ACIT, Nashik V. The Ozer Merchant Co-Operative Bank Ltd., Nashik

ITA 1588/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72348 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1588/PN/2012 (ASSESSMENT YEAR : 2009-10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK . APPELLANT VS. THE OZER MERCHANT CO-OPERATIVE BANK LTD., TAMBAT LANE, OJHAR (MIG), TAL. NIUPHAD, DIST. NASHIK. PAN : AAAAT9564H . RESPONDENT DEPARTMENT BY : MR. P. L. PATHADE ASSESSEE BY : MR. PRAMOD SHINGTE DATE OF HEARING : 23-10-2013 DATE OF PRONOUNCEMENT : 30-10-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATE D 22.05.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 28.11.2011 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. THE FIRST ISSUE IN THIS APPEAL IS WITH REGARD TO AN ADDITION OF RS.55,600/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AMORTIZ ATION OF PREMIUM OF INVESTMENTS HELD TILL MATURITY (HTM) BY THE BANK. I N THIS REGARD THE BRIEF FACTS ARE THAT ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. IT HAD PURCHASED CERTAIN GOVERNMENT SECURI TIES WHICH WERE HELD BY THE BANK AS HELD TILL MATURITY (HTM). THE PREMIUM P AID ON THE PURCHASE OF SAID SECURITIES I.E. THE AMOUNT OVER AND ABOVE THE FACE VALUE OF THE SECURITIES WAS AMORTIZED OVER THE PERIOD TILL MATURITY. THE PREMIU M SO PAID WAS CLAIMED AS A ITA NO.1588/PN/2012 A.Y. 2009-10 REVENUE EXPENDITURE WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER FOR THE REASON THAT THE SECURITIES HELD BY THE BANK ARE CAPITAL INVESTMENTS AND NOT STOCK-IN-TRADE AS CONSIDERED BY THE ASSESSEE. THE CIT(A) HAS DELETED THE ADDITION FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE ACIT VS. BANK OF RAJASTHAN LTD. (2011) TIOL-35 ITAT (MUM). AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, THE LEARNED REPRESENTATI VE FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) BY THE DECISION O F THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE SHAHADA PEOPLE CO-OPERATIVE BANK LTD. VIDE ITA NO.996/PN/2012 DATED 27.08.2013. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT REFERRED TO ANY DECISION CONTRARY TO THE DECISION OF THE MUMBAI BEN CH OF THE TRIBUNAL IN THE CASE BANK OF RAJASTHAN LTD. (SUPRA) WHICH HAS BEEN RELIED UPON BY THE CIT(A) IN HOLDING THAT THE PREMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY, WHICH HAS BEEN AMORT IZED OVER THE PERIOD TILL MATURITY, IS ALLOWABLE AS REVENUE EXPENDITURE. AC CORDINGLY, WE AFFIRM THE ORDER OF THE CIT(A) FOLLOWING THE DECISION OF THE M UMBAI BENCH OF THE TRIBUNAL IN THE CASE BANK OF RAJASTHAN LTD. (SUPRA). THUS, O N THIS GROUND, REVENUE FAILS. 5. THE SECOND GROUND RAISED BY THE REVENUE IS WITH REGARD TO THE DISALLOWANCE OF RS.36,644/- REPRESENTING EMPLOYEES CONTRIBUTION OF PROVIDENT FUND WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT SUCH CONTRIBUTION WAS PAID BEYOND THE DUE DATE SPECIFI ED UNDER THE EMPLOYEES PROVIDENT FUND SCHEME, 1952. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE NOTICING THAT THE CONTRIBUTION HAS BEEN PAID BY THE ASSESSEE WITHIN THE GRACE PERIOD OF FIVE DAYS UNDER THE EMPLOYEES PROVIDENT FUND SCHEME, 1952 AND THEREFORE IT WOULD NOT SUFFER ANY DISALLOWANCE FOLL OWING THE DECISION OF THE ITA NO.1588/PN/2012 A.Y. 2009-10 HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SA LEEM CO-OPERATIVE SPINNING MILLS LTD., (2006) 284 ITR 621 (MAD). APAR T THEREFROM THE CIT(A) IN PARA 7.3 OF HIS ORDER HAS NOTED THAT IN ANY CASE TH E SAID CONTRIBUTION WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME A S PER SECTION 139(1) OF THE ACT, AND FOLLOWING THE JUDGEMENT OF THE HONBLE DEL HI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD., 321 ITR 508 (DELHI), NO DISALLO WANCE WAS MERITED. 6. IN THE ABOVE BACKGROUND, WE HAVE CONSIDERED THE OBJECTION PUT-FORTH BY THE REVENUE AND FIND NO FORCE IN THE SAME BECAUSE T HE CIT(A) HAS DELETED THE DISALLOWANCE FOLLOWING THE JUDGEMENT OF THE HON BLE MADRAS HIGH COURT AND THE HONBLE DELHI HIGH COURT IN THE CASE OF SAL EEM CO-OPERATIVE SPINNING MILLS LTD. (SUPRA) AND AIMIL LTD. (SUPRA) RESPECTIV ELY. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE AND THEREFO RE THE DECISION OF THE CIT(A) IS HEREBY AFFIRMED. THUS, ON THIS GROUND, RE VENUE FAILS. 7. THE THIRD ISSUE IS WITH REGARD TO THE DISALLOWAN CE OF RS.16,71,405/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 4 0(A)(IA) OF THE ACT ON THE GROUND THAT THE CORRESPONDING TDS ON THE SAID INTER EST PAYMENTS WAS NOT DEDUCTED AT SOURCE. IN BRIEF, THE FACTS ARE THAT AS SESSEE HAD MADE PAYMENTS TO THE VARIOUS PERSONS BY WAY OF INTEREST AMOUNTING TO RS.16,71,405/-, AS ENUMERATED IN PARA 6.2 OF THE ASSESSMENT ORDER. AS PER THE ASSESSING OFFICER, THE REQUISITE TDS AS PER SECTION 194A OF THE ACT WA S NOT DEDUCTED AT SOURCE ON SUCH PAYMENTS. THUS, HE INVOKED SECTION 40(A)(IA ) OF THE ACT AND DISALLOWED SUCH EXPENDITURE. 8. THE CIT(A) HAS DELETED THE DISALLOWANCE ON THE G ROUND THAT SUCH INTEREST WAS PAID TO THE MEMBERS OF THE SOCIETY AND IN TERMS OF SECTION 194A(3)(V) OF THE ACT, NO TAX WAS DEDUCTIBLE AT SOU RCE. THUS, THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT HAS BEEN SET-ASI DE. AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEFORE US. ITA NO.1588/PN/2012 A.Y. 2009-10 9. SECTION 194A OF THE ACT PROVIDES FOR DEDUCTION O F TAX AT SOURCE ON PAYMENTS BY WAY OF INTEREST OTHER THAN THE INTERE ST ON SECURITIES. THE ASSESSEE BEFORE US IS A CO-OPERATIVE SOCIETY WHICH IS INTER-ALIA ENGAGED IN THE BUSINESS OF BANKING. SECTION 194A(3)(V) OF THE ACT PROVIDES THAT THE TAX SHALL NOT BE REQUIRED TO BE DEDUCTED ON INCOME WHICH HAS BEEN CREDITED OR PAID BY A CO-OPERATIVE SOCIETY TO A MEMBER THEREOF OR TO AN Y OTHER CO-OPERATIVE SOCIETY. THE CLAIM OF THE ASSESSEE IS THAT THE INTE REST PAYMENTS IN QUESTION HAVE BEEN PAID/CREDITED TO ITS MEMBERS AND THEREFOR E FOLLOWING THE PROVISIONS OF SECTION 194A(3)(V) OF THE ACT, NO TAX WAS REQUIR ED TO BE DEDUCTED AT SOURCE. IT IS, THUS, CONTENDED THAT THERE WAS NO DEFAULT IN DEDUCTING TAX AT SOURCE AND THUS SECTION 40(A)(IA) OF THE ACT IS NOT ATTRACTED. THE AFORESAID ASSERTION OF THE ASSESSEE HAS BEEN ACCEPTED BY THE CIT(A). ACCORDING TO THE CIT(A), ASSESSEE HAD MADE PAYMENTS OF INTEREST TO THE MEMBE RS ON THEIR DEPOSITS; AND, IN VIEW OF THE SPECIFIC EXEMPTION AVAILABLE TO IT UNDER SECTION 194A(3)(V) OF THE ACT, NO TAX WAS REQUIRED TO BE DEDUCTED AT S OURCE. AT THE TIME OF HEARING, IT WAS SPECIFICALLY PUT TO THE COUNSEL FOR THE ASSESSEE AS TO WHETHER THE IMPUGNED PAYMENTS OF INTEREST WERE MADE TO THE MEMBERS. OUR ATTENTION WAS DRAWN TO THE DISCUSSION MADE BY THE CIT(A) IN P ARA 9.1 OF THE IMPUGNED ORDER WHEREIN IT IS SEEN THAT THE CIT(A) FORWARDED THE CONTENTIONS OF THE ASSESSEE TO THE ASSESSING OFFICER FOR COMMENTS. THE CIT(A) HAS FURTHER OBSERVED THAT EVEN DURING THE ASSESSMENT PROCEEDING S, ASSESSEE VIDE LETTER DATED 13.07.2011 HAD SUBMITTED THAT NO TAX WAS DEDU CTED AT SOURCE AS THE PAYMENT OF INTEREST WAS MADE TO THE MEMBERS. THE CI T(A) HAS FURTHER OBSERVED THAT IN THE REPORT DATED 07.03.2012 (WRONG LY NOTED BY THE CIT(A) AS 07.03.2011) SUBMITTED BY THE ASSESSING OFFICER, THE CONTENTION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED. IN THIS BACKGRO UND, THE CIT(A) HAS CONCLUDED THAT ASSESSEE HAD CREDITED THE IMPUGNED I NTEREST TO THE CREDIT OF THE MEMBERS, AND NO TAX WAS REQUIRED TO BE DEDUCTED IN VIEW OF SECTION 194A(3)(V) OF THE ACT. THE AFORESAID FINDING OF THE CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US ON THE BASIS OF ANY COGENT MATERIAL OR ITA NO.1588/PN/2012 A.Y. 2009-10 REASONING. IN THE ABSENCE OF ANY COGENT MATERIAL BR OUGHT OUT BY THE REVENUE, WE HEREBY AFFIRM THE AFORESAID CONCLUSION OF THE CI T(A). ACCORDINGLY, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT ON ACCOUNT OF SECTION 194A(3)(V) OF THE ACT, ASSESSEE WAS NOT LIABLE TO DEDUCT TDS ON THE I MPUGNED PAYMENTS AND THUS INVOKING OF SECTION 40(A)(IA) OF THE ACT BY TH E ASSESSING OFFICER HAS BEEN RIGHTLY SET-ASIDE. THE REVENUE FAILS ON THIS GROUND AS WELL. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH OCTOBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE