Col R D Nikam Sainik Sah. Bank Ltd, Satara V. Assistant Commissioner of Income-tax, Circle - Satara, Satara

ITA 1305/PUN/2019

AI Insights

The case involves Col. R. D. Nikam Sainik Sahakari Bank Ltd., a cooperative bank, which appealed against the order of the CIT(A)-10, Pune, concerning the assessment year 2013-14. The primary contention was regarding the disallowance of deductions claimed under section 36(1)(viii) of the Income Tax Act, 1961, related to the income earned from housing loans. The Assessing Officer had rejected the claim, stating that the bank was not engaged in the 'development of housing in India' as required by the section. The Tribunal, however, found that the bank's activities fell within the scope of the section and allowed the deduction. Furthermore, the Tribunal addressed the taxability of certain capital receipts, ruling them out as taxable income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137134 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 25-08-2019
• Other Referred Cases: National Thermal Power Co. Ltd. vs. CIT, 229 ITR 383 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1305/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year : 2013-14 Col. R. D. Nikam Sainik Sahakari Bank Ltd., Chh. Shivaji Maharaj Circle, Powai Naka, Satara- 415001. PAN : AABAS2355J Vs. ACIT, Satara Circle, Satara. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of the ld. CIT(A)-10, Pune [‘the CIT(A)’] dated 18.06.2019 for the assessment year 2013-14. 2. Briefly, the facts of the case are that the appellant is a cooperative society engaged in the banking business incorporated under the Maharashtra Co-operative Societies Act. The Return of Income for the assessment year 2013-14 was filed on 28.09.2013 Assessee by : Smt. Renuka Ghatge Revenue by : Shri Ramnath P. Murkunde Date of hearing : 12.12.2022 Date of pronouncement : 02.01.2023 ITA No.1305/PUN/2019 2 declaring total income of Rs.3,66,66,193/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Satara Circle, Satara (‘the Assessing Officer’) vide order dated 30.11.2015 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.4,27,67,764/- after making the following additions :- (i) The amount directly credited to Reserve Fund - 3,11,237/- (ii) Disallowance of provision of Standard assets - 10,00,000/- (iii) Disallowance of broken period interest - 33,22,899/- (iv) Disallowance of amortization of premises - 4,88,614/- (v) Disallowance of special Reserve u/s 36(1)(viii) - 9,78,821/- Total - 61,01,567/- 3. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order, confirmed the additions on account of special reserve u/s 36(1)(viii) of Rs.9,78,821/- while granting relief in respect of other additions. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. It is contended that the appellant is a cooperative bank deriving income from banking business. It also derived interest income by advancing housing loans for the purchase & construction of the houses. The appellant bank sought exemption of interest ITA No.1305/PUN/2019 3 earned on such housing loans u/s 36(1)(viii) of the Act. The said claim was rejected by the Assessing Officer by holding that the appellant bank is only engaged in providing long term finance for purchase & construction of housing in India, not engaged in providing long term finance for development of housing in India. The Assessing Officer was of the opinion that the term “development of housing in India” and term “purchase & construction of housing in India” have different connotation. The Assessing Officer also referred to the amendment made by the Finance Act, 2009 w.e.f. 01.04.2010 whereby it was provided that the income earned by re-financing by the housing by National Housing Bank (‘NHB’) was made eligible for deduction. The Assessing Officer also brought to tax the amount credited to Profit & Loss Account of Rs.3,11,237/- by holding that the income had accrued the appellant. 6. The ld. AR submits that the appellant is specified entity within the meaning of sub-clause 4A of Explanation inserted to the provisions of section 36(1)(viii) and also carried on the eligible business and complied with all the conditions prescribed under the provisions of section 36(1)(viii) of the Act. The ld. AR submits that ITA No.1305/PUN/2019 4 the lower authorities have misconstrued the term “development of housing in India”. 7. On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities. 8. We heard the rival submissions and perused the material on record. The ground of appeal no.1 challenges the decision of the ld. CIT(A) confirming the addition of Rs.3,11,237/- being the amount transferred to the capital reserve account. The AR submits that the amount transferred to capital reserve fund represents the entrance fees collected from its shareholders of Rs.2,65,400/-, unclaimed deposit represents capital receipts, cannot be taxed as “income”. The Assessing Officer was of the opinion that the above receipt represents income as transferred to reserve account and, therefore, taxable. Before the ld. CIT(A) this issue was not pressed. However, before this Tribunal, the issue was laid as to the taxability of the above receipts. 9. We are of the considered opinion that the entrance fees or subscription fees received by the members is on capital account does not form part of the revenue receipts. Similarly, as regards to the old balance of DD payable to sundry creditors, there is no cessation of liability and mere write off of the DD payable to sundry ITA No.1305/PUN/2019 5 creditors etc and never the unilateral act on the part of the appellant by writing off of the amount and credit to Profit & Loss Account neither amount to cessation of liability or income. In the circumstances, we direct the Assessing Officer to allow this ground of appeal no.1. 10. We also make it clear that there is no estoppel against law, seeing exclusion from the total income before the Tribunal for the first time. Even though this ground of appeal was not pressed during the course of first appellate stage. In view of law laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT, 229 ITR 383 (SC), the ground of appeal no.1 stands allowed. 11. Ground of appeal no.2 relates to the allowability of deduction u/s 36(1)(viii) of the Act. The appellant bank had derived income on lending money for the purpose of purchase & construction of houses. There is no dispute that the appellant is specified entity being the cooperative bank as per sub-clause (4) of section 36(1)(viii) of the Act. The term “long term finance” has been defined under clause (h) to mean any loan or advance provided for a period for not less than 5 years. We do not perceive any distinction between term “development of housing in India” and “purchase & ITA No.1305/PUN/2019 6 construction of housing in India for residential purposes. Thus, we are of the considered opinion that the claim made by the appellant clearly falls within the exemption under the provisions of section 36(1)(viii) of the Act and the assessee bank is entitled for deduction. Accordingly, the ground of appeal no.2 stands allowed. 12. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 02 nd day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 02 nd January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-10, Pune. 4. The Pr. CIT-3, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.