Indian Overseas Bank, CHENNAI V. DCIT, CHENNAI

ITA 2412/CHNY/2003

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0902 (ITAT-CHENNAI)
• Duration Of Justice: 9 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-01-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 19-02-2003
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Question of law; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO.2412 & 323/MADS/2003 & 694/MDS/2001 ASSESSMENT YEARS : 1994-95, 1995-96 AND 1996 -97 INDIAN OVERSEAS BANK FUNDS & ACCOUNTS DEPT. 763, ANNA SALAI CHENNAI 600 002 VS THE DY. CIT/JT. CIT SPECIAL RANGE I CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C. NARESH, CA RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 21-01-2013 DATE OF PRONOUNCEMENT : 31-01-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE ASS ESSEE AGAINST THE ORDER OF THE CIT(A), CHENNAI, DATED 13.12.2002, FOR ASSE SSMENT YEAR 1994-95, 17.12.2002 FOR ASSESSMENT YEAR 1995-96 AND 19.2.2001 FOR ASSESSMENT YEAR 1996-97. 2. GROUND NO.1 IN THE APPEALS FOR ASSESSMENT YEAR 1994 -95 AND 1995-96 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE I.T.A.NO. 2412 & 323/03 694/01 :- 2 -: ORDER OF THE ASSESSING OFFICER IN CHARGING TO TAX I NTEREST ON SECURITIES OF ` 26,25,37,472/- IN ASSESSMENT YEAR 1994-95 AND ` 71,59,42,553/- IN ASSESSMENT YEAR 1995-96 BEING THE AMOUNT OF INTE REST ACCRUED BUT NOT DUE ON SECURITIES. 3. THE BRIEF FACTS OF THE CASE AS OBSERVED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE HAS BEEN SHOWING INTER EST ON SECURITIES ON MERCANTILE BASIS AS BUSINESS INCOME IN ITS BOOKS OF ACCOUNT. FOR THE PURPOSE OF INCOME TAX IT HAD CLAIMED TO OFFER INTER EST ON SECURITIES WHICH HAD BECOME DUE TO THE ASSESSEE. THE ASSESSI NG OFFICER OBSERVED THAT SINCE THE ASSESSEE WAS FOLLOWING INC OME ACCRUED AND DUE SYSTEM OF ACCOUNTING FOR THE PURPOSES OF INCOME , THE TREATMENT OF THE ASSESSEE TO EXCLUDE THE INTEREST ACCRUED AS ON 31.3.1994 OF ` 71,59,42,553/- WAS CORRECT. BUT THE ASSESSEE HAS NOT INCLUDED IN THE COMPUTATION OF INCOME INTEREST WHICH BECAME DUE OF ` 26,25,37,472/- DURING THE ASSESSMENT YEAR 1994-95 WHICH ACCRUED IN THE ASSESSMENT YEAR 1993-94 BUT HAD NOT BECOME DUE. THEREFORE, T HE ASSESSING OFFICER MADE ADDITION OF ` 26,25,37,472/- TO THE INCOME OF THE ASSESSEE. SIMILARLY, HE ADDED ` 71,59,42,553/- TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT YEAR 1995-96. I.T.A.NO. 2412 & 323/03 694/01 :- 3 -: 4. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE ORDE R OF THE CIT(A) IN I.T.A.NO. 286/2001-02 DATED 21.10.2002 FOR ASSESSME NT YEAR 1993-94, THEREFORE, AS THERE WAS NO DEVIATION IN FACTS, THE CIT(A), FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 1993-94, DISMISSED THE GR OUND OF APPEAL OF THE ASSESSEE FOR THE VERY SAME REASON, THE CIT(A) DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE FOR ASSESSMENT YE AR 1995-96 ALSO. 5. THE A.R OF THE ASSESSEE HAS FILED A COPY OF THE CO NSOLIDATED ORDER OF THE TRIBUNAL PASSED IN THE ASSESSEES OWN CASE IN I.T.A.NOS. 780 & 781/2001 IN ASSESSMENT YEARS 1990-91 AND 1991 -92, ORDER DATED 30.08.2011, WHICH IS PLACED AT PAGES 4 TO 22 OF THE PAPER BOOK FOR ASSESSMENT YEAR 1994-95. HE SUBMITTED THAT THE CONSOLIDATED ORDER OF THE TRIBUNAL FOR ASSESSMENT YEARS 1992-93 AND 1993-94 IN I.T.A.NOS.782/MDS/2001 AND 1991/MDS/2002, DATED 30. 8.2011, IS PLACED AT PAGE NO.23 TO 37 OF THE PAPER BOOK FOR AS SESSMENT YEAR 1994-95. THE A.R SUBMITTED THAT THE TRIBUNAL VIDE ITS ABOVE CONSOLIDATED ORDERS HAS DECIDED THIS ISSUE IN FAVOU R OF THE ASSESSEE AND THE FINDINGS ARE AT PAGE 10 PARA 7 AND AT PAGE 29 PARA 8 OF THE TRIBUNALS ORDER. 6. THE DR, ON THE OTHER HAND, OPPOSED THE SUBMISSION O F THE A.R. HE ARGUED THAT IT WILL BE OBSERVED FROM PARA 7 OF THE ORDER OF THE I.T.A.NO. 2412 & 323/03 694/01 :- 4 -: TRIBUNAL THAT THE TRIBUNAL HAD DELETED THE DISALLO WANCE BY OBSERVING THAT NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE IMPUGNED INTEREST OF ` 29,89,48,379/- AND ` 13,66,41,676/- HAD BECOME LEGALLY DUE TO THE ASSESSEE DURING THE ASSESSMENT YEARS 19 90-91 AND 1991- 92 RESPECTIVELY. HE ARGUED THAT IN THE PRESENT YE ARS, THE FACTS OF THE CASE ARE ENTIRELY DIFFERENT. HE SUBMITTED THAT IN ASSESSMENT YEARS 1994-95 AND 1995-96, THE ASSESSING OFFICER HAD ALLO WED DEDUCTION FROM THE COMPUTATION OF INCOME OF AMOUNTS WHICH WER E ACCRUED BUT NOT DUE TO THE ASSESSEE. THE ASSESSING OFFICER HA S MADE ADDITION FOR THE AMOUNTS OF INTEREST WHICH WERE CLAIMED AS DEDUC TION IN THE EARLIER YEARS ON THE GROUND THAT THE SAME WERE ACCRUED, BUT NOT BECOME DUE AND WHICH HAVE ACCRUED AS ON 31.3.1993 AND 31.3.199 4 AND RECEIVED DURING THE PREVIOUS YEAR 1993-94 AND 1994-95 HENCE, IT WAS HIS SUBMISSION THAT THE DECISION OF THE TRIBUNAL RELIED BY THE ASSESSEE WAS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE IN THE ASSESSMENT YEARS UNDER CONSIDERATION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS NOT INCLUDING INTEREST ON SECURITIES WHICH WAS NOT RECE IVED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. HE OBS ERVED THAT ON THIS I.T.A.NO. 2412 & 323/03 694/01 :- 5 -: BASIS, THE ASSESSEE EXCLUDED THE INTEREST ACCRUED AS ON 31.3.1993 OF ` 26,25,37,472/- AND ` 71,59,42,553/- AS ON 31.3.1994 FROM THE INCOME OF THE ASSESSEE AS THESE INTEREST ACCRUED HAD NOT BECOME DUE TO THE ASSESSEE WHILE COMPUTING THE INCOME FOR THE ASSESSM ENT YEARS 1993- 94 AND 1994-95. HE OBSERVED THAT THE INTEREST INCO ME WHICH WERE EXCLUDED IN THE COMPUTATION OF INCOME IN THE ASSESS MENT YEARS 1993- 94 AND 1994-95 AND WHICH HAD BECOME DUE TO THE ASS ESSEE DURING THE RELEVANT PREVIOUS YEAR RELATING TO THE ASSESSME NT YEARS 1994-95 AND 1995-96 WERE NOT INCLUDED FOR TAXATION IN THE C OMPUTATION OF INCOME FOR THE ASSESSMENT YEARS 1994-95 AND 1995-96 , THEREFORE, HE MADE THE ADDITION OF ` 26,25,37,472/- IN ASSESSMENT YEAR 1994-95 AND ` 71,59,42,553/- IN ASSESSMENT YEAR 1995-96. THE A SSESSEE COULD NOT EXPLAIN THE REASON FOR NOT INCLUDING THE INTER EST INCOME IN THE YEAR OF ITS BECOMING DUE TO THE ASSESSEE EITHER B EFORE THE ASSESSING OFFICER AND THE CIT(A) OR EVEN BEFORE US DURING THE COURSE OF HEARING. IN OUR CONSIDERED OPINION, IF THE ASSESSEE WAS CO NSISTENTLY FOLLOWING THE SYSTEM OF COMPUTING TOTAL INCOME BY EXCLUDING T HE INTEREST WHICH HAS NOT LEGALLY BECOME DUE DURING THE YEAR THEN THE ASSESSEE IS DUTY BOUND TO INCLUDE IN ITS INCOME ALL THE INTEREST INC OME WHICH BECOME LEGALLY DUE IN THE RELEVANT PREVIOUS YEAR IN THE LI KE MANNER. THE A.RS CONTENTION IS THAT THE ISSUE INVOLVED IN THE PRESEN T APPEAL IS COVERED IN I.T.A.NO. 2412 & 323/03 694/01 :- 6 -: FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUN AL IN ITS CASE PASSED IN ASSESSMENT YEAR 1990-91, 1991-92, 1992-93 AND 19 93-94 IN I.T.A.NO.780 & 781/MDS/2001, ORDER DATED 30.8.2011 AND I.T.A.NO.782/MDS/2001, AND I.T.A.NO.1991/MDS/2002, ORDER DATED 30.8.2011. WE FIND THAT THE TRIBUNAL IN THOSE APPE ALS HAD ADJUDICATED THE ISSUE THAT IF THE INTEREST WAS NOT LEGALLY DUE TO THE ASSESSEE THEN IT CANNOT BE TAXED IN THAT YEAR. THUS, IT IS OBSER VED THAT THE ISSUE INVOLVED IN THE PRESENT APPEALS IS DIAMETRICALLY OP POSITE TO THE ISSUE WHICH WAS BEFORE THE TRIBUNAL IN THOSE APPEALS. EV EN IN THOSE APPEALS, THE TRIBUNAL HAS HELD THAT INTEREST INCOME IS ASSESSABLE IN THE HANDS OF THE ASSESSEE WHEN IT BECAME LEGALLY DUE T O THE ASSESSEE. IN THE INSTANT CASE, WE FIND THAT IT IS NOT DISPUT ED THAT THE ASSESSEE HAS BEEN ALLOWED DEDUCTION OF ` 26,25,37,342/- IN ASSESSMENT YEAR 1994-95 AND ` 71,59,42,553/- IN ASSESSMENT YEAR 1995-96 ON THE GROUND THAT THOUGH SUCH INTEREST HAS BEEN ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS INCOME BUT AS T HAT INTEREST HAS NOT BECOME LEGALLY DUE TO THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEARS 1993-94 AND 1994-95. IN OTHER WORDS, INTEREST INCOME IS TO BE ASSESSED IN THE ASSESSMENT YEAR IN WHICH IT BECAME LEGALLY DUE TO THE ASSESSEE. IN THE PRESENT CASE, THE CONTENTION OF THE REVENUE IS THAT THE ABOVE INTEREST INCOME OF ` 26,25,37,472/- I.T.A.NO. 2412 & 323/03 694/01 :- 7 -: BECAME LEGALLY DUE TO THE ASSESSEE IN ASSESSMENT Y EAR 1994-95 AND INTEREST INCOME OF ` 71,59,42,553/- BECAME LEGALLY DUE TO THE ASSESSEE IN ASSESSMENT YEAR 1995-96, AND THEREFORE, THE ASSESSEE OUGHT TO HAVE INCLUDED THE SAME WHILE COMPUTING ITS TOTAL INCOME . WE FIND THAT NO EXPLANATION COULD BE GIVEN BY THE ASSESSEE EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US FOR NOT I NCLUDING THE INTEREST INCOME WHICH WERE ACCOUNTED FOR IN THE BOOKS OF ACC OUNT OF EARLIER YEARS BUT WAS EXCLUDED FROM THE TOTAL INCOME ON THE GROUND THAT THE INTEREST INCOME HAS BECOME LEGALLY DUE TO THE ASSE SSEE IN THE SUBSEQUENT YEAR. WE, THEREFORE, DO NOT FIND ANY M ERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE AND DISMISS THE GROUND R AISED IN BOTH THE YEARS UNDER CONSIDERATION. 8. GROUND NO.2 OF THE APPEAL FOR ASSESSMENT YEAR 1994- 95 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRM ING CHARGING TO TAX ` 131,59,65,267/- BEING APPRECIATION IN VALUE OF CAPI TAL INVESTED IN FOREIGN BRANCH WHICH WAS REPATRIATED TO INDIA. 9. THE FACTS OF THE CASE AS GIVEN IN THE ASSESSMENT OR DER ARE THAT THE ASSESSEE CREDITED ` 131,59,65,267/- IN THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF PROFIT ON EXCHANGE. THE ASS ESSING OFFICER OBSERVED THAT THIS REPRESENTS THE EXCHANGE DIFFEREN CE ON TRANSFER OF PROBLEM ACCOUNTS OF OVERSEAS BRANCHES TO CENTRAL OF FICE IN INDIAN CURRENCY. IN THE COMPUTATION MEMO THE AMOUNT HAS BEEN DEDUCTED I.T.A.NO. 2412 & 323/03 694/01 :- 8 -: AS NOT BEING TAXABLE BASED ON THE PRINCIPLE OF MUT UALITY. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE S MAIN OFFICE IN INDIA HAD GIVEN SOME SUBSIDY TO ITS OVERSEAS BRANCH ES FOR ENABLING THEM TO MAKE ADVANCES TO CLIENTS/CUSTOMERS/PARTIES. WHEN SOME OF SUCH ACCOUNTS BECAME PROBLEMATIC, THE AMOUNTS DUE W ERE ASCERTAINED AND TRANSFERRED TO THE HEAD OFFICE. AT THE TIME OF RE-TRANSFER OF SUCH SUBSIDY THERE WAS APPRECIATION IN VALUE AND THIS WA S BOOKED AS PROFIT ON EXCHANGE. THE ASSESSING OFFICER OBSERVED THAT A NY ACCRETION ON DEPOSITS WAS REVENUE IN THE HANDS OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS BANK OF INDIA, 218 ITR 371 WHICH FOLLOWED THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF SUTLEZ COTTON MILLS LTD, 116 I TR 1 WHEREIN IT WAS HELD THAT PROFIT OR LOSS ARISING TO THE ASSESSEE O N ACCOUNT OF APPRECIATION OR DEPRECIATION IN THE VALUE OF FOREIG N CURRENCY ON CONVERSION TO ANOTHER CURRENCY WOULD ORDINARILY BE TRADING PROFIT OR LOSS. THEREFORE, THE ASSESSING OFFICER ADDED THE S UM OF ` 1,31,59,65,267/- TO THE INCOME OF THE ASSESSEE. 10. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR THE VERY SAME REASON. 11. THE A.R OF THE ASSESSEE ARGUED BEFORE US THAT THE ASSESSEE HAD TRANSFERRED THE AMOUNT OF CAPITAL TO ITS BRANCH ES WHEN THE LOANS I.T.A.NO. 2412 & 323/03 694/01 :- 9 -: AND ADVANCES IN THE FOREIGN COMPANY HAD BECOME BAD AND THE GOVERNMENT AND THAT FOREIGN COMPANY INSISTED ON THE ASSESSEE ON INTRODUCING MORE CAPITAL FOR MAKING UP THE LOSSES. HE SUBMITTED THAT THE LOANS AND ADVANCES OF THE OVERSEAS BRANCHES WER E TRANSFERRED TO THE HEAD OFFICE WHEN THE ACCOUNTS BECAME PROBLEMATI C. HE SUBMITTED THAT LATER ON DURING THE YEAR THESE ACCOU NTS WERE TRANSFERRED BACK TO THE BRANCHES AND DUE TO THE FLU CTUATION IN THE RATE OF FOREIGN EXCHANGE THE ASSESSEE REALIZED ` 1,31,59,65,267/-. IT WAS HIS ARGUMENT THAT AS THIS EXCHANGE AROSE DUE TO TRA NSFER OF CAPITAL AND WAS ON CAPITAL ACCOUNT THE EXCHANGE GAINED WAS NOT LIABLE TO TAX. 12. ON THE OTHER HAND, THE DR SUBMITTED THAT THIS PERTA INS TO THE WORKING CAPITAL ADVANCED BY THE ASSESSEE TO IT S OVERSEAS BRANCHES WHICH WAS RECEIVED BACK. THE ADVANCE WAS MADE IN F OREIGN CURRENCY AND IT WAS RECEIVED BACK IN FOREIGN CURRENCY. THE DIFFERENCE RECEIVED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE GAI N WAS CREDITED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT. HOWEVE R, THE SAME WAS REDUCED FROM TAXABLE INCOME IN THE INCOME COMPUTATI ON STATEMENT FOR INCOME TAX PURPOSES. HE ARGUED THAT THE CLAIM OF T HE ASSESSEE IS NOT ACCEPTABLE SINCE AS PER SECTION 45D, INCOME ACCRUES TO THE ASSESSEE THE MOMENT IT IS CREDITS IN THE BOOKS OF ACCOUNT. HE ARGUED THAT AS PER AS-11, SUCH GAIN IS INCOME OF THE ASSESSEE AND THAT IS WHY THE I.T.A.NO. 2412 & 323/03 694/01 :- 10 -: ASSESSEE HAS CORRECTLY TREATED IT AS INCOME IN ITS BOOKS OF ACCOUNT. NO REASON WAS MADE OUT BY THE ASSESSEE TO MAKE A DIF FERENT TREATMENT FOR INCOME-TAX PURPOSES. THE PRESENT ONE IS A COMP LETED TRANSACTION DURING THE YEAR AND NOT A NOTIONAL LIABILITY OR ASS ET AS ON 31 ST OF MARCH. HE FURTHER SUBMITTED THAT THE ASSESSEE IS AN AUTHO RIZED DEALER IN FOREIGN EXCHANGE AND HENCE, THE GAINS ARISING ON TR ANSACTIONS OF FOREIGN EXCHANGE WAS RIGHTLY TREATED AS INCOME BY T HE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE ASSESSEE CLAIMS THAT SUCH R EVERSAL WAS MADE ON ACCOUNT OF RBI DIRECTIONS. FIRSTLY, DIRECTIONS OF RESERVE BANK ARE NOT BINDING ON I.T. AUTHORITIES TO DECIDE THE ACCRU AL OF INCOME AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHER N TECHNOLOGIES LTD VS JCIT, 320 ITR 577. SECONDLY, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF SUCH CONTENTION AND IF A T ALL RBI GIVES ANY SUCH DIRECTION, IT WILL BE TO EXCLUDE SUCH INCOME F ROM ITS BOOKS OF ACCOUNT (WHICH ASSESSEE HAS NOT DONE AND NOT FROM THE INCOME FOR THE PURPOSES OF I.T. ASSESSMENT. HE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BANK OF INDIA, 218 ITR 371 AS WELL A S THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF IRCO N INTERNATIONAL LTD. VS DCIT, 74 ITD 117. I.T.A.NO. 2412 & 323/03 694/01 :- 11 -: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE CIT(A) HAS HELD AS UNDER: 8. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS OF THE LEARNED COUNSEL FOR THE APPELLANT AND THE ASSESSING OFFICER AND PERUSED THE NECESSARY MATERIAL ON RECORD. THE CONTE NTION OF THE APPELLANT'S COUNSEL THAT THE NOTIONAL UNREALISED GA IN AROSE ON ACCOUNT OF THE DIFFERENCE IN EXCHANGE RATE DIFFEREN CE BETWEEN THE DATE ON WHICH THE FUNDS WERE REMITTED BY CENTRAL OFFICE TO ITS OVERSEAS BRANCHES AND THE DATE ON WHICH THESE FUNDS WERE REMITTED BACK TO CENTRAL OFFICE IS A CONTRADICTION IN TERMS. ONCE THE FUNDS REMITTED ORIGINALLY WERE RECEIVED BACK WI TH ENHANCED AMOUNT ON ACCOUNT OF THE EXCHANGE DIFFERENCE, THIS ITSELF SHO WS THAT THE EXCHANGE GAIN DIFFERENCE HAS BEEN REALISED BY THE APPELLANT. IT WOULD THEREFORE BE WRONG TO SAY THAT NOTIONAL UNREALISED GAIN AROSE. AS REGARDS THE VARIOUS DECIS IONS RELIED ON BY THE APPELLANT COUNSEL IT WOULD BE RELEVANT TO DI SCUSS THE RATIO OF THE VARIOUS DECISIONS. 151 ITR 446 THIS CASE RELATES TO THE APPELLANT BANK ITSELF. IN THIS CASE THE APPELLANT BANK DEALING IN FOREIGN CURRENCI ES ON BEHALF OF CUSTOMERS, THE LOSS OR PROFIT ARISING ON THE OUTSTA NDING CONTRACTS WAS ESTIMATED, BASED ON THE EXCHANGE AS ON THE CLOS ING DATE. THE APPELLANT BANK MADE PROVISION FOR THIS AMOUNT I N ITS ACCOUNT FOR THE ACCOUNTING PERIOD ON THE GROUND THAT THIS A MOUNT HAD TO BE PROVIDED FOR BEFORE ASCERTAINING THE PROFIT AND ACCORDINGLY CLAIMED THE DEDUCTION OF THE SAID AMOUNT FROM THE P ROFIT. IT HAS BEEN HELD BY THE HONOURABLE MADRAS HIGH COURT HELD THAT IT CANNOT BE DISPUTED THAT AS AGAINST THE PROFITS EARNED IN THE ACCOUNTING YEAR, ONLY THE ACT UAL LOSS INCURRED CAN BE DEDUCTED AND NOT ANY PROBABLE OR POSSIBLE LOSS. AS THERE WAS NO SETTLEMENT OF TH E OUTSTANDING CONTRACTS IN THE ACCOUNTING YEAR IN QUESTION, THE AMOUNT CLAIMED COULD ONLY BE CONSIDERED TO BE A NOTIONAL OR ANTICIPATED LOSS AND SUCH NOTIONAL OR ANTICIPATED LOSS COULD NOT BE ALLOWED DEDUCTION. THE TRIBUNAL WAS, THEREFORE, IN ERROR AND THE AMOUNT CLAIMED COULD NOT BE ALLOWED AS A DEDUCTION. I.T.A.NO. 2412 & 323/03 694/01 :- 12 -: IT CAN THUS BEEN SEEN THAT THE AMOUNT CLAIMED BY TH E APPELLANT ON THE BASIS OF THE ANTICIPATED LIABILITY WAS HELD TO BE NOT ALLOWABLE. THE DECISION WAS AGAINST THE APPELLANT. 183 ITR200 THE RATIO OF THE DECISION IN THIS CASE WHICH IS ALS O IN THE CASE OF APPELLANT ITSELF IS BASED ON THE REAL INCOM E PRINCIPLE. IT HAS BEEN HELD THEREIN 'THE LEVY OF INCOME TAX IS ON INCOME AND. THOUGH TH E INCOME TAX ACT HAS TAKEN NOTE OF THE TWIN POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ: THE A CCRUAL OF INCOME OR ITS RECEIPT, YET, THE SUBSTANCE OF THE MA TTER IS INCOME AND IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH, FOR PURPOSES OF BOOK-KEEPING , AN ENTRY IS MADE ABOUT AN HYPOTHETICAL INCOME WHICH DO ES NOT MATERIALISE AND A MERE BOOK-KEEPING ENTRY CANNO T BE INCOME UNLESS INCOME HAS ACTUALLY RESULTED. THE QUE STION WHETHER THERE IS A LOSS OR PROFIT ON FOREIGN EXCHAN GE TRANSACTIONS CAN BE ASCERTAINED ONLY AFTER THE SETT LEMENT OF THE FORWARD CONTRACTS AND NOT BEFORE AND SO LON G AS THAT STAGE HAS NOT BEEN REACHED, THE LOSS CAN ONLY BE NOTIONAL AND NOT ACTUAL OR REAL AND A NOTIONAL LOSS CANNOT BE CLAIMED AS A DEDUCTION. WHETHER A LOSS OR PROFIT , THE PRINCIPLE APPLICABLE WOULD BE THE SAME AND THE ESTI MATED PROFIT, TILL THE SETTLEMENT OF THE FORWARD FOREIGN EXCHANGE CONTRACTS, COULD BE REGARDED ONLY AS NOTIONAL AND N OT ACTUAL OR REAL AND SUCH NOTIONAL PROFITS CANNOT BE ASSESSED. 250 ITR 146 THIS CASE ALSO RELATES TO THE DECISION OF THE HIGH COURT IN THE APPELLANT'S OWN CASE. IT HAS BEEN HELD THAT '(II) THAT THE PROVISION MADE IN THE ACCOUNTS TOWARDS THE ESTIMATED PROFIT ON EXCHANGE TRANSACTIONS WAS NOT L IABLE TO TAX AND NOT TO BE INCLUDED IN THE PROFITS FOR TH E YEAR IN QUESTION.' I.T.A.NO. 2412 & 323/03 694/01 :- 13 -: IT IS THUS SEEN THAT THE PROVISION WAS MADE IN THE AMOUNT ON THE BASIS OF THE ESTIMATED PROFIT ON EXCHANGE TRANS ACTION. 246 ITR 206 IN THIS CASE IT HAS BEEN HELD 'THAT THE TRIBUNAL WAS NOT CORRECT IN ITS VIEW THA T THE ESTIMATED PROFIT OF THE ASSESSEE ON CONTRACTS IN FO REIGN EXCHANGE WAS LIABLE TO BE INCLUDED AS PART OF THE TOTAL INCOME OF THE ASSESSEE.' IT IS THUS SEEN THAT HERE AGAIN THE PROFIT WAS EST IMATED ON FOREIGN EXCHANGE HELD TO BE NOT TAXABLE ON ACCOUNT OF THE PROFIT BEING ON ESTIMATED. BASIS. 9. IT CAN THUS BEEN SEEN FROM THE DECISIONS CITED AND ANALYSED SUPRA THAT THE CLAIM OF THE APPELLANT WAS BASED ON ESTIMATED LIABILITY OR THE ESTIMATED PROFIT ON EXCHANGE DIFF ERENCE. THEREFORE THE RATIOS OF THE ABOVE DECISIONS WILL NOT APPLY IN THE PRESENT APPEAL SINCE IN THE PRESENT APPEAL THE ACTUAL AMOUN T DUE TO THE APPELLANT FROM OVERSEAS BRANCHES HAD BEEN RECEIVED AND AS A RESULT OF SUCH RECEIPT THE PROFIT HAS NOT ONLY ACCR UED BUT ALSO BEEN REALISED BY THE APPELLANT. AS REGARDS THE DECISION OF THE SUPREME COURT IN BROOKE BOND INDIA LTD REPORTED IN 225 ITR 789 RELIED ON BY THE APPELLANT , I MAY MENTION HERE THAT THE SAID DECISION IS WITH REFERENCE TO THE EXPENDITURE INCURRED IN CONNECTION WITH THE INCREAS E OF CAPITAL BASE BY AN ASSESSEE. IN THE PRESENT CASE THE INCREA SE OF CAPITAL BASE WAS NOT BY THE APPELLANT BANK NOR HAS THE APPE LLANT INCURRED ANY SUCH EXPENDITURE. THEREFORE, THE RATIO OF THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE 10. THE SUPREME COURT IN CASE OF SUTLEJ COTTON MILL LTD VS COMMISSIONER OF INCOME TAX (WB) HAS FORMULATED THE TESTS FOR DETERMINING THE PROFITABILITY ON ACCOUNT OF THE APP RECIATION OR DEPRECIATION IN THE VALUE OF FOREIGN CURRENCY. IT HAS BEEN HELD THEREIN THAT 'WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCO UNT OF APPRECIATION OR DEPRECIATION IN THE VALUE OF FOR EIGN CURRENCY HELD HIM, ON CONVERSION INTO ANOTHER CURRE NCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE TRADING PRO FIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSE E ON I.T.A.NO. 2412 & 323/03 694/01 :- 14 -: REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL EMBARKED IN THE BUSINESS. BUT, IF ON THE OTHER HAND, THE FOREIGN CURRENCY IS HELD AS A C APITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOUL D BE OF CAPITAL NATURE. IT IS NOW WELL SETTLED THAT THE WAY IN WHICH ENTRIES ARE MADE BY AN ASSESSEE IN HIS BOOKS OF ACCOUNT IS NOT DETERMINATIVE OF THE QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFERED ANY LOSS . THE ASSESSEE MAY, BY MAKING ENTRIES WHICH ARE NOT I N CONFORMITY WITH THE PROPER PRINCIPLES OF ACCOUNTANC Y, CONCEAL PROFIT OR SHOW LOSS AND THE ENTRIES MADE BY HIM CANNOT, THEREFORE, BE REGARDED AS CONCLUSIVE ONE WA Y OR THE OTHER. WHAT IS NECESSARY TO BE CONSIDERED I S THE TRUE NATURE OF THE TRANSACTION AND WHETHER IN FACT IT HAS RESULTED IN PROFIT OR LOSS TO THE ASSESSEE. FOLLOWING THE SAID DECISION THE BOMBAY HIGH COURT I N CASE OF COMMISSIONER OF INCOME TAX VS BANK OF INDIA REPORTED IN 218 ITR 371 HAS HELD AS UNDER: 'WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCOUNT OF APPRECIATION OR DEPRECIATION IN THE VALU E OF FOREIGN CURRENCY HELD BY HIM, ON CONVERSION INTO ANOTHER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINAR ILY BE TRADING PROFIT OR LOSS IF THE FOREIGN CURRENCY I S HELD BY HIM ON REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL IN THE BUSINESS. IT WOULD, HOWEVER, BE PROFIT OR LOSS OF CAPITAL NATURE, IF TH E FOREIGN CURRENCY IS HELD AS A CAPITAL ASSET OR AS F IXED CAPITAL. FOR DETERMINING WHETHER DEVALUATION LOSS I S REVENUE LOSS OR CAPITAL LOSS WHAT IS RELEVANT IS TH E UTILISATION OF THE AMOUNT AT THE TIME DEVALUATION A ND NOT THE OBJECT FOR WHICH THE LOAN HAD BEEN OBTAINED . EVEN IF THE FOREIGN CURRENCY WAS INTENDED OR HAD ORIGINALLY BEEN UTILISED FOR ACQUISITION OF FIXED ASSET, IF AT THE TIME OF DEVALUATION IT HAD CHANGED ITS CHARACTER AND HAD ASSUMED THE NEW CHARACTER OF STOCK-IN-TRADE OR CIRCULATING CAPITAL, THE LOSS THA T OCCURRED ON ACCOUNT OF DEVALUATION SHALL BE A REVENUE LOSS AND NOT A CAPITAL LOSS. BASED ON THE ABOVE TWO DECISIONS THE TESTS FOR DETERMINING THE TAXABILITY OF PROFIT ARISING OUT OF FOREIGN EXCHANGE WOULD BE TO DETERMINE I.T.A.NO. 2412 & 323/03 694/01 :- 15 -: I) WHAT IS THE NATURE OF TRANSACTION? II) WHETHER THE TRANSACTION RELATES TO THE CIRC ULATING CAPITAL OR THE INVESTMENT? III) WHETHER A PROFIT HAS RESULTED OUT OF SUCH TRA NSACTIONS? 11. APPLYING THE ABOVE TESTS TO THE FACTS OF THE P RESENT CASE THERE IS NO DISPUTE THAT THE APPELLANT'S HEAD OFF ICE TRANSFERRED THE AMOUNT TO ITS FOREIGN BRANCHES AS CIRCULATING C APITAL. THE AMOUNT SO TRANSFERRED BY ANY PARAMETER CANNOT BE SA ID TO BE INVESTME NT. MOREOVER THERE IS NO DISPUTE IN THE PRESENT CA SE THAT THE PROFIT HAS ARISEN AS RESULT OF THE TRANSAC TIONS. IN MY VIEW THEREFORE THE TESTS LAID DOWN BY THE SUPREME COURT IN CASE OF 116 ITR 1 AND BOMBAY HIGH COURT IN 218 ITR 371 ARE SATISFIED WHICH LEAD TO IRRESISTIBLE CONCLUSION THAT THE IMPU GNED AMOUNT WHICH AROSE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUAT ION IS IN THE NATURE OF REVENUE RECEIPT LIABLE TO BE TAXED. THE A DDITION OF RS.131,59,65,267/- MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. THE APPELLANT FAILS ON THIS GROUND. 14. BEFORE US, THE ASSESSEE CONTENDED THAT IT HAS REMI TTED CAPITAL TO ITS BRANCHES OUTSIDE INDIA. WHEN THE CA PITAL IN SUBSEQUENT YEARS BECAME EXCESS THE SAME WAS BROUGHT BACK TO IN DIA AND THEREFORE, THE EXCHANGE GAIN RECEIVED BY THE ASSES SEE WAS ON ACCOUNT OF CAPITAL AND THEREFORE, NOT LIABLE TO TAX . WE FIND THAT THE ASSESSEE IS ENGAGED IN BANKING BUSINESS IN INDIA AS WELL AS ABROAD IN ITS BRANCHES. IT IS UNDISPUTED FACT THAT THE ASSE SSEE, FOR ITS BUSINESS PURPOSES, TRANSFERRED MONEY TO ITS BRANCHES ABROAD AND SUBSEQUENTLY WHEN MONEY WAS SURPLUS IN THE BRANCHES, IT RECEIVED MONEY BACK FROM THE ABROAD BRANCHES. WHEN MONEY WAS RECEIVED BACK EXCHANGE FLUCTUATION INCOME ACCRUED TO THE ASSESSEE. IN TH E CASE OF SUTLEZ I.T.A.NO. 2412 & 323/03 694/01 :- 16 -: COTTON MILLS LTD VS CIT, 116 ITR 1, THE HON'BLE SUP REME COURT HAS HELD AS UNDER: 'WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCO UNT OF APPRECIATION OR DEPRECIATION IN THE VALUE OF FOR EIGN CURRENCY HELD HIM, ON CONVERSION INTO ANOTHER CURRE NCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE TRADING PRO FIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSE E ON REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL EMBARKED IN THE BUSINESS. BUT, IF ON THE OTHER HAND, THE FOREIGN CURRENCY IS HELD AS A C APITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOUL D BE OF CAPITAL NATURE. 15. NO MATERIAL COULD BE BROUGHT BEFORE US TO SHOW THAT THE FOREIGN CURRENCY WHICH WAS BROUGHT BACK BY THE ASS ESSEE WAS HELD AS CAPITAL ASSET OR FIXED ASSET OF THE ASSESSEE AN D NOT ITS TRADING ASSET. THUS, WE DO NOT FIND ANY GOOD REASON TO INT ERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. THEY ARE CONFIRME D AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 16. GROUND NO.3 FOR ASSESSMENT YEAR 1994-95, GROUND NO. 3 FOR ASSESSMENT YEAR 1995-96 AND GROUND NO.2 FOR ASSESSM ENT YEAR 1996- 97 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER DISALLOWING DEPRECIATION O N BUILDING OF ` 2,17,115/- IN ASSESSMENT YEAR 1994-95, ` 1,95,403/- IN ASSESSMENT YEAR 1995-96 AND ` 1,75,863/- IN ASSESSMENT YEAR 1996-97. I.T.A.NO. 2412 & 323/03 694/01 :- 17 -: 17. AT THE TIME OF THE HEARING, THE A.R OF THE ASSESSE E SUBMITTED THAT THE ISSUE WAS DECIDED AGAINST THE A SSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 1997-98 IN I.T.A.NO. 1931/MDS/2000 & OTHERS, VIDE ITS CONSOLID ATED ORDER DATED 31.3.2006. 18. WE FIND THAT THE TRIBUNAL IN THE APPEAL OF THE ASS ESSEE FOR ASSESSMENT YEAR 1997-98 HAS HELD THAT THERE WAS NO QUESTION OF ALLOWING DEPRECIATION ON LAND TO THE ASSESSEE AND HAS DISMISSED THE GROUND OF THE ASSESSEE. AS THE A.R OF THE ASSESSE E HAS CONCEDED BEFORE US THAT THE ISSUE IS DECIDED AGAINST THE AS SESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 1997-98, THEREFORE, RES PECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL, WE DISMI SS THE GROUNDS RAISED BY THE ASSESSEE IN THE YEARS UNDER CONSIDER ATION. 19. GROUND NO.4 IN ASSESSMENT YEAR 1994-95, GROUND NO .4 IN ASSESSMENT YEAR 1995-96, AND GROUND NO.3 IN ASSESSM ENT YEAR 1996- 97 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF ` 6,86,572/- IN ASSESSMENT YEAR 1994-95, ` 6,52,612/- IN ASSESSMENT YEAR 1995-96 AND ` 7,23,780/- IN ASSESSMENT YEAR 1996-07 ON ACCOUNT OF ENTERTAINMENT EXPENSES. I.T.A.NO. 2412 & 323/03 694/01 :- 18 -: 20. THE A.R OF THE ASSESSEE SUBMITTED THAT THE ISSUE I S DECIDED AGAINST BY THE ASSESSEE BY THE TRIBUNAL VIDE ITS CONSOLIDATED ORDER DATED IN 31.3.2006 (SUPRA). 21. WE FIND THAT THE TRIBUNAL IN THE ABOVE QUOTED ORDE R, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 HAS HELD THAT THE EXPENDITURE WHICH HAS BEEN INCURRED DURING THE OFFI CE HOURS OF EMPLOYEES OF ASSESSEE-BANK WAS ENTERTAINMENT EXPEN DITURE WITHIN THE MEANING OF SECTION 37(2A). AS THE A.R OF THE ASSESSEE HAS CONCEDED BEFORE US THAT THE ISSUE IS DECIDED AGAINS T THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 1997-98, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION. 22. IN ASSESSMENT YEAR 1995-96, GROUND NO.2 OF THE APPE AL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRM ING ADDITION OF 47,05,41,973/- BEING APPRECIATION IN VALUE OF BALAN CE OF FOREIGN BRANCHES ACCOUNT IN HEAD OFFICE BOOKS. 23. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT YEAR 2005-06, THE ASSESSEE HAD GAINS DUE TO EXCHAN GE DIFFERENCE ON ACCOUNT OF TRANSLATION OF ITEMS OF FINANCIAL STATEM ENTS OF FOREIGN I.T.A.NO. 2412 & 323/03 694/01 :- 19 -: BRANCHES WHICH WAS CREDITED TO THE PROFIT & LOSS AC COUNT BY THE ASSESSEE AND DEDUCTED FROM THE COMPUTATION OF INCOM E. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THA T IT WAS A NOTIONAL GAIN NOT LIABLE TO TAX. THE ASSESSING OFFICER ADDE D THE EXCHANGE DIFFERENCE TO THE INCOME OF THE ASSESSEE OBSERVING THAT THE CREDIT TO THE PROFIT & LOSS ACCOUNT REPRESENTS PROFIT ON EXCH ANGE WHEN PROBLEM ACCOUNTS OF OVERSEAS BRANCHES ARE TRANSFERRED TO CE NTRAL OFFICE IN INDIAN CURRENCY. THE CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER FOR THE VERY SAME REASON. 24. THE A.R OF THE ASSESSEE SUBMITTED THAT BOTH THE LO WER AUTHORITIES HAVE NOT APPRECIATED THE TRUE FACTS OF THE ASSESSEES CASE. HE POINTED OUT FROM GROUND NO.2 OF THE APPEAL TAKEN BEFORE THE CIT(A) WHICH WAS THAT THE ASSESSING OFFICER HAD ERR ED IN CHARGING TO TAX THE SUM OF ` 47,05,41,973/- REPRESENTING THE TRANSLATION DIFFER ENCE OF OVERSEAS BRANCHES ASSETS AND LIABILITIES. HE SU BMITTED THAT THE CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFF ICER FOR THE REASON THAT EXCHANGE DIFFERENCE RELATES TO PROBLEMATIC ACC OUNTS TRANSFERRED TO CENTRAL OFFICE IN INDIAN CURRENCY AND THEREFORE, CO VERED BY THE DECISION OF THE CIT(A) IN EARLIER ASSESSMENT YEAR 1994-95. 25. BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE SH OULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE I.T.A.NO. 2412 & 323/03 694/01 :- 20 -: ISSUE AFRESH AFTER EXAMINING THE FACTS OF THE CASE OF THE ASSESSEE IN THE PRESENT YEAR UNDER APPEAL. SINCE WE FIND THAT THERE IS DIFFERENCE IN THE FACTS AS STATED BY THE ASSESSEE AND AS STAT ED BY THE LOWER AUTHORITIES ON THIS ISSUE, WE, IN THE INTEREST OF J USTICE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE MATT ER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH AF TER VERIFICATION OF THE FACTS OF THE ASSESSEE AND AFTER ALLOWING REASONAB LE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 26. IN ASSESSMENT YEAR 1995-96, GROUND NO.5 OF THE APPE AL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN DISAL LOWING ARREARS OF SALARY OF ` 53,46,21,347/- PAYABLE TO STAFF ON THE GROUND THAT THE LIABILITY TO PAY HAD ARISEN AFTER THE CLOSE OF THE ACCOUNTING YEAR WHEN THE BIPARTITE AGREEMENT BETWEEN THE MANAGEMENT AND UNIONS WERE SIGNED. 27. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE H AS CLAIMED A SUM OF ` 53,46,21,347/- REPRESENTING WAGES ARREARS OF AWARD STAFF FOR THE PERIOD UPTO 31.3.1995 CONSEQUEN T UPON THE BIPARTITE AGREEMENT ENTERED INTO BETWEEN THE MANAGE MENT AND UNION WHICH WAS STATED TO HAVE ACCRUED DURING THE YEAR. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT ADDUCED ANY EVIENCE TO I.T.A.NO. 2412 & 323/03 694/01 :- 21 -: SHOW THAT THE ABOVE SUM RELATED TO THE YEAR ENDING 31.3.1995 AND THAT IT HAD ACCRUED. HE ALSO OBSERVED THAT THE AMO UNT WAS PAID DURING THE YEAR ENDED 31.3.1996 AND HENCE, HE DISAL LOWED THE CLAIM OF THE ASSESSEE. 28. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER ON THE GROUND THAT THE LIABILITY ACCRUES ON LY ON THE BASIS OF AGREEMENT BETWEEN THE MANAGEMENT AND THE UNIONS WHI CH OCCURRED SUBSEQUENTLY. 29. THE A.R OF THE ASSESSEE SUBMITTED THAT AS THE BIPA RTITE AGREEMENT WAS ENTERED INTO DURING THE FINANCIAL YEA R 1994-95, THEREFORE, THE DEDUCTION CLAIMED BY THE ASSESSEE I N THE COMPUTATION OF INCOME SHOULD HAVE BEEN ALLOWED TO THE ASSESSEE . 30. BEFORE US, THE DR FILED NOTES ON ACCOUNTS TO THE PR OFIT & LOSS ACCOUNT OF THE ASSESSEE-BANK. HE POINTED OUT FROM NOTE NO.6(B) WHICH STATES THAT IN REGARD TO WAGE ARREARS FOR AWA RD STAFF AND OFFICERS, THE BANK HAS BEEN CONSISTENTLY FOLLOWING THE ACCOUNTING ON CASH BASIS AND AS SUCH NO PROVISION HAS BEEN MADE. HE, THEREFORE, SUBMITTED THAT THE ASSESSEE CONSISTENTLY CLAIMED S UCH DEDUCTION ON CASH BASIS AND EVEN PROVISION WAS NOT MADE IN THE A CCOUNTS DURING THE RELEVANT PREVIOUS YEAR. HE ALSO SUBMITTED THAT CONSISTENT METHOD I.T.A.NO. 2412 & 323/03 694/01 :- 22 -: FOLLOWED BY THE ASSESSEE SHOULD NOT BE DISTURBED A ND RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS HINDUSTAN ZINC LTD, 291 ITR 391. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASSESSEE CLAIMED DEDUCTION OF ` 53,46,21,347/- IN THE COMPUTATION OF TOTAL INCOME ON ACCOUNT OF PROVISION OF WAGE ARREAR S. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT NO EVIDENCE WAS PRODUCED TO SHOW THAT THE EXPENSES ACCRUED DURING T HE YEAR AND ALSO THAT THE EXPENSES WERE CLAIMED IN ASSESSMENT YEAR 1996-97 AND WERE ALLOWED DEDUCTION TO THE ASSESSEE. 32. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT LIABILITY TO PAY ARREAR WAGES ACCRUED IN THE SUBSEQUENT YEAR. 33. WE FIND THAT THE CIT(A) HAS BROUGHT NO MATERIAL ON RECORD ON THE BASIS OF WHICH HE ARRIVED AT THE FINDING THA T THE LIABILITY TO PAY ARREAR WAGES ACCRUED IN THE SUBSEQUENT YEAR. BEFOR E US, THE ASSESSEE FILE A COPY OF THE SIXTH BIPARTITE SETTLEM ENT REGARDING WAGE REVISION AND CHANGES IN OTHER SERVICE CONDITIONS BE TWEEN MANAGEMENTS OF A CLASS BANKS (REPRESENTED BY INDI AN BANKS I.T.A.NO. 2412 & 323/03 694/01 :- 23 -: ASSOCIATION) AND THEIR WORKMEN (REPRESENTED BY AIBE A, NCBE, BEFI AND INBEF), DATED 14.2.1995 AND ARGUED THAT THE LIA BILITY TO PAY ARREAR WAGES ACCRUED TO THE ASSESSEE DURING THE YEAR UNDE R CONSIDERATION. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSE ES INCOME IS COMPUTED ON THE BASIS OF ACCRUAL SYSTEM OF ACCOUNTI NG. IN THE ABOVE CIRCUMSTANCES, IT SHALL BE JUST AND FAIR TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRE SH AFTER TAKING INTO CONSIDERATION THE AGREEMENT DATED 11.2.1995. IF TH E ASSESSING OFFICER FINDS THAT LIABILITY TO PAY ARREAR WAGES HAS ACCRUE D DURING THE YEAR UNDER CONSIDERATION THEN THE DEDUCTION FOR SUCH LIA BILITY SHOULD BE ALLOWED TO THE ASSESSEE. HOWEVER, THE ASSESSING O FFICER SHALL ALSO ENSURE THAT IF ANY PART OF THE LIABILITY IS ACTUALL Y ALLOWED AS DEDUCTION TO THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR 1996-97, THEN DEDUCTION OF THAT LIABILITY SHOULD NOT BE ALLOWED T HIS YEAR SO AS TO AVOID DOUBLE DEDUCTION FOR THE SAME EXPENDITURE. THUS, T HE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 34. GROUND NO.4 IN ASSESSMENT YEAR 1996-97 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWA NCE OF LOSS ON REVALUATION OF SECURITIES AMOUNTING TO ` 104,43,71, 688/-. 35. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED LOSS ON REVALUATION OF SECURITIES HELD A S INVESTMENT BY THE I.T.A.NO. 2412 & 323/03 694/01 :- 24 -: BANK AMOUNTING TO ` 104,43,71,688/-. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY FO LLOWING HIS ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1992-93 IN I.T.A.NO. 250/98- 99, DATED 18.12.2000. 36. THE A.R SUBMITTED THAT THE ISSUE WAS COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS KARUR VYSYA BANK LTD IN TCA NO.2139 OF 2008, ORDER DATED 13.7.2009. THE DR ALSO AGREED WITH THE SAME. 37. WE FIND THAT THE HON'BLE MADRAS HIGH COURT IN THE A BOVE QUOTED CASE HAS HELD AS UNDER: 2. IN SO FAR AS THE FIRST QUESTION OF LAW RAISED BY THE REVENUE IS WHETHER THE TRIBUNAL IS RIGHT IN HOLDIN G THAT THE DIMINUTION IN THE VALUE OF THE SECURITIES HELD BY T HE BANK SHOULD BE ALLOWED AS DEDUCTION DISREGARDING THE METHOD PRE SCRIBED IN THE RESERVE BANK OF INDIA AS PER WHICH PERMANENT INVESTMENTS HAD TO BE VALUED ONLY AT COST AND ONLY CURRENT IN VESTMENTS WERE TO BE VALUED AT MARKET PRICE AT THE CLOSE OF THE AC COUNTING YEAR. THE VERY SAME ISSUE CAME UP FOR CONSIDERATI ON BEFORE THIS COURT IN THE DECISION REPORTED IN 273 ITR 510 @ 571, WHICH WAS RENDERED BY RELYING UPON THE DECISION OF THE SU PREME COURT REPORTED IN 1999 240 ITR 355. IN THAT CASE, THE HO N'BLE SUPREME COURT CATEGORICALLY FORMULATED THE PRINCIP LES AS UNDER: 1. THAT FOR VALUING THE CLOSING STOCK, IT IS OPEN TO THE ASSESSEE TO VALUE IT AT THE COST OR MARKET VALUE WHICHEVER I S LOWER; 2. IN THE BALANCE-SHEET, IF THE SECURITIES AND SHARES ARE VALUED AT COST BUT FROM THAT NO FIRM CONCLUSION CAN BE DRA WN. A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE OF HIS T RADE, HIS OWN METHOD OF KEEPING ACCOUNTS, AND FOR THAT PURPOS E, TO VALUE STOCK-IN-TRADE EITHER AT COST OR MARKET PRICE . I.T.A.NO. 2412 & 323/03 694/01 :- 25 -: 3. A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONS ISTENTLY AND REGULARLY, CANNOT BE DISCARDED BY THE DEPARTMEN TAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING ACCOUNTS OR OF VALUATIO N. 4. THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICABLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT, IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN THEIR RECOGNIZ ED LIMITS. 5. WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION. 3. FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'B LE SUPREME COURT, THIS COURT HAS CLEARLY HELD THAT THE ASSESSEE IS E NTITLED TO CHANGE THE METHOD OF VALUATION OF GOVERNMENT SECURITIES TO MARKET VALUE FROM COST AND CLAIM DEPRECIATION ON THE DIFFERENCE IN THE DIMINUTION VALUE. THE TRIBUNAL ALSO RIGHTLY POINTED OUT THE A BOVE RULING AND HELD THAT THE SECURITIES ARE TRADING ASSETS OF THE BANK AND THE LOSS ARISING ON ITS SALE IS AN ALLOWABLE DEDUCTION. THE LOSS ON SALE OF SECURITIES IS A REVENUE LOSS CONSIDERING THAT THE S ECURITIES ARE TRADING ASSETS AND NOT INVESTMENTS. HENCE, THIS QUESTION O F LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 38. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO N'BLE MADRAS HIGH COURT, WE ALLOW THIS GROUND OF APPEAL O F THE ASSESSEE. 39. GROUND NO.5 OF THE APPEAL IN ASSESSMENT YEAR 1996-9 7 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN CONFIRM ING THE DISALLOWANCE OF EXPENDITURE OF ` 98,05,002/- INCURRED ON WILLS WORLD CUP. 40. THE BRIEF FACTS ARE THAT DURING THE YEAR THE ASSES SEE INCURRED EXPENDITURE OF ` 1,58,05,001/- TOWARDS ADVERTISEMENT IN RESPECT OF WILLS WORLD CUP. OUT OF THE TOTAL EXPEN DITURE OF ` I.T.A.NO. 2412 & 323/03 694/01 :- 26 -: 1,58,05,001, THE ASSESSEE-BANK HAS CLAIMED A SUM O F ` 60 LAKHS BY WAY OF DEBIT IN THE PROFIT & LOSS ACCOUNT. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ENTIRE EXPENDITURE BEING OF REVEN UE NATURE, THE BALANCE AMOUNT OF ` 98,05,001/- WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER OBSER VED THAT THE FACT THAT THE ASSESSEE HAS CHOSEN TO DEBIT ONLY A PART OF THE EXPENDITURE IN THE BOOKS OF ACCOUNT SHOWS THAT THE BENEFITS OF THE EXPENDITURE WILL BE AVAILABLE TO THE ASSESSEE OVER A SPECIFIED TIME AND THEREFORE, IT WAS NOT OPEN TO THE ASSESSEE TO GIVE A DIFFERENT T REATMENT TO THE EXPENDITURE FOR THE PURPOSES OF INCOME TAX. HENCE, HE DISALLOWED THE DEDUCTION FOF ` 98,05,001/-. 41. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER BY FOLLOWING THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPRN. LTD VS CIT, 225 ITR 802. 42. THE A.R REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 43. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF ENTIRE EXPENDITUR E OF ` 1,58,05,001/- I.T.A.NO. 2412 & 323/03 694/01 :- 27 -: INCURRED ON ACCOUNT OF SPONSORING WILLS WORLD CUP W AS RESTRICTED BY THE ASSESSING OFFICER TO ` 60 LAKHS ON THE GROUND THAT THE ASSESSEE HAS TREATED THE REMAINING AMOUNT AS ASSET IN THE BA LANCE SHEET FOR WRITING IT OFF OVER THE SUBSEQUENT TWO YEARS. 44. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER ON THE BASIS OF DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPRN. LTD VS CIT, 225 ITR 802. 45. BEFORE US, THE ASSESSEE CONTENDED THAT THIS DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORPRN. LTD (SUPRA) WAS NOT APPLICABLE IN THE INSTA NT CASE AND THE ENTIRE AMOUNT SHOULD HAVE BEEN ALLOWED AS DEDUCTION TO THE ASSESSEE. 46. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ENTIRE E XPENDITURE OF ` 1,58,05,001/- IS REVENUE IN NATURE. FURTHER IT IS ALSO NOT IN DISPUTE THAT FUTURE BENEFIT OF THE EXPENDITURE IN QUESTION IS INCAPABLE OF BEING ASCERTAINED. IN THE CASE OF MADRAS INDUSTRIAL INVE STMENT CORPRN. LTD (SUPRA), THE FACTS WERE THAT THE ASSESSEE ISSUED D EBENTURE FOR TEN YEARS AND THE PREMIUM PAYMENT BY THE ASSESSEE AT T HE TIME OF REDEMPTION OF DEBENTURE AFTER TEN YEARS WERE CLAIME D EQUALLY IN TEN I.T.A.NO. 2412 & 323/03 694/01 :- 28 -: YEARS AND ON THAT FACT IT WAS HELD THAT THE EXPENDI TURE INCURRED ON PAYMENT OF PREMIUM IS ALLOWABLE ON PROPORTIONAL BAS IS OVER THE ENTIRE PERIOD OF DEBENTURE. THE FACTS OF THE PRESENT CASE IS CLEARLY DISTINGUISHABLE AND IN THE INSTANT CASE, IT IS NOT POSSIBLE TO ASCERTAIN PRECISELY THE FUTURE PERIOD FOR WHICH THE BENEFIT W ILL BE RECEIVED BY THE ASSESSEE AGAINST THE EXPENDITURE IN QUESTION. THER EFORE, THE SAID DECISION IS NOT APPLICABLE IN THE INSTANT CASE. F URTHER, WE FIND THAT AS IT IS NOT IN DISPUTE THAT THE EXPENDITURE IN QUESTI ON WAS INCURRED FOR BUSINESS PURPOSES AND IT IS ALSO NOT IN DISPUTE THA T THE EXPENDITURE IN QUESTION HAS NOT BEEN INCURRED FOR ACQUIRING ANY CA PITAL ASSET OF ENDURING NATURE AND EXPENDITURE IS REVENUE IN NATUR E, THEREFORE, IN OUR CONSIDERED OPINION, THE ENTIRE EXPENDITURE IS ALLOW ABLE AS DEDUCTION IN THE YEAR OF INCURRING OF EXPENDITURE IRRESPECTIVE O F THE TREATMENT OF SUCH EXPENDITURE GIVEN BY THE ASSESSEE IN ITS BOOK S OF ACCOUNT. WE, THEREFORE, DELETE THE DISALLOWANCE OF ` 98,05,001/- AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 47. GROUND NOS. 6 TO 11 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 1996-97 ARE AS FOLLOWS: 6. THE CIT(A) INSTEAD OF REMANDING BACK THE ISSUE OF DEDUCTION OF THE CORRECT AMOUNT OF INTEREST TAX DUE SHOULD HA VE DECIDED THAT THE ACTUAL INTEREST TAX PAID OF RS.18,45,00,00 0 SHOULD BE ALLOWED AS DEDUCTION U/S.43B IN COMPUTING THE TOTAL INCOME. I.T.A.NO. 2412 & 323/03 694/01 :- 29 -: 7. THE CIT(A) INSTEAD OF REMANDING BACK THE ISSUE OF TAXABILITY OF WRITE BACK OFF EXCESS PROVISION TOWARDS BAD AND DOU BTFUL DEBTS OF RS.45,50,09,088 SHOULD HAVE DECIDED THE SAID ISSUE. THE PROVISION MADE IN EACH YEAR TOWARDS BAD DEBTS IS AD DED BACK AND OFFERED TO TAX. THEREFORE THE WRITE BACK OF THE SAME CANNOT BE CHARGED TO TAX. 8. THE CIT(A) INSTEAD OF REMANDING BACK THE ISSUE OF DEDUCTION U/S.80G AMOUNTING TO RS.2,75,558 TO ASSESSING OFFIC ER SHOULD HAVE DECIDED THE SAME. SINCE THE ASSESSING OFFICER IN THE REASSESSMENT HAS CONVERTED THE LOSS RETURNED BY THE APPELLANT AS INCOME HE SHOULD HAVE ALLOWED THE DEDUCTION ELIG IBLE U/S 80G. 9. THE CIT(A) HAD ERRED IN NOT DECIDING ON THE ISS UE OF LEVY OF ADDITIONAL TAX AMOUNTING TO RS.L,56,40,000 WHICH AR OSE ON ACCOUNT OF THE PRIMA-FACIE DISALLOWANCE OF TRANS LATION DIFFERENCE STATED IN GROUND. THEREFORE THIS ISSUE S HOULD HAVE BEEN DECIDED BY CIT(A). 10. THE CIT(A) HAD ERRED IN NOT DECIDING ON THE ISSUES OF NON TAXABILITY OF REBATED INTEREST TAXED BY THE DEPARTM ENT IN THE EARLIER YEARS RECOVERED AND CREDITED TO PROFIT AND LOSS ACCOUNT OF RS.12,83,594 AND GRANT OF DITR IN RESPECT OF FOREIG N BRANCHES IN ACCORDANCE WITH THE DTA ENTERED INTO WITH THOSE COU NTRIES. THE CLAIM OF THE APPELLANT SHOULD HAVE BEEN ALLOWED BAS ED ON PARTICULARS FILED AT THE TIME OF ASSESSMENT IN RESP ECT OF REBATED INTEREST AND VARIOUS JUDICIAL DECISIONS INCLUDING T HAT OF SUPREME COURT ON THE ISSUE OF DITR. 11. THE CIT(A) HAD ERRED IN CONFIRMING THE REDUCTIO N OF RS. 11,65,419 BEING 5% OF DIVIDEND INCOME TOWARDS EXPEN DITURE IN COMPUTING THE DEDUCTION UNDER SECTION 80M. THE CIT( A) SHOULD HAVE NOTED THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME AND HENCE NO AMOUNT SHOULD HAVE BEEN DISALLOWED. BESIDES, THE APPELLANT HAS HU GE INTEREST FREE FUNDS AND HENCE THE QUESTION OF APPORTIONMENT OF ANY INTEREST TOWARDS EARNING THE INCOME ALSO DOES NOT A RISE. THIS VIEW IS SUPPORTED BY A NUMBER OF JUDICIAL DECISIONS INCLUDING THAT OF SUPREME COURT AND HENCE NO AMOUNT SHOULD HAVE BE EN DISALLOWED IN COMPUTING THE DEDUCTION U/S 80M. 48. AT THE TIME OF THE HEARING, THE AR SUBMITTED THAT H E IS NOT PRESSING THE ABOVE GROUNDS AND MADE AN ENDORSEMENT TO THIS EFFECT IN THE GROUNDS OF APPEAL ATTACHED TO THE MEMO OF APPEA L. THEREFORE, THE GROUNDS OF APPEAL ARE DISMISSED AS NOT PRESSED. I.T.A.NO. 2412 & 323/03 694/01 :- 30 -: 49. GROUND NO.12 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) IN NOT DECIDING THE ISSUE OF NON-ALLOWAN CE OF ` 12,83,394/- BEING REBATED INTEREST WHICH WAS REVERSED AND UTILI ZED FOR WRITE OFF. AS THIS AMOUNT WAS TAXED BY THE DEPARTMENT IN THE E ARLIER YEARS THE SAME SHOULD HAVE BEEN ALLOWED WHEN IT WAS WRITTEN O FF DURING THIS YEAR. 50. THE A.R OF THE ASSESSEE SUBMITTED THAT IN THE NOTE APPENDED TO THE COMPUTATION OF INCOME FILED ALONG W ITH THE RETURN OF INCOME, THE ASSESSEE STATED BY WAY OF NOTE NO.7 TH AT THE REBATED INTEREST IN RESPECT OF ALL DEBTS WRITTEN OFF WHICH WAS OFFERED TO TAX IN EARLIER YEARS WILL BE CLAIMED AS DEDUCTION AT THE T IME OF ASSESSMENT. HE SUBMITTED THAT A LETTER WAS FILED REGARDING THE QUANTUM OF REBATED INTEREST AND THE ASSESSING OFFICER WAS ASKED TO ALL OW THE SAME AS DEDUCTION. HE SUBMITTED THAT AS THE SUM WAS TAXED IN THE EARLIER YEAR, THEREFORE, THE DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE WHEN THE AMOUNTS WERE WRITTEN OFF. 51. ON THE OTHER HAND, THE DR SUBMITTED THAT NO SUCH AD DITION HAS BEEN MADE BY THE ASSESSING OFFICER IN THE ASSES SMENT ORDER. THE ISSUE IS ALSO NOT ARISEN OUT OF THE IMPUGNED ORDER OF THE CIT(A). NO I.T.A.NO. 2412 & 323/03 694/01 :- 31 -: DEDUCTION WAS CLAIMED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND THEREFORE, THE ISSUE IS NOT EMANATING FROM THE IMPUGNED PROCEEDINGS. 52. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE IN THE NOTE APPENDED TO THE RETU RN OF INCOME FOR ASSESSMENT YEAR 1996-97, STATED AS UNDER: 7. THE REBATED INTEREST IN RESPECT OF BAD DEBTS WRITTEN OFF WHICH WAS OFFERED TO TAX IN THE EARLIER YEARS WILL BE CLAIMED AS A DEDUCTION AT THE TIME OF ASSESSMENT. 53. HOWEVER, WE FIND THAT THE ASSESSMENT ORDER IS SILEN T ON THIS ISSUE. THE ASSESSEE, BEFORE US, CLAIMED THAT THE RELEVANT GROUND OF APPEAL WAS ALSO NOT ADJUDICATED UPON BY THE CIT(A). CONSIDERING THE FACT THAT GROUND NOS.2 AND 5 OF THE APPEAL FOR ASSE SSMENT YEAR 1995- 96 HAVE ALREADY BEEN RESTORED TO THE FILE OF THE A SSESSING OFFICER FOR ADJUDICATION AFRESH, IT SHALL BE FAIR AND REASONABL E TO RESTORE THIS ALSO BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUD ICATION OF THE ISSUE BY PASSING A SPEAKING ORDER. THUS, THIS GROUND OF APP EAL IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 2412 & 323/03 694/01 :- 32 -: 54. TO SUMMARIZE THE RESULT, I.T.A.NO. 2412/MDS/200 3 FOR ASSESSMENT YEAR 1994-95 IS DISMISSED, I.T.A.NO. 323 /MDS/2003 FOR ASSESSMENT YEAR 1995-96 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES AND I.T.A.NO. 694/MDS/2001 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 31 ST JANUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR