ACIT CIR 2(1)(1), MUMBAI vs. BANK OF BARODA, MUMBAI

2. The CIT (A) ought to have allowed the appellants claim in respect of exclusion of income of foreign branches situated in countries where there is a Double tax Avoidance Agreement based on Article 7 of the respective agreements which provides that the business profits is to be taxed in the respective countries. The CIT (A) failed to note that notification 91 of 2008 relied upon by Hon'ble ITAT does not apply to business profits but only to other sources of income.

4. The CIT(A) erred in holding that the provisions of section 115JB are applicable to appellant relying on Explanation 3 without appreciating that the said Explanation will apply only to those entities established under Companies Act and will not apply to appellant which is established under Banking (Companies Transfer Of Undertakings) Act, 1970 as held by Hon'ble ITAT Kolkata in the case of UCO 5. The CIT(A), having held that the provisions of section 115JB are applicable should not have held that the additions made to book profits are academic and should have decided on various additions made in computing book profit which were agitated in appeal.”

4. The issue arising in ground no. 1 raised in assessee’s appeal pertains to disallowance u/s 14A of the Act.

Commissioner of Income Tax, [(2018) 91 taxmann.com 154 (SC). Being aggrieved, the assessee is in appeal before us.

“3. In the appeal before the ld. CIT(A), the ld. CIT(A) has allowed the appeal of the assessee after following the decision of Mumbai ITAT in the case of the assessee itself vide for assessment year 2009 dated 08.03.2021. The relevant extract of the decision of CIT(A) is produced as under: “5. I have considered the findings of the AO, submissions of the appellant and the facts of the case as placed before me. It is pertinent to note that the honourable Mumbai ITAT in the appellants own case vide for AY 2009-10 dated 08/03/2021 had dismissed the grounds of Revenue on the same ground. The operative part of the order is reproduced as under: “2. The ground No 1 raised by the Revenue is challenging the action of the Id. CIT(A) in deleting the Interest disallowance made u/s 144 of the Act row. Rule 8D(2)(d) of the Rules on the ground that the assessee bank is having sufficient interest free funds to make investments. 3 We have heard rival submissions and perused the materials available on record. We find that assessee had earned exempt income of Rs.58,43,00,883 by way of interest on tax free bands, dividends on shares and interest which is exempt u/s 10(15)(iv)(c) & (f) of the Act. The assessée also holds certain securities as stock in trade. The assessee pleaded that its own funds available by way of share capital was Rs.365.52 Crores, reserves and surplus of Rs.12514.19 Crores and demand deposits of Rs.14451.22 Crores on which no interest was paid The assessee pleaded that these interest free funds were sufficient enough to explain the investments made by the assessee which had yielded exempt income. Accordingly, the assessée placed reliance on the decisions of the Hon'ble Jurisdictional High Court in the case of HDFC Bank Limited 366 1TR 505 and 383 ITR 629 to drive home the point that interest free funds available with the assessee were sufficient enough to cover the investments that had yielded exempt income.

3.1. We find that the Id. AO disregarded the aforesaid contentions of the assessee and proceeded to disallow Rs.85,90,80,262/- u/s 144A of the Act row Rule 8D(2) of the Rules. We find that assessee had voluntarily disallowed the sum of Rs.7,94,39,436/ under Rule 8D(2) (ii) of the Rules considering the investments which had yielded exempt income. We find that the Id CIT(A) on appreciating the fact that assessee has flooded with sufficient own and interest free funds in its kitty which would sufficiently explain the investments made by it which had actually yielded exempt income and hence, it could be safely inferred that no borrowed funds could have been utilised for the same. Accordingly, by placing reliance on the decision of Jurisdictional High Court in assessee's own case and various Tribunal decisions of Hon'ble Jurisdictional High Court which has been followed by the Id. CIT(A) while granting relief to the assessee, we find no infirmity in the said order of the Id. CIT(A). Accordingly, the ground No. 1 raised by the Revenue is dismissed.

4. The ground No.2 raised by the Revenue is challenging the action of the id CIT(A) wherein he had directed the Id. AO to exclude the investments that were held as 'stock in trade' while computing disallowance u/s 14A of the Act r.w Rule 8D(2) of the Rules We find that the Id. CIT(A) had directed the id AO to ignore the investment in shares and securities that were held as 'stock in trade' for the purpose of computing disallowance u/s 14A of the Act r w Rule 8D(2) of the Rules, by placing reliance on the decision of this Tribunal in case of DCIT vs. India Advantage Securities Ltd., in dated 14/09/2012, the decision of Hon'ble Kerala High Court in the case of CIT vs. Smt. Leena Ramachandran reported in 339 1TR 296 and also on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs India Advantage Securities Ltd, in of 2013 dated 17/03/2015 We find that this issue was the subject matter of adjudication by this Tribunal in the case of Central Bank of India vs. DCIT in ITA No.3739/Mum/2018 & 3763/Mum/2018 for AY 2012-13 dated 29/01/2020, which is authored by the undersigned, wherein it was held that the Hon'ble Apex Court in the case of Maxopp Investment Ltd., reported in 402 ITR 640 had categorically upheld the findings recorded by the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala reported in 78 Taxmann.com 3 (P & H) with regard to non-applicability of provisions of Section 14A of the Act in respect of investments held as stock in trade in respect of banks. It was also held by this Tribunal that the Hon'ble Punjab and Haryana High Court in above mentioned case had further placed reliance on the CBDT Circular No 18/2015 dated 02/11/2015. Hence, by respectfully following the said decision, we hold that there was absolutely no error in the action of the Id. CIT(A) in holding that provisions of Section 14A of the Act could not be made applicable in respect of investments in shares held as stock in trade in the case of assessee bank Accordingly, the ground No.2 raised by the Revenue is dismissed. At this juncture, I could not resist from observing that the judgment delivered by the Tribunal was very much binding on the Assessing Officer. The Assessing Officer was bound to follow the judgments in its true letter and spirit. It was necessary for the judicial unity and discipline that all the authorities below the Tribunal must accept as binding the judgment of the Tribunal. The Assessing Officer being inferior officer vis-a-vis the Tribunal, was bound by the judgment of the Tribunal and the Assessing Officer should not have tried to distinguish the same 14A issue on untenable grounds. The observation of the AO in the assessment order at para 3 4 that the submissions of the assessee have been considered but not found tenable because of the facts already discussed in the original assessment order indicates that the AO has approached the issue in a already pre-determined mind set and not willing to follow the jurisdictional ITAT direction. In this behalf, it will not be out of place to mention that in the hierarchical system of Courts which exists in our country. It is necessary for each lower tier' including the High Court, to accept loyally the decisions of the higher tiers. 'It is inevitable in hierarchical system of Courts that there are decisions of the supreme Appellate Tribunals which do not attract the unanimous approval of all members of the judiciary. But the judicial system only works if someone is allowed to have the last word, and that last word once spoken is loyally accepted The better wisdom of the Court below must yield to the higher wisdom of the Court above as held by the Supreme Court in the matter of CCE v. Dunlop India Ltd AIR 1985 SC 330.

17. In the aforesaid backdrop, for the reasons stated hereinabove, and humbly following the jurisdictional ITAT decision in the appellants own case, the disallowance u/s 14A in the impugned "giving effect order of the Assessing Officer dated 30.12 2019 is not held as not tenable and hence the appellants ground is hereby allowed.”

11. The Ld. CIT(A), vide impugned order, following the decision of the Co- ordinate Bench in assessee’s own case dismissed the ground raised by the assessee and upheld the addition made by the AO. Being aggrieved, the assessee is in appeal before us.

12. During the year, the Ld. Authorized Representative (“Ld. AR”) fairly agreed that this issue has been decided against the assessee in its own case by the Co-ordinate Bench of the Tribunal in preceding years. We find that the Co-ordinate Bench of the Tribunal in assessee’s own case in M/s Bank of Baroda v. DCIT, in & 1121/Mum/2018, vide order dated 22.05.2019 for the assessment years 2014-15 and 2015-16, following the decision rendered in preceding years upheld the addition made on the similar issue, by observing as follows: - “10. Another common issue raised in assessee's appeals is that learned CIT(A) ought to have allowed assessee's claim in respect of exclusion of income of foreign branches situated in countries where there is double tax avoidance agreement based on Article 7 of the respective agreements which provides that business profits is to be taxed in respective countries. It has further been submitted that learned CIT(A) failed to note that Notification No. 91 of 2008 relied upon by ITAT does not apply to business profit but only to other sources of income.

16. The Ld. CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that for the purpose of application of the provisions of section 43D of the Act, the time limit as provided in Rule 6EA, of the Rules should be applicable instead of the RBI guidelines. Being aggrieved, the assessee is in appeal before us.

“6. Heard both the sides and perused the material on record. The asesssee has recognized the amount of interest attributable on sticky advances as NPA for a period of 90 days or more as per the guidelines issued by the RBI in accordance with Sec. 43D of the Act. However, the A.O was of the view that as per Rule 6E, interest is not to be offered for taxation with respect to advances which become Non Performing Assets for a period of 180 days or more. With the assistance of id. representative we have perused the decision of ITAT, Mumbai in the case of Union Bank of India VS. ACIT, 16 taxman.com 304 wherein on identical issue and similar facts held that bank had no option but follow the RBI guidelines to make a provision for unrealized interest on the NPA by debiting profit and loss account. In the case of DCIT Vs. Karur Vysya Bank & 2467 of ITAT Chennai dated 29.03.2017 held that it becomes necessary to read down such rules so that it is in consonance with the RBI regulation or prudential norms for recognizing income. In Royal Bank of Scotland Vs. DCIT vide ITAT Kolkata held as under: "2.6 We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute before the lower authorities that the loan accounts had become sticky and doubtful of recovery. The only contention of the revenue is that section 43D of the Act read with Rule 6BA of the Rules permits accounting of interest income on receipt basis only if the loan account had become overdue for more than six months, whereas in the instant case, it is more than three months but less than six months as on 31.3.2010. The loan account becoming overdue and becoming sticky was never disputed. The next issue is whether the prudential norms of RBI for income recognition would override the provisions of the IT Act. This issue has been addressed by the Hon'ble Supreme Court in the case of Southern Technologies Ltd supra in the context of allowability of deduction towards 'Provision for NPA. We find that the same decision clearly stated that the interest income on NPA accounts should not be recognized on accrual basis which is in line with RBI prudential norms for income recognition. This fine distinction has been duly considered in the decision of the Hon'ble Delhi High Court in the case of CIT us Vasisth Chay Vyapar Ltd supra. When the account becoming NPA is not disputed by the revenue, the recognition of income is to be done only on receipt basis which is in consonance with the real income theory. In these circumstances and respectfully following the decisions of Hon'ble Delhi High Court in 330 ITR 440 and various other decisions refered to supra, we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly, the grounds raised by the assessee are allowed." We have also perused the provision of Sect. 43D of the Act which are reproduced as under: "43D. Notwithstanding anything to the contrary contained in any other pro vision of this Act,- (a) in the case of a public financial institution or a scheduled bank or "[a cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or a State financial corporation or a State industrial investment corporation "jor a deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company the income by way of interest" in relation to such categories of bad or doubtful debts as may be prescribed" having regard to the guidelines issued by the Reserve Bank of India in relation to such debts, (b) in the case of a public company, the income by way of interest" in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or "la co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or] the State financial corporation or the State industrial investment corporation or "[a deposit taking non-banking financial company or a systemically important non-deposit taking non- banking financial company or] the public company to its profit and loss account for that year or as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier." It is categorically provided in the provisions of section 43D that income by way of interest in relation to bad and doubtful debts to be prescribed in accordance with guidelines issued by the RBI. The section 43D was introduced by the Finance Act, 1991 as per the section the category of bad and doubtful debts to be prescribed in the Income Tax Rules having regard to the guidelines issued by the RBI in relation to such debts. In 1992 the Rules 6E was framed and as per RBI guidelines the norms for categorization of advances as NPA were those advances which remained over due for more than 6 months. The RBI has revised the guideline from time to time and made changes in the period of overdue of advances for categorization of NPA. During the year under consideration the RBI has reduced the period to 90 days for categorization of interest on sticky loan as NPA, however, similar changes was not made to Rule 6EA. After considering the provisions of Sec. 43D and judicial findings as supra we consider that norms for categorization of bad and doubtful debts had to be prescribed considering the guidelines issued by the RBI. Therefore, the Id. CIT(A) is not justified in substituting the limit for recognizing of interest on account of NPA to 180 days from 90 days in view of the clear provisions of Sec. 43D(a) that in the case of public financial institutions or schedule bank or a state financial corporation or a State Industrial Investment Corporation, the income by way of interest in relation to such categories of bad and doubtful debt as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts. Therefore, both the ground of appeals of the assessee are allowed.”

20. The issue arising in ground No. 4 raising assessee’s appeal pertains to applicability for the provisions of section 115JB of the Act to the assessee bank.

2. Taxability of Income of foreign branches Without prejudice to the contention that income of foreign branches is to be excluded in computing total income as per Section 90 of Income-tax Act, even if the income is to be taxed it will only be the income computed in accordance with Income-tax laws of respective countries and not foreign income computed as per provisions of Indian Income-tax Act.”

25. The additional ground no.1 raised by the assessee, pertaining to the deduction of education cess and higher and secondary education cess was not pressed, during the hearing. Therefore, the same is dismissed as not pressed.

26. The issue arising in additional ground no.2 raised in assessee’s appeal, pertains to the exclusion of income of foreign branches.

“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.

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 A.R on the notification issued by the Government. Accordingly, we set aside the order of learned CIT(A).”

28. Thus, respectfully following the aforesaid decision rendered in assessee’s own case, additional ground no.2, raised by the assessee, is dismissed.

Revenue’s Appeal – A.Y. 2016-17 30. In this appeal, the Revenue has raised the following grounds: - “

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in relying on the ratio of the Apex Court in the case of American Express International banking Corporation Vs CIF reported in 258 ITR 601 (Bom) and Citi Bank (Civil appeal No. 1549 of 2006) where the income from securities were treated as business income which was not the same in the present case? 2. "On the facts & circumstances of the case and in law, the Ld. CIT(A) is correct deleting the addition on account of interest accrued but not due to the assessee following the decision of Hon'ble Bombay High Court in the case of Credit Suisse First Boston (Cyprus) Ltd.(351 ITR 323) without appreciating the Assessing Officer's contention that deducting interest accrued but not due would tantamount to cash basis of accounting which is not permitted as per the provisions of section 145 of the IT Act, 1961. 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding that the Perpetual Bonds cannot be compared to the equity/ share capital of the banks without considering as per settled legal position in 130 ITR

18. ( P & H) of Hon'ble Punjab & Haryana High Court in the case of Pepsu Road Transport Corp vs CIT that an element of refund or repayment is a must in the concept of borrowing."

31. The issue arising in ground no.1, raised in Revenue’s appeal, pertains to the disallowance of the broken period of interest.

32. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee paid Rs.1639.76 crores as broken period interest on the purchase of securities, and treated the same as revenue expenditure. During the assessment proceedings, the assessee was asked to furnish an explanation why the broken period interest should be allowed as revenue expenditure. In response, the assessee submitted that its client treats its investment in Government securities, shares and debentures as stock in trade, and therefore, the broken period interest on the purchase and sales of securities is an item of revenue expenditure. Apart from placing reliance upon the decisions of various Hon’ble High Courts, in support of aforesaid submissions, the assessee also placed reliance upon the decisions of the Co- ordinate Bench in its own case for the earlier years. The AO, vide assessment order passed u/s 143(3) of the Act, disagreed with the submissions of the assessee and held that the broken period interest paid by the assessee is nothing but part of the price paid for the securities for acquiring the securities and therefore, whatever may be the reason that prompted the assessee to purchase the securities, the price paid for them is in the nature of capital outlay only. Accordingly, the AO held that the broken period interest claimed by the assessee is part of the cost price of the securities acquired by it, and therefore, the deduction of Rs.1639.76 crores claimed by the assessee was disallowed.

14. On this issue consequent upon Assessing Officer's disallowance, learned CIT(A) has decided the issue in favour of the assessee by referring to earlier years appellate order in assessee's own case where Hon'ble Supreme Court decision in the case of Citibank and Hon'ble Bombay High Court decision in the case of American Express were followed.

15. Now Revenue is in appeal before us.

17. Accordingly, respectfully following the precedent as above, we uphold the order of learned CIT(A) and dismiss the ground raised by the Revenue."

“16 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. As far as argument of rule of consistency is concerned, the Ld. CIT(A) has rejected the contention of the assessee following the decision of the Hon'ble Delhi High Court in the case of Krishak Bharati cooperative Ltd (supra). The said finding being based on the precedent, we concur with the finding of the Ld. CIT(A). 16.1 The assessee has distinguished the decision of Hon'ble Punjab Haryana High Court in the case of Pepsu Road transport Corporation (supra) on the ground that in said case capital was provided by the Union of India under a statutory obligation which had no provision of repayment. Further in the event of the liquidation of Pepsu Road transport Corporation after meeting the liabilities if any, the assets were to be divided among Central Government and the State Government and such other parties, if any as may have subscribed to the capital in proportion to the contribution made by each of them to the total capital. However in the instant case there was no statutory obligation on the investors to subscribe to IPDs and further the claim of the investor of the IPD bonds is superior to that of equity investor and subordinate to other creditors. Further, it was submitted that interest paid on IPD cannot be equated with the dividend as dividend is not mandatory to be paid each year and it has to be paid if there is profit during the any financial year and on approval of the proposal of the Board of Directors by the shareholders in the annual general meeting. Whereas in the case of the IPD, it is mandatory to pay interest irrespective of the availability of the profit and no approval of the Board of Directors or shareholders was required. In view of the above discussion, we concur with the contention of the assessee that ratio in the case of Pepsu Road transport Corporation Ltd (supra) cannot be applied or the instant case. 16.2 However as far as finding of the Coordinate bench of Tribunal in the case of Tata Power Co Ltd (supra) is concerned, the Tribunal has in principle held that perpetual bond are not in the nature of equity and therefore quashed the revision proceedings passed by the Ld. PCIT, The relevant finding of the Tribunal (supra) is reproduced as under: Heard both the sides and perused the material on record. Assessment in the case of the assessee was completed by the Assessing Officer u/s 143(3) r.w.s 144C(13) of the I.T. Act, 1961 on 30.06.2017. The ld. Pr.CIT has held vide order u/s 263(3) of the Act, dated 28.03.2018 that assessment order passed u/s 143(3) r.w.s 144C(13) as erroneous insofar as it was prejudicial to the interest of revenue holding that the Assessing Officer was not correct in allowing the interest on perpetual debt instruments without examining and verifying the allowability of such expenditure. With the assistance of ld. representatives we have gone through the copies of documents and detailed submission made before the A.O during the course of assessment proceedings as per page no. 1 to 160 of the paper book filed by the assessee. It is noticed that assessing officer has specifically asked the assessee vide notice dated 24.11.2016 to provide the detail of income tax reversal on distribution of unsecured perpetual securities. In this regard assessee has given detailed submission vide letter dated 16.12.2016 stating that it has issued 11.4% unsecured perpetual securities (bonds) for the purpose of business use. Interest of such securities is payable @ 11.40% per annum. The assessee has also specifically explained in line with accounting standard, the aforesaid interest is charged to reserve and surplus. The gross amount of interest of aforesaid securities was of Rs.142.03 crores for F.Y. 2010-11. But the same was charged to Rs.113.61 crores after netting off taxes [142.03 28.42]. The amount of tax impact of Rs.28.42 crores has been charged to reserve and surplus during the year. Thereafter again on 23.12.2016 the assessee has explained to the assessing officer that during the year the company has incurred Rs. 18.63 crores on issue of 10.75% debenture of Rs. 1500 crores. This amount being expenditure of capital nature has not been claimed by the assessee in its return of income. The assessee has also supplied to the Assessing Officer detailed offer document issued for unsecured perpetual debentures of Rs. 1500 crores during the course of assessment proceedings. In the offer document the terms and conditions of issuing perpetual debentures, basis of allotment, creation of debenture redemption reserves along with object of the issue were clearly mentioned. As per the copy of object of the issue placed at page 67 of the paper book, it is mentioned that utilization of funds to be raised through this private placement will be for general business purpose and at page no. 62 issue size was mentioned of 15000 debentures of face value of Rs. 10 lac each aggregating to Rs.1500 crores. It is demonstrated from the detailed submission and copies of documents placed in the paper book that assessing officer has made detailed inquiry/verification during the course of assessment proceedings that assessee has borrowed funds for business use by issue of debentures. The borrowed fund were payable on call option exercising by company after the 10th year or any at the end of every year thereafter. It was also explained that the lenders were not entitled to share any surplus or bear any loss like shareholders. Debentures trustee were appointed to safeguard interest of the lenders. The assessee company had also stated on the basis of aforesaid discussion that it had borrowed fund for the purpose of its business and the interest on debenture was deductible in computing the income from profit and gains from business and profession. In the light of the above facts and after considering the detailed material furnished by the assessee during the course of assessment proceedings before the assessing officer we observe that the assessee has categorically explained to the assessing officer with relevant supporting material that it has issued unsecured perpetual non-convertible debentures and such lenders were not entitled to share any surplus or bear any loss like shareholders. These debentures were entitled for fixed interest @11.40% along with redemption after the 10th year. These facts and submissions were also brought to the notice of the ld. Pr.CIT during the course of proceedings u/s 263 of the Act, however, the ld. Pr.CIT without controverting these undisputed fact held that assessment order was erroneous so far it was prejudicial to the interest of Revenue. Therefore, we consider that the order passed by the ld. Pr.CIT u/s 263 is unjustified and we quash the same. Therefore, we allow the ground of appeal of the assessee. 16.3 Respectfully, following the finding of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) on the issue in dispute and direct the Ld. A.O. to delete the disallowance of interest amounting to Rs. 18,00,00,000/-, which was made u/s 36(1)(iii) of the Act. The ground No. 4 of the appeal of the assessee is accordingly allowed.”

“10. Heard both the sides and perused the material on record. The A.O has disallowed the claim of interest made u/s 36(1)(iii) by treating the perpetual bond as equity in nature. In support of his finding the A.O has placed reliance on the observation of the Pr. CIT made in the order u/s 263 in the case of the assessee for A.Y. 2013-14. These observations are as under: (i) Perpetual bond with no maturity date; (ii) right to redeem that assessee not with the Investors; (iii) showing in the balance sheet as debt or borrowings. However, it is observed that A.O has failed to controvert the undisputed fact that assessee has issued innovative perpetual debt instruments (IPDI) which carry a fixed rate of interest. The holder of these instruments had no right in management of the assessee bank. The assessee had paid interest to the bond holder after deducting tax at source. We have also perused the schedule 4 of the balance sheet placed in the paper book wherein at serial no. (vi) Innovative Perpetual Debt Instruments was placed under the head borrowings. The interest payment on these debt instruments was paid before computing profit of the assessee bank. We have also perused the detail of the redemption of perpetual debt instrument made by the assessee placed in the paper book reproduced as under: Sr. Series Allotment date Date of Principle amount Interest for the No. redemption period FY. 2009-10 1. DAG06RRB 09.08.2006 09.08.2016 Rs.233,00,00,000 23,53,30,000 2. DSP06RRB 13.09.2006 13.09.2016 RS.550,00,00,000 54,89,00,000 3. DJA07RB1 15.01.2007 30.04.2017 Rs.18,00,00,000 1,79,63,998 4. DJA08RB1 10.01.2008 30.04.2018 Rs.500,00,00,000 50,75,00,000 5. BHSTN7.25% 24.06.2006 31.10.2016 USD 34,00,00,000 1,16,68,81,013 2,47,65,45,011 It is further noticed that the assessee had demonstrated from the submission that these debt instruments were also redeemed. We also find that facts of the case of Pepsu Road Transport Corporation Vs. CIT 130 ITR 18 (P & H) relied upon by the ld. D.R. are distinguishable from the case of the assessee. In that case the capital was not borrowed but the same was provided by the Government as per the provisions of the Road Transport Corporation Act, 1950 whereas in the case of the assessee bank it had borrowed the money from the lenders. Similarly the fact of the case of Bank of India Vs. ACIT vide 122 taxman.com 247 (Mum ITAT) are also distinguishable from the case of the assessee. In that case the revenue had not discussed about the terms on which perpetual bond were issued. Therefore, the issue was remained back to the ld. CIT(A) for fresh adjudication. We have also perused the decision of Kerala Road Transport Corporation Vs. ITO 34 TTJ 101 Cochin, ITAT, wherein held that payment of interest was not made to the corporation but it was the payment made to the third parties. In the light of the above facts and circumstances merely that RBI recognizes to treat the said debt instruments as additional Tier/Capital would not change the nature of Innovative Perpetual Debt Instruments which were of the nature of long term borrowings and the interest paid was debited to the profit and loss account. These debt instruments were also redeemed on different dates as discussed supra in this order, therefore, we don’t find any reason to interfere in the decision of ld. CIT(A), accordingly, this ground of appeal of the revenue is dismissed.”