State Bank of India Vs DCIT (ITAT Mumbai)
Summary: The Income Tax Appellate Tribunal, Mumbai, disposed of cross-appeals involving State Bank of India and the Income Tax Department for assessment years 2001-02 and 2002-03 by a consolidated order pronounced on 12 July 2021. The appeals concerned ITA Nos. 4409, 4656, 4408 and 4655/Mum/2011, challenging appellate orders dated 29 March 2011. At the hearing, both sides acknowledged that many questions had already been adjudicated in the bank’s own appeals for earlier years. The Tribunal therefore applied those precedents issue by issue rather than repeating extensive factual discussion. The assessee’s appeals were partly allowed for statistical purposes, while the Revenue’s appeals were dismissed.
For assessment year 2001-02, the Tribunal allowed the bank’s claim relating to broken-period interest of Rs.274,04,19,099, following its earlier orders and noting that the Revenue’s appeal for assessment year 1996-97 had been dismissed by the jurisdictional High Court. It also allowed the deduction for deferred-payment guarantee commission of Rs.64,82,28,164 and depreciation on securities of Rs.35,99,26,182, both on the basis of consistent earlier-year decisions. However, it rejected the bank’s ground concerning scientific research payments of Rs.3,36,420, despite its argument that the payments had been made from funds created out of taxed profits.
A significant dispute concerned disallowance under Rule 8D analysis” target=”_blank” rel=”noopener”>Section 14A for exempt income. The bank contested disallowance of Rs.337,18,21,921 for assessment year 2001-02, relying on its own non-interest-bearing funds and arguing that Rule 8D could not apply retrospectively. The Tribunal accepted that Rule 8D was inapplicable to that assessment year and followed its earlier practice of estimating expenditure at one percent of exempt income. It issued the same direction for assessment year 2002-03 in relation to the disputed disallowance of Rs.199,64,30,232. These directions were based on consistency with the Tribunal’s decisions in SBI’s preceding assessments.
The Tribunal rejected depreciation on leased assets for both years, following decisions against the bank on similar sale-and-leaseback issues. It also upheld the treatment of a one-time Rs.24 crore payment received from Cardif S.A. in connection with formation of SBI Life Insurance Company as revenue income. Although SBI described the receipt as a non-compete payment or capital receipt, the Tribunal found that it represented consideration for the commercial advantage of access to the bank’s established branch network and customer base in developing the insurance business. It therefore sustained the addition for assessment year 2001-02.
Other issues for assessment year 2001-02 produced mixed results. The Tribunal allowed expenses connected with the India Millennium Deposits issue, including road-show, legal and advertising expenditure, following an earlier order in the bank’s favour. It rejected the original grounds concerning bad debts written off on non-rural advances and provisions for doubtful debts under Sections 36(1)(vii) and 36(1)(viia), respectively, based on the decisions then followed in the bank’s own cases. It restored the foreign-office provision claim for fresh examination and upheld interest under Section 234D. Additional grounds on bad-debt write-offs, recovery of previously written-off debts and foreign-branch income were restored to the Assessing Officer for verification and fresh adjudication.
For assessment year 2002-03, the Tribunal allowed deferred-payment guarantee commission and broken-period expenses, but rejected depreciation on matured investments and scientific research payments. It accepted the bank’s revised valuation of Held for Trading securities under Reserve Bank of India guidelines and deleted the addition of Rs.106.46 crore for unrealised appreciation. The Tribunal reasoned that banks were required to follow RBI valuation directions and should not recognise unrealised gains merely because the valuation policy had changed. It also allowed the bank’s claim concerning Rs.36.60 crore paid to US banking regulators, characterising the payments in the circumstances as compensatory rather than punitive and therefore deductible business expenditure.
The Tribunal’s remaining findings for assessment year 2002-03 included rejection of the original doubtful-debt provision claim and the ground against interest under Section 234D, while additional grounds concerning bad-debt write-offs, recovery of bad debts and foreign-branch income were restored for fresh adjudication. The Revenue’s appeals for both years were dismissed. For assessment year 2001-02, relief for payments to schools for employees’ children and taxation of interest on securities was sustained. For assessment year 2002-03, the Tribunal upheld relief relating to staff-welfare expenditure, amortisation of securities in the Held to Maturity category and taxation of interest on securities. The final result was that SBI’s appeals were partly allowed for statistical purposes and the Revenue’s appeals dismissed.
Cases Discussed
- State Bank of India v. DCIT — ITA Nos. 3644 and 4563/Mum/2016 (ITAT Mumbai), order dated 03.02.2020
- PCIT v. Sintex Industries — (2018) 93 taxmann.com 24 (Supreme Court)
- CIT v. HDFC Bank Ltd. — (2016) 383 ITR 529 (Bombay High Court)
- CIT v. HDFC Bank — (2014) 366 ITR 505 (Bombay High Court)
- CIT v. Essar Teleholdings Ltd. — (2018) 90 taxmann.com 2 (Supreme Court)
- Godrej & Boyce Mfg. Co. Ltd. v. DCIT — (2010) 328 ITR 81 (Bombay High Court)
- Vijaya Bank v. CIT — (2010) 323 ITR 166 (Supreme Court)
- Catholic Syrian Bank Ltd. v. CIT — (2012) 343 ITR 270 (Supreme Court)
- DCIT v. Karnataka Bank Ltd. — (2012) 349 ITR 705 (Supreme Court)
- CIT v. Corporation Bank Ltd. — (1988) 174 ITR 616 (Karnataka High Court)
- Chainrup Sampatram v. CIT — 24 ITR 481 (Supreme Court)
- CIT v. Ahmedabad Cotton Manufacturing Co. Ltd. — 205 ITR 163 (Supreme Court)
- CIT v. Indian Oil Corporation Ltd. — (2012) 25 taxmann.com 284 (Bombay High Court)
- State Bank of Mysore v. DCIT — (2009) 33 SOT 7 (ITAT Bangalore)
FULL TEXT OF THE ORDER OF ITAT CHENNAI
These cross appeals have been filed challenging four separate orders all dated 29″ March 2011, passed by the learned Commissioner (Appeals)-5, Mumbai, pertaining to the assessment year assessment year 2001-02 and 2002-03.
2. These cross appeals pertain to the same assessee involving common issues arising out of materially similar set of facts and circumstances and were heard together. As a matter of convenience, therefore, all the three appeals are being disposed off by way of this consolidated order. We now proceed to dispose off all these appeals on
merit one by one.
3. At the outset, we wish to place on record that the learned Sr. Counsel, Shri Girish Dave, appearing for the assessee submitted before us that each and every ground of appeal raised for the captioned assessment years under consideration are identical and covered by assessee’s own case for preceding assessment years, wherein the Co-ordinate Bench of this Tribunal has been consistently decided these issues. In support of this contention, he filed a chart showing each ground of appeal which is covered by the decision of the Tribunal in preceding assessment years. The learned Departmental Representative also fairly conceded the submissions of the learned Counsel for the assessee. Consequently, this Bench was of the considered opinion that since all the issues have already been decided multiple times, therefore, we deem it fit and appropriate not to repetitively discuss the facts of each issue.
ITA no.4409/Mum./2011
Assessee’s Appeal – A.Y. 2001-02
4, Ground no.1, relates to disallowance of % 274,04,19,099, in respect of broken period interest.
5. Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. During the course of hearing, both the leaned Counsels for the parties agreed that the identical issue raised in this ground by the assessee is now settled in favour of the assessee and against the Revenue by the decisions of the Tribunal rendered in assessee’s own case in assessment years 2008-09, 1996-97, 1995-96 and 1991-92. The relevant findings (vide Para-119 / Page-110 & 111) of the Tribunal in State Bank of India v/s DCIT, ITA no.3644 & 4563/Mum./2016, order dated 3″ February 2020, for the A.Y. 2008-09. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) by allowing the ground raised by the assessee. We also observe that the appeal filed by the Revenue before the Hon’ble Jurisdictional High Court for the assessment year 1996-97, was also dismissed vide its order dated 1*’ August 2016. Thus, ground no.1, is allowed.
6. Ground no.2, raised by the assessee relates to deferred payment guarantee commission of ¥ 64,82,28,164.
7. We have heard both the parties and perused the material on record including the case laws relied upon by the parties. The leaned Sr. Counsel for the assessee submitted that the Assessing Officer has given effect to the order passed by the Tribunal and has allowed the deduction for the deferred payment guarantee commission of the assessment year 1984-85 to 1989-90 and 1996-97. However, both the leaned Counsels for the parties conceded that that identical issue raised in this ground by the assessee is now settled in favour of the assessee and against the Revenue by the decisions of the Tribunal rendered in assessee’s own case in as 2000-01, 1984-85, 1996-97, and 1999-2000. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) by allowing the ground raised by the assessee. The learned Sr. Counsel for the assessee also brought to our notice that the Assessing Officer has given effect to the order of the Tribunal and has allowed the deduction for deferred payment guarantee commission for the assessment year 1984-85 to 1989-90 and 1996-97. Consequently, the ground raised by the assessee is decided in favour of the assessee and against the Revenue. Ground no.2, is allowed.
8. Ground no.3, relates to disallowance of ¥ 35,99,26,182, on account of depreciation on securities.
9. We have heard both the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue has been decided by the Tribunal and has allowed the claim of depreciation on securities in the assessment year 2000-01, 1996-97, 1997-98, 1998-99, 1999-00. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) by allowing the ground raised by the assessee. Ground no.3, is allowed.
10. Ground no.4, relates to disallowance of T 3,36,420 in respect of payments for scientific research.
11. The learned Sr. Counsel for the assessee submitted before us that this issue is covered by the decision of the Tribunal in assessee’s own case for the assessment year 2000-01, 1997-98, 1998-99, 1999-2000, wherein this issue has been decided by the Tribunal against the assessee and in favour of the Revenue. However, he pointed out that during the year under consideration the payment for scientific research was made out of separate funds created out of taxed profits in each of the earlier years. The amount set apart for the funds has not been claimed as a deduction in the earlier years. He submitted that the amount has been spent by the Bank in the ordinary course of business and hence, is allowable in terms of section 37(1) of the Act.
12. The learned Departmental Representative did not object to the submissions of the learned Sr. Counsel for the assessee.
13. Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue in respect of disallowance on account payments for scientific research is decided against the assessee and in favour of the Revenue by the decisions of the Tribunal rendered in assessee’s own case in assessment year 1 2000-01, 1997-98, 1998-99 and 1999-2000. Consistent with the view taken therein, we uphold the order of the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.4, is dismissed.
14. Ground no.5, relates to disallowance of ¥ 337,18,21,921, for earning exempt income under section 10(15) (iv)(c), 10(15) (iv)(f), 10(15) (iv)(h), 10(23G) and 10(33) by applying provisions of section 14A of the Act.
15. The learned Counsel for the assessee submitted that the loan granted / investments made out of own funds and non-interest bearing funds cannot attribute to disallowance in relation to interest expenditure and no disallowance can be made under rule 8D(2)(ii), as the assessee has own / non-interest bearing funds as far more than the investments made by the assessee. In this regard, he brought to our notice the financial statements at Page-135-212 of the paper book. For the above proposition, he relied upon the following case laws: –
i) PCIT v/s Sintex Industries, [20181 93 com 24 (SC);
ii) CIT v/s HDFC Bank Ltd., [2016] 383 ITR 529 (Born.);
iii) CIT v/s HDFC Bank, [2014] 366 ITR 505 (Born.);
iv) CIT v/s Tin Box Co. [2003] 260 ITR 637 (Del.);
v) Gujarat State Fertilizers & Chemicals Ltd., Tax Appeal no.82 of 2013 (Guj. HC);
vi) UTI Bank Ltd., 32 com 370 (Guj.
16. Further, he submitted that provisions of rule 8D are not applicable for the current assessment year considering the fact that it is introduced only in Income Tax Sth Amendment Rules 2008, w.e.f. 24th March 2008. For that proposition, he relied upon the decision of the Hon’ble Supreme Court in CIT v/s Essar Teleholdings Ltd., [2019] 90 taxmann.com 002 (SC) and the decision of the Hon’ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, [2010] 328 ITR 81 (Born.). Further, he submitted that disallowance under section 14A of the Act can be made only when the expenditure is actually incurred. In support of this proposition, he relied upon the following decisions:-
i) CIT v/s Central Bank of India, [2003] 264 ITR 522 (Born.);
ii) CIT v/s General Insurance Corporation of India, (2000] 254 ITR 203 (Born.);
iii) CIT v/s Eicher Ltd., 101 TTJ 369 (Del.);
iv) Dhanlakshmi Bank Ltd. v/s ACIT, [2007] 12 SOT 625 (Cochin);
v) State Bank of Indore, 275 ITR 23 (MP);
vi) Maruti Udyog LW., 92 ITD 119 (Del.); and others.
17. Further, the learned Counsel for the assessee submitted that the disallowance under section 14A of the Act in relation to administrative expenses may be calculated on the basis of certain percentage of the exempted income. He also brought to our notice the decision of the Tribunal in assessee’s own case wherein the Co-ordinate Bench has restricted the disallowance to one percent of the dividend income for the assessment year 1982-83 to 1983-84 and 1984-85 to 1990-91. He also submitted that no disallowance can be made under section 14A of the Act in the absence of exempt income. However, he submitted that in assessment year 2000-01, in assessee’s own case, the Co-ordinate bench has restored the issue to the file of the Assessing Officer and similarly in the year 1997-98, 1998-99 and 1999-2000. However, he submitted that the Assessing Officer has not granted any relied by giving effect to the order of the Tribunal for the assessment year 1997-98 and 1998-99 and the above orders were not speaking order. Accordingly, he prayed that similar to the finding given by the Tribunal in preceding assessment years, the issue may be decided in this year also and the Assessing Officer may be directed to give a clear decision in this regard.
18. The learned Departmental Representative relied upon the order of the authorities below.
19. Considered the rival submissions and perused the material on record. We notice that the provisions of rule 8D was introduced only from the assessment year 2008-09 and strictly the rules are not applicable in the current assessment year. However, following the findings of the Co-ordinate Bench decisions rendered in assessee’s own case which has directed the Assessing Officer to estimate the disallowance under section 14A of the Act at one percent of the exempt income. Keeping in view the consistency maintained by the Tribunal in assessee’s own case, we are also inclined to direct the Assessing Officer to estimate the expenditure under section 14A of the Act at the rate of one percent of the exempt income. We do not prefer to remit this issue to the Assessing Officer since the direction of the Co-ordinate Bench are very clear and it should be estimated at the rate of one percent of the exempt income. Thus, ground no.5, is allowed in terms indicated above.
20. Ground no.6, relates to depreciation of 165,18,13,363, on account of leased assets.
21. Having considered the submissions of the parties and having perused the material on record including the case laws relied upon, we find that the issue for our adjudication has been decided by the Coordinate Bench of this Tribunal in assessee’s own case against the assessee in assessment year 2008-09, 2000-01, 1996-97, 1997-98, 1998-99 and 1999-2000. The learned Sr. Counsel for the assessee submitted that the assessee has filed appeal against the order passed by the Tribunal, which has been admitted by the Hon’ble Jurisdictional, High Court and pending for hearing and yet no orders have been passed on merit. Keeping this in view and consistent with view taken by the Co-ordinate Bench of this Tribunal in assessee’s own case, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the ground raised by the assessee. Ground no.6, is dismissed.
22. Ground no.7, relates to the dispute arising out of the order of the learned CIT(A) in treating the amount of 24,00,00,000, received from Cardif S.A. as revenue receipt.
23. The learned Counsel for the assessee brought to our notice Note-25 attached to the statement showing computation of total income. He submitted that the assessee has received amount of 24 crore from Cardif S.A. in consideration of entering into joint venture to form SBI Life Insurance Co. Ltd. The joint venture entered by the assessee with Cardif S.A. was in the nature of “bancassurance” where an insurance company ties up with the local bank and wherever the bank operates, it target customers for insurance. He submitted that the LEARNED CIT(A) erred in considering the amount paid by the Cardif S.A. for utilizing the assessee’s brand and the learned CIT(A) has not appreciated the fact that Cardif S.A. is not using the assessee’s brand at all and it is merely making a payment for enterirg into a joint venture with the assessee and the payment made by the Cardif S.A. was a onetime payment. He brought to our notice the provisions of clause-2.2 of the joint venture agreement placed at Page-112 of the paper book which specifies that either party will carry on life BUSINESS IN India except through SBI Life Insurance Co. Ltd. Therefore, such payment was to be insured that the business of SBI Life Insurance can be protected from competition. For the above proposition, he relied upon the following case laws:-
i) Best & Co., 60 ITR 11 (SC);
ii) Kettlewell Sullen & Co. Ltd., 53 ITR 261;
iii) Gi/landers Arbuthnot & Co. Ltd., 53 ITR 283;
iv) Guftic Chem Pvt. Ltd., 198 Taxman 79 (SC);
v) Rchitasava Chand, 306 ITR 242, etc.
24. Further, he submitted that the provision of section 28(va) of the Act are not applicable to assessment year 2001-02. The said provisions are applicable w.e.f. 1st April 2003. Therefore, the above provision is not applicable for this assessment year. In support of this proposition, he relied upon the following decisions:-
i) Vikram S. Agrawal, 14 SOT 515 (Mum.);
ii) Ashit M. Patel, 96 7711 439 (Mum.); and
iii) Kaushal N. Desa/, ITA no.5025/Mum./2000 (Mum.).
25. Therefore, the amount received from Cardiff S.A., was capital in nature and hence, not taxable.
26. The learned Departmental Representative on the other hand submitted that the amount received by the assessee is credited in Profit & Loss Account and the assessee claimed the above income as exempt only in computation of income for the purpose of Income Tax which is placed at paper book Page-103 to 109. He submitted that the payment received by the assessee as a part of premium as per the communication submitted by the assessee in paper book at Page-100103. He also brought to our notice the joint venture agreement. Further, he brought to our notice Para-11.3.1 of the order passed by the learned CIT(A) and he brought to our notice the findings given by the learned CIT(A) that the payment was made for utilization of assessee’s brand as Cardif S.A. did not receive any asset in exchange of the consideration paid. There is nothing on record to indicate that there is a case of sale of brand or extinguishment of assessee’s right over its brand and the assessee allowed its brand to be used by the Insurance Company, therefore, it is revenue in nature. For that proposition, he heavily relied upon the findings of the learned CIT(A).
27. Considered the rival submissions and perused the material on record. We notice that the assessee entered into Joirt Venture with Cardif S.A. to form an entity SBI Life Insurance Co. Ltd., with the ratio of 74:26 between them. The Assessing Officer notice that the assessee received an amount of Z 24 crore for accepting Cardif S.A. as Joint Venture partner. It was paid as premium for the above purpose. The assessee submitted consistently that this payment is towards non-compete fee and not received in the ordinary course of business. Since it is onetime payment, it is only towards commencing insurance business. Therefore, it can only be capital in nature and, hence not taxable. It was argued that the non-compete fee is not taxable in this assessment year. We also noticed that the Revenue authorities treated the above payments towards utilization of brand of the assessee for the insurance business. The authorities applied the purpose test and the value exchange test to bring this receipt in revenue in nature.
28. We also notice that the assessee agreed to enter into insurance business with the collaboration of Cardif S.A. to form a new venture. The assessee will facilitate to establish the insurance business along with its regular business of banking. The existing and prospective customers are targeted and encouraged to take insurance policy. The concept itself “bancasurrance”. It means Insurance company in this case is Joint Venture, ties up with the assessee branches, the branches targets existing and prospective customers not only for banking facilities but also for insurance. These activities are carried out simultaneously with the banking facilities. The Joint Venture gets added advantage to expand their business with the existing facilities of vast network of the assessee. The Joint Venture i.e., Cardif S.A. paid the premium not only for selecting it for Joint Venture partner but for getting ready made platform for establishing the business and huge advantage to the Joint Venture partners and Joint Venture to establish its business. The payment is more towards the facilitation than the brand value. In fact, there is no doubt that the assessee carries the huge brand value since it is in the interest of Joint Venture not to compete with each other. Therefore, we cannot agree that it will fall under non-compete fee or restrictive trade practice. Rather it is towards offering the branch network for the establishment of insurance business. In the changing business scenario, the banking business has huge shift from the traditional banking business. The RBI has taken note of it and we noticed that so many banks has established its own insurance business along with the banking business. Some of them has utilised their own brand name. But some of the banks have entered Joint Venture with the international big players in the insurance business. In this case, the assessee has selected Cardif S.A. The international players will look for readymade establishment to establish their business. The assessee is providing its huge network facility to establish this new line of business along with its regular banking business. The assessee received the onetime premium towards this additional facilities and advantage which it was willing to offer to the other partner. Therefore, in the changing business module in the banking sector, it can only be treated as charges for facilitation offer or advantage for establishing the insurance business in India. Therefore, it cannot be said that it is for non-compete but it is for the advantage offered for the Joint Venture business. Therefore, we are inclined to sustain the addition made by the Assessing Officer. Thus, ground no.7, raised by the assessee is dismissed.
29. Ground no.8, relates to disallowance of Z 57,74,039 on account of road show, Z 5197,880 on account of legal expenses and Z 2,05,092, on account of advertisement expenses incurred in connectior with the issue of India Millennium Deposits under section 40(1) of the Act on account of non-deduction of tax at source under section 195 of the Act.
29. Considered the submissions and perused the material on record along with the case laws relied upon by the parties. We find that identical issue has been decided in favour of the assessee and against the Revenue by the decision of the Tribunal rendered in assessee’s own case in the assessment year 1999-2000. It was also brought to our notice that the learned CIT(A) has also while decided the issue for the year under consideration has relied upon the order of the first appellate authority for the assessment year 1999-2000 holding that the facts of the issue are similar to the assessment year 1999-2000. Consistent with the view taken therein as aforesaid, we set aside the impugned order passed by the learned Commissioner (Appeals) and allow the ground raised by the assessee. Ground no.8, is allowed.
30. Ground no.9, relates to write-off of bad debts under section 36(1)(vii) of the Act in respect of non-rural advances.
31. After hearing both the parties and on perusal of the record in the light of the decisions relied upon by the learned Sr. Counsel for the assessee, we find that the issue for our consideration is identical to the issue decided by the Co-ordinate Bench of this Tribunal rendered in assessee’s own case wherein the Tribunal has decided the issue against the assessee and in favour of the Revenue in assessment year 2008-09. Consistent with the view taken therein as aforesaid, we uphold the order passed by the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.9, is dismissed.
32. Ground no.10, relates to the disallowance of Z 1474,31,07,529, on account of doubtful debts under section 36(1)(viia) of the Act.
33. Considered the submissions and perused the material on record in the light of the decisions relied upon by the learned Sr. Counsel for the assessee. As it appears, the issue for our consideration is identical to the issue decided by the Co-ordinate Bench of this Tribunal rendered in assessee’s own case wherein the Tribunal has decided the issue against the assessee and in favour of the Revenue in assessment year 2000-01, 1996-97, 1997-98, 1998-99 and 1999-2000. The learned Sr. Counsel for the assessee further brought to our notice that the assessee had also filed appeal against the order passed by the Tribunal for the assessment year 1996-97, wherein the Hon’ble Jurisdictional High Court vide its order dated 23rd August 2016, has decided the issue against the assessee. Consistent with the view taken therein as aforesaid, we uphold the order passed by the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.10, is dismissed.
34. Ground no.11, relates to disallowance in respect of provisions made on account of foreign offices.
35. Considered the rival submissions and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. As has been brought to our notice by the learned Counsel appearing for the parties that this issue has been decided by the Co-ordinate Bench of the Tribunal in assessee’s own case in ITA no.6482 & 6822/Mum./2010, order dated 6th March 2020, wherein the Co-ordinate Bench Para-26 of its order has restored the issue to the file of the Assessing Officer directing him to decide the issue afresh after following the directions given in the order dated 31st January 2018 passed in assessee’s own case for the assessment year 19992000. Consistent with the view taken therein, we set aside the order of the first appellate authority and restore the issue to the file of the Assessing Officer for deciding the issue afresh following the directions given in the order dated 31St January 2018 passed in assessee’s own case for the assessment year 1999-2000 and verify the assessee’s claim in accordance with law. Thus, ground no.11, is allowed for statistical purposes.
36. Ground no.12, relates to levy of interest under section 234D of the Act.
37. Considered the rival submissions and perused the material on record. The learned Counsel for the assessee fairly conceded before us that this issue covered against the assessee and in favour of the Revenue by the decision of the Hon’ble Jurisdictional High Court in CIT v/s Indian Oil Corporation Ltd., [2012] 25 com 284 (Bom.), wherein the Hon’ble Court has decided identical issue in favour of the Revenue and against the assessee. Since the issue is squarely covered against the assessee, consistent with the view taken by the Hon’ble Jurisdictional High Court as aforesaid, we do not have any hesitation to uphold the order of the learned CIT(A) on this issue by dismissing the ground raised by the assessee. Thus, the assessee fails on ground no.12.
38. The assessee has also raised additional grounds for our adjudication and these additional grounds are being disposed off accordingly.
39. Additional ground no.1, raised by the assessee relates to deduction for write-off of the bad debts under section 36(1)(vii) of the Act as per the judgment of the Hon’ble Supreme Court in Vijaya Bank Ltd. v/s CIT, [2010] 323 ITR 166 (SC).
40. Having considered the rival submissions and having perused the material on record in the light of the decisions of the Tribunal rendered in assessee’s own case as well as the decision of the Hon’ble Supreme Court in Vijaya Bank v/s CIT [2010] 323 ITR 166 (SC) relied upon by the learned Counsel for the assessee, both the parties agree before us that identical issue has been decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 19992000, 2000-01, 2008-09, wherein the Tribunal has restored the issue to the file of the Assessing Officer adjudication afresh. Consistent with the view taken by the Tribunal in assessee’s own case, we set aside the impugned order passed by the learned CIT(A) and restore the issue to the file of the Assessing Officer for deciding the issue afresh after verify the assessee’s claim in accordance with law. Thus, additional ground no.1, raised by the assessee is allowed for statistical purposes.
41. Additional ground no.2, raised by the assessee relates to recovery of bad-debts written-off should not be liable to tax under section 41(4) of the Act as the assessee had not claimed deduction under section 36(1)(vii), as held by the Tribunal, Bangalore Bench, in State Bank of Mysore v/s DCIT, [2009] 33 SOT 007 (Bang.).
42. Having heard both the parties, we find that identical issue has been consistently decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 200001 and 2008-09, wherein the Tribunal following the order 31° January 2014, passed in assessee’s own case for the assessment year 1996-97 in M.A. no.371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.2, raised by the assessee is allowed for statistical purpose.
43. Additional ground no.3, raised by the assessee relates to treatment of income earned from foreign branches i.e., whether or not the income earned is liable to be taxed in India.
44. Considered the rival submissions and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. Before us, both the parties agree that identical issue has been consistently decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 2000-01 and 2008-09, wherein the Tribunal following the order 3rd January 2014, passed in assessee’s own case for the assessment year 1996-97 in M.A. no.371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learnec Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.3, raised by the assessee is allowed for statistical purpose.
45. In the result, assessee’s appeal being ITA no.4409/Mum./2011, for A.Y. 2001-02 is partly allowed for statistical purposes.
ITA no.4656/Mum./2011
Revenue’s Appeal – A.Y. 2001-02
46. Ground no.1, raised by the Revenue relates to deletion of addition on account of payment made to various schools for reservation of seats for children of the Officers of the Bank.
47. During the course of hearing, both the parties agree before us that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for the assessment year 1992-93, 1995-96 1996-97, 19992000, 2000-01 and 2008-09. The Tribunal in assessee’s own case in State Bank of India v/s DCIT, ITA no.3644 & 4563/Mum./2016, order dated 3rd February 2020, for the A.Y. 2008-09, has decided this issue in favour of the assessee and against the Revenue. Consistent with the view taken by the Tribunal in assessee’s own case as cited supra, we uphold the order of the learned CIT(A) on this issue and decline to interfere in the order as such. While concluding, we place on record that the appeal filed by the Revenue in assessee’s own case before the Hon’ble Jurisdictional High Court for the assessment year 1996-97, the said appeal was also dismissed vide its order dated lst August 2016. Thus, ground no.1, raised by the Revenue is dismissed.
48. Ground no.2, raised by the Revenue is, the learned CIT(A) erred in allowing the taxing of interest on securities on due basis.
49. During the course of hearing, on a perusal of the record available before us, we find that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for the assessment year 1991-92 1995-96 1996-97, 1999-2000, 2000-01 and 2008-09. The Tribunal in assessee’s own case in State Bank of India v/s DCIT, ITA no.3644 & 4563/Murn./2016, order dated 3rd February 2020, for the A.Y. 200809, has decided this issue in favour of the assessee and against the Revenue. Consistent with the view taken by the Tribunal in assessee’s own case as cited supra, we uphold the order of the learned CIT(A) on this issue by dismissing the ground raised by the Revenue. The learned Counsel for the assessee also submitted before us that that the appeal filed by the Revenue in assessee’s own case before the Hon’ble Jurisdictional High Court for the assessment year 1996-97, the said appeal was also dismissed vide its order dated 1st August 2016. Ground no.2, raised by the Revenue is dismissed.
50. In the result, Revenue’s appeal is dismissed.
ITA no.4408/Mum./2011
Assessee’s Appeal – A.Y. 2002-03
51. Ground no.1, raised by the assessee relates to deferred payment guarantee commission of 43,78,18,454.
52. We have heard both the parties and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the related facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.2, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-6 above, we have decided the issue in favour of the assessee and against the Revenue. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) on this issue and allow the ground no.1, raised by the assessee.
53. Ground no.2, relates to disallowance of depreciation on matured investments of Z 15,28,05,239.
54. Considered the submissions of the parties and perused the material on record including the case laws relied upon by the parties. Both the parties agreed before us that identical issue in respect of disallowance on account of depreciation on matured investment is consistently decided against the assessee and in favour of the Revenue by the decisions of the Tribunal rendered in assessee’s own case in assessment year 2000-01, 1996-97, 1997-98, 1998-99 and 19992000. Consistent with the view taken therein, we uphold the order of the learned CIT(A) by dismissing the ground raised by the assessee. Ground no.2, is dismissed.
55. Ground no.3, relates to disallowance of 1,60,000, on account of payments for scientific research.
56. Both the parties have been heard and material perused in the light of the decisions relied upon by the learned Counsel for the assessee. As it appears, we find that the facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.4, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-13 above, we have decided the issue in against the assessee and in favour of the Revenue. Consistent with the view taken therein, we uphold the order of the learned CIT(A) by dismissing the ground no.3, raised by the assessee.
57. Ground no.4, relates to the addition of net unrealized appreciation of Z 106,46,00,000, on account of change in accounting policy of investments in the HFT category of income.
58. During the course of assessment proceedings, it was found that in terms of RB I guidelines there has been a change in the accounting policy on valuation of investments in the “Held for Trading” (HFT) category from market value to book value or market value whichever is lower. Consequent to this change, the profit for the year was lower by 106.46 crore. The Assessing Officer, therefore, asked the assessee to explain why appreciation of 106.46 crore should not be added to the income. In response, the assessee submitted that the method of accounting regularly followed by the bank is mercantile and governed by the guidelines of the RBI and there was a bona fide change in the method of valuation of stock during the financial year 2001-02 brought about to comply with the RBI guidelines. In support of these submissions, the assessee relied upon the following decisions:-
i) Chainrup Sampatram v/s CIT, 24 ITR 481 (SC);
ii) Melmould Corp. v/s CIT, 202 ITR 789 (Born.);
iii) CIT v/s Corpn. Bank Ltd., 174 ITR 616 (Kar.).
59. The Assessing Officer, however, did not accept the explanation of the assessee for the following reasons:-
iii) The bank has been valuing the scrips in the HTF category at market place.
ii) The Appellant’s reliance on the decision in the case of Chainrup Sampatram v/s CIT 24 ITP 481 (SC), wherein it is stated unrealized profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following yearn account in a business that is contirnhing are not brought to charge as a matter of practice’ is misplaced. The Appellant has itself taken into account the appreciation in stock value in the earlier years. As a consequence of this, the opening stock of the HIT category of the current year i.e, FY 2001-02 will reflect a higher value and is not comparable with the opening stock.
iii) Opening stock cannot be valued in a manner different from the valuation of the closing stock; both have to be valued on the same principle.
iv) The RBI Circular was necessitated by a change in market conditions and thus the prudential norms requiring creation of the IFT was being reviewed. However; as these guidelines are specific from year to year and reflect necessity of reckonhig market forces, it would also be subject to change in future. The Appellants profits would, therefore, undergo fluctuation subject to changes in RBI guidelines.
v) In respect of BPI, ills pertinent to note while P81 has stated that the BPI is to be treated as item of expenditure, it has also clarified that the above accounting treatment does not take into account income tax implications. The DBOD Circular dt. 6.9.2001 stales “It is to be noted that the above accounting treatment does not take into account taxation implications and hence the banks should comply with the requirements of the IT authorities in the manner prescribed by them.
vi) The Appellant has also relied on the decision in CIT v/s Corporation Bank Ltd. 174 ITP 616. The facts of the case are distinguishable. This was a case when there was loss due to fall in market value. In the Appellant’s case, there is no loss clue to fall in market value in the friFT category.
vii) As per the PSI guidelines the Appellant is also permitted to shift investments from the head trading category to Available for Sale category when the bank is not able to sell the security within 90 clays due to tight liquidity conditions or extreme volatility or the market become uni-directional.
viii) From a plain reading of the Circular; it would appear that the emphasis of this Circular is that the investment fluctuation reserve is to be created out of taxable profits and not out of unrealized gains. The master circular dt. 6.9.2001 states as follows. “The individual scrips in the head trading for category will be revalued at monthly or at more frequent intervals and the net depreciation / depreciation under each classification referred to in item 2(1) above will be recognized in the income a/c. The book value of the individual scrip will change with the revaluation.”
60. The Assessing Officer held that the circular referred to by assessee is for the purpose of creation and maintenance of investment fluctuation reserve a/c and is to ensure that the assessee does create IFR out of unrealized gains and that the effect of the change with reference to the closing stock alone is not acceptable as following the method adopted by the assessee in earlier years. Accordingly, amount of Z 106,46,00,000 was added back to the total income of t assessee. The assessee being aggrieved, filed appeal before the appellate authority.
61. The learned CIT(A) upholding the order of the Assessing Officer dismissed the ground raised by the assessee by observing as follows:-
“8.3 I have considered the submissions of the Appellant and the assessment order. As I see, the main issue here is twofold.
i) Whether or not the change violates the principles of accounting consistency?
ii) What as the scope and import of the RBI guidelines?
The answers to the questions make we agree with the Assessing Officer Coming to the first question, I find that the change leads to a major accounting inconsistency in that during the same accounting year, the opening stock and the closing stock are being valued differently on different principles. This is highly anomalous In this respect, the Assessing Officer’s reliance on the decision in the case K.. G. Khosla & Co. Pvt. Ltd. v/s CIT. 99 ITP 574 (Delhi) is very apt and appropriate. It is to be noted that this anomaly being there, the Appellant’s accounts will also not be able to give the true and fair view of the statements of affairs of the Appellant bank. As spelt out in sub-section (1) and (2) of section 211 of the Companies Act, 1956, ‘every Balance Sheet should give a true and fair view of the statement of affairs of the company and every Profit & Loss A/c should give true and fair view of the profit and loss of the company for the financial year”. The change in the method of accounting in the Appellant’s case leads to the violation of this basic accounting principle. Besides, the change being based on P81 guidelines is likely to be subjected to further change in future as the P81 guidelines are issued from time to time keeping in view the market forces. The change is likely to suffer from inconsistency from this point of view in future also. The basis of the change would thus keep the Appellant’s accounts in continuous flux, which is not acceptable in accounting norms and conventions.
8.3.1 Coming to the second question, I find that as pointed out by the Assessing Officer, P81 guidelines do not take into account income tax implications. This is clear a from DBOD Circular dt. 6.9.2001 which states in the context of BPI ‘It is to be noted that the above accounting treatment does not take into account taxation implications and hence the banks should comply with the requirement of Income-Tax Authorities in the manner prescribed by them •. Further, I agree with the Assessing Officer that, the PSI Circular is more on the desired model of creation and maintenance of investment fluctuation reserve account and to ensure that the Appellant does not create IFP out of unrealized gains. Change in the method of valuing the closing stock is not the only option earmarked for this purpose.
8.3.2 In line with the above very fundamental principles and position, the arguments put forth by the Appellant are found to be misplaced. As I see, the Circulars and Instructions quoted by the Appellant are not exactly on the issue at hand as the PSI guidelines in question here is not only on valuation of stock but on overall expected model of investments Further, the argument that the gain in question is notional is also misplaced in the closing stock is intrinsic to the accounts and any variation or income on account of closing stock would also be intrinsic to income. Accordingly, seen in this perspective the decisions relied upon by the Appellant are also distinguishable. The change being bona fide or otherwise is also immaterial when the change violates some basic accounting principles.
8.3.3 In line with the foregoing, I find the action of the Assessing Officer justified. It is confirmed and the ground of appeal is dismissed.”
62. Considered the rival submissions and perused the material on record. We notice that the RBI has modified the method of valuation of investments held for trading. Based on the above guidelines, the assessee has changed the method of valuation from market value to book value or market value whichever is lower. As per the DBOD circular, it was advised to the assessee to ensure that the unrealized gains if any on valuation of investment portfolio are not taken to the income or to investment fluctuation reserve (IFR) account. Based on the above guidelines of the RBI, the assessee revalued Its Investment portfolio on 315t March 2002. Based on the above, the value of the closing stock was appreciated, which according to the assessee it is unrealizec appreciation. Even the RBI DBOT Circular direct the assessee not to account for if there is any appreciation in valuation as income or creation of IFR. The tax authorities rejected the valuation of closing stock based on the RBI guidelines with the objection that the assessee cannot revalue only the closing stock, it cannot adopt two method for valuation of closing and opening stock. According to them, it is not prudent method of valuation. In our view, the DBOD circular guidelines clearly indicate that bank should not book the unrealized gain as profit or IFT. It is in fact the most prudent method of accounting. Further, the banks are required to prepare the financial statements only based on the guidelines and master circular. The whole financial results depend upon the master circular guidelines i.e., the guidelines on provision, valuation of investment, recording of bad debts, etc. The financial records and results depend upon the above uniform guidelines, across the banks. Therefore, the financial assets and liabilities are valued only based on the above master circular. The status of valuation will keep changing year on year. Therefore, there will be up and down on the book result of the banks, which will iron out over the period. It is not expected to revalue the opening and closing stock every year, which will give absurd results. This aspect was already considered by the RBI and they judiciary in the past. It was explained clearly in the decision of the Hon’ble Karnataka High Court in CIT v/s Corporation Bank Ltd., [1988] 174 ITR 616 (Kar.). The bank’s financial results are completely different from the regular business results since they are bound by the guidelines of the RBI and the new method of valuation adopted by the banks, henceforth applied on a permanent basis in the later years. Therefore, the contention of the tax authorities are not proper and not as per judicial precedence. Accordingly, the ground raised by the assessee is allowed.
63. Ground no.5, relates to disallowance of 199,64,30,232, for earning exempt income under section 10(15)(iv)(c), 10(15)(iv)(f), 10(15)(iv)(h), 10(23G) and 10(33) by applying provisions of section 14A of the Act r/w rule 8D.
64. Having considered the rival submissions and having perused the material on record, we find that identical issue, except variation in figures, has been decided by us in assessee’s own case being ITA no.4409/Mum./2011. Since the issue is mutatis mutandis similar to the issue decided by us vide Para-19 of this order as aforesaid, facts and circumstances being similar, therefore, on this issue also, we are inclined to direct the Assessing Officer to estimate the expenditure under section 14A of the Act at the rate of one percent of the exempt income. Accordingly, this ground no.5, is allowed in terms indicated above.
65. Ground no.6, relates to depreciation of Z 164,55,89,293, on account of leased assets.
66. Both the parties have been heard and material perused in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.6, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-17 above, we have decided the issue against the assessee and in favour of the Revenue. Consistent with the view taken therein, worlds the order of the learned CIT(A) by dismissing the ground no., raised by the assessee.
67. Ground no.7, relates to disallowance of broken period expenses of Z 151,03,18,584.
68. We have heard both the parties and perused the material on record in tie light of the decisions relied upon by the learned Counsel for the assessee. We find that the related facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by JS vide ground no.1, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-2 above, we have decided the issue in favour of the assessee and against the Revenue. Consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) on this issue and allow the ground no.7, raised by the assessee.
69. Ground no.8, relates to disallowance of deduction under section 36(1)(vii) of the Act in respect of non-rural advances.
70. We have heard both the parties and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the related facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.9, raised by the assessee in its appeal being ITA no.4409/Mum./ 2011, for the assessment year 2001-02, vide Para-23 above, we have decided the issue in favour of the assessee and against the Revenue. The learned Counsel for the assessee has also relied upon the following decisions:-
i) The Catholic Syrian Bank Ltd. v/s CIT, [20121 343 ITR 270 (SC);
ii) CIT v/s City Union Bank Ltd., [2007] 291 ITR 144 (Mad.);
iii) DCIT v/s Karnataka Bank Ltd., [2-012] 349 ITR 705 (SC); and
iv) Punjab & Sind Bank v/s ACIT, 120081 23 SOT 103 (Del.).
71. Consistent with the view taken in assessee’s own case for the assessment year 2001-02 cited supra, we set aside the impugned order passed by the learned CIT(A) on this issue and allow the ground no.8, raised by the assessee.
72. Ground no.9, relates to disallowance of payment of 36,60,00,000, made to Federal Reserve Bank of New York and State of New York Banking Department due to the payment being penal in nature.
73. The Assessing Officer, during the course of assessment proceedings, found that in terms of order of assessment of civil money penalty and monetary payment issued by the Board of Governors of the Federal Reserve System, USA, the New York Office of the Appellant bank has paid Federal Reserve Bank, New York and the State New York Banking Dept., an amount of 36,60,00,000. These amounts were payments for violation of certain requirements. In this context, the Assessing Officer held that a penalty imposed for breach of law during the course of trade cannot be treated as a commercial loss. According to the Assessing Officer, this view was in line with the decisions of various Courts that infraction of law is not a normal incident of business and, therefore, no expenses which are claimed by way of penalty for beach of law can be an amount wholly and exclusively made for the purpose of business. Reliance was placed on the decision in the case of Swadeshi Cotton Mills, 233 ITR 199 (SC). The assessee was aggrieved by the order of the Assessing Officer, hence, filed appeal before the first appellate authority.
74. Before the learned CIT(A), the assessee submitted that in terms of order of assessment of civil money penalty and monetary payment issued by the Board of Governors of the Federal Reserve System, USA, the New York Office of the Appellant bank has paid Federal Reserve Bank, New York and the State New York Banking Dept., it was argued that the Appellant has paid the amount by way of civil money penalty for apparent violation of 12C.F.R. 326.8 as a result of SBIUS’s failure to establish and maintain procedure reasonably designed to assure and monitor compliance. It was also submitted that the payments were made without admitting to any allegations, which the U.S. authorities have accepted. The assessee was of the view that these are not in-the nature of penalty for infraction of law and that the expenditure was incurred during the course of business. The learned CIT(A) was not convinced with the submissions of the assessee and hence, held that disallowance made by the Assessing Officer was justified. The relevant observations of the learned CIT(A) are reproduced below: –
“14.3. I have considered the submissions of the Appellant and the assessment order. Looking into the nature of the payment and the infringement committed, I am in agreement with the Assessing Officer. To this end, 1 find that the payments were made for failure to maintain accounting procedures and compliance and reporting requirements. These were clear infringements of relevant Rules and accordingly, the payments were penal in nature. The Appellant is thus not right holding that the payments were not for infraction of law. As is clear, the payment is termed Civil penalty and was enforced for violation of 12 C.F.R 326.8. In this respect, the Assessing Officer’s reliance on the decision of CiT v/s Syndicate Bank 261 ITR 528 (Kar.) (Penal interest paid by bank under Banking Regulation Act).
In line with the foregoing, I find the disallowance justified. It is confirmed and the ground of appeal is dismissed.”
75. Considered the rival submissions and perused the material on record. We notice that the Assessing Officer found that the assessee incurred expenditure towards penalty in the nature of failure to maintain accounting procedures, compliance and reporting requirements. The board of Governors of the Federal Reserve System, USA, proposed the above civil penalty on the non-compliance of accounting and reporting requirements. The Assessing Officer held that penalty imposed for breach of law during the course of trade be treated as commercial loss. This view was supported by the decision of various Courts that infraction of law is not a normal incident of business, therefore, no expenses which are claimed by way of penalty for breach of law can be an amount wholly and exclusively for the purpose of business. The above view of the Assessing Officer was upheld by the learned CIT(A). After considering the submissions of both the parties, in our considered view, penalty can be based on the action committed by the parties when the law allows the parties to compound the lapse and mistake committed. What needs to be seen is, whether the penalty imposed is towards punishment for breach or infraction of law or statutory scheme or something akin to penalty. In case, the same law gives option to the assessee to compound the offence or in the nature of compensation. These penalty expenses can be treated based on the severity of the offence. The offence falls under the category of infringement then these kind of penalty is not allowable under section 37 of the Act. The law of allowability of penalty is fully settled by the Hon’ble Supreme Court in CIT v/s Ahmedabad Cotton Manufacturing Co. Ltd., 205 ITR 163 (SC), wherein it is held that as per Explanation to section 37, the expenditure incurred for any purpose which is an offence or which is prohibited by law is to be treated to have not been incurred for the purpose of the business and, hence, the payment which is punitive is not allowable. In case the payment is compensatory in nature, the same is to be allowed. In the given case, the penalty was levied on the non-compliance of accounting procedure and reporting requirements. These are mere infringement of certain rules governing the banking sector. These cannot be treated as punitive in nature. Therefore, these can be classified under compensatory in nature. Therefore, we are inclined to allow these expenses as business expenditure. Hence, the ground no.9, raised by the assessee is allowed.
76. Ground no.10, relates to the disallowance of 2211,10,64,916, on account of doubtful debts under section 36(1)(viia) of the Act.
77. Both the parties have been heard and material perused in the light of the decisions relied upon by the learned Counsel for the assessee. We find that the facts and circumstances of the issue raised by the assessee in this appeal, except variation in figures, are materially identical to the issue decided by us vide ground no.10, raised by the assessee in its appeal being ITA no.4409/Mum./2011, for the assessment year 2001-02, vide Para-25 above, we have decided the issue against the assessee and in favour of the Revenue. Consistent with the view taken therein, we uphold the order of the learned CIT(A) by dismissing the ground no.10, raised by the assessee.
78. Ground no.11, relates to levy of interest under section 234D of the Act.
79. Considered the rival submissions and perused the material on record. The learned Counsel for the assessee fairly conceded before us that this issue covered against the assessee and in favour of the Revenue by the decision of the Hon’ble Jurisdictional High Court in DT v/s Indian Oil Corporation Ltd., [2012] 25 taxmann.com 284 (Born.), wherein the Hon’ble Court has decided identical issue in favour of the Revenue and against the assessee. Since the issue is squarely covered against the assessee, consistent with the view taken by the Hon’ble Jurisdictional High Court as aforesaid, we do not have any hesitation to uphold the order of the learned CIT(A) on this issue by dismissing the ground raised by the assessee. Thus, ground no.11, raised by the assessee is dismissed.
80. The assessee has also raised additional grounds for our adjudication and these additional grounds are being disposed off accordingly.
81. Additional ground no.1, raised by the assessee relates to deduction for write-off of the bad debts under section 36(1)(vii) of the Act as per the judgment of the Hon’ble Supreme Court in Vijaya Bank Ltd. v/s CIT, [2010] 323 ITR 166 (SC).
82. Having considered the rival submissions and having perused the material on record in the light of the decisions of the Tribunal rendered in assessee’s own case as well as the decision of the Hon’ble Supreme Court in Vijaya Bank v/s CIT [2010] 323 ITR 166 (SC) relied upon by the learned Counsel for the assessee, both the parties agree before us that identical issue has been decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 19992000, 2000-01, 2008-09, wherein the Tribunal has restored the issue to the file of the Assessing Officer adjudication afresh. Consistent with the view taken by the Tribunal in assessee’s own case, we set aside the impugned order passed by the learned CIT(A) and restore the issue to the file of the Assessing Officer for deciding the issue afresh after verifying the assessee’s claim in accordance with law. Thus, additional ground no.1, raised by the assessee is allowed for statistical purposes.
83. Additional ground no.2, raised by the assessee relates to recovery of bad-debts written-off should not be liable to tax under section 41(4) of the Act as the assessee had not claimed deduction under section 36(1)(vii), as held by the Tribunal, Bangalore Bench, in State Bank of Mysore v/s DOT, [2009] 33 SOT 007 (Bang.).
84. Having heard both the parties, we find that identical issue has been consistently decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-2000, 200001 and 2008-09, wherein the Tribunal following the order 3′d January 2014, passed in assessee’s own case for the assessment year 1996-97 in M.A. no.371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.2, raised by the assessee is allowed for statistical purpose.
85. Additional ground no.3, raised by the assessee relates to treatment of income earned from foreign branches i.e., whether or not the income earned is liable to be taxed in India.
86. Considered the rival submissions and perused the material on record in the light of the decisions relied upon by the learned Counsel for the assessee. Before us, both the parties agree that identical issue has been consistently decided by the Tribunal in assessee’s own case for the assessment year 1996-97, 1997-98, 1998-99, 1999-20p0, 2000-01 and 2008-09, wherein the Tribunal following the order 3rd January 2014, passed in assessee’s own case for the assessment year 1996-97 in M.A. no.371/Mum./2014, restored the issue to the file of the Assessing Officer and directed him to decide the controversy afresh by giving an opportunity of being heard to the assessee in accordance with law by following similar guidelines as given by the Tribunal in the aforesaid misc. application. Consistent with the view as aforesaid, we set aside the order passed by the learned Commissioner (Appeals) and restore the issue to the file of the Assessing Officer with similar direction. We order accordingly. Additional ground no.3, raised by the assessee is allowed for statistical purpose.
87. In the result, assessee’s appeal is partly allowed for statistical purposes.
ITA no.4655/Mum./2011
Revenue’s Appeal – A.Y. 2002-03
88. Ground no.1, relates to disallowance of 86,32,689, on account of staff welfare expenses.
89. Before us, during the course of hearing, the learned Counsel Appearing for the parties agreed that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for the assessment year 199293, 1995-96 1996-97, 1999-2000, 2000-01 and 2008-09. The Hon’ble Jurisdictional High Court had also dismissed the Revenue’s which was filed by the Revenue challenging the order passed by the Tribunal in assessee’s own case for the assessment year 1996-97. Consistent with the view taken by the Tribunal as well the Hon’ble Jurisdictional High court In assessee’s own case as cited supra, we
90. Ground no.2, relates to disallowance of deduction of 19,47,08,383, on account of loss in respect of amortization of securities held in HTM category.
91. Considered the rival submissions and perused the material on record in the light of the decision relied upon by the learned Counsel for the assessee. Both the learned Counsel appearing for the parties conceded before us that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for the assessment year 2008-09, 1995-96, 1996-97. The Hon’ble Jurisdictional High Court had also dismissed the Revenue’s which was filed by the Revenue challenging the order passed by the Tribunal in assessee’s own case for the assessment year 1996-97. Consequently, consistent with the view taken by the Tribunal as well the Hon’ble Jurisdictional High Court in assessee’s own case as cited supra, we uphold the order of the learned CIT(A) dismissing the ground no.2, raised by the Revenue.
92. Ground no.3, raised by the Revenue is, the learned CIT(A) erred in allowing the taxing of interest on securities.
93. Having considered the submissions of the parties and having perused the material on record in the light of the decision relied upon by the learned Counsel for the assessee, both the learned Counsel appearing for the parties conceded before us that identical issue has been consistently decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for the assessment year 1991-92, 1995-96, 1996-97 and 1999-2000. The Hon’ble Jurisdictional High Court had also dismissed the Revenue’s which was filed by the Revenue challenging the order passed by the Tribunal in assessee’s own case for the assessment year 1996-97. It is also placed on record that identical issue has also been decided by in assessee’s own case being ITA no.4656/Mum./2011, for the assessment year 2001-02, vide Para-44 of this order, wherein, the issue has been decided in favour of the assessee and against the Revenue. Consequently, consistent with the view taken by the Tribunal as well the Hon’ble Jurisdictional High Court in assessee’s own case as cited supra, we uphold the order of the learned CIT(A) dismissing the ground no.2, raised by the Revenue.
91. In the result, Revenue’s appeal is dismissed.
92. To sum up, assessee’s appeals are partly allowed for statistical purposes and Revenue’s appeals are dismissed.
Order pronounced open court on 12.07.2021
