THE COMMISSIONER OF INCOME-TAX vs. M/S. ING VYSYA BANK LTD

THE ASST. COMMISSIONER OF INCOME-TAX

THE COMMISSIONER OF INCOME-TAX

We have heard Shri. K.V. Aravind, learned Senior Standing Counsel for the Revenue

Revenue has framed following questions in ITA No.309/2015: "

Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that the securities held under 'held to maturity' have the material characteristics of capital asset rather than stock in trade and the form part of investments only?

Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing relief to the assessee writing off entire expense as revenue when the expenditure towards software item is capital in nature having enduring benefit eligible for depreciation at 60%?

Whether the Hon'ble Tribunal was justified in allowing relief with regard to ESOP when the assessing officer rightly disallowed the same on the ground that the liability is purely contingent and not an ascertained liability?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing relief to the assessee when the assessing officer rightly held that the losses which are contingent in nature cannot be allowed to be written off and disallowed the same on the ground that the liability is purely contingent and not an ascertained one?

Whether on the facts and on the circumstances of the case, the Tribunal is justified in law in allowing relief on the issue of 'broken period interest' without appreciating the fact that the assessee cannot follow receipt bais of accounting for some items of income and

Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing relief to the assessee towards diminution in value of investment under AFS/HFT categories when the assessing officer have made the addition based on RBI guidelines dated 16.11.2008 wherein it clearly states that the depreciation on these securities has to be aggregated script-wise and only net depreciation, if any, is to be provided and allowed for in the account?

The questions of law in ITAs No.350/2015 & 312/2015 are common and they read as follows: "

Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that the securities held under 'held to maturity' have the material characteristics of capital asset rather than stock in trade and the form part of investments only?

Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing relief to the assessee writing off entire expense as revenue when the expenditure towards software item is capital in nature having enduring benefit eligible for depreciation at 60%?

Whether the Hon'ble Tribunal was justified in allowing relief with regard to ESOP when the assessing officer rightly disallowed the same on the ground that the liability is purely contingent and not an ascertained liability?

Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing relief to

Whether on the facts and on the circumstances of the case, the Tribunal is justified in law in allowing relief on the issue of 'broken period interest' without appreciating the fact that the assessee cannot follow receipt basis of accounting for some items of income and follow accrual basis of accounting for other items of income?

Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing relief to the assessee towards diminution in value of investment under AFS/HFT categories when the assessing officer have made the addition based on RBI guidelines dated 16.11.2008 wherein it clearly states that the depreciation on these securities has to be aggregated script-wise and only net depreciation, if any, is to be provided and allowed for in the account?

Whether on the facts and in the circumstances of the case, the Tribunal erred in concluding that banking companies are exempt from MAT provisions even when there is no specific exemption for the banking companies in the provisions of section 115 JB of Act?

Whether on the facts and in the circumstances of the case, the Tribunal erred in allowing the relief with regard to losses which were due to operational mistakes, related mainly to ATM transactions of customer and that loss is essential capital loss incurred for operational purposes?

Whether on the facts and in the circumstances of the case, the Tribunal erred in allowing relief to the assessee in

Whether on the facts and in the circumstances of the case, the Tribunal erred in allowing relief to the assessee in respect of insurance premium even when assessing authority rightly held that as per the mutual agreement the insurance premium for housing loans is to be amortized over the period of 17 years?

Shri A.Shankar, learned Senior Advocate for the respondent submitted that question No.1 is held against the Revenue by the Apex Court in • Commissioner of Income-tax, Hubli Vs. Karnataka Vikas Grameen Bank1

Shri Shankar further submitted that the ITAT has remanded the matter to the Assessing officer in this case. The Assessing Officer has not granted relief and the appellant has accepted that position for the period 2005-06.

Shri. Shankar's submissions are not disputed by Shri K.V.Aravind, for the Revenue. Accordingly, this question is answered against the Revenue and in favour of the assessee.

Shri. Shankar submitted that this question is covered against the Revenue in ITA No.130/20073. The same was opposed by Shri. Aravind contending that ITA No.130/2007 is

We may record that in Oriental Bank of Commerce Vs. Additional Commissioner of Income- tax4 it is held as follows: " 7. The mere circumstance that the depreciation rate is spelt out in the Schedule to the Income-tax Act in our opinion is not conclusive as to the nature of the expenditure and whether it resulted in enduring advantage to a particular assessee. It is nobody's case that the assessee is dealing with computer softwares or is in the business of any related services. Rather it uses specific customized software, which is specific to its banking activities. But for the use of such software, the nature of expenditure otherwise incurred for streamlining its functions i.e. towards fee payable to the consultants for systems and employment of special professionals to carry on the tasks that the software in fact performs, would have fallen undoubtedly in the

We are in respectful agreement with the said Authority. Accordingly, this question is answered in favour of the assessee and against the Revenue.

Shri Aravind, sought to amend the question as follows and Shri Shankar has no objection for the same.

“Whether the Hon’ble Tribunal was justified in allowing the relief with regard to Stock Option ESOP when the assessing officer rightly disallowed the same on the ground that the liability was contingent liability and not an ascertained liability?

Shri Shankar submitted that said issue is held against the Revenue by the Special Bench of ITAT

Shri. Aravind, in his usual fairness, does not dispute the same.

In substance, this question of law is covered against the Revenue and accordingly answered. Re. Question No.4: 15. Shri Shankar, submitted that for the assessment year 2004-05, the ITAT has given relief by following the decision in Syndicate Bank v. DCIT7. The said order has been challenged by the Revenue before a Division Bench of this Court in CIT Vs. Syndicate Bank8. Following the decision in CIT Vs. Bharat heavy

Shri Aravind submitted that questions No.5 and 6 do not arise for consideration in the facts and circumstances of the case. His submission is placed on record.

Shri A.Shankar submitted that question No.1 is held against the Revenue by the Apex Court in • Commissioner of Income-tax, Hubli Vs. Karnataka Vikas Grameen Bank10

He further submitted that the ITAT has remanded the matter to the Assessing officer in this case. The Assessing Officer has not granted relief to the appellant and the appellant has accepted that position for the period 2005-2006.

This factual position is not disputed by Shri K.V.Aravind. Hence, this question is held against the Revenue and answered accordingly.

This question has been considered in ITA No.309/2015 (Supra) and answered in favour of the assessee.

Shri Aravind, sought to amend the question as follows and Shri Shankar, learned Senior advocate has no objection for the same.

“Whether the Hon’ble Tribunal was justified in allowing the relief with regard to Stock Option ESOP when the assessing officer rightly disallowed the same on the ground that the liability was contingent liability and not an ascertained liability?

Shri Shankar submitted that the above question has been held against the Revenue by the Special Bench of ITAT in Biocon Ltd., V. Dy.CIT12 which has been upheld by this Court in Commissioner of Income Tax, LTU Vs. Biocon Ltd.13 He further submitted that the ITAT for the assessment Year 2005-06 has remanded the matter to the Assessing Officer, who by following the ITAT Special Bench decision has granted the relief.

Shri. Aravind does not dispute the same.

In substance, the legal question is covered against the Revenue and answered accordingly.

The assessee has claimed a sum of Rs.2,39,38,811/- as insurance premium paid on Housing Loan Policies. The Assessing Officer held that the amount has to be spread over for a period of 17

Shri.Aravind submitted that the Housing loans are spread over for several years. Therefore, claim has to be made in that particular year.

Shri.Shankar placing reliance on Taparia Tools Ltd., v. Joint Commissioner of Income-tax, Nasik24, submitted that once the expenses are spread over, that benefit will have to be extended to the assessee and the Department has no option to impose its view that the expenses have to be claimed in the relevant year.

ITAT has recorded that the expenses are relatable to Housing Projects which are part of the assessee’s business activities. Payment of insurance premium on the Housing projects is revenue in nature. We concur with the view taken by the CIT (Appeals) confirmed by the ITAT.

Resultantly, this question is also answered in favour of the assessee and against the Revenue.

In the result, these appeals fail and are accordingly dismissed.