A.C.I.T Cir - Nadia., Nadia V. Nadia District Cent Co- Operative Bank Ltd., Nadia

ITA 119/KOL/2013

• Counselvise Citation: 11923514 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S UBHAJYOTI BHATTACHARYA
• Assessee Lawyers: UDAY DEB PAL
• Keywords: Additional evidence; Revenue expenditure; Capital expenditure

Judgement Text

I.T.A. NO . 119 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 119 / KOL / 20 1 3 ASSESSMENT YEAR : 200 9 - 20 10 ASSISTANT COMMISSIONER OF INCOME TAX, .... . .... .. ..... . APPELLANT CIRCLE - NADIA , KRISHNANAGAR, NADIA - VS. - NADIA DISTRICT CENTRAL COOPERATIVE BANK LIMITED, . RESPONDE NT M.M. GHOSH STREET, KRISHNANAGAR, NAIDA - 741 101 [PAN : AA ANL 0139 M ] APPEARANCES BY: SHRI S UBHAJYOTI BHATTACHARYA, J CIT, SR. D .R., FOR THE DEPARTMENT SHRI UDAY DEB PAL , A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : AUGUST 04 , 2 01 5 DATE OF PRONOUNCING THE ORDER : AUGUST 06 , 201 5 O R D E R PER S.V. MEHROTRA : THIS A PPEAL HA S BEEN FILED BY THE REVENU E AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - XXXV I , KOLKATA D ATED 07 . 11 .20 1 2 FOR THE ASSESSMENT YEAR 200 9 - 10 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A) - XXXVI, KOL KATA, ERRED IN LAW AS WELL AS IN FACT IN NOT DETERMINING WHETHER THE NATURE OF INVESTMENT MADE IN GOVERNMENT SECURITIES WERE CAPITAL OR REVENUE BEFORE DELETING ADDITIONS ON ACCOUNT OF PROVISION FOR AMORTIZATION OF GOVERNMENT SECURITIES AMOUNTING TO RS. 32, 65,288 / - AND HENCE THERE IS LACK OF ENQUIRY AND FINDING BY LD . CIT(A) - XXXVI, KOLKATA AND AS SUCH THE ASSESSEE'S PLEA HAS BEEN ACCEPTED ON FACE VALUE. I.T.A. NO . 119 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 2 OF 5 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A) - XXXVI, KOLKATA, ERRED IN ADMI TTING ADDITIONAL EVIDENCE AT THE TIME OF APPELLATE PROCEEDINGS IN CONTRAVENTION OF RULE 46A IN DELETING ADDITIONS ON ACCOUNT OF PROVISION FOR AMORTIZATION OF GOVERNMENT SECURITIES AMOUNTING TO RS. 32,65,288 / - . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSE SESE , A COOPERATIVE BANK, IN THE R ELEVANT ASSESSMENT YEAR, WAS RUNNING THE BUSINESS OF BANKING AS PER RULES AND REGULATIONS OF RESERVE BANK OF INDIA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE - SOCIETY RECEIVED RS.28,44,28,676/ - AS INTEREST AND DISCO UNT, RS.36,52,071/ - AS COMMISSION, EXCHANGE & BROKERAGE AND RS.63,60,218/ - AS OTHER RECEIPTS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, INTER ALIA, NOTICED THAT IN SCHEDULE - 8 REGARDING OTHER EXPENSES, THE ASSESSEE HAD CLAIMED AMORTIZA TION OF GOVERNMENT SECURITIES FOR RS.32,65,288/ - . HE NOTED THAT THE ASSESSEE - SOCIETY MADE INVESTMENT IN GOVERNMENT SECURITIES IN NINE PHASES. TOTAL FACE VALUE OF INVESTMENT WAS RS.37,50,00,000/ - AND THE TOTAL BOOK VALUE OF INVESTMENT WAS OF RS.41,50,85,450 / - . THUS THERE WAS DIFFERENCE (PREMIUM) OF RS.4,00,85,450/ - , WHICH AMORTIZED BY THE ASSESSEE OVER THE REMAINING PERIOD. HE ISSUED SHOW - CAUSE NOTICE AS TO WHY THIS CLAIM BE NOT DISALLOWED. THE ASSESSEE IN ITS REPLY NOTED IN PARA 3 OF ASSESSMENT ORDER PRIMAR ILY SUBMITTED AS UNDER: - (I) THE ASSESSEE MADE INVESTMENT FROM TIME TO TIME IN GOVERNMENT SECURITIES BY FOLLOWING THE GUIDELINES LAID DOWN BY RESERVE BANK OF INDIA. (II) THE INTEREST RECEIVED ON SECURITIES WAS TREATED AS REVENUE INCOME. (III) THE INVESTM ENTS WERE CLASSIFIED UNDER HTM CATEGORY AS PER THE RBI GUIDELINES AND CBDT CIRCULAR NO. 17/DT - 26/11/2008. THEREFORE, IT COULD NOT BE MARKED TO MARKET AND PREMIUM AMOUNTS PAID DURING ACQUISITION HAVE TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. I.T.A. NO . 119 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 3 OF 5 THE ASSESSING OFFICER OBSERVED THAT FROM THE NATURE AND PERIOD OF INVESTMENT, IT CANNOT BE TAKEN THAT THE INVESTMENTS IN SECURITIES WERE OF THE NATURE OF STOCK - IN - TRADE. THEREFORE, AS PER THE CIRCULAR NO. 665 OF THE CBDT, IN CASE OF INVESTMENT IN SECURIT IES WHICH ARE TO BE HELD TILL ITS MATURITY OR FOR A LONGER PERIOD AS PERMANENT INVESTMENT, AMORTIZATION WAS NOT ALLOWABLE FOR DEDUCTION IN PROFIT & LOSS A/C. 3. BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASS ESSEE WAS MANDATORILY REQUIRED TO INVEST A PART OF ITS FUNDS IN GOVERNMENT SECURITIES FOR MAINTAINING STATUTORY LIQUID RESERVE (SLR) RATIO WITH THE RBI. THE PREMIUM ON GOVERNMENT SECURITIES PAID BY THE ASSESSEE WAS AMORTIZED IN THE YEAR OF PURCHASE NOT TO JEOPARDIZE ITS PROFITS OF THE YEAR AND INCLUDED IN THE BALANCE - SHEET OF THE YEAR. THE PROPORTIONATE AMOUNT OF THE AMORTIZED PREMIUM WAS CHARGED TO PROFIT & LOSS ACCOUNT IN SUBSEQUENT YEARS. IT WAS FURTHER STATED THAT THE ASSESSEE HAS INADVERTENTLY INCLUDED THE AMOUNT IN THE PROVISIONS MADE FOR THE YEAR, INSTEAD OF SHOWING IT SEPARATELY FOR WHICH THERE WAS NO IMPACT ON COMPUTING THE TAXABLE INCOME. THE ASSESSEE RELIED ON THE RBI GUIDELINE REGARDING AMORTIZATION OF THE PREMIUM PAID ON GOVERNMENT SECURITIES CO NTAINED IN CIRCULAR NO. RB/2005 - 06/55, RPCD.CO.RF.BC 14/07/02 - 03/2005 - 06 DATED 13.07.2005. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF ACIT VS. - THE BANK OF RAJASTHAN LIMITED REPORTED IN (2011 - TIOL - 35 ITAT - MUM.), WHEREIN I T HAS BEEN HELD AS UNDER: - 4. AFTER CONSIDERING THE ASSESSEE S SUBMISSIONS, LD. CIT(APPEALS) DELETED THE DISALLOWANCE RELYING ON THE DECISION OF THE TRIBUNAL AND ALLOWED THE ASSESSEE S APPEAL. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUN AL. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. WE NOTICE THAT THE LD. CIT(APPEALS) HAS I.T.A. NO . 119 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 4 OF 5 FOLLOWED THE RBI S CIRCULAR UNDER THE HEADING NON - SCHEDULED SCBS AND ALL DCCBS AND HAS POINTED OUT THAT RBI H AS CLARIFIED AS UNDER: - SHIFTING OF SECURITIES FROM CURRENT CATEGORY TO PERMANENT CATEGORY BY NON - SCHEDULED SCBS/DCCBS MAY BE DONE AT BOOK VALUE, SUBJECT TO THE FOLLOWING CONDITIONS: - IN CASE THE BOOK VALUE IS HIGHER THAN THE FACE VALUE, THE DIFFERENC E BETWEEN THE BOOK VALUE AND THE FACE VALUE I.E. THE PREMIUM, MAY BE AMORTIZED IN EQUAL INSTALMENTS OVER THE PERIOD REMAINING TILL MATURITY. IF THE SECURITY WAS OBTAINED AT A DISCOUNT TO FACE VALUE, THE DIFFERENCE SHOULD BE BOOKED AS PROFIT ONLY AT THE TIM E OF MATURITY OF THE SECURITY . THUS IT IS NOT DISPUTED THAT THE ASSESSEE WAS REQUIRED TO INVEST A PART OF ITS FUNDS IN GOVERNMENT SECURITIES FOR MAINTAINING STATUTORY LIQUID RESERVE (SLR) RATIO WITH THE RESERVE BANK OF INDIA AND AS PER THE RBI INSTRUCTIO NS/GUIDELINES, WHICH ARE OBLIGATORY OF THE ASSESSEE. THEREFORE, THE ASSESSEE WAS REQUIRED TO FOLLOW THE GUIDELINES FOR REPRESENTING ITS INVESTMENTS IN GOVERNMENT SECURITIES ONLY. THEREFORE, WHEN THESE INVESTMENTS WERE CLASSIFIED UNDER THE PERMANENT CATEGOR Y, THE PREMIUM WAS TO BE AMORTIZED IN EQUAL INVESTMENT OVER THE PERIOD REMAINING TILL MATURITY. SINCE THE PREMIUM PAID BY THE ASSESSEE - BANK FOR ACQUISITION OF GOVERNMENT SECURITIES WAS NECESSARY FOR CARRYING OUT ITS BUSINESS OF BANKING, THEREFORE, THIS PRE MIUM COULD NOT BE CLASSIFIED AS CAPITAL EXPENDITURE AND HAD TO BE TREATED AS REVENUE EXPENDITURE. FROM THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ASSESSEE S CLAIM FOR AMORTIZING THE PREMIUM OVER THE YEARS FOR WHICH INVESTMENTS IN GOVERNMENT SECURITIES WERE TO BE HELD. IN THE GROUNDS OF APPEAL, THE DEPARTMENT HAS SUBMITTED THAT THE LD. CIT(APPEALS) HAS NOT CONSIDERED WHETHER THE NATURE OF INVESTMENTS MADE IN GOVERNMENT SECURITIES WAS CAPITAL OR REVENUE BEFORE DELETING THE ADDITION. IN OUR OPI NION, THERE CANNOT BE ANY DISPUTE THAT THE INVESTMENT IN GOVERNMENT SECURITIES WAS CAPITAL IN NATURE BUT THE PREMIUM THAT WAS PAID BY THE ASSESSEE - BANK FOR ACQUISITION OF GOVERNMENT SECURITIES HAD TO BE ALLOWED OVER THE PERIOD OF INVESTMENTS HELD BY THE AS SESSEE BECAUSE THERE WAS INCIDENTAL TO CARRY I.T.A. NO . 119 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 5 OF 5 BUSINESS ACTIVITIES OF ASSESSEE. THE DEPARTMENT HAS ALSO TAKEN A GROUND THAT THE LD. CIT(APPEALS) ADMITTED ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A. HOWEVER, WE DO NOT FIND ANY SUCH EVIDENCE BEING TAKEN BY THE LD. CIT(APPEALS). ACCORDINGLY WE CONFIRM THE ORDER OF LD. CIT(APPEALS). 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH AUGUST , 201 5 . SD/ - SD/ - MAHAVIR SINGH S.V. MEHROTRA ( JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) KOLKATA, THE 6 TH D AY OF AUGUST , 201 5 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - NADIA, KRISHNANAGAR, NADIA (2) NADIA DISTRICT CENTRAL COOPERATIVE BANK LIM ITED, M.M. GHOSH STREET, KRISHNANAGAR, NAIDA - 741 101 (3) COMMISSIONER OF INCOME - TAX (APPEALS) - XXXV I , KOLKATA (4) COMMISSIONER OF INCOME TAX - , KOLKATA ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .