DCIT 2(1)(1), MUMBAI V. BANK OF INDIA, MUMBAI

ITA 3761/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8056 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 23-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNITHA BILLA
• Keywords: Opportunity of being heard; Permanent establishment; Question of law
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , HON'BLE ACCOUNTANT MEMBER ITA NO. 3449 /MUM/201 7 (A.Y: 2013 - 14) M/S. BANK OF INDIA 8 TH FLOOR, TAXATION DEPARTMENT, STAR HOUSE, C - 5, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 PAN: AAACB 0472 C V. A .C.I.T 2(1)( 1) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ITA NO S . 3761 & 3762 / MUM/201 7 (A.Y S : 2002 - 03 & 2013 - 14) D .C.I.T 2(1)(1) ROOM NO. 561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. BANK OF INDIA STAR HOUSE, C - 5, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051 PAN: AAACB 0472 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. NARESH DEPARTMENT BY : SHRI SUNITHA BILLA DATE OF HEARING : 1 3 .12.2018 DATE OF PRONOUNCEMENT : 20. 12 .2018 2 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA O R D E R PER C. N. PRASAD (JM) 1. THESE THREE APPEALS ARE FILED BY THE REVENUE AND ASSESSEE. CROSS APPEALS WERE FILED FOR THE ASSESSMENT YEAR 2013 - 14 AND REVENUE FILED APPEAL FOR THE ASSESSMENT YEAR 2002 - 03. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2002 - 03. THE ONLY ISSUE RAISED IN THE GROUNDS OF APPEAL OF THE REVENUE IS , AS TO WHETHER THE PROFITS OF THE FOREIGN BRANCHES SHALL BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE OR NOT . 3. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE BOMBAY HIGH COURT FOR THE ASSESSMENT YEAR 2003 - 04 IN I.T. APPEAL NO . 1630 OF 2012 DATED 07.01.2015 BY DISMISSING THE APPEAL OF THE REVENUE. 4. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. LD. DR FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2012 - 13 HON'BLE TRIBUNAL R EMITTED THE MATTER BACK TO THE ASSESSING OFFICER FOR DENOVO ADJUDICATION . T HEREFORE , IT IS SUBMITTED THAT THIS ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER . 5. I N REPLY , L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , THE TRIBUNAL SET - ASIDE THE ISSUE FOR THE ASSESSMENT YEAR 2012 - 13 FOR D ENOVO 3 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA CONSIDERATION , THE TRIBUNAL WAS OF THE VIEW THAT , AFTER THE A .Y 2004 - 05 THE PROVISIONS OF SECTION 90(3) OF THE ACT HAVE COME INTO STATUTE AND THE NOTIFICATION NO. S.O. 2123(E) DATED 28.08.2008 ISSUED BY THE CENTRAL GOVERNMENT , HA S NOT BEEN CONSIDERED BY THE ASSESSING OFFICER . L D . COUNSEL FOR THE ASSESSEE SUBMITTED THAT , THE HON'BLE TRIBUNAL TAKING NOTE OF THE CHANGE IN LEGAL POSITION ARISING DUE TO THE PROVISIONS OF SECTION 90(3) R.W. CENTRAL GOVERNMENT NOTIFICATION DATED 28.08.2008 WHICH ARE APPLICABLE AFT ER 2004 - 05 RESTOR ED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR D ENOVO CONSIDERATION. THEREFORE, L D . COUNSEL FOR THE ASSESSEE SUBMITTED THAT , FOR THE A SSESSMENT Y EAR UNDER CONSIDERATION I.E. A.Y. 2002 - 03 THERE IS NO SUCH PROVISION AND THE NOTIFICATI ON ISSUED BY THE CENTRAL GOVERNMENT AND T HEREFORE , THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE WILL APPLY. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW . ON A PERUSAL OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2012 - 13, WHEREIN SIMILAR ISSUE WAS RESTOR ED TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO C ONSIDERATION . WE FIND THAT THE TRIBUNAL WAS OF THE VIEW THAT THE ASSESSING OFFICER DID NOT CONSIDER THE PROVISIONS OF SECTION 90(3) AND THE NOTIFICATION OF THE CENTRAL GOVER NMEN T NO . 91/ 2008 DATED 28.08.2008 . IN VIEW OF THE CHANGE IN LEGAL POSITION ARISING DUE TO THE PROVISIONS OF SECTION 90(3) AND THE NOTIFICATION OF THE 4 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA CENTRAL GOVERNMENT TH E TRIBUNAL N OTICED THAT INCOME OF FOREIGN BRANCHES SHALL BE INCL UDED IN THE TOTAL INCOME CHARGEABLE IN INDIA FROM ASSESSMENT YEAR 2004 - 05 ONWARDS, AS WAS HELD IN THE CASES OF ESSAR OIL LTD., AND IN THE CASE OF BAN K OF BARODA V. ACIT IN ITA.NO. 2927/ MUM / 2011 DATED 25.07.2014. FOR THESE REASONS THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION. HOWEVER, SINC E THE PROVISIONS OF SECTION 90(3) AND THE NOTIFICATION OF THE CENTRAL GOVERNMENT CAME INTO OPERATION AFTER THE ASSESSMENT YEAR 2002 - 0 3 THE SAID PROVISIONS AND NOTIFICATION SHALL NOT BE APPLICABLE FOR THE A SSESSMENT YEAR 2002 - 03 WHICH IS UNDER CONSIDERATION BEFORE US . T HE HON'BLE BOMBAY HIGH COURT FOR THE ASSESSMENT YEAR 2003 - 04 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY REJECTING THE APPEAL OF THE REVENUE HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OBSERVING AS UNDER : - THIS APPEAL CHALLENGES THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENCH AT MUMBAI, IN INCOME TAX APPEAL NO.2781 OF 2011. THE ASSESSMENT YEAR IN QUESTION IS 2003 - 04. 2] MR. SURESH KUMAR, LEARNED COUNSEL, SUBMITS THAT THIS APPEAL RAISES THE SUBS TANTIAL QUESTIONS OF LAW AND PARTICULARLY AS FORMULATED IN THE MEMO OF APPEAL BY THE REVENUE. HE WOULD SUBMIT THAT THE TRIBUNAL COMMITTED AN ERROR IN HOLDING THAT THE OPERATIONS OF THE RESPONDENT - BANK IN FOREIGN COUNTRIES DENOTES IT HAVING A PERMANENT ESTA BLISHMENT OUTSIDE INDIA. THE INCOME ATTRIBUTABLE TO THIS BRANCH CANNOT BE TAXED IN INDIA. MR. SURESH KUMAR SUBMITS THAT THIS FINDING IS RENDERED WITHOUT ADVERTING TO THE RELEVANT FACTUAL MATERIALS AND PROOF OF PAYMENT OF TAXES IN RELATION TO THE ESTABLISHM ENT ABROAD. THEREFORE, THE APPEAL DESERVES TO BE ADMITTED. 3] ON THE OTHER HAND, MR. SANJIV SHAH, LEARNED COUNSEL, APPEARING FOR THE RESPONDENT - ASSESSEE BRINGS TO OUR NOTICE SERIES OF ORDERS PASSED BY THE TRIBUNAL IN IDENTICAL CIRCUMSTANCES AND IN CASE OF THIS VERY ASSESSEE. HE SUBMITS THAT THE TRIBUNAL FOLLOWED THAT ORDERS WHEN THE IDENTICAL CIRCUMSTANCES WERE POINTED OUT. THE PERMANENT ESTABLISHMENTS OR BRANCHES OUTSIDE INDIA GENERATED INCOME AND WHICH WAS SUBJECTED TO THE LAW PERTAINING TO TAX ON INCOME ABROAD. ONCE THE 5 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA FACTUAL POSITION IS NOT DISPUTED BY THE REVENUE, THEN, THE BENEFIT OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT HAS BEEN RIGHTLY EXTENDED. HE RELIES UPON THE FINDINGS IN THE TRIBUNAL'S ORDER IMPUGNED IN THIS APPEAL AND PARTICULARLY PARA 28 THEREOF. 4] WITH THE ASSISTANCE OF MR. SURESH KUMAR AND SANJIV SHAH, WE HAVE PERUSED THE MEMO OF APPEAL. THE ASSESSING OFFICER WAS SATISFIED THAT THE BENEFIT OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT IS ADMISSIBLE PROVIDED THE PROOF IS PRODUCED IN RELATI ON TO PAYMENT OF TAXES BY THE ASSESSEE ABROAD. IN OTHER WORDS, IF THE ASSESSEE HAS PERMANENT ESTABLISHMENT ABROAD, THEN, THE ASSESSEE WOULD HAVE TO PRODUCE EVIDENCE REGARDING PAYMENT OF TAXES PERTAINING TO THE INCOME OF THESE ESTABLISHMENTS ABROAD. ON PRODUCTION OF SUCH EVIDENCE, THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT. THAT EVIDENCE WAS ALWAYS AVAILABLE AND AS NOTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL. IN THE CIRCUMSTANCES, THE AUTHORITIES DID NOTHING BUT FOLLOW THEIR EARLIER ORDERS BASED ON IDENTICAL FACTS AND CIRCUMSTANCES. THE FINDING OF FACT, THEREFORE, CANNOT BE TERMED AS PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD. THE APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. IT IS DEVOID OF MERITS AND IS, ACCORDINGLY, DISMISSED. NO COSTS . 7. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE LD.CIT(A) ON THIS ISSUE FOR A.Y. 2002 - 03 . THIS GROUND RAISED BY THE REVENUE IS REJECTED. 8. COMING TO THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2013 - 14 IN ITA.NO. 3449/ MUM /2017 , T HE FIRST ISSUE IN GROUNDS OF APPEAL OF THE ASSESSEE IS WITH REGARD DISALLOWANCE MADE U/S. 14A OF THE ACT . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL IN ITA.NO. 5175/MUM / 2016 DATED 30.11.2018 WHILE DISPOSING OF F THE APPEAL FOR THE ASSESSMENT YEAR 2012 - 13 RESTORED THE ISSUE TO THE FILE ASSESSING OFFICER FOR DENOVO ADJUDICATION KEEPING IN VIEW THE OBSERVATIONS MADE ON THE SUBMISSIONS BY THE ASSESSEE, THAT IT HAD HUGE SURPLUS FUNDS TO MAKE INVESTMENTS AND T HEREFORE, NO DISALLOWANCE IS REQUIRED EITHER ON INTEREST OR ADMINISTRATIVE EXPENSES . T HUS, F OLLOWING THE SAID ORDER OF THE TRIBUNAL 6 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA FOR THE ASSESSMENT YEAR 2012 - 13 IN ITA.NO. 5175/MUM / 2016 DATED 30.11.2018 , WE RESTORE THIS ISSUE TO FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE AFRESH KEEPING IN VIEW THE DIRECTIONS BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2012 - 13. GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE SECOND ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS RELATING TO AMORTIZATION OF LEASE PREMIUM. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT , IDENTICAL ISSUE HAS BEEN DECIDED AGAINST ASSESSEE BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2012 - 13 IN ITA.NO. 5175/ MUM /2016 DATED 30.11.2018 AT P ARAS 12 TO 17. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THIS GROUND IS REJECTED. 10. THIRD ISSUE IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO EXCLUSION OF INCOME OF FOREIGN BRANCHES , THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THIS ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH FOR THE ASSESSMENT YEAR 2012 - 13 PARTLY IN FAVOUR OF THE ASSESSEE WHEREBY REMITTING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER IN ITA.NO. 5175/MUM2016 DATED 30.11.2018 AT PAR A NO S . 18 TO 24. 11. LD. DR SUBMITTED THAT THIS ISSUE MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. 7 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE COORDINATE BENCH WHILE DISPOSING OFF THE APPEAL FOR THE ASSESSMENT YEAR 2012 - 13 OBSERVED AS UNDER: - 24. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. NO DOUBT, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 05, THE TRIBUNAL FOLLOWING ITS OWN DECISION FOR ASSESSMENT YEAR 2003 04, HAS HELD THAT INCOME OF FOREIGN BRANCHES CANNOT BE I NCLUDED FOR COMPUTING THE TAXABLE INCOME OF THE ASSESSEE IN INDIA. FOLLOWING THE AFORESAID DECISION, THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEARS 2009 10 AND 2011 12 AS WELL. HOWEVER, FROM THE MATERIAL ON RECORD, IT APPE ARS THAT THOUGH THE DEPARTMENT IN ITS APPEAL IN ITA NO.6016/MUM./2011, HAS RAISED A SPECIFIC GROUND CHALLENGING THE EXCLUSION OF INCOME OF FOREIGN BRANCHES IN VIOLATION OF CENTRAL GOVT. NOTIFICATION NO.S.O. 2123(E), DATED 28TH AUGUST 2008, HOWEVER, WHILE D ECIDING THE ISSUE THE TRIBUNAL HAS NOT DELIBERATED ON THE TRUE IMPORT AND IMPACT OF THE SAID NOTIFICATION ON THE TAXABILITY OF THE INCOME OF FOREIGN BRANCHES KEEPING IN VIEW THE PROVISIONS OF SECTION 90(3) OF THE ACT. SIMILAR IS THE SITUATION IN THE APPEAL ORDERS PASSED FOR THE SUBSEQUENT ASSESSMENT YEARS I.E., A.Y. 2009 10 AND 2011 12. IT IS RELEVANT TO NOTE, IN CASE OF ESSAR OIL LTD. (SUPRA) THE CO ORDINATE BENCH AFTER TAKING NOTE OF THE PROVISIONS CONTAINED UNDER SECTION 90(3) OF THE ACT AND CENTRAL GOVT . NOTIFICATION DATED 28TH AUGUST 2008, REFERRED TO ABOVE, HAS HELD THAT AFTER ASSESSMENT YEAR 2004 05 INCOME OF THE FOREIGN BRANCHES WOULD BE INCLUDIBLE IN THE INCOME OF THE ASSESSEE FOR CHARGEABILITY TO TAX IN INDIA. IT IS RELEVANT TO OBSERVE, THOUGH, IN THE CASE OF ESSAR OIL LTD. (SUPRA), THE TRIBUNAL AND THE HON'BLE JURISDICTIONAL HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN PRECEDING ASSESSMENT YEAR, HOWEVER, WHILE DECIDING THE APPEAL FOR SUBSEQUENT ASSESSMENT YEAR, THE TRIBUNAL TAKING NOTE OF THE CHANGE IN LEGAL POSITION ARISING DUE TO SECTION 90(3) R/W THE CENTRAL GOVERNMENT NOTIFICATION NO.91/2008, DATED 28TH AUGUST 2008, HELD THAT INCOME OF FOREIGN BRANCHES SHALL BE INCLUDED IN THE TOTAL INCOME CHARGEABLE IN INDIA UNDER THE ACT FROM ASSESSMENT YEAR 2004 05 ONWARDS. FOLLOWING THE AFORESAID DECISION, THE CO ORDINATE BENCH IN BANK OF BARODA V/S ACIT, IN ITA NO.2927/MUM./2011, DATED 25TH JULY 2014, EXPRESSED SIMILAR VIEW. IT IS RELEVANT TO OBSERVE, NEITHER THE EFFECT / IMPACT OF SECTION 9 0(3) R/W CENTRAL GOVERNMENT NOTIFICATION NO.S.O. 2123(E) DATED 28TH AUGUST 2008, NOR THE DECISIONS OF ESSAR OIL LTD. (SUPRA) AND BANK OF BARODA (SUPRA) WERE TAKEN NOTE OF OR DELIBERATED UPON WHILE DECIDING THE ISSUE IN ASSESSEES CASE FOR PRECEDING ASSESSM ENT YEARS. SIMPLY RELYING UPON THE DECISIONS OF THE TRIBUNAL ON IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2000 01 AND 2003 04, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS. IT IS FURTHER RELEVANT TO OBSERVED, THE DECISIONS OF THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE SINCE PERTAINED TO ASSESSMENT YEARS 2000 01 AND 2003 04, THE HON'BLE HIGH COURT NEVER HAD ANY OCCASION TO EXAMINE THE TAXABILITY OF INCOME IN FOREIGN BRANCHES IN INDIA KEEPING IN V IEW THE PROVISIONS OF SECTION 90(3) R/W GOVERNMENT NOTIFICATION NO.S.O. 2123(E) DATED 28TH AUGUST 2008. IN THE AFORESAID CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE IS COVERED BY EARLIER DEC ISIONS OF THE TRIBUNAL. IN OUR VIEW, THE ISSUE HAS TO BE DECIDED KEEPING IN VIEW THE PROVISION OF SECTION 90(3) READ WITH CENTRAL GOVT. NOTIFICATION NO S.O. 2123(E) DATED 28TH 8 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA AUGUST 2008 AS WELL AS THE DECISIONS CITED BY LEARNED DEPARTMENTAL REPRESENTATIV E. HOWEVER, IT NEEDS TO BE OBSERVED, THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE US AGAINST THE APPLICABILITY OF THE DECISIONS OF ESSAR OIL LTD. (SUPRA) AND BANK OF BARODA LTD. (SUPRA) APPEARS TO HAVE NOT BEEN MADE BEFORE THE DEPARTMENTAL AUTHORITIES, MAY BE FOR THE REASON THAT THE ASSESSEE THOUGHT THE ISSUE TO BE COVERED BY THE DECISIONS OF THE HIGHER APPELLATE AUTHORITY IN ITS OWN CASE IN THE PRECEDING ASSESSMENT YEARS. THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSEE DESERVES AN OPPORTUNITY TO ESTABLIS H ITS CASE BEFORE THE DEPARTMENTAL AUTHORITIES THAT THE INCOME OF THE FOREIGN BRANCHES ARE NOT INCLUDIBLE IN THE INCOME CHARGEABLE TO TAX IN INDIA NOTWITHSTANDING THE CENTRAL GOVERNMENT NOTIFICATION NO.S.O. 2123(E) DATED 28TH AUGUST 2008 R/W SECTION 90(3) OF THE ACT AS WELL AS THE DECISIONS OF ESSAR OIL LTD. (SUPRA) AND BANK OF BARODA LTD. (SUPRA). ACCORDINGLY, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 13. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR D ENOVO ADJUDICATION, KEEPING IN VIEW THE OBSERVATIONS OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2012 - 13, A FTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS RELATING TO DISALLOWANCE OF BROKEN PERIOD INTEREST . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL DECIDED THE ISSUE IN ITA.NO. 5175/ M UM/2016 IN PARA NO S . 25 TO 3 0 WHEREIN THE ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 15. LD. DR SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. 9 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA 16. WE HAVE PERUSED THE ORDERS OF THE TRIBUNAL FOR ASSESSMENT YEAR 2012 - 13 , WHEREIN IDENTICAL ISSUE HAS BEEN RESTORED TO THE FILE ASSESSING OFFICER OBSERVING AS UNDER: - 29. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN, IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNA L IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 12, IN ITA NO.4357 AND 4491/MUM./2016, DATED 25TH MAY 2018. THE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION OBSERVING AS UND ER: 38. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. BEFORE WE PROCEED TO DECIDE THE ISSUE, IT IS NECESSARY TO UNDERSTAND THE EXACT NATURE OF BROKEN PERIOD INTEREST. AS MANDATED BY THE RESERVE BANK OF INDIA, EVERY BANK HAS TO MAI NTAIN STATUTORY LIQUIDITY RATIO. FOR THAT PURPOSE BANKS INVEST IN GOVERNMENT SECURITIES. THEREFORE, DEPENDING ON THE REQUIREMENT A BANK PURCHASES AND SELLS GOVERNMENT SECURITIES. GENERALLY, INTEREST IN GOVERNMENT SECURITIES IS PAYABLE ON HALF YEARLY BASIS. WHEN GOVERNMENT SECURITIES ARE TRADED THE PURCHASER HAS TO PAY TO THE SELLER NOT ONLY THE PURCHASE PRICE OF THE SECURITIES BUT ALSO THE INTEREST ACCRUED FROM THE GOVERNMENT SECURITIES FROM THE LAST DUE DATE OF THE INTEREST TILL THE DATE OF PURCHASE OF THE SECURITIES. THIS INTEREST FROM THE LAST DUE DATE TILL THE DATE OF PURCHASE IS REFERRED TO AS BROKEN PERIOD INTEREST. WHILE THE PURCHASER OF THE GOVERNMENT SECURITY PAYS THE BROKEN PERIOD INTEREST THE SELLER RECEIVES IT. IT IS EVIDENT ON RECORD, ASSESSEES CLAIM OF BROKEN PERIOD INTEREST PAID HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE REASONING THAT THE ASSESSEE IS NOT OFFERING BROKEN PERIOD INTEREST ON ACCRUAL BASIS. IN OUR VIEW, THE AFORESAID REASONING OF THE DEPARTMENTAL AUTHORITIES DO NOT STAND TO REASON. IF THE ASSESSEE IS CONSISTENTLY FOLLOWING AN ACCOUNTING METHOD AS PER WHICH THE BROKEN PERIOD INTEREST IS OFFERED AS INCOME WHEN IT IS RECEIVED, THE BROKEN INTEREST PAID WHILE PURCHASING THE SECURITIES CANNOT BE DISALLOWED MERELY ON THE REASONI NG THAT THE ASSESSEE IS NOT SHOWING THE BROKEN PERIOD INTEREST INCOME ON ACCRUAL BASIS. AS COULD BE SEEN, THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF STATE BANK OF INDIA, VIDE JUDGMENT DATED 1ST AUGUST 2016, AFTER FOLLOWING THE DECISION OF THE SAID CO URT IN CASE OF AMERICAN EXPRESS INTERNATIONAL CORPORATION (SUPRA) HAS REJECTED REVENUES APPEAL AGAINST ALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION IN RESPECT OF BROKEN PERIOD INTEREST PAID. WHILE DOING SO, THE HON'BLE HIGH COURT HAS ALSO UPHELD THE DECISIO N OF THE TRIBUNAL IN HOLDING THAT THE BROKEN PERIOD INTEREST INCOME HAS TO BE TAXED ON DUE BASIS INSTEAD OF ACCRUAL BASIS. IT IS EVIDENT, THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WAS NEITHER REFERRED TO NOR EXAMINED BY THE DEPARTMENT AL AUTHORITIES WHILE DECIDING THE ISSUE. IN VIEW OF THE AFORESAID, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DECIDING AFRESH KEEPING IN VIEW THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT REFERRED TO ABOVE AND ONLY AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 10 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA 30. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENCH, WE RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN TERMS WITH OUR DIRECTIONS THEREIN. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 17. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION , KEEPING IN VIEW THE OBSERVATIONS OF THE TRIBUNAL IN THE EARLIER YEARS I.E. FOR THE ASSESSMENT YEAR 2011 - 12 & 2012 - 13. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 18. THE LAST ISSUE IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO ADDING BACK INCOME RECEIVED FROM VENTURE CAPITAL FUNDS. 19. AT THE TIME OF HEARING L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOT PRESSED SINCE RELIEF HAS BEEN GRANTED BY THE ASSESSING OFFICER IN A SUBSEQUENT ORDER. IN VIEW OF THE OF THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE GROUND NO.5 OF GROUNDS OF APPEAL OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. 20. COMING TO THE APPEAL OF THE REVENUE IN ITA.NO. 3762/ MUM /2016 , GROUND NO.1 & 2 RELATES TO WHETHER INCOME FROM FOREIGN BRANCHES IS TO BE EXCLUDED F ROM TOTAL INCOME OF THE ASSESSEE OR NOT. THIS GROUND IS SIMILAR TO THE GROUND NO.3 RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND WE RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR D ENOVO ADJUDICATION WHILE DECIDING THE ISSUE IN PARA NO S . 12 & 13 ABOVE. AS THE ISSUE IN ASSESSEES APPEAL 11 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA IS RESTORED TO THE FILE OF THE ASSESSING OFFICER THIS ISSUE OF REVENUE IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR D ENOVO ADJUDICATION. GROUND NOS. 1 & 2 ARE ALLOWED FOR STATISTICAL PURPOSE. 21. GROUND NOS. 3 & 4 RAISED BY THE REVENUE RELATES TO THE ISSUE OF WHETHER THE PROVISIONS OF SECTION 115JB ARE APPLICABLE TO THE ASSESSEES BANK OR NOT. 22. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE THE FOR THE ASSESSMENT YEAR 2012 - 13 IN ITA.NO. 5170/ MUM /2016 DATED 30.11.2018 , WHEREIN THE COORDINATE BENCH DISMISSED THE APPEAL OF THE REVENUE FOLLOWING ITS OWN ORDER FOR THE ASSESSMENT YEAR 2011 - 12 HOLDING THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE WHICH IS A BANKING COMPANY. LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT AMENDMENT BY WAY OF INSERTION OF EXPLANATION 3 TO SECTION 115JB HAS ALSO BEEN CONSIDERED BY THE KOLKATA BENCH IN THE CASE OF UCO BANK V. DCIT IN ITA.NO. 1768/KOL/2009 DATED 27.11.2015 AND HELD THAT ONLY THOSE COMPANIES TO WHOM PROVISIONS OF COMPANIES ACT ARE APPLICABLE WILL COME WITHIN THE AMBIT OF PROVISIONS OF SECTION 115JB OF THE ACT. 23. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL CONSIDERED THE PROVISIONS OF SECTION 211 OF THE COMPANIES ACT TO 12 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA ASCERTAIN AND FIND WHETHER THE BANKING COMPANY WOULD FALL UNDER THE PROVISIONS OF SECTION 211 OF THE COMPANIES ACT, SO AS TO ATTRACT THE EXPLANATION 3 TO PROVISIONS OF SECTION 115JB OF THE ACT AND CONSID ERING THE PROVISIONS , IT HAS BEEN HELD THAT ASSESSEE BANK IS NOT A COMPANY WITHIN THE MEANING OF SECTION 211 OF COMPANIES ACT AND CONSEQUENTLY PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO BANKING COMPANY. 24. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 25. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE , AS TO WHETHER THE PROVISIONS OF SECTION 115JB ARE APPLICABLE TO THE ASSESSEE OR NOT HAVE BEEN CONSIDERED BY THE TRIBUNAL CONSISTENTLY IN ASSESSEES OWN CASE UPTO THE ASSESSMENT YEAR 2012 - 13 AND IT HAS BEEN HELD THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE BANK OBSERVING AS UNDER: - 33. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL BY THE REVENUE IS WHETHER THE PROVISIONS OF SECTION 115JB OF THE ACT IS APPLICABLE TO THE ASSESSEE. 34. AT THE OUTSET, TH E LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 12. 35. THE LEARNED DEPARTMENTAL REPRESENTATIVE, THOUGH, AGREED WITH THE AFORES AID SUBMISSIONS OF THE ASSESSEE, HOWEVER, HE RELIED UPON THE OBSERVATION OF THE ASSESSING OFFICER. 36. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2011 12, IN ITA NO.4357 AND 4491/ MUM./2016, DATED 25TH MAY 2018, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: 51. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN, LEARNED COM MISSIONER (APPEALS) RELYING UPON CERTAIN JUDICIAL PRECEDENTS HELD THAT AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT APPLICABLE TO THE RELEVANT ASSESSMENT YEAR, IT CANNOT BE EXTENDED TO BANKING COMPANIES. 13 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA 52. THE LEARNED COUNSELS APPEARING FOR THE PAR TIES HAVE FAIRLY AGREED THAT THE ISSUE IS COVERED BY VARIOUS JUDICIAL PRECEDENTS AS REFERRED TO IN PARA 19.2 OF THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). IN VIEW OF THE AFORESAID, WE DISMISS THIS GROUND. 37. THERE BEING NO CHANGE EITHER IN FACTUAL OR LEGAL POSITION IMPUGNED ASSESSMENT YEAR, OUR DECISION IN ASSESSMENT YEAR 2011 12 AS REFERRED TO ABOVE, WILL APPLY TO THE PRESENT APPEAL AS WELL. GROUND RAISED IS DISMISSED. 26. BY FINANCE ACT , 2012 EXPLANATION 3 TO SECTION 115JB HAS BEEN INSERTED W.E.F 01.04.2013 WHICH IS APPLICABLE FOR THE CURRENT ASSESSMENT YEAR AND THE SAID EXPLANATION READS AS UNDER: EXPLANATION 3 FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT FOR THE PURPOSES OF THIS SECTION, THE ASSESSEE, BEING A COMPANY TO WHICH THE [SECOND PROVISO TO SUB - SECTION(1) OF SECTION 129 OF THE COMPANIES ACT, 2013 (18 OF 2013)] IS APPLICABLE, HAS, FOR AN ASSESSMENT YEAR COMMENCING ON OR BEFORE THE 1 ST DAY OF APRIL, 2012, AN OPTION TO PREPARE ITS [STATEMENT OF PROFIT AND LOSS] FOR THE RELEVANT PREVIOUS YEAR EITHER IN ACCORDANCE WITH THE PROVISIONS OF [SCHEDULE III TO THE COMPANIES ACT, 2013 (18 OF 2013)] OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT G OVERNING SUCH COMPANY. 27. AS COULD BE SEEN FROM THE ABOVE , IT HAS BEEN CLARIFIED THAT FOR THE PURPOSE OF THE PROVISIONS OF SECTION 115JB ASSESSEE BEING A COMPANY TO WHICH THE PROVISO TO SUB - SECTION (1) OF SECTION 129 OF THE COMPAN IES ACT, 2013 IS APPLICABLE , FOR ASSESSMENT YEAR COMMENCING ON OR BEFORE FIRST DATE OF APRIL 2012 H AS AN OPTION TO PREPARE ITS STATEMENT OF PROFIT AND LOSS FOR THE RELEVANT PREVIOUS YEAR EITHER IN ACCORDANCE WITH PROVISIONS OF THE COMPANI ES ACT OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY. ONE HAS T HE OPTION TO PREPARE ITS ACCOUNTS IN ACCORDANCE WITH PROVISIONS OF ACT GOVERNING SUCH COMPANY OR IN ACCORDANCE WITH SCHEDULE 13 OF THE COMPANIES ACT ONLY FOR THE PERIOD PRIOR TO 01.04.2012 AND NOT AFTER THE PERIOD FROM 01.04.2013. THEREFORE , THE IMPLICATION OF 14 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA EXPLANATION 3 TO SECTION 115JB HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AND THE LD.CIT(A) . 28. WE OBSERVE THAT THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF UCO BANK V. DCIT (SUPRA) CONSIDERED EXPLANATION 3 TO SECTION 115JB AND HELD THAT BANKING COMPANY WILL NOT FALL UNDER THE DEFINITION OF 211 OF THE COMPANY ACT AND THEREBY THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE. THIS DECISION OF THE TRIBUNAL HAS BEEN FOLLOWED BY THE LD.CIT(A) HOLDING THAT THE PROVISIONS OF SECTION 115JB HAVE NO APPLICATION TO THE ASSESSEE WHICH IS THE BANKING COMPANY AND DIRECTE D THE ASSESSING OFFICER NOT TO APPLY THE PROVISIONS OF SECTION 115JB OF THE ACT TO THE ASSESSEE. 29. HOWEVER, WE OBSERVE THAT THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL HAS BEEN RENDERED FOR THE ASSESSMENT YEAR 2002 - 03 AND THE PROVISIONS OF EXPLANATION 3 TO SECTION 115JB HAVE BEEN INSERTED W.E.F 01.04.2013 BY FINANCE ACT , 2012 WHICH ARE APPLIC ABLE FOR THE ASSESSMENT YEAR 2013 - 14. THEREFORE , L D.CIT(A) I S NOT CORRECT IN APPLYING THE SAID DECISION FOR THE A.Y. 2013 - 14 WITHOUT EXAMINING THE IMPLICATION OF EXPLANATION 3 TO 115JB TO THE ASSESSEE . O N A READING OF THE ASSESSMENT ORDER , WE FIND THAT THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE APPLICABILITY OF THE PROVISIONS OF EXPLANATION 3 TO SECTION 115JB TO THE 15 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA ASSESSEE BANK . THEREFORE, W E ARE OF THE CONSIDERED VIEW THAT THIS ISSUE OF WHETHER THE PROVISION S OF SECTION 115JB ARE APPLICABLE TO THE ASSESSEE BANK OR NOT IN VIEW OF INSERTION OF THE EXPLANATION 3 TO SECTION 115JB OF THE ACT HAS TO BE RESTORED TO THE FILE ASSESSING OFFICER FOR D ENOVO ADJUDICATION . T HUS , WE RESTORE THIS ISSUE TO A.O TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE SUBMISSIONS MADE, THE DECISION OF THE KOLKATA BENCH AND PARTICULARLY THE PROVISIONS OF EXPLANATION 3 TO SECTION 115JB WHICH WERE INSERTED W.E.F. 01.04.2013 AND APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS , WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR D ENOVO ADJUDICATION K EEPING IN VIEW THE ABOVE OBSERVATIONS. NEEDLESS TO SAY T HAT THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE . 30. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2002 - 03 IS DISMISSED , APPEAL OF THE ASSESSEE AND REVENUE FOR A.Y. 2013 - 14 ARE PARTLY ALLOWED AS IN DICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 T H DECEMBER , 2018 SD/ - SD/ - ( MANOJ KUMAR AGGARWAL ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20 / 12 / 2018 GIRIDHAR , S R. PS 16 ITA NO. 3449 , 3761 & 376 2 /MUM/2017 (A.Y: 2013 - 14) M/S. BANK OF INDIA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM