DY.C.I.T. AMRAVATI CIRCLE, AMRAVATI V. M/S JIJAJU COMMERCIAL CO OP. BANK LTD, Amaravati

ITA 253/NAG/2015

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8885 (ITAT-NAGPUR)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2015
• Court: TRIBUNAL
• Department Lawyers: A R NINAVE
• Assessee Lawyers: K P DEVANI
• Keywords: Depreciation
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.253/NAG./2015 ( ASSESSMENT YEAR : 2009 10 ) DY. COMMISSIONER OF INCOME TAX AMRAVATI CIRCLE, AMRAVATI . APPELLANT V/S M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. , 1 ST FLOOR, KHATRI COMPLEX WALCUT COMPOUND, AMRAVATI 444 601 PAN AAAAJ1905E . RESPONDENT ITA NO.254/NAG./2015 ( ASSESSMENT YEAR : 20 12 1 3 ) DY. COMMISSIONER OF INCOME TAX AMRAVATI CIRCLE, AMRAVATI . APPELLANT V/S M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD., 1 ST FLOOR, KHATRI COMPLEX WALCUT COMPOUND, AMRAVATI 444 601 PAN AAAAJ1905E . RESPONDENT REVENUE BY : SHRI A.R. NINAVE ASSESSEE BY : SHRI K.P. DEVANI DATE OF HEARING 31 . 03 .201 7 DATE OF ORDER 31. 03.2017 O R D E R PER RAM LAL NEGI, J.M. TH E AFORESAID APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDER S DATED 29 .6. 2015 , PASSED BY THE LEARNED 2 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. COMMISSIONER (APPEALS) I , NAGPUR, PERTAINING TO ASSESSMENT YEAR 2009 10 AND 2012 13 , WHEREBY THE LEARNED CIT(A) PARTLY ALLOWED THE APPEALS FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDERS PASSED BY THE AO U/S 143(3) READ WITH SECTI ON 147 OF THE INCOME TAX ACT 1961 . (FOR SHORT THE ACT.) 2 . SINCE BOTH THE APPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUE ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, EXCEPT THE AMOUNT INVOLVED , THESE APPEALS WERE CLUBBED, HEARD TOGE THER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . SINCE THE FACTS OF THESE APPEALS ARE SIMILAR, WE TAKE THE FACTS, AS THEY APPEAR IN THE ITA N O.253/NAG./2015, FOR ASSESSMENT YEAR 2009 10. 3 . T HE ASSESSEE IS A CO OPERATIVE BANK REGISTERED UNDER MAHARASHTRA STATE CO OPERATIVE SOCIETIES ACT, 1960, AND BANKING REGULATION ACT, 1959. THE ASSESSEE COMPANY DERIVES INCOME FROM BANKING ACTIVITIES. THE ASSESSEE CLAIMED DEDUCTION OF ` 13,47,442 UNDER SECTI ON 36(1)(VIIA) OF THE ACT @ 7.5% ON THE GROSS TOTAL INCOME. THE ASSESSING OFFICER DISCUSSING THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT , CONCLUDED THAT THE ASSESSEE BANK IS NOT A CO OPERATIVE BANK WITHIN THE MEANING OF EXPLANATION (VI) OF SECTION 36( 1)(VIIA) OF THE ACT. THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE BANK IS A NON SCHEDULED CO OPERATIVE BANK AND DOES NOT FALL WITH IN THE AMBIT OF CO OPERATIVE BANK AS PER EXPLANATION (VI) TO SECTION 36(1)(VIIA) OF THE ACT AND SINCE THE ASSESSEE BANK I S NOT A CO OPERATIVE BANK, IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. HENCE, THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT BY DETERMINING @ 7.5% OF THE GROSS TOTAL INCOME AT ` 13,47, 442 AND MADE THE ADDITION OF ` 13,47,442. IN THE FIRST 3 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. APPEAL THE LEARNED COMMISSIONER (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION. 4 . BEING AGGRIEVED BY THE AFORESAID ORDER OF THE LEARNED COMMISSIONER (APPEALS), THE REVENUE IS IN A PPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE BANK OF LOSS ON ACCOUNT OF DIMINUTION IN THE VALUE OF GOV ERNMENT SECURITIES TO THE EXTENT OF ` 52,09,367. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE ABOVE LOSS DISREGARDING THE FACT THAT THE ASSESSEE HA FLOUTED THE RBI GUIDELINES DATED 16/10/2000 BY NOT MAKING ANY CLASSIFICATION OF IT INVESTMENTS AS REQUIRED UNDER THE SAME JUSTIFYING THE CLAIM OF ABOVE LOSS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE AB OVE LOS DISREGARDING THE FACT THAT THE ASSESSEE DEVIATED FROM THE MERCANTILE SYSTEM OF ACCOUNTING BEING EARLIER FOLLOWED BY IT IN CLAIMING THE ABOVE LOSS. 5 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE ASSAILING THE ORDER PASSED BY THE LEARNED COMMIS SIONER (APPEALS) SUBMITTED THAT DURING INVESTIGATION AO FOUND THE OPENING BALANCE AND CLOSING BALANCE OF THE VALUE OF GOVERNMENT SECURITIES ARE SAME. THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE IN RESPECT OF GOVERNMENT SECURITIES IS NOT CONSISTENT. THE ASSESSEE IS REQUIRED TO VALUE SECURITIES ON 31 ST OF THE YEAR ENDED AND DEPRECIATION AND APPRECIATION IS TO BE DEBITED OR CREDITED TO THE PROFIT & LOSS ACCOUNT WHILE MAKING VALUATION OF THE SECURITIES. THE ASSESSEE BANK HAS NEITHER CLASSIFIED THE INVESTMEN T PORTFOLIO NOR MADE ANY PROVISIONS OF DEPRECIATION ON GOVERNMENT SECURITIES IN THE PROFIT & LOSS ACCOUNT ON WHICH DEDUCTION CAN BE 4 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. CLAIMED. THE LEARNED DEPARTMENTAL REPRESENTATIVE ACCORDINGLY SUBMITTED THAT THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 6 . ON THE OTHER HAND T HE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CIT V/ S HDFC BANK LTD., [2014] 368 ITR 377 (BOM.) AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN KARNATAKA BANK LTD. V/S ACIT, [2013] 356 ITR 549 (KAR.) SINCE, THE LEARNED COMMISSIONER (APPEALS) HAS DELETED THE ADDITION IN QUESTION BY FOLLOWING THE LAW LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY AND KARNATAKA, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) HAS DELETED THE ADDITION BY HOLDING AS UNDER: 7.0 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AR OF THE APPELLANT, THE ORDER OF THE A.O. AND THE JUDICIAL DECISIONS RELIED UPON BY AR. ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEEN THAT THE APPELLANT HAD MADE A CLAIM FOR LOSS ON GOVERNMENT SECUR ITIES AT RS. 52,09,367/ - DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT IN THE COURSE OF APPELLATE PROCEEDINGS SUBMITTED THE DETAILS TO SHOW THAT DIMINUTION IN THE VALUE OF SECURITIES FOR THE YEAR UNDER CONSIDERATION IS RS. 52,09,367/ - . THE A.O. HAS DISA LLOWED THE CLAIM OF APPELLANT ON THE GROUND THAT APPELLANT HAS NOT MADE ANY PROVISION FOR LOSS/DEPRECIATION ON GOVT. SECURITIES IN THE PROFIT & LOSS ACCOUNT ON WHICH DEDUCTION CAN BE CLAIMED. IT IS SEEN FROM THE FINANCIAL STATEMENT SUBMITTED THAT THE APPEL LANT HAS PROVIDED FOR INVESTMENT FLUCTUATION FUND AT RS.6,00,000/ - AND FOR AMORTISED INVESTMENT AT RS.9,26,648 AND FOR INVESTMENT DEPRECIATION RESERVE AT ` 1,00,000 IN PROFIT & LOSS ACCOUNT. DURING THE COURSE OF APPELLATE PROCEEDINGS THE A.R. OF THE APPELL ANT SUBMITTED THAT THE ALLOWANCE OF LOSS IN RESPECT TO SECURITIES IS TO BE GRANTED TO 5 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. DETERMINE THE REAL ASSESSABLE INCOME OF APPELLANT. THE AR OF THE APPELLANT IN THIS REGARD HAS RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD ., WHEREIN THE HON'BLE HIGH COURT HAS CONSIDERED THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF UCO BANK VS. CIT 240 ITR 355 (SC) AND ALSO THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA BANK LTD. VS. ACIT REPORTED IN 356 ITR 549. THE R ELEVANT FINDINGS GIVEN BY THE HON'BLE BOMBAY HIGH COURT IS AS UNDER : 'IN OUR VIEW, THE JUDGMENT OF THE SUPREME COURT IN UNITED COMMERCIAL BANK'S CASE (1999) 240 ITR 355 SQUARELY APPLIES TO THE FACTS OF THIS CASE. IN FACT, THE PRESENT CASE BEFORE US IS ON A STRONGER FOOTING BECAUSE IN THE CASE OF UNITED COMMERCIAL BANK, THE LOSS WAS NOT DEBITED TO TH E PROFIT AND LOSS ACCOUNT WHEREAS AS IN THIS CASE, AS CAN BE SEEN FROM THE WORKING AT PAGES 25 AND 26 OF THE PAPER BOOK, THE LOSS OF RS. 11,82,35,0071 - HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH IS REFLECTED AS A PROVISION FOR LIABILITY IN THE B ALANCE SHEET AND THE SHARES AND SECURITIES WERE VALUED AT COST ON THE ASSET SIDE. FOR THE REASONS GIVEN HEREINABOVE, WE ANSWER THE ABOVE QUOTED QUESTION IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE BANK AND AGAINST THE DEPARTMENT.' RESPECTFULLY FOLL OWING THE DECISION OF THE JURISDICTIONAL HIGH COURT AND THE DECISION OF UCO BANK LTD., BY THE APEX COURT, THE CLAIM OF THE APPELLANT TO THE TUNE OF RS. 52,09,367/ - ON ACCOUNT OF LOSS ON SALE OF GOVT. SECURITIES IS ALLOWED. HENCE, THESE GROUNDS OF APPEAL AR E ALLOWED. 8 . THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LEARNED COMMISSIONER (APPEALS ) HAS ERRED IN ALLOWING THE LOSS OF RS. 52.09,367/ - CLAIMED BY THE ASSESSEE BANK ON ACCOUNT OF DIMINUTION IN THE VALUE OF GOVERNMENT SECURITIES. WE NOTICE THAT T HE ASSESSEE HA S SUFFERED LOSS IN VALUE OF GOVERNMENT SECURITIES AT ` 52,09,367. THE ASSESSING OFFICER HAS NOT DISPUTED THE SAID FACT. HOWEVER, T HE A.O. HAS DISALLOWED THE CLAIM OF APPELLANT ON THE GROUND THAT APPELLANT HAS NOT MADE ANY PROVISION FOR LOSS/DEPRECIATION ON GOVT. SECURITIES IN THE PROFIT & LOSS ACCOUNT ON WHICH DEDUCTION CAN BE CLAIMED. THE ASSESSEE 6 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. IN ITS FINANCIAL STATEMENT HAS PROVIDED FOR INVESTMENT FLUCTUATION FUND AT RS.6,00,000/ - AND FOR AMORTISED INVESTMENT AT ` 9,26,648 AND FOR I NVESTMENT DEPRECIATION RESERVE AT ` 1,00,000 IN PROFIT & LOSS ACCOUNT . THE LOSS IN RESPECT TO SECURITIES IS TO BE ALLOWED TO DETERMINE THE REAL ASSESSABLE INCOME OF ASSESSEE. THE LEARNED COMMISSIONER (APPEALS ) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF HON'BLE BOMBAY HIGH COURT RENDERED IN CIT VS. HDFC BANK LTD., WHEREIN THE HON'BLE HIGH COURT FOLLOWING THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF UCO BANK V/S CIT, 240 ITR 355 (SC) HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SINCE, THE LEARNED COMMISSIONER (APPEALS) HAS DECIDED THIS GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT , WE DO NOT FIND ANY FACTUAL OR LEGAL INFIRM ITY IN THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) TO INTERFERE WITH THE SAME . CONSEQUENTLY, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2009 1 0 STANDS DISMISSED. ITA NO.254/MUM./2015 A.Y. 2012 13 9 . GROUNDS RAISED BY THE REVENUE FOR ASSESSMENT YEAR 2012 13 ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE BANK OF LOSS ON ACCOUNT OF DIMINUTION IN THE VALUE OF GOVERNMENT SECURITIES TO THE EXTENT OF ` 41,20,777. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE ABOVE LOSS DISREGARDING THE FACT THAT THE ASSESSEE HA FLOUTED THE RBI GUIDELINES DATED 16/10/2000 BY NOT MAKING ANY CLASSIFICATION OF IT IN VESTMENTS AS REQUIRED UNDER THE SAME JUSTIFYING THE CLAIM OF ABOVE LOSS. 7 M/S. JIJAU COMMERCIAL CO OPERATIVE BANK LTD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ALLOWING THE ABOVE LOS DISREGARDING THE FACT THAT THE ASSESSEE DEVIATED F ROM THE MERCANTILE SYSTEM OF ACCOUNTING BEING EARLIER FOLLOWED BY IT IN CLAIMING THE ABOVE LOSS . 10 . T HE ISSUE AND THE FACTS & CIRCUMSTANCES INVOLVED IN THE REVENUES APPEAL FOR ASSESSMENT YEAR 2012 13 ARE IDENTICAL TO THE AFORESAID APPEAL OF THE REVE NUE FOR ASSESSMENT YEAR 2009 10. SINCE , WE HAVE DISMISSED SIMILAR GROUND S RAISED BY THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 200 9 10 ABOVE, WE DISMISS THE PRESENT APPEAL FILED BY THE REVENUE FOR THE SAME REASONS AND UPHOLD THE ORDER PASSED BY THE LEARNED COM MISSIONER (APPEALS) FOR ASSESSMENT YEAR 2012 13 . 11 . IN THE RESULT, REVENUES APPEAL FOR A.Y. 2012 13 IS DISMISSED. ACCORDINGLY, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH 2017 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER SD/ - RAM LAL NEGI JUDICIAL MEMBER NAGPUR, DATED: 3 1 .03.2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, NAGPUR CITY CONCERNED; ( 5 ) THE DR, ITAT, NAGPUR; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR