Actuarial Pension Provision Allowed as Accrued Liability; SBI Wins Key Issues ITAT Mumbai

State Bank of India Vs ACIT (ITAT Mumbai Bench)

Safe Harbour Cannot Sail Backward—20% TP Mark-Up Cut To 10%; RBI-Based Real Income, Pension & Banking Deductions Largely Upheld

Summary: The consolidated order disposed of cross-appeals filed by State Bank of India & the Revenue for AYs 2012-13 & 2013-14. The disputes covered transfer pricing, pension liability, section 14A, depreciation & valuation of securities, interest on NPAs, retired employees’ medical benefits, foreign-branch income, bad debts, deductions u/s 36(1)(viia), 36(1)(viii), 80-IA & 80LA, TDS defaults, double-taxation relief & several banking-specific issues.

Most issues stood covered by earlier orders in SBI’s own cases. In the absence of any material change in facts or law, the Tribunal followed the principle of consistency.

Safe-Harbour Rules Cannot Apply Retrospectively

SBI rendered technical services to its associated enterprise, Nepal SBI Bank, by deputing personnel under an agreement approved by the regulatory authorities. It recovered ₹74,13,281 as technical-service fees. It also recovered ₹203.33 lakh from overseas associated enterprises towards ITeS and allocated head-office expenses.

The TPO applied a 20% mark-up by referring to the Safe Harbour Rules & proposed an aggregate adjustment of ₹55,49,256.

The Tribunal held that the Safe Harbour Rules were not applicable to AY 2012-13 & their prescribed 20% margin could not be mechanically imported into an earlier year. However, absence of applicable Safe Harbour Rules did not mean that the services could be accepted at arm’s length without examination. Deputation of personnel involved service & value addition requiring appropriate remuneration.

Considering the age of the dispute & practical difficulty in identifying reliable contemporaneous comparables, the Tribunal adopted a 10% mark-up on the relevant costs. Credit was directed for amounts already recovered. It expressly clarified that the 10% rate arose from the peculiar facts & was intended to bring finality, rather than constitute a general benchmark.

Actuarial Pension Provision Is an Accrued Liability

SBI claimed deduction for a pension provision of ₹1,663.41 crore, quantified through actuarial valuation.

Following earlier years, the Tribunal held that actuarial valuation did not create the liability; it merely quantified the present value of an existing employee-benefit obligation arising progressively from services rendered. The provision was an ascertained accrued liability, not a contingent liability dependent upon a future event. The deduction was allowed.

Section 14A Cannot Become Larger Than the Exemption

SBI earned exempt income of ₹896.83 crore & had suo motu disallowed ₹1.31 crore. The AO computed a staggering disallowance of approximately ₹1,163.37 crore under Rule 8D.

The issue was restored for limited recomputation. The AO was required to grant credit for the voluntary disallowance, consider only investments which actually yielded exempt income & ensure that the aggregate disallowance did not exceed the exempt income.

Interest on NPAs Follows Real Income

The AO taxed ₹51.31 crore as interest on NPAs & ₹23.58 lakh as interest on non-performing investments.

The Tribunal held that RBI norms, though not overriding the Income-tax Act, are highly relevant in determining whether income has genuinely accrued. When recovery is uncertain & regulatory norms prohibit recognition until realisation, taxing interest merely on a theoretical accrual amounts to taxing hypothetical income.

Accordingly, interest on NPAs & non-performing investments was deleted by applying the real-income doctrine.

Securities Are Part of a Bank’s Business

The Revenue challenged relief of approximately ₹746.63 crore relating to depreciation or loss on revaluation of securities & amortisation of premium on securities classified as Held to Maturity.

The Tribunal held that securities held by a bank form an integral part of its banking operations & circulating capital. Their RBI classification as HTM does not conclusively determine their character for tax purposes. Where the bank consistently values securities at cost or market value, whichever is lower, depreciation is allowable.

The Tribunal also upheld deduction of broken-period interest paid on the purchase of securities. Since corresponding broken-period interest received was assessed as business income, disallowing the payment would artificially tax notional income.

Other Banking Issues

Contribution to the Retired Employees Medical Benefit Scheme was allowed because it represented employee-welfare expenditure incurred for business purposes. Staff-welfare expenditure, including payment to a school for reserving seats, was similarly held allowable u/s 37(1).

Deduction u/s 36(1)(viia) for provision for bad & doubtful debts, including the claim concerning standard assets, was accepted in principle, subject to verification of the provision actually created, total income, rural-branch advances & statutory ceiling.

Claims relating to bad debts recovered after earlier write-off, section 80-IA deduction for windmills, short deduction of TDS u/s 40(a)(ia), double-taxation relief, TDS credit & specified employee liabilities were restored for factual verification.

SBI’s claim that income of foreign branches should be excluded from Indian taxation was rejected. Notification No. 91/2008 required such income to be included in total income, with relief granted through the treaty mechanism for elimination of double taxation.

The claims for deduction u/s 80LA & additional deduction u/s 36(1)(viii) were rejected for want of adequate particulars, computation & supporting evidence. Depreciation on leased assets was also disallowed following earlier orders.

Decision

SBI’s appeals for both years were partly allowed. The Revenue’s appeal for AY 2012-13 was dismissed, while its appeal for AY 2013-14 was partly allowed, principally on issues restored for verification.

Key Takeaway

The order reinforces that banking taxation must follow commercial reality. Actuarial liabilities, non-performing income & securities cannot be judged through ordinary-business assumptions divorced from RBI-regulated banking operations. Yet statutory deductions must still be proved through proper computation & evidence.

Safe Harbour cannot time-travel, NPAs cannot earn imaginary interest & even a bank cannot withdraw a deduction without depositing the paperwork.

Cases Discussed

• Brooke Bond India Ltd. (Calcutta High Court)
• Ranbaxy Laboratories Ltd. (Delhi High Court)
• Maxopp Investment Ltd. v. CIT (Supreme Court)
• Cheminvest Ltd. v. CIT (Delhi High Court)
• Southern Technologies Ltd. Vs. JCIT (Supreme Court)
• Catholic Syrian Bank Ltd. Vs. CIT (Supreme Court)
• Goetze (India) Ltd. Vs. CIT (Supreme Court)
• Bank of Rajasthan Ltd Vs CIT (Supreme Court)
• UCO Bank v. CIT (Supreme Court)
• Vijaya Bank v. CIT (Supreme Court)
• American Express International Banking Corporation v. CIT (Supreme Court)
• Exide Industries Ltd. v. UOI (Calcutta High Court/Supreme Court proceedings)
• Allied Motors (P.) Ltd. v. CIT (Supreme Court)
• CIT v. Alom Extrusions Ltd. (Supreme Court)
• Bharat Earth Movers v. CIT (Supreme Court)
• State Bank of Travancore v. CIT (Supreme Court)
• Technimont (P.) Ltd. (ITAT)
• Bank of India (ITAT)
• Dy. DIT (International Taxation) v. Chohung Bank (ITAT Mumbai)

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI

The above cross-appeals relate to A.Ys. 2012-13 and 2013-14 and arise from the orders, the particulars whereof are tabulated hereinbelow. Since common and connected issues are involved, all four appeals were heard together and are being disposed of by this consolidated order.

ITA 2390/MUM/2015 (AY: 2012-13) Assessee’s Appeal	ACIT, Circle (2)(2)(1); dated 27/02/2015.
ITA 2429/MUM/2015 (AY:2012-13) Departmental Appeal
ITA 3395/MUM/2018 (AY:2013-14) Departmental Appeal	Ld.CIT (A)- 5 MUMBAI; dated 19/03/2018.
ITA 3429/MUM/2018 (AY: 2013-14) Assessee’s Appeal

We first take up the assessee’s appeal in ITA No. 2390/Mum/2015 — Appeal by the assessee

2. Ground No. 1 — Transfer pricing adjustment

This ground concerns the transfer pricing adjustment of Rs.55,49,256/-, comprising an adjustment of Rs.14,82,656/- in respect of technical services and Rs.40,66,600/- in respect of reimbursements.

2.1. The facts leading to the issue are that Nepal SBI Bank was formed as a joint venture between State Bank of India and the Government of Nepal. The assessee entered into a technical service agreement with Nepal SBI Bank, which was approved by the Central Bank of Nepal and His Majesty’s Government of Nepal. During the year under consideration, the assessee rendered technical services to its associated enterprise, Nepal SBI Bank. In terms of the agreement, the assessee deputed certain personnel to the said associated enterprise and recovered the cost thereof on an agreed fixed-charge basis.

2.2. It was submitted that the deputation of the assessee’s personnel to the said associated enterprise was in the interest of the assessee and not for the benefit of the associated enterprise. The recovery on a fixed-fee basis was stated to be higher than the cost incurred on such deputation. It was further submitted that the deputation was approved by the Central Bank of Nepal, the Government of Nepal and the Government of India. The assessee recovered Rs.74,13,281/- towards technical service fees and treated the transaction as being at arm’s length.

The assessee also provided ITeS services to its associated enterprises, namely, SBI (Mauritius), SBI (California), PT Bank SBI Indonesia and SBI (Canada). The associated enterprises reimbursed the costs incurred by the assessee under various heads, including salary and allowances of the International Division, directors’ sitting fees, expenses of the IT Global Centre and expenses of Central Accounting. It was submitted that these expenses pertained to the Information Technology Division, which monitors and regulates the assessee’s foreign operations from India.

It was further submitted that these expenses were incurred to ensure the smooth functioning of the banking operations as a whole. Payments were made to third-party service providers in India in support of such services and were recovered from the overseas offices on a cost-to-cost basis without any mark-up. The expenses, being in the nature of head-office cost allocations, were recovered from the respective associated enterprises under various heads.

2.3. The Ld. TPO was of the opinion that the assessee should have charged a mark-up of 20% on the technical service fees as well as the ITeS fees by reference to the Safe Harbour Rules. He accordingly proposed adjustments of Rs.14,82,656/- and Rs.40,66,600/-, respectively.

2.4. The DRP upheld the proposed adjustment by observing that the assessee had not furnished comparables rendering business-support services and that the Ld. TPO had determined the value of the international transaction in a rational manner.

2.5. Before this Tribunal, the Ld. AR submitted that the Ld. TPO had applied the Safe Harbour Rules to A.Y. 2012-13 even though the same were not in force for the year under consideration.

2.6. On the contrary, the Ld.DR relied on the orders passed by the authorities below.

We have perused the submissions advanced by both sides in light of records placed before us.

2.7. We have considered the rival submissions and perused the material available on record. It is not in dispute that, pursuant to the technical service agreement entered into with Nepal SBI Bank, the assessee had deputed its personnel to the said associated enterprise and had rendered technical services. It is also not in dispute that the assessee recovered amounts of Rs.74,13,281/- and Rs.203.33 lakhs from its associated enterprises towards technical services and ITeS services, respectively.

2.8. The dispute before us is essentially with regard to the mark-up adopted by the Ld.TPO. The Ld.TPO has applied a mark-up of 20% by referring to the Safe Harbour Rules. The Ld.AR has rightly pointed out that the Safe Harbour Rules were not applicable to the assessment year under consideration, being A.Y. 2012-13. Therefore, the mark-up of 20% prescribed under the Safe Harbour regime could not have been mechanically applied for determining the arm’s length price of the impugned transaction.

2.9. However, we are also unable to accept the proposition that, merely because the Safe Harbour Rules were not applicable, the consideration received by the assessee should be accepted as being at arm’s length without any further examination. The assessee admittedly rendered technical services to its associated enterprise through deputation of its personnel. The assessee itself has also acknowledged that the amount recovered from the associated enterprise was higher than the cost incurred in respect of such personnel. Thus, there is an element of service and value addition which requires appropriate remuneration.

2.10. At the same time, we find considerable force in the submission of the Ld.AR that the transaction pertains to A.Y. 2012-13 and considerable time has elapsed thereafter. The matter has remained in litigation for several years. At this stage, identification of reliable and contemporaneous comparables for the particular nature of technical services rendered by the assessee to Nepal SBI Bank may not be practicable. A further remand to undertake a fresh comparability exercise, after such a considerable lapse of time, would prolong the litigation without necessarily yielding a more reliable determination of the arm’s length price.

2.11. In these peculiar facts and circumstances, while we reject the 20% mark-up adopted by the Ld.TPO, we also consider it appropriate that the assessee should be remunerated by way of a reasonable mark-up over the cost incurred in rendering the services. Having regard to the nature of the services rendered, the fact that the assessee had deputed its personnel to the associated enterprise, the admitted recovery of charges on a fixed-fee basis, and the absence of reliable comparables before us, we consider a mark-up of 10% on the relevant cost incurred by the assessee to be reasonable for determining the arm’s length consideration in the peculiar facts of the present case.

2.12. We accordingly direct that the arm’s length price of the technical services rendered by the assessee be determined by applying a 10% mark-up on the cost incurred in respect of the personnel deputed for rendering such services. The amounts already recovered by the assessee from the associated enterprises shall be given due credit. The transfer-pricing adjustment shall accordingly be restricted to the difference, if any, between the consideration so determined and the amounts of Rs.74,13,281/- and Rs.203.33 lakhs already recovered by the assessee.

2.13. In arriving at the above conclusion, we have not applied the 20% margin prescribed under the Safe Harbour Rules. We hereby specify that the determination of 10% mark-up is based on the peculiar facts and circumstances of the present case and is intended to bring finality to the dispute having regard to the passage of time and the practical difficulty in undertaking a meaningful comparability analysis at this stage.

Accordingly, Ground No. 1 raised by the assessee stands partly allowed.

3. Ground No. 2 — Provision for pension

3.1. The assessee challenges the disallowance of provision for pension amounting to Rs.1,663.41 crores. The Ld.AR submitted that the liability, quantified on actuarial valuation, was an accrued and ascertained employee-benefit obligation. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

3.2. The Ld.DR relied upon the orders of the authorities below. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

3.3. We note that identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 4.1 to 4.4 and 4.6 to 4.7 of the order dated 29/06/2026, read as under:-

“4.1. We note that the Ld.DR has placed reliance on the decision of the Hon’ble Calcutta High Court in the case of Brooke Bond India Ltd. (supra). However, on perusal of the facts of the said case, we find that the claim therein was rejected as the liability was sought to be created merely on the basis of a Board Resolution and there was no independent enforceable obligation existing against the assessee. The said decision, therefore, turned on the absence of a crystallised liability.

4.2. In the present case, however, the facts are materially different. The liability has arisen out of the existing employee benefit obligations and the assessee is required to account for such liability in accordance with the applicable accounting principles. The actuarial valuation has not created the liability but has merely quantified the present value of an obligation which has accrued on account of services rendered by the employees.

4.3. Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. (supra), while dealing with a similar issue, held that a provision towards pension liability based on actuarial valuation represents an accrued liability and cannot be disallowed merely because the payment is to be made at a future date. Hon’ble Court recognized that, such liability arises progressively with the rendering of services by employees.

4.4. Applying the aforesaid principles, we are of the considered view that the liability claimed by the assessee is not a contingent liability but an ascertained liability reasonably determined on the basis of actuarial valuation. Therefore, the ratio of Brooke Bond India Ltd. (supra) is not applicable to the facts of the present case, whereas the principles laid down in Ranbaxy Laboratories Ltd. (supra) support the claim of the assessee.

4.6. We find that the Ld.DR could not factually controvert the findings recorded by the Tribunal in assessee’s own case for A.Y.2010-11, nor could any material be brought on record demonstrating any change in facts or law warranting a departure from the view already taken by the Co-ordinate Bench. The additional judicial precedents relied upon by the Ld.DR also do not persuade us to take a view different from that adopted by the Tribunal in the earlier year.

4.7. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 on an identical set of facts and circumstances, we allow Ground No. 1 raised by the assessee.”

3.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, Ground No.2 raised by the assessee stands allowed.

4. Ground No. 3 — Disallowance u/s.14A read with Rule 8D

The assessee earned exempt income of Rs.896.83 crores and made suo moto disallowance of Rs.1,31,49,287/- towards administrative expenditure. The Ld.AO computed disallowance under Rule 8D at Rs.1,163.37 crores and, after reducing suo moto amount, made a net disallowance of Rs.1,162.06 crores.

4.1. The Ld.AR disputed the interest component and sought restriction of the administrative component to investments which yielded exempt income, with credit for the amount already disallowed. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

4.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

4.3. We note that identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 5.3 to 5.5 of the order dated 29/06/2026, read as under:-

“5.3. After considering the rival submissions, we find that the Ld. DR could not point out any distinguishing feature in the facts of the year under consideration vis-à-vis A.Y. 2010-11, nor could any contrary judicial precedent be brought to our notice warranting a different view. The reliance placed on the decision of the Hon’ble Supreme Court in Maxopp Investment Ltd. vs. CIT (supra) does not advance the case of the Revenue, as the said decision has already been considered by the Co-ordinate Bench while adjudicating the identical issue in assessee’s own case for A.Y. 2010-11.

5.4. We, therefore, remit this issue to the file of the Ld. Assessing Officer only to the limited extent of examining the ground raised by the Revenue, namely, to consider only those investments which have actually yielded exempt income during the year under consideration. The Ld. AO shall recompute the disallowance, if any, in accordance with law, after duly granting credit for the suo motu disallowance already offered by the assessee.

5.5. It is further clarified that the disallowance under section 14A shall be subject to the settled legal position that it cannot, in any case, exceed the quantum of exempt income earned by the assessee during the relevant year, as laid down by the Hon’ble Delhi High Court in case of Cheminvest Ltd. v. CIT reported in (2015) 61 taxmann.com 118. Accordingly, Ground No. 2 raised by the assessee stands allowed for statistical purposes.”

4.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we restore the issue to the file of the Ld.AO for the same limited exercise. The Ld.AO shall exclude the interest component in terms of the precedent, consider only investments which actually yielded exempt income, grant credit for the suo motu disallowance, and ensure that the aggregate disallowance does not exceed the exempt income.

Accordingly Ground No.3 raised by the assessee stands allowed for statistical purposes.

5. Ground No.4- Depreciation on leased assets

This ground concerns disallowance of depreciation of Rs.3,22,88,358/- claimed on leased assets.

5.1. The Ld.AR relied on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

5.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

5.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 6.1 to 6.3 of the order dated 29/06/2026, read as under:—

“6.1. This Ground relates to the disallowance of depreciation claimed by the assessee on leased assets. At the outset, both the parties submitted that the facts and circumstances involved in the year under consideration are identical to those considered by the Tribunal in assessee’s own case for A.Y. 2010-11.

6.2. The Ld. DR reiterated the submissions advanced before the Co-ordinate Bench while adjudicating the appeal for A.Y. 2010-11 and relied upon the findings recorded by the lower authorities. The Ld.AR, on the other hand, submitted that the issue stands squarely covered against the assessee and in favour of the revenue by the order of the Tribunal for A.Y. 2010-11.

6.3. We have perused the submissions advanced by both sides in light of the record placed before us. We find that the issue involved in the present ground is identical to that adjudicated by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, wherein the Tribunal while adjudicating the issue held as under:-

“10.5. Admittedly the issue has been decided against assessee by various decisions as noted herein above for the preceding assessment years. The facts and circumstances of the case shows that assessee was merely advancing loan which was made to adorn in the garb of yeast to avoid the rightful tax due to the exchequer. This Tribunal has recorded a clear finding of fact that the lessee’s are the actual and the real owner and the lessor who is assessee is only a nominal or symbolic and so-called perceived owner.

10.6. Facts being identical with the year under consideration we do not find any reason to deviate from the view taken by this Tribunal in the preceding assessment years. We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is apparent. Accordingly ground number 4 raised by the assessee stands dismissed.”

5.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, Ground No. 4 raised by the assessee stands dismissed.

6. Ground No. 5 — Valuation of securities classified as AFS/HFT

The assessee seeks recognition of depreciation and appreciation arising on valuation of securities classified as Available for Sale and Held for Trading.

The Ld.AR placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

6.1. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

6.2. We note that identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 9.1 to 9.4, including the operative findings reproduced therein of the order dated 29/06/2026, read as under:—

“14.28. The Ld. DR could not show any reason to deviate from the aforesaid view taken in the assessee’s own case. The Ld. DR could not bring out any legal or factual distinctions in support of the contentions raised hereinabove.

14.29. Respectfully following the consistent approach, which is in line with the view taken by the Hon’ble Supreme Court as well as the Hon’ble Bombay High Court and Hon’ble Karnataka High Court, we are of the view that the method of valuation followed by the assessee is required to be accepted. Emphasis is placed on the decision of the Hon’ble Supreme Court in the case of UCO Bank vs. CIT (supra). Accordingly, this ground raised by the assessee is allowed.”

9.4. The Ld. DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 6 stands allowed.”

6.3. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we allow Ground No. 5 raised by the assessee.

7. Ground No. 6 — Deduction u/s. 36(1)(viia): provision for standard assets

The assessee challenges exclusion of Rs.978,81,31,847/-, representing provision relating to standard assets, while computing deduction u/s. 36(1)(viia).

7.1. The Ld. AR submitted that the statutory expression “provision for bad and doubtful debts” is not confined to assets classified as NPAs under RBI norms. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

7.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

7.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y.2011-12. The relevant findings, appearing at paras 10.1 to 10.3, read with paras 15.12 to 15.18 reproduced therein of the order dated 29/06/2026, read as under:—

“10.1. This Ground relates to the deduction claimed by the assessee u/s 36(1)(viia) of the Act. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

10.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“15.12. We have considered the submissions of the Ld. DR and perused the material on record. The core objection of the Revenue is that the provision created by the assessee includes amounts relatable to “standard assets”, which, as per the prudential norms prescribed by the Reserve Bank of India, are not Non-Performing Assets (NPAs), and therefore, according to the Revenue, cannot form part of “bad and doubtful debts” within the meaning of section 36(1)(viia).

15.13. At the outset, we are unable to accept the contention of the Ld.DR that the scope of deduction under section 36(1)(viia) is to be restricted only to NPAs as per RBI classification. The Income-tax Act and the RBI prudential norms operate in distinct fields. While the RBI guidelines govern asset classification and provisioning requirements for regulatory and financial reporting purposes, the allowability of deduction under the Act is governed by the statutory language of section 36(1)(viia), which permits deduction in respect of “any provision for bad and doubtful debts” subject to the prescribed limits. The section does not mandate that such provision must be confined strictly to NPAs alone.

15.14. It is well settled that RBI norms, though relevant for understanding the nature of provisioning, cannot control or restrict the scope of deduction expressly granted under the Act. In the banking business, such provisioning is made on a scientific and actuarial basis, considering the overall risk profile, and cannot be equated with a purely contingent or ad hoc reserve. Further, the expression “bad and doubtful debts” used in section 36(1)(viia) is of wider import and is not synonymous with the RBI concept of NPAs. A debt may be considered doubtful from a provisioning perspective even before it formally slips into the NPA category. Therefore, the legislative intent behind section 36(1)(viia), which is to provide a measure of relief to banking companies in respect of anticipated credit losses, cannot be curtailed by importing restrictive definitions from RBI guidelines.

15.16. While we have held hereinabove that the mere inclusion of standard assets in the provisioning base does not, by itself, render the claim under section 36(1)(viia) inadmissible, and that the scope of deduction cannot be restricted solely by reference to the prudential classification norms prescribed by the Reserve Bank of India, we find that the aspect of quantification of the eligible deduction requires fresh verification.

15.17. It is noted that the issues arising in the subsequent grounds relating to sections 36(1)(vii) and 36(1)(viia), particularly the reconciliation between provision created, write-offs effected, and the statutory limits prescribed, have already been restored to the file of the Assessing Officer. The correct quantification of deduction under section 36(1)(viia), including the extent to which the provision (comprising standard as well as non-performing assets) falls within the permissible limits, is intrinsically linked with such verification.

15.18. Accordingly, while upholding the principle of allowability, we set aside the impugned order only for the limited purpose of quantification of the deduction under section 36(1)(viia). The Ld.AO shall re-compute the allowable deduction in accordance with law, having regard to the provision actually created, the statutory ceilings, and the findings rendered in respect of related grounds, after affording adequate opportunity of being heard to the assessee. It is clarified that the issue on merits stands decided in favour of the assessee, and the remand is confined strictly to the arithmetical and factual determination of the quantum. Accordingly, Ground No. 9 raised by assessee stands allowed.”

10.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 7 stands allowed.”

7.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, the principle of allowability is decided in favour of the assessee. The matter is restored only for quantification in the manner directed in the precedent.

Accordingly, Ground No. 6 raised by the assessee stands allowed.

8. Ground No. 7 — Interest on NPAs and non-performing investments

The additions challenged are Rs.51,31,14,710/- towards interest on non-performing assets and Rs.23,57,560/- towards interest on non-performing investments.

8.1. The Ld. AR relied upon RBI norms, the real-income principle and the orders in assessee’s own case. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

8.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

8.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 11.1 to 11.3 and 12.1 to 12.3 of the order dated 29/06/2026, read as under:—

“11.1. This Ground relates to taxation of interest income from non-performing assets (NPAs). At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

11.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“16.6. We have considered the submissions of the Ld. DR and perused the material on record. The first objection of the Revenue is that the claim has been made by the assessee through a note and not by way of a revised return, and therefore, the same ought not to be entertained. In this regard, we find that it is now well settled that while the Assessing Officer may be constrained by the ratio of Goetze (India) Ltd. v. CIT, the appellate authorities are not so fettered and are empowered to entertain a legitimate claim arising from facts already on record. In the present case, the issue pertains to the correct recognition of income from sticky advances based on the method consistently followed by the assessee and duly disclosed in the accounts. Therefore, the objection of the Ld. DR on this count is rejected.

16.7. On merits, the contention of the Revenue is that the assessee has followed the prudential norms prescribed by the Reserve Bank of India, which recognize income on NPAs only upon actual realization (with a 90-day delinquency norm), whereas the Assessing Officer has applied Rule 6EA read with section 43D, which contemplates a 180-day period, and that the provisions of the Income-tax Act must prevail in view of the decision of the Hon’ble Supreme Court in Southern Technologies Ltd. v. JCIT.

16.8. We are unable to accept the sweeping proposition canvassed by the Revenue. The decision in Southern Technologies Ltd. itself recognizes that while RBI norms do not override the provisions of the Income-tax Act, they are relevant in determining the real income of the assessee, particularly in the context of income recognition. In the case of banking entities, section 43D is a beneficial provision intended to align taxability of interest on sticky advances with commercial reality by deferring taxation until realization. The provision cannot be interpreted in a manner that compels taxation of hypothetical income which, in terms of binding regulatory norms, has not accrued in real terms.

16.9. In the present case, the assessee followed RBI-mandated prudential norms, under which income on NPAs is not recognized unless actually realized. The difference between the 90-day norm (RBI) and 180-day norm (Rule 6EA) is thus only in the threshold of classification, and not in the fundamental principle of taxing real income. Where, on facts, the asset has already become non-performing under RBI norms and income is not recognized in the books, bringing such notional income to tax would run contrary to the settled principle that only real income can be taxed.

16.11. The Ld.DR could not demonstrate any cogent reason to depart from the consistent view taken by the coordinate Bench of this Tribunal in the assessee’s own case, nor could he point out any distinguishing feature, either on facts or in law, to support the contentions raised hereinabove.

16.12. Accordingly, we hold that the action of Ld.AO in taxing interest on sticky advances merely by applying Rule 6EA, without appreciating the binding nature of RBI norms on income recognition and the concept of real income, is not sustainable. The addition made on this account is therefore directed to be deleted. Accordingly, Ground No.10 raised by assessee stands allowed.”

11.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 8 stands allowed.

12.1. This Ground relates to taxation of interest income from non-performing investment. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

12.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“17.5. We have considered the rival submissions and perused the material on record. The issue relates to the taxability of interest on investments which have become non-performing in terms of the prudential norms prescribed by the Reserve Bank of India. The Assessing Officer has proceeded on the footing that since the assessee follows mercantile system of accounting, interest must be taxed on accrual basis notwithstanding its non-recognition in the books.

17.6. At the outset, we find that the reasoning adopted by the Ld.AO, as well as the submissions advanced by the Ld.DR, are substantially similar to those considered by us while adjudicating the issue relating to interest on sticky advances (NPAs). The underlying principle governing both situations is identical, namely, whether income can be said to have accrued in real terms when its recovery itself is uncertain.

17.7. It is an undisputed position that, in respect of performing investments, the assessee recognizes interest on accrual basis and offers the same to tax. However, once such investments become non-performing in accordance with RBI norms, the recognition of interest is deferred until actual realization, owing to uncertainty of recovery. This treatment is not a matter of mere accounting choice but is mandated by binding regulatory norms governing banking operations.

17.8. The contention of the Revenue that RBI guidelines are merely prudential and cannot override the provisions of the Income-tax Act is, no doubt, correct as a general proposition. However, it is equally well settled that such guidelines are highly relevant in determining whether income has, in fact, accrued. The concept of accrual under the Act is not divorced from commercial reality. Where the recovery of income is highly uncertain and recognition thereof is prohibited under binding regulatory norms, such income cannot be brought to tax on a hypothetical basis.

17.9. In the present case, once the investment is classified as non-performing, the uncertainty of realization is established. Taxing such interest on accrual basis, despite its non-recognition in the books in accordance with RBI norms, would amount to taxing notional income, which is impermissible in law. We find that the issue of taxation of interest on NPAs is governed by settled law, and such interest cannot be said to have accrued where its recovery is uncertain. The doctrine of real income squarely applies, and accordingly, only income that has truly accrued in a real sense can be brought to tax.

17.11. The Ld.DR could not demonstrate any cogent reason to depart from the consistent view taken by the coordinate Bench of this Tribunal in the assessee’s own case, nor could he point out any distinguishing feature, either on facts or in law, to support the contentions raised hereinabove. Accordingly, Ground No. 11 raised by assessee stands allowed.”

12.3. The Ld. DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 9 stands allowed.”

8.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in the law brought to our notice for the year under consideration, Ground No. 7 raised by the assessee stands allowed.

9. Ground No. 8 — Contribution to Retired Employees Medical Benefit Scheme

The assessee challenges disallowance of contribution of Rs.92,00,00,000/- to the Retired Employees Medical Benefit Scheme.

9.1. The Ld.AR submitted that the payment was a bona fide employee welfare expenditure incurred for business purposes. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

9.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

9.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. Both sides reiterated the submissions made on identical issue for assessment year 2011-12. The relevant findings, appearing at paras 13.1 to 13.2 and the operative findings reproduced therein of the order dated 29/06/2026, read as under:—

“13.1. This Ground relates Disallowance in respect of payment towards contribution to retired employees medical benefit scheme. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

13.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“18.5. We have considered the rival submissions and perused the material on record. The issue for consideration is whether the contribution made by the assessee to a fund for the benefit of retired employees is allowable as deduction or is hit by the provisions of section 40A(9) of the Act. It is an undisputed fact that the assessee actually paid the sum during the year under consideration to a fund constituted for the benefit of employees, including retired employees, pursuant to a scheme formulated as part of its employee welfare policy. The claim is thus not a mere provision but represents actual outgo.

18.6. The objection of the Revenue is two-fold: firstly, that such contribution is not to a statutory or approved fund and is therefore hit by section 40A(9); and secondly, that upon retirement, the employer–employee relationship ceases and hence the expenditure cannot be said to be incurred for the purposes of business.

18.7. We are unable to accept the above contentions of the Ld. DR in their entirety. Section 40A(9) seeks to disallow contributions made to funds, trusts, etc., unless the same fall within the specified exceptions or are mandated by law. However, judicial precedents have consistently held that where the contribution is made bona fide, pursuant to a binding settlement or scheme, and is intrinsically linked with business considerations such as employee welfare, industrial harmony, and smooth functioning of the organisation, the same cannot be disallowed merely on technical grounds.

18.8. In the present case, the contribution is part of a structured employee welfare scheme covering both serving and retired employees. The benefit to retired employees is not in isolation but forms part of the overall employment framework, fostering confidence among existing employees and contributing to industrial peace and efficiency. Such expenditure, therefore, has a clear nexus with the business of the assessee.

18.9. The contention that the employer–employee relationship ceases upon retirement, and therefore no deduction can be allowed, is too narrow a view. Business expediency under section 37(1) is not confined to immediate contractual obligations but extends to measures taken by a prudent employer to maintain morale, goodwill, and continuity in workforce relations. Expenditure incurred in furtherance of such objectives cannot be said to be unrelated to business. We also find merit in the reliance placed by the assessee on the decision of the Tribunal in the case of State Bank of Travancore (supra), wherein on similar facts, such contribution was held to be allowable and not hit by section 40A(9).

18.12. The Ld.DR could not demonstrate any cogent reason to depart from the consistent view taken by the coordinate Bench of this Tribunal in the assessee’s own case, nor could he point out any distinguishing feature, either on facts or in law, to support the contentions raised hereinabove. In view of the above, we hold that the contribution made by the assessee to the retired employees benefit scheme, being a bona fide business expenditure incurred wholly and exclusively for the purposes of business, is allowable as deduction. The disallowance made by the Ld.AO is thus directed to be deleted.”

13.2. The Ld. DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 10 stands allowed.”

9.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, Ground No. 8 raised by the assessee stands allowed.

10. Ground No. 9 — Income of foreign branches

The assessee contends that income of its foreign branches is not taxable in India.

10.1. The Ld.AR placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

10.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

10.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 14.1 to 14.3 of the order dated 29/06/2026, read as under:—

“14.1. This Ground relates to non-taxability of income from foreign branches. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

59. Further, Notification no. 91 of 2008 dated 20/08/2008 issued by the Central Government as per section 90(3) of the Act, reads as under:- “In exercise of the powers conferred by sub-section (3) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax or as the case may be, avoidance of double taxation, provides that any income of a resident of India ‘may be taxed’ in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement.”

60. Therefore, as is evident from section 90(3) of the Act, the same refers to term used but not defined both in the Act as well as in the tax treaty. Thus, we find no basis in the submission made on behalf of the assessee that the aforesaid notification has no applicability to the tax treaty. Further, the word ‘term’ used in section 90(3) of the Act not only means a word but also means a phrase and thus cannot be restricted to words such as salary, dividend, etc. as claimed by the assessee but also includes phrase such as ‘may be taxed’ as used in the tax treaty.

63. Therefore, in view of the above, respectfully following the decisions rendered by the coordinate bench of the Tribunal in Technimont (P.) Ltd. (supra) and Bank of India (supra) for the assessment year 2015-16, we find no merits in the submissions of the assessee. As a result, ground no. 14 raised in assessee’s appeal is dismissed.” Respectfully following the above view we do not find any merit in the arguments of the Ld.AR.”

14.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 11 stands dismissed.”

10.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, Ground No. 9 raised by the assessee stands dismissed.

11. Ground No. 10 — Recovery of bad debts written off in earlier years

The assessee challenges taxation of Rs.1,42,71,51,152/- recovered against bad debts written off in earlier years, contending that section 41(4) applies only where deduction u/s. 36(1)(vii) had earlier been allowed.

11.1. The Ld.AR placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

11.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

11.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 16.1 to 16.3, including paras 18.6 to 18.11 reproduced therein of the order dated 29/06/2026, read as under:—

“16.1. This Ground relates to non-taxability of recovery of bad-debts written off in earlier years. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

16.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“18.6. The issue for consideration is whether the recovery of bad debts written off in earlier years is liable to be taxed under section 41(4) of the Act. It is an undisputed legal position that the provisions of section 41(4) are attracted only where a deduction has been allowed in respect of bad debts under section 36(1)(vii) in an earlier year. The condition precedent for invoking section 41(4) is thus the prior allowance of deduction; in the absence of such allowance, the recovery cannot be brought to tax.

18.7. In the present case, the assessee offered to tax recovery of ₹ 62.61 crores pertaining to loans written off up to 31.03.2004, in respect of which deduction was admittedly claimed and allowed. However, in respect of the balance recovery of ₹ 931.60 crores relating to write-offs made after 01.04.2004, the assessee contended that no deduction under section 36(1)(vii) was claimed in those years, and therefore, recovery thereafter does not fall within the ambit of section 41(4).

18.8. The Ld.DR objected to the claim on the ground that the assessee did not substantiate, with supporting material, that no deduction was allowed in earlier years and that no verification has been carried out at the assessment stage.

18.10. The applicability of section 41(4) hinges entirely on this factual aspect. Accordingly, while we accept the legal proposition advanced by the assessee that recovery of bad debts is taxable only where corresponding deduction has been allowed earlier, we deem it appropriate to restore this issue to the file of the Ld.AO for limited verification. The Ld.AO shall examine whether deduction under section 36(1)(vii) was in fact allowed in respect of the debts written off in the relevant earlier years. To the extent such deduction was allowed, the corresponding recovery shall be brought to tax under section 41(4); and to the extent no such deduction was allowed, the recovery shall not be taxed.

18.11. We find that the taxability of such recovery is contingent upon verification of whether deduction was allowed in earlier years. In absence of such verification, no conclusive finding can be recorded. The Ld.AO shall afford adequate opportunity of being heard to the assessee and decide the issue in accordance with law. Accordingly, Ground No.13 raised by the assessee stands allowed for statistical purposes.”

16.3. The Ld. DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 13 stands allowed for statistical purposes.”

11.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we restore the issue to the Ld. AO for the limited verification directed above.

Accordingly, Ground No. 10 raised by the assessee stands allowed for statistical purposes.

12. Ground No. 11 — Deduction u/s. 80-IA in respect of windmills

The assessee seeks deduction u/s. 80-IA in respect of income from windmills.

12.1. The Ld.AR sought examination of the claim on merits. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

12.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

12.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 21.1 to 21.3 of the order dated 29/06/2026, read as under:—

“21.1. This Ground relates to deduction u/s 80IA in respect of windmills. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

21.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“23.5. Similarly, the claim of deduction under section 80-IA in respect of income from windmills necessitates verification of eligibility conditions prescribed under the Act, including the nature of undertaking, generation of power, and computation of eligible profits.”

21.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 17 stands partly allowed for statistical purposes.”

12.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we restore the claim to the file of the Ld. AO for verification of the statutory conditions and computation in accordance with law.

Accordingly, Ground No. 11 raised by the assessee stands partly allowed for statistical purposes.

13. Ground No. 12 — Disallowance u/s. 40(a)(ia) for short deduction of tax

13.1. The assessee contends that section 40(a)(ia) is not attracted to a case of short deduction of tax at source. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

13.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra). We have perused the submissions advanced by both sides in light of the record placed before us.

13.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 22.1 to 22.3 of the order dated 29/06/2026, read as under:—

“22.1. This Ground relates to disallowance u/s 40(a)(ia) of the Act in respect of short deduction of TDS. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. We have perused the submissions advanced by both sides in light of the record placed before us.

22.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“23.2. At the outset, it is observed that the claims relating to (i) disallowance under section 40(a)(ia) on account of short deduction of TDS, (ii) deduction under section 80-IA in respect of income from windmills, and (iii) refund of excess Dividend Distribution Tax (DDT), were raised by the assessee by way of notes appended to the revised computation/return of income. It is an admitted position that the Ld. Assessing Officer has not examined these claims on merits.

23.3. Insofar as the objection of the Revenue regarding claims being made through notes is concerned, the same cannot, by itself, be a ground to reject the claims outright. It is well settled that appellate authorities are empowered to entertain and adjudicate a legitimate claim arising from facts already on record in order to determine the correct taxable income. However, we find that all the three claims raised by the assessee require proper verification of facts and examination of supporting material, which has not been carried out at the level of the Assessing Officer.

23.4. In respect of disallowance under section 40(a)(ia), the contention of the assessee that no disallowance is warranted in cases of short deduction of tax at source, as against non-deduction, needs to be examined in light of judicial precedents relied upon by the assessee, after verifying the nature of payments and extent of deduction.”

22.3. The Ld. DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, Ground No. 18 stands partly allowed for statistical purposes.”

13.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we restore this issue to the file of the Ld. AO for examination in accordance with the above directions.

Accordingly, Ground No. 12 is partly allowed for statistical purposes.

14. Ground No. 13 — Deduction u/s. 80LA

The claim for deduction u/s. 80LA was made through a note to the revised return.

14.1. The Ld.AR relied upon the claim so raised. The material placed before us does not contain the necessary particulars regarding eligibility, nature of income or computation. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

14.2. The Ld.DR relied upon the orders of the authorities below. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

14.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 23.1 to 23.3 of the order dated 29/06/2026, read as under:—

“23.1. Assesse has raised the claim of deduction u/s 80LA by way of notice to the revised return as under:- “The learned DCIT erred in not considering the claim o the Bank in respect of additional deduction under section 80LA vide Note 29 to the revised return of income.”

23.2. However, it is observed that the assessee has not furnished any details or supporting material in respect of the said claim till date. No factual information has been placed on record regarding the eligibility of the assessee for deduction under section 80LA, the nature of income claimed to be eligible for deduction, computation of eligible deduction, or any other relevant particulars necessary for verification of the claim.

23.3. In the absence of necessary details and supporting evidence, the claim raised by the assessee cannot be adjudicated upon. Accordingly, the claim of deduction under section 80LA is not entertained. Accordingly, Ground No.19 raised by the assessee stands dismissed.”

14.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, the claim cannot be entertained on the material presently available.

Accordingly, Ground No. 13 raised by the assessee stands dismissed.

15. Ground No. 14 — Disallowance u/s. 40(a)(ia) of interest expenditure

This Ground relates to disallowance of interest expenditure amounting to Rs.25,93,38,750/- u/s. 40(a)(ia) of the Act.

15.1. The Ld.AR submitted that the assessee raised this claim by way of Note No.38 appearing at page 13 of the return of income. It was submitted that the impugned interest expenditure was incurred in the course of assessee’s banking business and was allowable while computing the business income u/s. 28 of the Act. The Ld.AR further submitted that the provisions of section 40(a)(ia) of the Act are not applicable to the impugned expenditure.

15.2. The Ld.DR relied on the orders passed by the authorities below.

We have perused the submissions advanced by both sides in light of the records placed before us.

15.3. We note that the assessee raised the impugned claim by way of Note No.38 to the return of income. The nature of the interest expenditure, the provision under which the deduction has been claimed and the applicability of section 40(a)(ia) of the Act to such expenditure require factual verification. We note that these aspects have not been examined by the Ld.AO.

15.4. We thus set aside the impugned order on this issue and restore the matter to the file of the Ld.AO. The Ld.AO is directed to verify the claim raised by the assessee in Note No.38 and determine, in accordance with law, whether the impugned expenditure is allowable u/s. 28 of the Act and whether the provisions of section 40(a)(ia) of the Act are applicable. The assessee is directed to furnish all relevant details and supporting documents in support of its claim. The Ld.AO shall decide the issue by way of a speaking order after granting reasonable opportunity of being heard to the assessee.

Accordingly, Ground No.14 raised by the assessee stands allowed for statistical purposes.

16. Ground No. 15 – Delayed-payment compensation This ground relates to the disallowance of compensation for delayed payment amounting to Rs.63,29,156/-. It was submitted that, although the amount was described as a penalty in the tax audit report, it represented compensation paid by the assessee for delayed remittance of Government funds and delayed filing of service-tax/TDS returns, among other matters.

16.1. The Ld.AR referred to Note No.40 forming part of the revised computation of income wherein the assessee had initially disallowed the impugned amount suo moto. However, the assessee subsequently claimed that the payment was compensatory in nature and allowable as a deduction. The assessee therefore sought withdrawal of the suo motu disallowance.

16.2. The Ld.DR submitted that the claim raised by the assessee requires verification.

We have perused the submissions advanced by both sides in light of the records placed before us.

16.3. We note that merely because an amount was disallowed suo moto by the assessee in the computation of income, the authorities are not precluded from examining whether such disallowance is sustainable in law. However, the nature and purpose of the payment, the circumstances under which it was made and its allowability under the provisions of the Act require factual verification.

16.4. We therefore set aside the impugned order on this issue and restore the matter to the file of the Ld.AO. The Ld.AO is directed to verify Note No.40, the revised computation of income, the basis of the original suo moto disallowance and the supporting documents relating to the delayed-payment compensation. Thereafter, the Ld.AO shall determine whether the assessee is entitled to withdraw the suo moto disallowance and claim the impugned amount as a deduction in accordance with law. The assessee shall be granted reasonable opportunity of being heard.

Accordingly, Ground No.15 raised by the assessee stands allowed for statistical purposes.

17. Ground No.16- Deduction u/s. 36(1)(viii)

This Ground relates to the assessee’s claim of deduction u/s. 36(1)(viii) of the Act.

17.1. The Ld.AR referred to Note No.25 forming part of the revised computation of income stating that the assessee is entitled to additional deduction u/s.36(1)(viii) in relation to non-interest income of some circles. It was submitted that the assessee claimed deduction of approximately Rs.677 crore u/s. 36(1)(viii) of the Act, whereas a special reserve of approximately Rs.1,400 crore was created on an estimate basis. It was further submitted that the income attributable to the eligible business of providing long-term finance had not been finally determined.

17.2. The Ld.DR relied on the orders passed by the authorities below.

We have perused the submissions advanced by both sides in light of the records placed before us.

17.3. The claim made by the assessee is essentially that, in addition to the deduction already claimed u/s. 36(1)(viii), it is entitled to a further deduction on the basis of certain non-interest income attributable to the eligible business. However, apart from referring to Note No. 25 forming part of the revised computation of income, the assessee has not placed before us the necessary particulars and working to demonstrate the manner in which such non-interest income is attributable to the eligible business, the quantum of income so attributable, and the consequent additional deduction claimed u/s. 36(1)(viii).

17.4. We also note that the assessee itself has stated that the income attributable to the eligible business of providing long-term finance had not been finally determined. The mere creation of a special reserve of approximately Rs.1,400 crore, particularly when the deduction actually claimed is approximately Rs.677 crore, does not by itself establish the quantum of deduction allowable under section 36(1)(viii). The allowance under the said provision has to be determined with reference to the income derived from the eligible business and the other statutory conditions prescribed therein.

17.5. In the absence of a complete and verifiable computation identifying the eligible business income, the non-interest income sought to be included therein, the basis of its attribution to the eligible business and the corresponding amount of deduction claimed, we are unable to ascertain the correctness of the additional claim made by the assessee. The burden of substantiating a claim for deduction rests upon the assessee. A claim which remains unsupported by the requisite particulars and working cannot be allowed merely on the basis of an assertion contained in the revised computation. Accordingly, Ground No.16 raised by the assessee stands dismissed.

18. Ground No.17- Deduction u/s. 36(1)(viia)

This Ground relates to the assessee’s claim of deduction u/s. 36(1)(viia) of the Act.

18.1. The Ld.AR submitted that the assessee, being a scheduled bank, is entitled to deduction in respect of the provision made for bad and doubtful debts, subject to the limits prescribed u/s.36(1)(viia) of the Act. It was submitted that the deduction is to be computed having regard to the provision actually created in the books of account, the total income and the aggregate average advances made by the rural branches of the assessee.

18.2. The Ld.DR relied on the orders passed by the authorities below.

We have perused the submissions advanced by both sides in light of the records placed before us.

18.3. We note that u/s. 36(1)(viia) of the Act, a scheduled bank is entitled to deduction in respect of any provision made for bad and doubtful debts, subject to the prescribed statutory limits. The quantification of the deduction requires verification of the provision actually created in the books of account, the total income computed before allowing the deduction under the said clause and Chapter VIA, and the aggregate average advances made by the eligible rural branches.

18.4. We further note that the relevant factual particulars and the reconciliation necessary for determining the correct quantum of deduction have not been examined by the Ld.AO. The claim therefore requires fresh verification in accordance with the provisions of the Act. We therefore set aside the impugned order on this issue and restore the matter to the file of the Ld.AO. The Ld.AO is directed to verify the provision actually created by the assessee, the computation of total income, the aggregate average rural advances and the applicable statutory limits. The Ld.AO shall thereafter recompute the deduction allowable u/s. 36(1)(viia) of the Act in accordance with law. The assessee is directed to furnish all relevant computations and supporting documents. The Ld.AO shall grant reasonable opportunity of being heard to the assessee.

Accordingly, Ground No.17 raised by the assessee stands allowed for statistical purposes.

19. Ground No.18- Double Taxation Relief

The assessee vide this ground seeks credit of Double Taxation Relief. As the exact eligible amount requires examination of the supporting certificates and the applicable provisions, the Ld. AO is directed to verify the claim and grant the admissible relief in accordance with law, after affording due opportunity to the assessee.

Accordingly, Ground No. 18 is allowed for statistical purposes.

20. Ground No.19 – Consequential computation of deduction u/s. 36(1)(viii)

Vide this ground the assessee seeks recomputation of deduction u/s.36(1)(viii) on the basis of the finally assessed income and is stated to be consequential to Ground No.16.

Since Ground No.16 has been dismissed, no deduction is available to the assessee u/s.36(1)(viii).

Accordingly, Ground No.19 raised by the assessee stands dismissed.

21. Ground No.20- Short grant of TDS credit

21.1. The assessee seeks credit for tax deducted at source as reflected in the supporting record. The Ld.AO is directed to verify the claim and grant due credit in accordance with law.

Accordingly, Ground No.20 raised by the assessee is allowed for statistical purposes.

22. Ground No.21 -Interest u/s. 234D and u/s. 244A

22.1. Levy of interest u/s.234D and grant of interest u/s. 244A are consequential. The Ld.AO shall recompute the same in accordance with law while giving effect to this order.

Accordingly, Ground No.21 raised by the assessee is allowed for statistical purposes.

23. Additional Ground No.1- Education cess

23.1. The written submissions expressly record that this additional ground is not pressed. Accordingly, Additional Ground No.1 is dismissed as not pressed.

ITA No. 2429/Mum/2015 — Appeal by the Revenue

24. Ground No.1- Broken period interest

The Revenue challenges allowance of broken period interest of Rs.789,86,04,075/- paid on purchase of securities.

24.1. The Ld.DR relied upon the assessment order. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, vide order dated 29/06/2026.

24.2. The Ld.AR submitted that the receipt of broken period interest had been assessed as business income and that the corresponding payment was allowable on settled principles. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case, (supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

24.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 28.1 to 28.4 of the order dated 29/06/2026, read as under:-

“This ground raised by the Revenue relates to the allowability of deduction in respect of broken period interest.

28.1. At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. The Ld.AR submitted that the issue stands covered by the order of the Co-ordinate Bench in favour of the assessee.

28.2. The Ld.DR relied on the assessment order and reiterated the submissions advanced by the Revenue in the earlier year. We have perused the submissions advanced by both sides in light of the record placed before us.

28.3. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 wherein the Tribunal held as under:-

“29.11. We have considered the rival submissions and perused the material available on record. The limited issue for our consideration is the allowability of Broken Period Interest (BPI) paid on purchase of securities classified under the HTM category.

29.12. It is an undisputed position that in the Government securities market, the purchaser of a security pays, in addition to the purchase price, the interest accrued from the last due date till the date of purchase, commonly referred to as Broken Period Interest. Such payment represents interest relatable to the period prior to acquisition of the security and, correspondingly, the seller accounts for the same as income. The purchaser, having acquired the security only from the date of purchase, becomes entitled to interest thereafter. Thus, BPI paid is intrinsically linked to the period prior to acquisition and partakes the character of revenue expenditure rather than forming part of the cost of acquisition of the security.

29.13. We find that the aforesaid treatment is in consonance with the recognized accounting principles embodied in Accounting Standard–9 and Accounting Standard–13 issued by the Institute of Chartered Accountants of India, which mandate recognition of interest on a time proportion basis and require that interest pertaining to the pre-acquisition period be excluded from the cost of investment. The method consistently followed by the assessee is, therefore, in accordance with commercial principles and reflects the true income.

29.14. The contention of the Revenue that, since the securities are classified under the HTM category, the same are to be treated as investments and the BPI paid should be capitalized, does not merit acceptance. Merely because Broken Period Interest received is assessed as business income, it does not ipso facto follow that the underlying securities are to be regarded as stock-in-trade. The Hon’ble Supreme Court in Bank of Rajasthan Ltd. v. CIT (2024) 167 taxmann.com 430 has clarified that the characterization of securities in the hands of a banking company is a fact-dependent exercise and that RBI classification is not determinative for tax purposes. However, for the limited purpose of allowability of Broken Period Interest, such distinction is not decisive.

29.15. In the present case, the Revenue has admittedly brought to tax the Broken Period Interest received as business income. In such circumstances, the corresponding Broken Period Interest paid cannot be disallowed, as doing so would result in taxing notional income and would be contrary to the settled principle that only real income can be brought to tax. This position stands fortified by the judgment of the Hon’ble Bombay High Court in American Express International Banking Corporation (supra), wherein it has been held that, once Broken Period Interest received is taxed as business income, the Broken Period Interest paid is allowable as deduction so as to arrive at the correct taxable income. Hon’ble Bombay High Court has factually distinguished the decision of Hon’ble Supreme Court in Vijaya Bank(supra) on the ground that the same was rendered in the context of the erstwhile provisions relating to “interest on securities”, which no longer govern the field.

29.15. Therefore reliance placed by the Revenue on the decision of Hon’ble Supreme Court in Vijaya Bank v. CIT(supra) is misplaced. The said decision was rendered in the context of the erstwhile scheme of taxation under the head “Interest on securities”, where the income was assessed under specific statutory provisions then in force. The facts and statutory framework in the present case are materially different, inasmuch as the income from securities, including Broken Period Interest, is assessed as business income under section

28. This distinction has been clearly recognized by Hon’ble Bombay High Court in American Express International Banking Corporation v. CIT,(supra), wherein it has been held that once Broken Period Interest received is taxed as business income, the corresponding payment cannot be disallowed. We therefore hold that, the decision in Vijaya Bank does not apply to the facts of the present case.

29.16. We are also of the considered view that no useful purpose would be served by remanding the matter to the file of the Ld.AO for examining the nature of HTM securities. The allowability of Broken Period Interest does not hinge upon such characterization. Hon’ble Supreme Court in case of Bank of Rajasthan Ltd. v. CIT reported in (2024) 167 taxmann.com 430 clarifies that classification is fact-dependent and RBI guidelines are not determinative; however, it does not make the allowability of Broken Period Interest contingent upon such classification.

29.17. In the present case, the material facts are not in dispute, in as much as the assessee has paid Broken Period Interest on purchase of securities and has correspondingly offered Broken Period Interest received to tax as business income. The method followed is consistent and borne out from the record. In the absence of any factual ambiguity requiring verification, we find no justification for restoring the issue to the file of the Ld.AO.

29.18. In view of the above discussion, we hold that the Broken Period Interest paid by the assessee on purchase of HTM securities is allowable as deduction. We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld. Accordingly, ground no.3 raised by the revenue stands dismissed.”

28.4. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, we dismiss Ground No. 2 raised by the Revenue.”

24.4. Respectfully following the above view taken by the Coordinate Bench in assessee’s own case, there being no material change in the facts or in law brought to our notice for the year under consideration, we uphold the relief granted on this issue. Accordingly, Ground No.1 raised by the Revenue stands dismissed.

25. Ground No.2- Staff welfare expenditure

The Revenue challenges allowance of Rs.21,36,876/- incurred towards staff welfare, including payment to a school in connection with reservation of seats.

25.1. The Ld. DR relied upon the assessment order and placed reliance on the detailed submissions advanced on the identical issue in the assessee’s own case for A.Y. 2011-12, decided vide order dated 29/06/2026. 25.2. The Ld. AR submitted that the expenditure had a direct nexus with employee welfare and the assessee’s business operations. He placed reliance on the detailed submissions advanced on the identical issue in the assessee’s own case for A.Y. 2011-12 (supra). We have perused the submissions advanced by both sides in light of the record placed before us.

25.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 31.1 to 31.3 of the order dated 29/06/2026, read as under:—

“At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. The Ld.AR submitted that the issue stands covered by the order of the Co-ordinate Bench in favour of the assessee.

31.1. The Ld.DR relied upon the assessment order and reiterated the submissions advanced by the Revenue in the earlier year. We have perused the submissions advanced by both sides in light of the record placed before us.

31.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, wherein the Tribunal held as under:-

“31.9. We have considered the submissions of both sides and perused the material on record. We find that the issue under consideration is squarely covered in favour of the assessee by the consistent view taken by the Coordinate Benches of this Tribunal in the assessee’s own case for earlier years, including the recent decisions for A.Y. 2006-07 and 2007-08. Further, we note that the Hon’ble High Court, vide its order dated 01/08/2016 in the assessee’s own case for A.Y. 1996-97, upheld the view taken by this Tribunal and decided the issue in favour of the assessee. The Revenue has not brought on record any distinguishing facts or change in law to warrant a deviation from the settled position.

31.10. We further find that the expenditure incurred on staff welfare is intrinsically connected with the business operations of the assessee. In the case of a banking company, efficient and uninterrupted functioning is largely dependent upon the morale, health and motivation of its employees. Such expenditure cannot be regarded as gratuitous or voluntary in nature, but constitutes a necessary outlay to ensure better productivity, industrial harmony and effective discharge of business functions. The same has a direct nexus with the business of the assessee and is incurred wholly and exclusively for the purposes of business.

31.11. Respectfully following the binding precedent, we hold that the expenditure in question, being incidental to the business of the assessee, is allowable as deduction under section 37(1) of the Act. Accordingly, this ground raised by the revenue stands dismissed.”

31.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, we uphold the order of the Ld.CIT(A) on this issue and dismiss Ground No. 5 raised by the Revenue.”

25.4. Respectfully following the above view taken by the Coordinate Bench in the assessee’s own case, there being no material change in the facts or in the law brought to our notice for the year under consideration, we uphold the order of the Ld. CIT(A) on this issue.

Accordingly, Ground No.2 raised by the Revenue stands dismissed.

26. Ground No.3 – Valuation of investments and amortisation of premium on HTM securities

The Revenue challenges relief of Rs.746,63,32,506/- relating to loss on revaluation of investments and amortisation of premium on securities classified as Held to Maturity.

26.1. The Ld.DR relied upon the classification under RBI norms and the assessment order. He placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case,(supra).

26.2. The Ld.AR relied upon the consistently followed method of valuation and the orders in assessee’s own case. He also placed reliance on the detailed submission advanced on identical issue for assessment year 2011-12 in assessee’s own case,(supra).

We have perused the submissions advanced by both sides in light of the record placed before us.

26.3. We note that an identical issue came up for consideration before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12. The relevant findings, appearing at paras 33.7 to 33.16, read with paras 33.1 to 33.3 of the order dated 29/06/2026, read as under:—

“At the outset, both the parties submitted that the issue involved in the present ground is identical to the issue adjudicated by the Tribunal in assessee’s own case for A.Y. 2010-11. The Ld. AR submitted that the issue stands covered by the order of the Co-ordinate Bench in favour of the assessee.

33.1. The Ld.DR relied upon the assessment order and reiterated the submissions advanced by the Revenue in the earlier year. We have perused the submissions advanced by both sides in light of the record placed before us.

33.2. We find that the issue arising in the present ground is identical to that considered by the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, wherein the Tribunal held as under:-

“33.7. It is an undisputed position that the assessee, being a banking company, has classified its investment portfolio in accordance with RBI guidelines into HTM, AFS and HFT categories. The Ld.AO disallowed depreciation in respect of HTM securities on the premise that such securities are intended to be held till maturity and, therefore, partake the character of capital investments.

33.8. In our opinion, aforesaid approach of the Revenue fails to appreciate the settled legal position governing banking business. It is well established that, in the case of banks, securities constitute integral part of their business operations and are held as part of circulating capital. The distinction between “investment” and “stock-in-trade” in such cases cannot be applied in a rigid or mechanical manner divorced from the functional realities of banking.

33.9. Hon’ble Supreme Court in UCO Bank v. CIT(supra) upheld the principle that, banks are entitled to value their securities at cost or market value, whichever is lower, and claim depreciation accordingly, recognizing that such method reflects true income. This principle is rooted in the doctrine of real income, which mandates that only real profits, and not notional or illusory gains, can be brought to tax.

33.10. Reliance placed by the Revenue on RBI classification to deny depreciation is misplaced. While RBI guidelines are undoubtedly relevant for prudential regulation, their role in income-tax proceedings is limited to providing guidance on the nature and valuation of assets. They do not, by themselves, determine the taxability or allowability under the Act.

33.11. In this context, decision of Hon’ble Supreme Court in Southern Technologies Ltd. v. JCIT (supra) is clearly distinguishable. In that case, the issue pertained to allowability of provision for NPAs by an NBFC, where Hon’ble Court held that RBI directions cannot override the specific provisions of the Income-tax Act. However, the Court also recognized that RBI norms may be relevant in understanding the nature of income and accounting treatment.

33.12. In present facts of the case, we are not confronted with a claim contrary to the Act, but with the question of correct computation of business income of a bank, where valuation of securities at lower of cost or market value has been judicially accepted as a permissible method.

33.13. Further, Hon’ble Supreme Court in CIT v. Bank of Rajasthan Ltd. reiterated that the treatment of securities in the hands of banks must be viewed in the context of their business model, and regulatory classification under RBI norms does not conclusively determine their tax character.

33.14. We also find that the CBDT itself has, in its circulars, accepted that banks may follow the method of valuing securities at cost or market value whichever is lower, and that such method, when consistently followed, reflects true and fair income. Thus, the position adopted by the assessee is in consonance not only with judicial precedents but also with administrative guidance.

33.15. Equally important is the principle of consistency. We note that in the assessee’s own case for earlier assessment years, the coordinate benches of this Tribunal consistently has held that, depreciation on securities, including those classified under HTM category, is allowable. The Ld. DR has not brought on record any material change in facts or law warranting a deviation from such settled position. In the absence of any distinguishing feature, a contrary view would lead to uncertainty and arbitrariness in tax administration.

33.16. In view of the foregoing, we hold that the mere classification of securities under the HTM category, for RBI purposes, does not disentitle the assessee from claiming depreciation where such securities form part of its banking business and are valued in accordance with a recognized and consistently followed method. The Ld.AO is directed to allow the claim of depreciation on HTM securities. Accordingly, this ground raised by the revenue stands dismissed.”

33.3. The Ld.DR could not point out any distinguishing feature in the facts of the year under consideration nor bring any contrary material on record warranting a departure from the view already taken by the Tribunal. Accordingly, respectfully following the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, we uphold the order of the Ld.CIT(A) on this issue and dismiss Ground No. 8 raised by the Revenue.”

26.4. Respectfully following the above view taken by the Coordinate Bench in the assessee’s own case, there being no material change in the facts or in the law brought to our notice for the year under consideration, we uphold the order of the Ld. CIT(A) on this issue. Accordingly, Ground No. 3 raised by the Revenue stands dismissed.

Assessment year 2013-14

27. We note that most of the issues arising in the cross-appeals for A.Y. 2013-14 are identical, mutatis mutandis, to the corresponding issues adjudicated hereinabove for A.Y. 2012-13. However, certain grounds raised by the assessee as well as the Revenue were not the subject matter of adjudication for A.Y. 2012-13. The parties submitted that such grounds stand covered by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. We shall first adjudicate these grounds by following the said order and thereafter record the ground-wise disposal of the cross-appeals for A.Y. 2013-14 in a consolidated table.

Assessment year 2013-14:

ITA No. 3429/Mum/2018 — Appeal by the assessee

It is noted that some of the grounds are not common in the appeal filed by the assessee and revenue for assessment year 2013-14, with the appeal considered herein above of the assessee and revenue for assessment year 2012-13. Accordingly, those grounds are being considered separately first as under.

28. Ground No. 3 — Provision for other employee benefits

Ground No.3 relates to the provision made for other employee benefits. The Ld.AR submitted that the issue stands covered in favour of the assessee by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 12.6 to 12.14 for order passed for assessment year 2010-11 that reads as under:

“12.6. We have considered the submissions of the Ld. DR and perused the material on record. The objection of the Revenue is that the provisions created towards Leave Travel/Home Travel, Sick Leave and Casual Leave aggregating to Rs.47.04 crores are in the nature of contingent liabilities and hence not allowable as deduction.

12.7. At the outset, we are unable to accept the sweeping contention of the Ld. DR that the said liabilities are contingent merely because the actual outflow would arise only upon the happening of certain events such as availing of leave or falling sick. The determinative test for allowability is not whether the liability is to be discharged in future, but whether the liability has accrued during the year with reasonable certainty. In the present case, the liability arises out of services already rendered by the employees and represents an obligation of the employer in respect of earned benefits. The fact that such benefits may be availed or encashed at a later point of time does not render the liability contingent.

12.8. We note that such employee benefit obligations are required to be recognised in accordance with Accounting Standard-15 (Employee Benefits) issued by the Institute of Chartered Accountants of India, which mandates that liabilities towards accumulated leave and similar benefits be determined on actuarial basis. Where such liability is computed on scientific principles and reflects a present obligation arising from past service, the same assumes the character of an ascertained liability.

12.9. The contention of the Ld. DR that no expenditure would be incurred if the employees do not avail the leave is, in our view, misplaced. The obligation of the employer arises the moment the employees earn such leave in accordance with the service conditions, and the liability thus accrues with the rendering of services. Insofar as Leave Travel Concession/Home Travel Concession is concerned, the provision represents the estimated liability towards actual reimbursement of travel costs such as rail or air fare to which the employees become entitled upon availing such leave. The same is not in the nature of leave encashment so as to fall within the ambit of section 43B(f) of the Act.

12.10. Similarly, the provision towards casual leave and sick leave represents the obligation arising on account of services already rendered by the employees, being in the nature of compensation for loss of services during the period of leave that the employees are entitled to avail. Such leave is not encashable and can only be availed in future. Therefore, these provisions do not partake the character of contingent liabilities, but represent present obligations arising from past services, reasonably estimated on scientific basis, and hence constitute allowable business expenditure.

12.11. We further note that the disallowance sought to be justified by reference to section 43B(f) is not sustainable inasmuch as the said provision specifically deals with leave encashment and its applicability would depend upon the nature of liability claimed.

12.12. As regards the argument that the claim has been made by way of a note and therefore deserves to be rejected, we find the same to be untenable in view of the settled legal position that appellate authorities are empowered to consider a legitimate claim arising from facts already on record, even if not specifically made in the return of income. The requirement of making a claim through a revised return is confined to the powers of the Assessing Officer and does not fetter the jurisdiction of appellate authorities.

12.13. In view of the aforesaid discussion, we hold that the liability towards employee benefits, being an accrued and reasonably ascertainable obligation arising from services already rendered, cannot be regarded as contingent in nature.

12.14. Further, similar employee-related expenditure has been allowed by the Coordinate Bench in State Bank of India v. ACIT in ITA Nos. 3644 and 4563/Mum/2016 for A.Y. 2008-09, vide order dated 03/02/2020. Accordingly, Ground No. 6 raised by the assessee stands allowed.”

28.1. There being no distinguishing feature in the facts or law brought to our notice, we respectfully follow the above view of the Coordinate Bench in assessee’s own case.

Accordingly, Ground No. 3 raised by the assessee stands allowed.

29. Ground No.12 — Deduction u/s. 36(1)(vii) in respect of non-rural advances

Ground No.12 relates to the assessee’s claim of deduction u/s. 36(1)(vii) in respect of non-rural advances. The issue stands covered by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 11.10 to 11.16 for order passed for assessment year 2010-11 that reads as under:

“11.10. At the cost of repetition, we are unable to accept the said objection in the absolute terms canvassed by the Revenue. It is now a settled position of law that while the Assessing Officer may be constrained in entertaining a fresh claim otherwise than by way of a revised return in view of the decision of Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT (supra), such restriction does not apply to appellate authorities. The appellate fora are duty-bound to determine the correct tax liability of the assessee and are empowered to entertain a legal claim arising from facts already on record. Therefore, the contention that a claim made by way of a note must be outrightly ignored and no appeal should be entertained is contrary to the settled legal position and is rejected.

11.11. Further, the objection of the Ld. DR regarding lack of clarity in quantification of the claim also cannot be a ground to reject the claim at threshold. At best, it may warrant verification. The material on record indicates that the assessee has placed reliance on judicial precedents and has sought to raise a legal claim regarding allowability of bad debts in respect of non-rural advances. The absence of a claim in the return does not denude the appellate authorities of jurisdiction to examine the issue on merits.

11.12. On merits, the Revenue has contended that the decisions relied upon by the assessee stand overruled and that Explanation 2 to section 36(1)(vii) disentitles the claim. In this regard, we note that the allowability of deduction under section 36(1)(vii) is governed by the requirement of actual write-off in the books of account and is subject to the conditions laid down in section 36(2). Further, the interplay between sections 36(1)(vii) and 36(1)(viia), particularly in the case of banking companies, has been explained by the Hon’ble Supreme Court in Catholic Syrian Bank Ltd. v. CIT, wherein it has been held that both provisions operate in distinct fields and deduction under section 36(1)(vii) in respect of non-rural advances is not barred, subject to statutory conditions.

11.14. It is relevant to note that the later decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd. v. CIT (supra) explained the scope and interplay of sections 36(1)(vii) and 36(1)(viia) by holding that the two deductions operate in distinct fields and that the statutory restriction is to be understood in the context of avoiding double deduction. Thus, the earlier decision relied upon by the Ld. AR cannot be read divorced from the subsequent exposition of law by the Hon’ble Supreme Court. It further held that the proviso to section 36(1)(vii), which restricts the write-off claim by reference to the credit balance in the provision account, is aimed at preventing double deduction in respect of the class of debts for which the statutory provision under section 36(1)(viia) is made essentially the rural-advance segment and does not automatically wipe out an otherwise valid write-off claim relating to non-rural advances.

11.16. The rejection of the claim appears to have been influenced substantially by procedural objections rather than a complete factual and legal analysis. In these circumstances, while rejecting the preliminary objection of the Revenue regarding maintainability of the claim, we deem it appropriate, in the interest of justice, to restore the matter to the file of the Ld. AO for limited purpose of verification and quantification of the claim. Thus, in our considered view, the issue requires a fresh examination both on facts and in law, particularly in the light of the later judgment of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd. (supra), which has explained the true scope of sections 36(1)(vii) and 36(1)(viia). We, therefore, set aside the impugned order on this issue and restore the matter to the file of the Ld. AO for necessary verification and adjudication in accordance with law. The assessee shall be at liberty to place all relevant material in support of its claim, and the Ld. AO shall decide the issue by way of a speaking order after granting adequate opportunity of being heard.”

29.1. There being no distinguishing feature in the facts or law brought to our notice, we respectfully follow the above view of the Coordinate Bench in assessee’s own case. We thus restore the issue to the file of the Ld. AO for verification and fresh adjudication in accordance with the directions contained therein.

Accordingly, Ground No. 12 raised by the assessee stands allowed for statistical purposes.

30. Ground No.17 — Provision for privilege-leave encashment

Ground No.17 relates to the provision for privilege-leave encashment. The issue stands covered by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 13.2 to 13.3 for order passed for assessment year 2010-11 that reads as under:

“13.2. It is noted that the assessee raised this claim based on the decision of Hon’ble Calcutta High Court in the case of Exide Industries Ltd. v. UOI reported in (2007) 292 ITR 470. The Revenue challenged the said decision before the Hon’ble Supreme Court, wherein the constitutional validity of section 43B(f) was upheld in (2020) 425 ITR 1.

13.3. In any event, it is noted that the Hon’ble Supreme Court has held that the deduction in respect of such liability is allowable only on actual payment basis. Accordingly, the provision shall be allowed on payment basis in terms of section 43B, i.e., where the payment is made on or before the due date of filing the return of income. We, therefore, direct the Ld. AO to grant deduction of the said amount to the assessee in the year of actual payment in accordance with the ratio laid down by the Hon’ble Supreme Court.”

30.1. Respectfully following the above decision, we direct the Ld.AO to allow the deduction in the year of actual payment in accordance with section 43B(f) and the applicable judicial position.

Accordingly, Ground No.17 raised by the assessee stands partly allowed.

ITA No. 3395/Mum/2018 — Appeal by the Revenue

31. Ground Nos. 1 and 2 — Taxability of interest on securities on accrual basis vis-à-vis due basis

Ground Nos. 1 and 2 relate to the taxability of interest on securities on accrual basis as against due basis. The issue stands covered by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 28.4 and 28.5 for order passed for assessment year 2010-11 that reads as under:

“28.4. It is not in dispute that the assessee follows mercantile system of accounting and recognizes interest income on accrual basis in its books. It is also not in dispute that there is no uncertainty regarding realization of such income. On first principles, we find considerable force in the reasoning of the Assessing Officer and the submissions of the Ld. DR. Once income is recognized in books on accrual basis and such recognition is supported by RBI norms ensuring certainty and quantification, there appears to be no justification to exclude the same from taxable income. The method adopted by the assessee results in recognition of income in books, its exclusion in computation, and subsequent offering in later years, thereby resulting in deferment of taxation. Further, the assessee is claiming expenditure such as broken period interest on accrual basis while not offering corresponding income on the same basis, which is inconsistent and contrary to the matching principle. We also note that the Coordinate Bench in assessee’s own case in ITA No. 3868/Mum/2013 dated 11/10/2024 has observed that the concept of accrual cannot be applied differently for accounting and taxation purposes and such selective treatment leads to distortion of income.

28.5. However, it is an admitted position that the identical issue has been consistently decided in favour of the assessee in earlier years and the same has been affirmed by the Hon’ble jurisdictional High Court. In view of the binding nature of such precedents and following the principle of judicial discipline, we are constrained to follow the earlier decisions. We therefore do not find any infirmity in the view taken by the Ld. CIT(A) and the same is upheld.”

31.2. There being no distinguishing feature in the facts or law brought to our notice, we respectfully follow the above view of the Coordinate Bench in assessee’s own case. We there do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld.

Accordingly, Ground Nos. 1 and 2 raised by the Revenue stand dismissed.

32. Ground No. 5 — Provision for wage revision

It is submitted that the claim relating to provision for wage revision has already been allowed by the Ld.AO after verification while giving effect to the order of the Ld.CIT(A) and no surviving grievance remains for adjudication.

Accordingly, Ground No. 5 raised by the Revenue is therefore dismissed as infructuous.

33. Ground No. 6 — Deferred-payment guarantee commission

Ground No.6 relates to the taxability of deferred-payment guarantee commission. The issue stands covered by the order of the Coordinate Bench in assessee’s own case for A.Y. 2010-11 dated 21/04/2026. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 30.9 and 30.10 for order passed for assessment year 2010-11 that reads as under:

“30.9. We find that the Coordinate Bench of the Tribunal in assessee’s own case in ITA No. 3868/Mum/2013 for A.Y. 2006-07, vide order dated 11/10/2024, examined this issue in detail in paras 96 to 103 as under:

‘96. We have carefully considered the rival contentions and perused the orders of the learned lower authorities. The only issue in this ground of appeal is that when the bank issues guarantee and receives the guarantee commission, whether such guarantee commission should accrue and be chargeable to tax as and when it is received at the time of issuing the guarantee, or whether such income can be spread over the period for which the guarantee subsists.

100. The facts do not show that such deferred guarantee commission is refundable subsequently. Thus, the facts in the case of the assessee are distinguishable. If such guarantee commission is not received on the basis of the period for which the guarantee is issued, but at the time of issue of the guarantee, there is no logic or reason for holding that such guarantee commission accrues over the period for which the guarantee is issued.

102. We also find that the Mumbai Bench of the Tribunal in Dy. DIT (International Taxation) v. Chohung Bank (2010) 126 ITD 448 considered an almost similar case wherein the assessee-bank gave a guarantee for a period extending beyond the close of the year. The Tribunal held that the entire commission accrued at the time of giving the guarantee and no part thereof could be spread over to the subsequent year.

103. Accordingly, respectfully following the decisions of the Tribunal in assessee’s own case for the earlier years, we find that the commission on deferred guarantees issued by the bank is chargeable to tax as and when the deferred guarantee is issued and the commission is received.’

30.10. We are in complete agreement with the decision of the Coordinate Bench and accordingly hold that the guarantee commission is taxable in the year of receipt and cannot be spread over the period of guarantee. The order of the Ld. CIT(A) is therefore set aside and the action of the Ld. AO is restored.”

Respectfully following the above decision, we set aside the order of the Ld. CIT(A) on this issue and restore the action of the Ld. AO.

Accordingly, Ground No. 6 raised by the Revenue stands allowed.

34. Ground No. 12 — Deduction for bad debts

We note that the ground relating to deduction for bad debts does not arise from the findings or directions recorded by the Ld. CIT(A) in the impugned order. The ground has therefore been wrongly raised and does not give rise to any surviving grievance requiring adjudication.

Accordingly, Ground No. 12 raised by the Revenue stands dismissed as misconceived.

35. Ground No. 13 — Provision for other long-term employee benefits

Ground No.13 relates to the provision made for other long-term employee benefits. The arguments advanced by both sides are similar and identical to the arguments raised by them while arguing the issue for assessment year 2010-11. The relevant findings on the issue has been recorded in paras 34.4 and 34.9 for order passed for assessment year 2010-11 that reads as under:

“34.4. The issue for consideration is the allowability of deduction in respect of bonus, leave encashment and other employee-related liabilities in the light of the provisions of section 43B of the Act. It is a settled position of law that section 43B mandates allowance of certain expenditures only on actual payment basis. However, the proviso to section 43B provides that where such payments are made on or before the due date of filing the return of income under section 139(1), the deduction shall be allowed in the year of accrual itself.

34.5. The Hon’ble Supreme Court in Allied Motors (P.) Ltd. v. CIT (supra) and CIT v. Alom Extrusions Ltd. (supra) has authoritatively held that payments made before the due date of filing the return are allowable and the proviso to section 43B is curative in nature.

34.6. In the present case, the assessee contended that the impugned amounts were in fact paid before the due date of filing the return of income. However, we find that the Ld. AO has not carried out proper verification of the factual position regarding actual payment and the timing thereof.

34.7. Insofar as leave encashment is concerned, it is governed by the specific provision contained in section 43B(f), which requires actual payment for allowability. Therefore, the allowability of such claim shall be strictly examined with reference to the said provision and the judicial position prevailing thereon.

34.8. In our considered view, the allowability of the claims under this section essentially depends on factual verification as to whether the payments have been made within the time prescribed under the proviso to section 43B and, in the case of leave encashment, whether the conditions of section 43B(f) are satisfied.

34.9. Accordingly, we deem it appropriate to restore this issue to the file of the Ld. AO for the limited purpose of verifying: (i) whether the payments towards bonus and other employee-related liabilities were made on or before the due date of filing the return of income; and (ii) whether the claim of leave encashment satisfies the requirement of actual payment in terms of section 43B(f). The Ld. AO shall grant deduction in accordance with law after due verification.”

Respectfully following the above decision, we restore the issue to the file of the Ld. AO for the limited verification directed therein.

Accordingly, Ground No. 13 raised by the Revenue stands allowed for statistical purposes.

36. The other grounds raised by the assessee as well as revenue for the year under consideration are identical and similar to the facts and circumstances considered for assessment year 2012-13 in the preceding paras. Both sides submitted that the arguments advanced are also identical for these common issue.

36.1. Having adjudicated all the grounds raised in the cross-appeals for A.Y. 2013-14, our findings recorded hereinabove while disposing of the corresponding issues for A.Y. 2012-13 will thus be applicable mutatis mutandis. For the sake of convenience, the relevant paras considering the issues in AY 2012-13 are summarized and tabulated as under:

Ground No. for A.Y. 2013-14	Issue	Corresponding ground for A.Y. 2012-13	Para(s) of the present order	Result/treatment
1	Disallowance u/s. 14A read with Rule 8D	Assessee Ground No. 3	4.1 to 4.4	Allowed for statistical purposes
2	Depreciation on leased assets	Assessee Ground No. 4	5.1 to 5.4	Dismissed
4	Depreciation/appreciation on securities classified as AFS/HFT	Assessee Ground No. 5	6.1 to 6.3	Allowed
5	Deduction u/s. 36(1)(viia) in respect of provision for standard assets	Assessee Ground No. 6	7.1 to 7.4	Allowed; quantification subject to verification
6	Taxation of interest income from non-performing assets	Assessee Ground No. 7	8.1 to 8.4	Allowed
7	Taxation of interest income from non-performing investments	Assessee Ground No. 7	8.1 to 8.4	Allowed
8	Contribution to Retired Employees Medical Benefit Scheme	Assessee Ground No. 8	9.1 to 9.4	Allowed
9	Provision for pension	Assessee Ground No. 2	3.1 to 3.4	Allowed
10	Double Taxation Relief	Assessee Ground No. 18	19	Allowed for statistical purposes
11	Income of foreign branches	Assessee Ground No. 9	10.1 to 10.4	Dismissed
13	Deduction u/s. 80-IA in respect of windmills	Assessee Ground No. 11	12.1 to 12.4	Partly allowed for statistical purposes
14	Disallowance u/s. 40(a)(ia) for short deduction of tax	Assessee Ground No. 12	13.1 to 13.4	Partly allowed for statistical purposes
15	Disallowance u/s. 40(a)(ia) in respect of interest expenditure	Assessee Ground No. 14	15.1 to 15.4	Allowed for statistical purposes
16	Disallowance of compensation for delayed payment	Assessee Ground No. 15	16.1 to 16.4	Allowed for statistical purposes
Additional Ground No. 1	Deduction of education cess	Additional Ground No. 1	23.1	Dismissed as not pressed

ITA No. 3395/Mum/2018 – Appeal by the Revenue

Ground No. for A.Y. 2013-14	Issue	Corresponding ground for A.Y. 2012-13	Para(s) of the present order	Result/treatment
3 and 4	Broken-period interest expenditure	Revenue Ground No. 1	24.1 to 24.4	Dismissed
7	Staff-welfare expenditure	Revenue Ground No. 2	25.1 to 25.4	Dismissed
8, 9 and 10	Disallowance u/s. 14A read with Rule 8D	Assessee Ground No. 3	4.1 to 4.4	Restored for limited recomputation
11	Loss on revaluation of investments/amortisation of premium on HTM securities	Revenue Ground No. 3	26.1 to 26.4	Dismissed
14 and 15	Recovery of bad debts written off in earlier years	Assessee Ground No. 10	11.1 to 11.4	Restored to the Ld. AO for verification

In the result, the appeals filed by the assessee in ITA Nos. 2390/Mum/2015 and 3429/Mum/2018 are partly allowed. The appeal filed by the Revenue in ITA No. 2429/Mum/2015 is dismissed, whereas the appeal filed by the Revenue in ITA No. 3395/Mum/2018 is partly allowed.

Order pronounced in the open court on 11-09-2026.