The Attur Town Co-Operative Bank Limited, Salem V. ACIT, Salem

CO 86/CHNY/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5233 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 26-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CROSSOBJECTOR
• Assessee Lawyers: P B SEKARAN SHRI S SRIDHAR
• Section: 6

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: B- BENCH:CHENN AI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE. ACCOUNTANT MEMBER ) ITA NO.1213 / MDS/10 & CO NO.86/MDS/10 (ASST. YEAR 200 5-06) THE ACT CIR. II, SALEM VS M/S THE ATTUR TOWN CO-OP. BANK LTD., 78 ARUNAGIRINATHAR STREET, ATTUR, SALEM DISTRICT. (PAN AAAAT8219P) (APPELLANT) (RESPONDENT/CROSS-OBJECTOR) APPELLANT BY: RESPONDENT/CROSS OBJECTOR BY: SHRI P.B.SEKARAN, CIT-DR SHRI S. SRIDHAR ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL OF THE REVENUE ITS GRIEVANCE IS TH AT CIT(A) DELETED ADDITIONS MADE BY THE AO CONSIDERING THE PROFIT ARI SING ON SALE OF GOVERNMENT SECURITIES TO BE NOT DEDUCTIBLE UNDER SE C. 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 1213 & CO 86/MDS/10 2 2. SHORT FACTS APROPOS ARE THAT THE ASSESSEE, A BAN K FOR THE IMPUGNED ASSESSMENT YEAR CLAIMED DEDUCTION UNDER SEC. 80P((2 )(A)(I) OF THE ACT IN RESPECT OF ITS INCOME INCLUDING THE PROFITS FROM PU RCHASING AND SELLING SECURITIES. AO WAS OF THE OPINION THAT SUCH PROFITS COULD NOT BE CONSIDERED AS PART OF THE BANKING BUSINESS. ACCORDING TO HIM C LAIM UNDER SEC. 80P(2)(A)(I) WOULD NOT BE AVAILABLE TO SUCH AMOUNTS . AS PER THE AO THE DEFINITION OF BANKING ACTIVITY GIVEN IN THE BANK ING REGULATION ACT CLEARLY MEANT THAT SUCH ACTIVITIES WERE DIFFERENT FROM THE BUSINESS OF BANKING. THEREFORE, HE CONSIDERED A SUM OF ` 53,36,923/- BEING THE PROFITS ARISING FROM SALE OF SECURITIES AS NOT DEDUCTIBLE UNDER SEC .80P(2)(1)(A) OF THE ACT. THOUGH THE ASSESSEE RELIED ON THE DECISION OF COORD INATE BENCH OF THIS TRIBUNAL IN MAYURAM CO-OP URBAN BANK LTD., MAYILADU THURAI IN ITA NO. 1421/MDS/07 DATED 07-09-2007, THE AO CONSIDERED SUC H ORDER TO BE NOT ACCEPTABLE TO THE DEPARTMENT SINCE IT HAD FILED AN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. 3. BEFORE THE CIT(A) ARGUMENT OF THE ASSESSEE WAS T HAT SEC.6 OF THE BANKING REGULATION ACT MENTIONS THE FORMS OF BUSINE SS WHICH THE BANKING COMPANIES COULD ENGAGE IN, AND THIS INCLUDED ACQUI RING, HOLDING, ISSUING ON COMMISSION, UNDERWRITING AND DEALING IN STOCK, F UNDS, SHARES, DEBENTURES, DEBENTURE STOCK, BONDS, OBLIGATION, SEC URITIES AND INVESTMENTS ITA NO. 1213 & CO 86/MDS/10 3 OF ALL KINDS. CIT(A) WAS APPRECIATIVE OF THIS CONTE NTION. ACCORDING TO HIM, PURCHASING AND SELLING OF BONDS, SCRIPTS OR OTHER F ORMS OF SECURITIES WAS A PERMITTED ACTIVITY THAT COULD BE CARRIED ON BY A BA NKING COMPANY UNDER BANKING REGULATION ACT. HE, THEREFORE, DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 4. NOW BEFORE US, THE LD. DR SUBMITTED THAT THE DEC ISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN MAYURAM CO-OP URBAN BANK LTD. (SUPRA) RELIED ON BY THE CIT(A) WAS WITHOUT CONSIDE RING THE RATIO OF DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V S. NAWANSHAHAR CENTRAL CO-OP BANK LTD. (289 ITR 6). ACCORDING TO H IM, LD. CIT(A) OUGHT TO HAVE RESTRICTED THE LEVY ONLY TO THE EXTENT OF PROF ITS ARISING ON SALE OF SECURITIES, WHICH WAS REQUIRED BY THE BANK TO BE IN VESTED UNDER THE SLR REQUIREMENT. ONLY 15% OF NET DEMAND AND TIME LIABI LITY WAS REQUIRED TO BE MAINTAINED AS INVESTMENT IN THE APPROVED SECURITY A ND TRADING IN ANYTHING MORE THAN THAT WAS NOT A PERMITTED ACTIVITY. HENCE, IT WAS ARGUED THAT PROFITS THEREFROM COULD NOT BE CONSIDERED FOR DEDUC TION UNDER SEC. 80P(2)(A)(I) OF THE ACT. ITA NO. 1213 & CO 86/MDS/10 4 5. PER CONTRA, THE LD. AR SUPPORTED THE ORDER OF TH E CIT(A), RELYING ON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE C ASE OF MAHARASHTRA STATE CO-OPERATIVE BANK LTD. V. ACIT (2010) 2 ITR ( TRIB) 543 (MUMBAI)(SB). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. IN THE FIRST PLACE, WHAT WE NOTE FROM THE ASSESSMENT ORDER IS THAT THE AO DISALLOWED PROFITS DERIVED BY THE ASSESSEE BANK FRO M PURCHASING AND SELLING OF SECURITIES, AS NOT ALLOWABLE UNDER SEC. 80P(2)(A)(I) OF THE ACT. THERE IS NOTHING COMING FROM THE ASSESSMENT ORDER W HETHER THE INVESTMENTS ON SECURITIES OF WHICH PURCHASE AND SAL E WERE EFFECTED BY THE ASSESSEE WAS IN EXCESS OF SLR REQUIREMENTS. THE AO HAS SIMPLY WENT BY A CONSIDERATION THAT SUCH TRANSACTION DID NOT PARTA KE THE CHARACTER OF BANKING ACTICVITIES. BEFORE THE CIT(A) ASSESSEE WAS SUCCESSFUL SINCE THE CIT(A) WAS OF THE OPINION THAT THESE WERE PERMITTED ACTIVITIES UNDER SEC. 6 OF THE BANKING REGULATION ACT. THOUGH RELIANCE HAS BEEN PLACED BY THE LD. DR ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF NAWANSHAHAR CENTRAL CO-OP. BANK LTD. (SUPRA), WE FIND THAT WHAT WAS DECIDED THERE WAS REGARDING PROFITS DERIVED BY AN ASSESSEE OUT OF TRA DING IN SECURITIES WHICH WERE REQUIRED TO BE INVESTED FOR SPECIFIED SLR REQU IREMENT. HONBLE APEX COURT HELD THAT SUCH SECURITIES BEING STATUTORILY R EQUIRED TO BE KEPT BY A ITA NO. 1213 & CO 86/MDS/10 5 BANK, PROFIT ARISING FROM TRADING THEREFROM COULD N OT BE CONSIDERED AS AN ACTIVITY NOT COMING WITHIN THE BANKING BUSINESS. NO W THE REVENUE IS TRYING TO BRING A NEW CASE BEFORE US BY STATING THAT THE I NVESTMENT MADE BY THE ASSESSEE ON WHICH TRADING WAS DONE BY IT WAS IN EXC ESS OF 15% OF THE NET DEMAND AND TIME LIABILITY. THERE IS NO SUCH CASE FO R THE AO IN THE ASSESSMENT ORDER. REVENUE CANNOT BE ALLOWED TO BRIN G IN A NEW ISSUE NEVER CONSIDERED BY THE AO AND WHICH WAS NEVER THE REASON FOR MAKING THE DISALLOWANCE OF THE DEDUCTION CLAIMED BY THE AS SESSEE. WE ARE OF THE OPINION THAT UNDER SUCH CIRCUMSTANCES THE DECISION OF THE HONBLE APEX COURT IN NAWANSHAHAR CENTRAL CO-OP BANK LTD. CITED SUPRA, AND EARLIER DECISION REFERRED TO IN THE SAID CASE WOULD HAVE NO APPLICATION ON THE FACTS AS MENTIONED HERE. ARGUMENT OF THE LD. DR THAT TH E EARLIER DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN MAYURAM CO-OP. URBAN BANK LTD. (SUPRA) WAS RENDERED PER INCURIAM, DOES NOT HOLD A NY WATER FOR THE SIMPLE REASON THAT THE REVENUE IS TRYING TO BRING IN A NEW CASE WHICH IS NOT COMING FROM THE ASSESSMENT ORDER AT ALL. WE ARE, TH EREFORE, NOT INCLINED TO ACCEPT THE ARGUMENT OF THE REVENUE. ITS APPEAL IS D ISMISSED. 7. WHEN THE CROSS-OBJECTION OF THE ASSESSEE WAS TAK EN UP, IT WAS SUBMITTED BY THE LD. AR THAT HE WAS NOT PRESSING IT . THEREFORE, THE CROSS OBJECTION IS DISMISSED AS NOT PRESSED. ITA NO. 1213 & CO 86/MDS/10 6 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND CRO SS-OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTE R HEARING ON 9-11-2010. SD/- SD/- ( HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 9TH NOVEMBER, 2010 NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.