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TMI Blog2018 (4) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ld. CIT-A has not properly followed the Tribunal decision as referred by him . A reading of the notification canvassed by the assessee also does not help the case of assessee. The notification also does not support the direction of CIT-A. The doctrine of stare decisis mandates that we follow the coordinate bench decision as above and hold that the income of the branches of assessee situated abroad shall also be taxable in India and whatever tax have been paid by the branches in the foreign country, credit of such taxed shall be given. Accordingly, we allow the ground raised by the revenue. Disallowance of broken period interest expenses - HELD THAT:- As decided in own case [ 2018 (3) TMI 1777 - ITAT MUMBAI] Hon ble Bombay High Court in CIT Vs. HDFC Bank Ltd [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] while relying on the ratio laid down in its earlier decision in American Express International Banking Corporation Vs. CIT [ 2002 (9) TMI 96 - BOMBAY HIGH COURT] which in turn, had distinguished the ratio laid down by the Hon ble Supreme Court in Vijaya Bank Vs. CIT [ 1990 (9) TMI 5 - SUPREME COURT] and CIT Vs. Bank of Rajasthan Ltd [ 2008 (3) TMI 325 - RAJASTHAN HIGH COURT] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for bad and doubtful debts in the Balance sheet and create provision for incremental amount alone by debiting Profit and Loss account. The incremental amount is added to the opening balance of Provision for bad and doubtful debts . If second method is followed, then the closing balance of Provision for bad and doubtful debts has to be considered for the purposes of sec. 36(1)(viia) of the Act. Hence, if the assessee has followed the second method, then there is merit in the claim of the assessee. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the method followed by the assessee MAT applicability of section 115JB - HELD THAT:- AO applied the provision of section 115JB on his observation that every assessee which is company, has to prepare its account as per part II and III of schedule VI of Companies Act. However, the ld CIT(A) allowed the relief to the assessee on the basis of decision of Mumbai Tribunal in case of Bank of India Vs ACIT [ 2014 (5) TMI 929 - ITAT MUMBAI] and in case of Union Bank of India Vs ACIT [ 2013 (1) TMI 785 - ITAT MUMBAI] wherein the Tribunal held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 2010-11 to 2013-14. In all appeals both the parties have raised common grounds of appeal and hence all the appeals are clubbed and heard together and are decided by this consolidated order, for the sake of convenience. The ld. representatives of the parties agreed to treat the appeals filed by them for assessment year 2011-12 as lead appeals. 2. In ITA No. 4355/Mum/2016, the revenue has raised the following grounds of appeal for assessment year 2011-12: 1. The order of the CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in directing the Assessing Officer to exclude the income of foreign branches in violation to Central Government notification No. SO 2123 (e) dt. 28.08.2008 which clearly indicates its inclusion while arriving at the total Income. 3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in deleting the disallowance of broken period interest paid, inspite of the decision of Hon'ble Supreme Court in the case of CIT vs Vijaya Bank (187 ITR 541). 3. Ground No.1 is general in nature and needs no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have carefully considered the submission and perused the record we find that the ITAT in the aforesaid decision has duly considered the said notification referred by the Ld. Counsel of the assessee. We may carefully refer to the contents of the said notification as under; In exercise of the powers conferred by sub-section (3) of section 90 of the Income-Tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief to tax, or as the case may be, avoidance of double taxation, provides that any income of a resident of India may be taxed in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-Tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. 25. We find that after taking into account the aforesaid notification the Tribunal in the aforesaid order has concluded as under. In view of the aforesaid findings/conclusion, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (197 ITR 541). On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A) and submits that the Hon ble Supreme Court in case of CIT vs. Citi Bank in C.A. No. 1549 of 2006 dated 12.08.2008 has allowed the broken period interest expenses. The ld. AR of the assessee further submits that similar ground of appeal was raised by Revenue in appeal for A.Y. 2008-09 2009-10 which has been decided against the revenue in ITA No. 5605, 5604/Mum/2016 dated 01.03.2018. 7. We have considered the submission of the parties and find that identical ground of appeal was raised by Revenue in appeal for A.Y. 2008-09 2009-10 has been decided against the revenue in ITA No. 5605, 5604/Mum/2016 dated 01.03.2018 and the decision rendered by the Tribunal is extracted below:- 4. We have considered the rival submission of the parties and have gone through the order of lower authorities. The Assessing Officer made the disallowance on the basis of decision of Vijaya Bank Ltd. vs. ACIT [197 ITR 541 SC)] on his observation that broken period interest is a part of capital outlet for acquisition of securities and also on the basis of decision of CIT vs. Bank of Rajasthan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax free income was earned. The CIT (A) should have appreciated as all the assets from which the tax free income has been earned are stock in trade, as held in the case of India Advantage Securities (380 ITR 471). 1.2 Without prejudice to the above contention, even if rule 8D is to be applied, the disallowance can only be nil since the appellant does not hold any investment the income from which does not or shall not form part of total income and the appellant only holds stock in trade. 1.3 Without prejudice to the above contention, the question of disallowance of interest expenditure under rule 8D does not arise since the interest free funds held by the appellant far exceed the amount of investments in assets earning tax free income. The CIT(A) ought to have followed the ratio laid down by Jurisdictional High Court in the case of Reliance Utilities and Power Ltd 313 ITR 340 and held that no disallowance of interest as contemplated in rule 8D was warranted. 1.4 Without prejudice to the above contention, as held in various judicial decisions, the disallowance in no case can exceed the tax free income earned by the appellant and in any case the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment is held as stock in trade. In our considered opinion we should follow the doctrine of stare decisis. Accordingly following the same directions as above we remit this issue to the file of the assessing officer. Assessing Officer is directed to consider the issue in light of the directions as above after giving the assessee adequate opportunity of being heard. Assessee is at liberty to canvas further case laws as it deems appropriate. 13. We have further noted that recently the Hon ble Apex Court in Maxopp Investment Ltd. Vs Commissioner of Income-tax [2018] 91 taxmann.com 154 (SC) has held that in cases, where shares are held as stock-in-trade, main purpose is to trade in those shares and earn profits therefrom, in the process, certain dividend is also earned, though incidentally, which is also an income. This triggers applicability of section 14A which is based on theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, expenditure incurred in acquiring those shares will have to be apportioned. Thus, considering the decision of Hon ble Apex Court and the decision of co-ordinate bench in assessee s own case for ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning balance standing under the head Provision for bad and doubtful debts by crediting to the Profit and Loss account and then create fresh Provision for Bad and Doubtful debts by debiting the Profit and loss account. If this method had been followed, then the revenue might not have objected to allow the amount debited to Profit and loss account u/s 36(1)(viia) of the Act. The second method is to retain the Opening balance of Provision for bad and doubtful debts in the Balance sheet and create provision for incremental amount alone by debiting Profit and Loss account. The incremental amount is added to the opening balance of Provision for bad and doubtful debts . If second method is followed, then the closing balance of Provision for bad and doubtful debts has to be considered for the purposes of sec. 36(1)(viia) of the Act. Hence, if the assessee has followed the second method, then there is merit in the claim of the assessee. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the method followed by the assessee and if the assessee has debited its Profit and Loss account with increm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntemplated in rule 8D was warranted. 1.4 Without prejudice to the above contention, as held in various judicial decisions, the disallowance in no case can exceed the tax free income earned by the appellant and in any case the disallowance cannot exceed the tax free income earned of ₹ 60.77 crore. 2. The CIT (A) erred in restricting the deduction u/s 36(1)(viia) to the extent of provision made for bad and doubtful debts in the books instead of allowing the same based on eligible deduction as per the said section. 3. The CIT (A) ought to have allowed the appellants claim in respect of exclusion of income of foreign branches situated in countries where there is a Double tax Avoidance Agreement based on Article 7 of the respective agreements which provides that the business profits is to be taxed in the respective countries. The CIT (A) failed to note that notification 91 of 2008 relied upon by Hon'ble ITAT does not apply to business profits but only to other sources of income. 22. Ground No.1 of the appeal raised by assessee relates to the disallowance under section 14A. We have noted that this ground of appeal is identical to the Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical to the Ground No.3 of appeal by revenue for A.Y. 2011-12, which we have already dismissed. Considering the principle of consistency, Ground No.3 of the appeal is dismissed with similar observation. 29. In the result, appeal of the Revenue is partly allowed. 30. In ITA No. 5602/Mum/2016 for assessment year 2013-14 the Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in directing the AO to allow the claim u/s 36(1)(viia) on the total income including income from capital gain income from other sources which is not envisaged in the said sub-section. 2. On the facts and in the circumstances of the case and in Law, the Ld CIT(A) has erred in directing the Assessing Officer to include only the foreign branch income taxed in the foreign country but remained silent on the foreign branch income that has not been taxed (treated as exempt in the foreign country. 3. On the facts and in the circumstances of the case and in Law, the Ld CIT(A) has erred in holding that the broken period interest is allowable on matching principles, without realizing tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onate expenditure of treasury branch which controls and monitors the securities from which the tax free income was earned. The CIT (A) should have appreciated as all the assets from which the tax free income has been earned are stock in trade, as held in the case of India Advantage Securities (380 ITR 471). 1.2 Without prejudice to the above contention, even if rule 8D is to be applied, the disallowance can only be nil since the appellant does not hold any investment the income from which does not or shall not form part of total income and the appellant only holds stock in trade. 1.3 Without prejudice to the above contention, the question of disallowance of interest expenditure under rule 8D does not arise since the interest free funds held by the appellant far exceed the amount of investments in assets earning tax free income. The CIT(A) ought to have followed the ratio laid down by Jurisdictional High Court in the case of Reliance Utilities and Power Ltd 313 ITR 340 and held that no disallowance of interest as contemplated in rule 8D was warranted. 1.4 Without prejudice to the above contention, as held in various judicial decisions, the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1956 applies i.e. companies which are not required to prepare its profit loss account in accordance with Part-II .III of Schedule VI of the Companies Act, 1956 without appreciating that under section 115JB(2) of the Income Tax Act, 1961, every company is mandatorily required to prepare profit loss account in accordance with the provisions of Part-II III of Schedule VI of the Companies Act, 1956 for Income Tax purposes. 4. On the facts and in the circumstances of the case, the ld. CIT(A)'s has erred in holding that the amendment to section 115JB of the Income Tax Act, 1961, to bring all the companies (including companies to whom proviso to subsection (2) of section 211 of the Companies Act, 1956 applies) in its ambit, vide Finance act, 2012, with effect from 01.04.2013 is not applicable in the assessment year under consideration without appreciating that the said amendment is clarificatory in nature and thus, retrospective in effect. 5. On the facts and circumstances of the case and in law the CIT(A) has erred in directing the A.O. not to apply 115JB and thus not to make addition of disallowance u/s 14A to the book profits computed. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. 44. In the result the appeal of the revenue is partly allowed. 45. In ITA No. 5020/Mum/2015 for assessment year 2010-11, the assessee has raised the following grounds of appeal: 1.1 The Ld CIT(A) erred in confirming the disallowance of provision towards liability arising on of wage revision payable to employees. The Ld CIT(A) failed to appreciate that provision had been made based on a reasonable estimate of the imminent liability consequent on the bipartite settlement talks that were being held between the Indian Bank's Association (IBA) and various Employee Unions. 1.2 The Ld CIT(A) failed to appreciate that once liability for an expenditure which is contractual in nature is foisted on appellant the same is allowable as deduction though the same could be quantified based on reasonable estimate only. Reliance is placed on the decision of Jurisdictional ITAT Mumbai in ITAT Communications Ltd. V JCIT (ITA 3062/Mum/2003 dated 05-12-2(12) and other decisions. 2.1 The Id CIT (A) erred in confirming the disallowance u/s 14A computed as per rule 8D at ₹ 100.47 crore on a tax free income of ₹ 56.71 crore over looking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 in ITA. No. 2480/M/2015. The ld. DR for the revenue fairly conceded the submissions of the ld. AR for the assessee. 47. We have considered the submissions of the ld. representatives of the parties and perused the record. We have noted that the assessee raised the identical ground of appeal in assessment year 2009-10 and the Tribunal vide order dated 17.02.2017 in ITA 2480/M/2015 deleted the similar disallowance. The coordinate bench deleted the similar disallowance by following the decision in earlier year in ITA No. 4619 and 4873/M/2012. Thus, considering the consistent view taken by the Tribunal, the ground of appeal raised by the assessee is allowed. 48. Ground No.2 relates to the disallowance under section 14A of the Act. We have noted that this ground of appeal is identical to the Ground No.1 in appeal for A.Y. 2011-12 2012-13, which we have already restored to the file of Assessing Officer. Considering the principle of consistency, this ground of appeal is also restored to the file of Assessing Officer with similar observation. In the result this ground of appeal is allowed for statistical purpose. 49. Ground No. 3 relates to the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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