DCIT- 2(2)(2), MUMBAI V. YES BANK LTD., MUMBAI

ITA 3237/MUM/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2277 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 14-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L. GAJBHIYE
• Keywords: Business income; Depreciation; Earning of tax free income; Proportionate interest; Additional evidence; Question of law; Non-deduction of tax; Bad and doubtful debts; Revised return; Revenue expenditure; Capital expenditure; Rule 8D; Set aside
• Section: 37; 28; 139; 143(3); 14A; 250; 80IA; 251; 207; 246A; 64; 43; 48; 73; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM ITA No. 3498/Mum/2018 (Assessment Year 2011-12) ITA No. 3499/Mum/2018 (Assessment Year 2012-13) ITA No. 3500/Mum/2018 (Assessment Year 2013-14) Yes Ban k Lim ited 9 th Floo r, Nehru Ce ntre, Dis co ve r y of India, Dr. A B Road, W orli, Mum bai-400 018 Vs. The Deputy Commissioner of Income Tax , Circle 2(2)(2) 545, Aykar Bhavan, MK road, Mumbai-400 020 (Appellant) (Respondent) PAN No. AAACY2068D ITA No. 3236/Mum/2018 (Assessment Year 2011-12) ITA No. 3237/Mum/2018 (Assessment Year 2012-13) ITA No. 3238/Mum/2018 (Assessment Year 2013-14) The Deputy Commissioner of Income Tax , Circle 2(2)(2) 545, Aaykar Bhavan, MK road, Mumbai-400 020 Vs. Yes Ban k Lim ited 9 th Floo r, Nehru Ce ntre, Dis co ve r y of India, Dr. A B Road, W orli, Mum bai-400 018 (Appellant) (Respondent) Assessee by : Shri Yogesh Thar, AR Revenue by : Shri Shekhar L. Gajbhiye, CIT DR Date of hearing: 17.06.2022 Date of pronouncement : 28.06.2022 Page | 2 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 O R D E R PER PRASHANT MAHARISHI, AM: 01. All these appeals were originally heard on 10 .03.2022 , put up for clarification on issue of deduction u/s 35D and finally heard on 17.06.2022. 02. These Cross appeals pertaining to the same assessee i.e. Yes Bank Limited for A.Ys. 2011-12, 2012-13, and 2013- 14 involving common grounds, both parties argued these appeals together and therefore, same are disposed of by this common order. 03. For A.Y. 2011-12, the assessee has filed ITA No. 3498/Mum/2018 against the order passed by the learned Commissioner of Income-tax (Appeals)-5, Mumbai, [ The ld CIT (A) ] dated 31 st January, 2018 raising following grounds of appeal:- “GROUND NO. I: DISALLOWANCE UNDER SECTION 14A OF THE ACT: 1. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in rejecting the plea of the Appellant that Rule 8D is not automatic even when the AO had not recorded any satisfaction before applying Rule 8D of the Income-tax Rules, 1962. 2. The Appellant prays that the order of the CIT (A) disregarding the settled legal position be treated as illegal. WITHOUT PREJUDICE TO GROUND I: Page | 3 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 GROUND NO. I: DISALLOWANCE of EXPENSES UNDER SECTION 14A OF THE ACT: 3. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in rejecting the plea of the Appellant that when the securities are held as stock- in-trade, no disallowance can be made u/s. 14A of the Act. 4. The Appellant, therefore, prays that the suo-moto disallowance of Rs. 9,27,255/- be deleted. GROUND NO. III: ORDER MADE ON THE BASIS OF SURMISES AND ASSUMPTIONS IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in disallowing the claim for deduction u/s. 35D of the Act on the assumption that the shares may have been allotted only to selected QIPs. 2. The Appellant prays that an order made on surmises and presumptions is bad-in-law and void-ab initio. WITHOUT PREJUDICE TO GROUND III: GROUND NO. IV: DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 35D ON EXPENSES INCURRED IN CONNECTION WITH THE QUALIFIED INSTITUTIONAL PLACEMENT ("QIP"): 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance of deduction of Rs. 2,82,80,291/- Page | 4 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not tantamount to public subscription and such capital expenses are not eligible for deduction u/s. 35D of the Act. 2. The Appellant prays that the AO be directed to allow Rs. 2,82,80,291/- as a deduction u/s. 35D of the Act. WITHOUT PREJUDICE TO GROUND III AND IV: GROUND NO. V; DISALLOWANCE OF QIP EXPENSES BY INVOKING SECTION 40(a)(i/(ia) OF THE ACT 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in disallowing the expenses in connection with QIP on the ground that the expense may not be allowable in view of section 40(a)(i) /(ia) of the Act. 2. The Appellant prays that the AO be directed to allow the expenses in connection with QIP. GROUND NO. VI: NON ADMISSION OF ADDITIONAL GROUND OF APPEAL: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in rejecting the Additional ground raised by the Appellant, in respect of discount on issue of shares under the employee stock option plan ("ESOP"), without appreciating the fact that the appellate authorities can admit and Page | 5 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 adjudicate the additional claim raised by the assessee during the course of Appellate proceeding. 2. The Appellant prays that the claim for deduction in respect of discount on issue of shares under the ESOP be allowed. WITHOUT PREJUDICE TO GROUND NO. VI GROUND NO. VII: DEDUCTION OF DISCOUNT ON ISSUE OF SHARES UNDER THE EMPLOYEE STOCK OPTION PLAN ("ESOP"): 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not allowing the claim for deduction in respect of discount on issue of shares under the ESOP amounting to Rs. 143,24,22,420/-. 2. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not giving any findings on the additional evidence filed by the Appellant 3 The Appellant prays that the claim for deduction in respect of discount on issue of shares under ESOP be allowed.” 04. ITA No. 3236/Mum/2018 is filed by the learned Deputy Commissioner of Income tax 2 (2) (2), Mumbai [ The Ld AO ] against the same order [ AY 2011-12] of the learned CIT (A) raising following grounds of appeal:- “1. Whether on the facts and in the circumstances of the case and in law, learned CIT Appeal was right in directing to delete the disallowances made U/s 14A Page | 6 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 of the IT Act without appreciating that the disallowance u/s 14A has to be mandatorily calculated as per rule 8D of IT Rules and no discretion is available with the A.O for estimated disallowances? 2. Whether on the facts and in the circumstances of the case and in law, learned CIT Appeal was right in directing to delete the disallowances of brokerage paid on acquisition of investments without appreciating that such expenditure is in the nature of capital expenditure and forms a part of cost of asset?" 05. Assessee is a company engaged in the business of banking. It filed its original return of income on 30 th September, 2011, and subsequently, filed revised return on 30 th March, 2013, declaring income of ₹1176,82,76,464/-. Return of the assessee was picked up for scrutiny and assessment order under Section 143(3) of the Income Tax Act, 1961 (the Act) was passed on 12 March 2014. 06. The learned Assessing Officer made following disallowances:- I. Disallowance under Section 14A of the Act of ₹3,65,18,979/-. II. Disallowance of deduction under Section 35D of the Act of ₹2,82,80,291/-. III. Brokerage paid on acquisition of investment of ₹2,08,640/-. Page | 7 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 07. Assessee approached learned CIT (A), who passed order on 31 st January, 2018, the learned CIT (A) a. Deleted the addition of ₹3,65,18,979/- under Section 14A of the Act but upheld the action of ld AO in recording proper satisfaction. b. Confirmed disallowance under Section 35D of the Act of ₹2,82,80,291/-. c. Deleted disallowance of brokerage paid on acquisition of investment of ₹2,08,640/-. 08. Assessee raised additional ground of appeal before him claiming deduction of Employees Stock Option Scheme (ESOS) of ₹143,24,22,420/-. He did not admit additional ground relying on the decision of Hon'ble Bombay High Court in case of Ultratech Cement Ltd. Vs. Additional CIT [2018] 408 ITR 500 (Bombay) dated 18 th April, 2017. He held that a. Act of treating the above expenditure on ESOP as capital expenditure as well as treating the same in the computation of total income in a similar manner was a willful act on part of the assessee and hence, it does not fulfill the basic condition of the provisions of Section 250(5) of the Act, 1961. b. Claim was not verified by the learned Assessing Officer as the same was not discussed in the order and further, there were no sufficient judicial Page | 8 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 precedents, which prevented the assessee in not making the claim earlier. 09. Therefore, both the parties are aggrieved with the above order. Learned Assessing Officer is aggrieved with the order of the learned CIT (A) against deletion of disallowance under Section 14A of the Act and disallowance of brokerage paid on acquisition of investments. 010. Assessee is aggrieved with the order of the learned CIT (A) wherein, [1] It has been held by him that the learned Assessing Officer has correctly recorded the satisfaction for invocation of Rule 8D of The Income Tax Rules, 1962 (the Rules). [2] disallowance under Section 35(D) of the Act of ₹2,82,80,291/- was confirmed. [3] Not admitting its additional ground of appeal for deduction of discount on issue of shares under the Employees Stock Option Plan (ESOP). [4] Not adjudicating and allowing on ESOP deduction claim based on the additional evidence field by the appellant 011. The first ground of appeal of the learned Assessing Officer and ground nos. 1 and 2 of the appeal of the assessee are Page | 9 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 with respect to the disallowance under Section 14A of the Act. 012. Assessee has claimed dividend income of ₹50,76,400/- as exempt under Section 10(34) of the Act. Assessee disallowed a sum of ₹ 9,27,255/- under Section 14A of the Act. Learned Assessing Officer asked assessee to furnish details regarding the disallowance. Assessee submitted that i. It has made investment in equity shares of various companies and holding is those shares in compliance with statutory requirement as part of stock in trade. ii. It has not incurred any expenses in relation to earning of such dividend income. iii. However, it has offered identified expenditure of ₹9,26,255/-,as disallowable expenses u/s 14A of the Act. It identified direct and indirect expenditure for the same. It stated that assessee has disallowed 100% of treasury cost of custodian charges amounting to ₹3,25,930/- as direct expenditure. It further submitted the details of indirect expenses of salary, rent, electricity, telephone and other operating expenses amounting to ₹679,81,02,344/- and identified out of the total expenditure pertaining to treasury function amounting to ₹28,79,41,137/- and held that 0.21% on this Page | 10 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 expenditure amounting to ₹6,00,325/- is disallowable under Section 14A of the Act. For arriving at 0.21%, assessee stated that the total number of treasury deals were 89,554, out of which only 187 equity deals were made, which are just 0.21% of the total deals. Therefore, out of the treasury expenditure, only 0.21% expenditure is pertaining to exempt income and considered as indirect expenditure. iv. it has its own funds of Rs 3794 crores which do not have any interest cost and investment in tax free securities is only ₹21.91 crores and therefore, relying on the decision of Hon'ble Bombay High Court in CIT vs. Reliance Utilities Ltd. 313 ITR 340, no indirect or direct interest expenditure is disallowable. v. No disallowance u/s 14A could be made when investment in shares is held as stock in trade. vi. Only those securities on which tax-free dividend are earned are to be considered for working out disallowance under this section. 013. The learned Assessing Officer held that explanation of the assessee is not satisfactory and disallowance is required to be computed in accordance with Rule 8D of the Rules. Thus, he proceeded to compute disallowance as per Rule 8D of the Rules. He disallowed interest expenditure of ₹33,648,000/- u/r 8D (2)(ii) and further 0.5 % of Page | 11 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 average value of investment for other administrative expenses u/r 8D [2][iii] of ₹2871,000/-. Thus, total disallowance was worked out at ₹3,65,18,997/-. 014. The issue was agitated before learned CIT (A). The assessee contested that there is no satisfaction recorded by the learned Assessing Officer as to how the disallowance offered by the assessee is not correct. The learned CIT (A) rejected this contention and held that learned Assessing Officer has recorded his satisfaction for invocation of Rule 8D of the Rules in paragraph 5.3 of the assessment order. He further rejected the contention that on securities held as stock-in-trade, no disallowance can be made for the reason that assessee has offered on its own disallowance under Section 14A of the Act With respect to custodian charges as well as administrative charges. With respect to the interest disallowance, he agreed with the argument of the assessee that in view of more interest free funds available than the amount invested in tax-free income earning securities, o disallowance u/r 8D (2) (i) and (ii) can be made. Therefore, he deleted the disallowance of ₹3,65,18,979/-. Thus, both the parties aggrieved with the above order 015. The learned Authorized Representative submitted that the learned Assessing Officer has failed to record any satisfaction about the correctness of the disallowance offered by the assessee. He submitted that this is mandatory requirement before the learned Assessing Officer proceeds to invoke Rule 8D for making Page | 12 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 disallowance. He referred to section 14 A (2) of the Act. For this proposition, he relied on the decision of Hon'ble Supreme Court in case of Maxopp Investment Ltd. Vs. CIT [2018] 91 taxmann.com 154 (SC) and also the decision of the Hon'ble Bombay High Court in Principal Commissioner of Income Tax-2 Vs. Bombay Stock Exchange Ltd. [2020] 113 taxmann.com 303 (Bombay) dated 15-10-2019. He also relied on several judicial precedents of co-ordinate Benches. Thus, it was stated that as learned Assessing Officer has failed to record any satisfaction about correctness of the claim of assessee, the disallowance under Section 14A of the Act invoking Rule 8D of the Rules is invalid. 016. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and learned CIT (A). He further relied on Para 5.3 of the assessment order and stated that satisfaction has been correctly recorded by the learned Assessing Officer. 017. We have carefully considered the rival contentions and perused the orders of the lower authorities. Undisputed facts emerging from the orders clearly shows that assessee has disallowed a sum of ₹9,27,255/- under Section 14A of the Act as it has earned the exempt dividend income of ₹50,76,400/-. Assessee has given detail reasons and workings of disallowance offered by it. The learned Assessing Officer in paragraph no. 5.3 has held that the explanation offered by assessee is not satisfactory. No reasons for this finding were narrated in Page | 13 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 assessment order. The learned Assessing Officer relied upon the decision of Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT dated 12 August 2010 , and on reading it, he was under the impression that disallowance is required to be computed by applying Rule 8D of the Rules. The provisions of Section 14A of the Act (2) clearly provides that if the learned Assessing Officer „having regard to the accounts of the assessee‟ is not „satisfied‟ with the „correctness of the claim‟ of the assessee in respect of expenditure offered for disallowance under Section 14A of the Act, then only he shall proceed to determine the disallowable expenditure in accordance with Rule 8D of the Rules. „Satisfaction‟ under Section 14A [2] of the Act about the correctness of the claim of the assessee is a basic condition for invoking the Rule 8D of the Rules. Such satisfaction has also to be with „regard to accounts‟ of the assessee. In the present case, the learned Assessing Officer has not given any finding about the voluntary disallowance offered by the assessee of ₹9,27,255/-. Hon'ble Supreme Court in case of Maxopp Investment Ltd. (supra) in paragraph no. 41 has held that whether the assessee in his return has himself apportioned the disallowance under Section 14A of the Act, the learned Assessing Officer needs to record his satisfaction having record the accounts of the assessee and that why it is not correct. That means learned Assessing Officer has to give reasons with regard to the accounts of the assessee about incorrectness of the claim of the assessee. The Supreme Court also held that while Page | 14 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 recording such satisfaction, the nature of loans and the nature of investment need to be examined by the learned Assessing Officer. Further, Hon'ble Bombay High Court following the aforesaid judgment of the Hon'ble Supreme Court in Bombay Stock Exchange Ltd. (supra) in Paragraph no. 9 has also categorically held that the learned Assessing Officer must first record a conclusion that having regard to the account of the assessee he has not satisfied with the disallowance offered by the assessee. In paragraph no. 11, it further held that no satisfaction with the disallowance offered has to be arrived at, based on the accounts submitted by the assessee. In the present case, we find that the learned Assessing Officer has failed to carry out the necessary exercise before applying the provisions of Rule 8D of the Rules. There is no reference to examination of accounts of the assessee. There is no finding that disallowance offered by assessee is inadequate as envisaged by the books of assessee. Therefore, we do not have any hesitation in holding that the learned Assessing Officer has jumped the queue by invoking Rule 8D of the Rules without recording any satisfaction a holding that quantum of disallowance offered by assessee is inadequate. In view of this, we reverse the orders of the learned CIT(A) on this ground and hold that in absence of any satisfaction of the learned Assessing Officer about correctness of the disallowance offered under Section 14A of the Act, no disallowance under Section 14A read with Rule 8D of the Rules can be made. Accordingly, we dismiss ground no. 1 of the appeal Page | 15 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 of the learned Assessing Officer and allow ground no. 1 and 2 of the appeal of the assessee. 018. The second ground of the appeal of the learned Assessing Officer is against the order of the learned CIT (A) in deleting the disallowance of brokerage paid on acquisition of investments. 019. Assessee has mentioned in the notes to accounts that brokerage/ commission pertaining to investment, paid at the time of acquisition of securities is charged to revenue account. Thus, as per the practice followed by the assessee when the securities are purchased and any brokerage/ commission is paid there on, assessee debits it to the profit and loss account and for tax matters same are claimed as deduction as revenue expenditure. 020. The learned Assessing Officer was of the view that as per the principles of conventional accounting of such cost is to be added to the cost of securities and therefore, such brokerage expenditure is not allowable as revenue expenditure. The learned Assessing Officer noted that brokerage paid on acquisition of investment which are not sold during the year but are carried in the balance sheet at the end of account year[ as closing stock] needs to be disallowed. Therefore, out of the total brokerage expenditure of Rs. 8,43,955/-, he disallowed Rs. 2,08,640/-. For the balance expenditure, the learned Assessing Officer noted that when the shares are sold during the year, the assessee applies profit and loss on Page | 16 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 sale of investment as trading profit, therefore; no disallowance is warranted when the shares are sold during the year. 021. Assessee contested the above disallowance before the learned CIT (A), who categorically noted that the learned Assessing Officer has confused himself due to the treatment of securities as per books of account and as per Banking Regulation Act. Therefore, he held that when a particular security has been treated as stock-in-trade and profit or loss has been offered as business income, all the expenses incidental to the earning of such income has to be allowed as deduction as revenue expenditure. The learned Assessing Officer is aggrieved with the same. 022. Learned Departmental Representative vehemently supported the order of the learned Assessing Officer. 023. Learned Authorised Representative supported the order of the learned Commissioner of Income Tax (Appeals). He further supported the order of the learned CIT(A) relying on the decisions of CIT vs. Nawan shahar co-operative Bank of India 289 ITR 6, CIT vs. DLF Universal Ltd 317 ITR 197 of Hon'ble Delhi High Court and also relied upon circular no. 18/15 dated 2 nd November, 2015. 024. We have carefully considered the rival contentions and perused the orders of the lower authorities. On appreciation of facts, we find that assessee offers profit and loss on sale of securities as business income and not as capital gain. This fact has also been accepted by the Page | 17 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 LD AO. Therefore the securities purchased and sold by assessee are its stock in trade. Therefore, all necessary expenditure incurred by assessee for purchase of stock in trade, like, commission/ brokerage are revenue expenditure only. It is not the case of revenue that, despite these securities being stock in trade, it needs to value at cost or market value whichever is less at the end of the year, and commission or brokerage incurred on its acquisition should have formed part of cost of such securities, subject to available market rate. Ld AO has held that commission or brokerage as far as it relates to unsold stock in trade is not allowable during the year of incurring such expenditure, but would be taken in to consideration when securities are sold. The Central Board of Direct Taxes has issued a circular no. 18 of 2015 provides that in view of the decision of Hon'ble Supreme Court in Nawanshahar cooperative bank Ltd (supra), wherein it has been held that the investment made by banking companies are part of the banking business which is chargeable to tax under the head profit and gains of business and profession and therefore, expenses relatable to investment cannot be disallowed under section 57(i) of the Act. The applicability of deduction of expenditure under section 28 is also to be treated on the same parameters. When it is not the claim of the ld AO that valuation of securities held as stock in trade at the end of the year is not valued higher to the extent of commission and brokerage incurred on these securities to determine “at cost” valuation , we do not find any reason Page | 18 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 to uphold disallowance made by the ld AO. In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the above disallowance. Accordingly, ground no. 2 of the appeal of learned Assessing Officer is dismissed. 025. Ground no. 3 of the appeal of assessee is with respect to the disallowance confirmed by learned CIT (A) under Section 35D of the Act of Rs. 2,82,80,291/-. 026. The fact of the case shows that Assessee Company has raised Rs. 1,033.87 crores during the Financial Year through Qualified Institution Placement (QIP) in which it placed its share capital with Qualified Institutional Buyers [QIB]. For this purpose, it incurred expenditure of Rs. 14,14,01,453/- on account of payment to lead managers, local consultants, and auditors. The assessee claimed Rs. 2,82,80,291/- being 1/5 th of such expenditure as deduction u/s 35D of The Act. This is the first year of such claim with respect to this issue of shares. Assessee submitted that said expenses are in connection with the issue of „public subscription‟ of shares of the assessee. 027. Learned Assessing Officer examined the claim and held that since the issue of shares to Qualified Institutional Buyers, does not tantamount to „issue of shares to public‟ and therefore, expenditure incurred is not covered under Section 35D of the Act. Hence, he disallowed the same. 028. Assessee aggrieved with the same and preferred the appeal before the learned CIT (A). Assessee submitted Page | 19 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 that the provisions of Section 35D of the Act are complied with. It further stated that Qualified Institutional Buyers are „public‟ and therefore, the assessee deserves to be allowed the above deduction. For this proposition, assessee relied on the SEBI Regulation. Assessee also referred to Securities Contract Regulation Rules, wherein the word „Public‟ was defined. The learned CIT (A) referred to SEBI (issue of capital and disclosure requirement) 2019, Rules, and the Companies Act. He therefore held that the offer made under the QIP scheme could not be equated with the offer of equity shares to „public‟. Further, the assessee has not furnished the list of allottees such as name, address, number of shares and amount to the learned Assessing Officer or before learned CIT (A) and further, the learned Assessing Officer has not verified whether tax has been deducted at source on such payments or not. Further, where the provisions of Section 35D (3) of the Act and (4) of the Act are complied with or not. Thus, he confirmed the disallowance. 029. The learned Authorized Representative submitted that the issue is squarely covered in assessee‟s own case for Assessment Year 2010-11 in ITA No. 3497/Mum/2018, wherein the deduction under Section 35D of the Act was allowed on issue of shares to QIB. He referred to paragraph number 6 of that order and submitted that ITAT in that case following the order of the co-ordinate Bench in case of DCIT vs. Deccan Chronicle Holdings Ltd. [2015] 60 taxmann.com 240 (Hyderabad - Trib.), held that assessee Page | 20 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 is eligible for deduction under Section 35D of the Act where the shares were issued to Qualified Institutional Buyers. 030. The learned Departmental Representative supported the orders of the lower authorities. He extensively referred to the order of ld CIT {A} and submitted that QIB are not public, no tax is deducted at sources, and other conditions of section 35D are not fulfilled. 031. We have carefully considered rival contentions and perused the orders of the lower authorities. According to provisions of section 35D (2) (c ) ( iv) of the act companies are allowable following deduction:- c) Where the assessee is a company, also expenditure (iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage, and charges for drafting, typing, printing, and advertisement of the prospectus; 032. So the only issue is whether the issue of shares made by assessee to QIB is „Public subscription of shares‟ or not. Allotment of shares to QIB can be permitted on “Private Placement basis “or also in „Public Issue‟. 033. We find that issue is decided in favour of the assessee in assessee‟s own case for Assessment Year 2010-11 in ITA NO. 3497/Mum/2018 dated 14 July 2020 so far the issue was whether QIB is “Public” or not . The co-ordinate Page | 21 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Bench in that case considered whether the allottees Qualified Institutional Buyers is “ public” or not. The co- ordinate Bench following the decision of ITAT in Deccan Chronicle Holdings Ltd. (supra) hold that QIB is “ Public” so deduction under Section 35D of the Act is allowable. It held as under:- “ 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The appellant is a banking company. It filed its revised return of income for the AY 2010-11 on March 30, 2012 declaring total income at ₹ 7,90,10,18,157/-. As mentioned earlier, the question involved in this appeal is whether QIB can be regarded as “public” and whether the offer made to them can be regarded as “offer made to public” for the purpose of section 35D of the Act. In Deccan Chronicle Holdings Limited (supra), the Tribunal has held as under : “6. With respect to ground No. 4 for the assessment year 2008- 09, we find that the Assessing Officer has not disallowed for the assessment years 2006-07 and 2007-08. However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers for the assessment year 2008-09 which has been allowed by the Commissioner of Income-tax (Appeals) holding as under : "5. I have gone through the factual and legal contentions of the appellant in support of its argument that the deduction was claimed under section 35D read with section 37 i.e., both under sections 35D and 37. I agree with the argument of the appellant that the language used in section 35D is so plain and unambiguous that the only condition laid down in that section is that the issue should be offered for public subscription and the mode of placement is immaterial. Thus, the only issue for consideration is whether QIB can be called 'public' or not. After a careful and comprehensive consideration of the relevant provisions of the Company Law, Securities Contract (Regulation) Rules, SEBI Guidelines/Instructions, I am of the considered opinion that QIBs constitute 'public' and accordingly, Page | 22 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 the subscription made by the amount to public subscription. In this view of the matter and also considering the facts with regard to the utility of funds raised through QIB issue, I hold that the issue expenditure, to the extent attributable to the funds utilised for extension of the appellant's undertakings, is eligible for deduction under section 35D. So far as the remaining funds, utilised for modernisation and working capital requirements of the appellant's business are concerned, I have considered both factual and legal submissions of the applicant, in support of its contention that the expenditure was in the nature of revenue expenditure since the primary object and intent of raising these funds was to meet the operational requirements, in order to run the business more efficiently and profitably. The hon'ble High Court of Delhi, after analysing plethora of case law on this subject, had laid down certain broad guidelines, in the case of CIT v. J.K. Synthetics Ltd. [2009] 309 ITR 371 (Delhi), to decide whether a particular expenditure is capital or revenue in nature. Tested against these broad legal principles, I am of the opinion that there is considerable force in the arguments of the appellant-company that the expenditure claimed by it clearly falls in the revenue field. These guidelines were impliedly approved by the hon'ble Supreme Court, in view of the fact that the special leave petition filed against this decision was dismissed. There is also merit in the argument of the appellant-company that the facts of its case are distinguishable from those in the case of Brooke Bond, for the detailed reasons submitted by it, and therefore its claim cannot be denied by relying on that decision. It was further claimed that though the entire expenditure was allowable in one year under section 37, the same was treated as deferred revenue expenditure and claimed over five years, starting from the assessment year 2007-08. The concept of deferred revenue expenditure is now legally recognised by various judicial authorities and in fact, this was upheld even in the case of the appellant by my predecessor, while deciding the appeal for assessment year 2006-07. In view of the above facts, I hold that the expenditure of ₹ 2,07,00,112 claimed for assessment year 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in order, the disallowance on this account is deleted." 7. We find that during the year 2007-08, the company incurred debenture expenses of ₹ 2.07 crores and QIB issue expenditure of ₹ 8.28 crores, both totalling to ₹ 10.35 crores. The expenditure referred to above of ₹ 10.35 crores was adjusted against the share premium account as per the provision of the Companies Act. However, the expenditure being deferred revenue expenditure falls within the ambit of section 35D read with section 37 of the Income-tax Act which is eligible to be Page | 23 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 charged to profit and loss account. Accordingly as per the provisions of section 35D of the Income-tax Act, one-fifth of the QIB issue expenditure i.e., ₹ 207 lakhs was written off. Qualified Institutional Buyers (QIBs) are a class of investors as a part of the large investor community and the companies sought for QIB issues because the funds can be raised within a short span. This is an extremely important investment for larger investors and since the buyers are only a class of investors, the issue of shares to QIB have been considered as public issue. The expenses in connection with public issue of shares or debentures of the company are allowable. Reliance is placed on CIT v. Shree Synthetics Ltd. [1986] 162 ITR 819 (MP). Hence on the merits of the issue, the QIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D of the Income-tax Act is confirmed. Hence on merits of the issue as well as the fact that the same issue has been allowed in the earlier years and the Department cannot come upon in appeals in the subsequent years would be the reason to dismiss the Departmental appeal. We confirm the order of the Commissioner of Income-tax (Appeals) with respect to qualified institutional buyers expenses and dismiss the Departmental appeal on this issue. In the result, the Departmental appeal for the assessment years 2007-08 and 2008-09 are dismissed.” 6.1 A perusal of the above order of the Tribunal clearly indicates that the present issue is directly covered in favour of the appellant. 6.2 Further, we find that the appellant being a listed company is bound by “Listing Agreement”, which provides for the disclosure requirements for the share holding pattern of a listed company. As can be seen therefrom, there are only two categories of shareholders- “promoter/promoter group” and “public”. For the definition of these terms in Clause 35, reference is made to Clause 40A of the Listing Agreement. As can be seen therefrom, Mutual Funds/Financial Institutions which are QIBs are classified under “public shareholding”. The terms are defined in Clause 40A of the SEBI Listing Agreement. Further, the listing agreement takes us to Securities Contracts (Regulation) Rules, 1957 (in short “SCRR”). Also Rule 19(2)(b) and Rule 19A of the SCRR provide that companies are required to maintain minimum public shareholding of 25% in case of first time listing and in case of continuous listing agreement respectively. In this context, we may refer to section 2(d) of SCRR defining the term “public”. It (public) is defined to mean any person other than the promoter, promoter group, subsidiaries and associates of the company. Thus any person other than these four qualify to be considered as public. As can be seen from the list of QIBs to whom shares are issued, the Page | 24 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as “public”. As specified in clause 40A(ii) of the listing agreement, public shareholding can be increased by any of the modes specified therein to comply with Rule 19(2) and 19A of SCRR. One such note is the issue of IIP in accordance with Chapter VIIIA of the SEBI-ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding requirement in Rule 19(2) and 19A of SCRR. Reg. 91B defines IPP as a further public offer made only to QIBs. These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. It thus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public shareholding. That “a section of public qualifies as public” has been clarified in Nitta Gelatine India Limited (supra) and Andhra Chamber of Commerce (supra). 7. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Limited (supra) and in view of the discussion hereinabove at para 6.2 , hold that the appellant is eligible for deduction u/s 35D of the Act. Thus we set aside the order of the Ld. CIT(A) and allow the 1st , 2nd and 3rd ground filed by the assessee.” 034. For Deduction u/s 35 D (2) ( C ) (iv), allottees of shares and Debentures are immaterial , those may be QIB, FII, DII, Other Investors Individuals etc, but only issue to be seen is whether the expenditure is “ in connection with the issue for public subscription “ or not. 035. Therefore, as we have already held that if the issue of shares is through “ public Subscription” assessee is eligible for deduction u/s 35 D, conversely, if the issue of shares are not „ Public Subscription” i.e. such as Private Placement etc, assessee is not eligible for deduction u/s Page | 25 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 35 D of the Act . These facts are not on record whether shares issued to QIB are issued in “Public Subscription “or otherwise. Therefore, the matter needs to be set aside to the file of the ld AO for fresh examination, to show before him that the issue was a public subscription and not otherwise, onus lies on assessee. Ld AO may examine the same; if shares are issued in “Public Subscription”, deduction may be allowed. 036. Accordingly, ground no. 3 and 4 of the appeal of assessee are allowed with above directions. 037. Ground no. 6 of the appeal is with respect to non- admission of additional ground of appeal vis-a-vis allowance of deduction of discount on issue of shares under the Stock Option Plan. 038. Before the learned CIT (A), vide letter dated 8 th December, 2017, assessee raised an additional ground that he is entitled to deduction of Rs. 143,24,22,420/- being the discount on issue of shares under the ESOP computed as difference between the fair market value of shares on the date on which the ESOP were exercised by the eligible employees and issue price of shares. 039. The fact shows that assessee introduced the ESOP in accordance with the provisions of Securities Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Assessee submitted that the issue is squarely covered in favour of the assessee by the Special Bench decision of Page | 26 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Biocon Ltd. VS. DCIT [2013] 35 taxman. com 335 (Bangalore - Trib.) (SB) 040. With respect to the fact that whether the adequate information was available on record for pressing the additional ground, the learned Authorized Representative referred to the annual report of the assessee for the year ended 31 st March, 2011. He referred to note number 18.7.7, where ESOP disclosures were made. He submitted that there is a complete scheme wise expenditure disclosed by the assessee. He further referred to the note appended to the summary of the status of the Stock Option Plan, which states, “the bank has charged ₹nil, being the intrinsic value of the stock option granted for the year ended 31 March 2011. Had the bank adopted the fair value method (based on black –scholes price method), for pricing as accounting option, net profit after tax would have been lower by ₹2,24,12,000/-, the basic earnings per share would have been Rs. 20.47 per share instead of Rs. 21.12 per share, and diluted earnings per share would have been ₹ 19.63 per share instead of ₹20.25 per share”. He therefore submitted that there is an adequate disclosure and information available in the return of income and annual accounts for adjudicating the additional ground of appeal. He therefore submitted that when the information is available on record, the fresh claims could be raised before the appellate authorities by way of additional ground. To support his contentions, he relied on the decision of Ultratech Cement Ltd. (supra) of Page | 27 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Hon'ble Bombay High Court. He also referred to the decision of Hon'ble Supreme Court in case of Jute Corporation of India Vs. CIT 189 ITR 688 and National Thermal Power Company Limited Vs. CIT [1998] 229 ITR 383 (SC). 041. On the merits of the case about the allowability of the deduction, he submitted that now Hon'ble Karnataka High Court in the case of CIT vs. Biocon Limited 270 taxman 1, [2021] 131 taxmann.com 187 (Kar.) and Hon'ble Delhi High Court in CIT vs. Lemon Tree Hotels (P). Ltd. has already allowed the claim of the assessee. He therefore submitted that on merits, the issue is squarely covered in favour of the assessee. He further submitted that principle of commercial accounting should be followed in determining the tax treatment of expenses and for this proposition; he relied on the decision of Hon'ble Supreme Court in case of CIT vs. Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC). In view of this, he submitted that the learned CIT (A) has erred in not admitting the additional ground of appeal and thereafter refusing allowance of deduction of discount on issue of shares under ESOP. 042. The learned Departmental Representative vehemently supported the order of the learned CIT (A) in not admitting the additional ground of appeal. He submitted that additional ground of appeal could only be admitted in accordance with the provisions of Section 250 (5) of the Act, which has been dealt with by the learned CIT (A). Page | 28 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Therefore, it has not been correctly admitted. The learned Departmental Representative further submitted in addition to that assessee has failed to raise this ground before the learned Assessing Officer and it is an admitted fact that for four assessment years i.e. AYs 2011-12 to 2014-15, assessee never claimed this deduction in the original return of income or even in the revised return. It was also not claimed before the learned Assessing Officer during scrutiny assessment proceedings and all these claims have been raised first time in December 2017 as fresh claims before the learned CIT (A) as additional grounds. It was stated that inexplicable pattern of making the fresh claim stated to be due to inadvertent error is devoid of any merit. Assessee further stated that no specific reason supported by evidence has been mentioned as to why the alleged inadvertence occurred. Merely stating that the ground could not be raised earlier is a bald statement, which is unacceptable. Therefore, in the guise of additional ground in fact assessee is making fresh claim, which was not made earlier. The learned Departmental Representative placed reliance on the decision of Hon'ble Bombay High Court in case of Ultratech Cement Ltd. (supra) referred to by the learned CIT (A) for non- admission of additional ground. He further submitted that these additional grounds did not arise from order of the learned Assessing Officer. He further submitted that the issue, which was not subject matter of assessment, the assessee could not be termed as aggrieved person under Section 246A of the Act. The order of the learned CIT (A) Page | 29 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 is correct. He further relied on the decision of Hon'ble Bombay High Court in case of Arun Muchala vs. CIT, wherein it has been held that assessee cannot be allowed to take advantage of his own wrong. It was further submitted that all claims are required to be made only in the return of income and there is no other way known to the law for making such claim. It was also submitted that admitting fresh claims in case of a person whose case is picked up for scrutiny creates discrimination in case of a person whose case is not selected for scrutiny. Therefore, even otherwise such a method is not known to the law. Thus, no fresh claim to be raised through appellate route in the manner in which the assessee has raised appears to be contrary to both the explicit provisions and the intent of the Act. It was further stated that if new claim were allowed in the appellate proceedings, the assessed income would certainly fall below the return of income will lead to refund of tax, voluntarily paid by the assessee. It was further stated that the right route for the assessee is to file the return of income afresh and make a proper representation under Section 119(2B) of the Act. He further relied on the decision of Hon'ble Supreme Court in Additional CIT vs. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC) dated 08-11-1977, National Thermal Power Co. Ltd. VS. CIT [1998] 97 Taxman 358 (SC), Batliboi & Co. Ltd. Vs. DCIT [1998] 67 ITD 397 (Mumbai) and the decision of Hon'ble Bombay High Court in Ultratech Cement Ltd. (Supra). Page | 30 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 043. The learned Departmental Representative further contested that assessee has filed detailed Paper Book on the issue of deductibility of ESOP clearly shows that the material available for allowing the claim is not available “on record‟ before the learned Assessing Officer. He therefore submitted that, if the material was available before the learned Assessing Officer and facts were on record before the learned Assessing Officer there would not have been any need of filing such a Paper Book. 044. The learned Departmental Representative on merit submitted that piece of expenditure is contingent, notional and capital in nature. For this proposition, he relied on the order of the co-ordinate Bench in cases of Medha Servo Drivers Ltd. Vs. DCIT dated 01.02.2011 in ITA No. 1189 & 1190/Hyd/2009, DCIT vs. Blow Plast Ltd in ITA No. 512/Mum/2009 dated 26 th Nov, 2010, Mahindra & Mahindra Vs. DCIT in ITA No. 8597/Mum/2010 and M/s VIP Industries Ltd vs. DCIT in ITA no. 7242/Mum/2018. He also relied on the decision of Hon'ble Supreme Court in case of EMCO KCP Ltd. Vs. CIT 159 CTR 137, that the shares issued against assets contributed by shareholders cannot be considered as Revenue expenditure. He further submitted that ESOP expenses has not attained finality and pending before the Hon'ble Supreme Court in 2021] 131 taxmann.com 188 (SC)/[2021] 283 Taxman 290 (SC). In view of this, he submitted that CIT (A) has correctly not admitted the additional ground and even otherwise, on merits, the deduction is not allowable. Page | 31 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 045. In rejoinder, the learned Authorized Representative submitted that assessment of income of the assessee at a lower than the return of income cannot act as a bar in admitting the claim of the assessee, which is legally sustainable. For the reason that the issue is still not settled, debatable claim of the assessee passes the test laid down under Section 250(5) of the Act. On the issue of lately raising such claim cannot be classified unreasonable and not willful. He further stated that with respect to the prima facie facts available on record, there is an annual account available with the learned Assessing Officer. In this annual account, scheme wise description is given. The note not clearly shows that assessee considered it as a capital expenditure. The Judicial precedents are available in public domain, which says that the view taken by the assessee may not be correct, therefore, it is apparent that all necessary facts are available on record. He further submitted that circular issued in 1955 also comes to the rescue of the assessee. 046. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first ground that arises before us is whether raising the claim by way of an additional ground has correctly been admitted by the learned CIT (A) or not. The second question arises is whether the assessee is eligible for deduction of discount on ESOP as an expenditure or not. 047. Firstly, the fact shows that for A.Y. 2011-12, assessee filed its return of income on 30 November 2011, which Page | 32 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 was subsequently revised on 30 March 2013. Assessment was concluded on 12 March 2014. The appeal preferred before the learned CIT (A) was on 11 April 2014. On 8 December 2017, assessee raised an additional ground before the learned CIT (A) raising an additional claim of ₹143.24 crores. The learned CIT (A) after considering the submissions of the assessee and obtaining the remand report of the learned Assessing Officer and rejoinder of the assessee did not admit the additional ground. The learned CIT (A) referred to the provisions of Section 250(5) of the Act. The learned CIT (A) held that the ground could be admitted if the omission to raise such ground is not willful or unreasonable. According to the learned CIT (A) when the assessee filed its appeal it was filed with due application of mind and same was signed by Managing Director. When the audited accounts were finalized, the Board of Directors of the assessee stated it to be a capital expenditure even at the time of the filing of the return, the assessee did not claim the same therefore, filing of the return, the assessment proceedings, the appellant proceedings to the extent of filing of appeal which with due application of mind and therefore, as the omission to raise additional ground was a conscious decision considering all the facts and therefore, same is not admissible. The learned CIT (A) relied on the decision of Hon'ble Bombay High Court in case of Ultratech Cement Ltd. (supra). Page | 33 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 048. The learned CIT (A) also invoked the provisions of Section 46A of the Act and stated that the case of the assessee do not fall into parameters from (a) to (d) laid down in that Rule. Hence, he rejected the same. Therefore, he held that omission of raising the above ground in the original appeal was willful and hence, it does not pass the test of provision of Section 250(5) of the Act. 049. Section 250 deals with the procedure in appeals before the learned CIT (A). Provisions of Sub Section 5 gives power to the learned CIT (A) to go into any ground of appeal which is not mentioned in the original grounds of appeal, if he is satisfied that omission of raising that ground in the original appeal memo was not willful or unreasonable. Therefore, provision clearly provides that the learned CIT (A) has right to refuse the admission of the additional ground, if he finds that omission was willful or unreasonable. However, he has to give a reason for the same and if such reasons are not found to be proper only then such decision can be interfered with. 050. In the present case, the learned CIT (A) has given a reason that; in the books of account assessee treated it as a capital expenditure, did not claim in the return of income as Revenue expenditure, the assessee is one of the largest bank applied all its minds and therefore, did not claim the same in the original appeal or during the assessment proceeding which clearly shows that not to raise such claim was willful omission. In fact, in the present case, if the decision of the Special Bench in case of Biocon Ltd Page | 34 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 (supra), no doubt it was on July 2013, there is a change of circumstances and also the judicial precedents according to which there is hope and opinion that ESOP expenditure are allowable to the assessee as deduction under Section 37(1) of the Act. Therefore, after filing of the return of income but before the assessment such decision was available in the case of some other assessee, therefore, though the assessee raised this ground in the year 2017; therefore, availability of judicial precedents has given an option to the assessee to raise the above additional ground. Merely, because the appeal was filed on 11 April 2014, an additional ground was raised on 8 December 2017, i.e. the timeline is not only fact based on which it can be said that non-raising of the ground is unreasonable or willful omission. Further, at the time of finalization of the Return, preparation of account, assessee himself was of the belief that the impugned expenditure is capital expenditure therefore to that time the assessee was also having a view that this expenditure is not allowable to the assessee. Therefore, in claiming such expenditure, in the original return of income and now raising an additional ground cannot be said to be willful. Assessee is duty bound to file its return of income with proper due diligence, taking plausible stand about taxability of its income, Otherwise, there are severe consequences of penalties. After the assessee has same judicial precedents in its favour rendered by the courts and tribunals. Later on based on that any claim is made by raising additional ground of appeal, It cannot be said to be not a bona fide Page | 35 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 action of assessee. Assessee cannot be prevented to do so. No malafide can be attributed on part of the assessee in raising these additional grounds. Hence, according to us, it passes the test of section 250(5) of the Act. Therefore, we hold that raising the additional ground by the assessee is not willful and unreasonable failure. The ld CIT (A) ought to have admitted the same. 051. The second issue that arises is that fresh claims can be raised before the learned CIT (A) or not. Undisputedly, the claims are required to be made in the return of income under Section 139 of the Act or by filing revised return. Certain times it may happen that claims are not raised in return of income , but are raised/made before appellate authorities. Such an event may arise on account of multiple reasons, such as, availability of judicial precedents in favour of such claim, purely legal claims, etc. Those reasons cannot be exhaustively visualized. However, the issue that may arise whether, the assessee can raise fresh claim during the course of appellate proceeding or not. The learned CIT (A) has referred to the decision of Ultratech Cement Ltd. (supra) to hold that it cannot be made. Ld AR has also supported and relied on the same decision . The Hon'ble Bombay High Court in 408 ITR 500 has categorically held that additional ground relating to claim of deduction under Section 80IA cannot be permitted to raise, if necessary evidence that assessee was entitled to claim was not on record and assessee had no reason to satisfy appellate authority that ground now Page | 36 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 raised was bona fide and same could not have been raised earlier for good reasons. In that particular case, the assessee raised additional ground of appeal before the Tribunal. The claim was under Section 80IA of the Act. Assessee submitted that for the subsequent year when the claim of the assessee was allowed under Section 80IA of the Act in respect of Port for the first time the assessee raised the above additional ground. The Tribunal rejecting the same held that relevant facts are not on record for that assessment year in question and thus, the material facts to support such claim for the subject assessment year is not on record before the learned Assessing Officer, therefore, Tribunal cannot admit such fresh claims. Before the Hon'ble High Court, assessee challenged non- admission of additional ground by ITAT. The only facts available on record were that a. it was known to the Revenue that Jetty is in operation since A.Y. 1998-99 and further, b. the benefit of deduction under Section 80IA of the Act was granted in the subsequent assessment year. 052. The Revenue agitated that additional ground could be urged by the assessee for the first time in appeal only if it is supported by evidence on record for the year under consideration. Based on these facts, Hon'ble High Court following the decision of Hon'ble Supreme Court Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC), National Thermal Power Co. Ltd. v. CIT [1998] 229 Page | 37 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 ITR 383 (SC) and Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85 (SC) held that where on the pure question of law arises from facts which are already on record then there is no reason why appellate authority should not considered the question of law, so as it determine the correct tax liability of assessee in accordance with law. However, where necessary evidences, which are required to be examined for the claim of the assessee, are not recorded then the additional ground could be raised and admitted if assessee satisfies the appellate authority that such claim could not be made for good and sufficient reasons. Therefore, there could be two situations first, where the facts are on record and second, whether the facts are not on record. 053. If the facts are not on record, even then the additional ground can be raised if assessee proves that such ground could not be raised before the lower authorities for good and sufficient reasons. Such is the mandate of Hon'ble Jurisdictional High Court in 408 ITR 500. Now, therefore, we must say that whether the relevant material is on record or not, the claim of the assessee is with respect to deduction of ESOP expenditure. In this proposition, assessee has submitted the balance sheet of the assessee. As per Para no. 18.7.5, the assessee has stated that it has five employees stock option scheme, where provision for grant of options to eligible employees are made and it is approved by the remuneration committee, the board of Page | 38 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Directors and shareholders. According to those plans, vesting took place at the end of three years from the grant date for 50% of the options and at the end of five years for the balance. It also gives the details of the opening balance options grated during the year, office exercised during the year and options lapsed during the year. Therefore, what can be the closing balance of each of the ESOP scheme were also provided. The note also says that bank has charged ₹ nil for the year ended of 31 March 2011. It is also says that had the fair value method adopted the earning per share would have been lower. It also disclosed the various assumptions taken for the determination of fair value of stock option plan. Therefore, 054. Now let us see what facts were available on record and where. In this case assessee submits that in note no 18.7.7 which reads as under :- “18.7.7 ESOP Disclosures Statutory Disclosures Regarding Joining Stock Option Scheme: The Bank has five Employee Stock Option Schemes viz. Joining Stock Option Plan I (JSOP D). Joining Employee Stock Option Plan II (JESOP II), Joining Employee Stock Option Plan III (JESOP II), YBL ESOP (consisting of two sub schemes) and YBL JESOP V/ PESOP II (consisting of three sub schemes). The schemes include provisions for grant of options to eligible employees. All the aforesaid schemes have been approved by the Board Remuneration Page | 39 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Committee and the Board of Directors and were also approved by the members of the Bank. JSOP I is administered by the Board Remuneration Committee of the Bank and was in force for employees joining the Bank on or before March 31, 2005. All the grants under JSOP I were made before the IPO of the Bank. JESOP II and JESOP III are administered by the Board Remuneration Committee of the Bank and were in force for employees joining the Bank up to March 31, 2006 and March 31, 2007 respectively. YBL ESOP (JESOP IV), a sub scheme of YBL ESOP and YBL JESOP V, a sub scheme of YBL JESOP V/ PESOP II are also administered by the Board Remuneration Committee of the Bank and are in force for employees joining the Bank from time to time. Under the above Plans, vesting takes place at the end of three years from the grant date for 50% of the options granted and at the end of five years for the balance. Options under all these plans are granted for a term of 10 years (inclusive of the vesting period) and are settled with equity shares being allotted to the beneficiary upon exercise. 18. Notes forming part of the Accounts for the year ended March 31, 20110 (Continued) 18.7 Disclosures as required by Accounting Standards (Continued) 18.7.7 ESOP disclosures (Continued) Page | 40 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 YBL ESOP (PESOP 1), a sub scheme of YBL ESOP, YBL PESOP II and YBL PESOP II 2010, sub schemes of YBL JESOP V/ PESOP II are Performance Stock Option Plans and are also administered by the Board Remuneration Committee of the Bank. Under YBL ESOP (PESOP I) vesting takes place at the end of each year from the grant date for 25% of the options granted and are settled with equity shares being allotted to the beneficiary upon exercise. Under YBL PESOP II, 30% of the granted options vest at the end of first year, 30% vest at the end of second year and balance 40% vest at the end of third year. Further grants under PESOP II had been discontinued with effect from January 20, 2010. Under YBL PESOP II- 2010, 30% of the granted options vest at the end of the third year, 30% vest at the end of the fourth year and balance vest at the end of the fifth year. A summary of the status of the Bank's stock option plans is set out below: Particulars JSOP_I JESOP-II JESOP-III JESOP-IV YBL PESOP I YBL PESOP II JESOP V PESOP II 2010 Opening balance 1,114,779 1,571950 2,924,961 3,893,500 4,005,300 13,646,150 1,835,000 4,533,000 Add: Option granted during the year - - - - - - 2,261,000 4,533,000 Less: Options exercised during the year 653,279 499,880 939,061 558,700 972,820 3,856,115 - - Less: Options lapsed during the year closing balance - 18,750 860,000 499,500 182,625 985,735 583,500 290,000 Approved by October April 26, July 24, August August, Sep 18, Sep 18, July 2, Page | 41 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 shareholders on Options granted and exercised during the year Options granted and eligible for exercising and exercised during the year 27,2004 2005 2006 29, 2007 29, 2007 2008 2008 2010 The Bank has charged ₹ Nil, being the intrinsic value of the stock options granted for the year ended March 31, 2011. Had the Bank adopted the Fair Value method (based on Black-Scholes pricing model), for pricing and accounting of options, net profit after tax would have been lower by 224,012 thousands, the basic earnings per share would have been 20.47 per share instead of 21.12 per share; and diluted earnings per share would have been ₹ 19.63 per share instead of 20.25 per share. 18. Notes forming part of the Accounts for the year ended March 31, 20110 (Continued) 18.7 Disclosures as required by Accounting Standards (Continued) 18.7.7 ESOP disclosures (continued) The following assumptions have been made for computation of the fair value Particulars JSOP I JESOP II JSOP III JESOP IV YBL PESOP-I UBL PESOP-II JESOP V PESOP II 2010 Risk free interest rate 6.54% ~6.81% 6.73% ~7.45% 7.27% ~8.23% 7.48% ~8.55% 5.98% ~8.51% 4.96% ~8.51% 5.20% ~8.55% 5.83% ~7.49% Page | 42 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Expected life 6.5 yrs to 7.5 yrs 6.5 yrs to 7.5 yrs 6.5 yrs to 7.5 yrs 4.5 yrs to 7.5 yrs 1.5 yrs to 6 yrs 1.5 yrs to 4.5 yrs 4.5 yrs to 7.5 yrs 4.5 yrs to 7.5 yrs Expected volatility 50.58% 35.97% ~49.92% 35.82% ~41.74% 39.94% ~64.92% 40.74% ~82.76% 61.31% ~82.76% 54.63% ~82.76% 39.75% 63.71% Expected dividends 1.44% 1.13% ~1.23% 1.13% 1.13% ~1.5% 1.13% ~1.5% 1.5% 1.5% 1.5% The price of the underlying share in market at the time of option grant (₹) Not listed 96.51 105.78 176.48 166.59 123.62 233.03 270.61 In computing the above information, certain estimates and assumptions have been made by the Management which have been relied upon by the auditors.” 055. In present case before us, we find assessee has disclosed the preliminary facts with respect to the employee‟s stock option scheme in its annual accounts. The details with respect to each of the scheme, options granted during the year, exercised during the year and options lapsed during the year along with the closing balance of each of the scheme are shown. It also shows how in the books of accounts the treatments of stock options granted are made. Various assumptions in arriving in the fair valuation of the options showing risk free interest rate, expected life, volatility and expected dividend are also disclosed. The details also show the market price of the shares of the company at the time of grant of options. Therefore, it cannot be said that the primary facts of deduction for ESOP is not available on record. No doubt, the final computation of allowable deduction is required to be produced and verified by the assessee. However, absence of such allowable deduction at the time of Page | 43 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 assessment stage cannot deprive the assessee in raising the additional claim. Had such deduction already computed at the time of filing of the return of income or during the course of assessment proceedings, the occasion would not have arisen, for making this additional claim before the learned CIT – A by raising an additional ground. In view of this, we are of the view that the learned CIT – A is not correct in not admitting the additional ground raised by the assessee in respect of deduction of discount on issue of shares Under ESOP scheme. In the result ground, number 6 of the appeal of the assessee is allowed. 056. Ground number 6 has also another subsidiary ground, alternatively raised for claim of deduction of discount on issue of shares Under ESOP scheme. As we have held that, the learned CIT – A should have admitted additional ground of the assessee, we do not find it appropriate here to allow the claim of the assessee for the simple reason that deduction is required to be verified with respect to its quantum by the lower authorities. Accordingly, we set- aside the alternative ground of allowability of discount on issue of shares Under the employee stock option plan of ₹ 1,432,422,420/– back to the file of the learned assessing officer to examine the claim of the assessee and allow it in accordance with the law. The assessee is directed to produce the requisite details before the learned assessing officer. If the AO, on examination of such details, is not satisfied with the claim of the assessee, a reasonable opportunity of hearing is required to be given. Page | 44 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Accordingly, alternative claim of the assessee is restored back to the file of the learned AO. Accordingly, ground number 6 of the appeal is partly allowed. 057. In the Result, appeal filed by the assessee in ITA number 3498/M/2018 for assessment year 2011 – 12 is partly allowed and appeal of the learned assessing officer in ITA number 3236/M/2018 for the same assessment year is dismissed. Assessment year 2012 – 13 ITA numbers 3499/M/2018 (by assessee) and ITA number 3237/M/2018 (by AO) 058. For assessment year 2012 – 13 cross appeals are filed before us against the order passed by the Commissioner of income tax (Appeals) – 5, Mumbai dated 31/1/2018 059. ITA numbers 3499/M/2018 , assessee has raised following grounds of appeal:- Ground NO I : setting aside the ground to the file of the AO 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in effectively setting aside the ground of appeal numbers III, IX and XI to the file of the AO, which is beyond the powers conferred u/s 251 of the act Page | 45 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 2. the appellant prays that it be held that the order of the CIT (A) is void ab initio and/or otherwise bad in law GROUND No II:- disregarding the direction on the tribunal with respect to disallowance u/s 14 A of the act 1) on the facts and circumstances of the case and in law, the honourable CIT (A) erred in going beyond the order of the honourable ITAT in the appellant‟s own case for earlier year in directing the AO to re- examine the entire claim made by the appellant GROUNd No III :- disallowance of interest and expenses u/s 14 A of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the proportionate interest expenditure u/s 14 A of the act 2. he further erred in rejecting the plea of the appellant that when the securities are held as stock in trade, no disallowance can be made u/s 14 A of the act 3. the appellant, therefore, prays that the disallowance u/s 14A of the act, including the SUO Moto disallowance of ₹ 233,399/– made by the appellant, be deleted Page | 46 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 GROUND No IV : order made on the basis of surmises and assumptions is bad in law 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the claim for deduction u/s 35D of the act on the assumption that the shares may have been allotted only to selected QIPs 2. the appellant prays that an order made on surmises and presumption is bad in law and void ab initio GROUND No V : disallowance of deduction claimed u/s 35D on expenses incurred in connection with the qualified institutional placement [ QIP] 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in confirming the disallowance of deduction of ₹ 28,280,291/– claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not amount to public subscription and such capital expenses are not eligible for deduction u/s 35D of the act 2. the appellant prays that the AO be directed to allow ₹ 2,82,80,291/– as a deduction u/s 35D of the act GROUND no VI :-disallowance of QIP expenses by invoking Section 40 (a) (i)/(ia) of the act Page | 47 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the expenses in connection with QIP on the ground that the expense may not be allowable in view of Section 40 (a) (I)/(ia) of the act 2. the appellants paid that the AO be directed to allow the expenses in connection with the QIP GROUND no VII the valuation of securities held as stock in trade 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify book entries as regards the system of accounting followed in valuation methodology adopted while following the deduction for loss on year and revaluation of securities GROUND NO VIII :- setting aside to the AO the issue of allowance of brokerage paid on HTM securities 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify the by fortification of securities Under different categories when all the details were available on record and no further verification was required GROUND No IX :-disallowance of brokerage paid on acquisition of HTM investments Page | 48 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not following his own order in appellant‟s case for assessment year 2011 – 12 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in partly confirming the action of the AO of disallowing the brokerage paid on HTM securities though all the securities are held by the appellant as stock in trade 3. the appellant prays that the disallowance of brokerage paid on HTM securities be deleted GROUND NO X : setting aside to the AO the ground of Section 36 (1) (viia) of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify whether the appellant had rural branches within the meaning of Section 36 (1) (viia) when all the relevant details were submitted before him as additional evidences during the appellate proceedings and on which the AO had given his remand report 2. the appellant prays that the claim of deduction u/s 36 (1) (viia) of the act be allowed without sending it back to the AO for verification GROUND No XI:- non-allowability of deduction claimed u/s 36 (1) (viia) of the act Page | 49 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in contradicting his own stand by rejecting the claim for deduction u/s 36 (1) (viia) of the act after directing the AO to allow the claim of the verification of facts 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in confirming the action of the AO of rejecting the claim of the appellant of ₹ 115,677,762/– made u/s 36 (1) (viia) of the act 3. he further added holding that the deduction u/s 36 (1) (viia) is available only in respect of advances given by rural branches 4. he further added holding that the claim for deduction u/s 36 (1) (viia) is available only when separate and distinct provisions is made by the appellant in respect of advances made by its rural branches 5. the appellant prays that the claim for deduction u/s 36 (1)(viia) of the act amounting to ₹ 115,677,762/– be allowed Ground No XII alternatively on higher deduction u/s 36 (1) (vii) in subsequent year 1. on the facts circumstances of the case and in law the honourable CIT (A erred in not directing the AO to allow the alternatively that the bad debts in assessment year 2013 – 14 be correspondingly Page | 50 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 allowed on higher side by reducing the opening balance of provision for bad and doubtful debt for assessment year 2013 – 14 2. the appellant prays that the AO be directed to allow bad debts in assessment year 2013 – 14 on higher side by reducing the opening balance of provision for bad and doubtful debts for assessment year 2013 – 14 GROUND No XIII non-admission of additional ground of appeal 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in rejecting the additional ground raised by the appellant, in respect of discount on issue of shares Under the employee stock option plan (ESOP) without appreciating the fact that the appellant authorities can admit and adjudicate the additional film raised by the assessee during the course of appellate proceedings 2. the appellant prays that the claim for deduction in respect of discount on issue of shares Under the ESOP be allowed GROUND no XIV deduction of discount on issue of shares under the employee stock option plan {ESOP] 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not allowing the claim for deduction in respect of discount on issue of Page | 51 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 shares Under the ESOP amounting to ₹ 107,39,69,980/– 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not giving any finding on the additional evidences filed by the appellant 3. the appellant prays that the claim for deduction in respect of discount on issue of shares Under ESOP be allowed 060. Despite the appeal filed by the assessee in 2018 raising lengthy, argumentative, descriptive grounds of appeal, till 2022 assessee did not care to revise those grounds of appeal. However, in the interest of justice we proceed with the appeal. 061. In ITA number 3237/M/2018 the learned assessing officer has raised following grounds of appeal:- 1. whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance made u/s 14 A of the IT act without appreciating the fact that the disallowance u/s 14 A has to be mandatorily calculated as per rule 8D of IT rules and no discretion is available with the AO for estimated disallowances. 2. Whether on the facts and in the circumstances of the case and in law the learned CIT (A) was right in allowing depreciation on HTM securities without Page | 52 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 appreciating the fact that such securities do not form part of stock in trade 3. whether on the facts and in the circumstances of the case and in law the learned CIT (A) was right in allowing depreciation on HTM securities without appreciating the fact that the RBI guidelines cannot override the statutory provisions of the IT act for the purpose of valuation of closing stock of securities 4. whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance of brokerage paid on acquisition of investment without appreciating the fact that such expenditure is in the nature of capital expenditure and forms a part of cost of assets 5. whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete BPI without appreciating the fact that the HTM category of securities are long-term securities held till maturity and forming part of investment and not as stock in trade hence BPI on HTM securities is a capital outlay and hence not an allowable deduction 6. whether on the facts and in the circumstances of the case and in law it CIT (A) was right in directing to delete BPI without considering the decision of the honourable Supreme Court in the case of Vijaya bank Ltd versus additional Commissioner of income tax Page | 53 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 (1991) 187 ITR 547 (SC) wherein it is held that the BPI is a part of capital outlay for acquisition of securities and hence not an allowable deduction 7. whether on the facts and circumstances of the case and in law, the learned CIT (A) was right in directing to delete premium amortised without appreciating the fact that the HTM category of securities are held as investment i.e. a capital asset and hence amortisation of premium paid on such securities will form part of cost of acquisition of HTM securities and hence not an allowable deduction 062. Brief facts of the case shows that the assessment order was passed u/s 143 (3) of the income tax act 1961 on 31/3/2015 by the learned assessing officer assessing the total income of the assessee at ₹ 17,156,743,620/– against the returned income filed by the assessee on 29/9/2012 which was subsequently revised on 30/3/2014 at ₹ 15,557,206,530/– . The learned assessing officer made the following disallowances i. disallowance u/s 14 A of ₹ 120,603,405/– ii. disallowance of deduction u/s 35D for allotment to QIP of Rs 2, 82,80,291/– iii. provision on investment amounting to ₹ 160,152,000/– iv. brokerage paid on acquisition of investment ₹ 386,405 v. provision for bad and doubtful debts of 11,56,77,762 Page | 54 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 vi. broken period interest charged to tax of ₹ 866,301,425 vii. amortisation of premium paid on held to maturity securities amounting to ₹ 308,135,800 063. Assessee preferred an appeal before the learned CIT – A who passed an order on 31/1/2018 allowing certain deductions and confirming certain disallowances. The learned CIT – A also did not admit certain additional evidences as well as the additional ground raised by the assessee on the issue of deduction under employee stock option plan. Therefore, both the parties are aggrieved with that order and have preferred this appeal. 064. We first come to the appeal of the assessee. 065. As per ground number 1 assessee has challenged the setting aside the ground to the file of the learned AO on certain issues. No specific arguments were produced before us and therefore ground number 1 is dismissed 066. ground number two is with respect to the disallowance u/s 14 A of the act wherein the assessee is aggrieved in and not following the order of ITAT by the learned CIT – A and with respect to ground number 3 the assessee is aggrieved with the disallowance of interest expenditure u/s 14 A of the act. Therefore, ground number 2 and 3 are against the disallowance u/s 14A of the act. The fact shows that assessee has earned exempt income in the form of dividend of ₹ 5,652,800/– on the shares, which would though not, purchased by the assessee but which were acquired by the assessee in corporate debt restructuring as a part of the rehabilitation package where the outstanding loan was converted into equity. Further the assessee has earned tax free interest income of ₹ Page | 55 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 154,01,205/– the assessee was asked to furnish the details regarding the disallowance u/s 14 A of the act as assessee was holding investment in equity share capital of the company. The assessee submitted a detailed letter stating that it has earned tax-free dividend incomes, which are part of the securities. However, the assessee has offered the disallowance of the custody charges and Treasury cost amounting to ₹ 124,161 as a direct expenditure. With respect to the indirect expenditure, it identified several head of expenditure and also applied percentage thereon and disallowed ₹ 109238/– as indirect expenditure. With respect to the percentage, it employed the number of deals in the financial year compared to the number of deals pertaining to the equity. Accordingly it disallowed a sum of Rs. 233,399/–. The assessee raised several other legal arguments. The learned assessing officer rejected the contentions of the assessee and held that the provisions of rule 8D are mandatory accordingly, he worked out the disallowance according to that rule and computed the total disallowance of ₹ 120,836,804. After reducing the disallowance already offered by the assessee of ₹ 233,399/–, the net disallowance of ₹ 120,603,405/– was made. Assessee challenged the disallowance before the learned CIT – A who set-aside the issue back to the file of the learned assessing officer directing the AO to follow the direction contained in the order of the ITAT for assessment year 2008 – 09. Therefore, the assessee is aggrieved with that order. 067. Before us the learned authorised representative has challenged that the AO has failed to record any satisfaction to the disallowance offered by the assessee, no interest disallowance can be made to the extent of interest free funds available with the assessee, disallowance u/s 14 A of the act cannot be made Page | 56 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 when securities are held as stock in trade of the business, only those investments are required to be taken into consideration which gives exempt dividend income and only net interest expenditure after setting off of interest income should be considered for the purpose of interest disallowance u/s 14 A of the act. The assessee submitted dozens of judicial precedents with respect to each of these issues. 068. The learned departmental representative vehemently supported the order of the learned assessing officer. 069. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the assessee has though Under exempt income u/s 10 (35) as well as u/s 10 (34) of the act and offered disallowance of ₹ 233,399/–. Assessee also submitted the working of the above disallowances. However, the learned assessing officer without recording any satisfaction u/s 14 A (2) of the act proceeded to compute the disallowance under rules 8D of the act. This issue is identical to the issue involved in the appeal of the assessee for assessment year 2011 – 13 wherein we have held that as the learned assessing officer has failed to record any satisfaction with respect to the correctness of the claim of the assessee of the disallowance offered, the learned assessing officer could not have proceeded to compute the disallowance Under rule 8D of the act. Accordingly, we have deleted the disallowance and directed the learned assessing officer to restrict the disallowance as offered by the assessee. As there is no change in the facts and circumstances of the case for this year also, we direct accordingly. Accordingly, ground numbers 2 – 3 of the appeal are allowed. Page | 57 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 070. Ground number 4 of the appeal is with respect to the disallowance of deduction u/s 35D of the act. Ground number 5 is also with respect to the disallowance of deduction amounting to ₹ 28,280,291/– claimed u/s 35D in respect of issue made of shares to QIP. Ground number 6 of the appeal is also with respect to the invoking provisions of Section 40 (a (I) and (I) of the act for non-deduction of tax at source. The facts relating to the above disallowance shows that during the year assessee has raised 1033.87 crores in the financial year 2009 – 10 a qualified institutional placement by issue of share capital. Assessee has incurred an expenditure aggregating to ₹ 14,14,01,453/– on account of fees of lead managers and auditors et cetera accordingly the assessee has claimed deduction u/s 35D of the act of Rs 2 82,80,291/– being 1/5 of the total amount of the expenditure incurred u/s 35D of the act. Assessing Officer was of the view that expenditure if incurred in respect to the issue for public subscription is allowable. According to the AO, the shares are only allotted to QIP and therefore it is not a public issue of shares and therefore the deduction is not allowable. Assessee preferred an appeal before the learned CIT – A who held that the expenditure incurred by the assessee is not in connection with the issue for public subscription of shares and therefore the deduction as rightly been disallowed. 071. The assessee has come up in appeal before us stating that disallowance of deduction is already covered in favour of the assessee by the assessee‟s own case for assessment year 2010 – 11 in ITA number 3497/M/2018. He further relied on the decision of coordinate bench in 70 SOT 600. This ground is identical to the ground raised in appeal of the assessee for Page | 58 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 assessment year 2011 – 12. Therefore, the argument of the assessee was also similar. 072. The learned departmental representative vehemently supported the orders of the lower authorities and stated that the provisions of Section 35D of the income tax act grants deduction of expenditure only if it is issued in connection with a public issue. 073. We have carefully considered the rival contention and perused the orders of the lower authorities. The identical issue arose in the case of the assessee on the same set of facts and circumstances. We find that the provisions of Section 35D (2) (c) of the act grants deduction of expenditure incurred in relation to expenditure on public subscription of shares. The facts are not coming out that whether the allotment of shares to QIP is made in public subscription or in private placement. In earlier year i.e. assessment year 2011 – 12, we have set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to show whether it was an issue of shares of public subscription of private placement. The learned assessing officer may examine the claim as soon as submitted by the assessee and decide the issue afresh. Accordingly, ground number 4 and 5 of the appeal is allowed with above directions. 074. With respect to ground number 6 on disallowance of QIP expenses by noting whether the expenditure are subject to deduction of tax at source or not. We find that in this year the expenditure has not been incurred by the assessee and therefore the question does not arise of disallowance u/s 40 Page | 59 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 (a)(ia) and (i) of the act. In the result ground, number 6 of the appeal is not required to be adjudicated. 075. Ground number 7 is with respect to the revaluation of securities held as stock in trade amounting to ₹ 160,152,000/– is disallowed by the learned AO. The brief facts of the case show that assessee is holding investment in securities. The method of valuation followed by the assessee is to value investment at cost of market value in line with the guidelines issued by the reserve bank of India on valuation of investment. During the year, the assessee has shown depreciation in the value of securities amounting to ₹ 160,152,000 and assessee has claimed the deduction of the sum. Assessee submitted that according to the guidelines of the reserve bank of India the assessee is required to value each of the investment in different buckets and the amount of losses arising on this valuation. It relied on several judicial precedents also. The assessee submitted that out of the above provision are sum Of Rs 2,99,74,000 was a provision for investment relating to the equity shares on prudent basis. The learned assessing officer held that the guidelines issued by the reserve bank of India are not determinative to grant any deduction to the assessee Under the income tax act. Therefore, the entire depreciation provided in the books of ₹ 160,152,000 was disallowed. The assessee preferred an appeal before the learned CIT – A. The learned CIT – A in paragraph number 6.3 wherein he held that the treatment given by the learned assessing officer with respect to the assets/investments available for sale and held for trading are treated as stock in trade however the investment held to maturity category are treated by the AO as a capital asset. At page number 60, the learned CIT appeal has given a categorical finding that all the three types of investments i.e. Page | 60 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 available for sale, held to maturity and held for trading are stock in trade of the assessee and therefore revaluation laws with respect to all the three would be allowable to the assessee as per regular system of accounting followed by the assessee. This claim was allowed by the learned CIT appeal. However, he directed the AO to verify actual book entries before allowing deduction about the system of accounting followed by the assessee and the method of valuation adopted. 076. Assessee is aggrieved with this direction and is in appeal before us. We have carefully considered the rival contentions and find that this issue has been decided in favour of the assessee by the learned CIT – A but has given a direction to the AO to verify the accounting entries and the method of valuation adopted by the assessee. This issue has also been considered by the coordinate benches in assessee‟s own case for assessment year 2006 – 07 and 2007 – 08 wherein loss in Revelation of securities classified as held for trading in available for sale is held to be a revenue expenditure and allowable as deduction. We do not find any reason to sustain the order of the learned CIT – A for the purpose of verification to the file of the learned AO wherein identical deduction is allowed to the assessee in earlier years also. It would be a futile exercise. In view of this, we allow ground number 7 of the appeal. 077. Ground number 8 of the appeal is with respect to disallowance of brokerage paid on acquisition of held to maturity investments. The facts of the case shows that assessee charges to the revenue the amount of expenditure incurred such as brokerage commission et cetera on purchase of investments paid at the time of acquisition itself as an expenditure. This method is challenged by the AO and accordingly he held that Page | 61 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 whatever is the amount of investment which has been carried forward at the end of the accounting year, the expenditure of brokerage et cetera paid on such investments which have not been sold during the year are not allowable to the assessee as a deduction as revenue expenditure. The learned CIT A noted that there is no details available whether the disallowance has been made by the learned assessing officer with respect to the category of investment available for sales, held for maturity or held for trading. He held that if the securities are held for trading then the brokerage expenses relating to that should be disallowed. Accordingly, he confirmed the disallowance of ₹ 384,405/– subject to verification by the learned assessing officer. 078. Assessee is aggrieved with that order and is submitting that that the issue is covered in favour of the assessee by the decision of honourable Supreme Court in 289 ITR 6, honourable Delhi High Court in 378 ITR 197 and Delhi benches of ITA T in 82 taxmann.com 251. It is further stated that it is also covered in view of circular number 18/2015 dated 2/11/2015. 079. The learned departmental representative vehemently supported the orders of the lower authorities. 080. We have carefully considered the rival contention and perused the orders of the lower authorities. Identical in this issue has been decided by the learned CIT – A wild deciding the appeal of the assessee for assessment year 2011 – 12 in favour of the assessee however for deciding the appeal of the assessee for assessment year 2012 – 13 he has taken a diametrically opposite view. When the above view was challenged for assessment year 2011 – 12 before the coordinate bench, we Page | 62 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 have upheld the order of the learned CIT – A. Therefore, this issue is now squarely covered in favour of the assessee by the decision given by us in the appeal filed by the revenue for assessment year 2011 – 12, which is decided by this same order. We do not find any reason to deviate from the same accordingly, ground number 9 of the appeal is allowed. 081. Ground number 10 of the appeal is against the order of the learned CIT – A aside the order of the learned AO with respect to deduction claimed u/s 36 (1) (viia) of the act and further ground number 11 is with respect to the claim of the above deduction of ₹ 115,677,762. As per ground, number 12 assessee has raised an alternative plea that bad debts in assessment year 2013 – 14 the correspondingly allowed on higher side by reducing the opening balance of the provisions for bad and doubtful debts for assessment year 2013 – 14. The facts related to the above issue shows that that assessee company has claimed a deduction under this Section of ₹ 115,677,762 and made a provision for non-performing assets. The 7.5% of the income of the assessee company comes to Rs 117,55,45,107/–. Assessee has claimed deduction lower of these two amounts at ₹ 115,677,762/–. The assessee was questioned that how the deduction is available to the assessee in view of the decision of the honourable Supreme Court in case of 343 ITR 270. The assessee submitted that the entire provision is with respect to urban branches and assessee did not have any rural advances. The bank is entitled to deduction at the rate of 7.5% of total income and 10% of aggregate average advances made by the rural branches. Therefore, assessee is entitled to the above deduction. Assessee also submitted that it has return of bad debts amounting to ₹ 165,394,457 u/s 36 (1) (vii) which has not been claimed as Page | 63 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 deduction which is more than the right of ₹ 929,421,651/–. The learned assessing officer rejected the contention of the assessee holding that deduction Under this Section can only be claimed in respect of rural advances. As assessee has admitted that it has not created any provision because of rural advances and the total claim of deduction is with respect to the urban branches, following the decision of the honourable Supreme Court the assessee is not entitled for the deduction amounting to ₹ 115,677,762. 082. The assessee challenged the same before the learned CIT – A dismissed the claim of the assessee holding that deduction u/s 36 (1) (viia) can be granted only if assessee had rural branches and these rural branches had given advances. He held that the details regarding list of rural branches and the quantum of advances given and the relevant income tax rules remains unverified. He therefore directed the learned assessing officer to verify that assessee had rural branches within the meaning of it u/s 36 (1) (viia) of the act then the deduction allowable will be computed. Therefore, he rejected the claim of the assessee. Before him and assessee also made an alternative claim which was also rejected? Therefore, assessee is in appeal before us. 083. The learned authorised representative submitted that the reasons for which the learned CIT – A has rejected the claim of the assessee is squarely covered in favour of the assessee by the decision of several coordinate benches. He referred to the decision of Sadhna sahkari bank Limited versus ACIT hundred and 18 taxman.com 526, Bhagini Nivedita sahkari bank Limited versus DCIT 174 ITD 303,Kodangullar account co- Page | 64 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 operative Bank Ltd versus ACIT 160 ITD 132 and DCIT versus ING Vasya bank Ltd 149 ITD 611. 084. The learned departmental representative vehemently supported the order of the lower authorities. 085. We have carefully considered the rival contention and perused the orders of the lower authorities. The only reason why the deduction is disallowed to the assessee is that assessee does not have any rural branches. we find that deduction u/s 36 (1) (viia) of the act is not restricted to the banks only having the rural branches. This has been dealt with in 42 taxmann.com 303 as under :- “34. It can be seen from the history of Sec.36(1)(viia) of the Act that at stage-I the deduction was allowed in respect of any provision for bad and doubtful debts made by a scheduled bank in relation to the advances made by its rural branches. At this stage the PBDD had to be linked to the advances made by Bank's rural branches. At stage-II of Sec.36(1)(viia), the deduction while computing the taxable profits was allowed of an amount not exceeding ten per cent of the total income (computed before making any deduction under the proposed new provision) or two per cent of the aggregate average advances made by rural branches of such banks, whichever is higher. At this stage also the PBDD had to be created and debited to the profit and loss account but it was not required to be done in relation to advances made by Bank's rural branches and can be in relation to any debt. PBDD need not be in relation to rural advances but can be in relation to any advances both rural and non-rural advances. The two percent AAA made by rural branches of such banks had to be computed and the PBDD made in books has to be in relation to rural advances. The other eligible sum which can be considered for deduction u/s.36(1)(viia) of the Act viz., ten per cent of the total income (computed before making any deduction under the proposed new provision) does not require computation in relation to rural advances. Nevertheless the debit of PBDD to Profit and Loss account is necessary of the higher of the two sums to claim deduction u/s.36(1)(viia) of the Act. If the concerned bank does not have rural branches then they could not claim the deduction. Therefore the deduction was confined only to banks that had rural branches. 35. At Stage-III of the provisions of Sec.36(1)(viia) of the Act, the deduction allowed earlier was enhanced. The enhancement of the deduction was consequent to representation to the Government that the existing ceiling in this regard i.e. 10% of the total income or 2% of the aggregate average advances made by the rural branches of Indian banks, whichever is higher, should be modified. Accordingly, by the Amending Act, the deduction presently Page | 65 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 available under cl. (viia) of sub-s. (1) of s. 36 of the IT Act has been split into two separate provisions. One of these limits the deduction to an amount not exceeding 2% (as it existed originally, now it is 10%) of the aggregate average advances made by rural branches of the banks concerned. This will imply that all scheduled or non-scheduled banks having rural branches would be allowed the deduction (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) a further deduction upto 5% of their total income in respect of provision for bad and doubtful debts. The further deduction of 5% of total income was available to banks which did not have rural branches. 36. Therefore after 1.4.1987, scheduled or non-scheduled banks having rural branches were allowed deduction., (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) Schedule or non-scheduled banks whether it had rural branches or not a deduction upto 5% of their total income in respect of provision for bad and doubtful debts. Even under the new provisions creating a PBDD in the books of accounts is necessary. 37. Though under Stage-II and Stage-III of the provisions of Sec.36(1)(viia) of the Act, PBDD has to be created by debiting the profit and loss account of the sum claimed as deduction, the condition that the provision should be in respect of rural advances is not necessary. At stage-II of the provisions of Sec.36(1)(viia) of the Act, this condition was done away with and it was only necessary to create PBDD in the books of accounts and debit to profit and loss account. The quantification of the maximum deduction permissible u/s.36(1)(viia) of the Act had to be done. Firstly it has to be ascertained as to what is 10% of the aggregate average advances made by rural branches, if the Bank has rural branches, otherwise that part of the deduction u/s.36(1)(viia) of the Act will not be available to the bank. The second part of the deduction u/s.36(1)(viia) has to be ascertained viz., 7.5% seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VI-A). The above are the permissible upper limits of deductions u/s.36(1)(viia) of the Act. The actual provision made in the books by the Assessee on account of PBDD (irrespective of whether it is rural or non-rural) has to be seen. To the extent PBDD is so created, then subject to the permissible upper limits referred to above, the deduction has to be allowed to the Assessee. The question of bifurcating the PBDD as one relating to rural advances and other advances (Non-rural advances) does not arise for consideration.” 086. Therefore respectfully following the decision of the coordinate bench we hold that the lower authorities were not justified in denying deduction u/s 36 (1) (viia) of the act. Therefore, we set-aside the whole issue back to the file of the learned assessing officer to compute the deduction allowable to the assessee Under this Section and grant the same. In view of this ground number 10 of the appeal is allowed. Page | 66 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 087. In view of our decision in ground number 10 of the appeal ground number, 11 and 12 becomes redundant/ infructuous and therefore it is dismissed. 088. Ground number 13 and ground number 14 of the appeal is with respect to the non-admission of additional ground of appeal by the learned CIT – capital with respect to the deduction of employee stock option plan discount. 089. Both the parties confirm that this issue is identical to the appeal of the assessee for assessment year 2011 – 12. We have carefully considered the rival contention and find that the issue involved in this appeal ground is exactly the same as it was in appeal of the assessee for assessment year 2011 – 12 where the learned CIT – A refuse to admit the additional ground of appeal. In that appeal, we have held that the learned CIT – A was incorrect in not admitting the additional ground of appeal. Therefore, for similar reasons we hold that the learned CIT – A was incorrect in not admitting the additional ground of appeal. In the result ground, number 13 of the appeal is allowed. 090. Ground number 14 is with respect to the allowability of the deduction. This ground is also identical to the appeal of the assessee for assessment year 2011 – 12 where we have sent the issue back to the file of the learned assessing officer to grant the deduction of employee stock option plan discount to the assessee. For similar direction we also set-aside ground number 14 of the appeal. 091. In the result, appeal of the assessee in ITA number 3499/M/2018 for assessment year 2012 – 13 is partly allowed. Page | 67 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 092. Now we come to the appeal of the assessing officer. The first ground of appeal is with respect to disallowance u/s 14 A of the act. Ground number 2 and 3 of the appeal of the assessee is also on the same issue. We have already held that the learned assessing officer has not recorded satisfaction u/s 14 A (2) of the act prior to proceeding for computing disallowance Under rule 8D and therefore we have allowed those grounds while deciding the appeal of the assessee in favour of the assessee. In view of this ground number, 1 of the appeal of learned AO does not survive. Hence, we dismiss the same. 093. Ground number 2 and 3 is with respect to the allowance of revaluation loss arising on HTM securities by the learned CIT – A. We find that this issue is linked with ground number 7 of the appeal of the assessee. Ground number 7 is with respect to the amortization of premium paid for acquisition of held to maturity securities. 094. The learned authorised representative stated that that this issue is now squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in case of CIT versus HDFC bank Ltd 366 ITR 505 wherein loss on revaluation of securities classified as held till maturity is a revenue expenditure. 095. The learned departmental representative vehemently supported the order of the learned assessing officer. 096. We have carefully considered the rival contention and perused the orders of the lower authorities. We fully agree with the learned authorised representative that identical issue has been decided by the honourable Bombay High Court in favour of the Page | 68 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 assessee in CIT versus HDFC bank Ltd 366 ITR 505 while deciding the issue number ( C ) , the issue being (C) Whether the ITAT is right in law in holding that the assessee is entitled for deduction with respect to the diminution in value of the investment and amortization of premium on investment held to maturity on the ground of mandate by RBI guidelines thereby ignoring the decision of the Supreme Court in the case of Southern Technologies v. CIT (320 ITR 577) ?" The honourable High Court held as Under : 7. As far as question (C) is concerned, we find that an identical question of law was framed and answered in favour of the Assessee by this Court in its judgement dated 4-7-2014 in Income Tax Appeal No.1079 of 2012, CIT-2 v. Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.). Mr Suresh Kumar fairly stated that question (C) reproduced above is covered by the said order. In view thereof, we are of the view that even question (C) does not raise any substantial question of law that requires an answer from us. 097. In view of this, ground number 2, 3 and 7 of the appeal of the AO are dismissed. 098. Ground number 4 is with respect to the disallowance of brokerage paid on acquisition of investments holding it to be a capital expenditure. We also find that this issue is also covered in favour of the assessee by our own decision in case of the Page | 69 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 assessee for assessment year 2011 – 12. The facts of the issue remains the similar and therefore we do not have any reason to deviate from the same. Accordingly, we dismiss ground number 4 of the appeal of the AO. 099. Ground number 5 and 6 with relation to the broken period interest allowable as a deduction. The learned authorised representative stated that the honourable Bombay High Court in CIT versus HDFC bank Ltd has decided the issue while deciding ground number (b) before them. The learned departmental representative supported the order of the AO. 0100. We find that this issue squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in CIT versus HDFC bank Ltd 366 ITR 505 wherein while deciding issue number (b) i.e. B) Whether the ITAT was correct in law in holding that the broken period interest is allowable as a deduction, inspite of the Hon'ble Supreme Court's decision in the case of CIT v. Vijay Bank (187 ITR 541) and the Rajasthan High Court's decision in the case of Bank of Rajasthan (316 ITR 391) ? Honourable High Court held as Under:- “6. Even as far as question (B) is concerned, we find no infirmity in the orders passed by the CIT (Appeals) or the ITAT. In deciding this issue, CIT (Appeals) and the ITAT have merely followed the judgment of this Court in the case of American Express International Banking Corpn. v. CIT [2002] 258 ITR 601/125 Taxman 488. On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr Suresh Kumar is squarely answered by the judgment of Page | 70 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 this Court in the case of American Express International Banking Corpn. (supra). In view thereof, we do not find that even question (B) gives rise to any substantial question of law that needs to be answered by this Court.” 0101. In view of this ground number 5 & 6 of the appeal of the learned assessing officer is dismissed. 0102. Accordingly, appeal filed by the learned assessing officer in ITA number 3237/M/2018 for assessment year 2012 – 13 is dismissed. Assessment year 2013 – 14 ITA number 3500/M/2018 (by assessee) And ITA number 3238/M/2018 (by AO) 0103. for assessment year 2013 – 14, both the parties filed a cross appeals against the order of the Commissioner of income tax (appeals) – 5, Mumbai dated 31/1/2018. 0104. Both the parties confirmed that the grounds of appeal raised by both the parties in the respective appeals are identical to ground of appeal raised by them for assessment year 2012 – 13. They also submitted that their arguments on these respective grounds are also similar. 0105. We have also carefully perused the grounds of appeal raised by both the parties and the respective appeals and Page | 71 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 find that they are identical to the grounds raised by them in their respective appeals for assessment year 2012 – 13. Therefore, our decision, in absence of any change in the facts and circumstances of the case pointed out before us, also remains the same. However, for clarity we decide the issue by stating the respective grounds in the respective appeals. 0106. The fact shows that assessee filed return of income on 28/9/2013, revised date on 31/3/2015 at ₹ 2,321,424,380/–. It was assessed u/s 143 (3) of the act by the order dated 29/2/2016 at ₹ 23,152,411,580/–. Most of the disallowances/additions were made by the learned assessing officer based on earlier assessment order. Such disallowances are as Under:- i. disallowances u/s 14 A as per rule 8D 23,03,88,000/– ii. disallowance u/s 35D ₹ 28,280,291 iii. disallowances of brokerage paid on acquisition of investments ₹ 2,580,751/– iv. denial of deduction u/s 36 (1) (viia) of the act ₹ 128,33,49,717/– v. disallowance of broken period interest on held to maturity securities 101,71,26,692/– Page | 72 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 vi. Disallowance of amortization of premium on securities which are held to maturity ₹ 269,252,627/–. 0107. Aggrieved by the order, assessee preferred an appeal before the learned CIT – A who decided as per order dated 31/1/2018. He decided the issue on the same line and reasoning as given by him for assessment year 2012 – 13. Therefore, both the parties are in appeal before us. 0108. Appeal of the learned assessing officer in ITA number 3238/M/2018 raised [9] grounds of appeal as Under:- 1) whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance made u/s 14 A of the IT act without appreciating the fact that the disallowance u/s 14 A has to be mandatorily calculated as per rule 8D of IT rules and no discretion is available with the AO for estimated disallowances 2) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete the disallowance of brokerage paid on acquisition of investments without appreciating the fact that such expenditure is in the nature of capital expenditure and forms a part of cost of assets. 3) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to allow deduction u/s 36 (1) (viia) after Page | 73 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 verification without appreciating the fact that the assessee has no branches and hence not entitled for the same to deduction claimed. 4) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to allow deduction u/s 36 (1) (viia) after verification without appreciating the fact that the assessee has not created any provisions on account of rural branches and hence not entitled for the said deduction claimed 5) whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to allow deduction u/s 36 (1) (viia) after verification of provisions for bad and doubtful debt accounts of the earlier assessment years and examine claim of allowability of deduction u/s 36 (1) (vii) of the IT act without appreciating the fact that the proviso to Section 36 (1) (vii) comes into operation only when the case of the assessee squarely falls u/s 36 (1) (viia) of the IT act since the assessee‟s case does not fall u/s 36 (1) (viia) of the IT act, hence not entitled for the said deduction claimed. 6) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to allow deduction u/s 36 (1) (vii) after verification of provisions for bad and doubtful debt accounts of the earlier assessment years and examine Page | 74 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 claim of allowability of deduction u/s 36 (1) (vii) of the IT act without appreciating the fact that the assessee has not actually return of the bad debts as irrecoverable as also the requirement of Section 36 (2) of the IT act not satisfied and hence not entitled for the said deduction claimed 7) whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete broken period interest without appreciating the fact that the held to maturity category of securities are long-term securities held till maturity and forming part of investment and not stock in trade hence broken period interest on HTM securities is a capital outlay and hence not an allowable deduction. 8) Whether on the facts and in the circumstances of the case and in law, learned CIT (A) was right in directing to delete broken period interest without considering the decision of the honourable Supreme Court in case of Vijaya bank Ltd versus additional CIT (1991) 187 ITR 547 (SC) wherein it is held that broken period interest is part of capital outlay for acquisition of securities and hence not an allowable deduction. 9) Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was right in directing to delete premium amortised without appreciating the fact that held to maturity category of Page | 75 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 securities are held as investment i.e. a capital asset and hence amortisation of premium paid on such securities will form part of cost of acquisition of held to maturity securities and hence not an allowable deduction. 0109. Assessee, in its appeal in ITA number 3500/M/2018 has raised the following grounds of appeal:- Ground NO I : setting aside the ground to the file of the AO 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in effectively setting aside the ground of appeal numbers III, IX and XI to the file of the AO, which is beyond the powers conferred u/s 251 of the act 2. the appellant prays that it be held that the order of the CIT (A) is void ab initio and/or otherwise bad in law GROUND No II: - disregarding the direction on the tribunal with respect to disallowance u/s 14 A of the act 1) on the facts and circumstances of the case and in law, the honourable CIT (A) erred in going beyond the order of the honourable ITAT in the appellant‟s own case for earlier year in directing the AO to re- examine the entire claim made by the appellant Page | 76 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 Ground No III :- disallowance of interest and expenses u/s 14 A of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the proportionate interest expenditure u/s 14 A of the act 2. he further erred in rejecting the plea of the appellant that when the securities are held as stock in trade, no disallowance can be made u/s 14 A of the act 3. the appellant, therefore, prays that the disallowance u/s 14A of the act, including the SUO Moto disallowance of ₹ 13,39,128/- made by the appellant, be deleted GROUND No IV : order made on the basis of surmises and assumptions is bad in law 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the claim for deduction u/s 35D of the act on the assumptions that the shares may have been allotted only to selected QIPs 2. the appellant prays that an order made on surmises and presumption is bad in law and void ab initio Page | 77 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 GROUND No V : disallowance of deduction claimed u/s 35D on expenses incurred in connection with the qualified institutional placement [ QIP] 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in confirming the disallowance of deduction of ₹ 28,280,291/– claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not amount to public subscription and such capital expenses are not eligible for deduction u/s 35D of the act 2. the appellant prays that the AO be directed to allow ₹ 2,82,80,291/– as a deduction u/s 35D of the act GROUND no VI :-disallowance of QIP expenses by invoking Section 40 (a) (i)/(ia) of the act 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in disallowing the expenses in connection with QIP on the ground that the expense may not be allowable in view of Section 40 (a) (I)/(ia) of the act 2. the appellants paid that the AO be directed to allow the expenses in connection with the QIP Page | 78 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 GROUND NO VII :- setting aside to the AO the issue of allowance of brokerage paid on HTM securities 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify the by fortification of securities Under different categories when all the details were available on record and no further verification was required GROUND No VIII :-disallowance of brokerage paid on acquisition of HTM investments 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not following his own order in appellant‟s case for assessment year 2011 – 12 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in partly confirming the action of the AO of disallowing the brokerage paid on HTM securities though all the securities are held by the appellant as stock in trade 3. the appellant prays that the disallowance of brokerage paid on HTM securities be deleted GROUND NO IX : setting aside to the AO the ground of Section 36 (1) (viia) of the act Page | 79 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to verify whether the appellant had rural branches within the meaning of Section 36 (1) (viia) when all the relevant details were submitted before him as additional evidences during the appellate proceedings and on which the AO had given his remand report 2. the appellant prays that the claim of deduction u/s 36 (1) (viia) of the act be allowed without sending it back to the AO for verification GROUND No X: - non-allowability of deduction claimed u/s 36 (1) (viia) of the act amounting To Rs 128,33,49,717/- 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in contradicting his own stand by rejecting the claim for deduction u/s 36 (1) (viia) of the act after directing the AO to allow the claim of the verification of facts 2. On the facts and circumstances of the case and in law, the honourable CIT (A) erred in ignoring the amendment made in the act and there is no requirement to maintain separate accounts for rural and urban advances. Page | 80 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 3. the appellant prays that the claim for deduction u/s 36 (1)(viia) of the act amounting to ₹ 128,33,49,717/– be allowed Ground No XI alternatively on higher deduction u/s 36 (1) (vii) in subsequent year 1. on the facts and circumstances of the case and in law the honourable CIT (A) erred in directing the AO to verify the claim u/s 36 (1) (vii) of the act, based on the accounting entries and provisions made in the books, when all the details were available on record 2. the appellant prays that the claim for deduction u/s 36 (1) (vii) of the act be allowed Ground number XII alternatively on deduction u/s 36 (1) (vii) set-aside 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in setting aside to the AO the alternatively that since the appellant was not allow deduction u/s 36 (1) (viia) in assessment year 2012 – 13 bad debts written off in the current financial year or to be allowed without adjusting the opening balance of provisions of bad and doubtful debts u/s 36 (1) (viia). 2. The appellant prays that the AO be directed to allow bad debts written of u/s 36 (1) (vii) Page | 81 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 consistent with his own stand that the provision for bad debts was for non-rural branches Ground number XIII alternatively on higher deduction u/s 36 (1) (vii) in subsequent year set- aside 1. on the facts and in the circumstances of the case and in law, the honourable CIT (A) erred in setting aside to the AO the alternatively that the bad debts in assessment year 2014 – 15 be correspondingly allowed on higher side by reducing the opening balance of provision for bad and doubtful debts for assessment year 2014 – 15 2. the appellant press that the AO be directed to allow bad debts in assessment year 2014 – 15 on higher side by reducing the opening balance of provisions for bad and doubtful debts for assessment year 2014 – 15 Ground number XIV deduction of additional claim u/s 36 (1) (vii) of the act amounting to Rs 2 43,53,135/– 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in directing the AO to reverify the additional claim of the appellant u/s 36 (1) (vii) of the act amounting to ₹ 24,353,135/– Page | 82 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 2. the appellant prays that the additional claim for deduction u/s 36 (1) (vii) of the act amounting to Rs 2,43,53,135/– be allowed GROUND No XV non-admission of additional ground of appeal 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in rejecting the additional ground raised by the appellant, in respect of discount on issue of shares Under the employee stock option plan (ESOP) without appreciating the fact that the appellant authorities can admit and adjudicate the additional film raised by the assessee during the course of appellate proceedings 2. the appellant prays that the claim for deduction in respect of discount on issue of shares Under the ESOP be allowed GROUND no XVI deduction of discount on issue of shares under the employee stock option plan {ESOP] 1. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not allowing the claim for deduction in respect of discount on issue of shares Under the ESOP amounting to ₹ 144,05,19,989/– Page | 83 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 2. on the facts and circumstances of the case and in law, the honourable CIT (A) erred in not giving any finding on the additional evidences filed by the appellant 3. the appellant prays that the claim for deduction in respect of discount on issue of shares Under ESOP be allowed 0110. Now we first deal with the appeal of the assessee. 0111. Ground number 1 is general in nature, no arguments advanced, hence, dismissed. 0112. Ground number 2, 3 and 4 are on the issue of disallowance u/s 14 A of the act. These are identical to similar grounds in assessee‟s appeal for assessment year 2012 – 13, which we have allowed, for similar reasons, we allow this grounds. 0113. Ground number 5 is with respect to disallowance u/s 35D, is similar to ground in appeal of the assessee for assessment year 2011 – 12 and 2012 – 13, which we have set-aside to the file of the learned assessing officer with a direction to the assessee to show whether the allotment was made in a public subscription of shares or private subscription, for similar directions ground number 5 and 6 are set-aside to the file of AO. 0114. Ground number 7 is with respect to the disallowance of brokerage paid on held to maturity securities and ground number 8 is also related to the same, both these grounds, Page | 84 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 are identical to ground is in appeal of the assessee for assessment year 2011 – 12 and 2012 – 13. We have allowed the claim of the assessee for those years, therefore, for similar reasons these grounds are allowed. 0115. Ground number 9 is with respect to the disallowance u/s 36 (1) (viia) of the act of ₹ 1,283,349,717/–. Ground number 11 is an alternative ground, ground number 12 is a further alternative ground and ground number 13 is against the setting aside. Ground number 14 is also an alternative ground. This issue has already been decided in appeal of the assessee for assessment year 2012 – 13 on the main ground regarding disallowance u/s 36 (1) (viia) of the act. Therefore, for the similar reasons and with similar direction, we dispose of all these grounds accordingly. 0116. Ground number 15 and ground number 16 are related to the admission of the additional ground with respect to the deduction of employee stock option plan discount as well as allowing the claim on the merit. This issue is identical to the issue in appeal of the assessee for assessment year 2011 – 12. We dispose of this ground with similar directions. 0117. In the result, appeal filed by the assessee is partly allowed. 0118. Now we come to the appeal of the learned assessing officer. The ground number one is with respect to the disallowance u/s 14 A of the act which is related to the Page | 85 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 ground number 2 – 4 of the appeal of the assessee. Those grounds of appeal in the appeal of the assessee are allowed and therefore ground number 1 of the appeal of the AO becomes infructuous and dismissed. 0119. Ground number 2 is with respect to the disallowance of brokerage paid on acquisition of investment. This issue is identical to the issue in the appeals for earlier years wherein we have allowed the claim of the assessee. Therefore, we do not find any reason to deviate from the same hence ground number 2 of the appeal of the AO is dismissed. 0120. Ground number 3 – 6 are on the issue of deduction u/s 36 (1) (viia) of the act. This issue is decided in appeal of the assessee for assessment year 2012 – 13. These are the grounds related to the same issue. As we have already said those grounds in appeal of the assessee for assessment year 2012 – 13, for the similar reasons we do not find any merit in these grounds of appeal of the learned AO and hence dismissed. 0121. Ground number 7 – 8 are with respect to the taxability of broken period interest in held to maturity investments. We find that identical issue has been dealt with in the appeal of the parties for assessment year 2012 – 13 wherein we following the decision of the honourable High Court decided the issue in favour of the assessee. Therefore, ground number 7 and 8 are dismissed. Page | 86 ITA No. 3498 to 3500 & 3236 to 3238/Mum/2018 Yes Bank Limited; A.Y. 11-12 to 13-14 0122. Ground number 9 is with respect to the premium amortized on held to maturity securities. This issue is also similar to the ground in the appeal for assessment year 2012 – 13 wherein we have decided this issue in favour of the assessee. Therefore, for similar reasons, ground number 9 of the appeal of the AO is dismissed. 0123. In the result, appeal filed by the learned assessing officer in ITA number 3238/M/2018 for assessment year 2013 – 14 is dismissed. 0124. In the result all the six appeals filed by the rival parties in case of the assessee for assessment year 2011 – 12, 2012 – 13 and 2013 – 14 are disposed of by this order. Order pronounced in the open court on 28.06.2022. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28.06.2022 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai