S.C. TIWARI, A.M. : ORDER These four appeals comprised of three appeals filed by assessee on 2nd Feb., 2000, 12th June, 2001 and 28th March, 2002 against orders of learned CIT(A)-XXII, New Delhi dt. 30th Nov., 1 99 9 and 28th Feb., 2001 and order of learned CIT(A)-XIV, New Delhi, dt. 28th Jan., 2002 in case of assessee in relation to assessment order under s. 143(3) for asst. yr. 1 99 6- 97, assessment order under s. 143(3) r/w s. 147 for asst. yr. 1 99 5-96 and assessment order under s. 143(3) for asst. yr. 1 99 8- 99 . fourth appeal ITA No. 3250/Del/2002 has been filed by Revenue on 12th Aug, 2002 against order of learned CIT(A)-XIV, New Delhi, dt. 23rd May, 2002 made under s. 154 for rectifying order of his predecessor dt. 30th Nov., 1 99 9 for asst. yr. 1 99 6-97. ITA No. 454/Del/2000 Asst. yr. 1 99 6-97 2 . first ground in assessee s appeal is general and covered by subsequent grounds of appeal. Ground of appeal No. 2 is that learned CIT(A) erred in confirming disallowance of expenditure of Rs. 11,59,82,000 claimed by assessee in connection with swapping of foreign currency fund for augmenting rupee fund. During course of hearing before us learned counsel for assessee pointed out that identical issue had arisen in case of assessee for asst. yr. 1 99 5-96 and Tribunal, Delhi Bench "A", New Delhi, by its order dt. 31st May, 2005 in ITA No. 1563/Del/1 99 9 [reported asIndustrial Finance Corporation of India vs. Dy. CIT (2006) 101 TTJ (Del) 894 Ed.] decided this issue in para 17 in following words : "17. In result, having regard to aforesaid discussion, claim of assessee for allowance of expenditure of Rs. 67,06,33,245 incurred in connection with swapping of foreign currency funds for augmenting rupee funds required by it for its business is to be allowed in year of incurrence of same i.e., during current assessment year itself. assessee succeeds on this ground." Respectfully following aforesaid order of Tribunal, we direct that assessee be allowed deduction of expenditure incurred in connection with swapping of foreign currency fund to extent incurred during previous year relevant to asst. yr. 1 99 6-97 against assessee s income for asst. yr. 1 99 6- 97. 3. assessee s ground of appeal No. 3 is directed against learned CIT(A) confirming disallowance of Rs. 144,77,62,262 claimed as revenue expenditure in connection with issue of bonds and by way of discount on issue of convertible debentures. During course of hearing of this appeal, learned Authorised Representative of assessee stated that assessee was not interested in pressing this ground of appeal in view of order under s. 154 subsequently made by learned CIT(A). We, therefore, reject this ground of appeal as withdrawn. 4 . Ground of appeal No. 4 is directed against order of learned CIT(A) not allowing assessee s claim of deduction of Rs. 50 crores. Similarly, ground of appeal No. 5 is directed against order of learned CIT(A) that assessee s claim for bad and doubtful debts be reduced from amount of Rs. 5.70 crores. Facts of case leading to these grounds of appeal briefly are that as per Sch. II of balance sheet, position of special reserve under s. 36(1)(viii) is as under : Rs. in lacs Balance as on 1-4-1 99 5 26,963.00 Reserve created during year 12,906.18 Transferred to bad and doubtful debts 5,000.00 Balance as on 31-3-1 99 6 34,869.18 As per revised return filed by assessee, deduction was claimed at Rs. 1,18,19,69,148 only on account of ceiling limit of 40 per cent on account of amendment in s. 36(1)(viii) w.e.f. 1st April, 1 99 6. learned AO held that effectively assessee had created fresh reserve of Rs. 7,906.18 lacs only. He asked assessee to explain as to why assessee s claim of deduction under s. 36(1)(viii) may not be reduced accordingly. assessee replied that transfer of Rs. 50 crores was for creating provision against bad and doubtful loans and, therefore, there was no reversal of reserve of Rs. 129.0618 crores created during year. assessee argued that provisions of s. 41(4A) were inserted by Finance Act, 1 99 7 w.e.f. 1st April, 1 99 8 only. learned AO held that by merely showing first amount of Rs. 12,906.18 lacs transferred to reserve under s. 36(1)(viii) and then transferring Rs. 5,000 lacs out of same, assessee could not override substantial provision of law and reality is that only Rs. 7,906.18 lacs was transferred to special reserve under s. 36(1)(viii). learned AO found that amount of Rs. 5,000 lacs had been directly shown under head Provision for bad and doubtful loans . argument of assessee that provisions of s. 41(4A) were introduced only w.e.f. 1st April, 1 99 8 was misplaced because it was not case of utilization of reserve, but in fact direct provision of Rs. 50 crores was created and only amount of Rs. 79.0618 crores was created as reserve under s. 36(1)(viii). 5 . Without prejudice, learned AO argued that even if it was held that reserve created under s. 36(1)(viii) was Rs. 129.0618 crores, question arose whether assessee was entitled to withdraw sum of Rs. 50 crores. intention of law that reserve under s. 36(1)(viii) should remain intact was evident from fact that deduction under s. 36(1)(viii) was available till reserve created was double of paid-up capital. learned AO emphasized that in case of assessee there was no actual utilization of any amount from reserve under s. 36(1)(viii) for any bad debts written off during year. 6. learned AO noticed that during year position of provision for bad and doubtful loans was as follows : 25,012.14 Provision as on 1st April, 1 99 5 lacs Add : Provision transferred from 5,000 reserve under s. 36(1)(viii) lacs Provision under s. 36(1)(viia) @ 570 5,570 5% of gross total income lacs lacs 30,582.14 Provision as on 31.3.1 99 6 lacs 7 . learned AO further noted that during year assessee had claimed deduction for bad debts written off amounting to Rs. 18,624.61 lacs and again Rs. 570 lacs on basis of provision for bad and doubtful debts under s. 36(1)(viia)(c) with reference to 5 per cent of gross total income. learned AO referred to proviso to s. 36(1)(vii) and held that assessee should have claimed deduction for bad debt written off reduced by amount of Rs. 570 lacs. As per s. 36(2)(v) assessee should have claimed deduction for bad debts written off only after debiting amount to provision for bad and doubtful debts account under s. 36(1)(viia)(c). learned AO noticed that assessee had created provision under s. 36(1)(viia)(c) in earlier years as well and total provision created till 31st March, 1 99 6 was Rs. 34,31,90,547. Although assessee had claimed deduction for provision under s. 36(1)(viia)(c) of Rs. 570 lacs only, fact remained that aggregate balance was Rs. 34,31,90,547. learned AO, therefore, held that out of bad debt of Rs. 18,624.61 lacs written off and claimed under s. 36(1)(vii), assessee was not entitled to deduction to extent of Rs. 34,31,90,547 because assessee had already claimed deduction of that amount under provisions of s. 36(1)(viia)(c). As to allowability of remaining amount of Rs. 1,51,92,70,453. learned AO held that there was provision of Rs. 27,150.23 lacs after excluding provision created by assessee under s. 36(1)(viia)(c). During year, assessee had transferred sum of Rs. 50 crores from special reserve under s. 36(1)(viii). In preceding year also assessee had transferred sum of Rs. 175 crores in similar manner. If assessee s claim of deduction under s. 36(1)(viii) on gross amount of Rs. 12,906.18 lacs was to be allowed, reserve of Rs. 50 crores and Rs. 175 crores in preceding year remained. If intention of assessee to transfer Rs. 50 crores during year and Rs. 175 crores in preceding year was to utilize transferred amount for bad and doubtful loan, assessee had to utilize said amount for bad debts actually written off during year. Thus, assessee s claim of deduction on account of bad debt written off was required to be reduced by sum of Rs. 225 crores as well as to extent of provision under s. 36(1)(viia)(c) amounting to Rs. 34,31,90,547. On basis of this position, learned AO held that assessee s claim on account of bad debt written off was required to be reduced by sum of Rs. 34,31,90,547 created as provision under s. 36(1)(viia)(c). Secondly, either assessee s claim of amounts transferred to provision for bad and doubtful loans i.e., Rs. 50 crores during assessment year under consideration and Rs. 175 crores in preceding year was required to be disallowed or deduction for bad debt written off was further required to be reduced to that extent. assessee was not entitled to claim deduction twice. learned AO, therefore, did not allow any deduction to assessee on account of bad debt actually written off to extent of Rs. 18,624.61 lacs on ground that provision for bad and doubtful loan under s. 36(1)(viia)(c) of Rs. 34,31,90,547 and provision for bad and doubtful loan of Rs. 225 crores created by way of transfer from special reserve under s. 36(1)(viii) exceeded total amount of bad debt written off. learned AO also held that otherwise assessee was entitled to deduction under s. 36(1)(viii) to extent of Rs. 7,906.18 lacs and not Rs. 12,906.18 lacs as claimed by assessee. In computation of total income learned AO accordingly did not allow assessee any deduction on account of bad debt actually written off, while allowing assessee deduction under s. 36(1)(viia)(c) of Rs. 570 lacs and deduction under s. 36(1)(viii) of Rs. 12,906.18 lacs. 8 . During course of hearing before learned CIT(A), assessee submitted that as far as amount of provision under s. 36(1)(viia)(c), assessee had already adjusted amount of provision against bad debts written off while filing return of income for asst. yr. 1 99 8- 99 . provision of law in that regard had come into effect from asst. yr. 1 99 8- 99 only. As regards utilization of special reserve under s. 36(1)(viii), assessee argued that during year there was no provision for retention of amounts created as special reserve. Therefore, assessee could transfer balances from special reserve to general reserve at any time after end of year in which special reserve was created. CBDT had also clarified that such special reserve could be utilized for purpose for which it was created. assessee placed reliance on CBDT Circular No. 763, dt. 18th Feb., 1 99 8 [(1 99 8) 145 CTR (St) 38, 49], para 21.3 in support of contention that amendments were effective from asst. yr. 1 99 8- 99 only. assessee also referred to provision of reserve under ss. 32A, 33AC, 80HHD and 80HHC and argued that wherever legislature so desired specific conditions had been laid down for utilization of special reserves created for specified purposes. As there was no condition prescribed for utilization of special reserve under s. 36(1)(viii) up to asst. yr. 1 99 7-98, assessee was entitled to utilize amount of reserve for its business purposes. Furthermore, there was no provision for withdrawing benefit granted in earlier years if amount was withdrawn from reserve in subsequent year. 9. learned CIT(A) held that in absence of specific provision, AO could not withdraw reserve created under s. 36(1)(viia)(c) in earlier years. Nothing prevented AO from considering such action as deemed fit in respective earlier assessment years. only issue, therefore, was as to whether bad debts actually written off should first exhaust provision of Rs. 570 lacs created during year under s. 36(1)(viia)(c). There was no ambiguity in this regard in provisions of s. 36(1)(viia)(c). learned CIT(A), therefore, upheld disallowance to extent of Rs. 570 lacs. learned CIT(A) also agreed with learned AO that sum of Rs. 50 crores transferred to provision for bad and doubtful loan was required to be utilized towards writing off bad debts. However, here again learned CIT(A) held view that disallowance could only be made in respect of amount transferred to provision for bad and doubtful loan during year. He, therefore, upheld disallowance made by AO to extent of Rs. 50 crores only. 10. During course of hearing before us learned counsel for assessee argued that assessee fully complied with provisions of s. 36(1)(viii), inasmuch as special reserve was created in books of account. As far as asst. yr. 1 99 6-97 was concerned, there was no further requirement that special reserve created should be retained by assessee and not utilized for any other purpose. As law stood as at end of previous year under assessment, assessee was required to create special reserve. requirement that assessee should create and maintain special reserve has been laid down by Finance Act, 1 99 7 w.e.f. 1st April, 1 99 8 after has been laid down by Finance Act, 1 99 7 w.e.f. 1st April, 1 99 8 after inserting words "and maintained" in provisions of s. 36(1)(viii). Simultaneous amendment made by way of provisions of s. 41(4A) was also inserted w.e.f. 1st April, 1 99 8. These provisions could not be pressed into service by Revenue in relation to any assessment year prior to asst. yr. 1 99 8- 99 . In support of this contention learned Authorised Representative of assessee relied upon judgment of Hon ble Kerala High Court reported inKerala Financial Corporation vs. CIT (2003) 182 CTR (Ker) 502 : (2003) 261 ITR 708 (Ker). As to disallowance of bad debt to extent of Rs. 570 lacs being amount of provision created by assessee under provisions of s. 36(1)(viia)(c), learned counsel argued that provisions of ss. 36(1)(vii) and 36(1)(viia)(c) were two separate and distinct provisions of Act independent of each other. There was nothing in law to prevent assessee from availing of deduction in relation to both provisions. In support of this claim learned Authorised Representative placed reliance on judgment of Hon ble Rajasthan High Court reported inCIT vs. Bank of Rajasthan Ltd. (2002) 174 CTR (Raj) 400 : (2002) 255 ITR 5 99 (Raj). 11. learned Departmental Representative argued that amendment to provisions of s. 36(1)(viii) and insertion of s. 41(4A) by Finance Act, 1 99 7 was clarificatory. From these amendments it did not follow that legal position prior to amendment was different. These amendments only enacted ordinary accountancy principles in relation to provision and reserve created for special purpose. Both special reserve under s. 36(1)(viii) and provision under s. 36(1)(viia)(c) were created in case of financial institution to safeguard it against bad and doubtful loans. assessee could not claim deduction on basis of provision as well as on basis of actual expenditure. principles of accountancy required that where amount is provided for expenditure, expenditure actually incurred subsequently has to be set off against amount already provided for. In support of her arguments, learned Departmental Representative also placed reliance on judgment of Hon ble Supreme Court reported inAllied Motors (P) Ltd. Etc. vs. CIT (1 99 7) 139 CTR (SC) 364 : (1 99 7) 224 ITR 677 (SC). 12. We have carefully considered rival submissions. It is seen that in impugned assessment order learned AO has taken several grounds to support addition to declared income by sum of Rs. 50 crores transferred by assessee from special reserve to provision for bad and doubtful loans as well as addition of Rs. 570 lacs being amount of provision under s. 36(1)(viia)(c) claimed by assessee. However, finally assessment has been made by way of disallowance of assessee s claim of deduction of bad debts actually written off under provisions of s. 36(1)(vii) of Act. learned AO has disallowed assessee s claim of deduction on account of bad debts written off by still larger amount, inasmuch as he has adjusted opening balances also of both provision for bad and doubtful loans created by assessee himself by way of transfer from special reserve and provision created by assessee in respect of amounts allowable under s. 36(1)(viia)(c). learned CIT(A) has not upheld order of learned AO, inasmuch as he has held that AO should have confined himself to provision of both kind created by assessee during year under assessment and he could not have taken into account provisions created in earlier assessment years. 1 3 . It will be worthwhile here to state position as reflected in assessee s annual accounts for financial year 1 99 5-96. During year assessee created special reserve under s. 36(1)(viii) of IT Act amounting to Rs. 12,906.18 lacs. assessee had opening balance of Rs. 26,963 lacs as at 1st April, 1 99 5. Out of these amount assessee transferred sum of Rs, 5000 lacs to provision for bad and doubtful loans and thus, assessee carried forward sum of Rs. 34,869.18 lacs by way of special reserve under s. 36(1)(viii) of Act. This balance appears in annual accounts of assessee in Sch. II under head "Reserve & surplus". sum of Rs. 12,906.18 lacs added by assessee to special reserve has been debited by assessee by way of appropriation of profit as per P&L a/c. In computation of income chargeable to tax this amount has been claimed as deduction under s. 36(1)(viii). As to "Provision for bad and doubtful loans" account to which sum of Rs. 5,000 lacs has been transferred by assessee from special reserve account, assessee had opening balance of Rs. 25,012.14 lacs. assessee credited thereto not only sum of Rs. 5,000 lacs transferred from special reserve account but also sum of Rs. 570 lacs provided for under provisions of s. 36(1)(viia)(c) by way of expenditure debited to P&L a/c. aggregate sum of Rs. 30,582.14 lacs as at end of year on 31st March, 1 99 6 has been reduced by assessee from outstanding loans amounting to Rs. 11,15,921.06 lacs and only net amount of Rs. 10,85,338.92 lacs has been shown as loans outstanding as per Sch. V of balance sheet. In addition to sum of Rs. 30,582.14 lacs adjusted to loans recoverable under caption "Provision for bad and doubtful loans", assessee has further written off outstanding loans by sum of Rs. 18,624.61 lacs being aggregate amount of bad debts written off in books of account of assessee. This sum of Rs. 18,624.61 lacs has been claimed as deduction by assessee over and above sum of Rs. 570 lacs provided for under s. 36(1)(viia)(c) and special reserve of Rs. 12,906.18 lacs created under provisions of s. 36(1)(viii) of Act. sum effect is that assessee has reduced amount of loans by sum of Rs. 18,624.61 lacs by way of write off and by sum of Rs. 30,582.14 lacs by way of "Provision for bad and doubtful loans". 14. After careful consideration of relevant provisions of Act, viz., ss. 36(1)(vii), 36(1)(viia)(c), 36(1)(viii) and 41(4A), we are of view that argument of learned AO that sum of Rs. 5000 lacs transferred by assessee from special reserve account to provision for bad and doubtful loans account, in effect meant reduction or reversal of special reserve created by assessee under s. 36(1)(viii) should be rejected. It is because prior to asst. yr. 1 99 8- 99 law obliged assessee to create special reserve and there is no further requirement for retention of amount of reserve thus created. Amendment to provisions of s. 36(1)(viii) as well as insertion of new provision of s. 41(4A) by Finance Act, 1 99 7 are w.e.f. 1st April, 1 99 8, i.e., asst. yr. 1 99 8- 99 only and same cannot be given retrospective effect. This is view held by Hon ble Kerala High Court in case ofKerala Financial Corporation vs. CIT(supra), whereby Hon ble High Court have reversed decision of Cochin Bench of Tribunal reported inKerala Financial Corporation vs. Addl. CIT (2000) 69 TTJ (Coch) 558 : (2000) 74 ITD 360 (Coch).Respectfully following aforesaid judgment of Hon ble Kerala High Court, we hold that deduction to assessee under s. 36(1)(viii) cannot be curtailed on ground of transfer of sum of Rs. 5,000 lacs from special reserve account. 1 5 . As to argument of Revenue that amount of bad debt actually written off during year and claimed by assessee as deduction under s. 36(1)(vii) of Act should be reduced by sum of Rs. 5000 lacs being amount transferred by assessee from special reserve to provision for bad and doubtful loans, we find question to be difficult one. On one hand there is proposition that assessee cannot claim deduction of both provision and actual expenditure as it amounts to double deduction. On other hand, we find that provisions of s. 36(1)(viii) are in nature of special deduction conferred upon assessee for having qualified for deduction as per requirements of provisions of s. 36(1)(viii). There is nothing in language of provision of s. 36(1)(viii) to suggest any relationship between bad debts written off by assessee and amount credited to special reserve. It is, thus, clear that if assessee had not transferred sum of Rs. 5,000 lacs from special reserve account to provision for bad and doubtful loans account, AO would have no occasion to reduce amount of bad debts actually written off by assessee and debited to P&L a/c. Merely because assessee transferred amount from one head in balance sheet to another, assessee s claim of deduction under s. 36(1)(vii) should not be disturbed. After all, what assessee had done is mere book entry from one account to another. After careful consideration of arguments of both sides, we are of view that assessee should not be penalized merely on account of entries made by it in books of account. As held by Hon ble Supreme Court in their celebrated judgment in case ofKedarnath Jute Mfg. Co. Ltd. (1971) 82 ITR 363 (SC), mere book entries cannot be decisive of tax liability. We, therefore, hold that learned CIT(A) erred in upholding disallowance of assessee s claim of deduction under s. 36(1)(vii) to extent of Rs. 50 crore and direct deletion of addition to declared income to that extent. 16. At same time we see considerable force in contention of Revenue that assessee could not separately claim deduction of bad debt actually written off in accordance with provisions of s. 36(1)(vii) and at same time claim further deduction under provisions of s. 36(1)(viia) of same time claim further deduction under provisions of s. 36(1)(viia) of Act. This position clearly emerges from proviso to s. 36(1)(vii) as well as from provisions of s. 36(2)(v). According to proviso to s. 36(1)(vii) in case of assessee to which cl. (viia) applies, amount of deduction under s. 36(1)(vii) shall be limited to amount by which bad debt or any part thereof exceeds credit balance in provision made under s. 36(1)(viia). Similarly provisions of s. 36(2)(v) provide that in case of assessee to which provisions of s. 36(1)(viia) apply, no deduction shall be allowed on account of bad debt or part thereof unless assessee has debited amount of such debt or part of debt in that previous year to provision for bad and doubtful loan account made under cl. (viia) of sub-s. (1) of s. 36. We further find that learned CIT(A) has erred in restricting addition made by AO on this count to amount of Rs. 570 lacs only. During course of assessment proceedings, learned AO found that assessee had created provision under s. 36(1)(viia)(c) in different assessment years in following manner : Rs. Asst. yr. 1 99 2-93 4,94,63,176 Asst. yr. 1 99 3-94 4,97,58,313 Asst. yr. 1 99 4-95 6,35,18,063 Asst. yr. 1 99 5-96 12,34,54,934 Asst. yr. 1 99 6-97 5,70,00,000 Total 34,31,90,547 We find that provisions of s. 36(2)(v) are somewhat ambivalent in this regard, but proviso to s. 36(1)(vii) is clear and unambiguous that amount of deduction claimed under s. 36(1)(vii) has to be limited to amount by which bad debt actually written off during year exceeds credit balance in provision for bad and doubtful loan account made under s. 36(1)(viia). proviso speaks of credit balance and not merely amount of provision created during particular assessment year. For this reason we do not see much assistance to case of assessee from judgment of Hon ble Rajasthan High Court in case ofBank of Rajasthan(supra) relied upon by learned Authorised Representative of assessee. matter considered in that judgment is on altogether different basis. We, therefore, hold that learned CIT(A) was not justified in restricting disallowance to sum of Rs. 570 lacs. According to AO aggregate amount of provision under s. 36(1)(viia) availed of by assessee amounted to Rs. 34,31,90,547. It is not immediately known to us as to what are amounts of bad debt claimed by assessee in those assessment years under provisions of s. 36(1)(vii). However, it is quite possible that there may be opening balance in this account. After such adjustment it should be added to sum of Rs. 570 lacs so as to work out amount of disallowance to be made in case of assessee in accordance with proviso to s. 36(1)(vii). We, therefore, restore this issue to file of learned AO for computation of disallowance accordingly after allowing assessee opportunity to place relevant facts. 17. Ground of appeal No. 6 in assessee s appeal for asst. yr. 1 99 6-97 is directed against disallowance of assessee s claim of loss of Rs. 2,56,35,395 under head "Investment written off". Facts of case leading to this dispute briefly are that during year assessee reduced value of its investments in shares, etc. in accordance with RBI guidelines. According to assessee loss of Rs. 2,66,33,395 was booked in respect of various companies which had gone into liquidation or were lying closed or those who had become BIFR cases. learned AO found that by no stretch of imagination provisions of s. 36(1)(vii) could be applied though assessee had booked loss under head "Investments written off". There was only possibility of deduction under s. 37 but that too did not apply because amount written off did not represent revenue expenditure of assessee. investments in shares by assessee was in nature of capital expenditure and same had been treated as capital assets held by assessee in balance sheet. Under provisions of s. 45 no capital gain or loss could be computed unless and until there was transfer of capital asset within meaning of provisions of Act. On this reasoning learned AO disallowed assessee s claim of loss amounting to Rs. 2,66,33,395. 18. During course of hearing before learned CIT(A) assessee relied upon judgment of Hon ble Gujarat High Court reported asCIT vs. relied upon judgment of Hon ble Gujarat High Court reported asCIT vs. Jaykrishna Harivallabhdas (1 99 8) 146 CTR (Guj) 342 : (1 99 8) 231 ITR 108 (Guj). learned CIT(A) found that in that case extinguishment of right of shareholders was treated to be allowable loss. assessee argued that some of companies had gone into liquidation while others had ceased their business operations. learned CIT(A) considered judgment of Hon ble Gujarat High Court and found that there was vast difference in facts of case. Whereas in case before Hon ble Gujarat High Court, companies in question had already been liquidated, assessee could not point out any company having already been liquidated. In case of BIFR companies there was possibility of revival in due course of time. learned CIT(A), therefore, held that write off of investments was not covered by ratio of decision of Hon ble Gujarat High Court. 1 9 . During course of hearing before us learned Authorised Representative of assessee reiterated arguments as made before authorities below. He also argued that treatment given by assessee to matter was in accordance with RBI guidelines. learned Departmental Representative argued that assessee s claim of loss was not covered by any provisions of Act. 20. We have carefully considered rival submissions. During course of assessment proceedings, we pointedly asked learned Authorised Representative of assessee as to whether any of shares has been held by assessee as stock-in-trade. learned Authorised Representative fairly admitted that all these were investments that had been treated as capital asset held by assessee year after year. On these facts, provisions of s. 45(1) are quite clear. No gain or loss can be assessed in any assessment year other than previous year in which transfer of capital asset takes place. Provisions of s. 2(47) of Act define transfer in number of situations including extinguishment of any rights or compulsory acquisition under any law, conversion of capital asset into stock-in-trade and so on. assessee has not claimed that any of clauses of s. 2(47) apply. Plainly and simply, there is no transfer of capital asset. We, therefore, hold that assessee s claim of loss has rightly been rejected by authorities below and no interference on our part is called for. This ground of appeal is, therefore, rejected. 21. Ground of appeal No. 7 is directed against disallowance of Rs. 52,7 99 claimed by assessee on account of lease rent. It is seen that similar issue had been considered by Tribunal, Delhi Bench "A", New Delhi in paras 18 and 19 of their order dt. 31st May, 2005 in ITA No. 1563/Del/1 99 9 (supra). Respectfully following that order, we restore matter to file of AO for passing fresh order in accordance with directions of Tribunal in case of assessee for earlier assessment years. 22. Ground of appeal No. 8 is directed against interest charged under ss. 234B and 234C. During course of hearing learned Authorised Representative of assessee submitted that this ground is consequential. We, therefore, direct AO to revise interest levied under ss. 234B and 234C of Act on basis of assessee s tax liability computed after giving effect to present order made by us. ITA No. 2544/Del/2001 23. We now turn to assessee s appeal for asst. yr. 1 99 5-96. It is seen that while completing assessment order under s. 143(3) in case of assessee for asst. yr. 1 99 6-97 on 26th Feb., 1 99 9 AO made substantial disallowance from out of assessee s claim of deduction on account of bad debts actually written off under provisions of s. 36(1)(vii) of Act. Though AO adjusted opening balance both under s. 36(1)(viii) and under s. 36(1)(viia)(c) to assessee s claim of deduction under s. 36(1)(vii) for asst. yr. 1 99 6-97, learned AO found that decision has not been accepted by assessee and matter had been carried over in appeal before learned CIT(A). learned AO also found that just as in asst. yr. 1 99 6-97 assessee had separately claimed deduction under s. 36(1)(vii) over and above deductions claimed under s. 36(1)(viia)(c) and s. 36(1)(viii) of Act. learned AO, therefore, reopened assessment under s. 143(3) already made on 23 January, 1 99 8, for asst. yr. 1 99 5-96 after recording detailed reasons in writing, by way of issue of notice under s. 148 on 19th July, 1 99 9 with view to assess income for asst. yr. 1 99 5-96 that had escaped assessment. Thereafter learned AO completed assessment under s. 143(3) r/w s. 147 on 29th Feb., 2000 whereby learned AO made addition of Rs. 1,87,34,50,934 to income already assessed in original assessment as revised by CIT(A) order under s. 250 in relation to original assessment. This addition made by learned AO comprised of two amounts viz., sum of Rs. 17,500 lacs transferred by assessee from special reserve under s. 36(1)(viii) to provision for bad and doubtful loans and another sum of Rs. 1234.5493 lacs claimed by assessee under provisions of s. 36(1)(viia)(c) of Act. On assessee s appeal learned CIT(A) following order for asst. yr. 1 99 6-97 upheld reassessment as made by AO and dismissed assessee s appeal. Still aggrieved assessee is in appeal before us. 24. Ground of appeal No. 1 in this appeal is general and is covered by subsequent grounds of appeal. Ground of appeal No. 2 is directed against reopening of assessment by way of initiation of proceedings under s. 147. During course of hearing before us learned Authorised Representative of assessee argued that assessment had been reopened merely because subsequent AO had formed different opinion on highly debatable question. s reopening had been done on account of mere change of opinion, same was bad in law. In support of this contention, learned Authorised Representative relied upon judgment of Hon ble Delhi High Court in case ofJindal Photo Films Ltd. vs. Dy. CIT (1 99 9) 154 CTR (Del) 355 : (1 99 8) 234 ITR 170 (Del). learned Authorised Representative argued that assessee had not withheld any facts from AO during course of original assessment proceedings and, therefore, it was clearly case of change of opinion. learned Authorised Representative relied in this respect on another judgment also of Hon ble Delhi High Court in case ofCIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB). 25. learned Departmental Representative argued that it was clear case of escapement of income. assessee had in fact claimed double deduction of same amount. During course of original assessment proceedings there was no application of mind on part of AO to these aspects of matter. Now under provisions of s. 147 w.e.f. 1st April, 1989 AO has enlarged powers to take recourse to provisions of s. 147. the AO has enlarged powers to take recourse to provisions of s. 147. proceedings for reassessment were, therefore, validly initiated. 26. We have carefully considered rival submissions. We find that in this case assessment has been reopened prior to expiry of four years from end of assessment year. As result, proviso to s. 147 is not applicable. As result there is no further obligation on part of Revenue to show that there was any failure or omission on part of assessee to disclose fully and truly all material facts necessary for assessment for asst. yr. 1 99 5-96. validity of reopening during period of four years mainly hinges upon "escapement of income". 2 7 . There is some substance in contention of assessee that validly completed assessment under s. 143(3) cannot be reopened under s. 147 o n mere change of opinion and that condition would apply even where assessment is reopened within period of four years from end of assessment year. However, as learned Departmental Representative has succinctly put, is there really any change of opinion ? During course of hearing before us we pointedly asked learned Authorised Representative of assessee to point out any material to suggest that question of reduction of assessee s claim of deduction under s. 36(1)(vii) on account of deduction claimed by assessee under s. 36(1)(viia)(c) and under s. 36(1)(viii) was as matter of fact considered by AO while completing original assessment proceedings. learned Authorised Representative could not point out any communication either from AO or from assessee or even otherwise that this aspect was considered by AO and AO had formulated opinion after due consideration. Apparently this aspect of matter escaped consideration by learned AO altogether while completing original assessment proceedings under s. 143(3) resulting into no application of mind on escapement of income referred to by AO while initiating reassessment proceedings under s. 147. We, therefore, are unable to appreciate assessee s argument against reopening of assessment based on mere change of opinion. 2 8 . expression "change of opinion" postulates that there was opinion in first instance. If earlier no opinion is formed there cannot take place any change of opinion. In case ofDelhi Glass Works (P) Ltd. vs. CIT (1971) 81 ITR 95 (Del), Hon ble Delhi High Court have observed as under : "All relevant facts were available to ITO at time of original assessment. He also applied his mind to these facts but on account of complex nature of these facts he could not comprehend their significance or arrive at definite conclusion on question whether amount of Rs. 2,62,277 was assessable in year 1955-56 or in year 1957-58. As he could not make up his mind, he completed assessment for 1957-58 without including said amount in assessment of that year. Subsequently, after reconsidering facts and consulting his superiors he was of view that this amount was includible in assessment for year 1957-58. In our view, this does not amount to change of opinion on part of ITO as assessee s counsel would have us believe. ITO had not formed any definite opinion at stage of original assessment which, it may be said, was changed by him subsequently. Under these circumstances we hold that reopening of assessment w s permissible under s. 34(1)(b) of Act. question referred to us is answered in affirmative, i.e., in favour of Revenue and against assessee." 29. In case ofNawabganj Sugar Mills Co. Ltd. & Ors. vs. CIT (1980) 17 CTR (Del) 194 : (1980) 123 ITR 287 (Del), Hon ble Delhi High Court have,inter alia, observed : "There is also no gainsaying that once ITO had formed opinion on basis of inferences or conclusions drawn from those material facts, he was l t e r precluded from changing that opinion by way of resort to reassessment.There should, however, be something positive to show that there was in fact such formation of opinion at original assessment stage. If initially no opinion was formed, question of change therein could not be said to take place.Rather Explanation added to s. 34 made it clear that mere production before ITO of account books or other evidence from which material facts could with due diligence have been discovered by ITO would not necessarily amount to disclosure within meaning of that section. Explanation thus plainly postulated appliance of mind by ITO and formation of some opinion." (Emphasis, italicised in print, ours) In case ofEss Ess Kay Engineering Co. (P) Ltd. vs. CIT (2001) 166 CTR (SC) 396 : (2001) 247 ITR 818 (SC), similar plea was raised before Hon ble Supreme Court. Hon ble Supreme Court pronounced following judgment : "This is case of reopening. We have perused documents. We find there was material on basis of which ITO could proceed to reopen case, it is not case of mere change of opinion. We are not inclined to interfere with decision of High Court merely because case of assessee was accepted as correct in original assessment for this assessment year. It does not preclude ITO to reopen assessment of earlier year on basis of his findings of fact made on basis of fresh materials in course of assessment of next assessment year. appeal is dismissed. No order as to costs." 30. From judgments cited by us in foregoing paragraphs, it is well settled legal position that charge of mere change of opinion cannot be levelled merely because earlier assessment has been completed under provisions of s. 143(3) of Act. If arguments of assessee of such kind are accepted it would amount to holding that where assessment is completed under s. 143(3), same cannot be reopened at all by way of recourse to provisions of s. 147. That is not correct position. Statute clearly lays down reopening of assessment completed under s. 143(3) by subsequent AO on ground of escapement of income. We, therefore, reject assessee s ground of appeal challenging validity of reopening of assessment under s. 147 of Act. 31. Grounds of appeal Nos. 3 and 4 are directed against additions made by AO. Various issues relating to these two additions, on merits, have been discussed by us at length while dealing with assessee s grounds of appeal No. 4 and 5 for asst. yr. 1 99 6-97 (supra). Following same we direct deletion of addition of Rs. 17,500 lacs made by AO on account of transfer from special reserve created under s. 36(1)(viii) to provision for bad and doubtful loans. As to disallowance of Rs. 12,34,50,934, we uphold same in view of detailed reasons given by us for asst. yr. 1 99 6-97. 32. Assessee s ground of appeal No. 5 is directed against directions of learned AO that balance amount of Rs. 76,82, 99 ,000 would be chargeable to tax for asst. yr. 1 99 8- 99 under provisions of s. 41(4A) of Act. We hold that while learned AO has made certain observations in this regard in assessment order, this ground of appeal does not arise in proceedings before us. fact of matter is that no addition has been made of Rs. 76,82, 99 ,000 in assessment order under appeal. As to observations of learned AO about assessability for asst. yr. 1 99 8- 99 , assessee s grievance, if any, would arise only in relation to assessment order for asst. yr. 1 99 8- 99 . We, therefore, reject assessee s ground of appeal No. 5 being merely academic and infructuous so far as asst. yr. 1 99 5-96 is concerned. 33. Ground of appeal No. 6 is directed against levy of interest under s. 234B. During course of hearing before us learned Authorised Representative of assessee submitted that this ground of appeal was only consequential. We, therefore, direct learned AO to recompute interest chargeable under s. 234B, if any, after giving effect to present order of ours for asst. yr. 1 99 5-96. ITA No. 1066/Del/2002 For asst. yr. 1 99 8- 99 3 4 . Ground of appeal No. 1 in this appeal is general and covered by subsequent grounds of appeal. Ground of appeal No. 2 is directed against order of learned CIT(A) that proportionate amount of Rs. 5,55,65,383 out of expenditure incurred on issue of bonds in asst. yr. 1 99 6-97 and disallowed in that year is not to be allowed in asst. yr. 1 99 8- 99 . During course of hearing before us learned Authorised Representative of assessee stated that assessee was not interested in pressing this ground of appeal. Hence this ground of appeal is rejected as withdrawn. 35. Similarly ground of appeal No. 4 is directed against disallowance of sum of Rs. 20 lacs on account of administrative and management expenses. During course of hearing before us learned Authorised Representative stated that assessee was not interested in pressing this ground of appeal as well. Hence ground of appeal No. 4 is also rejected as withdrawn. 36. We are now left with ground of appeal No. 3, that is directed against order of learned CIT(A) rejecting claim of assessee for deduction of sum of Rs. 23, 99 7,000 under provisions of s. 35D of Act. Facts of case briefly are that assessee had during financial year 1 99 3-94 floated public issue of shares worth Rs. 52,500 lacs. assessee claimed for asst. yr. 1 99 8- 99 deduction of sum of Rs. 2,39,97,000 for first time. learned AO held that as per provisions of s. 35D, share issue expenses can be allowed either prior to commencement of business or on expansion of industrial undertaking. assessee had already commenced business and assessee was not industrial undertaking. learned AO, therefore, held that assessee was not entitled to any deduction under s. 35D. On assessee s appeal learned CIT(A) upheld disallowance made by AO. 3 7 . During course of hearing before us learned Authorised Representative of assessee traced history of assessee-company that it was formerly statutory corporation not entitled to issue shares for subscription by general public. Subsequently constitution of assessee was changed from statutory corporation to company and thereafter assessee-company came out with public issue of shares. learned Authorised Representative argued that if provisions of s. 35D did not apply, assessee was entitled to deduction of entire expenditure under s. 37 of t h e Act. For that purpose, assessee relied upon judgments reported asCIT vs. Glaxo Laboratories (India) Ltd. (1 99 ) 81 CTR (Bom) 89 : (1 99 ) 181 ITR 59 (Bom)andBombay Burmah Trading Corporation Ltd. vs. CIT (1983) 32 CTR 306 : (1984) 145 ITR 793 (Bom). assessee argued that as against full deduction under s. 37, assessee had claimed deduction of only 1/10th expenditure under s. 35D and that course was advantageous to Revenue. learned Departmental Representative relied upon orders of authorities below. 38. We have carefully considered rival submissions. We see no force in arguments of assessee relating to applicability of provisions of s. 37(1) because share issue expenses incurred by assessee represented expenditure of capital nature, as held by Hon ble Supreme Court in their judgment in case ofBrooke Bond India Ltd. vs. CIT (1 99 7) 140 CTR (SC) 598 : (1 99 7) 225 ITR 798 (SC). As to assessee s claim of deduction under s. 35D it is seen that public issue of shares was made by assessee during previous year relevant to asst. yr. 1 99 4-95. However, assessee has not claimed any deduction under s. 35D for that assessment year as well as subsequent assessment year and deduction has been clamed for first time for asst. yr. 1 99 8- 99 . Provisions of s. 35D(1) are quite clear that same apply in relation to either expenditure incurred before commencement of business or to expenditure incurred after commencement of business in connection with expansion of industrial undertaking or in connection with setting up new industrial unit. That being so, AO has rightly rejected assessee s claim of deduction under s. 35D. We, therefore, reject this ground of appeal. ITA No. 3250/Del/2002 Asst. yr. 1 99 6-97 39. only ground taken by Revenue in this appeal is that learned CIT(A) erred in deleting disallowance of Rs. 32.98 crores of bonds issue expenses. In fact Revenue s appeal is directed against order passed by learned CIT(A) to rectify under s. 154 his earlier order dt. 30th Nov., 1 99 9. During course of appellate proceedings assessee submitted that its claim of deduction of Rs. 1,44,77,62,262 comprised of two amounts viz., discount Rs. 1,16,89,17,590 and bonds issue expenses of Rs. 27,88,44,672. assessee submitted that in original order sum of Rs. 27,88,44,672 had been wrongly disallowed. After consideration of matter, learned CIT(A) held that there was error in his earlier order, inasmuch as, judgment of Hon ble Supreme Court in case ofMadras Industrial Investment Corporation Ltd. vs. CIT (1 99 7) 139 CTR (SC) 555 : (1 99 7) 225 ITR 802 (SC)apply to discount and not to issue expenses, such as commission, brokerage, administrative expenses, etc. learned CIT(A) held that these expenses were entirely of revenue nature and were, therefore, allowable as deduction. learned CIT(A), therefore, directed AO to allow bond issue expenses pertaining to asst. yr. 1 99 6-97 in full. 4 0 . During course of hearing before us, learned Departmental Representative argued that assessee had issued discount bonds and, therefore, entire expenditure could not be allowed as deduction in single year. benefit of bonds issued by assessee spread over number of years until maturity of bonds issued. Hence assessee was entitled only to proportionate expenditure. On consideration of matter, we do not s e e force in this contention of Revenue. It is settled legal position after judgment of Hon ble Supreme Court in case ofIndia Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC)that any expenditure incurred for obtaining loans is allowable as revenue expenditure even if loan is intended for acquisition of capital asset. Respectfully following aforesaid judgment of Hon ble Supreme Court and host of subsequent judgments, we uphold order of learned CIT(A). 41. In result, assessee s appeals in relation to asst. yrs. 1 99 5-96 and 1 99 6-97 are partly allowed; whereas assessee s appeal for asst. yr. 1 99 8- 99 and Revenue s appeal for asst. yr. 1 99 6-97 are dismissed. *** INDUSTRIAL FINANCE CORPORATION OF INDIA LTD. v. JOINT COMMISSIONER OF INCOME TAX