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

ITA 35/PUN/2014

• Counselvise Citation: 3524514 RSA 2014
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation
• Section: 6

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 S . 3 5 & 36 / P N/ 20 1 4 ASSESSMENT YEAR S : 200 8 - 09 & 2009 - 10 RAJARAMBAPU SAHAKAR I 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 : 19 - 12 - 2 014 DATE OF PRONOUNCEMENT : 30 - 12 - 2014 ORDER PER R.S . PADVEKAR , JM : - TH ESE TWO APPEALS ARE FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDERS OF THE LD. CIT(A) , KOLHAPUR DATED 0 8 - 11 - 2013 FOR THE A.Y S . 200 8 - 09 & 2009 - 10. BOTH THESE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ISSUE WHICH ARISES FOR OUR CONSIDERATION IS DISALLOWANCE OF CLAIM OF THE ASSESSEE BANK IN RESPECT OF AMORTIZATION OF PREMIUM PAID FOR ACQUISITION OF GOVT. SECURITIES HELD UNDER HTM CAT EGORY. IN THE A.Y. 2008 - 09 , THE ASSESSING OFFICER DISALLOWED RS.25,48,932/ - AND IN THE A.Y. 2009 - 10 ALSO THE ASSESSING OFFICER DISALLOWED THE SAME AMOUNT WHICH WAS AMORTIZED AND CLAIMED AS A DEDUCTION. 3. WE HAVE HEARD THE PARTIES. THE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION IN THE ASSESSEES OWN CASE IN THE A.Y. 2007 - 08 IN ITA NO. 34/PN/2014 DATED 15 - 12 - 2014 AND IT IS HELD AS UNDER: 2 ITA NO S . 3 5 & 36 /PN/2014, RAJARAMBAPU SAHAKARI BANK L TD., SANGLI 3. WE HAVE HEARD THE PARTIES. THE 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. THE LD. DR FAIRLY CONCEDED THE SUBMISSION MADE BY THE LD. COUNSEL. IN THE CASE O F 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 TRIBUNAL IS AS UNDER: 3. WE HAVE HEARD THE PARTIES. WE FIND THAT THIS ISSUE IS SQUAR ELY 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 HAV E 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 BANK VS. CIT, 240 ITR 355 (SC). IN THE CASE OF BANK OF BARODA (SUPRA), THE ISSU E 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 ASSESSEE 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 ASSESSEE 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 SECURITIES. THE HONBLE HIGH COURT FOLLOWED THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF UNITED COMMERCIAL BANK (SUPRA). 3 ITA NO S . 3 5 & 36 /PN/2014, RAJARAMBAPU SAHAKARI BANK L TD., SANGLI 15. IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA), EVEN THE ISSUE OF VALUATION OF THE STOCK IN TRADE OF THE INVESTMENT WAS BEFORE THE HONBLE SUPREME COURT. IN THE CASE OF THE ASSESSEE, THE ISSUE IS REGARDIN G 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 I N 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 CASE, 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, NOMENCLATURE 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 VIEW. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS CONFIRMED. ACC ORDINGLY, 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. 4. AS THE FACTS ARE IDENTICAL IN THESE TWO YEARS, WE, THEREF ORE, FOLLOWING THE DECISION IN THE ASSESSEES OWN CASE IN THE A.Y. 2007 - 08 DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE TOWARDS THE AMORTIZATION OF PREMIUM PAID FOR ACQUISITION OF GOVT. SECURITIES IN BOTH THE ASSESSMENT YEARS . ACCORDINGLY, RESPECTIVE GROUND I.E. GROUND NO. 2 IN BOTH THE APPEALS ARE ALLOWED. 4 ITA NO S . 3 5 & 36 /PN/2014, RAJARAMBAPU SAHAKARI BANK L TD., SANGLI 5. THE NEXT ISSUE IS IN RESPECT OF THE CLAIM OF DEDUCTION MADE U/S. 36(1)(VIIA) OF THE INCOME - TAX ACT AND THIS ISSUE ARISES IN BOTH THE ASSESSMENT YEARS. THE ASSESSING O FFICER HAS OBSERVED THAT IN THE A.Y. 2008 - 09 THE ASSESSING OFFICER HAS OBSERVED THAT A SUM OF RS. 275 LAKHS HAS BEEN DEBITED TO P & L ACCOUNT UNDER THE HEAD BDDR. AS OBSERVED BY THE ASSESSING OFFICER , THE ASSESSEE BANK HAS NO BRANCHES IN RURAL AREA A ND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION @ 7.5% OF THE GROSS TOTAL INCOME BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VIA. AS NOTED BY THE ASSESSING OFFICER THE GROSS TOTAL INCOME OF THE BANK BEFORE CONSIDERING DEDUCTIONS UNDER CHAPTER VIA, WORKS OUT TO RS.4,37, 52,067/ - . IN THE OPINION OF THE ASSESSING OFFICER AT THE MOST THE ASSESSEE SHOULD HAVE CLAIMED @ 7.5% OF ABOVE GROSS TOTAL INCOME WHICH WORKS OUT TO RS.30,90,310/ - AND THE SAME IS ALLOWABLE SUBJECT TO ACTUAL PROVISIONS MADE BY THE ASSESSEE BANK DURING THE CURRENT YEAR. AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE BANK HAS NOT MADE ANY PROVISION FROM THE CURRENT YEARS PROFIT . THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE THE PROVISION FOR BDDR IN THE PREVIOUS YEAR WHI CH WAS REJECTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESSES. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING O FFICER. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 12. THE APPELLANT BANK HAS NOT INTERPRETED THE WORD 'ANY' IN THE ABOVE SECTION PROPERLY. I AGREE WITH THE ASSESSING OFFICER THAT WHEN NO PROVISION WAS MADE DURING THE YEAR UNDER CONS IDERATION, NO DEDUCTION UNDER THIS SECTION IS ALLOWABLE. THE APPELLANT TAKES THE CONTENTION THAT CLAUSE (VIIA) OF SUB - SECTION (1) OF SECTION 36 STARTS WITH THE WORDS AND PHRASES 'IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL ............ W . BY THE WORD 'ANY' IN THE ABOVE WORDS AND PHRASES, THE APPELLANT MEANS THAT THE AMOUNT PRESCRIBED IN SUB - CLAUSE (VIIA) WILL BE ALLOWED IRRESPECTIVE OF THE AMOUNT DEBITED BY 5 ITA NO S . 3 5 & 36 /PN/2014, RAJARAMBAPU SAHAKARI BANK L TD., SANGLI THE APPELLANT IN PROFIT AND LOSS ACCOUNT, IT MEANS THAT THERE MAY BE ANY AMOUNT OF DEBIT IN PRO FIT AND LOSS ACCOUNT, STILL IT WILL GET THE DEDUCTION OF THE AMOUNT PRESCRIBED IN SUB - CLAUSE (VIIA) I.E. 7.5% OF TOTAL INCOME AND 10% OF AGGREGATE AVERAGE ADVANCE. SUCH ILLOGICAL INTERPRETATION CANNOT BE ACCEPTED AND THIS IS TO STRETCH THE MEANING OF ABOVE WORDS AND PHRASES TOO FAR. IF YOU DON'T HAVE ANY INCOME TO SET APART AS PROVISION OR YOU HAVE INCOME BUT DON'T SET APART A PORTION OF IT AS PROVISION, YOU CAN'T GET DEDUCTION FOR NON EXISTENT PROVISION. IF THE APPELLANT HAD ANY DOUBT, SUCH DOUBT IS REPELL ED BY THE CBDT INSTRUCTION NO. 17/2008 WHICH SPECIFICALLY CLARIFIES THAT THE DEDUCTION UNDER SECTION 36(1)(VIIA) WILL BE LIMITED TO THE AMOUNT OF PROVISION MADE BY BANK. THEREFORE, THE GROUND TAKEN BY THE APPELLANT IS REJECTED. 6. IN THE SAME WAY IN THE A .Y. 2009 - 10 , THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.56,98,7 8 5/ - U/S. 36(1)(VIIA) OF THE ACT WHICH WAS WORKED OUT @ 7.5% AS GROSS TOTAL INCOME . THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS TO THE SAID DEDUCTION. THE ASSESSING OFFICE R HAS ALSO OBSERVED THAT NO PROVISION TOWARDS STANDARD LOAN WAS MADE IN THE YEAR. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A) BUT WITH THE SAME FA TE AS IN THE A.Y. 2008 - 09 A S THE GROUND TAKEN BY THE ASSESSEE WAS DISMISSED. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE HAS FILED THE PROFIT AND LOSS ACCOUNT AND ONE CHART SHOWING THE BDDR (STANDARD ASSET PROVISION). EVEN IF THE LD. COUNSEL MADE THE ORAL SUBMISSIONS BUT WE FIND THAT FOR ADJUDICATING THE ISSUE REQUIRED INFORMATION FROM THE STATEMENT OF ACCOUNTS OF THE ASSESSEE IS NOT PLACED BEFORE US. THE ARGUMENT OF THE LD. COUNSEL IS THA T THE ASSESSEE HAS MADE THE PROVISION AND THEN CLAIMED THE DEDUCTION. BOTH THE PARTIES AGREED THAT AS REQUIRED INFORMATION IS NOT SUFFICIENT , THE ISSUE MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. WE, ACCORDINGLY, RES TORE THE ISSUE OF 6 ITA NO S . 3 5 & 36 /PN/2014, RAJARAMBAPU SAHAKARI BANK L TD., SANGLI DEDUCTION CLAIMED U/S. 36(1)(VIIA) OF THE ACT FOR FRESH ADJUDICATION TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO FURNISH THE REQUIRED INFORMATION TO THE ASSESSING OFFICER . WE, ACCORDINGLY, ALLOW THE RESPECTIVE GROUN D IN BOTH THE APPEALS FOR STATISTICAL PURPOSES AND SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30 - 12 - 20 1 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 30 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