M/S DENA BANK, Mumbai v. THE ADD CIT RG 2(3), Mumbai

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI R.S. PADVEKAR (J M) I.T.A.NO.3676/MUM/2000 :: A.Y. 1996-97 JT.COMMR. OF INCOME-TAX S.R. 27 R.NO.671 AAYKAR BHAVAN 6 TH FLOOR M.K.RD. MUMBAI-400 020. VS. M/S. DENA BANK 17 HORNIMAN CIRCLE 2 ND FLOOR FORT MUMBAI-400 023. PAN: AAACD4249B APPELLANT RESPONDENT I.T.A.NO. 237/MUM/2002 :: A.Y. 1997-98 I.T.A.NO. 238/MUM/2002 :: A.Y. 1998-99 I.T.A.NO.5062/MUM/2004 :: A.Y. 1999-2000 I.T.A.NO.2195/MUM/2004 :: A.Y. 2000-2001 I.T.A.NO.4789/MUM/2008 :: A.Y. 2003-2004 M/S. DENA BANK 17 HORNIMAN CIRCLE 2 ND FLOOR FORT MUMBAI-400 023. PAN: AAACD4249B VS. JT.COMMR. OF INCOME-TAX S.R. 27 R.NO.671 AAYKAR BHAVAN 6 TH FLOOR M.K.RD. MUMBAI-400 020. APPELLANT RESPONDENT DEPARTMENT BY SHRI NARENDRA SINGH. ASSESSEE BY SHRI S.ANANTHAN & MRS. LALITHA RAMESWARAN. O R D E R PER BENCH : THIS BATCH OF SIX APPEALS - ONE BY THE REVENUE FOR ASSTT. YEAR 1996- 97 AND THE OTHER FIVE BY THE ASSESSEE FOR ASSTT. Y EARS 1997-98 1998-99 1999-2000 2000-01 AND 2003-04 INVOLVE SOME COMMO N ISSUES. WE ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 2 ARE THEREFORE PROCEEDING TO DISPOSE THEM OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. A.Y. 1996-97: 2. THE FIRST ISSUE IN THIS APPEAL IS AGAINST ALLOWI NG OF DEDUCTION TOWARDS PROVISION FOR BAD DEBTS. BRIEFLY STATED FACTS OF TH E CASE ARE THAT THE ASSESSEE DEBITED A SUM OF RS.52 30 30 064/- TOWARDS SPECIFIC PROVISION ON ACCOUNT OF NON-PERFORMING ASSETS. THESE ASSETS INCL UDED SUB-STANDARD ASSETS DOUBTFUL ASSETS AND LOSS ASSETS. ACCORDING TO THE AO THE CLASSIFICATION WAS DONE BY THE ASSESSEE AS PER THE GUIDELINES ISSUED BY THE RBI. THE AO NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT A SUM OF RS.42 81 94 064/- REPRESENTED BAD DEBTS WRIT TEN OFF DURING THE YEAR WHICH WERE ADJUSTED AGAINST SIMILAR SPECIFIC PROVISION FOR AN EARLIER YEAR. ACCORDING TO THE AO THE ENTIRE PROVISION CRE ATED BY THE ASSESSEE WAS NOT DEDUCTIBLE. HE SPLITTED THIS PROVISION INT O TWO PARTS VIZ. PROVISION FOR RURAL DEBTS AMOUNTING TO RS.11.05 CRO RES AND THE REMAINING PROVISION TOWARDS NON-RURAL DEBTS. IN HIS OPINION THE PROVISION FOR RURAL DEBS WAS ALLOWABLE U/S.36(1)(VIIA). AS REGARDS THE OTHER PROVISION HE HELD THAT ONLY THE ACTUAL AMOUNT OF BAD DEBTS WRITTEN WA S DEDUCTIBLE U/S.36(1)(VII).THIS AMOUNT WAS DETERMINED AT RS.31 76 36 641/-. THE EXCESS PROVISION OF RS.9 48 36 000/- WAS DISALLOWED . THE LD. CIT(A) OVERTURNED THE IMPUGNED ORDER ON THIS ISSUE AND DEL ETED THE SAID ADDITION. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SEC. 36(1)(VII) GRANTS DEDUCTIO N FOR ANY AMOUNT OF BAD ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 3 DEBT OR PART THEREOF WRITTEN OFF BY THE ASSESSEE AS IRRECOVERABLE IN THE ACCOUNTS SUBJECT TO THE PROVISIONS OF SEC. 36(2) OF THE ACT. SEC. 36(1)(VIIA) DEALS WITH THE GRANTING OF DEDUCTION IN RESPECT OF PROVISION FOR ANY BAD OR DOUBTFUL DEBTS MADE BY A SCHEDULED BANK ETC. THE CASE OF THE AO IS THAT THE DEDUCTION ON ACCOUNT OF PROVISION FO R NON-RURAL DEBTS SHOULD BE ALLOWED ONLY TO THE EXTENT OF THE AMOUNT OF DEBT S ACTUALLY WRITTEN OFF. ON THE OTHER HAND THE ASSESSEE IS CONTENDING THAT THE PROVISION MADE BY IT IN ACCORDANCE WITH THE RBI GUIDELINES SHOULD BE ALLOWED AS DEDUCTION. HERE IT IS IMPORTANT TO MENTION THAT THERE IS NO D ISPUTE ON THE CLAIM OF PROVISION FOR RURAL DEBTS WHICH HAS BEEN ALLOWED BY THE AO AT THE AMOUNT CLAIMED. THE HONBLE SUPREME COURT IN VIJAYA BANK V S. CIT (2010) 323 ITR 166 (SC) CONSIDERED A CASE IN WHICH THE ASSESSE E CLAIMED DEDUCTION IN RESPECT OF PROVISION FOR BAD DEBTS U/S.36(1)(VII ). THE AO HELD THAT IT WAS ONLY A PROVISION AND HENCE COULD NOT BE EQUATED WITH ACTUAL WRITE OFF OF BAD DEBTS AS PER THE REQUIREMENTS OF SEC. 36(1)( VII). THE HONBLE SUPREME COURT AFTER CONSIDERING THE ISSUE AT LENGT H HELD THAT IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBTS TO THE P & L A/C. AND CREDITS THE ASSESTS ACCOUNT LIKE SUNDRY DEBTORS ACCOUNT TH AT WOULD CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT. IT WAS FURTHER HELD TH AT IF AN ASSESSEE DEBITS PROVISION FOR DOUBTFUL DEBTS TO THE P & L A/C. AND MAKES A CORRESPONDING CREDIT TO THE TO THE LIABILITIES AND PROVISIONS ON THE LIABILITIES SIDE OF THE BALANCE-SHEET THEN IT WOULD CONSTITUTE A PROVISION FOR DOUBTFUL DEBTS AND IN SUCH A CASE THE ASSESSEE WOULD NOT BE ENTITLED T O DEDUCTION AFTER 1-4- 1989. THE YEAR UNDER CONSIDERATION IS ASSTT. YEAR 1 996-97. AS PER THE ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 4 JUDGMENT OF THE HONBLE APEX COURT IN VIJAYA BANK ( SUPRA) DEDUCTION FOR BAD DEBTS IS ALLOWABLE PROVIDED IT IS FIRSTLY DEBIT ED TO THE P & L A/C. AND THEN IT IS REDUCED FROM THE FIGURE OF DEBTORS IN TH E BALANCE-SHEET. WE HAVE PERUSED THE ANNUAL REPORT OF THE ASSESSEE BANK FOR THE YEAR UNDER CONSIDERATION. IT IS NOTICED THAT THE ASSESSEE HAS REDUCED THE ULTIMATE AMOUNT OF PROVISION FOR BAD DEBTS FROM THE FIGURE O F DEBTORS IN THE BALANCE-SHEET AND IT IS ONLY AFTER REDUCING THE AM OUNT OF PROVISION FROM THE GROSS FIGURE OF DEBTORS THAT THE NET FIGURE I S REFLECTED. SUCH A COMPUTATION CAN BE SEEN FROM PAGES 24 29 AND 47 OF THE PAPER BOOK. IN SO FAR AS THE FIGURE OF PROVISION FOR NON-PERFORMIN G ASSETS AT THE YEAR ENDING IS CONCERNED THE CALCULATION CAN BE SEEN AT PAGE 51 OF THE PAPER BOOK FROM WHERE IT IS DISCERNIBLE THAT THE AMOUNT OF PROVISION FOR NPA MADE DURING THE YEAR IS ADDED TO THE AMOUNT OF OPEN ING BALANCE OF THE PROVISION AND AFTER REDUCING THE AMOUNT OF BAD DEBT S WRITTEN OFF/PROVISION WRITTEN BACK DURING THE YEAR THE NET AMOUNT IS REF LECTED BY WAY OF REDUCTION FROM THE AMOUNT OF DEBTORS IN THE BALANCE SHEET. IT IS THEREFORE VIVID THAT THE ASSESSEE HAS COMPLIED W ITH THE REQUIREMENTS OF SEC. 36(1)(VIIA) AS INTERPRETED BY THE HONBLE SUPR EME COURT IN THE CASE OF VIJAYA BANK (SUPRA). THUS THE IMPUGNED ORDER ON THIS SCORE IS UPHELD AND GROUND NOS. 1 & 2 ARE NOT ALLOWED. 4. THE SECOND ISSUE IN THIS APPEAL IS AGAINST THE D ELETION OF DISALLOWANCE OF RS.81 21 716/- BEING THE BROKEN PER IOD INTEREST. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE RECEIVED BROKEN PERIOD INTEREST OF RS.4 78 73 191/- ON SECURITIES IN ITS OPENING ST OCK WHICH WERE SOLD ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 5 DURING THE YEAR. IT ALSO PAID AN AMOUNT OF RS.5 50 74 387/- AS BROKEN PERIOD INTEREST ON SECURITIES PURCHASED AND SOLD DU RING THE YEAR. FURTHER THE ASSESSEE PAID A SUM OF RS.2 95 13 008/- AS BROK EN PERIOD INTEREST ON SECURITIES PURCHASED DURING THE YEAR AS REFLECTED I N THE CLOSING STOCK. ON BEING CALLED UPON TO JUSTIFY THE DEDUCTION OF INTER EST FOR BROKEN PERIOD THE ASSESSEE STATED THAT SIMILAR PRACTICE WAS FOLLOWED BY IT IN THE PAST TREATING THE INTEREST COMPONENT AS REVENUE ITEM. IT WAS FURTHER CLARIFIED THAT IN TRADING OF SECURITIES PURCHASE OR SALE PRI CE INCLUDED A COMPONENT OF INTEREST DUE ON THE SECURITIES TILL THE DATE OF PURCHASE/SALE. IT WAS CLAIMED THAT SINCE SUCH INTEREST RELATED TO CURRENT INVESTMENTS THE SAME WAS LIABLE TO BE CONSIDERED AS REVENUE INCOME/EXPEN DITURE. NOT CONVINCED THE AO CAME TO HOLD HAT THE BROKEN PERIO D INTEREST PAID ON SECURITIES IN CLOSING STOCK AMOUNTING TO RS.81 21 7 16/- WHICH WAS DEBITED TO THE P & L A/C. WAS TO BE DISALLOWED. THE LD. CI T(A) GOT CONVINCED WITH THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE AND ORDERED FOR THE DELETION OF ADDITION. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED AS AN UNDISPUTED FA CT THAT THE ASSESSEE WAS HOLDING THE SECURITIES AS CURRENT ASSETS. AT THE TI ME OF PURCHASING SECURITIES THE ASSESSEE WAS BIFURCATING THE PURCHA SE CONSIDERATION INTO TWO PARTS VIZ. FIRST PART TOWARDS THE INTEREST FO R THE PERIOD FROM THE DATE IT WAS LAST GRANTED UPTO THE DATE OF PURCHASE AND THE REMAINING PART TOWARDS THE PURCHASE PRICE OF SECURITIES. SIMILARLY IN RESPECT OF SALE OF SECURITIES THE ASSESSEE WAS BIFURCATING THE SALE C ONSIDERATION INTO TWO ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 6 PARTS VIZ. THE FIRST PART TOWARDS INTEREST FOR T HE PERIOD FROM WHICH IT WAS LAST GRANTED UPTO THE DATE OF SALE AND THE REMAININ G PART TOWARDS THE VALUE OF SECURITIES PURCHASED. HOWEVER ON RECEIPT OF THE ACTUAL INTEREST THE ASSESSEE WAS OFFEING THE TOTAL AMOUNT AS INCOM E. TO PUT IT IN DIFFERENT WORDS SUPPOSE A SECURITY WAS PURCHASED ON 1 ST SEPTEMBER FOR RS.110/- AND THE INTEREST FOR THE PERIOD 1 ST JULY TO 31 ST AUGUST IS RS.10/- (WITH THE PRESUMPTION THAT INTEREST IS PAYABLE ON 30 TH JUNE AND 31 ST DECEMBER) THE ASSESSEE WAS ACCOUNTING FOR SECURITIES AT RS.100/- AND CLAIMING DEDUCTION FOR RS.10/-. WHEN IT WAS RECEIVING INTEREST ON 31 ST DECEMBER FOR THE PERIOD 1 ST JULY TO 31 ST DECEMBER THE ENTIRE AMOUNT SAY RS.30/- (INCLUDING RS.10/- FOR THE PERIOD 1 ST JULY TO 31 ST AUGUST) WAS OFFERED FOR TAXATION. THE SAME TREATMENT WAS GIVEN IN RESPECT O F SECURITIES SOLD INASMUCH AS THE INTEREST FOR THE BROKEN PERIOD WAS ACCOUNTED FOR AS INCOME AT THE TIME OF SALE OF SECURITIES ITSELF BEC AUSE SUCH INTEREST WAS TO BE ULTIMATELY RECEIVED BY THE PURCHASER ON THE CUT OFF DATES. WHEN SUCH SECURITIES ARE ADMITTEDLY HELD AS STOCK IN TRADE W E FAIL TO UNDERSTAND AS TO HOW THE INTEREST FOR THE BROKEN PERIOD WHICH IS IN COME/EXPENDITURE FROM SUCH SECURITY SHOULD NOT BE CONSIDERED AS REVENUE ITEM. THE AO HAS ALBEIT GRANTED DEDUCTION IN RESPECT OF BROKEN PERIOD INTE REST IN RESPECT OF SECURITIES WHICH WERE PURCHASED AND SOLD DURING THE YEAR BUT MADE ADDITION IN RESPECT OF BROKEN PERIOD INTEREST PAID ON THE SECURITIES IN THE CLOSING STOCK. THE ASSESSEE WAS REGULARLY FOLLOWI NG THIS METHOD OF ACCOUNTING. IF THE AO WAS NOT SATISFIED WITH SUCH T REATMENT HE WAS OBLIGED TO CORRESPONDINGLY INCREASE THE VALUE OF OP ENING STOCK OF SECURITIES ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 7 BY WAY OF SUCH BROKEN PERIOD INTEREST FOR THE LAST YEAR. BE THAT AS IT MAY SINCE THE SECURITIES ARE CURRENT ASSETS OF THE ASSE SSEE THE BROKEN PERIOD INTEREST EXPENDITURE OR INCOME HAS TO BE ALLOWED A S DEDUCTION. RECENTLY SPECIAL BENCH OF THE TRIBUNAL IN DCIT VS. BANK OF B AHRAIN & KUWAIT (2010) 132 TTJ (MUMBAI) (SB) 505 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THERE CANNOT BE ANY DISALL OWANCE ON ACCOUNT OF BROKEN PERIOD INTEREST PAID BY THE ASSESSEE. IN REA CHING ITS CONCLUSION THE TRIBUNAL RELIED ON THE JUDGEMENT OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN AMERICAN EXPRESS INTERNATIONAL BANKING CORPN. VS. CIT (2002) 177 CTR (BOM) 442. RESPECTFULLY FOLLOWING THE JUDGMENT OF T HE HONBLE JURISDICTIONAL HIGH COUR AND THE AFORENOTED SPECIAL BENCH ORDER WE DISMISS THIS GROUND RAISED BY THE REVENUE. 6. THE NEXT ISSUE IN THIS APPEAL IS AGAINST GRANTIN G OF DEPRECIATION ON VALUE OF SECURITIES TO THE TUNE OF RS.55 53 09 959 /-. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE ADDED BACK AN AMOUNT O F RS.29 16 97 241/- REPRESENTING THE DECREASE IN THE VALUE OF CURRENT INVESTMENTS AND CLAIMED AS DEDUCTION A SUM OF RS.84 70 07 200/- WHI CH REPRESENTED DEPRECIATION IN THE VALUE OF SECURITIES IN THE COMP UTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME. ON BEING CAL LED UPON TO JUSTIFY THIS DEDUCTION THE ASSESSEE STATED THAT THE BANK TREATE D WHOLE OF ITS INVESTMENT AS STOCK IN TRADE. AS THE BANK WAS VALUI NG SUCH SECURITIES ON THE BALANCE-SHEET DATE AS PER ITS REGULAR METHOD OF VALUING THE STOCK THERE WAS NET DECREASE IN THE VALUE OF SUCH SECURIT IES WHICH AMOUNT WAS CLAIMED AS DEDUCTION. THE AO MADE ADDITION OF RS.55 53 09 959/- BY ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 8 CONSIDERING THE AMORTIZATION LOSS ON PERMANENT SEC URITIES AS NOT ALLOWABLE. THE LD. CIT(A) ACCEPTED THE ASSESSEES C LAIM. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSE E WAS HOLDING SECURITIES (EXCLUDING SECURITIES TO THE TUNE OF RS.275.63 CROR ES RECEIVED FROM GOVT. OF INDIA IN VIEW OF CAPITAL CONTRIBUTION) AS ITS ST OCK IN TRADE. ACCORDING TO THE UNCONTROVERTED SUBMISSION MADE BY THE LD. A.R. THE ASSESSEE WAS FOLLOWING THE METHOD OF VALUING SUCH SECURITIES AT COST OF MARKET PRICE WHICHEVER IS LESS. THERE IS NO DISPUTE ON THE VALU ATION ASPECT. THE VIEW OF THE AO WAS THAT SUCH DEDUCTION WAS NOT ALLOWABLE. TO EXEMPLIFY THE ISSUE IF SOME SECURITIES ARE PURCHASED AT RS.100/- THE MARKET PRICE OF WHICH AS AT THE END OF THE YEAR ONE IS RS.90/- THE ASSESSEE WILL VALUE SUCH STOCK AT RS.90/- (BEING MARKET PRICE OF RS.90/ - WHICH IS LESS THAN THE COST PRICE OF RS.100/-). SUPPOSE IN THE SECOND YEAR THE MARKET PRICE OF SUCH SECURITIES WHICH WERE PURCHASED BY THE ASSE SSEE IN YEAR ONE AT RS.100/- AND VALUED AT RS.90/- AT THAT YEAR END WE NT UP TO RS.95/- THERE WOULD BE NET INCOME OF RS.5/- IN THE SECOND YEAR ( RS.95/- MINUS RS.90/-) AND THERE WOULD BE AUTOMATIC LOSS OF RS.10/- IN THE FIRST YEAR BECAUSE THE COST PRICE ON THE DEBIT SIDE SHALL STAND REFLECTE D AT RS.100/- AND THE CLOSING STOCK AT RS.90/- RESULTING INTO LOSS OF RS. 10/-. WHEN THE METHOD OF COST OR MARKET PRICE WHICHEVER IS LESS IS FOLLOW ED BY ANY ASSESSEE FOR VALUING ITS STOCK THE EFFECT HAS TO BE GIVEN ACCOR DINGLY. IN OTHER WORDS IF THE VALUE OF STOCK HAS COME BELOW ITS PURCHASE PRIC E IT IS ONLY THE MARKET PRICE WHICH WOULD STAND REFLECTED AS CLOSING STOCK AT THE END OF THE YEAR. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 9 IF HOWEVER THE MARKET PRICE EXCEEDS THE COST PRIC E THEN THE STOCK WOULD CONTINUE TO BE VALUED AT THE COST PRICE ONLY BECA USE OF THE METHOD OF VALUING THE CLOSING STOCK AT COST OR MARKET PRICE WHICHEVER IS LESS. CONTINUING WITH THE SAME EXAMPLE SUPPOSE IN THE T HIRD YEAR THE MARKET VALUE OF THE SECURITY RISES TO RS.120/- IN SUCH A SITUATION IT SHALL BE VALUED AT RS.100/- (BEING ITS PURCHASE PRICE) AND T HERE WOULD BE AN INCOME OF RS.5/- (RS.100/- MINUS RS.95/-). THE EXCE SS OVER THE COST PRICE WOULD NOT BE CONSIDERED FOR VALUING THE CLOSING STO CK. IT IS ONLY WHEN SUCH SECURITY IS SOLD THAT THE PROFIT WOULD STAND REFLE CTED ACCORDINGLY. IN VIEW OF THESE REASONS WE ARE SATISFIED THAT DEPRECIATIO N ON ACCOUNT OF FALL IN VALUE OF SECURITIES HELD BY THE ASSESSEE AS STOCK I N TRADE WAS LIABLE TO BE CONSIDERED AT THE MARKET VALUE BEING LESS THAN ITS COST PRICE AS REFLECTED BY THE ASSESSEE. THIS GROUND FAILS. 8. THE LAST EFFECTIVE GROUND IS AGAINST THE DELETIO N OF DISALLOWANCE OF RS7 48 104 ON ACCOUNT OF ENTERTAINMENT EXPENSES. T HE ASSESSEE OFFERED DISALLOWANCE OF RS.11 17 081/- ON ACCOUNT OF ENTERT AINMENT EXPENSES. THE AO NOTED THAT THE TOTAL ENTERTAINMENT EXPENSES WER E TO THE TUNE OF RS.37 40 269/-. HE HELD THAT AN ORDER PASSED BY THE TRIBUNAL IN AN EARLIER YEAR IN THE ASSESSEES OWN CASE WAS NOT LIABLE TO B E CONSIDERED. HE THEREFORE MADE DISALLOWANCE OF RS.11 17 081/-. THE LD. CIT(A) DELETED THE ADDITION. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS PLACED ON RECO RD A COPY OF THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSTT. YEAR ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 10 1983-84 IN ITA NO.5550/BOM/86. VIDE ORDER DATED 15- 11-1990 THE TRIBUNAL HAS HELD THAT IT WOULD BE REASONABLE TO ESTIMATE 40 PERCENT OF THE TOTAL EXPENSES AS NOT IN THE NATURE OF ENTERTA INMENT EXPENSES . NOTHING HAS BEEN BROUGHT TO OUR NOTICE TO DEMONSTRA TE THAT THE SAID ORDER HAS BEEN MODIFIED OR SET ASIDE BY THE HONBLE HIGH COURT. RESPECTFULLY FOLLOWING THE PRECEDENT WE HOLD THAT 40% OF TOTAL EXPENSES BE CONSIDERED AS NOT IN THE NATURE OF ENTERTAINMENT EXPENSES. TH E AO IS DIRECTED TO WORK OUT THE AMOUNT OF DISALLOWANCE ACCORDINGLY. 10. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. A.Y. 1997-98 : 11. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE O RDER OF THE CIT(A) DATED 19-11-2001. THE FIRST GROUND IS AGAINST THE S USTENANCE OF ADDITION ON ACCOUNT OF PROVISION OF BAD DEBTS U/S.36(1)(VII) . AS AGAINST THE LD. CIT(A) DECIDING SUCH ISSUE IN ASSESSEES FAVOUR IN ASST. YEAR 1996-97 THE LD. FIRST APPELLATE AUTHORITY IN THE INSTANT YEAR TOOK OPPOSITE VIEW AND SUSTAINED THE DISALLOWANCE. BOTH THE SIDES ARE IN A GREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE MUTATIS MUTAND IS SIMILAR TO THOSE THE PRECEDING YEAR. FOLLOWING THE VIEW TAKEN HEREIN ABOVE WE ORDER FOR THE DELETION OF THIS ADDITION. THIS GROUND IS ALLOW ED. 12. GROUND NO. 2 IS AGAINST CONFIRMATION OF DISALLO WANCE OF BROKEN PERIOD INTEREST. IN THIS YEAR ALSO AGAIN THE LD. CIT(A) TOOK CONTRARY VIEW FROM THE ONE TAKEN IN ASSTT. YEAR 1996-97. AS THE F ACTS ARE ADMITTEDLY ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 11 SIMILAR FOLLOWING OUR ORDER TAKEN IN THE IMMEDIATE LY PRECEDING YEAR WE ALLOW THIS GROUND OF APPEAL. 13. GROUND NO. 3 IS AGAINST DISALLOWANCE OF PROVISI ON FOR LOSS ON FORWARD EXCHANGE CONTRACT. THE ASSESSEE BOOKED A LOSS ON FO RWARD FOREIGN EXCHANGE CONTRACTS WHICH WERE UNMATURED ON THE DATE OF BALANCE-SHEET FOR AN AMOUNT OF RS.17 84 97 527/-. THE AO WHILE M AKING DISALLOWANCE FOR THIS AMOUNT ALSO REDUCED SUCH DISALLOWANCE BY A SUM OF RS.5.96 CRORES WHICH WAS DISALLOWED BY HIM IN ASSTT. YEAR 1996-97. THE LD. CIT(A) UPHELD THE ASSESSMENT ORDER ON THIS ISSUE. 14. HAVING HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD WE FIND THAT THE SPECIAL BENCH OF TRIBUNAL IN DCIT VS. BANK OF BAHRAIN & KUWAIT (SUPRA) HAS DISPOSED OF THIS ISSUE BY HOLDING THAT WHERE A FORWARD CONTRACT IS ENTERED INTO BY THE ASSESSEE TO BUY OR SELL THE FOREIGN CURRENCY AT AN AGREED PRICE AT A FUTURE DA TE FALLING BEYOND THE LAST DATE OF THE ACCOUNTING PERIOD THE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF EVALUATION OF THE CONTRACT ON THE LAST D ATE OF THE RELEVANT ACCOUNTING PERIOD I.E. BEFORE THE DATE OF MATURIT Y OF THE FORWARD CONTRACT IS ALLOWABLE AS DEDUCTION. A DETAILED DI SCUSSION HAS BEEN MADE IN THE SAID ORDER. IN OUR CONSIDERED OPINION IT W OULD BE JUST AND FAIR IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE M ATTER IS RESTORED TO THE FILE OF AO FOR DECIDING IT AFRESH ON THE TOUCHSTONE OF THE PRESCRIPTION GIVEN BY THE SPECIAL BENCH IN THE AFORENOTED ORDER. NEE DLESS TO SAY THE ASSESSEE WOULD BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 12 15. THE NEXT GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF ENTERTAINMENT EXPENSES. HERE ALSO BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMI LAR TO THAT OF ASSTT. YEAR 1996-97. FOLLOWING THE VIEW TAKEN HEREINABOVE WE DIRECT THE AO TO COMPUTE THE DISALLOWANCE OF ENTERTAINMENT EXPENSES IN ACCORDANCE WITH THE EARLIER ORDER OF THE TRIBUNAL. 16. GROUND NO. 5 IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE U/S.35D. NO PERMISSION HAS BEEN GRANTED BY THE COD TO PROSECUTE THIS GROUND. IN THE ABSENCE OF ANY APPROVAL GIVEN BY COD THIS GROUND I S DISMISSED. 17. GROUND NO. 6 IS AGAINST DISALLOWANCE OF EXEMPTI ON U/S.10. THE ASSESSEE CLAIMED INTEREST RECEIVED ON TAX FREE SECU RITIES AMOUNTING TO RS.2.21 CRORES AS EXEMPT U/S.10(15)(IV)(A). RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RAJASTHAN STATE WAREHOUSING CORPORATION VS. CIT 209 ITR 271 AND CERTAIN OTHER J UDGMENTS THE AO CAME TO HOLD THAT EXEMPTION WAS CLAIMED BY THE ASSE SSEE FOR GROSS INTEREST RECEIVED WHICH WAS NOT CORRECT. HE REDUCED THE QUANTUM OF INTEREST INCOME BY PROPORTIONATELY REDUCING EXPENS ES AT 36.93% OF SUCH INCOME. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE AO MADE DISALLOWANCE BY REDUCING PROPORTIONATE EXPENSES FROM THE INTEREST R ECEIPT BY DETERMINING THE CORRECT AMOUNT OF INCOME WHICH WAS EXEMPT U/S.1 0(15). IN OTHER WORDS HE APPLIED THE PRESCRIPTION OF SEC. 14A. WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 13 COURT IN GODREJ & BOYCE MFG. LTD. VS. DCIT (2010) 3 28 ITR 81 (BOM) IN WHICH IT HAS BEEN HELD THAT DISALLOWANCE IS CALLED FOR U/S.14A IN SUCH CIRCUMSTANCES. HOWEVER THE MANNER OF COMPUTATION O F SUCH DISALLOWANCE HAS BEEN RESTORED TO THE FILE OF AO FOR MAKING ON S OME REASONABLE BASIS. IT HAS FURTHER BEEN HELD IN THIS CASE THE PROVISION S OF RULE 8D ARE NOT APPLICABLE AS THESE ARE PROSPECTIVE. RESPECTFULLY F OLLOWING THE PRECEDENT WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO T O COMPUTE DISALLOWANCE U/S.14A IN ACCORDANCE WITH THE RATIO L AID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORENOTED CASE OF GODREJ & BOYCE LTD. THE LD. A.R. HAS CONTENDED BEFORE US THAT IT WAS HAVING SUFFICIENT INTEREST-FREE FUNDS AT ITS DISPOSAL WHICH WERE INVESTED IN SECURI TIES EARNING EXEMPT INCOME AND HENCE NO DISALLOWANCE OF INTEREST WAS CA LLED FOR. THE AO WHILE COMPUTING DISALLOWANCE U/S.14A WILL ALSO EXAMINE THIS CONTENTION OF THE ASSESSEE AS PER LAW. 19. THE LAST GROUND IS AGAINST RESTRICTING THE DEDU CTION U/S.80M. THE ASSESSEE CLAIMED THAT GROSS DIVIDEND RECEIVED BY IT AS ELIGIBLE FOR DEDUCTION U/S.80M. THE AO CAME TO HOLD THAT DEDUCTI ON SHOULD BE ALLOWED U/S.80M AT 60% OF THE INCOME FROM DIVIDEND PRESUM ABLY CONSIDERING 40% TOWARDS EXPENSES. THE LD. CIT(A) UPHELD THE ASS ESSMENT ORDER ON THIS ISSUE. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. A.R. HAS RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. CENTRAL BANK OF INDIA (2003) 130 TAXMAN 116 (BOM.) IN WHICH IT HAS BEEN HELD THAT THE DEPAR TMENT WAS NOT ENTITLED ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 14 TO IMPORT THE RULE OF PROPORTIONATE EXPENDITURE AND INTEREST INTO SEC. 80M. THE MANDATE OF THIS JUDGMENT IS THAT INDIRECT EXPEN SES CANNOT BE REDUCED FROM THE AMOUNT OF DIVIDEND FOR THE PURPOSES OF GRA NTING DEDUCTION U/S.80M. THE LD. A.R. CAME FORWARD WITH A SUBMISSIO N THAT A DISALLOWANCE OF 1 OR 2% OF THE GROSS DIVIDEND INCOME MAY BE MADE TOWARDS SUCH DIRECT EXPENSES. WE ARE UNABLE TO MAKE ANY ORDER FOR REDUC TION FROM THE DIVIDEND INCOME TOWARDS THE EXPENSES ON AN AD HOC BASIS. IN OUR CONSIDERED OPINION IT WOULD BE JUST AND FAIR IF TH E IMPUGNED ORDER IS SET ASIDE ON HIS ISSUE AND THE MATTER IS RESTORED TO TH E FILE OF AO FOR REDUCING THE DIRECT EXPENSES FROM THE AMOUNT OF GROSS DIVIDE ND FOR THE PURPOSE OF DEDUCTION U/S.80M. 21. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. A.Y. 1998-99: 22. GROUND NO. 1 OF THE ASSESSEES APPEAL IS AGAINS T THE CONFIRMATION OF ADDITION TOWARDS PROVISION FOR BAD DEBTS U/S.36(1)( VII). AS THE FACTS OF THIS GROUND ARE ADMITTEDLY SIMILAR TO THOSE DECIDED BY U S FOR THE EARLIER YEAR FOLLOWING THE VIEW TAKEN HEREINABOVE WE ALLOW THIS GROUND OF APPEAL. 23. GROUND NO. 2 IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE ON BROKEN PERIOD INTEREST. THE FACTS OF THIS GROUND ARE ALSO ADMITTEDLY SIMILAR TO THOSE ALREADY DISCUSSED IN THE EARLIER YEARS. FOLLO WING THE VIEW HEREINABOVE WE ALLOW THIS GROUND OF APPEAL. 24. GROUND NO. 3 IS AGAINST APPRECIATION ON THE REV ALUATION OF SECURITIES. THE ASSESSEE ADDED BACK A SUM OF RS.27 35 38 282/- REPRESENTING ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 15 APPRECIATION IN THE VALUE OF CURRENT INVESTMENTS. I T WAS CLAIMED THAT THE BANK WAS TREATING THE WHOLE OF ITS INVESTMENTS AS S TOCK IN TRADE. CONSIDERING THE FACT THAT IN EARLIER YEARS THE DEPA RTMENT DID NOT ALLOW ANY DEDUCTION TOWARDS APPRECIATION IN THE VALUE OF SUCH SECURITIES AS STOCK IN TRADE THE AO HELD THAT THE BANK SHOULD BE ALLOWED A DEDUCTION OF THE AMOUNT OF APPRECIATION. SINCE THE ASSESSEE DID NOT ACCEPT THE DECISION OF THE DEPARTMENT ON SUCH ISSUE IN EARLIER YEARS AND P REFERRED APPEAL TO THE CIT(A) THIS INCOME WAS TAXED BY THE AO ON PROTECTI VE BASIS. 25. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT SIMILAR ISSU E RAISED BY THE ASSESSEE IN EARLIER YEARS FOR GRANT OF DEDUCTION ON ACCOUNT OF DEPRECIATION IN THE VALUE OF SECURITIES HELD AS STOCK IN TRADE HAS BEEN DECIDED IN ASSESSEES FAVOUR BY HOLDING THAT DEPRECIATION IN THE VALUE OF SECURITIES IS ALLOWABLE AS DEDUCTION. IN THAT VIEW OF THE MATTER AND APPLYI NG THE SAME ANALOGY THE APPRECIATION IN THE VALUE OF SUCH SECURITIES IN THE INSTANT YEAR AT RS.27.35 CRORES IS LIABLE TO BE TAXED ON SUBSTANTIV E BASIS RATHER THAN PROTECTIVE BASIS AS DONE BY THE AO. THIS GROUND IS THEREFORE NOT ALLOWED. 26. GROUND NO. 4 IS AGAINST LOSS ON FORWARD EXCHANG E CONTRACT. SIMILAR ISSUE HAS BEEN DISCUSSED BY US IN AN EARLIER YEAR R ESTORING THE MATTER TO THE FILE OF AO FOR TAKING A FRESH DECISION IN ACCOR DANCE WITH THE SPECIAL BENCH ORDER IN THE CASE OF BANK OF BAHRAIN & KUWAIT (SUPRA) . FOLLOWING THE VIEW TAKEN HEREINABOVE WE SET ASIDE THE IMPUGNED O RDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF AO FOR TAKING A FRESH DECISION ACCORDINGLY. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 16 27. GROUND NO. 5 IS AGAINST CONFIRMATION OF DISALLO WANCE U/S.35D. COD HAS NOT GRANTED APPROVAL TO THE ASSESSEE BANK FOR P ROSECUTING THIS GROUND. AS SUCH THIS GROUND IS DISMISSED. 28. GROUND NO.6 IS AGAINST DISALLOWANCE OF EXEMPTIO N U/S.10. FOLLOWING THE VIEW TAKEN IN EARLIER YEARS THE AO REDUCED THE EXEMPT INCOME BY PROPORTIONATE EXPENDITURE. THIS ISSUE HAS BEEN DEAL T WITH US IN THE IMMEDIATELY PRECEDING YEAR BY WHICH THE MATTER HAS BEEN RESTORED TO THE FILE OF AO FOR A FRESH DECISION. FOLLOWING THE SAME VIEW WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER T O THE FILE OF AO FOR DECIDING ACCORDINGLY. 29. GROUND NO. 7 IS AGAINST CHARGING OF INTEREST U/ S.201(1A). THE AO PASSED ASSESSMENT ORDER ON 24-01-2001. AT THE END O F THE ORDER HE DIRECTED FOR CHARGING INTEREST UNDER SECTIONS 234B AND 234C. WHILE ISSUING NOTICE OF DEMAND IN ITNS 150 INTEREST WAS ALSO CHA RGED U/S.201(1A) AT RS.55 270/-. THE ASSESSEE IS AGGRIEVED AGAINST THE CHARGING OF SUCH INTEREST. 30. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE LEVANT MATERIAL ON RECORD. SECTION 201 DEALS WITH THE CONSEQUENCES OF FAILURE TO DEDUCT OR PAY TAX AT SOURCE. SUB-SEC. (1) PROVIDES THAT WHERE ANY PERSON WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE P ROVISIONS OF THIS ACT OR AN EMPLOYER U/S. 192(1A) DOES NOT DEDUCT OR DOES N OT PAY OR AFTER SO DEDUCTING FAILS TO PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY OR UNDER THIS ACT THEN SUCH PERSON SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. SUB-SEC. (1A) OF SE C. 201 PROVIDES THAT IF ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 17 ANY SUCH PERSON AS REFERRED TO IN SUB-SEC. (1) DOES NOT DEDUCT THE WHOLE OR ANY PART OF TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX HE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE PRESCRIBED RATE . ON GOING THROUGH SUB- SECTIONS (1) AND (1A) OF SEC. 201 IT TRANSPIRES T HAT BEFORE CHARGING ANY INTEREST U/S.201(1A) THE ASSESSEE SHOULD BE DEEMED TO BE IN DEFAULT IN RESPECT OF SUCH TAX. TREATING A PERSON AS ASSESSEE IN DEFAULT IS SUBJECT MATTER OF PROVISIONS U/S. 201(1) WHICH ASPECT IS DECIDED BY THE AO (TDS).THE AO WHILE FRAMING ASSESSMENT U/S.143(3) O F THE ACT CANNOT CHARGE INTEREST U/S.201(1A). WE THEREFORE ALLOW T HIS GROUND OF APPEAL. 31. THE LAST GROUND ABOUT CONFIRMATION OF DISALLOWA NCE OF SET OFF OF UNABSORBED DEPRECIATION/CARRIED FORWARD LOSS IS ST ATED TO BE CONSEQUENTIAL. THIS GROUND IS ACCORDINGLY DISPOSED OF. 32. IN THE RESULT THIS APPEAL IS PARTLY ALLOWED. A.Y. 1999-2000 : 33. THE FIRST GROUND OF THE ASSESSEES APPEAL IS AG AINST CONFIRMATION OF DISALLOWANCE OF PROVISION OF BAD DEBTS U/S.36(1)(VI I). AS THE FACTS OF THIS GROUND ARE ADMITTEDLY SIMILAR TO THOSE DECIDED BY U S FOR THE EARLIER YEAR 1998-99 FOLLOWING THE VIEW TAKEN HEREINABOVE WE A LLOW THIS GROUND OF APPEAL. 34. GROUND NO. 2 IS FOR NOT TAXING APPRECIATION IN THE VALUE OF SECURITIES. THIS GROUND HAS BEEN DEALT WITH BY US IN ASSTT. YEA R 1998-99 HOLDING THAT SUCH APPRECIATION IN THE VALUE OF SECURITIES IS LIA BLE TO BE TAXED. THIS GROUND IS NOT ALLOWED. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 18 35. GROUND NO.3 IS AGAINST CONFIRMATION OF DISALLOW ANCE OF PROVISION FOR LOSS ON FORWARD EXCHANGE CONTRACT. SIMILAR ISSUE HA S BEEN DISCUSSED BY US IN AN EARLIER YEAR RESTORING THE MATTER TO THE FILE OF AO FOR TAKING A FRESH DECISION IN ACCORDANCE WITH THE SPECIAL BENCH ORDER IN THE CASE OF BANK OF BAHRAIN & KUWAIT (SUPRA) . FOLLOWING THE VIEW TAKEN HEREINABOVE WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT TH E MATTER TO THE FILE OF AO FOR TAKING A FRESH DECISION ACCORDINGLY. 36. GROUND NO. 4 IS AGAINST CONFIRMATION OF DISALLO WANCE U/S.35D FOR THE EXPENSES ON PUBLIC ISSUE OF EQUITY SHARES. THE FACT S OF THIS GROUND ARE THAT IN AN EARLIER YEAR THE BANK ISSUED TO THE PUBLIC CE RTAIN SHARES. TOTAL EXPENDITURE ON THIS PUBLIC ISSUE AMOUNTED TO RS.9.3 6 CRORES. THE ASSESSEE CLAIMED DEDUCTION AT 1/10 TH OF THE ISSUE EXPENSES U/S.35D AMOUNTING O RS.93.62 LAKHS. THE AO FOLLOWING THE JUDGMENT OF T HE HONBLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT (1997) 225 ITR 798 AND ANOTHER JUDGMENT OF THE HONBLE SUPREME COURT I N PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT (1997) 2 25 ITR 792 (SC) HELD THAT SUCH EXPENSES CANNOT BE ALLOWED AS DEDUCTION U /S.35D. HE THEREFORE MADE DISALLOWANCE AS DONE IN THE PAST. T HE LD. CIT(A) FOLLOWING THE VIEW TAKEN BY HIS PREDECESSORS IN EARLIER YEARS UPHELD THE DISALLOWANCE. 37. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON HE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT IN CIT. VS. NEHA PROTEINS LTD. (2008) 171 TAXMAN 455 (RAJ.) TO CONTEND THAT THE INTEREST ACCRUED ON SHARE APPLICATION MONEY LYING WITH THE BANK SHOULD BE ADJ USTED AGAINST PUBLIC ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 19 ISSUE EXPENSES SO AS REDUCE THE AMOUNT OF PUBLIC IS SUE EXPENSES FOR ENABLING THE ASSESSEE TO CLAIM AMORTIZATION UNDER A ND IN ACCORDANCE WITH THE PROVISIONS OF SEC. 35D. THE LD. D.R. ARGUED THA T THIS POINT WAS NEVER AGITATED BY THE ASSESSEE BEFORE THE AUTHORITIES BEL OW AND HAS COME UP BEFORE THE TRIBUNAL FOR THE FIRST TIME. 38. WE HAVE OBSERVED FROM THE ASSESSMENT AS WELL AS THE IMPUGNED ORDER THAT THERE IS NO DISCUSSION ON THIS ASPECT OF THE MATTER. UNDER SUCH CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THA T IT WOULD BE JUST AND FAIR IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASI DE AND THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCORDINGLY AN D DIRECT HIM TO DECIDE THIS QUESTION AFRESH AS PER LAW AFTER ALLOWING A RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 39. THE NEXT GROUND IS AGAINST CONFIRMATION OF DISA LLOWANCE OF EXEMPTION U/S.10. AFTER CONSIDERING THE RIVAL SUBMI SSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE AO MADE DISALLOWANCE BY REDUCING PROPORTIONATE EXPENSES FRO M THE INTEREST RECEIPT BY DETERMINING THE CORRECT AMOUNT OF INCOME WHICH W AS EXEMPT U/S.10(15). THIS IS ALSO A RECURRING ISSUE WHICH HAS BEEN DEALT WITH BY US IN AN EARLIER YEAR SUPRA. FOLLOWING THE SAME VIEW WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO DECIDE THIS ISS UE AFRESH IN ACCORDANCE WITH OUR VIEW EXPRESSED ABOVE. 40. IN THE RESULT THIS APPEAL IS PARTLY ALLOWED. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 20 A.Y. 2000-01 : 41. THE FIRST GROUND IS AGAINST ALLOWING OF DEDUCT ION TOWARDS PROVISION FOR BAD DEBTS. THIS IS A RECURRING ISSUE WHICH HAS BEEN DECIDED BY US IN THE YEARS DEALT WITH ABOVE. IN THE ABSENCE OF THE L D. DR POINTING OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THIS YEAR V IS--VIS THOSE OF THE EARLIER YEAR WE ALLOW THIS GROUND OF APPEAL. 42. THE SECOND GROUND IS AGAINST DISALLOWANCE OF P ROVISION FOR LOSS ON FORWARD EXCHANGE CONTRACT. IT IS AGAIN NOTICED THAT THIS ISSUE HAS ALSO BEEN DEALT WITH BY US IN EARLIER YEARS. FOLLOWING THE S AME VIEW TAKEN SUPRA WE REMIT THIS MATTER TO THE FILE OF AO FOR DECIDING I T AFRESH IN ACCORDANCE WITH OUR OBSERVATIONS RECORDED ABOVE. 43. THE NEXT GROUND IS AGAINST CONFIRMATION OF DISA LLOWANCE U/S.35D. THIS IS ALSO A RECURRING ISSUE IN AS MUCH AS WE HA VE DEALT WITH IT IN EARLIER YEARS. FOLLOWING THE SAME VIEW WE SET ASIDE THE IM PUGNED ORDER AND DIRECT THE AO TO DECIDE IT AFRESH AS PER OUR ABOVE OBSERVATIONS. 44. THE LAST GROUND IS AGAINST DISALLOWANCE OF EXE MPTION U/S.10. HERE AGAIN IT IS NOTICED THAT THIS ISSUE HAS BEEN DECIDE D BY US IN AN EARLIER YEAR SUPRA. FOLLOWING THE SAME VIEW WE DIRECT THE AO TO COMPUTE THE DISALLOWANCE U/S 14A IF ANY AS PER OUR ABOVE OBSE RVATIONS. 45. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. A.Y. 2003-04 : ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 21 46. THE FIRST GROUND IS AGAINST ALLOWING OF DEDUCT ION TOWARDS PROVISION FOR BAD DEBTS. THIS ISSUE HAS ALSO BEEN DEALT WITH BY US IN EARLIER YEARS ABOVE. FOLLOWING THE SAME VIEW THIS GROUND IS ALLO WED. 47. THE SECOND GROUND IS AGAINST DISALLOWANCE OF P ROVISION FOR LOSS ON FORWARD EXCHANGE CONTRACT. THIS IS ALSO A RECURRING ISSUE IN AS MUCH AS WE HAVE DEALT WITH IT SUPRA IN EARLIER YEARS. FOLLOWIN G THE SAME VIEW WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO DECID E THIS ISSUE IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS. 48. GROUND NO. 3 IS AGAINST THE CONFIRMATION OF DI SALLOWANCE U/S.35D. NO PERMISSION HAS BEEN GRANTED BY THE COD TO PROSEC UTE THIS GROUND. IN THE ABSENCE OF ANY APPROVAL GIVEN BY COD THIS GROU ND IS DISMISSED. 49. GROUND NO. 4 IS AGAINST DISALLOWANCE U/S.14A. T HE COD HAS NOT GRANTED PERMISSION TO THE ASSESSEE TO AGITATE THIS GROUND BEFORE THE TRIBUNAL. THIS GROUND IS AS SUCH DISMISSED. 50. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 23RD DAY OF FEBRUARY 2011. SD/- SD/- (R.S. PADVEKAR) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 23RD FEBRUARY 2011. NG: ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 22 COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XVI MUMBAI. 4 CIT MC-III MUMBAI. 5.DR D BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA NOS.3676 + 5 OTHER APPEALS DENA BANK 23 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 15-02- 2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 18-02- 2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10 . DATE OF DISPATCH OF ORDER *