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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 280/JP/2009
PER BENCH
Out of bunch of 21 Appeals, these two Cross Appeals one by the Assessee
i.e. ITA No. 280/JP/2009 & other by the Revenue’s appeal in ITA No.
438/JP/2009 pertaining to the Assessment Year 2006-07 are directed against the
order of the Commissioner of Income Tax (Appeals)-II, Jaipur, dated - 27/03/2009.
Since the appeals were heard together, therefore, are being disposed off by way of
consolidated order for the sake of brevity.
2 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 280/JP/2009 & 438/JP/2009
First, we take up Appeals pertaining to the Assessment Year 2006-07 i.e. ITA
No. 280/JP/2009 & 438/JP/2009.
280/JP/2009 (Assessee).
Assessee’s appeal in ITA No. 280/JP/2009, the assessee has raised the following
grounds of appeal:-
“1. (i) Under the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) has erred in upholding the applicability of the provision of Section 14A and thereby upholding the disallowance of proportionate interest and estimated administrative expenditure of the banking business.
(ii) Under the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) has erred in quantifying the disallowance u/s 14A at the sum of Rs. 17,50,00,000/-.
(iii) Under the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) has further erred in calculating the amount u/s 14A in terms of provisions of Rule 8D. He has also erred in applying these provisions of Rule 8D for the year under consideration as the same have been introduced on 24.03.2008.
Under the facts and circumstances of the case Ld. Commissioner of Income-tax (Appeals) has erred in confirming the addition of Rs. 47,33,34,127/- made by the assessing officer by treating the transfer of amount of un-reconciled outstanding entries originated upto 31.01.1999 in the inter branch amount to the profit and loss account as income of the assessee.
3(i) Under the facts and circumstances of the case Ld. Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of prior period expenses of Rs. 35,916/-. He has further erred in not directing the AO to allow this claim in the preceding respective Assessment Years.
(ii) Under the facts and circumstances of the case Ld. Commissioner of Income-tax (Appeals) has also erred in not allowing the relief in respect of disallowance of alleged prior period rent expenses of Rs. 33,34,245/-.
Appellant craves to add, amend, alter or modify any of the ground of appeal.
3 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 5. The appropriate cost be awarded to the assessee.”
Facts in brief are that, the case of the assesse was picked up for scrutiny
assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter
referred to as the Act) was framed vide order dated 20/02/2008. While framing the
assessment the Assessing Officer made various additions on account of taking
interest of tax-free debenture on accrual basis of Rs. 14,55,068/-, disallowance out
of interest claimed exempt u/s 10(23G) of the Act of Rs. 3,87,30,043/-, disallowance
made by invoking the provision of Section 14A of Rs. 12,92,57,568/-, disallowance of
depreciation on securities- for valuing as per global method of Rs. 7,21,74,918/-,
disallowance of amortization claim on securities held in HTM of Rs. 111,81,75,752/-,
disallowance of prior period expenses of Rs. 33,70,161/-, capital receipts treated as
income of Rs. 47,33,34,127/-. Aggrieved by this order, the assessee preferred an
appeal before Ld. CIT(A), who after considering the submissions partly allowed the
appeal. While partly allowing the appeal the Ld. CIT(A) deleted the addition made on
account of interest on accrual basis. Ld. CIT(A) confirmed the addition made on
account of disallowance of exemption claim of Rs. 3,87,30,043/- made u/s 10(23G)
of the Act. The Ld. CIT(A) has further enhanced the disallowance made u/s 14A
from Rs. 12,92,57,568/- to Rs. 17,50,00,000/- the Ld. CIT(A) deleted the addition
made on account of disallowance of depreciation on securities on global method of
Rs. 7,21,74,918/-.
3.1 Further the Ld. CIT(A) confirmed the addition of Rs. 111,81,75,752/- made on
account of amortization of premium, however, the Ld. CIT(A) restricted the
disallowance in respect of prior period expenses of Rs. 35,916/- out of total
disallowance of Rs. 33,70,161/-. The Ld. CIT also confirmed the addition made on
4 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. account of capital receipts of Rs. 47,33,34,127/-. Against this order, both Revenue
and Assessee are in appeal. In this appeal, the assessee has challenged correctness
of action of Ld. CIT(A) for confirming the additions made by the AO.
Ground no. 1 (i) to (iii) is against the addition made on account of
disallowance of expenditure made by invoking the provisions of section 14A.
4.1 Apropos to ground no. 1, Ld. Counsel for the assessee vehemently argued
that the authorities below were not justified in invoking the provision of Section 14A.
4.2 Ld. Counsel submitted that Ld. CIT(A) has grossly erred in applying the
provisions of Rule 8D. He contended that the Rule 8D, for the Income Tax Rule,
1962, became applicable only w.e.f. Assessment Year 2008-09 as held by Hon’ble
Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd.
Vs. DCIT 328 ITR 81.
He further submitted that, in present case, the assessee had made advances of Rs.
191.24 crores from which exempted interest income of Rs. 21.52 crores is earned.
Further, the assessee made investment of Rs. 146.46 crores which yielded tax free
interest of Rs. 1.19 crores. Further, investment of Rs. 188.29 crores yielded
dividend income of Rs. 5.03 crores but profit on sale of such investment is taxable.
Thus, the total investment which yielded exempt income as well as taxable income is
Rs. 525.99 crores. He submitted that there is no relationship of borrowed funds for
making such investment. In fact, this investment is made by the assessee out of
interest free funds aggregating to Rs. 1,405.65 crores comprising of Share Capital of
Rs. 50.00 crores and Reserves and Surplus of Rs. 1,355.65 crores. Thus, when
interest free funds far exceeds the investment which has yielded exempted income
and there is no finding of the AO that borrowed fund has been used in making such
5 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. investment, no disallowance of interest expenditure is called for. He submitted that
under the identical facts the Hon’ble Jurisdictional High Court in the case of assessee
pertaining to the Assessment Years 2000-01 to 2003-04 had deleted the
disallowance. He further submitted that investment in debentures, bonds, mutual
funds and shares which has yielded exempt income constitute stock in trade of the
assessee. On sale of such stock, business income is assessed in the hands of the
assessee. The assessee has not retained these investments with the intentions of
earning exempt income rather the exempt income is incidental to the business of
sale of shares/securities. Therefore, it cannot be said that expenditure incurred
while acquiring these investments has to be apportioned to the extent of dividend
income and that should be disallowed from deduction.
4.3 Ld. Counsel for the assessee has placed reliance on the Judgment of the
Hon’ble Punjab & Haryana High Court in case of PCIT vs. State Bank of
Patiala 98 CCH 35. Ld. Counsel for the assessee placed reliance on the decision of
the Co-ordinate Bench of this Tribunal in the case of Fiduiciary Shares and Stock Pvt.
Ltd. vs. AIT 159 ITD 554 to buttress the contentions that the shares held as stock in
trade should be excluded for the purpose of computing disallowance u/s 14A of the
Act, since they could not be said to be “investment” made for the purpose of earning
dividend income. Further, reliance is placed on Judgment of the Hon’ble the
Karnataka High Court in the case of CCI Ltd. vs. JCIT 71 DTR 141/206 Taxman 563
to buttress the contention that provision of Section 14A is not applicable to the
expenses incurred by the assessee in course of its business of share dealing merely
because assessee is also having dividend income. He submitted that in view of
6 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. these decisions the disallowance as made by invoking the provision of Section 14A
may be deleted.
4.4 On the contrary, Ld. Departmental Representatives opposed the submissions
and supported the order of the authorities below. Ld. D/R submitted that the
Assessing Officer has given a finding on fact that the assessee has earned exempt
income to the tune of Rs, 23,72,13,375/-. The assessee has incurred interest
expenditure of Rs. 9,72,87,83,151/- and in earned interest of Rs. 19,65,78,03,553/-.
Therefore it cannot be assumed that the assessee has not incurred any expenditure
for earning such exempt income. Ld. D/R therefore submitted that Ld. CIT(A) was
therefore justified in making the disallowance u/s 14A. Ld. D/R submitted that the
disallowance has to be on some basis and rule 8D prescribes certainly the basis of
disallowance, for the expenditure related to the income not forming part of total
income.
4.5 We have heard the rival contentions, perused the material available on record
and gone through the order of the authorities below. We find that Ld. CIT(A) has
made disallowance by computing as per Rule 8D of the Income Tax Rules 1962. In
our view, the Ld. CIT(A) was not justified in computing the disallowance as per rule
8D, as the Rule 8D became operational from the A.Y. 2008-09. Further, there is not
dispute with regard to the fact that similar disallowances were made u/s 14A in the
assessment year 2000-01, 2002-03 and 2003-04 and the matter traveled up to the
Hon’ble Rajasthan High Court. The Hon’ble High court in DB Income Tax Appeal
Nos. 172/2008, 119/2010, 141/2010 and 142/2010 was pleased to held that in view
of the decision of the Hon’ble Supreme Court in the case of Godrej Boyce
Manufacturing Company Ltd. vs. DCIT. The order of disallowance was reversed.
7 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. The facts are identical in the present year and also there is no change into facts and
circumstances. As the assessee bank is having sufficient interest free funds which
has been accepted by both the authorities below. Therefore, respectfully following
the Judgment of the Hon’ble Jurisdictional High Court, we hereby direct the AO to
delete the disallowance. Thus, this ground of assessee’s appeal is allowed.
Ground no. 2 is against confirming the addition of Rs. 47,33,34,127/- made
by the Assessing Officer treating the transfer of amount of unreconciled outstanding
entries originated upto 31.3.1999.
5.1 Ld. Counsel for the assessee reiterated the submissions as made in the
written submissions. Ld. Counsel submitted that the R.B.I. vide its letter dated
19/12/2005 directed the assessee to transfer the net credit balance of unreconciled
entries originated upto 31.3.1999 in the inter branch accounts to General Reserves.
The Assessing Officer treated the amount of Rs. 47,33,34,127/- as income of the
assessee chargeable to tax. The Ld. CIT(A) confirmed the addition by relying upon
the judgment of the Hon’ble Supreme Court rendered in the case of CIT vs. T.V.
Sundaram Iyengar & Sons 222 ITR 344. The Ld. Counsel submitted that the three
important aspect about transfer of reconciled entries in the inter branch accounts.
One, the assessee is to maintain complete details, the second; the assessee does
not have any right to forfeit the amount. It has to honor any claim in this respect
and the third, the amount so transferred cannot be distributed as dividend. This
amount can be utilized only for meeting the claims in respect of these unreconciled
entries.
5.2 Ld. Counsel submitted that no event has taken place during the year except
passing of the entries in the books of accounts, which by itself cannot make any
8 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. liability as income unless covered by the provisions of section 41(1). Ld. Counsel for
the assessee submitted that Ld. CIT(A) wrongly applied the ratio of the CIT Vs. T.V.
Sundaram Iyangar & Sons Ltd. 222 ITR 344, as in that case the assessee has
received deposits in the course of its business which were originally treated as
capital receipts and some of the deposits were neither claimed by nor returned to
the depositor. Ld. Counsel submitted that in that case the amount became the
assessee’s own money because of limitation or by any other statutory or contractual
right. In the present case, the assessee holds money in trustee capacity. It has not
got any right to forfeit the money nor it becomes assessee’s own money so as to
give it a right to utilize the same for it purpose. Since, the money is held by the
assessee in trustee capacity, the liability does not become barred by limitation. Ld.
Counsel further submitted that the Ld. CIT(A) himself accepted that it is not a case
failing u/s 41(1). Thus, section 41(1) is not applicable.
5.3 Ld. Counsel further placed reliance on the following cases:-
CIT vs. Shoorji Vallabhdas & Co. 46 ITR 144(SC),
CIT Vs. Mogul Line Ltd. 46 ITR 590 (Bom),
Kedarnath Jute Manuf. Co. Ltd. Vs. CIT 82 ITR 363 (SC),
CIT Vs. Industrial Credit & Development Syndicate Ltd. 284 ITR 310
(Karnataka)(HC)
5.4 Ld. Counsel submitted that the ratio laid down in those cases it can be
noticed that the amount credited to the Profit and Loss Account and thereafter
appropriated to General Reserves is not the income of the assessee as it does not
have any right over it to use/utilize. Ld. Counsel further placed reliance on the
9 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. decision of the Co-ordinate Bench rendered in the case of Punjab National Bank in
ITA No. 2047/Del/2007 & 2873/Del/2007.
5.5 On the contrary, Ld. D/R opposed the submissions and submitted that
whether this reconciliation represents the income would not depend on, how the
assessee has treated the same. The assessee has not demonstrated what is the
character of these reconciliation entries? Whether these were deposits or not if such
entries were not claimed by the account holder certainly such receipts would be the
income of the bank.
5.6 We have heard the rival contentions, perused the material available on record
and gone through the order of the authorities below. Ld. Counsel for the assessee
was not in a position to assist the bench with regard to exact character of the
reconciled entries. He submitted that this reconciliation entries cannot be treated as
income of the bank even if it is presumed that this money belonging to the
depositors. The submissions of the assessee is not supported by any evidence
demonstrating that the amount credited in the accounts of the assessee bank would
be paid to the concerned account holder or alternatively such entries pertain to its
own funds. In our considered view, it was incumbent upon the assessee’s bank to
demonstrate the nature of reconciliation entries in the absence of the same, the
order of the AO cannot be disturbed. Accordingly, this ground of the assessee’s
appeal is rejected.
Ground no. 3(i) to (ii) is relate to prior period expenses.
6.1 Ld. Counsel for the assessee reiterated the submissions as made in the
written submissions. The submissions of the Ld. Counsel for the assessee are
reproduced as under:-
10 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. “Facts:-
The AO disallowed prior period expenditure of Rs.33,70,161/- as reported in the tax audit report. The break up of this expenditure is as under:-
i) Rent of office buildings of Rs.33,34,245/-
ii) Audit Fees Rs.27,100/-
iii) Overtime expenses Rs. 8,816/-
The Ld. CIT(A) held that predominantly the disallowance refers to rent of office building of Rs.33,34,245/- which was pertaining to earlier period. However, it has to be appreciated that increase in the rent is as per rent agreement and therefore, the assessee was in a position to ascertain the liability related to rent increase which could been provided in the relevant accounting year to which it pertains. AO is therefore, directed to verify the available evidence and if the liability for the same was not ascertainable in earlier accounting year and has crystallized only in the account year relevant to present AY then only such deduction has to be allowed. In respect of overtime expenses and audit fees it is held that the claim which pertain to earlier year was ascertainable in relevant accounting year and since no such evidence could have been given that liability for the same has been crystallized only in the accounting year relevant to present assessment year and therefore, such disallowance of Rs.35,916/- is confirmed and for rest of the claim, the same is allowable subject to verification keeping in view the available evidence.
Submission:-
It is submitted that rent of office building for Rs.33,34,245/- though relate to earlier years has accounted for during the year under consideration as the liability to pay the enhanced rent crystallized during the year. This is verifiable from the following details:-
11 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. Branch Explanation S. Amount (in No. Rs.) 1. C-Scheme, 6,36,000 Rent of the branch premise was increased to Rs.95,000/- from Jaipur Rs.42,000/- per month w.e.f 01.04.2004 vide letter dated 16.12.2004 with the condition that the increased rent shall be paid only when the landlord would get the premise renovated. Since the renovation was done in the year under consideration, therefore, the increased rent @ Rs.53,000/- p.m., i.e. Rs.6,36,000/- is paid during the year (PB 53-56). Thus, the liability of payment of increased rent crystallized during in the year and therefore, it is not a prior period expenditure. 2. 7,47,132 This amount was paid for the period 01.04.2000 to 31.03.2005 Nehru Place, New Delhi after the settlement is made with the landlords of these premises in pursuance to the order of the Delhi High Court dt.19.01.2005 where they directed the assessee to vacate the premises (PB 57-63). Thus, the liability crystallized during the year and it is not a prior period expenditure. 3. MR Jodhpur 6,29,920 Amount pertains to the arrear of rent of Rs.4,010/- from period April-1989 to March-2005 being sanctioned by the bank’s committee in January, 06 i.e. in the year under consideration. Since the arrear of rent was approved during the year under consideration only therefore the liability to payment was crystallized in this year itself (PB 64-67). Hence, the expenditure is not prior period and same is allowable. 4. 5,81,768 The amount pertains to the assessee’s share of arrear of N.S. Road, Kolkata Corporation Tax and surcharge on the rented premises for the period 01.04.2003 to 31.03.2005 demanded by the landlord of the premises in the year under consideration only on the demand of Kolkata Municipal Corporation. Since the amount was demanded by the Municipal Corporation and the landlord during the year under consideration, therefore, the liability of payment crystallized during the year and the same is not a period expense (PB 68-71). 5. Barielly 2,57,659 Amount pertains to the arrear of lease rent of the bank premises for the period 14.02.2002 to 31.03.2005. The amount was charged to expense during the year under consideration since the lease deed was executed during the year consideration only. (PB 72-73). Hence the liability for expenditure is crystallized during the year under consideration only, therefore, same is not prior period expenditure.
12 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 6. Shaharanpur 1,72,237 The amount is the arrear of rent of branch premises for the period September’2000 to March’2005 being paid on the order of Addl. District Judge, Shahranpur dated 10.01.2005. The amount was finally sanctioned by the Bank’s authority during the year under consideration only. The liability for payment thus crystallized during the year and therefore, same is not prior period expense (PB 74-75). 7. T P Kanpur 97,200 Amount pertains to the arrear of increase rent for period 15.12.1999 to 31.03.2005. The permission for the execution of the lease deed for higher rent was granted during the year under consideration only, therefore, the liability for payment crystallized in the year under consideration. Hence, the expenditure is not prior period (PB 76-81). 8. Machind 50,520 Amount pertains to the arrear of increased rent by Rs.4,035/- for 01.04.2004 to 31.03.2005. The lease deed for the increased rental was executed during the year under consideration, therefore, the liability for payment crystallized in the year under consideration. Hence, the expenditure is not prior period (PB 82). 9. Sheo 49,000 Amount pertains to the arrear of increased rent as the lease deed for the increased rental was executed during the year under consideration, therefore, liability for payment crystallized in the year under consideration. Hence, the same is not prior period (PB 83-84). 10 Ahore 43,821 Amount does not pertains to the prior period rent expenses rather it is sum total of various petty expenses on account of stationery, newspaper, conveyance etc. which has wrongly classified by the auditors as prior period rent. Details are enclosed at PB 85-86. Since other expenses of similar nature were allowed by the AO, therefore, same be allowed. 11. Balotra 33,988 Amount pertains to the arrear of increased rent as the lease deed for the increased rental was executed during the year under consideration, therefore, liability for payment crystallized in the year under consideration. Hence, the expenditure is not prior period (PB 87-90). 12. Raniwara 15,000 Amount pertains to the rent of ATM Room for the year 2005- 06. Since the lease deed for the same was executed in January, 06, therefore, the liability for payment crystallized in the year under consideration. Hence, the expenditure is not prior period
13 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. (PB 91-94). 13. Ramdeora 9,000 Amount pertains to the arrear of increased rent of ATM premise @ Rs.1,500 per month for the period 01.10.2004 to 31.03.2005. Since the increased rent was sanctioned during the year under consideration only, therefore, the liability for payment crystallized in the year under consideration. Hence, the expenditure is not prior period (PB 95-96). 14 Jhiri 8,000 There was leakage in the rented premises due to which rent of the premises from Nov, 04 to Feb, 05 was withheld by the assessee. Later on approval amount was paid in the year under consideration. Being the approval was sanctioned in the year under consideration, therefore, the amount is not a prior period expense (PB Pg.97-99). 15 Phalsoond 3,000 Rent pertains to the previous year for which sanction was granted in AY 2005-06, hence, the same is not prior period expense. Total 33,34,245
From the above table it can be noted that the liability for payment of rent crystallized during the year itself and therefore, the same is not a prior period expenses. The Ld. CIT(A) even after examining all these evidences, which were already before the AO, has directed him to verify the available evidences instead of directing him to allow the same. Hence, the order of Ld. CIT(A) to this extent is erroneous and the AO be directed to allow the expenditure claimed by the assessee.
So far as the expenses of Rs.35,916/- is concerned, out of it Rs.8,816/- pertains to overtime work of employees in the last week of March, 2006 due to finalization of accounts for the period ended on 31.03.2005. Sample vouchers are at PB 100 -104. The overtime expenses are booked as and when claims are made against the assessee to pay/ reimburse the same. The claims were made in April, 2005 and were accordingly paid. Thus, the liability has crystallized on raising of the claim and therefore the same is to be allowed in the year under consideration. In respect of audit fees, the bill is settled in April and June 2005
14 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. (PB 105-107) and therefore, the same is allowable in the year under consideration.
Without prejudice to above, it is submitted that the tax rate being same, if these expenses are not allowed during the year, then direction be given to allow the same in the previous year to which it pertain. Further, the expenditure of Rs.14,05,671/- which is claimed as previous year expenditure in AY 2007-08 be directed to be allowed in the year under consideration. If this course is adopted, it would only lead to unnecessary paper work without any revenue effect. The Supreme Court in case of CIT Vs. Excel Industries Ltd. 93 DTR 457 has held that when the rate of tax remained the same in present assessment year as well as in the subsequent AY, the dispute raised by the revenue is entirely academic or at best may have a minor tax effect, there is no need for the revenue to continue with the litigation where it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public office.”
6.2 Ld. Departmental Representatives opposed the submissions, and supported
the Assessment Order.
6.3 We have heard the rival contentions, perused the material available on record
and gone through the order of the authorities below.
6.4 Ld. CIT(A) has decided this issue in para 8.3 of his order that reads as
under:-
“8.3 I have considered facts of the case and arguments taken by Sh. Jhanwar and Sh. Parwal quite carefully. It is seen that predominantly this disallowance refers to rent of office building of Rs. 33,34,245/- which was pertaining to earlier period. However, it has to be appreciated that increase in the rent as per rent agreement and therefore, the banker was in a position to ascertain the liability related to rent increase which could have been provided in the relevant accounting year to which it pertains. AO is therefore,
15 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. directed to verify the available evidence and if the liability for the same was not ascertainable in earlier amounting year and has crystallized only in the accounting year relevant to present A.Y. then only such deduction has to be allowed. I agree with AO that over time expenses claim of Rs. 8,816/- and audit fee claim of Rs. 27,100/- which was pertaining to earlier year was ascertainable in relevant accounting year and since no such evidence could have been given that liability for the same has been crystallized only in the accounting year relevant to present assessment year and therefore, such disallowance of Rs. 35,916/- is confirmed and for rest of the claim the same is allowable subject to aforesaid verification keeping in view the available evidence.”
6.5 The contention of the assessee is that the expenditure relates to payment of
rent and the authorities below failed to appreciate the fact that this payment was
made on the basis of either the rent was increased in the year under consideration
or in pursuance of the order of the courts.
In our view, where the payment is made by the order of the court or increased by
the agreement in the year under consideration that expenditure certainly crystallized
in the year under consideration. Therefore, in view of the material placed in the
paper book, we are of the view that Ld. CIT(A) ought not to have restored this issue
to the file of the AO for verification as the evidence placed are sufficient to infer that
these liabilities related to rent crystallized in the year under appeal. Therefore, we
hereby direct the AO to allow the expenditure. Hence, this ground no. 3(i) is
allowed. Ground no. 3 (ii) relates to expenditure of audit fees and over time
expenses in our view the Ld. CIT(A) rightly disallowed the same as such expenditure
16 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. related to the earlier years and duly crystallized during that year. This ground of the
assessee’s appeal is rejected.
Ground no. 4 is general in nature and needs no separate adjudication.
Ground no. 5 is prayer for cost. Under the facts and the circumstances of
the present case the parties to bear the respective cost. This ground of the
assessee’s appeal is dismissed.
In the result, appeal of the assessee in ITA No. 280/JP/2009 is partly allowed.
ITA No. 438/JP/2009 (Revenue)
Now, we take up Revenue’s appeal in ITA No. 438/JP/2009 pertaining to
Assessment Year 2006-07.
The Revenue has raised the following grounds of appeal:-
“On the facts and in the circumstances of the cases and in law the Ld. CIT(A) has erred in:-
Holding that interest on Government and other securities has to be included in the income on due basis.
Deleting the addition of Rs. 14,55,068/- made by the AO on account of disallowance of deduction claimed for interest on tax free debenture on due basis.
Deleting the addition of Rs. 7,21,74,918/- made by the AO on account of valuation of investment by adopting global method of valuation of securities as against category wise method of valuation followed by the assessee.
Deleting the addition of Rs. 1,11,81,75,752/- made by the AO on account of disallowance of amortization in respect of permanent diminution in the value of securities held by the Bank under the “Head to Maturity” category.”
At the outset, Ld. Counsel for the assessee submitted that the issues raised in
the appeal are squarely covered in the favour of the assessee by the Judgments of
17 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. Hon’ble Jurisdictional High Court relating to earlier years. Ld. D/R supported the
order of the authorities below.
Ground no. 1, is against the holding that interest on Government and other
securities has to be included in the income on due basis.
12.1 Ld. D/R supported the order of the Assessing Officer.
12.2 On the contrary, Ld. Counsel for the assessee supported the order of the Ld.
CIT(A) and submitted that the issue is squarely covered in favour of the assessee by
the decision of the Hon’ble Jurisdictional High court, in assessee’s own case
pertaining to A.Y. 1997-98 to 2000-01 and 2004-05.
12.3 We have heard the rival contentions of the parties. The undisputed facts is
that the issue has been decided in favour of the assessee by the Hon’ble High Court
of Rajasthan in Appeals pertaining to the Assessment Year 1997-98 to 2000-01 &
2004-05 is not controverted by the Revenue. Ld. Counsel has invited our attention to
the Judgment of Hon’ble High Court rendered in D.B. Income Tax Appeal No.
185/2014. Therefore, we do not see any reason to interfere into the finding of the
Ld. CIT(A) same is hereby affirmed. This ground of Revenue’s appeal is rejected.
Ground no. 2, is against deleting the addition of Rs. 14,55,068/- made by
the AO on account of disallowance of deduction claimed for interest on tax free
debenture on due basis.
13.1 Ld. D/R supported the order of the AO and submitted that Ld. CIT(A) was not
justified in deleting the addition.
13.2 However, Ld. Counsel for the assessee submitted that this issue is covered in
the favour of the assessee by the earlier decision of the Tribunal and order of the
Tribunal confirmed by the Hon’ble Rajasthan High Court.
18 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 13.3 We have heard the rival contentions, perused the material available on
record. The Hon’ble Rajasthan High court in assessee’s own case in DB Income Tax
Appeal No. 185/2014 formulated the substantial question of law whether on facts
and circumstances of the case, the ITAT was justified in deleting the addition of Rs.
4,56,60,998/- made by the AO by taking the interest income by Government and
other securities on accrual basis instead of due basis as claimed by the assessee.
Admittedly, this question is answered against the Revenue. Therefore, we do not
see any reason to interfere into the finding of the Ld. CIT(A), same is hereby
affirmed. Thus, Ground no.2 of the appeal is dismissed.
Ground no. 3, is against deleting the addition of Rs. 7,21,74,918/- made by
the AO on account of valuation of investment by adopting global method of
valuation of securities a against category wise method of valuation followed by the
assessee.
14.1 Ld. D/R supported the order of the authorities below.
14.2 On the contrary, Ld. Counsel for the assessee supported the order of the Ld.
CIT(A) and submitted that issue is covered by the decision of the Hon’ble High Court
in assessee’s own case.
14.3 We have heard the rival contentions, perused the material available on
record. The Ld. CIT(A) by following its earlier years pertaining to the AY 2005-06
deleted the addition. We find that this issue was also decided by the Hon’ble
Rajasthan High court in the assessee own case in DB Income Tax Appeal No.
27/2015 in favour of the assessee. Therefore, we do not see any reason to interfere
into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of
Revenue’s appeal is dismissed.
19 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 15. Ground no. 4, is against deleting the addition of Rs. 1,11,81,75,752/- made
by the AO on account of disallowance of amortization in respect of permanent
diminution in the value of securities held by the Bank under the “Head of Maturity”
category”.
15.1 Ld. D/R supported the order of the AO and submitted that Ld. CIT(A) was not
justified in deleting the addition.
15.2 On the contrary, Ld. Counsel for the assessee submitted that similar addition
was made in the AY 2005-06, the Hon’ble Rajasthan High Court in D.B. Income Tax
Appeal No. 27/2015, decided the issue in favour of the assesse. The contention of
the assessee is not controverted by the Revenue and has also not brought to our
notice any other contrary binding precedent. Therefore, we do not see any reason
to interfere into the finding of the Ld. CIT(A), same is hereby affirmed. This ground
of Revenue’s appeal is dismissed.
In the combined result, Appeal of the Assessee in ITA No. 280/JP/2009
is partly allowed & Revenue’s Appeal in ITA No. 438/JP/2009 is dismissed. Order pronounced in the open court Tuesday, the 29th day of August 2017.
Sd/- Sd/- ( dqy Hkkjr) ¼foØe flag ;kno½ (VIKRAM SINGH YADAV) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 29/08/2017. Pooja/ आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
The Appellant- State Bank of Bikaner & Jaipur, Jaipur. 2. The Respondent- Dy. CIT, Circle-6, Jaipur. 3. The CIT(A).
20 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur. 4. The CIT, 5. The DR, ITAT, Jaipur 6. Guard File (ITA No. 280/JP/2009 & 438/JP/2009)
vkns'kkuqlkj@ By order,
सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत
21 ITA No. 280/JP/2009 & 438/JP/2009. State Bank of Bikaner & Jaipur, Jaipur.