Deputy Commissioner of Income-tax, V. Maharashtra Gramin Bank, Nanded

ITA 1654/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2747 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: RAMESH K MAGAR
• Keywords: Capital asset; Question of law; Cost of acquisition
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1654/PN/2014 #& & / ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE-3, NANDED . / APPELLANT V/S MAHARASHTRA GRAMIN BANK, SHIVANI NAGAR, NANDED, TQ. AND DIST : NANDED 431 602 PAN NO.AABCM8807B . / RESPONDENT / ASSESSEE BY : SHRI RAMESH K. MAGAR / REVENUE BY : SHRI HITENDRA NINAWE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 23-06-2014 OF THE CIT(A), AURANGABAD RELATING TO ASSESSM ENT YEAR 2011-12. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE CIT(A) AURANGABAD IS NOT JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVT. SECURIT IES AT RS.5,56,53,837/- MADE BY THE ASSESSING OFFICER. 2. THE CIT(A) HAS CONSIDERED THE ASSESSEE' S PLEA THAT THE BANK HAS AMORTIZED THE PREMIUM ON GOVT. SECURITIES IN VIEW OF THE GUIDELINES GIVEN BY THE RBI. AS PER THESE GUIDELINES THE ENTIRE INVESTMENT FOLIO IS REQUIRED TO CLASSIFY UNDER FOLLOWING THREE CATEGORIES. / DATE OF HEARING :03.02.2016 / DATE OF PRONOUNCEMENT:04.02.2016 2 ITA NO.1654/PN/2014 1. HTM - HELD TO MATURITY 2. AFS - AVAILABLE FOR SALE 3. HFT - HELD FOR TRADING IN VIEW OF THESE GUIDELINES VALUATION OF AFS & HFT SECURITIES IS TO BE DONE ON THE BASIS OF AT COST OR MARKET PRICE WHICHEVER IS LESS. WHILE THE HTM SECURITIES ARC IN THE NATURE OF CAPITAL ASSETS. THE PREMIUM ON HTM SECURITIES REPRESENTS 'THE EXCESS COST' OVER THE FACE VALUE OF HTM SECURITIES WHICH IS AMORTIZED BY THE BANK OVER THE REMAINING PERIOD OF MATURITY. 3. SECTION 37(1) OF THE I.T. ACT CATEGORICALLY PROH IBITS THE ALLOWANCE OF EXPENDITURE ON CAPITAL ASSETS. 4. RELIANCE IS PLACED ON THE DECISION OF APEX COURT IN THE CASE OF V IJAYA BANK LTD VS COMMISSIONER OF INCOME TAX, 187 ITR 541 (SC). 5. THE ORDER OF THE A.O. BE RESTORED AND THE ITAT, PUNE BE VACATED. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS. IT FILED ITS RETUR N OF INCOME ON 22-09-2011 DECLARING LOSS OF RS.2,45,41,740/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT ASSESSEE HA S DEBITED AN AMOUNT OF RS.5,56,53,839/- ON ACCOUNT OF AMORTIZATION OF PRE MIUM ON INVESTMENT IN GOVERNMENT SECURITIES IN THE CATEGORY OF H ELD TO MATURITY. THE AO NOTED THAT THIS PREMIUM REPRESENTS T HE EXCESS OF ACQUISITION COST OVER THE FACE VALUE OF HELD TO MATURITY SE CURITIES WHICH HAS BEEN CARRIED ON BY THE BANK OVER THE REMAINING PER IOD OF MATURITY. THE AO HELD THAT THE DEDUCTION ON AMORTIZATION OF PREMIUM IS NOT ALLOWABLE IN VIEW OF CLASSIFICATION OF SECURITIES AS PER CIRCULA R ISSUED BY RBI AS HELD TO MATURITY, HELD FOR TRADING, AND AVAILABLE FOR SALE. THE AO FURTHER OBSERVED THAT HELD TO MATURITY SECURIT IES ARE CAPITAL ASSET AND OTHER 2 TYPES OF SECURITIES, I.E. HELD FOR TRADING AND AVAILABLE FOR SALE ARE STOCK IN TRADE. THE COMPUTATION O F TAXABLE INCOME HAS TO BE MADE AS PER THE PROVISIONS OF I.T. ACT , 1961 AND NOT AS PER GUIDELINES PRESCRIBED IN MASTER CIRCULAR OF RBI. THE AO FURTHER HELD 3 ITA NO.1654/PN/2014 THAT THE SAID AMORTIZATION EXPENDITURE CLAIMED IS NOT REVE NUE EXPENDITURE AND IS NOT ALLOWABLE U/S.37(1) OF THE ACT. FOR T HE ABOVE PROPOSITION, THE AO RELIED ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF VIJAYA BANK LTD. VS. CIT REPORTED IN 187 ITR 541. 4. IN APPEAL THE LD.CIT(A) FOLLOWING VARIOUS DECISIONS DELETED THE ADDITION OF RS.5,56,53,837/- MADE BY THE AO ON ACCOUNT OF A MORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. 5. AGGRIEVED WITH SUCH ORDER OF CIT(A) THE REVENUE IS IN A PPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF ACIT VS. BANK OF RAJASTHAN IN ITA NOS. 2246 TO 2250/MUM/2009 ORDER DATED 20-12-2012 FOR A.YRS. 200 2-03 TO 2006- 07. THE TRIBUNAL UPHELD THE ORDER OF THE CIT(A) AND DISMISS ED THE APPEAL FILED BY THE REVENUE. WE FIND ON FURTHER APPEAL BY T HE REVENUE THE HONBLE BOMBAY HIGH COURT, AURANGABAD BENCH DISMISSE D THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : 3. WE HAVE CONSIDERED THE SUBMISSIONS CANVASSED BY THE R ESPECTIVE PARTIES. THE DIVISION BENCH OF THIS COURT COMMISSIONER OF INCOME TAX-2, MUMBAI 400 020 VS. HDFC BANK LTD. REFERRED SUPRA, H AS OBSERVED IN PARA 7 THUS : 7. AS FAR AS QUESTION (C) IS CONCERNED, WE FIND THAT A N IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR OF T HE ASSESSEE BY THIS COURT IN ITS JUDGMENT DATED 4 TH JULY, 2014 IN INCOME TAX APPEAL NO.1079 OF 2012, COMMISSIONER OF INCOME TAX-2 VS. M/S. LORD KRISHNA BANK LTD., (NOW MERGED WITH HDFC BANK LTD.) MR. SURESH KUMAR FAIRLY STATED THAT QUESTION (C) REPRODUCED ABOV E IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW THAT REQUIRES AN ANSWER FROM US. 4 ITA NO.1654/PN/2014 QUESTION (C) FRAMED BY THE DIVISION BENCH OF THIS COUR T IN THE CASE OF COMMISSIONER OF INCOME TAX-2 VS. HDFC BANK LTD. REFERR ED SUPRA, WAS AS UNDER : (C) WHETHER THE ITAT IS RIGHT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION WITH RESPECT TO THE DIMINUTIO N IN VALUE OF THE INVESTMENT AND AMORTIZATION OF PREMIUM ON INVESTMENT HELD TO MATURITY ON THE GROUND OF MANDATE BY RBI GUIDELINES THEREBY IGNORING THE DECISION OF THE SUPREME COURT IN THE CA SE OF SOUTHERN TECHNOLOGIES VS. CIT (320 ITR 577)? 4. CONSIDERING THE AFORESAID ASPECTS OF THE MATTER, NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL, AS SUCH DISMISSED. NO COSTS. 7. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND S RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04-02-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED :04 TH FEBRUARY, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ), AURANGABAD 4. 5. 6. THE CIT, AURANGABAD $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , $ ' //TRUE COPY// // TRUE COPY // // $ ' //TRUE C // /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE