The ACIT- 1(2), Bhopal V. M/s Krishna Mercantile Coop. Bank Ltd., Bhopal

ITA 255/IND/2013

• Counselvise Citation: 25522714 RSA 2013
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: H P VERMA; N D PATWA
• Keywords: Business income; Depreciation

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAAAK1432B I.T.A.NO. 255 /IND/201 3 A.Y. : 2007-08 ACIT, 1(2), BHOPAL VS. M/S. KRISHNA MERCANTILE COOP. BANK LIMITED, BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI R. A. VERMA, SR. DR RESPONDENT BY : SHRI H.P. VERMA & SHRI N. D PATWA, ADVOCATES DATE OF HEARING : 23 . 10 .201 3 DATE OF PRONOUNCEMENT : 25 . 10 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 21.1.2013 FOR THE ASSES SMENT YEAR 2007-08 IN THE MATTER OF ORDER PASSED U/S 143(3)/14 7 OF THE INCOME-TAX ACT, 1961. M/S.KRISHNA MERCANTILE COOP BANK LIMITED, BHOPAL. I.T.A.NO. 255/IND/2013 A.Y.2007-08 2 PAGE 2 OF 5 2. THE REVENUE IS AGGRIEVED FOR CIT(A)S ACTION IN ALL OWING BUSINESS LOSS OF RS. 21.37 LAKHS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COOPERATIVE BANK. AS PER BANKING REGULATION ACT, THE ASSESSEE I S REQUIRED TO MAINTAIN SLR AS A PERCENTAGE SPECIFIED BY RBI, T HEREFORE, USED TO PURCHASE GOVERNMENT SECURITIES WITH SPECIFI ED AGENCIES. INTEREST INCOME FROM SUCH SECURITY IS SHO WN AS BUSINESS INCOME. SOME PART OF GOVERNMENT SECURITIES WERE SOLD IN THE YEAR UNDER CONSIDERATION WHICH RESULTED IN A LOSS OF RS. 25,47,220/-. THE ASSESSING OFFICER DECLINED ASS ESSEES CLAIM OF LOSS ON THE PLEA THAT LOSS WAS NOT REVENUE BUT CAPITAL LOSS. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) PARTLY ALLOWE D ASSESSEES CLAIM AFTER HAVING THE FOLLOWING OBSERVA TIONS :- I HAVE CONSIDERED THE SUBMISSION MADE BY THE LD. AUTHORIZED REPRESENTATIVE CAREFULLY. THE APPELLANT BANK IS GOVERNMENT BY BANKING REGULATION ACT, 1949. AS PER THE ACT, THE APPELLANT BANK IS UNDER A STATUTORY OBLIGATION TO KEEP PART O F M/S.KRISHNA MERCANTILE COOP BANK LIMITED, BHOPAL. I.T.A.NO. 255/IND/2013 A.Y.2007-08 3 PAGE 3 OF 5 DEMAND AND TIME LIABILITY AS SPECIFIED BY RBI IN THE FORM OF SECURITIES FOR MEETING LIABILITIES AND ALSO ENSURING LIQUIDTY OF THE BANK. IT IS AN ESSENTIAL P ART OF BANKING BUSINESS AND, THEREFORE, IT CONSTITUTES STOCK-IN-TRADE OF THE BANK. THE RBI ISSUES GUIDELINES EVEN FOR VALUATION OF INVESTMENT IN SLR/APPROVED SECURITY. SUCH GUIDELINES ARE BOUND TO BE ADOPTED BY THE BANK (LORD KRISHNA BANK LTD. VS. CIT, 339 ITR 606). THUS, THE LOSS SUFFERED BY THE APPELLANT BANK BY SALE OF ITS SECURITIES IS A BUSINESS LOSS. MERE THE FACT THAT THE IN RBI CIRCULAR THE WORD 'STOCK-IN-TRADE' HAVE NOT BEEN USED THE WORD, BUT ONLY THE WORD 'INVESTMENT' USED, IT DOES NOT ALTER THE CHARACTER. THE APPELLANT BANK HAD NO OBJECTION BUT TO SHOW IT AS INVESTMENT AS CURRENT ASSETS (RELIED ON DCIT VS. NEDUNGADI BANK LTD. 89 TT J 711 (COCH.). THE APPELLANT BANK IS ENTITLED TO CLAIM DEPRECIATION ON DIFFERENCE IN DIMINUTION OF VALUE OF THE SECURITIES AS WELL. SIMILARLY, THE PROFITS ON WITHDRAWAL OF SUCH M/S.KRISHNA MERCANTILE COOP BANK LIMITED, BHOPAL. I.T.A.NO. 255/IND/2013 A.Y.2007-08 4 PAGE 4 OF 5 SECURITIES ARE PART OF THE PROFIT OF BANKING BUSINE SS. THE RATIO OF THE CASES RELIED ON BY THE LD.AR EXACT LY FIXED INTO THE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND. IN VIEW OF THE ABOVE, I FIND THAT THE ADDITIO N MADE ON THIS COUNT IS NOT SUSTAINABLE. BUT, THE LOS S HAS BEEN CERTIFIED BY THE INSPECTING OFFICERS OF RB I AT RS.21.37 LACS. ACCORDINGLY, LOSS OF RS. 21.37 LA CS ON SALE OF GOVERNMENT SECURITIES IS HELD AS REVENUE LOSS OF THE YEAR, BUT NOT RS.25.47 LACS AS CLAIMED BY THE APPELLANT BANK. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT GOVERNMENT SECURITIES WERE HELD BY THE ASSESSEE AS ITS STOCK IN TRADE. INTEREST INCOME ON SUCH SECURITIES WERE ALSO OFFERED AS BUSINESS INCOME AND ACCEPTED BY THE DEPARTMENT AS BUSINESS INCOME. UNDER THESE CIRCUMSTANCES, ANY PROFIT OR LOSS ARISING OUT OF SU CH SALE OF SECURITIES ARE REVENUE IN NATURE, ACCORDINGLY, LOSS INCURRED ON SALE OF SUCH SECURITIES ARE LIABLE TO BE ALLOWED AS REVENUE LOSS/EXPENSES WHILE COMPUTING BUSINESS INCOME. THE DETAILED FINDING RECORDED BY THE LD.CIT(A) AS REPRODUCED HER EINABOVE M/S.KRISHNA MERCANTILE COOP BANK LIMITED, BHOPAL. I.T.A.NO. 255/IND/2013 A.Y.2007-08 5 PAGE 5 OF 5 HAVE NOT BEEN CONTROVERTED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING PART LOSS ON SALE SECURITIES AS REVENUE LOSS, TO THE EXTENT CERTIFIED BY INSPECTING OFFICER OF R.B.I. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH OCTOBER, 2013. CPU* 242510