ACIT LTU 2, CHENNAI V. Indian Overseas Bank, CHENNAI

ITA 948/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6623 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M SRINIVASA RAO
• Keywords: General deduction; Depreciation; Double taxation relief; Earning of tax free income; Permanent establishment; Bad and doubtful debts; Speculative transactions; Rule 8D
• Section: 43B; 14A; 192; 64; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 948/CHNY/2018 / ASSESSMENT YEAR : 2014-15 ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT -2, CHENNAI 600 034. VS. M/S. INDIAN OVERSEAS BANK, 763, ANNA SALAI, CHENNAI 600 002. [PAN: AAACI 1223J] /. I.T.A. NO. 777/CHNY/2018 / ASSESSMENT YEAR : 2014-15 M/S. INDIAN OVERSEAS BANK, 763, ANNA SALAI, CHENNAI 600 002. [PAN: AAACI 1223J] VS. DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT -2, CHENNAI 600 034. ( / APPELLANT) ( / RESPONDENT) ' ( / APPELLANT BY : SHRI. C. NARESH, CA +,' ( / RESPONDENT BY : SHRI. M. SRINIVASA RAO, CIT ( /DATE OF HEARING : 24.10.2019 ( /DATE OF PRONOUNCEMENT : 22.01.2020 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, IN ITA NO. 103/CIT(A)-5/16-17 DATED 29 .12.2017 FOR THE :-2-: ITA NOS.948 & 777/CHNY/2018 ASSESSMENT YEAR 2014-15. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSE THEM BY THIS COMMON ORDER. 2. M/S. INDIAN OVERSEAS BANK, THE ASSESSEE, IS A SC HEDULED BANK AND IS ASSESSED AS A COMPANY FOR THE PURPOSE OF INCOME TAX . WHILE MAKING THE ASSESSMENT FOR AY 2014-15, THE AO MADE VARIOUS ADDI TIONS/DISALLOWANCES TO THE RETURNED INCOME BOTH UNDER PROVISIONS OF THE IN COME TAX ACT AND AS WELL AS U/S. 115JB. AGGRIEVED AGAINST THAT ORDER, THE A SSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) PARTLY ALLOWED T HE APPEAL. AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSEE A S WELL AS THE REVENUE FILED THESE APPEALS. THEY ARE HEARD TOGETHER AND DISPOSE D OFF AS UNDER. ASSESSEES APPEAL IN ITA NO. 777/2018: 3. ON THE GROUND NOS 1.1 & 1.2 IE ON THE ISSUE OF CONSIDERATION OF PROVISION FOR STANDARD ASSETS AND THE PROVISION FOR COUNTRY RISK AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE LD. AR RELIED ON T HE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/CHNY/2018 DA TED 28.02.2019 FOR ASSESSMENT YEAR 2013-14 , THE RELEVANT PORTION IS EXTRACTED AS UNDER: ITA NO.496 & 497/2015: 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD AND JUDICIAL DECISIONS, CIRCULARS, PROVISIONS AND ALSO BANK REGU LATIONS. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN RESPECT OF ONE SUBSTANTIVE ISSU E THAT THE COMMISSIONER OF INCOME TAX ORDER IS BAD IN LAW AND ALSO DEDUCTION U /S.36(1)(VII) AND 36(1)(VIIA) SHALL BE IN RESPECT OF BOTH BAD AND DOUBTFUL DEBTS IRRESPECTIVE OF RURAL OR URBAN DEBTS. THE LEGISLATIVE INTENTION OF DECISION OF CA THOLIC SYRIAN BANK WAS TO PROTECT THE RURAL FARMERS AND ALSO BENEFIT GIVEN WITHOUT AC TUAL WRITE OFF IN THE ACTUAL BOOKS OF ACCOUNTS THOUGH THE PRINCIPLE WAS CONSIDERED IN THE EARLIER YEARS AND THE :-3-: ITA NOS.948 & 777/CHNY/2018 DEPARTMENT HAS ACCEPTED AND PASSED THE ORDER. ON T HE DECISION OF THE ALLOWABILITY OF SEC.36(1)(VIIA) WE RELIED ON THE CO-ORDINATE DE CISION OF LAKSHMI VILAS BANK IN ITA NOS.1205 TO 1209/MDS/2014 DATED 29.01.2016, WH ERE IT HAS BEEN HELD IN DETAIL AT PARA 90 TO 93 IN PAGE NO. 60 TO 63 90. AFTER EXAMINING THE VARIOUS CIRCULARS ISSUED B Y THE BOARD IN RELATION TO SECTION 36(1)(VIIA) AND 36(1)(VII) AND ALSO THE STA TEMENT OF OBJECTS AND REASONS TO THE FINANCE ACT 1986, THE HON'BLE SUPREME COURT CAME TO THE CONCLUSION THAT THE LEGISLATIVE INTENTION BEHIND THE INTRODUCTION O F SECTION 36(1)(VIIA) WAS TO ENCOURAGE RURAL ADVANCES AND TO AID CREATION OF THE PROVISION FOR BAD DEBTS IN RELATION TO SUCH RURAL BRANCHES. SOME OF THE SALIEN T FINDINGS OF THE HON'BLE SUPREME COURT ARE AS FOLLOWS: A MERE PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT AN ALLOWABLE DEDUCTION IN THE COMPUTATION OF TAXABLE PROFITS. HOWEVER, IN THE CAS E OF RURAL ADVANCES, IN LINE WITH THE POLICY TO PROMOTE RURAL BANKING, A PROVISI ON MAY BE ALLOWABLE U/S SEC.36(1)(VIIA), WITHOUT INSISTING ON AN ACTUAL WRI TE- OFF. PROVISIONS OF SECTIONS 36(1) (VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND THEY OPERATE IN THEIR RESPECTIVE FIELDS. A SCHEDULED BANK MAY HAVE BOTH URBAN AND RURAL BRAN CHES. IT MAY GIVE ADVANCES FROM BOTH BRANCHES WITH SEPARATE PROVISION ACCOUNTS FOR EACH. IN THE NORMAL COURSE OF ITS BUSINESS, AN ASSESSEE BANK IS TO MAINTAIN DIFFERENT ACCOUNTS FOR THE RURAL DEBTS AND FOR NON-RURAL/URBAN DEBTS. MAINTENANCE OF SUCH SEPARATE ACCOUNTS WOULD NOT ONLY BE A MATTER OF MERE CONVENI ENCE BUT WOULD BE THE REQUIREMENT OF ACCOUNTING STANDARDS. THE BAD DEBTS WRITTEN OFF IN DEBTS, OTHER THAN THOS E FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTION TO THE EXTENT OF DIFFERENCE BETWEEN THE D EBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROV ISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA). IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAU SE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY, CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. IF THE AMOUNT OF BAD DEBT ACTUALLY WRITTEN OFF IN T HE ACCOUNTS OF THE BANK REPRESENTS ONLY DEBT ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED I N ANY WAY BY THE PROVISO TO CLAUSE (VII). A STATUE IS NOT NORMALLY CONSTRUED TO PROVIDE FOR A DOUBLE BENEFIT UNLESS IT IS SPECIFICALLY SO STIPULATED OR IS CLEAR FROM THE SCH EME OF THE ACT. PROVISO TO SEC 36(1)(VII) WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO 'RURAL' LOANS, WHILE UNDER SECTIO N 36(1)(VII), THE ASSESSEE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HA VING BECOME BAD DEBT AND BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. 91. A NUMBER OF CASES DECIDED BY THE HON'BLE HIGH COURTS AND ALSO BY THE APEX COURT ARE CITED / REFERRED TO IN THE ABOVE JUD GEMENT. CASES OF VIJAYA BANK VS. CIT (323 ITR 166) AND SOUTHERN TECHNOLOGIES VS JCIT (320 ITR 577) ARE REFERRED TO THEREIN. ACCOUNTING STANDARD AS29 AND A LSO THE EFFECT OF BOARD'S CIRCULAR'S HAVE ALSO BEEN DISCUSSED AT LENGTH IN TH E ORDER ALONG WITH THE SUBJECT :-4-: ITA NOS.948 & 777/CHNY/2018 OF INTERPRETATION AND CONSTRUCTION OF THE RELEVANT SECTIONS. THUS, THE JUDGEMENT IS A COMPREHENSIVE ONE WHICH HAS CONSIDERED THE RAT IOS LAID DOWN BY VARIOUS COURTS, THE IMPLICATIONS OF BOARD'S CIRCULARS AND A CCOUNTING STANDARDS. 92. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CATHOLIC SYRIAN BANK THAT 'MERE PROVISION FOR BAD AND DOUBTFUL DEBTS MAY NOT BE ALLOWABLE, BUT IN THE CASE OF A RURAL ADVANCE, THE SAME, IN TERMS OF SECTION 3 6(1)(VIIA) MAY BE ALLOWABLE WITHOUT INSISTING ON AN ACTUAL WRITE OFF .IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAUSE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY CLAUSE (VIIA) APPLIES ONLY TO RURAL AD VANCES.' (EMPHASIS SUPPLIED) (PARA 25&27). 93. THUS, IT CAN BE SEEN THAT IN THE CASE OF PROVI SION MADE TOWARDS NON- RURAL DEBTS, NO DEDUCTION CAN BE ALLOWED AS THERE I S NO SPECIFIC PROVISION IN THE INCOME TAX ACT TO ALLOW THE SAME. THIS INDICATES TH AT THE PROVISION MADE TOWARDS URBAN DEBT SHOULD BE ADDED BACK AND ALLOWED ONLY WHEN BAD DEBTS ARE REALLY WRITTEN OFF. THE QUESTION OF DOUBLE DEDUCTIO N BEING ALLOWED DOES NOT ARISE THEREIN AT ALL, BECAUSE IT IS ALLOWED ONLY ON ACTUA L WRITE OFF. THE HONBLE APEX COURT HAS ALSO HELD THAT THE PROVISO TO SECTION 36( 1)(VII) APPLY ONLY IN RESPECT OF RURAL DEBTS. IN VIEW OF THE ABOVE DECISION AND IN V IEW OF THE OPTION EXERCISED BY THE ASSESSEE THAT IT CAN CLAIMS DEDUCTION ON DOUBTF UL DEBTS AS PER OPTION (B) I.E. 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVE RAGE RURAL ADVANCES, THE ASSESSING OFFICER HAS RIGHTLY WORKED OUT THE ALLOWA BLE DEDUCTION, WHICH IS LESS THAN THAT OF THE PROVISION MADE BY THE ASSESSEE AS DOUBTFUL DEBTS, ALLOWED THE DEDUCTION OF BAD DEBTS FOR ALL ASSESSMENT YEARS AND REMAINING BALANCE WAS BROUGHT TO TAX. ACCORDINGLY, WE REVERSE THE ORDER O F THE LD. CIT(A) AND CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALL THE ABOVE ASSESSMENT YEARS. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. CONSIDERING THE FACTS OF THE CO-ORDINATE DECISION W HERE THE PROVISION HAS BEEN RESTRICTED TO THE EXTENT OF RURAL BRANCHES ONLY. W E CONFIRM THE FINDINGS OF THE COMMISSIONER OF INCOME TAX ON THE ISSUE OF RURAL BR ANCHES FOLLOWING THE CATHOLIC SYRIAN BANK DECISION AND UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX. ACCORDINGLY, THE APPEAL OF THE ASSESSE E IN ITA NO. 496/MDS/2015 IS DISMISSED. 9. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IN ITA NO. 497/MDS/2015 IS ALSO DISMISSED. 10. IN THE RESULT, THE ASSESSEE APPEALS ITA NOS.496 & 4 97/MDS/2015 ARE DISMISSED. ITA NO.77/MDS/2014: 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD.A.R, THIS ISSUE WAS DECIDEDAGAINST THE ASSESSEE. BY THE CO-ORDINATE BEN CH OF CHENNAI TRIBUNAL INASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-LI CITED SUPRA, WHEREIN TRIBUNAL HELD THAT: 60. WE HAVE PERUSED THE ABOVE ORDER OF THE CO-ORDI NATE BENCH OF THISTRIBUNAL IN ITA NO.1815/MDS/2011 DATED 2.4.2013 AND FIND THAT THE :-5-: ITA NOS.948 & 777/CHNY/2018 TRIBUNAL HAS DECIDED BOTH THESE ISSUES AGAINST THE ASSESSEE BY DISMISSING THE GROUNDS OBSERVING AS UNDER.- 4. THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS R EGARDING RESTRICTION OF CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(V IIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS. THE AFT. FOR THE ASSES SEE HAS CONCEDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED AGAINST THE ASS ESSEE BANK IN THE CASE OF BHARAT OVERSEAS BANK LTD. IN ITA NO. 1191/M DS/2012. THIS ISSUE HAD ALSO COME UP BEFORE THE TRIBUNAL IN ITA NO.818/ MDS/2OLO RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE FINDINGS OF THE TRIBUNAL ARE REPRODUCED HEREIN BELOW: 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS: THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON OTHER ISSUES AND P URSUANT TO THE RELIEF GRANTED IN SUCH APPEAL, THE GROSS TOTAL INCOME WHIC H EARLIER STOOD AT I76,54,31,493/- CAME DOWN TO I 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GROSS TOTAL INCOME, DEDUCTION UNDER SE CTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM RS, 74,07,362/- TO RS.2,65,39 ,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING T O , 72,65,099/-, RESULTED IN THE SUM OF 5,38,05,015/- BEING EVENTUAL LY ALLOWED AS DEDUCTION UNDER SECTION 36(1(VIIA), OF THE ACT IN T HE BOOKS OF THE ASSESSEE, ACTUAL PROVISION FOR BAD AND DOUBTFUL DEB TS WAS ONLY 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION O F I2.23 CRORES ON ITS STANDARD ASSETS, IF THE PROVISION FOR BAD AND DOUBT FUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANCE UNDER SECTION 36(1))(VIIA) WAS IN EXCESS OF SUCH PROVISION. HOWEVER, IF THE PROVISION FOR STANDARD ASSETS WAS ALSO CONSIDERED AS PROVISION FOR BAD AND DOUBTF UL DEBTS,THEN THE TOTAL PROVISION COULD GO UP TOI 6,24,44,027I-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WELL WITHIN THE LIMITS SPECIFIED UNDER SECTION 3(1)VIIA OF THE ACT. AT THIS JUNCTURE, A LOOK AT SE CTION 36(1)(VIIA) IS NECESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BRE VITY. 36(1)(VIIA,) A SCHEDULED BANK [NOT BEING A BANK INC ORPORATEDBY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NONSCHEDUL ED BANK FOR A CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HA/F PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS C LAUSE AND CHAPTER VLV AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF T HE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUBJECT TO THE ACTUAL PROVISION MADE BY THE ASSESSEE, WHICH IN NO CASE SHALT EXCEED 7.5% OF THE GROSS TOTAL INCOME. THEREFORE, THE ARGUMENT OF THE ASSESSEE THAT WHATEV ER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED, IS NOT IN ACCORDANCE WITH LAW. NOW :-6-: ITA NOS.948 & 777/CHNY/2018 CONSIDERING THE SECOND ASPECT, WHETHER PROVISION FO R STANDARD ASSETS COULD BE CONSIDERED AS PROVISION FOR BAD AND DOUBTF UL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AGAINST ANY D EBTS WHICH HAD BECOME DOUBTFUL. STANDARD ASSETS ARE ALWAYSCONSIDER ED RECOVERABLE, IN THE SENSE, BANK HAS NO DOUBT OF RECOVERABILITY. WHE N THE BANK ITSELF HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PR OVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS. THE DEBT ITSELF BEING GOOD, A PROVISION MADE ON GOOD DEBT CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL D EBTS, MAY BE, THE RB! HAS MADE A FOR 10% PROVISION FOR STANDARD ASSETS AL SO A NORM. THIS CAN HOWEVER BE CONSIDERED AS AMEASURE PRESCRIBED IN ABU NDANT CAUTION, TO DEAL WITH A SITUATION WHERE BANKS ARE NOT TO SUFFER SHOCK OF SUDDEN DELINQUENCY THAT COULD HAPPEN IN FUTURE, THERE IS A LWAYS A POSSIBILITY THAT AN ASSET, WHICH IS FULLY RECOVERABLE MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPENING OF SUCH A CO NTINGENCY CANNOT BE A SUFFICIENT REASON TO CONSIDER A PROVISION MADE ON S TANDARD ASSETS ALSO AS A PROVISION FORBAD AND DOUBTFUL DEBTS, THEREFORE, C LAIM OF THE ASSESSEE THAT PROVISION FOR STANDARD ASSETS ALSO HAS TO BE C ONSIDERED FOR APPLYING THE CONDITION SAT OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION FOR STANDARD ASSETS IS NOT CO NSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PROVISION FOR BA D AND DOUBTFUL DEBTS MADE BY THE ASSESSEE IN ITS BOOKSI4,01,44,027/- FAL L MUCH BELOW THE SUM OF I5,38,05,015/- ALLOWED BY THE ASSESSING OFFI CER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLEARLY SHO W THAT BUT FOR THE DEDUCTION ALLOWED TO THE ASSESSEE AS CLAIMED BY IT IN ITS RETURN, THERE WAS NO DISCUSSION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIED AND WHETHER THE LIMITS WERE CORRECTED WORKED OUT ADMITTEDLY, NO QUESTION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS ALSO WITH REGARD TO THE CLAIM MADE BY IT UNDER SECTION 36(1)( VIIA), INSOFAR AS IT CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSESSING OFFICER HAD NOT COME TO ANY C ONCLUSION AT ALL HAVING NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36FTVIIA OF THE ACT. WE CANNOT SAY THAT HE HAD TAKEN A VIEW WHICH WAS IN ACCORDANCE WITH LAW. IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COURSE, A CRYPTIC ORDER OF THE ASSESSING OFFICER BY ITSELF MA Y NOT SHOW THAT THERE WAS NO THOUGHT GIVEN: BY HIM ON A CLAIM OF THE ASSE SSEE. HOWEVER, HERE THERE WAS IO ENQUIRY MADE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. THEREFORE, THE ORDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, ANDALLOWING SUCH CLAIM, WITHOUT ANY DISCU SSION,: WILL DEFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE.AS HELD BY HONB!E APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. V. LT (243 ITR 83, PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS A TERM OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN ORDER WI THOUT APPLICATION OF MIND IS DEFINITELY PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE ARE IN AGREEMENT WITH ID. CIT THAT THE ORDER OF ASSESSING OFFICER WA S INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE.NO INTERFER ENCE IS REQUIRED. :-7-: ITA NOS.948 & 777/CHNY/2018 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. IN VIEW OF THE AFORESAID FINDINGS, THIS GROUND OF A PPEAL OF THE ASSESSEE IS DISMISSED. 6.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TR IBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THI S GROUND RAISED BY THE ASSESSEE. 4. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE A BOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT , WE FIND NO REASON TO IN TERFERE WITH THE ORDER OF THE LD. CIT(A) AND HENCE REJECT THE CORRESPONDING G ROUNDS OF THE ASSESSEE. 5. ON THE ISSUE OF RESTRICTION OF RELIEF U/S. 90 TO THE EXTENT OF TAX PAID IN FOREIGN COUNTRY INSTEAD OF TAX CHARGED ON FOREIGN I NCOME WHICH IS INCLUDED IN TOTAL INCOME, THE AR RELIED ON THE ORDER OF THIS TR IBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/CHNY/2018 DATED 28.02.2019 FOR ASSESSMENT YEAR 2013- 14 , THE RELEVANT PORTION IS EXTRACTED AS UNDER: 6.1 ON HEARING RIVAL CONTENTIONS, WE FIND THAT T HIS ISSUE WAS DECIDED AGAINST THE ASSESSEE IN ITS OWN CASE FOR THE ASSESSMENT YEAR 20 11-12 IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03.04.2017. THE RELEVANT PORTION OF THE SAID ORDER IS EXTRACTED HERE UNDER:- 18. THE LAST GROUND: IN THIS APPEAL IS WITH. REGARD TO RESTRICTING THE RELIEF U/S.90 TO THE EXTENT OF TAX PAID IN THE FOREIGN COUNTRY. 19. WE HAVE HEARD BOTH THE PARTIES ARID PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE SAME ISSUE CAME FOR CONSIDERATION BEFO RE THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN ASSESSES OWN CASE FOR ASSESSME NT YEAR 2010-11 CITED SUPRA, WHEREIN TRIBUNAL HELD THAT:- 76. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISS UE HAS BEEN DECIDED AGAINST THE ASSESEE BY THE CO-ORDINATE BENCH FOR THE ASSESS MENT YEAR 2009-10/N 174 NO.1949/MDS/2012 DATED 18.6.2014 AT PAGES 11 TO 13 IN PARAS 21 TO 25 OF THE ORDER, 77. WE HAVE PERUSED THE SAID ORDER OF THIS TRIBUNAL AND FIND THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE HO/DING AS UNDER: :-8-: ITA NOS.948 & 777/CHNY/2018 21. THE SEVENTH SUBSTANTIVE GROUND CHALLENGES THE C LTASORDER RESTRICTING RELIEF 90% OF THE TAX PAID IN FOREIGN COUNTRIES 22. FACTUAL BACKDROP QUA THIS ISSUE IS THAT THE ASS ESSEEHADRAISED A CLAIM OF DOUBLE TAXATION RELIEF IN MEMO OF INCOME FROM ITS O VERSEAS BRANCHES IN SOUTH KOREA, SINGAPORE, THAILAND, SRILANKAANDHONG KONG AM OUNTING TO I357,573I- I21,32,37,338/-I7,84,71,232, ,I42,94,845/- AND I39, 80,57,968/- RESPECTIVELY. ITS THRUST WAS UPON VARIOUS DOUBLE TAXATION AVOIDAN CE AGREEMENTS DTAAS BETWEEN INDIA AND THE SAID COUNTRIES EXCEPT HONG KO NG. THE ASSESSING OFFICERHAD RESTRICTED THIS RELIEF @ 16.5% LE THE PR EVAILING TAX RATE IN HONGKONG. THEREAFTER, HE DISTINGUISHED CASE LAW PVAL .KULANDA GANCHETTIARVS CIT, 267 ITR 654 BY OBSERVING THAT CONTRARY TO THE FACTS OFTHIS CASE, SHRICHTTIAR WAS FISCALLY DOMICILED IN MALAYSIA AND DID NOTHAVE ANY PERMANENT ESTABLISHMENT IN INDIA. ON DTM WITH SOUTHKOREA, THE ASSESSING OFFICER WAS O F THE VIEW THAT THE TERMS CONTAINED THEREIN DID NOT GIVE EXCLUSIVE RATE OF TA X TO THE CONCERNED COUNTRY AND IT HAD ONLY PROVIDED FOR CREDIT METHODOF RELIEF IN DOUBLE TAXATION.ACCORDINGLY, HE DECLINED TO ACCEPT THE ASS ESSES CLAIM. 23. COMING TO THE DTMS BETWEEN INDIA AND SINGAPORE, THAILARIDANDSRILANKA, THE ASSESSING OFFICER OBSERVED THAT THEY ALSO RECOG NIZED CREDIT METHOD. HE ALLEGED THE ASSESSEE NOT TO HAVE PROVIDED ANYDIFFER ENCE IN RATES OF TAX IN THE ABOVE STATED TAX JURISDICTIONS.SIMULTANEOUSLY, THE ASSESSING OFFICER HELD THAT ON FURNISHING DETAILSONASSESSEES PART; THE CLAIM WOUL D BE ALLOWED IN ITS FAVOUR. THISRESULTED IN DISALLOWANCE/ADDITION OF 55, 65,44, 48/-. 24.IN LOWER APPELLATE ORDER, THE CIT(A) HAS QUOTED A NOTIFICATION NO. SO 2123(E) DATED 28.8.2008 REPORTED AS 304 ITR(ST )63, CLARIFYING THAT IN SUCH A CASE INVOLVING A DTAA, AN INCOME HAS TO BE INCLUDED IN THE TOTAL RECEIPTS AND THE NECESSARY RELIEF IS TO BE GRANTED BY ELIMINATI ON METHOD OR AS PER THE TERMS OF AGREEMENT SEEKING TO AVOID DOUBLE TAXATION. HE R ELIES UPON FINANCE ACT, 2012 INSERTING EXPLANATION 3 TO SECTION 90 MAKING T HE NOTIFICATION RETROSPECTIVELY APPLICABLE. IN THIS MANNER, THE CIT (A) HAS DIRECTED THE ASSESSING OFFICER TO ALLOW RELIEF TO THE ASSESSEE A S PER THE AFORESAID NOTIFICATION. 25. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE RELEVANT FINDINGS IN THE ORDERS OF ASSESSING OFFICER AS WELL AS THE CLTA,) THE PARTIES ARE UNANIMOUS BEFORE US THAT THIS VARY ISSUE STANDS DECIDED IN TH E REVENUES FAVOUR BY THE TRIBUNALSUPRA) IN PRECEDING ASSESSMENT YEAR. SO, WE ALSO FOLLOW SUITAND REJECT THE ASSESSEES RELEVANT GROUNDS. 78 RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIS MISS THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. 6.2 IN VIEW OF THE ABOVE FINDINGS OF THIS TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REJECT T HE GROUNDS RAISED BY THE ASSESSEE. 6. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE A BOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT , WE FIND NO REASON TO IN TERFERE WITH THE ORDER OF :-9-: ITA NOS.948 & 777/CHNY/2018 THE LD. CIT(A) AND HENCE REJECT THE CORRESPONDING G ROUNDS OF THE ASSESSEE. 7. ON THE ISSUE OF DEPRECIATION ON GOODWILL, THE AR RELIED ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/CHNY/2018 DATED 28.02.2019 FOR THE ASSESSMENT YEAR 2013-14 , THE RE LEVANT PORTION IS EXTRACTED AS UNDER: 7. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO DENIAL OF DEPRECIATION ON GOODWILL AND THE LD. AR SUBMITTED THAT THE BANK HA D DURING THE YEAR ENDED 31.01.2010 TAKEN OVER ASSETS &LIABILITIES OF SHREE SUVAMASAHAK ARI BANK LTD. THE EXCESS OF LIABILITIES OVER ASSETS AMOUNTING TO I246,52,02,148/- HAS BEEN TREAT ED AS GOODWILL, DEPRECIATION ON THE SAID AMOUNT OF GOODWILL BASED ON THE WDV AS ON 01.04.201 2 OF RS. 26,00,01,789/- HAS BEEN CLAIMED AS DEDUCTION BASEDON THE DECISION OF SUPREM E COURT IN THE CASE OF CIT VSSMIFT SECURITIES LTD (CIVIL APPEAL NO.5961 OF 2012 (ARISI NG OUT OF SLP (C) NO.35600 OF 2009) DATED 22.08.2012.THE AO REJECTED THIS CLAIM ON THE FOLLOW ING REASONS: AS HELD BY THE ASSESSEE, ASSESSEE HAS TAKEN OVER T HE SPECIFIC ASSET AND LIABILITIES OF M/S.SHREESWATNASAHAKARI BANK LTD AS EXISTING AS ON 19.05.2009 AS PER THE APPROVAL OF RBI. ACCORDINGLY IT RESULTED IN EXCESS OF LIABILITIES OVER ASSETS ABSORBED ON ACCOUNT OF ABSORPTION SCHEME OF RB1. THE LIABILITIES ARE BALANCE SHEET ENTRIES AND SAME WILL BE CONSIDERED A S AND WHEN INCURRED OR PAID AS PER THE PROVISIONS OF IT ACT. CONSIDERING S UCH LIABILITIES AS GOOD WILL IS NEITHER JUSTIFIABLE NOR BASED ON ANY PRUDENT ACCOUN TING NORMS/METHODS OF DUE DILIGENCE. ASSESSEES CONTENTION IS DEVOID OF M ERITS AND SUPPORT OF LAW. AS PER THE DEFINITION OF THE GOODWILL AS MADE IN THE PROVISIONS OF IT ACT THE SAME IS READ AS UNDER:- FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE MERELY EQUATED EXCESS LIABILITIES AS ATTRIBUTABLE TO GOODWILL ON ACCOUNT OF ABSORPTIO N SCHEME IN FACT IT IS OPPOSITE TO THE GOODWILL AS DEFINED IN THE IT ACT A S ABOVE AND SAME DO NOT QUALIFY ASSET LEAVE ALONE INTANGIBLE ASSET AS IT IS A LIABILITY. HENCE ASSESSEES CONTENTION TO THAT LIABILITY. HENCE ASSESSEES CONT ENTION TO TREAT LIABILITY AS AN INTANGIBLE ASSET IF FAR STRETCHED AND CONTRARY TO T HE PROVISIONS OF IT ACT IN LATTER AND SPIRIT. ASSESSEE WAS REQUESTED TO RECONCILE THE GOOD WILL A S REFLECTED IN THE BOOKS OF THE ABSORBED CONCERN I.E. M/S1SHREE SWARNASAHAKARIB ANK LTD AS APPEARING IN THEIR BLOCK OF ASSETS PRIOR TO ITS ABSORPTION HENCE ASSESSEES NOTIONAL WORKING OF GOODWILL BASED ON EXCESS LIABILITIES IS NOT ALLO WABLE AS INTANGIBLE ASSET QUALIFIED UNDER GOOD WILL. ANY ABSORPTION SCHEME SURPLUS OF ASSET OVER LIABI LITIES HAS TO BE TAKEN TO RESERVES ACCOUNT OF BALANCE SHEET. SUBSEQUENT TO AB SORPTION AS HELD BYHONBLE ITAT IN THE CASE OF SPENCER AND COMPANY L TD OF ITAT VIDE ITR NO.440 OF 2011. ON SIMILAR ANALOGY THE SURPLUS OF L IABILITIES OVER ASSETS HAS TO BE TAKEN TO THE BALANCE SHEET AND SAME HAS NO BEARI NG ON PROFIT AND LOSS :-10-: ITA NOS.948 & 777/CHNY/2018 ACCOUNT OF ASSESSEE AS IT TANTAMOUNT TO SKEWED REPR ESENTATION OF PROFITS ON THE YEAR OF ABSORPTION SO AS TO AVOID GENUINE TAXES DUE TO EXCHEQUER. 7.1 THELD. AR INVITED OUR ATTENTION TO THE COPY OF MEMORANDUM OF UNDERSTANDING FOR THE PROPOSED TRANSFEROR DATED 17.02.2009 AND TO THE SC HEDULE TO THE MOU AND SUBMITTED THAT AS PER THE MOU, LIABILITIES TO BE TAKEN OVER AS ON 31 .12.2008 WAS VALUED AT I1,078.13 CRORES AND THE ASSETS TO BE TAKEN OVER AS ON 31.12.2008 WA S VALUED AT I870.58 CRORES AND THE RESULTANT DEFICIT OF I207.55 CRORES WAS NOTIONALLY TREATED AS PURCHASE CONSIDERATION AND ARGUED THAT ON THIS AMOUNT THE ASSESSEE CLAIMED DE PRECIATION. IN SUPPORT OF HIS CONTENTION, HE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD.(348 ITR 302) DATED 22.08.2012. 7.2 PER CONTRA, THE LD. DR INVITED OUR ATTENTION T O PARA 12 OF THE MEMORANDUM OF UNDERSTANDING, WHICH IS EXTRACTED AS UNDER : 12. REGARDING GOODWILL:-SINCE THE BUSINESS OF TRAN SFEROR BANK IS UNDERMORATORIUM FROM 14/09/2006, THE TRANSFEROR BAN K DOES NOT ENJOY ANY GOODWILL IN COMMERCIAL TERMS. ACCORDINGLY, NO MONET ARY CONSIDERATION ISPROVIDED FOR GOODWILL. AND SUBMITTED THAT AS PER THE AGREEMENT, IT IS CLE AR THE TRANSFEROR BANK DOES NOT ENJOY ANY GOODWILL IN COMMERCIAL TERMS AND HENCE, THERE IS NO GOODWILL. THE LD. DR FURTHER INVITED OUR ATTENTION TO THE FOLLOWING PORTION OF THE JUDGEMEN T OF THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD.(348 ITR 302) : ASSESSING OFFICER, AS A MATTER OF FACT, CAME TO TH E CONCLUSION THAT NO AMOUNT WAS ACTUALLY PAID ON ACCOUNT OF GOODWILL. TH IS IS A FACTUAL FINDING. THE COMMISSIONER OF INCOME TAX (APPEALS) [ CIT(A), FOR SHORT] HAS COME TO THE CONCLUSION THAT THE AUTHORIS ED REPRESENTATIVES HAD FILED COPIES OF THE ORDERS OF THE HIGH COURT OR DERING AMALGAMATION OF THE ABOVE TWO COMPANIES; THAT THE ASSETS AND LIA BILITIES OF M/S. YSN SHARES AND SECURITIES PRIVATE LIMITED WERE TRANSFER RED TO THE ASSESSEE FOR A CONSIDERATION; THAT THE DIFFERENCE BETWEEN TH E COST OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT T HE ASSESSEE- COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WO RTH OF THE ASSESSEE-COMPANY STOOD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY INCOME TAX APPELLATE TRIBUNAL [ITAT, FOR SHORT] . WE SEE NO REASON TO INTERFERE WITH THE FACTUAL FINDING AND SUBMITTED THAT THE DECISION OF THE SUPREME CO URT IS DISTINGUISHABLE ON FACTS OF THE ASSESSEES CASE. IN THE REPORTED CASE, THE ASSETS A ND LIABILITIES OF M/S. YSN SHARES AND SECURITIES PRIVATE LIMITED WERE TRANSFERRED TO THE ASSESSEE FOR A CONSIDERATION; THAT THE DIFFERENCE BETWEEN THE COST OF AN ASSET AND THE AMO UNT PAID CONSTITUTED GOODWILL AND THAT THE ASSESSEE-COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEE-COMPANY STOOD INCREASED. THIS FINDING HAS ALSO BEEN UPHELD BY INC OME TAX APPELLATE TRIBUNAL. HOWEVER, IN THE ASSESSEES CASE, THERE IS A DEFICIT OR LOSS O F I207.55 CRORES IN THE PURCHASE CONSIDERATION . FURTHER, AS PER TRANSFER AGREEMENT EXTRACTED , SUPRA, ITSELF IT IS CLEAR THAT THE TRANSFEROR BANK DOES NOT ENJOY ANY GOODWILL IN CO MMERCIAL TERMS AND HENCE, THERE IS NO GOODWILL. WHEN THERE IS NO GOODWILL AND THE ASSESSE E HAS ALSO NOT PAID ANY AMOUNT FOR GOODWILL IT IS NOT ENTITLED TO CLAIM ANY GOODWILL, CONSEQUENTLY NO DEPRECIATION CAN BE ALLOWED. 7.3 WE HEARD RIVAL SUBMISSIONS AND GONE THROUGH RE LEVANT MATERIAL. IT IS CLEAR FROM THE ABOVE THAT THE ASSESSEE DID NOT HAVE ANY GOODWILL I N COMMERCIAL TERMS AS IT HAS ACQUIRED MORE LIABILITIES THAN THE ASSETS. THE LD.DRS SUBMI SSION THAT WHEN THERE IS NO GOODWILL AS PER THE TERMS OF THE AGREEMENT AS WELL AS IN REALITY. W HEN THE ASSESSEE HAS NOT PAID ANY AMOUNT :-11-: ITA NOS.948 & 777/CHNY/2018 FOR THE GOODWILL, IT CANNOT CLAIM EXISTENCE OF ANY GOODWILL. WHEN THERE IS NO EXISTENCE OF GOODWILL, IT IS NOT ENTITLED FOR ANY DEPRECIATION. THEREFORE, THE ASSESSEES CORRESPONDING GROUNDS FAIL. 8. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE A BOVE FINDINGS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE EARL IER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT , WE REJECT THE CORRESPON DING GROUNDS OF THE ASSESSEE. 9. ON THE ISSUE OF DISALLOWANCE OF CONTRIBUTION TO STAFF WELFARE FUND, THE AR RELIED ON THE ORDER OF THIS TRIBUNAL IN THE ASSE SSEES OWN CASE IN ITA NO. 776/CHNY/2018 DATED 28.02.2019 FOR ASSESSMENT YEAR 2013-14 , THE RELEVANT PORTION IS EXTRACTED AS UNDER: 8. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF CONTRIBUTION TO STAFF WELFARE FUND . THE LD. AR SUBMITTED THAT T HIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THIS TRIBUNAL IN ITS OWN CASE FOR THE ASSESSMEN T YEAR 2011-12 IN ITA NO.77/MDS/2014. 8.1 ON HEARING BOTH SIDES, WE FIND THAT THIS TRIBUN AL VIDE ORDER DATED 03.04.2017 IN ITA NO.77/MDS/2014 FOR THE ASSESSMENT YEAR 2011-12 HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THIS TRIBUNAL, SUPRA, IS EXTRACTED AS UNDER:- 12. THE THIRD GROUND IS WITH REGARD TO DISALLOWANCE OF CONTRIBUTIONOF STAFF WELFARE FUND. 13. AT THE OUTSET, THE LD. AR. SUBMITTED THAT THIS ISSUE CAME FORCONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2126/MDS/2013(SUPRA). 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. AR THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH OF CHENNAI TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 CITED SUPRA, WHERE IN TRIBUNAL HELD THAT: 67. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE I S THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUCTIO N IN RESPECT OF CONTRIBUTION TO STAFF WELFARE FUND OVERLOOKING THE MANDATORY REQUIREMENT OF PAYMENT AS AN EMPLOYER. :-12-: ITA NOS.948 & 777/CHNY/2018 68. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.1815/MDS/ 2011 DATED 2.4.2013 IN PARA 14 OF THE ORDER. RESPECTFULLY FOLL OWING THE SAID ORDER OF THIS TRIBUNAL, WE DISMISS THE GROUND OF ASSESSEE ON THIS ISSUE. 14.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T RIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THI S GROUND RAISED BY THE ASSESSEE. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE AB OVE ORDER OF THIS TRIBUNAL, WE REJECT THE CORRESPONDING GROUNDS OF APPEAL OF THE ASSESSEE. 10. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT , WE REJECT THE CORRESPON DING GROUNDS OF THE ASSESSEE. 11. ON THE ISSUE OF RECOVERY IN RESPECT OF BAD DEB TS WRITTEN OFF RELATING TO RURAL BRANCHES VIZ GROUND NOS 5.1 & 5.2, THE AR REL IED ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/ CHNY/2018 DATED 28.02.2019 FOR ASSESSMENT YEAR 2013-14 , THE RELEVA NT PORTION IS EXTRACTED AS UNDER: 9. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO RECOVERY OF BAD DEBTS WRITTEN OFF RELATING TO RURAL BRANCHES . THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL IN ITA NO35/MDS/2014VIDE ORDER DATED 03.4.2017. 9.1 HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORD ER OF THIS TRIBUNAL IN ITA NO.35/MDS/2017 DATED 03.04.2017. THE RELEVANT PORTI ON OF THE ORDER OF THIS TRIBUNAL, SUPRA IS EXTRACTED HERE UNDER:- 27. THE FIFTH GROUND IS WITH REGARD TO ADDITION TOW ARDS BAD DEBTS RECOVERED. 27.1 AFTER HEARING BOTH THE PARTIES, THE SAME ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ITA NO.1949/M DS./2012 VIDE :-13-: ITA NOS.948 & 777/CHNY/2018 ORDER DATED 18.06.2014 IN ASSESSES OWN CASE WHEREI N THE TRIBUNAL HELD THAT: 52. RELEVANT FACTS QUA THIS GROUND ARE THAT IN RS MEMO OF INCOME, THE ASSESSEE IS STATED TO HAVE CLAIMED DEDU CTION TOWARDS BAD DEBTS RECOVERED. IT EXPLAINED BEFORE TH E ASSESSING OFFICER THAT THIS AMOUNT PERTAINED TO RURAL ADVANCE S WRITTEN OFF BUT NOT ALLOWED IN VARIOUS PRECEDING ASSESSMENT YEA RS. IT STRESSED THE FACT THAT WHEN BAD DEBTS ITSELF HAD BE EN DISALLOWED AS DEDUCTION, RECOVERY THEREOF COULD NOT HAVE BEEN TAXED IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSIN G OFFICER HELD THAT THEASSESSEE HAD ORDINARILY CLAIMED THE AB OVE BAD DEBTS WRITTEN OFF AS EXPENDITURE. FURTHER, HE OBSER VED THAT IT HAD A/SO FIFED APPEALS BEFORE THE TRIBUNAL AND TH E ISSUE WAS YET TO ATTAIN FINALITY. ACCORDINGLY, HE DISALLOWED THE AFORESAID AMOUNT. 53. IN LOWER APPELLATE ORDER, THE CIT(A) HOLDS THAT THE RECOVERY MADE IN RESPECT OF BAD DEBTS COULD BE TAXED ONLY IF THE BAD DEBTS THEMSELVES ARE ALLOWED AS A DEDUCTION BY QUOT ING SECTION 41(4) IN SUPPORT. HE DISAGREES WITH THE ASSESSING O FFICER AFTER EXPRESSING AN OPINION THAT WHEN THE BAD DEBTS WRITT EN OFF HAD NOT BEEN ALLOWED AS A DEDUCTION, THE SAME CANNOT BE TAXED AGAIN. THEREFORE, THE REVENUE HAS RAISED THE INSTAN T GROUND. 54. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE ORDERS OF ASSESSING OFFICER AND CIT(A). EVEN THE REVENUE DOES NOT DISPUTE THAT THE ASSESSEE HAD RAISED ITS CLAIM OF D EDUCTION OF BAD DEBTS RELATING TO THE VERY SUMS IN PRECEDING AS SESSMENT YEARS. THE ASSESSING OFFICER DID NOT ALLOW THIS REL IEF IN RELEVANT PREVIOUS YEAR, WHEN IT HAS RECOVERED THE AFORESAID DEBTS, THE REVENUE IS AGAIN SEEKING TO TAX THE SAME. THERE IS NO COGENT EVIDENCE BEFORE US TO DISPUTE THIS FACTUAL POSITION MOREOVER, THE CIT(A) HASCITED SECTION 41(4) OF THE ACT WHILST GRANTING RELIEF .THE REVENUE HAS FAILED TO POINT OUT ANY LEG AL OR FACTUAL ERROR INCIT(A)S FINDINGS THEREFORE, THE SAME ARE A FFIRMED. HOWEVER, AS A MATTER OF CAUTION, WE OBSERVE THAT TH EASSESSEES CLAIM OF BAD DEBTS PERTAINING TO THOSE SUMS INPRECE DING ASSESSMENT YEARS, IF ANY, SHALL BE DEEMED TO HAVE B EEN DISMISSED. WITH THESE OBSERVATIONS, THE REVENUES G ROUND IS REJECTED. :-14-: ITA NOS.948 & 777/CHNY/2018 IN VIEW OF THE ABOVE ORDER OF TRIBUNAL, WE DISMISS THE GROUND RAISED BY THE REVENUE. FURTHER, WE MAKE IT CLEAR THAT IF I T IS ALLOWED AS BAD DEBT IN EARLIER YEARS AND RECOVERED THE SAME IN THE ASSESSMENT YEAR UNDER CONSIDERATION TO BE TREATED AS INCOME OF ASSE SSEE. 9.2 RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, WE ALLOW THESE GROUNDS OF THE ASSESSEE SUBJECT TO THE ABOVE LINES. 12. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT , WE ALLOW THE CORRESPOND ING GROUNDS OF THE ASSESSEE. 13. ON THE ISSUE OF DEPRECIATION ON UPS ALLOWED AT 60% INSTEAD OF 80%, THE AR RELIED ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/CHNY/2018 DATED 28.02.2019 FOR ASSESSMENT Y EAR 2013-14 , THE RELEVANT PORTION IS EXTRACTED AS UNDER: 10. THE NEXT GROUND RAISED BY THE ASSESSEE ISWITH REGARD TO DEPRECIATION ON UPS ALLOWED AT 60% INSTEAD OF 80% CLAIMED BY THE ASSESS EE. THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEEBY THIS TRIBUNAL IN ITA NO,77/MDS/2014 DATED 3.4.2017 FOR THE ASSESSMENT YEAR 2011-12. 15. THE FOURTH GROUND IN THIS APPEAL IS WITH REGARD TO DISALLOWING THE CLAIM OF DEPRECIATION ON UPS AT 80% OVERLOOKING THE FACT THA T UPS ISAN ENERGY SAVING DEVICE ENTAILING FOR HIGHER DEPRECIATION. 16. AT THE TIME OF HEARING, THE ID.A.R SUBMITTED TH AT THIS ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OW N CASE IN I.T.A.NO.2L26/MDS/2013(SUPRA) AND THE TRIBUNAL DECI DED THE ISSUE AGAINST THE ASSESSEE. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE ID.A.R, THIS ISSUE WAS DECIDED A GAINST THE ASSESSEE BY THE CO- ORDINATE BENCH OF CHENNAI TRIBUNAL IN ASSESSES OWN CASE FOR ASSESSMENT YEAR 2010-11 CITED SUPRA, WHEREIN TRIBUNAL HELD THAT: :-15-: ITA NOS.948 & 777/CHNY/2018 69. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEEIS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORD ER OF THE ASSESSING OFFICER DISALLOWING THE CLAIM OF DEPRECIATION ON UPS AT 80% OVERLOOKING THE FACT THAT UPS IS AN ENERGY SAVING DEVICE ENTAILING FOR HIGHER DEP RECIATION. 70. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH FOR THE ASSESSMEN T YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014 AT PAGES 10 & 11 I N PARA 16 TO 18 OF THE ORDER. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, WE REJECT THIS GROUND RAIS ED BY THE ASSESSEE. IN VIEW OF THE ABOVE REASONING OF THIS TRIBUNAL, WE REJECT THIS ISSUE RAISED BY THE ASSESSEE . 14. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT, WE REJECT THE CORRESPOND ING GROUNDS OF THE ASSESSEE. 15. ON THE ISSUE OF DEPRECIATION ON ATM, THE AR REL IED ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 776/ CHNY/2018 DATED 28.02.2019 FOR ASSESSMENT YEAR 2013-14 , THE RELEVA NT PORTION IS EXTRACTED AS UNDER: 11. THE NEXT GROUND RAISED BY THE ASSESSEE ISW ITH REGARD TO THE DEPRECIATION ON ATM. THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED IN FAV OUR OF THE ASSESSEE BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS.SARASWATINFOTECH L TD. IN ITA(L) NO.1243 OF 2012. ON HEARING BOTH SIDES, WE FIND THAT THE HONBLE BOMBAY HIGH CO URT IN THE ABOVE CITED CASE HAS HELD AS UNDER:- 5) IN SECOND APPEAL, THE TRIBUNAL BY ITS ORDER DATE D 14.03.2012 HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AND REGULATE T HE FLOW OF POWER TO AVOID ANY KIND OF DAMAGE TO THE COMPUTER NETWORK DUE TO FLUCTUATION I N POWER SUPPLY WHICH COULD LEAD TO LOSS OF VALUABLE DATA. THE TRIBUNAL RELIED UPON THE DECISION OF DELHI HIGH COURT DATED :-16-: ITA NOS.948 & 777/CHNY/2018 20/1/2011 IN THE MATTER OF CIT VS. ORIENT CERAMICS & INDUSTRIES LTD IN WHICH UPS WAS HELD TO BE THE PART OF THE COMPUTER SYSTEM AND DEPR ECIATION AT 60% WAS ALLOWED. SIMILARLY, SO FAR AS ATMS ARE CONCERNED, THE TRIBUN AL ON FINDING OF FACT CONCLUDED THAT ATM CANNOT FUNCTION WITHOUT THE HELP OF COMPUTER AN D WOULD BE A PART OF THE COMPUTER USED IN THE BANKING INDUSTRY. RELIANCE WAS PLACED B Y THE TRIBUNAL UPON THE DECISION OF THE DELHI BENCH OF TRIBUNAL IN THE MATTER OF DCIT V . GLOBAL TRUST BANK (ITA NO.474/D/09) WHEREIN IT HAS BEEN HELD THAT ATM WAS A COMPUTER EQ UIPMENT AND DEPRECIATION @ 60% WAS ALLOWED. SO FAR AS THE USE OF SOFTWARE IS CONCE RNED, THE TRIBUNAL RECORDS A FACT THAT THE EVIDENCE OF THE USE OF THE SOFTWARE ON 31/3/200 8 WAS PRODUCED BEFORE THE TRIBUNAL. THUS, THE TRIBUNAL HELD THAT DEPRECIATION @ 30% ON SOFTWARE WAS RIGHTLY CLAIMED. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF SARASWAT INFOTECH LTD., SUPRA, WE ALLOW THIS GROUND OF THE ASSESSEE . IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALL OWED. 16. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING IT, WE ALLOW THE CORRESPONDI NG GROUNDS OF THE ASSESSEE. REVENUES APPEAL IN ITA NO. 948/CHNY/2018: 17. ON THE ISSUE OF DEDUCTION U/S. 36(1)(VIIA) BASE D ON ADVANCES OUTSTANDING AND NOT ON INCREMENTAL ADVANCES, THE LD DR PRESENTED THE CASE ON THE LINES OF GROUNDS OF APPEAL . PER CONTRA, THE LD AR RELIED ON THE ORDERS OF THE CALCUTTA HIGH COURT IN THE CASE OF UTTARBAN GA KSHETRIYA GRAMIN BANK IN ITA NO. 76/KOL/2016 AND THE ASSESSEES OWN CASE IN ITA NO. 947/CHNY/2018 DATED 28.02.2019 , THE RELEVANT PORTI ON IS EXTRACTED AS UNDER: :-17-: ITA NOS.948 & 777/CHNY/2018 13. WITH REGARD TO THE CLAIM THAT THE DEDUCTION U/S36(1)(VIIA) NEEDS TO BE CALCULATED BASED ON THE INCREMENTAL ADVANCES FOR EA CH MONTH AND NOT ON THE OUTSTANDING ADVANCE AS ON THE LAST DAY OF THE RELEV ANT MONTH, THE LD. DR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL. PER CONTRA, THE LD. AR SUBMITTED THAT THIS ISSUE WAS DECIDED BY THIS TRIBUNAL IN FAVOUROFTHEASSESSEE IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03.04.2017. THE RELEVANT PORTION OF THE SAID ORDER OF THIS TRIBUNAL IS EXTRACTED AS UNDER:- NEXT WE TAKE UP REVENUES APPEAL IN ITA.NO.35/MD S/2014 THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THA T COMMISSIONER TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO THE AGGREGATE AVERAGE ADVANCES OUTSTANDING AT THE END OF EACH MONTH AND N OT THE INCREMENTAL ADVANCES GRANTED DURING EACH MONTH WHILE COMPUTING DEDUCTION UNDER SECTION 36(I) (VIIA) OF THE ACT. 22. WE HAVE HEARD THE SUBMISSIONS OF THE COUNSEL AN D PERUSED THEMATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY C OVERED BYTHE DECISION OF THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL INASSESSE ES OWN CASE IN 1TA NO.2O3L/MDS./2013 FOR ASSESSMENT YEAR2010-11 WHEREI N HELD THAT:- 80. AT THE TIME OF HEARING COUNSEL FOR THE ASSESSE E SUBMITS THAT THE PRESENT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10/N J74 NO. 1949/MDS/20.T 2 DATED 18.6.2014 AT PAGES 24 TO 26 IN PARES 55 TO 59 OF THE ORDER. HE P LACES RELIANCE ON THE SAID ORDER. DEPARTMENTAL REPRESENTATIVE RELIES ON THE OR DER OF THE ASSESSING OFFICER. 81. SIMILAR ISSUE HAS BEEN RAISED BY THE REVENUE IN 17A NO.2030/MDS/2013 FOR THE ASSESSMENT YEAR 2007-08 AND WE HAVE DEALT W ITH THIS ISSUE IN PARA 51 & 52 OF THIS ORDER. FOR THE REASONS MENTIONED TH EREIN AND THE DECISION HOLDS GOOD FOR THE ASSESSMENT YEAR 2010-11, WE REJE CT THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 22.1 IN VIEW OF THE ABOVE ORDER OF TRIBUNAL IN THE APPEAL OF REVENUE, WE DISMISS THE GROUND RAISED BY THE REVENU E RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, THE GRO UNDS OF THE REVENUE ARE DISMISSED. 18. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, :-18-: ITA NOS.948 & 777/CHNY/2018 RESPECTFULLY FOLLOWING IT, WE REJECT THE CORRESPOND ING GROUNDS OF THE REVENUE . 19. ON THE ISSUE OF ALLOWABILITY OF LOSS ON REVALUA TION OF TRADING DERIVATIVES, THE LD DR PRESENTED THE CASE ON THE LINES OF GROUND S OF APPEAL. PER CONTRA, THE LD AR RELIED ON THE ORDER OF THIS TRIBUNAL IN T HE ASSESSEES OWN CASE IN ITA NO. 77/MDS/2014 DATED 03.04.2017, THE RELEVANT PORT ION IS EXTRACTED AS UNDER: 87. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRI BUNAL WHILE UPHOLDING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING TH E CLAIM OF LOSS ON REVALUATION OF DERIVATIVE CONTRACTS OBSERVED AS UNDER:- 47. THE R EVENUES SIXTH SUBSTANTIVE GROUND IS THAT THE CIT(A)HAS WRONGLY DELETED DISALLOWANCE OF `11,3 2,83,633/- ON REVALUATION OF DERIVATIVE CONTRACTS. 48. IN SCRUTINY, THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE CLAIMED LOSS OF `11,32,83,633/- ON ACCOUNT OF AFORESAID REVALUATION . PER ASSESSING OFFICER, THIS PERTAINED TO ONLY SPECULATIVE TRANSACTIONS WHICH WOULD INVOKE TH E BOARDS INSTRUCTION NO.3 OF 2010.HE HELD THAT THE LOSS ARISING OUT OF SPECULATIVE/NOTIO NAL TRANSACTIONS COULD ONLY BE SET OFF AGAINST THE INCOME OF SUCH ACTIVITY AS NO SALE/CONCLUSION/S ETTLEMENT OF CONTRACTS HAD TAKEN PLACE SINCE THE ASSETS IN QUESTION CONTINUED TO BE OWNED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING AUTHORITY MADE CONSEQUENTIAL ADDITION IN ASSESSEES INCOME. 49. HEREIN ALSO, THE CIT(A) HAS FOLLOWED HIS PREDECESSORS ORDER FOR ASS ESSMENT YEAR 2008-09 AS WELL AS DECISION OF THE ITAT MUMBAI IN CASE OF EDELWISS CAPITAL LTD VS ITO, I.T.A. NO. 5324/MUM/07 DECIDED ON 10.11.2010, TO HOLD THAT PROVISION FOR LOSS ON MARKET TO MARKET BASIS IN RESPECT OF TRADING DERIVATIVES COULD NOT HAVE BEEN DISALLOWED. SO, TH E IMPUGNED DISALLOWANCE STANDS DELETED. 50. COMING TO THIS GROUND, WE FIND FROM THE PARTIES WRITTEN SUBMISSIONS AND PAPER BOOKS FILED THAT THE 'TRIBUNAL' HAS UPHELD THE CIT(A)S I DENTICAL FINDINGS IN ASSESSMENT YEAR 2008-09. ON BEING GRANTED OPPORTUNITY, THE REVENUE HAS FAILE D TO POINT OUT ANY DISTINCTION ON FACTS. THEREFORE, WE UPHOLD THE CIT(A)S ORDER DELETING TH E AFORESAID DISALLOWANCE AND REJECT THE REVENUES GROUND. 88. RESPECTFULLY FOLLOWING THE S AID ORDER, WE UPHOLD THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS OF REVENUE. 26.2 IN VIEW OF THE ABOVE ORDER OF TRIBUNAL IN THE APPEA L OF REVENUE, WE DISMISS THE GROUND RAISED BY THE REVENUE. :-19-: ITA NOS.948 & 777/CHNY/2018 20. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSME NT YEAR 2011-12, RESPECTFULLY FOLLOWING IT, WE REJECT THE CORRESPOND ING GROUNDS OF THE REVENUE . 21. ON THE ISSUE OF DISALLOWANCE U/S. 14A, THE LD D R PRESENTED THE CASE ON THE LINES OF GROUNDS OF APPEAL . PER CONTRA, THE LD AR RELIED ON THE ORDERS OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 947/CHNY/2018 DATED 28.02.2019 , THE RELEVANT PORTION IS EXTRACTED AS UNDER: 14. THE NEXT GROUND RAISED BY THE REVENUE IS AGAIN ST THE DISALLOWANCE UNDER SECTION 14A. THE LD. DR SUBMITTED ON THE LINES OF GROUNDS OF APPEAL. HOWEVER, THE LD AR SUBMITTED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD (402 ITR 640) AND THIS TRIBUNAL IN ITA NO.77/MDS/2014 VIDE ORDER DATED 03/04/2017 DEC IDED PARTLY IN THE ASSESSEESFAVOUR IN ITS OWN CASE. THE RELEVANT PORTION OF THE ORDER OF THIS TRIBUNAL DATED 03.04.2017 IS EXTRACTED AS UNDER:- 8. THE SECOND GROUND IS WITH REGARD TO DISALLOWANCE U/S.14AR.W.RULES 8D OF THE INCOME TAX RULES, 1962. 9. AT THE OUTSET, THE ID.A.R SUBMITTED THAT THIS IS SUE CAME FORCONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN IT.A.NO.212 6/MDS/20 13(SUPRA) WHEREIN THE TRIBUNAL HELD THAT:P63. COUNSEL FOR THE ASSESSE E SUBMITS THAT ASSESSEE BANK IS HOLDING SECURITIES AS STOCK-IN-TRADE, WHEN ONCE SEC URITIES ARE HELD AS STOCK-IN- TRADE, NO DISALLOWANCE UNDER SECTION 14A IS WARRANT ED. THE COUNSEL SUBMITS THAT CO-ORDINATE BENCH OF THIS TRIBUNAL DECIDED SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1949/MDS/2012 DATED 18.6.2014. RE FERRING TO THE SAID ORDER, COUNSEL SUBMITS THAT IN PRINCIPLE, THE TRIBUNAL DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT PROVISIONS OF SECTION 14A HAV E NO APPLICATION WHEN THE SECURITIES ARE HELD AS STOCK-IN-TRADE. HOWEVER, THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO ASCERTAIN WHET HER SECURITIES ARE HELD AS STOCK-IN- TRADE. 64. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDERS OF LOWER AUTHORITIES IN INVOKING PROVISIONS OF SECTION 14A READ WITH RUL E 8D FOR THE PURPOSE OF DISALLOWING EXPENDITURE ATTRIBUTABLE FOR EARNING DI VIDEND INCOME. 65. WE HAVE PERUSED THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10, WHEREIN THE TRIBUNAL HELD THAT AUTHORITIES BELOW HAVE WRONGLY INVOKED SECTION 14A IN CASE OF INVESTMENTS HELD AS STOCK-IN-TRADE. WHILE HOLDING SO THE TRIBUNAL OBSERVED AS UNDER:15. WE H AVE CONSIDERED THE RIVAL CONTENTIONS, PERUSED THERELEVANT FINDINGS AND THE J UDICIAL PRECEDENTS UNDISPUTEDLY, THE ASSESSE HAD EARNED INCOME OF 21 CRORES FROM INV ESTMENTS MADE IN MUTUAL :-20-: ITA NOS.948 & 777/CHNY/2018 FUNDS AND EQUITIES. ITS STAND ADOPTED THROUGHOUT HA S BEEN TO HAVE HELD THE INVESTMENTS AS STOCK-IN- TRADE. THERE IS NO FINDI NG ON THIS ISSUE FORTHCOMING EITHER FROM THE ASSESSING OFFICER ORTHE CIT(A). WE HAVE ALSO PERUSED THE GUARD FIFE PERTAINING TOL.T.A.NO. 1815/MDS/2011 DECIDED O N 2.4.2013(SUPRA). IT IS EVIDENT THERE FROM THAT THE VERY DISALLOWANCE STANDS UPHELD BY A CO-ORDINATE BENCH. ITS PLEA CHALLENGING APPLICABILITY OF SECTION 14A IN CA SE OF INVESTMENT HELD AS STOCK-IN- TRADE APPEARS TO HAVE NEITHER BEEN RAISEDNOR ADJUD ICATED. SO, WE TREAT IT AS A FRESH PLEA NOT COVERED BY THEEARLIER ORDER. THUS, T HE NEW ISSUE THAT ARISES FOR OUR CONSIDERATION ISAS TO WHETHER A DISALLOWANCE U/S 14 A CAN BE MADE EVEN IN A CASE WHEN THE INVESTMENTS GIVING RISE TO AN EXEMPT INC OME ARE HELD ASSTOCK-INTRADE OR NOT. PROCEEDING ON THE SAME, WE FIND THAT THE CA SELAW QUOTED BY THE ASSESSEE (SUPRA) SQUARELY SUPPORTS ITS PLEA. THE REVENUE HAS BROUGHT TO OUR NOTICE A RECENT THIRD MEMBER DECISION INCASE OF D.H. SECURITIES P. LTD VS DCIT (2014] 31 (TRIB) 381. THIS DECISION FOLLOWS THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT (WHICH IS ALSO THE CONCERNED JURISDICTIONAL HIGH COURT) IN CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD VS A CIT, 328 ITR 81 AND THAT OF HONBLE CALCUTTA HIGH COURT IN DHANUKA& SONS VS CIT, 339 ITR 319. NOTONLY THIS, THE HONBLE THIRD MEMBER ALSO REFERS TO THE CASE LAW CC! LTD.(SUPRA) AND EXP RESSES A VIEW THAT THE AFORESAID DECISIONS OF OTHERHONBLE HIGH COURTS WERE NOT BROU GHT TO THE NOTICE OF THE KARNATAKAHIGH COURT. IN THESE CIRCUMSTANCES, THE PI CTURE THAT EMERGES IS THATVARIOUS HIGH COURTS HAVE EXPRESSED DIVERGENT OP INIONS ON THIS LEGALISSUE. THAT BEING THE CASE, WE APPLY THE DECISION OF CIT VS VEG ETABLE PRODUCTS LTD 88 ITR 192 AND IN THE VIEW FAVOURABLE TO THE ASSESSEE IS FOLLO WED. SO, IN PRINCIPLE, WE HOLD THAT THE AUTHORITIES BELOW HAVE WRONGLY INVOKED SEC TION 14A IN CASE OF INVESTMENTS HELD AS STOCK-IN TRADEWHEREIN THE EXEMPT INCOME BY WAY OF DIVIDENDS IS ONLY INCIDENTAL. IT IS ALSO MADE CLEAR THAT SINCE THERE IS NO VERIFICATION OF THE FACTUAL POSITION OF INVESTMENTS HELD AS STOCK-IN-TRADE, W E ACCEPT THE ASSESSEES CONTENTIONS IN PRINCIPLE ONLY AND REMIT THE ISSUE B ACK TO THE ASSESSING OFFICER TO DETERMINE THE TRUE FACTUALPOSITION. THE ASSESSEES ALTERNATIVE PLEA CARRIES ONLY AN ACADEMICSIGNIFICANCE. THE RELEVANT GROUND IS ACCEPT ED FOR STATISTICAL PURPOSES. 66. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL , FOLLOWINGTHE SAID DECISION OF THIS TRIBUNAL, WE ALLOW THE GROUND RAISED BYTHE ASS ESSEE. 10. ON THE OTHER HAND, THE LD.D.R RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES IN INVOKING THE PROVISIONS OF THE SECTION 14A R.W.RULE 8D HE FURTHER SUBMITTED FOR ASSESSMENT YEAR 2008-09, THE SAME ISSUE WAS DECIDED AGAINST THE ASSESSEE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ORDER OF THE ASSESSMENT ORDER. THE RE IS NO FINDING IN THE ASSESSMENT ORDER REGARDING TREATMENT OF EXEMPTED IN COME YIELDING ASSETS AS STOCK-IN-TRADE. HENCE, IN OUR OPINION, IF IT IS TRE ATED AS STOCK-IN-TRADE BY THE ASSESSEE, THEN THE CLAIM OF ASSESSEE IS TO BE ALLOW ED IN TERMS OF ORDER OF TRIBUNAL IN ITA NO.2126/MDS./2013 (SUPRA). ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE REASONING OF THIS TRIBUNAL, FO LLOWING IT , WEREMITTHISISSUE BACK TO THE FILE OF AO FOR FRESH CONSIDERATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 22. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR, :-21-: ITA NOS.948 & 777/CHNY/2018 RESPECTFULLY FOLLOWING IT, WE REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION . THIS GROUND IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. 23. ON THE ISSUE OF DISALLOWANCE OF PROVISION FOR L EAVE ENCASHMENT, THE LD DR PRESENTED THE CASE ON THE LINES OF GROUNDS OF AP PEAL. PER CONTRA, THE LD AR RELIED ON THE ORDERS OF THIS TRIBUNAL IN THE ASSESS EES OWN CASE IN ITA NO. 947/CHNY/2018, DATED 28.02.2019, FOR ASSESSMENT YE AR 2013-14, THE RELEVANT PORTION IS EXTRACTED AS UNDER: 15. THE NEXT GROUND RAISED BY THE REVENUE IS AGAIN ST THE DISALLOWANCE OF PROVISION MADE FOR LEAVE SALARY ON ACTUARIAL VALUATION. WITH REGARD TO THE ISSUE ON LEAVE SALARY, THE AO HELD THAT IT IS ONLY A PROVISION AND HENCE D ISALLOWED. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. C IT(A) ALLOWED THE APPEAL BASED ON THIS TRIBUNALS DECISION IN ASSESSEES CASE FOR ASS ESSMENT YEAR 2010-11 IN ITA NO.2031/MDS/2013 DATED 26.09.2014. BEFORE US, THE A SSESSEE SUBMITTED THAT THE PROVISION FOR LEAVE SALARY CANNOT BE DISALLOWED U /S. 43B FOR THE REASON THAT LEAVE PROVISION IS A CONTRACTUAL LIABILITY AND THEREFORE, IT CANNOT BE TREATED AT PAR WITH TAX, DUTY, CESS OR FEE U/S. 43B. HOWEVER, IN THE SLP (C IVIL) NOS. 22889/2008 DATED 08.05.2009 IN THE CASE OF CIT &ORS. VS M/S. EXIDE I NDUSTRIES LTD & ANR, WHEREIN, THE APEX COURT HELD THAT PENDING HEARING AND FINAL DI SPOSAL OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY A ND INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTAND ING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RE COVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER M AKE IT CLEAR THAT THE ASSESSEE WOULD, DURING THE PENDENCY OF THIS CIVIL APPEAL , P AY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME IT WOULD BE ENTITLED T O MAKE A CLAIM IN ITS RETURNS. IN VIEW OF THE ABOVE, SUBJECT TO THE CONDITIONS IMP OSED BY THE APEX COURT, SUPRA, THE ADDITION MADE IS SUSTAINED. 24. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR, RESPECTFULLY FOLLOWING IT, THE ADDITION IS SUSTAINE D. :-22-: ITA NOS.948 & 777/CHNY/2018 25. ON THE ISSUE OF ALLOWANCE OF DEPRECIATION ON UP S AT 60% INSTEAD OF 15%, THE LD DR PRESENTED THE CASE ON THE LINES OF G ROUNDS OF APPEAL . PER CONTRA, THE LD AR RELIED ON THE ORDERS OF THIS TRIB UNAL IN THE ASSESSEES OWN CASE IN ITA NO. 947/CHNY/2018, DATED 28.02.2019, F OR ASSESSMENT YEAR 2013-14, THE RELEVANT PORTION IS EXTRACTED AS UNDE R: 16. THE NEXT ISSUE RAISED BY THE REVENUE IS WITH R EGARD TO DEPRECIATION ON UPS AT 60% INSTEAD OF 15%. SIMILAR ISSUE WAS RAISED BY THE ASSESSEE IN ITS APPEAL NO.776/CHNY/2018 HEREIN ABOVE. FOR THE SAME REASON ING, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUND RAISED BY THE REVE NUE. 26. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR, RESPECTFULLY FOLLOWING IT, WE REJECT THE CORRESPOND ING GROUNDS OF THE REVENUE . 27. ON THE ISSUE OF DEPRECIATION ON ASSETS TAKEN OV ER BY BANK OF TAMILNADU, THE LD. CIT(A) DIRECTED TO THE AO TO FOL LOW THE DIRECTIONS GIVEN BY THE ITAT. IN THIS REGARD THE LD AR SUBMITTED THAT I T NEEDS NO INTERFERENCE. FURTHER, THE LD. AR RELIED ON THE ORDERS OF THIS TR IBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 947/CHNY/2018, DATED 28.02.2019, F OR ASSESSMENT YEAR 2013-14, THE RELEVANT PORTION IS EXTRACTED AS UND ER: 17. THE NEXT ISSUE RAISED BY THE REVENUE IS WITH REGARD TO DEPRECIATION ON ASSETS TAKEN OVER BY BANK OF TAMILNADU. WE HEARD THE RIVAL SUBMISSIONS. SINCE THE LDCIT(A) HAS DIRECTED THE AO TO FOLLOW THE DIRECTIONS OF THI S TRIBUNAL DECISION IN THE ASSESSEES OWN CASE IN ITA NO.1815/CHY/2011 DATED 02.04.2014 W HEREIN, THE ITAT HAD REMITTED :-23-: ITA NOS.948 & 777/CHNY/2018 THE MATTER BACK TO THE AO TO VERIFY THE SCHEME OF T AKE OVER AND TO DETERMINE WHETHER THE PROVISIONS OF SECTION 2(1B) WERE APPLICABLE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). 28. WE HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR, RESPECTFULLY FOLLOWING IT, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). 29. ON THE ISSUE OF APPLICABILITY OF PROVISIONS OF SECTION 115JB, THE LD. AR RELIED ON THE ORDER OF THE CALCUTTA ITAT IN THE CAS E OF UCI BANK (2015) 64 TAXMANN.COM 51 AND DAMODAR VALLEY CORPORATION IN IT A NO. 438/KOL/2017, WHICH IS RELIED ON BY THE LD. CIT(A) IN ALLOWING TH E APPEAL IN ITS FAVOUR. 30. WE HEARD THE RIVAL SUBMISSIONS. SINCE, THE LD. CIT(A) HAS FOLLOWED AND APPLIED THE DECISION OF CALCUTTA ITAT IN THE CASE OF UCI BANK (2015) 64 TAXMANN.COM 51 AND DAMODAR VALLEY CORPORATION IN IT A NO. 438/KOL/2017, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF THE LD. CIT(A) AND HENCE , THE CORRESPONDING GROUNDS OF THE REVENUE ON THIS GROUND AS WELL AS THE OTHER GROUNDS RAISED BY THE REVENUE WITH REG ARD TO THE VARIOUS ADDITIONS MADE IN COMPUTING BOOK PROFITS ARE DISMISSED. :-24-: ITA NOS.948 & 777/CHNY/2018 31. IN THE RESULT, THE ASSESSEES APPEAL IN ITA NO. 777/CHNY/2018 IS PARTLY ALLOWED AND THE REVENUES APPEAL IN ITA NO. 948/CHN Y/2018 IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED ON 22 ND JANUARY, 2020 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $% /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 22 ND JANUARY, 2020 JPV (+3454 /COPY TO: 1. '/ APPELLANT 2. +,' /RESPONDENT 3. 6 ) (/CIT(A) 4. 6 /CIT 5. 4+ /DR 6. 9 /GF