ACIT, CHENNAI V. M/s. Shriram Transport Finance Co.Ltd., CHENNAI

ITA 1013/CHNY/2012

• Counselvise Citation: 101321714 RSA 2012
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: S BALAMURUGAN
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1013/MDS/2012 (ASSESSMENT YEAR : 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI - 600 034 . (APPELLANT) V. M/S SHRIRAM TRANSPORT FINANCE CO. LTD., MOOKAMBIKA COMPLEX, 3 RD FLOOR, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI - 600 004. PAN : AAACS7018R (RESPONDENT) APPELLANT BY : SHRI S. DASGUPTA, JCIT RESPONDENT BY : SHRI S. BALAMURUGAN, ADVOCATE DATE OF HEARING : 01.08.2012 DATE OF PRONOUNCEMENT : 01.08.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, DIRECTED AGA INST AN ORDER DATED 6.2.2012 OF COMMISSIONER OF INCOME TAX (APPEA LS)-V, CHENNAI, ITS GRIEVANCE IS THAT PROVISION RELATING T O DIMINUTION IN VALUE OF INVESTMENTS ON 6.13% GOVERNMENT OF INDIA BONDS, WHICH WAS DISALLOWED BY THE A.O., WAS ALLOWED BY CIT(APPEALS) . AS PER THE I.T.A. NO. 1013/MDS/12 2 REVENUE, DECISION OF THIS TRIBUNAL IN ASSESSEE'S OW N CASE FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 725/MDS/2010 AND FOR ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 320/MDS/2011, HAD NOT BECOME FINAL SINCE DEPARTMENT HAD PREFERRED APPEAL BEFORE HONBLE JURISDICTIONAL HIGH COURT. 2. WE HAVE HEARD CONTENTIONS OF THE LEARNED COUNSEL S. IT IS NOT DISPUTED BY THE LEARNED D.R. THAT THE CIT(APPEALS) HAD FOLLOWED THE TRIBUNAL ORDER IN ASSESSEE'S OWN CASE FOR ASSESSMEN T YEAR 2006-07 WHERE IT WAS HELD THAT DIMINUTION VALUE OF GOVERNME NT SECURITIES WAS RIGHTLY ALLOWED BY THE CIT(APPEALS). A COPY OF THE SAID ORDER WAS FILED BY THE LEARNED A.R. RELEVANT PARA 10 OF ORDE R OF THIS TRIBUNAL DATED 16 TH DECEMBER, 2010 IN I.T.A. NO. 725/MDS/2010, IS REPRODUCED HEREUNDER, FOR BREVITY:- 10. THE SECOND ISSUE OF THIS APPEAL RELATES TO DELE TION OF THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF ` 11,78,613/- ATTRIBUTABLE TO DIMINUTION CLAIMED BY THE ASSESSEE IN THE VALUE OF INVESTMENTS. THE FACTS OF THIS ISSUE ARE ASSESSEE- COMPANY HAS BEEN HOLDING GOVERNMENT SECURITIES AND THE DIMINUTI ON THROUGH VALUATION AS ON 31.3.2005 HAS BEEN DEBITED TO THE P ROFIT & LOSS ACCOUNT AND HAS BEEN CLAIMED AS DEDUCTION. THE ASS ESSING OFFICER HAS DISALLOWED THE SAME ON THE GROUND THAT THESE SECURITIES HAVE BEEN CLASSIFIED AS INVESTMENT IN TH E BALANCE-SHEET AND THAT THE INCOME EARNED ON THEIR RELEASE IS IN T HE NATURE OF DIVIDENDS WHICH ARE EXEMPT U/S 10(34) OF THE ACT AN D HENCE, THE DIMINUTION IN THE VALUE IS NOT RELATABLE TO EXEMPT INCOME ALLOWABLE AS DEDUCTION. THE MAIN ARGUMENT OF THE LD.DR IN TH IS REGARD WAS I.T.A. NO. 1013/MDS/12 3 THAT THESE INVESTMENTS WERE KEPT NOT IN THE BUSINES S PORTFOLIO BUT IN THE INVESTMENT PORTFOLIO AND THE INCOME FROM THE SE INVESTMENTS WAS CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. THE S UBMISSION OF THE LD.AR AGAINST THE CONTENTION OF THE LD.DR IS TH AT THE SECURITIES WERE PURCHASED TO SATISFY THE STATUTORY LIQUID RATIO (SLR) AND HENCE, THEY ARE NOT IDLE INVESTMENTS BUT REPRESENT SECURITIES PURCHASED TO SATISFY SLR REQUIREMENTS IN THE COURSE OF CARRYING ON BUSINESS. IT WAS FURTHER SUBMITTED THA T, IN FACT, THE INCOME FROM SECURITIES WERE NOT CLAIMED AS EXEMPT B Y THE ASSESSEE. IT WAS FURTHER ARGUED THAT LOOKING TO TH E CORRECT FACTS, THE MANNER IN WHICH ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT IS NOT DETERMINATIVE OF THE TAX CONSEQUENCES AS HAS BE EN HELD BY THE HON'BLE SUPREME COURT DECISION IN THE CASE OF S UTLEJ COTTON MILLS LTD VS CIT, 116 ITR 1. IT WAS ARGUED THAT T HIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE ALSO BY THE DECIS ION IN THE CASE OF CIT, A.P VS COCANADA RADHASWAMI BANK LTD, 57 IT R 306 AND IN THE CASE OF UCO BANK VS CIT, 240 ITR 355. 11. AFTER CIRCUMSPECTING THE ENTIRE RECORDS IN THE LIGHT OF THE ORAL AS WELL AS WRITTEN SUBMISSIONS OF THE PARTIES, WE HAVE FOUND IT FOR A FACT THAT THE ASSESSEE IS A NON-BANKING FINAN CE COMPANY REGISTERED WITH THE RESERVE BANK OF INDIA (RBI) FOR DOING BUSINESS IN FINANCING AND IS REGULATED BY THE DIREC TIONS ISSUED BY RBI FROM TIME TO TIME. IT ACCEPTS PUBLIC DEPOSITS. SECTION 45-IB OF THE RBI ACT STIPULATES THAT EVERY NON-BANKING F INANCIAL COMPANY SHALL INVEST AND CONTINUE TO INVEST IN INDI A IN UNENCUMBERED APPROVED SECURITIES, VALUED AT A PRICE NOT EXCEEDING THE CURRENT MARKET PRICE OF SUCH SECURITIES, AN AMO UNT WHICH, AT THE CLOSE OF BUSINESS ON ANY DAY, SHALL NOT BE LESS THAN FIVE PERCENT OR SUCH HIGHER PERCENTAGE NOT EXCEEDING TWE NTY FIVE PERCENT AS THE BANK MAY, FROM TIME TO TIME AND BY N OTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY, OF THE DEPOSITS OUTS TANDING AT THE CLOSE OF BUSINESS ON THE LAST WORKING DAY OF THE SE COND PRECEDING QUARTER. RBI NOTIFIES THE PERCENTAGE OF THE OUTST ANDING DEPOSIT WHICH HAS TO BE INVESTED IN APPROVED SECURITIES FRO M TIME TO TIME. THE PERCENTAGE NOTIFIED IS 15%. REGULATIONS REGARD ING CUSTODY OF SECURITIES ETC ARE INCORPORATED IN NBFC PUBLIC DEP OSITS (RBI) DIRECTIONS-1998. IT IS THUS, CLEAR THAT INVESTME NTS IN SECURITIES IS A STATUTORY DIRECTION WHICH HAS TO BE NECESSARIL Y COMPLIED WITH I.T.A. NO. 1013/MDS/12 4 BY THE ASSESSEE, AS IT HAS PUBLIC DEPOSITS. IT IS IMMATERIAL THAT THEY ARE SHOWN UNDER THE CLASSIFICATION INVESTMENT S. WE HAVE TO LOOK AT THEIR TRUE NATURE. DOING SO, WE FIND THE D ECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS COCANAD A RADHASWAMI BANK LTD (SUPRA) AND THE OTHER DECISIONS MENTIONED ABOVE SUPPORT THE VIEW THAT THE ASSESSEE IS ENTITLE D TO THE CLAIM OF DIMINUTION IN THE VALUE OF SECURITIES WHICH ARE HELD FOR THE PURPOSE OF ITS BUSINESS. THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE FINDING OF THE LD. CIT(A) IN THIS REGARD ALS O AND THUS, DISMISS GROUND NO.3 OF REVENUES APPEAL. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL, WE ARE OF THE OPINION THAT CIT(APPEALS) W AS JUSTIFIED IN DELETING THE DISALLOWANCE. NO INTERFERENCE IS CALL ED FOR. 3. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 1 ST OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 1 ST AUGUST, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-VIII, CHENNAI (4) CIT-VI, CHENNAI-34 (5) D.R. (6) GUARD FILE