State Bank of India Vs ACIT (ITAT Mumbai)
The assessee has received dividend of Rs.194,09,17,456/-. The assessee had distributed dividend of Rs.447,35,40,463/-. The assessee had claimed deduction u/s.80M of the Act to the tune of Rs.194,09,17,456/-. We find that the lower authorities had made the disallowance by applying the estimated percentage to the income as the expenses incurred to earn the dividend income. The law is now well settled that for the purpose of deduction u/s.80M of the Act, only actual expenditure incurred has to be taken into consideration and there cannot be any estimate of expenditure that could be made thereon. Reliance in this regard had been rightly placed on the decision of the Hon‟ble Jurisdictional High Court in the case of CIT vs. Modern Terry Towels Ltd., reported in 43 Taxmann.com 466. We also find that this issue apparently had arose pursuant to the order passed by the ld. Administrative Commissioner of Income Tax u/s.263 of the Act wherein deduction u/s.80M of the Act was sought to be reduced. We find that assessee had preferred an appeal against the said order of the Administrative Commissioner u/s.263 of the Act before this Tribunal. This Tribunal had vide its order dated 14/03/2007 had set aside the order to the extent of restriction of claim of deduction of 80M of the order. Hence, the entire reduction u/s.80M of the Act which was made by the ld. AO pursuant to 263 proceedings becomes infructuous. The ld. AO is directed to give effect accordingly.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals in ITA Nos. 3779/Mum/2012, 3780/Mum/2012, 4097/Mum/2012 & 4098/Mum/2012 for A.Y.2003-04 & 2004-05 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-5, Mumbai in appeal No.CIT(A)-5/ACIT-2(2)/IT-55/2009-10 & CIT(A)-5/ACIT-2(2)/IT-90/2009-10 dated 01/03/2012 & 20/03/2012 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/11/2015 & 27/03/2006 respectively by the ld. Asst. Commissioner of Income Tax, Circle 2(2), Mumbai (hereinafter referred to as ld. AO).
ITA No.3779/Mum/2012 (A.Y.2003-04) Assessee Appeal
2. The ground No.1 raised by the assessee is with regard to addition made on account of deferred payment guarantee commission.
2.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee‟s own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:-
“7. We have heard both the parties end 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.”
2.2. Respectfully following the same, the ground No.1 raised by the assessee is allowed.
3. The ground No.2 raised by the assessee is with regard to disallowance of depreciation on securities.
3.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered against the assessee by the order of this Tribunal in assessee‟s own case for A.Y.2000-01 vide order dated 06/03/2020 wherein it was held as under:-
“7. Under this issue the assessee has challenged the disallowance of depreciation on matured investments in sum of Rs.15,13,81,119/-. At the very outset, the Ld. Representative of the assessee has argued that this issue has been covered against the assessee in the assessee‟s own case bearing ITA. No. 4736/M/2010 & 4598/M/2010 dated 31.01.2018 for the A.Y. 1999-2000. The relevant finding has been given in para no. 8 to 10 which is hereby reproduced as under.:-
“8. We have considered the contention of the parties and have gone through the orders of authorities below. We have noted that similar ground of appeal has been dismissed by the Tribunal in assessee‟s own case, with the following order: 38. Additional Ground No. 2 is regarding depreciation on matured securities. The assessee has claimed a sum of Rs. 2,23,86,418/- towards depreciation of investments. The AO disallowed the claim of the assessee and the CIT(A) has confirmed the action of the AO. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The CIT(A) has decided the issue in para 9 as under: “9. The ninth effective ground of appeal is against the disallowance of Rs.2,23,86,418/- being the provision for diminution in the value of securities which had matured and become due for redemption during the year but were not redeemed. It was contended before the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as non- performing assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was followed in Western India Oil Distributing Co. Ltd. Vs. CIT 206 ITR 359 (Bom). It was held in this decision that the concept of real income should not be so read as to defeat the provisions of the Act. Extension of the concept of real income to a field so as to negate accrual after the amount had become receivable is contrary to the postulates of the Act, the Supreme Court held (p. 146 of 158 ITR). Moreover, as held in the case of Navin R. Karnani Karnani vs. CIT 185 ITR 408 (Bom), it was not possible to waive any amount of income which had accrued under the mercantile system of accounting on the ground of diminished hope of recovery. Furthermore, any liability de futuro is not an ascertained liability in praesenti and cannot be allowed as deduction under the Income-tax Act as held in the case of Indian Molasses Co. Pvt. Ltd. vs. CIT 37 ITR 66 (SC) and Standard Mills Co. Ltd. Vs.CIT Vs.CIT 229 ITR 366(Bom) 366(Bom). Hence, no such ad hoc deduction could be allowed against the amount receivable on redemption of securities which had matured and become due for payment before the close of the accounting year. This ground therefore fails.
” 39. The findings of the CIT(A) is based the on the various decisions of the Hon’ble Supreme Court as well Jurisdiction High Court. No contrary decisions has been brought before us accordingly we do not find any error or illegality in the impugned order of CIT(A) qua this issue. The same is upheld. 9. Again in appeal for AY 1997-98 & 1998-99, the Tribunal by following the decision of AY 1996-97 dismissed the identical ground of appeal by passing the following order: 11.Next additional ground pertains to disallowance of depreciation on matured investments Rs.18,35,53,508/-.The AR fairly conceded that the issue is covered against the assessee by the decision of the Tribunal in its own case for assessment year 1996-97 (para 38 & 39) in ITA No.5470/M/2002 which reads as under :- “38. Additional Ground No. 4 is regarding depreciation on matured securities. The assessee has claimed a sum of Rs. 2,23,86,418/- towards depreciation of investments. The AO disallowed the claim of the assessee and the CIT(A) has confirmed the action of the AO. We have heard the Ld. AR as well as Ld. DR and ITA No. 4736 & 4598/M/2010- State Bank of India 10 considered the relevant material on record. The CIT(A) has decided the issue in para 9 as under:
“9.The ninth effective ground of appeal is against the disallowance of Rs.2,23,86,418/- being the provision for diminution in the value of securities which had matured and become due for redemption during the year but were not redeemed. It was contended before the A.O. that in some cases, the companies or the State Governments who had issued the relevant securities were not able to pay the amount due on redemption. The appellant treats these securities as nonperforming assets and a provision is made at a certain percentage for diminution in their value as in the case of other non-performing assets. There may be some delay on the part of the companies or the State Governments in paying the redemption amount. But, whenever the payment would be made it cannot be expected to be less than the face value. On the date of maturity, the whole of the amount of redemption money becomes due under the mercantile system of accounting followed by the appellant unless a portion of this amount is written off as bad debt. It is a real income and hence has to be taxed as such under the mercantile system followed by the appellant. Reliance in this regard is placed on State Bank of Travancore vs. CIT 158 ITR 102, 155 (SC) which was Travancore vs. CIT 158 ITR 102, 155 (SC) followed in Western India Oil Distributing Co. Ltd. Vs. CIT 206 ITR 359 (Bom). ITR 359 (Bom). It was held in this decision that the concept of real income should not be so read as to defeat the provisions of the Act. Extension of the concept of real income to a field so as to negate accrual after the amount had become receivable is contrary to the postulates of the Act, the Supreme Court held (p. 146 of 158 ITR). Moreover, as held in the case of Navin R. avin R. Karnani vs. CIT 185 ITR 408 (Bom) Karnani vs. CIT 185 ITR 408 (Bom) ani vs. CIT 185 ITR 408 (Bom), it was not possible to waive any amount of income which had accrued under the mercantile system of accounting on the ground of diminished hope of recovery. Furthermore, any liability de futuro is not an ascertained liability in praesenti and cannot be allowed as deduction under the Income-tax Act as held in the case of Indian Molasses Co. Pvt. Molasses Co. Pvt.Ltd. vs. CIT 37 ITR 66 (SC) Ltd. vs. CIT 37 ITR 66 (SC) and Standard Mills Ltd. vs. CIT 37 ITR 66 (SC) Standard Mills Co. Ltd. Vs.CIT 229 ITR 366(Bom Co. Ltd. Vs.CIT 229 ITR 366(Bom) CIT 229 ITR 366(Bom). Hence, no such ad hoc deduction could be allowed against the amount receivable on redemption of securities which had matured and become due for payment before the close of the accounting year. This ground therefore fails.”
39. The findings of the CIT(A) is based the on the various decisions of the Hon‘ble Supreme Court as well Jurisdiction High Court. No contrary decisions has been brought before us accordingly we do not find any error or illegality in the impugned order of CIT(A) qua this issue. The same is upheld.” Respectfully following the above additional ground No.4 is decided against the assessee.
10. Thus, respectfully following the decision of Tribunal in assessee‘s own case for AY 1996-97, 1997-98 & 1998-99 in ITAs No. 5470/Mum/2002 and ITA No. 3823-3824/Mum/2002, this ground of appeal is dismissed.”
8. On appraisal of the above mentioned finding, we find that this issue has already decided against the assessee by Hon‘ble ITAT in the assessee‘s own case for the A.Y. 1996-97, 1997-98 & 1998-99 bearing ITA.No.5470/M/2002, 3823 & 3824/M/2002. Nothing came into noticed that the finding has been changed or varied at this stage. Therefore, by reliance upon the decision of the Hon‘ble ITAT in the assessee‘s own case for the A.Y. 1999-2000 (supra). We decide this issue in favour of the revenue against the assessee.
3.2. Respectfully following the same, the ground No.2 raised by the assessee is dismissed.
4. The ground No.3 raised by the assessee is with regard to disallowance of payment made in respect of scientific research.
4.1. We have heard rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is already covered by the order of this Tribunal in assessee‟s own case for A.Yrs. 2001-02 and 2002-03 vide order dated 12/07/2021. The relevant operative portion of the said order is reproduced hereunder:-
“10. Ground no.4, relates to disallowance of ₹ 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 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.”
4.2. Respectfully following the same, the ground No.3 raised by the assessee is dismissed.
5. The ground Nos.4.1 to 4.4 raised by the assessee are with regard to disallowance of expenses u/s.14A of the Act r.w.r. 8D of the Rules.
5.1. We have heard rival submissions and perused the materials available on record. We find that assessee had earned exempt income during the year as under:-
