M/s. DENA BANK, MUMBAI V. ADDL. CIT. - 2(3), MUMBAI

ITA 4789/MUM/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3835 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-03-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 21-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Keywords: Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Retrospective amendment; Bad and doubtful debts; Revenue expenditure; Reassessment proceedings
• Section: 14A; 115JB; 37(1); 11

Judgement Text

, . INCOME TAX APPELLATE TRIBUNAL, MUMBAI - BENCH D. !' !' !' !' , ! !! ! BEFORE S/SH.VIJAYPAL RAO,JUDICIAL MEMBER AND RAJE NDRA,ACCOUNTANT MEMBER ./ ITA/237/M/2002- # # # # $ $ $ $ / ASSESSMENT YEAR 1997-98 ./ ITA/238/M/2002- # # # # $ $ $ $ ASSESSMENT YEAR 199 8 -9 9 . / ITA/4789/M/2008- # # # # $ $ $ $ / ASSESSMENT YEAR 2003-04 . /ITA/2337/M/2011- # # # # $ $ $ $ / ASSESSMENT YEAR 200 6 -0 7 DENA BANK, DENA BANK BUILDING, 2 ND FLOOR.17/B HORNIMAN CIRCLE, FORT,MUMBAI.400023 PAN:AAACD4249 B # VS. ACIT2(3), ROOM NO. 521, 5 TH FLOOR, AAYKAR BHAVAN, M K ROAD, MUMBAI -400 020. ( %& / APPELLANT) ( '(%& / RESPONDENT) %& ) ! / APPELLANT BY : S.ANANTHAN '(%& * ) ! /RESPONDENT BY : MS.RUPINDER BRAR . . /ITA/2731/M/2011- # # # # $ $ $ $ / ASSESSMENT YEAR 200 6 -0 7 ACIT2(3), ROOM NO. 521, 5 TH FLOOR, AAYKAR BHAVAN, M K ROAD, MUMBAI -400 020. # VS. DENA BANK, DENA BANK BUILDING, 2 ND FLOOR.17/B HORNIMAN CIRCLE, FORT,MUMBAI.400023 PAN:AAACD4249 B ( %& / APPELLANT) ( '(%& / RESPONDENT) %& ) ! / APPELLANT BY : MS.RUPINDER BRAR '(%& * ) ! /RESPONDENT BY : S.ANANTHAN DATE OF HEARING # * + :12.03.2013 DATE OF PRONOUNCEMENT ,-$ * + : 10.04.2013 !. / O R D E R PER BENCH: 2. ASSESSEE-BANK AS WELL AS THE ASSESSING OFFICE (AO) HAVE FILED APPEALS FOR VARIOUS ASSESSMENT YEARS(AYS.)BEFORE US.IT IS FOUND THAT AFTER THE FIR ST ROUND OF APPELLATE PROCEEDINGS CERTAIN GROUNDS OF APPEAL REMAINED UN-ADJUDICATED OR NEED F RESH ADJUDICATION IN THE APPEALS FILED BY THE ASSESSEE FOR THE AYS.1997-98,1998-99,2003-04 AND 20 06-07. ITA/237/M/2002 AY 1997-98, ITA/238/M/2002-AY 1998-99 3. GROUNDS OF APPEAL,TO BE DECIDED BY US NOW, FOR THE AY.1997-98 AND 1998-99 ARE IDENTICAL AND READ AS UNDER : .THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM FOR DEDUCTION UNDE R SECTION 35D FOR EXPENDITURE ON PUBLIC ISSUE OF EQ UITY SHARES AMOUNTING TO RS.93,62,692/-(I.E.10% OF RS.9, 36,26,923/-).IT IS SUBMITTED THAT THE ABOVE EXPENDITURE IS FOR THE PURPOSE OF EXPANSION OF AN I NDUSTRIAL UNDERTAKING WITHIN THE PURVIEW OF INDUSTR IAL UNDERTAKING MENTIONED IN THE INDUSTRIAL DISPUTES AC T.YOUR APPELLANTS SUBMIT THAT THE EXPENDITURE OUGHT TO HAVE BEEN ALLOWED AS CLAIMED BY THE APPELLANTS. WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS SUB MIT THAT THE ABOVE EXPENDITURE IS IN THE NATURE OF REVENUE EXPENDITURE AND OUGHT TO BE ALLOWED UNDER S ECTION 37(1) IN FULL OF RS.9,36,26,923/-. 3.1. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT BAN K HAD ISSUED SHARES TO THE PUBLIC FOR WHICH AN EXPENDITURE AMOUNTING TO RS.9.36 CRORES WA S INCURRED,THAT THE ASSESSEE HAD CLAIMED DEDUCTI-ON AT 1/10 TH OF THE ISSUE EXPENSES U/S. 35D OF THE ACT AMOUNTIN G TO RS. 93.62 LAKHS. FOLLOWING THE JUDGMENTS OF HONBLE SUPREME COURT D ELIVERED IN THE CASES OF BROOKE BOND (225 ITR 798)AND PUNJAB STATE INDUSTRIAL DEVELOPMENT COR PORATION (225 ITR 792),HE HELD THAT EXPENDITURE CLAIMED BY THE ASSESSEE COULD NOT BE AL LOWED U/S. 35D OF THE ACT.IN THE APPELLATE PROCEEDINGS; FOLLOWING THE ORDERS OF HIS PREDECESSO RS FOR EARLIER YEARS;FAA UPHELD THE ORDER OF THE AO.WHEN THE MATTER TRAVELLED TO THE TRIBUNAL,AU THORISED REPRESENTATIVE (AR) OF THE ASSESSEE RELIED UPON THE JUDGMENT DELIVERED BY HON BLE HIGH COURT OF RAJASTHAN IN THE CASE OF NEHA PROTEINS LTD. (171TAXMAN45)TO CONTEND THAT INT EREST ACCRUED ON SHARE APPLICATION MONEY LYING WITH BANK SHOULD BE ADJUSTED AGAINST PUBLIC I SSUE EXPENSES SO AS TO REDUCE THE AMOUNT OF PUBLIC ISSUE EXPENSES FOR ENABLING THE ASSESSEE TO CLAIM AMORTISATION UNDER AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 35D OF THE ACT.DEPAR TMENTAL REPRESENTATIVE (DR) ARGUED BEFORE THE TRIBUNAL AT THE TIME OF HEARING FOR THE AY. 199 9-2000 (ITA NO.5062/M/04), THAT ISSUE RAISED BY THE AR WAS NEVER AGITATED BY THE ASSESSEE-BANK B EFORE THE AUTHORITIES BELOW.THEREFORE,WHILE DECIDING THE APPEAL FOR THE AY.1999-2000 (SUPRA),TR IBUNAL HELD AS UNDER: WE HAVE OBSERVED FROM THE ASSESSMENT AS WELL AS TH E IMPUGNED ORDER THAT THERE IS NO DISCUSSION ON THI S ASPECT OF THE MATTER. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE JUS T AND FAIR IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF TH E AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO DECIDE THIS QUESTION AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 3.2. BEFORE US, AR SUBMITTED THAT SIMILAR ORDERS I.E. RE STORING THE MATTER TO THE FILE OF THE AO WAS PASSED BY THE TRIBUNAL FOR THE ITA NOS. 2195/ M/ 20 04 AY.2000-01; 3608/M/2006 AY. 2001- 02; 3609/M/2006 AY. 2002-03 & 3575/M/2009 AY. 2005- 06 ALSO. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT HE HAD NO OBJECTION IF MATTER W AS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.RESPECTFULLY FOLLOWING THE ORDER S OF THE COORDINATING BENCHES, IN THE INTEREST OF JUSTICE,WE RESTORE BACK THE ISSUE TO THE FILE OF THE AO TO DECIDE THE QUESTION AFRESH AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE-BANK. GROUND NO.1 FILED BY THE ASSESSEE FOR BOTH THE AYS. IS PARTLY DECIDED IN FAVOUR OF THE ASSESSEE. APPEALS FILED BY THE ASSESSEE-BANK FOR THE AYS.1997 -98 AND 1998-99 STAND PARTLY ALLOWED. ITA/4789/M/2008-AY2003-04: 4. GROUNDS OF APPEAL FOR THE AY.UNDER CONSIDERATION RE AD AS UNDER: 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM FOR DEDUCTION UNDE R SECTION 35D FOR EXPENDITURE ON PUBLIC ISSUE OF EQ UITY SHARES AMOUNTING TO RS.93,56,000/-.YOUR APPELLANTS SUBMIT THAT THE ABOVE EXPENDITURE IS FOR THE PURPOS E OF EXPANSION OF AN EXISTING INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF THE INDUSTRIAL UNDERTAKING MENTIONED IN THE INDUSTRIAL DISPUTES ACT.YOUR APPEL LANTS SUBMIT THAT THE ABOVE EXPENDITURE OUGHT TO HA VE BEEN ALLOWED AS CLAIMED BY THE APPELLANTS. 4.DISALLOWANCE U/S 14A OF RS.55,03,74,407/ - A)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A OF ESTIMATED INTEREST EXPENSE OF RS.53,46,38,L34/- AS EXPENDITURE ATTRIBUTABLE TO THE EXEMPT INCOME RECEI VED BY YOUR APPELLANT. YOUR APPELLANTS SUBMIT THAT THE INCOME CLAIMED AS EXEMPT OUGHT NOT TO HAVE BEEN REDUCED BY ESTIMATING INTEREST OF RS.53,46,38,L 84/ - AS INCURRED FOR EARNING EXEMPT INCOME. B)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A OF ESTIMATED ADMINISTRATIVE EXPENSE OF RS.1,57,36,223/ -CALCULATED AT 2% OF TOTAL TAX EXEMPT INCOME OF RS.78,68,L 1,161/-,AS EXPENDITURE ATTRIBUTABLE TO E XEMPT INCOME RECEIVED BY YOUR APPELLANT. YOUR APPELLANTS SUBMIT THAT THE INCOME CLAIMED AS EXEMPT OUGHT NOT TO HAVE BEEN REDUCED BY ESTIMATING ADMINISTRATIVE EXPENSE OF RS. 1,57,36,223/- AS INCU RRED FOR EARNING EXEMPT INCOME. C)YOUR APPELLANTS SUBMIT THAT INTEREST EXPENSE OF R S.53,46,38,184/- AND ADMINISTRATIVE EXPENSE OF RS.L,57,36,223/- TOTALING TO RS.55,03,74,407/- OUGH T NOT TO HAVE BEEN CONSIDERED AS EXPENDITURE INCURR ED IN RELATION TO EXEMPT INCOME AND OUGHT TO HAVE BEEN ALLOWED AS CLAIMED. YOUR APPELLANTS SUBMIT THAT THERE IS NO DIRECT NEXU S BETWEEN INTEREST EARNED AND INTEREST EXPENDED, FURTHER THE ASSETS FROM WHICH THE INCOME IS EARNED ARE BUSINESS ASSETS AND HENCE THE ADMINISTRATIVE EXPENSES INCURRED BY THE APPELLANTS ARE ALLOWABLE A S A DEDUCTION FROM THE BUSINESS INCOME. D)WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS S UBMIT THAT THE DISALLOWANCE MADE U/S. 14A ON ACCOUN T OF ESTIMATED INTEREST EXPENSES AND ESTIMATED ADMINI STRATIVE COST IS EXCESSIVE AND OUGHT TO BE REDUCED SUBSTANTIALLY. 4.1. AS FAR AS THE ISSUE OF DISALLOWANCE OF CLAIM FOR DE DUCTION U/S.35D FOR EXPENDITURE ON PUBLIC ISSUE OF EQUITY SHARES AMOUNTING TO RS.93,56,000/- IS CONCERNED,WE HAVE ALREADY HELD IN PARAGRAPH 3.2.OF THE ORDER FOR THE AY.1997-98/1998- 99 THAT MATTER HAS TO BE ADJUDICATED AFRESH BY THE AO.FOLLOWING THE SAME AO IS DIRECTED TO AFFO RD REASONABLE OPPORTUNITY TO THE ASSESEE DURING THE COURSE OF FRESH HEARING. GROUND OF APPEAL NO.3 IS PARTLY ALLOWED IN FAVOUR O F THE ASSESSEE. 5. NOW,WE WOULD DEAL WITH THE DISALLOWANCE MADE BY THE AO U/S.14A OF THE ACT.FACTS OF THE CASE ARE THAT THE ASSESSEE-BANK HAD CLAIMED EXEMPTI ON OF RS.78.68 CRORES U/S.10 OF THE ACT AND AO RESTRICTED THE SAME TO RS.23.64 CRORES.AO HELD T HAT OUT OF RS.78.68 CRORES INTEREST EXPENSE AMOUNTING TO RS.53.46 CRORES WERE NOT ALLOWABLE.AO FURTHER HELD THAT 2% (RS. 1.57 CRORES) OF THE TOTAL EXEMPT INCOME (I.E.RS.78.68 CRORES)WERE T O BE DISALLOWED AS ADMINISTRATIVE EXPENSES FROM THE SAID INCOME.THUS,A TOTAL DISALLOWANCE OF R S.55.03 CRORES WAS MADE BY THE AO AND FAA UPHELD THE DISALLOWANCE. 5.1. BEFORE US,AR SUBMITTED THAT ISSUE OF DISALLOWANCE U /S.14A OF THE ACT WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO WHILE DISPOSING THE APPEAL FOR THE AY.1997-98(ITA/237/MUM/ 2002-AY 1997-98,DTD.23.02.2011)WHERE SIMILAR ADDITI ONS WERE MADE/CONFIRMED BY THE AO/ FAA.HE FURTHER MENTIONED THAT IN SUBSEQUENT AYS.-19 98-99,1999-00,2000-01.2001-02,2002-03 AND 2005-06 SAME ISSUE WAS SENT BACK BY THE TRIBUNA L TO THE AO.DR SUBMITTED THAT MATTER COULD BE DECIDED BY ON MERITS.WE HAVE HEARD THE RIVAL SUB MISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT WHILE DECIDING THE APPEAL FO R THE AY.1997-98 D BENCH OF THE MUMBAI TRIBUNAL HAS HELD AS UNDER : AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSI NG THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED T HAT THE AD MADE, DISALLOWANCE BY REDUCING PROPORTIONATE EXPENSES FROM THE INTEREST RECEIPT BY DETERMINING THE CORRECT AMOUNT OF INCOME WHICH WAS EXEMPT- U/S. 10(15).IN OTHER WORDS, HE APPLIED THE PRESCRIPTION OF SEC.14A.WE FIND THAT THIS ISSUE IS NO MORE RES INTE GRA.IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG, LT D. VS.DCIT (2010) 328 ITR 81 (BOM.) IN WHICH IT HAS BEEN HELD THAT DISALLOWANCE IS CALLED FOR U/S,14A I N SUCH CIRCUMSTANCES. HOWEVER, THE MANNER OF COMPUTATION OF SUCH DISALLOWANCE HAS BEEN RESTORED. TO THE FILE OF AO FOR MAKING ON SOME REASONABLE BASIS. IT HAS FURTHER BEEN HELD IN THIS CASE THE PR OVISIONS OF RULE 8D ARE NOT APPLICABLE AS THESE ARE PROSPECTIVE. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO T O COMPUTE DISALLOWANCE U/S.14A IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORE NOTED CASE OF GODREJ & BOYCE LTD . THE LD. A.R. HAS CONTENDED BEFORE US THAT IT WAS HAVING SUFFICIENT INTEREST-FREE FUNDS AT ITS DISPOS AL WHICH WERE INVESTED IN SECURITIES EARNING EXEMPT AND HENCE NO DISALLOWANCE OF INTEREST WAS CALLED FOR. T HE AO, WHILE COMPUTING DISALLOWANCE U/S.14A, WILL ALSO EXAMINE THIS CONTENTION OF THE ASSESSEE AS PER LAW. IN THE APPEALS FILED BY THE ASSESSEE FOR SUBSEQUENT YEAR TRIBUNAL FOLLOWED THE ORDER PASSED FOR THE AY 1997-98.RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATING BENCHES WE RESTORE BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICA TION AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.4 IS ALLOWED IN PART IN FAVOUR OF THE ASS ESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE-BANK STAND S PARTLY ALLOWED. ITA/2337/M/2011 AND ITA/2731/M/2011 AY.2006-07 : 6. FOLLOWING GROUNDS OF APPEAL FILED BY THE ASSESSEE-B ANK ARE TO BE ADJUDICATED UPON FOR THE AY. 2006-07 : 1)(A) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN NOT ALLOWING THE CLAIM FOR DEDUCTION U/S . 35D FOR THE EXPENSES INCURRED ON PUBLIC ISSUE OF EQUITY SHARES AMOUNTING TO RS.1,44,24,299/-. YOUR A PPELLANTS SUBMIT THAT THE ABOVE EXPENDITURE OUGHT T O HAVE BEEN ALLOWED AS CLAIMED BY YOUR APPELLANTS. (B)WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANTS SUBMIT THAT THE INCOME EARNED FROM THE SHARE APPLICATION MONEY SHOULD BE NETTED OFF AGAINST THE EXPENDITURE AND ONLY THE NET EXPENDITURE BE CONSIDERED FOR DISALLOWANCE. 2)(A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR DISALLOWANCE U/S. 14A OF THE INCOME-TAX ACT 1961 AS EXPENDITURE ATTRIBUTABLE TO THE EARNIN G OF EXEMPT INCOME. YOUR APPELLANTS SUBMIT THAT LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, NO DISALLOWANCE U/S.14A OF THE INCOME-TAX ACT 1961 IS CALLED FOR. (B)THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF ANY INTEREST EXPENDITURE AS THE APPELLANT HAD INTEREST FREE FUNDS FAR IN EXC ESS OF THE INVESTMENTS, THE INCOME FROM WHICH IS EXEMPT FR OM TAX. (C)WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN MERELY DIRECTING THE ASSESSING OFFICER TO COMPUTE THE DISA LLOWANCE U/S. 14A ON A REASONABLE BASIS WITHOUT GIVING ANY DIRECTIONS AS TO THE BASIS OF COMPUTING SUCH DISALLOWANCE. 3)THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN C ONFIRMING ADDITION MADE BY THE ASSESSING OFFICER OF RS.46,33,953/- AS PRIOR PERIOD EXPENSES. YOUR APPEL LANTS SUBMIT THAT THESE EXPENSES ARE ALLOWABLE AS CLAIMED. YOUR APPELLANTS SUBMIT THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE ADDITION OF RS.46 ,33, 953/- ON ACCOUNT OF ID EXPENDITURE. 4).(A)THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN ACTION OF ASSESSING OFFICER IN COMPUTING THE INCOME OF YOUR APPELLANT U/S.115JB OF THE INCOME TAX ACT, 1961, YOUR APPELLANT SUBMITS THAT THE PROVISIONS OF SEC. 115JB ARE NOT APPLICABL E TO YOUR APPELLANTS CASE. (B)WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANT S UBMITS THAT THEY SHOULD BE ALLOWED TO RECAST THE PR OFIT & LOSS ACCOUNT AS PER THE PROVISIONS OF COMPANIES A CT, 1956 AND THE NET PROFIT AS PER THE RECASTED PRO FIT & LOSS ACCOUNT SHOULD BE CONSIDERED FOR ARRIVING AT THE BOOK PROFIT. 6.1. GROUND NOS.1A) AND 1B) HAVE ALREADY BEEN DECIDED BY US WHILE FINALISING THE APPEALS FILED BY THE ASSESSEE FOR THE EARLIER AYS.FOLLOWING THE SAME ,MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.1 IS ALLOWED IN PART IN FAVOUR OF THE ASS ESSEE. 7. AR DID NOT PRESS GROUND NO.2 BEFORE US.THEREFORE,SA ME IS TREATED AS NOT PRESSED AND HENCE DISMISSED. 8. NEXT GROUND OF APPEAL IS ABOUT PRIOR PERIOD EXPENSE S AMOUNTING TO RS.46,33,953/-.DURING THE ASSESSMENT PROCEEDINGS AO HELD THAT EXPENSES AMOUN TING TO RS.46.33 LACS PERTAINED TO EARLIER YEARS AND DID NOT RELATE TO THE AY UNDER CONSIDERAT ION.HE DISALLOWED THE SAID AMOUNT BECAUSE HE WAS OF THE OPINION THAT ASSESSEE WAS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING AND HENCE EXPENDITURE OF EARLIER YEARS COULD NOT BE CLAIMED I N THE YEAR UNDER CONSIDERATION. 8.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE FACTS OF THE ISSUE AND THE SUBMISSIONS MADE BY THE AR HE HELD THAT MOST OF THE EXPENSES CLAIMED AS PRIOR PERIOD EXPENSES WERE ON ACCOUNT OF UNCLAIMED DEPRECIATION, INTEREST , RENT REPAIRS AND MAINTENANCE, ELECTRIC EXPENSES, TELEPHONE EXPENSES, ANNUAL MAINTENANCE, P ROFESSIONAL QUALIFICATION ALLOWANCES AND MUNICIPAL TAXES, ETC.,THAT THE SAID EXPENSES DID NO T PERTAIN TO THE YEAR UNDER CONSIDERATION,THAT THESE EXPENSES WERE PERTAINING TO EARLIER YEARS, TH AT THE APPELLANT WAS REGULARLY FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THAT AS PER THE PR OVISIONS OF THE ACT EXPENSES PERTAINING TO EARLIER YEARS WERE NOT AN ADMISSIBLE DEDUCTION, THA T NOTHING HAD BEEN BROUGHT ON RECORD TO PROVE THAT THE IMPUGNED EXPENSES HAD CRYSTALISED DURING T HE YEAR UNDER CONSIDERATION. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 8.2. BEFORE US,AR SUBMITTED THAT MOST OF THE EXPENDITURE REPORTED IN THE TAX AUDIT REPORT WAS IN RESPECT OF ARREARS OF RENT PAID BY THE BANK IN RESP ECT OF LEASED PROPERTY,THAT BANK TOOK PREMISES ON LEASE WHEN THE LEASE IN RESPECT OF SAME EXPIRED AND THE BANK HAD TO RENEGOTIATE THE RATES AT WHICH LEASE HAD TO BE RENEWED, THAT DURING THE PERI OD OF RENEGOTIATION THE BANK CONTINUED THE PAYMENT OF RENT AT OLD RATES AND ONCE THE NEW RATES WERE FINALISED BANK HAD TO MAKE PAYMENT AT NEW RATES FROM THE DATE WHEN SAID LEASE EXPIRED,THA T TOTAL PRIOR PERIOD EXPENSE ON ACCOUNT OF SUCH RENT EXPENSES HAD BEEN STATED TO BE 46,97,489/ -,THAT INTEREST EXPENDITURE WAS MAINLY DUE TO RENEWAL OF FIXED DEPOSITS WHICH MATURED DURING THE YEAR HOWEVER WERE NOT RENEWED BY THE FDR-HOLDER IMMEDIATELY BUT WERE RENEWED ONLY AFTER A CERTAIN TIME LAG WHERE THE BANK WAS REQUIRED TO PAY THE INTEREST TO THE FDR HOLDER WITH RETROSPECTIVE EFFECT AT THE RATE APPLICABLE TO THE SAID FDR.,THAT THE SAID INTEREST CRYSTALLISED O NLY IN THE PERIOD WHEN IT WAS DEBITED,THAT THE SAID EXPENSES WERE NOT REALLY PRIOR PERIOD IN NATUR E SINCE THE LIABILITY IN RESPECT OF THE SAID EXPENSES WAS CRYSTALLISED DURING THE YEAR.FURTHER , HE RELIED ON THE DECISIONS DELIVERED BY THE VARIOUS BENCHES OF ITAT, MUMBAI-TOYO ENGINEERING IN DIA LTD., [SOT 616 (MUM)],UNION BANK OF INDIA(ITA NOS.4720&4724/MUM/2010DT.30-06-2011)AN D BANK OF INDIA(ITA NO.2155 & 2443 /MUM/2011 AYS. 2002-03 DT. 30-07-2012)DR RELIED UPO N THE ORDER OF THE I BENCH OF MUMBAI TRIBUNAL DELIVERED IN THE CASE OF TIPCO INDUSTRIES LTD.(TIPCO)ON 3.08.2012. 8.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT FACTS OF THE CASE UNDER CONSIDERATION AND THAT OF TIPCO ARE TOTALLY DIFFERENT.IN THE CASE OF TIPCO NOTHING HAD BEEN BROUGHT ON RECORD TO SUBSTANTIATE ITS CLAI M NEITHER BEFORE THE LOWER AUTHORITIES NOR BEFORE THE TRIBUNAL.BUT,IN THE PRESENT CASE ASSESSE E HAD MADE SUBMISSIONS ABOUT PENDING RENT PAYMENT AND ACCRUED INTEREST ON FDRS.AS PER THE SET TLED PRINCIPLES OF TAXATION-JURISPRUDENCE, PRIOR PERIOD EXPENSES CAN BE ALLOWED IN CERTAIN CIR CUMSTANCES THOUGH THEY MAY NOT PERTAIN TO A PARTICULAR AY FOR WHICH RETURN OF INCOME IS FILED.C RYSTALISATION OF EXPENSES DURING A PARTICULAR PERIOD IS THE DECIDING FACTOR IN SUCH CASES.WE FIND THAT IN THE MATTER UNDER CONSIDERATION PRIOR PERIOD EXPENSES RELATED TO ARREARS OF RENT PAID BY THE BANK IN RESPECT OF LEASED PROPERTY AND INTEREST EXPENDITURE DUE TO RENEWAL OF FIXED DEPOSI TS HELD BY THE FDR HOLDERS. THE NATURE OF EXPENDITURE IS AS SUCH THAT SOME DELAY IS BOUND TO HAPPEN AND CRYSTALISATION OF SUCH EXPENDITURE AFTER 31 ST MARCH OF THE AY.UNDER CONSIDERATION IS NATURAL.WE HAVE PERUSED THE ORDERS PASSED BY COORDINATING BENCHES IN THE CASES OF TOYO ENGINEERI NG INDIA LTD.,UNION BANK OF INDIA AND BANK OF INDIA(SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE DECIDE THE GROU ND NO.3 IN FAVOUR OF THE ASSESSEE. 9. LAST GROUND OF APPEAL IS ABOUT APPLICABILITY OF SEC TION 115 JB OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT CALCULATION OF MAT FOR T HE YEAR UNDER CONSIDERATION WAS WORKED OUT BY THE ASSESSEE AT RS. 87.29 CRORES. AO MADE CERTA IN ADDITIONS TO THE BOOK PROFIT WORKED OUT BY THE ASSESSEE. BESIDES, HE ALSO DISALLOWED CERTAIN CLAIMS MADE BY THE ASSESSEE FOR WORKING OF MAT PROVISIONS AND FINALLY HE DETERMINED THE TAXABL E BOOK PROFIT AT RS.1,81,23,65,310/- .ASSESSEE PREFER-ED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA HELD THAT PROVISIONS OF SECTION 115JB WERE APPL ICABLE TO A BANKING COMPANY,THAT PROVISIONS OF THE SAID SECTION APPLIED TO ALL COMPA NIES AS DEFINED IN SECTION 2(17), OF THE ACT,THAT ASSESSEE WAS REQUIRED TO PREPARE THE ACCOUNTS AS PE R THE PROVISIONS OF COMPANIES ACT 1956,THAT SUB-SECTION 2 OF THE SEC.115JB DID NOT REQUIRE APPL ICABILITY OF SCHEDULE VI OF COMPANIES ACT FOR COMPUTING BOOK PROFIT.ACCORDINGLY, HE HELD THAT PRO VISIONS OF SECTION 115JB WERE APPLICABLE IN THE CASE UNDER CONSIDERATION. 9.1. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT PROVISIONS OF SECTION 115JB WERE NOT APPLICABLE TO THE ASSESSEE-BANK.HE RELIED UPON THE ORDERS OF UNION BANK OF INDIA(ITA/ 4702 &4706/M/2010DT.30-06-2011) DELIVERED BY THE ITAT B BENCH,MUMBAI AND INDIAN BANK (ITA NO.469/MDS/2010 DT.30-08-2011)DELIVERED BY THE CB ENCH OF CHENNAI AND THE MATTER OF ICICI LOMBARD GENERAL INSURANCE COMPANY LTD., REPOR TED BY 2012-TIOL- 690-ITAT-MUM. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE RS OF THE FAA. 9.2. WE FIND THAT THE ISSUE OF APPLICABILITY OF SECTION 115JB HAS BEEN DISCUSSED BY THE B BENCH OF MUMBAI TRIBUNAL IN THE CASE OF UNION BANK OF IND IA (SUPRA) IN FAVOUR OF THE ASSESSEE.IN THAT MATTER TRIBUNAL HAS HELD AS UNDER: 18. GROUND NO. 5 (IN ITA NO. 4706/M/10 -A.Y.2006-0 7) RELATES TO APPLICABILITY OF THE PROVI-SIONS OF SEC.115JB 19.THIS ISSUE IS COVERED BY THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF KURUNG THAI B ANK PCL)(ITA NO. 3390/M/90 DT. 30.9.2010.THE LD.CIT(A)H OWEVER FOLLOWED THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO. 9061 / M/0420.THE LD. AR OF THE ASSESSEE HAS SUBMITTED AS FOLLOWS: THE APPELLANT FURTHER SUBMITS THAT THE APPELLANT I S NOT A COMPANY UNDER COMPANIES ACT BUT IS ONLY DEEMED TO BE A COMPANY AS PER THE PROVISIONS O F SEC. 11 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKING)ACT,1970.T HEREFORE AS HELD BY THE JURISDICTIONAL ITAT IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD (82 LTD 422) THE PROVISIONS OF SEC. 11 5JB CANNOT BE MADE APPLICABLE TO THE APPELLANT. RELIANCE IS AL SO PLACED ON THE DECISION OF KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD (329 ITR 91). 21. WE FIND THAT IN THE CASE OF KURUNG THAI BANK PC L) IN ITA NO. 3390/M/90 FOR A.Y. 2004-05 IT HAS BEEN HELD AS FOLLOWS: IN VIEW OF THE ABOVE DISCUSSIONS, AND FOLLOWING TH E VIEW TAKEN BY A CO ORDINATE BENCH IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD VS JCIT (82ITD4 22),WHICH HOLDS THAT PROVISIONS OF MAT CANNOT BE APPLIED TO ELECTRICITY COMPANIES FOR MUTUALLY SI MILAR REASON WE UPHOLD THE PLEA OF THE ASSESSEE.THE PRO VISIONS OF SEC. 115JB DO NOT APPLY TO THE ASSES SEE AND, AS SUCH, THE AO WAS IN ERROR IN CONCLUDING THAT INCOME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE ASSESSEE THE VENJ INITIATION OF REASSESSMENT PROCEEDINGS WAS BAD IN LAW, AND WE QUASH THE SAME. 22.THE DECISION OF THE LD. CIT(A) IS REVERSED AND W E HOLD THAT PROVISIONS OF SEC.115JB CANNOT BE MADE APPLICABLE TO THE ASSESSEE.THIS GROUND OF THE ASSES SEE IS DISMISSED. 9.3. WE HAVE PERUSED THE OTHER ORDERS CITED BY THE AR OF THE ASSESSEE-BANK.WE FIND THAT ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE.THEREFORE, RESPEC TFULLY FOLLOWING THE ORDERS OF THE COORDINATING BENCHES OF THE ITAT,WE DECIDE THE ISSUE IN FAVOUR O F THE ASSESSEE. APPEAL FILED BY THE ASSESSEE-BANK FOR THE AY.2006-0 7 STANDS PARTLY ALLOWED. 10. NOW WE WILL TAKE UP THE APPEAL FILED BY THE AO.HE HAS FILED FOLLOWING GROUNDS OF APPEAL AGAINST THE ORDER OF THE FAA FOR THE SAME AY.: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWIN G RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN TH E GROUNDS ENUMERATED BELOW: 1.THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FACTS O F THE CASE 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW,THE LD.CIT(A)ERRED IN ALLOWING WHOLE OF THE BAD DEBTS OF RS. 2,36,91,65,153/- AS THIS WAS A PROVISION AND NOT ACTUAL WRITE OFF OF BAD DEBTS. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCOUNT OF SETTING OFF PROVISIONS MADE U/S 36(1)(VII) OF RS. 68.31 CRS AGAINST BAD D EBTS OF RS.273.62 CRS. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF TAX PAID U/S 115JB IS INCOME TAX ONLY AND CREDIT BE GIVEN ON TAX COMPUTED U/S 88E AND SECTIO N 88E IS APPLICABLE FOR TAX PAID ON NORMAL COMPUTATIO N ONLY. 10.1. EFFECTIVE GROUNDS OF APPEAL FILED BY THE AO I.E. GR OUNDS NO.2 AND 3 ARE ABOUT DEDUCTION U/S.36 (1)OF THE ACT.DURING THE ASSESSMENT PROCEEDI NGS,AO FOUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF PROVISION MADE FOR BAD AND DOUBTFUL DE BTS CALCULATING AS PER THE GUIDELINES ISSUED BY THE RBI AT RS.2,36,91,66,153/-.AO AFTER MAKING E NQUIRIES AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,GRANTED DEDUCTION OF ACTUAL DEBTS WRIT TEN-OFF AFTER ADJUSTING PROVISION FOR RURAL DEBTS MADE AT 10% AND AVERAGE RURAL ADVANCES AND A PROVIS ION FOR BAD AND DOUBTFUL DEBTS CALCULATED AT 7.5% OF TOTAL INCOME.THE DETAILS OF ACTUAL DEBTS WR ITTEN-OFF AND PROVISIONS ALLOWED UNDER THE ACT CAN BE SUMMARISED AS UNDER: AMOUNT (IN RS) DETAILS OF BAD DEBTS WRITTEN OFF: RURAL DEBTS WRITTEN OFF 9,31,69,000 NON-RURAL DEBTS WRITTEN OFF 2,64,30,51,573 TOTAL DEBTS WRITTEN OFF 2,73,62,20,573 DETAILS OF PROVISIONS U/S. 36(1)(VIIA) 10% OF AVERAGE RURAL ADVANCES 68,81,03,934 7.5% OF TOTAL INCOME 32,81,13,376 TOTAL PROVISIONS U/S. 36(1)(VIIA) 1,01,62,17,310 10.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE-BANK, FAA HELD THAT ONLY THE OPENING BALAN CE IN THE PROVISION FOR BAD DEBTS COULD BE ADJUSTED, THAT PROVISION MADE AT THE END OF THE FY COULD NOT BE ALLOWED, THAT THE PROVISION MADE AT THE END OF THE YEAR HAD TO BE ALLOWED IN FULL, T HAT RURAL AND NON-RURAL BAD DEBTS ARE TO BE CONSIDERED SEPARATELY THAT IF BAD DEBTS WRITTEN-OF F RELATED TO DEBTS OTHER THAN FOR WHICH PROVISION WAS MADE UNDER CLAUSE-(VIIA) SUCH DEBTS FELL SQUARE LY UNDER THE MAIN PART OF THE CLAUSE-(VII) OF SECTION 36 OF THE ACT, THAT IN APPELLANTS CASE, PR OVISION IN RESPECT OF RURAL DEBT HAS BEEN MADE BY IT AT RS. 68.1 CRORES, THAT DEBTS WRITTEN-OFF OF RS. 264.31 CRORES WERE OTHER THAN THE RURAL DEBTS, THAT SAME WERE LIABLE UNDER CLAUSE-(VII) OF SECTION 36,THAT NO ADJUSTMENT IN RESPECT OF SAME COULD BE DONE AGAINST RURAL PROVISION CREATED BY THE ASSESSEE.HE DIRECTED THE AO TO ALLOW DEDUCTION OF RS.273.62 CRORES IN RESPECT OF DEBTS A CTUALLY WRITTEN-OFF U/S. 36(1)(VII) AS CLAIMED BY THE ASSESSEE AFTER DULY VERIFYING THAT THERE WAS NO OPENING BALANCE AVAILABLE IN RURAL AND OTHER PROVISIONS ACCOUNT MADE U/S. 36(1)(VIIA) OF T HE ACT.HE FURTHER DIRECTED THE AO AS HOW TO TREAT THE PROVISIONS MADE IN RESPECT OF RURAL ADVAN CE AT THE END OF THE YEAR AMOUNTING TO RS.68. 81 CRORES AND PROVISIONS @7.5% OF TOTAL INCOME.HE F INALLY HELD THAT THE PROVISIONS ALLOWED,OF RS.68.81CRORES AND 7.5% OF TOTAL INCOME,WOULD BECOM E THE OPENING PROVISION FOR THE SUBSE- QUENT AYS.HE REFERRED TO THE JUDGMENT DELIVERED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF SOUTH INDIA BANK LTD.(262ITR579). 10.3. BEFORE US,DR SUPPORTED THE ORDER OF THE AO.AR SUBMI TTED THAT FAA HAD RIGHTLY DIRECTED THE AO TO CALCULATE THE BAD DEBTS AND PROVISIONS IN A PARTICULAR MANNER,THAT SECTION 36(1) OF THE ACT ALLOWED WRITING OFF OF BAD DEBTS AS WELL AS PRO VISIONS IN CERTAIN CIRCUMSTANCES.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIA L ON RECORD.WE FIND THAT SIMILAR ISSUE WAS DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD.(343ITR 270). THE PROVISIONS OF CLAUSE (VIIA) OF SECTION 36(1) R ELATING TO THE DEDUCTION ON ACCOUNT OF THE PROVISIO N FOR BAD AND DOUBTFUL DEBT(S) ARE DISTINCT AND INDEP ENDENT OF THE PROVISIONS OF SECTION 36(1)(VII) RELA TING TO ALLOWANCE OF THE BAD DEBT(S). IN OTHER WORDS, SC HEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF OF THE IRRECOVERABLE DEBT(S) UNDER SECTION 36(1)(VII) IN ADDITION TO THE BENEFIT OF DEDUCTION FOR THE PROVISION MADE FOR BAD AND DOU BTFUL DEBT(S) UNDER SECTION 36(1)(VIIA). NORMALLY, A DEDUCTION FOR BAD DEBT(S) CAN BE ALLOWED ONLY IF TH E DEBT IS WRITTEN OFF IN THE BOOKS AS BAD DEBT(S). BUT IN THE CASE OF RURAL ADVANCES, A DEDUCTION WOULD BE ALLOWED EVEN IN RESPECT OF A MERE PROVISION WITHOUT INSISTING ON AN ACTUAL WRITE OFF. HOWEVER, THIS MAY RESULT IN DOUBLE ALLOWANCE IN THE SENSE TH AT IN RESPECT OF THE SAME RURAL ADVANCE THE BANK MAY G ET ALLOWANCE ON THE BASIS OF CLAUSE (VIIA) AND ALSO ON THE BASIS OF ACTUAL WRITE OFF UNDER CLAUSE (VII) . THIS SITUATION IS TAKEN CARE OF BY THE PROVISO TO CLAUSE (VII) WHICH LIMITS THE ALLOWANCE ON THE BASI S OF THE ACTUAL WRITE OFF TO THE EXCESS, IF ANY, OF THE WRITE OFF OVER THE AMOUNT STANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). THE CBDT ITSELF HAS RECOGNIZED THE POSITION THAT A BANK WOUL D BE ENTITLED TO BOTH THE DEDUCTIONS, ONE UNDER CLA USE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF A MERE PROVISION. IT WOULD BE MEANINGLESS TO INVOKE THE PR OVISO WHERE THERE IS NO THREAT OF DOUBLE DEDUCTION. IN CASE OF RURAL ADVANCES, WHICH ARE COVERED BY THE PROVISIONS OF CLAUSE (VIIA), THERE WOULD BE NO SUC H DOUBLE DEDUCTION. THE PROVISO LIMITS ITS APPLICATIO N TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPL IES. CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. THIS HAS BEEN EXPLAINED BY CIRCULARS ISSUED BY THE CBDT. THUS, THE PROVISO IS LIMITED IN ITS APPLICATION TO BAD DEBT(S) ARISING OUT OF RURAL ADVANCES OF A BANK . IT FOLLOWS THAT IF THE AMOUNT OF BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE BANK REPRESENTS ONLY DEBT(S) ARISING OUT OF URBAN ADVANCES, THE ALLOWANC E THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII). RESPECTFULLY FOLLOWING THE PRINCIPLES ENUMERATED BY THE APEX COURT IN THE ABOVE REFERRED MATTER WE UPHOLD THE ORDER OF THE FAA.WE FIND THAT HE HAS DIRECTED THE AO TO VERIFY THE FACT AND THEN TAKE A DECISION. IN OUR OPINION HIS ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. IN THESE CIRCUMSTANCES GROUND NOS.2 AND 3 FILED BY THE AO ARE DECIDED AGAINST THE AO 11. LAST GROUND OF APPEAL IS ABOUT APPLICABILITY OF SEC TION 88E WHILE COMPUTING THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 115 JB O F THE ACT.IN THE RETURN OF INCOME FILED BY IT ASSESSEE HAD CLAIMED REBATE OF SECURITIES TRANSACTI ON TAX(STT) PAID OF RS.43,42,541/- AGAINST THE TAX LIABILITY TO BE DETERMINED U/S.115JB OF THE ACT.AO REJECTED THE SAID CLAIM OF THE ASSESSEE HOLDING THAT REBATE U/S.88E WAS ALLOWABLE ONLY IF T AX WAS PAYABLE UNDER THE NORMAL PROVISIONS OF THE ACT.AFTER CONSIDERING THE FACTS OF THE ISSUE AN D THE SUBMISSIONS MADE BY THE AR FAA HELD THAT . PROVISIONS OF SECTION 115JB DEEMED THE BOOK PROFITS TO BE THE TOTAL INCOME OF THE ASSESSEE, THAT INCOME TAX ON SUCH BOOK PROFITS WAS PAYABLE AT THE RATE PROVIDED IN SECTION 115JB,THAT TAX PAID U/S.115JB WAS INCOME TAX ONLY,THAT THE REFEREN CE TO INCOME TAX IN SECTION 88E WOULD LOGICALLY INCLUDE THE TAX PAYABLE U/S. 115JB.FINALL Y,HE HELD THAT THE APPELLANT WAS ENTITLED TO REBATE OF STT PAID EVEN AGAINST THE TAX PAYABLE UND ER THE PROVISIONS OF SECTION 115JB.BEFORE US DR SUBMITTED THAT STT PAID BY THE ASSESSEE WAS NOT ELIGIBLE FOR TAX COMPUTATION PURPOSES WHEN INCOME WAS CALCULATED AS PER THE PROVISIONS OF SECT ION 115JB OF THE ACT.AR SUPPORTED THE ORDER OF THE FAA. 11.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.ANALYSIS OF SECTION 88E OF THE ACT PROVES THAT WHERE THE TOTAL INCOME O F ANY ASSESSEE INCLUDES ANY INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSI NESS/PROFESSION ARISING FROM TAXABLE SECURITIES TRANSACTION,THE ASSESSEE IS ENTITLED TO A DEDUCTION FROM THE AMOUNT OF INCOME TAX ON SUCH TRANSACTION OF AN AMOUNT PAID AS STT.WE AGREE WITH THE VIEW OF THE FAA THAT PROVISIONS OF SECTION 115JB DEEM THE BOOK PROFITS TO BE INCOME OF THE ASSESSEE AND INCOME TAX ON SUCH BOOK PROFITS IS PAYABLE AT THE RATE PROVIDED IN SECTION1 15JB. THEREFORE,WE ARE OF THE OPINION THAT THE AMOUNT TAX PAID AS STT IS INCOME TAX ONLY AND THE R EFERENCE TO INCOME TAX IN SECTION 88E INCLUDES THE TAX PAYABLE U/S. 115JB.IN OUR OPINION APPELLANT-BANK IS ENTITLED TO THE REBATE OF STT PAID EVEN IF TAX HAS TO BE CALCULATED UNDER MAT PR OVISIONS. GROUND NO.4 IS DECIDED AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO FOR THE AY 2006- 07 STANDS DISMISSED. APPEALS OF THE ASSESSEE-BANK FOR THE AY 1997-98,199 8-99,2003-04 AND 2006-07 STAND PARTLY ALLOWED,WHEREAS APPEAL FILED BY THE AO FOR AY 2006- 07 STAND DISMISSED. # /+ 0 1 * 2 # $ 1997-98,1998-99,2003-04 +% 2006-07 * 3 4. 5 ! * + 67 8 # /+ * # $ 2006-07 * #9 * + 6: . ORDER PRONOUNCED IN THE OPEN C OURT 10 TH APRIL, 2013 !. * ,-$ ! 3 ;# 10 ':,2013 - * 2 A SD/ - SD/ - ( / VIJAYPAL RAO ) ( !' / RAJENDRA) JUDICIAL MEMBER ! /ACCOUNTANT MEMBER / MUMBAI, ;#/ DATE: 10 TH APRIL, 2013 TNMM !. !. !. !. * ** * '+ '+ '+ '+ C!$+ C!$+ C!$+ C!$+/ COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / %& 2. RESPONDENT/ '(%& 3. THE CONCERNED CIT (A)/ DE F . 4. THE CONCERNED CIT/ DE F 5. DR D BENCH, ITAT,/MUMBAI G2 '+# . . . . 6. GUARD FILE/ 2 H (+ '+ //TRUE COPY// !.# !.# !.# !.# / BY ORDER, I II I/ // /6 6 6 6 DY./ASST. REGISTRAR , , , , / ITAT, MUMBAI