ITO WD 2(4), THANE V. AMBERNATH JAI HIND CO OP BANK LTD, MUMBAI

ITA 104/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88180 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Keywords: Business income; Depreciation; Cost of acquisition; Reassessment proceedings; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 104 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 8 - 0 9 ) ACIT, CIRCLE - 2, KALYAN VS. AMBERNATH JAI - HIND CO - OP BANK LIMITED, 42, PURVADARSHAN,, L.T.MARG, AMBERNATH (W) - 421501 PAN/GIR NO. : A A A AJ 0263 F ( APPELLAN T ) .. ( RESPONDENT ) /REVENUE BY : SHRI ASGHAR ZAIN VP /ASSESSEE BY : SHRI PIYUSH CHHAJED DATE OF HEARING : 21 ST JANUARY , 201 5 DATE OF PRONOUNCEMENT 21 ST JANUARY , 2015 O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE AS SESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF ORDER PASSED U/S. 143 ( 3 ) OF THE I.T. ACT , WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS RIGHT IN HOLDING THAT THE INVESTMENTS IN CASE OF BANK ARE STOCK - IN - TRADE, WHEN ADMITTEDLY, THE GOVERNMENT SECURITIES WERE TO BE HELD BY THE BANK TILL ITS MATURITY. 2. WHETH ER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS RIGHT IN HOLDING THAT THE PROPORTIONATE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT IS REVENUE IN NATURE AND THUS ALLOWABLE EXPENDITURE. 3. THE APPELLANT PRAYS THAT ORDER OF THE LEARNED CIT(A) - II, THANE BE CANCELLED AND THAT OF THE AO BE RESTORED. ITA NO. 104 /1 2 2 2. THERE IS A DELAY OF 16 DAYS IN FILING APPEAL. LD. DR SUBMITTED THAT DUE TO INEVITABLE CIRCUMSTANCES, THE AFORESAID DELAY HAS BEEN OCCURRED, WHICH MAY KINDLY BE CONDONED. 3. RIVAL CONTENTION S HAVE BEEN HEARD AND RECORD PERUSED. AFTER CONSIDERING THE SUBMISSION OF THE LD. DR, WE CONDONE THE DELAY OF 16 DAYS IN FILING THE PRESENT APPEAL. 4 . LD. AR PLACED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2007 - 08, PASSED IN ITA NO. 75 48/MUM/2011, DATED 19 - 2 - 2014, WHEREIN THE SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL. 5 . WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL, WHEREIN THE TRIBUNAL AFTER FOLLOWING EARLIER ORDER OF THE TRIBUNAL IN ITA NOS.2246 TO 2250/MUM/2009, HAS HELD AS UN DER : - REFERENCE WAS MAD E TO THE FOLLOWING OBSERVATIONS OF THE TRIBUNAL IN ITA NO.2246 TO 2250/MUM/2009: '15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT IN THE CASE OF THE ASSESSEE ALL INVESTMENT IS STOCK IN TRADE WHICH IS ACCEPTIN G BY THE DEPARTMENT SINCE LONG. FOR THE FIRST TIME THIS POINT WAS RAISED IN THE ASSESSMENT YEAR 1982 - 83 TO 1984 - 85. IN THESE YEARS THE APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR VIDE M.A.NOS. 2,3 864 (JDPR)/ 2000 ORDER DATED 14/ 12/ 2002 HAS HELD THAT IN TH E CASE OF THE BANK(ASSESSEE) THE INVESTMENT IS STOCK IN TRADE AND ENTIRE LOSS ON ACCOUNT OF DIMINISHING IN VALUE HAS BEEN ALLOWED AS DEDUCTION. THIS JUDGMENT HAS BEEN ACCEPTED BY THE DEPARTMENT AND NO APPEAL WAS FILED BEFORE THE HON'BLE RAJASTHAN HIGH COUR T. 16. SINCE BEGINNING THE LOSS OF INVESTMENT BEING LOSS ON ACCOUNT OF DIMINISHING IN VALUE OF INVESTMENT (STOCK IN TRADE) INCLUDING AMORTIZATION IS ALLOWED AS BUSINESS LOSS AND THE DEPARTMENT HAS ALLOWED THE SAME AND ACCEPTED THIS POSITION SINCE LONG IN ALL T HESE ASSESSMENT PROCEEDINGS. 17. IN THE CASE OF THE BANK ALL INVESTMENTS ARE STOCK IN TRADE AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF UCO BANK REPORTED AT 240 ITR 355. THERE IS NO INVESTMENT IN THE NATURE OF INVESTMENT ON WHICH THE EXPENDITURE/ LOSS CAN BE TREATED IN THE NATURE OF CAPITAL EXPENDITURE. THE SECURITIES ARE CATEGORIZED AS PER THE NORMS OF THE RBI. AS PER THE 'SIGNIFICANT ACCOUNTING POLICIES' GIVEN IN SCHEDULE 17 ATTACHED WITH THE BALANCE SHEET EVERY YEAR, THE FACT THAT ALL INVESTMENTS ARE STO CK IN TRADE HAS BEEN CLARIFIED IN THE CASE OF THE ASSESSEE. IT DOES NOT MEAN THE SECURITIES KEPT IN CATEGORY OF HTM CANNOT BE SOLD BEFORE THE MATURITY. THE HTM HAS BEEN SOLD IN SUBSEQUENT YEAR AND ITA NO. 104 /1 2 3 INCOME/ LOSS TREATED AS BUSINESS INCOME/ LOSS AND NOT AS CA PITAL GAIN/ LOSS AT ALL. 18. ALL INCOME/ LOSS WHATEVER ARISING ON ACCOUNT OF INVESTMENT (STOCK IN TRADE) INTEREST LOSS/ PROFITS OR DIMINISHING OF INVESTMENT INCLUDING SECURITIES HELD UNDER HTM CATEGORY HAS BEEN TREATED AS BUSINESS INCOME/ LOSS AND ALWAYS HAS B EEN TREATED BY DEPARTMENT AS BUSINESS AND ASSESSED ACCORDINGLY IN ALL PAST YEAR ASSESSMENT BY DEPARTMENT. THE INTEREST EARNED IN THE CASE OF THE BANK, ON ALL SHARE AND SECURITY ASSETS ARE STOCK IN TRADE AND WHATEVER THE LOSS/ PROFIT ARE NOT IN THE NATURE O F CAPITAL. THE ENTIRE INTEREST INCOME OF SECURITIES UNDER WHATEVER CATEGORY HAD BEEN AND IS BEING ASSESSED IN ALL THESE YEARS AS BUSINESS INCOME. THEREFORE, AS SUCH DIFFERENT CATEGORIES OF THE INCOME DOES NOT FORM(HTM) AS CAPITAL IN NATURE. 19. AS STATED EARLI ER, THE FIGURE OF RS. 65.62 LACS REPRESENTS THE AMORTIZATION OF PREMIUM FOR SECURITIES HELD UNDER HTM CATEGORY, WHICH HAS BEEN WRITTEN OFF IN TERMS OF THE RBI CIRCULAR DATED 1611012000. PARA 14 OF THE SAID CIRCULAR READS AS UNDER: '14. INVESTMENTS CLASSIFI ED UNDER HELD TO MATURITY CATEGORY NEED NOT TO BE MARKED TO MARKET AND WILL BE CARRIED AT ACQUISITION COST UNLESS IT IS MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY.' VIDE RBI CIRCULAR NO.DBO D NO.BP.B.0 32121.04.0812000 - 01 DATED 1611012000, BANK MAY SHIFT INVESTMENT TO/FROM HTM CATEGORY WITH APPROVAL OF BOARD FROM/TO OTHER CATEGORY. FURTHER IN TERMS OF ABOVE REFERRED CIRCULAR, PROFIT ON SALE OF INVESTMENTS IN HTM CATEGORY SHOULD BE TAKEN TO TH E PROFIT AND LOSS ACCOUNT. THERE IT IS VERY CLEAR THAT SECURITIES HELD UNDER HTM CATEGORY CAN BE SOLD BY BANK AT ANY POINT OF TIME. THEREFORE, THESE SECURITIES ARE BEING AS STOCK IN TRADE AND PROFIT/LOSS ON SALE OF THESE SECURITIES ARE TREATED AS BUSINESS INCOME/ LOSS. 20. THE ASSESSEE HAS FURTHER FILED A COPY OF CBDT INSTRUCTION NO. 17 DATED 26 /11/2008 PUBLISHED IN 220 CTR (STATUTE PAGES 41 TO 44). THE CBDT IN PARA (VII) OF THIS INSTRUCTION HAS STATED THAT IN THE CASES OF BANKS WHERE RBI HAD ISSUED GUIDELINES FOR ALLOWING DEDUCTION OF AMORTIZATION PREMIUM PAID ON SECURITIES UNDER HTM CATEGORY. THE RELEVANT PORTION OF INSTRUCTION IS AS UNDER: 'AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKED AND ARE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHI CH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/ APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQ UIRED TO BE PROVIDED FOR THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS.' 21. SINCE THE CLAIM OF THE ASSESSEE IS AS PER RBI GUIDELINES AND CBDT HAS ALSO ISSUED DIRECTIONS TO ALLOW PREMIUM TO BE AMORTIZED REMAININ G WITH THE MATURITY, THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE AMOUNTING TO RS. 65,51,8261 - . 22. SINCE THE CLAIM OF THE ASSESSEE IS ACCEPTED ON MERITS THE GROUND WITH REGARD TO CHALLENGING OF THE VALIDITY OF CIT(A)'S ORDER HOLDING INITIATION OF REASSESSMENT PROCEEDINGS TO BE INVALID ITA NO. 104 /1 2 4 IS NOT TAKEN UP FOR CONSIDERATION. IN THE RESULT, THIS APPEAL BY THE REVENUE IS DISMISSED'. IT WAS POINTED OUT THAT THE EXPENSES RELATE TO 'HELD TO MATURITY' (HTM) CATEGORY AND THIS POSITION HA S BEEN CLARIFIED IN RBI CIRCULAR DATED 16/10/2000 IN PARA 14 AND THE POSITION EXPLAINED BY RBI HAS BEEN APPROVED BY CBDT VIDE INSTRUCTION NO.17 DATED 26/11/2008. IT WAS SUBMITTED THAT BOTH THE ABOVE MENTIONED DOCUMENTS I.E. GUIDELINE OF RBI AND CIRCULAR OF CBDT, ARE REFERRED IN THE AFOREMENTIONED ORDER. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. THE ISSUE RAISED BY THE REVENUE IS SQUARELY COVERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL. RESPECTFULLY FOLLOWIN G THE SAME WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. ACCORDINGLY, BOTH THE APPEALS ARE DISMISSED. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR ARE SAME, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN ASSESSE ES OWN CASE WE DO NOT FIND ANY MERIT IN THE APPEAL , ACCORDINGLY THE SAME IS DISMISSED. 6 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/01 / 201 5 . 21/01 / 201 5 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 21/01 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGIS TRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//