ACIT, Gulbarga V. Krishna Grameena Bank, Gulbarga

ITA 232/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63851 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A SHANKAR SHRI S K AMBAST
• Keywords: Capital asset; Business income; Depreciation; Revenue expenditure

Judgement Text

PAGE 1 OF 14 ITA NOS.117 & 232/B ANG/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.117/BANG/2012 (ASST. YEAR 2008-09) M/S KRISHNA GRAMEENA BANK, HEAD OFFICE, KUSNOOR ROAD, GULBARGA. PA NO. AAGFK 6964 K VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, GULBARGA. (APPELLANT) (RESPONDENT) ITA NO.232/BANG/2012 (ASSESSMENT YEAR 2008-09) (BY REVENUE) DATE OF HEARING : 29.11.2012 DATE OF PRONOUNCEMENT : 14.12.2012 APPELLANT BY : SHRI A SHANKAR, ADVOCATE RESPONDENT BY : SHRI S K AMBASTHA, CIT (DR-I), I TAT OR DER PER GEORGE GEORGE K : THESE TWO APPEALS ONE BY THE ASSESSEE-BANK AND A NOTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT (A), HUBLI DATED 30.11.2011. THE RELEVANT ASSESSMENT YEAR IS 2 008-09. I. ITA NO.117/B/12 AY 2008-09 BY THE AS SESSEE BANK: 2. THE ASSESSEE-BANK HAS, IN ITS GROUNDS OF APPEA L, RAISED 8 GROUNDS . HOWEVER, ALL THE GROUNDS RELATE TO THE SOLITARY I SSUE WHETHER THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DISALLOWING RS.79,88,196/- BEING PROVISION FOR LEAVE ENCASHMENT. PAGE 2 OF 14 ITA NOS.117 & 232/B ANG/2012 2 II. ITA NO.232/B/12 AY 2008-09 BY THE R EVENUE: 3. THE REVENUE IN ITS GROUNDS OF APPEAL, RA ISED FIVE GROUNDS. GROUND N0.5 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUE IS IN VOLVED, IT DOESNT REQUIRE ANY ADJUDICATION. THE REMAINING GRO UNDS RELATE TO THE FOLLOWING ISSUES, NAMELY: (1) (GROUND NOS.1,3 & 4) THAT THE CIT (A) HAD ERRED IN TREATING THE INVESTMENT MADE BY THE ASSESSEE BANK IN S ECURITIES AS STOCK- IN-TRADE; & (2) (GROUND NO.2) THAT THE CIT (A) ALSO ERRED IN ALLOWING THE PREMIUM PAID FOR PURCHASE OF A CAPITAL ASSET TO BE AMORTIZED AND ALLOWED AS REVENUE EXPENDITURE. 4. AS THE ISSUES RAISED BY BOTH THE PARTIES PERTAIN ING TO THE SAME ASSESSEE AS WELL AS THE SAME ASSESSMENT YEAR, FOR TH E SAKE OF CLARITY AND CONVENIENCE, THEY WERE HEARD, CONSIDERED TOGETHER AN D DISPOSED OFF IN THIS CONSOLIDATED ORDER. 5. LET US NOW PROCEED TO DEAL WITH THE ISSUES RAIS ED BY THE ASSESSEE-BANK AS UNDER: I. ITA NO.117/B/12 AY 2008-09 BY THE AS SESSEE-BANK: 6. THE ISSUE, IN BRIEF, IS AS UNDER: THE ASSESSEE-BANK [THE ASSESSEE HENCEFORTH], A GRAMEENA BANK ENGAGED IN THE BANKING ACTIVITY, FURNISHED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ADMITTING AN IN COME OF RS.24,48,06,180/- ON 25.7.2008 WHICH WAS INITIALLY P ROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SC RUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED, A MONG OTHERS, THAT THE PAGE 3 OF 14 ITA NOS.117 & 232/B ANG/2012 3 ASSESSEE HAD CLAIMED PROVISION ON PRIVILEGE LEAVE E NCASHMENT PAYABLE TO ITS EMPLOYEES AND, ACCORDINGLY, DEBITED IN ITS P & L ACC OUNT. 6.1. AFTER DUE CONSIDERATION OF THE ASSESSEES CO NTENTIONS, THE AO HAD REJECTED THE ASSESSEES SUBMISSION AS RECORDED IN HIS ASSESSMENT ORDER UNDER DISPUTE AND TREATED THE SAME AS CONTINGENT LI ABILITY. THE REASONS RECORDED BY HIM ARE EXTRACTED AS UNDER: 5.(ON PAGE 4) THE PROVISION OF ACTUARIAL VALUE O F PRIVILEGE LEAVE ENCASHMENT AT RS.79,88,196/- HAS NO T CRYSTALLIZED DURING THE PREVIOUS YEAR RELEVANT TO AY 2008-09. THE CONTINGENT LIABILITY AMOUNT DOES NOT CONSTITUTE DEDUCTIBLE EXPENDITURE FOR THE PURPOSE O F INCOME-TAX ACT. THUS, PUTTING ASIDE OF MONEY WHICH MAY BECOME EXPENDITURE ON THE HAPPENING OF A FUTURE EVE N WOULD NOT CONSTITUTE ALLOWABLE EXPENDITURE UNDER TH E I.T. ACT. IT IS ALSO PERTINENT TO MENTION THAT THIS IS A PROVISION CREATED FOR MEETING A FUTURE LIABILITY WHI CH MAY ARISE OR MAY NOT ARISE AT A LATER DATE AND THE LIABI LITY DID NOT CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY, THIS PROVISION MADE FOR ACTUARIAL VALUA TION OF PRIVILEGE LEAVE AT RS.79,88,196/- AND CLAIMED IN P & L ACCOUNT IS DISALLOWED AS A CONTINGENT LIABILITY. 7. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE, AMON G OTHERS, WITH THE CIT (A) FOR RELIEF. BEING QUERIED, THE ASSESSE E HAD MADE A LENGTHY SUBMISSION COUPLED WITH VARIOUS RULINGS OF THE HON BLE SUPREME COURT TO JUSTIFY ITS CLAIM. BRUSHING ASIDE THE CONTENTIONS O F THE ASSESSEE, THE LEARNED CIT (A) HAD SUSTAINED THE STAND OF THE AO O N THIS ISSUE. THE REASONING OF THE CIT (A) IN DOING SO IS EXTRACTED A S UNDER: PAGE 4 OF 14 ITA NOS.117 & 232/B ANG/2012 4 10.2. (ON PAGE 9) THE APPELLANT HAS RELIED UPON TH E DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LTD (BEML) V. CIT 162 CTR 325 (SC). THE FACTS OF THE APPELLANTS CASE IS CLEARLY DISTINGUISHABLE FROM THAT OF BEMLS CASE, SINCE IN THE CASE OF BEML, THE COMPANY HAD CREATED A FUND FOR LEA VE ENCASHMENT SEPARATELY AND THEN HAD MADE A CLAIM OF T HE SAME. IN THE APPELLANTS CASE, NO SUCH FUND WAS CR EATED AND IT IS MERELY A PROVISION AND A BOOK ENTRY OUT OF WHICH NO PAYMENTS ALSO HAVE BEEN MADE. IN THE CIRCUMSTANC ES, WHEN NO FUNDS ARE CREATED AS IN THE CASE OF BEML, PROVISION FOR ACCRUED LEAVE SALARY REMAINS A CONTING ENT LIABILITY AND, THEREFORE, NOT PERMISSIBLE DEDUCTION. THE LIABILITY OF ENCASHMENT OF LEAVE WILL ARISE ONLY WHEN AN EMPLOYEE MAY NOT GO LEAVE AND INSTEAD APPLY FOR ENCASHMENT. IN VIEW OF THIS, THE ADDITION MADE BY T HE AO ON ACCOUNT OF THE PRIVILEGE LEAVE ENCASHMENT OF RS.52,35,008/- IS SUSTAINED 8. AGITATED, THE ASSESSEE HAS COME UP WITH THE PRE SENT APPEAL. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARNED AR ARE SUMMED UP AS UNDER: - THAT THE AUTHORITIES BELOW HAVE FAILED TO APP RECIATE THAT THE PROVISION FOR LEAVE ENCASHMENT IS ASCER TAINED LIABILITY AND HAS BEEN PROVIDED ON THE BASIS OF AN ACTUARIAL VALUATIO N AND IS ESSENTIAL COMPONENT IN THE DETERMINATION OF THE INC OME; - THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECIAT E THAT THE ENTRY IN THE BOOKS OF ACCOUNTS IN THIS REGARD IS IN ACCORDANCE WITH THE ACCEPTED STANDARDS AND GUIDELINES ISSUE BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THE QUESTION OF DISALLOWANCE OF THE SAME ON ACCOUNT OF BEING A C ONTINGENT LIABILITY DOES NOT ARISE AS IT IS ASCERTAINED LIABIL ITY; PAGE 5 OF 14 ITA NOS.117 & 232/B ANG/2012 5 - THAT WITHOUT PREJUDICE, THE AUTHORITIES BELOW OUGHT TO HAVE ALLOWED THE AMOUNT ACTUALLY PAID DURING THE YEAR AND DEBITED TO PROVISIONS ACCOUNT AS OTHERWISE, BY NOT ALLOWING THE PROVISION AND ALSO PAYMENT MADE DURING THE YEAR AMOUNTS TO DENI AL ON BOTH ACCRUAL AND PAYMENT BASIS WHICH IS NOT IN ACCOR DANCE WITH LAW; - THAT THE AO FAILED TO APPRECIATE THAT THE PROVISION S TOWARDS LEAVE ENCASHMENT WERE VERY MUCH ASCERTAINED LIABILIT Y; RELIES ON CASE LAWS : (I) BHARAT EARTH MOVERS V. CIT 245 ITR 428 (SC); (II) METAL BOA COMPANY OF INDIA LTD. V. THEIR WORKMEN 73 ITR 53 (SC); (III) CALCUTTA CO LTD V. CIT 37 ITR 1 (SC) - THAT IT IS ALSO RELEVANT THAT UNDER THE COMPANIES A CT, THE ACCOUNTS WILL REPRESENT TRUE AND FAIR VIEW ONLY IF A LL ITEMS OF EXPENDITURE ARE PROVIDED FOR, THAT IT IS WITHOUT DO UBT THAT THE COMPANY HAS A LIABILITY ON ACCOUNT OF PENSION, LEAVE ENCASHMENT AND GRATUITY. THE COMPANY HAD OBTAINED AN ACTUARIAL VALUATION AND PROVIDED FOR THE AMOUNTS IN ACCORDANCE WITH THE VALUATION AS IT IS ONE OF THE ACCEPTED METHODS OF PROVIDING F OR SUCH EXPENSES; & - THAT THE RELIANCE BY THE AUTHORITIES ON THE PROVISIO NS OF S. 43B(F) IS NOT IN ACCORDANCE WITH LAW AND THAT THE S AID PROVISION HAS BEEN STRUCK DOWN BY THE HONBLE CALCUTTA HIGH CO URT IN THE CASE OF EXIDE INDUSTRIES LTD V. UNION OF INDIA [292 ITR 470 (CAL)] 8.1. ON THE OTHER HAND, THE LEARNED D R SUPPORTED THE STAND OF THE AUTHORITIES BELOW. AS THE CIT (A) HAD RECORDED HIS REASONING FOR REJECTING THE ASSESSEES CONTENTIONS, IT WAS PLEADED THAT THE GRIEVANCE OF THE ASSESSEE IS UNFOUNDED WITHOUT ANY BASIS WHICH REQUIR ES TO BE DISMISSED. PAGE 6 OF 14 ITA NOS.117 & 232/B ANG/2012 6 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ALSO DILIGENTLY PERUSED THE RELEVANT CASE RECORDS. AT THE OUT-SET, WE WOULD LIKE TO REITERATE THAT A SIMILAR ISSUE HAD BEEN CONSIDERED IN THE ASSESSEES OWN CASE IN T HE IMMEDIATELY PREVIOUS ASSESSMENT YEAR BEFORE THE EARLIER BENCH OF THIS TRI BUNAL. AFTER DUE CONSIDERATION OF THE ASSESSEES SUBMISSION AND ALSO EXTENSIVELY QUOTING THE RULINGS OF THE (I) HONBLE SUPREME COURT N THE CASE OF BEML (SUPRA); AND (II) THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXID E INDUSTRIES LTD (SUPRA), THE HONBLE BENCH OF THIS TRIBUNAL IN ITA NOS.146 & 224/BANG/2011 DATED 15.6.2012 HAD RECORDED ITS FINDINGS AS UNDER: 6.3.3. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AS DISCUSSED ABOVE AND IN ACCORDANCE WITH THE RATIO AND REASONING LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF BEML (SUPRA) AND THE FACT THAT THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF EXIDE INDUSTRIES L TD (SUPRA) STRUCK DOWN THE PROVISIONS OF S. 43B(F) OF THE ACT, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSE ES CLAIM FOR DEDUCTION OF THE PROVISION FOR PRIVILEGE LEAVE ENCASHMENT IS NOT A CONTINGENT LIABILITY AND IS TO BE ALLOWED.. 9.1. AS THE ISSUE UNDER CONSIDERATION IS SIMILAR TO THAT OF THE ONE WHICH HAS BEEN DISCUSSED ABOVE AND ALSO IN CONFORMI TY WITH THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF BEML ( SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEES CLAIM FOR DEDUC TION OF THE PROVISION FOR PRIVILEGE LEAVE ENCASHMENT WAS NOT A CONTINGENT LIA BILITY AS PROJECTED BY THE AUTHORITIES BELOW. IT IS ORDERED ACCORDINGLY. PAGE 7 OF 14 ITA NOS.117 & 232/B ANG/2012 7 WE SHALL NOW PROCEED TO ADDRESS THE GRIEVANCES OF THE REVENUE HEREUNDER, CHRONOLOGICALLY. II. ITA NO.232/B/12 AY 2008-09 BY THE R EVENUE: 10. BRIEFLY STATED, THE ASSESSEE HAD CLAIMED DEPREC IATION OF RS.8,06,801/- ON SECURITIES WHICH HAS BEEN REJECTED BY THE AO ON THE GROUND THAT THE INCOME RECOGNITION AS PER THE BANKI NG REGULATIONS WOULD DIFFERENT FROM THE INCOME DETERMINATION AS PER INCO ME-TAX. THE DECREASE IN THE VALUE OF THE SECURITIES AS ON 31 ST MARCH IS ONLY A NOTIONAL LOSS AND IF THE ASSESSEE HAS SOLD THE SECURITIES AND INCURRED L OSS THEN SUCH LOSS CAN BE ALLOWED. FURTHER, IF IN THE SUBSEQUENT YEAR, THE VA LUE OF THE SECURITIES IS MORE THAN THE NAV OF A PARTICULAR SECURITY, THEN THE ASSESSEE WOULD BE BOOKING A NOTIONAL PROFIT. THERE IS NO SUCH PROVIS ION UNDER THE INCOME-TAX FOR TAXING OF JOINTLY RELIEF OF NOTIONAL INCOME OR N OTIONAL LOSS. BUT, HOWEVER, SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE PROFIT OR LOSS WOULD ONLY BE CONSIDERED IF THE SECURITY IS S OLD. IN OTHER WORDS, THERE SHOULD BE A CRYSTALLIZATION OF AN EVENT IN AS MUCH AS THE SALE TAKING PLACE AND WHAT THE ASSESSEE CLAIMED IS NOTIONAL LOS S AND THE SAME CANNOT BE ALLOWED. 11. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE TH E FIRST APPELLATE AUTHORITY. DURING THE COURSE OF APPELLATE PROCEEDI NGS, THE ASSESSEE HAD MADE A LENGTHY CONTENTION BY EXTENSIVELY QUOTING THE R ULINGS OF VARIOUS JUDICIARIES TO JUSTIFY ITS CLAIM AS RECORDED IN THE CIT (A)S ORDER UNDER CONSIDERATION. AFTER TAKING INTO ACCOUNT THE ASSES SEES CONTENTION AND ALSO PAGE 8 OF 14 ITA NOS.117 & 232/B ANG/2012 8 ELABORATELY ANALYZING AND REPRODUCING THE RELEVANT PO RTIONS OF THE FINDINGS OF THE EARLIER BENCH OF THIS TRIBUNAL IN THE CASE O F ACIT (LTU), BANGALORE V. VIJAYA BANK IN ITA NOS.253 & 225/BANG/07 DATED 24.1. 2008 FOR THE AY 2003-04, THE CIT (A) HAD RECORDED HIS FINDINGS ON T HE ISSUE AS UNDER: 12.5.(ON PAGE 21) I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE VIEW THAT INVESTMENTS OF BANKS ARE STOCK-IN-TRADE I S SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDI NG THOSE IN THE CASES OF CIT V. KARUR VYSYA BANKLTD (200 5) 273 ITR 510 (MAD), ITO V. J & K BANK LTD (2005) 95 ITD 141 ASR).................................. ................................... THE HONBLE ITAT HAS ALSO CONSIDERED THIS ISSUE IN ITS ORDER DATED 3.12.2008 IN ITA NO.122/BANG/2008 IN TH E CASE OF CORPORATION BANK IN ASSESSMENT YEAR 2004-05, WHERE IT WAS HELD THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK V. CIT (1999) 240 ITR 355 WAS DIRECTLY APPLICABLE TO TH IS ISSUE. IN THE CASE, THE HONBLE SUPREME COURT HAS HELD THAT PREPARATION OF THE BALANCE SHEET IN ACCORDANCE WITH STATUTORY PROVISIONS WILL NOT DISENTITLE THE ASSESSE E FROM SUBMITTING THE INCOME-TAX RETURN ON ITS REAL TAXABL E INCOME IN ACCORDANCE WITH THE METHOD OF ACCOUNTING IT ADOPTS CONSISTENTLY AND REGULARLY. FOR THE PURPOSE O F INCOME-TAX, WHAT IS TO BE TAXED IS REAL TIME WHICH IS TO BE DEDUCED ON THE BASIS OF THE ACCOUNTING SYSTEM REGULA RLY MAINTAINED BY THE ASSESSEE. THE METHOD BY WHICH THE ASSESSEE BANK IS VALUING SECURITIES BY TREATING THEM AS STOCK-IN-TRADE IS IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES AND THE REVENUE ITSELF IS TREATING THE P ROFIT ON MATURITY OF SUCH SECURITIES AS BUSINESS INCOME. THEREFORE, SUCH SECURITIES CANNOT BE TREATED AS CAP ITAL ASSETS. PAGE 9 OF 14 ITA NOS.117 & 232/B ANG/2012 9 FOLLOWING THE ABOVE DECISION OF THE HONBLE SUPREME COURT AND IN LINE WITH ITS DECISION DATED 24.1.2008 IN ITA NO.253/BANG/2007 IN THE CASE OF ACIT (LTU) V. VIJAYA BANK, THE HONBLE ITAT HAS HELD THAT THE ASSESSEE B ANK IS ENTITLED TO VALUE ALL INVESTMENTS AT LCMV BY TREA TING SUCH INVESTMENTS AS STOCK-IN-TRADE, AND HAS DELETED THE DISALLOWANCE MADE ON LOSS ON VALUATION. 13.0. AFTER CAREFUL CONSIDERATION OF BOTH AOS AND APPELLANTS VERSIONS AND VARIOUS COURT DECISIONS CI TED ABOVE, I AM OF THE OPINION THAT THE DEPRECIATION CL AIMED ON INVESTMENTS IS AN ALLOWABLE DEDUCTION AND, ACCOR DINGLY, ADDITION MADE BY AO TO THE TUNE OF RS.8,06,801.00 UN DER THIS HEAD IS NOW DELETED. 12. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARN ED D R ARE SUMMARIZED AS UNDER: - THAT THE CIT (A) HAD ERRED IN TREATING THE INVESTME NT MADE BY THE BANK IN SECURITIES AS STOCK-IN-TRADE BY RELYING U PON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F UCO BANK V. CIT AS REPORTED IN 240 ITR 355 WITHOUT APPRECIAT ING THE FINDING OF THE AO THAT THE AMOUNTS INVESTED SECURIT IES CONSTITUTED INVESTMENT AND HAVE TO BE TILL MATURITY AND ARE NOT AVAILABLE FOR SALE READILY TO BE TREATED AS STOCK-IN -TRADE; - THAT THE BOARDS CIRCULAR NO.599 RELIED UPON BY THE CIT (A) HAS BEEN WITHDRAWN BY THE BOARD VIDE CIRCULAR NO.655 DATED 5.10.1993 WHICH HAS BEEN OVERLOOKED BY THE CIT (A). AS PER THE SAID CIRCULAR, IT WAS LEFT TO THE AO TO DECIDE WHETHER A PARTICULAR ITEM OF INVESTMENT CONSTITUTES STOCK-IN- TRADE OR A CAPITAL ASSET. ACCORDINGLY, THE CIT (A) HAS NOT APP RECIATED THE FINDING OF THE AO THAT THE INVESTMENT MADE BY THE BA NK IN SECURITIES CONSTITUTED AS A CAPITAL ASSET; & PAGE 10 OF 14 ITA NOS.117 & 232/ BANG/2012 10 - THAT THE CIT (A) ALSO ERRED IN TREATING THE SECURIT IES HELD BY THE ASSESSEE UNDER THE CATEGORY OF HELD TO MATURITY AS HELD IN THE NATURE OF STOCK-IN-TRADE WITHOUT APPRECIATING T HE FACT THAT THESE SECURITIES SHALL BE HELD TILL MATURITY AND ARE NOT AVAILABLE FOR SALE READILY AS IN THE CASE OF SECURITIES HELD U NDER AS STOCK- IN-TRADE. THE LEARNED DR FINALLY SUBMITTED THAT THE ABOVE IS SUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF ING VYSYA BANK IN ITA NO.2886/05 DATED 6/ 6/2012. IT WAS, THEREFORE, PLEADED THAT THE FINDINGS OF THE CIT (A) REQUIRE TO BE REVERSED AND THAT OF THE AO BE RESTORED. 12.1. ON THE OTHER HAND, THE LEARNED AR SUPPORTED THE STAND OF THE CIT (A) ON THE ISSUE. IN FURTHERANCE, THE LEARNED A R DREW THE ATTENTION OF THIS BENCH TO THE EFFECT THAT THE JUDGMENT OF HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF ING VYSYA BANK (SUPRA) HAS BEEN CHALLENGED BEFORE THE HONBLE SUPREME COURT BY THE ASSESSEE-BANK AND SLP H AS BEEN ADMITTED. A COPY OF THE ORDER OF HONBLE APEX COURT ADMITTING TH E SLP IS PLACED ON RECORD. IT WAS, THEREFORE, PLEADED THAT IN VIEW OF THE ABOVE SCENARIO, THE PRESENT ISSUE BE RESTORED ON THE FILE OF THE AO WIT H A SPECIFIC DIRECTION TO DECIDE THE ISSUE ONLY AFTER THE OUTCOME OF THE RULIN G OF THE HONBLE SUPREME COURT IN THE CASE OF ING VYSYA BANK LTD (SUPR A). 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND ALSO PERUSED THE RELEVANT CASE RECORDS. PAGE 11 OF 14 ITA NOS.117 & 232/ BANG/2012 11 13.1. AS POINTED OUT BY THE LEARNED DR, IN THE CASE OF CIT V. ING VYSYA BANK LTD., A SIMILAR ISSUE TO THAT OF THE PRESE NT ONE WAS PLACED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT FOR CONSIDERA TION. AFTER TAKING INTO ACCOUNT THE CONTENTIONS OF EITHER PARTY, THE HONBLE COURT IN ITS RULING IN ITA NO.2886/2005 DATED 6.6.2012 HAD HELD THUS: 31.IT IS, THEREFORE, HELD THAT ALL HOLDIN GS OF A BANKING INSTITUTION IN THE FORM OF INVESTMENT IN SECURITIES DOES NOT AUTOMATICALLY ACQUIRE THE CHARACTERISTIC OF STOCK-IN-TRADE. AS TO WHETHER A PARTICULAR INVESTMENT IN ANY SECURITY IS IN THE NATUR E OF STOCK-IN-TRADE OR OTHERWISE IS A QUESTION WHICH HAS TO BE EXAMINED IN EACH CASE HAVING REGARD TO THE NATURE O F TRANSACTIONS, MANNER OF HOLDING AND IF IT IS CURTAI LED OR REGULATED BY ANY OTHER EXTERNAL OR OUTSIDE COMPULSION S OTHER THAN THE VOLITION OF THE ASSESSEE. IN THE IN STANT CASE, WE ARE OF THE VIEW THAT ON THE FINDINGS RECOR DED BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE APPELL ATE COMMISSIONER, THE TRIBUNAL COULD NOT AND SHOULD NOT HAVE UPSET SUCH Z FINDING BY DRAWING A COMPARISON TO A SITUATION PREVAILING IN RESPECT OF SOME OTHER BANK AND THE VIEW OF THE TRIBUNAL IN THAT CASE WAS BASED ON THE BOARD CIRCULAR WHICH HAD HELD THE FIELD AT THE RELEVANT P OINT OF TIME. EVEN OTHERWISE, WE FIND IN THE FACTS AND CIRCUMSTANCES, THIS IS A CLEAR CASE OF INVESTMENT I N THE SECURITIES, WHICH CANNOT BE CHARACTERIZED AS STOCK- IN- TRADE AT ALL, AS EVEN AS PER THE ADMISSION OF THE A SSESSEE AND AS PER THE RELAXATION, ASSUMING IT HAS ASNY RELE VANCE, GIVEN BY RBI, IT CAN ONLY BE 30% OF THE INVESTMENT WH ICH CAN BE CLOTHED WITH THE CHARACTER OF STOCK-IN-TRADE , AS THE ASSESSEE-BANK HAD SOME FREEDOM IN EXCHANGING SU CH SECURITIES/ OR ANY OTHER FORM OF SECURITY, IT CAN BE SAID THAT TO THIS EXTENT SECURITIES ARE AVAILABLE FOR SA LE, BUT THE CONDITION IS THAT IT AGAIN SHOULD BE INVESTED I N ANY OTHER SECURITY, SO THAT REQUIREMENT OF INVESTMENT IN SECURITIES AS PER RBI GUIDELINES/INSTRUCTIONS IS PAGE 12 OF 14 ITA NOS.117 & 232/ BANG/2012 12 MAINTAINED BY THE BANK. IT IS FOR THIS REASON, WE A LSO REJECT THE REQUEST OF SRI PARTHASARATHI THAT THE MA TTER WARRANTS REMAND TO THE TRIBUNAL FOR RE-EXAMINATION ON THIS ASPECT OF THE MATTER. ACCORDINGLY, QUESTIONS 1 AND 2 ARE ANSWERED IN THE NEGATIVE AND IN FAVOUR OF THE REVENUE. 13.2. AGGRIEVED, THE ASSESSEE [ING VYSYSA BANK LTD] HAD APPROACHED THE HONBLE SUPREME COURT THROUGH A SPECIAL LEAVE T O APPEAL (CIVIL) NO.27546/2012 FROM THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA. ON HEARING THE PETITION, THE HONBLE SUPREME COURT HAD MADE AN ORDER ON 28.9.2012 WHICH STATES THAT LEAVE GRANTED. THE APPEAL WILL BE HEARD . [COURTESY: PHOTOSTAT COPY OF THE ORDER IS PLACED ON R ECORD]. THUS, IN OUR CONSIDERED VIEW, THE HONBLE SUPREME COURT IS SEIZE D OF THE ISSUE AND SINCE BASIC FACTS ARE NOT RECORDED AS REGARDS W HETHER THE ENTIRE INVESTMENT ARE CLASSIFIED AS HELD TO MATURITY OR N OT, THIS ISSUE IS RESTORED ON THE FILE OF THE ASSESSING OFFICER. IN ORDER TO AVOID MULTIPLICITY OF PROCEEDING, IT IS PREFERABLE THAT THE ASSESSING OFF ICER KEEPS THE MATTER IN ABEYANCE UNTIL THE HONBLE SUPREME COURT DECIDES THE VERY SAME ISSUE IN THE CASE OF ING VYSYA BANK AND TO TAKE APPROPRIATE DECISI ON IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 13.3. WE WOULD LIKE TO PLACE ON RECORD THAT OUR AB OVE DIRECTIONS ARE IN CONFORMITY WITH THE FOLLOWING JUDICIAL VIEWS: (I) CIT & ANOTHER V. M/S DHRUV & CO., IN ITA NO.938 OF 2006 DATED 10.8.2011 OF THE HONBLE HIGH COURT OF KARNATAKA; PAGE 13 OF 14 ITA NOS.117 & 232/ BANG/2012 13 (II) CIT V. S.N. WODEYAR (HUF), MYSORE IN T .R.C. NO.17/2000 DT: 21.11.2007 OF THE HONBLE HIGH COURT OF KARNATAKA; (III) ITO V. M/S. BANGALORE CLUB IN ITA NO .562/BANG/06 DATED 29.6.2010 OF THE ITAT, BANGALOR E; & (IV) M/S. BANGALORE CLUB V. ITO IN ITA NO. 919/BANG/2011 DATED: 17.7.2012 (AY 2007-08) OF THE I TAT, BANGALORE. 14. THE OTHER GRIEVANCE OF THE REVENUE RELATES TO THE STAND OF THE CIT (A) IN ALLOWING THE PREMIUM TO BE AMORTIZED AND ALLOWED AS REVENUE EXPENDITURE. 14.1. IN THIS CONNECTION, WE WOULD LIKE TO RECALL THE FINDINGS OF THE EARLIER BENCH IN THE ASSESSEES OWN CASE FOR THE AY 2007-08 ON A SIMILAR ISSUE. AFTER TAKING INTO ACCOUNT THE RIVAL SUBMISSIONS A ND ALSO EXTENSIVELY QUOTING THE FINDINGS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SRI M VISHVESWARAYA CO-OP BANK LIMITED V . JCIT IN ITA NO.1122/BANG/2010 DATED 11.5.2012 WITH REGARD TO TH E ISSUE OF AMORTIZATION OF PREMIUM ON INVESTMENTS, THE EARLIER BENCH HAD HE LD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. 14.2. IN CONFORMITY WITH THE FINDINGS OF THE EARLIE R BENCH IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING AS SESSMENT YEAR, WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF THE CIT (A). IT IS ORDERED ACCORDINGLY. PAGE 14 OF 14 ITA NOS.117 & 232/ BANG/2012 14 15. IN THE RESULT: (I) THE ASSESSEES APPEAL IS ALLOWED; & (II) THE REVENUES APPEAL IS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF DECEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.