THE ACIT 2(3), MUMBAI V. M/S. INDUSIND BANK LTD, MUMBAI

ITA 3649/MUM/2006

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3269 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 13-02-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 09-06-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MAHAPATRA
• Assessee Lawyers: H P MAHAJANI
• Keywords: Depreciation; Earning of tax free income; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , ! '#$ % % % % &'. '.(.. %) * '#$ '+ BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM './ I.T.A. NO. 3024/MUM/2006 ( *) - %.- *) - %.- *) - %.- *) - %.- / / / / ASSESSMENT YEAR : 2002-03) INDUSIND BANK LIMITED, 8 TH FLOOR, TOWER ONE, ONE INDIABULLS CENTRE, 841, SENAPATI BAPAT MARG, ELPHINSTONE ROAD (WEST), MUMBAI 400 013. ) ) ) ) / VS. ADDL. COMMISSIONER OF INCOME TAX RANGE 2(3), AAYAKAR BHAWAN, MUMBAI 400 020. $/ ! './ PAN : AAACI 1314G ( /0 / // / APPELLANT ) .. ( 12/0 / RESPONDENT ) './ I.T.A. NO. 3649/MUM/2006 ( *) - %.- *) - %.- *) - %.- *) - %.- / / / / ASSESSMENT YEAR : 2002-03) ASSTT. COMMISSIONER OF INCOME TAX RANGE 2(3), AAYAKAR BHAWAN, MUMBAI 400 020. ) ) ) ) / VS. INDUSIND BANK LIMITED, 8 TH FLOOR, TOWER ONE, ONE INDIABULLS CENTRE, 841, SENAPATI BAPAT MARG, ELPHINSTONE ROAD (WEST), MUMBAI 400 013. $/ ! './ PAN : AAACI 1314G ( /0 / // / APPELLANT ) .. ( 12/0 / RESPONDENT ) ASSESSEE BY : SHRI H.P. MAHAJANI DEPARTMENT BY : SHRI S.K. MAHAPATRA ')% 3 ! / // / DATE OF HEARING : 26-06-2013 45. 3 ! / DATE OF PRONOUNCEMENT : 03.07.2013 ITA 3024/MUM/06 I TA 3649/MUM/06 2 # 6 / O R D E R PER P.M. JAGTAP, A.M . .. , ! '#$ : THESE TWO APPEALS, ONE BY THE REVENUE BEING ITA NO. 3649/MUM/2006 AND THE OTHER BY THE ASSESSEE BEING ITA NO. 3024/MU M/2006, ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) DATED 17-03-2006. 2. THE GROUNDS RAISED BY THE REVENUE AND THE ASSESS EE IN THEIR RESPECTIVE APPEALS READ AS UNDER:- BY THE REVENUE :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW:- 1. THE CIT(A) HAS ERRED IN ALLOWING INTEREST EXPENS ES OF RS. 7,27,80,949/- INCURRED FOR EARNING THE INCOME WHICH WAS NOT INCLUDED IN TOTAL INCOME IGNORING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. 2. THE CIT(A) HAS ERRED IN HOLDING THAT THE EXPENSE S ON SWAP COST OF RS. 2,04,28,235/- WERE ACTUALLY INCURRED BY THE ASSESSEE DURING THE PREVIOUS YEAR. 3. FOR THIS AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF BEARING, THE DECISION OF THE CIT(A) MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER RESTORED. BY THE ASSESSEE:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING AN AMOUNT OF RS. 76,10,78,436 REPRESENTING INTEREST ACCRUED ON SECURITIES BUT NOT FALLING DUE FOR PAYMENT. SUCH INTEREST, WHICH IS IN THE PROCESS OF ACCRUAL, IS AT INCIPIENT AND INCHOATE STAGE, MATURING INTO TAXABLE INCOME ONLY WHEN IT BECOMES DUE AND PAYABLE IN TERMS OF THE ISSUE OF SU CH SECURITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION TO THE EXTENT OF RS. 89,45,433 ON ASSETS LEASED TO VARIOUS LESSEES DURING THE COURSE OF BANKING OPERATIONS BY THE APPELLANT. IN R ESPECT OF SUCH ASSETS ITA 3024/MUM/06 I TA 3649/MUM/06 3 THE APPELLANT CONTINUES TO BE A RIGHTFUL OWNER AND IS, THEREFORE ENTITLED TO DEPRECIATION ON THE BASIS OF, AMONG OTHERS, THE USER OF THE ASSETS IN THE BUSINESS OF LEASING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN REDUCING DEDUCTION U/S 36(1 )(VII) BY RS. 5,29,01,270. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE U/S 14A OF OTHER EXPENSES OF RS. 21,46,159 IN RELATION TO EARNING EX EMPT INCOME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF LOSS AMOUNTING TO RS. 8,52,896 ON UNMATURED FOREIGN EXCHANGE CONTRACT S AND IGNORING THE FACT THAT THE APPELLANT MAINTAINS ACCOUNTS ON M ERCANTILE SYSTEM, WHERE LIABILITY HAS ALREADY ACCRUED THOUGH DISCHARG ED AT A FUTURE DATE REGARD BEING HAD TO THE ACCEPTED PRINCIPLES OF ACCO UNTANCY AND COMMERCIAL PRACTICE. 3. GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 4 OF THE ASSESSEES APPEAL INVOLVE A COMMON ISSUE RELATING T O DISALLOWANCE OF RS. 7,27,80,949/- MADE BY THE A.O. U/S 14A OF THE INCOM E TAX ACT, 1961 (THE ACT) WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF RS.21,46,159/-. 4. AT THE TIME OF HEARING BEFORE US, THE LD. REPRES ENTATIVES OF BOTH THE SIDES SUBMITTED THAT A SIMILAR ISSUE INVOLVED IN TH E CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2001-02 WA S REMANDED BY THE TRIBUNAL TO THE A.O. VIDE ITS ORDER DTD. 17 TH JUNE, 2011 PASSED IN ITA NO. 4343/MUM/2005 & 4535/MUM/2005 FOR A.Y. 2001-02 FOLL OWING ITS ORDER IN ASSESSEES OWN CASE FOR 1998-99 AND 1999-2000 WITH A DIRECTION TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. COMPANY LTD. AS SUBMI TTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE A.O. HAS ALREADY GIVEN EFFECT TO THE ORDERS OF THE TRIBUNAL FOR A.Y. 1998-99 AND 1999-2000 AND MADE A DISALLOWA NCE U/S 14A OF THE ACT TO THE EXTENT OF 5% OF THE EXEMPT INCOME EARNED BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE TRIBUNAL IN ITA 3024/MUM/06 I TA 3649/MUM/06 4 ASSESSEES OWN CASE FOR EARLIER YEARS, WE RESTORE T HIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME ON THE SAM E LINE AS DONE IN THE EARLIER YEARS. GROUND NO. 1 OF THE REVENUES APPEA L AND GROUND NO. 4 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 5. AS REGARDS THE ISSUE RAISED IN GROUND NO. 2 OF T HE REVENUES APPEAL RELATING TO DISALLOWANCE OF SWAP COST OF RS. 2,04,2 8,235/-, IT IS OBSERVED THAT THE ASSESSEE BEING A BANKING COMPANY REGULARLY RECE IVES FOREIGN CURRENCY DEPOSITS AS PER THE SCHEMES APPROVED BY THE RESERVE BANK OF INDIA. THESE DEPOSITS ARE REPAYABLE IN FOREIGN CURRENCY ALONG WI TH INTEREST THEREON AND SINCE THE FOREIGN CURRENCY DEPOSITS ARE VULNERABLE TO EXCHANGE FLUCTUATION RISK, BANKS ARE PERMITTED TO HEDGE THE INTEREST AND FOREIGN EXCHANGE FLUCTUATION RISK INVOLVED IN THESE TRANSACTIONS BY CARRYING OUT SWAP TRANSACTIONS. THE ASSESSEE ACCORDINGLY CONVERTS IT S FOREIGN CURRENCY INTO RUPEE FUNDS BY WAY OF EXCHANGE OF FOREIGN CURRENCY FUNDS FOR A SPECIFIED PERIOD. FOR THIS PURPOSE, THE ASSESSEE HAS TO PAY PREMIUM ON THE FOREIGN CURRENCY FUNDS TO THE COUNTERPARTY BANK, WHICH IS R EADY TO PROVIDE THE RUPEE FUNDS TO IT IN EXCHANGE OF FOREIGN CURRENCY FUNDS F OR A SPECIFIED PERIOD. THUS, THIS PREMIUM IS A DEFINITE COST OF THE SWAP TRANSAC TION TO THE ASSESSEE AND THE PROPORTIONATE PREMIUM ON THE OUTSTANDING SWAP C ONTRACTS AS ON 31-3- 2001 BASED ON NUMBER OF DAYS FOR WHICH THE CONTRACT WAS HELD IN THE PREVIOUS YEAR WAS WORKED OUT BY THE ASSESSEE AT RS. 2,04,28,235/- AND THE SAME WAS DEBITED TO THE P&L ACCOUNT. THE A.O., HOW EVER, TOOK THIS AMOUNT DEBITED BY THE ASSESSEE AS SWAP COST RELATABLE TO T HE ENTIRE PERIOD OF THE SWAP TRANSACTIONS. HE HELD THAT THE ENTIRE COST THUS WAS DEBITED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ITSELF INSTEAD OF CLAI MING ONLY THE PROPORTIONATE COST ON THE SWAP DEALS WHOSE MATURITY WAS FALLING B EYOND THE PREVIOUS YEAR. ON VERIFICATION OF THE RELEVANT DETAILS FURNISHED B Y THE ASSESSEE, THE LD. CIT(A), HOWEVER, FOUND THAT THE TOTAL SWAP COST WAS RS. 14,80,14,056/- OUT OF ITA 3024/MUM/06 I TA 3649/MUM/06 5 WHICH ONLY THE PROPORTIONATE SWAP COST ON THE OUTST ANDING CONTRACT AS ON 31- 3-02 AMOUNTING TO RS. 2,04,28,235/- WAS CLAIMED BY THE ASSESSEE. HE, THEREFORE, ALLOWED THE SWAP COST CLAIMED BY THE ASS ESSEE AND DELETED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO DISPUTE THA T ONLY THE PROPORTIONATE SWAP COST RELATABLE TO THE PERIOD FALLING IN THE YE AR UNDER CONSIDERATION IS ALLOWABLE TO THE ASSESSEE AS HELD BY THE A.O. HE H AS SUBMITTED THAT THE AMOUNT OF SWAP COST CLAIMED BY THE ASSESSEE AT RS. 2,04 , 28,235/- WAS ACTUALLY SUCH PROPORTIONATE COST AS WORKED OUT BY T HE ASSESSEE WHICH THE A.O. MISTOOK AS THE TOTAL COST. HE HAS SUBMITTED T HAT THE LD. CIT(A), HOWEVER, FOUND THE SAME TO BE ONLY THE PROPORTIONATE COST ON THE BASIS OF THE WORKING FURNISHED BY THE ASSESSEE AND ACCORDINGLY ALLOWED T HE CLAIM OF THE ASSESSEE ON THIS ISSUE. THE LD. D.R. HAS SUBMITTED THAT THI S WORKING FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A) WAS ACCEPTED BY THE LATER WITHOUT GIVING ANY OPPORTUNITY TO THE A.O. TO VERIFY THE SAME. THE LD . COUNSEL FOR THE ASSESSEE HAS FAIRLY SUBMITTED THE ASSESSEE HAS NO OBJECTION IF THE MATTER IS REMANDED TO THE A.O. FOR THE PURPOSE OF THIS VERIFICATION. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE WORKING OF PROPORTIONATE COST MADE BY THE ASSESSEE. GROUND NO . 2 OF REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL P URPOSE. 7. AS REGARDS GROUND NO. 1 OF THE ASSESSEES APPEAL RELATING TO DISALLOWANCE OF RS. 76,10,78,436/-REPRESENTING INTE REST ACCRUED ON SECURITIES BUT NOT FALLING DUE FOR PAYMENT, THE LD. REPRESENTA TIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE RELATING TO TAXABILITY OF IN TEREST ACCRUED ON SECURITIES BUT NOT FALLING DUE FOR PAYMENT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN C ASE FOR A.Y. 2000-01 ITA 3024/MUM/06 I TA 3649/MUM/06 6 RENDERED VIDE ITS ORDER DTD. 14-01-011 PASSED IN IT A NO. 931/MUM/2004 WHEREIN A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF TH E ASSESSEE VIDE PARA NO. 2 TO 5 OF THE ORDER AS UNDER:- 2. APROPOS GROUND NO.2, MATERIAL FACTS ARE LIKE TH IS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD EXCLUDED RS.91,99,67,252/- ON THE GROUND THAT THIS AMOUNT THOUGH ACCRUED BUT NOT RECEIVED DURING THE YEAR BEING NOT DUE, HEN CE NOT ELIGIBLE TO TAX. THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND AFTE R EXCLUDING RS. 62,63,63,964 BEING THE AMOUNT ALREADY TAXED IN THE ASSESSMENT YEAR 1999- 2000, ADDED THE BALANCE AMOUNT OF RS. 29,36,03,288 TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE M ATTER IN APPEAL BUT WITHOUT ANY SUCCESS. 3. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT MUMBAI (SB) IN THE CASE OF DCIT (INTERNATIONAL TAXATION) VS. BANK OF BAHRAIN AND KU WAIT, 41 SOT 290 (MUM)(SB). ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF RAMABAI V. CIT, 181 ITR 400(SC) AND CONTENDED THAT INCOME HAS TO BE TAKEN ON ACCRUAL BASIS. 4. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE IS SUE IS SQUARELY COVERED BY THE DECISION OF THE ITAT (SB) IN THE CASE OF DCIT V . BANK OF BAHRAIN AND KUWAIT (SUPRA), WHEREIN, IT WAS HELD AS FOLLOWS:- 11.LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN ASSESSEES OWN CASE FOR THE ASSESSMENT Y EARS 1992-93, 1993-94, 1995-96 AND 1996-97. LD COUNSEL SUBMITTED THAT INTEREST ON GOVERNMENT SECURITIES DOES NOT ACCRUE O N DAY TO DAY BASIS BUT ON FIXED DATES AND THE ENTRY MADE IN THE BOOKS ARE NOT RELEVANT FOR INCOME TAX PURPOSES. 12. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE CORDS OF THE CASE. WE FIND THAT THE ISSUE IS COVERED BY THE DECI SION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1992- 93, 1993-94, 1995-96 AND 1996-97. IN A.Y. 1996-97, THE TRIBUNAL HAS ALLOWED THE ASSESSEES APPEAL, INTER A LIA, OBSERVING AS UNDER:- WE HAVE CAREFULLY PERUSED THE ORDER OF THE TRIBUNA L CITED ABOVE. IN THAT CASE ALSO, THE ISSUE WAS IDENTICAL, NAMELY, WHETHER IN THE CASE OF GOVERNMENT SECURITIES, INTEREST ACCRUES ON DAY TO DAY BASIS OR ONLY ON THE COUPON DATES. THE TRIBUNAL HEL D THAT INTEREST ACCRUES ONLY ON THE COUPON DATES AND NOT ON DAY TO DAY BASIS. IN COMING TO THIS CONCLUSION, THE TRIBUNAL PLACED RELI ANCE ON THE JUDGMENT OF THE LAHORE HIGH COURT IN HAVELI SHAH SA RDARILAL V CIT, PUNJAB, 4 ITR 297, THE FULL BENCH OF THE PATNA HIGH COURT IN ITA 3024/MUM/06 I TA 3649/MUM/06 7 RANJIT PRASAD SINGH V CIT, BIHAR & ORISSA (4 ITC 26 4) AND THE KARNATAKA HIGH COURT JUDGMENT IN ADDL CIT, MYSORE V . THE VIJAY BANK LTD., MANGALORE (1976) TAX LR 524. IT WAS ALSO NOTICED BY THE TRIBUNAL THAT THE CONTENTION ADVANCED ON BEHALF OF THE REVENUE BEFORE TRIBUNAL IN THAT CASE WAS TOTALLY CO NTRADICTORY TO THE CONTENTION ADVANCED BY THE REVENUE BEFORE THE K ARNATAKA HIGH COURT IN THE CASE OF VIJAY BANK(SUPRA) BEFORE THE TRIBUNAL. THE DEPARTMENT HAD PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN E XPRESS INTERNATIONAL BANKING CORPORATION V CIT, 258 ITR 60 2 AND TAPARIA TOOLS LTD V. JCIT, 269 ITR 102. THESE TWO JUDGMENTS HAVE BEEN CONSIDERED BY THE TRIBUNAL IN PARAGRAPHS 14 TO 17 O F THE ORDER CITED ABOVE AND IT WAS HELD THAT THESE JUDGMENTS AR E NOT APPLICABLE TO THE FACTS OF UNION BANKS CASE. IN PA RAGRAPHS 20 AND 21, THE TRIBUNAL HAS ALSO CONSIDERED THE OBJECTION OF THE DEPARTMENT THAT THE ASSESSEE CANNOT CREDIT THE INTE REST ON GOVERNMENT SECURITIES IN THE PROFIT & LOSS ACCOUNT ON DAY TO DAY BASIS BUT CONTENDED THAT FOR PURPOSES OF INCOME TAX ONLY THE INTEREST THAT ACCRUED ON THE COUPON DATES CAN BE AS SESSED. THE TRIBUNAL NOTICED THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ANOTHER BANK, NAMELY UNITED COMMERCIAL BANK, 240 IT R 355. IN THIS CASE, THE SUPREME COURT HAS REVERSED THE JUDGM ENT OF THE CALCUTTA HIGH COURT, WHICH HELD THAT THE ASSESSEE C ANNOT PREPARE THE COMPUTATION OF ITS INCOME FOR INCOME TAX PURPOS ES IN A MANNER DIFFERENT FROM THE METHOD UNDER WHICH IT KEE PS ACCOUNTS. APPLYING THIS JUDGMENT OF THE SUPREME COURT, THE TR IBUNAL HELD THAT UNION BANK OF INDIA CANNOT BE PREVENTED FROM U RGING IN THE RETURN THAT THE INTEREST ON GOVT. SECURITIES ACCRUE D ONLY ON THE SPECIFIED COUPON DATES NOTWITHSTANDING THAT CREDIT HAS BEEN TAKEN IN THE PROFIT & LOSS ACCOUNT FOR THE INTEREST ON DA Y TO DAY BASIS. THUS, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE V IEW THAT THE INTEREST ACCRUES ONLY ON THE SPECIFIED COUPON DATES AND NOT ON DAY TO DAY BASIS. SINCE THE FACTS OF THE PRESENT ARE ID ENTICAL, FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF UNION BANK OF INDIA (SUPRA), WE UPHOLD THE ACTION TAKEN BY THE CIT (APP EALS) AND DISMISS THE APPEAL. CONSISTENT WITH THE PRECEDENTS, WE DISMISS THIS GRO UND OF THE REVENUE. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MAT TER THAN THE VIEW SO APPROVED BY THE SPECIAL BENCH. AS REGARDS, HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF RAMABAI (SUPRA), THE RATIO OF THIS J UDGMENT WOULD NOT APPLY ON INTEREST ON SECURITIES, SINCE, AS NOTED BY THE TRIB UNAL IN THE ABOVE CASE, IN THE CASE OF GOVERNMENT SECURITIES, INTEREST DOES NOT AC CRUE ON DAY TO DAY BASIS BUT ONLY ON THE FIXED DATES. THAT SITUATION IS MATE RIALLY DIFFERENT FROM INTEREST ON COMPENSATION AWARDS WHICH WERE DEAL WITH BY HON BLE SUPREME COURT. RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH (SUPRA), WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS GROUND IS ALL OWED. ITA 3024/MUM/06 I TA 3649/MUM/06 8 THE TRIBUNAL THUS HAS DECIDED A SIMILAR ISSUE IN FA VOUR OF THE ASSESSEE IN A.Y. 2000-01 BY FOLLOWING THE DECISION OF THE SPECI AL BENCH OF ITAT IN THE CASE OF DCIT (INTERNATIONAL TAXATION) VS. BANK OF B AHRAIN AND KUWAIT, 41 SOT 290 (MUM) [SB] AND RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE ADDITION MADE BY THE AO. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST ACCRUED ON SECURITIES BUT NOT FALLING DUE FOR PAYME NT IN THE YEAR UNDER CONSIDERATION. GROUND NO. 1 OF ASSESSEES APPEAL I S ACCORDINGLY ALLOWED. 8. GROUND NO. 2 OF THE ASSESSEES APPEAL INVOLVING THE ISSUE OF DISALLOWANCE OF DEPRECIATION ON ASSETS LEASED TO VA RIOUS LESSEES DURING THE COURSE OF BANKING OPERATION HAS NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAM E IS ACCORDINGLY DISMISSED AS NOT PRESSED. 9. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN REDUCING THE DEDUCTION U/S 36(1)(VII) BY RS. 5,2 9,01,270/-. 10. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAD WRITTEN OFF BAD DEBTS AMOUNTING TO RS. 152,41,10,116/- AND AFTER RE DUCING OPENING PROVISION OF BAD AND DOUBTFUL DEBTS AMOUNTING TO RS. 1,40,00, 000/-, DEDUCTION ON ACCOUNT OF BAD DEBTS WAS CLAIMED AT RS. 151,01,10,1 16/-. THE SAID DEDUCTION CLAIMED BY THE ASSESSEE WAS ALLOWED BY TH E A.O. THE ASSESSEE HAD ALSO CLAIMED DEDUCTION ON ACCOUNT OF PROVISION FOR BAD DEBTS AT RS. 5,24,45,199/- BEING 5% OF THE TOTAL INCOME AS PER T HE RETURN. IN THE ASSESSMENT, THE A.O. ALLOWED THE DEDUCTION ON ACCOU NT OF PROVISION FOR BAD DEBTS AMOUNTING TO RS. 5,29,01,270/- BEING 5% OF TH E TOTAL ASSESSED INCOME. THE LD. CIT(A),HOWEVER, DISALLOWED THE SAID DEDUCTI ON ON ACCOUNT OF PROVISION FOR BAD DEBTS ON THE GROUND THAT PROVISION FOR BAD DEBTS OF THE CURRENT YEAR SHOULD BE REDUCED FROM BAD DEBTS CLAIMED BY THE ASS ESSEE AS PER THE PROVISO TO SECTION 36(1)(VII) OF THE ACT. ITA 3024/MUM/06 I TA 3649/MUM/06 9 11. AT THE TIME OF HEARING BEFORE US, THE LD. REPRE SENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS ALSO COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2000-01 (SUPRA) WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF OMAN INTERNATIONAL BANK SAOG VS. DCIT, 92 ITD 76 (MUM). AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THE S AID DECISION OF THE TRIBUNAL IN THE CASE OF OMAN INTERNATIONAL BANK SAO G HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UTI BA NK LTD. (212 TAXMAN 273) HOLDING THAT DEDUCTION ON ACCOUNT OF BAD DEBTS SHOULD BE ALLOWED AFTER REDUCING OPENING PROVISION OF BAD AND DOUBTFUL DEBT S. THIS ISSUE THUS NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UTI BANK LIMITED ( SUPRA). RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT, WE REVERSE THE DECISION OF THE LD. CIT(A) IN REDUCING THE DEDU CTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS BY A SUM OF RS. 5, 29,01,270/- AND ALLOW GROUND NO. 3 OF ASSESSEES APPEAL. 12. AS REGARDS GROUND NO. 5 OF THE ASSESSEES APPEA L, THE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE ASSESSEES CLAIM FOR LOSS ON UNMATU RED FOREIGN EXCHANGE CONTRACTS IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2000-0 1 (SUPRA) WHEREIN A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF DCIT (INTE RNATIONAL TAXATION) VS. BANK OF BAHRAIN AND KUWAIT, 41 SOT 290 (MUM) [SB] W HEREIN IT WAS HELD THAT WHERE A FORWARD CONTRACT IS ENTERED INTO BY TH E ASSESSEE TO SELL THE FOREIGN CURRENCY AT AN AGREED PRICE AT A FUTURE DAT E FALLING BEYOND THE LAST DATE OF ACCOUNTING PERIOD, THE LOSS IS INCURRED TO THE ASSESSEE ON ACCOUNT OF EVALUATION OF THE CONTRACT ON THE LAST DATE OF THE ACCOUNTING PERIOD I.E. BEFORE ITA 3024/MUM/06 I TA 3649/MUM/06 10 THE DATE OF MATURITY OF THE FORWARD CONTRACT. RESP ECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DELETE THE DISALLOWANC E MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF LOSS CLAI MED BY THE ASSESSEE ON UNMATURED FOREIGN EXCHANGE CONTRACTS AND ALLOW GROU ND NO. 5 OF ASSESSES APPEAL. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JULY 2013 . # 6 3 45. ! 7#)8 03.07.2013 5 3 SD/ SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) * '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; 7#) DATED 03.07.2013 %.*).'./ RK , SR. PS # 6 3 1*9: ; :. # 6 3 1*9: ; :. # 6 3 1*9: ; :. # 6 3 1*9: ; :./ COPY OF THE ORDER FORWARDED TO : 1. /0 / THE APPELLANT 2. 12/0 / THE RESPONDENT. 3. < () / THE CIT(A)XXXIII, MUMBAI. 4. < / CIT CITY -II, MUMBAI 5. :%? 1**) , , / DR, ITAT, MUMBAI H BENCH 6. &- @ / GUARD FILE. # 6)' # 6)' # 6)' # 6)' / BY ORDER, '2: 1* //TRUE COPY// A A A A/ // /'B 'B 'B 'B ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI