The Botad Peoples Co.Op.Bank Ltd., Bhavnagar V. The ACIT.,Circle-2, Bhavnagar

ITA 1579/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1617 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Business income; Depreciation; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1579/AHD/2011 (ASSESSMENT YEAR: 2008-09) THE BOTAD PEOPLES CO-OP. BANK LTD., SARDAR SAHAKAR BHAWAN, HAVELI CHOWK, PALIYAD ROAD, BOTAD- 364710 DIST. BHAVNAGAR V/S ACIT, CIRCLE-2, BHAVNAGAR (APPELLANT) (RESPONDENT) PAN: AAAAS3897C APPELLANT BY : SHRI S.N. DIVETIA, AR RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 13 -05-201 6 DATE OF PRONOUNCEMENT : 18 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-XX, AHMEDABAD DATED 23.03.2 011 PERTAINING TO A.Y. 2008-09. ITA NO. 1579 /AHD/2011 . A.Y. 2008-0 9 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 45 LA CS MADE BY THE A.O VIDE ORDER DATED 09.12.2010 MADE U/S. 143(3) OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS ENGAGED IN CO-OPERATIVE BANKING ACTIVITIES AND IN FURTHERANCE OF ITS BUSINESS ACTIVITIES. THE ASSESSEE IS HOLDING INVESTMENT IN G OVERNMENT SECURITIES WHICH HAVE BEEN EARMARKED AS: (A) HELD T O MATURITY AND (B) AVAILABLE FOR TRADE. 4. AS PER THE RESERVE BANK OF INDIA GUIDELINES VIDE CI RCULAR DBOD NO. BP.BC.32/31.04.048/2000-2001, ALL BANKS WERE DIRECT ED TO CLASSIFY THEIR INVESTMENTS INTO THREE CATEGORIES NAMELY HELD TO MATURITY, AVAILABLE FOR SALE, AND HELD FOR TRADING. 5. INVESTMENTS CLASSIFIED UNDER HELD TO MATURITY WER E REQUIRED TO BE CARRIED AT ACQUISITION COST, WHILE IN THE CASE OF HELD FOR TRADING, THE SCRIPTS WERE TO BE MARKED AT MARKET. ACCORDINGLY, T HE DEPRECIATION IN VALUE OF SECURITIES-HELD FOR TRADE WAS ALLOWABLE DEDUCTION. 6. WHILE PERUSING THE FINANCIAL RECORDS OF THE ASSESSE E, THE A.O NOTICED THAT IN THE FINANCIAL YEARS 2002-03 TO 2005-06, ASS ESSEE HAD MADE PROVISION ON ACCOUNT OF DIMINUTION OF VALUE OF SECU RITIES. SINCE, IN THOSE YEARS, THE ASSESSEE WAS ELIGIBLE FOR DEDUCTIO N U/S. 80P OF THE ACT, THE ASSESSEE DID NOT WROTE OF THE PROVISIONS. WHILE DURING THE YEAR, WHEN THE SECURITIES HAVE BEEN SOLD, THE ASSES SEE HAS CLAIMED THE DIMINUTION IN THE VALUE OF SECURITIES FROM FINA NCIAL YEAR 2002-03 TO 2005-06. THIS CLAIM OF THE ASSESSEE WAS OUT-RIGHTLY REJECTED BY THE A.O STATING THAT WHEN THE ASSESSEE HAD ALREADY CLAI MED ADDITIONAL ITA NO. 1579 /AHD/2011 . A.Y. 2008-0 9 3 BENEFIT EQUIVALENT TO DEPRECIATION ON SECURITIES IN EARLIER YEARS, IT CANNOT BE FURTHER ALLOWED TO TAKE AGAIN THE SAME BE NEFIT BY NOT ADDING THE PROVISION FOR DIMINUTION TO THE LOSS INCURRED ON SALE OF SECURITIES. THE RETURNED INCOME OF RS. 19,46,684/- WAS ASSESSED AT RS. 64,46,684/- AFTER DISALLOWING THE CLAIM OF RS. 45,0 0,000/- 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT FAILED TO CONVINCE. AFTER CONSIDERING THE FACTS AND THE SUBMI SSIONS, THE LD. CIT(A) HELD AS UNDER:- 4.2 I HAVE GONE THROUGH THE ORDER OF DIE AO AND SUB MISSIONS OF THE AR CAREFULLY. IT IS SEEN THAT THE APPELLANT HAD MADE P ROVISIONS OF DIMINUTION IN THE VALUE OF SECURITIES AS UNDER: ASSESSMENT YEAR PROVISION MADE 2003-04 500000 2004-05 1000000 2005-06 1500000 2006-07 1500000 4.2(I) IT IS ALSO SEEN THAT THE APPELLANT HAD ON HI S OWN DISALLOWED THE PROVISION FOR DIMINUTION IN THE VALUE OF SECURITIES DURING ASSESSMENT YEAR 2003-04 TO 2006-07. IT IS TO BE SEEN THAT THE ENTIR E DEPRECIATION WHICH HAS BEEN CLAIMED IS ON THE DEPRECIATION IN RESPECT OF S ECURITIES HELD FOR TRADING AND NOT ON SECURITIES HELD TO MATURITY. IN RESPECT OF SECURITIES HELD FOR TRADING IT IS CLEAR THAT THE SAME CONSTITUTE STOCK IN TRADE OF THE APPELLANT. ONLY THE SECURITIES WHICH ARE HELD TO MATURITY ARE CLASSIFIED AS INVESTMENTS OF THE APPELLANT. IN SO FAR AS THE VALUE OF SECURIT IES HELD TO MATURITY IS CONCERNED, THERE IS NO DIMINUTION IN THE HELD TO MA TURITY ARE CLASSIFIED AS INVESTMENTS OF THE APPELLANT. IN SO FAR AS THE VALU E OF SECURITIES HELD TO MATURITY IS CONCERNED, THERE IS NO DIMINUTION IN TH E VALUE OF THE SAME. AS PER THE GUIDELINES OF THE RBI THE VALUE OF THESE SE CURITIES HAS TO BE TAKEN AT THE COST PRICE AND IT IS ONLY ON THEIR SALE THAT : THE DIFFERENCE BETWEEN THE ITA NO. 1579 /AHD/2011 . A.Y. 2008-0 9 4 COST PRICE AND THE SALE PRICE THAT HAS TO BE OFFERE D AS CAPITAL GAIN OR LOSS AS THE CASE MAYBE. IN RESPECT OF SECURITIES HELD FO R TRADING, BEING STOCK IN TRADE, THE SAME; HAVE TO BE VALUED AT COST OR MARKE T PRICE WHICHEVER IS LOWER. THUS THE DIMINUTION IN THE VALUE OF SUCH STO CKS HAS TO BE TAKEN AS THE LOSS IN THE RESPECTIVE YEAR ARID CANNOT BE ALLO WED AS A LOSS OF THE CURRENT YEAR. THE ACTION OF THE APPELLANT IN NOT CL AIMING THE LOSS ON THE SECURITIES HELD FOR TRADING WHICH OCCURRED IN THE E ARLIER YEARS DUE TO THE DIMINUTION IN THEIR VALUE IS NOT CORRECT. THE LOSS, DUE TO DECREASE IN THE MARKET PRICE OF THE SECURITIES HAD TO BE CLAIMED IN THE YEAR IN WHICH SUCH DIMINUTION OCCURRED AND CANNOT BE ALLOWED IN THE CU RRENT YEAR WHEN THE SALE OF SUCH SECURITIES HAS TAKEN PLACE. IT IS ALSO SEEN THAT EVEN THOUGH THE BUSINESS INCOME OF THE APPELLANT WOULD INCREASE IF THE LOSS ON DIMINUTION IN THE VALUE OF SECURITIES WAS ALLOWED, THE APPELLANT WOULD NOT BE ADVERSELY EFFEC.SD BECAUSE THE ENTIRE INCOME WAS ALLOWABLE AS A DEDUCTION U/S.80P WHEREAS IN THE CURRENT YEAR THE I NCREASED BUSINESS INCOME WAS FULLY TAXABLE AS DEDUCTION U/S.80P WAS N OT AVAILABLE TO THE APPELLANT. THE APPELLANT IS HENCE NOT RIGHT IN CLAI MING SUCH DEPRECIATION ON SECURITIES HELD FOR TRADING IN THE CURRENT YEAR. IN VIEW OF THE ABOVE THE ACTION OF THE A.O IN MAKIN G THE ADDITION IS JUSTIFIED. THE SAME IS CONFIRMED. 8. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. RIVAL CONTENTIONS WERE HEARD AT LENGTH, ORDERS OF THE LOWER AUTHORITIES HA VE BEEN CAREFULLY PERUSED. THE ENTIRE DISPUTE REVOLVES AROUND THE PRO VISIONS ON ACCOUNT OF DIMINUTION OF VALUE OF SECURITIES IN EARLIER FIN ANCIAL YEARS WHICH CAN BE UNDERSTOOD BY THE FOLLOWING CHART:- ASSESSMENT YEAR PROVISION MADE 2003-04 500000 2004-05 1000000 2005-06 1500000 2006-07 1500000 ITA NO. 1579 /AHD/2011 . A.Y. 2008-0 9 5 9. UNDISPUTEDLY, IN THE AFOREMENTIONED FINANCIAL YEAR, THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S. 80P OF THE ACT. THE DED UCTION IS ALLOWED AFTER GIVING EFFECT TO ALL THE STATUTORY DEDUCTIONS AVAILABLE TO THE ASSESSEE. THOUGH THE ASSESSEE HAS NOT CLAIMED THE S TATUTORY DEDUCTION ON DIMINUTION OF VALUE OF SECURITIES FOR THE SIMPLE REASON THAT ITS INCOME WAS ELIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT, BE AS IT MAY. BY CLAIMING THE DIMINUTION OF VALUE OF SECURI TIES DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE IS MAKING ITSELF ENTITLED TO A DOUBLE BENEFIT WHICH HAS BEEN DECLINED BY THE A.O AND HAS BEEN CONFIRMED BY THE FIRST APPELLATE AUTHORITY AS MENTIONED HEREINAB OVE. 10. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACT S IN ISSUES QUA THE FINDINGS OF THE FIRST APPELLATE AUTHORITY, WE D O NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 11. HOWEVER, IN ALL FAIRNESS, THE ASSESSEE IS VE RY MUCH ENTITLED FOR THE DIMINUTION IN THE VALUE OF SECURITIES FOR THE F INANCIAL YEAR 2007-08 WHICH IS RELEVANT FOR THE ASSESSMENT YEAR UNDER CON SIDERATION. WE, THEREFORE, DIRECT THE A.O TO ALLOW THE CLAIM OF F.Y . 2007-08 AS PER THE PROVISIONS OF THE LAW. WITH THE ABOVE DIRECTIONS, A PPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 05 - 2016 . SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH