Assistant Commissioner of Income tax, V. The Beed District Central Co-operative Bank Ltd, Beed

ITA 2987/PUN/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7050 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Revised return
• Section: 143(3); 201; 143(2); 9(1); 9(1); 9(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE VIRTUAL COURT BEFORE SH RI P.M. JAGTAP , VICE PRESIDENT (K/Z) AND SH RI PARTHA SARATHI CHAUDHURY , J UDICIAL MEMBER ITA NO. 2987 /PUN/20 1 6 / ASSESSMENT YEAR : 201 2 - 1 3 THE ASST. COMMISSI ONER OF INCOME - TAX, CIRCLE - 3, AURANGABAD VS. THE BEED DISTRICT CENTRAL CO - OPERATIVE BANK LTD., HEAD OFFICE, RAJURI VES, BEED 431122 PAN: AAAAT5256C APPELLANT RESPONDENT / ORDER PER P.M. JAGTAP , VP : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A) - 2 , AURANGABAD , DATED 2 5 . 1 0.201 6 , WHEREBY HE ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PENAL INTEREST PAID TO RESERVE BANK OF INDIA (RBI). 2. THE ASSESSEE IN THE PRESENT CASE IS A CO - OPERATIVE BANK WHICH IS REGISTERED U/S 9(1) OF MAHARASHTRA COOPERATIVE SOCIETIES ACT, 1960. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS ORIGINALLY FILED BY IT ON 30.09.2012 DECLARING A LOSS OF RS.9,65,89,324/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS ISSUED BY THE ASSESSING OFFICER ON 12.08.2013, WHICH WAS DULY SERVED ON THE ASSESS EE BANK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE REVISED RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 02.03.2015 DECLARING A LOSS OF RS.28,39,60,085/ - . IN THE SAID REVISED RETURN, A A SSESSEE BY S MT. DEEPA KHARE RE VENUE BY S MT. KESAN G Y. SHERPA DATE OF HEAR ING 08 - 0 9 - 2020 DATE OF PRONOUNCEMENT 09 - 0 9 - 2020 ITA NO . 2987 /PUN/ 20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 2 DEDUCTION INTER - ALIA, OF RS.7,03,26,586/ - WAS CLAIMED BY THE A SSESSEE ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI FOR NON - MAINTENANCE OF SLR AND CRR BY RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEOGIRI NAGARI SAHAKARI BANK AND OTHERS RENDERED ON 22.01.2015, WHEREIN IT WAS HELD TH AT PENAL INTEREST CHARGED BY RBI WAS COMPENSATORY IN NATURE AND NOT PENAL IN CHARACTER. SINCE THE REVISED RETURN FILED BY THE ASSESSEE ON 02.03.2015 WAS BEYOND THE PERIOD OF ONE YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER CONSIDER ED THE SAME AS INVALID AND PROCEEDED TO COMPLETE THE ASSESSMENT ON THE BASIS OF RETURN OF INCOME ORIGINALLY FILED BY THE ASSESSEE BANK ON 30.09.2012, THEREBY NOT ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI F OR NON - MAINTENANCE OF SLR AND CRR VIDE AN ORDER DATED 22.03.2015 PASSED U/S 143(3) OF THE ACT. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE LD. CIT(A), WHO ENTERTAINED THE CLA IM OF THE ASSESSEE INTER - ALIA, FOR DEDUCTION ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI FOR NON - MAINTENANCE OF SLR AND CRR AND ALSO ALLOWED THE SAME ON MERIT FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NOS.9 AND 10 OF HIS IMPUGNED ORDER. 9. SUB - GROUND O F GROUND NO.4 STATES THAT DEDUCTION OF PENAL INTEREST FOR NON - MAINTENANCE OF A SLR AND CRR PAID TO THE RBI SHOULD BE ALLOWED AS A DEDUCTION. THE CLAIM FOR DEDUCTION OF THIS AMOUNT WAS MADE IN THE REVISED RETURN FILED ON 25/02/2015 AND THE ASSESSING OFFICER HAD NOT CONSIDERED THE CLAIM BECAUSE THE REVISED RETURN WAS FILED BEYOND THE DUE DATE. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE STATED THAT THIS ISSUE IS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE ITAT, MUMBAI, BEN CH 'H' IN THE CASE OF BANK OF AMERICA, N.A. VS. JCIT, SPECIAL RANGE - 32 FOR THE ASSESSMENT YEAR 1997 - 98 IN ITA NO.4408/MUM/2000 DATED 27/11/2013. IN THE AFORESAID DECISION IT HAS BEEN HELD AS UNDER : 7 . GROUND NO.7 AND 8 ARE REGARDING DISALLOWANCE IN RESP ECT OF AMOUNT PAID TO RBI FOR SHORTFALL IN MAINTENANCE OF CASH RESERVE RATIO (CRR) AND STATUTORY L IQUI DITY RESERVE (SLR). THE AO DISALLOWED A SUM OF RS.3 , 74 , 704/ - PAID TO RBI FOR SHORTFA LL IN MAINTENANCE OF CRR AS WELL AS AN AMOUNT OF RS.9 , 30,377/ - PAID TO RBI FOR NOT COMPLYING WITH THE SLR REQUIREMENTS. THESE DISALLOWANCES WERE MADE BY AO ON THE GROUND THAT THE PAYMENTS ARE INFRACTION OF LAW AND THEREFORE, CANNOT BE ALLOWED U/S. 36(1). THE ID. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY ASSESSING OFFICER . ITA NO . 2987 /PUN/ 20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 3 7 . 1 WE HAVE HEARD THE L D. SR. COUNSEL AS WELL AS THE L D. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE L D. SR. COUNSEL HAS SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 1992 - 93 IN ITA NO. 141 /BOM/96 IN FAVOUR OF ASSESSEE. HE HAS FURTHER SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE HON BL E J URISDICTIONAL HIGH COURT IN CASE OF BANK OF BARODA VIDE ORDER DATED 15.02.2011 IN INCOME TAX APPEAL NO.4169 OF 2009. ON TH E OTHER HAND THE L D. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 7 . 2 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF RECORD WE NOTE THAT THIS ISSUE IS COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S. BANK OF BARODA (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER : - 'THE ONLY QUESTION RAISED BY THE REVENUE IN THIS APPEAL IS WHETHER THE INTEREST PAID BY THE ASSESSEE FOR NON - MAINTENANCE OF THE CASH RESERVE RATIO / STATUTORY LIQUIDITY RATIO A S PER SECTION 24 OF THE BANKING REGULATION ACT, 1949 AND SECTION 42 OF THE RESERVE BANK OF INDIA ACT, 1934 CONSTITUTE PENALTY SO AS TO DISALLOW THE INTEREST CLAIM. THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF DCIT V/S DHANALAKSHMI BANK LTD. (COCHIN) REPORTED IN 76 TTJ 439 HELD THAT THE INTEREST PAID TO THE RBI WAS NOT PENALTY AND ACCORDINGLY THE INTEREST EXPENDITURE IS ALLOWABLE. SLP FILED BY THE REVENUE AGAINST SIMILAR DECISION OF THE TRIBUNAL IN THE CASE OF DHANALAKSHMI BANK LTD. (SUPRA) HAS BEEN DI SMISSED BY THE APEX COURT AS REPORTED IN [2005] 277 ITR (ST) 3. IN THIS VIEW OF THE MATTER, WE FIND NO MERIT IN THE APPEAL AND THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS.' 7.3 FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT WE DECIDE THIS ISSUE IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 10. THUS THE DECISION IN THE CASE OF BANK OF AMERICA, N.A. (SUPRA) IS A DIRECT DECISION ON THIS ISSUE AND THE HON'BLE TRIBUNAL IN THAT CASE HAD RELIED ON THE DECISION GIVEN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BANK OF BARODA VIDE ORDER DATED 15.02.2011 IN INCOME TAX APPEAL NO.4169 OF 2009. RESPECTFULLY FOLLOWING THE ABOVE DECISION I HOLD THAT AMOUNT PAID TO THE RBI U/S.24 OF THE BANKING REGULATION ACT FOR SHORTFALL IN MAINTENANCE OF CASH RE SERVE RATIO (CRR) AND STATUTORY LIQUIDITY RESERVE (SLR) IS NOT A PENALTY WHICH IS REQUIRED TO BE DISALLOWED U/S.37 OF THE ACT AS THE SAME IS NOT A PENALTY FOR INFRACTION OF LAW. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE AMOUNTS PAID FOR SHORTFALL IN MAINTENANCE OF CRR AND SLR TO THE RBI IS A LEGITIMATE BUSINESS EXPENDITURE. THIS SUB - GROUND OF GROUND NO.4 IS ALLOWED. 4. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEF ORE THE TRIBUNAL ON THE FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) - 2, AURANGABAD ERRED IN DELETING ENTIRE ADDITION OF RS.7,03,26,586/ - ON ACCOUNT OF PENAL INTEREST PAID TO RBI WHEREAS THE ASSESSEE HAD ACTUALLY INCU RRED EXPENDITURE OF RS.89,37,585/ - ONLY AND FOR REMAINING AMOUNT OF RS.6,13,89,000/ - ONLY PROVISION HAS BEEN CREATED. ITA NO . 2987 /PUN/ 20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 4 5. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE NEW CLAIM MADE BY TH E ASSESSEE BANK FOR DEDUCTION ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI FOR NON - MAINTENANCE OF SLR AND CRR WAS NOT ENTERTAINED BY THE ASSESSING OFFICER AS THE SAME WAS NOT MADE BY WAY OF REVISED RETURN VALIDLY FILED BY THE ASSESSEE BANK. THE LD. CIT(A) NOT ONLY ENTERTAINED THE SAID CLAIM AT THE APPELLATE STAGE BUT ALSO ALLOWED THE SAME ON MERIT. IT IS OBSERVED THAT THE ACTION OF LD. CIT(A) IN ENTERTAINING THE SAID CLAIM AT APPELLATE STAGE IS DULY SUPPORTED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC) AND EVEN THE DECISION RENDERED BY HIM IN ALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI FOR NON - MAINTENANCE OF SLR AND CRR ON MERIT IS DULY SUPPORTED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DEOGIRI NAGARI SAHAKARI BANK AND OTHERS (SUPRA). THE REVENUE IN THE PRESENT APPEAL HAS NOT CHALLENGED THE IMPUGNED ORDER OF LD. CIT(A) ON TH ESE ISSUE S . THE LIMITED GRIEVANCE AS RAISED BY THE REVENUE IN THE SPECIFIC GROUND TAKEN IN ITS APPEAL AND AS FURTHER ARGUED BY THE LD. DR DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL IS THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PENAL INTEREST PAID TO RBI REPRESENTED PROVISI ON TO THE EXTENT OF RS.6,13,89,000/ - AND THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION TO THAT EXTENT. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE LIABILITY ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI FOR NON - MAINTENANCE OF SLR AND CRR WAS ACCEPTED BY THE ASSESSEE BANK AND THE SAME HAVING BEEN ARISEN AND CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N EVEN ON ACCOUNT OF PROVISION MADE ON ACCOUNT OF PENAL INTEREST CHARGED BY RBI. KEEPING IN VIEW THIS CATEGORICAL ASSERTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE , WHICH HAS REMAINED UNDISPUTED OR UNCONTROVERTED BY THE LD. DR, WE FIND NO INFIRMITY IN TH E IMPUGNED ORDER OF LD. CIT(A) ALLOWING THE CLAIM OF ASSESSEE FOR ITA NO . 2987 /PUN/ 20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 5 DEDUCTION ON ACCOUNT OF PENAL INTEREST PAID TO RBI FOR NON - MAINTENANCE OF SLR AND CRR INCLUDING ESPECIALLY THE PROVISION MADE FOR THE SAME TO THE EXTENT OF RS.6,13,89,000/ - . THE SAME IS ACC ORDINGLY UPHELD AND TH IS APPEAL OF REVENUE IS DISMISSED. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE O PEN COURT ON 9 TH SEPTEMBER , 2020 SD/ - SD/ - ( PARTHA SARATHI CHAUDHURY ) ( P.M. JAGTAP ) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 9 TH SEPTEMBER , 2020 GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT (A) - 2 , AURANGABAD 4 . 5. THE PR. CIT - 2 , AURANGABAD DR A BENCH , ITAT, PUNE 6 . / GUARD FILE / BY ORDER, / / TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE