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Income Tax Appellate Tribunal, BENCH “I”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI PAWAN SINGH
Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeal by Revenue under section 253 of Income Tax Act are directed against the order of Ld. Commissioner of Income-Tax (Appeals)-4, Mumbai, [for short the ld. CIT(A)] dated 30.06.2016 and 22.11. 2011 for Assessment Year 2008-09 and 2009-10 respectively. The Revenue in both the appeals has raised identical grounds of appeal
; hence both the appeals were heard together and are decided by common order. For appreciation of fact, we are discussing the fact for Assessment Year 2008-09. Though the revenue has raised two ground of appeal, however, as per our considered view the sole ground of appeal is whether ld. CIT(A) erred in deleting the broken period interest expenditure.
2. Brief facts of the case are that assessee is Banking Company. The assessee is carrying banking business. The assessment for the Assessment Year 2008-09 was completed on 30.12.2010 under section 143(3). Subsequently, the assessment was reopened under section 147. Notice under section 148 dated 31.12.2013 was served upon the assessee- bank. In response to the notice under section 148, the assessee requested to treat the revised return filed on 12.03.2010 as return in response to the said notice. The re-assessment was completed on 26.03.2015 under section 143(3) r.w.s 147. The Assessing Officer while passing assessment order made the disallowance of broken period interest expenditure of Rs. 30,51,30,523/- incurred on purchase of securities. The Assessing Officer made the disallowance holding that assessee bank is not trader in securities and not entitled for claim of broker period interest expenditure. The Assessing Officer was also of the view that the Government Securities held by assessee cannot be treated as a part of trading asset. On appeal before the ld. CIT(A), the disallowance of broker period expenses was deleted. Hence, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
We have heard the ld. DR for the Revenue and ld. AR of the assessee and perused the material available on record. The ld. DR of the Revenue argued that the assessee is not entitled for deduction on account of broken period interest expenses. In support of her submissions the ld DR for the revenue relied on the decision of Hon’ble Supreme Court in case of Vijaya Bank vs. ACIT [187 ITR 541 (SC)]. The ld DR further submits that initially the Hon’ble Bombay High Court in case of American Express International Banking Corporation vs. CIT (258 ITR 601) has allowed broken period interest expenses, however, the same has been distinguished by Hon’ble Rajasthan High Court in case of CIT vs. Bank of Rajasthan (2009) 178 Taxman 304 (Raj). On the other hand, the ld. AR of the assessee supported the order of ld CIT(A) and submits that the Hon’ble Supreme Court in case of 2 CIT vs. City Bank in C.A. No. 1549 of 2006 dated `12.08.2008 by considering the decision of Hon’ble Bombay High Court in American Express International Banking Corporation vs. CIT (supra) and earlier decision of Hon’ble Apex Court in Vijaya Bank vs. ACIT (supra) allowed the broken period interest expenses. The Hon’ble Supreme Court affirmed the view taken by Hon’ble Bombay High Court in case of American Express International Banking Corporation vs. CIT (supra) and held that the decision in Vijaya Bank (supra) have no application, thus the decision relied by ld DR has been reversed by Hon’ble Supreme Court in Citi Bank (Supra).
We have considered the rival submission of the parties and have gone through the order of lower authorities. The Assessing Officer made the disallowance on the basis of decision of Vijaya Bank Ltd. vs. ACIT [197 ITR 541 SC)] on his observation that broken period interest is a part of capital outlet for acquisition of securities and also on the basis of decision of CIT vs. Bank of Rajasthan that expenses made by Bank towards broken period interest on securities purchased by it is not allowable business deduction. The Assessing Officer also concluded that assessee is not a trader in security and not entitled for claim of broken period interest expenses.
The Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd 366 ITR 505 (Bom), while relying on the ratio laid down in its earlier decision in American Express International Banking Corporation Vs. CIT reported in 258 ITR 601 (Bom), which in turn, had distinguished the ratio laid down by the Hon’ble Supreme Court in Vijaya Bank Vs. CIT (supra) and the Hon’ble High Court of Rajasthan In CIT Vs. Bank of Rajasthan Ltd (supra) and had held that broken period interest is allowable as deduction. Following the same parity of reasoning, we hold that the assessee is entitled to the claim of broken period interest.
We have also noted that the Hon’ble Apex Court in case of CIT vs. Citi Bank (supra) held that broken period interest expenses are allowable expenses. We have noted that the order passed by ld. CIT(A) is based on the decision of Hon’ble Bombay High Court in American Express International Banking Corporation (supra) and the decision of Hon’ble Supreme Court in Citi Bank (supra). The decision relied by ld. DR was distinguished by Hon’ble Apex Court in Citi Bank (supra). No other contrary decision is brought to our notice. Thus, we do not find any illegality or infirmity in the order passed by ld. CIT(A) in deleting the disallowance of broken period expenses. In the result, grounds of appeal
raised by Revenue are dismissed. AY 2009-10
7. The Revenue has raised the identical grounds of appeal as raised for appeal for AY 2008-09. We have already dismissed the appeal for AY 2008-09. Thus, following the principle of consistency, the appeal for AY 2009-10 is also dismissed with similar observations.
8. In the result, appeal for both the Assessment Years is dismissed.