UCO Bank, Kolkata V. ACIT, LTU - 2, Kolkata, Kolkata

CO 51/KOL/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 4127 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 08-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G HANGSHING
• Assessee Lawyers: D S DAMLE
• Keywords: Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Proportionate interest; Corroborative evidences
• Section: 14A; 115JB; 139

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1615/KOL/2016 ASSESSMENT YEARS: 2012-13 ASSISTANT COMMISSIONER OF INCOME-TAX, LTU-2, KOLKATA. VS. UCO BANK (PAN: AAACU3561B) APPELLANT RESPONDENT & C.O. NO. 51/KOL/2018 IN I.T.A. NO. 1615/KOL/2016 ASSESSMENT YEARS: 2012-13 UCO BANK VS. ASSISTANT COMMISSIONER OF INCOME-TAX, LTU-2, KOLKATA. CROSS OBJECTOR RESPONDENT DATE OF HEARING 13.06.2018 DATE OF PRONOUNCEMENT 21.08.2018 FOR THE REVENUE SHRI G. HANGSHING, CIT, DR FOR THE ASSESSEE SHRI D.S. DAMLE, FCA ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE AGAINST THE ORDER OF LD. CIT(A)-23, KO LKATA DATED 31.05.20116 FOR AY 2012- 13. THE ASSESSEE ALSO FILED INTIMATION UNDER RULE 27 OF THE ITAT RULES TO SUPPORT THE ORDER OF THE LD. CIT(A) ON THE GROUNDS WHICH WERE DECIDE D AGAINST IT. 2. THE CROSS OBJECTION FILED BY THE ASSESSEE IS DEL AYED BY 555 DAYS AND THE REASONS FOR DELAY IN FILING THE ABOVE CROSS OBJECTION WHICH HAS EXPLAINED TO BE DUE TO THE ADVICE RENDERED BY THE LD. AR OF THE ASSESSEE THAT DISALLO WANCE CONFIRMED BY THE LD. CIT(A) COULD BE OPPOSED AT THE TIME OF HEARING OF APPEAL B Y FILING INTIMATION UNDER RULE 27 OF THE ITAT RULES AND, THEREFORE, FILING OF CROSS OBJECTIO N WAS NOT REQUIRED. HOWEVER, OUT OF ABUNDANT PRECAUTION, THE ASSESSEE BANK FILED THE CR OSS OBJECTION ON THE SAME GROUNDS ON WHICH THE INTIMATION UNDER RULE 27 OF THE ITAT RULE S WAS GIVEN. CONSIDERING THE REASONS 2 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 2 PUT-FORTH FACT THAT CONTENTIONS RAISED IN THE CROSS OBJECTION ARE ONLY LEGAL IN NATURE, WE DEEM IT FIT TO CONDONE THE DELAY AND ADMIT THE ASSE SSEES CROSS OBJECTION. 3. GROUND NO. 1 OF THE DEPARTMENTS APPEAL IS AGAIN ST THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.66,80,772/- MADE U/ S. 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WITHOUT GIVI NG THE AO PROPER OPPORTUNITY OF BEING HEARD IN TERMS OF RULE 46A OF THE INCOME TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT IN THE TAX AUDIT REPORT ISSUED ON 08.03.2012, THE AUDITOR HAD REPORTED THAT A SUM OF RS.73,32,304 /- U/S. 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TDS. IN THE RETURN OF INCOME FILE D U/S. 139 OF THE ACT, THE ASSESSEE HAD, HOWEVER, DISALLOWED EXPENDITURE OF ONLY RS.6,50,532 /- U/S. 40(A)(IA) OF THE ACT. WHEN CONFRONTED BY THE AO TO EXPLAIN THE REASON FOR NOT DISALLOWING THE DIFFERENTIAL FIGURE OF RS.66,80,772/-, THE ASSESSEE SUBMITTED THAT THE BAN K HAD DEPOSITED THE TDS ON THE BALANCE SUM OF RS.66,80,772/- BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME I.E. ON 30.09.2012 AND, THEREFORE, IN VIEW OF THE PROVISO TO SEC. 40(A )(IA) OF THE ACT, THEREFORE, AFORESAID SUM WAS NOT DISALLOWABLE IN THE COMPUTATION OF TOTAL IN COME. THE AO, HOWEVER, NOTED THAT THE ASSESSEE HAD NOT FURNISHED THE SUPPORTING EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT THE TDS ON THE AMOUNT OF RS.66,80,772/- HAD BEEN DEPOSITED BEF ORE THE RETURN FILING DATE AND, THEREFORE, HE WAS PLEASED TO DISALLOW THE SAME. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO RESTORE THE ISSUE BACK TO THE AO WITH A DIRECTION TO CONDUCT VERIFICATION OF THE RELEVANT SUPPORTING EVIDENCE FURNISHED BY THE ASSESSEE IN THE COURSE OF APPEAL IN SUPPORT OF ITS CLAIM ON DEDUCTIBILITY OF RS.60,80,772/-. THE RELEVANT OBSERVATION OF THE LD . CIT(A) ARE AS FOLLOWS: '4 . I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY LD. ARS FOR THE ASSESSEE AND THE FACTS INVOLVED IN THE PRESENT CASE. THE LD. ARS HAVE REL IED UPON THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATIONS (SUPRA) AND I SSUE BEFORE HON'BLE HIGH COURT THAT AMENDMENT U/S 40(A)(IA) WHETHER THE AMENDMENT MADE IN SECTION 40(A)(IA)VIDE FINANCE ACT 2010 WILL HAVE RETROSPECTIVE OPERATION OR NOT. THE HON'BLE COURT H AS RULED THAT THE AMENDMENT MADE IN THE PROVISIONS WILL HAVE RETROSPECTIVE OPERATION. IT WA S BROUGHT TO NOTICE BY THE LD A.RS FOR THE APPELLANT-COMPANY THAT THE MATTER HAS ALSO BEEN DEC IDED IN FAVOUR OF THE ASSESSEE(S) IN VARIOUS OTHER CASES, AS UNDER: 3 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 3 AUTHORITY REFERENCE DATE OF ORDER CASE ITAT-'B' BENCH ITA NO. 1260/KOL/2012 21.06.2013 ACIT VS MANISH TIWARI ITAT-'A' BENCH ITA NO. 1532/KOL/2010 20.04.2012 DESIGNER EXPORTS VS DCIT ITAT-'B' BENCH ITA NO.1153/KOL/2011 15.05.2012 MOFIZUL ALI VS ACIT 5. AS FAR AS THE ISSUE OF DEPOSIT OF TDS ONCE MADE AFTER DUE DATE OF PAYMENT AND BEFORE FILING OF THE INCOME-TAX RETURN AS ENVISAGED U/S 139(1) OF THE ACT IS CONCERNED, THE SAME HAS BEEN DECIDED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF V IRGIN CREATIONS (SUPRA) AND FOLLOWED THE JURISDICTIONAL ITAT BENCHES. HOWEVER, IT IS NOTED T HAT THE APPELLANT HAS ONLY PROVIDED THE BRANCH- WISE BREAK-UP OF THE TAXES WHICH WERE DEDUCTED AND DEPOSITED BEFORE THE RETURN FILING DUE DATE. THE SUPPORTING EVIDENCES IN FORM OF CHALLAN/FORMS HAVE NOT BEEN PROVIDED IN THIS MATTER. IN THIS VIEW OF THE MATTER AND TO MEET THE ENDS OF JUSTICE, I AM OF THE CONSIDERED OPINION THAT THE LD . AO MAY VERIFY THE ISSUE AT HAND, AND SEEK THE RELEV ANT SUPPORTING EVIDENCES IN RESPECT OF THE ASSESSEE'S CLAIM OF RS.66,80,772/-, AND IF THE AO F INDS THAT THE IMPUGNED TAXES THEREON IS DEPOSITED BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN OR THAT THE PAYEES HAVE FURNISHED FORM 15G/15H TO THE ASSESSEE, THEN SUCH AMOUNTS SHALL BE DELETED FR OM THE ADDITIONAL AND REMAINING AMOUNTS, IF ANY, FOR WHICH RELEVANT SUPPORTING ARE NOT FURNISHED MAY BE DECIDED AFRESH AS PER LAW. NEEDLESS TO SAY, THE LD. AO SHALL ALLOW SUFFICIENT OPPORTUNITY OF BE ING HEARD TO ASSESSEE IN THIS REGARD. THIS GROUND OF ASSESSEE'S APPEAL IS ACCORDINGLY ALL OWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENU E IS NOW IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. CIT(A) HAS NOT DELETED THE DISALLOWANCE MADE BY THE AO, THEREFORE, THE GROUNDS OF APPEAL RAISED BY THE REVE NUE ITSELF IS ERRONEOUS FOR THE SIMPLE REASON THAT THE LD. CIT(A) HAS ONLY DIRECTED TO AO TO VERIFY AND FIND WHETHER THE TAXES HAVE BEEN DEPOSITED BEFORE THE DUE DATE OF FILING O F INCOME TAX RETURN OR THAT THE PAYEES HAVE FURNISHED FORM 15G/15H TO THE ASSESSEE. IN CA SE, IF THE ASSESSEE HAS BEEN ABLE TO SATISFY THE AO THAT THE TAX HAS BEEN DEPOSITED BEFO RE THE DUE DATE OF FILING OF INCOME TAX RETURN OR THAT THE PAYEE HAS FILED FROM 15G/15H TO THE ASSESSEE THEN ONLY SUCH AMOUNT SHALL BE DELETED FROM THE ADDITION/DISALLOWANCE MADE BY T HE AO. THE LD. DR FAIRLY CONCEDED THAT THE LD. CIT(A) HAD ONLY DIRECTED THE AO TO EXA MINE THE RELEVANT SUPPORTING EVIDENCE AND ONLY THEREAFTER, DECIDE THE ALLOWABILITY OF THE CLAIM OF RS.66,80,772/-. SO, WE NOTE THAT IT IS NOT THE CASE WHETHER THE DISALLOWANCE WAS DEL ETED BY THE LD. CIT(A) WITHOUT GIVING OPPORTUNITY TO THE AO IN VIOLATION OF RULE 46A OF T HE RULES. HOWEVER, FOR THE INTEREST OF JUSTICE FOR BOTH PARTIES, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF AO TO DECIDE THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE AFTER EXAMINING THE 4 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 4 RELEVANT SUPPORTING EVIDENCE AND IF AO FINDS THAT T HE IMPUGNED TAXES THEREON IS DEPOSITED BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN OR THAT THE PAYEES HAVE FURNISHED FORM 15G/15H TO THE ASSESSEE, THEN SUCH AMOUNTS SHALL BE DELETED FROM THE ADDITIONAL AND REMAINING AMOUNTS, IF ANY, FOR WHICH RELEVANT SUPPO RTING ARE NOT FURNISHED MAY BE DECIDED AFRESH AS PER LAW AFRESH AFTER GIVING OPPORTUNITY T O THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOS ES. 6. GROUND NO.2 OF REVENUES APPEAL AND THE CROSS O BJECTION RAISED BY THE ASSESSEE RELATED TO THE DISALLOWANCE OF RS.39,14,48,612/- MA DE U/S. 14A READ WITH RULE 8D OF THE RULES. 7. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PUBLIC SECTOR BANK. DURING THE RELEVANT YEAR, THE ASSESSEE DERIVED EXEMPT INCO ME OF RS.57,10,00,241/- FROM THE SHARES AND SECURITIES. IN THE RETURN OF INCOME, NO DISALL OWANCE U/S. 14A OF THE ACT WAS OFFERED BY THE ASSESSEE. THE AO SOUGHT CLARIFICATION FROM THE ASSESSEE FOR NOT OFFERING ANY DISALLOWANCE U/S. 14A OF THE ACT. IN COMPLIANCE TH ERETO IT WAS SUBMITTED THAT THE ASSESSEE BANK IS DEALING IN SHARES AND THE INCOME EARNED THE REON WAS ASSESSED AS BUSINESS INCOME UNDER THE PROVISIONS OF THE ACT. ACCORDINGLY, THE DIVIDEND INCOME DERIVED BY IT WHICH IS EXEMPT FROM TAX WAS INCIDENTAL TO THE PRINCIPAL BAN KING BUSINESS OF THE ASSESSEE. THE AO, HOWEVER, DISREGARDED THE CONTENTION PUT-FORTH AND C OMPUTED THE DISALLOWANCE U/S. 14A IN TERMS OF RULE 8D(2)(II) AND (III) OF THE RULES AT R S.36,24,11,122/- AND RS.2,90,37,490/- RESPECTIVELY. AGGRIEVED BY THE AOS ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE DISALLOWANCE MA DE ON ACCOUNT OF PROPORTIONATE INTEREST OF RS.36,24,18,122/- UNDER RULE 8D(2)(II) BUT CONFIRMED THE DISALLOWANCE OF RS.2,90,37,490/- MADE BY THE UNDER RULE 8D(2)(III). AGGRIEVED BY THE SAID ORDER, THE REVENUE IS IN APPEAL BEFORE US AND THE ASSESSEE HAS FILED THE CROSS OBJECTION BEFORE US. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE LD. DR SUBMITTED THAT MERELY BECAUSE THE ASSESSEE W AS A DEALER IN SHARES, IT COULD NOT TAKE A STAND THAT EXPENDITURE INCURRED IN CONNECTION WITH EARNING OF TAX FREE INCOME WAS NOT DISALLOWABLE U/S 14A OF THE ACT. HE SUBMITTED THAT THE HONBLE SUPREME COURT IN ITS RECENT 5 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 5 JUDGMENT IN THE CASE OF MAXOPP INVESTMENT LTDVS CIT (402 ITR 640) HAD CONSIDERED THE ISSUE OF DISALLOWABILITY OF THE EXPENDITURE INCURRE D IN THE ASSESSMENT OF AN ASSESSEE WHO DERIVED EXEMPT DIVIDEND INCOME FROM SHARES HELD AS STOCK-IN-TRADE. REFERRING TO THE SAID JUDGMENT, THE LD. DR SUBMITTED THAT THE HONBLE SUP REME COURT IN PRINCIPLE UPHELD THE REVENUES CONTENTION THAT SINCE EVEN THE DEALER IN SHARES ENJOYS EXEMPTION GRANTED U/S 10(33) OF THE ACT IN RESPECT OF DIVIDEND DERIVED FR OM SHARES HELD AS STOCK-IN-TRADE, PART OF THE EXPENSES INCURRED IN RELATION TO EARNING SUCH D IVIDEND INCOME WERE LIABLE FOR DISALLOWANCE U/S 14A OF THE ACT. HE FURTHER SUBMITT ED THAT DESPITE GIVING OPPORTUNITY OF FURNISHING THE DETAILS OF EXPENSES INCURRED IN RELA TION TO EARNING TAX FREE INCOME, THE ASSESSEE HAD NOT COME FORWARD WITH HIS OWN WORKING OF EXPENSES DISALLOWABLE U/S 14A AND THEREFORE THE AO WAS LEFT WITH NO OTHER ALTERNATIVE BUT TO MAKE THE DISALLOWANCE IN CONFORMITY WITH RULE 8D. HE FURTHER SUBMITTED THAT EVEN BEFORE THE LD. CIT(A) OR BEFORE THIS TRIBUNAL, THE ASSESSEE DID NOT FURNISH ITS OWN WORKING OF EXPENSES INCURRED IN RELATION TO SUCH EXEMPTED DIVIDEND INCOME AND THEREFORE THE DISALLOWANCE U/S 14A READ WITH RULE 8D AS MADE IN THE ASSESSMENT ORDER SHOULD BE RESTOR ED BY THE TRIBUNAL. 9. PER CONTRA, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE LD. CIT(A) DID NOT GRANT THE RELIEF TO THE ASSESSEE ON THE FOOTING THAT THE ASSESSEE WAS A DEALER IN SHARES AND FOR THAT REASON RULE 8D WAS NOT APPLICABLE. DRAWING ATTENTIO N TO THE LD. CIT(A)S ORDER, HE SUBMITTED THAT THE LD. CIT(A) HAD TAKEN NOTE OF THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE BANK HAD EARNED INTEREST AS WELL AS PAID INTEREST AND NET INTEREST GAIN FOR THE YEAR WAS RS.3902.10 CRORES. THE LD. C IT(A) ALSO TOOK NOTE OF THE FACT THAT THE ASSESSEES OWN CAPITAL AND OTHER NON-INTEREST BEARI NG FUNDS AVAILABLE WITH THE ASSESSEE WERE FAR IN EXCESS OF THE INVESTMENTS MADE IN SHARES & S ECURITIES WHICH HAD YIELDED TAX FREE INCOME. THE LD. AR THEREFORE SUBMITTED THAT THAT TH E LD. CIT(A) RIGHTLY DELETED THE INTEREST DISALLOWANCE OF RS.36,24,11,122/- SINCE THERE WAS N O NET INTEREST EXPENDITURE. IN SUPPORT OF SUCH FINDING OF THE LD. CIT(A), THE LD. AR RELIED O N THE FOLLOWING JUDICIAL DECISIONS: - PR. CIT VSNIRMA CREDIT & CAPITAL PVT LTD (300 CTR 2 86) (GUJ HC) - DCIT VSMACHINO FINANCE PVT LTD (ITA NO. 312/KOL/201 4) (ITAT KOL) - DCIT VS TRADE APARTMENT LTD (ITA NO. 1277/KOL/2011) (ITAT KOL) - BISWANATHPASARIVS ASST. CIT (ITA NO. 1682/KOL/2011) (ITAT KOL) 6 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 6 10. IN SO FAR AS DISALLOWANCE MADE BY THE AO UNDER THE THIRD LIMB OF RULE 8D(2) WHICH WAS UPHELD BY THE LD. CIT(A) AND OBJECTED BY THE AS SESSEE THROUGH CO, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES IN THE COURSE OF CARRYING ON ITS PRINCIPAL BUSINESS OF BANKING. HE SUBMITTED THAT IN ORDER TO CONFORM WITH RBI REGULATIONS CONCERNING MAINTAINING CRR & SLR, THE ASSESSEE IS R EQUIRED TO HOLD CERTAIN SECURITIES AND ALSO IN THE COURSE OF CARRYING ON BANKING BUSINESS THE SHARES OF BODIES CORPORATE ARE REQUIRED TO BE HELD. DRAWING ATTENTION TO THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE ASSESSEES OWN CASE REPORTED IN 240 ITR 355, THE LD . AR SUBMITTED THAT ALTHOUGH IN THE ASSESSEES BALANCE SHEET, THE SHARES & SECURITIES W ERE DECLARED UNDER THE HEAD INVESTMENTS YET THE TRUE CHARACTER OF SUCH HOLDIN G WAS CONSIDERED BY THE SUPREME COURT TO BE ON TRADING ACCOUNT. ACCORDINGLY THE LD. AR SUBMITTED THAT ANY GAIN OR LOSS WHICH THE ASSESSEE EARNED FROM PURCHASE AND SALE OF SHARE S & SECURITIES WAS ALWAYS ASSESSED BY THE TAX AUTHORITIES UNDER THE HEAD PROFITS & GAINS OF BUSINESS. IN THE COURSE OF CARRYING ON SUCH BANKING BUSINESS, THE ASSESSEE EARNED PROFI TS FROM THE ACTIVITY OF PURCHASE & SALE OF SHARES AND SECURITIES AND DIVIDEND ON SUCH SHARES W AS ONLY INCIDENTAL. THE LD. AR SUBMITTED THAT SINCE NONE OF THE EXPENSES WERE INCU RRED BY THE ASSESSEE IN RELATION TO EARNING ANY TAX FREE INCOME BUT THE EXPENSES WERE A LWAYS INCURRED IN RELATION TO CARRYING ON ITS BANKING BUSINESS, NO PART OF EXPENSES WERE DISA LLOWABLE U/S 14A OF THE ACT. THE LD. AR BROUGHT TO OUR ATTENTION THAT THE HONBLE SUPREME C OURT IN ITS DECISION DATED 12.02.2018 HAD DECIDED A LARGE NUMBER OF APPEALS WHICH INTER A LIA INCLUDED MAXOPP INVESTMENT LTD (SUPRA) AS WELL AS REVENUES APPEAL IN THE CASE OF STATE BANK OF PATIALA , DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND REPORTED IN 391 ITR 218 . HE SUBMITTED THAT THE REVENUES APPEAL IN THE CASE OF STATE BANK OF PATIA LA WAS DISMISSED BY THE HONBLE SUPREME COURT, AND CONSEQUENT TO DISMISSAL OF THE R EVENUES APPEAL, THE REASONING INCORPORATED IN THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT STOOD UPHELD. THE LD. AR THEREFORE SUBMITTED THAT IN THE CASE OF ASSESSEE BANK, THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT SINCE UPHELD BY THE HONBLE SUPREME COURT WAS REQUIRED TO BE APPLIED AND ACCORDINGLY HE PRAYED FO R DELETION OF THE DISALLOWANCE OF RS.2,90,37,490/- MADE UNDER RULE 8D(2)(III). 7 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 7 11. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S, WE FIND THAT THE ISSUE INVOLVED IN THE REVENUES APPEAL IS SQUARELY COVERED IN ASSESSE ES FAVOUR BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VSHDFC BANK LTD (383 ITR 529) . IN THAT CASE ALSO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT WAS WHETHER ANY PART OF THE INTEREST PAID BY THE BANK COULD BE DISALLOWED U/S 1 4A READ WITH RULE 8D(2)(II). ON APPEAL THIS TRIBUNAL AND THEREAFTER THE HONBLE BOMBAY HIG H COURT HELD THAT SINCE THE BANKS OWN FUNDS WERE SUBSTANTIALLY MORE THAN THE COST OF INVE STMENTS YIELDING TAX FREE INCOME, NO PART OF THE INTEREST PAID WAS LIABLE FOR DISALLOWANCE. T HE VIEW OF THE HONBLE BOMBAY HIGH COURT WAS FOLLOWED WITH APPROVAL BY THE JURISDICTIO NAL CALCUTTA HIGH COURT IN THE CASE OF CIT VSRASOI LTD (ITA NO. 109 OF 2016) . 12. WE ALSO FIND MERIT IN THE ASSESSEES ALTERNATE CONTENTION THAT NO DISALLOWANCE OUT OF INTEREST PAID WAS WARRANTED BECAUSE AFTER NETTING O FF INTEREST PAID AGAINST INTEREST RECEIVED, THE ASSESSEE HAD MADE NET INTEREST GAIN OF RS.3902. 10 CRORES. THE HONBLE GUJARAT HIGH COURT IN ITS RECENT JUDGMENT IN THE CASE OF PR. CIT VSNIRMA CREDIT & CAPITAL PVT LTD (SUPRA) HAS HELD THAT THE EXPRESSION USED IN RULE 8D(2)(II ) IS INTEREST EXPENDITURE AND NOT INTEREST PAID AND ACCORDINGLY THE EXPENDITURE IN THIS CONTEXT MUST MEAN INTEREST PAID MINUS TAXABLE INTEREST EARNED. APPLYING THE RATIO LAID DOWN IN THIS JUDGMENT TO THE FACTS OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) DELETING THE INTEREST DISALLOWANCE MADE UNDER RULE 8D(2)(II). 13. IN SO FAR AS DISALLOWANCE OF RS.2,90,37,490/- U NDER RULE 8D(2)(III) IS CONCERNED, WE FIND THAT BEFORE THE LOWER AUTHORITIES THE ASSESSEE HAD RAISED THE PLEA THAT NO DISALLOWANCE U/S 14A WAS WARRANTED SINCE THE ASSESSEE WAS A DEAL ER IN SHARES ALTHOUGH IN ITS BALANCE SHEET, SHARES WERE DISCLOSED UNDER THE HEAD INVEST MENTS. WE FIND THAT THE HONBLE SUPREME COURT IN ITS RECENT JUDGMENT DATED 12.02.20 18 IN THE CASE OF MAXOPP INVESTMENT LTD VS CIT (SUPRA) DID NOT UPHOLD THIS LINE OF ARGUMENT AND HELD THAT EVEN IN THE CASE OF A DEALER IN SHARES, EARNING DIVIDEND INCOME FROM ITS STOCK-IN-TRADE, MAY EXPOSE HIS TO THE RIGORS OF SECTION 14A OF THE ACT. WE HOWEVER FIND M ERIT IN THE LD. ARS SUBMISSIONS THAT IN THE SAID JUDGMENT, THE HONBLE SUPREME COURT ALS O EXTENSIVELY DEALT WITH THE REVENUES APPEAL IN THE CASE OF STATE BANK OF PATIALA ARISING FROM THE DECISION OF THE HONBLE PUNJAB 8 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 8 & HARYANA HIGH COURT REPORTED IN 391 ITR 218 . IN THE SAID JUDGMENT THE HONBLE PUNJAB & HARYANA HIGH COURT HAD TAKEN NOTE OF THE FACT THA T THE BANKING COMPANIES IN THE COURSE OF CARRYING ON THEIR BANKING BUSINESS WERE REQUIRED TO HOLD SHARES & SECURITIES AND THE EXPENSES WERE INCURRED IN CONNECTION WITH SUCH BANK ING BUSINESS AND THE INCOME THEREFROM WAS ASSESSABLE UNDER THE HEAD PROFITS & GAINS OF B USINESS. THE HONBLE HIGH COURT HAD TAKEN NOTE OF THE BOARDS CIRCULAR NO. 18 DATED 02.11.2015 WHEREIN THE BOARD HAD DIRECTED THE AOS TO ASSESS THE INCOME DERIVED FROM SECURITIES HELD IN THE COURSE OF CARRYING ON BANKING BUSINESS UNDER THE HEAD PROFITS & GAINS OF BUSINESS AND NOT UNDER THE HEAD OTHER SOURCES. THE HIGH COURT HAD ALSO TAKEN NOTE OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VSNAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD (28 9 ITR 6). APPLYING THE RATIO IN THE SAID DECISION THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT THE INVESTMENTS HELD BY THE ASSESSEE BAN K WAS PART OF ITS BANKING BUSINESS AND INCOME ARISING FROM TRADING IN SECURITIES WAS ATTRI BUTABLE TO BANKING BUSINESS OF THE ASSESSEE. THE HONBLE PUNJAB & HARYANA HIGH COURT T HEREFORE HELD THAT IN ASSESSING THE INCOME OF THE ASSESSEES ENGAGED IN BANKING BUSINESS , NO DISALLOWANCE U/S 14A WAS WARRANTED BECAUSE IN SUCH CASES THE EXPENDITURE WAS INCURRED IN RELATION TO ITS BANKING BUSINESS AND NOT IN RELATION TO EARNING ANY TAX FRE E INCOME. THE REVENUES APPEAL AGAINST THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT WAS DISMISSED BY THE HONBLE SUPREME COURT. WE THEREFORE FIND THAT QUA THE ASSES SEES ENGAGED IN THE BANKING BUSINESS, THE HONBLE SUPREME COURT UPHELD THE JUDGMENT OF TH E HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PR. CIT VSSTATE BANK OF PATIALA (SUPRA) AS PER WHICH NO DISALLOWANCE U/S 14A IS PERMISSIBLE IN TERMS OF RUL E 8D IN CASE OF ASSESSEES ENGAGED IN BANKING BUSINESS. RESPECTFULLY FOLLOWING THE JUDGME NT OF THE SUPREME COURT IN CASE OF STATE BANK OF PATIALA (SUPRA) , WE DIRECT THE LD. AO TO DELETE THE DISALLOWANCE O F RS.2,90,37,490/- MADE UNDER RULE 8D(2)(III). GROUND NO. 2 OF THE REVENUES APPEAL IS THEREFORE DISMISSED AND THE GROUNDS OF ASSESSEES C O ARE ALLOWED. 14. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DIRECTING THE AO TO RE-COMPUTE AND ALLOW THE BENEFI T OF UNABSORBED LOSSES AND DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS. AT THE ONSET TH E LD. DR APPEARING ON BEHALF OF THE 9 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 9 REVENUE FAIRLY STATED THAT THE DIRECTIONS GIVEN BY THE LD. CIT(A) WERE ONLY CONSEQUENTIAL IN NATURE AND IN ACCORDANCE WITH THE PROVISIONS OF LAW . WE ALSO DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY GROUND NO. 3 IS DISMISSED. 15. GROUND NOS. 4 & 5 OF THE APPEAL ARE AGAINST THE ACTION OF THE LD. CI T(A) HOLDING THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLIC ABLE TO THE ASSESSEE BANK. AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THIS TRIBUNAL WHICH DECIDED THIS IDENTICAL QUESTION IN FAVOUR OF ASSESSEE IN ITS OWN CASE FOR AY 2002-03 IN ITA NO.1768/KOL/2009 DATED 27.1.2015 , WHEREIN THE TRIBUNAL HELD AS FOLLOWS : 7.5. IN VIEW OF THE ABOVE, WE HOLD THAT IN VIEW OF THE LEGISLATIVE CHANGE BROUGHT ABOUT BY THE INTRODUCTION OF EXPLANATION 3 IN SECTION 115JB OF T HE ACT BY THE FINANCE ACT, 2012 , THE ASSESSEE'S CONTENTION IN FACT STANDS MORE FORTIFIED. THE EXPLA NATION 3 TO SECTION 115JB MAKES IT EVIDENTLY CLEAR THAT SECTION 115JB IS APPLICABLE ONLY TO ENTITIES R EGISTERED AND RECOGNIZED TO BE COMPANIES UNDER THE COMPANIES ACT, 1956. SINCE THE ASSESSEE IS NOT A CO MPANY WITHIN THE MEANING OF COMPANIES ACT, 1956, SECTION 211(2) AND PROVISO THEREON IS NOT APP LICABLE AND THEREFORE CONSEQUENTLY WE HOLD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE ALSO NOT APPLICABLE. 16. FOLLOWING THE DECISION RENDERED BY THE COORDINA TE BENCH IN THEASSESSEES OWN CASE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE LD. CIT(A). ACCORDINGLY GROUND NOS. 4 & 5 ARE DISMISSED. 17. NEXT ISSUE RAISED BY THE REVENUE IN GROUND NO. 6 OF THE APPEAL IS THAT LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE VARIOUS A DDITIONS/ DISALLOWANCES MADE BY THE AO WHILE ASSESSING BOOK PROFIT U/S 115JB OF THE ACT. 18. SINCE WE HAVE ALREADY HELD THAT THE PROVISION O F SECTION 115JB DO NOT APPLY TO THE ASSESSEE, THEREFORE, THE DISPUTE RAISED THROUGH GRO UND NO. 6 IS ONLY OF ACADEMIC INTEREST AND THEREFORE DOES NOT REQUIRE ANY ADJUDICATION. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND ASSESSEES CO IS ALLOWED . SD/- SD/- [ DR. A. L. SAINI] [A.T. VARKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21ST AUGUST, 2018 JD.(SR.P.S.) 10 ITA NO.1615/KOL/2016 & CO NO. 51 OF 2018 UCO BANK, AY 2012-13 10 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, LTU-2, KOLKATA. 2 RESPONDENT UCO BANK, FINANCE DEPTT., 3 RD FLOOR, 2, INDIA EXCHANGE PLACE, KOLKATA-700 001.. 3. THE CIT(A) -23, KOLKATA. (SENT THROUGH E-MAIL) 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY