The ACIT Cir-1(1), Thrissur V. South Indian Bank Ltd, Thrissur

ITA 219/COCH/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1194 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 14-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHANSHU SHEKHAR JHA
• Assessee Lawyers: MOHAN PULICKAL
• Keywords: Depreciation; Earning of tax free income; Tax effect; Rule 8D
• Section: 234B; 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 215/COCH/2 018 ASSESSMENT YEAR : 2012 - 13 SOUTH INDIAN BANK LTD., SIB HOUSE, MISSION QUARTERS, THRISSUR. [PAN:AABCT 0022F] VS. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), THRISSUR (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) I. T.A. NO. 219 /COCH/20 18 ASSESSMENT YEA R : 2012 - 13 THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1), THRISSUR SOUTH INDIAN BANK LTD., SIB HOUSE, MISSION QUARTERS, THRISSUR. [PAN:AABCT 0022F] (REVENUE - RESPONDENT) (R EVENUE - APPELLANT) REVENUE BY S HRI SUDHANSHU SHEKHAR JHA, CIT(DR) ASSESSEE BY SHRI MOHAN PULICKAL, CA D ATE OF HEARING 20 / 0 3 / 201 9 DATE OF PRONOUNCEMENT 22 / 0 3 /201 9 O R D E R PER CHANDRA POOJARI, AM: TH E SE APP EAL S FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) , THRISSUR DATED 21/02/2018 AND PERTAIN TO THE A SSESSMENT YEAR 2012 - 13. I.T.A. NO S . 215&219/COCH/2018 2 2. THE FIRST GROUND IN ASSESSEE S APPEAL IN ITA NO. 215/ C OCH/2018 IS WITH REGARD TO DISALLOWANCE OF RS.10,10,99,840/ - . 3. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.10,10,99,840/ - U/S. 14A R.W.R. 8D TOWARDS EXPENDITURE INCURRED IN RELATION TO INCO ME NOT INCLUDIBLE IN TOTAL INCOME. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR OPINION, A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.29/COCH/2017 DATED 13/12/2017 WHEREIN IT WAS HELD AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. W E FIND, THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, IN ASSESSEE'S O WN CASE IN ITA 730 OF 2009. THE RELEVANT PARA OF THE HON'BLE JURISDICTIONAL HIGH COURT READS AS FOLLOW: - '5 . WHAT WE HAVE SLATED ABOVE IS ONLY A REASONABLE SUGGESTION FOR THE ASSESSING OFFICER TO ADOPT WHICH ARISES ONLY IF ASSESSEE IS NOT ABLE TO ESTABLI SH MORE ACCURATELY THE I NTEREST SPENT ON EARNING TAX FREE INCOME. WE , THEREFORE, LEAVE THIS MATTER TO BE DECIDED BY THE ASSESSING OFFICER WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSEE - BANKS FOR EACH YEAR. SINCE WE FIND THAT THE RATIONAL E ADOPTED BY THE AS SESSING OFFICE R TO ESTIMATE THE EXPENDITURE FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A IS NOT TENABLE, WE FEEL T HE M ATTER SHOULD BE RESTORED TO THE ASSESSING OFFICER FOR MAKING DISALLOWANCE UNDER SECTION 14A BY REASONABLY ESTIMATING AS NEARLY AS PO SSIBLE THE EXPENDITURE INCURRED FOR EARNING THE TAX FREE INCOME. THIS SHOULD BE DONE AFTER GIVING OPPORTUNITY TO '.HE ASSES SEE - BANKS TO SUGGEST THEIR OWN FORMULA WITH REFERENCE TO ACCOUNTS FOR THE PURPOSE OF ARRIVING AT THE ACTUAL AMOUNT OR NEAR ACTUAL AM OUNT THE DISALLOWANCE ON ESTIMATED BASIS HAS TO BE DONE AS ABOVE UNTIL RULE 80 WAS FRAMED AND THEREAFTER IT IS FOR THE ASSESSING OFFICER TO MAKE I.T.A. NO S . 215&219/COCH/2018 3 DISALLOWANCE BY FOLLOWING SUB - SECTION (2) OF SECTION 14A AND RULE 80 OF THE INCOME TAX RULES. 6. SO FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE IS CONCERNED, WE FEEL CONSIDERING THE FACT THAT THERE IS NO PRECISE FORMULA FO R PROPORTIONATE DISALLOWANCE, NO DISALLOWANCE IS CALLED FOR, FOR PROPORTIONATE ADMINISTRATIVE COST ATTRIBUTA BLE TO EARNING OF TAX FREE INCOME UNTIL RULE 80 CAME INTO FORCE. WE, THEREFORE, DISPO SE OF THE APPEALS BY SETTING ASIDE THE ORDERS OF THE TRIBUNAL A ND THAT OF THE FIRST APPELLATE AUTHORITY ON THIS ISSUE AND REMAND AL L THE ASSESSMENTS B ACK TO THE ASSESSING O FFICER FOR REWORKING DISALLOWANCE UNDER SECTION 14A IN THE CASE OF EACH ASSESSEE FOR EACH ASSESSMEN T YEAR. THE PROPORTIONATE DISALLOWANCE UNDER SECTION 14A SHOULD BE LIMIT ED TO ONLY INTEREST LIABILITY AND NOT OVERHEADS OR ADMINISTR ATIVE EXP ENDITURE; WHICH SHOULD BE CONSIDERED FOR DISALLOWANCE UNDER RULE 80 FROM 2007 - 08 ONWARDS.' 5. FROM THE ABOVE, IN OUR OPINION, IT IS VERY CLEAR THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010 - 2011 ONWARDS, THE DISALLOWANCE U/S 14A SHOULD BE MADE UNDER RULE 8D BY THE A.O. IN THE IMPUGNED ASSESSMENT YEAR, I.E., 2009 - 2010, THE C IT (A) HAS RIGHTLY UPHELD THE ORDER OF THE A.O. BY FOLLOWING THE JUDGMENT OF THE HON B LE JURISDICTIONAL HIGH COURT, IN ASSESSEE'S OWN CASE. THE LEARNED COUNSEL FOR THE AS SESSEE FAIRLY CONCEDED THAT THIS I SSUE IS COVERED AGAINST THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A) . IT IS ORDERED ACCORDINGLY. 4.1 IN VIEW OF THE ABOVE ORDER OF THE TRI B UNAL, WE ARE INCLINED TO REJECT THIS GROUND OF APPEAL OF THE ASSESSEE. 5. THE NEXT COMMON GROUND IN ASSESSEES APPEAL IN ITA NO.215/COCH/2018 AND REVENUES APPEAL IN ITA NO. 219/COCH/2018 IS WITH REGARD TO DISALLOWANCE OF DEDUCTION OF RS.10, 79,80,515/ - (LATER RE - WORKED AND REVISED AT RS.9,53,09,753/ - ) DURING THE COURSE OF THE APPEAL) CLAIMED IN RESPECT OF SPECIAL RESERVE U/S. 36(1)(VIII) OF THE ACT. I.T.A. NO S . 215&219/COCH/2018 4 6. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAD DISALLOWED AN AMOUNT OF RS. 10,79,80,515/ - BEING THE DEDUCTION CLAIMED U/S. 36(1)(VIII) OF THE ACT HOLDING THAT THE ASSESSEE HAD NOT ADVANCED ANY LOAN AS LONG TERM FINANCE FOR DEVELOPMENT OF HOUSING IN INDIA, INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FAC ILITY IN INDIA. 7. ON APPEAL, THE CIT(A) ALLOWED DEDUCTION U/S. 36(1)(VIII) OF THE ACT FOR THE INCOME GENERATED FROM ADVANCING LOANS TO INDUSTRIAL OR AGRICULTURAL DEVELOPMENT AND DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF ERNAKULAM DISTRICT CO - OP. BANK LTD. VS. JT. DIRECTOR OF INCOME - TAX (TS - 7866 - ITAT - 2017), HOWEVER, W ITH REGARD TO LONG TERM FINANCE FOR DEVELOPMENT OF HOUSING IN INDIA, HE OBSERVED THAT CONSTRUCTION/PURCHASE OF INDIVIDUAL HOU SES DOES NOT TANTAMOUNT TO HOUSING DEVELOPMENT. H ENCE, HE UPHELD THE ACTION OF THE ASSESSING OFFICER IN SO FAR AS THE DISALLOWANCE OF THE CLA I M OF THE ASSESSEE FOR ADVANCES GIVEN FOR DEVELOPMENT OF HOUSING IS CONCERNED U/S. 36(1)(VIII) OF THE ACT. 8. AGAINST THIS, BOTH THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US. THE LD. AR HAD MADE ELABORATE SUBMISSIONS WHICH HAS BEEN EXTRACTED IN THE CIT (A) S ORDER. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. I.T.A. NO S . 215&219/COCH/2018 5 9. WE HAVE HEARD THE RIVA L SUBMISSIONS AND PERUSED THE RECORD. AS REGARDS THE ELIGIBILITY OF THE ASSESSEE FOR DEDUCTION U/S 36(1)(VIII), FIRST P OINT TO BE CONSIDERED IS WHETHER THE ASSESSEE IS A SPECIFIED ENTITY . FOR THIS WE WILL HAVE TO CONSIDER EXPLANATION (A) TO SECTION 36(1 )(VIII) WHICH IS R EPRODUCED BELOW: ( I) A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT, 1956 (1 OF 1956); ( II) A FINANCIAL CORPORATION WHICH IS A PUBLIC SECTOR COMPANY (III) A BANKING COMPANY (IV) A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK; (V) A HOUSING FINANCE COMPANY AND (VI) ANY OTHER FINANCIAL CORPORATION INCLUDING A PUBLIC COMPANY BEING A BANKING COMPANY, IT IS CLEAR THAT THE ASSES SEE IS A SPECIFIED ENTITY WITHIN CLAUSE (III) OF EXPLANATION (A) TO SECTION 36(1)(VIII). 9.1 NEXT POINT TO BE CONSIDERED IS WHETHER THE ASSESSEE WILL BE ENTITLED TO DEDUCTION U/S. 36(1)(VIII) FOR INCOME GENERATED BY GIVING LOANS TO THEIR CUSTOMERS FOR PURCHASE/CONSTRUCTION OF INDIVIDUAL HOUSES. FOR THIS WE WILL HAVE TO CONSIDER EXPLANATION (B) TO SECTION 36(1)(VIII). (B) ELIGIBLE BUS I NESS MEANS - (I) IN RESPECT OF THE SPECIFIED ENTITY REFERRED TO IN SUB - CLAUSE (I) OR SUB - CLAUSE (II) OR SUB - CLAUSE ( III ) OR SUB - CLAUSE (IV) O F CLAUSE (A), THE BUSINESS OF PROVIDING LONG - TERM FINANCE FOR - I.T.A. NO S . 215&219/COCH/2018 6 (A) INDUSTRIAL OR AGRICULTURAL DEVELOPMENT (B) DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA; OR ( C ) DEVELOPMENT OF HOUSING IN INDIA (II) IN RESPECT OF THE SPECIFIED E NTITY REFERRED TO I N SUB - CLAUSE (V) OF CLAUSE (A), THE BUSINESS OF PROVIDING LONG - TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES; AND 9.2 HERE IT IS QUITE APPARENT THAT A HOUSING FINANCE COMPANY WILL BE ENTITLE D TO THE DEDUCTION U/S 36(1)(VIII) FROM INCOME GENERATED OUT OF THE BUSINESS OF PROVIDING LONG - TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. A BANKING COMPANY WILL BE ENTITLED TO THE DEDUCTION U/S 36(1)(VII I) FROM INCOME GENERATED OUT OF THE BUSINESS OF PROVIDING LONG - TERM FINANCE FOR ONLY DEVELOPMENT OF HOUSING IN INDIA . THIS MAKES IT ABUNDANTLY CLEAR THAT FOR THE PURPOSES OF SECTION 36(1)(VIII) PROVIDING LONG - TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE O F HOUSES IN INDIA FOR RESIDENTIAL PURPOSES AND PROVIDING LONG - TERM FINANCE FOR ONLY DEVELOPMENT OF HOUSING IN INDIA ARE DIFFERENT. 9.3 THE WORDS DEVELOPMENT OF HOUSING OR HOUSING HAS NOT BEEN DEFINED IN HE ACT. HENCE, WE WILL HAVE TO TAKE THE DICTIONARY MEANING. HOUSING MEANS AS PER DICTIONARY MEANING : - MERRIAM WEBSTER - IS A GROUP OF INDIVIDUAL DWELLINGS OR APARTMENT HOUSES TYPICALLY OF SIMILAR DESIGN THAT ARE USUALLY BUILT AND SOLD OR LEASED BY ONE MANAGEMENT. I.T.A. NO S . 215&219/COCH/2018 7 CAMBRIDGE : AN AREA CONTAINING LARGE NUMBER OF HOUSES OR APARTMENTS BUILT CLOSE TOGETHER AT THE SAME TIME. COLLINS: A LARGE NUMBER OF HOUSES OR FLATS BUILT TOGETHER AT THE SAME TIME. 9.4 HOWEVER , THE ASSESSEE REFERRED TO LEGISLATIVE HISTORY OF SECTION 3 6 (1)(VIII) . PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 2009 ALL BANKING COMPANIES WERE ENTITLED TO DEDUCTION U/S 36(1)(VIII) FOR THE PROFITS GENERATED FROM THE BUSINESS OF PROVIDING LONG - TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. N OW LET US QUO TE FROM THE EXPLANATORY CIRCULAR FOR FINANCE (NO.2) ACT, 2009. 17. SPECIAL DEDUCTION UNDER SECTION 36(1) (VIII) TO NATIONAL HOUSING BANK (NHB) 17.1 CLAUSE (VIII) OF SUB - SECTION (1) OF SECTION 36 [SECTION 36(1)(VIII)] PROVIDES SPECIAL DEDUCTION TO FINAN CIAL CORPORATIONS AND BANKING COMPANIES OF AN AMOUNT NOT EXCEEDING 20% OF THE PROFITS SUBJECT TO CREATION OF A RESERVE. EXPLANATORY CIRCULAR FOR FINANCE (NO.2) ACT, 2009 PAGE 22 OF 63 17.2 NATIONAL HOUSING BANK (NHB) IS WHOLLY OWNED BY RESERVE BANK OF IN DIA AND IS ENGAGED IN PROMOTION AND REGULATION OF HOUSING FINANCE INSTITUTIONS IN THE COUNTRY. IT PROVIDES RE - FINANCING SUPPORT TO HOUSING FINANCE INSTITUTIONS, BANKS, ARDBS, RRBS ETC., FOR THE DEVELOPMENT OF HOUSING IN INDIA. IT ALSO UNDERTAKES FINANCING OF SLUM PROJECTS, RURAL HOUSING PROJECTS, HOUSING PROJECTS FOR EWS AND LIG CATEGORIES ETC. NHB IS ALSO A NOTIFIED FINANCIAL CORPORATION UNDER SECTION 4A OF THE COMPANIES ACT. 17.3 A VIEW HAS BEEN EXPRESSED THAT NHB IS NOT ENTITLED TO THE BENEFITS OF SECT ION 36(1)(VIII) ON THE GROUND THAT IT IS NOT ENGAGED IN THE LONG - TERM FINANCING FOR CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSE. HENCE THE ACT HAS BEEN AMENDED TO PROVIDE THAT CORPORATIONS I.T.A. NO S . 215&219/COCH/2018 8 ENGAGED IN PROVIDING LONG - TERM FINANCE (INC LUDING REFINANCING) FOR DEVELOPMENT OF HOUSING IN INDIA WILL BE ELIGIBLE FOR THE BENEFIT UNDER SECTION 36(1)(VIII). 17.4 APPLICABILITY - THESE AMENDMENTS WILL BE EFFECTIVE FROM THE 1ST APRIL, 2010 AND WILL ACCORDINGLY APPLY IN RESPECT OF ASSESSMENT YEAR 2010 - 11 AND SUBSEQUENT ASSESSMENT YEARS.' 9.5 IT IS TRUE THAT THE AMENDMENT PROVIDED THE DEDUCTION TO NATIONAL HOUSING BANK. BUT THE AMENDMENT ALSO SUBSTITUTED THE PREVIOUS WORDS WITH WORDS 'DEVELOPMENT OF HOUSING' WHICH HAS TO BE INTERPRETED IN ITS PLA IN DICTIONARY MEANING IN ABSENCE OF ANY DEFINITION GIVEN. WE CANNOT READ INTO LAW ANYTHING THAT IS NOT SPECIFICALLY PROVIDED THEREIN. 9.6 THE ASSESSEE REFERRED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF ERNAKULAM DISTRICT CO - OP B ANK LTD . VS. JOINT DIRE CTOR OF INCOME TAX (TS - 7866 - IT AT - 2017 (COCHIN ) . IT IS STATED THAT DEVELOPMENT OF HOUSING WAS NOT ISSUE FOR ADJUDICATION BEFORE THE IN THIS CASE. THE ITAT HAD ADJUDICATED UPON THE ISSUE OF DEVELOPMENT OF I NFRASTRUCTURE VIDE THE AFORESAID ORDER. THUS , THE SAID CASE IS OF NO HELP TO THE ASSESSEE. 9.7 FROM THE ABOVE, IT IS CLEAR THAT CONSTRUCTION/PURCHASE OF INDIVIDUAL HOUSES DOES NOT TANTAMOUNT TO HOUSING DEVELOPMENT. HENCE, WE UPHOLD THE ACTION OF THE LOWER AUTHORITIES IN SO FAR AS THE DISALLOWANCE OF T HE CLAIM OF THE ASSESSEE FOR A DVANCES/ L OANS GIVEN FOR DEVELOPMENT OF HOUSING IS CONCERNED. NO DEDUCTION SHALL BE ALLOWED TO ASSESSEE U/S 36(1)(VIII) FOR THE AMOUNT CLAIMED BY ASSESSEE IN RESPECT OF ADVANCES/LOANS GIVEN FOR INDIVIDUAL HOUSES. I.T.A. NO S . 215&219/COCH/2018 9 10. THE REVE NUE HAS ALSO RAISED THE FOLLOWING GROUND AS GROUND NO. 4 IN ITA NO. 219/ C OCH/2018: THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE CONSIDERED THE CBDT CIRCULAR NO.665 DATED 05/10/1993 AND INSTRUCTION 17/2008 DATED 26/11/2008 READ WITH GUIDE LINES ISSUED BY RESERVE BANK OF INDIA RELIED ON BY THE ASSESSING OFFICER. 10.1 THE LD. DR SUBMITTED THAT A S PER SEC.36(1)(VIII), DEDUCTION IS ALLOWABLE TO A BANKING COMPANY FOR ELIGIBLE BUSINESS OF PROVIDING LONG TERM FINANCE FOR: (A) INDUSTRIAL OR AG RICULTURAL DEVELOPMENT. (B) DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA OR (C) DEVELOPMENT OF HOUSING IN INDI A . ACCORDING TO THE LD. DR, W ITH REGARD TO ELIGIBILITY FOR DEDUCTION U/S. 36(1)(VIII), THE ASSESSEE SHOULD ADVANCE LOAN FOR ELIGIBLE BUSINESS , HOWEVER, TH E ASSESSEE HA D NOT ADVANCE ANY LOAN FOR SUCH PURPOSES. 10.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE CIT(A) HAS PLACE D RELIANCE ON THE DECISION OF THE ITAT IN THE CASE OF ERNAKULAM DISTRICT CO - OP. BANK LTD. VS. JOINT DIRECTOR INCOME - TAX (TS - 7866 - IT AT - 2017 (COCHIN) WHEREIN IT WAS HELD AS UNDER: 9. BRIEFLY STATED THE FACTS IN RELATION TO THE REVENUE'S APPEAL IS THAT DURING THE ASSESSMENT YEAR 2010 - 11, THE ASSESSE HAD CLAIMED A N AMOUNT OF RS.1,73,33,833/ - AS DEDUCTION U /S.36(1)(VIII) OF THE IT ACT. HOWEVER, WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER RESTRICTED THE SAME TO RS. 45, 93,784 / - . FOR RESTRICTING THE DEDUCTION, THE ASSESSING OFFICER HELD THAT THE ASSESSE IS NOT ENTITLED FOR DEDUCTION IN RESPECT OF THE LOANS FOR HOSPITAL CONSTRUCTION, EDUCATIONAL INSTITUTIONS, INDUSTRIAL PURPOSES, SMALL SCALE PROJECTS. ACCORDING TO THE ASSESSING OFFICER, ONLY THE LOANS UNDER THE I.T.A. NO S . 215&219/COCH/2018 10 CATEGORY OF HOUSING LOANS IS ELIGIBLE FOR DEDUCTION AND ACCORDINGLY RESTRICTED THE CLAIM OF DEDUCTION TO THE INTEREST INCOME EARNED FROM HOUSING LOANS. 9.1 ON APPEAL, THE CIT(A) READ AS FOLLOWS: - '8.5 FURTHER, AS PER THE PROVISIONS OF SECTION 36(1)(VIII), ELIGIBLE BUSINESS MEANS BUSINESS OF PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRI CULTURAL DEVELOPMENT, DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA AND DEVELOPMENT OF HOUSING IN INDIA. THE BREAK UP OF THE LONG TERM FINANCE WAS ALSO FURNISHED BY THE APPELLANT, AS BELOW: - DESCRIPTION INTEREST (RS.) INCOME PURPOSES LONG TERM A/ON HOUSING LOAN AGRI. 11,19,104 HOUSING LOAN AGRI. LOAN 37,89,067 AGRI. PURPOSES MITHRA SHG/NHG LOANS 12,59,494 CARRY BAG MFG. UNITS (INDUSTRIAL PURPOSES) TERM LOANS 64, 1 7 ,383 FOR ESTABLISHMENT OF NEW INDUSTRIES AN D ALLIED ACTIVITIES SOCIETIES AND EXPANSION OF EXISTING INDUSTRIES HOUSING LOANS 42,85,34,630 HOUSING PROJECT LOANS 2,32,48,158 SMALL SCALE INDUSTRIAL PROJECTS ETC. OTHER LONG TERM 4,54,60,679 FOR PURCHASE OF PROPERTY LOANS HOUSING (CONSTRUCTION OF FLATS/PURCHASE OF PROPERTY FOR CONSTRUCTION OF HOUSE/FLATS TOTAL 50,98,18,515 8.6. FROM THE ABOVE DISCUSSIONS, IT IS CLEAR THAT THE SAID LOANS FALLS UNDER THE ELIGIBLE B USINESS OF PROVIDING LO NG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT, DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA I.T.A. NO S . 215&219/COCH/2018 11 AND DEVELOPMENT OF HOUSING IN INDIA AND HENCE IS ELIGIBLE FOR DEDUCTION U/S.36(1)(VIII). ACCORDINGLY, DEDUCTION OF RS.1, 56,78,943 IS ALLOWED TO THE ASSESSEE. 9.2 AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE ID. DR STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT THE NEW ORDER OF THE CIT(A) IS A NON - SPEAKING ORDER AND THE SAME NEEDS TO B E QUASHED. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISSION MADE BEFORE THE INCOME TAX AUTHORITIES. JOINT DIRECTOR OF INCOME TAX {TS - 7866 - IT AT - 2017 (COCHIN) - O} 9.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. AS PER PROVISIONS OF SECTION 3 6 (1)(VIII) OF THE IT ACT, TH E ELIGIBLE BUSINESS MEANS BUSINESS OF PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT, DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA AND DEVELOPMENT OF HO USING IN INDIA. IN OUR VIEW, INDUSTRIAL PURPOSES INCLUDES ALL TYPES OF INDUSTRIES BOTH MANUFACTURING AS WELL AS SERVICE INDUSTRY. ADMITTEDLY, THESE ARE LOANS ADVANCED BY THE ASSESSE FOR LONG TERM FINANCE AND THE DETAILS OF THE PURPOSE FOR WHICH THE LOANS A RE ADVANCED ARE ENUMERATED IN PARA 8.5 OF THE IMPUGNED ORDER OF THE CIT(A). THE CIT(A), AFTER EXAMINING THE PURPOSE FOR WHICH THE LOANS WERE ADVANCED HAD CATEGORICALLY HELD THAT THE INTEREST INCOME, OUT OF LOANS ENUMERATED, CLEARLY FALLS WITHIN THE DEFINIT ION UF 'ELIGIBLE BUSINESS' UNDER SECTION 36(1)(VIII) OF THE ACT. THIS FACTUAL FINDING OF THE CIT(A) WAS NOT DISPELLED BY THE REVENUE BY ANY CONTRARY MATERIAL ON RECORD. MOREOVER, ON IDENTICAL FACTS, THE CLAIM U/S. 36(1)(VIII) OF THE ACT FOR EARLIER ASSESSM ENT YEARS NAMELY A.Y.2008 - 09 AND 2009 - 10 WERE DISALLOWED BY THE CIT(A) AND DEPARTMENT HAD ACCEPTED THE SAME. IT IS WELL SETTLED THAT DEPARTMENT HAVING ACCEPTED THE CIT(A)'S ORDER FOR EARLIER YEARS CANNOT AGITATE THE ISSUE FOR THE CURRENT ASSESSMENT YEARS, UNLESS DEPARTMENT IS ABLE TO PROVE THAT FOR EARLIER YEARS CIT(A) ORDERS WERE ACCEPTED ON ACCOUNT OF LOW TAX EFFECT. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW ON THIS ISSUE AND NO INTERFERENCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . 10.2 ACCORDINGLY, THE CIT(A) OBSERVED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION IN ACCORDANCE WITH SECTION 36(1)(VIII) FOR THE INCOME GENERATED FR OM ADVANCING TO (A) INDUSTRIAL OR AGRICULTURAL DEVELOPMENT AND (B) DEVELOPMENT OF INFRASTRUCTURE I.T.A. NO S . 215&219/COCH/2018 12 FACILITY IN INDIA. THEREFORE , THIS GROUND WAS PARTIALLY ALLOWED. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSEE HAD ADOPTED A NEW METHODOLOGY FOR CLAIMING DEDUCTI ON U/S 36(1) ( VIII) OF IT ACT WHICH IS MORE OBJECTIVE AND HA D RESULTED IN REDUCTION OF ASSESSEES CLAIM. THUS , WHILE ALLOWING DEDUCTION U/S 36(1)(V I II) OF IT ACT , THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW SUCH DEDUCTION AS PER THE NEW COMPUTATION. 10 .3 IN VIEW OF THE ABOVE ORDER OF THE TRIBU N AL IN THE CASE OF ERNAKULAM DISTRICT CO - OP. BANK LTD. VS. JOINT DIRECTOR INCOME - TAX (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN GRANTING RELIEF TO THE ASSESSEE U/S. 36(1)(VIII) OF THE ACT WITH REGARD TO PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA AND THE SAME IS CONFIRMED. THUS, THIS GROUND OF APPEALS OF BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE DISMISSE D. 1 1 . T HE NEXT GROUND IN ASSESSEES APPEAL IN ITA NO. 215/COCH/2018 IS WITH REGARD TO ADDITION OF INTEREST CHARGED U/S 234B OF THE INCOME - TAX ACT, 1961. ON THIS ISSUE ALSO, THE CIT(A) HAS UPHELD THE VIEW OF THE AO IN CHARGING INTEREST U/S 234B, BY FOLLOWING THE DECISION OF THE HON BL E JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN ITA NO. 189 OF 2011, FOR ASSESSMENT YEAR 2005 - 2006. 11. 1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT A SIMILAR ISSUE HAD COME UP FOR CONSID ERATION IN ASSESSEES OWN CASE IN ITA NO.29/COCH/2017 DATED 13/12/2017 WHEREIN IT WAS HELD AS UNDER: I.T.A. NO S . 215&219/COCH/2018 13 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE LEARNED CIT(A) HAS RIGHTLY CONFIRMED THE CHARGING OF INTE REST U/S 234B BY FOLLOWING THE D ECISION OF THE HON BLE J URISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN THE PR ECEDING ASSESSMENT YEAR, I.E. A.Y. 2005 - 2006. THE RELEVANT PART OF THE HIGH COURT ORDER IS REPRODUCED AS UNDER. - 'IT WAS CONTENDED B Y THE ASS ESSEE THAT THE CHARGING OF INTEREST UNDER SECTION 234B IS ERRONEOUS AS THE ASSESSEE CANNOT ANTICIPATE THE CONDITIONS LIKELY TO BE MADE BY THE ASSESSING OFFICER IN REGULAR ASSESSMENT ON A FUTURE DATE. SECTION 234B PROVIDES THAT SHORT FALLS HAS TO BE TAXED U NDER SECTION 43(3) . THE MATTER IS COVERED BY THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANJUM M.H. GHASWALA . (252 ITR 1 ) AND IT WAS HELD THAT INTEREST CONTEMPLATED UNDER SECTIONS 234A, 2348 AND 234C IS MANDATORY IN NA TURE. IN VIEW OF THE FACT THAT THE APPELLATE AUTHORITIES HAVE CONSIDERED THE MATTER BASED ON ' T HE JUDGMENT OF THE SUPREME COURT, THIS ISSUE IS A L SO ANSWERED AGAINST THE APPELLANT'. 11. HERE AGAIN, BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT, IN ASSESSEE'S OWN CASE. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE C I T(A). IT IS ORDERED ACCORDINGLY. 11. 2 IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 12. THE NEXT GROUND IN REVENUES APPEAL IN ITA NO.219/COCH/2018 IS WITH REGARD TO DELETION OF ADDITION OF RS.1,16,00,57,121/ - ON ACCOUNT OF DEPRECIATION CLAIMED ON HELD TO MATURITY CATEGORY INVESTMENTS. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE FIND THAT A SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN I.T.A. NO S . 215&219/COCH/2018 14 CASE IN ITA NOS. 503 & 504/COCH/2016 DATED 01/12/2017 WH EREIN IT WAS HELD AS UNDER: 5. WE HAVE HEARD THE RI V AL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE - BANK HAD TREATED SECURITIES WHICH ARE HTM AS CURRENT ASSETS / STOCK - IN - TRADE. THE VALUE OF THE CURRENT ASSETS / STOCK - IN - TRADE WAS C ALCULATED AT THE END OF THE EACH FINANCIAL YEAR ON COST OR MARKET PRICE WHICHEVER IS LOWER. BY ADOPTING SUCH VALUATION OF SECURITY, THE DEPRECIATION / APPRECIATION WAS DULY OFFERED FOR TAXATION UNDER THE INCOME - TAX ACT. THE BANK WAS CONSISTENTLY ADOPTING T HE ABOVE METHOD OF VALUATION OF SECURITY AS PER THE RBI GUIDELINE. THE INCOME - TAX APPELL ATE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2005 - 2006 TO 2007 - 2008 (SUPRA ) BY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. NEDUNGADI BANK LTD. REPORTED IN 264 ITR 545 (K E R) HAD HELD THAT THE DEPRECIATION ON INVESTMENT WHICH ARE 'HELD TO MATURITY' AND FORMING PAR T OF STOCK - IN - TRADE IS ENTITLED TO CLAIM THE SAME AS A DEDUCTION. THE CIT(A) HAD FOLLOWED THE ORDERS OF THE TRIBUNAL IN ASSESSEE'S OWN CASE, FOR ASST.YEARS 2005 - 2006 TO 2007 - 2008 ( SUPRA). NO JUDGMENT OF THE HON'BLE HIGH COURT HAS BEEN BROUGHT TO OUR NOTI CE REVERSING THE ORDERS OF IT AT IN ASSESSEE'S OWN CASE FOR ASST.YEARS 2005 - 2006 TO 2007 - 2008 (SUPRA ) . HENCE, WE SEE NO REASON TO DEVIATE FROM THE FINDINGS OF THE CO - ORDINAT E BENCH ORDERS OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2 005 - 2 006 TO 2007 - 2008 ( SUPRA). THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AS CORRECT AND IN ACCORDANCE LAW. IT IS ORDERED ACCORDINGLY. 1 3 .1 IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL OF THE REVENUE . 14. IN THE RESULT, BOTH THE APPEAL FIL ED BY THE ASSESSE E AS WELL AS THE APPEAL FILED BY THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND MARCH , 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER I.T.A. NO S . 215&219/COCH/2018 15 PLACE: KOCHI DATED: 22 ND MARCH , 2019 GJ COPY TO: 1 . SOUTH INDIAN BAN K LTD., SIB HOUSE, MISSION QUARTERS, THRISSUR. 2. THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1(1) , THRISSUR. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) , THRISSUR. 4. THE PR. COMMISSIONER OF INCOME - TAX, THRISSUR . 5 . D. R., I.T.A.T., COCHIN BENCH, COC HIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN