The Bhagyodaya Co.Op. Bank Ltd., Ahmedabad V. The Dy.CIT, Circle-2, Ahmedabad

ITA 1520/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5879 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: S N DIVATIA
• Keywords: Capital asset; Depreciation; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 1520/AHD/2015 (ASSESSMENT YEAR: 2011-12) THE BHAGYODAYA CO-OP BANK LTD. 14531, NAVA MADHUPURA OPP. DELHI GATE, AHMEDABAD V/S DCIT, CIRCLE-2, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAAAT 0528M APPELLANT BY : SHRI S. N. DIVATIA, AR RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 27-11-2018 DATE OF PRONOUNCEMENT : 15 -01-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-10, AHMEDABAD DATED 23.03.2015 PERTAINING TO A.Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 1520 /AHD/2015 . A.Y. 2011-1 2 2 1.1 THE ORDER PASSED U/S.250 ON 23.03.2015 FOR A.Y. 2011-12 BY CIT(A)-10, ABAD MAKING THE ADDITION/DISALLOWANCES TOWARDS ACCRUED I NTEREST ON NPAS OF RS.25,00,752/- AND INVESTMENT DEPRECIATION RESERVE OF RS. 10,75,880/- IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NAT URAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENC E PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED ADDITIONS. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND O N FACTS IN CONFIRMING THAT THE INTEREST OF RS.25,00,752/- ON NPAS PROVIDED BY THE APPELLANT BANK IN ACCORDANCE WITH THE GUIDELINES OF RBI AND RECOGNIZED ACCOUNTIN G PRACTICE HAD ACCRUED AND CHARGEABLE TO TAX. THE LD. CIT(A) HAS FAILED TO APP RECIATE THAT THERE BEING NO REAL INCOME OR ACTUAL RECEIPTS, THE IMPUGNED INTEREST WA S NOT LIABLE TO TAX. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE INTEREST OF RS.25 ,00,752/- ON NPAS HAD ACCRUED AND ACCORDINGLY, IT WAS CHARGEABLE TO TAX I N SPITE OF NO ACTUAL RECEIPT. 3.1 THE LD.CIT(A) HAS ERRED IN LAW AND OR ON FACTS IN MAKING DISALLOWANCE OF INVESTMENT DEPRECIATION RESERVE OF RS-10,75,880/-. 3.2 THE LD. CIT(A) OUGHT NOT TO HAVE MAKE DISALLOWA NCE OF INVESTMENT DEPRECIATION RESERVE OF RS. 10,75,880/-. 2. BRIEFLY FACTS OF THE CASE ARE THAT THE APPELLANT IS CO-OP BANK REGISTERED UNDER THE GUJARAT CO-OP SOCIETY ACT AND CARRYING ON BANKI NG BUSINESS UNDER THE SUPERVISION AND CONTROL OF RBI. IT HAD FILED ITS RE TURN OF INCOME FOR A.Y.2011- 12 ON 19.09.2001 DECLARING TOTAL INCOME OF RS.83,51 ,733. 3. DURING THE COURSE OF ASSTT. PROCEEDINGS, THE AO NOT ICED THAT THE APPELLANT HAD NOT OFFERED TO TAX THE INTEREST ACCRUED ON ADVANCES CLASSIFIED AS NPA. HENCE, ADDITION OF RS.25,00,752 /-WAS MADE AS ACCRUED INTE REST ON SUCH NPA ADVANCES. THE AO ALSO MADE DISALLOWANCE OF INVESTME NT DEPRECIATION PROVISION OF RS. 10,75,880/-. 4. BEING AGGRIEVED, THE APPELLANT PREFERRED FIRST STAT UTORY APPEAL BEFORE THE CIT(A) WHEREIN THE APPELLANT VIDE ITS WRITTEN SUBMI SSION CONTENDED THAT SINCE ITA NO. 1520 /AHD/2015 . A.Y. 2011-1 2 3 THE RECOVERY OF THE ADVANCES ITSELF WAS IN JEOPARDY , THERE WAS NO ACCRUAL OF INCOME AND EVEN NO REAL INCOME CAN BE SAID TO HAVE ARISEN SO AS TO TAX. THEREFORE SUCH DISALLOWANCE CANNOT BE MADE. WITH RE GARD TO DISALLOWANCE OF INVESTMENT DEPRECIATION RESERVE OF RS. 10,75,880/-. HOWEVER, WITHOUT CONSIDERING THE SAME UPHELD THE DISALLOWANCE OF INV ESTMENT DEPRECIATION RESERVE OF RS. 10,75,880/-. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. APPELLANT IS CO-OP BANK REGISTERED UNDER THE GUJARAT CO-OP SOCIE TY ACT AND CARRYING ON BANKING BUSINESS AS PER RESERVE BANK OF INDIA GUIDE LINES. 6. THE APPELLANT HAS FURNISHED THE COMPLETE LIST OF NO N PERFORMING ASSETS AS PER RBI GUIDELINES AND ALSO FURNISHED THE DETAILS OF IN TEREST ACCRUED ON SUCH NPAS DURING THE FINANCIAL YEAR 2010-11 WHICH AGGREGATED TO RS. 25,00,752/- AND SAME WAS NOT CHARGED AS MANDATORILY STIPULATED UNDE R INCOME RECOGNITION AND ASSETS CLASSIFICATION NORMS OF RESERVE BANK OF INDI A. 7. AS WE CAN SEE, THE ASSESSEE CASE IS COVERED BY JURI SDICTIONAL HIGH COURT IN THE MATTER OF PR.CIT VS. SHRI MAHILA SEWA SAHAKARI BANK LTD. WHEREIN IT HAS BEEN HELD THAT NON PERFORMING ASSSETS CANNOT BE RECO GNISED ON ACCRUAL BASIS ASSESSEE BOUND BY RESERVE BANK OF I NDIA GUIDELINES AND INCOME FROM NON PERFORMING ASSET IS NOT RECOGNIZED ON ACCRUAL BASIS BUT IS BOOKED AS INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. THEREFORE BANK SHOULD NOT TAKE TO INCOME ACCOUNT, I NTEREST ON NON PERFORMING ASSETS ON ACCRUAL BASIS. ITA NO. 1520 /AHD/2015 . A.Y. 2011-1 2 4 8. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE SAID JU DGMENT, WE ALLOW THIS GROUND OF APPEAL. 9. NOW WE COME TO NEXT GROUND RELATING TO DISALLOWANCE OF INVESTMENT DEPRECIATION RESERVE OF RS. . 10,75,880/-. 10. IN SUPPORT OF ITS CONTENTION, LD. A.R. HAS CITED AN ORDER OF BOMBAY HIGH COURT IN THE MATTER OF CIT VS. GAJANAN NAGARI SAHAKARI BA NK LTD. WHEREIN RELIEF HAS BEEN GRANTED TO THE ASSESSEE AND REVENUE APPEAL HAS BEEN DISMISSED WITH FOLLOWING: DEDUCTIONDEDUCTION TOWARDS DEPRECIATION OF SECURIT YENTITLEMENT ASSESSEE WAS A CO-OPERATIVE BANK AND HAD FILED INCOME TAX RE TURNS FOR RELEVANT ASSESSMENT YEAR DECLARING TOTAL LOSS OF RS.27,51,09 6AO DEBITED AMOUNT OF RS.81,67,500/- TOWARDS DEPRECIATION ON INVESTMENT O N GOVERNMENT SECURITIES HELD UNDER CATEGORY OF 'HELD TO MATURITY'IN OPINIO N OF AO , SECURITIES HELD UNDER 'HTM' CATEGORY WERE IN NATURE OF CAPITAL ASSET S AND THEREFORE, WERE AVAILABLE FOR SALEAO ALSO HELD THAT SECURITIES WER E HELD IN TRADING AND DISALLOWED AMOUNT AS DIMINUTION IN VALUE OF SECURIT Y AND ADDED SAME TO THE TOTAL INCOMECIT(A) AND ITAT HELD THAT ASSESSEE WAS ENTIT LED TO DEDUCTED ON ACCOUNT OF DEPRECIATION OF SECURITY HELD AS AN INVESTMENT I N GOVERNMENT SECURITYHELD, IN APPEAL BEFORE APPELLATE TRIBUNAL, IT HELD THAT S ECURITIES WERE STOCK IN TRADE AND SO DEPRECIATION WOULD AMOUNT TO LOSS AND NOT INCOME -AUTHORITIES BELOW HELD THAT THIS ASPECT WAS WELL SETTLED THROUGH JUDGMENT OF HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BANK OF BARODA, AS W ELL AS IN JUDGMENT OF SUPREME COURT IN CASE OF UCO BANK VS. THE COMMISSIO NER OF INCOME TAX SUPREME COURT IN SAID JUDGMENT HELD THAT MERELY BEC AUSE SECURITIES WERE KEPT UNDER HEAD BY BANK TILL MATURITY, SAID SECURITY COU LD NOT BE TREATED AS PURELY INVESTMENT.SECURITY HELD BY BANK WAS IN NATURE OF STOCK IN TRADERELIANCE PLACED BY REVENUE ON JUDGMENT OF VIJAYA BANK VS. CO MMISSIONER OF INCOME TAX WAS MISPLACED THUS, REVENUE'S APPEAL DID NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND SAME WAS, DISMISSEDREVENUE'S APPEAL DISMIS SED. 11. RESPECTFULLY FOLLOWING THE ORDER OF THE BOMBAY HIGH COURT, WE ALLOW THIS GROUND OF APPEAL. ITA NO. 1520 /AHD/2015 . A.Y. 2011-1 2 5 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 15- 01- 2 019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 15 /01/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD