Axis Bank Limited, Ahmedabad V. The Dy.CIT, Circle-1 Now Circle-1(1)(1), Ahmedabad

ITA 311/AHD/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2418 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 08-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AHD; OTHERS ASSTT YEARS TO
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Maximum Marginal Rate; Rule of consistency; Earning of tax free income; Question of law; Bad and doubtful debts; Right to appeal; Notional interest; TDS; Rule 8D; Set aside; Capital Gains
• Section: 14A; 40(a)(ia); 36 (1) (iii); 37(1); 43D; 201; 274; 143(2); 64; 43; 48; 72; 13; 145(3); 22; 145; 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER SL. NO(S) ITA NO(S) ASSET. YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 311/AHD/2016 2010-11 AXIS BANK LIMITED, TRISHUL, 3 RD FLOOR, OPP. SAMTHESHWAR MAHADEV NEAR LAW GARDEN, ELLISBRIDGE, AHMEDABAD-380006. PAN: AAACU2414K D.C.I.T., CIRCLE-1(1)(1) AHMEDABAD. 2 . 2176/AHD/2016 2011 - 12 AXIS BANK LIMITED, TRISHUL, 3 RD FLOOR, OPP. SAMTHESHWAR MAHADEV NEAR LAW GARDEN, ELLISBRIDGE, AHMEDABAD-380006. PAN: AAACU2414K D.C.I.T . , CIRCLE-1(1)(1) AHMEDABAD. 3. 2173/AHD/2016 2011-12 D.C.I.T., CIRCLE-1(1)(1) AHMEDABAD. AXIS BANK LIMITED, AHMEDABAD. PAN: AAACU2414K 4. 165/AHD/2017 2012-13 AXIS BANK LIMITED, AHMEDABAD. PAN: AAACU2414K D.C.I.T., CIRCLE-1(1)(1) AHMEDABAD. 5 . 287 /AHD/2017 2012 - 13 D.C.I.T . , CIRCLE-1(1)(1) AHMEDABAD. AXIS BANK LIMITED, AHMEDABAD. PAN: AAACU2414K 6 - 7 520 & 521/AHD/2018 2013 - 14 & 2014-15 AXIS BANK LIMITED, AHMEDABAD. PAN: AAACU2414K D.C.I.T . , CIRCLE-1(1)(1) AHMEDABAD. 8-9 604 & 605/ AHD/2018 2013-14 & 2014-15 D.C.I.T., CIRCLE-1(1)(1) AHMEDABAD. AXIS BANK LIMITED, AHMEDABAD. PAN: AAACU2414K ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 2 ASSESSEE BY : SHRI S.N. SOPARKAR, SR. ADVOCATE WITH SMT. URVASHI SHODHAN, AND SHRI PARIN SHAH, A.RS REVENUE BY : SHRI ANSHU PRAKASH , CIT .D R SHRI S.S. SHUKLA, SR.D.R / DATE OF HEARING : 07/09/2021 / DATE OF PRONOUNCEMENT: 28/10/2021 / O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: THESE NINE APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE ASSESSEE AND REVENUE AGAINST THE APPELLATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS), AHMEDABAD [LD. CIT(A) IN SHORT] RELEVANT TO ASSESSMENT YEARS 2010-11, 2011-12, 2012-13 2013-14 AND 2014-15. OUT OF NINE APPEALS, FIVE APPEALS ARE BY THE ASSESSEE AND FOUR APPEAL BY THE REVENUE. 2. FIRST WE TAKE UP ITA NO. 311/AHD/2016 FOR AY 2010-11 FOR THE PURPOSE OF ADJUDICATION. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THE APPELLANT, BEING AGGRIEVED BY ORDER DATED 4-1-2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS] 10, AHMEDABAD [HEREINAFTER THE LEARNED CIT(A)], THIS APPEAL IS FILED ON FOLLOWING GROUNDS, WHICH MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE ANOTHER. 1.0 DISALLOWANCE U/S 14A R.W. RULE 8D RS. 26,19,60,802 (RS. 26.19 CRORES) PLUS SUO MOTO DISALLOWANCE OF RS. 106,38,000 (RS. 1.06 CROIES) 1.1 IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST EXPENSES TO THE EXTENT OF RS. 24.26 CRORES AND OUL OF OPERATING EXPENSES TO THE EXTENT OF RS. 3.00 CRORES, THUS AGGREGATE RS. 27.26 CRORES (INCLUSIVE OF DISALLOWANCE OUT OF OPERATING EXPENSES OF RS. 1.06 CRORES VOLUNTEERED U/S 14A BY THE BANK) I.E. CONFIRMING DISALLOWANCE BY UPHOLDING INVOCATION OF RULE 8D IN RELATION TO TAX-FREE INCOME OF RS. 13.83 CRORES. THE DISALLOWANCE IS UNLAWFUL AND, IN ANY CASE, HIGHLY EXCESSIVE AND UNREALISTIC IN FACTS AND LAW OF THE CASE. 1.2 IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT (I) THE BANK HELD (EXCEPT SHARES IN SUBSIDIARIES/JV COMPANIES) ITS ENTIRE INVESTMENT PORTFOLIO OF RS. 55821 CRORES (INCLUDING TAX-FREE SHARES AND SECURITIES OF RS. 683 CRORES) AS CURRENT ASSET I.E. STOCK-IN-TRADE: AND PROVISIONS OF SECTION 14A ARE PRIMA FACIE NOT APPLICABLE TO THE DEALERS IN SHARES AND SECURITIES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 3 (II) THE BANK HELD TAX-FREE SECURITIES OF RS. 683 CRORES AS AGAINST INTEREST-FREE OWNED FUNDS (PAID-UP SHARE CAPITAL AND FREE RESERVES) OF RS. 16044 CRORES [IN ADDITION TO HUGE NON- INTEREST PEERING CURRENT ACCOUNT DEPOSITS OF RS. 32167 CRORES OF ITS CONSTITUENTS]; AND POST TAX PROFIT OF RS. 2514 CRORES EARNED DURING THE PREVIOUS YEAR. (III) DEALINGS IN SHARES AND SECURITIES IS ONE OF THE PRINCIPAL AND CORE BUSINESS OF THE BANK; THE TAX-FREE DIVIDEND INCOME IS INCIDENTAL TO THE TREASURY OPERATIONS. (IV) THERE WAS NO SPECIFIC BORROWING FOR MAKING SUCH TAX-FREE SHARES AND SECURITIES; NOR IT IS SO ECONOMICALLY PRUDENT (LOW ROR AT 2,02%): THERE IS NO ADVERSE EVIDENCE OR SCOPE EVEN FOR PRIMARY PRESUMPTION THAT INTEREST-BEARING FUNDS HAVE BEEN UTILIZED FOR MAKING TAX-FREE INVESTMENT. (VJ THE BANK EARNED SHARES AND SECURITIES TRADING PROFITS OF RS. 714.05 CRORES AS BUSINESS PROFITS WHICH WAS MUCH HIGHER THAN THE TAX-FREE DIVIDEND INCOME OF RS. 13.83 CRORES. PRIMARY OPJECT OF THE TREASURY OPERATIONS IS TO REAP TRADING PROFITS AND NOT TO EARN TAX-FREE INCOME. (VI) THE BANK HAS EARNED INTEREST INCOME FOR IN EXCESS OF INTEREST EXPENSES THERE AGAINST I.E. THERE IS NO NET INTEREST EXPENSES AND RULE 8D(2)(II) CANNOT BE INVOKED. (VII) RULE 8D IS NOT CHARGING PROVISION. RULE 8D IS SUBORDINATE TO CHARGE PROVIDED IN SECTION I4A. RULE 8D W.E.F. A.Y. 2008-09 CANNOT SUPERSEDE JUDICIAL AUTHORITIES IN THE BANK'S OWN CASE FOR A.Y. 2002-03 TO A.Y. 2005-06: NOR CAN SUPERSEDE REAL INCOME THEORY. RULE 8D STANDALONE CANNOT SOURCE CHARGE IN FORM OF NOTIONAL DISALLOWANCE WHICH IS EXCESSIVE AND UNREALISTIC. (VIII) POSITION OF LAW UPTO A.Y. 2007-C DIFFERENT U/S 14A R.W.S. 4. AND POST A.Y. 2008-09 (RULE 8D) CANNOT BE 1.3 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THAT RULE 8D R.W.S. 14A ARE APPLICABLE TO FACTS OF THE CASE: RULE 8D IS MANDATORY OR AUTOMATIC WITH NO SCOPE FOR VARIATION, EFFECTIVELY HOLDING THAT RULE 8D, THOUGH SUBORDINATE OR MACHINERY PROVISION, COULD GO BEYOND THE SCOPE OF CHARGE PROVIDED IN SECTION 14A. 1.4 HAVING ACCEPTED THAT THERE WAS NO PORROWING SPECIFIC TO ANY TAX-FREE SECURITIES, NO DISALLOWANCE WAS WARRANTED OUT OF INTEREST EXPENSES HAVING REGARD TO ADEQUATE INTEREST- FREE FUNDS AVAILABLE IN THE FORM OF PAID-UP SHARE CAPITAL, RESERVES AND INTEREST-FREE CURRENT ACCOUNT BALANCES OF CONSTITUENTS, AS HELD BY THE HON. GUJARAT HC FOR A.Y. 2002-03 TO AY 2005-06 AND UPHELD BY THE HON. S.C. FOR A.Y. 2003-04 IN THE BANK'S OWN CASE AND PARTICULARLY WITHOUT GIVING ANY COGENT REASONS HOW THE SAID HON. HC AND HON. SC ORDERS U/S 14A THOUGH FOR PRE-RULE 8D YEARS ARE IRRELEVANT IN APPLICATION OF RULE 8D R.W.S. 14A DURING THE PREVIOUS YEAR. 1.5 IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A] ERRED IN NOT APPRECIATING THAT ADMINISTRATIVE EXPENDITURE WAS INCURRED IN THE COURSE OF BANKING PUSINESS AND NO PORT OF SUCH EXPENDITURE COULD HAVE BEEN DISALLOWED U/S 14A AS HELD BY THE HON. GUJARAT HC FOR A.Y. 2002-03 TO 2005-06 REJECTING THE REVENUE TA IN THE BANK'S OWN CASE, MUCH LESS BY SUSTAINING HARBOUR FORMULA OF RULESD. 1.6 WITHOUT PREJUDICE IT IS SUBMITTED THAT SUO-MOTO DISALLOWANCE OUT OF OPERATING EXPENSES AT RS. 1.06 CRORES BE CANCELLED OR ALTERNATIVELY THE SAID DISALLOWANCE BE RESTRICTED TO 1% TO 2% OF TAX-FREE INCOME OF RS. 13.83 CRORES AS HELD BY HON. MUMBAI ITAT/MUMBAI HC IN THE PEER BANK'S CASES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 4 2.0 SECURITISATION GAINS OF RS. 3,85,08,433 (RS. 3.85 CRORES) AMORTISED AS PER RBI GUIDELINES AND NON-ALLOWANCE OF SUCH REALISED GAINS OF RS. 2,54,17,371 (RS. 2.54 CRORES) DISALLOWED AND TAXED DURING EARLIER YEARS AND NOW STAND DOUBLY TAXED 2.1 IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT[A) ERRED IN UPHOLDING ADDITION OF RS. 3.85 CRORES UNDER THE CAPTION 'SECURITISATION GAIN DEFERRED IN BOOKS' ON SECURITIZATION OF LOAN ASSETS WHICH WAS ACCOUNTED ON DEFERRED BASIS PURSUANT TO MANDATE OF RBI GUIDELINES GOVERNING THE SUBJECT MATTER. 2.2 IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT (I) THE APPELLANT BEING A BANKING COMPANY, RBI DIRECTIVES/GUIDELINES ARE MANDATORILY APPLICABLE, PARTICULARLY AS NO OTHER EXPRESSED PROVISIONS TO THE CONTRARY OR OTHERWISE EXIST IN INCOME TAX. (II) RBI IS AN APEX REGULATORY AND CONTROLLING BODY FOR THE BANKS, RBI HAS SOUND AND TOP CLASS EXPERTISE TO DECIDE MODE OF THIS REVENUE RECOGNITION AND ITS GUIDELINES ARE IN ACCORDANCE WITH ACCEPTED AND PRUDENT ACCOUNTING PRACTISES EVEN AT GLOBAL LEVEL AND ACCEPTED ALSO BY STATUTORY AUDITORS, AUDIT COMMITTEE, CEO/CFO ETC. AND EVEN IN RBI INSPECTION AUDIT. (III] SECURITISED ASSETS CONTINUE TO BE OWNED BY THE BANK AND THERE IS NO DIRECT SALE OR DIRECT ASSIGNMENT OF LOAN ASSETS SECURITARISED IN FAVOUR OF SPV. THE BANK, UNDER NEGOTIATED COVENANTS, CONTINUES TO SERVICE THE LOON ASSETS, TO PROVIDE CREDIT ENHANCEMENT IN THE FORM OF CASH COLLATERALS (INCLUDING SUBORDINATION OF CASH FLOW THROUGH PTC) ETC. TO SPV. [IV] THE GAINS, AS REPORTED BY APPLYING MANDATORY RBI GUIDELINES, IS REAL COMMERCIAL INCOME OF THE PREVIOUS YEAR. JUDICIAL AUTHORITIES HAVE GIVEN WEIGHTAGE TO RBI DIRECTIVES/GUIDELINES IN DECIDING INCOME TAX ISSUES WHERE THERE ARE NO SPECIFIC PROVISIONS EITHERWAY IN INCOME TAX. (V) SUCH CHARGE OF GAIN ON SECURITIZATION AMORTIZED IS ONLY TIMING DIFFERENCE BASED ADDITION, TAX-NEUTRALIZED OVER THE YEARS [NAGRI MILLS 33 ITR 681 (BOM)] AND ALSO AS PER THE RATIO OF EXCEL INDUSTRIES 358 ITR 295 (SC] WHERE THE HON. SC HAS DIRECTED THE AO TO TAKE PRAGMATIC VIEW RATHER THAN PENDATIC VIEW. 2.3 WITHOUT PREJUDICE TO ABOVE IT IS SUBMITTED THAT THE AO BE DIRECTED TO ALLOW REDUCTION OF RS. 2.54 CRORES RECOGNIZED AS INCOME DURING THE PREVIOUS YEAR WHICH WAS DISALLOWED AND TAXED AS ACCRUAL OF INCOME LAST YEAR, RESULTING INTO DOUBLE TAXATION OF THE SAME INCOME WITHOUT EXPRESSED AUTHORITY OF THE ACT AND OUGHT TO BE SO REDUCED EVEN ON THE PRINCIPLE OF EQUITY AND JUSTICE. 3.0 BANK GUARANTEE (BG) COMMISSION INCOME PRORATE RELATABLE TO UNEXPIRED PERIOD TREATED (W.E.F. A.Y. 2010-11) BY THE BANK AS INCOME RECEIVED IN ADVANCE BUT HELD TAXABLE RS. 136.52 CRORES 3.1 THE LEARNED CIT(A) ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS. 136.52 CRORES IN RESPECT OF BG COMMISSION INCOME FOR UNEXPIRED PERIOD (BEYOND YEAR END) AS CHARGEABLE INCOME OF THE PREVIOUS YEAR, BUT TREATED BY THE BANK AS PRE-RECEIVED INCOME. 3.2 IT IS SUBMITTED THAT THERE IS NOTHING IN SECTION 145 TO PROHIBIT A CHANGE FROM ONE REGULAR METHOD OF ACCOUNTING TO ANOTHER REGULAR METHOD. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT PRUDENCE AND CONSERVATISM REQUIRE NOT ANTICIPATING A RECEIPT WHICH HAD NOT BECOME DUE AT PREVIOUS YEAR END. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 5 3.3 IT IS SUBMITTED THAT THE CHANGED PRO-RATE METHOD IS NOT DEVOID OF LOGIC, ON THE CONTRARY IS WELL-RECOGNIZED, FOLLOWED BY PEER BANKS, MORE RATIONAL AND IN ACCORDANCE WITH GLOBAL PRACTISES. 3.4 PARA 4 OF AS 1 NOTIFIED U/S 145(2) PERMITS AN ASSESSEE TO ADOPT ACCOUNTING POLICIES SO AS TO REPRESENT A TRUE AND FAIR VIEW OF ITS STATE OF AFFAIRS. PARA 9 THEREOF PERMITS A CHANGE IN ACCOUNTING POLICY IF SO REQUIRED BY THE STATUTE; OR IF IT IS CONSIDERED THAT THE CHANGE WOULD RESULT IN MORE APPROPRIATE PREPARATION OR PRESENTATION OF THE FINANCIAL STATEMENTS. 3.5 THE ADVERSE INFERENCE U/S 145 AGAINST THE CHANGE IS PERMISSIBLE ONLY IF ACCOUNTING SYSTEM ADOPTED IS CONTRARY TO PRESCRIBED AS U/S 145; OR AS NOITIFIED BY ICAI U/S 211 (3C) OF THE COMPANIES ACT, 1956 OR WHERE TRUE PROFITS CANNOT BE DEDUCED. 3.6 THE LEARNED C1T(A) FAILED TO APPRECIATE THAT THE CUSTOMER HAS INHERENT LEGAL RIGHT TO RECEIVE REFUND FOR UNEXPIRED PERIOD IN THE EVENT OF BG BEING TERMINATED BEFORE FULL PERIOD. IT IS SUBMITTED THAT EVEN IN ABSENCE OF WRITTEN COVENANT, A RIGHT ALWAYS REMAINS VESTED IN THE CUSTOMER TO GET SUCH REFUND, THE BANK BEING A PUBLIC INSTITUTION AND FOLLOWS GOOD AND MORAL BUSINESS PRACTISES. 3.7 UPFRONT COLLECTION OF SMALL COMMISSION IS ONLY MODE OF FEE COLLECTION TO COVER SEVERAL TIMES MORE DEVOLVING RISK WHICH COULD EXTEND BEYOND THE PREVIOUS YEAR. BG IS A CONTINUING OBLIGATION, THE LIABILITY GENERALLY EXTENDS BEYOND PREVIOUS YEAR END AND MONETARY RISK UPON INVOCATION OF BG IS DISPROPORTIONATELY HIGH THAN RATE OF BG COMMISSION EARNED. 3.8 THE ISSUE MERELY REPRESENTS A TIMING DIFFERENCE, TAX-NEUTRAL AND THERE IS NO LOSS OF REVENUE IF CONSIDERED OVER THE YEARS. 3.9 THE LEARNED C1T(A) ERRED IN HOLDING THAT BG GET CONCLUDED OR COMPLETED IMMEDIATELY UPON THE GUARANTEE DEED IS SIGNED AND THERE IS NO REVIEWING POWERS TO MODIFY THE TERM. 3.10 BG COMMISSION INCOME IS INCIDENTAL INCOME AND NOT MAIN REVENUE STREAMS OF THE BANK. THE LEARNED CIT(A) ERRED IN HOLDING CHANGED ACCOUNTING METHOD AS UNREALISTIC PRESENTATION WHICH POSTPONES REAL PROFITS FOR A LIABILITY WHICH IS CONTINGENT AND CREAFES A MIS-MATCH IN REVENUE IMPACT IN HANDS OF CUSTOMER AND IN HANDS OF THE BANK. THE LEARNED CIT(A) ALSO ERRED IN HOLDING THAT ENTIRE REVISION SERVES ONLY ONE PURPOSE I.E. DEFERMENT OF TAX FOR THE BANK. THE LEARNED CIT(A) ALSO ERRED IN LAW THAT THE BANK'S RIGHT TO RECEIVE BG COMMISSION STANDS ESTABLISHED SINCE IT IS RECOGNISED AS EXPENSE IN HANDS OF THE CUSTOMER. IT IS, THEREFORE, SUBMITTED THAT ADDITION OF RS. 136.52 CRORES IN RESPECT OF COMMISSION INCOME RELATABLE TO PERIOD BEYOND PREVIOUS YEAR END BE CANCELLED. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER, DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 2.1 THE ASSESSEE VIDE LETTER DATED 27/11/2017 HAS FILED ADDITIONAL GROUNDS OF APPEAL AS DETAILED UNDER: ADDITIONAL GROUND IN THE APPLICATION DATED 27-11-2017 1.1 THE APPELLANT SUBMITS THAT EMPLOYEES STOCK OPTIONS PLAN (ESOP) COST OF RS.250.63 CRORES, INCURRED BY THE APPELLANT ON ISSUE OF NEW SHARES TO THE ELIGIBLE EMPLOYEES OUGHT TO BE ALLOWED AS DEDUCTION UNDER SECTION 37 OF THE ACT AND OTHER APPLICABLE PROVISIONS OF THE ACT. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 6 1.2 THE ESOP COST OF RS.250.63 CRORES REPRESENTS THE DIFFERENCE BETWEEN THE MARKET PRICE OF SHARES AS ON DATE OF EXERCISE AND THE EXERCISE PRICE (BEING MARKET PRICE OF SHARE AS ON DATE OF GRANT OPTION). THE APPELLANT SUBMITS THAT IT BE GRANTED DEDUCTION OF THE SAID ESOP COST OF RS.250.63 CRORES WHILE COMPUTING ITS TOTAL INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 1.3 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, SUBSTITUTE, DELETE AND/OR MODIFY IN ANY MANNER WHATSOEVER THIS GROUND ON OR BEFORE THE HEARING OF APPEAL. 2.2 THE ASSESSEE VIDE LETTER DATED 14-08-2020 HAS FILED FURTHER ADDITIONAL GROUNDS OF APPEAL AS DETAILED UNDER: ADDITIONAL GROUND IN THE APPLICATION DATED 14-08-2020 1. DEDUCTION OF EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS 1.1 THE APPELLANT SUBMITS THAT EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS OF INR 44,06,59,588 PAID BY THE APPELLANT SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961(THE ACT) 1.2 THE APPELLANT HAD NOT CLAIMED EDUCATION CESS AND SECONDARY AND HIGH SECONDARY CESS (COLLECTIVELY REFERRED TO AS CESS ) OF INR 44,06,59,588 PAID FOR FY 2009-10, IN THE RETURN OF INCOME FILED FOR AY 2010-11. 1.3 IT IS RESPECTFULLY SUBMITTED THAT CESS IS ALLOWABLE AS A DEDUCTION WHILE COMPUTING TAXABLE INCOME. THIS IS BECAUSE IT IS DIFFERENT FROM AND NOT FORMING PART OF INCOME TAX AND HENCE DOES NOT FALL UNDER THE PURVIEW OF SECTION 40(A)(IA) OF THE ACT. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 26,19,60,802/- UNDER THE PROVISION OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES. 3.1 THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A SCHEDULE BANK AND ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS EARNED EXEMPT INCOME OF RS. 13,83,14,263/- BY WAY OF DIVIDEND. THE ASSESSEE AGAINST SUCH INCOME HAS MADE THE DISALLOWANCE OF RS. 1,06,39,198/- UNDER THE COMPUTATION OF INCOME UNDER PROTEST IN PURSUANCE TO THE PROVISION OF SECTION 14A OF THE ACT. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THERE WAS NO BASIS OF MAKING THE DISALLOWANCE OF RS. 1,06,39,198/- AGAINST THE EXEMPTED INCOME. AS PER THE AO THE DISALLOWANCE NEEDS TO BE MADE IN TERMS OF THE PROVISION OF RULE 8D OF INCOME TAX RULES R.W.S. 14A OF THE ACT. THUS THE AO WORKED OUT THE AMOUNT OF DISALLOWANCE AS DETAILED UNDER: ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 7 SR.NO PARTICULARS AMOUNT 1. DIRECT EXPENSES NIL 2. INTEREST EXPENSES 24,25,90,327/- 3. ADMINISTRATIVE EXPENSES 30,02,100/- TOTAL 27,26,11,827/- 3.2 THE ASSESSEE ALREADY MADE DISALLOWANCE U/S 14A OF THE ACT FOR RS. 1,06,39,198/- ONLY. ACCORDINGLY, THE AO MADE THE DISALLOWANCE OF THE BALANCE AMOUNT OF RS. 26,19,72,629/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LD.CIT(A), WHO FOUND THAT HIS PREDECESSOR IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008- 09 HAS ALSO MADE THE DISALLOWANCE IN THE IDENTICAL MANNER VIDE ORDER DATED 01/12/2011. ACCORDINGLY, THE LD.CIT(A) UPHELD THE DISALLOWANCE MADE BY THE AO UNDER THE PROVISION OF SECTION 14A R.W. RULE 8D OF INCOME TAX RULES. 5. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 464 AND CONTENDED THAT THE LD. CIT(A) HAS MADE THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 14A R.W.RULE 8D AFTER MAKING THE REFERENCE TO THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN REVERSED BY ORDER OF THE ITAT IN ITA NO. 251/AHD/2012 VIDE DATED 24-01-2017. 6.1 THE LD. AR FURTHER CONTENDED THAT THE ORDER OF THE TRIBUNAL FOR THE AY 2008- 09 BEARING ITA NO. 251/AHD/2012 WAS ALSO UPHELD BY THE HONBLE HIGH COURT OF GUJARAT IN TAX APPEAL NO. 878 OF 2001 VIDE ORDER DATED 12-12-2017. 6.2 IT WAS ALSO CONTENDED BY THE LD. AR THAT THE IMPUGNED ISSUE WAS ALSO DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT IN ITA NO. 2196/AHD/2014 FOR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 13-10-2017. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 8 6.3 IN VIEW OF THE ABOVE THE LD. AR FOR THE ASSESSEE CONTENDED THAT THERE CANNOT BE ANY DISALLOWANCE UNDER THE PROVISION OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES. 7. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO UNDER THE PROVISIONS OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES FOR RS. 26,19,72,629/- WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A) AFTER MAKING THE REFERENCE TO THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2008-09 AS DISCUSSED ABOVE. 8.1 THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2008-09 HAS BEEN REVERSED BY THE ORDER OF THIS ITAT IN ITA NO. 251/AHD/2012 VIDE ORDER DATED 24/06/2017 BY OBSERVING AS UNDER: 15. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS IN ISSUE, WE FIND THAT FROM THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THE CAPITAL BALANCE IS AT RS. 360 CRORES AND THE FREE RESERVES ARE AT RS. 8411 CRORES TOTALING TO RS. 8051 CRORES. AGAINST THIS, WE FIND THAT THE TAX FREE INVESTMENT AT RS. 651 CRORES. THUS, IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO MAKE THE TAX FREE INVESTMENT, JFHE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILITIES AND WER LTD. 313 ITR 340 HAS HELD THAT IF THERE ARE MIXED FUNDS THEN THE POWER PRESUMPTION WOULD BE THAT THE INVESTMENTS HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. THIS RATIO OF THE HON'BLE HIGH COURT OF BOMBAY WAS SUBSEQUENTLY FOLLOWED IN THE CASE OF HDFC LTD. 266 ITR 505. AS MENTIONED ELSEWHERE, THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO MEET OUT THE TAX FREE INVESTMENT. DRAWING SUPPORT FROM THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY (SUPRA), WE DO NOT FIND ANY MERIT IN CONSIDERING THE INTEREST EXPENSES FOR THE COMPUTATION OF DISALLOWANCE U/S. 14A OF THE ACT. TO THIS EXTENT, WE SET ASIDE THE FINDINGS OF THE ID. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 29,35,41,415/-. 16. HOWEVER, IN OUR CONSIDERED OPINION, ADMINISTRATIVE EXPENSES NEED TO BE DISALLOWED AND SINCE THE ASSESSEE HAS MADE SUO MOTO DISALLOWANCE OF RS. 63,84,525/-, IN OUR CONSIDERED OPINION, THIS SHOULD MEET THE ENDS OF JUSTICE. WE, ACCORDINGLY, CONFIRMED THE SUO MOTO DISALLOWANCE OF RS. 63,84,525/-. GROUND NO. 2 IS ACCORDINGLY DISMISSED AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALSO DISMISSED. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 9 8.2 THE FACT OF THE CASE ON HAND SEEMS IDENTICAL TO THE FACT OF THE CASE AS DISCUSSED ABOVE IN ITA NO. 251/AHD/2012 (SUPRA) . HOWEVER, BEFORE PARTING IT IS PERTINENT TO NOTE THAT THE ITAT HAS NOT GIVEN ANY DETAILED FINDINGS BASED ON REASONS WITH RESPECT TO THE ADMINISTRATIVE EXPENSES DISALLOWED UNDER THE PROVISION OF RULE 8D(2)(III) OF INCOME TAX RULES. THE ASSESSEE HAS MADE SUO MOTO DISALLOWANCE OF RS. 1,06,38,000/- WITHOUT ANY BASIS. ACCORDINGLY, A QUESTION WAS PUT UP TO THE LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING TO EXPLAIN THE BASIS OF MAKING THE DISALLOWANCE OF RS. 1,06,38,000/- BUT HE FAILED TO PROVIDE ANY INFORMATION. RATHER THE LD. AR REQUESTED TO SET ASIDE THE ISSUE TO THE FILE OF THE AO TO ALLOW ONE MORE OPPORTUNITY TO THE ASSESSEE TO FURNISH THE DETAILS CONCERNING THE BASIS ADOPTED FOR DISALLOWANCE OF RS. 1,06,38,000/- ONLY UNDER RULE 8D(2)(III) OF INCOME TAX RULES. 9. THE LD. DR HAS NOT RAISED ANY OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE AO WITH RESPECT TO ADMINISTRATIVE EXPENSES AS PER THE PROVISIONS OF LAW. 10. INDEED, THE ONUS LIES UPON THE ASSESSEE TO JUSTIFY THE EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. IF THE ASSESSEE FAILED TO DISCHARGE THE ONUS, THE ONLY OPTION AVAILABLE TO REVENUE IS TO MAKE THE DISALLOWANCE BY RESORTING THE PROVISIONS OF RULE 8D OF INCOME TAX RULES. HOWEVER, IN THE INTEREST OF JUSTICE, FAIR PLAY AND KEEPING IN VIEW TO THE FACT THAT ASSESSEE HAS MADE SUO MOTO DISALLOWANCE OF RS. 1,06,38,000, WE ARE INCLINED TO EXTEND ONE MORE OPPORTUNITY TO THE ASSESSEE TO PROVIDE THE BASIS OF SUCH DISALLOWANCE BY FURNISHING THE NECESSARY DETAILS. ACCORDINGLY, THE ISSUE WITH RESPECT TO ADMINISTRATIVE EXPENSES IS SET ASIDE TO THE FILE OF AO FOR FRESH ADJUDICATION AS PER THE PROVISION OF LAW. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR RS. 3,85,08,433.00 ON ACCOUNT OF SALE OF ASSETS UNDER SECURITIZATION. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 10 12. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SECURITISED ITS 7 LOAN ACCOUNTS ON THE SALE CONSIDERATION OF RS. 2,173.10 CRORES. THE BOOK VALUE OF SUCH LOAN WHICH WERE SECURITISED WERE OF RS. 2,153.80 CRORES. THUS THE ASSESSEE AS A RESULT OF SECURITISATION OF ITS LOAN ASSETS HAS MADE A GAIN OF RS. 19.30 CRORES. OUT OF SUCH GAIN A SUM OF RS. 15.45 CRORES WAS RECOGNISED IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. IN OTHER WORDS THE BALANCE AMOUNT OF RS. 3.85 CRORES WAS DEFERRED AS OTHER LIABILITIES AND PROVISIONS. 12.1 AS PER THE ASSESSEE, THE RBI BY NOTIFICATION HAS DIRECTED TO CHARGE THE INCOME ON THE SALE OF LOAN ASSETS UNDER SECURITISATION OVER A PERIOD OF THE LIFE OF SPECIAL PURPOSE VEHICLE (FOR SHORT SPV) WHEREAS ANY LOSS ON ACCOUNT OF THE SALE OF ASSETS UNDER SECURITISATION SHOULD BE CHARGED TO THE PROFIT AND LOSS ACCOUNT DURING THE YEAR IN WHICH THE SALE UPON SECURITISATION WAS EFFECTED. 12.2 THE ASSESSEE FURTHER CONTENDED THAT IT, IN LINE OF RBI NOTIFICATION, HAS OFFERED A SUM OF RS. 2.54 CRORES AS INCOME WHICH WAS BROUGHT FORWARD FROM THE EARLIER YEAR. THUS, THE ASSESSEE EFFECTIVELY HAS OFFERED THE INCOME ON ACCOUNT OF SECURITISATION OF LOAN ASSETS FOR RS. 17.99 CRORES ( 2.54 CRORES, THE BROUGHT FORWARD BALANCE AND 15.45 CRORES THE INCOME IN THE YEAR UNDER CONSIDERATION). 12.3 THE ASSESSEE ALSO SUBMITTED THAT ABOVE SYSTEM OF RECOGNISING THE INCOME ON THE SALE OF LOAN ASSETS UNDER SECURITISATION HAS BEEN FOLLOWED BY IT CONSISTENTLY IN PURSUANCE TO THE RBI GUIDELINES DATED 1 ST FEBRUARY 2006. THE ABOVE SYSTEM OF ACCOUNTING WAS ALSO APPROVED BY THE STATUTORY AUDITORS AND THE SHAREHOLDERS OF THE BANK. 12.4 ADMITTEDLY, UNDER SECURITISATION THE LOAN ASSETS ARE TRANSFERRED TO THE SPV BUT THE BANK (ASSESSEE) CARRY THE RESPONSIBILITY FOR SERVICING THE LOAN TILL IT COMES TO THE END. FURTHERMORE, THE BANK REMAINS LIABLE TO THE INVESTORS TO PROVIDE SAFEGUARD FOR THE SECURITY, LOAN DOCUMENTS ETC. ACCORDINGLY, THE ASSESSEE CONTENDED THAT IT IS RECOGNISING THE INCOME BY SPREADING THE SAME OVER THE RESIDUAL TERM OF THE LOAN. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 11 12.5 THE ASSESSEE ALSO CONTENDED THAT IT IS PAYING TAX ON THE MAXIMUM MARGINAL RATE AND WITHOUT ANY TAX HOLIDAY BENEFIT. THUS, THE AMOUNT OF INCOME RECOGNIZED BY THE ASSESSEE OVER THE RESIDUAL PERIOD OF THE LOAN IS NOTHING BUT REPRESENTS THE TIMING DIFFERENCE. HENCE, IT IS A TAX NEUTRAL EXERCISE. 12.6 HOWEVER, THE AO BEING DISAGREED WITH THE CONTENTION OF THE ASSESSEE AND OBSERVED THAT ON THE SALE OF LOAN ASSETS UNDER SECURITISATION, BUYER I.E. SPV BECOMES THE OWNER OF THE LOAN WHEREAS THE ASSESSEE HAS NO CONNECTION WITH SUCH LOANS. ACCORDINGLY THERE WAS NO RATIONAL FOR SPREADING OVER THE INCOME OVER THE TENURE OF THE LOAN. ACCORDINGLY, THE AO MADE THE ADDITION OF RS. 3.85 CRORES TO THE TOTAL INCOME OF THE ASSESSEE. 13. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT-A WHO CONFIRMED THE ORDER OF THE AO BY PLACING THE RELIANCE ON THE ORDER OF HIS PREDECESSOR FOR THE AY 2008-09 BY OBSERVING AS UNDER: 5,2. IDENTICAL ISSUE CAME UP IP , APPELLANT'S OWN CASE (OR A.Y. 2008-09. VIDE ORDER DTD. 01-12-2011 IN APPEAL NO CIT(A)/ADDL C1T./R-1/247/10-11. MY PREDECESSOR HELD AS UNDER: '5.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER END APPELLANT'S WRITTEN SUBMISSION APPELLANT DEFERRED INCOME EARNED ON SALE OF SECURE/ZED ASSETS TO THE LIFE OF '.HOSE ASSETS IT IS NOT IN DISPUTE THAT SOLE OF SECURITIZED ASSETS WAS COMPLETE, IT WAS IN THE NATURE OF TRUE SALE AS PER R3I GUIDSIIR.ES AND THESE ASSETS HAVE GONE OUT OF APPELLANT'S BALANCE SHEET. IT IS ALSO NOT IN DISPUTE THAT APPELLANT HAD ABSOLUTELY NO LIABILITY WHATSOEVER ON THESE TRANSACTIONS AFTERWARDS. SINCE THERE WAS NO LIABILITY OF THE APPELLANT IN FUTURE ON ACCOUNT OF SECURITIZATION TRANSACTIONS, THERE IS NO REASON FOR POSTPONING THE INCOME IN FUTURE YEARS. AS PER ACCOUNTING STANDARD AS 9, INCOME EARNED ON SALE OF SECURITIZED ASSETS IS TO BE RECOGNIZED IN THE SAME YEAR AND NO! TO BE DEFERRED IN FUTURE YEARS. HOWEVER APPELLANT RELIED UPON RBI GUIDELINES ON SECURITIZATION OF ASSETS AND PARA 20 OF THIS GUIDELINES SAYS THAT PREMIUM ARISING ON ACCOUNT OF SALE SHOULD BE AMORTIZED OVER THE LIFE O/ THE SECURITY ISSUED OR LA BE ISSUED BY SPV. APPELLANT SUBMITTED (HOI P,BI GUIDELINES ORE BINDING ON BANKS AND IN SUPPORT OF THIS, JUDICIAL DECISIONS WERE RELIED UPON. HOWEVER THE GUIDELINE 20.1 ONLY RELATES TO ACCOUNTING IN THE BOOKS OF ORIGINATOR, IT NOWHERE DEALS WITH TRUE SALE TRANSACTIONS WHETS THERE IS NO LIABILITY OF THE BANK AFTER SALE. PARA 23.2 ALSO MENTIONS THAT GUIDANCE NOTE ISSUED BY ICAI WILL APPLY TO THOSE ASPECTS NO: COVERED IN THE RB! GUIDELINES WHICH MEANS REVENUE RECOGNITION FOR TRUE SOLE TRANSACTION NEED TO BE AS PER A S 9. SINCE THERE IS NO UNCERTAINTY TO THE INCOME ON THESE TRANSACTIONS, THERE IS NO QUESTION OF POSTPONING THE INCOME. IN MY VIEW THE APPELLANT'S SELL TRANSACTIONS AS IF THE CATEGORY OF TRUE SALE TO WHICH AS 9 APPLES AND AS PER THAT REVENUE NEED TO BE RECOGNIZED IN THE YEAR OF SALE. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 12 EVEN OTHERWISE, SINCE APPELLANT'S TRANSACTIONS WERE COMPLETE IN THIS YEAR WITH NO UNCERTAINTY OR LIABILITY IN FUTURE, THERE IS NO QUESTION OF POSTPONING INCOME INCOME HAS TO BE TAXED ON THE BASIS OF ACCRUAL AND NOT ON THE BASIS OF ACCOUNTING ENTRIES. ACCOUNTING ENTRIES MAY BE PRESCRIBED FOR THE PURPOSE OF DISCLOSURE BUT THAT CANNOT DECIDE THE TAXABILITY OF INCOME WHEREVER THERE IS ANY CONFLICT BETWEEN INCOME TAX ACT AND ACCOUNTING STANDARDS PRESCRIBED BY ANY AUTHORITY, INCOME TAX ACT WILL PREVAIL. THE CHARGEABILITY OF INCOME := NOT BASED ON ACCOUNTING STANDARD OR ACCOUNTING GUIDELINES BUT IT IS BASED ON REAL INCOME EARNED. WHEN THERE IS NO DISPUTE OR CONFUSION ABOUT THE QUANTUM OF INCOME, INCOME EARNED CANNOT BE POSTPONED TO THE FUTURE YEAR. IN VIEW OF THIS I AGREE WITH THE ASSESSING OFFICER THAT DEFERMENT O/ INCOME IS NOT JUSTIFIED. ADDITION MADE BY THE AO IS THEREFORE CONFIRMED. APPELLANT'S CLAIM OF CONSEQUENTIAL RELIEF ON THE BASIS OF LAST YEAR'S APPEAL AIDER CANNOT BE GRANTED AT THIS STAGE SINCE APPELLANT HAS DISPUTED THE ADDITION BEFORE ITAT AND THE ISSUE IS NOT FINAL YET. THEREFORE ' AGREE WITH THE ASSESSING OFFICER THAT ASSESSEE WILL BE FREE TO CLAIM DEDUCTION ONCE THE ISSUE IS FINALIZED IN ASSESSMENT YEAR 2007-08.' FACTS REMAINING THE SAME IN THE YEAR UNDER CONSIDERATION, FOLLOWING THE ABOVE-MENTIONED ORDER, IMPUGNED ADDITION OF PROFIT ON SECURITIZATION OF RS 3,85,03,433/- IS UPHELD THIS GROUND OF APPEAL IS DISMISSED. 14. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT-A, THE ASSESSEE IS IN APPEAL BEFORE US. 15. THE LEARNED AR BEFORE US CONTENDED THAT THE LEARNED CIT (A) HAS CONFIRMED THE ORDER OF THE AO BY PLACING RELIANCE ON THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2008-09 WHICH WAS SUBSEQUENTLY REVERSED/DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN ITA NO. 251/AHD/2012 VIDE ORDER DATED 24-01-2017. 15.1 ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 16. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE DISALLOWANCE MADE BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A) AFTER MAKING THE REFERENCE TO THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN REVERSED BY THE ORDER OF THIS ITAT IN ITA NO. 251/AHD/2012 VIDE ORDER DATED 24/06/2017. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 19. WE FIND THAT IN EARLIER ASSESSMENT YEAR, THIS DISPUTE TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL HAS CONSIDERED THE SAME IN ITA NOS. 1015 & 1219/AHD/2011 AND 250/AHD/2012. THE RELEVANT FINDINGS OF THE COORDINATE BENCH READS AS UNDER- ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 13 24. GROUND NO. 3 RELATES TO THE ADDITION MADE TOWARDS GAIN ON SECURITLZATLON AMORTIZED AS PER KBI GUIDELINES. 25. THE A. 0 HAS CONSIDERED THIS ISSUE AT PARA 7 ON PAGE 14 OF HIS ORDER WHEREIN THE OFFICER MADE THE FOLLOWING OBSERVATIONS;- 7.1 ON PERUSAL OF THE SIGNIFICANT ACCOUNTING POLICIES TO THE FINANCIAL STATEMENT, IT IS SEEN THAT THE NOTE ON 'SECURITIZATION 1 (PARA 4,4) READS AS UNDER: THE BANK ENTERS INTO PURCHASE/ SALE OF CORPORATE AND RETAIL LOANS THROUGH DIRECT ASSIGNMENT/ SPECIAL PURPOSE VEHICLE (SPV). IN MOST CASE, POST SECURITIZATION, THE BONK CONTINUES TO SERVICE THE LOANS TRANSFERRED TO THE ASSIGNEE/ SPV. THE BONK ALSO PROVIDES CREDIT ENHANCEMENT IN THE FORM OF, CASH COLLATERALS AND/ OR BY SUBORDINATION OF CASH FLOWS TO SENIOR POSS THROUGH CERTIFICATE /PTC) HOLDERS. IN RESPECT OF CREDIT ENHANCEMENTS PROVIDED OR RECOURSE OBLIGATIONS (PROJECTED DELINQUENCIES, FUTURE SERVICING ETC./ ACCEPTED BY THE BANK, APPROPRIATE PROVISION/DISCLOSURE IS MODE AT THE_ TIME OF SALE IN ACCORDANCE WITH AS-29- PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS. GAINS ON SECURITIZATLON TRANSACTION IS RECOGNIZED OVER THE PERIOD OF THE UNDERLYING SECURITIES ISSUED BY THE SPV. LOSS ON SECURTTIZOTION IS IMMEDIATELY DEBITED TO PROFIT AND LOSS ACCOUNT. 7.2.FURTHER, IT IS SEEN THAT 'NOTES TO ACCOUNT'(PARA 5.1. 15) READS AS UNDER:- 31.03.07 (RS IN CR.) NUMBER OF LOON ACCOUNTS SECURITIZED 2.00 BOOK VALUE OF LOAN ASSETS SECURITIZSD 547.16 SALE CONSIDERATION RECEIVED FOR THE SECURITIES ASSETS 550.09 NET GAIN/ LOSS OVER NET BOOK VALUE 2.93 7.3 THE ASSESSES WAS ASKED TO EXPLAIN WHERE THE ABOVE AMOUNT OF KS. 2.93 CRORES HAS BEEN OFFERED AS INCOME IN ITS ANNUAL ACCOUNTS. IN THIS REGARD, THE ASSESSEE CONTENDED AS UNDER: GAIN ON SECURITIZA TION OF ASSET OF RS. 2.93 CRORES AS PER PARA 5.1,15 OF THE AUDITED ACCOUNTS DURING THE HEARING HELD ON 10.3.1.2009, YOU HOVE REQUESTED US TO PROVIDE EXPLANATION THAT WHERE THE NET GAIN OF R$. 2.93 ON SECURITIZATION TRANSACTIONS, AS PER PARA 5.1.15 (PAGE NO. 60 OF THE ANNUAL REPORT), HAS BEEN ACCOUNTED IN THE PROFIT AND LOSS. IN THIS REGARD WE SUBMIT AS FOLLOWS: FOR THE YEAR UNDER CONSIDERATION, THE BONK HAS RECOGNIZED INCOME OF FTS. 2,00,28,09? UNDER THE HEAD OTHER INCOME, (SCHEDULE 14, SUB-CLAUSE, VII, MISCELLANEOUS INCOME) AND FIS. 93,13,051 WAS SHOWN UNDER THE HEAD OTHER LIABILITIES AND PROVISIONS /SCHEDULE 5, SUB CLAUSE VIL, OTHERS INCLUDING PROVISIONS). THE METHOD OF ACCOUNTING FOLLOWED IN THIS REGARD !S AS PER THE RB1 GUIDELINES. IN TERMS OF THE RBI NOTIFICATION, A COPY OF WHICH IS ENCLOSED FOR YOUR REFERENCE, ANY LOSS ARISING ON ACCOUNT OF THE SALE PURSUANT TO SECVRITTIATION PROPOSAL SHOULD BE ACCOUNTED AND CHARGED TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR DURING WHICH THE SALE UPON SECU/AFIIATION ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 14 IS EFFECTED AND ANY PROFIT/PREMIUM ARISING ON ACCOUNT OF SUCH SALE SHOULD BE AMORTIZED OVER THE LIFE OF THE SECURITIES ISSUED OR TO BE ISSUED BY THE SPV (SPECIALPURPOSE VEHICLE). AS PER THE RBI DIRECTIVES, (PLEASE REFER SIGNIFICANT ACCOUNTING POLICIES AT PARA 4.4 UNDER THE HEAD 'SECURLTISATION', ON PAGE NO. 51 OF THE ANNUAL REPORT/, GAIN ON SECURITIZATLON IS RECOGNIIED OVER THE PERIOD OF THE UNDERLYING SECURITIES ISSUED BY THE SPV AND LOSS ON SECURI T/ZOTI'ON FA DEB/TED TO PROFIT AND LOSS ACCOUNT, 26. THE EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, WHO WENT ON TO MAKE AN ADDITION OF RS. 93.13.051/: ASSESSEE CARRIED THE MATTER BEFORE THE ID. CIT'A) AND REITERATED WHAT HAS BEEN STATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS STRONGLY CONTENDED THAT WHAT IS RELEVANT FOR INCOME TAX IS REAL INCOME. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE FIRST APPELLATE AUTHORITY THAT RBI GUIDELINES ORE EXPRESSLY MADE MANDATORY FOR ALL BANKS. AFTER CONSIDERING THE FACTS OND THE SUBMISSIONS, THE ID, CIT(A) WAS OF THE OPINION SINCE THE ASSESSEE HAS SOLD THESE IMPUGNED ASSETS, THEREFORE, THE ASSESSEE HAS NO LIABILITY WHATSOEVER ON THESE TRANSACTIONS AFTERWARDS. SINCE THERE IS NO UNCERTAINTY TO THE INCOME ON THESE TRANSACTIONS THERE IS NO QUESTION OF POSTPONING THE INCOME. THE ID. CITFA) CONFIRMED THE ADDITION MADE BY THE A.O. BEFORE US, THE ID. COUNSEL FOR THE ASSESSEE ONCE AGAIN STATED THAT BEING A BANK IT HAS TO MONETARILY FOLLOW THE GUIDELINES ISSUED BY THE RBI. IT IS THE SOY OF THE (D. COUNSEL THAT IT IS NOT THE COSE OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS NOT FOLLOWED THE GUIDELINES OF THE RBI, THEREFORE, THE ACTION OF THE A.O AND ALSO OF THE LA. CITFA) ORE AGAINST THE FACTS OF THE CASE. PER CQNTRO, THE ID. D.R. STRONG// RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 27. HAVING HEARD THE RIVAL SUBMISSIONS, WE HOVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. IT IS A SETTLED PROPOSITION OF LAW THAT WHAT IS RELEVANT FAR INCOME TAX ON THE BASIS IS THE REAL INCOME AS HELD BY THE HON'BLE SUPREME COURT IN THE COSE OF'GODHRA ELECTRICITY CO. LTD. 225 ITR 746. VARIOUS HIGH COURTS HAVE GIVEN DUE RECOGNITION TO RBI GUIDELINES WHICH DETERMINED THE TAXATION OF BANKS/NBFC. THE HON'BLE VTTARUNCHAT HIGH COURT IN THE CASE OF NAINLTAL BANK LTD, 309 ITR 335, HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KOIHSH AUTO FINANCE LTD. 320 TTR 394 AND ALSO HON'BLE HIGH COURT OF DELHI IN THE CASE OF ELGI FINANCE LTD. 293 ITR 357. 28. IN OUR CONSIDERED OPINION, THE AMORTIZATION MERELY REPRESENTS A TIMING DIFFERENCE AND SINCE THE BANK IS CONSISTENTLY MAKING PROFITS AND PAYING TAX AT THE HIGHEST RATE WITHOUT CLAIMING ANY TAX HOLIDAY BENEFIT, IT CAN BE SAFELY CONCLUDED THAT THE METHOD FOLLOWED IS REVENUE NEUTRAL. WE DRAW SUPPORT FROM THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE COSE OF NAGRI MILLS CO. LTD. 33 ITR 681. 29. CONSIDERING THE/ACTS IN TOTALITY IN THE TIGHT OF THE JUDICIAL DECISIONS REFERRED TO HERETNABOVE, WE DO NOT FIND ANY MERIT IN THE FINDINGS O/ THE ID. QJ(F\}. WE ACCORDINGLY SET ASIDE THE FINDINGS O/F THE ID. CIT(A) OND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 93.13 LACS. GROUND NO. 3 ACCORDINGLY ALLOWED. 20. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH (SUPRA), WE DIRECT THE A.O TO DELETE THE IMPUGNED DISALLOWANCE/ ADDITIONS. SO GROUND NO.3 IS ACCORDINGLY ALLOWED. 16.1 BEFORE US, NO MATERIAL HAS BEEN PLACED ON RECORD BY THE REVENUE TO DEMONSTRATE THAT THE DECISIONS OF TRIBUNAL AS DISCUSSED ABOVE HAS BEEN SET ASIDE / STAYED OR OVERRULED BY THE HIGHER JUDICIAL AUTHORITIES. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION AND THAT OF EARLIER YEARS NOR HAS PLACED ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 15 ANY CONTRARY BINDING DECISION IN ITS SUPPORT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 17. THE 3 RD ISSUE RAISED BY THE ASSESSEE IN GROUND NUMBER 3 IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE ADDITION OF RS. 136.52 CRORE ON ACCOUNT OF COMMISSION INCOME FROM THE BANK GUARANTEE FURNISHED TO THE CUSTOMERS. 18. THE ASSESSEE BEING A BANKER WAS PROVIDING VARIOUS KINDS OF BANK GUARANTEES TO ITS CUSTOMERS. ON PROVIDING THE BANK GUARANTEES, THE ASSESSEE USED TO CHARGE COMMISSION UP FRONT FROM THE CUSTOMERS WHICH USED TO BE OFFERED TO TAX SAME YEAR IN WHICH THE BANK GUARANTEE WAS PROVIDED TILL THE IMMEDIATE PRECEDING YEAR. HOWEVER, THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CHANGED ITS POLICY FOR RECOGNISING THE INCOME BY WAY OF COMMISSION FROM THE BANK GUARANTEES. INSTEAD OF CHARGING THE COMMISSION INCOME IN ENTIRETY IN THE YEAR IN WHICH BANK GUARANTEE WAS FURNISHED, IT HAS SPREAD THE INCOME OVER THE GUARANTEE PERIOD. 18.1 THE CHANGE IN THE POLICY FOR RECOGNISING THE INCOME IN THE BOOKS OF ACCOUNTS WAS JUSTIFIED BY THE ASSESSEE ON THE REASON THAT THE BANK GUARANTEE IS ISSUED FOR CERTAIN PERIOD OF TIME BUT THE SAME CAN BE RESCIND BEFORE THE EXPIRY OF TERM ON ACCOUNT OF ANY REASON. IN THAT EVENT THE ASSESSEE HAS TO REFUND THE GUARANTEE COMMISSION UNDER THE RULES FRAMED BY THE FOREIGN EXCHANGE DEALERS ASSOCIATION OF INDIA. THUS, THE ASSESSEE CHANGED ITS ACCOUNTING POLICY TO RECOGNISE THE COMMISSION INCOME QUA THE BANK GUARANTEE FURNISHED WHICH IS ACCRUED DURING THE PERIOD OF 12 MONTHS COMPRISING IN THE FINANCIAL YEAR. THERE IS NO PROHIBITION UNDER THE PROVISIONS OF SECTION 145 OF THE ACT TO CHANGE THE POLICY TO RECOGNISE THE INCOME IF IT IS BASED ON BONA FIDES REASONS. 18.2 HOWEVER, THE AO DISREGARDED THE CONTENTIONS OF THE ASSESSEE BY OBSERVING THAT THERE WAS NO REQUIREMENT FOR CHANGING THE ACCOUNTING POLICY EITHER UNDER ANY STATUTE OR MANDATED BY THE ICAI. THE ASSESSEE CONSISTENTLY HAS BEEN FOLLOWING THE ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 16 SYSTEM OF RECORDING THE COMMISSION INCOME ON UPFRONT BASIS. SIMILARLY, THE ASSESSEE HAS NOT GIVEN ANY JUSTIFICATION THAT THE CHANGE IN THE METHOD OF ACCOUNTING WILL SHOW THE BETTER PRESENTATION AND PREPARATION OF THE FINANCIAL STATEMENTS. AS SUCH THE ASSESSEE HAS ADOPTED UNREALISTIC APPROACH BY POSTPONING ITS REAL PROFIT FOR A LIABILITY WHICH IS CONTINGENT IN NATURE. FURTHERMORE, THE ASSESSEE WILL DEFER ITS INCOME WHEREAS ITS CUSTOMERS WILL RECOGNISE THE EXPENSES IN THE YEAR IN WHICH THE BANK GUARANTEE WAS FURNISHED BY THE BANK. THUS, THERE WILL BE A MISMATCH BETWEEN THE INCOME SHOWN BY THE ASSESSEE VIZ A VIZ THE EXPENSES TO BE SHOWN BY THE CUSTOMERS. THE ASSESSEE BY ISSUING A BANK GUARANTEE IS NOT RENDERING SERVICES ON CONSTANT/ YEAR TO YEAR BASIS. AS SUCH, ONCE THE BANK GUARANTEE ISSUED EVEN FOR A LONGER PERIOD BUT THE SERVICES ARE ASSUMED TO BE RENDERED IN ONE TIME. 18.3 THE AO FURTHER OBSERVED THAT THERE WAS NO CLAUSE APPEARING IN THE GUARANTEE AGREEMENT MAKING THE ASSESSEE LIABLE TO REPAY THE GUARANTEE COMMISSION IN THE EVENT IT COMES TO AN END BEFORE THE TENURE PROVIDED THEREIN. THUS, THERE WAS NO LIABILITY ON THE ASSESSEE TO REPAY THE AMOUNT OF BANK GUARANTEE COMMISSION RECEIVED BY IT. 18.4 ONCE THE CONTRACT FOR THE GUARANTEE SIGNED IT MEANS THE SERVICES HAVE BEEN RENDERED BY THE ASSESSEE. AS SUCH THE PERIOD OF CONTRACTUAL TERMS BECOMES IMMATERIAL. ACCORDINGLY THE AMOUNT OF COMMISSION CANNOT BE TREATED AT PAR WITH THE ADVANCES. 18.5 THE DEFERMENT OF TAX LIABILITY ON THE COMMISSION INCOME CANNOT INVITE THE PRINCIPLES OF MATCHING CONCEPT. IF IT IS ACCEPTED, THEN IT WOULD LEAD TO DISTORTED PICTURE OF THE REVENUE IN THE HANDS OF THE ASSESSEE AND THE CUSTOMER OF THE BANK. IN VIEW OF THE ABOVE, THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE AND MADE THE DISALLOWANCE OF RS. 136.52 CRORES WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 17 19. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER: 7.3 I HAVE CONSIDERED THE OBSERVATIONS OF IHE AO AND THE SUBMISSIONS MADE BY THE APPELLANT. I FIND THAT THE APPELLANT HAD BEEN FOLLOWING THE ACCOUNTING POLICY IN RESPECT OF ACCOUNTING ITS INCOME OF COMMISSION FROM PROVIDING BANK GUARANTEE ON UPFRONT BASIS IE AS ACCRUED IN INE YEAR OF ISSUING BANK GUARANTEE WHILE COMMISSION ON DEFERRED PAYMENT GUARANTEE WAS BEING RECOGNISED IN THE BOOKS ON PRO RATA BASIS OVER THE TENURE OF SUCH GUARANTEE , THE COMMISSION INCOME ON GUARANTEE OTHER THAN DEFERRED PAYMENT GUARANTEE WAS RECOGNISED AS INCOME IN THE YEAR OF ISSUE OF SUCH BANK GUARANTEE. HOWEVER, THE APPELLANT CHANGED ITS POLICY TO RECOGNIZE THE COMMISSION INCOME ON GUARANTEES WHEREBY ALL KINDS OF GUARANTEES ISSUED BY THE BANK WAS RECOGNIZED ON PRO-RALA BASIS OVER THE PERIOD OF THE GUARANTEE THE AO HELD THAT SUCH A CHANGE IN THE ME'IHOD RESULTED IN TO LOWER INCOME FOR THE YEAR UNDER CONSIDERATION AND THE CHSNGE WAS ALSO NOT JUSTIFIED. HE THEREFORE ADDED A SUM OF RS 136.52 CRORES AS INCOME CONSIDERING THE NON ACCEPTANCE OF THE CHANGED METHOD AND AS PER NOTE IN THE AUDITED ACCOUNTS IT IS NECESSARY TO UNDERSTAND THE VARIOUS TYPES OF BANK GUARANTEES SO AS TO ASCERTAIN WHETHER IN RESPECT OF THE GUARANTEES ISSUED BY THE APPELLANT THERE IS ANY SERVICE REMAINING TO BE PROVIDED AS IS THE CASE OF DEFERRED PAYMENT GUARANTEES 7.3 1 THE VARIOUS TYPES OF BANK GUARANTEES ARE GENERALLY ISSUED AS BELOW. I) FINANCIAL GUARANTEE: HERE, THE BANK GUARANTEES THAT THE BENEFICIARY WIIL MEET THE FINANCIAL OBLIGATION AND IN CASE HE FAILS THE BANK AS A GUARANTOR IS BOUND TO PAY. II) PERFORMANCE GUARANTEE 1 HERE THE GUARANTEE ISSUED IS FOR HONOURING A TASK AND COMPLETION OF THE SAME IN THE PRESCRIBED/AGREED UPON MANNER AS STATED IN THE GUARANTEE DOCUMENT LII) ADVANCE PAYMENT GUARANTEE THIS GUARANTEE ASSURES THAT THE ADVANCE AMOUNT WOULD BE RETURNED, IN CASE THE AGREEMENT FOR WHICH THE ADVANCE IS GIVEN DOES NOT GET FULFILLED. IV) PAYMENT GUARANTEE/LOAN GUARANTEE THE GUARANTEE IS FOR ASSURING THE PAYMENT/LOAN REPAYMENT IN CASE, THE PARTY FAILS TO DO SO, GUARANTOR IS BOUND TO PAY ON BEHALF OF THE DEFAULTING BORROWER V) BID BOND GUARANTEE: AS A PART OF IHE BIDDING PROCESS, THIS GUARANTEE ASSURES THAT THE BIDDER WOULD UNDERTAKE THE CONTRACT HE HAS BID FOR. ON THE TERMS THE BIDDING IS DONE. VI) FOREIGN BANK GUARANTEE. WNEN A GUARANTEE IS ISSUED FOR A FOREIGN BENEFICIARY, IT IS CALLED FOREIGN BG VII) DEFERRED PAYMENT GUARANTEE- WHEN THE BANK GUARANTEES SOME DEFERRED PAYMENT, THE GUARANTEE IS TERMED AS DEFERRED PAYMENT GUARANTEE FOR EXAMPLE: A COMPANY PURCHASES A MACHINE ON CREDIT BASIS W.TH TERMS OF PAYMENT BEING 6 EQUAL INSTALMENTS IN THIS CASE, SINCE THE PAYMENT IS DEFERREDTO A LATER PERIOD, CREDITOR SEEKS DEFERRED PAYMENT GUARANTEE FOR AN ASSURANCE THAT THE PAYMENT WOULD REACH HIM IN THE GIVEN TIME PERIOD. VIII) SHIPPING GUARANTEE: THIS GUARANTEE PROTECTS THE SHIPPING COMPANY FROM ALL KINDS OF LOSS, IN CASE THE CUSTOMER DOES NOT PAY. THIS DOCUMENT HELPS THE CUSTOMER TO TAKE POSSESSION 'OF GOODS ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 18 7.3.2 AS SEEN ABOVE, IT IS ONLY IN RESPECT OF THE DEFERRED PAYMENT GUARANTEE IN WHICH THE APPELLANT BANK HAS TO PROVIDE THE SERVICE IN RESPECT OF FUTURE PERIOD ON DEFERRED BASIS. HOWEVER IN RESPECT OF NORMAL BANK GUARANTEES , THE MOMENT THE GUARANTEES ARE ISSUED, THE COMMISSION THEREON IS ACCRUED AND WHAT IS REMAINING IS THE LIABILITY OF THE BANK IF IT MAY ARISE IN FUTURE ON ACCOUNT OF INVOCATION OF THE GUARANTEE BY THE BENEFICIARY. HOWEVER, THAI IS A SEPARATE TRANSACTION AND THE EXPENDITURE OR LOSS IF ANY THAT MAY SO ARISE DUE TO INVOCATION OF THE GUARANTEE AND THE FAILURE OF THE CLIENT TO PAY THE SAME TO THE BANK HAS NOTHING TO DO WITH THE COMMISSION INCOME THAT HAS ALREADY ACCRUED AT THE TIME OF ISSUING THE FINANCIAL GUARANTEES. THERE REMAINS NOTHING FURTHER IN THE MATTER OF PROVIDING ANY SERVICE BY THE APPELLANT HANK ONCE AN IRREVOCABLE GUARANTEE IS ISSUED. HENCE THE ACCAIAL OF COMMISSION INCOME IN SUCH A CASE CANNOL BE POSTPONED OVER THE PERIOD OF !HE GUARANTEE. NO SUCH CLAIM OF ANY LOSS IS THE ISSUE BEFORE ME NOR IL IS THE APPELLANT'S CASE THA! ANY SUCH COMMISSION HAS BEEN REFUNDED. IF ON HAPPENING O ANY SUCH CONTINGENCY IN FUTURE DURING TENURE OF GUARANTEE ANY SUCH PAYMENT OR REFUND IS GIVEN, THE SAME CAN BE CERTAINLY CLAIMED AS EXPENDITURE IN ACCORDANCE WITH THE PROVISIONS OF LAW OR AS A LOSS INCIDENTAL TO THE BUSINESS IN THE YEAR IN WHICH SUCH EVEN OCCURS BUT IN SUCH A CASE, (HERE IS NO EFFECT AS I'AR AS 'HE COMMISSION INCOME WHICH HAS ALREADY ACCRUED &( THE TIME OF ISSUING IHE GUARANTEE IS CONCERNED . BY CHANGING THE METHOD, IHE ASSESSEE CANNOT REVERSE THE ACCRUAL OF INCOME. THE BASIS OF ACCOUNTING THE INCOME AND ITS CHARGEABILITY IS NOW SPECIFIED IN SECTION 145 AND THE ASSESSEE CAN ADOPT EITHER CASH OR MERCANTILE METHOD. ONCE THE MERCANTILE METHOD IS ADOPTED FOR SEVERAL YEARS ON IHE CORRECT BASIS UNDER WHICH THE COMMISSION INCOME ON NORMAL TYPE OF FINANCIAL GUARANTEES IS ACCOUNTED FOR AND TAXED UPFRONT. THERE IS NO JUSTIFICATION TO CHANGE THE SAME IN THE YEAR UNDER CONSIDERATION AS THAT WOULD DISTURB THE VERY FUNDAMENTAL OF ACCRUAL CONCEPT. 7.3.3 AS FAR AS THE VARIOUS CASE LAWS ON WHICH RELIANCE IS PLACED BY THE APPELLANT IT IS TO BE STATED THAT THEY ARE NOT RELEVANT TO IHE ISSUES ON HAND. THE DECISIONS UPHOLDING SPREAD OVER OF INCOME IN LATER YEARS ARE THOSE IN WHICH THERE IS SOME SERVICES TO BE PROVIDED IN FUTURE AND AMOUNT IS RECEIVED IN ADVANCE BUT THAT IS NOT THE CASE AS FAR AS THE QUESTION ISSUANCE OF BANK UUARANTEES IS CONCERNEY, WNHEN THE COMMISSION IS RECEIVED AND BECOMES THE INCOME OF THE APPELLANT BANK SOON DATE WHEN SUCH GUARANTEES ARE ISSUED NO FURTHER SERVICE ARE PENDING FOR BEING RENDERED AS FAR AS THE CLIENT IS CONCERNED AND WHAT REMAINS IS ONLY THE LIKELY OBLIGATION UNDER SUCH GUARANTEE IN CASE SUCH CONTINGENCY HAPPENS ON INVOCATION OF SUCH GUARANTEES BY THE BENEFICIARY HOWEVER SUCH OBLIGATION CANNOT BE TERMS AS 'SERVICE' PROVIDED BY THE SPPELLANT BUT IT IS ONLY PART OF ITS UNDERTAKING WHICH IT HAS UNDERTAKEN TO DISCHARGE WHICH IS A SEPARATE TRANSACTION ON THE SIDE CF OUTGO OL THE MONEY 7.3.4 REGARDING RELIANCE PLACED BY THE APPELLANT ON THE DECISIONS IN THE CASE OF BANK OF TOKYO LTD 71 TAXMAN 85 AND ON DECISION IN THE CASE C F BNP PARIBADS BANK 150 TTJ 395 (MUM), IT IS TO BE NOTED THAI IN THE CASE OF BANK OF TOKYO, THE ISSUE RELATED TO COMMISSION INCOME ON DEFERRED PAYMENT GUARANTEE AND THE FACTS WERE THAT UNDER THE TERMS OF THE GUARANTEE, THE AMOUNT OF COMMISSION WAS REFUNDABLE EN CANCELLATION OF GUARANTEES. THE HON'BLE -HIGH COURT CONSIDERED THE RELEVANT RULES UNOER WHICH GUARANTEES WERE ISSUED WHICH PROVIDED THAT IN CASE THE GUARANTEE IS REDEEMED OR CANCELLED, THE OVERCHARGED COMMISSION SNAIL BE REFUNDED IN THE INSTANT CASE OF THE APPELLANT HOWEVER, THE ISSUE IS NOT ABOUT COMMISSION INCOME ON DEFERRED PAYMENT GUARANTEE (WHICH IS ALREADY ACCOUNTED FOR AS HITHERTO ON PRO RATA BASIS AND WHICH IS NOT DISPUTED BY AO) BUT THE ISSUE IS REGARDING CHANGE IN ACCOUNTING THE COMMISSION INCOME ON OTHER GUARANTEES WHICH WAS ACCOUNTED FOR AS ACCRUED WHEN GUARANTEES WERE ISSUED WHERE THERE IS NO SUCH REFUND CLAUSE TO RETURN THE COMMISSION INCOME ALREADY ACCRUED AS NOTED BY AO AFTER VERIFICATION OF SAMPLE GUARANTEE DOCUMENTS. 7.3.5 AS REGARDS IHE DECISION OF THE ITAT MUMBAI IN IHE CASE OF BMP PARIBAS BANK 150 TTJ 395, THE ITAT HAS FOLLOWED THE JUDGMENT OF CALCUTTA HIGH COURT IN THE CASE OF BANK OF TOKYO LTD WHICH AS SEEN ABOVE DEALT WITH THE ISSUE OF DEFERRED PAYMENT GUARANTEE. THE ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 19 SAID DECISION OF ITAT ALSO MAKES IT CLEAR THAT IHE APPELLANT WAS FOLLOWING THE METHOD OF SPREAD OVER SUCH COMMISSION IN EARLIER YEAR (AND IT WAS NOT CHANGE MADE IN THE YEAR WHICH WAS UNDER CONSIDERATION). THE BOMBAY HIGH COURT IN 214 TAXMAN 548 AFFIRMED THE SAID DECISION BECAUSE THE FACTS FOUND IN THAT CASE WERE THAT THE GUARANTEE WHICH HAS BEEN ISSUED FOR A CERTAIN PERIOD OF TIME IS CANCELLED BY THE CLIENT BEFORE THE EXPIRY OF THE TENURE OF IHE GUARANTEE, RESULTING INTO THE RESPCNDENT-ASSESSEE RETURNING TO ITS CLIENTS THE PART OF THE GUARANTEE COMMISSION ATTRIBUTABLE TO THE UNEXPIRED PERIOD OF THE GUARANTEE, HENCE THE FACTS ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE APPELLANT'S CASE IN WHICH THE COMMISSION INCOME ON BONK GUARANTEES WAS ACCOUNTED FOR UPFRONT IN THE PASI (EXCEPI DEFERRED PAYMENT GUARANTEES) AND THE SAME WAS REGULARLY FOLLOWED AND ACCEPTED IN THE PAST AND THERE IS NO REFUND CLAUSE AS NOTED ABOVE. 7.3 6 REGARDING THE CONTENTION THAT THE GUARANTEE TRANSACTION, DOES NOT GET CONCLUDED OR COMPLETED UPON THE SIGNING OF GUARANTEE DEED AND IT MAY BE INVOLVING RISK WHERE THE GUARANTEE IS INVOKED BY THE BENEFICIARY, AS ALREADY DISCUSSED ABOVE, THERE IS NO SERVICES TO BE RENDERED TO THE CLIENT FROM WHOM COMMISSION IS RECEIVED BY THE APPELLANT AND IN IHE EVENIUSLITY OF INVOCATION OF GUARANTEE , SUCH PAYMENT BY THE APPELLANT BANK MAY BE THE EXPENDITURE OF ICSS BUT THAT DOES NOT ENTITLE THE APPELLANT TO REDUCE THE COMMISSION ON THE GROUND OF LIKELY HOOD OF SUCH CONTINGENCY IT IS NOT THE CASE OF ANY PRODUCT BEING SOLD WITH A WARRANTY WHERE IN THERE MAY BE SCIENTIFIC METHOD OF CALCULATING RISK BASED ON PAST HISTORY AND THE PROVISION THEREOF MAY BE PERMIT DEDUCTION WHEN MADE BASEO ON SUCH SCIENTIFIC ANALYSIS. IN THE CASE OF AGUARANTEE THERE MAY NOT BE INVOCATION FOI SEVERAL YEARS OR MIGHT BE SUCH INVOCATION INANY PARTICULAR YEAR WHICH IS QUITE CONTINGENT AND SUCH RISK CANNOT BE CALCULATED AS CANBE DONE IN CASE OF A SALE OF MANUFACTURED PRODUCT. BANK GUARANTEE : S A SERVICE AND NOTSALE OF PRCDUCL. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE JUDGMENTS INTHE CASE OF WOODWARD GOVERNOR INDIA P LD 312 ITR 254 AND THE CASE LAWS CITEDREGARDING REAL PROFITS OR COMMERCIAL PRINCIPLES , PERMISSIBLE CHANGE IN METHOD ARE NOTAPPLICABLE TO THE FACTS OF THE APPELLANT'S CASE ANY ACTUAL EXPENSES OR LOSS ON ACCOUNTOF PAYMENT WHILE DISCHARGING OBLIGATION UNDER THE GUARANTEE IS ALWAYS CLAIMED ANDALLOWED TO THE AOPELLANT ACCORDING LO IHE ACCEPTED ACCOUNTING METHOD IN THE PAST THEJUDGMENT OF GUJARAT HIGH COURI IN THE CASE OF ECHKE LIMITED 310 ITR 4 IS ALSO NOTRELEVANT TO THE FACTS AS IT CANNOT BE SAID THAT BY NET ALLOWING THE CHANGE IN THE ACCOUNTING METHOD IN RESPECT OF ACCRUED INCOME, THE ASSESSEE IS PAYING TAX ON NOTIONALINCOME. WHAT IS REALLY ACCRUED AS INCOME -S ONLY BEING TAXED BY THE AO AS THEGUARANTEE COMMISSION HAS ALREADY ACCRUED THE DECISIONS RELIED UPON WHERE THEINCOME IS RECEIVED IN ADVANCE AND SERVICES WERE TO BE RENDERED IN FUTURE ARE ALSO NOTAPPLICABLE AS THERE IS NO SERVICE TO BE RENDERED ONCE THE BANK HAS ACCEPTED THEOBLIGATION AND ANY DISCHARGE OF SUCH OBLIGATION WHICH MAY OR MAY NOT ARISE HAS NOIMPACT AS FAR AS INCOME SIDE O ! THE-APPELLANT IS CONCERNED. AS FAR SS COMMISSION ON BANK GUARANTEE IS CONCERNED . THE SAME CANNOT BE COMPARED WITH RECEIPT O F INTEREST ORBILL DISCOUNT WHERE THE BORROWER HIMSELF IS USING THE FJNDS OF THE BANK FOR FUTURE PERIODAND HENCE THE RECEIPT IS RELATED LO THE PERIOD OF SUCH USE , THE JUDGMENT OF SUPREMECOURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LID 225 ITR 802 IS ALSONOT RELEVANT TO THE FACTS OF THE APPELLANT'S CASE AS IN THAT CASE THE ASSESSEE WAS MAKING USE OF THE FUNDS FOR FUTURE PERIOD AND HENCE THE EXPENSE WAS SPREAD OVER THE PERIOD OF USE IN THE INSTANT CASE, IT IS NOT THE CASE O F ANY SUCH EXPENDITURE OF WHICH BENEFIT IS RECEIVED (OR FUTURE YEARS BUT HERE THE CASE IS OF RECEIPT OF INCOME ON ACCRUAL BASIS. 7.3.7 IN MY OPINION, ONCE GUARANTEE IS ISSUED, THE SERVICE TO THE CLIENT GETS CONCLUDED UNLIKE IN THE CASE OF DEFERRED PAYMENT GUARANTEE WHERE THE PROVISION OF SERVICE IS CONTINUED IN RESPECT OF FUTURE PAYMENT. THE CONTENTION OF THE APPELLANT THAT A CHANGE IN ACCOUNTING POLICY IS PERMISSIBLE, THERE IS NO DISPUTE ABOUT SUCH CONTENTION ALSO, THE FACT THAT IN THE YEAR OF CHANGE (HERE MAY BE LRANSIT ; ONAL IMPACT IS NOT THE QUESTION RELEVANT IN THE INSTANT CASE. THE MOOT QUESTION IS THAT IS THERE ANY JUSTIFICATION WHICH MAY PERMIT THE CHANGE IN THE ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 20 ACCOUNTING PO ; ICY ONCE THE CONCEPT OF ACCRUAL IS CONSIDERED AND GUARANTEE COMMISSION IS HELD IO HAVE ACCRUED WHEN THE GUARANTEE IS ISSUED. 7.3.8 AS REGARDS THE CONTEN'ICN THAT CHANGE IN METHOD IS MERELY A TIMING DIFFERENCE AND RELIANCE ON THE DECISIONS IN THE CASE OF NAGRI MILLS LIMITED 33 ITR 681 AND EXCEL INDUSTRIES LIMITED RELIED UPON BY THE APPELLANT . THE DECISION OF THE NAGRI MILLS WAS PERTAINING TO DEDUCTION OF BONUS AND YEAR OF ALLOWABILITY IN THE CASE OF EXCEL INDUSTRIES LIMITED AGAIN THE SUPREME COURT WAS CONCERNED WIIH QUESTION OF VALUE OF BENE F IT IN RESPECT OF BENEFIT OF DUTY ON ADVANCE LICENSE PASS BOOK AND :SSUE WAS WHETHER THERE CAN BE BROUGHT TO TAX ANY HYPOTHETICAL INCOME WHICH HAS NOT ACCRUED ? THE COURT ON THE CONTRARY HELD THAT INCOME 'ACCRUES' WHEN THE SAME IS DUE ANDVRI TO RECEIVE THE SAME GETS VESTED IN THE ASSESSEE. IN IHE INSTANT CASE, NOT ONLY THE TO RECEIVES THE BANK GUARANTEE COMMISSION IS DUE AND GETS VESTED IN THE APPELLANT BUT THE SAME IS ALSO RECEIVED WHEN ;HE GUARANTEE IS ISSUED IT IS SETTLED LEGAL POSITION THAT A DECISION IN A CASE IS ALWAYS TO BE READ WITH REFERENCE TO THE FACTS OF THAT PARTICULAR CASE, IN THE APPELLANT'S CASE, ONCE THERE IS NO REFUND CLAUSE OF COMMISSION RECEIVED ON ISSUANCE OF PANK GUARANTEE . THE INCOME OF COMMISSION GETS ACCRUED IN THE YEAR IN WHICH THE GUARANTEE IS ISSUED 7.3.9 IT IS PERTINENT TO STATE THAI THE SPECIAL BENCH OF ITAT IN THE CASE OF DY.CIT VS BANK OF BAHARAIN & KUWAIT 132 TTJ 505 (MUM) (SB) HAS CONSIDERED IHE IDENTICAL ISSUE AND ALSO JUDGMENT IN IHE CASE OF BANK OF TOKYO AND MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD RELIED UPON TAY IHE APPELLANT AND HELD THAT IF THE GUARANTEE COMMISSION WAS REFUNDABLE THEN IT CANNOL BE SAID THAT ABSOLUTE RIGHT TO THE COMMISSION HAD ACCRUED IN FAVOUR OF THE ASSESSEE AT THE TIME OF EXECUTION OF CONTRACT FOR FURNISHING GUARANTEE BY IT BUT IF THE GUARANTEE COMMISSION WAS NOT DEPENDED UPON THE PERIOD OF GUARANTEE AND. THUS, HAD ACCRUED M FAVOUR OF THE ASSESSEE ON THE DATE OF EXECUTION OF CONTRACT FOR FURNISHING GUARANTEE THEN THE SAME HAS TO BE TAXED IN ;HE YEAR IN WHICH THE GUARANTEE WAS FURNISHED IRRESPECTIVE OF THE PERIOD TO WHICH GUARANTEE REMAINED ALIVE BECAUSE THE GUARANTEE COMMISSION CANNOT BE APPORTIONED WITH REFERENCE TO THE PERIOD OVER WHICH THE GUARANTEE EXTENDED SIMILAR VIEW IS TAKEN BY TV.UMBAI ITAT IN THE CASE OF ,DY CIT VS CNOHUNG BANK 126 ITD 448 AFTER CONSIDERING IHE JUDGMENTS IN THE CASE OF BANK OF TOKYO AND MADRAS INDUSTRIAL INVESTMENT CORPORATION AND HELD AS UNDER: ADMITTEDLY, THE AMOUNT OF COMMISSION IS RECEIVED WHEN THE BONK ISSUES GUARANTEE. SUCH GUORAM.SE IS LOR N SPECIFIC PERIOD, SOMETIME; EXTENDING TO YEARS. THE AMOUNT OF FULL GUARANTEE COMMISSION IS RECEIVED O; THS TIME OF ISSUING GUARANTEE IRIESPSCUVE OF THE PERIOD FOR \VHICH THE GUARANTEE IS GIVEN, IJ THE CUSTOMER DOES NOT MOKE A DEFAULT TO THE THIRD PARTY, THEFT THS AU-ARC-ITSS ZXPIKI AT THE END OF IHA PERIOD AND THE SECURITY RECEIVED FROM ITS CUSTOMER, IN THE SHAPE OF FOFII. IS RETURNED THERE MAY BE SITUATION IN WH:CH THE CLIENT REVOKES TNE GUARANTEE ONOR TO THE COMPLETION OF THE GUARANTEE PERIOD 01 COMMITS THE DEFAULT AS O RESU THOUGH THERE HAS BEEN NO CHANGE IN UNDERLYING FACTS OR LAW SINCE A.Y. 1995-96 AND THE SAME IS ACCEPTED HITHERTO IN INCOME TAX UPTO A.Y. 2010-11 [RADHASAOMI SATSANG 193 1TR 321 ISC)]. 3.2 THE CIT [A] FAILED TO APPRECIATE THAT RULE 6EA IS SUBSERVIENT TO SECTION 43D AND HENCE IT CANNOT EXTEND THE SCOPE BEYOND THE CHARGE OF INCOME PROVIDED IN SECTION 43D. 3.3 IT IS SUBMITTED THAT SUCH NOTIONAL INTEREST INCOME, DEEMED AS ACCRUED, GETS CRYSTALISED IN ANY CASE BY 30-6-2012 WHEREIN PERIOD OF 180 DAYS IS COMPLETED AND HENCE IT IS A TIMING DIFFERENCE BASED ADDITION AND TAX- NEUTRAL OVER TWO YEARS. 4.1 THE CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF ADDITIONAL EXPENDITURE OF RS. 20,00,72,692 ON ACCOUNT OF REVISION IN TREATMENT OF LEASE OPERATING EXPENSES CHARGED TO REVENUE IN ACCORDANCE WITH ICAI AS 19. 4.2 THE CIT(A) FAILED TO APPRECIATE THAT AS ISSUED BY ICAI IS BINDING U/S.211(3C) OF THE COMPANIES ACT, 1956. HENCE IT IS IMPERATIVE FOR THE BANK TO TREAT LEASE OPERATING EXPENSES IN LINE WITH SUCH ACCOUNTING STANDARD ALTHOUGH IT IS TAX NEUTRAL OVER THE YEARS. THE APPELLANT CRAVES, LEAVE TO ADD, TO AMEND, ALTER DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 57. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 7,37,03,738/- UNDER THE PROVISION OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES. 58. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 51 FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 59. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE ADDITION OF RS. 1,70,91,09,524/- CRORE ON ACCOUNT OF COMMISSION INCOME FROM THE BANK GUARANTEE FURNISHED TO THE CUSTOMERS. 60. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 20 TO 20.8 OF THIS ORDER IN ITA NO.311/AHD/2016. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 61. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 30,40,62,200.00 BEING THE AMOUNT OF INTEREST ON THE STICKY ADVANCES UNDER RULE 6EA READ WITH SECTION 43D OF THE ACT. 62. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 36 TO 36.3 OF THIS ORDER IN FAVOURE OF THE ASSESSEE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 52 CONSIDERATION I.E. AY 2012-13. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 63. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 20,00,72,692/- CRORES ON ACCOUNT OF LEASE OPERATING EXPENSES. 64. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 41 TO 41.5 OF THIS ORDER IN FAVOURE OF THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS DISMISSED. 65. THE ASSESSEE IN THE ADDITIONAL GROUNDS OF APPEAL HAS SOUGHT THE DEDUCTION ON ACCOUNT OF EDUCATION, SECONDARY AND HIGHER EDUCATION CESS AS WELL AS EMPLOYEE STOCK OPTION PLAN FOR RS. 66.10 CRORES AND RS. 185.51 CRORES RESPECTIVELY. 66. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS ADDITIONAL GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010-11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 25 TO 25.2 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 53 APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-123. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 66.1 IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES COMING TO ITA NO. 287/AHD/2017, AN APPEAL BY REVENUE FOR THE AY 2012-13 67. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: (1) THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.85,24,00,000/- MADE IT/S 14A R.W.R 8D OF THE ACT. (2) THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,20,69,810/- MADE ON ACCOUNT OF DISALLOWANCE OF 'ANNUAL TECHNICAL SERVICES FEES PAID TO INFOSYS LIMITED. ' (3) THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS,67,48,546/- MADE U/S 36(L)(III) OF THE L.T.ACT. ON ACCOUNT OF CAPITAL WORK IN PROGRESS. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES, TO LEAVE, TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 68. THE FISRT ISSUE RAISED BY THE REVENUE IS THAT THE LEANRED CIT (A) ERRED IN DELETING THE ADDITION OF RS. 85,24,00,000/- MADE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULE. 69. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 54 WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 70. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 2,20,69,810/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 71. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2012-13 ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN ITA NO. 2173/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2173/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-13. THE APPEAL OF THE REVENUE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 55 TO 55.2 OF THIS ORDER IN FAVOURE THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2012-123. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS ALLOWED. 72. THE ISSUE RAISED BY THE REVENUE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO FOR RS. 67,48,546.00 ON ACCOUNT OF INTEREST EXPENSES INCURRED IN RESPECT OF CAPITAL WORK IN PROGRESS. 73. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS SHOWN CAPITAL WORK IN PROGRESS OF RS. 70.63 CRORES. ON QUESTION BY THE AO WHETHER ANY INTEREST-BEARING FUND HAS BEEN UTILISED IN SUCH WORK IN PROGRESS, THE ASSESSEE HAS FAILED TO MAKE ANY SATISFACTORY REPLY. THEREFORE, THE AO CONCLUDED THAT THE PROPORTIONATE AMOUNT OF INTEREST ON THE FUND DEPLOYED IN SUCH CAPITAL WORK-IN- PROGRESS SHOULD BE CAPITALISED UNDER THE PROVISIONS OF SECTION 36 (1) (III) OF THE ACT. ACCORDINGLY, THE AO WORKED OUT THE PROPORTIONATE AMOUNT OF INTERST FOR RS. 67,48,546.00 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 55 74. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 10.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT\ AND THE ASSESSMENT ORDER CONSIDERING THE RATIO OF MUMBAI HIGH COURT IN RELIANCE UTILITIES (SUPRA) WHERE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. I AM ALSO OF THE OPINION THAT WHERE AN ASSESSEE HAS INTEREST-FREE FUNDS FAR IN EXCESS OF COST OF CAPITAL ADVANCES TOWARDS PURCHASE OF FIXED ASSETS, IN VIEW OF THE JUDICIAL AUTHORITIES BROUGHT OUT ON THE RECORDS, THERE IS VALID LEGAL PRESUMPTION THAT SUCH INVESTMENT IN CAPITAL ADVANCES HAVE BEEN MADE OUT OF INTEREST FREE FUNDS IN ABSENCE OF ANY SPECIFIC CONTRARY EVIDENCE BROUGHT OUT BY THE AO. THE ADDITION OF RS.67,48,546 MADE U/S.36(1)(III) IS CANCELLED FOR THE REASONS MENTIONED ABOVE. THIS GROUND OF APPEAL IS ALLOWED. 75. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 76. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AS FAVOURABLE TO THEM. 77. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY THE OWN FUND OF THE ASSESSEE IN THE FINANCIAL YEAR 2011-12 STANDS AT RS. 22,808.00 CRORES WHEREAS THE CAPITAL WORK-IN- PROGRESS STANDS AT RS. 70.76 CRORES. THE OWN FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF CAPITAL WORK-IN-PROGRESS. THEREFORE, A PRESUMPTION CAN BE DRAWN THAT THE OWN FUND OF THE ASSESSEE WAS UTILISED IN SUCH CAPITAL WORK IN PROGRESS. ACCORDINGLY, THERE CANNOT BE ANY DISALLOWANCE ON ACCOUNT OF INTEREST EXPENSES. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 77.1 IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPUSES COMING TO ITA NO. 520/AHD/2018, AN APPEAL BY ASSESSEE FOR THE AY 2013-14 78. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. DISALLOWANCE U/S 14A R.W. RULE SD OF THE INCOME-TAX ACT, 1961 ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 56 1.1 THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF OPERATING EXPENSES OF RS.9.58 CRORES UNDER SECTION 14A R.W. RULE 8D, DESPITE THE BANK BEING A DEALER AND HOLDING ALL ITS SHARES AND SECURITIES (EXCEPT SHARES IN SUBSIDIARIES/ JV COMPANIES) AS ITS STOCK-IN- TRADE. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE BANK HAS EARNED TREASURY BUSINESS PROFITS (TAXABLE) OF RS. 586.30 CRORES ON DEALINGS IN SHARES AND SECURITIES WHICH IS ONE OF ITS MAIN OBJECTS AND THE BANK IS ACTIVELY AND EXTENSIVELY CARRYING OUT TREASURY OPERATIONS .IN SHARES AND SECURITIES IN ORDER TO CONTRIBUTE TO ITS PROFITS. 1.2 THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT RULE 8D IS NEITHER CHARGING PROVISION NOR AUTOMATIC AND RULE 8D(2)(III) W.E.F. A.Y, 2008-09 CANNOT SUPERSEDE FAVOURABLE JUDGEMENTS OF HON. ITAT UPFO AY 2009-10 AND GUJARAT HC UPTO A.Y. 2008-09 IN THE BANK'S OWN CASE. 2. BANK GUARANTEE COMMISSION 2.1 THE CIT (A) ERRED IN UPHOLDING THE ADDITION OF BANK GUARANTEE (BG) COMMISSION INCOME OF RS. 152.32 CRORES BEING THE SUM RELATABLE TO UNEXPIRED PERIOD OF THE GUARANTEE CONTRACT. THIS SUM REPRESENTS THE PRO-RATA INCOME FOR THE PERIOD BEYOND 1-04-2013 WHICH SHALL BE AMORTISED BY THE BANK OVER THE BALANCE TENURE OF THE GUARANTEE CONTRACT. THIS ADDITION REPRESENTS TIMING DIFFERENCE WHICH SHALL BE TAX NEUTRAL AND THERE SHALL NOT BE LOSS OF REVENUE TO THE DEPARTMENT. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE CUSTOMER HAS INHERENT LEGAL RIGHT TO RECEIVE REFUND OF PROPORTIONATE AMOUNT OF GUARANTEE COMMISSION PERTAINING TO THE UNEXPIRED PERIOD OF GUARANTEE CONTRACT, IN THE EVENT OF BANK GUARANTEE BEING TERMINATED BEFORE FULL PERIOD OF THE GUARANTEE CONTRACT. THUS, THE ENTIRE AMOUNT OF COMMISSION RECEIVED CANNOT BE RECOGNISED AS INCOME IN THE YEAR OF RECEIPT ITSELF. UPFRONT COLLECTION OF GUARANTEE COMMISSION COVERS GUARANTEE RISK WHICH EXTENDS OVER THE TENURE OF THE GUARANTEE NOT BEING LIMITED TO THE YEAR IN WHICH SUCH COMMISSION IS RECEIVED BY THE BANK. 3. INTEREST ON NPA 3.1 THE LEARNED CIT (A) ERRED IN LAW IN CONFIRMING ADDITION OF NOTIONAL INTEREST INCOME ON NPA OF RS. 16.30 CRORES UNDER RULE 6EA R.W.S. 43D OF THE ACT AS INTEREST INCOME IS DEEMED TO BE ACCRUED DURING PREVIOUS YEAR, THOUGH THERE HAS BEEN NO CHANGE IN UNDERLYING FACTS OR LAW SINCE AY 1995-96 AND THE SAME IS ACCEPTED HITHERTO IN INCOME TAX ASSESSMENT UPTO AY 2010-1 I. 3.2 THE LEARNED CITFA] FAILED TO APPRECIATE THAT RECOGNITION OF INTEREST INCOME ON NPA IS IN ACCORDANCE WITH BINDING RBI GUIDELINES AND SPECIFIC MANDATE OF SECTION 43D AND THAT RULE 6EA IS SUBSERVIENT TO SECTION 43D AND HENCE IT CANNOT EXTEND THE SCOPE BEYOND THE CHARGE OF INCOME PROVIDED IN SECTION 43D. 4. LEASE OPERATING EXPENDITURE 4.1. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 17.86 CRORES BY IGNORING IHE TREATMENT OF LEASE OPERATING EXPENSES FOLLOWED BY THE BANK IN ACCORDANCE WITH AS-19 ISSUED BY ICAI TO BE MANDATORILY FOLLOWED BY THE BANK AS PER SECTION 133 OF THE COMPANIES ACT, 2013. 4.2. THE LEARNED CITFA) ALSO FAILED TO APPRECIATE THAI THIS ADDITION REPRESENTS TIMING DIFFERENCE WHICH SHALL BE TAX NEUTRAL AND THERE WILL NOT BE ANY LOSS OF REVENUE TO THE DEPARTMENT. 5. EMPLOYEE STOCK OPTION COST ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 57 5.1 THE LEARNED CIT(A) ERRED IN LAW BY NOT ALLOWING THE ESOP COST OF RS. CLAIMED AS DEDUCTION U/S 37(1) OF THE ACT. 177.34 CRORES 5.2 THE LEARNED CITFA) FAILED TO APPRECIATE THAT THE MARKET PRICE AS ON DATE OF EXERCISE OF OPTIONS BEING GREATER THAN THE EXERCISE PRICE, THERE IS ACTUAL DISCOUNT OFFERED TO THE EMPLOYEES. 5.3 THE LEARNED CITFA) ALSO FAILED IN CORRECTLY APPLYING THE RATIO OF THE DECISION OF BANGALORE SPECIAL BENCH OF HON'BLE ITAT IN CASE OF BIOCON LIMITED VS DCIT [2013] 144 ITD 21 (BANGALOREJ(SB) WHICH STATES THAT ESOP COST IN HANDS OF THE COMPANY HAS TO BE EQUIVALENT TO AMOUNT TAXABLE AS PERQUISITE IN THE HANDS OF EMPLOYEES. RELYING ON THE DECISION OF HON'BLE SPECIAL BENCH, THE DIFFERENCE BETWEEN MARKET PRICE AS ON DATE OF EXERCISE OF OPTIONS AND THE EXERCISE PRICE (I.E. THE MARKET PRICE ON THE GRANT DATE) IS AN ALLOWABLE DEDUCTION FOR COMPUTING INCOME UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION' IN THE YEAR OF EXERCISE OF OPTIONS BY THE EMPLOYEE (SUCH AMOUNT BEING EQUAL TO THE AMOUNT TAXABLE AS PERQUISITE IN HANDS OF EMPLOYEE). THE APPELLANT CRAVES LEAVE TO ADD, FO AMEND, ALTER, DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 79. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 9.58 CRORE UNDER THE PROVISION OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES. 80. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 81. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE ADDITION OF RS. 152.32 CRORE ON ACCOUNT OF COMMISSION INCOME FROM THE BANK GUARANTEE FURNISHED TO THE CUSTOMERS. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 58 82. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 20 TO 20.8 OF THIS ORDER IN ITA NO.311/AHD/2016. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 83. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 16.30 CRORE BEING THE AMOUNT OF INTEREST ON THE STICKY ADVANCES UNDER RULE 6EA READ WITH SECTION 43D OF THE ACT. 84. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 36 TO 36.3 OF THIS ORDER IN FAVOURE OF THE ASSESSEE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 85. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 17.86 CRORES ON ACCOUNT OF LEASE OPERATING EXPENSES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 59 86. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 41 TO 41.5 OF THIS ORDER IN FAVOURE OF THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS DISMISSED. 87. THE ASSESSEE IN THE GORUND NO 5 AND ADDITIONAL GROUNDS OF APPEAL HAS SOUGHT THE DEDUCTION ON ACCOUNT OF EDUCATION, SECONDARY AND HIGHER EDUCATION CESS AS WELL AS EMPLOYEE STOCK OPTION PLAN FOR RS. 177.34 CRORES AND RS. 80.35 CRORES RESPECTIVELY. 88. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS ADDITIONAL GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010-11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 25 TO 25.2 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 88.1 IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES COMING TO ITA NO. 604/AHD/2018, AN APPEAL BY REVENUE FOR THE AY 2013-14 ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 60 89. THE REVENUE HAS RAISED FOLLOWING FGFROUNDS OF APPEAL: (1) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE U/S.14A FROM RS.1,31,27,60,212/- TO RS.9,58,07,301/-. (2) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELEING THE ADDITION OF RS.1,82,63,504/- MADE ON ACCOUNT OF ANNUAL TECHNICAL FEES. (3) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.73,03,649/- MADE ON ACCOUNT OF INTEREST IN RESPECT OF CAPITAL WORK IN PROGRESS. (4) THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 90. THE FISRT ISSUE RAISED BY THE REVENUE IS THAT THE LEANRED CIT (A) ERRED IN DELETING THE ADDITION OF RS. 1,29,54,449/- MADE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULE. 91. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 92. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 1,82,63,504/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 93. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN ITA NO. 2173/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 61 GIVEN IN ITA NO. 2173/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE REVENUE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 55 TO 55.2 OF THIS ORDER AGAINST THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS DISMISSED. 94. THE ISSUE RAISED BY THE REVENUE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO FOR RS. 73,03,649.00 ON ACCOUNT OF INTEREST EXPENSES INCURRED IN RESPECT OF CAPITAL WORK IN PROGRESS. 95. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2013-14 ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN ITA NO. 287/AHD/2017 FOR THE ASSESSMENT YEAR 2012-13. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 287/AHD/2017 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. THE APPEAL OF THE REVENUE FOR THE ASSESSMENT 2012- 13 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS. 77 TO.77.1 OF THIS ORDER AGAINST THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2012-13 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2013-14. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS DISMISSED. 95.1 IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES COMING TO ITA NO. 521/AHD/2018, AN APPEAL BY ASSESSEE FOR THE AY 2014-15 96. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. DISALLOWANCE U/S 14A R.W. RULE 8D OF THE INCOME-TAX ACT, 1961 1.1 THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF OPERATING EXPENSES OF RS.15.59 CRORES UNDER SECTION I4A R.W. RULE 8D, DESPITE THE BANK BEING A DEALER AND HOLDING ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 62 ALL ITS SHARES AND SECURITIES (EXCEPT SHARES IN SUBSIDIARIES/ JV COMPANIES) AS ITS STOCK-IN- TRADE. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE BANK HAS EARNED TREASURY BUSINESS PROFITS (TAXABLE] OF RS. 327.58 CRORES ON DEALINGS IN SHORES AND SECURITIES WHICH IS ONE OF ITS MAIN OBJECTS AND THE BANK IS ACTIVELY AND EXTENSIVELY CARRYING OUT TREASURY OPERATIONS IN SHARES AND SECURITIES IN ORDER TO CONTRIBUTE TO ITS PROFITS. 1.2 THE LEORNED C1T[A) ERRED IN NOT APPRECIATING THAT RULE 8D IS NEITHER CHARGING PROVISION NOR AUTOMATIC AND RULE 8D(2)(III) W.E.F. A.Y. 2008-09 CANNOT SUPERSEDE FAVOURABLE JUDGEMENTS OF HON. ITAT UPTO AY 2009-10 AND GUJARAT HC UPTO A.Y. 2008-09 IN THE BANK'S OWN CASE. 2. BANK GUARANTEE COMMISSION 2.1 THE CIT (A) ERRED IN UPHOLDING THE ADDITION OF BANK GUARANTEE (BG) COMMISSION INCOME OF RS. 182.58 CRORES BEING THE SUM RELATABLE TO UNEXPIRED PERIOD OF THE GUARANTEE CONTRACT. THIS SUM REPRESENTS THE PRO-RATA INCOME FOR THE PERIOD BEYOND 1-04-2014 WHICH SHALL BE AMORTISED BY THE BANK OVER THE BALANCE TENURE OF THE GUARANTEE CONTRACT. THIS ADDITION REPRESENTS TIMING DIFFERENCE WHICH SHALL BE TAX NEUTRAL AND THERE SHALL NOT BE LOSS OT REVENUE TO THE DEPARTMENT. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE CUSTOMER HAS INHERENT LEGAL RIGHT TO RECEIVE REFUND OF PROPORTIONATE AMOUNT OF GUARANTEE COMMISSION PERTAINING TO THE UNEXPIRED PERIOD OF GUARANTEE CONTRACT, IN THE EVENT OF BANK GUARANTEE BEING TERMINATED BEFORE FULL PERIOD OF THE GUARANTEE CONTRACT. THUS, THE ENTIRE AMOUNT OF COMMISSION RECEIVED CANNOT BE RECOGNISED AS INCOME IN THE YEAR OF RECEIPT ITSELF. UPFRONT COLLECTION OF GUARANTEE COMMISSION COVERS GUARANTEE RISK WHICH EXTENDS OVER THE TENURE OF THE GUARANTEE NOT BEING LIMITED TO THE YEAR IN WHICH SUCH COMMISSION IS RECEIVED BY THE BANK. 3. INTEREST ON NPA 3.1 THE LEARNED CIT (A) ERRED IN LAW IN CONFIRMING ADDITION OF NOTIONAL INTEREST INCOME ON NPA OF RS. 18.08 CRORES UNDER RULE 6EA R.W.S. 43D OF THE ACT AS INTEREST INCOME DEEMED TO BE ACCRUED DURING PREVIOUS YEAR, THOUGH THERE HAS BEEN NO CHANGE IN UNDERLYING FACTS OR LOW SINCE AY 1995-96 AND THE SAME IS ACCEPTED HITHERTO IN INCOME 1AX~'\ ASSESSMENT UPTO AY 2010-11. / 3.2 THE LEORNED CIT(A) FAILED TO APPRECIATE THAT RECOGNITION OF INTEREST INCOME ON NPA IS IN ACCORDANCE WITH BINDING RBI GUIDELINES AND SPECIFIC MANDATE OF SECTION 43D AND THAT RULE 6EA IS SUBSERVIENT TO SECTION 43D AND HENCE IT CANNOT EXTEND THE SCOPE BEYOND THE CHARGE OF INCOME PROVIDED IN SECTION 43D. 4. LEASE OPERATING EXPENDITURE 4.1. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 25.47 CRORES BY IGNORING THE TREATMENT OF LEASE OPERATING EXPENSES FOLLOWED BY THE BANK IN ACCORDANCE WITH AS-19 ISSUED BY ICAI TO BE MANDATORY FOLLOWED BY THE BANK AS PER SECTION 133 OF THE COMPANIES ACT, 2013. 4.2. THE LEARNED CIT(A) ALSO FAILED TO APPRECIATE THAT THIS ADDITION REPRESENTS TIMING DIFFERENCE WHICH SHALL BE TAX NEUTRAL AND THERE WILL NOT BE ANY LOSS OF REVENUE TO THE DEPARTMENT, ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 63 5. EMPLOYEE STOCK OPTION COST 5.1 THE LEARNED CIT(A) ERRED IN LAW BY NOT ALLOWING THE ESOP COST OF RS. 104.56 CRORES CLAIMED AS DEDUCTION U/S 37(1) OF THE ACT. 5.2 THE .LEARNED CIT(A) FAILED TO APPRECIATE THAT THE MARKET PRICE AS ON DATE OF EXERCISE OF OPTIONS BEING GREATER THAN THE EXERCISE PRICE, THERE IS ACTUAL DISCOUNT OFFERED TO THE EMPLOYEES. 5.3 THE LEARNED CIT(A) ALSO FAILED IN CORRECTLY APPLYING THE RATIO OF THE DECISION OF BANGALORE SPECIAL BENCH OF HON'BLE ITAT IN CASE OF BIOCON LIMITED VS DCIT [2013] 144 ITD 21 (BANGALOREJ(SB) WHICH STATES THAT ESOP COST IN HANDS OF THE COMPANY HAS TO BE EQUIVALENT TO AMOUNT TAXABLE AS PERQUISITE IN THE HANDS OF EMPLOYEES. RELYING ON THE DECISION OF HON'BLE SPECIAL BENCH, THE DIFFERENCE BETWEEN MARKET PRICE OS ON DATE OF EXERCISE OF OPTIONS AND THE EXERCISE PRICE (I.E. THE MARKET PRICE ON THE GRANT DATE) IS AN ALLOWABLE DEDUCTION FOR COMPUTING INCOME UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION' IN THE YEAR OF EXERCISE OF OPTIONS BY THE EMPLOYEE (SUCH AMOUNT BEING EQUAL TO THE AMOUNT TAXABLE AS PERQUISITE IN HANDS OF EMPLOYEE), THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER, DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL'ON OR BEFORE THE FINAL DATE OF HEARING. 97. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 15.59 CRORE UNDER THE PROVISION OF SECTION 14A R.W.RULE 8D OF INCOME TAX RULES. 98. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER HAS BEEN PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 64 99. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE ADDITION OF RS. 182.58 CRORE ON ACCOUNT OF COMMISSION INCOME FROM THE BANK GUARANTEE FURNISHED TO THE CUSTOMERS. 100. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 20 TO 20.6 OF THIS ORDER IN ITA NO.311/AHD/2016. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. 101. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 18.08 CRORE BEING THE AMOUNT OF INTEREST ON THE STICKY ADVANCES UNDER RULE 6EA READ WITH SECTION 43D OF THE ACT. 102. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 36 TO 36.3 OF THIS ORDER IN FAVOURE OF THE ASSESSEE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 65 103. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR RS. 25.47 CRORES ON ACCOUNT OF LEASE OPERATING EXPENSES. 104. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 2176/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2176/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS 41 TO 41.5 OF THIS ORDER IN FAVOUR OF THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS DISMISSED. 105. THE ASSESSEE IN THE GORUND NO 5 AND ADDITIONAL GROUNDS OF APPEAL HAS SOUGHT THE DEDUCTION ON ACCOUNT OF EDUCATION, SECONDARY AND HIGHER EDUCATION CESS AS WELL AS EMPLOYEE STOCK OPTION PLAN FOR RS. 104.56 CRORES AND RS. 102.19 CRORES RESPECTIVELY. 106. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE ASSESSEE IN ITS ADDITIONAL GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010-11 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS.25 TO 25.2 OF THIS ORDER IN FAVOURE THE ASSESSEE FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 66 106.1 IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES COMING TO ITA NO. 605/AHD/2018, AN APPEAL BY REVENUE FOR THE AY 2014-15 107. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: (1) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE U/S.14A FROM RS.1,98,34,99,488/- TO RS.15,59,59,936/-. (2) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELEING THE ADDITION OF RS.3,08,31,629/- MADE ON ACCOUNT OF ANNUAL TECHNICAL FEES. (3) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,07,69,748/- MADE ON ACCOUNT OF INTEREST IN RESPECT OF CAPITAL WORK IN PROGRESS. (4) THE APPELLANT CRAVES, TO LEAVE, TO AMEND AND/OR TO ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 108. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT THE LEANRED CIT (A) ERRED IN DELETING THE ADDITION OF RS. 2,09,81,890/- MADE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULE. 109. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE ASSESSEE IN ITA NO. 311/AHD/2016 FOR THE ASSESSMENT YEAR 2010-11. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 311/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT 2010- 11 VIDE PARAGRAPH NOS. 8 TO 10 OF THIS ORDER HAS BEEN PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2010-11 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 67 110. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 3,08,31,629/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. 111. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN ITA NO. 2173/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 2173/AHD/2016 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE REVENUE FOR THE ASSESSMENT 2011- 12 HAS BEEN DECIDED BY US VIDE PARAGRAPH NOS.55 TO 55.2 OF THIS ORDER IN FAVOUR THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2011-12 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS ALLOWED. 112. THE ISSUE RAISED BY THE REVENUE IN GROUND NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO FOR RS. 1,07,69,748/- ON ACCOUNT OF INTEREST EXPENSES INCURRED IN RESPECT OF CAPITAL WORK IN PROGRESS. 113. AT THE OUTSET WE NOTE THAT THE ISSUES RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL FOR THE AY 2014-15 ARE IDENTICAL TO THE ISSUES RAISED BY THE REVENUE IN ITA NO. 287/AHD/2017 FOR THE ASSESSMENT YEAR 2012-13. THEREFORE, THE FINDINGS GIVEN IN ITA NO. 287/AHD/2017 SHALL ALSO BE APPLICABLE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2014-15. THE APPEAL OF THE REVENUE FOR THE ASSESSMENT 2012- 13 HAS BEEN DECIDED BY US VIDE PARAGRAPH NO.71 OF THIS ORDER AGAINST THE REVENUE. THE LEARNED AR AND THE DR ALSO AGREED THAT WHATEVER WILL BE THE FINDINGS FOR THE ASSESSMENT YEAR 2012-13 SHALL ALSO BE APPLIED FOR THE YEAR UNDER CONSIDERATION I.E. ITA NOS.311/AHD/2016 AND 8 OTHERS ASSTT. YEARS 2010-11 TO 2014-15 68 A.Y 2014-15. HENCE, THE GROUNDS OF APPEAL FILED BY THE REVENUE IS ALLOWED. 113.1 IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES 114. THE COMBINED RESULTS OF THE APPEALS ARE AS FOLLOWS: SR NO ITA NO A.Y APPEAL BY RESULT 1. 311/AHD/2016 2010-11 ASSESSEE GROUNDS OF APPEAL AS WELL AS ADDITIONAL GROUND ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES 2. 2176/AHD/2016 2011-12 ASSESSE PARTLY ALLOWED FOR STATISTICAL PURPOSES 3. 2173/AHD/2016 2011-12 REVENUE DISMISSED 4. 165/AHD/2017 2012-13 ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES 5. 287/AHD/2017 2012-13 REVENUE PARTLY ALLOWED FOR STATISTICAL PURPOSES 6-7 520 & 521/AHD/2018 2013-14 & 2014-15 ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES 8-9 604 & 605/AHD/2018 2013-14 & 2014-15 REVENUE PARTLY ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE COURT ON 28/10/2021 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY) AHMEDABAD; DATED 28/10/2021 MANISH