Axis Bank Ltd., Ahmedabad V. The Addl.CIT, Range-I, Ahmedabad

ITA 2196/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8360 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Proportionate interest; Question of law; Fair market value; Revised return; Revenue expenditure
• Section: 143(3); 80HHC; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NOS. 2196 & 2395/AHD/2014 (ASSESSMENT YEAR: 2009-10) AXIS BANK LIMITED, TRISHUL, OPP. SAMTHESHWAR MAHADEV, NEAR LAW GARDEN, ELLIS BRIDGE, AHMEDABAD - 380006 APPELLANT VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1/ CIRCLE-1, AHMEDABAD RESPONDENT / CROSS APPELLANT PAN: AAACU2414K /BY ASSESSEE : SHRI ARVIND SONDE WITH SHRI GAUTAM SHAH, A.R. /BY REVENUE : SHRI D. P. GUPTA, CIT D.R. WITH SHRI K. MADHUSUDAN , SR. D.R. /DATE OF HEARING : 20.09.2017 /DATE OF PRONOUNCEMENT : 13.10.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE ASSESSEE AND REVENUE HAVE FILED INSTANT CROSS A PPEALS FOR ASSESSMENT YEAR 2009-10 ARISE AGAINST THE CIT(A)-VI, AHMEDABAD S ORDER DATED 18.06.2014 IN CASE NO. CIT(A)-VI/ADDL.R-1/295/11-12, IN PROCEEDIN GS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 2 - HEARD BOTH SIDES. CASE FILE PERUSED. 2. THE ASSESSEES FIRST SUBSTANTIVE GROUND IN ITS A PPEAL ITA NO.2196/AHD/2014 SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING A SUM OF RS.39,45,30,140/- U/S. 14A R.W. RULE 8D OF THE INCO ME TAX RULES RELATING TO ITS EXEMPT INCOME OF RS.15,48,10,925/-. THE ASSESSEE I S A COMPANY ENGAGED IN BANKING BUSINESS. THERE IS NO DISPUTE THAT IT DERI VED THE ABOVE EXEMPT INCOME IN THE RELEVANT PREVIOUS YEAR. THE ASSESSEE APPEARS T O HAVE SUO MOTTO DISALLOWED A SUM OF RS.1,00,21,247/- DURING THE COURSE OF SCRUTI NY. IT THEREAFTER CONTESTED ASSESSING OFFICERS SHOW CAUSE NOTICE SEEKING TO IN VOKE SECTION 14A R.W. RULE 8D INTER ALIA BY PLEADING THAT THERE HAS TO BE AN EXPR ESS SATISFACTION U/S.14A(2) QUA ITS ACCOUNTS ESTABLISHING A DIRECT NEXUS WITH THE EXEMP T INCOME IN QUESTION, ITS INTEREST FREE FUNDS WERE MUCH MORE THAN TAX FREE INVESTMENTS AND THAT THE RELEVANT FACTS INVOLVED IN DERIVING THE IMPUGNED EXEMPT INCOME DID NOT WARRANT ANY SUCH DISALLOWANCE. THE ASSESSING OFFICER HOWEVER REJECT ED ALL THESE CONTENTIONS IN HIS ASSESSMENT ORDER. HE OBSERVED FIRST OF ALL THAT TH E ASSESSEE HAS NOT DISCHARGED ITS INITIAL ONUS OF PROVING THE ABOVE DIRECT NEXUS BETW EEN TAX FREE INVESTMENTS VIS-- VIS THE NON INTEREST BEARING FUNDS. HE THEN INVOKE D PROPORTIONATE INTEREST AND ADMINISTRATIVE DISALLOWANCE UNDER RULE 8D (2) (II & III) TO THE TUNE OF RS.37,11,56,870/- AND RS.3,33,94,517/-; RESPECTIVEL Y TOTALING TO RS.40,45,51,387/- AS REDUCED BY THE ABOVE SUO MOTU DISALLOWANCE OF RS .1,00,21,247/-; COMING TO RS.39,45,30,140/- UNDER CHALLENGE BEING MADE IN ASS ESSMENT ORDER DATED 21.12.2011. 3. THE CIT(A) AFFIRMS ASSESSING OFFICERS ACTION BY PLACING RELIANCE UPON HIS CORRESPONDING FINDINGS IN PRECEDING ASSESSMENT YEAR 2008-09 AS UNDER: 4.4 IDENTICAL ISSUE CAME UP IN APPELLANT'S OWN CAS E FOR A.Y. 2008-09. VIDE ORDER DTD. 01-12-2011 IN APPEAL NO. CIT(A)/ADDL.CIT./R-L/247/1 0-LL, MY PREDECESSOR HELD AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND. APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER MADE DISALLOW ANCE OF EXPENSE RELATING TO EXEMPT INCOME. SUCH DISALLOWANCE WAS CONSIDERED NECESSARY SINCE APPELLANT DISALLOWED ONLY RS 0.64 CRORES OUT OF COMMON INTEREST AND OTHER EXPENS ES TREATING THE SAME AS RELATING TO ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 3 - INVESTMENT RESULTING IN EXEMPT INCOME. THE SATISFAC TION OF THE ASSESSING OFFICER IN THIS REGARD IS AS UNDER- ' THE AMOUNT PROPOSED FOR DISALLOWANCE UNDER SECTIO N 14 A OF THE ACT BY THE ASSESSEE AT RS. 63,84,525/-, (WHICH WAS ALSO WITHDR AWN DURING THE ASSESSMENT PROCEEDINGS IS FOUND TO BE EXTREMELY LOW, CONSIDERI NG THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 30,19,15,390/-. NO SOUND BASIS IS FOU ND FOR THIS DISALLOWANCE. NOT BEING SATISFIED BY THIS CLAIM OF THE ASSESSEE, THE UNDERS IGNED IS BOUND TO REVERT TO RULE 8D OF THE RULES.' NOW RULE 8D IS HELD TO BE APPLICABLE WITH EFFECT FR OM ASSESSMENT YEAR 2008-39 BY BOMBAY HIGH COURT, THE DISALLOWANCE OF EXPENSES REL ATING TO EXEMPT INCOME ARE TO BE MADE BY THE METHOD PRESCRIBED IN THE SAID RULE IF D ISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME IS NOT MADE BY THE APPELLANT PROPERLY . APPELLANT ONLY DISALLOWED NOMINAL EXPENSES UNDER SECTION 14A WHEREAS IF WAS INCURRING SUBSTANTIAL EXPENSES ON ACCOUNT OF INTEREST AND OTHER ADMINISTRATIVE EXPE NSES FOR THE BUSINESS OF BANKING AND INVESTMENT, PA RT OF WHICH RESULTED IN EXEMPT INCOME. CONSIDERING ALL THESE FACTS, DISALLO WANCE UNDER SECTION 14 A ON ACCOUNT OF INTEREST AND OTHER-EXPEN SES ARE NECESSARY. IN THE CASE OF APPELLANT, BUSINESS IS OF BORROWING AND LENDING AND THEREFORE IT CANNOT BE SAID THAT BORROWED FUNDS WERE FOR X PURPO SES AND NOT FOR Y PURPOSES. ENTIRE FUNDS IN THE CASE OF BANK ARE FUNGIBLE AND NO PART OF FUND CAN BE ATTRIBUTED EXCLUSIVELY TO INVESTMENT OR OTHER BANKING ACTIVITY. THEREFORE ARGUMENT OF OWNED FUND OR INTEREST FREE FUNDS UTILIZED FOR INVESTMENT IS NOT CORRECT. THERE IS NO QUESTION OF BENEFICIAL ALLOCATION OF FUNDS IN THE CASE OF BANKING BUSINESS . THEREFORE THE DECISIONS REFERRED BY THE APPELLANT IN THIS REGARD ARE NOT APPLICABLE TO THE BANKING COMPANY WHOSE PRINCIPAL BUSINESS IS OF BORROWING AND LENDING/INVESTMENTS. COMING TO THE METHOD OF COMPUTATION OF DISALLOWANCE UNDER SECTION 14 A, ASSESSING OFFICER DISALLOWED EXPENSES RELATABLE TO EXEMPT INCOME AS PER RULE 3D WHICH IS MANDATORY FROM ASSESSMENT YEAR 2008-09. FOR INTERES T, PROPORTIONATE EXPENSE IS DISALLOWABLE WHEREAS FOR OTHER EXPENSES .5% OF AVER AGE INVESTMENT VALUE IS DISALLOWABLE. CONSIDERING THE FACT THAT APPELLANT CLAIMED HUGE AD MINISTRATIVE AND OTHER EXPENSES, THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE BY THE ASSESSING OFFICER @.5% OF INVESTMENT RESULTING IN EXEMPT INCOME IS AS PER THE FORMULA GI VEN IN RULE 3D WHICH IS MANDATORY FOR MAKING DISALLOWANCE. IN VIEW OF THIS THE ADDITION @ .5% OF INVESTMENT RE SULTING IN EXEMPT INCOME MADE BY THE ASSESSING OFFICER IS CONF IRMED. SINCE RULE 8D IS MANDATORY FROM THIS YEAR, DISALLOWANCE OF ADMINISTRATIVE AND OTHER EXPENSES RELATING TO EXEMPT INCOME ARE TO BE COMPUTED AS PER THIS. THE BASIS OF DISALLOWANCE IN EARLIER YEARS CANNOT BE APPLIED THIS YEAR SINCE RULE 8D IS MANDATORY AND HAS TO BE APPLIED FOR THIS YEAR ONWARDS. ACCORDINGLY THE ORDERS OF APPEAL IN EARLIER YEARS A RE NOT RELEVANT FOR THIS YEAR. AS REGARDS INTEREST, APPELLANT HAD BORROWED FUNDS O N WHICH INTEREST WAS PAID. WHILE MAKING INVESTMENTS, BOTH BORROWED FUNDS AS WE LL AS OWN FUNDS WERE USED HENCE ONE CANNOT SAY THAT BORROWED FUNDS WERE USED ONLY F OR BUSINESS PURPOSE AND OWNED CAPITAL WAS ONLY USED FOR INVESTMENT. ADMITTEDLY NO SEPARATE ACCOUNTS ARE MAINTAINED FOR BUSINESS AND INVESTMENT ACTIVITIES THEREFORE APPELL ANT'S CLAIM IS NOT JUSTIFIED THAT BORROWED FUNDS WERE NOT USED IN MAKING INVESTMENT. THEREFORE IN THE ABSENCE OF CLEAR CUT DETAILS OF UTILIZATION OF FUNDS, THE FORMULA GIVEN IN RULE 8D WHICH IS MANDATORY FROM THIS YEAR ONWARD IS TO BE APPLIED. AS REGARDS TRADING SHARES, THE DECISIONS RELIED UPO N BY THE APPELLANT ARE NOT APPLICABLE IN VIEW OF THE FACT TH AT DIVIDEND RECEIVABLE ON EVEN TRADING STOCK IS EXEMPT AND DISALLOWANCE OF EXPENSES RELATI NG TO THAT ARE TO BE MADE. ONCE RULE 8D IS APPLIED IN COMPUTING DISALLOWANCE, THERE IS N O SCOPE FOR MODIFYING THE FIGURES SO COMPUTED. SINCE RULE 8D WAS NOT APPLICABLE TILL LAS T YEAR, THE DISALLOWANCE UNDER SECTION 14 A CONFIRMED WAS NOT EXACTLY AS PER RULE 8D. HOWE VER SINCE THE FORMULA FOR ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 4 - DISALLOWANCE OF COMMON INTEREST IS GIVEN IN RULE 8D , THERE IS NO SCOPE OF ANY VARIATION ON ACCOUNT OF ANY CLAIM. THE MOMENT APPELLANT IS NOT A BLE TO PROVE THAT INTEREST OR PART OF INTEREST PAID IS NOT DIRECTLY ATTRIBUTABLE TO TAXAB LE INCOME RECEIVED OR EARNED; THE FORMULA HAS TO BE APPLIED. SINCE RULE 8D IS STATUTORY AND B INDING, THE DISALLOWANCE COMPUTED UNDER THE SAME RULE HAS TO BE MADE. ACCORDINGLY, AP PEAL ORDERS PASSED FOR EARLIER YEARS ARE NOT CONSIDERED RELEVANT IN THE PRESENT SITUATIO N. THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER IS ACCORDINGLY CONFIRMED.' FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDER ATION, FOLLOWING THE ABOVE-MENTIONED ORDER, IMPUGNED DISALLOWANCE U/S 14A OF RS. 39,45,3 0,140/- IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 4. WE HAVE HEARD RIVAL SUBMISSIONS. BOTH PARTIES A RE FAIR ENOUGH DURING THE COURSE OF HEARING THAT RELEVANT FACTS PERTAINING TO THE INSTANT ISSUE ARE IDENTICAL AS THEY WERE IN PRECEDING ASSESSMENT YEAR 2008-09 I.E. SINCE APPLICATION OF RULE 8D OF THE INCOME TAX RULES. THE ASSESSEE THEN TAKES U S TO PAPER BOOK PAGES 77 TO 98 CONTAINING A CO-ORDINATE BENCH ORDER DATED 24.01.20 17 FOR PRECEDING ASSESSMENT YEAR DELETING PROPORTIONATE INTEREST DISALLOWANCE O N THE GROUND THAT ASSESSEES INTEREST FREE FUNDS EXCEED ITS TAX FREE INVESTMENTS AMOUNTING TO RS.651CRORES. IT THEN CONFIRMS LATTER LIMB OF ADMINISTRATIVE DISALLO WANCE AMOUNTING TO RS.63.84LACS. WE TAKE CUE THEREFROM TO NOTICE THAT ASSESSEES TAX FREE INVESTMENTS IN THE IMPUGNED ASSESSMENT YEAR READ A FIGURE OF RS .684CRORES AS AGAINST INTEREST FREE FUNDS IN THE NATURE OF SHARE CAPITAL AND RESER VES AMOUNTING TO RS.10,214CRORES. WE THEREFORE FIND NO REASON TO CONCUR WITH THE ABOV E PROPORTIONATE INTEREST DISALLOWANCE OF RS.37,11,56,870/-. WE NOW PROCEED TO DEAL WITH ADMINISTRATIVE EXPENDITURE DISALLOWANCE OF RS.3,33,94,517/-. IT I S NO MORE AN ISSUE THAT THE ABOVE CO-ORDINATE BENCH HAD UPHELD THE SAME IN PRECEDING ASSESSMENT YEAR. WE THEREFORE ADOPT CONSISTENCY TO AFFIRM THIS LATTER DISALLOWANC E OF ADMINISTRATIVE EXPENDITURE. THIS FIRST SUBSTANTIVE GROUND IS TAKEN AS PARTLY AC CEPTED. 5. THE ASSESSEES SECOND SUBSTANTIVE GROUND PLEADS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS I N ADDING SPECULATIVE GAINS OF RS.2,64,27,796/- AMORTIZED AS PER RBI GUIDELINES AS WELL AS IN DISALLOWING SUCH RELATED GAIN OF RS.3,21,04,491/- AS TAXED IN PRECED ING ASSESSMENT YEARS. BOTH PARTIES VERY FAIRLY TAKE US TO PAGE 85 OF THE PAPER BOOK WHEREIN THE ABOVE CO- ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 5 - ORDINATE BENCH HAS ACCEPTED ASSESSEES IDENTICAL AR GUMENTS QUA FORMER LIMB IN PRECEDING ASSESSMENT YEAR 2008-09 AS UNDER: 17. GROUND NO. 3 RELATES TO THE SECURITIZATION GAI NS OF RS. 3,16,64,200/- AMORTISED AS PER RBI GUIDELINES AND NON-ALLOWANCE OF SUCH REA LIZED GAINS OF RS. 86,29,309/-. 18. THE A.O. HAS CONSIDERED THIS ISSUE AT PARA 6 ON PAGE 5 OF ITS ORDER AND HAS FOLLOWED THE FINDINGS GIVEN IN THE IMMEDIATE PRECED ING ASSESSMENT YEAR 2007- 08. 19. WE FIND THAT IN EARLIER ASSESSMENT YEAR, THIS D ISPUTE TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL HAS CONSIDERED THE SAME I N ITA NOS. 1015 & 1219/AHD/2011 AND 250/AHD/2012. THE RELEVANT FINDIN GS OF THE CO-ORDINATE BENCH READS AS UNDER:- 24. GROUND NO. 3 RELATES TO THE ADDITION MADE TOWA RDS GAIN ON SECURITIZATION AMORTIZED AS PER RBI GUIDELINES. 25. THE A.O HAS CONSIDERED THIS ISSUE AT PARA 7 ON PAGE 14 OF HIS ORDER WHEREIN THE OFFICER MADE THE FOLLOWING OBSERVATIONS:- 7.1 ON PERUSAL OF THE SIGNIFICANT ACCOUNTING POLICIES T O THE FINANCIAL STATEMENT, IT IS SEEN THAT THE NOTE ON 'SECURITIZATION 1 (PARA 4.4) READS AS UNDER: THE BANK ENTERS INTO PURCHASE/ SALE OF CORPORATE AN D RETAIL LOANS THROUGH DIRECT ASSIGNMENT/ SPECIAL PURPOSE VEHICLE (SPV). IN MOST CASE, POST SECURITIZATION, THE BANK CONTINUES TO SERVICE THE LOANS TRANSFERRED TO THE ASSIGNEE/ SPV. THE BANK ALSO PROVIDES CREDIT ENHANCEMENT IN THE FORM OF CAS H COLLATERALS AND/ OR BY SUBORDINATION OF CASH FLOWS TO SENIOR PASS THROUGH CERTIFICATE (PTC) HOLDERS. IN RESPECT OF CREDIT ENHANCEMENTS PROVIDED OR RECOURSE OBLIGATIONS (PROJECTED DELINQUENCIES, FUTURE SERVICING ETC.) ACCEPTED BY T HE BANK, APPROPRIATE PROVISION/ DISCLOSURE IS MADE AT THE TIME OF SALE IN ACCORDANC E WITH AS-29- PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS. GAINS ON SECURITIZATION TRANSACTION IS RECOGNIZED O VER THE PERIOD OF THE UNDERLYING SECURITIES ISSUED BY THE SPV. LOSS ON SECURITIZATIO N IS IMMEDIATELY DEBITED TO PROFIT AND LOSS ACCOUNT. 7.2.FURTHER, IT IS SEEN THAT 'NOTES TO ACCOUNT' (PA RA 5.1.15) READS AS UNDER:- 31.03.07 (RS IN CR.) NUMBER OF LOAN ACCOUNTS SECURITIZED 2.00 BOOK VALUE OF LOAN ASSETS SECURITIZED 547.16 SALE CONSIDERATION RECEIVED FOR THE SECURITIES ASSE TS 550.09 NET GAIN/ LOSS OVER NET BOOK VALUE 2.93 7.3 THE ASSESSEE WAS ASKED TO EXPLAIN WHERE THE ABO VE AMOUNT OF RS. 2.93 CRORES HAS BEEN OFFERED AS INCOME IN ITS ANNUAL ACCOUNTS. IN THIS REGARD, THE ASSESSEE CONTENDED AS UNDER: ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 6 - GAIN ON SECURITIZATION OF ASSET OF RS. 2.93 CRORES AS PER PARA 5.1.15 OF THE AUDITED ACCOUNTS DURING THE HEARING HELD ON 10.11.2009, YOU HAVE REQ UESTED US TO PROVIDE EXPLANATION THAT WHERE THE NET GAIN OF RS. 2.93 ON SECURITIZATION TRANSACTIONS, AS PER PARA 5.1.15 (PAGE NO. 60 OF THE ANNUAL REPORT), HAS BEEN ACCOUNTED IN THE PROFIT AND LOSS. IN THIS REGARD WE SUBMIT AS FOLLOW S: FOR THE YEAR UNDER CONSIDERATION, THE BANK HAS RECO GNIZED INCOME OF RS. 2,00,28,097 UNDER THE HEAD OTHER INCOME, (SCHEDULE 14, SUB-CLAUSE, VII, MISCELLANEOUS INCOME) AND RS. 93,13,051 WAS SHOWN U NDER THE HEAD OTHER LIABILITIES AND PROVISIONS (SCHEDULE 5, SUB CLAUSE VII, OTHERS INCLUDING PROVISIONS). THE METHOD OF ACCOUNTING FOLLOWED IN THIS REGARD IS AS PER THE RBI GUIDELINES. IN TERMS OF THE RBI NOTIFICATION, A COPY OF WHICH I S ENCLOSED FOR YOUR REFERENCE, ANY LOSS ARISING ON ACCOUNT OF THE SALE PURSUANT TO SECURITIZATION PROPOSAL SHOULD BE ACCOUNTED AND CHARGED TO THE PROFIT AND LOSS ACC OUNT FOR THE YEAR DURING WHICH THE SALE UPON SECULARIZATION IS EFFECTED AND ANY PROFIT/PREMIUM ARISING ON ACCOUNT OF SUCH SALE SHOULD BE AMORTIZED OVER THE L IFE OF THE SECURITIES ISSUED OR TO BE ISSUED BY THE SPV (SPECIAL PURPOSE VEHICLE). AS PER THE RBI DIRECTIVES, (PLEASE REFER SIGNIFICAN T ACCOUNTING POLICIES AT PARA 4.4 UNDER THE HEAD 'SECURITISATION 1 , ON PAGE NO. 51 OF THE ANNUAL REPORT), GAIN ON SECURITIZATION IS RECOGNIZED OVER THE PERIOD OF THE UNDERLYING SECURITIES ISSUED BY THE SPV AND LOSS ON SECURITIZATION IS DEBITED TO PR OFIT AND LOSS ACCOUNT. 26. THE EXPLANATION OF THE ASSESSEE DID NOT FIND F AVOUR WITH THE A.O. WHO WENT ON TO MAKE AN ADDITION OF RS. 93,13,051/-. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HAS BEEN STATED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS STRONGLY CONTENDED THAT WHAT IS RELEVANT FOR INCOME TAX IS REAL INCOME. IT WAS FURTHER BROUGHT TO THE NOTICE O F THE FIRST APPELLATE AUTHORITY THAT RBI GUIDELINES ARE EXPRESSLY MADE MANDATORY FO R ALL BANKS. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS O F THE OPINION SINCE THE ASSESSEE HAS SOLD THESE IMPUGNED ASSETS, THEREFORE, THE ASSE SSEE HAS NO LIABILITY WHATSOEVER ON THESE TRANSACTIONS AFTERWARDS. SINCE THERE IS NO UNCERTAINTY TO THE INCOME ON THESE TRANSACTIONS THERE IS NO QUESTION OF POSTPONI NG THE INCOME. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A.O. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN STATED THAT BEING A BANK IT HAS TO MANDATORILY FOLLOW THE GUIDELINES ISSUED BY THE RBI. IT IS THE SAY OF THE LD. COUNSEL THAT IT IS NOT THE CASE OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS NOT F OLLOWED THE GUIDELINES OF THE RBI. THEREFORE, THE ACTION OF THE A.O AND ALSO OF T HE LD. CIT(A) ARE AGAINST THE FACTS OF THE CASE. PER CONTRA, THE LD. D.R. STRONGL Y RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 27. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CA REFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. IT IS A SETTLED PROPOSITI ON OF LAW THAT WHAT IS RELEVANT FOR INCOME TAX ON THE BASIS IS THE REAL INCOME AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY CO. LTD. 225 ITR 746. VARIOUS HIGH COURTS HAVE GIVEN DUE RECOGNITION TO RBI GUIDELINES WHICH DETER MINED THE TAXATION OF BANKS/NBFC. THE HONBLE UTTARANCHAL HIGH COURT IN T HE CASE OF NAINITAL BANK LTD. 309 ITR 335, HONBLE ALLAHABAD HIGH COURT IN T HE CASE OF KAILASH AUTO FINANCE LTD. 320 ITR 394 AND ALSO HONBLE HIGH COUR T OF DELHI IN THE CASE OF ELGI FINANCE LTD. 293 ITR 357. 28. IN OUR CONSIDERED OPINION, THE AMORTIZATION ME RELY REPRESENTS A TIMING DIFFERENCE AND SINCE THE BANK IS CONSISTENTLY MAKIN G PROFITS AND PAYING TAX AT THE HIGHEST RATE WITHOUT CLAIMING ANY TAX HOLIDAY BENEF IT, IT CAN BE SAFELY CONCLUDED THAT THE METHOD FOLLOWED IS REVENUE NEUTRAL. WE DRA W SUPPORT FROM THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF NAG RI MILLS CO. LTD. 33 ITR 681. 29. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS REFERRED TO HEREINABOVE, WE DO NOT FIND ANY MERIT IN THE FIN DINGS OF THE LD. CIT(A). WE ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 7 - ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A ) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 93.13 LACS. GROUND NO. 3 IS ACCORDI NGLY ALLOWED. 20. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH (SU PRA), WE DIRECT THE A.O. TO DELETE THE IMPUGNED DISALLOWANCE/ADDITIONS. GROUND NO. 3 IS ACCORDINGLY ALLOWED. 6. WE DRAW SUPPORT FROM ABOVE CO-ORDINATE BENCH FIN DINGS TO DELETE ADDITION OF SPECULATIVE GAINS OF RS.2,64,27,796/- AMORTIZED AS PER RBI GUIDELINES. THE ASSESSEE AT THIS STAGE SUBMITS THAT IT NO MORE WISH ES TO PRESS FOR ITS LATTER GRIEVANCE QUA ADDITION OF RS.3,21,05,491/- AS AN INSTANCE OF DOUBLE ADDITION SINCE ASSESSED IN EARLIER ASSESSMENT YEARS BECAUSE OF THE FACT THAT I T HAS NOT BEEN TAXED TILL DATE. WE APPRECIATE THIS FAIR STAND TO CONFIRM THE ABOVE LAT TER ADDITION OF RS.3.21CRORES. THIS SECOND SUBSTANTIVE GROUND IS THEREFORE PARTLY ACCEP TED. 7. WE NOTICE AT THIS STAGE THAT THE ASSESSEE HAS RA ISED AN ADDITIONAL GROUND ON 08.09.2017 CLAIMING EMPLOYEES STOCK OPTION SCHEME ESOP AS PER SEBI GUIDELINES, 1999 AS REVENUE EXPENDITURE. IT SUBMIT S FIRST OF ALL THAT ITS SIGNIFICANT ACCOUNTING POLICIES IN ANNUAL REPORT THROW SUFFICIE NT LIGHT ON THE IMPUGNED ESOP SCHEME 2001 IN DULY EXPLAINING THAT IT HAS BEEN FOL LOWING INTRINSIC VALUE METHOD IN ALLOCATING STOCK OPTION TO EMPLOYEES. THESE OPTION S ARE STATED TO BE GRANTED AT AN EXERCISE PRICE EQUAL OR LOWER THAN FAIR MARKET PRIC E OF THE UNDERLYING EQUITY SHARES. THE ACCESS OF SUCH FAIR MARKET PRICE OVER EXERCISE PRICE ON GRANT DATE IS CLAIMED TO BE RECOGNIZED AS A DEFERRED COMPENSATION COST AS AM ORTIZED ON STRAIGHTLINE BASIS OVER THE VESTING PERIOD OF SUCH OPTIONS. MR. SONDE THEN DRAWS OUR ATTENTION TO THIS TRIBUNALS SPECIAL BENCH DECISION IN BIOCON LTD. VS . DCIT (2013) 144 ITD 21(BANGALORE)(SB) ACCEPTING DIFFERENCE BETWEEN FAIR MARKET VALUE OF SHARES ON ESOP GRANT DATE AND EXERCISE OF OPTIONS DAY AS BU SINESS EXPENDITURE U/S.37(1) OF THE ACT. HE THEN CLARIFIES THAT ESOP COST IN THE I MPUGNED ASSESSMENT YEAR IS RS.61.90CRORES. RELEVANT DOCUMENTS TO THIS EFFECT ARE STATED TO BE FORMING PART OF ASSESSEES PAPERBOOK / 15 TH ANNUAL REPORT PAGES 19, 21, 23, 67 AND 85. ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 8 - 8. WE AFFORDED AMPLE OPPORTUNITY TO THE REVENUE. I T FAILS TO REBUT LEGALITY OF ASSESSEES CLAIM THAT ABOVE DIFFERENCE BETWEEN FAIR MARKET VALUE OF STOCK OPTION ON THE DATE OF ALLOCATION AND EXERCISE OF OPTION IS AD MISSIBLE AS REVENUE EXPENDITURE AS PER HONBLE SPECIAL BENCH DECISION (SUPRA). ITS ON LY CASE IS THAT THE ASSESSEE IS NOT ENTITLED TO RAISE ITS ADDITIONAL GROUND AT THIS BEL ATED STAGE. WE FIND NO MERIT IN THE INSTANT TECHNICAL PLEA. HONBLE JURISDICTIONAL HIG H COURTS DECISION IN CIT VS. MITESH IMPEX 270 CTR 66 (GUJARAT) RECOGNIZES THIS T RIBUNALS JURISDICTION TO ENTERTAIN SUCH AN ADDITIONAL GROUND FOR THE FIRST T IME AS UNDER. '38. IT THUS BECOMES CLEAR THAT THE DECISION OF TH E SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA) IS CONFINED TO THE POWERS OF THE ASSESSING OFFICER AND ACCE PTING A CLAIM WITHOUT REVISED RETURN. THIS IS WHAT SUPREME COURT OBSERVED IN THE SAID JUDGMENT WHILE DISTINGUISHING THE JUDGMENT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA) A ND THAT IS HOW VARIOUS HIGH COURTS HAVE VIEWED THE DICTUM OF THE DECISI ON IN THE CASE OF GOETZE (INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX (SUPRA). WHEN I T COMES TO THE POWER OF APPELLATE COMMISSIONER OR THE TRIBUNAL, THE COUR TS HAVE RECOGNIZED THEIR JURISDICTION TO ENTERTAIN A NEW GROUND OR A LEGAL CONTENTION. A GROUND WOULD HAVE A REFERENCE TO AN ARGUMENT TOUCHING A QUESTION OF FACT OR A QUESTION OF LAW OR MIXED QUESTION OF LAW OR FACTS. A LEGAL CONTENTION WOULD ORDINARILY BE A PURE QUESTION OF LAW WITHOUT RAISING ANY DISPUTE ABOUT THE FACTS. NOT ONLY SUCH ADDITIONAL GROU ND OR CONTENTION, THE COURTS HAVE ALSO, AS NOTED ABOVE, RECOGNIZED THE POW ERS OF THE APPELLATE COMMISSIONER AND THE TRIBUNAL TO ENTERTAIN A NEW CLAIM FOR THE FIRST TIME THOUGH NOT MADE BEFORE THE ASSESSING OFFICER. INCOME TAX PROCEEDI NGS ARE NOT STRICTLY SPEAKING ADVERSARIAL IN NATURE AND THE INTENTION OF THE REVENUE WOULD BE TO TAX REAL INCOME. 39. THIS IS PRIMARILY ON THE PREMISE THAT IF A CLA IM THOUGH AVAILABLE IN LAW IS NOT MADE EITHER INADVERTENTLY OR ON ACCOUNT OF ERRONEOUS BELIEF OF COMPLEX LEGAL POSITION, SUCH CLAIM CANNOT BE SHUT OUT FOR ALL TI MES TO COME, MERELY BECAUSE IT IS RAISED FOR THE FIRST TIME BEFORE THE APPE LLATE AUTHORITY WITHOUT RESORTING TO REVISING THE RETURN BEFORE THE ASSESSING OFFIC ER. 40. THEREFORE, ANY GROUND, LEGAL CONTENTION OR EVEN A CLAIM WOULD BE PERMISSIBLE TO BE RAISED FOR THE FIRST TIME BEFORE T HE APPELLATE AUTHORITY OR THE TRIBUNAL WHEN FACTS NECESSARY TO EXAMINE SUCH GRO UND, CONTENTION OR CLAIM ARE ALREADY ON RECORD. IN SUCH A CASE THE SITUATIO N WOULD BE AKIN TO ALLOWING A PURE QUESTION OF LAW TO BE RAISED AT ANY STAGE OF THE PROCEEDINGS. THIS IS PRECISELY WHAT HAS HAPPENED IN THE PRESE NT CASE. THE APPELLATE COMMISSIONER AND THE TRIBUNAL DID NOT NEED TO NOR DID THEY TRAVEL BEYOND THE MATERIALS ALREADY ON RECORD, IN ORDER T O EXAMINE THE CLAIMS OF THE ASSESSEES FOR DEDUCTIONS UNDER SECTION 80I B AND 80HHC OF THE ACT.' ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 9 - 9. IT IS NOT IN DISPUTE THAT ASSESSEES RELEVANT DE TAILS PERTAINING TO THE IMPUGNED ESOP SCHEME ALREADY FORM PART OF THE CASE RECORDS A S INDICATED IN PRECEDING PARAGRAPH. IT HAS FURTHER COME ON RECORD THAT THE WHETHER OR NOT SUCH AN ESOP EXPENDITURE IS ALLOWABLE U/S.37 OF THE ACT OR NOT W AS OF COURSE A DEBATABLE ISSUE ULTIMATELY SETTLED AS PER ABOVE SPECIAL BENCH DECIS ION. WE THEREFORE FIND MERIT IN ASSESSEES ADDITIONAL GROUND IN PRINCIPLE. THE SAM E IS THEREFORE ADMITTED. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO CARRY O UT NECESSARY FACTUAL VERIFICATION AS PER LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO ASSESSEE. THIS THIRD SUBSTANTIVE GROUND IS TAKEN AS ACCEPTED FOR STATIST ICAL PURPOSES. ASSESSEES APPEAL ITA NO.2196/AHD/2014 PARTLY SUCCEEDS. 10. WE NOW ADVERT TO THE REVENUES APPEAL ITA NO.23 95/AHD/2014 RAISING SOLITARY SUBSTANTIVE GROUND SEEKING TO REVIVE PRIOR PERIOD EXPENDITURE DISALLOWANCE OF RS.45,49,315/- MADE BY THE ASSESSING OFFICER QUA ANNUAL TECHNICAL FEES PAID TO INFOSYS AS DELETED IN LOWER APPELLATE PROCEEDINGS. THERE IS NO DISPUTE THAT THE ASSESSEE INCURRED THE IMPUGNED EXPENDITURE IN PRECE DING ASSESSMENT YEAR BETWEEN JULY 2007 TO MARCH 2008. IT HOWEVER CLAIMED THAT T HE ABOVE EXPENDITURE STOOD CRYSTALLIZED ONLY IN RELEVANT PREVIOUS YEAR AS IT R ECEIVED CORRESPONDING BILLS IN SAID PERIOD ONLY. THE ASSESSING OFFICER TERMED THE SAME AS VIOLATION OF MATCHING CONCEPT AND LACK OF EVIDENCE INDICATING CRYSTALLIZA TION OF IMPUGNED EXPENDITURE IN RELEVANT PREVIOUS YEAR TO INVOKE THE DISALLOWANCE I N QUESTION. THE CIT(A) IN TURN FOLLOWS HIS FINDINGS IN ASSESSMENT YEAR 2007-08 ON IDENTICAL ISSUE IN ASSESSEES FAVOUR. 11. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL SUBMISSIONS. THE REVENUE FAILS TO REBUT THE FACT THAT THE ASSESSEE H AS ALREADY SUCCEEDED ON THIS PRIOR PERIOD EXPENDITURE DISALLOWANCE ISSUE IN PRECEDING ASSESSMENT YEARS. WE FURTHER FIND THAT HONBLE JURISDICTIONAL HIGH COURT DECISIO N IN TAX APPEAL NO. 566/2016 PCIT VS. ADANI ENTERPRISES HOLDS THAT SUCH A DISALL OWANCE IS NOT TO BE INVOKED IN CASE AN ASSESSEE IS ASSESSED AT THE SAME RATE IN TH E TWO ASSESSMENT YEARS IN QUESTION. WE THEREFORE AFFIRM THE CIT(A)S FINDING S UNDER CHALLENGE. THE ITA NOS. 2196 & 2395/AHD/14 [AXIS BANK LTD. VS. ACI T] A.Y. 2009-10 - 10 - REVENUES SOLE SUBSTANTIVE GROUND AS WELL AS MAIN A PPEAL ITA NO.2395/AHD/2014 FAIL. 12. THE ASSESSEES APPEAL ITA NO.2196/AHD/2014 IS P ARTLY ALLOWED WHEREAS REVENUES APPEAL ITA NO.2395/AHD/2014 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF OCTOBER, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 13/10/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0