Nagar Urban Co-Op Bank Ltd, Ahmednagar V. Addl CIT Rg- Ahmednagar, Ahmednagar

ITA 306/PUN/2012

• Counselvise Citation: 30624514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Capital asset; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS. 306/PN/2012 (ASSTT. YEAR : 2007-08) NAGAR URBAN CO-OP. BANK LTD. POST BOX NO. 7 CENTRAL BANK ROAD AHMEDNAGAR 414 001 PAN AAAAN 0509 L ... APPELLANT VS. DY. CIT AHMEDNAGAR RANGE AHMEDNAGAR. RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 23-5-2013 DATE OF PRONOUN CEMENT : 30-05-2013 ORDER PER R.S. PADVEKAR, JM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING T HE IMPUGNED ORDER OF THE LD CIT(A)-I I PUNE DATED 5-9-2011. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND IN THE APPEAL : THAT THE LEARNED CIT(A)-I HAS ERRED I CONFIRMING T HE DISALLOWANCE OF EXPENSES UNDER THE HEAD AMORTIZATION OF PREMIUM PAI D ON GOVERNMENT SECURITIES DEBITED TO P & L A/C RS. 15,11,333/- BY THE ASSESSING OFFICER THAT AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES BE ALLOWED AS CLAIMED AND THE ADDITION MADE MAY BE DELETED. 2. THE BRIEFLY STATED THE FACTS WHICH REVEAL FROM T HE RECORD ARE AS UNDER. THE ASSESSEE SOCIETY IS IN THE BUSINESS OF BANKING AND ALSO DERIVES INCOME FROM INSURANCE BUSINESS. THE ASSESSEE HAS MADE INVESTM ENTS IN CERTAIN GOVERNMENT SECURITIES AS PER THE NORMS PRESCRIBED BY THE RBI. THE SAID SECURITIES WERE CLASSIFIED UNDER TWO DIFFERENT HEADS I.E. HELD TO M ATURITY (HTM) AND AVAILABLE FOR SALE (AFS). THE ASSESSEE HAS MADE A CLAIM OF RS. 1 5,11,333/- UNDER THE HEAD PREMIUM PAID ON GOVERNMENT SECURITIES. THE ASSES SEE EXPLAINED THAT THE SAID CLAIM REPRESENTS EXCESS ACQUISITION OF COST OVER TH E FUNDS AVAILABLE IN RESPECT OF CERTAIN GOVERNMENT SECURITIES HELD UNDER HTM CATEGO RY, WRITTEN OFF ON THE BASIS OF UNEXPIRED PERIOD OF MATURITY. THE ASSESSEE HAS ALS O PLEADED THAT HTM SECURITIES ARE IN THE NATURE OF STOCK-IN-TRADE. IN SUM AND SUB STANCE, THE ASSESSEE HAS AMORTIZED THE AMOUNT OF PREMIUM OVER THE PERIOD OF MATURITY WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND ADDED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. ITA NOS. 306//PN/2012 NAGAR URBAN CO-OP. BANK LTD. A.Y.2007-08 PAGE OF 3 2 3. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER FOR REJECTING THE CLAIM OF AMORTIZATION OF THE PREMIUM ON THE SEC URITIES HELD UNDER HTM TREATING THE SAME AS CAPITAL ASSET. THE ASSESSEE IS IN APPE AL BEFORE US. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ISS UE BEFORE US IS CLEARLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT PUNE BENCH IN THE CASE OF LATUR URBAN CO-OP. BANK LTD. IN ITA NO. 778 AND 792 /PN/2011, ORDER DATED 31-8- 2012. THE RELEVANT DISCUSSION AND FINDING OF THE TR IBUNAL ON THE ISSUE IS AS UNDER. 13. SO FAR AS GROUND NO. 2 IS CONCERNED, IT IS IN RESPECT OF THE DISALLOWANCES ON THE LOSS ON SALE OF SURPLUS OF RS. 14,70,000/-. THE A.O HAS OBSERVED THAT AN AMOUNT OF RS. 14,70,000/- IS DEBIT ED TO THE PROFIT & LOSS A/C ON ACCOUNT OF LOSS ON SALE OF SECURITIES. THE A.O HAS FURTHER OBSERVED THAT THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT SEC URITIES OF THE BANK ARE HELD UNDER THE HEAD TO MATURITY CATEGORY AND, THEREFO RE, LOSS ARISING ON THE SALE OF INVESTMENT IS IN THE NATURE OF CAPITAL LOSS AND THEREFORE, THE SAME IS NOT ALLOWABLE EXPENDITURE. THE A.O MADE THE ADDITION T O THE EXTENT OF RS. 14,70,000/-. THE LD CIT(A) CONFIRMED THE ADDITION. 14. WE HAVE HEARD THE PARTIES. THE LD COUNSEL PLAC ED HIS HEAVY RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BANK OF BARODA AND IN THE CASE OF UCO BANK VS. CIT, 240 ITR 355 (SC). IN THE CASE OF BANK OF BARODA (SUPRA), THE ISSUE BEFOR E THEIR LORDSHIP WAS WHETHER THE ASSESSEE WAS ENTITLED FOR DEDUCTION ON ACCOUNT OF DEPRECIATION IN THE VALUE OF INVESTMENTS. THE METHOD OF VALUATION FOLLOWED BY THE ASSESSEE BANK WAS TO VALUE INVESTMENTS AT COST OR MARKET VAL UE WHICHEVER WAS LOWER. THE ASSESSEE HAD CLAIMED THE DEPRECIATION TO THE TU NE OF RS. 11,82,35,007/- AND THE SAID DEPRECIATION WAS CLAIMED AS A DEDUCTIO N WHICH WAS DISALLOWED BY THE A.O, BUT THE ASSESSEE BANK SUCCEEDED BEFORE THE CIT(A). THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). THE RE VENUE CARRIED THE ISSUE BEFORE THE HONBLE HIGH COURT. THE CORE ISSUE WAS THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE BANK FOR VALUING THE STOCK OF THE SECURITIES. THE HONBLE HIGH COURT FOLLOWED THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA). 15. IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA), EVEN THE ISSUE OF VALUATION OF THE STOCK IN TRADE OF THE INVESTMENT W AS BEFORE THE HONBLE SUPREME COURT. IN THE CASE OF THE ASSESSEE, THE IS SUE IS REGARDING ALLOWABILITY OF THE LOSS ON THE SALE OF THE SECURIT IES. MERELY BECAUSE THE SECURITIES ARE KEPT UNDER THE HEAD TILL THE MATURI TY, THE SAID SECURITY CANNOT BE TREATED AS A PURELY INVESTMENT. LAW IS WELL S ETTLED THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK-IN-TRAD E. WE MAY LIKE TO QUOTE HERE THE DECISION OF THE HONBLE HIGH COURT OF KERA LA IN THE CASE OF CIT VS. NEDUNGADI BANK LTD., 264 ITR 545. IN THE SAID CASE , THE HONBLE HIGH COURT HAS HELD THAT THE SECURITIES HELD BY THE BANK ARE I N THE NATURE OF STOCK-IN- TRADE. BOTH THE AUTHORITIES BELOW HAVE MERELY GONE ON THE NOMENCLATURE OF THE HEAD UNDER WHICH THE SECURITIES ARE HELD. IN OU R CONSIDERED VIEW, NOMENCLATURE CANNOT BE DECISIVE FOR THE ASSESSEE BA NK. WE, THEREFORE, HOLD THAT THE LOSS ON THE SALE OF THE SECURITIES IS REV ENUE IN NATURE AND SAME IS ALLOWABLE. ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 5. MOREOVER, THE SAID ISSUE IS ALSO DECIDED IN FAVO UR OF THE ASSESSEE BY OTHER CO-ORDINATE BENCH IN THE FOLLOWING CASES: ITA NOS. 306//PN/2012 NAGAR URBAN CO-OP. BANK LTD. A.Y.2007-08 PAGE OF 3 3 I) DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN T HE CASE OF KRISHNA GRAMEENA BANK VS. ADDL. CIT (ITA NO. 146/BANG/2011 AND 224/BANG/2011 ORDER DATED 15-6-2012. II) DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF NATIONAL CO-OP. BANK LTD. VS. JT. CIT RANGE 3 BANGALORE (ITA NO. 1090/BANG/2010 AND 7/BANG/2011, ORDER DATED 11-5-20 12). WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON T HIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH MAY 2013. SD/- S D/- ( R.K. PANDA) ACCOUNTANT MEMBER ( R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 30 TH MAY 2013 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT , I PUNE 4. THE CIT(A)-I, PUNE 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE