STATE BANK OF INDIA, Jaipur V. DCIT, Jaipur

ITA 473/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2068 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROLLY AGARWAL
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Business expenditure; Question of law
• Section: 143(3); 14A; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 473/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2013-14. STATE BANK OF INDIA, (SUCCESSOR TO STATE BANK OF BIKANER & JAIPUR) TILAK MARG, C-SCHEME, JAIPUR. CUKE VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 509/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2013-14. DY. COMMISSIONER OF INCOME- TAX, CIRCLE-6, JAIPUR. CUKE VS. STATE BANK OF BIKANER & JAIPUR, (SUCCESSOR TO STATE BANK OF BIKANER & JAIPUR) TILAK MARG, C-SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLLY AGARWAL (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.08.2017. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/08/2017. VKNS'K@ ORDER PER BENCH : THESE TWO APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS)-2, JAIPUR DATED 24.03.20 17 PERTAINING TO A.Y. 2013-14. 2 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. BOTH THE APPEALS ARE BEING DISPOSED OFF BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FIRST, WE TAKE UP ASSESSEES APPEA L IN ITA NO. 473/JP/2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 3,84,16,04,632/- ON ACCOUNT OF BROKEN PERIOD INTERE ST PAID BY THE ASSESSEE BY HOLDING THAT THE INTEREST FOR THE B ROKEN PERIOD PAID WAS IN THE NATURE OF A CAPITAL OUTLAY. SHE HAS FURTHER ERRED IN HOLDING THAT CBDT CIRCULAR NO. 18/2005 DATED 20. 11.2015 IS NOT APPLICABLE AND ALSO BY NOT FOLLOWING THE DECISI ON OF HONBLE SUPREME COURT IN CIT VS. CITI BANK NA IN CIVIL APPE AL NO. 1549/2006 DATED 12.08.2008. 1.1. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN NOT GIVING THE DIRECTIONS TO THE ASSE SSING OFFICER FOR REDUCING THE INTEREST COST SO TREATED AS CAPITA L OUTLAY FROM THE SALES CONSIDERATION OF THE SECURITIES SOLD DURI NG THE YEAR THEREBY RESULTING IN THE DOUBLE TAXATION OF INTERES T INCOME. 1.2. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN TAXING THE BROKEN PERIOD INTEREST REC EIVED OF RS. 3,71,48,79,066/- AND DISALLOWING THE BROKEN PERIOD INTEREST PAID OF RS. 3,84,16,04,432/- AND THEREBY NOT SETTING OFF OF INTEREST RECEIVED AGAINST THE INTEREST PAID. 2. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERR ED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 1, 68,05,129/- U/S 14A READ WITH RULE 8D BY NOT ACCEPTING THE CONT ENTION OF ASSESSEE THAT IT HAS NOT INCURRED ANY INTEREST OR A DMINISTRATIVE EXPENSES IN EARNING SUCH TAX FREE INCOME. SHE HAS F URTHER ERRED IN IGNORING THE FCT THAT THE SECURITIES ARE STOCK I N TRADE AND THEREFORE SEC. 14A HAS NOT APPLICATION AS HELD BY P UNJAB AND HARYANA HIGH COURT IN THE CASE OF PR. CIT VS. STATE BANK OF PATIALA 147 DTR 290. 3. APPELLANT CRAVES TO ADD, AMEND, ALTER OR MODIFY ANY OF THE GROUND OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 3 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 19.02.2015. WHILE FRAMING THE ASSESSMENT, THE AO MADE DISALLOWANCE ON ACCOUNT OF BROKEN PERIOD INTEREST PAID BY THE BANK AND ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. AGGRIEVED BY THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER C ONSIDERING THE SUBMISSIONS, CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE I S IN APPEAL BEFORE THIS TRIBUNAL. 3. IN RESPECT OF GROUND NO. 1 TO 1.2 OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE ASSESSEES OWN CASE IN AY 2000-01 VIDE ORDER DATED 17.05.2017 & IN AY 2001-02, 2002-03 & 2005-06 VIDE ORDER DATED 22.05.2017. 3.1. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS. 3.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THAT THE HONBLE RAJASTHAN HIGH COURT IN D.B. INCOME TAX APPEAL NO. 446/2008 I N THE CASE OF CIT VS. SBBJ HAD FRAMED THE QUESTION OF LAW AS UNDER :- WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE ITAT HAS NOT ACTED ILLEGALLY AND PERVERSELY IN HOLDING THAT THE BROKEN PERIOD INTEREST ON PURCHASE OF SECURITIES IS DEDUCTIBLE U/ S 37 OF THE ACT AS BUSINESS EXPENDITURE ? THE HONBLE HIGH COURT AFTER CONSIDERING THE VARIOU S CASE LAWS DECIDED THE ISSUE AGAINST THE REVENUE. THEREFORE, RESPECTFULLY FOLLOW ING THE JUDGMENT OF THE HONBLE 4 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. JURISDICTIONAL HIGH COURT, WE HEREBY DIRECT THE AO TO DELETE THE ADDITION. THE GROUND OF THE ASSESSEE IS ALLOWED. 4. GROUND NO. 2 RELATES TO CONFIRMING THE DISALLOW ANCE OF RS. 1,68,05,129/- U/S 14A READ WITH RULE 8D. 4.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ADJUDICATED IDENTICAL GROUND IN THE ASSESSEES APPEAL IN ITA NO. 280/JP/2 009 FOR THE A.Y. 2006-07 WHEREIN WE HAVE DELETED THE ADDITION BY OBSERVING A S UNDER :- 4.5 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF T HE AUTHORITIES BELOW. WE FIND THAT LD. CIT(A) HAS MADE DISALLOWAN CE BY COMPUTING AS PER RULE 8D OF THE INCOME TAX RULES 1962. IN OUR VIEW, THE LD. CIT(A) WAS NOT JUSTIFIED IN COMPUTING THE DISALLOWA NCE AS PER RULE 8D, AS THE RULE 8D BECAME OPERATIONAL FROM THE A.Y. 200 8-09. FURTHER, THERE IS NOT DISPUTE WITH REGARD TO THE FACT THAT S IMILAR DISALLOWANCES WERE MADE U/S 14A IN THE ASSESSMENT YEAR 2000-01, 2 002-03 AND 2003-04 AND THE MATTER TRAVELED UP TO THE HONBLE R AJASTHAN HIGH COURT. THE HONBLE HIGH COURT IN DB INCOME TAX APP EAL NOS. 172/2008, 119/2010, 141/2010 AND 142/2010 WAS PLEAS ED TO HELD THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF GODREJ BOYCE MANUFACTURING COMPANY LTD. VS. DCIT. T HE ORDER OF DISALLOWANCE WAS REVERSED. THE FACTS ARE IDENTICAL IN THE PRESENT YEAR AND ALSO THERE IS NO CHANGE INTO FACTS AND CIRCUMST ANCES. AS THE ASSESSEE BANK IS HAVING SUFFICIENT INTEREST FREE FU NDS WHICH HAS BEEN ACCEPTED BY BOTH THE AUTHORITIES BELOW. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE. T HUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE IN THE YEAR UNDER APPEAL AND ALSO FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, THEREFORE, TAKING A CONSISTENT VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. THE GRO UND OF THE ASSESSEE IS ALLOWED. 5 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. 5. OTHER GROUNDS RAISED ARE GENERAL IN NATURE AND N EEDS NO ADJUDICATION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. NOW WE TAKE UP THE APPEAL OF THE REVENUE IN ITA NO. 509/JP/2017 PERTAINING TO ASSESSMENT YEAR 2013-14. THE GROUND S RAISED BY THE REVENUE ARE AS UNDER :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 41,67,04,699/- MADE BY THE AO ON ACCOUNT OF INCLUDING THE INTEREST OF GOVERNMENT AND OTHER SECURITIES IN THE INCOME OF THE ASSESSEE ON A CCRUAL BASIS AT RS. 1474,84,66,217/- AS AGAINST THE INCLUSION BY THE AS SESSEE BANK ON DUE BASIS AT RS. 1433,17,61,518/-. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 22,35,79,935/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF AMORTI ZATION IN RESPECT OF PREMIUM PAID FOR PURCHASE OF SECURITIES UNDER HE LD TO MATURITY CATEGORY FROM THE PROFIT OF THE BUSINESS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 2,72,71,712/- MADE BY THE AO IN RESPECT OF VALUATIO N OF INVESTMENT BY ADOPTING GLOBAL METHOD OF VALUATION OF SECURITIE S AS AGAINST CATEGORY WISE METHOD OF VALUATION FOLLOWED BY THE A SSESSEE. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 4,53,189/- MADE ON ACCOUNT OF EXPENDITURE CLAIMED BY THE ASSES SEE IN VARIOUS HEADWS BY TREATING THE SAME AS PRIOR PERIOD EXPENSE S. 5. THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR AL TER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 8. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 19.02.2015. WHILE FRAMING THE ASSESSMENT, THE AO MADE VARIOUS 6 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. ADDITIONS/DISALLOWANCES ON ACCOUNT OF BROKEN PERIOD INTEREST PAID BY THE BANK AND ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A READ W ITH RULE 8D, EXPENSES INCURRED FOR EARNING TAX FREE INCOME, INTEREST INCOME ON ACC RUAL BASIS, AMORTIZATION ON HTM SECURITIES, PRIOR PERIOD EXPENSES ETC. AGGRIEVED BY THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER C ONSIDERING THE SUBMISSIONS, CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE I S IN APPEAL BEFORE THIS TRIBUNAL. 9. IN RESPECT OF GROUND NOS. 1 TO 4 OF THE REVENUE S APPEAL, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL GROUNDS WERE RAISED IN REVENUES APPEAL IN ITA NO. 438/JP/2009 PERTAINING TO ASSESSMENT YEAR 2006- 07. HE SUBMITTED THAT THE FACTS ARE IDENTICAL AS WERE IN THE A.Y. 2006-07. THE ISS UES ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE PERTAINING TO A.Y. 1997-98 TO 2 000-01 AND 2004-05. 9.1. THE LD. D/R HAS NOT CONTROVERTED THIS FACT. 9.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. BOTH THE RESPECTIVE REPRESENTATIVES OF THE PARTIES HAVE ADOP TED THE SAME ARGUMENTS AS WERE MADE IN THE REVENUES APPEAL IN ITA NO. 438/JP/2009 AND THE APPEAL OF THE REVENUE ON THE IDENTICAL GROUNDS RAISED MENTIONED HEREIN AB OVE HAVE BEEN DECIDED BY FOLLOWING JUDGMENT OF THE HONBLE HIGH COURT OF RAJ ASTHAN IN APPEALS PERTAINING TO THE ASSESSMENTS 1997-98 TO 2000-01 AND 2004-05. THE LD. COUNSEL HAS INVITED OUR ATTENTION, TO THE JUDGMENTS OF HONBLE HIGH COURT R ENDERED IN D.B. INCOME TAX APPEALS NO. 185/2014 AND 27/2015. THEREFORE, TAKING A CONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT (A) IN THIS APPEAL ALSO, SAME IS HEREBY AFFIRMED. THE GROUNDS OF REVENUES A PPEAL ARE REJECTED. 7 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. 11. IN TOTALITY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED WHEREAS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/08/20 17. SD/- SD/- FOE FLAG ;KNO DQY HKKJR (VIKRAM SINGH YADAV) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31/08/2017. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- STATE BANK OF BIKANER & JAIPUR, JAI PUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 473/JP/2017 & 509/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 8 ITA NO. 473 & 509/JP/2017 STATE BANK OF INDIA (SUCCESSOR TO SBBJ), JAIPUR.