This appeal is by assessee directed against order of CIT(A)-III, Bangalore, dt. 27th Feb., 1997. assessee had claimed loss of Rs. 1,09,10,252 as loss on account of revaluation of securities classified as permanent assets. This was disallowed by AO on following grounds: "Upto 31st March, 1992 assessee was holding Government securities and debentures as stock-in-trade. In terms of RBI instructions applicable with effect from financial year 1992-93, banks are required to hold 70 per cent of securities as permanent assets. According to these instructions permanent assets are those which bank shall hold till date of maturity. In other words such securities are held by bank for period ranging from 10 to 15 years. RBI issued further instructions as follows: (a) In beginning 70 per cent of securities shall be held as permanent assets. (b) Securities classified as permanent assets shall remain so till date of maturity. If at all any permanent asset is to be changed as current asset prior decision of board of directors is necessary. (c) Depreciation on revaluation of permanent assets need not be provided for. (d) Permanent assets are not to be freely sold and even if it is sold gain should be taken to capital reserve account." action of AO was confirmed by CIT(A). learned counsel for assessee submitted that to meet SLR requirements of RBI, investments were made in Central Government and State Government securities. As per directions of RBI investments were classified into permanent investments and current investments. permanent investments according to classification prescribed by RBI are securities that need to be kept by assessee till date of maturity, and current investments may be sold by assessee before date of maturity. Various ratios have been prescribed by RBI in their guidelines with regard to this from year to year (as for instance 30: 70), in terms of current and permanent investments. With permission of board bank is also permitted to change investments from current category to permanent category or vice versa, only requirement being that overall ratios of current to permanent investments should be maintained as per RBI requirement. guidelines given by RBI for valuation in respect of current investments are at cost or market value whichever is less and at cost in respect of permanent investments. assessee being of opinion that it would be desirable to be prudent in manner of valuation, wished to value all investments, current or permanent, at cost or market value, whichever is less. assessee then sought approval of RBI for valuing of investments thus (cost or market value whichever is less) and this permission was granted. It is also relevant to notice that this method of valuation of all investments, whether current or permanent at cost or market value whichever is lower had been existing practice consistently followed by assessee over earlier year also and RBI while granting permission took cognizance of this fact also. learned counsel for assessee further submitted that issue is squarely covered by decision of this Tribunal in MP No. 113/Bang/2003 in ITA No. 50/Bang/1997 dt. 27th May, 2004 case of Dy. CIT vs. Karnataka Bank Ltd. In case of Karnataka Bank Ltd. (supra) assessee had categorized investments into permanent and current investments. Revenue had objected t o valuation of permanent investments to which principle of market price whichever is less cannot be applied. While deciding main appeal, Tribunal declined to accept stand taken by Revenue. However, Revenue filed miscellaneous petition viz., MP No. 116/2003 stating that there is mistake apparent from record and therefore, same has to be rectified. After considering arguments of both sides, Tribunal, in para 4 of its order decided issue as under: "The matter has been considered by Board and it has been decided that securities must be regarded as stock-in-trade by banks. Therefore, claim of loss, if debited in books of account, would be given same treatment as is normally given to stock-in-trade. As far as second issue is concerned, both interest payments and receipts must be regarded as revenue payment/receipts and only net interest on securities shall be brought to tax as business income." (Emphasis, italicised in print, supplied) Therefore, applying same, we allow ground of assessee on this issue. next issue relates to claim of allowance of bad debts under s. 36(1)(vii) of IT Act. assessee had written off bad debts to extent of Rs. 7,21,45,770. AO noted that there was credit balance of Rs. 2,21,14,369. Taking note of this, he was of view that under proviso to s. 36(1)(vii) assessee is entitled to allowance of bad debt of amount which is in excess of credit balance in reserve account. AO concluded that assessee is entitled to deduction only to extent of Rs. 5,24,74,740 and added same to total income. learned counsel for assessee, at time of hearing, filed copy of t h e order of AO, dt. 10th March, 2003 giving effect to order of Tribunal, Bangalore for asst. yr. 1992-93 in case of assessee from which it is seen that there was no balance to be carried forward to next year. Considering this aspect, we find much force in stand taken by assessee. same is therefore allowed. AO is directed to allow bad debt in full as claimed by assessee. Besides that, learned counsel for assessee relied on decision of Tribunal in ITA No. 96/1998, dt. 24th March, 2003 in case of Canara Bank. In aforesaid decision, similar issue was considered and decided by this Tribunal as under: "5.4 ... Reading aforesaid provisions, following things emerge: (i) Deduction under s. 36(1)(vii) and s. 36(1)(viia) are distinct and separate. Deductions under both clauses are permissible. (ii) Deduction under cl. (vii) is in respect of debts actually becoming bad, written off in books and can be claimed by all assessees. (iii) Deduction under cl. (viia) is available in respect of provision for doubtful debts by certain class of assessees only. (iv) There is no cap on allowability of sum under cl. (vii) whereas under cl. (viia) same is restricted to certain percentage of total income or advances by rural branches of assessee institution. (v) For claiming deduction under both clauses amount should be written off by debiting to P&L a/c of assessee. Reading proviso to cl. (vii) it is clear that deduction thereunder is limited to amount by which claim is in excess of credit balance in provision for bad debts claimed under cl. (viia). controversy will be whether opening balance in bad debts reserve account should be considered or closing balance is to be considered. In our opinion, opening balance at commencement of financial year will be deducted under proviso to cl. (vii) and any excess write offs will be admissible under cl. (vii). reasons for same can be ascribed to following: (i) deduction under cl. (vii) is for debts actually becoming bad, whereas deduction under cl. (viia) is for provision for doubtful debts which may or may not turn bad. (ii) deduction under cl. (viia) is for debts not actually turning bad. If debt is already bad, it can be better be claimed under cl. (vii) for which there is no ceiling. (iii) Deduction under cl. (viia) can be computed only after total income is computed which can be computed only after deduction under cl. (vii) is allowed, and business income is computed. computation of business income prior to deduction under cl. (viia) will also determine amount of brought forward losses to be set off. Thus, deduction will not be workable under cl. (viia) if deduction under cl. (vii) is not computed first. (iv) intention behind insertion of proviso to s. (vi) is only to ensure that there is no claim for double deduction for one and only type of debt. It is also clear that deduction can be claimed independently under cl. (vii) as well as under cl. (viia). If on one hand, deduction is allowed under cl. (viia) which is only for provision, and if same is taken back by restricting deduction under cl. (vi), which is for debts actually becoming bad, such interpretation will not be in consonance with relevant provisions of Act. (v) There is no double deduction involved. amount of provision for bad debts claimed and allowed under cl. (viia) will be reduced subsequently when claim is made for debts actually becoming bad subsequently and when claimed under cl. (vii). In view of our above reasoning, we hold that deduction in present set of facts for bad debts under s. 36(1)(vii) will not be reduced by deduction allowable under s. 36(1)(viia). This ground of appeal is accordingly allowed." Therefore, we find force in stand taken by assessee. Hence same is allowed. next issue relates to claim of deduction under s. 80M of Act. AO had considered 5 per cent of gross dividends as having been spent for purpose of collecting dividends and allowed deduction only at 95 per cent of gross dividends. action of AO was confirmed by CIT(A). He further estimated expenditure at Rs. 14,30,185. This was so, according to AO. There was no separate account relatable to dividend income. learned counsel for assessee submitted that as no expenses at all have been incurred in earning of dividend income, AO has to compute deduction on entire gross dividend. AO should not have restricted it to 95 per cent of gross dividend. At time of hearing, learned counsel for assessee also relied on decision of Tribunal in case of Canbank Financial Services Ltd. [ITA No. 612/Bang/1999, dt. 30th Jan., 2004). In aforesaid decision, on identical facts, it was held as under: "From these decisions it will be clear that common expenditure which is incurred for purpose of business cannot be subject-matter of disallowance on ground that such expenditure has resulted either in tax-free income or resulted in income chargeable under other head. Income from other sources under s. 55 is to be computed after deducting expenditure incurred for earning such dividend income. There is no reworking of income from business. From books of account produced before them, AO was unable to state any such expenditure claimed by assessee. That is why not only AO but CIT(A) have resorted to estimation. In very context of s. 80M of Act, Calcutta High Court and Bombay High Court have held that it is not open to t x authorities to limit allowance under s. 80M by resorting to estimation of expenditure incurred for purpose of earning dividend. Similar view has been taken by recent decision of Bombay High Court in CIT vs. Central Bank of India (2003) 184 CTR (Bom) 225: (2003) 264 ITR 522 (Bom). Even unreported decision of Karnataka High Court in CIT vs. Canara Bank (ITC No. 781/1998) is to effect that expenses cannot be estimated for purpose of allowing relief under s. 80M of Act. In view of this, we do not see any reason to set aside matter as canvassed for by Dr. Krishna. Accordingly, we allow appeal of assessee and direct AO to allow deduction under s. 80M in sum of Rs. 33,85,108." Applying same, we allow ground raised by assessee on this issue. next issue arises under s. 37(2A). assessee had claimed 50 per cent of expenses which were incurred on employees of company. According to learned counsel for assessee, expenses are reasonable and similar claim by Mysore Minerals Ltd. has been approved by Karnataka High Court in CIT vs. Mysore Minerals Ltd. (1986) 57 CTR (Kar) 135: (1986) 162 ITR 562 (Kar). While perusing CIT(A) s order, it is seen that in fact, he was in total agreement with assessee s case. However, he remanded issue back to AO. Similar issue in case of assessee for asst. yr. 1992-93 travelled before this Tribunal in ITA No. 452/Bang/1996 wherein Tribunal, on identical facts, held as under: "9. first ground of Revenue relates to order of CIT(A) in directing AO to allow 50 per cent of entertainment expenditure incurred on employees of assessee. It was submitted by rival counsels that in ground of appeal by Department for earlier years, similar issue has been adjudicated upon by Tribunal. learned Departmental Representative submitted copy of order of Tribunal in ITA No. 1891/Bang/1991, dt. 22nd Dec., 1998, pertaining to asst. yr. 1989-90 wherein Tribunal has upheld decision of CIT(A). Accordingly, we confirm order of CIT(A) on this point and dismiss ground of appeal raised by Revenue." During pendency of aforesaid appeal, assessee had raised additional ground on 6th Nov., 2003 as under: "That learned CIT(A) erred in law in confirming action of learned AO in reducing by amount of Rs. 3,27,715 claim of appellant for depreciation, on ground that appellant was not registered owner of properties in respect of which sum in question had been claimed as depreciation." aforesaid additional ground was modified on 19th Aug., 2004 as under: "That learned CIT(A) erred in law in confirming action of learned AO in reducing by amount of Rs. 63,27,715 claim of appellant for depreciation, on ground that appellant was not registered owner of properties in respect of which sum in question had been claimed as depreciation." case of assessee is that Hon ble Supreme Court in case of Mysore Minerals Ltd. vs. CIT (1999) 156 CTR (SC) 1: (1999) 239 ITR 775 (SC) held that for purpose of allowance of depreciation in income-tax assessment, assessee need not be registered owner of property in question. From records, it is seen that in fact, assessee had raised ground before CIT(A) but in view of decision of Karnataka High Court in case of CIT vs. Bharath Gold Mines Ltd. (1991) 96 CTR (Kar) 188: (1991) 192 ITR 639 (Kar), assessee seriously did not contest this issue. However, as of now, decision of Hon ble Supreme Court will hold field. We are of view that additional ground has to be taken on file. Further, in view of decision of Hon ble Supreme Court, we find force in stand taken by assessee and therefore, additional ground raised by assessee is allowed. It is ordered accordingly. In result, appeal filed by assessee is allowed. *** ING VYSYA BANK LTD. v. DEPUTY COMMISSIONER OF INCOME TAX