9911796707
TMI Blog2015 (5) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... iation in question in the first assessment year, it would get the same relief in subsequent years. Since the assessee has been held entitled for the units in question for the assessment year 1996-97, we see no reason as to why it is not entitled for the same very assets in the impugned assessment year. The argument raised by the Revenue that the assessee led no evidence or material to prove its case also does not inspire any confidence as there is no cogent material placed before us to accept the Revenue's contention that the assessee is not entitled for the relief granted by the Commissioner of Income-tax (Appeals). - Decided in favour of assessee. Disallowance of payment to non approved pension fund - Held that:- In the instant case as well, the vital aspect of application of the legal principle of "commercial expedience" under section 37(1) of the Act has escaped the consideration of the Assessing Officer as well as the Commissioner of Income-tax (Appeals). Hence, we observe that the Assessing Officer in this case shall pass a fresh order in accordance with law by taking into consideration the above case law after affording adequate opportunity of hearing to the assessee. - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee offers cash excess once in every fourth year, therefore, we see no reason to affirm the disallowance in question because the four year time period includes the impugned assessment year as well. Accordingly, we hold that the Commissioner of Income-tax (Appeals) has rightly deleted the addition. - Decided against revenue. Re-depreciation on investment - Held that:- Since the Assessing Officer himself has held the disallowance to be inappropriate by rectifying the assessment order, there is no locus standi on the part of the Revenue to raise the instant ground. Hence, we reject this ground agitated by the Revenue. - Decided against revenue. Interest amount paid on securities as "revenue expenditure" - Held that:- the issue deserves to be redecided by the Assessing Officer by way of a detailed order in accordance with law after affording an opportunity of hearing to the assessee. We also make it clear that we have not expressed any opinion on merits of the issue. Therefore, the Assessing Officer would be at liberty to examine the issue afresh in the light of judgment of CIT v. Karur Vysya Bank Ltd. [2004 (7) TMI 52 - MADRAS High Court ] as well as various orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee. Disallowance on account of pooja expenses - Held that:- These expenses have been incurred only in respect of the workers, it is clear that the expenses have been rightly held to be ones incurred for the welfare of the workers. Thus we accept the assessee's ground and delete the disallowance on account of pooja expenses - Decided in favour of assessee. Business expenditure for developing business by gifting small mementos and gifts on special occasions - Held that:- The assessee has been able to prove the case with preponderance of probability if not beyond reasonable doubt that the gift articles as mentioned in the return were purchased and the same were utilised for promotion and growth of the business . Thus there is no issue between parties on facts, we hold that the assessee is entitled for the relief in question. - Decided in favour of assessee. Ex gratia payments disallowed by CIT(A) - Held that:- Admitted the relevant facts are that the assessee claims that the payment in question is made for earning more profit. This, in our opinion is nothing but bonus which is only in appropriations of profit. Hence, we see no reason to interfere in the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer for the assessment year 1996-97 and subsequent years. (v) Valuation of machinery was done by an eminent valuer. The amount valued by SITRA was equal to the previous valuer. (vi) Bank officials verified the existence of machinery. Insurance companies insured the machineries. (vii) The learned Commissioner of Income-tax (Appeals) did not go through the facts of the case but came to a conclusion that the appellant failed to establish the existence of these assets. This is not correct. (For the assessment year 1996-97, the then Commissioner of Income- tax (Appeals) remitted some issues to the Assessing Officer, including depreciation on leased assets of M/s. Rajender Steels Ltd. and M/s. Aruna Textiles Exports Ltd.) III (i) The pension payments to bank employees was one of the issue in bi-partite settlement. The pension payment starts after employees retired from active service. The pension fund was registered at the office of the Chief Commissioner of Income tax, Chennai. Agreement signed by all the parties (i.e.) bank, employees and IBA in January 1998. The Central Board of Direct Taxes was request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition rejected, acted according to law and purchased annuity from LIC. So, LIC annuity cannot be purchased for past liability (i.e.) from 1993 to 1998. Past liability is to be paid by bank directly. These were well and elaborately discussed by the then Commissioner of Income-tax (Appeals) in the appeal order dated March 31, 2005 for the assessment year 1998-99. (iv) Provision for pension liability is made as per actuary valuations. (v) Since employees gave notice for strike, to maintain industrial peace, the pension paid by bank directly to pensioners. (vi) If pension fund pays pension directly to pensioners without pur chasing annuity it is violation. But, pension was paid by bank directly. This is actual payment. So there is no violation. (vii) This pension payment was made wholly and exclusively for the purpose of business. Paying pension to employees is expenditure for business purposes. The retired employees are also equal to existing employees. They are also associate members of the union association. The payment was not made for personal or private purposes. On these grounds the Commissioner of Income-tax (Appeals) had erred in disallowing the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assets alleged to have been leased to Erode Rane Textile Processors I and II and Sri Sarvesh Cotton Mills Ltd. I, II and III ever existed. 2.2 The Commissioner of Income-tax (Appeals) ought to have appreciated the fact that if there is no asset in existence, then where is the question of user of the asset and consequently allowing the depreciation on the same asset. The Commissioner of Income-tax (Appeals) ought to have confirmed the order of the Assessing Officer to the extent of allowing depreciation on asset allegedly leased to Erode Rane Textile Processors I and II and Sri Sarvesh Cotton Mills Ltd. I, II and III. 3. The Commissioner of Income-tax (Appeals) erred in deleting the addition of cash excess of ₹ 83,701. 3.1 The Commissioner of Income-tax (Appeals) failed to observe that only the incremental value was added in the assessment. 4. The Commissioner of Income-tax (Appeals) has erred in deleting the disallowance of depreciation in the value of investment of ₹ 75,83,177. 4.1 The Commissioner of Income-tax (Appeals) failed to appreciate that Reserve Bank of India is a regulator of banks and can (nay, is required to) give directions to the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for purchase of current securities (treated as stock-in trade) lying unsold as closing stock. 6. The Commissioner of Income-tax (Appeals) erred in deleting the disallowance of bad debts to the extent of ₹ 9,38,735. 6.1 The Commissioner of Income-tax (Appeals) failed to note that under proviso to clause (vii) of sub-section (1) of section 36, only bad debts written off which are over and above the credit balance available in the provision for bad and doubtful debts account would be eligible for deduction. The Commissioner of Income-tax (Appeals) ought to have confirmed the addition made by the Assessing Officer. 7. For these and other reasons that may be adduced at the time of hearing, the order of the Commissioner of Income-tax (Appeals) may be cancelled and that of the Assessing Officer be restored. 3. In addition to this, the assessee has raised additional grounds challenging the legality of reopening under section 148 vide notice dated June 20, 2003 by terming it as mere change of opinion. During the course of hearing, the authorised representative has conceded that he does not wish to press the above additional grounds. He has also made an endorsement in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed an amount of ₹ 9,32,78,656 by holding that some expenses are always incurred to earn exempt income and it was not possible to say that specified item of expenditure related to earning of a particular income and rest for earning the other income. 8. In appeal preferred by the assessee, the Commissioner of Income-tax (Appeals) has restricted the disallowance made by the Assessing Officer to 2 per cent. only on tax-free bonds by holding as under: 3.3 The Assessing Officer is directed to restrict the disallowance in this regard to 2 per cent. only on tax-free bond reasonably as some expenditure element is definitely involved in earning this tax-free bond. 9. Reiterating the pleadings in the above said ground, the assessee has submitted before us that since there was no expenditure incurred for earning exempt income, the Assessing Officer as well as the Commissioner of Income-tax (Appeals) have erred in following apportionment formula and reasonable computation at 2 per cent respectively. It has also been stated that in the earlier assessment years, i.e., assessment years 1996-97, 1997-98 and 1998-99, the co-ordinate Bench of the Income-tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal held that rule 8 is to be followed in disallowing such expenses and the said rule is retrospective. Hence, he submitted that the matter may be restored to the file of the Assessing Officer to follow the ratio laid down by the Special Bench of the Tribunal in the above cited order. We find force in the contention of the learned Departmental representative that the point at issue is now governed by the decision of the Special Bench of the Tribunal cited supra and hence, we restore this issue back to the file of the Assessing Officer with a direction to follow the decision of the Special Bench cited supra and decide the issue afresh according to law, of course, after giving effective oppor tunity of being heard to the assessee. The assessee is also directed to co-operate with the Assessing Officer by providing necessary details that would be required for deciding the issue. Thus, both the assessee and the Revenue are allowed for statistical purpose on this ground for all the three assessment years under consideration. Against the above order passed by the co-ordinate Bench, the assessee's appeals are pending before the hon'ble High Court. It has also come to our notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hold that the Commissioner of Income-tax (Appeals) has rightly disallowed expenditure in earning exempt income at 2 per cent. So, the ground stands rejected. Ground No. II and 2 (common) in the assessee's appeal as well as Revenue's appeal : 12. The facts pertaining to this ground are that in the assessment proceedings, the assessee had claimed depreciation on leased assets at ₹ 16,72,395. Vide assessment order, the Assessing Officer disallowed ₹ 1,35,69,436 after placing reliance on the assessment order for the assessment year 1996-97. In the assessee's appeal, the Commissioner of Income-tax (Appeals) has dealt with the issue as under : 4.3 As the Assessing Officer has allowed the depreciation in the last two cases in the appellant's case. Accordingly disallowance made by the Assessing Officer on depreciation in the cases of Erode Rane Textile Processors I and II and Sri Sarvesh Cotton Mills Ltd. I, II and III are allowed. However, in the case of Rajendra Steels Ltd. and Aruna Textile disallowance made by the Assessing Officer are confirmed due to failure of the appellant to establish existence of these assets. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Income-tax (Appeals)'s order. Similarly, so far as the Revenue's contentions are concerned, we hold that since the assessee has been held entitled for the units in question for the assessment year 1996-97, we see no reason as to why it is not entitled for the same very assets in the impugned assessment year. The argument raised by the Revenue that the assessee led no evidence or material to prove its case also does not inspire any confidence as there is no cogent material placed before us to accept the Revenue's contention that the assessee is not entitled for the relief granted by the Commissioner of Income-tax (Appeals). Hence, we reject the Revenue's contention as well. 14. To sum up, ground No. II in the assessee's as well as ground No. 2 in the Revenue's appeal stand rejected. Ground No. III (assessee's appeal) 15. The facts apropos this ground are that in the assessment proceedings, the assessee had raised a claim of ₹ 3,43,51,768 with the explanation that the said amount had been paid directly in pension fund of its retired employees. In the Assessing Officer's opinion since the assessee had not made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37(1) of the Act. The Assessing Officer's (A.O's) objection thereto was that the assessee had already established a pension fund for the purpose, and to which regular contributions were being claimed and allowed under section 36(1)(iv) of the Act. An amount could be claimed as a business expenditure only under a specific section ; section 37(1) clearly providing for expenditure which is not specifically covered under sections 30 to 36 of the Act. On facts, it was pointed out by him that the amount available with the pension fund was more than that being claimed by the asses see by way of direct payment. He relied on several decisions, both as regards the legal proposition as raised by him as well as in respect of the pension paid thus. The learned Commissioner of Income-tax (Appeals) found that the Tribunal had in the case of South Indian Bank Ltd. (in I.T.A. Nos. 359 and 360/Coch/2006 dated September 27, 2007) remitted the matter back to the file of the Assessing Officer to consider as to how the liability (which stands claimed as arising by virtue of a tripartite agreement between the assessee, Indian Banks' Association and the Employees' Trade Union) had arisen i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and neither has the assessee been able to show us any. The order by the Tribunal referred to by the assessee disposes the Revenue's appeal, whose case, as afore noted, stands dismissed by the Tribunal, finding the allowance of deduction under section 36(1)(iv), which is qua the contribution to the fund, as no bar for the claim of deduction under section 37(1). However, that the same has to be on its merits, i.e., on a stand-alone basis, is unexceptional, and which we understand to be the import of the decision by the learned Commissioner of Income-tax (Appeals). The Assessing Officer shall afford proper opportunity of hearing to the assessee in the matter. We decide accordingly. After perusing the above observations, we are of the view that in the instant case as well, the vital aspect of application of the legal principle of commercial expedience under section 37(1) of the Act has escaped the consideration of the Assessing Officer as well as the Commissioner of Income-tax (Appeals). Hence, we observe that the Assessing Officer in this case shall pass a fresh order in accordance with law by taking into consideration the above case law after affording adequate opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng cogent evidence. Hence, we are unable to concur with the assessee's claim on the premise that purchase of software by the assessee is necessarily liable to be termed as revenue expenditure. Although the authorised representative has taken pains to refer the abovesaid case law, but as already observed hereinabove, on facts itself the assessee's case has failed to convince us for want of details of expenses. Therefore, the judgment of various hon'ble Courts (supra) are not applicable in this case. Accordingly, we confirm the findings of the Commissioner of Income-tax (Appeals). 23. The ground stands decided against the assessee and in favour of the Revenue. Ground No. V 24. In assessment proceedings, the assessee had claimed an amount of ₹ 2.40 lakhs as filing fees in its profit and loss account. Its contention before the Assessing Officer was that the same had been paid to the Registrar of Companies for the purpose of increasing its authorised capital. We find that the Assessing Officer as well as the Commissioner of Income-tax (Appeals) have treated it as capital expenditure and disallowed the assessee's claim. Therefore, the assessee is aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 1,50,000 paid to the Registrar of Companies as filing fee for enhancement of the capital was not revenue expenditure, this court has said (page 797 of 225 ITR) : We do not consider it necessary to examine all the decisions in extenso because we are of the opinion that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure since the expenditure was directly related to the expansion of the capital base of the company. We are, therefore, of the opinion that the view taken by the different High Courts in favour of the Revenue in this behalf is the preferable view as compared to the view based on the decision of the Madras High Court in CIT v. Kisenchand Chellaram (India) P. Ltd. [1981] 130 ITR 385 (Mad).' This decision thus covers the question that falls for consideration in this appeal. Dr. Pal has, however, submitted that this decision does not cover a case, like the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n instance of incurring capital expenditure. Hence, we see no reason to upset the findings of the Commissioner of Income-tax (Appeals). 28. The ground is therefore, decided against the assessee. Ground No. VI 29. In the assessment proceedings, the Assessing Officer had noticed Schedule 16 of profit and loss account, wherein the assessee had raised claim of ₹ 3,51,55,372 as arrears of wages on account of pay revision of its employees. After examining the assessee's explanation, the Assessing Officer arrived at following conclusions : (1) The sixth bi-partite settlement between bank employees associa tion/federation and ended on October 31, 1997, negotiations were started during the financial year 1998-99 to fix new scales of pay and allowances for seventh bi-partite settlement. (2) The memorandum of understanding was signed between the employee's organisation and Indian Bank Association on March 11, 1999. (3) New scale of pay effected from November 1, 1997 onwards. (4) Finally settlements were reached on December 14, 1999 for officers and on March 27, 2000 for workmen to give effect to revised scales of pay, etc., for the period from April 1, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kmen respectively were revised in pursuance to seventh bi-partite settlement. It is therefore, clear that the decision to enhance the wages was only arrived in the month of December, 1999 and March, 2000, i.e., not in the accounting period of the impugned assessment year. The case of the assessee is that since the memorandum of understanding between the workers and banks was settled on March 11, 1999 (in the accounting period), the liability stood ascertained. We are unable to accept this argument advanced by the assessee. We notice from the case law cited by the Revenue in the case of Indian Overseas Bank, this very issue had arisen i.e. the liability in furtherance to memorandum of understanding dated March 11, 1999 and the seventh bi-partite settlement. In the said case, the co-ordinate Bench after examining the issue in detail had decided that consequent liability was not an ascertained liability. The relevant observations of the co-ordinate Bench are reproduced hereinbelow : 12. The next issue relates to the question whether the Commissioner (Appeals) was correct in computing the book profit under section 115JA of the Act by disallowing the provision for wage re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee fol lowing the mercantile system of accounting a liability is said to be properly incurred when the dispute between the parties is amicably settled or finally adjudicated, where the liability in question is not a statutory liability. 17. In the present case we find that the liability in question cannot be construed to be a statutory liability. It can only be termed as a con tractual liability, as it emanates out of a contract. The memorandum of understanding is only a prelude to the contract. Actually the contract was entered into in the subsequent year on the basis of the memo randum of understanding. Therefore, in our opinion the liability did not crystallise in the year under consideration. It can be allowed only consequent upon its crystallisation within the framework of law. Sub ject to this remark we uphold the impugned order on this count. Although the assessee has also cited case law of Bharat Earth Movers [2000] 245 ITR 428 (SC), but in our opinion, since the issue before the hon'ble apex court was as to whether the amount already set apart to meet liability on account of leave encashment of the employees could hold to be ascertained liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the Commissioner of Income-tax (Appeals) has rightly deleted the addition. 37. We have given our thoughtful consideration to the ground and also gone through the relevant findings of the Assessing Officer as well as Commissioner of Income-tax (Appeals). Admittedly, the Assessing Officer has granted benefit of ₹ 1,03,674 out of ₹ 1,87,375 to the assessee which had been transferred to miscellaneous income account of the assessee as on March 31, 1996. On the same analogy, the Commissioner of Income-tax (Appeals) has observed that the cash excess is offered to tax in the fourth year, therefore, the addition in question stands deleted. After giving our thoughtful consideration, we are also of the view that since the Assessing Officer himself had allowed the cash excess as on March 31, 1996, in view of the said findings only, the Commissioner of Income-tax (Appeals) has proceeded to delete the addition. The factual position as it emanates from the orders of the lower authorities is that the assessee offers cash excess once in every fourth year, therefore, we see no reason to affirm the disallowance in question because the four year time period includes the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under : Dated 03.07.2003 G.I. No. 101CT16 AAACT3373J Sub : Income-tax assessment-assessment year 1999-2000-M/s. The Karur Vysya Bank Ltd., Erode Road, Karur-Revision of- Regarding. Order under section 154 : In the assessment completed under section 143(3) on March 27, 2002, for the assessment year 1999-2000, the following addition/dis allowance has been made. (a) ₹ 98,22,000 relating to interest under section 244A granted in the assessment year 1997-98 has been adopted as income in the assessment. (b) ₹ 75,83,177 has been disallowed in the assessment taking it a provision for depreciation on investment. The assessee-bank in its letter has stated that the interest of ₹ 98,22,000 granted under section 244A has been withdrawn in the scrutiny assessment completed for the assessment year 1997-98 and that this interest income taken for addition in the assessment for 1999-2000 is not correct. Further it has stated that the amount of ₹ 75,83,177 has been already offered as income in the books of account and the net profit shown at ₹ 37,03,92,219 in page number III of the income statements includes this amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3 Respectfully following the Madras High Court decision on the appellant's own case (CIT v. Karur Vysya Bank Ltd. [2005] 273 ITR 510 (Mad)) and the order of the Income-tax Appellate Tribunal, Chennai the above addition is deleted. 43. In support of the ground raised, the Departmental representative representing Revenue has vehemently argued that the Commissioner of Income-tax (Appeals) has wrongly accepted the assessee's claim. He also produced copy of the hon'ble Madras High Court judgment relied upon by the Commissioner of Income-tax (Appeals) reported as CIT v. Karur Vysya Bank Ltd. [2005] 273 ITR 510 (Mad) and submitted that in the said case, there are no finding by the hon'ble jurisdictional High Court in the assessee's favour since the Revenue had itself conceded the issue. He further contended qua the issue of stock-in-trade, there are no finding by the Commissioner of Income-tax (Appeals). To buttress his argument, he also placed reliance on CIT v. ING Vysya Bank Ltd. [2012] 24 taxmann.com 51 (Karn) and argued that the Commissioner of Income-tax (Appeals) has wrongly accepted the assessee's claim. 44. Per contra, the submissions of the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground is therefore, restored back to the file of the Assessing Officer. Ground No. 6 46. Background of this issue is that in the assessment proceedings, the assessee raised a claim of ₹ 12,19,401 in the shape of bad debts by writing it off under section 37(1)(vii) of the Act . The Assessing Officer did not accept the assessee's claim on the ground that since the said amount did not exceed the credit balance in the provisions for bad and doubtful debts under section 37(1) of the Act of ₹ 8.74 crores, the assessee was not entitled for the said deduction. Accordingly, he worked out that an amount of ₹ 2,80,666 out of abovesaid amount of ₹ 12,91,401 had already been added back in the memo of income statement and the balance amount written off was within the credit balance of the said account. Therefore, by placing reliance on the assessment order of previous years, the Assessing Officer made disallowance of balance amount of ₹ 9,38,735 by treating it the assessee's income. In appeal, the same stands deleted by the Commissioner of Income-tax (Appeals) on the basis of following findings : 9.3 Respectfully following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to section 36(1)(vii) will relate to cases covered under section 36(1)(viia) and has to be read with section 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans while under section 36(1)(vii), the asses see would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year. This, obviously, would be subject to satisfaction of the requirements contemplated under section 36(2). 42. Consequently, while answering the question in favour of the assessee, we allow the appeals of the assessees and dismiss the appeals preferred by the Revenue. Further, we direct that all matters be remanded to the Assessing Officer for computation in accordance with law, in light of the law enunciated in this judgment. Taking cue from the abovesaid observations of the hon'ble Supreme Court, we are of the view that in the instant case, none the less the assessee is entitled to write off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced money to the lessee under different scheme. (iv) Purchase receipts are available. Insurance done and bank officials verified the existence of machinery and all certificates were produced to the Assessing Officer and the case is not yet opened by the Assessing Officer for the assessment year 1996-97 and subsequent years. In the case of M/s. Aruna Textiles and Exports Ltd., (v) Valuation of machinery was done by an eminent valuer. The amount valued by SITRA was equal to the previous valuer. (vi) The bank officials verified the existence of machinery. Insurance companies insured the machineries. Without verifying all these facts, conclusion of the Commissioner of Income-tax (Appeals) that the appellant failed to establish existence of these assets is wrong and misleading. III (i) Pension payments to bank employees was one of the issue in bi-partite settlement. Pension payment starts after employees retired from active service. The pension fund was registered at the office of the Chief Commissioner of Income tax, Chennai. Agreement signed by all the parties (i.e.) bank, employees and IBA in January 1998. The Central Board of Direct Taxes was requested to grant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , acted according to law and purchased annuity from LIC. So, LIC annuity cannot be purchased for past liability (i.e.) from 1993 to 1998. Past liability is to be paid by bank directly. These were well and elaborately discussed by the then Commissioner of Income-tax (Appeals) in the appeal order dated March 31, 2005 for the assessment year 1998-99. (iv) The provision for pension liability is made as per actuary valuations. (v) Since the employees gave notice for strike, to maintain industrial peace, the pension paid by bank directly to pensioners. (vi) If pension fund pays pension directly to pensioners without purchasing annuity it is violation. But, pension was paid by bank directly. This is actual payment. So there is no violation. (vii) This pension payment was made wholly and exclusively for the purpose of business. Paying pension to employees is expenditure for business purposes. The retired employees are also equal to existing employees. They are also associate members of the union/association. The payment was not made for personal or private purposes. On these grounds the Commissioner of Income-tax (Appeals) had erred in disallowing the claim with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the portfolio of the securities in three categories, viz., held to maturity (HTM), available for sale (AFS) and held for trading (HFT). With a view to meet the legal requirement of SLR as per the Banking Regulations Act, the Reserve Bank of India has directed the banks that the securities held as HTM category are intended to be held as investment and shown in the books of accounts at cost ; while the securities of HFT and AFS categories are treated as stock-in-trade. It implies that investment in HTM category of securities is to be treated as 'investment' of capital nature. The Commissioner of Income-tax (Appeals) failed to observe that interest paid on purchase of HTM category of securities will be capital expenditure and not revenue expenditure. The Commissioner of Income-tax (Appeals) erred in treating entire investment in securities as stock-in-trade, overlooking the fact that only AFS and HFT category of securities would alone qualify for treatment as stock-in-trade. 4.1 The Commissioner of Income-tax (Appeals) failed to observe that broken-period interest paid at the time of purchase of securities would be part of 'cost' of securities. The Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer for decision afresh in accordance with law. Therefore, for impugned assessment year also, we restore ground No. 4 only back to the Assessing Officer. 57. Consequently, both appeals stand partly allowed for statistical purpose. I.T.A. No. 904/Mds/2010 (by assessee) and 899/Mds/2010 (by Revenue) for the assessment year 2001-02 58. These cross-appeals at the behest of the assessee and the Revenue respectively, emanate from the order of the Commissioner of Income-tax (Appeals), Tiruchirappalli dated March 23, 2010 in I.T.A. No. 53/04-05 for the assessment year 2001-02, in proceedings under section 143(3) of the Income-tax Act 1961 (in short the Act ). 59. The following grounds have been raised by the assessee : I.T.A. No. 904/Mds/2010 (i) The learned Commissioner of Income-tax (Appeals), Trichy failed to see that the lease agreement of two lessee, viz, M/s. Rajender Steels Ltd. and M/s. Aruna Textiles and Exports Ltd. are genuine. Depreciation claimed by the appellant regarding the two items were remitted back to the Assessing Officer by the Commissioner of Income-tax (Appeals), for the assessment year 1996-97. The transactions were genuine. (ii) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce any evidence to prove that assets alleged to have been leased to Erode Rane Textile Processors I and II and Sri Sarvesh Cotton Mills Ltd. I, II and III ever existed. 3.2 The Commissioner of Income-tax (Appeals) ought to have appreciated the fact that if there is no asset in existence, then where is the question of user of the asset and consequently allowing the depreciation on the same asset. The Commissioner of Income-tax (Appeals) ought to have confirmed the order of the Assessing Officer to the extent of allowing depreciation on asset allegedly leased to Erode Rane Textile Processors I and II and Sri Sarvesh Cotton Mills Ltd. I, II and III. 4. The Commissioner of Income-tax (Appeals) erred in deleting the addition of excess cash of ₹ 55,983. 4.1 The Commissioner of Income-tax (Appeals) failed to observe that only the incremental value was added in the assessment. 5. The Commissioner of Income-tax (Appeals) erred in deleting the addition of surplus amount of ₹ 1,62,971 received from jewellery auction. 5.1 The Commissioner of Income-tax (Appeals) failed to follow the ratio of decision of the apex court in the case of CIT v. T. V. Sun daram Iyengar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer. This leaves us with ground No. 5, i.e., issue regarding addition of surplus amount received by the assessee from jewellery auction. 63. The facts apropos are that in its profit and loss account, the assessee had raised a claim of ₹ 1,62,971 as expenses, which had been received from auction of jewellery. Its explanation before the Assessing Officer was that when any balance is left in auction, the same has to be paid to the borrowers concerned. The Assessing Officer did not agree to the assessee's contention ; in whose opinion, if any borrower did not turn up to collect the surplus amount in question, the same had to be retained in suspense account being a liability. Accordingly, he followed the assessment orders of the earlier assessment years and made addition in the assessee's total income. In the assessee's appeal, the Commissioner of Income-tax (Appeals) has deleted the addition by holding as under : 6.3 Respectfully following decision of the hon'ble Income-tax Appellate Tribunal in this regard the Assessing Officer is directed to delete the addition on surplus from jewellery auction ₹ 1,62,971. 64. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the drafts would apply. Accordingly, he treated this amount as the asset of the assessee from the day after the end of the previous year during which the drafts were issued. The Assessing Officer has made this addition and the learned Commissioner of Income-tax (Appeals) has confirmed the same in the light of the hon'ble Supreme Court decision in the case of T. V. Sundaram Iyengar and Sons [1996] 222 ITR 344 (SC). 3. We have given thoughtful consideration to the facts, evidences and the legal position relatable to the impugned issue. It is true that this liability has occurred due to ordinary business (trading) transac tions of the assessee-bank. The decision of the hon'ble apex court (supra) is on entirely different facts. In that case, it was held that '. . . In other words, the principle appears to be that if any amount is received in the course of trading transaction, even though it is not tax able in the year of deposit as being of revenue character, the amount changes its character when the amount becomes the assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, common-sense demands that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income/asset of the asses see-bank after the lapse of particular time lag. The decision of the hon'ble Supreme Court (cited supra) is, otherwise helpful to the claim of the assessee. The Assessing Officer has not given any clear cut finding as to how the amount has become unclaimable. Hence, we set aside the impugned finding and delete the entire addition. 5. In the result, the appeal of the assessee stands allowed. We also notice that in the assessee's own case in I.T.A. Nos. 1051 and 1139/Mds/2003 for the assessment years 1987-88 and 1989-90, the same issue had arisen before the co-ordinate Bench decided on July 14, 2006 which was accepted in the assessee's favour by holding as follows : 10. Another issue raised pertains to treatment of surplus in auc tion of jewellery (I.T.A. Nos. 1054 and 1139/Mds/03). 10.1 The issue raised in this regard reads as under : 'The Commissioner of Income-tax (Appeals) has failed to note that surplus amount was held by the assessee-bank because of non-loca tion of customers to whom the surplus amount was payable and they were in the nature of forfeited money by the customers which remained undisturbed and no claim fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the appellant, is contrary to law, erroneous, and unsustainable on the facts of the case. 2. The learned Commissioner of Income-tax (Appeals), Tiruchirap palli, has erred in treating 2 per cent. of the income from tax-free bonds as estimated expenses in earning tax-free interest. 2.1 Your appellant, a banking company which is controlled by the Reserve Bank of India, has got interest-free funds such as capital, reserves and current account deposits. The appellant has not incurred any expenditure by way of interest on tax-free investment. Your appellant being a banking company having more than 300 branches had not incurred any collection charges for realising tax-free income. Your appellant did not employ any additional person to look after tax-free investment. 2.2 The profit earned by taxable bonds and taxable investments were not pulled down by the investments in tax-free bonds, since the appellant has more interest-free funds. 2.3 Your appellant did not take loan from others for investing in tax-free bonds. 2.4 Under the above circumstances the maximum administrative expenses will not be more than Rs. one lakh. Therefore the estimated disallowance of 2 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 175 Taxman 494 (Bombay) ; (2) CIT v. Lakshmi Mills Co. Ltd. [1999] 240 ITR 81 (Mad) ; (3) CIT v. Sivanandha Mills Ltd. [1985] 156 ITR 629 (Mad) ; (4) CIT v. National Engineering Industries Ltd. [1994] 208 ITR 1002 (Cal) ; and (5) CIT v. Assam Frontier Tea Ltd. [2001] 249 ITR 469 (Gauhati). 5. The Commissioner of Income-tax (Appeals) Tiruchirappalli, while deciding the allowability of direct payments made by the appellant-bank to the pensioners, had erred in concluding that the payments are not made through annuity purchase and hence the payments are in violation of rule 89. 5.1 For paying pension to the employees an organisation should purchase annuity from LIC as per rule 89. Many banks have got self managed recognised provident fund and gratuity fund. So the banks wanted to have self-managed pension fund also. On application by IBA to the Central Board of Direct Taxes, for giving exemption to rule 89 to all banks, the Central Board of Direct Taxes permitted the nationalised banks alone to have self-managed pension fund. Therefore, once again the private sector banks association had requested Central Board of Direct Taxes to grant exemption for them also. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, the Commissioner of Income-tax after full study and hearing with the appellant accepted our views and given a direction under section 144A that the payments made by the bank to the retired employees, pending disposal of application by the Central Board of Direct Taxes is an expenditure incurred wholly and exclusively for business development and allowed the same under section 37(1). The assessment was reopened by issue of notice under section 148 and fresh re assessment order was passed on December 29, 2006. But in this order dated December 29, 2006 also, no additions were made on this front. 6. For the reasons stated in the grounds of appeal and arguments that may be adduced at the time hearing your appellant requests that the additions may kindly be deleted. 69. The Revenue's grievance in appeal has been pleaded as under : 1. The order of the Commissioner of Income-tax (Appeals) is contrary to law, facts and in the circumstances of the case and relied upon cases which are not applicable to facts of the case. 2. The Commissioner of Income-tax (Appeals) has erred in deleting the disallowances of depreciation in the value of investment of ₹ 20,79,27,343. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f securities will be capital expenditure and not revenue expenditure and therefore bro ken-period interest paid for HTM category of securities lying unsold at the end of the year ought to have been confirmed by the Commissioner of Income-tax (Appeals). 3.1 The Commissioner of Income-tax (Appeals) also erred in treat ing entire investment in securities as stock-in-trade, overlooking the fact only AFS and HFT category of securities would alone qualify for treatment as stock-in-trade. The Commissioner of Income-tax (Appeals) failed to observe that broken-period interest paid at the time of purchase of securities would be part of 'cost' of securities. The Commissioner of Income-tax (Appeals), therefore, ought to have con firmed the broken-period interest paid towards securities (AFS and HFT categories treated as stock-in-trade) lying unsold as closing stock. The Commissioner of Income-tax (Appeals) failed to note the understatement in value of the closing stock to the extent of broken period interest paid for purchase of AFS and HFT securities (treated as stock-in-trade) lying unsold as closing stock. 3.2 The Commissioner of Income-tax (Appeals) failed to consider the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciating that the assessee-bank did not consider in its computation dividend received to the extent of ₹ 3,88,19,875 only because the same was reinvested. Without conceding that view taken by Commissioner of Income-tax (Appeals) as regards applicability of section 94(7) is correct, yet this loss of ₹ 3,88,19,875 has been allowed by the Commissioner of Income-tax (Appeals) in excess of what is loss on sale of mutual fund units as per basic accounting practices. The Commissioner of Income-tax (Appeals) ought to have confirmed the addition made by the Assessing Officer at least to the extent of ₹ 3,88,19,875 purely on accounting basis itself. 7. The Commissioner of Income-tax (Appeals) erred in interpreting the second limb of section 36(1)(viia). The Commissioner of Income- tax (Appeals) allowed deduction on the total average outstanding rural advances made by the bank at the end of the accounting year without restricting the deduction to the incremental advance made during the year. The Commissioner of Income-tax (Appeals) failed to appreciate the fact that income for each year is required to be computed separately as each accounting year is a separate unit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Loss on mutual fund 8,77,49,442 Total additions 45,06,03,870 71. Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) which has been partly accepted. It is in this background of the fact that both parties are aggrieved and before us. 72. The Departmental representative representing the Revenue has strongly assailed the Commissioner of Income-tax (Appeals)'s order and submitted that the addition above said made by the Assessing Office have been wrongly deleted in part. Therefore, he prayed for restoration of additions. 73. Opposing the Revenue, it has been submitted by the authorised representative that in this case, the order dated March 30, 2009 (supra) passed by the Commissioner of Income-tax, Trichy exercising jurisdiction under section 263 of the Act has been nullified by the co-ordinate Bench of Income-tax Appellate Tribunal, Chennai in I.T.A. No. 825/Mds/2009 decided on June 3, 2011. In the light thereof, he has stated that the very foundation of the assessment order in question does not exist. He also produced c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Thus it is settled position of law that jurisdiction of the Assessing Officer under section 147 of the Act is limited to the escaped income and not other issues which are beyond his jurisdiction. Further, it is also settled position of law that the order of the lower authorities merges with the order of the higher authority, and that too, only to the extent of issues which were considered by the higher authorities. The order of the statutory authority does not merge with subsequent order passed by the very same authority because the stat utory authority is not empowered to revise its own order or order of his predecessor. In that case, order which remains in force is the ori ginal order read with or subsequent order. In our considered opinion, the issue of escaped income that is ₹ 2,70,96,093, subject matter of proceedings under section 148 only arises out of the reassessment order dated December 29, 2006 in the instant case and the other issues have attained finality, vide order dated March 29, 2004 passed under section 143(3) of the Act and do not arise out of the order dated December 29, 2006. Thus, if there was an error in the original order which was prejudicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As it is found that all the issues in respect of which impugned order under section 263 was passed by the Commissioner of Income-tax on March 30, 2009 were relating to the original order of assessment dated March 29, 2004, in our considered opinion, the order dated March 30, 2009 passed under section 263 is barred by limitation in view of provisions of sub-section (2) of section 263 of the Act and consequently bad in law. We, therefore, set aside the order of the learned Commissioner of Income-tax (Appeals) passed under section 263 of the Act on March 30, 2009 and allow the appeal of the assessee. 12. In the result, the appeal filed by the assessee stands allowed. After going through relevant portion of the order (supra), we are of the view that since the revision order under section 263 dated March 30, 2009 passed by the Commissioner of Income-tax, Trichy itself does not exist, the order of the Commissioner of Income-tax (Appeals) and that of the Assessing Officer have no legs to stand. Therefore, we hold that both these appeals have become infructuous as the additions in question made by the Assessing Officer no more hold ground. 75. As a sequel, both appeals h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation by IBA to the Central Board of Direct Taxes, for giving exemption to rule 89 to all banks, Central Board of Direct Taxes permitted the nationalised banks alone to have self-managed pension fund. Therefore, once again the private sector banks association had requested Central Board of Direct Taxes to grant exemption for them also. 3.2 This petition was pending before the Central Board of Direct Taxes. Since the pension was payable from 1993 the appellant-bank in order to avoid strike by employees and to have a harmonious relationship paid the pension directly without resorting to purchase of annuity. 3.3 The Central Board of Direct Taxes in August 2003 intimated its inability to grant exemption to private sector banks. The Karur Vysya Bank employees' pension fund started from September 2003 to pur chase annuity from LIC as per rule 89 in the case of employees retired. The fund is purchasing annuity from LIC as and when an employee retires. 3.4 Your appellant paid pension directly to employees when the petition was pending before the Central Board of Direct Taxes. 3.5 Since exemption was given to rule 89 for nationalised banks, private sector banks association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) failed to apply High Court orders in the cases of (a) CIT v. Aruna Sugars Ltd. [1981] 132 ITR 718 (Mad) ; (b) Atlas Cycle Industries Ltd. v. CIT [1982] 134 ITR 458 (P H) ; (c) Brijraman Das and Sons v. CIT [1983] 142 ITR 509 (All). 5. The learned Commissioner of Income-tax (Appeals) has erred in treating 2 per cent. of dividend income as estimated expenses on earning dividend income. 5.1 Your appellant a banking company had not incurred any expenditure by way of interest for purchasing shares and mutual funds. Your appellant had not incurred any collection charges. Your appellant did not employ additional person to look after investments in shares and mutual funds. 5.2 The profit earned by taxable bonds and other taxable invest ments were not pulled down by investments in shares and mutual funds since the appellant has more interest-free funds. 5.3 Your appellant did not take/borrow loan from others for invest ing in shares and mutual funds. 5.4. Under the above circumstances the maximum administrative expenses will not be more than ₹ 1 lakh. Therefore the estimated disallowance of 2 per cent. on dividend income may kindly be restricted to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax (Appeals), therefore, ought to have confirmed the disallowances for diminution in value in respect of HTM category of securities. The Commissioner of Income- tax (Appeals) erred in treating the entire portfolio of securities as stock-in-trade and consequently, deleted the additions made on account of disallowance of depreciation in value of portfolio of these securities shown as 'investments' in books. 3. The Commissioner of Income-tax (Appeals) has erred in allowing the interest claimed on purchase of securities as revenue expenditure. The Commissioner of Income-tax (Appeals) failed to observe that interest paid on purchase of HTM category of securities will be capital expenditure and not revenue expenditure and therefore bro ken-period interest paid for HTM category of securities lying unsold at the end of the year ought to have been confirmed by the Commissioner of Income-tax (Appeals). 3.1 The Commissioner of Income-tax (Appeals) also erred in treating entire investment in securities as stock-in-trade, overlooking the fact only AFS and HFT category of securities would alone qualify for treatment as stock-in-trade. The Commissioner of Income-tax (Appeals) fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored. 105. Coming to the assessee's appeal, the authorised representative representing the assessee has pointed out that grounds Nos. 2 and 5 in this appeal pertain to disallowance made by the Commissioner of Income-tax (Appeals) at 2 per cent. under section 14A qua income from tax-free bonds and dividend. He has submitted that the ground in hand is identical to that raised in I.T.A. No. 902/Mds/2010. Similarly qua ground No. 3 which relates to the issue of applicability of rule 89 qua allowability of direct payments made by the assessee to its pensioners, the authorised representative has clarified that the said issue also stands adjudicated in I.T.A. No. 902/Mds/2010. After considering the submissions made by the authorised representative, we are of the opinion that since we have already adjudicated upon grounds Nos. 2 and 5 and 3 raised in the instant appeal in I.T.A. No. 902/ Mds/2010 filed by the assessee decided hereinabove, we pass the same order in the instant case, i.e., grounds Nos. 2 and 5 are rejected and ground No. 3 stands remitted back to the Assessing Officer. This leaves us with grounds Nos. 4 and 6 raised in the instant appeal which pertain to pooja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant Commissioner on appeal. On further appeal, the Income-tax Appellate Tribunal allowed the appeals in part. In para 12 of its order, the Tribunal pointed out that these expenses were incurred for the poojas, etc., performed by the workers and that they should form part of the welfare expenses. It also pointed out that, similarly, expenses on bakshish and presenta tion were found to have been incurred in respect of the workers alone. Hence, the Tribunal did not find any reason for the disallow ance of these claims. It is this conclusion of the Tribunal that is now sought to be questioned. Having regard to the finding of the Tribunal that these expenses have been incurred only in respect of the workers, it is clear that the expenses have been rightly held to be ones incurred for the welfare of the workers. The conclusion of the Tribunal is based on the particular facts and, therefore, no question of law arises out of the order of the Tribunal. The petitions are, accordingly, dismissed with costs. Counsel's fee ₹ 250 (rupees two hundred and fifty only), one set. In the light thereof, we are of the view that the Commissioner of Income-tax (Appeals) has erred in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the learned Tribunal. It appears that the learned Tribunal while reversing the judgment and the order of the Commissioner of Income-tax (Appeals) and restoring that of the Assessing Officer followed the earlier decision of the Tribunal which had affirmed the decision of the Commissioner of Income-tax (Appeals) on the question of disallowance of expenditure. Dr. Pal has rightly pointed out that on earlier occasion for the assessment year 1988-89 the assessee-company could not establish by producing evidence that the gift articles were purchased or the same were utilised for the purpose of promotion and growth of the business. Therefore, the judgment based on fact earlier should not be a binding precedent to be followed by the learned Tribunal. We find considerable force in the submission that reason for disallowance of fifty per cent. on earlier occasion was not established by adducing cogent evidence that there has been purchase of the gift articles and the same were utilised for promotion and growth of business so as to bring the deduction under the head of business expenditure. In view of the aforesaid factual position it cannot be said that the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax (Appeals) and bad debts. Since the parties are not at variance that these grounds have been adjudicated hereinabove in I.T.A. No. 897/ Mds/2010 (supra), we restore grounds Nos. 3, 4 and 5 to the Assessing Officer and reject ground No. 2. 89. Accordingly, the Revenue's appeal stands partly allowed for statistical purpose. I.T.A. Nos. 907/Mds/2010 (by the assessee) and 901/Mds/2010 (by the Revenue) 90. These cross-appeals by the assessee and the Revenue respectively ; challenge the order of the Commissioner of Income-tax (Appeals), Tiruchirappalli, dated March 23, 2010 in I.T.A. No. 311/07-08 for the assessment year 2005-06, in proceedings under section 143(3) of the Income-tax Act 1961 (in short the Act ). 91. The assessee has raised the following grounds : I (i) The learned Commissioner of Income-tax (Appeals), Trichy failed to see that the appellant did not incur any expenditure in earning the tax-free income. The estimated disallowance at 2 per cent. of the tax-free income is not correct as per the decision of many appellate authorities. (ii) The learned Commissioner of Income-tax (Appeals), Trichy failed to see that the Assessing Officer had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance for diminution in value in respect of HTM category of securities. The Commissioner of Income-tax (Appeals) erred in treating the entire portfolio of securities as stock-in-trade and consequently, deleted the additions made on account of disallowance of depreciation in value of portfolio of these securities shown as 'investments' in books. 3. The Commissioner of Income-tax (Appeals) has erred in allowing the interest claimed on purchase of securities as revenue expenditure. The Commissioner of Income-tax (Appeals) failed to observe that interest paid on purchase of HTM category of securities will be capital expenditure and not revenue expenditure. The Commissioner of Income-tax (Appeals) erred in treating entire investment in secu rities as stock-in-trade, overlooking the fact that only AFS and HFT category of securities would alone qualify for treatment as stock-in trade. 3.1 The Commissioner of Income-tax (Appeals) failed to observe that broken-period interest paid at the time of purchase of securities would be part of 'cost' of securities. The Commissioner of Income-tax (Appeals), therefore, ought to have confirmed the broken-period interest paid towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. qua exempt income. Similarly, ground No. III pertains to disallowance of pooja expenses. 94. We find that in I.T.A. No. 902/Mds/2010 filed by the assessee for the assessment year 1999-2000, we have confirmed the disallowance made by the Commissioner of Income-tax (Appeals) at 2 per cent. qua exempt income. Therefore, ground Nos. I and II are rejected. 95. Qua ground No. III of pooja expenditure, it is noticed that in I.T.A. No. 930/Mds/2011 filed by the assessee for the assessment year 2004-05, we have deleted the disallowance. In the light thereof, we accept the assessee's ground in hand and delete the disallowance. 96. Consequently, the assessee's appeal in I.T.A. No. 907/Mds/2010 stands partly allowed. 97. Now, we come to the Revenue's appeal in I.T.A. No. 901/Mds/2011. In this appeal, the Revenue has raised five substantive grounds, i.e., grounds Nos. 2 to 6 regarding disallowance of depreciation in the value of investment, interest claim on purchase of securities, disallowance of brokerage, bad debts and unclaimed balances. It is seen that in I.T.A. No. 897/Mds/ 2010 (supra) decided hereinabove, we have rejected the Revenue's contention qua dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e funds. 2.3 Your appellant did not take loan from others for investing in tax-free bonds. 2.4 Under the above circumstances the maximum administrative expenses will not be more than ₹ 1 lakh. Therefore the estimated disallowance of 2 per cent. on income from tax-free bonds may kindly be restricted to ₹ 1 lakh. 3. The learned Commissioner of Income-tax (Appeals) has erred in treating 2 per cent. of dividend income as estimated expenses on earning dividend income. 3.1 Your appellant a banking company had not incurred any expenditure by way of interest for purchasing shares and mutual funds. Your appellant had not incurred any collection charges. Your appellant did not employ additional person to look after investments in shares and mutual funds. 3.2 The profit earned by taxable bonds and other taxable invest ments were not pulled down by investments in shares and mutual funds since the appellant has more interest-free funds. 3.3 Your appellant did not take/borrow loan from others for invest ing in shares and mutual funds. 3.4 Under the above circumstances the maximum administrative expenses will not be more than ₹ 1 lakh. Therefore the estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the reasons stated in the grounds of appeal and arguments that may be adduced at the time hearing your appellant requests that the additions may kindly be deleted. Similarly, the Revenue has pleaded its grievance as under : 1. The order of the Commissioner of Income-tax (Appeals) is contrary to law, facts and in the circumstances of the case and relied upon cases which are not applicable to the facts of the case. 2. The Commissioner of Income-tax (Appeals) has erred in deleting the disallowances of depreciation in the value of investment of ₹ 42,92,57,263. 2.1 The Commissioner of Income-tax (Appeals) failed to appreciate that Reserve Bank of India is a regulator of banks and can give directions to the banks with regard to SLR requirements, cash reserve ratio and the manner in which the accounts are to be kept by the banks. Pursuant to the powers given by the Banking Regulations Act, the Reserve Bank of India had asked the banks to maintain the portfolio of the securities in three categories, viz., held to maturity (HTM), available for sale (AFS) and held for trading (HFT). With a view to meet the legal requirement of SLR as per the Banking Regulations Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument has not been taken up before and therefore ratio of decision of the assessee-bank for the earlier year is not applicable to the facts of the case. 4. The Commissioner of Income-tax (Appeals) erred in deleting the disallowance of brokerage without appreciating that securities in the HTM category would be investment of capital nature. The Commissioner of Income-tax (Appeals) ought to have restricted the relief for the brokerage paid in respect of AFS and HFT category of securities. 5. The Commissioner of Income-tax (Appeals) erred in deleting the addition with regard to unclaimed balances. The Commissioner of Income-tax (Appeals) failed to follow the ratio of decision of the apex court in the case T. V. Sundaram Iyengar and Sons [1996] 222 ITR 344 (SC). The balance lying unclaimed with the bank for more than 3 years ought to have been confirmed by the Commissioner of Income- tax (Appeals) as these are to be treated as income in the light of the above referred decision. 6. The Commissioner of Income-tax (Appeals) erred in deleting of the disallowance of amortisation expenses of ₹ 22,51,01,585. 6.1 The Commissioner of Income-tax (Appeals) failed to observe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax (Appeals), the assessee has vehemently argued that its contention is liable to be accepted and the claim in question is to be allowed. On the other hand, the Revenue placed reliance on the Commissioner of Income-tax (Appeals)'s order and prayed for its confirmation. 106. We have heard both parties and also perused the respective findings arrived at by both the lower authorities. Admitted the relevant facts are that the assessee claims that the payment in question is made for earning more profit. This, in our opinion is nothing but bonus which is only in appropriations of profit. Hence, we see no reason to interfere in the findings of the Commissioner of Income-tax (Appeals). 107. Consequently, I.T.A. No. 931/Mds/2011 filed by the assessee stands partly allowed. 108. In I.T.A. No. 1071/Mds/2011, the Revenue has raised total five substantive grounds. Ground No. 2 relates to disallowance of depreciation in the value of investments which we have already decided in favour of the assessee in I.T.A. No. 897/Mds/2010 (supra). Similarly, we notice in the said appeal that we have restored the issue pertaining to interest claimed on purchase of securities bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expenses has been rightly deleted. 113. We have heard rival contentions and also perused the relevant findings as well as case law referred to by the Revenue. The assessee has claimed amortised expenditure which was treated as capital expenditure by the Revenue. In appeal, the Commissioner of Income-tax (Appeals) has placed reliance on the judgment of the hon'ble jurisdictional High Court (supra) and deleted the same. We notice that in I.T.A. No. 897/Mds/2010 (supra) decided hereinabove, the Commissioner of Income-tax (Appeals) had placed reliance on the same very case law and we have restored the ground back to the Assessing Officer for adjudication afresh. In the light thereof and with a view to maintain consistency, we deem it appropriate that this ground is liable to be restored back to the file of the Assessing Officer who shall decide afresh in accordance with law after affording opportunity of hearing to the assessee. 114. Consequently, I.T.A. No. 1071/Mds/2011 filed by the Revenue stands partly allowed for statistical purpose. 115. Accordingly, the assessee's appeals in I.T.A. Nos. 902/Mds/2010 (AY: 1999-2000), 903/Mds/2010 (assessment year 2000-01) are p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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