The Federal Bank Ltd, Ernakulam V. The ADCIT, Cochin

ITA 231/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81327 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 27-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: RADHESH BHATT
• Keywords: Cost of acquisition
• Section: 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS. 231,232&283/COCH/2014 ASSESSMENT YEARS : 2008-09,2009-10 & 2010-11 THE FEDERAL BANK LTD., FEDERAL TOWERS, ALUVA. [PAN: AABCT 0020H] VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-4, KOCHI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI RADHESH BHATT, CA REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 27/08/2014 DATE OF PRONOUNCEMENT 05/09/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST DIFFERENT ORDERS PASSED BY CIT(A)-II, KOCHI FOR THE ASSESSMEN T YEARS 2008-09, 2009- 10 AND 2010-11 RESPECTIVELY. 2. THE FIRST GROUND IS WITH REGARD TO DISALLOWANC E OF PROVISION FOR LEAVE ENCASHMENT. 3. THE LD. AR RELIED ON THE JUDGMENT OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN LATEX LTD., (72 DTR 212) (KERALA). I.T.A. NOS. 231,232&283/COCH/2014 2 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE CIT(A) ON THIS ISSUE. 5. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT A SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 169/COCH/2014 VIDE ORDER DATED 25/07/2014 WHEREIN THE TRIBUNAL FOLLOWED THE JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SOUTH INDI AN BANK VS. CIT IN I.T.A. NO. 186/2011 VIDE JUDGMENT DATED 22-01-2014 WITH TH E OBSERVATION THAT PROVISION MADE FOR LEAVE ENCASHMENT CANNOT BE ALLOW ED IN VIEW OF THE PROVISIONS OF SEC. 43B(F) OF THE ACT. IN VIEW OF T HE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THIS GROUND IN ALL THREE YEARS. THE JUDGMENT RELIED ON BY THE LD. AR IS DELIVERED IN TH E CONTEXT OF SEC. 263 OF THE I.T. ACT AND IN THAT CIRCUMSTANCES, IT WAS OBSE RVED BY THE HIGH COURT THAT WHEN THE ASSESSING OFFICER HAS ADOPTED ONE OF THE TWO POSSIBLE VIEWS IN LAW ON ALLOWABILITY OF PROVISION FOR LEAVE ENCAS HMENT WHICH MAY RESULT IN LOSS OF REVENUE, WITH WHICH THE CIT DOES NOT AGREE, THE PROVISIONS OF SEC. 263 OF THE I.T. ACT CANNOT BE INVOKED BY THE CIT. 6. THE NEXT GROUND IS WITH REGARD TO ASSESSMENT O F INTEREST/COMMISSION RECEIVED UPFRONT ON INLAND/EXPORT BILLS PURCHASED/D ISCOUNTED/LCS OPENED WHICH WAS CONFIRMED BY THE CIT(A). I.T.A. NOS. 231,232&283/COCH/2014 3 7. AFTER HEARING BOTH THE PARTIES, WE FIND THIS ISS UE WAS ALSO CONSIDERED BY THE TRIBUNAL IN AN EARLIER OCCASION IN THE ASSES SEES OWN CASE IN I.T.A. NO. 169/COCH/2014 WHEREIN THE TRIBUNAL DISMISSED T HIS GROUND BY OBSERVING AS FOLLOWS: 10. WE HAVE HEARD THE PARTIES AND PERUSED THE RECO RD. IN THIS CASE, THE ASSESSEE HAS TRANSFERRED AN AMOUNT OF RS.27.64 CROR ES TOWARDS OTHER LIABILITIES OUT OF THE INTEREST RECEIVED UPFRONT ON INLAND BILLS AND EXPORT BILLS PURCHASED/DISCOUNTED. THOUGH INITIALLY, THE FULL AMOUNT RECEIVED IS CREDITED TO THE P&L ACCOUNT AS IT WAS RECEIVED BY T HE ASSESSEE, AT THE TIME OF PREPARING FINAL ACCOUNTS, PROPORTIONATE INT EREST RELATING TO THE REMAINING PERIOD OF MATURITY OF THE BILLS WAS TRANS FERRED FROM THE P&L ACCOUNT TO UNEXPIRED INTEREST/DISCOUNT/COMMISSION I N THE BALANCE SHEET. ACCORDING TO THE LD. AR, THIS AMOUNT IS NOT ACCRUED TO THE ASSESSEE AND SINCE THE ASSESSEE CAN CHARGE INTEREST ONLY ON THE BORROWER, SUCH INCOME IS APPORTIONED ON THE BASIS OF PERIOD OF TIM E. IN OUR OPINION, WHEN BILLS ARE DISCOUNTED, THE TRANSACTION IS COMPL ETED AND INCOME IS ACCRUED TO THE ASSESSEE AND THERE IS NO QUESTION OF POSTPONEMENT OF RECOGNITION OF INCOME. HENCE, IN OUR OPINION, THE LOWER AUTHORITIES ARE JUSTIFIED IN TREATING THE AMOUNT ACCRUED AS INCOME OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS DISMISS ED. 8. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TR IBUNAL, WE ARE INCLINED TO DISMISS THIS GROUND IN ALL THE THREE AS SESSMENT YEARS. 9. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND T HAT THE CIT(A) ERRED IN CONFIRMING A PART OF THE DISALLOWANCE MADE UNDER SECTION 14A OF THE I.T. ACT WITHOUT APPRECIATING THAT THE ASSESSEES OWN FU NDS WERE MORE THAN INVESTMENTS IN TAX FREE SECURITIES AND HENCE SUCH I NVESTMENTS OUGHT TO BE I.T.A. NOS. 231,232&283/COCH/2014 4 REGARDED AS MADE OUT OF ITS OWN FUNDS AND THE ASSES SEE HAD NOT INCURRED ANY INTEREST ON BORROWED FUNDS IN RELATION TO INCOM E FROM TAX FREE SECURITIES, WHICH DO NOT FORM PART OF THE TOTAL INC OME OF THE ASSESSEE. 10. THE LD. AR PRAYED THAT THE ADDITIONAL GROUND M AY BE ADMITTED AND DUE TO INADVERTENCE, THIS GROUND WAS NOT RAISED BEF ORE THE LOWER AUTHORITIES ON EARLIER OCCASION. ON MERIT, THE LD. AR RELIED ON THE FOLLOWING JUDGMENTS: I) CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 34O (BOM.). II) CIT VS. HDFC LTD. I.T.A. NO. 330/2012 (BOM.) DA TED 23 RD JULY, 2014 III) EAST INDIA PHARMACEUTICAL WORKS VS. CIT (1997) (224 ITR 627) (SC) IV) WOOLCOMBERS OF INDIA LTD. VS. CIT (1982) 134 IT R 219 (CAL.) 11. ON THE OTHER HAND, THE LD. DR OBJECTED TO THE A DMISSION OF THE ADDITIONAL GROUND AND ALSO SUBMITTED THAT THIS ISSU E CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL ON AN EARLIER OC CASION IN THE CASE OF THE DHANALAKSHMI BANK LTD. VS. ACIT IN I.T.A. NOS.93&9 4/COCH/2009 DATED 30/12/2011 WHEREIN IT WAS HELD AS UNDER: 2. THE FIRST ISSUE IN THIS APPEAL IS WITH REFER ENCE TO THE DISALLOWANCE IN THE SUM OF ` 59,22,784/-BY APPLYING S. 14A OF THE ACT, WITH THE IMPUGNED EXPENSES INCLUDING THE PURCHASE COST OF IN TEREST-FREE SECURITIES, AS ALSO THE PROPORTIONATE SHARE OF ADMI NISTRATIVE EXPENSES, I.E., ` 58,641/-. IT WAS THE COMMON CONTENTION OF THE PARTI ES DURING HEARING BEFORE US THAT THOUGH THE MATTER STANDS DEC IDED IN THE ASSESSEES FAVOUR BY THE TRIBUNAL IN THE ASSESSEES OWN CASE F OR EARLIER YEAR, THE I.T.A. NOS. 231,232&283/COCH/2014 5 MATTER HAS SINCE ATTAINED FINALITY BY THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ASSESS EE-BANK, ALONG WITH, OTHERS FOR SEVERAL YEARS (IN I.T.A. NO. 1324 OF 200 9 DATED.21-10-2010 (EXHIBIT P-1), IT MAY BE RESTORED BACK TO HE FILE O F THE ASSESSING AUTHORITY TO CARRY OUT THE DIRECTIONS BY THE HONBL E HIGH COURT, AFTER HEARING THE ASSESSEE. WE FIND THE SAID CONTENTION T O BE IN ACCORD WITH THE PROCEDURE THAT WOULD ENABLE THE APPLICATION OF THE DECISION BY THE HONBLE HIGH COURT IN A FAIR AND TRANSPARENT MANNER . WE, ACCORDINGLY, DIRECT SO. 12. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO REMIT THIS ISSUE BACK TO THE FILE OF THE AO FOR FRESH CON SIDERATION. 13. IN THE RESULT, ALL THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 05-09 -2014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 05 SEPTEMBER, 2014 GJ COPY TO: 1. THE FEDERAL BANK LTD., FEDERAL TOWERS, ALUVA. S2. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-4, KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN