Deputy Commissioner of Income-tax, V. Lokmangal Co-op. Bank Ltd.,

ITA 1097/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5302 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1097 /P U N/201 6 / ASSESSMENT YEAR : 20 1 1 - 12 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, SOLAPUR ....... / APPELLANT / V/S. LOKMANGAL CO - OPERATIVE BANK LTD., 193, GOLD FINCH PETH, SOLAPUR - 413007 PAN : AAAAL0119J / RESPONDENT ASSESSEE BY : S HRI S. N. PURANIK REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 18 - 07 - 201 8 / DATE OF PRONOUNCEMENT : 20 - 0 7 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 7, PUNE DATED 02 - 02 - 2016 FOR THE ASSESSMENT YEAR 201 1 - 12. 2. THE REVENUE IN APPEAL HAS RAISED 13 GROUNDS. IN GROUND NOS. 1 TO 7 OF THE APPEAL, THE REVENUE HAS ASSAILED DELETING THE ADDITION OF 2 ITA NO . 1097/PUN/2016, A.Y. 2011 - 12 RS.75,43,189/ - MADE ON ACCOUNT OF ACCRUED INTEREST ON NON PERFORMING ASSETS U/S. 43D O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). IN GROUND NOS. 8 TO 11 OF THE APPEAL, THE REVENUE HAS ASSAILED D ELETING THE ADDITION OF RS.66,34,639/ - MADE ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVESTMENTS. THE GROUND NOS. 12 AND 13 ARE GENERAL IN NATURE. 3. SHRI S. N. PURANIK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ISSUE RAISED B Y THE REVENUE IN GROUND NOS. 1 TO 7 OF THE APPEAL RELATING TO ACCRUED INTEREST ON NON PERFORMING ASSETS IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1540/PN/2014 FOR ASSESSMENT YEAR 2009 - 10 DECIDED ON 28 - 11 - 2014. 3.1 THE LD. AR FURTHER SUBMITTED THAT IN GROUND NOS. 8 TO 11 OF THE APPEAL , THE REVENUE HAS ASSAILED DELETING THE ADDITION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVESTMENTS. NO SUCH ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER, THEREFORE, THE ISSUE RAI SED IN THE GROUND NOS. 8 TO 11 DOES NOT EMANATE FROM THE ASSESSMENT ORDER OR THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 4. SHRI MUKESH JHA REPRESENTING THE DEPARTMENT FAIRLY ADMITTED THAT IN GROUND NOS. 1 TO 7 OF THE APPEAL BY THE DEPARTMENT TH E ISSUE RELATES TO ACCRUED IN TEREST ON NON PERFORMING ASSETS, SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN APPEAL BY THE REVENUE IN ITA NO. 1540/PN/2014 (SUPRA). THE TRIBUNAL DECIDED THE ISSUE AGAINST THE DEPARTMENT. 4.1 IN R ESPECT OF GROUND NOS. 8 TO 11 , THE LD. DR POINTED THAT THE ASSESSING OFFICER HAD MADE ADDITION OF RS.66,34,639/ - ON ACCOUNT OF 3 ITA NO . 1097/PUN/2016, A.Y. 2011 - 12 BROKEN PERIOD INTEREST . THE ASSESSEE HAS AGITATED THE ISSUE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE COMMISSION ER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT IN GROUNDS OF APPEAL NO. 8 TO 11 AMORTIZATION OF PREMIUM ON INVESTMENTS IN SECURITIES HELD UNDER THE CATEGORY HTM HAS BEEN INADVERTENTLY MENTIONED. THE DEPAR TMENT IS IN FACT AGGRIEVED BY RELIEF GRANTED TO THE ASSESSEE BY THE COMMISSIONER OF INCOME TAX (APPEALS) ON ACCOUNT OF BROKEN PERIOD INTEREST. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISION OF CO - ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 1540/PN/2014 FOR THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS A CO - OPERATIVE SOCIET Y ENGAGED IN THE BANKING BUSINESS. WE OBSERVE THAT IN THE A SSESSMENT YEARS 2009 - 10 AND 2010 - 11 , THE ASSESSING OFFICER HAD MADE SIMILAR ADDITIONS/DISALLOWANCES ON ACCOUNT OF INTEREST ACCRUED ON NON PERFORMING ASSETS AND INTEREST FOR THE BROKEN PERIOD. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY. THE COMMISSIONER OF INCOME TAX (APPEALS) GRANTED RELIEF TO THE ASSESSEE IN RESPECT OF DISALLOWANCE OF INTEREST ACCRUED ON NON PERFORMING ASSETS. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. THE CO - ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 28 - 11 - 2014 BY FOLLOWING THE DECISION RENDERED IN THE CASE OF ACIT VS. THE OMERGA JANTA SAHAKARI BANK LTD. IN ITA NO. 350/PN/2013 DATED 31 - 10 - 2013 AND THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF M/S. VASISTH CHAY VYAPAR LTD. REPORTED AS 330 ITR 440 AND THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD. REPORTED AS 31 TAXMANN.COM 305 DISMISSED THE GROUND RAISED BY THE REVENUE I N RESPECT OF ACCRUED INTEREST ON NON 4 ITA NO . 1097/PUN/2016, A.Y. 2011 - 12 PERFORMING ASSETS. THE LD. DR HAS NOT PLACED ON RECORD ANY CONTRARY DECISION, THEREFORE, WE FIND NO REASON TO TAKE A DIFFERENT VIEW. FOLLOWING THE ORDER OF CO - ORDINATE BENCH , THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF RS.75,43,189/ - ON ACCOUNT OF ACCRUED INTEREST ON NON PERFORMING ASSETS U/S. 43D OF THE ACT ARE UPHELD. ACCORDINGLY, GROUND NOS. 1 TO 7 RAISED IN THE APPEAL BY REVENUE ARE DISMISSED. 6. IN GROUND NOS. 8 TO 11 THE R EVENUE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF RS.66,34,639/ - . WE OBSERVE THAT THE ASSESSING OFFICER HAD MADE ADDITION OF THE AFORESAID AMOUNT ON ACCOUNT OF BROKEN PERIOD INTEREST. THE REVENUE HAS WRONGL Y MENTIONED IN GROUNDS OF APPEAL THAT THE ADDITION IS ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVESTMENTS IN SECURITIES HELD UNDER THE CATEGORY HTM. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE IN RESPECT OF DISALLOWANCE OF INTEREST FOR THE BROKEN PERIOD BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN CO NO. 101/PN/2014 ARISING OUT OF ITA NO. 1540/PN/2014 FOR THE ASSESSMENT YEAR 2009 - 10 DECIDED ON 28 - 11 - 2014. THE RELEVANT EXTRACT OF THE ORDER OF CO - ORDINATE BEN CH READS AS UNDER : 14. IN THIS CONTEXT, RELEVANT FACTS ARE THAT ASSESSEE HAD EFFECTED PURCHASES OF GOVERNMENT SECURITIES FROM SECONDARY MARKET ON 28.12.2008. OSTENSIBLY, INTEREST ACCRUING ON SUCH SECURITIES UPTO 28.12.2008 WAS TO THE ACCOUNT OF THE SELLE R AND FOR THE BALANCE PERIOD I.E. FROM 29.12.2008 TO 31.03.2009 IT WAS THE INCOME OF THE ASSESSEE. ASSESSEE RECEIVED INTEREST FOR THE TOTAL PERIOD OF SIX MONTHS, WHICH AMOUNTED TO RS.6,24,372/ - AND THE INTEREST PERTAINING TO PERIOD UPTO 28.12.2008 WAS RS.3 ,13,855/ - . CONSIDERING THAT THE INTEREST OF RS.3,13,855/ - BELONGED TO THE SELLER OF SECURITIES, ASSESSEE HAD PAID THIS AMOUNT TO THE SELLER AT THE TIME OF PURCHASE OF SECURITIES. THE SAID AMOUNT OF RS.3,13,855/ - WAS DEBITED TO INTEREST RECEIVABLE ACCOUNT A ND ON RECEIPT OF INTEREST OF RS.6,24,372/ - , SAME WAS CREDITED TO THE INTEREST RECEIVABLE ACCOUNT, AND THE BALANCE REMAINING IN THE SAID ACCOUNT I.E. RS.3,10,517 - WAS CREDITED TO THE PROFIT & LOSS ACCOUNT AS INCOME. IN THE BANKING PARLANCE, THE PAYMENT OF RS.3,13,855/ - MADE BY THE ASSESSEE TO THE SELLER OF SECURITIES ON ACCOUNT OF INTEREST UPTO 28.12.2008 IS COMMONLY REFERRED AS BROKEN PERIOD INTEREST. THE ASSESSING OFFICER DIFFERED WITH THE 5 ITA NO . 1097/PUN/2016, A.Y. 2011 - 12 ASSESSEE WITH RESPECT TO THE TREATMENT OF BROKEN PERIOD INTERE ST OF RS.3,13,855/ - PAID ON PURCHASE OF THE GOVERNMENT SECURITIES. AS PER THE ASSESSING OFFICER, SUCH BROKEN PERIOD INTEREST FORMED AN INTEGRAL PART OF THE COST OF SECURITIES AND THAT SUCH COMPOSITE CONSIDERATION CANNOT BE BIFURCATED INTO BROKEN PERIOD INTEREST AND COST OF SECURITIES EVEN THOUGH THE DIFFERENCE BETWEEN THE FACE VALUE OF THE SECURITIES AND THE PURCHASE PRICE WAS BASICALLY ON ACCOUNT OF THE BROKEN PERIOD INTEREST. THE ASSESSING OFFICER HELD THAT BROKEN PERIOD INTEREST CANNOT BE SEGREG ATED AND CLAIMED AS DEDUCTION BY THE ASSESSEE BANK FOR THE REASON THAT SUCH EXPENDITURE WAS TO BE UNDERSTOOD AS A CAPITAL OUTLAY. THE ASSESSING OFFICER FURTHER HELD THAT SUCH EXPENDITURE HAS TO BE DEALT WITH AT THE TIME OF SALE OF SECURITIES AND NOT IN THE YEAR OF PURCHASE OF SECURITIES. IN COMING TO HIS CONCLUSION, THE ASSESSING OFFICER RELIED UPON THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK LTD. VS. CIT, 187 ITR 541 (SC) AS ALSO THE JUDGEMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. BANK OF RAJASTHAN LTD., 316 ITR 391. 15. THE CIT(A) HAS ALSO AFFIRMED THE AFORESAID STAND OF THE ASSESSING OFFICER. THE CIT(A) FOLLOWED THE JUDGEMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF BANK OF RAJASTHAN LTD. (SUPRA), WHICH HAD DISSENTED FROM THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VS. CIT, 258 ITR 601 (BOM), BY RELYING ON THE HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK LTD. (SUP RA). AGAINST SUCH DECISION OF THE CIT(A), ASSESSEE IS IN APPEAL BY WAY OF CROSS OBJECTION BEFORE US. 16. AT THE TIME OF HEARING, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD., 107 DTR 140 (BOM) HAS HELD THAT THE BROKEN PERIOD INTEREST IS ALLOWABLE AS A DEDUCTION. IT IS ALSO NOTEWORTHY THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) CONSIDERED THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF VIJAYA BAN K LTD. (SUPRA) AS ALSO THAT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF BANK OF RAJASTHAN LTD. (SUPRA) AND THEREAFTER, IT HAS UPHELD THE STAND OF THE ASSESSEE THAT BROKEN PERIOD INTEREST IS ALLOWABLE AS A DEDUCTION. IN VIEW OF THE AFORESAID AUTHOR ITATIVE PRONOUNCEMENT BY THE HONBLE BOMBAY HIGH COURT, WE FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE INCOME - TAX AUTHORITIES. FOLLOWING THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA), WE HEREBY SET - ASIDE THE ORDE R OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 17. IN THE RESULT, C.O. NO.101/PN/2014 IN THE CASE OF LOKMANGAL CO - OP. BANK LTD. IS ALLOWED. THERE HAS BEEN NO CHANGE IN THE FACTS IN THE ASSESSMENT YEAR UNDER APPEAL. THE REVENUE HAS NOT PLACED ON RECORD ANY JUDGMENT CONTRARY TO THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN 6 ITA NO . 1097/PUN/2016, A.Y. 2011 - 12 ALLOWING ASSESSEES CLAIM. ACCORDINGLY, GROUND NOS. 8 TO 11 RAISED IN THE APPEAL BY REVENUE ARE DISMISSED BEING DEVOID OF ANY MERIT. 7. THE GROUND NOS. 12 AND 13 ARE GENERAL IN NATURE, HENCE REQUIRE NO ADJUDICATION. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, TH E 20 TH DAY OF JU LY , 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 20 TH JU LY , 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 7, PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 6, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE