DCIT- 2(2)(2), MUMBAI vs. YES BANK LTD., MUMBAI

All these appeals were originally heard on 10 .03.2022 , put up for clarification on issue of deduction u/s 35D and finally heard on 17.06.2022.

These Cross appeals pertaining to the same assessee i.e. Yes Bank Limited for A.Ys. 2011-12, 2012-13, and 2013- 14 involving common grounds, both parties argued these appeals together and therefore, same are disposed of by this common order.

For A.Y. 2011-12, the assessee has filed ITA No. 3498/Mum/2018 against the order passed by the learned Commissioner of Income-tax (Appeals)-5, Mumbai, [ The ld CIT (A) ] dated 31st January, 2018 raising following grounds of appeal:-

ITA No. 3236/Mum/2018 is filed by the learned Deputy Commissioner of Income tax 2 (2) (2), Mumbai [ The Ld AO ] against the same order [ AY 2011-12] of the learned CIT (A) raising following grounds of appeal:-

Assessee is a company engaged in the business of banking. It filed its original return of income on 30th September, 2011, and subsequently, filed revised return 30th on March, 2013, declaring income of ₹1176,82,76,464/-. Return of the assessee was picked up for scrutiny and assessment order under Section 143(3) of the Income Tax Act, 1961 (the Act) was passed on 12 March 2014.

The learned Assessing Officer made following disallowances:-

Assessee raised additional ground of appeal before him claiming deduction of Employees Stock Option Scheme (ESOS) of ₹143,24,22,420/-. He did not admit additional ground relying on the decision of Hon'ble Bombay High Court in case of Ultratech Cement Ltd. Vs. Additional CIT [2018] 408 ITR 500 (Bombay) dated 18th April, 2017. He held that a. Act of treating the above expenditure on ESOP as capital expenditure as well as treating the same in the computation of total income in a similar manner was a willful act on part of the assessee and hence, it does not fulfill the basic condition of the provisions of Section 250(5) of the Act, 1961. b. Claim was not verified by the learned Assessing Officer as the same was not discussed in the order and further, there were no sufficient judicial

Assessee has claimed dividend income of ₹50,76,400/- as exempt under Section 10(34) of the Act. Assessee disallowed a sum of ₹ 9,27,255/- under Section 14A of the Act. Learned Assessing Officer asked assessee to furnish details regarding the disallowance. Assessee submitted that

The learned Assessing Officer held that explanation of the assessee is not satisfactory and disallowance is required to be computed in accordance with Rule 8D of the Rules. Thus, he proceeded to compute disallowance as per Rule 8D of the Rules. He disallowed interest expenditure of ₹33,648,000/- u/r 8D (2)(ii) and further 0.5 % of

The issue was agitated before learned CIT (A). The assessee contested that there is no satisfaction recorded by the learned Assessing Officer as to how the disallowance offered by the assessee is not correct. The learned CIT (A) rejected this contention and held that learned Assessing Officer has recorded his satisfaction for invocation of Rule 8D of the Rules in paragraph 5.3 of the assessment order. He further rejected the contention that on securities held as stock-in-trade, no disallowance can be made for the reason that assessee has offered on its own disallowance under Section 14A of the Act With respect to custodian charges as well as administrative charges. With respect to the interest disallowance, he agreed with the argument of the assessee that in view of more interest free funds available than the amount invested in tax-free income earning securities, o disallowance u/r 8D (2) (i) and (ii) can be made. Therefore, he deleted the disallowance of ₹3,65,18,979/-. Thus, both the parties aggrieved with the above order

The learned Authorized Representative submitted that the learned Assessing Officer has failed to record any satisfaction about the correctness of the disallowance offered by the assessee. He submitted that this is mandatory requirement before the learned Assessing Officer proceeds to invoke Rule 8D for making

The learned Departmental Representative vehemently supported the order of the learned Assessing Officer and learned CIT (A). He further relied on Para 5.3 of the assessment order and stated that satisfaction has been correctly recorded by the learned Assessing Officer.

We have carefully considered the rival contentions and perused the orders of the lower authorities. Undisputed facts emerging from the orders clearly shows that assessee has disallowed a sum of ₹9,27,255/- under Section 14A of the Act as it has earned the exempt dividend income of ₹50,76,400/-. Assessee has given detail reasons and workings of disallowance offered by it. The learned Assessing Officer in paragraph no. 5.3 has held that the explanation offered by assessee is not satisfactory. No reasons for this finding were narrated in

The second ground of the appeal of the learned Assessing Officer is against the order of the learned CIT (A) in deleting the disallowance of brokerage paid on acquisition of investments.

Assessee has mentioned in the notes to accounts that brokerage/ commission pertaining to investment, paid at the time of acquisition of securities is charged to revenue account. Thus, as per the practice followed by the assessee when the securities are purchased and any brokerage/ commission is paid there on, assessee debits it to the profit and loss account and for tax matters same are claimed as deduction as revenue expenditure.

The learned Assessing Officer was of the view that as per the principles of conventional accounting of such cost is to be added to the cost of securities and therefore, such brokerage expenditure is not allowable as revenue expenditure. The learned Assessing Officer noted that brokerage paid on acquisition of investment which are not sold during the year but are carried in the balance sheet at the end of account year[ as closing stock] needs to be disallowed. Therefore, out of the total brokerage expenditure of Rs. 8,43,955/-, he disallowed Rs. 2,08,640/-. For the balance expenditure, the learned Assessing Officer noted that when the shares are sold during the year, the assessee applies profit and loss on

Assessee contested the above disallowance before the learned CIT (A), who categorically noted that the learned Assessing Officer has confused himself due to the treatment of securities as per books of account and as per Banking Regulation Act. Therefore, he held that when a particular security has been treated as stock-in-trade and profit or loss has been offered as business income, all the expenses incidental to the earning of such income has to be allowed as deduction as revenue expenditure. The learned Assessing Officer is aggrieved with the same.

Learned Departmental Representative vehemently supported the order of the learned Assessing Officer.

Learned Authorised Representative supported the order of the learned Commissioner of Income Tax (Appeals). He further supported the order of the learned CIT(A) relying on the decisions of CIT vs. Nawan shahar co-operative Bank of India 289 ITR 6, CIT vs. DLF Universal Ltd 317 ITR 197 of Hon'ble Delhi High Court and also relied upon circular no. 18/15 dated 2nd November, 2015.

We have carefully considered the rival contentions and perused the orders of the lower authorities. On appreciation of facts, we find that assessee offers profit and loss on sale of securities as business income and not as capital gain. This fact has also been accepted by the

Ground no. 3 of the appeal of assessee is with respect to the disallowance confirmed by learned CIT (A) under Section 35D of the Act of Rs. 2,82,80,291/-.

The fact of the case shows that Assessee Company has raised Rs. 1,033.87 crores during the Financial Year through Qualified Institution Placement (QIP) in which it placed its share capital with Qualified Institutional Buyers [QIB]. For this purpose, it incurred expenditure of Rs. 14,14,01,453/- on account of payment to lead managers, local consultants, and auditors. The assessee claimed Rs. 1/5th 2,82,80,291/- being of such expenditure as deduction u/s 35D of The Act. This is the first year of such claim with respect to this issue of shares. Assessee submitted that said expenses are in connection with the issue of „public subscription‟ of shares of the assessee.

Learned Assessing Officer examined the claim and held that since the issue of shares to Qualified Institutional Buyers, does not tantamount to „issue of shares to public‟ and therefore, expenditure incurred is not covered under Section 35D of the Act. Hence, he disallowed the same.

Assessee aggrieved with the same and preferred the appeal before the learned CIT (A). Assessee submitted

The learned Authorized Representative submitted that the issue is squarely covered in assessee‟s own case for Assessment Year 2010-11 in ITA No. 3497/Mum/2018, wherein the deduction under Section 35D of the Act was allowed on issue of shares to QIB. He referred to paragraph number 6 of that order and submitted that ITAT in that case following the order of the co-ordinate Bench in case of DCIT vs. Deccan Chronicle Holdings Ltd. [2015] 60 taxmann.com 240 (Hyderabad - Trib.), held that assessee

The learned Departmental Representative supported the orders of the lower authorities. He extensively referred to the order of ld CIT {A} and submitted that QIB are not public, no tax is deducted at sources, and other conditions of section 35D are not fulfilled.

We have carefully considered rival contentions and perused the orders of the lower authorities. According to provisions of section 35D (2) (c ) ( iv) of the act companies are allowable following deduction:-

So the only issue is whether the issue of shares made by assessee to QIB is „Public subscription of shares‟ or not. Allotment of shares to QIB can be permitted on “Private Placement basis “or also in „Public Issue‟.

We find that issue is decided in favour of the assessee in assessee‟s own case for Assessment Year 2010-11 in ITA NO. 3497/Mum/2018 dated 14 July 2020 so far the issue was whether QIB is “Public” or not . The co-ordinate

Therefore, as we have already held that if the issue of shares is through “ public Subscription” assessee is eligible for deduction u/s 35 D, conversely, if the issue of shares are not „ Public Subscription” i.e. such as Private Placement etc, assessee is not eligible for deduction u/s

Accordingly, ground no. 3 and 4 of the appeal of assessee are allowed with above directions.

Ground no. 6 of the appeal is with respect to non- admission of additional ground of appeal vis-a-vis allowance of deduction of discount on issue of shares under the Stock Option Plan. 038. Before the learned CIT (A), vide letter dated 8th December, 2017, assessee raised an additional ground that he is entitled to deduction of Rs. 143,24,22,420/- being the discount on issue of shares under the ESOP computed as difference between the fair market value of shares on the date on which the ESOP were exercised by the eligible employees and issue price of shares.

The fact shows that assessee introduced the ESOP in accordance with the provisions of Securities Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Assessee submitted that the issue is squarely covered in favour of the assessee by the Special Bench decision of

With respect to the fact that whether the adequate information was available on record for pressing the additional ground, the learned Authorized Representative referred to the annual report of the assessee for the year ended 31st March, 2011. He referred to note number 18.7.7, where ESOP disclosures were made. He submitted that there is a complete scheme wise expenditure disclosed by the assessee. He further referred to the note appended to the summary of the status of the Stock Option Plan, which states, “the bank has charged ₹nil, being the intrinsic value of the stock option granted for the year ended 31 March 2011. Had the bank adopted the fair value method (based on black –scholes price method), for pricing as accounting option, net profit after tax would have been lower by ₹2,24,12,000/-, the basic earnings per share would have been Rs. 20.47 per share instead of Rs. 21.12 per share, and diluted earnings per share would have been ₹ 19.63 per share instead of ₹20.25 per share”. He therefore submitted that there is an adequate disclosure and information available in the return of income and annual accounts for adjudicating the additional ground of appeal. He therefore submitted that when the information is available on record, the fresh claims could be raised before the appellate authorities by way of additional ground. To support his contentions, he relied on the decision of Ultratech Cement Ltd. (supra) of

On the merits of the case about the allowability of the deduction, he submitted that now Hon'ble Karnataka High Court in the case of CIT vs. Biocon Limited 270 taxman 1, [2021] 131 taxmann.com 187 (Kar.) and Hon'ble Delhi High Court in CIT vs. Lemon Tree Hotels (P). Ltd. has already allowed the claim of the assessee. He therefore submitted that on merits, the issue is squarely covered in favour of the assessee. He further submitted that principle of commercial accounting should be followed in determining the tax treatment of expenses and for this proposition; he relied on the decision of Hon'ble Supreme Court in case of CIT vs. Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC). In view of this, he submitted that the learned CIT (A) has erred in not admitting the additional ground of appeal and thereafter refusing allowance of deduction of discount on issue of shares under ESOP.

The learned Departmental Representative vehemently supported the order of the learned CIT (A) in not admitting the additional ground of appeal. He submitted that additional ground of appeal could only be admitted in accordance with the provisions of Section 250 (5) of the Act, which has been dealt with by the learned CIT (A).

The learned Departmental Representative on merit submitted that piece of expenditure is contingent, notional and capital in nature. For this proposition, he relied on the order of the co-ordinate Bench in cases of Medha Servo Drivers Ltd. Vs. DCIT dated 01.02.2011 in ITA No. 1189 & 1190/Hyd/2009, DCIT vs. Blow Plast Ltd in ITA No. 512/Mum/2009 dated 26th Nov, 2010, Mahindra & Mahindra Vs. DCIT in ITA No. 8597/Mum/2010 and M/s VIP Industries Ltd vs. DCIT in ITA no. 7242/Mum/2018. He also relied on the decision of Hon'ble Supreme Court in case of EMCO KCP Ltd. Vs. CIT 159 CTR 137, that the shares issued against assets contributed by shareholders cannot be considered as Revenue expenditure. He further submitted that ESOP expenses has not attained finality and pending before the Hon'ble Supreme Court in 2021] 131 taxmann.com 188 (SC)/[2021] 283 Taxman 290 (SC). In view of this, he submitted that CIT (A) has correctly not admitted the additional ground and even otherwise, on merits, the deduction is not allowable.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The first ground that arises before us is whether raising the claim by way of an additional ground has correctly been admitted by the learned CIT (A) or not. The second question arises is whether the assessee is eligible for deduction of discount on ESOP as an expenditure or not.

Firstly, the fact shows that for A.Y. 2011-12, assessee filed its return of income on 30 November 2011, which

Section 250 deals with the procedure in appeals before the learned CIT (A). Provisions of Sub Section 5 gives power to the learned CIT (A) to go into any ground of appeal which is not mentioned in the original grounds of appeal, if he is satisfied that omission of raising that ground in the original appeal memo was not willful or unreasonable. Therefore, provision clearly provides that the learned CIT (A) has right to refuse the admission of the additional ground, if he finds that omission was willful or unreasonable. However, he has to give a reason for the same and if such reasons are not found to be proper only then such decision can be interfered with.

In the present case, the learned CIT (A) has given a reason that; in the books of account assessee treated it as a capital expenditure, did not claim in the return of income as Revenue expenditure, the assessee is one of the largest bank applied all its minds and therefore, did not claim the same in the original appeal or during the assessment proceeding which clearly shows that not to raise such claim was willful omission. In fact, in the present case, if the decision of the Special Bench in case of Biocon Ltd

The second issue that arises is that fresh claims can be raised before the learned CIT (A) or not. Undisputedly, the claims are required to be made in the return of income under Section 139 of the Act or by filing revised return. Certain times it may happen that claims are not raised in return of income , but are raised/made before appellate authorities. Such an event may arise on account of multiple reasons, such as, availability of judicial precedents in favour of such claim, purely legal claims, etc. Those reasons cannot be exhaustively visualized. However, the issue that may arise whether, the assessee can raise fresh claim during the course of appellate proceeding or not. The learned CIT (A) has referred to the decision of Ultratech Cement Ltd. (supra) to hold that it cannot be made. Ld AR has also supported and relied on the same decision . The Hon'ble Bombay High Court in 408 ITR 500 has categorically held that additional ground relating to claim of deduction under Section 80IA cannot be permitted to raise, if necessary evidence that assessee was entitled to claim was not on record and assessee had no reason to satisfy appellate authority that ground now

The Revenue agitated that additional ground could be urged by the assessee for the first time in appeal only if it is supported by evidence on record for the year under consideration. Based on these facts, Hon'ble High Court following the decision of Hon'ble Supreme Court Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC), National Thermal Power Co. Ltd. v. CIT [1998] 229

If the facts are not on record, even then the additional ground can be raised if assessee proves that such ground could not be raised before the lower authorities for good and sufficient reasons. Such is the mandate of Hon'ble Jurisdictional High Court in 408 ITR 500. Now, therefore, we must say that whether the relevant material is on record or not, the claim of the assessee is with respect to deduction of ESOP expenditure. In this proposition, assessee has submitted the balance sheet of the assessee. As per Para no. 18.7.5, the assessee has stated that it has five employees stock option scheme, where provision for grant of options to eligible employees are made and it is approved by the remuneration committee, the board of

Now let us see what facts were available on record and where. In this case assessee submits that in note no 18.7.7 which reads as under :-

In present case before us, we find assessee has disclosed the preliminary facts with respect to the employee‟s stock option scheme in its annual accounts. The details with respect to each of the scheme, options granted during the year, exercised during the year and options lapsed during the year along with the closing balance of each of the scheme are shown. It also shows how in the books of accounts the treatments of stock options granted are made. Various assumptions in arriving in the fair valuation of the options showing risk free interest rate, expected life, volatility and expected dividend are also disclosed. The details also show the market price of the shares of the company at the time of grant of options. Therefore, it cannot be said that the primary facts of deduction for ESOP is not available on record. No doubt, the final computation of allowable deduction is required to be produced and verified by the assessee. However, absence of such allowable deduction at the time of

Ground number 6 has also another subsidiary ground, alternatively raised for claim of deduction of discount on issue of shares Under ESOP scheme. As we have held that, the learned CIT – A should have admitted additional ground of the assessee, we do not find it appropriate here to allow the claim of the assessee for the simple reason that deduction is required to be verified with respect to its quantum by the lower authorities. Accordingly, we set- aside the alternative ground of allowability of discount on issue of shares Under the employee stock option plan of ₹ 1,432,422,420/– back to the file of the learned assessing officer to examine the claim of the assessee and allow it in accordance with the law. The assessee is directed to produce the requisite details before the learned assessing officer. If the AO, on examination of such details, is not satisfied with the claim of the assessee, a reasonable opportunity of hearing is required to be given.

In the Result, appeal filed by the assessee in ITA number 3498/M/2018 for assessment year 2011 – 12 is partly allowed and appeal of the learned assessing officer in ITA number 3236/M/2018 for the same assessment year is dismissed.

For assessment year 2012 – 13 cross appeals are filed before us against the order passed by the Commissioner of income tax (Appeals) – 5, Mumbai dated 31/1/2018

ITA numbers 3499/M/2018 , assessee has raised following grounds of appeal:-

Despite the appeal filed by the assessee in 2018 raising lengthy, argumentative, descriptive grounds of appeal, till 2022 assessee did not care to revise those grounds of appeal. However, in the interest of justice we proceed with the appeal.

In ITA number 3237/M/2018 the learned assessing officer has raised following grounds of appeal:-

Brief facts of the case shows that the assessment order was passed u/s 143 (3) of the income tax act 1961 on 31/3/2015 by the learned assessing officer assessing the total income of the assessee at ₹ 17,156,743,620/– against the returned income filed by the assessee on 29/9/2012 which was subsequently revised on 30/3/2014 at ₹ 15,557,206,530/– . The learned assessing officer made the following disallowances i. disallowance u/s 14 A of ₹ 120,603,405/– ii. disallowance of deduction u/s 35D for allotment to QIP of Rs 2, 82,80,291/– iii. provision on investment amounting to ₹ 160,152,000/– iv. brokerage paid on acquisition of investment ₹ 386,405 v. provision for bad and doubtful debts of 11,56,77,762

Assessee preferred an appeal before the learned CIT – A who passed an order on 31/1/2018 allowing certain deductions and confirming certain disallowances. The learned CIT – A also did not admit certain additional evidences as well as the additional ground raised by the assessee on the issue of deduction under employee stock option plan. Therefore, both the parties are aggrieved with that order and have preferred this appeal.

We first come to the appeal of the assessee.

As per ground number 1 assessee has challenged the setting aside the ground to the file of the learned AO on certain issues. No specific arguments were produced before us and therefore ground number 1 is dismissed

ground number two is with respect to the disallowance u/s 14 A of the act wherein the assessee is aggrieved in and not following the order of ITAT by the learned CIT – A and with respect to ground number 3 the assessee is aggrieved with the disallowance of interest expenditure u/s 14 A of the act. Therefore, ground number 2 and 3 are against the disallowance u/s 14A of the act. The fact shows that assessee has earned exempt income in the form of dividend of ₹ 5,652,800/– on the shares, which would though not, purchased by the assessee but which were acquired by the assessee in corporate debt restructuring as a part of the rehabilitation package where the outstanding loan was converted into equity. Further the assessee has earned tax free interest income of ₹

Before us the learned authorised representative has challenged that the AO has failed to record any satisfaction to the disallowance offered by the assessee, no interest disallowance can be made to the extent of interest free funds available with the assessee, disallowance u/s 14 A of the act cannot be made

The learned departmental representative vehemently supported the order of the learned assessing officer.

We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the assessee has though Under exempt income u/s 10 (35) as well as u/s 10 (34) of the act and offered disallowance of ₹ 233,399/–. Assessee also submitted the working of the above disallowances. However, the learned assessing officer without recording any satisfaction u/s 14 A (2) of the act proceeded to compute the disallowance under rules 8D of the act. This issue is identical to the issue involved in the appeal of the assessee for assessment year 2011 – 13 wherein we have held that as the learned assessing officer has failed to record any satisfaction with respect to the correctness of the claim of the assessee of the disallowance offered, the learned assessing officer could not have proceeded to compute the disallowance Under rule 8D of the act. Accordingly, we have deleted the disallowance and directed the learned assessing officer to restrict the disallowance as offered by the assessee. As there is no change in the facts and circumstances of the case for this year also, we direct accordingly. Accordingly, ground numbers 2 – 3 of the appeal are allowed.

The assessee has come up in appeal before us stating that disallowance of deduction is already covered in favour of the assessee by the assessee‟s own case for assessment year 2010 – 11 in ITA number 3497/M/2018. He further relied on the decision of coordinate bench in 70 SOT 600. This ground is identical to the ground raised in appeal of the assessee for

The learned departmental representative vehemently supported the orders of the lower authorities and stated that the provisions of Section 35D of the income tax act grants deduction of expenditure only if it is issued in connection with a public issue.

We have carefully considered the rival contention and perused the orders of the lower authorities. The identical issue arose in the case of the assessee on the same set of facts and circumstances. We find that the provisions of Section 35D (2) (c) of the act grants deduction of expenditure incurred in relation to expenditure on public subscription of shares. The facts are not coming out that whether the allotment of shares to QIP is made in public subscription or in private placement. In earlier year i.e. assessment year 2011 – 12, we have set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to show whether it was an issue of shares of public subscription of private placement. The learned assessing officer may examine the claim as soon as submitted by the assessee and decide the issue afresh. Accordingly, ground number 4 and 5 of the appeal is allowed with above directions.

With respect to ground number 6 on disallowance of QIP expenses by noting whether the expenditure are subject to deduction of tax at source or not. We find that in this year the expenditure has not been incurred by the assessee and therefore the question does not arise of disallowance u/s 40

Ground number 7 is with respect to the revaluation of securities held as stock in trade amounting to ₹ 160,152,000/– is disallowed by the learned AO. The brief facts of the case show that assessee is holding investment in securities. The method of valuation followed by the assessee is to value investment at cost of market value in line with the guidelines issued by the reserve bank of India on valuation of investment. During the year, the assessee has shown depreciation in the value of securities amounting to ₹ 160,152,000 and assessee has claimed the deduction of the sum. Assessee submitted that according to the guidelines of the reserve bank of India the assessee is required to value each of the investment in different buckets and the amount of losses arising on this valuation. It relied on several judicial precedents also. The assessee submitted that out of the above provision are sum Of Rs 2,99,74,000 was a provision for investment relating to the equity shares on prudent basis. The learned assessing officer held that the guidelines issued by the reserve bank of India are not determinative to grant any deduction to the assessee Under the income tax act. Therefore, the entire depreciation provided in the books of ₹ 160,152,000 was disallowed. The assessee preferred an appeal before the learned CIT – A. The learned CIT – A in paragraph number 6.3 wherein he held that the treatment given by the learned assessing officer with respect to the assets/investments available for sale and held for trading are treated as stock in trade however the investment held to maturity category are treated by the AO as a capital asset. At page number 60, the learned CIT appeal has given a categorical finding that all the three types of investments i.e.

Assessee is aggrieved with this direction and is in appeal before us. We have carefully considered the rival contentions and find that this issue has been decided in favour of the assessee by the learned CIT – A but has given a direction to the AO to verify the accounting entries and the method of valuation adopted by the assessee. This issue has also been considered by the coordinate benches in assessee‟s own case for assessment year 2006 – 07 and 2007 – 08 wherein loss in Revelation of securities classified as held for trading in available for sale is held to be a revenue expenditure and allowable as deduction. We do not find any reason to sustain the order of the learned CIT – A for the purpose of verification to the file of the learned AO wherein identical deduction is allowed to the assessee in earlier years also. It would be a futile exercise. In view of this, we allow ground number 7 of the appeal.

Ground number 8 of the appeal is with respect to disallowance of brokerage paid on acquisition of held to maturity investments. The facts of the case shows that assessee charges to the revenue the amount of expenditure incurred such as brokerage commission et cetera on purchase of investments paid at the time of acquisition itself as an expenditure. This method is challenged by the AO and accordingly he held that

Assessee is aggrieved with that order and is submitting that that the issue is covered in favour of the assessee by the decision of honourable Supreme Court in 289 ITR 6, honourable Delhi High Court in 378 ITR 197 and Delhi benches of ITA T in 82 taxmann.com 251. It is further stated that it is also covered in view of circular number 18/2015 dated 2/11/2015.

The learned departmental representative vehemently supported the orders of the lower authorities.

We have carefully considered the rival contention and perused the orders of the lower authorities. Identical in this issue has been decided by the learned CIT – A wild deciding the appeal of the assessee for assessment year 2011 – 12 in favour of the assessee however for deciding the appeal of the assessee for assessment year 2012 – 13 he has taken a diametrically opposite view. When the above view was challenged for assessment year 2011 – 12 before the coordinate bench, we

Ground number 10 of the appeal is against the order of the learned CIT – A aside the order of the learned AO with respect to deduction claimed u/s 36 (1) (viia) of the act and further ground number 11 is with respect to the claim of the above deduction of ₹ 115,677,762. As per ground, number 12 assessee has raised an alternative plea that bad debts in assessment year 2013 – 14 the correspondingly allowed on higher side by reducing the opening balance of the provisions for bad and doubtful debts for assessment year 2013 – 14. The facts related to the above issue shows that that assessee company has claimed a deduction under this Section of ₹ 115,677,762 and made a provision for non-performing assets. The 7.5% of the income of the assessee company comes to Rs 117,55,45,107/–. Assessee has claimed deduction lower of these two amounts at ₹ 115,677,762/–. The assessee was questioned that how the deduction is available to the assessee in view of the decision of the honourable Supreme Court in case of 343 ITR 270. The assessee submitted that the entire provision is with respect to urban branches and assessee did not have any rural advances. The bank is entitled to deduction at the rate of 7.5% of total income and 10% of aggregate average advances made by the rural branches. Therefore, assessee is entitled to the above deduction. Assessee also submitted that it has return of bad debts amounting to ₹ 165,394,457 u/s 36 (1) (vii) which has not been claimed as

The assessee challenged the same before the learned CIT – A dismissed the claim of the assessee holding that deduction u/s 36 (1) (viia) can be granted only if assessee had rural branches and these rural branches had given advances. He held that the details regarding list of rural branches and the quantum of advances given and the relevant income tax rules remains unverified. He therefore directed the learned assessing officer to verify that assessee had rural branches within the meaning of it u/s 36 (1) (viia) of the act then the deduction allowable will be computed. Therefore, he rejected the claim of the assessee. Before him and assessee also made an alternative claim which was also rejected? Therefore, assessee is in appeal before us.

The learned authorised representative submitted that the reasons for which the learned CIT – A has rejected the claim of the assessee is squarely covered in favour of the assessee by the decision of several coordinate benches. He referred to the decision of Sadhna sahkari bank Limited versus ACIT hundred and 18 taxman.com 526, Bhagini Nivedita sahkari bank Limited versus DCIT 174 ITD 303,Kodangullar account co-

The learned departmental representative vehemently supported the order of the lower authorities.

We have carefully considered the rival contention and perused the orders of the lower authorities. The only reason why the deduction is disallowed to the assessee is that assessee does not have any rural branches. we find that deduction u/s 36 (1) (viia) of the act is not restricted to the banks only having the rural branches. This has been dealt with in 42 taxmann.com 303 as under :-

Ground number 13 and ground number 14 of the appeal is with respect to the non-admission of additional ground of appeal by the learned CIT – capital with respect to the deduction of employee stock option plan discount.

Both the parties confirm that this issue is identical to the appeal of the assessee for assessment year 2011 – 12. We have carefully considered the rival contention and find that the issue involved in this appeal ground is exactly the same as it was in appeal of the assessee for assessment year 2011 – 12 where the learned CIT – A refuse to admit the additional ground of appeal. In that appeal, we have held that the learned CIT – A was incorrect in not admitting the additional ground of appeal. Therefore, for similar reasons we hold that the learned CIT – A was incorrect in not admitting the additional ground of appeal. In the result ground, number 13 of the appeal is allowed.

Ground number 14 is with respect to the allowability of the deduction. This ground is also identical to the appeal of the assessee for assessment year 2011 – 12 where we have sent the issue back to the file of the learned assessing officer to grant the deduction of employee stock option plan discount to the assessee. For similar direction we also set-aside ground number 14 of the appeal.

In the result, appeal of the assessee in ITA number 3499/M/2018 for assessment year 2012 – 13 is partly allowed.

Ground number 2 and 3 is with respect to the allowance of revaluation loss arising on HTM securities by the learned CIT – A. We find that this issue is linked with ground number 7 of the appeal of the assessee. Ground number 7 is with respect to the amortization of premium paid for acquisition of held to maturity securities.

The learned authorised representative stated that that this issue is now squarely covered in favour of the assessee by the decision of the honourable Bombay High Court in case of CIT versus HDFC bank Ltd 366 ITR 505 wherein loss on revaluation of securities classified as held till maturity is a revenue expenditure.

The learned departmental representative vehemently supported the order of the learned assessing officer.

We have carefully considered the rival contention and perused the orders of the lower authorities. We fully agree with the learned authorised representative that identical issue has been decided by the honourable Bombay High Court in favour of the

In view of this, ground number 2, 3 and 7 of the appeal of the AO are dismissed.

Ground number 4 is with respect to the disallowance of brokerage paid on acquisition of investments holding it to be a capital expenditure. We also find that this issue is also covered in favour of the assessee by our own decision in case of the

Ground number 5 and 6 with relation to the broken period interest allowable as a deduction. The learned authorised representative stated that the honourable Bombay High Court in CIT versus HDFC bank Ltd has decided the issue while deciding ground number (b) before them. The learned departmental representative supported the order of the AO.