DCIT 2(3)(2), MUMBAI vs. ICICI BANK LTD, MUMBAI

आयकर अपीलीय अिधकरण �ाय पीठ मुंबई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI ARUN KHODPIA, AM & SHRI RAHUL CHAUDHARY, JM I.T.A. No. 1446/Mum/2016 (Assessment Year: 2010-11)

ICICI Bank Limited, The Dy.CIT-2(3)(2), ICICI Bank Towers, [Earlier assessed with Dy. CIT, Bandra Kurla Complex, Circle,3(1)], Vs. Bandra (East), Mumbai - 400051 Room No. 552/556, 5th Floor, Aayakar Bhavan, PAN: AAACI1195H Mumbai-400020 Assessee -अपीलाथ� / Appellant Revenue - ��थ� / Respondent :

IT(TP) A No. 1560/Mum/2016 (Assessment Year: 2010-11)

The Dy.CIT-2(3)(2), ICICI Bank Limited, ICICI Bank Towers, [Earlier assessed with Dy. CIT, Circle,3(1)], Bandra Kurla Complex, Vs. Room No. 556, 5th Floor, Bandra (East), Mumbai - 400051 Aayakar Bhavan, PAN: AAACI1195H Mumbai-400020 Revenue -अपीलाथ� / Appellant Assessee - ��थ� / Respondent :

Assessee by : Ms. Arati Vissqanji, Sr. Adv. a/w Ms. Stuti Jindal & Mr. Ankit Harsora, AR Revenue by : Shri Ajay Chandra, CIT-DR Date of Hearing 15.12.2025 : : 20.02.2026 Date of Pronouncement

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited

O R D E R Per Arun Khodpia, AM: The captioned Cross Appeals are filed by the assessee as well as the Revenue to assail the order of Commissioner of Income Tax (Appeal)-54, Mumbai [for short ‘ld. CIT(A)’] dated 31.12.2015, arises from the order dated 12.03.2014 passed by Dy. CIT, Circle-3(1), Mumbai under section 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (for short ‘the Act’). 2. The grounds of appeal raised by the assessee and the revenue are extracted as under: Assessee’s grounds “1. Adjustment as per Transfer Pricing Order under section 92CA(3) 2,26,44,520 [Paras 2 to 2.13, pages 2 to 13 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the comparables taken by the Transfer Pricing Officer [TPO] vide his order dated January 23, 2014 passed under section 92CA(3) of the Act and confirming the adjustment made to the arm's length price in respect of back office support services. 2. Expenses apportioned against income exempted under section 10(15), 10(34) and 10(35)- Disallowance u/s. 14A: Rs.37,99,40,048 [Para 4.5, pages 28 and 29 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the apportionment of expenses at Rs. 48,32,00,000 as against 10,32,59,952 made by the Appellant to the income exempt under section 10(15), 10(34) and 10(35) of the Act by applying provisions of Rule 8D(2)(iii) of the Income-tax Rules, 1962. 3. Disallowance of Provision for expenses - 133,74,36,609 [Para 9, pages 42 to 44 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of the amount of 133,74,36,609 in respect of 2

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited provision for expenses created in March 2010 on which no tax was deducted at source on the ground that the same was contingent and unascertained in nature and hence not allowable as a deduction.” Revenue’s Grounds 1 The order of the CIT(A) is opposed to law and facts of the case. 2 "On facts and circumstances of the case and in law the Ld CIT(A) erred in holding that no transfer pricing adjustments was required to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore; ignoring the fact that the undertaking given by the assessee was unconditional, irrevocable, it made the assessee a primary obligor, it was a risky obligation, and had benefitted the AE for standing of business, and therefore needs to be adequately compensated by the AE?" 3 "On facts and circumstances of the case and in law the Ld CIT(A) erred in holding that no transfer pricing adjustments was required to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore, thereby overlooking Section 92B(1) and not appreciating the fact that the unconditional undertaking given by the assessee in the letter of undertaking tantamount to any service, benefit or facility to its AE and therefore is an international transaction. 4 "On facts and circumstances of the case and in law the Ld CIT(A) erred in holding that 'no transfer pricing adjustments was required to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore" ignoring the risks undertaken by the assessee in issuing the letter of undertaking and thereby overlooking Rule 10B(2)(b) which is an essential factor for comparability of an international transaction. 5 "On facts and circumstances of the case and in law the Ld CIT(A) erred in allowing assessee's appeal on marked to market loss ignoring the fact that on similar issue for AY 2008-09, the Ld CIT(A) had dismissed the appeal. 6 "On facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the disallowance under Rule 8D(2)(ii) ignoring the brought out in the assessment order that expenses of facts Rs.457.85 Cr were attributable to earning of exempt income." 7"On facts and circumstances of the case and in law the Ld CIT(A) erred in allowing the depreciation on leased assets without appreciating the fact that the said transaction being a financial lease transaction, the assessee did not satisfy the legal requirement of ownership of the assets for the purpose of Section 32(1) of the I.T.Act, 1961 and therefore not entitled for claim of depreciation on the leased assets 8" On facts and circumstances of the case and in law the Ld CIT(A) erred in allowing the depreciation on leased assets without appreciating the fact that the

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited leased assets in question were not in possession of the assessee and also not utilized by the assessee for its business purpose." 3 9 "On facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the disallowance towards bad debts ignoring the fact that conditions laid down u/s.36(2)(v) of the Act were not fulfilled by the assessee." 10 "On facts and circumstances of the case the Ld. CIT(A) has erred in directing the AO to allow the amount of Rs. 79,21,46,381 being the difference between the exercise price and the market value of the ESOS, when the same is not an ascertained liability, is contingent in nature, quantum cannot be worked out precisely and is capital in nature and hence not allowable. 11"On facts and circumstances of the case and in law the Ld CIT(A) erred in directing the AO to allow the claim for expenses on issue and discount of Rupee & Foreign currency bonds amounting to Rs 6,54,231/- when appeal against this issue has been filed before the ITAT and the issue has not reached finality. 12. "On facts and circumstances of the case and in law the Ld CIT(A) has erred in deleting the addition made on account of payment of membership fees to clubs without appreciating the fact that the benefit of the above expenses are enduring in nature and hence cannot be treated as revenue expenses. 13 "On facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the disallowance of losses of Rs. 12.25 crores on the ground that these losses were incurred in the course of regular banking business, without appreciating that the assessee has not given sufficient proof/evidences during the assessment proceedings nor in the appellate proceedings to prove that these losses have actually been incurred.”

2.1 Since the aforesaid Cross Appeals are directed against the same order, having common facts, circumstances and interconnected issues, therefore, for the sake of brevity, are heard together and adjudicated under this common order.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited Advances, Dividend, Interest on debentures, Income from leasing, securities, deposits and advances, commission and fee, etc.”. The return of income of assessee was taken up for scrutiny, also referred to the Transfer Pricing Officer (TPO) for an examination of international transactions entered into by the assessee. Subsequently, the return was revised on 21.02.2014 disclosing a total income of Rs. 4560,04,33,250/-, while the course of assessment proceedings was in progress. The TPO vide his order dated 23.01.2014 had recommended T.P. Adjustment of Rs. 2,61,09,160/-. The assessment was completed on 12.03.2014, incorporating such adjustments along with various other disallowances and additions to the returned income of the assessee.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 7. Ground No. 1 of assessee’s appeal - T.P. Adjustment under section 92CA(3) of the Act.

7.1 The ld. AO has made a reference under section 92CA(1) of the Act on 08.10.2012 to the concerned TPO, for computation of Arms Length Price (ALP) in relation to the international transactions detailed in the Audit Report in Form-3CEB,. During the proceedings before the ld. TPO the first issue taken up was regarding provision of back-office support services. It is observed by the ld. TPO that the ICICI Bank Ltd. (assessee) has provided certain back-office support services to ICICI Bank, UK and ICICI Bank, Canada and has charged an amount of Rs. 13,67,12,254/-. The service charges are comprising of cost + mark up @ 10%. The assessee has taken 10 comparables for the purpose of T.P. Analysis, whereby the mean was computed at 10.47%. Ld. TPO has observed that the assessee has applied some filters which are different from the filters applied by the Department in the previous years in the assessee’s own case. The ld. TPO further discussed certain quantitative filters applied by the assessee as well as Department along with the observation of Tribunal in some of these cases including the notifications of CBDT and have arrived at the mean of 28.22%, thereby have computed an adjustment of Rs. 2,26,44,520/-. The final table of comparables along with working for aforesaid adjustment are extracted as under:

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited Sr. No. Name of the Company PLI 1 Accentia Technologies Limited 43.07 2 Acropetal Technologies Limited 33.92 3 Cosmic Global Limited 16.59 4 Crossdomain Solutions (P) Ltd. 18.05 5 Infosys BPΡΟ 31.43 6 Eclerex Services Limited 55.94 7 Nittany Outsourcing Services Pvt. Ltd 19.52 8 Microgenetics Systems Limited 12.39 9 Tata Communications Transformation services 23.11 28.22

Particulars Amount (Rs.) Operating cost 12,42,83,867 Mark-up @ 28.22% 3,50,72,907 ALP 15,93,56,774 Price actually charged 13,67,12,254 Adjustment amount 2,26,44,520 7.2 The aforesaid adjustment recommended by the ld. TPO was adopted by the ld. AO and the addition was proposed in the assessment order. Being aggrieved with the aforesaid additions assessee preferred an appeal before the ld. CIT(A), however the contentions raised therein are rejected.

7.3 Before us, the ld. AR of the assessee has submitted that out of list of 9 comparables adopted by the ld. TPO only 2 are comparable in the case of assessee remaining all the 7 comparables at serial no. 1 to 6 & 9 cannot be taken into consideration, since the same are in different area of operation and therefore, there was a functional dissimilarity in the operations of those companies, as against the operation of assessee company. It is further submitted that the ITAT in assessee’s own case for AY 2007-08, 2008-09 and 2009-10

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited had already held that the aforesaid 7 companies namely i.e. (1) Assentia

Technologies Ltd., (2) Acropetal Technologies Limited, (3) Cosmic Global

Limited, (4) Crossdomain Solutions (P) Ltd., (5) Infosys BPΡΟ, (6) Eclerex

Services Limited and (7) Tata Communications Transformation services, are to

be excluded for the purpose of TP Analysis while bench marking the

international. Remaining 2 companies i.e. (1) Nittany Outsourcing Services Pvt.

Ltd and (2) Microgenetics Systems Limited, are agreed to be acceptable by the

assessee and their net cost + margin percentage as suitable comparable has been

averaged at 15.96%. The ld. AR furnished a chart showing comparables taken

by the ld. TPO as against the comparable accepted by the company, the same,

for the sake of completeness, extracted hereunder:

Sr. Company Name Net Cost Net Cost Plus Remarks No. Plus Margin (%) Margin for accepted (%) as comparables per TP order 1 Assentia Technologies Ltd. 43.07 Excluded by ITAT in AY2007-08, AY2008-09 and AY2009-10 due to functional dissimilarity 2 Acropetal Technologies Limited 33.92 Excluded by ITAT in AY2008-09 and AY2009-10 due to functional dissimilarity 3 Cosmic Global Limited 16.59 Excluded by ITAT in AY2007-08 and AY2009-10 due to functionally different and high translation charges to revenue 4 Crossdomain Solutions (P) Ltd. 18.05 Excluded by ITAT in AY 2008-09 and AY2009-10 due to functional dissimilarity 5 Infosys BPΡΟ 31.43 Excluded by ITAT in AY2007-08, AY2008-09 and AY2009-10 due to higher turnover 6 Eclerex Services Limited 55.94 Excluded by ITAT in AY2007-08 due to functional dissimilarity 7 Nittany Outsourcing Services Pvt. 19.52 19.52 Ltd 8 Microgenetics Systems Limited 12.39 12.39 9 Tata Communications 23.11 Excluded by ITAT in AY2009-10 due Transformation services to functional dissimilarity Average 28.22 15.96

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 7.4 On this issue the ld. DR has placed his reliance on the orders of authorities below. 7.5 After thoughtful consideration of the aforesaid facts and circumstances, on a perusal of the orders of ITAT, Mumbai in assessee’s own case for AY 2007-08, 2008-09 and 2009-10, we find that the name of companies, their respective Profit Level Indicator (PLI) and area of operations are considered by the Tribunal and held that such comparables are to be excluded from the final set of comparables. Consequently, the companies at serial no. 1 to 6 and 9 shall remain out of the scope of comparables and therefore directed to be excluded whereas Item No. 7 & 8 taken by the revenue, as also accepted by the assessee company can be taken into consideration for arriving at the final bench marking, as against the bench marking adopted by the assessee company. The AO is directed to rework the TP adjustment accordingly.

7.6 In result, ground no. 1 of the assessee’s appeal is partly allowed, in terms of our aforesaid observations.

8.1 The aforesaid issue has been taken up by the Department, being the adjustment regarding letter of comfort for Rs. 34,64,640/- recommended by the ld. TPO has been deleted by the ld. CIT(A), stating the reasons that there was no additional financial cost incurred by the assessee to provide the comfort

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited letter /undertakings on behalf of its Associated Enterprises (AE). Giving further reasoning that the assessee bank was not actually required at any point of time during the concerned year to make good any legality shortfall on behalf of the assessee. Further, there was no occasion arose for concerned monetary authority of Singapore to invoke the comfort letter / undertaking provided by the assessee. The ld. CIT(A) relied on the decision of ITAT, Delhi in the case of Bharti Airtel vs. ACIT (43 taxmann.com 150) and order of ld. CIT(A) for AY 2009-10. 8.2 Before us, the ld. AR of the assessee furnished a written note with respect to the aforesaid adjustment the same is culled hereunder for the sake of completeness and adjudication:

“The above grounds challenge the deletion by the CIT(A) of the TPO's action of making an adjustment of Rs.34,64,640 with respect to the letter of comfort (LOC) issued by the Bank to Monetary Authority of Singapore on behalf of ICICI Securities INC (Singapore branch). The said adjustment was made by considering the LOC to be akin to a guarantee and was benchmarked on the basis of the CUP method by adopting the rate of 1.08% charged by the Bank to its customers in India for issuance of financial guarantees.

The A.R. relied upon the order of the Hon'ble Tribunal for the immediately preceding assessment year 2009-10 wherein the LOC was treated as a guarantee but the adjustment was restricted to 0.04% following the order in Asian Paints Ltd.'s case [(2024) 160 taxmann.com 214] in place of 1.50% being the rate adopted by the TPO based on the rate charged by the Bank to its customers/third parties in India (para 3, pg.1064. poper book 3).

In reply to the submission of the Id. CIT D.R. for adoption of either 0.53% upheld in the case of Cyient Ltd. vs. DCIT 172 taxmann.com 45 referred to in the order of the ITAT for A.Y.2009-10 (para 11-12, pg.1064, paper book 3) or 1.08% being the rate adopted by the TPO, the A.R. had requested for some time to gather information about the prevailing rate charged in Singapore. The Bank

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited is unable to retrieve the rates charged for guarantees issued in Singapore jurisdiction as the assessment year under consideration is an old year and more than 14 years have elapsed. It is therefore respectfully submitted that the order of the Hon'ble ITAT for A.Y.2009-10 be followed wherein the TPO was directed to adopt a commission rate of 0.04% relying on the Mumbai Tribunal's order in the case of Asian Paints Limited ((2024) 160 taxmann.com 214] instead of the rate of 1.08% adopted by the TPO based on the rate charged by the Bank to its customers in India. (para 13, pg.1064, paper book 3)”

8.3 Ld. AR raised the contention that on the issue of comfort letter/undertaking ITAT, Mumbai in assessee’s own case for AY 2009-10 has restricted the rate of commission at 0.04% relying on the decision of Mumbai Tribunal in Asian Paints Ltd. [2024] 160 taxmann.com 214 (Mum) and Cyent Ltd. vs. DCIT [172 taxmann.com (HYD)]. It was therefore the prayer that the assessee has tried to gather the information about prevailing rate charged in Singapore at the relevant time, however is unable to retrieve the information about such rates charged for guarantee issued in Singapore Jurisdiction being the AY under consideration is AY 2010-11 and more than 14 years have elapsed, therefore has placed his reliance on the decision of ITAT, Mumbai in assessee’s own case for AY 2009-10 and requested to direct the revenue authorities to adopt a commission rate of 0.04%.

8.4 Ld. CIT-DR who also had relied on the decision of ITAT, Mumbai in assessee’s own case have contended to decide the issue on merits.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 8.5 We have considered the rival submissions and perused the material available on record and the decisions relied upon by the parties. On perusal of the information furnished before us, without going into the merits of issue, in absence of any fresh information or decision to deviate from the view taken by the Tribunal in assessee’s own case for AY 2009-10, which has fairly conceded by both the parties, the ld. AO / TPO is directed to scale down the rate of commission at 0.04% as per decision of this tribunal in assessee’s own case for earlier year, instead of 1.08% adopted by the TPO.

8.6 In result, Ground No. 2, 3 & 4 of the revenue are partly allowed.

9.1 The aforesaid disallowance for Rs. 37,99,40,048/- was made by the ld. AO, invoking the provisions of section 14A r.w.r. 8D. The original disallowance made by ld. AO was for Rs. 506,17,00,000/- reduced by Rs. 10,32,59,952/-, as already suo-motu disallowed by the assessee in its computation of total income.

9.1 Aggrieved by the calculations and final disallowance by ld. AO under section 14A r.w.r. 8D, the assessee preferred an appeal before the ld. CIT(A) who had reduced the disallowance to Rs. 37.99/- crore with the following observations: 12

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited

“4.5 As regards the administrative expenses attributable to the earning of the exempt incomes, the Appellant has offered the same at 1% of the gross exempt incomes received. However, in terms of the provisions of Rule 8D(2)(iii), an amount equal to half percent of the average value of investments, the income from which does not or shall not form a part of the total income, is to be taken as the expenditure incurred in relation to the earning of such tax free incomes. The Appellant itself in the course of the assessment proceedings had given a without prejudice computation under Rule 8D wherein the administrative expenses relatable to the earning of tax free incomes has been computed at Rs.48.32 crores. As the Appellant had offered only Rs.10.33 crore in its return of income as the administrative expenses disallowable under section 14A of the Act, the balance of Rs.37.99 crores has been correctly added to the returned income by the AO. The same is hereby upheld. The appeal filed by the Appellant on this ground relating to the total addition made to the returned income by the AO under section 14A of the Act may be treated as partly allowed.”

9.2 As the assessee remain dissatisfied, even after a substantial relief by the first appellate authority as per the aforesaid findings, therefore had raised the issue in present appeal. Ld. AR having concern with the working of disallowance which according to her had not been carried out by the revenue in accordance with the settled principles, had furnished a revised working at page no. 843 of the assessee’s Paper Book (PB), the same is culled hereunder for batter appreciation of fact and adjudication of the issue: Computation of disallowance of exempt income u/s 14A as per Formula prescribed by Rule BD Particulars March, 2010 (Amt. in cr.) Opening Investment Shares (equity and preference) 847.18 Subsidiaries and/or joint ventures 2,519.35 Venture funds 1,264.16 Total-a 4,630.69 Closing Investment Shares (equity and preference) 998.09 Subsidiaries and/or joint ventures 2,619.35 Venture funds 1,167.06 13

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited Total-b 4,784.49 Average Investment [(a+b)/2] 4,707.59 Section 14A Disallowances c) Administrative Expenses 23.54 Total 23.54

9.3 The ld. AR further placed her reliance on the following decisions: 1 Delhi High Court in Cargo Motors (P.) Ltd. v. DCIT [2022] (145 taxmann.com 641) 2 Delhi Tribunal Special bench in ACIT vs. Vireet Investment P. Ltd. [2017] (82 taxmann.com 415) 3 Mumbai Tribunal in Sajjan India Ltd. v. Addl. CIT [2018] (89 taxmann.com 21)

14A not applicable on stock in trade 1 Supreme Court in Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC)

2 Delhi High Court in PCT v. PNB Housing Finance Ltd. [2023] 146 taxmann.com 445 (SLP dismissed by Hon'ble Supreme Court- [2023] 157 taxmann.com 465)

1 ITAT order in own case for A.Y. 2009-10 and earlier years

9.4 It is submitted that the identical issue, when came up before the ITAT, Mumbai in assessee’s own case, the ITAT has held as under: “21. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. So far as grounds of appeal raised by revenue is concerned, we find that it has been consistently held by jurisdictional High Court right from Reliance Utilities and Power Ltd. (supra) and in CIT vs HDFC 366 ITR 505 that when interest free funds available with the assessee are sufficient to meet its investment that yielded tax free income, it can be safely presumed that such investment were from interest free funds available with it. The ld. CIT(A) followed this principle while allowing relief to the assessee. Thus, we do not find any infirmity in his finding, which we affirmed. So far as, grounds of appeal in assesse’s appeal is concerned. We find that on similar disallowances in appeal for A.Y. 2008-09 in ITA No. 4249 & 4951/M/2014, in para 11.3, the co-ordinate bench on furnishing fresh disallowance of rule 8D(2)(iii) restored the matter to assessing officer to consider such suo moto disallowance. Before us the ld. AR of the assessee has 14

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited furnished the following fresh working of disallowance on account of administrative expenses as per rule 8D(20(iii).

Particulars March, 2009 Opening Investment Shares (equity and preference) 957.66 Subsidiaries and/or joint ventures 1129.27 Venture funds 1177.23 Tota –a 3264.16 Closing Investment Shares (equity and preference) 850.07 Subsidiaries and/or joint ventures 1423.43 Venture funds 1256.07 Tota –b 3529.56 Average Investment (a+b)/2 3396.86 Section 14A disallowances c) Administrative expenses (0.5&) 16.98 Total 16.98”

9.5 Per contra, ld. CIT-DR vehemently supported the orders of ld. CIT(A).

9.6 We have considered the rival submissions and perused the material available on record and case laws relied upon by the assessee. The aforesaid issue is squarely covered by the findings of ITAT, Mumbai in assessee’s own case for AY 2009-10. The facts and circumstances in the present matter are also at parity to the facts and circumstances for the earlier year, the workings furnished by the assessee reproduced (supra) are prima facie found to be in accordance with the decisions referred to (supra), however for the purpose of verification are being set-aside to the file of ld. AO for verification of the working submitted by the assessee and re-computation of the disallowance

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited under section 14A r.w.r. 8D in terms of decision of Special Bench of Delhi Tribunal in ACIT vs Vireet Investment P. Ltd..

9.7 In result, Ground No.2 of the assessee’s appeal stands allowed for statistical purposes.

10.1 On this issue the provision for expenses on which no tax has been deducted at source were considered to be non-entitled for deduction by the ld. AO and accordingly an addition of Rs. 133,74,36,609/- was made. The issue was carried before the First Appellate Authority (FAA), who had coincided with the findings of ld. AO, stating that as the provisions are for contingent and uncertain liabilities also no TDS is deducted, therefore the disallowances liable to be upheld. The issue is raised by the assessee before us, which was there before this Tribunal in the earlier years also. A breakup of such expenses was furnished before us at page 843A of the PB, the same is extracted as under: Nature Amount (Rs.) Advertisement/promotional expense/marketing 35,43,80,177 Annual Maintenance Expenses 37,06,53,940 Courier Charges 2,03,11,959 DMA Fee Sharing Expense 1,63,60,283 DST Expenses - Credit Card 1,85,15,052 Electricity 2,64,00,983 Expenses on Outsourcing Activities 1,83,12,617 Leased Line Expenses 11,00,71,493 Others 1,34,20,168 Postage & Telegram 52,63,354 Printing & Stationery 1,57,86,705

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited Professional fees 9,29,968 Recruitment Expenses 1,91,06,948 Repairs & Maintenance 23,16,23,124 Security Charges 7,21,21,892 Stationery & consumables 11,60,249 Subscription to Databases & Market Feed 87,66,430 Telephone expenses 2,85,88,537 Travelling/conveyance/motor car 56,62,730 TOTAL 1,33,74,36,609

10.2 Referring to the aforesaid details of expenses for which the assessee has made the provisions at the end of year, it is argued that such provisions are as per regular practice of the assessee, claimed as per the mercantile system of accounting. It is further clarified that TDS is not applicable on the year end provisions. Further, the ld. AR drew our attention to the decision of ITAT, Mumbai in assessee’s own case for AY 2009-10 and earlier years, wherein such adjustment was found to be correct as per consistent accounting practices followed by the assessee, which has been approved by the ITAT in assessee’s own case for AY 2008-09 also, following the decision of Hon’ble Karnataka High Court in Subex Ltd. vs. DCIT in ITA No. 787/2017. The relevant findings of the Tribunal for AY 2009-10 are culled hereunder for the sake of completeness:

“45. We have considered the rival submissions of both the parties and gone through the orders of lower authorities. We find merit on the submissions of ld. AR of the assessee that the assessee was following mercantile system of accounting regularly and making provision for expenses incurred during the year as has been claimed as at 31st March of relevant financial year. If the liability is arisen in the accounting year, deduction should be allowed although the liability may have to be quantified and discharged at future days. It should be capable of being estimated with reasonable certainty though actual quantification may not be possible. We further find in assessee’s own case for

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited A.Y. 2008-09 (supra), similar relief was allowed to the assessee on the basis of decision of Karnataka High Court in Subex Ltd. vs DCIT in ITA No. 787 of 2017 and held that provision was made at the year end on estimate basis cannot be denied. We find that assessee is in a business of banking and all such provision are integral part of business activities. Thus, following the order of co-ordinate bench in A.Y. 2008-09 and the decision of Karnataka High Court in Subex Ltd. (supra), we direct the assessing officer to delete the entire addition. In the result, ground no. 3 of appeal of assessee is allowed.”

10.3 The ld. CIT-DR per contra vehemently supported the orders of revenue authorities.

10.4 We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Admittedly, the issue is no more res-integra, which is already decided by the Co-ordinate Bench of ITAT, Mumbai in assessee’s own case for AY 2008-09 and 2009-10 following the decision of Hon’ble Karnataka High Court in the case of Subex Ltd. (supra), we therefore in absence of any new material on the issue brought on record by the revenue found it appropriate to decide the issue, following the earlier decision of ITAT, Mumbai in assessee’s own case, directing to delete the entire disallowance.

10.5 In result, Ground No.3 of the appeal of assessee stands allowed.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 11.1 On the aforesaid issue an addition of Rs. 81.50/- crore was made by ld. AO. The assessee is involved into derivatives transactions in the course of its banking and treasury business in accordance with the guidelines by Reserve Bank of India (RBI). The ld. AO had made the disallowance with the conviction that mark to market losses are contingent liability and hence are not deductible as expenditure under the provisions of the Act. The assessee carried the matter before the ld. CIT(A) and have submitted that losses on forward contract on the last date of accounting period is allowable as deduction, even though the date of maturity of those forward contracts did not fall within the same accounting period. Reliance was placed on the decision of Hon’ble Supreme Court in the case of Woodward Governor (312 ITR 254) and the decision of Special Bench of Mumbai Tribunal in the case of Bank of Bahrain & Kuait (41 SOT 290) and CIT’s order for earlier AY 2009-10, Ld. CIT allowed the issue in favour of assessee. The revenue raised the objection against the aforesaid decision of ld. CIT(A) in allowing the relief to the assessee, the matter is taken up before the Tribunal. At the outset the ld. Counsel of the assessee submitted that the issue is squarely covered by the decision of ITAT in assessee’s own case for AY 2009-10 wherein it is held that Mark to Market Loss / Gain is not contingent and allowable under section 37 of the Act. The relevant findings of the Tribunal on the aforesaid issue in assessee’s own case for AY 2009-10 are extracted as under:

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited “17. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities. We find that on similar issue in A.Y. 2007-08 and 2008-09, similar disallowance on account of MTM loss was disallowed, however, on appeal before Tribunal the similar loss was allowed on the basis of decision of Hon’ble Supreme Court in CIT vs Woodward Governor India (P) Ltd. (supra). Thus, respectfully following the same we do not find any informative in the order of ld. CIT(A) which we affirmed. No contrary fact or law is brought to our notice to take other view. In the result, ground no. 7 of the appeal of revenue is dismissed.”

11.2 Ld. CIT-DR supported the order of ld. AO.

11.3 We have considered the rival submissions and perused the material available on record and case laws relied by the assessee. As apprised by ld. AR that the issue is identical with the issues in assessee’s own case for AY 2007- 08, 2008-09 and 2009-10, wherein the disallowance on account of Mark to Market Loss on forex derivatives was directed to be deleted by the ITAT following the decision of Hon’ble Supreme Court in the case of CIT vs. Woodward Governor (supra), therefore in the present case also in absence of any deviating fact, circumstances and decision, it would justify to be decided it in favour of assessee. The ld. CIT(A) in the impugned order has followed the decision of Hon’ble Apex Court in Woodward Governor (supra), we thus do not see any infirmity in the order of ld. CIT(A) to interfere with the same.

11.4 In result, Ground No.5 of the revenue, thus stands dismissed.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 12. Ground No.6 of revenue: Regarding exemption under section 10(15), 10(34) and 10(35), disallowance under section 14A and interest portion.

12.1 The issue regarding disallowance under section 14A has already discussed and deliberated by us vide Ground No.2 of assessee’s appeal in the foregoing para’s and we have set-aside the same to the file of ld. AO for the purpose of verification of computation provided by the assessee, consequently, Ground No. 6 raised by the revenue stands disposed of in terms of our observations in Ground No. 2 of the assessee’s appeal.

12.2 In result, Ground No.6 of revenue’s appeal stands partly allowed for statistical purposes.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 13.2 Before us the ld. CIT-DR supported the orders of ld. AO whereas the ld. AR representing the assessee submitted that the issue is expressly covered by the decision in ITAT in assessee’s own case for AY 2009-10 wherein the relevant observations are reiterated and extracted hereunder for the same of completeness:

“25. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully as well as the order of Tribunal on this issue in earlier years. We find that ld. CIT(A) while allowing relief to the assessee followed the order of Hon’ble Supreme Court in ICDS vs CIT (supra). Further, similar relief was allowed in assessee’s group case in ICICI Personal Financial Services Ltd., which was later on amalgamated with the assessee. We find that on similar issue the assessee have been consistently allowed relief on similar issue including in appeal for A.Y. 2008-09 wherein order of earlier years was followed. Thus, we do not find any merit in the grounds of appeal no. 9 & 10 revenue’s appeal. In the result, ground no. 9 & 10 of revenue’s appeal are dismissed.”

13.3 Since the facts of the present issue are identical to the facts of appeal in assessee’s own case for AY 2009-10 and relief is granted by ld. CIT(A) following the decision of Hon’ble Supreme Court in case of ICDS vs.CIT (supra), therefore the decision of ld. CIT(A) cannot be found at fault so as to revisit the same. We, thus do not find any substance in the ground of appeal no. 7 & 8 raised by the revenue in the present appeal, the same are accordingly dismissed.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 14. Ground No.9 of the revenue’s appeal: Disallowance of bad-debts (gross) written off

14.1 The aforesaid issue has been cropped up, as the addition of Rs. 32,51,44,22,114/- was made by ld. AO, observing that the assessee was unable to substantiate the claim as per the provisions of section 36(1)(vii) r.w.s 36(2) by furnishing complete details. It was held that the assessee failed to justify the condition requisite for allowance of debt as bad-in-law under section 36(1)(vii) of the Act. The ld. AO observed that the similar issue is sub judice for the previous year also.

14.2 The assessee carried the matter before the ld. CIT(A), who had taken cognizance of the decision in the case of TRF Ltd. (230 CTR 14) and Vijaya Bank (323 ITR 166) and accordingly held that that there is no ambiguity left for allowance of deduction on account of bad-debts as the Hon’ble Supreme Court has very clearly taken note of amendment in section 36(1)(vii) of the Act and decided that after 01.04.1989, it is not necessary in assessee to establish that the debt in fact has become irrecoverable. It is enough as the bad-debt is written off as irrecoverable in the account of assessee and only requirement for claim of deduction as bad-debt on the part of assessee i.e. such debt has to be written off from books of accounts, as irrecoverable.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 14.3 Before us the ld. CIT-DR vehemently supported the orders of ld. AO whereas the ld. AR of the assessee has submitted that the issue is squarely covered by the decisions relied upon by the ld. CIT(A) and further the same issue was decided by the ITAT, Mumbai in assessee’s own case for AY 2009- 10 and earlier years. The finding from the ITAT decision has been extracted as under: “31. We have considered the rival submissions of the parties and have gone through the order of lower authorities. We find that in appeal for A.Y. 2003- 04. On similar issue Mumbai Bench in ITA No. 8420 & 8435 /M/2010 dated 21.07.2023 consider similar issue in detail and allowed relief to the assessee by following the decision of Apex Court in TRF vs CIT (supra) and in Vijaya Bank vs CIT (supra). All the grounds which were made basis for making disallowance by assessing officer was considered and held in favour of assessee. We find that in A.Y. 2004-05 in ITA No. 6217 & 6137/M 2008 dated 03.11.2017 similar disallowance was allowed in favour of assessee. We further find that order of A.Y. 2003-04 & 2004-05 was followed in A.Y. 2006- 07 in ITA No. 5792 & 5397/M/2013 dated 25.10.2024. Thus, we find that consistently similar issue has been decided in favour of assessee. Hence, we do not find any infirmity in the order of ld. CIT(A) in allowing relief to the assessee. In the result, this ground of appeal raised by the revenue is also dismissed.”

14.4 On a thoughtful consideration of the facts and circumstances in light of the judicial pronouncements relied upon by the ld. CIT(A), we find that the identical issue has been decided in favour of the assessee by the Tribunal in the earlier years also, therefore de horse any new fact or decision to dislodge the aforesaid findings, we see no substance in the contentions raised by the

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited revenue, we therefore approved the findings of ld. CIT(A) and dismiss ground no. 9 of the revenue’s appeal. 15. Ground No.10 of revenue’s appeal: Disallowance of Employees Stock Option Cost (ESOS) Expenses.

15.1 During the assessment proceedings the assessee vide letter dated 21.02.2014 had claimed a deduction of Rs. 79.21/- Crore, being the difference between exercise price and market value of the stock options offered by it to its employees. As the claim has been made during the course of assessment proceedings, the ld. AO denied the same following the decision of Hon’ble Apex Court in the case of Goetze India Pvt. Ltd. [284 ITR 323].

15.2 The issue was raised before the FAA relying upon the decision of Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT [187 ITR 688] and Hon’ble Bombay High Court in the case of Pruthvi Brokers & Shareholders [2012] 349 ITR 336. Such claim of assessee was allowed by the ld. CIT(A) following the decision of ITAT, Bangalore in the case of Biocon Ltd. reported in (2013) 25 ITR (Trib.) 602. In the case of M/s Biocon Ltd. (supra), it was held that the difference between the exercise price and market price of the ESOS can be claimed as deductible expenditure by the tax payer. 15.3 The ld. CIT-DR on the aforesaid issue have placed his reliance on the order of ld. AO and has submitted that the assessee has the option to make such 25

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited claim by way of revising its return, which was not done by the assessee, therefore the ld. CIT(A) was not right in his decision to delete such addition accordingly the decision of ld. CIT(A) is liable to be reversed. The ld. CIT-DR also submitted that the decision of ld. CIT(A) was erroneous so far as the difference between the exercise price and the market value of ESOC and the same is not unascertained liability, is contingent in nature, quantum cannot be worked out precisely, thus capital in nature, hence not allowable.

15.4 Per contra, the ld. AR of the assessee submitted that the assessee has granted ESOP at the market price of the previous day of grant of option. The difference between the exercise price and market price is treated as perquisite in the hands of employee and is claimed as expenses under section 37 of the Act by the assessee. The ld. AR referred to the letter dated 21.02.2024 addressed to the ld. AO claiming therein the ESOS claim. The details of ESOS claim proced before the AO are also furnished at page no. 923 to 937 of PB, consisting of serial number, grant date, exercise date, allotment date, options exercised, exercise price/grant price, FMB (Average NSE Price) on date of exercise, difference (FMB and Exercise Price). It was the submission that all the aforesaid documents were furnished before the ld. AO, however the ld. AO has denied the claim of assessee based on the decision of Hon’ble Apex Court in the case of Goetze India Pvt. Ltd. (supra), whereas there were favorable

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited decisions for the assessee also, according to which such claim of assessee should have been allowed. Reliance was placed on the following decisions:

15.5 We have considered the rival submissions and perused the material available on record and the judicial pronouncements relied upon by the assessee. In the context of aforesaid ground raised by the revenue, we find that the identical issue has come up before Mumbai Tribunal in the case of Kotak Mahindra Bank vs. DCIT (supra), wherein it is categorically held that the discount of issuance of ESOPs is allowable business expenditure under section 37 of the Act. The relevant findings from the said decision are culled out as under:

“27. Rewarding employees through share-based benefit schemes has been an effective tool for the companies to not just recognize their contribution to the company but also retain them by imbibing a sense of belonging and ownership. One such scheme, popular among the companies for almost last two decades, has been to grant of Employee Stock Option Plans ("ESOPs"). In simple terms, an ESOP is an option and not an obligation, provided by a company to its employees, to purchase its shares at a future date at a pre-determined price, which is ordinarily less than the market price, on satisfaction of certain

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited prescribed conditions. Recently, the Karnataka High Court affirmed the ruling of the special bench of the Bangalore Income Tax Appellate Tribunal in the case of Biocon Ltd., wherein it was held that discount on issuance of ESOPs is an allowable business expenditure under Section 37(1) of the Act, 1961 for the employer. CIT, LTU v. Biocon Ltd. [2020] 121 taxmann.com 351/276 Taxman 1/(2021] 430 ITR 151 (Karnataka); Biocon Ltd. v. Dy. CIT (LTU) [2013] 35 taxmann.com 335/144 ITD 21/[2013] 25 ITR(T) 602 (Bangalore Trib.) (SB).

27.1 In view of the foregoing, considering the fact that issue in hand is identical and recurring in nature and is also being consistently decided in favour of the assessee, respectfully following the decisions referred above, the disallowance made is accordingly deleted.”

15.6 Further, ITAT Mumbai in the case of HDFC Bank Ltd. vs. Addl. CIT, [2025] 171 taxmann.com 47 dated 28.01.2025 has held as under:

“28.3. This issue is no longer res integra as has been dealt by Co-ordinate Bench in the case of HDFC Bank Lid (supra) with similar view taken by Hon'ble Special Bench, ITAT, Bangalore in the case of Biocon Ltd. (supra). the same having been approved by Hon'ble Court of Karnataka Biocon Ltd. (supra)”

15.7 As evident from the aforesaid decision that the claim of assessee for ESOS expenses in terms of decisions of Hon’ble Karnataka High Court in the case of CIT(LTU) vs. Biocon Ltd., would be allowable, further since the claim was made during the assessment proceedings, the ld. AO on account of his limitations had not allowed the claim, but the FAA/CIT(A) has rightly allowed as the claim as held in Goetze India Pvt. Ltd. (supra). We therefore convince with the decision arrived at by the ld. CIT(A), so we approve the same.

15.8 In result, ground no. 10 of the revenue stands dismissed.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 16. Ground No.11- disallowance of expenses on issue and discount of rupees and foreign currency bonds.

16.1 This issue is squarely covered by the decision of ITAT, Mumbai in assessee’s own case for AY 2009-10 the relevant findings are culled out as under:

“35. We have considered the rival submissions of parties and also perused the order of Tribunal on similar issue in earlier years. We find that discount expenses of bonds was claimed in AY 2002-03, which was disallowed by assessing officer in that year on the ground that such expenses should be amortised over the tenure of the bonds. However, on appeal before Tribunal it was allowed in ITA No. 836/Mum/2008 wherein the assessing officer was directed to allow proportionate expenditure on the issue of discount bonds. This is the 8th year of bonds, following the decision of Tribunal prorate expenses is allowable in the current year. As recorded that similar relief was allowed to the assessee in AY 2007-08 & 2008-09. Thus, the assessing officer is directed to follow the order of Tribunal in A.Y. 2007-08 and 2008-09. Resultantly, this ground of appeal is also dismissed.”

16.2 In terms of identical facts and circumstances, without any contrary material to dislodge the aforesaid findings by the Tribunal in the assessee’s own case for earlier years, we find that the ld. CIT(A) had rightly allowed the claim of assessee qua the expenses on issue and discount of rupees and foreign currency bonds, we therefore concur with the decision of ld. CIT(A).

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited 16.3 In result, ground no. 11 of the revenue in absence of any substantial material to convince us to deviate from the decisions of Tribunal stands rejected.

17.1 Claim for such expenses are covered by assessee’s own case for AY 2009-10 and earlier years. During the year under consideration, the ld. AO has made a disallowance of Rs. 25,43,423/- which is deleted by the ld. CIT(A) following the ld. CIT(A)’s earlier order for AY 2009-10, taking support from the principle emerging from the judgment by Hon’ble Supreme Court in the case of CIT vs. United Glass Manufacturing Company Ltd. (Appeal No. 6449 of 2012).

17.2 At the outset, the ld. CIT-DR vehemently supported the order of ld. AO and request to sustain the same. Whereas, the ld. AR placed reliance on assessee’s own case decided by ITAT for earlier years.

17.3 We have considered the rival submissions and perused the material available on record and find that the similar issue was dealt with by the Tribunal in assessee’s own case for AY 2008-09 wherein the Club Membership Fees paid by the assessee was allowed following the decision of Tribunal for AY 2007-08 in terms of the ratio laid down by the Hon’ble Bombay High Court

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited in the case of Otis Elevators Co. Ltd. reported in 195 ITR 682. The abstract of relevant findings of Tribunal for the AY 2008-09, are extracted as under

“25. Ground number 2 raised by the revenue is against the club membership fees being allowed as expenditure under section 37 of the act by the Ld. CIT(A).

25.1. During assessment proceedings are Ld.AO noted that assessee claimed Rs. 49,81,062/- towards club membership. Assessee was called upon to explain as to why the said expenditure should not be treated as capital expenditure. In response assessee submitted that membership fees peter the club is allowable as business expenditure since it is incurred to promote the business interest of the assessee. Assessee also relied on the decision of Hon’ble Bombay High Court in case of Otis elevators company India Ltd reported in 195 ITR 682. The Ld.AR however dismissed the claim of the assessee by treating the expenditure to be capital in nature.

25.2. On an appeal before the Ld. CIT(A) the claim of the assessee was allowed by following the order of the preceding assessment years on similar facts and circumstances.

Aggrieved by the order of the Ld. CIT(A) revenue is in appeal before this Tribunal.

25.3. The Ld. DR relied on orders passed by the Ld.AO.

25.4. The Ld.AR on the contrary relied on coordinate of this Tribunal in assessee’s own case for assessment year 2007-08 (supra) as well as observations of the Ld. CIT(A) for the year under consideration.

We have submissions advanced by both sides in the light of the records placed before us.

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited India Ltd (supra). We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld.”

17.4 Since the aforesaid issue has been discussed and decided in favour of the assessee, thus sans any new fact, material or decision to contravene the aforesaid finding of Tribunal, which is followed by the ld. CIT(A), we do not find any infirmity in the decision of ld. CIT(A) in deleting the Club Expenses incurred and claimed by the assessee, so as to disturb the same. Accordingly Ground No. 12 of the revenue in present appeal stands dismissed.

“39. We have considered the rival submissions of both the parties and the order of lower authorities. We find that assessee has incurred aforesaid business loss during the course of banking business. Complete details were provided to the assessing officer. We further find that similar relief was allowed to the assessee in appeal for A.Y. 2006-07 & 2008-09 and further similar claim of assessee was accepted by assessing officer in A.Y. 2011-12. Thus, following the principle of consistency, the grounds of appeal raised by revenue is dismissed.”

18.2 On the aforesaid issue the claim of assessee during the assessment proceedings was denied by the ld. AO, following the decision of Hon’ble Apex Court in the case of Goetze India Pvt. Ltd. (supra), however the same was allowed by the ld. CIT(A) following the orders for earlier years in the

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited assessee’s own case and placing reliance upon the decision of Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. (supra) as well as the decision of Hon’ble Bombay High Court in the case of Pruthvi Brokers & Shareholders (supra) that revised claims can be allowed. Further since the issue has been dealt with by the Mumbai Tribunal in assessee’s own case for earlier years also, thus stands at parity to decide the same. In terms of aforesaid observations as the ld. CIT(A) had considered the contentions of assessee and deleted the addition following the decision of ITAT in assessee’s own case, we thus do not find any infirmity in the order of ld. CIT(A), so we uphold the same.

18.3 In result, ground no. 13 of appeal of revenue stands dismissed.

Order pronounced in the open court on 20-02-2026.

Sd/- Sd/- (RAHUL CHAUDHARY) (ARUN KHODPIA) Judicial Member Accountant Member Mumbai, Dated : 20-02-2026. *SK, Sr. PS

ITA No. 1446 & 1560/Mum/2016 ICICI Bank Limited

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai