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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R PER RAM LAL NEGI, JM These appeals by the revenue are directed against two orders dated 28.12.2015 passed by the Ld. Commissioner of Income Tax (Appeals)-6, Mumbai, for the assessment years 2010-2011 and 2011-2012, whereby the Ld. CIT (A) has partly allowed both the appeals filed by the assessee against assessment orders passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’). Since, both the appeals pertain to the same assessee for different assessment years and the issues involved in both the appeals are identical, the same were clubbed, heard together and are being disposed of by this common order for the sake of convenience. Assessment Years: 2010-11 & 2011-12 2. Brief facts of the case are that the assessee bank filed its return of income for the Assessment Year (A.Y.) 2010-11 declaring the total income of Rs. 4,88,77,70,049/- under the normal provisions of the Act and Rs. 6,81,96,49,730/- u/s 115JB of the Act. The case was selected for scrutiny and notice u/s 143 (2) was served on the assessee. The assessee filed a revised return declaring the revised income of Rs. 2,25,98,20,186/- under the normal provisions of the Act and ‘nil’ income u/s 115JB of the Act. Thereafter, notice u/s 142 (1) was issued and details were called for. In response thereof the authorized representative of the assessee appeared before the AO filed details and produced books of account.
After verification of the details, the AO determined the income of the assessee at Rs. 3,02,30,30,055/- under the normal provisions of Act and Rs. 7,11,20,58,798/-u/s 115JB of the Act, after rejecting the contention of the assessee that provisions of section 115JB is not applicable to the assessee and further making inter alia disallowance of Rs. 65,73,08,869/- deduction claimed by the assessee as broken period interest. The assessee challenged the assessment order before the CIT (A). The Ld. CIT (A) after hearing the assessee decided both the issues in favour of the assessee. The Ld. CIT (A) decided the first issue in favour of the assessee holding that the provisions of section 115JB are not applicable to the appellant bank and decided the second issue in favour of the assessee following the judgment of the Hon’ble Supreme Court in the case of CIT vs. Citi Bank in Civil appeal No. 1549 of 2006 and decision of the Hon’ble Bombay High Court rendered in American Express Int. Banking Corporation vs. CIT 258 ITR 601 (Bom) and decisions of the ITAT, Mumbai.
The revenue has challenged the said order by raising the following grounds of appeal:- Assessment Years: 2010-11 & 2011-12
1. “The order of the CIT (A) is opposed to law and facts of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law in holding that the provisions of Section 115JB of the Income Tax Act, 1961 were not applicable to assessed bank.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that the broken period interest paid by the assessee is allowable inspite of Hon’ble Supreme court decision in the case of CIT Vs Vijaya Bank (187 ITR 541) and the Rajasthan High Court decision in the case of Bank of Rajasthan (316 ITR 391).” 5. At the outset, the Ld. counsel for the assessee pointed out that issue No. 1 of the appeal is covered in favour of the assessee by the assessee’s own case for the A.Y. 2008-09 and issue No. 2 is covered by the judgment of Hon’ble Supreme Court passed in Citibank (supra) and the order of the Mumbai Bench of the Tribunal rendered in ACIT vs. IndusInd Bank Ltd. and vice-a-versa, ITA Nos. 4273 to 4275/Mum/2016, ITA No. 4653 to 4655/Mum/2016 dated 06.09.2017. The Ld. counsel further submitted that since, the order passed by the Ld. CIT (A) is in accordance with the decisions aforesaid, there is no merit in the appeal of the revenue and the same is liable to be dismissed.
On the other hand, the Ld. Departmental Representative (DR) did not controvert the submissions made by the Ld. counsel for the assessee, however, relied on the assessment order passed by the AO.
We have heard the rival submissions and also gone through the material placed before us. The first ground of appeal is general in nature and does not need separate adjudication. So far as the second ground of appeal is concerned, we notice that the assessee had raised the identical Assessment Years: 2010-11 & 2011-12 issue before the Tribunal in its own appeal, for the A.Y. 2008-09 and the coordinate Bench of the Tribunal, by following the earlier decision rendered in the assessee’s own case, ITA No. 2337/Mum/2011 for the A.Y. 2006-07 decided this issue in favour of the assessee holding that provisions of section 115JB are not applicable to the assessee. The co-ordinate Bench has decided this issue in favour of the assessee holding as under:-
“8. Vide ground No. 3 the assessee has agitated the application of section 115JB of the act to the case of the assessee. It has been submitted that the provisions of section 115JB are not applicable in the case of the assessee bank. The ld. A.R. has submitted that the issue is squarely covered in favour of the assessee in the own case of the assessee for assessment year 2006-07 vide order dated 10.04.13 passed in ITA Nos. 2337/M/2011. The co-ordinate bench of the Tribunal while dealing with the identical issue in the own case of the assessee has observed as under:-
9. Last ground of appeal is about applicability of section 115JB of the Act. During the assessment proceedings, AO found that calculation of MAT for the year under consideration was worked out by the assessee at Rs. 87.29 Crores. AO made certain additions to the book profit worked out by the assessee. Besides, he also disallowed certain claims made by the assessee for working of MAT provisions and finally he determined the taxable book profit at Rs. 1,81,23,65,310/-. Assessee preferred an appeal before the FAA. After consideration the submissions of the assessee, FAA held that provisions of Section 115JB were applicable to a banking company, that provisions of the said section applied to all companies as defined in Section 2(17) of the Act that assessee was required to prepare the accounts as per the provisions of Companies Act 1956, that sub- section 2 of the Sec. 115JB did not require applicability of Schedule VI of Companies Act for computing book profit. Accordingly, he held that provisions of Section 115JB were applicable in the case under consideration. Assessment Years: 2010-11 & 2011-12 9.1 Before us, Authorized Representative (AR) submitted that provisions of Section 115JB were not applicable to the assessee bank. He relied upon the orders of Union Bank of India (ITA/4702 & 4706/m/2010 dt. 30-06- 2011) delivered by the ITAT ‘B’ Bench, Mumbai and India Bank (ITA No. 469/MDS/2010 dt. 30-08-2011) delivered by the ‘C’ Bench of Chennai and the matter of ICICI Lombard General Insurance Company Ltd., reported by 2012 IIOL- 690-ITAT-Mum. Departmental Representative (DR) supported the orders of the FAA 9.2. We find that the issue of applicability of Section 115JB has been discussed by the ‘B’ Bench of Mumbai Tribunal in the case of Union Bank of India (supra) in favour of the assessee. In that matter Tribunal has held as under:- 18. Ground No. 5 (in A.Y. 2006-07) relates to applicability of the provisions of Sec. 115JB.
19. This issue is covered by the decision of the Jurisdictional High Court in the case of Kurung Thai Bank PCL (ITA No. 3390/M/90 dt. 30.09.2010. The Ld. CIT (A) however followed the decision of the ITAT in assessee’s own case for the assessment year 2001-02 in ITA No. 9061/M/04. The Ld. AR of the assessee has submitted as follows:- The appellant further submits that the appellant is not a company under Companies Act but is only deemed to be a company as per the provisions of Sec. 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. Therefore, as held by the Jurisdictional ITAT in the case of Maharashtra State Electricity Board (82 ITD 422) the provisions of Sec. 115JB cannot be made applicable to the appellant. Reliance is also placed on the decision of Kerala High Court in the case of Kerala State Electricity Board 9329 ITR 91).
21. We find that in the case of Kurung Thai Bank PCL in ITA No. 3390/M/90 for A.Y. 2004-05 it has been held as follows:- In view of the above discussion and following the view taken by a coordinate Bench in the case of Maharashtra State Electricity Board Vs JCIT (82ITD422), which holds that provisions of MAT cannot be applied to electricity companies for mutually similar reason we uphold the plea of the assessee. The provisions of Sec. 115JB do not apply to the assessee and as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee. The venjinitiation of reassessment Proceedings was bad in law, and we quash the same.
22. The decision of the Ld. CIT (A) is reversed and we hold that provisions of Sec. 115JB cannot be made applicable to the assessee. This ground of the assessee is dismissed. Assessment Years: 2010-11 & 2011-12 9.3 We have perused the other orders cited by the AR of the assessee-bank. We find that issue is decided in favour of the assessee. Therefore, respectfully following the orders of the coordinate benches of the ITAT, we decide the issue in favour of the assessee. Appeal filed by the assessee-bank for the AY 2006-07 stands partly allowed.
The ld. AR could not bring before us any contrary fact or case law which may justify departure from the above finding of the Tribunal. So respectfully following the proposition of law laid down by the co-ordinate bench of this Tribunal, for the sake of consistency, this issue is allowed in favour of the assessee.”
Since, the Ld. CIT (A) has decided the identical issue in accordance with the decision of the coordinate Bench rendered in assessee’s own case, for the A.Y. 2008-09, we do not find any infirmity in the findings of the Ld. CIT (A) to interfere with the same. Hence, we uphold the findings of the Ld. CIT(A) on the said issue and dismiss this ground of appeal of the revenue.
9. Third ground of appeal pertains to disallowance of broken period interest claimed by the assessee. As pointed out by the Ld. counsel for the assessee in the case of Commissioner of Income Tax vs. CitiBank (supra), the issue before the Hon’ble Supreme Court was that whether on the facts and circumstances of the case the High Court was right in holding that the interest paid for broken period should not be considered as part of the purchase price but should be allowed as revenue expenditure in the year of purchase of the securities. The Hon’ble High Court had answered the same in favour of the assessee and against the revenue following its earlier decision in the case of American Express Vs. CIT 258 ITR 601 (Bom) and distinguishing the decision of Vijaya Bank vs. Commissioner of Income Tax 1991 supp. (2) SCC 147. The Hon’ble Supreme Court holding that the facts in the present case are similar to the facts in the American Express Assessment Years: 2010-11 & 2011-12 (supra) dismissed the two Special Leave petitions filed by the revenue and decided the said issue in favour of the assessee and against the revenue. We further notice that in ACIT vs. IndusInd Bank Ltd. and vice-versa similar disallowance was made by the AO. In the first appeal the Ld. CIT (A) following the decision of the Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank in Income Tax Appeal No. 330 of 2012 dated 23.07.2014 and the decision of the coordinate Bench passed in assessee’s own case for the A.Y. 2001-02 held that the broken period interest paid by the appellant is allowable as deduction in computing the total income of the assessee. The coordinate Bench upheld that findings of the Ld. CIT (A) holding as under:_ “9. We have heard rival contentions and perused the material available on record in the light of the decisions relied upon. Undisputedly, the Assessing Officer relying upon the decision of the Hon’ble Supreme Court in Vijaya Bank Ltd. (supra), has disallowed assessee’s claim of deduction on account of broken period interest on the reasoning that it is capital in nature. However, Hon’ble Jurisdictional High Court in American Express International Banking Corp. v/s CIT, [2002] 258 ITR 601 (Bom), after analyzing the concept of broken period interest held that broken period interest is allowable as revenue expenditure. While deciding so, the Hon’ble Court also held that the decision of Hon’ble Supreme Court in Vijaya Bank Ltd. (supra) would not apply to the facts of the assessee’s case. Since, in case of Vijaya Bank Ltd. (supra), the Assessing Officer has assessed the broken period interest as interest on security under section 18 of the old Act, whereas in case of assessee the income was assessed as business income under section 28 of the Act. It is pertinent to observe the Tribunal while deciding the issue in case of HDFC Bank Ltd., had held that broken period interest is allowable as revenue expenditure. The revenue being aggrieved of the said decision of the Tribunal filed an appeal before the Hon’ble Jurisdictional High Court. The Hon’ble Jurisdictional High Court in judgment dated 23rd July 2014 in ITA no. 330/2012, while deciding the said issue followed its judgment in case of American Express International Banking Corp. (supra) and upheld the decision of the Assessment Years: 2010-11 & 2011-12 Tribunal, thereby, dismissing the appeal of the Department on the said issue. Further, it is relevant to note, the Hon’ble Supreme Court in CIT v/s Citi Bank N.A., Civil Appeal no. 1549/2006, dated 12th August 2008, has approved the view expressed by the Hon’ble Jurisdictional High Court in American Express International Banking Corp. (supra). In fact, in assessee’s ye own case in and 4335/Mum/2005 dated 17th June 2011, the Co-ordinate Bench allowed deduction claimed on account of broken period interest. The learned Departmental Representative has not brought to our notice any contrary decision on the issue. Therefore, respectfully following the ratio laid down in the decision of the Hon’ble Jurisdictional High Court the Hon’ble Supreme Court in Citi Bank N.A. (supra) and decision of the ITAT in assessee’s own case as referred to above, we uphold the order of the learned Commissioner (Appeals) on this issue. Grounds raised by the Revenue in all these appeals are dismissed.”
In our considered opinion, the findings of the Ld. CIT (A) is in accordance with the principals of law laid down by the Hon’ble Supreme Court in the case of CIT vs. Citibank (supra), decision of the Hon’ble Bombay High Court in the case of American Express International Banking Corp. (supra) and in accordance with the decision of coordinate Bench in appellant’s own case, for the A.Y. 2006-07 and ITA No. 3676/M/2012 for the A.Y. 2008-09, we therefore do not find any infirmity in the order passed by the Ld. CIT (A). We accordingly dismiss this ground of appeal of the revenue. Since, the facts of the present case are similar to the facts of the assessee’s own case for the assessment year 2010-11 discussed above, we do not consider it necessary to reproduce here again. The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- Assessment Years: 2010-11 & 2011-12
“The order of the CIT (A) is opposed to law and facts of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law in holding that the provisions of Section 115JB of the Income Tax Act, 1961 were not applicable to assessed bank.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that the broken period interest paid by the assessee is allowable in spite of Hon’ble Supreme court decision in the case of CIT Vs Vijaya Bank (187 ITR 541) and the Rajasthan High Court decision in the case of Bank of Rajasthan (316 ITR 391).”
All the grounds of the present appeal are identical to the grounds of the appeal of the assessee pertaining to the A.Y. 2010-11. Similarly, the facts of the present case are also identical to the facts of the case of the assessee for the A.Y. 2010-11. Since, we have decided both the effective grounds of appeal, which are identical to the grounds of this appeal, in the assessee’s own case for the A.Y. 2010-11, discussed above, we dismiss both the effective grounds of the revenue in this appeal for the same reasons. In the result, appeals filed by the revenue for assessment years 2010- 2011 and 2011-2012 are dismissed.