Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 3104 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 6 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
27-07-2015
Assessment Year
2008-2009
Appeal Filed On
28-03-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 8613/MUM/2010 (ASSESSMENT YEAR : 2007-08) ITA NO.2056/MUM/2012 (ASSESSMENT YEAR : 2008-09) ITA NO.6079/MUM/2012 (ASSESSMENT YEAR : 2009-10) THE ACIT, CIRCLE-3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W), 421301, DIST.THANE ... APPELLANT VS. M/S. THE KALYAN JANATA SAHAKARI BANK LTD. NIHARIKA, NEAR ICE FACTORY, OPP-RAILWAY STATION, KALYAN (W) 421 301 .... RESPONDENT REVENUE BY : SHRI S.P.WALIMBE ASSESSEE BY : SHRI RAVI K. MULCHANDANI DATE OF HEARING : 27/07/2015 DATE OF PRONOUNCEMENT : 30/09/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED ARE THREE APPEALS BY THE REVENUE RELA TING TO ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. SIN CE THE APPEALS RELATE TO THE SAME ASSESSEE AND INVOLVE CERTAIN COM MON ISSUES, THEY 2 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLID ATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVI TY. 2. FIRST, WE MAY TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009-2010, WHICH IS DIRECTED AGAINST ORDER PAS SED BY CIT(A)-1, THANE DATED 11/07/2011, WHICH IN TURN HAS ARISEN OU T OF THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). 3. IN THIS APPEAL, THE FIRST ISSUE RELATES TO THE D EDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON PURCHASE OF SECURITIES, CLASSIFIED UNDER THE CATEGORY HELD TO MATURITY ( IN SHORT HTM). IN THIS CONTEXT, THE RELEVANT FACTS ARE T HAT THE RESPONDENT ASSESSEE IS A CO-OPERATIVE SOCIETY, WHICH IS INTER -ALIA, ENGAGED IN THE BUSINESS OF BANKING AS DEFINED UNDER SECTION-5 OF T HE BANKING REGULATION ACT, 1949. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD DEBITED AN AMOUNT OF RS.6,37,20,000/- IN ITS PROFIT & LOSS ACCOUNT UNDER THE HEAD AMORTIZATION OF PREMIUM ON INVESTME NT. ON BEING ASKED TO EXPLAIN THE AFORESAID, THE ASSESSEE EXPLAI NED THAT THE IMPUGNED SUM REPRESENTED THE AMORTIZED PREMIUM PAID ON PURCHASE OF GOVERNMENT SECURITIES, WHICH HAVE BEEN CLASSIFI ED UNDER THE CATEGORY HTM. EXPLAINING FURTHER, ASSESSEE CONTE NDED THAT AS PER CIRCULAR AND DIRECTIONS OF RESERVE BANK OF INDIA I SSUED FROM TIME TO TIME, THE BANKS HAVE TO CLASSIFY THEIR PORTFOLIO IN THREE CATEGORIES I.E. AVAILABLE FOR SALE (AFS), HELD TO MATURITY (HTM) AN D HELD FOR TRADING (HFT). FURTHER, AS PER THE PRUDENTIAL NORMS FOR C LASSIFICATION, VALUATION & OPERATION OF INVESTMENT PORTFOLIO BY BANK, THE RB I PRESCRIBED THAT THE INVESTMENT CLASSIFIED UNDER THE CATEGORY HELD TO MATURITY NEED 3 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. NOT BE MARKED TO MARKET BUT ARE REQUIRED TO BE CARR IED AT ACQUISITION COST, AND IN CASE THE SAME IS MORE THAN THE FACE VA LUE, THE PREMIUM PAID OVER AND ABOVE THE FACE VALUE OF THE SECURITIE S SHALL BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. ACCORDINGLY , IT WAS SOUGHT TO BE POINTED OUT THAT THE IMPUGNED AMOUNT OF AMORTIZATIO N OF PREMIUM FOR THE INVESTMENT HELD UNDER THE CATEGORY HELD TO MAT URITY WAS AKIN TO DIMINUTION IN THE VALUE OF INVESTMENT AND WAS THUS, AN ALLOWABLE DEDUCTION. THE STAND OF THE ASSESSEE WAS THAT ALL THE INVESTMENTS MADE BY THE BANK PARTAKE THE NATURE OF STOCK- IN- T RADE AS THEY HAVE BEEN MADE IN THE COURSE OF CARRYING OUT THE BUSINES S OF BANKING. BEFORE THE ASSESSING OFFICER, ASSESSEE ALSO RELIED UPON DECISION OF COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF CATHOLI C SYRIAN BANK LTD. VS. ACIT (2010) 38 SOT 553(COCH.), WHEREIN ALSO, AMORTI ZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES WAS HELD TO BE AN ALLOWABLE DEDUCTION. 3.1 THE ASSESSING OFFICER HOWEVER, DID NOT ACCEPT T HE PLEA OF THE ASSESSEE PRIMARILY ON THE GROUND THAT THE SECURITIE S CLASSIFIED AS HTM WERE IN THE NATURE OF A CAPITAL ASSET IN DISTINCT ION TO THE SECURITIES HELD UNDER THE CATEGORIES AFS AND HFT. AS PER THE ASSESSING OFFICER, SO FAR AS THE SECURITIES HELD UNDER THE CATEGORIES AF S AND HFT ARE CONCERNED, THEY WERE TO BE VALUED AS AT THE YEAR EN D ON THE PRINCIPLE OF COST OR MARKET VALUE, WHICHEVER IS LESS. HOWEVER, SECURITIES CLASSIFIED AS HTM ARE HELD TILL THE MATURITY AND, THEREFORE, TH E SAME CANNOT BE CONSIDERED AS STOCK-IN-TRADE. IN THIS MANNER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR TREATING T HE AMOUNT OF 4 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. AMORTIZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES UNDER THE HTM CATEGORIES AS A DEDUCTIBLE AMOUNT. 4. IN APPEAL BEFORE THE CIT(A), ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER ON FACTS AND IN LAW. THE CIT(A) HAS CONSIDERED THE SUBMISSIONS PUT FORTH BY THE ASSESSEE AND NOTICED T HAT SIMILAR ISSUE HAD COME UP IN ASSESSEES OWN CASE IN ASSESSMENT YE ARS 2007-08 AND 2008-09, WHEREIN HIS PREDECESSOR CIT(A) HAD UPHELD ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON ACQUISITION OF HTM SECURITIES. THE CIT(A) HAS CO NCLUDED THAT THE SECURITIES PURCHASED BY THE ASSESSEE CO-OPERATIVE B ANK EVEN UNDER THE CATEGORY HTM FORMED A PART OF ITS STOCK-IN-TRADE BECAUSE THE SAME ARE PURCHASED WITH A PREDOMINANT MOTIVE OF MAINTAIN ING STATUTORY LIQUIDITY RATIO (SLR) AS PRESCRIBED FROM TIME TO T IME BY RBI, AND THAT THE DEDUCTION FOR AMORTISATION OF PREMIUM PAID ON SUCH SECURITIES WAS ALLOWABLE IN TERMS OF THE MANDATE OF THE RBI GUIDEL INES. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS PRIMARILY CANVASSED THE ARGUMENTS PUT FORTH BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, WHICH HAVE ALREADY BEEN ADVERTED TO IN THE EARLIER PART OF THIS ORDER AND ARE NOT BEING REPEATED FOR T HE SAKE OF BREVITY. 6. ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT THE CIT(A) MADE NO MISTAKE IN ALLOWING THE CLAIM OF THE ASSESSEE AND SUBMITTED THAT SUBSEQUENT TO THE IMPUG NED ORDER, THE ISSUE NOW STANDS COVERED BY THE DECISION OF THE HON BLE KERALA HIGH COURT IN THE CASE OF CIT VS. NEDUNGADI BANK LTD. 26 4 ITR 545(KER), WHEREIN IT HAS BEEN HELD THAT THE SECURITIES HELD B Y BANK CONSTITUTED 5 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. THEIR STOCK-IN-TRADE. APART THEREFROM, A REFERENC E HAS ALSO BEEN INVITED TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF THANE JANATA SAHARI BANK LTD., ITA NO. 1215/PN/2010 DATED 31/01/2013, WHEREIN, IT HAS ALSO BEEN LAID DOWN THAT EVEN THE S ECURITIES HELD UNDER THE CATEGORY OF HTM ARE PART OF STOCK-IN-TRADE OF T HE BANK AND THERE WAS NO JUSTIFICATION TO DECLINE THE CLAIM OF DEPREC IATION/LOSS ON THE VALUE OF SECURITIES AS PER MANDATE OF RESERVE BANK OF INDIA. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. HAVING CONSIDERED THE RIVAL STANDS, WE FIND NO REASON TO I NTERFERE WITH THE CONCLUSION DRAWN BY THE CIT(A). PERTINENTLY, ASSES SEES CLAIM FOR AMORTIZATION OF PREMIUM PAID ON THE PURCHASE OF GOV ERNMENT SECURITIES CLASSIFIED AS HTM IS CONSISTENT WITH TH E PRUDENTIAL NORMS ISSUED BY THE RBI. IT IS ALSO UNDENIABLE THAT THE ACQUISITION OF THE GOVERNMENT SECURITIES UNDER THE HTM CATEGORIES HAS BEEN UNDERTAKEN BY THE ASSESSEE IN THE COURSE OF CARRYING ON THE B ANKING BUSINESS UNDER THE MANDATE OF RBI. OSTENSIBLY, THE PREDOMIN ANT MOTIVE TO PURCHASE SECURITIES IS TO MAINTAIN THE STATUTORY L IQUIDITY RATIO PRESCRIBED BY THE RBI. THE CENTRAL BOARD OF DIRECT TAXES VIDE ITS CIRCULAR NO.665 DATED 5/10/1995 ALSO PROVIDES THAT THE QUEST ION AS TO WHETHER ANY PARTICULAR SECURITIES CONSTITUTE STOCK-IN-TRADE OR INVESTMENT IN THE CASE OF A BANK SHALL BE DETERMINED, INTER-ALIA, HAV ING REGARD TO THE GUIDELINES ISSUED BY RBI FROM TIME TO TIME. IN TH IS BACKGROUND, IT WOULD BE RELEVANT TO REFER TO THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF NEDUNGADI BANK LTD. (SUPRA), W HEREIN IT HAS BEEN HELD THAT SECURITIES HELD BY A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING WOULD CONSTITUTE THE STOCK-IN- TRADE OF THE 6 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. BUSINESS OF THE SAID SOCIETY. THEREFORE, IN THE CO NTEXT OF THE PRESENT ASSESSEE, WHICH IS ALSO A CO-OPERATIVE SOCIETY ENGA GED IN THE BUSINESS OF BANKING, THE IMPUGNED GOVERNMENT SECURITIES ARE LIABLE TO BE CONSIDERED AS THE STOCK-IN-TRADE OF ITS BUSINESS OF BANKING. THUS, CONSIDERING THE AFORESAID FACT-SITUATION AND ALSO T HE MANDATE OF THE RBI, THE AMORTIZATION OF PREMIUM PAID ON PURCHASE O F SECURITIES CLASSIFIED UNDER HTM CATEGORY IS LIABLE TO BE ALLOW ED AS A DEDUCTION WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE BANK. AT THIS POINT, IT WOULD ALSO BE APPROPRIATE TO REFER TO THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. HDFC BANK LTD. (2014) 89 CCH 0185 (MUM), WHEREIN THE ASSESSEE BANK WAS HELD ENTITLED FOR DEDUCTION WITH RESPECT TO THE AMORTIZA TION OF PREMIUM PAID ON ACQUISITION OF SECURITIES CLASSIFIED AS HTM CAT EGORY ON THE GROUND OF THE MANDATE BY RBI GUIDELINES. IN OUR CONSIDERED O PINION, THE AFORESAID JUDGMENT OF THE HONBLE BOMBAY HIGH COURT CLEARLY S UPPORTS THE INFERENCE REACHED BY THE CIT(A), WHICH WE HEREBY AF FIRM. 7.1 BEFORE PARTING, WE MAY REFER TO THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF T.N FINANCE & INFR ASTRUCTURE DEVELOPMENT CORPORATION LTD.,280 ITR 491(MAD), WHIC H HAS BEEN RELIED UPON BY THE ASSESSING OFFICER IN SUPPORT OF HIS STA ND THAT THE RBI GUIDELINES DO NOT OVER-RIDE THE STATUTORY PROVISION S OF THE ACT AND, THUS, AMORTIZATION CLAIMED BY THE ASSESSEE ON THE INVESTM ENT HELD IN THE HTM CATEGORY CANNOT BE ALLOWED AS A DEDUCTION. WE HAVE PERUSED THE SAID JUDGMENT OF THE HONBLE MADRAS HIGH COURT AND FIND THAT THE SAME DOES NOT HELP THE CASE OF THE REVENUE. FIRSTLY, TH E ASSESSEE BEFORE THE HONBLE MADRAS HIGH COURT WAS A NON-BANKING FINANCI AL CORPORATION (I.E. 7 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. NBFC), WHEREAS THE ASSESSEE BEFORE US IS A CO-OPERA TIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING UNDER LICENCE FR OM RBI, WHICH IS QUITE DISTINCT FROM AN ENTITY ENJOYING STATUS OF NB FC. MOREOVER, IN THE CASE BEFORE HONBLE MADRAS HIGH COURT, THE CLAIM OF THE ASSESSEE WAS IN RELATION TO SECTION 36(1)(VII) OF THE ACT ON ACC OUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS; SECTION 36(1)(VII) OF THE A CT CLEARLY PROHIBITS ALLOWABILITY OF A MERE PROVISION FOR BAD AND DOUBTF UL DEBTS. IT IS IN THIS CONTEXT THE HONBLE HIGH COURT NOTED THAT THE PRECI SE CONDITIONS CONTAINED IN SECTION 36(1)(VII) OF THE ACT WOULD GO VERN THE SITUATION AND NOT THE GUIDELINES OF THE RBI WHILE EVALUATING A C LAIM FOR DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. WHAT IS TO BE ALLOWED U/S. 36(1)(VII) OF THE ACT IS ACTUAL WRITE- OFF OF A BAD DEBT AND NOT A MERE PROVISION FOR BAD AND DOUBTFUL DEBTS. THE CLAIM BEFORE US IS IN RESPECT OF THE AMORTIZATION OF PREMIUM PAID ON ACQUISITION OF GOVE RNMENT SECURITIES CLASSIFIED UNDER HTM CATEGORY ON THE GROUND OF THE MANDATE OF THE RBI, A PROPOSITION WHICH IS SUPPORTED BY THE JUDGEMENT O F THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK (SUPRA). THUS, THE DECISION OF HONBLE MADRAS HIGH COURT IN T.N FINANCE & INFRA STRUCTURE DEVELOPMENT CORPORATION LTD. (SUPRA) DOES NOT HELP THE CASE OF THE REVENUE IN THE PRESENT CASE. 7.2 HENCE, WE HEREBY AFFIRM THE ORDER OF CIT(A) AND HOLD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION ON ACCOUNT OF THE AMORTIZATION OF PREMIUM PAID ON PURCHASE OF SECURITIES CLASSIFIED U NDER HTM CATEGORY. THUS, ON THIS ASPECT THE REVENUE FAILS. 8. THE SECOND ISSUE, IN THIS APPEAL IS WITH REGARD TO A LOSS OF RS.68.00 LACS SUFFERED BY THE ASSESSEE ON COMPULSOR Y REDEMPTION OF 8 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. SARDAR SAROVAR NARMADA NIGAM LTD.(SSNNL) BONDS. IN THIS CONTEXT, RELEVANT FACTS ARE THAT ASSESSEE HAD PURCHASED BOND S OF SSNNL ON 27/9/2055 AT A COST OF RS.4,68,00,000/-, WHICH WER E FORCEFULLY REDEEMED BY SSNNL ON 10/1/2009 FOR A CONSIDERATION OF RS.4.00 CORES, THUS, RESULTING INTO A LOSS OF RS.68.00 LACS. THE ASSESSEE CLAIMED THE LOSS OF RS.68.00 LACS AS A DEBIT IN ITS P&L ACCOUNT , WHICH HAS SINCE BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT IT WAS A CAPITAL LOSS. AS PER THE ASSESSING OFFICER, THE INVESTMENT IN DEEP DISCOUNT BONDS OF SSNNL WAS DIFFERENT FROM A NORMAL INVEST MENT AND THAT SINCE THE PURCHASE OF BONDS ON 27/9/2005, ASSESSEE DID NO T TRADE EVEN ONCE IN SUCH BONDS. THEREFORE, AS PER THE ASSESSING OFF ICER THE INTENTION OF THE ASSESSEE WAS TO TREAT SUCH INVESTMENT AS A CAPI TAL INVESTMENT AND, THEREFORE, ANY LOSS RESULTING THEREFROM WAS LIABLE TO BE CONSIDERED AS A CAPITAL LOSS. 8.1 BEFORE THE CIT(A), ASSESSEE REITERATED THAT THE IMPUGNED INVESTMENT WAS A PART OF ITS ACTIVITY OF THE BUSINE SS OF BANKING IN ACCORDANCE WITH SECTION 5 OF THE BANKING REGULATIO N ACT,1949 AND THE PURPOSE OF SUCH INVESTMENT WAS TO EARN INTEREST INC OME BY UTILIZING THE FUNDS AS ALSO TO KEEP THE LIQUIDITY AVAILABLE AS AN D WHEN REQUIRED. THE ASSESSEE ALSO RELIED UPON THE CBDT CIRCULAR NO.599 DATED 24/4/1991 TO SAY THAT THE IMPUGNED INVESTMENT ALSO CONSTITUTED I TS STOCK-IN-TRADE. THE CIT(A) HAS CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE ASSESSEE AND HELD THAT THE INVESTMENT IN THE BONDS OF SSNNL WAS IN THE NATURE OF STOCK-IN-TRADE AND, HENCE, ANY LOSS ON SALE THER EOF WAS ALLOWABLE AS A REVENUE LOSS. AGAINST AFORESAID DECISION OF CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. 9 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. 8.2 BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE CONT ENDED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.68.00 L ACS IN AS MUCH AS IT WAS A LOSS SUFFERED ON LIQUIDATING THE CAPITAL INVE STMENT. ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE, INVESTING IN B ONDS IS NOT A PREDOMINANT ACTIVITY IN THE BUSINESS OF BANKING BE ING CARRIED OUT BY THE ASSESSEE AND, THEREFORE, IT IS A CASE OF INVEST MENT IN A LONG TERM ASSET AND NOT OF INVESTMENT IN STOCK-IN-TRADE. 8.3 ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE A SSESSEE HAS REITERATED THE SUBMISSIONS PUT-FORTH BEFORE THE LOW ER AUTHORITIES AND CONTENDED THAT THE IMPUGNED ACTIVITY OF ACQUIRING T HE BONDS WAS A PART AND PARCEL OF THE ACTIVITY OF BANKING BEING CARRIED OUT BY THE ASSESSEE. ACCORDINGLY, THE CONCLUSION DRAWN BY CIT(A) WAS SOU GHT TO BE DEFENDED. 8.4 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE FACTUAL MATRIX IN THE PRESENT DISPUTE LIES IN A NARROW COMP ASS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SUFFERED A LO SS OF RS.68.00 LACS ON COMPULSORY REDEMPTION OF BONDS OF SSNNL, WHICH WERE PURCHASED BY IT FROM THE SECONDARY MARKET IN THE PAST ON 29/9/2005 FOR RS.4,68,00,000/-. THE BONDS WERE COMPULSORILY REDE EMED BY SSNNL ON 4/1/2009 FOR RS.4,00,00,000/-, THEREBY RESULTING IN A LOSS OF RS.68.00 LACS. IT IS ALSO A NOTABLE FACT THAT THE BONDS WER E REGULARLY QUOTED ON THE STOCK EXCHANGES, AS ASSERTED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER VIDE ITS WRITTEN SUBMISSION DATED 19/12/201 1. THE BUSINESS OF BANKING HAS BEEN DEFINED IN SECTION 5 OF THE BANKIN G REGULATIONS ACT,1949, TO INTER-ALIA, MEAN .... ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF MONEY FROM THE PUBLIC, REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWAL BY CHEQUE, DRAFT , ORDER OR 10 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. OTHERWISE. ...... IT IS QUITE WELL UNDERSTOOD TH AT BANKS DEAL IN MONEY AND FOR THAT MATTER, MONEY FOR THE BANKS CONSTITU TE STOCK-IN-TRADE WHICH IS TAKEN AND ACCEPTED BY THEM FROM DEPOSITORS AND THEN DEPLOYED IN THE FORM OF EITHER GIVING LOANS TO VARI OUS TYPES OF BORROWERS OR IT IS INVESTED IN DIFFERENT TYPES OF S ECURITIES. THE BANK IS OBLIGED TO PAY INTEREST TO ITS DEPOSITORS, WHICH IT GENERATES BY WAY OF INTEREST RECEIPTS FROM LOANS ADVANCED AND EARNINGS FROM INVESTMENTS MADE IN VARIOUS SECURITIES AND OTHER INCOMES RECEIV ED DURING THE COURSE OF BANKING ACTIVITIES. IN THIS CONTEXT, ASS ESSEE EXPLAINED BEFORE THE LOWER AUTHORITIES THAT THE INVESTMENT IN THE BO NDS OF SSNNL WAS WITH THE PREDOMINANT OBJECTIVE OF EARNING INTEREST SO AS TO SERVICE THE BURDEN OF INTEREST PAYMENTS TO THE DEPOSITORS. THE ASSESSEE ALSO EXPLAINED THAT THE BONDS WERE TRADED ON STOCK EXCH ANGES AND THAT THEY WERE AVAILABLE AS A SOURCE OF LIQUIDITY, IF RE QUIRED. IT WAS, THEREFORE, CONTENDED THAT SUCH INVESTMENT WAS A ST OCK-IN-TRADE AND ANY LOSS SUFFERED THEREFROM IS A REVENUE LOSS. IN OUR CONSIDERED OPINION, THE BUSINESS OF BANKING INCLUDES IN ITS FO LD MAKING OF INVESTMENTS FOR THE PURPOSE OF GENERATING INCOMES W HICH WOULD SERVICE BANKS REQUIREMENT OF PAYING INTEREST TO ITS DEPOSI TORS. THE ASSESSEE HAS CONSISTENTLY EXPLAINED THE RATIONALE FOR MAKING THE IMPUGNED INVESTMENT, AND THE SAME HAS BEEN MERELY BRUSHED AS IDE BY THE LOWER AUTHORITIES. THE CHARACTERIZATION OF SUCH INVESTME NTS AS AN ACTIVITY CARRIED OUT IN THE COURSE OF THE BANKING BUSINESS C ANNOT BE DOUBTED AND, THEREFORE, IT WOULD CONSTITUTE ASSESSEES STOC K-IN-TRADE OF THE BUSINESS OF BANKING. AS A CONSEQUENCE, ANY LOSS SU FFERED ON SALE OF SUCH STOCK-IN-TRADE WOULD BE AN ALLOWABLE DEDUCTION WHILE COMPUTING THE BUSINESS INCOME. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ASPECT 11 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. IS LIABLE TO BE AFFIRMED, WHICH WE DO SO. THUS, ON THIS ASPECT ALSO REVENUE FAILS. 8.5 IN THE RESULT, REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 IS DISMISSED. 9. IN SO FAR AS THE APPEAL FOR ASSESSMENT YEAR 2008 -09 IS CONCERNED, THE ONLY ISSUE INVOLVED IS THE AMORTIZATION OF PREM IUM PAID ON PURCHASE OF SECURITIES UNDER HTM CATEGORY. THIS ASPECT HAS ALREADY BEEN DEALT WITH BY US IN THE APPEAL FOR ASSESSMENT YEAR 2009-1 0 AND OUR DECISION THEREIN SHALL APPLY MUTATIS MUTANDIS IN ASSESSME NT YEAR 2008-09 ALSO. ACCORDINGLY, FOR ASSESSMENT YEAR 2008-09 ALSO, REVE NUE FAILS. 10. WITH RESPECT TO ASSESSMENT YEAR 2007-08, THE FI RST ISSUE INVOLVED IS THE AMORTIZATION OF PREMIUM PAID ON PURCHASE OF SECURITIES UNDER HTM CATEGORY. THIS ASPECT HAS ALREADY BEEN DEALT W ITH BY US IN THE APPEAL FOR ASSESSMENT YEAR 2009-10AND OUR DECISION THEREIN SHALL APPLY MUTATIS MUTANDIS IN ASSESSMENT YEAR 2007-08 ALSO. ACCORDINGLY, FOR ASSESSMENT YEAR 2007-08 ALSO, REVENUE FAILS. 11. THE ONLY OTHER ISSUE IN THE APPEAL FOR ASSESSME NT YEAR 2007-08 ARISES FROM THE ACTION OF THE CIT(A) IN HOLDING THA T ASSESSMENT PROCEEDINGS FINALIZED BY THE ASSESSING OFFICER WERE INVALID. 11.1 ON THIS ASPECT, THE RELEVANT FACTS ARE THAT T HE ASSESSEE BANK FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 OR IGINALLY ON 31/10/2007 DECLARING A TOTAL INCOME OF RS.8,73,01,5 89/-. THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE AC T ON 6/11/2008. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A NOTIC E UNDER SECTION 148 OF THE ACT TO THE ASSESSEE ON 17/11/2008 REOPENING THE ASSESSMENT ON 12 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. THE GROUND THAT CERTAIN COMES CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. AS A CONSEQUENCE, THE ASSESSING OFFICER HAS FINALIZED TH E IMPUGNED ASSESSMENT ON 30/12/2009 UNDER SECTION 143(3) R.W.S 147 OF THE ACT, WHEREBY THE TOTAL INCOME HAS BEEN ASSESSED AT RS.8, 73,01,589/-. 11.2 ONE OF THE OBJECTION BEFORE CIT(A) WAS THAT TH E ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT HAS BEEN COMPLETED ON 30/12/2009 WITHOUT ISSUANCE OF A NOTICE UNDER SECTI ON 143(2) OF THE ACT WITHIN THE PRESCRIBED PERIOD. IN THIS CONTEXT, THE CIT(A) NOTICED THAT THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 O F THE ACT ON 17/11/2008 AND NOTICES UNDER SECTION 143(2) AS WELL AS UNDER SECTION 142(1) OF THE ACT WERE ALSO ISSUED ON THE SAME DATE . ACCORDING TO THE CIT(A), ALL THE THREE NOTICES ARE DATED 17/11/2008 AND IN RESPONSE TO WHICH ASSESSEE FILED A REVISED RETURN ON 31/3/2009. IN THE BACKGROUND OF THE AFORESAID CHRONOLOGY OF EVENTS, THE CIT(A) H AS CONCLUDED THAT THE LAST DATE FOR ISSUANCE OF NOTICE UNDER SECTION 143 (2) EXPIRED ON 30/9/2009, WHEREAS THE NOTICE UNDER SECTION 143(2) WAS ISSUED ON 8/10/2009 WHICH WAS BEYOND THE PERIOD PRESCRIBED. AS A CONSEQUENCE, THE CIT(A) CONCLUDED THAT NOTICE UNDER SECTION 143(2) OF THE ACT DATED 8/10/2009 WAS BELATED AND HENCE, THE CONSEQUENT ASSESSMENT ORDER WAS HELD TO BE INVALID. 11.3 BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE HA S NOT CONTESTED ANY OF THE FACTUAL FINDINGS RECORDED BY CIT(A) AND , THEREFORE, WE HAVE NO REASON TO DISTRACT FROM THE ULTIMATE CONCLUSION OF THE CIT(A) THAT THE IMPUGNED ASSESSMENT IS INVALID. WE HOLD SO. 13 M/S. THE KALYAN JANATA SAHAKRI BANK LTD. 11.4 IN THE RESULT, FOR ASSESSMENT YEAR 2007-08 ALS O REVENUE FAILS IN ITS APPEAL. 12. RESULTANTLY, CAPTIONED APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/2015 . SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI,DATED 30/09/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS
