Shri Warana Sahakari Bank Ltd., Kolhapur V. Assistant Commissioner of Income-tax,

ITA 342/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9295 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SUSHANT S PHADNIS
• Keywords: Business income; Earning of tax free income; Bad and doubtful debts
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.341 AND 342/PUN/2016 / ASSESSMENT YEARS : 2011-12 AND 2012-13 SHRI WARANA SAH. BANK LTD., WARANANAGAR, TAL. PANHALA, KOLHAPUR. PAN : AAAAS1033L. . / APPELLANT V/S THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1, KOLHAPUR. . / RESPONDENT ASSESSEE BY : SHRI SUSHANT S. PHADNIS REVENUE BY : SHRI AJAY MODI, JCIT. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE TWO APPEALS FILED BY ASSESSEE ARE EMANATING OU T OF SEPARATE ORDERS OF COMMISSIONER OF INCOME-TAX (APPEAL)- I, KOLHAPUR DT.03.12.2015 AND 10.12.2015 FOR A.YS. 2011-12 AND 2012-13 , RESPECTIVELY. 2. FIRSTLY, WE TAKE UP ASSESSEES APPEAL IN ITA.NO.341/PUN /2016 FOR A.Y. 2011-12. 2.1 THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING : 05.02.2018 / DATE OF PRONOUNCEMENT: 12.02.2018 2 ASSESSEE IS A CO-OPERATIVE SOCIETY STATED TO BE ENGAGE D IN THE BUSINESS OF BANK. ASSESSEE ELECTRONICALLY FILED ITS RETURN O F INCOME FOR A.Y. 2011-12 ON 28.09.2011 DECLARING LOSS OF RS.5,06,993/- . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSES SMENT WAS FRAMED U/S 143(3) VIDE ORDER DT.04.12.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.6,33,61,323/-. AGGRIEVED BY THE ORDE R OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.03.12.2015 (IN APPEAL NO.KOP/432/13-14) GRANTED PARTIAL R ELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(APPEALS) ERRED IN LAW AND ON MERIT IN CONFIRMIN G ADDITION OF RS.2,77,48,591/- ON ACCOUNT OF DISALLOWANCE UNDER S ECTION 36(1)(VIIA) OF THE ACT AS EXCESS DEDUCTION CLAIMED . 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 36(1)(VIIA) OF THE ACT AM OUNTING TO RS.3,26,18,591/-. HE ALSO NOTICED THAT ASSESSEE HAD D EBITED A SUM OF RS.48,70,000/- TO THE PROFIT AND LOSS ACCOUNT AS P ROVISION FOR BAD AND DOUBTFUL DEBTS. AO WAS OF THE VIEW THAT THE DEDUCTION U/S 36(1)(VIIA) OF THE ACT IS LIMITED TO THE EXTENT OF PROVIS ION MADE IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE DIFFERENCE NOT BE DISALLOWED. AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE AND AFTER CONSIDERING THE INS TRUCTION NO.17 DT.26.11.2008 ISSUED BY CBDT UNDER BOARDS F.NO.228/3/2008-ITA-II REPORTED IN 220 CTR (ST) 41 (2008 ), AO NOTED THAT THE INSTRUCTIONS STIPULATE THAT THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD BE RESTRICTED TO THE A MOUNT OF PROVISION ACTUALLY CREDITED IN THE BOOKS OF ASSESSEE IN TH E RELEVANT YEAR OR THE AMOUNT CALCULATED AS PER THE PROVISIONS OF 3 6(1)(VIIA) OF 3 THE ACT, WHICHEVER IS LESS. HE NOTED THAT SINCE ASSESSE E HAS MADE A PROVISION OF RS.48,70,000/- WHICH HAS BEEN DEBITED TO THE P ROFIT AND LOSS ACCOUNT, THE DEDUCTION WHICH CAN BE ALLOWED TO THE ASSESSEE IS ONLY OF SUCH AMOUNT. HE ACCORDINGLY DISALLOWED THE BALAN CE AMOUNT OF RS.2,77,48,591/- (RS.3,26,18,591/- -- RS.48,70,000/-.) AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 23. THE CIRCULAR IS VERY CLEAR. THE CIRCULAR CLEAR LY STATES THAT THE NEW CLAUSE (VII A) HAS BEEN INSERTED IN THE SUB- SECTION (1) OF SECTION 36 TO PROVIDE FOR A DEDUCTION IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTF UL DEBTS RELATING TO ADVANCES MADE BY THEIR RURAL BRAN CHES . THE CIRCULAR FURTHER CLARIFIES THAT THE DEDUCTION WI LL BE LIMITED TO A CERTAIN PERCENTAGE OF AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BANKS. THERE CANNOT BE A NY EQUIVOCALITY IN INTERPRETATION OF THE PROVISIONS OF SECTION 36(1)(VIIA) WHEN READ WITH THE CIRCULAR. AS STATED EA RLIER, THE HONOURABLE SUPREME COURT IN R & B FALCON (A) PUT . LTD. VIS C IT (SUPRA) HAS LAID DOWN THAT SUCH CIRCULARS ARE CONTEMPORANEOUS AND EXPLAIN THE CONTENTS OF THE PROVISIONS ENACTED IN THE ACT THROUGH AN AMENDMENT ACT. THE QUANTUM OF ELIGIBLE AMOUNT WOULD BE THE SUM DEBI TED INTO THE PROFIT AND LOSS ACCOUNT. THIS DOES NOT MEAN THAT THE ENTIRE ELIGIBLE AMOUNT BECOMES THE AMOUNT DEDUCTIBLE UNDER SECTION 36(1)(VIIA). THIS IS THE Q UALIFYING AMOUNT OF DEDUCTION WHICH WOULD BE PERMISSIBLE UNDER 0 - IS SECTION. THAT QUALIFYING AMOUNT WOULD THEN BE SUB JECTED TO A COMPARISON OF THE SUM ACTUALLY ALLOWABLE, WHIC H IS THE AGGREGATION OF SUMS MENTIONED IN THIS CLAUSE I.E. 7.5 % OF TOTAL INCOME AND 10% OF AGGREGATE AVERAGE RURAL ADVANCES. READ IN THIS LIGHT, IT NATURALLY FOLLOWS T HAT THE QUANTUM OF DEDUCTION MADE AVAILABLE UNDER THIS SECTI ON IS IN RESPECT ' OF A PROVISION MADE FOR BAD AND DOUBTFUL DEBTS. IT IS NOT NECESSARY THAT THE PROVISIONS SHOULD NECES SARILY INCLUDE PROVISIONS MADE FOR ADVANCES MADE BY RURAL BRANCHES. IT IS A PROVISION WHICH IS IN REFERENCE TO ALL CATEGORIES OF ASSETS FOR WHICH PROVISIONING IS REQU IRED TO BE MADE ACCORDING TO THE GUIDELINES OF THE RBI AND THES E ASSETS CAN INCLUDE ADVANCES MADE BY RURAL BRANCHES ALSO. HOWEVER, SINCE A CEILING IS PRESCRIBED, AS CLARIFIED IN THE CIRCULAR, THE AMOUNT OF PROVISIONS MADE CANNOT EXC EED THE AGGREGATION REFERRED TO ABOVE. HENCE, AS MENTIONED I N INSTRUCTION NO.17 DATED 26.11.2008, A SITUATION WILL NEVER ARISE WHERE THE AMOUNT OF PROVISIONS ACTUALLY CREATED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WILL EXCEED TH E AGGREGATION. SIMULTANEOUSLY IF THE TOTAL AMOUNT OF AGGREGATION IS LESS THAN THE PROVISION MADE, THE AM OUNT OF PROVISION OVER AND ABOVE THE AGGREGATION WILL NOT BE ALLOWED AS A DEDUCTION BECAUSE THIS IS A CEILING WHIC H HAS BEEN INCORPORATED TO REGULATE THE DEDUCTION ALLOWAB LE UNDER SECTION 36(1)(V I IA). THIS AGGREGATION IS NOT THE SUM WHICH HAS TO BE COMPULSORILY ALLOWED AS A DEDUCTION TO THE APPELLANT . UNDER THE CIRCUMSTANCES, THERE IS NO INFIRMITY IN 4 THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE DEDUCTION TO THE EXTENT OF AMOUNTS OF PROVISION FOR BAD AND DOUBTFUL MADE IN THE BOOKS OF THE APPELLANT. IN VIE W OF THE ABOVE DISCUSSION, THIS GROUND OF APPEAL IS, THEREFOR E, DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 4. BEFORE US, AT THE OUTSET, LD.A.R. FAIRLY SUBMITTED THAT ID ENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2010-11 AND T HE CO-ORDINATE BENCH OF THE TRIBUNAL UPHELD THE ORDER OF LD .CIT(A) AND DISMISSED THE GROUND OF THE ASSESSEE. HE THEREFORE SUBM ITTED THAT THE ISSUE BE DECIDED ACCORDINGLY. LD.D.R. SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO THE ALLOWABILITY OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT. WE FIND TH AT IDENTICAL ISSUE AROSE IN THE CASE OF ASSESSEE IN A.Y. 2010-1 1. THE CO-ORDINATE BENCH OF THE TRIBUNAL UPHELD THE ORDER OF LD .CIT(A) AND DECIDED THE ISSUE IN FAVOUR OF REVENUE BY OBSERVING AS UNDER : 8. IN VIEW OF CLEAR CUT PROVISION OF SECTION 36(1) (VIIA) OF THE ACT, IT IS CLEAR THAT THE ASSESSEE IS ENTITLED TO CLAIM THE SAID DEDUCTION IN CASE PROVISION FOR BAD AND DOUBTFUL DEBTS IS MADE T O THE EXTENT OF THE AMOUNT CLAIMED AS EXPENDITURE. THE PUNE BENCH OF T RIBUNAL IN PARSHWANATH CO-OP BANK LTD. VS. ITO IN ITA NO.674/P N/2015, RELATING TO ASSESSMENT YEAR 2009-10, ORDER DATED 22 .07.2016, WHICH IN TURN, RELYING ON THE ORDER OF TRIBUNAL IN SHRI M AHALAXMI CO-OP. BANK LTD. VS. ITO IN ITA NO.1658/PN/2011, RELATING TO ASSESSMENT YEAR 2008-09, VIDE ORDER DATED 29.10.2013 HAD LAID DOWN THE PROPOSITION OBSERVING AS UNDER:- 8. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN R ESPECT OF AFORESAID ADDITION OF RS.18,79,285/-. AS PER PROVI SIONS OF SECTION 36(1)(VIIA) OF THE ACT, COMPUTATION OF ALLO WABLE DEDUCTION IS CARRIED OUT BY THE ASSESSING OFFICER A S PER PARA 9.4 AT PAGE 6 OF THE ASSESSMENT ORDER. THE ASSESSI NG OFFICER NOTED THAT THE CLAIM OF ASSESSEE UNDER SECTION 36(1 )(VII) OF THE ACT ALSO INCLUDED AMOUNT OF RS.1,42,118/-, WHICH WA S WRITTEN OFF AS BAD DEBTS BY ITS RURAL BRANCH. FURTHER, THE ASSESSEE HAD DEBITED SUM OF RS.5,52,000/- BEING PROVISION FOR BD DR OF RURAL 5 BRANCH, FOR WHICH SEPARATE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AT 10% OF AVERAGE RURAL ADVANCES AMOUNTI NG TO RS.5,52,000/- WAS CLAIMED BY THE ASSESSEE BANK. TH EREFORE, IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSES SEE WAS NOT ELIGIBLE FOR SEPARATE DEDUCTION UNDER SECTION 36(1) (VII) OF THE ACT FOR SUM OF RS.1,42,118/- AS PER THE PROVISO TO SAID SECTION. FURTHER, THE ALLOWANCE OF DEDUCTION UNDER SECTION 3 6(1)(VIIA) OF THE ACT WAS DEPENDENT ON THE GROSS TOTAL INCOME, BE FORE MAKING ANY DEDUCTION UNDER THE SAID CLAUSE AND UNDE R CHAPTER VIA OF THE ACT. IN VIEW THEREOF, THE COMPU TATION OF DEDUCTION UNDER SECTION 36(1)(VII) AND 36(1)(VIIA) OF THE ACT WAS RE-WORKED BY THE ASSESSING OFFICER AS UNDER:- GROSS TOTAL INCOME AS PER ASSESSEES COMPUTATION OF INCOME 5,86,022 ADD: (1) PROVISION FOR BDDR 1,17,50,000 LESS: ALREADY ADDED BACK BY THE ASSESSEE IN COMPUTATION 7,000 1,17,43,000 ADD: (2)PROVISION FOR RURAL BDDR 5,52,000 1,22,95,000 1,28,81,022 LESS: DEDUCTION ALLOWABLE U/S 36(VII) AS DISCUSSED ABOVE 97,61,187 LESS : BAD DEBTS WRITTEN OFF BY RURAL BRANCHES NOT ALLOWABLE AS DISCUSSED ABOVE 1,42,118 96,19,069 96,19,069 GROSS TOTAL INCOME FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 36(1)(VIIA) 32,61,953 LESS: DEDUCTION U/S 36(1)(VIIA) 7 OF G.T.I. 2,44,646 10% OF AVERAGE RURAL ADVANCES RESTRICTED TO THE ACTUAL PROVISION MADE 5,52,000 7,96,646 GROSS TOTAL INCOME AFTER DEDUCTION U/S 36 24,65,307 LESS: GROSS TOTAL INCOME AS PER COMPUTATION OF INCOME 5,86,022 DISALLOWANCE OF EXCESS CLAIM OF DEDUCTION 18,79,285 9. THE PUNE BENCH OF TRIBUNAL IN SHRI MAHALAXMI CO- OP. BANK LTD. VS. ITO IN ITA NO.1658/PN/2011, RELATING TO ASSESSMENT YEAR 2008-09, VIDE ORDER DATED 29.10.201 3 HAD HELD THAT WHERE THE ASSESSEE HAS NOT MADE A PROVISI ON FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNT EQUAL TO THE AMOUNT OF DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 36( 1)(VIIA) OF THE ACT, THEN THE DEDUCTION IS TO BE RESTRICTED UND ER SECTION 36(1)(VIIA) OF THE ACT. 10. IN VIEW THEREOF, WHERE THE DISALLOWANCE UNDER S ECTION 36(1)(VIIA) OF THE ACT HAS BEEN WORKED OUT AS PER T HE PROVISIONS OF THE ACT AND THE ASSESSEE HAS NOT CONTROVERTED TH E SAME, THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE IN T HIS REGARD AND THE ADDITION CONFIRMED BY THE CIT(A) IS UPHELD. TH E GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 6 9. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE U S IS SQUARELY COVERED BY ORDERS OF PUNE BENCH OF TRIBUNAL AND FOL LOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDER OF CIT(A) IN RESTRICTING THE CLAIM OF ASSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT TO THE EXTENT OF RS.60 LAKHS I.E. TO THE AMOUNT OF PROVISION MADE IN THE BOOKS OF ACCOUNT ON ACCOUNT OF BAD AND DOUBTFUL DEBTS. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, DISMISSED. 6. WE FIND THAT THE ISSUE IN THE YEAR UNDER CONSIDERATIO N IS IDENTICAL TO THAT OF A.Y. 2010-11. FURTHER, IN VIEW OF LD.A .R.S SUBMISSIONS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUND OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. 8. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.342/PUN/ 2016 FOR A.Y. 2012-13. 8.1. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON MERIT IN CONFIRMING A DDITION OF RS.3,4,18,021/- ON ACCOUNT OF DISALLOWANCE UNDER S ECTION 36(1)(VIIA) OF THE ACT AS EXCESS DEDUCTION CLAIMED . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON MERIT IN CONFIRMING A DDITIONS OF RS.1,17,95,553/- ON ACCOUNT OF DISALLOWANCE OF EX EMPTION CLAIMED IN RESPECT OF INCOME FROM SALE OF MUTUAL FUNDS, WHEN I NCOME FROM SUCH SALE WAS EXEMPT UNDER SECTION 10(38) OF THE ACT. 9. FIRST GROUND IS WITH RESPECT TO DISALLOWANCE OF RS.3,24,18,021/- U/S 36(1)(VIIA) OF THE ACT. 9.1. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE ISSUE IN THE PRESENT GROUND IS INTER-CONNECTED WITH SOLITARY GROUND O F ASSESSEES APPEAL IN ITA NO.341/PUN/2016 FOR A.Y. 2011-12. 7 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE SUBMISSIONS OF BOTH THE PARTIES WHILE DECIDING THE SOLITARY GROUND IN ASSESSEES APPEAL IN ITA NO.341/PUN/2016 HEREINABOVE, WE HAVE DECIDED THE ISSUE A GAINST THE ASSESSEE. WE THEREFORE FOR THE SIMILAR REASONS STA TED HEREIN WHILE DECIDING THE GROUND NO.1 OF THE ASSESSEE IN REVENUE S FAVOUR AND FOR SIMILAR REASONS, DISMISS THE GROUND NO.1 OF THE ASSE SSEE IN THE PRESENT APPEAL (ITA NO.342/PUN/2016). THUS, THIS GROUND OF THE ASSESSEE IS DISMISSED. 11. 2 ND GROUND IS WITH RESPECT TO ADDITION OF RS.1,17,95,553/-. 11.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ON PERUSING THE COMPUTATION OF INCOME NOTICED THAT ASSESSEE HAD DED UCTED AN AMOUNT OF RS.1,17,95,553/- ON ACCOUNT OF EXEMPT INCOME INC LUDED IN THE NET PROFITS. ON GOING THROUGH THE DETAILS, AO NOT ICED THAT ASSESSEE HAD PURCHASED UNITS OF VARIOUS MUTUAL FUNDS AND THE PROFIT ON SALE OF THOSE UNITS AMOUNTING TO RS.1,17,95,552/- WAS CLA IMED AS EXEMPT UNDER SEC.10(35) OF THE ACT. AO WAS OF THE VIEW T HAT THE PROFIT EARNED ON SALE OF MUTUAL FUNDS WAS NEITHER A DIVIDEN D NOR INTEREST AND THEREFORE THE CLAIM OF BEING EXEMPT U/S 10(35) OF THE ACT WAS NOT CORRECT. HE ALSO NOTICED THAT IDENTICAL ISSUE ARO SE IN ASSESSEES CASE IN A.Y. 2010-11 WHEREIN, THE LD.CIT(A) VIDE ORDER DT.25.02.2014 HAS CONFIRMED THE DISALLOWANCE MADE BY AO. AO THEREFORE HELD THE INCOME OF RS.1,17,95,553/- AS BUSINESS I NCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 8 15. THE APPELLANT HAS ARGUED THAT ASSESSING OFFICE R HAS DISALLOWED THE CLAIM NOT APPRECIATING THAT DIVIDEND RECEIVED FROM MUTUAL FUND IS EXEMPT UNDER SECTION 10(35) OF THE ACT . ASSESSEE HAS RECEIVED INCOME FROM SALE OF MUTUAL FU NDS. THIS INCOME WAS CLAIMED AS EXEMPT INCOME. THE ASSES SING OFFICER HAS CALLED FOR DETAILS AND THE APPELLANT HA S FURNISHED THE STATEMENT SHOWING DETAILED CALCULATION OF PROFI T ON SALE OF MUTUAL FUNDS . THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT BANK HAD PURCHASED UNITS OF MUTUAL FUNDS SUCH AS RELIANCE MONEY MANAGER FUND (GROWTH), LIC NOMURA MF LIQUID FUND (GROWTH), LIC NOMURA MF LIQUID FUND (DA ILY DIVIDEND), HDFC CASH MANAGEMENT FUND (GROWTH), AXIS TREASURY ADVANTAGE FUND (GROWTH), UTI TREASURY ADVANTAGE FUND (GROWTH), AXIS TREASURY ADVANTAGE FU ND (GROWTH), UTI TREASURY ADVANTAGE FUND (GROWTH) , UTI FIXED TERM INCOME FUND (GROWTH) 366 DAY, UTI CAPITAL PROT ECTION ORIENTED FUND (GROWTH), BIRLA SUNLIFE FIXED TERM PL AN SERIES CE (GROWTH) . IT IS MENTIONED THAT THE PROFIT ON SALE OF UNITS OF THE ABOVE MUTUAL FUNDS AS DECLARED BY THE APPELLANT AMOUNTED TO RS.1 , 17,95,552/ - . AS PER SECTION 10(35), ANY INCOME BY WAY OF INCOME RECEIVED IN RES PECT OF THE UNITS OF A MUTUAL FUND SPECIFIED UNDER CLAUSE 2 3D SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME OF TH E ASSESSEE. IN THE PRESENT CASE, THE INCOME RECEIVED IS NOT THE INCOME RECEIVED IN RESPECT OF UNITS OF MUTUAL FUNDS BUT IT IS CAPITAL GAIN ON PURCHASE AND SALE OF MUTUAL FUNDS A ND SINCE THIS CAPITAL GAIN WAS RECEIVED IN THE HANDS OF THE ASSESSEE WHOSE BUSINESS IS BANKING, T H EREFORE, THE INCOME IS BUSINESS INCOME. THEREFORE , THE ASSESSING HAS RIGHTLY DISALLOWED THE EXEMPTION CLAIMED BY THE ASSESSEE R EJECTED AND THE DISALLOWANCE IS SUSTAINED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 12. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT IDENTIC AL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2010-11 AND THE C O-ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE A SSESSEE. HE POINTED TO THE RELEVANT FINDINGS OF ITAT. HE THEREFORE SUBMITTED THAT THE ISSUE BE DECIDED ACCORDINGLY. LD.D.R. DID NOT CO NTROVERT THE SUBMISSIONS OF LD.A.R. AND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IDENTICAL ISSUE OF TAXING THE PROFITS ON SALE OF MUTUAL FUNDS AROSE IN ASSESSEES OWN CASE IN A.Y. 2010-11 . THE 9 CO-ORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE IN I.T.A.NO.748/PN/2014 DT.07.10.2016 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY OBSERVING AS UNDER : 14. THE ASSESSEE HAS FAILED TO CONTROVERT THE FIND ING OF CIT(A), WHERE THE ASSESSEE HAS SOLD / TRANSFERRED THE MUTUAL FUND S AND REALIZED EXCESS GAINS ON ITS SALE, THE PROFIT EARNED IN THIS BEHALF IS TAXABLE IN THE HANDS OF ASSESSEE. IN VIEW OF THE PROVISO TO SE CTION 10(35) OF THE ACT, IT IS CLEARLY PROVIDED THAT THE PROVISION OF C LAUSE SHALL NOT APPLY TO ANY INCOME ARISING FROM TRANSFER OF UNITS OF MUTUAL FUNDS AND / OR AS PROVIDED THEREIN. IT IS ONLY THE INCOME ARISING ON HOLDING MUTUAL FUNDS WHICH IS EXEMPT FROM TAX UNDER SECTION 10(35) OF THE ACT. HOWEVER, THE GAIN ARISING ON TRANSFER OF ASSETS IS TAXABLE IN THE HANDS OF ASSESSEE. UPHOLDING THE ORDER OF CIT(A), W E DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 14. BEFORE US, LD.A.R. HAS SUBMITTED THAT THE ISSUE IN THE PRESENT GROUND IS IDENTICAL TO THAT OF A.Y. 2010-11. WHILE DECIDING TH E ISSUE IN A.Y. 2010-11, THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. WE THEREFORE FOLLOWING TH E DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CA SE IN A.Y. 2010-11 AND IN VIEW OF THE LD.A.R.S SUBMISSIONS, FIND NO REA SON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUNDS OF THE ASSESSEE ARE DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. 16. TO SUM UP, BOTH THE APPEALS OF ASSESSEE ARE DISMIS SED. ORDER PRONOUNCED ON 12 TH FEBRUARY, 2018. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH FEBRUARY, 2018. YAMINI 10 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT(A)-I, KOLHAPUR. 4. CIT-I, KOLHAPUR. 5. '#$ %%&',) &', / DR, ITAT, B PUNE; 6. $+,-/ GUARD FILE. / BY ORDER , // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE