Solapur Janata Sahakari Bank Ltd., Solapur V. Joint Commissioner of Income-tax,

ITA 2188/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79810 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: P S SHINGTE
• Keywords: Capital asset; Cost of acquisition; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2188/PN/2013 (ASSESSMENT YEAR : 2010-11) SOLAPUR JANATA SAHAKARI BANK LTD., GAGANBHARARI, SHIVSMARAK SANKUL, GOLDFINCH PETH, SOLAPUR 413 007. PAN : AAAAS3627C . APPELLANT VS. JT. COMMISSIONER OF INCOME TAX, RANGE- 2, SOLAPUR. . RESPONDENT ASSESSEE BY : MR. P.S. SHINGTE DEPARTMENT BY : MR. P. L. PATHADE DATE OF HEARING : 21-04-2014 DATE OF PRONOUNCEMENT : 25-04-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED A GAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 12.09.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 27.11.2012 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESS EE IS AGAINST THE ACTION OF THE CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS. 1,55,08,931/- WHICH WAS CLAIMED BY THE ASSESSEE AS AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES. 3. BRIEFLY PUT, THE CIT(A) HELD THAT THE AMORTIZATI ON OF PREMIUM PAID ON GOVERNMENT SECURITIES WAS NOT AN ALLOWABLE DEDUCTIO N BECAUSE THE SECURITIES ACQUIRED BY THE ASSESSEE IN QUESTION WERE CLASSIFIE D AS HELD TILL MATURITY (I.E. HTM) SECURITIES, WHICH ACCORDING TO THE CIT(A ), WERE CAPITAL IN NATURE. AS PER THE CIT(A), ACQUISITION OF HTM SECURITIES IS A CAPITAL INVESTMENT AS SUCH SECURITIES ARE NORMALLY HELD BY THE BANKS UNTIL MAT URITY. ACCORDING TO HER, ITA NO.2188/PN/2013 A.Y. 2010-11 SINCE THE SAID SECURITIES WERE PERMANENT SECURITIES AND IN THE NATURE OF A CAPITAL INVESTMENT, THE PREMIUM PAID TOWARDS THEIR ACQUISITION WOULD FORM AN INTEGRAL PART OF THE COST OF THE CAPITAL ASSET AND THE SAME COULD NOT BE ALLOWED AS A REVENUE DEDUCTION. THE ASSESSEE IS NOT SATISF IED WITH THE ORDER OF THE CIT(A) AND HENCE, THE PRESENT APPEAL OF THE ASSESSE E BEFORE US. 4. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE PUNE BENCH OF THE TRIBUN AL IN THE CASE OF NAGAR URBAN CO-OP BANK LTD. VS. ADDL.CIT, VIDE ITA NO.711 /PN/2013 ORDER DATED 27.11.2013 AND IT HAS BEEN HELD THAT AMORTIZATION O F THE PREMIUM PAID FOR ACQUIRING OF HTM SECURITIES IS ALLOWABLE AS A REVEN UE EXPENSE. MOREOVER, SIMILAR ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BANK OF RAJASTHAN LTD. VIDE ITA NO.3238/MUM/2011 ORDER DATED 09.09.2011 AND ALSO BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SRI SUBRAMANYESWARA COOPERATIVE BANK LTD. VS. ACIT VIDE ITA NO.488/BANG/2011 ORDER DATED 06.06.20 12. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS REITERATED THE STAND OF THE LOWER AUTHORITIES, BUT NO CONTRARY DECISION HAS BEEN PLACED IN SUPPORT OF THE CASE OF THE REVENUE. 6. IN THE ABOVE CONTEXT, WE REPRODUCE HEREINAFTER T HE FOLLOWING DISCUSSION IN THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF RAJASTHAN LTD. (SUPRA), WHEREIN AN IDENTICAL ISSUE HAS BEEN CONSIDERED :- 9. THE AMORTIZED AMOUNT OF PREMIUM PAID FOR SECURI TIES HELD UNDER HTM CATEGORY AMOUNTING TO RS.11.77 CRORES WAS CLAIMED BY THE ASSESSEE AS DEDUCTION IN ITS COMPUTATION OF TOTAL I NCOME. THE SAME, HOWEVER, WAS DISALLOWED BY THE ASSESSING OFFICER HOLDING THA T THE EXPENDITURE INCURRED ON PREMIUM PAID FOR SECURITIES HELD UNDER HTM CATEG ORY WAS A CAPITAL EXPENDITURE NOT ALLOWABLE AS DEDUCTION. HE HELD THA T THE SAID SECURITIES WERE IN THE NATURE OF INVESTMENT AND NOT STOCK IN TRADE. ON APPEAL, THE LEARNED CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE A O ON THIS ISSUE. BESIDES RELYING ON HIS OWN ORDER IN ASSESSEE'S OWN CASE ON A SIMILAR ISSUE FOR THE EARLIER YEAR, THE LEARNED CIT(APPEALS) ALSO RELIED ON CBDT INSTRUCTION NO. 17/2008 DATED 26-11-2008 PUBLISHED IN 220 CTR (STAT UTE) PAGE 41. HE HELD THAT THE ASSESSEE COMPANY WAS BOUND TO CLASSIFY ITS INVESTMENT AS PER RBI GUIDELINES DATED 16-10-2010 AND AS PER THE SAID GUI DELINES, INVESTMENT CLASSIFIED UNDER HTM CATEGORY WAS REQUIRED TO BE CA RRIED AT ACQUISITION COST ITA NO.2188/PN/2013 A.Y. 2010-11 UNLESS IT WAS MORE THAN THE FACE VALUE. HE HELD THA T THE PREMIUM ON SUCH INVESTMENTS WAS ALSO REQUIRED TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. HE HELD THAT THE CLAIM OF THE ASSESSEE TH US WAS AS PER RBI GUIDELINES AND CBDT INSTRUCTION WHICH CLARIFIED THA T PREMIUM AMORTIZED OVER THE PERIOD REMAINING TO MATURITY WAS LIABLE TO BE A LLOWED AS DEDUCTION. 10. AT THE TIME OF HEARING BEFORE US, THE LEARNED R EPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS ALSO SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS ORDERS OF THE TRIBUNAL PASS ED IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. COPIES OF THE SAID ORDERS A RE PLACED ON RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS THAT IN ONE OF S UCH ORDERS DATED 22ND DEC., 2010 PASSED IN ASSESSEE'S OWN CASE FOR ASSESS MENT YEARS 2002-03 TO 2006-07, THE COORDINATE BENCH OF THIS TRIBUNAL HAS DIRECTED THE AO TO ALLOW THE PREMIUM AMORTIZED BY THE ASSESSEE OVER THE PERI OD REMAINING TO MATURITY HOLDING THAT THE SAME WAS CLAIMED AS PER THE RELEVA NT RBI GUIDELINES AND EVEN THE CBDT HAS ISSUED INSTRUCTIONS TO ALLOW THE SAME. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL IN ASSESSE E'S OWN CASE FOR EARLIER YEARS, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO . 3 OF THE REVENUE'S APPEAL. 7. APART FROM THE AFORESAID PRECEDENT, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AFORESAID ISSUE HAS ALS O BEEN RECENTLY DECIDED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. RAJKOT DIST. CO-OP. BANK LTD. [2014] 43 TAXMANN.COM 161 (GUJ.) AND IT H AS BEEN HELD THAT THE PREMIUM PAID BY A COOPERATIVE BANK TO BUY GOVERNMEN T SECURITIES OVER AND ABOVE THEIR FACE VALUE IS LIABLE TO BE AMORTISED FO R REMAINING PERIOD OF MATURITY; AND, NOTABLY THE SAID JUDGEMENT IS IN THE CONTEXT OF THE SECURITIES HELD TO MATURITY (HTM), WHICH IS ALSO THE CASE BEFO RE US. 8. FOLLOWING THE AFORESAID PRECEDENTS, WE SET-ASIDE THE ACTION OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.1,55,08,931/- REP RESENTING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES UNDER THE HTM CATEGORY AND ALLOW THE CLAIM OF THE ASSESSEE. THUS ON THIS ASPECT, AS SESSEE SUCCEEDS. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 25 TH APRIL, 2014. SUJEET ITA NO.2188/PN/2013 A.Y. 2010-11 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE