DEPUTY COMMISSIONER OF INCOME TAX-2(3)(2), MUMBAI V. INDUSIND BANK LIMITED, MUMBAI

ITA 4486/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6805 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Revised return; Revenue expenditure; Capital expenditure; Rule 8D; Set aside
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NOS.4486 & 4464/M/2017 ASSESSMENT YEARS: 2011-12 & 2012-13 DCIT-2(3)(2), ROOM NO.552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. INDUSIND BANK LTD., 8 TH FLOOR, TOWER ONE, ONE INDIABULLS CENTRE, 841, SENAPATI BAPAT MARG, ELIPHINSTONE ROAD (W), MUMBAI - 400013 PAN: AAACI1314G (APPELLANT) (R ESPONDENT) ITA NOS.3875 & 3876/M/2017 ASSESSMENT YEARS: 2011-12 & 2012-13 M/S. INDUSIND BANK LTD., 8 TH FLOOR, TOWER ONE, ONE INDIABULLS CENTRE, 841, SENAPATI BAPAT MARG, ELI]PHINSTONE ROAD-WEST, MUMBAI - 400013 PAN: AAACI1314G VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 2(3), MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KARTHIK NATARAJAN, A.R. SHRI VIRAL SHAH, A.R. REVENUE BY : SHRI AWUNGSHI GIMSAN, D.R. SHRI ABI RAMA KARTHIKEYAN, D.R. DATE OF HEARING : 26.02.2019 DATE OF PRONOUNCEMENT : 28.02.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEALS TWO BY THE ASSESSEE AND TW O BY THE REVENUE HAVE BEEN PREFERRED AGAINST THE COMMON ORDER ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 2 DATED 24.03.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2011-12 & 2012-13. ITA NO.3875 /MUM/2017 & 4486/MUM/2017 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ACTION OF AO IN MAKING DI SALLOWANCE OF RS.18,50,000/- @ 0.5% OF THE AVERAGE INVESTMENTS UN DER SECTION 14A READ WITH RULE 8D2(III) TOWARDS ADMINIS TRATIVE AND OTHER EXPENSES. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A BA NKING COMPANY AND IS ENGAGED IN THE BUSINESS OF BANKING A CTIVITIES. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEN D OF RS.2,86,21,328/- WHILE NO DISALLOWANCE WAS MADE OF ANY EXPENSES ATTRIBUTABLE TO EARNING OF THE SAID EXEMPT INCOME. ACCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE EXPENSES ATTRIBUTABLE TO EARNING OF EXEM PT INCOME SHOULD NOT BE DISALLOWED WHICH WAS REPLIED BY ASSES SEE BY SUBMITTING THAT ASSESSEE HAS OWN INTEREST FREE FUND S AVAILABLE WITH THE BANK AND NET PROFIT OF RS.577.324 BESIDES HAVING NET WORTH AT THE YEAR END OF RS.4049 CRORES. THE ASSES SEE SUBMITTED THAT THE ENTIRE PORTFOLIO OF THE ASSESSEE OF SECURITIES AND SHARES WAS OF RS.37.45 CRORES WHICH WAS INVESTE D OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND THEREFORE NO EXPENSES ATTRIBUTABLE TO THE SAID EXEMPT INCOME. THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND HE DISALLOWED ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 3 AND ADDED A SUM OF RS.2,21,10,000/- UNDER SECTION 1 4A READ WITH RULE 8D COMPRISING RS.2,02,60,000/- UNDER RULE 8D2(II) AND RS.18,50,000/- UNDER RULE 8D2(III). 4. THE LD. CIT(A), IN THE APPELLATE PROCEEDINGS DEL ETED THE DISALLOWANCE MADE UNDER RULE 8D2(II) OF RS.2,02,60, 000/- WHILE THE DISALLOWANCE UNDER RULE 8D2(III) OF RS.18,50,00 0/- WAS SUSTAINED. THE ASSESSEE HAS CHALLENGED THE UPHOLDIN G OF ADDITION UNDER RULE 8D(2)(III) WHEREAS THE REVENUE HAS CHALLENGED BY WAY OF GROUND NO.1 THE DELETION OF AD DITION OF RS.2,02,60,000/-. 5. THE LD. COUNSEL OF THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ASSESSEE IS A BANKING COMPANY AND SHARES/S ECURITIES WERE HELD IN THE ORDINARY COURSE OF BUSINESS. THE LD. A.R. SUBMITTED THAT IN TERMS OF CIRCULAR NO.18/2015 DATE D 02.11.2015 ISSUED BY CBDT , INVESTMENTS MADE BY THE BANKING CONCERNS ARE PART OF BUSINESS ACTIVITY OF BANKING A ND THEREFORE INCOME ARISING FROM SUCH INVESTMENTS IS ATTRIBUTABL E TO BUSINESS OF BANKING FALLING UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION. THE LD. A.R. ALSO S UBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF T HE ASSESSEE IN ITS OWN CASE IN ITA NO.5331 & 5332/M/2016 A.Y. 2008 -09 AND 2009-10 BY THE COORDINATE BENCH BY FOLLOWING THE RU LING OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF PCIT VS. STATE BANK OF PATIALA 391 ITR 218 AND CBDT CIRCULAR 18/2015. THE LD. A.R. ALSO SUBMITTED THAT THE HON'BLE APEX COURT HA D IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT [2018] 402 ITR 640 (SC) DISMISSED THE APPEAL FILED BY THE REVENUE CHALLENGI NG THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF PCIT ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 4 VS. STATE BANK OF PATIALA (SUPRA). IT WAS ALSO SUB MITTED BEFORE US THAT CO-ORDINATE BENCH OF THE TRIBUNAL DELHI BEN CH IN ITA NO.2236/DEL/2011 DATED 09.01.2019 AND HONBLE KOLKA TA HIGH COURT IN THE CASE OF ACIT VS. UCO BANK IN ITA NO.1615/KOL/2016 DATED 21.08.2018 HAVE HELD THAT NO DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD BE MADE IN THE CASE OF BANKS WHO TREAT THE INVESTMENTS AS PART OF STOCK IN TRADE. 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE G ROUNDS FILED BY THE REVENUE AND ALSO THE ORDER OF AO SO FAR AS T HE APPEAL OF THE ASSESSEE IS CONCERNED. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE INVOLVED IN THE PRES ENT CASE IS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.5331 & 5332/M/2016 A.Y. 2008-09 AND 2009-10. TH E OPERATIVE PART IS REPRODUCED AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS AND CASE LAW RELIED U PON BY THE ASSESSEE. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BANKING COMPANY AND IS CARRYING ON BY BANKING BUSINESS. THE ID AR SUBMITTE D THAT SHARES/SECURITIES ARE HELD IN THE ORDINARY COURSE OF BUSINESS AS INVESTME NTS IN THE SHARES/SECURITIES ARE PART OF ASSESSEE ACTIVITY. IT IS ONLY BY VIRTUE OF INVESTMENTS IN THE SECURITIES HELD AS STOCK IN TRADE THE DIVIDEND ACCRUED TO THE ASSESSEE AND IT IS SETTLED LAW THAT PROVISIONS OF SECTION 14A RULE 8D ARE NOT APPLICABL E TO SUCH CASE. THE CASE OF THE ASSESSEE IS ALSO SUPPORTED BY THE DECISION OF HON'B LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PCIT V/S SBOP (SUPRA) VIDE PARA 26 I N WHICH IT HAS BEEN HELD THAT: '26. WHAT IS OF VITAL IMPORTANCE IN THE ABOVE JUDGM ENT ARE THE OBSERVATIONS EMPHASISED BY US. EACH OF THEM EXPRESSLY STATES THA T WHAT IS DISALLOWED IS EXPENDITURE INCURRED TO 'EARN' EXEMPT INCOME. THE W ORDS 'IN RELATION TO' IN SECTION 14A MUST BE CONSTRUED ACCORDINGLY. THUS, TH E WORDS 'IN RELATION TO' APPLY TO EARNING EXEMPT INCOME. THE IMPORTANCE OF T HE OBSERVATION IS THIS. WE HAVE HELD THAT THE SECURITIES IN QUESTION CONSTI TUTED THE ASSESSEE'S STOCK-IN-TRADE AND THE INCOME THAT ARISES ON ACCOUN T OF THE PURCHASE AND ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 5 SALE OF THE SECURITIES IS ITS BUSINESS INCOME AND I S BROUGHT TO TAX AS SUCH. THAT INCOME IS NOT EXEMPT FROM TAX AND/ THEREFORE, THE EXPENDITURE INCURRED IN RELATION THERETO DOES NOT FALL WITHIN T HE AMBIT OF SECTION 14A. NOW, THE DIVIDEND AND INTEREST ARE INCOME. THE QUES TION THEN IS WHETHER THE ASSESSEE CAN BE SAID TO HAVE INCURRED ANY EXPEN DITURE AT ALL OR ANY PART OF THE SAID EXPENDITURE IN RESPECT OF THE EXEMPT IN COME VIZ. DIVIDEND AND INTEREST THAT AROSE OUT OF THE SECURITIES THAT CONS TITUTED THE ASSESSEE'S STOCK-IN-TRADE. THE ANSWER MUST BE IN THE NEGATIVE. THE PURPOSE OF THE PURCHASE OF THE SAID SECURITIES WAS NOT TO EARN INC OME ARISING THEREFROM, NAMELY, FOR SUBSEQUENT ORDERS SEE ITA -277-2016 16 OF 21 ITA-244-2016 - 17- DIVIDEND AND INTEREST, BUT TO EARN PROFITS FROM TRA DING IN I.E. PURCHASING AND SELLING THE SAME. IT IS AXIOMATIC, THEREFORE, THAT THE ENTIRE EXPENDITURE INCLUDING ADMINISTRATIVE COSTS WAS INCURRED FOR THE PURCHASE AND SALE OF THE STOCK-IN-TRADE AND, THEREFORE, TOWARDS EARNING THE BUSINESS INCOME FROM THE TRADING ACTIVITY OF PURCHASING AND SELLING THE SECURITIES. IRRESPECTIVE OF WHETHER THE SECURITIES YIELDED ANY INCOME ARISING T HEREFROM, SUCH AS, DIVIDEND OR INTEREST, NO EXPENDITURE WAS INCURRED I N RELATION TO THE SAME.' 5. IN THE LATEST CIRCULAR NO.18/2015, F.N 0.279/MIS C./140/20 IS/IT J, GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DIRECTORATE OF INCOM E-TAX LEGAL & RESEARCH, NEW DELHI, 2ND NOVEMBER, 2015, VIDE PARA 3 IT HAS BEEN PROVIDED AS UNDER:- '3. THE MATTER HAS BEEN EXAMINED IN LIGHT OF THE JU DICIAL DECISIONS ON THIS ISSUE. IN THE CASE OF CIT VS NAWANSHAHAR CENTRAL CO OPERATIVE BANK LTD. [2007] 160TAXMAN 48(SC), THE APEX COURT HELD THAT T HE INVESTMENTS MADE BY A BANKING CONCERN ARE PART OF THE BUSINESS OF BA NKING. THEREFORE, THE INCOME ARISING FROM SUCH INVESTMENTS IS ATTRIBUTABL E TO THE BUSINESS OF BANKING FALLING UNDER THE HEAD 'PROFITS 'AND GAINS OF BUSINESS AND PROFESSION ' 6. WE, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT AND THE DIREC TION OF THE CBDT VIDE CIRCULAR DATED 2.11.2015 INCLINED TO SET ASIDE THE ORDER OF THE ID.CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE U/S 14A OF THE ACT. RESULT ANTLY, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IS ALLOWED. 8. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THE VARIOUS TRIBUNALS AND ALSO THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE DECIDE THE ISSUE IN FAVOUR O F THE ASSESSEE BY HOLDING THAT NO DISALLOWANCE UNDER SECTION 14A IS CALLED FOR. THE AO IS DIRECTED ACCORDINGLY. THUS THE ASSESSEE S APPEAL IS ALLOWED AND GROUND NO.1 OF THE REVENUE APPEAL IS DI SMISSED. ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 6 9. THE ISSUE RAISED IN GROUND NO.2 OF REVENUES APP EAL IS AGAINST THE DELETION OF DISALLOWANCE OF AMORTIZATIO N OF EMPLOYEE STOCK PLAN (ESOP) EXPENSES OF RS.6,45,53,097/- AS M ADE BY THE AO WITHOUT APPRECIATING THE FACT THAT IT IS A CAPIT AL EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS BEING EMPLOYEE COMPENSATION COST. 10. AT THE OUTSET, THE LD. A.R. SUBMITTED THAT THE ISSUE IN THE PRESENT GROUND HAS BEEN DECIDED BY THE AO WHILE GI VING EFFECT TO ITATS DIRECTION IN ASSESSEES OWN CASE IN A.Y. 2009-10 AND CONSEQUENTLY THE REVENUE HAS ALSO ACCEPTED ESOP EXP ENSES WERE ALLOWABLE EXPENSES. 11. THE LD. D.R. APPEARED TO BE FAIRLY AGREED TO TH E CONTENTIONS OF THE ASSESSEE. 12. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT IN THIS CASE THE ISSUE HAS BEE N DECIDED BY THE ITAT CO-ORDINATE BENCH IN FAVOUR OF THE ASSESSE E WHICH HAS BEEN FOLLOWED BY THE LD. CIT(A) WHILE ALLOWING THE RELIEF TO THE ASSESSEE IN THE CURRENT YEAR. THE OPERATIVE PART O F LD. CIT(A)S ORDER IS REPRODUCED AS BELOW: 7.4.3 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF T HE APPELLANT AS WELL AS THE FACTS OF THE CASE. THE HON'BLE MUMBAI TRIBUNAL IN THE APP ELLANT'S OWN CASE FOR A.Y.2009- 10 HAD HELD AS UNDER: '9. DISALLOWANCE OF EXPENDITURE ON ESOP IS THE SUBJ ECT MATTER OF GROUND NO.4 FOR THE YEAR UNDER APPEAL. DURING THE ASSESSME NT PROCEEDINGS THE AO HELD THAT THE ASSESSES HAD NOT INCURRED THE EXPENDI TURE FOR ISSUING ESOPS, THAT IT WAS AN UNASCERTAINABLE ITEM OF EXPENDITURE, THAT IT DEPENDED UPON THE OPTION TO BE EXERCISED BY THE EMPLOYEES AT A FU TURE DATE. IN THE APPELLATE PROCEEDINGS THE FAA UPHELD THE ORDER OF T HE AO. ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 7 9.1 BEFORE US, THE AR ARGUED THAT SHARE UNDER ESOP WERE ISSUED TO THE EMPLOYEE AT BELOW MARKET PRICE TO RETAIN THEM IN CO ., THAT IT WAS A FORM OF COMPENSATION FOR SERVICES RENDERED, THAT SEBI HAD D IRECTED THE LISTED COMPANIES TO ACCOUNT FOR THE COMPENSATION COST AS E XPENDITURE, THAT ESOP AMORTIZATION COST WAS CHARGED TO THE P&LA/C. UNDER THE MATCHING COST AND REVENUE PRINCIPLES AS WELL AS FUNDAMENTAL ACCOUNTIN G CONCEPT OF PRUDENCE, THAT BOTH THE ABOVE CONCEPTS WERE FOLLOWED AS PER M ANDATORY ACCOUNTING STANDARD-:,THAT THERE WAS NO BENEFIT OF ENDURING NA TURE, THAT IT WAS CLEARLY A REVENUE EXPENDITURE BEING EMPLOYEE COMPENSATION COS T, THAT IT WAS AN ASCERTAINED LIABILITY THAT WAS CREATED DURING THE Y EAR AND QUANTIFIED DURING THE DATE OF GRANT, THAT IN THE HANDS OF EMPLOYEES E SOP BENEFITS WAS TAXED AS PERQUISITE. DR SUPPORTED THE ORDER OF FAA. 9.2 WE HAVE HEARD THE RIVAL SUBMISSIONS. WE ARE OF THE OPINION THAT THE ISSUE NEEDS FURTHER VERIFICATION ABOUT THE TERMS AN D CONDITIONS OF ESOP ISSUE BY THE ASSESSEE .THEREFORE, IN THE INTEREST O F JUSTICE THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICAT ION, WHO WOULD AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, GR.NO.4 IS DECIDED IN FAVOUR OF THE ASSESSES, IN PART.' THE FACTS OF THIS GROUND ARE SAME DECIDED BY THE CO ORDINATE BENCH IN ASSESSEES OWN CASE SUPRA, WE, THEREFORE, DO FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) ON THIS IS SUE AND THE GROUND NO. 2 OF THE REVENUE APPEAL IS DISMISSED. 13. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE DELETION OF DISALLOWANCE OF RS.2,81,01,155/- AND RS.10,40,07,37 5/- ON ACCOUNT OF BROKEN PERIOD INTEREST WHICH WAS TREATED AS CAPITAL EXPENDITURE BY THE AO. 14. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE ISSUE OF BROKEN PERIOD INTEREST IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ITA NO.4274 & 4275/M/2016 IN ASSESSEES OWN CASE AND ALSO BY TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK 366 ITR 505. THE LD DR RELIED ON THE GROUND RAISED BY THE REVENUE. ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 8 15. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) ALLOWED THE ISS UE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECES SOR IN ASSESSEES OWN CASE FOR A.Y. 2007-08, 2008-09 & 200 9-10 BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. CITI BANK NA IN CA NO.1549 OF 2006 DATED 12.08.2008. 16. WE, THEREFORE, ARE OF THE VIEW THAT ISSUE IS SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY THE GROUN D NO.3 OF THE REVENUE IS DISMISSED BY UPHOLDING THE ORDER OF LD. CIT(A). 17. THE ISSUE RAISED IN GROUND NOS.4, 5 & 6 IS AGAI NST THE ORDER OF LD. CIT(A) HOLDING THAT NEW CLAIM OF DEDUC TION UNDER SECTION 35D CAN BE ADMITTED FIRST TIME WHICH WAS NO T RAISED BEFORE THE AO AT ALL. 18. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS RA ISED THE ISSUE OF NON GRANTING OF DEDUCTION UNDER SECTION 35D IN R ESPECT OF PRELIMINARY EXPENSES OF RS.4.55 CRORE INCURRED IN C ONNECTION WITH ISSUE OF SHARES UNDER QUALIFIED INSTITUTIONAL PLACEMENT. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.11.03 C RORES IN A.Y. 2010-11 AND RS.14.11 CRORES IN A.Y. 2011-12 RE SPECTIVELY ON SHARES ISSUED UNDER QIP ROUTE. AS THE ISSUE WAS RAISED BEFORE THE LD. CIT(A) FOR THE FIRST TIME, THE AO WA S ASKED TO GIVE HIS COMMENTS BY WAY OF REMAND REPORT WHICH WAS FILE D BY THE AO VIDE REMAND REPORT BEARING NO.ACIT-2(3)(2)/REMAN D REPORT- 2016-17 DATED 27.06.2016 IN WHICH THE AO STATED THA T ASSESSEE HAS NOT CLAIMED THE SAID EXPENSES EITHER IN THE ORI GINAL OR IN THE REVISED RETURN AND SUBMITTED THAT IN VIEW OF THE DE CISION OF ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 9 HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LT D. 284 ITR 323 AND GURJARGRAVURS PVT. LTD. 111 ITR 1 WHEREIN I T HAS BEEN HELD THAT IF CLAIM IS NOT MADE BEFORE THE AO, THE A AC CAN NOT ENTERTAIN SUCH CLAIM IN THE APPEAL PROCEEDINGS. TH E AO STATED THAT THE ASSESSMENT ORDER WAS PASSED AFTER GIVING R EASONABLE AND ADEQUATE OPPORTUNITIES TO THE ASSESSEE AND TH EREFORE REQUESTED TO UPHOLD THE DISALLOWANCE. 19. THE LD. CIT(A) ADMITTED THE ISSUE AS LEGAL ISSU E BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SHAREHO LDERS PVT. LTD. (2012) 349 ITR 336 (BOM.) AND GRASIM INDUSTRI ES LTD. 2016-TIOL-292-HC-MUM-IT WHEREIN THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. (SUPR A) HAD BEEN CONSIDERED AND IT WAS HELD THAT APPELLATE AUTHORITI ES HAVE POWER TO ENTERTAIN THE LEGAL ISSUES WHICH ARE RAISE D FOR THE FIRST TIME. FOLLOWING THE RATIO LAID DOWN IN THE SAID DE CISIONS, THE LD. CIT(A) RECORDED A FINDING OF FACT THAT SHARE ISSUE EXPENDITURE IS COVERED UNDER SECTION 35D OF THE ACT AND IS A LEGAL ISSUE AND THUS CAME TO THE CONCLUSION THAT THE ASSESSEE IS EL IGIBLE FOR DEDUCTION UNDER SECTION 35D EQUAL TO 1/5 TH OF THE TOTAL PRELIMINARY EXPENSES. ACCORDINGLY THE LD CIT(A) D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DIRECTING THE AO TO ALLOW THE SAME. 20. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE REVENUE HAS CHALLENGED THA T THE LD. CIT(A) HAS ERRED IN ACCEPTING THE ISSUE OF GRANT OF DEDUCTION IN RESPECT OF SHARE ISSUE EXPENSES UNDER SECTION 35D W HICH WAS NOT RAISED BEFORE THE AO. AFTER PERUSING THE APPEL LATE ORDER, WE ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 10 FIND THAT THE APPELLATE AUTHORITY HAS PASSED THE OR DER AFTER FOLLOWING THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS PV T. LTD. AND GRASIM INDUSTRIES LTD. (SUPRA) WHEREIN THE DECISION S OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA L TD. HAS BEEN CONSIDERED AND IT WAS HELD THAT THE FRESH ISSUE CAN BE ADMITTED BEFORE THE APPELLATE AUTHORITY. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORD INGLY THE SAME IS UPHELD. WE ALSO NOTE THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN DCIT VS . DECCAN CHRONICLE HOLDING LTD. 60 TAXMANN.COM 240 AND TRANS PORT CORPORATION OF INDIA VS. ACIT IN ITA NO.117/HYD/201 6. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS AS STATED HEREINABOVE UPHOLD THE ORDER OF THE LD. CIT(A) AND THE ISSUE RAISED BY THE REVENUE IN GROUND NOS.4 TO 6 IS DISMI SSED. ITA NO.3876 & 4464 21. THE ISSUE RAISED IN THE ASSESSEES APPEAL IN IT A NO. 3876/M/2017 IS IDENTICAL TO ONE AS DECIDED BY US IN 3875/MUM/2017.THEREFORE OUR DECISION IN ITA NO. 3875/MUM2017 WOULD, MUTATIS MUTANDIS, APPLY TO THIS APPEAL AS WELL. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. SIMILARLY THE GROUND NO.1, 2, 3 IN THE REVENUES A PPEAL ARE IDENTICAL TO GROUND NO.1, 2 AND 3 IN ITA NO. 4486/M UM/2017. THEREFORE, OUR DECISION IN ITA NO. 4486/MUM/2017 WO ULD APPLY TO THESE GROUNDS AND ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. ITA NOS.4486 & 4464/M/2017 ITA NOS.3875 & 3876/M/2017 M/S. INDUSIND BANK LTD. 11 22. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.02.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.