ASST CIT CIR 3, THANE V. THE THANE JANTA SAHAKARI BANK LTD, THANE

ITA 2903/MUM/2012

• Counselvise Citation: 290319914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: RAVI K MULCHANDANI
• Keywords: Depreciation; Opportunity of being heard; Cost of acquisition; Revenue expenditure

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER . / ITA NO.2514/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR: 2008-09 THE THANE JANATA SAHAKARI BANK LTD. MADHUKAR BHAWAN, ROAD, NO. 16, WAGLE ESTATE, THANE(W),-400604 VS. THE ACIT, CIRCLE-3, THANE VARDAN, LOWER GROUND FLOOR, M.I.D.C. WAGLE INDL. ESTATE, THANE-400604 ( !#$ / ASSESSEE) ( % / REVENUE) P.A. NUMBER : AAAAT4062E . / ITA NO.2903/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR: 2008-09 THE ACIT, CIRCLE-3, THANE VARDAN, LOWER GROUND FLOOR, M.I.D.C. WAGLE INDL. ESTATE, THANE-400604 VS. THE THANE JANATA SAHAKARI BANK LTD. MADHUKAR BHAWAN, ROAD, NO. 16, WAGLE ESTATE, THANE(W),-400604 ( % / REVENUE) ( !#$ / ASSESSEE ) P.A. NUMBER : AAAAT4062E !#$ & ' / ASSESSEE BY SHRI RAVI K. MULCHANDANI % & ' / REVENUE BY: SHRI NEIL PHILIP ! & $( / DATE OF HEARING : 15/12/2014 )*' & $( / DATE OF PRONOUNCEMENT : 17/12/2014 2 THE THANE JANATA SAHAKARI BANK LTD . . O R D E R PER JOGINDER SINGH, JM: THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS AP PEALS AGAINST THE IMPUGNED ORDER DATED 23/01/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. FIRST, WE SHALL TAKE UP APPEAL OF THE REVENUE (2903/MUM/2012), WHEREIN THE ONLY GROUN D RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN APPRECIATING THE FACT THAT THE EXPENDITURE INCURRED AT THE TIME OF PURCHASE OF HMT SECURITY AT A PRICE HIGHER THAN THE MATURED PRICE IS NOT ALLOWABLE AS REVENUE EXPENDITURE. 2. AT THE TIME OF HEARING, LD. DR, SHRI NEIL PHILIP , DEFENDED THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER. WHEREAS, SHRI RAVI K. MULCHANDANI, LD. COUNSEL FOR THE ASSESSEE DEFEND ED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER BY FURTHER S UBMITTING THAT IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL, WHE REIN IN VIDE ORDER DATED 28/05/2014 (ITA NO.8606/MUM/2010), THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE , WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 28/05/2014. 2. THE SOLITARY ISSUE IS WITH REGARD TO THE TREATME NT OF HTM SECURITY PURCHASED AT A HIGHER PRICE THAN THE MATURITY PRICE. THE AO HELD IT TO BE REVENUE IN NATU RE AND THE CIT(A) REVERTING THE DECISION OF THE AO, ACCEPT ED THE CONTENTION OF THE ASSESSEE. 3 THE THANE JANATA SAHAKARI BANK LTD . . 3. AT THE TIME OF HEARING, THE AR POINTED OUT THAT IDENTICAL ISSUE WAS DECIDED BY THE COORDINATE BENCH IN THE CASE OF JCIT VS DOMBIVILI NAGRI SAHAKARI BANK L TD, ITA NO. 7484/MUM/2012, DATED 12.03.2014, WHEREIN THE GROUND RAISED READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONSIDERING THE ADDITION OF RS. 3,98,53,423/- BEING AMORTIZATION OF PREMIUM PAID ON PURCHASE OF SECURITIES CLASSIFIED UN DER THE HIM CATEGORY. , THE CO-ORDINATE BENCH HAD HELD, WE ALSO FIND THAT CBDT, VIDE ITS CIRCULAR NO. 17 DT. 26.11.2008 (PARA VII) HAS DEALT THE ISSUE OF HTM (H ELD TO MATURITY) CATEGORY SECURITIES IN THE FOLLOWING MANN ER: AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BANK IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURI TY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NE ED NOT BE MARKED TO MARKET AND RE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE AND OF THE BANK, T HE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP W ISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE PREFERRED TO FOR ALLOWING ANY SUCH CLAIMS . 4 THE THANE JANATA SAHAKARI BANK LTD . . FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE-BANK W AS FOLLOWING THE GUIDELINES AND INSTRUCTION ISSUED BY TH E RBI AND THE TREATMENT GIVEN BY IT IN THE BOOKS OF ACCOU NTS TO THE SECURITIES WAS ALSO AS PER THE ABOVE REFERRED CI RCULAR OF THE CBDT . CASES RELIED UPON BY THE DR ARE ABOUT PRIVATE BANKS OR INSTITUTIONS. THEREFORE, CONFIRMIN G THE ORDER OF THE FAA, WE DECIDE EFFECTIVE GROUND OF APPEA L AGAINST THE AO 4. SINCE THE ISSUE AS DECIDED BY THE COORDINATE BENCH IS ON THE ISSUE IMPUGNED BEFORE US AND WE ALSO FIND THAT THE TREATMENT UNDERTAKEN ON HTM HAS BEEN ALLOWED BY THE RBI, AS MENTIONED IN THE ORDER OF THE CIT(A), IT WAS EXPLAINED TO THE AO THAT, THE AMORTIZATION OF PREMIUM PAID ON PURCHASE OF SECURITIES CLASSIFIED UN DER THE CATEGORY HELD TO MATURITY, AS PER GUIDELINES OF RBI, IS AKIN TO DIMINUTION IN THE VALUE OF INVESTMENTS. AT THE TIME OF PURCHASE OF SUCH SECURITIES, THE BANK KNOWS , WHAT WILL BE AMOUNT OF DIMINUTION IN THE VALUE OF INVEST MENT UPTO THE DATE OF MATURITY OF SUCH SECURITIES AND CONSIDERING SUCH VALUATION, THE RBI HAS DIRECTED THE BANKS TO AMORTIZE SUCH PREMIUM OVER THE RESIDUAL YE ARS OF SUCH SECURITY. 5. CONSIDERING THE FACTS OF THE CASE AND TAKING INTO CONSIDERATION THE ORDER OF THE COORDINATE BENCH, DECI DED AS LATE AS 12.03.2014 ON THE SAME ISSUE AND ALSO FIN DING THAT THE ASSESSEE HAS ACTED STRICTLY IN ACCORDANCE W ITH THE GUIDELINES OF THE RBI, WE FIND NO REASON TO DEVIAT E FROM THE ORDERS OF THE COORDINATE BENCH AND OTHER 5 THE THANE JANATA SAHAKARI BANK LTD . . DECISIONS AS PLACED IN THE PAPER BOOK AND INTERFERE WI TH THE ORDER OF THE CIT(A), WHICH WE SUSTAIN. 6. WE, THEREFORE, REJECT THE GROUND TAKEN BY THE DEPARTMENT. 7. IN THE RESULT, THE APPEAL AS FILED BY THE DEPARTM ENT IS DISMISSED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTION MADE BY THE LD. RESPECTIVE COUNSEL AND TH E CONCLUSION DRAWN IN THE ORDER OF THE TRIBUNAL (SUPRA), IF KEPT IN JUXTAPOSITION AND ANALYZED AND ALSO THE FACT THAT T HE LD. DR FAIRLY AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, APPEAL OF THE REVENUE IS DISM ISSED. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE (ITA NO.2514/MUM/2010) WHEREIN CONFIRMING THE LOSS AMOUN TING TO RS.1,05,55,504/-, BEING AMORTIZATION OF PREMIUM PAI D ON GOVERNMENT SECURITIES, ACQUIRED BY THE ASSESSEE AT THE TIME OF MERGER OF ERSTWHILE SHREE SADGURU JANGALI MAHARAJ S AHKARI BANK LTD. WITH THE ASSESSEE BANK HAS BEEN CHALLENGE D. WE FIND THAT IN PARA 7 OF THE ASSESSMENT ORDER, THE LD. ASS ESSING OFFICER HAS DISCUSSED THE LOSS ON AMORTIZATION OF PREMIUM O N SECURITIES AND MERELY CONTENDED THAT IT CANNOT BE ALLOWED ON S AME PRINCIPLE AS ENUMERATED IN PARA 3 OF THE ASSESSMENT ORDER, 6 THE THANE JANATA SAHAKARI BANK LTD . . WHEREAS, THE ASSESSEE AT PAGE 18 OF THE PAPER BOOK (COPY OF RETURN) RELEVANT PAGE 19 IN ITS REVISED COMPUTATION OF INCOME HAS MENTIONED AMORTIZATION OF COST OF ACQUISITION AT RS .6,97,97,672. THE PROFIT & LOSS ACCOUNT HAS BEEN ANNEXED AT PAGE 13 OF THE PAPER BOOK. ALL THESE FACTS HAVE NOT BEEN ANALYZED BY THE ASSESSING OFFICER, THEREFORE, THIS GROUND IS REMITT ED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDE AFRESH IN ACCORDANCE WITH LAW FOR WHICH DUE OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUPPORT ITS CLAIM BE PROVIDED TO THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON15/12/2014. SD/- SD/- (R.C.SHARMA) ( JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED -17/12/2014 F{X~{T? P.S/. ! . . & && & +$, +$, +$, +$, -,'$ -,'$ -,'$ -,'$ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. +0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 7 THE THANE JANATA SAHAKARI BANK LTD . . 4. 1 / CIT 5. ,23 +$! , , / DR, ITAT, MUMBAI 6. 34 5 / GUARD FILE. ! ! ! ! / BY ORDER, 0,$ +$ //TRUE COPY// 6 66 6 / 7 7 7 7 % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI