The Karnataka State Co-operative Apex Bank Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-5(2)(1), Bangalore

ITA 1157/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3338 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: L BHARAT
• Keywords: Set aside
• Section: 13; 6; 2

Judgement Text

ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1157/BANG/2017 ASSESSMENTYEAR: 2012 13 THE KARNATAKA STATE CO- OPERATIVE APEX BANK LIMITED NO.1, UTHUNGA PAMPA MAHAKAVI ROAD CHAMARAJPET, BANGALORE-560018 PAN NO :AABAT0269J VS. THE ACIT, CIRC-5(2)(1) BANGALORE APPELLANT RESPONDENT A PPELLANT BY : SRI. L. BHARAT, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, CIT DR DATE OF HEARING : 19.02.2020 DATE OF PRONOUNCEMENT : 06.03.2020 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 23-02-2017 PASSED BY LD CIT(A)-5, BANGALORE AND IT RELATES TO THE ASSESSMENT YEAR 2012-13. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN CONFIRMIN G THE ACTION OF THE AO IN TREATING THE LOSS OF RS.12.91 CRORES ARISING ON SALE OF ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE PAGE 2 OF 6 SECURITIES AS CAPITAL LOSS REJECTING THE CLAIM OF BUSINESS LOSS MADE BY THE ASSESSEE. 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE A RE DISCUSSED IN BRIEF. THE ASSESSEE IS DOING BANKING BUSINESS. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD SECURITI ES/BONDS HELD BY IT IN POWER FINANCE CORPORATION AND INDIAN RAILW AY FINANCE CORPORATION. THE SAME HAS RESULTED INTO A LOSS OF RS.12.91 CRORES AND THE ASSESSEE CLAIMED THE SAME AS BUSINESS LOSS. THE AO NOTICED THAT THE ASSESSEE HAS INVESTED IN THE ABOVE SAID SECURITIES/BONDS AS ITS NON-SLR INVESTMENTS. FROM T HE EXPLANATIONS FURNISHED BY THE ASSESSEE, THE AO NOTI CED THAT THE ASSESSEE HAD MADE INVESTMENTS NON-SLR INVESTMENTS I N EXCESS OF THE LIMITS PRESCRIBED BY THE RBI IN ITS MASTER CIRC ULAR NO.RPCD.CO.RF.BC.26/07.02.03/2005-06. THE SAME WAS POINTED OUT BY THE RBI IN ITS LETTER DATED 05-12-2011. ACC ORDINGLY, THE ASSESSEE HAS SOLD THE EXCESS INVESTMENTS AND THE SA ME HAS RESULTED INTO LOSS. 3. THE ASSESSEE SUBMITTED BEFORE THE AO THAT AL L INVESTMENTS MADE BY BANKING COMPANIES ARE STOCK IN TRADE IN I TS HANDS AND ACCORDINGLY CLAIMED THAT THE ABOVE SAID LOSS IS BUS INESS LOSS. HOWEVER, THE A.O. TOOK THE VIEW THAT THE ABOVE SAID INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE OVER AND ABOVE THE L IMITS PRESCRIBED BY THE RBI AND HENCE THESE INVESTMENTS S HOULD BE CONSIDERED AS HAVING BEEN MADE ON ASSESSEES OWN VO LITION AND NOT AS PART OF BUSINESS. ACCORDINGLY, HE TREATED THE A BOVE SAID ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE PAGE 3 OF 6 BONDS/SECURITIES AS INVESTMENT AND ACCORDINGLY COMP UTED CAPITAL GAIN ON THEIR SALE. THE LD. CIT(A) CONFIRMED THE V IEW TAKEN BY THE A.O. AND HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. A.R. SUBMITTED THAT ALL THE INVESTMENTS MADE BY A BANKING COMPANY IS CONSIDERED AS STOCK IN TRADE AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF UNITED COMMERCIAL BANK VS. CIT 240 ITR 355. HE SUBMITTED THAT THE ASSESSEE HAS MADE INVESTMENTS IN THE ABOVE SAID BON DS/SECURITIES AS PART OF ITS BUSINESS ACTIVITIES AND SINCE THE HO LDING OF VARIOUS TYPES OF SECURITIES WAS CONSIDERED BY RBI AS EXCESS IVE, THE ASSESSEE HAS SOLD THE SAME DURING THE YEAR UNDER CONSIDERATI ON. HE SUBMITTED THAT RBI CIRCULAR/INSTRUCTIONS CANNOT OVE RWRITE THE INCOME TAX PROVISIONS. HE FURTHER SUBMITTED THAT T HE ASSESSEE HAS BEEN TREATING THESE BONDS/SECURITIES AS STOCK IN TR ADE ONLY IN THE EARLIER YEARS. 5. WHEN A SPECIFIC QUESTION WAS ASKED AS TO WHETHER THE IMPUGNED BONDS/SECURITIES HAVE BEEN REVALUED IN THE PAST AS AT THE YEAR END TO MATCH WITH MARKET PRICE AND WHETHER THE LOSS, IF ANY, ARISING ON SUCH REVALUATION WAS ALLOWED AS DEDUCTIO N IN THE EARLIER YEARS, THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS REVALUED THESE SECURITIES IN THE PAST AND CLAIMED THE LOSS ON SUCH REVALUATION AS DEDUCTION. IN SUPPORT OF THE SAME, THE ASSESSEE FU RNISHED A LETTER ALONG WITH SUPPORTING DOCUMENT TO SUBSTANTIATE HIS CONTENTIONS. ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE PAGE 4 OF 6 6. THE LD. D.R. ON THE CONTRARY, SUPPORTED THE ORDE R PASSED BY LD. CIT(A). 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. AC CORDING TO THE ASSESSEE, AS PER THE DECISION RENDERED BY HONB LE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK, BANKIN G BUSINESS SHALL INCLUDE MAKING INVESTMENTS ALSO AND HENCE THE IMPUGNED INVESTMENTS ARE STOCK IN TRADE ONLY. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS REVALUED THESE SECURITIES AS AT THE YE AR END ON MARKED TO MARKET BASIS. THE SAID ACTION OF THE ASSE SSEE, FURTHER REINFORCES ITS CONTENTIONS THAT THE IMPUGNED SECURI TIES WERE HELD AS STOCK IN TRADE ONLY. WE NOTICE THAT BOTH THE TAX A UTHORITIES HAVE TAKEN THE VIEW THAT THE INVESTMENT MADE BY THE ASSE SSEE OVER AND ABOVE THE LIMITS PRESCRIBED BY RBI FOR NON-SLR INVE STMENTS SHOULD BE CONSIDERED AS INVESTMENTS ONLY AND NOT STOCK I N TRADE. HOWEVER, IT IS PERTINENT TO NOTE THAT THE TAX AUTHO RITIES HAVE NOT BROUGHT ANY JUDGMENT OR MATERIAL IN SUPPORT OF THEI R VIEW. 8. THERE SHOULD NOT BE ANY DISPUTE THAT IF THE A SSESSEE HAS REVALUED THESE SECURITIES AS AT THE YEAR END ON MAR KED TO MARKET BASIS, THEN IT WILL SHOW THAT THESE SECURITIES HAVE BEEN HELD AS STOCK IN TRADE ONLY BY THE ASSESSEE. THIS EXERCISE IS WITHOUT PREJUDICE THE ASSESSEES RELIANCE ON THE DECISION R ENDERED BY HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERC IAL BANK (SUPRA). BEFORE US, THE LD. A.R. HAS FURNISHED CER TAIN DETAILS TO SUBSTANTIATE ITS CONTENTIONS THAT THESE SECURITIES HAVE BEEN REVALUED AS AT THE YEAR END. SINCE THESE ARE ALL N EW FACTS, WHICH ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE PAGE 5 OF 6 WOULD SUPPORT THE CONTENTIONS OF THE ASSESSEE AND S INCE THESE FACTS HAVE NOT BEEN VERIFIED BY THE A.O., WE ARE OF THE V IEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS IS SUE AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMINING AFRE SH BY CONSIDERING THE EVIDENCES THAT WERE FILED BY THE ASSESSEE BEFOR E US AND VARIOUS DECISIONS THAT MAY BE RELIED UPON BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.03. 2020 SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 6 TH MARCH, 2020. /VG/ COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE ITA NO.1157 /BANG/2017 THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., BA NGALORE PAGE 6 OF 6 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED