STATE BANK OF BIKANER & JAIPUR, Jaipur V. ACIT, Jaipur

ITA 279/JPR/2009

• Counselvise Citation: 27923114 RSA 2009
• Duration Of Justice: 5 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Source of fund; Proportionate interest; Cost of acquisition; Competent authority; Tax effect
• Section: 143(3); 14A; 28; 10; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 700/JP/2003 ASSTT. YEAR- 2001-02 PAN NO. AADCS 4750 R THE A.C.I.T., STATE BANK OF BIKANER & JAIPUR, CIRCLE-6, JAIPUR. VRS. TILAK MARG, C-SCHEME, JAIPUR. (APPELLANT) (RESPONDENT) I.T.A. NO. 701/JP/2003 ASSTT. YEAR- 2002-03 PAN NO. AADCS 4750 R THE A.C.I.T., STATE BANK OF BIKANER & JAIPUR, CIRCLE-6, JAIPUR. VRS. TILAK MARG, C-SCHEME, JAIPUR. (APPELLANT) (RESPONDENT) I.T.A. NO. 279/JP/2009 ASSTT. YEAR- 2005-06 PAN NO. AADCS 4750 R STATE BANK OF BIKANER & JAIPUR, THE ADDL.C.I.T., TILAK MARG, C-SCHEME, VRS. RANGE-6, JAIPUR. JAIPUR. (APPELLANT) (RESPONDENT) I.T.A. NO. 437/JP/2009 ASSTT. YEAR- 2005-06 PAN NO. AADCS 4750 R THE D.C.I.T., STATE BANK OF BIKANER & JAIPUR, CIRCLE-6, JAIPUR. VRS. TILAK MARG, C-SCHEME, JAIPUR. (APPELLANT) (RESPONDENT) ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 2 DEPARTMENT BY :- SHRI A.K. KHANDELWAL. ASSESSEE BY :- SHRI P.C. PARWAL DATE OF HEARING : 02/09/2014 DATE OF PRONOUNCEMENT : 12/09/2014 O R D E R PER: T.R. MEENA, A.M. THE ITA NO. 700 & 701/JP/2003 FILED BY THE REVENUE, ITA NO. 279/JP/2009 OF THE ASSESSEE AS WELL AS CROSS APPEAL NO. 437/JP/2009 BY THE REVENUE ARE AGAINST THE ORDERS DATED 30/07/2003 , 31/07/2003 AND 26/03/2009 OF THE LEARNED C.I.T.(A)-II, JAIPUR FOR T HE A.Y. 2001-02, 2002- 03 AND 2005-06. THE GROUNDS OF REVENUES APPEALS AS WELL AS THE ASSESSEE ARE AS UNDER:- GROUNDS OF ITA NO. 700/JP/2003 FOR A.Y. 2001-02 (R EVENUE) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A)-II, JAIPUR HAS ERRED IN: (I) REDUCING THE DISALLOWANCE OF EXPENDITURE IN RELA TION TO EXEMPT INCOME MADE U/S 14A FROM RS. 11,87,60,152/- TO RS. 7,76,47,631/-, THEREBY ALLOWING RELIEF TO THE EXTENT OF RS. 4,11,12,521/-. (II) DELETING THE DISALLOWANCE OF RS. 27,53,67,173/- MADE BY THE A.O. ON ACCOUNT OF BROKEN PERIOD INTEREST EXPENSES, RELATING TO SECURITIES PURCHASED AND NOT FOLLOWING SUPREME COURTS DECISION IN THE CASE OF VI JAYA BANK, 187 ITR 541. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 3 (III) NOT UPHOLDING THE ENTIRE ADDITION OF RS. 4,99 ,60,054/- MADE BY THE A.O. ON ACCOUNT OF PROVISION FOR DEPRECIATION BEING AN UNASCERTAINED LIABILITY AND (IV) REDUCING THE ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK OF SECURITIES FOR RS. 24,24,47,962/- TO RS. 8,16,51,112/-, THEREBY ALLOWING A RELIEF OF RS. 16,07,96,850/-. GROUNDS OF ITA NO. 701/JP/2003 FOR A.Y. 2002-03 (R EVENUE) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A)-II, JAIPUR HAS ERRED IN: (I) REDUCING THE DISALLOWANCE OF EXPENDITURE IN RELA TION TO EXEMPT INCOME MADE U/S 14A FROM RS. 15,81,27,285/- TO RS. 12,47,28,784/-, THEREBY ALLOWING RELIEF TO TH E EXTENT OF RS. 3,33,98,501/-. (II) DELETING THE DISALLOWANCE OF RS. 1,45,59,32,42 8/- MADE BY THE A.O. ON ACCOUNT OF BROKEN PERIOD INTEREST EXPENSES, RELATING TO SECURITIES PURCHASED AND NOT FOLLOWING SUPREME COURTS DECISION IN THE CASE OF VI JAYA BANK, 187 ITR 541. (III) NOT UPHOLDING THE ENTIRE ADDITION OF RS. 12,5 8,56,484/- MADE BY THE A.O. ON ACCOUNT OF PROVISION FOR DEPRECIATION BEING AN UNASCERTAINED LIABILITY AND (IV) DELETING THE ADDITION OF RS. 36,83,04,447/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF SECURITIES. GROUNDS OF ITA NO. 279/JP/2009 FOR A.Y. 2005-06 (AS SESSEE) 1 (I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE APPLICABILITY OF THE PROVISION OF SEC TION ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 4 14A AND THEREBY UPHOLDING THE DISALLOWANCE OF PROPORTIONATE INTEREST AND ESTIMATED ADMINISTRATIVE EXPENDITURE OF THE BANKING BUSINESS OF THE APPELLAN T BANK. (II) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN QUANTIFYING THE DISALLOWANCE U/S 14A AT A SUM OF RS. 15,08,00,000/-. (III) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN CALCULATING THE AMOUNT OF DISALLOWANCE U/S 14A IN TERMS OF PROVISIONS OF RULE 8D. HE HAS ALSO ERRE D IN APPLYING THESE PROVISIONS OF RULE 8D FOR THE YEAR U NDER CONSIDERATION AS THE SAME HAVE BEEN INTRODUCED ON 24/03/2008. 2.(I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 16,90,827/-. HE HAS FURTHER ERRED IN NOT DIRECT ING THE A.O. TO ALLOW THIS CLAIM IN THE PRECEDING RESPEC TIVE ASSESSMENT YEARS. (II) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO ERRED IN NOT ALLOWING THE RELIEF IN RESPECT OF DISALLOWANCE OF ALLEGED PRIOR PERIOD MISCELLANEOUS EXPENSE OF RS. 12,26,085/-. 3. APPELLANT CRAVES TO ADD, AMEND, ALTER OR MODIFY ANY OF THE GROUND OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 5 GROUNDS OF ITA NO. 437/JP/2009 FOR A.Y. 2005-06 (RE VENUE) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN: (I) HOLDING THAT INTEREST ON GOVERNMENT AND OTHER SECURITIES HAS TO BE INCLUDED IN THE INCOME ON DUE BASIS. (II) DELETING THE ADDITION OF RS. 83,51,729/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED FOR INTEREST ON TAX FREE DEBENTURE ON DUE BASIS. (III) DELETING THE ADDITION OF RS. 14,75,66,529/- M ADE BY THE A.O. ON ACCOUNT OF VALUATION OF INVESTMENT BY ADOPT ING GLOBAL METHOD OR VALUATION OF SECURITIES AS AGAINST CATEGORY WISE METHOD OF VALUATION FOLLOWED BY THE ASSESSEE. (IV) DELETING THE ADDITION OF RS. 47,52,13,802/- MA DE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF AMORTIZATION IN RESPECT OF PERMANENT DIMINUTION IN THE VALUE OF SECURITIES HELD BY THE BANK UNDER THE HEAD OF MATURITY CATEGORY. (V) DELETING THE ADDITION OF RS. 5,51,70,961/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF THE BROKEN PERIOD INTEREST PAYMENT ON PURCHASES OF SECURITIES. 2. GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 20 01-02 AND 2002- 03 AND GROUND NO. 1 OF THE ASSESSEES APPEAL FOR A. Y. 2005-06 ARE AGAINST REDUCING AND UPHOLDING THE DISALLOWING OF EXPENDITUR E IN RELATION TO EXEMPT INCOME MADE U/S 14A OF THE IT ACT RESPECTIVEL Y. THE ASSESSEE IS IN BANKING BUSINESS. IT HAS CLAIMED EXEMPTED INCOME OF RS. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 6 17,22,50,607/-. THE ASSESSING OFFICER GAVE REASONAB LE OPPORTUNITY OF BEING HEARD ON THIS ISSUE TO THE APPELLANT. THE LEAR NED ASSESSING OFFICER MADE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), ON THE BASIS THAT THE MAIN BUSINESS OF BANK IS BORROWING AND LENDING MONEY. THE SOURCE OF FUND OF TH E BANK IS MAINLY BY WAY OF DEPOSIT/BORROWINGS, WHICH CONSTRUED MORE TH AN 70% OF THE TOTAL OF THE BANK BALANCE SHEET. THE BANK HAS TO INC UR INTEREST ON ADVANCES AND ESTABLISHMENTS. IT HAS NOT ESTABLISHED BY THE BANK THAT INTEREST FREE EARNINGS WERE FROM INTEREST FREE FUND AVAILABLE. THE ACTIVITY OF THE BANK HAS TO OBTAIN FUND FROM ANY POOL. IT IS FURTHER HELD THAT THE LEGISLATIVE INTENTION HAS NEVER BEEN TO ALLOW DEDUCT ION MORE THAN 100%. IN THE ASSESSEES CASE, TOTAL DIVIDEND INCOME AS WEL L AS EXPENDITURE WOULD BE ALLOWED IF THE ASSESSEES SUBMISSION IS ACCEPTED. THE LEARNED ASSESSING OFFICER FURTHER OBSERVED THAT COMMON FUNDS WERE USED FOR EARNING INCOME. THE ASSESSEE BANK IN P&L ACCOUNT HAD SHOWN TO TAL INTEREST INCOME OF RS. 1266.83 CRORES AND TOTAL INTEREST EXP ENSES AT RS. 810.87 CRORES I.E. 64% OF INTEREST EARNED. IT IS FURTHER H ELD THAT ADMINISTRATIVE EXPENSES IS NOT MORE THAN 5%, THUS HE CONSIDERED NE T MARGIN OF 69% AS EXPENSES INCURRED FOR EARNING EXEMPT INCOME. ACCORD INGLY, HE PROPORTIONATELY HAD TAKEN 69% FOR DISALLOWANCE. DURI NG THE YEAR, THE ASSESSEE HAD RECEIVED TOTAL DIVIDEND ON SHARES OF R S. 83,75,610/- INTEREST ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 7 ON TAX FREE DEBENTURE RS. 5,51,57,260/- INCOME FROM MUTUAL FUND AT RS. 10,85,83,293/- (TOTAL 17,21,16,163/-) WHICH HAD BEEN CLAIMED AS EXEMPTED INCOME UNDER VARIOUS PROVISIONS OF SECTION 10 OF THE ACT. IT IS HELD THAT THE APPELLANT HAD USED PARTLY BORROWED FUN D ON WHICH INTEREST HAD BEEN PAID. THUS, APPLYING THE RATIO OF EXPENSES ON EXEMPTED INCOME, THE DISALLOWANCE U/S 14A OF THE ACT HAD BEEN CALCULA TED AT RS. 11,87,60,152/- IN A.Y. 2001-02, RS. 15,81,27,285/- IN A.Y. 2002-03 AND RS. 13,27,70,745/- IN A.Y. 2005-06. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD PARTLY ALLOWED THE APPEALS BY OBSERVING AS UNDER IN A.Y. 20 01-02:- 7.3 AS REGARDS ALTERNATIVE ARGUMENTS OF THE APPELL ANT FOR QUANTUM OF DISALLOWANCE, THE FIRST PLEA IS REGARDING AVAILABILITY OF AMPLE INTEREST FREE FUNDS. THE SECON D PLEA IS THAT ASSESSEE MADE INVESTMENT OF RS. 90.23 CRORES I N THE SECURITIES WHICH YIELDED TAXABLE AS WELL AS TAX FREE INCOME AS AGAINST THE OTHER INVESTMENT OF RS. 54.95 CRORES WH ICH YIELDED ONLY TAX FREE INCOME. THE THIRD IS IN RESPEC T OF ADMINISTRATIVE EXPENSES. I HAVE CONSIDERED ABOVE SUBMISSIONS CAREFULLY. IT IS ADMITTED FACT THAT THE APPELLANT BANK HAS AMPLE INTEREST FREE FUNDS, WHICH ARE MORE T HAN THE INVESTMENTS MADE IN SECURITIES EARNING TAX FREE INC OME, YET IT CANNOT BE ACCEPTED THAT THESE INTEREST FREE FUNDS O NLY ARE USED FOR INVESTMENT IN SECURITIES EARNING TAX FREE INCOME. IT IS ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 8 TRUE THAT IN BANKING BUSINESS THE PROPER BLEND OF INVESTMENT AND ADVANCES IS REQUIRED ALL THE TIMES AND, THEREFO RE, ONLY INTEREST FREE FUNDS CANNOT BE ATTRIBUTED EITHER TO TAX FREE INCOME OR TO TAXABLE INCOME. HOWEVER, THERE IS CONSP ICUOUS ABSENCE OF ANY DETAIL ON THE PART OF THE APPELLANT BANK TO WORK OUT DIRECT NEXUS OF EXPENDITURE ATTRIBUTABLE TO EXEMPTED INCOME TO MEET OUT THE OBJECTIVE OF THE PR OVISIONS OF NEW SECTION 14A OF INCOME-TAX ACT, 1961. THIS DETA IL OUGHT TO HAVE BEEN MAINTAINED BY THE ASSESSEE BANK. I AM, THEREFORE, DO NOT AGREE WITH THE SECOND PLEA THAT TH E COST OF FUNDS IN RESPECT OF THOSE INVESTMENTS WHICH YIELDED BOTH THE TAXABLE AS WELL AS TAX FREE INCOME CANNOT BE DISALLO WED. SINCE INVESTMENT OF RS. 90.23 CRORES YIELDED TAXABL E AND NON- TAXABLE INCOME PROPORTIONATE EXPENDITURE HAS TO BE DISALLOWED IN ADDIOTN TO THE EXPENDITURE INCURRED EA RNING TAX FREE INCOME ON INVESTMENT OF RS. 54.95 CRORES. 7.4 DURING THE APPELLATE HEARING THE ASSESSEE BANK HAS SUBMITTED A STATEMENT PLACED AT PAGE 79 OF THE PAPE R BOOK WHICH SHOWS THAT TOTAL FUNDS WERE AVAILABLE AS ON 31/ 03/2001 TO THE EXTENT OF RS. 13,865.37 CRORES OUT OF WHICH R S. 54.95 CRORES ARE EXCLUSIVELY INVESTED FOR TAX FREE INCOME RS. 90.23 CRORES WHICH INCLUDE RS. 19.74 CRORES INVESTMENT IN SHARES AND RS. 70.49 CRORES INVESTMENT IN MUTUAL FUNDS TO EARN TAX FREE AS WELL AS TAXABLE INCOME DURING THE YEAR UNDER APPEALS. THE APPELLANT BANK HAS EARNED RS. 17,21,16,163/- EXE MPTED INCOME AS MENTIONED EARLIER WHILE SPENT TOTAL INTERE ST EXPENDITURE OF RS. 8,10,87,59,000/- TO EARN TOTAL I NTEREST ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 9 INCOME OF RS. 12,66,83,31,000/- AS EVIDENT FROM ASS ESSMENT ORDER. THESE FIGURES INDICATE PRESUMING THAT INVESTM ENT OF TOTAL FUNDS OF RS. 13865.37 CRORES, BANK HAS EARNED TOTAL INTEREST INCOME OF RS. 1266.83 CRORES, THEREFORE, O N INVESTMENT OF RS. 54.95 CRORES, BANK MAY FETCH IN T HE SAME PROPORTION THE EXEMPTED INCOME OF RS. 5.02 CRORES A ND SIMILARLY ON RS. 90.23 CRORES THE INCOME WORKS OUT T O RS. 8.24 CRORES. ON THE OTHER HAND, THE APPELLANT BANK HAS INCURRED TOTAL INTEREST EXPENDITURE TO THE EXTENT OF RS. 810.88 CR ORES TO EARN RS. 1266.83 CRORES. THEREFORE, TAKING INTO ACCO UNT SAME RATIO THE EXPENDITURE ON INCOME OF RS. 5.02 CRORES SHOULD BE RS. 3,21,32,311/- WHICH ARE EXCLUSIVELY SPENT FOR N ON TAXABLE INCOME. ON INVESTMENT OF RS. 90.23 CRORES WHICH EARNED TAXAB LE AND NON-TAXABLE INCOME, THE EXPENDITURE ON SAME RATIO WO RKS OUT TO RS. 52743076. SINCE THE APPELLANT BANK HAS NOT M AINTAINED SPECIFIC DETAIL OF EXPENDITURE FOR NON-TAXABLE INCO ME. I DO, HEREBY ESTIMATE 50% OUT OF THE ABOVE EXPENSE AS REA SONABLE WHICH COMES TO RS. 26371538/- FOR EXEMPTED INCOME EA RNED OUT OF MIXED INVESTMENT FOR TAXABLE AND NON-TAXABLE INCOME. THEREFORE, A SUM OF RS. 58503849/- WORKS OUT AS EXPEN DITURE ON EXEMPTED INCOME. SINCE ACTUAL EXEMPTED INCOME OF RS. 172116163/- IS HIGHER THAN AVERAGE INCOME WORKS OUT ABOVE AT RS. 13.26 CRORES, THEREFORE, EXPENDITURE ON EXEM PTED INCOME IS RS. 75926470/-. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 10 7.5 AS REGARDS ADMINISTRATIVE EXPENSES, I AM OF THE VIEW THAT 5% OF THE EXEMPT INCOME IS DISALLOWED BY THE A.O. IS ON THE HIGHER SIDE. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND EFFORTS/MANPOWER REQUIRED FOR INVESTMENT AC TIVITY, IT WOULD BE JUST AND REASONABLE TO DISALLOW 1% OF THE EX EMPTED INCOME IN RESPECT OF ADMINISTRATIVE EXPENSES. DURIN G THE APPELLATE DISCUSSION LEARNED AR HAS PROVIDED A COP Y OF APPELLATE ORDER OF PUNJAB NATIONAL BANK FOR A.Y. 20 00-01 WHEREIN ADMINISTRATIVE EXPENSES @ 1% FOUND REASONABLE BY LEARNED CIT(A). I, THEREFORE, HOLD A SUM OF RS. 172 1161 AS REASONABLE ADMINISTRATIVE EXPENSES FOR NON TAXABLE INCOME. IN VIEW OF THE ABOVE DISCUSSION A SUM OF RS. 7764763 1/- (75926470+1721161) ARE CONFIRMED OUT OF THE TOTAL DISALLOWANCE OF RS. 118760152 AND THE REST RS. 41112 521 ARE DELETED (RELIEF RS. 41112521). SIMILAR FINDINGS HAVE BEEN GIVEN IN A.Y. 2002-03 AN D THE LEARNED CIT(A) HAS ENHANCED THE DISALLOWANCE IN A.Y. 2005-06 ON THE BASIS OF HIS ORDER FOR A.Y. 2004-05 FROM 13.27 CRORES TO 15.08 CRORES. 4. NOW THE REVENUE IS IN APPEALS FOR A.Y. 2001-02 AN D 2002-03 AND ASSESSEE IS IN APPEAL FOR A.Y. 2005-06 BEFORE US. T HIS BENCH HAD DECIDED THIS ISSUE IN THE ASSESSEES APPEAL IN ITA NO. 329/ JP/2005 FOR A.Y. 2003- 04 IN GROUND NO. 1 ON PAGES 3 TO 5 AND MATTER HAS B EEN SET ASIDE TO THE ASSESSING OFFICER ON THE BASIS OF DISALLOWANCE IS TO BE CALCULATED BY THE ASSESSING OFFICER AS PER RULE 8D(2) OF THE INCOME TA X RULES, 1962 (IN ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 11 SHORT THE RULES). BOTH THE PARTIES AGREED THAT THIS BENCH HAS SET ASIDE THE ISSUE IN ITA NO. 278/JP/2009 FOR A.Y. 2004-05 IN GR OUND NO. 1 OF THE ASSESSEES APPEAL AND ISSUE HAS BEEN SET ASIDE TO T HE ASSESSING OFFICER FOR RECOMPUTING THE DISALLOWANCE U/S 14A OF THE ACT ON T HE BASIS OF HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF GODREJ AN D BOYCE MFG. CO. LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX, WHEREIN IT HAS BEEN HELD THAT RULE 8D IS APPLICABLE FROM A.Y. 2008-09. HERE BEFOR E THIS BENCH, THE ISSUE PERTAINED TO A.YS. 2001-02, 2002-03 AND 2005-06, TH EREFORE, SAME MAY BE SET ASIDE TO THE ASSESSING OFFICER. THE ASSESSEE ALSO RELIED IN THE CASE OF DCIT VS. GULSHAN INVESTMENT COMPANY LTD. (2013) 8 6 DTR 262 (KOL) AND CCI LTD. VS. DCIT (2012) 206 TAXMANN 563 (KAR.) 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE COORDINATE BENCH HAS DE CIDED THE ASSESSEES APPEAL IN ITA NO. 329/JP/2005 FOR A.Y. 2003-04 ON T HE BASIS OF RULE 8D OF THE RULES BUT AS DISCUSSED IN OUR ORDER IN ITA NO. 278/JP/2009 FOR A.Y. 2004-05, THE RULE 8D IS APPLICABLE FROM A.Y. 2008-0 9 AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX (SUPRA). THUS, IN THIS YEAR ALSO, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE DISAL LOWANCE U/S 14A OF THE ACT ON THE BASIS OF DECISION GIVEN BY THIS BENCH IN A.Y. 2004-05. THIS GROUND OF APPEAL IS SET ASIDE TO THE ASSESSING OFFI CER. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 12 6. GROUND NO. 2 OF THE REVENUES APPEAL IN A.YS. 20 01-02 AND 2002- 03 IS AGAINST DELETING DISALLOWING OF RS. 27,53,67,1 73/- IN A.Y. 2001-02, RS. 145,59,32,438/- IN 2002-03 AND RS. 5,51,70,961/ - IN A.Y. 2005-06 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BROKEN PERIOD INTEREST EXPENSES RELATING TO SECURITIES PURCHASED IN THE VI EW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK 18 7 ITR 541. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DE BITED BROKEN PERIOD INTEREST PAID ON PURCHASE OF SECURITIES. SIMILARLY, IT HAD CREDITED INCOME ON ACCOUNT OF INTEREST REALIZED ON SALE OF INVESTMENT AND THE NET OF THESE TWO HAD BEEN TAKEN IN THE HEAD OF INCOME ON INVESTMENT IN SCHEDULE ATTACHED TO BALANCE SHEET. THE LEARNED ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD IN ALL THESE YEARS AND WA S PROPOSED TO FOLLOW THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F VIJAYA BANK (SUPRA) AND IT SHOULD NOT BE TREATED COST OF PURCHASE OF SC RIP. THE APPELLANT REPLIED AGAINST THIS QUERY BEFORE THE ASSESSING OFF ICER. THE LEARNED ADDITIONAL CIT ALSO GAVE A DIRECTION TO THE ASSESSIN G OFFICER U/S 144A OF THE ACT, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN ASSESSMENT ORDER AND DETAILED ANALYSIS WITH FACTS AN D CASE LAWS ON THIS POINT HAD BEEN DISCUSSED INCLUDING HONBLE BOMBAY H IGH DECISION IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORP ORATION VS. CIT 258 ITR 601 (BOM) AND IT WAS DIRECTED TO THE ASSESSING OF FICER THAT THE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 13 BROKEN PERIOD INTEREST IS A COST OF GOVERNMENT SECU RITIES PURCHASED BY THE BANK AS THE ASSESSEE BANK IS MAKING INVESTMENT IN G OVERNMENT SECURITIES AS PER RBI GUIDELINES AND THEREAFTER IT IS FREE TO TRADE IN THESE SECURITIES. THE ASSESSEE EARNS PROFIT ON INVESTMENTS WHEN THE SAL E PRICE OF THE FACE VALUE OF SECURITY IS HIGHER THAN THE PURCHASE PRICE . AT THE SAME TIME, THE ASSESSEE ALSO EARNS BROKEN PERIOD INTEREST ON SUCH SALES. SIMULTANEOUSLY, WHILE PURCHASING SECURITIES IT IS LIABLE TO PAY BROK EN PERIOD INTEREST ALSO. THE SALE OF THE SECURITIES IS OF THOSE SCRIPS IN HAN D WHICH MAY HAVE BEEN PURCHASED THIS YEAR OR EVEN EARLIER YEARS. IN THESE SALES, THE PROFIT HAS TO BE ADDED BY THE RECEIPT ON ACCOUNT OF INTEREST. THE PURCHASES ON THE OTHER HAND, ARE OF THE SECURITIES, WHICH MAY CONTINU E IN CLOSING STOCK OR BE PARTIALLY SOLD BUT THE ENTIRE PURCHASE WILL NOT G ET SOLD IN THE SAME FINANCIAL YEAR. IT IS FURTHER OBSERVED THAT AS PER HON'BLE SUPREME COURT DECISION IN THE CASE OF VIJAYA BANK (SUPRA), THE IN TEREST PAID WOULD GO TO ADD TO THE PURCHASE VALUE OF THE STOCK. THEREAFTER THE NET PROFIT WOULD BE COMPUTED ON THE SECURITIES ONLY WHEN THEY ARE ACTUAL LY SOLD AND THEN THIS INTEREST WOULD ENHANCE THE PURCHASE COST TO REDUCE T HE PROFIT. THERE IS NO QUESTION OF TREATING THIS PAYMENT AS CAPITAL INPUT, BUT IT IS A PART OF COST OF GOVERNMENT SECURITIES. AS PER THE ASSESSEE, IT WAS S UBMITTED THAT BY CLAIMING THIS INTEREST COST, IN THE YEAR IN WHICH, IT WAS INCURRED ITS POSTPONEMENT OF THE NET PROFIT FOR THE SUBSEQUENT Y EAR. IF SECURITIES WERE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 14 SOLD IN SUBSEQUENT YEARS, BUT AS PER ASSESSING OFFI CER IT IS A DISTORTED POSITION OF ACCOUNTS AS THE ASSESSEE IS CLAIMING IN TEREST EXPENDITURE FOR BROKEN PERIOD IN THE YEAR IT IS INCURRED EVEN SECUR ITIES ARE SHOWN AS INVESTMENT IN BALANCE SHEET. ON MATCHING PRINCIPLE ALSO, THE INTEREST EXPENDITURE IS NOT FOR THE INTEREST INCOME CREDITED ON SECURITIES. THE LEARNED ASSESSING OFFICER ALSO REFERRED THE CBDT CIR CULAR NO. 665 DATED 05/10/1993. IT IS UNDISPUTED FACT THAT DURING THE Y EAR, THE ASSESSEE CLAIMED THE INTEREST ON BROKEN PERIOD ON SECURITIES PURCHASED DURING THE YEAR BUT NO ANY INTEREST INCOME ON THESE SECURITIES CREDITED IN THE P&L ACCOUNT. THUS, FOLLOWING THE DECISION OF HON'BLE SUP REME COURT AS WELL AS KERALA HIGH COURT DECISION IN THE CASE OF CIT VS. CATHOLIC SYRIAN BANK LTD. 220 ITR 363, THE ASSESSING OFFICER NOT ALLOWED T HE BROKEN PERIOD INTEREST AS THE REVENUE EXPENSES DURING THE YEAR UN DER CONSIDERATION. 7. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ). AFTER CONSIDERING THE ASSESSEES DETAILED REPLY ON PAGES 25,26,27,29, 30,31 AND 33 OF THE APPELLATE ORDER FOR A.Y. 2001-02, THE LEARNED CIT(A ) HAS OBSERVED AS UNDER:- THE A.O. HAS APPLIED DECISION IN THE CASE OF VIJAYA BANK WHEREIN IT WAS HELD THAT BROKEN PERIOD INTEREST SHOULD BE MADE PART OF THE COST OF SECURITIES AND NOT PART OF EXPENDITURE. IN THAT CASE SECURITIES ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 15 WERE CAPITAL ASSET AND INTEREST WAS CLAIMED AS EXPEND ITURE WHILE IN THE PRESENT CASE THE INTEREST AS WELL AS COST OF SEC URITIES FORMS PART OF TRADING ACCOUNT AND ARE ASSESSED U/S 28 OF IT ACT AS BUSINESS INCOME. THE FACTS OF THE APPELLANT BANK ARE SIMILAR TO THE FACTS OF AMERICAN EXPRESS BANK, THEREFORE, I AM OF THE VIEW T HAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F VIJAYA BANK 187 ITR 541 (SC) IS NOT APPLICABLE TO THE PRESENT A PPEAL. IN ADDITION TO ABOVE DECISIONS, I HAVE RESPECTFULLY PE RUSED THE DECISION DT. 7.11.2002 OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. NEDUNGADI BANK LTD. (2003) REPORTED IN 130 TAXMANN 9 3 (KER) WHEREIN THE COURT HAS HELD THE ASSESSING AUTHORITY H AD IN FACT REOPENED THE ASSESSMENT ON THE BASIS OF THE DECISIO N OF THE HON'BLE SUPREME COURT IN VIJAYA BANK LTD. (SUPRA). IN THAT CASE, THE QUESTION WHICH AROSE FOR CONSIDERATION WAS AS TO WHE THER INTEREST ACCRUED ON SECURITIES TAKEN BY THE ASSESSEE BANK FR OM THE BANK AND INTEREST ACCRUED UPTO THE DATE OF PURCHASE IN T HE CASE OF SECURITIES PURCHASED BY THE ASSESSEE BANK FROM THE OPEN MARKET WERE ADMISSIBLE AS DEDUCTION UNDER THE PROVISIONS OF SECTIONS 19, 20 AND 37. IN THAT CONTEXT, THE SUPREME COURT RELIE D ON A DECISION OF THE COURT OF APPEAL CIR VS. PILCHER (1949) 31 TC 314, 332 WHERE IT WAS OBSERVED THAT OUTLAY ON PURCHASE OF AN INCOME BARING ASSET IS IN THE NATURE OF CAPITAL ASSET. THE SUPREME COURT OBSERVED IN VIJAYA BANK LTD.S CASE (SUPRA) THAT THE PRICE PAID FOR THE SECURITIES IS DETERMINED WITH REFERENCE TO THEIR ACTUAL VALUE A S WELL AS THE INTEREST WHICH HAS ACCRUED ON THEM TILL DATE OF PURC HASE, THAT WHATEVER IS THE CONSIDERATION WHICH PROMPTED THE ASSE SSEE TO PURCHASE THE SECURITIES, THE PRICE PAID FOR THEM IS IN THE NATURE OF A CAPITAL OUTLAY AND NO PART OF IT CAN BE SETOFF AS E XPENDITURE AGAINST ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 16 INCOME ACCRUING ON THOSE SECURITIES. IN THAT CASE T HE SUPREME COURT HAS NOT AT ALL CONSIDERED THE QUESTION WITH RE GARD TO THE CHARACTER OF SECURITIES FROM WHICH INTEREST INCOME I S EARNED. NO CONTENTION WAS SEEN TAKEN BY ANY OF THE PARTIES THAT THE SECURITIES INVOLVED IN THE SAID CASE REPRESENTED STOCK IN TRAD E. HENCE THE DECISION RENDERED IN THE SAID CASE COULD NOT BE TAK EN AS AN AUTHORITY FOR THE POSITION THAT THE SECURITIES HELD BY THE ASSESSEE IN THE INSTANT CASE IN COMPLIANCE WITH THE PROVISIONS O F THE BANKING REGULATION ACT IS TO BE HELD AS CAPITAL INVESTMENT. INSTANT COURT AND THE SUPREME COURT HAVE CLEARLY TAKEN THE VIEW THAT T HE GOVERNMENT SECURITIES ACQUIRED BY THE ASSESSEE BANK IN COMPLIA NCE WITH THE PROVISIONS OF BANKING REGULATION ACT HAS TO BE TREA TED AS STOCK IN TRADE OF THE BUSINESS OF THE BANK. IN FACT, THE CBD T IN CIRCULAR NO. 599 DATED 24/5/1991 HAS TAKEN THE VERY SAME VIEW. IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED IN DETAIL FROM PA RA 8 ONWARDS AS WELL AS ARGUMENTS PUT FORTH BY LEARNED ARS OF THE A PPELLANT BANK AND THE DECISIONS RELIED UPON, THE ADDITION OF RS. 275367173 AS MADE BY THE A.O. IS FOUND UNJUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. SAME FINDINGS HAS BEEN GIVEN BY THE LEARNED CIT(A) I N REVENUES APPEAL FOR A.Y. 2002-03. IN REVENUES APPEAL FOR A.Y. 2005 -06, THE LEARNED CIT(A) HAS OBSERVED AS UNDER: 7.3 I HAVE CONSIDERED FACTS OF THE CASE AND ARGUME NTS TAKEN BY SHRI JHANWAR AND SHRI PARWAL QUITE CAREFULLY. THIS ISS UE HAS CAME UP BEFORE CIT(A)-II, JAIPUR WHILE DECIDING THE APPEAL FOR A.Y. 2003-04 AND CIT(A)-II, JAIPUR IN HIS APPEAL FOR A.Y. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 17 2003-04 DATED 30/03/2005 IN PARA 5.6 OF THE APPEAL ORDER HAS RELIED UPON THE DETAILED ORDER PASSED BY A.O. O N THIS ISSUE FOR A.Y. 2001-02, DATED 30/07/2003 AND FOR A. Y. 2002- 03, DATED 31/07/2003 FOLLOWING THE SAME THE CIT(A) H AS DELETED THE SAID ADDITION AS MADE BY THE A.O. FURTH ER AGAINST THOSE ORDERS TO FILE APPEAL BEFORE THE HONBLE ITAT, THE PERMISSION TO THE DEPARTMENT HAS BEEN REFUSED BY TH E COMMITTEE OF THE DISPUTE IN THEIR MEETING DATED 16/ 10/2008 WHERE IN THE ITEM NO. 19 TO 21 OF THE MINUTES CIRCUL ATED BY CABINET SECRETARIATS LETTER DATED 4 TH NOVEMBER, 2008 WAS ON THIS ISSUE. KEEPING IN VIEW THESE DEVELOPMENTS IN MY CONSIDERED VIEW, THE A.O. WAS NOT JUSTIFIED IN MAKING THE SAID DISALLOWANCE OF RS. 5,51,70,961/- WHICH IS HEREBY DE LETED. 8. NOW THE REVENUE IS IN APPEALS BEFORE US. 9. THE LEARNED CIT D.R. ARGUED THAT THE BROKEN PERIOD INTEREST IS THE INTEREST COMPONENTS PAID BY IT ON THE INTEREST BEAR ING GOVERNMENT SECURITIES. HE FURTHER ARGUED THAT THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. BANK OF RAJASTHAN (2009) 316 ITR 391 (RAJ. ) HAS HELD THAT INTEREST PAID FOR BROKEN PERIOD IS IN THE NATURE OF CAPITAL OUTLAY AND NOT PART OF IT CAN BE SET OFF AS EXPENDITURE AGAINST TH E INCOME ACCRUING ON THOSE SECURITIES. THE ASSESSEE BANK HAS SHOWN THESE SECURITIES AS INVESTMENT IN BALANCE SHEET. THIS EXPENDITURE HAS NO T BEEN INCURRED THE EARNING OF ANY INTEREST ON SECURITIES. THEREFORE, I T IS PRAYED TO REVERSE THE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 18 ORDER OF THE LEARNED CIT(A) AND CONFIRM THE ORDER OF THE LEARNED ASSESSING OFFICER. 10. AT THE OUTSET, THE A.R. FOR THE ASSESSEE SUBMIT TED THAT THE LEARNED CIT(A) IN PARA 8.7 HAS GIVEN A FINDING HOW THE DECISI ON OF SUPREME COURT IN CASE OF VIJAYA BANK IS NOT APPLICABLE AND ALSO R ELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS I NTERNATIONAL BANKING CORPORATION VS. CIT 258 ITR 601 WHERE THE DECISION OF VIJAYA BANK WAS DISTINGUISHED. IT MAY BE NOTED THAT THIS ISSUE IS C OVERED IN FAVOUR OF THE ASSESSEE BY JUDGMENT OF THE FOLLOWING HIGH COURTS: AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VS. CIT 258 ITR 601(BOM) CIT VS. CITI BANK N.A. 264 ITR 18 (BOM) CIT VS. NEDUNGARI BANK LTD. 264 ITR 545 (KER.) CIT VS. SOUTH INDIA BANK LTD. 241 ITR 374 (KER.) HE HAS FURTHER SUBMITTED THAT THE SLP OF THE DEPART MENT ON THIS ISSUE IS ALSO DISMISSED BY HONBLE SUPREME COURT IN CASE OF CIT VS. UNION OF INDIA S.L.P. NO. 6815 OF 2004, 268 ITR (STATUTE) 216 AND C IT VS. DEUTSCHE BANK A.G.: S.L.P. (C.) NO.3710 OF 2004, 266 ITR (STA TUTE) 106. IT MAY BE ALSO NOTED THAT COD HAS NOT PERMITTED CBDT TO PURSUE THIS ISSUE BEFORE HONBLE ITAT ON THE GROUND THAT THERE IS NO INFIRMIT Y IN THE DECISION OF CIT(A) ON THIS ISSUE. THE LEARNED AR ALSO CLARIFIED THAT THE LEARNED CIT(A) IN A.Y. 2010-11 AND 2011-12 HAD RECTIFIED ITS ORDER U/S 154 OF THE ACT ON THIS ISSUE AND BROKEN PERIOD INTEREST HAS BE EN DISALLOWED BY ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 19 RECTIFYING ITS ORDER PASSED U/S 154 OF THE ACT, FOR WHICH, HE RELIED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. SOUTH INDIAN BANK LTD. 241 ITR 374 WHEREIN THE HONBLE COUR T HAS HELD THAT BROKEN PERIOD INTEREST IS ALLOWABLE AS BUSINESS EXPE NDITURE AND RECTIFICATION U/S 154 OF THE ACT IS NOT JUSTIFIED. THE LEARNED AR ALSO RELIED THE DECISION OF HONBLE BOMBAY HIGH COURT DATED 23/ 7/2014 IN THE CASE OF CIT VS. HDFC BANK LTD. WHEREIN PAYMENT MADE FOR BROKE N PERIOD INTEREST AT THE TIME OF PURCHASE OF SECURITIES IS ALLOWABLE A S DEDUCTION. IN VIEW OF ABOVE THE GROUND OF THE DEPARTMENTAL APPEAL BE DISM ISSED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE CASE LA WS CITED BY BOTH THE PARTIES. THE HON'BLE SUPREME COURT IN THE CASE OF VI JAYA BANK (SUPRA) VIDE ORDER DATED 19 TH SEPTEMBER, 1990 HAS HELD AS UNDER:- A CLAIM FOR DEDUCTION AGAINST SECURITIES CAN BE SUS TAINED ONLY WHEN THE ASSESSEE IS IN A POSITION TO SHOW THAT ANY REASO NABLE EXPENDITURE HAS BEEN INCURRED FOR REALIZING THE INT EREST ON SECURITIES. WHERE THE ASSESSEE PURCHASES SECURITIES AT A PRICE DETERMINED WITH REFERENCE TO THEIR ACTUAL VALUE AS WELL AS THE INTER EST ACCRUED THEREON TILL THE DATE OF PURCHASE, THE ENTIRE PRICE PAID FOR THEM WOULD BE IN THE NATURE OF A CAPITAL OUTLAY AND NO PA RT OF IT CAN BE SET OFF AS AN EXPENDITURE AGAINST THE INCOME BY WAY OF INTEREST RECEIVED ON THE SECURITIES. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 20 THE DECISION OF HONBLE RAJASTHAN HIGH COURT DATED 2 4/3/2008 IN THE CASE OF CIT VS. BANK OF RAJASTHAN (2009) 316 ITR 391 (RAJ. ). THE HONBLE COURT HAS HELD AS UNDER:- WHEN A BANK PURCHASES GOVERNMENT SECURITIES AFTER A CERTAIN TIME OF THE DATE OF ISSUE, THEN, CERTAIN AMOUNT OF INTER EST IS ALREADY ACCRUED ON THAT SECURITY, PAYABLE BY THE GOVERNMENT TO THE PURCHASER BANK, AND, THEREFORE, THE BANK PURCHASES THAT SECURITY PAYING THE COMPOSITE SUM, COMPRISING THE ISSUE PRIC E, AND ACCRUED INTEREST UP-TILL THE DATE OF PURCHASE, WHICH IS KNOWN AS BROKEN PERIOD INTEREST. AFTER DELETION OF SECTIONS 18, 19 , 20 AND 21 OF THE INCOME-TAX ACT, 1961, THE INCOME EARNED BY THE BANK BY WAY OF INTEREST IS CHARGEABLE UNDER SECTION 28(I) AS INCOM E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE P RICE PAID FOR THE SECURITIES IS DETERMINED WITH REFERENCE TO THEIR ACT UAL VALUE AS WELL AS THE INTEREST, WHICH HAS ACCRUED ON THEM TILL THE DATE OF PURCHASE. THE PRICE PAID FOR THEM IS IN THE NATURE OF A CAPITA L OUTLAY, AND NO PART OF IT CAN BE SET OFF AS EXPENDITURE AGAINST IN COME ACCRUING ON THOSE SECURITIES. THEREFORE, THE AMOUNT OF BROKEN PERIOD INTEREST PAI D BY THE BANK CANNOT BE CLAIMED AS AN ALLOWABLE DEDUCTION. THE HONBLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 1 6 TH APRIL, 2003 IN THE CASE OF CIT VS. CITIBANK N.A. REPORTED IN 264 ITR 18 HAS HELD THAT INTEREST FOR THE BROKEN PERIOD SHOULD NOT BE CONSID ERED AS PART OF THE PURCHASE PRICE, BUT SHOULD BE ALLOWED AS REVENUE EXP ENDITURE IN THE YEAR OF PURCHASE OF SECURITIES. THE DECISION OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION V. CIT (2002) 258 ITR 601 (BOM) F OLLOWED. THE LATEST DECISION FROM THE HONBLE JURISDICTIONAL HIG H COURT HAS BEEN RELIED UPON BY THE REVENUE WHEREIN THE HON'BLE SUPREME COUR T DECISION IN THE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 21 CASE OF VIJAYA BANK (SUPRA) FOLLOWED AND DECISION IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION V. CIT OF THE HONBLE BOMBAY HIGH COURT HAS BEEN DISSENTED. THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CITIBANK N.A. HAD FOLLOWED THE CASE OF AMERI CAN EXPRESS INTERNATIONAL BANKING CORPORATION V. CIT AND ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BUT BEING THE JURISDICTIONAL HIGH C OURT DECISION, WHICH IS BINDING ON US AND THIS ASPECT HAS BEEN CONSIDERED B Y THE HONBLE HIGH COURT IN DETAIL AND IT HAS BEEN HELD THAT BROKEN PE RIOD INTEREST CLAIMED BY THE RAJASTHAN BANK CANNOT BE CLAIMED AS AN ALLOWABLE DEDUCTION. THE LEARNED AR HAS NOT BROUGHT ON RECORD THAT RAJASTHAN BANK HAS CHALLENGED THIS ISSUE BEFORE THE HON'BLE SUPREME COURT. THE APP ELLANT BANK HAD SHOWN THESE SECURITIES AS INVESTMENT IN BALANCE SHEE T. THE INTEREST COST FOR THE BROKEN PERIOD ON THESE SECURITIES AT THE TI ME OF PURCHASE AND AT THE TIME OF SALE IS TO BE INCLUDED IN PURCHASE COST AND SALES RECEIPTS RESPECTIVELY. THE CASE REFERRED BY THE LEARNED AR FO R THE ASSESSEE I.E. DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CITIBANK (SUPRA) ARE SQUARELY APPLICABLE, BUT IT IS EVIDENT FROM THE DE CISION THAT HAS BEEN RENDERED ON PECULIAR FACTS OF THE CASE AS TAX EFFEC T WILL BE NEUTRAL AND THE METHOD OF ACCOUNTING WAS ACCEPTED BY THE DEPARTMENT. IN ASSESSEES CASE, THE TAX EFFECT IS SUBSTANTIAL AND DEPARTMENT HAS NOT ACCEPTED ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE. THE ASSES SEE HAS BEEN ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 22 SHOWING THESE SECURITIES UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET AND ON THE OTHER HAND, THE ASSESSEE HAS BEEN CLAIMING THESE SECURITIES ARE STOCK IN TRADE TO GET BENEFIT FROM T HE TAXATION. THEREFORE, WE REVERSE THE ORDER OF THE LEARNED CIT(A) IN ALL TH E YEARS AND CONFIRM THE ORDER OF THE LEARNED ASSESSING OFFICER. 12. GROUNDS NO. 3 AND 4 FOR A.Y. 2001-02 AND 2002-0 3 OF THE REVENUES APPEAL ARE INTER LINKED AND ARE AGAINST D ELETING THE ADDITION OF RS. 4,99,60,054/- ON ACCOUNT OF PROVISION FOR DEPRE CIATION AND VALUATION OF CLOSING STOCK OF SECURITIES FOR RS. 24,24,47,962 TO RS. 8,16,51,112/- IN A.Y. 2001-02 AND RS. 12,58,56,484/- AND 36,83,04,447/- I N A.Y. 2002-03. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CL AIMED DEDUCTION OF RS. 4,99,60,054/- AS PROVISION FOR DEPRECIATION ON INVE STMENT. THE ASSESSEE WAS GIVEN REASONABLE OPPORTUNITY OF BEING HEARD BY T HE ASSESSING OFFICER, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 2 7/12/2002. IT WAS CONTENDED BY IT BEFORE HIM THAT THE ASSESSEE HAD VA LUED ITS STOCK ADOPTING SCRIPWISE METHOD WHILE AS PER STAND OF THE D EPARTMENT HAS TO BE VALUED ON GLOBAL BASIS. IN BALANCE SHEET, THE INVES TMENT ON THE BASIS OF GLOBAL METHOD HAS BEEN TAKEN AND THE ASSESSEE HAS R EDUCED DEPRECIATION OF RS. 24,24,00,000/- FOR BRINGING THE VALUE OF ITS SECURITIES TO INDIVIDUAL SCRIP CATEGORY WISE METHOD. ACCORDINGLY, THE ASSESSE E HAS CREATED A PROVISION FOR DEPRECIATION ON INVESTMENT. THIS YEAR, THE ASSESSEE HAD ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 23 MADE PROVISION TO THE TUNE OF RS. 4,99,60,093/- CON TAINING THAT A PROVISION OF RS. 29,24,87,907/- WAS ALREADY LYING IN THE BOOKS OF THE ASSESSEE. THE LEARNED ASSESSING OFFICER OBSERVED THA T IN PAST, THE ASSESSEE HAD MADE PROVISIONS FOR DEPRECIATION ON IN VESTMENT AS WELL AS WRITTEN BACK THE PROVISION AND SHOWN AS INCOME. THE AS SESSING OFFICER HAD DISALLOWED THESE PROVISIONS IN A.Y. 1998-99, 199 9-2000, 2000-01. THE PROVISIONS MADE BY THE BANK IS NOT AN ASCERTAINED L IABILITY AND IT CANNOT BE SAID THAT THERE IS ACTUAL CHANGE IN THE MARKET V ALUE OF THE STOCK. ACCORDINGLY, HE MADE ADDITION OF RS. 4,99,60,093/- IN A.Y. 2001-02 AND RS. 12,58,56,484/- IN A.Y. 2002-03. FURTHER ADDITIO N ON ACCOUNT OF VALUATION OF CLOSING STOCK OF SECURITIES, WHICH WAS MADE ON SCRIP CATEGORY WISE METHOD, MADE ADDITION OF RS. 24,24,48,000/- IN A.Y. 2001-02 AND RS. 36,83,04,000/- IN A.Y. 2002-03. 13. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT THE FINDING OF THE ASSESSING OFFI CER THAT THE PROVISIONS MADE BY THE BANK IS NOT AN ASCERTAINED LIABILITY, T HE DEPRECIATION SHOULD HAVE BEEN DONE IN THE BLOCK OF ASSETS, ARE UNJUSTIF IED, UNREASONABLE AND NOT RELEVANT TO THE ISSUE. THE ASSESSING OFFICER HAS FAILED TO PINPOINT THE REASONS AS TO WHY THE LIABILITY IS NOT ASCERTAINABL E. NO SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT IS POINTED OUT IN THIS REGARD SINCE THE APPELLANT BANK ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 24 HAS FOLLOWED CATEGORY WISE VALUATION OF INVESTMENT OF STOCK IN TRADE AS PER GUIDELINES OF THE RBI AND MORE SO FAVOURABLE TO THE REVENUE IN COMPARISON TO THE SCRIPWISE VALUATION AND THE GLOBAL METHOD HAS NOT BEEN FOUND ACCEPTABLE IN THE PAST BY HIS LEARNED PREDECE SSOR CIT(A). HE WAS OF THE VIEW THAT THE METHOD ADOPTED BY THE ASSESSEE IS CORRECT AND ACCEPTABLE IN ACCORDANCE WITH THE RBI GUIDELINES. TH EREFORE, THE APPELLANT/ASSESSEE BANK IS ALLOWED FOR DEPRECIATION ON ACCOUNT OF DEPRECIATION IN THE CATEGORY WISE VALUATION OF SECUR ITIES OF STOCK IN TRADE. THE FACT OF THE CASE WITH REGARD TO PROVISIONS OF DEP RECIATION ON ACCOUNT OF VALUATION OF SECURITIES ARE SQUARELY COVERED WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BANK OF BAR ODA 262 ITR 334 WHEREIN THE DECISION OF HONBLE APEX COURT IN THE CA SE OF UNITED COMMERCIAL BANK, 240 ITR 355 (SC) HAS BEEN APPLIED. SIMILAR FINDINGS HAD BEEN GIVEN BY THE LEARNED CIT(A) FOR A.Y. 2002-0 3. 14. NOW THE REVENUE ARE IN APPEAL BEFORE US. THE LEAR NED CIT DR HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND AR GUED THAT THE LIABILITY IS PROVISIONAL AND NOT CRYSTALLIZED DURING THE YEAR UN DER CONSIDERATION, THEREFORE, THE ORDER OF THE LEARNED ASSESSING OFFIC ER MAY BE CONFIRMED. 15. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE CONTENDED THAT THE LEARNED CIT(A) CONFIRMED AN ADDITION OF RS. 55,50,7 33/- IN RESPECT OF PROVISIONS FOR DEPRECIATION MADE ON PROTESTED AND N PA DEBENTURES OUT OF ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 25 ADDITION OF RS. 4,99,60,054/- MADE BY THE ASSESSING OFFICER AND CONFIRMED AN ADDITION OF RS. 8,16,51,112/- OUT OF TOTAL PROVI SION OF RS. 24,24,47,962/- ON ACCOUNT OF DEPRECIATION IN THE VA LUE OF SHARE AND SECURITIES BY RELATING IT TOWARDS THE PROVISION ON D EPRECIATION ON NPA DEBENTURE. AGAINST THIS ADDITION, THE ASSESSEE FILE D APPEAL BEFORE THE HONBLE ITAT BEARING ITA NO. 578/JP/2003 AND VIDE OR DER DATED 30/10/2009, THE HONBLE ITAT HAD DELETED THE ADDITIO N CONFIRMED BY THE LEARNED CIT(A) UNDER THIS HEAD BY RELYING CBDT CIRCUL AR NO. 17/2008 DATED 26/11/2008 WHERE IT IS CLARIFIED THAT DEPRECI ATION IN RESPECT OF THE SECURITIES MADE AS PER THE GUIDELINES OF RBI SHOULD BE ALLOWED WHEN THE ADDITION SUSTAINED BY THE LEARNED CIT(A) HAD BEEN D ELETED BY THE HONBLE ITAT. THE GROUND OF THE DEPARTMENT NO MORE SURVIVED. SIMILAR APPEAL ALSO FILED FOR A.Y. 2002-03 BY THE ASSESSEE ON THIS ISSUE, BUT PARTLY CONFIRMATION MADE BY THE LEARNED CIT(A) IN ITA NO. 577/JP/2003 DATED 30/10/2009 AND ADDITION MADE BY THE LEARNED CIT(A) DELETED BY THE HONBLE ITAT INCLUDING CUMULATIVE PROVISIONS FOR DEP RECIATION. 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE COORDINATE BENCH HAS DECIDED THE ASSESSEES APPEAL ON THIS ISSUE ON PARTLY CONFI RMATION MADE BY THE LEARNED CIT(A) IN FAVOUR OF THE ASSESSEE IN ITA NO. 578 & 577/JP/2003 FOR A.Y. 2002-03 AND 2001-02 RESPECTIVELY. THE ASSESSEE S APPEAL ALREADY ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 26 DECIDED BY THIS BENCH. THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED AS UNDER: 17. CONSIDERING THE ABOVE SUBMISSION, MATERIAL ON RECORD AND THE RBI CIRCULAR WE AGREE WITH THE CONTENTION OF THE LD. AR. AFTER THE ORDER OF CIT(A) THERE DOES NOT REMAIN ANY DISPUT E THAT THE VALUATION OF THE SECURITIES IS TO BE MADE CATEG ORY WISE AND DEPRECIATION TO BE PROVIDED ACCORDINGLY. THE RBI HAS FURTHER CLARIFIED THAT EVEN WITHIN THE CATEGORY WHERE INTEREST/PRINCIPAL IS IN ARREARS, THE BANK SHOULD N OT RECKON INCOME ON THE SECURITIES AND ALSO MADE APPROPRIATE PROVISION FOR THE DEPRECIATION IN THE VALUE OF THE INVESTMENT . IN RESPECT OF THESE NON PERFORMING SECURITIES SET OFF OF THE D EPRECIATION SHOULD NOT BE MADE AGAINST THE APPRECIATION IN RESP ECT OF OTHER PERFORMING SECURITIES. THE CBDT IN INSTRUCTION NO. 17/2008 DATED 26/11/2008 HAS ALSO CLARIFIED THAT DE PRECIATION IN RESPECT OF THE SECURITIES SHOULD BE MADE AS PER THE GUIDELINES OF THE RBI. THE CIT(A) HAS ALSO ACCEPTED T HE RBI GUIDELINES IN DELETING THE ADDITION MADE BY THE A.O . BUT IN RESPECT OF THE PROTESTED/NPA DEBENTURES HE HAS NOT FOLLOWED THE SAME WHICH IN VIEW OF THE DISCUSSION MADE ABOVE I S NOT CORRECT. WE FURTHER NOTE THAT THE ADDITION OF RS. 8,16,51,112/- SUSTAINED BY THE CIT(A) IN VIEW OF THE ABOVE DISCUSSION IS NEITHER CORRECT ON THE MERIT NOR CAN BE MADE DURING THE YEAR AS THIS IS THE AMOUNT OF THE PROVIS ION MADE UP TO THE LAST YEAR. IN VIEW OF THIS DISCUSSION, THE ADDITION OF RS. 55,50,733/- AND 8,16,51,112/- CONFIRMED BY THE CIT(A) IN RESPECT OF THE PROTESTED/NPA DEBENTURE IS DELETED. BY RESPECTFULLY FOLLOWING THE DECISION OF THE COORDI NATE BENCH, WE DISMISS THE REVENUES APPEAL IN BOTH THE ASSESSMENT YEARS O N THIS GROUND. 17. GROUNDS NO. 1 AND 2 OF THE REVENUES APPEAL FOR A.Y. 2005-06 IS AGAINST HOLDING THAT INTEREST ON GOVERNMENT AND OTH ER SECURITIES HAS TO BE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 27 INCLUDED IN THE INCOME ON DUE BASIS AND DELETING TH E ADDITION OF RS. 83,51,729/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD ACCOUNTED INTEREST ON FOLLOWING GOVERNMENT SECURITIE S ON ACCRUAL BASIS. HOWEVER, IN COMPUTATION OF INCOME, SAME HAS BEEN OFF ERED ON DUE BASIS. S. NO. PARTICULARS INTEREST ON DUE BASIS INTEREST ON ACCRUAL BASIS (I) INTEREST ON GOVERNMENT AND OTHER TRUSTEE SECURITIES 7597119713 7535184067 (II) INTEREST ON DEBENTURES 446901310 349629597 (III) DISCOUNT ON TREASURY BILLS 117742265 85080223 (IV) INCOME ON OTHER INVESTMENTS 79676075 79311507 TOTAL 8241439363 8049205394 THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS AVAILED BY THE ASSESSEE. IT WAS HELD THAT IN PAST, THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION ON THE BAS IS OF METHOD OF ACCRUAL BASIS. IN A.Y. 1999-00, 2000-01, 2001-02, 2 002-03, 2003-04 AND 2004-05 GAVE DETAILED REASONS ON PAGE 3 OF THE ASSE SSMENT ORDER. THE ASSESSEE HAD CLAIMED DEDUCTION FOR INTEREST ON TAX FREE DEBENTURE ON ACCRUAL BASIS AMOUNTING TO RS. 2,40,63,411/- AND DU E BASIS AMOUNTING TO RS. 3,24,15,150/- HENCE IN COMPUTATION EXCESS DEDUC TION CLAIMED BY THE ASSESSEE WAS RS. 83,51,729/-, WHICH WAS ADDED BY THE ASSESSING OFFICER IN THE INCOME OF THE ASSESSEE ON THE BASIS OF ACCRU AL BASIS. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 28 18. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: CHALLENGING THE SAID VIEW OF ASSESSING OFFICER SH. SANDEEP JHANWAR AND SH. P.C. PARWAL CA AS AR OF THE APPELLANT BANK HAS MADE SIMILAR WRITTEN SUBMISSION WHICH WAS MADE IN THE APPELLATE PROCEEDINGS FOR A.Y. 2004-05. SINCE, IN PARA 1.3 OF MY APPELLATE ORDER DATED 24/3/2009 FOR A.Y. 2004-05 IN THE CASE OF APPELLANT BANKER, I HAVE GIVEN A FINDING THAT THE APPELLANT B ANK HAS RIGHTLY OFFERED THE INTEREST INCOME ON DUE BASIS. FOR THE P RESENT YEAR THERE IS NO REASON TO DEVIATE FROM THE SAID VIEW AND FOR T HIS YEAR ALSO BY ALLOWING THE RELEVANT GROUND OF APPEAL I HOLD THAT T HE APPELLANT BANKER HAS CORRECTLY SHOWN INTEREST INCOME ON DUE B ASIS IN THE COMPUTATION OF INCOME STATEMENT. SINCE, THE ASSESSI NG OFFICER HAS ALSO ADOPTED THE SAID INTEREST INCOME ON DUE BASIS WHILE COMPUTING TOTAL INCOME THEREFORE, WHILE GIVING APPEAL EFFECT O N THIS ISSUE NO FURTHER DEDUCTION IS REQUIRED TO BE GIVEN. SIMILAR FINDINGS GIVEN BY THE LEARNED CIT(A) THAT TH E APPELLANT BANK HAS MADE SIMILAR WRITTEN SUBMISSION, WHICH WAS MADE IN TH E APPELLATE PROCEEDINGS FOR A.Y. 2004-05. SINCE IN PARA 1.3 OF THE APPELLATE ORDER DATED 24/3/2009 FOR A.Y. 2004-05 IN THE CASE OF APP ELLANT BANKER, THAT THE APPELLANT BANK HAS ALREADY OFFERED INTEREST INCOME ON DUE BASIS. FOR THE PRESENT YEAR, THERE IS NO REASON TO DEVIATE FROM TH E SAID VIEW AND FOR THIS YEAR ALSO BY ALLOWING THE RELEVANT GROUND OF APPEAL. HE HELD THAT THE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 29 APPELLANT BANKER HAD CORRECTLY SHOWN INTEREST INCOME ON DUE BASIS IN COMPUTATION OF INCOME STATEMENT. SINCE THE ASSESSIN G OFFICER HAS ALSO ADOPTED THE SAID INTEREST INCOME ON DUE BASIS WHILE COMPUTING THE TOTAL INTEREST, THEREFORE, WHILE GIVING APPEAL EFFECT ON T HIS ISSUE, NO FURTHER DEDUCTION IS REQUIRED TO BE GIVEN. HE FURTHER OBSER VED THAT IF ANY EXEMPT INTEREST IS INCLUDED THEREIN, IT HAS ALSO TO BE INC LUDED ON DUE BASIS ONLY. THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE SAID ADDITION OF RS. 43,51,729/- SUBJECT TO VERIFICATION THAT WHETHER IT INCLUDES ANY EXEMPT INCOME THAN FOR THE SAME NECESSARY EVIDENCE OF EXEM PTION U/S 10(23G) OF THE ACT HAS BEEN FURNISHED ON RECORD. ACCORDINGL Y, HE ALLOWED THE ASSESSEES APPEAL. 19. GROUND NO. 3 OF THE REVENUES APPEAL FOR A.Y. 2 005-06 IS AGAINST DELETING THE ADDITION OF RS. 14,75,66,529/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VALUATION OF INVESTMENT BY ADOPTING G LOBAL METHOD OF VALUATION OF SECURITIES. THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAD CLAIMED DEDUCTION FOR DEPRECIATION OF INVESTMEN T AMOUNTING TO RS. 413,86,86,972/-. THE ASSESSING OFFICER GAVE REASONAB LE OPPORTUNITY OF BEING HEARD, WHICH WAS REPLIED BY THE ASSESSEE. IT WAS SUBMITTED BY THE APPELLANT THAT THESE INVESTMENTS WERE VALUED AS PER THE GUIDELINES OF RBI AGAINST THE GLOBAL METHOD. IT WAS SUBMITTED THAT THE BANK IS CONSISTENTLY FOLLOWING CATEGORY WISE VALUATION AS PER RBI GUIDELIN ES AND THIS METHOD IS ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 30 ACCEPTED IN THE BANKING SECTOR. THE ASSESSEE ALSO SU BMITTED VALUATION AS PER THE GLOBAL METHOD BEFORE THE ASSESSING OFFICER. THE INVESTMENT PORTFOLIO OF THE BANK HAS BEEN CLASSIFIED IN ACCORD ANCE WITH THE RBI GUIDELINES INTO THREE CATEGORIES, (I) HELD TO MATUR ITY, (II) AVAILABLE FOR SALE AND (III) HELD FOR TRADING, BUT IN BALANCE SHEET, IT HAS FURTHER CLASSIFIED IN THESE GROUPS (I) GOVERNMENT SECURITIES, (II) OTHER APPROVED SECURITIES, (III) SHARES, (IV) DEBENTURE AND BOND, (V) SUBSIDIA RY AND JOINT VENTURE AND (VI) OTHERS. FOR THE PURPOSE OF VALUATION IN TE RMS OF RBI GUIDELINES, FOLLOWING PRINCIPLES HAD BEEN ADOPTED BY THE BANK. (I) SECURITY HELD IN HELD TO MATURITY CATEGORY AT ACQUISITION COST. (II) SECURITY CLASSIFIED AS AVAILABLE FOR SALE ARE MARKED TO MARKET AT THE END OF THE EACH QUARTER WHICH ARE VALUED SCR IPWISE AND DEPRECIATION/APPRECIATION FOR EACH CATEGORY AS DISC LOSED IN THE BALANCE SHEET IS AGGREGATED NET DEPRECIATION IF ANY IS PROV IDED FOR BUT NET APPRECIATION IS IGNORED. (III) SECURITY HELD FOR TRADING CATEGORY ARE REVAL UED AT MONTHLY INTERVAL AND THE NET DEPRECIATION IS RECOGNIZED AND BUT NET APPRECIATION IS IGNORED. IT WAS SUBMITTED BY THE APPELLANT THAT THE SAME POLI CY WAS FOLLOWED BY THE BANK IN A.YS. 2001-02 TO 2004-05, THEREFORE, TH ERE IS NO DEVIATION IN ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 31 POLICY OF VALUATION OF SECURITIES AS PROVIDED BY TH E CBDT VIDE CIRCULAR NO. 665 (F) NO. 201/3/92-ITA-11 DATED 05/10/1993. THE L EARNED ASSESSING OFFICER OBSERVED THAT FROM A.YS. 2001-02 TO 2004-05 , THE ASSESSING OFFICER HAS ASSESSED THE VALUATION OF SECURITIES ON GLOBAL VALUATION METHOD. THE LEARNED CIT(A) HAD ACCEPTED THE CATEGORY WISE METHOD OF VALUATION IN A.Y. 2001-02 AND 2002-03. IN A.YS 2003 -04 AND 2004-05, THERE WAS A NET APPRECIATION IN VALUATION OF INVESTM ENT OF SECURITIES, THEREFORE, THE ASSESSING OFFICER ACCEPTED THIS METH OD OF VALUATION OF THE ASSESSEE I.E. SCRIPWISE VALUATION. ON THE BASIS OF A .YS. 2001-02 AND 2002- 03 I.E. VALUATION OF INVESTMENT OF SECURITIES ON GL OBAL METHOD IS ASSESSED BY THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDER ATION AND AS PER THE GLOBAL METHOD AND SCRIP METHOD, THE DIFFERENCE OF T HE EXCESS DEPRECIATION CLAIMED AMOUNTING TO RS. 14,75,66,529/- HAS BEEN AD DED BY THE ASSESSING OFFICER IN THE INCOME OF THE ASSESSEE. 20. BEING AGGRIEVED BY THE ORDER OF THE LEARNED AS SESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 5.3 I HAVE CONSIDERED FACTS OF THE CASE AND ARGUME NTS TAKEN BY SH. JHANWAR AND SH. PARWAL QUITE CAREFULLY. WHETHER S UCH DEPRECIATION IS TO BE WORKED OUT ON THE GLOBAL BASIS OR IT SHOULD BE CONSIDERED CATEGORY WISE THIS ISSUE HAS BE EN DISCUSSED BY ME IN PARA 4.4. OF MY APPELLATE ORDER FOR A.Y. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 32 2004-05 DATED 24/3/2009 IN WHICH FOLLOWING CIT(A)S ORDER FOR A.Y. 2002-03 AND AS PER RECENT CBDT INSTRUCTION NO. 18/2008 DATED 26/11/2008 ALREADY A FINDING WAS GIVEN THAT THE CATEGORY WISE METHOD FOLLOWED BY THE ASSESSEE FOR THIS PURPOSE WAS CORRECT AND JUSTIFIED. FURTHER, SIMILAR VIEW HAS BEEN TAKEN RECENTLY BY HONBLE UTRANCHAL HIGH COURT IN THE CASE OF CIT VS. NAINETAL BANK LTD. 309 ITR 335 IN WHIC H THE VALUATION FOR SECURITIES MADE BY THE BANKER AS PER RBI GUIDELINES WAS HELD AS CORRECT FOR INCOME TAX PURPOS E ALSO. WITH THIS DISCUSSION THE A.O. IS HEREBY DIRECTED TO DELETE SAID DISALLOWANCE OF RS. 14,75,66,529/- MADE ON THIS ISSU E AND THE RELEVANT GROUND OF APPEAL IS HEREBY ALLOWED. 21. NOW THE REVENUE IS IN APPEAL BEFORE US. 22. IT IS ARGUED THAT THE DEPARTMENT HAD CONSISTENT LY FOLLOWED GLOBAL METHOD OF VALUATION OF INVESTMENT IN SECURITIES AND NOT SCRIPWISE. THEREFORE, IT IS REQUESTED TO CONFIRM THE ORDER OF T HE ASSESSING OFFICER. 23. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E HAS SUBMITTED THAT INTEREST ON GOVERNMENT AND OTHER SECURITIES AND ON DEBENTURES HAS BEEN ACCOUNTED FOR ON ACCRUAL BASIS IN THE BOOKS OF ACCO UNT OF THE BANK. HOWEVER, THE SAID INTEREST HAS BEEN INCLUDED IN THE INCOME OF THE BANK ON DUE BASIS AS THE BANK GETS THE RIGHT TO RECEIVE THE SAID INTEREST ONLY WHEN IT BECOMES DUE. THE HONBLE INCOME TAX APPELLATE TRIBU NAL, JAIPUR BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE BANK FOR TH E ASSESSMENT YEARS ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 33 1989-90 TO 2003-04. THE ISSUE IS ALSO COVERED BY THE DECISIONS OF CIT VS. CITY UNION BANK LTD. 291 ITR 144 (MAD), CIT VS. FEDER AL BANK LTD. 301 ITR 188 (KER) & CANARA BANK V/S JOINT COMMISSIONER O F INCOME TAX, 84 ITD 310. FURTHER THE COMMITTEE OF DISPUTE HAS ALSO R EFUSED PERMISSION TO DEPARTMENT TO FILE APPEAL BEFORE THE HONBLE RAJAST HAN HIGH COURT IN EARLIER YEARS. IN VIEW OF THE ABOVE, THE GROUND OF THE DEPARTMENT BE DISMISSED. THE LEARNED A.R. FURTHER SUBMITTED THAT T HE LEARNED CIT(A) DELETED THE ADDITION RELYING ON THE CBDT INSTRUCTION NO. 17/2008 DATED 26/11/2008 AND THE DECISION OF HONBLE UTRANCHAL HI GH COURT IN THE CASE OF CIT VS. NAINETAL BANK LTD. 309 ITR 335. HE FURTHER ARGUED THAT THE HONBLE ITAT JAIPUR BENCH IN ITA NO. 578/JP/2003 OR DER DATED 30/10/2009 FOR A.Y. 2001-02 HAD CONFIRMED THE ORDER OF THE LEARNED CIT(A) AND DELETED THE ADDITION MADE BY THE ASSESSIN G OFFICER. HE FURTHER RELIED UPON THE ORDER IN THE CASE OF CIT VS. NEDUNG ARI BANK LTD. 264 ITR 545 (KER.) WHEREIN SLP FILED BY THE DEPARTMENT WAS DI SMISSED BY THE HON'BLE SUPREME COURT, ORDER REPORTED IN 312 ITR 6. 24. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE COORDINATE BENCH HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO. 578 /JP/2003 DATED 30/10/2009 IN A.Y. 2001-02. THE LEARNED CIT(A) ALSO CONSIDERED THE CBDT INSTRUCTION AND THE DECISION OF HONBLE UTRANCHAL H IGH COURT IN THE CASE OF ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 34 CIT VS. NAINETAL BANK LTD. (SUPRA) AND DELETED THE A DDITION. BY FOLLOWING THE DECISION OF THIS BENCH OF ITAT IN PRECEDING YEAR ON SAME ISSUES, WE CONCUR OUR OPINION IN FAVOUR OF THE ASSESSEE THAT T HE APPELLANT HAD RIGHTLY DISCLOSED THE INTEREST INCOME ON DUE BASIS AND MADE VALUATION OF SCRIPWISE OF INVESTMENT AS PER THE RBI GUIDELINES, WH ICH IS MANDATORY FOR THE APPELLANT. THEREFORE, WE DISMISS THE REVENUES AP PEAL ON THESE GROUNDS. 25. GROUND NO. 4 OF THE REVENUES APPEAL FOR A.Y. 2 005-06 IS AGAINST DELETING THE ADDITION OF RS. 47,52,13,802/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF AMORTIZATION IN RESPEC T OF DIMINUTION IN THE VALUE OF SECURITIES HELD BY THE BANK UNDER THE HEA D TO MATURITY CATEGORY. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASS ESSEE HAS CLAIMED AMORTIZATION OF SECURITIES HELD IN HTM AMOUNTING TO RS. 47,52,13,802/-. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE A SSESSEES REPLY, THE LEARNED ASSESSING OFFICER CONCLUDED THAT SECURITIES HELD TO HTM REPRESENTS INVESTMENT PORTFOLIO OF THE ASSESSEE. AS PER THE AC COUNTING STANDARD ANY DIMINUTION IN THE VALUE OF INVESTMENT IS NOT TO BE RECOGNIZED AS A LOSS. ONLY AT THE TIME OF SALE OF THIS INVESTMENT, THE AS SESSEE CAN REALIZE THE CAPITAL GAIN OR LOSS EVEN WHEN THE AMORTIZATION AMOU NT HAS BEEN CLAIMED AS PER THE RBI GUIDELINES STILL THE INCOME IS TO BE COMPUTED AS PER THE ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 35 PROVISIONS OF IT ACT. SINCE DIMINUTION IN VALUE OF A NY INVESTMENT IS NOT TO BE RECOGNIZED ON YEAR TO YEAR BASIS. THE ASSESSEE HA D CLAIMED FOR AMORTIZATION OF SECURITIES HELD IN HTM CATEGORY IS D ISALLOWED AND ADDED RS. 47,52,13,802/- IN THE INCOME OF THE ASSESSEE. 26. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD CONFIRMED THE APPEAL BY OBSERVING AS UNDER: 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND ARG UMENTS TAKEN BY SH. JHANWAR AND SH. PARWAL QUITE CAREFULLY. IT IS UNDISPUTED FACT THAT THE SAID CLAIM WAS IN RESPECT O F SUCH SECURITIES WHICH ARE NOT TRADABLE AND HAD TO BE RET AINED TILL THE DATE OF THE MATURITY. THE APPELLANT BANKER HAS K EPT AND SHOWN THE SAID SECURITIES AS PART OF THE INVESTMENT. IF ON YEAR TO YEAR BASIS THERE IS ANY DIMINUTION IN THE VALUE OF THE INVESTMENT THEN HOW IT COULD BE CONSIDERED AS PART O F THE REVENUE LOSS. IT MAY BE THAT APPELLANT IS REQUIRED TO ACCOUNT FOR THE SAID AMORTIZATION AS PER RBI GUIDELINES BUT COMPUTATION OF THE TOTAL INCOME HAS TO BE MADE WITH REFERENCE TO PROVISION OF THE IT ACT AND IN THE IT AC T THERE IS NO SUCH PROVISION TO ALLOW SAID AMORTIZATION ON ACCO UNT OF DIMINUTION IN THE VALUE OF THE INVESTMENT HELD BY B ANK TILL IT IS MATURED. IN MY CONSIDERED VIEW THE DECISIONS RELIED UPON BY AUTHORIZED REPRESENTATIVE IN THE CASE OF SATLAJ COT TON MILLS IS NOT APPLICABLE BECAUSE IN THAT CASE THE ISSUE WAS PR OFIT OR LOSS ARISING BETWEEN ASSESSEE ON ACCOUNT OF APPRECIA TION OF ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 36 DEPRECIATION IN THE VALUE OF FOREIGN CURRENCY HELD BY IT AND CERTAINLY THE FOREIGN CURRENCY WAS NOT HELD AS INVES TMENT. FURTHER THE HONBLE RAJASTHAN HIGH COURT JUDGMENT R ELIED UPON IN THE CASE OF RAJASTHAN FINANCIAL CORPORATION IS ALSO DIFFERENT AND DISTINGUISHABLE ON FACTS BECAUSE IN T HAT CASE THE LOSS HAS ARISEN ON THE SALE OF SUCH SECURITIES. FUR THER THE DECISION OF THE MADRAS INDUSTRIAL CORPORATION IS AL SO NOT APPLICABLE BECAUSE IN THAT CASE THERE WAS A LIABILIT Y WHICH HAS ALREADY ACCRUED THOUGH IT WAS PAYABLE ON SUBSEQUENT DATES. WITH THIS DISCUSSION IN MY CONSIDERED VIEW, THE A.O. WAS FULLY JUSTIFIED WHILE MAKING ADDITION OF RS. 47,52,13,802 /- WHICH IS HEREBY CONFIRMED BY REJECTING THE RELEVANT GROUNDS OF APPEAL. IN THE ASSESSMENT ORDER THE A.O. HAS ALREADY OBSERV ED THAT ONLY IT SHOULD BE CONSIDERED ON SALE OF THIS INVEST MENT WHICH MAY RESULT INTO CAPITAL GAIN OR LOSS. 27. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION AND THE REVENUES APPEAL ON THIS GROUND IS NOT MAINTAINABLE AS THE RE VENUE HAS NOT AGGRIEVED WITH THE ORDER OF THE CIT(A). THE LEARNED C IT(A) FURTHER RECTIFIED U/S 154 OF THE ACT VIDE ORDER DATED 30/3/ 2009 AND ALLOWED THE CLAIM ON AMORTIZATION OF RS. 47,52,13,802/- IN FAVO UR OF THE ASSESSEE BY FOLLOWING THE CBDT INSTRUCTION NO. 17/2008 DATED 26/1 1/2008. 28. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AS PER FROM N O. 36, THE REVENUE HAS FILED APPEAL AGAINST THE ORDER PASSED U/S 143(3) OF THE ACT NOT U/S 154 OF ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 37 THE ACT. AS PER APPEAL MEMO, THE APPEAL FILED BY TH E REVENUE AGAINST THE ORDER PASSED BY THE LEARNED CIT(A) AGAINST THE ORDE R OF THE ASSESSING OFFICER U/S 143(3) OF THE ACT, THEREFORE, THE REVEN UES GROUND OF APPEAL IS NOT MAINTAINABLE AS THE LEARNED CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE. 29. GROUND NO. 2 OF THE ASSESSEES APPEAL FOR A.Y. 2005-06 IS AGAINST CONFIRMING THE ADDITION OF PRIOR PERIOD EXPENSES OF RS. 16,90,827/- AND RS. 12,26,085/-. IN AUDIT REPORT, THE AUDITOR HAD S HOWN PRIOR PERIOD EXPENDITURE OF RS. 60,28,558/-, WHICH HAS BEEN DEBIT ED IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE IS FOLLOWING MERCANTILE SY STEM OF ACCOUNTING. ACCORDING TO IT, PRIOR PERIOD EXPENSES ARE NOT ALLO WABLE. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH HAD BEEN AVAILED BY IT. AFTER CONSIDERING THE ASSES SEES REPLY, THE LEARNED ASSESSING OFFICER ALLOWED SOME OF THE PRIOR PERIOD E XPENSES. IT WAS FURTHER HELD THAT RENT OF PREVIOUS YEAR HAD BEEN CL AIMED IN PRIOR PERIOD EXPENSES. HOWEVER, IT CAN BE PROVIDED IN THE BOOKS O F ACCOUNT ON THE BASIS OF AGREEMENT AS THESE EXPENSES HAD BEEN CRYST ALLIZED IN THE YEAR UNDER CONSIDERATION. AFTER CONSIDERING ALL THE FACT S, THE LEARNED ASSESSING OFFICER HAD DISALLOWED PRIOR PERIOD EXPENSES AT RS. 47,56,322/-. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 38 30. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASS ESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL PARTLY. THE OPERATIVE PORTION OF THE ORDE R IS AS UNDER:- 8.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND AR GUMENTS TAKEN BY SHRI JHANWAR AND SHRI PARWAL QUITE CAREFULLY. CONS IDERING AFORESAID SUCH SUBMISSION IN MY CONSIDERED VIEW THE CLAIM PERTAINING TO INTEREST OF RS. 18,38,410/- IS ALLOWAB LE AND A.O. IS DIRECTED TO ALLOW THE SAME. HOWEVER, IN RESPECT O F RENT CLAIM OF RS. 10,81,435/- THERE WERE NO SUCH COGENT E VIDENCE ON THE BASIS OF WHICH IT CAN BE HELD THAT THE LIABI LITY FOR THE SAME WAS CRYSTALLIZED IN THE ACCOUNTING YEAR RELEVAN T TO A.Y. 2005-06 AND IT COULD NOT HAVE BEEN PROVIDED IN THE EARLIER ACCOUNTING PERIOD TO WHICH IT BELONGED AND THEREFORE THE SUCH CLAIM OF RS. 10,81,435/- HAS BEEN CORRECTLY DI SALLOWED BY A.O.. I ALSO AGREE WITH THE A.O. THAT BANKER WAS K NOWING AS ON THE LAST DATE OF THE ACCOUNTING YEAR OF PREVI OUS YEAR THAT WHAT WERE THE RATE OF OVER TIME AND HOW MUCH WAS OVER TIME LIABILITY THEREFORE, IN MY CONSIDERED VIEW THE A.O. HAS CORRECTLY DISALLOWED THE SAID AMOUNT OF RS. 5,05,552 /-. SIMILARLY WHATEVER AMOUNT WAS PAYABLE TO THE AUDITORS NO EVIDENCE COULD BE GIVEN FOR THE SAME THAT WHETHER L IABILITY WAS CRYSTALLIZED PRESENT ACCOUNTING YEAR AND THEREFO RE, SUCH CLAIM OF RS. 1,03,840/- ALSO DISALLOWED BY THE A.O. CORRECTLY. REGARDING REMAINING EXPENDITURE CLAIM PERTAINING TO EARLIER YEAR THE A.O. IS DIRECTED TO MAKE COMPLETE VERIFICA TION FROM THE DETAILS FURNISHED AND IF ACCORDING TO EVIDENCES THE LIABILITY ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 39 FOR THE SAME IS CRYSTALLIZED ONLY IN THE PRESENT AC COUNTING YEAR THEN THIS SHOULD BE ALLOWED. 31. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 32. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED T HAT THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 47,56,322/- AS PRIOR PERIOD EXPENDITURE ON THE BASIS OF TAX AUDIT. THE BREAK UP OF THIS EXPENDIT URE IS AS UNDER:- I. INTEREST OF RS. 18,39,410/-. II. RENT OF OFFICE BUILDINGS OF RS. 10,81,435/-. III. OUT OF VARIOUS EXPENSES RS. 18,35,476/-. THE CIT(A) ALLOWED THE CLAIM OF INTEREST OF RS. 18,39 ,410/-. IN RESPECT OF RENT CLAIMED OF RS. 10,81,435/-, HE HELD THAT THERE IS NO EVIDENCE ON THE BASIS OF WHICH IT CAN BE HELD THAT LIABILITY HAS CRY STALLIZED DURING THE YEAR. IN RESPECT OF REMAINING CLAIM OF RS. 18,35,476/-, T HE CIT (A) HELD THAT THE A O HAS CORRECTLY DISALLOWED A SUM OF RS. 5,05,552/- TOWARDS OVERTIME EXPENSES AS THE BANKER WERE KNOWING AS ON THE LAST DA TE OF ACCOUNTING YEAR OF PREVIOUS YEAR THAT WHAT WERE THE RATE OF OVE R TIME AND HOW MUCH WAS OVER TIME LIABILITY. SIMILARLY WHATEVER AMOUNT WAS PAYABLE TO THE AUDITORS NO EVIDENCE COULD GIVEN FOR THE SAME THAT WHETHER LIABILITY WAS CRYSTALLIZED IN PRESENT ACCOUNTING YEAR AND THEREFO RE SUCH CLAIM OF RS. 1,03,840/- ALSO DISALLOWED BY THE A O CORRECTLY. RE GARDING REMAINING ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 40 EXPENDITURE CLAIM PERTAINING TO EARLIER YEAR THE A O IS DIRECTED TO MAKE COMPLETE VERIFICATION FROM THE DETAILS FURNISHED AN D IF ACCORDING TO EVIDENCE THE LIABILITY FOR THE SAME IS CRYSTALLIZED ONLY IN THE PRESENT ACCOUNTING YEAR THEN THIS SHOULD BE ALLOWED. THE LEAR NED CIT(A) ALLOWED THE CLAIM OF INTEREST OF RS. 18,39,410/-. THE RENT O F BUILDING FOR RS. 10,81,435/- PERTAINED TO PRECEDING YEAR BUT HAVE BE EN ACCOUNTED FOR DURING THE YEAR FOR REASONS OF REVISION/ENHANCEMENT OF RENT. THE LIABILITY HAS BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDE RATION AS PER FOLLOWING DETAILS. S. NO. BRANCH AMOUNT (IN RS.) EXPLANATION 1. CHANDIGARH 588336 THE PAYMENT PERTAINS TO ENHANCED RENT FOR THE PERIOD 1.2.2003 TO 31.3.2004 FOR WHICH THE LEASE DEED WAS EXECUTED IN THE MONTH OF APRIL 2005 AND THE APPROVAL FOR PAYMENT WAS MADE IN MARCH 2005. 2. NEW DELHI, NANGALRAYA 108432 ARREAR OF RENT SANCTIONED BY THE COMPETENT AUTHORITY ON 7.1.2005. 3. KOTA, I.L. 141110 AMOUNT IS RELAT ED TO ARREAR OF RENT FOR THE PERIOD MAY 1993 TO MARCH 2001, WHICH WAS SANCTIONED BY COMPETENT AUTHORITY ON 6.11.2004. 4. VIDHYADHAR NGR.JPR 2697 BILL WAS RAISED AND SETTLED IN THE CURRENT FINANCIAL YEAR. 5. KHATIPURA, JAIPUR 41684 AMOUNT IS RELATED TO E NHANCEMENT OF RENT FOR PERIOD 15.2.2004 TO 31.3.2004. THE ENHANCEMENT WAS SANCTIONED BY THE COMPETENT AUTHORITY ON 29.6.2004. 6. VAYAD 22608 AMOUNT IS RELATED TO ARREAR OF RENT FOR THE PERIOD 27.8.2003 TO 31.3.2004, WHICH WAS ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 41 SANCTIONED BY THE COMPETENT AUTHORITY ON 29.9.2004. 7. VKI, JAIPUR 12000 BILL WAS RAISED ON 30.4.2004 I.E. IN THE CURRENT FINANCIAL YEAR. 8. SAMRANIA 6960 BILL WAS RAISED AND SETTLED IN THE CURRENT FINANCIAL YEAR. 9. MUMBAI OVERSEAS 95000 THIS AMOUNT OF RENT PERTAINING TO AUGUST 96 WHICH WERE LYING UNRECONCILED AS THE PAYMENT WAS MADE BY ANOTHER BRANCH ON BEHALF OF THE CONCERNING BRANCH. SAME WAS TRACED DURING THE YEAR UNDER CONSIDERATION. 10 HOWRAH SALKIA 8000 BILL WAS RAISED AND SETTLED IN THE CURRENT FINANCIAL YEAR. 11. FARIDABAD 54608 AMOUNT IS RELATED TO ARREAR OF RENT FOR THE PERIOD AUGUST 2002 TO MARCH 2004. THE DEMAND OF ARREAR WAS MADE BY THE LAND LORD ON 26.3.2005, I.E. IN THE CURRENT FINANCIAL YEAR ONLY. TOTAL 1081435 THE REMAINING EXPENSES OF RS. 18,35,476/- IS CONCERN ED, OUT OF IT 5,05,522/- PERTAINS TO OVERTIME WORK OF EMPLOYEES IN THE LAST WEEK OF MARCH'2005. THUS, EXPENSES WERE PAID IN THE SUBSEQUEN T YEAR BUT ON ACCOUNT OF LIABILITY CRYSTALLIZED DURING THE YEAR B UT PERTAINED TO EARLIER YEAR. THEREFORE, THE ASSESSEE HAS CLAIMED THESE EXPE NSES. HE FURTHER RELIED THE DECISION OF HON'BLE SUPREME COURT IN CAS E OF CIT VS. EXCEL INDUSTRIES LTD. 93 DTR 457 AND CLAIMED THAT THERE IS NO MAJOR REVENUE LOSS TO THE DEPARTMENT, THEREFORE, IT SHOULD BE ALL OWED . 33. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE O RDER OF THE ASSESSING OFFICER AND ARGUED THAT THE EXPENSES WERE PERTAINED TO EARLIER YEARS, IT ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 42 SHOULD HAVE BEEN PROVIDED IN THE BOOKS OF ACCOUNT B ECAUSE THE LIABILITY WAS ASCERTAINABLE ON THE BASIS OF RENT AGREEMENT AND LAST WEEK OF OVERTIME. FURTHER THERE WERE NO DETAILS OF REMAINING EXPENSES WITH THE ASSESSEE TO CLARIFY WHETHER TO PROVE THE EXPENSES CR YSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IT IS NOT ALLOWA BLE. 34. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN ASSESSEES OWN CASE IN ITA NO. 278/JP/2009 FOR A.Y. 2004-05, THE IDENTICAL ISSUE I N GROUND NO. 4 HAVE BEEN ALLOWED FULLY. THE FACTS AND CIRCUMSTANCES OF TH E CASE ARE IDENTICAL AND FOR SAKE OF BREVITY WE REPRODUCE THE OPERATIVE P ORTION OF THE ORDER AS UNDER:- 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BO TH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PERIOD EXPEN SES WERE CLAIMED BY THE ASSESSEE HAVE BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS NUMBE R OF BRANCHES IN ALL OVER THE INDIA AND CERTAIN EXPENSES OF PREVIOUS YEAR WERE CLAIMED AFTER THE CLOSING OF BOOK S OF ACCOUNT, WHICH HAS BEEN CLARIFIED BY THE AUDITOR IN AUDIT REPORT. THE GENUINENESS OF THE EXPENSES HAS NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. THUS, THESE EXPENSE S WERE ALLOWABLE IN RESPECTIVE YEAR TO WHICH THEY PERTAINED BUT INFORMATION OF EXPENSES WITH EVIDENCE RECEIVED BY TH E APPELLANT FROM THE VARIOUS BRANCHES AFTER CLOSING O F BOOKS OF ACCOUNT. THE COORDINATE BENCH HAS CONSIDERED THIS IS SUE IN ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 43 A.Y. 2003-04 IN ASSESSEES OWN CASE. THE OPERATIVE F INDING IS AS UNDER:- CONSIDERING THE ABOVE SUBMISSIONS WE FIND SUBSTANC E IN THE ARGUMENT OF THE LD. AR. PRIOR PERIOD EXPENDITUR E REFERS TO THOSE EXPENSES WHICH ARISE AS A RESULT OF ERROR OR OMISSION IN PREPARATION OF THE FINANCIAL STATEMENT OF EARLIER YEARS AS EXPLAINED IN ACCOUNTING STANDARD-5 ISSUED BY ICAI. IT IS NOT THE CASE OF THE A.O. THAT IN EARLIER YEAR S INTEREST ON FDR WAS NOT PROVIDED. SUCH INTEREST WAS PROVIDED MA NUALLY AND THE DIFFERENCE HAS ARISEN BECAUSE OF THE CALCUL ATION OF INTEREST ON COMPUTERIZATION. SUCH DIFFERENCE CANNOT BE CATEGORIZED AS AN ERROR OR OMISSION. OTHERWISE ALSO THE EARLIER YEARS APPEAL WERE PENDING BEFORE US AND IF IT IS NOT ALLOWED IN THIS YEAR THE CLAIM OF THE ASSESSEE THAT IT SHOULD BE ALLOWED IN EARLIER YEARS IS REASONABLE AND PERMI SSIBLE IN VIEW OF THE DECISION CITED BY LEARNED AR. WE THERE FORE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF PRIOR PERIOD EXPENSES OF RS. 36,46,004/-. THIS GROUND IS ALLOWED . BY RESPECTIVE FOLLOWING THE COORDINATE BENCH DECISIO N IN ASSESSEES OWN CASE, WE ALSO HAVE CONSIDERED VIEW THAT THESE EXPENSES ARE ALLOWABLE DURING THE YEAR UNDER CONSIDE RATION. THUS, THE ASSESSEE GETS RELIEF FULLY ON THIS ISSUE. 35. BY RESPECTFULLY FOLLOWING THE DECISION FOR A.Y. 2004-05 IN ASSESSEES OWN CASE ON IDENTICAL ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEES EXPENSES ARE ALLOWABLE, THUS WE ALLOW THE ASSESSEES APPEAL ON BOTH THE GROUNDS. ITA 700, 701, 279 & 437/JP/2003 & 09 ACIT VS. SBBJ 44 36. IN THE RESULT, THE APPEALS OF THE REVENUE ARE P ARTLY ALLOWED FOR A.YS. 2001-02, 2002-03 AND 2005-06 AS WELL AS APPEAL OF THE ASSESSEE IS ALSO PARTLY ALLOWED FOR A.Y. 2005-06. ORDER PRONOUNCED IN THE OPEN COURT ON 12/09/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 12 TH SEPTEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE A.C.I.T., CIRCLE-6, JAIPUR/THE ADDL.CIT, RANGE -6, JAIPUR/THE DCIT, CIRCLE-6, JAIPUR. 2. STATE BANK OF BIKANER & JAIPUR, TILAK MARG, C-SCH EME, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NOS. 700 & 701/JP/2003 & 279 & 43 7/JP/2009) BY ORDER, AR ITAT JAIPUR.