UNITED BANK OF INDIA, Kolkata V. D.C.I.T Cir- 6,kolkata, Kolkata

ITA 1916/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100303 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Court: TRIBUNAL
• Department Lawyers: NO NE APPEARED
• Assessee Lawyers: SOUMITRA CHOUDHURY LD
• Keywords: Business expenditure; Rule of consistency; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1916/KOL/2012 A.Y 2009-10 UNITED BANK OF INDIA VS. DCIT, CIRCLE-6, KOLKATA PAN: AAACU5624P (APPELLANT) (RESPONDENT) ITA NO. 113/KOL/2013 A.Y 2009-10 DCIT, CIRCLE-6, KOLKATA VS. UNITED BANK OF IND IA (APPELLANT) (RESPONDENT) FOR THE APPELLANT/ASSESSEE: SHRI SOUMITRA CH OUDHURY, ADVOCATE, LD.AR FOR THE RESPONDENT/DEPARTMENT: N ONE APPEARED DATE OF HEARING: 14-12 -2015 DATE OF PRONOUNCEMENT: 30 -12-2 015 ORDER SHRI M.BALAGANESH, AM : THESE APPEALS OF THE ASSESSEE AS WELL AS THE REVEN UE ARISE OUT OF THE ORDER OF THE LEARNED CIT(A)-VI, KOLKATA IN APPEAL NO. 290/CI T(A)-VI/CIR-6/2011-12/KOL DATED 26.10.2012 FOR THE ASST YEAR 2009-10 PASSED A GAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). BOTH THE APPEALS AR E TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1916 / KOL/2012 ASSESSEES APPEAL BY UNIT ED BANK OF INDIA 2. THE GROUND NO. 1 RAISED BY THE ASSESSEE IS GEN ERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 2 3. THE FIRST ISSUE TO BE ADJUDICATED IN THIS APP EAL IS AS TO WHETHER THE PROVISIONS OF SECTION 115JB OF THE ACT ARE APPLICABLE TO THE ASSE SSEE BEING A BANKING COMPANY FOR THE ASST YEAR 2009-10. 3.1. THE LEARNED AR ARGUED THAT THIS ISSUE IS COVE RED BY THE COORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF UCO BANK V S DCIT IN ITA NO. 1768/KOL/2009 DATED 27.11.2015 FOR THE ASST YEAR 20 02-03. IN RESPONSE TO THIS, THE LEARNED DR FAIRLY CONCEDED THAT THIS ISSUE IS COVER ED BY THE SAID DECISION. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND WE FI ND THAT THIS ISSUE IS SQUARELY COVERED BY THE CO-ORDINATE BENCH DECISION OF THIS T RIBUNAL IN THE CASE OF UCO BANK VS DCIT IN ITA NO. 1768/KOL/2009 DATED 27.11.2015 FOR THE ASST YEAR 2002-03. THE TRIBUNAL WHILE RENDERING THIS JUDGEMENT DULY APPREC IATED THE RELEVANT PROVISIONS OF SECTION 211 OF COMPANIES ACT, 1956, INSERTION OF EX PLANATION 3 TO SECTION 115JB OF THE IT ACT, 1961, WITH EFFECT FROM 1.4.2013 , REL EVANT PROVISIONS OF SECTION 2(5) OF THE COMPANIES ACT, 1956, DEFINITION OF COMPANY UNDER BANKING REGULATION ACT, 1949, DEFINITION OF COMPANY UNDER COMPANIES ACT, 1956, NOTES TO CLAUSES TO FINANCE ACT, 2012 ON THE SUBJECT OF MINIMUM ALTERNATE TAX (MAT) WHILE INTRODUCING EXPLANATION 3 TO SECTION 115JB OF THE IT ACT, 1961, INTENTION BEHIND INTRODUCTION OF MAT PROVISIONS, CIRCULAR NO. 762 DATED 18.2.1998 ON THE SUBJECT OF MAT, THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO.2 ) BILL, 1996 ON THE SUBJECT OF MAT AND RELEVANT RULES OF LEGAL INTERPRE TATION. THE TRIBUNAL ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS:- * SURANA STEELS P LTD VS DCIT REPORTED IN (1999) 2 37 ITR 777 (SC) * STATE BANK OF HYDERABAD VS DCIT REPORTED IN (2013 ) 33 TAXMANN.COM 312 (HYDERABAD TRIBUNAL) VIDE ORDER DATED 7.9.20 12 *MAHARASHTRA STATE ELECTRICITY BOARD VS JCIT REPORT ED IN (2002) 82 ITD 422 (MUMBAI TRIBUNAL) VIDE ORDER DATED 6.8.2001 ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 3 *KERALA STATE ELECTRICITY BOARD VS DCIT REPORTED IN (2010) 329 ITR 91 (KER) * INDIAN BANK VS ADDL CIT IN ITA NO. 469 / MDS / 20 10 DATED 3.8.2011 FOR ASST YEAR 2000-01 * KURUNG THAI BANK VS JCIT REPORTED IN (2012) 49 S OT 12 (MUMBAI TRIBUNAL) * UNION BANK OF INDIA VS ACIT IN ITA NO. 4702 TO 47 06 / MUM / 2010 FOR THE ASST YEARS 2002-03 TO 2006-07 * ICICI LOMBARD GENERAL INSURANCE CO LTD VS ACIT RE PORTED IN 2012- TIOL-690-ITAT-MUM IN ITA NO. 2398/ MUM / 2009 DATED 10.10.2012 FOR THE ASST YEAR 2003-04 * BANK OF INDIA VS ADDL CIT REPORTED IN 2014 (5) T MI 929 IN ITA NO. 1498/MUM/ 2011 DATED 9.4.2014 (MUMBAI TRIBUNAL) IT WAS HELD BY THIS TRIBUNAL THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BANK AND FUR THER HELD THAT THE AMENDMENT BROUGHT IN SECTION 115JB OF THE ACT READ WITH EXPLA NATION 3 THEREON BY THE FINANCE ACT 2012 IS APPLICABLE ONLY WITH EFFECT FROM ASST Y EAR 2013-14 ONWARDS IN LINE WITH THE NOTES TO CLAUSES OF FINANCE ACT 2012 . 3.3. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF UCO BANK (SUPRA), WE ALSO HOLD ACCORDINGLY. HE NCE THE GROUND NO. 2 RAISED BY THE ASSESSEE IN THIS REGARD IS ALLOWED. 4. THE NEXT GROUND TO BE DECIDED IN THIS ISSUE IS THAT WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, DISALLOWANCE U/S 40(A)(I A) OF THE ACT COULD BE MADE IN THE SUM OF RS. 15,16,519/-. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE BANK CLAIMED DEDUCTION OF RS. 15,16,519/- TOWARDS EXPENDITURE ON PAYMENT OF TDS D URING ASST YEAR 2009-10. THE ASSESSEE STATED THAT THE SAID SUM WAS DISALLOWED IN ASST YEAR 2008-09 FOR NON- DEDUCTION OF TAX AT SOURCE. HOWEVER, THE LEARNED A O OBSERVED THAT NO PROOF FOR THE ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 4 REMITTANCE OF TDS WAS PRODUCED BY THE ASSESSEE AND ACCORDINGLY DID NOT ENTERTAIN THE CLAIM OF DEDUCTION U/S 40(A)(IA) OF THE ACT WHICH W AS ALSO UPHELD BY THE LEARNED CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US ON THE FOLLOWING GROUND:- 3. FOR THAT ON THE FACTS OF THE CASE, LD.CIT(APPEA LS) WAS WRONG IN NOT CONSIDERING THE FACT AND CONFIRMING PREVIOUS YE ARS EXPENDITURE AMOUNTING TO RS.15,16,519.00, ALTHOUGH THE T.D.S O N THE SAID EXPENDITURE WAS DULY DEPOSITED IN THE PRESENT FINA NCIAL YEAR, MOREOVER IN THE ASSESSMENT YEAR 2008-09 THE SAID EX PENDITURE WAS DISALLOWED U/S. 40(A)(IA) ON NON-DEPOSIT OF TDS, TH EREFORE, THE C.I.T(A) WAS WRONG IN NOT ALLOWING RS.15,16,519.00 WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4.2. THE LEARNED AR PRAYED THAT ONE MORE OPPORTUN ITY BE GIVEN TO THE ASSESSEE FOR PROVING THE FACT OF REMITTANCE OF TDS BEFORE THE LE ARNED AO DURING THE ASST YEAR 2009-10. IN RESPONSE TO THIS, THE LEARNED DR VEH EMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND IN T HE FACTS AND CIRCUMSTANCES OF THIS CASE, WE DEEM IT FIT AND APPROPRIATE , IN THE INTER EST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO , TO DECID E THIS ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO PRODUCE EVIDENCE OF REMITTANCE OF TDS ON THE SUBJECT MENTIONED EXPENDITURE TO THE SATISFACTION OF THE LE ARNED AO. ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL I S WHETHER DISALLOWANCE U/S 14A OF THE ACT TO THE TUNE OF RS. 1,21,00,000/- COULD BE ADDED TO THE BOOK PROFITS U/S 115JB OF THE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN THIS REGARD:- 4. FOR THAT ON THE FACTS OF THE CASE, THE LD.CIT( APPEALS) WAS WRONG IN DISALLOWING U/S. 14A RS.1,21,00,000/- AS N OTIONAL EXPENDITURE U/S. 115JB WHICH IS COMPLETELY ARBITRAR Y, UNJUSTIFIED AND ILLEGAL. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 5 5.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND WE HA VE ALREADY HELD IN GROUND NO.2 HEREINABOVE, THAT THE PROVISIONS OF SECTION 115JB O F THE ACT PER SE WOULD NOT BE APPLICABLE TO THE ASSESSEE BANK FOR THE ASST YEAR 2 009-10 AND HENCE THERE IS NO QUESTION OF MAKING ANY ADDITION TO THE BOOK PROFITS U/S 115JB TOWARDS DISALLOWANCE U/S 14A OF THE ACT. ACCORDINGLY, THE GROUND NO. 4 RAISED BY THE ASSESSEE IS ALLOWED. 6. THE OTHER GROUND IS WITH REGARD TO CHARGING OF INTEREST U/S 234 B AND 234 D OF THE ACT WHICH IS ONLY CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 1916/KOL/2012 FOR THE ASST YEAR 2009-10 IS PARTLY ALLOWED. ITA NO. 113 / KOL/2013 DEPARTMENTAL APPEAL FOR A.Y 2009-10 8. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS WITH REGARD TO ADOPTION OF MUNICIPAL VALUE OF PROPERTY FOR THE PURPOSE OF ASSESSING RENT AL INCOME FROM PROPERTY. 8.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE A SSESSEE BANK DISCLOSED RENTAL INCOME FROM PROPERTY LET OUT AND DECLARED LOSS FROM HOUSE PROPERTY TO THE EXTENT OF RS. 54,502/- . THE ASSESSEE SUBMITTED THE DETAILS OF M UNICIPAL VALUATION OF THE SUBJECT MENTIONED PROPERTIES AT RS. 13,84,554/- AND STATED THAT THE HIGHER OF THE MUNICIPAL VALUATION OR ACTUAL RENT SHOULD BE ADOPTED AS INCOM E FROM HOUSE PROPERTY. THE LEARNED AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS SUBSTITUTED THE SAME BY ADOPTING THE ANNUAL VALUE OF THE PROPERTY BASED ON AVERAGE RENTAL RATES AVAILABLE IN THE WEBSITE WWW.MAGICBRICKS.COM . ACCORDINGLY THE LEARNED AO ARRIVED AT THE RENTAL FIGURE OF RS. 2,61,58,020/- AND INCOME FROM HOUSE P ROPERTY WAS COMPUTED ACCORDINGLY BY GIVING DEDUCTION TOWARDS MUNICIPAL T AXES PAID AND STANDARD DEDUCTION @ 30% ON THE BALANCE. ON FIRST APPEAL, THE LEARNE D CITA ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY DIRECTED THE LEARNE D AO TO ADOPT THE MUNICIPAL ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 6 VALUATION FOR ASSESSMENT OF RENTAL INCOME FROM SUBJ ECT MENTIONED PROPERTIES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUND:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD.CIT(A) ERRED IN LAW IN HOLDING THAT MUNICIPAL VA LUATION FOR RENT IS ACCEPTED TO BE APPROPRIATE REASONABLE AND RELIABLE AS EVIDENCE. 8.2. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR ARGUED THAT THE SUBJECT ME NTIONED PROPERTIES ARE OLD PROPERTIES AND ARE LET OUT TO DIFFERENT TENANTS FOR THE LAST 3 0 YEARS. IN ALL THE EARLIER ASSESSMENT YEARS, THE INCOME DECLARED BY THE ASSESSEE BANK FRO M THE SUBJECT MENTIONED PROPERTIES WERE ACCEPTED BY THE DEPARTMENT AND ASSESSMENTS COM PLETED U/S 143(3) OF THE ACT. HE ARGUED THAT THE ASSESSEE HAD OFFERED THE MUNICIP AL VALUATION OF PROPERTIES WHICH IS HIGHER THAN THE ACTUAL RENT RECEIVED BY THE ASSESSE E. HE ARGUED THAT IN ANY CASE, NO ADDITION TOWARDS RENTAL INCOME COULD BE MADE BY THE LEARNED AO BY ADOPTING THE AVERAGE RENTAL FIGURES TAKEN FROM THE WEBSITE. 8.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LEARNED CITA HAD CORRECTL Y ADOPTED THE MUNICIPAL VALUATION FOR DETERMINATION OF RENTAL INCOME FROM SUBJECT MEN TIONED PROPERTIES. WE ALSO FIND THAT THE MUNICIPAL VALUATION IS HIGHER THAN THE ACT UAL RENT RECEIVED IN THE INSTANT CASE. FOR THE SAKE OF CONVENIENCE, LET US GET INTO THE PR OVISIONS OF SECTION 23 WHICH IS REPRODUCED BELOW:- SECTION 23 ANNUAL VALUE HOW DETERMINED ANNUAL VALUE HOW DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; O R ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 7 (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : THE COMPUTATION OF ANNUAL VALUE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 23 OF THE ACT COULD BE BETTER UNDERSTOOD IN THE FOLLOWING MAN NER:- A = ACTUAL RENT RECEIVED RS. 15,062/- B = FAIR RENT - RS. 2,61,58,020/- C = STANDARD RENT NOT APPLICABLE AND HENCE RS N IL D = MUNICIPAL VALUE - RS. 20,44,361/- ANNUAL VALUE (Z) = HIGHER OF B OR D = 2,61,58,020 /- EXPECTED RENT (Y) = LOWER OF Z OR C = NIL GROSS ANNUAL VALUE = HIGHER OF Y OR A = 15,062/- IN THE INSTANT CASE, THE LEARNED CIT(A) HAD ADOPTED THE MUNICIPAL VALUE OF RS. 20,44,361/- AS THE GROSS ANNUAL VALUE AND PROCEEDED TO COMPUTE THE TAXABLE INCOME FROM HOUSE PROPERTY ON THAT BASIS. AGAINST THIS , THE ASSESSEE IS NOT IN APPEAL BEFORE US. HENCE WE FIND THAT THE REVENUE SHOULD NOT BE A GGRIEVED AT ALL IN THE INSTANT CASE. IN ANY CASE, THE FIGURES OBTAINED FROM THE WEBSITE WWW.MAGICBRICKS.COM CANNOT BE TREATED AS A RELIABLE EVIDENCE. HENCE WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CITA. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE R EVENUE IS DISMISSED. 8. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE EXPENDITURE INCURRED TOWARDS DEBIT CARDS TO THE TUNE OF RS. 69, 23,167/- BE TREATED AS REVENUE EXPENDITURE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 8.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASS ESSEE INCURRED A SUM OF RS. 69,23,167/- TOWARDS ISSUANCE OF DEBIT CARDS TO ITS CUSTOMERS WH ICH ARE VALID FOR A PERIOD OF 5 YEARS. THE LEARNED AO OBSERVED THAT SINCE THE CARDS ARE VA LID FOR 5 YEARS, THE SAME ARE TO BE TREATED AS CAPITAL EXPENDITURE AND ACCORDINGLY DISA LLOWED THE SAME IN THE ASSESSMENT. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 8 ON FIRST APPEAL, THE LEARNED CIT(A) DELETED THE ADD ITION. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD.CIT(A) ERRED IN LAW IN HOLDING THAT THE EXPENDITURE ON ATM CUM DEBIT CARD BE TREATED AS REVENUE EXPENDITURE. 8.2. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDE R OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR ARGUED THAT THE IN CURRENCE OF THE EXPENDITURE TOWARDS ISSUANCE OF DEBIT CARDS NEITHER RESULTS IN ANY CAPI TAL ASSET NOR ANY ENDURING BENEFIT TO THE ASSESSEE IN THE CAPITAL FIELD. THESE DEBIT CA RDS ARE ISSUED FREE OF COST TO THE CUSTOMERS OF THE ASSESSEE BANK. HE FURTHER ARGUED THAT THE SAME HAS BEEN ALLOWED AS A NORMAL BUSINESS EXPENDITURE BY THE DEPARTMENT IN TH E EARLIER YEARS UNDER SCRUTINY ASSESSMENT PROCEEDINGS. 8.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND WE F IND THAT THE ISSUANCE OF ATM CUM DEBIT CARDS TO THE CUSTOMERS OF THE ASSESSEE BANK I S PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE AND THERE IS NO ENDURING BENEFIT TO THE AS SESSEE OUT OF INCURRING THIS EXPENDITURE. THE LEARNED CIT(A) HAD OBSERVED THA T IN THE PAST THE DEPARTMENT HAD BEEN ACCEPTING THIS EXPENDITURE AS A REVENUE EXPEND ITURE AND WE FIND NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UN DER APPEAL WITH REGARD TO THE IMPUGNED ISSUE WARRANTING THE DEPARTMENT TO TAKE A DIFFERENT STAND. THIS FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. THOUGH THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, IN OUR OPINION THE PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A GO BYE. RELIANCE IN THIS REGARD IS PLA CED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RADHASAOMI SATSANG REPORT ED IN 193 ITR 321(SC) . HENCE WE FIND NO INFIRMITY IN THE ORDER OF THE LEAR NED CIT(A). ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 9 9. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE ACT COULD BE MADE FOR VIOLATION OF PROVISIONS OF SECTION 194A OF THE ACT IN RESPECT OF INTEREST ON MATURED DEPOSITS TO T HE TUNE OF RS. 21,66,00,000/-. 9.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LEA RNED AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AD PROVIDED FOR INTEREST ON MATURED TERM DEPOSITS TO THE TUNE OF RS. 21,66,00,0 00/- WITHOUT DEDUCTION OF TAX AT SOURCE. ACCORDING TO THE ASSESSEE, THE SAID INTERES T DOES NOT FALL UNDER THE AMBIT OF SECTION 194A OF THE ACT AS THE TERM DEPOSITS ON MAT URITY BECOMES PAYABLE TO THE CUSTOMER ON DEMAND AND HENCE IT GETS CONVERTED INTO A DEMAND DEPOSIT AND ATTRACTS INTEREST ONLY AT SAVINGS BANK INTEREST RATE AS PER RBI GUIDELINES. THE ASSESSEE ARGUED THAT ADMITTEDLY, THE PROVISIONS OF SECTION 194A OF THE ACT ARE APPLICABLE ONLY IN RESPECT OF INTEREST ON TERM DEPOSITS AND NOT IN RES PECT OF DEMAND DEPOSITS. THE LEARNED AO DID NOT AGREE WITH THIS PROPOSITION AND SOUGHT TO DISALLOW THE INTEREST ON MATURED TERM DEPOSITS TO THE TUNE OF RS. 21,66,00,0 00/- FOR VIOLATION OF TDS PROVISIONS AND MADE DISALLOWANCE U/S 40(A)(IA) OF T HE ACT. ON FIRST APPEAL, THE LEARNED CIT(A) APPRECIATED THE CONTENTIONS OF THE A SSESSEE AND DELETED THE DISALLOWANCE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD.CIT(A) ERRED IN LAW IN HOLDING THAT PROVISIONS OF SEC 194A RWS 40(A)(IA) IS NOT APPLICABLE ON PAYMENT OF INTEREST ON MATURED TE RM DEPOSITS. 9.2. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDE R OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR REITERATED THE ARGUMENTS AD VANCED BY THE ASSESSEE BEFORE THE LEARNED AO. IN ADDITION TO THAT, HE ARGUED THAT NO DISALLOWANCE ON THIS ACCOUNT WAS MADE BY THE DEPARTMENT IN THE EARLIER YEARS. IN SU PPORT OF THIS CONTENTION, HE PLACED THE COPY OF THE LEARNED CIT(A) ORDER FOR THE ASST Y EAR 2007-08. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 10 9.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIND THAT THE PROVISIONS OF SECTION 194A(3)(VII) OF THE ACT MAKES IT CLEAR THAT THE PRO VISIONS OF SUB-SECTION (1) OF SECTION 194A SHALL NOT APPLY TO - SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSIT S (OTHER THAN TIME DEPOSITS MADE ON OR AFTER 1.7.1995) WITH A BANKING COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 APPLIES (INCLUDING ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT). 9.3.1. HENCE IT IS VERY CLEAR THAT THE PROVISIONS OF SECTION 194A OF THE ACT DOES NOT APPLY TO DEPOSITS OTHER THAN TIME DEPOSITS ON OR AF TER 1.7.1995. NOW THE SHORT POINT THAT ARISES FOR OUR CONSIDERATION IS AS TO WHAT WOU LD BE THE NATURE OF DEPOSIT IN RESPECT OF MATURED TERM DEPOSITS . IN THIS REGARD, IT WOUL D BE PERTINENT TO LOOK INTO THE RELEVANT GUIDELINES ISSUED BY RBI WHICH ARE AS BELO W:- MASTER CIRCULAR ON CASH RESERVE RATIO (CRR) AND STA TUTORY LIQUID RATIO (SLR) VIDE REFERENCE IN DBOD.NO. RET.BC.22/12.01.001/2012-13 D ATED 2.7.2012 1.5. DEMAND LIABILITIES DEMAND LIABILITIES OF A BANK ARE LIABILITIES WHICH ARE PAYABLE ON DEMAND. THESE INCLUDE CURRENT DEPOSITS, DEMAND LIABILITIES PORTION OF SAVINGS BANK DEPOSITS, MARGINS HELD AGAINST LETTERS OF CREDIT / GUARANTEES , BALANCES IN OVERDUE FIXED DEPOSITS , CASH CERTIFICATES AND CUMULATIVE / RECURRING DEPOSITS, OUTSTANDING TELEGRAPHIC TRANSFERS (TTS), MAIL TRANSFERS (MTS), DEMAND DRAFTS (DDS), UNCLAIMED DEPOSITS, CREDIT BAL ANCES IN THE CASH CREDIT ACCOUNT AND DEPOSITS HELD AS SECURITY FOR AD VANCES WHICH ARE PAYABLE ON DEMAND. MONEY AT CALL AND SHORT NOTICE FROM OUTSIDE THE BANKING SYSTEM SHOULD BE SHOWN AGAINST LIABILITY TO OTHERS. 9.3.2. FROM THE ABOVE MEANING AS CLARIFIED IN RBI GUIDELINES, IT COULD BE SAFELY INFERRED THAT THE ONCE A TERM DEPOSIT GETS MATURED, IF THE CUSTOMER DOES NOT APPROACH THE BANK FOR EITHER WITHDRAWING OR RENEWING THE MAT URED TERM DEPOSIT, THE BANK CANNOT SUFFER INTEREST APPLICABLE TO THE TERM DEPOSITS FOR THE FAULTS COMMITTED BY THE CUSTOMER ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 11 / DEPOSITOR. INSTEAD THE BANKS ARE INSTRUCTED BY R BI TO PAY INTEREST AT THE RATE APPLICABLE TO SAVINGS BANK DEPOSITS WHICH IS MUCH L ESS AS COMPARED TO THE TERM DEPOSIT INTEREST RATE. MOREOVER, THE TERM DEPOSITS ON MATURITY BECOMES REPAYABLE BY THE ASSESSEE ON DEMAND AND GETS AUTOMATICALLY CONVE RTED INTO A DEMAND DEPOSIT. THE PROVISIONS OF SECTION 194A (3)(VII) ARE VERY CLEAR THAT THE PROVISIONS OF SECTION 194A(1) SHALL NOT APPLY TO DEMAND DEPOSITS AND HENC E THE ASSESSEE BANK IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON INTEREST PROVIDED ON THO SE DEMAND DEPOSITS. HENCE IN THESE CIRCUMSTANCES, WE FIND THAT THE LEARNED CITA HAD RI GHTLY GRANTED RELIEF TO THE ASSESSEE BANK IN THIS REGARD. ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 10. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE RULES CO ULD BE MADE APPLICABLE TO THE ASSESSEE BANK IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 10.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE A SSESSEE BANK WAS IN RECEIPT OF EXEMPTED DIVIDEND INCOME OF RS. 3,54,45,760/-. THE LEARNED AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) AND (III) OF THE RULES AND MADE DISALLOWANCE OF RS. 13,10,65,100/- AND RS. 1,21,01, 500/- RESPECTIVELY. ON FIRST APPEAL, THE LEARNED CIT(A) HELD THAT THE ASSESSEE HAS GOT S UFFICIENT OWN FUNDS TO THE EXTENT OF RS. 4532.27 CRORES AS ON 31.3.2009 TO MAKE INVESTME NT OF RS. 242.03 CRORES AND HENCE NO PART OF BORROWED FUNDS WERE UTILIZED FOR MAKING INVESTMENTS. ACCORDINGLY, THE PROVISIONS OF RULE 8D(2)(II) CANNOT BE MADE APPLICA BLE AND DELETED THE DISALLOWANCE U/S 14A TO THE TUNE OF RS. 13,10,65,100/-. HOWEVE R, HE UPHELD THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES @ 0.5% OF INVEST MENTS AMOUNTING TO RS. 1,21,01,500/-. AGGRIEVED, THE REVENUE IS IN APPE AL BEFORE US ON THE FOLLOWING GROUND:- 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD.CIT(A) ERRED IN LAW IN HOLDING THAT SECTION 14A RULE 8D IS NOT APPLICABLE IN RESPECT OF INTEREST EXPENSES MADE BY THE ASSESSEE. ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 12 10.2. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORD ER OF THE LEARNED AO. IN RESPONSE TO THIS, THE LEARNED AR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED CIT(A). 10.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIN D THAT THE ASSESSEE BANK HAS GOT SUFFICIENT OWN FUNDS TO THE EXTENT OF RS. 4532.27 C RORES AS ON 31.3.2009 WHICH IS VERY MUCH AVAILABLE FOR MAKING INVESTMENT OF RS. 242.03 CRORES AND HENCE IT CAN SAFELY BE PRESUMED THAT NO PART OF BORROWED FUNDS WERE UTILIZ ED FOR MAKING INVESTMENTS YIELDING TAX FREE INCOME. MOREOVER, THE LEARNED AO HAD NOT BROUGHT ON RECORD ANY NEXUS BETWEEN BORROWED FUNDS AND AMOUNT INVESTED BY ASSESSEE. THERE ARE PLETHORA OF JUDGEMENTS IN FAVOUR OF THE ASSESSEE ON THE IMPU GNED ISSUE. HENCE THE ADDITION DELETED BY THE LEARNED CIT(A) IN RESPECT OF RS. 13, 10,65,100/- BY INVOKING RULE 8D(2)(II) OF THE RULES DOES NOT REQUIRE ANY INTERFE RENCE. ACCORDINGLY, THE GROUND NO. 4 RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 113/KOL/2013 IS DISMISSED. 12. TO SUM UP, THE APPEAL OF THE ASSESSEE IN ITA NO. 1916/KOL/2012 FOR THE ASST YEAR 2009-10 IS PARTLY ALLOWED AND APPEAL OF THE RE VENUE IN ITA NO. 113/KOL/2013 IS DISMISSED. ORDER PRONOUNCED ON 30 .12.2015 SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 30 /12/2015 ITA NOS.1916/K/12 & 113/K/13-C-AM UNITED BANK OF INDIA 13 1. THE APPELLANT: UNITED BANK OF INDIA 16 OLD COUR T HOUSE ST., KOL-1 2 THE RESPONDENT-DCIT,CIR-6 AAYKAR BHAVAN, P-7 C HOWRINGHEE SQ, KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS COPY OF THE ORDER FORWARDED TO: