BANK OF INDIA,MUMBAI vs. THE ACIT-2(1)(1), MUMBAI

Assessment Year: 2013-14 Assistant Commissioner of Bank Of India Income-tax-2(1)(1), 8th Floor, Mumbai Vs. Taxation Department, Star House, C-5, 'G'-Block, BKC, Bandra (E), Mumbai - 400051 (PAN: AAACB0472C) (Appellant) (Respondent) Present for: Assessee : Shri P. J. Pardiwala, Sr. Advocate and Shri C. Naresh, CA Revenue : Shri Satya Pal Kumar, CIT DR Date of Hearing : 15.12.2025 Date of Pronouncement : 23.12.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by assessee and revenue are against the order of CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide and 1549/MUM/2023 Bank of India AY 2013-14 ITBA/NFAC/S/250/2022-23/1050212290(1), dated 28.02.2023 passed against the assessment order by DCIT, Circle-2(1)(2), Mumbai, u/s. 143(3) r.w.s 254 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 31.12.2019 for Assessment Year 2013-14.

2.1 Grounds taken by the Revenue are reproduced as under: 1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in holding that if there are funds available both interest free and loans fund then presumption would arise that investment is made out of interest free fund for calculation of disallowance us. 14A r.w.r. 8D(2)(ii) when the issue of mixed fund is pending before larger Bench of Supreme Court. More so when no nexus is established by the assessee to prove that own i.e., interest free funds were initiated to make the investment? 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee relying on the decision of Hon'ble Special Bench of ITAT Delhi in the case of vireet Investment (P) Ltd., without appreciating the facts that the issue has not reached to its finality as the Hon'ble Delhi High and 1549/MUM/2023 Bank of India AY 2013-14 Court in its decision in the case of Goetz India Ltd., reported in 361 ITR 505 held that while computing Book Profit disallowance ws 14A is required to be made, though in its later judgement the case of Bhushan Steel Ltd. (ITA No. 593 & 594 2015) the Hon'ble Delhi High Court has taken a contrary view? 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in allowing provision for wage revision of Rs. 70,00,00,000/- without appreciating the fact that the provision made is for a contingent liability? 4. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing to exclude the adjustment made by adding the provision for bad and doubtful debts of Rs. 4082.50,85,396/-while calculating book profit w/s 115JB? 5. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was correct in holding that the interest portion of the refund issued earlier has to be ignored for the purpose of calculating interest u/s 244A of the Income tax Act. 1961, payable to the assessee, on refund arising out of the order giving effect to order of appellate authority? 6. The Ld. CIT (A)'s order is contrary in law and on facts and deserves to be set aside.

I. Ground No.1(A) and (B) - Disallowance u/s. 14A r.w.r. 8D(2)(iii) 4. During the year under consideration, assessee has claimed the following income as exempt in its return of income:

(a) Interest exempt - Rs. 1,13,91,370/- (b) Dividend from companies - Rs. 31,62,12,487/- Total - Rs. 32,76,03,857/- 4.1. In the original assessment made u/s 143(3) on 27.03.2015, ld. Assessing Officer applied Rule 8D to determine the expenses attributed to exempt income u/s 14A at Rs. 1,32,98,41,522/- (Rs. 1,21,86,47,635/- under Rule 8D(@)(i) + Rs. 11,11,93,887/- under Rule 8D(2)(iii). As the assessee had made Suo Moto disallowance of Rs. 24,88,528/-, the balance amount of Rs. 1,32,73,52,994/- was further 4.2. In the reassessment made u/s 143(3) r.w.s 254 of the Act dated on 31.12.2019, ld. Assessing Officer mentioned that assessee had disallowed Suo Moto expenses of Rs. 24,88,528/- u/s 14A, meaning thereby that assessee had incurred some expenses, however these have been computed as per Rule 8D. Ld. Assessing Officer relied on Para 39 of Hon'ble Supreme Court Judgement in the case of Maxopp Investments Ltd vs. CIT 402 ITR 640 (SC), Hon'ble High Court Judgement in the case of Godrej and Boyce and Hon'ble Special Bench Of ITAT, Mumbai in the case of M/s Daga Capital Management Pvt. Ltd. Further, ld. Assessing Officer observed that the SLP in the case PCIT vs. State Bank of Patiala had been dismissed by Hon. Supreme Court. Also, in the case of PCIT vs. State Bank of Patiala [2018] 259 taxmann.com 314, the Hon'ble High Court took a view that disallowance u/s 14A should be restricted to the amount of exempt income only. Following this judgement, the disallowance u/s 14A r.w Rule 8D worked at Rs. 1,32,73,52,994/- was restricted by the ld. Assessing Officer to the exempted income of Rs.32,76,03,857/-.

4.3. We note that similar issue had come up before the Co-ordinate Bench of ITAT, Mumbai in assessee’s own case for AY 2012-13 in dated 28.06.2023. The relevant extracts from the same are reproduced below for ready reference: “6. We have heard the submissions of rival sides and have examined the orders of authorities below. We have also considered the decisions on which both sides have placed reliance in support of their respective submissions. In ground No. 1 of appeal the assessee has assailed disallowance made u/s. 14A t.w.r 80(2)(m) of the Act. Both sides have placed heavy reliance on the decision rendered in the case of Maxopp Investment Ltd. vs. CIT(supra). The contention of the Revenue is that the purpose of holding the shares is not relevant. The Hon'ble Apex Court in the said case has rejected the theory of "dominant purpose". Here it would be relevant to refer to the following observations of the Hon'ble Apex Court: and 1549/MUM/2023 Bank of India AY 2013-14 “38. From this, Punjab and Haryana High Court pointed out that this circular carves out a datinction between 'stock-in-trade' and 'investment and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the test of dominant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to an what basis those cases are to be decided where the shores of other companies are purchased by the assessees as Stock-in-trade and not as investment. We proceed to discuss this aspect hereinafter 39. in those cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head profits and gains from business and profession. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Wolfort Shore & Stock Brokers (P.) Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned.

7. The Hon'ble Delhi High Court in the case of PCIT vs. Punjab & Sind Bank (supra) after considering the judgment rendered in the case of Maxopp Investment Ltd. vs. CIT(supra) has upheld the decision of Tribunal in deleting disallowance made u/s. 14A of the Act in respect of exempt income earned on shares held as stock-in-trade. Similar view has been expressed by Hon'ble Delhi High Court in the case of PCIT vs. Punjab National Bank, 140 taxman.com 131 following the judgment rendered in the case of Maxopp Investment Ltd. vs. CIT(supra). The relevant extract of the judgment reads as under: "19. The Supreme Court in this judgment upheld the decision of the High Court of Punjab and Haryana arising under section 14A of the Act with respect to an assessee bank. It further held that when the shares were held as stock-in- trade and not as investment particularly by banks, the main purpose was to trade in those shares and earn profits there from and therefore section 14A of the Act was not attracted and the expenditure could not be disallowed. The judgment of MМахорр Investment Ltd. (supra) has been duly noted by the Tribunal in its impugned order and in our opinion the Tribunal has correctly disallowed the disallowance under rule 8D(2)(iii) of the Rules."

8. Thereafter, in the case of PCIT vs. PNB Housing Finance Ltd. (supra) the Hon'ble Delhi High Court again following the decision rendered in the case Maxopp Investment Ltd. vs. CIT(supra) and the decision of Hon'ble Apex Court in the case of South Indian Bank Ltd. (supra) held that no disallowance u/s. 14A of the Act is warranted where shares are held as stock-in-trade. The relevant extract of the decision rendered by Hon'ble Apex Court reads as under: "6. With respect to the challenge of the deletion of the disallowance made under section 14A of the Act, this issue is no longer res integra. It is an admitted fact that the exempt income was earned by the assessee from the investment held by it as stock-in-trade. This issue has been conclusively determined by the Supreme Court in Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154/254 Taxman 325/402 ITR 640/2018) 15 SCC 523. In this matter, the Supreme Court was concerned with a batch of appeals which also included a challenge to the judgment of the Punjab and Haryana High Court Pr. CIT v. State Bank of Patiala [2017] 78 taxmann.com 3/245 Taxman 273/391 ITR 218 and the facts of the said case are para materia to the case in hand. In the case of State Bank of Patiala, (supra) the AO restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in rule 8-D and holding that section 14A of the Act would be applicable. The CIT(A) issued a notice of enhancement under section 251 of the Act and disallowed the entire expenditure claimed by the assessee therein instead of restricting the disallowance to the amount which was claimed as exempt income. The ITAT set aside the order of the AO as well as CIT(A). The High Court upheld the order of the ITAT and dismissed the appeal filed by the Revenue. The Supreme Court after deliberating on the object and purpose of section 14A, conclusively held that in cases where shares are held by assessee as stock-in-trade, the dividend earned on the said shares is incidental and would not attract the provisions of section 14A of the Act. In this regard, the following paragraphs of the judgment are apposite :- and 1549/MUM/2023 Bank of India AY 2013-14 "49. We note from the facts in State Bank of Patiala case that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in rule 8-D of the Rules and holding that section 14-A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court.

7. The judgment of the Punjab and Haryana Court in the case of State Bank of Patiala (supra) was also cited with approval by the Supreme Court in a subsequent judgment South Indian Bank Ltd. v. CIT [2021] 130 taxmann.com 178/283 Taxman 178/438 ITR 1 and held as under:- "25.... The Punjab and Haryana High Court, in the case of Pr CIT v. State Bank of Patiala [2017] 88 taxmann.com 667/393 ITR 476 (Punj. & Har.), while adverting to the CBDT Circular, concluded correctly that shares and securities held by a bank are stock-in-trade, and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income." (Emphasis Supplied) 7.1 The law settled by the aforesaid judgments of the Supreme Court is squarely applicable facts of the present case as there is no dispute that the exempt income was earned from stock-in-trade." Thus, in light of various decisions rendered by Hon'ble Delhi High Court after considering the judgment rendered in the case of Maxopp Investment Ltd. vs. CIT(supra) deleting disallowance u/s. 14A where shares are held as stock-in- trade, we are of considered view that disallowance u/s. 14A of the Act is and 1549/MUM/2023 Bank of India AY 2013-14 unsustainable in the instant case. Thus, the assessee succeeds on ground No.1 of the appeal.

9. Since, we have accepted primary contention of the assessee raised in ground No.1, the alternative prayer made in ground No.1A of the appeal has become infructuous and the same is dismissed.”

II. Ground No.2(A) – Exclusion of income of foreign branches 6. In the original assessment made u/s 143(3) on 27.03.2015, ld. Assessing Officer disallowed the claim of exclusion of profit of Rs.972.39 Crores in respect of income of Foreign Branches. In the appeal before ld. CIT(A), in the order dated 23.02.2017 for the year under consideration, ld. CIT(A) confirmed this disallowance following its own order in Assessment Year 2012-13.

6.1. We note that similar issue was dealt by the Co-ordinate Bench of ITAT, Mumbai in assessee’s own case in (supra). The relevant extracts from the same are reproduced below for ready reference: “10. In ground No.2 of appeal, the assessee has assailed the findings of the CIT(A) in disallowing exclusion of profits of overseas branches. During the period relevant to the assessment year under appeal the overseas branches of the assessee have earned profits aggregating to Rs.635,19,04,811/-. The assessee claimed benefit of Double Taxation Avoidance Agreement (DTAA) entered into with the nations, where the branches of the assessee are located. The Id. Authorized Representative of the assessee has fairly admitted that this issue has been considered by the Tribunal in assessee's own case in Assessment Year 2015-16 and has decided the same against the assessee. Though the Id. Authorized Representative of the assessee has vehemently argued that Notification No.91 of 2008 (supra) on the basis of which the decision has been rendered by the Tribunal in the case of Tecnimont Pvt. Ltd. (supra) which in turn has been relied in the case of assessee, is inconsistent with the provisions of the Act, hence, the same cannot be used to deny the claim of assessee, we are not inclined to accept the same. The Co-ordinate Bench has considered the and 1549/MUM/2023 Bank of India AY 2013-14 notification (supra) and its application while passing the order in the case of Tecnimont Private Ltd. (supra). The Co-ordinate Bench after placing reliance on the decision in the case of Tecnimont Pvt. Ltd. (supra) decided the issue as under:- "7. Learned counsel has shown, in accepting the fact that even though the issue is covered in favour of the assessee by earlier decisions of the coordinate benches, these coordinate bench decisions cease to be binding judicial precedents inasmuch as reasoning adopted therein does not hold good any longer in the light of the decision in the case of Technimont (supra), admirable grace. It is not clear to us whether this approach is to preempt a detailed discussion on merits of the matter, or whether this approach is indeed bonafide stand of the assessee. That does not, however, matter much at this stage, as all the facets of this matter are covered above nevertheless. The basis on which the relief was granted in the earlier years has been examined and that basis being ex facie incorrect and even rendered by inadvertence is glaring in the analysis that has been extensively reproduced above. Learned counsel for the assessee, however, does not give up; he has an even more innovative plea now. He submits that above decision is per incuriam for some other reason, which has not been discussed in any judicial precedent so far, inasmuch as it overlooks the fact that the notification dated 28th August 2008 was not issued in the context of the business income, and, should accordingly not be applicable so far as business income earned abroad, as in this case, is concerned. We see no substance in this plea either. The notification deals with connotations of the expression "may be taxed", appearing in the tax treaties entered into by India, and there is absolutely no basis whatsoever to support the proposition that the effect of the notification has to be restricted in its application to non-business income only. No such differentiation in treatment of business and non-business income is envisaged in the said notification, nor to do we see any justification for inferring the same. Learned counsel does not have any material whatsoever in support of the proposition canvassed by him, nor does this proposition make any sense on the first principles- inasmuch as once the notification is issued without any such specific restriction for application to business income, we cannot infer a restriction in its application. We, therefore, reject the plea of the assessee, and thus decline to interfere in the matter. We uphold the action of the Assessing Officer in including the profits of the assessee's overseas branches, amounting to Rs1,408.32 crores, in its taxable income in India.

III. Ground No.2(B) – In case of exclusion of income not being allowed, income of foreign branch computed as per the provisions of respective countries only to be taxed 8. In ground No.2(A), assessee had taken the ground of exclusion of income of foreign branches with whom India has DTAA. This issue has already been decided against the assessee in ground no. 2(A) taken by the assessee. Accordingly, this ground of appeal is dismissed. Similar issue was dealt by the Coordinate Bench of ITAT, Mumbai in the case of Bank of Baroda for AY 2014-15 in dated 22.05.2019, the relevant extracts are furnished below for ready reference:

18. Another common issue raised relates to foreign income to be taxed in India.

19. On this issue learned Counsel of the assessee fairly conceded that this issue has been decided against the assessee by the ITAT in assessee's own case for A.Y. 2011-12 in vide para 3 to 5 of the said order.

20. Upon careful consideration we find that ITAT in assessee's own case has decided the issue in favour of the Revenue as under :-

4. We have considered the submission of Id. representative of the parties and perused the order of authorities below. The Assessing Officer while relying and 1549/MUM/2023 Bank of India AY 2013-14 upon the Notification No. S 2123(e) dated 28.08.2008 treated the income of foreign branches as taxable in India. The Id. CIT(A) on the basis of decision of Tribunal in assessee's own case for Assessment Year 2005-06 to 2007-08 in 2928, 5735/Mum/2011 dated 25.07.2014 held that as per the Notification, the income which is to be included in the total income is such income of foreign branch that was taxed in the foreign country, the relief of tax will be allowed based on the taxed paid in the foreign country and thereby granted part relief to the assessee. We have noted that similar ground of appal was raised by Revenue in appeal for A.Y. 2009-10 and the co-ordinate bench of the Tribunal in dated 17.02.2017 passed the following order: 24. We 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 hold that the income of the branches of the assessee shall also taxable in India Le., it would be included in the return of income filed by the assessee in India and whatever taxed have been paid by the Branches in the other contracting States i.e., the source country, credit of such taxes shall be given.”

by the revenue.

5. Considering the decision of co-ordinate bench in assessee's own case, the ground of appeal raised by Revenue is allowed mutatis mutandis as per order dated 17.02.2017 for A. Y. 2009-10. In the result, Ground No.2 of appeal of the Revenue is allowed. Since the notification issued by the Government does not differentiate between dividend income and business income, we are unable to agree with the interpretation given by Ld AR on the notification issued by the Government. Accordingly, we set aside the order of learned CIT(A).”

IV. Ground No. 2(C) – Non granting of credit towards foreign tax credit carried forward 9. Through this ground, assessee contends that due to the losses in the preceding AY 2012-13, tax paid by it in foreign jurisdictions was not claimed as relief. The same are now claimed to be adjusted in the year under consideration before us, i.e. in Assessment Year 2013-14 against the tax payable, when brought forward losses of the preceding AY 2012- 13 are adjusted in this year. To put it differently, issue relates to carry forward of foreign taxes paid in AY 2012-13 which could not be claimed in that year due to losses as there was no tax payable in that year and now adjust it in the present AY 2013-14 against the tax payable when brought forward losses are set-off.

10.1. Against this effect giving order, assessee went before the ld. CIT(A) who confirmed the order of ld. Assessing Officer. Ld. CIT(A) observed that there is no provision in the Act to carry forward the relief for credit of taxes paid in the foreign countries, if there is net loss in the year AY 2012-13, as relief of these taxes could not be claimed in that year, i.e. year of payment. The view taken by the authorities below is that in a situation, where the credit of taxes paid in foreign countries is more that the total tax liability in the year under consideration, there is no provision to refund the excess credit relief claimed and there is no carry forward of this excess credit in the Act. Once there is no provision of refund or carry forward of such excess tax credit paid in foreign countries, the same cannot be allowed to be adjusted in the subsequent year.

10.2. On further appeal by the assessee against the order of ld. CIT(A), Coordinate Bench of the Tribunal in its order in dated 04.03.2021 held that the issue of claiming credit will arise only in the year in which the reduced loss for AY 2012- 13 is set off. It held that in the absence of any specific legal bar on carrying forward of foreign tax credits, the assessee can, nevertheless, and 1549/MUM/2023 Bank of India AY 2013-14 on the grounds of equity and double disadvantage, claim those tax credits in the year in which the assessee is actually subjected to a higher tax burden on account of reduced eligible set off of losses carried forward. In this respect, relevant paragraphs from the order of the Coordinate Bench (supra) are extracted below for ready reference: "29. At this juncture, we would like to briefly touch upon the plea of the learned counsel that the assessee will be subjected to double jeopardy inasmuch as, on the one hand, the assessee has been subjected to tax abroad in respect of the foreign-sourced income, and, on the other hand, the said income will also end up reducing its losses carried forward, and thus enhance the domestic tax liability. So far as the period prior to 1st April 2017 is concerned, without expressing any merits on the admissibility or otherwise, of carrying forward foreign tax credits, all we can say is that even for such a double disadvantage, the double disadvantage could at best arise in which the taxpayer is denied the full set-off of the carried forward loss excluding the foreign income in respect of which foreign tax credit is declined. In legal parlance, double jeopardy has very narrow connotation in the criminal law, but, lest such technicalities may detain the flow of our discussion, let us take this expression in a liberal sense of double disadvantage. There are two important points in this regard. The first point is that the double jeopardy, if one can call these two aspects of impact on the tax liability of the taxpayer as a double jeopardy, will arise in the year in which the losses incurred in India in this year will be eligible for set off against the eligible profits- if at all so happens. For example, if in the current year, total losses incurred by the assessee (excluding the profits of Rs 50 crores so taxed abroad, and reduced from the losses carried forward) are Rs 100 crores, and the assessee has a total taxable income (before setting off the losses carried forward) of Rs 150 crores in the next year, the assessee will have only Rs 100 crores set off against that year's income whereas assessee's actual eligibility for set off, excluding the foreign profit of Rs 50 crores, could have been Rs 150 crores. That's the year in which the so-called double jeopardy will hit the assessee. In case the assessee is not to make any profits during the period eligible for set off, there cannot be any double jeopardy. Therefore, the so called double jeopardy, as in the present year, is nothing more than a mere possibility, in the realm of a contingent event. The taxation reliefs cannot be on the basis of possibilities. The second point is that one has to see the legal position in the year in which the double jeopardy actually hits the assessee. Rule 128 of the Income Tax Rules 1962, introduced with effect from 1st April 2017, specifically restricts the foreign tax credit "in the manner and to the extent as specified" therein [See rule 128(1)], and, therefore, so far as the assessment years 2017-18 onward are concerned, a taxpayer cannot even claim carry forward of the excess tax credits. It is well settled in law, and as provided in the relevant treaty and 1549/MUM/2023 Bank of India AY 2013-14 article itself, foreign tax credits are admissible subject to the domestic law provisions inasmuch as these credits are "subject to the provisions of the law regarding the allowance as a credit against Indian tax of tax paid in a territory outside India" [Article 24(2)]. So far as the period prior to 1st April 2017 is concerned, without expressing any merits on the admissibility or otherwise, of carrying forward foreign tax credits, all we can say is that even for such a double disadvantage, the double disadvantage could at best arise in which the taxpayer is denied the full set-off of the carried forward loss excluding the foreign income in respect of which foreign tax credit is declined. This issue cannot, therefore, be addressed in the present assessment year. The claim of the assessee regarding double disadvantage, in terms of taxation of an income abroad and the corresponding reduction in losses carried forward having tax implications in the source jurisdiction, is thus premature in any case. For this reason, while we reject the plea of the assessee at present, we leave the issue open for adjudication, if and so necessary, at an appropriate stage. The issue whether in the absence of any specific legal bar on carrying forwards on foreign tax credits, the taxpayer can nevertheless, on the grounds of equity and double disadvantage, claim those tax credits in the year in which the taxpayer is actually subjected to a higher tax burden on account of reduced eligible set off of losses carried forward, thus perhaps remains an open issue for adjudication. In all fairness, we must add that, as we have seen in our survey of academic literature on the subject a short while ago, according to one school of thought, in the absence of domestic law provisions for carry forward or back for offset for foreign tax credits, the excess tax credits are lost. To what extent this school of thought is correct or not is a call to be taken as and when the occasion comes for that adjudication. Our observations above are in the context of holding that no double disadvantage to the assessee, by denial of the tax credit, at least in the present assessment year, and, these observations should be seen in this context alone. As to what is the impact of this deduction being claimed on the possible claim of the assessee with respect to the carry forward of the tax credit, even if that be admissible, it may indeed appear that once the assessee is allowed a deduction for expenses, the claim of the assessee for carrying forward of the tax credit, whether permissible in the pre 1st April 2017 period or not, may cease to be inadmissible for the short reason of this deduction having been allowed alone. It could be so for the reason that there may be no double disadvantage in that case. However, we need not deal with that aspect of the matter at this stage." [emphasis supplied by us by bold and underline] 10.3. From the above extraction of the decision of Coordinate Bench in assessee’s own case for AY 2012-13, following emerges: and 1549/MUM/2023 Bank of India AY 2013-14 i) Possibility in the realm of contingent event expressed has now turned into reality in the year under consideration before us, i.e. in AY 2013-14 ii) Arousal of double disadvantage in the year under consideration which is a period prior to 01.04.2017 i.e., prior to introduction of Rule 128 which provides for method of computing FTC iii) Mitigation of double jeopardy/disadvantage in the light of Article 23/24 of the relevant treaties (DTAAs) when the tax payer has been subjected to higher tax burden on account of reduced eligible set off of losses carried forward 10.4. Thus, what was left open by the Coordinate Bench in the aforesaid order, now needs to be dealt with since present AY 2013-14 before us is the year in which assessee claims to have paid higher tax after adjusting the reduced loss brought forward from AY 2012-13. It is important to note that factual matrix of the present case in respect of claim of credit for foreign taxes paid by the assessee in AY 2012-13 are not in dispute. According to the assessee, losses to be carried forward in AY 2012-13 and the same available for set off in AY 2013-14 would have been Rs.1035.94 crores, if the profit of foreign branches in AY 2012-13 would not have been set off against the global income which the assessee was required to report in its return on account of its residential status being a resident of India. On account of its residential status, since the global income was a loss reported by the assessee in its return filed in India, there was no credit given for the foreign taxes already paid on the premise that there was no income-tax payable by the assessee. As against this, in the present year, ld. Assessing Officer allowed set off of Rs.191.36 crores which was revised subsequently to Rs.353.54 crores. Hence, assessee is in appeal before the Tribunal claiming credit for foreign taxes paid in AY 2012-13 on the profits of its foreign branches and 1549/MUM/2023 Bank of India AY 2013-14 which has now got “subjected to tax” in India. According to the assessee, its foreign sourced income of Rs.844.55 crores pertaining to AY 2012- 13 has been "subjected to tax" in India in the current assessment year and hence, it claims foreign tax credit of Rs.182.64 crore. This amount of foreign tax credit pertains to foreign sourced income of Rs.844.55 crores from its overseas branches.

10.5. In the present year, assessee has offered to tax, income of foreign branches aggregating to Rs.1178.90 crores and claimed credit for foreign taxes of Rs.265.05 crores u/s. 90 and of Rs.32.89 crores u/s. 91 of the Act, aggregating to Rs.297.95 crores. Details in this respect are already tabulated below:

Table 1: Sr. Foreign branch Eligible Foreign Tax Credit (FTC) u/s. No. 90/91 Income FTC 1 United Kingdom 2,45,66,21,299 56,50,22,899 2 France 6,04,54,461 1,96,14,450 3 Belgium 60,11,44,159 19,50,41,222 4 Kenya 50,50,05,869 16,38,49,154 5 Japan 1,04,25,85,737 29,24,45,299 6 USA 3,54,98,82,404 1,15,17,59,346 7 Singapore 1,43,26,99,078 24,35,58,843 8 Johannesburg 1,41,12,295 39,51,442 9 China 6,13,97,260 1,53,49,315 [A] Total FTC eligible u/s 90 9,72,39,02,562 2,65,05,91,971

5 Japan (state taxes) --- 2,03,55,387 10 Cambodia 73,74,064 14,74,813 11 Hong Kong 1,55,85,47,887 25,71,60,401 12 Jersey 49,91,86,358 4,99,18,636 [B] Total FTC eligible u/s 91 2,06,51,08,309 32,89,09,237

Grand Total FTC 11,78,90,10,871 2,97,95,01,208 Table 2: Sr. Tax jurisdiction Income as per tax Taxes paid in the No. concerned laws of the Respective tax respective jurisdiction jurisdiction 1 United Kingdom 164,83,03,346 42,85,58,870 2 Singapore 148,75,29,708 24,27,31,477 3 USA 134,29,98,097 43,57,35,733 4 Japan 115,31,72,581 34,59,51,694 5 Belgium 29,27,12,456 9,49,70,556 6 Kenya 27,25,92,653 8,84,42,686 7 China 11,38,14,129 1,00,64,665 9 France 4,07,81,841 1,32,31,668 10 Dividend Income-Zambia 8,46,61,252 87,54,656 and Tanzania 11 Hongkong 142,33,31,811 9,53,86,270 12 Jersey 57,96,82,547 6,23,49,551 13 Phnom Penh 59,93,696 2,45,122 Total Eligible Tax 844,55,74,117 182,64,22,948 Credit u/s 90/91

11.1. Before we delve deeper in to the subject, we remind ourselves of constitutional provision contained in Article 265 of the Constitution of and 1549/MUM/2023 Bank of India AY 2013-14 India which states, "no tax shall be levied or collected except by the authority of law”. Taxing authority cannot collect or retain a tax that is not authorized. Any retention of tax levied or collected, which is not otherwise payable, will be illegal and unconstitutional.

11.2. The provisions of section 90(2) of the Act provides that if India has entered into a DTAA with another country, then, the provisions of the DTAA or the domestic Act, whichever is more beneficial to the assessee shall apply. Even though there is no express provision in the Act, where the credit method applies, the DTAA itself is the legal basis for the credit because the treaty casts an obligation on the resident state to allow credit to its residents. When the credit method is applied, the residence state first determines the tax due under the domestic law, without taking into consideration a tax treaty in the first instance. This tax is then reduced by the foreign tax paid.

11.3. Despite the legislative framework for granting FTC, the Act does not contain any express provision permitting the carry-forward of unutilized FTC to subsequent assessment years. Likewise, there is also no specific prohibition in carrying forward the FTC. Rule 128 of the Rules which provides for method of computing FTC was introduced only from AY 2017-18 and onwards and will not apply to the year under consideration i.e. AY 2013-14. However, absence of a specific enabling provision does not amount to a statutory bar. Unlike provisions that expressly disallow carry-forward, the FTC framework is silent in this regard. Accordingly, treaty-based interpretation and recognition under the available jurisprudence is looked into to resolve the present issue wherein more pertinent question involved is in respect of timing mismatch for the FTC paid and its claim as a credit by the assessee. and 1549/MUM/2023 Bank of India AY 2013-14 11.4. In this regard, Hon’ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC) expressly observed that equitable considerations are irrelevant in interpreting tax laws but those laws like all other laws have to be interpreted reasonably and in consonance with justice. Also, Hon'ble Supreme Court in Vodafone International Holdings B.V. v. Union of India [2012] 341 ITR 1 (SC) emphasized that taxing statutes must be interpreted strictly and that legislative silence cannot be construed as a prohibition unless expressly stated.

11.5. Further, Hon’ble jurisdictional High Court of Bombay in the case of CIT v. Petroleum India International [2013] 29 taxmann.com 250 (Bom) had before it, one of the substantial questions of law (SQL) relating to timing mismatch which reads as under:

“Whether on true and proper interpretation of Section 91(1) the assessee is entitled to take double taxation benefit for the taxes paid in Kuwait only during the current ear and not during previous years or on provisions for future period?”

11.5.1. Hon’ble Court dealt with the above SQL in para 5 of its judgment. The factual position in this regard was that Assessing Officer denied the benefit of section 91(1) of the Act on the ground that payment of taxes in Kuwait was not made in previous year relevant to the present assessment year. By referring to provisions of section 91(1) of the Act, Hon’ble Court found that there is no such requirement in the said section as considered by the Assessing Officer. According to it, object of section 91(1) of the Act is to give relief from taxation in India to the extent taxes have been paid abroad for the relevant previous year. This deduction/relief is not dependent upon the payment also being made in and 1549/MUM/2023 Bank of India AY 2013-14 the previous year. The said substantial question of law was thus, not entertained, holding that assessee is entitled to deduction of taxes paid in Kuwait in terms of section 91(1) of the Act.

11.6. Based on the above jurisprudence, parallel interpretation was drawn for giving judicial treatment to Minimum Alternate Tax (MAT) credit in amalgamation cases by the Coordinate Benches of ITAT of Ahmedabad and Mumbai in Adani Gas Ltd v. ACIT in Ahd/2011 and in Ambuja Cements Ltd. v. DCIT [2019] 179 ITD 436 (Mum), respectively. In these decisions, successor entity was allowed to claim MAT credit despite absence of enabling language in section 115JAA. Thus, in absence of a statutory bar, relief mechanism was judicially recognised to uphold the constitutional governance and object of the Act.

and 1549/MUM/2023 Bank of India AY 2013-14 not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax. For the purposes of the credit referred to in the above paragraph (2), where the resident of India is a company, by which surtax is payable, the credit to be allowed against Indian tax shall be allowed in the first instance against the income-tax payable by the company in India and, as to the balance, if any, against the surtax payable by it in India." [emphasis supplied by us by bold and underline] 12.1. The following principles can be discerned from the above stated Article 24(2) for allowing foreign tax credits which become relevant in the present case before us: a) Provisions of domestic law does not affect FTC: Although the same tax credits granted is subject to the provisions of the domestic law, shall not affect the general principles under the treaty provision. b) Subjected to tax in both the jurisdictions: Income in question, in respect of which foreign tax credit is to be given, must have been subjected to tax in both the jurisdictions, i.e. United Kingdom as also in India. c) Proportionate tax credit i.e. tax credit limitation: If the income in question has been subjected to tax in both the jurisdictions, i.e., UK and India, only so much of the tax credit is allowed as a credit against the Indian income-tax payable in respect of such income but in an amount not exceeding that proportion of Indian income-tax which such income bears to the entire income chargeable to Indian income-tax. and 1549/MUM/2023 Bank of India AY 2013-14 12.2. Under the domestic law provisions in this regard, introduced vide Rule 128 of the Rules have come into effect from 01.04.2017, and, therefore does not have any bearing on the general principles under the treaty provision for AY 2013-14, the year under consideration before us. Since there is no statutory provision in this regard in the Act, we refer to the Preamble to India-UK DTAA to understand the ‘general principles as envisaged in the treaty. Objective of DTAA is to eliminate double taxation. Denial of FTC in AY 2013-14 when foreign sourced income is effectively taxed, undermines the objective as set out in the preamble. The same is extracted below for ready reference: “CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS” [emphasis supplied by us by bold and underline] 12.3. A view expressed by authors of an article titled “Foreign Tax Credit - Is a Carry-Forward Obligatory?” published in the Bulletin for International Taxation, October 2012 which is relevant in the present case before us, mentions that: “…object and purpose of a tax treaty, i.e. the avoidance of double taxation, is undermined if no credit is granted in later years when taxes are due in the residence state. It can be argued that, in this scenario, the same item of income is taxed twice and that the timing distortion should not impede the application of the credit method. Consequently, a tax credit carry-forward should be granted, even if national law does not explicitly provide for such a carry-forward.”

12.4. Even though India is not a party to the Vienna Convention of the Law of Treaties (VCLT), 1969, we take useful guidance from it as it contains many principles of customary international law. Principle of interpretation in Article 31 of the Vienna Convention provides a broad guideline as to what could be an appropriate manner of interpreting a treaty in the Indian context also. ‘Principle of Good Faith’ as enunciated and 1549/MUM/2023 Bank of India AY 2013-14 in Article 26 of VCLT, ‘Pacta sunt servanda’ states that every treaty in force is binding upon the parties to it and must be performed by them in good faith. Further, Article 31, "General Rule of Interpretation", of the VCLT provides that a "treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

13.1. Para 32.1 of the OECD Commentary on Article 23A and 23B concerning the methods for elimination of double taxation, states as follows: "E. Conflicts of qualification: 32.1 [Residence state obliged to give relief] Both Article 23A and 23B requires that the relief be granted through the exemption or credit method as the case may be where an item of income or capital may be taxed by the state of source in accordance with the provisions of the convention. Thus, the state of residence has the obligation to apply the exemption or credit method in relation to an item of income or capital where the convention authorises taxation of that item by the state of source. F. Timing mismatch: 32.8 [Relief irrespective of timing mismatch] The provisions of the convention that allow the state of source to tax particular items of income or capital do not provide any restriction as to when such tax is to be levied (see, for instance, paragraph 2.2 of the commentary on Article 15). Since, both Article 23A and 23B require that relief be granted where an item of income or capital may be taxed by state of source in accordance with the and 1549/MUM/2023 Bank of India AY 2013-14 provision of convention, it follows that such relief must be provided regardless of when the tax is levied by the state of source. The state of residence must therefore provide relief of double taxation through the credit or exemption method with respect to such item of income or capital even though the state of source taxes it in earlier or later year." [emphasis supplied by us by underline] 13.1.1. With regard to timing mismatch for tax credit, in the Commentary on Article 23A and 23B of the OECD Model (2019), it is explicitly stated as under: "…relief must be provided regardless of when the tax is levied by the State of source. The State of residence must therefore provide relief of double taxation through the credit or exemption method with respect to such item of income or capital even though State of source taxes it in an earlier or later year"

13.1.2. Article 23B of OECD Model Convention reads as follows: "1. Where a resident of a Contracting State derives income or owns capital which may be taxed in the other Contracting State in accordance with the provisions of this Convention (except to the extent that these provisions allow taxation by that other State solely because the income is also income derived by a resident of that State or because the capital is also capital owned by a resident of that State), the first-mentioned State shall allow: a) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in that other State; b) as a deduction from the tax on the capital of that resident, an amount equal to the capital tax paid in that other State. Such deduction in either case shall not, however, exceed that part of the income tax or capital tax, as computed before the deduction is given, which is attributable, as the case may be, to the income or the capital which may be taxed in that other State." [emphasis supplied by us by bold and underline] 13.1.3. It is to be noted deriving of income can be out of varying events owing to difference in domestic tax laws of the contracting state and the other state. Therefore, tax consequence can occur later in one state than in the other. Object and purpose of treaty can only be achieved effectively when "derived income" or "income subjected to tax" is interpreted independent of domestic tax law and 1549/MUM/2023 Bank of India AY 2013-14 by considering income which results in a tax consequence. The phrase "the tax on the income of that resident" refers to the amount of tax in the residence state on the foreign sourced income which is independent of timing of its arousal.

13.2. In view of above understanding, income from the source state (UK) is not derived/subjected to tax (in India) until the assessee turns profitable, as this is only when it becomes (indirectly) taxable in the residence state (India) in subsequent years (AY 2013-14). Consequently, the source taxes paid in respect of that income are to be credited as soon as there are profits in the residence state, barring applicability of Rule 128 of the Rules which in the present case is not applicable.

14.1. Also, in the case of Union of India v. Ram Jethmalani [2011] 12 and 1549/MUM/2023 Bank of India AY 2013-14 taxmann.com 27 (SC), Hon'ble Supreme Court observed on the principles set out in the VCLT even though India is not a party to the same, as under: “60. Article 31, "General Rule of Interpretation", of the Vienna Convention of the Law of Treaties, 1969 provides that a "treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." While India is not a party to the Vienna Convention, it contains many principles of customary international law, and the principle of interpretation, of Article 31 of the Vienna Convention, provides a broad guideline as to what could be an appropriate manner of interpreting a treaty in the Indian context also.”

14.2. We thus, note that Hon'ble Supreme Court has, in the cases of Azadi Bachao Andolan (supra) and Ram Jethmalani (supra) referred to the principles set out in Vienna Conventions on Law of Treaties (VCLT) which, inter alia, refer to the interpretation of the tax treaties "in good faith in accordance with the ordinary meaning given to the terms of the treaty in their context and in the light of its object and purpose". Similar reference has been made to OECD Commentary in support of the reasoning, in a large number of reported judgments, including landmark judgments in the cases of Azadi Bachao Andolan (supra) and Formula One World Championship Ltd [2017] 80 taxmann.com 47 (SC).

and 1549/MUM/2023 Bank of India AY 2013-14 on preamble and Article 23 / 24 of the treaty, OECD commentary, Vienna Convention of the Law of Treaties and jurisprudence of Azadi Bachao Andolan (supra), Ram Jethmalani (supra) and Petroleum India International (supra) supports the case of the assessee to address the double jeopardy caused to it.

15.1. Accordingly, under Article 23A(2) of the OECD Model Tax Convention, a State should allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in that other State. This deduction is limited and should not exceed that part of the tax, as computed before the deduction is given, which is attributable to such items of income derived from that other State. The credit is, therefore, restricted to the appropriate proportion of tax of the residence state. This is also referred to as an ordinary or a maximum credit and means that, for a credit to be granted, a tax on the same foreign income must first be due in the residence state. In other words, if the foreign income is not taxable in the residence state, no credit can be granted for any foreign tax paid. Similarly, if the foreign tax is greater than the tax in the residence state, the tax credit is capped at the level of the tax of the residence state. In other words, the foreign tax credit is limited to the amount of tax paid in the residence state on the foreign sourced income.

16.1. An overall loss arose in AY 2012-13. Foreign income is taxed only in the source State i.e. UK and, therefore, only taxed once. Though foreign income is attributable to this taxable period, but, due to the and 1549/MUM/2023 Bank of India AY 2013-14 overall loss, it was not possible to avail credit for foreign tax in AY 2012- 13. As the credit method does not have any effect on the tax base in the residence state i.e. India, foreign profits reduced the overall domestic loss carry-forward, although no credit was given in respect of foreign tax paid. There are overall profits in the residence state i.e. India in the second year i.e. AY 2013-14, which are subject to tax in India. Consequently, the reduced overall loss carry-forward resulted in a temporary deferral of the tax base into the future. The foreign positive income of AY 2012-13 gave rise to an increase in the tax in India in AY 2013-14. But for the profit of foreign branches during AY 2012-13, the losses to be set off in AY 2013-14 would have been higher by Rs.1035.94 crores.

16.2. In other words, double taxation did not arise in AY 2012-13 i.e. in the tax period in which foreign income is received, but, rather, in AY 2013-14 i.e. the tax period in which the (reduced) loss carry forward is absorbed by positive business income and is subjected to tax under the domestic law. Important fact to be noted is that although the taxable income in AY 2013-14 is not the "original" foreign sourced income received in AY 2012-13 but, it is certainly traceable to this income. From this perspective, there is no difference between the losses of the current and of preceding period, and, therefore, is treated equally for the purpose of applying the credit method.

16.3. With the above understanding, in the facts of the present case, as the reduced loss for the AY 2012-13 is set off in the AY 2013-14 and due to the obligation of the state of residence, i.e. India to eliminate double taxation irrespective of timing mismatch, the foreign taxable income of Rs. 164.84 crores is subjected to tax during the AY 2013-14 in India and, accordingly, assessee is entitled to such tax credit in the and 1549/MUM/2023 Bank of India AY 2013-14 current assessment year before us. In a nutshell, AY 2013-14 is the year in which assessee is actually subjected to higher tax burden on account of reduced eligible set off of losses carried forward and as a result, it is eligible to claim those tax credits of Rs. 42.86 crores on such income of Rs. 164.84 crores. This amount of Rs.164.84 crores towards foreign income and its related tax credits of Rs. 42.86 crores relate to UK jurisdiction alone as we dealt with provisions of India-UK treaty. Our finding needs to be applied for all the other treaty jurisdictions analogously, since treaty provisions are in this respect are same. However, only so much of the tax credit is to be allowed as a credit against the Indian income-tax payable in respect of such income not exceeding that proportion of Indian income-tax which such income bears to the entire income chargeable to Indian income-tax.

17.1. Non-treaty partner jurisdictions include Hongkong, Jersey and Phnom Phen (Cambodia) whose income has already been subjected to tax in AY 2012-13. However, due to set off of global loss (i.e. overall domestic loss as reduced by foreign source income) during AY 2013-14, the said income is considered to be doubly taxed in current assessment year, on similar lines as that of income from treaty-partner jurisdictions, dealt by us in above paragraphs. and 1549/MUM/2023 Bank of India AY 2013-14 18. In conclusion, assessee is eligible to claim FTC in respect of both, treaty and non-treaty partner jurisdictions towards taxes paid in AY 2012-13 for which corresponding foreign sourced income got subjected to tax in India in the present AY 203-14 when set off of reduced brought forward loss was made which had resulted in higher tax burden in the hands of the assessee. Since FTC cannot exceed the domestic tax liability as deliberated above in detail, ld. Assessing Officer is directed to verify and ascertain the correct quantum of domestic tax incidence on the foreign sourced income against which FTC is claimed and accordingly, give credit for the same. This issue is therefore, remitted back to the file of ld. Jurisdictional Assessing Officer (JAO) for limited purpose of verification and ascertainment as directed herein above. Accordingly, this ground is allowed for statistical purposes.

V. Ground No. 3(A) – Applicability of provisions of section 115JB

VI. Ground No. 3(B) and 3(C) – Exclusion of income of foreign branches in computing book profits

VII. Ground No. 4 – Deduction u/s. 36(1)(viia) before set off of brought forward losses

23.1. He recorded that it is clear from the plain wording of this section that the specific exclusion is deductions under Chapter-VIA of the Act only. The provisions of set-off and carry forwarded of losses will be given effect to determine the total income under this clause. He supported this interpretation by placing reliance on the decision of Hon'ble High Court of Karnatak in the case of DCIT vs Syndicate bank [2022] 145 taxmann.com 336 (Kar), dated 05.09.2022. Hon'ble High Court in the decision held as under: "R. Nataraj, J. This review petition is filed by the Revenue seeking review of the judgment dated 18-6-2021 passed in in so far as it relates to the substantial question of law No. 2 framed by this Court, which is as follows:-

"(ii) Whether, on the facts of the circumstances of the case and on the grounds raised

, the Tribunal was right in holding that the deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forward losses?"

2. This Court while answering the above question held that the Tribunal was right in holding that the deduction computed at the rate of 7.5% of the total income ought to be computed after setting off brought forward losses. However, in paragraph No. 15 of the judgment, this Court held contrarily that the deduction at the rate of 7.5% of the total income should be computed "before setting off the loss brought forward". This Court held that the reasoning adopted in this regard by the Assessing Officer and the Commissioner of the Income-tax (Appeals) is "not" in accordance with the provisions of the Income-tax Act, 1961. Hence, this Court held the above question against the revenue and in favour of the assessee and consequently, allowed the appeal in part and answered the substantial question of law No. 2 against the revenue and in favour of the appellant- assessee.

3. It is now well settled that the deduction towards bad and doubtful debts at 7.5% shall be made after setting off the brought forward loss, to arrive at the total income. Therefore, the finding recorded by this Court on substantial question of law No. 2 is an error apparent on the face of the record and therefore, deserves to be reviewed. Hence, the substantial question of law No. 2 in is answered as follows:- "The Tribunal was justified in holding that the deduction at the rate of 7.5% of the total income should be computed after setting off the brought forward loss."

4. Hence, the following ORDER The review petition is allowed. Consequently, the judgment dated 18-6-2021 passed by this Court in I.T.A.No.783/2018 is modified and the substantial question of law No. 2 framed therein and extracted above, is answered in favour of the Revenue and against the assessee. Consequently, is dismissed." [emphasis supplied by us by bold] 23.2. In view of the above decision, ld. CIT(A) held that the total income for the purpose of section 36(1)(viia) will be determined after set-off of brought forwarded losses. Accordingly, he upheld the working of net and 1549/MUM/2023 Bank of India AY 2013-14 profit after set-off of brought forwarded losses for the purpose of section 36(1)(viia) of the Act and thus, this ground of appeal was dismissed. Aggrieved, assessee is in appeal before the Tribunal.

24. Ld. Counsel for the assessee relied on the decision of the Coordinate Bench of ITAT, Mumbai who decided the aforesaid issue in favour of the assessee in the case of Union Bank of India in dated 17.12.2015 which in turn relied on another decision of the Coordinate Bench Chennai in the case of Indian Overseas Bank in ITA No. 1147/Mds/2008. The relevant portion from the decision of Union Bank of India by ITAT Mumbai (supra) is extracted below for ready reference: 2. The grievance of the Revenue read as under: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to allow deduction u/s. 36(1)(viia) of 1.T. Act before setting of brought forward losses without appreciating the facts that deduction is to allowed on total income and not on business income".

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to calculate the interest u/s. 24A of the I.T. Act, 1961 by relying on the ITAT decision in the case of Interest Tax/04 & 05/M/2010 dated 13.5.2011 for A.Y 1999-2000 and 2000-01 in its own case without appreciating that the case law relied upon by ITAT differs on the facts of the case and the Hon'ble Supreme Court has in civil appeal No. 4366 of 2012 distinguished the decision in Sandvik Asia".

3. At the very outset, the Ld. Counsel for the assessee stated and the Departmental Representative agreed that this issue has been decided by the Tribunal, Chennai Bench in favour of the assessee and against the Revenue in the case of Indian Overseas Bank vide ITA No. 1147/Mds/2008. We find that similar issue was considered by the Tribunal (supra) at para-6 on page-5 of its order and at para-9 on page-7, the Tribunal observed as under: "Since, the definition of Section 2 begins with the term unless context otherwise requires which means that the definition provided u/s. 2 of the Income Tax Act, 1961 are not exclusive. Moreover, as per Sec. 2(45) of the Income Tax Act, 1961 the income of the assessee is to be computed as per the manner prescribed in and 1549/MUM/2023 Bank of India AY 2013-14 this Act. The purpose of total income u/s./36(1) (viia) of the Income Tax Act, 1961 is for computing the deduction for computation of business income as per the provisions of Sec 28 to 43D of the Income Tax Act, 1961. Therefore, the term total income referred in Clause (viia) of Sub-section 1 of Sec. 36 of the Income Tax Act, 1961 is used for the purpose of statutory deduction available for business income". and finally at para-10 on page-9 the Tribunal held as under: "We are of the view that while computing the statutory deduction under Clause (viiia)of Sub-section 1 of Section 36 of the Income Tax Act, 1961, the total income would be the business income of the assessee before deducting the deduction under this Clause and deductions under Chapter 6A of the Income Tax Act, 1961. Therefore the brought forward losses would not be deducted while computing the total income for the purpose of Sec. 36(1)(vita). Since, the deduction is available only for computing the business income under this Clause, therefore the total income also refers the income of the assessee from profit and gain from a business and shall not include the income other than the business income." Respectfully following the findings of the Tribunal (supra), we decline to interfere with the findings of the Ld. CIT(A). Ground No. 1 is dismissed.”

24.1 Hon'ble High Court of Karnataka in its decision in the case of DCIT vs. Syndicate Bank, (supra) had held against the assessee which is based on review petition filed by the Department. From the perusal of the order passed for the review petition, it is noted that it does not give any specific reason as to why the deduction under section 36(1)(viia) is to be computed after setting off brought forward losses. In this respect, relevant para – 3 and 4 from the said order are already extracted above and highlighted as bold.

and 1549/MUM/2023 Bank of India AY 2013-14 Coordinate Bench at Chennai. It is strongly contended before us by the ld. Counsel of the assessee that judgement by a non-jurisdictional High Court can only have a persuasive value. Force of binding nature comes only from the jurisdictional Court under which the assessee is covered. Decision of High Court will have a binding precedent only in the State or Territories on which the High Court has its jurisdiction. Omnipresent status is reserved only for the decisions of Hon'ble Supreme Court which are binding on all courts in the country under Article 141 of the Constitution of India. Decisions of Hon'ble non-jurisdictional High Courts are followed by the authorities below them on account of persuasive effect and taking into account the concept of judicial propriety which are subjective factors.

25.1. To deal with the present situation before us as stated above, we are guided by the detailed exposition in the judgment of Hon'ble jurisdictional High Court of Bombay in the case of CIT v. Thane Electircity Supply Ltd. [1994] 206 ITR 727 (Bom). The propositions which were listed by the Hon'ble Court on the judicial hierarchy is extracted below for ready reference: “(a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence through out the territories in relation to which it exercises jurisdiction. It does not extend beyond its territorial jurisdiction. (c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court may be summed up as follows : (i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would and 1549/MUM/2023 Bank of India AY 2013-14 be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a larger Bench to examine the question (see Food Corporation of India v. Yadav Engineer and Contractor, AIR 1982 SC 1302). (ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court. If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench. (iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. (d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.” [emphasis supplied by us by bold and underline] 25.2. From the above, it is noted that the proposition in (d) also dealt with the situation where only one decision of any one High Court on a particular point has no relevance when it is a non-jurisdictional one. and 1549/MUM/2023 Bank of India AY 2013-14 25.3. Aforesaid decision was dealt by the Coordinate Bench in assessee’s own case in appeal for Assessment Year 2012-13 in dated 04.03.2021. It noted that applicability of non- jurisdictional High Court is never absolute, without exceptions and as a matter of course. Reference was also made to the decision of Hon'ble Supreme Court in the case of CIT v. Saurashtra Kutch Stock Exchange Ltd [2008] 305 ITR 227 (SC) which held that “non-consideration of a decision of jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record.” It kept out the decisions of ‘non- jurisdictional High Courts while holding so. Thus, a conscious call is required to be taken, on the facts of a particular situation. Relevant extracts from the decision of the Coordinate Bench in assessee’s own case (supra) are as under for ready reference: "34…….While dealing with judicial precedents from non-jurisdictional High Courts, we may usefully take of observations of Hon'ble jurisdictional High Court in the case of CIT v. Thana Electricity Co. Ltd. [1994] 206 ITR 727 (Bom.), to the effect "The decision of one High Court is neither binding precedent for another High Court nor for the courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect". Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course. That is the principle implicit in Hon'ble Supreme Court's judgment in the case of Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. 2008| 173 Taxman 322/305 ITR 227 wherein Their Lordships have upheld the plea that "non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record. The decisions of Hon ble non-jurisdictional High Courts are thus placed at a level certainly below the Hon'ble High Court, and it's a conscious call that is required to be taken with respect to the question whether, on the facts of a particular situation, the non-jurisdictional High Court is required to be followed. The decisions of non-jurisdictional and 1549/MUM/2023 Bank of India AY 2013-14 High Courts do not, therefore, constitute a binding judicial precedent in all situations. To a forum like us, following a jurisdictional High Court decision is a compulsion of law and absolutely sacrosanct that way, but following a non-jurisdictional High Court is a call of judicial propriety which is never absolute, as it is inherently required to be blended with many other important considerations within the framework of law, or something which cannot be, in deserving cases, deviated from. The rationale justifying the approach that non- jurisdictional High Courts are to be followed proceeds, inter alia, on the basis that, as held by Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973/88 ITR 192, when two interpretations are possible, and one of the views is in favour of the assessee, the view in favour of the assessee, and a decision of Hon'ble non-jurisdictional High Court is required to be treated at least as a possible view of the matter. This principle has, however, two major exceptions. It has been held that the rule of resolving ambiguities in favour of tax-payer does not apply to deductions, exemptions, and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman v. Barron 1952 (2) AIR 393 and followed by apex Court in Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commr. of C1992 taxmann.com 24 and Novopan India Ltd. v. CCE & C 1994 taxmann.com 231, has been summed up in the words of Lord Lohen, "in case of ambiguity, a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving taxpayer relief in certain cases from a section clearly imposing liability". The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. v. Dadabhoy's New Chirimiri Ponri Hill Colliery Co. (P.) Ltd. AIR 1972 (SC) 614. Once it is clear that this principle does not apply to a situation in which, to borrow the words of Lord Lohen, "a provision giving taxpayer relief in certain cases from a section clearly imposing liability", and it is also clear that we are dealing with the foreign tax credit, wherein relief is being given from unambiguous levy of tax, this principle of resolving ambiguity does not come into play at all. To this extent, the justification for following non-jurisdictional High Court judgments does not hold good as such, and one of the foundational propositions in support of following the non-jurisdictional High Courts ceases to hold good in law." [emphasis supplied by us by bold and underline] 25.4. We have already noted from the judgment of Hon'ble High Court of Karnatak in the case of Syndicate Bank (supra) that it does not give any specific reason as to why the deduction under section 36(1)(viia) is to be computed after setting off brought forward losses, while adjudicating review petition to reverse the initial conclusion arrived at. and 1549/MUM/2023 Bank of India AY 2013-14 In the decision by the jurisdictional Coordinate Bench in the case of Union Bank of India (supra), the conclusion drawn is founded on a reasoning which is already extracted above. The ‘total income’ referred in the section 36(1)(viia) means business income for the reason that the deduction under it is allowed for computing the business income and not the total income. Hon’ble High Court in Syndicate Bank’s case gave similar reasoning while originally deciding the appeal which was subsequently reversed without mentioning any reason thereto. For this, para - 15 from the said decision is extracted for ready reference: “15. In so far as the second question of law is concerned, a plain reading of section 36(1)(viia) of the Act, it is clear that the amount of deduction at the rate of 7.5% is to be calculated with reference to total income computed under the head 'profits and gains of business or profession'. The provisions governing the brought forward and set of business loss are not part of the provisions governing the computation of profits under the heads 'profits and gains of business' under Section 28. Hence, we hold that the deduction at the rate of 7.5% of the total income should be computed before setting off the loss brought forward. Hence the reasoning adopted in this regard by the assessing officer and the Commissioner of Income Tax (Appeals) is not in accordance with the provisions of the Act. Hence, the substantial question No.2 is answered against the revenue and in favour of the assessee.”

25.5. Accordingly, under the guidance of binding nature from the Hon’ble jurisdictional High Court of Bombay in Thane Electricity Supply (supra), we with utmost respect are not persuaded enough by the decision in review petition of Syndicate Bank (supra) and therefore, keeping consistency with the decision of Coordinate Bench (supra), we also in our considered view hold for the purpose of section 36(1)(viia), total income would be the business income before deducting the claim under the said section and eligible deduction under Chapter VI-A. Therefore, brought forward losses would not be deducted while computing the total income for the purpose of section 36(1)(viia). Resultantly, ground no. 4 raised by the assessee is allowed.

28.1. Respectfully, following the aforesaid decision, we do not find any reason to interfere with the finding arrived at by the ld. CIT(A). Accordingly, ground raised by the revenue is dismissed.

and 1549/MUM/2023 Bank of India AY 2013-14 (2014) 361 ITR 646 (Del). On a perusal of the order of the CIT(A), we find, that he had by drawing support from the order passed by the Tribunal in the assessee's own case for A.Y. 2003-04 in dated 10.04.2019, had therein directed the A.O to follow the said decision of the Tribunal and re-compute the interest due u/s 244A of the Act and also calculate the interest as per Rule 119A of the Income Tax Rules, 1962, observing as under: 5. The next issue in this appeal of assesses is against the order of CIT(A) in not granting interest under section 244A of the Act on interest portion of refund due For this assessee has raised the following ground No 2-

2. On the facts and in the circumstances of the case and in the learned DCIT has erred m non granting of interest u/s 244A of the Income-tax Act, 1961 on interest portion of refund one and the Hon'ble CIT(A) has erred in confirming the same The learned DCIT be directed to grant interest u/s 244A of lh9 Income-tax Act, 1961 on interest portion of refund due and enhance the refund accordingly."

6. We have heard rival contentions and gone through the facts and circumstances of the case We find that this issue is also covered by Tribunal's decision in assessee's own case in & 2908/Mum/2017 for AY 2007-08 & 2009-W vide-order dated 22.11.2018 wherein the issue is decided vide Para 7 as under:- The next ground number 3 and 4 raised by Revenue in its appeal for AY 2007-08 relates to computation of grant of interest u/s 244A of the 1961 Act payable to the assesses on refund arising out of the order giving effect to order of the appellate authority or consequent to order passed u/s 154 of the 1961 Act. The identical issue is also recurring issue in assessee's own case wherein tribunal has restored the issue back to the AO with certain directions. The tribunal order in assessee's own case for AY 2005-06 in vide dated 03.06 2016 is reproduced hereunder.-

5. The next issues contested by the assesses relates to the granting of interest u/s 244A of the Act The id AR submitted that the assessee has been receiving refunds upon passing of orders by the appellate authorities or upon passing of orders u/s 154 of the Act. The Id AR submitted that the AO has made adjustment of refund (consisting of tax and interest) already granted against the refund of tax dye in each of the successive orders The Id. A.R submitted that the entire amount of refund (both tax and interest) granted should be first adjusted against and 1549/MUM/2023 Bank of India AY 2013-14 the interest portion that has become due and then the remaining amount, if any. should be adjusted against the tax portion of me refund that has become due in support of his contentions the Ld. A.R planed reliance on the decision rendered by the Tribunal in the assessee's own case in to 5446/Mum/2013 dated 22.12.2014 and also the decision rendered by the Tribunal in the case of Union Bank of India (ITA No. 571 85741/Mum/2013 dated 23.6.2014).

7. The AO will decide this issue in term of the directions given by the Tribunal in AY 2007-05 and 2009-10 in & 2908/MUM/2017 The Ground No 2 by assesses is allowed for statistical purposes." We have deliberated on the observations of the CIT(A) in the backdrop of the issue in hand. As the CIT(A) has followed the order passed by the Tribunal in the assessee's own case for A.Y. 2003-04 in dated 10.04.2019, we, thus, finding no infirmity in the view taken by him, uphold the same.”

30.1. Ld. CIT(A) by following the aforesaid decisions as well as similar decisions of the Co-ordinate Bench in the case of Union Bank of India in dated 11.08.2016 directed the ld. AO to and 1549/MUM/2023 Bank of India AY 2013-14 follow the ratio decidendi of these judgments for granting of refund to the assessee. Considering the overall facts of the case and the judicial precedents referred above, we do not find any infirmity in the direction so given by the ld. CIT(A). Accordingly, ground raised by the revenue is dismissed.