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TMI Blog2013 (8) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... time of allowing deduction under s 36(1)(vii), and, to that extent, the actual deduction attributable to bad debts [i.e. 36(1)(vii) plus 36)(1)(vii)(b)] will indeed be more than the actual bad debts in that year However, since the provision so allowed under s 36(1)(viia)(b) is be taken into account while allowing deduction for actual bad debts in the subsequent year, the effect of excess deduction, if any, will be squared up in that subsequent year. Secondly, a view seems perfectly acceptable that the provision for bad debts allowable under s. 36(1)(viia)(b) being inherently attributable to the debts outstanding at the end of the year, provision allowable as such is against future bad debts out of debts outstanding at the year end, and, therefore, It need not he mixed up with actual bad debts incurred during the year. - AO to compute deduction allowable on account of bad debt in line with the decision of the Tribunal in case of Oman International Bank, SAOG vs. DCIT [2003 (11) TMI 286 - ITAT BOMBAY-H] and M/s INDUSIND BANK LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(3), MUMBAI [2011 (1) TMI 1244 - ITAT MUMBAI] - Decided in favour of assessee. Disallowance of loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes due and payable in terms of the issue of such security. 2. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming disallowance of depreciation to the extent of Rs. 89,45,433 on assets leased to various lessees during the course of banking operations by the appellant. In respect of such assets the appellant continues to be a rightful owner and is, therefore entitled to depreciation on the basis of, among others, the user of the assets in the business of leasing. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in reducing deduction u/s 36(1)(vii) by Rs. 5,29,01,270. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance u/s 14A of other expenses of Rs. 21,46,159 in relation to earning exempt income. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance of loss amounting to Rs. 8,52,896 on unmatured foreign exchange contracts and ignoring the fact that the appellant maintains accounts on mercantile system, where liability has already accrued though discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign currency funds to the counterparty bank, which is ready to provide the rupee funds to it in exchange of foreign currency funds for a specified period. Thus, this premium is a definite cost of the swap transaction to the assessee and the proportionate premium on the outstanding swap contracts as on 31-3- 2001 based on number of days for which the contract was held in the previous year was worked out by the assessee at Rs. 2,04,28,235/- and the same was debited to the P L account. The A.O., however, took this amount debited by the assessee as swap cost relatable to the entire period of the swap transactions. He held that the entire cost thus was debited by the assessee in the year under consideration itself instead of claiming only the proportionate cost on the swap deals whose maturity was falling beyond the previous year. On verification of the relevant details furnished by the assessee, the ld. CIT(A), however, found that the total swap cost was Rs. 14,80,14,056/- out of which only the proportionate swap cost on the outstanding contract as on 31- 3-02 amounting to Rs. 2,04,28,235/- was claimed by the assessee. He, therefore, allowed the swap cost claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible to tax. The AO rejected the contention of the assessee and after excluding Rs. 62,63,63,964 being the amount already taxed in the assessment year 1999- 2000, added the balance amount of Rs. 29,36,03,288 to the total income of the assessee. Aggrieved, the assessee carried the matter in appeal but without any success. 3. At the time of hearing, learned counsel for the assessee contended that this issue is covered by the decision of the ITAT Mumbai (SB) in the case of DCIT (International Taxation) vs. Bank of Bahrain and Kuwait, 41 SOT 290 (Mum)(SB). On the other hand, learned Departmental Representative relied upon the Hon'ble Supreme Court judgment in the case of Ramabai v. CIT, 181 ITR 400(SC) and contended that income has to be taken on accrual basis. 4. Having heard both the sides, we find that the issue is squarely covered by the decision of the ITAT (SB) in the case of DCIT v. Bank of Bahrain and Kuwait (supra), wherein, it was held as follows:- "11.Ld Counsel for the assessee submitted that this issue is covered in assessee's own case for the assessment years 1992-93, 1993-94, 1995-96 and 1996-97. ld Counsel submitted that interest on Government Securities does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation of its income for income tax purposes in a manner different from the method under which it keeps accounts. Applying this judgment of the Supreme Court, the Tribunal held that Union Bank of India cannot be prevented from urging in the return that the interest on govt. securities accrued only on the specified coupon dates notwithstanding that credit has been taken in the profit loss account for the interest on day to day basis. Thus, the issue has been decided in favour of the view that the interest accrues only on the specified coupon dates and not on day to day basis. Since the facts of the present are identical, following the order of the Tribunal in the case of Union Bank of India (supra), we uphold the action taken by the CIT (Appeals) and dismiss the appeal". Consistent with the precedents, we dismiss this ground of the revenue." We see no reasons to take any other view of the matter than the view so approved by the Special Bench. As regards, Hon'ble Supreme court's judgment in the case of Ramabai (supra), the ratio of this judgment would not apply on interest on securities, since, as noted by the Tribunal in the above case, in the case of Government securities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in assessee's own case for A.Y. 2000-01 (supra) wherein a similar issue was decided by the Tribunal in favour of the assessee by following the decision of the co-ordinate Bench of this Tribunal in the case of Oman International Bank SAOG vs. DCIT, 92 ITD 76 (Mum). As submitted by the ld. Counsel for the assessee the said decision of the Tribunal in the case of Oman International Bank SAOG has been upheld by the Hon'ble Bombay High Court in the case of UTI Bank Ltd. (212 Taxman 273) holding that deduction on account of bad debts should be allowed after reducing opening provision of bad and doubtful debts. This issue thus now stands covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of UTI Bank Limited (supra). Respectfully following the said decision of the Hon'ble jurisdictional High Court, we reverse the decision of the ld. CIT(A) in reducing the deduction claimed by the assessee on account of bad debts by a sum of Rs. 5,29,01,270/- and allow ground No. 3 of assessee's appeal. 12. As regards ground No. 5 of the assessee's appeal, the ld. Representatives of both the sides have agreed that the issue involved therein relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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