The Laxmi Co.op. Bank Ltd., V. Assistant Commissioner of Income-tax,

ITA 121/PUN/2014

• Counselvise Citation: 12124514 RSA 2014
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DOSHI
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 121/PN/2014 (ASSESSMENT YEAR : 2010-11) THE LAXMI COOPERATIVE BANK LTD., 319, SOUTH KASBA, SOLAPUR - 413001 PAN NO.AAAA3183G .. APPELLANT VS. ACIT, CIRCLE-2, PUNE .. RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 05-01-2015 DATE OF PRONOUNCEMENT : 12-01-2015 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27-04-2012 OF THE CIT(A)-III, PUNE RELATING T O ASSESSMENT YEAR 2010-11. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ID. CIT(A) HAS ERRED IN NOT ALLOWING THE DEDUCTION OF RS. 25,93,92 9/- THAT CLAIMED ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON GOVERNME NT SECURITIES WHICH FALL IN THE CATEGORY OF HELD TO MATURITY AND OVERLOOKING THE CBDT CIRCULAR NO. 17 OF 2008 DATED 26/1 1/2008. (THE APPELLANT ACTUALLY CLAIMED RS. 35,28,509/- ON THIS ACCOUNT. THE ASSESSING OFFICER ERRONEOUSLY HOWEVER DISALLOWED RS . 25,93,929/-, THE SAME AMOUNT WAS CHALLENGED IN GROUND OF APPEAL BEFO RE CIT(A) AND HE TOO CONFIRMED THE DISALLOWANCE OF THE SAME AMOUNT. THE CORRECT AMOUNT TO BE CONSIDERED IS RS. 35,28,509/-). 2 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE, LAXMI COOPERATIVE LTD., IS A COOPERATIVE SOCIETY REGISTER ED UNDER THE COOPERATIVE SOCIETIES ACT WITH LICENSE FROM RBI TO CARRY ON THE BUSINESS OF BANKING. THE ASSESSEE FILED ITS RETURN OF INCOME ON 05- 10-2010 DECLARING AN INCOME OF RS.74,82,490/-. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE AS SESSEE HAS CLAIMED RS.25,93,929/- TOWARDS AMORTIZATION OF PREM IUM ON GOVT. SECURITIES. ACCORDING TO THE AO, SUCH PREMIUM PAID ON GOVT. SECURITY IS PART OF CAPITAL COST WHICH CAN ONLY BE DETERMINED WHEN THE ASSET IS SOLD. HE, THEREFORE, DISALLOWED THE S AME ON THE GROUND THAT THE SAME CANNOT BE ALLOWED EITHER IN THE FORM OF ACQUISITION OR OVER THE PERIOD OF MATURITY ON DEFERRED BASIS. SO FAR AS THE CBDT INSTRUCTION RELIED UPON BY THE ASSESSEE, HE NOTED T HAT THE SAME WAS ISSUED PRIOR TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. REPORTED IN 320 ITR 577 (SC) WHEREIN IT WAS HELD THAT RBI GUIDELINES OR PRUDENTI AL NORMS ARE NOT INCLUDED TO REGULATE INCOME-TAX LAWS. REJECTING TH E VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO MADE ADDI TION OF RS.25,93,929/-. 3. BEFORE CIT(A) IT WAS ARGUED THAT THE ASSESSEE FO LLOWED THE PRUDENTIAL NORMS PRESCRIBED AND THE GUIDELINES ISSU ED BY THE RBI AND CLAIMED AMORTIZATION OF PREMIUM ON HTM SECURITI ES AS DEDUCTION FROM PROFITS AT THE BANK. VARIOUS DECISI ONS WERE ALSO BROUGHT TO THE NOTICE OF THE LD.CIT(A). HOWEVER, H E WAS ALSO NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESS EE AND UPHELD THE ADDITION MADE BY THE AO. 3 3.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE ASSESSEE HAS ACTUALLY CLAIMED RS.35,28,509/- ON THIS ACCOUNT. HOWEVER, THE AO HAS ERRONEOUSLY DISALLOWED AN AMOUN T OF RS.25,93,929/- AND THE CIT(A) ALSO HAS ERRONEOUSLY CONFIRMED THE SAME. REFERRING TO THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (COPY FILED) HE SUBMITTED THAT THE ISSUE STANDS SQUARELY DECIDED IN FAVOUR OF THE ASSESSEE WHERE THE DECISION OF THE TRIBUNAL HOLDING THAT ASS ESSEE IS ENTITLED FOR DEDUCTION WITH RESPECT TO THE DIMINUTION IN VAL UE OF THE INVESTMENT AND AMORTIZATION OF PREMIUM ON INVESTMEN T HELD TO MATURITY HAS BEEN UPHELD AND THE APPEAL FILED BY T HE REVENUE HAS BEEN DISMISSED. REFERRING TO THE DECISION OF THE P UNE BENCH OF THE TRIBUNAL IN THE CASE OF BHAVANI URBAN CO-OP BANK LT D. VIDE ITA NO.610/PN/2011 ORDER DATED 31-07-2013 FOR A.Y. 2007 -08 HE SUBMITTED THAT THE TRIBUNAL IN THE AFORESAID DECISI ON HAS ALLOWED SUCH CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISIO N OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF RAJAST HAN LTD. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MAT TER THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) FAIRLY CONCEDED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRI BUNAL. 4 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. THE ONLY ISSUE TO BE DECIDED IS REGARDING T HE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON GOVT. SECURITIES OF RS.2 5,93,929/- BY THE AO (RS.35,28,509/- AS CLAIMED BY THE ASSESSEE I N THE GROUNDS). WE FIND THE AO DISREGARDING THE CBDT INSTRUCTION NO .17/2008 DATED 26-11-2008 DISALLOWED THE DEDUCTION OF AMORTI ZATION OF PREMIUM BY FOLLOWING THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD., REPORTED IN 320 ITR 577. WE FIND THE LD.CIT(A) UPHELD THE DISALLOWANCE SO MA DE BY THE AO. WE FIND BEFORE THE HONBLE BOMBAY HIGH COURT I N THE CASE OF HDFC BANK LTD., (SUPRA) THE FOLLOWING SUBSTANTIAL Q UESTION OF LAW WAS RAISED : C WHETHER THE ITAT IS RIGHT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION WITH RESPECT TO THE DIMINUT ION IN VALUE OF THE INVESTMENT AND AMORTIZATION OF PREMIUM ON INVESTM ENT HELD TO MATURITY ON THE GROUND OF MANDATE BY RBI GUIDELINES THEREBY IGNORING THE DECISION OF THE SUPREME COURT IN THE CA SE OF SOUTHERN TECHNOLOGIES VS. CIT (320 ITR 577)? 6.1 WE FIND THE HONBLE HIGH COURT DISMISSED THE AP PEAL FILED BY THE REVENUE ON THIS ISSUE BY OBSERVING AS UNDER : 7. AS FAR AS QUESTION (C) IS CONCERNED, WE FIND TH AT AN IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR O F THE ASSESSEE BY THIS COURT IN ITS JUDGEMENT DATED 04 TH JULY, 2014 IN INCOME TAX APPELLATE NO. 1079 OF 2012, COMMISSIONER OF INCOME TAX-2 VS. M/S. LORD KRISHNA BANK LTD., (NOW MERGED WITH HDFC BANK LTD., ). MR. SURESH KUMAR FAIRLY STATED THAT QUESTION (C) REPROD UCED ABOVE IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT RAISE ANY SUBSTANTIAL QUESTIO N OF LAW THAT REQUIRES AN ANSWER FROM US. 6.2 WE FURTHER FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BHAVANI URBAN CO-OP BANK LTD.(SUPRA) FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BAN K OF RAJASTHAN 5 LTD., HAS ALSO ALLOWED SIMILAR CLAIM OF THE ASSESSE E. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD. AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT TO OUR NOTICE BY T HE LD. DEPARTMENTAL REPRESENTATIVE, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE DISAL LOWANCE. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12-01-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED: 12 TH JANUARY, 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE