9911796707
TMI Blog2021 (10) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... be safely concluded that the method followed Is revenue neutral. We draw support from the decision of the Hon'ble High Court of Bombay in the cose of Nagri Mills Co. Ltd. [ 1957 (9) TMI 30 - BOMBAY HIGH COURT ] Addition on account of commission income from the bank guarantee furnished to the customers - Whether the commission income has accrued to the assessee on furnishing the bank guarantee to the parties? - change in accounting policy - HELD THAT:- It is the management of the company to choose specific accounting policies that are advantageous to the financial reporting of the company. Once a policy has been adopted by the company but on a later date the management decides to change the same then, the onus of justifying the change in accounting policy is on the assessee. In other words, the assessee has to justify the change in the accounting policy on the parameters that it is more logical and transpires sound commercial basis. Furthermore such change in the accounting policy should not defeat or postpone the charge on the income of the assessee which has been earned by it. The mere receipt of commission does not mean that such amount represents the income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tch with the income of the assessee recipient disclosed in the return of income. Admittedly, the accounting standard issued by the ICAI are mandatory to be followed by the assessee under the Companies Act. But the question arises, such accounting standards should also be followed while working out the income under the provisions of the income tax Act. So far, the Income Tax Act has not notified the accounting standard 19 issued by the ICAI, though mandatory for the assessee to follow while preparing its books of accounts, but this is not the same under the Income Tax Act. Hence the ground of appeal of the assessee is dismissed. Addition on the transfer of residential flat as short term capital gain - HELD THAT:- The provisions of section 53A of TOPA were amended w.e.f. 24.09.2001 whereby the requirement of registration of agreement was made mandatory. While the provisions of s. 53A prior to the said amendment were applicable irrespective of whether the contract between the parties had been registered or not, the said relaxation in registration was done away with pursuant to the said amendment. To attract the provisions of section 53A of the Act, it is necessary that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has raised the following grounds of appeal: The appellant, being aggrieved by order dated 4-1-2016 passed by learned Commissioner of income Tax (Appeals] 10, Ahmedabad [hereinafter the learned CIT(A)], this appeal is filed on following grounds, which may be considered without prejudice to one another. 1.0 Disallowance u/s 14A r.w. Rule 8D Rs. 26,19,60,802 (Rs. 26.19 crores) plus suo moto disallowance of Rs. 106,38,000 (Rs. 1.06 crores) 1.1 In facts and circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance out of interest expenses to the extent of Rs. 24.26 crores and out of operating expenses to the extent of Rs. 3.00 crores, thus aggregate Rs. 27.26 crores (inclusive of disallowance out of operating expenses of Rs. 106 crores volunteered u/s 14A by the Bank) i.e. confirming disallowance by upholding invocation of Rule 8D in relation to tax-free income of Rs. 13.83 crores. The disallowance is unlawful and, in any case, highly excessive and unrealistic in facts and law of the case. 1.2 In facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that (i) The Bank held (except shares in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng specific to any tax-free securities, no disallowance was warranted out of interest expenses having regard to adequate interest free funds available in the form of paid-up share capital, reserves and interest-free current account balances of constituents, as held by the Hon. Gujarat HC for A.Y. 2002-03 to AY 2005-06 and upheld by the Hon. S.C. for A.Y. 2003-04 in the Bank's own case and particularly without giving any cogent reasons how the said Hon. HC and Hon. SC orders u/s 14A though for pre-Rule 8D years are irrelevant in application of Rule 8D r.w.s. 14A during the previous year. 1.5 In facts and circumstances of the case and in law, the learned CIT (A] erred in not appreciating that administrative expenditure was incurred in the course of banking business and no port of such expenditure could have been disallowed u/s 14A as held by the Hon. Gujarat HC for A.Y. 2002-03 to 2005-06 rejecting the Revenue TA in the Bank's own case, much less by sustaining harbour formula of Rule SD. 1.6 Without prejudice it is submitted that suo-moto disallowance out of operating expenses at Rs. 1.06 crores be cancelled or alternatively the said disallowance be restricted to 1% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow reduction of Rs. 2.54 crores recognized as income during the previous year which was disallowed and taxed as accrual of income last year, resulting into double taxation of the same income without expressed authority of the Act and ought to be so reduced even on the principle of equity and justice. 3.0 Bank Guarantee (BG) commission income prorate relatable to unexpired period treated (w.e.f. A.Y. 2010-11) by the Bank as income received in advance but held taxable Rs. 136.52 crores 3.1 The learned CIT(A) erred both in law and on facts in upholding the addition of Rs. 136.52 crores in respect of BG commission income for unexpired period (beyond year end) as chargeable income of the previous year, but treated by the Bank as pre-received income. 3.2 It is submitted that there is nothing in section 145 to prohibit a change from one regular method of accounting to another regular method. The learned CIT(A) failed to appreciate that prudence and conservatism require not anticipating a receipt which had not become due at previous year end. 3.3 It is submitted that the changed pro-rate method is not devoid of logic, on the contrary is well-recognized, followed by pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that addition of Rs. 136.52 crores in respect of commission income relatable to period beyond previous year end be cancelled. The appellant craves leave to add, to amend, alter, delete and/or modify the above grounds of appeal on or before the final date of hearing. 2.1 The assessee vide letter dated 27/11/2017 has filed additional grounds of appeal as detailed under: Additional ground in the application dated 27-11-2017 1.1 The Appellant submits that Employees stock Options plan (ESOP) cost of Rs.250.63 crores, incurred by the Appellant on issue of new shares to the eligible employees ought to be allowed as deduction under section 37 of the Act and other applicable provisions of the Act. 1.2 The ESOP cost of Rs.250.63 crores represents the difference between the market price of shares as on date of exercise and the exercise price (being market price of share as on date of grant option). The Appellant submits that it be granted deduction of the said ESOP cost of Rs.250.63 crores while computing its total income for the assessment year under consideration. 1.3 The appellant craves leave to add, amend, alter, substitute, delete and/or modify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 27,26,11,827/- 3.2 The assessee already made disallowance u/s 14A of the Act for Rs. 1,06,39,198/- only. Accordingly, the AO made the disallowance of the balance amount of Rs. 26,19,72,629/- and added to the total income of the assessee. 4. The aggrieved assessee preferred an appeal to the Ld. CIT(A), who found that his predecessor in the own case of the assessee for the Assessment Year 200809 has also made the disallowance in the identical manner vide order dated 01/12/2011. Accordingly, the Ld. CIT(A) upheld the disallowance made by the AO under the provision of section 14A r.w. Rule 8D of Income Tax Rules. 5. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 6. The Ld. AR before us filed a paper book running from pages 1 to 464 and contended that the Ld. CIT(A) has made the disallowance under the provisions of section 14A r.w. Rule 8D after making the reference to the order of his predecessor for the Assessment Year 2008-09 which has been reversed by order of the ITAT in ITA No. 251/AHD/2012 vide dated 24-01-2017. 6.1 The Ld. AR further contended that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. To this extent, we set aside the findings of the Id. CIT(A) and direct the A.O. to delete the addition of Rs. 29,35,41,415/-. 16. However, in our considered opinion, administrative expenses need to be disallowed and since the assessee has made suo moto disallowance of Rs. 63,84,525/-, in our considered opinion, this should meet the ends of justice. We, accordingly, confirmed the suo moto disallowance of Rs. 63,84,525/-. Ground no. 2 Is accordingly dismissed and the additional ground raised by the assessee is also dismissed. 8.2 The fact of the case on hand seems identical to the fact of the case as discussed above in ITA No. 251/Ahd/2012 (Supra). However, before parting it is pertinent to note that the ITAT has not given any detailed findings based on reasons with respect to the administrative expenses disallowed under the provision of Rule 8D(2)(iii) of Income Tax Rules. The assessee has made suo moto disallowance of Rs. 1,06,38,000/- without any basis. Accordingly, a question was put up to the ld. AR for the assessee at the time of hearing to explain the basis of making the disallowance of Rs. 1,06,38,000/- but he failed to provide any information. Rather the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in line of RBI notification, has offered a sum of Rs. 2.54 crores as income which was brought forward from the earlier year. Thus, the assessee effectively has offered the income on account of securitisation of loan assets for Rs. 17.99 crores ( 2.54 crores, the brought forward balance and 15.45 crores the income in the year under consideration). 12.3 The assessee also submitted that above system of recognising the income on the sale of loan assets under securitisation has been followed by it consistently in pursuance to the RBI guidelines dated 1st February 2006. The above system of accounting was also approved by the statutory auditors and the shareholders of the bank. 12.4 Admittedly, under securitisation the loan assets are transferred to the SPV but the bank (assessee) carry the responsibility for servicing the loan till it comes to the end. Furthermore, the bank remains liable to the investors to provide safeguard for the security, loan documents etc. Accordingly, the assessee contended that it is recognising the income by spreading the same over the residual term of the loan. 12.5 The assessee also contended that it is paying tax on the maximum marginal rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions that guidance note issued by ICAI will apply to those aspects not covered in the RBI Guidelines which means revenue recognition for true sole transaction need to be as per AS 9. Since there is no uncertainty to the income on these transactions, there is no question of postponing the income. In my view the appellant's sell transactions as if the category of true sale to which AS 9 apples and as per that revenue need to be recognized in the year of sale. Even otherwise, since appellant's transactions were complete in this year with no uncertainty or liability in future, there is no question of postponing income has to be taxed on the basis of accrual and not on the basis of accounting entries. Accounting entries may be prescribed for the purpose of disclosure but that cannot decide the taxability of income Wherever there is any conflict between income tax act and accounting standards prescribed by any authority, income tax act will prevail. The chargeability of income not based on accounting standard or accounting guidelines but it is based on real income earned. When there is no dispute or confusion about the quantum of income, income earned cannot be postponed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase/ sale of corporate and retail loans through direct assignment/ special purpose vehicle (SPV). In most case, post securitization, the bonk continues to service the loans transferred to the assignee/ SPV. The bonk also provides credit enhancement in the form of, cash collaterals and/ or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc./ accepted by the Bank, appropriate provision/disclosure is mode at the time of sale in accordance with AS-29- provisions, contingent liabilities and contingent assets. Gains on securitization transaction is recognized over the period of the underlying securities issued by the SPV. Loss on securitization is immediately debited to Profit and Loss Account. 7.2.further, it is seen that 'Notes to account'(Para 5.1.15) reads as under:- 31.03.07 (RS in Cr.) Number of loon accounts securitized 2.00 Book value of loan assets securitized 547.16 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter considering the facts ond the submissions, the ld, CIT(A) was of the opinion since the assessee has sold these Impugned assets, therefore, the assessee has no liability whatsoever on these transactions afterwards. Since there is no uncertainty to the income on these transactions there Is no question of postponing the Income. The Id. CIT (A) confirmed the addition made by the A.O. Before us, the Id. counsel for the assessee once again stated that being a bank It has to monetarily follow the guidelines Issued by the RBI. It is the soy of the ld. counsel that It is not the case of the revenue authorities that the assessee has not followed the guidelines of the RBI, Therefore, the action of the A.O and also of the ld. CIT (A) ore against the facts of the case. Per Contro, the Id. D.R. strong relied upon the order of the revenue authorities. 27. Having heard the rival submissions, we hove carefully considered the orders of the authorities below. It is a settled proposition of law that what is relevant far income Tax on the basis is the real income as held by the Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. 225 ITR 746. Various High Courts have given due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g year. However, the assessee in the year under consideration has changed its policy for recognising the income by way of commission from the bank guarantees. Instead of charging the commission income in entirety in the year in which bank guarantee was furnished, it has spread the income over the guarantee period. 18.1 The change in the policy for recognising the income in the books of accounts was justified by the assessee on the reason that the bank guarantee is issued for certain period of time but the same can be rescind before the expiry of term on account of any reason. In that event the assessee has to refund the guarantee commission under the rules framed by the Foreign Exchange Dealers Association of India. Thus, the assessee changed its accounting policy to recognise the commission income qua the bank guarantee furnished which is accrued during the period of 12 months comprising in the financial year. There is no prohibition under the provisions of section 145 of the Act to change the policy to recognise the income if it is based on bona fides reasons. 18.2 However, the AO disregarded the contentions of the assessee by observing that there was no requirement for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ont basis i.e. as accrued in nine year of issuing bank guarantee While commission on deferred payment guarantee was being recognised in the books on pro rata basis over the tenure of such guarantee , the commission income on guarantee other than deferred payment guarantee was recognised as income in the year of issue of such bank guarantee. However, the appellant changed its policy to recognize the commission income on guarantees whereby all kinds of guarantees issued by the bank was recognized on pro-rata basis over the period of the guarantee The AO held that such a change in the method resulted in to lower income for the year under consideration and the change was also not justified. He therefore added a sum of Rs 136.52 Crores as income considering the non acceptance of the changed method and as per note in the audited accounts It is necessary to understand the various types of bank guarantees so as to ascertain whether in respect of the guarantees issued by the appellant there is any service remaining to be provided as is the case of deferred payment guarantees 7.3 1 The various types of Bank Guarantees are generally issued as below. i) Financial Guarantee: Here, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f providing any service by the appellant hank once an irrevocable guarantee is issued. Hence the accaial of commission income in such a case cannot be postponed over the period of the guarantee. No such claim of any loss is the issue before me nor il is the appellant's case that any such commission has been refunded. If on happening of any such contingency in future during tenure of guarantee any such payment or refund is given, the same can be certainly claimed as expenditure in accordance with the provisions of law or as a loss incidental to the business in the year in which such even occurs but in such a case, (here is no effect as far as the commission income which has already accrued the time of issuing the guarantee is concerned. By changing the method, the assessee cannot reverse the accrual of income. The basis of accounting the income and its chargeability is now specified in section 145 and the assessee can adopt either cash or mercantile method. Once the mercantile method is adopted for several years on the correct basis under which the commission income on normal type of financial guarantees is accounted for and taxed upfront. there is no justification to change t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Bank of Tokyo Ltd which as seen above dealt with the issue of deferred payment guarantee. The said decision of ITAT also makes it clear that the appellant was following the method of spread over such commission in earlier year (and it was not change made in the year which was under consideration). The Bombay High Court in 214 Taxman 548 affirmed the said decision because the facts found in that case were that the guarantee which has been issued for a certain period of time is cancelled by the client before the expiry of the tenure of the guarantee, resulting into the respondent-assessee returning to its clients the part of the guarantee commission attributable to the unexpired period of the guarantee, hence the facts are clearly distinguishable from the facts of the appellant's case in which the commission income on bonk guarantees was accounted for upfront in the past (except deferred payment guarantees) and the same was regularly followed and accepted in the past and there is no refund clause as noted above. 7.3 6 Regarding the contention that the guarantee transaction, does not get concluded or completed upon the signing of guarantee deed and it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated Lo the period of such use. The judgment of Supreme Court in the case of Madras Industrial Investment Corporation Ltd. 225 ITR 802 is also not relevant to the facts of the appellant's case as in that case the assessee was making use of the funds for future period and hence the expense was spread over the period of use in the instant case, it is not the case of any such expenditure of which benefit is received (or future years but here the case is of receipt of income on accrual basis. 7.3.7 In my opinion, once guarantee is issued, the service to the client gets concluded unlike in the case of deferred payment guarantee where the provision of service is continued in respect of future payment. The contention of the appellant that a change in accounting policy is permissible, there is no dispute about such contention Also, the fact that in the year of change (here may be transitional impact is not the question relevant in the instant case. The moot question is that is there any justification which may permit the change in the accounting policy once the concept of accrual is considered and guarantee commission is held io have accrued when the guarantee is issued. 7.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Admittedly, the amount of commission is received when the bank issues guarantee. Such guoram.se is lor n specific period, sometime extending to years. The amount of full guarantee commission is received o; ths time of issuing guarantee iriespscuve of the period for which the guarantee is given, if the customer does not make a default to the third party, theft this au-arc-itss zxpiKi at the end of the period and the security received from its customer, in the shape of FOfii. is returned There may be situation in which the client revokes the guarantee onor to the completion of the guarantee period 01 commits the default as o result of which the bank hoi to appropriate the proceeds of the security to satisfy the third part. Whatever may be the case the bank incurs no personal obligation cither at the time of issuing guarantee or thereafter, which may land it into situation of paying from its own pocket The bank's duty is only to either return the security in the shape of FDfts tc its customer as such at ibe end of the guarantee period, if all goes well, or to appropriate the security in discharge of obligation of the customer to the third party, in case of default Ordinari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer revoking the guarantee, The amount earlier received will require refund Consequently, if there exists such a clause of refund of the commission in the agreement on the earlier revoking of the guarantee or there is some other material to show the understanding between the Dank and the customer to that extent, in that situation the accrual of entire income will not take place on furnishing guarantee, but it will be spread over the period to which the guarantee relates If, however, the amount of the guarantee commission is 'Cceived at ,'; siretch and there is no contingency of paying it beck even in the eventuality of revoking the guarantee prior to the completion of the guarantee period, then the entire amount of guarantee commission will partake the character of income in the year of receipt itself. Coming back to the facts of our case, we find that no material has been placed before us to demonstrate that there was any clause in the agreement or there wo.-, some other material obliging the bonk to refund the part of the guarantee comniission. in case it is eoetici revoked. 7.3.10 In view of the above, the contentions of the appellant cannot be accepted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the current financial year, the bank has changed its policy to recognize commission income on guarantees issue by it. Against the earlier practice of recognizing the commission income on guarantees upfront when due (except in the case of deferred payment guarantees), the Bank now recognizes the income on a pro-rata basis over the period of the guarantee. As a result of the aforesaid change in policy, other income for the year is lowe by Rs.136.52 crores with a corresponding increase in other liabilities. 20.1 Now, first let us understand what does the accounting policy means. Accounting policies are the specific doctrines, conventions, rules and practices adopted by the assessee in the preparation and presentation of financial statements. These policies are used to deal specifically with complicated accounting practices such as depreciation methods, recognition of goodwill, preparation of research and development (R D) costs, inventory valuation, and the consolidation of financial accounts. These policies may differ from company to company. It is the management of the company to choose specific accounting policies that are advantageous to the financial reporting of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in two different financial years. Accordingly, the exposure of the assessee to the risk on such guarantee is relating to different financial years i.e. Financial Year 2011-12 and 2012-13. This fact can be verified from the details available on pages 275 to 277 of the paper book. 20.5 We also draw support and guidance from the judgment of Hon ble Madras High Court in the case of CIT Vs. Coral Electronic Pvt Ltd. reported 274 ITR 336, where it was held as under: 8. In the instant case the amount that was received was only as charges for the services to be rendered in future. The services may be rendered or may not be rendered depending upon withdrawal of the money as and when the customer required. So, it is highly uncertain as to whether it would at all remain as income of the assessee. Only when the service is done the assessee has a right over the amount that was deposited. Till then, he has no right over the same. It is in that sense till then, it cannot be considered as an income of the assessee and is not exigible to tax. Therefore, the issue is answered in favour of the assessee and against the revenue. 20.6 We further draw support and guidance from the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the above and after considering the facts in totality, we et aside the finding of the ld. CIT-A and director the AO to delete the addition made by the AO. Hence, the ground of appeal of the assessee is allowed. 21. The assessee in the additional grounds of appeal has sought the deduction on account of education, secondary and higher education cess as well as employee stock option plan for Rs. 44,06,59,588.00 and 250.63 crores respectively. 22. The assessee has submitted two applications dated 27-11-2017 and 9-9-2020 for admitting the additional grounds of appeal which read as under: Additional ground in the application dated 27-11-2017 1.4 The Appellant submits that Employees stock Options plan (ESOP) cost of Rs.250.63 crores, incurred by the Appellant on issue of new shares to the eligible employees ought to be allowed as deduction under section 37 of the Act and other applicable provisions of the Act. 1.5 The ESOP cost of Rs.250.63 crores represents the difference between the market price of shares as on date of exercise and the exercise price (being market price of share as on date of grant option). The Appellant submits that it be granted de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. 25.1 The view that the Tribunal is confined only to issues arising out of the appeal before Commissioner (Appeals) is too narrow a view to describe the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k held fax-free securities of Rs. 1571 crores as against interest-free owned funds (paid-up share capital and freejeserves) of Rs. 18998 crores [in addition to huge non-interest bearing current account deposits of Rs. 36917 crores]; and cash profit after tax of Rs. 2718 crores earned during the previous year. (iii) Dealing in shares and securities is one of the principal and core business of the Bank. (iv) There was no specific borrowing for making such tax-free shares and securities; there is no adverse evidence even for primary presumption that interest-bearing funds have been utilized for making tax-free investment. (v) The Bank earned trading profits of Rs. 366 crores from shares and securities as business profits which was much higher than the tax-free dividend income of Rs. 16.25 crores. The primary object of the treasury operations is to reap trading profits and not to earn tax-free income. Tax-free securities yielded meagre ROR of 1.03% p.a. (vi) The Bank has earned interest income far in excess of interest expenses there against i.e. there is no net interest expenses and Rule 8D(2)(ii) cannot be invoked. (viij Rule 3D is not charging provision. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contrary is well-recognized, followed by peer banks, more rational and in accordance with global practises. 2.4 Para 4 of AS i notified u/s 145(2) permits an assessee to adopt accounting policies so as to represent a true and fair view. Para 9 of AS 1 notified u/s 145(2) permits a change in accounting policy if it is considered that the change would result in more appropriate preparation or presentation of the financial statements. 2.5 The adverse inference u/s 145 against the change is permissible only if accounting system adopted is contrary to prescribed AS u/s 145; or AS notified by ICAI u/s 211 (3c) of the Companies Act, 1956 or where true profits cannot be deduced 2.6 The learned CIT(A) failed to appreciate that the customer has right to receive refund for unexpired period in the event of BG being terminated period-. 2.7 Upfront collection of small BG commission is only mode of fee collection to cover several time more devolving risk. BG is a continuing obligation, the liability generally extends beyond previous year end and monetary risk upon invocation of BG is disproportionately high than rate of BG commission earned. 2.8 The issue merely repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inical reading of Rule 6EA during A.Y. 2011-12 based on RBI outdated 20 years old assets classification etc. repealed Guidelines. 3.5 It is submitted that real income test does not authorize the AO to tax hypothetical interest income which is not real income earned by the assessee. 3.6 It is further submitted that alternatively the interest income deemed, by (he AO as accrued on 31-3-2011, becomes NPA interest on 30-6-2011 even as per 1991 RBI Guidelines 180 days overdue criteria (as against 90 days overdue criteria at present) under Rule 6EA. 3.7 Without prejudice it is submitted that interest income of Rs. 11.16 crores, deemed chargeable under Rule 6EA, should consequently be deemed bod debt write off as per present RBI binding directives and hence consequential allowable deduction u/s36fl)(vii). 3.8 Without prejudice and alternatively such interest income, deemed chargeable under Rule 6EA, becomes deemed provision for bad and doubtful debt u/s 36(I)fviia) and be allowed thereunder being within the ceiling limit of Rs. 546.07 crores allowable u/s 36(l)(viia). 3.9 It is further submitted that this addition is only timing difference based addition, tax neutral o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody in India, it reflects the best practices adopted by the accounting world over. The loss of revenue in the year of change is only a transitional one and over the years is tax-neutral. 4.6 The CIT(A) also failed to appreciate revised estimate adopted by the Bank, has foundational relevance to the nature of banking business carried on in the branches, offices, ATM, extension counters etc. which are housed in the premises acquired for long duration tenure upto 9 years period. 5.0 Deemed short term capital gains on transfer of depreciable residential flat Rs. 81,18,900 (Rs. 0.81 crores). 5.1 The CIT(A) erred to appreciate that residential flat was sold under Open Bid process, though registered agreement for sale was executed on 14-3-2011, only 10% of sale consideration was received upto 31-3-2011, possession of the flat was not given upto 31-32011, the Bank has exclusive right-to cancel the agreement for sale and reallocate the said flat to next successful bidder if balance sales consideration is not received within stipulated time. 5.2 The learned CIT(A) also failed to appreciate that balance 90% sales consideration was actually received during June/July, 2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 has been decided by us vide paragraph No. 20 of this order in ITA No. 311/Ahd/2016. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the grounds of appeal filed by the assessee is allowed. 30. The next issue raised by the assessee in ground No. 3 is that the learned CIT (A) erred in confirming the addition of Rs. 11,16,75,000.00 being the amount of interest on the sticky advances under rule 6EA read with section 43D of the Act. 31. The assessee in the year under consideration has not recognised the interest as income on accrual basis with respect to the sticky advances i.e. the interest was due for 3 months. It was the contention of the assessee that as per the guidelines issued by the Reserve Bank of India, the advances/ loans in respect of which the interest was overdue for 3 months have to be categorised as non-performing assets. As per the assessee, the income on such overdue advances was to be recognised on realization/cash basis. The same method was also adopted by the assessee in the earlier years which was also accepted by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally with such guidelines. 8.3.3 This very issue is considered by Hon'ble Mumbai Tribunal in the following case GIG Housing Finance Ltd Vs Addl CIT ITA No. 1874/Mum/ 2010, it has been held that In our view it cannot be said that the guidelines of trie NHB as and when they arc revised have to be treated by implication incorporated in Rule 6EB of the Rules. NHB is not the rule making authority for the purposes of Sec.43D of the Act. The discretion is left to the rule making authority to follow or not follow the guidelines of NHB as and when they are revised. The purpose of classification of debts as bad and doubtful by the NHB and the purpose of not recognising interest income for the purposes of the Act, are different. The considerations that weigh with the relevant authorities are also different. Therefore it cannot be said that the rule making authority under the Act has to automatically follow the guidelines of NHB as they exist from time to time. In that view of the matter, we cannot agree with the submission of the learned counsel for the Assessee, that the guidelines issued by the NHB, has to be read as part of Sec.43D of the Act. We cannot also agree that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the AO is confirmed and this ground of the appellant is dismissed. 33 Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 34. The learned AR before us contended that the assessee is not liable to recognize the income on the NPA as per the RBI Provisions. The ld. AR in support of its contentions vehemently relied on various orders which are placed on record. 35. On the other hand the learned DR before us vehemently supported the order of the authorities below. 36. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether interest income with respect to the loans and advances which were overdue for more than 3 months but less than 6 months should be recognized as income. The AO was of the view that the interest on such categories of loans and advances has to be recognized as income as per rule 6EA of Income Tax Rule read with section 43D of the Act. The view taken by the AO was subsequently confirmed by the learned CIT(A). 36.1 However we find that the banks are governed by the rules/ regulations/ schemes of the Rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hakari Bank Ltd reported in [2016] 72 taxmann.com 117 (Gujarat) in similar facts held as under: 20. Section 45Q finds place in Chapter IIIB of the RBI Act. Thus, the provisions of Chapter IIIB of the RBI Act have an overriding effect qua other enactments to the extent the same are inconsistent with the provisions contained therein. In order to reflect a bank's actual financial health in its balance sheet, the Reserve Bank has introduced prudential norms for income recognition, asset classification and provisioning for advances portfolio of the cooperative banks. The guidelines provided thereunder are mandatory and it is incumbent upon all co-operative banks to follow the same. Insofar as income recognition is concerned, clause 4.1.1 of the circular provides that the policy of income recognition has to be objective and based on the record of recovery. Income from non-performing assets (NPA) is not recognised on accrual basis but is booked as income only when it is actually received. Therefore, banks should not take to income account interest on non-performing assets on accrual basis. Thus, in view of the mandate of the RBI Guidelines the assessee cannot recognise income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by RBI under Chapter III-B of the RBI Act, 1934. These norms deal essentially with income recognition. They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFCs to reflect true and correct profits. By virtue of Section 45-Q, an overriding effect is given to the RBI Directions, 1998 vis- vis income recognition principles in the Companies Act, 1956. These Directions constitute a code by itself. However, these RBI Directions, 1998 and the IT Act operate in different areas. These RBI Directions, 1998 have nothing to do with computation of taxable income. These Directions cannot overrule the permissible deductions or their exclusion under the IT Act. The inconsistency between these Directions and the Companies Act is only in the matter of income recognition and presentation of financial statements. The accounting policies adopted by an NBFC cannot determine the taxable income. It is well settled that the accounting policies followed by a company can be changed unless the AO comes to the conclusion that such change would result in understatement of profits. However, here is the case where the AO has to follow the RBI Directions, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 537/2008, ITA 408/2003 well. The assessee has further successfully demonstrated that even in the succeeding assessment years, no interest was received and the position remained the same until the assessment years 2006-07. Reason was adverse financial circumstances and the financial crunch faced by Shaw Wallace. So much so, it was facing winding up petitions which were filed by many creditors. These circumstances, led to an uncertainty insofar as recovery of interest was concerned, as a result of the aforesaid precarious financial position of Shaw Wallace. What to talk of interest, even the principal amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not accrued . We are in agreement with the submission of Mr. Vohra on this count, supported by various decisions of different High Courts including this court which has already been referred to above. (2) In the instant case, the assessee-company being NBFC is governed by the provisions of RBI Act. In such a case, interest income cannot be said to have accrued to the assessee having regard to the provisions of section 45Q of the RBI and Prudential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, insofar as income recognition is concerned, the Assessing Officer has to follow the RBI Directions, 1998 in view of section 45Q of the RBI Act. That insofar as income recognition is concerned, section 145 of the Income-tax Act, 1961 has not role to play. 36.3 In view of the above we hold that there cannot be any addition to the total income of the assessee by way of interest with respect to the loans and advances which were overdue for 3 months. Thus we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 37. The next issue raised by the assessee in ground No. 4 is that the learned CIT (A) erred in confirming the disallowance made by the AO for Rs. 93.04 crores on account of lease operating expenses. 38. The assessee being the bank takes various premises/properties on long-term lease basis. These lease are known as operating lease. Generally, in every lease agreement there is a clause for increase of the rent either on yearly or once in 3 years. Accordingly the assessee was claiming the rent expenses on accrual basis in each year. However, the bank found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traight-line method. Thus, the AO disallowed the sum of Rs. 93.04 crores and added to the total income of the assessee. 39. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as under: 10.3 I have carefully considered the submissions of the appellant and the assessment order. This ground is relating to disallowance of additional expenditure on account of revision of lease operating expenditure. The appellant included secondary lease period while claiming the liability of lease expenses. The AO has noted that the appellant reviewed the method of accounting for the said purpose and that the claim made was contingent in nature. The AO has noted that in the circumstances of lease being cancelled, the expenditure allowed would be claimed as deduction and the would never be taxed in the hands of the recipient. The AO has noted that judgment of Delhi High Court in the case of Virtual Soft System Ltd 341 ITR 593 was on different issue and was not applicable;. The appellant has mainly relied on AS19 and the case laws on Accounting Standards required to be followed. 10.3.1 Having carefully considered the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional receipt will not show the said as income and it will not be and cannot be taxed in the hands of :he recipient. This shows that the accounting system adopted by the appellant from this year is not in accordance with any accounting procedures approved by the Department. If-the procedure adopted by the appellant is accepted, the books of accounts of the appellant will never show the true correct profit / income. In first three years, the expenditure is debited more than the actual expenditure incurred and in next three years, the appellant will debit less expenditure than the actual expenditure incurred. In such situation, it is doubtful that the books of accounts of the appellant will show true correct income / profit in any year. The appellant tried to explain the method with the help of the table mentioned above, but in the said table, the period of lease rent mentioned is static for six years, but the actual situation cannot remain same. Every year some new properties will be acquired on rent by the appellant and similarly few may be evacuated. This further shows that the method adopted by the appellant will create more confusion in maintaining the accounts of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the assessee on SLM basis is allowable deduction under the provisions of the Act. The provisions of section 145(3) of the Act mandates to maintain the books of accounts either on mercantile system of accounting or cash system of accounting. Undeniably, the assessee is following mercantile/accrual system of accounting. Under mercantile system of accounting, the following concepts needs to be consider: (1) Under the mercantile system of accounting a liability has to be treated as accrued when it is due for payment though actual payment shall be in future. (2) Just as the accrual system is concerned with accrued income, though not received, liability has also to be treated in the same manner. (3) A condition subsequent has to be recognised. The fact that the liability may ultimately get reduced or even become extinct does not make it a contingent liability. (4) A trader computing his taxable income is entitled to deduct payments actually made to his employees as well as the present value of any payments to be made in a subsequent year, if it can be satisfactorily estimated. 41.3 From the above, it is transpired that the liabilities which have accrued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs being 10% of the total value of the consideration on the date of the agreement. The balance amount of Rs. 73.07 Lacs was received in the subsequent year in 2 instalments of Rs. 31.50 lakhs and Rs. 41.57 Lacs dated 1 June 2011 and 30 July 2011 respectively. Thereafter the possession was handed over to the buyer dated 15 July 2011 after receiving the full consideration. Thus the assessee contended that the transfer of the residential flat has not taken place in the year under consideration but it was effectively transferred within the meaning of the provisions of section 2(47) of the Act in the subsequent year. Furthermore, the income on the transfer of such property was offered to tax in the subsequent assessment year. 43.1 However, the AO disagreed with the contention of the assessee on the reasoning that the transfer of the residential flat has taken place in the year under consideration within the meaning provided under section 53A of Transfer of Property Act 1982. Thus the AO made the addition of Rs. 81.18 lakhs to the total income of the assessee. 43.2 Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and has done some Act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract. 47.1 To attract the provisions of section 53A of the Act, it is necessary that the possession of the property should be handed over to the transferee. However, in the case on hand, the possession of the property has not been transferred. Accordingly, we are of the view that the transfer has not taken place within the meaning of the provisions of section 2(47) of the Act and consequently the provisions of capital gain cannot be attracted. 47.2 Besides the above, we also note that there is no loss to the Revenue in the given facts and circumstances for the reason that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich requires to claim the expenses in the year in which such expenses were accrued. In view of the above the AO disallowed the same and added to the total income of the assessee. 52. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: 6.3 I have carefully considered the submissions of the appellant and the assessment order. The identical issue was there in the appellant's own case in AY 2010-11, which was decided by me as mentioned below : 6.2. Identical issue came up in appellant's own case for A.Y. 2008-09. vide order dtd, 01-12-2011 in appeal no. CIT(A)/Addl.CIT./R-l/247/10-ll, my predecessor held as under: 6,3 Ihave considered the facts of the case; assessment order and appellant's written submission. On the identical facts, this issue has been decided by me in appeal order fat- assessment year 2006-07 in the appellant's own case. The relevant pan of the said order is quoted below- It is not in dispute that appellant received Bill from Infosys during the current year. The services rendered in earlier year were also included in the said Bill. Assessing officer all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer termed the same as violation of matching concept and lack of evidence indicating crystallization of impugned expenditure in relevant previous year lo invoke the disallowance in question. The CIT(A) in turn follows his findings in assessment year 2007-08 on identical issue in assessee's favour. 11. We have given our thoughtful consideration to rival submissions. The Revenue fails to rebut the fact that the assessee has already succeeded on this prior period expenditure disallowance issue in preceding assessment years, We further find that hon'ble jurisdictional high court decision in Tax Appeal No. 566/2016 PCIT Vs. Adani Enterprises holds that such a disallowance is not to be invoked in case an assessee is assessed at the same rate in the two assessment years in question. We therefore affirm the CIT(A)'s findings under challenge. The Revenu s sole substantive ground as well as main appeal ITA No.2395/Ahs/2014 fail 55.1 Before us, the learned AR has not brought out anything on record suggesting that the above finding in the own case of the assessee has either been stayed or overruled by a higher forum. Accordingly we are of the view, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accrued, gets crystalised in any case by 30-6-2012 wherein period of 180 days is completed and hence it is a timing difference based addition and tax- neutral over two years. 4.1 The CIT (A) erred in confirming disallowance of additional expenditure of Rs. 20,00,72,692 on account of revision in treatment of lease operating expenses charged to revenue in accordance with ICAI AS 19. 4.2 The CIT(A) failed to appreciate that As issued by ICAI is binding u/s.211(3c) of the Companies Act, 1956. Hence it is imperative for the Bank to treat lease operating expenses in line with such accounting standard although it is tax neutral over the years. The appellant craves, leave to add, to amend, alter delete and/or modify the above grounds of appeal on or before the final date of hearing. 57. The first issue raised by the assessee is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 7,37,03,738/- under the provision of section 14A r.w.Rule 8D of Income Tax Rules. 58. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the assessee is allowed. 63. The next issue raised by the assessee in ground No. 4 is that the learned CIT (A) erred in confirming the disallowance made by the AO for Rs. 20,00,72,692/- crores on account of lease operating expenses. 64. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the assessee in ITA No. 2176/AHD/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 2176/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the assessee for the assessment 201112 has been decided by us vide paragraph Nos 41 to 41.5 of this order in favoure of the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the assessee is dismissed. 65. The assessee in the additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Rule. 69. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the assessee in ITA No. 311/AHD/2016 for the assessment year 2010-11. Therefore, the findings given in ITA No. 311/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2012-13. The appeal of the assessee for the assessment 201011 has been decided by us vide paragraph Nos. 8 to 10 of this order in favoure the assessee for statistical purposes. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the grounds of appeal filed by the Revenue is partly allowed for statistical purposes. 70. The next issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 2,20,69,810/- on account of prior period expenses. 71. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the Revenue in ITA No. 2173/AHD/2016 for the assessment year 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AR before us vehemently supported the order of the authorities below as favourable to them. 77. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the own fund of the assessee in the financial year 2011-12 stands at Rs. 22,808.00 crores whereas the capital work-inprogress stands at Rs. 70.76 crores. The own fund of the assessee exceeds the amount of capital work-in-progress. Therefore, a presumption can be drawn that the own fund of the assessee was utilised in such capital work in progress. Accordingly, there cannot be any disallowance on account of interest expenses. Hence the ground of appeal of the Revenue is dismissed. 77.1 In the result appeal of the Revenue is partly allowed for statistical purpuses Coming to ITA No. 520/AHD/2018, an appeal by Assessee for the AY 2013-14 78. The Assessee has raised following grounds of appeal: 1. Disallowance u/s 14A r.w. Rule SD of the Income-tax Act, 1961 1.1 The learned CIT(A) erred in confirming disallowance out of operating expenses of Rs.9.58 crores under section 14A r.w. Rule 8D, despite the Bank being a dealer and holding all its sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rule 6EA is subservient to Section 43D and hence it cannot extend the scope beyond the charge of income provided in section 43D. 4. Lease operating expenditure 4.1 The learned CIT(A) erred in confirming disallowance of Rs. 17.86 crores by ignoring Ihe treatment of lease operating expenses followed by the Bank in accordance with AS-19 issued by ICAI to be mandatorily followed by the Bank as per section 133 of The Companies Act, 2013. 4.2 The learned CITfA) also failed to appreciate thai this addition represents timing difference which shall be tax neutral and there will not be any loss of revenue to the department. 5. Employee Stock Option cost 5.1 The learned CIT(A) erred in law by not allowing the ESOP cost of Rs. claimed as deduction u/s 37(1) of the Act. 177.34 crores 5.2 The learned CITfA) failed to appreciate that the market price as on date of exercise of options being greater than the exercise price, there is actual discount offered to the employees. 5.3 The learned CIT(A) also failed in correctly applying the ratio of the decision of Bangalore Special Bench of Hon'ble ITAT in case of Biocon Limited Vs DCIT [2013] 144 ITD 21 (Bangalor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by us vide paragraph Nos. 20 to 20.8 of this order in ITA No.311/Ahd/2016. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the assessee is allowed. 83. The next issue raised by the assessee in ground No. 3 is that the learned CIT (A) erred in confirming the addition of Rs. 16.30 crore being the amount of interest on the sticky advances under rule 6EA read with section 43D of the Act. 84. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 2176/AHD/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 2176/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 201112 has been decided by us vide paragraph Nos 36 to 36.3 of this order in favoure of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricting the disallowance u/s.14A from Rs.1,31,27,60,212/- to Rs.9,58,07,301/-. (2) That the ld.CIT(A) has erred in law and on facts in deleing the addition of Rs.1,82,63,504/- made on account of Annual Technical Fees. (3) That the ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.73,03,649/- made on account of interest in respect of capital work in progress. (4) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary. 90. The fisrt issue raised by the Revenue is that the leanred CIT (A) erred in deleting the addition of Rs. 1,29,54,449/- made under section 14A read with rule 8D of Income tax Rule. 91. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 311/AHD/2016 for the assessment year 2010-11. Therefore, the findings given in ITA No. 311/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 201011 has been decided by us vide paragraph Nos. 8 to 10 of this order partly allowed for statist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Disallowance u/s 14A r.w. Rule 8D of the Income-tax Act, 1961 1.1 The learned CIT(A) erred in confirming disallowance out of operating expenses of Rs.15.59 crores under section I4A r.w. Rule 8D, despite the Bank being a dealer and holding all its shares and securities (except shares in subsidiaries/ JV companies) as its stock-intrade. The learned CIT(A) has failed to appreciate that the Bank has earned treasury business profits (taxable] of Rs. 327.58 crores on dealings in shores and securities which is one of its main objects and the Bank is actively and extensively carrying out treasury operations in shares and securities in order to contribute to its profits. 1.2 The learned CIT[A) erred in not appreciating that Rule 8D is neither charging provision nor automatic and Rule 8D(2)(iii) w.e.f. A.Y. 2008-09 cannot supersede favourable judgements of Hon. ITAT upto AY 2009-10 and Gujarat HC upto A.Y. 2008-09 in the Bank's own case. 2. Bank guarantee commission 2.1 The CIT (A) erred in upholding the addition of Bank Guarantee (BG) commission income of Rs. 182.58 crores being the sum relatable to unexpired period of the guarantee contract. This sum represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise price, there is actual discount offered to the employees. 5.3 The learned CIT(A) also failed in correctly applying the ratio of the decision of Bangalore Special Bench of Hon'ble ITAT in case of Biocon Limited Vs DCIT [2013] 144 ITD 21 (Bangalore(SB) which states that ESOP cost in hands of the company has to be equivalent to amount taxable as perquisite in the hands of employees. Relying on the decision of Hon'ble Special Bench, the difference between market price os on date of exercise of options and the exercise price (i.e. the market price on the grant date) is an allowable deduction for computing income under the head 'profits and gains from business or profession' in the year of exercise of options by the employee (such amount being equal to the amount taxable as perquisite in hands of employee), The appellant craves leave to add, to amend, alter, delete and/or modify the above grounds of appeal'on or before the final date of hearing. 97. The first issue raised by the assessee is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 15.59 crore under the provision of section 14A r.w.Rule 8D o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment 201112 has been decided by us vide paragraph Nos 36 to 36.3 of this order in favoure of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2014-15. Hence, the grounds of appeal filed by the assessee is allowed. 103. The next issue raised by the assessee in ground No. 4 is that the learned CIT (A) erred in confirming the disallowance made by the AO for Rs. 25.47 crores on account of lease operating expenses. 104. At the outset we note that the issues raised by the assessee in its grounds of appeal for the AY 2014-15 are identical to the issues raised by the assessee in ITA No. 2176/AHD/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 2176/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2014-15. The appeal of the assessee for the assessment 201112 has been decided by us vide paragraph Nos 41 to 41.5 of this order in favour of the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he findings given in ITA No. 311/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2014-15. The appeal of the assessee for the assessment 201011 vide paragraph Nos. 8 to 10 of this order has been partly allowed for statistical purposes. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2014-15. Hence, the grounds of appeal filed by the Revenue is partly allowed for statistical purposes. 110. The next issue raised by the revenue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 3,08,31,629/- on account of prior period expenses. 111. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2014-15 are identical to the issues raised by the Revenue in ITA No. 2173/AHD/2016 for the assessment year 2011-12. Therefore, the findings given in ITA No. 2173/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2014-15. The appeal of the Revenue for the assessment 2011-12 has been decided by us vide paragraph Nos.55 to 55.2 of this order in favour the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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