DOMBIVLE NAGARI SAHAKARI BANK LTD., THANE V. A.C.I.T.CIRCLE 3, KALYAN

ITA 2513/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7866 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S E DASTUR SENIOR
• Keywords: Depreciation; Opportunity of being heard; Question of law; Cost of acquisition; Revised return; Unabsorbed depreciation
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2513/MUM/2012 ASSESSMENT YEAR: 2008 - 09 DOMBIVLI NAGARI SAHAKARI BANK LTD., P/52, MADHUKUNJ, PHASE - II, SONARPADA, DOMBIVLI (E) - 421204 VS. ACIT - 3 RANI MANSION, 2 ND FLOOR, NEAR STATE BANK OF INDIA, MURBAD ROAD, KALYAN (W) PAN NO. AAATD3444K APPELLANT RESPONDENT ITA NO. 3203 /MUM/2012 ASSESSMENT YEAR: 2008 - 09 ACIT - 3 RANI MANSION, 2 ND FLOOR, NEAR STATE BANK OF INDIA, MURBAD ROAD, KALYAN (W) VS. DOMBIVLI NAGARI SAHAKARI BANK LTD., P/52, MADHUKUNJ, PHASE - II, SONARPADA, DOMBIVLI (E) - 421204 PAN NO. AAATD3444K APPELLANT RESPONDENT ASSESSEE BY : MR. S.E. DASTUR , SENIOR ADVOCATE REVENUE BY : MR. PURUSHOTTAM KUMAR , DR DATE OF HEARING : 05/10 /2017 DATE OF PRONOUNCEMENT : 27/12/2017 ORDER PER N.K. PRADHAN, A.M. THESE TWO CROSS APPEALS - ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE - FOR ASSESSMENT YEAR IS 2008 - 09 ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 1 , THANE AND ARISE DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 2 OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). AN ISSUE WAS RAISED BY THE LD. DR AS TO WHETHER THE GENERAL MANAGER & CEO OF THE ASSESSEE - BANK WAS AUTHORIZED TO SIGN THE ADDITIONAL GROUND OF APPEAL . WE FIND THAT SECTION 140(A) TO (E) DEALS WITH THE CASE OF PART ICULAR ASSESSEE AND THE RESIDUARY CLAUSE (F) WHICH APPLIES TO THE ASSESSEE CO - OPERATIVE BANK PROVIDES THAT IN THE CASE OF ANY OTHER PERSON, THE RETURN OF INCOME SHALL BE SIGNED BY THAT PERSON OR BY SOME PERSON COMPETENT TO ACT ON HIS BEHALF. CLAUSE 4(VIII) OF THE BYE - LAWS OF THE ASSESSEE - BANK DEFINES A CHIEF EXECUTIVE OFFICER TO MEAN THE HIGHEST EXECUTIVE AUTHORITY IN THE BANK AS MAY BE DESCRIBED BY ANY OTHER NAME SUCH AS GENERAL MANAGER, MANAGING DIRECTOR, ETC. AND EX - OF F ICIO FUNCTIONAL DIRECTOR OF THE B OARD. CLAUSE 51(C) OF THE BYE - LAWS STATES THAT THE CHIEF EXECUTIVE OFFICER SHALL EXERCISE THE POWERS AND DISCHARGE THE FUNCTIONS SPECIFIED WHICH INCLUDES SIGNING ON THE DOCUMENTS FOR AND ON BEHALF OF THE BANK. THEREFORE, THE GENERAL MANAGER & CEO WHO HAS S IGNED THE ADDITIONAL GROUND IS COMPETENT TO SIGN. WE ALSO FIND THAT THE ORIGINAL RETURN FOR THE CURRENT YEAR WHICH HAS BEEN ACCEPTED AND ACTED UPON WAS ALSO SIGNED BY HIM. THE SUBMISSION OF THE LD. DR ON THE ABOVE ISSUE, BEING DEVOID OF MERIT, IS DISMISSE D. ITA NO. 2513/MUM/2012 ASSESSMENT YEAR: 2008 - 09 2. THE 1 ST GROUND RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.2,99,70,676/ - MADE BY THE ASSESSING OFFICER (AO) BEING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES PURCHASED BY THE ASSESSEE - B ANK AND CLASSIFI ED DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 3 UNDER THE CATEGORY HELD TO MATURITY (HTM) AND DEBITED TO THE P&L ACCOUNT UNDER THE HEAD PROVISIONS FOR CONTINGENCIES. 2.1 IN SO FAR AS THE ABOVE GROUND OF THE ASSESSEE - BANK IS CONCERNED, CERTAIN SECURITIES CLASSIFIED BY IT UNDER AVAILABLE FOR SALE CATEGORY WERE CONVERTED INTO HELD TO MATURITY CATEGORY. AT THE TIME OF CONVERSION, THE DIFFERENCE BETWEEN THE VALUE APPEARING IN THE BOOKS AND THE MARKET VALUE WAS AMORTIZED OVER A PERIOD OF FIVE YEARS. THE SAME WAS CLAIMED AS A DEDUCTION BY THE ASSESSEE - BANK. 2.2 IN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) HELD THAT THE CLAIM OF AMORTIZATION OF PREMIUM OF RS.2,99,70,676/ - W AS MADE BY THE ASSESSEE BEFORE THE AO FOR THE FIRST TIME BY FILING A LETTER DATED 24.12.2010 DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT(A), FOLLOWING THE DECISION IN THE CASE OF GOETZE (INDIA) LTD. V. CIT (2006) 284 ITR 323 (SC) OBSERVED THAT THE AO CANNOT ENTERTAIN CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVISED RETURN OF INCOME AND THUS DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE ABOVE SUBJECT. 2.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THOUGH TH IS CLAIM WAS NOT MADE IN THE RETURN OF INCOME BUT BY WAY OF A NOTE DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO, IT IS A SETTLE D POSITION THAT THERE IS NO LIMITATION ON THE HIGHER APPELLATE AUTHORITIES ENTERTAINING A CLAIM WHICH WAS INITIALLY MADE BY A LETTER BEFORE THE AO. RELIANCE IS PLACED BY HIM ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. PRUTHVI BROKERS AND SHAREHOLDERS (P.) LTD. 349 ITR 336 (BOM) WHEREIN IT IS HELD THAT EVEN ASSUMING THAT THE AO IS NOT ENTITLED TO CONSIDE R THE ASSESSEES CLAIM NOT MADE IN THE RETURN OF INCOME BUT DURING THE ASSESSMENT PROCEEDINGS, THE APPELLATE AUTHORITIES ARE BOUND TO CONSIDER THE SAME AND ADJUDICATE ON THEM. DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 4 THE LD. COUNSEL FURTHER SUBMITS THAT THE ABOVE GROUND STANDS CONCLUDED IN FAVO UR OF THE ASSESSEE - BANK BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN AY 2009 - 10 AND AY 2010 - 11 AS WELL AS THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT V. HDFC BANK LTD. 368 ITR 377. 2.4 ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF T HE LD. CIT(A). ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN GOETZE (INDIA) LTD . (SUPRA). 2.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN GOETZE (INDIA) LTD . (SUPRA) , THE ASSESSMENT YEAR IN QUESTION WAS 1995 - 96. THE RETURN WAS FILED ON 30.11.1995 BY THE ASSESSEE FOR THAT ASSESSMENT YEAR. ON 12.01.1998, THE ASSESSEE SOUGHT TO CLAIM A DEDUCTION BY WAY OF A LETTER BEFORE THE AO. THE DEDUCTION WAS DISALLOWED BY THE AO ON THE GROUND THAT THERE WAS NO PROVISION UNDER THE INCOME TAX ACT TO MAKE AMENDMENT IN THE RETURN OF INCOME BY MODIFYING AN APPLICATION AT THE ASSESSMENT STAGE WITHOUT REVISING THE RETURN OF INCOME. THE ASSSESSEES APPEAL BEFORE THE CIT(A) WAS ALLOWED. HOWEV ER, THE FURTHER APPEAL OF THE D EPARTMENT BEFORE THE ITAT WAS ALLOWED. THE ASSESSEE APPROACHED THE HON'BLE SUPREME COURT AND SUBMITTED THAT THE TRIBUNAL WAS WRONG IN UPHOLDING THE ORDER OF THE AO. THE HON'BLE SUPREME COURT DISMISSED THE CIVIL APPEAL FILED B Y THE ASSESSEE AND MADE IT CLEAR THAT THE ISSUE IN THIS CASE IS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE ITAT U/S 2 54 OF THE ACT. IN PRUTHVI BROKERS & SHAREHOLDERS (P) LTD . (SUPRA) , THE HONBLE BOMBAY HIGH C OURT HAS CLARIFIED : DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 5 THUS, IT IS CLEAR THAT THE SUPREME COURT DID NOT HOLD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGEMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELLANT AUTHOR ITIES. THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGEMENT. IN FACT THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORI TY AND THAT THE JUDGEMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL UNDER SECTION 254. THUS, EVEN ASSUMING THAT THE AO IS NOT ENTITLED TO CONSIDER THE ASSESSEES CLAIM NOT MADE IN THE RETURN OF INCOME BUT DURING THE ASSESSMENT PROCEEDINGS, WE ARE BOUND TO CONSIDER THE SAME AND ADJUDICATE ON THEM. 2.6 WE FIND THAT THE ABOVE GROUND STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN HDFC BANK LTD. (SUPRA). IN THAT CASE, HONBLE HIGH COURT HAS FOLLOWED THE JUDGEMENT OF THE KARNATAKA HIGH COURT IN KARNATAKA BANK LTD. V. ACIT (2013) 356 ITR 549 WHICH IS PRODUCED BELOW : FROM THE AFORESAID JUDGMENTS OF THE APEX COURT, NOW IT IS CLEAR THAT A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING THE ACCOUNTS OR ON VALUATION. FINANCIAL INSTITUTIONS LIKE BANK, ARE EXPECTED TO MAINTAIN ACCOUNTS IN TERMS OF THE RBI ACT AND ITS REGULATIONS. THE FORM IN WHICH, ACCOUNTS HAVE TO BE MAINTAINED IS PRESCRIBED UNDER THE AFORESAID LEGISLATION. THEREFORE, THE ACCOUNT HAD TO BE IN CONFORMITY WITH THE SAID REQUIREMENTS. THE RBI ACT OR THE COMPANIES ACT DO NOT DEAL WITH THE PERMISSIBLE DEDUCTIONS OR EXCLUSION UNDER THE INCOME TAX ACT. FOR THE PURPOSE OF THE INCOME TAX ACT, IF THE ASSESS EE HAS CONSISTENTLY BEEN TREATING THE VALUE OF INVESTMENT FOR MORE THAN TWO DECADES THE INVESTMENTS AS STOCK - IN - TRADE AND CLAIMED DEPRECIATION, IT IS NOT OPEN TO THE AUTHORITIES DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 6 TO DISALLOW THE SAID DEPRECIATION ON THE GROUND THAT IN THE BALANCE - SHEET IT I S SHOWN AS INVESTMENT IN TERMS OF THE RBI REGULATIONS. THE RBI REGULATIONS, THE COMPANIES ACT AND THE INCOME TAX ACT OPERATE ALTOGETHER IN DIFFERENT FIELDS. THE QUESTION WHETHER THE ASSESSEE IS ENTITLED TO PARTICULAR DEDUCTION OR NOT WILL DEPEND UPON THE P ROVISION OF LAW RELATING THERETO AND NOT THE WAY, IN WHICH THE ENTRIES ARE MADE IN THE BOOKS OF ACCOUNT. IT IS NOT DECISIVE OR CONCLUSIVE IN THE MATTER. FOR THE PURPOSE OF THE INCOME TAX ACT WHICHEVER METHOD IS ADOPTED BY THE ASSESSEE, A TRUE PICTURE OF TH E PROFITS AND GAINS, I.E. REAL INCOME IS TO BE DISCLOSED. FOR DETERMINING THE REAL INCOME, THE ENTRIES IN THE BALANCE SHEET IS REQUIRED TO BE MAINTAINED IN THE STATUTORY FORM MAY NOT BE DECISIVE OR CONCLUSIVE. IT IS OPEN TO THE INCOME TAX OFFICER AS WELL A S THE ASSESSEE TO POINT OUT TRUE AND PROPER INCOME WHILE SUBMITTING THE INCOME TAX RETURNS. EVEN IF THE ASSESSEE UNDER SOME MISREPRESENTATION OR MISTAKE FAILS TO MAKE AN ENTRY IN THE BOOKS OF ACCOUNT, ALTHOUGH UNDER LAW, A DEDUCTION MUST BE ALLOWED BY THE INCOME TAX OFFICER, THE ASSESSEE WILL NOT LOSE ANY RIGHT ON CLAIMING OR WILL BE DEBARRED FROM BEING ALLOWED THE DEDUCTION. THEREFORE, THE APPROACH OF THE AUTHORITIES IN THIS REGARD IS CONTRARY TO THE WELL SETTLED LEGAL POSITION AS DECLARED BY THE APEX COUR T. IN THE INSTANT CASE, THE ASSESSEE HAS MAINTAINED THE ACCOUNTS IN TERMS OF THE RBI REGULATIONS AND HE HAS SHOWN IT AS INVESTMENT. BUT CONSISTENTLY FOR MORE THAN TWO DECADES IT HAS BEEN SHOWN AS STOCK - IN - TRADE AND DEPRECIATION IS CLAIMED AND ALLOWED. THER EFORE, NOTWITHSTA NDING THAT IN THE BALANCE - SHEET , IT IS SHOWN AS INVESTMENT, FOR THE PURPOSE OF INCOME TAX ACT, IT IS SHOWN AS STOCK - IN - TRADE. THEREFORE, THE VALUE OF THE STOCKS BEING CLOSELY CONNECTED WITH THE STOCK MARKET, AT THE END OF THE FINANCIAL YEA R, WHILE VALUING THE ASSETS, NECESSARILY THE BANK HAS TO TAKE INTO CONSIDERATION THE MARKET VALUE OF THE SHARES . IF THE MARKET VALUE IS LESS THAN THE COST PRICE , IN LAW, THEY ARE ENTITLED TO DEDUCTION SAND IT CANNOT BE DENIED BY THE AUTHORITIES UNDER THE PRETEXT THAT IT IS SHOWN AS INVESTMENT IN THE . BALANCE - SHEET (EMPHASIS SUPPLIED) DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 7 THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION IN KARNATAKA BANK LTD . (SUPRA). 2. 6 .1 WE FIND THAT THE SAME ISSUE AROSE BEFORE THE ITAT D BENCH MUMBAI IN ASSESSEES OWN CASE FOR THE AY 2009 - 10 (ITA NO. 7484/MUM/2012). THE TRIBUNAL VIDE ORDER DATED 12.03.2014 HELD AT PARA 2.3 : WE HAVE HEARD THE SUBMISSIONS OF THE DR AND HAVE PERUSED THE MATERIAL BEFORE US. WE FIND THAT ASSESSEE BANK IS A COOPERATIVE BANK AND IT HAS TO FOLLOW THE GUIDELINES ISSUED BY THE RBI. IT HAS TO MAINTAIN SLR AND HAS TO INVEST IN SECURITIES AS PER THE DIRECTIONS OF THE FEDERAL BANK. VALUATION OF SECURITIES CLASSIFIED AS HTM HAS TO BE DONE IN A PARTICULAR MANNER. CO - OPERATIVE BANKS, AS COMPARED TO PRIVATE BANKS, FUNCTION DIFFERENTLY. WE FIND THAT AS PER THE RBI GUIDELINES (DATED 16.10.2000) THE INVESTMENT PORTFOLIOS OF THE BANKS ARE REQUIRED TO BE CLASSIFIED UNDER THRE E CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS), THAT INVESTMENTS CLASSIFIED UNDER HTM CATEGORY ARE NOT TO BE TREATED AS MARKED TO MARKET AND ARE TO BE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN T HE FACE VALUE, THAT IN SUCH CASES, THAT PREMIUM HAS TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY, THAT THE DEPRECIATION/ APPRECIATION IS TO BE AGGREGATED SCRIP - WISE AND ONLY NET DEPRECIATION IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. WE ALSO FIND THAT CBDT, VIDE ITS CIRCULAR NO.17 DT. 26 - 11 - 2008 (PARA VII) HAS DEALT THE ISSUE OF HTM (HELD TO MATURITY) CATEGORY SECURITIES IN THE FOLLOWING MANNER: AS PER RBI GUIDELINES DATED 16TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BANK IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND RE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN TH E FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 8 MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIAT ION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED T O FOR ALLOWING ANY SUCH CLAIMS. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE - BANK WAS FOLLOWING THE GUIDELINES AND INSTRUCTION ISSUED BY THE RBI AND THE TREATMENT GIVEN BY IT IN THE BOOKS OF ACCOUNTS TO THE SECURITIES WAS ALSO AS PER THE ABOVE REFERRED CIRCULAR OF THE CBDT. CASES RELIED UPON BY THE DR ARE ABOUT PRIVATE BANKS OR INSTITUTIONS. THEREFORE, CONFIRMING THE ORDER OF THE FAA, WE DECIDE EF FECTIVE GROUND OF APPEAL AGAINST THE AO. 2. 7 IN VIEW OF THE ABOVE SETTLED POSITION, WE DIRECT THE AO TO ALLOW RS.2,99,70,676/ - BEING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES PURCHASED BY THE ASSESSEE - BANK AND CLASSIFIED UNDER THE CATEGORY HTM AND DEBITED TO THE P&L ACCOUNT UNDER THE HEAD PROVISIONS FOR CONTINGENCIES. THUS , THE 1 ST GROUND OF APPEAL IS ALLOWED. 3. THE 2 ND GROUND RAISED IN THIS APPEAL IS AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING THE SET OFF OF BROUGHT FORWARD LOSSES OF RS.7,66,88,795/ - OF THE ERSTWHILE SHREE SHIVNERI SAHAKARI BANK LTD. (WHICH HAS GOT MERGED WITH THE ASSESSE - BANK DURING THE FY 2007 - 08) AGAINST THE INCOME OF THE ASSESSE - BANK. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE - BANK VIDE LETTER DATED 28.12.2010 FILED AN EXPLANATORY NOTE BEFORE THE AO STATING THAT SHREE SHIVNERI SAHAKARI BANK LTD. MERGED WITH THE ASSESSEE - BANK DURING THE FY 2007 - 08 RELEVANT TO THE AY 2008 - 0 9 AND THE BROUGHT FORWARD LOSSES OF THE FORMER UP TO AY 2008 - 09 WERE DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 9 RS.7,66,88,795/ - . THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF THE FORMER BE SET OFF AGAINST THE INCOME OF THE ASSESSEE - BANK. HOWEVE R, THE AO DISALLOWED THE SAID CLAIM WITHOUT DISCUSSING IT AT ALL IN THE ASSESSMENT ORDER. 3.2 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOUND THAT THE CONDITION S RELATING TO THE MEMBERS OF AMALGAMA TING CO - OP. BANK BECOMING MEMBERS IN THE AMALGAMATED CO - OP. BANK AND ACQUIRING SHAREHOLDINGS WERE NOT SATISFIED IN THE INSTANT CASE AS ADMITTEDLY NO MEMBER OF THE AMALGAMATING CO - OP. BANK HAS BECOME MEMBER OF THE AMALGAMATED CO - OP. BANK. AS PER HIM THIS WA S A CLEAR VIOLATION OF THE PROVISIONS OF SECTION 72AB RELATING TO CARRY FORWARD AND SET OFF OF UNABSORBED LOSSES/DEPRECIATION. ALSO, THE LD. CIT(A) FOLLOWING THE DECISION IN GOETZE (INDIA) LTD. (SUPRA) HELD THAT THE DEDUCTION CANNOT BE CLAIMED BY FILING A LETTER TO THE AO AND IT WAS MANDATORY FOR THE ASSESSEE TO CLAIM THE DEDUCTION BY FILING A REVISED RETURN OF INCOME. THEREFORE, HE DISALLOWED THE ABOVE CLAIM. 3.3 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT (I) SECTION 72AB (1) PROVIDES THAT AN ASSESSEE, BEING A SUCCESSOR CO - OP. BANK, SHALL BE ALLOWED TO SET OFF THE ACCOMMODATED LOSS AND THE UNABSORBED DEPRECIATION OF THE PREDECESSOR CO - OP. BANK ON AMALG AMATION AS IF THE AMALGAMATION HAD NOT TAKEN PLACED ; THIS PROVISION HAS BEEN INTRODUCED AS AN INCENTIVE FOR STRONG CO - OP. BANKS TO TAKEOVER BY AMALGAMATION WEAKER CO - OP. BANKS WITH A VIEW PRIMARILY TO PROTECT DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 10 THE INTEREST OF DEPOSITORS, (II) ALL THE CON DITIONS PRESCRIBED IN SECTION 72AB (2) ARE SATISFIED AND THERE IS NO DISPUTE RAISED ON THE SAME ; THE ONLY ISSUE IS WHETHER THE AMALGAMATION COMES WITHIN THE AMBIT OF SECTION 72AB (1), (III) SECTION 72AB (7) (C) STATES THAT AMALGAMATION IS TO HAVE THE SA ME MEANING ASCRIBED TO IT IN SECTION 44DB, (IV) SECTION 44DB (5) (C) DEFINES AMALGAMATION , (V) THERE IS NO DISPUTE THAT THE CONDITION OF SECTION 44DB (5) (C) (I) IS STRATIFIED I.E. ALL THE ASSETS AND LIABILITIES OF SHIVNERI BANK HAVE BECOME THE ASSETS AN D LIABILITIES OF THE ASSESSEE - BANK. THE LD. COUNSEL FURTHER SUBMITS THAT THE DISPUTE IS ONLY VIS - A - VIS THE CONDITIONS SPECIFIED IN SECTION 44DB (C) (II) & (III) AND IN ASSESSEES SUBMISSION, THE CONDITIONS LAID DOWN IN SECTION 44DB (C) (II) & (III) ARE A LSO FULFILLED IF THE SAID SECTION IS INTERPRETED AS PER LITERAL RULE OF INTERPRETATION. ALSO IT IS STATED THAT IN ANY EVENT, A LIBERAL INTERPRETATION MUST BE PLACED IN CONSTRUING THE PROVISIONS OF SECTION 72AB. THUS IT IS STATED THE ASSESSEE BE ALLOWED T O CLAIM SET OFF OF BROUGHT FORWARD LOSSES OF RS.7,68,88,795/ - PERTAINING TO THE AMALGAMATING BANK I.E. SHREE SHIVNERI SAHAKARI BANK LTD. 3.4 PER CONTRA, THE LD. DR SUBMITS THAT THE FINANCE ACT 2007 INSERTED SECTION 44DB W.E.F. APRIL 1, 2008 TO PROVIDE FOR THE FORMULA FOR COMPUTATION OF THE ALLOWANCE AND DEDUCTION U/S 32, 35D, 35DD AND 35DDA IN THE CASE OF AMALGAMATION OR DEMERGER OF CO - OP. BANK TO THE AMALGAMATED AND DEMERGED ENTITY PROPORTIONATE TO THE PERIOD BEFORE AND AFTER THE AMALGAMATION OR DEMERGER. HE EXPLAINS THAT THE PROVISION SEEKS TO MAINTAIN TAX NEUTRAL STATUS FOR AMALGAMATION AND DEMERGER OF CO - OP. BANKS. THE CONDITIO N FOR THE CONTINUATION OF DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 11 ALLOWANCE TO THE AMALGAMATED BANK AND THE DEMERGED BANK ARE THAT THE AMALGAMATION OR DEMERGER SHOULD BE THE ENTITY AS A GOING CONCERN AND THE MAJORITY SHAREHOLDING SHOULD CONTINUE BOTH BEFORE AND AFTE R THE DEMERGER AND AMALGAMATIO N. THE LD. DR FURTHER SUBMITS THAT THE NOC ISSUED BY THE RBI AND THE AMALGAMATION ORDER DO NOT OVERRIDE OR SUPERSEDE THE PROVISIONS CONTAINED IN THE ACT. RELIANCE IS PLACED BY HIM ON THE DECISION THE CASE OF SOUTHERN TECHNOLOGIE S LTD. V. JCIT 320 ITR 577 (SC). HE SUBMITS THAT THE ASSESSEE - BANK HAS FAILED TO ESTABLISH THAT IT HAD SATISFIED THE CONDITIONS PRESCRIBED UNDER THE ACT AND HENCE THE B ENEFIT CANNOT BE ALLOWED TO HIM. 3.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE FIND THAT THE ASSESSEE - BANK HA S MADE THE CLAIM BY WAY OF A LETTER DATED 28.12.2010 DURING THE ASSESSMENT PROCEEDINGS AND N OT IN THE RETURN OF INCOME. THE SAME WAS NOT CONSIDERED BY THE AO AND THE ASSESSEES CLAIM WAS NOT DISCUSSED AT ALL IN THE ASSESSMENT ORDER. SUBSEQUENTLY, IN APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION IN GOETZE (INDIA) LTD . (SUPRA) HAS HELD THAT THE DED UCTION CANNOT BE CLAIMED BY FILING A LETTER TO THE AO AND IT WAS MANDATORY FOR THE ASSESSEE TO CLAIM THE DEDUCTION BY FILING A REVISED RETURN OF INCOME. THE LD. COUNSEL HAS MENTIONED THE ABOVE AT PAGE 3 OF HIS WRITTEN SUBMISSION DATED 08.11.2017 FILED BE FORE US. THE LD. DR HAS ALSO MENTIONED THE ABOVE AT PAGE 13 OF HIS WRITTEN SUBMISSION FILED BEFORE US. DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 12 HERE W E FOLLOW THE DECISION IN PRUTHVI BROKERS & SHAREHOLDERS (P.) LTD. (SUPRA) DELINEATED AT PARA 2.5 HEREINBEFORE . HOWEVER, WE FIND THAT THE ABOVE IS SUE WAS NOT EXAMINED AT ALL BY THE AO . ALSO THE LD. CIT(A) HAS NOT EXAMINED THE ISSUE IN DETAILS ON MERIT. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDE NCE BEFORE THE AO. THUS THE 2 ND GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND OF APPEAL STATING THAT IT IS ENTITLED TO DEPRECIATION ON THE INTANGIBLE ASSETS (BEING THE DIFFERENCE BETWEEN THE LIABILI TIES TAKEN OVER AND THE ASSETS AS REFLECTED IN THE BOOKS) ACQUIRED BY IT ON THE AMALGAMATION OF SHREE SHIVNERI SAHAKARI BANK LTD. WITH ITSELF . 4.1 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE FACTS FOR ADJUDICATING THIS GROUND ARE AVAILABLE BEFORE THE AO. THE MERGE R SCHEME WAS FILE D BEFORE HIM. THIS ADDITIONAL GROUND FOR ALLOWANCE OF DEPRECIATION IS RAISED ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME COURT IN SMIFS CASE PRONOUNCED ON 22 ND AUGUST 2012. THE ASSESSMENT ORDER WAS PASSED BY THE AO ON 29 TH DECEMBER 2010 AND SMIFS CASE WAS NOT AVAILABLE WHEN THE ASSESSMENT PROCEEDINGS CONCLUDED AND, THEREFORE, THE CLAIM FOR DEPRECIATION WAS NOT RAISED. THE LD. COUNSEL RELIES ON THE JUDGMENT OF T HE HONBLE SUPREME COURT IN NTPC LTD. VS. CIT 229 ITR 383 AND EXPLAINS THAT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 13 WAS ENTITLED TO RAISE SUCH QUES TION SO AS TO CORRECTLY ASSESS THE TAX LIABILITY OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE LD. COUNSEL SUBMITS THAT THE ADDITIONAL GROUND BE ADMITTED AND, IF NECESSARY, THE MATTER BE SENT BACK TO THE AO FOR ADJUDICATING THE SAME. 4.2 PER CONTRA , THE LD . DR SUBMITS THAT THE ABOVE ADDITIONAL GROUND IS NOT A PURE QUESTION OF LAW AND AT BEST IT COULD BE TERMED AS A MIXED QUESTION OF FACT AND LAW. IT IS ALSO STATED BY HIM THAT EXAMINATION OF VARIOUS FACTS ARE REQUIRED FOR ASCERTAINING THE GOODWILL ARISING OU T OF AMALGAMATION OF SHREE SHIVNERI SAHAKARI B ANK LTD. WITH THE ASSESSEE - BANK. IT IS SUBMITTED BY HIM THAT IF ADDITIONAL GROUND SO RAISED IS ADMITTED BY THE TRIBUNAL, THEN A SEPARATE ORDER WITH REASON FOR ADMISSION BE PASSED PENDING THE ASSESSEES CASE TO BE DECIDED ON MERIT. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE R ELEVANT MATERIALS ON RECORD. IN THE CASE OF NTPC (SUPRA) , IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THE QUESTION TO ASSESS THE TAX LIABILITY OF AN ASSESSEE. IN THE INSTA NT CASE, WE FIND THAT THE MERGER SCHEME WHICH WAS FILED BY THE ASSESSEE - BANK BEFORE THE A O STATES THAT FROM THE DATE OF AMA LGAMATION, ALL RIGHTS, POWERS, CLAIMS, DEMANDS, INTEREST, AUTHORITIES, PRIVILEGES, BENEFITS, ASSETS AND PROPERTIES OF THE SHIVNERI DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 14 B ANK WOULD BECOME THE PROPERTIES OF THE ASSESSEE - BANK. THE MERGER SCHEME FURTHER PRESCRIBE S THAT THE AUDITOR SHALL VALUE THE PROPERTY AND ASSETS AND RECKON THE LIABILITIES AS PER THE TERMS LAID DOWN IN THE SCHEME. THE FACT THAT THE ASSESSEE HAD ACQUIRED ALL ASSETS OF THE AMALGAMATING BANK INCLUDING THE GOODWILL AND INTANGIBLES IS QUITE CLEAR FRO M THE MERGER SCHEME WHICH WAS THEREON RECORD BEFORE THE AO . WE FIND THAT THE ASSESSMENT ORDER WAS PASSED BY THE AO ON 29 TH DECEMBER 2010. THE DECISION OF THE HONBLE SUPREME COURT IN SMIFS WAS PRONOUNCED ON 22 ND AUGUST 2012 AND IT HELD GOODWILL TO BE AN A SSET COVERED WITHIN EXPLANATION 3 TO SECTION 32(1) AND THEREFORE, ELIGIBLE FOR CLAIM OF DEPRECIATION. IN VIEW OF THE ABOVE, WE FOLLOW THE DECISION IN NTPC (SUPRA) AND ADMIT THE ADDITIONAL GROUND. WE RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE ADDITIONAL GROUND IS ALLOWED FOR STATISTI CAL PURPOSES. 5. AS WE HAVE RESTORED THE 2 ND AND THE ADDITIONAL GROUND OF APPEAL TO THE FILE OF THE AO, WE ARE NOT ADVERTING TO THE CASE - LAWS RELIED ON BY BOTH SIDES. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 3203/MUM /2012 ASSESSMENT YEAR: 2008 - 09 7 . IN SO FAR AS THE REVENUES APPEAL IS CONCERNED, THE ASSESSEE - BANK HELD CERTAIN SECURITIES WHICH WERE CLASSIFIED UNDER THE HEAD HELD TO DOMBIVLI NAGARI SAHAKARI BANK ITA NOS. 2513 & 3203/MUM/2012 15 MATURITY CATEGORY. THE PREMIUM PAID BY THE ASSESSEE FOR ACQUIRING THESE SECURITIES WA S CLAIMED AS A DEDUCTION. WE FIND THAT THIS GROUND STANDS CONCLUDED IN FAVOUR OF THE ASSESSEE - BANK BY THE ITATS ORDER IN THE ASSESSEES OWN CASE IN AY 2009 - 10 AS WELL AS THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN HDFC BANK LTD. (SUPRA) AS NARRATED AT PARA 2. 6 & 2. 6 .1 HEREINBEFORE. 7 .1 IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A) A ND DISMISS THE APPEAL FILED BY THE REVENUE. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9 . TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/12/2017. SD/ - SD/ - (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 27/12/2017 RAHUL SHARMA, SR. P.S. 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, MUMBAI