Assistant Commissioner of Income-tax, V. The Pandharpur Merchants Co-op. Bank Ltd., Solapur

ITA 1421/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7690 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Capital asset; Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1421/PUN/2016 / ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE-1, SOLAPUR . /APPELLANT VS. THE PANDHARPUR MERCHANTS CO-OPERATIVE BANK LTD., MAHAVIR NAGAR, LAXMI PETH, PANDHARPUR, DIST. SOLAPUR PAN : AAAAT3361L . / RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI MUKESH JHA, JCIT / DATE OF HEARING : 03.05.2018 / DATE OF PRONOUNCEMENT: 09.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF C IT(A)-7, PUNE, DATED 01-04-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. REVENUE RAISED TOTAL 13 GROUNDS. ALL THESE GROUNDS R EVOLVE AROUND COUPLE OF ISSUES. GROUND NOS. 1 TO 7 RELATE TO TH E ISSUE OF DELETION OF ADDITION BY THE CIT(A) ON ACCOUNT OF INTEREST AC CRUED ON NON-PERFORMING ASSETS U/S.43D OF THE I.T. ACT, 1961. FURTH ER, THE GROUND NOS. 8 TO 11 RELATE TO DELETION OF ADDITION BY THE CIT(A) ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVESTMENTS UNDER THE CATEGORY HELD TO MATURITY (HTM). 3. AT THE OUTSET, BEFORE US, LD. COUNSEL FOR THE ASSESSEE ARGUES THAT PROVISIONS OF SECTION 43D OF THE ACT APPLY TO ALL THE BANK S INCLUDING THE 2 COOPERATIVE BANKS. ON THE OTHER HAND, REVENUE HOLDS TH AT THESE PROVISIONS ARE APPLICABLE ONLY TO THE SCHEDULED BANKS. REGARDING THE FIRST ISSUE, I.E. ADDITION ON ACCOUNT OF INTERES T ACCRUED ON NPA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE STANDS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE OR DER OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.875/PN/2014, C.O.NO.100/PN/2014 FOR THE A.Y. 2009-10 AND ITA NO.1354/PN /2014, DATED 28-11-2014 FOR THE A.Y. 2010-11. 4. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE AS SESSEE ON THIS ISSUE OF NPA. WE FIND THE CIT(A) DISCUSSED THE ISSUE IN PAR A NOS. 6 TO 6.4 OF HIS ORDER AND ALLOWED THE GROUND RELATING TO INTERES T ACCRUED ON NPA AMOUNTING TO RS.67,84,906/-. WHILE DOING SO, HE EXPLAINED THE PROVISIONS OF SECTION 43D OF THE ACT AND RELIED ON THE JUD GMENT OF HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOG IES LTD. VS. JCIT (COIMBATORE) 320 ITR 577 (SC), JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF M/S. VASISTH CHAY VYAPAR LTD. 330 I TR 440 (DELHI) AND THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YRS. 2009-10 AND 2010-11 VIDE ITA NOS. 875/PN/2014 & C.O.NO.100/PN/2014, DATED 28-11-2014. EVENTUALLY, THE CI T(A) ALLOWED THE CLAIM OF THE ASSESSEE IN HIS FAVOUR. ON PERUS ING THE FINDING GIVEN BY THE CIT(A) WE FIND IT RELEVANT TO EXTRACT THE OPE RATIONAL PARAS AND THE SAME READ AS UNDER : 6.2.3 THE ABOVE ANALYSIS SHOWS THAT, WHETHER AMOU NT HAS BECOME NPA OR NOT IS TO BE DECIDED FIRST THEN TREAT MENT OF THE INTEREST THEREON IS TO BE CONSIDERED FOR OFFERING TO INCOME TAX ON THE BASIS OF ACCRUAL OR RECEIPT BASIS. 3 6.3 FROM THE FACTS OF THE CASE, IT IS APPARENT FRO M THE RECORD THAT APPELLANT HAS NOT SHOWN THE AMOUNT RECEIVED AS INTEREST AFTER RECOVERY FROM NPA. 6.4 RESPECTFULLY FOLLOWING THE DECISION OF ITAT PU NE IN THE CASE OF APPELLANT FOR A.Y. 2009-10 AND 2011-12 THE AMOUN T OF RS.67,84,906/- CLAIMED AS NPA IS NOT TO BE TAXED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE GROUND NO.1 OF THE APPEAL IS ALLOWED . 6. CONSIDERING THE SETTLED NATURE OF ISSUE RELATING TO TAX ATION OF INTEREST ACCRUED ON NPAS, WE FIND THE ORDER OF THE CIT(A) IS A WELL REASONED ONE AND THEREFORE DOES NOT WARRANT ANY ADVE RSE VIEW ON THIS ISSUE. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. ACCORDINGLY, GROUND NOS. 1 TO 7 RAISED BY THE REVENUE ARE DISMISSED. 7. NOW COMING TO THE SECOND ISSUE RAISED BY THE REVENUE VIDE GROUND NOS. 8 TO 11, BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT ASSESSEE DEBITED AN AMOUNT OF RS.1,55,037/- TOWARDS AMORTIZATION OF PREMIUM ON SECURITIES. ASSESSEE SUBMITTED THAT AS ON 31-03-20 12 IT HOLDS RS.23,75,16,951/- IN GOVT OF INDIA SECURITIES AND ALL SUCH INVE STMENT IS HELD FOR MATURITY HTM CATEGORY. ASSESSEE STATED THAT WHEN THESE SECURITIES ARE PURCHASED, THE ENTIRE PREMIUM PAID ON PURC HASE OF SECURITIES IS NOT BOOKED TO EXPENDITURE ACCOUNT AS IT IS REQUIRED TO BE AMORTIZED OVER THE PERIOD UNTIL THE MATURITY OF SECURITIES. HOWEVER, THE AO AFTER ANALYSING THE INVESTMENT PORTFOLIO OF THE BANKS C AME TO THE CONCLUSION THAT THESE SECURITIES ARE INTO THREE CATEGORIE S NAMELY (1) HELD TO MATURITY, (2) AVAILABLE FOR SALE AND (3) HELD FOR TRADING. AO OPINED THAT AFS AND HFT ARE IN THE NATURE OF STOC K IN TRADE WHILE THE HTM SECURITIES ARE IN THE NATURE OF CAPITAL ASSETS. FOR THE PURPOSE OF INCOME-TAX, THE VALUATION IN RESPECT OF AFS AND HFT S ECURITIES ARE TO BE VALUED AT COST OR MARKET WHICHEVER IS LESS WHEREAS HTM SECURITIES HAVE TO BE VALUED AT COST ONLY AND NOT AT COST OF MAR KET WHICHEVER IS LESS AND THUS DISALLOWED THE CLAIM ON AMORTIZATION OF PREMIUM AMOUNTING TO RS.1,55,037/-. 4 8. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RELYING O N THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YRS. 2009-10 AND 2010-11 AND THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF LOKMANGAL CO-OPERATIVE BANK LTD. ITA NO.1540/PN/2014, DATED 28-11-2014 ALLOWED THE CLAIM IN FAVOUR OF THE ASSESSEE. C ONTENTS OF PARA NO.7.3 TO 7.5 OF THE ORDER OF CIT(A) ARE RELEVANT ON THIS ISSUE. 9. AGGRIEVED WITH THE ORDER OF CIT(A), REVENUE FILED THE PR ESENT APPEAL. 10. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THIS ISSUE ALSO IS A COVERED ISSUE IN VIEW OF THE DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.YRS. 2009-10 AND 2010-11. PER CONTRA, LD. DR FOR THE REVENUE RELIED ON TH E ORDER OF THE AO DUTIFULLY. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORD ERS OF THE REVENUE AND THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 28-11-2014 WHERE ASSESSEE IS ALSO COVERED IN THE SAID ORDER, WE FIND THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA NOS. 25 TO 2 7 OF THE ORDER. FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE SAID FINDIN GS OF THE TRIBUNAL HERE AS UNDER : 25. THE ONLY OTHER REMAINING GROUND IN THE CROSS-OBJECT ION IS WITH REGARD TO THE ACTION OF THE CIT(A) IN CONFIRMING THE DISAL LOWANCE OF RS.3,70,913/- REPRESENTING AMORTIZATION OF PREMIUM PAID ON ACQUIS ITION OF HELD TO MATURITY (HTM) SECURITIES. 26. IN THIS CONTEXT, BRIEF FACTS ARE THAT BEFORE TH E CIT(A) ASSESSEE CLAIMED DEDUCTION OF RS.3,70,913/- ON ACCOUNT OF AMORTIZATI ON OF PREMIUM PAID ON GOVERNMENT SECURITIES IN THE CATEGORY OF INVESTM ENTS HELD TO MATURITY (I.E.HTM). THE SAID PREMIUM REPRESENTED THE EXCESS OF ACQUISITION COST OVER THE FACE VALUE OF THE SECURITIES AND THE CLAIM OF THE ASSESSEE WAS THAT THE SAME WAS TO BE AMORTIZED OVER THE REMAININ G PERIOD OF MATURITY OF THE SECURITIES. THE CLAIM OF THE ASSESSEE WAS BA SED ON THE MASTER CIRCULAR DATED 12.07.2006 ISSUED BY THE RESERVE BAN K OF INDIA. THE CIT(A) DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND SUSTAINED THE DISALLOWANCE OF RS.3,70,913/-. AGAINST SUCH A DECIS ION OF THE CIT(A), ASSESSEE IS IN APPEAL BY WAY OF CROSS- OBJECTION BE FORE US. 5 27. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE SAID ISSUE IS NO LONGER RES-INTEGRA AND HAS BEEN ADJUDICATED ILL FAV OUR OF THE ASSESSEE BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC B ANK LTD. (SUPRA). THE HON'BLE BOMBAY HIGH COURT REFERRED TO ITS EARLI ER DECISION IN THE CASE OF CIT VS. LORD KRISHNA BANK LTD. (2014) 107 DTR 13 8 (BOM.) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIE W OF THE AFORESAID, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE AN ADDITION OF RS.3,70,913/- REPRESENTING AM ORTIZATION OF PREMIUM PAID ON HTM SECURITIES. THUS, THE GROUND OF THE ASS ESSEE IS ALLOWED. IN VIEW OF THE ABOVE, WE HOLD THAT THE ADDITION ON ACCOU NT OF AMORTIZATION OF PREMIUM ON HTM SECURITIES IS ALLOWABLE IN FAVO UR OF THE ASSESSEE. WE THEREFORE DIRECT THE AO TO DELETE THE SAID ADDITION OF RS.1,55,037/- IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, RELEVANT GROUNDS (8 TO 11) RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MAY, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 09 TH MAY, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-7, PUNE 4. CIT-7, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.