Assistant Commissioner of Income-tax, V. The Ahmednagar Sahar Sahakari Bank Ltd., Ahmednagar

ITA 298/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89066 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Question of law; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.298/PN/2014 (ASSESSMENT YEAR : 2008-09) ASSTT. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . APPELLANT VS. THE AHMEDNAGAR SAHAR SAHAKARI BANK LTD., SARWATHA, NAVI PETH, AHMEDNAGAR PAN : AAABB0323R . RESPONDENT DEPARTMENT BY : SHRI RAJESH DAMOR ASSESSEE BY : SHRI C. H. NANIWADEKAR DATE OF HEARING : 23-03-2015 DATE OF PRONOUNCEMENT : 30-03-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUN E DATED 18.11.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 20.1 0.2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE SOLITARY DISPUTE RAISED BY T HE REVENUE IS WITH REGARD TO A DISALLOWANCE OF RS.11,38,171/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID FOR ACQUISITION OF SECURITIES CATEGORIZED AS HELD TO MATURITY (HTM), WHICH HAS SINCE BEEN DELETE D BY THE CIT(A). 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESS EE IS A CO-OPERATIVE BANK REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIE TIES ACT, 1960 AND IS CARRYING ON THE BUSINESS OF BANKING IN TERMS OF A L ICENSE ISSUED BY THE RESERVE BANK OF INDIA (RBI). ASSESSEE CLAIMED DEDU CTION FOR AMORTIZATION OF PREMIUM PAID ON ACQUISITION OF SECURITIES CATEGORIZ ED AS HTM, WHICH WAS ITA NO.298/PN/2014 DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT SUCH SECURITIES ARE CAPITAL IN NATURE. THE CIT(A) HAS DELETED THE ADDI TION OF RS.11,38,171/- FOLLOWING THE DECISION OF THE PUNE OF THE TRIBUNAL IN THE CASE OF LATUR URBAN CO-OPERATIVE BANK VS. DCIT VIDE ITA NO.778/PN/2011 DATED 31.08.2012 WHEREIN THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US, 4. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT SIMILAR ISSUE OF THE ALLOWABILITY OF PREMIUM ON AMORTIZATION OF H TM SECURITIES, AROSE BEFORE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PUNE DIST RICT CENTRAL CO-OPERATIVE BANK LTD. VS. ADDL.CIT IN ITA NO.1796/PN/2013 RELAT ING TO ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 28 TH NOVEMBER 2014, IT WAS HELD AS UNDER:- 10. WE FIND THAT A SIMILAR ISSUE OF ALLOWABILIT Y OR DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES AROSE BEFORE PUNE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN ITA NO.1795/PN/2013 RELATING TO ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 22.09.2014 WHEREIN, IT WAS HELD AS UNDER:- 2.1 THE ONLY ISSUE REMAINS IS WITH REGARD TO DISAL LOWANCE MADE BY THE ASSESSING OFFICER OF RS.2,20,68,302/- C LAIMED BY THE ASSESSEE AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF OVER AND ABOVE THE VALUE O F SUCH SECURITIES. THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM), WHEREIN THE HON BLE BOMBAY HIGH COURT ON SIMILAR ISSUE, HELD AS UNDER: AS FAR AS QUESTION (C) IS CONCERNED, WE FIND THAT AN IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED I N FAVOUR OF THE ASSESSEE BY THIS COURT IN ITS JUDGMEN T DATED JULY 4, 2014, IN INCOME TAX APPEAL NO.1079 OF 2012, CIT V. LORD KRISHNA BANK LTD. (NOW MERGED WITH HDFC BAN K LTD.) (2014) 366 ITR 416 (BOM). MR. SURESH KUMAR F AIRLY STATED THAT QUESTION (C) REPRODUCED ABOVE IS COVERE D BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIE W THAT EVEN QUESTION (C) DOES NOT ARISE ANY SUBSTANTIAL QU ESTION OF LAW THAT REQUIRES AN ANSWER FROM US. AND A SIMILAR VIEW HAS BEEN TAKEN BY ITAT, PUNE A BENCH IN THE CASE OF DY.CIT VS. KALLAPPANNA AWADE I CHALKARANJI JANATA SAHAKARI BANK LTD. IN ITA NO.449/PN/2012 AND ANOTHER BY OBSERVING AS UNDER: ITA NO.298/PN/2014 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND AN IDENTICAL IS SUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF NAHSIK MERCHANT COOPERATIVE BANK LTD. (SUPRA). WE FIND TH E TRIBUNAL HAS DISCUSSED THE ISSUE AND DISMISSED THE GROUNDS RAISED BY THE REVENUE BY HOLDING AS UNDER : 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT WITH THE ADVENT OF SECTION 80P(4) W.E.F. A.Y, 2007-08 HAS CLOSED THE DOORS FOR COOPERATIVE BANKS FOR CLAIMING THE BENEFI T OF DEDUCTION U/S.80P(2)(A)(I) FROM THIS TOTAL INCOM E. HOWEVER, THE COOPERATIVE SOCIETY SHOULD NOW BE ENTITLED TO BE ASSESSED AS NORMAL BANKING COMPANY. THE CLAUSE (4) INSERTED IN SECTION 80P HAS TAKEN AWAY THE BENEFIT OF THE ERSTWHILE DEDUCTION AVAILABLE TO COOPERATIVE SOCIETY IN CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE NEW CLAUSE (4) INSERTE D BY THE FINANCE ACT, 2006 W.E.F. 01-04-2007 READS AS UNDER: ' THE PROVISION OF THE SECTION WAS NOT IN RELATION TO ANY COOPERATIVE BANK OTHER THAN AGRICULTURAL CREDIT SOCIETY OR PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK'. 5. THE INTENTION OF THE PROVISION MAY BE DERIVED MORE PRECISELY FROM RELEVANT PARA 166 OF THE BUDGET SPEECH WHICH STATED THAT : 'CO- OPERATIVE BANKS, LIKE ANY OTHER BANK, ARE LENDING INSTITUTIONS AND SHOULD PAY TAX ON THEIR PROFITS, PRIMARY AGRICULTURAL CREDIT SOCIETIES (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK (PCARDB) STAND ON A SPECIAL FOOTING AND WILL CONTINUE TO BE EXEMPT UNDER SECTION 80P OF THE INCOME TAX ACT. HOWEVER, I PROPOSE TO EXCLUDE ALL OTHER CO-OPERATIVE BANKS FROM THE SCOPE OF THAT SECTION'. ACCORDINGLY, SECTION 80P IS TO BE AMENDED TO GIVE EFFECT TO THE ABOVE PROPOSAL. IT IS ALSO PROPOSED TO AMEND SECTION 2(24) TO PROVIDE THAT PROFITS AND GAINS OF BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO-OPERATIVE SOCIETY WI TH ITS MEMBERS SHALL BE INCLUDED IN THE DEFINITION OF 'INCOME' (WITH EFFECT FROM 1ST APRIL, 2007)'. 6. COOPERATIVE BANK UNLIKE OTHER COMMERCIAL BANKS ARE SUBJECTED TO DUAL CONTROL FROM BOTH RBI ITA NO.298/PN/2014 AS WELL AS FROM STATE COOPERATIVE DEPARTMENT. THE ACCOUNTING TREATMENT FOR A COOPERATIVE BANK IS THEREFORE A RESULT OF GUIDELINES FROM BOTH THE CONTROLLING AUTHORITIES. ORDINARILY A DEDUCTION IS NOT AVAILABLE TO AN ASSESSEE UNLESS SPECIFICALLY PROVIDED UNDER THE ACT. THIS IS IRRESPECTIVE OF ACCOUNTING TREATMENT PROVIDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. BUT AT THE SAME TIME IT WAS WELL SETTLED THAT DEDUCTION EXPRESSLY MENTIONED UNDER THE ACT ARE NOT EXHAUSTIVE AND PROFIT IS TO B E DERIVED ACCORDING TO ORDINARY COMMERCIAL PRINCIPLES. AS PER THE EXTANT RBI GUIDELINES DATED 01-07-2009 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER 3 CATEGORIES VIZ., HELD THE MATURITY HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). THE VALUE OF EACH KIND OF INVESTMENT IS TO BE DONE IN THE FOLLOWING MANNER: SR.NO. CLASSIFICATION VALUATION NORMS OF INVESTMENT. 1.. 2.. 3.. 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008, ON 'ASSESSMENT OF BANK - CHECK LIST FOR DEDUCTION, STATES AS UNDER: 'AS PER RBI GUIDELINES..' 8. THE ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. THE BANK OF RAJASTHAN LTD. (2011) TIOL- 35-ITAT-MUMBAI, HAS HELD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IT HAS ALSO BEEN HELD IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. ACIT THAT AMORTIZATION ON PURCHASE OF GOVERNMENT SECURITIES WAS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VIEW OF ABOVE, ASSESSEE WAS JUSTIFIED IN CONTENDING FOR AMORTIZATION OF PREMIUM PAID IN EXCESS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PERIOD REMAINING TILL MATURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY ADDITION OF RS.17,91,659/- MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS ITA NO.298/PN/2014 REASONED FACTUAL AND LEGAL FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 9. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ABOVE CITED DECISION WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION. ACCORDINGLY, THE ORDER OF THE LD.CIT(A) IS UPHELD AND THE GROUNDS RAISED BY T HE REVENUE ARE DISMISSED. 2.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING WE HOLD THAT IN CASE OF BANKS, THE P REMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED U NDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD T ILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IN VIEW OF ABOVE, THE ASSESSEE IS JUSTIFIED IN CONT ENDING THAT THE AMORTIZATION OF PREMIUM IN EXCESS OF FACE VALUE SEC URITIES AS HTM, PERIOD REMAINING DIFFERENCE WAS FOUND REASONAB LE. ACCORDINGLY, THE DISALLOWANCE OF RS.2,20,68,302/- M ADE BY THE ASSESSING OFFICER CLAIMED AS AMORTIZATION OF PREMIU M EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF PREMIU M OVER AND ABOVE THE FACE VALUE OF SUCH SECURITIES IS DIRECTED TO BE ALLOWED. 11. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC B ANK (SUPRA) HELD THAT THE ASSESSEE THEREIN WAS ENTITLED TO DEDU CTION WITH RESPECT TO THE DIMINUTION IN THE VALUE OF INVESTMENTS AND AMOR TIZATION OF PREMIUM ON INVESTMENTS HELD TO MATURITY ON THE GROUND OF MA NDATE OF THE RBI GUIDELINES. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 AND HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK (SUPRA). WE HOLD THAT AMORTIZATI ON OF PREMIUM EXPENDITURE FOR SECURITIES HELD TO MATURITY IN VIEW OF RBI GUIDELINES ARE ALLOWABLE BUSINESS EXPENDITURE IN THE CASE OF ASSES SEE. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THU S, ALLOWED. 5. WE FURTHER FIND THAT THE HONBLE BOMBAY HIGH COU RT IN CASE OF HDFC BANK LTD. (SUPRA) IN INCOME TAX APPEAL NO.330 OF 20 12 VIDE ORDER DATED 23.07.2014, ON A SIMILAR ISSUE ON ACCOUNT OF DEDUCT ION WITH RESPECT TO DIMINUTION IN THE VALUE OF INVESTMENT AND AMORTIZAT ION OF PREMIUM ON INVESTMENT (HELD TO MATURITY) AFTER REFERRING TO TH E MANDATE OF THE RBI GUIDELINES, AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ITA NO.298/PN/2014 SOUTHERN TECHNOLOGIES VS. JCIT, (2010) 320 ITR 577 (SC) HAD DISMISSED THE APPEAL FILED BY THE REVENUE. 6. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE DECIDED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PU NE DISTRICT CENTRAL CO- OPERATIVE BANK LTD. (SUPRA) AND ALSO THE HONBLE BO MBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA), AND FOLLOWING THE S AME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCT ION OF RS.11,38,171/- BEING THE PREMIUM ON AMORTIZATION OF SECURITIES. ACCORDI NGLY, WE HEREBY AFFIRM THE ACTION OF CIT(A) IN DELETING THE DISALLOWANCE OF RS .11,38,171/- REPRESENTING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITI ES UNDER THE HTM CATEGORY. THUS ON THIS ASPECT, REVENUE FAILS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 30 TH MARCH, 2015. SD/- SD /- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH MARCH, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-IT/TP, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE