DCIT 7(3), MUMBAI V. YES BANK LTD, MUMBAI

ITA 3388/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4323 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K KRISHNA MURTY
• Keywords: Earning of tax free income
• Section: 14A; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 3357 / MUM/ 201 3 ( / ASSESSMENT YEA R : 200 8 - 09 ) YES BANK LI MITED, 9 TH FLOOR, NEHRU CENTRE, DISCOVERY OF INDIA BUILDING, DR.A B ROAD, WORLI, MUMBAI - 400018 / VS. ADDL.COMMISSIONER OF INCOME TAX 7(3), ROOM NO.614, 6TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / R ESPONDENT ) ./ I.T.A. NO . 3388 / MUM/ 201 3 ( / ASSESSMENT YEA R : 200 8 - 09 ) DY.COMMISSIONER OF INCOME TAX 7(3), ROOM NO.61 5 , 6TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. YES BANK LIMITED, 9 TH FLOOR, NEHRU CENTRE, DISCOVERY OF INDIA BUILDING, DR.A B ROAD, WORLI, MUMBAI - 400018 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACY2068D / ASSESSEE BY S/ SHRI YOGESH THAR AND DEEPAK JAIN / REVENUE BY SHRI K KRISHNA MURTY / DATE OF HEARING : 29 .12.2015 / DATE OF PRONOUNCEMENT: 1. 1.2016 / O R D E R P ER B R BASKARAN, AM : THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 27 - 02 - 2013 PASSED BY LD CIT(A) - 13, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2008 - 09. ITA NO. 3388 / MUM/ 201 3 AND OTHER ONE CASE 2 2. THE ASSESSEE IS CARRYING ON BANKING BUSINESS. THE FIRST ISSUE URGED IN THE APPEAL OF THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/ S 14A OF THE ACT. THE LD A.R SUBMITTED THAT THE DISALLOWANCE U/S 14A IS NOT WARRANTED IN THIS CASE SINCE (A) THE ASSESSEE HAS NOT RECEIVED ANY EXEMPTED INCOME. (B) THE SECURITIES ARE HELD AS STOCK IN TRADE. (C) THE NON - INTEREST BEARING FUNDS HELD BY T HE ASSESSEE ARE MORE THAN THE VALUE OF TAX FREE INVESTMENTS. IN SUPPORT OF THE ABOVE SAID PROPOSITIONS, THE LD A.R PLACED RELIANCE ON HOST OF CASE LAWS. 3. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER RU LE 8D(2)(III) IS REQUIRED TO BE MADE EVEN IF THE INTEREST FREE FUNDS HAVE BEEN USED FOR MAKING INVESTMENTS. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWING CASE LAW: - (A) ESCORTS LTD (102 TTJ 522) (B) SOUTHERN PETRO CHEMICAL INDUSTRIES ( 93 TTJ 161) (C) SMT. LEENA RAMACHANDRAN (339 ITR 293)(KER). 4. WE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE UNDER RULE 8D(2)(I) AND (II) IS REQUIRED TO BE MADE , IF THE NO N - INTEREST BEARING FUND S AVAILABLE WITH THE ASSESSEE ARE MORE THAN THE AMOUNT OF INVESTMENT WHICH GENERATE TAX FREE INCOME , S INCE THE SAID VIEW HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S HDFC BANK LTD. [2014] 366 ITR 505 (BOM) . HOWEVER, THE FUND POSITION OF THE ASSESSEE I S REQUIRED TO BE EXAMINED AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECT ION TO EXAMINE THIS ISSUE BY FOLLOWING THE RATIO RENDERED IN THE CASE OF HDFC BANK L TD (SUPRA) AND ALSO ANY OTHER DECISION THAT MAY ITA NO. 3388 / MUM/ 201 3 AND OTHER ONE CASE 3 BE RELIED UPON BY THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 5. WITH REGARD TO THE EXPENDITURE WHICH REQUIRES TO BE DISAL LOWED UNDER RULE 8D (2)(III), THE LD.AR SUBMITTED THAT THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE DURING THE YEAR UNDER CONSIDERATION , SINCE THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME. HOWEVER, WHEN IT WAS POINTED OUT THAT THE ASSESSEE WOULD HA VE SPENT SOME PORTION OF EXPENSES FOR THE PURPOSE OF PURCHASE, MAINTENANCE AND SALE OF INVESTMENTS AND HENCE A PORTION OF ADMINISTRATIVE EXPENSES IS REQUIRED TO BE DISALLOWED EVEN IF NO DIVIDEND INCOME IS RECEIVED , T HE LD. AR AGREED THAT THE SAID DISALLOWA NCE MAY BE RESTRICTED TO RS.5 , 93 , 655/ - AS COMPUTED BY THE ASSESSEE BEFORE THE TAX AUTHORITIES. 6. WE FIND MERIT IN THE SAID SUBMISSIONS , SINCE THE OBJECT OF THE ASSESSEE IN MAKING INVESTMENT IS TO HOLD THEM AS STOCK - IN - TRADE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE METHODOLOGY PRESCRIBED UNDER RULE 8D(2)(III) CANNOT BE APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO RESTRICT THE ADDITION UNDER RULE 8D(2)(III) TO RS.5, 93,655/ - . 7. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO DEDUCTION OF RS.3.28 CRS. C LAIMED UNDER SECTION 35D OF THE ACT. THE LD.AR FAIRLY ADMITTED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO - ORDINATE BENCH OF THE TRIBUNAL , VIDE ITS ORDER DATED 30.9.2015 PASSED IN THE ASSES S EES OWN CASE IN ITA NO.4270/MUM/2013 RELATING TO ASSESSMENT YEAR 2006 - 07. FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE UPHOLD THE ORDER OF LD.CIT(A) ON THIS ISSUE. 8. THE ONLY ISSUE URGED IN THE APP EAL OF THE REVENUE RELATES TO DISALLOWANCE OF CLAIM OF LOSS OF RS.13.31 CRORES ARISING ON ACCOUNT OF RE - ITA NO. 3388 / MUM/ 201 3 AND OTHER ONE CASE 4 VALUATION OF SECURITIES. THE SAID DISALLOWANCE WAS DELETED BY THE LD. CIT(A) BY FOLLOWING THE DECISION RENDERED BY HIM ON IDENTICAL ISSUE IN THE ASSES SMENT YEAR 2006 - 07. THE LD.AR POINTED OUT THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE ASSESSMENT YEAR 2006 - 07 IN ITA NO.5833/MUM/2012 AND THE DECISION OF THE LD. CIT(A) HAS BEEN UPHELD BY THE TRIBUNAL. 9. WE HAVE GONE THROUGH THE ORDER DATED 21.1.2015 PASSED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 PASSED IN ITA NO.5833/MUM/2012 AND WE NOTICE THAT THE TRIBUNAL HAS FOLLOWED THE FOLLOWING DECISIONS AND HELD T HAT LOSS ON ARISING ON RE - VALUATION OF SECURITIES IS REQUIRED TO BE ALLOWED : A) UNITED COMMERCIAL BANK V/S CIT (240 ITR 355)(SC); B) CIT V/S BANK OF BARODA (262 ITR 334)(BOM); AND C) CIT V/S HDFC BANK LTD IT A NO.330 OF 2012 (BOM) . IN VIEW OF THE A BOVE DECISIONS RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE S RE FERRED ABOVE, WE UPHOLD THE ORDER OF LD.CIT(A) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. PRON OUNCED ACCORDINGLY ON 1 ST JAN , 201 6 . 1ST JAN, 201 6 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 1ST JAN , 201 6 . . . ./ SRL , SR. PS ITA NO. 3388 / MUM/ 201 3 AND OTHER ONE CASE 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI