DCIT, CIRCLE - 6 KOLKATA, KOLKATA vs. UCO BANK, KOLKATA

SHRI M.BALAGANESH, AM :

These appeals arise out of the order of the Learned CIT(A), VI, Kolkata in Appeal No. 60/CIT(A)-VI/06-07/C-6 dated 27-05-2008 for Asst Year 2003-04 ; Appeal No.121/CIT(A)-VI/06-07/C-6 dated 13-05-2008 for Asst Year 2004-05 ;

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Appeal No. 300/CIT(A)-VI/07-08/Cir-6 dated 30-11-2009 for Asst Year 2005- 06 ; Appeal No. 625/CIT(A)-VI/08-09/Cir-6/Kol dated 29-12-2009 for Asst Year 2006-07 ; and Appeal No. 853/CIT(A)/VI/2009-10/Cir-6/Kol dated 19-11- 2010 for Asst Year 2007-08 ; Against the respective order of assessments framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

RURAL ADVANCES CLAIMED U/S 36(1)(vii) OF THE ACT

GROUNDS 2 & 3 – ASST YEAR 2003-04 GROUNDS 2 , 3, 4, 5 & 6 – ASST YEAR 2004-05 GROUND 1 of Assessee Appeal - ASST YEAR 2007-08

The brief facts of this issue is that the assessee claimed deduction towards bad debts written off u/s 36(1)(vii) of the Act. The Learned AO held that the assessee being a bank is entitled for deduction towards provision for bad and doubtful advances in terms of section 36(1)(viia) of the Act and granting deduction u/s 36(1)(vii) of the Act would be overlapping and would result in double deduction. This action of the Learned AO was upheld by the Learned CITA. Aggrieved, the assessee is in appeal before us for the various assessment years on various grounds as listed hereinabove.

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4.1. We have heard the rival submissions. The Learned AR produced a statement showing claim of deduction u/s 36(1)(vii) and 36(1)(viia) for each of the assessment years as below:-

Asst Year 2003-04 1) Provision created in the books of accounts Rs. 224,72,26,320/- 2) Deduction allowed u/s 36(1)(viia) by Learned CIT(A) Rs. 115,59,63,471/- 3) Bad Debts Written Off (Apart from provision created for the year) 3A) Bad Debts Written Off (relating to rural branches) Rs. 21,25,38,302/- 3B) Bad Debts Written Off (other than rural advances) Rs. 132,66,41,596/-

Asst Year 2004-05 1) Provision created in the books of accounts Rs. 335,04,07,864/- 2) Deduction allowed u/s 36(1)(viia) by Learned CIT(A) Rs. 192,27,57,403/- 3) Bad Debts Written Off (Apart from provision created for the year) 3A) Bad Debts Written Off (relating to rural branches) Rs. 46,26,28,000/- 3B) Bad Debts Written Off (other than rural advances) Rs. 231,86,13,287/-

Asst Year 2007-08 1) Provision created in the books of accounts Rs. 290,23,67,319/- 2) Deduction allowed u/s 36(1)(viia) by Learned CIT(A) Rs. 290,23,67,319/- 3) Bad Debts Written Off (Apart from provision created for the year) 3A) Bad Debts Written Off (relating to rural branches) Rs. 1,31,21,100/- 3 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

3B) Bad Debts Written Off (other than rural advances) Rs. 239,44,04,842/-

We find that the assessee had duly written off the debts in its books of accounts as mandated by RBI regulations through reversal from provision account. This amounts to actual write off in its books of accouns. We find that this issue is already covered in favour of the assessee in assessee’s own case by the co-ordinate bench decision of this tribunal for the Asst Years 1998-99, 1999-2000, 2001-02 & 2002-03 and also covered by the decision of the Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT reported in 343 ITR 270 (SC). The Learned DR fairly conceded that the issue is covered by the decision of the Hon’ble Apex Court but the figures stated by the Learned AR requires verification and confirmation by the Learned AO. Hence in these facts and circumstances, we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the Learned AO, to verify the figures given by the assessee with regard to the claim of deduction u/s 36(1)(vii) of the Act. Accordingly the ground nos. 2 & 3 in ITA No. 1329/Kol/2008 for Asst Year 2003-04 ; ground nos. 2 to 6 in ITA No. 1102/Kol/2008 for Asst Year 2004-05 and ground no. 1 in ITA No. 2286/Kol/2010 for Asst Year 2007-08 are allowed for statistical purposes.

GROUND 1 – ASST YEAR 2005-06 GROUND 1 - ASST YEAR 2006-07 GROUND 2 of Assessee Appeal – ASST YEAR 2007-08

This issue pertains to claim of deduction towards provision for bad and doubtful debts as per the provisions of section 36(1)(viia) of the Act in excess of provision created in 4 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

the books. It was argued by the assessee that the intention of the legislature while inserting provision u/s 36(1)(viia) of the Act and its scope has to be understood. It was argued that from the provisions of section 36(1)(viia) of the Act, it is evident that for a scheduled bank in order to claim deduction, the essential pre-requisite is the provision for bad and doubtful debts must be created in respect of advances given in its books of accounts. Thus, on creation of such provision, the assessee is automatically entitled to such deduction i.e aggregate of 7.5 % of total income and 10% of aggregate average advances made by the rural branches. According to Learned AR, thus, if a provision for bad and doubtful debts is made by a scheduled bank having rural branches, the assessee is entitled to a deduction which should not be restricted to the provision for bad and doubtful debts made in the accounts but is to be allowed at the rate of 7.5% of total icnoem and 10% of aggregate rural advances made by the assessee. It was argued further that such provision has been inserted so as to promote rural banking. It was argued that the legislature has provided that extent of deduction which it deems fit irrespective of whether the corresponding provision has been made in the books or not. In response to this, the Learned DR vehemently supported the orders of the lower authorities. Aggrieved, the assessee is in appeal before us for the various assessment years on various grounds as listed hereinabove.

5.1. We have heard the rival submissions. We hold that there cannot be any question of considering claim for any deduction u/s 36(1)(viia) of the Act if there is no provision for bad and doubtful debts made by the assessee bank because the clause (viia) starts with the phrase “In respect of any provision for bad and doubtful debts made by – ” . No doubt that the deduction is to be restricted to 7.5% of total income and 10% of aggregate rural advances, but the result of the such workings cannot be allowed in excess of the provision charged to profit and loss account for the year. We find that the issue is squarely covered against the assessee by the decision of the

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Hon’ble Punjab and Haryana High Court in the case of State Bank of Patiala vs CIT reported in (2005) 272 ITR 54 (P&H) (supra) wherein it was held as under:-

“A bare perusal of the above shows that the deduction allowable under the above provisions is in respect of the provision made Therefore, making of a provision for bad and doubtful debt equal to the amount mentioned in this section is a must for claiming such deduction The Tribunal has rightly pointed out that this issue stands further clarified from the proviso to clause (vii) of section 36(1) of the Act, which reads as under:

"Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause"

This also clearly shows that making of provision equal to the amount claimed as deduction in the account books is necessary for claiming deduction under section 36(1) (viia) of the Act The Tribunal has distinguished various authorities relied upon by the assessee wherein deductions had been allowed under various provisions which also required creation of reserve after the assessee had created such reserve in the account books before the completion of the assessment It has been correctly pointed out that in all those cases, reserves/provisions had been made in the books of account of the same assessment year and not of the subsequent assessment year

In the present case, the assessee has not made any provision in the books of account for the assessment year under consideration, ie, 1985-86, by making supplementary entries and by revising its balance-sheet The provision has been made in the books of account of the subsequent year

We are, therefore, satisfied that the Tribunal was right in holding that since the assessee had made a provision of Rs 1,19,36,000 for bad and doubtful debts, its claim for deduction under section 36(1) (viia) of the Act had to be restricted to that amount only Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this court

The appeal is, accordingly, dismissed No costs.”

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Respectfully following the decision cited supra, the ground no.1 in ITA No. 07/Kol/2010 for Asst Year 2005-06 ; ground no.1 in ITA No. 415/Kol/2010 for Asst Year 2006-07 and ground no. 2 in ITA No. 2286/Kol/2010 for Asst Year 2007-08 are dismissed.

Ground No. 4 for Asst Year 2003-04 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 4 raised by the assessee in ITA No. 1329/Kol/2008 is dismissed as not pressed.

The brief facts of this issue is that the assessee had derived dividend income from shares held as stock in trade and interest income out of tax free bonds. The assessee claimed that it had not incurred any expenditure for the purpose of earning these exempt incomes and therefore objected to the disallowance u/s 14A of the Act. It was also further argued by the assessee that the shares were not held as investments for the

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purpose of earning dividend income (which is exempt) and instead the same were held as stock in trade, wherein the profit derived on sale of such shares would only result in taxable income and not exempt income. The Learned AO however made disallowance u/s 14A of the Act which was also confirmed by the Learned CITA. Aggrieved, the assessee is in appeal before us for the various assessment years on various grounds as listed hereinabove.

8.1. We have heard the rival submissions. The Learned AR argued that the Hon’ble Apex Court in assessee’s own case reported in (1999) 240 ITR 355 (SC) had held that the assessee has been holding the shares held as stock in trade and has been valuing the same at cost or market value which is lower for several decades. Based on this finding by the Hon’ble Apex Court, he argued that the shares were not held by the assessee with an intention to earn dividend income and instead the same were held only as stock in trade in order to make business profits out of the same. Accordingly, he argued that the primary intention behind introduction of section 14A of the Act would not get satisfied and hence disallowance contemplated thereon would not be applicable to the assessee herein. In response to this, the Learned DR argued that the disallowance u/s 14A of the Act would be applicable to the assessee as the said section does not bifurcate between an assessee holding the shares as investments or as stock in trade. We are in complete argument with the Learned DR in this regard. We find that the dividend income whether earned from shares held as investments or as stock in trade, still retains the character of exempt income and accordingly the provisions of section 14A would have to be invoked thereon. Hence the finding given by the Hon’ble Supreme Court in assessee’s own case with regard to the status of the assessee does not support/ advance the case of the assessee in the context of making disallowance u/s 14A of the Act.

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Respectfully following the decision of the Hon’ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Ltd reported in 328 ITR 81 (Bom), we hold that the provisions of Rule 8D of the IT Rules, 1962 cannot be made applicable for Asst Years prior to Asst Year 2008-09. However, is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence disallowance is definitely warranted in terms of section 14A which is brought in the statute book with retrospective effect from 1.4.1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income. The Hon’ble Jurisdictional High Court in the case of CIT vs M/s R.R.Sen & Brothers P Ltd in GA No. 3019 of 2012 in ITAT NO. 243 of 2012 dated 4.1.2013 had held as under:-

“ The assessee did not show any expenditure incurred by him for the purpose of earning the money which is exempted under income tax. The tribunal has computed expenditure at 1% of such dividend income, which, according to them, is the thumb rule applied consistently. We find no reason to interfere.

The appeal is dismissed.”

Respectfully following the decision of the Hon’ble Calcutta High Court (supra), we direct the Learned AO to disallow 1% of exempt income under this issue and accordingly, the grounds raised by the assessee are set aside to the file of Learned AO to make addition as directed above. Accordingly, the grounds raised by the assessee in this regard are allowed for statistical purposes. 9. EXCLUSION OF PROFIT ON SALE OF INVESTMENT AND INCLUSION OF PROFIT / LOSS AS PER INVESTMENT TRADING ACCOUNT – Rs. 344,84,22,513/-

GROUNDS 7 & 8 IN ASST YEAR 2003-04

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The brief facts of this issue is that the assessee claimed exclusion of profit on sale of investments amounting to Rs. 344,84,22,513/- as well as deduction for loss on sale of investment amounting to Rs. 115,28,84,687/-. The assessee submitted that it has been treating all the investments as stock in trade for income tax purposes and the resultant profit / loss from buying and selling of these securities has been offered to tax as business income. It was also argued that the investments at the end of the year are valued at the lower of cost or market price consistently over several decades and this method of valuation and the status of the assessee holding investments as stock in trade had been approved by the Hon’ble Apex Court in assessee’s own case reported in 240 ITR 355 (SC) and any profit / loss arising out of the said valuation at the end of the year has been considered in the books of accounts. It was argued that however, for the purpose of income tax valuation of investments, an investment trading account is prepared in which all the securities are treated as stock in trade and resultant figure of the trading account has been offered to tax. The profit / loss on sale of investments as per books and the depreciation on investments as per books are added back in the computation statement for the purpose of income tax. It was argued further that the stand of the assessee has been accepted by the revenue from Asst Year 2004-05 onwards and no addition has been made on this account by the Learned AO. In response to this, the Learned DR vehemently supported the orders of the lower authorities.

9.1. We have heard the rival submissions. We find that the Learned AO had accepted to the stand of the assessee from Asst Year 2004-05 onwards and had not made any addition with regard to the impugned issue. We find that the present issue has been considered by the Hon’ble Apex Court in assessee’s own case reported in 240 ITR 355 (SC). The facts before the Hon’ble Apex Court were that the assesee bank following mercantile system of accounting, claimed a notional loss of Rs. 7.45 crores 10 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

on account of closing stock of securities at market value. Since the revenue had accepted the same method for over last 30 years, the IAC accepted the same but the Commissioner proceeded for revision u/s 263 of the Act. He held that the assessee bank had no right to calculate profit and loss arising out of investment trading account as it had excluded the same from the preparation of its final accounts. He held that unless a bank itself accepted the position by incorporating such loss / profit in the final accounts, it would have no right to put across such hypothetical loss for the purpose of income tax assessment. On appeal, however, the Tribunal set aside the order of the Commissioner and accepted that of the IAC. On the revenue’s appeal, the High Court, rejecting the Tribunal’s order, affirmed the order of the Commissioner. Held :- “What is taxable under the Act is the rea11y accrued or arisen income. On the basis of the method of accountancy regularly employed by the assessee, the real income is pointed out in {he income-tax return submitted by the assessee. This cannot be ignored by holding that in a balance sheet which is required 10 be statutorily maintained in a particular form, market value of the shares and securities is not mentioned or is mentioned ill brackets.

For the purpose of income-lax whichever method is adopted by the assessee, a true picture 0f the profits and gains, that is to say, the real income is to be disclosed. For determining the real income, the entries in a balance sheet required to be maintained in the statutory form may not be decisive or conclusive. In such cases, it is open to the ITO as well as the assessee to point out the true and proper income while submitting the income-tax return.

For reasons, the Central Government, in exercise of the powers conferred by section 53 of the Banking Regulation Act, and on the recommendation of the RBI, permitted the assessee not to disclose the market value of its investment in the balance sheet required to be maintained as per the statutory form. But as the assessee was maintaining its accounts on mercantile system, it was entitled to show its real income by taking into account the market value of such investments in arriving at the real taxable income. On that basis, therefore, the Assessing Officer had taxed the assessee.

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From the various decisions of the Supreme Court, it can be held that (1) for valuing the closing stock, it is open to the assessee to value it at cost or market value, whichever is lower; (2) in the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can he drawn, a taxpayer is free to employ for the purpose of his trade his own method of keeping accounts and, jar that purpose, to value stock-in-trade either at cost or market price; (3) a method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation; (4) the concept of real income is certainly applicable in judging whether there has been income or not, but. in every case, it must be applied with care and within the recognised limits; (5) whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation; (6) under section 145 of the Act, in a case where accounts are correct and complete hut the method employed is such that in the opinion of the ITO the income cannot be properly deduced therefrom, the computation shall be made in such manlier and on such basis as the ITO may determine. The assessee-bank was valuing the stock-in-trade at cost for the purpose of statutory balance sheet and for the income-tax return, valuation was at cost or market value, whichever was lower. That practice was accepted by the department and there was no justifiable reason for not accepting the same. Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That could not be discarded by the departmental authorities, on the ground that the assessee was maintaining balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods jar valuing its stock-in-trade (investments) because the bank was required to prepare balance sheet in the prescribed form and it had no option to change it. For the purpose of income-tax as stated earlier, what is to be taxed is the real income which is to be deduced on the has is of the accounting system regularly maintained by the assessee and that was done by the assessee in the instant case. Therefore, the order of the High Court was to be set aside.”

Respectfully following the decision of the Hon’ble Apex Court in assessee’s own case (supra) , we allow the grounds 7 & 8 for Asst Year 2003-04 raised by the assessee.

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GROUND NO. 9 OF ASST YEAR 2004-05 The brief facts of this issue is that the assessee derived dividend income of Rs. 16,17,000/- from Bank of Barhad , Malaysia and claimed exemption for the same. The Learned AO disallowed the same on the ground that the said dividend is received from foreign company and exemption u/s 10 (34) read with section 1150 of the Act is applicable only for dividend received from domestic companies. During the first appellate proceedings, the assessee argued that it is enjoying benefit of double taxation relief as per DTAA entered into between India and Malaysia and also pleaded that the said exemption has been granted to the assessee by the revenue in the earlier years and there is no reason to shift the stand during the assessment year under appeal. Not convinced with the arguments of the assessee, the Learned CITA upheld the addition made by the Learned AO. Aggrieved, the assessee is in appeal before us.

10.1. The Learned AR argued that as per the Double Taxation Avoidance Agreement entered into between India and Malaysia, the right to tax the dividend income for company registered in Malaysia was vested in the hands of Malaysia and accordingly the same is not taxable in India. He fairly stated that as per the new treaty between India and Malaysia, dividend is taxable in both the states and also subject to claim of tax credit in terms of section 91 of the Act. He further argued that the new treaty between India and Malaysia was notified vide Notification No. GSR 667(E) dated 12.10.2004 and accordingly the same is not applicable for Asst Year 2004-05. In response to this, the Learned DR argued that the taxability of foreign dividend income is to be construed as retrospective in operation as the new treaty had come into force on 14.8.2003 and hence is applicable for Asst Year 2004-05.

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10.2. We have heard the rival submissions . We have gone through the new treaty between India and Malaysia and the relevant article of coming into force of this new treaty is dealt in Article 28. For the sake of convenience, the preamble to the treaty and Article 28 are reproduced hereunder:- Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Malaysia

Whereas the annexed Agreement between the Government of the Republic of India and the Government of Malaysia for the avoidance of double taxation and the prevention of fiscal evasion with respect to Taxes on income has come into force on the 14th August, 2003, on the notification by both the Contracting States to each other, under Article 28 of the said Agreement, of the completion of the procedures required by their respective laws for bringing into force of the said Agreement.

Now, therefore, in exercise of the powers conferred by section 90 of the Income-Tax Act, 1961 (43 of 1961) , the Central Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India.

Notification ; NO. GSR 667(E), dated 12-10-2004.

ARTICLE 28 – ENTRY INTO FORCE

(a) in Malaysia :

(i) in respect of Malaysian tax, other than petroleum income tax, to tax chargeable for any year of assessment beginning on or after the first day of 14 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

January in the calendar year following the year in which tis Agreement enters into force;

(ii) in respect of petroleum income tax, to tax chargeable for any year of assessment beginning on or after the first day of January of the second calendar year following the year in which this Agreement enters into force; and

(b) in India:

In respect of income in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force.

From the above, it could be safely be concluded that the new treaty is effective only from 1.4.2004 and hence not applicable for Asst Year 2004-05. Accordingly, for Asst Year 2004-05, the taxability of foreign dividend income would be governed only by the old treaty entered into on 25.10.1976. We find that the Hon’ble Apex Court had an occasion to address the taxability of foreign dividend income in the case of DCIT vs Torqouise Investment & Finance Ltd & Ors reported in (2008) 300 ITR 1 (SC) , wherein it was held that dividend income derived by the assessee from a company in Malaysia is not liable to be taxed in the hands of the assessee in India by virtue of provisions of DTAA between India and Malaysia. Respectfully following the said judicial precedent and in view of the fact that the new treaty is not applicable for Asst year 2004-05, we hold that the dividend received from foreign company in Malaysia by the assessee is not liable to be taxed in India. Accordingly, the ground no. 9 raised by the assessee for Asst Year 2004-05 is allowed.

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GROUND NO. 3 OF ASST YEAR 2007-08 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 3 raised by the assessee in ITA No. 2286/Kol/2010 is dismissed as not pressed.

GROUND NO. 4 OF ASST YEAR 2007-08 During the course of hearing, the Learned AR stated that the assessee is not willing to press this ground. Hence the ground no. 4 raised by the assessee in ITA No. 2286/Kol/2010 is dismissed as not pressed.

GROUND NO. 5 OF ASST YEAR 2007-08

The brief facts of this issue is that the assessee made provision for leave encashment in its books of accounts and claimed the same as deduction. The Learned AO invoked the provisions of section 43B(f) of the Act and disallowed the same on the ground that the same is not paid by the assessee. This action of the Learned AO was confirmed by the Learned CITA on first appeal. Aggrieved, the assessee is in appeal before us .

13.1. We have heard the rival submissions. We find that this issue is covered by the decision of the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India reported in 292 ITR 470 (Cal). We find that the revenue had 16 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

preferred Special Leave Petition before the Supreme Court against the judgement of Calcutta High Court. The Apex Court in Special Leave to Appeal (Civil) CC 12060 / 2008 dated 8.9.2008 had held as under:-

“The petition was called on for hearing today. Upon hearing counsel the court made the following Order. Issue Notice. In the meantime, there shall be stay of the impugned judgement, until further orders.” Later the Hon’ble Supreme Court in Special Leave to Appeal (Civil) No(s). CC 22889 / 2008 dated 8.5.2009 had held as under:-

“The petition was called on for hearing today. Upon hearing counsel the court made the following Order Delay condoned. Leave granted. Pending hearing and final disposal of the Civil appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the department to recover that amount in case Civil Appeal of the department is allowed.

We further make it clear that the assessee would, during the pendency of this Civil Appeal , pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns.” Hence from the aforesaid Supreme Court judgement, it could be inferred that the Hon’ble Supreme Court had not stayed the judgement of the Calcutta High Court during Leave proceedings. Hence, we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly, the ground no. 5 raised by the assessee in ITA No. 2286/Kol/2010 for Asst Year 2007-08 is allowed for statistical purposes.

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GROUND NO. 3 OF REVENUE’S APPEAL FOR ASST YEAR 2007-08 The brief facts of this issue is that assessee claimed relief u/s 91 of the Act for Rs. 2,55,47,497/- while computing tax liability on account of taxes paid outside India in relation to its operations in Hongkong. The Learned AO disallowed the claim on the contention that the said relief is available only for taxes paid under normal provisions of the Act and not when taxes are paid u/s 115JB of the Act. This action was not endorsed by the Learned CITA who directed the Learned AO to grant relief for the same. Aggrieved , the revenue is in appeal before us.

14.1. We have heard the rival submissions. We find that the provisions of section 91 of the Act did not distinguish between normal provisions and provisions of section 115JB of the Act when it comes to claiming relief u/s 91 of the Act in respect of taxes paid for income earned in another country with which DTAA does not exist. We find that it is clearly specified in section 91 of the Act that if the income in respect of which the assessee has paid income tax in any country, with which no agreement u/s 90 exists, and such income is taxable in India, the assessee shall be entitled to relief u/s 91 from the Indian Income tax payable. We are in agreement with the argument of the Learned AR in this regard and also on the reliance placed on the co-ordinate bench decision of Mumbai Tribunal in the case of Hindustan Construction Co Ltd vs CIT reported in 25 SOT 359 (Mum ITAT) in favour of the assessee, wherein it was held :-

“6.4 In the light of the above discussion, we consider the facts of the case under consideration. There is no dispute that the assessee is entitled to relief under section 91 of the Act. The scheme of the Act is that section 115JB is applicable wherein the case of an assessee, being a company, the income-tax payable on the total income as computed under this Act in respect of any previous year is less than 7.5 per cent of its book profit, 7.5 per cent book profit shall be deemed to be the total income of the assessee. 18 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

This can be explained by an illustration. Suppose an assessee having income in India is 'x ' and income outside India is 'y'. In normal calculations of income from sections 2!! to 430, the income i.e., 'x' + 'y' is less than the income 'z': as per calculation under section 115JB then income 'z' is to be taken. In the case under consideration 'x' + 'y' is less than 7.5 per cent so income according to section 1151B is taken which is more than income 'x ' + 'y'. On consideration of above guidelines laid down by the Apex Court in the above decisions and the ratio laid down by the Calcutta High Court in the case of Jeewanlal (1929) Ltd. (supra), we find that income in Bhutan has been considered while invoking section 11518, once Bhutan income has been considered for the purpose of this Act, the assessee is entitled to deduction under section 91. We are, therefore, of the considered view that the assessee is entitled to deduction under section 91 of the Act even on merit. The orders of the Assessing Officer are neither erroneous nor prejudicial to the interests of the revenue, therefore, the CIT is not correct in invoking section 263. The order of the CIT is, thus, quashed.”

We also find that this issue has been accepted by the Learned AO in the assessment order framed u/s 143(3) of the Act for the Asst Year 2009-10 which is part of the records produced before us.

Respectfully following the judicial precedent relied upon hereinabove, we find no infirmity in the order of the Learned CITA in this regard. Accordingly, the ground no. 3 raised by the revenue in ITA No. 197/Kol/2011 for Asst Year 2007-08 is dismissed.

ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2003-04 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2004-05 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2005-06 ADDITIONAL GROUNDS 1 TO 4 - ASST YEAR 2006-07 GROUND NO. 6 OF A’EE APPEAL - ASST YEAR 2007-08

19 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

We find that this issue is covered by the co-ordinate bench decision of this tribunal in assessee’s own case in ITA No. 1768/Kol/2009 dated 27.11.2015 for Asst Year 2002- 03, wherein it was held that the provisions of section 115JB of the Act are not applicable to the assessee bank and the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012. Accordingly, the additional grounds 1 to 4 raised by the assessee for Asst Years 2003-04 to 2006-07 and Ground No. 6 raised by the assessee for Asst Year 2007-08 are allowed.

GROUND NO. 9 - ASST YEAR 2003-04 GROUND NOS 3 & 4 - ASST YEAR 2005-06 GROUND NO. 2 - ASST YEAR 2006-07 GROUND NOS 7 & 8 OF ASSESSEE’S APPEAL - ASST YEAR 2007-08 GROUND NOS. 1 & 2 OF REVÉNUE’S APPEAL - ASST YEAR 2007-08

In view of our decision in Para No. 15 above that the provisions of section 115JB of the Act are not applicable to the assessee bank , hence the aforesaid grounds raised by the assessee and revenue become infructuous and academic in nature. Hence the grounds raised by the assessee in this regard are allowed and grounds raised by the revenue are dismissed.

20 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

In view of our decision in Para No. 15 above that the provisions of section 115JB of the Act are not applicable to the assessee bank , hence the ground no. 9 raised by the assessee becomes infructuous and academic in nature. Hence the ground no. 9 raised by the assessee for Asst Year 2007-08 is allowed.

Order pronounced in the open court on 21 -03-2016.

Sd/- Sd/- ( Mahavir Singh, Judicial Member ) ( M.Balaganesh, Accountant Member)

Date : 21 -03-2016

21 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM

Copy of the order forwarded to: 1. The Appellant/Department: The DCIT/ACIT, Cir-6 P-7 Chowringhee Square, Kol-69. 2 The Respondent/Assessee- UCO Bank 10 B.T.M Sarani, Kol-700001. . 3 /The CIT, 4.The CIT(A)

22 ITA No. 1329/KOl/2008 ITA No. 1102/KOl/2008 ITA No. 07/KOl/2010 ITA No. 415/KOl/2010 ITA No. 2286/KOl/2010 ITA No. 197/KOl/2011 UCO Bank-AM