Maratha Co-op. Bank Ltd., Belgaum V. Deputy Commissioner of Income Tax Circle-1, Belgaum

ITA 195/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1428 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Depreciation; Cost of acquisition; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 195 /PNJ/201 5 (ASST. YEAR : 20 1 0 - 1 1 ) MARATHA COOPERATIVE BANK LTD., 1477, BASAWAN GALLI, BELGAUM. VS. D CIT, CIRCLE - 1, BELGAUM PAN NO. AABAM 0730 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY D. SHIRGUP P E C A DEPARTMENT BY : SHRI K.M. MAHESH - D R DATE OF HEARING : 12 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 1 2 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , BELA GAVI , DATED 0 4 /0 3 /201 5 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER DISALLOWING 1,54,583/ - DEBITED TOWARDS GOVERNMENT SECURITIES PREMIUM. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED 1,54,583/ - TOWARDS GOVERNMENT SECURITIES PREMIUM . ACCORDING TO THE ASSESSING OFFICER, THIS WAS A CAPITAL EXPENDITURE AND ACCORDINGLY HE DISALLOWED THE SAME AND ADDED TO THE INCOME OF THE ASSESSEE. 2 ITA NO. 195 /PNJ/201 5 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO PERUSED THE ASSESSMENT ORDER. THE ASSESSEE HAD DEBITED RS.1,54,583/ - TOWARDS GOVERNMENT SECURITIES PREMIUM WHICH THE A.O HAD DISALLOWED AS SAME BEING CAPITA L IN NATURE. THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS ARGUED THAT AS PER PARAGRAPH 2(VII) OF THE INSTRUCTION NO.17 OF 2008 DATED 26 - 11 - 2008 ISSUED BY THE CBDT, THE DEDUCTION CLAIMED BY THE APPELLANT SHOULD BE ALLOWED AS ADMISSIBLE DEDUCTION. THE RELEVANT PART OF THE AFORESAID INSTRUCTION READS AS FOLLOWS: AS PER RB! GUIDELINES DATED 16TH OCTOBER,2000 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING(HFT) AND A VAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURI TY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIATION , IF ANY, IS REQUIRED TO BE PRO VIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI M AY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS. IT IS CLAIMED BY THE APPELLANT THAT THE GOVERNMENT SECURITIES IN QUESTION ARE HELD BY THE APPELLANT AS HTM CATEGORY AS PRESCRIBED BY THE RBI. THESE ARE NOT HELD AS HFT OR AFS. AS PER THE CBDT GUIDELINES AS STATED ABOVE, IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS AND THEREFORE, THE CLAIM OF THE APPELLANT IS NOT ADMISSIBLE. IT IS CLEAR THAT NEITHER DURING THE ASSESSMENT PROCEEDINGS AND NOR DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS BEEN ABLE TO PROVE THAT THE SECURITIES HELD BY IT ARE IN THE NATURE OF HTM AND THEREFORE, THE CLAIM O F THE APPELLANT IS DISMISSED. THE A.O IS CORRECT IN DISALLOWING AN AMOUNT OF RS. 1 ,54,583/ - AND THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FILED BEFORE US A COPY OF THE ORDER OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SREE 3 ITA NO. 195 /PNJ/201 5 SUBRAMANYESWARA COOPERATIVE BANK LTD. VS. ACIT IN I.T.A.NO. 488/BANG/2011 PASSED IN ASSESSMENT YEAR 2008 - 09 DATED 06/06/2012 AND SUBMITTED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE TRIBUNAL. 6 . ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7 . WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE U NDISPUTED FACT OF THE CASE IS THAT THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR P REMIUM OF GOVERNMENT SECURITIES OF 1,54,583/ - DEBITED IN THE PROFIT & LOSS ACCOUNT BY THE ASSESSEE BY HOLDING IT TO BE A CAPITAL EXPENDITURE. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ACTION OF THE ASSESS ING OFFICER. WE FIND THAT THE C OORDINATE BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF SREE SUBRAMANYESWARA COOPERATIVE BANK LTD. (SUPRA) HAS DECIDED A SIMILAR ISSUE AND HELD AS UNDER: - 6. WE HAVE ALSO HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE FACTS AND MATERIALS ON RECORD INCLUDING THE CONTENTS OF THE PAPER BOOK AND THE DECISION OF THE TRIBUNAL. WE FIND THAT THE DECISION DATED 11/05/2012 IN THE CASE OF M. VISWESWARAYA CO - OPERATIV E BANK LTD., (SUPRA) IS EXACTLY ON THE VERY SAME ISSUE AND IT COVERS THE POINT AT ISSUE IN THE PRESENT CASE. ONE OF THE MEMBERS OF THIS BENCH IS ALSO A PARTY TO THE ORDER CITED SUPRA. IN THE CASE OF M.VISWESWARAYA COOPERATIVE BANK LTD., (SUPRA), THE TRIBU NAL HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: 08. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FACTS AND MATERIALS ON RECORD. WE HAVE ALSO CONSIDERED THE FINDINGS OF THE VARIOUS BENCHES OF THE TRIBUNAL, AS UNDER: (I) CATHOLIC SYRAIN BANK LTD V ACIT (2010) 38 SOT 553 (COCH): 4 ITA NO. 195 /PNJ/201 5 AN IDENTICAL ISSUE TO THAT O F THE SUBJECT MATTER UNDER CONSIC2RATION HAD ARISEN BEFORE THE COCHIN BENCH. AFTER ANALYZING THE ISSUE IN DEPTH, THE BENCH HAS OBSERVED THAT WITH REGARD TO AMORTIZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES, I T WAS CL ARIFIED THAT THIS WAS MADE AS PER THE PRUDENTIAL NORMS OF THE RBI, FOLLOWING THE TRIBUNAL DECISION IN THE ASSESSEE OWN CASE AND CONSIDERING THAT THE ASSESSEE BANK IS FOLLOWING CONSI STENT AND REGULAR METHOD OF ACCOUNTING SYSTEM, THERE IS NO JUSTIFICATION IN INTERFERING WITH THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) ON TH IS ISSUE OF AMORTIZATION O F PREMIUM ON GOVERNMENT SECURITIES. UNITED COMMERCIAL BANK V. CIT (1999) 156 C TR (SC) 380; (1999) 240 JTR 355 (SC) AND SOUTH INDIAN BANK LTD., (I T A NO. 126/COC H /2004, DATED SEPT, 2005 FOLLOWED . (II) THE KHANAPUR CO - OP BANK LTD. V ITO ITA NO. 141/PNJ/2011, DATED 08/09/2011: THE HON'BLE BENCH OF PANAJI TRIBUNAL HAD RECORDED ITS FINDINGS THAT 6. LIKEWISE, THE PREMIUM AMORTIZED AT RS. 1,78,098/ - IS CLAIMED TO BE RESPECT OF SECURITIES HELD UNDER THE CATEGORY HELD TO MATURITY. THE ASSESSING OFFICER HAS TAKEN THEM AS LONG TERM INVESTMENTS. IN OTHER WORDS, HE HAS ACCEPTED THE ASSESSEES CLAIM THAT THE SECURITIES ARE HELD TO MATURITY . THAT BEI NG SO AND HAVING REGARD TO THE CBDT INSTRUCTION NO.17 O F 2008 DATED.26.1L2008 AS REPRODUCED HEREIN ABOVE, THE PREMIUM PAID ON SUCH GOVERNMENT SECURITIE S IS REQUIRED TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. (III) IN THE CASE OF CORPORATION BANK V ACIT, MLORE IN ITA NO. 112/BANG/2008 (BANG) FOR THE ASSESSMENT YEAR 2004 - 05 , THE EARLIER BENCH HAD ALSO HELD A SIMILAR VIEW. I N THE LIGHT OF THE ABOVE DISCUSSION AND THE CASE LAWS DISCUSSED SUPRA, TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND MATERIALS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM THIS DEDUCTION AND HENCE WE A L LOW THE GROUNDS OF THE ASSESSEE RELATING TO THIS ISSUE. HENCE, FOLLOWING THE DECISION OF TH I S TRIBUNAL C I TED SUPRA, WE ARE ALLOWING THE ASSESSEES APPEAL N THIS CASE ALSO. 8 . T H E DEPARTMENTAL REPRESENTATIVE C O U L D N O T S H O W A N Y G O O D R E A S O N T O N O T T O F O L L O W T H E A B O V E Q U O T E D D E C I S I O N O F T H E C O O R D I N A T E B A N G A L O R E B E N C H O F T H E T R I B U N A L . N O M A T E R I A L W A S A L S O B R O U G H T O N R E C O R D T O S H O W 5 ITA NO. 195 /PNJ/201 5 T H A T T H E A B O V E Q U O T E D D E C I S I O N O F T H E T R I B U N A L W A S V A R I E D I N A P P E A L B Y A N Y H I G H E R A U T H O R I T Y . THEREFORE , F ACTS BEING IDENTICAL RESPECTFULLY FOLLOWING THE PRECEDENT, WE ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 1 2 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 12 TH AUGUST , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 6 ITA NO. 195 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 2 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 3 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 13 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 13 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 13 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 12 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 3 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER