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TMI Blog2012 (12) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... O u/s. 36(1)(viia) against the bad debts written off during the year. 3. The CIT(A) erred in upholding the disallowance made by the AO with regard to payment to Master Card International of Rs. 39,59,959 and Visa Card International of Rs. 24,07,755/-. 4. The CIT(A) erred in confirming the action of the AO of bringing to tax net profit of Rs. 15,320/- on unmatured forward exchange contracts." 3. At the time of hearing Ld. AR submitted that ground No.1 of appeal is not pressed for. Hence, Ground No. 1 of the appeal is rejected. 4. In respect of ground No. 2 of appeal, Ld. Representatives of both parties agreed that issue involved is covered in assessee's own case for assessment years 2002-03 and 2004-05 in ITA Nos. 4146 & 4147/M/09 vide order dt. 26th March, 2010. A copy of said order is also placed on record. In view of above submissions of Ld. Representatives of parties and considering earlier order dt. 26.3.2010 (supra), we hold that credit balance for the purpose of considering provisions for bad and doubtful debt u/s. 36(1)(viia) will be opening credit balance i.e. balance brought forward as on 1st April to the relevant accounting year. In view of above, we reverse orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment is disallowable u/s. 40(a)(i) of the I.T. Act. It is relevant to state that in this regard Ld. CIT(A) has considered his earlier decision in the case of Hong Kong & Shanghai Banking Corpn. Ltd for assessment year 1996-97 which he has stated in para 23 of impugned order and following the same he agrees with the finding of AO to disallow payments made by assessee by invoking Sec. 40(a)(i) of the Act. Hence assessee is in further appeal before Tribunal. 28. Ld. AR submitted that similar issue was considered by ITAT Mumbai Bench in assessee's own case for assessment year 2000-01 in ITA No. 5371/M/01 and Tribunal by following decision of ITAT Bangalore in the case of Vijaya Bank Vs DCIT in ITA Nos. 808 to 816/Bang/2000 for assessment years 1996-97 to 1999-2000 decided the issue in favour of assessee by its order dt. 9th September, 2005, copy placed at pages 139 to 140 of Paper Book. Ld. AR submitted that in the case of Central Bank of India Vs DCIT 42 SOT 450, ITAT Mumbai Bench decided the same issue on similar facts and held that even if no TDS was deducted on the payments made to Visa International and Master Card International, it could not be disallowed in view of Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that they accepted having permanent establishment(s) in India under a Mutual Agreement procedure. Therefore, it does not lay down a law but it is only an agreement pursuant to which controversy has been resolved. He submitted that when assessee made payments to them, issue was very much open as to whether Visa International and Master Card International were having Permanent Establishment in India or not. He submitted that AO himself considered the said payments made by assessee bank to them as royalty. Ld. AR further submitted that said payees had already paid tax as per provisions of I.T. Act and if the said payment is disallowed on account of further developments which have taken place subsequent to payments made by assessee, assessee will be put to loss and will not be able to recover the amount from payees if it pays because said payees had already made payments of tax to department on the amount received from assessee. He submitted that Tribunal has decided this issue by its order dt. 24.9.2010 on similar facts in the case of Central Bank of India (supra) and since facts in the case of assessee are identical, Tribunal should consider the said case of Co-ordinate Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, it was submitted by Ld. Representatives of both parties that similar issue was also involved in the appeals for assessment years 1998-99 and 1999-2000 in ITA Nos. 5275 & 5276/M/01 and whatever decision is taken by Tribunal in those appeals be followed in the appeal for assessment year under consideration. 8. We have considered submissions of Ld. Representatives of parties The Tribunal in assessee's own case for assessment years 1998-99 and 1999-2000 dt. 13.01.2012 observed that Tribunal has considered the above issue vide paras 20 to 23 of said order, to which one of us is a party (JM)and Tribunal by following the decision of Special Bench in the case of DCIT Vs Bank of Bahrain & Kuwait 132 TTJ (Mum) 505 (SB) has restored the issue to AO to consider liability which has accrued as per Accounting Policy consistently being followed by assessee and directed the AO to allow claim to that extent. We state paras 20 to 23 of said order which are as under: "20. We have heard Ld. Representatives of parties. During the course of hearing, Ld. AR submitted that this issue is covered by order of Special Bench in the case of DCIT Vs. Bank of Bahrain & Kuwait 132 TTJ (Mum) 505 (SB). Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not agree with Revenue's contention that liability can arise only when the contract matured as it is divorced of the principles of commercial accounting. It was held that both legal obligation and commercial principles have to be taken into consideration for deciding such issues. Therefore anticipated losses on account of existing obligation as on 31st March, determinable with reasonable currency, being in the nature of expenditure/accrued liability, have to be taken into account while preparing financial statement. In view of above decision of Special Bench (supra), we are of the considered view that matter should be restored to AO to consider liability which has accrued as per Accounting Policy consistently followed by assessee as on 31.3.1998 and accordingly to allow said claim to that extent. Hence ground No. 5 of appeal taken by assessee is allowed for statistical purposes by restoring the issue to the file of AO to decide the same afresh in the light of above decision of Special Bench (supra)." In view of above order of Tribunal, we restore the matter to AO to decide the same afresh in the light of above decision of Special Bench (supra). Hence, ground No. 4 of appeal is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 1998-99 has allowed ground of appeal taken by assessee by following earlier orders of Tribunal in assessee's own case for assessment year 1990-91 as well as orders in succeeding assessment years. In view of the above, this issue is covered by earlier orders of Tribunal in favour of assessee. Hence, we uphold the order of Ld. CIT(A) and reject ground No. 2 of appeal taken by department.
14. In respect of ground No. 3 of appeal, Ld. DR relied on the order of AO and whereas Ld. AR submitted that the issue is covered in favour of assessee by the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income-tax Vs Bhor Industries Ltd. (Bom) 264 ITR 180. Ld. DR has not disputed above contention of Ld. AR.
15. In view of the fact that this issue is covered in favour of assessee by the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income-tax Vs Bhor Industries Ltd. (Bom) (supra), we uphold the order of Ld. CIT(A) and reject ground No. 3 of appeal taken by department.
16. In the result, appeal filed by the assessee is allowed in part and whereas appeal filed by department is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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