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

ITA 3501/MUM/2018

AI Insights

The case involves cross-appeals by the assessee, M/s Yes Bank Ltd., and the Revenue against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2014-15. The primary issues revolved around the disallowance of expenses under section 14A related to tax-free income and the deduction of expenses under section 35D related to QIP. The Tribunal examined whether the expenses were correctly disallowed and whether the deductions claimed were in accordance with the provisions of the Income Tax Act. The Tribunal's decision involved a detailed analysis of the legal provisions, previous judicial decisions, and the specific facts of the case, leading to the restoration of certain issues for further examination by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123589 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 28-05-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2018
• Other Referred Cases: Deccan Chronicle Holdings Ltd. vs. DCIT, CIT vs. HDFC Bank Ltd., CIT vs. Andhra Chamber of Commerce, CIT vs. J.K. Synthetics Ltd., CIT vs. Southern Technologies
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Earning of tax free income; Proportionate interest; Additional evidence; Question of law; Cost of acquisition; Bad and doubtful debts; Revised return; Revenue expenditure; TDS; Rule 8D; Set aside
• Section: 37; 144; 143(3); 14A; 251; 207; 43; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 3239/MUM/2018 Assessment Year: 2014-15 DCIT-2(2)(2), Room No. 545, 5 th floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai-400020. Vs. M/s Yes Bank Ltd., 9 th Floor, Nehru Centre, Discovery of India, Dr. AB Road, Worli, Mumbai-400018. PAN No. AAACY 2068 D Appellant Respondent ITA No. 3501/MUM/2018 Assessment Year: 2014-15 M/s Yes Bank Ltd., 9 th Floor, Nehru Centre, Discovery of India, Dr. AB Road, Worli, Mumbai-400018. Vs. DCIT-2(2)(2), Room No. 545, 5 th floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai-400020. PAN No. AAACY 2068 D Appellant Respondent Assessee by : Mr. Yogesh Thar/Ms. Ayushi Modani Revenue by : Dr. Kishor Dhule, DR Date of Hearing : 29/05/2023 Date of pronouncement : 30/06/2023 PER OM PRAKASH KANT, AM These cross appeals by the assessee against order dated 31.01.2018 passed by the Ld. Commissioner of Income-tax (Appeals) assessment year 2014 reproduced as under: GROUND NO. I: SET OF THE AO 1. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in effectively setting aside Grounds of appeal no. III, VIlI examination/ re conferred under section 251 of 2. The Appellant prays that it be held that the order of the CIT(A) is void ab GROUND NO. II: DISREGARDING THE DIRECTION OF THE TRIBUNAL WITH RESPECT TO DISALLOWANCE U/S 14A OF THE ACT: On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in going beyond the order of the Hon'ble ITAT in the Appellant's own case for an directing the AO to re Appellant. WITHOUT PREJUDICE TO GROUND NOS. I AND II, GROUND NO. III: DISALLOWANCE UNDER SECTION 14A OF THE ACT: ITA Nos.3501 & 3239/M/2018 ORDER PER OM PRAKASH KANT, AM These cross appeals by the assessee and Revenue are directed against order dated 31.01.2018 passed by the Ld. Commissioner of tax (Appeals)-5, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2014-15. The grounds raised by the assessee are reproduced as under: GROUND NO. I: SETTING ASIDE THE GROUND TO THE FILE 1. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in effectively setting aside Grounds of appeal no. III, VIlI and X to the file of the AO for re examination/ re-verification, which is beyond the powers conferred under section 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. O. II: DISREGARDING THE DIRECTION OF THE TRIBUNAL WITH RESPECT TO DISALLOWANCE U/S 14A OF On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in going beyond the order of the Hon'ble ITAT in the Appellant's own case for an earlier year and directing the AO to re-examine the entire claim made by the WITHOUT PREJUDICE TO GROUND NOS. I AND II, GROUND NO. III: DISALLOWANCE UNDER SECTION 14A OF M/s Yes Bank Ltd. 2 ITA Nos.3501 & 3239/M/2018 and Revenue are directed against order dated 31.01.2018 passed by the Ld. Commissioner of 5, Mumbai [in short ‘the Ld. CIT(A)’] for 15. The grounds raised by the assessee are TING ASIDE THE GROUND TO THE FILE 1. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in effectively setting aside Grounds of and X to the file of the AO for re- verification, which is beyond the powers 2. The Appellant prays that it be held that the order of the law. O. II: DISREGARDING THE DIRECTION OF THE TRIBUNAL WITH RESPECT TO DISALLOWANCE U/S 14A OF On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in going beyond the order of the Hon'ble earlier year and examine the entire claim made by the WITHOUT PREJUDICE TO GROUND NOS. I AND II, GROUND NO. III: DISALLOWANCE UNDER SECTION 14A OF 1. On the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in directing the AO to disallow proportionate interest expense u/s. 14A of the Act 2. He further erred in rejecting the plea of the Appellant that when the securities are held as stock disallowance can be made us. 14A of the Act 3. The Appellant prays that the disallowance us. 14A of the Act, including the suo 2,09,42,284/ GROUND NO. IV: ORDER MADE ON THE BASIS OF SURMISES AND ASSUMPTIONS: 1. On the facts and circumstanc Hon'ble CIT(A) erred in confirming the disallowance of deduction w/s. 35D of the Act on the assumption that the shares may have been allotted only to selected Qualified Institutional Buyers ("'QIBs"). 2. The Appellant prays t presumptions is bad WITHOUT PREJUDICE TO GROUND IV: GROUND NO. V: DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 35D ON EXPENSES INCURRED IN CONNECTION WITH THE QUALIFIED INSTITUTIONAL PLACEMENT 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/ expenses incurred in connection with the QIP on the alleged ground that the issue of shares to OIP does not tantamount to public subscription and such capital expenses are not eligible for deduction us. 35D of the Act. 2. The Appellant prays that the AO be directed to allow Rs. 2,82,80,291/ WITHOUT PRETUDICE TO GROUND NOS. IV AND V: ITA Nos.3501 & 3239/M/2018 1. On the facts and circumstances of the case and in law, CIT(A) erred in directing the AO to disallow proportionate interest expense u/s. 14A of the Act 2. He further erred in rejecting the plea of the Appellant that when the securities are held as stock-in disallowance can be made us. 14A of the Act . The Appellant prays that the disallowance us. 14A of the Act, including the suo-moto disallowance of Rs. 2,09,42,284/- made by the Appellant, be deleted. GROUND NO. IV: ORDER MADE ON THE BASIS OF SURMISES AND ASSUMPTIONS: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance of deduction w/s. 35D of the Act on the assumption that the shares may have been allotted only to selected Qualified Institutional Buyers ("'QIBs"). 2. The Appellant prays that an order made on surmises and presumptions is bad-in-law and void-ab initio. WITHOUT PREJUDICE TO GROUND IV: GROUND NO. V: 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/- claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged hat the issue of shares to OIP does not tantamount to public subscription and such capital expenses are not eligible for deduction us. 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 PRETUDICE TO GROUND NOS. IV AND V: M/s Yes Bank Ltd. 3 ITA Nos.3501 & 3239/M/2018 1. On the facts and circumstances of the case and in law, CIT(A) erred in directing the AO to disallow proportionate interest expense u/s. 14A of the Act 2. He further erred in rejecting the plea of the Appellant that in-trade, no . The Appellant prays that the disallowance us. 14A of the moto disallowance of Rs. made by the Appellant, be deleted. GROUND NO. IV: ORDER MADE ON THE BASIS OF es of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance of deduction w/s. 35D of the Act on the assumption that the shares may have been allotted only to selected Qualified hat an order made on surmises and GROUND NO. V: DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 35D ON EXPENSES INCURRED IN CONNECTION WITH THE QUALIFIED INSTITUTIONAL 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance of claimed u/s 35D in respect of expenses incurred in connection with the QIP on the alleged hat the issue of shares to OIP does not tantamount to public subscription and such capital expenses are not 2. The Appellant prays that the AO be directed to allow Rs. Act. WITHOUT PRETUDICE TO GROUND NOS. IV AND V: GROUND NO. VI: DISALLOWANCE OF QIP EXPENSES BY INVOKING SECTION40(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)(j/ (ia) of the Act. 2. The Appellant prays that the A be directed to allow the expenses in connection with GROUND NO. VII: SETTING ASIDE TO THE AO THE ISSUE OF ALLOWANCE OF BROKERAGE PAID ON HIM SECURITIES: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify the bifurcation of securities under different categories when all the details were available on record verification was required. WITHOUT PREJUDICE TO GROUND NOS. I AND VII GROUND NO. VILI DISALLOWANCE OF BROKERAGE PAID ON ACOUISITION OF HIM INVESTMENTS: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in par disallowing the brokerage paid on HTM securities even though all the securities are held by the Appellant as stock in-trade. 2. The Appellant prays that the disallowance of brokerage paid on HTM securities be deleted. GROUND NO. IX: SETTING ASIDE TO THE AO THE GROUND ON SECTION 36(1)(viia) OF THE ACT: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify whether the Appellant had rural branches within the meaning of section 36(1) (via) when all the relevant details were available on record. ITA Nos.3501 & 3239/M/2018 GROUND NO. VI: DISALLOWANCE OF QIP EXPENSES BY INVOKING SECTION40(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 ction with QIP on the ground that the expense may not be allowable in view of section 40(a)(j/ (ia) of the Act. 2. The Appellant prays that the A be directed to allow the expenses in connection with GROUND NO. VII: SETTING ASIDE TO THE AO THE ISSUE WANCE OF BROKERAGE PAID ON HIM SECURITIES: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify the bifurcation of securities under different categories when all the details were available on record and no further verification was required. WITHOUT PREJUDICE TO GROUND NOS. I AND VII GROUND NO. VILI DISALLOWANCE OF BROKERAGE PAID ON ACOUISITION OF HIM INVESTMENTS: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in partly confirming the action of the A of disallowing the brokerage paid on HTM securities even though all the securities are held by the Appellant as stock 2. The Appellant prays that the disallowance of brokerage paid on HTM securities be deleted. GROUND NO. IX: SETTING ASIDE TO THE AO THE GROUND ON SECTION 36(1)(viia) OF THE ACT: 1. On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to verify whether the Appellant had rural branches within the meaning of section 36(1) (via) when all the relevant details were available on M/s Yes Bank Ltd. 4 ITA Nos.3501 & 3239/M/2018 GROUND NO. VI: DISALLOWANCE OF QIP EXPENSES BY 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in disallowing the expenses in ction with QIP on the ground that the expense may not be allowable in view of section 40(a)(j/ (ia) of the Act. 2. The Appellant prays that the A be directed to allow the GROUND NO. VII: SETTING ASIDE TO THE AO THE ISSUE WANCE OF BROKERAGE PAID ON HIM On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify the bifurcation of securities under different categories when all and no further WITHOUT PREJUDICE TO GROUND NOS. I AND VII GROUND NO. VILI DISALLOWANCE OF BROKERAGE PAID 1. On the facts and circumstances of the case and in law, the tly confirming the action of the A of disallowing the brokerage paid on HTM securities even though all the securities are held by the Appellant as stock- 2. The Appellant prays that the disallowance of brokerage GROUND NO. IX: SETTING ASIDE TO THE AO THE GROUND 1. On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to verify whether the Appellant had rural branches within the meaning of section 36(1) (via) when all the relevant details were available on 2. The Appellant prays that the claim for deduction u/s. 36(1) (via) of t the AO for re WITHOUT PREJUDICE TO GROUND NOS. I AND IX GROUND NO. X: NON ALLOWABILITY OF DEDUCTION CLAIMED U/S 36(1) (via) OF THE ACT: On the facts and in the circumstances of the case, it be held that the Appellant is eligible for deduction u/s 36(1) (via) as it was not a provision for standard assets as alleged by the AO. WITHOUT PREJUDICE TO GROUND NOS IX AND X GROUND NO. XI: IGNORING THE AMENDMENT IN SECTION 36(1)(vi) OF THEАСТ: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in ignoring the amendment in section 36(1) (vii) as per which there is no requirement to maintain separate accounts for rural and urban advances. 2. The Appellant prays that deduction u/s. 36(1)(via) o 135,21,64,723/ WITHOUT PREIUDICE OF GROUND NOS, X AND XI GROUND NO. XII: DEDUCTION U/S. 36(1) (vi 1. On the facts and circums Hon'ble CIT(A) erred in directing the AO to verify the claim w/s. 36(1) (vit) 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 p 36(1)(vil) of the Act be allowed. WITHOUT PREJUDICE TO GROUND NOS. X, XI AND XI: ITA Nos.3501 & 3239/M/2018 2. The Appellant prays that the claim for deduction u/s. 36(1) (via) of the Act be allowed without sending it back to the AO for re-verification. WITHOUT PREJUDICE TO GROUND NOS. I AND IX GROUND NO. X: NON ALLOWABILITY OF DEDUCTION CLAIMED U/S 36(1) (via) OF THE ACT: On the facts and in the circumstances of the case, it be held that the Appellant is eligible for deduction u/s 36(1) (via) as it was not a provision for standard assets as alleged by the WITHOUT PREJUDICE TO GROUND NOS IX AND X GROUND NO. XI: IGNORING THE AMENDMENT IN SECTION 36(1)(vi) OF THEАСТ: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in ignoring the amendment in section 36(1) (vii) as per which there is no requirement to maintain separate accounts for rural and urban advances. 2. The Appellant prays that the AO be directed to allow the deduction u/s. 36(1)(via) of the Act amounting to Rs. 135,21,64,723/- as claimed by the Appellant. WITHOUT PREIUDICE OF GROUND NOS, X AND XI GROUND NO. XII: DEDUCTION U/S. 36(1) (vii) OF THE ACT: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify the claim w/s. 36(1) (vit) 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 W/$. 36(1)(vil) of the Act be allowed. WITHOUT PREJUDICE TO GROUND NOS. X, XI AND XI: M/s Yes Bank Ltd. 5 ITA Nos.3501 & 3239/M/2018 2. The Appellant prays that the claim for deduction u/s. he Act be allowed without sending it back to WITHOUT PREJUDICE TO GROUND NOS. I AND IX GROUND NO. X: NON ALLOWABILITY OF DEDUCTION On the facts and in the circumstances of the case, it be held that the Appellant is eligible for deduction u/s 36(1) (via) as it was not a provision for standard assets as alleged by the WITHOUT PREJUDICE TO GROUND NOS IX AND X GROUND NO. XI: IGNORING THE AMENDMENT IN SECTION 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in ignoring the amendment in section 36(1) (vii) as per which there is no requirement to maintain the AO be directed to allow the the Act amounting to Rs. WITHOUT PREIUDICE OF GROUND NOS, X AND XI GROUND ) OF THE ACT: tances of the case and in law, the Hon'ble CIT(A) erred in directing the AO to verify the claim w/s. 36(1) (vit) of the Act, based on the accounting entries and provisions made in the books, when all the details were rays that the claim for deduction W/$. WITHOUT PREJUDICE TO GROUND NOS. X, XI AND XI: GROUND NO. XIII: ALTERNATIVE PLEA ON DEDUCTION U/S 36(1) (vii) SET ASIDE 1. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A) erred in setting aside to the AO the alternative plea that since the Appellant was not allowed deduction u/s 36(1) (via) in A.Y. 2013 off in the current financial year ought to be allowed without adjusting the opening doubtful debts u/s. 36(1)(via). 2. The Appellant prays that the AO be directed to allow bad debts written off u/s 36(1)(vi) consistent with his own stand that the provision for bad debts was for non WITHOUT PREJUDICE TO GROUND NOS. X, XI AND XII: GROUND NO. XIV: ALTERNATIVE PLEA ON HIGHER DEDUCTION U/S 36(1)(vi) IN SUBSEQUENT YEAR SET ASIDE 1. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A) erred in setting aside to the AO the alternative plea that the bad debts in A.Y. 2015 correspondingly allowed on a higher side by reducing the opening balance of provision for bad and doubtful debts for A. Y. 2015-16. 2. The Appellant prays that the AO be directed to allow bad debts in A.Y. opening balance of provision for bad and doubtful debts forA.Y. 2015 GROUND NO. XV: NON ADMISSION OF ADDITIONAL GROUND OF APPEAL: 1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) err 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 adjudicate the additional cla during the course of Appellate proceeding. ITA Nos.3501 & 3239/M/2018 GROUND NO. XIII: ALTERNATIVE PLEA ON DEDUCTION U/S ) SET ASIDE 1. On the facts and in the circumstances of the case and in , Hon'ble CIT(A) erred in setting aside to the AO the alternative plea that since the Appellant was not allowed deduction u/s 36(1) (via) in A.Y. 2013-14 bad debts written off in the current financial year ought to be allowed without adjusting the opening balance of provision of bad and doubtful debts u/s. 36(1)(via). 2. The Appellant prays that the AO be directed to allow bad debts written off u/s 36(1)(vi) consistent with his own stand that the provision for bad debts was for non-rural branches. REJUDICE TO GROUND NOS. X, XI AND XII: GROUND NO. XIV: ALTERNATIVE PLEA ON HIGHER DEDUCTION U/S 36(1)(vi) IN SUBSEQUENT YEAR SET 1. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A) erred in setting aside to the AO the rnative plea that the bad debts in A.Y. 2015 correspondingly allowed on a higher side by reducing the opening balance of provision for bad and doubtful debts for 16. 2. The Appellant prays that the AO be directed to allow bad debts in A.Y. 2015-16 on a higher side by reducing the opening balance of provision for bad and doubtful debts forA.Y. 2015-16. GROUND NO. XV: 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 adjudicate the additional claim raised by the assessee during the course of Appellate proceeding. M/s Yes Bank Ltd. 6 ITA Nos.3501 & 3239/M/2018 GROUND NO. XIII: ALTERNATIVE PLEA ON DEDUCTION U/S 1. On the facts and in the circumstances of the case and in , Hon'ble CIT(A) erred in setting aside to the AO the alternative plea that since the Appellant was not allowed 14 bad debts written off in the current financial year ought to be allowed without balance of provision of bad and 2. The Appellant prays that the AO be directed to allow bad debts written off u/s 36(1)(vi) consistent with his own stand rural branches. REJUDICE TO GROUND NOS. X, XI AND XII: GROUND NO. XIV: ALTERNATIVE PLEA ON HIGHER DEDUCTION U/S 36(1)(vi) IN SUBSEQUENT YEAR SET 1. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A) erred in setting aside to the AO the rnative plea that the bad debts in A.Y. 2015-16 be correspondingly allowed on a higher side by reducing the opening balance of provision for bad and doubtful debts for 2. The Appellant prays that the AO be directed to allow bad 16 on a higher side by reducing the opening balance of provision for bad and doubtful debts GROUND NO. XV: NON ADMISSION OF ADDITIONAL 1. On the facts and circumstances of the case and in law, the ed 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 im raised by the assessee 2. The Appellant prays that the claim for deduction in respect of discount on issue of shares under the ESOP be allowed. WITHOUT PEJUDICE TO GROUND NO. XV GROUND NO. XVI: DEDUCTION OF DIS 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. 53,27,10,069/ 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. 2. The grounds raised by the Revenue are reproduced as under: 1. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete the disallowances made Us appreciating the fact that the disallowance us 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 circumstan and in law, Ld.CIT disallowance of brokerage paid on 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, Ld.CIT(A) was right in directing to allow deduction us 36(1)(viia) after verificationhence not entitled for the said deduction claimed?" ITA Nos.3501 & 3239/M/2018 2. The Appellant prays that the claim for deduction in respect of discount on issue of shares under the ESOP be allowed. WITHOUT PEJUDICE TO GROUND NO. XV GROUND NO. XVI: DEDUCTION OF DISCOUNT ON ISSUE OF SHARES UNDER THE EMPLOYEE STOCK OPTION PLAN 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 nting to Rs. 53,27,10,069/-. 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 discount on issue of shares under ESOP be allowed. The grounds raised by the Revenue are reproduced as under: 1. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete the disallowances made Us 14A of the ITAct without appreciating the fact that the disallowance us 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, Ld.CIT 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 3. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to allow deduction us 36(1)(viia) after verificationhence not entitled for the said deduction claimed?" M/s Yes Bank Ltd. 7 ITA Nos.3501 & 3239/M/2018 2. The Appellant prays that the claim for deduction in respect of discount on issue of shares under the ESOP be allowed. COUNT ON ISSUE OF SHARES UNDER THE EMPLOYEE STOCK OPTION PLAN 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 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 3. The Appellant prays that the claim for deduction in respect discount on issue of shares under ESOP be allowed. The grounds raised by the Revenue are reproduced as under: 1. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete the 14A of the ITAct without appreciating the fact that the disallowance us 14A has to be mandatorily calculated as per rule 8D of IT Rules and no discretion is available with the A.O for estimated ces of the case was right in directing to delete the acquisition of investments without appreciating the fact that such expenditure is in the nature of capital expenditure and forms a part of cost of 3. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to allow deduction us 36(1)(viia) after verificationhence not entitled for 4. "Whether on the facts and in the cir and in law, Ld.CIT(A) was right in directing to allow deduction u/s 36(1)(via) 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, Ld. CIT(A) was right in directing to allow deduction u/s 36(1)(vi) after verification of provisions for bad and doubtful debt accounts of the earlier ass and examine claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the proviso to section 36(I)(vii) comes into operation only when the case of the assessee squarely falls u/s 36(1)(viia) of theIT Ac since the assessee's case does not fall us 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, Ld.CIT(A) was right in directing to allow deduction u/ and doubtful debt accounts of the earlier assessment years and examine claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the assessee has not actually wri 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, Ld.CIT(A) was rig without appreciating the fact that theHTM category of Securities are long term securities held till maturity and forming a part of investment and not a stock in trade hence BPI on HTMSecurities is a capital outlay and hence no allowable deduction?" 8. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete BPI without considering the decision of honorable supreme court in the case of Vijaya Bank Ltd. v/s Addl. CIT (1 547(S.C.) wherein it is held that BPI is a part of capital outlay for acquisition of securities and hence not an allowable deduction?" ITA Nos.3501 & 3239/M/2018 4. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to allow deduction u/s 36(1)(via) after verification without appreciating the fact that the assessee has not created any provisions on account of rural branches and hence not the said deduction claimed?" 5. "Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was right in directing to allow deduction u/s 36(1)(vi) after verification of provisions for bad and doubtful debt accounts of the earlier assessment years and examine claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the proviso to section 36(I)(vii) comes into operation only when the case of the assessee squarely falls u/s 36(1)(viia) of theIT Ac since the assessee's case does not fall us 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, Ld.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 claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the assessee has not actually written off 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, Ld.CIT(A) was right in directing to delete BPI without appreciating the fact that theHTM category of Securities are long term securities held till maturity and forming a part of investment and not a stock in trade hence BPI on HTMSecurities is a capital outlay and hence no allowable deduction?" 8. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete BPI without considering the decision of honorable supreme court in the case of Vijaya Bank Ltd. v/s Addl. CIT (1 547(S.C.) wherein it is held that BPI is a part of capital outlay for acquisition of securities and hence not an allowable M/s Yes Bank Ltd. 8 ITA Nos.3501 & 3239/M/2018 cumstances of the case and in law, Ld.CIT(A) was right in directing to allow deduction u/s 36(1)(via) after verification without appreciating the fact that the assessee has not created any provisions on account of rural branches and hence not 5. "Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was right in directing to allow deduction u/s 36(1)(vi) after verification of provisions for bad essment years and examine claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the proviso to section 36(I)(vii) comes into operation only when the case of the assessee squarely falls u/s 36(1)(viia) of theIT Act and since the assessee's case does not fall us 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, Ld.CIT(A) was right in directing to allow s 36(1)(vii) after verification of provisions for bad and doubtful debt accounts of the earlier assessment years and examine claim of allow ability of deduction us 36(1)(vi) of the IT Act without appreciating the fact that the assessee has tten off 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 ht in directing to delete BPI without appreciating the fact that theHTM category of Securities are long term securities held till maturity and forming a part of investment and not a stock in trade hence BPI on HTMSecurities is a capital outlay and hence not an 8. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete BPI without considering the decision of honorable supreme court in the case of Vijaya Bank Ltd. v/s Addl. CIT (1991)187 IT 547(S.C.) wherein it is held that BPI is a part of capital outlay for acquisition of securities and hence not an allowable 9. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to premium amortized without appreciating the fact that the HTM category of Securities are held as investment i.e. acapital asset and hence amortization of premium paid on such securities will form part of cost of acquisition of HTM securities and henc 3. Briefly stated, facts of the case are that the assessee company filed its return of income for the year under consideration on 29.11.2014, which was subsequently revised on 30.03.2016 declaring total income of Rs.22,75,02, income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income Act’) were issued and complied with. The assessment u/s 143(3) of the Act was completed on Rs.2,710,009,76,971/ part relief. Aggrieved, Income-tax Appellate Tribunal (ITAT) raising the grounds as reproduced above. 4. Before us, the Ld. Counsel of the assessee filed a Paper Book containing pages 1 to 234. 5. The ground No ground No. 1 of the appeal of the Revenue are connected with the issue of disallowance u/s 14A of the Act r. Income-tax Rules,1962 (in short ‘the Rules’). ITA Nos.3501 & 3239/M/2018 9. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to premium amortized without appreciating the fact that the HTM category of Securities are held as investment i.e. acapital asset and hence amortization of premium paid on such securities will form part of cost of acquisition of HTM securities and hence not an allowable deduction?" Briefly stated, facts of the case are that the assessee company filed its return of income for the year under consideration on 29.11.2014, which was subsequently revised on 30.03.2016 declaring total income of Rs.22,75,02,02,660/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the were issued and complied with. The assessment u/s 143(3) of the Act was completed on 30.03.2016, assessing total income at Rs.2,710,009,76,971/-. On further appeal, the Ld. CIT(A) allowed , both the assessee and Revenue are before the tax Appellate Tribunal (ITAT) raising the grounds as fore us, the Ld. Counsel of the assessee filed a Paper Book containing pages 1 to 234. The ground Nos. 1 to 3 of the appeal of the assessee and ground No. 1 of the appeal of the Revenue are connected with the issue of disallowance u/s 14A of the Act r.w. Rule 8D of the tax Rules,1962 (in short ‘the Rules’). M/s Yes Bank Ltd. 9 ITA Nos.3501 & 3239/M/2018 9. "Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in directing to delete premium amortized without appreciating the fact that the HTM category of Securities are held as investment i.e. acapital asset and hence amortization of premium paid on such securities will form part of cost of acquisition of HTM deduction?" Briefly stated, facts of the case are that the assessee company filed its return of income for the year under consideration on 29.11.2014, which was subsequently revised on 30.03.2016 . The return of income filed by the assessee was selected for scrutiny assessment tax Act, 1961 (in short ‘the were issued and complied with. The assessment u/s 143(3) of 30.03.2016, assessing total income at . On further appeal, the Ld. CIT(A) allowed evenue are before the tax Appellate Tribunal (ITAT) raising the grounds as fore us, the Ld. Counsel of the assessee filed a Paper Book . 1 to 3 of the appeal of the assessee and ground No. 1 of the appeal of the Revenue are connected with the w. Rule 8D of the 6. The brief facts qua the issue in dispute are that the assessee reported tax free exempted income from two sources. dividend income of Rs.2,87,07,418/ preference shares of Rs.93,24,79,690/ income amounting to Rs.29,42,88,665/ investment in tax fre Rs.188,56,84,686/- (PTC) of Rs.4869.00 crores the assessee made suo motu disallowance of Rs.2,09,42,284/ of the proportionate administrative expenses related to treasury and industrial finance department and claimed that those expenses were directly and indirectly relatable to the earning of the tax free dividend and tax free interest income through the year. Regarding the investments in shares submitted by the assessee that same were part of the debt restructuring (CDR) Reserve Bank of India and as a part of rehabilitation package under which part of the outstanding loan was preference shares. Regarding the pass was claimed that the assessee invested in securitization trust and the interest received was accordingly exempted in the hands of the assessee. Regarding the breakup of suo moto disallowance, the assessee submitted a detailed working expenses related to the treasury division/department and also worked out the expenses incurred pass through certificates. The ITA Nos.3501 & 3239/M/2018 The brief facts qua the issue in dispute are that the assessee tax free exempted income from two sources. dividend income of Rs.2,87,07,418/- from investment in equity an preference shares of Rs.93,24,79,690/-. Secondly, tax free interest income amounting to Rs.29,42,88,665/- was shown from investment in tax free interest bond of Rs.544.20 crores and from investment in pass through certificates Rs.4869.00 crores. Against the tax-free exempted income he assessee made suo motu disallowance of Rs.2,09,42,284/ of the proportionate administrative expenses related to treasury and dustrial finance department and claimed that those expenses e directly and indirectly relatable to the earning of the tax free dividend and tax free interest income through the year. Regarding the investments in shares i.e. equity and preference shares submitted by the assessee that same were part of the (CDR) of the borrowers under the direction of the Reserve Bank of India and as a part of rehabilitation package under which part of the outstanding loan was converted preference shares. Regarding the pass throughcertificates was claimed that the assessee invested in securitization trust and the interest received was accordingly exempted in the hands of the assessee. Regarding the breakup of suo moto disallowance, the assessee submitted a detailed working of direct and indirect expenses related to the treasury division/department and also worked out the expenses incurred pass through certificates. The M/s Yes Bank Ltd. 10 ITA Nos.3501 & 3239/M/2018 The brief facts qua the issue in dispute are that the assessee tax free exempted income from two sources. Firstly, from investment in equity and , tax free interest was shown from interest bond of Rs.544.20 crores and from investment in pass through certificates exempted income, he assessee made suo motu disallowance of Rs.2,09,42,284/- out of the proportionate administrative expenses related to treasury and dustrial finance department and claimed that those expenses e directly and indirectly relatable to the earning of the tax free dividend and tax free interest income through the year. Regarding equity and preference shares, it was submitted by the assessee that same were part of the corporate of the borrowers under the direction of the Reserve Bank of India and as a part of rehabilitation package under converted into equity or certificates(PTC), it was claimed that the assessee invested in securitization trust and the interest received was accordingly exempted in the hands of the assessee. Regarding the breakup of suo moto disallowance, the of direct and indirect expenses related to the treasury division/department and also worked out the expenses incurred pass through certificates. The relevant computation of disallowance reproduced by the Assessing Officer on page 16 to 18 of the assessment under: “In this connection, Yes Bank submits that it has identified certain expenses actually incurred in connection with the activity of buying and selling of securities/equities/tax free instruments/ servicing of pass through certi by securitisation trust and has offered the same for disallowance u/s. 14A of the Act. The details of such expenses are as under: Certain direct expenditure which are incurred solely for the purpose of earning exempt income are fully Such expenditure is fully disallowed us 14A of the Act. Details of such expenditure is as below. Custody charges Brokerage on Equity Sec Transaction tax Total In so far as indirect expenses in relation to earing income from dividend income from equity or preference share, interest income from tax free instruments and maintenance of PT deals are concerned, Yes Bank has, based on its internal records such number of equity deals/tax free/PTC deals to the total number of treasury deals done in the financial year, has computed the disallowance under section 14A of the Act as under: Name Salary Rent – Corporate Office Rent – IFC Electricity – Corp Office Electricity – Branch Telephone Other Operation ITA Nos.3501 & 3239/M/2018 relevant computation of disallowance reproduced by the Assessing Officer on page 16 to 18 of the assessment order is extracted as In this connection, Yes Bank submits that it has identified certain expenses actually incurred in connection with the activity of buying and selling of securities/equities/tax free instruments/ servicing of pass through certificates issued by securitisation trust and has offered the same for disallowance u/s. 14A of the Act. The details of such expenses are as under: Certain direct expenditure which are incurred solely for the purpose of earning exempt income are fully disallowed. Such expenditure is fully disallowed us 14A of the Act. Details of such expenditure is as below. Custody charges 10,240 10,240 100% Brokerage on Equity 11,723 11,723 100% Sec Transaction tax 22,695 22,695 100% In so far as indirect expenses in relation to earing income from dividend income from equity or preference share, interest income from tax free instruments and maintenance of PT deals are concerned, Yes Bank has, based on its internal records such as the books of accounts and the number of equity deals/tax free/PTC deals to the total number of treasury deals done in the financial year, has computed the disallowance under section 14A of the Act as Total Cost Treasury % Distribution 7,843,990,647 361,442,070 0.07% Corporate 38,567,489 5,449,196 0.07% 1,838,645,861 74,131,200 0.07% Corp 6,540,202 726,689 0.07% 228,832,431 9,129,022 0.07% 38,515,087 1,028,766 0.07% Other Operation 4,111,173,324 43,245,820 0.07% M/s Yes Bank Ltd. 11 ITA Nos.3501 & 3239/M/2018 relevant computation of disallowance reproduced by the Assessing order is extracted as In this connection, Yes Bank submits that it has identified certain expenses actually incurred in connection with the activity of buying and selling of securities/equities/tax free ficates issued by securitisation trust and has offered the same for disallowance u/s. 14A of the Act. The details of such Certain direct expenditure which are incurred solely for the disallowed. Such expenditure is fully disallowed us 14A of the Act. 100% 10,240 100% 11,723 100% 22,695 44,658 In so far as indirect expenses in relation to earing income from dividend income from equity or preference share, interest income from tax free instruments and maintenance of PT deals are concerned, Yes Bank has, based on its as the books of accounts and the number of equity deals/tax free/PTC deals to the total number of treasury deals done in the financial year, has computed the disallowance under section 14A of the Act as % Distribution (Amt in Rs.) 0.07% 246,071 0.07% 3,710 0.07% 50,469 0.07% 495 0.07% 6,215 0.07% 700 0.07% 29,442 Expenses 4.4.6 Other Operating cost Cost on no. of employees in treasury department to the total number of employees of the Bank Note 1 : Deals Made in Financial Year 2013 Deals in tax free instruments (including PTCs where tax is paid by Secu trust) in FY 2013 % of tax free deals (including PTC deals where tax is paid by Secu trust) to Total Deals  The Treasury Department ('TD*) of Yes Bank is the Department which is exclusively engaged in the buying and selling of securities. The TD is engage buying and selling of Government Securities, Treasury Bills, Corporate /PSU Bonds, Equity, Mutual Funds and other investments. Hence, Yes Bank has considered the expenses of the TD for the purpose of computation of the disallowances under section 14A from its office in India Bulls Financial Centre which also has its Back Office ('Back Office"). The locations is in situated in Mumbai.  As the first step, Yes Bank has identified the specific expenses of the TD which the buying and selling activities of Government Securities, Treasury Bills, Corporate / PSU Bonds and Shares.  These specific expenses are salary expense of TDs, Rent of the corporate office, rent of Back Office, electricity and  Other expenses from the total operating expenses incurred by Yes Bank for the assessment year under consideration are also considered on the basis of the employee strength of the TD to the total employee strength on a  Since the TD is involved in buying and selling of different types of securities (i.e. shares and other securities), ratio of equity deals to the total deal is used on the expenses referred to in the earlier ITA Nos.3501 & 3239/M/2018 17,498,673,623 Total 4.4.6 Other Operating cost Cost has been allocated based on no. of employees in treasury department to the total number of employees of the Bank Deals Made in Financial Year 2013-14 Deals in tax free instruments (including PTCs where tax is paid by Secu trust) in FY 2013-14 % of tax free deals (including PTC deals where tax is paid by Secu trust) to Total Deals The Treasury Department ('TD*) of Yes Bank is the Department which is exclusively engaged in the buying and selling of securities. The TD is engage buying and selling of Government Securities, Treasury Bills, Corporate /PSU Bonds, Equity, Mutual Funds and other investments. Hence, Yes Bank has considered the expenses of the TD for the purpose of computation of the disallowances under section 14A of the Act. The TD of Yes Bank operates from its office in India Bulls Financial Centre which also has its Back Office ('Back Office"). The locations is in situated in Mumbai. As the first step, Yes Bank has identified the specific expenses of the TD which are incurred in relation to the buying and selling activities of Government Securities, Treasury Bills, Corporate / PSU Bonds and Shares. These specific expenses are salary expense of TDs, Rent of the corporate office, rent of Back Office, electricity and telephone expenses of TD. Other expenses from the total operating expenses incurred by Yes Bank for the assessment year under consideration are also considered on the basis of the employee strength of the TD to the total employee strength on a conservative basis. Since the TD is involved in buying and selling of different types of securities (i.e. shares and other securities), ratio of equity deals to the total deal is used on the expenses referred to in the earlier M/s Yes Bank Ltd. 12 ITA Nos.3501 & 3239/M/2018 Total 337,102 has been allocated based on no. of employees in treasury department to the total Nos. 177,731 0.07% The Treasury Department ('TD*) of Yes Bank is the Department which is exclusively engaged in the buying and selling of securities. The TD is engaged in buying and selling of Government Securities, Treasury Bills, Corporate /PSU Bonds, Equity, Mutual Funds and other investments. Hence, Yes Bank has considered the expenses of the TD for the purpose of computation of the disallowances under of the Act. The TD of Yes Bank operates from its office in India Bulls Financial Centre which also has its Back Office ('Back Office"). The locations As the first step, Yes Bank has identified the specific are incurred in relation to the buying and selling activities of Government Securities, Treasury Bills, Corporate / PSU Bonds These specific expenses are salary expense of TDs, Rent of the corporate office, rent of Back Office, Other expenses from the total operating expenses incurred by Yes Bank for the assessment year under consideration are also considered on the basis of the employee strength of the TD to the total employee Since the TD is involved in buying and selling of different types of securities (i.e. shares and other securities), ratio of equity deals to the total deal is used on the expenses referred to in the earlier paragraphs TD to finally comp under 14A of the Act.  Expenses (such as Custody charges) which specifically pertain to the equity deals are identified and disallowed completely. Expenses incurred for Pass Through Certificates In addition to treasury expenses, for investments in Pass through certificates issued by securitisation trust, 9 employees of the of Corporate Finance department (CF) and 4 employees of Indian Financial Instution (IFI) group are involved in the activity of PTs. Both these departments are based in Mumbai in IndiaBulls Finance Centre, Mumbai. Based on the management estimate of the time spent (50% for corporate Finance) and (15% of Indian Financial Institution group) we have com salary and administrative table. Working for disallowance of administrative cost u/s 14A for the period of Apr 13 Name Corporate Finance/Indian Financials Institution Salary 15,055,508 Rent – India Bulls Finance Centre 3,093,525 Electricity – Branch 374,613 Telephone 39,093 Other Operating Expenses 3,426,006,452 Employee Database CF/IFI Employees Total no of employees Cost allocation % of the employees Total Accordingly, Yes Bank calculated total sum of Rs.20,942,284/ ITA Nos.3501 & 3239/M/2018 paragraphs TD to finally compute the disallowance under 14A of the Act. Expenses (such as Custody charges) which specifically pertain to the equity deals are identified and disallowed completely. Expenses incurred for Pass Through Certificates In addition to treasury expenses, for investments in Pass through certificates issued by securitisation trust, 9 employees of the of Corporate Finance department (CF) and 4 employees of Indian Financial Instution (IFI) group are involved in the activity of sourcing and servicing the the PTs. Both these departments are based in Mumbai in IndiaBulls Finance Centre, Mumbai. Based on the management estimate of the time spent (50% for corporate Finance) and (15% of Indian Financial Institution group) we have computed and allocated the administrative cost which are given below in the Working for disallowance of administrative cost u/s 14A for the period of Apr 13 (Amt in Rs.) Corporate Finance/Indian Financials Institution group Cost allocated 15,055,508 15,055,508 3,093,525 3,093,525 374,613 374,613 39,093 39,093 3,426,006,452 1,997,786 20,560,525 Employee Database IFI CF 4 9 Total no of employees 8,746 8,746 Cost allocation % of the employees 15% 50% 235,034 1,762,752 1,997,786 Accordingly, Yes Bank calculated total sum of Rs.20,942,284/- for the assessment year under M/s Yes Bank Ltd. 13 ITA Nos.3501 & 3239/M/2018 ute the disallowance Expenses (such as Custody charges) which specifically pertain to the equity deals are identified Expenses incurred for Pass Through Certificates In addition to treasury expenses, for investments in Pass through certificates issued by securitisation trust, 9 employees of the of Corporate Finance department (CF) and 4 employees of Indian Financial Instution (IFI) group are sourcing and servicing the the PTs. Both these departments are based in Mumbai in Based on the management estimate of the time spent (50% for corporate Finance) and (15% of Indian Financial puted and allocated the cost which are given below in the Working for disallowance of administrative cost u/s 14A for the period of Apr 13 – Mar 14 Rationale Actual at 50% for Corporate Finance and 15% for IFI. Actuals Actuals Actuals No of Employees CF 1,762,752 1,997,786 Accordingly, Yes Bank calculated total sum of for the assessment year under consideration and disallowed the same under section 14A of the Act.” 7. The Assessing Officer however was not satisfied with the computation of the suo motu disal recording dissatisfaction as to the computation of the assessee in para 4.8.2 to 4.8.9 of the assess disallowance in terms of Rule 8D “4.4.10 The provisions of Sec 14A, inserted by Finance Act, 2001 w.e.f. 1.04.1962 reads as follows: 'No deduction shall be allowed in respect of expenditure incurred by assessee in relation to income, which does not form part of the total income under this also applicable retrospectively.Therefore, disallowance of expenditure under Sec 14A is as follows: Disallowance working u/s 14A of Income Investment in shares/tax free bonds as on 31 2013 Investment in shares /tax free bonds/Pass through certificates as on 31-Mar Average Investment for FY 2013 Interest cost for FY 2011 Total Assets as on 31 Total Assets as on 31 Average total asset for FY 2013 Interest to be disallowed (A*B/C) Add:1/2 % of total investment Total disallowance Rs. The disallowance u/s. 14A of the Act has to be read in consonance with Rule 8D of I.T. Rules which has been made effective w.e.f. A.Y. 2008 disallowance given in the table above clearly shows that there are elements of ex incurred and which are relatable to the investment made in ITA Nos.3501 & 3239/M/2018 consideration and disallowed the same under section 14A The Assessing Officer however was not satisfied with the computation of the suo motu disallowance and therefore after dissatisfaction as to the computation of the assessee in para 4.8.2 to 4.8.9 of the assessment order, disallowance in terms of Rule 8D as under : 4.4.10 The provisions of Sec 14A, inserted by Finance Act, 2001 w.e.f. 1.04.1962 reads as follows: 'No deduction shall be allowed in respect of expenditure incurred by assessee in relation to income, which does not form part of the total income under this Act'. Further, Rule 8D of the I.T. Rule is also applicable retrospectively.Therefore, disallowance of expenditure under Sec 14A is as follows: Disallowance working u/s 14A of Income-tax Act for AY 2013-14 Closing balance INR (‘000s) shares/tax free bonds as on 31-Mar-3,218,715 Investment in shares /tax free bonds/Pass through Mar-2014 55,254,609 Average Investment for FY 2013-14 29,236,662 Interest cost for FY 2011-12 72,650,918 Assets as on 31-Mar-2013 991,041,273 Total Assets as on 31-Mar-2014 1,090,157,899 Average total asset for FY 2013-14 1,040,599,586 Interest to be disallowed (A*B/C) 2,041,199 Add:1/2 % of total investment 146,183 Total disallowance Rs. 2,187,382 The disallowance u/s. 14A of the Act has to be read in consonance with Rule 8D of I.T. Rules which has been made effective w.e.f. A.Y. 2008-09. The working of the disallowance given in the table above clearly shows that there are elements of expenditure which the assessee has incurred and which are relatable to the investment made in M/s Yes Bank Ltd. 14 ITA Nos.3501 & 3239/M/2018 consideration and disallowed the same under section 14A The Assessing Officer however was not satisfied with the lowance and therefore after dissatisfaction as to the computation of the assessee in , computed the 4.4.10 The provisions of Sec 14A, inserted by Finance Act, 2001 w.e.f. 1.04.1962 reads as follows: 'No deduction shall be allowed in respect of expenditure incurred by assessee in relation to income, which does not form part of the total Act'. Further, Rule 8D of the I.T. Rule is also applicable retrospectively.Therefore, disallowance of Closing balance INR (‘000s) 3,218,715 55,254,609 29,236,662 (A) 72,650,918 (B) 991,041,273 1,090,157,899 1,040,599,586 (C) 2,041,199 2,187,382 The disallowance u/s. 14A of the Act has to be read in consonance with Rule 8D of I.T. Rules which has been 09. The working of the disallowance given in the table above clearly shows that penditure which the assessee has incurred and which are relatable to the investment made in shares, etc, the income from which is not includible in the total works out to Rs. 2,187,382,000/ made, however as the assessee has already made disallowance of Rs. 20,942,284/ amount of Rs. 2,166,439,716/ income of the assessee u/s 14A of the Act. 7.1 The Assessing Off disallowance made balance further appeal before the Ld. CIT(A), the assessee challenged the addition mainly on the ground that not automatic, secondly of r.w. Rule 8D if securities own funds and interest free funds are more than tax free investments, no disallowance u/s 14A r.w. Rule 8D should be made, fourthly, no disallowance investment converted securities yielding exempt computing disallowance , Act can be made where investments are seventhly, investments made to requirement should not be included while computing disallowance u/s 14A of the Act. The Ld. CIT(A) after considering submission of the assessee given a detailed finding in impugned order, however restored the Officer for reexamining the entire worked out for quantum yielding security and disallow the same. No finding was given in ITA Nos.3501 & 3239/M/2018 shares, etc, the income from which is not includible in the total works out to Rs. 2,187,382,000/- is required to be made, however as the assessee has already made disallowance of Rs. 20,942,284/- in computation balance amount of Rs. 2,166,439,716/- is therefore added to the income of the assessee u/s 14A of the Act.” The Assessing Officer after reducing the suo moto disallowance made balance addition of Rs.2,166,430,716/ further appeal before the Ld. CIT(A), the assessee challenged the addition mainly on the ground that,firstly, Rule 8D of the Rules is secondly, no disallowance could be made u/s 14A securities are held in stock in trade own funds and interest free funds are more than tax free no disallowance u/s 14A r.w. Rule 8D should be no disallowance can be made in respect of converted from loans to equity shares, exempted income should be considered computing disallowance ,sixthly, no disallowance u/s 14A can be made where investments are strategic in nature, investments made to comply with the statutory should not be included while computing disallowance u/s 14A of the Act. The Ld. CIT(A) after considering submission of the assessee given a detailed finding in para-No. 3.4 however restored the matter to the Assessing Officer for reexamining the entire case from factual worked out for quantum of interest relatable to tax free income yielding security and disallow the same. No finding was given in M/s Yes Bank Ltd. 15 ITA Nos.3501 & 3239/M/2018 shares, etc, the income from which is not includible in the is required to be made, however as the assessee has already made in computation balance is therefore added to the icer after reducing the suo moto of Rs.2,166,430,716/-. On further appeal before the Ld. CIT(A), the assessee challenged the Rule 8D of the Rules is no disallowance could be made u/s 14A e held in stock in trade, thirdly, if own funds and interest free funds are more than tax free no disallowance u/s 14A r.w. Rule 8D should be made in respect of hares, fifthly,only income should be considered for disallowance u/s 14A of the strategic in nature, comply with the statutory should not be included while computing disallowance u/s 14A of the Act. The Ld. CIT(A) after considering submission of No. 3.4 of the matter to the Assessing case from factual angle and tax free income yielding security and disallow the same. No finding was given in respect of disallowance for administrati moto computed by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as para 3.4 as under: “3.4 Decision: I have carefully considered the facts of the case and examined all the submissions, details and documents furnished by the assessee while adjudicating the appeal. Assessee in its submissions has admitted following facts: 1) It earned tax free dividends of Rs. 38,77,418/ investments in shares of Rs.93,24,79,619/ 29,42,88,685/ Crores and Rs. 188,56,84,686/ through certificates (PTC) of Rs. 4869.00 2) It had incurred certain administrative expenses which were directly and/or indirectly relatable to the earning of tax free dividend and tax free interest income during the year, 3) It had invested in Shares, Tax Free Bonds andPass ThroughCertif during the year. Assessee is engaged in the business of banking in India and is governed by the Banking regulation act and RBI Act and as part and parcel of its business requirements and strategy and as the statutory guidelines issued byRBI, it invests in securities and shares and investments in shares and securities in earlier assessment years and during the year and derived tax free income from these investments. Now, the investments require funds and these funds have to come from somewhere and that is the moot point for debate in the case. It is observed from the records that assessee's Investments yielding tax free incomes and Interest bearing borrowings went up during the year simultaneously and its position as on 31/3/2013 and 31/3/2014 was as follows: ITA Nos.3501 & 3239/M/2018 respect of disallowance for administrative expenses, which was moto computed by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as para 3.4 as under: “3.4 Decision: I have carefully considered the facts of the case and examined all the submissions, details and documents rnished by the assessee while adjudicating the appeal. Assessee in its submissions has admitted following facts: 1) It earned tax free dividends of Rs. 38,77,418/ investments in shares of Rs.93,24,79,619/- 29,42,88,685/- on tax free interest bonds of Rs. 544.20 Crores and Rs. 188,56,84,686/- on investments in pass through certificates (PTC) of Rs. 4869.00 Crores. 2) It had incurred certain administrative expenses which were directly and/or indirectly relatable to the earning of tax free dividend and tax free interest income during the 3) It had invested in Shares, Tax Free Bonds andPass ThroughCertificates (PTs) of several companies/ trust during the year. is engaged in the business of banking in India and is governed by the Banking regulation act and RBI Act and as part and parcel of its business requirements and strategy and as the statutory guidelines issued byRBI, it invests in securities and shares and thus made several investments in shares and securities in earlier assessment years and during the year and derived tax free income from these investments. Now, the investments require funds and these funds have to come from somewhere and that is the point for debate in the case. It is observed from the records that assessee's Investments yielding tax free incomes and Interest bearing borrowings went up during the year simultaneously and its position as on 31/3/2013 and 31/3/2014 was as follows: INR ( M/s Yes Bank Ltd. 16 ITA Nos.3501 & 3239/M/2018 expenses, which was suo moto computed by the assessee. The relevant finding of the Ld. I have carefully considered the facts of the case and examined all the submissions, details and documents rnished by the assessee while adjudicating the appeal. Assessee in its submissions has admitted following facts: 1) It earned tax free dividends of Rs. 38,77,418/- on and Rs. on tax free interest bonds of Rs. 544.20 on investments in pass 2) It had incurred certain administrative expenses which were directly and/or indirectly relatable to the earning of tax free dividend and tax free interest income during the 3) It had invested in Shares, Tax Free Bonds andPass icates (PTs) of several companies/ trust is engaged in the business of banking in India and is governed by the Banking regulation act and RBI Act and as part and parcel of its business requirements and strategy and as the statutory guidelines issued byRBI, it thus made several investments in shares and securities in earlier assessment years and during the year and derived tax free income from these investments. Now, the investments require funds and these funds have to come from somewhere and that is the point for debate in the case. It is observed from the records that assessee's Investments yielding tax free incomes and Interest bearing borrowings went up during the year simultaneously and its position as on 31/3/2013 INR (‘000s) Investment in shares/tax free bonds as on 31 Investment in shares /tax free bonds/Pass through certificates as on 31 Schedule 4 – Borrowings 1. Innovative perpetual debt (IPDI) and tier II debt A. Borrowing in India i. IPDI ii. Upper tier II Borrowings iii. Lower tier II Borrowings Total (A) B. Borrowing outside India i. IPDI ii. Upper tier II Borrowings iii. Lower tier II Borrowings Total (B) Total (A+B) 2. Other borrowings A. Borrowing in India i. Reserve Bank of India ii. Other Banks iii. Other Institution and agencies Total (A) B. Borrowing outside India (B) Total (A+B) Total(1+2) This is the main reason why the interest expenditure went up from Rs.607.52 Crores to Rs.726.50 Crores during the F.Y 2013-14 relevant to A.Y2014 admitted that it has earned tax free interest on tax free bonds and if the bank account had been checked, it would have revealed that there is a direct nexus between the borrowings and the investments from time to time since borrowings by way of loans time to time, month to month, week to week, and may be day to day depending on various factors. It may be mentioned here that whether the shares and securities were held as investments or stock treated as stock in trade as per RBI norms, each one of these purchases required funds and these could have come from a basket of deposits and/or loans and/or own funds by way of share capital/premium. Basically it is a question of fact and then law, and hence basi highlighted under the weight of legal submissions. ITA Nos.3501 & 3239/M/2018 Investment in shares/tax free bonds as on 31-03-2013 3,218,715 Investment in shares /tax free bonds/Pass through certificates as on 31-03-2014 55,254,609 March 31, 2014 Innovative perpetual debt instruments 7,410,000 ii. Upper tier II Borrowings 19,367,000 iii. Lower tier II Borrowings 30,255,000 57,032,000 outside India 299,575 ii. Upper tier II Borrowings 20,382,401 iii. Lower tier II Borrowings - 10,681,976 67,713,976 . Reserve Bank of India 35,020,000 26,610,000 iii. Other Institution and agencies 31,554,417 93,184,417 B. Borrowing outside India (B) 52,244,469 145,428,886 213,142,862 This is the main reason why the interest expenditure went up from Rs.607.52 Crores to Rs.726.50 Crores during the 14 relevant to A.Y2014-15. Assessee admitted that it has earned tax free interest on tax free bonds and if the bank account had been checked, it would have revealed that there is a direct nexus between the borrowings and the investments from time to time since borrowings by way of loans and deposits were made from time to time, month to month, week to week, and may be day to day depending on various factors. It may be mentioned here that whether the shares and securities were held as investments or stock-in-trade or investments s stock in trade as per RBI norms, each one of these purchases required funds and these could have come from a basket of deposits and/or loans and/or own funds by way of share capital/premium. Basically it is a question of fact and then law, and hence basic facts have not been highlighted under the weight of legal submissions. M/s Yes Bank Ltd. 17 ITA Nos.3501 & 3239/M/2018 3,218,715 55,254,609 March 31, 2013 7,510,000 19,367,000 31,255,000 58,132,000 271,425 9,334,984 - 9,606,409 67,738,409 48,958,900 30,832,500 24,759,375 104,550,775 36,932,288 141,483,063 209,221,472 This is the main reason why the interest expenditure went up from Rs.607.52 Crores to Rs.726.50 Crores during the 15. Assessee has admitted that it has earned tax free interest on tax free bonds and if the bank account had been checked, it would have revealed that there is a direct nexus between the borrowings and the investments from time to time since and deposits were made from time to time, month to month, week to week, and may be day to day depending on various factors. It may be mentioned here that whether the shares and securities trade or investments s stock in trade as per RBI norms, each one of these purchases required funds and these could have come from a basket of deposits and/or loans and/or own funds by way of share capital/premium. Basically it is a question c facts have not been highlighted under the weight of legal submissions. Moreover, assessee has meticulously worked out expenses relating to administrative wing of the treasury department and newly created wing of the industrial finance wing of the assessee bank during the year. In this regard, assessee has come up with several alternate arguments as to why interest should not be disallowed notwithstanding the fact that it has itself offered "direct expenses of Rs. 209,42,284/ expenses of its treasury wing and newly set up industrial finance department for disallowance in the computation of total income computed by it. It is worth noting here that the figure of Rs. 209,42,284/ meticulously by the assessee, however, out any interest and bill discounting charges allocable to the activity of the Treasury Wing especially when the auditors of the company and the directors of the company have themselves admitted in annual accounts that the treasury wing h segmented expenses including interest and bill discounting charges allocable to the Tax Free Income yielding investments even though rule 8D of the IT. Rules 1962 mandates it. It is important to note that assessee has cit numerous decisions of the High court/ITAT favoring it,however, the matter is not ultimately decided by the Supreme Court of India and even the ITATHC decisions cited by the assessee have also reiterated the issue that "It is a question of fact and wheth indirect nexus between the borrowings" on which interest had been paid and the investments on which tax free interest/dividends/any other income has been carned or not. These decisions show beyond doubt that in facts and circumstances of the case "rule and provisions will apply or not" and not otherwise. So, if the facts are clear, then the rule and the law will apply.Moreover, legislature had already envisaged all such eventualities and decided in its wisdom to frame the law an issues raised in the matter. Assessee's business operations are governed by the B.R. Act 1949 and RBI Guidelines issued from time to time. As per B.R. Act 1949, every bank operating in India is required to maintain certain pe Securities and assessee, being a bank and in the banking ITA Nos.3501 & 3239/M/2018 Moreover, assessee has meticulously worked out expenses relating to administrative wing of the treasury department and newly created wing of the industrial finance wing of e bank during the year. In this regard, assessee has come up with several alternate arguments as to why interest should not be disallowed notwithstanding the fact that it has itself offered "direct expenses of Rs. 209,42,284/-out of administrative of its treasury wing and newly set up industrial finance department for disallowance in the computation of total income computed by it. It is worth noting here that the figure of Rs. 209,42,284/- has been worked out meticulously by the assessee, however, it has not worked out any interest and bill discounting charges allocable to the activity of the Treasury Wing especially when the auditors of the company and the directors of the company have themselves admitted in annual accounts that the treasury wing had segmented liabilities and hence segmented expenses including interest and bill discounting charges allocable to the Tax Free Income yielding investments even though rule 8D of the IT. Rules 1962 mandates it. It is important to note that assessee has cit numerous decisions of the High court/ITAT favoring it,however, the matter is not ultimately decided by the Supreme Court of India and even the ITATHC decisions cited by the assessee have also reiterated the issue that "It is a question of fact and whether there was a direct and/or indirect nexus between the borrowings" on which interest had been paid and the investments on which tax free interest/dividends/any other income has been carned or not. These decisions show beyond doubt that in facts and stances of the case "rule and provisions will apply or not" and not otherwise. So, if the facts are clear, then the rule and the law will apply.Moreover, legislature had already envisaged all such eventualities and decided in its wisdom to frame the law and formulate the rules. Various issues raised in the matter. Assessee's business operations are governed by the B.R. Act 1949 and RBI Guidelines issued from time to time. As per B.R. Act 1949, every bank operating in India is required to maintain certain percentage of its deposits in Government Securities and assessee, being a bank and in the banking M/s Yes Bank Ltd. 18 ITA Nos.3501 & 3239/M/2018 Moreover, assessee has meticulously worked out expenses relating to administrative wing of the treasury department and newly created wing of the industrial finance wing of In this regard, assessee has come up with several alternate arguments as to why interest should not be disallowed notwithstanding the fact that it has itself offered "direct out of administrative of its treasury wing and newly set up industrial finance department for disallowance in the computation of total income computed by it. It is worth noting here that the has been worked out it has not worked out any interest and bill discounting charges allocable to the activity of the Treasury Wing especially when the auditors of the company and the directors of the company have themselves admitted in annual accounts that the ad segmented liabilities and hence segmented expenses including interest and bill discounting charges allocable to the Tax Free Income yielding investments even though rule 8D of the IT. Rules 1962 mandates it. It is important to note that assessee has cited numerous decisions of the High court/ITAT favoring it,however, the matter is not ultimately decided by the Supreme Court of India and even the ITATHC decisions cited by the assessee have also reiterated the issue that "It er there was a direct and/or indirect nexus between the borrowings" on which interest had been paid and the investments on which tax free interest/dividends/any other income has been carned or not. These decisions show beyond doubt that in facts and stances of the case "rule and provisions will apply or not" and not otherwise. So, if the facts are clear, then the rule and the law will apply.Moreover, legislature had already envisaged all such eventualities and decided in its d formulate the rules. Various Assessee's business operations are governed by the B.R. Act 1949 and RBI Guidelines issued from time to time. As per B.R. Act 1949, every bank operating in India is required rcentage of its deposits in Government Securities and assessee, being a bank and in the banking business in India, was required to comply with the same as well. Assessee has submitted that it was complying with the statutory requirements of maintaining cer percentage of its deposits received from public, by depositing certain percentage of it in Government Securities and Bonds to comply with RBI Guidelines. Now, deposits made by the customers vary from day to day, week to week, month to month, depending customers and yet a bank is required to comply with RBI guidelines strictly so as not to invite penal clauses of the B.R.Act. Thus assessee was complying with the statutory provisions applicable to it and hence it made investments tax free income yielding securities totaling Rs. 5507 Crores which yielded tax freedeposits bearing interest received by the assessee during the year" since the assessee was complying with statutory requirements and had invested in tax free investments. investing in such securities in as much as "the income by way of interest and dividends was tax free.' Thus, prima face it would appear that borrowed funds by way of interest bearing savings and other deposits were utilized b the assessee in investing in tax free income yielding securities and there is direct nexus between the two by way of statutory compliance requirement since the assessee is a Bank governed by the provisions of the B.R.Act 1949 and RBI Act. It is therefore were utilized for investing in tax free income yielding securities and hence provisions of section 14A of the IT Act 1961 and rules 8D of the ITRules 1962 will squarely apply to the facts of the case. However, the assesseein i submissions cited that 'the ITAT, Mumbai in assessee's own case for AY2008 follows: "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(@)G) and (i) is required to be made, if the non the assessee are more than the amount of investment which generate tax free income, since the said view has been upheld by the Hon'ble Bombay High Vs. HDFC Bank Ltd. (2014)366 IT 505 (Bom). However, the fund position of the assessee is required to be examined at ITA Nos.3501 & 3239/M/2018 business in India, was required to comply with the same as well. Assessee has submitted that it was complying with the statutory requirements of maintaining cer percentage of its deposits received from public, by depositing certain percentage of it in Government Securities and Bonds to comply with RBI Guidelines. Now, deposits made by the customers vary from day to day, week to week, month to month, depending on various needs of the customers and yet a bank is required to comply with RBI guidelines strictly so as not to invite penal clauses of the B.R.Act. Thus assessee was complying with the statutory provisions applicable to it and hence it made investments tax free income yielding securities totaling Rs. 5507 Crores which yielded tax freedeposits bearing interest received by the assessee during the year" since the assessee was complying with statutory requirements and had invested in tax free investments. There is another advantage of investing in such securities in as much as "the income by way of interest and dividends was tax free.' Thus, prima face it would appear that borrowed funds by way of interest bearing savings and other deposits were utilized b the assessee in investing in tax free income yielding securities and there is direct nexus between the two by way of statutory compliance requirement since the assessee is a Bank governed by the provisions of the B.R.Act 1949 and RBI Act. It is therefore held that the'borrowed funds were utilized for investing in tax free income yielding securities and hence provisions of section 14A of the IT Act 1961 and rules 8D of the ITRules 1962 will squarely apply to the facts of the case. However, the assesseein i submissions cited that 'the ITAT, Mumbai in assessee's own case for AY2008-09 vide order dated 1/1/2016 has held as "4.We heard the rival contentions on this issue and perused the record. We agree with the contention of the assessee allowance under Rule 8D(@)G) and (i) is required to be made, if the non-interest bearing funds available with the assessee are more than the amount of investment which generate tax free income, since the said view has been upheld by the Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. (2014)366 IT 505 (Bom). However, the fund position of the assessee is required to be examined at M/s Yes Bank Ltd. 19 ITA Nos.3501 & 3239/M/2018 business in India, was required to comply with the same as well. Assessee has submitted that it was complying with the statutory requirements of maintaining certain percentage of its deposits received from public, by depositing certain percentage of it in Government Securities and Bonds to comply with RBI Guidelines. Now, deposits made by the customers vary from day to day, week to on various needs of the customers and yet a bank is required to comply with RBI guidelines strictly so as not to invite penal clauses of the B.R.Act. Thus assessee was complying with the statutory provisions applicable to it and hence it made investments in tax free income yielding securities totaling Rs. 5507 Crores which yielded tax freedeposits bearing interest received by the assessee during the year" since the assessee was complying with statutory requirements and had invested in There is another advantage of investing in such securities in as much as "the income by way of interest and dividends was tax free.' Thus, prima face it would appear that borrowed funds by way of interest bearing savings and other deposits were utilized by the assessee in investing in tax free income yielding securities and there is direct nexus between the two by way of statutory compliance requirement since the assessee is a Bank governed by the provisions of the B.R.Act 1949 held that the'borrowed funds were utilized for investing in tax free income yielding securities and hence provisions of section 14A of the IT Act 1961 and rules 8D of the ITRules 1962 will squarely apply to the facts of the case. However, the assesseein its submissions cited that 'the ITAT, Mumbai in assessee's own 09 vide order dated 1/1/2016 has held as "4.We heard the rival contentions on this issue and perused the record. We agree with the contention of the assessee allowance under Rule 8D(@)G) and (i) is required interest bearing funds available with the assessee are more than the amount of investment which generate tax free income, since the said view has been Court in the case of CIT Vs. HDFC Bank Ltd. (2014)366 IT 505 (Bom). However, the fund position of the assessee is 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 fil AO with the direction to examine this issue by following the ratio rendered in the case of HDFC Bank Ltd. (Supra) and also any other decision that may be relied upon by the assessee and take appropriate decision in açeordance with the law. 5. With regard to the expenditure with requires to be disallowed under Rule 8D(2)(iii), the Id. 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, out that the assessee would have 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, the Ld. AR agreed that the disallowance may be restricted to Rs. 2,09,42,284/ 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 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 Rs.2,09,42,284/ It would thus appear that 'the two main issues raised in the appeal relating to the quantum of disallowance u/s. 144 relating to interest on borrowed funds and disallowance vis-à-vis the tax free securities held as stock in trade are already decided in thi of the ITAT dated 1/1/2016 in assessee's own case for AY 2008-09, it is directed that the AO will follow the directions of the ITAT, Mumbai for AY 2008 the spirit of various decisions quoted in and also in light of subsequent decision and direction of Bombay High Court in the case of HDFC Ltd. v/s. DCIT 368 IT 529 vis-@ examine the entire case from factual angle and work out the quantum of interest relatable to these tax free income ITA Nos.3501 & 3239/M/2018 the end of the AO. Accordingly, we set aside the order of Ld. CIT(A) on this issue and restore the same to the fil AO with the direction to examine this issue by following the ratio rendered in the case of HDFC Bank Ltd. (Supra) and also any other decision that may be relied upon by the assessee and take appropriate decision in açeordance with regard to the expenditure with requires to be disallowed under Rule 8D(2)(iii), the Id. 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 have 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 received, the Ld. AR agreed that the disallowance may be restricted to Rs. 2,09,42,284/- 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 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)(ji) to Rs.2,09,42,284/- It would thus appear that 'the two main issues raised in the appeal relating to the quantum of disallowance u/s. 144 relating to interest on borrowed funds and disallowance vis the tax free securities held as stock in trade are already decided in this appeal'. Keeping in view the orders of the ITAT dated 1/1/2016 in assessee's own case for AY 09, it is directed that the AO will follow the directions of the ITAT, Mumbai for AY 2008-09 for AY2014- the spirit of various decisions quoted in the ITAT decision and also in light of subsequent decision and direction of Bombay High Court in the case of HDFC Ltd. v/s. DCIT 368 @-vis the facts of the assessee'scase and re examine the entire case from factual angle and work out the m of interest relatable to these tax free income M/s Yes Bank Ltd. 20 ITA Nos.3501 & 3239/M/2018 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 direction to examine this issue by following the ratio rendered in the case of HDFC Bank Ltd. (Supra) and also any other decision that may be relied upon by the assessee and take appropriate decision in açeordance with regard to the expenditure with requires to be disallowed under Rule 8D(2)(iii), the Id. AR submitted that there is no requirement to make any disallowance during the year under consideration, since the assessee has not when it was pointed out that the assessee would have 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 received, the Ld. AR agreed that the disallowance as computed by the 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 the addition under Rule 8D(2)(ji) to It would thus appear that 'the two main issues raised in the appeal relating to the quantum of disallowance u/s. 144 relating to interest on borrowed funds and disallowance vis the tax free securities held as stock in trade are s appeal'. Keeping in view the orders of the ITAT dated 1/1/2016 in assessee's own case for AY 09, it is directed that the AO will follow the directions -15 also in the ITAT decision and also in light of subsequent decision and direction of Bombay High Court in the case of HDFC Ltd. v/s. DCIT 368 vis the facts of the assessee'scase and re- examine the entire case from factual angle and work out the m of interest relatable to these tax free income yielding securities and disallow the same to enable the AO to verify the facts of the case as per ITAT's directions. In nutshell, assessee's appeal is partly allowed subject to verification.” 8. Before us, the assessee by way of ground NO. 1 has challenged the direction of the Ld. CIT(A) for restoring the matter for re examination/re-verification beyond the powers conferred u/s 254 of the Act. It is the contention of the assessee in ground No. 2 that said direction of the Ld. CIT(A) is beyond the direction of the ITAT in the assessee’s own case for earlier years. Alternatively, in ground No. 3, the assessee has prayed for relief for disallowance on proportionate interest expenses, no disallowance if securities as stock in trade and also submitted for deleting the suo moto disallowance also. The Ld. Counsel appeared before us deletion of the addition. Regarding interest disallowance could be made to the extent of interest free funds available with the assessee : “The Assessee Bank submits that when own funds and interest free funds are more than tax free investments, no disallowance of interest w/s 144 r.w.r. 8D(fi) be made. The said proposition is supported with the position of own funds and tax-free investments as on March 31, 2014, tabulated below for reference: Details of Owned funds and other non interest bearing funds Share Capital (a) (Pg. 8 of FPB) Reserves and Surplus (b) (Pg. 8 of Current Account Deposits ITA Nos.3501 & 3239/M/2018 yielding securities and disallow the same to enable the AO to verify the facts of the case as per ITAT's directions. In nutshell, assessee's appeal is partly allowed subject to ” he assessee by way of ground NO. 1 has challenged the direction of the Ld. CIT(A) for restoring the matter for re verification, which according to the assessee is beyond the powers conferred u/s 254 of the Act. It is the contention sessee in ground No. 2 that said direction of the Ld. CIT(A) is beyond the direction of the ITAT in the assessee’s own case for earlier years. Alternatively, in ground No. 3, the assessee has prayed for relief for disallowance on proportionate interest no disallowance if securities as stock in trade and also deleting the suo moto disallowance also. The Ld. Counsel appeared before us and made various propositions praying deletion of the addition. Regarding the, first proposition interest disallowance could be made to the extent of interest free funds available with the assessee, the assessee submitted as under The Assessee Bank submits that when own funds and interest free funds are more than tax free investments, no owance of interest w/s 144 r.w.r. 8D(fi) be made. The said proposition is supported with the position of own funds free investments as on March 31, 2014, tabulated below for reference: Details of Owned funds and other non- interest bearing funds Amount (Rs. In Lacs) As on March 31, 2014 Share Capital (a) (Pg. 8 of FPB) 36,063 Reserves and Surplus (b) (Pg. 8 of FPB) 6,76,110 Current Account Deposits M/s Yes Bank Ltd. 21 ITA Nos.3501 & 3239/M/2018 yielding securities and disallow the same to enable the AO to verify the facts of the case as per ITAT's directions. In nutshell, assessee's appeal is partly allowed subject to he assessee by way of ground NO. 1 has challenged the direction of the Ld. CIT(A) for restoring the matter for re- the assessee is beyond the powers conferred u/s 254 of the Act. It is the contention sessee in ground No. 2 that said direction of the Ld. CIT(A) is beyond the direction of the ITAT in the assessee’s own case for earlier years. Alternatively, in ground No. 3, the assessee has prayed for relief for disallowance on proportionate interest no disallowance if securities as stock in trade and also deleting the suo moto disallowance also. The Ld. made various propositions praying proposition, that no interest disallowance could be made to the extent of interest free he assessee submitted as under The Assessee Bank submits that when own funds and interest free funds are more than tax free investments, no owance of interest w/s 144 r.w.r. 8D(fi) be made. The said proposition is supported with the position of own funds free investments as on March 31, 2014, tabulated Amount (Rs. In Lacs) As on March 31, 2014 - From Banks (c) - From Others (d) Total current account deposits (e=c+d) (Pg. 9 of FPB) Total own funds (a+b+e) Tax free investments Reliance is placed on various judicial precedents listed in the index of Legal Paper Book running from pg. no. 1 ("LPB-I) under proposition 1, including the decision of Hon' ble ITAT in Assessee's own case for AY 2008 pg. no. 2, para 4. 8.1 Regarding the second has not recorded dissatisfaction as to the claim of the assessee, the Ld. Counsel submitted as under: “Proposition 2: Satisfaction not recorded The AO while rejecting the suo satisfaction (Pg. no. 22 of AOOrder) as to how the working is wrong but states a generic reason as to why Rule 8D should be applied. The AO needs to record 'satisfaction having regard to the accounts of the Assessee as to how he is not satisfied correctness of the claim of Assessee before applying Rule 8D Reliance is placed on various judicial precedents filed in LPB-I at Pg. no. 6 decision of Hon'ble ITAT in Assessee's own case for AY 2011-12 to AY 13 2011-12).” 8.2 Regarding the other 14A of the Act could be made when securities were held as stock in trade business etc., the Ld. Counsel submitted as under: ITA Nos.3501 & 3239/M/2018 From Banks (c) 23,469 From Others (d) 6,78,246 Total current account deposits (e=c+d) of FPB) 7,01,715 Total own funds (a+b+e) 14,13,888 Tax free investments 5,53,525 Reliance is placed on various judicial precedents listed in the index of Legal Paper Book running from pg. no. 1 I) under proposition 1, including the decision of Hon' ble ITAT in Assessee's own case for AY 2008-09 at LPB pg. no. 2, para 4. second proposition that the Assessing Officer has not recorded dissatisfaction as to the claim of the assessee, the Ld. Counsel submitted as under: Proposition 2: Satisfaction not recorded The AO while rejecting the suo-moto working failed satisfaction (Pg. no. 22 of AOOrder) as to how the working is wrong but states a generic reason as to why Rule 8D should be applied. The AO needs to record 'satisfaction having regard to the accounts of the Assessee as to how he is not satisfied correctness of the claim of Assessee before applying Rule Reliance is placed on various judicial precedents filed in I at Pg. no. 6-109 under Proposition 2, including the decision of Hon'ble ITAT in Assessee's own case for AY 12 to AY 13-14 (Refer LAB-I Pg. No. 17, Para 17 for AY other propositions that no disallowance u/s 14A of the Act could be made when securities were held as stock in the Ld. Counsel submitted as under: M/s Yes Bank Ltd. 22 ITA Nos.3501 & 3239/M/2018 14,13,888 Reliance is placed on various judicial precedents listed in the index of Legal Paper Book running from pg. no. 1-343 I) under proposition 1, including the decision of Hon' 09 at LPB-I that the Assessing Officer has not recorded dissatisfaction as to the claim of the assessee, the moto working failed to record satisfaction (Pg. no. 22 of AOOrder) as to how the working is wrong but states a generic reason as to why Rule 8D The AO needs to record 'satisfaction having regard to the accounts of the Assessee as to how he is not satisfied about correctness of the claim of Assessee before applying Rule Reliance is placed on various judicial precedents filed in 109 under Proposition 2, including the decision of Hon'ble ITAT in Assessee's own case for AY I Pg. No. 17, Para 17 for AY that no disallowance u/s 14A of the Act could be made when securities were held as stock in the Ld. Counsel submitted as under: “No disallowance held as stock The Assessee Bank being in the business of banking, holds all its investments as stock sale of such investments is offered for tax under the head "Income from Business or Profession". Kindly note that no income under the head Capital Gains is offered by the Assessee in its COI (Pg. no. 60 of FPB). Any exempt income earned out of such investments is only incidental. Reliance is placed on various case laws filed in LPB no. 1-204 under Proposition 3 including the decision of Hon'ble ITAT in Assessee's own case for AY 2008 Pg. No. 3, Para 6). Out of the above decisions, the following judicial precedents, after considering the decision of Hon'ble SC in Maxopp Investments Ltd. v. CIT (402 ITR 640) have held that no 144 disallowance is warranted with respect to investments held as  Nice Bombay Transport (P) Ltd vs. ACIT (20191 175 ITD 684 (Delhi  Punjab National Bank vs. ACIT ITA No. 1519/Del/2016 & ITA No. 7106/Del/2017] (Delhi Trib.)  ACIT vs. UCO Bank [ITA No. 1615/Kol/2016| (Kolkata  Bank of Maharashtra /Pun/2014) Proposition 4: Only those investments yielding exempt income to be considered for calculating disallowance us 14A Without Prejudice to proposition 1, 2, 3 & 4 Proposition 5: Only net interest expenditure after setting off interest income should be considered for the purpose of interest disallowance u/s 14A r.w.r. 8D ITA Nos.3501 & 3239/M/2018 No disallowance us 14A of the Act when securities are held as stock-in-trade of the business The Assessee Bank being in the business of banking, holds all its investments as stock-in-trade.Any income/loss from sale of such investments is offered for tax under the head "Income from Business or Profession". Kindly note that no income under the head Capital Gains is offered by the Assessee in its COI (Pg. no. 60 of FPB). Any exempt income ut of such investments is only incidental. Reliance is placed on various case laws filed in LPB 204 under Proposition 3 including the decision of Hon'ble ITAT in Assessee's own case for AY 2008- No. 3, Para 6). Out of the above decisions, the following judicial precedents, after considering the decision of Hon'ble SC in Maxopp Investments Ltd. v. CIT (402 ITR 640) have held that no 144 disallowance is warranted with respect to investments held as stock-in-trade: Nice Bombay Transport (P) Ltd vs. ACIT (20191 175 ITD 684 (Delhi-Trib.) Punjab National Bank vs. ACIT ITA No. 1519/Del/2016 & ITA No. 7106/Del/2017] (Delhi ACIT vs. UCO Bank [ITA No. 1615/Kol/2016| (Kolkata-Trib.) Bank of Maharashtra v. DCIT (ITA No. 1370 /Pun/2014) Proposition 4: Only those investments yielding exempt income to be considered for calculating disallowance us Without Prejudice to proposition 1, 2, 3 & 4 Proposition 5: Only net interest expenditure after setting off interest income should be considered for the purpose of interest disallowance u/s 14A r.w.r. 8D M/s Yes Bank Ltd. 23 ITA Nos.3501 & 3239/M/2018 us 14A of the Act when securities are The Assessee Bank being in the business of banking, holds income/loss from sale of such investments is offered for tax under the head "Income from Business or Profession". Kindly note that no income under the head Capital Gains is offered by the Assessee in its COI (Pg. no. 60 of FPB). Any exempt income Reliance is placed on various case laws filed in LPB-I at Pg. 204 under Proposition 3 including the decision of -09 (LPB-1 No. 3, Para 6). Out of the above decisions, the following judicial precedents, after considering the decision of Hon'ble SC in Maxopp Investments Ltd. v. CIT (402 ITR 640) have held that no 144 disallowance is warranted with respect to Nice Bombay Transport (P) Ltd vs. ACIT (20191 175 Punjab National Bank vs. ACIT ITA No. 1519/Del/2016 & ITA No. 7106/Del/2017] (Delhi- ACIT vs. UCO Bank [ITA No. 1615/Kol/2016| v. DCIT (ITA No. 1370 Proposition 4: Only those investments yielding exempt income to be considered for calculating disallowance us Proposition 5: Only net interest expenditure after setting off interest income should be considered for the purpose of The Assessee has earned an amount of Rs. 9.981/ as interest and incurred interest expenditure of Rs. 7,265/ crores. The Assessee prays that since the i higher than the interest expense incurred, no disallowance u/s 14A r.w.r. 8D is warranted. As for propositions 2 to 5 are concerned, the Assessee submits that if the Assessee under a mistake or misconception, has over assessed inco relief ought to be given as per provisions of law. Reliance is placed on various judgements attached at LPB Nos.344 to 382 under Proposition 5. 8.3 However, the Ld. Counsel proposed that only investment yielding exempted income sh disallowance u/s 14A. Further, the Ld. Counsel in 5 submitted in the net interest expenditure income should be considered for the purpose of interest disallowance u/s 14A r.w.r. 8 9. On the contrary, the Ld. Departmental Representative (DR) submitted that dissatisfaction has been Officer on the claim of the assessee and disallowance as per computing the disallowance as per the law i.e. as per Rule 8D of the Rules. He submitted that the Ld. CIT(A) has not given any finding in respect of disallowance under Rule 8D(2)(ii direction in respect of interest disallowance und the Rules. He accordingly submitted that disallowance as per Rule 8D should be upheld. ITA Nos.3501 & 3239/M/2018 The Assessee has earned an amount of Rs. 9.981/ as interest and incurred interest expenditure of Rs. 7,265/ The Assessee prays that since the interest income earned is higher than the interest expense incurred, no disallowance u/s 14A r.w.r. 8D is warranted. As for propositions 2 to 5 are concerned, the Assessee submits that if the Assessee under a mistake or misconception, has over assessed income in the return, relief ought to be given as per provisions of law. Reliance is placed on various judgements attached at LPB Nos.344 to 382 under Proposition 5.” However, the Ld. Counsel proposed that only investment yielding exempted income should be considered for disallowance u/s 14A. Further, the Ld. Counsel in 5 submitted in the net interest expenditure after setting off interest income should be considered for the purpose of interest disallowance u/s 14A r.w.r. 8D. On the contrary, the Ld. Departmental Representative (DR) submitted that dissatisfaction has been recorded by the Assessing Officer on the claim of the assessee and thereafter, he disallowance as per Rule 8D of Rules , therefore, he justi computing the disallowance as per the law i.e. as per Rule 8D of the Rules. He submitted that the Ld. CIT(A) has not given any finding in respect of disallowance under Rule 8D(2)(iii) and only given direction in respect of interest disallowance under Rule 8D(2)(ii) of the Rules. He accordingly submitted that disallowance as per Rule 8D should be upheld. M/s Yes Bank Ltd. 24 ITA Nos.3501 & 3239/M/2018 The Assessee has earned an amount of Rs. 9.981/- crores as interest and incurred interest expenditure of Rs. 7,265/- nterest income earned is higher than the interest expense incurred, no disallowance As for propositions 2 to 5 are concerned, the Assessee submits that if the Assessee under a mistake or me in the return, relief ought to be given as per provisions of law. Reliance is placed on various judgements attached at LPB-II Pg. However, the Ld. Counsel proposed that only investment ould be considered for calculating disallowance u/s 14A. Further, the Ld. Counsel in 5 th propositions setting off interest income should be considered for the purpose of interest On the contrary, the Ld. Departmental Representative (DR) by the Assessing thereafter, he worked out therefore, he justified in computing the disallowance as per the law i.e. as per Rule 8D of the Rules. He submitted that the Ld. CIT(A) has not given any finding in ) and only given er Rule 8D(2)(ii) of the Rules. He accordingly submitted that disallowance as per Rule 10. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. It is evident that the Ld. CIT(A) has not adjudicated the issue in dispute support of disallowance of expenses related to exempted income u/s 14A r.w.r. 8D of the Rules and directed the Assessing Officer for re examination/re-verification of the disallowance of interest component related to investment in assets yielding exempted income. In our opinion, under the provisions of section 251 of the Act the power of the Ld. CIT(A) for restoring the matter back has been withdrawn and issuing direction for re verification of the facts and then decide the issue power of the Ld. CIT(A). In the facts and circumstances of the case, the finding of the Ld. CIT(A) the matter need to be restored back to the file of the Ld. CIT(A) for deciding afresh. Further, as far as the contention of the assessee that funds and interest free funds are more than the investment in tax free assets, the Ld. Counsel of the assessee was asked to provide the position of the availability of the own funds and interest free funds at the time of investment in those funds rather than availability of the funds in the year under consideration. no such details could be made available during the cou hearing. In the circumstances, the proposition by the Ld. Counsel of the assessee cannot be adjudicated. Accordingly, we restore this issue of disallowance u/s 14A of the Act to the file of the Ld. CIT(A) for deciding afresh after taking into co ITA Nos.3501 & 3239/M/2018 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. It is evident IT(A) has not adjudicated the issue in dispute support of disallowance of expenses related to exempted income u/s 14A r.w.r. 8D of the Rules and directed the Assessing Officer for re verification of the disallowance of interest related to investment in assets yielding exempted income. In our opinion, under the provisions of section 251 of the Act the power of the Ld. CIT(A) for restoring the matter back has been withdrawn and issuing direction for re-examination or re n of the facts and then decide the issue power of the Ld. CIT(A). In the facts and circumstances of the case, the finding of the Ld. CIT(A) being beyond his authority need to be restored back to the file of the Ld. CIT(A) for deciding afresh. Further, as far as the contention of the assessee that funds and interest free funds are more than the investment in he Ld. Counsel of the assessee was asked to rovide the position of the availability of the own funds and interest free funds at the time of investment in those funds rather than availability of the funds in the year under consideration. no such details could be made available during the cou hearing. In the circumstances, the proposition by the Ld. Counsel of the assessee cannot be adjudicated. Accordingly, we restore this issue of disallowance u/s 14A of the Act to the file of the Ld. CIT(A) for deciding afresh after taking into consideration submissions of M/s Yes Bank Ltd. 25 ITA Nos.3501 & 3239/M/2018 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. It is evident IT(A) has not adjudicated the issue in dispute in support of disallowance of expenses related to exempted income u/s 14A r.w.r. 8D of the Rules and directed the Assessing Officer for re- verification of the disallowance of interest related to investment in assets yielding exempted income. In our opinion, under the provisions of section 251 of the Act the power of the Ld. CIT(A) for restoring the matter back has examination or re- n of the facts and then decide the issue, is beyond the power of the Ld. CIT(A). In the facts and circumstances of the case, beyond his authority,therefore, need to be restored back to the file of the Ld. CIT(A) for deciding afresh. Further, as far as the contention of the assessee that funds and interest free funds are more than the investment in he Ld. Counsel of the assessee was asked to rovide the position of the availability of the own funds and interest free funds at the time of investment in those funds rather than availability of the funds in the year under consideration. However, no such details could be made available during the course of the hearing. In the circumstances, the proposition by the Ld. Counsel of the assessee cannot be adjudicated. Accordingly, we restore this issue of disallowance u/s 14A of the Act to the file of the Ld. CIT(A) nsideration submissions of the assessee. The ground No ground No. 1 of the appeal of the Revenue for statistical purposes. 11. The ground Nos to disallowance of deduction claimed u/s 35D on the expenses related to qualified institutional placement (QIP). 12. Brief facts qua the issue in dispute are that during the assessment year 2010 by way of issue of share capital through share capital with qualified institutional buyers (QIB). In connection with issue of shares to aggregating to Rs.14,14,01,453/ managers of the issue and payments auditors for the finalization of QIP. The assessee claimed 1/5 Rs.2,82,80,290/- u/s 35D of the Act for the captioned year. This is last year of its claim out of 5 years beginning with AY 2010 noted that section 35D of the Act allows deduction of 1/5 expenses incurred in connect subscription of shares in or debentures of the company. Thu question involved in the appeal is whether Qualified Institutional Buyers (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. ITA Nos.3501 & 3239/M/2018 the assessee. The ground Nos. 1 to 3 of the appeal of ground No. 1 of the appeal of the Revenue, are accordingly allowed for statistical purposes. s. 4, 5 and 6 of the appeal of the assessee relate to disallowance of deduction claimed u/s 35D on the expenses related to qualified institutional placement (QIP). Brief facts qua the issue in dispute are that during the assessment year 2010-11, the assessee had raised Rs.103.87 crores of share capital through QIP, in which it placed it share capital with qualified institutional buyers (QIB). In connection issue of shares to QIB, the assessee incurred expenses 14,14,01,453/- on account of payments to lead s of the issue and payments, to legal consultants and auditors for the finalization of placement document for the . The assessee claimed 1/5 th of those expenses amounting to u/s 35D of the Act for the captioned year. This is last year of its claim out of 5 years beginning with AY 2010 noted that section 35D of the Act allows deduction of 1/5 expenses incurred in connection with the issue, for public subscription of shares in or debentures of the company. Thu question involved in the appeal is whether Qualified Institutional Buyers (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. M/s Yes Bank Ltd. 26 ITA Nos.3501 & 3239/M/2018 appeal of assessee and are accordingly allowed . 4, 5 and 6 of the appeal of the assessee relate to disallowance of deduction claimed u/s 35D on the expenses Brief facts qua the issue in dispute are that during the the assessee had raised Rs.103.87 crores in which it placed its share capital with qualified institutional buyers (QIB). In connection , the assessee incurred expenses on account of payments to lead to legal consultants and placement document for the purpose se expenses amounting to u/s 35D of the Act for the captioned year. This is last year of its claim out of 5 years beginning with AY 2010-11. It is noted that section 35D of the Act allows deduction of 1/5 th of the with the issue, for public subscription of shares in or debentures of the company. Thus, the question involved in the appeal is whether Qualified Institutional Buyers (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 13. Before us, the Ld. C decision of the Tribunal Hyderabad Bench in the case ofDCIT v. Deccan Chronicle Holdings Ltd. (70 SOT 600) provisions of Securities and Exchange Board of India (SEBI) issue on capital and disclosure requirem that QIB falls in the category of offer made to public. The Ld. Counsel also referred to the order of the Tribunal in the case of the assessee for assessment year 2010 to be forming part of the Hon’ble Supreme Court in the case of CIT v. Andhra Chamber of Commerce (AIR 1965 SC 1281) held that QIB are a class of investors, which forms a part of the larger investor community and accordingly would be considered section 35D. However, the Co case of assessee’s own case for assessment year 2011 14 has remanded the issue to AO shares to QIB was a public subs Application filed by the assessee against the said order has also been rejected by the Tribunal vide order dated 22.05.2023 13.1 Before us, the Ld. Counsel of the assessee submitted that order of the Tribunal for assessme should be ignored and order for followed. ITA Nos.3501 & 3239/M/2018 Before us, the Ld. Counsel of the assessee relying on the Tribunal Hyderabad Bench in the case ofDCIT v. Deccan Chronicle Holdings Ltd. (70 SOT 600) Securities and Exchange Board of India (SEBI) issue on capital and disclosure requirements regulation, 2009 submitted that QIB falls in the category of offer made to public. The Ld. Counsel also referred to the order of the Tribunal in the case of the assessee for assessment year 2010-11 wherein QIB have been held to be forming part of the public. The Ld. Counsel submitted that Hon’ble Supreme Court in the case of CIT v. Andhra Chamber of Commerce (AIR 1965 SC 1281) held that QIB are a class of investors, which forms a part of the larger investor community and accordingly would be considered as public for the purpose of section 35D. However, the Co-ordinate Bench of the Tribunal in the case of assessee’s own case for assessment year 2011 as remanded the issue to AO for examining whether issue of shares to QIB was a public subscription or not. A Miscellaneous Application filed by the assessee against the said order has also been rejected by the Tribunal vide order dated 22.05.2023 Before us, the Ld. Counsel of the assessee submitted that order of the Tribunal for assessment year 2011-12 to AY 2013 and order for assessment year 2010 M/s Yes Bank Ltd. 27 ITA Nos.3501 & 3239/M/2018 ounsel of the assessee relying on the Tribunal Hyderabad Bench in the case ofDCIT v. Deccan Chronicle Holdings Ltd. (70 SOT 600) along with Securities and Exchange Board of India (SEBI) issue ents regulation, 2009 submitted that QIB falls in the category of offer made to public. The Ld. Counsel also referred to the order of the Tribunal in the case of the 11 wherein QIB have been held public. The Ld. Counsel submitted that Hon’ble Supreme Court in the case of CIT v. Andhra Chamber of Commerce (AIR 1965 SC 1281) held that QIB are a class of investors, which forms a part of the larger investor community and as public for the purpose of ordinate Bench of the Tribunal in the case of assessee’s own case for assessment year 2011-12 and 2013- whether issue of cription or not. A Miscellaneous Application filed by the assessee against the said order has also been rejected by the Tribunal vide order dated 22.05.2023. Before us, the Ld. Counsel of the assessee submitted that 12 to AY 2013-14 assessment year 2010-11 should 14. We have heard the rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the issue in dispute is squarely covered by the order of the Tribunal for AY 2011 3500/Mum/2018 and the Miscellaneous Application filed against that order has also been rejected by the Tribunal and therefore, the Tribunal (supra) has assessment year 2010 precedent. The relevant finding of the Tribunal (supra) 442 to 444 of 2022 are “09. However, claim of the assessee is that the decision of the coordinate bench in A.Y. 2010 assessee is entitled to deduction under Section 35D of the Act and therefore, the decision cannot be revisited and the Tribunal has to follow the same. Coordinate bench has decided this issue as under :- "031. We have carefully considered rival contentions and pe 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 subsc 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 of shares to QIB can be permitted on “Private Placement basis “or ITA Nos.3501 & 3239/M/2018 We have heard the rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the issue in dispute is squarely covered by the order of the Tribunal for AY 2011-12 to 2013-14 in ITA No. 3498 to 2018 and the Miscellaneous Application filed against that order has also been rejected by the Tribunal and therefore, the (supra) has duly considered the order of the Tribunal for assessment year 2010-11, therefore, this order is a binding The relevant finding of the Tribunal (supra) 442 to 444 of 2022 are reproduced as under: “09. However, claim of the assessee is that the decision of the coordinate bench in A.Y. 2010-11 has categorically decided that is entitled to deduction under Section 35D of the Act and therefore, the decision cannot be revisited and the Tribunal has to follow the same. Coordinate bench has decided this issue as "031. We have carefully considered rival contentions and pe the orders of the lower authorities. According to provisions of section 35D (2) (c) (iv) of the act companies are allowable following 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 M/s Yes Bank Ltd. 28 ITA Nos.3501 & 3239/M/2018 We have heard the rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the issue in dispute is squarely covered by the order of the 14 in ITA No. 3498 to 2018 and the Miscellaneous Application filed against that order has also been rejected by the Tribunal and therefore, the duly considered the order of the Tribunal for , this order is a binding The relevant finding of the Tribunal (supra) in MA No. “09. However, claim of the assessee is that the decision of the 11 has categorically decided that is entitled to deduction under Section 35D of the Act and therefore, the decision cannot be revisited and the Tribunal has to follow the same. Coordinate bench has decided this issue as "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 c) Where the assessee is a company, also expenditure ription, of shares in or debentures of the company, being underwriting commission, brokerage, and charges for drafting, typing, printing, and 032. So the only issue is whether the issue of shares made by “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 Bench in that case considered whether theallottees Qualified Institutional Buyers is “ public” or not. The coordinate Bench following the decisio (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 The appellant is a banking company. It filed its revised return of income for the AY 2010 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 g we find that the Assessing Officer has not disallowed for the assessment years 2006 However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers f 2008-09 which has been allowed by the Commissioner of Income tax (Appeals) holding as under : ITA Nos.3501 & 3239/M/2018 also in “Public Issue”. 033. We find that issue is decided in favour of the assessee in assessee”s own case for Assessment Year ITA NO. 3497/Mum/2018 dated 14 July 2020 so far the issue was whether QIB is “Public” or not . The co Bench in that case considered whether theallottees Qualified Institutional Buyers is “ public” or not. The coordinate 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 ₹ 7,90,10,18,157/-. As mentioned earlier, the question involved in this appeal is er 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 200809, 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 09 which has been allowed by the Commissioner of Income tax (Appeals) holding as under : M/s Yes Bank Ltd. 29 ITA Nos.3501 & 3239/M/2018 also in “Public Issue”. 033. We find that issue is decided in favour of the assessee in assessee”s own case for Assessment Year ITA NO. 3497/Mum/2018 dated 14 July 2020 so far the issue was whether QIB is “Public” or not . The co-ordinate Bench in that case considered whether theallottees Qualified Institutional Buyers is “ public” or not. The coordinate Bench n of ITAT in Deccan Chronicle Holdings Ltd. (supra) hold that QIB is “ Public” so deduction under Section 35D “6. We have heard the rival submissions and perused the relevant our decisions are given below. The appellant is a banking company. It filed its revised return of 11 on March 30, 2012 declaring total As mentioned earlier, the question involved in this appeal is er QIB can be regarded as “public” and whether the offer made to them can be regarded as “offer made to public” for the In Deccan Chronicle Holdings Limited (supra), the Tribunal has round No. 4 for the assessment year 200809, we find that the Assessing Officer has not disallowed for the However, the Assessing Officer has disallowed the expenditure on or the assessment year 09 which has been allowed by the Commissioner of Income- "5. I have gone through the factual and legal contentions of the appellant in support of its argument that the deduction was claimed 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 b 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, S Guidelines/Instructions, I am of the considered opinion that QIBs constitute 'public' and accordingly, 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 objectand 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 ca 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, am of the opinion that there is considerable force in the arguments of the appellantcompany that the expenditure claimed by it clearly ITA Nos.3501 & 3239/M/2018 "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, 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 nature of revenue expenditure since the primary objectand 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, am of the opinion that there is considerable force in the arguments of the appellantcompany that the expenditure claimed by it clearly M/s Yes Bank Ltd. 30 ITA Nos.3501 & 3239/M/2018 "5. I have gone through the factual and legal contentions of the appellant in support of its argument that the deduction was 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 e 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 ecurities Contract (Regulation) Rules, SEBI Guidelines/Instructions, I am of the considered opinion that QIBs constitute 'public' and accordingly, the subscription made by the amount to public subscription. In this view of the matter and also he 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 nature of revenue expenditure since the primary objectand 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 se 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 appellantcompany 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 special leave petition filed against this decision was dismissed. There is also merit in the argument of the appellant the facts of its case are distinguishable from those in the case of Brooke Bond, for the detailed reasons submitted 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 y from the assessment year 2007 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 appe assessment year 2006 the expenditure of 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is order, the disallowance on this account is deleted." 7. We find that during the year 2007 debenture expenses of ₹ 8.28 crores, both totalling to ₹ 10.35 crores. The expenditure referred to above of 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 charged to profit and loss account. Accordingly as per the provisions of section 35D of the Income Act, onefifth of the QIB issue expenditure i.e., written off. Qualified Institutional Buyers (QIBs) are a clas investors as a part of the large investor community and the ITA Nos.3501 & 3239/M/2018 falls in the revenue field. These guidelines were impliedly approved by the hon'ble Supreme Court, in view of the fact 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 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 appe assessment year 2006-07. In view of the above facts, I hold that the expenditure of ₹ 2,07,00,112 claimed for assessment year 09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is 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 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 ct which is eligible to be charged to profit and loss account. Accordingly as per the provisions of section 35D of the Income Act, onefifth of the QIB issue expenditure i.e., ₹ 207 lakhs was written off. Qualified Institutional Buyers (QIBs) are a clas investors as a part of the large investor community and the M/s Yes Bank Ltd. 31 ITA Nos.3501 & 3239/M/2018 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. company that the facts of its case are distinguishable from those in the case of 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 ears, starting 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 07. In view of the above facts, I hold that ₹ 2,07,00,112 claimed for assessment year 09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in 08, the company incurred ₹ 2.07 crores and QIB issue expenditure of ₹ 8.28 crores, both totalling to ₹ 10.35 crores. The expenditure ₹ 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- ct which is eligible to be charged to profit and loss account. Accordingly as per the provisions of section 35D of the Income-tax ₹ 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 in 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 o merits of the issue, theQIB 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 th 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 6.1 A perusal of the above order of the Tribunal clearly indicates that the present issue is dir 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 ther shareholders- 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 Institu “public shareholding”. The terms are defined in Clause 40A of the SEBI Listing Agreement. Further, the listing agreement takes us to ITA Nos.3501 & 3239/M/2018 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 in 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 o merits of the issue, theQIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D of the tax Act is confirmed. Hence on merits of the issue as well as the fact that the same issue has been allowed in th 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 tax (Appeals) with respect to qualified institutional buyers xpenses and dismiss the Departmental appeal on this issue. In the result, the Departmental appeal for the assessment years 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 - “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 M/s Yes Bank Ltd. 32 ITA Nos.3501 & 3239/M/2018 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, theQIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D of the 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 tax (Appeals) with respect to qualified institutional buyers xpenses and dismiss the Departmental appeal on this issue. In the result, the Departmental appeal for the assessment years 6.1 A perusal of the above order of the Tribunal clearly indicates ectly 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 efrom, there are only two categories of “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 tions 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)( 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 def 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 o 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 listi 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 prov 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 tha specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. Itthus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must b 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). ITA Nos.3501 & 3239/M/2018 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 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. Itthus 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). M/s Yes Bank Ltd. 33 ITA Nos.3501 & 3239/M/2018 Securities Contracts (Regulation) Rules, 1957 (in short “SCRR”). 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 ining 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 f QIBs to whom shares are issued, the shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of ng 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- ide 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 n the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. Itthus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions e in compliance with the That “a section of public qualifies as public” has been clarified in Nitta Gelatine India Limited (supra) and Andhra Chamber of 7. Facts being identical, we follow the order 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 t 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 share Subscription” i.e. such as Private Placement etc, assessee is not eligible for deduction u/s 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 ma 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”, dedu Accordingly, ground no. 3 and 4 of the appeal of assessee are allowed with above directions." 010. Coordinate bench while deciding the issue has clearly considered the decision in case of assessee in first year. We do not find there is any finding in the order in the coordinate bench for earlier year whether it was an issue of public subscription or not. This is the basic requirement of that section. put forth, the issue was set aside for verification whether ITA Nos.3501 & 3239/M/2018 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 diture is “ in connection with the issue for public subscription 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 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." 010. Coordinate bench while deciding the issue has clearly considered the decision in case of assessee in first year. We do not here is any finding in the order in the coordinate bench for earlier year whether it was an issue of public subscription or not. This is the basic requirement of that section. As no evidence was put forth, the issue was set aside for verification whether M/s Yes Bank Ltd. 34 ITA Nos.3501 & 3239/M/2018 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 he 1st , 2nd and 3rd ground 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 diture is “ in connection with the issue for public subscription 035. Therefore, as we have already held that if the issue of shares is through “ public Subscription” assessee is eligible for deduction s are not “ Public Subscription” i.e. such as Private Placement etc, assessee is not eligible for deduction u/s 35 D of the Act . These facts are not on record whether shares issued to QIB are issued in “Public tter 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 ction may be allowed. 036. Accordingly, ground no. 3 and 4 of the appeal of assessee are 010. Coordinate bench while deciding the issue has clearly considered the decision in case of assessee in first year. We do not here is any finding in the order in the coordinate bench for earlier year whether it was an issue of public subscription or not. As no evidence was put forth, the issue was set aside for verification whether the expenses were in connection with the issue for ' Public Subscription' or not. The coordinate bench in earlier year allowed claim of the assessee holding that whether QIP is public or not. It did not decide whether it is a 'public subscription' or not. 011. Any way in these proceedings, we cannot go in to the merits of the case as held by Hon Sc in case of CIT V Reliance Telecom Limited2021] 133 taxmann.com 41 (SC). Further, as we have restored the issue to the file of the LD AO, our observation on the merits, even otherwise, may influence the order of the LD AO in set aside proceedings. Therefore, these grounds of all these MA are dismissed, as on this issue there is no mistake in the order. 14.1 Thus, following the 2013-14 in ITA No. 3498 to 3500/Mum/ of claim of 1/5 th of the file of the Assessing Officer to be decided in accordance with direction of the Tribunal in 3498 to 3500/Mum/2018 for AYs 2011 12 to 13-14. The ground No assessee are accordingly allo 15. The ground Nos ground No. 2 of the appeal of the Revenue are related to disallowance of brokerage paid on acquisition of the investment which remained unsold during the year. 16. We have heard rival submission of the parties on the issue in disputed and perused the relevant material on record. The Tribunal ITA Nos.3501 & 3239/M/2018 he expenses were in connection with the issue for ' Public Subscription' or not. The coordinate bench in earlier year allowed claim of the assessee holding that whether QIP is public or not. It did not decide whether it is a 'public subscription' or not. 11. Any way in these proceedings, we cannot go in to the merits of the case as held by Hon Sc in case of CIT V Reliance Telecom Limited2021] 133 taxmann.com 41 (SC). Further, as we have restored the issue to the file of the LD AO, our observation on the rits, even otherwise, may influence the order of the LD AO in set aside proceedings. Therefore, these grounds of all these MA are dismissed, as on this issue there is no mistake in the order. following the finding of the Tribunal for AY 2011 14 in ITA No. 3498 to 3500/Mum/2018,the issue in dispute of the expense u/s 35D of the Act is restored to the file of the Assessing Officer to be decided in accordance with direction of the Tribunal in 3498 to 3500/Mum/2018 for AYs 2011 14. The ground Nos. 4, 5 and 6 of the appeal of the assessee are accordingly allowed for statistical purposes. s. 7 and 8 of the appeal of the assessee and ground No. 2 of the appeal of the Revenue are related to disallowance of brokerage paid on acquisition of the investment which remained unsold during the year. We have heard rival submission of the parties on the issue in disputed and perused the relevant material on record. The Tribunal M/s Yes Bank Ltd. 35 ITA Nos.3501 & 3239/M/2018 he expenses were in connection with the issue for ' Public Subscription' or not. The coordinate bench in earlier year allowed claim of the assessee holding that whether QIP is public or not. It did not decide whether it is a 'public 11. Any way in these proceedings, we cannot go in to the merits of the case as held by Hon Sc in case of CIT V Reliance Telecom Limited2021] 133 taxmann.com 41 (SC). Further, as we have restored the issue to the file of the LD AO, our observation on the rits, even otherwise, may influence the order of the LD AO in set aside proceedings. Therefore, these grounds of all these MA are dismissed, as on this issue there is no mistake in the order.” finding of the Tribunal for AY 2011-12 to the issue in dispute u/s 35D of the Act is restored to the file of the Assessing Officer to be decided in accordance with direction of the Tribunal in 3498 to 3500/Mum/2018 for AYs 2011- . 4, 5 and 6 of the appeal of the wed for statistical purposes. . 7 and 8 of the appeal of the assessee and ground No. 2 of the appeal of the Revenue are related to disallowance of brokerage paid on acquisition of the investment We have heard rival submission of the parties on the issue in disputed and perused the relevant material on record. The Tribunal for AY 2011-12 to 13 trade of the assessee and brokerage expenses in relation t ought to be allowed. The relevant finding of the Tribunal reproduced as under: “024. We have carefully considered the rival contentions and perused the orders of the lower authorities. On appreciation of facts, we find that assessee offer securities as business income and not as capital gain. This fact has also been accepted by theLD AO. Therefore the securities purchased and sold by assessee are its stock in trade. Therefore, all necessary expenditure incurred 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 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 allo 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 r disallowed under section 57(i) of the Act.The applicability of deduction of expenditureunder section 28 is also to be treated on the same parameters. When it is not the claim of the Id AO that valuation of securities held a 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 reasonto uphold disallowance made by the Id AO. In view of this, we do 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. ITA Nos.3501 & 3239/M/2018 12 to 13-14 has held that said investment are stock in trade of the assessee and brokerage expenses in relation t ought to be allowed. The relevant finding of the Tribunal reproduced as under: 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 theLD 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 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 allo 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 awanshahar 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 expenditureunder section 28 is also to be treated on the same parameters. When it is not the claim of the Id 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 reasonto uphold disallowance made by the Id 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.” M/s Yes Bank Ltd. 36 ITA Nos.3501 & 3239/M/2018 14 has held that said investment are stock in trade of the assessee and brokerage expenses in relation to same ought to be allowed. The relevant finding of the Tribunal (supra) is 024. We have carefully considered the rival contentions and perused the orders of the lower authorities. On appreciation of s profit and loss on sale of securities as business income and not as capital gain. This fact has also been accepted by theLD AO. Therefore the securities purchased and sold by assessee are its stock in trade. 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 awanshahar 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 elatable to investment cannot be disallowed under section 57(i) of the Act.The applicability of deduction of expenditureunder section 28 is also to be treated on the same parameters. When it is not the claim of the Id AO s 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 reasonto uphold disallowance 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 16.1 Following the finding of the Tribunal (supra) , 7 and 8 of the appeal of the assessee are allowed whereas ground No. 2 of the appeal of Revenue is dismissed. 17. The ground No ground No. 3 of the appeal of the Revenue are connected with the issue of deduction u/s 36(1)(1)(vii 17.1 Briefly stated facts qua the issue in dispute are that the ground pertains to disallowance of provision of bad and doubtful debts claimed by the assessee u/s 36(1)(viia) of Rs.135,21,64,723/ with respect to non-performing assets (NPA). The Assessing Officer disallowed the same on the premises that the same pertain to Standard Assets and hence should not be allowed. The Ld. CIT(A) remanded the issue back to the file of the AO claim pertain to Rural v. non Counsel of the assessee submitted that the claim pertains to only NPA and not standard assets. He submitted that provision for standard advances is a separate line income (COI) and the claim u/s 36(1)(viia) of the assessee purely pertains to NPAs and claim has advances. He further submitted the there is no such requirement that under section 36(1)(viia) only with respect to rural branches. The Ld. Counsel further submitted that the issue in dispute is cover ITA Nos.3501 & 3239/M/2018 Following the finding of the Tribunal (supra) , the ground Nos. 7 and 8 of the appeal of the assessee are allowed whereas ground No. 2 of the appeal of Revenue is dismissed. The ground Nos. 9 to 14 of the appeal of the assessee and ground No. 3 of the appeal of the Revenue are connected with the sue of deduction u/s 36(1)(1)(viia) of the Act. Briefly stated facts qua the issue in dispute are that the ground pertains to disallowance of provision of bad and doubtful debts claimed by the assessee u/s 36(1)(viia) of Rs.135,21,64,723/ performing assets (NPA). The Assessing Officer disallowed the same on the premises that the same pertain to Standard Assets and hence should not be allowed. The Ld. CIT(A) remanded the issue back to the file of the AO for examin pertain to Rural v. non-rural branches. Before us, the Ld. Counsel of the assessee submitted that the claim pertains to only NPA and not standard assets. He submitted that provision for standard advances is a separate line of item in the claim u/s 36(1)(viia) of the assessee purely s and claim has not been made for standard advances. He further submitted the there is no such requirement 36(1)(viia) of the Actdeduction only with respect to rural branches. The Ld. Counsel further submitted that the issue in dispute is covered in assessee’s own M/s Yes Bank Ltd. 37 ITA Nos.3501 & 3239/M/2018 the ground Nos. 7 and 8 of the appeal of the assessee are allowed whereas ground . 9 to 14 of the appeal of the assessee and ground No. 3 of the appeal of the Revenue are connected with the Briefly stated facts qua the issue in dispute are that the ground pertains to disallowance of provision of bad and doubtful debts claimed by the assessee u/s 36(1)(viia) of Rs.135,21,64,723/- performing assets (NPA). The Assessing Officer disallowed the same on the premises that the same pertain to Standard Assets and hence should not be allowed. The Ld. CIT(A) examining whether rural branches. Before us, the Ld. Counsel of the assessee submitted that the claim pertains to only NPA and not standard assets. He submitted that provision for item in computation of the claim u/s 36(1)(viia) of the assessee purely been made for standard advances. He further submitted the there is no such requirement can be claimed only with respect to rural branches. The Ld. Counsel further ed in assessee’s own case for AY 2011-12 to 2013 controvert this fact. 18. We have heard rival submissio dispute and perused the relevant material on record. The identical issue has been decided by the Tribunal in favour of the assessee for AY 2011-12 to 2013 reproduced as under: “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 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 respect 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 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 o 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 ne 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 ITA Nos.3501 & 3239/M/2018 12 to 2013-14. The Ld. DR also could not We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The identical issue has been decided by the Tribunal in favour of the assessee for 12 to 2013-14. The relevant finding of the Tribunal is reproduced as under: 5. 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 deductio 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 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 M/s Yes Bank Ltd. 38 ITA Nos.3501 & 3239/M/2018 14. The Ld. DR also could not n of the parties on the issue in dispute and perused the relevant material on record. The identical issue has been decided by the Tribunal in favour of the assessee for 14. The relevant finding of the Tribunal is 5. 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 ) of the act is not restricted to the banks only having the rural branches. This has been dealt with “34. It can be seen from the history of Sec.36(1)(viia) of I the deduction was allowed in 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. 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 f 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 ed not be in relation to rural advances but can be in relation to any advances both rural and 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 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 advan 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 t to banks that had rural branches. 35. At Stage Act, the deduction allowed earlier was enhanced. The enhancement of the deduction was consequent to representation to the Governm 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 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 of the banks concerned. This will imply that all scheduled or non allowed the deduction (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) a further deduction 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 banks having (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. ITA Nos.3501 & 3239/M/2018 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 advan 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 presentlyavailable 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 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 sion for bad and doubtful debts. Even under the new provisions creating a PBDD in the books of accounts is necessary. M/s Yes Bank Ltd. 39 ITA Nos.3501 & 3239/M/2018 . 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 he deduction was confined only 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 ent 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 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 rural branches of the banks concerned. This will imply that all scheduled scheduled banks having rural branches would be allowed the deduction (a) upto 2% (now 10%) of the aggregate average advances made by such branches 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 36. Therefore after 1.4.1987, scheduled or non-scheduled 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 sion for bad and doubtful debts. Even under the new provisions creating a PBDD in the books of accounts 37. Though under Stage of Sec.36(1)(viia) of the Act, PBDD has to be created by debiting the profit an as deduction, the condition that the provision should be in respect of rural advances is not necessary. At stage of the provisions of Sec.36(1)(viia) of the Act, this condition was done away with and it was only necessa 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 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 before making any deduction under this clause and Chapter VI of deductions u/s.36(1)(viia) of the Act. The actual provision made in the books by the Assessee on of PBDD (irrespective of whether it is rural or non 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 bifurcatin advances and other advances (Non not arise for consideration.” 086. Therefore respectfully following the decision of the coordinate bench we hold that the lower authorities were not justified in den Therefore, we set learned assessing officer to compute the deduction allowable to the assessee Under this Section and grant the same. In view of this ground number 1 18.1 Respectfully following the above finding (supra), the claim of the assessee is allowed and respective grounds are accordingly decided ITA Nos.3501 & 3239/M/2018 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 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 of PBDD (irrespective of whether it is rural or non 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.” Respectfully following the above finding of the Tribunal , the claim of the assessee is allowed and respective grounds decided mutasis mutandis. M/s Yes Bank Ltd. 40 ITA Nos.3501 & 3239/M/2018 III of the provisions of Sec.36(1)(viia) of the Act, PBDD has to be created by d 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 ry 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 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% half per cent of the total income (computed before making any deduction under this clause and 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 g the PBDD as one relating to rural rural advances) does 086. Therefore respectfully following the decision of the coordinate bench we hold that the lower authorities were not ying deduction u/s 36 (1) (viia) of the act. 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 of the Tribunal , the claim of the assessee is allowed and respective grounds 19. The ground Nos to non-admission of additional ground of appeal and disallowance of deduction of discount on issue of shares under the ESOP. 20. We have heard rival submission of parties on the issue in dispute and perused the relevant material on record. W under similar facts, the Tribunal in assessee’s own case for AY 2011-12 to 2013-14 has admitted the additional ground and restored the matter back to the file of the Assessing Officer for examination of the claim in accordance with law. The rel finding of the Tribunal “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 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, allowability of discount on issue of shares Under the employee stock option plan of learned assessing officer to examine the claim of the assessee and allow it in accordance w 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 g 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. 20.1 Respectfully following the finding of the Tribunal (supra) the additional ground in the year under consideration is also admitted ITA Nos.3501 & 3239/M/2018 s. 15 and 16 of the appeal of the as admission of additional ground of appeal and disallowance of deduction of discount on issue of shares under the ESOP. We have heard rival submission of parties on the issue in dispute and perused the relevant material on record. W under similar facts, the Tribunal in assessee’s own case for AY 14 has admitted the additional ground and restored the matter back to the file of the Assessing Officer for examination of the claim in accordance with law. The rel finding of the Tribunal (supra) is reproduced as under: 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 setaside 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. 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.” Respectfully following the finding of the Tribunal (supra) the additional ground in the year under consideration is also admitted M/s Yes Bank Ltd. 41 ITA Nos.3501 & 3239/M/2018 . 15 and 16 of the appeal of the assessee relate admission of additional ground of appeal and disallowance of deduction of discount on issue of shares under the ESOP. We have heard rival submission of parties on the issue in dispute and perused the relevant material on record. We find that under similar facts, the Tribunal in assessee’s own case for AY 14 has admitted the additional ground and restored the matter back to the file of the Assessing Officer for examination of the claim in accordance with law. The relevant is reproduced as under: 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 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 we setaside the alternative ground of allowability of discount on issue of shares Under the employee back to the file of the learned assessing officer to examine the claim of the assessee ith 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 iven.Accordingly, alternative claim of the assessee is restored back to the file of the learned AO. Accordingly, ground number 6 of the appeal is Respectfully following the finding of the Tribunal (supra) the additional ground in the year under consideration is also admitted and restored back to the file of the Assessing Officer to be decided in accordance with the direction given by the Tribunal in 12 to 2013-14. The ground of appeal is accordingly allowed for statistical purposes. 21. The ground Nos disallowance of broke 22. Before us, both the parties agre favour of the assessee vide assessment years 2011 The relevant part of the decision is reproduced as under: “0121. Ground number 7 of broken period interest in held to maturi find that identical issue has been dealt with in the appeal of the parties for assessment year 2012 following the decision of the honourable High Court decided the issue in favour of the assessee. Therefore, ground number and 8 are dismissed. 22.1 Respectfully following the above finding of the Tribunal (supra), the ground No dismissed. 23. The ground NO. 9 of the appeal of the Revenue amortisation of premium on 24. Before us, both the parties agreed that issue in dispute is covered in favour of the assessee by the order of the Tribunal for assessment year 2011 Tribunal(supra) is reproduced as under: ITA Nos.3501 & 3239/M/2018 and restored back to the file of the Assessing Officer to be decided in accordance with the direction given by the Tribunal in 14. The ground of appeal is accordingly allowed for s. 7 and 8 of the appeal of the Revenue relate to broken period of interest on securities. Before us, both the parties agreed that issue is covered in assessee vide assessment years 2011- The relevant part of the decision is reproduced as under: 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 and 8 are dismissed.” Respectfully following the above finding of the Tribunal (supra), the ground Nos. 7 and 8 of the appeal of the Revenue are The ground NO. 9 of the appeal of the Revenue amortisation of premium on HTM securities. Before us, both the parties agreed that issue in dispute is covered in favour of the assessee by the order of the Tribunal for assessment year 2011-12 to 2013-14. The relevant part of is reproduced as under: M/s Yes Bank Ltd. 42 ITA Nos.3501 & 3239/M/2018 and restored back to the file of the Assessing Officer to be decided in accordance with the direction given by the Tribunal in AY 2011- 14. The ground of appeal is accordingly allowed for . 7 and 8 of the appeal of the Revenue relate to securities. ed that issue is covered in -12 to 2013-14. The relevant part of the decision is reproduced as under: 8 are with respect to the taxability ty investments. We find that identical issue has been dealt with in the appeal of 13 wherein we following the decision of the honourable High Court decided the issue in favour of the assessee. Therefore, ground number 7 Respectfully following the above finding of the Tribunal . 7 and 8 of the appeal of the Revenue are The ground NO. 9 of the appeal of the Revenue relates to Before us, both the parties agreed that issue in dispute is covered in favour of the assessee by the order of the Tribunal for 14. The relevant part of order of “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 cas 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 theassessee 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 a 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 identical question of law was framed and answered in favour of the Assessee by this Court in its judgement dated 4 CIT-2 v. Lord Krishna Bank Ltd. (now merged w 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. ITA Nos.3501 & 3239/M/2018 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 mortization 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 cas 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 ssee 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 : 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, 2 v. Lord Krishna Bank Ltd. (now merged w 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.” M/s Yes Bank Ltd. 43 ITA Nos.3501 & 3239/M/2018 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 mortization of premium paid for acquisition of held to 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 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 ssee 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 mortization 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 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 2014 in Income Tax Appeal No.1079 of 2012, 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 097. In view of this, ground number 2, 3 and 7 of the appeal of 24.1 Respectfully following the above finding of the Tribunal (supra), the ground No. 9 of the appeal of the Revenue is accordingly dismissed. 25. In the result, both t are allowed partly for statistical purposes. Order pronounced in the open Court on Sd/ (KAVITHA RAJ JUDICIAL MEMBER Mumbai; Dated: 30/06/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA Nos.3501 & 3239/M/2018 Respectfully following the above finding of the Tribunal (supra), the ground No. 9 of the appeal of the Revenue is accordingly dismissed. In the result, both the appeals of the Revenue and assessee are allowed partly for statistical purposes. nounced in the open Court on 30/06/2023. Sd/- KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s Yes Bank Ltd. 44 ITA Nos.3501 & 3239/M/2018 Respectfully following the above finding of the Tribunal (supra), the ground No. 9 of the appeal of the Revenue is he appeals of the Revenue and assessee /06/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai