INDIA WAS A TRANSACTION BETWEEN T HE PRINCIPAL AND PRINCIPAL . IN LAW, THERE CANNOT BE A VALID TRANSACTION OF SALE BETWEEN THE BRANCH AND ITS HEAD OFFICE. AS IT IS ULTIMATELY BASED ON A PROPOSITION THAT NO PERSON CAN ENTER INTO CONTRACT WITH ONE SELF. DEBITING OR CREDITING ONE ' S ACCOUNT CANNOT ALTER THE LEGAL POSITION. APPLYING THE SAME PRINCIPLE AS ENUNCIATED BY THE HON ' BLE CA L CUTTA HIGH COURT, IT CANNOT BE SAID THAT THE TRANSACTIONS BETWEEN THE BRANCHES GAVE RISE TO AN INCOME ASSESSABLE UNDER THE INCOME-TAX ACT . THE SUBSTANCE OF THE ENTIRE TRANSACTION, IN OUR VIEW, APPEARS TO BE PURE ACCOUNTING LAPSES ON THE PART OF THE BANK OR ITS BRANCHES TO PROPERLY RECONCILE THE TRANSACTIONS. IN FACT, IT IS ALWAYS UNDERSTOOD THAT ALL THESE ACCOUN TS MUST HAVE CANCELLED EACH OTHER. IT DID NOT TAKE PLA CE THAT WAY DUE TO HUMAN ERRORS OR LACK OF ADVICE FORTHCOMING AS REGARDS THE CLOSURE OF THE ACCOUNTS. IN ANY CASE, ANY IMBALANCE IN THE INTER BRANCH ACCOUNT S , IN OUR CONSIDERED VIEW, CANNOT GIVE RISE TO A TAXAB LE INCOME UNDER THE INCOME-TAX ACT . THE ASSESSING OFFICER AS WELL AS CRR - DR HAS HEAVILY RE L IED UPON THE DECISION OF THE HON ' BLE SUPREME COURT IN THE CASE OF T. V.SUNDARAM IYENGAR & SONS LTD. - 222 ITR 344 = (2002-TIOL-239-SC - IT). IN THAT CASE, THE ASSESSEE RECEIVED THE DEPOS I TS FROM CUSTOMERS IN THE COURSE OF ITS BUSINESS AND TRANSFERRED THE AMOUNTS WHICH WERE NOT CLA I MED BY THE CUSTOMERS TO ITS PROFIT & LOSS ACCOUNT . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SUMS IN QUESTION HAVE BECOME THE INCOME OF THE ASSESSEE BECAUSE OF THE EXPIRY OF LIMITATION PERIOD OR OTHER STATUTORY OR CONTRACTUAL RIGHTS. THE AMOUNTS HAD THE CHARACTER OF INCOME AND THEREFORE, ASSESSABLE TO TAX. THE HON'BLE SUPREME COURT HELD THAT ALTHOUGH THE AMOUNTS RECEIVED ORIGINALLY WERE NOT IN THE NATURE OF AN INCOME, THE AMOUNTS REMAINED WITH THE ASSESSEE FOR A LONG PERIOD UNCLAIMED BY THE TRADE PARTIES . BY THE LAPSE OF TIME, THE CLAIM OF THE DEPOSIT BECAME TIME BARRED A ND THE AMOUNT ATTAINED A TOTALLY DIFFERENT QUALITY. IT BECAME A DEFINITE TRADE SURPLUS . THE ASSESSEE ITSELF 18 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 TREATED THE MONEY AS ITS OWN MONEY AND TAKE N THE AMOUNT TO ITS PROFIT & LOSS ACCOUNT. THE AMOUNTS WERE ASSESSABLE IN THE HANDS OF THE ASSESSEE. HERE, IN THIS CASE, THE FACTS ARE SLIGHTLY DIFFERENT. THE AMOUNTS ARE LYING IN THE ACCOUNTS WHICH ARE KNOWN AS INTER BRAN CH ACCOUNTS. IT IS EXPECTED THAT ALL THESE INTER BRANC H ACCOUNTS SHOULD GET SQUARED UP ON CONSOLIDATION. DUE TO HUMAN ERROR OF ACCOUNTING OR LACK OF PROPER ADVISE FROM DIFFERENT BRANCHES, THE AMOUNTS IN QUESTION HAVE REMAINED EITHER IN DEBIT OR CREDIT IN DIFFERENT INTER BRANCH ACCOUNTS AND THE BANK HAS ADMITTEDLY NOT RECONCILED THESE ACCOUNTS FOR OVER A LONG PERIOD OF TIME. IT IS VERY DIFFICULT TO SAY TH AT THESE HAVE TRACES OF INCOME EITHER AT THE TIME OF RECEIPT OR AT THE TIME OF WRITE OFF TO THE PROFIT & LOSS ACCOUNT. IN FACT , THE RESERVE BANK OF INDIA HAS PERMITTED THEM TO CLOSE THESE DIFFERENCES TO THE PROFIT & LOS S ACCOUNT WITH A RIDER THAT THE SUMS IN QUESTION ARE NOT PERMITTED BY THE RESERVE BANK OF INDIA TO BE USED IN THE FORM OF DISTRIBUTION OF DIVIDENDS AND IT WAS SPECIFICALLY MADE CLEAR BY THE RESERVE BANK OF INDI A THAT THE OBLIGATION TO DISCHARGE THE LIABILITIES AR ISING THEREUNDER IS UPON THE BANK. MEANING THEREBY, THERE IS NO QUESTION OF THE AMOUNTS BEING TREATED AS INCOME IN THE HANDS OF THE BANK. WE MUST APPRECIATE THAT THESE TRANSACTIONS IN THE INTER BRANCH ACCOUNT S ARE MERE ACCOUNTING ENTRIES. WHEN THE TRANSACTIONS WERE MADE TO THESE ACCOUNTS I NITIALLY, THESE WERE NOT IN THE NATURE OF INCOME EITHER OF THE BRANCHES INVOLVED OR OF THE BANK AS A WHOLE. IT IS A PART OF TRANSACTIONS ON THE REAL ACCOUNTS AND NOT ON WHAT I S KNOWN AS REVENUE ACCOUNTS. THEREFORE, IT IS DIFFICU LT TO SAY THAT THE AMOUNTS IN QUESTION BEAR THE SAME CHARACTER AS UNCLAIMED DEPOSIT RECEIVED FROM THE CUSTOMERS BY THE ASSESSEE T.V.SUNDARAM I YENGAR & SONS LTD . 34. IN THE LIGHT OF THE DISCUSSIONS OF THESE FACTS, IT IS DIFFICULT TO SAY THAT EITHER THE DECISION OF THE AP EX COURT IN THE CASE OF T.V.SUNDARAM IYENGAR & SONS LTD. (SUPRA) OR OTHER DECISIONS INCLUDING THE DECIS ION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN GOLDEN TRANSPORT CO.(P} LTD. - 249 ITR 723 ARE APPLICABLE TO THE FACTS OF THE CASE. IN FAC T, THE HON'BLE DELHI HIGH COURT IN THE CASE OF RAJASTH AN GOLDEN TRANSPORT CO.(P) LTD. (SUPRA) WAS CONCERNED WITH THE AMOUNTS RECEIVED IN THE COURSE OF TRADE TRANSACTIONS. IN THE DECISION OF THE HON'BLE DELHI HIGH COURT, THE AMOUNTS IN QUESTION WERE HELD TO BE TAXABLE UNDER SECTION 41(1) OF THE ACT. AS REGARDS THE APPLICABILITY OF SECTION 41(1), WE MAY AGAIN ST ATE THAT SUCH PROVISIONS OF SECTION 41(1) CANNOT BE 19 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 INVOKED TO BRING THESE AMOUNTS IN QUESTION TO BE TAXED AS A PART OF THE RECEIPT IN THE AFORESAID PROVISION . THE REVENUE HAS TO FIRST ESTABLISH THAT THE SUM IN QUESTION WHICH IS NOW BEING BROUGHT TO TAX HAS ONCE BEEN ALLOWED IN THE PAST AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE BANK. IT IS NOT T HE CASE OF THE REVENUE OR AT LEAST THE REVENUE HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT THE SUM IN QUESTION FORMING PART OF THE SO-CALLED INTER BRANCH TRANSACTIONS WERE ONCE ALLOWED BY THE REVENUE AS A DEDUCTION IN THE COMPUTATION OF PROFITS AND GAINS O F BUSINESS. WHEN THAT PRIMARY REQUIREMENT IS ABSENT, THE QUEST I ON OF BRINGING THE SUMS IN QUESTION TO TAX UNDER SECTION 41(1) MAY NOT BE LEGALLY PERMISSIBLE TO THE REVENUE . IN THE LIGHT OF THE DISCUSSIONS ABOVE, WE DO NOT AGREE WITH TH E STAND OF THE DEPARTMENT THAT THE AMOUNTS IN QUESTION WHICH ARE PART OF THE INTER BRANCH T RANSACTIONS REQUIRES TO BE BROUGHT TO TAX AS INCOME OF THE ASSESSEE IN THE YEAR IN QUESTION. 21. SINCE THE FACTS ARE IDENTICAL IN THE CASE OF TH E ASSESSEE AND ALSO THE ISSUE DECIDED BY THE TRIBUNAL IN THE C ASE OF PUNJAB NATIONAL BANK (SUPRA), RESPECTFULLY FOLLOWIN G THE SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 22. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT PROVISIONS OF SECTION 115JB ARE NOT A PPLICABLE TO THE ASSESSEE. 20 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 23. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE IN ITS FAVOUR IN ITA NO.1757/MDS/2011 DATED 2.4.2013 FOR THE ASSESSMENT YEAR 2006-07. COPY OF THE ORDER IS PLACED ON RECORD. 24. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THIS I SSUE IS NOT EMANATING FROM THE ASSESSMENT ORDER. 25. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND FIND THAT THE ASSESSING OFFICER COMPUTED BOOK PROFI TS UNDER SECTION 115JB OF THE ACT AND ALSO INCOME UNDER NORM AL PROVISIONS OF THE ACT AS THE INCOME UNDER NORMAL PR OVISIONS OF THE ACT IS MORE HE ADOPTED THE SAID INCOME. THE ASSESSEE ALSO CHALLENGED AGAINST THE ACTION OF THE ASSESSING OFFICER IN COMPUTING BOOK PROFITS UNDER SECTION 115 JB CONTENDING THAT PROVISIONS HAVE NO APPLICATION TO I TS BANK. HAVING GONE THROUGH THE DECISION OF THE CO-ORDINAT E BENCH IN ASSESSEES OWN CASE IN ITA NO.1757/MDS/2011 DAT ED 2.4.2013, WE FIND THAT THE ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSE. RESPECTFULLY FOLLOWING THE SAID DECISI ON, WE 21 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVE NUE ON THIS ISSUE. 26. THE LAST ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT INTEREST UNDER SECTION 244A IS TO BE G RANTED ON THE INTEREST COMPONENT OF THE REFUND ALSO. 27. DEPARTMENTAL REPRESENTATIVE PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. GUJARAT FLUORO CHEMICALS (358 ITR 291) SUBMITS THAT ASSESSEE IS NOT ENTITLED FOR INTEREST ON INTEREST. 28. COUNSEL FOR THE ASSESSEE SUBMITS THAT CO-ORDI NATE BENCH IN ASSESSEES OWN CASE IN ITA NO.1757/MDS/201 1 DATED 2.4.2013 FOR THE ASSESSMENT YEAR 2006-07 REMI TTED THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO CONS IDER THE ISSUE IN THE LIGHT OF THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF SANDVIK ASIA LTD. VS. CIT (2 SCC 508) AND GRANT INTEREST ON INTEREST. 22 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 29. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND DECISIONS RELIED ON. ON GOING THROUGH THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF GUJARAT FLUORO CHEMICALS (SUPRA) WE FIND THAT THE ISSUE ON HAND HA S BEEN DECIDED AGAINST THE ASSESSEE BY THE LARGER BENCH HOLDING THAT ASSESSEE IS NOT ENTITLED FOR INTEREST ON INTER EST. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOLD T HAT INTEREST ON INTEREST IS NOT ALLOWABLE TO THE ASSESSEE. THE G ROUNDS RAISED BY THE REVENUE ARE ALLOWED ON THIS ISSUE. ITA NO.2125/MDS/2013 30. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) LTU CHENNA I DATED 20.9.2013 FOR THE ASSESSMENT YEAR 2007-08 ARI SING OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. 31. THE ASSESSEE RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAD ERRED IN HOLD I NG THAT REOPENING THE ASSESSMENT ALREADY COMPLETED U/S 143 (3) IS VALID EVEN WHEN NO TANGIBLE MATERIAL WAS AVAILABLE WITH THE AO TO REOPEN THE ASSESSMENT AND THE DETAILS IN RESP ECT OF THE ISSUES ON WHICH REOPENING WAS DONE WERE ALREADY 23 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 AVAILABLE WITH THE AO AT THE TIME OF ORIGINAL ASSES SMENT U/S 143(3). HENCE THE REOPENING WAS BASED ONLY ON CHANG E OF OPINION AND THE ASSESSMENT NEEDS TO BE STRUCK DOWN AS INVALID ON THIS GROUND ITSELF . 2. WITHOUT PREJUDICE TO THE ABOVE CONTENTION AS TO J URISDICTION , EVEN ON MERITS THE CIT ( A ) ERRED IN UPHOLDING THE COMPUTATION OF DEDUCT I ON U/S 36 ( 1 )( VIIA ) MADE BY AO BY CONSIDERING THE WORD ' PLACE ' AS APPEARING I N RULE 6EA TO MEAN THE ' PANCHAYAT ' WHEREAS THE SAME SHOULD ONLY BE TAKEN TO MEAN THE ' WARD ' IN A RURA L AREA. 2 . 1 FURTHER IN COMPUTING THE DEDUCTION U/S 36(1 )(VII A) , THE CIT(A) ERRED IN CONFIRMING THE ORDER OF AO IN NOT CONSIDERING PROVISION MADE IN BOOKS OF ACCOUNTS FOR DEBTS HAVING ARREARS , IF ANY , UPTO 90 DAYS CLASSIFIED UNDER RBI NORMS AS STANDARD ASSETS . 2.2 IN COMPUTING THE DEDUCTION U/S 36(1 )(VIIA) , THE CIT(A ) HAS ALSO ERRED IN CONFIRMING THE ORDER O F AO IN NOT CONS I DERING PROV I SION FOR DEBTS BASED ON COUNTRY RISK AS PER RBI GU I DELINES . 32. GROUND NO.1 IS RAISED CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN UPHOLDING T HE REOPENING OF ASSESSMENT. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT REOPENING OF ASSESSMENT ALREADY COMPLE TED UNDER SECTION 143(3) OF THE ACT IS VALID EVEN WHEN NO TANGIBLE MATERIAL WAS AVAILABLE WITH THE ASSESSING OFFICER T O REOPEN THE ASSESSMENT. COUNSEL SUBMITS THAT THE DETAILS I N RESPECT OF THE ISSUES ON WHICH REOPENING WAS DONE WERE ALRE ADY AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL 24 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THEREFO RE REOPENING WAS BASED ONLY ON CHANGE OF OPINION AND T HE ASSESSMENT NEEDS TO BE STRUCK DOWN AS INVALID ON TH IS GROUND. 33. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF LOWER AUTHORITIES IN REOPENING THE ASSESSM ENT. 34. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. THE ISSUE OF REOPENING HAS BEEN CONSIDERED ELABORAT ELY BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND HELD T HAT REOPENING IN THIS CASE WAS MADE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THE REOPENI NG WAS MADE SUBSEQUENT INFORMATION AVAILABLE WITH THE ASSE SSING OFFICER AND THEREFORE REOPENING IS VALID. WHILE HOL DING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED AS UN DER:- 4 . 1 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSION OF THE ID . AR . THE REOPENING IN THIS CASE WAS MADE WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR . AS SEEN FROM THE RECORDS , THE FOUR ISSUES ON WHICH THE ASSESSMENT IS REOPENED DO NOT S EEM TO HAVE COME FOR DISCUSSION DURING THE COURSE OF OR IGINAL ASSESSMENT WHICH WAS PASSED ON 30 . 12 . 2008. THE REOPENING HAS BEEN DONE BASED ON THE SUBSEQUENT INFORMATION AVAILABLE WITH THE AO. THE ARGUMENT OF THE 25 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 APPELLANT THAT IT HAS SUBMITTED ALL THE FACTS RELAT ING TO THESE ISSUES DURING THE TIME OF ORIGINAL ASSESSMENT AND NO NEW TANGIBLE MATERIAL WAS AVAILABLE WITH THE AO FOR INI TIATING THE REOPENING PROCEEDINGS WILL NO MORE HOLD GOOD IN THE LIGHT OF FOLLOWING DECISIONS : (I) SUPREME COURT IN THE CASE OF KALYANJI MAVJI & C OMPANY V. CIT (102 ITR 287) (SC) (1976) WHEREIN IT IS STATED THAT THERE IS NO CHANGE OF OPINION IF THE ASSESSMENT IS REOPENED ON NEW FACTS WHICH CAME TO NOT I CE SUBSEQUENTLY , EVE N THOUGH THEY ARE ALREADY ON RECORD . (I I ) GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL AND VASANTH CHUNILAL PATEL V . ACIT ( 236 ITR 832) (1999) HELD THAT WHERE THE AO HAD OVER L OOKED SOMETHING AT THE FIRST ASSESSMENT, THERE CAN BE NO QUESTION OF ANY C HANGE OF OPINION, WHEN THE INCOME WHICH WAS CHARGEABLE TO TA X IS ACTUALLY TAXED AS IT OUGHT TO HAVE BEEN UNDER THE L AW BUT WAS NOT DUE TO AN ERROR COMMITTED AT THE FIRST ASSE SSMENT , THE REOPENING WAS HELD VALID. (III) ITAT, CHENNAI IN THE CASE OF CHENNAI PETROLEU M CORPN. LTD A . Y . 2006-07 (ITA NO . 66/11-12/LTU(A) DATED 08.01 . 2013 RELYING ON THE HIGH COURT OF DELHI IN THE CASE OF CONSOLIDATED PHOTO AND FINVEST LTD V . ACIT (281 ITR 394) (2006) AND HIGH COURT OF MUMBAI IN THE CASE OF DR . AMIR'S PATHOLOGICAL LABORATORY V. JCIT (252 ITR 673) HELD THAT MERE PRODUCTION OF BOOKS OF ACCOUNT , BALANCE- SHEET AND PROFIT AND LOSS ACCOUNT WILL NOT NECESSAR ILY AMOUNT TO DISCLOSURE NECESSARY FOR EXPLANATION 1 OF SEC 147. ( IV) HIGH COURT OF DELH I IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD V . DCIT (197 TAXMAN 415) (2011) I T IS HELD THAT MERELY BECAUSE THE MATERIAL LIES EMBEDDED IN THE MATERIAL EVIDENCE WHICH THE AO COULD HAVE UNCOVERED BUT DID NOT UNCOVER, IS NOT A GOOD REASON FOR STRIKING DOWN REOPENING. (V) HIGH COURT OF MUMBAI IN THE CASE OF EXPORT CRED IT GUARANTEE CORPORATION OF INDIA UD V. ADDL. CIT (30 TAXMAN . CAM 211) (2013), IT WAS HELD THAT THERE IS NO FAILU RE ON THE PART OF ASSESSEE TO DISCLOSE MATERIAL FACTS BUT THE RE IS COMPLETE FAILURE ON THE PART OF THE AO TO APPLY HIS MIND DURING ORIGINAL ASSESSMENT TO POINTS ON WHICH ASSES SMENT IS REOPENED, REOPENING WAS TREATED AS VALID . 26 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 4 . 2.1 IN VIEW OF THE ABOVE JUDGMENTS, I AM OF THE CON SIDERED OPINION THAT THERE IS NO INFIRMITY IN REOPENING TH E ASSESSMENT . THE GROUND RAISED BY THE APPELLANT , THEREFORE , GETS DEFEATED . NOW , LET US MOVE ON TO THE MERITS OF THE CASE . 35. ON GOING THROUGH THE IMPUGNED ORDER, WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THA T REOPENING IS VALID. THE GROUNDS RAISED BY THE ASSES SEE ON THIS ISSUE ARE REJECTED. 36. COMING TO THE MERITS, GROUND NO.2 IS RAISED CHA LLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IN UPHOLDING THE COMPUTATION OF DEDUCTION UNDER SECTIO N 36(1)(VIIA) OF THE ACT MADE BY THE ASSESSING OFFICE R BY CONSIDERING THE WORD PLACE AS APPEARING UNDER RUL E 6EA TO MEAN PANCHAYAT WHEREAS THE SAME SHOULD ONLY BE T AKEN TO MEAN WARD IN A RURAL AREA. COUNSEL FOR THE AS SESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST TH E ASSESSEE BY THE CO-ORDINATE BENCH WHILE DISPOSING O FF THE APPEAL IN THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. COPY OF THE ORDER IS PLACED ON RECORD. 27 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 37. WE HAVE PERUSED THE ORDER OF THIS TRIBUNAL IN I TA NO.1949/MDS/2012 AND FIND THAT THE TRIBUNAL DECIDED THIS ISSUE AGAINST THE ASSESSEE BY DISMISSING THE GROUND S OBSERVING AS UNDER:- 8. THE ASSESSEES THIRD GROUND RAISES THE ISSUE BAD DEBTS RELATING TO RURAL BRANCHES U/S 36(1)(VIIA). I T PLEADS THAT THE CIT(A) HAS WRONGLY RESTRICTED ITS C LAIM OF AFORESAID DEDUCTION BY TREATING A BRANCH AS RUR AL BASED ON POPULATION OF THE PANCHAYAT INSTEAD OF CONCERNED WARD. 9. IT IS TO BE SEEN THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF BAD AND DOUBTFUL ADVANCES OF ` 654,41,43,300/-. THE ASSESSING OFFICER RESTRICTED T HIS CLAIM TO ` 25,58,86,646/-; INTER ALIA, ON THE GROUND THAT THE ASSESSEES 48 BRANCHES WERE NOT RURAL AS PER SECTION 36(1)(VIIA) EXPLANATION READ WITH RULE 6ABA IN VIEW OF THE CENSUS FIGURES GIVEN IN THE MINISTRY OF HOME AFFAIRS WEBSITE. THE CIT(A) HAS ALSO EXPRESSED AGREEMENT WITH THE ASSESSING OFFICERS FINDINGS IN VIEW OF CASE LAW CIT VS LORD KRISHNA BANK LTD, 339 ITR 6 06 (KERALA). 10. IN THE COURSE OF HEARING, WHEN WE CONFRONTED THE ASSESSEE ABOUT THE AFORESAID DECISION OF THE HON'BL E KERALA HIGH COURT, IT HAS FAILED TO DRAW ANY DISTIN CTION ON FACTS. THUS, WE DECIDE THIS GROUND AS WELL AGAIN ST THE ASSESSEE. 38. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DI SMISS THE GROUNDS OF THE ASSESSEE ON THIS ISSUE. 28 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 39. GROUND NOS.2.1 AND 2.2 ARE RAISED CHALLENGING T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN NO T ALLOWING DEDUCTION UNDER SECTION 36(1)(VIIA) ON PRO VISION FOR STANDARD ASSETS AND COUNTRY RISK. COUNSEL FOR THE A SSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THIS TR IBUNAL AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1815/MDS/2011 DATED 2.4.2013 FOR THE ASSESSMENT YEAR 2008-09 . 40. WE HAVE PERUSED THE ABOVE ORDER OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN ITA NO.1815/MDS/2011 DATE D 2.4.2013 AND FIND THAT THE TRIBUNAL HAS DECIDED BO TH THESE ISSUES AGAINST THE ASSESSEE BY DISMISSING THE GROUN DS OBSERVING AS UNDER:- 4. THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS R EGARDING RESTRICTION OF CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS. THE A .R. FOR THE ASSESSEE HAS CONCEDED THAT THIS ISSUE HAS ALREADY B EEN DECIDED AGAINST THE ASSESSEE BANK IN THE CASE OF BHARAT OVE RSEAS BANK LTD. IN ITA NO.1191/MDS/2012. THIS ISSUE HAD ALSO COME UP BEFORE THE TRIBUNAL IN ITA NO.818/MDS/2010 RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE FINDINGS OF THE TRIBUN AL ARE REPRODUCED HEREIN BELOW:- 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS:- 29 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 7.5% OF GROSS TOTAL INCOME : ` 5,74,07,362 10% OF RURAL ADVANCES ( ` 27,26,50,990/-) : ` 2,72,65,099 ` 8,46,72,461 THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON O THER ISSUES AND PURSUANT TO THE RELIEF GRANTED IN SUCH A PPEAL, THE GROSS TOTAL INCOME WHICH EARLIER STOOD AT ` 76,54,31,493/- CAME DOWN TO ` 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GROSS TOTAL INCOME, DEDU CTION UNDER SECTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM ` 5,74,07,362/- TO ` 2,65,39,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING TO ` 2,72,65,099/-, RESULTED IN THE SUM OF ` 5,38,05,015/- BEING EVENTUALLY ALLOWED AS DEDUCTION UNDER SECTION 36(1) (VIIA) OF THE ACT. IN THE BOOKS OF THE ASSESSEE, ACTUAL P ROVISION FOR BAD AND DOUBTFUL DEBTS WAS ONLY ` 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION OF ` 2.23 CRORES ON ITS STANDARD ASSETS. IF THE PROVISION FOR BAD AND DOUBTFUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANC E UNDER SECTION 36(1)(VIIA) WAS IN EXCESS OF SUCH PRO VISION. HOWEVER, IF THE PROVISION FOR STANDARD ASSETS WAS A LSO CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THEN THE TOTAL PROVISION COULD GO UP TO ` 6,24,44,027/-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WEL L WITHIN THE LIMITS SPECIFIED UNDER SECTION 36(1)(VIIA) OF T HE ACT. AT THIS JUNCTURE, A LOOK AT SECTION 36(1)(VIIA) IS NEC ESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BREVITY:- 36(1)(VIIA) A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA] OR A NON-SCHEDULED BANK [OR A CO-OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING A NY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGAT E AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUB JECT TO THE ACTUAL PROVISION MADE BY THE ASSESSEE, WHICH IN NO CASE SHALL EXCEED 7.5% OF THE GROSS TOTAL INCOME. 30 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT WHATEV ER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED , IS NOT IN ACCORDANCE WITH LAW. NOW CONSIDERING THE SECOND ASPECT, WHETHER PROVISION FOR STANDARD ASSETS COULD BE CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AG AINST ANY DEBTS WHICH HAD BECOME DOUBTFUL. STANDARD ASSE TS ARE ALWAYS CONSIDERED RECOVERABLE, IN THE SENSE, BA NK HAS NO DOUBT OF RECOVERABILITY. WHEN THE BANK ITSE LF HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PROVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS. THE DEBT ITS ELF BEING GOOD, A PROVISION MADE ON GOOD DEBT CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBT S. MAY BE, THE RBI HAS MADE A REGULATION FOR 10% PROVI SION FOR STANDARD ASSETS ALSO A PRUDENTIAL NORM. THIS C AN HOWEVER BE CONSIDERED AS A MEASURE PRESCRIBED IN ABUNDANT CAUTION, TO DEAL WITH A SITUATION WHERE BA NKS ARE NOT TO SUFFER SHOCK OF SUDDEN DELINQUENCY THAT COULD HAPPEN IN FUTURE. THERE IS ALWAYS A POSSIBILITY TH AT AN ASSET, WHICH IS FULLY RECOVERABLE, MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPENING OF SU CH A CONTINGENCY CANNOT BE A SUFFICIENT REASON TO CONSID ER A PROVISION MADE ON STANDARD ASSETS ALSO AS A PROVI SION FOR BAD AND DOUBTFUL DEBTS. THEREFORE, CLAIM OF TH E ASSESSEE THAT PROVISION FOR STANDARD ASSETS ALSO HA S TO BE CONSIDERED FOR APPLYING THE CONDITION SET OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION FOR STANDARD ASSETS IS NOT CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PR OVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE IN ITS BOOKS ` 4,01,44,027/- FALL MUCH BELOW THE SUM OF ` 5,38,05,015/- ALLOWED BY THE ASSESSING OFFICER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLE ARLY SHOW THAT BUT FOR THE DEDUCTION ALLOWED TO THE ASSE SSEE AS CLAIMED BY IT IN ITS RETURN, THERE WAS NO DISCUS SION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIED AND WHETHER THE LIMITS WERE CORRECTED WORKED OUT. ADMITTEDLY, NO Q UESTION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO WITH REGARD TO THE CLAI M MADE BY IT UNDER SECTION 36(1)(VIIA), INSOFAR AS IT 31 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSES SING OFFICER HAD NOT COME TO ANY CONCLUSION AT ALL HAVIN G NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36(1)(VIIA) OF THE ACT. WE CANNOT SAY T HAT HE HAD TAKEN A VIEW WHICH WAS IN ACCORDANCE WITH LAW. IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COURSE, A CRYPT IC ORDER OF THE ASSESSING OFFICER BY ITSELF MAY NOT SHOW THA T THERE WAS NO THOUGHT GIVEN BY HIM ON A CLAIM OF THE ASSES SEE. HOWEVER, HERE THERE WAS NO ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE O RDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, AND ALLOWING SUCH CLAIM, WITHOUT ANY DISCUSSION, WILL D EFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. AS HELD BY HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (243 ITR 83), PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS A TERM OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN OR DER WITHOUT APPLICATION OF MIND IS DEFINITELY PREJUDICI AL TO THE INTERESTS OF THE REVENUE. WE ARE IN AGREEMENT WITH LD. CIT THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEO US INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF R EVENUE. NO INTERFERENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. IN VIEW OF THE AFORESAID FINDINGS, THIS GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 41. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RE JECT THE GROUNDS RAISED BY THE ASSESSEE. IN THE RESULT, APPE AL OF THE ASSESSEE IS DISMISSED. 32 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ITA NO.2030/MDS/2013: (REVENUE APPEAL): 42. THIS CROSS APPEAL IS FILED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) LTU, CHENNAI DATED 20.9.2013 FOR THE ASSESSMENT YEAR 200 7-08. 43. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT DEDUCTION UNDER SECTION 36(1)(VIIA) IS TO BE ALLOW ED FROM TOTAL INCOME INCLUDING THE INCOME OF THE MERGED ENTITY BH ARAT OVERSEAS BANK LTD. BRIEF FACTS ARE THAT DURING THIS ASSESSMENT YEAR BHARAT OVERSEAS BANK LTD. WAS MERGE D WITH THE ASSESSEES BANK INDIAN OVERSEAS BANK. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 36(1)(VIIA ) ON THE TOTAL INCOME OF THE BANK INCLUDING INCOME OF THE ME RGED ENTITY BHARAT OVERSEAS BANK LTD. ALSO. THE ASSESSIN G OFFICER WHILE COMPLETING THE ASSESSMENT RESTRICTED THE DEDU CTION ONLY ON THE INCOME OF THE ASSESSEE BANK ON THE GROU ND THAT INCOME OF BHARAT OVERSEAS BANK LTD. ALREADY ENJOYED ALL THE BENEFITS OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) AL LOWED THE CLAIM OF THE ASSESSEE. 33 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 44. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSMENT IN NOT ALLOWING DEDUCTION U NDER SECTION 36(1)(VIIA) ON THE INCOME OF BHARAT OVERSE AS BANK LTD. 45. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 46. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND ALLOWED CL AIM OF THE ASSESSEE OBSERVING AS UNDER:- 5.6 ON THE ISSUE OF EXCLUSION OF INCOME OF THE ERSTWHI L E BHARAT OVERSEAS BANK LTD, THE AO HAS EXCLUDED THE S AID INCOME ON THE CONTENTION THAT THE PROPORTIONATE IN COME OF ERSTWHILE BHARAT OVERSEAS BANK LTD INCLUDED IN THE HANDS OF THE APPELLANT WAS ONLY AFTER CONSIDERING T HE DEDUCTION U/S 36(1 )(VIIA) AND THEREFORE ON THE SAI D AMOUNT THE DEDUCTION AT 7 . 5% OF TOTAL INCOME AS PROVIDED I N SECTION 36(1 )(VIIA) CANNOT BE ALLOWED . THE AR ON THE OTHER HAND SUBMITS THAT SINCE THE INCOME FRO M THE ERSTWHILE BHARAT OVERSEAS BANK LTD HAS BEEN IN C LUDED I N T HE T O T A L INCOME OF THE APPELLANT, THE AO SHOULD HAVE ALLOWED DEDUCTION ON THE SAID INCOME ALSO IRRESPECT IVE OF WHETHER THE INCOME OF THE ERSTWHILE BHARAT OVERSEAS BANK LTD IS BEFORE OR AFTER DEDUCTION U/S 36(1 )(VI IA). I FIND FORCE IN THE CONTENTION OF THE AR . AS PER THE PROVISIONS OF SECTION 36(1)(VIIA), THE DEDUCTION IS ALLOWED AT 7 . 5% OF 34 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 TOTAL INCOME . TOTAL INCOME U/S 2(45) RWS 5 OF THE ACT DEFINES TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERS ON WHO IS A RESIDENT TO INCLUDE ALL INCOME FROM WHATEVER S OURCE DERIVED. THEREFORE, ONCE THE INCOME OF ERSTWHILE BH ARAT OVERSEAS BANK LTD HAS BEEN INCLUDED IN THE TOTAL IN COME OF THE APPELLANT, THE DEDUCTION AS PROVIDED FOR IN THE SAID SECTION HAS TO BE ALLOWED . THIS ISSUE IS ACCORDINGLY ALLOWED . 47. ON GOING THROUGH THE ABOVE IMPUGNED ORDER, WE D O NOT FIND ANY VALID REASON TO REVERSE THE CONCLUSION ARR IVED AT BY THE COMMISSIONER OF INCOME TAX (APPEALS)IN ALLOWING THE CLAIM OF THE ASSESSEE. WE AGREE WITH HIS CONCLUSION THAT DEDUCTION UNDER SECTION 36(1)(VIIA) IS TO BE ALLOW ED ON THE TOTAL INCOME OF THE ASSESSEE. THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE REJECTED. 48. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT WHILE COMPUTING DEDUCTION UNDER SECTION 36(1)(VIIA) , THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END O F EACH MONTH SHOULD BE CONSIDERED AND NOT THE INCREMENTAL ADVANCES GRANTED DURING EACH MONTH. 35 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 49. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THE PRESENT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL FOR THE ASSESSMENT YE AR 2009- 10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. A COPY OF THE ORDER IS PLACED ON RECORD. 50. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 51. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. WE FIND TH AT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 -10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. THE TRIBUNAL WHILE REJECTING THE APPEAL OF THE REVENUE HELD AS UNDER:- 56. NOW WE COME TO THE ADDITIONAL GROUND WHICH RAISES ISSUE OF COMPUTATION OF AVERAGE OF ADVANCES FOR ALLOWING DEDUCTION U/S 36(1)(VIIA). THE RELEVAN T PLEADINGS READ AS FOLLOWS: THE CIT(A) ERRED IN DIRECTING THE AO TO CONSIDER THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END OF EACH MONTH AND NOT THE INCREMENTAL ADVANCES GRANTED DURING EACH MONTH, IN COMPUTING THE DEDUCTION U/S 36(1) (VIIA). THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PER CLAUSE (A) OF RULE 6ABA, THE SUM TO BE RECKONED FOR DEDUCTION U/S 36(1 )(VIIA) HAS TO BE COMPUTED ON ADVANCES MADE BY THE RURAL BRANCH DURING THE 36 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 PREVIOUS MONTH & THE SAME SHOULD BE OUTSTANDING AS AT THE END OF THE MONTH. THE ASSESSEE IN ITS CLAIM FOR THE CURRENT YEAR, HAD CONSIDERED THE CLOSING BALANCES OF ADVANCES MADE AS ON 31.3.2008. THIS AMOUNTS TO DOUBLE DEDUCTION OF THE SAME AMOUNT SINCE CLOSING BALANCE AS ON 31.3.2008 WAS ALREADY CONSIDERED FOR DEDUCTION U/S 36(1 )(VIIA) FOR THE EARLIER PREVIOUS YEAR. THE CIT(A) OUGHT TO HAVE APPRECIATED THIS FACT AND UPHELD THE DISALLOWANCE OF EXCESS DEDUCTION U/S 36(1 )(VIIA). THE CIT(A) ERRED IN FOLLOWING THE DECISION IN THE CASE OF CITY UNION BANK, (ITA NO.1485/MDS/2007 DT 30.10.2009) WHEREIN THE FACTS ARE DISTINGUISHABLE AND HENCE INAPPLICABLE TO THE FACTS OF THE PRESENT CASE. 57. THE FACTUAL BACKDROP OF THIS GROUND IS THAT WHILE DEALING WITH ASSESSEES CLAIM OF BAD DEBTS OF ` 654,41,43,300/- (SUPRA), THE ASSESSING OFFICER RESTRICTED THIS RELIEF, INTER ALIA, ON THE GROUND T HAT ONLY THE INCREMENTAL ADVANCES GIVEN IN RURAL BRANCHES AND NOT THE ONES OUTSTANDING BE CONSIDERED FOR THIS PURPOSE. 58. IN ASSESSEES APPEAL, THE CIT(A) HAS FOLLOWED ORDER OF THE 'TRIBUNAL' IN CITY UNION BANKS CASE I N DELETING THE DISALLOWANCE AS FOLLOWS: 7.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS OF THE LD. A.R. I HAVE ALSO GONE THROUG H THE DECISION RELIED ON BY THE LD. DR. WITH REGARD TO TH E RESTRICTION OF ADVANCES OF RURAL BRANCHES TO THE INCREMENTAL ADVANCES SANCTIONED DURING THE YEAR, TH E HON'BLE ITAT, CHENNAI IN THE CASE OF CITY UNION BAN K (SUPRA) HAS HELD AS UNDER: ' WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. WE HAVE PERUSED RULE 6A BA OF THE INCOME-TAX RULES, 1962. AS PER THE SAID RULE , THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES HAVE TO BE COMPUTED BY TAKING THE AMOUNTS OF ADVANC ES MADE BY EACH RURAL BRANCH AS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONTH COMPRISED IN THE PREVIOU S YEAR. THUS, IT IS CLEAR THAT THERE IS NO PROVISION TO CONSIDER ONLY THE ADVANCES MADE DURING THE YEAR UNDER 37 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 CONSIDERATION. IT IS THE FINDING OF THE ASSESSING O FFICER THAT THE ASSESSEE HAS FURNISHED THE WORKING AS PER RULE 6ABA. IT IS NOT IN DISPUTE THAT THE WORKING IS AS P ER RULE 6ABA BUT THE ASSESSING OFFICER SEEMS TO HAVE INTERPRETED THE PROVISION NOT WARRANTED BY LAW. THE REFORE, WE UPHOLD THE ORDER OF THE CIT(A) ALLOWING THE DEDU CTION TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE AO I S DIRECTED TO CONSIDER THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END OF EACH MONTH AND NOT THE INCREMENTAL ADVANCES GRANTED DURING EACH MONTH IN COMPUTING THE DEDUCTION U/S 36(1 )(VIIA). 59. BEFORE US, THE REVENUE REITERATES THE PLEADINGS TO CHALLENGE THE CIT(A)S ORDER. HOWEVER, ON BEING ASKED TO POINT OUT SPECIFIC DISTINGUISHING FEATURES VIS--VIS THE AFORESAID PRECEDENT, IT HAS FAILED TO DRAW ANY. IN THESE CIRCUMSTANCES, WE UPHOLD THE RELEVANT FINDINGS OF THE CIT(A) AND REJECT THE REVENUES ADDITIONAL GROUND. 52. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, WE REJECT THE GROUNDS RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 ALSO. 53. THE LAST ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT THE INTEREST UNDER SECTION 244A IS TO BE GRANTED ON THE INTEREST COMPONENT OF THE REFUND ALSO. 54. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE R EVENUE IN PARA NO.29 OF THIS ORDER IN ITA NO.1951/MDS/2013 . FOR THE 38 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 REASONS AND CONCLUSIONS ARRIVED THEREIN, THE GROUND S RAISED BY THIS REVENUE ON THIS ISSUE FOR THE ASSESSMENT YE AR 2007- 08 ARE ALLOWED. ITA NO.2126/MDS/2013:- 55. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), LTU, CHEN NAI DATED 20.9.2013 FOR THE ASSESSMENT YEAR 2010-11 ARI SING OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 56. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE I S THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE COMPUTATION OF DEDUCTION UNDER SECTION 36(1)(VI IA) MADE BY THE ASSESSING OFFICER BY CONSIDERING THE WORD ' PLACE ' AS APPEARING I N RULE 6EA TO MEAN THE ' PANCHAYAT ' WHEREAS THE SAME SHOULD ONLY BE TAKEN TO MEAN THE ' WARD ' IN A RURA L AREA. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESS EE BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. CO PY OF 39 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 THE ORDER IS PLACED ON RECORD. WE FIND THAT THE TRI BUNAL WHILE DISMISSING THE ASSESSEES GROUND IN THE ABOVE ORDER HELD AS UNDER :- 8. THE ASSESSEES THIRD GROUND RAISES THE ISSUE BAD DEBTS RELATING TO RURAL BRANCHES U/S 36(1)(VIIA). I T PLEADS THAT THE CIT(A) HAS WRONGLY RESTRICTED ITS C LAIM OF AFORESAID DEDUCTION BY TREATING A BRANCH AS RUR AL BASED ON POPULATION OF THE PANCHAYAT INSTEAD OF CONCERNED WARD. 9. IT IS TO BE SEEN THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF BAD AND DOUBTFUL ADVANCES OF ` 654,41,43,300/-. THE ASSESSING OFFICER RESTRICTED T HIS CLAIM TO ` 25,58,86,646/-; INTER ALIA, ON THE GROUND THAT THE ASSESSEES 48 BRANCHES WERE NOT RURAL AS PER SECTION 36(1)(VIIA) EXPLANATION READ WITH RULE 6ABA IN VIEW OF THE CENSUS FIGURES GIVEN IN THE MINISTRY OF HOME AFFAIRS WEBSITE. THE CIT(A) HAS ALSO EXPRESSED AGREEMENT WITH THE ASSESSING OFFICERS FINDINGS IN VIEW OF CASE LAW CIT VS LORD KRISHNA BANK LTD, 339 ITR 6 06 (KERALA). 10. IN THE COURSE OF HEARING, WHEN WE CONFRONTED THE ASSESSEE ABOUT THE AFORESAID DECISION OF THE HON'BL E KERALA HIGH COURT, IT HAS FAILED TO DRAW ANY DISTIN CTION ON FACTS. THUS, WE DECIDE THIS GROUND AS WELL AGAIN ST THE ASSESSEE. 57. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE AR E REJECTED. 58. THE GROUNDS RAISED ON THE NEXT ISSUE BY THE ASS ESSEE ARE AS UNDER:- 40 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 1.1 FURTHER IN COMPUTING THE DEDUCTION U/S.36(1)(VIIA) THE CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER IN NOT CONSIDERING PROVISION MADE IN BOOKS OF ACCOUNTS FOR DEBTS HAVING ARREARS, IF ANY, UPTO 90 DAYS CLASSIFIED UNDER RBI NORMS AS STANDARD ASSETS. 1.2 IN COMPUTING THE DEDUCTION U/S. 36(1)(VIIA) THE CIT(A) HAD ALSO ERRED IN CONFIRMING THE ORDER O F THE A.O. IN NOT CONSIDERING PROVISION FOR DEBTS BASED ON COUNTRY RISK AS PER RBI GUIDELINES. 59. COUNSEL FOR THE ASSESSEE SUBMITS THAT THESE GR OUNDS HAVE BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-OR DINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1815/MDS/2011 DAT ED 2.4.2013. 60. WE HAVE PERUSED THE ABOVE ORDER OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN ITA NO.1815/MDS/2011 DATE D 2.4.2013 AND FIND THAT THE TRIBUNAL HAS DECIDED BOT H THESE ISSUES AGAINST THE ASSESSEE BY DISMISSING THE GROUN DS OBSERVING AS UNDER:- 4. THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS R EGARDING RESTRICTION OF CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS. THE A .R. FOR THE ASSESSEE HAS CONCEDED THAT THIS ISSUE HAS ALREADY B EEN DECIDED AGAINST THE ASSESSEE BANK IN THE CASE OF BHARAT OVE RSEAS BANK LTD. IN ITA NO.1191/MDS/2012. THIS ISSUE HAD ALSO COME UP BEFORE THE TRIBUNAL IN ITA NO.818/MDS/2010 RELEVANT TO THE 41 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ASSESSMENT YEAR 2007-08. THE FINDINGS OF THE TRIBUN AL ARE REPRODUCED HEREIN BELOW:- 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS:- 7.5% OF GROSS TOTAL INCOME : ` 5,74,07,362 10% OF RURAL ADVANCES ( ` 27,26,50,990/-) : ` 2,72,65,099 ` 8,46,72,461 THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON O THER ISSUES AND PURSUANT TO THE RELIEF GRANTED IN SUCH A PPEAL, THE GROSS TOTAL INCOME WHICH EARLIER STOOD AT ` 76,54,31,493/- CAME DOWN TO ` 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GROSS TOTAL INCOME, DEDU CTION UNDER SECTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM ` 5,74,07,362/- TO ` 2,65,39,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING TO ` 2,72,65,099/-, RESULTED IN THE SUM OF ` 5,38,05,015/- BEING EVENTUALLY ALLOWED AS DEDUCTION UNDER SECTION 36(1) (VIIA) OF THE ACT. IN THE BOOKS OF THE ASSESSEE, ACTUAL P ROVISION FOR BAD AND DOUBTFUL DEBTS WAS ONLY ` 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION OF ` 2.23 CRORES ON ITS STANDARD ASSETS. IF THE PROVISION FOR BAD AND DOUBTFUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANC E UNDER SECTION 36(1)(VIIA) WAS IN EXCESS OF SUCH PRO VISION. HOWEVER, IF THE PROVISION FOR STANDARD ASSETS WAS A LSO CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THEN THE TOTAL PROVISION COULD GO UP TO ` 6,24,44,027/-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WEL L WITHIN THE LIMITS SPECIFIED UNDER SECTION 36(1)(VIIA) OF T HE ACT. AT THIS JUNCTURE, A LOOK AT SECTION 36(1)(VIIA) IS NEC ESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BREVITY:- 36(1)(VIIA) A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA] OR A NON-SCHEDULED BANK [OR A CO-OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING A NY 42 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGAT E AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUB JECT TO THE ACTUAL PROVISION MADE BY THE ASSESSEE, WHICH IN NO CASE SHALL EXCEED 7.5% OF THE GROSS TOTAL INCOME. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT WHATEV ER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED , IS NOT IN ACCORDANCE WITH LAW. NOW CONSIDERING THE SECOND ASPECT, WHETHER PROVISION FOR STANDARD ASSETS COULD BE CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AG AINST ANY DEBTS WHICH HAD BECOME DOUBTFUL. STANDARD ASSE TS ARE ALWAYS CONSIDERED RECOVERABLE, IN THE SENSE, BA NK HAS NO DOUBT OF RECOVERABILITY. WHEN THE BANK ITSE LF HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PROVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS. THE DEBT ITS ELF BEING GOOD, A PROVISION MADE ON GOOD DEBT CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBT S. MAY BE, THE RBI HAS MADE A REGULATION FOR 10% PROVI SION FOR STANDARD ASSETS ALSO A PRUDENTIAL NORM. THIS C AN HOWEVER BE CONSIDERED AS A MEASURE PRESCRIBED IN ABUNDANT CAUTION, TO DEAL WITH A SITUATION WHERE BA NKS ARE NOT TO SUFFER SHOCK OF SUDDEN DELINQUENCY THAT COULD HAPPEN IN FUTURE. THERE IS ALWAYS A POSSIBILITY TH AT AN ASSET, WHICH IS FULLY RECOVERABLE, MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPENING OF SU CH A CONTINGENCY CANNOT BE A SUFFICIENT REASON TO CONSID ER A PROVISION MADE ON STANDARD ASSETS ALSO AS A PROVI SION FOR BAD AND DOUBTFUL DEBTS. THEREFORE, CLAIM OF TH E ASSESSEE THAT PROVISION FOR STANDARD ASSETS ALSO HA S TO BE CONSIDERED FOR APPLYING THE CONDITION SET OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION FOR STANDARD ASSETS IS NOT CONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PR OVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE IN ITS BOOKS ` 4,01,44,027/- FALL MUCH BELOW THE SUM OF ` 43 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 5,38,05,015/- ALLOWED BY THE ASSESSING OFFICER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLE ARLY SHOW THAT BUT FOR THE DEDUCTION ALLOWED TO THE ASSE SSEE AS CLAIMED BY IT IN ITS RETURN, THERE WAS NO DISCUS SION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIED AND WHETHER THE LIMITS WERE CORRECTED WORKED OUT. ADMITTEDLY, NO Q UESTION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO WITH REGARD TO THE CLAI M MADE BY IT UNDER SECTION 36(1)(VIIA), INSOFAR AS IT CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSES SING OFFICER HAD NOT COME TO ANY CONCLUSION AT ALL HAVIN G NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36(1)(VIIA) OF THE ACT. WE CANNOT SAY T HAT HE HAD TAKEN A VIEW WHICH WAS IN ACCORDANCE WITH LAW. IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COURSE, A CRYPT IC ORDER OF THE ASSESSING OFFICER BY ITSELF MAY NOT SHOW THA T THERE WAS NO THOUGHT GIVEN BY HIM ON A CLAIM OF THE ASSES SEE. HOWEVER, HERE THERE WAS NO ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE O RDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, AND ALLOWING SUCH CLAIM, WITHOUT ANY DISCUSSION, WILL D EFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. AS HELD BY HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (243 ITR 83), PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS A TERM OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN OR DER WITHOUT APPLICATION OF MIND IS DEFINITELY PREJUDICI AL TO THE INTERESTS OF THE REVENUE. WE ARE IN AGREEMENT WITH LD. CIT THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEO US INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF R EVENUE. NO INTERFERENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. IN VIEW OF THE AFORESAID FINDINGS, THIS GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 44 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 61. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RE JECT THE GROUNDS RAISED BY THE ASSESSEE. 62. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE T HAT COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT SINCE ALL THE INVESTMENTS HELD BY THE APPELLAN T CONSTITUTES ITS STOCK-IN-TRADE THE PROVISIONS OF S ECTION 14A ARE NOT APPLICABLE AND HENCE NO DISALLOWANCE IS CAL LED FOR. 63. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE BANK IS HOLDING SECURITIES AS STOCK-IN-TRADE, WHEN ONCE SECURITIES ARE HELD AS STOCK-IN-TRADE, NO DISALLOWANCE UNDER S ECTION 14A IS WARRANTED. THE COUNSEL SUBMITS THAT CO-ORDINATE BENCH OF THIS TRIBUNAL DECIDED SIMILAR ISSUE FOR THE ASSESSM ENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. REFERRING TO THE SAID ORDER, COUNSEL SUBMITS THAT I N PRINCIPLE, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE HOLDING THAT PROVISIONS OF SECTION 14A HAVE NO APPL ICATION WHEN THE SECURITIES ARE HELD AS STOCK-IN-TRADE. HO WEVER, THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF THE ASS ESSING 45 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 OFFICER TO ASCERTAIN WHETHER SECURITIES ARE HELD AS STOCK-IN- TRADE. 64. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDERS OF LOWER AUTHORITIES IN INVOKING PROVISIONS OF SECTION 14A READ WITH RULE 8D FOR THE PURPOSE OF DISALLOWIN G EXPENDITURE ATTRIBUTABLE FOR EARNING DIVIDEND INCOM E. 65. WE HAVE PERUSED THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10, WHEREIN T HE TRIBUNAL HELD THAT AUTHORITIES BELOW HAVE WRONGLY I NVOKED SECTION 14A IN CASE OF INVESTMENTS HELD AS STOCK-IN -TRADE. WHILE HOLDING SO THE TRIBUNAL OBSERVED AS UNDER:- 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUS ED THE RELEVANT FINDINGS AND THE JUDICIAL PRECEDENTS. UNDI SPUTEDLY, THE ASSESSEE HAD EARNED EXEMPT INCOME OF ` 21 CRORES FROM INVESTMENTS MADE IN MUTUAL FUNDS AND EQUITIES. ITS STAND ADOPTED THROUGHOUT HAS BEEN TO HAVE HELD THE INVESTMENTS AS STOCK-IN-TRADE. THERE IS NO FINDIN G ON THIS ISSUE FORTHCOMING EITHER FROM THE ASSESSING OFFICER OR THE CIT(A). WE HAVE ALSO PERUSED THE GUARD FILE PERTA INING TO I.T.A.NO. 1815/MDS/2011 DECIDED ON 2.4.2013(SUPRA). IT IS EVIDENT THEREFROM THAT THE VERY DISALLOWANCE STANDS UPHELD BY A CO-ORDINATE BENCH. ITS PLEA CHALLENGING APPLIC ABILITY OF SECTION 14A IN CASE OF INVESTMENT HELD AS STOCK-IN -TRADE APPEARS TO HAVE NEITHER BEEN RAISED NOR ADJUDICATED . SO, WE TREAT IT AS A FRESH PLEA NOT COVERED BY THE EARLIER ORDER. THUS, THE NEW ISSUE THAT ARISES FOR OUR CONSIDERATION IS AS TO WHETHER A DISALLOWANCE U/S 14A CAN BE MADE EVEN IN A CASE WHEN THE INVESTMENTS GIVING RISE TO AN EXEMPT INC OME ARE HELD AS STOCK-IN-TRADE OR NOT. PROCEEDING ON THE SAME, WE FIND THAT THE CASE LAW QUOTED BY THE ASSESSEE (SUPR A) 46 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 SQUARELY SUPPORTS ITS PLEA. THE REVENUE HAS BROUGHT TO OUR NOTICE A RECENT THIRD MEMBER DECISION IN CASE OF D. H. SECURITIES P. LTD VS DCIT [2014] 31 (TRIB) 381. THI S DECISION FOLLOWS THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COU RT (WHICH IS ALSO THE CONCERNED JURISDICTIONAL HIGH COURT) IN CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD VS ACIT, 328 I TR 81 AND THAT OF HON'BLE CALCUTTA HIGH COURT IN DHANUKA & SONS VS CIT, 339 ITR 319. NOT ONLY THIS, THE HON'BLE THIRD MEMBER ALSO REFERS TO THE CASE LAW CCI LTD.(SUPRA) AND EXP RESSES A VIEW THAT THE AFORESAID DECISIONS OF OTHER HON'BLE HIGH COURTS WERE NOT BROUGHT TO THE NOTICE OF THE KARNATAKA HIG H COURT. IN THESE CIRCUMSTANCES, THE PICTURE THAT EMERGES IS TH AT VARIOUS HIGH COURTS HAVE EXPRESSED DIVERGENT OPINIONS ON TH IS LEGAL ISSUE. THAT BEING THE CASE, WE APPLY THE DECISION O F CIT VS VEGETABLE PRODUCTS LTD 88 ITR 192 AND IN THE VIEW FAVOURABLE TO THE ASSESSEE IS FOLLOWED. SO, IN PRIN CIPLE, WE HOLD THAT THE AUTHORITIES BELOW HAVE WRONGLY INVOKE D SECTION 14A IN CASE OF INVESTMENTS HELD AS STOCK-INTRADE WHEREIN THE EXEMPT INCOME BY WAY OF DIVIDENDS IS ONLY INC IDENTAL. IT IS ALSO MADE CLEAR THAT SINCE THERE IS NO VERIFICAT ION OF THE FACTUAL POSITION OF INVESTMENTS HELD AS STOCK-IN-T RADE, WE ACCEPT THE ASSESSEES CONTENTIONS IN PRINCIPLE ONLY AND REMIT THE ISSUE BACK TO THE ASSESSING OFFICER TO DETERMIN E THE TRUE FACTUAL POSITION. THE ASSESSEES ALTERNATIVE PLEA C ARRIES ONLY AN ACADEMIC SIGNIFICANCE. THE RELEVANT GROUND IS AC CEPTED FOR STATISTICAL PURPOSES. 66. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL , FOLLOWING THE SAID DECISION OF THIS TRIBUNAL, WE AL LOW THE GROUND RAISED BY THE ASSESSEE. 67. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT A LLOWING DEDUCTION IN RESPECT OF CONTRIBUTION TO STAFF WELFA RE FUND OVERLOOKING THE MANDATORY REQUIREMENT OF PAYMENT AS AN EMPLOYER. 47 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 68. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST TH E ASSESSEE BY THE CO-ORDINATE BENCH FOR THE ASSESSMEN T YEAR 2008-09 IN ITA NO.1815/MDS/2011 DATED 2.4.2013 IN P ARA 14 OF THE ORDER. RESPECTFULLY FOLLOWING THE SAID ORD ER OF THIS TRIBUNAL, WE DISMISS THE GROUND OF ASSESSEE ON THIS ISSUE. 69. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER DISALLOWING THE CLAIM OF DEPRECIATION ON UPS AT 80% OVERLOOKING THE FACT THAT UPS IS AN ENERGY SAVING D EVICE ENTAILING FOR HIGHER DEPRECIATION. 70. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINAT E BENCH FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/ 2012 DATED 18.6.2014 AT PAGES 10 & 11 IN PARA 16 TO 18 O F THE ORDER. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. 48 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 71. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING DISALLOWANCE OF PROVISION FOR WAGE ARREARS. 72. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINAT E BENCH FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.1566/MDS/ 2008 DATED 5.3.2013 AT PAGE 13 & 14 IN PARA 16 OF THE OR DER. 73. WE HAVE PERUSED THE SAID ORDER OF THE CO-ORDINA TE BENCH ON THIS ISSUE, WHEREIN THIS TRIBUNAL HELD AS UNDER:- 16. THE NEXT ADDITIONAL GROUND OF APPEAL RAISED B Y THE REVENUE IS WITH REGARD TO PROVISION TOWARDS WAGE AR REARS. THIS ISSUE HAS BEEN DEALT IN DETAIL IN AN APPEAL OF THE REVENUE IN ITA NO.1866/MDS/2006 FOR THE ASSESSMENT YEAR 1999-2000 DECIDED ON 26.02.2013. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IS REPRODUCED HERE UNDER:- 42. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE SIDES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENTS/ORDERS REFERRE D TO BY THE RESPECTIVE PARTIES. THE CO-ORDINATE BENCH O F THE TRIBUNAL IN ITA NO.1690/MDS/2006 HAS DECIDED THE IS SUE AGAINST THE ASSESSEE BY HOLDING THAT LIABILITY HAS NOT BEEN CRYSTALLIZED AND IT CAN BE ALLOWED CONSEQUENT UPON ITS CRYSTALLIZATION WITHIN THE FRAMEWORK OF LAW. BE THAT AS IT MAY, IT IS AN ADMITTED FACT THAT AGREEMENT WAS ENTERED BETWEEN THE INDIAN BANKS ASSOCIATION INCLUDING THE ASSESSEE AND THE UNIONS OF STAFF/WORKERS FOR REVISION OF WAGES ETC. IT IS ALS O AN 49 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ADMITTED POSITION THAT CONSEQUENT TO REVISION IN WA GES THE AMOUNT HAS BEEN PAID TO THE STAFF. A PERUSAL OF THE ORDER OF CIT(A) SHOWS THAT THOUGH IN NOTES ON ACCOU NT IT IS STATED THAT THE PROVISION OF ` 25.00 CRORES WAS MADE IN AN AD-HOC MANNER DURING THE ACCOUNTING PERIOD, IT FORMED PART OF THE LIABILITY INCURRED BY THE BANK A CTUALLY IN THE NEXT ACCOUNTING YEAR AND THE BANK HAS NOT CLAIM ED THE AMOUNT FOR THAT YEAR. THE EXPENDITURE IS AN BUS INESS EXPENDITURE ALLOWABLE UNDER SECTION 37 OF THE ACT. NOW, THE QUESTION IS WHEN SUCH EXPENDITURE SHOULD BE ALLOWED: WHETHER IT SHOULD BE ALLOWED IN THE ASSESS MENT YEAR RELEVANT TO THE FINANCIAL YEAR IN WHICH MEMORA NDUM OF UNDERSTANDING WAS SIGNED OR IN THE YEAR OF ACTUA L PAYMENT? THE LEARNED AR HAS STATED THAT THE EXPENDITURE MAY BE ALLOWED IN THE YEAR OF ACTUAL PAYMENT. IN VIEW OF THE ABOVE DISCUSSION AND THE STATEMENT MADE BY THE LEARNED AR, WE HOLD THAT THE AMOUNT CLAIMED BY THE ASSESSEE TOWARDS WAGE REVISI ON BE ALLOWED IN THE YEAR OF ACTUAL DISCHARGE OF THE S AID LIABILITY. THIS GROUND OF APPEAL OF THE REVENUE IS THUS PARTLY ALLOWED. SINCE, THE ISSUE IN HAND IS IDENTICAL TO THE ONE AL READY ADJUDICATED BY THE TRIBUNAL, THE PRESENT GROUND OF APPEAL IS PARTLY ALLOWED FOR THE AFORESAID REASONS. 74. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HO LD THAT PROVISION MADE TOWARDS WAGE ARREARS IS ONLY A PROVI SION AND LIABILITY HAS NOT BEEN CRYSTALLIZED. THE WAGE ARREA RS SHALL BE ALLOWED AS DEDUCTION IN THE YEAR IN WHICH THE ASSES SEE DISCHARGES THE LIABILITY BY PAYING WAGE ARREARS TO THE EMPLOYEES. THUS, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS PARTLY ALLOWED. 50 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 75. THE LAST GROUND IN THE GROUNDS OF APPEAL OF THE ASSESSEE READS AS UNDER:- THE CIT(A) ERRED IN RESTRICTING THE RELIEF U/S.90 TO THE EXTENT OF TAX PAID IN THE FOREIGN COUNTRY. THE CIT(A) SHOULD HAVE NOTED THAT THE RELIEF CLAIMED BY THE APPELLANT IS IN ACCORDANCE WITH SECTION 90 READ WITH NOTIFICATION ISSUED AND THEREFORE OUGHT T O HAVE UPHELD THE CLAIM OF THE APPELLANT. 76. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINAT E BENCH FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/ 2012 DATED 18.6.2014 AT PAGES 11 TO 13 IN PARAS 21 TO 25 OF THE ORDER. 77. WE HAVE PERUSED THE SAID ORDER OF THIS TRIBUNA L AND FIND THAT THE ISSUE HAS BEEN DECIDED AGAINST THE AS SESSEE HOLDING AS UNDER:- 21. THE SEVENTH SUBSTANTIVE GROUND CHALLENGES THE CIT(A)S ORDER RESTRICTING RELIEF @ 90% OF THE TAX PAID IN FOREIGN COUNTRIES. 22. FACTUAL BACKDROP QUA THIS ISSUE IS THAT THE ASS ESSEE HAD RAISED A CLAIM OF DOUBLE TAXATION RELIEF IN MEM O OF INCOME FROM ITS OVERSEAS BRANCHES IN SOUTH KOREA, SINGAPORE, THAILAND, SRILANKA AND HONG KONG AMOUNTI NG TO ` 73,57,573/-, ` 21,32,37,338/-, ` 7,84,71,232, ` ` 6,42,94,845/- AND R ` 39,80,57,968/- RESPECTIVELY. ITS THRUST WAS UPON VARIOUS DOUBLE TAXATION AVOIDANCE AGREEMENTS (DTAAS) BETWEEN INDIA AND THE SAID COUNTRIES EXCEPT HONG KONG. THE ASSESSING OFFICER H AD RESTRICTED THIS RELIEF @ 16.5% I.E THE PREVAILING T AX RATE IN 51 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 HONG KONG. THEREAFTER, HE DISTINGUISHED CASE LAW PV AL KULANDAGAN CHETTIAR VS CIT , 267 ITR 654 BY OBSERVI NG THAT CONTRARY TO THE FACTS OF THIS CASE, SHRI CHETT IAR WAS FISCALLY DOMICILED IN MALAYSIA AND DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. ON DTAA WITH SOUT H KOREA, THE ASSESSING OFFICER WAS OF THE VIEW THAT T HE TERMS CONTAINED THEREIN DID NOT GIVE EXCLUSIVE RATE OF TAX TO THE CONCERNED COUNTRY AND IT HAD ONLY PROVIDED F OR CREDIT METHOD OF RELIEF IN DOUBLE TAXATION. ACCORDI NGLY, HE DECLINED TO ACCEPT THE ASSESSEES CLAIM. 23. COMING TO THE DTAAS BETWEEN INDIA AND SINGAPORE , THAILAND AND SRILANKA, THE ASSESSING OFFICER OBSERV ED THAT THEY ALSO RECOGNIZED CREDIT METHOD. HE ALLEG ED THE ASSESSEE NOT TO HAVE PROVIDED ANY DIFFERENCE IN RAT ES OF TAX IN THE ABOVE STATED TAX JURISDICTIONS. SIMULTAN EOUSLY, THE ASSESSING OFFICER HELD THAT ON FURNISHING DETAI LS ON ASSESSEES PART, THE CLAIM WOULD BE ALLOWED IN ITS FAVOUR. THIS RESULTED IN DISALLOWANCE/ADDITION OF ` 55,65,44,48/-. 24. IN LOWER APPELLATE ORDER, THE CIT(A) HAS QUOTED A NOTIFICATION NO.S.O 2123(E) DATED 28.8.2008 REPORTE D AS 304 ITR(ST.)63, CLARIFYING THAT IN SUCH A CASE INVO LVING A DTAA, AN INCOME HAS TO BE INCLUDED IN THE TOTAL REC EIPTS AND THE NECESSARY RELIEF IS TO BE GRANTED BY ELIMI NATION METHOD OR AS PER THE TERMS OF AGREEMENT SEEKING TO AVOID DOUBLE TAXATION. HE RELIES UPON FINANCE ACT, 2012 INSERTING EXPLANATION 3 TO SECTION 90 MAKING THE NOTIFICATION RETROSPECTIVELY APPLICABLE. IN THIS MA NNER, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ALLOW RELIEF TO THE ASSESSEE AS PER THE AFORESAID NOTIFICATION. 25. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE RELEVANT FINDINGS IN THE ORDERS OF ASSESSING OFFICE R AS WELL AS THE CIT(A). THE PARTIES ARE UNANIMOUS BEFOR E US THAT THIS VERY ISSUE STANDS DECIDED IN THE REVENUE S FAVOUR BY THE 'TRIBUNAL' (SUPRA) IN PRECEDING ASSES SMENT YEAR. SO, WE ALSO FOLLOW SUIT AND REJECT THE ASSESS EES RELEVANT GROUNDS. 78. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DI SMISS THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 52 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ITA NO.2031/MDS/2013 : ( REVENUE APPEAL): 79. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIREC TING THE ASSESSING OFFICER TO CONSIDER THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END OF EACH MONTH AND NOT THE INCREMENTAL ADVANCES GRANTED DURING EACH MONTH WHIL E COMPUTING DEDUCTION UNDER SECTION 36(1)(VIIA) OF TH E ACT. 80. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THE PRESENT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL FOR THE ASSESSMENT YE AR 2009- 10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014 AT PAGES 24 TO 26 IN PARAS 56 TO 59 OF THE ORDER. HE PLACES RELIAN CE ON THE SAID ORDER. DEPARTMENTAL REPRESENTATIVE RELIES ON T HE ORDER OF THE ASSESSING OFFICER. 81. SIMILAR ISSUE HAS BEEN RAISED BY THE REVENUE I N ITA NO.2030/MDS/2013 FOR THE ASSESSMENT YEAR 2007-08 AN D WE HAVE DEALT WITH THIS ISSUE IN PARA 51 & 52 OF THIS ORDER . FOR THE REASONS MENTIONED THEREIN AND THE DECISION HOLD S GOOD 53 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 FOR THE ASSESSMENT YEAR 2010-11, WE REJECT THE GROU NDS RAISED BY THE REVENUE ON THIS ISSUE. 82. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE OF LOSS ON REVALUATION OF INVESTMENTS. 83. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSE SSEE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014 IN PAGES 20 & 21 AT PARA 43 TO 46 O F THE ORDER. HE PLACES RELIANCE ON THE SAID ORDER. DEPA RTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF ASSESSING OFFI CER. 84. ON GOING THROUGH THE ORDER OF THE CO-ORDINATE B ENCH IN ITA NO.1949/MDS/2012 DATED 18.6.2014 WE FIND THAT T HE ISSUE IN APPEAL HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE HOLDING AS UNDER:- 43. THE REVENUES FIFTH SUBSTANTIVE GROUND CHALLENGES THE CIT(A)S ORDER DELETING DISALLOWANCE OF ` 69,13,38,139/- QUA LOSS ON REVALUATION OF INVESTMEN TS. 54 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 44. IN SCRUTINY THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE CLAIMED DEDUCTION BY WAY OF LOSS O N REVALUATION OF INVESTMENTS OF ` 69,13,38,139/-. PER ASSESSING OFFICER, THE SAME WAS NEITHER AN ALLOWABL E EXPENDITURE NOR AN ASCERTAINED LIABILITY. IN ASSESS MENT ORDER, HE PLACED RELIANCE ON HIS FINDINGS FOR ASSESSMENT YEARS 1996-97 AND 1998-99 FOR MAKING THE IMPUGNED DISALLOWANCE. 45. IN LOWER APPELLATE ORDER, THE CIT(A) HAS QUOTED HIS PREDECESSORS ORDERS FOR ASSESSMENT YEARS 2005-06 AND 2008- 09(SUPRA) AS WELL AS VARIOUS DECISIONS STATED HEREIN BELOW: UCO BANK VS CIT 240 ITR 355 (SC) CIT VS CITY UNION BANK LTD 291 ITR 144 (MAD) BHARAT OVERSEAS BANK LTD VS ACIT I.T.A.NO. 239/MDS/2001 DATED 7.1.2005 INDIAN BANK VS DCIT I.T.A.NO.984/MDS/2003 DATED 30.6.2011 ACCORDINGLY, THE IMPUGNED DISALLOWANCE STANDS DELETED. 46. COMING TO THIS ISSUE AS WELL, THE PARTIES EXPRESS UNANIMITY IN REFERRING TO ORDER OF THE 'TRIBUNAL' F OR ASSESSMENT YEAR 2008- 09(SUPRA) TO STATE THAT THE V ERY ISSUE STANDS DECIDED IN THE ASSESSEES FAVOUR. CONSEQUENTLY, WE AGREE WITH THE CIT(A)S FINDINGS A ND REJECT THE RELEVANT REVENUES GROUND. 85. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UP HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND REJECT THE GROUNDS OF APPEAL OF THE REVENUE. 86. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING DISALLOWANCE OF LOSS ON REVALUATION OF DERIVATIVE CONTRACTS. 55 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS ALSO BEEN DECIDED BY THE CO-ORDINATE BENCH FOR THE ASSES SMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.201 4 AT PAGES 21 & 22 IN PARAS 47 TO 50 IN FAVOUR OF THE AS SESSEE. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF T HE ASSESSING OFFICER. 87. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIB UNAL WHILE UPHOLDING THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS) IN ALLOWING THE CLAIM OF LOSS ON REVALUAT ION OF DERIVATIVE CONTRACTS OBSERVED AS UNDER:- 47. THE REVENUES SIXTH SUBSTANTIVE GROUND IS THAT THE CIT(A) HAS WRONGLY DELETED DISALLOWANCE OF ` 11,32,83,633/- ON REVALUATION OF DERIVATIVE CONTRAC TS. 48. IN SCRUTINY, THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE CLAIMED LOSS OF ` 11,32,83,633/- ON ACCOUNT OF AFORESAID REVALUATION. PER ASSESSING OFF ICER, THIS PERTAINED TO ONLY SPECULATIVE TRANSACTIONS WHI CH WOULD INVOKE THE BOARDS INSTRUCTION NO.3 OF 2010. HE HELD THAT THE LOSS ARISING OUT OF SPECULATIVE/NOTIO NAL TRANSACTIONS COULD ONLY BE SET OFF AGAINST THE INCO ME OF SUCH ACTIVITY AS NO SALE/CONCLUSION/SETTLEMENT OF CONTRACTS HAD TAKEN PLACE SINCE THE ASSETS IN QUEST ION CONTINUED TO BE OWNED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING AUTHORITY MADE CONSEQUENTIAL ADDITION IN ASSESSEES INCOME. 49. HEREIN ALSO, THE CIT(A) HAS FOLLOWED HIS PREDECESSORS ORDER FOR ASSESSMENT YEAR 2008-09 AS WELL AS DECISION OF THE ITAT MUMBAI IN CASE OF EDEL WISS CAPITAL LTD VS ITO, I.T.A. NO. 5324/MUM/07 DECIDED ON 10.11.2010, TO HOLD THAT PROVISION FOR LOSS ON MAR KET TO 56 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 MARKET BASIS IN RESPECT OF TRADING DERIVATIVES COU LD NOT HAVE BEEN DISALLOWED. SO, THE IMPUGNED DISALLOWANCE STANDS DELETED. 50. COMING TO THIS GROUND, WE FIND FROM THE PARTIES WRITTEN SUBMISSIONS AND PAPER BOOKS FILED THAT THE 'TRIBUNAL' HAS UPHELD THE CIT(A)S IDENTICAL FINDIN GS IN ASSESSMENT YEAR 2008-09. ON BEING GRANTED OPPORTUNI TY, THE REVENUE HAS FAILED TO POINT OUT ANY DISTINCTION ON FACTS. THEREFORE, WE UPHOLD THE CIT(A)S ORDER DELE TING THE AFORESAID DISALLOWANCE AND REJECT THE REVENUES GROUND. 88. RESPECTFULLY FOLLOWING THE SAID ORDER, WE UPHOL D THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) ON T HIS ISSUE AND REJECT THE GROUNDS OF REVENUE. 89. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING DEPRECIATION ON UPS @ 60%. THE DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR THE ASS ESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.20 14 AT PAGE 10 & 11 IN PARA 16 TO 18 OF THE ORDER IN RESTR ICTING DEPRECIATION TO 15% AS AGAINST 80% CLAIMED BY THE ASSESSEE. 57 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 90. ON PERUSAL OF THE ABOVE DECISION, WE FIND THAT THE DEPRECIATION ON UPS WAS ALLOWED BY THIS TRIBUNAL A T 60% OBSERVING AS UNDER:- 16. THE ASSESSEES FIFTH GROUND RAISES ISSUE OF DEPRECIATION ON UPS CLAIMED @ 80%. THE ASSESSING OFFICER TREATED IT AS GENERAL PLANT AND MACHINERY A ND RESTRICTED IT TO 15% OF THE TOTAL VALUE OF RS. 12,49,63,955/- RESULTING IN CONSEQUENTIAL ADDITION OF RS.5,89,08,262/-. IN DOING SO, HE DREW SUPPORT FROM THE ITAT DELHI AND JODHPUR BENCHES DECISIONS TO HOLD T HAT A UPS IS NEITHER PART OF A COMPUTER NOR AN ENERGY SAV ING DEVICE BUT ONLY AN EQUIPMENT TO ENSURE UNINTERRUPTE D POWER SUPPLY. 17. IN LOWER APPELLATE ORDER, THE CIT(A) HAS AGREED WIT H THE ASSESSING OFFICERS FINDINGS TREATING THE UPS I N QUESTION AS PART OF GENERAL PLANT AND MACHINERY ONL Y. 18. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. IT EMANATES FROM THE TABULATION THAT THE VERY DEPRECIATION CLAIM FOR PRECEDING ASSESSMENT YEAR HA S BEEN PARTLY ACCEPTED @ 60% BY THE 'TRIBUNAL' (SUPRA ). THEREFORE, WE ADOPT CONSISTENCY HEREIN AS WELL AND ACCEPT ASSESSEES CLAIM @ 60%. THE BALANCE 20% AMOUNT IS, DISALLOWED. THE ASSESSEE GETS PART RELIE F. 91. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND REJECT THE GROUNDS OF APPEAL OF THE REVENUE ON THIS ISSUE. 92. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING PROVISION MADE FOR LEAVE SALARY. THE COUNSEL FOR TH E 58 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1815/MDS/2011 DATED 2.4.2013 AT PAGE 11 TO 14 IN PARA 6 OF THE ORDER. THE DEPARTMENTAL REPRESENTATIVE SUPPO RTS THE ORDER OF THE ASSESSING OFFICER IN REJECTING THE CLA IM OF THE ASSESSEE FOR ALLOWING PROVISION FOR LEAVE ENCASHMEN T INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT. 93. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRI BUNAL IN ITA NO.1815/MDS/2011 DATED 2.4.2013 ALLOWED THE CLA IM OF THE ASSESSEE BY SUSTAINING THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) OBSERVING AS UNDER:- 6. THE FIFTH GROUND OF APPEAL RELATES TO ALLOWABLI LITY OF PROVISION FOR LEAVE ENCASHMENT. THE ISSUE HAS ALREA DY BEEN ADJUDICATED BY THE TRIBUNAL IN ITA NO.818/MDS/2010 RELEVANT TO THE ASSESSING OFFICER 2007-08 IN THE CASE OF THE AS SESSEE, WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PAR TIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AN D THE JUDGEMENTS REFERRED TO BY BOTH THE SIDES. THE RELE VANT EXTRACT OF THE PROVISIONS OF SECTION 43B(F) ARE REPRODUCED HER EIN BELOW:- 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF A) XXXXXXXXXX B) XXXXXXXXXX C) XXXXXXXXXX D) XXXXXXXXX E) XXXXXXXXX (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, 59 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSES SEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY P AID BY HIM: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR F URNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYM ENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN. 21. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES (SUPRA) HAS HELD THAT THE ORIGINAL ENACT MENT OF SECTION 43B OF THE INCOME TAX ACT WAS TO CURB UNREASONABLE DEDUCTION ON THE BASIS OF THE MERCANTILE SYSTEM OF ACCOUNTING WITHOUT DISCHARGING STATUTORY LIABILITIES ON THE ONE HAND AND CLAIM APPROPRIATE BENEFIT UNDER THE ACT ON THE OTHER INTR ODUCED THE PROVISIONS OF SECTION 43B(F). UNDER CLAUSE (F) OF S ECTION 43B ANY SUM PAYABLE BY THE EMPLOYER TO ITS EMPLOYEES AS LEA VE ENCASHMENT SHALL BE DEDUCTIBLE ONLY IN COMPUTING TH E INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH THE SUM IS ACTUALLY PAID BY THE EMPLOYER TO ITS EMPLOYEES. T HE HONBLE HIGH COURT FURTHER HELD THAT WHILE INSERTING THE C LAUSE (F) NO SPECIAL REASONS WERE DISCLOSED. WITHOUT SUCH REASON S THE ENACTMENT IS INCONSISTENT WITH THE ORIGINAL PROVISI ONS OF THAT SECTION. ALTHOUGH THE DISCLOSURE OF THE REASONS WAS NOT MANDATORY, BUT IN THE INTEREST OF JUSTICE, IT WAS I NCUMBENT UPON THE LEGISLATURE TO DISCLOSE THE REASONS. THE LEGISL ATURE MUST DISCLOSE REASONS WHICH WOULD BE CONSISTENT WITH THE PROVISIONS OF THE CONSTITUTION AND THE LAWS OF THE LAND AND N OT FOR THE SOLE OBJECT OF NULLIFYING THE SUPREME COURT DECISION. THE HONBLE HIGH COURT FURTHER HELD THAT SECTION 43B(F) WAS LI ABLE TO BE STRUCK DOWN AS ARBITRARY AND INCONSISTENT AND DE H ORS THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF BHARAT EARTH MOVERS LTD. (SUPRA). 22. IN THE PRESENT CASE, THE ASSESSEE HAS CREATED P ROVISIONS FOR LEAVE ENCASHMENT OF ` 27.68 CRORES. THE LEARNED AR HAS RELIED ON THE JUDGEMENT OF THE HONBLE CALCUTTA HIG H COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) WHEREIN T HE HONBLE COURT HAS STRUCK DOWN THE PROVISIONS OF SUB-CLAUSE (F) OF SECTION 60 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 43B. THE HONBLE SUPREME COURT OF INDIA IN THE C ASE OF BHARAT EARTH MOVERS LTD. VS. CIT REPORTED AS 245 ITR 428 ANSWERING TO THE QUESTION : WHETHER, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, THE PROVISION FOR MEETING THE LIABILITY F OR ENCASHMENT OF EARNED LEAVE BY THE EMPLOYEE IS ADMISSIBLE DEDUCTIO N? HELD AS UNDER:- A FEW PRINCIPLES WERE LAID DOWN BY THIS COURT, THE RELEVANT OF WHICH FOR OUR PURPOSE ARE EXTRACTED AND REPRODUCED AS UNDER: (I) FOR AN ASSESSEE MAINTAINING HIS ACCOUNTS ON THE MERCANTILE SYSTEM, A LIABILITY ALREADY ACCRUED, THO UGH TO BE DISCHARGED AT A FUTURE DATE, WOULD BE A PROPER DEDU CTION WHILE WORKING OUT THE PROFITS AND GAINS OF HIS BUSI NESS, REGARD BEING HAD TO THE ACCEPTED PRINCIPLES OF COMM ERCIAL PRACTICE AND ACCOUNTANCY. IT IS NOT AS IF SUCH DEDU CTION IS PERMISSIBLE ONLY IN THE CASE OF AMOUNTS ACTUALLY EX PENDED OR PAID ; (II) JUST AS RECEIPTS, THOUGH NOT ACTUAL RECEIPTS B UT ACCRUED DUE ARE BROUGHT IN FOR INCOME-TAX ASSESSMENT, SO AL SO LIABILITIES ACCRUED DUE WOULD BE TAKEN INTO ACCOUNT WHILE WORKING OUT THE PROFITS AND GAINS OF THE BUSINESS; (III) A CONDITION SUBSEQUENT, THE FULFILMENT OF WHI CH MAY RESULT IN THE REDUCTION OR EVEN EXTINCTION OF THE L IABILITY, WOULD NOT HAVE THE EFFECT OF CONVERTING THAT LIABILITY IN TO A CONTINGENT LIABILITY ; (IV) A TRADER COMPUTING HIS TAXABLE PROFITS FOR A P ARTICULAR YEAR MAY PROPERLY DEDUCT NOT ONLY THE PAYMENTS ACTU ALLY MADE TO HIS EMPLOYEES BUT ALSO THE PRESENT VALUE OF ANY PAYMENTS IN RESPECT OF THEIR SERVICES IN THAT YEAR TO BE MADE IN A SUBSEQUENT YEAR IF IT CAN BE SATISFACTORILY ES TIMATED. SO IS THE VIEW TAKEN IN CALCUTTA CO. LTD. V. CIT [1 959] 37 ITR 1 (SC) WHEREIN THIS COURT HAS HELD THAT THE LIABILITY ON THE ASSESSEE HAVING BEEN IMPORTED, THE LIABILITY WO ULD BE AN ACCRUED LIABILITY AND WOULD NOT CONVERT INTO A COND ITIONAL ONE MERELY BECAUSE THE LIABILITY WAS TO BE DIS- CHARGED AT A FUTURE DATE. THERE MAY BE SOME DIFFICULTY IN THE ES TIMATION THEREOF BUT THAT WOULD NOT CONVERT THE ACCRUED LIAB ILITY INTO A CONDITIONAL ONE ; IT WAS ALWAYS OPEN TO THE TAX AUT HORITIES CONCERNED TO ARRIVE AT A PROPER ESTIMATE OF THE LIA BILITY HAVING REGARD TO ALL THE CIRCUMSTANCES OF THE CASE. APPLYING THE ABOVE SAID SETTLED PRINCIPLES TO THE F ACTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVI SION MADE BY THE APPELLANT-COMPANY FOR MEETING THE LIABILITY INCURRED BY 61 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED BY EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, IS ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPTS FOR THE ACCO UNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THE LIABILIT Y. THE LIABILITY IS NOT A CONTINGENT LIABILITY. THE HIGH C OURT WAS NOT RIGHT IN TAKING THE VIEW TO THE CONTRARY. THE APPEA L IS ALLOWED. THE JUDGMENT UNDER APPEAL IS SET ASIDE. TH E QUESTION REFERRED BY THE TRIBUNAL TO THE HIGH COURT IS ANSWERED IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE HONBLE MADRAS HIGH COURT FOLLOWING THE JUDGEM ENT OF THE HONBLE SUPREME COURT OF INDIA, DISMISSED THE APPEA L OF THE REVENUE IN THE CASE OF CIT VS. PANASONIC HOME APPLI ANCES REPORTED AS 323 ITR 344 WHEREIN SIMILAR QUESTION WA S INVOLVED. IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE JUDGEME NTS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. IN VIEW OF THE AFORESAID FINDINGS, WE ALLOW THIS GR OUND OF APPEAL OF THE ASSESSEE. 94. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UP HOLD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND R EJECT THE GROUNDS OF APPEAL OF THE REVENUE ON THIS ISSUE. 95. THE LAST ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT PROVISIONS OF SECTION 115JB ARE NOT A PPLICABLE TO THE ASSESSEE. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED B Y THE CO- 62 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 ORDINATE BENCH IN ASSESSEES OWN CASE IN ITS FAVOUR IN ITA NO.1757/MDS/2011 DATED 2.4.2013 FOR THE ASSESSMENT YEAR 2006-07. COPY OF THE ORDER IS PLACED ON RECORD. DEP ARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF THE ACT. 96. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND FIND THAT THE ASSESSING OFFICER COMPUTED BOOK PROFI TS UNDER SECTION 115JB OF THE ACT AND ALSO INCOME UNDER NORM AL PROVISIONS OF THE ACT AS THE INCOME UNDER NORMAL PR OVISIONS OF THE ACT IS MORE HE ADOPTED THE SAID INCOME. THE ASSESSEE ALSO CHALLENGED AGAINST THE ACTION OF THE ASSESSING OFFICER IN COMPUTING BOOK PROFITS UNDER SECTION 115 JB CONTENDING THAT PROVISIONS HAVE NO APPLICATION TO I TS BANK. HAVING GONE THROUGH THE DECISION OF THE CO-ORDINAT E BENCH IN ASSESSEES OWN CASE IN ITA NO.1757/MDS/2011 DAT ED 2.4.2013, WE FIND THAT THE ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSE. RESPECTFULLY FOLLOWING THE SAID DECISI ON, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAISED BY THE REVE NUE ON THIS ISSUE. 63 ITA NOS. 2124 TO 2126, 1951, 2030 & 2031/MDS/2013 97. TO SUM UP, THE APPEALS OF THE ASSESSEE IN ITA NOS.2124 & 2125/MDS/2013 ARE DISMISSED AND THAT OF ITA NO.2126/MDS/2013 IS PARTLY ALLOWED. THE APPEALS O F THE REVENUE IN ITA NOS.1951 & 2030/MDS/2013 ARE PARTLY ALLOWED AND THAT OF ITA NO.2031/MDS/2013 IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 26 TH DAY OF SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- . ( - 01 2 ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) ACCOUNTANT MEMBER / 4 JUDICIAL MEMBER/ 06 4 0 /CHENNAI, 7 /DATED, 26 TH SEPTEMBER, 2014 SOMU 26:; =; /COPY TO: 1. ASSESSEE 2. ASSESSING OFFI CER 3. > () /CIT(A) 4. > /CIT 5. ; 266B /DR 6. E /GF .