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

ITA 280/JPR/2009

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2097 (ITAT-JAIPUR)
• Duration Of Justice: 8 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROLLY AGARWAL CIT DHK
• Keywords: Business income; Depreciation; Earning of tax free income; Proportionate interest; Tax effect; Capital receipt
• Section: 143(3); 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 280/JP/2009 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 STATE BANK OF BIKANER & JAIPUR, TILAK MARG, C-SCHEME, JAIPUR. CUKE VS. DY. CIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 438/JP/2009 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 DY. CIT, CIRCLE-6, JAIPUR CUKE VS. STATE BANK OF BIKANER & JAIPUR, TILAK MARG, C-SCHEME, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLLY AGARWAL (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.08.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29/08/2017. VKNS'K@ ORDER PER BENCH OUT OF BUNCH OF 21 APPEALS, THESE TWO CROSS APPEAL S ONE BY THE ASSESSEE I.E. ITA NO. 280/JP/2009 & OTHER BY THE REVENUES APPEAL IN ITA NO. 438/JP/2009 PERTAINING TO THE ASSESSMENT YEAR 2006-07 ARE DIRE CTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I I, JAIPUR, DATED - 27/03/2009. SINCE THE APPEALS WERE HEARD TOGETHER, THEREFORE, A RE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. 2 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 280/JP/2009 & 438/JP/2009 2. FIRST, WE TAKE UP APPEALS PERTAINING TO THE ASSE SSMENT YEAR 2006-07 I.E. ITA NO. 280/JP/2009 & 438/JP/2009. 280/JP/2009 (ASSESSEE). ASSESSEES APPEAL IN ITA NO. 280/JP/2009, THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. (I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE APP LICABILITY OF THE PROVISION OF SECTION 14A AND THEREBY UPHOLDING THE DISALLOWANCE OF PROPORTIONATE INTEREST AND ESTIMATED ADMINISTRATIVE EXPENDITURE OF THE BANKING BUSINESS. (II) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN QUANTIFYING THE D ISALLOWANCE U/S 14A AT THE SUM OF RS. 17,50,00,000/-. (III) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN CALCULATI NG THE AMOUNT U/S 14A IN TERMS OF PROVISIONS OF RULE 8D. HE HAS ALSO ERRED IN APPLYING THESE PROVISIONS OF RULE 8D FOR THE YEAR UNDER CONS IDERATION AS THE SAME HAVE BEEN INTRODUCED ON 24.03.2008. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE L D. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE AD DITION OF RS. 47,33,34,127/- MADE BY THE ASSESSING OFFICER BY TRE ATING THE TRANSFER OF AMOUNT OF UN-RECONCILED OUTSTANDING ENTRIES ORIGINA TED UPTO 31.01.1999 IN THE INTER BRANCH AMOUNT TO THE PROFIT AND LOSS A CCOUNT AS INCOME OF THE ASSESSEE. 3(I) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE DI SALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 35,916/-. HE HAS FURTHER ER RED IN NOT DIRECTING THE AO TO ALLOW THIS CLAIM IN THE PRECEDING RESPECT IVE ASSESSMENT YEARS. (II) UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO ERRED IN NOT ALLOWING THE RELIEF IN RESPECT OF DISALLOWANCE OF ALLEGED PRIOR PERIOD RENT EXPENS ES OF RS. 33,34,245/-. 4. APPELLANT CRAVES TO ADD, AMEND, ALTER OR MODIFY ANY OF THE GROUND OF APPEAL. 3 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 5. THE APPROPRIATE COST BE AWARDED TO THE ASSE SSEE. 3. FACTS IN BRIEF ARE THAT, THE CASE OF THE ASSESS E WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 20/02/2008. WHILE FRAMING THE ASSESSMENT THE ASSESSING OFFICER MADE VARIOUS ADDIT IONS ON ACCOUNT OF TAKING INTEREST OF TAX-FREE DEBENTURE ON ACCRUAL BASIS OF RS. 14,55,068/-, DISALLOWANCE OUT OF INTEREST CLAIMED EXEMPT U/S 10(23G) OF THE ACT O F RS. 3,87,30,043/-, DISALLOWANCE MADE BY INVOKING THE PROVISION OF SECTION 14A OF RS . 12,92,57,568/-, DISALLOWANCE OF DEPRECIATION ON SECURITIES- FOR VALUING AS PER GLOB AL METHOD OF RS. 7,21,74,918/-, DISALLOWANCE OF AMORTIZATION CLAIM ON SECURITIES HE LD IN HTM OF RS. 111,81,75,752/-, DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 33,70, 161/-, CAPITAL RECEIPTS TREATED AS INCOME OF RS. 47,33,34,127/-. AGGRIEVED BY THIS OR DER, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING THE APPEAL THE LD. CI T(A) DELETED THE ADDITION MADE ON ACCOUNT OF INTEREST ON ACCRUAL BASIS. LD. CIT(A) C ONFIRMED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXEMPTION CLAIM OF RS. 3 ,87,30,043/- MADE U/S 10(23G) OF THE ACT. THE LD. CIT(A) HAS FURTHER ENHANCED TH E DISALLOWANCE MADE U/S 14A FROM RS. 12,92,57,568/- TO RS. 17,50,00,000/- THE L D. CIT(A) DELETED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON SECURITIES ON GLOBAL METHOD OF RS. 7,21,74,918/-. 3.1 FURTHER THE LD. CIT(A) CONFIRMED THE ADDITION O F RS. 111,81,75,752/- MADE ON ACCOUNT OF AMORTIZATION OF PREMIUM, HOWEVER, THE LD . CIT(A) RESTRICTED THE DISALLOWANCE IN RESPECT OF PRIOR PERIOD EXPENSES OF RS. 35,916/- OUT OF TOTAL DISALLOWANCE OF RS. 33,70,161/-. THE LD. CIT ALSO CONFIRMED THE ADDITION MADE ON 4 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. ACCOUNT OF CAPITAL RECEIPTS OF RS. 47,33,34,127/-. AGAINST THIS ORDER, BOTH REVENUE AND ASSESSEE ARE IN APPEAL. IN THIS APPEAL, THE AS SESSEE HAS CHALLENGED CORRECTNESS OF ACTION OF LD. CIT(A) FOR CONFIRMING THE ADDITION S MADE BY THE AO. 4. GROUND NO. 1 (I) TO (III) IS AGAINST THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE MADE BY INVOKING THE PR OVISIONS OF SECTION 14A. 4.1 APROPOS TO GROUND NO. 1, LD. COUNSEL FOR THE AS SESSEE VEHEMENTLY ARGUED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN IN VOKING THE PROVISION OF SECTION 14A. 4.2 LD. COUNSEL SUBMITTED THAT LD. CIT(A) HAS GROSS LY ERRED IN APPLYING THE PROVISIONS OF RULE 8D. HE CONTENDED THAT THE RULE 8D, FOR THE INCOME TAX RULE, 1962, BECAME APPLICABLE ONLY W.E.F. ASSESSMENT YEAR 2008-09 AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT 328 ITR 81. HE FURTHER SUBMITTED THAT, IN PRESENT CASE, THE ASS ESSEE HAD MADE ADVANCES OF RS. 191.24 CRORES FROM WHICH EXEMPTED INTEREST INCOME O F RS. 21.52 CRORES IS EARNED. FURTHER, THE ASSESSEE MADE INVESTMENT OF RS. 146.46 CRORES WHICH YIELDED TAX FREE INTEREST OF RS. 1.19 CRORES. FURTHER, INVESTMENT O F RS. 188.29 CRORES YIELDED DIVIDEND INCOME OF RS. 5.03 CRORES BUT PROFIT ON SA LE OF SUCH INVESTMENT IS TAXABLE. THUS, THE TOTAL INVESTMENT WHICH YIELDED EXEMPT INC OME AS WELL AS TAXABLE INCOME IS RS. 525.99 CRORES. HE SUBMITTED THAT THERE IS NO RE LATIONSHIP OF BORROWED FUNDS FOR MAKING SUCH INVESTMENT. IN FACT, THIS INVESTMENT I S MADE BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AGGREGATING TO RS. 1,405.65 CRO RES COMPRISING OF SHARE CAPITAL OF RS. 50.00 CRORES AND RESERVES AND SURPLUS OF RS. 1, 355.65 CRORES. THUS, WHEN INTEREST FREE FUNDS FAR EXCEEDS THE INVESTMENT WHIC H HAS YIELDED EXEMPTED INCOME AND THERE IS NO FINDING OF THE AO THAT BORROWED FUN D HAS BEEN USED IN MAKING SUCH 5 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. INVESTMENT, NO DISALLOWANCE OF INTEREST EXPENDITURE IS CALLED FOR. HE SUBMITTED THAT UNDER THE IDENTICAL FACTS THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF ASSESSEE PERTAINING TO THE ASSESSMENT YEARS 2000-01 TO 2003- 04 HAD DELETED THE DISALLOWANCE. HE FURTHER SUBMITTED THAT INVESTMENT IN DEBENTURES, BONDS, MUTUAL FUNDS AND SHARES WHICH HAS YIELDED EXEMPT INCOME CO NSTITUTE STOCK IN TRADE OF THE ASSESSEE. ON SALE OF SUCH STOCK, BUSINESS INCOME I S ASSESSED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS NOT RETAINED THESE INVE STMENTS WITH THE INTENTIONS OF EARNING EXEMPT INCOME RATHER THE EXEMPT INCOME IS I NCIDENTAL TO THE BUSINESS OF SALE OF SHARES/SECURITIES. THEREFORE, IT CANNOT BE SAID THAT EXPENDITURE INCURRED WHILE ACQUIRING THESE INVESTMENTS HAS TO BE APPORTI ONED TO THE EXTENT OF DIVIDEND INCOME AND THAT SHOULD BE DISALLOWED FROM DEDUCTION . 4.3 LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E ON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF PCIT VS. STATE BANK OF PATIALA 98 CCH 35. LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FIDUICIARY SHARES AND STOCK PVT. LTD. VS. AIT 159 ITD 554 TO BUTTRESS THE CONTENTION S THAT THE SHARES HELD AS STOCK IN TRADE SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTI NG DISALLOWANCE U/S 14A OF THE ACT, SINCE THEY COULD NOT BE SAID TO BE INVESTMENT MADE FOR THE PURPOSE OF EARNING DIVIDEND INCOME. FURTHER, RELIANCE IS PLACED ON JU DGMENT OF THE HONBLE THE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD. VS. JC IT 71 DTR 141/206 TAXMAN 563 TO BUTTRESS THE CONTENTION THAT PROVISION OF SECTIO N 14A IS NOT APPLICABLE TO THE EXPENSES INCURRED BY THE ASSESSEE IN COURSE OF ITS BUSINESS OF SHARE DEALING MERELY BECAUSE ASSESSEE IS ALSO HAVING DIVIDEND INCOME. H E SUBMITTED THAT IN VIEW OF 6 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. THESE DECISIONS THE DISALLOWANCE AS MADE BY INVOKIN G THE PROVISION OF SECTION 14A MAY BE DELETED. 4.4 ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIV ES OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. LD. D/R SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN A FINDING ON FACT THAT THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS, 23,72,13,375/-. THE ASSE SSEE HAS INCURRED INTEREST EXPENDITURE OF RS. 9,72,87,83,151/- AND IN EARNED I NTEREST OF RS. 19,65,78,03,553/-. THEREFORE IT CANNOT BE ASSUMED THAT THE ASSESSEE HA S NOT INCURRED ANY EXPENDITURE FOR EARNING SUCH EXEMPT INCOME. LD. D/R THEREFORE SUBMITTED THAT LD. CIT(A) WAS THEREFORE JUSTIFIED IN MAKING THE DISALLOWANCE U/S 14A. LD. D/R SUBMITTED THAT THE DISALLOWANCE HAS TO BE ON SOME BASIS AND RULE 8D PR ESCRIBES CERTAINLY THE BASIS OF DISALLOWANCE, FOR THE EXPENDITURE RELATED TO THE IN COME NOT FORMING PART OF TOTAL INCOME. 4.5 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . WE FIND THAT LD. CIT(A) HAS MADE DISALLOWANCE BY COMPUTING AS PER RULE 8D OF TH E INCOME TAX RULES 1962. IN OUR VIEW, THE LD. CIT(A) WAS NOT JUSTIFIED IN COMPU TING THE DISALLOWANCE AS PER RULE 8D, AS THE RULE 8D BECAME OPERATIONAL FROM THE A.Y. 2008-09. FURTHER, THERE IS NOT DISPUTE WITH REGARD TO THE FACT THAT SIMILAR DISALL OWANCES WERE MADE U/S 14A IN THE ASSESSMENT YEAR 2000-01, 2002-03 AND 2003-04 AND TH E MATTER TRAVELED UP TO THE HONBLE RAJASTHAN HIGH COURT. THE HONBLE HIGH COU RT IN DB INCOME TAX APPEAL NOS. 172/2008, 119/2010, 141/2010 AND 142/2010 WAS PLEASED TO HELD THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING COMPANY LTD. VS. DCIT. THE ORDER OF D ISALLOWANCE WAS REVERSED. 7 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. THE FACTS ARE IDENTICAL IN THE PRESENT YEAR AND ALS O THERE IS NO CHANGE INTO FACTS AND CIRCUMSTANCES. AS THE ASSESSEE BANK IS HAVING SUFF ICIENT INTEREST FREE FUNDS WHICH HAS BEEN ACCEPTED BY BOTH THE AUTHORITIES BELOW. T HEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE. THUS, THIS GROUND OF ASSE SSEES APPEAL IS ALLOWED. 5. GROUND NO. 2 IS AGAINST CONFIRMING THE ADDITION OF RS. 47,33,34 ,127/- MADE BY THE ASSESSING OFFICER TREATING THE TRANSFER OF A MOUNT OF UNRECONCILED OUTSTANDING ENTRIES ORIGINATED UPTO 31.3.1999. 5.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. LD. COUNSEL SUBMITTED THAT TH E R.B.I. VIDE ITS LETTER DATED 19/12/2005 DIRECTED THE ASSESSEE TO TRANSFER THE NE T CREDIT BALANCE OF UNRECONCILED ENTRIES ORIGINATED UPTO 31.3.1999 IN THE INTER BRAN CH ACCOUNTS TO GENERAL RESERVES. THE ASSESSING OFFICER TREATED THE AMOUNT OF RS. 47, 33,34,127/- AS INCOME OF THE ASSESSEE CHARGEABLE TO TAX. THE LD. CIT(A) CONFIRM ED THE ADDITION BY RELYING UPON THE JUDGMENT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS 222 ITR 344. THE LD. COUNS EL SUBMITTED THAT THE THREE IMPORTANT ASPECT ABOUT TRANSFER OF RECONCILED ENTRI ES IN THE INTER BRANCH ACCOUNTS. ONE, THE ASSESSEE IS TO MAINTAIN COMPLETE DETAILS, THE SECOND; THE ASSESSEE DOES NOT HAVE ANY RIGHT TO FORFEIT THE AMOUNT. IT HAS T O HONOR ANY CLAIM IN THIS RESPECT AND THE THIRD, THE AMOUNT SO TRANSFERRED CANNOT BE DISTRIBUTED AS DIVIDEND. THIS AMOUNT CAN BE UTILIZED ONLY FOR MEETING THE CLAIMS IN RESPECT OF THESE UNRECONCILED ENTRIES. 5.2 LD. COUNSEL SUBMITTED THAT NO EVENT HAS TAKEN P LACE DURING THE YEAR EXCEPT PASSING OF THE ENTRIES IN THE BOOKS OF ACCOUNTS, WH ICH BY ITSELF CANNOT MAKE ANY 8 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. LIABILITY AS INCOME UNLESS COVERED BY THE PROVISION S OF SECTION 41(1). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) WRONGLY APPL IED THE RATIO OF THE CIT VS. T.V. SUNDARAM IYANGAR & SONS LTD. 222 ITR 344, AS IN THA T CASE THE ASSESSEE HAS RECEIVED DEPOSITS IN THE COURSE OF ITS BUSINESS WHI CH WERE ORIGINALLY TREATED AS CAPITAL RECEIPTS AND SOME OF THE DEPOSITS WERE NEIT HER CLAIMED BY NOR RETURNED TO THE DEPOSITOR. LD. COUNSEL SUBMITTED THAT IN THAT CASE THE AMOUNT BECAME THE ASSESSEES OWN MONEY BECAUSE OF LIMITATION OR BY AN Y OTHER STATUTORY OR CONTRACTUAL RIGHT. IN THE PRESENT CASE, THE ASSESSEE HOLDS MON EY IN TRUSTEE CAPACITY. IT HAS NOT GOT ANY RIGHT TO FORFEIT THE MONEY NOR IT BECOMES A SSESSEES OWN MONEY SO AS TO GIVE IT A RIGHT TO UTILIZE THE SAME FOR IT PURPOSE. SINCE, THE MONEY IS HELD BY THE ASSESSEE IN TRUSTEE CAPACITY, THE LIABILITY DOES NO T BECOME BARRED BY LIMITATION. LD. COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) HIMSE LF ACCEPTED THAT IT IS NOT A CASE FAILING U/S 41(1). THUS, SECTION 41(1) IS NOT APPL ICABLE. 5.3 LD. COUNSEL FURTHER PLACED RELIANCE ON THE FOLL OWING CASES:- CIT VS. SHOORJI VALLABHDAS & CO. 46 ITR 144(SC), CIT VS. MOGUL LINE LTD. 46 ITR 590 (BOM), KEDARNATH JUTE MANUF. CO. LTD. VS. CIT 82 ITR 363 ( SC), CIT VS. INDUSTRIAL CREDIT & DEVELOPMENT SYNDICATE L TD. 284 ITR 310 (KARNATAKA)(HC) 5.4 LD. COUNSEL SUBMITTED THAT THE RATIO LAID DOWN IN THOSE CASES IT CAN BE NOTICED THAT THE AMOUNT CREDITED TO THE PROFIT AND LOSS ACCOUNT AND THEREAFTER APPROPRIATED TO GENERAL RESERVES IS NOT THE INCOME OF THE ASSESSEE AS IT DOES NOT HAVE ANY RIGHT OVER IT TO USE/UTILIZE. LD. COUNSEL FURTHER PLACED RELIANCE ON THE 9 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. DECISION OF THE CO-ORDINATE BENCH RENDERED IN THE C ASE OF PUNJAB NATIONAL BANK IN ITA NO. 2047/DEL/2007 & 2873/DEL/2007. 5.5 ON THE CONTRARY, LD. D/R OPPOSED THE SUBMISSION S AND SUBMITTED THAT WHETHER THIS RECONCILIATION REPRESENTS THE INCOME W OULD NOT DEPEND ON, HOW THE ASSESSEE HAS TREATED THE SAME. THE ASSESSEE HAS NO T DEMONSTRATED WHAT IS THE CHARACTER OF THESE RECONCILIATION ENTRIES? WHETHER THESE WERE DEPOSITS OR NOT IF SUCH ENTRIES WERE NOT CLAIMED BY THE ACCOUNT HOLDER CERT AINLY SUCH RECEIPTS WOULD BE THE INCOME OF THE BANK. 5.6 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . LD. COUNSEL FOR THE ASSESSEE WAS NOT IN A POSITION TO ASSIST THE BENCH WITH REGA RD TO EXACT CHARACTER OF THE RECONCILED ENTRIES. HE SUBMITTED THAT THIS RECONCI LIATION ENTRIES CANNOT BE TREATED AS INCOME OF THE BANK EVEN IF IT IS PRESUMED THAT THIS MONEY BELONGING TO THE DEPOSITORS. THE SUBMISSIONS OF THE ASSESSEE IS NOT SUPPORTED BY ANY EVIDENCE DEMONSTRATING THAT THE AMOUNT CREDITED IN THE ACCOU NTS OF THE ASSESSEE BANK WOULD BE PAID TO THE CONCERNED ACCOUNT HOLDER OR ALTERNAT IVELY SUCH ENTRIES PERTAIN TO ITS OWN FUNDS. IN OUR CONSIDERED VIEW, IT WAS INCUMBENT UPON THE ASSESSEES BANK TO DEMONSTRATE THE NATURE OF RECONCILIATION ENTRIES IN THE ABSENCE OF THE SAME, THE ORDER OF THE AO CANNOT BE DISTURBED. ACCORDINGLY, THIS GROUND OF THE ASSESSEES APPEAL IS REJECTED. 6. GROUND NO. 3(I) TO (II ) IS RELATE TO PRIOR PERIOD EXPENSES. 6.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE SUBMISSIONS OF THE LD. CO UNSEL FOR THE ASSESSEE ARE REPRODUCED AS UNDER:- 10 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. FACTS:- 1. THE AO DISALLOWED PRIOR PERIOD EXPENDITURE OF R S.33,70,161/- AS REPORTED IN THE TAX AUDIT REPORT. THE BREAK UP OF THIS EXPENDITURE IS AS UNDER:- I) RENT OF OFFICE BUILDINGS OF RS.33,34,245/- II) AUDIT FEES RS.27,100/- III) OVERTIME EXPENSES RS. 8,816/- 2. THE LD. CIT(A) HELD THAT PREDOMINANTLY THE DISA LLOWANCE REFERS TO RENT OF OFFICE BUILDING OF RS.33,34,245/- WHICH WAS PERTAINING TO EARLIER PERIOD. HOWEVER, IT HAS TO BE APPRECIATED THAT INCREASE IN THE RENT IS AS PER RENT AGREEMENT AND THEREFORE, THE ASSESSEE WAS IN A POSITION TO ASCERT AIN THE LIABILITY RELATED TO RENT INCREASE WHICH COULD BEEN PROVIDED IN THE RELEVANT ACCOUNTING YEAR TO WHICH IT PERTAINS. AO IS THEREFORE, DIRECTED TO VERIFY THE A VAILABLE EVIDENCE AND IF THE LIABILITY FOR THE SAME WAS NOT ASCERTAINABLE IN EAR LIER ACCOUNTING YEAR AND HAS CRYSTALLIZED ONLY IN THE ACCOUNT YEAR RELEVANT TO P RESENT AY THEN ONLY SUCH DEDUCTION HAS TO BE ALLOWED. IN RESPECT OF OVERTIME EXPENSES AND AUDIT FEES IT IS HELD THAT THE CLAIM WHICH PERTAIN TO EARLIER YEAR W AS ASCERTAINABLE IN RELEVANT ACCOUNTING YEAR AND SINCE NO SUCH EVIDENCE COULD HA VE BEEN GIVEN THAT LIABILITY FOR THE SAME HAS BEEN CRYSTALLIZED ONLY IN THE ACCO UNTING YEAR RELEVANT TO PRESENT ASSESSMENT YEAR AND THEREFORE, SUCH DISALLO WANCE OF RS.35,916/- IS CONFIRMED AND FOR REST OF THE CLAIM, THE SAME IS AL LOWABLE SUBJECT TO VERIFICATION KEEPING IN VIEW THE AVAILABLE EVIDENCE. SUBMISSION:- 1. IT IS SUBMITTED THAT RENT OF OFFICE BUILDING FOR RS .33,34,245/- THOUGH RELATE TO EARLIER YEARS HAS ACCOUNTED FOR DURING THE YEAR UNDER CONSI DERATION AS THE LIABILITY TO PAY THE ENHANCED RENT CRYSTALLIZED DURING THE YEAR. THIS IS VERIFIABLE FROM THE FOLLOWING DETAILS:- 11 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. S. NO. BRANCH AMOUNT (IN RS.) EXPLANATION 1. C - SCHEME, JAIPUR 6,36,000 RENT OF THE BRANCH PREMISE WAS INCREASED TO RS.95,0 00/ - FROM RS.42,000/- PER MONTH W.E.F 01.04.2004 VIDE LETTER DATED 16.12.2004 WITH THE CONDITION THAT THE INCREASED RE NT SHALL BE PAID ONLY WHEN THE LANDLORD WOULD GET THE PREMISE R ENOVATED. SINCE THE RENOVATION WAS DONE IN THE YEAR UNDER CON SIDERATION, THEREFORE, THE INCREASED RENT @ RS.53,000/- P.M., I .E. RS.6,36,000/- IS PAID DURING THE YEAR (PB 53-56). THUS, THE LIABILITY OF PAYMENT OF INCREASED RENT CRYSTALLIZED DURING IN THE YEAR AND THEREFORE, IT IS NOT A PRIOR PERIOD EXPEND ITURE. 2. NEHRU PLACE, NEW DELHI 7,47,132 THIS AMOUNT WAS PAID FOR THE PERIOD 01.04.2000 TO 3 1.03.2005 AFTER THE SETTLEMENT IS MADE WITH THE LANDLORDS OF THESE PREMISES IN PURSUANCE TO THE ORDER OF THE DELHI HIG H COURT DT.19.01.2005 WHERE THEY DIRECTED THE ASSESSEE TO V ACATE THE PREMISES (PB 57-63) . THUS, THE LIABILITY CRYSTALLIZED DURING THE YEAR AND IT IS NOT A PRIOR PERIOD EXPENDITURE. 3. MR JODHPUR 6,29,920 AMOUNT PERTAINS TO THE ARREAR OF RENT OF RS.4,010/ - FROM PERIOD APRIL-1989 TO MARCH-2005 BEING SANCTIONED BY THE BA NKS COMMITTEE IN JANUARY, 06 I.E. IN THE YEAR UNDER CON SIDERATION. SINCE THE ARREAR OF RENT WAS APPROVED DURING THE YE AR UNDER CONSIDERATION ONLY THEREFORE THE LIABILITY TO PAYME NT WAS CRYSTALLIZED IN THIS YEAR ITSELF (PB 64-67) . HENCE, THE EXPENDITURE IS NOT PRIOR PERIOD AND SAME IS ALLOWAB LE. 4. N.S. ROAD, KOLKATA 5,81,768 THE AMOUNT PERTAINS TO THE ASSESSEES SHARE OF ARRE AR OF CORPORATION TAX AND SURCHARGE ON THE RENTED PREMISE S FOR THE PERIOD 01.04.2003 TO 31.03.2005 DEMANDED BY THE LAN DLORD OF THE PREMISES IN THE YEAR UNDER CONSIDERATION ONLY O N THE DEMAND OF KOLKATA MUNICIPAL CORPORATION. SINCE THE AMOUNT WAS DEMANDED BY THE MUNICIPAL CORPORATION AND THE L ANDLORD DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE LIABILITY OF PAYMENT CRYSTALLIZED DURING THE YEAR AND THE SAME I S NOT A PERIOD EXPENSE (PB 68-71) . 5. BARIELLY 2,57,659 AMOUNT PERTAINS TO THE ARREAR OF LEASE RENT OF THE BANK PREMISES FOR THE PERIOD 14.02.2002 TO 31.03.2005. T HE AMOUNT WAS CHARGED TO EXPENSE DURING THE YEAR UNDER CONSID ERATION SINCE THE LEASE DEED WAS EXECUTED DURING THE YEAR CONSIDERATION ONLY. (PB 72-73) . HENCE THE LIABILITY FOR EXPENDITURE IS CRYSTALLIZED DURING THE YEAR UNDER C ONSIDERATION ONLY, THEREFORE, SAME IS NOT PRIOR PERIOD EXPENDITU RE. 12 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 6. SHAHARANPUR 1,72,237 THE AMOUNT IS THE ARREAR OF RENT OF BRANCH PREMISES FOR THE PERIOD SEPTEMBER2000 TO MARCH2005 BEING PAID ON T HE ORDER OF ADDL. DISTRICT JUDGE, SHAHRANPUR DATED 10.01.200 5. THE AMOUNT WAS FINALLY SANCTIONED BY THE BANKS AUTHORI TY DURING THE YEAR UNDER CONSIDERATION ONLY. THE LIABILITY FO R PAYMENT THUS CRYSTALLIZED DURING THE YEAR AND THEREFORE, SA ME IS NOT PRIOR PERIOD EXPENSE (PB 74-75) . 7. T P KANPUR 97,200 AMOUNT PERTAINS TO THE ARREAR OF INCREASE RENT FOR PERIOD 15.12.1999 TO 31.03.2005. THE PERMISSION FOR THE EX ECUTION OF THE LEASE DEED FOR HIGHER RENT WAS GRANTED DURING T HE YEAR UNDER CONSIDERATION ONLY, THEREFORE, THE LIABILITY FOR PAYMENT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. HENCE , THE EXPENDITURE IS NOT PRIOR PERIOD (PB 76-81) . 8. MACHIND 50,520 AMOUNT PERTAINS TO THE ARREAR OF INCREASED RENT BY RS.4,035/ - FOR 01.04.2004 TO 31.03.2005. THE LEASE DEED FOR TH E INCREASED RENTAL WAS EXECUTED DURING THE YEAR UNDER CONSIDERA TION, THEREFORE, THE LIABILITY FOR PAYMENT CRYSTALLIZED I N THE YEAR UNDER CONSIDERATION. HENCE, THE EXPENDITURE IS NOT PRIOR PERIOD (PB 82) . 9. SHEO 49,000 AMOUNT PERTAINS TO THE ARREAR OF INCREASED RENT AS THE LEASE DEED FOR THE INCREASED RENTAL WAS EXECUTED DURING T HE YEAR UNDER CONSIDERATION, THEREFORE, LIABILITY FOR PAYME NT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. HENCE , THE SAME IS NOT PRIOR PERIOD (PB 83-84) . 10 AHORE 43,821 AMOUNT DOES NOT PERTAINS TO THE PRIOR PERIOD RENT E XPENSES RATHER IT IS SUM TOTAL OF VARIOUS PETTY EXPENSES ON ACCOUNT OF STATIONERY, NEWSPAPER, CONVEYANCE ETC. WHICH HAS WR ONGLY CLASSIFIED BY THE AUDITORS AS PRIOR PERIOD RENT. DE TAILS ARE ENCLOSED AT PB 85-86 . SINCE OTHER EXPENSES OF SIMILAR NATURE WERE ALLOWED BY THE AO, THEREFORE, SAME BE ALLOWED. 11. BALOTRA 33,988 AMOUNT PERTAINS TO THE ARREAR OF INCREASED RENT AS THE LEASE DEED FOR THE INCREASED RENTAL WAS EXECUTED DURING T HE YEAR UNDER CONSIDERATION, THEREFORE, LIABILITY FOR PAYME NT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. HENCE , THE EXPENDITURE IS NOT PRIOR PERIOD (PB 87-90) . 12. RANIWARA 15,000 AMOUNT PERTAINS TO THE RENT OF ATM ROOM FOR THE YEA R 2005 - 06. SINCE THE LEASE DEED FOR THE SAME WAS EXECUTED IN JANUARY, 06, THEREFORE, THE LIABILITY FOR PAYMENT CRYSTALLIZ ED IN THE YEAR UNDER CONSIDERATION. HENCE, THE EXPENDITURE IS NOT PRIOR PERIOD 13 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. (PB 91 - 94) . 13. RAMDEORA 9,000 AMOUNT PERTAINS TO THE ARREAR OF INCREASED RENT OF ATM PREMISE @ RS.1,500 PER MONTH FOR THE PERIOD 01.10.2 004 TO 31.03.2005. SINCE THE INCREASED RENT WAS SANCTIONED DURING THE YEAR UNDER CONSIDERATION ONLY, THEREFORE, THE LIABI LITY FOR PAYMENT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATIO N. HENCE, THE EXPENDITURE IS NOT PRIOR PERIOD (PB 95-96) . 14 JHIRI 8,000 THERE WAS LEAKAGE IN THE RENTED PREMISES DUE TO WHI CH RENT OF THE PREMISES FROM NOV, 04 TO FEB, 05 WAS WITHHELD B Y THE ASSESSEE. LATER ON APPROVAL AMOUNT WAS PAID IN THE YEAR UNDER CONSIDERATION. BEING THE APPROVAL WAS SANCTIONED IN THE YEAR UNDER CONSIDERATION, THEREFORE, THE AMOUNT IS NOT A PRIOR PERIOD EXPENSE (PB PG.97-99) . 15 PHALSOOND 3,000 RENT PERTAINS TO THE PREVIOUS YEAR FOR WHICH SANCTI ON WAS GRANTED IN AY 2005-06, HENCE, THE SAME IS NOT PRIOR PERIOD EXPENSE. TOTAL 33,34,245 FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE LIABI LITY FOR PAYMENT OF RENT CRYSTALLIZED DURING THE YEAR ITSELF AND THEREFORE, THE SAME IS NOT A PRIOR PERIOD EXPENSES. THE LD. CIT(A) EVEN AFTER EXAMINING ALL T HESE EVIDENCES, WHICH WERE ALREADY BEFORE THE AO, HAS DIRECTED HIM TO VERIFY T HE AVAILABLE EVIDENCES INSTEAD OF DIRECTING HIM TO ALLOW THE SAME. HENCE, THE ORDE R OF LD. CIT(A) TO THIS EXTENT IS ERRONEOUS AND THE AO BE DIRECTED TO ALLOW THE EX PENDITURE CLAIMED BY THE ASSESSEE. 2. SO FAR AS THE EXPENSES OF RS.35,916/- IS CONCERNED, OUT OF IT RS.8,816/- PERTAINS TO OVERTIME WORK OF EMPLOYEES IN THE LAST WEEK OF M ARCH, 2006 DUE TO FINALIZATION OF ACCOUNTS FOR THE PERIOD ENDED ON 31 .03.2005. SAMPLE VOUCHERS ARE AT PB 100 -104 . THE OVERTIME EXPENSES ARE BOOKED AS AND WHEN CLAI MS ARE MADE AGAINST THE ASSESSEE TO PAY/ REIMBURSE THE SAME. THE CLAIMS WERE MADE IN APRIL, 2005 AND WERE ACCORDINGLY PAID. THUS , THE LIABILITY HAS CRYSTALLIZED ON RAISING OF THE CLAIM AND THEREFORE THE SAME IS T O BE ALLOWED IN THE YEAR UNDER CONSIDERATION. IN RESPECT OF AUDIT FEES, THE BILL I S SETTLED IN APRIL AND JUNE 2005 14 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. (PB 105-107) AND THEREFORE, THE SAME IS ALLOWABLE IN THE YEAR UN DER CONSIDERATION. 3. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT TH E TAX RATE BEING SAME, IF THESE EXPENSES ARE NOT ALLOWED DURING THE YEAR, THEN DIRE CTION BE GIVEN TO ALLOW THE SAME IN THE PREVIOUS YEAR TO WHICH IT PERTAIN. FURT HER, THE EXPENDITURE OF RS.14,05,671/- WHICH IS CLAIMED AS PREVIOUS YEAR EX PENDITURE IN AY 2007-08 BE DIRECTED TO BE ALLOWED IN THE YEAR UNDER CONSIDERAT ION. IF THIS COURSE IS ADOPTED, IT WOULD ONLY LEAD TO UNNECESSARY PAPER WORK WITHOU T ANY REVENUE EFFECT. THE SUPREME COURT IN CASE OF CIT VS. EXCEL INDUSTRIES L TD. 93 DTR 457 HAS HELD THAT WHEN THE RATE OF TAX REMAINED THE SAME IN PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT AY, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT, TH ERE IS NO NEED FOR THE REVENUE TO CONTINUE WITH THE LITIGATION WHERE IT WA S QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT H AVE ADDED ANYTHING MUCH TO THE PUBLIC OFFICE. 6.2 LD. DEPARTMENTAL REPRESENTATIVES OPPOSED THE SU BMISSIONS, AND SUPPORTED THE ASSESSMENT ORDER. 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW . 6.4 LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA 8.3 O F HIS ORDER THAT READS AS UNDER:- 8.3 I HAVE CONSIDERED FACTS OF THE CASE AND ARGUME NTS TAKEN BY SH. JHANWAR AND SH. PARWAL QUITE CAREFULLY. IT IS SEEN THAT PREDOMINANTLY THIS DISALLOWANCE REFERS TO RENT OF OFFICE BUILDING OF R S. 33,34,245/- WHICH WAS PERTAINING TO EARLIER PERIOD. HOWEVER, IT HAS TO B E APPRECIATED THAT INCREASE IN THE RENT AS PER RENT AGREEMENT AND THEREFORE, TH E BANKER WAS IN A POSITION TO ASCERTAIN THE LIABILITY RELATED TO RENT INCREASE WHICH COULD HAVE BEEN PROVIDED IN THE RELEVANT ACCOUNTING YEAR TO WHICH I T PERTAINS. AO IS THEREFORE, 15 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. DIRECTED TO VERIFY THE AVAILABLE EVIDENCE AND IF TH E LIABILITY FOR THE SAME WAS NOT ASCERTAINABLE IN EARLIER AMOUNTING YEAR AND HAS CRYSTALLIZED ONLY IN THE ACCOUNTING YEAR RELEVANT TO PRESENT A.Y. THEN ONLY SUCH DEDUCTION HAS TO BE ALLOWED. I AGREE WITH AO THAT OVER TIME EXPENSES C LAIM OF RS. 8,816/- AND AUDIT FEE CLAIM OF RS. 27,100/- WHICH WAS PERTAININ G TO EARLIER YEAR WAS ASCERTAINABLE IN RELEVANT ACCOUNTING YEAR AND SINCE NO SUCH EVIDENCE COULD HAVE BEEN GIVEN THAT LIABILITY FOR THE SAME HAS BEE N CRYSTALLIZED ONLY IN THE ACCOUNTING YEAR RELEVANT TO PRESENT ASSESSMENT YEAR AND THEREFORE, SUCH DISALLOWANCE OF RS. 35,916/- IS CONFIRMED AND FOR R EST OF THE CLAIM THE SAME IS ALLOWABLE SUBJECT TO AFORESAID VERIFICATION KEEPING IN VIEW THE AVAILABLE EVIDENCE. 6.5 THE CONTENTION OF THE ASSESSEE IS THAT THE EXPE NDITURE RELATES TO PAYMENT OF RENT AND THE AUTHORITIES BELOW FAILED TO APPRECIATE THE FACT THAT THIS PAYMENT WAS MADE ON THE BASIS OF EITHER THE RENT WAS INCREASED IN THE YEAR UNDER CONSIDERATION OR IN PURSUANCE OF THE ORDER OF THE COURTS. IN OUR VIEW, WHERE THE PAYMENT IS MADE BY THE ORDER OF THE COURT OR INCREASED BY THE AGREEMENT IN THE YEAR UNDER CONSIDERATION THAT EXPENDITURE CERTAINLY CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THEREFORE, IN VIE W OF THE MATERIAL PLACED IN THE PAPER BOOK, WE ARE OF THE VIEW THAT LD. CIT(A) OUGH T NOT TO HAVE RESTORED THIS ISSUE TO THE FILE OF THE AO FOR VERIFICATION AS THE EVIDE NCE PLACED ARE SUFFICIENT TO INFER THAT THESE LIABILITIES RELATED TO RENT CRYSTALLIZED IN T HE YEAR UNDER APPEAL. THEREFORE, WE HEREBY DIRECT THE AO TO ALLOW THE EXPENDITURE. HENC E, THIS GROUND NO. 3(I) IS ALLOWED. GROUND NO. 3 (II) RELATES TO EXPENDITURE OF AUDIT FEES AND OVER TIME EXPENSES IN OUR VIEW THE LD. CIT(A) RIGHTLY DISALLO WED THE SAME AS SUCH EXPENDITURE 16 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. RELATED TO THE EARLIER YEARS AND DULY CRYSTALLIZED DURING THAT YEAR. THIS GROUND OF THE ASSESSEES APPEAL IS REJECTED. 7. GROUND NO. 4 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDIC ATION. 8. GROUND NO. 5 IS PRAYER FOR COST. UNDER THE FACTS AND THE CIRCU MSTANCES OF THE PRESENT CASE THE PARTIES TO BEAR THE RESPECTIVE COST. THIS GROUND OF THE ASSESSEES APPEAL IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 280/JP/2009 IS PARTLY ALLOWED. ITA NO. 438/JP/2009 (REVENUE) 10. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO. 438 /JP/2009 PERTAINING TO ASSESSMENT YEAR 2006-07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES AND IN LAW THE LD. CIT(A) HAS ERRED IN:- 1. HOLDING THAT INTEREST ON GOVERNMENT AND OTHER SECUR ITIES HAS TO BE INCLUDED IN THE INCOME ON DUE BASIS. 2. DELETING THE ADDITION OF RS. 14,55,068/- MADE BY TH E AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED FOR INTEREST ON T AX FREE DEBENTURE ON DUE BASIS. 3. DELETING THE ADDITION OF RS. 7,21,74,918/- MADE BY THE AO ON ACCOUNT OF VALUATION OF INVESTMENT BY ADOPTING GLOBAL METHOD O F VALUATION OF SECURITIES AS AGAINST CATEGORY WISE METHOD OF VALU ATION FOLLOWED BY THE ASSESSEE. 4. DELETING THE ADDITION OF RS. 1,11,81,75,752/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF AMORTIZATION IN RESPECT OF PERMA NENT DIMINUTION IN THE VALUE OF SECURITIES HELD BY THE BANK UNDER THE HEA D TO MATURITY CATEGORY. 11. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ISSUES RAISED IN THE APPEAL ARE SQUARELY COVERED IN THE FAVOUR OF TH E ASSESSEE BY THE JUDGMENTS OF 17 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. HONBLE JURISDICTIONAL HIGH COURT RELATING TO EARLI ER YEARS. LD. D/R SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 12. GROUND NO. 1 , IS AGAINST THE HOLDING THAT INTEREST ON GOVERNMEN T AND OTHER SECURITIES HAS TO BE INCLUDED IN THE INCOME ON DUE BASIS. 12.1 LD. D/R SUPPORTED THE ORDER OF THE ASSESSING O FFICER. 12.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ISSUE IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT, IN ASSESSEES OWN CASE PERTAINING TO A.Y. 1997-98 TO 2000-01 AND 2004-05. 12.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PAR TIES. THE UNDISPUTED FACTS IS THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE AS SESSEE BY THE HONBLE HIGH COURT OF RAJASTHAN IN APPEALS PERTAINING TO THE ASSESSMEN T YEAR 1997-98 TO 2000-01 & 2004-05 IS NOT CONTROVERTED BY THE REVENUE. LD. COU NSEL HAS INVITED OUR ATTENTION TO THE JUDGMENT OF HONBLE HIGH COURT RENDERED IN D.B. INCOME TAX APPEAL NO. 185/2014. THEREFORE, WE DO NOT SEE ANY REASON TO IN TERFERE INTO THE FINDING OF THE LD. CIT(A) SAME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS REJECTED. 13. GROUND NO. 2, IS AGAINST DELETING THE ADDITION OF RS. 14,55,068/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAI MED FOR INTEREST ON TAX FREE DEBENTURE ON DUE BASIS. 13.1 LD. D/R SUPPORTED THE ORDER OF THE AO AND SUBM ITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 13.2 HOWEVER, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THIS ISSUE IS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE EARLIER DECISION OF THE TRIBUNAL AND ORDER OF THE TRIBUNAL CONFIRMED BY THE HONBLE RAJASTHAN HIGH CO URT. 18 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 13.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE HONBLE RAJASTHAN HIGH COURT IN ASSESS EES OWN CASE IN DB INCOME TAX APPEAL NO. 185/2014 FORMULATED THE SUBSTANTIAL QUES TION OF LAW WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS JUSTIFI ED IN DELETING THE ADDITION OF RS. 4,56,60,998/- MADE BY THE AO BY TAKING THE INTEREST INCOME BY GOVERNMENT AND OTHER SECURITIES ON ACCRUAL BASIS INSTEAD OF DUE BA SIS AS CLAIMED BY THE ASSESSEE. ADMITTEDLY, THIS QUESTION IS ANSWERED AGAINST THE R EVENUE. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THUS, GROUND NO.2 OF THE APPEAL IS DISMIS SED. 14. GROUND NO. 3 , IS AGAINST DELETING THE ADDITION OF RS. 7,21,74,9 18/- MADE BY THE AO ON ACCOUNT OF VALUATION OF INVESTMENT BY ADO PTING GLOBAL METHOD OF VALUATION OF SECURITIES A AGAINST CATEGORY WISE MET HOD OF VALUATION FOLLOWED BY THE ASSESSEE. 14.1 LD. D/R SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 14.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT ISSUE IS COVERED BY THE D ECISION OF THE HONBLE HIGH COURT IN ASSESSEES OWN CASE. 14.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) BY FOLLOWING ITS EARLIER YE ARS PERTAINING TO THE AY 2005-06 DELETED THE ADDITION. WE FIND THAT THIS ISSUE WAS ALSO DECIDED BY THE HONBLE RAJASTHAN HIGH COURT IN THE ASSESSEE OWN CASE IN DB INCOME TAX APPEAL NO. 27/2015 IN FAVOUR OF THE ASSESSEE. THEREFORE, WE D O NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 19 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 15. GROUND NO. 4, IS AGAINST DELETING THE ADDITION OF RS. 1,11,81,75 ,752/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF AMORTIZATIO N IN RESPECT OF PERMANENT DIMINUTION IN THE VALUE OF SECURITIES HELD BY THE B ANK UNDER THE HEAD OF MATURITY CATEGORY. 15.1 LD. D/R SUPPORTED THE ORDER OF THE AO AND SUBM ITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 15.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ADDITION WAS MADE IN THE AY 2005-06, THE HONBLE RAJASTHAN H IGH COURT IN D.B. INCOME TAX APPEAL NO. 27/2015, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE. THE CONTENTION OF THE ASSESSEE IS NOT CONTROVERTED BY THE REVENUE AND HAS ALSO NOT BROUGHT TO OUR NOTICE ANY OTHER CONTRARY BINDING PRECEDENT. THERE FORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SA ME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 16. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 280/JP/2009 IS PARTLY ALLOWED & REVENUES APPEAL IN ITA NO. 438/JP/2009 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TUESDAY, THE 29 TH DAY OF AUGUST 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 29/08/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- STATE BANK OF BIKANER & JAIPUR, J AIPUR. 2. THE RESPONDENT- DY. CIT, CIRCLE-6, JAIPUR. 3. THE CIT(A). 20 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR. 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 280/JP/2009 & 438/JP/2009) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 21 ITA NO. 280/JP/2009 & 438/JP/2009. STATE BANK OF BIKANER & JAIPUR, JAIPUR.