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TMI Blog2017 (1) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... Income- tax Appellate Tribunal following the ratio laid down by the jurisdictional High Court in State Bank Of Hyderabad Versus Commissioner Of Income-Tax, AP -I, Hyderabad [1984 (7) TMI 66 - ANDHRA PRADESH High Court ] and CIT V/s. Nedungadi Bank Ltd (2002 (11) TMI 29 - KERALA High Court ) held that when there is no distinction between the three categories of securities viz.,HTM, AFS and HFT. The assessee can provide for depreciation in all the securities on the same footing. In view of the ratio laid down by the co- ordinate bench of this Tribunal, we do not find any reason to interfere with the finding of the CIT (A) on this issue in allowing claim - Decided in favour of assessee. Disallowance of claim of broken period interest paid on purchase of securities - Held that:- As decided in assessee's own case CIT(A) allowed the claim on the ground that the same was in stock in trade and hence the interest for the broken period is an allowable deduction. Issue is covered by the decision of the Mumbai Bench in the case of JCIT Vs. Dena Bank [2013 (3) TMI 326 - ITAT MUMBAI] - Decided in favour of assessee. Disallowance of proportionate expenditure on exempted income u/s 14A - CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri. P Chandra Sekhar (DR) ORDER Per P. Madhavi Devi, J. M. The above appeals are cross appeals filed by both the assessee as well as revenue for the AYs 2010-11 and 2011-12 respectively against the common and consolidated order of the CIT(A) - IV, Hyderabad, dated 18-02-2014. 2. Brief facts of the case are that the assessee bank is a subsidiary of State Bank of India and is carrying on the business of banking. It filed its returns of income for the relevant A.Ys. and during the assessment proceedings u/s 143(3) of the I.T Act, various details were called for and perused. 3. On perusal of the computation of income filed along with return of income for the respective assessment years, the A.O. observed that the assessee has claimed depreciation on investments in HTM (Held to Maturity) securities, AFS (Available for sale)and HFT(Held for trading) securities. The A.O. observed that in the books of accounts, the assessee is following the accounting policy for investments for valuation of HMT category investments i.e. at acquisition cost or market value whichever is lower, and that the securities held under AFS/HFT category were valued scrip-wise i.e. at market / estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the same by following the decision of the coordinate bench of this tribunal in the assessee s own case in ITA No. 12332/Hyd/2006, dated 28/11/2008 for AY 2003-04, wherein the investments were held to the stock-in-trade and fall in the value was allowed as depreciation in respect of all the securities held under all these categories. Against this relief granted by the CIT(A), the revenue is in appeal before us for the both the assessment years under consideration. 5. The Ld. DR, supported the orders of the A.O, while the Ld. counsel for the assessee relied upon the orders of the CIT(A) and also placed reliance upon the decision of the coordinate bench of this tribunal in the assessee s own case for the earlier assessment years which are placed in the paper book filed by the assessee. 6. Having regard to the rival contentions and the material placed on record, we find that the coordinate bench of this tribunal in ITA No. 666/Hyd/2015 and 584/Hyd/2015 for the assessment year 2009-10, vide order dated 29-11-2013 at Para 5 of its order has held as under: 5. Having considered the submissions of the parties and perused the materials on record, we are of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O was of the opinion that the interest paid by the bank at the time of purchase of securities is a part of purchase consideration of the asset and is a capital expenditure. He therefore, disallowed the same. 8. On appeal, the CIT(A) allowed the same by the following the decision of coordinate bench of the tribunal in the assessee s own case for the assessment year 2009-10. Aggrieved, the revenue is in appeal before us by raising a ground in both the appeals as ground no. 11. 9. Having regard to the rival contentions and the material on record, we find that this issue is also covered in favour of the assessee by the decision of the coordinate bench of this tribunal in the assessee s own case (cited supra) and the tribunal vide para Nos. 8 to 10 has held as under: 8. During the assessment proceedings, the A.O. noticed that the assessee has claimed expenditure of an amount of ₹ 157,60,72,614/- on account of broken period interest. The A.O. however, disallowed the assessee's claim by treating it as capital expenditure. While deciding assessee's appeal on the issue, the CIT(A) allowed assessee's claim by following the Order of the ITAT in assessee's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ITR 601, we find that Kerala High Court., CIT Vs. Nedungadi Bank 264 ITR 545 has held that the broken period interest is an allowable deduction. Respectfully following the above decisions, we uphold the order of CIT(A) and reject the Revenue's appeal on this ground. 31. Though it is a fact that in case of CIT V/s. Bank of Rajasthan Ltd (316 ITR 391), relied upon by the learned Departmental Representative, the Hon'ble Rajasthan High Court has taken a contrary view by holding that the payment towards broken period interest is a capital expenditure. However, as the co-ordinate bench has decided the issue after following the view expressed by the Hon'ble Bombay High Court in case of American Express International Banking Corporation (supra) and Hon'ble Kerala High Court in case of CIT V/s. Nedungadi Bank (supra), we respectfully follow the same and uphold the order of the CIT (A). The ground raised by the department is dismissed. 10. Respectfully following the aforesaid finding of the Coordinate Bench, we uphold the decision of the CIT(A) and dismiss the ground raised by the department. Respectfully following the same, we see no reason to interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank had sufficient interest free funds in the form of share capital, free resources and internal accruals by observing that banks are required to keep a contain percentage of the profits in the statutory reserves. The A.O. noticed that as per the P L account, the assessee had incurred opening expenditure of ₹ 933.14 crores and interest expenditure of ₹ 4242.71 crores, totaling to ₹ 5175.85 crores, for earning the total income of ₹ 6478.81 crores which worked out to 79.88%. He, therefore, was of the view that the assessee would have spent the same percentage of expenditure for earning the exempt income also. Accordingly, the A.O. held that 79.88% of the exempted income of ₹ 5,11,26,104/- is to be disallowed. The assessee itself having disallowed an amount of ₹ 14,11,575/-, the A.O. worked out the disallowance to ₹ 3,94,23,918/-. The assessee challenged the disallowance in an appeal preferred before the CIT(A). 14. During the hearing of appeal before the CIT(A), the assessee contended that as per the view of the ITAT, establishment charges incurred in the form of salary of Officers and Staff working in the investment division, incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Punjab and Haryana in the case of State Bank of Patiala Vs CIT reported in 272 ITR 54. 15. Aggrieved the assessee preferred an appeal before the CIT(A), by raising the following grounds of appeal: 5.1 The Learned Assessing Officer in not allowing claim 299.18 12.17 crores for the AYs 2010-11 2011-12 respectively, u/s 36(1)(viia) of the Income Tax Act. 5.2 The learned Assessing Officer is not correct in holding that the provision u/s 36(1)(viia) of the Act is allowed to the appellant Bank subject to making provisions in the books of accounts which we contend against the spirit of law. 5.3 The learned Assessing Officer failed to note that the appellant bank being government undertaking participating in the Public Policies, Rural Development Programs is allowed additional allowance u/s 36(1)(viia) of Act without creating provisions in the books of account. 5.4 The appellant contends that claim u/s 36(1)(viia) of the Act is made in accordance with law and decisions rendered by courts. 5.5 Without prejudice to the above, the appellant contends that the provision u/s 36(1)(viia) of Act in respect of rural branch advances 436.70 526.89 crores for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court of Punjab and Haryana in the case of State Bank of Patiala Vs CIT cited supra. Further, it is submitted that while completing the assessment order, the A.O. allowed the deduction fully claimed by the assessee u/s 36(1)(vii) of the Act in both the assessment years and accordingly, there was no issue with regard to setting off other debts against deduction u/s 36(1)(viia) in respect of rural advances. Therefore, according to him, the ground of appeal No. 6 raised by the assessee before the CIT(A) is infructuous and the CIT(A) s observation on this issue is uncalled for. 20. Having regard to the rival contentions and the material on record, we find that the assessee has made a provision u/s 36(1)(vii)(a) of the Act and while computing of income, it has set off the bad debts written off under section 36(1)(iii) of the Act and has claimed the deduction u/s 36(1)(viia) of the Act to the extent provided for in the section. We find that this issue is covered by the decision of the Hon ble Punjab Haryana High Court in the case of the State Bank of Patiala Vs CIT cited (supra), wherein it has been held that the claim u/s 36(1)(viia) can be allowed only to the extent of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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