ASSISTANT COMMISSIONER OF INCOME TAX 2(3)(1), MUMBAI vs. DCB BANK LIMITED (FORMERLY DEVELOPMENT CREDIT BANK LIMITED), MUMBAI

On the facts and in the circumstances of the case and in Law, the Ld. CIT (A) has erred in deleting the addition made by the AO on account of expenses u/s 14A r.w.r. 8d, without considering the fact that the Revenue has filed appeal before Hon’ble Supreme Court on this similar issue which is pending for final verdict.

Vide Ground No. 1 the revenue has challenged the action of Ld. CIT (A) in deleting the addition made by the AO on account of broken period interest. The Ld. Departmental Representative (DR) relying on the assessment order submitted that as has been held by the AO, the broken period interest paid by the assessee is nothing but part of price paid for acquiring the securities, Assessment Year: 2013-14 therefore no part of it can be set off as expenditure against interest accruing on these securities. Since, the AO has rightly disallowed the claim of the assessee. The Ld. CIT (A) has wrongly deleted the same.

On the other hand, the Ld. counsel for the assessee submitted that this issue is covered in favour of the assessee in assessee’s own case for the assessment year 2010-11. Similarly, the Ld. CIT (A) has decided the identical issue in favour of the assessee in the assessment year 2012-13. The Ld. counsel further submitted that the findings of the Ld. CIT (A) are based on the decision of the Hon’ble Supreme Court in the case of Citibank in Civil Appeal No. 1549 of 2006, decision of the Hon’ble Bombay High Court in the case of American Express International Banking Corporation vs. CIT 258 ITR 601 and the decisions of the ITAT, Mumbai. The Ld. counsel further submitted that the ITAT has confirmed the order of the Ld. CIT (A) passed in assessee’s own case for the AY 2009-10 and 2012-13. Since, the findings of the Ld. CIT (A) are based on the decision referred above and covered by the decision of the ITAT rendered in assessee’s appeals pertaining to the earlier years, there is no infirmity in the order of the Ld. CIT (A) to interfere with.

We have gone through the material on record in the light of the rival contention of the parties. The Ld. CIT (A) has decided this issue in favour of the assessee. The relevant paras of the order passed by the Ld. CIT (A) read as under:- “6.4 I have carefully considered the facts of the case, discussion of the AO in the impugned order as well as oral contentions and written submissions of the appellant. I find that similar issue has come up for consideration in appellant's own case for the preceding A.Y.2011-12. After considering the facts of the case and submissions of the appellant, the issue has been decided in favour of the appellant by my learned predecessor vide Appeal No. CIT(A)-6/IT-178/2014-15 dated 05.10.2015. The relevant portion of the order is reproduced hereunder for ready reference: Assessment Year: 2013-14 "6.2 1 have carefully considered the facts of the case and the submission of the appellant. I have also gone through the decisions relied upon by Ld.. AR and the AO. I find that similar issue has been decided in favour of the appellant by the Hon'ble Supreme Court in the case of CIT v. Citi Bank in Civil Appeal No.1549 of 2006. Further, Hon'ble Bombay High Court in the case of American Express Bank (supra) has also decided this issue in favour of the appellant. It was also argued that the Hon'ble ITAT in the case of Dena Bank has decided this issue in assessee's favour in dated 10.02.2014. Respectfully following the above decisions of Hon'ble Supreme Court, Bombay High Court and Mumbai ITAT, it is held that the broken period interest paid by the appellant is allowable as deduction in computing the total income. The ground is accordingly allowed." 6.5 Similarly. in A.Y.2012-13, my learned predecessor has decided the issue in favour of the appellant vide Appeal No. CIT(A)-6/IT-2/2014-15 dated 27.05.2016. The relevant part of the order is reproduced hereunder for ready reference: “7.2 1 have carefully considered the facts of the case, discussion of the AO in the impugned order as well as oral contentions and written submissions of the appellant. I find that similar issue has come up for consideration in appellant's own case for the preceding A.Y.2011-12. After considering the facts of the case and submissions of the appellant, the issue has been decided in favour of the appellant by my learned predecessor vide Appeal No.CIT'(A)6/IT 178/2014-15 dated 05.10.2015. The relevant portion of the order is reproduced hereunder for ready reference: "6.2. I have carefully considered the facts of the case and the submission of the appellant. I have also gone through the decisions relied upon by the AR and the AO. I find that similar issue has been decided in favour of the appellant by the Hon'ble Supreme Court in the case of CIT v. Citi Bank in Civil Appeal No.1549 of 2006. Further, Hon'ble Bombay High Court in the case of American Express Bank (supra) has also decided this issue in favour of the appellant. It was also argued that the Hon'ble ITAT in the case of Dena Bank has decided this issue in assessee's favour in ITA No.3676/M/2000 dated 10.02.2014. Respectfully following the above decisions of Hon'ble Supreme Court, Bombay High Court and Mumbai ITAT, it is held that the Assessment Year: 2013-14 broken period interest paid by the appellant is allowable as deduction in computing the total income. The ground is accordingly allowed." 7.3 Since the facts are similar, following the reasons given in appellant's own case for A.Y.2011-12 (supra), no disallowance is called for in respect of broken period interest on HTM securities. Accordingly, the addition of Rs.4,71,69,218/- made by the AO is deleted. The ground is allowed." 6.6 Since the facts are similar for the year under consideration, respectfully following the reasons given by my learned predecessor for A.Y.2011-12 and 2012-13, no disallowance is called for in respect of broken period interest on HTM securities. The addition of Rs.9.48,81,164/- made by the AC in respect of broken period interest on HIM securities is deleted. Accordingly, the ground is allowed.

We notice that the Ld. CIT (A) has decided this issue in favour of the assessee by following the decision of his predecessor in the assessee’s own case for the AY 2011-12 and 2012-13. Since, the decisions of the then Ld. Commissioners (Appeals) relied upon by the Ld. CIT(A) who has passed the impugned order, are based on the decision of the Hon’ble Supreme Court in the case of Citibank (supra), Hon’ble Bombay High Court in the case of American Express Bank (supra) and since there is no material change in the facts of the present case there is no merit in the contention of the department. Moreover, the Ld. CIT(A) has decided this ground of appeal

On the other hand, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has decided this issue in favour of the assessee by following the decision of his predecessor in the assessee’s own case for the AY 2012-13 and since the said decision is based on the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR (Del) and other cases, there is no infirmity in the order of the Ld. CIT (A).

We have heard the rival submissions and also gone through the material on record in the light of the rival contentions of the parties. The Ld. CIT (A) has deleted the disallowance holding as under:- “8.4 have carefully considered the facts of the case, discussion of the AC in the impugned order as well as oral contentions and written submissions of the appellant. I find that similar issue has come up for consideration in appellants own case for the preceding A.Y.2012-13. After considering the facts of the case and submissions of the appellant. the issue has been decided in favour of the appellant by my learned predecessor vide Appeal N1o.CIT(A)-6/IT-2/2014-15 dated 27.05.2016. The relevant portion of the order is reproduced hereunder for ready reference: "6.2 1 have carefully considered the facts of the case and submission made by the Ld. AR. I have also gone through the decisions relied on by the Ld. AR. It has been contended by the Ld. AR that the appellant bank has not earned any exempt income during the previous year relevant to the subject assessment year. Hence, respectfully following the decisions of Cheminvest Ltd. V. CIT, 378 ITR 33 (Del) in the cases of Corrtech Energy (P.) Ltd. (supra), Lakhani Marketing Inc. (supra), Shivam Motors (P) Ltd. (supra), no disallowance is called for. Following these decisions, addition made by the AO is deleted. The ground is allowed. 8.5 Since the facts are similar, respectfully following the decisions relied upon by my learned predecessor. addition of Rs.1,40,786/- made by the AO is deleted. Accordingly, the ground of appeal is allowed.” Assessment Year: 2013-14

We notice that the findings of the Ld. CIT (A) are based on the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (supra) in which the Hon’ble High Court has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. In the present case, admittedly the assessee bank had not earned any exempt income during the previous year, therefore the application of 14A does not arise. Since, the findings of the Ld. CIT (A) are based on the law laid down by the Hon’ble Delhi High Court, we do not find any infirmity in the order of the Ld. CIT (A) to interfere with. Hence, we uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal

On the other hand, the Ld. counsel for the assessee submitted that this issue is covered in favour of the assessee by the decision of the coordinate Bench rendered in the assessee’s own case for the AY 1996-97 to 2004-05 and AY 2008-09. Since, the findings of the Ld. CIT (A) are based on the findings of the Tribunal rendered in the assessee’s own case, there is no merit in the contention of the department. Therefore, this ground of appeal