The ACIT, B.K.Circle, Palanpur V. Chhapi Nagarik Sahakari Bank Ltd., Banaskantha

ITA 3027/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0278 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH
• Keywords: Depreciation; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 3027/AHD/2013 (ASSESSMENT YEAR: 2010-11) ASSTT. CIT, B.K. CIRCLE, PALANPUR V/S CHHAPI NAGARIK SAHAKARI BANK LTD., BAZAR, AT- CHHAPI-385210 TAL. VADGAM DIST-BANASKANTHA (N.GUJ) (APPELLANT) (RESPONDENT) PAN: AAATN1395F APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI A. C. SHAH, A.R. ( )/ ORDER DATE OF HEARING : 14 -10-201 6 DATE OF PRONOUNCEMENT : 20 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, AHMEDABAD DATED 16.09.2013 PERTAINING TO A.Y. 2010- 11. ITA NO.3027/ AHD/2013 . A.Y. 2010- 11 2 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 34,39,000/- MADE ON ACCOUNT OF NOTI ONAL LOSS ON ACCOUNT OF DIMINUTION IN VALUE OF STOCK-IN-TRADE OF THE GOVERN MENT SECURITIES. 3. ASSESSEE IS A CO.OP. BANK FILED ITS RETURN OF INCOM E ON 07.10.2010 DECLARING TOTAL INCOME AT RS. 50,91,200/-. THE RETURN WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE I SSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED RS. 34,39,000/- ON AC COUNT OF GOVERNMENT SECURITIES DEPRECIATION PROVISION. THE ASSESSEE WAS ASKED TO PROVIDE DETAILS AND JUSTIFY ITS CLAIM. ASSESSEE FILED A DETAILED RE PLY STATING THAT ITS BOOKS OF ACCOUNTS ARE AS PER AS-13 FOR ACCOUNTING OF INVESTM ENT IN WHICH IT IS MENTIONED THAT THE CURRENT INVESTMENT MUST BE VALUE D AND DISCLOSED AT LOWER OF COST AND FAIR MARKET VALUE. IT WAS BROUGHT TO THE NOTICE OF THE A.O. THAT INVESTMENT IN GOVERNMENT SECURITIES ARE CONSID ERED AS STOCK-IN-TRADE AND VALUED AT MARKET PRICE OR COST WHICHEVER IS LOW ER. 5. THE CONTENTIONS OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O. WHO WAS OF THE FIRM BELIEF THAT A NOTIONAL LOSS IS DEBITED BY THE ASSESSEE AND THE SAME CANNOT BE ALLOWED AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY, THE A.O. MADE AN ADDITION OF RS. 34,39,000/-. ITA NO.3027/ AHD/2013 . A.Y. 2010- 11 3 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CONTENTION. 7. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK 240 ITR 355 AND IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE, THE LD. CIT(A) HELD AS UNDER:- 5. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUB MISSIONS OF THE A.R. OF THE APPELLANT CAREFULLY. THE REASONS FOR MAKING ADDITIONS AND SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFULLY GO NE THROUGH. THE APPELLANT IS IN BANKING BUSINESS AND HAS TO FOLLOW GUIDELINES ISSUED BY THE RBI FOR INVESTMENTS IN VARIOUS GOVERNMENT SECURITIE S. THE INVESTMENT MADE IN THE GOVERNMENT SECURITIES FOR WHICH LOSS HA S BEEN SHOWN IN PROFIT AND LOSS ACCOUNT IS IN THE NATURE OF STOCK-IN-TRADE , AS THESE HAVE BEEN CLASSIFIED ACCORDING TO THE GUIDELINES ISSUED BY TH E RBI. AS THE STOCK-IN- TRADE IS VALUED AT THE MARKET PRICE OR THE COST OF ACQUISITION WHICHEVER IS LESS AND THE APPELLANT HAS FOLLOWED THE SAME UNIVER SALLY ACCEPTED ACCOUNTING METHOD, THE LOSS DEBITED TO THE PROFIT A ND LOSS ACCOUNT IS AN ALLOWABLE EXPENDITURE TO THE APPELLANT. IT HAS BEEN FOUND FROM THE PAST RECORDS OF THE APPELLANT THAT THE APPELLANT IS FOLL OWING THIS PRACTICE SINCE MANY YEARS AND IF HIGHER VALUE OF ANY GOVERNMENT SE CURITY WAS FOUND, IT HAS TAKEN BY TAKING HIGHER VALUE IN ITS BOOKS OF AC COUNTS. THIS FACT SHOWS THAT THE APPELLANT IS MAINTAINING THE BOOKS ON MERC ANTILE BASIS OF ACCOUNTING AND THAT IS IN ORDER. THEREFORE, THE ADD ITIONS MADE ARE DESERVES TO BE DELETED, THEREFORE, IT IS DELETED. T HUS, THIS GROUND OF APPEAL IS ALLOWED. ITA NO.3027/ AHD/2013 . A.Y. 2010- 11 4 9. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE WH ICH MAY WARRANT A DIFFERENT VIEW. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HEAVILY RELIED UPON THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. 10. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT THE CBDT VIDE CIRCULAR NO. 599 DATED 24.04.1991 REPORTED IN 189 ITR 126 (STAT) HAS, INTERALIA, ISSU ED GUIDELINES, THE RELEVANT PORTION READ AS UNDER:- (I) WHETHER THE SECURITIES HELD BY THE BANKS CONST ITUTE THEIR STOCK-IN-TRADE OR INVESTMENT, AND CONSEQUENTLY WHETHER THE LOSS CL AIMED BY THE BANKS ON THE VALUATION OF THEIR SECURITIES SHOULD BE ALLO WED AS DEDUCTION IN COMPUTING THEIR TAXABLE PROFIT? (II) WHETHER . THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT THE SECURITIES MUST BE REGARDED AS STOCK-IN-TR ADE BY THE BANKS. THEREFORE, THE CLAIM OF LOSS, IF DEBITED IN THE BOO KS OF ACCOUNT, WOULD BE GIVEN THE SAME TREATMENT AS IS NORMALLY GIVEN TO TH E STOCK-IN-TRADE. 11. A PERUSAL OF THE AFOREMENTIONED CBDT CIRCULAR CONSI DERED IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF UCO BANK AND WOODWARD GOVERNOR (SUPRA), WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ITA NO.3027/ AHD/2013 . A.Y. 2010- 11 5 FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REV ENUE IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 - 10- 2016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD