ASSISTANT COMMISSIONER OF INCOME TAX 2(3)(2), MUMBAI V. KOTAK MAHINDRA BANK LIMITED, MUMBAI

ITA 781/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0914 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 08-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: FV IRANI CHETAN KAKAARS
• Keywords: Capital asset; Business income; Earning of tax free income; Bad and doubtful debts; Provision of bad debts; Rule 8D
• Section: 14A; 201; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NOS. 781 & 782/MUM/2018 (ASSESSMENT YEAR: 2013-14 & 2014-15) ACIT-2(3)(2), ROOM NO. 552, 5 TH FLOOR, AAYAKAR BHAWAN, M.K.ROAD, MUMBAI VS M/S KOTAK MAHINDRA BANK LTD 27, BKC, C-27, G BLOCK BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051 PAN : AAACK4409J APPELLANT RESPONDEDNT APPELLANT BY SHRI B. SRINIVAS, CIT-DR RESPONDENT BY SHRI FV IRANI / CHETAN KAKA-ARS DATE OF HEARING 31-07-2019 DATE OF PRONOUNCEMENT 27-08-2019 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER : 1. THESE ARE TWO APPEALS FILED BY THE REVENUE ARE DIRE CTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOMET AX (APPEALS)-6 LD. CIT(A), MUMBAI DATED 21-11-2017 AND 24-11-2017 FOR ASSESSMENT YEAR (AY) 2013-14 & 2014-15 RESPECTIVELY. THE REVE NUE HAS RAISED IDENTICAL GROUNDS OF APPEAL FOR BOTH THE ASSESSMENT YEARS. THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE DECIDE D BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE APPEAL FOR AY 2013 -14 ARE TREATED AD LEAD CASE. THE GROUNDS OF APPEAL RAISED FOR ASSESS MENT YEAR 2013-14 IN ITA NO.781/MUM/2017 ARE REPRODUCED BELOW:- 2 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD /. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE UNDER RULE 8D(2)(II) IGNORING THE FACTS BROUGHT OUT IN THE ASSESSMENT ORDER THAT EXPENSES OF RS.453.53 CRORES WERE ATTRIBUTABLE TO EARNING OF EXEMPT INCOM E.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) ON THE INVESTMENT EXCLUDING INVESTMENT O F RS,328.78 CRORES AS ON 01.04.2012 AND RS.385.05 CRORES AS ON 31.03.2013 AN D INVESTMENT IN FOREIGN COMPANY AS ON 01.04.2012 AT RS. 10.43 LAKHS AND AS ON 31.03.2013 AT RS.33.31 LAKHS RELYING ON THE DECISION OF THE HON'B LE ITAT IN THE CASE OF GARWARE WALL ROPES LTD. (65 SOT 83) WITHOUT APPRECI ATING THE FACT THAT THE DECISION OF HON'BLE ITA T HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN ADMITTED BY THE HON'BLE HIGH COURT. ' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE BROKEN PERIOD I NTEREST IS ALLOWABLE ON THE MATCHING PRINCIPLES, WITHOUT REALIZING THAT THE SAM E HAS NOT BEEN INCURRED FOR REALIZING THE INTEREST ON SECURITIES AS ENUNCIATED BY THE APEX COURT IN VIJAYA BANK LTD. (57 TAXMAN 152) (SC).' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLOW EXPEND ITURE INCURRED ON ESOP, AFTER VERIFICATION IN ACCORDANCE WITH THE PRINCIPLE LAID DOWN BY HON'BLE SPECIAL BENCH IN THE CASE OF BIOCON LTD. (368/BANG/ 2010) WITHOUT APPRECIATING THAT THE SAME IS NOT AN ASCERTAINED LI ABILITY, CONTINGENT IN NATURE, QUANTUM CANNOT BE WORKED OUT PRECISELY AND IS CAPITAL IN NATURE AND HENCE NOT ALLOWABLE. 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLOW BAD DE BTS U/S 36(1)(VII) INDEPENDENT OF THE CLAIM AND BALANCE AVAILABLE IN T HE PROVISION OF BAD DEBTS U/S 36(1 )(VIIA).' 2. THE ASSESSEE, A BANKING COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT 2013-14 ON 10-09-2014 DECLARING TOTAL IN COME OF RS.1653,31,94,036/-, WHICH WAS REVISED ON 27-03-201 5 REVISING THE 3 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD TOTAL INCOME AT RS.1660,98,31,281/-. IN A SCRUTINY ASSESSMENT U/S 143(3), AFTER ISSUING STATUTORY NOTICES, THE ASSES SING OFFICER DETERMINED AN INCOME OF RS.1996,78,95,040/- BY MAKING VARIOUS ADDITIONS INCLUDING DISALLOWANCE U/S 14A OF RS. 27,80,06,782/ - ADDITION ON ACCOUNT OF ESOP EXPENSES OF RS. 89,51,07,154/- AND BED DEBTS OF RS. 130 CRORE. AGGRIEVED BY THE ASSESSMENT ORDER, ASSE SSEE CHALLENGED THE ABOVE TWO ADDITIONS BEFORE THE CIT(A). THE LD.CIT( A) DELETED DISALLOWANCE U/S 14A AND ADDITION ON ACCOUNT OF ESO P EXPENSES AND BED DEBTS. AGGRIEVED BY THE ORDER OF LD. CIT(A), R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ABOVE GROUNDS OF APPEA L. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DEPART MENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND THE LEARNED AUTHORISED REPRESENTATIVE (AR) FOR THE ASSESSEE AND CONSIDERED THE MATERIAL ON RECORD. AT THE OUTSET OF THE HEARING THE LD AR FOR THE ASSESSEE SUBMITS THAT ALL THE GROUNDS OF APPEALS RAISED BY THE REVEN UE ARE COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. AR FOR THE ASSESSEE FURNISHED A CHART NARRATING THE GROUNDS OF APPEAL THE DECISIONS OF CASE WHEREIN THE GROUNDS OF APPEALS ARE COVERED. 4. ON THE OTHER HAND THE LD. DR FOR THE REVENUE AFTER GOING THROUGH THE CHARTS AND THE CASE LAWS SUBMITS THAT HE STRONGLY R ELIES ON THE ORDER OF THE ASSESSING OFFICER ON VARIOUS DISALLOWANCES. 4 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE REPR ESENTATIVES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAV E ALSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LD. LOWER AUTHORITIES A ND THE LD AR FOR THE ASSESSEE. GROUND NO. 1 RELATES TO DELETING THE INTE REST DISALLOWANCE UNDER RULE 8D(2)(II). DURING THE ASSESSMENT THE AO NOTED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 9.97 CRORE . THE ASSESSEE MADE SUO MOTO DISALLOWANCE OF RS. 22,38,426/-. THE WORKING OF THE ASSESSEE WAS NOT ACCEPTED BY AO. THE WORKED OUT THE DISALLOWANCE AT RS.28,02,45,208/- AS GIVEN IN PARA 4.5 ON PAGE 18 O F HIS ORDER. THE AO WORKED OUT DISALWANCE UNDER RULE8D(2)(II) OF RS. 26 ,01,60,853/- AND RS. 2,00,84,355/- UNDER RULE 8D2(III). HOWEVER, HE SET OFF THE SUO MOTO DISALLOWANCE CARRIED OUT BY THE ASSESSEE FROM THE DISALLOWANCE WORKED OUT BY HIM AND MADE A NET DISALLOWANCE OF RS .27,80,06,782/-. ON APPEAL, THE LD.CIT(A) DELETED THE DISALLOWANCE U NDER RULE 8D2(II) WITH THE FOLLOWING OBSERVATIONS:- 6.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, DISCUSSION OF THE AO IN THE IMPUGNED ORDER AS WELL AS ORAL CONTENTION S AND WRITTEN SUBMISSIONS OF THE APPELLANT. THE APPELLANT IS A BA NKING COMPANY AND CARRIES ON THE BANKING BUSINESS AS PROVIDED IN THE BANKING REGULATION ACT, 1949. THE APPELLANT HAS VARIOUS SUBSIDIARIES C OMPANIES, WHICH ARE IN THE BUSINESS OF LIFE INSURANCE, STOCK BROKING, A SSET MANAGEMENT, NBFC ETC. BESIDES INVESTMENT IN SUBSIDIARY COMPANY, IT HAS ALSO MADE CERTAIN INVESTMENTS IN SHARES OF OTHER COMPANIES, I NVESTMENT IN VENTURE CAPITAL FUNDS ETC. DURING THE YEAR UNDER APPEAL, TH E AO HAS DISALLOWED 5 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD EXPENDITURE U/S.14A BY INVOKING RULE 8D2(II) & 8D(2 )(III) AND HAS MADE THE DISALLOWANCE OF RS, 28, 02,45,2087- (RS. 2 6,01, 60,8537- AND RS. 2, 00,84,3557-). THE APPELLANT, ON ;;HE OTHER H AND, HAS DISALLOWED RS. NIL UNDER RULE 8D(2)(II) AND RS. 22, 38,4267- U NDER RULE 8D(2)(III). THE APPELLANT ITSELF HAS DISALLOWED A SUM OF RS. 22 , 38,4267- IN THE RETURN OF INCOME U7S.14A R.W.S.8D(2)(III). ONCE THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE SUO MOLO DISALLOWANCE O F THE ASSESSEE, INVOCATION OF RULE 8D IS MANDATORY. THE AO HAS ELAB ORATELY DISCUSSED THE REASONS AS TO WHY HE IS NOT SATISFIED WITH THE CORRECTNESS OF DISALLOWANCE MADE BY THE ASSESSEE WITH WHICH I FULL Y AGREE. THE SAME HAS BEEN BRIEFLY DISCUSSED IN PARA 6.2 ABOVE. HENCE , THE CONTENTION OF THE APPELLANT THAT THE AO HAS MECHANICALLY INVOKED RULE 8D IS NOT CORRECT AND THE SAME IS REJECTED, HAVING HELD AS AB OVE, LET US NOW PROCEED TO DISCUSS THE QUANTUM OF DISALLOWANCE REQU IRED U7S.14A 6.5 AS STATED EARLIER, THE APPELLANT HAS DISAL LOWED RS,22, 38,4267- U7S,14A R.W.R.SD. FOR THIS PURPOSE, THE APPELLANT H AD EXCLUDED THE INVESTMENT MADE IN SUBSIDIARY COMPANIES, WHICH ACCORDING TO THE APPELLANT ARE STRATEGIC IN NATURE. AS FAR AS DISALLOWANCE UND ER CLAUSE (II) OF RULE 80(2) IS CONCERNED, IT IS THE SUBMISSION OF THE APPELLANT TH AT IT HAS ITS OWN FUNDS TO THE EXTENT OF RS.9,446.95 CRORES AS AGAINST THE INVESTM ENT GENERATING /CAPABLE OF GENERATING EXEMPT INCOME AT RS.453,53 CRORES. IN TH E APPELLANT'S OWN CASE FOR A.Y.2008-09 TO 2011-12 IN ITA NO.1657/MUM/2012, THE ITAT HAS GIVEN RELIEF TO THE APPELLANT IN RESPECT OF DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A OF THE ACT. FURTHER IN THE FACTUAL POS.ITION OF AVA ILABILITY OF ITS OWN FUNDS FAR IN EXCESS OF INVESTMENT WHICH HAVE OR COULD YIELD EXEM PT INCOME, THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC B ANK LTD VS. DCIT (SUPRA) COMES INTO PLAY AND ACCORDINGLY THERE CANNO T BE ANY DISALLOWANCE OF INTEREST MADE U/S 14A OF THE ACT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING DECISIONS OF THE HON'BLE TAT IN APPELLANT'S OWN CASE FOR A.Y. 2008-09 TO 2011-12 AND DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS. DCIT (SUPRA), THE DI SALLOWANCE MADE BY THE AO UNDER CLAUSE (II) OF RULE 8D(2) OF THE RULE U/S 14A OF THE ACT IS DIRECTED TO BE DELETED. GROUND NO. I IS ACCORDINGLY, ALLOWED. 6 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 6. THE LD. DR PRESENT FOR THE REVENUE HEAVILY RELIED U PON THE ORDER OF THE ASSESSING OFFICER. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS 1657, 1629/MUM/2012; 3491, 3592, 3593, 6394, 6217/M/2013 FOR AYS 2008- 09 TO 2011-12. FURTHER, RELYING UPON THE FOLLOWING JUDGEMENTS, HAS SUBMITTED THAT WHEN OWN FUNDS ARE MORE THAN THE AMO UNT OF INVESTMENTS MADE FOR EARNING TAX FREE DIVIDENDS, NO DISALLOWANCE U/S 14A IS WARRANTED. HE ALSO SUBMITTED THAT WHEN THE INVESTMENTS ARE MADE IN VIEW OF HAVING STRATEGIC INTEREST, NO DISAL LOWANCE COULD BE MADE. THE FOLLOWING ARE THE DECISIONS, THE LD.COUN SEL RELIED UPON:- 1. HDFC BANK LTD VS DCIT (2016) 383 ITR 529 (BOM) 2. CIT VS HDFC BANK LTD (2016) 383 ITR 529 (BOM) 3. CIT VS RELIANCE UTILITIES & POWER LTD (2009) 31 3 ITR 340 (BOM) 4. CIT VS BOMBAY OIL INDUSTRIES LTD 23014) 42 TAXM ANN.COM 440 (BOM) 5. CIT VS RELIANCE INDUSTRIES LTD CA NO. 10 OF 201 0 (SLP(C) NO.37/2010 6. PCIT VS SINTEX INDUSTRIES LTD (2018) 255 TAXMAN 171 (SC) 7. PCIT VS SINTEX INDUSTRIES LTD (2017) 82 TAXMANN .COM 171 (GUJ) 8. DCIT VS BENNET COLEMAN & CO LTD ITA NO.1951/M/2 016 9. DCIT VS AGEIS LOGISTIC LTD ITA NO.1945/M/2016 10.ITO VS SANKALP CORPORATE SERVICES P LTD ITA NO. 1951/M/2016 7 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 11.WARTSILA INDIA LTD VS ACIT ITA NO.5002/M/2013 12.ACIT VS GODREJ AGROVET LTD ITA NO.5002/M/2013 13.ACIT VS JINDAL DRUGS LTD ITA NO.1694/M/2017 14.JOY BEAUTY CARE (P) LTD VS DCIT ITA NO.1694/M/2 017 15.ESSEL MINING & INDUSTRIES LTD VS DCIT ITA NO.85 6/KOL/2017 16.ESSEL MINING & INDUSTRIES LTD VS DCIT ITA NO.16 94/M/2017 17.INTEGRATED COAL MINING LTD VS DCIT ITA NO.786/K OL/2013 18.DCIT VS GARWARE POLYESTER LTD ITA NO.5757/M/201 7 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL CIT ED SUPRA IN ASSESSEES OWN CASE FOR AYS 2008-09 TO 2011-12. THE TRIBUNAL, BY FOLLOWING THE DECISIONS OF THE TRIBUNAL IN THE CASES OF PREMIER F INANCE & LEASING CO. LTD (ITA NO.1655/MUM/2013 FOR AY 2008-09 & OTHE RS DATED 25- 05-2016 AND ADITYA BIRLA NUVO LTD (ITA NO.8427/ & 8 483/MUM/2010 (ORDER DATED 17.09.2014) DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE. THE FACTS AND CIRCUMSTANCES OF THE ISSUE UNDER CONS IDERATION IS STATED TO BE IDENTICAL EXCEPT FOR FIGURES. THEREFORE, CONSIS TENT WITH THE DECISION ALREADY ARRIVED AT BY THE TRIBUNAL, WE UPHOLD THE O RDER OF THE CIT(A). GROUND 1 OF THE REVENUE FAILS. 7. GROUND 2 RELATES TO NO RECORDING OF THE SATISFAC TION ABOUT THE WORKING OF SUO MOTO DISALLOWANCE. THE LD. DR RELIED UPON TH E DECISION OF THE ASSESSING OFFICER, WHEREAS THE LD.AR SUBMITTED THAT WHERE THERE IS NO 8 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD SATISFACTION OF THE ASSESSING OFFICER IS RECORDED, NO DISALLOWANCE COULD BE MADE. FOR THIS PROPOSITION, HE RELIED UPON THE FOLLOWING JUDGEMENTS:- 1. GODREJ & BOYCE MFG CO LTD 394 ITR 449 (SC) 2. MAXOPP INVESTMENT LTD 402 ITR 640 (SC) 3. RELIANCE CAPITAL ASSET MANAGEMENT LTD 400 ITR 2 17 (SC) 4. ANSHUL SPECIALITY MOLECULES LTD ITA NO.4436/M/1 6 5. G.K.K. CAPITAL MARKET (P) LTD ITA NO.805/KOL/20 12 6. TAURIAN ENGINEERING P LTD ITA NO.7239/MUM/2016 7. ASHOK M WADHWA ITA NO.1871 & 2576/MUM/2012 8. WADHWA RESIDENCY (P) LTD 95 TAXMANNN.COM294 (MU M) 9. INTEGRATED COAL MINING LTD VS DCIT 67 TAXMNN.CO M 260 10. DCIT VS RARE ENTERPRISES ITA NO.5207,5208/M/20 16 8. THE LD.AR FURTHER SUBMITTED THAT WHEN INVESTMENTS A RE NOT FOR THE PURPOSE OF YIELDING INCOME, THAT PART OF INVESTMENT IS TO BE EXCLUDED FROM THE WORKING OF DISALLOWANCE U/R 8D(2)(III). F OR THIS PROPOSITION, THE LD.AR RELIED UPON THE FOLLOWING PRECEDENTS:- 1. VIREET INVESTMENT (P) LTD 82 TAXMANN.COM 415 (DEL)( SB) 2. KOTAK SECURITIES LTD ITA NO.666, 7055/M/16 3. AGEIS LOGISTIC LTD ITA NO.1945/M/2016 4. RELIANCE CAPITAL LTD ITA NO.4008/M/2016 5. STOCK TRADERS PVT LTD ITA NO.2108/M/2006, 4403 & 687/M/2011 6. RELIANCE CAPITAL LTD ITA NO.6396 & 6397/M/2017 7. SYNTEX CORPORATION P LTD ITA NO.2994/M/2012 9 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 8. GARDEN COURT DISTILLERIES P. LTD ITA NO.5562/MUM/20 16 9. BOMBAY OXYGEN CORPORATION LTD 86 TAXMANN.COM 88(MUM ) 10. SAJJAN INDIA LTD 89 TAXMANN.COM 21 (MUM) 11. INTEGRATED COAL MINING LTD 67 TAXMANN.COM 260 (MUM) 12. JOY BEAUTY CARE (P) LTD VS DCIT ITA NO.786/KOL/2013 4 13. DCIT VS SKILL INFRASTRUCTURE LTD 5786/MUM/2017 14. WARTSILA INDIA LTD VS ACIT ITA NO.5002/M/2013 15. VRINDAVAN SERVICES PVT LTD V. DCIT ITA NOS 10, 11,1 2,15,232, 233/M/2015 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D MATERIAL PLACED BEFORE US. THE HONBLE SUPREME COURT IN THE CASE O F MAXOPP INVESTMENT LTD (SUPRA) HELD THAT WHERE THE SHARES A RE HELD AS STOCK-IN- TRADE, THE EXPENDITURE INCURRED FOR EARNING BUSINES S PROFITS WILL HAVE TO BE APPORTIONED AND ALLOWED AS A DEDUCTION. ONLY TH AT EXPENDITURE WHICH IS IN RELATION TOEARNING DIVIDENDS CAN BE D ISALLOWED U/S 14A & RULE 8D. FURTHER, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD (SUPRA) HAS UPHELD THE FI NDING OF THE ITAT THAT THE EXPENDITURE INCURRED IN RELATION TO E XEMPT INCOME CAN BE DISALLOWED ONLY IF THE ASSESSING OFFICER IS NOT SAT ISFIED WITH THE CORRECTNESS OF THE EXPENDITURE CLAIMED BY THE ASSES SEE. 10. BE THAT AS IT MAY, WE FIND FROM RECORDS THAT THE IT AT, FOR AYS 2008-09 TO 2011-12, AFTER CONSIDERING A PLETHORA OF JUDGEME NTS, HAS DIRECTED THE ASSESSING OFFICER TO MAKE DISALLOWANCE U/R 8D(2)(II I) @0.5% OF THE 10 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD AVERAGE VALUE OF INVESTMENTS AFTER EXCLUDING STRATE GIC INVESTMENTS. CONSIDERING THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN VIREET INVESTMENT (P) LTD (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DISALLOW 0.5% OF THE AVERAGE VALUE OF INVESTMENTS EXCLUDING STRATEGIC INVESTMENTS FOR THE MAKING OF RULE 8D(2)(III) OF I. T. RULES. AS SUCH, GROUND 2 OF THE ASSESSEE SUCCEEDS IN PART. 11. GROUND NO. 3 RELATES TO DELETING THE DISALLOWAN CE OF BROKEN PERIOD EXPENSES. THE BRIEF FACTS ARE THAT BASED ON THE RE OPENING OF ASSESSMENT FOR AYS 2008-09 TO 2011-12, THE ASSESSING OFFICER A DDED AN AMOUNT OF RS.88,41,69,624/- TOWARDS BROKEN PERIOD INTEREST, F OR THE REASONS STATED IN HIS ASSESSMENT ORDER ON PAGES 39 TO 46. ON APPE AL, THE LD.CIT(A) DELETED THE DISALLOWANCE BY RELYING UPON THE JUDGEM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS I NTERNATIONAL BANKING CORPORATION VS CIT 125 TAXMAN 488 (BOM). A GGRIEVED, THE REVENUE CARRIED THE MATTER BEFORE THE TRIBUNAL. 12. BEFORE US, THE LD. DR HAS HEAVILY RELIED UPON T HE ORDER OF THE ASSESSING OFFICER. THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, HAS RELIED UPON THE FOLLOWING JUDICIAL PRECEDENTS AND SUBMITTED THA T THE LD.CIT(A) WAS RIGHT IN DELETING THE ADDITION: 1. CIT VS CITI BANK N.A. CIVIL APPEAL NO.1549 OF 2006 11 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 2. AMERICAN EXPRESS INTERNATIONAL BANKING CORP VS CIT 258 UTR 601(BOM) 3. CIT VS DEUSTCHE BANK 266 ITR 106-107 (SC) 4. CIT VS HDFC BANK LTD 49 TAXMANN.COM 335, 366 IT R 505 (BOM) 5. INDIAN BANK VS DCIT 44 TAXMANN.COM 339 (MAD) 6. DCIT VS DENA BANK ITA NO.1407/M/16 & 1408/M/16 7. DCB BANK LTD VS. ACIT ITA NO.820/M/14 & 615/M/1 4 8. ACIT VS DENA BANK ITA NO.5259/M/14 9. DCIT VS BANK OF BARODA ITA NO.5605 & 5604/M/16 10. CBDT CIRCULAR 28 OF 2015 CBDT CIRCULAR 18 OF 2 015 11. ACIT VS THE W.B. STATE CO-OP BANK LTD ITA NO.324&325/KOL/2018 12. DCIT VS BANK OF BARODA ITA NO.4355,4504,5082, 5020,4505,4356,5602/M/2018 13. DCIT VS BANK OF BARODA ITA NO.1222, 1221, 1120,1121/M/2018 14. ADIT VS HSBC ITA NO.2519,2520, 2679, 2680,4424 ,4424 /M /2004 13. THE LD.AR OF THE ASSESSEE FURTHER SUBMITTED THA T THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HONBLE SUPREME COURT / BOMBAY HIGH COURT / TRIBUNAL. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDER OF LOWER AUTHORITIES AND THE VARIOUS CASE LAWS RELI ED BY THE LD AR FOR THE ASSESSEE. DURING THE ASSESSMENT THE AO REQUIRED THE DETAILS OF THE BROKEN PERIOD INTEREST EXPENSES. THE ASSESSEE FURNI SHED SUCH INTEREST ON 12 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD BROKEN PERIOD EXPENSES OF RS. 88,41,69,624/-. THE A O DISALLOWED THE SAME HOLDING THAT THE SECURITIES ARE HELD TILL THE MATURITY WHICH CONSTITUTE THE INVESTMENT OF THE BANK AND CANNOT BE CONSIDERED AS STOCK IN TRADE. BEFORE LD CIT(A) THE ASSESSEE CONTENDED THAT ALL TH E INVESTMENTS WERE MADE IN ACCORDANCE WITH RBI GUIDELINES. THE CLOSING BALANCE HAS BEEN SHOWN IN THE BALANCE SHEET. THE INTEREST INCOME ON GOVERNMENT SECURITIES AND THE PROFIT/ LOSS HAS BEEN OFFERED IN THE RETURN OF INCOME FOR THE CURRENT YEAR. SIMILAR TREATMENT IS CONSISTENTLY OFFERED BY THE ASSESSEE IN EARLIER YEARS. THE ASSESSEE ALSO RELIED ON THE CBDT CIRCULAR NO. 18/2015 DATED 02.11.2015. THE LD CIT(A) ACCEPTED T HE CONTENTION OF THE ASSESSEE GRANTED RELIEF TO THE ASSESSEE BY RELYING ON THE CBDT CIRCULAR AND ON THE DECISION OF HONBLE SUPREME COURT IN C IT VS CITI BANK NA ( IN CIVIL APPEAL NO. 1549 OF 2006) AND BOMBAY HIGH COURT IN AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VS CIT ( 125 TAXMAN 488 BOM). WE HAVE NOTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE, HENCE, WE AFFIRMS THE ORDER OF THE LD CIT(A) AND ACCORDINGLY DISMISSED THE GROUND OF APPEAL RAISED B Y THE REVENUE. 15. GROUND NO. 4 PERTAINS TO ESOP EXPENSES. THE AS SESSING OFFICER DISALLOWED AN AMOUNT OF RS.89,51,07,154/- BEING ESO P EXPENSES ON THE GROUND THAT (I) ESOP DISCOUNTS ARE INCURRED IN REL ATION TO ISSUE OF SHARES TO EMPLOYEES; THEY ARE NOT RELATABLE TO PROFITS AND GAINS ARISING OR 13 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD ACCRUING FROM A BUSINESS / TRADE; THE APEX COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPN LTD (1997) 225 I TR 792 (SC) AND BROOKE BOND INDIA LTD (1997) 225 ITR 798 (SC) HAVE HELD THAT EXPENDITURE RESULTING IN INCREASE IN CAPITAL IS NOT ALLOWABLE DEDUCTION EVEN IF SUCH EXPENDITURE MAY INCIDENTALLY HELP IN B USINESS OF THE COMPANY; (II) ESOP DISCOUNT DOES NOT DIMINISH TRADI NG / BUSINESS RECEIPTS OF THE ISSUING COMPANY. THE COMPANY DOES NOT SUFFER ANY PECUNIARY DETRIMENT. TO CLAIM A CHARGE AGAINST INC OME, IT SHOULD INFLICT A DETRIMENT TO THE FINANCIAL POSITION. ESOP IS A V OLUNTARY SCHEME LAUNCHED BY THE EMPLOYERS TO ISSUE SHARES TO EMPLOY EES. THE INTENTION IS TO ONLY GIVE A STAKE TO THE EMPLOYEES IN THE ORGANI ZATION; (III) THIS DISCOUNT IS NOT INCURRED TOWARDS SATISFACTION OF AN Y TRADE LIABILITY AS THE EMPLOYEES HAVE NOT GIVEN UP ANYTHING TO PROCURE SUC H ESOP;(IV) SHARE PREMIUMS OBTAINED ON ISSUE OF SHARES ARE ITEMS OF C APITAL RECEIPT. WHEN SUCH PREMIUM IS FORGONE, IT CANNOT BE CLAIMED AS AN EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT OR EXPENDED FOR THE PURPOS E OF THE TRADE; (V) THERE IS NOT ANY SPECIFIC PROVISION FOR SUCH DEDUCT ION FROM SECTIONS 30 TO 36 OF THE INCOME-TAX ACT. SO, THE RESIDUARY SEC TION 37 ONLY COMES TO PLAY AND THE PRIMARY CONDITION FOR ALLOWANCE UNDER THIS SECTION IS THE EXISTENCE OF BUSINESS. AS ELABORATED IN THE ABOVE POINTS, THERE IS NEITHER ANY REAL EXPENDITURE AT THE STAGE OF GRANT OR OTHER WISE, NOR THE 14 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD EXPENDITURE IF AT ALL ANY, CAN BE QUALIFIED AS REVE NUE IN NATURE. THE CBDT CIRCULAR NO.9/2007 DATED 20-12-2007 HAS CLEARL Y PROVIDED THAT WHERE ESOPS ARE PURCHASED BY THE COMPANY, AND THEN ISSUED TO THE EMPLOYEES THEN THE SAME IS ALLOWED; ELSE IT IS NOT AN EXPENDITURE. FOR THISW PROPOSITION, THE AO RELIED UPON THE DECISION OF RANBAXY LABORATORIES LTD VS ACIT [124 TTJ 771 (2009)(DELHI TRIBUNAL). FURTHER, IN GIVING ITS JUDGMENT, THE DELHI TRIBUNAL HELD THAT THE ISSUE OF SHARES AT BELOW MARKET PRICE DOES NOT RESULT INTO I NCURRING ANY EXPENDITURE; RATHER IT RESULTS INTO SHORT RECEIPT O F SHARE PREMIUM WHICH THE ASSESSEE WAS OTHERWISE ENTITLED TO. THE RECEIPT OF SHARE PREMIUM IS NOT TAXABLE AND HENCE ANY SHORT RECEIPT OF SUCH PRE MIUM WILL ONLY BE A NOTIONAL LOSS AND NOT ACTUAL LOSS FOR WHICH NO LIAB ILITY IS INCURRED AND SUCH NOTIONAL LOSSES ARE NOT ALLOWABLE UNDER THE PR OVISIONS OF THE INCOME TAX ACT, 1961. FURTHER, REFERENCE WAS MADE TO SECTI ON 37 OF THE IT ACT WHICH REQUIRES THAT THERE SHOULD BE AN EXPENDITURE INCURRED BY THE ASSESSEE; HOWEVER, A BENEFIT OR INCOME FOREGONE CAN NOT BE CONSIDERED AS EXPENDITURE. THE TRIBUNAL WAS OF THE VIEW THAT THE ASSESSE HAS NOT INCURRED ANY EXPENDITURE BUT MERELY RECEIVED LESSER AMOUNT OF SHARE PREMIUM. THE ASSESSING OFFICER FURTHER STATED THAT ABOVE JUDGMENT HAS BEEN HEAVILY RELIED ON IN THE RECENT JUDGMENT PRONO UNCED BY MUMBAI TRIBUNAL IN THE CASE OF M/S. V1P INDUSTRIES LTD (20 10 TIOL 654). THE 15 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD AO ALSO STATED THAT ANOTHER JUDGMENT THAT DESERVES A MENTION HERE IS THE CASE OF LOWRY (INSPECTOR OF TAXES) VS CONSOLIDATED AFRICAN SELECTION TRUST LTD (1940) 8 FTR (SUPPI) 88 (HL) IN WHICH THE HOUSE OF LORDS HELD THAT THE DIFFERENCE BETWEEN THE MARKET PRICE A ND AMOUNT RECOVERED FROM THE EMPLOYEES CANNOT BE ALLOWED AS DEDUCTIBLE EXPENDITURE. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE'S RELIANCE ON THE MADRAS HIGH COURT JUDGMENT OF M/S.PVP VENTURES WAS DISTING UISHABLE ON FACTS. THE PRIMARY ISSUE OF ALLOWABILITY OF ESOP EXPENSES AS A SUBSTITUTE OF EMPLOYEE REMUNERATION WAS THE SUBJECT MATTER OF THE JUDGMENT AND DEDUCIBILITY OF SUCH EXPENSE ON THE GROUNDS ENUMERA TED ABOVE WAS NOT DECIDED UPON BY THE HON'BLE COURT. ON APPEAL, THE LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING B ANGALORE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF BIOCO N LTD (APPEAL NO.368/BANG/2010). 16. BEFORE US, THE LD. DR HEAVILY RELIED UPON THE O RDER OF ASSESSING OFFICE. ON THE OTHER HAND THE LD.AR OF THE ASSESSEE PLACED HIS RELIANCE ON THE FOLLOWING PRECEDENTS AND SUBMITTED THAT THE LD.CIT( A) WAS JUSTIFIED IN ALLOWING THE GROUND OF THE ASSESSEE BY PLACING AUTH ORITY ON BANGALORE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF BIOCON LTD (SUPRA):- 16 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 1. KOTAK MAHINDRA BANK LTD. 89 TAXMANN.COM 223 (IT A NO. 698/M/16). 2. DCIT V. KOTAK MAHINDRA BANK LTD. ITA NO. 2817/M /16 & 38/M/18. 3. BIOCON LTD. V. DCIT 144 ITD 21 (BANG) (SB). 4. DCIT V. AVENDUS CAPITAL P. LTD. ITA NO. 5679/M/ 2015. 5. CIT V. PVP VENTURES LTD. V. 211 TAXMAN 554 (MA D). 6. S.S.I. LTD. V. DCIT 2005-TIOL-30-ITAT-MAD. 7. GOLDMAN SACHS INDIA SECURITIES P. LTD. V. ACIT ITA NO. 1428/MUM/2017. 8. DCIT V. MAGMA FINCORP LTD. ITA NO. 946/KOL/2017 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IED AND PERUSED THE RECORD. WE HAVE NOTED THE AO DISALLOWED THE ES OP AS WE HAVE RECORDED IN PARA 15 ABOVE. HOWEVER, THE LD CIT(A) A LLOWED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECES SOR IN ASSESSEES OWN CASE FOR AY 2009-10 DATED 12.11.2015 AND FOR AY 2012-13 DATED 19.01.2016.THE LD CIT(A) ALSO RELIED ON THE DECISIO N OF SPECIAL BENCH OF BANGALORE TRIBUNAL IN BIOCON LTD (SUPRA). WE HAV E FURTHER NOTED THAT THE ORDER OF LD CIT(A) IN APPEAL FOR AY 2009-1 0 & 2012-13 HAS BEEN AFFIRMED BY TRIBUNAL IN ITA NO. 698/MUM/2016 S ATED 20.12.2017 AND IN ITA NO.2817/MUM/2016 DATED 28.02.2018, THUS, WE DO NOT FIND ANY REASON FOR INTERFERING WITH THE ORDER OF LD CIT (A), WHICH WE AFFIRMS. IN THE RESULT THIS GROUND OF APPEAL IS D ISMISSED. 18. GROUND NO. 5 PERTAINS TO DISALLOWANCE OF URBAN (NO N RURAL) BAD DEBTS. THE BRIEF FACTS ARE THAT THE ASSESSEE HAD DEBITED A N AMOUNT OF RS.7,95,88,80,461/- IN THE BOOKS BEING NET PROVISIO N FOR BAD AND 17 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD DOUBTFUL DEBTS / WRITE OFF / RECOVER / TAX, ETC. T HE ASSESSEE SUBMITTED THE BREAK OF THIS AMOUNT, WHEREBY IT STATED THAT BA D DEBTS AMOUNTING TO RS.1,30,06,04,016/- PERTAINED TO NON RURAL BRANCHES (URBAN BAD DEBTS) WAS ALLOWABLE AS DEDUCTION U/S 36(1)(VII) AS PER DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK L TD VS CIT 206 TAXMAN 182(SC). THE ASSESSEE FURTHER STATED THAT I T WAS ENTITLED FOR DEDUCTION U/S 36(1)(VII) R.W.S. 36(2)(V) AND THE SA ME WAS INDEPENDENT OF PROVISIONS MADE IN SECTION 36(1)(VII) OVER AND A BOVE THE DEDUCTION U/S 36(1)(VIIA). ASSESSING OFFICER HELD THAT CLAUS E 36(1)(VIIA) DOES NOT PROVIDE FOR ENTIRE DEDUCTION PERTAINING TO RURAL BR ANCHES. THEREFORE, HE CONCLUDED THAT BAD DEBTS OF RS.1,30,06,04,016/- PER TAINING TO URBAN ADVANCES HAS TO BE DEBITED TO THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS REQUIRED U/S 36(2)(V) AND ONL Y THE EXCESS AMOUNT CAN BE GRANTED AS DEDUCTION. ACCORDINGLY, HE ADDED THE ENTIRE BAD DEBTS OF RS.1,30,06,04,016/- TO THE TOTAL INCOME. THE ASSESSEE CARRIED THE ISSUE BEFORE THE CIT(A) AND FURNISHED DETAILED WRITTEN SUBMISSIONS, WHICH ARE REPRODUCED BY THE CIT(A) IN HIS ORDER ON PAGES 20 TO 26 OF HIS ORDER. THE SUBMISSIONS OF THE ASSESSEE FOUND F AVOUR WITH THE CIT(A), WHO DELETED THE ADDITION. AGGRIEVED, THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 18 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD 21. THE LD. DR PLACED HIS RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. PER CONTRA THE LD.AR FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON THE FOLLOWING JUDICIAL PRECEDENTS:- 1. KOTAK MAHINDRA BANK LTD ITA NO.1657, 1929/M/12, 349 1, 3592, 3593, 6394, 6217/M/2013 2. DCIT VS KOTAK MAHINDRA BANK LTD ITA NO.2817/M/1 6 & 38/M/18 3. CATHOLIC SYRIAN BANK LTD VS CIT 343 ITR 270(SC) 4. CIT VS. KARNATAKA BANK LTD 349 ITR 705 (SC), 2 5 TAXMANN.COM 235 5. DCIT VS UNION BANK OF INDIA ITA NO.4678/MUM/201 3 6. DCIT VS UCO BANK ITA NO.197/KOL/2011 7. CENTRAL BANK OF INDIA VS DCIT ITA NO.7428, 7485 /M/2016 8. DCIT VS. UNION BANK OF INDIA ITA NO.2142, 1627/ M/2014 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE AO MADE DISALLOWANCE AS WE HAVE NOTED I N PARA 20 ABOVE. THE LD CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOL LOWING THE ORDER OF HIS PREDECESSOR IN APPEAL FOR AY 2010-11DATE 04.02. 2013, FOR AY 2011-12 DATED 20.08.2013 AND AY 2012-13 DATED 19.01 .2016. WE HAVE FURTHER NOTED THAT COORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE APPEAL FOR AY 2010-11, 2011-12 AND 2012-13 IN KOTAK MAHINDRA BANK VS DCIT IN ITA(S) NO. 1657, 1929/M/12, 3491, 3592, 3593, 6394, 6217/M/2013 & IN DCIT VS KOTAK MAHINDRA BANK LTD IT A NO.2817/M/16 & 38/M/18 CONFIRMED THE ACTION OF LD CIT(A). THE TRIBUNAL WHILE CONFIRMING THE ORDER OF LD CIT(A) FO LLOWED THE DECISIONS OF HONBLE SUPREME COURT IN CATHOLIC SYRIAN BANK LTD VS CIT 343 ITR 270(SC) AND IN CIT VS. KARNATAKA BANK L TD 349 ITR 705 19 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD (SC), 25 TAXMANN.COM 235. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A), WHICH WE AFFIRMS. IN THE RESULT THIS GROUND OF APPEAL IS DISMISSED. 23. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ITA NO.782/MUM/2018 AY 2014-15 24. IN THIS APPEAL FOR AY 2014-15, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE UNDER RULE 8D(2)(II) IGNORING THE FACTS BROUGHT OUT IN THE ASSESSMENT ORDER THAT EXPENSES OF RS.504.53 CRORES WERE ATTRIBUTABLE TO EARNING OF EXEMPT INCOM E.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) ON THE INSVESTMENT EXCLUDING INVEST MENT OF RS.385.05 CRORES AS ON 31.03.2O13 AND RS.459.19 CRORES AS ON 31.O3.2 O14 AND INVESTMENT IN FOREIGN COMPANY AS ON O1.O4.2O13 AT RS.33,31 LAK HS AND AS ON 31.O3.2O13 AT RS.33.31 LAKHS RELYING ON THE DECISIO N OF THE HON'BLE ITAT IN THE CASE OF GARWARE WALL ROPES LTD. (65 SOT 83) WITHOUT APPRECIATING THE FACT THAT THE DECISION OF HON'BLE ITA T HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN ADMITTED BY THE HON' BLE HIGH COURT.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE BROKEN PERIOD I NTEREST IS ALLOWABLE ON THE MATCHING PRINCIPLES, WITHOUT REALIZING THAT THE SAME HAS NOT BEEN INCURRED FOR REALIZING THE INTEREST ON SECURITIES A S ENUNCIATED BY THE APEX COURT IN VIJAYA BANK LTD. (57 TAXMAN 152) (SC).' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLOW EXPEND ITURE INCURRED ON ESOP, AFTER VERIFICATION IN ACCORDANCE WITH THE PRI NCIPLE LAID DOWN BY HON'BLE SPECIAL BENCH IN THE CASE OF BIOCON LTD. (368/BANG/2010) WI THOUT APPRECIATING THAT THE SAME IS NOT AN ASCERTAINED LI ABILITY, CONTINGENT IN 20 ITA NO.781&782/M/2018 KOTAK MAHINDRA BANK LTD NATURE, QUANTUM CANNOT BE WORKED OUT PRECISELY AND IS CAPITAL IN NATURE AND HENCE NOT ALLOWABLE. 25. WE HAVE SEEN THAT ALL THE GROUNDS OF APPEAL RA ISED IN THIS APPEAL ARE IDENTICAL AS RAISED IN APPEAL FOR ASSESSMENT YEAR 2 013-14. THEREFORE, FOLLOWING THE PRINCIPLES OF CONSISTENCY, THE DECISI ON ARRIVED AT THEREIN SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL ALSO. 26. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27-08-2019. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 27 AUGUST, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI