Rajarshi Shahu Government Servants Co.op. Bank Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 1063/PUN/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2337 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1063/PN/2014 '% % / ASSESSMENT YEAR : 2009-10 RAJARSHI SHAHU GOVERNMENT SERVANTS COOPERATIVE BANK LTD., 746E, SHAHUPURI, KOLHAPUR PAN NO.AAAAT0947L . / APPELLANT V/S ACIT, CIRCLE-2, KOLHAPUR . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : MS. ANN KAPTHUAMA / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-12-2013 OF THE CIT(A), KOLHAPUR RELATING TO AS SESSMENT YEAR 2009-10. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHALF OF TH E ASSESSEE. THEREFORE, THIS APPEAL IS BEING DECIDED ON THE B ASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPA RTMENTAL REPRESENTATIVE. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL RELATE TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING TO RS.19,08,668/- ON ACCOUNT OF UNCLAIMED DIVIDEND. / DATE OF HEARING :21.12.2015 / DATE OF PRONOUNCEMENT: 23.12.2015 2 ITA NO.1063/PN/2014 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE STATUTORY A UDIT REPORT OF THE BANK, NOTED THAT THE FOLLOWING RECEIPTS ARE DIRECTLY CREDITED TO THE RESERVE FUND : B CLASS MEMBERS SHARE FEES - RS.6,985/- (PERTAINS TO 1990 TO 2003) I) DIVIDEND PAYABLE TO A CLASS MEMBERS (UNCLAIMED DIVIDEN D RS.18,36,793/- II) DIVIDEND PAYABLE TO B CLASS MEMBERS (UNCLAIMED DIVIDEN D RS.64,880/- 4.1 ACCORDING TO THE AO THE ABOVE RECEIPTS ARE EARNED BY THE BANK DURING THE COURSE OF ITS NORMAL BANKING ACTIVITIES AND THER EFORE THESE SHOULD HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE BANK OR IT SHOULD HAVE BEEN ADDED TO THE TOTAL INCOME OF THE BANK IN THE COMPUTATION OF INCOME. MOREOVER SINCE IT IS CUSTOMARY PRA CTICE TO CREDIT THE UNCLAIMED DIVIDEND FOR MORE THAN 3 YEARS AND IT IS NEVER EXTINCTION OF LIABILITY SO IT SHOULD BE ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE AO MADE THE ADDITIO N OF RS.19,08,668/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A) IT WAS SUBMITTED THAT THE DIVIDEND PAYABL E IS NOTHING BUT DISTRIBUTION OF PROFITS TO THE MEMBERS OF SOCIE TY. THE BANK HAS ALREADY PAID TAX ON PROFIT EARNED AS INCOME TAX IN EARLIER YEARS. ONCE THE INCOME IS ALREADY OFFERED TO TAX THE SAM E INCOME CANNOT BE TAXED AGAIN. 5.1 HOWEVER, THE CIT(A) WAS ALSO NOT CONVINCED WITH THE AR GUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO. WHILE DOING SO, HE NOTED THAT THE ASSESSEE HAS NOT PAID THE DIVIDEND PAYABLE TO THE SHAREHOLDERS. THERE IS CESSATION OF LIABILI TY. THE AMOUNT OF DIVIDEND ONCE DECLARED IS THE MONEY BELONGING T O RESPECTIVE SHAREHOLDERS. INSTEAD OF PAYING THE SAME TO THE 3 ITA NO.1063/PN/2014 SHAREHOLDERS THE ASSESSEE HAS KEPT IT AND HAS BEEN UT ILIZING IT. AS PER THE AUDITOR CERTIFICATE THE AMOUNT IN QUESTION PERTAINS TO YEAR 19 90 TO 2003. THEREFORE, THE AO HAS RIGHTLY ADDED THESE OLD NON -DISTRIBUTED AMOUNTS OF DIVIDEND TO ASSESSEES INCOME. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. ALTHOUGH NONE APPEARED ON BEHALF OF THE ASSESSEE, WE FIND THE ASSESSEE IN THE GROUNDS OF APPEAL HAS STATED THAT THE ISSUE OF UNCLAIMED DIVIDEND IS COVERED IN FAVOUR OF THE ASSESSEEBANK IN VIEW OF THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CA SE OF KALLAPPANNA AWADE ICHALKARANJI JANATA SAHAKARI BANK LTD. V IDE ITA NO.2352/PN/2012 AND ITA NO.2205/PN/2012 ORDER DATED 3 0-12- 2013 FOR A.Y. 2009-10. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE AO AND CIT(A). SHE SUBMITTED T HAT SINCE THE ASSESSEE HAS NOT PAID THE DIVIDEND FOR SO MANY YEAR S THE LIABILITY TO PAY SUCH DIVIDEND HAS CEASED AND THEREFORE THERE IS CESSATION OF LIABILITY AND THE LOWER AUTHORITIES ARE JUSTIFIED IN BRINGING THE SAME TO TAX. 9. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL A VAILABLE ON RECORD. THE ONLY DISPUTE TO BE DECIDED IN THE IMPUGNED GROUNDS IS REGARDING ADDITION OF UNCLAIMED DIVIDEND OF RS.19,08,668/- BY T HE AO WHICH HAS BEEN UPHELD BY THE CIT(A). WE FIND THE ASSESSEE BEFORE THE CIT(A) HAS ALREADY STATED THAT TAX HAS ALREADY BEEN PAID ON PROFIT EARNED AS INCOME IN EARLIER YEARS AND THE DIVIDEND PAYABLE IS NOTHING 4 ITA NO.1063/PN/2014 BUT DISTRIBUTION OF PROFITS TO THE MEMBERS OF THE SOCIETY. THEREFORE, ONCE INCOME IS ALREADY OFFERED TO TAX THE SAME CANNOT BE TAXED AGAIN. 10. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIB UNAL IN THE CASE OF KALLAPPANNA AWADE ICHALKARANJI JANATA SAHAKAR I BANK LTD. VS. JCIT VIDE ITA NO.2205/PN/2012 ORDER DATED 30-1 2-2013. WE FIND THE TRIBUNAL AT PARA 17 OF THE ORDER HAS DECIDED THE ISSUE AND ALLOWED THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE BY OBSERVING AS UNDER : 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTRO VERT THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DIVIDEN D HAS BEEN PAID OUT OF NET INCOME WHICH IS ARRIVED AT AFTER PAY MENT OF INCOME-TAX AND THE UNCLAIMED DIVIDEND TRANSFERRED TO RESERVE FUN D IS AN AMOUNT ON WHICH INCOME-TAX HAS ALREADY BEEN PAID AND ADDITION OF THE SAME AMOUNTS TO DOUBLE TAXATION. 17.1 WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE D ELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S.GULSHAN MERCANTILE URBAN C OOPERATIVE BANK LTD. (SUPRA). IN THE SAID DECISION THE TRIBUNAL UPHE LD THE DECISION OF THE CIT(A) WHO DELETED THE ADDITION MADE BY THE AO ON A CCOUNT OF UNCLAIMED DIVIDEND AND THE GROUNDS RAISED BY THE REVENUE WERE D ISMISSED. THE OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL READS A S UNDER : 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE ORDER OF LD.CIT(A). THE ASSESSING OFFICE HAD MADE ADDITION ON THE GROUND THAT A MOUNT OF UNPAID DIVIDEND WAS TO BE DEPOSITED IN THE GOVERNMENT ACCOUNT AFTER CERTAIN PERIOD. IN THIS CASE, THERE IS NO DISP UTE THAT THE AMOUNT OF DIVIDEND PAID HAS NOT BEEN CHARGED TO P&L ACCOUNT. IT FORMS PART OF APPROPRIATION OF INCOME. THEREFORE, W HEN THE ASSESSEE PAID DIVIDEND TO THE SHAREHOLDERS, THE AMOUNT WA S NOT DEBITED TO P&L ACCOUNT AND, THEREFORE, THE PROVISION S OF SECTION 41(1) ARE NOT APPLICABLE AS THERE IS NO CESSATION OF LI ABILITY. THEREFORE, IN OUR CONSIDERED OPINION, LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 17.2 RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THI S ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 11. IN VIEW OF THE DECISION OF THE TRIBUNAL CITED (SUPRA) (T O WHICH ONE OF US (AM) IS A PARTY, WE ARE OF THE OPINION THAT THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO AT 5 ITA NO.1063/PN/2014 R.19,08,668/- ON ACCOUNT OF UNCLAIMED DIVIDEND. THE ORDER O F THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 12. GROUND OF APPEAL NO.3 RELATES TO LEVY OF INTEREST U/S .234B AND 234C. 13. AFTER HEARING BOTH THE SIDES, WE ARE OF THE CONSIDERE D OPINION THAT CHARGING OF INTEREST U/S.234B AND 234C IS MANDATORY AND CONSEQUENTIAL IN NATURE. THEREFORE, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 14. GROUND OF APPEAL NO.4 BEING GENERAL IN NATURE IS DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-12-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 23 RD DECEMBER, 2015. ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ), KOLHAPUR 4. 5. 6. THE CIT, KOLHAPUR % ((), ), / DR, ITAT, A PUNE; . / GUARD FILE. / BY ORDER , // % ( //TRUE COPY// 01 ( ) / SR. PRIVATE SECRETARY ), / ITAT, PUNE