STATE BANK OF INDIA,MUMBAI V. DCIT CIR 2(2), MUMBAI

MA 90/MUM/2025

AI Insights

The State Bank of India filed Miscellaneous Applications against the Tribunal's consolidated order dated 11 October 2024, which pertained to the assessment years 2006-07 and 2007-08. The main contention was regarding the taxation of deferred payment guarantee commission, which the Tribunal had previously decided was taxable upon receipt. The Bank argued that this was contrary to earlier decisions in their favor and constituted an error apparent on record. The Tribunal, however, found no error in its decision and dismissed the Bank's application. Additionally, minor typographical errors in the order were corrected.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714623 (ITAT-MUMBAI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2007-2008
• Other Referred Cases: DCIT v/s. Chohung Bank (2010) 126 ITD 448 (Mumbai Trib.), Kerala Urban Development Finance Corpn. Ltd. v/s. CIT (2004) 266 ITR 245 (Kerala)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU JOSHI
• Keywords: Bad and doubtful debts

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM MA No. 89/Mum/2025; (Assessment Year: 2006-07) (Arising out of ITA No. 3868/Mum/2013) & MA No. 90/Mum/2025; (Assessment Year: 2007-08) (Arising out of ITA No. 4105/Mum/2014) & MA No. 91/Mum/2025; (Assessment Year: 2007-08) (Arising out of ITA No. 4128/Mum/2014) State Bank of India Financial Reporting & Taxation Dept. 3rd Floor, Corporate Centre, Madam Cama Road, Nariman Point, Mumbai – 400021. Vs. The Additional Commissioner of Income Tax, Circle – 2(2), Mumbai. PAN/GIR No. AAACS8577K (Applicant) : (Respondent) Applicant by : Shri Ninad Patade & Akshay Nagarajun Respondent by : Shri Himanshu Joshi (SR. DR.) Date of Hearing : 09.05.2025 Date of Pronouncement : 05.08.2025 O R D E R Per Kavitha Rajagopal, J M: These Miscellaneous Applications have been filed by the assessee/applicant u/s. 254(2) of the Income Tax Act, 1961 (‘the Act' for short), challenging the Tribunal’s order dated 11.10.2024 pertaining to A.Y. 2006-07 and 2007-08, where the cross appeals of the assessee and revenue were filed on various grounds which was adjudicated by the Tribunal by a consolidated order. Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 2 MA No. 89/Mum/2025 arises out of ITA No. 3868/Mum/2013 pertains to A.Y. 2006-07 2. Ground no. 1 of the Miscellaneous Application pertains to deferred payment guarantee commission. The assessee’s submission on this ground is reproduced herein under: “Re.: Taxation of deferred payment guarantee commission on receipt basis: 5. With respect to the aforesaid issue, the Applicant had filed: • a statement showing commission on deferred payment guarantee as a part of its paperbook; and • it was also submitted that this issue has been decided in favour of the Applicant by the Order(s) of the Hon'ble Tribunal passed in the Applicant’s own case for the earlier assessment years - copies of which were included in the case law compilation filed. 6. The Tribunal in the earlier years has held that commission on deferred payment guarantees to the extent it is related to the future years cannot be taxed in the hands of the Applicant in the current year. Though the commission on deferred payment guarantees covering more than one year has been received in advance for the entire period of the guarantee, the portion thereof relating to the current financial year ought to be treated as income and the balance amount of commission pertaining to the subsequent period/ periods would be carried forward and offered to tax in the relevant years in accordance with the tenure and the Applicant's obligation under the deferred payment guarantee. 7. Vide consolidated Order dated 11 October 2024, the Hon'ble Tribunal has dismissed this ground of appeal No. 1 and held that commission of deferred guarantee issued by the Applicant is chargeable to tax as and when deferred guarantee is issued and commission is received. 8. It is pertinent to note that the Tribunal in para No. 103 of its Order (refer page No. 81 of the compilation) while deciding this issue refers to the fact that it is following the decisions of the Tribunal in the Applicant's own case for the earlier years but dismisses the ground of appeal No. 1. 9. As pointed out above, the Applicant submits that this issue has been decided by the Tribunal in its favour in the earlier years by holding that commission on deferred guarantee to the extent it pertains to the current financial year is taxable in that year and is not taxable on receipt basis. 10. In the consolidated Order dated 11 October 2024, even though it is stated that the Hon'ble Tribunal is following its decisions in the Applicant's case for the earlier years, the Hon'ble Tribunal decides this issue to the contrary of what has been held in the earlier years. Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 3 11. The Tribunal while discussing this issue in the consolidated Order dated 11 October 2024 has referred to another decision of the Mumbai Bench of the Tribunal in the case of DCIT v/s. Chohung Bank (2010) 126 ITD 448 (Mumbai Trib.) wherein it has been held that the entire commission accrued at the time of giving guarantee and no part of it can be spread to the next year. The Tribunal has also referred to the decision of the Kerala High Court in the case of Kerala Urban Development Finance Corpn. Ltd. v/s. CIT (2004) 266 ITR 245 (Kerala) which was relied upon by the Department Representative. 12. However, eventually while giving its decision on the issue involved, the Tribunal at para No. 103 states as under: “Accordingly, respectfully following the decisions of the tribunal in assessee's own case for the earlier years, we find that the commission on deferred guarantee issued by the bank is chargeable to tax as and when deferred guarantee is issued and commission is received. Accordingly ground number 1 of the appeal is dismissed................” 13. The Applicant submits that the Tribunal to the extent it relies on its own decisions rendered in favour of the Applicant's case for the earlier years while deciding this issue and still decides the issue against the Applicant which is contrary to what has been held in the earlier years constitutes an error apparent from record which ought to be rectified. 14. It is also submitted that in Para No. 100 on page No. 80 of the Order, the Tribunal states as under: \"Facts do not show that such deferred guarantee commission is refundable at all subsequently. Thus, facts in the case of assessee are distinguishable. If such guarantee commission is not received on the basis of time period for which guarantee is issued, but at the time of issue of guarantee, there is no logic and reason in saying that such guarantee commission will accrue as per period of time for which guarantee is issued.\" 15. This aspect of the matter, it is submitted, wasn't discussed at all during the course of the hearing(s) before the Hon'ble Tribunal and hence the said observations of the Hon'ble Tribunal which give factual findings on deferred guarantee commission as not being refundable at all which are contrary to the facts of the Applicant's case constitutes an error apparent on record and the same ought to be expunged.” 3. On the above submission of the assessee and on perusal of the impugned order, it is observed that the Tribunal has given a finding that commission on deferred guarantee issued by the bank is chargeable to tax at the time of issuance of deferred guarantee and when commission was received, for which the Tribunal has relied on the decision of Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 4 the Hon'ble Kerala High Court in the case of Kerala Urban Development Finance Corporation Ltd. vs. CIT [2004] 266 ITR 245/[2004] 136 taxman 24, wherein it has been held that income accrued at the time of disbursal of loan has to be taxed in the same year in which the said loan was disbursed. It further held that the guarantee commission is not received on the basis of the time period for which the guarantee was issued by the assessee but only at the time of issuance of guarantee, thereby discarding the assessee’s submission that guarantee commission will accrue as per the period of time for which guarantee is issued. It could be inferred that the Tribunal has taken a conscious view that the commission on deferred payment guarantee cannot be carry forward depending upon the tenure and has to be taxed at the time of issuance of guarantee. We do not find any error apparent on record in the finding of the Tribunal and therefore the order of the Tribunal requires no interference. On this note, we hereby dismiss this ground no. 1 raised by the assessee/applicant. 4. In the result, ground no. 1 raised by the assessee is hereby dismissed. 5. Ground no. 2 pertains to the typographical error at para 139 and 140 at page 102 and 103 of the said order pertaining to ground no. 6 of ITA No. 3868/Mum/2014, where the said ground pertains to deduction claimed u/s. 36(1)(vii) of the Act. It is observed that the Tribunal has wrongly specified the same as Section 36(1)(viia) of the Act instead of 36(1)(vii) of the Act, where this issue was remanded back to the ld. AO for verifying recovery of outstanding which the assessee has not claimed u/s. 36(1)(vii) of the Act. To that extent, the order of the Tribunal at para 139 and 140 have to be rectified as to wherever Section 36(1)(viia) of the Act is mentioned has to be replaced as Section Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 5 36(1)(vii) of the Act. We therefore allow ground no. 2 of the Miscellaneous Application raised by the assessee/applicant. 6. In the result, ground no. 2 of the Miscellaneous Application raised by the assessee is allowed. 7. In the result, the Miscellaneous Application filed by the assessee/applicant is hereby partly allowed. MA No. 90/Mum/2025 arises out of ITA No. 4105/Mum/2014 pertains to A.Y. 2007- 08 8. The assessee/applicant has filed this Miscellaneous Application on the ground that the ground no. 4.1 and 4.2 of the Tribunal’s order dated 11.10.2024 on deduction u/s. 36(1)(viia) of provision for standard assets have not been adjudicated by the Tribunal. 9. The ld. AR for the applicant/assessee contended that though there has been a specific ground raised by the assessee pertaining to deduction u/s. 36(1)(viia) of the Act for standard assets in respect of any provision made for bad and doubtful debts for standard assets, the same has not been adjudicated by the Tribunal. 10. On perusal of the same, it is observed that ground no. 4.1 and 4.2 raised by the assessee in ITA No. 4105/Mum/2014 pertaining to A.Y. 2007-08 has not been adjudicated by the Tribunal and we therefore hold that as the same amounts to a mistake apparent on record. We therefore deem it fit to recall the said order to that extent for adjudicating the same after duly hearing both parties and on perusal of the materials available on record. 11. Ground no. 1 of the Miscellaneous Application raised by the assessee/applicant is hereby allowed. Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 6 12. Ground no. 2 pertains to the typographical error at para 139 and 140 at page 102 and 103 of the said order pertaining to ground no. 7 of ITA No. 4105/Mum/2014, where the said ground pertains to deduction claimed u/s. 36(1)(vii) of the Act. It is observed that the Tribunal has rightly specified the same as Section 36(1)(viia) of the Act instead of 36(1)(vii) of the Act, where this issue was remanded back to the ld. AO for verifying recovery of outstanding which the assessee has not claimed u/s. 36(1)(vii) of the Act. To that extent, the order of the Tribunal at para 139 and 140 have to be rectified as to wherever Section 36(1)(viia) of the Act is mentioned has to be replaced as Section 36(1)(vii) of the Act. We therefore allow ground no. 2 of the Miscellaneous Application raised by the assessee. 13. In the result, ground no. 2 of the Miscellaneous Application raised by the assessee is hereby allowed. 14. In the result, the Miscellaneous Application filed by the assessee/applicant is hereby allowed. MA No. 91/Mum/2025 arises out of ITA No. 4128/Mum/2014 pertains to A.Y. 2007-08 15. This Miscellaneous Application filed by the assessee/applicant arises out of ITA No. 4128/Mum/2014 pertaining to A.Y. 2007-08 filed by the revenue. The assessee/applicant has raised this ground that ground no. 7 of revenue’s appeal decided by the Tribunal has failed to consider the decision of the Hon'ble Jurisdictional High Court in assessee’s own case reported in [2015] 59 taxmann.com 86, Bombay, where it was held that the assessee is entitled to deduction u/s. 36(1)(viii) of the Act. Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 7 16. This issue pertains to ground no. 7 of the revenue’s appeal for A.Y. 2007-08 with respect to any special reserve created and maintained by financial corporation engaged in providing long term finance for international and agriculture development or development of infrastructure facility in India or by a public company formed and registered in India with the object of carrying on the business of providing long term finance for specified activities. The Tribunal held that as the said deduction is only for two financial corporation including the public company and government company, the revenue’s contention was that the assessee is not eligible for the said deduction as the assessee would not fall under the category of those entitled to the said deduction. The Tribunal further stated that since the issue of eligibility of deduction has not been looked at by the coordinate bench in earlier years and that the ld. CIT(A) has also not adjudicated this issue raised by the assessee, the Tribunal in its impugned order has restored this ground back to the file of ld. AO to verify the eligibility of the assessee for claiming the said deduction. Pertinently, this issue has not been decided on the merits by the Tribunal, for the reason that the eligibility criteria being the factual aspect has not been considered in any of these decisions. The assessee/applicant’s prayer that the Hon'ble Bombay High Court decision has not been considered is not relevant, for the reason that it is only for verification of the eligibility conditions for claiming the said deduction the Tribunal has remanded this issue. Further, the decision of Hon'ble Bombay High Court was also not part of the paper book before us during the appellate proceedings. Printed from counselvise.com MA No. 89 to 91/Mum/2025 (A.Y. 2006-07 & 2007-08) State Bank of India 8 17. For this reasons, we do not find any mistake apparent on record and the same does not hold merit for recalling of the said order. We therefore dismiss this ground of the Miscellaneous Application against the assessee/applicant. 18. In the result, the Miscellaneous Application filed by the assessee/applicant is hereby dismissed. Order pronounced in the open court on 05.08.2025 Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 05.08.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "