Bhingar Urban Co.op. Bank Ltd., V. Income-tax Officer,

ITA 2027/PUN/2013

• Counselvise Citation: 202724514 RSA 2013
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS.2027, 2028 & 2029/PN/2013 (ASSESSMENT YEARS : 2008-09, 2009-10 & 2010-11) BHINGAR URBAN CO-OP BANK LTD., BHINGAR, AHMEDNAGAR 414001 PAN: AAAAB1241M . APPELLANT VS. ITO, WARD-1, AHMEDNAGAR . RESPONDENT ASSESSEE BY : SHRI NARESH KUMAR DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 14-10-2014 DATE OF PRONOUNCEMENT : 20-10-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEALS BY THE ASSESSEE IS DIRECTED A GAINST CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)-IT/TP, PUNE DATED 30.08.2013 WHICH, IN TURN, HAVE ARISEN FROM D IFFERENT ORDERS PASSED BY THE RESPECTIVE ASSESSING OFFICERS U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEARS 2008-09, 2009-10 & 2010- 11. 2. IN ITA NO.2029/PN/2013, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING TO RS.31,734/- ON ACCOUNT OF NOMINAL MEMBERSHIP FEES AND SHARE TRANSF ER FEES WITHOUT CONSIDERING FOLLOWING FACTORS: A. THAT THE APPELLANT BANK CANNOT TRANSACT WITH A P ERSON UNLESS HE BECOMES A MEMBER. B. THE RECEIPT THOUGH NOT REFUNDABLE IS A VERY NECE SSITY OF THE BUSINESS TO COMMENCE WITH SO CALLED NEW MEMBER. THE SAID BEING ONE TIME AND NON TRADING RECEIPT, THE SAME HA S TO BE TREATED AS CAPITAL RECEIPT. ITA NOS.2027 TO 2029/PN/2013 BHINGAR URBAN CO-OP BANK LTD C. THE SHARE TRANSFER FEE IS COLLECTED FOR TRANSFER RING THE SHARE/S OF MEMBER TO SOME OTHER PERSON. IT IS COLLECTED SO AS TO COMPLY WITH PROVISIONS OF THE MAHARASHTRA CO-OPERAT IVE ACT AND HENCE, CANNOT BE TERMED AS AN OPERATIONAL/REVEN UE RECEIPT. 2. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING TO RS.90,670/- ON ACCOUNT OF UNCLAIMED DIVIDEND TRANSFERRED TO RESERV E ON THE GROUND THAT TRANSFER FROM 'UNCLAIMED DIVIDEND ACCOUNT TO G ENERAL RESERVE ACCOUNT IS CESSATION OF LIABILITY WITHOUT CONSIDERI NG FOLLOWING FACTORS: A. THAT THE APPELLANT BANK PAYS DIVIDEND TO MEMBERS FROM PROFITS AFTER TAX. B. THAT AS PER THE PROVISIONS OF MAHARASHTRA CO-OPE RATIVE ACT, BANKS ARE REQUIRED TO TRANSFER UNCLAIMED DIVIDEND T O RESERVE FUND AFTER A PERIOD OF THREE YEARS. C. THAT DIVIDEND IS APPROPRIATION OF PROFIT AND TRE ATING IT AS REVENUE WOULD AMOUNT TO DOUBLE TAXATION. D. DIVIDEND DECLARED IN EARLIER YEAR WAS NOT ALLOWE D AS A DEDUCTION WHILE COMPUTING THE TOTAL INCOME OF THE E ARLIER YEARS AND THEREFORE PROVISIONS OF SECTION 41 ARE NO T APPLICABLE. 3. THE LEARNED CIT (A) HAS FURTHER ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.12,314/- ON ACCOUNT O F PENAL INTEREST. 4. THE LEARNED CIT (A) HAS FURTHER ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.22,28,693/- ON ACCOUN T OF OTHER LIABILITIES WITHOUT APPRECIATING THE SUBMISSIONS MADE BY THE AP PELLANT AND WITHOUT CONSIDERING THE FOLLOWING FACTORS : A. THE LIABILITIES OUTSTANDING IN THE BALANCE SHEET ARE THE AMOUNTS COLLECTED BY THE APPELLANT BANK IN LIEU OF CERTAIN COMPLIANCES PENDING FROM THE BORROWER LIKE NON SUBM ISSION OF 7/12 EXTRACTS, RC BOOKS, ETC OR TOWARDS DEPOSIT FOR GOLD AUCTIONS OR CHEQUE BOOKS, LAWAD, ETC. B. THE APPELLANT BANKS OWES THIS SUM TOWARDS THESE BORROWERS OR DEPOSITORS, AS THE CASE MAY BE. HAD THE SUM BEEN FORFEITED BY BANK, THE SAID COULD HAVE BEEN CONSIDE RED AS 'EXTINGUISHMENT OF LIABILITY'. HOWEVER, THE BANK HA S CREDITED MOST OF THE AMOUNT TO THE RESPECTIVE ACCOUNT HOLDER S IN THE SUBSEQUENT YEARS. C. THAT THE AMOUNT COLLECTED BY THE APPELLANT BANK WHI CH IS REPAYABLE AFTER A CERTAIN EVENT CANNOT BE CONSTRUED AS INCOME . ITA NOS.2027 TO 2029/PN/2013 BHINGAR URBAN CO-OP BANK LTD 3. AT THE TIME OF HEARING, THE LEARNED AUTHORIZED R EPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS GROUND OF APPEAL NOS.1 AND 3 RELATING TO ADDITION OF RS.31,73 4/- AND RS.12,314/- ON ACCOUNT OF NOMINAL MEMBERSHIP FEE AND ON ACCOUNT OF PENAL INTEREST, RESPECTIVELY. ACCORDINGLY, GROUND OF APPEAL NOS.1 AND 3 ARE DISMISSED AS NOT PRESSED. 4. THE GROUND OF APPEAL NO.2 RELATES TO AN ADDITION OF RS.90,670/- MADE BY THE LOWER AUTHORITIES ON ACCOUNT OF UNCLAIMED DI VIDEND TRANSFERRED TO RESERVE ACCOUNT. THE ASSESSING OFFICER AS WELL AS THE CIT(A) WERE OF THE VIEW THAT UNCLAIMED DIVIDEND WERE TRANSFERRED TO TH E GENERAL RESERVE ACCOUNT WHICH SHOWED THAT SUCH LIABILITY CEASED TO EXIST AND THEREFORE, THE SAME WAS LIABLE TO BE TAXED. 5. IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES HAVE MIS-DIRECTED THEMSELVES IN TAXING THE UNCLAIMED DIVIDEND AS AN I NCOME. OSTENSIBLY, DIVIDEND DISTRIBUTION BY THE ASSESSEE BANK IS AN AP PORTIONED FROM ITS TAX PAID PROFITS AND DOES NOT A CHARGE AGAINST THE PROFITS F OR THE PURPOSES OF COMPUTING TAXABLE INCOME. ONCE DIVIDEND DECLARED BY THE ASSE SSEE BANK IS NOT A CHARGE AGAINST THE PROFITS IN ORDER TO COMPUTE TAXA BLE INCOME, ANY UNCLAIMED DIVIDEND THEREOF, CANNOT BE CHARGED AS AN INCOME UN DER THE ACT. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. THUS, ON GROUND OF APPEAL N O.2, THE ASSESSEE SUCCEEDS. 6. IN SO FAR AS THE GROUND OF APPEAL NO.4 IS CONCER NED, IT RELATES TO AN ADDITION OF RS.22,28,693/- ON ACCOUNT OF OTHER LIAB ILITIES. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT IN THE BALANCE SHEET, THE ASSESSEE HAS SHOWN OUTSTANDING LIABILITY OF RS.22,2 8,693/- UNDER THE HEAD ITA NOS.2027 TO 2029/PN/2013 BHINGAR URBAN CO-OP BANK LTD OTHER LIABILITIES. ON BEING TO EXPLAIN THE NATUR E, ASSESSEE SUBMITTED THAT THE SAME REFLECTED:- I. DEPOSITS RECEIVED FROM THE CUSTOMERS TOWARDS ISS UE OF CHEQUE BOOKS THAT SHALL BE RETURN BACK TO THE ACCOUNT HOLD ER ON CLOSURE OF ACCOUNT; II. AUCTION MONEY RECEIVED TOWARDS GOLD AUCTION FUN D TO BE RETURNED TO THE BORROWERS; III. SECURITY MONEY DEPOSIT RECEIVED TILL ALL THE PRESCRIBED DOCUMENTS ARE NOT RECEIVED FROM THE BORROWERS, ETC. IV. ADVANCE MONEY RECEIVED AGAINST HYPOTHECATION O F LOAN ACCOUNT, WHICH IS REVERSED AT THE TIME OF RECOVERY OR THE CL OSURE OF THE ACCOUNT OF BORROWER; AND V. CERTAIN MISCELLANEOUS OUTSTANDING PAYMENTS LIKE CREDITORS FOR PRINTING, COURT FEES, ETC., 7. IN SUM AND SUBSTANCE, THE PLEA OF THE ASSESSEE W AS THAT THE AFORESAID AMOUNTS ARE IN THE NATURE OF OUTSTANDING DUES OR TH E DEPOSITS OF CUSTOMERS WHICH HAVE TO BE RETURNED SUBSEQUENTLY. THE ASSESS ING OFFICER HOWEVER, HELD THAT THE AMOUNTS RECEIVED ARE IN THE NATURE OF INCO ME. THE RELEVANT DISCUSSION IS CONTAINED IN 5.1.3 OF THE ORDER, WHIC H READS AS UNDER: 5.1.3. THE REPLY OF THE ASSESSEE HAS BEEN CONSID ERED AND IT IS CLEAR THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ARE IN TH E NATURE OF INCOME WHICH HAS NOT BEEN RECOGNIZED BY THE ASSESSEE TILL DATE. THE AMOUNTS ARE RECEIVED IN RESPECT OF THE ISSUE OF CHEQUE BOOK S. THE SUSPENSE ALSO INCLUDES THE AMOUNTS LYING WITH THE BANK AFTER AUCTION OF THE GOLD OR OTHER ASSETS OF THE DEFAULTING CLIENTS. THIS AM OUNT IS LYING WITH THE BANK FOR A LONG PERIOD OF TIME AND THERE IS NO CLAI M FROM ANY PARTY. FROM THE DETAILS FILED IT IS ALSO SEEN THAT THE AMO UNTS ARE RANGING FROM RS.100/- TO RS.1000/- IN ALMOST ALL CASES EXCEPT IN ONE OR TWO CASES. AS FAR AS THE BANK IS CONCERNED ALL LIABILITY TO IT S CLIENTS IN RESPECT OF THIS AMOUNT HAS BEEN FINISHED AFTER THE AUCTION OF THE P ROPERTY PLEDGED WITH THE BANK. THERE IS DEFINITELY AN EXTINGUISHMENT OF THE LIABILITY FOR THE BANK AND THE SAME THEREFORE IS INCOME LYING IN THE HANDS OF THE ASSESSEE. THE AMOUNTS INSISTED BY THE BANK FOR ISS UE OF CHEQUE BOOKS CLEARLY IS AN INCOME OF THE BANK FOR THE YEAR. IN VIEW OF THESE FACTS, RS.22,28,693/- IS THEREFORE ADDED TO THE INCOME OF THE ASSESSEE. 8. THE CIT(A) ALSO CONCURRED WITH THE ASSESSING OFF ICER AND THUS, THE ASSESSEE IS IN FURTHER APPEAL. ITA NOS.2027 TO 2029/PN/2013 BHINGAR URBAN CO-OP BANK LTD 9. AFTER HEARING RIVAL SUBMISSIONS, IN OUR CONSIDER ED OPINIONED, THE STAND OF THE REVENUE IS UNSUSTAINABLE. IT IS ABUNDANTLY CLEARLY THAT ASSESSEE HAD REFLECTED THE IMPUGNED SUM AS A LIABILITY IN THE BA LANCE SHEET. IF AT ALL, THE ASSESSING OFFICER WAS TO TREAT THE SAME AS INCOME I N THE HANDS OF THE ASSESSEE, THE ONUS WAS ON HIM TO EXPLAIN AS TO HOW THE AMOUNTS ARE TO BE TAXED AS INCOMES. THE ASSESSING OFFICER DOES NOT J USTIFY AS TO WHY HE HAS TREATED THE IMPUGNED SUM AS INCOME TO BE TAXED UNDE R THE ACT. THERE IS NOTHING TO SUPPORT THE ASSERTIONS OF THE ASSESSING OFFICER THAT THE BANK HAS CEASED TO BE LIABLE TO RETURN THE IMPUGNED SUMS. T HEREFORE, WE ARE UNABLE TO UPHOLD THE STAND OF THE INCOME TAX AUTHORITIES ON T HIS ASPECT AND ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASS ESSING OFFICER TO DELETE THE IMPUGNED ADDITION. THUS, ON THIS GROUND ALSO, THE ASSESSEE SUCCEEDS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A .Y. 2010-11 IS PARTLY ALLOWED. 11. IN SO FAR AS A.YS 2008-09 AND 2009-10 ARE CONCE RNED, THE GROUNDS OF APPEAL RELATING TO ADDITIONS ON ACCOUNT OF NOMINAL MEMBERSHIP FEE AND PENAL INTEREST HAVE NOT BEEN PRESSED AT THE TIME OF HEARI NG AS WAS THE CASE IN ASSESSMENT YEAR 2010-11 IN THE EARLIER PARAS. THER EFORE, GROUND OF APPEAL NOS.1 AND 3 IN THE APPEALS FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 ARE DISMISSED AS NOT PRESSED. 12. GROUND OF APPEAL NO.2 IN THE APPEALS FOR ASSESS MENT YEARS 2008-09 AND 2009-10 RELATE TO ADDITIONS OF RS.1,00,992/- AN D RS.1,33,073/- ON ACCOUNT OF UNCLAIMED DIVIDENDS. THE SAID ISSUE IS SIMILAR TO GROUND OF APPEAL NO.2 DECIDED IN THE APPEAL FOR ASSESSMENT YEAR 2010-11. FOLLOWING OUR DECISION ON GROUND OF APPEAL NO.2 IN THE APPEAL FOR ASSESSME NT YEAR 2010-11, THE SAID GROUND IS ALSO ALLOWED. ITA NOS.2027 TO 2029/PN/2013 BHINGAR URBAN CO-OP BANK LTD 13. RESULTANTLY, THE CAPTIONED APPEALS OF THE ASSES SEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE, DATED: 20 TH OCTOBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE 4) THE CIT-IT/TP, PUNE 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE