Rajarambapu Sahakari Bank Ltd., Sangli V. Deputy Commissioner of Income-tax,

ITA 34/PUN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85272 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 34 / P N/ 20 1 4 ASSESSMENT YEAR : 200 7 - 08 RAJARAMBAPU SAHAKARI BANK LTD., A/P, PETH, TAL. - WALWA, DISTT. - SANGLI VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2, SANGLI (APPELLANT) (RESPONDENT) PAN NO. AAAAR0868E APPELLANT BY: SHRI M.K. KULKARNI RESPONDENT BY: SHRI B.C. MALAKAR DATE OF HEARING : 0 4 - 12 - 2014 DATE OF PRON OUNCEMENT : 15 - 12 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A) , KOLHAPUR DATED 0 8 - 11 - 2013 FOR THE A.Y. 200 7 - 08. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND IN T HE APPEAL: (2). ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE - BANK MADE ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID FOR ACQUISITION OF GOVT. SECURITIES (HTM SECURITIES). TH E ISSUE IS NOW FULLY COVERED IN FAVOR OF THE APPELLANT - BANK BY VARIOUS JUDICIAL PRECEDENTS INCLUDING THE JUDGMENTS OF THE JURISDICTIONAL TRIBUNAL, PUNE BENCH, PUNE. THE CLAIM OF RS.25,48,932/ - BE ALLOWED IN FAVOUR OF THE APPELLANT BANK. 2. THE FACTS W HICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN THE BUSINESS OF BANKING. THE RETURN FILED BY THE ASSESSEE BANK WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TA X ACT. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF THE PREMIUM PAID ON THE SECURITIES HELD UNDER THE CATEGORY OF HELD TO MATURITY (HTM) TO THE EXTENT OF RS.25,48,932/ - . IN THE OPINION OF THE ASSESSING OFFICER THE SECURITY WAS OBTAINED AT 2 ITA NO. 34/PN/2014, RAJARAMBAPU SAHAKARI BANK LTD., SANGLI DISCOUNT TO FACE VALUE THE DIFFERENCE SHOULD BE BOOKED AS A PROFIT AT THE TIME OF MATURITY OF SECURITY. AS OBSERVED BY THE ASSESSING OFFICER , THE SAME SHOULD BE THE TREATMENT FOR THE CASE WHEN THE PREMIUM IS PAID IN A DDITION TO FACE VALUE OF SECURITY BY THE BANK. H E, THEREFORE, DISALLOWED THE ENTIRE PREMIUM WRITTEN OFF TO THE EXTENT OF RS.25,48,932/ - . THE LD. CIT(A) CONFIRMED THE ADDITION. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. T HE LD. COUNSEL SUBMITS THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT, CIRCLE - 1, NASHIK VS. VISHWASH CO - OPERATIVE BANK LTD., NASHIK BEING ITA NO. 951/PN/2013 ORDER DATED 29 - 05 - 2014. TH E LD. DR FAIRLY CONCEDED THE SUBMISSION MADE BY THE LD. COUNSEL. IN THE CASE OF VISHWASH CO - OPERATIVE BANK LTD., NASHIK (SUPRA) THE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BEFORE THE ITAT, PUNE BENCH AND OPERATIVE PART OF THE FINDING OF THE TRIBUNA L IS AS UNDER: 3. WE HAVE HEARD THE PARTIES. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, PUNE IN THE CASE OF LATUR URBAN CO - OP. BANK LIMITED, LATUR (SUPRA). THE OPERATIVE PART OF THE DECISION IN THE CASE OF LATUR URBAN CO - OP. BANK LIMITED, LATUR (SUPRA) IS AS UNDER: 14. WE HAVE HEARD THE PARTIES. THE LD COUNSEL PLACED 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 BA NK VS. CIT, 240 ITR 355 (SC). IN THE CASE OF BANK OF BARODA (SUPRA), THE ISSUE BEFORE 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 ASSES SEE BANK WAS TO VALUE INVESTMENTS AT COST OR MARKET VALUE WHICHEVER WAS LOWER. THE ASSESSEE HAD CLAIMED THE DEPRECIATION TO THE TUNE OF RS. 11,82,35,007/ - AND THE SAID DEPRECIATION WAS CLAIMED AS A DEDUCTION WHICH WAS DISALLOWED BY THE A.O, BUT THE ASSES SEE BANK SUCCEEDED BEFORE THE CIT(A). THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). THE REVENUE 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 SECURI TIES. THE HONBLE HIGH COURT FOLLOWED THE DECISION OF HONBLE 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 3 ITA NO. 34/PN/2014, RAJARAMBAPU SAHAKARI BANK LTD., SANGLI WAS BEFORE T HE HONBLE SUPREME COURT. IN THE CASE OF THE ASSESSEE, THE ISSUE IS REGARDING ALLOWABILITY OF THE LOSS ON THE SALE OF THE SECURITIES. MERELY BECAUSE THE SECURITIES ARE KEPT UNDER THE HEAD TILL THE MATURITY, THE SAID SECURITY CANNOT BE TREATED AS A PURELY INVESTMENT. LAW IS WELL SETTLED THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK - IN - TRADE. WE MAY LIKE TO QUOTE HERE THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. NEDUNGADI BANK LTD., 264 ITR 545. IN THE SAID C ASE, THE HONBLE HIGH COURT HAS HELD THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK - IN - TRADE. BOTH THE AUTHORITIES BELOW HAS MERELY GONE ON THE NOMENCLATURE OF THE HEAD UNDER WHICH THE SECURITIES ARE HELD. IN OUR CONSIDERED VIEW, NOMENCLA TURE CANNOT BE DECISIVE FOR THE ASSESSEE BANK. WE, THEREFORE, HOLD THAT THE LOSS ON THE SALE OF THE SECURITIES IS REVENUE IN NATURE AND SAME IS ALLOWABLE. ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 4. WE, THEREFORE, FIND NO REASON TO TAKE THE DIFFERENT VIE W. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS CONFIRMED. ACCORDINGLY, THE GROUND NOS. 1 & 2 ARE DISMISSED. 4. WE, THEREFORE, FOLLOWING THE DECISION IN THE CASE OF VISHWASH CO - OPERATIVE BANK LTD., NASHIK (SUPRA) ALLOW THE GROUND TAKEN BY THE ASSESSEE. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 15 - 12 - 20 1 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 15 TH DECEMBER, 20 1 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) , KOLHAPUR 4 THE CIT - II, KOLHAPUR 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE